Land Regulation Fosters Pricing Bubbles

“In places with fewer building restrictions, like Atlanta and Dallas, housing price volatility is moderated by a construction sector that supplies extra houses during booms and ratchets back building during downturns. In California and Massachusetts, where abundant land use restrictions keep new construction low, any uptick in demand translates into higher prices, which then come back to earth. If an area’s prices go up by an extra $100,000 over five years, then, on average, those prices fall by an extra $32,000 over the next five years.”

..Yet another example of the unintended consequences of government meddling (and yet another way the government shares in the blame of the housing bubble).

The Federal Government Hurts the Environment and the Economy

Surprising to hear a voice in Boston about how government meddling makes our lives worse, but props to Jeff Jacoby for this scathing article on how Big Brother screws things up. (Read Jacoby’s full article here.) First, consider ethanol subsidization:

The problem, laid out in two new studies in the journal Science, is that it takes a lot of land to grow biofuel feedstocks such as corn, and as forests or grasslands are cleared for crops, large amounts of CO₂ are released. Diverting land in this fashion also eliminates “carbon sinks,” which absorb atmospheric CO₂. Bottom line: The government’s ethanol mandate will generate a “carbon debt” that will take decades, maybe centuries, to pay off…

Now, consider the government’s role in bringing about the financial crisis of the era: the Subprime Mortgage problem:

The crisis has its roots in the Community Reinvestment Act of 1977, a Carter-era law that purported to prevent “redlining” - denying mortgages to black borrowers - by pressuring banks to make home loans in “low- and moderate-income neighborhoods.”…But to earn high ratings, banks were forced to make increasingly risky loans to borrowers who wouldn’t qualify for a mortgage under normal standards of creditworthiness…The financial fallout has hurt investors around the world. And all of it thanks to the government, which was sure it understood the credit industry better than the free market did, and confidently created the conditions that made disaster unavoidable.

And now Clinton wants to get the government involved in improving baseball. Yet another one of Hillary’s pipe dreams the country can certainly do without.

Cato on the Gold Standard

Lawrence H. White, Professor of Economic History at the University of Missouri-St. Louis debunks several myths about the gold standard and concludes the following:

“A gold standard does not guarantee perfect steadiness in the growth of the money supply, but historical comparison shows that it has provided more moderate and steadier money growth in practice than the present-day alternative, politically empowering a central banking committee to determine growth in the stock of fiat money. From the perspective of limiting money growth appropriately, the gold standard is far from a crazy idea.”

Read more about the seemingly antiquated monetary regime that our constitution prescribes and politicians ignore here.

McCain on The US as World Policeman

You thought the Bush Administration was hawkish on policing the world? You ain’t seen nothing yet. (from Foreign Affairs; Quoted here by Reason Magazine):

America needs not simply more soldiers but more soldiers with the skills necessary to help friendly governments and their security forces resist common foes. I will create an Army Advisory Corps with 20,000 soldiers to partner with militaries abroad, and I will increase the number of U.S. personnel available to engage in Special Forces operations, civil affairs activities, military policing, and military intelligence. We also need a nonmilitary deployable police force to train foreign forces and help maintain law and order in places threatened by state collapse.

It is ideas such as these that spawn such seemingly oxymoronic groups such as Libertarians for Obama. Apparently, socialism appeals to some libertarians more than empire building. It is truly a tragedy that the politics of the day demand that such a choice be made.

Why not ask the Iraqis?

While politicians debate about how many decades we should leave troops in Iraq, more evidence surfaces to indicate that the US is less like the penitent shopper who broke an item, and more like Lennie Small from Of Mice and Men who just can’t leave well enough alone:

“THE US occupying army in Iraq (euphemistically called the Multi-National Force-Iraq) carries out extensive studies of popular attitudes. Its December 2007 report of a study of focus groups was uncharacteristically upbeat.

The report concluded that the survey “provides very strong evidence” to refute the common view that “national reconciliation is neither anticipated nor possible”. On the contrary, the survey found that a sense of “optimistic possibility permeated all focus groups … and far more commonalities than differences are found among these seemingly diverse groups of Iraqis.”

This discovery of “shared beliefs” among Iraqis throughout the country is “good news, according to a military analysis of the results”, Karen deYoung reports in The Washington Post.

The “shared beliefs” were identified in the report. To quote deYoung, “Iraqis of all sectarian and ethnic groups believe that the U.S. military invasion is the primary root of the violent differences among them, and see the departure of ‘occupying forces’ as the key to national reconciliation.”

So, according to Iraqis, there is hope of national reconciliation if the invaders, responsible for the internal violence, withdraw and leave Iraq to Iraqis.” (link)

The Iraq situation is a complicated one. Those who respect the constitution (though few they may be) say we had no right to go in, but there may be something to be said for fixing what we’ve broken. Perhaps the issue would be a bit clearer if we included the voice of the Iraqis in our decision making. After all, it’s their lives on the line.

Romney Ignores Economic Adviser, Supports Fiscal “Stimulus”

As even the casual observer would know, virtually all of the Republican candidates are in favor of Bush’s fiscal stimulus package (with one notable exception). After all, what politician in his right mind would vote against sending $1,000 to every voter? Given the political faux paus of such a move, it’s no surprise that focus-group-fueled political machine Mitt Romney has joined the ranks of the neoconservative yes-men in supporting such a measure, in spite of the advice of one of his own economic advisers. As you read Mankiw’s analysis, ask yourself whether Romney thinks he knows better than the Harvard PhD economist who literally wrote the book on macroeconomics, or if he’s simply saying what the focus groups want to hear (here’s the link):

When designing a tax system and evaluating tax proposals, policy analysts have at least four goals in mind:

1. Efficiency: The tax system should distort incentives as little as possible (and, in the case of externalities and Pigovian taxes, correct incentives when necessary).
2. Intergenerational equity: The tax system should raise enough revenue so current generations do not unduly burden future generations.
3. Egalitarianism: The tax system should try to achieve a more equal distribution of after-tax incomes.
4. Stabilization: The tax system should help maintain the economy at full employment.

The current debate over fiscal stimulus involves trading off these goals. The stimulus package being discussed is mainly aimed at achieving goal 4, but it does so at the cost of sacrificing goals 1 and 2 to some degree. Efficiency is sacrificed because the phase out raises effective marginal tax rates and because the higher future taxes that result from the extra government debt will likely be distortionary. Of course, the phase out is there in order to achieve goal 3: This is the classic tradeoff between efficiency and equality.

Differences of opinion arise when policy analysts weight these goals differently. Advocates of fiscal stimulus put a large weight on goal 4. Critics of fiscal stimulus come in two varieties. One type of critic discounts goal 4 entirely because they are skeptical of Keynesian theories that underlie this goal. A second type of critic admits that goal 4 is legitimate in principle but believes that in the current environment macroeconomic stabilization is best left to monetary policy so fiscal policy can focus on goals 1 and 2. I am in this latter category.

Romney supporters, add this to your list of Romney’s conveniently adopted views (hint: abortion, gay rights, and federal education policy should already be there). Of course, he could really believe all the things he claims to– the political convenience of his changes in position could just be a coincidence…

Would a Ron Paul Presidency Hurt Israel?

Some have claimed that a Ron Paul presidency would be bad for Israel. Shimshon Weisman, an orthodox jew who lives in Israel, begs to differ (thanks to Lew Rockwell for the post):

“There are a number of issues here. First, aid to Israel. It has been obvious for a long time that Israel does not need this aid. Israel’s GDP per capita is at European levels and rising. The aid itself is a form of corporate welfare in that it must be spent in America. It comes with many strings attached.“It allows the government to avoid sorely needed economic reforms.

“Along with the aid Israel receives, potential or actual enemies receive several times more. That aid doesn’t just allow the recipient nations to avoid reforms, it actually props them up and allows them to continue to maintain a bellicose stance against Israel (this certainly includes Egypt, with whom Israel has a peace treaty in place).

“When the entire world condemned Israel, including President Reagan on down in America, Dr. Paul supported Israel’s right to act in its own self-interest (and preemptively, I might add) in its bombing of the Osirak reactor in Iraq. He had absolutely nothing to gain by taking this position, and nothing to lose by following the herd in its condemnation of Israel.

Does the Constitution Also Scare Elizabeth Edwards?

The Economist quotes Elizabeth Edwards expressing her fear of Mike Huckabee and Republicans in general:

“[Mike Huckabee] doesn’t believe in evolution and has some nutty views about what it is we should do about ending violence in our inner city—we should make sure all of our young people are armed. Republicans scare me.”

While there are legitimate reasons to fear, or at least disagree with, Mike Huckabee (e.g. his tax reform legislation that doesn’t actually eliminate any existing taxes) and Republicans (e.g. their determination to make criminals of people who use or prescribe medical marijuana in accordance with state laws), the right to bear arms is not one of them. Reading Edwards’ quote above does make gun ownership seem like a silly answer to ending violence, but if one looks at the empirical evidence, there is little reason to believe that making it a crime to own a gun does anything but ensure that the only people who own guns are criminals. Consider the following examples of gun ownership deterring crime:

1. In 1966 the police in Orlando, Florida, responded to a rape epidemic by embarking on a highly publicized program to train 2,500 women in firearm use. The next year rape fell by 88 percent in Orlando (the only major city to experience a decrease that year); burglary fell by 25 percent. Not one of the 2,500 women actually ended up firing her weapon; the deterrent effect of the publicity sufficed. Five years later Orlando’s rape rate was still 13 percent below the pre-program level, whereas the surrounding standard metropolitan area had suffered a 308 percent increase.
2. During a 1974 police strike in Albuquerque armed citizens patrolled their neighborhoods and shop owners publicly armed themselves; felonies dropped significantly.
3. In March 1982 Kennesaw, Georgia, enacted a law requiring householders to keep a gun at home; house burglaries fell from 65 per year to 26, and to 11 the following year.
4. Similar publicized training programs for gun-toting merchants sharply reduced robberies in stores in Highland Park, Michigan, and in New Orleans; a grocers organization’s gun clinics produced the same result in Detroit.

Ron Paul: The Most Electible Republican

The 2008 presidential election is rapidly approaching, and Republicans are going to have a difficult time holding onto the presidency after the Bush administration. Prediction markets like Intrade provide a fairly accurate assessment of the probability of each candidate winning the primary nomination, as well as the probability of each candidate becoming president. In determining which candidate to send to a general election, however, primary voters should choose the candidate most likely to win the general election, given that they receive the primary nomination.

Non-Interventionism ≠ Isolationism

Bruce Miller of The Blue Voice confuses non-interventionism with isolationism:

“Let me start this by saying as I’ve said in a number of posts before that most warnings about ‘isolationism’ are fake, straw-man arguments. At least outside of Ron Paul’s political corner, there are no actual isolationists in American politics…If you listen carefully to what Ron Paul and similar isolationist rightwingers are saying, their brand of nationalism is coming from a very similar place. They want to discard normal diplomacy, foreign aid, even the threat of economic and trade sanctions from the set of foreign policy tools available to the United States. They are not far from the neocons in that essential focus. As the Overstreets described the perspective 43 years ago, “What we might need to do abroad, in military terms, could be done by a well-placed bomb or a regiment of Marines.”

Bruce mischaracterizes Congressman Paul’s foreign policy. Paul does not advocate “pulling back out of the world” altogether, but merely eliminating US military intervention unrelated to our national security. Whenever he talks about the success we’ve had by leaving Vietnam, he also talks about the stability that has come from our actively trading with them: