I promise not to throw a touchdown if your cornerback falls down.

I think there’s more to this excerpt from Robert Samuelson’s Wednesday column on China’s trade policies than he’s explicitly stating:

Even Chinese officials favor higher local demand. But either they can’t or won’t stimulate it. Personal consumption spending is a meager 38 percent of GDP; that’s half the U.S. rate of 70 percent. The Chinese save at astonishingly high levels, partly because they’re scared of emergencies. The social safety net is skimpy. Health insurance is modest: Out-of-pocket spending covers half of medical costs, reports economist Nicholas Lardy of the Peterson Institute. There’s no universal Social Security, and only 17 percent of workers have pensions. A mere 14 percent are covered by unemployment insurance.

It would take a much longer essay than I’m willing to write on this to unpack every implication here. Primarily, though, Mr. Samuelson is implying that China doesn’t have enough socialism. Could those oversights be a sign that the Chinese political class is more interested in enriching itself and its supporters than caring about the citizenry? Of course, that’s the experiential reality of socialism, but pay that no mind. So maybe saving for those emergencies has more to do with the way their “leaders” plunder the country’s wealth. Of course, if it’s true the Chinese save at astonishingly high levels, wouldn’t that bust the myth that a publicly-financed and provided safety net is necessary?

It is not “protectionist” (I am a long-standing free-trader) to complain about policies that are predatory; China’s are just that. The logic of free trade is that comparative advantage ultimately benefits everyone. Countries specialize in what they do best. Production and living standards rise. But the logic does not allow for one country’s trade systematically to depress its trading partners’ production and employment. Down that path lie resentment and political backlash.

Again, Mr. Samuelson is saying nothing more than China isn’t socialistic enough. It isn’t interested in the common good, only its own self-interest. And somehow this has the ability to depress its trading partners’ production and employment. Perhaps it’s that, or it could be the stupidity of implementing your own socialist protectionism rather than operating out of your own self-interest. I’m not interested in blaming the victim, but if a country lets itself get pushed around because it wants to insist on different rules, we can’t blame competition and free trade for the outcome.

For example, I negotiated with a recruiter earlier this week. She offered a contract rate significantly below what I’m willing to accept. However, I’m not willing to accept less because I know what my time is worth in this market. I gave her a bare minimum and she was nowhere close to that. I said no.

The next day, she called back and told me she’d managed to secure a higher rate. She was very proud of herself, although it was still significantly less than what I quoted her. I said no again.

Approximately five minutes after we hung up, she called back and said I’d won, she could match the rate I quoted as my bare minimum. This came as no surprise to me because I’ve done my homework on my situation. I still said no, but that’s because I didn’t want to trade negotiate with her anymore. She only met my minimum, and I’m working on better deals for my time and knowledge, which is my product. Under Mr. Samuelson’s analysis, it’s possible to conclude that I’m hurting her company’s production and employment because I didn’t seek the common good, which I presume means reaching a deal, regardless of the terms. Self-interest shouldn’t matter.

Nonsense. I seek what’s in my own interest. I trust my trading partners to do the same.

Shallow Fun With Numbers

Andrew Sullivan links to this story and states that the data suggest that vegetarianism is peaking. From the article:

A number of both positive and negative factors have impacted on growth in the vegetarian foods market over the past 7 years (since 1998/1999). …

On the negative side, the number of vegetarians in the population has been in decline since 1999, after peaking in 1997. Nevertheless, continued growth in vegetarian foods sales supports the fact that the market has become more mainstream with maturity, with such foods purchased and eaten by many people who would not describe themselves particularly as being vegetarian. They might see themselves as meat reducers, or might be seeking healthier and more varied diets. Vegetarian foods are claimed to be lower in saturated fat, and contain higher levels of dietary fibre, minerals and vitamins.

Perhaps the data suggest, as a whole, that vegetarianism is decreasing. But is the sales volume of manufactured (i.e. processed) vegetarian foods a sufficient indicator, sans any other data? The sale of a banana is the sale of vegetarian food. The same applies to a cucumber. Even eggs, milk, and yogurt are vegetarian and could be considered applying to the data on vegetarianism. If they’re increasing because people are swapping bacon for eggs at breakfast, that could imply an increase in vegetarianism, or “meat reduction”.

Consider my pattern of grocery purchases. In the past, I’ve relied heavily on manufactured processed vegetarian foods. Over the years I’ve reduced my consumption of those types of foods. Part of that change has been my full evolvement to veganism, but I’ve also focused on consuming less sodium and chemicals necessary to create such processed foods. As such, I purchase more from the corner of the supermarket and less from the middle.

Does this imply that my vegetarianism has decreased because I buy fewer processed vegetarian food than I purchased in the late ’90s? Or is it proof that one data point does not sufficiently represent the market? Again, maybe vegetarianism is in decline. But such a trend, if occurring, can’t be confirmed by this research alone.

Should I get business subsidies?

Because Democrats apparently can’t look at the calendar to figure out when summer months are coming, among other simpler solutions that don’t involve market interference, they find it more expedient to blame oil companies.

Standing in front of an Exxon station near the Capitol on Wednesday with the posted $3.05-a-gallon price for unleaded regular in the background, half a dozen senators railed against the oil industry.

Sen. Charles E. Schumer (D-N.Y.) said Congress would look into breaking up the giant companies. Sen. Maria Cantwell (D-Wash.) promoted her anti-price-gouging bill, which the Senate Commerce Committee adopted on Tuesday. And Sen. Bernard Sanders (I-Vt.) backed a windfall profits tax, pointing to $440 billion in profits over the past six years for the nation’s five biggest oil companies.

“I think it’s time to say to these people, ‘Stop ripping off the American people,’ ” Sanders said.

In order…

  • Good plan. Investment in oil discovery and refining is expensive. Small firms with a smaller capital base are best suited to the task.
  • Right, if the price is “high”, or higher than people want to pay in an ideal world ($0? negative prices?), means that companies are “gouging”. Who needs any context into costs, demand, or other basic economic concepts?
  • Again, “windfall” is an empty buzzword, for it pretends that the laws of economics can be violated. Particularly, as Sanders said, the silly notion that oil companies are “ripping off” American consumers.

For example:

While they haven’t curtailed their driving habits, two-thirds of U.S. adults said in a mid-April Washington Post-ABC News poll that gasoline price increases had caused “financial hardship” for their households; 36 percent said that the hardship had been “serious.”

Rather than first look to strategies individuals can immediately implement, Congress needs to step in and threaten to transfer money from one group (oil company stockholders) to another group (gas consumers). We must make certain to ignore the obvious fact that the former is a subset of the latter.

For a real life example, consider my current unemployment lack of a contract¹. Rather than complain that my income is dramatically reduced while continuing to spend, I’ve curbed my spending in response to an adverse situation. I deem zero income to be “bad”. My actions reflect that.

American drivers don’t seem to agree that gas prices are all that “bad”.

¹ A situation that appears nearing its end, thankfully. Hopefully.

Pop goes the market.

I’m not surprised:

President George W. Bush’s January, 2006, declaration that the U.S. is “addicted to oil” marked the beginning of a gold rush for corn growers: The government policies the comment helped spur have been a boon for the producers of corn-based ethanol, the all-American fuel that now displaces about 4% of U.S. gasoline supply. Over the past 18 months, farmers have rushed to plant more corn—and are set to produce a record crop this year—while small-time entrepreneurs and agricultural giants alike have built plants to expand capacity. A handful of initial public offerings have fed investors’ desire to get in on the action.

Government sets incentives outside of the market, so the market responds. In this case, farmers plant more (or switch to planting) corn. That’s no surprise. Nor is this:

Lurking behind ADM’s gloomy news are doubts about the future of corn ethanol. A growing number of analysts, once bullish on the product, are warning that an oversupply may be coming as soon as this year. On Apr. 27, a Lehman Brothers (LEH) report projected that production will outstrip demand in the second half of 2007, measuring the domestic thirst for corn ethanol at 420,000 barrels per day but supply at 445,000 barrels a day, mainly because the U.S. lacks the infrastructure to move the product to market.

“There’s tremendous capacity coming online, but the infrastructure isn’t there to keep up with it,” says Michael Waldron, an oil markets research analyst at Lehman Brothers who co-authored the report. “We need a nationwide system to pipe it, and until that happens, we’ll likely have an excess of product.”

Just a quick pause to speculate on who’s going to pay for that infrastructure. You know it’s coming.

Waldron says the problem isn’t a lack of demand for ethanol, which remains high, especially given that the federal Renewable Fuel Standard mandates at least 4 billion gallons, or about 3% of all U.S. transportation fuels, to come from alternative sources today, and nearly double that amount, or 7.5 billion gallons, by 2012. Lawmakers are expected to give the mandate a significant boost later this year. Rather, the problem is getting ethanol to consumers in various parts of the country. Ethanol requires a separate piping system from gasoline, and since Uncle Sam hasn’t appropriated funds to build such infrastructure, ethanol is now primarily transported by rail. But the rail system extends only to major metropolitan areas—not to mention the dual problems of its high cost and carbon dioxide emissions.

So, let’s see, we get energy dependence, if you count only needing oil for 96% of our gasoline, as well as increased carbon dioxide emissions to transport what the government mandates we buy. (We won’t need foreign oil if we choke to death? Is that the plan?) And we’re supposed to accept that this is because the government hasn’t provided the funds to build such infrastructure? I’m not buying that argument. If the demand were truly “high”, private entities would be building a pipeline without government subsidies. That those entities are waiting for the pipeline suggests some combination of insufficient profit motive from the pipeline’s cost structure and market infantilization.

Either way, it implies that ethanol is not ready for prime time, despite the grandiose wishes of politicians. I’m reminded that the facts, although interesting, are irrelevant¹, especially when politicians consider public policy.

Looking at the consequences of this, though, how much economic hardship will result for those who rushed to grow more corn to produce ethanol that can’t be shipped economically? I have little sympathy for those people because they ignored economic signals for the quick buck, but I’m sure a government bail-out will be “necessary” because “the market” doesn’t work. It’s amazing how consistently government creates problems that “prove” how necessary more government is to our well-being and survival.

¹ Was it Einstein who said this?

“Read the track listing” will have new meaning.

Why do legislators hate the environment?

Independent merchants selling and buying used CDs across the United States say they are alarmed by stepped-up pawn-broker-related laws recently enacted in Florida and Utah and pending in Rhode Island and Wisconsin.

In Florida, the new legislation requires all stores buying second-hand merchandise for resale to apply for a permit and file security in the form of a $10,000 bond with the Department of Agriculture and Consumer Services. In addition, stores would be required to thumb-print customers selling used CDs, and acquire a copy of state-issued identity documents such as a driver’s license. Furthermore, stores could issue only store credit — not cash — in exchange for traded CDs, and would be required to hold discs for 30 days before reselling them.

I think it’s reasonable to assume that some CDs that would’ve ended up in a used record store will now end up in landfills. I can assure you I wouldn’t go through the bother, not to mention the Big Brother statism, involved just to earn a few dollars of store credit. I’d find someone I know who wants the CD, or I’d toss it in the garbage. If the goal is to force incentivize people to discard their unwanted property in a sub-optimal manner, mission accomplished.

This perverse incentive to discard used CDs wouldn’t involve rent-seeking, I’m sure.

Meanwhile, [National Association of Recording Merchandisers] says it will try to help shape the pending legislation. In Florida, retailers selling previously owned videos and videogames managed to carve out a partial exemption from the law so that they do not need a permit and have to wait only 15 days before reselling the merchandise.

The article doesn’t state any more than that, but the mere existence of an exemption indicates what’s inevitably going on behind the scenes. It’s shameful.

Link via Hit & Run.

Catching Up: Miscellaneous Edition

News flash: kids are creative at circumventing the rules. Some are using iPods to cheat on tests, and administrators are pissed enough to ban iPods for all. There’s no need to rehash the details because anyone with a third-grade intellect could’ve predicted as much. Instead, consider a student who’s just a little bit smarter than her leaders in the school system:

Kelsey Nelson, a 17-year-old senior at the school, said she used to listen to music after completing her tests — something she can no longer do since the ban. Still, she said, the ban has not stopped some students from using the devices.

“You can just thread the earbud up your sleeve and then hold it to your ear like you’re resting your head on your hand,” Nelson said. “I think you should still be able to use iPods. People who are going to cheat are still going to cheat, with or without them.

I’m not advocating a policy open to cheating, merely stating the obvious. As we learned with prohibition, and we’re (not) learning with the drug war, people looking to do what’s prohibited won’t stop just because it’s prohibited. Mostly, prohibition just harms the innocent from going about their innocent ways. Duh.

In light of one Michigan legislator’s recent plan to use taxpayer funds to purchase an iPod for every student in the state (now defeated), what can we conclude?

Next, this story on the likelihood of regulatory approval for the proposed Sirius-XM merger provides an elementary but useful finance lesson.

“The merger faces a very tough road at the FCC, where the public interest test applied by the commission is inherently subjective,” [Craig Moffett, a senior analyst with Sanford C. Bernstein] said. “In Washington, ‘subjective’ is codeword for ‘political.'”

The decline of the companies’ stock, analysts say, has less to do with the merits of the merger than with its prospects. They cited the political climate in Washington, where lawmakers have grilled Sirius chief executive Mel Karmazin about antitrust concerns during four hearings on Capitol Hill, as the driving force behind Wall Street’s pessimism.

When the two companies announced the merger, both share prices inched up. As time has gone by, and the process rent-seeking kicks into gear, expectations of success declined. This has brought the share prices below the pre-merger levels. Pre-merger, the likelihood of an unannounced merger held prices at one level. The benefits of a merged company improved the analysis, providing better information in the process. Now, the prospects of two companies without any chance of merger takes that piece out of the shares.

As much as I hate what’s happening to the Sirius share price, markets are efficient.

Catching Up: Food Edition

I didn’t expect to be away for this many days. I’ve been pre-occupied, so Rolling Doughnut has taken the hit. You know the rest, so I’ll just get to a recap of some news items of interest lately.

I first read about proposed changes to chocolate standards via this entry at A Stitch in Haste. From a few days later than the original story Kip linked, the Washington Post summarizes the changes, which would allow “chocolate” to include other vegetable fat in place of cocoa butter and still be called chocolate. (There’s a story in the FDA’s regulation of such, and the politics of this apparently rent-seeking change, of course.) If enacted, this change doesn’t bother me because I like dark chocolate exclusively, even before I limited myself to it through veganism. It simply tastes better. And I care enough to look at ingredients. To the people like me who care, this change will mean little.

For example, it doesn’t harm me as a chocolate lover/buyer if Hershey’s can start calling Whoppers “chocolate”, even though they already contain no cocoa butter. I’m not their customer. I’ll venture a guess that most chocolate buyers don’t have an especially refined palette for the difference. I’m not judging in that; I don’t have a refined palette for many things, so little nuances escape me.

We’re all different. The market for fine chocolate, or real chocolate, will determine how important this change is if it’s implemented. That’s enough. Besides, I’m more up in arms about the fact that companies like Hershey’s advertises its products as “dark” chocolate when it has milk in it.

Next up, following the recent pet food scare, several thousand hogs destined for human consumption appear contaminated with the same chemical (melamine) because they consumed the contaminated pet food. The risk to humans is allegedly small. I don’t eat pork, so I don’t care, mostly. I do find this fascinating:

A maximum of about 300 of the animals may have already entered the human food supply, but the rest of the hogs have been quarantined and are slated to be euthanized, Agriculture Department officials said.

It’s good to know that if animals become tainted, they’ll be euthanized. Humane treatment for the sick is decent. What about the millions of hogs who aren’t sick? Here’s an example showing how hogs are slaughtered. (Warning: Link has graphic pictures.)

Officials emphasized that the human health risks of eating pork from animals fed the contaminated food are very low. The decision to keep those animals off the market — and to reimburse farmers for the losses — was made in the interest of extreme prudence, they said.

If the hogs ate contaminated feed, that sounds like a tort in which whoever bought the tainted feed could sue the feed producer for the damage done to the hogs. Why should the government taxpayers foot the bill for such negligence?

Rent-seeking protectionism is ugly when you confront it.

More on the proposed Sirius-XM merger, this time recapping recent research studies:

One of the main arguments against the merger, according to the Carmel Group, is that consumers’ audio options, particularly in the car, are limited. While some technology firms promise great advances that could bring more choice — such as in-car, high-definition radio and built-in MP3 technology — regulators should consider only what’s available now, the group says.

“The FCC and DOJ aren’t in the business of looking into some crystal ball and predicting some technology in the future,” said Jimmy Shaeffler, Carmel Group senior analyst and author of the group’s report released last week. “Somewhere down the line, maybe 5 years, 7 years or more, XM and Sirius can come back to this argument and possibly prevail.”

I wrote about this study last week when it first appeared. I must say, it’s mighty gracious of Mr. Shaeffler to permit Sirius and XM to come back to regulators and the National Association of Broadcasters, presumably with hat in hand, and ask for permission. Assuming they’re both still around, of course. But it’s not competition they have to worry about. Nope, that’s not evolved, and it would certainly be irresponsible to predict changes that will no doubt be glacial in speed. Look at where we were 5 or 7 years ago. So little has happened, it would be irresponsible to assume anything.

Nothing to see here, folks. The Carmel Group’s study is independent and unbiased, despite being paid for by the National Association of Broadcasters.

Choose: Bankruptcy in Solidarity or Survival in Reality

In today’s Washington Post, Harold Meyerson attempts to suck us into his view of the world. Imagine how he gets to this line:

It was, in short, just a normal day in contemporary American capitalism.

Any number of scenarios could build to that. When you have an aversion to economic liberty because it means some people will “lose,” you arrive via this route:

On March 28, Circuit City announced that it was laying off 3,400 of its salesclerks. Not because they had poor performance records, mind you: Their performance was utterly beside the point. They were shown the door, said the chain, simply because they were the highest-salaried salesclerks that Circuit City employed.

Their positions were not eliminated. Rather, the store announced that it would hire their replacements at the normal starting salary.

One can only imagine the effect of Circuit City’s announcement on the morale of the workers who didn’t get fired. The remaining salesclerks can only conclude: Do a good job, get promoted, and you’re outta here.

I’m in a somewhat useful position to critique this. As of next Friday, I will not have an active client. The funding for the project I’ve been working on disappeared. I’m a bit concerned, but I’ve planned for this possibility. That’s mere responsibility. But as much as capitalism can be blamed for losing my current contract, it will also be responsible when I land my next contract. Change may mean death for some opportunities, but it’s only the natural re-ordering in response to reality. This is inherently good.

In the case of Circuit City¹, what function do salesclerks serve? When I visit an electronics retailer, I either know what I’m looking for or am browsing to discover what’s out that I’ve missed. I rely on the Internets for my pre-education, if you will. I rarely make an impulse buy. (Danielle is saying “no kidding” right now.) The one time in recent memory where I did make an impulse buy, I called my brother from the store and asked him to pull up reviews of the product. I gave my usual “just browsing” response to any salesclerks who accosted me offered to help. I didn’t need anyone other than a cashier, and if a store offers self-checkout, I always do that. From my anecdotal observations, most shoppers behave this way. Expert knowledge is no longer valuable in store the way it used to be.

That doesn’t stop Mr. Meyerson:

Over at Wal-Mart, the employer that increasingly sets the labor standards for millions of our compatriots, wage caps have been set for certain jobs, and many longtime employees are now required to work weekends and nights in the hope that they’ll quit. A memo prepared by a Wal-Mart executive in 2005 for the company’s board noted that, “the cost of an associate with 7 years of tenure is almost 55 percent more than the cost of an associate with 1 year of tenure, yet there is no difference in his or her productivity.”

(That, of course, is because Wal-Mart does nothing to raise its employees’ skills lest it have to raise their wages.) Coincidentally, in the same week that Circuit City axed its clerks, an analysis of Internal Revenue Service data from 2005 that became available showed that the bottom 90 percent of Americans made less money that year than they had in 2004. According to a study by economists Emmanuel Saez of the University of California at Berkeley and Thomas Piketty of the Paris School of Economics, total reported income in the United States increased by 9 percent in 2005 over its level in 2004. All of that increase, however, came from the wealthiest 10 percent of Americans, and the wealthiest 1 percent experienced an increase of 14 percent. Among the remaining 90 percent, income actually decreased by 0.6 percent.

Capitalism, as cruel as it is, generally demands that one provide more value to earn more return. If Mr. Meyerson prefers the world of government, his skewed view is understandable, for the government is far more lax in requiring measurable return for its increased expenditures. But the government has guns to enforce its demands. The private sector must use persuasion.

When Mr. Meyerson quotes the IRS data showing a decrease in income for the “bottom 90 percent”, the only context he provides involves the change in income for the top 10 percent. Big deal. There is more than just income to determine how well a person is doing. Mr. Meyerson offers no analysis of how this affects Poor American other than the outrage we’re supposed to feel because his absolute dollar income decreased. This is the fallacy of a mind unconcerned with the basics of economics.

There’s a bunch of progressive gobbledygook in the rest of his essay, but given his poor economic foundation, Mr. Meyerson offers little beyond the usual chants. Unions! Health care! Equality! Blech, all socialist crap. When American workers who buy into this start treating themselves as mini-capitalists offering a product rather than pawns in a game for business elites, this drivel will die away from all but the tiniest group of “intellectuals”. Until then, we’ll suffer through more harmful policies masquerading as help for the working man.

¹ I shop at Best Buy because I like it better and I’ve only had bad experiences the last few times I’ve given Circuit City a chance. But the buying process is the same.

On Buying Absolution

From Kip I learned of this brief essay by Michael Dorf. Here are the first two of its three paragraphs:

In my FindLaw column yesterday, I argued that Al Gore undermines his ability to act as a spokesman for combating global warming by living in a very large house and jetting around the world — even though he “carbon balances,” i.e., pays green causes to plant trees, cover landfill and take other actions that compensate for his own generation of greenhouse gases. I compare these compensating measures to the purchase of papal indulgences and the payment of substitute soldiers by Civil War draftees. (I go on, however, to praise Gore’s policy proposals.)

Here I want to add another example. Suppose I think that it’s wrong to eat animals and animal products (as in fact I do) but that I really like the taste of meat. Could I discharge my moral obligation (as I see it) to be a vegan by continuing to pack away the hamburgers and steaks but pay a carnivore to convert to veganism so that I “meat balance?” The very idea seems absurd.

Such a transaction is far too utilitarian-at-the-expense-of-principles for me personally, but I don’t think it’s absurd to consider this.

Animal rights vegans, of which I am one only tangentially¹ through my primary health justifications for being vegan, tend to fall into two camps: welfarists and abolitionists. The distinction isn’t perfectly applicable here because the distinction has more to do with approach to the treatment of animals, but it’s useful anyway. Welfarists believe that marginal improvements in how we treat animals is useful. Free-range chickens and cage-free hens, for example, reduce the suffering of animals while they’re alive. If a pig has the ability to stretch her legs in her gestation crate, that’s better than her being pinned to the floor by the constraints of her crate. The treatment may still be despicable, but the animal suffers less.

Abolitionists view this distinction more as a black-or-white issue. It does matter how compassionately you treat the animal, the animal still suffers. It doesn’t matter how compassionately you slaughter the animal, dead is still dead. Since humans do not need meat and alternatives exist for animal products, there is no justification that renders the use and abuse of animals acceptable.

I tend to side with the abolitionists. There is value in the welfarist approach when it exposes people to the horrible practices involved in animal “agriculture”. Every change must begin somewhere. But I agree that such concessions may lead to as much or more animal consumption. I’ve had discussions where a carnivore will say “but I buy only free-range meat”. So? The animal still suffers, although that’s not apparent in the marketing. (How many singing cows do we need to see to believe something untrue?) Again, dead is dead.

Which gets back to the question at hand. Would a barter of money for veganism work? I don’t think it discharges the buyer’s moral obligation, but it could work to reduce animal suffering. For every new vegan, n animals will not die or suffer. That’s the beauty of capitalism. Reduced demand will lead to reduced supply. Over a lifetime, that could be a tremendous individual impact.

There are drawbacks, of course. The buyer may now consume more meat because he is “offsetting” his consumption. The buyer may be a large man with a vociferous appetite, while the seller may be a petite woman with a small appetite. The balance falls heavily against significant improvement. The net effect from the person with a moral qualm is potentially less than if he had the character to act according to his beliefs.

I suspect this drawback is more likely than the optimistic outcome from buying veganism. A bit like Al Gore’s energy consumption for his home, for example.

¹ I care about animals rights enough to do the basics. I don’t buy animal products such as leather. I don’t buy products tested on animals. You just won’t find me actively protesting and agitating for change. I care about it, but I’m not passionate enough. I’d get in the way.