View From a Height

What does the NFL draft have to do with Frederic Bastiat?

Bastiat might have liked George Allen, senator and governor very much. His father, George Allen, Mr. "The Future Is Now," not so much. George Allen pere decided to trade away the team's draft for the next century in order to turn the Redskins into the Ramskins, and bring his Over-the-Hill Gang to Washington. Almost immediatley they got to a Super Bowl. They were much-beloved, these Redskins of my youth. But the team didn't win another playoff game until the Super Bowl year of 1982.

Years later, the Minnesota Vikings were to make the same mistake, trading away their first and second round draft picks for three years, for the rights to one running back, Herschel Walker.

Why do teams do this?

Bastiat would have understood. He spent a career arguing that economic policies that are popular in the short term are almost ruinous in the long term. And that what makes such catastrophe possible is the difference between the seen and the unseen.
You can always point to the guy who gets laid off when someone moves a manufacturing operation to Asia because of NAFTA. (Yes, oh humorless ones, that's a joke.) But with rare exceptions, you can't point to the guy who has a job because his boss is spending half as much on office supplies as he used to.

George Allen was the perfect football administration for DC. He could immediately point to the Super Bowl appearance, and to the terrific players he had brought with him. And nobody could point with certainty to the talent the Redskins didn't draft, because B.K. (before Kiper) nobody could say with certainty where they would have picked, and who would have been available.

The Over-the-Hill Gang was seen; the players who went to Pittsburgh, Dallas, and Oakland were unseen. Except on some very big Sundays in January.

David Sirota, Barack Obama in his current incarnation, Hillary Clinton trying to catch up with them, are George Allen. They'll trade the unseen for the seen, and make people happy for the moment. The free-traders are the dynasty-builders. They'll trade the seen, with the assurance that the unseen will materialize.

Posted by Joshua Sharf at 09:09 AM | Permalink | Comments (0) | TrackBacks (0)

The Democrats are now in the process of repeating all of the mistakes of the Great Depression.

Pushing for a war on inflation, seeking to increase uncertainty in the housing market, allowing a $2 Trillion tax increase in three years, threatening to go full Smoot-Hawley, and now pushing for artificially inflated wages and artificial - and extremely temporary - job security.

The UFCW Local 7 has introduced a whole raft of ballot initiatives for this fall. While they're the political equivalent of an F- economic grounds, their underlying political agenda is unmistakable.

First, the economics. Ben Bernanke's been taking a beating recently, and on some counts, he deserves it. But this is a scholar of the Great Depression. I'm probably one of the bloggers you'll see who's actually read any of his scholarly papers on the Depression. Bernanke notices two great contributing factors to the Depression: the US's late abandonment of the gold standard, and the stickiness of wages.

One of the dirty little secrets of the Great Depression is that if you had a job, it wasn't so bad. That's because wages often staid at pre-crash levels, even as more of them were being paid by soup kitchens. Why were wages sticky? That is, why, instead of lowering wages, did companies keep them high, even to the point of failure? Because Herbert Hoover wanted it that way, believing that high prices meant prosperity.

These labor initiatives: no firings without specific cause, forcing small business to pay for health insurance, and forcing businesses to match the inflation rate, are the economic equivalent of begging for unemployment. Sure, if you've got a job it's not too bad. But try getting one when the cost of hiring keeps going up relative to everything else.

The cynic will say that this is all part of the plan. Well, it is. First, the unions have seen their membership drop off the edge of a cliff. The majority of their membership is now comprised of public employees, and people are beginning to question the propriety of paying taxes to support a naked political agenda. The unions need to prove that they still have some political muscle.

Another, little-mentioned aspect of their initiatives is that it would let anyone bring suit for alleged corporate wrongdoing. Historically, you actually have to have been hurt in order to have standing in a civil suit. This obvious sop to the other Great Democrat Constituency, the trial lawyers, would be another avenue for corporate shake-down artists to raise the cost of doing business, and to fund their own personal and political cash flow needs from the hard work of others.

Inflation-indexed wages will have yet another perverse effect. Such a rule would act as a subsidy to inflation, both promoting and limiting the incentive to fight it. Which means that pensioners, retirees, and those on fixed incomes will find their own savings stolen from them. Which will become an excuse for another big tax increase to fund those generous retirement programs we've rashly promised our teachers and other public servants.

Today's economy is more inter-connected, more diversified, more entrepreneurial, and more resilient than in was in 1930, which probably means that we'll end up looking more like Japan in 1990 than the US in 1930. But that doesn't mean that the damage to hopes, dreams, and security won't be real.

Posted by Joshua Sharf at 12:37 PM | Permalink | Comments (0) | TrackBacks (0)

Over at EconLog, Arnold Kling replies to a post by Tyler Cowen asking why the development of economics came so late in western intellectual history:

My view is that historically there was a universal propensity for plunder and coercion. It could be that only in the late stages of the British empire, around the time that Adam Smith was writing, that people really began to be accustomed to market economic activity.

In that case, it would not be surprising that economics itself developed late. Conversely, the fact that there was no Greek or Roman Adam Smith is consistent with my view that the Greeks and the Romans did not really have modern market economies.

I'd go in a slightly different direction here; rather than only understanding plunder, production wasn't understood at all.

There wasn't, as near as I can tell, a concept of money beyond currency. Kings would routinely re-issue debased coinage, inflating their way out of debt. When Spain decided to plunder the Americans for gold and silver, mostly what they did was create a global inflation of historic proportions. The problem, of course, is that all they did was create more money chasing the same goods.

I've been listening to the High Middle Ages CDs from the Teaching Company as well, and Prof. Daileader makes a point that towns really did constitute a market. So much so that guils felt it necessary to regulate trade in order to prevent "unfair" competition. Like advertising of any kind. Artisans worked on demand, rather than keeping regular hours. So while the Town was criticized by the Church and the Country for being mean and materialistic, it was such a heavily regulated market so as to be quite unfree. It even benefited from the urban advantage of specialization. Yet it certainly wasn't based on plunder.

But production was severely limited, often by factors outside the control of the producer. Farmers were stuck with the local weather, and villages would starve while villages only a few miles away would have crops rotting. Artisans couldn't scale up before industrialiization, so their production was essentially limited by time, and only variable in a very limited sense. The European population might have doubled between 1000 and 1300, but that amounts to about a 0.3% change each year - so of course business would look like a zero-sum game. Especially since innovation wasn't seen as changing and improving markets so much as undercutting your competition.

Some of these misconceptions persist, especially in the minds of Democrats and rent-seeking businessmen. But for the most part, the conditions had changed by 1776. Progress was obvious within one's lifetime. Production was scalable. Guilds were losing their power, and money was much better-understood.

Posted by Joshua Sharf at 08:51 AM | Permalink | Comments (0) | TrackBacks (0)

Netflix is addictive. While working on the computer, I spent yesterday watching Seabiscuit twice - once with commentary and once without - and watching the special features, including a mini-documentary about the Seabiscuit's times, the Depression. Unenlightened self-interest has pretty much wrecked horse-racing, but if the current crop of self-styled "Progressives" has its way, we may soon get to relive the 30s economy.

(WARNING; The following links contain shameless self-promotion and extreme economic geekery. Follow at your own risk. The management assumes no liability.)

Even almost 80 years after the fact, we still don't fully understand the Great Depression. Still, economists now seem to be groping towards a multi-pronged consensus: 1) the Fed tightened money when banks were failing, 2) stubbornly high wages and 3) artificially high tariffs kept the costs of doing business up when they should have been falling. Amity Shlaes adds 4) uncertainty caused by incessant government "experimentation" with the economy as another leg.

When unions and union contracts keep wages artificially high, they discourage new hiring. The profit from increased sales doesn't match the cost of the new workers needed to get there. Further. businesses can't lower prices through economies of scale; and consumers don't have money coming into buy the stuff, anyway. This isn't just bad for workers, it's pretty much bad for everyone except union bosses, who can keep on collecting fat-cat salaries and perks, and spending their union dues on politicians devoted to, er, keeping wages high.

Now, you can offset some of this through incresed productivity. Unions don't much care for this, either, because they think that it costs jobs. It's only the very definition of economic progress, so you'd think "progressives" would be in favor of it, but next time you see one, ask how it is we've managed to keep everyone employed as the population has gone up 100 times in 200 years.

But if you've got tariffs in place, the incentive to invest in more efficient equipment and processes declines. Fifty-cent tariffs on Brazilian sugar ethanol mean that we can continue to produce expensive, inefficient corn-based ethanol to the point where we cause food riots in Mexico. Inefficiency makes it harder to ramp up production when you want to, and also artificually suppresses economic activity.

Combined, the two are deadly.

Fortunately, the Dems will only be in a position to repeat mistakes 2) and 3), while exacerbating 4) again as well. Unfortunately, that may well be enough to spread what should be a short recession over most of the next 10 years.

Last word to the brilliant Lileks:

Speaking as an utter amateur, I’m worried less about a recession than inflation. I’m worried most about a recession, inflation AND a jolly round of trade wars, coupled with fragile banks, overcapacity, diminished consumer confidence and aggressive messianic collectivism. Something about that smells familiar. I love studying the thirties and forties, but not first hand.

*Sigh*

Progressively more restrictive. Progressively more expensive. Progressively more intrusive.

Progressively more...reactionary.

Posted by Joshua Sharf at 01:46 PM | Permalink | Comments (0) | TrackBacks (0)

Mark Udall - a good, patriotic American - is a threat to national security.

OK, not all by himself, and not any one of his positions, but as part of a Democratic Senate majority, and as a combination of his policy views.

Consider:

1. He has repeatedly opposed expanded gas production on the western slope
   
2. He has voted against an additional 700 miles of fencing along our border with Mexico
   

Why is this a threat to national security? Because Iran is almost certainly plotting to disrupt our supply of natural gas from Mexico, And because they may well be trying to insert operatives directly into the United States.

Todd Bensman of the San Antonio Express-News, wrote the series, "Breaching America," and appeared as a guest on Backbone Radio with John Andrews and me. Well, he's back, with a story about Iran establishing a presence in Nicaragua, now run by Venezuela-friendly and decidedly US-unfriendly Danny Ortega.

Make no mistake, this is no humanitarian mission. This is exactly from the Soviet playbook - promise aid to establish a reason for being there. In this case, the aid amounts to a ridiculously ambitious project with little-to-no economic reason for being. Send a high-level delegation, with ministers of electricity, or whatever, providing cover for intelligence operatives. (Note that one of the delegation members is the Iranian Ambassador to Venezuela, also a likely intelligence agent.)

With completely ineffective border security, the Iranians will soon be in terrific position to start slipping agents across borders. And there aren't a whole lot of borders between Managua and El Paso.

More immediately, they may already have tried to blow up the main Mexican pipeline. Or, they may have gotten the idea from that attempt, and want to do it right this time.

If it were an oil pipeline, it might matter less. Oil is easily shipped all over the world, so there's a world market for it. Natural gas is difficult and expensive to ship across oceans, and the US has also resisted building LNG terminals. This means that there is, at best, a continental market for natural gas. And it also means that the best defense against any disruption in supply is...a good, reliable, local supply.

Mark Udall's policies leave us both more vulnerable to an attack, and more vulnerable to the effects of that attack.

Posted by Joshua Sharf at 08:53 PM | Permalink | Comments (0) | TrackBacks (0)

Home sick yesterday with something that even weapons-grade Mucinex wasn't helping, I saw a part of a speech where Barack Obama proposed his "solution" to the higher education "crisis." This is a paraphrase, but not much of one:

I'll make college education affordable for every American with a $4000 tax rebate payable towards tuition. We're going to invest in you. But in return (There's always an, "in return." -ed.), we're going to require you to invest in us by volunteering in the Peace Corps, the VA...

I'd give it about half an hour before every college in the country raised tuition by about, oh $4000. Repeat after me: subsidies either raise prices or create surpluses.

But the really insidious part is that public service requirement, couched as, "investing in us." "Us" being the government and government programs. Obama is proposing to take more of your money, transfer it directly to liberal universities, many of whom already get your tax money or have endowments the size of small countries' treasuries, and then claim the first two years of your kids' working lives doing make-work projects for the government.

Now, if "us" meant the country, then going out, getting a job, and doing research in alternative fuels or new drug therapies, possibly nanotech. Notice what else is missing from this list: the CIA, FBI, the military.

But then, making money or defending the country aren't nearly as appealing as ticking off allies.

Progressively more expensive. Progressively more intrusive. Progressively more restrictive.

Posted by Joshua Sharf at 05:41 PM | Permalink | Comments (1) | TrackBacks (0)

You know, if the Democrats actually cared about the homeless as something other than a political bludgeon, they'd stop trying to create more of them.

Just as New York is phasing out a 60-year experiment in rent control, Democrats on the House Committee for Local Government are proposing to let local governments here try it. I know it's a basic principle of history that nobody ever learns anything, but really, people, nobody's memory is that short.

As with most populist measures, predicated on the notion that I can get the government to get someone else to pay my bills for me, this scheme would only prolong the pain. By keeping rents down, mortgages would have to decline more to reach the historic averages. And with more people selling, and fewer places for them to move into, well, they'd either have to move farther out, or find a bridge with indoor plumbing.

All together now: subsidies create surpluses, price controls create shortages. There's no shortage of gasoline, because the price floats. There is a shortage of gasoline at $1 a gallon. There's also a shortage of bread at 10 cents a loaf, and Maseratis at $5000. Rent controls create housing shortages, because developers aren't willing to build as many apartment complexes when they'll make less money on them. Rent controls reduce the return on such a project, and make other projects more attractive by comparison.

There's never a good time for this sort of intervention, but right now, what's driving it is the number of foreclosures, and thus the number of people involuntarily entering the rental market, driving up rents at the same time that housing prices fall. Now one way to measure how out of whack the housing market had gotten is to compare rents to mortgages. Nationally, mortgages were 43% higher than they should have been, given historical averages. So some combination of house price declines and rent increases is necessary to get the market back into whack.

The irony is that, as bad as things are here compared to 2006, they're not that bad compared to the rest of the country, contrary to what you might have read. The Wall Street Journal shows that Denver's housing inventory actually decreased 3.8% compared to last year, one of only two markets to show a decline. We have 5.7 months supply on hand, tied for fourth-best in the nation, and prices declined a modest 1.8% year-over-year (6th-best nationally, with the 3rd-lowest decline). Denver's 3.71% delinquency rate is below the national average of 3.98%.

All of which means that, while there might seem to be enough of a glut now to absorb any price controls, in fact, we're likely to start feeling that pain a lot sooner than we think.

Even the bill's prime sponsor, Rep. Weissmann, admits that rent control is a "failed economic policy," but puts forth his measure as a nod to local zoning control. But every Democrat on the committee voted for it, save one (who's married to a landlord and developer, so she rightfully recused herself). Makes you wonder exactly what political forces pushed the House leadership to bring this thing to committee.

Progressively more intrusive. Progressively more expensive. Progressively more restrictive.

Posted by Joshua Sharf at 10:55 PM | Permalink | Comments (0) | TrackBacks (0)

With the support of all seven of Colorado's representatives (must be those multinationals based in Bailey and the money-center banks headquartered in Grand Junction), the House voted last night to extend NAFTA rules to Peru.

This is a good thing for both the US and for Peru, for a variety of reasons. Peruvian goods basically flow freely into the US, the deal does more to lower Peruvian barriers to US goods than the other way around. It helps serve as a counter-weight to Chavezism-Castroism in Latin America, although some people have never forgiven them for defeating Shining Path. It draws Peru more tightly into US economic orbit. Their #2 trading partner is China, so unless you're expecting to see some of that wealth circle around in the form of campaign contributions, strategically it's probably better to have them trading with us.

From Peru's point of view, their economy is miniscule compared to the US, about 1.5% of our GDP. So anything that helps boost their economy will disproportionately help lift their people out of poverty. Our total trade deficit with Peru is $3 billion annually (or about $1.2 billion at the official exchange rate). Hardly something to be scared of.

Posted by Joshua Sharf at 10:19 PM | Permalink | Comments (0) | TrackBacks (0)

Our New Governor (heh) was in Washington today, promoting the idea of a federal diktat on generating electricity with renewable sources: Ritter notes that 20 states have mandates. Of course, if they're anything like Europe's Kyoto targets, we won't be meeting them this century. If you actually look at what the states are requiring, the real mandates haven't started yet, and we have no idea of the eccnomic effects of actually producing 20% of our power this way.

"This has to be a national effort," said Ritter, a Democrat. "This is too important a conversation we face not to undertake it now."

If it's an important conversation, we should be having the conversation, not jumping to dictate policy. Of course, like most big-government enthusiasts, especially when it comes to the environment, honest "conversation" is the very last thing they want: "We need to move beyond debates about whether global change is occurring." I'm sure James Hansen over at NASA will be happy to hear he won't be facing that debate. After all, it's not as though it's the 30s, or anything like that.

And don't kid yourself about the ease of making an about-face if it turns out to be a bad bet. We hear lots of talk about improving Mexico's economy as the antidote to illegal immigration, yet in the face of tortilla riots in Mexico City, plow right on ahead turning food into fuel.

Posted by Joshua Sharf at 08:58 PM | Permalink | Comments (0) | TrackBacks (0)

Our New Governor (heh) was in Washington today, promoting the idea of a federal diktat on generating electricity with renewable sources: Ritter notes that 20 states have mandates. Of course, if they're anything like Europe's Kyoto targets, we won't be meeting them this century. If you actually look at what the states are requiring, the real mandates haven't started yet, and we have no idea of the eccnomic effects of actually producing 20% of our power this way.

"This has to be a national effort," said Ritter, a Democrat. "This is too important a conversation we face not to undertake it now."

If it's an important conversation, we should be having the conversation, not jumping to dictate policy. Of course, like most big-government enthusiasts, especially when it comes to the environment, honest "conversation" is the very last thing they want: "We need to move beyond debates about whether global change is occurring." I'm sure James Hansen over at NASA will be happy to hear he won't be facing that debate. After all, it's not as though it's the 30s, or anything like that.

And don't kid yourself about the ease of making an about-face if it turns out to be a bad bet. We hear lots of talk about improving Mexico's economy as the antidote to illegal immigration, yet in the face of tortilla riots in Mexico City, plow right on ahead turning food into fuel.

Posted by Joshua Sharf at 08:58 PM | Permalink | Comments (0) | TrackBacks (0)

Well, some of the facts, anyway. As with any good propagandist, the secret is in what they leaves out. So maybe workers in states without Right-to-Work laws earn more than workers elsewhere. Let's see how much they have to give up in order to get it.

We'll use the list of states from National Right to Work. For purposes of the comparison we'll ignore DC, because it wouldn't be fair to include a forced-union district where the whole city is a company town. (It also skews the numbers, since we're primarily concerned with private-sector competitions here.)

According to the Missouri Department of Economic Development, the cost of living index averages 16% higher in non-right-to-work states (111-95). According to the Tax Foundation, for the year 2007, the state and local tax burden is over 8% higher (almost a full percentage point), 11.1% vs. 10.2%. So not only do you have to pay more for dinner, you've got less to cover it with.

I've also used BLS statistics to calculate the average unemployment rates for July 2007, but that's mostly a time limitation. It's basically a snapshot of what should be viewed as a movie, but I don't have the time at the moment to do much more. Yes, it's higher in the non-right-to-work states: 4.7% to 4.1%.

The one thing I haven't done is adjust for population. California, New York, the high-population Northeast and the old industrial midwest are all non-right-to-work. (There's a reason it's call the Rust Belt.) For the moment, that would just highlight how much more of the population lives under the threat of a closed shop.

At least until the rest of the jobs move to the South.

Cross-posted at Politics West.

Posted by Joshua Sharf at 08:40 PM | Permalink | Comments (0) | TrackBacks (0)

Wherein the CFA Econ book abandons empirical observation, choosing instead to count 5 chambers in the heart...

Posted by Joshua Sharf at 05:55 PM | Permalink | Comments (0) | TrackBacks (0)

In studying for the CFA, the Economics section has eight readings (about a week's worth) on Microeconomics, and eight readings on Macroeonomics. It seems to me that while economic illiteracy abounds, especially among the political and journalistic classes, it manifests itself somewhat differently between the two subjects. Most of the juice is around macro stuff, because that's where policy decisions lay. But most of the action is in micro, because that's where businesses actually have to operate.

Illiteracy about macroeconomics leads people to assume that price rises mean inflation. Inflation is a monetary phenomenon. Illiteracy about microeconomics leads people to ignore how poorly gate space is allocated at DIA. Gates are not offered by competitive bid, leading to all sorts of market distortions. Historically, I would guess that micro-illiteracy is dangerous all the time, while macro-illiteracy is mostly dangerous on four- and two-year cycles.

But when politicians talk about 'windfall' taxes on oil companies, then complain about lack of slack in refinery capacity, or when they shut down drilling on the Roan Plateau, then complain about natural gas prices, it's dangerous micro-illiteracy. Or demagoguery taking advantage of it, which amounts to the same thing.

Cross-Posted over at CFA Blog.

Posted by Joshua Sharf at 10:53 PM | Permalink | Comments (0) | TrackBacks (0)

Proponents of stricter enforcement of laws against hiring illegals often argue that this will result in "self-deportation." In other words, large numbers of illegals will pick themselves up and leave a place where things always get better to go back to a place where things never seem to.

Now, we may have a chance to put this to the test. The Wall Street Journal's Economics Blog reports that four researchers from Deutsche Bank believe that, a year and a half into the housing slump, builders have laid off as many as 500,000 illegal aliens.

The title of the post, "Report Illegal Hispanics Bear Housing Slump Brunt," recalls "World Ends, Women, Minorities Hardest Hit," but the point is clear. 500,000 jobs lost translates to just over a 4 percentage point increase in the unemployment rate for illegals, assuming 12 million illegals in the country. It's not 1930, but it's also not

Since we all believe that neither illegals nor their informal network are stupid, word should be getting around that it's not so easy to find work pounding shingles and hanging sheet rock right now. Despite the fact that we've seen about 40 feet of actual fencing built, we should still be seeing fewer people trying to sneak in. If we do, there may be some merit to the demand-side enforcement argument. If we don't, then the draw of the American idea remains stronger than any transient economics.

Posted by Joshua Sharf at 06:54 AM | Permalink | Comments (0) | TrackBacks (0)

Last week, the local propagator of economic illiteracy, the Denver Post, ran an op-ed by a professor over at the University of Colorado Health Sciences center, who specializes in bioethics and the humanitites. It included the usual bromides about obscene profit margins and too much marketing vs. too little R&D. It concluded with a call for the citizenry to demand more R&D spending by drug companies. Or presumably, we'll be taking away those profits to make sure there's no more R&D. (Ironically, a week earlier I had had this debate with a friend of mine who's a doctor there, so maybe it's something in the water. Or a virus.)

In the meantime, Russ Roberts has an extensive podcast with Mr. Law-and-Economics himself, RIchard Epstein, an actual economist, of the Hoover Institution and the University of Chicago. Epstein makes the following points.

• That studies show that drug companies keep somewhere between 15% and 25% of the economic profit from their discoveries. Which means that you and I get to keep about 80% of the benefit from someone else's work.
  
• That the excessively long FDA approval time robs the compnies from many of the benefits of the patent system
  
• That taxing away the profits is only going to force the drug companies to focus on the higher-margin projects, which will then lead the same whiners to complain about the even more obscene profit margins
  
• That there will always be competition, since it's the molecule not the health benefit that gets patented; this means that your slightly different drug with a slightly different mechanism can compete even while the original is under patent protection
  

I'd add one other point. Mark Yarborough complains about the ratio of marketing budgets to R&D budgets. But this is always true. I just finished visiting a company, Brush Engineered Materials, which refuses to get pantents on much of its research out of the belief that they'd rather not have their competition reverse engineer their processes. Their competitive advantage and their real asset is their institutional know-how and craftsmanship in the art of making metal alloys. This is a company that knows it needs to be ahead of the curve, always developing new alloys and new uses for those alloys.

They spend less than 1% of gross revenues on R&D.

I never would have know about Epstein's book if not for a series of blog links.

Thus do institutional biases restrict the debate. At least on their pages.

Posted by Joshua Sharf at 09:01 PM | Permalink | Comments (0) | TrackBacks (0)

On the show this evening, we hosted Bob Chitester, who's produced an intellectual biography of Milton Friedman, "The Power of Choice," airing tomorrow night on PBS. Bob's site, The Idea Channel, is also streaming both the original Free to Choose series and its updated version for free. Several years earlier, the Dallas Fed hosted a conference dedicated to the legacy of that series and book.

When Milton Friedman died late last year, much was made of the legacy of his economic thought, and its spirited promotion of liberty. Sadly, the election to majority status of a party dedicated to the slow destruction of that liberty has also emboldened those Republicans who don't quite trust their fellow citizens. Reminders of the power of economic freedom are desperately needed.

Posted by Joshua Sharf at 05:10 PM | Permalink | Comments (1) | TrackBacks (0)

The Taylor Ranch controversy is one of those nasty points of intersection between economics, politics, and the judiciary. In 2002, the Colorado Supreme Court ruled that a series of landowners who border the Taylor Ranch had the right to continue doing what they had been doing for about 150 years, namely, freeloading off the Taylor Ranch resources. We had the chance to interview Dick Johnston, author of The Taylor Ranch War, which follows the 40-year (!) series of lawsuits required to resolve this issue.

In essence, the court ruled that the communal rules of the original Mexican land grant from the 1830s and 1840s overrode the American notion of exclusive use.

It hadn't occurred to me before, but is it possible that communal property right could be an answer to the question, "Why is Mexico so poor?"

Posted by Joshua Sharf at 07:45 AM | Permalink | TrackBacks (0)

Warren Buffett, in addition to his admirable philanthropic endeavors, has also been trying to make sure that the Federal Government continues to be the recipient of your largess from beyond the grave:

The world's second-richest man, Warren Buffett, has asked Sen. Ken Salazar to vote against repealing the estate tax.

Buffett sent a letter to Salazar, D-Colo., the senator's spokesman, Drew Nannis, said. The multibillionaire Monday called on Congress not to repeal the tax.

...

Repealing the entire estate tax now would cost the government an estimated $550 billion to $700 billion through 2010. (emphasis added - ed.)

The Post gives no citation for this number, nor does it consider the additional wealth that will be created by businesses that can, well, stay in business after their owners die. If the estate tax comes back, it will be on estates over $1 million. Most estates over that number aren't just cash sitting around under mattresses. They're in businesses that employ people.

Larger businesses tend to be separate corporations, but the smaller businesses hit here are often partnerships or sole proprietorships that tend to struggle for cash. They would have to sell all or some of their assets just to pay the IRS. In all likelihood, they'll sell to larger companies. Even assuming that everyone stays employed - a bold assumption at best - these transfers concentrate wealth, they don't diffuse it.

The Post also fails to notice that Mr. Buffett hasn't been such a big fan of paying unnecessary taxes himself:

Mr. Buffett’s decision to give away to charity Berkshire Hathaway stock valued at about $37 billion, much of it to the Bill and Melinda Gates Foundation, is the sort of bold move that has made so many Americans admirers of Mr.Buffett. As an avowed supporter of the estate tax, Mr. Buffett could have let the government take its share of his estate after he dies. But just as Mr. Buffett has accumulated his vast wealth without paying much personal income tax, he has found a way to avoid the tax man in this maneuver as well, even writing in his letter to Bill and Melinda Gates that a condition of the gift is that the foundation “must continue to satisfy legal requirements qualifying my gifts as charitable and not subject to gift or other taxes.”

(Hat tip: Best of the Web)

Posted by Joshua Sharf at 09:06 AM | Permalink | Comments (0) | TrackBacks (0)

For those of you intrigued by the Free Markets, Free People class being offered by last night's radio guest, Paul Prentice, but who either don't have the time to attend class, or don't have the time to commute from California to attend class, here's the reading list:

Economics in One Lesson, Henry Hazlitt
Between Power and Liberty: Economics and the Law
Free to Choose, Milton Friedman
Economic Fallacies, Frederic Bastiat
Human Action, Ludwig von Mises
Capitalism: The Unknown Ideal, Ayn Rand
The Road to Serfdom, Friedrich von Hayek
The Mystery of Capital, Hernando de Soto

A little light reading for the beach, maybe?

Posted by Joshua Sharf at 10:07 PM | Permalink | Comments (0) | TrackBacks (0)