Saturday, March 6, 2010

RSS Feed Now Available for New Site

My apologies for the delay: the feed is here (   Thanks for reading,  jeff

Monday, March 1, 2010

New Blog Site

Dear Readers:

In anticipation of my book's release (May 4th), I am switching to a nicer-looking blog site that adopts the look and feel of the book (the address is, or click on the link).

Many thanks to Brian Aitken of Alister & Paine for creating the site. My apologies for any inconvenience the transition might cause.

Thanks for reading,


Airport Security Anecdote

When my wife, son, and I flew back from San Francisco yesterday, the security scanners detected a small Swiss Army knife in my wife's purse. Shows the system works, right?

Not so much.  She cannot remember when she put the knife in her purse, but it was years ago and has therefore gone through security undetected on numerous occassions.

Sunday, February 28, 2010

Out of the Cap-and-Trade Frying Pan, ...

Three key senators are engaged in a radical behind-the-scenes overhaul of climate legislation, preparing to jettison the broad "cap-and-trade" approach that has defined the legislative debate for close to a decade. ...

Sen. Lindsey O. Graham (R-S.C.) ... , Sens. John F. Kerry (D-Mass.) and Joseph I. Lieberman (I-Conn.) ... plan to introduce legislation next month that would apply different carbon controls to individual sectors of the economy instead of setting a national target.
It is hard to imagine a worse policy than the Cap-and-Trade program being kicked around Congress, but this new proposal fits the bill. 

For all its problems, CAT at least allows markets to price the permits, which means economic considerations determine who emits more or less carbon (given the number of permits).

The command-and-control system being suggested by Graham et al. means politics, not costs and benefits, will determine who gets to emit carbon.  Another victory for crony capitalism.

Vancouverites on Hosting the Olympics

I have enjoyed watching the Olympics (short track is my favorite), but I'm glad the U.S. taxpayer did not foot the bill.   Apparently many Vancouverites are not persuaded the city got a good deal:

While hundreds of thousands of people have streamed onto the streets to enjoy (some of them to excess late at night) the Olympic party, there is still an undercurrent of crankiness and apprehension in the city. ...

Security costs, first estimated at $165 million, are now headed toward $1 billion.

So maybe the cost-benefit analysis mentioned in my earlier post, which concluded the Games are a loser for Canada, was too optimistic!

Saturday, February 27, 2010

The Pot (Microsoft) Calling the Kettle (Google) Black

Microsoft Corp made its most vehement and public attack on Google Inc on Friday, calling its internet rival's actions potentially anti-competitive, and urging victims to file complaints to regulators.
The irony of  Microsoft trying to squelch competition via the antitrust laws is amusing. 

But the incident illustrates one key negative of antitust: companies that are losing in the marketplace encourage Justice or the FTC to prosecute competing firms, often with dubious justification.

Are Increasing Housing Prices a Good Thing?

The latest Case-Shiller data indicate that housing prices increased in December for the 7th straight month.  Most news accounts regarded this as good news.

But between 2000 and 2006, housing prices rose 80-90 percent, and they are still 35-40 percent above the 2000 level.  If most of the 2000-2006 increase was a bubble, then housing prices should be lower, not higher, based on fundamentals.

In that case, the U.S. is continuing to overinvest in housing.  So the higher prices are bad news.

This does not imply that policy should attempt to lower housing prices; it should just not care one way or the other.

Friday, February 26, 2010

Private Airport Security

Every time I fly, the urge to rant about airport security becomes irrepressible.

But what exactly is the alternative to the current system? Specifically, what would happen if airlines and airports could design and pay for their own systems? Here are some possibilities.

1. Trusted flyer programs. To join, you undergo an extensive initial security check. From then on, you just show a high-security ID at the airport and skip all the screening. (TSA has experimented with these, but they have been small scale so far.)

2. Flights that prohibit carry-on luggage. In exchange for being bored for a few hours, you get faster screening and a cheaper flight.

3. Expanded air marshal programs, with both uniformed and undercover marshals on every flight. Terrorists realize their chances of success are minuscule even if they get a weapon on a plane, so less screening is necessary.

I have no idea whether any of these would be cost-effective. But I would like to see what the private sector could figure out if it were free to innovate, and I bet it would work better, at lower cost, than what TSA does now.

Romer and Summers Should Resign in Protest

According to today's New York Times,

The Obama administration is planning to use the government’s enormous buying power to prod private companies to improve wages and benefits for millions of workers, according to White House officials and several interest groups briefed on the plan.
This kind of intervention cannot possibly be beneficial; it is an excuse for redistribution to organized labor and politically connected businesses.  It is hard to imagine a worse idea.

See also Alex Tabarrok's excellent critique at Marginal Revolution.

Marriage Rules in Massachusetts

The marriage laws in Massachusetts specify the following:

No man shall marry his mother, grandmother, daughter, granddaughter, sister, stepmother, grandfather's wife, grandson's wife, wife's mother, wife's grandmother, wife's daughter, wife's granddaughter, brother's daughter, sister's daughter, father's sister or mother's sister.

No woman shall marry her father, grandfather, son, grandson, brother, stepfather, grandmother's husband, daughter's husband, granddaughter's husband, husband's grandfather, husband's son, husband's grandson, brother's son, sister's son, father's brother or mother's brother.
Presumably the demand for such marriages is small.  But should policy prohibit them?

Thanks to Joel Pollak for the tip (he noticed a sign with this information when he applied for his own marriage license).

Pollak is the Republican (libertarian sympathizing) candidate for the 11th Congressional district in Illinois; see here for more information.  I met Pollak recently when he visited Harvard.

See here for a faceoff over subprime lending between Pollak and Barney Frank; see here for a follow-up interview of Pollak by Greta Van Susteren.

Thursday, February 25, 2010

Does Big Government Lead to Smaller Government?

Greg, a loyal reader,, emails me this query:

I live near Chicago Illinois. It must be one of the least libertarian places in the US. Chicago is famous for its preposterously large (and horrendously run) government. All this government has created very large operating deficits for the city, county and state. The government has gotten so big and burdensome that Chicago has had to think creatively to solve its debt problems.

Here's my dilemma: To solve their budget problems, Chicago has ironically been at the leading edge of some very libertarian-friendly policies.

For example, the city became one of the first municipalities to privatize a major tollway (the Skyway)... and is now trying to privatize a major airport (Midway). Chicago also privatized its parking meter operations. With that privatization, parking rates rose to a more competitive and unsubsidized rate. This deal has been criticized - but now more parking spaces are available and the company that runs the meters has upgraded all the facilities so that now people no longer need 500 quarters to feed the meters... you can pay with cash, credit card, etc.

The obvious paradox is that as government gets worse (and budgets get bigger), the city has resorted to more libertarian-friendly options. So what's the hopeful libertarian to do?
So does this mean that Frankin Roosevelt, Lyndon Johnson, George W. Bush, and Barack Obama are big time libertarians?

Wednesday, February 24, 2010

Truth is Stranger than Fiction

In Butch Cassidy and the Sundance Kid, Butch hatches a plan to escape a posse and avoid culpability for the duo's past crimes by joining the Army.  The plan did not work for Butch and Sundance, but a similar scheme seems to have worked for Mathew Meineke:

A man who helped arrange a drug deal that brought a large amount of cocaine into Maine is being allowed to return to the Army - and do a second combat tour in Afghanistan.

Mathew Meineke faced the prospect of five years in prison because of the drug deal in 2006. Afterward, the Colorado native cleaned up his life, enlisted in the Army, and served in Afghanistan as a forward observer for his infantry unit from July 2008 to June 2009. While in Afghanistan, he was indicted.

This month, Meineke got a rare break. Defense lawyer Tim Zerillo asked federal prosecutors to consider dropping the charges, and they agreed to do that.

“All he wants to do is to be able to serve his country,’’ Zerillo told the Portland Press Herald. “His highest and best use is not in a federal prison, it’s in Afghanistan protecting us and everyone else.’’
Butch and Sundance would be proud.

Tuesday, February 23, 2010

White House Urges Repeal of Insurers' Antitrust Exemption

I have three reactions to this news:

1. On balance, antitrust policy does more harm than good and should therefore be repealed.  Then the insurance exemption would be moot.

2. If we have an antitrust policy, I see no good argument for exempting the insurance industry.

3. I cannot figure out what health insurers are currently doing that violates the antitrust laws. So repeal of the exemption would make no difference.

Am I misssing something here?

How Long Will the U.S. be in Iraq?

According to the current plan, all combat forces are to leave by the end of August.  Yet

The top U.S. commander in Iraq said Monday that the planned withdrawal of all U.S. combat forces by the end of August could be delayed if conditions worsen in the coming months as Iraqis choose a new government.
Since violence has ticked upward in recent weeks (see, e.g., here), the likelihood of delay is real.  Recall my earlier prediction that the U.S.

will have at least 200,000 troops in Iraq / Afghanistan in November, 2012.
Aside: The same general who issued the above statement also announced this week that he supports open gay service in the military.

Monday, February 22, 2010

The Animal Abuse Registry

California may soon place animal abusers on the same level as sex offenders by listing them in an online registry, complete with their home addresses and places of employment.
Is this a good idea? I think not.

First, as awful as animal abuse can be, it is ridiculous to think of animal abuse as similar to rape or molesation.  Animals are not people.

Second, registries for sex offenders seem unlikely to be the right policy.  If offenders still pose risks to others, keep them in jail.

Paul Ryan on Spending-Cut Specifics

In an earlier post, I stated that conservatives who decry federal spending are nevertheless loath to name specific programs they would cut.  One exception is Paul Ryan, whose "Road Map for America's Future" advocates substantial reductions in Medicare and Social Security spending. 

You can read an interview with Ryan in yesterday's NYTimes.  He's from Wisconsin, so he's a cheesehead!

Sunday, February 21, 2010

Will the Republicans Nominate a Libertarian in 2012?

Rep. Ron Paul won the most support for the 2012 Republican presidential nomination in an unofficial straw poll of conservative activists attending an annual conference.

A libertarian from Texas who has railed against spending and the Federal Reserve, Paul won the Saturday contest at the Conservative Political Action Conference with 31 percent backing.
This straw poll does not mean much, but Paul's success does raise a crucial question for Republicans: are they going to lean conservative or libertarian?

Another libertarian the Republicans might nominate in 2012 is Gary Johnson, the former governor of New Mexico.  You can read about him here and here.  Full disclosure: I have been working with Johnson on his economic program.

Saturday, February 20, 2010

Conservatives versus Libertarians on Fiscal Imbalance

Conservative commentary these days is fixated on U.S. fiscal imbalance and holds that we should address the imbalance with spending cuts, not tax increases.

Missing from most such commentary, however, is specifics about what expenditure to cut (see, e.g., Daniel Henninger's recent WSJ piece).

Conservatives recognize that addressing the debt in a serious way means cutting national defense, Social Security, and Medicare.  But conservatives support high spending on national defense, and they are unwilling, for reasons of political expendiency, to propose reductions in entitlements.

Libertarians also believe we must slash expenditure, but they are happy to name specific cuts.  Libertarians advocate U.S. withdrawal from Iraq and Afghanistan, which would save hundreds of billions of dollars per year, and they endorse major cuts or elimination of Social Security and  Medicare.

The public thus perceives the conservative position as disingenuous, the libertarian position as unelectable.  Take your pick.

Friday, February 19, 2010

If One Leech is not Enough, Try Two

In response to concerns that unemployment remains high despite the stimulus, President Obama said this:
"You can argue, rightly, that we haven't made as much progress as we need to make when it comes to spurring job creation." ... "That's part of the reason why I expect Congress to pass additional measures as quickly as possible."
The President's response assumes that the first stimulus worked, just not enough. That is possible, but maybe the Keynesian model that underlies the case for stimulus is just wrong.

Non-Keynesian perspectives suggest that additional spending or poorly designed tax cuts will harm the economy by distorting resource allocation.  More broadly, stabilization policy instills a belief that governments can moderate recessions, which encourages risk-taking and larger booms and busts.  A steady stream of  policy "remedies" creates uncertainty that discourages productive activity.

So maybe the treatment is worse than the disease.

Thursday, February 18, 2010

A Punishment That Fits the Crime?

My writings on drug legalization seem to generate a lot of interest from college and high school students (surprise).  Thus, I get many emails from students posing questions about my research, or requesting an intereview, or asking for a reprint.

One hight school student with whom I corresponded recently just sent me the following:

Sorry I never thanked you for talking to me about marijuana legalization. I got my internet privileges taken away for, funnily enough, smoking marijuana. So anyways, thanks.
I wonder if his parents see the humor!

Wednesday, February 17, 2010

Driver's Education, Continued

On Monday, my son started the classroom portion of the state-mandated driver's education program.  He views it as a collasal waste of time, especially since it is eating his entire winter break.  In his opinion, the state should just administer an appropriate written test on the material and let students choose how much to prepare.  If they flunk, they study more until they pass (yes, he is a libertarian).

When my daughter took the course a few years ago, she said her class divided into four groups:

Front few rows: ultra nerdy private school kids who took careful notes on everything the teacher said.

Next couple of rows: nerdy public shools kids who sort of paid attention, but not diligently.

Third set of rows: non-nerdy kids of all flavors who paid little attention and played hangman, or texted each other, or read a book, or whatever.

Last set of rows: stoners who were quite obviously high/asleep for most of the classes.

Tuesday, February 16, 2010

Deaths from Black Tar Heroin

Whenever media stories report a surge of deaths from heroin use, it turns out that more potent heroin has recently arrived in a particular city or town.  For example, a recent L.A. Times headline reads

Black tar moves in, and death follows
and the story goes on to explain that

The death was part of a rash of overdoses, 12 of them fatal, that shook Huntington that fall and winter. All were caused by black-tar heroin, a potent, inexpensive, semi-processed form of the drug that has spread across the United States, driven by the entrepreneurial energy and marketing savvy of immigrants from a tiny farming county in Mexico.
These deaths are due to prohibition.  In a legal market, information about potency would be readily available, so few users would suffer these accidental overdoses.

Monday, February 15, 2010

Public Education and Thought Control

One argument libertarians offer against government funding for education is that it facilitates thought control, since funding education means defining education.  This problem is particularly accute if funding comes in the form of public schools; it exists but is more easily avoided if funding comes as education vouchers.

Advocates of public schools view this concern as wild exaggeration, but I wonder what they think about a recent decision by the Texas School Board:

Finally, the board considered an amendment to require students to evaluate the contributions of significant Americans. The names proposed included Thurgood Marshall, Billy Graham, Newt Gingrich, William F. Buckley Jr., Hillary Rodham Clinton and Edward Kennedy. All passed muster except Kennedy, who was voted down.
More broadly, as this article explains, Christian Conservatives have become almost a majority of the Texas Board, and they want the public school curriculum to teach that the founding fathers were Christian and intended for the country to be the same.

The power to fund is the power to control.

Sunday, February 14, 2010

A Cost-Benefit Analysis of the Vancouver Olympics

From Darren McHugh, in the Queens University Department of Economics.  His bottom line:

The net benefit of the Olympic Games is therefore also substantially negative when the estimates of Olympic benefits from this paper are combined with published estimates for event costs.
In other words, the U.S. should be happy that President Obama failed to secure the 2016 summer games for Chicago.

Saturday, February 13, 2010

A Pox on Both Their Houses

More than a year after President George W. Bush left office, more Americans continue to blame his administration over any other entity for the nation's economic woes, according to a new poll.

In a New York Times/CBS News survey out Friday, 31 percent of Americans said the Bush administration is at fault for the current state of the economy while only 7 percent pointed their finger at President Obama and his team.
My assessment differs somewhat from this poll's;  I would argue that the following pre-Obama policies played the main role in generating the current mess:

1. The housing policies pursued by HUD, FHA, Fannie, and Freddie.

2. The implicit (almost explicit) guarantees issued by the Fed that it could clean up the housing bubble without much fuss;

3. The growth of expenditure during the Bush administration (Medicare prescription drug coverage, Middle East Wars, pork for everyone).

4. The Wall Street bailouts.
But then I would argue that the following Obama policies have made the recession deeper and longer:

1. Endorsement of the Wall Street bailouts (Obama voted for TARP and appointed a key architect, Tim Geithner, as his Treasury Secretary)

2. The auto bailouts;

3. The fiscal stimulus;

4. Populist ranting at Wall Street over compensation, taxes;

5. Refusal to extend the Bush tax cuts, or repeal the estate tax, or cut taxes rates generally;

6. Pre-occupation with resdistribution over productivity: health care, card check, auction-less cap-and-trade, and continued support for low-income homeownership.
Thus, plenty of blame to go around.

Friday, February 12, 2010

Health Care Price Controls in Massachusetts?

In 2006, Massachusetts enacted a health insurance "reform" that became the blueprint for Obamacare.  Now

Governor Deval Patrick is seeking sweeping authority to review and reject rates charged by hospitals, physician groups, medical imaging centers, and insurers, in a broad new effort to make health care more affordable, particularly for smaller companies and their workers.
The Governor's desire to reduce costs is understandable, since Massachusetts has the highest premiums in the nation.

But the Governor's approach to reducing expenditure is misguided because it will kill the incentive to supply healthcare services in the Commonwealth.  A better approach is to make consumers pay a higher fraction of their health costs, via increased co-pays and deductibles in government insurance and greater taxation of employer-paid premiums.

Thursday, February 11, 2010

The Public School Monopoly

A video by Izzy Santa, of the Cato Institute.

Wednesday, February 10, 2010

Do State Liquour Stores Know How to Profit-Maximize?

Apparently not:
States suffering through tough times are reaching for a tonic.

Lawmakers in several states with tight control of liquor sales are considering legislation that would shift the job to private industry, saving money and raising revenue.
If these governments are running their stores in a profit-maximizing fashion, they gain nothing by selling them off.

Tuesday, February 9, 2010

The Nutrition Police March On

The Obama administration will begin a drive this week to expel Pepsi, French fries and Snickers bars from the nation’s schools in hopes of reducing the number of children who get fat during their school years.
I cannot imagine that such efforts will yield results; kids have too many ways to circumvent these restrictions.

Instead, what about health insurance premiums that increase with weight above the "healthy" threshold?

Monday, February 8, 2010

A Victory for Gay Marriage In Mexico City?

A new Mexico City law goes into effect March 4 that will allow same-sex couples to marry and adopt children, propelling the city to the forefront of the global gay rights movement.
A backlash is attempting to have the law declared unconstitutional.  One argument being made is that Mexico City already has civil unions for same-sex couples.

That argument, however, just raises the issue of whether government should provide marriage at all; it could instead provide civil unions to both same-sex and opposite sex couples, leaving marriage to religious institutions.

Sunday, February 7, 2010

Suicide Tourism

What can you do if you want help committing suicide, but you live in a state (all but Oregon) or country where assisted suicide is illegal?  Travel to Switzerland:

From the start, Mr. Minelli [founder of Dignitas] has kicked up controversy for his willingness to help foreigners die. Most groups in Switzerland don't assist foreigners. Dignitas only helps foreigners. The number of foreigners Dignitas helps each year—132 in 2007, compared to 91 in 2003—has increasingly left the Swiss uncomfortable with the country's growing reputation for "suicide tourism." As of the end of last year, Dignitas had helped a total of 1,046 people to commit suicide.
I do not see a convincing reason for bans on assisted suicide.  Informed consent rules are reasonable, but that seems sufficient to me.

Saturday, February 6, 2010

Buy America Provisions in the Stimulus

The U.S. and Canada, its largest trading partner, reached a preliminary deal to settle what had become an acrimonious dispute over "Buy American" provisions in the U.S. stimulus package.

The deal, if approved, will give companies on both sides of the border access to government procurement contracts at the state and local levels. U.S. Trade Representative Ron Kirk said the increased access for U.S. firms in Canada would be worth billions of dollars in contracts.

Last year's U.S. stimulus package requires that manufactured products used in projects paid for with federal stimulus funds be made in the U.S. While the restrictions were meant to exempt countries like Canada that have existing trade treaties with the U.S. and have signed on to the World Trade Organization's government procurement pact, the Canadian government in the 1990s excluded its provinces and towns from those rules.
Even if this issue gets resolved sensibly, it should never have arisen in the first place.  When the government builds infrastructure, it should do so at minimum cost (quality adjusted).  The Buy America provisions interfere with that objective and risk killing jobs when our trading partners retaliate.

Friday, February 5, 2010

Is Marijuana Effective Medicine?

The short answer is, "We don't know."  Why not?  Because existing DEA rules make it virtually impossible to carry about appropriate double-blind trials.

Yet the anecdotal evidence for marijuana's efficacy is stunning; here is one good example:

Even though it's a crisp November day, the flower boxes of Mary Jones's neat little bungalow are overflowing with brightly colored blooms. The bubbly mother of three has her utility vehicle parked in the driveway. Her hair is perfectly coiffed, her blond highlights glimmer in the late-fall sun. She looks like she could be a real-estate broker, and seeing the rock on her manicured finger, I imagine for a moment that her husband is a doctor or a lawyer. Mary would, in fact, be the ideal soccer mom, except that one of her now-grown sons played football, and rather than working in real estate, she grows and sells marijuana.
Read the rest here.  Anecdotes do not prove that marijuana works, but they make a good case for allowing objective scientific evaluation.

Thursday, February 4, 2010

Should Policy Try to Reduce Foreclosures?

In 2006, Benjamin Koellmann bought a condominium in Miami Beach. By his calculation, it will be about the year 2025 before he can sell his modest home for what he paid. Or maybe 2040.

“People like me are beginning to feel like suckers,” Mr. Koellmann said. “Why not let it go in default and rent a better place for less?”

After three years of plunging real estate values, after the bailouts of the bankers and the revival of their million-dollar bonuses, after the Obama administration’s loan modification plan raised the expectations of many but satisfied only a few, a large group of distressed homeowners is wondering the same thing. ...

In a situation without precedent in the modern era, millions of Americans are in this bleak position. Whether, or how, to help them is one of the biggest questions the Obama administration confronts as it seeks a housing policy that would contribute to the economic recovery.
In my mind the crucial question is whether to help distressed homeowners, and the right answer is no:

1. these homeowners assumed the risk of buying houses; they should accept the consequences;

2. homeowners who default will acquire a bad credit rating, but they will be free of their debt burden.  Instead of putting money into an asset they may never actually own, they can start to accumulate savings.

2. foreclosing on these homeowners does not mean homeownerhip will decline; it means the houses will become available at low prices to others with limited income.  What's wrong with that?

Wednesday, February 3, 2010

Repeal Don't Ask, Don't Tell

I agree with President Obama; the U.S. Congress should repeal "don’t ask, don’t tell" and eliminate any federal prohibition on gay service.

The usual argument made for excluding gays from the military is that, because of anti-gay sentiment among some non-gay soldiers, the presence of gays might undermine cohesion and discipline. No evidence, however, supports this view; gays have served with minimal problems in numerous countries (e.g., Australia, Canada, Germany, Israel, Italy, United Kingdom, Switzerland). The same arguments made against gays in the military were offered decades ago in the United States to oppose racial integration of the armed forces, yet these forces are now entirely integrated with minorities disproportionally represented.

Whether policy should compel the armed forces to allow gays to serve openly – or just leave the issue to the individual armed forces – is a more subtle question. A decentralized approach might lead to slower change, but it might also produce a less polarizing transition.

Tuesday, February 2, 2010

The Demand for Guns in India

In the land of Mahatma Gandhi, Indian gun owners are coming out of the shadows for the first time to mobilize, U.S.-style, against proposed new curbs on bearing arms.

When gunmen attacked 10 sites in Mumbai in November 2008, including two five-star hotels and a train station, Mumbai resident Kumar Verma sat at home glued to the television, feeling outraged and unsafe.

Before the end of December, Verma and his friends had applied for gun licenses. He read up on India's gun laws and joined the Web forum Indians for Guns. When he got his license seven months later, he bought a black, secondhand, snub-nose Smith & Wesson revolver with a walnut grip.

"I feel safe wearing it in my ankle holster every day," said Verma, 27, who runs a family business selling fire-protection systems. "I have a right to self-protection, because random street crime and terrorism have increased. The police cannot be there for everybody all the time. Now I am a believer in the right to keep and bear arms."
Two aspects of this story are especially worth noting.

First, it illustrates how escalating violence can increase the demand for guns; hence, the observation that guns and violence coincide in no way shows that guns cause violence.  This is a standard fallacy committed by advocates of gun controls.

Second, the story suggests that guns benefit owners by making them feel safer.  

If this perception of safety is false, or if it pervents more effective steps to avoid being a target of crime, then this feeling could be counterproductive. 

But neither of those conditions seems likely.  So evaluation of gun control laws must recognize that they reduce the well-being of exactly the people these laws claim to help.

Monday, February 1, 2010

Did TARP Just Kick the Can Down the Road?

That seems to be the opinion of Neil Barofsky, the special inspector general of TARP.  According to a report released yesterday,

The government's bailout of financial institutions deemed "too big to fail" has created a risk that the United States could face a worse fiscal meltdown in the future, an independent watchdog assigned to review the program told Congress on Sunday.

The Troubled Assets Relief Program, known as TARP, has not addressed the problems that led to the last crisis and in some case those problems have festered and are a bigger threat than before, warned Neil Barofsky, the special inspector general at the Treasury Department.

"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," Barofsky wrote.

Barofsky wrote the $700 billion financial bailout has encouraged more risk-taking because bank executives, who are still receiving massive bonuses, figure the government will come to the rescue the next time they steer their ships nearly aground.
No one should be surprised.

Sunday, January 31, 2010

Is High-Speed Rail Good Stimulus?

That depends on your criterion for good stimulus. 

If the only requirement is that the government write checks to people who are nominally employed, then building high-speed rail is great - but so is paying people to dig ditches and fill them up.

If the requirement is also that stimulus projects pass a standard cost-benefit test, then high-speed rail does not appear to measure up:

In the face of high energy prices and concerns about global warming, environmentalists and planners offer high-speed rail as an environmentally friendly alternative to driving and air travel. California, Florida, the Midwest, and other parts of the country are actively considering specific high-speed rail plans.

Close scrutiny of these plans reveals that they do not live up to the hype. As attractive as 110-to 220-mile-per-hour trains might sound, even the most optimistic forecasts predict they will take few cars off the road. At best, they will replace for profit private commuter airlines with heavily subsidized public rail systems that are likely to require continued subsidies far into the future.

Nor are high-speed rail lines particularly environmentally friendly. Planners have predicted that a proposed line in Florida would use more energy and emit more of some pollutants than all of the cars it would take off the road. California planners forecast that high-speed rail would reduce pollution and greenhouse gas emissions by a mere 0.7 to 1.5 percent—but only if ridership reached the high end of projected levels. Lower ridership would nullify energy savings and pollution reductions.
I have nothing against government infrastructure spending in principle.  But since interest groups like construction companies and unions have a strong incentive to oversell the benefits of these projects, while the green lobby has a religious hatred of cars, we should not be surprised if dispassionate analyses finds that the cost-benefit case for these projects is lacking.

Saturday, January 30, 2010

More Subsidy for Nuclear Power?

The Obama administration moved vigorously on two fronts Friday to promote nuclear power, proposing to triple federal loan guarantees for new projects and appointing a high-level panel to study what to do with nuclear waste.
One more example of picking winners and losers among industries; hardly government's strong suit.

Plus, the U.S. already subsidizes nuclear energy via the Price-Anderson Act of 1957, which limits the liability of the nuclear power industry in the case of accidents.

This subsidy means the true costs of nuclear power are much higher than they appear.  Although nuclear produces fewer greenhouse emissions than burning fossil fuel, it is probably not efficient even assuming a large negative effct from emissions.

Friday, January 29, 2010

An Economist Gets Stoned

Listen to a podcast of NPR's David Kestenbaum interviewing yours truly for Planet Money.  Here's the summary:

Fourteen states have adopted medical marijuana laws. We talk to Harvard economist, Jeffrey Miron, about what happens when drugs move from the black market to the open market. Do they get 100 times cheaper? Or instead, more expensive? Miron talks about the economics of prohibition, and reveals his drug of choice (which is legal) and one he would like to try (which is not).

Thursday, January 28, 2010

Will Obama Pull Off a Clinton?

Considerable discussion since Scott Brown's victory in Massachusetts has suggested that Obama might follow Bill Clinton's path: after governing from the left and being rebuked by the voters, he will moderate his message, reconnect with indpendents, and enjoy substantial two-term popularity.

After watching the SOTU address, I do not see that happening.  For whatever reasons, Obama seems more fundamentally tied to the left than Clinton.  He continues to push an agenda that independents do not share, and he castigates those who disagree with him as selfish, mean-spirited, or partisan.  This is not the way to win over moderates.

Obama's presidency is headed for failure unless he abandons the far-left agenda.

Wednesday, January 27, 2010

A 10-Point, Libertarian, SOTU Address

1. Abandon Obamacare

2. Forget Cap and Trade

3. Reject the Card Check Bill

4. Withdraw from Iraq and Afghanistan

4. Legalize Drugs

5. Scrap the Tax Code and replace with a flat tax.

6. Expand free trade and immigration.

7. Stop the bailouts

8. Cut spending

9. Cut spending

10. Cut spending

Tuesday, January 26, 2010

Obama to Propose a Budget Freeze

President Barack Obama intends to propose a three-year freeze in spending that accounts for one-sixth of the federal budget—a move meant to quell rising voter concern over the deficit but whose practical impact will be muted.

To attack the $1.4 trillion deficit, the White House will propose a three-year freeze on discretionary spending unrelated to the military, veterans, homeland security and international affairs, according to senior administration officials. Also untouched are big entitlement programs such as Social Security and Medicare.
Is this proposal a step in the right direction?  Yes, as far as it goes.

But it's a baby step: only $250 billion saved over the coming decade.  To make a real difference, cuts must focus on national defense, social security, and health care.  These three are the largest components of the budget, and health care in particular is growing rapidly.  Unless budget cuts tackle these items, they will have only minor impact.

In addition, most of the affected programs should actually be zeroed out, not just frozen at current levels; that would be a real start on fiscal responsibility.

Still, any restraint in spending is welcome.  We will see if President Obama wields his veto pen if (when) Congress does not play along.

Monday, January 25, 2010

Barney Frank Wants to End Fannie, Freddie


Representative Barney Frank said Friday that the House Financial Services Committee, which he leads, would push to replace Fannie Mae and Freddie Mac, seized by regulators almost 17 months ago, with a different model for mortgage financing.

“The committee will be recommending abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance,” Mr. Frank, a Massachusetts Democrat, said at a hearing in Washington, according to Bloomberg News. “That’s the approach, rather than a piecemeal one.”
Of course, Frank has not explained his "whole new system of housing finance."

Grab your wallet and head for the hills.

Sunday, January 24, 2010

Jury Nullification: A Case Study

This story was written by a staff writer for the Washington Post who ended up on jury duty:

Last week I was a juror in the trial of a man accused of selling a $10 bag of heroin to an undercover police officer. At the end of the two days of testimony, I concluded that the defendant was guilty beyond a reasonable doubt. I also concluded that he should be acquitted.

You can read the whole story here; the bottom line is that police fabricated evidence to make their case stronger, and the jury acquited.   The writer's key insight:

I believe they had the right guy, too. But the willingness to cheat, I think, is a poisonous corruption of a system designed to protect the innocent at the risk of occasionally letting the guilty walk free. It's a good system, fundamental to freedom. I think a police officer willing to cheat is more dangerous than a two-bit drug peddler.

Saturday, January 23, 2010

Should the Senate Confirm Ben Bernanke?


You might be suprised by that answer. To be clear, I think the Fed has erred tremendously during Ben's first term, both by supporting the bailouts and by expanding the Fed's actions beyond standard open market operations (e.g., buying up mortgage-backed securities).  In my utopia, the Fed would not exist at all.

But we do not live in that utopia (yet).  If Ben is not confirmed, we will stil have a Fed, and someone will be chairman.  So the following points argue in favor of confirmation:

1. Hindsight is easier than foresight.  The Fed had to act in real time. Many of Ben's current critics supported the Fed's actions as they occurred, even if they disagree now.  And macroeconomists as a group believe Ben has done a good job.

2. Ben took the actions he did because he was convinced they were right for the economy.  He may have been mistaken, but his intentions were always benevolent.

3. Most distinguished candidates to replace him will be horrified if he is not confirmed.  So, his successor may be far less talented.

4. Ben is being made a scapegoat (perhaps by politicos within the White House), to soothe populist rage.

5. Stability in policy is important, even if that policy is not perfect.  If Ben is not confirmed, uncertainty about monetary policy increases dramatically.

So I endorse Ben for a second term, without reservation.

Friday, January 22, 2010

The Supreme Court's Ruling on Campaign Finance Laws

Sweeping aside a century-old understanding and overruling two important precedents, a bitterly divided Supreme Court on Thursday ruled that the government may not ban political spending by corporations in candidate elections.

The ruling was a vindication, the majority said, of the First Amendment’s most basic free speech principle — that the government has no business regulating political speech.
So, the Court's view is that campaign finance regulation (at least the part addressed in yesterday's decision) is not constitutional. I am not a lawyer, but that view sounds right to me.  Let's put aside the constitutional issue, however, and ask whether campaign finance regulation would be good policy if it were constitutional?

The standard argument for such regulation rests on four claims:

1. that spending by politicians affects their likelihood of election;

2. that contributions to political campaigns affect the policies a politician supports;

3. that these influences on political outcomes are undesirable;

4. and that regulation successfully limits money’s influence on these outcomes.
Claims 1 and 2 are oft-overstated, but they probably have some validity. 

Claim 3, however, is probably backwards. Money lines up on one side of an issue because a larger economic pie supports that side. Special interests do support bad policies, including corporate welfare, tariffs and quotas, agricultural subsidies, wasteful weapons programs, and pork pork-barrel spending, but money often causes better policies, not worse; free trade is an excellent example.

Claim 4 is even less convincing: politicians and special interests can circumvent most regulation.

So, campaign finance regulation's main goal is not compelling, and the regulation does not achieve that goal anyway.  Instead, the regulation protects incumbents and rewards politicians who exploit loopholes in the law.  The Court's decision is good economics, as well as good law.

Thursday, January 21, 2010

Common Sense and Global Warming

A WARNING that climate change will melt most of the Himalayan glaciers by 2035 is likely to be retracted after a series of scientific blunders by the United Nations body that issued it.

Two years ago the Intergovernmental Panel on Climate Change (IPCC) issued a benchmark report that was claimed to incorporate the latest and most detailed research into the impact of global warming. A central claim was the world's glaciers were melting so fast that those in the Himalayas could vanish by 2035.

In the past few days the scientists behind the warning have admitted that it was based on a news story in the New Scientist, a popular science journal, published eight years before the IPCC's 2007 report.

It has also emerged that the New Scientist report was itself based on a short telephone interview with Syed Hasnain, a little-known Indian scientist then based at Jawaharlal Nehru University in Delhi.

Hasnain has since admitted that the claim was "speculation" and was not supported by any formal research. If confirmed it would be one of the most serious failures yet seen in climate research. The IPCC was set up precisely to ensure that world leaders had the best possible scientific advice on climate change.
The stunning thing about the IPCC's assertion is not that it turns out to be pure speculation; the scary fact is that anyone believed this in the first place.  Just look at a picture: does it make sense that a degree or so of higher temperature could melt this within 30 years?

Wednesday, January 20, 2010

Limits on Lobbying? Don't Tell the Lobbyists

Ellen Miller, co-founder of the Sunlight Foundation, has spent years arguing for rules to force more disclosure of how lobbyists and private interests shape public policy. Until recently, she herself registered as a lobbyist, too, publicly reporting her role in the group’s advocacy of even more reporting. Not anymore.

In light of strict new regulations imposed by Congress over the last two years, Ms. Miller joined a wave of policy advocates who are choosing not to declare themselves as lobbyists.
Read the rest here; it gets better.
Should Congress regulate lobbying? In my view, no.  Beyond the enforcement issue, such regulation is not only inconsistent with free speech but counterproductive as well: it lulls voters into thinking the law has constrained special interests, when it has not.

Tuesday, January 19, 2010

Should Libertarians Vote for Scott Brown?

Massachusetts is holding a special election tomorrow for Ted Kennedy's Senate seat. The candidates are Martha Coakley, a Democrat and until recently the presumptive victor; Scott Brown, the Republican and until recently a little known state senator (mine in fact); and Joseph L. Kennedy, a Libertarian and no relation to Ted.

In most Massachusetts elections, I vote for the libertarian or write in my wife (also a libertarian). The Democrats always win, so I can vote my conscience without worrying how my vote might affect the outcome.

This election, however, is different.  If the polls are to be believed, the race is close.  And, having a 41st Republican in the Senate could defeat ObamaCare, which I view as evil. So, what's a libertarian to do? 

I looked into Brown's and Kennedy's views on a range of issues.  Kennedy is definitely libertarian, Brown more conservative. Thus, on economics they are similar and while on social issues they differ, with Kennedy's views closer to my own.  Brown, however, is not ultra-conservative; he is personally opposed to abortion and gay marriage, but he believes abortion should remain legal while gay marriage should be left to each state.

The other factor to consider is that one-party rule is awful; gridlock is great.

So, which way will I vote?

PS: You might think Brown has a chance because of backlash over the economy and Obama excesses.  That is part of the story, but in addition Coakly announced on a local radio show that Curt Schilling is a Yankees fan!

PPS: Brown might do better than the polls indicate because the Kennedy supporters will probably vote for Brown.

PPPS: My home phone rang about 5 times while I was writing this, all automated messages urging me to vote for Brown.

Monday, January 18, 2010

Martin Luther King Quote

An individual who breaks a law that conscience tells him is unjust, and who willingly accepts the penalty of imprisonment in order to arouse the conscience of the community over its injustice, is in reality expressing the highest respect for the law.

Sunday, January 17, 2010

Will France Become Lebanon?

LYON, FRANCE -- France, which regards itself as the cradle of human rights, is moving to impose legal restrictions on Muslim women who wear Afghan-style burqas or other full-face veils.

The restrictions, likely to apply to many public places, come in response to resentment in France and other European countries over the growing visibility of Muslims -- immigrants or locally born -- on a continent with ancient Christian roots. The tensions have long run through European societies but increasingly are coming to the surface as the number of Muslims grows and symbols of their faith, including mosques, are seen as a challenge to European traditions.
Beyond the fact that these restrictions are inconsistent with any notion of free expression, they are counterproductive: by isolating Mulsims they generate resentment, rather than encourage assimilation.

Saturday, January 16, 2010

ObamaCare: Laugh Till It Hurts

From a friend:

Let me get this straight.

The new health care plan will be written by a committee whose Chairman says he doesn't understand it;

Passed by a Congress which hasn't read it;

Signed by a President who smokes;

Funded by a Treasury Chief who did not pay his taxes;

Overseen by a Surgeon General who is obese;

And financed by a country that is nearly broke.

What could possibly go wrong?

Friday, January 15, 2010

Best One-Liner from a Judge This Year

The judge presiding over the first serious challenge in federal court of a state gay-marriage ban has defined his career with an unconventional approach.

Two days into the trial over the constitutionality of California's Proposition 8 gay-marriage ban, Judge Vaughn Walker has upset some opponents of gay marriage by allowing gay couples to testify on the meaning of marriage.

The 65-year-old judge has tried to breach the longtime ban on TV cameras in federal court by ordering the trial to be posted on YouTube -- though the Supreme Court has temporarily stayed that decision.

On Monday, the first day of the trial, he repeatedly asked the lawyers: Why don't states "get out of the marriage business? It would solve the problem."

OK, that's two lines, but right on the money in any case.  Read the rest; Walker is an interesting guy.  How did a libertarian get on the federal bench?

Thursday, January 14, 2010

Maybe Chefs Should Design Anti-Terrorism Tactics

It seems that professional chefs are better than terrorists at getting things past airport security:

The Christmas Day underwear-bombing attempt won't just slow airport-security lines. It probably will also disrupt efforts to provide U.S. carnivores with quality salami, prosciutto and headcheese.

Last week, a federal grand jury indicted Umar Farouk Abdulmutallab, the Nigerian who allegedly tried to set off a bomb hidden in his underpants on a Northwest Airlines flight to Detroit. The bomb didn't explode, but it spurred demand for pat-down searches, body scans and more-meticulous baggage examinations for airline passengers headed for the U.S.

Such measures might discourage terrorists, but they are also likely to catch chefs smuggling meat from Europe. Chefs such as Rey Knight, who once flew from Italy to Miami with a pork shoulder and fennel-pollen salami vacuum-sealed and hidden inside a stainless-steel water bottle. Another time, he says, he hid a 4-pound goose-liver torchon from France inside the belly of a salmon.
Increased scrutiny of international travelers means "I'll have to come up with more creative ways" to get charcuterie into the U.S., says Mr. Knight, whose Knight Salumi Co. sells cured meats to San Diego-area restaurants.

Wednesday, January 13, 2010

Cell Phones and Traffic Accidents

I do not dispute that talking or texting on a cell phone can inhibit good driving.

But laws that limit the use of cell phones while driving may still be undesirable.

First, the people who text while driving might be the same people who would otherwise be putting on makeup, fiddling with the radio, trying to eat a sandwich, or yelling at their kids.  Thus, the net amount of bad driving due to cell phones may not be large.

Second, traffic fatalities per vehicle mile have declined steadily and significantly since 1994, even while cell phones and texting have grown enormously.  This does not prove cell phones do not cause bad driving, but it makes you wonder if this effect is large.  Most studies on cell phones and traffic accidents suffer from serious statistical flaws.

Third, any accidents caused by cell phones are only one side of the equation.  Millions of people use cell phones while driving for beneficial purposes, so the net impact may well be positive.

Tuesday, January 12, 2010

Fareed Zakaria on Our Response to the Underwear Bomber

In responding to the attempted bombing of an airliner on Christmas Day, Sen. Dianne Feinstein voiced the feelings of many when she said that to prevent such situations, "I'd rather overreact than underreact." This appears to be the consensus view in Washington, but it is quite wrong. The purpose of terrorism is to provoke an overreaction. Its real aim is not to kill the hundreds of people directly targeted but to sow fear in the rest of the population. Terrorism is an unusual military tactic in that it depends on the response of the onlookers. If we are not terrorized, then the attack didn't work. Alas, this one worked very well.
 I could not agree more.  The rest of Zakaria's piece is dead on as well, this paragraph in particular:

As for the calls to treat the would-be bomber as an enemy combatant, torture him and toss him into Guantanamo, God knows he deserves it. But keep in mind that the crucial intelligence we received was from the boy's father. If that father had believed that the United States was a rogue superpower that would torture and abuse his child without any sense of decency, would he have turned him in? To keep this country safe, we need many more fathers, uncles, friends and colleagues to have enough trust in America that they, too, would turn in the terrorist next door.

Monday, January 11, 2010

NY (Nutrition) Police Strike Again

First New York City required restaurants to cut out trans fat. Then it made restaurant chains post calorie counts on their menus. Now it wants to protect people from another health scourge: salt.

On Monday, the Bloomberg administration plans to unveil a broad new health initiative aimed at encouraging food manufacturers and restaurant chains across the country to curtail the amount of salt in their products.

The new plan is said to be voluntary and involves no new legislation.  Does anyone believe it will stay that way?

Sunday, January 10, 2010

Libertarian Humor

“You libertarians are the types that would allow fornication in public parks!”

"What do you mean, public parks?”

Saturday, January 9, 2010

The Coming California Bailout

SACRAMENTO, Calif. -- Republican Gov. Arnold Schwarzenegger asked for $6.9 billion in federal funds in his state-budget proposal Friday and warned that state health and welfare programs would be threatened without the emergency help.

Mr. Schwarzenegger's proposed $82.9 billion general-fund budget for the 2010-11 fiscal year would close a $19.9 billion gap over 18 months. In addition to the federal aid, he called for $8.5 billion in cuts and $4.5 billion in alternative funding to balance the budget.

"It's time to enact long-term reforms that will change the way the most populous state and the federal government work together," Mr. Schwarzenegger said. He and state legislative leaders plan to visit Washington to lobby for bailout money. White House budget officials weren't available for comment on the governor's request.
Federal bailouts of state governments are insane not just because they reward profligate state spending. These bailouts also come with strings attached - dictates on how states can run education, welfare, transportation, and so on - and thus quickly destory any remnance of federalism in the United States.

Friday, January 8, 2010

A Republican Senator in Massachusetts?

BOSTON — Martha M. Coakley, the Democrat running for Senator Edward M. Kennedy’s seat in Massachusetts, had seemed so certain of winning the special election on Jan. 19 that she barely campaigned last month.

But the dynamic has changed in recent days. ...

And a new poll that showed a competitive race between Ms. Coakley and Mr. Brown has generated buzz on conservative blogs and energized the Brown campaign — though many news organizations dispute its methodology.
Brown is unlikely to win, but if he does, the implications for the health care debate are huge.

Thursday, January 7, 2010

Should Polygamy be Legal?

Well, it still is in some parts of the world:

KUALA LUMPUR — Rohaya Mohamad, 44, is an articulate, bespectacled medical doctor who studied at a university in Wales. Juhaidah Yusof, 41, is a shy Islamic studies teacher and mother of eight. Kartini Maarof, 41, is a divorce lawyer and Rubaizah Rejab, a youthful-looking 30-year-old woman, teaches Arabic at a private college.

The lives of these four women are closely entwined — they take care of each others’ children, cook for each other and share a home on weekends.

They also share a husband.
So, should polygamy be legal?  To address this question, I think it is useful to consider two prior questions:

Should government "supply" and enforce the particular bundle of contracts known as marriage?

If it does so, should it restrict this supply to opposite-sex couples?
My answer to the first question is no: government should establish and enforce default rules about the division of property from communal living arrangements, about inheritances, and about guardianship of children, but it need not and should not bundle these rules into the particular package known as marriage. 

My answer to the second question is also no.  If goverment is going to supply marriage, it should do so in the most neutral way possible.  This means treating same-sex marriage and polygamy just like opposite-sex marriage.   Government should calls these contracts civil unions, leaving marriage to religious institutions.

Wednesday, January 6, 2010

The Fed and the Next Bubble

David Leonhardt has a terrifice piece in today's New York Times on the Fed's quest for more power.   His key point:

The fact that Mr. Bernanke and other regulators still have not explained why they failed to recognize the last bubble is the weakest link in the Fed’s push for more power. It raises the question: Why should Congress, or anyone else, have faith that future Fed officials will recognize the next bubble?
A related point is that, even without additional power, the Fed could have sounded an alarm about the housing bubble rather than chanting, "All is well."  Imagine how different the last few years might have been if in 2004 the Fed's testimony before Congress had been,

"Housing prices are growing at an unprecedented rate.  While the U.S. has never had a large nationwide decline in housing prices, it has also have had such a huge nationwide increase in prices, so all bets are off. Consumers and banks are becoming obscenely levered.  Fannie and Freddie are issuing mortgages to every borrower with a pulse.  This situation is scaring our pants off!

Tuesday, January 5, 2010

Hardly Anyone Really Believes in Free Speech

A radical Islamic group planning a protest march through the streets of a town that has achieved iconic status in Britain for honoring the passing hearses of British soldiers killed in Afghanistan ran into a stiff rebuff from the British government on Monday.
Prime Minister Gordon Brown issued a statement saying he was “personally appalled” by the group’s plan to march through the streets of Wootton Bassett, 70 miles west of London, where townspeople have lined the sidewalks since April 2007 to mourn the passing cort├Ęges of British military casualties flown home to the nearby military airbase at Lyneham. ...
Home Secretary Alan Johnson, who is responsible for the police, said in a separate statement that he would support any request from the police or local government officials to ban the march.
The point that the opponents of the march fail to get is that suppressing the march will polarize and alienate Muslims even more.

Monday, January 4, 2010

Alcohol Prohibition in Iraq?

BAGHDAD -- The banner appeared mysteriously this fall on a railing along Abu Nawas Street, the hub of nightlife on the banks of the Tigris River in downtown Baghdad, where the atmosphere in recent months has grown markedly more subdued.

"Damned is he who sits at a table with alcohol," the handwritten sign said.

Posted near a strip of nightclubs recently raided by police, the unsigned missive spoke to a new fight being fought across Iraq as government officials attempt to assert greater control over the country's moral and social norms.
This is evidence for my view that, when all is said and done, the invasion and occuption of Iraq will have replaced a secular repressive regime with a sectarian repressive regime.

Sunday, January 3, 2010

Smoking Bans in New York City

Six years after New York City passed a ban on smoking in bars and restaurants, it is easier than ever to find smokers partying indoors like it’s 1999, or at least 2002. In November, called it “the worst kept secret in New York nightlife” that “smoking is now allowed in numerous nightspots, specifically just about any and every lounge and club with a doorman and a rope.” A few weeks later,, a blog about New York clubs and bars, posted a “smoker’s guide to N.Y.C. nightlife.”

“Everyone looks the other way,” said Billy Gray, 25, a reporter for Guest of a Guest, who says that he knows precisely which high-end bars and lounges, most of them in the meatpacking district or Lower East Side, will let him smoke inside. Far from deterring smoking indoors, the ban simply adds an allure to it, said Mr. Gray, a half-pack-a-day smoker.

“It’s more of an illicit thrill now,” he said. “Like when you were a teenager and snuck a beer in your parents’ basement.”
Thus, as with other prohibitions, smoking bans breed disrespect for the law.

Is a prohibition ever the right policy?  What about the ban on murder?  Take as given that this one is a good idea.  So what's the difference between banning murder and banning smoking in restaurants?

Everyone agrees that murder inflicts grave harm one someone who cannot easily avoid that harm.  Smoking in restuarants does not share this feature.  Even taking the evidence on second-hand smoke at face value, the effects from occasional expsoure are trivial, and anyone who wants to avoid them can stay home or patronize non-smoking restaurants.

Smoking bans are also miguided because they assume restaurants and bars are "public" and should therefore be subject to regulation by government.   Instead, any privately owned establishment should be regarded as fully private, with owners allowed to offer smoking versus non-smoking experiences, as they wish.

Saturday, January 2, 2010

How Not to "Fix" the Housing Market

The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.

As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.
All these criticisms are dead on.  Keeping people in homes they cannot afford makes no sense, so policies that attempt to prevent foreclosure are guaranteed to generate perverse side effects.  The horrifying fact is that policy is still subsidizing high-risk mortgages.

Friday, January 1, 2010

Liberals, Unions, and Detroit

A friend from Detroit passes along this story and video about my home town.  News or comedy?