Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Saturday, June 11, 2005

Just How Dumb is Stacy Schiff?
or is she just another NYTimes elitist?

Stacy Schiff writes in the NYTimes (reg. req.) that increasing consumer choice has made us worse off. At least she seems to think more choice is a bad thing when it comes to dental floss and toothpaste.

E. B. White claimed he knew his wife was the girl for him when she referred to dental floss as "tooth twine." I take his point. I also tried to buy "tooth twine" recently. By any name, that is an exercise in frustration, or affluence-induced A.D.D., or option overload. If there is plain old standard issue dental floss out there, it is on the shelf with the all-purpose running shoes and the unadulterated, adjectiveless cup of coffee.
What's her problem? Of course there is plain old dental floss out there. And all-purpose running shoes. And standard cups of coffee. Doesn't she shop at Wal-Mart or go to a local eatery?

Anyway, what's wrong with someone's being able to get a double naked skinny cow [or whatever the jargon is]? I think increased variety and choice are glorious things about our North American affluent economies. She seems to disagree that choice is good:

In taking cluster analysis and its classifications to the logical extreme, are we not building a superfinicky society? Five minutes in any Starbucks line will answer that one. We used to be one nation, undivided, under three networks, three car companies and two brands of toothpaste for all. Today we are the mass niche nation.
And isn't it wonderful that we can indulge our vast variety of tastes? Maybe she would rather have the editorial writers of the NYTimes decide which varieties should be available for us. Or maybe she was just trying to be funny or cute. It didn't work, Stacy.

Speaking of niches, what has happened to Diet Vanilla Coke in cans? I've seen a few of the big 2-litre bottles of the stuff on store shelves and even cellared a couple, but I am totally unable to find it in cans in our area.

The Economics of Laxatives:
$60 per CSBM

I have excerpted below a portion of some material that sends out in a subscription e-mail service. I've added a link to the original article that is referenced.

Bottom line
Tegaserod is a safe and effective treatment for chronic constipation. Although some benefit was seen at a dose of 2 mg twice daily, a better treatment effect was seen at 6 mg twice daily, and the higher dose was similarly tolerated. However, tegaserod is much more expensive than alternatives like colchicine. Since patients receiving 6 mg tegaserod had a mean of 0.6 additional complete spontaneous bowel movements per week than those taking placebo, the cost for each one was more than $60. [Emphasis added]
Kamm MA, Muller-Lissner S, Talley NJ, et al. Tegaserod for the treatment of chronic constipation: a randomized, double-blind, placebo-controlled multinational study. Am J Gastroenterol 2005;100:362-72.

I guess, under the recent Canadian Supreme Court decision, the provinces are obliged to provide the drug, regardless of the price, so as not to "endanger life and personal security". Here is a clear case for cost-benefit analysis to be applied!

The Anti-Expert Economy

Alvin and Heidi Toffler [Future Shock -- remember it?] have recently written a column for the Tribune Services about the anti-expert revolution.

The revolt has no name, but it has an ideology: anti-expertism.
We are seeing this revolt brewing across the world, in a strange collection of places: a doctor's office here, a supermarket there, and even in governor's mansions.
They relate this revolution to some work on credentialism done by my friend, socionomologist Ben Singer:

Closely tied to this revolt against expertise-ism is a mounting suspicion of credentials -- the criteria that separates experts in a field from the rest of us.

... Criterial systems, Singer notes, often encourage professionals such as academics and physicians to falsify credentials.

... Today, people are on to this system. With more information of their own, made available by the new knowledge-delivery technologies, we are better able to judge competence without an intermediary to tell us whom to trust. At least, that is what many of the anti-expertise rebels believe.

In short, the old system is facing a legitimation crisis, a crisis of authority. By puncturing the monopoly of experts over information and criterial systems, people are seeking to become their own authorities.

Makes sense to me. It is fairly easy to check almost anything on the internet.

Friday, June 10, 2005

Golden Meatless Nuggets:
Two Thumbs Down

My 5-year-old granddaughter [Joan Robinson Palmer] is a vegetarian. We thought we'd give her a real treat tonight by serving her Zoglo's Golden Meatless Nuggets [which are designed to look a bit like Chicken McNuggets]. She tried one dipped in honey and another dipped in plum sauce and then announced that she didn't really like them. I tried them and concur. In fact, we agreed they would detract from any soup we might put them in, so we threw them away.

Friggin' Activist Judges:
Canada's Supremes Can't Stop Meddling in Policy

Canadian Health Care. We got the right outcome, but I am far from convinced this was the right way to get it. To see the recent Canadian Supreme Court decision on health care in Quebec, click here.

Until Thursday, Canada had a single, all-encompassing health care system. It was stupid and inefficient. It specifically denied the people the opportunity to purchase a little bit more or a little bit less or lot more than that provided by the gubmnt. There was a view that this system would mean everyone would be equal and the rich wouldn't be able to buy more than the poor.

I am strongly opposed to this view for several reasons:
  1. It provides a good incentive for people to work harder and save more and plan for their futures if doing so means they will be able to afford better health care. Alternatively, not being allowed to purchase better health care dampens incentives. [Example: my wife says we should save more in case we need money for health care as we age; my reaction is there's no reason to do so if we won't be allowed to get more than the gubmnt offers anyway.]
  2. Time and again in other industries, we see that different pricing for different levels of service attracts more resources to the field. Allowing some people to pay more to buy more or better health care would not necessarily mean there would be less health care available for poor people. Rather, it would induce more doctors and nurses and other health professionals to stay in Canada and practice here.
  3. The result has been a shrinkage of resources available and an increase in the quantity demanded, relative to a partially private system --- and, at zero price, the only way to ration the shortage is via doctors' playing God and deciding who is where on what waiting list. For more on these arguments, see A Canadian Econoview, which is sure to have more on this topic soon, since he is specialist in health economics. [Update: Brian and I must have posted our articles at about the same time. He does, indeed, have a very thorough analysis of the economics involved, along with many valuable links. If you're interested in health economics, his piece is a must read.][Another Update: Alan Adamsom at Silly Little Country has written a nice piece on the decision (along with some intriguing questions about the CBC); so has Mike at London Fog.]

My concern is that this decision reflects a policy choice, and that is the type of decision that should be made in Parliament, by elected officials, not by judges. The rationale for their decision was

that the Quebec ban on private insurance for medically necessary services violates Quebec's charter of rights because care in the public system is so slow it endangers life and personal security.

So? There are many things that endanger life and personal security, such as crime. Does that mean the Supreme Court of Canada gets to decide how many scarce resources must be devoted to law enforcement in Canada? or to child safety? or to every single activity that involves even a scintilla of risk?

Of course not. And the Justices of the Supreme Court are uniquely unqualified to make the requisite cost-benefit decisions that must be made in deciding how many [and whose] scarce resources to devote to the various ways of reducing dangers to life and personal security. As strongly as I have disagreed with Canadian health care policy, I disagree even more with majority decision in this case. This is a matter for Parliament to decide, not the Supreme Court. It is a matter of policy, not a matter of legal interpretation. If Parliament gets it wrong, it is up to voters to elect people who will get it right.

Sadly, none of the major reporting on the decision recognizes this problem. There were ten articles about the decision in today's National Post. Not one mentions it. Nor do articles in the Globe & Mail or CBC. The Globe comes close, though:

However, in a blistering dissent, Mr. Justice Ian Binnie, Mr. Justice Louis LeBel and Mr. Justice Morris Fish derided the notion that a court can decide a time limit after which waiting lists for an MRI or a hip replacement are too long.

"It is to be hoped that we will know it when we see it," they said. "It will be very difficult for those designing and implementing a health plan to predict when judges will think its provisions cross the line from what is 'reasonable' into the forbidden territory of what is 'unreasonable.'

They said it is foolhardy for judges to attempt to resolve an issue that has been the subject of protracted debate in Quebec and across Canada through several provincial and federal elections.

Someone, somewhere, has to blow the whistle on this court. Their role is NOT to make policy.

The Economics of ADD/ADHD

People with ADD/ADHD often impose costs on others. In their own distractions, they distract others. Further, while in school, they require the use of additional scarce resources for separate exams, extra assistance, etc. These extra costs are reasonably well-known, and there seems to be pretty good agreement that they exist.

The economic policy question is, "Who should bear how much of these costs?"

This question takes on new meaning when we learn about new research that ADHD drivers aren't as safe as others [thanks to Brian Ferguson for the link]:

Researchers at a national road safety conference in Fredericton are trying to figure out why people with attention deficit hyperactivity disorder are more likely to drive dangerously.

Christine Wickens, a graduate student from York University in Toronto, said there hasn't been enough study of the problem. But based on the available research, she said it's clear that people with ADHD get into more trouble on the road than other drivers.

"ADHD drivers tend to be involved in more collisions. They have more traffic citations, particularly for speeding. They're more likely to have had their licences revoked and to drive without a licence."

Wickens said people with ADHD are also more likely to get arrested for driving under the influence of alcohol.

"What we're interested in really, is trying to understand why that's happening and why ADHD drivers tend to engage in more risky driving behaviour."

Economics suggests a Larry-Summers-type hypothesis to test: It is possible that some (not all) people suffering from ADHD have received special privileges often in their lives and have not been required to figure out how to deal with their condition. To the extent this is correct, we might expect these individuals to show less care in their driving as well, having been trained to expect special favours.

And speaking of driving, if, indeed, people with ADHD have more accidents and infractions, there is a higher expected cost of their driving and of insuring them. Who will bear the costs of the risks these drivers impose on others? How many people would try to get rid of their ADHD designation if they had to pay a few hundred dollars extra for auto insurance every six months?

Chinese Revaluation Won't Help U.S. Producers least not much

Ben Carliner at Cynic's Delight makes the point that if the Chinese revalue their currency much foreign trade involving the U.S. will simply shift to other countries.

If China does adjust in this way, who are the winners and losers? The US will not benefit much from an adjustment in the real renminbi exchange rate. First, Chinese goods will suffer more of a decline in competitiveness compared to other exporting nations than to US products. So the overall US trade deficit will not decline, but merely shift to other countries. Second, if the Chinese really do succeed in boosting domestic demand and decrease their trade and current account surpluses, this means they will stop buying so many US Treasuries, leading to higher interest rates in the US as demand for Treasuries falls.

The real winners are export industries in the rest of the world. Not only will rising Chinese demand increase their business, but they will become more competitive in industries in which they compete with the Chinese.
Cynic's Delight is an excellent blog that has had several good items about currencies recently.
I've added it to my list.

I thought Ben's name sounded familiar, so I wrote to ask him. Sure enough, I co-authored several papers with his dad, Geoff Carliner back in the 70s. Geoff's departure from UWO was a great loss.

Doctor Shortage by 2015 in the U.S.?

There is only one reason for there to be a shortage of anything: Prices are not allowed to adjust to market-clearing price levels.

So how can someone [though it is difficult to figure out who] forecast a shortage of physicians in the United States, as someone does in this article?

Since 1977, Harris says, the prestige the public assigns to medical doctors has slipped from 61% to 52%, and the nation may face a shortage of 85,000 to 200,000 doctors in 15 years.
[Link via Tyler Cowen at Marginal Revolution, "What are the most prestigious jobs?"]

Before you click on the comments to argue that barriers to entry can create a shortage, don't do it. Barriers to entry [e.g. via limited enrolments in medical schools] can reduce the supply, thus forcing the price up, but there will not be an excess of the quantity demanded over the quantity supplied unless prices are restricted.

So what does the article mean? That the writer expects gubmnts to impose wage controls on physicians? That demand will increase very rapidly due to an aging population but prices will not adjust very quickly? Or just that people will end up paying more than they want to pay, in part because of limitations on admissions to medical schools?

Thursday, June 09, 2005

The Euro "Was a Really Dumb Idea..."

When central bank monetary policy isn't consistent with fiscal plans of a particular region, politicians in that region can get pretty upset. That is what is happening in Europe regarding the Euro. [links and quotes below are courtesy of A Canadian Econoview].

The Dutch, the Germans and the Italians have all complained in the past few days that the ECB's management of monetary policy has been damaging to their economics, and there have been mutterings, in some countries more overt than in others, about leaving the Euro and reverting to their own national currencies.
I have long been curious about how long the Euro could survive without having some oversight body with both the authority and the power to require and force member nations to pursue fiscal policies consistent with the ECB policy; the recent negative votes by France and Holland on the EU constitution meant this oversight body was not going to come into existence any time soon.

Tyler Cowen has more on the Euro at Marginal Revolution.

People had a good idea what the Euro would be worth but the road back would involve much more uncertainty. I don't even know if a resurrected deutschmark would be a stronger currency than the Euro (I can, however, give you my guess on the lira). And wouldn't either everyone in Europe, or no one, wish to cash in to the new currency right away, depending on the conversion rate and the associated degree of credibility? Don't currency substitution models, and all their tricky implications (it becomes very difficult to control prices), come into play? Might short-term interest rates go whacky? What would be the domino effect on, say, Polish asset values?

I've never been a huge fan of the Euro, but these are scary questions. It would be ironic if the strongest argument against the Euro was simply the eventual need to dissolve it.

It would be even more ironic if the strongest argument in favour of keeping the Euro is that there is no politically feasible way to get rid of it. And if that is the case, then look for some form of EU constitution to pass, eventually.

A Mile-Long Row of

When the Rolling Stones visit Moncton, New Brunswick, this September, concert organizers will be well-prepared. Presumably many of the problems documented in the cult film Gimme Shelter will be avoided. [thanks to Brian Ferguson of A Canadian Econoview for the pointer].

Various local radio stations ... devoted considerable air time to whether there would be enough portable bathrooms available for 70,000 potentially beer-swigging fans at the mother of all Moncton concerts scheduled for September 3.

... Your average portable toilet is just about a metre (3.5 feet) wide. Place 1,400 side by side and you have an outhouse chain 1.4 kilometres long, a bit shy of a mile.

If only parts of the concert site offer beer, the required number of toilets will of course drop. But even 700 would tax the capacities of what's currently available in the province, according to Jolaine Gallant. "All New Brunswick couldn't meet the demand."

An averaged sized business for the local industry, Gallant Septic, for instance, has 150 toilets in its inventory. However, all except 40 or 50 are rented out longterm to other clients. On top of that, Gallant speculated there would also be a need for a number of toilets in the parking area.

Further increasing the demand, Gallant said her business has received lots of calls from private citizens, who are either hosting friends and family for the Labour Day weekend event or looking at setting up temporary campgrounds for profit.

The news has not all gone to pot though. Talk trickling down from the plastic outhouse industry is that portable toilets from as far away as Quebec, Ontario, and New England are being lined up to supplement what's available in our region.

Shane Porter of the City of Moncton's Community Services Department echoed that, saying it would not be unusual for truckloads of toilets to hit the open road and head for Magnetic Hill.
Clearly, not all capital is fixed and immobile.

Here's a fun question: do you think Gallant Septic raised their rental rates for September 3rd? For regular customers? Surely the opportunity cost of renting a porta-potty to the long-standing (!) regular customes has risen for that day, and in that sense raising the rental rate would be cost-justified. And yet my guess is they didn't, for P.R. reasons, though it would likely be acceptable to remove any discounts they might have been offering.

Let's face it, we humans are a pretty asymmetrical bunch when it comes to understanding opportunity costs.

Update: Moncton authorities should consider importing some Emerald Oases, like these [hat tip to The Emirates Ecomomist]

Anti-Semitism in 12 European Countries

One of the reasons this blog includes material about anti-Semitism is that it concerns me. Here's why [link courtesy of MA]:

A survey of 12 European countries revealed that a plurality of Europeans believe Jews are not loyal to their country and that they have too much power in business and finance. The opinion survey of 6,000 adults – 500 in each of the 12 European countries – found either minimal decline, no change or, in some cases, an increase in negative attitudes toward Jews from its 2004 findings....

• Alarmingly high levels of those surveyed across Europe still believe in the traditional anti-Jewish canard that "Jews have too much power in the business world." Overall, nearly 30 percent of all respondents believe this stereotype to be true.
• Similarly, European respondents still adhere to the notion that "Jews have too much power in international financial markets." Overall, 32 percent of those surveyed cling to the traditional stereotype.
• Large portions of the European public continue to believe that Jews still talk too much about what happened to them in the Holocaust. Overall, 42 percent of those surveyed believe it is "probably true." In fact, a plurality of respondents in Austria, Germany, Hungary, Italy, Poland, Spain and Switzerland believe this notion to be true.
• Overall, 20 percent of those surveyed across Europe continue to blame Jews for the death of Jesus.

For more, see this in addition to the link provided above.

Wednesday, June 08, 2005

Is There a U.S. Housing Bubble?

Many respectable people are worrying that the U.S. is in the throes of a speculative housing bubble. As an example, from NPR,

Yale University economics professor Robert Shiller ... calls the housing market a "bubble" -- meaning prices are out of touch with economic reality -- and predicts the market will collapse. The only question, he says, is when.
Also, see this for a detailed discussion of the size of the bubble in different local residential real estate markets. Here's its summary:

Growth-management planning leads to rapid, artificial increases in the price of housing that can turn home buyers into speculators. Such speculation leads to housing bubbles that, when they burst, can impose huge costs on individual homeowners and the economy as a whole.

Such bubbles certainly exist in San Jose, Boston and other California and Northeast housing markets as well as those in a few other regions. Most regions suffering bubbles have used various forms of growth-management planning, while most regions that don't use growth-management planning appear safe unless there are other constraints on the land supply. While bubbles in Portland, Denver, and other smart-growth regions are not as severe as in San Jose or Boston, planners should be far more wary than they are of the likelihood that their policies will create such bubbles.
What amazes me is that there still are such things as bubbles. In today's economy, with low-cost information, the existence of bubbles casts serious doubt on the more simplified theories of rational expectations. I can understand that many buyers might over-estimate values to some extent for awhile, but a "bubble", which I think of as being extreme [whatever that means!], really puzzles me.

Here are two and a half things that have not caused the bubble [if one exists]:
  1. "Smart Growth" or regulations requiring green areas; these regulations might cause housing prices to be higher than they otherwise would be, but they do not cause them to be higher than one would expect, using supply and demand, nor did they recently cause them to rise rapidly unless they have only recently been implemented. In short, they may have contributed to higher housing prices in some markets, but they didn't cause a speculative bubble.
  2. Mortgage interest deductability: it's been around a long time; there's no reason for it to start causing housing prices to rise now.
  3. (This one has a bit of merit.) Low interest rates: "WHAT?" you ask in disbelief. Interest rates have been low for a LONG time, now. Yes, they have encouraged people to buy second houses as investments, but I don't think they have caused a bubble.

    A friend of mine is slowly selling off several properties he owns. I guess he expects housing prices to fall.

Short-Run and Long-Run Effects of an Increase in Demand

Here is one of the very best real-world examples I have seen of
  1. the short-run and long-run effects of an increase in demand, and
  2. the inability on the part of journalists to understand these basic relationships.

Suppose it takes some time for the quantity supplied to adjust to new, higher prices. Then an increase in demand will raise prices in the short-run.

However, in the long-run, the higher profits will induce entry into the industry.

One would think entry would drive prices back down to their original point, but that will not happen if some of the inputs are fixed or in short supply.

John Chilton provides a great example in grocery pricing:

Demand is being pushed up by a rapid growth in population and by the growth in the country's income from oil due to the steep increase in world oil prices. An increased demand leads to an increase in retail prices at groceries even if the wholesale prices have not changed. Some groceries are experiencing above normal profits. ...

The profits the groceries experience will attract entrants and supply will grow with time. However, because the rent for retail space has increased, retail prices for groceries will not return to their previous level.

Straight-forward and brilliant.

As I told a bunch of journalists many years ago, "Look for the fixed factors."

Textbook Inaccuracies and
anti-Israel Bias

Most textbooks contain inaccuracies to some degree (except The Economic Way of Thinking, of course). Most errors are inadvertent, but in some instances the inaccuracies reflect a pernicious bias that perpetuates problems for future generations. A recent example is highlighted on Campus Report Online, where such biases in Civilization: Past and Present (10th ed.) are highlighted. Here is just one instance of many, in which its anti-Israel bias shines through:

After inaccurately reporting the events of the Six Day War, the book continues, “Now Israel had three types of residents: Jewish citizens, Palestinian citizens (Muslim and Christian) with second-class citizenship status, and individuals under military occupation who had no citizen’s rights.” The characterization of second-class citizenship (author's emphasis) status is factually incorrect. Israeli Arabs and Christians have the right to vote, to own property, to engage in any profession, and to serve as representatives in the Knesset. In 2003, three Arab political parties, out of a total of thirteen parties, participated in the Knesset. While Jews are the majority, minority rights are protected by the Declaration of the Establishment of the State of Israel, which states “it [Israel] will ensure complete equality of social and political rights to all its inhabitants irrespective of religion, race or sex; it will guarantee freedom of religion, conscience, language, education and culture.”
It isn't surprising that many U.S. high school students come to support the PLO if they are learning from textbooks like this one.

Tuesday, June 07, 2005

Vouchers for Child-Care?

Back in February, when assessing the new Canadian budget, I wrote:

The big mistake: federal gubmnt funding for child care, which has likely created yet another costly entitlement programme. This is almost a moral hazard problem in that guaranteeing young couples that the gubmnt will pick up the day-care tab will induce more of them to have more children(see these links for other criticisms); I don't see any reason to subsidize this activity any more than subsidizing the purchase of big recreational vehicles (Phil Miller refers to his children as "the durables"). As of now, it appears to be a voucher-like plan, but just wait. My prediction is that the feds will become increasingly involved and squeeze the private schools out.
My prediction is already coming true. Our interventionist minority gubmnt has proposed a federal-provincial partnership to provide child-care.

This particular program is for regulated child care, regulated early learning," he said.
[Former hockey goalie great and minister in charge of the programme, Ken] Dryden said Ottawa is building the foundation for a national early learning child-care system through the program, which will bolster infrastructure and improve training and pay for child-care workers."This is not custodial; this is not babysitting; this is something that has very important learning and development intentions," he said.
Brian Ferguson has a detailed smackdown of the plans at A Canadian Econoview. He sardonically points out,

Giving families a children's allowance would permit them to spend it on the type of child-care that est suits their needs, and would also permit it to be taxed back from high income families. That won't happen, for the simple reason that the feds don't trust us to spend money wisely. Ottawa knows that if they don't control how every dollar is spent, the whole fabric of society will crumble.
The more I see of the plan, the more I'm reminded of Maoist China: take the kids out of the home, make the parents work, and make the kids attend only those schools/camps that teach the approved approaches to life. Phhht.

I hope Canadians don't buy into this centralization and control by elitists who think they know what is good for everyone.

For a very sensible view of child care economics, see the most recent Fraser Forum, which is devoted to the topic.

The Scatology - Incentive Trade-off

When people let their dogs defecate in public and do not clean up after them, it imposes a disgusting negative externality on others. Even fining them for not cleaning up does not deter some dog owners from leaving the mess.

A group in Wales has come up with a truly weird scheme for shaming owners into cleaning up after their dogs, but it is very difficult to figure out how the incentives are supposed to work [thanks to Brian Ferguson for the pointer].
Volunteers at Loggerheads country park and Brickfield Pond in Rhyl will spray paint dog faeces found on the paths [using yellow paint].

... Countryside officer Vanessa Cooke said: "At Brickfield Pond the paths could look like the yellow brick road."
I guess the idea is that while you are walking your dog, when you see some dog do-do that has been spray painted yellow, you think "Oh, Oh. I had better clean up after my dog or else some unknown dog do-do scatologist will spray paint the droppings yellow."

The plan might have some reminder- or guilt-based incentive effects, but I cannot imagine they will be very large. I strongly suspect that there are other, deeper motives for people to engage in such a scheme. These people should consider a visit to this restaurant.

Update: Ben Muse alerted me to a story in yesterday's Juneau-Empire:

Hundreds of tiny flags of Gov. Frank Murkowski's face, glued to toothpicks and stuck in piles of dog excrement along Juneau's trails and parks, are surprising hikers and trail officials.

.... The escapade, and the design of the flags, is almost identical to a prank that's been going on in Germany for more than a year.

In Bayreuth, an individual or group has been sticking miniature toothpick flags of President George Bush into piles of dog waste, according to the San Francisco Bay Area Independent Media Center. Almost 3,000 flags have been found in parks across the German city.

In Juneau, the flags are showing up by the dozens, even on the steep, 1,900-foot rise in the first mile of the Sheep Creek Trail.
I understand the use of the flags to make a political statement -- they can at least be amusing. But I still do not understand the deterrent effect for dog owners.

Risks of Quebec Separation
and the Loonie

Back in November, I wrote that the risk of Quebec separation had diminished, and the value of the Canuck buck was rising, in part, because of this reduced risk. But ever since the sponsorship scandal became increasingly serious, some pundits have suggested that the risk of separation has risen once again. But not all agree, as is clear from this piece by Barbara Kay [$, thanks to Jack for the link].

Much has changed since the last referendum... Here are 10 good reasons not to fear a third one:

1. Reason and self-interest work against separation, so only a master demagogue like Lucien Bouchard can whip up the irrational ethnic nationalist fervour necessary for a close vote. There is presently less than zero charisma in separatist ranks.
2. From former PQ minister Richard Le Hir and other informants, we have the straight goods on the separatists’ desperation tactics in the ’95 campaign: bogus financial studies, corrupt commissions, PQ-sanctioned ballot-box fraud and plans for an illegal UDI — none of which can be repeated.
3. The Clarity Act precludes the kind of rambling, misleading question posed in 1995 that nobody understands, and which falsely implies a right to “sovereignty association” that the PQ could not and did not intend to honour.
4. Montreal, the now-globalized engine of Quebec, is prosperous, peaceful and more multicultural and bilingual than ever before. Politically, culturally, socially and economically, Montreal is a world apart from the ROQ (Rest of Quebec). The city has worked too hard at recovery, with too much at stake internationally, to acquiesce to Quebec City ideologues. Look for a muscular counter-offensive and “distinct society” solution in Montreal.
5. Quebec won’t have the support or sympathy of France, as it did in ’95, or any other democratic country. The zeitgeist is blowing in the opposite direction of ethnic nationalism, as the EU attests.
6. A potentially divided Quebec, with native and federalist regions opting out of separation, is now constitutionally — not just theoretically — on the table in the event of a Yes vote. Nothing in the PQ arsenal can stand up to this daisy-cutting bomb.
7. Playing the language card is over as a result of Bill 101’s success. Today, confidently francophone Quebecers are actually militating for more English in a super-healthy French environment.
8. The separatists depend on public gullibility and the dissemination of their nationalist spin through tacitly complicit media. In 1995, the francophone media — virtually 100% sympathetic to sovereignty — controlled public debate in French. Technology has fractured that monopoly. Blogs, Blackberrys and chatrooms will democratize the Quebec media ideoligarchy.
9. Asymmetrical federalism – what mainstream Quebecers always really wanted — has de facto triumphed under the federal Liberals, who appease Quebec to keep the peace. There are no more “victim” pegs to hang political indignation on.
10. It was the near-complete absence of strategic planning and leadership — under Jean Chrétien and his cabinet, including Paul Martin, who visibly panicked in the final days of the campaign — that nearly blew it for Canada in 1995.

Which brings us to the most reassuring reason we have nothing to fear from the separatists: Observing a politically volatile situation unfold on their border, a post-9/11 United States will not wait on events. In 1995, the U.S. expressed polite disapproval of Quebec’s bid for independence. Next time, they will threaten to intervene, and they will mean it.
Now that Bernard Landry has resigned as leader of the Parti Quebecois, separatism may regain some of its lost strength. Landry was anything but a charismatic leader. My expectation is that if the P.Q. select a more charismatic leader, we could well see another referendum in the next decade.

Monday, June 06, 2005

Which Country is More Aristocratic and Elitist?

France or England?

Here is one perspective [second from the end; link courtesy of MA]:

The sight of president Chirac inviting Mr de Villepin to become prime minister of a country which so proudly proclaims its identity as the home of democracy had a wildly comic aspect to it. Talk about old boy networks. Here was one graduate of the École Nationale d'Administration inviting another to form the government of a democracy, when the latter has never gone to the minimal inconvenience of getting himself elected by the public.

By my calculations, all of the last four French prime ministers have been products of ENA, apart from the just-departed Mr Raffarin, who was at the very slightly more blokeish École Supérior du Commerce....

By contrast, the last four British prime ministers include two who did not go to university at all, and none who had a parent in the ruling class. The next time some smug, ignorant Frenchman starts to hold forth on the British class structure, you might invite him to ponder this fact.

Leading Economists Urge Drug Legalization - -

Over 500 economists have urged the complete legalization of marijuana, not just for clinical use, but as a recreational drug as well.

In a report released today, Dr. Jeffrey Miron, visiting professor of economics at Harvard University, estimates that replacing marijuana prohibition with a system of taxation and regulation similar to that used for alcoholic beverages would produce combined savings and tax revenues of between $10 billion and $14 billion per year. In response, a group of more than 500 distinguished economists—led by Nobel Prize-winner Dr. Milton Friedman—released an open letter to President Bush and other public officials calling for “an open and honest debate about marijuana prohibition,” adding, “We believe such a debate will favor a regime in which marijuana is legal but taxed and regulated like other goods.”
The above quotation and link are provided by Stephen Ayer of Disinterested Party, who goes even further:

It’s not just marijuana. The war on drugs has been one of the most costly social-policy failures in U.S. history. On one estimate, the U.S. spends more than $40 billion of taxpayer’s money every year fighting illegal drugs. About one in four of America’s prison population is locked up thanks to a drug-related offense, usually non-violent. A report released on May 18th by the White House Office of National Drug Control Policy acknowledge that 1.6% of state prisoners are incarcerated for marijuana-related offenses alone.

Moreover, there is little connection between the severity of a drugs policy and prevalence of use. Illegal drugs continue to get easier and cheaper to obtain—for example, a gram of cocaine cost about $38 wholesale in the U.S. in 2003, down from $48 in 2000 and $100 in 1986. The illegal-drugs business continues unabated, with global sales on the same scale as the global tobacco industry. The industry fuels corrupt regimes, terrorists, civil wars, gangs… the list is endless. Worse, the fallout from this criminal activity disproportionately impacts poor countries or poor people in developed countries.

Legalizing drugs would cut profits, crime and exploitation. It would empty America’s jails of people who by most measures should never have been incarcerated in the first place.

To read an editorial that Milton Friedman wrote for the NYTimes in 1998 about legalizing even hard drugs, click here.

So why do major democracies continue to wage the war on drugs?

  1. Pressure from social and religious fanatics who think it is inappropriate for people to enjoy themselves.
  2. Pressure from the drug-war lobby who have a vested interest in continued spending on their services.
  3. Pressure from the alcohol, tobacco, and other lobbies who continue to attempt to limit competition for their own products.

The list of 500 economists favouring the legalization is here. I think I recognized three of the names. Why hasn't the campaign been more successful among better-known economists at higher ranked institutions? And why has it been successful where it has?

Update: The U.S. Supreme Court has just decreed that private medicinal use of personally grown marijauana violates federal statutes, AND that federal takes precedence over state law in this regard because such use affects the interstate, albeit illegal, market for marijuana. Huh? See more, along with links to majority and minority opinions here.

New Blogger at Always Low Prices

I have written quite a bit on The Eclectic Econoclast over the past six months about the benefits of competition. Many of these postings have sung the praises of the low prices and superb service offered by Wal-Mart and several of its competitors [e.g. see here, here, here, here, and here]. In general, I love it when businesses duke it out by providing more for consumers.

Kevin Brancato, of the Always Low Prices blog, recently invited me to become a co-blogger there. His blog is terrific, and I am delighted to be a part of it.

Stalling Problems in Toyota's Prius?

The USA Today reported last week that their gas-electricity hybrid car has had some serious problems with the engine stalling at speeds of 35 and 65 mph [h/t to Jack].

The government has opened an investigation of the hot-selling hybrid Toyota Prius amid reports of the engine stalling without warning, officials said Wednesday.
The National Highway Traffic Safety Administration said the preliminary investigation will involve about 75,000 cars of the 2004-2005 model years.

... All of the complaints reported that the engine shut down without warning and about half of the complaints said that when the engine shut off, the vehicle would not restart and required the vehicle to be towed.
Here is something, though, that is just plain wrong:

The Prius has been a hugely popular model in the United States, leading to waiting lists. Automotive experts have said it is the first economy car with a higher resale value.
The Rabbit Diesel, back during the gasoline shortages in 1978 -79 often sold on the street for more than its sticker price, especially in California. Also, the waiting list to buy one was at times more than six months long. And I expect the street price for a Smart car might exceed its sticker price, too -- the wait to get one in Canada is about 4 months these days.

Why don't the auto manufacturers charge more for these cars? Did they underestimate demand, and do they think that correcting the price would create too much ill will?

Sunday, June 05, 2005

Disparities in Chinese Economic Growth

When there is rapid economic growth in an economy, it is not surprising that some sectors and regions grow more rapidly than others. How the economy deals with the disparities will have a large impact on its very long-term outlook.

Ben Muse cites a recent study by Shane and Gale, showing that incomes and income growth in Western China have lagged behind income and growth in the east, especially the urbanized areas. To address these differences,

In 2000, China embarked on a “develop the west” campaign to push both public and private investment into the country’s poorest western provinces. In 2004, the party and central government leadership issued a “No. 1 Document” that made increasing rural incomes a top policy priority. Major policy initiatives in 2004 included a phase-out of agricultural taxes and direct subsidies of $1.2 billion to grain producers in 13 of China's 31 provinces.
Why use policy to address the differences? Why not let the market address them? Business should flow to areas of cheap land and cheap labour, and resources should flow to the areas and sectors of greater opportunity.

Perhaps in China, as has happened in Canada, residents of poorer regions are envious of the successes of others? If so, the Chinese might do well to learn from the abysmal failure of Canadian "equalization" payments from the "have" provinces to the "have-not" provinces. These policies amount to little more than greed and theft; but, worse, they distort incentives, leading to some important inefficiencies that arise from rent-seeking and reduced factor mobility.

Wedding Website Selections

My younger son, Adam Smith Palmer, is getting married later this summer. I guess it is common among young couples to set up a website for friends, relatives, guests, others who might be interested. The website has information about the couple, about their plans, about the wedding day schedule, and some maps, photos, and other information. Here are some selections from his website [his fiancee claims to have had no involvement in the site to date].

Welcome to our BLESSED page. or else.
. . . . .[brief intro, followed by]
Anyway, explore the site, since I've got nothing more to say here. Sorry. Enjoy. or else.

On the "About Us Page":
Ok, there's nothing here yet. That will change at some point. You can check out `Our Story' though. Or whatever. Your call.

Wedding Day Details:
1:00: Ceremony
1:30 - 5:30: Free time. Explore, or nap, or shop, etc.
5:30 - 6:00 : Refreshments (fruit punch and champagne punch)
6:00ish : Buffet dinner. Eat! Free wine with dinner. Drink!
After dinner : Dancing, mingling, and drinking (open bar!)
7:30 : Go home.
7:31 : Realize Adam is an idiot and that the party is not over. Stay and dance and drink and mingle and co-mingle until sometime later (12 - 1:00 am or so).
After the above : Clean up. Grab and mop and bucket and broom. Make yourselves useful. Remember, slothfulness is a sin, regardless of whether or not it's an actual word.
After reading the line above : Snort in derision, then move on and ignore the line above.

Talk about Tight Baysian Priors!

I laughed out loud when I read the description of a blog called, "Counterfactual":

A blog dedicated to the proposition that everything that happens only confirms my previously held worldview.
You have to expect good things from a blog with this sense of self-recognition.
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