The Parasite In Our Midst

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Revolving-Door

The administrative state is costly in many ways. It not only creates obstacles to economic growth. In promulgating and complying with its dictates, it absorbs vast amounts of resources within both the public and the private sectors. It also provides an avenue through which private elites can curry favor via lucrative contracts and favorable regulatory treatment, often gaining competitive advantages and even monopoly status. The opportunities for graft are legion, of course. The infamous revolving door in and out of government service reinforces the rent seeking potential afforded by this “fourth branch” of government. It is a prime example of the dangers of being governed by men rather than laws. Bureaucrats seem to become self-empowered to make wide-ranging and arbitrary decisions regarding matters not anticipated by any enabling legislation.

In “Bled Dry By The New Class,” Glenn Reynolds offers some insightful remarks regarding the sociological phenomenon that is the administrative state. He provides a telling quote from a frustrated Greek entrepreneur, which should be taken as a warning for us: “I, like thousands of others trying to start businesses, learned that I would be at the mercy of public employees who interpreted the laws so they could profit themselves.”

Bad Wind Has No Payback

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I have often heard greens discuss energy gains associated with alternative energy sources, to the exclusion of other resource costs. The idea of energy gain can be very meaningful. For example, nuclear fusion is only now approaching the point of an energy gain. Of course, making fusion an economic source of energy requires much more efficiency than a simple energy gain. Yet the narrative for certain “green” technologies is that energy gains are all that matters. This thinking is fundamentally flawed, to put it kindly. Here is the full embodiment of the idea, as described by Anthony Watts:

US researchers have carried out an environmental lifecycle assessment of 2-megawatt wind turbines mooted for a large wind farm in the US Pacific Northwest. Writing in the International Journal of Sustainable Manufacturing, they conclude that in terms of cumulative energy payback, or the time to produce the amount of energy required of production and installation, a wind turbine with a working life of 20 years will offer a net benefit within five to eight months of being brought online.   

The reaction at Coyoteblog is amusing. As noted there, the total resource costs of manufacturing and installing the energy production and distribution facilities are just as real in any “green” sense as the energy expended. This is to say nothing of some of the other shortfalls in assumptions mentioned at the link, as well as the avian death toll. The “payback” measure used by the wind farm researchers constitutes naivete at best and propaganda in pursuit of rents at worst.

I’m convinced that the environmentally-concerned public has the best intentions, but there is a deep misunderstanding at play: the notion that the state must intervene to facilitate the adoption of “sustainable” technologies, never mind that these technologies often require massive subsidies to be economically viable. A nice quote on this point from Coyoteblog:

Environmentalists seem to all feel that capitalism is the enemy of sustainability, but in fact capitalism is the greatest system to promote sustainability that has ever been devised. Every single resource has a price that reflects its relative scarcity as compared to demand. Scarcer resources have higher prices that automatically promote conservation and seeking of substitutes. So an analysis of an investment’s ability to return its cost is in effect a sustainability analysis. 

 

The Jobs Report: All Part-Time; Full-Time Down Half-a-Mil

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There were many breathless reports about today’s release of employment data for June, including this bit of coverage from Forbes. The report was better than expected in many ways: the number of jobs created was fairly strong; there were positive revisions to prior months; the official unemployment rate fell, as did the total “U-6” unemployment rate, which includes the unemployed plus potential workers “marginally attached” to job search and those employed part-time for economic reasons; labor force participation held steady, which must be viewed positively given recent trends.

The report seemed to reinforce impressions that the economy is gaining momentum, a welcome relief after the decline in real GDP in the first quarter. Some referred to June as a possible “inflection point,” but that obviously remains to be seen. Labor market conditions have been less than robust, the unemployment rate is still high for this stage of an economic expansion, and there are still far too many long-term unemployed and discouraged workers.

In addition, very little attention was paid by the media and most economists to a disturbing pattern in the jobs created in June: While total employment increased, there were 523,000 fewer full-time jobs (seasonally adjusted), while part-time employment increased 799,000. ZeroHedge has a brief discussion with a few charts. This undermines the case for real strength. There are fears that more full-time workers will be reduced to part-time status as the (delayed) Obamacare employer mandate takes hold in 2015. The chart above does not include the data for June: 80.8% full-time and 19.2% part-time, so the gap widened.

Redistributing a “Progressively” Smaller Pie

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Dilbert Layoffs

A Recovery Stymied By Redistribution” contains excerpts from a recent speech by Casey Mulligan of the University of Chicago. It’s about the destructive power of bad incentives, and it reeks of common sense. It’s long been recognized that efforts to soften economic blows can have damaging incentive effects. Today, those well-intentioned efforts have been expanded beyond the point at which they become counterproductive, and the negative effects are being compounded by new programs that can act as taxes on work effort.

I’ve witnessed some of the phenomena Mulligan describes first-hand. There is no question that some people can be tempted to accept benefits in exchange for a less than vigorous job-search effort, sometimes for no search effort at all, and sometimes fraudulently when they already have gainful employment. Mulligan quotes a job recruiter who, during the recession, “ran into a hurdle he hadn’t seen before. People would apply for jobs not with the intention of accepting it, but to demonstrate to the unemployment office that they were looking for work.” Mulligan also describes ways in which employers have seen reductions in their incentives to retain marginal workers.

Some programs are better than others at minimizing disincentives created by assistance. But here is what Ben Franklin thought:

I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. In my youth I traveled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.

— On the Price of Corn and Management of the Poor, November 1766

Damaging disincentives are also created by efforts to ease economic blows to businesses. Corporate bailouts, for example, create perverse, one-sided “win-can’t lose” sets of outcomes, leading to taxpayer subsidies and excessive risk-taking.

 

Time For OTC Contraceptives

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Here are seven reasons birth control pills shouldn’t require a prescription, offered by Adrianna McIntyre in Vox. There is much concern over “access” to contraceptives in the wake of the Hobby Lobby decision. While any new concern is largely misplaced, the biggest impediments to access might well be the prescription status of these drugs and their cost. Making contraceptives available over-the-counter would do a great deal to reduce these problems while leaving everyone else with a clear conscience. In fact, it would greatly improve access for the uninsured, a group which will remain large despite the best intentions of Obamacare supporters. As the Vox article notes, physicians support the move to make contraceptives available OTC, and it is highly feasible politically, though support will be contingent on certain safeguards, such as restrictions on sales to minors. Otherwise, it is a classic “small government” solution.

Abortifacients and Hobby Lobby

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Some are apparently too lazy, propagandized or ignorant to understand the facts underlying the Supreme Court’s Hobby Lobby decision. But not too lazy to re-tweet or re-post unreliable information.

Here is what the decision means:

1) The decision was narrower than the sloppy memes and some media reports would have you believe. Of the 20 different contraceptives approved for use by the FDA, only four are affected by the decision. Hobby Lobby offers the other 16 through its employee health plan, and it will continue to offer them. The four it is no longer required to offer through its plan are so-called abortifacients, which destroy an already fertilized egg. The ruling does not imply that Hobby Lobby can avoid covering other “mandated benefits” under Obamacare, including the other 16 contraceptives. (In my view, however, the entire coverage mandate should be struck down as well, keeping employer-provided health care benefits a private contactual matter. The specifics of the mandate were not part of the ACA legislation. They were promulgated by bureaucrats at HHS for whom overreach has no meaning.)

2) In general, when individuals decide to associate or act under a corporate form, the corporation assumes the rights they possess as individuals. Human action taken under the corporate form does not involve a diminution of individual rights. Yet the left acts as if people have no rights when acting under the corporate form. Incorrect. Speech, religion — all rights that are granted to individuals under the Constitution are guaranteed to them whether they act as a corporate association or not.

3) The decision in Hobby Lobby applies only to closely-held corporations, the shares of which are not publicly traded. These are not the “faceless corporations” of popular infamy, but are often family-owned companies, associations of partners, or professional practices. Publicly-traded corporations are not affected by the ruling. Only privately-held corporations with more than 50 employees (under the original provisions of the ACA) are affected.

4) The decision does NOT interfere with womens’ rights to obtain most contraceptives. It means that the government cannot force Hobby Lobby to pay for abortifacients, and female employees have an unrestricted right to pay for abortifacients out of their own pockets. They are employed, after all. In addition, the ruling has nothing to do with coverage of abortion procedures that might be necessary when a mother’s life is at risk.

5) The government is not restricted, except as a possible matter of politics, from offering all women free access to abortifacients. It has not offered to do so, however. Therefore, under the 1993 Religious Freedom Restoration Act (RFRA), signed by President Clinton, the Court held that the government cannot impose any burden on private parties (including individuals organized as closely-held corporations) in violation of their religious beliefs if there is a less burdensome alternative available. The RFRA’s importance to the Hobby Lobby ruling is discussed here.

6) Some have accused Hobby Lobby’s owners of hypocrisy, since they sell goods imported from China, where abortion is often coerced by the state. And that might be hypocritical, but the only possible relevance to the case would be if the purchase of Chinese goods reflected on the sincerity of their religious beliefs. That is a litmus test that few would sanction. A beauty of private markets is that they tend to be impersonal, allowing individuals of different cultural practices and beliefs to trade peacefully with one another if they so desire. That has no bearing on the type of labor contract that Hobby Lobby may offer its own employees. In any case, the ruling applies more broadly than to Christian importers of Chinese goods.

Aside

Just Insurance? Or Unjust Insurance?

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Ambulance

Voices from the left keep insisting that universal coverage and a single, all-inclusive risk pool is “just insurance,” and that anyone standing in opposition just “doesn’t understand insurance.” The argument is usually extended to the idea that all individuals must receive and pay for a comprehensive set of benefits, going far beyond any reasonable notion of catastrophic coverage. Proponents of this view advocate an extreme form of socialized health coverage that eliminates private choice and traditional risk-rating.

In a free society, individuals cannot be coerced into cross-subsidizing activities that might violate their religious convictions. It is hoped that this will be affirmed by the Supreme Court’s Hobby Lobby decision, likely to be issued this Monday.

Likewise, in a free society, individuals should not be forced to cross-subsidize private choices made by others. Preserving the right of individuals to purchase the benefits and coverage levels of their choice at reasonable premia (e.g., catastrophic care only or “wellness” features, no pregnancy coverage for senior citizens, risk-based pricing) is crucial. Providing care for high-risk individuals with pre-existing conditions need not involve a dismantling of the private health insurance market.

Of course, Obamacare has fallen short of the socialist “ideal,” either before or after all of the exceptions, delays, and waivers made by the administration and HHS. Its design, nevertheless, has had a destructive impact on the private insurance market, and the program is straining under the effort to provide high-risk coverage. In “Obamacare’s Prognosis Grows Dimmer,” Lanhee Chen discusses how adverse selection is playing out on the Obamacare exchanges. Based on the evidence available thus far, the exchanges appear to be laden with a high percentage of sick individuals. This is likely to lead to more premium shock for enrollees as we head into the mid-term elections.

A path toward providing effective coverage for pre-existing conditions is discussed in this article. It asserts that a solution hinges on the ability for individuals to make seamless transitions between employer-provided coverage and individual coverage, even with pre-existing conditions. Since that ability must apply nationwide, the authors also assert that there must be a role for federal funding of the high-risk pool of individuals making the transition to the individual market.

I’m Conjuring Some Damages For You To Pay

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Demands for climate change reparations are nothing new on an international level, but the essay at the link notes a fascinating comparison of these demands to calls for slavery reparations. Of course, given the weak evidence that climate warming is actually underway, and if so, that it is indeed man-made, and given the extremely poor track-record of models predicting global warming, the assertion of “moral equivalence of slavery and climate change” is ridiculous on its face.

Slavery and its damages are historical facts. Anthropomorphic global warming (AGW) remains speculative, let alone any presumed damages. The author amusingly notes:

It is as provocative today to express doubt in AGW as it would have been to argue with Cotton Mather about relying on spectral evidence. As Mather said, “Never use but one grain of patience with any man that shall go to impose upon me a Denial of Devils, or of Witches.”

Beyond measurement issues, the two demands for reparations share another practical weakness: the difficulty of apportioning the cost. If real, can or should such damages be generalized at the national level? Furthermore, actual payments for past damages are a political non-starter, whether for slavery reparations in the U.S. or climate reparations to the third world promulgated in Copenhagen. In both cases, there is some recognition that it is better politics to adopt forward-looking remedies. That is not to say these remedies are constitutionally legitimate or economically sound, however.

Land of the Lock-Up

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This chart may astound you. It shows that the U.S. and most individual states lead the rest of the world in terms of incarceration rates. At 0.7% of the population, the U.S. is ahead of all other countries, including Cuba, Russia, and other nations to which we’d otherwise not wish to compare ourselves. Again, most individual states finish ahead of all other nations, well ahead. States at the top of the list have incarceration rates 2-3 times higher than Cuba, the next highest country. According to this article, “The United States has about 5% of the world’s population yet it accounts for about 25% of the world’s prisoners.” The failed war on drugs in the U.S. is one obvious factor behind our large prison population. Land of the free? 

Reason Magazine has a special issue, linked here, on the topic of mass incarceration.

Government: Let’s All Fail Together

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Government failure is a topic that crops up so very often. Glenn Reynolds’ column today focuses on the problems with collective action, and he is right on target. “Many of the things government does, we don’t choose. Many of the things we choose, government doesn’t do. And whatever gets done, we’re not the ones doing it. And those who are doing it often interpret their mandates selfishly.” Reynolds uses the VA scandal as a sad case in point. The high performance ratings and bonus payments given to VA executives as the scandal festered around them is particularly galling.

“Whether the sign out front says ‘Department of Veterans Affairs’ or ‘Ministry of Silly Walks,’ … the strongest priority of most bureaucracies is the welfare of the bureaucracy and the bureaucrats it employs, not whatever the bureaucracy is actually supposed to be doing. That’s worth remembering, whenever someone says they’ve found something else that we should ‘choose to do together.'”