wall street journal

The Believing Brain

by Ryan Young on July 28, 2011

in Zeitgeist

Reason‘s Ronald Bailey (CEI’s inaugural Warren Brookes Fellow; a position you can apply for here) reviewed Michael Shermer’s excellent The Believing Brain for The Wall Street Journal. If you don’t feel like reading all 340 pages, Bailey summarizes them well:

Superstitions arise as the result of the spurious identification of patterns. Even pigeons are superstitious. In an experiment where food is delivered randomly, pigeons will note what they were doing when the pellet arrived, such as twirling to the left and then pecking a button, and perform the maneuver over and over until the next pellet arrives. A pigeon rain dance. The behavior is not much different than in the case of a baseball player who forgets to shave one morning, hits a home run a few hours later and then makes it a policy never to shave on game days.

It’s surprising how much of human behavior can be explained by what Shermer calls patternicity and agenticity. Like pigeons, we seek patterns and therefore find them. But we also have the ingrained instinct to believe that some kind of agent has to be behind those patterns: god, a politician, somebody, anybody. Every design must have a designer.

No wonder Hayekian spontaneous order polls so poorly, despite having the benefit of being true. Lessons abound.

CEI Podcast for April 21, 2011: The Male-Female Pay Gap

by Ryan Young on April 21, 2011

in Employment, Podcast

Have a listen here.

Carrie Lukas, Managing Director of the Independent Women’s Forum, argues that the pay gap between men and women isn’t due to discrimination. She also wrote about the issue last week in a Wall Street Journal op-ed.

Senator Jim Webb Flunks Legislation 101: Says Congress Can’t Change the Law

by Hans Bader on April 15, 2011

in Economy, Employment, Energy, Environment, Global Warming, Regulation

Congress can always change the law if it chooses. For example, it passed the 1991 Civil Rights Act, which overturned many Supreme Court decisions interpreting the Civil Rights Act of 1964.

But you would never know that from reading Virginia Senator Jim Webb’s letter today in the Wall Steely Journal. In it, Webb defends his vote against a Republican amendment to block EPA regulation of carbon dioxide, an amendment supported by many Virginians because the EPA’s regulation of carbon dioxide would wipe out thousands of Virginia jobs in industries that emit carbon dioxide. (Carbon dioxide is the gas needed by plants to conduct photosynthesis. It is not poisonous or dirty, and humans emit carbon dioxide every time they breathe.)

Webb claims he voted against the amendment because the amendment would have been “a violation of the Supreme Court holding in Massachusetts v. Environmental Protection Agency,” a case that interpreted a provision of the Clean Air Act to potentially expand the EPA’s ability to regulate greenhouse gases like carbon dioxide.

The amendment would have greatly reduced future energy costs, thus saving countless jobs. In 2008, President Obama admitted that under his greenhouse gas regulations, people’s utility bills would “skyrocket,” and coal-fired power plants would go “bankrupt.”  The EPA’s own internal documents show that the administration’s global warming regulations will result in a massive “loss of steel, paper, aluminum, chemical, and cement manufacturing jobs.”

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Should Helicopter Parents Stop Hovering Over Their Kids?

by Ryan Young on April 12, 2011

in Culture

Helicopter parents — constantly hovering over their children — have their heart in the right place. But that style of parenting has always struck me as… unnecessary.

My former professor Bryan Caplan agrees. He has a new book out that’s based on his research on identical twins. As it turns out, a lot of how kids will turn out as adults is based on nature, not nurture. The implication: parents can ease up on the high-maintenance parenting style that is so fashionable today.

In The Wall Street Journal, Caplan writes, “With a few exceptions, the effect of parenting on adult outcomes ranges from small to zero.”

He continues:

Once I became a dad, I noticed that parents around me had a different take on the power of nurture. I saw them turning parenthood into a chore—shuttling their kids to activities even the kids didn’t enjoy, forbidding television, desperately trying to make their babies eat another spoonful of vegetables. Parents’ main rationale is that their effort is an investment in their children’s future; they’re sacrificing now to turn their kids into healthy, smart, successful, well-adjusted adults.  But according to decades of twin research, their rationale is just, well, wrong.

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CEI Podcast for March 21, 2011: How Washington Ruined Your Washing Machine

by Ryan Young on March 21, 2011

in Energy, Environment, Podcast, Regulation

Have a listen here.

CEI General Counsel Sam Kazman talks about how ever-stricter energy efficiency regulations are making washing machines more expensive and less effective than they used to be. Sam recently wrote about the issue for The Wall Street Journal; you can read his article here.

Yes, Obamacare is a Government Takeover of the Health Care System

by Hans Bader on January 21, 2011

in Healthcare, Personal Liberty, Regulation

In Tuesday’s Washington Post, Glenn Kessler looked at Republican claims about Obamacare, such as the claim that it “is a ‘government takeover’ of the health care system.” He said that claim was “not true,” and approvingly cited PolitiFact’s controversial claim that this was the ‘2010 lie of the year.’” (He didn’t mention that PolitiFact’s claim was rebutted by newspapers like the Wall Street Journal, or the president’s own prediction that his health care plan would eventually lead to a government-run “single-payer” health care system.)

PolitiFact based its claim that Obamacare will not lead to a government takeover of health care on the false contention that Obamacare is not like European socialized medicine because the “European approach” is “where the government owns the hospitals and the doctors are public employees.” But that was a straw man argument, since the government does not own all the hospitals or employ most of the doctors even in many European nations long run by socialist parties.

France’s universal health care system is a classic example of the “European approach.” But even there, “doctors and other health care professionals are mostly self-employed,” especially general practitioners,” including all the physicians who have ever treated my daughter, a French citizen. Nor does the government own all the hospitals. For example, the private sector there has “half of all surgical beds.” Moreover, 92.2 percent of all French people purchase additional private insurance. When my father-in-law, a socialist trade unionist, recuperated from his quadruple bypass, he did so at a private convalescent home, using his supplemental private health insurance policy. Nonetheless, given its government’s dominant role in funding and supervising the health care system, France is commonly described as having socialized medicine.Moreover, the government’s share of healthcare spending is already higher in America than in various foreign countries. As a health care economist noted a few years ago, “the Swiss government only pays for 24.9% of health care costs (compared with 44.7% in the U.S.).” (PolitiFact itself had admitted that the government’s share of health care spending was already at 46 percent, and other estimates range up to 55 percent, if you add together state and federal spending.) Switzerland, not the United States, is the “country with highest annual out-of-pocket household spending on health.”

Obamacare will greatly increase the government’s share of health care spending by radically expanding state Medicaid programs to cover 16 million more people, resulting in the government paying for the lion’s share of health care spending in America. That is plausibly viewed as a government takeover.

Moreover, our health care system will become “government-run” under Obamacare in important ways. Obamacare imposes onerous government rules on our health care system, creating much more red tape than exists in many European countries, and turning health insurers into tightly-controlled public utilities. It will also spawn a potentially vast wave of lawsuits against state governments and private employee-benefit plans.

As a Wall Street Journal reader argued in criticizing PolitiFact, under Obamacare, government control is pervasive: “Government defines what health insurance is. Government defines what ‘minimum essential coverage’ is. Government forces everyone to buy one of four varieties of overpriced, low-value health insurance. . . .Congress establishes 159 government agencies to run the new health-care system. The government grants new powers to the Secretary of Health and Human Services, who will ‘deem,’ ‘create,’ ‘define,’ ‘determine,’ ‘approve,’ ‘disapprove’ and otherwise dictate everything about health care in America. The government takes away the power of individuals to appeal bad decisions by the secretary to the courts. The government penalizes doctors who don’t . . . follow cookbook medicine guidelines while expanding rationing powers of government and the insurance companies that it now effectively controls.”

As another Wall Street Journal reader noted, the fact that Obamacare “requires 15,000 to 18,000 additional IRS agents for implementation” is another sign of expanding government control. (An estimated 16,500 IRS agents will be required to implement the health care’s law requirements – the “biggest expansion of the IRS since World War II”).

The American people see Obamacare as a government takeover of health care, although not all view that as a bad thing. PolitiFact itself admits that “53 percent of respondents in a Bloomberg poll said they agreed that ‘the current proposal to overhaul health care amounts to a government takeover.’”

(While it dramatically increases regulation and red tape, the health care law has done little to control costs; health insurance premiums have risen substantially in many states as a result of its passage, such as a 47 percent increase for some policyholders in Connecticut.)

At best, PolitiFact’s claim that the government takeover of health care is a “lie” is as silly as saying it’s a lie to call a glass that’s half-empty “half-full.”

Consumer Leverage and Government Deficits

by Alex Schibuola on November 10, 2010 · 2 comments

in Economy, Stimulus to Nowhere

The Wall Street Journal published an excellent interview of Tom Hoenig, president of the Federal Reserve Bank of Kansas City. He is the lone voice of dissent regarding the Fed’s low-interest rate and QE2 policies.

He recognizes that consumers were over-leveraged going into (causing) the financial crisis and recession. Consequently. it takes time to re-balance. He’s absolutely correct. It’s a point that is all too easily overlooked by policy makers.

When the value of things I own (assets) is low relative to the value of things I owe to others (liabilities), I am highly leveraged. I don’t own enough things to pay off my debts. In other words, I’m close to (or am) bankrupt.

To prevent bankruptcy, I need to save more/borrow less (they’re identical). To save more, I must consume less. The conventional wisdom is that consuming less (saving more) sends the economy into a downward spiral. Therefore, if I won’t consume more, the government will for me.

What gets overlooked is that my attempt to deleverage gets offset by the government’s attempt to spend. When the government initiates deficit spending, it means my tax liabilities go up.

If I consume $5,000 less worth of goods and use this saving to pay off $5,000 worth of mortgage debt, I am deleveraging. Government realizes the error of my ways and benevolently intercedes on my behalf. It decides to spend $5,000 more on high-speed rail to offset my saving. To do so, it must borrow $5,000.

Government borrowing is the equivalent of future taxation. This means I’ll have to pay $5,000 later in taxes just like I’d have to pay $5,000 later on my mortgage debt as if I never paid it down in the first place.

The ultimate result is that the action of government puts me back in the same position I was trying to escape in the first place: being too highly leveraged. It simply draws out the problem that exists in the first place and delays the rebalancing.

Ethanol in The Wall Street Journal

by Brian McGraw on October 26, 2010 · 1 comment

in Energy, Ethanol

The editorial staff at The Wall Street Journal have not been kind to ethanol over the past months. They ran two editorials (one in July — “Survival of the Fattest“, one last week — “The Ethanol Bailout“) criticizing U.S. biofuel policy.

The most recent editorial sparked a letter to the editor from Agriculture Secretary Tom Vilsack. The letter reiterates many of the talking points Vilsack made in his recent address. The title, “Ethanol is a Step to More Biofuels,” almost implicitly acknowledges that corn ethanol itself is not the tell-tale solution the ethanol industry markets it as. Though his letter isn’t as bad as much of the propaganda put forth by the industry recently, his ending comment is misleading:

Don’t forget, the petroleum industry receives billions of dollars in tax breaks each year from the federal government.

I don’t think anyone has forgotten that. But two wrongs don’t make a right. Furthermore, a significant portion of the tax breaks received by the petroleum industry are part of a larger portion of the tax code that is not industry specific. You can credibly argue about the inefficiencies created by the U.S. tax code, but you can’t demonize the petroleum industry for taking advantage of credits available to a large portion of businesses in the U.S. (though there are also petroleum specific subsidies).

Additionally, as summarized (.pdf) by the EIA in 2007, while petroleum subsidies look BIG, on a BTU (subsidy per unit of energy provided) basis they’re miniscule in comparison to biofuel subsidies. The report calculates subsidies at $0.03 per million BTU’s for natural gas/petroleum compared to $5.72 per million BTU’s for ethanol/biofuels. Biofuel subsidies are 190 times larger than natural gas/petroleum subsidies on a per unit of energy basis (not sure why they couldn’t separate these out).

And then onto the commentators. Commentators on the Internet are generally known for their thoughtfulness and accuracy. Just kidding. But the WSJ letter includes comments from real live employee’s of the ethanol industry.

Ben Butterfield writes:

I work for Growth Energy, the coalition of ethanol supporters that filed the E15 waiver with the EPA. I agree with Secretary Vilsack that the EPA’s decision is the right step in the right direction. Moving to E15 is the first crack the blend wall – that artificial limit on the ethanol market. It is the one step we can take today to reduce our dependence on foreign oil, create jobs here in the US and improve our environment.

These types of comments are frustrating because they’re so incredibly misleading. The ethanol industry as a whole relies on government mandated biofuel production. Are they being “artificially limited” by restrictions on the amount of ethanol that can be blended into fuel? In a way, yes. But they also artificially exist, and will artificially grow, because of the EISA mandates on biofuel production. So they aren’t allowed to complain about all these unfair restrictions the government has placed on their industry. I’m willing to bet they wouldn’t trade unfettered market access (via tossing out the EPA and allowing fuel stations to sell ethanol blends as they desire) in exchange for killing the Renewable Fuel Standard.

Another, from Scott Miller — a bio-blogger:

Growth Energy (and their chief spokesman, Gen. Wesley Clark) champions the Fueling Freedom Plan ( see http://bit.ly/bZho2I ) which promotes the phasing out of ethanol subsidies to invest in the build-out of flexible fuel infrastructure – primarily the installation of blender pumps and ethanol pipelines – to provide a level playing field for market entry. Part of the problem of market entry of ethanol of all types has been that there are few blender pumps, so people have little reason to buy flexible fuel vehicles (FFVs). Conversely, there is little reason to install pumps if there are no FFVs

This isn’t the “phasing out of ethanol subsidies.” It’s the changing of ethanol subsidies from tax credits on production to subsidizing infrastructure and creating yet another artificial market by mandating FFVs. How can anyone take the “level playing field” stuff seriously? The real problem for the market entry of ethanol is that there isn’t any real demand for it because it isn’t consistently price competitive with gasoline. If oil prices rise back to previous highs ethanol will be price competitive again, and individuals will demand FFVs on their own. Though don’t forget the price of corn ethanol is also volatile and heavily tied to the price of corn and natural gas.

Miller was offended that the integrity of the ethanol industry was called into question. I’m not here to assault their integrity, maybe they genuinely believe ethanol is the fuel of the future. But its fair to attack their actions when they’re benefiting from taxpayer money and are fighting like hell to keep Brazilian sugarcane ethanol from reaching the United States.

Obamacare May Force McDonald’s to Drop Health Coverage for Employees

by Hans Bader on October 1, 2010

in Economy, Health and Illness, Healthcare, Insurance, Nanny State, Personal Liberty, Politics as Usual, Regulation, Sanctimony, Zeitgeist

Michelle Malkin points out that “McDonald’s has notified the feds that it may be forced to drop health insurance for some 30,000 workers due to the Obamacare mandate.”

A large number of employers may eventually eliminate health coverage due to Obamacare. As The Wall Street Journal notes:

Trade groups representing restaurants and retailers say low-wage employers might halt their coverage if the government doesn’t loosen a requirement for ‘mini-med’ plans, which offer limited benefits to some 1.4 million Americans. The requirement concerns the percentage of premiums that must be spent on benefits. . .McDonald’s and trade groups say the percentage, called a medical loss ratio, is unrealistic for mini-med plans because of high administrative costs owing to frequent worker turnover, combined with relatively low spending on claims.

It’s not just limited-benefit plans that are disappearing. Excellent health plans that patients prize most are disappearing too.  Earlier, 22,000 seniors lost their health care plan due to Obamacare. Meanwhile, state regulators are approving premium increases due to the increased costs resulting from Obamacare.

By the way, I’m tired of mindless McDonald’s bashing. The food at McDonald’s is no more fattening than at many restaurants which charge much higher prices.  (A Big Mac is healthier than quiche lorraine.)  I lost 10 pounds while working at McDonald’s and eating mostly McDonald’s food (a man in Richmond lost 86 pounds). Yet left-wing busybodies are now using discriminatory zoning rules to block the opening of new McDonald’s franchises in places like Los Angeles, and are calling for taxes on fast food to control what people eat, as part of “healthcare reform.”

The Two Americas

by Ryan Young on May 25, 2010

in Economy, Personal Liberty

Maybe there is something to John Edwards’ “Two Americas” conceit after all. Except the warring factions aren’t the haves and have-nots. They are what Steven Malanga calls tax eaters and tax payers. And the two see the world very differently. See this revealing excerpt from today’s WSJ Political Diary (subscription required).

Pollster Scott Rasmussen uses several questions to break down voters demographically, but one of his most original tweaks is to differentiate between those voters he calls the “Political Class” and those he calls “Mainstream Americans.” The “Political Class,” representing about 14% of the electorate, tend to express “trust” in political leaders while rejecting suggestions that government is its own special interest and often works with big business against consumers. In contrast, “Mainstream Americans” represent about 75% of the voting public and identify with or lean toward a more populist skepticism about the intentions and actions of political leaders.

Striking is how the two groups divide on the question of repealing ObamaCare. “Mainstream Americans” support repeal by an overwhelming 73%, while the numbers are almost exactly reversed among the “Political Class,” 72% of whom oppose repeal.

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