Errors of Enchantment

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The Entitlement Mess

11.27.2005

It is hard to believe that we have a brand new entitlement mess on our hands. We can’t even fix the Social Security mess we’ve already got. The new mess is the Medicare Prescription Drug Benefit entitlement.
In its editorial yesterday the Wall Street Journal correctly points out that the political process is sure to make things even worse:

…the new benefit will be a poor substitute for the drug coverage that some three-quarters of seniors already have, and which it will undoubtedly do much to replace.
In particular, seniors are nonplussed by the “donut hole” they see in the new coverage. The benefit envisaged by our Capitol Hill solons has coverage starting after a $250 deductible and continuing until annual drug expenses reach $2,250, after which it will disappear again until total costs reach $5,100. That means that if you spend $2,000 annually on drugs, Medicare will cover 66%. But if you spend $5,000, Medicare’s share will be only about 30%.

It goes on:

We also can’t forget how damaging the shifting cost estimates for this program have already been to the Administration’s credibility. Everybody knew the original 10-year, $400 billion figure that Congress was shooting for was a polite fiction. But that figure is now more than $700 billion, and both parties did their best to cover that fact up during the debate that led to the benefit’s passing the House by a single vote in 2003.

Do you know how your representative voted? There cannot be any ducking of responsibility on this one, Heather.
Finally:

Politically, the worst is probably yet to come as private employers start ditching retiree drug coverage and throwing more people into the government system. And as costs for the program inexorably increase, so will the pressure to raise taxes.

And don’t forget about pressure to do something in the form of price controls.
In a few years we will be in for an intergenerational battle royal as old fogies like me seek to tax our working kids to pay for our government goodies.

Where are the Economists?

11.27.2005

Absent because of the vision thing. Bush is economically incoherent:

“Bush’s reputation in at least the academic community is about as low as you can imagine,” said William A. Niskanen, who was a member of the council during President Ronald Reagan’s first term and is now chairman of the Cato Institute, a libertarian research group. “A lot of people would not be willing to give up a good tenured position for a position in the White House.”

Crises Everywhere?

11.26.2005

Today I received an email from a very good friend of mine in Virginia. He is worried:

I went to your Rio Grande Foundation Web site and read most of your articles. Interesting.
However in your article…”Why We Have a Water Crisis”…Point of View: March/April 2001… Published In: Intellectual Ammunition, you state: “There is no crisis in oil today, and there will be no crisis tomorrow.”
Do you still believe that?
Vivian and I not only believe in a forthcoming oil crises but also a worldwide environmental crisis due to global warming. We are trying to do our part by…our recent purchase and use of an electric lawn-mower; our recent purchase the 2006 Toyota Highlander Hybrid. Less fuel burned, less harm to the environment; and hopefully, help reduce the increasing demand for oil.

Here is my reply:
Jim, my first piece of advice is that you learn to love economics. Discover the joy of being a type C thinker. Stop worrying about the fear mongers (politicians and uninformed journalists).
Once you do that you will discover that we will never run out of oil and that there will never be an oil crisis (okay, I admit that government could get active and cause a crisis — but we would still have plenty of oil waiting once the government stopped its silliness).
As far as global warming goes the science is far from settled. And assuming there is warming caused by us humans, there is even more disagreement on whether it would be good or bad. You might want to check out Fred Singer’s website (one of the leading spokespersons for the skeptics). You can also subscribe to his weekly newsletter – I find it quite interesting. He is an authority on lots of stuff besides global warming (ozone, mercury and the like).
Also, you might be amazed (contrary to what journalists generally say) that the environment is getting better all the time.
Don’t you feel better now? You can be type C civil engineer and stop all that worrying.

What do price “gouging” and “living” wage have in common with WalMart?

11.22.2005

They are wedge issues. Here is how George Leef puts it:

Wedge issues show political hucksterism at its finest, just like the old-time snake-oil salesmen who took advantage of people’s ignorance to get them to buy bottles of elixir that supposedly cured all ailments. Conservatives and liberals each make use of wedge issues. The former’s wedge issues tend to revolve around patriotism and the latter’s tend to revolve around “social justice.”

What Do Otero Mesa, Valle Vidal and ANWR Have in Common?

11.21.2005

Government does not make good deciscions when considering tradeoffs in the uses of government land. The political process seems to generate all-or-nothing competition among interest groups rather than carefully balanced multiple uses. For example:

ANWR itself, if only a symbol, is a symbol of something more complex than greedy executives or green extremists; it’s indicative of an irresolvable tension over publicly held land, uselessly locked away and yet uniquely vulnerable to special interests.

Closer to home it looks like the tradeoffs for Otero Mesa and Valle Vidal will be decided by political opportunists rather than by private market participants who have the incentives to encourage wise stewardship:

Richardson and state Attorney General Patricia Madrid, a fellow Democrat, have filed a lawsuit to limit oil and gas drilling at Otero Mesa in southern New Mexico.
Another battle is being waged over proposed methane gas drilling on the Valle Vidal in the Carson National Forest in northern New Mexico.

Will He Run?

11.19.2005

Will our governor run for president in 2008? Robert Novak has learned he probably will:

Democratic insiders have raised from “possible” to “probable” the prospect of presidential candidacies in 2008 by New Mexico Gov. Bill Richardson and Sen. Joseph Biden of Delaware.
Richardson has said he will await his 2006 re-election campaign in New Mexico before making a presidential decision. But party insiders say now he is preparing the groundwork for a national campaign, assuming that his second term as governor is likely. Richardson is a former member of Congress, U.S. ambassador to the United Nations and secretary of energy.

Bird Flu Pandemic?

11.18.2005

Here is an interesting perspective on the prospect of a bird flu pandemic. I did not know that the bird flu has been around since at least 1959 and has yet to mutate. Did you?

State Treasurer Scandal

11.18.2005

Would you like to know how to easily reduce the likelihood of future scandals? See our research director’s recommended reforms here.
The problem is not merely some sticky fingered officials, but rather the way the operation ignores some obvious lessons of economics. Incentives really do matter.
Check it out.

Economic Illiteracy in the Capitol

11.10.2005

According to the Albuquerque Journal today (subscription) New Mexico’s two senators are not in favor of implementing a “windfall” profits tax on oil companies. This is good news. Our senators are not joining the illiteracy stampede.
I nonetheless sent them both a letter today. Here it is:
Dear Senator
I encourage you not to make matters worse for oil and gasoline consumers by imposing a “windfall” profits tax on oil production. I am a consumer of gasoline; and I am as unhappy as anyone else about higher prices. But a windfall profits tax would make me unhappier, since it would insure that oil and gasoline prices would be higher than without such a tax. The reason: it would undermine the roll of profits in that sector of our market economy.
Seeking profits (and avoiding losses) is what drives all sectors of our prosperous economy; and it is why we are prosperous. When we see rising profits we can be sure that more resources will be devoted to the profit generating activity. It may come about a bit slower in the case of oil and gasoline (compared, say, to Microsoft) because of the difficulties of bringing new wells into production or of building and expanding refineries. The high prices associated with high profits should be viewed as our friend. This friend encourages economizing on the part of buyers and more production on the part of sellers. That is just what we want to reduce the scarcity of oil and gasoline and what we cannot accomplish with windfall profits taxes and price gouging laws. Unfortunately we seem to forget how bad the results were when government last felt it had to do something about prices. The roll of price in making good things happen in a market economy seems to be universally misunderstood by the public; and I am always amazed by the vilification of profits.
Profits have recently been analyzed and compared by my good friends at the Tax Foundation. They have found that oil companies’ profits may be a little higher than their long-term average; but those profits are not unreasonable compared to other industries. They have a good point that helps put recent energy trends in perspective; but that point tends to deflect attention from the crucial roll of profits (and prices) in guiding the behavior of buyers and sellers in energy (or any other) markets.
There is a change in energy policy that would be helpful. It seems to me that you could strike a better balance between benefits and costs when it comes to regulation. Why not allow the building of new refineries? Why not allow transportation of gasoline between geographic areas of the country? Why not relax restrictions on drilling and exploration for oil? All of these actions would reduce the costs and risks for producers, benefiting us all.
Sincerely,
Harry Messenheimer, Ph.D.
President and Co-Founder, Rio Grande Foundation

We’re Back!

11.08.2005

Our site has been down for most of the last two weeks so that we could install some updates. Also, we have a new webmaster.
Thanks to Wayne Klick for the improvements he has made over the last 3 years. He has been responsible for the RGF website; and he helped launch our blog some 18 months ago. We wish Wayne well in his new endeavors in Lawrence, Kansas.

More on Government Gouging in Action

10.27.2005

I have posted here, here and here about the counterproductive effects of price gouging laws.
Have you heard about the awful gas lines in Florida following Hurricane Wilma? Were you able to figure out what the problem was? Think about it before you read Russell Robert’s explanation here. Were you able to do better than the news media?

How Many Feet before Wishful Thinking Ends?

10.26.2005

Answer is here. Hat tip to Robert Lawson for the link.
This BC cartoon would work especially well for NM too. How about bubbles that say “I’m a tax cutting governor,” “education reform will work” and/or “more economic development incentives?” Email me if you have any more suggestions (hmessen@nmia.com).

Is Colorado sliding south to New Mexico?

10.21.2005

I have heard rumors that nearly to 50 percent of Coloradoans believe in the tooth fairy. On November 1st they may overturn their state’s constitutional limits on taxing and spending via referenda C and D (mail in balloting has already begun). They believe that increased real, per capita spending will improve health care and education. Never mind that the constitutional limits have brought unprecedented prosperity to Colorado. All levels of government have had to make hard choices about the effectiveness of their spending.
Wishful thinking Coloradoans ought to visit New Mexico where the tooth fairy has been exposed as a fraud. Colorado is the envy of New Mexicans. If only we could get the government off of our backs as they have done in Colorado!
Those Coloradoans who really truly believe in the tooth fairy should move to New Mexico where we are last in everything good and first in everything bad. Why coerce other Coloradoans into accepting your wishful thinking?

FIERCE COMPETITION BETWEEN ALARMIST FEAR ENTREPRENEURS

10.21.2005

Here is an excellent piece by Frank Furedi. Excerpt:
“Political debate is often reduced to competing claims about what to fear. Claims about the threat of terrorism or child obesity or asylum seekers compete for the attention of the public. In this way, our anxieties become politicised and turned into a politics of fear. Health activists, environmentalists and advocacy groups are no less involved in using scare stories to pursue their agenda than politicians devoted to getting the public’s attention through inciting anxieties about crime and law and order.”
I recommend you read the whole thing. Hat tip to Craig Newmark.

NM’s Legislative Monopoly

10.20.2005

Here is the reason we are unable to break the legislative monopoly in NM. Worse yet, unlike California, we don’t have initiative or referendum.

I Deserve Representation, too: Carswell in Skirts

10.10.2005

Harriet Miers is the pick for me. I agree with what former Senator Roman Hruska once said about a failed Nixon pick: “G. Harrold Carswell is a mediocrity but mediocre Americans deserve representation on the court as well.”
Hat tip to Charles Krauthammer via Mickey Barnett.

What is the Secret?

10.05.2005

A special session of the legislature is scheduled to start tomorrow morning. Yet there is no specific proposal that I can find on the state’s website. Somehow that doesn’t seem right.

Whew!!!!

10.05.2005

Young, inexperienced workers can breathe a sigh of relief. The “living wage” ordinance in Albuquerque failed–but just barely.

Why we don’t want a right to everything

10.01.2005

Judge John Roberts has now been confirmed as the 17th chief justice of the US Supreme Court. Bushy is set to name another justice to fill the second vacancy any day (hour?) now. So it seems an appropriate time for another post on constitutionalism.
One of the themes Senator Biden sounded during the Roberts hearings was why the nominee did not support a broader interpretation of the Constitution to include more rights. A few weeks ago I offered one reason why the judge might be reluctant to recognize some rights. Namely: they might not be in the Constitution. But going beyond that, we might ask WHY some rights are not in the Constitution. If they are not, perhaps it is time from some amendments to put them there?
Let us begin with the republic’s mission statement, the Declaration of Independence. Perhaps better than any document before or since, the Declaration articulated the Enlightenment Era’s conception of government: People have certain unalienable rights. Governments are constituted for the purpose of securing these rights. If the government fails in this raison d’etre, the people have a legitimate cause to overthrow the government.
So if governments are constituted for the purpose of securing rights, then why not secure the heck out of all sorts of rights? This was basically the gist of Senator Biden’s indignant question to Mr. Roberts.
The answer is rather simple. It lies in the somewhat paradoxical fact that rights inherently involve restrictions of freedom. My right to life restricts your freedom to kill me. When we say that someone has a right to something we mean that the rest of us have an obligation to respect that right. Some obligations are more costly than others. And in some instances the obligation to respect Mr. A’s right may be onerously costly to Mr. B. It may even cost Mr. B his own rights! Thus, we have to be very careful when we delineate the rights which people possess. We cannot just hand them out like so many public high school diplomas.
To make this more concrete, let us think of some rights which can be respected with relatively low cost. Take, for instance, the right to life. When we say that I have a right to life, we oblige the rest of you to respect that right. In general, it is fairly easy to respect it. You don’t have to do anything but resist the temptation to pull a trigger. For another example, take the right to property. Here again, my right to my wallet means that you are obliged not to take it from me. Not too terribly onerous an obligation. These are examples of what philosophers call “negative rights.” They get their name because respecting them requires no positive action be taken by others.
I think it is safe to say with little exaggeration that at the time of America’s founding, negative rights were the only recognized rights. Those who recognized a broad class of negative rights were called liberals and those who had a more circumscribed view of rights were known as conservatives. (Nowadays few thinkers in the Western world defend the old conservative position.) As the 19th century wore on, however, some came to recognize a new species of right: what some have called a “positive right.”
Unlike a negative right, a positive right DOES obligate positive action be taken by others. For instance, some say that I have a right to medical care. You are in violation of my right if you are a doctor and you do not provide medical services to me. When society says that I possess a positive right like that of medical care, it is asking a great deal more of my fellows than when it says I have a negative right. It is obliging the nurse, the doctor, the hospital employee to attend to me. Other examples of positive rights include the right to education, or what FDR called the right to “freedom from want.”
Like those recognizing negative rights, those recognizing positive rights also called themselves liberals. This of course, got confusing, so to distinguish themselves from both conservatives and the new liberals, those who didn’t recognize positive rights began to call themselves classical liberals. Increasingly, they call themselves libertarians.
Anyway, back to the story. Why do libertarians fail to recognize positive rights? For one thing, it is simply more costly to impose an obligation on others to do something than it is to oblige them not to do something. In most instances, the obligation to respect another’s right to life or property can be fulfilled without cost. But an obligation to provide medical care can be extremely costly. Are all doctors obliged to save all people who might be suffering at all times? Obviously they must sleep. Are they permitted to take the weekend off? If we oblige someone to take a certain course of action—which is what we do when we recognize a positive right—we rob people of their more fundamental negative right to liberty.
The logic becomes crystal clear when we take the example to its extreme and recognize every positive right which comes to mind: a right to a job, a car, a girlfriend. The only way to recognize these rights is to force others to hire you, give you cash, or go see a Hugh Grant movie with you. A free society is impossible when everyone has a right to everything under the sun.
Because positive rights can be so much more costly to respect, their recognition poses another important problem: the risk that society will simply ignore them. No society is actually going to enforce someone’s right to medical care by obliging every doctor and nurse to work every waking hour. Thus society is likely to tolerate the abridgement of positive rights. Once it becomes acceptable to abridge a positive right, it may become acceptable to abridge more fundamental negative rights.
On this, all liberals, classical and modern can agree. A society which fails to recognize fundamental negative rights is a society which is lost.