The Liberal Order

The World's Population: A New Milestone (In Idiocracy)

The world's population symbolically reached 7 billion today. (Not really, but the UN decided to use a birth today to commemorate what will come in the near future.) 

"Seven billion is a number we should think about deeply," he said.

"We should really focus on the question of whether there will be food, clean water, shelter, education and a decent life for every child," he said. "If the answer is 'no,' it would be better for people to look at easing this population explosion."

I remember when we hit six billion; there was this same sentiment, the sentiment expressed by Paul Ehrlich in 1970. In response to this sentiment, I remember one commentator in 1999 making the important point that "It's not that we're multiplying like rabbits, it's that we're no longer dying off like flies." 

So for those lamenting the growth in the world's population, whom do you propose killing off to reduce it? Between which two countries should we instigate a war to reign in the number of people on the planet?

But things have been slowing down.

But Poston said a combination of factors led to what may be the most significant demographic shift ever.

In the industrialized West, improved methods of birth control and greater opportunities for women in the workplace and in society meant the end of 5,000 years of women generally being considered society's baby-makers.

In China, there has been aggressive enforcement of a "one-child" policy, drastically reducing population growth rates.

Worldwide, urbanization has reduced the need for large families beneficial in rural agricultural areas.

Reasons for significant growth rate declines in places like Iran, where the rate has fallen from 7.0 in 1974 to 1.9, remain more of a mystery, but Poston said they probably could be traced to cultural changes that can be very difficult to reverse.

And from what did those changes derive? What about vast changes in economic growth around the world? The adoption of market capitalism in the West since the nineteenth century? In parts of the developing world like Brazil, India, and China over the past four decades? If the argument is that we should reduce the size of families, well the best solution for that is increased economic growth. And for that, we need what the West initiated two to three centuries ago. And where is that going now? 

According to the United Nations Population Fund, the seven-billionth child is most likely to be a boy born in India or China, but the trend of fertility in the longer term is in a different direction, Dudley Poston, a professor of sociology and demographics at Texas A&M University, told Reuters.

For the first time ever, the human reproduction rate is slowing, in many places slowing significantly, and the slowing growth is not only happening in Europe and Japan, he said.

"Once your fertility rates drops below two, it is very very hard to get it to go back up again," Poston told Reuters.

"We now have 75 countries in the world where the fertility rate is below two," meaning the average woman is having fewer than two children.

It seems as if some of the world's leading economies are moving in the opposite direction. Let's hope the developing world adopts market capitalist policies more rapidly than the West rejects them.

Oh yeah, here's Robert Higgs explaining the cause of that decline. (HT: Don Boudreaux)

Steven Landsburg: Repeal the Death Tax

Steven Landsburg argues for the repeal of the death tax as a means of making us all  better off, especially the poor.

We're all living on other people's inheritances and investments in our economy. Just five generations ago, the average American worked 60 hours a week, took no vacations, and earned less than the modern-day equivalent of $6,000 a year. He or she rarely traveled more than a few miles from home, had no central heat or running water, and died at age 50.

Today we earn more and work less because of better factories, more powerful machinery, and far more advanced technology. We work less around the house because of self-cleaning ovens and frost-free refrigerators and automatic washing machines. We travel far from home in our trains, planes and cars, or we access the world virtually without ever leaving our climate-controlled living rooms. We live longer because of better hospitals, better medicines, better research institutions, and better trained doctors.

Where did all that stuff—all those factories and computers and research towers—come from? It was constructed from resources and capital that became available to investors because somebody—perhaps some "rich" person—was being frugal. Often, that frugality was motivated by the desire to leave a bequest. Absent the death tax, we'd have had even more frugality and more resources available for the kind of investments that benefit all of us.

 

Bank of America Backtracks On Its $5 Fee

Following the ill-advised move by Netflix, BofA is backing down on its $5 monthly fee it now charges for deposit accounts. 

Under the new plan, customers would be able to exempt themselves by having their paychecks deposited directly with Bank of America (BAC,Fortune 500), maintaining minimum balances or by using Bank of America credit cards.

As much blame for the financial crisis as deregulation of the banking sector gets (it wasn't the fault of deregulation), deregulation actually made the sector more competitive. So much so that retail banking services are not as profitable as they once were, and likely not worthwhile for the big banks to continue serving, at least in their present form. 

Add to the less profitable retail banking services the following:

The banks' decision to impose debit card fees is widely viewed as a response to the Durbin Amendment to the 2010 Dodd-Frank financial reform bill. Enacted in July, the provision reduces the fees banks can charge merchants for debit card purchases to 21 cents from 44 cents.

Another impact of the Dodd-Frank bill is to bifurcate the banking system into big mega banks with assets in excess of $10-$20 billion and small regional banks with assets less than $10 billion. Gone will be the super regional banks since under the new regulation they would have to compete with the mega banks under regulations controlled by the latter.

My prediction is that by the end of the decade you'll see two banking sectors. Super regional banks like BB&T that also offer successful non-bank financial services like insurance and wealth management will be bought out by the mega banks, leaving a few, much larger and too-bigger-to-fail, mega mega banks. They will get rid of most, if not all, of their branches and morph into more like investment banks with limited deposit account services. Deposit accounts will be handled totally electronically, with account holders having all money directly deposited and withdraws handled completely by ATMs or EFTs. Gone will be checks and ever visiting a branch. (When was the last time you stepped foot into a bank?) Loan applications will be conducted electronically, with the possible exception of smaller branches maintained in certain locales to serve niche needs. If you want an example of this type of commercial banking model, look at USAA. 

On the other end, the few thousand remaining smaller banks will merge into regional banks of less than $10 billion in assets or go out of business. They will maintain branches that largely serve the retail banking needs of local business that make regular cash deposits. They will provide loans to local business like homebuilders and other small businesses, car loans, and who knows, maybe become more like cash advance lenders. 

Paul Moreno On FDR and the "Brown Scare"

My friend Paul Moreno has a nice op-ed in today's Wall Street Journal (rr) about how President Obama is taking the low road blazed by FDR. Paul notes

American students are all familiar with the "Red Scare" that followed World War I, and even more with the one led by Joseph McCarthy in the early years of the Cold War. But they almost never hear of the "Brown Scare" of the 1930s, when liberals painted political opponents as incipient fascists.

Interview With Simon Johnson About Bank Regulations

Recommended for Money and Banking students.

Watch The Ballad of Diamond Jim - Annotated on PBS. See more from PBS NewsHour.

 

Do the rich pay enough in taxes?

Scott Adams has a nice blog piece regarding the flat tax - he's against it.

He has the following accurate comment:

The flat tax diversion is a deliciously cynical way to maintain the status quo while appearing to be in favor of change.  The diversion works because the middle class has been duped by the media into thinking high income people pay a lower tax rate than the general public, so maybe a flat tax will set things right. That's the power of anecdotes. If you hear a few stories about Warren Buffett paying a lower tax rate than his secretary, you assume your dentist is beating the system too. He probably isn't. [MS: Emphasis mine]

He's correct. One thing to look at is the following chart that shows the total federal tax liabilities (for all federal taxes paid) from the top 20% of income earners versus the bottom 80% between 1979 and 2007. The top 20% of income earners contributed 56.4% of all federal revenues in 1970 and 68.9% by 2007. By comparison, the bottom 80% contributed 43.5% of all federal revenue in 1970 and just 30.9% in 2007. The federal government has increasingly relied on the top-20% of income earners to fund its programs, notwithstanding arguments that the highest income earners don't pay their "fair share" of income taxes. 

But maybe this disproportionate increase in revenue shares paid by the rich is due to the fact that the rich are getting richer at a much greater pace than is everyone else. Assuming no inflation, say that the income of some rich person in 1979 was $100K. Let's also assume that she paid an average tax rate of 28%, or $28,000 in all federal taxes. Now, compare that to someone with $25,000 in income in 1979 who paid just 14%, or $3,500, in all federal taxes, one-eighth what the richer person paid.

By 2007, that high income person's income jumped to $200k while the other saw her income rise to just $35,000K. Assuming the same average tax rates, the richer person now pays $56,000 in all federal taxes while the lower income person pays $4,900, now one-eleventh what the richer person paid. The higher income person pays an increasingly disproportionate share of all tax revenue only because his or her income rose disproportionate to the others. 

That may indeed be true, maybe it's not, but the graph below shows the average tax rates paid by each quintile for all federal taxes (not just income taxes). Notice that even with the Reagan and Baby Bush tax cuts, about which the left loves to complain, the average rate paid by the top quintile fell almost negligibly between 1979 and 2009. In 1979, the top quintile surrendered 27.5% of her income to the federal government through various means. By 2007, that dropped just to 25.1%. (It's estimated to be 29% for 2010.)

By comparison, the average tax rates for all federal revenue for all other income quintiles decreased by a far greater rate than it did for the top. The bottom quintile saw the tax rate on its income fall 50%, from an average rate of 8% to just 4%. 

Warren Buffet can complain all he wants about how unfair it is that he pays such a low percentage of his income to the federal government, but he's both ignoring the taxes he pays to the federal government in other ways, including corporate income taxes that are paid prior to his receiving dividend payments, and/or he's refusing to see his situation as anomalous to the median taxpayer in his income range.

There Are No Solutions, Only Tradeoffs

Well stated:

HT: Belinda via Carol

Dewey Bozella and the Innocence Project

Dewey Bozella is receiving a lot of press for his win at age 52 of a professional boxing match. Oh, and for his overcoming 26 years in prison for a crime he didn't commit. 

This video is pretty incredible and says a lot about this man.

 

Forward Looking or Backward Looking Peanut Butter Producers?

NEW YORK (CNNMoney) -- Brace yourselves, peanut butter lovers -- prices are set to spike following one of the worst peanut harvest seasons growers have seen in years.

Prices for a ton of runner peanuts, commonly used to make peanut butter, hit nearly $1,200 this week, according to the U.S. Department of Agriculture. That's up from just $450 per ton a year ago.

It won't be long before consumers see this price increase reflected on store shelves.

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What's to blame for this sticky situation? The intense heat and drought that hit the southern U.S. this year, said John Beasley, a professor of crop physiology and management at the University of Georgia.

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In addition, Beasley said, high prices last year for other crops, such as cotton, corn and soy beans, led farmers who might otherwise have grown peanuts to focus their efforts elsewhere.

Overall, U.S. peanut production will hit 3.6 billion pounds this year, down 13% from last year, according to a Department of Agriculture report released this week.

Story here.

Now I have not been checking the prices of peanut butter lately, but my guess is that by the time this hit the news - in fact, way before - prices had already risen. 

Producers and retailers are no fools; if they expect higher prices in three months, they withhold supply today, thus driving the price up immediately. And despite calls of how unfair are the actions of peanut butter producers or retailers since they did not pay more for what is currently in stock, as consumers we want this to happen. The higher price today provides us better incentive to smooth consumption through time by cutting back on consumption today when we have a lot to transfer some to tomorrow when we expect to have less.

More evidence of the total failure of the "war on drugs"

In the latest innovation uncovered by law enforcement, smugglers in the border town of Nogales, Arizona were bringing drugs into the U.S. for the cost of a quarter.

The parking meters on International Street, which hugs the border fence in Nogales, cost 25 cents. Smugglers in Mexico tunneled under the fence and under the metered parking spaces, and then carefully cut neat rectangles out of the pavement. Their confederates on the U.S. side would park false-bottomed vehicles in the spaces above the holes, feed the meters, and then wait while the underground smugglers stuffed their cars full of drugs from below.

When the exchange was finished, the smugglers would use jacks to put the pavement "plugs" back into place. The car would drive away, and only those observers who were looking closely would notice the seams in the street.

Story here.