Are Crises Good for the Economy?

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Could Japan’s latest crisis help it economically?

Those who believe in Keynesian economics might answer yes. For them, destruction is creation because it “creates jobs” and otherwise “stimulates the economy.” Taking an opposite, more rational, view economists of the Austrian school would either laugh Keynesian theory off, or if they were more considerate, expound Bastiat’s broken window fallacy: there must be something wrong with the idea that if we all go around breaking windows, somehow we’ll be better off, because the windows will have to be repaired. The problem with notions like this is that we see the creation of a new window; we see money going into the workmen’s hands; but we do not see all the beneficial projects that cannot go forward because the money for them has been spent on mere repairs.

The broken window fallacy notwithstanding, there seems to be something that enables crises to revitalise an economy. While crises destroy wealth, sustained crises also weaken government, a hostile, anti-development institution. It is the latter event that eventually can have a huge favorable affect on society.

This is what India has experienced.

I lived in Bhopal in 1984 when the Union Carbide gas leakage swept the city, killing thousands and thousands of people within the hour. Hundreds of thousands were seriously sick. The same year, Indira Gandhi, the Prime Minister, was killed by her bodyguards, producing a very weak government. Massive Hindu-Sikh riots occurred all over the country. Sikh terrorism in support of the separation of Punjab and troubles in Kashmir kept us on edge for the rest of the decade. Then, in 1991, Rajiv Gandhi, who had just completed his term as Prime Minister, was killed, presumably by the same ammunition that he had supplied to the Tamil Tigers, a Sri Lanka-based terrorist organization. Around the same time, help from the USSR to India ceased, as the USSR ceased to exist. Nineteen ninety-two was a year of major Hindi-Muslim riots all over India. Massacres took place that competed with what Rwanda had experienced in terms of brutality. The economy was in a terrible shape, and India came very close to a default on its international commitments. In short, India was crumbling in 1992 and the government was extremely weak.

Let’s look at what was behind some of these events.

Punjab was not only the breadbasket of India, but huge fund transfers were happening from Punjab to the rest of the country. Supposedly bad elements in the Punjabi society, who had earlier been encouraged by Indira Gandhi, took leadership in the quest for a separate state, and the Indian government’s response was pathetic. Indira Gandhi sent army commandoes to attack and occupy the holy place of the Sikhs, the Golden Temple. A sane approach would have been for the Indian government to cut off the water and food supply to the temple. In that event, the terrorists (if that is what they actually were) would eventually have walked out without a shot being fired. But Gandhi wanted to humiliate the Sikhs. So her humiliated Sikh bodyguards killed her. Thereafter leaders in the Congress Party orchestrated anti-Sikh riots. India was in flames.

When a crisis hits, the first thing that fails and escapes is the government.

(One of the biggest regrets that I live with is the fact that in a fit of nationalistic fervor, I sent all my savings, which for a teenager in a poor country were a mere couple of dollars, to help the families of the dead army commandoes.)

The Bhopal gas tragedy happened in the place where I lived. I was awakened very early in the morning by the sounds of sirens and a smell in the air. Until then, ambulances and fire brigades, if they existed, usually did not use sirens, because they were usually not in working order. The working sirens were on the cars of all the petty politicians and bureaucrats. Reaching the rooftop of my house to see what was happening, I saw a stream of cars with sirens and emergency lights leaving the city — they were all running away. The people of Bhopal were soon to learn that when a crisis hits, the first thing that fails and escapes is the government. Not only were the government and the army (which has a huge existence just outside Bhopal) no longer in sight for a very long time, but given that most of the services — medical, water and electricity, sanitation, banks, intercity transportation and railway — were in the monopolistic hands of the government, it became extremely difficult for the city to get back on its feet. Comfortably sitting hundred of kilometers away from Bhopal, the head of the city was issuing statements that nothing was wrong, while carcasses rotted on the streets. He was making absurd decisions, such as banning the sale of gasoline to stop people from leaving the city.

At the same time, the Indian government was financing and arming Tamil Tigers. Prabhakarn, the Chief of Tamil Tigers, was hosted in Delhi. Starting his pro-Tamil Tigers mission, Rajiv Gandhi sent a naval ship, the Island Pride, a name chosen to humiliate Sri Lanka. It seems, in his naïveté (something that had killed his mother), Rajiv was trying to earn Indian votes. The Tigers, a poisonous snake that Rajiv had encouraged, eventually bit him with his own ammunition.

Given the weakened Congress party, Hindu fanatics were growing in power. They were soon to demolish a mosque in the city of Ayodhya, in 1992. The result was widespread massacres in many parts of the country. Distrust between Hindus and Muslims was at its peak. On top of it the economy was in shambles. It seemed that India would only get worse.

I do not wish to minimize the suffering caused by the events of 1984 to 1992. But in hindsight, it seems that something else was happening. By seriously weakening a cancerous growth, the government, the time of troubles created an opportunity to revitalise the society and the economy. It formed the lurid background of what is now a thriving economy. Indian government, the cancer, never recovered its control over society. The private economy had a breathing space, a space in which it could grow. It was as if a strong chemotherapy had been performed. The government was too confused and lost to control the IT industry, when it began to sprout.

The broken window fallacy is still a fallacy, an irrational approach to understanding economics. Destruction cannot be construction. Massacres are just that. There is no humanity in it. But crises can do one thing very important. While destroying the healthy tissue, they can also weaken the cancer, the government. Crises convey to those who survive the important idea that they must not trust in the government, for government is the first to leave when a crisis hits. Crisis teaches self-reliance.




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Unsolicited Advice

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The current state of our union has generated many opportunities to share libertarian perspectives on the economy, the constitution, and civil rights; but until I picked up the January-February issue of the Atlantic, I hadn’t seen much opportunity for sharing the libertarian outlook on social and personal relations. In that issue’s book review section there was a piece (no pun intended, you’ll get it as you read along) called “The Hazards of Duke.”

The article, by Caitlin Flanagan,loosely discussing several works (Girls on the Edge: The Four Factors Driving the New Crisis for Girls, I Hope They Serve Beer in Hell, andThe Company She Keeps), disparages Duke University (rightly in many ways), discusses alcohol consumption by young women, and pontificates about differences between male and female perspectives on sex. But its main focus (and the lens through which it views the preceding list) is on a relatively recent internet sensation — Karen Owen’s F*** List — a graduate’s mock senior thesis about her sexual escapades with 13 Duke athletes (“officially” titled — “An Education Beyond the Classroom: Excelling in the Realm of Horizontal Academics”).

Flanagan presumes a great deal about Karen Owen and her thesis, telling us much more about her own attitudes than about Owen. Shedivines Owen’s motivation — revenge on the men who discarded her — tagging it as a theme for women through the ages. She also identifies direct causes for Owen’s actions. For example, she cites a letter to Duke’s school newspaper, written in response to Owen’s thesis, and the surrounding controversy, by sorority members distancing themselves from Owen. According to Flanagan, this “served to underscore the disdain that the actual Karen Owen seems to have engendered in her fellow students, whose closed social system offered her no safe harbor.”

After reading Owen’s “brief communications with the press,” Flanagan contends that it’s hard to believe Owen’s claim that the email she sent to “only three friends” was not for public consumption, but it’s “not at all hard to believe that Owen had only three friends in college.” She then weighs in on Owen’s mental and emotional state: “The overwhelming sense one gets from the thesis is of a young woman who was desperate for human connection, and who had no idea how to obtain it.” The author further laments that poor treatment by one of her early partners “broke [Owen’s] heart and her spirit” and sent her on a self-destructive path.

That’s a lot of presumption.

The article describes a Fox News segment, hosted by Megyn Kelly, discussing Owen’s thesis. Not trusting the author for objective description, I watched the Fox News clip online. The segment included Kelly and two other female legal commentators. After discussing Owen’s possible financial motivations, Kelly said, “I gotta go off topic from the law because I have two beautiful women here who are college and law school graduates. What could she be thinking? First of all, she slept with 13 guys. . . . . I personally, reading this, was disgusted.” One commentator responded, “Disgusted, yeah. She’s dirty. Yeah, I don’t like it at all. I was like ‘Oh my God,’ this is so unbecoming.” After more banter, Kelly said, “I can tell you, having dated the captain of the lacrosse team at Syracuse, men do not respect women who do this.” She added, “You may sleep with half the lacrosse team. They don’t think that’s a great thing. They don’t talk about how great you are. They talk about what a joke you are. So that’s a word to the wise.” Thanking her guests, Kelly closed by saying, “This has nothing to do with the law, but my own unsolicited advice for young women. Don’t sleep around. Don’t be easy. It’s not empowering. It’s embarrassing. You will be the butt of men’s jokes. You will not be respected and you may be humiliated as this woman is now.”

That’s a lot of condemnation.

I looked up Owen’s “thesis” online and found what appeared to be the original power-point on YouTube. Reading it, I did not see the “little girl lost” who was discovered by Flanagan. I just saw someone who was objectively, and at times humorously, evaluating sexual partners from her college years. I was not the only one to see a discrepancy. Looking online for jezebel.com’s interview with Karen Owen, I discovered that a good number of posters, and the reporter who talked with Owen after her list went viral, took Flanagan to task for her many assumptions.

I believe I can identify several different perspectives on this.

The liberal perspective. Flanagan’s theme is clear. Karen Owen was a victim of an alpha-male, athlete-loving, cliquish, misogynist university culture. Her sexual exploits were not her own. Her desires were shaped — nay, deformed — by careless man-boys and a patriarchal system that coddled them. This is not her fault. Duke’s system failed Owen. It “offered her no safe harbor.” Owen deserves our pity. Something must be done, so other girls don’t suffer her fate.

The conservative perspective. Megyn Kelly’s commentary and advice are representative, and painfully traditional. She admits that her advice was unsolicited, yet she was compelled to give it, and keep giving it. It was advice laden with well-wornresentments and prescriptions for proper social and personal behavior for young ladies. It was imparted to viewers as if Mrs. Cunningham were having a serious talk with her daughter on “Happy Days.” Owen is not a good girl. She’s a bad girl. “She’s dirty.” What Owen did was wrong, immoral, disgusting. No self-respecting, young lady does that. It is bad, bad, BAD! SHAME!

Liberals say it’s not her fault. Conservatives say it’s all her fault. Both conclude that Owen is unfortunate. One scolds. One patronizes. Both warn: don’t act this way. It’s bad!

Now, I am no fan of Duke or its athlete-loving culture, but it’s clear from Owen’s own writing that she chose to do certain things with certain people. And she admits enjoying most of her liaisons. There is no accusation of rape or sexual assault, which are criminal acts. There is no blame to be borne here. Though I am a feminist, I do not share Flanagan's sentiments. The Duke University system did not fail Owen. It owed her little beyond an undergraduate education. As for the earnest advice from Ms. Kelly, it is paternalistic, and the shaming aspect is obnoxious. It’s what prompts so many non-Republicans to shout, “Get out of our bedrooms!” And to what purpose did Kelly cite the beauty of her guests? I graduated from college and law school and am now in the dissertation stage of a Ph.D. program. If I tell you what I look like, will that lend any more or less authority to this reflection? Moreover, Kelly’s claim of insight gained by dating the captain of the Syracuse lacrosse team is laughable. Nowhere in her thesis does Owen make any claim that what she was doing was dating. As to Kelly’s traditional invectives against Karen Owen and her exhortations not to sleep around and not be easy, that’s a decision for each individual adult woman to make for herself. Besides, there are two sides to that coin. As Mae West said, “When women go wrong, men go right after them.”

So now, a libertarian perspective. Entering college, Karen Owen was likely 18 years old — old enough to vote, old enough to go to war, and old enough to experiment in various social behaviors. Her thesis does not represent a giant step backward for women, or a giant step forward either. It is simply one individual’s description and humorous assessment of her past activities. It is nothing more, nothing less. As to the other people involved in those activities, they deserve no sympathy because of the publicity she gave them. They, as individuals, each chose to engage in sexual activity with Ms. Owen. If any of them are unhappy that Owen disclosed those activities, every choice has consequences, good or bad. If Owen wants to discuss or analyze these acts, she is free to do so. As are they. While such “postgame analysis” may be in bad taste, there is no law against it, nor should there be. It is simply an additional risk to the already risky act of the college hookup in the internet age.

Though I did not fully appreciate it in my youth, as a mature libertarian I value the advice my father always gave me about social and personal situations: “Be discreet.” He did not mean secretive. He meant that you should think about what you do, and with whom you do it, because all actions have consequences, some quite unwelcome. That’s good advice, solicited or not.




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Rewarding Yale-ness

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I thought I already knew what was wrong with US News’ rankings of “Best Colleges,” so I was slow to reach for Malcolm Gladwell’s recent piece in the New Yorker, The Order of Things” (Feb. 14 and 21). But (to use our past president’s wonderful locution), I misunderestimated Gladwell’s contribution, a portion of which I will share here.

People who follow higher education know that US News’ rankings rely heavily on inputs, not outputs (e.g., not the learning the schools impart but the amount of resources spent), and that they use estimates of reputation for a good part of the ranking (22.5%).

But the problems with US News’ rankings apparently go deeper or at least are more complex. Gladwell argues that it is impossible to come up with a single ranking of heterogeneous institutions (as US colleges are) on multiple dimensions — as US News tries to do — without making “implicit ideological choices.” He says that those choices mean that schools that enable more students to get better educations are always going to be low on the list.

To be specific: universities that currently rank in the middle of US News’ list can’t improve their rankings, for two reasons. A University of Michigan sociologist who studies rankings has found that the university presidents who take the reputation survey (some are expected to “evaluate” more than 200 peer institutions) depend heavily on the existing US News rankings for their evaluations! In other words, the reputation process is circular.

Second, student selectivity swamps measures of effectiveness. Here’s how it happens. US News does have what Gladwell calls an “efficacy” measure, “graduation rate performance.” Since graduation rates depend largely on the selectivity of the incoming students, this measure “compares a school’s actual graduation rate with its predicted graduation rate given the socioeconomic status and the test scores of its incoming freshman class.”

If the graduation rate is higher than expected, the difference raises a school’s score, because the school is graduating more students than would get through on the basis of selectivity alone. (There might be some question about this as a measurement of efficacy, but that’s not my point right now.)

The problem, says Gladwell, is that “no institution can excel at both.” For example, Yale is so high on the selectivity scale (it’s ranked first among national universities) that its “predicted graduation rate” is 96. Thus, its efficacy rate can’t be more than four, and it’s actually two. In contrast, Penn State, which has the lowest ranking of the top 50 national universities, is not as selective as Yale. But it does very well on the graduation measure; its expected graduation rate is 73% and its actual graduation rate is 85%, giving it an “efficacy” score of 12, the highest in the top 50.

But US News gives twice as much weight to selectivity as to efficacy — a completely arbitrary choice and, according to Gladwell, the wrong measure in terms of social benefit (although from the perspective of the student seeking prestige, it may be the right choice).

Finally, the rankings leave out price. Although Gladwell doesn’t recalculate the top 50 universities with price as a factor, he does so with law schools, since an Indiana University law professor has conveniently laid out the chief US News criteria in a spreadsheet. The expected schools are there, led by the University of Chicago, Yale, and Harvard. If Gladwell makes price a factor and gives it equal weight with the US News’ other criteria for law schools, two new schools pop up on the list. The upstarts are Brigham Young University and the University of Colorado.

Gladwell suggests that a school should be rewarded for being affordable, but this is beyond the pale for US News. As a result, says Gladwell, “the Yales of the world will always succeed at the US News rankings because the US News system is designed to reward Yale-ness.”




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Hell No, I Won't Go to Libya

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I've declared myself officially neutral in the Libyan civil war.

"Yeah? Well, who asked you, anyway?"

But that's my point. I believe that someone in America should admit his ignorance about which side of the Libyan conflict is good for life, liberty, and the pursuit of happiness. My guess is: neither. It also makes me feel a little strange, just listening to phrases like "a U.S.-provided no-fly zone in Libya." I can't help thinking that there must be a reductio ad absurdum in there someplace.

And speaking of reductios: have you noticed the peculiar behavior of Western correspondents who actually get anywhere near a battlefield in Libya? Every one of them is a huge propagandist for Qaddafi's foes — as, of course, they have a perfect right to be — yet many of their reports from the front sound like this: "Rebel forces are right ahead, hidden behind the ruins of that sentry post, hoping that Qaddafi's air force won't find them there." "Rebel leaders are marshalling their forces ten miles down the road, hoping to hold the city, but without much ability to do so, since they have only two tanks at their disposal." "The latest air strike came 500 feet from the rebel fortification, over on the left, about 50 feet behind that hill. Another strike would wipe them out, if the planes took better aim."

If these are the rebels' friends, I wouldn't want to be the rebels.




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The Hollow Revolution

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On the morrow of Governor Scott Walker’s brilliant tactical victory in Wisconsin (stripping the public employee unions of collective bargaining rights while Democratic lawmakers loitered in Illinois), it is perhaps timely to examine the “revolution” of November 2010. In the November elections the Republicans made major gains not only in statehouses across the country, but also in Congress. Sixty House seats changed hands. Eighty-seven freshman Republicans, most of them backed by the Tea Party, entered the House in January with a mandate to bring federal spending under control.

What has resulted from this? Has the Republican sweep produced legislation to reform entitlements, curb defense spending, and eliminate entire chunks of government (the Department of Education, for example)? Make no mistake, nothing less is required if the astronomical budget deficit (almost $1.5 trillion this year) and the crushing national debt (now equal to 100% of GDP) are to be tamed.

Well, the answer is no. After all the electioneering, all the emotion and bloviation about the terrible fiscal crisis America faces, the Republicans produced a plan to cut $100 billion from domestic discretionary spending. That $100 billion represented about 7% of the deficit. And of course the figure was quickly negotiated down to 61 billion, then 32 billion. In any case, domestic discretionary spending is not the problem, or at least represents a minor and noncritical aspect of the problem.

Only real entitlement reform and a willingness to reduce America’s commitments around the world (ergo the defense budget) can cure the fiscal illness that is killing America. And despite the willingness of a few politicians in Washington, DC — Paul Ryan and Rand Paul spring to mind — to enact real reforms, neither of the major parties will ever summon the will to do so. The Democrats will remain in thrall to the teachers’ unions and the trial lawyers and the 43% of Americans who pay no federal tax; the Republicans will continue to craft sweetheart legislation for the corporate donors that fund their party. Neither party dares touch a hot button like agricultural subsidies. And both, apparently, remain convinced that America must bestride the globe militarily, despite the absence of any overweening threat to the American people.

The smaller, statewide revolutions initiated by Walker, Governor Christie of New Jersey, and Governor Kasich in Ohio may offer glimmers of hope. But we shall have to see what the next round of elections brings. If these states fall back into the Democratic column in 2012 and 2014, the work of these governors will be undone. And we shall be back to square one.

In any case, Washington will never change in a fundamental way, even if the Republicans sweep the Senate and the White House in 2012 (don’t hold your breath). We are fated to live in interesting times.




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Green Dreams, Green Nightmares

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A rush of recent reports on energy has much to say about the fundamental foolishness of the green vision of energy production, the vision long regnant in academia, and the one that informs the Obama regime.

The green vision — really, the green dream or delusion — is that the world is running out of fossil fuels, and we need to switch to so-called renewable or sustainable sources, such as solar power, wind power, and biofuels. (These “renewable,” allegedly low-pollution green options never include nuclear or hydroelectric power, both of which are proven to be cost-effective and clean — a point to which I will return shortly). If we just embrace these “new” energy sources, the greens aver, jobs will just multiply magically.But if we continue to use fossil fuels, we are doomed to economic stagnation.

The first report is the happy news that the number of new American oil wells is increasing at a pace not seen in over three decades.

According to the major oil drilling company Baker Hughes, it installed over 800 new oil rigs last year, over twice the previous year's (2009) total, and a tenfold increase over the yearly average during the late 1990s.

These rigs are placed to tap so-called “unconventional reservoirs,” squeezed into shale rock strata. Ten years ago these shale oil reservoirs were written off, but the increase in oil prices and in the level of oil-drilling technology have now opened them up.

The story mentions several promising shale oil fields, including the Eagle Ford formation (stretching from southern Texas into northern Mexico), the Bakken formation (in North Dakota), and the Monterey formation (in California). These formations currently produce about half a million barrels a day. It is now projected that production will hit 1.5 million barrels per day in four years, the equivalent of what we currently get from the Gulf of Mexico, which is roughly about 30% of current total domestic oil production. This will go far toward making up for declining production from our conventional fields in Alaska and the Gulf of Mexico.

The Bakken formation is yielding oil faster than can be sent through pipelines to market, so the oil companies are shipping it by road and rail. The companies have had to open camps to house all the workers needed, and North Dakota has unemployment at less than half the national average (its rate is 3.8%, to be exact). As another article notes, the Bakken field produced 113 million barrels in 2010, up from 33 million the year before.

If the Bakken and Eagle Ford oil fields pay out as expected (they are projected to yield an eventual four billion barrels of oil), they will wind up as the fifth- and sixth- biggest US fields ever found. By 2020, shale oil fields could allow us to cut our imports of foreign oil by 60%, which (at $90 a barrel) is $175 billion less we give foreign dictators. And another article reports that the EIA estimates that with these new fields, American petroleum production will increase 14% by 2020.

A more recent news item gives us more detail about the new shale oil drilling technology. It involves drilling down and then horizontally into the rock, then pumping a mixture of sand, water, and small amount of chemicals in to crack the rock and loosen the oil molecules. Drillers figured out how to make the shale crack more extensively, and that made the extracted oil cheaper than had ever been thought possible.

This process, called fracking, has proven very effective in freeing natural gas, as I noted in an earlier piece. It is beginning to pay off big time in oil production as well.

With this method, new fields are being opened, such as the Leonard formation (which straddles New Mexico and Texas), and the Niobrara formation (which underlies Wyoming, Colorado, Nebraska, and Kansas).

Now, last year, as shale oil technology started proving itself a tremendously effective method for extracting oil, environmentalists immediately arose in opposition. Rep. Henry Waxman (D-CA) held hearings investigating fracking, and the environmentalist Left produced a documentary (Gasland) alleging that the technology was poisoning groundwater. But all the EPA studies have shown that fracking is safe, and even the Environmental Defense Fund seems comfortable with it.

So much for the death of petroleum. Turning now to renewable-green energy sources, some interesting stories are worth noting. Let’s begin with the report that France’s solar program is in trouble.

Two years ago, the French National Assembly passed a law requiring France’s national utility, Electricité de France (EDF), to buy all the power produced by newly installed solar panels at $745 per megawatt-hour, roughly ten times the market price for electricity. The goal was to increase the number of people installing solar panels on their roofs.

The Chinese-manufactured solar panels have a large “carbon footprint” — meaning they were produced by using large amounts of power generated by the burning of dirty coal.

The intended result was that applications for rooftop panel array connections rose — from 7,000 applications a year before the subsidiary to about 3,000 a day by December of last year. But there were unintended, though embarrassingly foreseeable, consequences. One was that the cost to EDF of buying solar power has exploded to $1.4 billion a year, and is threatening its financial health. EDF saw its stock drop by 20% in 2010 (compare that to a 3.7% drop for Europe’s Stoxx 600 Utilities Index). EDF is now $78 billion in debt, a situation that has caused it to defer modernizing its 53 nuclear reactors (which provide 75% of France’s electricity). And it has had to jack up the surcharge that consumers who don’t use solar panels have to pay.

A second consequence is that the solar panels are being purchased from China, thus shifting jobs from France to there. Worse, the Chinese solar panels have a large “carbon footprint” — meaning they were produced by using large amounts of power generated by the burning of dirty coal!

Then there is the report about an ethanol plant, Range Fuels, that in 2007 received startup subsidies of $76 million from the federal government and $6 million from the lucky state of Georgia, where it was supposed to open a plant making ethanol from pine chips. The next year, it got a loan for $80 million, guaranteed by taxpayers under the “Biorefinery Assistance Program.”

The reason the Bush administration started pushing this “advanced biofuels cellulosic ethanol” program (essentially, a program for producing ethanol from switch grass and other biomass) was that corn-based ethanol was already rapidly acquiring a bad reputation for excessive costs and a low yield of energy outputs. Cellulosic ethanol looked like a better prospect.

Georgia politicians were so excited by the smell of pork that they started calling their state “the Saudi Arabia of Pine Trees.” The Saudi Arabia of pine trees!

Well, guess what? Range Fuels just closed, having never produced even one shot of ethanol. Gone with the wind, as they used to say in Atlanta. And all the subsidy money gone with it.

Honest to God, you couldn’t make this stuff up.

 

 




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Liberté

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NewsBiscuit recently reported that in the wake of Wikileaks revelations, the truth has finally been admitted: "The 'French language' is indeed a one thousand year old hoax. The president of France revealed that what purported to be his native tongue was in fact complete gibberish, admitting the French really speak English, except in the presence of the British."

Here are my comments about this terrible revelation.

It’s a wonder the hoax lasted so long, the deceit was so transparent and so unsophisticated. Take the alleged French word for “table,” for example. It’s simply: “table.” They did not bother to change even a single letter. Or take the supposed French word for “intelligence.” It’s just the regular word “intelligence” pronounced in an affected and effeminate way.

Only once in a while did the French make even a small effort to appear to have their own distinctive language. So, for example, they took the English word “connoisseur” and made it “connaisseur,” turning an "o" into an "a" in the middle of the word to try to trip up the unaware and the naïve. Frequently, they just added an "e" at the end of a normal word in a paltry attempt to appear different. This goes, for example, for the longest word in the alleged French language, “anticonstitutionalisme,” which shows with pathetic clarity that it’s simply pseudo-English.

To be completely fair, the engineers of the hoax of a distinctive French language managed two clever defenses that retarded significantly the unavoidable uncovering of their treachery. I refer here to “irregular verbs” and to so-called “false friends.”

Every young American, or Englishman, or Australian, who was ever forced to learn the French “language” first went through an obligatory period of intimidation. They were all told that they had to master “irregular verbs,” like this: “je vais, j’irai, j’allais, [que] j’aille.” (I go, I will go, I used to go, that I go). They were all told of the three hundred verbs like this that they must master without fail. Naturally, as you would expect, all those young people quickly became discouraged. And, of course, their mass failure only served to reinforce, over time, the myth of a separate French language. The French themselves have never heard of such barbarity. In private, they used words like you and I (“you and me”?).

The second obstacle placed in the paths of students, the so-called “false friends,” was thrown at random into the pseudo-language by the perpetrators. Thus, “deception” means “disappointment,” “entree” means “hors-d’oeuvre,” and the old English word “mercy” was robbed of its final "y" and replaced with an "i." Then they tell you it means only “Thank you” in their pretend-language.

Had we been more observant, we would have uncovered the deception much earlier, noting the curious lack of certain words, in the imaginary French language. Thus, it has no word for “fun” and, on the Internet, it uses “LOL” to mean exactly “LOL.”

We were had. Dommage!




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Greenbacks and Green Energy

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Larry Kudlow kicked a hornets’ nest when he suggested last month that the riots that were then breaking out in Algeria, Egypt, Jordan, Libya, Morocco, and Yemen were caused not just by indigenous anger at tyrannical regimes but by skyrocketing food prices. Kudlow noted that Egypt in particular is the world’s largest importer of wheat, and rising wheat prices had pushed the Egyptian annual inflation rate to over 10%.

Kudlow suggested that the Fed’s easy-money pump priming may be in part to blame. As he noted, commodities are typically priced in our currency, and the Fed has been producing it as fast as rabbits on meth. The CRB food index is up 36% in one year, and inflation is blossoming around the world — in Latin America, Asia (China and India especially), and now even in the EU.

Kudlow was (as usual) quite prescient. Recent stories confirm the increasing squeeze of food inflation. First is the report that the dollar’s rapid descent is hurting many people in undeveloped countries, such as the Philippines. A large percentage of Filipinos work abroad for American employers, or for employers in countries (such as Hong Kong and Saudi Arabia) whose currencies are closely tied to the dollar. As the American dollar loses value, the funds that Filipinos who work abroad send home to help their families also lose value. Considering that remittances from abroad account for about 10% of the country’s economic output, this is causing immense hardship.

The once-lowly Philippine peso has appreciated against the dollar by over 15% in the last three years. So the dollar’s fall is hurting a lot of people. One woman quoted, who uses her husband’s remittances to feed and educate their three children, has seen the number of pesos she gets from him go down by nearly 25% over the last few years.

The problem is the same for China, India, and Mexico, all countries with large numbers of workers paid in dollars or dollar-linked currencies.

Besides the Fed’s endless pump-priming, another cause of food inflation has been the continuing boondoggle called the ethanol program. For years, the federal government has been shoveling tens of billions of dollars at corn growers to get them to produce corn for making ethanol for fuel.

Now, this program has long been criticized as a way of replacing petroleum. It is hugely costly, especially when you consider how much energy it takes, in fertilizers, planting, harvesting, and shipping the corn. Why, even Al Gore — the über-Green — is now questioning the wisdom of the corn-based ethanol program.

Not as much comment has been made on the role our massive ethanol program plays in jacking up food prices. Since now roughly 40% of America’s corn (which means 15% of all corn produced worldwide) is being used for ethanol, corn prices have skyrocketed, increasing food prices in countries (such as Mexico) where corn is a major staple for people or a major source of cattle feed.

Moreover, the billions of bucks shoveled out by the federal government have induced many farmers to switch from growing wheat to growing corn, thus helping to drive wheat prices up even further.

Just as Gore now doubts the wisdom of using corn-based ethanol as a substitute for petroleum, no less a luminary than Bill Clinton is wondering whether the ethanol program isn’t causing food riots and political instability all over the world. He expressed these heterodox thoughts at the Department of Agriculture’s annual Agricultural Outlook Forum. While he said he still believes in corn-based ethanol, he urged farmers to consider the effects of their choices on developing countries.

He was being ludicrously timid. The corn-based ethanol program should have its subsidies ended immediately. Then we would see what the real price — set by supply and demand, not by Congress — should be. My bet is that the industry would shrivel up rapidly, freeing grain for human consumption.

As the cliché has it, what goes around comes around. A recent story reports that the global food inflation is now hitting American stores. The U.S. Department of Agriculture estimates that US food prices will jump 3% to 4% this year — hardly news to anyone who has shopped for food lately.

In fact, consumers would have felt the sting of inflation earlier and deeper, except that supermarkets have not been passing on the full hit, for fear of hurting sales. But as prices for food commodities keep rising, sooner or later the full cost of those increases will have to be paid by the American consumer.

At that point, perhaps we will see food riots. Or at least see Obama join Egypt’s Mubarak as a toppled leader.




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How to Build a Marionette

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On January 18, 2011, on the floor of the House of Representatives, Congressman Steve Cohen of Tennessee said that those who characterize the new healthcare law as a “government takeover of healthcare” are purveyors of the “big lie. Just like Goebbels.”

A quick browse round the web reveals wide agreement that Mr. Cohen’s insertion of the Reich Minister’s name into the healthcare debate did little to encourage reasoned discourse. The next day, Mr. Cohen himself felt the need to clarify, saying, "Not in any way whatsoever was I comparing Republicans to Nazis."

A consensus seems to have emerged that, while the congressman is given to using inappropriate language, he means well, and that the matter should be gently set aside. I agree, and will do so right after addressing two small questions.

The first is straightforward: Is it a “big lie” to say that the implementation of the new healthcare law would result in a “government takeover of healthcare?” The second question is more speculative: what would Dr. Goebbels have thought of the new healthcare law?

Regarding the first question, anyone who considers the increased government regulation contained in the new law to be inadequate would almost certainly find the “takeover” accusation questionable. Those who favor the single-payer system of government-run universal healthcare insurance, for example, would probably find the characterization of the new law as a “government takeover” simply laughable. Their fondest hope is that the government will become the sole insurer of health, eliminating the need for private health insurance entirely. Because that hope is not fulfilled by the new law, from their vantage point the “big lie” charge may seem true. After all, they want a government takeover. It seems likely that Politifact, the Pulitzer-winning website that first called the “government takeover” charge the “biggest lie of 2010,” shared that hope.

But there is more than one way to take over a healthcare system.

Guess how many Americans already have their health insurance provided by the government? Come on, have a go.

According to the National Council of State Legislatures, more that 90 million Americans were covered by Medicare and Medicaid in 2009. The website Health Policy Gateway gives us additional government-insured group totals, also for 2009: 11 million covered by the military system, 7.8 million covered as federal employees, and 30.3 million covered as state and local employees. The Indian Health Service tells us that it serves some 1.9 million Native Americans. The Bureau of Justice Statistics counts 2.4 million who get their government healthcare behind bars.

So, even before the new law was passed, the government, in one form or another, was already insuring about 143 million Americans, or about 46% of the 2010 US Census total of 308 million. Not quite half.

How about the other half?

Under the new law, the government becomes a puppeteer and private health insurance companies its marionettes. Let’s look at a few of the strings.

The first string is called “guaranteed issue,” which means that the insurance companies will no longer be allowed to deny coverage to anyone, regardless of pre-existing conditions. They’ll have to take all comers.

The second is “community rating,” which means that insurance companies will be required to charge the same amount to all people of the same age, sex, and geographical location — again, no matter how serious the pre-existing conditions, and no matter what other risk factors may be present. One size fits all.

The third string is “minimum coverage standards,” which means that the minimum scope of coverage will be decided by the government. Have it our way.

The fourth string is “rate review regulation,” which means that Health and Human Services will judge whether proposed premium rate increases are unreasonable or excessive. (At this point the regulations indicate that while HHS will issue its judgment, “whether or not an insurer can implement an increase determined to be unreasonable by a state will, of course, depend on state law.”)

Now imagine that you are a healthcare insurer. Under this law, you have to sell insurance to everyone who wants it, you have to charge them all the same amount (except for age, etc.), your product (scope of coverage) will not be determined by you, and the amount that you can charge is subject to the approval of the government, whether state or federal.

If you are running an insurance company and you are told what you must sell, what you must charge for it, and to whom you must sell it, you are not running an insurance company.

The health insurance industry will be like a giant Howdy Doody, with Secretary Kathleen Sebelius holding the strings.

Note that this list is not comprehensive and does not include, among other things, the bizarre part of the law that compels citizens who are otherwise uninsured to buy health insurance from Mr. Doody.

So, regarding the first question, while it may be an exaggeration to say that the new healthcare law in itself constitutes a “government takeover of healthcare,” calling it a “big lie” stretches the truth. After all, whoever controls health insurance controls the health providers by deciding who will be paid how much for which procedures. There must be a way to put it more fairly. How about this: if implemented as written, the new healthcare law would constitute, in what has been a decades-long journey down the road of ever-greater government control and regulation of the country’s healthcare system, a great leap forward.

Now, what would Dr. Goebbels have thought of all this?

While the National Socialist Party never implemented a single-payer system, it did build on the government-sponsored healthcare system created by Kaiser Wilhelm II. In 1934, a national director was appointed for all sickness funds. Another director was created to be responsible for all other insurance funds. Both these directors reported directly to the central government. Then, all funds, community health services, and non-governmental healthcare organizations were put under direct central government leadership. By 1945, health insurance had been expanded to all pensioners, and accident coverage had been expanded to cover all workers, regardless of occupation. A 12-week, job-protected maternity leave had been introduced, and limitations on sick leave had been eliminated. In short, during the Third Reich, in keeping with Hitler’s leadership principle, or Führerprinzip, the central government increased its control of all aspects of the healthcare system. (See James A. Johnson and Carleen Harriet Stoskopf, Comparative Health Systems: Global Perspectives for the 21st Century, Jones & Bartlett, 2009.)

One can’t be sure, of course, but it seems reasonable to say that Goebbels approved of these developments in the healthcare system of Germany. He was, after all, a committed National Socialist and a close friend of the Führer. It also seems reasonable to infer that, were he alive, he would approve of America’s new healthcare law, which has the same sort of centralization of control that was evident in Germany during the decade from the mid-’30s to the mid-’40s.

In pointing this out, it needs to be said that I am not in any way whatsoever comparing supporters of the new healthcare law to Nazis.




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Marque and Reprisal

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The AP reports that Erik Prince, founder of Blackwater US, is involved in training 2,000 Somali recruits to fight pirates who operate on the African coast. The financing for this venture “is being moved through a web of international companies, the addresses of which didn't always check out when the AP sought to verify them.”

I’d hoped that the US government would have followed Congressman Ron Paul’s suggestion and used its constitutional authority to fund such operations. Article I, Section 8 of the Constitution authorizes Congress to punish piracy and felonies committed on the high seas. The next clause allows Congress to grant letters of marque and reprisal, to address the special situation in which American ships, property, and interests are menaced, but no other government is involved.

War is not declared. Money for rewards is passed like an ordinary spending bill. Privateers using their own arms and wits are authorized to make money by taking the property of an offending foreigner. A sharply defined goal can be set and only success rewarded. The cost of using mercenaries is minimal, and America’s reputation and diplomatic interests are not on the line. No US serviceman will die.

In Somalia, Prince and his roughnecks can make a profit and pay market compensation to mercenaries who might lose lives or be injured while carrying out their assignments. America can plausibly deny responsibility for the sometimes distasteful aspects of war.

In 2001 Paul suggested that Letters of Marque and Reprisal be issued to kill or capture Osama bin Laden, who was hiding in ungovernable areas of Afghanistan. A force of irregulars, highly motivated by a generous bounty, would have neutralized bin Laden if anyone could have. Mercenaries would not have been distracted by the mirage of bringing “democracy and a strong central government” to the proud and independent anarchists farming that expanse of gravel.

But I expect too much; our Constitution languishes on life support in Washington. War is the health of the state.




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