The Unbroken Window

That’s why the plunders of the past decided to do one of two things. (1) Move on to plunder someone else. (2) Stay put and allow their hosts to live so that there was still something to plunder in the future. The public employees and retirees are doing neither. Is it wrong for me to think that they actually have no legitimate property claims to their pensions?

As former Speaker of the State Assembly and San Francisco Mayor Willie Brown pointed out earlier this year in the San Francisco Chronicle, roughly 80 cents of every government dollar in California goes to employee compensation and benefits. Those costs have been rising fast. Spending on California’s state employees over the past decade rose at nearly three times the rate our revenues grew, crowding out programs of great importance to our citizens. Neglected priorities include higher education, environmental protection, parks and recreation, and more.

Much bigger increases in employee costs are on the horizon. Thanks to huge unfunded pension and retirement health-care promises granted by past governments, and also to deceptive pension-fund accounting that understated liabilities and overstated future investment returns, California is now saddled with $550 billion of retirement debt.

The cost of servicing that debt has grown at a rate of more than 15% annually over the last decade. This year, retirement benefits—more than $6 billion—will exceed what the state is spending on higher education. Next year, retirement costs will rise another 15%. In fact, they are destined to grow so much faster than state revenues that they threaten to suck up the money for every other program in the state budget. (See the nearby chart.)

This is truly incredible (I linked to it in an earlier post):

The chips will allow city workers to monitor how often residents roll carts to the curb for collection. If a chip show a recyclable cart hasn’t been brought to the curb in weeks, a trash supervisor will sort through the trash for recyclables.

Ignore the completely Orwellian nature of this, or that life imitates fiction, is there not a ridiculous contradiction here? Do we not have policies (or want them) to raise the cost of purchasing and using materials (the “reduce and reuse part of the 3Rs)? What if a consumers is reusing everything he buys, or not buying much of anything which requires recycling. The “Handicapper Generals” will fine (and what happens if you do not pay the fine?) people who are doing the right thing.

What makes this even more ridiculous is that curbside recycling programs turn out to not be very good ideas either. Who is behind this tyranny?

A market is something which emerges through the actions of everyone but the design of no one. They are part of what Hayek called the extended order of human cooperation.  Recognizing the fact that markets themselves are not consciously created, but that they offer myriad benefits to participants and non-participants alike, raises many questions.

Two such questions that I have been pondering lately are these. The first was brought to my attention by a lecture given years ago by James Buchanan. The second a natural consequence of looking at too many economics textbooks.

1. Is participation in an extended market order enough to keep society glued together? In other words, do we need more than this to establish important communitarian bonds? On the one hand participating in the informal market setting drastically reduces the need for commonality of experience with others along a great many dimensions of behavior. On the other hand, participating in the extended order allows for a greater range of interactions than would otherwise be possible. Furthermore, a Hayekian insight into this participation is that participation in the market order itself is only possible because of myriad individuals’ ability to adhere to evolved rules and traditions that are themselves part of the extended order. Adherence to these rules is not something that is conscious.  The point being is that markets are only possible when civil society has a set of rules and traditions that act as the glue. Or more directly, the existence of markets perhaps is evidence itself that society is glued together.

2. I will not go into detail here. But if there is a widely held understanding that the preponderance of markets is “good” for the general welfare, and that market participants do not consciously choose to be part of the market, or if they do so, they do it only in their narrow self interest, do we find ourselves in the unusual position of arguing that governments should be doing anything and everything to promote markets, if in fact the justification for government action is either to improve upon some ubiquitous market failure, or to promote some vague notion of the general welfare? This point is worth an entire book. I am not capable of writing it.

As if the guys in Albany were elected just to prove everything I say on this site correct:

State tax officials, under orders from cash-strapped Albany to ramp up their audit and compliance efforts, have begun to enforce one of the more obscure distinctions within the state’s sales tax law.

In New York, the sale of whole bagels isn’t subject to sales tax. But the tax does apply to “sliced or prepared bagels (with cream cheese or other toppings),” according to the state Department of Taxation and Finance. And if the bagel is eaten in the store, even if it’s never been touched by a knife, it’s also taxed…

And while sliced bagels are subject to sales tax, a sliced loaf of bread at a bakery isn’t, according to tax officials.

And the bagel brownshirts are literally cracking down bigtime on bagel store owners who did not even understand the “law” in the first place:

Kenneth Greene, the Rochester-based franchisee, said he was recently hit with a tax bill for not charging sales tax on any sliced bagel. Typically, he thought, sales tax is applied only when a bagel is sliced for a sandwich or for cream cheese and butter. Whole bagels are not taxed when they are eaten off the premises, state officials said.But Greene found out the hard way: The state ordered him to pay back taxes for three years on bagels that were sliced and sold, but not taxed.And it’s a lot of dough, for him and his customers. Most places in New York charge an 8 percent tax on purchases. Greene said the back taxes are “a lot of money,” but wouldn’t say how much.

And of course you know that those bagel store owners are just so flush with cash. This is a great way to get that small-business job creation engine started. If anyone who had entrepreneurial ideas takes notice of this story, it’s bye-bye New York State. Well, actually, most of them left already.

I’ll remind my readers in case it is not abundantly clear. This is not some isolated incident. These thugs rule you in your village, your town, your state and your federal government. Yet you believe that they should be entrusted with the awesome powers of guns and trillions of dollars to coercively organize most of what you think of as civil society? Clearly I have failed and all the other true liberals have failed.

We should all start baking bagels and giving them away for free, pre-sliced, outside of our homes. Think about all the laws you’d be breaking – selling without the permission of the lords to do so, ignorance of the food safety do-gooders who must inspect every morsel of food “sold” in the world, illegally not charging tax, having your 12 year old kids help you with the effort violates child labor laws, and not paying them violates minimum wage statutes, not putting in a ramp for the disabled to come get a free bagel violates the Americans with Disabilities Act (you know, because you had the fortitude to set up a business, you incur an obligation to help a certain group of people), and if you don’t recycle the materials you used for the bagel shop you would get arrested by the green police too (ok, I made that last one up, but that day is coming, mark my words).

Happy days.

UPDATE: Holy cow … in the you can’t make this stuff up category, only 10 hours after I ranted above, I have the following hit my inbox: “High-tech carts will tell on Cleveland residents who don’t recycle…” and we wonder why 50,000 people have left Cleveland in this decade alone.

Here is a quote from the son of the (then) leader of the Communist world, Nikita Kruschev (who ruled the USSR from 1953 to 1964 following the terror of Stalin):

I had tried and failed to understand what exactly communism was…. I had tried to get Father to shed light on the nature of communism, but did not get any intelligible answer then either. I understood that he was not very clear about it himself.

That was from his book, Nikita Kruschev. If the leader of the Red world hadn’t a clue what Communism was, what of the millions of bureaucrats, and what of the modern Progressives who have inherited this worldview (absent the overt tyranny)? I have come to understand that egalitarianism and its naissant political manifestations are nothing but fancy but weak edifices to suit the self-interests of the power hungry and the intellectual elites (after all, someone has to do the hard work of dictating to us how to live). Of course, my classical liberal edifice is also serving my self-interest, but at least my self-interest is compossible with the natural rights of humanity.

I have very little tolerance for public service announcements on a variety of grounds. One of those grounds is a Buchanan-Tullock ground. I do not view them as harmless little information packets intended to help us live better lives. Perhaps I am too cynical, but there is no question that some group is typically benefiting at the expense of others via the promotion of these things (some of them? all of them?). A second ground is that empirically it has been shown that “better education” does not seem to have any impact on the drug war, crime recidivism, welfare behavior, and a whole lot more. But hey, let’s not let good evidence get in the way of a noble idea (the idea isn’t even noble, but that’s for another day). A third ground would be that it is not clear that this is a necessary or proper role of government – especially given point one above, I do not see that government service announcements should be any more reliable than private ones – at least in the private sphere, there is not any misrepresentation of being an absolutely right authority, individuals would be free to test competing service announcements. Fourth, and the point of this post, is that few people have the time or energy or wherewithal to check whether the darn announcements make sense.

One announcement I’ve been hearing a lot about lately is that one in eight Americans “does not know where their next meal is coming from.” In other words, not only are 12.5% of Americans really poor, they are so poor as to be starving. I’d love to see where the folks at the Ad Council and whatever agency is pushing this got their data from. Why? The most recent Census poverty data reports that 12.5% of all Americans are living at or below the poverty level. For a myriad of reasons this data does not provide nearly the information that a glance might indicate.

The fact that the 12.5% numbers coincide I hope is a coincidence, because if it is not, it shows an awful lack of rigor on the part of the experts. Maybe they get it from places like this.  Really though, they do get it from the government, from someplace like this (read the language describing food insecurity, I think I would qualify). Why do I question the one in eight claim?

1. The poverty line is adjusted upward each year as the economy grows. In fact, the standard of living (if you can objectify such a thing) of the poor in America today far exceeds that of a middle income American in 1970 (some charts to follow in a future post – here is a glance).
2. Food is far cheaper today than at any point in American history. It takes only a few hours of work (or of income transfers) each week to purchase a diet that is richer in nutrition, taste and variety than the kings of 150 years ago could have enjoyed.
3. Most important, even the poorest of the poor spend a lot more money than their “income” indicates. For example, households which earn less than $5,000 per year in total income spent on average $23,000 per year, of which 16.8% (or $3,864) is spent on food. That is $74 per week on food. While this is not exactly living the high life, one can certainly take care of a family of 4 with this kind of budget. My family of 4 likes food a lot, and we probably spend $120 per week on food – my bet is that half of that is “luxury” spending.
4. Are there not programs in America for the poor? What about food stamps and cash transfer programs? Are the folks on the radio telling me that after we spend $80 billion per year for food assistance, $45 billion per year for housing assistance, $157 billion per year for direct welfare, $262 billion for health care for the poor (and these are only the federal government’s “contributions” it does not include the state or private organizations) are not being used at all? Or are they telling me that those programs are so ineffectual that even after 12.5% of Americans are poor, we spend hundreds of billions of dollars each year to make sure that all 12.5% of them are hungry? Or are we to believe that the non-poor are food insecure? If so, what the heck are people spending their money on? As I’ve written elsewhere, I can get a decent apartment in the city here for about $500 which would accommodate my entire family of 4. If I were poor enough, I could use “free” government schools, “free” Medicaid health care services, buy a used car for the equivalent of $100 per month, spend $150 or so per month on utilities and then have the rest left over to live. So, I could spend $750 per month, or $9,000 per year and my kids could go to school, we could have health care, and we could have crappy transportation (but our own) and a decent roof over our head. Where is the other $14,000 of spending going?

Maybe the problem is worse than I am giving it credit for, I admit that as a possibility. But there is simply no plausible way that 1 in 8 Americans do not know where their next meal is coming from. And if that does happen to be true, that is NOT a problem with the amount of food available, the price of food, or even the income and help available to those who are food insecure. But god forbid a public service announcement took a more cautious view of things, or pointed us to a source to learn more about the “problem.” And just think, some of these “food insecure” people are being taxed to be told that they are food insecure.

Tags: data

Did you ever wonder why some units of produce are priced per unit while others are priced per pound? For example, the cucumbers here are priced generally a 99 cents each, or more if they are enormous. Corn is priced at 4 per dollar or 5 per $2.00 or some other per unit price based on the season. On the other hand, sweet potatoes are typically priced by weight, such as $0.59 per pound, the same is true for apples, and my favorite red and orange and yellow peppers.

Why is this the case? It would be fun to ask the grocers, but perhaps it is a better microeconomic exercise to ponder a reason why. I actually don’t know the real reason, but for those interested, the way to systematically approach possible solutions to these puzzles is to simply think about the costs and benefits of pricing different types of produce in each way.

From thinking about it, I can safely rule out my knee-jerk response – that per unit pricing is used for produce that is more uniform in size and quality, while per pound pricing is used for my variable types. But that cannot be – the distribution of quality and size within say apples appears to me to be no different than for sweet potatoes and peppers. Or maybe I am wrong. Is it the case that better produce (for some types of produce) is heavier, even if it is the same size as other units? And that the produce which is priced by the pound is the produce for whom weight is a good proxy for quality? I don’t know enough about fruits and vegetables to make that determination.

Would it have something to do with packaging and shipping? With the quantities that consumers typically buy? With the variation in pricing? With how long produce remains fresh? With tradition in each particular item’s market? For each of these assertions, we’d have to think about the benefits and costs of each – an exercise I will not entertain here. But please take a shot at it, and I promise not to throw tomatoes at you for the effort!

With the latest egg scare coming to a head, I am sure that you will be reading plenty of commentary on how we need the FDA to take a greater role in food oversight, and that the powers of the FDA should be expanded. Of course, a crisis is a great opportunity to get people reacquainted with the idea that we would all be dead and starving were it not for the government.

Two observations.

1. Indeed, the FDA already has strong oversight powers in the food market. It would be impossible to have even a small portion of the food supply monitored and checked regularly. In any case, the egg contamination happened on the FDA’s watch, just as the Gulf Oil spill happened under the eye of the regulatory authorities, just as the financial crisis took place under the eye of the SEC, Fed and other regulatory bodies, just as the 9-11 attacks took place under the nose of our defense agencies, etc. And in every single case, all we see are calls for increased government involvement. Not only do we get “calls” we get massive intrusions and a ratcheting up of the power of government. Tell me one other institution were the buck is passed and failure is rewarded more regularly? In any case, the record of the FDA has been exemplary. The amount of food contamination is remarkably small. I do not attribute that to the FDA, but if they wish to take credit, so be it. The point is, we do not have anything resembling a food safety crisis on our hands.
2. If this egg contamination is evidence that the FDA should have its authority expanded (what do they want, government agents up the arse of every hen?), then please someone tell me what would ever be grounds for a decreasing of the power and authority or the FDA for that matter. The reality is, there will few if any state congregationalists that will even feign an answer. If anything that goes wrong is evidence that the state needs more power, and there is nothing that can be demonstrated to allow for a reduction in state power, then the ratcheting of government control over our lives will only continue. The deck is stacked, like it has been for centuries. And sadly the richer we are, the less we seem to be aware of it.

   So, let’s offer what should be a politically acceptable proposition: every time an agency is created, or an existing agencies pushes to have its powers expanded, then at the same time, a set of conditions and rules must be laid out for the unraveling of said powers or the diminution of other authorities when certain conditions are met. But we will never see that happen.

I spent way too much time reading economics, history, political theory, philosophy and all things related to learning more and teaching economics. But at the same time, I try to have at least one book or article going at all times that are far removed from it. Last month one of those books was Lenore Skenazy’s excellent Free Range Kids. It is filled with nice stories about frantic parents and full of good sources for data on risks of various things parents fret about. Much of the data was not new to me, but it was great to see it in a popular book that I suspect will get read by many people who would never read an economist’s blog postings on risk.

Then I get to one of the ending chapters and the following quote is emblematic of several other quotes that I noticed like it throughout the book.

For instance, if you have moved to a neighborhood plagued by deadly spiders, all I can say is: Deadly spiders? My god. Deadly? Spiders? Deadly Spiders?

Which may not be a whole lot of help.

Likewise, if you are worried about a huge issue like global warming and how it will affect your child, I don’t get into that here either, even though I am sure its long term effects are a lot scarier than whatever might happen if your kid takes a swig of Children’s Nyquil before age four.

In fact, now that I think about it, the last 8-10 non-economic/work related books I have read have been choc full of comments like it.  The highlight is mine above. This quote comes after 150 or so pages of the author sharply reminding us of how important it is to know the data and be aware of the actual risk and to not fall pray to the fear mongering of the news agencies, newspapers, corporations and other parents. I don’t think she is remotely aware of the contradiction. Furthermore, can I just read a damn book about raising kids and not have to hear yet another snarky remark about how we are wrecking the world, or the vicious inequalities perpetuated by the bourgeois class? Really. I’d pay an extra dollar per book if someone could flag on Amazon whether the book includes stuff like this or not.

Note that I am not saying that it is inappropriate to write these sorts of things – gosh, all the power to the authors who do it. But once in a while, you want to take your mind completely off of some things, and I spent some money on this book for that purpose. This is why we watch movies, play sports, go for hikes, and the like. I’d love to hear my readers’ thoughts on how to avoid these sorts of situations – and no, “stop reading” is not an option.

It is illegal in Maine for retailers to sell 6 gallons of milk and give away a 7th for free.  The hubris behind the whole program (similar ones operate in many states) is astonishing. The grocery store had to go to the milk czar to ask for permission to offer an in-store promotion. Under what definition of private property rights are we operating anymore? If the thugs in the Maine Milk Commissar’s office and the dairy farmers had an issue with the stores doing this, could they simply have decided to not sell their milk to the supermarkets? Pre-semester bonus points for any student: show what this milk program does to overall economic welfare, and show who gains, who loses and by how much. Extra, extra credit: explain why obviously destructive and unfair programs continue to exist and are unlikely to go away?