Dead(Dog)weight Loss

From Time:

Pierre-Alain Némitz said he's been overwhelmed by insults and threats since the Reconvilier municipal council he heads informed residents in late December they risked seeing their dogs killed if they don't pay the $48.50 annual tax the village levies per pooch.

Reconviler is a Swiss village.

From all of us at TPS...

Happy Thanksgiving!

Property Rights in India

My close friend and colleague Shruti Rajagopalan has an article at the WSJ on the Allahabad High Court's recent decision concerning the Babri Mosque. Here's an excerpt:

With such a precedent, state legislatures are too feeble to prevent similar disputes in other religious sites where Hindus and Muslims pray together, such as Mathura and Varanasi. In a land of 820 million Hindus who worship several hundred forms of God, the danger of expropriation in the name of faith is real and imminent.

ATSRTWT.

Very Good Sentences

From Megan McArdle, on the new Arizona Immigration Law:

I'd be a lot more sympathetic to this law, in fact, if it required the police to check the immigration status of every single person they pulled over, without any gauzy "reason to believe" fig leaf to cover up what's really going on.

Raise your hand if you think that law could have passed in Arizona.

My hand is down, by the way.

The Right to Hang (Your Laundry)?

Story here:

PERKASIE, Pennsylvania (Reuters) – Carin Froehlich pegs her laundry to three clotheslines strung between trees outside her 18th-century farmhouse, knowing that her actions annoy local officials who have asked her to stop.

Froehlich is among the growing number of people across America fighting for the right to dry their laundry outside against a rising tide of housing associations who oppose the practice despite its energy-saving green appeal.

Although there are no formal laws in this southeast Pennsylvania town against drying laundry outside, a town official called Froehlich to ask her to stop drying clothes in the sun. And she received two anonymous notes from neighbors saying they did not want to see her underwear flapping about.

"They said it made the place look like trailer trash," she said, in her yard across the street from a row of neat, suburban houses. "They said they didn't want to look at my 'unmentionables.'"

Froehlich says she hangs her underwear inside. The effervescent 54-year-old is one of a growing number of Americans demanding the right to dry laundry on clotheslines despite local rules and a culture that frowns on it.

[...]

Florida, Utah, Maine, Vermont, Colorado, and Hawaii have passed laws restricting the rights of local authorities to stop residents using clotheslines. Another five states are considering similar measures, said Lee, 35, a former lawyer who quit to run the non-profit group.

Do the 6 states that have already passed laws against clotheslines have anything in common? That is a very diverse group.

While states are getting in on the action, it seems primarily that private homeowners associations are the primary conduit here. It brings up the hairy issue of distinguishing between clubs and government. It is hard for me to see it as coercion since that meant there was a contract you had to agree to ex-ante in order to buy the house, but the same can be said of any local government rule (or pirate ships for that matter).

I take very seriously the externality concerns in this story. While I can not find it in me to object to someone hanging their laundry, others might feel it equivalent to someone standing nude on their front lawn. The Coasian/Bloomington school in me thinks that this should be resolved over a pie among neighbors rather than in the courts.

(Hat Tip: Jason Oberle for the story.)

Vromen on Freakonomics

TC at MR points us to Jack J. Vromen's essay in the Erasmus Journal for Philosophy and Economics, titled "The Booming Economics-Made-Fun Book Genre: More Than Having Fun, But Less Than Economic Imperialism."

It was the second part of the title that caught my interest, and indeed the essay is not so much a recent review of the way in which economics has expanded in popularity as it is a discussion of what constitutes economics and its place in social science. In particular, Vromen offers a response to the genre's critics that view this as "economics imperialism."

These critics are found in the other social sciences and parley their overall critique of economics (or at least what they perceive economics to be) and its expansion into "their" subject matter. By "their" subject matter, it is taken to mean the general non-econ aspects of life that tend to be discussed in this genre (more sex is safer sex, tipping your dentist, identifying the cheating sumo wrestlers, etc). They apparently view this as economists stealing their subject matter to apply our own (distasteful) methodology towards understanding it. In short, the criticism is that they do not want people "thinking like economists" in their subject area.

My favorite passage comes on page 79, in which he dismisses this critisim on the grounds that ideas are public, not private goods (whether he catches the irony or not, I cannot tell):

This presupposes that subjects (and issues and phenomena in general) can be appropriated by some discipline in a similar way as natural resources in some territory, such as oil and gas, can be appropriated by some foreign country or company. But are the subjects tackled or addressed by some discipline like that? If economists start tackling “outlandish” phenomena, are other disciplines that traditionally tackled these phenomena thereby denied access to them? It seems not. Unlike natural resources, which are private goods, subjects are more like public goods. Their “use” by the one discipline does not diminish the opportunities for other disciplines to “use” them. Disciplines cannot be dispossessed of their subjects in the same way that countries can be dispossessed of their natural resources.

That is thinking like an economist to determine the subject domain of economics, and the critics will not like it. I loved the essay, and highly recommend it.

From The People's Republic

Hat Tip to KipEsquire:

Staff at local government offices in Hubei province were given the order in a move intended to set an example for the rest of the nation, according to state media.

And if they fail to smoke their way through 230,000 packs of locally-produced cigarettes, the officials could face fines.

Brands such as Huanghelou have been earmarked as part of the official quota.

"The regulation will boost the local economy via the cigarette tax," local official Chen Nianzu was quoted as saying in the Global Times.

That last sentance subtracted 19 months off my life, it was that painful.

At Least We're Not Russia

I'm glad I don't find myself thinking that more often than I do. From the NYT:

Known as Avtovaz for short, it is one of the least efficient automobile factories anywhere in the world — each worker produces, on average, eight cars a year, compared with 36 cars a year at General Motors’ assembly line in Bowling Green, Ky., for example.
...
The factory, a monument to Soviet gigantism in industrial design, is a panoramic sprawl of pipes and smokestacks on a bank of the Volga River, 460 miles southeast of Moscow. It employs 104,000 assembly line workers, many of whom still toil with hand-held wrenches.

This factory persists because of subsidization and bailouts from the Russian government. The details of the bailout are less invasive (no executive firings or requests for a new business plans), but I see that as political hubris that unintentionally serving the role of deterring more firms from finding government bailouts attractive.

Hat Tip: Dave Esposito for the link.

Local Currency

Almost every time there is a recession, we hear more about the issuance of local currency. This was probably most prevalent during the Great Depression, when the federal currency was in contraction (see Williamson et al.). Suzie Witmer at 4 am frames the concept correctly and then asks all the right questions:

This would be like saying Walmart created its own currency when it started creating gift cards. An interesting part about this system though is while you can purchase almost everything at Walmart, people would be protesting if this company started paying their employees with gift cards....what happens though when participating members want to go on vacation in an area beyond Ithaca's borders?...What if they wanted to purchase a car that is not created in Ithaca and therefore does not accept Ithaca Hours as trading power? What if a neighboring community has higher quality products or lower prices on equal goods?

Indeed,Claudia has pointed out that coal mines in West Virginia often provided their own "company stores" as part of a package of benefits to their employees, and that company store "price gouging" was a myth. There is no functional difference between company stores, gift cards, and local currency.

On the surface Ithica Hours do seem to be voluntary, employers don't have to pay them and employees don't have to accept them. Given all the constraints Witmer points out, why does anyone adopt them? This isn't the Great Depression, where the federal money supply was choked off.

The motivation of the organization behind Ithica Hours seem to be your run-of-the-mill buy local fallacy, and amusingly they clearly recognize the advantages of expanding membership to as many people as possible. The organization appears to attract members by creating networking and advertising opportunities, as well as offering business loans in Ithica Hours at a interest rate of zero percent.

This subsidization appears to rely on donations, so fortunately the unseen consequences of the underlying fallacy are largely voluntary in their distribution. Since it is voluntary buy local bias, the people who prefer them are probably only substituting the color of their money, so the marginal cost of this program is probably pretty small.

Brilliance

From CNN:

President Obama announced Monday that struggling automotive giants General Motors and Chrysler will be given a "limited" period of time to "restructure in a way that would justify an investment of additional taxpayer dollars."

What a phenomenal idea! In fact, if GM and Chrysler restructure in a way that justifies additional investment, taxpayers will give them money directly instead of via government bureaucrats!

Too Voter Visible to Fail

Dave Prychitko at TAE has a great post on the "Too Big To Fail Fallacy." Throughout it he points out the difficulty of line drawing of what constitutes "too big." The Madoff investors? Workers on Main Street? Do read the whole thing.

My thinking on the subject is that it is not a linear relationship, where small groups add up into big collectives, but a circular one. "We" want to protect the local Mom-n-Pop's because of how cute and localish they are, and thus "we" don't want to see them fail. They're just so tiny and cute, how can you just let them fail?

The further you move in either extreme of size, the more likely you are to have populist and elitist support for circumventing their evolution.

Subsidize Things You Want More Of

Like bad decisions, as Sowell points out:

We hear a lot of talk in some quarters about how any one of us could be in the same financial trouble that many homeowners are in if we lost our job or had some other misfortune. The pat phrase is that we are all just a few paydays away from being in the same predicament.

Another way of saying the same thing is that some people live high enough on the hog that any of the common misfortunes of life can ruin them.

He then answers just the right question(s):

What if the foreclosures are not stopped?

Will millions of homes just sit empty? Or will new people move into those homes, now selling for lower prices-- prices perhaps more within the means of the new occupants?

The same politicians who have been talking about a need for "affordable housing" for years are now suddenly alarmed that home prices are falling. How can housing become more affordable unless prices fall?

The political meaning of "affordable housing" is housing that is made more affordable by politicians intervening to create government subsidies, rent control or other gimmicks for which politicians can take credit.

Affordable housing produced by market forces provides no benefit to politicians and has no attraction for them.

Study after study, not only here but in other countries, show that the most affordable housing is where there has been the least government interference with the market-- contrary to rhetoric.

COBRA Changes For Stimulus?

Med Law Blog has the details, but TPS friend Jason Oberle nails down what amounts to a rewriting of expired contracts:

Consider firm A has 100 employees and between Sept. 1, 2008 and Jan. 1, 2009 50 employees have been let go. The average cost of 65% of the COBRA benefit being carried by the employer is $650. Now that employee must retro-actively notify and further support the 50 people at $650 on the corporate books until the next tax season before the federal government will reimburse through a tax-credit. Sounds like an additional cost of $32,500 per month on the struggling business.

The Moral and Just Socialist Society

None of that voluntary market transaction evil greed in Venezuela. Troops ordered to turn on their own people? It's just the growing pains of a new order. CNN:

Venezuelan President Hugo Chavez has ordered troops to immediately take over rice-processing plants in his country, accusing some businesses of ignoring prices set by the government.

"What are some of the sectors of the agricultural industry doing? They buy rice from producers, and they don't want to produce regulated rice," Chavez said in a televised address Saturday.

"Well, I've ordered the intervention, starting right now, of all those sectors of the agricultural industry."

Recall that I have previously stated that I support Chavez in these interventions, while acknowledging that it may mean that I am evil.

With that in mind...keep it up Hugo!

Even Counting is Hard for the Public Sector

Why we trust these buffoons to run so many aspects of our lives, I will never fully understand. From TIME:

Why does it matter who oversees the census? In very general terms, Republicans would prefer to err on the side of under-counting and Democrats would prefer to err on the side of over-counting. The options can yield very different numbers for demographic groups and localities — and they have significant political and policy implications. This most recent skirmish is more manufactured than real, the result of willful misunderstandings. But it has its roots in an ongoing battle over whom the census counts — and how.

Despite its self-granted monopoly in education, government agencies cannot even count.

Obama's Patriot Act

The 2009 Stimulus Bill:

• Fear mongering and threats of catastrophe are used to pressure the public and lawmakers into passing it.
• For reasons above, it is being passed through congress quite hastily.
  
• Has a misleading title, who could be against Patriotism Stimulus? Much of the bill seems unrelated to the claims of its title, and creepy provisions seem to be buried in the bill.
• Bizarre arguments for killing freedom in order to save it.

The perverse question then is: If you had to choose, would you rather have the Patriot Act or the Stimulus Bill?

Tough call, but we're about to have both.

Regulating Life on Other Planets

TIME asks "Are We Bringing Our Germs to Mars?", and reveals that we have at least a hint of environmental regulations for other planets:

But beyond the broad language of the Outer Space Treaty, we don't really have set guidelines for how we should treat microbial life on another planet, should we run across it.

But there are efforts to fix that:

That's why NASA planetary scientist Christopher McKay, in an article in this week's Science, suggests the need for a stronger policy that ensures all exploration of Mars be "biologically reversible" — meaning we would be required to effectively wipe away our footprints and remove any possibility of contamination, by leaving behind nothing that could foster alien microbial growth. Such a policy would be especially necessary if we discover that life on Mars has emerged independently from life on Earth — what McKay calls a "second genesis" (as opposed to Martian life that arose because of meteorites exchanged between Mars and a hospitable Earth, a condition in which the two planets would share a tree of life and contamination would be less of a concern). If there really were a second genesis on Mars, "contamination by even one Earth bacterium may be a serious issue of environmental ethics," McKay writes.

My first thought: "What a pointless thing to spend time working on!"
My second thought: "Congress should devote all their attention to working on this issue!"

The Least Disappointing News I Read Yesterday

With respect to the expansion of government intervention in the economy:

In response to the publishing world's troubles, historian and best-selling author Douglas Brinkley has floated what may be the most improbable bailout yet: a federal subsidy for book reviews. Brinkley told the Times, "Like public television, I think book review sections almost need to get subsidized to keep the intellectual life in America alive. … So if we can do that for radio and we could do it for television, why can't we do it for the book industry, which is suffering terribly right now?"

Since this seems only "improbable," it makes it the least disappointing thing I read yesterday. Yesterday was a very bad day, even small measures of consolation are disappearing.

Not to mention this, this, and this: Image is everything, actual results are nothing.

What Would I Do For the Economy?

Russ Roberts inspires...

So what would I do to stimulate the economy out of the recession? I would look for things that would have both an immediate positive impact that are also good for the long-run:

1. Legalize drugs and prostitution: Bring the enormous amount of economic activity lost in space back into the legal sector, including all those off-shore bank accounts that would be injected into the banking system.
2. Cut every labor regulation I could, including the minimum wage. The unintended consequences of these acts are too well understood for anyone with a good conscience to overlook. Enough is enough, these laws were written for the purpose of racist eugenics and sexism.
3. More free trade, especially in agriculture: We should be buying much, much, more food from places like Africa and Asia. We should not be taxing households to pay American farmers not to grow food. Cheaper food and lower taxes mean more income for households.
4. Eliminate taxes on businesses, tax household income more broadly at a flat (and preferably low) rate. Businesses either pay out their earnings to households as income or invest it in expanding their business. Taxing household income twice makes no sense. The later part is good for expansion, as is a simpler tax code without a bunch of exemptions. I would settle for a negative income tax at low levels of income, if you must.
5. Cut the payroll tax.

Here is what I would NOT do:

1. Pick an arbitrarily large number (say, $880 billion) and decide to spend it, with the projects to be determined later. No, No, No. If you are looking for spending stimuli (and plenty believe that can work, even if I don't), you look for projects that are worthy in their own right. Otherwise you are destroying valuable resources.
   
2. Talk about depression and catastrophe every 5 minutes. Former President Bush, I'm looking at you when I say this. It's not great national defense policy, and it is terrible economic policy.
3. Nationalize or bailout any firms.
   

The Bailout: Coming This January

Be sure to click on the photo and read the smaller text.
Hat Tip: Philippe Legrain