Cafe Hayek

I talk about the proposed financial reform

Russell Roberts

On Minnesota Public Radio. Here.

Zywicki on The Price of Everything

Russell Roberts

Here.

World's Smallest Violin

Russell Roberts

Couldn't happen to a nicer guy (HT: Jeff Temple). Well, it could. But he's in the top 20 or so.

Law Ought Not be Centrally Planned

Don Boudreaux

Here's a letter that I sent recently to the Baltimore Sun:

Diana Schaub rightly argues that no judge should allow empathy for parties in a courtroom to dilute his or her commitment to apply the law dispassionately ("Why empathy is the enemy of justice," June 14).  But the need for judicial impartiality does not imply that judges should avoid engaging with the real-world contexts and details that surround every legal dispute.

In a free society, law isn't simply, or even chiefly, a set of explicit commands handed down from a sovereign (be it a monarch or a democratically elected legislature).  A great deal of law - indeed, most law - emerges undesigned from the daily practices of ordinary people interacting with, and sometimes bumping into, each other.  People on their own often find ways to minimize these conflicts, and these ways become embedded in people's expectations.  These expectations, in turn, become unwritten law - law that good judges find and enforce impartially.

Sincerely,
Donald J. Boudreaux

Openness and Transparency

Russell Roberts

Obama wants openness and transparency. Then why is he further empowering the Fed. the most opaque and secretive government agency outside of the CIA?

Interview about EconTalk

Russell Roberts

Here at the Finance Buff.

Rational rationing?

Russell Roberts

David Leonhardt writes (HT: Elizabeth Terrell):

Milton Friedman’s beloved line is a good way to frame the issue: There is no such thing as a free lunch. The choice isn’t between rationing and not rationing. It’s between rationing well and rationing badly. Given that the United States devotes far more of its economy to health care than other rich countries, and gets worse results by many measures, it’s hard to argue that we are now rationing very rationally.

It's an interesting column and I think Leonhardt is maybe half right or maybe even three quarters. He's right that the choice isn't between rationing and not rationing. But I don't agree that the choice is between rationing well and rationing badly. I don't know what rationing well or badly means. He means we ration badly because we spend too much. He's right. The current system doesn't let prices ration. Prices are artificially low. There isn't enough rationing in the global sense.

For me, the crucial question is who does the rationing, a centralized decision-maker or a decentralized system. Centralized decision makers influenced by political pressure inevitably ration badly. Decentralized systems can potentially avoid the problem of political pressure.

The "reformers" want more top-down rationing with prices playing a smaller role than they do now. I want prices to play a bigger role. Prices also play a role in rationing any overall level of care among individuals. This is one reason people tend to be suspicious of prices--they appear to give the rich an advantage. And they let people profit. But those profits produce incentives to control costs that are missing from the current system and that would not be in place in the typical reforms that are on the table.

I want more rationing with less control where power is dispersed. The "reformers" want more rationing with more control and more power. They scare me.

John Stossel's Take

Don Boudreaux

ABC News's John Stossel is now blogging.  This news is great!  I'll visit John Stossel's Take at least once a day, and likely more frequently.

Stupid Cult of Political Personality

Don Boudreaux

Here's a letter that I sent today to the New York Times:

Maureen Dowd wants President Obama to display his healthy, low-fat eating habits more publicly ("Hold the Fries," June 17).  The idea is that Our Leader's ostentatious display of his preferred diet will inspire ordinary Americans to eat better.

What has become of Americans?  How different are we now from Louis XIV's French subjects who gazed in awe upon him at his table?  And are we so childish that our dietary choices are directed by political celebrities?

If we Americans are indeed such mindless lemmings as Ms. Dowd assumes, I'd prefer that Pres. Obama spend lots of time being filmed gobbling Big Macs while, between bites, insisting that each of us take control of our own individual lives and that we would do well to reject the stupid cult of celebrity that now surrounds high government officials.

Sincerely,
Donald J. Boudreaux

Where is the world's smallest violin?

Russell Roberts

Diane Feinstein and Susan Collins are disappointed in the political process. Have they been kidnapped and replaced by zombies? Sleeping for the last 40 years or so? They can't believe how the process actually works:

It's amazing how quickly a good idea can go bad in Washington. In January, we joined with Sen. Charles Schumer to introduce a bill that would allow Americans to trade in gas-guzzling cars in exchange for vouchers worth up to $4,500 toward the purchase of vehicles with greatly improved fuel economy. This legislation was modeled after programs in California and Texas that improved fuel efficiency, reduced pollution, and helped easily identifiable groups of Americans explicitly while the harm and costs were spread widely across the general taxpaying public stimulated auto sales.

Our "Cash for Our Friends in Detroit Clunkers" proposal was a win-win for the environment and the economy. Then Detroit auto industry lobbyists got involved. Boy, that sure shocked us. Why would they do that? Soon a rival bill emerged in the House, tailored perfectly to the auto industry's specifications.

The House bill was written so quickly that one of its main components -- a provision that would have excluded any vehicle manufactured overseas -- had to be removed because it violated trade laws. Too bad. That would really have helped our "economy." Those nasty trade agreements sure can prevent a good law from getting even better. But the worst item on the auto industry's wish list is still at the heart of the bill -- a provision that undermines fuel-efficiency standards.

On Tuesday, the House approved this legislation, which would subsidize the purchase of a new Hummer H3T (16 mpg) or a new Dodge Ram 1500 4x4 truck (15 mpg), but not a two-year-old Ford Focus (27 mpg) or used Chevy Colorado (20 mpg). A companion bill is pending in the Senate.

Where is the world's smallest violin? You mean the lobbyists actually influenced the bill? And a new Hummer gets preference over a used Ford Focus? Well that's what happens when you have the wasteful idea of subsidizing new car purchases. It leads to waste. Why are you surprised?

Actually I am surprised. Why didn't they just require all Americans to destroy ALL of their cars every six months. That would be even more helpful to a small select group of politically-important Americans the economy.

Whose fault?

Russell Roberts

Arnold Kling analyzes the Administration's White Paper on the crisis. Not suprisingly, perhaps, it's was caused by greed and insufficient regulation. No mention of bad public policy or inept regulation. Highly recommended.

New financial regulations

Russell Roberts

I don't get it (from Yahoo):

Securitization, or the packaging and selling of loans as securities, has been blamed by critics for eroding lending standards in the mortgage and other lending businesses.

A Treasury spokesman said the administration would propose requiring lenders to retain 5.0 percent of the risk they securitize. A bill to do this was approved in May by the U.S. House of Representatives, but is languishing in the Senate.

Here's my guess. Securitization has gotten a bad name because banks originated loans with no incentive to be careful. So to keep securitization going, we have to force people to take a stake

But maybe we should have less securitization. This does not seem to be on the table. Why not? Could it be because some one has hopes of making money on it again?

Pinocchio declared winner in Iran

Russell Roberts

Nice cartoon (from Andrew Sullivan):

Uploaded with plasq's Skitch!

What a world

Russell Roberts

From Twitter:

A critical network upgrade must be performed to ensure continued operation of Twitter. In coordination with Twitter, our network host had planned this upgrade for tonight. However, our network partners at NTT America recognize the role Twitter is currently playing as an important communication tool in Iran. Tonight's planned maintenance has been rescheduled to tomorrow between 2-3p PST (1:30a in Iran).

Absolute mobility, quantified

Russell Roberts

This post looked at the proportion of children who have done better than their parents. Here's a measure of the amounts.

Half empty or half full? Both no doubt. Just don't tell me that people in the bottom 40% haven't received any of the economic gains of the last 30 years:

Absolute mobility

Russell Roberts

Half empty or half full?

You decide.

This is from the Pew Economic Mobility Project. Look at it carefully. I'll try to say more about it later and to bring some additional data.

It is from the PSID. It follows the same people. It is corrected imperfectly for inflation. But it's the best you can do.

More pictures from Iran

Russell Roberts

Here. Very powerful.

Where we are

Russell Roberts

Nice summary from Bob Davis and Jon Hilsenrath at the WSJ:

Since the onset of the financial crisis nine months ago, the government has become the nation's biggest mortgage lender, guaranteed nearly $3 trillion in money-market mutual-fund assets, commandeered and restructured two car companies, taken equity stakes in nearly 600 banks, lent more than $300 billion to blue-chip companies, supported the life-insurance industry and become a credit source for buyers of cars, tractors and even weapons for hunting.

I like their division between the gets and get-nots.

Here comes everybody

Russell Roberts

Clay Shirky was definitely on to something.

Live from Iran, brought to you by everybody.

Damned if you do, too

Russell Roberts

Reuters headline (HT: Planet Money):

Obama: Government could go broke if healthcare not fixed

Or if it's "fixed" the wrong way.