Category Archives: Politics

New York City: uh oh

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The Big Apple has been well run for 20 years. The mayor-elect promises change

We do not follow USA politics – better for the blood pressure that way. But a friend gifted us the 9 November Economist, so I flipped a few pages – finding a quite alarming article on the NYC mayoral election. Two decades ago NYC was a city that I dreaded having to visit on business. Now it is a thriving technology center, has much-improved public schools and some school choice. NYC has even become a desirable tourist destination. Some of that transformation is due to the steady and practical hand of 3-term mayor Michael Bloomberg.

Besides its traditional brainy industries—finance, property and the media—the city now has a thriving technology sector, which generates $30 billion in annual wages. Pay for tech workers is growing even as total pay on Wall Street has fallen (since so many bankers were laid off). Roche, a drugmaker, recently announced that it would move its biotech centre from New Jersey to Manhattan. Since 2007 Brooklyn’s tech cluster has grown faster than that of any large American county save San Francisco. Mr Bloomberg has given land and money to Cornell University and the Technion (an Israeli college) to develop an applied science campus, hoping that this will foster a start-up culture like Silicon Valley’s.

What is scary is that Bloomberg has been replaced by a public-service-union backed politician with zero executive experience. Let’s hope this guy turns out to be similar to London mayor Ken Livingstone. I.e., not as much a disaster as expected. 

Can the Bloomberg education reforms withstand the assault promised by a man bankrolled by teachers unions?

Before 2002, New York’s schools were in poor shape. More than a fifth of students dropped out of high school before graduating. Not one city public school was in New York state’s leading 25, says Mr Bloomberg; today 22 out of 25 are. Mr Bloomberg took control of the schools from a reactionary school board. He closed failing schools, opened smaller ones and allowed some charter schools (which are publicly funded but independently run) to operate. He made principals accountable for test scores and tried to make it easier to sack bad teachers. Overall, he made some progress. In 2003, 20.5% of New York’s pupils were proficient, or better, in maths on national tests; today 29.6% are. Charter schools in Harlem have done particularly well. But the unions hate them and Mr de Blasio means to curb them. Some 20,000 parents protested against his plans last month.

NYC was nowhere near “done” with transforming a dysfunctional, unaccountable school system to Finland standards. And the 1% won’t be touched by a reversion to typical US schools that are primarily in the business of making life comfortable for administrators (and to a much lesser extent, for teachers). The 1% send their kids to elite private schools. Meanwhile middle class hopes depend on what is available at public schools (and the lucky lottery winners, a tiny number access charter schools). And education is only one aspect of the better 2013 New York City.

Besides the unions, who voted for Bill de Blasio?

What scientific concept would improve everybody’s cognitive toolkit?

If you get depressed by the low quality of media [and politicians], spend some time at The Edge:

It’s ever more delectable that the Edge Foundation— the network of prominent scientists and intellectuals founded by literary agent John Brockman in New York — has worked against the reciprocal ignorance of literary cultures and sciences of each other. Successfully. If you take the algorithms developed by Larry Page and Sergey Brin, which measure the value of links, Edge’s website ranks seven on a global scale of ten. The New York Times ranks nine, eBay at eight. — Sueddeutche Zeitung

 

Was Saving the Chevy Cruze Worth $10 Billion?

Did America want to spend $10 billion to save the Chevy Cruze? That’s almost $200,000 for every worker still on GM’s assembly line. For that kind of money, you’d better like the cars an awful lot.

Megan McArdle sums up how much the American taxpayers paid to bail out the Detroit GM unions.  

 (…snip…) A lot of those decisions were driven not by management idiocy, but rather by the need to make cars at margins that could absorb their extremely high labor costs. Which meant, first, large cars that people paid a lot of money for, and second, small cars that had lower-quality components than their competitors.

Now that GM’s labor costs are closer to industry averages, it can afford to put better components in its cars. (…snip…)

In this short piece Megan does not have space to tally up all the costs of the union bailout. In particular the money owed to senior bondholders that was essentially stolen to pay off the unions. The rule of law does not always apply in the land of politics.

American politics: Morris Fiorina on Polarization and Stability

Stanford political scientist Morris Fiorina is co-author of the book Culture War? The Myth of a Polarized America. Dr. Fiorina was interviewed by Russ Roberts for the 8 July Econtalk. Given that we invest nearly zero time on the study of politics, especially American politics, I’m not qualified to recommend resources. Nevertheless I recommend this interview – primarily because the media coverage interferes with any understanding of the workings of the US in particular. E.g., the “polarization and gridlock memes”. The real world is so much more nuanced and complex.

If you have too little time for the one hour podcast, try starting at 42:33 for the conclusion – including helpful discussion of red/blue states or districts.

If you are a political junkie, or simply motivated to access objective research on US politics, I highly recommend two other Stanford political scientists. Both have been interviewed several times on Econtalk:

David Brady, e.g., Brady on the State of the Electorate

Doug Rivers, e.g., Rivers on polling. Dr. Rivers is also an expert on polling (see e.g., YouGov.com). This particular podcast is an excellent primer on sophisticated polling – how to dig down to what people really believe – usually very different than reported by such as Gallup. E.g., if you do interactive polling where you first ask typical opinion questions, then expose the respondent to a few facts (such as costs), repeat the questions – then backing for the currently favored elite agenda often disappears.

Econtalk: Epstein on the Constitution

If you are at all interested in the evolution of the US Constitution then you will learn from this Econtalk where Russ Roberts interviews constitutional scholar Richard Epstein of New York University and Stanford University’s Hoover Institution.

At around 52 minutes, following a summary of the constitutional history which lead to the creation of the fourth branch of government – the “Administrative State”, Richard Epstein said:

You can’t create wealth if all you are interested in doing is transferring from one party to another.

The transcript continues with this exchange:

Russ: Ah–a sigh. A long sigh.

52:35 Russ: It crosses my mind, as I ask the guests from time to time a variant of this question, that, we get the Constitution we deserve. You and I, we like the Constitution of 1787. Other people like the 1937 one or the 2007. And we don’t have many people that agree with us. So, there are these underlying political forces–again, all these ideas about theories of judicial interpretation, that’s just window dressing. What’s really going on is, the President nominates Supreme Court justices that are politically popular, and basically the ones that are politically popular, because the President wants to be politically popular, and his party wants to be popular, are going to be justices that don’t have the “right theory” of the Constitution, but who open the door to laws, legislation, that most people want. And what most people want is a more active Federal government.

Epstein: (…snip…) Most people want–I think most people want a more active Federal government to advance the particular cause that they champion and a smaller Federal government with respect to all those things which harm them so greatly. And so what happens is you still can get large numbers of people who will quote to you Gerald Ford when he says to you: the government is big enough to give you everything you want; it’s big enough to take away everything that you have.

And most people straddle that particular kind of an insight. So they don’t know which side they are on. But that’s why these academic debates, so called, are so absolutely important. Because quite simply, the stakes are enormous. It’s very clear that there is no sort of automatic guardian of the public welfare that sits outside of human beings, by divine origin or divine power to structure these things, so what you have to do is to change the climate of opinion in the hopes that once you do that, you’ll be able to change the input of the judges on the Court. And remember, it is very common for justices on the U.S. Supreme Court to shift one way or another. Harry Blackmun started out in some sense as a Nixon appointee, and he does the abortion cases because he worked for the Mayo Clinic, and by God, by the time he’s done he’s a member of the liberal faction. Indeed, if you look at the Supreme Court there are many conservative Presidents who appointed liberal justices. I think I did a rough calculation once that between, say, 1956 and 2005, roughly speaking, what you could say was that each year on average there were three justices appointed to the Supreme Court by conservative presidents who turned out to have deeply liberal sentiments.

Russ: My theory of that is they like to go to good parties. So, after you’ve been in Washington for a while, and most people are not like you, you think: Well, this isn’t any fun. 

This is a very information dense interview. I’ll have to listen at least a couple more times to absorb it all.

Richard A. Epstein: real solutions to bad regulation

Richard Epstein know the catacombs of US regulation better than any other source I know of. Recently in Hoover’s Defining Ideas prof. Epstein outlined the disease and specific cures. His commentary is US-centric, but the principles are universal. Every country’s regulatory system has some degree of the disease – whether Uganda or Australia. And I’m sure I don’t have to mention – every one of the regulatory abuses is defended by the rent-seeking beneficiaries of the regulation (e.g., big drug companies, because only the rich and powerful can operate in the regulated-zones).

Examples of the disease:

(…snip…) The dismal performance of the IRS is but a symptom of a much larger disease which has taken root in the charters of many of the major administrative agencies in the United States today: the permit power. Private individuals are not allowed to engage in certain activities or to claim certain benefits without the approval of some major government agency. The standards for approval are nebulous at best, which makes it hard for any outside reviewer to overturn the agency’s decision on a particular application.

That power also gives the agency discretion to drag out its review, since few individuals or groups are foolhardy enough to jump the gun and set up shop without obtaining the necessary approvals first. It takes literally a few minutes for a skilled government administrator to demand information that costs millions of dollars to collect and that can tie up a project for years. That delay becomes even longer for projects that need approval from multiple agencies at the federal or state level, or both.

The beauty of all of this (for the government) is that there is no effective legal remedy. Any lawsuit that protests the improper government delay only delays the matter more. Worse still, it also invites that agency (and other agencies with which it has good relations) to slow down the clock on any other applications that the same party brings to the table. Faced with this unappetizing scenario, most sophisticated applicants prefer quiet diplomacy to frontal assault, especially if their solid connections or campaign contributions might expedite the application process. Every eager applicant may also be stymied by astute competitors intent on slowing the approval process down, in order to protect their own financial profits. So more quiet diplomacy leads to further social waste.

One reason the administrative process gets so bogged down is the grandiose standards the agencies employ. The FDA’s mission statement provides one example: “The FDA is responsible for protecting the public health by assuring the safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, our nation’s food supply, cosmetics, and products that emit radiation.”

What is left unstated is how the FDA determines “the safety, efficacy, and security” of the huge list of products whose use it oversees. Clearly, absolute “safety, efficacy, and security” are unattainable, so it falls to the FDA to turn differences in kind into differences of degree. For example, just how safe is safe enough when all “safe” drugs have deadly side effects for which some FDA warnings are appropriate? The ambiguity in these key areas lets the FDA ask companies for additional trials in a two-page letter, often needlessly tacking on years to any particular application.

(…snip…) 

One Disease, Many Cures 

These three mission statements share a common feature with the tax-exemptions in the IRS: They use broad mandates that foster administrative discretion and delay, both of which pose a threat to the rule of law. Even though the disease is the same in all cases, the cure surely is not. Here is a quick primer on what ought to be done in these different settings.

501(C)(4) Organizations — (…snip…) 

The Food and Drug Administration — Turning next to the FDA, it is critical to strip it of most of its approval power. Right now, FDA approval involves three stages of clinical trials. Stage one clinical trials are small size affairs, intended to test whether a drug has serious adverse safety consequences that make it unfit for human use. Stage two and stage three trials are progressively far more elaborate productions intended to test for both safety and effectiveness before letting a drug on the market. Little time and money is spent on stage one trials. Stage two trials cost substantial sums. Stage three trials can cost thousands of lives, millions of dollars, and many years.

The best strategy to keep the FDA under control is to block it from banning a drug simply because the drug has not passed stage two or three trials. The removal of FDA oversight will allow these drugs to reach the market more quickly. People who are sick can then decide with the aid of their physicians and healthcare organizations whether to take these drugs in light of the other alternatives available to them. In so doing, they need not fly blind because many independent professional organizations right now do a far better job of evaluating drug efficacy by looking at off-label and overseas usage of drugs.

Liberalize the rules, and experimental treatments will not fall in the exclusive province of the rich and the well-connected (if indeed they are available to anyone at all). The drug companies and the patients can decide by contract how best to allocate the risk of adverse consequences. Clinical trials will not disappear, but they will be directed at satisfying potential customers, including health plan operators, and not FDA officials. There will be some losses from premature use, but far fewer losses from unconscionable delay, and far lower prices that will allow for greater access.

Environmental Protection — Endless environmental permits far too often stand in the path of sensible development. These permits require comprehensive evaluation of all potential future adverse effects, no matter how small or improbable, that might follow from the construction of a new plant or facility. Yet the parade of horribles rarely comes to pass.

This exhaustive preclearance stands in stark contrast to the private law rules that were developed in connection with just these environmental risks, and provide a clear solution to the problem: Allow the activity to proceed naturally as the market would dictate, but then draw a real red line in the sand once there is evidence that a plant or facility poses actual or imminent peril of serious harm. Then, but only then, lower the boom.

First, make them responsible for any harm caused, no excuses allowed. Second, shut the facility down immediately at the insistence of either the government or private party until the peril is corrected. Keeping that tough standard means that businesses with millions at stake in their new operations will steer clear of doubtful zones. New facilities will get online more rapidly, allowing dangerous older equipment, which is often grandfathered in under current laws, to be removed from operations more quickly. Killing the permit culture will reduce the opportunities for that deadly duo of discretion and delay.

FCC Licenses — The FCC has an inordinate and wholly unnecessary power to issue, renew, and revoke licenses to the airwaves. Their key task should be to make sure that operations taking place on one frequency do not interfere with the transmission of signals on other frequencies. Those observable events are easily remedied with the same combination of damages and injunctions available in environmental cases.

The FCC should arrange to sell off frequencies to private owners to use, develop, and sell like any other resource. That process has already allowed the government to pocket a fair piece of change in dealing with many broadband licenses. It could also rationalize and improve the operation of the broadcast licenses for radio, television, and other consumer services at a fraction of the price it now takes to run the current system. As Friedrich Hayek noted long ago in The Road to Serfdom, the function of government is to organize the traffic flow, not to determine the composition of the traffic.

The scandal at the IRS teaches a larger lesson for the overall operation of the administrative state. The best way to control the twin risks of discretion and delay is to strip administrative agencies of as much of their discretionary power as is humanly possible. Each area has its own twists, and some discretion on enforcement issues will always remain. But the larger goal should be clear: an efficient administrative state that does not incentivize discretionary bureaucratic delay. The time to start on major reform efforts is now. Here is one crisis that should not go to waste.

Richard A. Epstein, the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, is the Laurence A. Tisch Professor of Law, New York University Law School, and a senior lecturer at the University of Chicago. His areas of expertise include constitutional law, intellectual property, and property rights. His most recent books are Design for Liberty: Private Property, Public Administration, and the Rule of Law (2011), The Case against the Employee Free Choice Act (Hoover Press, 2009) and Supreme Neglect: How to Revive the Constitutional Protection for Private Property (Oxford Press, 2008). 

Why Rational People Buy Into Conspiracy Theories

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We don’t know the answer to the question, though society would surely be better off if there were no conspiracy theories. Maggie Koerth-Baker’s NYT Magazine essay looks at some of the research. Typically in psychology the results are fuzzy:

Conspiracy theories also seem to be more compelling to those with low self-worth, especially with regard to their sense of agency in the world at large. Conspiracy theories appear to be a way of reacting to uncertainty and powerlessness.

 She ends with this summary:

(…) Alex Jones, a syndicated radio host, can build fame as a conspiracy peddler; politicians can hint at conspiracies for votes and leverage; but if conspiracy theories are a tool the average person uses to reclaim his sense of agency and access to democracy, it’s an ineffective tool. It can even have dangerous health implications. For example, research has shown that African-Americans who believe AIDS is a weapon loosed on them by the government (remembering the abuses of the Tuskegee experiment) are less likely to practice protected sex. And if you believe that governments or corporations are hiding evidence that vaccines harm children, you’re less likely to have your children vaccinated. The result: pockets of measles and whooping-cough infections and a few deaths in places with low child-vaccination rates.

Psychologists aren’t sure whether powerlessness causes conspiracy theories or vice versa. Either way, the current scientific thinking suggests these beliefs are nothing more than an extreme form of cynicism, a turning away from politics and traditional media — which only perpetuates the problem.

Foseti: The real scandal

An edgy, accurate appraisal of “the government“:

(…) The vast majority of decisions made by “the government” (well over 99%) are made without any input from the President, the President’s immediate staff and advisors, anyone appointed by the President, anyone in Congress or that ultimate reports to Congress, or anyone else remotely impacted by any sort of election.

Does anyone know what “the government” is up to today? Is it a “Good Thing” that it is beyond comprehension?

I'm not confident an alien ultra-intelligence could comprehend what .gov is up to.

The New Power Class Who Will Profit From Obama’s Second Term

Joel Kotkin offers some well-knit analysis of the new center of political power —I don’t know the field well enough, but it makes sense. Here’s a fragment that will warm the hearts of those who love to see the Federal bureaucracy grow: 

When President Obama takes the oath of office for the second time, he will also usher in a new era in American power politics. Whereas the old left-wing definition of ‘who rules’ focused on large corporations, banks, energy companies and agribusinesses, the Obama-era power structure represents a major transformation.

(…) An even greater beneficiary of the second term will be the administrative class, who by their nature live largely outside the market system. This group, which I call the new clerisy, is based largely in academia and the federal bureaucracy, whose numbers and distinct privileges have grown throughout the past half century.

Even in tough times, high-level academics enjoy tenure and have been largely spared from job cuts. Between late 2007 and mid-2009, the number of U.S. federal workers earning more than $150,000 more than doubled, even as the economy fell into a deep recession. Even as the private sector, and state government employment has fallen, the ranks of federal nomenklatura have swelled so much that Washington, D.C., has replaced New York as the wealthiest region in the country.

As a former professor at the prestigious University of Chicago, and a longtime ally of public-sector unions, Barack Obama’s political persona is all but indistinguishable from these new hierarchies. Their support for him has become critical, particularly as the onetime ‘hedge fund candidate,’ decided to wage a very effective class warfare campaign on the hapless Mitt Romney.

This decreased Obama’s support among the plutocrats, even if they have thrived under his watch, but he made up for this in part by tapping bureaucracies that benefit from expanding government. Indeed the clerisy accounted for five of the top eight sources of Obama’s campaign funding, led by the University of California, the federal workforce, Harvard , Columbia and Stanford. Academic support for Obama was remarkably lock-step: a remarkable 96% of all donations from the Ivy League went to the president, something more reminiscent of Soviet Russia than a properly functioning pluralistic academy.

To understand the possible implications of the new power arrangement, it is critical to understand the nature of the new clerisy. Unlike traditional capitalist power groups, including private-sector organized labor, the clerisy’s power derives not primarily through economic influence per se but through its growing power to inform opinion and regulate everything from how people live to what industries will be allowed to grow, or die.

The clerisy shares a kind of mission which Bell described as the rational ‘ordering of mass society.’ Like the bishops and parish priests of the feudal past, or the public intellectuals, university dons and Anglican worthies of early 19th century Britain, today’s clerisy attempts to impart on the masses today’s distinctly secular ‘truths,’ on issues ranging from the nature of justice, race and gender to the environment. Academics, for example, increasingly regulate speech along politically correct lines, and indoctrinate the young while the media shape their perceptions of reality.

Most distinctive about the clerisy is their unanimity of views. On campus today, there is broad agreement on a host of issues from gay marriage, affirmative action and what are perceived as ‘women’s’ issues to an almost religious environmentalism that is contemptuous toward traditional industry and anything that smacks of traditional middle class suburban values. These views have shaped many of the perceptions of the current millennial generation, whose conversion to the clerical orthodoxy has caught most traditional conservatives utterly flat-footed.

As befits a technological age, the new clerisy also enjoys the sanction of what Bell defined as the ‘creative elite of scientists.’ Prominent examples include the Secretary of Energy, the Nobel Prize-winning physicist David Chu; science advisor John Holdren; NASA’s James Hansen; and the board of the U.N.’s Intergovernmental Panel on Climate Change. In the words of New York Times hyper-partisan Charles Blow, Republicans have devolved into the ‘creationist party.’ In contrast Obama reigns gloriously hailed as ‘the sun king’ of official science.

(…) 

See what you think.

Raise rates or cut loopholes?

Tyler Cowen on Kevin Drum:

Is it better to raise rates or cut loopholes? Maybe conservatives should be preferring the boost in rates. From Kevin Drum:

…which is simpler and easier, raising rates or closing loopholes? I’d say raising rates is easier, and if it’s done now it will make it harder to raise them again in the future. This means that if Democrats want to soak the rich again, they’ll have to do it via closing loopholes, which is a harder lift.

Second, there’s Coburn’s point. If you want to have any chance at all of broadening the base and lowering rates in the future, you can’t close loopholes now. You need to leave them there as bargaining chips. Tax reform will be more likely if rates are higher (making them easier to lower) and loopholes are all still intact (giving you plenty of stuff to close in return for lowering rates).