The Unbroken Window

From my single favorite blogger on the planet, Warren Meyer:

No one in government, that I have heard, has even suggested any sort of regulation holiday as a potential economic stimulus program. In fact, most of the legislative moves at the national level have made private investment less attractive

Seriously – if the economy is on the brink of disaster and we have unprecedented employment problems, is that not a reason to lighten the choke hold? Of course it would make sense – but politically this is a non-starter, perhaps a worse idea than ending Medicare (which is a good idea in the real world). Why? Because if this were proposed, it would be an admission that regulations and meddling are harmful for economic growth and prosperity. However, the state religionist view is that these regulations make us more competitive and are part of a more “just” 21st century economy that will do things a different way. So, we will not get serious about any stimulus that involves a shrinking of the grabbing hand.

This is in response to a reader who thinks we can eliminate our dependence on evil oil by developing Canadian oil fields:

Dear Editor,

Some of your readers wish to eliminate America ’s dependence on foreign oil (or at least from evil foreign oil) and propose that to do this the United States should help Canada develop its oil reserves. The belief here is that by purchasing oil from friendly nations (as if “nations” have dispositions), funding for Iran and other enemy nations would dry up.

Sounds great, but unfortunately the simplicity of this proposal is not its virtue. First of all, Canada is already the largest importer of oil to the United States (18% of our imports; with Mexico at #2 at 15% and Saudi Arabia comes in tied for third with Nigeria at 12%). How much does the US import from Iran ? Zero! However, the real reason developing better relationships with Canada will not stop our dependence on foreign oil or reduce funding for Iran and other enemy nations is the simple fact that “oil is oil” – it’s a commodity.

Suppose however that Saudi Arabia is the rogue state we are talking about. Would reducing oil imports by 12% stop all importation of Saudi Oil? No – at best it would reduce Saudi imports to the US by 12%. In fact, if we banned all imports of oil from Saudi Arabia – it would do little harm to the Saudi’s oil revenues. By developing Canadian oil reserves, we would be taking these reserves out of the market in countries that would have been supplied by them. In doing so, the Saudi’s would be able to sell all of the oil that they were selling to us to these other countries – with only a negligible change in their oil revenues. Therefore, even countries like Iran from whom we purchase no oil will not see their oil revenues fall unless all countries stop consuming oil – or if we simply go and take the oil from them.

Similarly while it might sound good to boycott purchases of Citgo oil (it funds the very anti-American and very hostile government of Hugo Chavez in Venezuala) – such actions would do nothing to cut into this despot’s revenue stream. All this would do is cause the companies we switched our business to to run out of non-Venezuala oil more rapidly and would force them to use more Venezualan oil.

In order to reduce our dependence on foreign oil – and therefore cut off all oil funding for rogue states – we’d have to reduce our oil consumption by 100%. There’s a reason the term “silver-bullet” is relegated to folklore.

From Arnold Kling:

So, when you overbuild houses in Nevada or condos in Florida, you cannot lure very many people with lower prices. Most unoccupied houses have close to zero marginal value to the vast majority of consumers, just as most unemployed workers have zero marginal product to the vast majority of firms.

He was responding to the question of why there are still so many housing vacancies. While I’d like to excoriate policy (and I can) I find this very compelling – and it raises the question of why this recalculation story is not applied more broadly. Maybe it is, maybe everything is cast in a transactions cost framework. Thus, if you offered me the opportunity to “buy” my exact home in, say, Pittsfield, Massachusetts, for zero dollars, I would say no. But the same is true for lots of other goods and services. Perhaps sadly for me, the provision of an economics education is not one of those services!

This just hit the wire:

WASHINGTON (AP) — Estimates of the number of graves that might be affected by mix-ups at Arlington National Cemetery grew from hundreds to as many as 6,600 on Thursday, as the cemetery’s former superintendent blamed his staff and a lack of resources for the scandal that forced his ouster.

John Metzler, who ran the historic military burial ground for 19 years, said he accepts “full responsibility” for the problems.

But he also denied some of the findings by Army investigators and suggested cemetery employees and poor technology were to blame for remains that may have been misidentified or misplaced. He said the system used to track grave sites relied mostly on a complicated paper trail vulnerable to error.

“Personally it is very painful for me that our team at Arlington did not perform all aspects of its mission to the high standard required,” he told a Senate panel. He was subpoenaed to testify.

Metzler and his deputy, Thurman Higginbotham, were forced to retire after Army investigators found that as many as 211 graves were unmarked or misidentified. The report by the Army Inspector General’s office accused Metzler of repeatedly failing to ensure burials were being done properly and of failing to respond after unmarked graves were discovered.

Yet another problem when the feedback loops are missing. But I am sure this is just one small administrative mix up in one small isolated example. We couldn’t possibly be making any other errors interpreting 75,000 pages of the federal register, or relying on 20 million government employees, or by administering a budget of $4 trillion. With all of that money, they must surely “have enough” to get it right.

At least when Ralph Kramden said it we all knew he was joking. Yesterday NASA awarded the contract to build a new manned lunar spaceship to Lockheed Martin. Of course, what we really need our government to be spending money on right now is sending people to the Moon and Mars. When will Americans wake up to the reality that NASA is perhaps the most poorly run bureaucracy in the solar system? Let’s look at some of the beauties that came out of the press conference (by the way, I am a big fan of all things outer-space).

NASA clearly has selected the best company for the project – one can only imagine what was going on behind the scenes here:

The last time NASA awarded a manned spaceship contract to Lockheed Martin of Bethesda , Md. , was in 1996 for a spaceplane that was supposed to replace the space shuttle. NASA spent $912 million and the ship, called X-33, never got built because of technical problems.

So, NASA spent $1 billion of taxpayer money on a program that never even was built. Great, I am sure I can deliver an unbuilt lunar module for half the cost of the new Orion project! What, you think I am being sardonic? I’m not – they really should pay me. Look what else they’ve done:

This is hardly the first time NASA has made a big deal over a next-generation spaceship. Since the 1980s, NASA has spent about $4.8 billion on shuttle follow-up ships that never were built, according to the U.S.

Think about that. If drug companies claimed that they spent $5 billion on R&D for drugs that never were able to be developed, the public would be demanding an investigation into price gouging – when NASA does it, they get rewarded with multi-billion dollar project to go to the moon … again!

We are just getting started. In the aftermath of two shuttle disasters and a history of cost over-runs and administrative failures, you would think that NASA would be especially cautious in selecting a contractor and proceeding with this project. Well, you’d think and you’d be wrong.

In July, the GAO warned that NASA was heading down the wrong path in choosing an Orion-builder by late August or early September. … “This approach increases the risk that the project will encounter significant cost overruns, schedule delays and decreased capability,” the GAO warned. …“None of these companies know how to cost innovate,” McCurdy said. “They’re basically aerospace divisions that depend on government contracts. Their whole incentive, based on the international space station, is to drive up costs.”

When quizzed on this the NASA spokesman assured us that:

“This time it’s different, NASA claims. That’s because after the Columbia accident in 2003, President Bush proposed a massive exploration plan. It would put astronauts on the moon for the first time since 1972, with plans for a home base. The plan also would ultimately send people to Mars.”

How many times do we have to hear that before we reject it? It’s the same story told by drug addicts, alcoholics, spouse abusers, child abusers, etc. and we don’t hand them billions of dollars to “give it another go.” Well, maybe it’s because the President said we could do it. This coming in the wake of the Katrina response should make one shudder. Hey Mr. President, do your job. Maybe we should be more optimistic this time around, Lockheed sounds so ambitious about this project:

Lockheed Martin Vice President John Karas said his company will succeed with Orion compared to its failure with X-33, because “we’re not shooting as far… I’d say it (Orion) is within reach.”

Great – so now we celebrate places that aim low. Well, maybe this time they will get it right … and the reason to stand behind this project is because it will create jobs! This sophistry continues to delude the American mind. I tell you what, everyone who is unemployed can come to my house and dig big holes in my yard – I gurantee that unemployment will be reduced to zero. This from the press conference:

Although all of NASA’s 10 centers will provide engineering support on Orion, the majority of the work will be at the Johnson Space Center in Houston and final assembly will be completed at the

Kennedy Space Center in Florida. Lockheed Martin spokeswoman Joan Underwood said the Orion project will create about 2,300 new jobs: some 1,200 in Houston; 600 in Colorado, 300 in Florida and 200 in Louisiana.

Although all of NASA’s 10 centers will provide engineering support on Orion, the majority of the work will be at the Johnson Space Center in Houston and final assembly will be completed at the Kennedy Space Center in Florida . Lockheed Martin spokeswoman Joan Underwood said the Orion project will create about 2,300 new jobs: some 1,200 in Houston ; 600 in Colorado , 300 in Florida and 200 in Louisiana .

Um … does anyone understand where the money comes from to “create” these jobs? Would taxpayers have voluntarily spent billions of dollars on space travel which would have created these jobs? What about all of the jobs that will not be created because billions of dollars consumers are not able to spend on things they actually want? The NASA and Lockheed folks need to read this.

And here’s a classic case of welfare statism – NASA seems to be aware of the difficulties described above. But they are granting the contract to Lockheed because they believe it is “fair” to do so:

“In picking Lockheed Martin for Orion, described by NASA’s chief as “Apollo on steroids,” NASA bypassed Apollo throwbacks Northrop Grumman of Los Angeles and its chief subcontractor Boeing of Chicago. Northrop Grumman predecessor built the Apollo lunar lander. Companies bought by Boeing built the Apollo, Gemini, and Mercury capsules, Skylab and the space shuttle.

“NASA decided to do something different and go with a company that has not been in manned space before, sort of spreading the wealth and making sure they’ve got two contractors that know the manned space business,” said aerospace industry analyst Paul Nisbet, president of JSA Research”

So, a good reason to pick a company to pursue a project is to spread the wealth? What ever happened to being the most qualified? This reasoning makes as much sense as the New York Mets hiring me to pitch Game 1 of the World Series because I have never had the good fortune to do so before – and because they want other people besides Pedro Martinez to have the experience of pitching an important game.

Oh wait – but it gets even better! I wouldn’t believe it it I did not read it three times over:

Lockheed Martin built several unmanned probes, including: 1998’s Lunar Prospector; 1976 Viking probes of Mars; Mars Reconnaissance Orbiter, which entered the red planet’s orbit earlier this year; and the 1999 Mars Climate Orbiter, which crashed because of a Lockheed Martin/NASA mismatching of metric and English measurement units (emphasis mine)

Wow. And all of these guys have PhDs. And while it only took the Apollo program 9 years to get to the moon with 1950s and 1960s technology, it seems that by replicating these technologies today will allow us to get to the moon in … 14 years! Just think of how much more money the program is going to cost us the longer it drags out. Someone want to bet that costs will at least double by then?

Upon reading the news from the press cnference you’d think the Orion program was some chimera, but alas it is just business as usual – and no few will bother to try and stop the egregious plundering of the American public as NASA blasts our billions into the netherworlds. For more on the craziness that is a publicly funded space program see here.

The antiplanner reports:

A new report from the Federal Transit Administration says that America’s transit agencies need $77.7 billion to bring their systems up to a state of good repair. This report is an update to a previous report that just looked at seven of the nation’s leading transit systems (Boston, Chicago, New Jersey Transit, New York, Philadelphia, San Francisco BART, and Washington Metro).

I thought we were changing the way we did business in Washington?

Well, we’re not allowed anymore. Another dispatch from the tyrannical state:

Under a little-noticed provision of the recently passed financial-reform legislation, the Securities and Exchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.

The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from “surveillance, risk assessments, or other regulatory and oversight activities.” Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.

That argument comes despite the President saying that one of the cornerstones of the sweeping new legislation was more transparent financial markets. Indeed, in touting the new law, Obama specifically said it would “increase transparency in financial dealings.”

Apparently the children of the sixties, who once pushed for the Freedom of Information Act as a check to those in power, now are rolling it back once they are in power themselves.

On August 7th , British Petroleum, the world’s 2nd largest oil company discovered corrosion in the pipelines at its Prudhoe Bay oil field – prompting it to shut down and repair 16 miles of pipeline. The shutdown is expected to disrupt oil supplies to the United States by as much as 400,000 barrels per day for several months.

This “crisis” has prompted many to resume their blame game on the oil companies for higher gasoline prices. Notwithstanding the fact that this disruption is expected to have a small effect, if any, on gasoline prices, this is an excellent opportunity to demonstrate two salient features about oil prices – and business operation in general. First, the real world is characterized by varying amounts of risk. Businesses can be disrupted, damaged or destroyed by floods, hurricanes, ice storms and more. When they do, the price system is the most efficient and equitable way for “society” to respond. During events such as a shutdown of a pipeline, the prices of scarce goods rises – signaling to consumers to economize on usage of the good (and /or find substitutes) and signaling to producers to increase and reallocate output so as to alleviate the problem. Second, government regulation that interferes with the price mechanism and alters the incentives of producers and consumers will amplify any problem that they are attempting to rectify.

Special favors granted on the oil industry by the federal government are partly responsible for the BP “crisis.” The result of these favors is that oil companies have fewer incentives to care for their property – and shift their time horizons forward to caring about short-term profits over long-term stewardship. The White House response to this event is not to expose companies like BP to the fierce discipline of market competition, but rather to extend the regulatory reach government holds on this sector. Tony Snow announced proudly during a recent press conference that, “these low-volume pipelines have not had the kind of federal oversight that the high-volume pipelines have had. And the administration is working quickly to get that into place.”

How come no one questioned this comment? Is it reasonable to believe that if only the caring and careful arms of the federal government oversaw more private enterprise that accidents would never happen? That equipment would never wear out? What then are we to make of the Challenger and Columbia tragedies for example? Governments are like cookie monsters in their quest for power. And never is the opportunity better to seize more of it than in times of distress – much like the easy passage of the PATRIOT Act in the aftermath of September 11th . That the press and the populace are pleased with more government control over the private sector is shameful, dangerous and will lead to far more serious crises than the shutdown of a pipeline.

Former Democratic Presidential candidate Michael Dukakis and Daniel Mitchell proposed in a New York Times letter on Wednesday to increase the minimum wage.

Same old stuff from the liberal supporters, right? Well, sort of. In their letter, Dukakis and Mitchell surprisingly demonstrate that they are two of the most honest and understanding people around. They rightfully assert that increasing the minimum wage will result in unemployment and reduced opportunities for low-skilled workers.   However, m ost liberals who support living wage and minimum wage campaigns refuse to believe that increasing the price of labor causes entrepreneurs to find ways to substitute away from it – thereby hurting the very people the laws are trying to help.   What it confusing is that when I discuss related issues with these people they understand full well the consequences of the law of demand.  In other words, they realize that if the price of the things they buy regularly increased, they’d find a way to buy less of them.

This irony is interesting in and of itself, but it is not nearly the scariest part of the position taken by Dukakis and Mitchell. You see, Dukakis and Mitchell are supporting minimum wage increases because they think it will create more unemployment among immigrants than among American natives – and they are probably right.   In fact, the letter explicitly is written as a policy proposal to reduce immigration of low-skilled workers to this country.

How can liberals advocate minimum wage increases both under the premise that they will increase unemployment and will not increase unemployment? In good conscience they must understand the real impact of the minimum wage legislation — their support for such legislation is merely to curry favor with entrenched interest groups and care only nominally about the low-income and low-skilled people of America.

If you are scoffing at this, go and study the history of the progressive movement in America. These idealists first pushed for minimum wages and regulations on working conditions at the turn of the 20th century and advocated them for women only. Why? To keep women from being in the workforce and get them back in their homes, where presumably the “progressives” felt women belonged. Have liberals really changed much in a century? Just check out how the teachers unions run most local governments, or how policies are currently enacted to favor the few at the expense of the many. Yet millions continue to belly up to the bar for a swig of this delicious Kool-Aid. It befuddles me.

Yes, I know, I surprise myself sometimes. This evening, they excerpted a quote in their usually excellent “Notable and Quotable” feature which includes:

But to argue that differences in policy ought to lead us to consider secession is lunacy. It also shows a (presumably) unwitting contempt for America, for its history, and for its role and purpose in the world. . .

The premise of the full piece was that modern secessionists are lunatic deviants because the previous attempt at secession was an economic and social attempt to keep chattel slavery alive. Is this any better than saying, “Hitler liked Raspberry Peach Crumb pie. Hitler killed millions and was evil. Wintercow chooses to eat Raspberry Peach Crumb pie too, so you know, like, he really shouldn’t be teaching those college students all that classical liberal gobbledeegook”

What a supremely weak point. I’d urge folks to remember what happened in 1798 and to read the Virginia and Kentucky resolutions themselves. Is that American tradition not important either? And those weren’t exactly about chattel slavery. And let me ask, perhaps rhetorically, is there any condition when secession is appropriate? If not, then how do you define tyranny?

If Texas ever seceded, I would move there. I would. You can hold me to it. I’ll even let you pay for my moving truck.