It’s a Big Government Mess

22 Tuesday Nov 2022

Posted by Nuetzel in Big Government, Uncategorized

Tags

Campaign Spending, Carbon Footprint, central planning, Climate Risk, Compliance Costs, Cronyism, Debt Monetization, dependency, Diversity, Do-Somethingism, External Costs, Fiscal Illusion, Limited government, Malinvestment, monopoly, Price Controls, Public goods, Redistribution, Regulatory Capture, rent seeking, Wetlands, Willingness To Pay

I’m really grateful to have the midterm elections behind us. Well, except for the runoff Senate race in Georgia, the cockeyed ranked-choice Senate race in Alaska, and a few stray House races that remain unsettled after almost two weeks. I’m tired of campaign ads, including the junk mail and pestering “unknown” callers — undoubtedly campaign reps or polling organizations.

It’s astonishing how much money is donated and spent by political campaigns. This year’s elections saw total campaign spending (all levels) hit $16.7 billion, a record for a mid-term. The recent growth in campaign spending for federal offices has been dramatic, as the chart below shows:

Do you think spending of a few hundred million dollars on a Senate campaign is crazy? Me too, though I don’t advocate for legal limits on campaign spending because, for better or worse, that issue is entangled with free speech rights. Campaigns are zero-sum events, but presumably a big donor thinks a success carries some asymmetric reward…. A success rate of better than 50% across several campaigns probably buys much more…. And donors can throw money at sure political bets that are probably worth a great deal…. Many donors spread their largess across both parties, perhaps as a form of “protection”. But it all seems so distasteful, and it’s surely a source of waste in the aggregate.

My reservations about profligate campaign spending include the fact that it is a symptom of big government. Donors obviously believe they are buying something that government, in one way or another, makes possible for them. The greater the scope of government activity, the more numerous are opportunities for rent seeking — private gains through manipulation of public actors. This is the playground of fascists!

There are people who believe that placing things in the hands of government is an obvious solution to the excesses of “greed”. However, politicians and government employees are every bit as self-interested and “greedy” as actors in the private sector. And they can do much more damage: government actors legally exercise coercive power, they are not subject in any way to external market discipline, and they often lack any form of accountability. They are not compelled to respect consumer sovereignty, and they make correspondingly little contribution to the nation’s productivity and welfare.

Actors in the private sector, on the other hand, face strong incentives to engage in optimizing behavior: they must please customers and strive to improve performance to stay ahead of their competition. That is, unless they are seduced by what power they might have to seek rents through public sector activism.

A people who grant a wide scope of government will always suffer consequences they should expect, but they often proceed in abject ignorance. So here is my rant, a brief rundown on some of the things naive statists should expect to get for their votes. Of course, this is a short list — it could be much longer:

Opportunities for graft as bureaucrats administer the spending of others’ money and manipulate economic activity via central planning.
A ballooning and increasingly complex tax code seemingly designed to benefit attorneys, the accounting profession, and certainly some taxpayers, but at the expense of most taxpayers.
Subsidies granted to producers and technologies that are often either unnecessary or uneconomic (and see here), leading to malinvestment of capital. This is often a consequence of the rent seeking and cronyism that goes hand-in-hand with government dominance and ham-handed central planning.
Redistribution of existing wealth, a zero- or even negative-sum activity from an economic perspective, is prioritized over growth.
Redistribution beyond a reasonable safety net for those unable to work and without resources is a prescription for unnecessary dependency, and it very often constitutes a surreptitious political buy-off.
Budgetary language under which “budget cuts” mean reductions in the growth of spending.
Large categories of spending, known in the U.S. as non-discretionary entitlements, that are essentially off limits to lawmakers within the normal budget appropriations process.
“Fiscal illusion” is exploited by politicians and statists to hide the cost of government expansion.
The strained refrain that too many private activities impose external costs is stretched to the point at which government authorities externalize internalities via coercive taxes, regulation, or legal actions.
Massive growth in regulation (see chart at top) extending to puddles classified as wetlands (EPA), the ”disparate impacts” of private hiring practices (EEOC), carbon footprints of your company and its suppliers (EPA, Fed, SEC), outrageous energy efficiency standards (DOE), and a multiplicity of other intrusions.
Growth in the costs of regulatory compliance.
A nearly complete lack of responsiveness to market prices, leading to misallocation of resources — waste.
Lack of value metrics for government activities to gauge the public’s “willingness to pay”.
Monopoly encouraged by regulatory capture and legal / compliance cost barriers to competition. Again, cronyism.
Monopoly granted by other mechanisms such as import restrictions and licensure requirements. Again, cronyism.
Ruination of key industries as government control takes it’s grip.
Shortages induced by price controls.
Inflation and diminished buying power stoked by monetized deficits, which is a long tradition in financing excessive government.
Malinvestment of private capital created by monetary excess and surplus liquidity.
That malinvestment of private capital creates macroeconomic instability. The poorly deployed capital must be written off and/or reallocated to productive uses at great cost.
Funding for bizarre activities folded into larger budget appropriations, like holograms of dead comedians, hamster fighting experiments, and an IHOP for a DC neighborhood.
A gigantic public sector workforce in whose interest is a large and growing government sector, and who believe that government shutdowns are the end of the world.
Attempts to achieve central control of information available to the public, and the quashing of dissent, even in a world with advanced private information technology. See the story of Hunter Biden’s laptop. This extends to control of scientific narratives to ensure support for certain government programs.
Central funding brings central pursestrings and control. This phenomenon is evident today in local governance, education, and science. This is another way in which big government fosters dependency.
Mission creep as increasing areas of economic activity are redefined as “public” in nature.
Law and tax enforcement, security, and investigative agencies pressed into service to defend established government interests and to compromise opposition.

I’ve barely scratched the surface! Many of the items above occur under big government precisely because various factions of the public demand responses to perceived problems or “injustices”, despite the broader harms interventions may bring. The press is partly responsible for this tendency, being largely ignorant and lacking the patience for private solutions and market processes. And obviously, those kinds of demands are a reason government gets big to begin with. In the past, I’ve referred to these knee-jerk demands as “do somethingism”, and politicians are usually too eager to play along. The squeaky wheel gets the oil.

I mentioned cronyism several times in the list. The very existence of broad public administration and spending invites the clamoring of obsequious cronies. They come forward to offer their services, do large and small “favors”, make policy suggestions, contribute to lawmakers, and to offer handsomely remunerative post-government employment opportunities. Of course, certaIn private parties also recognize the potential opportunities for market dominance when regulators come calling. We have here a perversion of the healthy economic incentives normally faced by private actors, and these are dynamics that gives rise to a fascist state.

It’s true, of course, that there are areas in which government action is justified, if not necessary. These include pure public goods such as national defense, as well as public safety, law enforcement, and a legal system for prosecuting crimes and adjudicating disputes. So a certain level of state capacity is a good thing. Nevertheless, as the list suggests, even these traditional roles for government are ripe for unhealthy mission creep and ultimately abuse by cronies.

The overriding issue motivating my voting patterns is the belief in limited government. Both major political parties in the U.S. violate this criterion, or at least carve out exceptions when it suits them. I usually identify the Democrat Party with statism, and there is no question that democrats rely far too heavily on government solutions and intervention in private markets. The GOP, on the other hand, often fails to recognize the statism inherent in it’s own public boondoggles, cronyism, and legislated morality. In the end, the best guide for voting would be a political candidate’s adherence to the constitutional principles of limited government and individual liberty, and whether they seem to understand those principles. Unfortunately, that is often too difficult to discern.

Biden’s Rx Price Controls: Cheap Politics Over Cures

08 Tuesday Nov 2022

Posted by Nuetzel in Prescription Drugs, Price Controls, Uncategorized

≈ 1 Comment

Tags

Big Pharma, Charles Hooper, CMS, David Henderson, Drug Innovation, Drug R&D, FDA Approval Process, Inflation Reduction Act, Innovation, Insulin Costs, Joe Biden, Joe Grogan, Medicare, Medicare Part B, Medicare Part D, Opioids, Over-prescription, Patent Extensions, Prescription Drug Costs, Price Controls, Price Gouging, Pricing Transparency, Shortages, third-party payments

You can expect dysfunction when government intervenes in markets, and health care markets are no exception. The result is typically over-regulation, increased industry concentration, lower-quality care, longer waits, and higher costs to patients and taxpayers. The pharmaceutical industry is one of several tempting punching bags for ambitious politicians eager to “do something” in the health care arena. These firms, however, have produced many wonderful advances over the years, incurring huge research, development, and regulatory costs in the process. Reasonable attempts to recoup those costs often means conspicuously high prices, which puts a target on their backs for the likes of those willing to characterize return of capital and profit as ill-gotten.

Biden Flunks Econ … Again

Lately, under political pressure brought on by escalating inflation, Joe Biden has been talking up efforts to control the prices of prescription drugs for Medicare beneficiaries. Anyone with a modicum of knowledge about markets should understand that price controls are a fool’s errand. Price controls don’t make good policy unless the goal is to create shortages.

The preposterously-named Inflation Reduction Act is an example of this sad political dynamic. Reducing inflation is something the Act won’t do! Here is Wikipedia’s summary of the prescription drug provisions, which is probably adequate for now:

“Prescription drug price reform to lower prices, including Medicare negotiation of drug prices for certain drugs (starting at 10 by 2026, more than 20 by 2029) and rebates from drug makers who price gouge… .”

“The law contains provisions that cap insulin costs at $35/month and will cap out-of-pocket drug costs at $2,000 for people on Medicare, among other provisions.”

Unpacking the Blather

“Price gouging”, of course, is a well-worn term of art among anti-market propagandists. In this case it’s meaning appears to be any form of non-compliance, including those for which fees and rebates are anticipated.

The insulin provision is responsive to a long-standing and misleading allegation that insulin is unavailable at reasonable prices. In fact, insulin is already available at zero cost as durable medical equipment under Medicare Part B for diabetics who use insulin pumps. Some types and brands of insulin are available at zero cost for uninsured individuals. A simple internet search on insulin under Medicare yields several sources of cheap insulin. GoodRx also offers brands at certain pharmacies at reasonable costs.

As for the cap on out-of-pocket spending under Part D, limiting the patient’s payment responsibility is a bad way to bring price discipline to the market. Excessive third-party shares of medical payments have long been implicated in escalating health care costs. That reality has eluded advocates of government health care, or perhaps they simply prefer escalating costs in the form of health care tax burdens.

Negotiated Theft

The Act’s adoption of the term “negotiation” is a huge abuse of that word’s meaning. David R. Henderson and Charles Hooper offer the following clarification about what will really happen when the government sits down with the pharmaceutical companies to discuss prices:

“Where CMS is concerned, ‘negotiations’ is a ‘Godfather’-esque euphemism. If a drug company doesn’t accept the CMS price, it will be taxed up to 95% on its Medicare sales revenue for that drug. This penalty is so severe, Eli Lilly CEO David Ricks reports that his company treats the prospect of negotiations as a potential loss of patent protection for some products.”

The first list of drugs for which prices will be “negotiated” by CMS won’t take effect until 2026. However, in the meantime, drug companies will be prohibited from increasing the price of any drug sold to Medicare beneficiaries by more than the rate of inflation. Price control is the correct name for these policies.

Death and Cost Control

Henderson and Hooper chose a title for their article that is difficult for the White House and legislators to comprehend: “Expensive Prescription Drugs Are a Bargain“. The authors first note that 9 out of 10 prescription drugs sold in the U.S. are generics. But then it’s easy to condemn high price tags for a few newer drugs that are invaluable to those whose lives they extend, and those numbers aren’t trivial.

Despite the protestations of certain advocates of price controls and the CBO’s guesswork on the matter, the price controls will stifle the development of new drugs and ultimately cause unnecessary suffering and lost life-years for patients. This reality is made all too clear by Joe Grogan in the Wall Street Journal in “The Inflation Reduction Act Is Already Killing Potential Cures” (probably gated). Grogan cites the cancellation of drugs under development or testing by three different companies: one for an eye disease, another for certain blood cancers, and one for gastric cancer. These cancellations won’t be the last.

Big Pharma Critiques

The pharmaceutical industry certainly has other grounds for criticism. Some of it has to do with government extensions of patent protection, which prolong guaranteed monopolies beyond points that may exceed what’s necessary to compensate for the high risk inherent in original investments in R&D. It can also be argued, however, that the FDA approval process increases drug development costs unreasonably, and it sometimes prevents or delays good drugs from coming to market. See here for some findings on the FDA’s excessive conservatism, limiting choice in dire cases for which patients are more than willing to risk complications. Pricing transparency has been another area of criticism. The refusal to release detailed data on the testing of Covid vaccines represents a serious breach of transparency, given what many consider to have been inadequate testing. Big pharma has also been condemned for the opioid crisis, but restrictions on opioid prescriptions were never a logical response to opioid abuse. (Also see here, including some good news from the Supreme Court on a more narrow definition of “over-prescribing”.)

Bad policy is often borne of short-term political objectives and a neglect of foreseeable long-term consequences. It’s also frequently driven by a failure to understand the fundamental role of profit incentives in driving innovation and productivity. This is a manifestation of the short-term focus afflicting many politicians and members of the public, which is magnified by the desire to demonize a sector of the economy that has brought undeniable benefits to the public over many years. The price controls in Biden’s Inflation Reduction Act are a sure way to short-circuit those benefits. Those interventions effectively destroy other incentives for innovation created by legislation over several decades, as Joe Grogan describes in his piece. If you dislike pharma pricing, look to reform of patenting and the FDA approval process. Those are far better approaches.

Conclusion

Note: The image above was created by “Alexa” for this Washington Times piece from 2019.

Wind and Solar Power: Brittle, Inefficient, and Destructive

03 Thursday Nov 2022

Posted by Nuetzel in Environment, Nuclear power, Renewable Energy, Uncategorized

≈ 1 Comment

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@MartialData1, @Mining_Atoms, B. F. Randall, Baseload Power, Blake Lovewall, Carbon Credits, Carbon Sink, Dispatchable Power, Fossil fuels, Greenwashing, Grid Stability, Intermittency, Land Use, Martian Data, Nuclear power, Plant Life Cycle, Polysilicons, Renewable energy, Solar Power, Turbine Blades, Wind Power, Zero-Carbon

Just how renewable is “renewable” energy, or more specifically solar and wind power? Intermittent though they are, the wind will always blow and the sun will shine (well, half a day with no clouds). So the possibility of harvesting energy from these sources is truly inexhaustible. Obviously, it also takes man-made hardware to extract electric power from sunshine and wind — physical capital— and it is quite costly in several respects, though taxpayer subsidies might make it appear cheaper to investors and (ultimately) users. Man-made hardware is damaged, wears out, malfunctions, or simply fails for all sorts of reasons, and it must be replaced from time to time. Furthermore, man-made hardware such as solar panels, wind turbines, and the expansions to the electric grid needed to bring the power to users requires vast resources and not a little in the way of fossil fuels. The word “renewable” is therefore something of a misnomer when it comes to solar and wind facilities.

Solar Plant

B. F. Randall (@Mining_Atoms) has a Twitter thread on this topic, or actually several threads (see below). The first thing he notes is that solar panels require polysilicon, which not recyclable. Disposal presents severe hazards of its own, and to replace old solar panels, polysilicon must be produced. For that, Randall says you need high-purity silica from quartzite rock, high-purity coking coal, diesel fuel, and large flows of dispatchable (not intermittent) electric power. To get quartzite, you need carbide drilling tools, which are not renewable. You also need to blast rock using ammonium nitrate fuel oil derived from fossil fuels. Then the rock must be crushed and often milled into fine sand, which requires continuous power. The high temperatures required to create silicon are achieved with coking coal, which is also used in iron and steel making, but coking coal is non-renewable. The whole process requires massive amounts of electricity generated with fossil fuels. Randall calls polysilicon production “an electricity beast”.

Greenwashing

The resulting carbon emissions are, in reality, unlikely to be offset by any quantity of carbon credits these firms might purchase, which allow them to claim a “zero footprint”. Blake Lovewall describes the sham in play here:

“The biggest and most common Carbon offset schemes are simply forests. Most of the offerings in Carbon marketplaces are forests, particularly in East Asian, African and South American nations. …

The only value being packaged and sold on these marketplaces is not cutting down the trees. Therefore, by not cutting down a forest, the company is maintaining a ‘Carbon sink’ …. One is paying the landowner for doing nothing. This logic has an acronym, and it is slapped all over these heralded offset projects: REDD. That is a UN scheme called ‘Reduce Emissions from Deforestation and Forest Degradation’. I would re-name it to, ‘Sell off indigenous forests to global investors’.”

Lovewall goes on to explain that these carbon offset investments do not ensure that forests remain pristine by any stretch of the imagination. For one thing, the requirements for managing these “preserves” are often subject to manipulation by investors working with government; as such, the credits are often vehicle for graft. In Indonesia, for example, carbon credited forests have been converted to palm oil plantations without any loss of value to the credits! Lovewall also cites a story about carbon offset investments in Brazil, where the credits provided capital for a massive dam in the middle of the rainforest. This had severe environmental and social consequences for indigenous peoples. It’s also worth noting that planting trees, wherever that might occur under carbon credits, takes many years to become a real carbon sink.

While I can’t endorse all of Lovewall’s points of view, he makes a strong case that carbon credits are a huge fraud. They do little to offset carbon generated by entities that purchase them as offsets. Again, the credits are very popular with the manufacturers and miners who participate in the fabrication of physical capital for renewable energy installations who wish to “greenwash” their activities.

Wind Plant

Randall discusses the non-renewability of wind turbines in a separate thread. Turbine blades, he writes, are made from epoxy resins, balsa wood, and thermoplastics. They wear out, along with gears and other internal parts, and must be replaced. Land disposal is safe and cheap, but recycling is costly and requires even greater energy input than the use of virgin feedstocks. Randall’s thread on turbines raised some hackles among wind energy defenders and even a few detractors, and Randall might have overstated his case in one instance, but the main thrust of his argument is irrefutable: it’s very costly to recycle these components into other usable products. Entrepreneurs are still trying to work out processes for doing so. It’s not clear that recycling the blades into other products is more efficient than sending them to landfills, as the recycling processes are resource intensive.

But even then, the turbines must be replaced. Recycling the old blades into crates and flooring and what have you, and producing new wind turbines, requires lots of power. And as Randall says, replacement turbines require huge ongoing quantities of zinc, copper, cement, and fossil fuel feedstocks.

The Non-Renewability of Plant

It shouldn’t be too surprising that renewable power machinery is not “renewable” in any sense, despite the best efforts of advocates to convince us of their ecological neutrality. Furthermore, the idea that the production of this machinery will be “zero carbon” any time in the foreseeable future is absurd. In that respect, this is about like the ridiculous claim that electric vehicles (EVs) are “zero emission”, or the fallacy that we can achieve a zero carbon world based on renewable power.

It’s time the public came to grips with the reality that our heavy investments in renewables are not “renewable” in the ecological sense. Those investments, and reinvestments, merely buy us what Randall calls “garbage energy”, by which he means that it cannot be relied upon. Burning garbage to create steam is actually a more reliable power source.

Highly Variable With Low Utilization

Randall links to information provided by Martian Data (@MartianManiac1) on Europe’s wind energy generation as of September 22, 2022 (see the tweet for Martian Data’s sources):

“Hourly wind generation in Europe for past 6 months:
Max: 122GW
Min: 10.2GW
Mean: 41.0
Installed capacity: ~236GW”

That’s a whopping 17.4% utilization factor! That’s pathetic, and it means the effective cost is quintuple the value at nameplate capacity. Take a look at this chart comparing the levels and variations in European power demand, nuclear generation, and wind generation over the six months ending September 22nd (if you have trouble zooming in here, try going to the thread):

The various colors represent different countries. Here’s a larger view of the wind component:

A stable power grid cannot be built upon this kind of intermittency. Here is another comparison that includes solar power. This chart is daily covering 2021 through about May 26, 2022.

As for solar capacity utilization, it too is unimpressive. Here is Martian Data’s note on this point, followed by a chart of solar generation over the course of a few days in June:

“so ~15% solar capacity is whole year average. ~5% winter ~20% summer. And solar is brief in summer too…, it misses both both morning and evening peaks in demand.”

Like wind, the intermittency of solar power makes it an impractical substitute for traditional power sources. Check out Martian Data’s Twitter feed for updates and charts from other parts of the world.

Nuclear Efficiency

Nuclear power generation is an excellent source of baseload power. It is dispatchable and zero carbon except at plant construction. It also has an excellent safety record, and newer, modular reactor technologies are safer yet. It is cheaper in terms of generating capacity and it is more flexible than renewables. In fact, in terms of the resource costs of nuclear power vs. renewables over plant cycles, it’s not even close. Here’s a chart recently posted by Randall showing input quantities per megawatt hour produced over the expected life of each kind of power facility (different power sources are labeled at bottom, where PV = photovoltaic (solar)):

In fairness, I’m not completely satisfied with these comparisons. They should be stated in terms of current dollar costs, which would neutralize differences in input densities and reflect relative scarcities. Nevertheless, the differences in the chart are stark. Nuclear produces cheap, reliable power.

The Real Dirt

Solar and wind power are low utilization power sources and they are intermittent. Heavy reliance on these sources creates an extremely brittle power grid. Also, we should be mindful of the vast environmental degradation caused by the mining of minerals needed to produce solar panels and wind turbines, including their inevitable replacements, not to mention the massive land use requirements of wind and solar power. Also disturbing is the hazardous dumping of old solar panels from the “first world” now taking place in less developed countries. These so-called clean-energy sources are anything but clean or efficient.

Stealth Hiring Quotas Via AI

24 Monday Oct 2022

Posted by Nuetzel in Discrimination, Diversity, Quotas, Uncategorized

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AI, AI Bill of Rights, Algorithmic Bias, Algorithms, American Data Privacy and Protection Act, Artificial Intelligence, DEI, Disparate impact, Diversity Equity Inclusion, EEOC, Hiring Quotas, Machine Learning, Neural Networks, Protected Classes, Stealth Quotas, Stewart Baker, Volokh Conspiracy

Hiring quotas are of questionable legal status, but for several years, some large companies have been adopting quota-like “targets” under the banner of Diversity, Equity and Inclusion (DEI) initiatives. Many of these so-called targets apply to the placement of minority candidates into “leadership positions”, and some targets may apply more broadly. Explicit quotas have long been viewed negatively by the public. Quotas have also been proscribed under most circumstances by the Supreme Court, and the EEOC’s Compliance Manual still includes rigid limits on when the setting of minority hiring “goals” is permissible.

Yet large employers seem to prefer the legal risks posed by aggressive DEI policies to the risk of lawsuits by minority interests, unrest among minority employees and “woke” activists, and “disparate impact” inquiries by the EEOC. Now, as Stewart Baker writes in a post over at the Volokh Conspiracy, employers have a new way of improving — or even eliminating — the tradeoff they face between these risks: “stealth quotas” delivered via artificial intelligence (AI) decisioning tools.

Skynet Smiles

A few years ago I discussed the extensive use of algorithms to guide a range of decisions in “Behold Our Algorithmic Overlords“. There, I wrote:

“Imagine a world in which all the information you see is selected by algorithm. In addition, your success in the labor market is determined by algorithm. Your college admission and financial aid decisions are determined by algorithm. Credit applications are decisioned by algorithm. The prioritization you are assigned for various health care treatments is determined by algorithm. The list could go on and on, but many of these ‘use-cases’ are already happening to one extent or another.”

That post dealt primarily with the use of algorithms by large tech companies to suppress information and censor certain viewpoints, a danger still of great concern. However, the use of AI to impose de facto quotas in hiring is a phenomenon that will unequivocally reduce the efficiency of the labor market. But exactly how does this mechanism work to the satisfaction of employers?

Machine Learning

As Baker explains, AI algorithms are “trained” to find optimal solutions to problems via machine learning techniques, such as neural networks, applied to large data sets. These techniques are are not as straightforward as more traditional modeling approaches such as linear regression, which more readily lend themselves to intuitive interpretation of model results. Baker uses the example of lung x-rays showing varying degrees of abnormalities, which range from the appearance of obvious masses in the lungs to apparently clear lungs. Machine learning algorithms sometimes accurately predict the development of lung cancer in individuals based on clues that are completely non-obvious to expert evaluators. This, I believe, is a great application of the technology. It’s too bad that the intuition behind many such algorithmic decisions are often impossible to discern. And the application of AI decisioning to social problems is troubling, not least because it necessarily reduces the richness of individual qualities to a set of data points, and in many cases, defines individuals based on group membership.

When it comes to hiring decisions, an AI algorithm can be trained to select the “best” candidate for a position based on all encodable information available to the employer, but the selection might not align with a hiring manager’s expectations, and it might be impossible to explain the reasons for the choice to the manager. Still, giving the AI algorithm the benefit of the doubt, it would tend to make optimal candidate selections across reasonably large sets of similar, open positions.

Algorithmic Bias

A major issue with respect to these algorithms has been called “algorithmic bias”. Here, I limit the discussion to hiring decisions. Ironically, “bias” in this context is a rather slanted description, but what’s meant is that the algorithms tend to select fewer candidates from “protected classes” than their proportionate shares of the general population. This is more along the lines of so-called “disparate impact”, as opposed to “bias” in the statistical sense. Baker discusses the attacks this has provoked against algorithmic decision techniques. In fact, a privacy bill is pending before Congress containing provisions to address “AI bias” called the American Data Privacy and Protection Act (ADPPA). Baker is highly skeptical of claims regarding AI bias both because he believes they have little substance and because “bias” probably means that AIs sometimes make decisions that don’t please DEI activists. Baker elaborates on these developments:

“The ADPPA was embraced almost unanimously by Republicans as well as Democrats on the House energy and commerce committee; it has stalled a bit, but still stands the best chance of enactment of any privacy bill in a decade (its supporters hope to push it through in a lame-duck session). The second is part of the AI Bill of Rights released last week by the Biden White House.”

What the hell are the Republicans thinking? Whether or not it becomes a matter of law, misplaced concern about AI bias can be addressed in a practical sense by introducing the “right” constraints to the algorithm, such as a set of aggregate targets for hiring across pools of minority and non-minority job candidates. Then, the algorithm still optimizes, but the constraints impinge on the selections. The results are still “optimal”, but in a more restricted sense.

Stealth Quotas

As Baker says, these constrains on algorithmic tools would constitute a way of imposing quotas on hiring that employers won’t really have to explain to anyone. That’s because: 1) the decisioning rationale is so obtuse that it can’t readily be explained; and 2) the decisions are perceived as “fair” in the aggregate due to the absence of disparate impacts. As to #1, however, the vendors who create hiring algorithms, and specific details regarding algorithm development, might well be subject to regulatory scrutiny. In the end, the chief concern of these regulators is the absence of disparate impacts, which is cinched by #2.

About a month ago I posted about the EEOC’s outrageous and illegal enforcement of disparate impact liability. Should I welcome AI interventions because they’ll probably limit the number of enforcement actions against employers by the EEOC? After all, there is great benefit in avoiding as much of the rigamarole of regulatory challenges as possible. Nonetheless, as a constraint on hiring, quotas necessarily reduce productivity. By adopting quotas, either explicitly or via AI, the employer foregoes the opportunity to select the best candidate from the full population for a certain share of open positions, and instead limits the pool to narrow demographics.

Demographics are dynamic, and therefore stealth quotas must be dynamic to continue to meet the demands of zero disparate impact. But what happens as an increasing share of the population is of mixed race? Do all mixed race individuals receive protected status indefinitely, gaining preferences via algorithm? Does one’s protected status depend solely upon self-identification of racial, ethnic, or gender identity?

For that matter, do Asians receive hiring preferences? Sometimes they are excluded from so-called protected status because, as a minority, they have been “too successful”. Then, for example, there are issues such as the classification of Hispanics of European origin, who are likely to help fill quotas that are really intended for Hispanics of non-European descent.

Because self-identity has become so critical, quotas present massive opportunities for fraud. Furthermore, quotas often put minority candidates into positions at which they are less likely to be successful, with damaging long-term consequences to both the employer and the minority candidate. And of course there should remain deep concern about the way quotas violate the constitutional guarantee of equal protection to many job applicants.

The acceptance of AI hiring algorithms in the business community is likely to depend on the nature of the positions to be filled, especially when they require highly technical skills and/or the pool of candidates is limited. Of course, there can be tensions between hiring managers and human resources staff over issues like screening job candidates, but HR organizations are typically charged with spearheading DEI initiatives. They will be only too eager to adopt algorithmic selection and stealth quotas for many positions and will probably succeed, whether hiring departments like it or not.

The Death of Merit

Unfortunately, quotas are socially counter-productive, and they are not a good way around the dilemma posed by the EEOC’s aggressive enforcement of disparate impact liability. The latter can only be solved only when Congress acts to more precisely define the bounds of illegal discrimination in hiring. Meanwhile, stealth quotas cede control over important business decisions to external vendors selling algorithms that are often unfathomable. Quotas discard judgements as to relevant skills in favor of awarding jobs based on essentially superficial characteristics. This creates an unnecessary burden on producers, even if it goes unrecognized by those very firms and is self-inflicted. Even worse, once these algorithms and stealth quotas are in place, they are likely to become heavily regulated and manipulated in order to achieve political goals.

Baker sums up a most fundamental objection to quotas thusly:

“Most Americans recognize that there are large demographic disparities in our society, and they are willing to believe that discrimination has played a role in causing the differences. But addressing disparities with group remedies like quotas runs counter to a deep-seated belief that people are, and should be, judged as individuals. Put another way, given a choice between fairness to individuals and fairness on a group basis, Americans choose individual fairness. They condemn racism precisely for its refusal to treat people as individuals, and they resist remedies grounded in race or gender for the same reason.”

Quotas, and stealth quotas, substitute overt discrimination against individuals in non-protected classes, and sometimes against individuals in protected classes as well, for the imagined sin of a disparate impact that might occur when the best candidate is hired for a job. AI algorithms with protection against “algorithmic bias” don’t satisfy this objection. In fact, the lack of accountability inherent in this kind of hiring solution makes it far worse than the status quo.

Hurricane—Warming Link Is All Model, No Data

18 Tuesday Oct 2022

Posted by Nuetzel in Climate science, Hurricanes, Uncategorized

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Carbon Forcing Models, carbon Sensitivity, Climate Alarmism, Geophysical Fluid Dynamics Laboratory, Glenn Reynolds, Greenhouse Gases, Hurricane Ian, Hurricane Models, IPCC, Model Calibration, Named Storms, National Hurricane Center, National Oceanic and Atmospheric Administration, Neil L. Frank, NOAA, Paul Driessen, Roger Pielke Jr., Ron DeSantis, Ryan Maue, Satellite Data, Tropical Cyclones

There was deep disappointment among political opponents of Florida Governor Ron DeSantis at their inability to pin blame on him for Hurricane Ian’s destruction. It was a terrible hurricane, but they so wanted it to be “Hurricane Hitler”, as Glenn Reynolds noted with tongue in cheek. That just didn’t work out for them, given DeSantis’ competent performance in marshaling resources for aid and cleanup from the storm. Their last ditch refuge was to condemn DeSantis for dismissing the connection they presume to exist between climate change and hurricane frequency and intensity. That criticism didn’t seem to stick, however, and it shouldn’t.

There is no linkage to climate change in actual data on tropical cyclones. It is a myth. Yes, models of hurricane activity have been constructed that embed assumptions leading to predictions of more hurricanes, and more intense hurricanes, as temperatures rise. But these are models constructed as simplified representations of hurricane development. The following quote from the climate modelers at the Geophysical Fluid Dynamics Laboratory (GFDL) (a division of the National Oceanic and Atmospheric Administration (NOAA)) is straightforward on this point (emphases are mine):

“Through research, GFDL scientists have concluded that it is premature to attribute past changes in hurricane activity to greenhouse warming, although simulated hurricanes tend to be more intense in a warmer climate. Other climate changes related to greenhouse warming, such as increases in vertical wind shear over the Caribbean, lead to fewer yet more intense hurricanes in the GFDL model projections for the late 21st century.

Models typically are said to be “calibrated” to historical data, but no one should take much comfort in that. As a long-time econometric modeler myself, I can say without reservation that such assurances are flimsy, especially with respect to “toy models” containing parameters that aren’t directly observable in the available data. In such a context, a modeler can take advantage of tremendous latitude in choosing parameters to include, sensitivities to assume for unknowns or unmeasured relationships, and historical samples for use in “calibration”. Sad to say, modelers can make these models do just about anything they want. The cautious approach to claims about model implications is a credit to GFDL.

Before I get to the evidence on hurricanes, it’s worth remembering that the entire edifice of climate alarmism relies not just on the temperature record, but on models based on other assumptions about the sensitivity of temperatures to CO2 concentration. The models relied upon to generate catastrophic warming assume very high sensitivity, and those models have a very poor track record of prediction. Estimates of sensitivity are highly uncertain, and this article cites research indicating that the IPCC’s assumptions about sensitivity are about 50% too high. And this article reviews recent findings that carbon sensitivity is even lower, about one-third of what many climate models assume. In addition, this research finds that sensitivities are nearly impossible to estimate from historical data with any precision because the record is plagued by different sources and types of atmospheric forcings, accompanying aerosol effects on climate, and differing half-lives of various greenhouse gases. If sensitivities are as low as discussed at the links above, it means that predictions of warming have been grossly exaggerated.

The evidence that hurricanes have become more frequent or severe, or that they now intensify more rapidly, is basically nonexistent. Ryan Maue and Roger Pielke Jr. of the University of Colorado have both researched hurricanes extensively for many years. They described their compilation of data on land-falling hurricanes in this Forbes piece in 2020. They point out that hurricane activity in older data is much more likely to be missing and undercounted, especially storms that never make landfall. That’s one of the reasons for the focus on landfalling hurricanes to begin with. With the advent of satellite data, storms are highly unlikely to be missed, but even landfalls have sometimes gone unreported historically. The farther back one goes, the less is known about the extent of hurricane activity, but Pielke and Maue feel that post-1970 data is fairly comprehensive.

The chart at the top of this post is a summery of the data that Pielke and Maue have compiled. There are no obvious trends in terms of the number of storms or their strength. The 1970s were quiet while the 90s were more turbulent. The absence of trends also characterizes NOAA’s data on U.S. landfalling hurricanes since 1851, as noted by Pail Driessen. Here is Driessen on Florida hurricane history:

“Using pressure, Ian was not the fourth-strongest hurricane in Florida history but the tenth. The strongest hurricane in U.S. history moved through the Florida Keys in 1935. Among other Florida hurricanes stronger than Ian was another Florida Keys storm in 1919. This was followed by the hurricanes in 1926 in Miami, the Palm Beach/Lake Okeechobee storm in 1928, the Keys in 1948, and Donna in 1960. We do not know how strong the hurricane in 1873 was, but it destroyed Punta Rassa with a 14-foot storm surge. Punta Rassa is located at the mouth of the river leading up to Ft. Myers, where Ian made landfall.”

Neil L. Frank, veteran meteorologist and former head of the National Hurricane Center, bemoans the changed conventions for assigning names to storms in the satellite era. A typical clash of warm and cold air will often produce thunderstorms and wind, but few of these types of systems were assigned names under older conventions. They are not typical of systems that usually produce tropical cyclones, although they can. Many of those kinds of storms are named today. Right or wrong, that gives the false impression of a trend in the number of named storms. Not only is it easier to identify storms today, given the advent of satellite data, but storms are assigned names more readily, even if they don’t strictly meet the definition of a tropical cyclone. It’s a wonder that certain policy advocates get away with saying the outcome of all this is a legitimate trend!

As Frank insists, there is no evidence of a trend toward more frequent and powerful hurricanes during the last several decades, and there is no evidence of rapid intensification. More importantly, there is no evidence that climate change is leading to more hurricane activity. It’s also worth noting that today we suffer far fewer casualties from hurricanes owing to much earlier warnings, better precautions, and better construction.

Great Moments In Projection: Il Doofe Says His Opponents Are Anti-Democratic, Fascist

06 Tuesday Sep 2022

Posted by Nuetzel in Democracy, fascism, Uncategorized

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Administrative State, Angelo M. Codaville, Babylon Bee, Benito Mussolini, Classical Liberal, Constitutional Republic, Corporatism, crony capitalism, Dan Klein, Democracy, fascism, FDR, Federalism, Friedrich Hayek, G.W.F. Hegel, Hitler, Il Duce, Joe Biden, Joseph Stalin, Majoritarianism, Nationalism, New Deal, Semi-Fascism, Sheldon Richman, Socialism

When partisans want to make sure they get their way, perhaps we shouldn’t be surprised to hear them claim their opponents are “anti-democratic”. Well, one-party rule is not democratic, just in case that’s unclear to leftists prattling about “hunting down” the opposition. We now have those forces hurling cries of “fascism” and “semi-fascism” at political adversaries for opposing their use of the state’s coercive power to get their way and to punish political enemies.

Restrained Democracy

The U.S. is not a democracy; it is a constitutional republic. The reason it’s not a democracy is that the nation’s founders were wary of the dangers of majoritarianism. There are many checks on unbridled majoritarianism built into our system of government, including the many protections and guarantees of individual rights in the Constitution, as well as federalism and three branches of government intended as coequals.

In a short essay on democracy, Dan Klein refers to a mythology that has developed around the presumed democratic ideal, quoting Friedrich Hayek on the “fantasy of consensus” that tends to afflict democratic absolutists. Broad consensus is possible on many issues, but it might have been an imperative within small bands of primitive humans, when survival of the band was of paramount concern. That’s not the case in modern societies, however. Classical liberals are often derided as “anti-democratic”, but like the founders, their distaste for pure democracy stems from a recognition of the potential for tyrannies of the majority. Klein notes that the liberal emphasis on individual rights is naturally at tension with democracy. Obviously, a majority might selfishly prefer actions that would be very much to the detriment of individuals in the minority, so certain safeguards are necessary.

However, the trepidation of classical liberals for democracy also has to do with the propensity for majorities to “governmentalize” affairs so as to codify their preferences. As Klein says, this often means regulation of many details of life and social interactions. These are encroachments to which classical liberals have a strong aversion. One might fairly say “small government” types like me are “anti-pure democracy”, and as the founders believed, democratic processes are desirable if governing power is distributed and restrained by constitutional principles and guarantees of individual rights.

Democracy has vulnerabilities beyond the danger posed by majoritarian dominance, however. Elections mean nothing if they can be manipulated, and they are easily corrupted at local levels by compromises to the administration of the election process. Indeed, today powerful national interests are seeking to influence voting for local election officials across the country, contributing substantial sums to progressive candidates. It’s therefore ironic to hear charges of racism and anti-democracy leveled at those who advocate measures to protect election integrity or institutions such as federalism.

And here we have the White House Press Secretary insisting that those in the “minority” on certain issues (dependent, of course, on how pollsters phrase the question) are “extremists”! To charge that someone or some policy is “anti-democratic” usually means you didn’t get your way or you’re otherwise motivated by political animus.

Fascism

Biden and others are throwing around the term fascism as well, though few of these partisans can define the term with any precision. Most who pretend to know its meaning imagine that fascism evokes some sort of conservative authoritarianism. Promoting that impression has been the purpose of many years of leftist efforts to redefine fascism to suit their political ends. Stalin actually promoted the view that anything to the right of the Communist Party was inherently fascist. But today, fascism is an accurate description of much of Western governance, dominated as it is by the administrative state.

I quote here from my post “The Fascist Roader” from 2016:

“A large government bureaucracy can coexist with heavily regulated, privately-owned businesses, who are rewarded by their administrative overlords for expending resources on compliance and participating in favored activities. The rewards can take the form of rich subsidies, status-enhancing revolving doors between industry and powerful government appointments, and steady profits afforded by monopoly power, as less monied and politically-adept competitors drop out of the competition for customers. We often call this “corporatism”, or “crony capitalism”, but it is classic fascism, as pioneered by Benito Mussolini’s government in Italy in the 1920s. Here is Sheldon Richman on the term’s derivation:

‘As an economic system, fascism is socialism with a capitalist veneer. The word derives from fasces, the Roman symbol of collectivism and power: a tied bundle of rods with a protruding ax.’”

Meanwhile, Hitler’s style of governing shared some of the characteristics of Mussolini’s fascism, but there were important differences: Hitler persecuted Jews, blaming them for all manner of social problems, and he ultimately had them slaughtered across much of Europe. Mussolini was often brutal with his political enemies. At the same time, he sought to unite an Italian people who were otherwise a fairly diverse lot, but once Mussolini was under Hitler’s thumb, Italian Jews were persecuted as well.

Angelo M. Codevilla provides an excellent account of Mussolini’s political career and the turns in his social philosophy over the years. He always considered himself a dedicated socialist, but the views he professed evolved as dictated by political expediency. So did his definition of fascism. As he took power in Italy with the aid of “street fighters”, fascism came to mean nationalism combined with rule by the administrative state and a corresponding preemption of legislative authority. And there were concerted efforts by Mussolini to control the media and censor critics. Sound familiar? Here’s a quote from Il Duce himself on this matter:

“Because the nature of peoples is variable, and it is easy to persuade them of things, but difficult to keep them thus persuaded. Hence one must make sure that, when they no longer believe, one may be able then to force them to believe.”

Here is Codevilla quoting Mussolini from 1919 on his philosophy of fascism:

“The fascist movement, he said, is ‘a group of people who join together for a time to accomplish certain ends.’ ‘It is about helping any proletarian groups who want to harmonize defense of their class with the national interest.’ ‘We are not, a priori, for class struggle or for class-cooperation. Either may be necessary for the nation according to circumstances.’”

This framing underlies another basic definition of fascism: a system whereby government coercion is used to extract private benefits, whether by class or individual. Codevilla states that Mussolini was focused on formal “representation of labor” in policy-making circles. Today, western labor unions seem to have an important, though indirect, influence on policy, and labor is of course the presumed beneficiary of many modern workplace regulations.

Modern corporatism is directly descended from Mussolini’s fascist state. The symbiosis that exists between large corporations and government has several dimensions, including regulatory capture, subsidies and taxes to direct flows of resources, high rates of government consumption, rich government contracts, and of course cronyism. This carries high social costs, as government dominance of economic affairs gives rise to a culture of rent seeking and diminished real productivity. Here is Codevilla’s brief description of the transition:

“Hegel, as well as the positivist and Progressive movements, had argued for the sovereignty of expert administrators. Fascist Italy was the first country in which the elected legislature gave up its essential powers to the executive, thus abandoning the principle, first enshrined in the Declaration of Independence and the U.S. Constitution, by which people are rightly governed only through laws made by elected representatives. By the outbreak of World War II, most Western countries’ legislatures—the U.S. Congress included—had granted the executive something like ‘full powers,’ each by its own path, thus establishing the modern administrative state.”

Mussolini saw Italian fascism as the forerunner to FDR’s New Deal and took great pride in that. On this point, he said:

“… the state is responsible for the people’s economic well-being, it no longer allows economic forces to run according to their own nature.”

The Babylon Bee’s take on Biden and fascism would have been more accurate had it alluded to Mussolini, but not nearly as funny! The following link (and photoshopped image) is obviously satire, but it has a whiff of eerie truth.

Biden Condemns Fascism in Speech While Also Debuting Attractive New Mustache

Conclusion

Biden’s slur that Republicans are “anti-democratic” is an obvious distortion, and it’s rather ironic at that. The nation’s support for democratic institutions has always been qualified for good reasons: strict majoritarianism tends to disenfranchise voters in the minority, and in fact it can pose real dangers to their lives and liberties. Our constitutional republic offers “relief valves”, such as “voting with your feet”, constitutional protections, and seeking recourse in court. Biden’s party, however, has a suspicious advantage via control of election supervision in many key urban areas of the country. This can be exploited in national elections to win more races as long as the rules on election administration are sufficiently lax. This is a true corruption of democracy, unlike the earnest efforts to improve election integrity now condemned by democrats.

Joe Biden hasn’t the faintest understanding of what fascism means. He uses the term mostly to suggest that Trump, and perhaps most Republicans, have authoritarian and racist sympathies. Meanwhile, he works to entrench the machinery and the breadth of our own fascist state, usurping legislative authority. He is buttressed by a treacherous security apparatus, “street fighters” under the guise of Antifa and BLM, and the private media acting as a propaganda arm of the administration. Joe Biden, you’re our fascist now.

Interventionists Love You and Demand You Change, or Else

19 Friday Aug 2022

Posted by Nuetzel in Central Planning, Industrial Policy, Uncategorized

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CHIPS Act, David McGrogan, Dierdre McCloskey, Don Boudreaux, Industrial Planning, Inflation Reduction Act, Jason Brennan, Joseph Stiglitz, Lionel Trilling, Lockdowns, Pandemic, Paul Krugman, Scientism, Solyndra

Statistics and measurement might not be critical to the exercise of the authoritarian impulse, but they have served to enable the technocratic tyranny idealized by contemporary statists. Certain influential thinkers have claimed our ability to compile statistics helps give rise to the bureaucratized state. I ran across a great post that led with that topic: “The Brutalization of Compassion” by David McGrogan. The mere ability to compile relevant statistics on a population and its well being (income, jobs, wages, inequality, mortality, suicide, etc… ) can motivate action by authorities to “improve” matters. The purpose might be to get ahead of rival states, or the action might be rationalized as compassion. But watch out! McGrogan quotes a bit of cautionary wisdom from Lionel Trilling:

“‘When once we have made our fellow men the objects of our enlightened interest,’ he put it, something within us causes us to then ‘go on and make them the objects of our pity, then of our wisdom, ultimately of our coercion.’”

Ultimately, to pursue their vision, interventionists must impose controls on behaviors. In practice, that means any variance or attempted variance must be penalized. Here’s McGrogan’s description of the steps in this process:

“The conceptualisation of the population as a field of action, and the measurement of statistical phenomenon within it – the taking of an ‘enlightened interest’ in it – gives rise to both ‘pity,’ or compassion, and the application of ‘wisdom’ to resolve its problems. What is left, of course, is coercion, and we do not need to look far to identify it in the many means by which the modern state subjects the population to a kind of Tocquevillian ‘soft despotism,’ constantly manipulating, cajoling and maneuvering it this way and that for its own good, whether through compulsory state education or ‘sin taxes’ or anything in between.”

Follow the Scientism

I can’t neglect to mention another important condition: the hubris among apparatchiks who imagine the state can improve upon private institutions to achieve social betterment. They will always fail in attempts to replace the action of the private markets and the price mechanism to process information relating to scarcities and preferences. Absent that facility, human planners cannot guide flows of resources to their most valued uses. In fact, they nearly always botch it!

Government provision of public goods is one concession worth making, but the state capacity needed to fulfill this legitimate function is subject to severe mission creep: we frequently see efforts to characterize goods and service as “public” despite benefits that are almost wholly private (e.g. education). Likewise, we often hear exaggerated claims of “harms” requiring state intervention (e.g. carbon emissions). These situations often hinge purely on politics. Even when legitimate external benefits or costs can be identified, there is a pretension that they can be accurately measured and corrected via subsidies or taxes. This is far-fetched. At best, it’s possible to vouch for the directional appropriateness of some interventions, but the magnitude of corrective measures is variable and essentially unknowable. Too often we see government failure via over-subsidization of politically favored activities and over-penalization of politically disfavored activities.

One of the most egregious errors of intervention is the over-application of the precautionary principle: if risks are associated with an activity, then it must be curtailed. This often relies on measurements of highly uncertain causes and effects, and it involves aggregation subject to its own biases.

Just as questionable is the ability of “experts” to model natural or behavioral processes such that outcomes can be “predicted” over horizons extending many decades forward. That interventionists tend to ignore the uncertainties of these predictions is the most blatant and damaging conceit of all, not least because the public and the media usually have limited knowledge with which to assess the phenomenon in question.

Public Health Tyranny

The Covid pandemic presented a compelling excuse for precautionists in government and even private institutions to impose radical controls under a set of claims they called “the science”. These claims were often false and really antithetical to the principles of scientific inquiry, which calls for continually questioning hypotheses, even when they represent “consensus”. Yet a series of questionable scientific claims were used to justify abridgment of basic freedoms for the general population, most of whom faced little risk from the virus. This included lockdowns of schools and churches, business closures, cancellation of public events (except of course for protests and riots by Leftists), deferred medical care, vaccine mandates, and mask mandates. The damage these measures inflicted was fierce, and in the end we know that it was almost entirely unnecessary. Still, the public health establishment seems all too willing to ignore the facts in its readiness to repeat the whole range of mistakes at the slightest uptick in what’s now an endemic infection.

Standard Issue Cronyism

In the wake of the pandemic, we’ve witnessed a surge in calls for government to enhance the security of our nation’s supply chains. Too large a share of the critical goods required by domestic industries are produced overseas, which has made supply disruptions, and the threat of future disruptions, especially acute. Right on cue, advocates of industrial policy and planning have arranged for the federal government to provide $85 billion to domestic producers of semiconductors under the so-called CHIPS Act. But semiconductor producers are in no need of government incentives to “re-shore” production:

“… there has been even more chipmaking investment dedicated to the U.S. market, even as federal subsidies have languished. Construction is now underway at four major U.S. facilities and will continue with or without subsidies—something even Intel reluctantly acknowledged when it delayed the groundbreaking ceremony on its much‐ballyhooed Ohio facility to protest congressional inaction. This is because, as numerous experts have explained over the last year, there are real economic and geopolitical reasons to invest in additional U.S. semiconductor production—no federal subsidies needed.”

Moreover, the global shortage of computer chips appears to be ending. The subsidies will unnecessarily enrich industrialists and their shareholders, provide a source of graft to bureaucrats and various middle men, and likely over-allocate resources to domestic production of chips. Industrial planning of this kind has a long history of failure, and this time won’t be different.

Climate Fascists

We also see repeated over-application of the precautionary principle and rising dominance of industrial policy in climate and energy policy. Enormous sacrifices are imposed on consumers for the sake of minuscule changes in global carbon emissions and the “expected” long-term path of future “global” temperatures. The interventions taken in pursuit of these objectives are draconian, limiting choices and raising the cost of virtually everything produced and consumed. They distort the direction of physical investment, disfavoring reliable sources of base load capacity needed for growth, and also disfavoring the safest and most reliable zero-carbon alternative: nuclear power. The renewable energy sources foolishly pushed by the state and the ESG establishment are environmentally costly in their own right, and they don’t work when natural conditions are unfavorable. As one wag says about the climate provisions of the ironically named Inflation Reduction Act, “Gonna be a lot more Solyndras coming”.

And talk about sloppy! Our “trusted representatives” in Congress could hardly be bothered to pretend they’d done their homework. They neglected to provide any quantitative carbon and temperature impacts of the legislation. This must be a case of true honesty, because they really have no idea!

Delusions of Central Planning

One great weakness (among many) of arguments for state industrial planning is the assumption that government agents are somehow more competent, efficient, and “pure of heart” than agents in the private sector. Nothing could be more laughable. On this point, some of the most incisive commentary I’ve seen is provided by the masterful Don Boudreaux, first quoting Georgetown philosopher Jason Brennan before adding his own entertaining thoughts:

The typical way the left argues for the state is to describe what economists in the 1850s thought markets would be like under monopoly or monopsony, and then compare that to a state run by angels. Both halves of the argument are bad, and yet philosophy treats this as if it were rigorous and sophisticated.

“Far too many policy proposals are nothing more than prayers to the state-god. ‘We entreat you, Oh Powerful and Sacred One, to relieve our people of this or that misery, blemish, and market imperfection! We beseech you to bestow upon us – your faithful servants – cosmic justice, safety from new pathogens, unkind thoughts, and microaggressions, and protection from each and every burden of reality that we can imagine being cured by an omniscient, benevolent, and omnipotent deity! If we obey – and sacrifice to you without complaint our treasure and our freedoms – you will provide!’

I do not exaggerate. Pick at random any proposed government intervention offered by the likes of Progressives or national conservatives, and you’ll discover that the workability of this proposed intervention, when evaluated honestly, rests on nothing more solid than the above absurd faith that the state is – or, when in the right hands, will be – a secular god.”

On the idealization of government’s ability to “plan the economy” rationally, here is more from Boudreaux, first quoting the great Deirdre McCloskey:

Deep in left-wing thought about the economy, and in a good deal of right-wing thought, too, is the premise, as Isaiah Berlin once put it with a sneer, that government can accomplish whatever it rationally proposes to do. As has been often observed about leftists even as sweet as John Rawls, the left has no theory of the behavior of the government. It assumes that the government is a perfect expression of the will of The People.

“And nothing is more unscientific – indeed, more mystical – than is this still-commonplace practice of most Progressives, and also of very many conservatives, to analyze the economy and society, and to offer policy recommendations, using such a juvenile ‘understanding’ of the state. Yet such an ‘understanding’ of the state permeates the work even of some Nobel laureates in economics – laureates such as Paul Krugman and Joseph Stiglitz. This ‘understanding’ of the state is inseparable also from the work of pundits too many to count…

That these professors and pundits think of themselves as scientific – and are widely regarded as being especially intelligent, thoughtful, and scientific – testifies to the strength of the cult of democratically rubber-stamped coercion.”

Conclusion

Humans have proven to be incredible documentarians. The advent of measurement techniques and increasingly sophisticated methods of accounting for various phenomena has enabled better ways of understanding our world and our well being. Unfortunately, a by-product was the birth of scientism, the belief that men in authority are capable not only of measuring, but of fine-tuning, the present and future details of society and social interaction. Those pretensions are terribly mistaken. However, the actions of Congress and the Biden Administration prove that it’s adherents will never be persuaded, despite repeated demonstrations of the futility of central planning. Their words of compassion are no comfort — they must coerce the ones they “love”.

The EPA’s Trip To the Constitutional Woodshed

07 Thursday Jul 2022

Posted by Nuetzel in Administrative State, Constitution, Supreme Court, Uncategorized

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Administrative Law, Administrative Procedures Act, Administrative State, Affordable Care Act, Charles Lipson, Chevron Deference, Clarence Carson, Clean Air Act, Climate Alarmism, Constitutional Law, Environmental Protection Agency, EPA, Francis Menton, Franklin D. Roosevelt, FTC, Gabriel Kolko, Great Society, Humphrey’s Executor, ICC, Jarkesy v. SEC, Jonathan Tobin, Kevin O. Leske, Lyndon B. Johnson, Major Questiins Doctrine, National Labor Relations Board, Neil Gorsuch, New Deal, Philip Hamburger, rent seeking, SEC, Sheldon Richman, Supreme Court, The Manhattan Contrarian, West Virginia v. EPA, Woodrow Wilson

The Supreme Court’s regular docket is done for the year, but one of last week’s rulings is of great interest to those concerned about the constitutional threat posed by the administrative state. In West Virginia v. EPA, the Court held that the Clean Air Act of 1970 does not authorize the EPA to regulate carbon emissions in power generation. Well, that’s getting to be a very old statute and no one thought much about carbon dioxide emissions when it became law, so of course it doesn’t! However, this decision is crucial as a check on the ever-growing, extra-legal power of the administrative bureaucracy. I say “extra-legal” because regulatory agencies are increasingly taking it upon themselves to write rules that reach well beyond their legislative mandates. Only the legislature can make law under our system of government, or at least law that settles “major questions”, a doctrine that the Court has applied in this case.

Consequential Side Issues

While many critics of the West Virginia decision might find this hard to believe, it has nothing to do with the Court’s views about the prospects for climate change. That is not the Court’s job and it knows it, or at least most of the justices know it. Even if climate change poses a real threat of global catastrophe, and it does not, that is not the Court’s job. Its primary function is to preserve constitutional law, and that is what this decision is about. (For more on the folly of climate alarmism, see here, here, and here.)

Apart from its constitutional implications, growth in the number of regulatory rules and their complexity also imposes massive costs on the economy, robbing the private sector of productive opportunities, often with little or no demonstrable public benefit. The unbridled promulgation of rules does, however, benefit special interests. That includes bureaucrats, litigators, and private parties who derive side benefits from regulation, such as protection of monopoly status, competitive advantages, and expanded professional opportunities. Leveraging government and political privilege for private benefit is rent seeking at its very heart, and it’s also at the very heart of fascistic corporatism.

A Little History

Regulation has been a channel for rent seeking going back to the earliest days of the Republic and even before. But a Great Leap Forward in federal regulatory intervention came in the late 1880s with several Supreme Court decisions involving railroad rates, and then the establishment of the Interstate Commerce Commission. The railroads practically begged to be regulated. At the last link, Sheldon Richmsn quotes historian Gabriel Kolko:

“The first regulatory effort, the Interstate Commerce Commission, had been cooperative and fruitful; indeed, the railroads themselves had been the leading advocates of extended federal regulation after 1887.”

The railroads wanted stability, of course, and less competition, and that’s what they got, though in the end they didn’t do themselves any favors. Here’s historian Clarence Carson on the ultimate result:

“Since the railroads could not effectively compete in so many ways, such opportunity for improving their situation as existed would usually be to combine roads covering the same general area so as to maintain some control over rates and get as much of the profitable business as possible within an area. This is what railroad financiers tended to do. The result, as far as the public was concerned, was a nonintegrated rail system, reduced competition, poorer service, and higher rates.”

Later, Woodrow Wilson and Franklin D. Roosevelt had strong roles in advancing the regulatory state. Wilson was smitten with the scientism inherent in centralized decision making and administrative expertise. He was also loath to concede his vision of administrative planning to democratic ideals. Justice Neil Gorsuch, in his concurrence on the EPA decision, offers some rather disturbing quotes from Wilson:

“Woodrow Wilson famously argued that ‘popular sovereignty’ ‘embarrasse[d]’ the Nation because it made it harder to achieve ‘executive expertness.’ The Study of Administration, 2 Pol. Sci. Q. 197, 207 (1887) (Administration). In Wilson’s eyes, the mass of the people were ‘selfish, ignorant, timid, stubborn, or foolish.’ Id., at 208. He expressed even greater disdain for particular groups, defending ‘[t]he white men of the South’ for ‘rid[ding] themselves, by fair means or foul, of the intolerable burden of governments sustained by the votes of ignorant [African-Americans].’ 9 W. Wilson, History of the American People 58 (1918). He likewise denounced immigrants ‘from the south of Italy and men of the meaner sort out of Hungary and Poland,’ who possessed ‘neither skill nor energy nor any initiative of quick intelligence.’ 5 id., at 212. To Wilson, our Republic ‘tr[ied] to do too much by vote.’ Administration 214.”

FDR’s New Deal was responsible for a huge expansion in the administrative apparatus, as this partial list of federal agencies created under his leadership indicates. Many of these agencies were subsequently ruled unconstitutional, but quite a few live on today with greatly expanded scope and presumed powers.

The Great Society policies of Lyndon B. Johnson also created new agencies and programs, with additional burdens on the ability of the private economy to function properly. Of course, the complexity of the administrative state has increased many-fold with more recent actions such as the Clean Air Act and the Affordable Care Act.

Major Questions

The agencies, despite any expertise they might have in-house, cannot create major rules and mandates without fairly specific statutory authorization. That is a constitutional imperative. It’s not quite clear, however, what test might distinguish a “major question” requiring enabling legislation from lesser matters. There is certainly some room for interpretation. According to Kevin O. Leske:

“Under the [major questions] doctrine, a court will not defer to an agency’s interpretation of a statutory provision in circumstances where the case involves an issue of deep economic or political significance or where the interpretive question could effectuate an enormous and transformative expansion of the agency’s regulatory authority.”

Unfortunately, this judicial deference to agency rule-making and interpretation led to further erosion of the separation of powers and due process rights. Vague legislation, aggressive special interests and rent seekers, and judicial deference have allowed agencies excessive latitude to interpret and stretch their mandates, to enforce expansive regulatory actions, and to adjudicate disputes with regulated entities in proceedings internal to the agencies themselves.

At issue in EPA v. West Virginia were the agency’s steps to radically transform the energy mix used in power generation, with potentially dramatic, negative impacts on the public. The Court said that won’t fly unless Congress gives the EPA more specific instructions along those lines. Agency expertise, by itself, is not enough to override the legitimate democratic interests of the public in such consequential matters.

But what about executive actions of the sort increasingly taken by presidents over the years? Why are those legal? Article Two of the Constitution grants discretion to the president for enforcement of laws and managing the executive branch. Furthermore, pieces of legislation can specifically grant discretionary power to the executive branch in particular areas. Nevertheless, it might be possible for even executive orders issued by the president to “go too far” in interpreting congressional intent. That is within the purview of courts in case of legal challenges.

Unaccountable Agency Power

So called “administrative expertise” was given some degree of deference by the Supreme Court as early as the 1930s. In 1947, the Court decided the application of such expertise should often take precedence over pre-established rules. There was also a recognition that legislators often lacked the expertise to formulate certain regulatory guidelines. The expanding scope and complexity of regulations gave rise to increasing legal disputes, however. This strained the judicial system for at least two reasons: the sheer limits of its capacity and the lack of technical expertise needed to settle many disputes. This ultimately led to the adjudication of many disputes within the agencies themselves. Agency tribunals of subject matter experts were formed to meet these growing demands. This was said to facilitate “cheap justice”, not to mention more rapid decisions. The passage of the Administrative Procedures Act in 1947 was a recognition that administrative law was necessary and required certain standards, though they differ from normal judicial standards, such as rules of evidence. This left very little to brake aggressive and extra-legal rule-making and enforcement by the agencies.

Another disturbing aspect of the growth in administrative power has been the advent of agencies said to be “independent” from the other branches of government, as if to intimate their existence as a fourth branch. As Francis Menton (the Manhattan Contrarian) says, agencies:

“… can create rules for your conduct free from the Congress, and … can prosecute you free from the President. In 1935, in a case called Humphrey’s Executor, the Supreme Court upheld the part of the FTC Act that made the Commissioners immune from discharge by the President other than in very limited circumstances. Humphrey’s Executor has not been overruled to this day.

The FTC was only the beginning of an explosion of creation of such ‘independent’ agencies and otherwise un-separated powers in the federal government. The Federal Reserve was created about the same time (actually 1913), and things really took off during Roosevelt’s New Deal, with agencies like the FCC, SEC, and NLRB.”

Later, the Supreme Court adopted a two-part test to determine whether courts may defer to administrative expertise in interpreting legislative intent, rather than substituting their own judgement or insisting on a clearer legislative mandate. This was the principle of so-called Chevron deference, named for the case Chevron v. Natural Resources Defense Council, in which the Court ruled for the EPA’s definition of a “stationary source” of pollution as “plantwide”. The test for Chevron deference was whether an agency’s rule was a “reasonable” statutory interpretation and whether Congress had not directly addressed the point in question.

Rolling It Back

Philip Hamburger, in his book “Is Administrative Law Unlawful?”, addressed the struggle between administrative power and “regular law” back to the days of “royal prerogative”. The advent of constitutional law was designed to prevent anything resembling the latter.

“… administrative law has returned American government and society to precisely the sort of consolidated or absolute power that the US Constitution―and constitutions in general―were designed to prevent.”

But now we have some very promising developments. Again, in the West Virginia case, the EPA’s authority to regulate carbon emissions in power generation has been denied by the Court, pending any future legislation that would specifically enable that authority. There was no mention of Chevron in this decision whatsoever! That’s a big win for constitutional principle. In another recent case before the Fifth Circuit Court in New Orleans, Jarkesy v. SEC, an administrative law judge (ALJ) at the SEC had assessed damages and fines against Jarkesy, but he challenged the SEC in court, as Menton describes:

“Jarkesy claimed that he was deprived of his Seventh Amendment right to have his case decided by a jury, and also that the SEC had unconstitutionally exercised legislative powers when deciding to try his case before an ALJ without having been given any guiding principles by Congress on how to make that decision. The Fifth Circuit ruled for Jarkesy on both points. This decision has the potential to force some significant changes on how the SEC does business. However, Mr. Jarkesy still does have to continue to run a gantlet that will likely include a request by the government for en banc review by the Fifth Circuit, and then a request for review by the Supreme Court.”

Conclusion

Here is a nice summary of the constitutional issues from an earlier post by Menton:

“… (1) the combining of powers into agencies that would enact, and also enforce, and also adjudicate regulations (directly contrary to the Constitution’s separation of powers into three branches of government); (2) agencies enacting regulations with the force of law on their own say so (contrary to the Constitution’s requirement that all laws be passed by both houses of Congress and presented to the President for signature); and (3) many agencies claiming to be “independent” of the President (contrary to the Constitution’s vesting all ‘ executive power’ in the President).

This is echoed by Jonathan Tobin, who says:

“Government by fiat of intellectuals or scientific experts may or may not be good policy. But it is alien to the U.S. Constitution, and it has nothing to do with democracy.”

One other critical point made by Charles Lipson is that the Court’s West Virginia decision, while sending an unmistakeable message to federal agencies, should also raise awareness in Congress that it is not enough to legislate vague statutes and rely on bureaucrats to make all the decisions about implementation. Instead, “major questions” must be dealt with legislatively and with full accountability to voters. Congress must address these issues, if not up-front, then whenever they arise as disputes in the courts or otherwise. Certainly, the West Virginia decision should make individuals or entities subject to regulatory action less likely to allow major questions to be settled by ALJ rulings within the agencies themselves. The Supreme Court has expressed a willingness for such cases to be reviewed in normal courts of law. That is a very positive development for liberty.

Observations on the Dobbs Decision

27 Monday Jun 2022

Posted by Nuetzel in Abortion, Federalism, Uncategorized

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Abortion, Clarence Thomas, Dobbs v. Jackson Women’s Health Organization, Equal Protection Clause, Fourteenth Amendment, Ninth Amendment, Roe v. Wade, Ruth Bader Ginsberg. Samuel Alito, Stare Decisis, Substantive Due Process, Supreme Court, Unenumerated Rights

The reaction to the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization was not short on outrageous assertions and even outright lies about the legal issues at stake. I wrote the article below a few weeks after the unfortunate leak of Justice Samuel Alito’s draft decision. But first, with the actual decision in hand, here are a few additional observations:

The most vocal pro-abortionists have a remarkably weak grip on the legal issues at play. Or do they take their supporters for idiots? More informed pro-choice advocates should be embarrassed.
There is not and never was an explicit right to abortion in the U.S. Constitution. This was a “right” conjured entirely by the judiciary.
Abortion has not been banned nationwide. The decision leaves the matter to state legislatures (and voters) and subsequent court challenges, which are sure to come. This is the very essence of federalism.
The decision has no implication for travel across state lines to obtain an abortion.
Stare decisis does not mean that the Court must always uphold precedent. Certainly not if, in the view of the Court, the precedent is egregiously bad. Precedents have been reversed in the past in a variety of contexts.
None of the justices “lied” to anyone in the Senate during pre-confirmation interviews. A prospective justice cannot and should not pronounce how they would rule on a specific issue, particularly outside the context of a specific case and its facts. Respecting precedent does not mean that precedent must be the only consideration.
The Supreme Court is independent and “undemocratic” by design. It cannot make law, as it did in Roe. Instead, it serves as a check on constitutional abuses by the other branches of government. In doing so, it must be insulated from the whims of popular opinion.
The Court agrees that the legality of abortion should never have been decided by “nine unelected men in robes”!
The Court rejected the claim that had been relied upon in Roe v. Wade, namely that the Fourteenth Amendment due process right to privacy covers the decision to abort a child. Ruth Bader Ginsberg also rejected that claim (see below), as have many other legal scholars on both sides of the debate. No, Ruth didn’t send you!
Roe relied on so-called “substantive due process”, which in the past has been used by the Court to extend the concept of due process under the law to protection of certain unenumerated (and contested) “rights”. Justice Thomas noted in his separate concurrence that a guarantee of “process” cannot itself establish a substantive right.
There is a possibility of federal legislation now, or after January with the new Congress, but an outright federal ban is unlikely, especially one without exceptions or one applicable at all stages of pregnancy.
Future court challenges to state or federal abortion laws are likely to be based on the Equal Protection Clause of the Fourteenth Amendment, which Ginsberg felt was the correct basis on which to establish a woman’s “right” to abort a child.
The U.S. Constitution protects unenumerated rights from infringement by the federal government, but it does not apply to actions taken by states because the Ninth Amendment has never been “incorporated” as applicable to infringements by state governments. Whether it should be incorporated is another matter.
Treating abortion as an unenumerated right of a woman is questionable at best because an unborn child is vested with competing rights. We may disagree on the stages at which vesting occur, but if you don’t believe it occurs, you are an extreme outlier (see below).
A pregnant woman cannot have complete bodily autonomy because she has another person’s life on board.
No women’s lives are threatened by the Dobbs decision. Even states with so-called “trigger laws” that now ban abortion have emergency exceptions for the life of the mother.
Expansive claims conflating a potential change in a woman’s life with “loss of life” are grotesque when it is almost always the child’s life at stake.
Pro-abortionists who give specific reference to family members and acquaintances born with disabilities, seemingly as a rationale for their position, are on dangerous ground. Their’s is a grotesque expression of regret for the birth of those individuals. It borders on suggesting that babies with Downs Syndrome should be murdered — post-birth! However, this is in keeping with the eugenicistic roots of abortion advocacy (see below).
The decision has no implication for the legality of contraceptives.
Democrats and Planned Parenthood have seemingly resisted efforts to legalize over-the-counter contraception. They should get on-board asap.
Post-Dobbs, abortion law in the U.S. is most assuredly not an outlier among developed nations. See the handy comparison with nations in the EU above.
Abortion proponents are having difficulty controlling their brethren’s use of the “N-word”, particularly when targeted at Justice Thomas. And apparently, advocating for the assassination of Thomas has been normalized among pro-abortionists.
The violence and histrionics of certain pro-arbortionists will not get them much sympathy. Jane’s Revenge terrorism is a good way to ruin their cause.
In a bit of great news, all sides now seem to agree that pregnancy and abortion are women’s issues. Breakthrough moment!

Here is the earlier post I mentioned above:

DOBBS, ROE, AND THE FREAKOUT OVER FEDERALISM

The leak of a Supreme Court draft opinion in Dobbs v. Jackson Women’s Health Organization has created uproars on several fronts. The opinion, written by Justice Samuel Alito, represented a 5-4 majority at the time of its writing, but it is a draft opinion, and the substance and the positions of other justices might change before a final decision is handed down by the Court by the end of June. The draft would essentially uphold a Mississippi law restricting abortions after the first 15 weeks of pregnancy. This would overturn the Roe v. Wade (1973) and Planned Parenthood v. Casey (1992) decisions. The former established that states could regulate abortion only beyond a certain stage of pregnancy (originally the first trimester), while the latter allowed states to regulate once a pregnancy reached the stage of fetal viability. While 24 weeks is often cited as the lower limit of viability, it is considered to be as early as 20 weeks by the World Health Organization, an estimate that could decline with future advances in prenatal and neonatal care (such as artificial wombs). In any case, viability would no longer be the standard if the draft opinion stands. Indeed, it would once again be up to states as to how they wish to regulate abortion.

Here is an update on where things stood on May 11th. Reportedly, the 5-4 majority still stood, and no other draft opinions existed in the case at that time. No news since.

Due Process and Privacy Rights

Was Roe v. Wade a good legal decision? Ruth Bader Ginsburg did not hold the opinion in high regard as a matter of the jurisprudence. Apparently, she felt that the Court should have simply struck down the restrictive Texas law in question without imposing a set of rules, which amounted to an aggressive infringement on the legislative function and the evolution of law, and case law, at the state level. Her words were:

“Doctrinal limbs too swiftly shaped, experience teaches, may prove unstable. The most prominent example in recent decades is Roe v. Wade.”

She also felt the Court should not have leaned on the Due Process Clause of Fourteenth Amendment, which prohibits the denial of “life, liberty or property, without due process of law”. And she believed that relying on due process and the privacy rights of a woman and her physician made Roe vulnerable to challenge. She was probably right.

Yale Law School professor Akhil Amar, who is pro-choice, also believes the Roe decision was misguided and calls its reliance on due process “textual gibberish”. The objection to substantive due process is based on the absence of any principle establishing which “rights” not found explicitly in the Bill of Rights are valid, and which are not.

Equal Protection

In fact, Amar defends Justice Alito’s draft opinion and believes, as Ginsberg did, that the Equal Protection Clause of the Fourteenth Amendment is a better defense of abortion rights. The contention is that unless a woman possesses the right to terminate a pregnancy, she is not on an equal footing with similarly situated men in terms of self-determination and life opportunities. Of course, none of this weighs the interests of the unborn child.

Establishment Clause

Josh Blackman has an interesting series of comments about whether the Establishment Clause of the First Amendment may be a valid defense of abortion rights. That seemingly preposterous claim relies on abortion as a right, in some cases, protected by the free exercise of religion. As Blackman sums up in his sixth point:

“… abortion rights groups should be careful what they wish for. If the Court recognizes a Free Exercise right to perform or receive an abortion, then conservatives can cook up even more aggressive religious liberty strategies. I’ll bring the bagels for the next meeting of the Temple of Automatic Weapons.”

Eugene Volokh makes several interesting points on attempts to use the Establishment Clause “to obtain exemptions from generally applicable laws”. A separate, misguided take at the Establishment Clause is that a law must be unconstitutional if it was based on religious beliefs. Volokh handily disposes of that contention here.

Judicially-Prescribed Rights vs. Constitutional Rights

Blackman has written that the Alito draft is a tour de force, addressing many constitutional principles and concerns expressed by other justices. In another post, Blackman explains a very basic rationale for a decision to overturn Roe. It is related to the objections expressed by Ginsberg and Amar, and to the many “lamentations” expressed in the Court’s abortion opinions over the years since Roe. Namely, that rule and establishment of new rights by court decision was not a mechanism intended by the framers of the Constitution, but self-government and federalist principles were:

“It is a mistake to argue that Dobbs extinguishes a right, without also acknowledging that the decision would restore another right. Overruling Roe would extinguish a judicially-created right to abortion, but it would restore a very different right: the right of the people to govern themselves.”

Personhood

Of course, none of these points are really germane to the crux of the pro-life argument to which I subscribe. However, both Roe and Casey acknowledge the state’s interest in protecting the fetus beyond some point in a pregnancy. The closer to term, the greater the interest. The implication is that a fetus gradually takes on degrees of “personhood” through the course of gestation, and that rights attach to that nascent individual at some point. Both Roe and Casey, by allowing states to regulate abortion beyond some point, offer recognition that the closer an abortion occurs to full term, the stronger the case that it may be prohibited.

The law in most European nations carries the same implication, and if anything leans more heavily in favor of fetal rights than Roe. Furthermore, there are 38 states with fetal homicide laws, which treat the fetus as a person in the case of a murder of a pregnant woman. In 29 of those states, the law applies at the earliest stages of pregnancy. This suggests that in most states, sentiments may weigh in favor of treating the fetus as a person imbued with constitutional rights.

In the end, this is not an exclusively religious argument, as the pro-abortion Left always suggests. For me, it’s purely an ethical one. At what point beyond conception are pro-abortion activists willing to concede that a human life is at stake? Apparently a heartbeat is not enough to convince them. Neither does the appearance of small fingers and toes. Nor the ability to feel pain. These are all things that happen before the child is “viable”. But even viability is not enough for some of the more radical abortion activists, who are proposing choice right up to the moment of birth. Incredibly, and despite the real limitations imposed on mid- or late-term abortions in many states (in line with Roe and Casey), some pro-choice advocates are now acting as if overturning these cases causes women to lose such an unfettered right!

Practical Matters

Anyone can obtain a variety of birth control alternatives without a prescription (and often for free). This includes emergency contraception, or the “morning after pill”. Granted, sometimes birth control measures fail, which places the prospective mother (and perhaps an involved or conscientious father) in a difficult position. Nevertheless, careful use of birth control would minimize the abortion problem and obviate much of the debate, but people are often too impulsive or careless about sex.

Late term abortions are a fairly small percentage of all abortions. The CDC reported that in 2018, 50,000 (~8%) abortions occurred after the first trimester (14+ weeks), and 6,200 (1%) took place at or beyond the point of theoretical viability (21+ weeks). This study found that of abortions at 20+ weeks, mothers tended to be younger (20 -24), discovered their pregnancies somewhat later, faced logistical and financial delays in arranging the abortion, or faced other challenging life circumstances. However, the researchers rebut a common rationale for late-term abortion when they say:

“… most women seeking later terminations are not doing so for reasons of fetal anomaly or life endangerment.”

Eugenics and Classism

Pregnancies among black women are terminated at a disproportionately high rate. That’s consistent with the original, eugenicistic and racist goals of Planned Parenthood founder Margaret Sanger. This is an outcome to top all disparate impacts. I have witnessed pro-abortion activists counter that these aborted lives would have been miserable, impoverished, and without opportunity — essentially not worth living — but these are value judgements of the most monstrous kind. I’ve also heard the pathetic argument that fiscal conservatives should be happy that abortions will reduce spending on aid programs. Of course, the plight of the would-be mother is also emphasized by pro-abortion advocates, but we should not be so eager to accept the tradeoff here: abortion gets the mother is off the hook, but a child’s life is at stake. No matter the odds of success, human beings are all endowed with potential and opportunity, and it’s not necessary to be economically secure to be happy or pursue dreams.

It’s easy to be pessimistic that public policy can ever mitigate the economic burden on impoverished women who bring unexpected or unwanted pregnancies to term, or to brighten the economic future of their children. After all, over the decades since the Great Society program was conceived, the welfare state has proven no better than a dependency treadmill. Family structure has been decimated by those programs and the destructive consequences of the failed (but ongoing) war on drugs. Likewise, public education is a disaster. However, there are also alternatives such as adoption, and there are many private individuals and organizations working to encourage prospective mothers and ease those burdens.

The Leak

The leak of the draft opinion in Dobbs is unfortunate as it compromises the ongoing integrity of the Court’s internal debates and proceedings. In addition to this institutional damage, the impropriety of staging protests outside the homes of justices and inside places of worship should be roundly condemned by people with respect for judicial integrity, privacy and free exercise. These protests are partly attempts to intimidate, and they have even been accompanied by threats of violence. The belligerent posture of these activists is unconscionable.

Long Live Federalism

Again, the Court’s final decision in Dobbs might not be the opinion in the leaked draft. However, if the Court does indeed overturn Roe, it would not outlaw abortion. Rather, it would allow voters in each state to have a voice in aligning the law with public sentiment. Some states will have more restrictive abortion laws than others, but even the Mississippi law at issue in Dobbs allows abortion up through week 15, almost two weeks longer than the original Roe limitation.

The country is still deeply divided on the issue of abortion. Fundamentally, a broader acceptance of the life-and-death reality of abortion would help bring more consensus on the issue. One theory I have is that many who oppose overturning Roe would simply rather not think about that reality. In their minds, Roe keeps abortion compartmentalized, safely walled off from conscience and sometimes even spiritual convictions. They rationalize Roe based on their inability to observe the person whose life is at stake, and they accept justifications that minimize the value of that life.

A single rule imposed by the Court has not and will not resolve these differences. Indeed, Roe and Casey were failed acts of judicial activism that should be reversed. While bad legislation is regrettable, it is always subject to review and challenge by the people. In a federalist system, a bad law is contained like a single experimental treatment in a large trial with multiple arms. However, in this case, unlike a trial with random selection of subjects, one treatment group may differ from others in important respects, and the objective is not to identify one single-best solution, but different solutions that work best for different groups. That is a closer approximation to real self-government than federal legislation and especially one-size-fits-all Court rule-making.

A Fiscal Real-Bills Doctrine? No Such Thing As Painless Inflation Tax

14 Tuesday Jun 2022

Posted by Nuetzel in Fiscal policy, Inflation, Uncategorized

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Biden Administration, Cronyism, Federal Debt, Fiscal Inflation, Fiscal policy, Friedrich Hayek, Hyperinflation, Inflation tax, Knowledge Problem, Modern Monetary Theory, Monetary policy, Money Printing, Nominal GDP Targeting, Pete Buttigieg, Real Bills Doctrine, Reichsbank, rent seeking, Ro Khanna

A remarkable proposal made recently by Representative Ro Khanna (D -CA) would have the Biden Administration impose price controls, which would be bad enough. Khanna also would like the federal government to cover the inflation losses incurred by Americans by having it directly purchase certain goods and services and resell them “cheap” to consumers. In fairness, Khanna says the government should attempt to take advantage of dips in prices for oil, food commodities, and perhaps other necessities, which of course would limit or reverse downward price changes. When asked about Khanna’s proposal, Pete Buttigieg, Joe Biden’s Transportation Secretary, replied that there were great ideas coming out of Congress and the Administration should consider them. Anyway, the idea is so bad that it deserves a more thorough examination.

Central Planners Have No Clothes

First, such a program would represent a massive expansion in the scope of government. It would also present ample opportunities for graft and cronyism, as federal dollars filter through the administrative layers necessary to manage the purchases and distribution of goods. Furthermore, price and quantity would then be shaded by a heavy political component, often taking precedence over real demand and cost considerations. And that’s beyond the crippling “knowledge problem” that plagues all efforts at central planning.

One of the most destructive aspects of allowing government to absorb a greater share of total spending is that government is not invested with the same budgetary discipline as private buyers. Take no comfort in the notion that the government might prove expert at timing these purchases to leverage price dips. Remember that government always spends “other people’s money”, whether it comes from tax proceeds, lenders, or the printing press (and hence future consumers, who have absolutely no agency in the matter). Hence, price incentives take on less urgency, while political incentives gain prominence. The loss of price sensitivity means that government expenditures are likely to inflate more readily than private expenditures. This is all the more critical at a time when inflation is becoming embedded in expectations and pricing decisions. Khanna thus proposes an inflation “solution” that puts less price-sensitive bureaucrats in charge of actual purchases. That’s a prescription for failure.

If anyone in Biden’s White House is seriously considering a program of this kind, and let’s hope they’re not, they should at least be aware that direct subsidies for the purchase of key goods would be far more efficient. It’s also possible to hedge the risk of future price increases on commodities markets, perhaps simply distributing hedging gains to consumers when they pay off. However, having the federal government participate as a major player in commodities options and futures is probably not on the table at this point … and I shudder to think of it, but it might be more efficient than Khanna’s vision.

A Fiscal Real Bills Doctrine

Khanna’s program would almost surely cause inflation to accelerate. Inflation itself a form of taxation imposed by profligate governments, though it’s an inefficient tax since it creates greater uncertainty. Higher prices deflate the real value of most government debt (borrowed from the public), assets fixed in nominal value, and incomes. Read on, but this program would have the government pay your inflation tax for you by inflating some more. Does this sound like a vicious circle?

Khanna’s concept of inflation-relief is a fiscal reimagining of a long-discredited monetary theory called the “Real Bills Doctrine”. According to this doctrine, rising prices and costs necessitate additional money creation so that businesses have the liquidity to pay the bills associated with ongoing productive efforts. The “real” part is a reference to the link between business expenses and actual production, despite the fact that those bills are expressed in nominal terms. The result of this policy is a cycle of ever-higher inflation, as ever-more money is printed. This was the policy utilized by the Reichsbank in Weimar Germany during its hyperinflation of 1922-23. It’s really quite astonishing that anyone ever thought such a policy was helpful!

In Khanna’s version of the doctrine, the government spends to relieve cost pressure faced by consumers, so the rationale has nothing to do with productive effort.

Financing and the Central Bank Response

It’s reasonable to ask how these outlays would be financed. In all likelihood, the U.S. Treasury would borrow the funds at interest rates now at 10-15 year highs, which have risen in part to compensate investors for higher inflation.

My bet is that Khanna imagines the Fed would simply “print” money (i.e., buy the new government debt floated by the Treasury to pay for the program). This is the prescription of so-called Modern Monetary Theory, whose adherents have either forgotten or have never learned that money growth and inflation is a costly and regressive form of taxation.

Most economists would say the response of the Federal Reserve to this fiscal stimulus would bear on whether it really ignites additional inflationary pressure. Of course, rather than borrowing, Congress could always vote to levy higher taxes on the public in order to pay the public’s inflation tax burden! But then what’s the point? Well, taxing at least has the virtue of not fueling still higher inflation, and the Fed would not have a role to play.

But if the government simply borrows instead, it adds to the already bloated supply of government debt held by the public. This borrowing is likely to put more upward pressure on interest rates, and the federal government’s mounting interest expense requires more financing. What then might the Fed do?

The Fed is an independent, quasi-government entity, so it would not have to accommodate the additional spending by printing money (buying the new Treasury debt). Either way, investors are increasingly skeptical that the growing debt burden will ever be reversed via future surpluses. The fiscal theory of the price level holds that something must reduce the real value of government debt (in order to satisfy the long-term fiscal budget constraint). That “something” is a higher price level. This position is not universally accepted, and some would contend that if the Fed simply set a nominal GDP growth target and stuck to it, accelerating inflation would not have to follow from Khanna’s policy. The same if the Fed could stick to a symmetric average inflation target, but they certainly haven’t been up to that task. Hoping the Fed would fully assert its independence in a fiscal hurricane is probably wishful thinking.

Conclusion

There are no choke points in the supply chain for bad ideas on the left wing of the Democratic Party, and they are dominating party centrists in terms of messaging. The answer, it seems, is always more government. High inflation is very costly, but the best policy is to rein it in, and that requires budgetary and monetary discipline. Attempts to make high inflation “painless” are misguided in the first instance because they short-circuit consumer price responses and substitution, which help restrain prices. Second, the presumption that an inflation tax can be “painless” is an invitation to fiscal debauchery. Third, expansive government brings out hoards of rent seekers instigating corruption and waste. Finally, mounting public debt is unlikely to be offset by future surpluses, and that is the ultimate admission of Modern Monetary Theory. A fiscal real bills doctrine would be an additional expression of this lunacy. To suggest otherwise is either sheer stupidity or an exercise in gaslighting. You can’t inflate away the pain of an inflation tax.

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A Fiscal Real-Bills Doctrine? No Such Thing As Painless Inflation Tax