In a speech tonight, President Obama is expected to announce the creation of a government infrastucture bank as part of his plan to reduce unemployment. Vice President for Policy Wayne Crews explains why it won’t work as planned, and offers an alternative idea: liberalization.
Comments Off on CEI Podcast for September 8, 2011: The Infrastructure Bank
Posted in CEI Podcast, Economics, Spending, Stimulus
Tagged forbes, infrastructure bank, jobs, obama, obama jobs speech, obama speech, wayne crews
One way to create jobs is to give workers shovels instead of backhoes — or even spoons. Another way is to ban computers, or farm machinery. None of these are good options. A better way to create jobs is to make it easier to create wealth.
That means repealing regulations that make it expensive to hire new workers. That also means cutting deficit spending that crowds out scarce investment capital that businesses need to grow, and to hire. This new video from Cato makes that point very effectively (click here if the embed doesn’t work).
I’ve argued for a long time that stimulus bills are poorly named; it implies that they stimulate the economy. “Spending bill” is a non-loaded term that has the added advantage of being accurate. Both parties have passed spending bills over the years in the hopes of stimulating the economy. Intentions being different than results, Democrats are finally starting to agree with me on this misuse of language, as The Hill reports:
Democrats are now being careful to frame their job-creation agenda in language excluding references to any stimulus, even though their favored policies for ending the deepest recession since the Great Depression are largely the same.
The article continues:
Recognizing the unpopularity of the 2009 package, however, Democratic leaders have revised their message with less loaded language – “job creation” instead of “stimulus” and “Make it in America” in lieu of “Recovery Act” – in hopes of tackling the jobs crisis.
Spending bills work by taking some money out of the economy and then putting it back in, minus transaction costs and political malfeasance; one can see why they don’t have much effect. The thinking is that Congress can invest money more wisely than private investors. If Solyndra is any indicator, that isn’t true.
Public opinion has soured on spending bills after some initial optimism. That same public also wants its politicians to do something, anything to get the economy going.
But the only tool available to Congress is spending. That’s why politicians insist on following the same failed policy over and over – it is their only tool. The only alternatives are doing nothing, or actively paring back spending and regulations. And those don’t look nearly as glamorous on camera.
Stimulus, spending bill, job creation bill – a rose by any other name has thorns just as sharp. And this particular rose refuses to bloom. That means it’s time to try something else. Maybe reducing spending to sustainable Clinton-era levels, which isn’t even particularly austere. Congress should also try a deregulatory stimulus sometime.
The Department of Justice sued this week to stop the proposed AT&T-T-Mobile merger. Associate Director of Technology Studies Ryan Radia thinks this is a mistake. The evidence that the merger would make the wireless market less competitive is unconvincing. Nobody knows if the merger will succeed or not. Either way, consumer harm is unlikely.
Comments Off on CEI Podcast for September 1, 2011: The Blocked AT&T-T-Mobile Merger
Posted in Antitrust, CEI Podcast, Economics, Technology
Tagged Antitrust, at&t, at&t merger, at&t t-mobile merger, department of justice, doj, justice department, ryan radia, t-mobile, t-mobile merger, wireless
Don Boudreaux hits it out of the park in this video (click here if the embedded video doesn’t work).
He brings up an important question that free trade skeptics need to answer: if international trade barriers create wealth, why stop there? Every state should have its own trade barriers against every other state.
Heck, inter-city trade should have barriers, too. Imagine how wealthy we would be if San Diego placed tariffs on all goods from Los Angeles! Barriers to inter-household trade within the same city could have even more profound effects.
The economic logic is exactly the same in all those cases. Protectionism’s greatest failing is that it does not recognize that fact. It is astounding that many people see nothing inconsistent in favoring restrictions at one level, but not the others.
Today, the Department of Justice sued to stop the proposed AT&T-T-Mobile merger. They claim to know in advance how the merger will affect the mobile market for years to come. It’s an example of F.A. Hayek’s fatal conceit. Of course, most people haven’t read Hayek. So over in the Daily Caller, I use a better known thinker to make the same point:
The philosopher Yogi Berra once said that “It’s tough to make predictions, especially about the future.” Let’s apply his lesson to the proposed $39 billion AT&T-T-Mobile merger…
Competitors are also surprisingly confident in their ability to predict the future. A Sprint spokeswoman said that “Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision … Today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.”
This translates roughly to “We think the merger would make the market more competitive. We were scared that we’d have to work harder to innovate and cut costs to keep our customers happy. Whew.”
Most mergers fail. Nobody knows if a merged AT&T and T-Mobile would offer a better, cheaper product line. The only way to find out is trial and, often, error. The Justice Department’s astounding claim that it knows the merger’s effects in advance is either proof of its superior enlightenment, or else the height of hubris. I’m guessing the latter.
Comments Off on The DOJ’s Antitrust Seers
Posted in Antitrust, Economics
Tagged Antitrust, at&t, at&t merger, at&t-t-mobilr merger, competition, daily caller, doj, fatal conceit, hayek, justice department, t-mobile, yogi berra
California legislators are set to pass a bill that would reduce the number of babysitters. Not on purpose, of course. But when you make babysitters more expensive, parents won’t hire as many of them. California Sen. Doug LaMalfa lists some of the bill’s requirements:
Under AB 889, household “employers” (aka “parents”) who hire a babysitter on a Friday night will be legally obligated to pay at least minimum wage to any sitter over the age of 18 (unless it is a family member), provide a substitute caregiver every two hours to cover rest and meal breaks, in addition to workers’ compensation coverage, overtime pay, and a meticulously calculated timecard/paycheck.
The intentions behind this bill are noble, one assumes. But when it comes to regulations, good intentions don’t matter. Results do. And it’s pretty easy to see that if it passes, this bill will result in a lot of unhappy nights at home for frustrated parents – and a lot less income for sitters who have been priced out of a job.
You can read the full text of the bill here (PDF). It would also raise unemployment for maids, nannies, and anyone else who makes a living helping others around the house.
Huricane Irene largely spared the East coast’s larger cities from the worst of its wrath. It still cut off power to about 4 million people. And it cost 25 lives. But there is a sunny side to the billions of dollars of destruction! Politico’s Josh Boak quotes the University of Maryland’s Peter Morici:
Morici said there could be some economic growth at the end of this year and the beginning of next year, because with the rebuilding, “largely what we’re going to get is a private-sector stimulus package.”
Morici fell for the broken window fallacy; if a kid (or a hurricane) breaks a window, it creates a job for the repairman. He then spends his wages on other things, and the economy gets a boost. Why not break every window in the entire country, then? Think how much wealthier everyone would be if only a hurricane would come along and level the entire nation!
Morici could well be right that Irene could cause a small GDP boost. But that doesn’t mean that America is richer for having endured a natural disaster; hurricanes are not stimulus packages. St. Lawrence University economist Steve Horwitz draws a useful dichotomy that can help us understand what’s going on here:
GDP measures a flow of activity, not a stock of wealth. Destroying things and then rebuilding them might increase economic activity in the area affected (by drawing resources from elsewhere), but leaves us with less wealth than we would have had without the disaster. That is the real meaning of the Broken Window Fallacy.
Irene destroyed billions of dollars of America’s stock of wealth. Getting back to where we were before the hurricane will probably give a boost to GDP. But we aren’t wealthier for it, even if GDP does look better. If nothing had been destroyed, all the time, energy, and materials put into playing catch-up would have been put into making something new.
Comments Off on Broken Window Fallacy: Hurricane Irene Edition
Tagged bastiat, broken window fallacy, hurricane, hurricane irene, irene, josh boak, peter morici, politico, steve horwitz
A few months ago, the FCC said it would hand down a decision on whether to allow AT&T and T-Mobile to merge within 180 days. August 26 was day 83. The FCC decided to reset the clock to zero. So now it will be as long as another 6 months before the FCC announces its verdict.
There’s a comment to made here about regulatory uncertainty. There’s another one to make about the value of the FCC keeping its word. But instead I’ll concentrate on Sen. Al Franken’s recent remarks. “I am very suspicious of consolidation of power,” he told MinnPost.com.
“Big is bad” is an old argument. Age has not given it wisdom, however. Suppose a super-size phone company like a merged AT&T-T-Mobile is so big, clunky, and inefficient that it has to charge higher prices. What a golden opportunity for smaller, leaner competitors like Verizon and Sprint to swoop in and gain market share.
Now suppose instead that the merger gives AT&T and T-Mobile better economies of scale and a faster, more reliable network. Consumers flee their previous networks to join a better, cheaper one. This is hardly consumer harm – which after all, is the usual rationale for antitrust regulations.
Nobody knows if the proposed merger will work or not. But a company’s size doesn’t have much to do with whether a merger should be allowed. If a merger gives diseconomies of scale, consumers will punish it. If it improves service and prices, consumers will reward it.
Unlike the FCC, markets are impartial. Consumers are the proper arbiters of this proposed merger. Let them hand down the verdict.
Comments Off on AT&T-T-Mobile Merger Delayed
Posted in Antitrust, Economics, Technology
Tagged anitrust regulations, Antitrust, at&t, at&t t-mobile merger, at&t-t-mobile, att-tmobile merger, corporate mergers, fcc, mergers, t-mobile
Gawker and 7 Other Formerly Popular Sites That Are Dead or Dying
(via Iain Murray)
Comments Off on Creative Destruction at Work
Posted in Economics, The Market Process
Tagged creative destruction
Inertia Wins! 