Deinonychus antirrhopus

The Dow's First Up Year...

...since 1999! The finished 2003 with a 25% gain for the whole year. The NASDAQ jumped to finish above 2000 (the first time in 2 years)

I suppose the fact that the stock market started declining in 2000 is also somehow Bush's fault. I'm sure this is actually bad news too.

Gorgosaurus

Gorgosaurus libratus, gorgon lizard. This theropod was 8 to 9 meters in length and weighed about 2.5 tonnes. This dinosaur was at one time thought to be the same as Albertosaurus, but is now known to be a distinct species.

The picture with feathery integument is interesting, and dinosaur fossils have been found millions of years earlir (in the fossil record) suggesting some dinosaurs did have them. However, these finds were usually smaller dinosaurs such as Microraptor zhaoianus.

49 Foot Python

At almost half a ton, this 49 foot python eats 3-4 full grown canines a month.

According to the video the snake had been captured by a local tribe and was revered as a leader. Hundreds now flock to see the snake at the zoo. I gotta tell you, there is no damn way you'd get me in that cage with that snake.

Thanks to Guy Montag for the link.

The Further Economic (Mis)Adventures of Kevin

Kevin has decided that raising the minimum wage is a great way to help the working poor. What does he base this on? The fact that large increases in the past have not had "ill-effects" what ever the Hell an ill effect is. Did the economy tank? No, probably not. Was there a plague of locust? Not that I've heard. Did cats start lying with dogs? Again, not that I've heard. But lets forget about this silly problem with a vague and completely subjective and undefined notion of what "ill effects" are.

Lets turn now to the Bureau of Labor Statistics, and look at some of their research. Here is the abstract (with emphasis added):

Disemployment effects and weak links among low wages, low income, and poverty have been at the center of the debate about the poverty-reducing effect of a higher minimum wage. Recent studies do not settle the debate. Charles Brown, Andrew Kohen, and Curtis L. Gilroy concluded that disemployment effects are small.¹ But Edward M. Gramlich and Terrence Kelly showed that most low-wage workers are not poor.² Several recent studies, using a variety of methods and data sources, confirm this result.³ Most economists analyzing the subject conclude from this evidence that a higher minimum wage is a poor tool for fighting poverty. But economists who specialize in studies of the poor concentrate on changes that have occurred while the minimum wage remained at its 1981 level. For example, between 1981 and 1986, the poverty line for a family of three increased from $7,250 to $8,737 (20.5 percent) and the number of poor workers increased from 8.6 to 8.9 million (2.7 percent).⁴ Anxious for ways to reduce working poverty that do not affect the Federal budget, poverty specialists still favor a higher minimum wage.⁵

Analysts on both sides of this debate neglect important barriers to reducing poverty through raising the minimum wage. These barriers are related to (1) the provisions of the minimum wage law, (2) the characteristics of low-wage workers, and (3) the characteristics of poor families with low-wage workers. (Here is a link to the full study.)

Now reading the paper initally leads one to believe that the data indicates that a higher minimum wage can reduce poverty amongst the working poor. However, the author offers a note of caution, the results are dependent on the covereage,

In particular, economists can only guess about the size of the disemployment effect for low-wage adult workers, who make the largest contribution to family income. If disemployment effects for low-wage adults is the same as for teenagers, complete coverage or a much higher minimum would have small poverty-reducing effects.

Okay so that is an old paper. 1990 sheesh! There has to be something earlier? Yes, there is. Does the Minimum Wage Affect Welfare Caseloads? The answer appears to be yes, and in a positive direction (i.e., an increase in the minimum wage increases the number of welfare cases).

Our empirical results indicate that, once state trends and a variety of other factors are accounted for, the elasticity of the welfare caseload with respect to the minimum wage is between 0.1 and 0.2. In other words, a 35 percent increase in the minimum wage (like the increase recently implemented in California) could lead to a 3 to 7 percent increase in the size of the welfare caseload, holding all else equal.

Whoops. Is that an "ill effect"? I suppose if you're not one of the 3-7% the 35% pay increase is a great thing. The article further states,

These results suggest that minimum wages are not an efficient means of improving the financial independence of low-skilled single mothers, since the wage gains experienced by those who keep their jobs are counteracted by an increase in the welfare rolls. Policies like the Earned Income Tax Credit (EITC), which increases wages through the tax code without depressing the demand for low-skill labor, are likely to be more effective in facilitating the transition from welfare to work.

Well, that isn't good now is it? But wait, that isn't all there is.

Do Minimum Wage Increases Lower the Probability that Low-Skilled Workers Will Receive Fringe Benefits? Well the answer appears to be yes, and not in a good way. Increases in the minimum wage tend to reduce the probability that workers will get fringe benefits such as health insurance, sick leave, retirement benefits, etc. How big is the effect? Well here are some of the findings from the paper,

For example, a $0.50 increase in the minimum wage from its 1999 level is estimated to decrease pension eligibility of less educated workers by 6.8 points and their health insurance eligibility by 3.9 points.

Is that a net benefit or an "ill effect"? Guess depends on which type of minimum wage worker you are, the one who doesn't get a pension or health insurance or not.

Of course, this paper that looks at the same issue finds no relationship. Unfortunately it is an NBER paper so it'll cost money to get a copy. This paper (also from NBER) suggests the better policy tool here is the Earned Income Tax Credit. And this NBER paper doesn't speak well of the minimum wage as a policy tool to help reduce poverty, I'll reproduce the entire abstract here,

The primary goal of a national minimum wage floor is to raise the incomes of poor or near-poor families with members in the work force. However, estimates of employment effects of minimum wages tell us little about whether minimum wages are can achieve this goal; even if the disemployment effects of minimum wages are modest, minimum wage increases could result in net income losses for poor families. We present evidence on the effects of minimum wages on family incomes from matched March CPS surveys, focusing on the effectiveness of minimum wages in reducing poverty. The results show that over a one-to-two year period, minimum wages increase both the probability that poor families escape poverty and the probability that previously non-poor families fall into poverty. The estimated increase in the number of non-poor families that fall into poverty is larger than the estimated increase in the number of poor families that escape poverty, though this difference is not statistically significant. We also find that minimum wages tend to boost the incomes of poor families that remain below the poverty line. The evidence indicates that in the wake of minimum wage increases, some families gain and others lose. On net, the various tradeoffs created by minimum wage increases more closely resemble income redistribution among low-income families than income redistribution from high- to low-income families. Given these findings it is difficult to make a distributional or equity argument for minimum wages.

Income redistribution among low-income families. Gee, is that and "ill effect" and is it "toxic"?

I wonder what the next adventure in economics will be about.

Update: VodkaPundit raises a good point. Since we don't know what constitutes an "ill-effect", why not just raise the damn minimum wage to $100/hour? Why not indeed?

Update II: In the comments to Kevin's post one of his readers raises the same objection and Kevin's response was,

Doc Memory: Don't be ridiculous. Suggesting that the minimum wage should be increased to $7 does not mean that it should be increased to $100. Try again.

But Doc Memory's response is perfect. Sure $100 is absurd, but it brings to light in much starker terms the problem. That is the problems with a $100/hour minimum wage are the same problems with a $7 minimum wage; it is just that the problems are smaller with the $7/hour minimum wage, or as Doc Memory put it,

Kevin: $100/hr is admittedly argumentum ad absurdem, but the absurdity is the point: a $7 minimum wage is a bad idea for the exact same reasons as a $100 minimum wage; we just don't see it as easily because the smaller number "seems" less absurd. But the inflationary and ethical fallout is exactly the same.

I think this highlights the problem I noted with the wage subsidy (link). That is, even though the Earned Income Tax Credit looks to be the better policy for lifting people out of poverty there is still strong opposition to eliminating the minimum wage and going with the most effective policy alone. Thus, when a new policy is spun as an "alternative" that can "replace" and existing program, don't believe it. Its bullshit. Oh, the people saying it is a replacement may believe it and be sincere, but in the end the political process wont provide that outcome. Junk the less effective program first then I'll be willing to consider the replacement, until that time forget it.

High Speed Car Chase

File this one under extreme criminal stupidity.

On the morning radio traffic report, the Eye in the Sky helicopter jockeys were warning motorists about a high speed car chase on the freeway.

Now I realize that high speed car chases are a rather frequent occurrance in Steve's neck of the woods, but it's an oddity here in fly-over country.

Anyway, the 8:39 traffic report had the suspects turning off the highway and onto Levy Road next to the Missouri River downtown. The 8:49 report said that the chase was over and the 8:59 report said that Kansas City Fire Department's Water Rescue team had the suspects in custody. The newsdesk anchors asked the reporter why the Fire Department was involved. The reporter said, completely seriously, that the suspects had tried to drive across the river. (For the geographically challenged, the Muddy Mo is several hundred feet across at Kansas City.) Said the reporter: "They weren't even in a Hummer, it was just a Suburban."

The anchors had to go to a commercial break because they were laughing so hard.

The Many Faces of Howard Dean

A new cartoon by Cox & Forkum.

I also like this one from November on the Prescrption Drug Program.

The Woo-Woo Brigade

Looks like somebody is about to jump on the "They had Saddam for months and were just waiting for the right time to catch him" conspiracy. Wonder who this member of the Woo-Woo Brigade is?

Libya's Nuke Program

Well, well, well. It looks like Libya's nuclear program was in the early stages of development.

U.N. investigators found centrifuges and other equipment that could be used to produce a nuclear device, the head of the U.N. nuclear watchdog agency said yesterday.

I'm sure the spin on this will be that Gadhafi was just about to turn over a new leaf anyways. Clearly this cannot be linked to the war in Iraq, and it is totally obviuos it has nothing to do with Saddam being captured.

U.N. investigators found centrifuges and other equipment that could be used to produce a nuclear device, the head of the U.N. nuclear watchdog agency said yesterday.

I also found this interesting,

In the veteran inspector's eyes, the findings highlighted the inadequacy of international inspections. IAEA teams have been visiting Libya for years and knew nothing about the equipment they saw Sunday. One location stood in urban neighborhoods along dirt alleys.

Let me see, the inspections are inadequate. Locations that had been there for years and inspectors were completely unaware of. Hmmmm.

"Low-level programs like this are difficult to detect. They can be run in a garage," he said. "You would have to be lucky or have very good intelligence to run across it. We're doing a lot of soul searching."

Lots of "soul searching"?!?! My, my.

Lord of the Rings

If you've seen any of the Lord of the Rings movie here is a question for you?

Do you think that the Uruk-hai, the big (super) orcs that were crossbreed with men, looked like Navtive Americans?

I personally thought they looked like a vile and nasty species of creature. Apparently Lloyd Hart thinks they look like Native Americans (here is Lloyd's website dadapop.com).

Being part of a European family that has lived on the North American continent for 400 years I've been lucky enough to gain perspective that when you create an evil character (Uruk-hai) that resembles native Americans as they have done in the Lord of the Rings films a great deal of cultural and racial alienation will occur.

Can you imagine how people of skin color, of Persian, Arab and East Asian ethnic background feel when they come out of these films where all the heroes are white and all the "evil doers" are of dark skin.

Actually this is not quite accurate. Sauron himself was a Maiar like Gandalf and Sauruman (as well as Radigast--ommitted from the movie). He was one of Aule's people who was a one of the Valar. Now maybe Sauron was black, but he could very well have been as white as Gandalf.

Another "evil doer" who was not a person of color was the Mouth of Sauron. The Mouth of Sauron was a "Black Numenorean" (uh-oh did I use the word 'black'?), and was probably as white as Aragorn at least initially. Also three of the Nazgul were Numernoreans as well, including the Lord of the Nazgul, the Witch-King of Angmar. Also, Grima Wormtongue, the advisor to King Theoden and Sauruman's spy in Edoras, was white. So not all the "evil doers" were of dark skin. In fact, the worst of the "evil doers" initially started out white. Oh...wait. There is probably an equal opportunity violation thing or something here as well. We actually need more high ranking bad guys with dark skin.

Thanks to InstaPundit for the link.

Mad Cow! Mad Cow!!

Check out the cartoon, it is quite funny.

(Link & Title via Michael Demmons)

Wage Subsidies

Aziz Poonawalla wonders why a wage subsidy program that brings all workers up to a minimum level of pay (say $10/hour) isn't more popular. The blog post that Aziz links too mentions Edmund Phelps and his wage subsidy program. Here is how McGrew describes the program,

Suppose you want every worker to be paid at least $10/hour. A minimum wage would just destroy jobs for people with productivity less than $10/hour. Wage subsidies won't, because the government pays the difference between the market wage and $10/hour.

The idea of a wage subsidy is that if an employer pays a worker a $5/hour salary, the government will give that employer a $5/hour subsidy which it would then pass on to the worker. The worker ends up making $10/hour, but the employer pays only $5/hour, so that it's still worth it to the employer to hire the worker and the job is not destroyed. The wage subsidies are phased out on a sliding scale, so that there's no cut-off effects.

Here is a graph that shows how the program would work.

The wage subsidy will increase the wage level which will result in an increase in supply (i.e., a move along the supply curve) and the decrease in the per unit cost of employment at all wage levels will shift the demand for labor to the right. The graph above assumes that there are no frictions in the economy and that the increase in demand is sufficient to offset the increase in supply. If this is not the case then there would be an increase in unemployment. That is, there would be more people seeking employment than there are jobs available.

The wage subsidy program is an attractive alternative to simply giving people a welfare check. Some of the administration costs are reduced in that firms will handle a portion of the administration by doing what they normally do (i.e., hire people to make a profit). Instead of having the stigma of welfare people will be working. Also, working people will be producing goods and services which is also socially beneficial. Further, since this is being done through for profit firms the goods and services produced will be socially more desirable than simply having people sitting around watching Jerry Springer.

Now my complaint with such a system is that it is unlikely to supplant the current welfare system. Even if there was a way to get this system put into place it would not replace the current welfare system. That is both systems would be in place and for some people, sitting at home watchng Jerry Springer and collecting the welfare check would be the preferred outcome. One must also remember that leisure time is considered a positive good (i.e., something we generally want more of). Thus, for some they would not go back to work even with the wage subsidy.

Another problem is the one that numerous people have raised. Namely that Democracy will only exist until people realze they can vote themselves pay raises from the public treasurey. I'd want to know what mechanism there is to prevent such abuse. Suppose you have an indiviudal making $25/hour in wages and benefits. Naturally a program like this funded by an increase in his taxes would be opposed. However, if the minimal wage were set to say, $30/hour in wages and benefits then the individual would now support it (assuming that the individual is simply a utility maximizer). So part of the problem is that this program would have to be connected to a complete and total dismantling of the current transfer payment welfare system we have now. Otherwise it will run into inordinate political opposition, or to overcome that political opposition would require a very high wage rate.

An Example of the Principle-Agent Problem

Micha Ghertner at Catallarchy has a great post that looks at the Principle-Agent problem I have discussed before.

Micha is quite correct to note that whatever system that is to replace the market has to also solve the Principle-Agent problem. If some sort of socialist, communist, or some other system is put into place to replace the market, then it will also have to address this problem.

Carnival of the Capitalists

This is the last entry for 2003 for the Carnival of the Capitalists. Sean has a large number of links to good posts, so go check them out.

Bad News From Iraq

According the Washinton Post the U.S. is scaling back drastically on several key reform efforts. Initially there was a strong desire to privatize state-owned businesses. This is now being scrapped. One concern is that by privatizing the businesses, there would be large layoffs which could spark labor unrest. So instead the plan is to leave the state-owned businesses as state owned businesses.

The problem is that this too is bad for Iraq's economy. Privatization would undoubtedly result in layoffs. State-owned businesses do not respond to market forces, hence there is a tendency for them to become bloated and inefficient. I would suspect this is especially true in a country like Iraq where a dictator could use such benefits to help garner support. So there would be large layoffs. Plus there would be changes in output, increases, decreases and sometimes a plant simply shutting down altogether. So the transition would undoubtedly be difficult.

However, keeping state-owned businesses going will also be bad for the economy as well. As noted state-owned businesses do not respond to market forces, but instead political forces. So the resources will be used inefficiently (in an economic sense).

Another issue that is going by the wayside is the disbanding of various militia groups. This move would seem to increase tremendously the outcome of Iraq's future. Will Iraq disolve into years of civil war? Will there be three new countries to emerge. And if it is the latter what will Turkey do about an independent Kurdish state? Will the group with the best equipped, trained, and lead militias seize control of the whole country and will we be back to square one with a dictator that might end up pursuing WMD programs? What about Iran and the Shiites in Iraq? Will they want to go the same route as Iran?

Another issue to fall to practicality is the drafting of a Constitution. Initially the plan was for a Constitution to be drafted and put into place before the U.S. and Coalition left. Also the plans to replace the food handouts that formed the basis of Hussein's welfare system.

While the overall attitude has been fairly happy with this amongst the governing council, there is a contingent that fears that if the Occupation Authority does not address this issue, the new government in Iraq will not want to take the risks of addressing them either.

By handing over sovereignty first, the administration has ceded veto power over the final document and is forcing Iraqis to confront a raft of contentious issues, from Kurdish demands for autonomy to Shiite demands for Islamic law, without a referee. In September, Bremer warned that electing a government without a constitution "invites confusion and eventual abuse."

I don't know, but all of this looks pretty bad to me. This quote pretty much sums it up,

"We're requiring a country that lacks a democratic tradition and the institutions of civil society, but has plenty of ethnic and religious tension, to sort out a lot of very challenging things," the senior American official said. "It's not ideal, but what choice do we have? Nobody wants us to extend our stay here."

Unemployment Insurance Claims

Unemployment insurance claims continue to remain rather low for this time of year. Even during boom years it has not been unusual for new unemployment claims in December to reach as high as 700,000 (IIRC).

Reading Comprehension Problems, Bad Writing or Both?

Mark Kleiman in a post about a possible campaign issue seems to egregiously misuse the facts of the article he links too.

Kleiman claims that there have been "2200 workplace deaths due to willful violations of safety laws by employers". The problem is that in reading the article that is actually the number of workplace deaths (or is it--keep reading). The article says nothing about that number being due solely to "willful violation of safety laws". Here are the relevant graphs,

The Times's examination — based on a computer analysis of two decades of OSHA inspection data, as well as hundreds of interviews and thousands of government records — is the first systematic accounting of how this nation confronts employers who kill workers by deliberately violating workplace safety laws. It identified a total of 2,197 deaths, at companies large and small, from international corporations like Shell Oil to family-owned plumbing and painting contractors in quiet corners of America.

On the broadest level, it revealed the degree to which companies whose willful acts kill workers face lighter sanctions than those who deliberately break environmental or financial laws.

For those 2,197 deaths, employers faced $106 million in civil OSHA fines and jail sentences totaling less than 30 years, The Times found. Twenty of those years were from one case, a chicken-plant fire in North Carolina that killed 25 workers in 1991.

Basically a workplace death does not have to be the result of bad behavior of the employer. Further, the article has two other numbers,

• 1,798, and
• 1,242.

The first number is the number of investigations of the 2,197 workplace deaths. The second number is that number which OSHA deemed to be the result of willful safety violations. This suggests that about 70% of workplace deaths are the result of willful violations of safety regulations.

Now the article does point out that there has a been an increasing tendency for OSHA to downgrade the cause of workplace deaths to unclassified and that 70% may very well be too low. However, it is tough to tell if this is indeed the case. The author of the article does not inform us if any of the 1,242 also count the 202 that have been "downgraded" during the 1990's. So we don't really know for certainty if the ratio is 70% or higher. Still given this serious potential for downwards bias it is also dubious that the actual ratio is 100%.

Another source for confusion could be this passage,

With more than 5,000 deaths on the job each year, safety experts and some members of Congress have long argued that hundreds of lives could be saved if employers faced a credible threat of prosecution.

The 5,000 number and the 2,197 would suggest, possibly, a ratio of about 44% of deaths on the job being the result of willful violation of saftey standards. But who knows. I went to the OSHA website to try and find a definition for "workplace death", and the search yielded no results for that specific phrase. So it is tough to tell if the author's "workplace death" is the same as a death on the job (I sincerely hope this article is never considered for a Pulitzer). A simple chart could have gone a long ways to removing much of this uncertainty. It does seem clear though that there is indeed a serious problem with the willful violation of workplace safety standards. Further, there is a still a serious problem with decent reporting at the newspaper of record.

Update: In comments Mark Kleiman points out that the 5,000 on the job deaths is per year. So even if we assume the 2,197 workplace deaths are due to wilful neglect it suggests a rate of about 2% per year. This strikes me as a bit of a non-issue. Sure its not a good thing that 2,200 people died, but it strikes me that overall OSHA is doing its job. In 1998 there were 2,568 children who died in automobile accidents. I bet if we took a look at those we'd find a driver at fault, i.e. negligent, and in some cases willfully so (drunk, speeding, not maintaining the vehicle, etc.). Where is the outrage?

Obtaining a lower rate of workplace deaths could be very costly. The firms/people being charged criminally would fight back. Thus, there would definitely be an increase use of resources. As a society we make these kinds of trade offs all the time. This is why the speed limit is not 3 mph for example. Sure, you could probably save the lives of those 2,600 kids, but it'd also take you half the day to drive across town.

More Incentive Theory

This year for Christmas one of my gifts was The Theory of Incentives: The Principal Agent Model. The book is a must buy for anybody who is seriously interested in economics. The principal agent model takes a look inside some of the "black boxes" in economics. For example, for decades is has been assumed that firms maximize profits. This assumption is somewhat unrealistic if you apply to the employees in the firm the same assumptions that economists apply to consumers: that they are utility maximizers subject to a budget constraint and that there is information the employee has that the employer does not. A common example is that the employee might know how much effort is needed to do a job and that effort is unobservable. Once you have this hidden information or hidden action along with the idea that the employee/agent is a utility maximizer then the firm is not maximizing profits.

The profit maximization hypothesis is what is called an unconstrained optimization problem. The inclusion of the agent as a utility maximizer and asymmetric information introduces two constraints into the problem faced by the firm (the firm/employer is typically called the principal) transforming the problem into one of constrained optimization¹. These two constraints are the participation and incentive compatibility constraints. The participation constraint basically ensures that the agent will participate in the market. The incentive compatibility constraint is a bit more complicated and they are designed to keep the agent from trying to pass himself off as something he is not. Typically this problem is initially looked at in a very simple environment. For example, there are two types of agents, a low cost agent and a high cost agent. You do not want to structure your wage contract such that the low cost agent tries to pass himself off as a high cost agent or the other way around.

Given these two constraints this means that there is usually a rent that is obtained by the agent. This rent is called an information rent, and it is a result of satisfying the above constraints. The information rent is essentially part of the firms profits. This solution is a second best solution and it means that firms are no longer simple profit maximizers. However, firms are incentive constrained profit maximizers. Further, this inefficiency does not require public policy intervention based solely on the grounds of improving efficiency. Any intervention on the part of a public policy planner would face exactly the same informational constraints that the principal faces, and there is little or no reason to believe that a public policy maker would do a better job than the principal.

Of course, this does not mean therea are not other reasons for public policy intervention. One such reason might be redistribution. However, redistribution also has its share of incentive problems as well (even if one assumes the public policy maker is benevolent--i.e., is not himself a utility maximizer as well). I don't think anybody can consider themselves serious about economics without having this book on their shelf.
_____
¹I hope it is pretty obvious that an unconstrained optimization problem does not have to give the same answer as a constrained optimization problem.

Dean's Socialism

I want to discuss a bit more the socialism that is in Dean's new speech about the New Social Contract. Kevin Brancato at Truck & Barter noted a very interesting part of the speech,

It is time for us to spell out a new social contract a fundamental renegotiation of the rights and responsibilities of the critical actors in the American economy: families, corporations and government.--emphasis added

Notice that for Dean the "critical actors" are families, corporations, and the government. What is missing is the individual. The rights spelled out in the Bill of Rights in the U.S. Constitution (our current social contract, IMO), are individual rights.

Amendment I

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

This amendment spells out several individual rights here. Each individual has the right to exercise religion (or not) as they see fit. Similarly for speech and the press. Each person can pretty much speak their mind, assembly in protest and petition the government.

When you read Dean's speech you see two things.

1. Many of the "rights" Dean discusses are for families.
2. Many of the "rights" are positive vs. negative rights.

Now, the family is basically a collective unit--i.e., it is a collection of people. Starting with the family for determining rights means one is not taking an individualistic approach to rights.

The fact that Dean is talking about positive rights is troubling to me. The bill of rights are primarily negative rights. The individual's right to free speech is not to be infringed upon (save in specific cases). That is it prevents others form prohibiting one from expressing their views in public. It does not give one the right to have access to the pages of a newspaper to print one's views (i.e., free ride of the hard work of those who own and work for the newspaper).

Granting people the right to health care is a positive right. It basically gives a family a claim resources that another person owns. For example, the doctor's specialized knowledge is the doctor's property. By giving a family a right to health care there is to some extent a claim against that doctor's property. It is like giving a person the right to take over part of the newspaper to print his or her views.

Further, there is the issue of responsibility. What if after granting Bob the right to health care Bob decides to be lazy, get fat and this leads to heart disease and diabetes. By making this decision Bob has increased his claim on health care resources. Does this mean anything for Bob's responsibilities? Does Bob now have a responsibility to keep in shape to avoid heart disease and diabetes so as to not increase his demand for health care (and thereby reduce the ability of others to consume health care resources)? This is where you start to get things like prohibitions on eating fatty foods, drinking sugary drinks like soda, prohibiting smoking, and so forth.

Now some people might think this is good. After all smoking is unhealthy, too much fatty foods can be bad, and so on. A couple of things. People thought this way about alcohol, and the result was Prohibition and a huge crime wave that we are still experiencing (instead of alcohol it is now drugs like heroin, crack cocaine, and other such substances). How far should this "responsibility" issue be taken by the state? What about two people who are genetically inclined to produce children with health defects. Do they and the government have a responsibility to prevent these kinds of things? Will genetic screening for such things a reproduction become mandantory? In other words, how invasive will this responsibility thing become?

The problem basically boils down to this. Once you start reaching into my pocket for money, I might decide to tell you what you can spend it on. If I know you'll be coming back for money if something bad happens, I might want to start making sure you don't engage in risky behavior.

I find this kind of world view troubling. I find it troubling because it removes the cost from the individual to society in general. When you do things like this, you tend to find an increase in the kind of behavior you are trying to address. The next step is to try and control the behavior directly to contain the costs. While this sounds wild eyed think of the legislation in California to remove soft drinks and sugary snacks from public schools. The proposed tax on sodas to help fight obesity. Then there were the lawsuits against fast food vendors. The ever rising tobacco taxes. Helmet safty laws, seat belt safty laws. Try buying an electronic tool and count the number of warnings on it the package, instructions, and the tool itself. Then look at how many are stupid.

Clark on Ghadafy

Link via The Corner.

Continuing his decline into woo-wooism, Gen. Wesley Clark Credits Clinton for Ghadafy Breakthrough

Democratic presidential hopeful Gen. Wesley Clark said Sunday that his old boss Bill Clinton - not President Bush - deserved credit for forcing Libyan dictator Moammar Gadhafi to abandon his weapons of mass destruction programs, even though Gadhafi's turnaround came nearly three years after Clinton left office.

"It's a program of squeezing Libya that's gone on for more than a decade," Clark told a Derry, N.H., audience, according to the Concord Monitor. "The Clinton administration was very much involved with this."

Actually, the sanctions have been in place for more than 20 years, so the credit should go to Reagan, right General? "Yeah but, yeah but, Clinton continued the sanctions, so there." No, it couldn't have been the fact that Ghadafy saw the hand writing on the wall after Iraq, could it?

A Cornerite reader points out the glaring illogic:

So let me get this straight...according to Clark, Clinton is responsible for an event (Libya) that happens 3 years into the Bush presidency, since he laid the groundwork for it throughout *his* 8 year presidency...BUT he is *not* responsible for an event (9/11) that happens 8 months into the Bush presidency, although he laid the groundwork for it throughout his 8 year presidency.

How did this bozo become a Rhodes Scholar?

As Glenn Reynolds would say, Indeed.

Dean's Military Deception

Looks like Dean got caught trying to pass a civilian family member off as a member of the Armed Services. In responding to a question about who was "his closest living relative in the armed services is....?" Dean responded that his brother is listed as MIA/POW in Laos.

The only problem is that Charlie Dean was never in the military and the newspaper accounts of his disappearance in Laos refer to him as a tourist. Ooops.

Link via Henry Hanks.

Update: Robin Roberts also points to this link too from last month. Funny, I don't get the impression the Daily Misled will cover this one.

Update II: In comments kismet has raised the speculation that Charlie Dean was actually working for the CIA. This New York Post article has some information on that.

They were accused of spying, and Howard Dean recently acknowledged in his book that his parents also "believed [that Charlie was working for the CIA]."

Intelligence and defense officials say there are no records that Charlie Dean ever worked for them, and Howard Dean says he doesn't believe it either.

Howard Dean himself has had to deal with questions about his lack of military service during Vietnam. A bad back gave Dean a medical excuse to stay out of the war, but after getting his deferment, he moved to Aspen, Colo., and skied for a year.

Given that Gov. Dr. Dean doesn't believe this it doesn't seem like a good defense.

Dean's New Socialist Contract

Well, okay it is actually a New Social Contract, but it sure does smack of socialism. Having trouble with any of the following:

• spending time with your child(ren),
• health insurance,
• pension,
• child care, or
• college tuition?

Well don't worry Gov. Dr. Dean has a nifty little government program for you. It'll make you feel like government gives a damn about your problems. Of course not satisfied with offering such a Social(ist) Contract, Gov. Dr. Dean has to blatantly lie about recent events,

Under this administration, Enron took advantage of utility deregulation to rip off California before ripping off its employees and shareholders. Mutual fund companies are cheating their investors; mortgage and credit schemes are putting families deeper in debt; worker safety standards are being lowered.

While Bush handled the energy crisis badly so did his predecessor. The legislation that deregulated California was supported by both Republicans and Democrats in the the State Legislature. To protray this as solely a failure of the Bush Administration is a blatant outright lie. Howard Dean is a liar.

Taxes are what we pay to be Americans to live in a democracy, to have opportunity, and to use the vast resources of America the highways, the schools, the national parks, the internet, the medical centers and scientific breakthroughs of government research.

The above isn't so bad, it is all the other crap that Dean wants to spend money on. College tuition, child care, health care, etc. are all private goods (well okay, a college education is more like a club good subject to congestion) and the market can provide such goods. I don't mind taxes/government provision of public goods. However, government provision of a private good results in distortions that do things like raise the prices for those who are not subsidized, raise taxes further, and in general impose economic inefficiencies.

Not paying your fair share is equivalent to turning your back on being an American.

Well, well, well. Now who is calling into question one's patriotism?

And that's what American companies that move to offshore shelters are doing. They're avoiding $70 billion a year in taxes enough money to bring a real tax cut to every family.

Oh, its only those nasty corporations. But wait, who works in and runs those corporations? People, so ultimately Dean is accusing some people of not being "American", of turning their back on what it means to be American. Nice.

Our government is the guarantor of the future of America. It is the repository of our trust, and the ultimate keeper of the promise of America.

You know I find this vaguely disturbing. I prefer to think of it the way Abraham Lincoln thought of it, "...a government of the people, by the people, and for the people." The way Dean envisions it government is something seperate, above, and better than the people. It is the State that shall keep America America, not the people.

If our government is to be there in the future, if it is to "secure the blessings of liberty to ourselves and our posterity", we must be responsible stewards, not profligate spenders.

Maybe Gov. Dr. Dean should read the entire preamble and not just some portion of it.

We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

Yes, we the people are the fundamental unit, not the government. The idea is that what the people give they can take away. Government is not the important entity here, but the people. Gov. Dr. Dean on the other hand seems to have mixed the two up. It is government that is important, and people who are subservient to the needs of government. For further evidence supporting this viewpoint there is this from the Contract Gov. Dr. Dean is offering,

A refundable tax credit will help lower-income people afford the premiums. It's health care that stays with you and goes with you, whether you work or not.

Sounds great, but previous research indicates that simply giving people more money wont cut; unless you give them alot of money. You see, people have wants and needs besides just health care. People who actually have access to employer provided health care sometimes turn it down because they have expenses that they consider a higher priority. So for the tax credit to work it either has to be a budget buster, or you have to mandate that the tax credit only goes towards health care (i.e., you don't get it if you spend it on something else). In other words, Dean's view is that he knows what is best for people so he'll provide what he thinks they need. Further, it is quite possible he is doing this simply for political gain which is even worse, IMO. This implies that Dean knows this plan is not what people would prefer, but he is going to go ahead with it anyways simply for his own benefit.

When you get right down to it, none of the government programs are sacrosanct. Not even Social Security or Medicare. If the will of the people is ultimately that they should go, that is, according to the founders, what should happen.

GDP for Third Quarter: Final

The final number for third quarter GDP is 8.2% and the final number for the second quarter is 3.1%.

The GDP estimates released today are based on more complete source data than were available for the preliminary estimates issued last month. In the preliminary estimates, the increase in real GDP was also 8.2 percent (see "Revisions" on page 3).

Yes, I know according to some this is actually bad economic news.

Opposition to Gay Marriage Rises

CBS has a new poll out showing an increase in opposition to legalizing gay marriage.

Some 61 percent of respondents in a CBS News/New York Times poll said they were against gay marriage, up from 55 percent in July, and only 34 percent said they favor gay marriage, down from 40 percent five months ago.

The public has reversed itself on the overall question of same-sex relations. Half now think homosexual relations between consenting adults should not be legal -- a reversal of opinion from the summer, when a majority of Americans thought they should be legal.

More than half now favor an amendment to the U.S. Constitution defining marriage as only between a man and a woman.

The linked article gives a breakdown of the responses in several categories.

One thing that seems to be missing from this poll (at least I can't find it) is a question like "How important is this issue to you" or "How likely is this issue to affect the way you vote."

I've read several pundits who say that this could be a big issue in the 2004 election. It reminds me of the flap about a decade ago over an anti-flag burning amendment. IIRC, large majorities of Americans, when asked, supported an amendment to protect the flag from desecration. Politicians and commentators made a big deal out of it, but in the end nothing happened, because most people didn't give it much priority.

The chattering classes may try to make gay marriage into a Big Deal (it'll make for a more interesting candidate debate next fall than something jejune like drilling in ANWR), but in the end, I think most people's votes will be decided on issues like security and the economy than whether Kevin and Danny should be able to marry.

Gadhafi Says Invasion of Iraq Played a Role

Looks like Ol' Leatherface was indeed influenced by the invasion of Iraq.

Asked about his decision, Gadhafi acknowledged that the Iraq war may have influenced him, but he insisted he wanted to focus on the "positive."

He said the world is a changed place in which his country can feel safe without weapons of mass destruction.

I wonder how Gov. Dr. Dean and his team will spin this one.

Carnival of the Capitalists

Is up at Bejus Pundit so check it out. There are quite a few links there to posts that I'll be reading, so check it out.

Income Inequality: Why Measure/Study It

One of the themes of my posts on income inequality has been to try and get an answer from those who do blog about income inequality to give a reason as to why they fret about it so. To date, the results have been dismal.

I have had responses along the following lines:

• Extreme equality and inequality of income are bad for growth: look at Africa.
• This is a personal issue--i.e., the people who think income inequality is too high don't like it based on their personal view of what society should be like.

I find both of these severely lacking in that neither explains why income inequality is "toxic" for a democracy. So, given this rather crappy showing I'll do their homework for them.

In economics there is a result known as the Second Fundamental Welfare Theorem. This theorem holds that every pareto-optimal allocation can be achieved as a competitive equilibrium after a suitable redistribution of initial endowments. The problem is the "suitable redistribution of initial endowments" part of the theorem. This redistribution must be done in lump sum fashion. However, most people wont stand for a lump sum system of taxes and transfers ("Hi, I'm from the government I'm here to take $10,000 that we need to give to Bob"). Further, how do you deal with endowments that are not income based, but will affect your income (suppose you are a genius at something that will earn you a large salary--e.g., sports, music, acting, business, etc.)? Another problem is that the other assumptions of the Second Fundamental Welfare Theorem don't hold. We have informational asymmetries and imperfections; we have externalities and public goods. So all of these issues thrust us into the world of the Second Best. One of the general results due to research on Second Best outcomes is that equity and efficiency can no longer be treated separately unless you have access to lump sum taxes and transfers in your policy tool box. Since these tools are not available all that is left are those tools which result in additional inefficiencies known as deadweight loss. So the reason why we study income inequality is because we live in a world of the Second Best. We aren't looking for the best possible outcome, but instead the best feasible (i.e., attainable) outcome.

So this is why income inequality (or more broadly equity) is measured and studied. This still doesn't answer the question of what are dangerous or toxic levels of inequality. There are several ways to look at this. One is from the perspective of economic growth. Does income inequality impact on economic growth? The answer to this one is not obvious. It has been suggested that extreme values in either direction is bad. Okay, I can agree with this as it seems somewhat intuitive. Let’s start with perfect equality.

With perfect equality everybody will have the same income. So why work? I'll get the same income if I work or not. So, thanks for the check, I'm off to play video games, take naps, and read. I can see it at the other end of the spectrum where a single person or a very small number own practically everything. Such a society must have a deck stacked heavily against just about everybody. Thanks, I'll just wallow in my misery (i.e., no work). So I guess we are sort of left with a Laffer curve for income inequality and work effort: we know what the end points are, but we have no idea what the rest of the curve looks like. Further, research on this is inconclusive (here, here, and here) in the sense that simply looking at inequality isn't necessarily going to tell you when it is a problem.

If we look at other countries like those in Africa we find that there are countries with both more and less income inequality than the U.S. The problem is that you have countries like Egypt which beat not only the U.S., but many European countries when it comes to income inequality. So the question now is what is an extreme value and does it vary from country to country? However, we get no answer.

The other explanation is probably the best one in the sense that who can argue with what another person thinks is ideal? So they'd like it if income was distributed more evenly. That's fine, but it still leaves one wondering why income inequality is toxic. I have lots of personal preferences for what I'd like society to look like. Yet, I don't see how the failure to fulfill these preferences is toxic. So while this is a valid answer it is sort of a Red Herring, or a shifting of goal posts. It moves from a statement about society as a whole to one of personal preference.

Resumption of Normal Blogging

Well the birthday party went well. We had it at the movie theater and after pizza and cake went to go watch Lord of the Rings: Return of the King. I enjoyed the movie immensly as did the boy (and his friends...and their parents, and owww my wallet).

Clark on Hardball

Link via Andrew Sullivan.

Here is a transcript of Wesley Clark's appearance on Hardball with Chris Matthews.

UNIDENTIFIED MALE: General Clark, you’ve criticized Bush for his unilateral actions in dealing with Iraq.
CLARK: Right.
UNIDENTIFIED MALE: However, if you were in Bush’s shoes right now, what would you be doing differently to rebuild those international bridges you believe have been compromised?
CLARK: Well, if I were president right now, I would be doing things that George Bush can’t do right now, because he’s already compromised those international bridges. I would go to Europe and I would build a new Atlantic charter. I would say to the Europeans, you know, we’ve had our differences over the years, but we need you. The real foundation for peace and stability in the world is the transatlantic alliance. And I would say to the Europeans, I pledge to you as the American president that we’ll consult with you first. You get the right of first refusal on the security concerns that we have. We’ll bring you in.

Sullivan responds with:

The right of first refusal. I'm with Clark on consultation and on building the U.S. alliance in Europe. But first refusal? That's tantamount to Howard Dean's view that we should seek the "permission" of the United Nations before military action.

I think Sullivan is incorrect here. "Right of first refusal" is not the same as asking for permission.

Say you're doing some home remodeling. If you have a right of first refusal agreement with Contractor X, you go to him and offer him the work before seeking bids from other contractors. Only if he declines the work do you go to Contractors W, Y, and Z.

Giving "the Europeans" (we'll skip over the fact that it's silly to refer to Europeans as a monolithic bloc) right of first refusal simply means asking them first to participate. If they say "no", then we move on to asking others.

Bush gave France, et. al., multiple chances to join in. So I guess the only difference is that Clark would wait for "non" before asking the Italians, Spanish, Australians, etc.

Of course, Sullivan could be right, and Clark is just using "right of first refusal" to obscure what he really meant -- "permission."

Further into the interview, Clark puts out yet another version of his "I was called on 9/12 and asked to tie Iraq to 9/11". He describes being in the Pentagon a couple of weeks after 9/11

And so I went in to see Secretary Rumsfeld, and Paul Wolfowitz was there. And I went downstairs, and a guy said, sir, come in here. And I said, I don’t want to take up your time. He says, no, you need to hear this. He said, have you heard the joke? I said no, I haven’t. What joke? He said “9/11, Saddam Hussein, if he didn’t do it, too bad, he should have.
Because we’re going to get him anyway.”
Of course, it wasn’t a joke. It wasn’t funny. And he didn’t tell it to me to make me laugh.

The only response I can think of is "woo woo".

Light Blogging Today

Due to my son's birthday party. Here are some pictures from a Sea World trip:

This next one is from the zoo (note the albino python behind him).

Krugman on Inequality

Krugman jumps on the income inequality bandwagon. In one part Krugman makes a rather odd comment,

Conservatives often cite studies like a 1992 report by Glenn Hubbard, a Treasury official under the elder Bush who later became chief economic adviser to the younger Bush, that purport to show large numbers of Americans moving from low-wage to high-wage jobs during their working lives. But what these studies measure, as the economist Kevin Murphy put it, is mainly "the guy who works in the college bookstore and has a real job by his early 30s." Serious studies that exclude this sort of pseudo-mobility show that inequality in average incomes over long periods isn't much smaller than inequality in annual incomes.

Wait a second.... Isn't that precisely the thing we are talking about with income mobility? You move from one wage/income level to another? I suppose it is important to know how the move is accomplished, but is it the kind of thing we want to ignore? In fact, isn't it the very thing we want to encourage? Go out, improve your human capital and get a better paying job. Sounds good to me, but apparently not to Krugman.

Very few children of the lower class are making their way to even moderate affluence. This goes along with other studies indicating that rags-to-riches stories have become vanishingly rare, and that the correlation between fathers' and sons' incomes has risen in recent decades. In modern America, it seems, you're quite likely to stay in the social and economic class into which you were born.

I'd like to see what role education plays in this. I'd be willing to bet that those who spend more time and resources towards education of their children tend to have children who do better income wise, than their parents. Further, this is considered to be the computer age. You pretty much have to know how to use a computer these days. Just about every desk in the building I work in has a computer on it. You don't have to know how to program in C++ or SQL or something, but knowing how to use the applications such as Excel, Word, and Access are pretty much essential. The jobs that don't require this are janitorial jobs, jobs in the cafeteria, and building porters.

Further, it is quite clear to me that the majority of the burden for my child's education is my responsibility, not the States. It is my job to make sure he does his homework, that I read to him, encourage him to learn about things that can help him in school (i.e., not parking him in front of Cartoon Network, plugging him into the X-Box, or other such mind numbing things). And the thing is its not easy. When you are tired and want to veg out yourself you have to suck it up and pick up the book to read to him, to tell him to buckle down and finish his homework.

But not with Krugman (who incidentally is childless). Nope, it is the role of not just your local community (it takes a village), but it is the responsibility of the Federal government. The President of the United States is supposed to make sure my child is prepared to compete in the job market in 20 or so years. I don't have to worry, Father State will take care of it for me. What utter bullshit.

Later in the article Krugman contradicts himself,

Meanwhile, on the spending side, you'd cut back on healthcare for the poor, on the quality of public education and on state aid for higher education. This would make it more difficult for people with low incomes to climb out of their difficulties and acquire the education essential to upward mobility in the modern economy.

Hold the phone! We aren't supposed to count these people who have a crap job while getting an education to get a better job. Yet this is quite possibly a future Nobel Prize winner.

Krugman also notes that this trend has been going on for about 20 years. Basically he is lamenting things like the loss of manufacturing jobs. While true, what is remarkable is Krugman's pathological hatred for Bush and his Administration that he blames it on Bush.

Notably this article has impressed Kevin Drum, who in comments notes pithily that this combination of lower mobility and higher income inequality is toxic. Why it is toxic I don't know and Kevin, as usual doesn't explain. It just is and he has Krugman to back him up (never mind that there have been periods in this country where income inequality and mobility have been higher/lower than it is now with no adverse societal consequences--i.e., such as rebellion). Oh well, (sub) par for the course for Kevin (and somebody send Kevin a Thesaurus for Christmas, toxic and odious get old and stale after awhile; how about pestilential, virulent, or even baneful for toxic and repulsive, repugnant and vile for odious?).

Update: Steve Antler has a big post on this too. Scroll down to the last update concerning Jim Glass' update. Looks like Krugman is full of it when he says the bottome 90% experienced a 7% decline in average real income. Looks like that number is complete baloney.

Update II: In comments Kevin Brancato raises some good points about relative income mobility vs. absolute income mobility. Like Kevin (and unlike Krugman) I think both measures are useful. Click on the comments and read Kevin's comments they are good.

New Telescope

NASA has a new telescope that uses infrared and is based in space. The telescope allows astronomers to peer into stellar fields that had been previously obscured by clouds of gas and dust.

"This gives us a powerful new capability that will enable us to see things not seen before and to answer questions we couldn't even ask before. This is a very powerful new tool for astronomy," Michael Werner, an astrophysicist at the Jet Propulsion Laboratory in Pasadena, Calif., said at a news conference. He is the project scientist for the Spitzer Space Telescope, named in honor of the famed astronomer Lyman Spitzer Jr.

Daniel Drezner Drops the Ball

Daniel Drezner, who periodically takes a swing at Bush's foreign policy, has done so again (which isn't a big deal I do it with Bush's huge spending problem). I think he does raise a number of points that should be of concern.

Evidence abounds in support of this process critique. In the past three months every magazine save Car & Driver has performed an autopsy on the prewar planning for the postwar occupation. All of these stories describe fierce conflicts between Defense and State leading to an embargo of information between the two bureaucracies. Even though State Department experts foresaw problems with the Iraqi electricity grid and looting, military planners brushed off or ignored their warnings. The cold war between administration officials and the intelligence community is another example of this problem. At its core, the issue with Bush's "16 little words" in his 2003 State of the Union address was really a debate about who got what intelligence memo when and whether it was actually read.

But Drezner drops the ball with regards to the Defense Deptarment memo barring non-coalition members from recieve contracts and the timing of its release with the push for Iraqi Debt relief.

The latest process screw-up was last week's decision to bar allies outside the coalition of the willing in Iraq from receiving reconstruction contracts. The Defense Department memo in question was badly worded and badly timed. Claiming that the policy was "necessary for the protection of the essential security interests of the United States" made it seem like the administration trusted Egypt and Saudi Arabia more than Germany or Canada. Releasing the memo the day before Bush was to call the leaders of France, Germany, and Russia to discuss forgiving Iraq's prewar debt was none too bright. White House officials admitted to the New York Times that they were "surprised by both the timing and the blunt wording" of the memo.

Actually from what I have been reading it looks like debt relief for Iraq is going pretty well. Who knows maybe the Defense Department Memo was part of a carrot/stick strategy? Of course, maybe Bush is the Bumbler Daniel Drezner claims and he just got lucky on Iraqi Debt relief.

Austin Bay on the Cascading Effects of Saddam's Capture

In the article Austing Bay runs down a list of benefits from Saddam's capture. These include:

• provided immediate operational intelligence,
• damage to fascist morale,
• pumping Saddam for details on his Weapons of Mass Destruction programs will take time, but the long-term pay-off will be an improved US and UN capability to counter the proliferation of nuclear and chemical weapons,
• in US domestic politics, the arrest makes anger-driven anti-war candidates like Howard Dean look even more fatuous and fringe,
• and more.

All of these benefits/advantages could cascade to result in a much more stable Middle East. This of course is good for long term U.S. security, IMO.

Link via InstaPundit.

Unemployment Insurance Claims Down

The Department of Labor reported that unemployment insurance claims were down about 22,000 last week.

In the week ending Dec. 13, the advance figure for seasonally adjusted initial claims was 353,000, a decrease of 22,000 from the previous week's revised figure of 375,000. The 4-week moving average was 361,750, a decrease of 2,250 from the previous week's revised average of 364,000.

Now based on the historical data since 1999 and a crude statistical analysis this data actually looks very, very good, IMO. Traditionally areound this time of the year unemployment insurance claims are very high. Yes much higher than the above. The weekly averages range from 400,000 to 500,000 for December. So far the December numbers have been below these weekly averages by about 40,000 to 140,000.

Further, according the the crude statistical analysis, the number of claims should also be higher, but they aren't. The statiscal analysis says the number of weekly claims should be higher by about 100,000. I used a model with 51 weekly dummies, a dummy for the recession, a trend variable.

What does all this say? That it seems quite likely to me that the number of new claims will drop even more in the first few months of the new year. I see this as a sign that employment growth is going to be pretty good.

Of course, this is all the result of a pretty quick and rough and dirty calculation and may in the end be wrong. Unemployment might surge, the economy get weaker and so forth, but I doubt it.

Good News On Iraq Debt Relief

It seems support is building for Iraqi debt relief.

PARIS (Reuters) - The Paris Club of creditor states can agree a debt relief deal for Iraq quickly but the agreement can be signed only when the country has an internationally recognized leadership, the Paris Club's president said on Thursday.

Increasing hopes that a deal will be reached, Britain said during a European tour by U.S. special envoy James Baker that it backed the idea of a substantial reduction in debts estimated at $120 billion.

This is very good news at it will help Iraq get back on its feet economically which, IMO, is probably just as important as having the country get back on its feet politically.

I wonder if the capture fo Saddam had anything to do with this? If the answer is yes, then to me it underscores the amateur nature of Gov. Dean's views on foreign policy. An Iraq that has a healthy economy and a more liberal¹ form of government then that is good for the Middle East as a hole, IMO. It will make it harder for the tyrants in that region to stay in power, IMO. In the long run it this could be very good and make the world a safer place (not just the U.S.). Of course, there is no assurance that this is what will happen, but it seems that the debt relief issue is one step in that direction.
_____
¹Liberal in the sense of allowing more liberty.

Income Inequaility: Is it Necessary?

Is income inequality necessary in a society? That is can we have a society with perfect income equality? The answer depends in large on how you are going to achieve income equality. If you are going to achieve income inequality through redistributive taxes, and people's work effort is largely unobservable, then the answer pretty much is: yes, income inequality is necessary.

The problem can be cast as an incentive problem which is precisely how Jean-Jaques Laffont and David Marimort cast it in their new book The Theory of Incentives: The Principal Agent Model Moral hazard, or hidden action, problems are quite common. How does a supervisor get a worker to put forth his best effort? How does an insurance company induce drivers to drive safely? How does the government achieve income equality without diminishing work effort? This latter one is the problem with income redistribution schemes. The naive approach of say giving each person a fixed dollar amount results in some people providing no work effort and a drop in output. Thus, if one is going to favor income redistribution, then it seems to me it is incumbent on that person to at least spend some time looking at the issue from an incentives stand point.

The problem, as laid out by Laffont and Martimort, is a simple maximization problem. The first best solution is to maximize the individual's¹ expected welfare (utility) by selecting a suitable tax rate to fund the income transfers. At the same time there is a balanced budget constraint that has to be met.² In this case insurance (i.e., perfect equality) results and the tax rate is set at one level.

When work effort is unobservable, then you have a problem of moral hazard--i.e, hidden action, that requires an additional constraint: the incentive compatibility constraint. Basically, if you want to ensure that there is no work effort at all you solve for the first best solution in which case no work effort is expended. The second best solution incorporates the incentive compatibility constraint which is to ensure that people at least put forward some work effort. Even in this case, insurance in not complete, i.e. you still have income inequality, and you also get less work effort than in the first best situation. In other words, just as with insurance markets that have deductibles to help seperate high risk from low risk customers, you have transfers/taxes that do not eliminate inequality. The inequality provides and incentive to expend work effort.

Now the question becomes one of how much inequality is necessary? Theoretically it depends on the parameters of the model. Looking at different countries wont necessarily be of any help here since individuals in different countries will probably have different utility functions (i.e., preferences). So just because country X has inequality at one level does not necessarily mean that is the level of inequality country Y should strive for.

Kevin Drum has argued that the current level of income inequality in the U.S. is a "danger signal" about our childrens future.³ The problem is that Kevin simply assumes that this is a problem and provides nothing to support the notion that is actually is a problem. For example, in an update to this post Kevin points to Daniel Drezner who notes that there seems to be little resentment due to income inequality. This, to me, suggests that the current levels are not a problem and could be at a level that is necessary to induce people to put forth more work effort. Kevin has several other posts on income inequality (here, here, and here). None of them provide any real evidence that the inequality levels we are seeing are in some way bad (or "fundamentally unhealthy" as Kevin has said). Of course, I haven't provided any evidence that they are fundamentally health beyond pointing out that currently there seems to be little resentment due to income inequality.

Another problem comes from political pandering. While it is all nice and neat to talk about the theory of how to achieve income redistribution while being aware of the incentive problem, there is also the potential pitfall of politicians using income redistribution for political gain (i.e., retaining an elected office). This itself can be viewed as an incentive problem as well. How do the voters ensure that their elected official votes for the best feasible outcome? Further, when we look at government today do we see results that are the second best results? While the second best results are sub-optimal they are the best feasible results. Is this what we are observing with government today? Was the energy bill a second best outcome? Was the Prescription Drug Bill for Seniors a second best outcome? So while, we can theoretically outline how these things should be done, it is far from clear that our current government is structured in a way that can achieve them.
_____
¹Each person is assumed to be identical other than their work effort which is determined randomly. Thus, a priori they are identical, but ex post they are different.
²This is a one period model so the idea of running a deficit is not really an option here. To run a deficit the model would have to be extended to include time (i.e., dynamic) as well as borrowing, lending and an interest rate at the very least.
³What is also kind of interesting is Kevin has no children and is worried about inequality a lot more than I am...and I actually do have a child. Go figure.

Dean / Clinton '04?

Dick Morris has a piece in the New York Post today speculating on the potential that Dean might ask Hillary Clinton to be his running mate. His reasoning?

So if Dean is the candidate, how can he avoid the McGovern problem - getting knifed in the back by his own party leaders? Take a hostage, Hillary, and put her on the ticket.

{snip}

Dean will remember how Reagan united his fractured party by putting his defeated primary opponent, George W. Bush [sic] on his ticket in 1980. While Dean's nominal opponents are named Gephardt, Kerry, Clark, and Lieberman, his real adversary all along has been Clinton. He might find the Reagan prescription the right one to follow.

His example of Reagan / GHW Bush isn't that great, since there wasn't all that much hatred between the two of them. There are other examples of a candidate sucking it up and picking a disagreeable running mate (Eisenhower / Nixon, Kennedy / Johnson), but I think the level of animosity between Dean and the Clintons runs much deeper.

The Clintons have done everything they could to undermine Dean's candidacy, including pushing General Clark to run. I don't think Dean could overlook their actions up to now, and I definitely think he would be concerned that having Hillary on the ticket would give her too much of an opportunity to sabotage the campaign. (I'm not saying that the Clintons actually would actively sabotage Dean, just that he might consider the possibility.)

His rationale for why Hillary might accept? Two reasons, Gore and Clark:

She suddenly has a new potential rival for the 2008 nomination - Al Gore.

The former vice president's un-retirement, signaled by his endorsement of Howard Dean, makes him a potent possible rival for Hillary. With his bold support of the peace movement's darling, Dean, Gore may get an edge among the party's new masters - its left wing.

Hillary may also worry that Dean might choose someone like Gen. Clark as VP. Such a choice would immediately lift Clark into contention for the 2008 nomination, making it a tough three-way race where it had once appeared a cakewalk for the former first lady.

Again, maybe, if she could overcome her animosity towards Dean.

My big problem with Morris's analysis is that it's based on the premise that a Dean / Clinton ticket would automatically lose. Wouldn't the Clintons consider the possibility that it could win?

That would postpone HRC's chances to run until 2012. She would be saddled with the warm-bucket-of-spit VP position, where she would have little opportunity to influence policy. (I can't imagine Dean would have the close relationship with her that GWB has with Cheney or Clinton had with Gore.). Also, she'd lose her position of influence in the Senate, which is bound to grow in the next 4 years. Given Daschle's crappy performance as as minority leader, she might even have a shot hat his job.

A Dean / Clinton ticket would make the election next year interesting, but I just don't see it happening.

Dean Criticized by Other Candidates

Several of the other candidates have criticized Dean in the wake of his Foreign Policy speech. Kerry notes that Dean has been "all over the lot". This is precisely the impression I have gotten too. "Don't talk about pre-emptive attacks, but if I [Dean] had to I would pre-emptively attack...if there was certainty." Well which is it? Talk about it or don't? And never mind that the not talking about it is not the best of strategies.

Campaigning in Arizona and New Mexico yesterday, Dean made his declaration that the capture did not make "America safer" part of his stump speech. In Sun City, Ariz., he told a group of seniors: "I hope very much this will begin to diminish attacks on our troops, but I do not think it will make America's homeland safer."

I think this is a load of crap. Does it mean we are safer than say last Friday? No, but that is short term thinking. The capture of Saddam basically says with certainty that he will no longer be any kind of threat to the U.S....ever. The days of his seeking WMDs are not completley and totally over. The possibility of him giving any kind of aid to any group of terrorists is completely and totally over. Granted, this threat was pretty much removed once the U.S. crushed his military and took control of the country, but now we can pretty much say the probability of Saddam posing a threat to the U.S. is zero. Is that a good thing, absolutely. Are there still dangers facing the U.S.? Absolutely. We need to find Osama bin Laden, we need to get rid of that little madman with the bouffant hairdo in North Korea. It'd be great if we could get the mullah's in Iran to step down and stop grinding their country into the dirt. So while the statement is literally true, the way Dean is going on about it suggests a level of naivete in regards to foreign policy that should leave most Americans some what concerned. If it isn't naivete, then it is playing politics with something I don't think should be political, or as Gephardt put it,

Gephardt told reporters, "Governor Dean can do all the repositioning he wants, but the fundamental truth is that he made many contradictory statements about the war in Iraq and the aftermath. He has consistently exploited foreign policy for his political agenda, and his positions don't demonstrate a person grounded in serious foreign policy experience and expertise."

Saddam's Role in the Insurgency Inspirational

That is what the Washington Post is claiming. Based on documents that were found with Saddam at the time of his capture, his role in the insurgency was passive and mostly inspirational.

"I doubt very much that he was directing daily operations. It's just not feasible," Dempsey said. "But he was clearly the symbolic figure, and these networks reported to him in a way that might" be characterized as "a son reporting to his parents."

A number of people on the Left might point to this and claim that capturing Saddam is/was irrelevant. This is not true, IMO since if Saddam is the inspirational figure then some insurgents might lose the will to fight. Also, the documents found with Saddam have information about a number of insurgency cells,

A document discovered during the capture of former Iraqi president Saddam Hussein has enabled U.S. military authorities to assemble detailed knowledge of a key network behind as many as 14 clandestine insurgent cells, a senior U.S. military officer said Tuesday.

"I think this network that sits over the cells was clearly responsible for financing of the cells, and we think we're into that network," said Army Brig. Gen. Martin E. Dempsey, commander of the 1st Armored Division.

If the above does indeed to turn out to be true, then a major source of funding might have been disrupted. I can't see this as anything but good, but I'm open to an arguement as to why it could be bad.

Go Read EconoPundit

Start at the top and just start reading. He has some good take downs on Krugman, and other good observations. You wont be sorry.

News Flash: The Daily Misleads Misleads

The Daily Mislead is a website put out by the people at MoveOn.org and it is supposedly a place that will highlight how everyday the Bush Administration distorts what has actually happened.

Today's article is tries to defend Dean's whacky LIHOP statement (LIHOP = Let It [9/11] Happen On Purpose). Here is what Dean said initially,

Rehm: Why do you think he (Bush) is suppressing that (Sept. 11) report?

Howard Dean:I don't know. There are many theories about it. The most interesting theory that I've heard so far -- which is nothing more than a theory, it can't be proved -- is that he was warned ahead of time by the Saudis. Now who knows what the real situation is?

Now, you can read that in several ways. The first is that he was warned ahead of tiime that Al Qa'ida might try to use hijacked airliners as missiles, but nothing specific. The other reading of this is that the Saudis warned Bush specifically that on Sept. 11th terrorist would hijack planes and ram them into the WTC and Pentagon, and Bush did nothing to stop it (Let It Happen On Purpose).

Dean has backed off substantially from the view, and has stated explicitly he does not believe the President would have ever done anything like that. This leads me to believe he was referring to the second, and more despicable, interpretation of his comments.

But, the Daily Mislead decides to try and defend the statement. Here is the actual question,

I know you said there will be a time for politics. But you've also said you wanted to change the tone in Washington. Howard Dean recently seemed to muse aloud whether you had advance knowledge of 9/11. Do you agree or disagree with the RNC that this kind of rhetoric borders on political hate speech?

Now, the question isn't,

Did your administration have any advance warning that some sort of attack like this was a possibility?

No, it was a question specifically about being tipped off about 9/11. Further, that is the basic gist of Dean's comment (which of course Dean doesn't believe).

So lets get this straight.

Bush and his Administraion are misleading.....and so is Dr. Dean. He too backs off the claim, which the Daily Mislead is claiming is in fact a true claim. Or maybe we should just conclude that the low brows over at the Daily Mislead are so desperate to paint Bush as a liar they'll go to any lengths. They have to have something misleading from the Administration every day, even if they have to make shit up.

Further their CBS link is not exactly the best supporting link. From the link,

"Suicide bomber(s) belonging to al-Qaida's Martyrdom Battalion could crash-land an aircraft packed with high explosives ... into the Pentagon, the headquarters of the CIA, or the White House." 1999 federal report

White House press secretary Ari Fleischer said the administration was aware of the 1999 report prepared by the Library of Congress for the National Intelligence Council, which advises the president and U.S. intelligence on emerging threats. He said the document did not contain direct intelligence pointing toward a specific plot but rather included assessments about how terrorists might strike.

In other words, it was speculation. The CBS link has nothing on the probability for this kind of scenario. Now lets stop here for a minute. The people at MoveOn.org point to the possible lack of sound intelligence on Iraq's WMD as a failure of the Bush Administration. Now lets break it down here,

• There is intelligence that Saddam has restarted his WMDs program
• This intelligence may be false, but many think it is accurate (the Clinton Administratino sure seemed to think so).
• Bush decides not to wait for certainty and attacks.
• According to the people at MoveOn.org this is horrible.

Now, lets look at 9/11 and the intelligence around it:

• There is possibly speculative intelligence that Al Qa'ida terrorist could use planes as a suicide mission.
• This intelligence may or maynot be wrong (a priori--i.e., we know now it was right).
• Bush took no actions based on this threat.
• The people at MoveOn.org think this is horrible.

The ABC link is pretty much the same as the CBS link. The threat was general, nothing indicated that a hijacking would lead to a suicide mission, and that there was no probability attached to such events. Further, look at the quoted portion of the report. It says nothing about a hijacked plane, but my reading suggests a plane purchased or rented by the terrorists then packed with explosives.

This CBS link seems completely irrelevant and perhaps gratuitious. There is no indication that the threat that led to Ashcroft using a private aircraft was in anyway connected to 9/11 or any other terrorist plot. In fact the article states the following,

All other Bush Cabinet appointees, with the exception of Interior and Energy with remote sites to oversee, fly commercial airliners. Janet Reno, Ashcroft's predecessor as attorney general, also routinely flew commercial. The secretaries of State and Defense traditionally travel with extra security on military planes.

So it looks like the threat was perhaps aimed at Ashcroft and not something like a general terrorist threat against any and all commerical flights.

Is it just me or there a glaring inconsistency the size of Montana here? Are the people at MoveOn.org this stupid or despicable, or perhaps both (this does indeed seem the most likely)?

Prof. Bainbridge on Cardinal Martino

Cardinal Martino opened his mouth and swallowed his foot up the the hip. Prof. Bainbridge has a thoughtful post on why the statment was not just inept, but also imprudent. I'm not going to write anymore as it wouldn't be nearly as charitable as Professor Bainbridge's comments.

Dean Running Mate Contest

Now that Hussein is no longer available, I think we need a contest to find an appropriate running mate for Howard Dean, assuming he gets the nomination. The winner of the contest will receive notoriety and 10 minutes of fame (18.25 minutes Canadian).

In an interview Friday, published in the Washington Post on Sunday, Dean is quoted as saying:

"This president has forfeited our moral leadership in the world because people dislike us so much,"

Rod Dreher at NRO's Corner suggest's Al Franken's self-help guru character Stuart Smalley

I'd like to suggest Barney the talking dinosaur, as Dean's foreign policy seems to be based on the "I love you, you love me" song.

My apologies to parents of toddlers who are sick of our purple pal.

Return of the New Economy?

GDP is grew last quarter at an amazing rate. Unemployment is doing better, coporate profits are up, productivity is up. Inflation is nowhere to be seen. So is this the return of the New Economy where what matters are computers and faster processors? No, says Robert Samuelson, and I agree.

What we are seeing is the rebound from a recession with a sluggish initial recovery. Productivity wont stay at its current growth rates. Neither will the growth rate of GDP. Employment will get better, but inflation fears will return.

It seems that every now and then somebody or some group of people have to pronounce the end of the business cycle. This was a commonly held view back in the 60's (IIRC) with Keynesian macro-theory. We knew what made the business cycle cycle and we could control it. Or so went the popular view. Then the 70's hit and ruined the party.

Anyhow read the whole article.

Gimli Gets it Right

In an interview John Rhys-Davies comes out in favor of Western Civilization.

“I think that Tolkien says that some generations will be challenged,” said Rhys-Davies, “and if they do not rise to meet that challenge, they will lose their civilization. That does have a real resonance with me.”

Pointing a finger at the media, Rhys-Davies went on, “What is unconscionable is that too many of your fellow journalists do not understand how precarious Western civilization is, and what a jewel it is… The abolition of slavery comes from Western democracy. True democracy comes from our Greco-Judeo-Christian Western experience. If we lose these things, then this is a catastrophe for the world.”

Rhys-Davies revealed that as far back as 1955 his father had predicted that “the next World War will be between Islam and the West.” The actor recalled his response: “I said to him, ’Dad, you’re nuts! The Crusades have been over for hundreds of years!’ And he said, ’Well, I know, but militant Islam is on the rise again. And you will see it in your lifetime.’ He’s been dead some years now. But there’s not a day that goes by that I don’t think of him and think, ’God, I wish you were here, just so I could tell you that you were right.’”

Looking at the lone female journalist at the table, Rhys-Davies said pointedly, “You should not be in this room [according to Muslim custom]. Because your husband or your father or your husband is not here to guide you. You could only be here in this room with these strange men for immoral purposes.”

Rhys-Davies went on to contemplate the significance of demographic shifts among Western Europeans and Muslims in Europe. “There is a demographic catastrophe happening in Europe that nobody wants to talk about, that we daren’t bring up because we are so cagey about not offending people racially. And rightly we should be. But there is a cultural thing as well… By 2020, fifty percent of the children in Holland under the age of 18 will be of Muslim descent…

“And don’t forget, coupled with this there is this collapse of numbers. Western Europeans are not having any babies. The population of Germany at the end of the century is going to be 56% of what it is now. The populations of France, 52% of what it is now. The population of Italy is going to be down 7 million people.

“There is a change happening in the very complexion of Western civilization in Europe that we should think about at least and argue about. If it just means the replacement of one genetic stock with another genetic stock, that doesn’t matter too much. But if it involves the replacement of Western civilization with a different civilization with different cultural values, then it is something we really ought to discuss — because, [hang it all], I am for dead-white-male culture!”

His fellow filmmakers might not all agree, but Tolkien would have applauded.

Right. Where do we still find slavery in this world? Sudan. Who practices it? Muslims.

Many are physically and sexually abused, and forced to live at a standard well below that of their captors (sleeping on the floor, minimum food, no chance for education). Beatings for "disobedience" are common. They are denied their ethnic heritage, language, religion, and identity as they are cut off from their families and are held by Arabic-speaking captors, most of whom rename the abductees with Arabic names and some of whom coerce the children and women into adopting Islam.

Western Civilization has repudiated slavery. It is seen as something abhorrent. Here is some more on slavery in Islam. Another good thing about Wesetern Culture, as Rhys-Davies notes, is Democracy. Yes, voting is a lousy way of aggregating preferences, but its the best we've got so far.

Another thing that Rhys-Davies didn't mention is the market. Western Civilization is structured so as to be conducive to market economies (although Europe is in many ways moving away from this). Market economies tend to result in higher standards of living, longer life spans, and even better environmental conditions.

Western Civilization isn't perfect, and it has had its disgusting glitches, but it seems to have come along way and come up with some really good things (as noted above). I'm personally in favor of keeping it.

Thanks to Little Green Footballs and Michael Demmons for the link.

Why I Think Jeralyn Merrit is All Wet

Clicky.

NEW YORK: A Taliban commander held at the US military base in Guantanamo and released by US authorities in July is now back in Afghanistan in charge of attacks against US forces there, according to a report released Sunday.

In other words, a released detainee is now back in a position to be killing Americans. Sorry, but I have no problem with indefinitely detaining the Taliban and Al Qaeda fighters in Guantanamo Bay. However, Jeralyn thinks these people should be tried or freed. So does Senator McCain and I think he is wrong too. We are in a war against these people. We can't afford to let a potential terrorist lose to continue his murderous and destructive ways.

Thanks to Bill Quick for the link.

What Is Up With Rep. Jim McDermott?

Is he crazy or what? Now it is that Bush and the Administration delayed the capture of Saddam for political gain.

Rep. Jim McDermott, D-Wash., told a Seattle radio station Monday the U.S. military could have found Saddam "a long time ago if they wanted." Asked if he thought the weekend capture was timed to help Bush, McDermott chuckled and said: "Yeah. Oh, yeah."

The Democratic congressman went on to say, "There's too much by happenstance for it to be just a coincidental thing."

When interviewer Dave Ross asked again if he meant to imply the Bush administration timed the capture for political reasons, McDermott said: "I don't know that it was definitely planned on this weekend, but I know they've been in contact with people all along who knew basically where he was. It was just a matter of time till they'd find him.

"It's funny," McDermott added, "when they're having all this trouble, suddenly they have to roll out something."

Of course, like the sleazebag weasel he is, he backs off this stupid claim,

McDermott, in a telephone interview with The Associated Press, called the timing of Saddam's capture suspicious but said he was not alleging it had been intentionally delayed.

"Everything was going wrong, and they got a real Christmas gift, if you will, in that the troops did a magnificent job and found" Saddam, he said.

If I were a voter in McDermott's district I'd find out what it would take to get Gary Condit to move there and run to replace McDermott. It'd be less embarassing.

Lets see if this makes sense. Bush is President right now. Bush will be President until January of 2004 2005. So does it make any sense, politically speaking, to "find Saddam now" if you are going for maximal returns? I suppose you could argue that it will give the President a boost in the polls and make it easier to get certing things through Congress, etc. But wouldn't it be really good to find Saddam closer to the 2004 election? If this was such an "easy and doable thing" why not find him at that date? It would seem to me that such a thing would help with the election.

Oh...wait, I forgot. They probably already have Osama bin Laden and will role him out for the 2004 election.

Thanks to Robin Roberts for the tip.

Dean Foreign Policy Speech

The full text of his speech is available here. I want to concentrate on one paragraph:

During the past dozen years, I have supported U.S. military action to roll back Iraq's invasion of Kuwait, to halt ethnic cleansing in Bosnia, to stop Milosevic's campaign of terror in Kosovo, to oust the Taliban and al Qaeda from control in Afghanistan. As President, I will never hesitate to deploy our armed forces to defend our country and its allies, and to protect our national interests. [Emphasis added]

Why did Dean support intervention, without UN approval, in Kosovo, but not in Iraq? Stopping Milosevic's terror is good, but not Hussein's terror?

According the this State Department document from 1999, approximately 11,000 people were killed and dumped in mass graves in Kosovo.

According to this link from Human Rights Watch, approximately 290,000 Iraqis have been killed and dumped in mass graves. (The date of that article is a few months old, and doesn't include some of the more recent discoveries).

So a hell of a lot more people died under Hussein's regime than under Milosevic's, yet Dean supported intervention in Kosovo but not Iraq.

I can think of a few reasons why Dean might hold this inconsistent position, and none of them are laudable.

1. Occupant of the White House. Democrat president Good, Republican president Bad.

2. Weapons of Mass Destruction Programs. Since Milosevic wasn't trying to get NBC weapons, it was okay to topple him.

3. Racism. Europeans being slaughtered is bad; Shi'ites and Kurds, not so bad.

I seriously doubt r