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Saturday, July 30, 2005

Keep on Truckin'

The economic expansion that just won't quit:
[I]t was the ninth straight quarter the economy exceeded its long-term growth rate of about 3%. And although the nation can't match China's gazelle-like 9.5% clip, it is outperforming most other industrialized nations and topping average growth during the booming 1990s.

And analysts said the economy was actually stronger than it appeared, as a sharp drawdown of inventories during the quarter depressed the headline growth number. [...]

Fearing a slowdown earlier in the quarter, businesses curbed production.

But consumers kept buying, whittling store shelves. Inventories of autos, for example, were pared through aggressive sales promotions by General Motors Corp. and others.

The overall inventory reduction cut about 2.4 percentage points from second-quarter growth.

"The replenishment of diminished inventories soon will quicken economic activity," John Lonski, chief economist at Moody's Investors Service, said in a report Friday.

He added that inventory depletion of the size seen in the second quarter normally occurred during recessions — efforts to replenish such inventories "helps to power the economy out of a recession."

Some analysts are forecasting that growth in the current July-to-September period could hit or top 4%.

A separate report Friday suggested that inflation remained tame.

Especially amazing given the relatively high price of oil. Also interesting is that these nine straight quarters above 3% immediately followed the 2003 tax cuts. Let's make those tax cuts permanent!

Thursday, July 28, 2005


Have you ever read a book that you felt you needed to read because the book and its author were frequently cited but the book was so onerous to read that you dreaded having to finish it to the point where you had to prohibit yourself from reading anything else until you finished it because you knew that otherwise you would never get through it? Well, if you like books like that, I heartily recommend A Theory of Justice (Revised Edition) by John Rawls.

I consider Rawls, Hayek (The Road to Serfdom, and The Fatal Conceit), and Nozick (Anarchy, State, and Utopia) as part of the same genre and I happen to frequent blogs that discuss the contents of these authors' writings. I've complained vehemently about Hayek's writing style even though I have great respect for the content of Hayek's publications. It was beyond my ability to imagine that I could like Rawls' style even less, yet, that turned out to be the case. Hayek had the habit of creating outrageously long and complex sentences, say of the form ABCDEFG where each of A through G were long enough to be a sentence in their own right. Rawls' sentences are more bite size. He might express the contents of ABCDEFG as ABC. BCD. CDE. DEF. EFG. Unfortunately, this means that even though the individual sentences are shorter, because of the repetition, it essentially takes Rawls 500+ pages to convey what should have only taken about 200 pages.

Perhaps the intersection of philosophy, political theory, economics, and sociology is so difficult to write about, that it's impossible to convey the necessary information without writing in a style that's distinctively unpleasant to read. But I don't think so. For example, I think I can personally describe the essence of the authors in one short paragraph each. Conveniently, Nozick has already done this for his book:

"From each as they choose, to each as they are chosen."

Hayek's easy enough (for the Fatal Conceit, anyway):

When implementing new policy, lots of unexpected shit happens.

And lastly for Rawl's tomb (or is that tome?):

If you give everybody a temporary frontal lobotomy so they don't know diddley squat about anything and turn them loose to design society's political and economic institutions, they'd no doubt do a great job, and the resulting system would no doubt have lots of socialism (redistribution) and ensure that everybody's self esteem is taken care of because self esteem is, after all, the most important thing.

There are many articles critiquing Rawls and his Theory, most of which do a much better job than I could. Now that I've read the book, I can endorse this one in particular. If you read that critique, you'll see how the paragraph above describes the contents of Rawls' book.

Maybe now that I'm finally done reading Rawls' book, I'll have more time to blog.

Tuesday, July 26, 2005

Tradition and the onslaught of abstract reasoning

Author Lee Harris presents a rather lengthy piece titled The Future of Tradition. It covers quite a lot of ground, touching on subjects like: tradition, ethos, civilization, the family, exemplars and character to name just a few. Here are some excerpts:

In every culture war the existing customs and traditions of a society are called to the bar of reason and ruthlessly interrogated and cross-examined by an intellectual elite asking whether they can be rationally justified or are simply the products of superstition and thus unworthy of being taken seriously by enlightened men and women.

Indeed, there could be no better example of this disdainful attitude toward inherited tradition than that displayed by the chief justice of the Supreme Court of Canada in discussing her court's legalization of gay marriage, clearly expressed by her summary dismissal of any opposition to the high court's decision as arising from nothing more than "residual personal prejudice." Against such opposition, it is no wonder that many conservatives--including many of those who call themselves neoconservatives--have attempted to combat the opponents of tradition with their opponents' own weapon of enlightened rationality.

But what if tradition is not reducible to a set of declarative sentences? What if all tradition took the form of "Resist not the tiger" rather than "Tigers are harmless"? The declarative-sentence paradigm suggests a tradition can be reduced to a set of formal beliefs that can be stated, catechism-like, as a proposition, such as "Tigers are not dangerous" or "Celibacy is better than procreation." But once we have freed ourselves from the declarative illusion we can see that a tradition always emerges first in the form of commands, prohibitions and instructions, and that the formalization of this tradition into a set of declarative propositions comes at a secondary stage--the stage of reflection and thought. In the beginning, as Goethe's Faust declares, was not the Word, but the Act. Or, to adopt the framework of Goethe's contemporary, Hegel, phenomenologically, tradition emerges originally as an imperative behavioral code wired into our visceral systems long before it is reflected as an idea in our minds.

The intellectualist interpretation of a tradition as a corpus of formal propositions whose truth or falsity may be argued lies at the heart of all efforts to find an objective or neutral way to judge among competing traditions. This is evident in the Enlightenment's attack on tradition as outmoded superstition--an argument Hayek brilliantly demolishes. A tradition, he realizes, may well be justified by a community on nonsensical or irrational grounds; but this by itself need not make the tradition less useful to those who follow it.

Reason, logic, the endless quest for knowledge--these are all noble things. But no sensible person will agree to have them used against him to undermine his happiness and tranquility. Imagine your response if someone forced you to consider that your spouse might be cheating on you without your knowledge, or harangued you about how much you really know about what your teenage children do when you are not looking. Yes, we are willing to admit that there is much we cannot know about the people we love, and much that we have to take on blind faith, and much indeed about which a skeptic can raise questions--but must we hear it all?

It is not merely that it is useful to produce honest men and women. In order to obtain certain collective social goods, a society must first create human actors who are capable of achieving them. You must first produce courageous men if you wish to achieve the collective social good of defending your society; you must first produce prudent men if you wish to achieve the collective social good of keeping your society on a stable course; you must first produce men who are willing to control their impulses in order to create the collective social good of an orderly society.

This, too, explains why communities have historically reacted so severely against those who challenged their habits of the heart. What was really at stake in such a challenge was not the community's ideological superstructure but the ethical foundation on which it had been socially constructed--its inherited visceral code.

Tradition, then, is the only possible mode for transmitting a community's habits of the heart, and it does this by providing the recipe for making the kind of human beings who will viscerally feel and respond to the same habits of the heart as the community to which they belong.

To see institutions and traditions as recipes is to grasp at once how pointless it is to debate their truth or falsity. Is Julia Child's recipe for Bouillabaisse true or false? The question sounds absurd because it is. Here again, we seem to be caught in the quandary of cultural relativism. The recipe for creating different habits of the heart, like the recipes for creating different authentic dishes of various cultures, would appear to be ultimately a matter of taste. Indians like plenty of fiery spices; most American Southerners do not. How is it possible to devise a neutral method by which to judge which dish or which culture is objectively better?

The theory of tradition offered here is a pragmatic one: Does it keep up the established level of civilization? But, as we shall see, it is also dialectical: A tradition will be evaluated in terms of its success not only in keeping up the civilizational standards of the past, but also in providing the foundation for future civilizational improvement, meaning not merely improvements in the making of things, but in the making of human character, both at the individual and at the collective level.

Tradition, in short, is of value in keeping us civilized and in offering us a foundation for becoming even more civilized. It is a social construction that, being embodied in the behavior of future generations, becomes the basis of ever more elaborate and, indeed, even improbable social constructions.

In the beginning was the Deed, to quote Goethe's Faust once more, and it is the mother's deeds that provide the fundamental ethical substratum on which the rest of the social construction rests. But in certain societies, it is more than just that. It is an insistence that this fundamental ethical substratum--the ethical baseline according to which praise, honor and shame shall be distributed according to how one measures up to it--is raised far above the ethical baseline that prevailed in the past and even persists in large parts of the present population.

To a mother and father, a child is a project and the child's personality a trajectory. This is not a consciously held value or principle, taught by a book: It is the natural cognitive mode of the parent who, in looking upon a child, sees its past, present and future all at once, in a vision that is genuinely sub species aeternatis and not entirely unlike God's vision of the universe, even if it is a bit more partial. Others teach us how to be; our family teaches us how to become.

When an ethical code is wired into our visceral system, it is constructing a certain character type--the human being who has been "raised according to this tradition" has been programmed to feel shame and praise in a way that allows him to be a kinder and more thoughtful person. Certain ethical routes have been closed off to him, and he now knows that it is shameful to travel back down them. But something of equal and perhaps greater importance is shown to him, and this is the path that brings praise

This connecting link is a critical one, but one that we have tended to discount in contemporary American culture. For us, it is imperative that an 8-year-old boy should have esteem for himself, for the person that he is. We do not want him thinking, "I wish I could be like John"; instead, we demand that he think, "I'm just fine the way I am. I don't need to model my behavior on anyone else." But our insistence on creating self-esteem in an 8-year-old boy comes with a high price tag--by refusing to encourage the boy's dissatisfaction with himself as he is, we are inadvertently taking from him the primary human motivation to change oneself for the better. By pumping him full of self-esteem, we rob him of the will to set himself transformative projects and goals. Totally at peace with what he is, he ceases to have any reason to become something more--and certainly no reason at all to become what he could be.

The contemporary gospel of individual self-esteem is at odds with the universal tradition of mankind--a tradition that the German poet Rilke summed up in the concluding lines of a poem addressed to the torso of Apollo, whose heroic perfection Rilke saw as a challenge to our own far from perfect status quo--Du must dein Leben andern. "You must change your life."

In the current debate on gay marriage, its advocates are cast in the role of long-oppressed suppliants demanding their just due. Indeed, the whole question is put in terms of their legal and moral rights, against which the opponents of gay marriage have nothing to offer but "residual personal prejudice," to recall again the memorable words of the chief justice of the Canadian Supreme Court.

But it is a mistake to conflate the automatic with the irrational, since, as we have seen, an automatic and mindless response is precisely the mechanism by which the visceral code speaks to us. It triggers a rush of emotions because it is designed to do precisely this. Like certain automatic reflexes, such as jerking your hand off a burning stovetop, the sheer immediacy of our visceral response, far from being proof of its irrationality, demonstrates the critical importance, in times of peril and crisis, of not thinking before we act. If a man had to think before jumping out of the way of an onrushing car, or to meditate on his options before removing his hand from that hot stovetop, then reason, rather than being our help, would become our enemy. Some decisions are better left to reflexes--be these of our neurological system or of our visceral system.

The high solemnity of marriage has been transgenerationally wired into our visceral system. We must take it seriously and treat it solemnly, and this "must" must appear to us at the level of second nature; it must possess the quality of being ethically obvious. Marriage must not be mocked or ridiculed. But can marriage keep its solemnity now? Who will tell the rising generation that there are standards they must not fail to meet if they wish to live in a way that their grandfathers could respect?

The intelligentsia have no idea of the consequences that would ensue if middle America lost its simple faith in God and its equally simple trust in its fellow men. Their plain virtues and homespun beliefs are the bedrock of decency and integrity in our nation and in the world. These are the people who give their sons and daughters to defend the good and to defeat the evil. If in their eyes this clear and simple distinction is blurred through the dissemination of moral relativism and an aesthetic of ethical frivolity, where else will human decency find such willing and able defenders?

Even the most sophisticated of us have something to learn from the fundamentalism of middle America. For stripped of its quaint and antiquated ideological superstructure, there is a hard and solid kernel of wisdom embodied in the visceral code by which fundamentalists raise their children, and many of us, including many gay men like myself, are thankful to have been raised by parents who were so unshakably committed to the values of decency, and honesty, and integrity, and all those other homespun and corny principles. Reject the theology if you wish, but respect the ethical fundamentalism by which these people live: It is not a weakness of intellect, but a strength of character.

Middle Americans have increasingly tolerated the experiments in living of people like myself not out of stupidity, but out of the trustful magnanimity that is one of the great gifts of the Protestant ethos to our country and to the world. It is time for us all to begin tolerating back. The first step would be a rapid retreat from even the slightest whisper that marriage ever was or ever could be anything other than the shining example that most Americans still hold so sacred within their hearts, as they have every right to do. They have let us imagine the world as we wish; it is time we begin to let them imagine it as they wish.

Thursday, July 21, 2005

More Imporant News

New research shows that showering is extremely dangerous:
Traces of manganese found in household water could be sufficient to cause permanent brain damage to those who take a regular shower, according to a report published in the US journal Medical Hypotheses.

John Spangler of the Wake Forest University School of Medicine in North Carolina and his team suggested that breathing in vapour containing manganese salts could be dangerous over the longer term.

"Inhaling manganese, rather than eating or drinking it, is far more efficient at delivering manganese to the brain. The nerve cells involved in smell are a direct pathway for toxins to enter the brain," Spangler wrote.

I wonder if, by any chance, the research was sponsored by deoderant companies?

Wednesday, July 20, 2005

Hubbert's Peak?

According to The American Enterprise article linked to by Howie's post "As long as we don't interfere too much", "in 1956, Shell Oil geologist M. King Hubbert predicted domestic oil production would peak in 1969. He missed by one year."

Did he only miss by one year? I'm wondering if that's true. We don't really know yet, since we'll have to wait till the end of time to observe that no other year going forward has higher domestic oil production before we can be sure he's right.

I've been contemplating this for a while now, after noticing that crude oil exceeding $60/bbl didn't seem to make any difference at all. No significant effect on inflation. No significant effect on GDP growth. No significant effect on employment, productivity, or anything else, as far as I can tell. A bit of bitching and moaning at the pumps, perhaps, but little else. An article by Peter Huber explains why (at least partially):
[W]hen the price of crude doubles--rising from, say, $28 a barrel to $56--the price of the average mile rises only 10% to 15%. That just isn't enough to impel most of us to change our behavior very much. People who drive expensive cars that burn lots of gas are the least sensitive to rising fuel costs. Most of the cost of quality miles lies in fancy leather and such--what surrounds the gas tank, not what gets pumped into it.
For other uses of oil, similar analyses are found. The cost of the oil is a small part of the cost of operating the devices that use the oil. What this means is that "the
demand elasticity for crude is very low".

How about the long term supply elasticity for crude? I think it is much higher than the demand elasticity. Also, I think that there is a very real possibility that at some point in the future, crude oil prices will become and remain high enough because of long term growth in demand, such that it will be very profitable to extract oil from the shale in Colorado. If that happens, the domestic oil production of the United States might greatly exceed the peak reached in 1970.

Admittedly, I wouldn't bet on it. One reason is that it is my understanding (I could be wrong here) that shale oil in Alberta is can be extracted somewhat more cost effectively than the shale oil in Colorado. There are hundreds of billions or even trillions of barrels of oil in the shale in Alberta, and by the time we even make a dent in it, the oil age might be over, replaced by new energy sources, perhaps some based on technology we haven't even thought of yet. In this case, no one would ever bother extracting oil from the shale in Colorado, so U.S. production might not ever exceed its 1970 peak.

There is so much oil that can be profitably produced at $60+/bbl that as long as that price level doesn't bring down the global economy (which it doesn't seem to be), I think we're virtually guaranteed increasing oil production, on average, for decades to come.

As long as we don't interfere too much...

Bret makes the case that we can adapt and adjust to changes in the supply/demand balance for energy and that price itself is one of the guide post to help us adjust. We are of course more interested in power, the rate at which we can do useful things, than in raw energy resources. An excellent book on the real crux of this matter is The Bottomless Well. You might spend some time reading the preface and looking at the table of contents which are available at the linked to site. There is also some information at this site along with a link to many reviews of the book. Lest you think I am only dealing in rosy thoughts about this matter, have a look at this article which concludes with a note of concern that we could make a mess of things. The author's concern is that we might be unable to deal with the politics of some partial solutions like more nuclear power. I'm also concerned that some people will be too eager to do too much on the policy front by trying to have the government select the approved "winners" and risk foreclosing better options. In case you didn't catch my drift, I highly recommend the book!

Tuesday, July 19, 2005

The Long, Long, Long, Long Emergency

I was recently pointed to an article titled "The Long Emergency", one of many articles that I've seen that began springing up many decades ago claiming that we were imminently running out of oil and that the coming declines in production would affect us profoundly, even catastrophically. None of the previous predictions of this ilk proved correct, but might this? First let's consider some of the statements in the article.
A few weeks ago, the price of oil ratcheted above fifty-five dollars a barrel, which is about twenty dollars a barrel more than a year ago. The next day, the oil story was buried on page six of the New York Times business section. Apparently, the price of oil is not considered significant news, even when it goes up five bucks a barrel in the span of ten days. That same day, the stock market shot up more than a hundred points because, CNN said, government data showed no signs of inflation. Note to clueless nation: Call planet Earth. [...]
Note to clueless author: try learning some basic fundamentals of economic statistics. At any one moment in time, whether within an inflationary or deflationary environment, prices of some products and services are going up, other prices are going down. Given that the vast majority of prices are stable, the rise in one commodity doesn't make much difference. Overall, people are paying more or less the same for the goods and services they procure.
It is no exaggeration to state that reliable supplies of cheap oil and natural gas underlie everything we identify as the necessities of modern life - not to mention all of its comforts and luxuries [...]
That depends, I suppose, on the exact definitions of "exaggeration", "cheap", "underlie", "necessity", and "modern life", but my subjective interpretation renders a strong false when reading this statement. Few people I know would consider the current price of $60+/bbl of oil particularly cheap, yet it looks to me that somehow modern life is going on just fine - necessities, comforts, luxuries, and all.
The few Americans who are even aware that there is a gathering global-energy predicament usually misunderstand the core of the argument. That argument states that we don't have to run out of oil to start having severe problems with industrial civilization and its dependent systems. We only have to slip over the all-time production peak and begin a slide down the arc of steady depletion.
It's a weak argument and shall be discussed far more below.
The term "global oil-production peak" means that a turning point will come when the world produces the most oil it will ever produce in a given year and, after that, yearly production will inexorably decline.
Looking forward forever, there's no doubt that there will be a year that has the largest global oil-production and for every year thereafter that peak, the total oil-production will be lower than the peak. That's a tautology. However, I find it unlikely that there will be a single peak. Since there is a significant delay in the oil production investment cycle, there will probably be a series of local maxima. Production may ebb, oil prices rise as a result, investment increases, then, after a delay, production increases and hits a new high.

Secondly, the inexorable decline may be due to many factors, not all of which are negative. New technology may become available that enables cost effective extraction of energy from sources other than petroleum, some of which we can't even imagine today (nobody imagined photovoltaic solar cells 100 years ago, for example).
Now we are faced with the global oil-production peak. The best estimates of when this will actually happen have been somewhere between now and 2010. In 2004, however, after demand from burgeoning China and India shot up, and revelations that Shell Oil wildly misstated its reserves, and Saudi Arabia proved incapable of goosing up its production despite promises to do so, the most knowledgeable experts revised their predictions and now concur that 2005 is apt to be the year of all-time global peak production.
Oh Really? I wonder if any of these knowledgeable experts (or anyone else for that matter) would like to take the opposite side of the following bet: I'll bet $1,000 that the global oil-production peak of at least one year during the period 2006 through 2015 exceeds the global oil-production of the year 2005. And I'll give 2 to 1 odds to boot. Any takers?

Why am I so confident? If oil is anywhere near as important as the author claims, and the price threatens to stay anywhere near the $60/bbl that it's currently at, or even rise from here, huge investments will be made to extract more expensive oil and that will push production up.

What would be the peak production at $30/bbl is different than the peak production at $60/bbl and is different than the peak production at $100/bbl. While I could believe that if the price of oil were frozen forever at $30/bbl, we might have already passed peak production. But each dollar increase in the price of a barrel of oil represents an addition $27 billion of revenue to the oil industry which is a substantial incentive to go and extract and deliver more oil to the global oil markets. For example, there are trillions of barrels of oil shale, and "[if] the oil price were to stay permanently at over forty dollars a barrel (with no chance of declining, which could be the case if oil shale were to be exploited on a large enough scale), then companies would exploit oil shale."

It will change everything about how we live. [...]

This is going to be a permanent energy crisis, and these energy problems will synergize with the disruptions of climate change, epidemic disease and population overshoot to produce higher orders of trouble.

We will have to accommodate ourselves to fundamentally changed conditions.

We live fundamentally differently than we lived 50 years ago. We will live fundamentally differently 50 years hence. Accommodating ourselves to fundamentally changed conditions wasn't a crisis over the last 50 years. There's no reason that adapting to change going forward will be a crisis either. Heck, we'll probably not even really notice it. Have you noticed how much things have changed in the last 50 years as they changed?

No combination of alternative fuels will allow us to run American life the way we have been used to running it, or even a substantial fraction of it. [...]

"No combination of alternative" energy technologies known today "will allow us to run American life"... So what? As oil prices increase due to higher extraction costs, new technologies will be invented, existing technologies refined, and eventually, we will use less oil, and maybe even be better off for it. The author implies that catastrophe is imminent. It's not. Don't believe me? Then take the bet defined above. There's adequate time to adapt to new energy technologies.

Much of the rest of the article then predicts the dire state of the world based on the premises that oil production will peak soon and that the following decline will be catastrophic. Since I don't agree with the premises, I also don't agree with the conclusions. The world may fall apart but I doubt it will be because of limitations in oil production.

As the former
Saudi Arabian oil minister Sheikh Zaki Yamani said, "The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil".

Monday, July 18, 2005

Harry Potter Book Review

Well, since there's only been 1,432,678* blogs that have a post reviewing Harry Potter and the Half Blood Prince, I figure I ought to do another one.

I think it was pretty good. It wasn't perhaps as creative and innovative as some of the others in the series, but I think it was a good story very well told with a high level of entertainment per unit of reading effort.

Bottom line: I heartily recommend it. I'll bet that the vast majority of the 10,000,000 people who bought it and read it in the first 24 hours after its release weren't too disappointed.

*Did you know that 47% of all statistics are made up on the spot?

Friday, July 15, 2005

Harry Potter Wow!

Harry Potter books are good, but even I am in disbelief as to how popular they are:

10.8 million [copies or Harry Potter are] being printed by U.S. publisher Scholastic [for the first printing alone. "They'll be ready to reprint pretty quickly, in the first week or so," said Jon Howells, a spokesman for Ottakar's bookstores. Amazon said it has more than 500,000 pre-orders in Britain alone and more than twice that worldwide, while Asda noted that the release of the previous book in the series, "Harry Potter and the Order of the Phoenix," was its fastest selling item across all its departments in 2003.

"We expect to sell three times as many copies of Harry Potter in one day as we sold of "The Da Vinci Code" -- last year's bestselling book -- in an entire year," said David Rutley, e-commerce director at Asda.

Of course, I have two Harry Potter 6 books being delivered Saturday and I won't be available Saturday night...

Thursday, July 14, 2005

What to do with the Upcoming Surpluses

The chart below (republished without permission from this post on Donald Luskin's blog), is generated using data from the Office of Government and Budget and is a crystal clear example of the Laffer curve in action; cut tax rates, promote growth, and watch tax revenues balloon. It's happened numerous times in numerous countries on every continent except Antartica (those penguins still have a thing or two to learn).

According to the LA Times:
White House budget officials said Wednesday that this year's federal deficit would be 22% smaller than expected, providing ammunition to supply-side advocates who contended that tax cuts helped pay for themselves.

The revised budget forecast by the White House Office of Management and Budget projected a deficit of $333 billion for the fiscal year ending in September, $94 billion less than the administration estimated five months ago.

The deficit is forecast to be 2.7% of gross domestic product, a broad measure of the nation's economy. That would be an improvement over last year's $412-billion shortfall, which was 3.6% of GDP. The record, 6%, was set in 1983 after then-President Reagan's big tax cuts.

Since I think that a 2% of GDP deficit is optimal for an economy growing over 4% per year in nominal terms, I think we should be cutting tax rates again soon. Some day I'll get around to posting why I think it's good to always run a small deficit.

The NY Times is surprised by the main reason for the deficit shrinkage:

The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.

Most of the increase in individual tax receipts appears to have come from higher stock market gains and the business income of relatively wealthy taxpayers.

Why are they surprised? Every time you cut tax rates on the wealthy they end up paying more tax. It reduces transaction costs so they make more transactions, moving resources to where they are optimally deployed, which boosts economic growth. What could be simpler?

The trade deficit is falling too:

The U.S. trade deficit narrowed unexpectedly in May to $55.3 billion as exports rose slightly to a record and imports retreated a bit from the record set in April, a U.S. government report showed on Wednesday.

The smaller-than-expected trade gap suggested stronger-than-expected U.S. economic growth in the second quarter and could help persuade the Federal Reserve to remain on a path of steadily rising interest rates.

And inflation is well under control:
Inflation pressures on the consumer were absent for a second straight month in June, reflecting another drop in energy costs, the government reported Thursday.

The Labor Department said that its Consumer Price Index was unchanged in June after having posted a 0.1 percent decline in May. [...]

If we don't cut tax rates soon, we'll be back to surpluses by the end of the decade. Though if we don't cut taxes, I'm sure our politicians will figure out a way to squander the surpluses on bogus spending - so no worries!

Sunday, July 10, 2005

Phlump; ... Phlump Phlump; Phlump ...

... That's the sound of sheep jumping and landing in a large pile of other fluffy sheep. I'm not sure I yet believe this one, but I've waited two days for to investigate (nothing yet) and it was published in the Washington Post, which, for the MainStream Media, is fairly reliable:

ISTANBUL, Turkey -- First one sheep jumped to its death. Then stunned Turkish shepherds, who had left the herd to graze while they had breakfast, watched as nearly 1,500 others followed, each leaping off the same cliff, Turkish media reported.

In the end, 450 dead animals lay on top of one another in a billowy white pile, the Aksam newspaper said. Those who jumped later were saved as the pile got higher and the fall more cushioned, Aksam reported.

Admittedly, I have a bizarre sense of humor, but I found this story almost as funny as the exploding toads story. Every sheep joke I'd ever heard came to mind. Where are the sheep shackles when you need 'em? It's rumored that one of the Turkish shepherds was heard saying, "I'm not sure about necrophilia or bestiality, but sex with 450 dead sheep ... that's definitely wrong - we'd better just move on..."

Saturday, July 09, 2005

Follow the Money

Not being a constitutional scholar, I can't really argue one way or the other for the Kelo decision, but the result seems clear enough: we have taken The Road to Serfdom to its logical conclusion. The government owns all the land. The government is kind enough to lease the land to us serfs who pay property tax. If the government can get higher revenues from someone else, they can and will force us off of "their" property that they were loaning to us (for the ever nebulous "just compensation") and transfer that property to said someone else. We serfs have limited recourse. Perhaps we can vote the politicians who exercise the eminent domain laws out of office. But in the meantime, we have to take whatever the government is willing to give us and then we have to pack our bags and get out.

Since about 70% of families own their own home, it wasn't lost on Congress that abuse of eminent domain by local governments wasn't going to be a big vote getter:
The House voted yesterday to use the spending power of Congress to undermine a Supreme Court ruling allowing local governments to force the sale of private property for economic development purposes. Key members of the House and Senate vowed to take even broader steps soon.

Last week's 5 to 4 decision has drawn a swift and visceral backlash from an unusual coalition of conservatives concerned about property rights and liberals worried about the effect on poor people, whose property is often vulnerable to condemnation because it does not generate a lot of revenue.

The House measure, which passed 231 to 189, would deny federal funds to any city or state project that used eminent domain to force people to sell their property to make way for a profit-making project such as a hotel or mall. Historically, eminent domain has been used mainly for public purposes such as highways or airports.

So let's consider who voted against this measure. One such person is Nancy Pelosi:

House Minority Leader Nancy Pelosi (D-Calif.) criticized the measure. "When you withhold funds from enforcing a decision of the Supreme Court, you are in fact nullifying a decision of the Supreme Court," she told reporters. "This is in violation of the respect of separation of powers in our Constitution."

When I first read this, I wondered, "what on earth is she talking about?" Not choosing to fund local and state governments is violating "the respect of separation of powers in our Constitution?" The Supreme Court decision didn't say that governments are required to confiscate property, only that they may. Since Ms. Pelosi's statement made no sense to me, I immediately wondered if there are other motivations for Ms. Pelosi's passionate defense of the Supreme Court decision.

Let's consider an eminent domain case in Ms. Pelosi's district:

The city of Oakland, using eminent domain, seized Revelli Tire and the adjacent property, owner-operated Autohouse, on 20th Street between Telegraph and San Pablo avenues on Friday and evicted the longtime property owners, who have refused to sell to clear the way for a large housing development.
Will Collier at vodkapundit did some digging and found:

The properties in question were seized to make room for the "Uptown Project," which is intended to replace under performing properties (at least in tax collection terms) with pricey condos.

I did a little Googling and found out that the prime contractor for the Uptown Project is Forest City Residential West, Inc. Forest City Residential West's co-chairmain of the board is Albert B. Ratner.

Ratner donated $1,000 to Nancy Pelosi in the 2004 election cycle. He and various other people named Ratner and identified as working for Forest City also gave thousands more to the the Democratic Congressional Campaign Committee over the last few elections ...

And Mr. Collier ends with the following conclusion:

Everybody knows politicians can be bought. Who knew they came so cheap?

I did! I did! I did! Follow the money and you can bet on the politician's vote.

Friday, July 08, 2005

The Seduction

I believe it was Mark Twain who said, “most people will do almost anything to avoid thinking.” Thinking through a difficult issue requires much work. The information, facts, historical examples can require a lot of reading and study to gather. Exploring several lines of reasoning and pondering their explanatory strengths and weaknesses is a considerable task. Before most people tackle such a task they can easily be seduced by powerful emotions. The collectivist impulses and sentiments of our tribal past are usually not far from bursting forth and blinding us to other ways of seeing the world. Our desire to see ourselves as good people can cause us to advocate policies which make us feel good, even if though the good intentions pave a road to hell. Seduced to the severe detriment of other people.

The 2-4-6-8 Solution

Like Kenyan economics expert James Shikwati (in my post yesterday), Max Boot, in the LA Times, also wonders about the effectiveness of aid to Africa:
In the last 50 years, $2.3 trillion has been spent to help poor countries. Yet Africans' income and life expectancy have gone down, not up, during that period, while South Korea, Singapore and other Asian nations that received little if any assistance have moved from African-level poverty to European-level prosperity thanks to their superior economic policies.
Max repeats many of the same theme's as James:
Economists who have studied aid projects have found numerous reasons for the failures. In many instances, money was siphoned off by corrupt officials. Even when funds did reach the intended beneficiaries, the money often distorted local markets for goods and labor, creating inflation that drove local businesses out of business.
This leads Max to propose the 2-4-6-8 solution:
Any real solution to Africa's problems must focus on the root causes of poverty - mainly misgovernment. Instead of pouring billions more down the same old rat holes, maybe the Live 8 crew should promote a more innovative approach: Use the G-8's jillions 2 hire mercenaries 4 the overthrow of the 6 most thuggish regimes in Africa. That would do more to help ordinary Africans than any number of musical extravaganzas.
I'm well aware that between my post yesterday about James Shikwati pleading that aid to Africa be stopped and this post that I must seem particularly cold hearted. However, repeatedly doing something that doesn't work seems to me like a type of insanity, even if it does feel good to be charitable, even if you can be charitable to music. I think it's time to try something new.

Thursday, July 07, 2005

For God's Sake, Please Stop the Aid!

Not everybody from Africa thinks that aid to Africa is such a good idea. Consider this excerpt from an interview with Kenyan economics expert James Shikwati:
SPIEGEL: Mr. Shikwati, the G8 summit at Gleneagles is about to beef up the development aid for Africa...

Shikwati: ... for God's sake, please just stop.

SPIEGEL: Stop? The industrialized nations of the West want to eliminate hunger and poverty.

Shikwati: Such intentions have been damaging our continent for the past 40 years. If the industrial nations really want to help the Africans, they should finally terminate this awful aid. The countries that have collected the most development aid are also the ones that are in the worst shape. Despite the billions that have poured in to Africa, the continent remains poor.

SPIEGEL: Do you have an explanation for this paradox?

Shikwati: Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa's problems. If the West were to cancel these payments, normal Africans wouldn't even notice. Only the functionaries would be hard hit. Which is why they maintain that the world would stop turning without this development aid.

SPIEGEL: Even in a country like Kenya, people are starving to death each year. Someone has got to help them.

Shikwati: But it has to be the Kenyans themselves who help these people. When there's a drought in a region of Kenya, our corrupt politicians reflexively cry out for more help. This call then reaches the United Nations World Food Program -- which is a massive agency of apparatchiks who are in the absurd situation of, on the one hand, being dedicated to the fight against hunger while, on the other hand, being faced with unemployment were hunger actually eliminated. It's only natural that they willingly accept the plea for more help. ...
Okay, James, now tell us how you really feel!

We've seen (or at least I've perceived) this cycle of dependency in the inner cities in the United States due to AFDC and the damage it's done. We've basically turned Africa into a giant inner city slum and enriched bureaucrats in the process.

Wednesday, July 06, 2005

Turnabout is fair play

When thinking and talking about liberty, many people place great emphasis on civil liberties. My study of economics, law and political science has lead me to place greater emphasis on economic and political liberties as well as freedom of beliefs. The recent Supreme Court decision in the Kelo case has shocked some people into realizing that perhaps property right are important. This article, excerpted below, makes this point.

The Framers understood that almost all personal liberties depend on security in property. You cannot have freedom of religion if you cannot build and keep a church; free expression is repressed if you live in fear for your place of work; a free press cannot exist if you cannot own the tools of the trade and a place to use them.

In 1782, James Madison wrote: “Government is instituted to protect property of every sort; as well that which lies in various rights of individuals, as that which the term particularly expresses. This being the end of government, that alone is a just government, which impartially secures to every man, whatever is his.”

In just the last week, the United States Supreme Court pummeled the Framers’ cherished ideals not once, but twice, in property rights decisions that squarely put the interests of the government ahead of the governed.

In one decision involving homeowners in New London, Connecticut, the Court allowed the government to confiscate perfectly good and occupied homes simply because it wanted to give the property to a corporation that claimed it could make the property more valuable and thus put more tax dollars in the government coffer.

Indeed, the Court’s decisions are disturbingly candid about its desire to make private property subservient to the whim of government decision-making. This deferential view of the government’s power to appropriate property without meaningful constitutional restraint has little in common with the understanding of the Framers.

The Court is, in fact, very close to having more in common with Lenin, when it comes to private property, than it does with Madison. And Madison’s ideological heirs may have legitimate cause to wonder whether the Framers made a mistake in creating such a powerful and autonomous judicial branch.

As Dr.Thomas Sowell points out:

What the latest Supreme Court decision does with verbal sleight-of-hand is change the Constitution's requirement of "public use" to a more expansive power to confiscate private property for whatever is called "public purpose" -- including turning that property over to some other private party.

Dr. Walter Williams emphasizes the same clarification:
The framers of our Constitution gave us the Fifth Amendment in order to protect us from government property confiscation. The Amendment reads in part: "[N]or shall private property be taken for public use, without just compensation." Which one of those 12 words is difficult to understand? The framers recognized there might be a need for government to acquire private property to build a road, bridge, dam or fort. That is a clear public use that requires just compensation, but is taking one person's private property to make it available for another's private use a public purpose? Justice John Paul Stevens says yes, arguing, "Promoting economic development is a traditional and long-accepted function of government."
"Avoiding Tyranny 101" teaches that people in power should live by the same laws as the governed. Logan Darrow Clements thinks that this is a good idea.

Justice Souter's vote in the "Kelo vs. City of New London" decision allows city governments to take land from one private owner and give it to another if the government will generate greater tax revenue or other economic benefits when the land is developed by the new owner.

On Monday June 27, Logan Darrow Clements, faxed a request to Chip Meany the code enforcement officer of the Towne of Weare, New Hampshire seeking to start the application process to build a hotel on 34 Cilley Hill Road. This is the present location of Mr. Souter's home.

Clements, CEO of Freestar Media, LLC, points out that the City of Weare will certainly gain greater tax revenue and economic benefits with a hotel on 34 Cilley Hill Road than allowing Mr. Souter to own the land.

The proposed development, called "The Lost Liberty Hotel" will feature the "Just Desserts Café" and include a museum, open to the public, featuring a permanent exhibit on the loss of freedom in America. Instead of a Gideon's Bible each guest will receive a free copy of Ayn Rand's novel "Atlas Shrugged."