Russell Roberts's Blog, page 1413

Not from the Onion

From the Boston Herald (HT: Drudge)

Encouraged by Michelle Obama's campaign to reduce childhood obesity, the company that owns the Olive Garden, Red Lobster and four other popular restaurant chains is pledging to cut the calories and sodium in its meals and overhaul its kids' fare.

Darden Restaurants Inc. was unveiling the changes Thursday, with the first lady on hand to lend support.

The company will pledge to reduce the calories and sodium in all its meals by 10 percent over five years, and by 20 percent over 10 years. For children, French fries and sugar-sweetened beverages will become the exception and not the rule.

It's very easy to reduce calories by 10%–just make the portions a little bit smaller. I doubt that's what they have in mind. And a restaurant making a 10 year pledge is a little strange. It's not going to be very much in our consciousness ten years from now. But, fine. It was the next paragraph that made me wonder if I was reading The Onion or something out of a Monty Python sketch:

All kids' meals will automatically come with a side of fruit or vegetables and eight ounces of 1 percent milk unless an adult requests a substitute, Drew Madsen, president and chief operating officer of Orlando, Fla.-based Darden, told The Associated Press.

Should be great for business. Kids at Red Lobster will love vegetables and milk with their fried fish. I'd love to know the real story here.

Quotation of the Day…

… is from page 14 of UCLA Econ Department Chairman Roger E. A. Farmer's 2010 book How the Economy Works:

Keynesian economists in the Obama administration and their supporters in academia and in the media have not provided an internally consistent theory that explains why the free market fails to deliver full employment.

Keynes's book, The General Theory, did not provide such a theory.  The book is difficult to read, internally incoherent, and inconsistent with a body of economic theory that has been widely accepted for at least 200 years.  More important, it is inconsistent with the existence of the stagflation that we observed in the 1970s.

Green dog bites man

Here's a shocker from the Washington Post:

A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.

The program — designed to jump-start the nation's clean technology industry by giving energy companies access to low-cost, government-backed loans — has directly created 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies.

President Obama has made "green jobs" a showcase of his recovery plan, vowing to foster new jobs, new technologies and more competitive American industries. But the loan guarantee program came under scrutiny Wednesday from Republicans and Democrats at a House oversight committee hearing about the collapse of Solyndra, a solar-panel maker whose closure could leave taxpayers on the hook for as much as $527 million.

The GOP lawmakers accused the administration of rushing approval of a guarantee of the firm's project and failing to adequately vet it. "My goodness. We should be reviewing every one of these loan guarantee" projects, said Rep. Marsha Blackburn (R-Tenn.).

Obama's efforts to create green jobs are lagging behind expectations at a time of persistently high unemployment. Many economists say that because alternative-­energy projects are so expensive and slow to ramp up, they are not the most efficient way to stimulate the economy.

Sometimes, "many economists" are right. Here's some wisdom from one economist:

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

F.A. Hayek

The plan was to create (or save) 65,000 jobs. It apparently didn't turn out that way.

Who cares? It's stimulus!

The WSJ reports:

Nearly $19 billion in state unemployment benefits were paid in error during the three years that ended in June, new Labor Department data show.

The amount represents more than 10% of the $180 billion in jobless benefits paid nationwide during the period. (See a sortable chart of each states' overpayments) The tally covers state programs, which offer benefits for up to 26 weeks, from July 2008 to June 2011. Layers of federal programs that help provide benefits for up to 99 weeks weren't included.

Improper payments most often occur when recipients claim benefits even though they have returned to work; employers or their administrators don't submit timely or accurate information about worker separations; or recipients don't correctly register with a state's employment-service organization.

Big difference between those categories. Maybe we'll find out the ratios.

Jim Crow 2.0

In today's Wall Street Journal, letter-writer Rob Sobhani proposes that the high rate of black unemployment be reduced by deploying better "immigration governance" – that is, Sobhani wants to stop all those Hispanics from competing against blacks for jobs.

It's an irony as deep as it is unintended that what is today rightly regarded as unjust, uncivilized, and economically destructive – namely, Jim Crow legislation that protected workers of one race from having to compete for jobs with workers of another race – is offered in 2011 by this Mr. Sobhani and many others as a policy worthy of a civilized society.

2nd Quotation of the Day…

… is from the effervescent James Grant's review, in the Wall Street Journal, of Sylvia Nasar's new book Grand Pursuit: The Story of Economic Genius:

Economics may be an "engine of analysis," as Alfred Marshall said, or an "apparatus of the mind," as Keynes put it. But economists no more set the world to producing and consuming than baseball statisticians hit home runs. Then, too, you'll never see Bill James, the dean of the baseball sabermetricians, trip up a base runner the way the government thwarts an entrepreneur. The intervention-minded economists are the ones who give the government its big ideas.

Beware especially of any economist who poses as a genius.

The Taking Tree

This short video conveys several truths enjoyably and with humor.  (Warning: an F-bomb at the very end – but G-rated till then.)  (HT Michael Ozias)

Some Links

David Henderson, with some help from Tim Worstall, weighs in on the new and much-trumpeted report on America's current rate of poverty.

Cato's Dan Mitchell weighs in on the same issue.

AEI resident scholar Andrew Biggs (formerly with the Social Security Adminstration) weighs in on the debate over whether or not Social Security is a Ponzi scheme.  (His answer: basically, yes it is.)

Over at Forbes, Merrill Matthews weighs in on the same debate.

The Institute for Humane Studies's LearnLiberty video project is churning out too many great, concise videos to keep up with!  Here, for example, is the great Steve Davies on government debt. Here's philosopher Aeon Skoeble on "What are Rights?"  And here's economist Art Carden on chain stores.

Finally, here's a story on how Pres. Obama has just renewed Uncle Sam's commitment – if protectionism is sound economic policy – to helping Cubans continue to prosper.  Cuban don't even have to pick up the tab to pay their own customs agents to search for and block wealth-destroying goods and services that might be imported from the U.S.  (HT Rick Lowe)

Are Property Rights Usefully Regarded as Sticks in a Bundle of Rights?

My GMU colleague Dan Klein doesn't like the now-familiar (at least to scholars in law-and-economics) characterization of property rights as being sticks in a bundle of rights – as in, for example, one of the "sticks" in the "bundle" of rights that I have as owner of a piece of land in Fairfax County, VA, is to grant to my neighbor an easement to cross my land; should I convey (by whatever means) such an easement to my neighbor, I'd transfer to him one of the "sticks" in my larger "bundle" of rights.

I've always liked the "sticks-in-a-bundle" idea.  (I think that I first encountered this notion, not in the legal literature, but in something that Armen Alchian wrote.)  But, as I say, Dan thinks this idea to be flawed, or at least misleading.

The latest (Sept. 2011) issue of Dan's own Econ Journal Watch is a collection bundle of articles, on this very issue, by some of America's leading legal scholars.  I'm eager to absorb it all.

Some of the questions that Dan tells me he's especially eager to have debated include:

What do you make of this issue?  Do you think it is "merely" a definitional or semantic dispute of little importance?

If you do think it important, where do you stand?  Is describing property as a "bundle of rights" inimical to classical liberalism, or is it, as Richard Epstein contends, a bulwark for classical liberalism?

Open Letter to a Department of Energy Official

Mr. Daniel Poneman

Deputy Secretary

U.S. Department of Energy

Dear Mr. Poneman:

In today's USA Today, you struggle gamely to prevent the bankruptcy of the heavily subsidized – and politically well-connected – solar-panel producer Solyndra from raising doubts about the alleged wisdom of government subsidies to sexy industries ("'Perfect storm' sank Solyndra").  Disappointingly, you play a trump card favored by crony capitalists: "competitiveness."

After asserting that the prize for "winning" is "a vast economic and employment opportunity to be seized by companies that succeed in this sector," you warn ominously that "Our competitors know this, and are playing to win."

Economies grow (or stagnate) depending on how little (or how much) their governments interfere with producers' abilities to specialize in those activities for which each has a comparative advantage.  Anyone who understands comparative advantage knows that a country that "wins" an advantage in one industry necessarily "loses" an advantage in other industries.  To understand comparative advantage, therefore, is to understand that economies (unlike firms in the same industry) don't compete with one another.  To understand comparative advantage is also to understand that, with free trade, a comparative disadvantage at producing, say, solar panels is in no way a disadvantage at consuming solar panels.  Quite the opposite.

Rather than excuse Solyndra's failure as being the unlikely result of a "perfect storm" of bad luck, you should recognize that this failure is evidence of the truth of Paul Krugman's 1994 observation that "a government wedded to an ideology of competitiveness is as unlikely to make good economic policy as a government committed to creationism is to make good science policy."

Sincerely,

Donald J. Boudreaux

Professor of Economics

George Mason University

Fairfax, VA 22030