Category Archives: Economics
A Must Watch on “Climate Change” from Climate Skeptic
Catastrophe Denied: The Science of the Skeptics Position (studio version) from Warren Meyer on Vimeo.
Warren is local to me (he lives about three miles away actually), and runs both the excellent libertarian small business and economics blog CoyoteBlog, and the absolutely essential climate blog Climate Skeptic.
The Reports Of CA’s Jobs Death Are Greatly Exaggerated
Ezra Klein links an interesting story by econoblogger Ryan Avent about declining cities. His post is a fairly interesting read about how (or whether to) try to save dying manufacturing cities.
But one of his passages discusses a greatly different topic. As a California resident, I’m stuck with a very high-tax, heavy-regulating, dysfunctional state government that tries to milk its residents of their lifeblood to pay for bloated, inefficient, and overpriced social services. Like most governments, even when facing a brutal economic clime like the one we’re currently in, they don’t want to face the music and truly cut spending to the bone, they’re going to try to clamor for federal help. Even with crippling taxation on the nation’s largest economy, they can’t make ends meet.
So what do they constantly do? They make it worse (I’ll have a post on 2010’s new CA laws making it worse soon). Each time they do so, the pronouncement from all those with right-of-center economics is that they’re going to destroy jobs and kill our state economy.
This is true — to an extent. Their policies do harm the economy. But its effect is greatly overstated for a reason that Avent points out:
The value in economically dynamic cities is the people that populate them. Where once, firms would pay high land prices to be near coal deposits or harbors, based on the economic advantages those amenities conferred, they now pay high land prices to be near talent. This yen to concentrate in particular areas has a number of dynamics. Firms want to be near customers and clients. Workers want to be near firms. Firms want to be near workers. Where there are lots of firms and workers, there will also be businesses serving those workers — in business and in the provision of consumption opportunities — and those services attract additional firms and workers. Everyone wants to be where everyone is, and it’s tough for anyone to go somewhere else because somewhere else is where people aren’t.
As every reader here knows, I’m a pretty hardcore libertarian. I hate California’s 9.3% state income tax, sales taxes hovering around the 8% mark, property taxes which aren’t high on a percentage basis (if you can avoid mello-roos) but are very high due to the cost of housing, nanny-state restrictions, and generally the higher price for almost all goods and services brought on by the taxes and regulations imposed on businesses. As a frequent traveler, I’m sometimes shocked at how much cheaper FOOD is elsewhere in the country. You’d think that the biggest thing I’d want to do in life would be to leave.
But I’m still here. Why? Because there’s a lot here worth living for. The job market is plentiful. If I were to leave my current employer there’s plenty of other engineering opportunities within very close proximity. The weather is absolutely perfect (something many readers may hate me for saying on January 5). I’m in close proximity to beaches and mountains, to great entertainment and dining options, and generally live in a very culturally rich and diverse place.
So what happens? Educated professionals want to be here. Companies want to be here to make use of the talents of those educated people. Support and service industries want to locate here to cater to those people. Those industries need labor, so labor all across the education spectrum is in demand. And this creates a cycle, attracting more professionals starting more companies requiring more services requiring more labor. The region grows.
And this attracts government. Make no mistake — economic activity is a tasty morsel, and government is a parasite that grows fatter and fatter on that morsel. Parasites steal from their hosts, they act as a drag and harm their hosts, but the good ones ensure that they never grow large enough to kill their host. Economic activity comes first, and government feeds on it second.
Why do the booming economic areas of the country correlate with some of the highest-taxed and highest-regulated locales of the world (think Massachusetts, New York, SoCal and NorCal, Chicago, etc)? Because the economic activity and the people came first, and once enough people wanted to live in the location the government knew it could feed and grow fat. While CA and MA have both been struggling with a domestic outflow of migration (Americans moving from those states to other US states), they are both growing in population due to international inflow. Despite the growth of government, these states are still alive. Where are the hottest “new” areas of growth? Places with critical mass of talent, such as Atlanta, Austin, or Minneapolis, but without a highly-developed parasite. The parasite is getting ready to feed, though.
To bring this back to Ryan Avent’s point, places like California and the northeast corridor, or Chicago, are not dying because their economies haven’t changed. The talent in the locale is still generating economic activity. The areas getting killed are the manufacturing-heavy rust belt areas, where as labor-intensive manufacturing is offshored and only capital-intensive manufacturing is retained, there is much less need for people. The talent in those locales has been made obsolete, and the “critical mass” of the newer type of talent was already established elsewhere.
There are a lot of things I like about California, and a lot of things I don’t like. But despite the proclamations of my right-leaning colleagues, the rest of the country need not write their eulogies for California yet.
Just because people make bad choices…
…Doesn’t mean they shouldn’t have any choice at all. The first freedom is the freedom to fail…
And when it comes to choosing our leaders in this country… whoooo boy have we failed big time, for a long time.
So fellow gunblogger Tam, being an Ovarian American, got a bit tweaked at a comment over at Travis Corcorans site (for those who don’t know, Travis is a somewhat radical libertarian… and for that matter so is Tam) t’other day:
“I think that female suffrage has been an unremitted disaster – all of the socialism that we’ve experienced in the US has happened since, and because women have been allowed to vote.”
Excluding snark, Tams comment boiled down to “correlation does not equal causation”; which normally I am one of the first to trumpet… but in this case there is a causative link… Or at least most major studies of voting demographics seem to show one.
The other part of her comment was that she (nor anyone) shouldn’t be denied the right to vote (which is not, in fact, a right; but a privilege as a member of society. It can be granted by society, taken away by society, and does not exist in any context without society, therefore is not a right.) because of the choices some might make.
And in that, I’m entirely with her.
But we really do need to look at why women, in the significant majority, vote for the nanny state; and on the larger scale in general, why people who vote for nannyism do so.
The three major events or major societal changes in 20th century that did more to advance the nanny government than all other events combined were:
1. World War 1
2. Womens suffrage
3. Massive expansion of university education
I note “directly” above, because indirectly the 16th and 17th amendments (income tax, and direct election of senators) may have had an even greater effect; and enabled and encouraged such nannyism… in fact the current nannystate would be impossible without them… but were not direct contributors to voting for nannyism.. In fact income taxes tend to push voting away from nannyism… at least for those who actually pay those taxes.
I’ve talked about point 1 before (along with about a hundred scholarly books, phd. dissertations etc…). By depriving most of Europe of a full generation of its healthiest, most aggressive, and most ambitious men; an environment was created that was dominated by the risk averse, and those who were hurting and suffering… and the entirety of Europe has never really recovered. Basically, the ’14-’18 war took the guts out of the continent, and they haven’t come back, (bar a minor resurgence for the second great war… and it sadly was a minor resurgence. Just look at England).
Everyone and their uncle has looked at point 3.
Point two though… it’s one of those third rail topics. You can’t talk about it publicly or you risk being eviscerated by… well by Tam for example, never mind the lefties.
So first things first. Point two is true, by all available statistics. Historically speaking, women vote for more nannyism at about 2/3 to 1/3.
HOWEVER, just because item two is true (and some rather exhaustive demographic studies have been done showing that it is) doesn’t mean women shouldn’t be allowed to vote.
American blacks and hispanics are more likely to vote for leftists idiocy too (over 80% to 20% for blacks, hispanics are highly variable), that doesn’t mean they should be barred from voting either.
The first freedom is the freedom to fail. That includes the freedom to make bad choices; even if those bad choices effect other members of society (this is where the anarchists, Spoonerists, and Rothbardites usually jump up and down and start yelling).
The thing is this: It’s not that women, blacks, or hispanics are inherently more socialist than white males; or are less capable of making good political judgments. It’s that they perceive (I think, in general, wrongly) that their interest is better served with leftist policies.
In general, over the long term, and free of interference or distortion; people will vote their perceived interests.
The “more vulnerable” of society (which up until recently included the majority of women, blacks, and hispanics) will almost always vote for more “safety” than more freedom; because as I said above, the first freedom is freedom to fail, and they have historically been more likely to suffer under the negative consequences of failure, and therefore perceive the risk/reward metric differently than white males have historically.
Also, both the most wealthy, and most educated members of society (who believe either that the negatives impacts of leftism wont effect them greatly; or that they can benefit more from the “system” if more government control is in place, at the expense of the slightly less educated risk taking capitalists that would otherwise dominate), and the poorest and least educated members of society (who generally believe that they will not be able to succeed to a greater degree than the government would provide largess), generally, vote for more protectionism, socialism, leftism etc…
This is true even in rural “white” “bible belt” America, where protectionism, unions, government works projects and the like are seen as good business economically; even while voting for socially conservative policies and politicians.
Also, this split is by no means stable. As I said, people will tend to vote their perceived interests. Men will vote left and women will vote right, if the positions floated match their perceived interest. Franklin D. Roosevelt was elected by landslide four times. Reagan was elected by landslide twice.
The problem then is not that women, minorities, and the poor vote left, or vote for socialism necessarily.
The problem is that they perceive (generally incorrectly) that their interests, and at least to some extent the interests of society, are better served by leftism.
So the task for us, is making the large majority of the people understand that leftism, even in the soft and limited forms of it like public works projects, job protection policies, tarrifs etc… is not in their interest, or the interest of society as a whole.
That’s a rather difficult task; because for someone who is naturally risk averse, capitalism (and specifically libertarian free market based capitalism) seems very risky… Heck, it IS very risky, that’s the point. You take risks, you fail, and you have the freedom to get back up and take more risks and succeed (or fail again).
Many people out there would happily vote for a “guaranteed” living, even if it was less than half what they could be making without a “guarantee”, and even if you could prove to them the “guarantee” was really false. It’s just the way they’re wired, and no amount of facts or logical arguments are going to convince them.
Many others are willing to accept a bit of risk, but they want a great big “safety net” underneath them for when they fall.
These people, even if they are shown it isn’t really true… they WANT it to be true bad enough, that they are willing to try and force that vision on the rest of us.
Those people (and by conventional estimate they make up about 40% of the population) are ALWAYS going to vote for the “safety and security” lie. They are going to vote for the nanny no matter what.
On the other hand, there are about 40% of the population who are always going to vote for the riskier path, that they can reap more reward from.
Even in Reagans 49 state landslide vs. Mondale, he only got 58.8% of the popular vote.
Nixon crushed Mcgovern 49 to 1 as well, and it was still a 60%/40% split.
Even in Roosevelts “New Deal” landslide against Hoover, he only got 57.4% of the popular vote (in ’36 against Alf Landon, 60.8%, the biggest landslide since the civil war. In ’40 against Wendell Wilkie, 54.7%. In ’44 against Thomas Dewey, 53.4%).
The 40% on either side is a pretty stable number; barring major events in society that temporarily distort it, like wars and disasters…. And even then, in the last 110 years, in every national election, the left has never had less than 35%, and neither has the right… And neither have had more than 60.8% either.
The fact is, some people will believe what they want to believe, or what they’re afraid to believe, over the truth; no matter how clear the truth is made to them.
It’s the remaining 20% that we need to get to, and teach them that it is ALWAYS a lie.
In a society where the government does not artificially force the private economy into failure, the government cannot possibly do better for you than you can do for yourself. Giving the government more power, and more control, is NEVER in your best interest, or in the interest of society.
Saying that “womens suffrage caused socialism” (which isn’t what Travis said exactly, but it’s certainly what a lot of people would hear from what he said) isn’t exactly helpful in that.
The real right to health care
The healthcare industry in the US is a complex issue. Small businesses ask “How do self-funded health plans work?” Major corporations look for ways to reduce healthcare costs. Individuals below the poverty line often struggle to receive treatment. The list goes on. And Democrats are addicted to saying that there is a right to health care, and subsequently hammering anyone who opposes their disastrous reform bill as opposing that right. The truth is, there is a right to health care, and it is consistently opposed by the left, not the right.
Put simply, each person has the right to seek the health care he deems appropriate for him and his family within the limits of his budget or insurance. However, even a simple visit to the dentist because of toothache can end in a costly bill. Anyone in this position might be pleased to know that hydrogen peroxide may temporarily help an aching tooth. Anyhow, a corollary to this is that each person has the right to seek the health insurance that he deems appropriate. This same right applies when buying TVs, cars, dinner, books, etc., and is fundamental to a free existence.
First, an example from Britain of a grievous violation of this right:
If health care is a fundamental right, equality under the law would seem to require that everyone have the same level of care, regardless of their resources. That principle was illustrated by the case of Debbie Hirst, a British woman with metastasized breast cancer who in 2007 was denied access to a commonly used drug on the grounds that it was too expensive.
When Hirst decided to raise money to pay for the drug on her own, she was told that doing so would make her ineligible for further treatment by the National Health Service. According to The New York Times, “Officials said that allowing Mrs. Hirst and others like her to pay for extra drugs to supplement government care would violate the philosophy of the health service by giving richer patients an unfair advantage over poorer ones.” The right to health care is so important, it seems, that it can nullify itself.
Mrs. Hirst was forced into a system where the right to seek appropriate care was appropriated by the government. When the National Health Service exercised a right that did not belong to it, Mrs. Hirst tried to use the resources available to her to reassert her right to seek health care. She was told if she were to do so, she would be forced out of the program that provides the only affordable health care for the lower and middle classes in the UK.
Take that example and apply it to the Reid bill. Centralized authority regulating what health insurance can and can’t cover, can and can’t cost, how much doctors will get paid by the public option… From Richard Epstein in the Wall Street Journal:
Normally, insurers have the power to underwrite-to choose their line of business, to select and to price risks, and to decline unattractive risks. Not under the Reid bill. In its frantic effort to expand coverage to the uninsured, the bill will create state health-care exchanges supported by generous federal subsidies to unspecified millions of needy and low-income individuals. Any health insurance carrier that steers clear of these exchanges cannot keep its customers. Any insurance carrier that enters Mr. Reid’s inferno will lose its financial shirt.
Here are some reasons why. Initially, all insurers have to take all comers and to renew all policies except for nonpayment of premiums. Insurers are not allowed to take into account differential risks based on pre-existing conditions. And the premium differentials based on such matters as age and tobacco use are smaller than the market spreads. If too many customers demand coverage from a given insurer to insure efficiently, it’s the government that will decide how many they have to keep and who they are.
Next, it’s the government that requires extensive coverage including “ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse disorder services, prescription drugs, rehabilitative and habilitative [sic!] services and devices, laboratory services, preventive and wellness services and chronic disease management, pediatric services, including oral and vision care.” The price squeeze gets even tighter because in every required area of care a collection of government standards will help set the minimum level of required services.
Ostensibly, the Reid bill does not impose any direct price controls on what health insurers can charge for this veritable cornucopia of services. But the bill’s complex, cooperative federalism scheme authorizes state regulators, after recommendations from the federal government, to exclude insurers from the exchanges if their prices are too high, which would again be a competitive death knell. Exile from the exchange does not, however, restore traditional underwriting controls, as the Reid bill and other federal and state regulation continue to apply to these firms.
The bill is designed to turn the health industry from servants of payers (primarily employers, insurers, and the government) into a servants of Congress and the President.
We are headed towards a day where our fundamental right to seek health care is non-existent, replaced by a state of submission where our betters in Washington decide what health care we should get. Anyone who equates a right to health care with taxpayer subsidized health care is mounting an assault on the real right to health care. Call them out, prove them wrong, and shout them down.
UPDATE 12/23: Added the section from Richard Epstein.
