Deficit Down Thanks to Taxpayers

President Bush can take credit all he wants for the 2006 budget deficit, "the smallest amount of red ink in four years" to use the AP's words. What disappoints me is how the deficit went down:

Both spending and tax revenues climbed to all-time highs in 2006. The sharp narrowing of the deficit reflected the fact that revenues climbed by 11.7 percent, outpacing the 7.3 percent increase in spending.

"Federal Deficit Now Lowest in 4 Years" [via Blue Crab Boulevard]

Cheap Drugs Already Available at FL Wal-Marts

Wal-Mart pushed up its plan to sell some prescription drug for $4/month, four months sooner than expected.

Wall Street wasn't happy. The retailer's shares fell during the day. But Wal-Mart isn't stupid. They must think there's good money to be made even from drastically cutting drug costs.

"Wal-Mart To Sell Low-Price Drugs Sooner Than Expected"

Dow Jones Index Near All-Time High

An economic story that's flown under the radar is the rise of the stock market to near-record heights. It's almost come back from the Internet stock-charged bubble that burst in 2000:

The Dow Jones industrial average is just 53.59 points away from its all-time high close, going into today's trading. In pre-market trading, Dow Jones futures are up 3 points, S&P 500 futures rose 0.5 of a point, and Nasdaq futures rose 2.8 points.

On Tuesday, the Dow industrials closed at its highest level of the year, as investors reacted to a consumer confidence survey that appeared to show an economy not floundering as some had feared, but not growing too much to spur inflationary pressure. The Dow climbed 93 points, the S&P 500 rose by nearly 10 points and the Nasdaq Composite rose 12.3 points.

The all-time high on the Dow is 11,722.98, reached in January 2000.

"Dow Just 53.59 from All-Time High Close"

Indiana Refinery to be Expanded

BP wants to expand its Indiana oil refinery to process Canadian oil. Those who complain about high gas prices and reliance on Middle East oil should get on board and make sure the regulators give their approval.

"BP Planning $3 Billion Whiting Refinery Investment"

Ford-GM Have Talked about Merging

GM and Ford merging would rock more than Detroit:

Senior executives at General Motors and Ford Motor Co. have discussed a merger or alliance, according to several sources familiar with the talks.

The talks began after Nissan CEO Carlos Ghosn broached the possibility of an alliance among Renault, Nissan and GM in July.

The Chevy and Ford fanatics would puke. For me, I'd want to short the combined company's stock. Nothing good happens when you take one faltering company and mush it together with another faltering company. Either GM or Ford will have to go under before the labor unions and calcified management really shake things up, become more innovative, and make cars people want to buy.

Both Ford and GM have to get under their union contracts and start from scratch. That means some factories would be unionized while other wouldn't. It means building cars would be more like building computers. Cars would go from designs to sell-able product in months instead of years. It means designing factories and manufacturing processes to quickly shift production from slow-selling vehicles to more popular cars. That way the companies wouldn't have to shut down production or offer margin-crimping incentives. GM and Ford have learn much from Toyota, Honda, and the other Japanese car companies. Now, they should look to Silicon Valley as their model. If they did it right they'd leapfrog the Japanese and be kings of the next generation of car making.

"The Ultimate Alliance"

UPDATE: GM's and Ford's home state has an abundance of economic problems as Jay Reding notes.

Get Ready to Flip that Playstation 3

People looking for a way to make a quick (legal) buck should know Sony has lowered the expected number of Playstation 3 consoles that will make it to North America this fall:

Sony Computer Entertainment Chief Ken Kutaragi told reporters that far fewer units will be available for the U.S. and Japanese launches, with the U.S. to be allocated 400,000 units, and Japan getting 100,000. As a result, Sony has now lowered its estimate of 4 million PS3s shipped by the end of 2006 to a more realistic 2 million.

"North American, Japanese PS3 Launch Limited to 500,000 Units"

"Sony’s PS3 Delayed In Europe"

Carnival of the Capitalists

The Business of America is Business hosts this week's Carnival of the Capitalists Q & A style.

Ford Might Go Private

Ford is thinking of going private and ditching the constant pressure to report to Wall Street while it restructures. The company's stock is in the tank with its market capitalization down to $14.5 billion. That would make Ford a tempting target for outside buyers if the Ford family didn't control 40% of the voting stock.

"Ford Motor Considers Going Private"

79-Year-Old Earns Economics Ph.D.

For my econ geek readers here's a story to let you know it's never too late to get that Ph.D.:

After a long and fruitful career, 79-year-old master’s degree graduate Herbert Baum has returned to the University of Chicago to earn his Ph.D. The oldest person ever to be awarded a doctorate by the University, Baum will receive the degree in economics Friday, Aug. 25.

When he left the University in 1951 to become a government agricultural economist in Washington, D.C., Baum had a master’s degree and was just short of writing his dissertation to earn a doctorate.

His dissertation contributes to agricultural economics by examining how to measure the impact of fees charged producers for commodity promotion and research. The thesis, based on a case study of the strawberry industry in California in which he was a leader, developed a model for researchers to understand the long-term value of the fees assessed growers. The model shows how the policies of the state strawberry commission, which supported research into improved varieties, improved production per acre and grower profitability.

"University of Chicago Awards Ph.D. to Oldest Person Ever to Receive the Degree" [via A Constrained Vision]

Carnival of the Capitalists

Forty Media hosts this week's Carnival of the Capitalists.

King Leopold and Government Constraint

Belgian King Leopold II's rule is a case of instututional and cultural contraints limiting a government. It's a case of two Leopolds. As king of Belgium he implemented free trade, and the nation prospered. It prospered so much Leopold undertook public building projects that gave him the name "King-Builder."

But there was another Leopold. In Africa he personally owned the Congo Free State. There he had fewer constraints. He could more easily do what he wanted for personal enrichment. Millions perished.

Brian Micklethwait summarizes well Leopold's lessons to political economists:

Leopold II, pursuer of ultimate and permanent power whenever and wherever he could find it, was able to let rip in Africa, but not in Belgium. Her was a civilised Belgian ruler not because he liked his fellow Belgians and welcomed their massed and massive influence over him. He hated it. He just did, in Belgium, what he had to do. The environment made the difference.

Countries are governed the way they are, not because the politicians in some countries are intrinsically more greedy and corrupt than they are in other countries, or for that matter because people in different countries differ in their willingness to accept tyranny, but because different countries differ in the constraints they place upon rulers.

"Bruce Bueno de Mesquita on the Logic of Political Survival and the Two Faces of King Leopold II of Belgium"

"The Political Economy of Power"

More Money Posts than You Can Shake a Stick At

BarryBlog hosts this week's Carnival of the Capitalists.

Alaskan Pipeline Could Take Months to Repair

Fixing the Prudhoe Bay pipeline in Alaska won't be a quick fix:

BP said Monday it discovered corrosion so severe that it will have to replace 16 miles of pipeline at the huge Prudhoe Bay oil field — work that could shut down the nation's single biggest source of domestic crude for months and drive gasoline prices even higher.

Oil prices climbed more than $2 a barrel on the news, and gasoline futures rose, too. The West Coast is expected to be squeezed particularly hard, and the government is considering releasing oil from its emergency stockpile to ease the crunch.

BP PLC said it will have to replace most of the 22 miles of so-called transit pipeline at Prudhoe Bay, which produces about 2.6 percent of the nation's daily supply, or about 400,000 barrels a day.

"BP: Pipeline Closing May Last for Months"

A Face of Globalization

It's rare that Hilbert, Wisconsin, my hometown, gets a dateline in the Milwaukee Journal Sentinel. There's no way I can ignore the story of Todd Thiel's global investment firm McKinley Reserve managing $1 billion in assets from in such an out-of-the-way place. Cheap communications technology and inexpensive airfares allow Thiel to run his investment firm from little Hilbert.

McKinley Reserve is garnering plenty of attention for its $1 billion RiverWalk real estate investment in Dubai. McKinley is the first American company to actually own the land. That's something Donald Trump can't even lay claim to.

Technology like the internet and mobile phones means Thiel's company can communicate with clients and dealmakers all over the world. Airlines flying almost anywhere mean Thiel can go anywhere to get on-the-ground information and to seal deals personally. With a website like McKinley's you'd never know the company is run in a rural town of 1000.

With the ability to do business anywhere from anywhere something had to bring Thiel back to rural Wisconsin. He comes from a large family with relatives all over the Hilbert area. Hilbert is comfortable. "There's a lot of people who leave to go find things, but everything you need is right here. I don't fight traffic. I don't fight people. The cost of living is obnoxiously low," Thiel told John Schmid. It indeed is a comfortable place.

But access to global communications and travel is a double-edged sword. Thiel could just as easily move his company out of Wisconsin if state economic policies deteriorated. RedPrairie's CEO has trouble recruiting talent because of Wisconsin's high taxes and Milwaukee's high crime. Policy makers have to make sure the state is a pleasant place to live and make money or people like Thiel won't establish billion dollar companies here.

"Global Village"

Taxing Times

Malcolm Gladwell notes a reason not to long for the "good old days:"

[I]n 1949, the highest paid CEO in America was Charlie Wilson of General Motors, who earned $586,100 in salary, bonus and stock. That's roughly equivalent to what some of the better-compensated CEO's are making today.

But what did Wilson pay in taxes? $430,350.

[via Club for Growth]

Marx as Literary Genius

Karl Marx biographer Francis Wheen sees Das Capital as more than a political economic treatise. It's a literary achievement of the first order. The number of literary references in the first volume--the only one completed before Marx's death--is astounding:

In 1976 SS Prawer wrote a 450-page book devoted to Marx's literary references. The first volume of Das Kapital yielded quotations from the Bible, Shakespeare, Goethe, Milton, Voltaire, Homer, Balzac, Dante, Schiller, Sophocles, Plato, Thucydides, Xenophon, Defoe, Cervantes, Dryden, Heine, Virgil, Juvenal, Horace, Thomas More, Samuel Butler - as well as allusions to horror tales, English romantic novels, popular ballads, songs and jingles, melodrama and farce, myths and proverbs.

The book can be read as a vast Gothic novel whose heroes are enslaved and consumed by the monster they created ("Capital which comes into the world soiled with gore from top to toe and oozing blood from every pore"); or as a Victorian melodrama; or as a black farce (in debunking the "phantom-like objectivity" of the commodity to expose the difference between heroic appearance and inglorious reality, Marx is using one of the classic methods of comedy, stripping off the gallant knight's armour to reveal a tubby little man in his underpants); or as a Greek tragedy ("Like Oedipus, the actors in Marx's recounting of human history are in the grip of an inexorable necessity which unfolds itself no matter what they do," C. Frankel writes in Marx and Contemporary Scientific Thought). Or perhaps it is a satirical utopia like the land of the Houyhnhnms in Gulliver's Travels, where every prospect pleases and only man is vile: in Marx's version of capitalist society, as in Jonathan Swift's equine pseudo-paradise, the false Eden is created by reducing ordinary humans to the status of impotent, alienated Yahoos.

"The Poet of Dialectics" [via Arts & Letters Daily]

Google to Build Michigan Office

Google announced they will open an office in Ann Arbor, Michigan that will create 1000 jobs within five years. The internet giant is already looking to fill positions.

In its search for a headquarters for his revenue-producing AdWords service Google the company looked at university cities like Boston, Boulder CO, Phoenix, and the winner Ann Arbor. Missing from that list was a Wisconsin city, specifically Madison. That's a city with a reputable university and a highly-educated workforce. AdWords manager David Fischer told the Detroit Free Press, "We see Michigan as an ideal location to recruit the best and brightest workers." Could it be Wisconsin isn't an "ideal location" like Michigan? And could it be one of the reasons it would be difficult for a company to "recruit the best and brightest workers" is the Badger State's tax and business climate? RedPrairie CEO John Jazwiec is considering moving his software company out of Wisconsin because it has trouble recruiting talent. Wisconsin's economic environment might have kept her out of Google's sights which would mean another opportunity lost.

"Google coming to Ann Arbor" [via digg]

UPDATE: Peter Cohan at Blogging Stocks sees this project as another example of "Google's underlying cheapness gene."

Ken Lay Dead at 64

Convicted felon and ex-Enron CEO Ken Lay died of a heart attack:

"Apparently, his heart simply gave out," said Pastor Steve Wende of Houston's First United Methodist Church. Lay, who lived in Houston, frequently vacationed in Colorado.

I found some Democratic Underground wacko looking for the Dick Cheney conspiracy angle:

I have to wonder if Cheney had him killed. Lay knew where a lot of bodies are buried.

"Enron Founder Kenneth Lay Dies at 64"

Ellison Takes Back Gift to Harvard

I'm under the weather today. Sleep has been my best friend. That's why there was no show prep for Charlie Sykes, and my first post is so late today.

Anyway, Oracle's billionaire Larry Ellison took back his gift to Harvard University, and it has to do with outgoing president Larry Summers:

An Oracle spokesman said on Tuesday that Mr Ellison’s decision to withdraw his pledge was “directly related” to the departure of Mr Summers, the controversial former US treasury secretary, whose brusque management style frequently clashed with members of the Harvard faculty.

“Larry Summers was the brainchild of this initiative. He and Larry Ellison had several dicussions about it. His last day at Harvard is this week, and his departure from Harvard is really the reason that Larry decided to reconsider the decision,” the spokesman said.

He said Mr Ellison planned to announce a donation to another organisation within “several weeks.”

Concerns about the pledge first emerged last week, after Christopher Murray, head of Harvard’s Global Health Initiative, who had been tapped to run the institute, said last week that the promised millions of dollars from Mr Ellison never materialised.

The planned Ellison Institute for World Health was to have studied ways to assess health policies around the world. Mr Ellison, whose wealth is estimated by Forbes at $16bn, had originally pledged the funds in a meeting with Mr Summers last year.

"Ellison Rescinds $115m Harvard Gift"

Buffett Donation is Estate Tax Dodge

You don't get to be the second-richest man in the world by being dumb. Warren Buffett has been a smart investor and is being smart in what happens to his money after he dies. James Taranto notes:

The federal death tax is currently being phased out, but it will reappear in 2011 unless Congress acts--which means that if Buffett lives that long, the government will confiscate 55% of his assets upon his death.

Critics Gloss Over Wal-Mart's Cheap Prices

Jason Furman, a self-professed progressive [PDF] who "instinctively recoil[s] at the big-box shopping centers spreading their uniformity across the American landscape" sees the benefits of Wal-Mart:

A range of studies has found that Wal-Mart's prices are 8 percent to 39 percent below the prices of its competitors. The single most careful economic study, co-authored by the well-respected MIT economist Jerry Hausman, found that grocery sales by Wal-Mart and other big-box stores made consumers better off to the tune of 25 percent of food consumption. That doesn't mean much for those of us in the top fifth of the income distribution—we spend only about 3.5 percent of our income on food at home and, at least in my case, most of that shopping is done at high-priced supermarkets like Whole Foods. But that's a huge savings for households in the bottom quintile, which, on average, spend 26 percent of their income on food. In fact, it is equivalent to a 6.5 percent boost in household income—unless the family lives in New York City or one of the other places that have successfully kept Wal-Mart and its ilk away.

Furman is surprised "by how quickly Wal-Mart's critics move past the issue of low prices?" They move pass that fact because deep down Wal-Mart's critics are anti-capitalist, anti-freedom. They get a strange, negative reaction knowing someone is making a profit. James Joyner puts this view into one sentence: "The thing to keep in mind, however, is that the people who own Wal-Mart make a lot of money, and they are therefore evil." The anti-capitalists view the economy as a zero-sum game where Wal-Mart's profit is derived directly from the low-wage serfs who work in the stores (voluntarily I might add). It's not true, but it helps power their crusade against an American success story.

"Is Wal-Mart Good for the American Working Class?"

Adam Smith's Birthday

The founder of economics Adam Smith was born 283 years ago today. Although DealBreaker.com says today is the anniversary of Smith's baptism. Either way, it's good to be reminded of the field of study he started and the brilliant ideas he advanced.

Carnival of the Capitalists

Rethink(IP) hosts this week's Carnival of the Capitalists.

Paulson Nominated as Next Treasury Secretary

John Snow resigned and President Bush nominated Goldman Sachs CEO Henry Paulson as the new Treasury Secretary.

Snow has been the most quiet, least public Treasury Secretaries in modern times. Today, President Bush said, the Treasury Secretary is the "chief spokesman for my economic policies." Snow's lack of exposure (whether his fault or the White House's) made him a failure. The economy isn't in recession yet a malaise infest the public's attitude toward it.

Being a long-time Wall Street veteran Paulson will have the investment community's ear. Whether that will translate into getting President Bush more credit for the economy will have to be seen.

The AP has already jumped on Paulson's environmental work. He is chairman of The Nature Conservancy. Unlike most environmental groups it uses donated money to buy land and use rights for protection. They take advantage of the power of private property rights.

"President Bush Nominates Henry Paulson as Treasury Secretary"

"Bush taps Paulson for Treasury Secretary"

"Goldman Sachs Chair Paulson Replacing Snow at Treasury"

UPDATE: Wonkette is occasionally funny. "Paulson: does he have a cold or does he always talk like “Macho Man” Randy Savage?"

Gasoline as a Percentage of Income

Glen Whitman whipped up some economic perspective that goes beyond adjusting current gas prices for inflation. He found that gasoline prices as a percentage of household income hasn't reached their early 1980s peak. He writes,

Even looking at the poorest fifth of the population, the fraction of income required to buy gasoline is still lower than it was in the early '80s.

"Affordability of Gasoline" [via Jonathan Adler]

The Power of Prices

Economics shows that when the price for something goes up consumers look for substitutes. We're seeing an example of this with the Air Force testing a new jet fuel:

In a series of tests — first on engines mounted on blocks and then with B-52's in flight — the Air Force will try to prove that the American military can fly its aircraft by blending traditional crude-oil-based jet fuel with a synthetic liquid made first from natural gas and, eventually, from coal, which is plentiful and cheaper.

"Military Plans Tests in Search for an Alternative to Oil-Based Fuel" [via California Yankee]

Mont Pelerin Society Essay Contest

A dream of mine is to attend a meeting of the Mont Pelerin Society, a group of classical liberal, libertarian, and conservative thinkers. The organization's website states, "Its sole objective was to facilitate an exchange of ideas between like-minded scholars in the hope of strengthening the principles and practice of a free society and to study the workings, virtues, and defects of market-oriented economic systems." Past members include Ludwig von Mises and my intellectual hero Friedrich von Hayek. Current members include Milton Friedman, James Buchanan, Gary Becker, and Ed Feulner.

If I get my act in gear and write one hell of an essay I could win and be invited. The topic is on this Hayek quote:

From the first establishment of (trade) which served reciprocal but not common purposes, a process has been going on for millennia which, by making rules of conduct independent of the particular purposes of those concerned, made it possible to extend these rules to ever wider circles of undetermined persons and eventually might make possible a universal peaceful order of the world.

Any essay of mine will draw upon Hayek's "The Use of Knowledge in Society." His The Constitution of Liberty and The Road to Serfdom will also have meaningful material. What I will need is a unique angle or hook to get the judges' attention. A few years ago I won an essay contest sponsored by Laissez Faire Books. My winning essay was title "Hayek's Alien Abduction." My hook was having the great economist kidnapped by aliens then transported to the present to see if his fears in The Road to Serfdom came to fruition. I'll need something more substantial to have a shot in the Mont Pelerin Society contest. If you've read any Hayek or have any thoughts on the above quote leave a comment or send me an e-mail.

A Picture is Worth a Few Billion Words (or Dollars)

Steve Verdon noticed Tim Russert had a little trouble understanding oil company profits. Being the econ geek he is he whips out some graphs.

"Helping Tim Russert"

Day of Rememberance

While ANSWER tries to gather the illegal immigration movement under its Stalinist umbrella Catallarchy turns today, May Day, the communist holiday on its head by making it a day of rememberance.

"May Day 2006: A Day Of Remembrance" [via Instapundit]

Economics 101

With the talk in Washington (by Republicans no less) of price gouging by oil companies it's obvious basic economics lessons are in order. That's where a resource like Wikipedia comes to the rescue with their entry on supply and demand. If someone knows of a site full of interactive or animated supply and demand graphs let me know. Seeing how the shifting curves affect prices helps me.

Some price manipulation may be occuring--the godfather of capitalism Adam Smith wasn't even that naive--but there's no need to leap to nefarious conclusions when non-evil explanations suffice.

Charlie Sykes read this Wall Street Journal editorial on his show today that applies the basic economic laws to gasoline prices.

A Tale of Two Headquarters

From the looks of the company headquarters you'd never guess Wal-Mart was the biggest name in retail. You'd never guess suppliers and potential suppliers come from all over the world to meet with company executives in a structure that looks like a high school. There are no flashing lights, no marble statues of Sam Walton spouting water into the air, and no post-modern architecture.

Compare this:

To this:

Comparing the two headquarters is a brief tale of two companies. Wal-Mart strives for efficency and customer satisfaction. Their headquarters is there to achieve those goals with no focus on flash. It's aesthetically unpleasing, but it works; just like your typical Wal-Mart store.

The New York Times is a company in the midst of change. The newspaper business is slowly but surely losing to electronic and alternative media. It has turned from being the United States' "paper of record" to a source of derision, contempt, and ideological bias. Despite the threats to their long-term business they put energy into a new headquarters designed by a famed (and pricey) architect. They even had a reporter do a hit piece on how Wal-Mart was using webloggers to promote the company. That's an interesting way to grow the business. Maybe that thinking is why NY Times investors want changes in how the company's stock is structured. Here's the tale of the tape: New York Times stock vs. Wal-Mart stock. Where would you rather have your money?

Weblogger Covers Wal-Mart Media Conference

The center of all that's evil, Lefties would call that Wal-Mart, looks awfully plain. Rob at Say Anything says the "headquarters looks like my high school." Judging by the picture he took he's right.

Tom Forbes is also in Bentonville at the conference.

"Wal-Mart Conference Day 1"

A Sign of the Bubble Bursting?

Larry Kudlow is always the optimist:

The economy is in a boom.

We’ve never had it so good.

Bolten Wants Snow Replaced

New White House Chief of Staff Josh Bolten wants Treasury Secretary John Snow replaced. Snow has been pretty much invisible while serving (like his predecessor Paul O'Neill so it's not like anyone would really notice. Part of it is the times we live in. We're at war so the foreign policy departments, State and Defense, get the limelight. Part of it is also the importance placed on the department by the President. Other than tax cuts Bush hasn't been an economics-focus President.

"Chief of Staff Is Expected to Shake Up 2 Key Teams"

Chunk of Change

Wow. According to the Legislative Fiscal Bureau (via MJS)...

taxpayers could have saved up to $1.9 billion in state taxes over 20 years if revenue limits had been in place.

The bureau report shows savings of about 4% annually, in both state and local taxes, if the so-called Taxpayer Protection Amendment were already law. The analysis was based on a new version of the measure under consideration by the Legislature.

The savings in state taxes came to about 4% in hypothetical snapshots taken by the bureau looking back 10, 15 and 20 years ago.

That would have translated into cumulative dollar savings of $473.3 million to $1.94 billion in state spending, depending on how long the proposed constitutional amendment had been in force, the bureau study says.

But not everyone's happy:

"Clearly, the impact would be devastating on schools and on the affordability of University of Wisconsin students," said Schmiedicke, Gov. Jim Doyle's top budget official. "Tough decisions need to be made, and this isn't the substitute for that."

Clearly, taxpayers mean nothing to the pro-tax forces in this state. It doesn't matter how much the hypothetical savings could have aided the state and our economy. What matters are state programs, which must be funded with extensive annual increases, regardless of whether we can afford it or not.

This is something the left conveniently forgets about tax and expenditure limits--they do not decrease existing expenditures, or remove funding from certain programs, but merely enforce reasonable growth rates. If necessary, every single program can increase at the given rate. As long as program officials and administrators are responsible, nothing will be "devastated."

I think that's the gist of the problem, however, is responsibility. Those who oppose TELs would never think to impose a requirement of responsibility upon anyone.

AT&T to Buy BellSouth

AT&T, formerly SBC, formerly Southwest Bell, formerly one piece of the Ma Bell empire, wants to buy BellSouth, another piece of old Ma (Grandma?) Bell. My initial reaction is this won't happen. There may be plenty of business and public policy reasons for this merger to happen--I am not fond of antitrust laws. It will take a lot of convincing of the public by AT&T and BellSouth that consumers won't be gouged. At a time when many people there's a conspiracy among oil companies to keep gas prices high the public will be highly skeptical of a business deal that reduces the number of major U.S. telecom players to three (AT&T, Qwest, and Verizon).

A part of the press release that caught my eye was the combined company will be headquartered in San Antonio, TX. If the deal goes through the U.S.'s #1 telecom players will be in Texas while the #1 retailer, Wal-Mart will be in Arkansas. Who would have thought 50 years ago that the dominant players in these two industries wouldn't be located either New York City or Chicago?

"AT&T, BellSouth to Merge"

Hamilton Never Looked Uglier

The feds continue to ruin our money. No, I'm not talking about inflation. I'm talking about adding garish colors that slowly evolve our fine greenbacks into euros. It's bad enough the fifty-dollar bill is pink. The new ten-dollar bill now includes yellow and red. It looks like the bill is suffering from yellow fever and chicken pox. (Is this prophetic of the bird flu?) Aesthetics have been abandoned to fight the counterfeiters. It means the coin-side of the federal moneymakers has the monopoly on the talent.

"New, More Colorful $10 Bill to Debut"

Carnival of the Capitalists

Lots of capitalist goodness at The Stalwart.

I'm Depressed

Carla Howell roughly estimates $7 trillion out of a $12 trillion economy last year was government controlled spending. We live during a time when people like Karl Rove think the nation is on the cusp of a long-term GOP majority. It goes to show you Republican doesn't equal conservative. Go John Shadegg!

"Big Government Is Even Bigger Than You Think" [via Cam Edwards/Farrah]

The Incredible Shrinking Deficit

Steve Conover, The Skeptical Optimist, sees a trend brewing. With some luck and a gridlocked Congress we could see the federal budget deficit at zero in a few years. It's so contrarian to what you hear from the MSM.

You can find this post along with other great business and economics writing at the Carnival of the Capitalists hosted this week by Wordlab.

"The Disappearing Deficit"

Sponsored by ACME

Not TAM, but this week's Carnival of the Capitalists hosted by Coyote Blog.

Google's Growth

Google is a joy for stock owners as well as employees. The perks of working there are lavish:

Meals of all kinds, painstakingly prepared by company chefs, are free at the company's headquarters in Mountain View, Calif., a modern corporate campus known as the Googleplex. Other amenities there include children's day care, doctors, dry cleaning, laundry, a gym, and basketball and volleyball courts. Maternity or paternity leave is 12 weeks at 75 percent of full pay. There is also up to $500 available for takeout meals for the entire family after a newborn arrives, courtesy of Google. Shuttle buses (with wireless Internet access for working while commuting) ferry employees to the Googleplex from throughout the Bay area.

CEO Eric Schmidt is a little more realistic though vague:

Another issue that we will face in the coming years is the maturation of the company, the industry and our work force. We, along with other firms in this industry, are in a rapid growth stage now, but that won't go on forever. Some of our new workers are fresh out of college; others have families and extensive job experience. Their interests and needs are different. We need to provide benefits and a work environment that will be attractive to all ages.

"At Google, Cube Culture Has New Rules" [via digg]

Leftists Would Say Bartlett is "Growing"

Bruce Bartlett isn't a fan of President Bush. Next year, he'll be coming out with a book titled Imposter: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. The book got him fired from a conservative think tank. During the Harriet Miers brouhaha he wrote in a column:

The truth that is now dawning on many movement conservatives is that George W. Bush is not one of them and never has been. They were allies for a long time, to be sure, and conservatives used Bush just as he used them. But it now appears that they are headed for divorce. And as with all divorces, the ultimate cause was not the final incident, but the buildup of grievances over a long period that one day could no longer be overlooked, contained or smoothed over.
...
I could go on, but the point is that George W. Bush has never demonstrated any interest in shrinking the size of government. And on many occasions, he has increased government significantly. Yet if there is anything that defines conservatism in America, it is hostility to government expansion. The idea of big government conservatism, a term often used to describe Bush's philosophy, is a contradiction in terms.

Bruce Bartlett, who worked as an economic aide to Presidents Reagan and George H.W. Bush, recommends the introduction of a value-added tax - a kind of sales tax used in Europe and most other advanced industrial nations - to bring in the large amounts of new revenue he deems necessary to close the enormous budget gap.

Serious academic studies have concluded that the VAT cannot be blamed for raising the overall burden of taxation even in countries where it was a new tax and not a replacement for some existing tax. Writing in the prestigious National Tax Journal in December 1985, economist J.A. Stockfisch found no support for the view that VATs raise either the tax level or government spending.

[The VAT] may turn out to be the least bad way of financing needed tax reforms and the massive growth of federal health care spending that neither the White House nor Congress shows any interest in restraining.

On Saturday (October 26), the Washington Post reported that the Treasury Department is studying plans to impose a value-added tax (VAT) to replace the corporate income tax and finance other tax reforms. This is a dangerous road for the Bush administration to travel, both politically and economically.
...
In 1984, the Treasury Department published a comprehensive study of the VAT that recommended against its adoption. The reasons laid out in that report are still valid today. Adopting a VAT, however it is termed, would put the U.S. on a slippery slope toward European levels of taxation and government. The Bush administration will be making a terrible mistake if it starts down that road.

The conservative movement doesn't need a "growing" conservative who won't reject a new tax.

Wondering about eBay

What's the point of hunting for deals on eBay when sellers slap on a big shipping charge? You may still end up getting a bargain, but something gets lost in the experience.

And I still don't understand the Skype purchase.

"Cyber Monday" a Myth

I fell for online marketers' claims that the Monday after Thanksgiving is the big online shopping day:

So what's up with this Cyber Monday idea? A little bit of reality and a whole lot of savvy marketing. It turns out that Shop.org, an association for retailers that sell online, dreamed up the term just days before putting out a Nov. 21 press release touting Cyber Monday as "one of the biggest online shopping days of the year."

The idea was born when a few people at the organization were brainstorming about how to promote online shopping, says Shop.org Executive Director Scott Silverman, who answered his phone, "Happy Cyber Monday." They quickly discarded suggestions such as Black Monday (too much like Black Friday), Blue Monday (not very cheery), and Green Monday (too environmentalist), and settled on Cyber Monday. "It's not the biggest day," Silverman concedes. "But it was an opportunity to create some consumer excitement."

The genesis of the concept goes back even further. Shop.org member Shmuel Gniwisch, chief executive of the online jewelry site Ice.com, recalls getting an e-mail from Shop.org last year, suggesting that online retailers come up with their own marketing hook to match Black Friday. "The online guys got together and said, 'Let's give people something different,'" he says. "The reality is, we didn't notice anything special" on the Monday after Thanksgiving.

Bravo to Shop.org. There are some cleaver people there. Too bad for them I'll discount anything put out by them as pure spin. Like The Who "I won't be fooled again."

"Cyber Monday, Marketing Myth" [via digg]

Carnival of the Capitalists

Plenty of good econ/biz reading at Gill Blog who hosts this week's Carnival of the Capitalists.

Sunday Night Pick-Me-Up

Dead Meat is a documentary that looks at the waiting, and waiting, and waiting...of the Canadian health care system. Unless you're a dog of course.

[via Dr. Helen]

Fed to Start Hiding Econ Data

Fiat currency is a given. Money backed in something tangible like gold or a basket of commodities will not happen in my lifetime. Doing so would restrict government power, something that rarely happens in modern times. Given that we're stuck with central banks printing money at will (but using fancy econometric and macroeconomic theories to support them) investors, consumers, and businesses need to know how much money is being created. The Federal Reserve has decided to no longer publish M3 money supply numbers. M3 covers not only cash but checking accounts (demand accounts in econo-speak), savings accounts, CDs, eurodollar deposits, and repurchase agreements. By manipulating the money supply central bankers attempt to regulate business cycles. Sometimes they do ok (Alan Greenspan) and sometimes they really blow it (the Great Depression). If Ben Bernanke becomes the next Fed chairman he will implement some kind of inflation targeting. Economic actors will be better off knowing how well the Fed is doing with the M3 numbers. Transparency is important. Economic actors won't want to rely solely on the good faith of the Fed, especially with a new Fed chair running the show.

Other great economics and business posts are found at this week's Carnival of the Capitalists hosted by The Entrepreneurial Mind.

"Unpleasant Trend - Fed Counters By Stopping Release of M3 Money Supply Data"

Peter Drucker, R.I.P.

Management guru Peter Drucker died at 95:

Peter F. Drucker, revered as the father of modern management for his numerous books and articles stressing innovation, entrepreneurship and strategies for dealing with a changing world, died Friday, a spokesman for Claremont Graduate University said.

...

In 2002, Drucker was awarded a Presidential Medal of Freedom. He has been called "the world's foremost pioneer of management theory" and a champion of concepts such as privatization, management by objective and decentralization. Business Week magazine hailed him as "the most enduring management thinker of our time," and Forbes magazine featured him on a 1997 cover under the headline: "Still the Youngest Mind."

In the early 1940s, General Motors invited Drucker to study its inner workings. That experience led to his first management book, "Concept of the Corporation," in 1946. He went on to write more than 30 books.

"He's very much an intellectual leader, and that's not common," said D. Quinn Mills, a professor at Harvard Business School who shared the podium at several conferences with Drucker. Quinn described Drucker's insights as rare.

After the big stock market decline of October 1987, Drucker said he had expected it, "and not for economic reasons, but for aesthetic and moral reasons."

"The last two years were just too disgusting a spectacle," Drucker said. "Pigs gorging themselves at the trough are always a disgusting spectacle, and you know it won't last long."

Drucker termed Wall Street brokers "a totally non-productive crowd which is out for a lot of easy money."

"When you reach the point where the traders make more money than investors, you know it's not going to last," he said.

"The average duration of a soap bubble is known. It's about 26 seconds," Drucker said. "Then the surface tension becomes too great and it begins to burst.

Drucker's influence on corporate America is substantial. Unfortunately he led to the plethora of business guru-wannabes who fill bookstore shelves with mountains of buzzword-laden dreck.

Here's some blogosphere reaction:

• SCSU Scholars
  
• Rough Type
  
• Life Beyond Code
  
• FusionLife
  
• Logical Thinking
  
• Be Excellent
  

Godspeed, Peter.

"Peter F. Drucker, Father of Modern Management, Dies at 95"

Banian on Bernanke

King goes into Ben Bernanke's idea of "inflation targeting." It may not be that different from what Alan Greenspan has been doing for years. In a later post he goes into the role of the Federal Reserve as an economics research outfit.

"Bernanke, Inflation and Targeting"

Bernanke Comments

When economics gets into the news I'm pleased. But the problem with talking about the Fed nominee Ben Bernanke is it goes into an area I'm not well versed in. I'm acquainted with macro and monetary economics from my undergraduate work, but I caught the Hayek bug* and have been more interested in microeconomics--especially the distribution and use of knowledge--and political economy broadly defined. Plus, I'm not fond of the wizbang applied mathematics macro has turned into.

Still, talking about the Federal Reserve and its role in the economy gets the econ gears in my head turning. Here's some blogospheric comments on Bernanke:

• Steve Verdon considers Bernanke "more moderate than Greenspan" and sees him as a "rules" man in the "rules vs. descretion" debate.
  
  

• Greg Ransom isn't happy. He'd prefer an Austrian macroeconomist like George Seglin, Roger Garrison, Larry White, or Steven Horwitz. I wonder if could get us back on the gold standard without Congressional action?
  
  

• No surprise at the Mises Blog. Jeffrey Tucker isn't happy.
  
  

• Tyler Cowen gets into Bernanke's contributions to monetary and macroeconomics.
  
  

• Russell Roberts does his best ScrappleFace impersonation and reports that President Bush named his personal accountant to be Fed chief.
  

Bernanke to be Next Fed Chairman

CNN reports President Bush will name Ben Bernanke as the next Federal Reserve Chairman to replace Alan Greenspan. Unlike Harriet Miers Bernanke won't be labled as a Bush crony. The unsurprising pick (he's been mentioned many times as Greenspan's replacement) worked at the Fed before as well as in academia. Currently he's the chairman of the Council of Economic Advisors.

On the plus side he's an inflation hawk like Greenspan. He's in favor of something called "inflation targeting." Here's what he told the Minneapolis Fed:

It's true that the Federal Reserve is already practicing something close to de facto inflation targeting, and I think we've seen many benefits from that. My main suggestion is to take the natural next step and to give an explicit objective, that is, to provide the public with a working definition of price stability in the form of a number or a numerical range for inflation. I believe that that step, though incremental, would have significant marginal benefits relative to current practice.

First and very importantly, such a step would increase the coherence of policy. Currently, the FOMC [Federal Open Market Committee] makes its decisions without an agreed-upon definition of price stability or of the inflation objective, and one wonders how oarsmen pulling in different directions can get the boat to go in a straight line. I think the FOMC's decision-making process would be improved if members shared a collective view of where we want the inflation rate to be once the economy is on a steady expansion path.

Second, there's a great deal of evidence now that tightly anchored public expectations of inflation are very beneficial, not only for stabilizing inflation but also in reducing the volatility of output and giving the Federal Reserve more ability in the short run to respond flexibly to shocks that may hit the economy.

Inflation expectations in the United States are better anchored than they used to be but are still too volatile for optimum performance of the economy. Announcing an actual number or range would serve to anchor public expectations of inflation more firmly and avoid the risk of “inflation scares” that might unnecessarily raise nominal bond yields.

Third, from a communications viewpoint, financial markets would be well served by knowing the medium- to long-term inflation objective of the Fed. An explicit inflation objective would help market participants accurately price long-term assets, both by anchoring long-term inflation expectations and by giving the market better information about the likely path of short-term policy as the Fed moves toward its long-term target. And fourth and finally, I think an inflation target does introduce an additional measure of accountability for the Federal Reserve, although I would put that as least important of the things I've mentioned.

On the downside he hasn't worked on Wall Street, and it might take a while for the bankers and financiers to get comfortable with the academic.

Here's Bernanke's c.v. and Princeton home page. In August, John Tamny wrote a critical article on Bernanake for National Review. "For his views on money, Bernanke has the potential to be very dangerous," he writes." Brad DeLong countered. It will be fun watching dueling economists for a day or two.

"Bernanke's the Man"

Fallen Wall Street Star Weblogs

Henry Blodget was wrapped up in the dotcom boom, bust, and subsequent repercussions. The ex-Wall Street stock analyst (now barred from the industry) now has a weblog. He tackles his past as much as he's allow to:

The first stage of my own personal dotcom bust came when, along with many others, I stayed optimistic too long. For me, this was especially frustrating because I had expected that there would be a major reversal at some point, that the industry would follow a typical boom-bust-boom pattern and that most early entrants would fail. I got the macro pattern right, but I blew the timing. I also vastly underestimated the impact the bust would have on the Internet leaders, the technology industry, and, ultimately, the broader economy. Like most economic phenomena, these events are screamingly obvious in hindsight, and I will always regret not nailing them ahead of time.

The second stage of my fall—the one that vaulted me from a vast pool of red-faced analysts into a regrettable place in history—was a regulatory investigation into the interaction between the research and investment banking functions at Wall Street brokerage firms. In the course of this investigation, the SEC alleged that some remarks that I and my colleagues made in emails were inconsistent with professional opinions in our published research, and charged me with civil securities fraud (to read the complaint and emails, please visit www.sec.gov). Along with other parties in the research complaint, I settled the charges without admitting or denying the allegations, paid a humongous fine, and agreed to be barred from the industry.

As anyone who has been involved in a legal proceeding can attest, one of the most frustrating and painful side effects is that, except for standard boilerplate, you can’t discuss the allegations publicly. In my case, for a variety of reasons, the blackout is still in effect, and I have been unable to talk about the details outside of a legal context. I won’t be able to talk about them here, either, unfortunately, but I do want to say that my silence is not an attempt to ignore or disavow the seriousness of what happened. Everyone who listened to me in my Wall Street years deserves forthright answers to many perfectly reasonable questions, and someday soon, I hope to be able to provide them (preferably this century, preferably pre-humously).

No More Free Shipping

To cut costs Dell will offer free shipping only if a computer is sent to a post office. The days of free UPS or FedEx shipping are over--until competition drives them to offer it again. (Just like you can expect the auto companies to offer employee prices again when sales get soft.) Some won't like it because they get their mail home delivered and might no know where their post office is. Folks like me don't mind. I'd prefer it sent to someplace where an actual human signed off on it instead of having a delivery person leave a $1000+ box sitting on my porch or next to the garage.

"Dell Stiffs Customers"

Better Late Than Never

AnyLetter hosts this week's late Carnival of the Capitalists. The tardiness shouldn't take away for its always high quality content.

Cash It All In

WILLisms.com hosts this week's Carnival of the Capitalists.

The Wal-Mart Bugaboo

Sen. Glenn Grothman was swept into office because his opponent State Senate Majority Leader Mary Panzer was ineffective in advancing the government-limiting Taxpayers' Bill of Rights (TABOR). We've found nothing has been done with TABOR. It's dead thanks to the new GOP Senate Leader Dale Schultz, a TABOR opponent. Now, Grothman is explaining why in a committee he voted to keep the minimum markup law. On WTMJ radio he put out two reasons: 1) he didn't get his compromise amendment voted on; and 2) he fears Wal-Mart swooping into the gas market, killing off competition, then raising prices. Grothman's first reason is just petty legislator-speak. The second reason has little empirical evidence. I've studied economics for years and know the theory of predatory pricing. The problem is there are few examples of it actually happening. For instance, Wal-Mart has cut prices on food and consumer disposable goods that have driven out mom-and-pop stores selling the same items. It doesn't matter if the state has a minimum markup law or not. There's been no example of Wal-Mart then raising prices after killing competition. That's because there's free entry into the market. A big competitor can come in like Target. Smaller stores adjust to the new competition and offer better service, a better environment, or lower prices on some items. New business models like the dollar stores pop up. Minimum markup backers have not offered any reason why something similar wouldn't happen in the gas market.

Grothman was a breath of fresh air when he came into office. He's now become a big disappointment in a very disappointing Wisconsin Republican Party.

eBay Buys Skype

Ebay buying Skype makes little sense unless Meg Whitman is trying to turn her company into the GE of the internet. Sure, Skype technology will allow some eBay buyers and sellers to better communicate. But she could have just as easily (and more cheaply) partnered with Skype. She didn't have to pay $4.1 billion. This is the first purchase for the company that goes outside the e-commerce zone eBay has dominated. If we see more unusual purchases we'll know if Whitman is trying to become the next Jack Welch.

Engadget interviewed Michael Robinson, CEO of SIPhone, a VoIP competitor. Interesting view of the whole market.

"EBay Set to Acquire Skype Technologies"

Possible Gas Shortages

Me and my big mouth. Gas hit $3.30 in places around Milwaukee. $3.50-3.75 isn't out of the question. Now, gas stations fear shortages. The problem is state law that says stations can only changes prices once in a 24-hour period. If that price is below the point where supply equals demand then we will have shortages. This law is an instance of putting emotion and "fairness" (whatever that means) before economic logic.

"$3.50 Gas Could Be Next"

$3.00

Going home from work today I saw a station selling gas for $2.99. I'm so glad I filled up Sunday and saved about $0.30/gallon. I won't be shocked to see $3.25/gal gas within a week. Expect a mild recession and even an interest rate cut by Alan Greenspan.

Carnival of the Capitalists

Oodles of business and economics posts all in one nice place. CaseySoftware.com hosts this week's Carnival of the Capitalists.

KPMG Fined

The corporate world dodged a bullet with KPMG agreeing to a fine and an outside monitor instead of an indictment. The accounting firm sold questionable tax shelters a Senate subcommittee said cost the federal treasury $1.4 billion. If KPMG would have been indicted it might have dissolved like Arthur Andersen did. Corporations were worried since that would have reduced competition in accounting services when compliance regulations have increased so much in recent years.

"KPMG Agrees to Fine"

"Peak Oil" Idea Demolished

Economics' newest celebrity Steven Levitt demolishes a NY Times Sunday Magazine story about "peak oil" and how it means oncoming economic catastrophe. It's obvious to Levitt that writer Peter Maass didn't pay much attention in his economics classes (if he took any). Levitt offers a Cliff Notes version of one very important economic insight:

What most of these doomsday scenarios have gotten wrong is the fundamental idea of economics: people respond to incentives. If the price of a good goes up, people demand less of it, the companies that make it figure out how to make more of it, and everyone tries to figure out how to produce substitutes for it. Add to that the march of technological innovation (like the green revolution, birth control, etc.). The end result: markets figure out how to deal with problems of supply and demand.

Thomas Barnett, a book-generated celebrity like Levitt, is skeptical about story because of the low quality of information it's based on:

Here's my problem with this analysis: Maas admits that the studies cover only a portion of the known Saudi fields and "date back, in some cases, several decades"! Despite these huge faults, these studies are presented "as perhaps the best public data about the condition and prospects of Saudi reservoirs."

Oh, and did I mention that the great expert, Matthew Simmons, is a banker and not a geologist?

This is the guts of a major NYT mag cover story?

How about a real expert?

Being a student of economics I'm very sympathetic to Levitt. Incentives matter, the price system conveys scarcities and a lack thereof, and the profit motive drives people to develop new technology and methods to deal with changing prices. If oil continues to go up alternative energy will become cost-effective. We might be reaching the point where nuclear power will be worthwhile even with all the regulatory, security, and insurance burdens placed on them. One thing we can be sure of is a growing global economy will need more energy. Satisfying more wants and needs requires more energy. We're seeing that already in the increased energy needs of developing India and China. Wait until Africa and the Middle East finally get their economic houses in order. We can't conserve our way to growth. In The Bottomless Well Peter Huber and Mark Mills argue that energy conservation ends up leading for more energy use. (Conservation lowers energy's price which increases demand.)

Prices change incentives which in turn change behavior. We may well be reaching the peak of oil production. That doesn't mean economic disaster is at hand, nor does it mean us using less energy. What it does mean is change. That's the one thing that's always constant.

"The Breaking Point"

[Added to OTB's Beltway Traffic Jam.]

A Fad is Dead

The company behind the low-carb Atkins died filed for Chapter 11 bankruptcy today.

Atkins Nutritionals Inc., the company that promoted low-carb eating into a national diet craze, filed for bankruptcy court protection Sunday, a company spokesman said.

Atkins has been hurt by waning popularity of its namesake diet, which focuses on eliminating carbohydrates such as bread and pasta as a way to shed weight. The diet quickly became one of the most popular in U.S. history, spawning numerous derivatives and a virtual cottage industry of low-carb regimens but also drew criticism from many experts for its focus on fatty foods and low fruit and vegetable consumption.

"Low-Carb Pioneer Atkins Files Chapter 11"

Thieves Target Retail

Organized crime has gone domestic. Gangs and crime rings now shoplift razors, prescription drugs, CDs, DVDs, and my favorite, hair-growth products. Yes, there's an black market to help balding men. The Washington Post reports:

Retailers and theft experts say criminals have discovered that large profits can be made relatively easily, and without much risk, by stealing merchandise from crowded, understaffed stores. They say the most stolen items tend to be high-priced, widely used products that are routinely sold in chain stores: over-the-counter medicines, razors, film, CDs and DVDs, baby formula, diapers, batteries, hair-growth and smoking-cessation products, hardware, tools, designer clothes and electronics.

Shoplifters might spend all day going from store to store, then sell the goods they've stolen to the fence for 10 or 20 percent of their retail value, said Chuck Miller, a retail security consultant in Great Falls and author of "Organized Retail Theft," a handbook published this month for industry professionals. Fences then aggregate the products from multiple shoplifters and sell them at flea markets, online or to bodegas and convenience stores, he said.

Department stores and drug stores aren't the only targets. Bookstores are also targets. They contain small valuable items that can quickly be resold or "returned" for cash or other more-easily sold merchandise.

Much of the problem is pointed out in the Post story. Stores are understaffed. The ceaseless desire for maintaining profit margins, keeping labor costs down, and not raising prices for fickle, internet-informed consumers makes stores vulernable to shoplifting. It also doesn't help if the government isn't talking shoplifting seriously. An anti-theft official for Walgreens, Jerry Biggs has one example:

"I'm going after a guy right now that's been arrested 56 times," Walgreen's Biggs said. "I've got to put together a case that can show this isn't your typical little shoplifter."

The day after making that statement, Biggs called back to say he had just arrested the same shoplifter for the 57th time.

"Retail Gangs: A New Breed of Thieves"

Stripper Economics

$134,000 a year! If you got it, flaunt it.

"Did You Know"

Cha-Ching!

Political Calculations hosts this week's Carnival of the Capitalists.

Carnival of the Capitalists

The Club for Growth Blog hosts this week's Carnival of the Capitalists. Andrew Roth has lots of good links and some good commentary too.

Doha Round Frustration

Daniel Drezner on why free-marketers shouldn't be optimistic about then end of agricultural protection:

The scary thing is that what's proposed represents liberalization of a sort -- agriculture is so heavily protected and subsidized that it will take decades for complete liberalization.... if it ever happens.

"Progress for the Doha Round?"

Ending Farm Subsidies

I'd love to see the end of U.S. farm subsidies. President Bush would definitely bolster his free market credentials with me. But the President can say stuff like this all he wants:

Let's join hands as wealthy industrialised nations and say to the world, we are going to get rid of all our agricultural subsidies together.

Although opponents of the reform legislation were disgruntled because it reduced the level of government control over the nation's agriculture industry, once the bill was passed, most farmers supported the flexibility it provided. Within two years, however, the bill's benefits were dimmed by worldwide economic problems and weather-related disasters in the United States.

This provided the opening that opponents of reform had been seeking--an economic downturn in the farm economy that they could pin on freedom to farm. A return to subsidy-laden government micromanagement of agriculture quickly followed. Since 1998, congressional efforts to gut the farm reforms have resulted in massive annual multibillion-dollar "emergency relief" packages for U.S. farmers, the lion's share of which have gone to large, high-income farms.

"Bush: We'll Drop Farm Subsidies If You Will"

Flatter is Better

An entire conference on the flat tax. It sounds like a policy wonk's dream. There is this nugget from former Estonian prime minister Mart Laar:

Among his points was the fact that he and his government team were all too young to know it couldn't be done, so they just did it. The IMF told them to prepare for a huge drop in revenue, but it resulted in a big gain which has been maintained. Investment and growth have boomed, and now Estonia is set to lower from the original 26 percent flat rate to a new 20 percent flat rate.

"Estonia Did it First"

Kelo-ing the Cable Companies

People dismayed the Supreme Court didn't force cable companies to open their networks to competitors could feel some solace in last week's Kelo decision. As Greg Ransom writes,

Something that most people have overlooked is that fact that the logic of Kelo v. New London extends beyond merely land and buildings. The general logic of Kelo v. New London has it that private property and private purposes are trumped by a govenment’s desire to increase its tax stream. This could be any kind of private property dedicated to any sort of private aim.

"Cable Wins Supreme Court Battle"

Money Posts Galore

BusinessBlogCast hosts this week's Carnival of the Capitalists.

Coffee is a Drop in the Bucket

It takes a hell of a lot of gumption for a law school to worry that its students are going into too much debt because of $3 Starbucks coffee. The example the Washington Post uses is Kirsten Daniels. Three years at Seattle University School of Law has put her $115,000 in debt. The director of career services at the law school calculated that Daniels' coffee consumption will cost her over $4000 including interest. While that is serious money it's ignoring the elephant in the room. The coffee is barely 3% of Daniels' debt. I'd think the school would be a lot more concerned with their students' debt by figuring out how to lower tuition, book costs, and fees. Heaven forbid a bastion of higher education try to control costs. Maybe after that they can then complain about students' "frivilous" spending.

"Javanomics 101: Today's Coffee Is Tomorrow's Debt" [via Captain's Quarters]

Silicon Valley's Brat Pack

When Silicon Valley gets a big long article in the NY Times Magazine I wonder if a tech startup boom is at hand or another bubble is soon to arrive. If venture capital funding is any indication Silicon Valley doesn't even have a boom yet:

Talk of what some in Silicon Valley are calling Web 2.0 began about two years ago. What started as a self-conscious whisper has now turned into a full-throated rallying cry. Significantly, the venture capitalists of Sand Hill Road have joined the chorus. Last year, they sank $7.5 billion into Bay Area startups. That's still a fraction of the staggering sums they invested during the bubble (the high-water mark was $33.2 billion in 2000), but once again they are willing to gamble on the latest startups.

Here is Mark Pincus, founder of Tribe.net:

have egos, they have their insecurities, they're concerned about their current standing in the world. ''Everyone's watching everyone else. Like Hollywood, there's this pecking order, and everyone is fundamentally aware of where they stand in the pecking order. They may pretend like they don't, but they know it.

Then there's Joe Kraus, one of the founders of Excite on appreciation by the Valley's elite:

''You can't underestimate the good feeling you get when people in your wider social circle think you created something really, really cool.

"If You Can Make It in Silicon Valley, You Can Make It . . . in Silicon Valley Again"

Is It Hayek?

I'm stealing this from Greg Ransom who used to do this on the now defunked HAYEK-L e-mail list.

Meanwhile, to expose humans' bounded rationality when it comes to economic reasoning is not to kick the legs out from under traditional economics, as is frequently claimed by diehard leftists. The power and legitimacy of markets doesn't depend on perfectly "rational" or consistent choices, but merely on relatively consistent behaviour by individuals acting on their unique knowledge of their circumstances and desires. Although we may be philosophically deluded in thinking that we "know our own minds," we certainly know them way better than those who would plan our affairs for us, whose "folly and presumption" Adam Smith, again, so perceptively noted.

Answer below the fold.

Answer: It isn't Hayek. It's Peter Foster.

"Monkey Business"

Expect to Hear the Sky is Falling

Bush bashers and economic nationalists will be freaking out over the news that GM will lay off 25,000 workers. Talk of a "jobless recovery" will return to political economic conversation. But what you won't hear are the all the jobs foreign companies like Hyundai are bringing to the states.

"GM Plans to Cut 25,000 U.S. Jobs by 2008"

Carnival of the Capitalists

Get your fill of econ and business posts at the Carnival of the Capitalists hosted this week by GalaTime.

Mahashaya, May I Take Your Order?

Outsourcing fast food orders.

More and more pizza restaurants -- including two chains in the Washington area -- are relying on operators at call centers to take orders for delivery and give employees more time and space to focus on food preparation.

Two fast-food restaurants are testing the use of remote order- takers to cut down on errors.

People taking orders can be thousands of miles from the restaurant preparing the food. One chain has workers in Southern California taking orders from Florida. Another chain has workers in Pennsylvania talking to customers in Reston and other Washington suburbs.

"Call Centers for Fast Food Now a Remote Possibility"

Amazing Time Span

Now, a company shutting down part of its operation wouldn't normally justify a TAM post. The economy is inherently dynamic. New ideas and resources are tried daily. That's understandable and praisworthy. But I have to mention Badger Paper Mills in Peshtigo. They're shutting down a papermaking machine that they've been running for 70 years! Human beings are about the only that lasts 70 years anymore. Jobs will be lost but credit must be giving to those who had the ingenuity to keep that hunk operating profitably for so long.

"Badger Shutting Down a Machine"

Cox as SEC Chief

President Bush will nominate Rep. Chris Cox to be the next SEC chief. Current SEC chairman William Donaldson is retiring. I don't like this. Cox is one of the biggest tax cuttering in the House. I wonder if this is a sign the President has seen enough tax cuts. This does not bode well since raising Social Security taxes is seen as a possible way to "fix" the welfare state retirement program. We need as many anti-tax people in Congress as possible.

"Bush to Nominate Rep. Cox for SEC Chairman"

Removing Chinese Tariffs

In reaction to the Bush administration slapping quotas some Chinese textiles the ChiComs will removes tariffs on "export duties it has charged on 78 types of textile products."

"China to Abolish Textile Export Tariffs"

A Tax Increase is Unacceptable

Judging from Oliver Willis' and Kos' reaction to this BusinessWeek story on what Social Security legislation might pass both right- and left-wing activists will be ticked.

Any compromise would fall far short of Bush's goal of fundamentally overhauling Social Security. It would make big changes to the program yet retain a basic government-provided benefit for all Americans. It would secure the system's financial solvency for many years by cutting promised benefits and raising payroll taxes on high-income workers. But it would not ensure permanent financial stability, as the President has demanded. An agreement would also include some form of personal accounts, just not the White House version. And new savings incentives -- sometimes called add-on accounts -- would be created outside the current Social Security system. "I can see an agreement along those lines," says Heritage Foundation research fellow David C. John, "assuming both sides come off their absolute positions."

Bush's private accounts fall by the wayside. They have lost any traction they might have had after his re-election. Either the President did a lousy job selling them, or a cynical public is too afraid of having more responsiblity over their own retirement. The best idea in decades to free Americans from Big Government is dying. With the death of private accounts you defintely won't see any politician call for allowing people to opt-out of S.S. so they can fund their retirement on their own. A dirty little secret about S.S. is no one can leave because retirees get their money out of the pockets of current workers. The way the system is structured old people need to pay for them (and I never ever get a "thank you").

What is absolute for this conservative is there can be to tax increases. The problems with government isn't that they don't have enough money. Government takes more money out of our pockets than at anytime in American history. And when they get their (our) money all they do is ask for more.

Benefit cuts I could stomach. Increasing the retirement age is also acceptable but doesn't go far enough. It should be pushed to 70. People are living longer, therefore they can work longer. Making cost-of-living adjustments that would slow the increase in S.S. benefits is also acceptable. These changes would better illustrate the fact that S.S. is a welfare state redistribution program cloaked in social insurance garb.

I can't believe President Bush would sign a tax increase after seeing close up what it cost his father. I also can't believe the same man who fought so hard for his tax cuts would make a 180 turn. That would be like him telling war critics they were right about Afghanistan and Iraq and order an immediate pull out.

But if Bush should sign a tax increase that would only delay Social Security's insolvency then he would cause a tremendous tumble in Republican support. Tax hawks and other economic conservatives would throw up their hands and withhold support. They'd say, "What's the point of electing Republicans if they end up raising taxes?" Raising S.S. taxes would surely usher in a Democratic President because the GOP base would be so discouraged.

"What A Social Security Deal Could Look Like"

States in the World Economy

Portugal has over 10 million people. Wisconsin has a little over 5 million. Yet the Badger State's economy is almost 10% bigger. The Club for Growth's Andrew Roth is right, "It’s exactly what the free market is all about, baby…" Let's make sure it stays that way.

"Georgia Is Bigger Than Georgia?" [via Alarming News]

Carnival of the Capitalists

Oodles of econ posts are collected at the Carnival of the Capitalists hosted this week by Ideologic.

Celebrity Economic Illiteracy

Chris Martin of Coldplay is unsettled his band could affect a company's profits.

Martin told reporters at Manhattan's Beacon Theatre that the band was uncomfortable that they sell so many albums they can affect a major corporation's stock price.

"It's very strange for us that we spent 18 months in the studio just trying to make songs that make us feel a certain way and then suddenly become part of this corporate machine," Martin said backstage.

He criticised what he called "the slavery that we are all under to shareholders". However, having sold 20 million albums worldwide to date, their album release on 7 June and subsequent two-month tour of America in August and September will play a large role in determining EMI's profits.

Notice that Coldplay hasn't decided to cancel their new album X&Y or make music for free. No one forced them to sign with EMI. They could say, "screw it," and walk away from their fame. They could give away new music as long as their large (and also probably evil) bank accounts allow. They won't because they're immature whiners who don't grasp the magnificant results of a global economy filled with joint-stock corporations. Without that institution there would be more suffering, more disease, more poverty, more death on this planet. I feel safe to claim that we wouldn't be hearing Martin's banal economic diatribe if it weren't for the corporation. That's because there wouldn't be a music industry, telecommunications, and Martin would be toiling away as a serf in some field. Get Mr. Gwyneth Paltrow some reading material so he doesn't sound like a complete fool the next time he complains about being a famous slave.

"Coldplay Attack 'Evil' of Profits" [via Drudge]

Retention

Joseph DePalma talks about how valuable retaining customers are to enhancing the bottom line. He writes,

Even if we want to play the devils advocate and say super-conservatively that a 15 - 25% increase in profits occurs for a 5% increase in customer retention, that's proof enough that businesses must direct their efforts on RETAINING CUSTOMERS.

So knowing that, businesses must be focused on constantly raising the bar, not only in their own business, but in their industry. We've all heard of ABC in selling (Always Be Closing), well how about ABI of Marketing - Always Be Innovating.

When shopping have you been asked to join some kind of membership? That's another way of making sure you make a return visit. The important thing with a membership program is to offer something of real value. For $25 a year, my company Barnes & Noble gives members an additional 10% off all purchases. That additional discount gets B&N's best customers into the stores a few more times a year. When a lot of people join that really helps boost the bottom line.

For more good business and economics posts check out the latest Carnival of the Capitalists hosted by AnyLetter.

"Tie Up Your Customers"

Going Nuclear

Finally some greens see the environmental benefits of nuclear power. Or at least they view it as less bad than oil or coal. Hopefully the environmental movement finally matures into accepting the fact that improved lives mean more not less power consumption. By the looks of the NY Times' piece that movement will endure an internal crack-up in the process.

"Old Foes Soften to New Reactors" [via The Huffington Post]

New Quotas on Chinese Clothing

President Bush the anti-free trader strikes again:

The Bush administration is re-imposing quotas on three categories of clothing imports from China, responding to complaints from domestic producers that a surge of Chinese imports was threatening thousands of U.S. jobs.

The administration action will impose limits on the amount of cotton trousers, cotton knit shirts and underwear that China can ship to this country. American retailers say that will drive up prices for U.S. consumers.

In announcing the decision Friday, Commerce Secretary Carlos Gutierrez said a government investigation had found that a surge in shipments from China since global quotas were eliminated on Jan. 1 was disrupting the domestic market.

"White House Re-Imposes Quotas on China"

UPDATE: Oh the irony. President Bush has declared 05.15-05.21 to be World Trade Week where we "recognize the many benefits of free and fair trade in strengthening economies and improving lives."

[via The Globalization Institute]

When Rising Incomes are Bad

There's no denying economists are strange fellows. The lastest example is John Hancock Financial Services economist Oscar Gonzalez commenting on the U.S. trade situation. He told the Washington Times,

"But the trade picture is still fairly dismal," he said. "We still are on course to break last year's record trade gap" because consumers are earning more and likely will want to indulge their "appetite for cheap foreign goods," he said.

Second and more important, Gonzalez worries that people are earning more. That's a bad thing because then they'll buy for foreign goods. So, would Gonzalez prefer consumers not to have higher incomes? How does that help the U.S. economy? It doesn't which means either the Times reporter Patrice Hill botched the interview, Gonzalez did a poor job explaining himself, or the economist doesn't know what he's talking about.

"Exports Boom, Drop in Imports Boost Economy"

Buying the Product Not the Politics

Capitalism is about firms collecting resources to create a good or service people want to buy. The product or service has to offer something of value for an acceptable price in order to earn my dollars. For me politics has little to do with it. Charmaine has a post about the the Buy Blue meme floating around Left circles. She has some graphs on how particular companies' employees politically donated. I'm just going to pick out a few:

• Starbucks vs. Dunkin' Donuts: First, I have no idea where the nearest Dunkin' Donuts is. Second, Krispie Kreme is my doughnut place. Third, When DD creates an atmosphere as inviting as Starbucks in a location I can find and have free WiFi (and one-up SB) then I'll start going there.
  

• Diageo North America (Guiness) vs. Anheuser-Busch (Budweiser): I am not giving up Guiness just because it's executive didn't donate to Republicans. Guiness is too good. Plus, Budweiser is bad, rice-brewed beer. (And I don't just say that because Miller sponsors my favorite baseball team.)
  

• Progressive Insurance vs. Geico: Hey, Geico's gecko is pretty cool, but Progressive gives me the same coverage for a better price. And their website makes it very easy to change my coverage and pay my bills.
  

• Apple vs. Dell: This is a tie. Apple wins with the iPod. Dell wins for its cheap notebooks. (What I really want is one of these.)
  

"Color-Coded Shopping: Starbucks, Out! Dunkin' Donuts In!"

Cha-Ching

Oodles of econ and biz links are in the Carnival of the Capitalists this week hosted by Incite.

Sad Truths

Jimmie at The Sundries Shack is not pleased with President Bush's remarks about Social Security:

So instead of an egalitarian system where you get back what you contribute plus some interest on your “contribution", we’re going to have a system where the rich again subsidize the poor? Instead of the regular old Ponzi Scheme, we’re going to get a Ponzi Scheme that redistributes wealth, too?

Ho-ookay. That sounds great, doesn’t it?

Further, from what I can see, folks in my age bracket are still hosed because the money we’ve been contributing all our lives still won’t be there when we hit retirement age. Even if it is, it’ll give me a return that’s less than if I stuck it in the average bank CD.

Did I mention that personal savings accounts look like they’re completely and utterly dead?

Man, how could I not be in favor of a plan that takes the same amount of money from me it always has, promises me no better return than the most rudimentary investment plan if I actually see any of my money at all, and guarantees to penalize me more the better I do financially in life.

Sign me up right away?

Look, I am not an accountant. I’m just an average American who sees 12 percent of his paycheck Hoovered away and used to finance the rest of the government (and I’m already losing a good hunk of change to finance that). My President has campaigned twice on the promise that he will reform the system and make it better. He’s promised to work hard to give me some control over some small pittance of the money the government already takes from me because, let’s face it, the government sucks as an investment banker.

So far he’s gone back on both of those promises. And I’m pissed.

The sad truth is the government needs Jimmies' and my, and other American's Social Security "contributions" to pay for current retirees. That's what's meant by Pay As You Go (PAYGO). It's the reason Bush only talked about allowing younger workers the option (never mandatory, only voluntary) of putting a portion of one's SS contribution into a personal account. Money would still be needed to pay current and future retirees.

Younger workers like Jimmie and myself are stuck with a system that claims to be a retirement plan* but is really an intergenerational welfare program. That's what it was set up to do, and that's what it is still today.

Jimmie goes on ranting:

You know something? I don’t want any more of my money going to prop up a lifetime of someone else’s stupid financial decisions. I don’t expect any of you to do that for me. I’m sick and tired of hearing how people need Social Security because that check is all they have. I need that money, too. I have rent, car insurance, and utility bills I need to pay and I have some small hope of building my own little nest egg so I’m not one of the people who my children are going to have to support in 40 years. If other people have frittered away a lifetime of savings, tough on ‘em.

"So It’s Now a Wealth-Redistributing Ponzi Scheme?"

*James Buchanan wrote (paragraph 40) that SS is accepted because the public is led to believe individual contributions fund one's own retirement instead of current retirees. He dubs this "an illusion of the Puviani sort."

Growing Economy Needs More Not Less Energy

In his primetime news conference President Bush said energy prices could go down by helping "growing energy-consumers overseas, like China and India, apply new technologies to use energy more efficiently and reduce global demand of fossil fuels." Efficency only goes so far, but it should certainly help developing economies like China and India. What will encourage efficency even more are rising energy costs. Rising prices tells energy users that they need to economize. The process won't be quick, and it may be painful. Feel the pain of someone who bought a gaz-guzzling SUV just before gas prices shot up.

But the UPI headline is misleading. Bush never called for reducing global energy demand. Saying something like that would be foolish. Man has insatiable desires. Economies organize resources to satisfy those desires. Economies grow when more and more desires are met. Energy is one resource that is needed for growing economies. Effectively using wasted energy is useful, but there comes a point (whether one runs into the laws of physics or diminishing marginal returns) where energy conservation isn't useful and more energy has to be produced. In a free market rising energy prices are a signal that there is a profit opportunity for new energy producers.

Why aren't more energy producers getting into the act? Well, stringent environmental zealots, Not In My Back Yard (NIMBY) protesters, and untold numbers of twisted governmental subsidies, regulations, and disincentives block entrepreneurs' attempts to build more nuclear plants, coal-burning plants, and even alternative energy producers.

It's sad to say, but I think it will take $5/gallon gas and/or multiple regional blackouts like the one that hit the eastern part of the U.S. a few years ago before some people really get serious about increasing U.S. energy production.

"Bush Wants Lowered Global Energy Demand"

Cha-Ching!

That noise means a new Carnival of the Capitalists hosted by Peaktalk.

No to "Add-On"

House conservatives oppose a Social Security "add-on." It's personal savings accounts within SS or nothing at all.

"Conservatives Oppose Social Security 'Add-Ons'"

Tax Day 2005

If you haven't filed your taxes yet you have less than 12 hours. If you haven't thought about getting them done and expect to just drop into an accountant's office or H&R Block, go get an extension and don't bother them. Leave the accountant's alone.

After getting all your stuff into the mail or filed online check out how much spending increased in your (Wisconsin) school district. Then read Charlie Sykes' latest newspaper column. And if you're still in need of material get a copy of Amity Shlaes' The Greedy Hand. Any other anti-tax books you recommend?

UPDATE: One more read is the Journal Sentinel editorial board actually opposed to a tax increase. Don't raise the gas tax, they say, but raise beer and cigarette taxes. You what they say: even a broken clock is right twice a day.

"Where's Gas Tax Outrage?"

Regulating Gift Cards

Charlie Sykes just talked about retail gift cards and how some businesses impose fees if the card isn't used in a certain length of time. A state legislator wants to pass a law regulating them (sorry can't find a link). Legislative action on gift cards is equivalent to a tax. Say it costs a business $0.10/year for every $100 is outstanding gift cards. A law requiring cards to never lose value would mean a perpetual cost imposed by the state. No matter if the owner of the cards knows she has them or not as the clock ticks the costs continue to be placed on the business. When the state does that to local governments it's called an unfunded mandate and many are outraged. When it's done to businesses it's called "consumer protection."

Good business sense tells you there shouldn't be any expiration date, and it appears the market is working things out. But what about the many people who lose their cards? Should businesses be required to give replacements? From work experience that seems like a bigger "rip-off" to the consumer. We complain about the government sticking its nose into so many things. They don't need to get involved in gift cards.

What's in a Name?

It's bad enough the EU decided to centrally plan what can and can't be in an operating system. The loons also have a veto on what the altered OS can be named.

"Microsoft to Rename Media Player-Less Windows"

No Surprise

Some Europeans don't like President Bush's pick of Paul Wolfowitz to run the World Bank. This quote from an unnamed source really makes me love the pick and the President:

Mr. Wolfowitz's nomination today tells us the U.S. couldn't care less what the rest of the world thinks.

"Europeans at World Bank Cool to Wolfowitz Pick"

Wolfowitz Picked to be World Bank Chief

President Bush named Defense Undersecretary Paul Wolfowitz to run the World Bank. With him there and John Bolton at the U.N. radical Lefties and paleoconservatives must will be going crazy believing a global neoconservative coup is taking place before their eyes.

I'm not sure how to evalutate the choice. The World Bank, at best, is an anachronism that has little purpose today. It'd be better if it were shut down. I assume Bush hasn't chosen Wolfowitz to liquidate the place, but at least he's better than Bono.

"Bush Taps Wolfowitz as New World Bank President"

Pro-Tax Republicans

Through the use of language the NY Times doesn't call a tax increase a tax increase. Some of President Bush's tax cuts are set to expire. Some Senate Republicans are worried about the budget deficit and don't want to extend all the cuts the administration wants. Senators like Judd Gregg, Olympia Snowe, and Lincoln Chafee prefer $70.2 billion verus the White House's $100 billion. If these tax cuts are allowed to expire that's a tax increase. Money that previously wasn't claimed by the government will become so. In short, there are some Senate Republicans who want to raise your taxes. Children of Reagan they're not.

Sen. Chafee tells the Times he's very concerned about the deficit. He's so concerned he braggs about nabbing $16 million in homeland security money (PDF) for Rhode Island and $10 million to reduce noise around an airport (PDF).

Sen. Snowe worries that the government might have to cut programs. Shudder to think. Being a D.C. veteran, she knows federal programs rarely die. They don't even fade away like soldiers. They grow even when their purpose for existing has ended.

"G.O.P. Senators Balk at Tax Cuts in Bush's Budget"

Oil of O'Larry

Larry Kudlow tells us to not worry so much about the high price of oil. He's right. Historically, oil today isn't as expensive as it was in the past. Demand is high because of blistering economic growth in China and India. They have millions of people entering the workforce so the demand for energy won't abate. Expect high oil prices for a long time. In a free market this would encourage new sources of energy. In the past few years we've seen the use of natural gas to generate electricity increase. I highly doubt renewable energy sources like wind power can satisfy the United States' unquenchable need for energy. I'm hoping our almost 30-year fear of nuclear power vanishes.

"Power"

Carnival of the Capitalists

Oodles of econ and business posts are collected at this week's Carnival of the Capitalists hosted by Blogcritics.org.

Bono: the "One" for the World Bank?

Bono to run the World Bank? What an absurd idea. Treasury Secretary John Snow didn't take his name off the list, but didn't put it on either.

Wouldn't it be some twisted joke to have U2's lead singer run the World Bank? It would show the lack of confidence the Bush administration had in that institution.

Even considering a rock star to run the World Bank shows to me that its time--if it ever had one--is long gone, and it should be dismantled.

"Will Bono's Next Gig be World Bank President?"

February Employment Numbers

I'm going to pick on Reuters and reporter Tim Ahmann a little bit. Here's the lead to a story on the release of February jobs numbers:

U.S. employers added 262,000 jobs last month, the biggest gain in four months, but the good news for workers was tempered by a rise in the jobless rate.

The unemployment rate is the percentage of workers actively seeking work divided by the emplyed workforce. There are times when the lots of people are finding work expanding the employed workforce. If the number of workers looking for jobs doesn't grow as fast the unemployment rate falls. There are also times when the number of workers looking for work grows faster than the employed workforce. When that happens the unemployment rate goes up.

From the February numbers it appears the number of job seekers are growing faster than the total number employed. That means many people who previously didn't think the economy as good enough to bother looking for work are now jobseeking. Why bother looking for a job if you think the economy stinks so much your effort will fail?

Jeannine Aversa for the AP better describes the economic situation:

America's employers added a sizable 262,000 jobs in February — the most in four months. The new hiring, however, wasn't sufficiently brisk to accommodate a wave of job seekers, and the overall unemployment rate rose to 5.4 percent.

More people looking for work may be a sign of more confidence in the economy despite what the fall in the consumer confidence index also announced today. (Another possiblity is workers are seeking jobs now because they've depleated their savings.)

I'm not harshly criticizing Ahmann and Reuters because if you ask the man on the street if a rise in the unemployment rate is a good or bad thing most would say it was bad. Their gut instinct is that rising unemployment rate means more people out of work, and that's bad. But as the AP demonstrates superficial economics reporting doesn't have to be the norm.

For some other reaction Ken Jarboe gives us a breakdown of the unemployment numbers by general occupation.

"Job Gains Strong, But Jobless Rate Climbs"

Beyond "Compassionate Conservatism"

If Myron Magnet is correct "compassionate conservatism" is only a different method of statism. In no way is it a reduction in the role of government. He writes,

Implicit in compassionate conservatism was the epochal paradigm shift that is now all but explicit. Taken together, compassionate conservatism's elements added up to a sweeping rejection of liberal orthodoxy about how to help the poor, which a half century's worth of experience had discredited. If you want to help the poor, compassionate conservatives argued, liberate them from dependency through welfare reform; free their communities from criminal anarchy through activist policing; give them the education they need to succeed in a modern economy by holding their schools accountable; and let them enjoy the rewards of work by taxing their modest wages lightly--or not at all.

For the worst-off--those hampered by addiction or alcohol or faulty socialization--let the government pay private organizations, especially religious ones, to help. Such people need a change of heart to solve their problems, the president himself deeply believed; and while a clergyman or a therapist might help them, a bureaucrat couldn't.

Magnet writes that President Bush's Social Security plan is consistent with compassionate conservatism. What he proposes is a forced savings plan. The hand of government isn't lessened by lowering payroll taxes. No, the government just will allow you a choice of how you want your Social Security "contribution" invested. Granted, individuals have more opportunity, but they don't gain any more freedom.

Politicians' role is to get legislation passed and to get re-elected. Hence, they have to go with the flow of public opinion as much as lead. Classical liberals and small government conservatives like myself can hem and haw all we want about weak-kneed pols and RINOs. But should we be surprised that after feeling the public's pulse well enough to get elected they switch gears to oppose public feeling?

The Right has created a marvelous set of institutions to advance the cause in government. But it's only done part of the job. Instead of the relentless analysis of legislation in Washington, D.C. and state capitols we need an campaign to teach the public a love for liberty and limited government. We need to instill into our fellow men and women that private property is the key to economic dynamism; that government programs my help some the taxes used to fund them lessen individual's ability to solve their own problems; that a bureaucrat in Washington had neither the knowledge nor the information to educate a child a thousand miles away.

Let me state that because of present political realities I support much of what the President is advancing. His ideas take the nation closer to the state our Founding Fathers envisioned when they wrote the constitution. Compassionate conservatism is not the end; it's only one step toward the much smaller state I hope to see the U.S. return to.

"The War on the War on Poverty"

[Added to Wizbang's Automated Linkfest.]

Still Working on It

Ugh! How can I call myself an economist (amatuer that is) when I still can grasp this stuff about Social Security transition costs. Want to embarass me more ask me about foreign exchange rates.

"There's No Free Lunch"

S.S. Myth

Some economists including Nobel Prize winner Edward Prescott consider any transition costs for Social Security reform to be a myth. I'm in a hurry to get out the door so I can't decide if they're right or wrong. I'll leave it up to my readers to discuss.

"Social Security 'Transition Costs' a Myth, Say Economists"

[Added to OTB's Beltway Traffic Jam.]

Republicans Against Spending Cuts

Since the GOP runs both houses of Congress they don't need Democratic help in passing any bill. Yet it may be Republicans who are the most strident opponents to cutting farm subsidies. Missouri Rep. Jo Ann Emerson worries that farmers in her state "will have a 10 percent loss in their gross income." No concern about the market-distorting effects that harm all consumers. Illinois' Rep. Ray LaHood went demogogic by saying the White House "is trying to balance the budget on the backs of farmers."

"House Lawmakers Say No to Farm Subsidy Cuts"

Become Enlighten and Maybe Rich

Weekend Pundit hosts this week's Carnival of the Capitalists.

Save Social Security: Soak the Rich

Democrats shouldn't be too despressed about their political setbacks. When it comes to fixing Social Security their 70 years of class warfare, soak-the-rich rhetoric has converted a wide swath of the electorate.

Most Americans are willing to endorse painful steps to ensure Social Security's long-term solvency - steps that nick the rich, that is.

Two-thirds of those surveyed by USA TODAY/CNN/Gallup last weekend say it would be a "good idea" to limit retirement benefits for the wealthy and to subject all wages to payroll taxes. Now, annual earnings above $90,000 aren't taxed.

"Poll: Tap Wealthy on Social Security"

[Added to OTB's Beltway Traffic Jam.]

I Wanna New Drug...Plan

Why should anyone be shocked that the estimate for the new Medicare prescription drug benefit has shot up to $720 billion? Government entitlements seem to have a way of skyrocketing in cost. When Medicare started in 1965 it cost taxpayers $1 billion a year. By 1971 it ballooned to $7.9 billion. The perception of free money does that.

Democrats are claiming the White House lied to them and the public. If so then the Congressional Budget Office also lied. But Democrats shouldn't gripe about cost when they "complained that the promised benefits would not go far enough."

Since the drugs haven't started flowing yet Congress and the President could get some common sense and end this expensive entitlement. I know, fat chance.

"New White House Estimate Lifts Drug Benefit Cost to $720 Billion"

TAM on the Cutting Edge

Neo-Sears will be rolling out a new version of their stores:

The company will open 25 of the new concept stores this spring in former Kmart and Wal-Mart locations that Sears purchased last year.

None of the first batch is in Wisconsin. But Sears has said that it would convert hundreds of Kmart stores to the freestanding Sears format within three years after the companies merge.

"Sears' New Store to Offer Essentials"

Drudge Gets It Wrong

Drudge reports that White House budget director Josh Bolten "bragged" about the rich paying so much in federal income taxes. "Bragged" is Drudge's word since I've found no mention of it in a Google News search. Drudge quotes Bolten as saying:

If you look at the president's tax cuts as a totality, the income tax, those at the upper end of the spectrum are now paying a larger share of the income tax than they were before.

An example, the top 5 percent in income in this country -- that's people making above about $140,000 -- without the president's tax cuts that top 5 percent would be paying about less than 52 percent of our total income tax revenue.

After the president's tax cut that group is paying more than 54 percent of our total tax revenue. So the notion that the president's tax cuts have somehow made the code less progressive is wrong. The president's tax cuts have made the tax code more progressive.

No Miller Super Bowl Ads?

I've gone through the online edition of the Journal Sentinel and I found no story reporting on the lack of any Miller ads during the Super Bowl. Ifilm is hosting the ads and it confirmed that Miller didn't air any. When was the last time the #2 beer maker didn't advertise during the Super Bowl? I want to know what SABMiller is thinking. I'm sure shareholders would too. I've e-mailed SABMiller and hope to get a response.

Another company that didn't air a commercial was Coors. Usually the Super Bowl is dominated by engagements in the beer wars. This year, two decided to play pacifists.

UPDATE: It seems Anheuser-Busch bought the privilage of being the only beer company to air ads during the Super Bowl. The Minneapolis Star Tribune reports, "The company has been the exclusive Super Bowl beer advertiser since 1986 and has the rights locked up through next year's game." That can't be right. Miller and Coors have both had beer commercials during the game in the last 19 years. I swear I saw them. I guess not because this Journal Sentinel article backs up the other two. Guess my senility has set in very early.

UPDATE II: Speaking of Super Bowl ads, the racy GoDaddy.com ad only got to be aired once.

UPDATE III: Miller Brewing quickly responded to my e-mail by pointing out A-B's exclusive SB deal. I'm happy they responded so quickly to a set of ill-informed questions.

What a Crockpot Can Inspire

Mark Hasty thinks about Wal-Mart and its very microeconomic effects:

My point in all of this is that, while we certainly know that many things have grown unfathomably more expensive since 1976, there’s an awful lot of stuff which has grown cheaper, everyday stuff that we all take for granted. So when you’re shaking your fist at the big-box retailers, remember–without their clout, you’d probably have to spend $60 for a crockpot and $100 for a coffeemaker. Say what you will, the price for the trappings of a middle-class life is less than it used to be.

"We're All Wal-Mart People"

My French Boycott Continues

Jacques Chirac has proposed international taxes on financial transactions (the Tobin Tax), bank secrecy, and air and sea transportation. The revenue would go to developing the Third World, but the Adam Smith Institute's Dr. Madsen Pirie thinks there are ulterior motives.

"Don't Back Chirac"

Taxes and an Ancient Question

Power Line's Scott Johnson and John Hinderaker look at who pays what kind of federal taxes. The rich pay most of the income tax that funds everything except Social Security and Medicare. The other income brackets "pay more in payroll taxes (supposedly earmarked for Social Security and Medicare, but in practice co-mingled with all other federal revenues) than they do in income taxes." They then ask a question:

Which leads to the question: What will happen if conservatives succeed, as part of their push for an Ownership Society, in redirecting much of the payroll tax from federal coffers into the personal accounts of workers? Most Americans would then be directly supporting the federal government only through the income tax and the few federal sales and excise taxes (e.g., on gasoline). The result: Most Americans would no longer be making any significant contribution whatever toward the maintenance of the federal government.

I'd say no. As the payroll tax has become the dominant tax for lower-income Americans these people haven't felt they were feeding from the government's trough. If you ask most people why they should be allowed to use government services they'll tell you they work hard and pay their taxes. Most Americans lump the income and payroll taxes together even though they're separately deducted off their paychecks. In fact, this perception is quite accurate. Johnson and Hindrocker point out the payroll taxes are "co-mingled with all other federal revenues." An unintended consequence of Congress' insatiable desire for revenue all Americans pay for all of government.

"Broad Ownership Needs Broad Taxpaying"

[Added to OTB's Beltway Traffic Jam.]

Social Security Weblog

The Club for Growth has a weblog devoted to Social Security reform. This should be good.

[via Redstate]

It's Just a Study

Minnesota Gov. Tim Pawlenty wants to look at how Colorado funds higher education. That state allocates funds through college students. Pawlenty asked that it be studied by his administration. I'm amazed that there's actually hub-bub about a study. About Colorado's approach, Travis Reindl of the American Association of State Colleges and Universities said, "States wouldn't do this unless they had a gun to their head, and Colorado had a fiscal gun to its head." University of Minnesota President Robert Bruininks said it was "a recipe to erode the strength and capacity of the university to support its educational and research programs." When two people who would like to see public universities get an unlimited budget complain about a study I suspect worry about the Colorado approach becoming law. It's also ironic that Reindl and Bruinicks are associated with centers of inquiry yet they complain when a governor attempts some of his own.

"Pawlenty College-Aid Plan Draws Criticism"

Walter Wriston: R.I.P.

Walter Wriston, former CEO of Citibank, died this week. His claim to fame: turning banking into an information technology industry. Wriston has a Wisconsin connection. In 1925 his family moved to Appleton, WI because his father was named president of Lawrence University.

"Walter B. Wriston: A Remembrance"

"Walter Wriston, Ex-Citigroup Chief Executive, Dies"

"Walter B. Wriston, Banking Innovator as Chairman of Citicorp, Dies at 85"

Krispy Kreme is Fried

Stay away from Krispy Kreme. The stock I mean. The doughnuts are still the golden glazed goodies I dream about. The company decided to restate 2004 earnings. More importantly for investors the company might default on a credit line.

"Krispy Kreme to Restate Earnings for 2004"

Heilbronner, R.I.P.

Robert Heilbronner, economic historian, died last week. I'm guessing his The Worldly Philosphers was the second-most read economics book of the 20th Century, behind Paul Samuelson's textbook. Many college students read that in an introductary econ class. The power of that book resided in Heilbronner's clear exposition of the ideas of Adam Smith, Karl Marx, and John Keynes. He also brought the study of the subject back to its initial roots as moral philosphy.

Godspeed, Robert.

"A Realistic Socialist Dies"

"Professor and Economic Historian Robert Heilbroner Dies at 85"

One Word: Plastic

James Joyner links to a story on plastic bills replacing paper ones. I'm all for it. Plastic bills are hard to counterfit and they last much longer than paper ones. I just want the government to make U.S. bills green again, not the ugly pink they're becoming.

"Plastic Currency"

Making Nations Richer and Safer

Timothy Terrell presents some data showing a nation's wealth determines how deadly natural disasters are. To generate wealth states must "allow people to interact in the marketplace without government intrusion." He then counters the belief that more regulation and government programs are needed by using the all-important idea of tradoffs:

Regulation to put technological fixes into place takes away from other contributors to disaster mitigation. Requiring stronger structures means that people cannot devote as many resources to improving communication (to find out in advance about coming disaster), transportation (to get away from approaching calamity), medical care (to keep injuries from turning into deaths, or to treat post-disaster diseases), and so on. In fact, any government mandate is likely to overemphasize some fraction of disaster mitigation, rather than allow people to choose for themselves the appropriate mix. Government funding of tsunami warning systems, for example, may require such an investment in communications networks that medical care or transportation are underfunded. Trying to fund all of these elements of mitigation through the state implies such high taxation that the incentive to produce is reduced, and economic growth is stunted. In fact, more resources going toward disaster mitigation of any type means giving up other things that contribute to long life and well-being: a better diet, education, freedom from crime, safer workplaces, and family and religious obligations.

"Government-Enhanced Disaster"

UPDATE: One effect of the lack of wealth is poor infrastructure as noted by James Joyner.

Bush Sticking Hand in "Wasp Nest"

Cuts in future Social Security benefits will be proposed by the Bush administration. That will tick off the old people. (AARP will spend $5 million on an ad campaign.) For me, since I think all my S.S. "contributions" are going into a black hole, a cut in a promise that can't be fulfilled doesn't bother me. I'm sure a lot of people me age feel the same way.

"Social Security Formula Weighed"

Business Can Be Strange

A few years ago, the bright spot for AT&T was its wireless unit. AT&T Wireless got spun off. Earlier this year, it merged with Cingular. Now, AT&T will be going back into the wireless business by using Sprint as its backend. It just has to get back the AT&T Wireless name from Cingular.

It's stories like this that make me understand how some can view capitalism as a chaotic, confusing mess.

"Coming in '05: AT&T Mobile (Via Sprint)"

Dealing with Future Disasters

The best way to deal with natural disasters is to be rich enough to take precautions and have the resources available to handle the aftermath. Only when a nation like Sri Lanka is rich enough can she seriously contemplate a tsunami warning system. Madsen Pirie on the Adam Smith Institute weblog offers some ideas to help make poor countries richer:

Cancel their debts (which were run up by a previous generation of predatory despots) and open our markets to their goods. Help them fight AIDS/HIV and Malaria. Help everyone gain access to clean water. Help them tackle corruption and predatory government. Buy their stuff.

"Ending World Poverty"

Last CotC of 2004

This week is the worst week of the year to host a weblog linkfest. Last year, I hosted the Carnival of the Capitalists. It was one of the only weeks that wasn't linked by Glenn Reynolds. Thus, I'm giving Dane Carlson some linky love.

Tsunamis' Possible Economic Effects

Early guesses indicate the deadly tsunamis won't hurt U.S. insurance companies. That means the U.S. economy shouldn't see a direct economic effect. But there could be indirect effects to the U.S. economy. That area of Southeast Asia is a source of cheap labor. Look on the tags of your clothes and you'll probably read "Made in Thailand" or "Made in Indonesia" on it. The tsunamis could disrupt a lot of production. That could mean temporary shortages or higher prices on some imports, at least until manufacturers can move production.

"U.S. Insurers Seen Little Exposed to Asia Tsunami"

UPDATE: It's good U.S. insurers have little exposure in SE Asia. They had a rough 2004 with U.S. hurricanes and Asian typhoons. Here's a "wow" statistic I found:

Total insurance premiums per capita in the U.S. averaged $3,638 last year, according to Swiss Re. In Indonesia, the average was $14.50.

"Insurers Took a Hit in 2004"

Preparing for the Big One

Glenn Reynolds' latest TCS article expands nicely on the points I've made about economic trade offs and tsunami warning systems. Sri Lanka, Indonesia, Thailand, and the other nations severely hit would have been better off had they been richer. That's easy for me to say since I have the luxury of typing my thoughts on a computer that's connected to the internet. But what is needed is the never-ending fight for global economic freedom. That means tax cuts where they impede growth, adequate law enforcement to protect life and property, innovation, and global free trade.

"Catastrophes and Their Cures"

Tsunami Tradeoffs

Many Sri Lankans feel the same way about the lack of a tsunami warning system in the Indian Ocean as air force chief Harry Goonetilleke: "This is tragic. There should have been such an arrangement for the region. This is absolutely not acceptable." So those Asian nations hit by the devestating tsunamis are considering building an early warning system. Of course this will cost money, something countries like Indonesia, Thailand, and Sri Lanka don't have a lot of. The costs of building a system have to be weighed against its effectiveness. A warning means nothing if local areas don't take advantage of it. One can't simply say a tsunami early warning system should be built. If one killer tsunami happens in the Indian Ocean every century would the system be worth it? What must also enter the equation is what will be sacrificed if money is put into an early warning system. Would programs fighting disease get lesser funding? Would infrastructure improvements be postponed? Money going to an early warning system and away from other programs may make nations worse off.

Even during disasters Man cannot change the laws of economics.

"Asia Considers Disaster-Warning System"

Cash Register Blues

Steven Taylor has posted some thing he doesn't get. I'll respond to his first item:

Three workers, long line of customers, yet only one register is open.

Even during the busiest shopping day there are lulls. For instance having every register manned when the store opens at 8:00 a.m. is a waste of money (wages). The store manager has to make educated guesses as to when to max out his cashiers. If he guesses wrong and customers flood the store early, lines build and tactical adjustments have to be made.

Which segues nicely to the second part of my explanation. If they know it or now accountants rule the world. They can take down global companies like Enron and WorldCom, and they can stick wrenches into public policy proposals--we'll see plenty of this with Social Security reform. In a store it's important to give limited access to cash and cash functions. Doing so prevents internal theft and mistakes that can lead to the retail buzzword "shrink." In order to minimize shrink only the management team has access to the store safe, and individual cashiers are assigned a register. That means that when more customers than expected appear in line an "excess" employee can't just hop onto a register and start checking people out. They have to get a manager to get them a cash drawer which has to be counted. Then the employee has to get a manager to sign them onto an unused cash register. Since lots of needy customers are around finding a free manager can take some time. I've seen many instances where someone found a manager, got a drawer, got signed in only to find no one left waiting in line.

There's probably a better way of handling the wax and wane in a store. If you figure a solution out you'll probably be able to make some good money in the consulting business. But for now we're bound by imperfect projections and accounants who have a lot more power than they realize.

"Things I Don’t Get (Christmas Shopping Edition)"

[Of course I shouldn't discount the most obvious explanation: lazy incompetence.]

Way to Go Apple

When it seems like customer service is going down the toilet, some of us get pleasantly surprised.

"I was So Ready to Hate Apple Today"

What's Old is New Again

Retro will never die. At least if marketers have their way.

Remember Spam, that mystery meat in a can? Does Popeye ring any bells? How about White Castle burgers? Maybe you're familiar with these products just from listening to your parents talk about the good old days. But chances are your familiarity will grow next year. Marketers are revving up the publicity machine to turn these darlings of yesteryear into 21st century stars.

Madison Avenue, Hollywood, and even Broadway are betting that many of these ubiquitous icons still retain some cachet. Witness the recent success of The Brady Bunch family reunions and the return of chocolate drink Ovaltine. Marketers know it's tougher to launch a new, unknown, and untested brand than to bring back oldies but goodies for a second act. "Marketers don't have to explain the brand, just build on latent appeal," says Drew Neisser, CEO of Renegade Marketing Group, a brand-marketing firm in New York.

No More Late Fees

One thing that makes capitalism so interesting is the changes that take place due to competition. Netflix and other (relatively) new DVD rental services have done better at satisfying consumers. Rental behemoth Blockbuster is countering by no longer charging late fees. If a customer doesn't return their movie or game within one week of the return date they'll buy it. If the item is returned after that one-week grace period but within 30 days they'll get a credit on their account. I'm not sure if that's a credit onto their credit card or if it can only be used on future rentals.

One result of this is customers won't consider the due date as the real due date. The average return date will be the last day of the grace period because customers won't have the incentive not to return the movies on the "soft" due date. But since Blockbuster test marketed this before rolling it out nationwide, I'm sure they know this.

Another result is the hit the company will take on the bottom line.

Blockbuster, which has more than 4,500 stores in the United States, says it expects to make up the lost revenue from late fees with increased store traffic, reduced promotional and marketing expenses and more focus on managing its operating expenses.

Late fees would have contributed $250 million to $300 million to 2005 operating income, it said.

"Blockbuster Ends Late Fees Starting Jan. 1" [via Catallarchy]

Warming Up to Dean

On global warming Dean Esmay writes,

My own opinion, for whatever it's worth: Lomberg is right on the most important matter: trying to "fix" global warming by spending trillions of dollars would be inhumane and irresponsible. For the costs associated with such questionable nostrums as the Kyoto protocol, we could do far more to provide clean air and water for most of the world's population, and do far more for extinct species preservation and nature conservation. The Earth has been much hotter (and had much higher CO2 levels) in the past, and the notion that we can control the temperature of the Earth the way we control the thermostat in our homes is absurd.

In any case, panic over rising ocean levels and global catastrophes isn't just unfounded in science: it's pseudoscientific hysteria.

And can someone buy Dean a copy of Michael Crichton's new book. Lately, he's been writing about him. I wonder if it's a subliminal message.

"The Nature of Science"

At Least de Soto Likes Him

If you have to fill the position of Energy Secretary (name one thing Spence Abraham did in his term--heck name one thing any secretary did) I guess filling it with someone respected by Hernando de Soto is alright.

But if "gets it" on property rights in the developing world then why waste him at Energy? Send him to USAID, have him run Treasury, or better yet send him to Iraq. It sounds like Samuel Bodman is a wasted talent in a wasteful department.

"The Treasury Department's Hidden Treasure" [via Hit & Run]

IBM Name Change?

The news of IBM selling its PC business to China's Lenovo Group wasn't shocking to me. Big Blue hasn't been big in PCs for years. Dell and HP have whupped them in market share. The fact that a Chinese company bought the division doesn't bother me because IBM has been outsourcing PC manufacturing for years. You can't make this into an "America gets screwed by the Chinese" story. If we did get "screwed" it happened some time ago. What did raise my eyebrow (I can do it just like Spock) was this nugget:

Like other major Chinese manufacturers hoping to expand overseas, Lenovo is planning to leverage a well-known foreign brand name. Liu said the company would be entitled to freely use IBM's brand name in five years' time.

"China Computer Maker Acquires IBM PC Biz"

Another Wal-Mart Theory

Joe Carter thinks Wal-Mart's bad news isn't really bad. The secret: gift cards.

"The Retailer’s Ruse Redux: What’s Going on with Wal-Mart?"

Midwest Christmas Shopping

In Milwaukee and the Midwest Black Friday's shopping was brisk but it tailed off on Saturday and Sunday. A manager of a Milwaukee mall said, "Saturday was pretty flat, or down." In the story we may have an explanation for Wal-Mart's lackluster November:

While retailers Boston Store, J.C. Penney and Sears, Roebuck & Co. drew crowds on Friday for early-bird deals on jewelry, toys, tools and electronics, some discounters didn't fare as well.

Wal-Mart was the big loser, after cutting back on early-bird deals. Wal-Mart said it took a "more balanced" approach to discounts on the day after Thanksgiving. Store traffic declined at the week's end, the retailer said on Saturday.

"Shoppers' Pace Slowed on Weekend"

Sluggish Wal-Mart Sales

While I'm watching the Packers battle the Rams (hopefully the succeed better than my fantasy football team) ponder the possiblity of Wal-Mart having sluggish early Christmas season sales while retail as a whole appearing to be doing well. Professor Bainbridge thinks we're seeing an income effect. With a stronger economy than in year's past people may be shopping more for quality rather than price. With more consumer purchasing power due to greater employment, better pay, and lower taxes price may not be as important in a shopping decision. While Wal-Mart can trump anyone on everyday items (groceries, toiletries, paper products) Christmas shoppers may be more interested in higher quality, name brands. Wal-Mart current product mix maybe unable to pique shoppers' interest. An indication that this may be what's happening we should look to Target's sales. That company's strategy has been to emphasis style rather than price. While Target too offers plenty of low prices they have an image of placing more emphasis on appearance, aethetics, and quality. If Target's sales better match the entire retail field then Professor Bainbridge's theory has more weight.

If you're a worried Wal-Mart investor I wouldn't fret too much. Wal-Mart has the best internal computer system in retail. When you combine that with their buying power Wal-Mart has the ability to figure out what customers want and get those goods to them. I don't think even it is fast enough to make changes in the middle of this shopping season, but don't be surprised if you see more name brands and higher quality goods in their stores.

"Wal-Mart's Woes, Online Shopping, and the Economy: A Comment"

Experts: Kmart is Doomed

A bunch of people who get paid to talk about retail said pretty much the same stuff I did about the death of Kmart. But you got it from me two days sooner.

"Kmart May Lose its Identity" [via PrestoPundit]

Kmart Buys Sears; Will Dump Kmart

Ed Lampert sees the future of retail. It includes Sears but not Kmart. That's the conclusion I've come to after thinking about the Sears-Kmart merger announced today.

Kmart ran smack-dab into the retail hurricane that is Wal-Mart and got blown away driving the company into bankruptcy. Lampert got the company out of its problems, not by boosting sales, but by closing stores. That effort has worked. Now, Lampert sees the Kmart brand as something of little value. They can't out Wal-Mart Sam Walton's creation. That was tried. Other than the Martha Stewart line, the store chain isn't known for style so it would be hard to battle Target on its turf. Just being the store with the Blue Light Special won't cut it.

Sears is in the position of being a hardware store and an appliance store and an apparel store in an age when customers think of Home Depot, Best Buy, and The Gap. Being all things to all people may work, but just not as shopping mall anchor stores where specialization is the word, and stores like Barnes & Noble become new anchors.

Sears Holdings gets Kmart's non-mall real estate plus Sears staid but reliable sensibility. More importantly the new company loses Kmart's bad reputation. There will be places where Kmart will survive, but expect most of the old Kmarts to become new Sears.

Don't think Kmart is doomed? The 50 stores Sears just bought from Kmart will still be turned into Sears. The old Sears CEO and CFO will hold the same titles in Neo-Sears. At least one "industry consultant" (whatever that means), George Whalin, agrees with me:

This is more a real estate deal than anything else. I would be very surprised if Kmart doesn't completely go away in the two to three years, or become something completely different.

Merging two stores loaded with great real estate and some proprietary brands won't be enough to produce a Wal-Mart or Target killer. Stephen Karlson poo-poos the merger as a mediocre combination of mediocre parts. The new Sears, now dubbed "Neo-Sears," will have to find some aspect of the shopping experience that neither Wal-Mart of Target satisfy and deliver on it in a cost effective way.

Wal-Mart wins on price, and Target wins on style. Neo-Sears should try to win on customer service. Neither of the two competitors offer much of it, but that doesn't stop customers from buying from them. Customers may be willing to pay a little more to get more than a greeting from an elderly person and fast check out. It will mean putting a customer service desk in the open instead of tucked away in a corner. It also means hiring and training employees to do more than find a product for the customer. They'll have to suggest complementary items. In essence Neo-Sears should have Marshall Fields' (or another high-end department store) service at value prices. Exclusive brands can get bodies into stores, but great customer service can additional incremental sales.

"Kmart to Acquire Sears in $11 Billion Deal"

"Sears and Kmart to Merge"

"Sears is Kmart is Sears"

"Kmart Buys Sears...Our Analysis"

"Screw the Softer Side"

A Realistic View of the Economy

Economic growth requires businesses developing better ways to satisfy consumers' desires. To do this an environment of innovation and incentive is needed. When businesses are free to try out different methods of fulfilling consumers' cravings, and the know they will be rewarded for it you will see more and better goods and services. In short, a growing economy requires an environment of limited regulation and low taxation.

If there were only more stories like this in the USA Today, the American public wouldn't look so much to Washington to solve their economic problems.

"U.S. Job Picture Isn't Drawn in the Oval Office"

Prediction Markets

Slog through the posts below because if you're interested in the potential power of prediction markets like the Iowa Electronic Markets these posts will help you understand some of the strengths and weaknesses of these devices.

• "On the Predictive Power of Markets"
  
• "The Predictions of Prediction Markets"
  
• "Candid Admission Time: What does TradeSports Tell Us?"
  
• "What Do IEM Prices Actually Mean?"
  
• "An Update on Manski, TradeSports and Predictive Markets"
  

UPDATE: I just found this Tyler Cowen post. Here's a key paragraph:

The very virtue of prediction markets now becomes their cost. If you hear rumors, in the absence of prediction markets, you can ignore them and pretend they are not true. With asset markets, however, your forecast moves into equality with that of the market, otherwise you would trade. It is precisely this "forcing quality" that makes prediction markets so useful, but also so potent. Price movements are materially and psychologically harder to ignore. The very feature of prediction markets that mobilizes information also mobilizes coordinated social reactions to the embodied information, and not always for the better.

Blogosphere is Hayekian

I always like posts that reference F. A. Hayek. King's is no different. I wonder if anyone has published a Hayekian analysis of the blogosphere? If not, someone should. Or how about getting the Pope to declare Hayek the saint of the blogosphere?

"Forming Different Information Flows"

Dispersed Vs. Centralized Journalism

Steven Horwitz sees the blogosphere's victory over CBS News through Hayekian glasses.

"Liberty, Power, and Knowledge: The Tale of the CBS Memos" [via PrestoPundit]

Helping The Cause

I want to do what I can to help President Bush in his re-election effort.

In a couple days, I will accept a job offer. That will reduce the unemployment rolls by one person, at least. Now that it's September, September's unemployment rate won't be reported until October. I hope that the lower unemployment rate will further solidify the President's lead in the final weeks of the campaign.

An added bonus, that might make Oliver mad.

There's Gold in Those Medals

With all that's happening with the Olympics you just want to read economics and business posts, right? Er, probably not. But check out the latest Carnival of the Capitalists.

Culture vs. Prosperity

A growing economy based on computers, electronics, and other gizmos needs energy. Gas, coal, nuclear, wind, solar, whatever, we need power or the machines will stop running, the cars will stop moving, and material improvement will grind to a halt. Oil prices have been high for months, long enough for serious alternatives to be considered. One is liquified natural gas (LNG) transported from overseas on large tanker ships. When the LNG arrives here it can immediately be put to use. It has to have its temperature raised so it can go into the natural gas pipeline network. Thus there is a need to build facilities to take in LNG.

The Passamaquoddy tribe in Maine will be voting tomorrow whether to turn over one-quarter of their reservation to a LNG facility. The Passamaquoddies are poor, and the facility will bring in 70 21st Century jobs (not all of them will go to tribe members) along with the halo of economic benefit that comes with them.

Critics inside the tribe worry that tradition will be lost. If continued poverty (half of the tribe is unemployed) and economic stagnation is tradition, then yes it will be lost to good jobs. It's wrong to assume the Passamaquoddy arrived in North America and stopped evolving culturally and socially over the centuries. I'm confident the tribesmen aren't living in huts and spending hours collecting and hunting for food like their ancestors did. So already some of their tradition has been lost.

As in all aspects of life, tradeoffs are required. The Passamaquoddy can drop the proposed LNG plant and try to find another way out of their poverty. Or they can embrace the economic benefits from the plant and use that gain to save the parts of the culture they feel are most important.

Just look at the rest of the world today. You will find that the richer a nation the more culture is created. This is because once individual needs are satisfied, people can use their surplus on culture--both high and low. Ironically, the best way for the Passamaquoddy to save their culture is to embrace the modern world.

"Maine Tribe Offers Home for Natural Gas Depot"

The Small Biz President

If Bill Hobbs had his way, President Bush would be touting how many jobs were created according to the household survey. Hobbs then notes that according to that survey small business does better under Republican administrations. Therefore, it's no surprise one of the poles of the GOP's big tent is small businessmen.

"Republicanomics Helps Small Business"

Difference of Opinion

Here we have two smart webloggers who would both be considered pro-Bush or Bush-leaning. Bill Hobbs liked the recent employment numbers, but based on the same information Megan McArdle wrote, "I think we in the media should start practicing saying 'President Kerry.'"

Sowell Speaks

Thomas Sowell discusses a range of topics from race to Marxism to rebuilding Iraq.

Pass Me the Money

This week's Carnival of the Capitalists is at the Business Evolutionist.

Tax Cuts For The Rich

James Lileks has an excellent piece today on stimulating the economy, one household at a time.

[T]oday marked the end of the tax-cut spending orgy. I’ve spent more than my taxes were reduced, but these improvements were spurred by the tax cut. I just plain felt flush, and that led to this mad spasm of extravagance – fixing a roof, repairing the garage, shoring up the storage room, and replacing windows that were installed during the Woodrow Wilson administration. It’s called “consumer confidence.” It’s a force-multiplier.

We've done the same here, notably taking a cruise last February after a 4-day trip to Miami. Also, while not hiring people to do the work, finishing a level of our basement (our basement is a split level of the house), and other things around here. When the Sarazin Consumer Confidence index rises, you can bet some other activities are going to take place around here, including some land clearing to erect a swing set for my daughter, a new (newer, probably will be a used or "certified Pre-owned") car for me, new clothes/wardrobe for the new job.

Read the whole Lileks piece. I'm changing my DirecTV service provider soon, will be buying my service directly from DirecTV. Lileks' experience leaves me a little weary of making that change. What I did here though, as part of the basement project, was have 2 CAT-5 and a Satellite cable run to several locations in the house, when the basement was all naked. All 3 upstairs bedrooms, the living room, and 2 sets in the downstairs living room and in the downstairs office. While I don't plan to activate the TV/phone/network connections in the guest or daughter's bedrooms, the capabilities are there for it for the next family that lives in this house. I did the "homerun" wiring plan. Now if I get the service switched over to DirecTV, they will install a 3-room service; well, now the wires just come in one place in the house, and I can determine, from the basement, which rooms are "hot" and which are not.

Health Care Costs

Perhaps we don't spend enough on healthcare costs in the United States.

In Romania:

A Romanian surgeon who underwent a fit of madness while operating on a man's testicles proceeded to amputate his penis and cut it into three pieces.

Twin Cities Light Rail

Minneapolis's light rail line just opened for business last week.

Fraters Libertas's The Elder (not that there is a Younger) points us to an article in The Economist discussing the light rail line. (The article is "premium content" so you have to pay to read the article.) The Elder breaks it down for us a little more sensibly:

And, to conclude that "the return of rail has given the Twin Cities something of a boost" is ridiculously pre-mature. The line opened this month for farg's sake. If there's been a "boost", I'd like someone to please point it out to me.

It certainly will be quite some time before any impact can be realized. Early ridership was "above projections" but that's the novelty of the thing talking. I wonder in the coming months if we will hear from the local news media about the ridership numbers; have they increased? Stayed the same? Dropped?

Econ Links Galore

The Outsourcing Weblog is hosting this week's Carnival of the Capitalists.

One Step Forward, Two Steps Back

Just when I thought the Bush administration got it together on trade with agreements with Morocco and Central American countries they just have to raise tariffs on imported shrimp. I feel like Charlie Brown. UGH!

"Prepare for Jumbo Shrimp Prices" [via The Agitator]

A Tax that Will Not Die

We can all agree that World War I is over, right? Then why are we still stuck with a "luxury" tax on telephone calls that origniated in during the Spanish-American War and was revived to pay for WWI? The answer is government inertia and the concept of concentrated benefits verus distributed costs. A 3% tax on phone calls winds up being a small portion of a consumer's total phone bill. For him the effort to lobby his Congressman to nix the tax isn't worth the benefits. On the other side are those inside the government who turn white when there's the possibility of reduced revenue coming to the federal government. These people, for ideological purposes or to protect their bureaucratic turf, lobby heavily to continue the revenue stream. This may have been what happened to the phone call excise tax. In 2000, the House of Representatives voted 420-2 to ax the tax, but the Senate didn't even take up the bill.

"IRS Eyes Net Phone Taxes"

"Public Choice Theory"

Cars for the Poor

The free market argument for why passenger rail shouldn't get government subsidies is that if the service were valued enough by riders they would pay enough in fares to cover the costs. This is very simplistic and doesn't add externalities into the calculation of social cost (if even such a beast actually exists). One arguement of proponents of passenger rail is the poor need means to get to jobs. In a thought experiment, the Heartland Institute's Wendell Cox concludes that giving the poor automobiles would be less costly than subsidizing transit.

[This is analgous to the thought that handing out cash payments (or a negative income tax) to the poor would be cheaper than funding bureaucratic welfare programs.]

"Why Not Just Buy Them Cars?"

A Tip of The Cap

Jay Reding points out that Michelle at asmallvictory points out that Home Depot is donating $1M USD in goods to the United States Military.

Retailer Home Depot Inc. is donating $1 million in tools and materials to support the U.S. military in Iraq.

The company said it is sending nine truck trailers to the military, filled with 100,000 tools and materials, including shovels, table saws, concrete mixers, safety scaffolding, power generators, light bulbs and jackhammers. The donated goods left San Diego on Thursday.

In a world where there are plenty of choices to make regarding where to shop for home remodeling goods, one could, and possibly should, choose to support a company that is doing something like this. I'm not going to go to Home Depot and spend a couple hundred dollars today, but I'll consider shopping there the next time I need some lumber, or a table saw or a gallon of paint. This isn't to say that your neighborhood hardware store or lumber yard isn't helping out in the war effort in some way. It is saying Home Depot has a PR firm and enough capital and goods to make a large impact.

In mentioning Minnesota blogs earlier, I failed to mention the fine Jay Reding. Another daily stop in my tour of the blogosphere. And, I've been reading asmallvictory for quite a while, before it was fashionable to do so. This is one site I found by visiting The American Mind. So, a tip of the cap all around: To Home Depot, to Jay Reding, to Michelle, and finally to Sean.

Contracts

I don't know how rampant a problem this is across America, but it has been a problem here in Minnesota.

The Minneapolis School Board has chosen its candidate for the next Superintendent of Schools, Thandiwe Peebles. Now the school board is in the process of negotiating her contract, which will likely pay her over $160,000 a year.

Minneapolis attorney Marshall H. Tanick has a piece in today's Star Tribune about the contract and what the school board should do to strengthen the contract.

Tanick is upset, rightfully, that contracts are not written to require an iota of loyalty on the part of the superintendant, but do require the school board to be loyal by providing payment, a car, a vacation policy, etc.

Previous superintendents in Minneapolis have left town before the end of their contract term, often with healthy package of unused vacation and sick time, and a pension. Then a new candidate search is started. And Minneapolis only looks for national candidates it seems. Nobody local is good enough.

Taxpayers in Minneapolis -- heck, all of Minnesota -- are left to pay for all this. The school board needs to remove the revolving door from the Superintendent's office, and get someone here who truly has a vision, a long term vision, for these schools instead of a candidate who views Minneapolis as a stop on the road to someplace bigger.

More Free Trade Progress

More good news (except if your the LJ) on the free trade front. A deal has been made with Morocco and one with Bahrain is on its way. If this keeps up I'd hope President Bush were always running for re-election.

"U.S. Signs Free Trade Deal With Morocco"

War Economy

I don't know what Oliver's been reading, but I haven't seen the claim that the war is boosting the economy. If this nonsense is out there I want to know about it so it can be slapped down properly.

War doesn't directly help the economy because goods and services are destroyed not created. It's like the nostrum that World War II pulled the U.S. out of the Great Depression. Not so. Instead, it was a better-managed money supply and the pent up demand of a post-war population who weren't burdened by war-time rationing.

But in a way, war is sometimes necessary for an economy. Anarcho-capitalist and hardcore libertarian readers will balk that government can do anything beneficial, but war and police powers are needed to protect economic and political rights. World War II is an example. A Europe controlled by Nazi Germany wouldn't have been good in the long-term interests of the U.S. That continent suffering under the National Socialists' facist central planning wouldn't have been able to buy or produce as much as a free Europe could. Also, who's to say Hitler would have stopped by conquering Britain? If the U.S. never got involved in WWII the tyrant could have assumed the U.S. was weak and made preparations for the invasion of North America.

"An Economic Question"

On the Right Path

After a very stupid decision to slap tariffs on imported steel, the Bush administration is actually promoting free trade with the Central America Free Trade Agreement. John Kerry, unions, environmentalists, and Pat Buchanan paleoconservatives will not be pleased.

"Trade Pact Signing Today Central America Agreement Covers U.S., 5 Nations" [via PoliBlog]

Honoring Adam Smith

Planning has begun on a statue in Edinburgh to honor Adam Smith. No postmodernism here. Just good, old sculpture.

"Capital Figure"

Never!

I don't care if doctors determine that low-carb diets will let me live until I'm 300, I will NOT EVER buy a low-carb Krispy Kreme. Note I wrote "buy." If I'm in a store when the hot light is on and the smiling person behind the doughnut case hands me a hot, sticky just-fried sample, I guarantee I won't say no.

"Krispy Kreme Makes Plans to Meet Low-Carb Challenge" [via Betsy's Page]

It's a Good Thing

A Secret Service ink expert who testified in the Martha Stewart trial has been arrested for lying on the stand. Federal prosecutors accuse Larry Stewart (no relation to Martha) of giving eight false statements. U.S. Attorney David Kelley didn't think this news would help overturn Martha Stewart's conviction, but I'm sure Martha's lawyers disagree.

"Stewart Witness Charged With Perjury"

Fad Fading Fast

There might be some relief for Krispy Kreme stockholders (here and here). The low carb craze is losing its craziness.

"Low-Carb Losing Steam"

Stock Fallout

Krispy Kreme's stock has been in the toilet along with the rest of the market. Yappers on stock message boards are calling for management's heads. All because management believes the low carb craze will slow profit growth. Note that CEO Scott Livengood didn't say the company would lose money. Profits just won't meet company expectations. In the same statement, Krispy Kreme pointed out that "Krispy Kreme experienced a 26.3% increase in systemwide volume in U.S. packaged doughnuts, predominantly through the addition of new accounts, while all other brands in the doughnut category combined experienced a 7.2% decrease in volume." KK store sales continue to grow which means the low carb fad is only effecting grocery store purchases. People continue to buy Krispy Kremes. They're just not considering it an add-on purchase while buying other groceries. Instead, they consider it a treat to go to a KK store, watch dough become golden glazed goodies, and savor a hot, soft doughnut.

If you really want to know the place of off-site sales in Krispy Kreme's plans read Making Dough. It's a bit on the hagiographic side, but it does mention that the company treats sales in grocery stores, gas stations, and convenience stores as a form of marketing. KK doesn't buy commericals on television or the radio. By offering doughnuts off-site the company gives you a taste of what they have to offer. Because of word of mouth potential buyers think there has to be something more at a KK store than an above average doughnut. The well-branded displays are the closest thing the company has to traditional commericals. Once someone goes into a store to have a hot doughnut off-site sales keep that experience in the consumer's mind.

I have to mention that I asked Prof. Bainbridge for his take on the KK lawsuits. He was kind enough to reply.

"Krispy Kreme Woes Take Cyber-Focus"

Krispy Kreme Sued

My beloved doughnut maker is being sued by shareholders for supposedly misleading them. Let me quote from the Reuters story:

The complaint names members of Krispy Kreme's senior management as defendants, and charges that they disregarded signs that the company had expanded too quickly, that its wholesale business undermined sales at its retail stores, and that it faced stiff competition from rival doughnut chain Dunkin' Donuts.

According to the statement, the suit also alleges that "the company ineptly accounted for how their bottom line would be affected by the popular low-carbohydrate diets; first by claiming that the trend would have no influence, and then by over-exaggerating the effect of the diet fad."

This is a reason why companies should bother with earnings guidance. There are too many variables that can change. It's similar to the problem macroeconomists have with measuring GDP or someother large aggregate. Months, even years later, revisions are made. It's good that Google won't be offering any guidance.

"Krispy Kreme Facing Two Shareholder Lawsuits"

De Soto Criticized

Previously, I've praised Hernando De Soto's The Mystery of Capital [here and here]. Gabriel Calzada Álvarez criticizes the book from a anti-statist/anarcho-capitalist angle. The criticism is a two-part one: first, De Soto doesn't offer a "clear definition of 'private property;'" second, the state would be the final arbiter of property rights. On the first part, I'll grant Álvarez that de Soto's defense of private property is flabby in its reliance on utilitarianism. But since the man focuses more on public policy examining the effects of not defining and enforcing property rights is more important in his goal of reducing poverty in the Third World.

On the second part of the criticism, Álvarez notes that government failure (both through mismanagment and corruption) happens. As much as possible designation of the boundaries of property lines should be left in the hands of private entities. Institutions like for-profit title companies have an incentive to efficiently determine boundaries. However, in some disputes there has to be a final arbiter. After all the obligatory private arbitration hearings, there will be occasions where people will seek an institution to make the final decision on their property conflict or some entity has to enforce a contract's provisions. Since the state has a monopoly on force it natually flows to them. Álvarez believes that "such a defense can be undertaken directly by the property own­er, or by contracting for it with a third party or agency." But who keeps a check on the third party other third parties? Who enforces the third party obligations other third parties? This never-ending circle of private checks and balances is one of the most confusing aspects of anarcho-capitalism I've encountered. Since I've been a causual observer of this line of political economy I would guess anarcho-capitalists have found a way out of this infinite loop.

"De Soto's Embrace of the State"

That Damn Atkins!

Krispy Kreme announced that growth will slow because of the low-carb craze sweeping the nation. Looks like I'm going to have to do my part and buy a dozen or two.

A frightening thought just occured to me: a low-carb Krispy Kreme. Oh, I hope not.

"High-Flying Doughnut Maker Krispy Kreme Hit by Low-Carb Craze" [via PoliBlog]

What's in a Name?

We live in interesting times when a company named "Google" lists "Microsoft" and "Yahoo" as two of its chief competitors.

I feel a Google IPO post in me. I've been playing around with some numbers and have been collecting news stories and weblog posts. It might happen later today if Donald Westlake's latest Dortmunder novel doesn't capture all my attention.

"Now That The Other Shoe Has Dropped" [via Scripting News]

UPDATE: As you can tell from today's lack of posts, my nose was deep into a book. The Road to Ruin was a typical Dortmunder novel: dark comedy; obvious foreshadowing; and plenty of quips. There was a subplot that should have been developed, but it still made for enjoyable reading.

Darn Progress

Don Boudreaux has an outstanding post on job loss and economic change. Here's just a portion:

50 years ago this month, Dr. Jonas Salk launched nationwide testing of his polio vaccine. Within an incredibly short time (and with help from the researches and refinements of Dr. Albert Sabin), polio was effectively wiped out as a health threat in America.

But there’s a downside: job loss. How many workers, who played by the rules, lost their jobs as a result of this development? People who built wheelchairs and crutches, who helped manufacture iron-lung machines, and who specialized in nursing polio victims – many of these people were thrown out of work by the product supplied by Dr. Salk and Dr. Sabin. Some of these workers surely found comparable alternative employment quickly. Others took longer to do so. And probably some others were obliged to accept jobs at much lower pay. Maybe some of these workers never found new jobs.

"Polio Vaccination and Jobs"

For the Econ Junkies in My Audience

The Knowledge Problem hosts this week's Carnival of the Capitalists.

Hayek's Spirit Takes Over Stephenson

When Neal Stephenson's Quicksilver came out last year geeks, webloggers, and sci-fi freaks were excited. Because of my connections I got a copy of the book a week before it was released. I got about half-way through (400+ pages) and quit. It's one of the rare occasions where I couldn't finish a book. If anything, I will myself to get to the end, just to say I finished it. With Quicksilver, so many lengthy sidebars, tangents, and details bored me so I moved on to something else.

I'm now a little bothered with not finishing Quicksilver because the next book in The Baroque Cycle, The Confusion has just been released. In this book, Stephenson gets into the economic history of 17th century Europe. He talks to Wired News about the economy back then in particular and economies in general:

Very generally, it has to do with the flow of metal around the world. That's important because money is a sort of medium for the exchange of information. When the price of cloth went up in Antwerp, it was because the system of international trade, in some fashion that's too complex for us to understand, was transmitting information about the supply/demand balance. Money makes that kind of information flow better. [Emphasis mine.]

Sadly, I'm not willing to re-start a 900+ page novel just to then jump into a 800+ page sequel when I'm getting all the Hayek I want in Bruce Caldwell's Hayek's Challenge.

"Clearing Up The Confusion"

Tax Day

To celebrate (accountants and those who get refunds) or dread (those who owe) April 15, here's Reason's Brian Doherty on the "tax honesty" movement.

""It’s So Simple, It’s Ridiculous"

"Missing" Worker

Bill Hobbs, in his quest to find the economy's "missing" workers (they're hidden in plain sight) links to an op-ed that echoes much of Bill's thinking.

"Payroll Survey Misses 'The Evolution of ... Work'"

O, My!

O is for obdurate. As in those obsessed (another O word!) with outsourcing "evils" fail to understand the importance of the division of labor in a modern, productive society. I offer them Bastiat's "A Petition" for enlightenment.

"Outsourcing Sends Jobs Away, But Others Come In, Supporters Say"

[My first (and possibly only) addition to Kate's Letter of the Day.]

Wal-Mart Rebuffed

Voters in California vetoed Wal-Mart's attempt to avoid the onerous zoning and environmental regulations that plagued the Golden State's economy. Wal-Mart critics will see this as a loss for Goliath and a victory for David. However, it really is a loss all-around. As Doug Bandow writes:

The objection to Wal-Mart is simple: It charges lower prices, drawing customers away from established businesses, hurting "the community." The problem is not really Wal-Mart, however. Rather, it is economy-minded customers who desire increased choice and lower prices. Thus, instead of barring Wal-Mart, honest critics should favor arresting anyone who shops at any discounter—even by mail. This is the logical, if nonsensical, consequence of the anti-Wal Mart worldview.

"California's Chilly Welcome for Wal-Mart"

[Added to OTB's Beltway Traffic Jam.]

De Soto Honored

Hernando de Soto won the 2004 Milton Friedman Prize for Advancing Liberty. The award goes to an "individual who has made a significant contribution to advancing human freedom." De Soto realized the property rights are vital to economic development. In the Third World, squatters live on land but have no formal right to that beneath their feet. He wrote in his book The Other Path, "They have houses but not titles; crops but not deeds; businesses but not statutes of incorporation." Even if common sense would dictate that they were the landowners due to not having a title, they cannot use the land as collateral to build a business or improve their homes. Economic progress is stagnant as a result. An innovative vision and entreprenurial spirit may be there, but the access to capital prevents them from taking on a greater economic role. If his most recent book, The Mystery of Capital, were written in the language of mainstream economists--mathematics--De Soto would be in line for the Nobel Prize. Nevertheless, he's deserving. His ideas, while appearing to be simple, common sense are powerful and could lift millions out of poverty.

"Property Rights Champion Hernando de Soto Wins Friedman Prize for Liberty"

UPDATE: NRO has a great interview with de Soto on the importance of well-defined property rights.

Corporate Reform and Entrepreneurship

Stephen BoykoHere and Aron Gottesman have something to ponder when looking at the government's response to "Enronitus:"

What is ironic is that having demonstrated the virtues of the capitalistic system, American policy makers are now trying to recreate the governance regime of European ancestry. Sarbannes-Oxley type regulation is a large operational tax on job creation that gives rise to unintended consequences. The more top-tier regulatory commands strive for predictive capability, the more imprecise the management of micro-cap commercial activity. The more commands add costs to the micro-cap market, the greater the incentive to go underground and/or offshore to conduct business. This, in turn, causes the US micro-cap market to become less transparent, less innovative and less productive.

Napoleonic Code governs Europe, where an activity is prohibited unless expressly permitted. English Common Law reverses the process; unless an activity is expressly prohibited, it is permitted. America took this “openness” and added the concept of “sweat equity” during the Jacksonian Era as an incentive to the settlers of the frontier. Yet disproportionate regulation, such as the Sarbannes-Oxley Act, reverts to Napoleonic Code. Our policymakers are fostering what our ancestors rejected!

Government Failure

The Transportation Security Administration is yet another example of inefficient government:

About one-quarter of the nation's commercial airports no longer want government employees screening passengers and baggage, preferring private companies working under federal supervision, a congressman said Thursday.
Airport directors are upset with the Transportation Security Administration's inability to adjust staffing to meet demand, which results in long waits at some airports, said Rep. John Mica, R-Fla., chairman of the House aviation subcommittee.

He said he had met with more than a dozen airport directors from around the country.

Concerns about long lines at airports were underscored by a Federal Aviation Administration report released Thursday that said domestic flights are expected to increase 4.8% this year.

Some large airports, such as those in Orlando, and Los Angeles, have only 80% of the screeners they need, while some small airports have far too many.

"It appears it's almost impossible for the TSA to micromanage staff and deal with schedule changes and fluctuations in traffic at all 429 (commercial) airports," Mica said.

Congress created the TSA after the Sept. 11 attacks and ordered it to replace the privately employed screeners with a better-paid, better-trained federal work force. But lawmakers also gave airports the option of returning to private screeners on Nov. 19, three years after President Bush signed the bill into law.

Mica said he expects more than 100 will take that option this fall.

Finally, let me toot my horn and quote what I wrote almost two years ago:

Airport security was passed only for Congress and the President to demonstrate that they were doing something about airline security. They made no case that a properly monitored collection of private firms couldn't do the job better. (Europe contracts security out to private companies.) So now, we're stuck with nationalized airport security with all its bloat and inefficiency.

"Some Airports Fed up with TSA, Want Private Screeners" [via Heritage Policy Weblog]

Give Him a Pulitzer

Thomas Friedman has another column based on his trip to India. There's much I don't agree with him in this piece. He thinks it's important for India's future that the government run much of the infrastructure now being built in private enclaves. However, his on-site reporting give his readers a colorful, three-dimentional view of outsourcing, the most current issue in political economy. Next year, the Pulitzer committee shouldn't even bother with nominations. Just give Friedman the award. He's doing an outstanding job.

"Software of Democracy"

Expanding the Pie

Miguel Helft found an example of the job-creating benefits of outsourcing. Extending the division of labor worldwide isn't just a zero-sum game. Finding the cheapest, most efficient uses of scarce resources is what has brought Americans the rich lives they live today.

"Offshore Complexities: Jobs there Mean Jobs Here"

UPDATE: For further reading, Tyler Cowen has some interesting links.

Anarcho-Capitalism

Steve Verdon is hosting a good discussion on anarcho-capitalism. The idea still seems very pie-in-the-sky to me, but it provides plenty of food for thought.

"Defending the Anarcho-Capitalists"

Job Gains Under Bush

Bill Hobbs sent me a link to a Heritage Foundation study that tries to explain the disparities between the payroll survey and the household survey. If you look at the former it appears the economy isn't producing jobs, but if you look at the later there's been a "surge in employment." Tim Kane offers some explanations for the differences:

• The payroll survey double-counts many workers who change jobs and is now artificially deflated because job turnover is down. Decelerating turnover in 2002-2003 explains up to 1 million jobs artificially "lost" in the payroll survey since 2001.
  
• The BLS household survey indicates record high employment. The disparity of 3 million jobs (in employment growth) between the household and payroll surveys since the recovery began is unprecedented.
  The disparity between the two BLS surveys of total employment is cyclical. The disparity widens during recessions and narrows during periods of rapid growth in gross domestic product (GDP). Such variation strongly suggests a statistical bias in one of the surveys.
  
• Payroll survey data are always preliminary. Past revisions have regularly shown the initial estimates to be off by millions of jobs. For example, initial estimates of job losses in 1992 were revised in 1993, 1994, and 1995 and now show net job creation.
  
• The payroll survey does not count the surge in self-employment. The household survey has recorded a surge of 650,000 self-employed workers. This number may be even higher if modern workers in limited liability companies and in consulting positions with traditional firms are not identifying themselves as self-employed.
  

"Think Tank: Household Survey Accurate, Employment Surges"

Economics Posts Galore

Catallarchy.net is hosting this week's Carnival of the Capitalists. Read and become enlightened.

No Justice No Quiche

It's (Not) a Good Thing

From what I've learned from barely following the Martha Stewart trial is echoed by an InstaPundit reader:

So, am I correct in assuming she has been found guilty of covering up crimes the government couldn't prove she committed?

"Martha Stewart Guilty of All Counts"

The Capitalist Pig

Not only is Jonathan Hoenig a financial talking head for Fox News, he also is managing member of a hedge fund, a book reviewer, and from looking at the Capitalistpig merchandise for sale, an Ayn Rand fan.

"Capitalism Best Cure for Dismal Education System"

Carnival of the Capitalists

Ignore Oscar and read the results on the wires tomorrow morning. Econ and biz posts galore are at the Carnival of the Capitalists hosted this week by D. F. Moore.

Friedman Gets It

Tom Friedman is right on the money when it comes to outsourcing, globalization, and a growing, dynamic economy:

[W]e must design the right public policies to keep America competitive in an increasingly networked world, where every company — Indian or American — will seek to assemble the best skills from around the globe. And we must cushion those Americans hurt by the outsourcing of their jobs. But let's not be stupid and just start throwing up protectionist walls, in reaction to what seems to be happening on the surface. Because beneath the surface, what's going around is also coming around. Even an Indian cartoon company isn't just taking American jobs, it's also making them.

"What Goes Around . . ."

Jobs Picture

There's good and bad economic news:

U.S. factory production will increase this year at the fastest pace since 1999, the National Association of Manufacturers forecast Monday.

But some 1.4 million factory jobs lost since 2001 are not coming back, even as many companies begin to hire for the first time in four years, said Jerry Jasinowski, president of the 14,000-member association.

But with more U.S. companies counting on exports, Jasinowski warned that the government should not repeal international trade agreements.

"It would be foolhardy to think that we could cut ourselves off from the rest of the world and create jobs at home," he said. "In general, open trade is better for the U.S. economy."

To get a better picture, we need to know the status of business creation.

"Factory Output is Headed Up; Jobs Aren't"

Prius Anyone?

Long term investment tip: Toyota and fuel cell companies.

"Forecast of Rising Oil Demand Challenges Tired Saudi Fields" [via Drudge]

Stealth Jobs and the Radio Shack Factor

In her latest NY Times column, Virginia Postrel makes a point that can't be said enough:

In a quickly evolving economy, in which increased productivity constantly makes some jobs redundant, we notice the job losses. It is much harder to spot where new jobs are emerging. Our mental categories tend to be behind the times. When we think of jobs, we see factories, secretarial pools, police officers, lawyers. We forget all about jobs we see every day.

Jeremy at whoknew (great logo) has his own indicator of how well the economy and job market are: The Tandy Indicator.

For a whole lot of econ/biz reading, there's this week's Carnival of the Capitalists at Forgotten Fronts.

"A Prettier Jobs Picture?"

The "Good" Paul Krugman

Once upon a time Paul Krugman was an interesting economist. Before he got a job with the NY Times and went on a crusade to berate the Bush administration at every opportunity Krugman was a well-respected economist. An essay about how he goes about his research is a facinating window into an insightful mind. In his lecture on "pop internationalism" he cuts through the cliches surrounding the trade/outsourcing/imports/exports debate. At a time like this when both political parties harbor protectionist notions (The Dems denigrate NAFTA, while Bush raised steel tariffs.) clear thinking is needed.

"How I Work"

"What Do Undergrad Need to Know about Trade?" [via Chip Taylor]

Soothing Allies

The White House is trying to soothe a possible conservative rebellion (it's what killed Bush I's re-election) with lots of face time. But the Heritage Foundation's Michael Franc put it correctly that actions speak louder than words. The first test is to see if Bush vetos a bloated highway bill.

One other note: Does Reuters consider "libertarian" to be a synonym for "conservative?" Both words are used to describe the Cato Institute.

"Bush Reaches Out to Conservatives to Quell Revolt"

Breathe In, Breathe Out, Start Car

The New Mexico House passed a bill that would mandate breathalizers for every vehicle. The bill's sponsor says it would save lives. If we really want drivers to drive safely the government should mandate that a steel spike be installed on every steering wheel. That would certainly provide an incentive to drive safely.

"House Votes for Ignition Interlocks on Every Vehicle" [via Drudge]

New CotC

Tasty Manatees is hosting this week's Carnival of the Capitalists. Plenty of econ and biz posts to keep all you money geeks happy for a few hours.

Lecture Next Friday

Barring some unforseen event, I plan on attending a lecture given by Austrian economist and Foundation for Economic Education president Dr. Richard Ebeling. If you're in the Milwaukee area at that time contact me. The event should provide some good intellectual fodder over drinks or a late meal. If it turns out to be awful, I should have some juicy material for a few Paleowatches.

"On the Road with FEE: Winning Freedom"

Comcast Wants to Grow Ears

This smells of AOL-TimeWarner. At the time, I thought it was some business innovation of historic proportions. What was I smoking? For the most part Comcast is a hardware company while Disney is a software company. They have two different cores. How does having lots of cable help Disney make more successful movies like Finding Nemo and Miracle? What X factor should make this combination work? If Comcast wanted exclusive access to Disney content they could negotiate individual contracts. What kind of economy of scale do they hope to achieve? If I was a gambling man I'd short the combo if they actually merge.

For more reading, check out Professor Bainbridge's take on the situation.

"Comcast proposes to buy Walt Disney" [via Wizbang]

Carnival of the Capitalists

Winds of Change.NET hosts this week's Carnival of the Capitalists.

Interview with an Economist

John Hawkins got himself an interview with the prolific economist and columnist, Thomas Sowell. It's brief so if you want further insight read Basic Economics and Applied Economics. Both are outstanding.

"10 Questions With Thomas Sowell"

Indian Business Development

Despite the cries that someone should "do something" about outsourcing, based on Gordon Smith's observation of India, the U.S. stil retains an important comparative advantage in entrepreneurship.

"Is India Entrepreneurial Enough?"

Civil Rights and Economics

Dwight Lee on Martin Luther King, Jr.'s economic legacy:

The expansion in freedom brought about by the civil rights movement under King's inspiring leadership receives far too little credit for improving the prospects and prosperity of all Americans. And our free-market economy receives far too little credit for helping move us toward King's dream of freedom for all our citizens.

Money Shots

Unpersons hosts this week's Carnival of the Capitalists.

"Your Tired, Your Poor, Your Huddled Masses..."

When President Bush released his illegal immigration plan, I didn't jump on the story. I still won't bash or praise it because in order to determine if it's a good idea one has to look beyond the immediate, "stage one" effects (to use Thomas Sowell's term from his excellent Applied Economics). It's obvious that wage rates for unskilled labor has been pushed down due to illegal workers. But it is also true that employers saved money by using the lower-cost labor. They either passed those saving onto consumers (if their market is sufficiently competitive) or invested their increased profits in some other enterprise.

National security has to be considered as well. Open borders can mean easy access for terrorists. However, amassing troops at the border to prevent any illegals from entering would draw forces away from international hotspots like Iraq, Afghanistan, and North Korea.

Then there are the cultural effects. No one knows how American society would change due to the influx of immigrants who may decide not to assimilate. Past American history shows this hasn't happened. However with the rise of organized ethinic interest groups and Leftists who feel America is evil and has to be changed, assimilation may not happen as readily as it used to.

"One Man's Verdict on Bush's Illegal Worker Plan"

"Bush Immigration Reform--No Reform at All"

[Linked to OTB's Beltway Traffic Jam]

Capitalist Goodies

Ensight is hosting this week's Carnival of the Capitalists.

Net Doesn't Change Economics

Robert Murphy takes on critics who think free trade ideas are somehow obsolete because of the Internet.

"Free Trade and Factor Mobility"

New CotC

Misty is hosting this week's Carnival of the Capitalists. If I were a conspiracy nut I'd think Glenn Reynolds has something against me (What, Glenn? What?). He linked to this week's CotC and the one from 12.15.03, but not the weeks Bejus Pundit or TAM hosted it. I'll just chalk it up to bad luck and the mountains of e-mail Glenn gets daily. How he can go through it all, I don't know. Let's see what happens when TAM hosts the Carnival of the Vanities at the end of January.

Carnival of the Capitalists

This is the last Carnival of the Capitalists for 2003. What a toppsy-turvy year in the economics/business world it was. President Bush got more tax cuts passed and continued to allow the Congress to spend, spend, spend. Also, through much of the year, the economy looked to be a heavy weight on Bush's re-election chances. But in the second half of the year, things perked up. The economy grew at a rate not seen in 20 years. The stock market has rebounded, while everyone waits for jobs to be created. What will happen in 2004? Here's wishing all of you untold riches (both material and non-material) in the new year. I apologize in advance for any and all errors or misconceptions of posts. Next week's CotC will be hosted by Misty at A Special Kind of Stupid.

Let's get this party started.

Josh Cohen has given up on NASA and sees it as a waste of tax dollars.

Da Goddess has found the real reason behind an Australian kangaroo culling.

Dean Esmay found a union he wouldn't mind joining.

J. P. Carter gets the "Most Clever Post Title Award" for his "Collecting Dead Presidents from Dead Peasants." It looks at a practice where an employer gets life insurance benefits from dead employees.

Todd at A Penny For... can help you find some good business books to help pass the time during the post-holiday doldrums.

Karun Philip is about to start his Knowledge Capital Project. This innovative, grass roots idea has real promise.

Robert Prather points out something good in the recently passed Medicare bill: Health Saving Accounts "get the same tax treatment as a regular insurance policy -- meaning a company can expense it and the employee doesn't have to pay taxes on it."

For you students of technical economics, Steve Verdon got a new book for Christmas. Firms aren't the "profit maximizers" you thought they were. This is due to the incentives of employees.

Joe Kristan offers some end-of-the-year tax ideas. (As with all things legal and tax-related, check with you accountant or financial adviser.)

Professor Bainbridge looks at food regulation in light of the Mad Cow situation.

Barry Ritholtz sees 2004 as a test for supply-side economic theory.

Aunty Goob rips apart a news story on pollutants found in people.

Rob of BusinessPundit sees the business benefits of running.

Micha Ghertner at Catallarchy.net points out that capitalism's critics have to do more than use platitudes.

Mike Pechar, the Interested-Participant, posts on the rise of the gift card and its effect on after-Christmas sales.

Tony Gill writes about Canada's new Ministry of Public Safety and Emergency Preparedness and how it incorporates health emergencies (unlike the U.S. Department of Homeland Security).

Lesjones applies the Law of Demand to prescription drugs.

And last, but not least, Kevin points out that Howard Dean, M.D. is already calling for a federal bailout of the cattle industry in light of the Mad Cow situation.

Still Waiting for CotC?

I'm home, but due to the Packers sneaking into the playoffs (thank you, Arizona) I'm on the phone and Net trying to get tickets for next Sunday's game. Wish me luck.

UPDATE: My patience paid off. After a little over 1 1/2 hours of constant redialing, I got through and got my tickets. What a way for a big Green Bay Packers fan like me to start the new year. The CotC is on its way.

Another CotC Reminder

You still have plenty of time today to get in your entry to this week's Carnival of the Capitalists. I'll be at a family Christmas gathering today so the CotC won't be up until late this evening. So far the entries are of high quality. Now, I also want a high number. Any recent economic or business related posts are fair game. Just send the URL to capitalists -at- elhide.com.

Not Over Yet

Just because Christmas is over, don't think that me and other retail workers will be taking it easy. Schools are out until after New Year's Day and many workers take their last few days of vacation for the year. Add that to the large numbers of gift cards given this Christmas and the inevitable gift returns, and retailers will be quite busy for a while. I won't be taking a breather until the middle of January when the post-holiday doldrums set in. It won't come too soon.

"Results Mixed, Stores Await a Final Burst of Shopping" [via Drudge]

Mad Cow Effects

It may be a short trading day on Wall Street, but resturant stocks are getting hit because of the Mad Cow scare. But there's a possible bright side:

But some analysts said there could be a long-term benefit for restaurants as beef prices slide from recent highs.

Japan and South Korea, the top two buyers of U.S. beef, along with several other countries, have already halted imports.

"That will increase domestic supply, which is good for pricing," said Matthew DiFrisco, analyst with Harris Nesbitt Gerard.

On the futures market cattle futures are down sharply. No surprise there.

"Restaurant Stocks Drop on Mad Cow Scare"

CotC Reminder

This is a reminder that I'm hosting the last Carnival of the Capitalists for 2003. Fitting posts would include "year in review" or "look ahead" posts. Do you have an analysis of the ups and downs of the stock market? Send them my way? Do you know what a major marketing trend was this year? Let me have it. Do you know of a hot company or sector we should all be watching in 2004? Send me that too. Do you know who'll win the Nobel Prize in economics next year? Gimme, gimme, gimme. Of course, I'll accept any and all economics and business-related posts. Send all entries to capitalists -at- elhide.com.

Black Christmas for Beef Producers

The first U.S. case of Mad Cow disease has been found in Washington state. Japan, Singapore, and South Korea immediately banned U.S. beef imports. It was only a matter of time before the disease reached the U.S. Let's hope the beef industry prepared for this potentially devastating blow.

Mad Cow is related to Creutzfeldt-Jakob disease [also here], a devestating neurological disease where 90% of its victims die within one year. Scientists believe both diseases are caused by prions, proteins folded in such a way as to disrupt the brain. There is no known treatment.

As for me, I'll be enjoying some nice beef roast at my family's Christmas dinner.

"First U.S. Mad Cow Case, Buyers Ban Beef Imports"

"USDA Refused to Release Mad Cow Records"

Color Scheme

James Joyner has an insightful post on the homeland security color threat scheme and government bureaucracy:

Since the inception of the system, we have always been in either Elevated or High status. Because the level is set by a bureacracy, it will likely always be either Elevated or High. No bureaucrat is going to be willing to take the risk of lowering the level to merely Guarded or--Heaven forfend--Low because, if they do, and an attack happens, heads would roll. Likewise, we're unlikely to see the level raised to Severe unless we're literally in the midst of an attack and already know it. No one is going to be willing to call Red Alert and then not have an attack happen.

"Level Orange"

CotC Now Available

The Bejus Pundit hosts this week's Carnival of the Capitalists. Yours truly will be hosting next week. Get those economic and business posts in. I'm really interested in takes on the Christmas shopping season. Was it good in your neck of the woods or lackluster? Notice any trends? Another good topic is last-minute tax advice or important changes for 2004. Of course any subject-related posts are welcome. Tell your friends, family, and friends' family about the CotC. I want to be really busy on Sunday collecting all the entries. Send all entries to capitalists -at- elhide.com.

Bush Benefits from Improving Economy

An AP poll finds public support increased for President Bush's handling of the economy. Right now, 55% approve and 43% disapprove. Last month, 46% approved, while 51% disapproved. The first thing to notice is how quickly public opinion moved. Second, other than dropping the steel tariffs, Bush hasn't done anything in the past month to deserve praise. In fact, the signing of the prescription drug expansion to Medicare will do long-term harm to the economy. What probably did more to boost people's spirits was the good economic news from the government and the rise in stock market indices [Dow Jones, NASDAQ, S&P 500] and a decrease in gasoline prices.

This is another reason to discount a poll from a rationally uninformed sample.

"AP Poll Finds Bush Getting Good Marks" [via Power Line]

CAFTA

The Bush administration's great efforts to get free trade agreements makes it even more frustrating when they try to buy votes like they did with the steel tariffs.

"U.S. and 5 Nations Work on Free Trade Pact" [via PoliBlog]

Austrian Econ Apparel

I want a t-shirt like this to match my Reagan one.

"What the World Needs Now"

Econ Links. Yummy!

samaBlog hosts this week's Carnival of the Capitalists.

Supply-Side Spokesman

Bob Bartley died of cancer at the age of 66. He made his mark as the editor of the Wall Street Journal's editorial page. His advocacy for tax cuts influenced Republican Presidents for over 20 years. Fred Barnes said, "How many other editorial pages can say they created the economic policy for an administration and for an era? Without The Wall Street Journal editorial page, there is no supply side economics." It's pretty easy to argue that Bartley's editorial page was the most influential in the world. That stems from Bartley's belief in the benefits of freedom and its relentless pursuit.

Godspeed, Bob.

"Robert L. Bartley"

"Robert L. Bartley, Who Led Journal Editorial Page, Dies at 66"

"Robert L. Bartley Dies; Influential Editorialist"

Revised GDP Numbers

Steve Verdon points out that due to adjustments on how the government measures the economy third quarter 2000 GDP growth was negative. There goes the idea that President Bush led the country into a recession.

"Bureau of Economic Analysis Revises 2000 GDP Numbers"

Population Bomb a Dud

Paul Erlich and those that feared a world where we run out of room must be happy with new U.N projections. For me, it's just further proof that capitalism solves leads to a solution. For some reason when a country gets richer they don't have as many children.

"World Population to Level Off"

Good Business Weblog

Oliver Willis and Jimmy Varghese have a business weblog called BoomNation. There are good, short, pithy posts there.

Iraq's "Odious Debt"

James Joyner linked to my post on Iraq's debts. He was making a similar point in October, but also brought the idea of "odious debt" onto the table.

Politically speaking does anyone really believe U.S. critics like France will consider any of Saddam's debt "odious?" Doing so would help the U.S. in their rebuilding efforts, and the only thing France cares about it putting up as many roadblocks in front of the U.S. as possible. For Chriac et. al. global gamesmanship is more important than successfully building a free country in Iraq.

Iraq's Debt

Good News

The unemployment rate dropped to 5.9%

"Jobless Rate Declined Again in November, to 5.9%" [via Balloon Juice]

UPDATE: Steve Verdon's post asks a good question: "has something changed in the economy that means employment will take longer to rebound and the rate of growth will be smaller?"

Could Paul Krugman get off his Bush-bashing horse and tackle this question? He is a better economist than political hack columnist.

"Unemployment Lower for Second Month"

Behavior Matters

Here's a stunning quote from liberal researcher Isabel Sawhill on how to reduce poverty:

If people did a few things -- graduated from high school, got a job, and delayed having a baby until they married -- our analysis shows that would eliminate a huge chunk of poverty in this country, and that would be far more effective than anything we could feasibly do through the welfare system alone.

"No Slack" [via Catallarchy.net]

Better Check Those Numbers

Steve Verdon ran Duck, M.D.'s budget numbers. They don't add up. With some generous assumptions Howard Dean's spending plans would increase the deficit. Duck, M.D. hasn't even been elected yet, and he's already broken one of his campaign promises.

Steve doesn't even include the effects of Duck M.D.'s "re-regulating," of rescinding Bush's tax cuts. Both would prevent economic growth which would lead to greater deficits (barring the miracle that Duck, M.D. would actually cut non-defense spending).

"Democrats and the Deficits: Dean"

Lessons from Adam Smith

In his column last week, Declan McCullagh points out that the Bush administration has done more for protectionism than just slapping tariffs on imported steel and Chinese underware. They also went after cheap Korean memory chips. Somebody send the White House a copy of The Wealth of Nations.

"Adam Smith's Lessons for IT"

Steel Tariffs Still Kicking

Maybe dumping the steel tariffs aren't "all but set in stone" like I thought yesterday. The AP reports President Bush is still weighing his options. He might decide not to get rid of all the tariffs he imposed last year. Keeping some wouldn't make the EU happy and would probably result in retaliation. I don't know what political calculations Bush is doing. If he doesn't drop the tariffs there will be a trade war just when the U.S. economy is coming out of its slumber. Domestic steel manufacturers would be hurt, but domestic steel users could face a steel shortage. We will know the President's decision later this week.

"Advisers Urge Bush to Drop Steel Tariffs"

The Bush Boom

Factory growth is at a 20-year high, people are being hired, and construction remains strong. Dare I say it? The recession is over and a new boom has begun.

"US Factory Growth Fastest in 20 Years, Spurs Jobs" [PoliBlog]

Bush's Beneficial Quirk

The slow crawl of government may be pretty timely for President Bush's re-election:

Mr. Stanley pointed out that while the Bush tax cuts this year were retroactive to Jan. 1, the tax tables could not be changed until July 1, after the cuts were adopted. As a result, next spring, consumers will receive tax refunds fattened by federal over-withholding during the first six months of this year. That might make taxpayers feel better, and if they spend the money, it could buoy an already consumer-driven economy as the campaign moves into high gear.

"Change in Consumer Confidence and Thus the Presidency"

Bush Steel Tariffs: R.I.P.

Rolling back the steel tariffs are "all but set in stone" according to unnamed Bush administration officials. Yeah!

"Bush Likely to Repeal Tariffs on Steel Imports"

"President To Drop Tariffs On Steel"

UPDATE: Stephen Green notes, "Free trade just doesn't seem to be in Bush's blood."

"Bad Instincts" [via OTB]

Satisfy Your Econ Cravings

Bill Hobbs is hosting this week's Carnival of the Capitalists.

Stop the Insanity!

It's bad enough that AmeriCorps even exists. Now, it's got itself a budget increase. This is how bad the Bush administration is doing on domestic budget spending:

The money represents a $170 million increase over AmeriCorps' 2003 budget. And it is at least $99 million more than either the House or the Senate had previously indicated they would grant AmeriCorps in 2004. Both the funding level and the increase are the highest in the corporation's history.

"AmeriCorps Receives Major Boost" [via The Corner]

Black Friday

I made it through Black Friday without any injuries to me or customers. In fact, it didn't seem as busy as it was (my boss was very pleased with the sales). I also know, that this is just the tip of the iceberg. My store has historically gotten busier the closer we get to Christmas.

Last year, I posted some tips to make last-minute Christmas shopping a little smoother. Almost all of them can be applied already, less than one month from Christmas.

Bush May Dump Steel Tariffs

It looks like some sense has come to the Bush administration on those stupid steel tarrifs.

Speculation mounted on Friday that Washington will scrap or roll back controversial steel tariffs after it sought and obtained an effective delay in retaliatory sanctions by countries opposed to them.

...

Officially, Washington wanted the delay because it had not been expecting the meeting to take place before Dec. 10, the legal deadline for WTO states to ratify the court decision.

"The president has said he would make a decision in a timely manner and this action will provide additional time, and the ongoing review will continue," said White House spokeswoman Claire Buchan.

But the delay comes amid increasing signs that President Bush's administration is considering ditching the duties, initially for up to 30 percent, which it imposed in 2002 to help defend the country's struggling steel industry against cheap imports.

Ending the tariffs 16 months ahead of schedule could spark a political backlash against Bush in next year's presidential election in the pivotal steel-producing states of Ohio, Pennsylvania and West Virginia.

But key Bush advisers have concluded the tariffs are causing more harm than good and that lifting them would boost Bush's standing with steel consuming industry, another important constituency, political sources say.

"Speculation Mounts Bush May Give Way on Steel"

Outsourcing and Entrepreneurial Error

Glenn Reynolds points out that Dell Computer is moving some of its tech support back into the U.S. because "customers weren’t satisfied with the level of support they were receiving." Because no one has perfect insight into the future, businesses have to be allowed to experiment with new ways of doing things. Dell tried outsourcing their tech support to India. It hasn't met the needs of their customers so it was brought back to the states. Maybe in the future Dell will develop ways to make Indian tech support better for customers and cheaper for the company. For now they haven't figured that out.

Experimentation like this is one way the free market better satisfies the desires of consumers (customer feedback that's really listened too is also extrememely important). The possibility to err is vital in channeling resources to their most beneficial ends.

Austrian economist Israel Kirzner writes,

In fact, the one really valuable feature of unprofitable entrepreneurial endeavor lies in its crucially important role in stimulating profitable entrepreneurship. Only in a society where entrepreneurs are free to make errors, can we expect an outpouring of entrepreneurship to lift its economy to new, hitherto unglimpsed, heights of prosperity. Only where potential entrepreneurs are free to follow the lure of profits as they see them, will there be the unleashing of entrepreneurial vision, daring, and judgment that creates profits in fact-and in so doing, creates new, more valuable ways of utilizing resources.

From errors, entrepreneuers re-evaluate how they use their resources. In Dell's case, while outsourcing tech support saved them labor costs, it wasn't keeping their corporate customers happy. With the easy substitution of computers and their life cycles being so short Dell knew unhappy customers would result in lost future sales. Based on the feedback from this failed experiment the company knows how to better allocate scarce resources to meet their customers' needs.

"From Outsourcing to Insourcing"

Great Econ Posts

The latest Carnival of the Capitalists is up hosted at Truck and Barter. I went straight for Professor Bainbridge's examination of the mutual fund scandal. The most glaring bit of malfeasance mentioned by the professor is the mutual funds' violation of the agreement between money manager and investor. This can create distrust turning the business into a lemons market for mutual funds. For me, the mud thrown on the industry just makes Vanguard look that much better.

Bainbridge has earned himself a place on the TAM blogroll.

There's more there to sink you capitalist teeth into.

"Alex Tabarrok on the Mutual Fund Scandal"

An Economic Fable

Gene Callahan has written one great fable on the benefits of trade. After reading it you'll understand that fears of lost manufacturing jobs are unfounded. The key to wealth is market being free to use scarce resources to satisfy people's desires.

"The Nation That Lost Its Jobs, But Got Them Back" [via Deinonychus Antirhopus]

Attack of the Big Government Conservatives

Late tonight the House will vote to add prescription drugs to Medicare. The cost is estimated at $400 billion, but since when has a government program been anywhere close to its estimate? The GOP leadership and the White House want this bill passed, but it's just not good policy. There is a group of Republicans fighting this massive increase in an already massive federal entitlement. Since the House will be working late, Congressional offices should be open too. The Capitol switchboard number is 202-224-3121. Just tell the operator you Congressman's name or zip code, and they'll connect you to the right office.

"A Senior Moment"

Jobless Claims Down Again

Good economic news for the President. This from Reuters:

First-time applications for unemployment aid fell 15,000 to 355,000 in the week ended Nov. 15, the Labor Department said, well below the 365,000 expected by Wall Street economists.

"These are good numbers," said Gary Thayer, chief economist for A.G. Edwards and Sons. "It suggests that the labor markets are improving and that the economy is, indeed, getting a little bit healthier."

How will Bush bashers spin this to make it sound like the economic sky is still falling?

"U.S. Jobless Claims Fell 15,000 Last Week"

Bush Still Bad on Trade

The last thing our economy needs while working its way into a decent recovery are new trade restrictions. But that's just what the Bush administration is doing. Limits on import growth will be implemented as a sop to uncompetitive U.S. textile factories. I hoped that the WTO's ruling against Bush's steel tariffs would have let the President reverse his trade stance with some political cover.

The affect on the world economy was immediate. The dollar dropped to a record low against the euro. That means U.S. buyers don't have as much buying power of European goods as before this decision. American consumers' choices have been restrained in exchange for an attempt to save some jobs.

Let's put this on a personal level. The U.S. government has no business from whom or where I buy my clothes. If an American company can produce a good product for a good price, then they'll have my business. If I can get better and/or cheaper stuff from a place like China, then so be it. This is how a free market works. This institution, not intentionally designed by any single mind, has created more wealth and a better quality of life to more people than any other in human history. Messing with it ends up hurting everyone.

"U.S. Announces Limits on Apparel Imports From China" [via Drudge]

New CotC and Mutual Fund Scandal

There are some really good posts in this week's Carnival of the Capitalists hosted by Professor Bainbridge. Sadly, there's nothing from TAM this week. However, read this post by Chris Noble on the mutual fund scandal. He responds to some bad writing by a MSN Money columnist.

With [open ended] mutual funds, shares are created when the purchase is made and destroyed when the shares are sold. There is no direct harm to another investor. Indirect through higher fees and operating expenses, maybe. But not directly.

"Mutual Fund Misinformation"

Mises Institute Politics

The LibertarianJackass has little problem with the Mises Institute promoting a paleo-libertarian political agenda under the name of economic study. He writes,

Talk about price theory all you want, but don't touch the fundamental issues facing society today ("national defense," galloping statism, etc.)?

My main complaint with the Mises Institute is their straying from economic analysis into defending the South in the Civil War and beating the hell out of Lincoln. DiLorenzo actually compared Lincoln to Zimbabwe's dictator Robert Mugabe. As a learning institution, they have done the most of anyone in the world to keep Ludwig von Mises' ideas alive. For economics students and lovers of liberty, that's a great accomplishment for which they deserve tremendous praise.

"The Austrian Economics Hoopla"

Kling's Take on Austrian Economics

Arnold Kling is confusing the Austrian School of economics with the paleolibertarianism of the Ludwig von Mises Institute and Lew Rockwell. Kling comments:

The reason that I only scored a 78 is that I took the title of the quiz literally ("are you an Austrian"), so I answered with my own beliefs, knowing that they diverged in some cases with the Austrian School. For example, I subscribe to the quaint notion of national defense. When tyrants and would-be tyrants ask about our President, as Stalin once asked Churchill about the Pope, "How many divisions does he have?" I would like the answer to be "more than enough to smash you!" The Austrian School thinks that you do not need a government to provide national defense. The Mises.org weblog is as eager as any Dean Democrat to see the U.S. fail in Iraq.

But the Rothbardians aren't the only branch of the Austrian School. From my observations, most non-Rothbardians focus more on economic research than libertarian political economy.

For a response to Kling's article, Mateusz Machaj has a post on the Mises Economics Blog.

"The Sect of Austrian Economics"

UPDATE:

Charles Oliver took the Austrian quiz and notes, "Actually, it should be how Rothbardian are you? Mises, Hayek, Kirzner and many other Austrians would have failed to get 100% if they took this quiz."

Catallarchy.net also has a few posts on Kling and the quiz.

"The Ubiquitous Quiz"

"Burn the Heretics"

Read and Be Enlightened

The Accidental Jedi hosts this week's Carnival of the Capitalists.

UPDATE: James Joyner's link to a story of cities chasing young smarties dovetails nicely with my entry in the CotC.

"Brain-Gain Cities"

Bartlett on Flat Tax

Bruce Bartlett has a weblog. Nice. He points out that Paul Bremer didn't actually institute a flat tax in Iraq. What he did was put a ceiling on individual and corporate rates of 15%. That doesn't prevent future Iraqi governors from creating a progressive tax scheme with a top rate of 15%. Bartlett then looks at the effects of a flat tax on Estonia and Russia. He also points out that Arnold Schwarzenegger is eyeing a flat tax for California's budgetary ills.

"Flat Tax"

Another Book Source

In what should help make Downtown Milwaukee even more attractive to young professionals, a new bookstore is opening up in the Third Ward. Voss Books is expanding from its Racine location. To add a little 21st Century tech to the story, owner Kelly Voss said, "I probably would not have purchased that bookstore without the Internet."

"Racine Bookshop Expands to Third Ward"

Milwaukee's Youth Movement

In the last five years, Milwaukee has gained college-educated people aged 25-39. This is an important demographic because their high education adds to the human capital of the local economy. Also, this group is at the age where they start families which could add to the area's population.

Milwaukee has become more hip for recent college graduates. In the downtown area, old buildings are being gutting and remodeled at lofts. Entertainment institutions like the Milwaukee Art Museum and the Milwaukee Brewers have been updated with new buildings. And the city has moved passed its aura of being only a place of Rust Belt manufacturing jobs.

As a state, Wisconsin isn't doing well keeping college-educated young people (broadly defined). She lost over 11,000 from 1995-2000. The state is doing better than others at keeping them, but can't attract them from other states. That's a sign to lawmakers that the state's business climate isn't healthy. In order to have good jobs young people want, business has to have a friendly enviroment conducive to job creation. Wisconsin has a long way to go.

"Milwaukee Gains Young Professionals"

Oliver's Selective Quoting

Oliver Willis quoted this portion of an AP story on company job cuts:

Job cuts announced by U.S. companies more than doubled in October from the previous month, providing more evidence that the nation's economy is in a period of jobless expansion, according to a report from an outplacement firm.

Chicago-based Challenger, Gray & Christmas Inc. said Tuesday that in October companies announced plans to eliminate 171,874 positions, compared with 76,506 jobs in September. It was the highest monthly level since October 2002, when 176,010 job cuts were announced.

What he failed to mention is that these are just planned job cuts. They haven't actually happened yet.

Challenger, Gray & Christmas's monthly report focuses on companies' planned cuts, not actual reductions. The data is based on tracking figures from the news media and the Securities and Exchange Commission.

"Job Cuts Announced by U.S. Corporations More Than Double in October"

Google IPO

They're months away from a possible IPO and a publicly-traded Google is the buzz of the financial world. That's because it would be the first big post-tech bubble IPO. With such hype and inability of the company to prevent competitors from entering the only direction Google stock could go is down. How can a company justify a $15 billion valuation on $150 million in profits from being a text ad agency?

"How Good is Google?" [via blogdex]

An Economics Feast

This time of the week is really good for reading econ material. David Warsh publishes his latest Economic Principals column and there's the always insightful Carnival of the Capitalists. First, Warsh doesn't lament the purchase of Boston-based Fleet Bank by Bank of America but uses the event to illustrate economic growth and change. He writes,

The thing about successful cities, as Jane Jacobs pointed out long ago, is that they generate their own renewal. New work grows out of old. And Boston does better than most because, since its very beginnings, it has been a center of education, a potent source of both new ideas and high-skilled talent.

"Everything Must Go"

---

There are some real goodies in the CotC. TJ, inspired by the Friendster VC funding, looks at the online dating market. He tries to make the case that Friendster "might be worth $135 million."

sugarmama comments on job opportunities for those with strange names.

---

And I can't pass up the opportunity to comment on Paul Bremer instituting a 15% flat tax in Iraq. Now, Russia and Iraq are sensible and fair to taxpayers than the U.S. It also easier for Iraq to start from scratch with a flat tax than it does in a country like the U.S. that has oodles of tax rules and constituencies willing to lobby hard to protect them. The flat tax is sound economic policy that will help turn Iraq into the Middle East's version of Hong Kong.

"U.S. Administrator Imposes Flat Tax System on Iraq"

DIY Economist

Gene Sperling has an outstanding article on some economic indicators anyone can look. Even better, he has links to the indicators so you don't have to spent a lot of time at Google.

"The Insider's Guide to Economic Forecasting" [via Tom Ehrenfeld]

Meg On Friendster Funding

Meg Hourihan on Friendster's valuation by VCs:

Hello? Did we totally forget what happened just two or three years ago?! Sure, Friendster is cool, but eyeballs and traffic do not a (huge) business model make. Remember? We already learned this! Obviously this is another deal with a valuation based on potential and not actual revenue (or did Friendster's revenue increase from ~$4 million to ~$17 million in the past two months?), and sure, there is potential there. But I hardly think there's $53 million worth. Earth to VCs: cut it out, before you force another crop of companies to grow too big, too fast, all to recoup an investment you shouldn't have done in the first place.

"How Soon We Forget"

Wild VC Spending

Near the end of the NY Times story on Microsoft possibly buying Google, there's this:

Partly in response, Google continues to explore new businesses to extend its reach into new markets and to find new sources of revenue. One such effort included approaching Friendster, a Silicon Valley social networking company that has recently grown rapidly, according to an executive briefed on the talks. Friendster has instead received a $13 million investment from a group of venture capitalists led by Kleiner Perkins and Benchmark Capital, an action that was first disclosed in The Wall Street Journal.

"Microsoft and Google: Partners or Rivals?" [via Drudge]

Strong Being Investigated

Elliot Spitzer's Wall Street investigation has reached Wisconsin where Richard Strong, Chairman of Strong Capital Managment, is accused of making improper trades in his mutual funds. Whether he did anything wrong or not index funds where fund managers aren't needed look better and better.

"Strong Ready to Step Down if 'Necessary'"

The Bush Recovery

The economy had a good third quarter. GDP rose 7.2%, the highest rate since 1984 (the year a GOP President got re-elected); initial jobless claims fell 5,000 last week, and

Unlike the past two years, any boost in the economy wasn't solely dependent on business spending. Firms finally started spending again which suggests they'll hire more workers and sustain the recovery. Housing growth remains strong too. All this good news could be harbinger for a good Christmas shopping season.

Steve briefly comments.

"Economy Rocketed Ahead in 3rd Quarter"

"Economy Grows at 7.2 Percent Annual Rate in Third Quarter"

Universal Health Care Means Gov. Monopoly

Steve Verdon points out an important part of any universal health care plan:

This is why with universal coverage legislation you see in all the legislative mumbo-jumbo a section which outlaws private insurance. The universal insurance program offered by the government is basically a big pooling equilibrium. So if private insurance is not outlawed, then the government is left with only the high risk/high cost people. It should also be noted that in this situation (i.e., pooling equilibria), the low cost individuals are subsidizing the medical care for the high risk/high cost individuals.

"Moral Hazard, Adverse Selection and Insurance"

SEC's Cold Shoulder

The SEC has frozen the accounts of an ex-FleetBoston employee on grounds that insider trading took place around the announcement of the company's merger with Bank of America. Here's the kicker:

[Guillermo Garcia] Simons has apparently not worked for FleetBoston within the past year.

So, because the SEC was afraid "that the assets could leave the country" they got a judge to freeze an entire family's accounts. This isn't justice. It's called being guilty until proven innocent.

The lesson to be learned is not to act on any hot tip even if you think the tipster isn't an "insider." Acting on it could set you up for a showdown with the SEC. Also don't buy any financial instrument in a large enough amount to garner notice.

"SEC: Ex-Employee Knew of Merger" [via Eugene David]

Cold, Hard Cash

Chris Noble (not Nobel which would be very fitting) is hosting this week's Carnival of the Capitalists.

Basic Economics

David Bernstein shoots down a canard used by Leftists opponents of school vouchers.

"It's Called Supply and Demand"

Free Trade With Australia

The collapse of free trade talks in Cancun last month isn't stopping the U.S. and Australia from hammering out an agreement. Like Cancun, the sticking point is agricultural products, especially Australian beef.

"U.S., Australia Agree to Fast-track Free Trade Talks"

Banning Wal-Mart

It will be hard for Gov.-elect Schwartzenegger to get California's economy moving when local governments do ridiculous things like banning Wal-Mart from opening grocery stores.

"Oakland, California Bans Wal-Mart Supercenters" [via Drudge]

Money, Money, Money!

Jay Solo is hosting the second Carnival of the Capitalists. There are a bunch of good posts there.

From this week's CotC, I've discovered A Penny For..., a Milwaukee-based weblog. The writer posted on a presentation from the local indoor soccer team.

Score One for Tax Cuts

Hold the presses! Someone thinks this year's Bush tax cuts boosted the economy and got it printed in the NY Times. I would declare it the end of the world if the writer were Paul Krugman.

Edmund Andrews writes,

To the surprise of many naysayers, economic data from the past several months suggests that the $350 billion tax-cut package may indeed have jolted the economy.

Congress approved the tax-cutting bill in late May, and consumer spending jumped at annualized rates of more than 12 percent in July and August. Business investment climbed modestly, and manufacturing activity is picking up as well.

Based largely on the unexpected strength in consumer spending, economists believe the economy grew at an annual rate of at least 6 percent in the quarter that ended Sept. 30.

The impact of the tax cuts is already fading, most economists believe. Even though the lower tax rates will continue, the economic jolt comes from the initial cut. After that, the economy simply grows in line with the overall rise in wealth.

"Spotted: Evidence That Tax Cut Worked"

School Breakfasts

Like many states, Wisconsin is under severe bugetary pains. So, what does Gov. Doyle want to do? Have every school provide breakfast for kids. It's not just conservatives like myself who question further government intrusion into families' lives. School administrators are questioning the idea.

And Dave Schmidt, superintendent of the Waukesha School District, said his district already provides meals where the need exists, at four schools that have children from low-income families who tend to benefit most from the program, he said. But the other 20 schools in the district don't serve a morning meal because it's not needed, he said.

"It ought to be driven by what a school needs and not by the government," Schmidt said. "Any time you bring a new program into a school, it takes time, people and money" away from serving other needs, he said.

John Box, superintendent of Mequon-Thiensville School District, said parents and teachers never told him that children were coming to school hungry.

"It isn't something we would consider a priority," Box said.

Elizabeth Burmaster, the state superintendent of schools, also questioned whether all schools needed to supply a morning meal.

Burmaster praised Doyle for bringing public attention to the issue, but added, "please understand that I am not calling for mandatory school breakfasts."

Carnival of the Capitalists

The first ever edition of the Carnival of the Capitalists is now at Business Pundit. If you want to read business, finance, and economics posts the CotC is your thing.

Carnival of the Capitalists

Krispy Kreme Invades England

My how marketing is different when an American sweet goes British. Krispy Kreme opened its first store in England at Harrod's. In the U.S. one of these golden glazed goodies (the crack cocaine of junk food) goes for about $0.75 cents. Across the pond, the tactic is to make these donuts into a Starbucks-type gourmet item with an upscale price. Each donut there sells for $1.49.

"Krispy Kreme Tempts British Sweet Tooth"

More on the Myth

Cold Spring Shops responded to my post on the 50% divorce rate myth. That got me to dig out my copy of Thomas Sowell's The Vision of the Annointed where I first encountered the myth's refutation.

In a given year, the number of divorces may well be half as large as the number of marriages that year, but this is comparing apples and oranges. The marriages being counted are only those marriages taking place within the given year, while the divorces that year are from marriages that took place over a period of decades. To say that half of all marriages end in diveroce, based on such statistics, would be like saying that half the population died last year if deaths were half as large as births. Just as most people were neither born nor died last year, so most marriages did not begin or end last year.

According to census data for 1992, 11 percent of all adults who had ever been married were currently in the status of divorced persons. If 50 percent overstates the divorce rate, 11 percent does not include people who had been divorced but were now remarried, or those who were never married. However, these census statistics are relevant to the claim that traditional marriages are disappearing, for remarriages are still marriages. Married couples outnumbered unmarried couples by about 54 million to 3 million. (p. 59)

Nobel Prize in Economics

Two statistical whiz-bangs won the Nobel in economics. I am not a statistical whiz-bang so I will withhold judgement.

"Press Release: The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel 2003" [via Steve Verdon]

UPDATE: Tyler Cowen has some links on the winners' work. He writes, "Very good picks, economists use their contributions all the time, note that their work is of less interest to the general public than is usually the case." Quite the understatement. [via The Knowledge Problem]

The Paradox of Voting

Here's something interesting (and completely unrelated to Plame/Wilson) from Will Baude:

I've recently heard a comment to the tune that Libertarians who vote for a Libertarian presidential candidate are "throwing their vote away," or hurting the major party that they consider to be the lesser evil. This isn't so.

Voting Libertarian in last election (or next election) is no more throwing your vote away than voting Democrat or Republican would have been. This is because the election did not come down to one vote (and, given the nature of the recount, may not have come down to any votes at all). The statistical chance of any single vote having an outcome on the presidential election is 0.000%. It simply doesn't matter.

The question that comes out of this intellectual run-around is why people vote at all? Baude has an explanation:

That is, we vote for Candidate A over Candidate B (or abstain altogether) because we feel like it, not because we have marshalled some careful analysis of whose positions are more likely to make the world a better place.

"Throwing it Away"

[Note the paradox here has little to do with the game theory puzzle.]

The Clark Economic Plan

Steve Verdon on Weasley Clark's economic plan:

Lets also be clear here. What Clark is talking about is deficit spending. Sure, he can talk about repealing Bush's tax cuts, but there will still be a deficit and he wants to increase spending. So if the deficit is say $400 billion, and half of it is due to the tax cuts. Further, Clark wants to roll back the tax cut, but at the same time spend an additional $100 billion dollars, what he is saying is he finds a $300 billion deficit reasonable.

Now, what is the difference in terms of percentage of GDP between a $300 billion deficit and a $400 billion deficit? Not much. Assuming an $11.5 trillion GDP, the difference is .009. Is that something to get worked up over?

Airports Seeding Growth

Just as railroads created (and destroyed) cities simply because of where they went, airports are driving the growth of cities. Sprouting up around the Denver International Airport and Washington's Dulles Airport are office parks and subdivisions.

"New 'Cities' Springing up Around Many U.S. Airports"

Lindsey on Iraq Costs

Larry Lindsey got fired from his White House job because he did a poor job talking about a sluggish economy that has finally started to perk up. It wasn't because he was stupid. His USA Today column shows he's a pretty bright guy. He predicted that the Iraq War would cost 1-2% of U.S. GDP. It turns out the cost could be about 0.8% for both Iraq and Afghanistan. Lindsey then puts this cost in perspective:

Each year American households spend about 1% of their income on alcoholic beverages and another 1% on tobacco products. We spend about 0.7% of our money on cosmetic products. In other words, our combined operations to combat terror in the Middle East cost a bit more than we spend on makeup and shampoo and a bit less than we spend on booze or tobacco.

"Iraq Costs Require Some Perspective" [via Balloon Juice]

The Purpose of College

James Joyner comments on my thoughts on the future of higher education:

I've long thought that if college is to exist primarily as a job training center for the business world, it not only will but should fail. That's never been the role of the academy and, frankly, it is amazingly unsuited for it. Professors are subject matter experts in their field but, at least in the "pure" academy, they are primarily theorists. Their job is to educate, not to train. Those are vastly different missions.

This distinction has become rather difficult to maintain in an era when, in order to be more "relevant" and compete for dollars, most colleges and universities have entered into the realm of vocational-technical training that was once reserved for trade schools and community colleges. Technical skills that were of a professional nature, notably engineering and architecture, have long been housed under the rubric of the academy. But, gradually, such things as nursing, criminal justice, marketing, hotel and restaurant management, and similar purely job training programs began to infiltrate.

They are simply not academic subjects. The problem with these fields, from the perspective of the academy, is that they are highly practical and best learned by hands-on experience. The sort of people who traditionally obtained a Ph.D. are almost certainly unqualified to teach most of these subjects, not only because of a different mindset but also a different career progression. The way to learn to manage a hotel is to work one's way up the food chain, not devote a decade to post-graduate education in theory. So, either the professoriate for these fields have to be non-academics--in which case their standing within the academy is that of a lower caste--or they will be people with a foot in both camps, usually with a rather dubious Ph.D. earned late in life and without the intellectual commitment usual in those committed to the life of the mind.

Right now, I see a college degree as useful to employers as a sorting mechanism. But if undergraduate scholarship continues to be watered down, employers will look for proof of training in specific skills. That's where innovative for-profit and non-profit schools could make a serious impact and change higher education.

"College of the Future"

The Future of College

Arnold Kling has a vision of the college of the future:

Colleges today are in a position to continue to increase tuition charges. They have successfully met the demand for the aesthetic qualities desired by parents and students. They have achieved market dominance by becoming highly attractive holding pens.

On the other hand, the ability of college to provide educational substance at reasonable cost is diminishing. To me, this suggests that in the future colleges will turn increasingly to outsourcing. Rather than rely on an internally-selected faculty, a college might turn to a specialized supplier. That supplier might provide instructional videos and software in addition to live professors. Rather than enjoy the privilege of institutional tenure, professors might sell their lecture time through agencies that book popular speakers.

In the information age, many manufacturing companies have become supply-chain integrators. You might hire consultants to design a product, go to China to manufacture it, hire a logistics specialist to ship it, and rely on a value-added reseller to market it. I could see colleges going down the same path. A generation from now, the most successful colleges may be the ones that provide the best aesthetics, while outsourcing the actual function of education.

If anything, the future of higher education (beyond high school) will be for-profit businesses providing specific training. Firms would hire the companies to train their employees to use some new piece of technology or individuals will get certified so they have better chances in the job market. As time goes on and businesses view college life as "holding pen" the value of a four-year degree will diminish.

"The World's Nicest Holding Pen"

Bird's the Word

I never would have thought a major news magazine would ever put an obscene gesture on their cover, but the breakdown of the WTO talks in Cancun really set The Economist off.

[via Jane Galt and Daniel Drezner]

Economist vs. Krugman

Ambit responds to Paul Krugman's arguments about income inequality in his interview with Kevin Drum.

"The Economist Fisks Paul Krugman"

Java Tax Rejected

There's at least one tax people of the Left Coast don't like.

"Espresso Tax Rejected by Voters" [via Starhawk]

Another Economist Interview

CalPundit's interview with Paul Krugman isn't as full of virulent condemnations of the Bush administration as his columns (which I haven't bothered to read for a long, long time). Krugman sounded calm yet kooky. He thinks the Bush administration hates Government, wants to slash Social Security and Medicare, and wipe out the New Deal. He's also worried that budget deficits could create an Argentina-type financial crisis.

I say he's only a little kooky because with the U.S. having the largest economy in the world, other countries look to her to lift the world out of the economic doldrums.

As for the anti-government philosophy of the Bush administration, I have to laugh. You don't get record-setting budget deficits by tearing down government. If Bush, Grover Norquist (whom Krugman seems to be mildly obsessed with), et. al. really hate the social safety net, then how come the GOP is working on a prescription drug plan, the largest new entitlement created since Medicare? And if the Right was doing such a good job destroying the government, how come Jonah Goldberg has declared our time as an age of Big Government Conservatism?

"An Interview with Paul Krugman" [via Dean's World]

Company Ditching Ground Zero

New York City leaders should really rethink the new design for Ground Zero. Westfield America, the company that has the lease for retail space there wants to sell it. An officer of the company said,

While Westfield wanted to be part of the future of the World Trade Centre, we recognised the conflict between the interests of the public and the needs of our commercial/net lease rights. Selling our interest back to the Port will allow the public interests to take precedence.

"Westfield Set to Quit Ground Zero"

Friedman Interview Tomorrow

I didn't do it. That lucky guy is John Hawkins. It will be posted tomorrow. I can't wait.

"Big Interview Tomorrow"

Lazy Weblogger

I'm just not in the mood to post tonight. It's not that there isn't anything to comment about. There's the collapse of the WTO talks in Cancun (it must have been the distraction of the nice, sandy beaches), the Swedes rejecting the Euro, and Microsoft raising its dividend. In the blogosphere, there's Steve ripping on Dick Gephardt on energy independence, Steven pointing out the horror of legal abortion, and Matthew's take on John Rawls' relevance in 100 years.

Instead, I'll play a little NCAA 2003 Football (waiting for 2004 to arrive in the mail) and catch a few z's. Goodnight.

"Talks Collapse at WTO Meeting in Mexico"

"Swedes Reject Euro Referendum"

"Microsoft Doubles Dividend, Investors Seek More"

Is Hayek Still Relevant?

Hans H.J. Labohm ponders Hayek's The Road to Serfdom. Even though centralized economies proved to be no match for free markets, we still need to be aware of illiberal policies arising from egalitarianism, regulation (especially environmental), and interest group politics.

"A New Road to Serfdom?"

Paradise Lost

Commiewatch links to some disturbing pictures from Cancun. Notice in the right-hand corner of the page that the site is part of an "Anti-Capitalist Movement." These anti-traders oppose the private control of the means of production. The only other possibility is socialized control. There can be no third way. These anti-traders also consider violence to be a form of protest. But at the WTO conference who's rights were being violated that deserved such a violent response? It's one thing to parade around shouting your anti-capitalist slogans. It's quite another to attack police, rip down baracades, and use them as weapons. Each and every one of us has political disagreements. However, most of us don't pretend we're holy warriors fighting in the name of the cause. There is such a thing as discussion and debate. Change may not come quickly, but it sure prevents broken bones, broken glass, and scarred memories.

Fashionable Freedom Fighters

Anne Applebaum thinks the anti-globalization movement has run out of steam. In Cancun, protesters bared all against the WTO. Applebaum's explanation: "It was fun." She sees a youth movement in pro-capitalist ideas with France's Sabine Herold and Sweden's Johan Norberg (who is