Category Archives: Economics

Individualism Doesn’t Mean Isolationism

Don Boudreaux hits a home run.

Much Ado about Nothing: Budget Cut Edition

Democrats want the federal budget to be about  $3,730,000,000,000. Republicans want it to be about $3,630,000,000,000. As with many other issues, the difference between the two parties is less than three percent. Even so, it nearly led to a federal government shutdown.

The deal that the two parties recently struck to avoid a government shutdown meets somewhere in the between. It is advertised as cutting $38.5 billion of spending. But on closer inspection, it would actually cut $14.7 billion. That would cut total federal spending by 0.39 percent.

I have a hunch that even those small cuts may not actually happen. This blog post I wrote in 2005 explains why.

The rules of the game in Washington are severely stacked in favor of spending increases. Presidents Bush and Obama grew the federal government by about 100 percent in only a decade with little political pain. And it apparently takes the specter of a government shutdown to reduce spending by 0.39 percent.

If anyone is looking for a reason for fundamental institutional reform, that would be a big one.

The Environmental-Industrial Complex

Sometimes the green part of green regulations isn’t the environment. It’s money.

Economics says that people act according to their incentives. Public choice theorists say that politicians and regulators also act according to their incentives — just like the rest of us. Those incentives include maximizing agency budgets and winning elections.

This short video from Reason.tv shows public choice theory in action:

Should Helicopter Parents Stop Hovering over Their Kids?

Helicopter parents — constantly hovering over their children — have their heart in the right place. But that style of parenting has always struck me as… unnecessary.

My former professor Bryan Caplan agrees. He has a new book out that’s based on his research on identical twins. As it turns out, a lot of how kids will turn out as adults is based on nature, not nurture. The implication: parents can ease up on the high-maintenance parenting style that is so fashionable today.

In The Wall Street Journal, Caplan writes, “With a few exceptions, the effect of parenting on adult outcomes ranges from small to zero.”

He continues:

Once I became a dad, I noticed that parents around me had a different take on the power of nurture. I saw them turning parenthood into a chore—shuttling their kids to activities even the kids didn’t enjoy, forbidding television, desperately trying to make their babies eat another spoonful of vegetables. Parents’ main rationale is that their effort is an investment in their children’s future; they’re sacrificing now to turn their kids into healthy, smart, successful, well-adjusted adults.  But according to decades of twin research, their rationale is just, well, wrong.

Caplan also uses the law of demand to encourage people to have more kids. One reason people have fewer kids than they used to is because they make parenting very costly for themselves than previous generations did.

By easing up a bit, parenting becomes much cheaper in terms of time, effort, and stress. And when something becomes cheaper, people tend to buy more of it. Or, in this case, Caplan says they should at least give it serious thought.

I’ll have to read the book before I can call myself convinced or not. But Caplan’s thesis that parenting doesn’t have to be a chore makes some intuitive sense. And while fatherhood is probably a few years away for this blogger, It does make the prospect of parenthood seem a little less daunting.

CEI Podcast for March 17, 2011: Are Biotech Crops Coming to Kenya?

Have a listen here.

CEI Senior Fellow Greg Conko discusses his recent trip to Kenya where he met with members of Parliament and other officials about the best way to regulate the introduction of genetically modified crops to the country.

Are Text Messages an Antitrust Issue?

Text messages cost 20 cents to send, even though they use a fraction of a penny of bandwidth. What gives? Antitrust authorities want to know.

Over at The American Spectator, I explain that it is likely a case of unbundling:

Maybe phone companies are unbundling texting from their other services. That way the only people who pay for text messages are the people who use them. If phone companies don’t have to provide texting service for people who don’t want it, they can keep costs down and charge lower prices.

This is much more fair to customers:

Why not just give all customers unlimited texting and charge a higher monthly bill? That would punish people who don’t text, such as this writer. By eschewing the flat rate and tolerating a few texts per month from family and friends who haven’t been properly trained, non-texters can save $50 or more per year.

Monopolists (and oligopolists) don’t behave that way. Companies competing against each other on price do. Trustbusters are forgetting something else, too. If a monopoly exists at all, it is very temporary.

It turns out that a young company called Beluga makes a free texting application for smartphones. Few things are as temporary as monopoly (or oligopoly) power. Since Beluga bypasses the texting cartel, you can have unlimited texting without the $5 monthly fee. Think of it as Skype for the text messaging set.

Read the whole article here.

Legislating the Way to Prosperity

Rep. Jesse Jackson, Jr. has a novel idea for ending poverty: make it illegal. He explains in this short video of a speech he gave on the House floor:

The Constitution should be amended to guarantee everyone the right to a decent home. That way, everyone will get one. In a speech he gave on the House floor, he asks, “What would that do for home construction in this nation? What would that do for millions of unemployed people?”

The Constitution should also be amended to guarantee the right to decent health care. Jackson implores, “How many doctors would such a right create?”

Education needs an amendment, too. “How many schools would such a right build, from Maine to California?” Jackson goes on to wonder how many jobs would be created by giving every student and iPod and a laptop.

If ending poverty really is as simple as passing a few laws, then Jackson isn’t going nearly far enough. If we want a truly prosperous nation, then the Constitution should guarantee everyone not just a decent home, but a mansion filled with servants to take care of every need.

Everyone should have the right to not just a doctor’s visit every 6 months, but a cadre of specialists with access to the latest technologies and tests. This would be a boon for life expectancy.

And why only an iPod and a laptop for children? They deserve supercomputers! They should have the right  to a Ph.D from Harvard in the field of their choice. Such a law would guarantee that America’s population  will be the most educated in the world. And it won’t even be close.

If legislation really is the only thing keeping every American from enjoying Bill Gates’ lifestyle, then Jackson is being far too moderate. Don’t just legislate a decent lifestyle. That doesn’t go nearly far enough. Congress should pass a law that guarantees an above-average lifestyle for all Americans.

More on the Broken Window Fallacy

The Independent Institute’s David Theroux has a valuable post on the broken window fallacy. He links to Bastiat, Hazlitt, and last and least, me. Worth a look.

Tsunamis Are Not Stimulus

Tragedy struck Japan this morning. It will be some time before we know just how many lives the tsunami took, and how much damage was done. But pundits are already saying dumb things.

Larry Summers, who should know better, committed the economists’ cardinal sin this morning: he fell for the broken window fallacy. The sunny side of the destruction is that it will boost the economy. Just think of all the jobs that will be created by the rebuilding process!

Over at the Daily Caller, I gently correct Summers. Natural disasters are bad for the economy. All the rebuilding activity in the next few years will only get Japan back to where it was. If the tsunami had never happened, all that energy could be put to creating new wealth. Disasters are just that: disasters.

$6 Billion More in Cuts

On Tuesday, the House will probably vote on a Continuing Resolution to avoid a government shutdown. Republicans are asking for $6 billion in spending cuts as part of the package. If they succeed, this year’s budget deficit will go from about $1.6 trillion to $1.594 trillion.

Never let it be said that congressional Republicans don’t think big!