The Liberal Order

Regulatory Reasons for High Health Care Costs - Another Example

My wife called the local Walgreens pharmacy to inquire about flu shots for herself and our two children. She was told that the pharmacist was able to administer the shot for my wife, but that North Carolina law prohibits her from administrating a shot to anyone under age 18.  

Roman Polanski and the Rule of Law

The rule of law is essential for a free society. The rule of law stipulates that no one is above the law, and thus the law applies equally to everyone regardless of ethnicity, social status or income. Trust in social institutions breaks down if, say, one person found guilty of possessing cocaine is sentenced to ten years in prison whole another is given probation, ceteris paribus. Or, if, say, a rich person who commits murder is essentially slapped on the wrist while a poor person is sentenced to twenty years for a small victimless drug crime.

I don't know if Roman Polanski is guilty of committing his alleged crime, notwithstanding his guilty plea more than thirty years ago, from which he fled rather than challenged. Violating the rights of anyone, much less a thirteen-year-old girl, is not some petty victimless crime. If he is guilty, and I keep open the possibility that he may not be, his recent arrest after thirty-two years on the lam and any prospective trial should not be treated as some frivolous nuisance imposed on someone who should be acquitted simply because of his creative talents.

The French culture and communications minister, Frederic Mitterrand, said he "learned with astonishment" of Polanski's arrest. He expressed solidarity with Polanski's family and said "he wants to remind everyone that Roman Polanski benefits from great general esteem" and has "exceptional artistic creation and human qualities."

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Filmmakers have reacted with outrage at the arrest.

"As a Swiss filmmaker, I feel deeply ashamed," Christian Frei said.

"He's a brilliant guy, and he made a little mistake 32 years ago. What a shame for Switzerland," said photographer Otto Weisser, a friend of Polanski.

The Polish Filmmakers Association posted a letter on its Web site Monday from the European Film Academy secretariat that protested "the arbitrary treatment of one of the world's most outstanding film directors."

Michigan Takes First Place Again

In the net out-migration of its population. Once again, Michigan is the nation's leader in the number of people entering the state minus those leaving.  Well, leader in the negative sense, that is.

In contrast, battered Michigan, with its housing and job woes, was the least-popular place to move to. The state experienced a net loss of 109,000 people, or 1.1%, in 2008, according to the Census. Allied said its outbound shipments totaled 2,388, more than double its inbound shipments of 1,181.

Michigan's unemployment rate is currently at 15.2%. Houses can be bought cheap. With these obvious incentives, how is it that firms aren't flocking to Michigan to set up shop?

Well, for starters, its education system is mediocre and a large segment of its workforce is nearly unemployable. Worse still is the state's political system and government. Michigan's single business tax (a value added tax that serves to tax labor productivity) hamstrings business competitiveness. It's an ideal means of taxing the rest of the nation when the companies located within the state are an oligopoly without competition. But it puts your firms at a competitive disadvantage when national and international competition are present.

Labor unions and Michigan's government believe in socializing the profits of firms operating in Michigan. It's no surprise then that Michigan still ranks below average in Kauffman's Index of Entrepreneurial Activity.  This means that people can't find jobs in Michigan because they're leaving faster than new ones can be created.

The 100 Worst Movies Of the Decade

Rotten Tomatoes ranks the 100 worst movies of the past decade. No surprises there.

A List of Overpriced Cars

Courtesy of the United Autoworkers Union (UAW), here is a list of the most overpriced cars produced and assembled in North America.

HT: Autoblog

West Virginia Ninja

Wow!!!

The G-20 As A Political Monopoly

Adam Smith wrote:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

This principle applies to governments as it does to private sector companies. The United States was founded on the principle that decentralized power and both political and market competition serve to promote the general welfare of the population. Hence the separation of powers and the federalist republican form of governance. That's why I cringe when I read this.

The Group of 20 largest economies will permanently replace the G-8 as the main forum for international economic cooperation in a move expected to give greater clout to developing nations, a senior White House official said Thursday night.

The change, which has been pushed by President Obama, will be announced Friday by world leaders attending the G-20 economic summit in Pittsburgh. It would make official a growing consensus that the G-20's broader membership better represents a new global economy.

Cartels break down for numerous reasons, chief among them is competition from outsiders. How to beat that competition? Admit them as members. Other than that, you can only berate the outsiders and bully them into raising taxes.

David Henderson has more.

Capitalism

Michael Moore's new movie, Capitalism: A Love Story, opens today. From Manohla Dargis' glowing review in The New York Times,

As it happens, the most galvanizing words in the movie come not from the current president but from Roosevelt, who in 1944 called for a “second bill of rights,” asserting that “true individual freedom cannot exist without economic security and independence.” The image of this visibly frail president, who died the next year, appealing to our collective conscience — and mapping out an American future that remains elusive — is moving beyond words. And chilling: “People who are hungry and out of a job are the stuff of which dictatorships are made.”

I'm having a hard time coming up with an example of a dictatorship that emerged from a market capitalist society. There was one dictatorship that produced a market capitalist society. But without being an apologist for tyranny and oppression of any sort, it did produce favorable results for the citizens of that country. And he stepped down voluntarily in order to institute democracy. (Here's an opposing view of the effects of the coup of 1973. But I do wonder if Tigermon truly believes that the average Chilean - especially the poorest of Chileans - would have been better of had the coup not occurred?)

In fact, market capitalism has done more than any other system of which we know to permit people to lift themselves out of poverty. That can't be said about any other system known to date, especially those held in the highest regard by Moore. The evidence speaks for itself. (And don't forget this superb dialog by Bryan Caplan.) Dictatorships emerge from authoritarian ideals, which empower tyrants to use force and coercion, and to violate individuals' natural rights, under the false widespread understanding that said tyrant's objectives serve the interests of the common man. That's never been the case. (Example 1. Example 2. Example 3. Example 4. Example 5.

Dargis goes on to say:

Mr. Moore doesn’t have any real answers, either, which tends to be true of most socially minded directors in the commercial mainstream and speaks more to the limits of such filmmaking than to anything else. Like most of his movies, “Capitalism” is a tragedy disguised as a comedy; it’s also an entertainment.

As in his other movies, Moore fails to appreciate the extent to which market capitalism, which is nothing more than voluntary cooperation under a system of rules and contracts, has improved the human condition, in part by ameliorating the conflict arising from scarcities imposed by nature. It's not market capitalism that led to the deaths of tens of millions of people. In fact, Moore would never have been able to make the documentary films he has made were he to live in the world he exalts.

Finally, I'm not one to say, "If you don't like it here why don't you move?" That's a petty statement. But I do have to wonder why Moore remains in this country given his disdain for American capitalism and Western culture? If health care is that much better in Cuba, why has he not moved there? If Chavez's Venezuela is more just and produces a better society, why waste his time here? Can it be that given its warts and all, Moore actually prefers America's market capitalist society to any of the other possibilities around the world? Maybe film making is just a means for Moore to profit off the backs of the poor and the uneducated.

Update: David Boaz, as usual, offers very good commentary on the funding of Moore's movie.

A New (Free) Untapped Source of Funding Foreign Aid

I guess if you say it and it sounds good, it is desirable and has to work.

The eight United Nations Millennium Development Goals — which include eradicating extreme poverty and hunger, establishing universal primary education, reducing child mortality, improving maternal health and combating AIDS, malaria and other diseases — are meant to be reached by 2015. Morally and practically, the world must try harder to keep these promises. President Obama has made it clear that the United States has, in his words, “a responsibility to protect the health of our people, while saving lives, reducing suffering and supporting the health and dignity of people everywhere.”

And it would. Unfortunately, the results are dubious at best. If only there were a source for funding these efforts. But alas.

The one untapped source that could easily provide the amount of money needed is the foreign currency market, which handles almost $800 trillion in trades annually, all of which is untaxed. A tiny levy of 0.005 percent on transactions involving the world’s most traded currencies — the dollar, the euro, the pound and the yen — would raise more than $33 billion annually for development, while not hurting the market or affecting the average international traveler.

Yes, another government "free" lunch. No cost to anyone from taxing foreign currency exchanges . . . and it's for a "moral" cause. Who could disagree?

Unfortunately, someone forgot the importance of perspective.

Is the Worst Yet to Come?

About a year ago I posed the following question to Tyler Cowen.

But I was actually somewhat (not altogether) surprised by your support for the bailout package.  So let me ask you again, what would cause you to disagree with yourself?  I guess I'm asking because I can't provide good answers to the following questions: What information do policymakers have to get it right? And what incentive do they have to get it right? Therefore, I don't see how they will get it right, and are more likely to do long and short run harm.

A year later, and in hindsight, Tyler reaffirms his position.

If another big negative shock comes the government's liability position still could turn out to be much worse.  But if we stop and click pause and evaluate the policy today -- the answer to my question is "yes, the bailouts were a good idea."

I'm not convinced. And I obviously wasn't then. But current conditions in the real estate market, which I have been tracking locally and somewhat regionally, leave me concerned about another wave of bank failures due to real estate foreclosures. (And here.)

Ivy Zelman, chief executive of Zelman & Associates, a research firm based in Cleveland, believes three million to four million foreclosed homes will be put up for sale in the next few years. The question is whether the flow of these homes onto the market will resemble "a fire hose or a garden hose or a drip," she says.

Analysts who track the shadow market have focused primarily on the gap between the number of seriously delinquent loans and the number of foreclosed homes for sale by mortgage companies. A loan is considered seriously delinquent, which typically means it is headed to foreclosure, if it is 90 days or more past due.

As of July, mortgage companies hadn't begun the foreclosure process on 1.2 million loans that were at least 90 days past due, according to estimates prepared for The Wall Street Journal by LPS Applied Analytics, which collects and analyzes mortgage data. An additional 1.5 million seriously delinquent loans were somewhere in the foreclosure process, though the lender hadn't yet acquired the property. The figures don't include home-equity loans and other second mortgages

Moreover, there were 217,000 loans in July where the borrower hadn't made a payment in at least a year but the lender hadn't begun the foreclosure process. In other words, 17% of home mortgages that are at least 12 months overdue aren't in foreclosure, up from 8% a year earlier.

This shadow inventory further depresses the market. So does the prevalence of half-finished developments, many with higher end larger homes that the median householder cannot afford. As these homes (primarily the shadow inventory) come on the market, the result is that more homeowners are driven under water with their existing mortgages. Consequently, more people are expected to walk away from their homes and mortgage obligations. The Economist adds more.

This is not something that Tyler did not consider; in fact, he was adamant that things could become worse. I believe that it is now a given that things are headed downward, notwithstanding the recent run up in stock prices. But the problem is that banks were not permitted to fail to begin with. Had they been left to stand or fall on their own, there would have been a liquidation of the assets of insolvent banks, a selling off of their outstanding loans, and more banks calling in builder loans and putting more homes into foreclosure sooner. The inevitable had to happen, it was a matter of when.

Like Japan's "lost decade," I am afraid we've forestalled the inevitable. We've permitted insolvent institutions to survive, and consequently exacerbated the financial problems facing the banking sector and the macro economy.

Update: I forgot to add the problems looming from the oversupply of properties in the commercial real estate market. Twenty years ago I was considering leasing retail space in Sterling, Virginia. It was 24 miles outside of Washington, DC, and you had to pass cow farms before you got to the isolated shopping center. It was not as densely populated as it is today, and the median household income was probably 30% of what it is today. Retail space was letting for $17 to $21 in that area. Today in Apex, NC, a twenty minute drive from downtown Raleigh, retail space is letting for $10 per square foot and there is an abundance of empty retail outlets. This puts further pressure on banks that had they not be recapitalized, may have already foreclosed on the developers and found a market-clearing price.