Wednesday, February 28, 2018
Want More Affordable Housing? Build More Housing, and Don’t Impose Government Rent Controls
According to a recent Wall Street Journal article (“Rent Controls, a Bane of Landlords, Are Gaining Support as Costs Soar“), rent control is making a comeback in response to rising housing prices in urban areas across the country in states like California, Illinois, Washington, and Massachusetts. Megan McArdle responds in a Bloomberg View op-ed “Rent Control Needs Retirement, Not a Comeback” (emphasis mine):
You can artificially restrict the amount of rent a landlord can legally charge for a rental unit, but you can’t force developers, builders, and landlords to build or supply more rental housing in the future. And the supply of rental housing in markets with rent control is guaranteed to decline.
If a perverse public policy goal was, in fact, to guarantee that there would be a continued and worsening supply of rental housing, there would be no more effective way to ensure that outcome than a government rent control law. And despite the best of intentions on behalf of policymakers to promote more affordable housing with rent control laws as a way to combat high housing prices, the reality is that those very laws are guaranteed, with 100 percent certainty, to do the opposite by making affordable housing as scarce as possible.
Price controls aren’t the answer. Building more housing is the only real solution to increase the supply of affordable housing.
Mark J. Perry
Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.
Policymakers should remember that a price is just the intersection of supply and demand. If you alter the price, but don’t alter the supply or the demand, the problem doesn’t go away; rationing just shows up in different forms. There will still be too many people who cannot find housing in your area.
Worse still, price controls actually make the scarcity worse. They increase demand — who wouldn’t want to live in New York City in a $600-a-month apartment? Meanwhile, price ceilings reduce the supply because they decrease the incentive to build, and can make it downright imperative to remove rental housing from the market and turn it to some other use — condos, warehouses, anything that won’t trigger the rent controls.
And in the long run, the situation for the very low-income people you’re trying to help probably gets worse. After all, if you take price signals out of the market, something has to ration the limited supply of housing: years-long wait lists, or personal friendships, or credit scores, or side payments to people lucky enough to have some housing. The wider the gap between supply and demand gets, the worse that rationing will be. And the people left out by those forms of rationing will be every bit as needy and deserving as the people currently being forced out by higher rents; given the deleterious effects on the supply of rental housing, possibly more so.
If politicians actually want to make sure everyone who needs a place to rest their head has one, there’s only one way to do it: Build more housing. Which means, in turn, loosening the legal restrictions and community veto points that make it so hard to add supply. Because there’s no way to escape the fundamental math: Unless you build enough housing to shelter the people who want to live in your city, a whole lot of people will be left out in the cold.
You can artificially restrict the amount of rent a landlord can legally charge for a rental unit, but you can’t force developers, builders, and landlords to build or supply more rental housing in the future. And the supply of rental housing in markets with rent control is guaranteed to decline.
If a perverse public policy goal was, in fact, to guarantee that there would be a continued and worsening supply of rental housing, there would be no more effective way to ensure that outcome than a government rent control law. And despite the best of intentions on behalf of policymakers to promote more affordable housing with rent control laws as a way to combat high housing prices, the reality is that those very laws are guaranteed, with 100 percent certainty, to do the opposite by making affordable housing as scarce as possible.
Price controls aren’t the answer. Building more housing is the only real solution to increase the supply of affordable housing.
Reprinted from the American Enterprise Institute.
Mark J. Perry
Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.
This article was originally published on FEE.org. Read the original article.
Sears Tele-Games Video Arcade (Atari 2600)
Sears has this weird thing they do where they contract with outside manufacturers to produce items for their store and then sell it under their own brand name. An example of this is Sears’ Kenmore line of appliances. These are actually made by companies like Whirlpool or whoever Sears happens to be contracted with at the moment. At one time they also did this with video games.
The Sears Tele-Games Video Arcade was nothing more than an Atari VCS (later known as the Atari 2600) with a different name. Not only did they do this with the system, but they did it with a number of the games as well. For example the Atari branded Combat was known as Tank-Plus under the Sears Tele-Games label and Air-Sea Battle was known as Target Fun. The games and systems were exactly the same except for some labeling differences. A very few games were Tele-Games exclusive but of course these also worked on an Atari VCS/260.
This ad from a Sears catalog in 1977 shows what Sears had to offer early in the life of the Atari system. These early ads tend to exaggerate the number of games. Atari 2600 games typically had multiple variations. For example, Combat involves driving a tank around trying to shoot another tank (either another player or the computer). There are multiple game variations that change things like the maze layout, bullet behavior and even the visibility of the mazes and tanks. Many ads portrayed these as different games. In this ad it talks about being able to choose from 27 exciting video games with the Target Fun cartridge. Really that’s just 27 different variations of the same game.
In 1977 the Atari VCS had just been introduced and there weren’t that many games yet. The days of Activision and other 3rd party developers was yet to come. The games in this ad probably represent most of what was available at the time and they include: Speedway II (Atari’s Street Racer), Outer Space (Atari’s Star Ship), Blackjack (also Blackjack under the Atari label), Tank Plus (Atari’s Combat), Race (Atari’s Indy 500), and Pong Sports (Atari’s Video Olympics).
Tuesday, February 27, 2018
Politicians Are Well Aware of the Harms of the Minimum Wage
Recently, I came across a rather interesting news report. Republican lawmakers in the US are proposing that the minimum salary firms must pay to their foreign workers, arriving on H1-B visas, be raised from $60,000 to $90,000. This move was backed by large corporations such as Facebook, Microsoft, and Oracle as well as by unions.
Not at all. Large corporations such as Microsoft and Facebook would like to get rid of competition. Their smaller competitors cannot afford to pay the kind of enormous salaries that Microsoft and Facebook do. Therefore, they hire cheaper workers from India. It is also a good deal for the Indian software engineers since even small firms in the US tend to pay better than firms in Bangalore.
By raising the minimum salary requirement, Microsoft, Facebook, and others wish to raise the labor costs of their competitors. While labor would also become more expensive for large corporations, they can absorb the cost, and the benefit of eliminating competition more than makes up for it.
The unions, of course, have a similar incentive. If workers from India and China are not competing with them, they get to demand higher salaries. And politicians understand all of this. In fact, the explicit aim of this legislation is to keep down the number of foreign workers. From the news report itself:
To all politicians who advocate raising the minimum wage saying that it helps workers, I have a question. Why is it that minimum wage laws do not create unemployment for fast food workers but do so for immigrant workers from India? I won’t hold my breath waiting for an answer.
The plain fact is that minimum wage laws, whether for fast food workers or for migrant ones, are just crony capitalism. I know it, politicians know it, and after reading this article, hopefully everyone knows it.
Jairaj Devadiga
Jairaj Devadiga is an economist who illustrates the importance of property rights and freedom through some interesting real-world cases. When he is not doing research, he enjoys reading about medicine, astronomy, computers, and law among other things. Readers may email him at jairajdevadiga@gmail.com with questions, suggestions, feedback etc.
Edging Out the Competition
Why are unions and large corporations supporting this measure? Did American workers suddenly decide to show solidarity with their Asian brethren? Did the CEOs of Microsoft, Facebook, and other large corporations deeply introspect and decide to be compassionate towards the less fortunate foreign workers?Not at all. Large corporations such as Microsoft and Facebook would like to get rid of competition. Their smaller competitors cannot afford to pay the kind of enormous salaries that Microsoft and Facebook do. Therefore, they hire cheaper workers from India. It is also a good deal for the Indian software engineers since even small firms in the US tend to pay better than firms in Bangalore.
By raising the minimum salary requirement, Microsoft, Facebook, and others wish to raise the labor costs of their competitors. While labor would also become more expensive for large corporations, they can absorb the cost, and the benefit of eliminating competition more than makes up for it.
The unions, of course, have a similar incentive. If workers from India and China are not competing with them, they get to demand higher salaries. And politicians understand all of this. In fact, the explicit aim of this legislation is to keep down the number of foreign workers. From the news report itself:
A California congressman, backed by U.S. technology companies, is pushing for the House to consider legislation that would narrow the number of eligible candidates for H-1B visas that are awarded to highly skilled foreign workers.
Stop Feigning Ignorance
It isn’t as though only Republicans understand the ill effects of the minimum wage. The Democrats are opposing this move, saying that it should be viewed in the larger context of immigration. Clearly, politicians across party lines understand that minimum wage laws create unemployment and, in this case, immigration obstacles.To all politicians who advocate raising the minimum wage saying that it helps workers, I have a question. Why is it that minimum wage laws do not create unemployment for fast food workers but do so for immigrant workers from India? I won’t hold my breath waiting for an answer.
The plain fact is that minimum wage laws, whether for fast food workers or for migrant ones, are just crony capitalism. I know it, politicians know it, and after reading this article, hopefully everyone knows it.
Jairaj Devadiga
Jairaj Devadiga is an economist who illustrates the importance of property rights and freedom through some interesting real-world cases. When he is not doing research, he enjoys reading about medicine, astronomy, computers, and law among other things. Readers may email him at jairajdevadiga@gmail.com with questions, suggestions, feedback etc.
This article was originally published on FEE.org. Read the original article.
Friday, February 23, 2018
Thursday, February 22, 2018
Socialized Medicine Is “Free” But Leads To Really, Really Long Wait Times
Last November, CTV News in Canada ran this incredible story about growing wait times for medical care in Canada due to its socialized medical system: “‘It’s insane’: Ont. patient told she’d have to wait 4.5 years to see a neurologist.” Here’s a slice:
An Ontario doctor says health-care wait times have reached “insane” lengths in the province, as one of her patients faces a 4.5-year wait to see a neurologist. When Dr. Joy Hataley, a family practice anesthetist in Kingston, Ontario, recently tried to send a patient to a neurologist at the Kingston General Hospital, she received a letter from the specialist’s office telling her that the current wait time for new patient referrals is 4.5 years. The letter said that, if the delay is “unacceptable” to Dr. Hataley, she should instead refer the patient to a neurologist in Ottawa or Toronto.
Dr. Joy Hataley said she was shocked when she received this letter from a neurologist’s office. Dr. Hataley, who has been outspoken about wait times and other issues plaguing Ontario’s health care system, said the wait time “shocked” her. She wanted to shock others as well, so she tweeted a photo of the letter above and tagged Ontario Health Minister Eric Hoskins and Kingston-area MPP Sophie Kiwala. Dr. Hataley said she’s used to hearing back from specialists who are unable to see her patients for months, and even up to 2.5 years. But a 4.5-year wait is “insane,” she told CTVNews.ca in a telephone interview. “This is an alarm bell,” she said. “What it is to me is a red flag to the system.”(h/t Peter Krieger)
“When Dr. Hataley first pulled up the response from the referral, both of us were just seeing the wait time first hand, I was just in disbelief and shocked,” Wooldridge, a 40-year-old developmental service worker, told CTVNews.ca in an email. “The more I thought about it after leaving her office I was just annoyed and felt that this is ridiculous and not in any way okay.” Wooldridge said she will continue to live with chronic pain and be cared for by Dr. Hataley until she can see a neurologist. She said she shouldn’t have to travel outside of Kingston to see a specialist.
“I don’t honestly feel that I should have to go to another city when we have a neurologist 4.5 minutes up the road and I’m a resident of the city in which my taxes help go towards,” she wrote. “I don’t think it’s right or fair to drive to another city…it’s financially not easy for me to just pick up and go, as much as I would like to.”
Waiting for treatment has become a defining characteristic of Canadian health care. In order to document the lengthy queues for visits to specialists and for diagnostic and surgical procedures in the country, the Fraser Institute has—for over two decades—surveyed specialist physicians across 12 specialties and 10 provinces. This edition of Waiting Your Turn indicates that, overall, waiting times for medically necessary treatment have increased since last year. Specialist physicians surveyed report a median waiting time of 21.2 weeks between referral from a general practitioner and receipt of treatment—longer than the wait of 20.0 weeks reported in 2016. This year’s wait time—the longest ever recorded in this survey’s history—is 128% longer than in 1993, when it was just 9.3 weeks (see graphic above).In the video below, Ronald Reagan tells the joke about waiting ten years to get a new car in the Soviet Union. Here’s my variation of that joke for the Canadian medical system.
A patient in Canada is told by a hospital administrator that there will be a five-year wait for an appointment with a neurologist. The patient asks, “Will that be in the morning or the afternoon.” The hospital administrator asks, “What difference does that make, it’s not until five years from today.” The patient says, “Well, I have my next dental appointment on that day in the morning.”
Reprinted from the American Enterprise Institute.
Mark J. Perry
Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.
This article was originally published on FEE.org. Read the original article.
Wednesday, February 21, 2018
The Promise of Smart Contracts
STANFargo is primarily a movie about promises, implicit and explicit. It asks whether we will keep our promises to others, even against our own self-interest. What makes the movie fascinating is that many of the promises aren’t backed by the court system, for very good reason — the deals are illegal. Fargo asks if we can trust each other even if there is no government force making us comply. In other words, can we make contracts in the state of nature? In 1651, Hobbes argued that we couldn’t:
Jerry, we’re not just going to
give you seven hundred and fifty
thousand dollars.
WADE
What the heck were you thinkin’?
Heck, if I’m only gettin’ bank
interest, I’d look for complete
security. Heck, FDIC. I don’t
see nothin’ like that here.
JERRY
Yah, but I — okay, I would, I’d
guarantee ya your money back.
WADE
I’m not talkin’ about your damn
word, Jerry.
Fargo (1996)
“If a covenant be made wherein neither of the parties perform presently, but trust one another, in the condition of mere nature (which is a condition of war of every man against every man) upon any reasonable suspicion, it is void: but if there be a common power set over them both, with right and force sufficient to compel performance, it is not void. For he that performeth first has no assurance the other will perform after, because the bonds of words are too weak to bridle men’s ambition, avarice, anger, and other passions, without the fear of some coercive power…”In other words, we need some external mechanism to enforce our promises, to make it so that other people can depend on our commitment. Making credible commitments is the foundation of business and society in general. Like Hobbes, we tend to assume that the government’s coercive power is the only way to create contracts. Nobel Prize-winning economist Oliver Williamson called this view legal centralism, the assumption that “the legal system enforces promises in a knowledgeable, sophisticated, and low-cost way” (Williamson, 1996, 121).
Williamson and other Nobel laureates, such as Elinor Ostrom, built their careers on proving this assumption wrong. In many instances, the court system is costly and time-consuming, and sometimes corrupt. Moreover, people are often surprisingly able to enforce promises and maintain order in their own communities without government.
Promises, Promises
Trust is the bedrock of society. Without it, life would look a lot like Hobbes’ state of nature — constant suspicion, backstabbing, and insecurity. A person might make a promise, but given the opportunity, they might break it and pursue their own self-interest, a scenario which Williamson calls opportunism. However, business deals depend on being able to trust that a promise will be kept, otherwise our society would be limited to instantaneous exchanges. Fortunately, there are a number of mechanisms that can be used to secure a promise, all of which have advantages and disadvantages [1].
For instance, we might depend on personal ethics and only make promises with people who have a strict moral code. The advantage of relying on personal ethics is that they don’t require institutions or outside coercion, but ethics also have a severe limitation: it’s difficult to know very many people well enough to trust them to do the right thing, and even the best people might break their promises.
Another enforcement mechanism is reputation. Before making a contract with someone, we can ask around and find out how their previous interactions went. Reputation is extremely useful in small communities with repeated transactions since, if someone breaks their promise, they will be labeled untrustworthy and will be excluded from future interactions. However, reputation is more difficult to apply when interacting with strangers.
Other enforcement mechanisms for promises include strategies like vertical integration in business (where opportunism is curbed through the alignment of incentives) and the use of collateral.
The Internet Problem
But the Internet, currently a state of nature if there ever was one, presents new difficulties. Personal ethics, of course, are always helpful, but there is no guarantee that a random stranger will be ethical. Reputation is more difficult because pseudonyms like email addresses and usernames are often used instead of true names. When a person breaks their promise, they can simply erase their history by creating a new pseudonym with a clean reputation.Being able to cheaply create a new pseudonym in order to dodge a bad reputation is called whitewashing (Nisan 2007, 682). There are various ways to handle the problem of whitewashing. One is to distrust all newcomers since they could have a new identity to hide a bad reputation. Another possibility is to ensure that any pseudonym is tied to a real person or business so that a bad reputation can’t be escaped.
So why don’t we just create a global reputation system connected to our real-life identities? China is doing just that. As Wired explains, people with low ratings (including those who speak out against the government) will be punished in nearly every aspect of their lives: slower internet speeds, restricted access to restaurants, and the removal of the right to travel. They will have extreme difficulty being hired, renting apartments, and getting loans. In other words, a global reputation system can become less about trustworthiness and more about allegiance to authority.
It’s clear that many of the enforcement mechanisms are hard to apply to the Internet. Personal ethics are ideal but unreliable. Reputation systems that attempt to enforce societal or organizational norms must be carefully designed lest they turn into “basically a big data gamified version of the Communist Party’s surveillance methods” (Botsman 2017).
Lastly, laws cannot be easily applied to people in different countries, since each geographic jurisdiction has its own separate legal system, and there’s little chance of forcing a person from the Internet (especially if they are anonymous) to appear in court in a different country.
A Tool Is Only Good if It's Useful
It is important to realize that all of our enforcement mechanisms are merely tools to be used when helpful. Like a hammer or a screwdriver, each tool might apply in a different situation. Moreover, like tools, our enforcement mechanisms are subject to innovation. For hundreds of years, since Hobbes, we’ve tended to think of contracts as legal agreements that must be enforced by the court system. However, court enforcement is only one of many ways to enforce promises, and we need to hold open the possibility that we can improve on it.
As public choice economist Gordon Tullock pointed out, “We tend to forget that there is such a thing as technological progress in contracts. People discover new ways of making agreements, and over a period of time we obtain considerable benefit from this sort of technological progress” (Tullock 1970).
One such example of technological progress is the invention of smart contracts. Smart contracts are a new mechanism for enforcing promises, allowing us to make credible commitments with each other on a blockchain, including commitments with strangers in other countries. To be clear, smart contracts are not legally enforceable, but that’s part of their unique advantage. Smart contract commitments are enforced outside of the law, outside of legal jurisdictions, without government enforcement.
Given that our legal jurisdictions are primarily tied to our geographic location, and many countries have frail or unreliable legal institutions, this is a huge societal advance. It means that given an Internet connection, someone from one of the poorest countries in the world can make business deals and credible commitments with someone in the US as easily as if they were American. By creating trust where there was none, the world will be opened like never before.
Smart Contracts
The idea of smart contracts originated in the mid-90s when programmer and legal scholar Nick Szabo published a series of articles explaining their potential [2]. Like a vending machine, smart contracts rely on machinery for enforcement. However, instead of using physical machinery, smart contracts are literally code that runs on a blockchain, a kind of open, distributed ledger that runs on the computers of thousands of users, and which has no central authority.Contrary to their name, smart contracts have nothing to do with artificial intelligence. “Smart” refers to their self-enforcing quality. Smart contracts are immutable, meaning that the code by default cannot be changed. For the purposes of the contract, this is a good thing, since it’s impossible to break a promise if you have no opportunity to do so.
However, for programmers, immutability presents a special challenge. All code has bugs, and code that cannot be altered needs to be written carefully to try to minimize the number of mistakes since the bugs can’t be fixed after the fact. Thus, writing a smart contract is like trying to write code for NASA — correctness matters a great deal, and the consequences of bad code can be dire.
A smart contract might be as simple as a transfer of money from one account to another after a certain time, or it might be very complicated. However, one major limitation is that smart contracts can only transfer digital assets that are defined on a blockchain, such as cryptocurrencies. This might seem like a show-stopper given that cryptocurrencies aren’t yet widely accepted, but transferring money subject to certain conditions is all that many contracts do. Also, even contracts that include actions with physical objects can potentially be enforced by putting up bonds that will be lost if the promise isn’t kept.
Another limitation is that smart contracts cannot access outside information unless it is written to the blockchain. For instance, a smart contract by itself has no access to weather data. To condition a contract on the temperature, for example, there must be a third party that takes the data from a weather API and writes it to the blockchain in a way that is accessible to other users. This trusted data source is called an oracle.
There Are Advantages and Drawbacks
Smart contracts have many limitations. However, we tend to forget that the courts have limitations as well. We shouldn’t compare smart contracts to an idealized version of court-enforced contracts. When we view both critically, it becomes clear that court-enforced contracts have intrinsic flaws. First, access to the court system is rationed, and there are many people waiting for their turn simply to use the service. This means that cases may take years or even decades. Because of the slowness of the courts, businesses often use private arbitration clauses in their contracts that allow them to settle out of court.Another often-overlooked limitation of the court system is that because the court is an external third party, it can only guess at the true damages if the contract is breached. This is problematic because the court system determines what will be given to the aggrieved party.
Unfortunately, simply asking the aggrieved party how much the performance of the contract was worth to them isn’t going to work — they have no incentive to be honest in reporting their damages. Therefore, the court system tries to use its best judgment to determine what the damages are, but as Georgetown Law professor Randy Barnett points out, “Any assessment of legal damages attempts to quantity or objectify that which is actually subjective and essentially unmeasurable…” (Barnett 2010).
The solution is for the parties to write their valuations explicitly in the contract, as liquidated damages. However, the courts may decide not to enforce these if they think they are unfair. Thus, even in countries with the best institutions, court-enforced contracts have intrinsic limitations and paternalistic aims.
Smart contracts are not legal contracts, and in many cases may not be a good replacement for legal contracts. However, they are a valuable new tool in our limited toolbox. They allow us to make commitments — even with strangers — without government enforcement, something many, for hundreds of years, have assumed was impossible. In the next few decades, smart contracts will give people around the world the power to make agreements with each other despite corrupt and broken institutions, and so transform the lives of millions.
Footnotes
- In Order Without Law: How Neighbors Settle Disputes (Ellickson 1991), Yale Law Professor Robert C. Ellickson studied how cattle ranchers in rural Shasta County, California enforced their promises, and categorizes some of the constraints on behavior thusly: personal ethics, contracts, norms, organization rules, and law. Anthony T. Kronman, also a Yale Law Professor, wrote about the ability to make contracts without using court enforcement in Contract Law and the State of Nature (Kronman 1985). He describes a number of devices, such as “hostages,” collateral, hand-tying, and the alignment of incentives by union.
- One of the primary pieces is Formalizing and Securing Relationships on Public Networks (Szabo 1997).
Works Cited
- Barnett, Randy E. The Oxford Introductions to U.S. Law: Contracts. Oxford: Oxford University Press, 2010.
- Botsman, Rachel. “Big data meets Big Brother as China moves to rate its citizens.” WIRED. November 28, 2017. Accessed February 05, 2018.
- Ellickson, Robert C. Order Without Law: How Neighbors Settle Disputes. Cambridge, MA: Harvard University Press, 1991.
- Hobbes, Thomas, and J. C. A. Gaskin. Leviathan. Oxford: Oxford University Press, 1998.
- Kronman, Anthony T. “Contract Law and the State of Nature.” Journal of Law, Economics, & Organization 1, no. 1 (1985): 5-32.
- Nisan, Noam, Tim Roughgarden, Éva Tardos, Vijay V. Vazirani, and Christos H. Papadimitriou. Algorithmic Game Theory. New York: Cambridge University Press, 2008.
- Szabo, Nick. “Formalizing and Securing Relationships on Public Networks.” First Monday. September 1, 1997. Accessed February 05, 2018.
- Tullock, Gordon. Private Wants, Public Means: An economic analysis of the desirable scope of government. New York: Basic Books, Inc, 1970.
- Williamson, Oliver E. The Mechanisms of Governance. New York: Oxford Univ. Press, 1996.
Reprinted from Libertarianism.org.
Kate Sills
Kate Sills holds degrees in Computer Science and Cognitive Science from UC Berkeley.This article was originally published on FEE.org. Read the original article.
Monday, February 19, 2018
What’s Missing from the Public Land Conservation Debate? Property Rights
President Trump’s decision last month to shrink Bears Ears National Monument by over 80 percent has elicited an impassioned reaction from environmentalists, conservationists, and recreationists.
Outdoor sportswear purveyor Patagonia, Inc., perhaps most visibly among the dissidents, launched a campaign to challenge the president’s decision on both legal and moral grounds under the banner: The President Stole Your Land. Whether it is an advertising stunt or a good-faith ode to the company’s values, Patagonia’s effort has heightened public awareness of a topic hitherto unfamiliar to most people: federal lands policy.
Federal Ownership and Management
Though our culture mythicizes the rugged individualist ethos of the Wild West, about half of all land west of the Great Plains is actually owned by the federal government and controlled by Washington agencies.
Over 60 percent of the total acreage in the states of Nevada, Alaska, Idaho, and Utah — the focus of the present controversy — is federal land. Even California is 45 percent federally-owned.
As a percentage of the United States’ total area, the 640 million acres of federal land make up a whopping 28 percent.
With so much acreage in the hands of federal agencies, federal land policy has real significance in terms of our environmental quality, asset utilization, and economic output.
So how is it all managed?
The over 600 million acres in the federal estate are controlled by an alphabet soup of government entities ranging from the Forest Service to the National Parks Service to the Bureau of Land Management.
The purposes of these agencies vary, but one standard — the multiple use doctrine — serves as the general guiding principle for most of our federal lands.
This doctrine, established with the Federal Land Policy and Management Act of 1976, dictates that agencies consider "management of the public lands and their various resource values so that they are utilized in the combination that will best meet the present and future needs of the American people."
Land Management and the Knowledge Problem
Unfortunately, this is often executed poorly. Consider, for example, the longstanding issue of so-called overgrazing on federal lands in the west.
Environmental protection groups such as the Center for Biological Diversity argue that the Bureau of Land Management is subsidizing the destruction of native vegetation and wildlife habitats by charging ranchers a submarket rate for livestock grazing access.
While this suits the ranchers, does the practice meet the present and future needs of the Center for Biological Diversity’s thousands of supporters?
Dilemmas like this in federal lands policy that pit interest groups against one another should come as no surprise. The multiple use guiding principle, which demands the “combination that will best meet” Americans’ needs, holds the Bureau of Land Management and its counterparts to an impossible standard.
It is not the case that government agencies and their dutiful employees mean ill — we all know how earnest park rangers are — it is that agencies lack the capacity to administer resources in a way that reflects the best combination of uses.
Economists like Friedrich Hayek teach us that knowledge is diffuse, that valuations differ, and, therefore, that a concentration of economic power in government can lead to inefficient, harmful judgments.
Applied to federal lands policy, this principle indicates that guidance from Washington cannot tell us how to utilize land to best meet the present and future needs of the American people. What Hayek’s insight suggests, rather, is that the way to best meet present and future needs would be to enable the American people themselves to make determinations based on their own knowledge and valuations in a price-based marketplace.
Avoiding the Tragedy of the Commons
There is a popular misconception that markets are “short-sighted” and do not take future needs into account. But if this were true, then farmers would slaughter all of their livestock and would eat all of their seed corn.
Indeed, the “tragedy of the commons” is a well-known phenomenon in which overgrazing, overfishing, deforestation, and other issues occur because of a lack of property rights. For a recent example, consider the African white rhino, which was in danger of extinction due to black market poaching until private property rights in the rhinos were introduced and the species was saved. For the very same reason, nobody ever worries that cows will go extinct.
With more than a quarter of American land under federal ownership, a market transition would be no small feat, but through a deliberate, judicious process, property rights could gradually be allocated to transfer decision-making from planners in Washington agencies to active market participants. When property rights are allocated, economics teaches us, incentives promote efficient use that reflects the value properties hold.
Many Americans support federal land ownership as a means of conservation, but this view misses the problems created by public ownership, such as the aforementioned overgrazing and poaching.
Groups that value land preservation, like the Center for Biological Diversity and Patagonia, Inc., would have just as much of a right to participate in the marketplace as would ranchers or companies that might use the land for commercial development.
With the implementation of a price-centric system for federal lands policy reform, individuals, advocacy groups, and companies alike would be able to express the value they attach to the land not through lobbying the government, as we see now, but through trading.
Rather than fuming at President Trump’s Bears Ears downsizing, conservationists and recreationists should consider whether they truly want the lands they love to be controlled from the sterile confines of federal offices in Washington or whether they might benefit from a more open, free system.
Jordan McGillis
Jordan McGillis is a policy analyst at the Institute for Energy Research. Follow him on Twitter @jordanmcgilllis.
Outdoor sportswear purveyor Patagonia, Inc., perhaps most visibly among the dissidents, launched a campaign to challenge the president’s decision on both legal and moral grounds under the banner: The President Stole Your Land. Whether it is an advertising stunt or a good-faith ode to the company’s values, Patagonia’s effort has heightened public awareness of a topic hitherto unfamiliar to most people: federal lands policy.
Federal Ownership and Management
Though our culture mythicizes the rugged individualist ethos of the Wild West, about half of all land west of the Great Plains is actually owned by the federal government and controlled by Washington agencies.
Over 60 percent of the total acreage in the states of Nevada, Alaska, Idaho, and Utah — the focus of the present controversy — is federal land. Even California is 45 percent federally-owned.
As a percentage of the United States’ total area, the 640 million acres of federal land make up a whopping 28 percent.
With so much acreage in the hands of federal agencies, federal land policy has real significance in terms of our environmental quality, asset utilization, and economic output.
So how is it all managed?
The over 600 million acres in the federal estate are controlled by an alphabet soup of government entities ranging from the Forest Service to the National Parks Service to the Bureau of Land Management.
The purposes of these agencies vary, but one standard — the multiple use doctrine — serves as the general guiding principle for most of our federal lands.
This doctrine, established with the Federal Land Policy and Management Act of 1976, dictates that agencies consider "management of the public lands and their various resource values so that they are utilized in the combination that will best meet the present and future needs of the American people."
Land Management and the Knowledge Problem
Unfortunately, this is often executed poorly. Consider, for example, the longstanding issue of so-called overgrazing on federal lands in the west.
Environmental protection groups such as the Center for Biological Diversity argue that the Bureau of Land Management is subsidizing the destruction of native vegetation and wildlife habitats by charging ranchers a submarket rate for livestock grazing access.
While this suits the ranchers, does the practice meet the present and future needs of the Center for Biological Diversity’s thousands of supporters?
Dilemmas like this in federal lands policy that pit interest groups against one another should come as no surprise. The multiple use guiding principle, which demands the “combination that will best meet” Americans’ needs, holds the Bureau of Land Management and its counterparts to an impossible standard.
It is not the case that government agencies and their dutiful employees mean ill — we all know how earnest park rangers are — it is that agencies lack the capacity to administer resources in a way that reflects the best combination of uses.
Economists like Friedrich Hayek teach us that knowledge is diffuse, that valuations differ, and, therefore, that a concentration of economic power in government can lead to inefficient, harmful judgments.
Applied to federal lands policy, this principle indicates that guidance from Washington cannot tell us how to utilize land to best meet the present and future needs of the American people. What Hayek’s insight suggests, rather, is that the way to best meet present and future needs would be to enable the American people themselves to make determinations based on their own knowledge and valuations in a price-based marketplace.
Avoiding the Tragedy of the Commons
There is a popular misconception that markets are “short-sighted” and do not take future needs into account. But if this were true, then farmers would slaughter all of their livestock and would eat all of their seed corn.
Indeed, the “tragedy of the commons” is a well-known phenomenon in which overgrazing, overfishing, deforestation, and other issues occur because of a lack of property rights. For a recent example, consider the African white rhino, which was in danger of extinction due to black market poaching until private property rights in the rhinos were introduced and the species was saved. For the very same reason, nobody ever worries that cows will go extinct.
With more than a quarter of American land under federal ownership, a market transition would be no small feat, but through a deliberate, judicious process, property rights could gradually be allocated to transfer decision-making from planners in Washington agencies to active market participants. When property rights are allocated, economics teaches us, incentives promote efficient use that reflects the value properties hold.
Many Americans support federal land ownership as a means of conservation, but this view misses the problems created by public ownership, such as the aforementioned overgrazing and poaching.
Groups that value land preservation, like the Center for Biological Diversity and Patagonia, Inc., would have just as much of a right to participate in the marketplace as would ranchers or companies that might use the land for commercial development.
With the implementation of a price-centric system for federal lands policy reform, individuals, advocacy groups, and companies alike would be able to express the value they attach to the land not through lobbying the government, as we see now, but through trading.
Rather than fuming at President Trump’s Bears Ears downsizing, conservationists and recreationists should consider whether they truly want the lands they love to be controlled from the sterile confines of federal offices in Washington or whether they might benefit from a more open, free system.
Reprinted from The Hill
Jordan McGillis
Jordan McGillis is a policy analyst at the Institute for Energy Research. Follow him on Twitter @jordanmcgilllis.
This article was originally published on FEE.org. Read the original article.
Thursday, February 15, 2018
Crusaders of Might and Magic (PlayStation)
Crusaders of Might and Magic is an action RPG released by The 3DO Company in late 1999 for Windows and in early 2000 for the PlayStation. It's a pretty average game for the genre and received mixed reviews at best. All in all I would say it doesn't hold up as well as older games in the series for the most part.
Can Amazon Fix American Health Care?
Amazon is teaming up with Berkshire Hathaway and JP Morgan Chase to have a go at reforming American healthcare. This is a good idea for two reasons: first, American healthcare definitely needs reforming. Secondly, it needs to be done in a more, not less, free-market direction.
Yes, I know that’s not quite how most of us see it. The usual pearl-clutching view is that the US healthcare system is already far too free-market. But that diagnosis entirely misunderstands the system and what it is that ails it; the system is cartelized and rigged in favor of the producers of healthcare. So much so that the method of paying for it, private-sector insurance, just isn’t the root problem.
Monopolies and Spending Other People's Money
Milton Friedman explained all of this 40 years ago, and matters haven’t improved since then. There is the essential financial problem, which is that people aren’t spending their own money on themselves (the way of spending which produces the optimal outcome). PJ O’Rourke’s version of the four ways to spend money is more amusing than Friedman’s, but we are still stuck on the fourth and least efficient method of doing it — spending other peoples’ money on other people. Not something that’s going to be improved by government taking over the raising and distribution of the cash, obviously.
But beyond that, and far more important as an explanation of the cost of the system, is the manner in which medical care provision isn’t anything close to a free market. Friedman particularly inveighed against the restrictions the American Medical Association places upon the training, number of, mobility, and monopoly of doctors. But there are many other restrictions too. For example, in many states, it is not possible to open a new medical facility — or even expand the equipment installed — without the express agreement of all local competitors that such expansion is needed.
It is this protection of the incumbents which explains why the US pays nearly twice — 18 percent or so of GDP — what other rich nations do for its healthcare. The system is good in at least one sense: treatment, for those who have the insurance, is blindingly fast by the standards of almost everywhere else. The system is also paying for a very large portion of that public good, global drug research, and development. But that’s not enough to explain the cost — it’s the cartelization and monopoly within the system which is responsible.
It would be good to have someone come in and break that economic power. Competition is, after all, the cure for such monopolistic costs. Conceptually, we might imagine government doing this, but since that monopoly power is granted by the political system itself, it’s not where the solution can be sought.
Disruption Is Needed
Warren Buffett is fond of saying that he likes a business with a moat around it. What he means is protection from any competition which might erode profits. He usually means something like branding, a distribution system that would cost too much to replicate, or some similar advantage — although he’s not averse to legally protected profits, such as those to be had in the insurance industry. And there’s a legally constructed moat around US healthcare, which explains the vast incomes of those working in it and, thus, the cost of the system.
Just as with medieval castles, the answer to a moat in military terms is overwhelming offensive power. Or, in economic terms, sufficient market power to be able to battle that defense. Which is where — perhaps — we may be with these three companies taking on the task. They have enough people for whose health care they are already paying to make it interesting for them to try to crack the problem. They’re not short of resources, and they’re most certainly not lacking in entrepreneurial brains. Who knows? They may even be able to make a success of it.
American healthcare definitely needs reform. But to do that we need to identify what ails it and, as Friedman said, the answer is not the insurance model itself, but the privileges accorded to the providers of it. The answer to monopolistic costs imposed upon consumers is competition.
With these three major corporations turning their attentions to providing just that, it may be possible to get genuine reform. We should wish them luck, for they’re going to need it — perhaps we should lay in a stock of popcorn as we watch how it plays out. But since they are identifying the problem correctly, there is at least a reasonable chance that they’ll be able to improve the system substantially.
Reprinted from CapX.
Tim Worstall
Tim is a Fellow at the Adam Smith Institute in London
This article was originally published on FEE.org. Read the original article.
Wednesday, February 14, 2018
Hardball (Commodore 64)
I've never played a whole lot of sports related video games. I covered my favorites on the Commodore 64 recently (The Games series by Epyx). The only other sports game I can recall playing on the Commodore 64 is HardBall!.
HardBall!, as the games suggests, is a baseball game and it was released for various home computers, including the Commodore 64, in 1985. The graphics were excellent on the Commodore 64 and the game play was fairly straightforward. There were not a huge number of options so the game was not that complicated. There are only two teams, each with their own roster of players. There are multiple pitchers and other players for each team and you can make substitutions but there are not a huge number to chose from though this does offer some strategy. Your pitcher does get tired and may need to be replaced if you don't want to throw home run pitches all the time.
Each pitcher has a list of pitches to chose from and each player has their own stats. It would have been nice if there was more to chose from in this regard (or if it had the ability to add additional players) but there is something to be said for simplicity. The game offers some enjoyment when playing against the computer but the computer can be a tough opponent and a second player is always more fun. HardBall! was notable for being the first baseball game to present a behind the pitcher viewpoint.
The original HardBall! was also available on the Apple II, Apple IIgs, Atari 8-bit, Amiga, Atari ST, DOS, Sega Genesis, Macintosh and a few other systems. The Commodore 64 version compares reasonably well with the versions for more advanced systems. Though the original has never been re-released, HardBall! was successful enough to spawn a number of sequels. There were six major releases with some of those having multiple editions. Only the first was ever available on the Commodore 64. The final iteration was Hardball 6: 2000 Edition which came out in 1999 for Windows based computers.
The review above for the Commodore 64 version comes from the May/June 1986 issue of Commodore Microcomputers. It is mostly positive but does mention the difficulty of the computer opponent. For an arcade baseball game it was pretty decent for its time.
Once Again, the FDA Is Making Life Harder for Sick People
While I’m not quite arrogant enough to believe that the federal government implements policy at me personally, sometimes it sure feels like it, and the FDA’s most recent “recommendations” certainly fit that bill.
As I’ve mentioned in a previous article, I have Crohn’s disease. It’s an autoimmune disorder that affects the digestive tract and is generally classified under the term inflammatory bowel disease (IBD). And I’m not alone. There are approximately 1.6 million Americans who suffer from IBD. Throw in the 25 to 45 million Americans with the less-severe irritable bowel syndrome (IBS), and you have a lot of people dealing with chronically problematic tummies.
My Crohn’s is stubborn and lingering. It flares up with very little warning and sticks around for a long time. My last flare-up lasted about a year. That’s an entire year of joint pain, fever, crippling abdominal pain, internal bleeding, chronic exhaustion, and somewhere between ten and twenty trips to the bathroom a day.
It’s also expensive to treat. A single dose of my prescribed immunomodulator costs a little over $20,000 retail. I take it every four weeks. And it, like all immunotherapy drugs, leaves me terrifyingly vulnerable to opportunistic disease — everything from the common cold to tuberculosis to MRSA — as well as increasing my chances for developing fun things like a rare and deadly type of lymphoma.
Long-term treatment may be expensive and slow-acting, but there is something I can take that will at least temporarily lessen some of my more pressing symptoms. I can get this medicine at any pharmacy, over the counter, for pretty cheap. It’s called loperamide, although you might better recognize it by its brand name Imodium. And now the FDA wants to make it harder to get.
There’s been much ink spilled on how to help solve this problem, so we won’t rehash that here. What concerns me is the blatant disregard the FDA has for genuinely sick people. In its frantic efforts to Do Something about fringe cases, it’s only making already-difficult life even harder for the chronically ill — to very little positive effect.
This isn’t the first time the FDA has restricted the purchase quantity of an over-the-counter medication. In an attempt to curb methamphetamine production, in 2006 the FDA put limits on how much pseudoephedrine, a nasal decongestant, you could buy and also required a photo ID to do so. Despite adding a lot of hassle into the treatment of stuffy noses, meth only became more pure.
What on earth makes anyone think that going down this same road with loperamide will have any kind of positive benefit?
The government has already wrecked severe pain management in its crusade against opioid abuse while having no discernable impact on the rate of overdoses. But instead of making it easier for addicts to get help, they’ve instead opted to make over-the-counter treatment of a fairly common ailment more difficult. It is infuriating to me how the FDA, with its access to much more detailed health statistics than I have with a casual Google search, could so callously disregard the impact on everyday life for more than 25 million Americans.
After all, isn’t the FDA — and, indeed, all government agencies — ostensibly there to make life better? Between its driving up the price of medicines, its refusal to acknowledge alternative therapies, and now this, I fail to see it.
Jen Maffessanti
Jennifer Maffessanti is an Associate Editor at FEE, chairwoman of America's Future Foundation Atlanta chapter, and mother of two. When she's not advocating for liberty or chasing kids, she can usually be found cooking or maybe racing cars. You can follow her on Twitter.
As I’ve mentioned in a previous article, I have Crohn’s disease. It’s an autoimmune disorder that affects the digestive tract and is generally classified under the term inflammatory bowel disease (IBD). And I’m not alone. There are approximately 1.6 million Americans who suffer from IBD. Throw in the 25 to 45 million Americans with the less-severe irritable bowel syndrome (IBS), and you have a lot of people dealing with chronically problematic tummies.
My Crohn’s is stubborn and lingering. It flares up with very little warning and sticks around for a long time. My last flare-up lasted about a year. That’s an entire year of joint pain, fever, crippling abdominal pain, internal bleeding, chronic exhaustion, and somewhere between ten and twenty trips to the bathroom a day.
It’s also expensive to treat. A single dose of my prescribed immunomodulator costs a little over $20,000 retail. I take it every four weeks. And it, like all immunotherapy drugs, leaves me terrifyingly vulnerable to opportunistic disease — everything from the common cold to tuberculosis to MRSA — as well as increasing my chances for developing fun things like a rare and deadly type of lymphoma.
Long-term treatment may be expensive and slow-acting, but there is something I can take that will at least temporarily lessen some of my more pressing symptoms. I can get this medicine at any pharmacy, over the counter, for pretty cheap. It’s called loperamide, although you might better recognize it by its brand name Imodium. And now the FDA wants to make it harder to get.
We’ve Done This Before
Apparently, some few people are taking dangerously high doses of loperamide to get high. Generally speaking, those abusing loperamide are already addicted to opiates. And, as you’d expect from huge overdoses, it’s making these people very sick and, in rare cases, killing them. This is, of course, indicative of the larger overall problem of opiate addiction in this country, but trying to stem the opioid crisis through regulation of how many anti-diarrhea pills you can buy at a time is a bit like putting a bandage on a wound while ignoring the arterial bleeding.There’s been much ink spilled on how to help solve this problem, so we won’t rehash that here. What concerns me is the blatant disregard the FDA has for genuinely sick people. In its frantic efforts to Do Something about fringe cases, it’s only making already-difficult life even harder for the chronically ill — to very little positive effect.
This isn’t the first time the FDA has restricted the purchase quantity of an over-the-counter medication. In an attempt to curb methamphetamine production, in 2006 the FDA put limits on how much pseudoephedrine, a nasal decongestant, you could buy and also required a photo ID to do so. Despite adding a lot of hassle into the treatment of stuffy noses, meth only became more pure.
What on earth makes anyone think that going down this same road with loperamide will have any kind of positive benefit?
Making Life Harder
I fully acknowledge that most people do not have the need to carry a supply of anti-diarrhea medication with them wherever they go. But I, and millions of other Americans, do, and the vast majority of us use it responsibly. We use it to make it through the workday and sleep through the night. We use it to manage the two-hour car ride to grandma’s house. We use it to get past the waiting room at the doctor’s office.The government has already wrecked severe pain management in its crusade against opioid abuse while having no discernable impact on the rate of overdoses. But instead of making it easier for addicts to get help, they’ve instead opted to make over-the-counter treatment of a fairly common ailment more difficult. It is infuriating to me how the FDA, with its access to much more detailed health statistics than I have with a casual Google search, could so callously disregard the impact on everyday life for more than 25 million Americans.
After all, isn’t the FDA — and, indeed, all government agencies — ostensibly there to make life better? Between its driving up the price of medicines, its refusal to acknowledge alternative therapies, and now this, I fail to see it.
Jen Maffessanti
Jennifer Maffessanti is an Associate Editor at FEE, chairwoman of America's Future Foundation Atlanta chapter, and mother of two. When she's not advocating for liberty or chasing kids, she can usually be found cooking or maybe racing cars. You can follow her on Twitter.
This article was originally published on FEE.org. Read the original article.
Tuesday, February 13, 2018
How Easy Money Is Rotting America from the Inside-Out
The Federal Reserve has been the main cause of business cycles in America since 1913. For several decades, it has tried to hide the consequences of its policies by enabling easy credit during each recession. As Jonathan Newman wrote yesterday, pouring trillions of dollars into the financial sector obscures the external signs of the recession such as low asset prices and high unemployment and promotes economic malinvestment.
This malinvestment creates the conditions that cause the next recession. Some of the consequences of the Fed’s policies, such as stock market and housing bubbles can be directly attributed to its policies. In other cases, the artificially low interest rates and other “easy money” policies foster an "infrastructure rot" that erodes the efficiency of the American economy, the standard of living of consumers, and eats away at American infrastructure. These effects are difficult to trace back to the Fed's policies, so let’s concretize some examples to understand how Federal Reserve policies affect America.
At the city level, low interest rates allow cities to fund new public projects such as parks and bridges. While this may seem fine and dandy, all infrastructure projects have a maintenance cost. It’s not sufficient to build a park. One must also have the money to maintain it every year. If there is not enough revenue to pay for maintenance, the park will literally rot until the playgrounds fall apart, the lawns are overgrown, the lights fail, and the park becomes too dangerous for families to play in.
The same thing will happen to streets, bridges, and plumbing. This is one of the ways urban decay happens: easy money policies fund unsustainable urban infrastructure projects which make politicians look good, but end up crumbling a few years or decades later. The Flint water crisis happened in large part because the Federal government funded infrastructure projects that were not sustainable by the incomes of the people of Michigan.
Easy money from the Fed also rots the guts of American corporations. New money goes to the most politically-connected businesses first, and funds projects that would not be possible in a free market. Because private investors haven’t actually saved enough to see the projects through to completion, and consumers don’t value the product enough to cover production costs, the companies getting free money from the government either fail or receive endless bailouts. For example, easy money encouraged unsustainable commitments like high union wages and pensions, forcing US automakers to sell cars for prices that consumers could not pay given their actual savings rate. When sales dipped in 2009, the government was forced to bail out GM, Chrysler, and Ford in 2009.
While small businesses are the last to get access to the Fed's easy money taps, big banks received over $700 billion in TARP bailouts and even more selling U.S. Treasury bonds to the Fed under the QE program. Such subsidies signal to banks that their primary customer is the government, not consumers. As a result, financial services have stagnated, and banks have fought rather than embraced genuine innovations like the blockchain.
The 2009 crisis made banks cautious of making mortgages to people who clearly could not afford them. But the Fed kept giving away free money and enabled a new phenomenon: zero-interest auto loans. While this may seem like a good deal for consumers, the Fed's credit expansion has created an auto-credit bubble worth 9.2% of all household debt. Consumers are buying and leasing cars that they would not normally be able to afford.
Instead of being taught to save, millennials are learning to have a negative savings rate (acquiring more debt than assets) and trust their future entirely to the government. If a recession happens, millions of people will suddenly find that they are unable to keep their cars and lack any emergency savings. When millions of unwanted cars are dumped back onto the market, automakers will again be unable to keep up with their inflated liabilities, requiring another bailout.
Perhaps one of the most destructive products of easy money has been the War On Terror. The U.S. has spent about $5 trillion on this seemingly endless war, and most of the money has not come from higher taxes, but from selling bonds to institutions like pensions funds, and especially foreign countries such as China and Japan. American citizens have gained nothing of value, while our government has been spreading death, destruction, and revolution abroad.
While the national economy has gotten away with federal deficits and a $20 trillion dollar debt for decades, this trend is only sustainable as long as the rest of the world keeps lending the U.S. money. When they decide to stop funding our wars and financial irresponsibility, Americans will suddenly be faced with paying trillions of dollars in liabilities. This overdue correction will likely come with dramatic reductions to Americans’ standard of living.
My point in writing this to help you visualize the destructive effect of the U.S. government's easy money policies from an abstract harm to the practical harm: collapsing bridges, kids poisoned from lead plumbing, millions of cars rotting in junkyards, scandalous bank services fees, bombs falling on innocent people all over the world, and widespread poverty once the easy-credit party ends.
David L Veksler
David Veksler is the Director of Marketing at FEE.
This malinvestment creates the conditions that cause the next recession. Some of the consequences of the Fed’s policies, such as stock market and housing bubbles can be directly attributed to its policies. In other cases, the artificially low interest rates and other “easy money” policies foster an "infrastructure rot" that erodes the efficiency of the American economy, the standard of living of consumers, and eats away at American infrastructure. These effects are difficult to trace back to the Fed's policies, so let’s concretize some examples to understand how Federal Reserve policies affect America.
At the city level, low interest rates allow cities to fund new public projects such as parks and bridges. While this may seem fine and dandy, all infrastructure projects have a maintenance cost. It’s not sufficient to build a park. One must also have the money to maintain it every year. If there is not enough revenue to pay for maintenance, the park will literally rot until the playgrounds fall apart, the lawns are overgrown, the lights fail, and the park becomes too dangerous for families to play in.
The same thing will happen to streets, bridges, and plumbing. This is one of the ways urban decay happens: easy money policies fund unsustainable urban infrastructure projects which make politicians look good, but end up crumbling a few years or decades later. The Flint water crisis happened in large part because the Federal government funded infrastructure projects that were not sustainable by the incomes of the people of Michigan.
Easy money from the Fed also rots the guts of American corporations. New money goes to the most politically-connected businesses first, and funds projects that would not be possible in a free market. Because private investors haven’t actually saved enough to see the projects through to completion, and consumers don’t value the product enough to cover production costs, the companies getting free money from the government either fail or receive endless bailouts. For example, easy money encouraged unsustainable commitments like high union wages and pensions, forcing US automakers to sell cars for prices that consumers could not pay given their actual savings rate. When sales dipped in 2009, the government was forced to bail out GM, Chrysler, and Ford in 2009.
While small businesses are the last to get access to the Fed's easy money taps, big banks received over $700 billion in TARP bailouts and even more selling U.S. Treasury bonds to the Fed under the QE program. Such subsidies signal to banks that their primary customer is the government, not consumers. As a result, financial services have stagnated, and banks have fought rather than embraced genuine innovations like the blockchain.
The 2009 crisis made banks cautious of making mortgages to people who clearly could not afford them. But the Fed kept giving away free money and enabled a new phenomenon: zero-interest auto loans. While this may seem like a good deal for consumers, the Fed's credit expansion has created an auto-credit bubble worth 9.2% of all household debt. Consumers are buying and leasing cars that they would not normally be able to afford.
Instead of being taught to save, millennials are learning to have a negative savings rate (acquiring more debt than assets) and trust their future entirely to the government. If a recession happens, millions of people will suddenly find that they are unable to keep their cars and lack any emergency savings. When millions of unwanted cars are dumped back onto the market, automakers will again be unable to keep up with their inflated liabilities, requiring another bailout.
Perhaps one of the most destructive products of easy money has been the War On Terror. The U.S. has spent about $5 trillion on this seemingly endless war, and most of the money has not come from higher taxes, but from selling bonds to institutions like pensions funds, and especially foreign countries such as China and Japan. American citizens have gained nothing of value, while our government has been spreading death, destruction, and revolution abroad.
While the national economy has gotten away with federal deficits and a $20 trillion dollar debt for decades, this trend is only sustainable as long as the rest of the world keeps lending the U.S. money. When they decide to stop funding our wars and financial irresponsibility, Americans will suddenly be faced with paying trillions of dollars in liabilities. This overdue correction will likely come with dramatic reductions to Americans’ standard of living.
My point in writing this to help you visualize the destructive effect of the U.S. government's easy money policies from an abstract harm to the practical harm: collapsing bridges, kids poisoned from lead plumbing, millions of cars rotting in junkyards, scandalous bank services fees, bombs falling on innocent people all over the world, and widespread poverty once the easy-credit party ends.
David L Veksler
David Veksler is the Director of Marketing at FEE.
This article was originally published on FEE.org. Read the original article.
Thursday, February 8, 2018
The FISA Reauthorization Only Boosts Big Brother
In a bipartisan manner, Congress recently passed the FISA Reauthorization Act of 2017. On January 19th, President Trump signed this bill into law. The new law extends the controversial Section 702 program that allows the NSA to conduct warrantless surveillance of non-US citizens or residents.
This program clearly serves the interests of our intelligence agencies. However, the private information of millions of Americans is also collected in this program. And the private information of anyone in the US who communicates with someone outside of the country could potentially be stored in this massive database.
Significant Privacy Issues
How expansive is this program? The Washington Post reviewed a sample of communications from the Edward Snowden leaks and found that 9 out of 10 people in the database were not surveillance targets. Nearly half of these people were American citizens or residents, and their private information was swept up in this net.
This isn’t just a matter of preserving privacy. Once information enters this program, all conventional constitutional law goes by the wayside. The FBI has access to this program to do “backdoor searches” for any crime without a warrant. That information can be passed along to whichever law enforcement agencies the FBI deems necessary. Furthermore, this isn’t a minor program that applies to a few people. There were an estimated 106,469 targets in 2016.
Even former CIA and NSA director Michael Hayden has admitted that the FBI’s access to this information without a warrant is a “no-fooling legitimate issue.” Hence, a small but bipartisan group within Congress supported the USA RIGHTS Act that would have maintained national security intelligence without sacrificing Americans’ basic freedoms. The bill would have required a warrant for FBI access to US citizens’ communications.
A group of five Senators, notably Ron Wyden (D-OR) and Rand Paul (R-KY), filibustered the FISA Reauthorization Act of 2017 in hopes of redirecting support for the USA Rights Act. Unfortunately, their effort was nullified when Sen. Claire McCaskill (D-MO) cast the deciding vote that ended the filibuster. She was one of 18 Democrats who voted in kind.
Bear in mind, the Democrats have consistently criticized President Trump’s authoritarian ways, yet their support for this bill contradicted all of their pleas for responsible leadership. Moreover, this filibuster was nullified on January 16th, the day after the birthday of Martin Luther King, one of the foremost victims of federal government persecution.
No Reform, Just Expansion
Nonetheless, Congress passed this bill under the guise that reforms in favor of civil liberties had been made. The new law requires the FBI to obtain a warrant to search the 702 database for information about American citizens. However, there’s a catch. The FBI only needs to get a warrant if that person is already under criminal investigation. Consequently, this “reform” actually incentivizes the FBI to conduct more arbitrary searches and provides criminals with better protections.
Some legal experts, such as Robyn Greene of the Open Technology Institute at New America, contest that the new law has also essentially reauthorized and expanded a practice that the NSA agreed to discontinue. This involves the collection of “about” data in which your personal communications can be swept up by the NSA for mentioning a person who is a target of surveillance. This decision poses a particular danger to the media or political activists.
Furthermore, there were no reforms of a little-known system called "parallel construction." As mentioned earlier, the information in the NSA's database can be used by federal law enforcement agencies, particularly the DEA, for domestic operations. However, the government doesn’t have to disclose in a court of law that the investigation was initiated by information from the NSA. Considering that prosecutors can omit the origin of the investigation, a former DEA agent, Finn Selander, accurately criticized this practice by analogizing it as “money laundering” for evidence.
There are many disturbing revelations about the FISA Reauthorization Act. Suffice it to say, Congress provided a tremendous amount of latitude to an agency that has shown no determination for reform in the wake of high-profile scandals. As a matter of fact, on the same day that President Trump signed the FISA Reauthorization Act, Politico reported that the NSA destroyed info related to Bush's warrantless wiretaps. That "mistake" was quite convenient because that information was to be used as evidence in pending lawsuits against the government.
A pair of Trump tweets illustrated some of the hypocrisy on this issue. At 4:33 in the morning on January 11th, Trump’s tweet asserted that the FISA Act “may have been used, with the help of the discredited and phony Dossier, to so badly surveil and abuse the Trump campaign by the previous administration and others?” Nearly two hours later, he flipped his stance tweeting, “With that being said, I have personally directed the fix to the unmasking process since taking office and today’s vote is about foreign surveillance of foreign bad guys on foreign land. We need it! Get smart!”
As easy as it is to poke fun at Trump on this issue, his views related to authoritarian government surveillance aren’t much different from most Americans. Polls show that public opinion on NSA spying shifts back and forth depending upon who is in the White House. In other words, liberal or conservative voters generally aren’t opposed to mass surveillance as long as their party is in power.
Both sides can point to a list, which is far too lengthy for this space, of federal government abuses for political purposes. However, the two major parties have continued raising the stakes by providing more power to the federal government with few meaningful reforms.
No Protection of Whistleblowers
The FISA Reauthorization Act received strong support from the Republicans despite the backdrop of the “Nunes memo” alleging misconduct towards President Trump. Over the last year, conservatives have heard from NSA whistleblower William Binney who is now a frequent guest on Fox News. Binney was persona non grata during the Bush administration, but now his revelations indirectly help build a narrative that the Deep State is suppressing Trump.
Binney and his fellow NSA whistleblowers felt the wrath of the FBI for merely speaking truth to power. Ironically, the disturbing information from intelligence whistleblowers led to the creation of the 702 program, which was approved by Congress in 2008, in part, to rein in the warrantless wiretaps by the Bush administration.
In an environment where there is no real government accountability, it elevates the importance of whistleblower protection. Nonetheless, numerous government whistleblowers have faced retaliation for merely performing their civic duty. The latest victim being Dan Meyer, the director of the Intelligence Community Whistleblowing and Source Protection program.
Meyer was escorted out of the building in December of last year, and his office was marked with police tape. He has been placed on leave and faces termination in an act of clear retribution. For several years, Meyers has worked as an advocate for whistleblowers in the Defense Department.
This is a familiar situation for Meyer personally as he has acted as a whistleblower in the past. He once received a settlement from the government due to the retribution he faced after disclosing that Leon Panetta allegedly leaked classified material to the directors of Zero Dark Thirty. In his current situation, Meyer is reportedly facing retaliation for pressuring the inspector generals from the 17 intelligence agencies to implement better whistleblower protections.
We face a system that punishes the reformers and rewards the most corrupt. For years, an AT&T technician, Mark Klein, warned of the secret backroom that connected to the NSA. His efforts were suppressed from the public eye until leaks from NSA whistleblowers were printed by the press. Nonetheless, AT&T has been rewarded handsomely with a multi-billion contract that was reported last week.
Unfortunately, public outrage against government abuses is generally selective and partisan. All in all, both major political parties use critical rhetoric that warns of the power of Big Brother, yet neither entity does much to prevent the growth of the surveillance state.
Brian Saady
Brian Saady is a freelance writer who focuses on a number of human rights and criminal justices issues. He’s also the author of four books, including a three-book series, Rackets, which is about the legalization of drugs and gambling, and the decriminalization of prostitution.
This program clearly serves the interests of our intelligence agencies. However, the private information of millions of Americans is also collected in this program. And the private information of anyone in the US who communicates with someone outside of the country could potentially be stored in this massive database.
Significant Privacy Issues
How expansive is this program? The Washington Post reviewed a sample of communications from the Edward Snowden leaks and found that 9 out of 10 people in the database were not surveillance targets. Nearly half of these people were American citizens or residents, and their private information was swept up in this net.
This isn’t just a matter of preserving privacy. Once information enters this program, all conventional constitutional law goes by the wayside. The FBI has access to this program to do “backdoor searches” for any crime without a warrant. That information can be passed along to whichever law enforcement agencies the FBI deems necessary. Furthermore, this isn’t a minor program that applies to a few people. There were an estimated 106,469 targets in 2016.
Even former CIA and NSA director Michael Hayden has admitted that the FBI’s access to this information without a warrant is a “no-fooling legitimate issue.” Hence, a small but bipartisan group within Congress supported the USA RIGHTS Act that would have maintained national security intelligence without sacrificing Americans’ basic freedoms. The bill would have required a warrant for FBI access to US citizens’ communications.
A group of five Senators, notably Ron Wyden (D-OR) and Rand Paul (R-KY), filibustered the FISA Reauthorization Act of 2017 in hopes of redirecting support for the USA Rights Act. Unfortunately, their effort was nullified when Sen. Claire McCaskill (D-MO) cast the deciding vote that ended the filibuster. She was one of 18 Democrats who voted in kind.
Bear in mind, the Democrats have consistently criticized President Trump’s authoritarian ways, yet their support for this bill contradicted all of their pleas for responsible leadership. Moreover, this filibuster was nullified on January 16th, the day after the birthday of Martin Luther King, one of the foremost victims of federal government persecution.
No Reform, Just Expansion
Nonetheless, Congress passed this bill under the guise that reforms in favor of civil liberties had been made. The new law requires the FBI to obtain a warrant to search the 702 database for information about American citizens. However, there’s a catch. The FBI only needs to get a warrant if that person is already under criminal investigation. Consequently, this “reform” actually incentivizes the FBI to conduct more arbitrary searches and provides criminals with better protections.
Some legal experts, such as Robyn Greene of the Open Technology Institute at New America, contest that the new law has also essentially reauthorized and expanded a practice that the NSA agreed to discontinue. This involves the collection of “about” data in which your personal communications can be swept up by the NSA for mentioning a person who is a target of surveillance. This decision poses a particular danger to the media or political activists.
Furthermore, there were no reforms of a little-known system called "parallel construction." As mentioned earlier, the information in the NSA's database can be used by federal law enforcement agencies, particularly the DEA, for domestic operations. However, the government doesn’t have to disclose in a court of law that the investigation was initiated by information from the NSA. Considering that prosecutors can omit the origin of the investigation, a former DEA agent, Finn Selander, accurately criticized this practice by analogizing it as “money laundering” for evidence.
There are many disturbing revelations about the FISA Reauthorization Act. Suffice it to say, Congress provided a tremendous amount of latitude to an agency that has shown no determination for reform in the wake of high-profile scandals. As a matter of fact, on the same day that President Trump signed the FISA Reauthorization Act, Politico reported that the NSA destroyed info related to Bush's warrantless wiretaps. That "mistake" was quite convenient because that information was to be used as evidence in pending lawsuits against the government.
A pair of Trump tweets illustrated some of the hypocrisy on this issue. At 4:33 in the morning on January 11th, Trump’s tweet asserted that the FISA Act “may have been used, with the help of the discredited and phony Dossier, to so badly surveil and abuse the Trump campaign by the previous administration and others?” Nearly two hours later, he flipped his stance tweeting, “With that being said, I have personally directed the fix to the unmasking process since taking office and today’s vote is about foreign surveillance of foreign bad guys on foreign land. We need it! Get smart!”
As easy as it is to poke fun at Trump on this issue, his views related to authoritarian government surveillance aren’t much different from most Americans. Polls show that public opinion on NSA spying shifts back and forth depending upon who is in the White House. In other words, liberal or conservative voters generally aren’t opposed to mass surveillance as long as their party is in power.
Both sides can point to a list, which is far too lengthy for this space, of federal government abuses for political purposes. However, the two major parties have continued raising the stakes by providing more power to the federal government with few meaningful reforms.
No Protection of Whistleblowers
The FISA Reauthorization Act received strong support from the Republicans despite the backdrop of the “Nunes memo” alleging misconduct towards President Trump. Over the last year, conservatives have heard from NSA whistleblower William Binney who is now a frequent guest on Fox News. Binney was persona non grata during the Bush administration, but now his revelations indirectly help build a narrative that the Deep State is suppressing Trump.
Binney and his fellow NSA whistleblowers felt the wrath of the FBI for merely speaking truth to power. Ironically, the disturbing information from intelligence whistleblowers led to the creation of the 702 program, which was approved by Congress in 2008, in part, to rein in the warrantless wiretaps by the Bush administration.
In an environment where there is no real government accountability, it elevates the importance of whistleblower protection. Nonetheless, numerous government whistleblowers have faced retaliation for merely performing their civic duty. The latest victim being Dan Meyer, the director of the Intelligence Community Whistleblowing and Source Protection program.
Meyer was escorted out of the building in December of last year, and his office was marked with police tape. He has been placed on leave and faces termination in an act of clear retribution. For several years, Meyers has worked as an advocate for whistleblowers in the Defense Department.
This is a familiar situation for Meyer personally as he has acted as a whistleblower in the past. He once received a settlement from the government due to the retribution he faced after disclosing that Leon Panetta allegedly leaked classified material to the directors of Zero Dark Thirty. In his current situation, Meyer is reportedly facing retaliation for pressuring the inspector generals from the 17 intelligence agencies to implement better whistleblower protections.
We face a system that punishes the reformers and rewards the most corrupt. For years, an AT&T technician, Mark Klein, warned of the secret backroom that connected to the NSA. His efforts were suppressed from the public eye until leaks from NSA whistleblowers were printed by the press. Nonetheless, AT&T has been rewarded handsomely with a multi-billion contract that was reported last week.
Unfortunately, public outrage against government abuses is generally selective and partisan. All in all, both major political parties use critical rhetoric that warns of the power of Big Brother, yet neither entity does much to prevent the growth of the surveillance state.
Brian Saady
Brian Saady is a freelance writer who focuses on a number of human rights and criminal justices issues. He’s also the author of four books, including a three-book series, Rackets, which is about the legalization of drugs and gambling, and the decriminalization of prostitution.
This article was originally published on FEE.org. Read the original article.