January 2012

By proclamation of several cities and states, Monday was Milton Friedman Day. CEI was one of many free-market groups that joined in this celebration with events celebrating the great economist’s life. But really, especially for the governments concerned, shouldn’t every day be Milton Friedman Day? We should try our best not to interfere or advocate interfering with the free market.

In that spirit, I want to share a passage of Dr. Friedman’s from The Book of Predictions published in 1980. It turns out that Friedman was not just a a sage of free-market economics, but a sage,  period. He was four out of five in his prediction of future fellow recipients of the Nobel Prize in economics, and there is still time for him to be five for five.

Reading prediction books from the past is a fun exercise, and this Book of Predictions is no exception. Most of the people quote in this book, written by People’s Almanac compiler David Wallechinsky, were not psychics, but experts in their fields taking educated guesses. Still, most of the predictions range from silly, in retrospect, to flat wrong.
Among the predictions made for the 1980s is a “steady downward trend” in car ownership and skyrocketing oil prices. Oil prices went down a year after the book was published, when Ronald Reagan lifted price controls. Since “peak oil” predictions are again in vogue, I quote some of these statements from the ’80s in my new book Eco-Freaks.

But Dr. Friedman, by contrast, has a batting average of 800 for his 1980 Nobel predictions — and may even hit 1000. He predicted future Nobel choices George Stigler, Gary Becker, Robert Lucas, and Franco Modigliani.

These choices show that while Dr. Freidman may not have been psychic, he was extremely far-sighted. It wasn’t a sure thing in 1980 that Gary Becker would be nominated for his novel human capital theories and applying economics to organizations like the family. Dr. Friedman also saw how Robert Lucas’ work on “rational expectations” of economic actors would transform how we study everything from inflation to stock prices.

Friedman’s fifth choice was Martin Feldstein, who has done seminal work on tax and retirement policy. Feldstein has also been a great advocate for giving workers the ability to save a portion of their Social Securituy payroll taxes. It would be one more great vindication of Friedman if his final prediction were to come true. It would be an even better vindication if we could follow Friedman and Feldstein’s advice and remove the payroll tax’s burden to saving.

This morning Secretary of Agriculture Mike Johanns presented the
Administration proposals for the new Farm Bill. Here’s his press
release:

Here’s the link to the proposals.

The energy program is extensive and will be costly — remember, this is a Farm Bill, known for its fat subsidies to large-scale farm operators.  For instance, the proposals would start a new program to “provide $100 million in direct support to producers of cellulosic ethanol.” But that’s only one of many boondoggles in the proposals.

The proposal for sugar “reform,” for instance, looks worse than the current program, because it will control even more of the domestic production of sugar.

Looks rather large:

Perhaps he should be called Bigfoot?

  

In today’s Politico, Amy Doolittle has a light-hearted story on the tours that Members of Congress occasionally give for constituents around the Capitol. A handful of congressmen are known to be frequent guides, taking over a job generally relegated to the lowest of low-level staffers. Part way through the piece, though, we find a dark confession by Utah Republican Rob Bishop:

I find that if you say something with enough fervor, anyone will believe it, so I do that. Trying to find what the true bits are as opposed to the false bits, it’s kind of part of the fun of it all.

As with Capitol tours, so it is with representative democracy. If our elected leaders always told us the truth about what they were doing, what fun would that be? After all, that’s one of the main reaosns we think tank people are here for.

At a House Ways and Means Committee hearing yesterday, chaired by Representative Charles Rangel, witnesses said that the effects of trade and globalization on American workers and the U.S. economy have to be carefully examined, and policies to deal with worker insecurity need to be addressed.

The panel testifying included law and business professors, economists, and business leaders, who all seemed to give credence to negative views of trade’s effects.

There were strong recommendations to include “social contracts” in trade agreements, with Georgetown Law Professor Daniel Tarullo specifically calling for that:

. . . trade agreements should be occasions for reaffirming the social compact. There is no single formula for doing so. What is sensible and feasible will vary with the nature and scope of the agreement at issue. But, in one form or another, each should include measures specifically addressed to the needs of Americans whose economic prospects and security are threatened by the forces of economic change, including globalization.

Gene Sperling, former President Clinton’s economic advisor, called for stringent labor mandates in trade agreements and monitoring procedures to ensure compliance. He also called for programs for displaced workers to provide security and enhance “human dignity.”

Most Committee members present at the hearings, in their comments and questions, seemed to blame trade and globalization for U.S. society’s ills. That doesn’t bode well for progress toward more open trade through the multilateral system or through bilaterals, where the U.S. has already weighed down trade agreements with stringent labor and environmental provisions for developing countries.

Today President Bush in New York City delivered his second speech on the economy. As expected, in the speech he called for a renewal of Trade Promotion Authority or “fast-track,” which gives the President the ability to negotiate trade agreements and have the Congress vote on them without amendments.

Here’s what the President said in a strong statement supporting open trade:

The only way America can complete Doha and make headway on other trade agreements is to extend Trade Promotion Authority. This authority allows the President to negotiate complicated trade deals for our country, and then send them to Congress for an up or down vote on the whole agreement. Presidents of both parties have considered this authority essential to completing good trade agreements. Our trading partners consider it essential for our success at the negotiating table. The authority is set to expire on July 1st — and I ask Congress to renew it. I know there’s going to be a vigorous debate on trade, and bashing trade can make for good sound bites on the evening news. But walling off America from world trade would be a disaster for our economy. Congress needs to reject protectionism, and to keep this economy open to the tremendous opportunities that the world has to offer.

Grist magazine just published an interesting Q&A with Frank Luntz, famed GOP pollster and author of the new book, Words That Work: It’s Not What You Say, It’s What People Hear:  “And Now, a Word From Our Detractor”. Luntz explains why enviros are failing, and why he thinks they’re mean.

In a Washington Post column, George Will questions the constitutionality of a recent vote in the House of Representatives to give delegates from Washington, D.C. and territories, such as American Samoa, the same right to vote in House committees as Congressmen.  He points out the absurdity of giving the delegate from Samoa, which has only 58,000 residents, the same vote in committee (where most important House decisions are made) as the Congressman from Montana, who represents 944,000 people.

Similar arguments can be made against recent proposals to give the District of Columbia a Congressman and two Senators. 

The District of Columbia has fewer voters than all 50 states, and fewer people living in it than 49 of the 50 states (and in a few years, based on current population trends, it will have fewer people than all 50 states).

California usually leads the nation in the formulation of bad public policy—which policymakers in other states often see as a model. But this week, they actually did something worth emulating. They lifted a state ban on residential use of vinyl plumbing pipes, which are made with chlorinated polyvinyl chloride or CPVC.

Unfortunately, it took the state more than a decade to lift this expensive, nonsensical mandate. The state’s change of heart came after its housing department conducted a study debunking claims that the pipes are dangerous, which were posited by a coalition of environmental activists and plumbers’ unions. In reality, the CPVC pipes are quite safe, energy efficient, and environmentally sound. They also cost much less—about a third of the alternative metal piping.

These pipes are also very easy to install. CPVC installs with glue, rather than having to be soldered with a propane torch. Activists complain that the glue is dangerous—as if working with propane, an open flame, and hot metal is safer! The California housing board found that the risks associated with the adhesives is “less than significant” for workers who are exposed to the fumes on a regular basis. Apparently, plumbers need not fear the glue, but they might fear the ease with which homeowners can install—without having to hire a plumber. Activists and the plumbers’ unions claimed a variety of other ills, which were rejected in the California study.

Unfortunately, it is expected to take the state an entire year before they can change the building code to allow freedom to choose in plumbing. New York, Chicago, and a few other cities also maintain such bans. For once, they should follow California’s lead—but they should move much faster.