Current Events

Italy overturns ‘absurd’ drug law equating marijuana and hard drugs

Adam Magoon Current Events, Liberty, Philosophy , , , , , , , ,

Italy overturns ‘absurd’ drug law equating marijuana and hard drugs

The title really gives all of the details. Libertarians are usually quick to celebrate these kinds of liberalizations of government authority but I always take these times to reiterate and oft forgotten fact.  Italy has not “given more rights to drug users”.  I hear this so often and strangely enough almost universally from more “left” policies such as gay marriage “Massachusetts has given the right to marry to homosexuals.”  This is a blatant misrepresentation of the truth.  The right of self-ownership is universal and each and every person already has the right to consume any drugs they please or to marry whomever they choose.  Government action has taken away those rights and them removing that restriction is not the same as giving away rights.  Rights cannot be granted, they are innate and inalienable.  Rights can only be removed by force.  Two forces in this world deny rights to others.  Criminals and the Government.  Most libertarians do not make a distinction between the two.

What’s up with decentralization (“Administrative Unit Proliferation”) in Uganda these days?

Brandon Christensen Current Events , , , , , , , , , ,

I just came across a fascinating new article on decentralization by two political scientists. Here is the abstract:

Numerous developing countries have substantially increased their number of sub-national administrative units in recent years. The literature on this phenomenon is, nonetheless, small and suffers from several theoretical and methodological shortcomings; in particular, a unit of analysis problem that causes past studies to mistakenly de-emphasize the importance of local actors. We posit that administrative unit proliferation occurs where and when there is a confluence of interests between the national executive and local citizens and elites from areas that are politically, economically and ethnically marginalized. We argue further that although the proliferation of administrative units often accompanies or follows far-reaching decentralization reforms, it likely results in a recentralization of power; the proliferation of new local governments fragments existing units into smaller ones with lower relative intergovernmental bargaining power and administrative capacity. We find support for these arguments using original data from Uganda.

The article is by Guy Grossman & Janet Lewis and it’s fascinating. Read the whole thing. I found one especially interesting argument that I’d like to mull over (the piece also produced a couple of off-topic questions in my mind). Grossman and Lewis argue that the process of decentralization first undertaken by rebels-turned-politicians has actually led to a recentralization of power in Uganda. From page 33:

Turning to political dependence, in recent years local government officials are increasingly appointed by the center, rather then [sic] being elected. Most dramatically, a 2008 amendment to the Local Government Act stripped from the directly elected District Chairperson the power to appoint the Chief Administrative Officer (CAO) and other senior level administrators. Instead the central government’s Public Service Commission was granted the power to appoint senior level administrators, who are assigned to districts by the Ministry of Local Government. The 2008 amendment has, in effect, put the entire technocratic arm of the district under the purview of the central government rather than the district’s elected political leadership.

So what is happening in Uganda (and, according to authors, elsewhere in the developing world) is that more and more administrative units (think counties or states in a US context) are being produced, but that this is actually making the executive branch stronger rather than weaker. Does this make sense? If not, you know where the comments section is.

I find this process of decentralization fascinating, largely because I think it is more conducive to freedom (in the broadest possible sense) and as a result produces more economic prosperity (see my pieces on secession within the US, EU). What I had not accounted for was the fact that decentralization could actually make it easier for a tyrant to control a swath of territory. So naturally I had to ask why this recentralization has come about.

The answer, I think, is on page 35 of the same article:

Since the late 1980s, key players in the international development community—such as the World Bank and USAID—have encouraged developing countries to implement far reaching decentralization reforms.

So foreign aid is probably the cause of loss of local power, but also the catalyst for such decentralization in the first place (by bribing post-colonial governments to decentralize; but what about ideology? From what I can tell, the rebels who set up Uganda’s new government were committed to decentralization in order to maintain peace between tribes and limit power of the center, rather than to get money from Western lending institutions).

Let me try again. Decentralization became all the buzz in development circles after the collapse of the Berlin Wall. Western lending institutions began paying governments when they decentralized. However, there may have been an indigenous drive for devolution that is overlooked here, and this drive may have been overpowered by the bribes given to governments by Western aid donors. This clash – between Western donors and indigenous attempts to assert sovereignty while integrating into the world economy – is what I think would be worth exploring further.

There is also the issue of economic prosperity. While decentralization may have led to a recentralization of power in the post-colonial world (I am not convinced that decentralization is to blame; I think foreign aid is largely responsible for the inability of developing states to fully decentralize), I am inclined to argue that decentralization has also led to a dramatic decline in poverty levels.

I mentioned the halving of global poverty a couple of days ago, and this decline, coupled with the increase in decentralization, suggests that the libertarian impulse to decentralize power structures does lead to wealthier, healthier societies. So with the dramatic increase of world prosperity in mind, I have to ask if the recentralization efforts of governments are given too much weight in the Grossman & Lewis paper.

I am sure that decentralization has not been perfect. I am sure that decentralization has left many people who supported it deeply unsatisfied. What I am less sure about is that supporting the status quo (that is to say, prohibiting decentralization by any means necessary) would have been a better option than the one post-colonial states have been pursuing for the last twenty years. It seems to me like the process of decentralization has been a good one, all things considered.

So, now that I have made it known that I think foreign aid is to blame for the (perceived) recentralization of power in Uganda, and now that I have made it known that I think decentralization has been more good than bad for people, what do I think needs to be done to address the problem of recentralization that Grossman & Lewis argue is occurring?

My quick, lazy answers are 1) create a Senate, and 2) keep liberalizing the economy.

There are other, supplemental prescriptions (such as ensuring property rights protections are strong; this is probably best handled by integrating indigenous property laws with generally agreed upon rules governing world trade; in this respect, African states that were a part of the British Empire generally do a great job, and the failures of these states can largely be attributed to protectionist policies after decolonization), but I think my lazy answers are more straightforward, and would get better results (at least in the context former British colonies). (h/t Joshua Keating)

The Republican Proposal on Illegal Immigrants and, the French Are Coming

Jacques Delacroix Current Events, Politics , , , , , ,

I am responding to a Republican radio and TV ad about illegal immigration. It’s presented as the Republican counter-proposal or response to Pres. Obama demand for “comprehensive immigration legislation.” It displays involuntarily some of the main fallacies Republicans commonly entertain in connection with illegal immigration and other topics. It demonstrates disturbing collective ignorance in my camp. (I am a registered Republican.) Here are four major fallacies in that short ad:

1 The ad continues to be based on the false notion that there exists an alternative to illegal immigration in the form of some orderly visa queue. In this perspective, illegal immigrants are rude, unprincipled line jumpers. Everyone hates such people.

In fact, there is no such queue. The average unmarried Mexican has no way (zero) way to come live in the US legally. (An unmarried Mexican can try to marry a US national or legal immigrant to gain a quick visa. Some do. This is hardly a more principled way to immigrate into this country than overstaying a tourist visa, for instance.)

2 The Republican proposal demands “no amnesty.” The Republican proposal contains an amnesty: amnesty for those who entered the country illegally. It rewards those who took the matter into their own hands against other foreigners who would like to move to the US but do not wish to violate laws to do so. Again, illegal immigration is the only way to enter the US and stay for almost everyone in the world.

There is no way to regularize the status of current illegals living in this country without an amnesty of some kind. I predict that neither the federal government nor the individual states will ever engage in the massive police action that would be required to hunt down illegal aliens in their homes, places of work, churches, and schools (including kindergartens). Everyone else also knows this to be true. Republican leaders have yet to acknowledge this simple fact of life.

3 The Republican proposal would require illegal aliens to “learn English” as a condition of their legalization. This is ill-informed as well as downright stupid.

First, illegal aliens are very busy learning English. They are all aware of the fact that knowing the main local language is a condition of real economic success in this country. To say otherwise is to make a tremendously xenophobic statement by implicitly calling immigrants stupid. That’s in addition to ignoring the facts on the ground.

Second: What are we going to do with Juan if he flunks his English midterm? Throw him over the border? How about Mr Lee, who has been here (illegally) for fifteen year and who owns a restaurant employing six people? Do we ship him back to Canton if he gets two C- in a row on his English grammar test?

Plus, what is the federal government going to do when some ill-intentioned academic reveals that a significant percentage of American-born US citizens also flunked the midterm, the same midterm?

Is this “obligation” to learn English, specifically, even constitutional? The last time I checked, the US had no official language. Why not Navajo?

This all smacks of the insane dreams of comfortably monolingual individuals who believe they would master Spanish if they could only clear a dozen Saturday mornings. Do these people take advice from anyone? Do they read anything?

4 “Securing the border” has become a mindless Republican incantation. It’s increasingly irrelevant for the purpose of immigration control, at least closing the southern border is. Several relevant points. At them same time as we were having our endless economic crisis killing thousands of jobs, the Mexican economy was doing better than before. And, Mexican population growth has almost ceased. The huge hordes of hungry Mexicans massed at the border to jump in and take over everything American have evaporated. Mexicans have almost stopped coming. Those who do use a student visa or a tourist visa and just don’t go home until they are good and ready.

Securing the border may serve a purpose in the context of a drug war. If that’s the issue, Republicans should have the coraje (same as “cojones” but more polite) to tell the truth.

And now, what the Republican leadership is not doing or not doing enough: Shout to the rooftops that legalizing illegals and awarding them citizenship are only artificially linked (by artful Democrats seeking free votes for generation). European countries have established successfully for many years the fact that citizens of another country can live in forever without acquiring political rights at all. (A recent well publicized Swiss vote on immigration does not deal with this matter.) Fellow immigrant Nikiforov and I explored this idea in depth in connection with the US and Mexico in our article “If Mexicans and Americans Could Cross the Border Freely” featured in the libertarian journal Independent Review.

Here is a real immigration issue the Republican leadership is not attending to: Tens of thousands of younger French people want to move to this country. The issue is so serious that there is a brand new French cabinet post dedicated to stemming the flow. Many of the would-be French migrants possess to a high degree the kind of training Silicon Valley companies say they can’t find. Many of the same well-educated French citizens who wouldn’t dream of opening a lollipop stand under French conditions discover that they possess a big entrepreneurial gene a couple of years after landing here. Let me also point out that the quality of food improves automatically after a surge of knowledgeable and demanding French customers. (Yes, some stereotypes are well founded.)

At this point, there is no legal way to bring in these high quality immigrants. Our immigration system is forcing into illegal immigration the most determined and least law-abiding segment among exactly the kind of immigrants we want.

Wait, what?!

Rick Weber Current Events , ,

There won’t be a MotoGP race at Laguna Seca this year and here’s why…

Unlike COTA and IMS, which are both privately owned, Laguna Seca is a non-profit operated by the Sports Car Racing Association of the Monterey Peninsula (SCRAMP), on property owned by the Monterey County parks department. This unique status disqualifies the facility from accepting large government subsidies available to tracks like COTA and IMS–the latter which reportedly received $100 million in state grants this year for track and facility upgrades to secure major events like MotoGP. “We can’t compete with that,” Campbell told the Herald. “Here, there are no tax credits or state subsidies.”

Hasta La Vista, Laguna Seca, Motorcyclist, January 2014

So the non-profit on public property isn’t eligible for subsidies but private tracks are?!

Из американских школ – в российские

Evgenii Grigorev Current Events ,

Привет, друзья! Сегодня расскажу вам про одно событие, которое произошло в Москве на прошлой неделе, и которое достаточно сильно освещалось в новостях. Я думаю вы не найдете в нем ничего экстраординарного, но для русского человека это нонсенс. Речь пойдет о стрельбе в московской школе, которую устроил один из учеников. Он принес в школу ружье, застрелил учителя географии и взял в заложники учеников. Потом застрелил одного из приехавших полицейских и тяжело ранил другого. Через некоторое время, после того как район был оцеплен и к месту происшествия приехал отец стрелка, бандит сдался.

Я знаю, что подобные ужасные события довольно часто происходят в США. Обусловлено это в первую очередь более доступным оружием, а во вторую, и наиболее интересную для меня очередь – менталитетом американцев. Точнее даже не американцев, а “не русских”, так как подобные расстрелы случаются не только в Америке, но и в других странах. В России же это первое подобное происшествие на моей памяти.

Не будем рассуждать об оружейном лобби, о “сложных подростках” и переходном возрасте, о высокой школьной нагрузке накануне поступления в высшие учебные заведения, а также о том, каким образом подросток смог достать оружие (по информации из средств массовой информации, он сумел раздобыть ключи от сейфа, где его отец хранил огнестрельное оружие). Вопрос сейчас в другом. Кстати, чтобы вы примерно представляли ситуацию с личным огнестрельным оружием, приведу пример: мне почти 27 лет, и за свою жизнь я держал в руках настоящее боевое оружие, которое может убить, только один раз – и то на охоте. Ни у кого из моих многочисленных друзей и знакомых нет пистолетов и ружей. При этом я не учитываю пневматическое, газовое и прочее “не смертельное” оружие, хотя для его приобретения необходимо собрать большое количество справок и документов. Так что можете понять – огнестрельное оружие у населения России – это скорее “исключение из правил”, чем “факт”.

С древних времен, в силу исторического развития и особенностей менталитета, русский человек привык терпеть. Таторо-монгольское Иго, несколько столетий терроризировавшее Русь, блокада Ленинграда во Вторую Мировую Войну, и всякие другие исторические события. Терпеливость эта обусловлена не слабоволием, а наоборот силой характера, которая в совокупности с ленью, которая к сожалению характерна для нас, приводит к тому, что русскому человеку проще перетерпеть негативный момент в жизни, чем попытаться его как-то решить. Отсюда и получаются всевозможные неврозы, кстати… Большое влияние на формирование этой терпеливости оказывает и христианская религия, которая вменяет долготерпение и непротивление в достоинства личности. Думаю многие знают, что я по натуре своей атеист, так что мои размышления о религии в общем не стоит воспринимать как “истину в последней инстанции”. У меня свое мнение, у верующих – свое.

Дополнительно накладывается и миролюбивость русских, которая в совокупности с тем, о чем я рассказал выше, приводит к неожиданным результатам. К слову, под миролюбивостью я имею в виду именно нежелание решать конфликты силовым методом. Видимо тоже влияет северный нордический характер… Однако это не мешает миролюбивым русским быть зачастую неприветливыми с незнакомцами. Это совершенно другой вопрос.

Зачастую, как и всем остальным, нам нужно выплескивать свои эмоции. Однако “миролюбивость” – это сдерживающий фактор. Не желая причинять зло окружающим, русский человек идет по пути саморазрушения: алкоголизм, наркомания, суицид. Хотя в большинстве случаев сила характера позволяет нам выпутаться из морального лабиринта не причинив себе вреда.

И я не понимаю, что должно было измениться в мире, чтобы русский ребенок взялся за оружие и пошел убивать людей, будучи не в состоянии самостоятельно решить свои проблемы.

Obama: “I can do what I want”

Adam Magoon Current Events, History, Law, Liberty, Politics ,

Obama: “I can do what I want”

Let us contrast this to the president that the founding fathers of America intended.   As Alexis de Tocqueville put it in the early 19th century, the president “has but little power, little wealth, and little glory to share among his friends; and his influence in the state is too small for the success or ruin of a faction to depend upon his elevation to power.”

How far we have come…

California’s Environmental Mal-Litigation

Fred Foldvary Current Events, Economics, Law , , , , , ,

The worst intervention by governments, aside from aggressive war, is excessive litigation. Taxes are burdensome, but they are predictable. The reason that enterprises are not entirely crushed by taxation is that much of the tax burden is at the expense of land rent, so it ends up destroying the economy’s surplus, but not totally wreaking the economy. Regulations act as a tax to impose costs on enterprise, and much of the cost is passed on to workers and the public, so they make us poorer but don’t totally stifle the economy. Subsidies create distortions that generate inequality and the boom-bust cycle, but subsidies is what politics is all about. The worst intervention, that does the most to crush enterprise and employment, is vicious litigation.

A prime example of litigative intervention is the California Environmental Quality Act. CEQA is codified at the Public Resources Code Section 21000 et seq. As California’s web site for CEQA states, “Most proposals for physical development in California are subject to the provisions of CEQA.” The “frequently asked questions” web section explains that “CEQA is a self-executing statute.” That means that “its provisions are enforced, as necessary, by the public through litigation and the threat thereof.” Past court cases can be seen on the web site of the California Natural Resources Agency.

As described by a “Schumpeter” blog article in the 25 January 2014 Economist, “The not so Golden State,” this law “has mutated into a monster.” Anybody in California may file a CEQA lawsuit against any project using environmental protection as an excuse. The plaintiffs win half the cases. If someone sues a company and loses, the defendant still has to cover his legal expenses. Many of the lawsuits under CEQA are also against governmental development projects and against permits by local governments to enable private development.

Suppose a developer seeks to build an industrial park. If he hires non-union workers, the union attacks with a CEQA lawsuit. So the builder hires expensive union labor. Suppose someone owns a gasoline station, and a competitor wants to set up a station nearby. The station owner stops the potential competitor by filing a CEQA case. In 2011, there were 254 “California disinvestment events,” in which companies employing more than one hundred workers either left the state or expanded in another state rather than in California. This is estimated to have gotten worse in 2012 and 2013.

The litigations and regulations of California fall hardest on manufacturing. California’s high sales tax and low property tax also induces cities to favor retail stores over manufacturing. Hostile policies in California are largely responsible for the flight of manufacturing to other states and to foreign countries. As noted by the Economist article, electronic devices are designed in “Silicon Valley,” the region from San Francisco to San Jose, but manufactured in Asia. Some environmentalists realize that CEQA does little to protect the environment, but attempts to reform the law have stalled. The frivolous lawsuits reward lawyers, unions, companies seeking to stifle competition, and “not in my backyard” opponents of development.

Litigation is the worst way to handle social problems. Lawsuits impose unpredictable and expensive costs on enterprise. Such laws let opportunists exploit legitimate job-creating industries. Excessive litigation is further rewarded by making the winning defendants of lawsuits have to pay their legal costs. We then get excessive malpractice suits that force doctors to buy expensive insurance. Federal and state laws that enable litigation for job and housing discrimination and environmental protection end up enriching lawyers who get much of the gains.

The best ways to handle environmental destruction is with covenants and easements, along with a liability rule for damages. If some development harms the natural environment, then the government assesses the damage, and the polluter pays for the damage, either as a one-time charge or as periodic payments for on-going pollution. Developers know in advance that they are liable for damage, and so they would have the incentive to prevent the payment by doing their own environmental assessment. The issue would be between the developer and the state, without involving attorneys and court costs.

Economic theory has recognized for the past hundred years that the optimal policy for pollution is a charge paid by the polluters, passed on to the customers, fully compensating society for the damage. That can be done by a pollution tax.

English common law traditionally provided law-suit protection against potential negative effects and damages to one’s property. Litigation can be a useful enforcement and restitution tool, but it has to be within a sensible legal system. In the English tort system, if a plaintiff loses a law suit, the loser has to pay the legal costs of the winner. So if a company sues another firm just to stifle competition, using the environment as an excuse, and that company loses the lawsuit, then that company has to pay the legal costs of the winning competitor. That would stop frivolous or phony law suits. And that is why the lawyer lobby will stop such a legal reform in the USA.

Imperialisms, Old and New: Sykes-Picot and the United Nations

Brandon Christensen Current Events , , , , , , , , , , , , ,

Foreign policy expert (and Reason contributor) Michael Young had an op-ed out last week on nationalism and imperialism in the Middle East. Writing in The National, Young argues that Western imperialism should not be blamed for the problems of the Middle East today. Young argues that the power vacuum left by the collapse of the Ottoman Empire guaranteed that violence would play a prominent role in the region, regardless of where the lines of borders had been drawn, or who had drawn them.

Violence would play an important role, Young argues, because aspirant hegemons and various types of nationalisms (Arab, Iraqi, Lebanese, etc.) would be eager to expand their influence and power throughout the Middle East. This is an interesting hypothesis, but it strikes me as disingenuous largely because there is no way to prove such an assertion wrong. The fact that violence could have happened in the absence of European imperialism does not excuse the cartographic crimes of European states. The carving up of the post-Ottoman Arab world happened (interesting counterfactuals notwithstanding).

Young’s argument fails on another account as well. He writes, for example, that:

None of the protagonists in Syria’s conflict has cast doubt on its borders, or has called for a Sunni or Alawite state. Their rhetoric has almost entirely been couched in nationalistic terms, with their aim being the control over all of Syria. Even Mr Al Assad has never expressed interest in falling back on an Alawite mini-state, and if he does so that would only be because he can no longer hold Damascus.

There are two arguments worth scrutinizing here. One, there have been calls for a Sunni state. Two, the nationalist rhetoric is itself a product of Western imperialism. For example, these power struggles for the center occur because secessionist or federalist options are not available to factions in the region. The lack of options stems from the inherent inability of these post-imperial states to govern without a strong man. Strong men are required in the post-imperial Middle East because the states that were drawn up by European diplomats were arbitrary and ahistorical, and therefore lack legitimacy in the eyes of the people.

Post-imperial states are not considered legitimate by their citizens because they never had a say in how to go about structuring such a state (not even through the traditional channel of war). They had no say in where the borders should be, or who they could trade with, or how to best accommodate foreigners. Because post-colonial states are not legitimate, violent centripetal forces are constant. This pattern continues unabated because those who eventually end up controlling the center receive legitimacy from the international legal order, as exemplified by the United Nations and financial lending institutions such as the IMF.

By recognizing the legitimacy of Sykes-Picot’s arbitrary states and the sanctity of its borders, the UN and other Western institutions contribute directly to the bloodshed and impoverishment of the region. Because these states have been legitimized by the UN, violent factions can simply seize control of the center and they will automatically gain legitimacy from the very international order that has sustained this chaos. Why bother trying to gain the legitimacy of an impoverished populace when you can simply capture the rent associated with running a post-imperial state?

The West would do well to start working on a foreign policy that looks at recognizing devolutionist tendencies in the post-imperial world as a legitimate option. Recognizing the mistakes of Western imperialism would be a good start. Western recognition would also give these breakaway movements a sense of legitimacy when it comes to working with international organizations such as the IMF or WTO. Official recognition could open up diplomatic options that are currently unavailable to stateless societies in the post-imperial world.

By continuing to not view devolution as a legitimate option for Middle Eastern (and other) societies, the West is doubling down on its moral failure of a hundred years ago. Recognizing centrifugal forces as a legitimate political process would also bring the post-imperial world and the West to a more level standing with each other, as the West would welcome new states into their international orders rather than picking winners and losers through cartographic exercises. In an era where inequalities are shaping up to play prominent roles in policy debates, this last tweak in diplomacy could very well contribute (politically at least) to a more equitable world.

Немного об Олимпиаде

Evgenii Grigorev Current Events ,

Привет, друзья! На днях у меня состоялся интересный разговор с одним другом, предметом которого стала Олимпиада в Сочи, которая, как вы знаете проходит в эти дни. Олимпиада пока что проявляет себя как истинно русское событие: с размахом, “на широкую ногу” – как принято говорить у нас. Одна из самых дорогих Олимпиад в истории, да? Если не ошибаюсь. При этом “за кадром” остались всевозможные нарушения, о которых не принято говорить, и кто знает – какая реальная стоимость этих Олимпийских Игр?

Сейчас в России весьма двойственное отношение к текущим мероприятиям в Сочи. С одной стороны, у нас определенная гордость за то, что мы смогли устроить такое дорогое и богатое мероприятие, что в принципе и было ожидаемо, так как Россия довольно богатая и большая страна, вы знаете. Но с другой стороны Олимпиада – это как фасад здания, которая совершенно не отражает настоящей ситуации в городах нашей страны. Поверьте мне, все далеко не так хорошо и празднично. Я не буду сейчас расписывать про минимальные размеры оплаты труда, минимумы проживания и всякие денежные эквиваленты… В большинстве своем народ не понимает, зачем было делать ТАК ДОРОГО. Ведь не для кого не секрет, чем такие колоссальные затраты (по некоторым оценкам от 250 до 1500 миллиардов рублей – разделите эти цифры на 33 и получите примерный эквивалент суммы в долларах) могут обернуться бедствием для российской экономики в ближайшие годы.

Признаюсь, я не смотрю Олимпийские Игры. Не потому что я бойкотирую спорт или не проявляю к нему интереса, а потому что я боюсь что мне это зрелище понравится и я перестану ясно отдавать себе отчет, сколько денег в это было потрачено, и из чьего кармана они потом будут восстанавливаться. Центральный Банк России пообещал восстановиться после таких трат за 4-5 лет, и мне реально страшно смотреть в налоговые квитанции, которые ожидают нас всех в ближайшие годы.

Keynesianism, the Global Economy, and Responsibility

Brandon Christensen Current Events, Politics , , , , , ,

Economist Joseph Stiglitz has an op-ed out in Project Syndicate lamenting bad policies for the current economic stagnation of the West. This response comes from economist Peter Boettke, and I think it is an important and woefully neglected one:

Since 2008, and before, [Stiglitz] has been constantly complaining about neo-liberal policy and how its lack of attention to the appropriate regulatory framework and disregard for fundamental policy priorities has produced the mess we are in.  In fact, he made the argument very simply even while he was in positions of tremendous political power in the Clinton administration and at the World Bank — if only the world would listen to me, and engage in the appropriate interventions then the mess would be avoided.  But who were the so-called neo-liberals that weren’t listening to him?  What neo-liberal thinker had the same powerful positions that he held?  Did F. A. Hayek or Milton Friedman actually come back from the grave to serve as head of the CEA or as Chief Economist at the World Bank?  Or did all this disruptive inequality and global imbalance happen on the watch of other thinkers.

I think Boettke is right, but I also think both economists are wrong in a sense, too. First of all, global poverty over the past twenty years or so has been halved thanks to the very neoliberal policies that both economists are disagreeing about, and that both economists have more or less endorsed. With this important, praiseworthy accomplishment in mind, why would these guys want to spend so much time pointing fingers at each other?

I know why they are pointing fingers (because of the terrible shape that Western economies are in), but I am a little baffled at the audacity of Stiglitz and other Keynesians who have held the levers of power for sixty years to point the finger at something other than themselves.

Really quickly: Some of might ask why Boettke and Stiglitz agree on neoliberalism abroad and disagree on policy at home. My short answer would be because the West already has the institutions (property rights, other individual rights, etc.) that economists have identified as necessary for a market order, so their debates about policy occur within the same theoretical framework. Post-colonial states (“developing states”) have virtually none of the institutions that the West, and so it easy for economists with different theoretical paradigms to agree on generalities concerning these developing countries (“they need to open up to world trade and focus on property rights before they do much else”). Does this make sense?

Order, Order, Order

Jacques Delacroix Current Events, Politics , , , , , , , , , ,

In the conventional wisdom, as you become older, you tend to like order more and more. That is, with age, one is supposed to become more “conservative” in the traditional sense of the term. Personally, I have escaped the curse. Instead, I find myself resenting more and more the growing imposition of petty rules by public entities.

It began a few years back when the city of Santa Cruz banned sleeping. OK, let’s be honest, you may still sleep legally in your bed. The city made it illegal to sleep in public. It’s true that the homeless are a plague here. Many are in a near-constant state of NDUI (not driving under the influence). Many are poor lost souls who are a danger to themselves and occasionally to others. Thus, three or four years ago, a local shopkeeper walking to work was knifed to death in broad daylight. Her killer had spent the previous 48 hours in a shelter muttering about and to his Bible. No one reported him,of course because he had not done anything illegal until then. Next!

The ban on sleeping made me acutely uncomfortable at the time. First, it was plainly inhumane. Second, if you prevent human being from doing what their human nature demands, they will find another way to do it. So, informal camps proliferate in the wooded areas juxtaposing the town. Here, in Central California, we are in a period of prolonged drought. Do we need unattended campfires and campfires attended by people who don’t play with a full deck?

A petty use of power, municipal power, applied in a search for orderliness led to greater and far more dangerous disorder.

I don’t even know if there are enough night shelters for everyone who wants one. I know that there will always be sane but houseless people who don’t want to be in a shelter, by choice. A sizable part of me respects their choice. You may not force people in places where they don’t want to be without due process. The Constitution is completely clear on this. And, I am not in favor of more shelters anyway because I believe they attract the economically feeble to Santa Cruz thus aggravating the problem.

You don’t have to be a “soft” to want the Constitution respected.

Now, since then, there as been a multiplication of city rules. This happens while the crime rate plunges. The fewer crimes the more rules. The crime rate is tanking all over the country; Santa Cruz city rules can hardly take the credit. What am I to think?

Here is a quiz: The Santa Cruz City Council is dominated by:

a Republicans;

b Democrats;

c Leftists to the left of the Democratic Party

Not far is the independent harbor. I used to admire the Santa Cruz (Small Yacht) Harbor. It was the only government and quasi-government organization I knew that stayed clear of reliance on taxes. Harbor users -in their many guises- supported the maintenance of the harbor. They included boat slip renters like me, of course, but also beach goers whose coffee paid for the rent the coffee shop paid to the harbor in return for an excellent commercial location. Harbor users also included patrons of the good restaurant that dominates the harbor entrance with its million dollar view. The restaurant goers gladly paid solid parking fees, of course, and a portion is remitted to the harbor.

I also liked the way the harbor administration put to work underused resources such as the large general parking lot reserved for boat owners that tends to stand more than half empty after four pm. The harbor had an agreement with the self- same restaurant to hold musical barbecues once a summer week evening on the beach it, the harbor, administers. The restaurant got its profits from the sale of barbecued food and the harbor pocketed full parking fees from those not holding slip stickers. The arrangement drew crowds. It was all a little bit untidy but not much. Twice, on such a barbecue evening, I leaned spontaneously out of my truck to congratulate the officer directing parking and to assure him, unsolicited, that this particular slip owner, me, was not (NOT) inconvenienced at all.

And then, someone retired and there was a new sheriff in town. Under the new harbormaster, several things that were allowed became forbidden overnight. The harbor hired a full-time parking enforcer, like the town next door. Suddenly, the one harbor employee the average harbor user interacted with was the parking enforcement officer. This necessarily hostile and heartless functionary supplanted the traditional harbor officers who save boats, and sometimes lives, every weekend. The mood changed and not for the better. I am not speaking for bitterness about parking fines here; with my slip rental goes a permanent parking sticker permit.

Maintaining a stricter order often requires stricter rules that make most people unhappy. Eve if it’s only a little bit unhappy, the bad feeling accumulates.

Then, stand-up surfboards had to be segregated from boats. Boats are limited to 5 m/h inside the harbor anyway. Some boats under sail inside the harbor regularly exceed the speed limit. Those are steered by aces. How bad can a collision be under these conditions, really? Has there been a single collision involving a standup board? Did a boat owner complain about stand-up boards being in the way? Maybe. Did ten complain? I doubt it. (I have not asked; I don’t trust I would get a valid answer I could cite.) My point is that one can always find a complainer or two. If you handed out free ice cream to poor children and cleaned carefully afterward, there would be some curmudgeons to object. I am sure there are boat-owning slip renters who complain even about the ocean swells. But everyone knows that good harbors are bustling with activity. Those who detest the corresponding moderate disorderliness have no business in a harbor at all. They should be reminded of the fact that there is a long waiting list for their slips instead of listened to.

The art of civilized administration requires that complaints be ignored up to a point. It also includes remembering the second most important American maxim: “If it ain’t broke, don’t fix it until it is.”

Then, there are the new signs that shout at you that fishing from docks is “prohibited.” For as long as I remember, 20 year-plus, children fished from the docks. It was an excellent, healthy, commendable form of leisure for kids, including poor kids, if you ask me. Were there ever any accident as a result, even one? I don’t think so. The signs affirm further and vengefully that the prohibition is: “strictly enforced.” No joking with serious matters here! We are not kidding. Don’t even think of enjoying yourselves!

The posted “minimum” fine is $174. Think about it: Your otherwise well-behaved 12-year old gives you the slip to try to catch a sardine or two. He gets caught. You are into it for about twenty hours of minimum wage. This comes close to a violation of the Eighth Amendment, prohibiting cruel and unusual punishment, I think. There may also be here a subtle breach of contract involved here. When I first rented a slip in the harbor, fishing from the docks was common practice. The locked dock that was part of the rental gave me special access to a pleasant fishing spot. Then, after twenty years, the contract becomes unilaterally modified to my detriment. The harbor did not bother to re-negotiate the contract.

I agree that this is a very small kind of tyranny but it’s tyranny all the same. The habit of being oppressed nearly always begins small in democratic countries. Our tiny liberties are eroded slowly until we don’t even remember we ever had them.

In the same period, I have heard the crew of one of the few remaining commercial fishing boats left in the harbor complain that they are made to feel unwelcome. I have no proof that their allegation is correct but, I wonder, why would they make it up? It jibes with the other forms of turning of the screw I mention. There is no doubt that the harbor would be neater without fishing boats. Fish smells and the rushed commercial fishermen drop the occasional dead fish into the harbor water. And, well, it’s a yacht harbor, after all. And, by the way, if slips only went to middle-aged nuns who work as librarians, the harbor would be even neater.

Occasionally, I take my grand-daughter to buy live crabs directly from a boat. It’s an expedition for her. It’s unforgettable. It shows her that some food does not come from the supermarket. But who am I to lay claim to such privilege? And who the hell are the commercial fishermen to insist on making a living from a harbor originally created by the Army Corps of Engineers with tax money?

On 2/3/14, coming out of a restaurant, my family and I were treated to a wonderful geyser-like spout of water reaching much higher than a three storied building. No, it was not a whale; the scene was a couple of miles inland, on a busy commercial artery, at a street intersection. We watched in utter fascination for more than fifteen minutes. (I posted a still picture of the event on my Facebook. Look for it.) I am obviously no expert, but I believe that while I looked on several hundreds of thousands of toilet flush- equivalents of city water were lost forever. I know, I know, accidents happen; no system is perfect. But why did it take so long to cap the leak? There is a fire station five or six blocks away.

I almost forgot to tell you: At the very same time, the same evening, there was an important meeting of the Santa Cruz Water Commission to make recommendations about water rationing to the City Council in view of the current drought.

Would I make this up? Would I dare? Do I have the talent?

In my immediate surroundings, the only rule or law I have seen abolished in the past twenty years or so concerns dogs. They used to be prohibited on the main commercial drag of Santa Cruz, Pacific Avenue. The prohibition has been rescinded. Dog owners are numerous and determined. Their victory renews my faith a little in democracy. I wish I could cite more examples though.

Sometimes, the ugly thought crosses my mind that public entities are increasingly run for the benefit of their nominal employees. Karl Marx was almost right about classes, maybe . (See, on this topic: “Karl Marx Was Right (Pretty Much)“)

More on local government action: “Coyotes: How Government Bureaucrats Think“

“Illegal Immigration: Bad Faith and Mental Confusion”

Jacques Delacroix Current Events, Politics , , ,

I wouldn’t change a word to this old posting.

Risks Of Regulation

Adam Magoon Current Events, Economics, History, Law, Liberty, Politics , , , , , , , ,

A bit dated but still very relevant.

Regulation; the four letter word of the business world.  Many people see regulation as a protective shield from the ‘dangers’ of the businessman; a way to protect people, property and the environment.  The oil industry is one of the most heavily regulated enterprises in the United States.  Despite being intended to protect us; these regulations failed catastrophically on April 20th, 2010 when the Deep Water Horizon oil rig suffered a mechanical failure resulting in an explosion which sank the rig two days later(1).  Yet, when the disaster happened, we were met with pleas for more government oversight and more red tape.  The regulations on that industry, both in the Gulf Mexico and throughout the country, helped cause the Deepwater Horizon disaster and removing them would help prevent similar disasters in the future.

Regulations in the Gulf of Mexico begin with the Minerals Management Service (MMS).  Created in 1982 due to the Federal Oil and Gas Royalty Management Act the MMS “both regulates the [gulf oil drilling] industry and collects billions[of dollars] in royalties from it”(2, 3).  The MMS’s responsibility to regulate includes monthly inspections, issuing safety documentation, and issuing safety citations(3).  Royalty collection is based on number of barrels of oil removed and varies from well to well.  The MMA also provides  “royalty relief“ to a number of rigs based on previous legislation. Until November of 2000 the royalty relief was issued based on the Outer Continental Shelf Deep Water Royalty Relief Act of 1995, better known as DWRRA.  This act “relieves eligible leases from paying royalties on defined amount of deep-water production”.  At depths over 2,526 feet oil companies did not have to pay the United States royalties on 87.5 million barrels of oil, between 1,312 and 2,625 feet the relief was 52.5 million barrels and between 656 and 1,312 feet the relief was only 17.5 million barrels.  While this act expired in the year 2000 it was replaced by an incentive program that allowed royalty relief to be “specified at the discretion of the MMS”(4).  This incentive program provides more relief if a drilling site is “more expensive to access” even if it is at the same water depth as another rig receiving less relief (2).  The royalty relief system provides incentives for Oil Rigs to operate in deep waters, especially those classified as “Ultra-Deepwater” by reducing the royalties paid on those sites(5).

While not specific to the gulf, there are a variety of moratoria on drilling throughout the country.  These moratoria take two forms.  The first set, known as “leasing moratoria” are general bans on drilling in select areas , the second set are temporary bans due to specific incidents.  Since   the fiscal year 1982 congress has denied funds to the MMS to “conduct leasing for the specified Outer Continental Shelf areas”.  Currently there is a “blanket moritorium” on leasing in effect “through 2012” that covers a large portion of both the East and West coasts( 2).  One of the largest bans on drilling however exists in the Arctic National Wildlife Refuge(ANWR).  Located in the “northeast corner” of Alaska over ten million acres of land are off limits to drilling.  In this wildnerness it is estimated that there exists “between ten billion and sixteen trillion barrels of oil” that could supply twenty percent of U.S. demand for nearly thirty years(6).  The most recent temporary bans have been a result of the Deepwater Horizon disaster.  A “30-day pause in offshore drilling” followed the sinking of the Horizon rig(11).  This did not only cover BP’s rigs but all offshore drilling “based on water depth”(7).  That ban was removed by a federal court, but was replaced with a revised ban that will be in effect until November, 2010(7).

Beyond physical limitations on drilling there are also economic regulations.  There are a number of federal subsidies and tax breaks for the drilling industry.  David Kocieniewski says that “examination of the American tax code indicates that oil production is among the most heavily subsidized businesses”.  These tax breaks occur for a number of reasons.  Many are simply to lure oil companies to American shores, others were “born of international politics” or “date back nearly a century”(8).  Beyond that the United States government has put “Liability Limits” on drilling operations.  The Oil Pollution Act of 1990 limits an oil companies liability for damages to only $75 million dollars.  Any remaining damages, up to $1 billion, are payed through the Oil Spill Liability Trust Fund.  This fund is “financed primarily through a fee on imported oil”(1).  Senator Robert Menendez from New Jersey recently introduced bill, S. 3305 which would raise that cap to $10 billion(9).

All of these laws and regulations have one thing in common.  They increased the probability of a catastrophic oil spill in the Gulf of Mexico.  Each regulation increased the risk of such a spill in some way and when combined they resulted in the disaster that is causing massive destruction in the Gulf today.  The Minerals Management service was organized to be the overarching regulatory body for the Oil Industry.  Why did it fail in its duty?  Why did “spills from offshore oil rigs…in U.S. waters more than quadrupled this decade” despite the MMS’s oversight(10)?  This question was answered by economist Walter Block in his book The Privatization of Roads & Highways (12).  Quoting Cecil Mackey, former Assistant secretary of transportation, he says:

“As the more obvious regulatory actions are taken; as the process becomes more institutionalized; as new leaders on both sides  replace ones who were so personally involved as adversaries in  the initial phases, those who regulate will gradually come to reflect,     in large measure, points of view similar to those whom they regulate.”

Quite simply, the MMS adopted the views of the Oil Industry completely negating their ability to regulate it.  Congressman Nick J. Rahall confirms this saying “MMS has been asleep at the switch in terms of policing offshore rigs”.  Using numbers supplied by the MMS in the prior 64 months before the incident “25 percent of monthly inspections were not performed”(3).  Are we to believe another agency would be any more efficient?  Bureaucracy and corruption are not the only things to blame however; legislation played a vital role in this disaster as well.  DWRRA, for example, incentivized the risk to drill in deep waters.  Under DWRRA the greater the depth being drilled the greater the royalty relief amount.  These waters are inherently less safe to drill in.   It is easy to compare the difficulties in dealing with a site 5000 feet below the ocean against one 500 feet below the surface.  These incentives were made worse when DWRRA expired.  Under the new program “the most economically risky projects would receive the most relief”, safer projects on the other hand would receive “little or no relief”(4).

While acts like DWRRA incentivize the risk of deepwater drilling the greater incentive to drill in the Gulf of Mexico is simply that there are so few places to drill in the continental United States.  The United States Exclusive Economic Zone extends “200 nautical miles” from all of it’s shores(2).  Yet, much of this area is off limits to drilling.  The “blanket moratorium” issued by former President George H.W. Bush in 1990  restricts drilling in “all unleased areas offshore Northern and Central California, Southern California except for 87 tracts, Washington, Oregon, the North Atlantic coast, and the Eastern Gulf of Mexico coast”.  The Gulf of Mexico is the only economically viable offshore area left for them to drill.  This of course pales in comparison to the Arctic National Wildlife Refuge.  Most of the 10-million-acre area is not even adjacent to the ocean, surely drilling on land or in shallow water is much safer than drilling 5000 feet under the ocean(6).  Beyond helping to cause the spill in the first place the government is increasing the risk of future disasters.  The temporary ban issued in response to the Horizon spill “neither improves safety nor mitigates risk”(11).  By forcing drilling to stop you immediately cause a number of problems.  Reentering a location is as dangerous, if not more so, than the original drilling operation.  Experienced workers have been fired, laid off, or relocated and will need to be replaced with less experienced ones.  Equipment in worse quality will be all that remains when the moratorium ends(11).

The economic regulations were the proverbial straw that broke the camel’s back.  A single tax break for the Deepwater Horizon oil rig covered “70 percent of the rent” or “$225,000 a day”.  Or, as policy analyst Sima J Gandhi describes it “We’re giving tax breaks to highly profitable companies to do what they would be doing anyway”(8).  These breaks are not only an unfair advantage, they incite these companies to make riskier choices.  If the potential cost of the Deepwater Horizon rig wasn’t offset by these breaks it may not have been economically viable to drill in such a dangerous location.  On top of the lower cost of the initial operation; the Liability Caps ensured that any potential risk was marginalized by the government.  The $75 million limit that has been in effect since 1990 was a message to the industry to attempt increasingly risky drills(1).

The oil companies should be liable for the full cost of any damages done by their rigs.  The worry that “operators and nonoperators in the U.S. Gulf of Mexico will be unable to obtain adequate protection from insurance” is totally unjustified (1).  If the site is not economically viable then there is no reason to drill there.  If BP and Transocean knew they would have been liable for all damages they would not have received a citation for “not conducting well control drills as required and not performing ‘all operations in a safe and workmanlike manner'”(3).  There would have been an incentive to spend money on safety, training and equipment instead of the incentive to take risks knowing they would be protected.  Or as one lawyer explained the situation “arbitrary liability caps are just not reasonable.  You cannot decide the expense of a disaster before it happens.  Liability caps allow companies like BP to avoid bearing the responsibility for the full cost of the damage they inflict”(9).

The oil has stopped flowing from the bottom of the Gulf; for now.  The question remains: How can we prevent this from happening again?  There, of course, is no easy answer.  Accidents, mistakes, and disasters can never be guarded against completely.  We can however mitigate the risk involved in those dangerous operations that are needed for the sake of humanity.  The best way to increase the safety of the oil industry is to remove the regulations that incentivize the risks involved in their industry.  Preventing drilling in safer areas, tax breaks, royalty reductions, liability limits; all these things make an already dangerous prospect that much more perilous.  We need to neither help nor hinder these companies, they must succeed or fail on their own merits.

Sources available upon request.

“Bizarre Conservative Ideas About Immigration”

Jacques Delacroix Current Events, Politics

This old posting is suddenly relevant again. Go to indented paragraph directly if you are in a hurry.

The Keystone Pipeline

Jacques Delacroix Current Events, Politics , , ,

You may have heard recently that the appropriate federal agency declared  the Keystone pipeline would pose no significant dangers to the environment. I doubt this will stop the green fanatics. Nor is the probability that oil no refined and used in this country will be mostly exported to China where environmental laws are lax and not often enforced. Rationality is not their forte, as a rule.

It appears that there may be a chance to influence the decision to build or not via an on-line petition. I don’t know what is the probability of its working is but the cost seems so low it would be a pity not to try a click. Besides, enough signatures may make Mr Obama squirm a little irrespective of the decision he makes.

Go to:   buildKXLnow.com [it’s actually buildKXLnow.org – bc]

Go to: “Go to Make Your Voice Heard,” [it’s  actually the ‘Take Action Now’ tab that you’ll want to click on – bc]

A simple sign-up box will appear.