A Debate About Mexico's Drug Wars

The event, tomorrow night at the Skirball Center at NYU, is produced by Intelligence Squared; see here for details.

Fareed Zakaria, Andres Martinez, and I will aruge in favor of the proposition:

America is to Blame for Mexico's Drug Wars

Jorge Casteneda, Chris W. Cox, and Asa Hutchinson will argue against.

Stay tuned for the outcome; I2 identifies the winner as the side that moved the most undecided members of the audience to its position.

Bernanke on the Fed

In a recent op-ed, Federal Reserve Chairman Ben Bernanke argues that proposals in Congress to reduce the Fed's powers or increase Congressional oversight are misguided.  My reactions to Ben's piece are as follows:

1. Given that the Fed exists, it probably made sense for it to lower interest rates in response to the financial crisis.  The private sector expected this; had the Fed not undertaken these actions, the confusion generated might have been counterproductive.

2. The Fed should have argued vociferously against, rather than for, the bailouts of Wall Street banks.  These bailouts probably made things worse rather than better in the short term by generating uncertainty and delaying appropriate adjustments in bank balance sheets.  And the bailouts virtually guarantee increased moral hazard in the long term.

3. Granting more regulatory power to the Fed is silly.  Regulation of large, complex, and constantly evolving finanicial market activities is not going to fix anything, since the financial sector will innovate around it.  Worse, regulation gives some investors a false sense of security.

4. Giving Congress more oversight of the Fed is a terrible idea; libertarians, in particular, should be wary of fixing bad government with more government.  The way to improve the Fed is to eliminate the Fed.

George Will, Medical Marijuana, and Legalization

George Will writes an interesting column on medical marijuana. 

Will argues that a large fraction of "medical" marijuana purchases are in fact for recreational use, a claim no reasonable person disputes.  Will believes that widespread circumvention of the law's official intent undermines respsect for the rule of law, and I agree.

Will also suggests that estimates of the tax revenue states can collect from medical marijuana are probably inflated; my own estimates suggest he is right on this as well.

But the most intriguing issue is Will's last sentence:

By mocking the idea of lawful behavior, legalization of medical marijuana may be more socially destructive than full legalization.

This last sentence leaves us hanging: is Will advocating legalization, or arguing that legalization is undesirable and medicalization is even worse? 

If Will is true to his small government, individual responsibility ideals (which I share), he must surely advocate full legalization.  To the best of my knowledge, however, he has yet to do that in so many words. 

Now would be a good time.

A College for Cannabis

At most colleges, marijuana is very much an extracurricular matter. But at Med Grow Cannabis College, marijuana is the curriculum: the history, the horticulture and the legal how-to’s of Michigan’s new medical marijuana program. ...

Even though the business of growing medical marijuana is legal under Michigan’s new law, there is enough nervousness about the enterprise that most students at a recent class did not want their names or photographs used. An instructor also asked not to be identified.

“My wife works for the government,” one student said, “and I told my mother-in-law I was going to a small-business class.”

 The rest of the story is here.

The Politics of Cap and Trade

A discussion at the New York Times's Room for Debate.  My bottom line:

Any policy to reduce emissions may be more costly than the emissions themselves, given the unintended consequences of such policies (e.g., pushing carbon-emitting activity to countries with lower carbon prices).

Dollars for Dishwashers

On the heels of its ballyhooed "Cash for Clunkers" program for cars, the federal government is expected to finalize details in the coming weeks of another tax-supported shopping extravaganza, known as "Cash for Appliances."

Supported by $300 million from the economic stimulus, the program will offer rebates to consumers who buy energy-efficient refrigerators, dishwashers, air conditioners and other appliances to replace their older models.

This program is just as misguided as the original Cash for Clunkers.  The only half-way respectable argument in its favor is the one offered by the Council on Economic Advisers:

Clunkers "is one of several stimulus programs whose purpose is to shift expenditures by households, businesses, and governments from the future to the present," the council wrote in a September report. "Such time-shifting is valuable in a recession, when the economy has an abundance of unemployed resources that can be put to work at low net economic cost."

This view could be right in principle, but it is unlikely to be right in practice.  Just as governments are error-prone and easily swayed by special interests when it comes to picking industries to support (industrial policy), they are likely to miscalculate often in picking when and where to stimulate.

Plus, this particular stimulus requires destruction of consumer durables that still work, an unambiguous waste.

Given its $300 million size, the program cannot have much influence.  But a better approach with that $300 million is to reduce tax rates and let consumers choose how to spend their money.

Franksgiving: Another Flawed Stimulus

In 1939, FDR decided to move Thanksgiving Day forward by a week. Rather than take place on its traditional date, the last Thursday of November, he decreed that the annual holiday would instead be celebrated a week earlier.

The reason was economic. There were five Thursdays in November that year, which meant that Thanksgiving would fall on the 30th. That left just 20 shopping days till Christmas. By moving the holiday up a week to Nov. 23, the president hoped to give the economy a lift by allowing shoppers more time to make their purchases and—so his theory went—spend more money.

 The plan did not turn out too well:

For the next two years, Roosevelt continued to move up the date of Thanksgiving, and more states resigned themselves to celebrating early. By 1941, however, the facts turned against Roosevelt.

By then, retailers had two years of experience with the early Thanksgiving, and data were available regarding the 1939 and 1940 Christmas shopping seasons. In mid-March 1941, The Wall Street Journal reported the results of a survey done in New York City. The Journal's headline put it succinctly: "Early Thanksgiving Not Worth Extra Turkey or Doll." Only 37% of stores surveyed favored the early date. In Washington, the federal government reported that the early Thanksgiving resulted in no boost to retail sales.

And so, on May 20, 1941, FDR called a press conference at the White House and announced that he was changing Thanksgiving Day back to its traditional date. The early Thanksgiving had been an "experiment," he said, and the experiment failed. It was too late to move the 1941 Thanksgiving back to the traditional date, but in 1942 Thanksgiving would revert to the last Thursday of the month. This was "the first time any New Deal experiment was voluntarily abandoned," a Washington Post columnist wrote.

Apparently during the debate over whether to honor the Roosevelt's wishes,

People started referring to Nov. 30 as the "Republican Thanksgiving" and Nov. 23 as the "Democratic Thanksgiving" or "Franksgiving."