Cato Op-Eds

Individual Liberty, Free Markets, and Peace
Subscribe to Cato Op-Eds feed

The U.S. Department of Agriculture (USDA) runs an array of rural subsidy programs, which are aside from the farm subsidy programs that it also runs. USDA’s rural programs are grouped within three agencies: the Rural Housing Service (RHS), the Rural Utilities Service (RUS), and the Rural Business-Cooperative Service (RBS). The agencies will spend $6.5 billion in 2016.

These subsidies are the focus of a new essay at DownsizingGovernment.org.

The USDA’s rural agencies have tentacles into a wide range of activities, as illustrated by the following projects funded in 2015:

  • $10 million to Exela Pharma Sciences in North Carolina.
  • $3.4 million for a sewer system in Geraldine, Alabama.
  • $8.5 million for a college expansion in Pocahontas, Arkansas.
  • $7,500 to an individual in Red Bluff, California, to fix his water well.
  • $200,000 to “one of the largest clam producers in Florida.”
  • $7.5 million to fix a dam in Idaho.
  • $1 million to an automotive shop and other businesses in Du Quoin, Illinois.
  • $63,000 to a biofuels company in Maine.
  • $200,000 for a farmers market in Michigan.
  • $651,000 for an arts center in Bozeman, Montana.
  • $373,000 to a paper company in Nevada.
  • $1.5 million to an apartment developer in Monticello, New York.
  • $2 million for a vet clinic in North Dakota.
  • $1.1 million for street improvements in Pittston, Pennsylvania.
  • $113,000 to fix up an old theatre in Rutland, Vermont.
  • $5.2 million for a fire station in Sweetwater County, Wyoming.

In the U.S. economy, these sorts of projects are usually funded by local governments and the private sector. So why should the USDA spend money on them? The assumption seems to be that the federal government has a magical source of cost-free funds. But all the money for federal aid programs ultimately comes from taxpayers who live in the 50 states. So the USDA’s aid programs are a zero-sum game for the nation as a whole.

Indeed, the programs are worse than zero-sum because taxpayers have to pay for the bureaucratic middlemen who run the programs. The USDA employs about 5,000 people to run its three rural agencies. The costs of wages, benefits, office space, travel, and supplies for these workers totaled $680 million in 2016. Thus about 10 percent of the $6.5 billion cost of USDA’s rural programs gets consumed by the federal bureaucracy.

Even if rural subsidy programs were administered efficiently, they represent an unfair redistribution of wealth. In many ways, rural Americans are better off than urban and suburban Americans. They enjoy cheaper housing, cleaner air, less congestion, and other advantages. So people who live in rural areas should not be a privileged class receiving special subsidies.

Rural subsidies should be ended, and the RHS, RUS, and RBS should be closed down.

Over at Cato’s Police Misconduct web site, we have selected the worst case for the month of September.  It was the Connecticut State Troopers who were caught on tape harassing a protester and fabricating charges against him.

According to news reports, Michael Picard was protesting near a DUI checkpoint.  He had his cell phone camera out and was recording the scene.  When a trooper noticed what he was doing, he angrily approached Picard and seized his phone saying it was illegal to record him.  This is when things got interesting.  Unbeknownst to the trooper, Picard’s cell phone was still recording as the trooper went back to his patrol car to confer with his colleagues.  The troopers were anxious to “hit” Picard with some kind of charge, but they became frustrated with their options.  Picard had a firearm, but a valid concealed carry permit.  Picard did record them with his cell phone, but that’s legal too.  What to do?  To “cover their ass,” they decide to fabricate a story that several citizens were complaining about Picard’s supposedly “disruptive actions,” but these “witnesses” did not want to stay on the scene, so the troopers just had to take action on their own.

The charges against Picard were quickly dismissed.  The ACLU has now filed a lawsuit on behalf of Picard.

The cell phone recording of the incident can be found here.  Because the phone is evidently sitting on the roof of the patrol car, the value is in what can be heard, not seen. Listen and decide for yourself.

You just never know what kind of government agents you may encounter.  Those who choose to film the police are especially vulnerable.  We must all remember to lawyer-up when necessary.

 

At the Mercatus / Cato CMFA conference a few weeks ago on “Monetary Rules for a Post-Crisis World,” David Laidler and David Glasner gave interesting and informative talks on the history (and history of economic thought) regarding the evolution of monetary rules during the first panel. Video of their talks, and that of co-panelist Mark Calabria, is available here. Ari Blask recaps the entire conference here.

I haven’t seen Glasner’s paper, but he has posted a summary of it on his blog. (All subsequent quotes are drawn from that source.) There he suggests that perhaps the earliest monetary rule, in the general sense of a binding pre-commitment for a money issuer, can be seen in the redemption obligations attached to banknotes. The obligation was contractual: A typical banknote pledged that the bank “will pay the bearer on demand” in specie. (Demand deposit contracts, which preceded banknotes historically, made the same pledge.) He rightly remarks that “convertibility was not originally undertaken as a policy rule; it was undertaken simply as a business expedient” without which the public would not have accepted demand deposits or banknotes.

I wouldn’t characterize the contract in quite the way Glasner does, however, as a “monetary rule to govern the operation of a monetary system.” In a system with many banks of issue, the redemption contract on any one bank’s notes was a commitment from that bank to the holders of those notes only, without anyone intending it as a device to govern the operation of the entire system. The commitment that governs a single bank ipso facto governs an entire monetary system only when that single bank is a central bank, the only bank allowed to issue currency and the repository of the gold reserves of ordinary commercial banks. Under a gold standard with competitive plural note-issuers (a free banking system) holding their own reserves, by contrast, the operation of the monetary system is governed by impersonal market forces rather than by any single agent. This is an important distinction between the properties of a gold standard with free banking and the properties of a gold standard managed by a central bank. The distinction is especially important when it comes to judging whether historical monetary crises and depressions can be accurately described as instances where “the gold standard failed” or instead where “central bank management of the monetary system failed.”

As the author of Free Banking and Monetary Reform, Glasner of course knows the distinction well. So I am not here telling him anything he doesn’t know. I am only alerting readers to keep the distinction in mind when they hear or read “the gold standard” being blamed for financial instability. I wish that Glasner had made it more explicit that he is talking about a system run by the Bank of England, not the more automatic type of gold standard with free banking.

Glasner highlights the British Parliament’s legislative decision “to restore the convertibility of banknotes issued by the Bank of England into a fixed weight of gold” after a decades-long suspension that began during the Napoleonic wars. He comments:

However, the widely held expectations that the restoration of convertibility of banknotes issued by the Bank of England into gold would produce a stable monetary regime and a stable economy were quickly disappointed, financial crises and depressions occurring in 1825 and again in 1836.

Left unexplained is why the expectations were disappointed, why the monetary regime remained unstable. A reader who hasn’t read Glasner’s other blog entries on the gold standard might think that he is blaming the gold standard as such.

My own view is that because the Bank of England’s monopoly was not broken up, even with convertibility acting as a long-run constraint, the Bank had the power to create cyclical monetary instability and occasionally did so by (unintentionally) over-issuing and then having to contract suddenly as gold flowed out of its vault — as happened in 1825 and again in 1836. Because the London note-issue was not decentralized, the Bank of England did not experience prompt loss of reserves to rival banks (adverse clearings) as soon as it over-issued. Regulation via the price-specie-flow mechanism (external drain) allowed over-issue to persist longer and grow larger. Correction came only with a delay, and came more harshly than continuous intra-London correction through adverse clearings would have. Bank of England mistakes boggled the entire financial system. It was central bank errors and not the gold standard that disrupted monetary stability after 1821.

This hypothesis about the source of England’s cyclical instability is far from original with me. It was offered during the 1821-1850 period by a number of writers. Some, like Robert Torrens, were members of the Currency School and offered the Currency Principle as a remedy. Others, like James William Gilbart, are better classified as members of the Free Banking School because they argued that competition and adverse clearings would effectively constrain the Bank of England once rival note issuers were allowed in London. Although they offered different remedies, these writers shared the judgment that the Bank of England had over-issued, stimulating an unsustainable boom, then was eventually forced by gold reserve losses to reverse course, instituting a credit crunch. Because Glasner elides the distinction between free banking and central banking in his talk and blog post, he naturally omits the third side in the Currency School-Banking School-Free Banking School debate.

Later in his blog post, Glasner fairly summarizes how a gold standard works when a central bank does not subvert or over-ride its automatic operation:

Given the convertibility commitment, the actual quantity of the monetary instrument that is issued is whatever quantity the public wishes to hold.

But he then immediately remarks:

That, at any rate, was the theory of the gold standard. There were — and are – at least two basic problems with that theory. First, making the value of money equal to the value of gold does not imply that the value of money will be stable unless the value of gold is stable, and there is no necessary reason why the value of gold should be stable. Second, the behavior of a banking system may be such that the banking system will itself destabilize the value of gold, e.g., in periods of distress when the public loses confidence in the solvency of banks and banks simultaneously increase their demands for gold. The resulting increase in the monetary demand for gold drives up the value of gold, triggering a vicious cycle in which the attempt by each to increase his own liquidity impairs the solvency of all.

These two purported “basic problems” prompt me to make two sets of comments:

  1. While it is true that the purchasing power of gold was not perfectly stable under the classical gold standard, perfection is not the relevant benchmark. The purchasing power of money was more stable under the classical gold standard than it has been under fiat money standards since the Second World War. Average inflation rates were closer to zero, and the price level was more predictable at medium to long horizons. Whatever Glasner may have meant by “necessary reason,” there certainly is a theoretical reason for this performance: the economics of gold mining make the purchasing power of gold (ppg) mean-reverting in the face of monetary demand and supply shocks. An unusually high ppg encourages additional gold mining, until the ppg declines to the normal long-run value determined by the flow supply and demand for gold. An unusually low ppg discourages mining, until the normal long-run ppg is restored. It is true that permanent changes in the gold mining cost conditions can have a permanent impact on the long-run level of the ppg, but empirically such shocks were smaller than the money supply variations that central banks have produced.
  2. The behavior of the banking system is indeed critically important for short-run stability. Instability wasn’t a problem in all countries, so we need to ask why some banking systems were unstable or panic-prone, while others were stable. The US banking system was panic prone in the late 19th century while the Canadian system was not. The English system was panic-prone while the Scottish system was not. The behavioral differences were not random or mere facts of nature, but grew directly from differences in the legal restrictions constraining the banks. The Canadian and Scottish systems, unlike the US and English systems, allowed their banks to adequately diversify, and to respond to peak currency demands, thus allowed banks to be more solvent and more liquid, and thus avoided loss of confidence in the banks. The problem in the US and England was not the gold standard, or a flaw in “the theory of the gold standard,” but ill-conceived legal restrictions that weakened the banking systems.

[Cross-posted from Alt-M.org]

The distinguished Stanford University economist Robert Hall, co-architect of the famed Hall-Rabushka flat tax, once described himself to me as a [Bill] Clinton Democrat. Bob Hall wrote one of the most serious studies trying to figure out why the U.S. economy has remained so weak for so long. He concluded that much of the explanation lies in the ways in which recent marginal tax and transfer incentives discourage work.

In an analysis similar to that of Casey Mulligan of the University of Chicago, Hall attributes much of the startling drop in labor force participation to the expansion of federal transfer payments. Disability benefits and food stamps, in particular, are quickly phased-out if nonworkers take a job, or part-time workers switch to full-time work, or single-earner families become two-earner families. In other words, higher tax rates on work and more generous subsidies to leisure leave the economy with fewer people seeking work and therefore less production, lower tax revenue and greater federal spending on transfers from those who earn income to those who instead rely on government.

As Hall put it,

Labor-force participation fell substantially after the crisis, contributing 2.5 percentage points to the shortfall in output. The decline showed no sign of reverting as of 2013. Part is demographic and will stabilize, and part reflects low job-finding rates, which should return to normal slowly. But an important part may be related to the large growth in beneficiaries of disability and food-stamp programs. Bulges in their enrollments appear to be highly persistent. Both programs place high taxes on earnings [emphasis added] and so discourage labor-force participation among beneficiaries. The bulge in program dependence …  may impede output and employment growth for some years into the future.

What does it take to make a state-level Republican policymaker work to grow the power of the Obama Administration? Not much! Washington Secretary of State Kim Wyman is a case in point.

In the wake of a shooting at a Macy’s in Mount Vernon, Washington, late last month, Secretary Wyman called for Washington State to comply with the national ID program run by the U.S. Department of Homeland Security under the REAL ID Act.

Secretary Wyman’s rationale for joining the national ID is that state authorities (including, for some reason, election officials) were unable to immediately identify the citizenship status of the shooter (who turned out to be a naturalized American citizen).

Washington State has hitherto declined to embrace REAL ID, and has been one of the states most actively pushing back against the federal program. Secretary Wyman argues that adopting REAL ID would allow the state to more quickly access federal databases and records and help prevent voter fraud in Washington State elections.

Whatever a state’s need for securing their vote, that’s no reason to join the national ID system. And REAL ID is a bloated, costly, and opaque federal program. Compliance would require Washington State to share its drivers’ personal data and copies of their digitally scanned documents with departments of motor vehicles across the country through a nationwide data sharing system. This database sharing is a two way street: Secretary Wyman might be able to access other jurisdiction’s databases, but any bad actor in a DMV from California to Connecticut could access Washington State’s.

In the wake of recent DMV hacking scandals in Louisiana and elsewhere, this concern is not overblown. Because of the hacking and identity fraud risks, and the lack of any real national security benefit, adoption of REAL ID would only make Washingtonians less safe.

Reuters dropped a bombshell story Tuesday afternoon, reporting that in 2015 Yahoo agreed to scan all their users’ incoming e-mails on behalf of a U.S. intelligence agency, hunting for a particular “character string” and turning over messages where it found a match to the government. Yet the vagueness of the story—which appears to be based on sources with limited access to the details of the surveillance—leaves a maddening number of unanswered questions.  Yahoo did not greatly help matters with a meticulously worded non-denial, calling the story “misleading” without calling it substantively false, and asserting that the “scanning described in the article does not exist on our systems.” (Obvious follow-up questions: Did it exist in 2015? Does it now exist on some other systems?)  Then, on Wednesday, Charlie Savage and Nicole Perlroth of The New York Times published a follow-up article fleshing out some of the details: The bulk scan was conducted pursuant to an order from the secretive Foreign Intelligence Surveillance Court, and hunted for a “digital signature” associated with a foreign state-sponsored terror group.

What’s troubling here is that it suggests Yahoo was asked to scan the contents of all messages for as a string of characters indicating that the message was produced using a particular software tool—such as, for instance, the Mujahideen Secrets encryption software used by Al Qaeda. There is, of course, nothing inherently wrong with targeting tools associated with known adversaries, but this does represent a dramatic inversion of the traditional way surveillance is conducted.  Normally, we expect that the government will identify a “communications facility” being used by a particular target, then proceed to scrutinizing their communications.  Here, the government has scrutinized an entire stream of communications in bulk, searching for something in the contents that would allow them to identify the target! 

It is not hard to see why intelligence agencies would find such scans useful, but it would be a serious mistake to normalize the bulk scanning of communications content—an indiscriminate “search” of people not known to be foreign intelligence targets—even if one is not overly dismayed by a particular application of that approach.  Surveillance architectures create their own institutional momentum, and a software tool designed to scan for digital fingerprints can just as easily scan for words or phrases in messages written by humans, or for cryptographic tools used by many innocent people seeking to protect their privacy as well as a few bad actors—a possibility that becomes far more tempting once the necessary technical infrastructure is in place.

That the government would employ this approach, however, should not exactly come as a great surprise. The National Security Agency’s targeting procedures for §702 of the FISA Amendments Act of 2008, disclosed three years ago by Edward Snowden, seem to contemplate keying surveillance to such signatures. One of the criteria mentioned for verifying the “foreignness” of a surveillance target is: 

Information indicates that  Internet Protocol ranges  and/or specific  electronic  identifiers or signatures  (e.g., specific types  of cryptology  or steganography)  are  used  almost  exclusively by individuals  associated with  a foreign power  or foreign territory,  or are extensively  used  by individuals  associated  with a foreign power  or foreign territory.

Note that “exclusively”—which may sound reassuring—is quickly followed by “extensively,” which would no doubt encompass a great deal of privacy protecting technology used by many law-abiding Americans as well as foreign criminals or terrorists. 

It also seems at least plausible that searches of this sort have been carried out domestically for far longer than a year.  Under the FISA Amendments Act’s §702, the government can designate foreign targets for intelligence collection—including electronic surveillance carried out domestically—under broad targeting procedures approved by the FISA Court, without any specific judicial approval of individual targets.   At last count, there were 94,368 such “targets” being monitored under the a single blanket authorization. As we know thanks to the Snowden disclosures, one way they conduct §702 surveillance is known as PRISM collection, and carried out with the cooperation of communications providers like Yahoo or Google.  The other main mechanism is known as “Upstream” collection and involves scanning of traffic on the Internet backbone—including not just message headers, but also the contents of messages—for “selectors” associated with approved targets. This has sometimes been dubbed “about collection”—because it means that the NSA would intercept not only messages to or from the e-mail address used as a selector, but also messages mentioning or “about” that selector.  It is at least possible that the government has been routinely using digital fingerprints—the text that says, in effect, “the following message is encrypted with a certain type of software”—along with more conventional selectors like e-mail or IP addresses to scan Internet traffic in bulk.

Why, then, would the government ask Yahoo to start doing such scannig for them in 2015?  One possibility is that ever since the Snowden revelations began, more and more companies have been encrypting their traffic by default, using a protocol known as Transport Layer Security, or TLS (the e-mail specific version of which is called STARTTLS).  The wider adoption of such encryption means data that would have been visible to an NSA sniffer sitting on the Internet backbone is now scrambled and unintelligible, making Upstream increasingly useless.  Even for NSA, breaking the encryption on traffic wholesale is likely infeasible—but aside from any message content separately encrypted by individual users, that traffic would be readable once it had arrived at Yahoo and been decrypted with the company’s private keys. Yahoo began making such encryption the default in 2014.

One obvious question is whether Yahoo is the only company to be served with such an order, or whether it reflects a more widespread practice.  Sam Biddle of The Intercept queried some major providers and got relatively straightforward denials from Google, Facebook, Twitter, and Apple—though it remains possible that this is a byproduct of the Reuters story having gotten some details of the story wrong. Microsoft said they had “never engaged in the secret scanning of e-mail traffic like what has been reported” but “would not comment on the record as to whether the company has ever received such a request,” which could reflect simple legal caution—intelligence surveillance requests are invariably covered by broad gag orders, and it gets awkward quickly if you deny getting some types but “no comment” others—or could be an indication that the company received a similar demand, but successfully fought it. 

A second, perhaps less obvious question, is why the scanning would be limited to incoming messages (rather than messages either sent or received by Yahoo users) and only to realtime scanning (rather than encompassing older messages stored in the company’s servers).  One possibility has to do with affecting the “facility” at which the surveillance was “directed.”  In NSA jargon, there is the “target” of surveillance (the person or entity about or from whom information is sought); the “selector” (the specific term used to filter out the information to be collected); and the “facility” at which surveillance is directed (the physical or virtual communications channel from which the information is obtained).  In the simplest type of case, these could all be the same:  There is a target known only as the user of a particular e-mail address, which serves as both the “selector” and—when communications are obtained from the provider who hosts that account—the “facility” at which surveillance is directed.  But they might also all be different.  An individual target might have several associated “selectors” (different e-mail accounts or other digital identifiers), and as the case of Upstream “about collection” shows, the “facility” might be an Internet routing switch rather than a particular repository of stored messages associated with that account.  My (possibly incomplete) understanding from discussions with intelligence officials is that a scan of the content of message sitting in a particular user’s inbox would be considered surveillance “directed at the facility” of the individual user’s account, even if the scan was based on some different selector.  Such a scan would likely require that the person whose inbox it was be considered a “target.”  Conceivably, however, intelligence community lawyers have decided the situation is different if the scans are conducted before messages are routed to specific inboxes—at which stage they’re treated analogously to Upstream traffic.  Before arriving in the recipient’s inbox, in other words, there might be no “particular, known U.S. person” who could be considered a “target” of the scan, triggering a laxer set of rules constraining searches.     

Whatever the reality, the government should now release an appropriately redacted version of the FISA Court opinion authorizing this bulk e-mail scanning—which appears to have come just months before the passage of the USA Freedom Act, under which they would be obligated to prepare an unclassified legal opinion for public release.  If the government is going to be compelling companies to scan everyone’s communications in its hunt for terrorists, the public is entitled to understand the legal framework within which it plans to do so—and to modify or reject that framework if it fails to meet Fourth Amendment standards.

Budget experts worried about the growth of federal spending and deficits have proposed various statutory and constitutional restraints to get the budget under control. I favor a simple cap on the percentage growth in annual total outlays.

Many state governments have spending, deficit, and debt restraints on the books, both statutory and constitutional. The restraints do help to tame state fiscal policy, but there is lots of cheating by the politicians.

Researching Cato’s new Governors Report Card, I came across an illuminating story about Connecticut’s spending restraint mechanism. I quote here at length:

The 1991 General Assembly tried to temper outrage over enactment of the state income tax by drafting a statutory spending cap. Voters would add the cap requirement to the state Constitution one year later by adopting the 28th Amendment.

The cap is supposed to keep spending increases in line with the annual growth in personal income or inflation, whichever is larger. For most of the cap’s history, the legislature has relied on personal income.

The cap system uses an average of personal income growth over the previous five years. That means that the sluggish growth years immediately following the last recession — which ended in 2010 — will continue to limit spending growth under the current cap system.

That makes sense to me—citizen income is stagnant in slow-growth Connecticut, so government growth should be limited so that it doesn’t squeeze people more when they can least afford it.

But that’s not how Connecticut politicians see it:

Both political parties have looked for ways around the cap over the past decade. The governor and legislature can exceed the cap legally if they agree and take special steps.

That happened in 2005 when Gov. M. Jodi Rell, a Republican, signed a declaration of fiscal exigency — declaring a budget emergency. More than 60 percent of the Democrat-controlled House and Senate voted to approve the plan.

Two years later, Rell and lawmakers used the same approach, this time approving a biennial budget that shattered the cap by a record-setting $690 million in the first year.

Since in 2011, Malloy has refused to declare a budget emergency. But that doesn’t mean he hasn’t bent to the cap’s weight.

The governor has proposed or approved moving spending outside of the cap – in large quantities …

The Democrat-controlled Appropriations Committee stunned the Capitol in April 2015 when it proposed a budget that moved billions of dollars in spending for pensions and other retirement benefit costs out from under the cap — for the first time since the spending control was established in 1991.

Both Rell and Malloy have been awarded “F” grades from Cato for their fiscal irresponsibility. It’s a shame that politicians of both parties in Connecticut aren’t abiding by a sensible constitutional restraint passed with the support of 80 percent of voters

Earlier this afternoon in the Rose Garden, President Obama celebrated the ratification of the Paris Agreement. I had this to say in response:

President Obama was a bit less than candid in his speech about the adoption of the U.N.’s Paris Agreement. Using realistic assumptions about role of carbon dioxide in climate change, the Agreement will prevent 0.1 to 0.2°C of global warming by the year 2100, not the inflated figure the U.N. gets by assuming all warming since the Industrial Revolution is caused by human emissions of carbon dioxide. Few, if any, climate scientists would defend that. It also assumes that emissions will—without the Paris Agreement—increase much faster than the average increase used in climate simulations. In reality, the UN’s own Climate Panel states only that carbon dioxide is causing more than 50% of the warming observed since 1950, not 1800. Further, the switch from coal to natural gas for electrical generation has already invalidated the UN’s assumptions about the growth of atmospheric carbon dioxide.

He is also a bit optimistic about China, which has said it will stop increasing carbon dioxide emissions “around” 2030. This is exactly the time that researchers in Obama’s own Department of Energy said, in 2011, that their emissions would level off due to their maturing economy, and without any explicit policy to reduce greenhouse gas emissions, best known as “business as usual.”

In this Norwegian documentary, former Conservative Party MP and Norway’s current Minister of Education and Research Torbjørn (“Thor Bear”) Røe Isaksen and I debate which provides a better guarantee of access to health care – government or a market system?

Washingtonians may recognize the locale: Bob & Edith’s Diner in Arlington, Virginia. 

A rough translation/transcript of the documentary is available here.

A law-abiding resident has few options to protect herself, if she is luckless enough to live in the Nation’s Capital. This truth became abundantly clear this weekend, when a neighborhood drunk attempted to break into my apartment way past either of our bedtimes. Once the situation resolved, I became hell-bent on determining how someone in my circumstances should respond in case next time they fared less agreeably.

A cursory web search of DC urban policy was less-than-encouraging: in the Nation’s Capital, urban policy so markedly favors the assailant that the victim’s best tool in the event of an emergency seems to be something like practicing jujitsu moves in the corner while she runs the clock out.

Conventionally speaking, there are two options when you are assaulted; lethal or nonlethal resistance. Guns fall into the former category, but leaving the matter of D.C.’s gun laws aside – as bewildering as they are – the perhaps more asinine urban policies are those surrounding non-lethal deterrents.

Non-lethal deterrents include 1) self defense sprays (mace or pepper spray) and 2) tasers. If you’re a woman, don’t own a gun, and would like to protect yourself, your best option is probably a good self-defense spray, followed by a taser or knife, except that in D.C. all of these options are either sometimes or always illegal.

For self-defense sprays, this is because certain sprays do not meet the requirements the City Council has set forth, requirements like containing approved chemicals from a list, being labeled with “clearly written instructions for use, and dated with [their] anticipated useful life.” (Apparently, in a life-or-death situation you should be thinking about whether you’ve labeled your itty bitty mace keychain’s expiration date properly.)

City council members are also rarefied luddites, insisting that your self defense spray use an aerosol-propelled mechanism, rather than the more effective, recent innovations that use a incendiary charge to direct the spray, like the Kimber Pepperblaster.*

This requirement is especially obnoxious, because aerosol-propelled self-defense sprays are less precise than self defense sprays with newer mechanisms. This means they must be used within close range, and that there is considerable risk that the spray blows back in your face, so that you can’t easily flee.

Adding insult to injury, if you still decide to bite the bullet – so to speak – and buy a strain of compliant self defense spray in DC, they are only sold in a limited number of stores, and you’ll be required to register your pathetic “weapon” before you check out.

Oh well, at least you can substitute a taser (which is legal in 45 states) if you get into a pinch? Not so fast. Just possessing a taser in DC, not using it, is a misdemeanor punishable by one to five years of jail time and a $1,000 - $5,000 fine. And don’t you dare think about arming your teenage daughter with a taser to protect her on her sketchy walk home from school; distributing a taser to someone under the age of 18 will land you ten years in jail and a $25,000 fine.

This is in spite of the fact that earlier this spring the Supreme Court found bans on tasers unconstitutional, and ruled that the Second Amendment  “does not mean … that only weapons popular in 1789 are covered…”**  

Still, at least you have one decent option to defend yourself, right – a good, old fashioned knife? Unfortunately, no: knives with blades longer than three inches, razorblades, switchblades, and daggers are illegal, too.

That doesn’t leave you with much to work with. Tragically, in this, Weapon Control Utopia, it seems our enlightened legislators favor a “come and get it” approach when it comes to law-abiding resident’s life and property. It shouldn’t be a surprise; those that sit on the thirteen-member City Council likely hold all sorts of advantages, including those that provide for basic security. Instead, if you’re a regular young woman or just a law-abiding citizen in DC, it’s probably time to get practicing those air punches. 

* Verified with DC’s Metropolitan Police Department, 10/03/16.

** There are signs this rule may change in the wake of a recent DC lawsuit, but in the meantime, DC’s Metropolitan Police Department confirmed that tasers are illegal, 10/05/16.

In a society such as ours … is appears crazy at first to want revolution.  For we have whatever we want.  But the aim here is to transform the will itself so that people no longer want what they now want… .The question with which we had to deal … amounts to the question of whether … in order to set free these needs, a dictatorship appears necessary…

–Herbert Marcuse, “The End of Utopia” (1967)

All ‘favourable’ Utopias seem to be alike in postulating perfection while being unable to suggest happiness.  . .  The inhabitants of various [Utopias] are chiefly concerned with avoiding fuss. They live uneventful, subdued, ‘reasonable’ lives, free not only from quarrels, disorder or insecurity of any kind, but also from passion … .  Nearly all creators of Utopia have resembled the man who has toothache, and therefore thinks happiness consists in not having toothache. They wanted to produce a perfect society by an endless continuation of something that had only been valuable because it was temporary. The wiser course would be to say that there are certain lines along which humanity must move, the grand strategy is mapped out, but detailed prophecy is not our business. Whoever tries to imagine perfection simply reveals his own emptiness.

–George Orwell, “Why Socialists Don’t Believe in Fun” (1943)

If another group tie takes the place of the religious one – and the socialistic tie seems to be succeeding in doing so – then there will be the same intolerance towards outsiders as in the age of the Wars of Religion.

–Sigmund Freud, “Group Psychology and the Analysis of the Ego” (1921).

The actual distribution of income or wealth has often been compared with a hypothetical ideal (Utopia) rather than actual experience in any country at any time. 

Many Westerners once believed incomes were nearly equal in the former Soviet Union, for example, but we now know that substantial privileges did exist for a select few – based on political power rather than economic contribution.[i] Even aside from bribery and corruption, special access to health care, education, housing and special shops was often granted to the Communist Party hierarchy and the bureaucratic elite.  Urban people in general were subsidized at the expense of rural areas.

By the late seventies, only a handful of Western leftists continued  to defend such dictatorships as Stalin’s Soviet Union, Mao’s China, Castro’s Cuba, or North Korea’s Kim Jong-il/Kim Jong-un feudal dynasty.  

In recent years, the left’s previous romanticism of communism has sometimes been briefly salavaged by relabeling similar authoritarian regimes as “socialist” (Chavez in Venezuela), which sounds nicer but isn’t. Others have switched to romanticizing some golden age of the past.  In the U.S., for example, the Golden Age of greater equality was said to have occurred between 1930 and 1973. Yet the realtively egalitarian (“fair”?) suffering of 1930-39 is difficult to romaticize, for obvious reasons, as is the post-1973 stagflationary collapse of Nixon’s authoritatian price controls.

Vague allusions to social justice are often employed to suggest that a larger fraction of the economy’s benefits (food, housing, health care, etc.) could and should be distributed by government rather than by markets.  In theory, we could turn over all of our income to democratically elected officials and let them decide who gets what. But distribution on the basis of political criteria is not necessarily fairer than distribution on the basis of economic criteria.  Political markets also tend toward one-size-fits-all solutions, with less variety and innovation than in economic markets.

Those currrently expecting politicians to make various goods or services “affordable” or “free” are really just asking government officials to force someone else to pay.  But artificially low prices (e.g., for colleges or physicians) inflate demand and discourage supply, requiring some bureaucrat to use nonprice rationing such as waiting lists, lotteries or preferential treatment for those with the most political clout.

The only alternative to a free market is a politically rigged market, and that invariably turns out to be neither fair nor pleasant. 

The only way to ban markets is to beat them down with force. And since markets are abstractions, the force is used against people. So the alternative to a market-oriented society in which everyone is required to respect everyone else’s rights is a society in which those in power use force on whomever they can get away with using it on.”

–David R. Henderson, The Concise Encyclopedia of Economics (1997)

[i] David R. Henderson, Robert M. McNab & Tamás Rózsás, “The Hidden Inequality in Socialism,” The Independent Review (Winter 2005)

Most state governments are in an expansionary phase, as revenues are growing at a steady clip. Some governors are using the growing revenues to expand spending programs, while others are pursuing tax cuts and tax reforms.

That is the backdrop to this year’s 13th biennial fiscal report card on the governors, which Cato released today. It uses statistical data to grade the governors on their taxing and spending records since 2014—governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.

Five governors were awarded an “A”: Paul LePage of Maine, Pat McCrory of North Carolina, Rick Scott of Florida, Doug Ducey of Arizona, and Mike Pence of Indiana.

Ten governors were awarded an “F”: Robert Bentley of Alabama, Peter Shumlin of Vermont, Jerry Brown of California, David Ige of Hawaii, Dan Malloy of Connecticut, Dennis Daugaard of South Dakota, Brian Sandoval of Nevada, Kate Brown of Oregon, Jay Inslee of Washington, and Tom Wolf of Pennsylvania.

The report describes the record of each governor and discusses the outlook for state budgets. Medicaid costs are rising, and federal aid for this huge health program will likely be reduced in coming years. At the same time, many states have high levels of unfunded liabilities in their pension and retiree health plans.

Those factors will create pressure for states to raise taxes. Yet global economic competition demands that states improve their investment climates by cutting tax rates, particularly on businesses, entrepreneurs, and skilled workers.

News reports about the states often focus on policymaker efforts to balance their budgets. Balanced budgets are important, but policymakers should also be running their governments in a lean and frugal manner, reforming tax codes to spur growth, and generally expanding fiscal freedom for state residents.

Cato’s new report helps to sort out the governors who are moving in that direction from those who are not. An oped describing the main results is here.

In the media, the issue of trade is sometimes presented as two sides debating whether free trade is good for the economy, with no way to determine the answer. For example, when Donald Trump suggests imposing tariffs on Carrier or Ford or Nabisco if they produce in Mexico and sell in the U.S., commentators may treat it as a serious suggestion that should be considered.  When you ask economists, though, you get a pretty clear answer: This is a bad idea. Recently, a group of leading economists was presented with this proposition:

Adding new or higher import duties on products such as air conditioners, cars, and cookies — to encourage producers to make them in the US — would be a good idea.

The 39 economists who answered the question all said – not surprisingly – that they disagreed or strongly disagreed with this proposition.

What was particularly interesting was a comment offered by one of the economists. David Autor of MIT said this: “Taxing consumers to subsidize domestic production is bad economics and a violation of the WTO agreement.”  I’m interested in his views because his paper that has been cited by some people to claim that trade with China is different, and the old rules do not apply.  As my colleague Dan Ikenson explains:

Unfortunately, a recent academic paper called “The China Shock,” by economists David Autor, David Dorn, and Gordon Hanson, which finds evidence of prolonged labor market adjustments in regions where local industries faced direct competition from imports from China last decade, is being portrayed by some in the media as a refutation of free trade. These interpretations have found their way into the political debate and are serving to obscure the proper meaning of the paper’s findings: Labor market frictions have been too severe for some workers with certain skills in certain industries in certain traditionally high-tax, pro-union states to find new jobs. The collective residue of decades of piling bad policies on top of bad policies has gummed up the works.

When you read Autor saying that these tariffs are bad economics, it becomes even more clear that the implications of his paper are being distorted. The laws of economics have not changed, and protectionist tariffs are still bad.  Perhaps what we need to get this point across to the media is to have all 39 of the economists on CNN at once to “debate” the issue. The host can ask each of them about Trump’s tariff proposals, and we can settle the issue once and for all.

People react to public policies by changing their behavior.  Foreigners committed to immigrating to the United States are confronted with two options – they can come legally or they can come illegally.  When visas are legally available, cheap, and plentiful they choose to come legally.  When visas are difficult to get, expensive, and few in number then many immigrants decide to come illegally.*  Employers face a similar dilemma when choosing to hire workers.

The inflow of illegal immigrants has slowed dramatically in recent years.  The poor American economy, economic growth south of the border, Mexican demographics, and heightened border security all partially explain that decline.  Another explanation is that the number of guest worker visa has increased, convincing some would-be illegal immigrants to instead enter and work legally.    

The annual number of guest worker visas issued on the E, H, L, O, P, and TN visas increased by 157 percent from 1997 to 2015.  The annual number of green cards for new arrivals also increased by 25 percent during the same time period and, although the majority are for lower-skilled family members, they also work in many of the occupations that would otherwise be filled by illegal immigrants.  The gross number of illegal immigrants making it into the United States each year also shrank during that time.

The number of guest workers, gross illegal immigrant entries, and green cards issued to new arrivals is surprisingly flat from 1997 to 2015, ranging from a high of 1.66 million in 1999 to a low of 1.17 million in 2009 (Figure 1).  The average during the entire period is 1.41 million entries a year.  The number of entries is remarkably constant even when considering the Great Recession and slow recovery, indicating that the number of entries doesn’t change nearly as much as the method of entry.  New green cards and guest worker visas are being used by many immigrants who would otherwise have entered illegally. 

Figure 1

Guest Worker Visas Issued, Green Cards for New Arrivals, and Gross Illegal Immigrant Inflows

 

Sources: State Department, Department of Homeland Security, Bureau of Labor Statistics, and Pew.

Mexicans are less likely to illegally immigrate than in previous years.  In 1997, Mexicans accounted for 97 percent of all border patrol apprehensions.  According to Customs and Border Protection (CBP), Mexicans accounted for little more than half of all apprehensions in 2015 and were less than half for the first time in 2014.  The number of guest worker visas issued to Mexicans increased 5.4 fold from 1997 to 2015 – from a mere 33,759 to 182,698 (Figure 2).  By contrast, the total number of guest worker visas issued to those of every nationally annually doubled over that time.  In 1997, Mexicans were issued 15.7 percent of all the guest worker visas.  In 2015, they were issued 33.4 percent.  The guest worker programs expanded and Mexicanized, funneling would-be illegal immigrants into the legal market – helping to explain the particularly sharp drop in Mexican illegal immigration. 

Figure 2

Guest Work Visas Issued to Mexicans and Non-Mexicans

Source: State Department.

If increased border security was really the source of the decline in gross Mexican illegal immigrant entries then illegal immigration from other countries south of the border should also decline.  After all, a new border patrol agent deters Central American just as well as he deters Mexicans.  However, Central Americans are the new growing source of illegal immigrant entries according to the apprehensions data.  The number of guest worker visas issued to Central Americans has remained steady since 2005 while the number of apprehensions by border patrol has shot up (Figure 3). 

Figure 3

Guest Worker Visas Issued to Salvadorans, Guatemalans, and Hondurans Compared to Other Than Mexican Apprehensions

 

Source: State Department and Customs and Border Protection.

Central Americans also have new reasons to flee such as violence and the second stage of immigration – children and other family members reuniting with their parents who emigrated first.  The lack of guest worker visa programs for Central Americans means that they will continue to come illegally.  Policy makers could instead increase the legal options for Central Americans to legally migrate to the United States for work and thus eradicate the incentive to come illegally.  Such a policy contributed to the decline of Mexican illegal immigration and could accomplish the same goal a lot more cheaply, humanely, and safely than building a wall.   

The government’s ability to control immigration is limited because Americans and the immigrants themselves react to incentives.  Creating a legal pathway for lower-skilled workers to come and work greatly reduces unlawful immigration.  In the 1950s, each new Bracero guest worker visa issued replaced about 3.4 illegal workers.  To reduce unlawful immigration to zero would require many fewer visas than there are unlawful immigrants.      

*Of course, the cost of circumventing border security can absorb much or the entirety of the benefits.  Acquiring a tourist visa with the intent of overstaying requires fooling a Foreign Service Officer.  Traveling to Mexico and then crossing the border illegally isn’t a picnic either.  Human smugglers charge high prices and there’s no guarantee that they’ll succeed.  The number of foreigners who would come here illegally in the absence of border security is vastly greater than those who try today, which means border security is more effective than most people realize.

After the New York Times published the 1995 tax returns of Donald Trump, Callum Borchers at the Washington Post and others have said it might be illegal. Trump’s lawyer claimed that publishing the returns was illegal without Trump’s consent, and, being Trump’s lawyer, he of course threatened “prompt initiation of appropriate legal action.”   Adding to the confusion, during a panel discussion at Harvard Law School in mid-September, Bob Woodward, associate editor of the Washington Post, and Dean Baquet, executive editor of the New York Times, presciently discussed whether they would publish Trump’s tax returns if they got ahold of them. “You know what your lawyers would tell you,” Woodward said, ”if you publish them, you go to jail.” Baquet said he would “seriously fight to publish [Trump’s] tax returns.”   For federal tax returns, there is a specific statute that prohibits publishing without consent (26 U.S.C. § 7213(a)(3)). But the Times only published the first page of Trump’s New York, New Jersey, and Connecticut tax returns (not the federal tax returns) so that statute would not apply.    Of those states, only New York has a privacy statute that could be construed to apply to non-government employees/contractors like the Times. Not to make your brain atrophy from an overdose of legalese, but the New York statute says that any person who, pursuant to this section, is permitted to inspect any report or return or to whom a copy, an abstract or a portion of any report or return is furnished, or to whom any information contained in any report or return is furnished, to divulge or make known in any manner the amount of income or any particulars set forth or disclosed in any report or return required under this article. This bit of printed chloroform is a convoluted statute (welcome the study of law), but the fairest reading is that the phrase “pursuant to this section”—i.e., the entire section describing the “general powers of the tax commission”—applies only to those who are “permitted to inspect any report or return” under New York law, such as some government contractors. The other entities listed, such as those “to whom a copy, an abstract or a portion of any return is furnished,” can be anyone, even those who obtained a return not “pursuant to this section.” That includes the Times.   So, let’s assume that what the New York Times did was against the law. A more interesting question is: would that law be constitutional under the First Amendment? After all, prohibiting someone from divulging information to the public is clearly an abridgement of speech, so would the law fall under an exception to the general rule that the government cannot prohibit speech?   The most relevant case would be Bartnicki v. Vopper from 2001. That case dealt with a radio commentator who broadcast a tape of an illegally recorded conversation between a chief union negotiator and a union president. The federal statute at issue prohibited people from “willfully disclosing the contents” of any communication that the person knew or had reason to know “was obtained through an illegal interception.” The Court struck the statute down as unconstitutional because it “implicates the core purposes of the First Amendment” by imposing “sanctions on the publication of truthful information of public concern.” Publishing crucial and truthful information about a presidential candidate a month before the election certainly implicates matters of “public concern.”   Finally, because the New York law makes it illegal to merely “divulge or make known” tax return information,  it is broader than laws that prohibit someone from releasing a tax return that he knows (or has reason to know) was obtained illegally. In other words, it prohibits even more speech than the law in Bartnicki. Therefore, it seems likely that the law would be struck down as unconstitutional. 

If you follow state policy issues, you may think that there has been a lot of tax cutting recently because of high-profile reforms by Mike Pence, Sam Brownback, and a few other governors. I examine those reforms in Cato’s 13th biennial fiscal report card on the governors, released tomorrow.

However, a chart from NASBO shows that recent tax cutting across the 50 states has been limited and mainly offset by tax hiking. The chart shows net state revenue changes from legislated cuts/hikes since 1979. In 2017, for example, the dollar value of hikes is expected to outweigh cuts.

That is a disappointing because there is usually a trend toward tax cutting during economic expansions, or at least there was during the 1990s. Recent tax cuts in places such as Florida, Indiana, Maine, New York, North Carolina, and Texas have been offset by hikes in places such as Alabama, Connecticut, Delaware, Nevada, Pennsylvania, and South Dakota.

What makes the current dearth of tax cuts odd is that state legislatures have become more Republican since the 1970s. The Wall Street Journal had a chart yesterday showing that the share of state legislature seats held by the GOP has risen from 40 percent in the 1980s to 55 percent today.  

Republicans are supposed to be the tax-cutting party. That is the core of their “brand.” So why isn’t there more tax-cutting? One reason is that some Republican governors start siding with special interests over taxpayer interests after they have been in office a while. They forget that they are supposed to work for all the citizens, not just the ones lobbying for more government spending. Nevada’s Governor Brian Sandoval seems to be a good example, as I discuss in the report tomorrow.

Another problem is that in some state legislatures that are nominally Republican, some of the members have chosen that label only because it was advantageous for election and reelection. In South Carolina, Governor Mark Sanford and then Nikki Haley long pursued major tax reforms, but to little avail.

A final problem is that the Democratic Party has moved to the left on fiscal issues. Andrew Cuomo of New York is about the only Democratic governor in recent years who has been amenable to substantial tax reductions.

Learn what grades Cuomo, Haley, Sandoval, and the others earn on their recent fiscal performance in tomorrow’s report.

The Sunday Washington Post had a long, hagiographic article about Senator Mark Warner’s critique about how capitalism “isn’t working” for the masses and his heroic attempts to fix it that left me thinking I’m in an alternate reality.

The problem he sees is that the growing tendency of people to change jobs throughout their career has left people unprepared for retirement, and that we need to do more to make sure that workers have some sort of safety net to provide them with health care and income in their golden years.

That this was largely addressed decades ago with the introduction of Social Security and Medicare was completely missing from the article. Social Security is an incredibly progressive retirement program that provides everyone with a work history of at least ten years with a decent-sized benefit that doesn’t go up all that much for wealthier people who contributed much more. And Medicare is the largest government program there is, covering hospitalization costs, basic health costs and drug benefits for tens of millions of senior citizens. The government spends about $1.5 trillion each year on these two programs, and they make up the majority of our federal budget. There’s also plenty of evidence that they prevent seniors from indigence: the poverty rate for seniors is well below that of other age groups. 

The current Administration also added an expensive entitlement that makes it much easier for people under age 65 who do not receive health insurance to obtain it, along with a healthy subsidy. For a family of four in Washington DC there is still a subsidy for an income of $80,000, which is well above the mean household income, and Medicaid completely covers those who don’t make enough money to buy their own health insurance. What more can we possibly do to make health insurance more affordable for the working poor?

The latest push of the Administration–and one that Senator Warner is leading–is to create some sort of government 401k. The idea is an awful one–the rationale is that since we move around to so many jobs, and since many employees do not provide a retirement plan, the government should do it for them. Earlier this year the Department of Labor made it much easier for the states to set up retirement accounts for their workers that would be administered by the state as an option for workers at firms without a retirement plan.

It is a supremely bad idea. For starters, there is no evidence that a public option is better than a private option, and plenty of data showing the contrary. For instance, the college savings accounts run by the states are no different than what people would get if they went to their local Fidelity or Vanguard office and opened their account, save for the fact that the latter would not come with a tax break, and the money in the government account has a sharply higher management fee than are found in the private funds. The Department of Labor just spent a year trying to drive down management fees in retirement accounts and they’re embarking on a new plan that would invariably create millions of accounts with higher management fees than they could get elsewhere.

Until recently liberals were in full defense of defined benefit pensions despite the fact that they disadvantaged people who had shorter job tenure and were more likely to change jobs, both of which tend to be truer for women than men. That they realize these don’t work in today’s economy is gratifying, but their insistence that the government create a vehicle to replace it is nonsensical.

If we want to nudge people to get a retirement account, we can do that without the state of Massachusetts inserting itself as a middleman. And politicians should stop pretending that there’s a senior citizen poverty crisis, no matter how flattering the Post may treat such efforts.

You Ought to Have a Look is a regular feature from the Center for the Study of Science.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary. 

With last week’s news dominated by the debates—both in front of the American people (Trump v. Clinton) and in front of the American courts (West Virginia v. EPA)—we figured we’d highlight a couple of other stories that may have not have gotten the attention that they deserved. 

First up is a piece that left us slack-jawed. “How the FDA Manipulates the Media” is an investigative journalism article Charles Seife of Scientific American that reveals a seamy world of backroom press manipulation by scientific bodies (in this case, the federal Food and Drug Administration) through a practice known as a close-hold embargo. While some organizations, including major scientific journals like Science and Nature, employ an embargo system that allows some members of the press access to articles before they are officially “published” so that they can prepare news stories, the only condition is that no one releases the story before a set date. This is why a bunch of news stories, all covering the same piece of scientific information, all hit the airwaves/intertubes at the same time.  While this type of embargo is a bit unfair to anyone who perhaps wants to comment on the story but is blindsided by it – the procedure only biased by the well-known predilections of the mainstream press.  However, the close-hold embargo is an (almost mythical) horse of a different color. Its intent is to generate loads of press, but only good press. 

Here’s a taste from Scientific American:

The deal was this: NPR, along with a select group of media outlets, would get a briefing about an upcoming announcement by the U.S. Food and Drug Administration a day before anyone else. But in exchange for the scoop, NPR would have to abandon its reportorial independence. The FDA would dictate whom NPR’s reporter could and couldn’t interview.

…This kind of deal offered by the FDA—known as a close-hold embargo—is an increasingly important tool used by scientific and government agencies to control the behavior of the science press. Or so it seems. It is impossible to tell for sure because it is happening almost entirely behind the scenes. We only know about the FDA deal because of a wayward sentence inserted by an editor at the New York Times. But for that breach of secrecy, nobody outside the small clique of government officials and trusted reporters would have known that the journalists covering the agency had given up their right to do independent reporting.

Documents obtained by Scientific American through Freedom of Information Act requests now paint a disturbing picture of the tactics that are used to control the science press. For example, the FDA assures the public that it is committed to transparency, but the documents show that, privately, the agency denies many reporters access—including ones from major outlets such as Fox News—and even deceives them with half-truths to handicap them in their pursuit of a story. At the same time, the FDA cultivates a coterie of journalists whom it keeps in line with threats. And the agency has made it a practice to demand total control over whom reporters can and can’t talk to until after the news has broken, deaf to protests by journalistic associations and media ethicists and in violation of its own written policies.

By using close-hold embargoes and other methods, the FDA, like other sources of scientific information, are gaining control of journalists who are supposed to keep an eye on those institutions. The watchdogs are being turned into lapdogs. “Journalists have ceded the power to the scientific establishment,” says Vincent Kiernan, a science journalist and dean at George Mason University.

And if you think this taste is bad, the whole article will make you ill. Sickening, but eye-opening. Perhaps take an alka seltzer first, but you really ought to have a look.

Next up is a provocative piece by Andrew Gelman, Professor of Statistics and Political Science, at Columbia University. In his post “What has happened down here is the winds have changed” Gelman contrasts the traditional peer-review system of scientific reportage with the new social-media-review system. While there are many scientists who are desperate to hold onto the old system which is controlled more by scientific “insiders,”Gelman documents how that system has become faulty and unreliable. It seems perhaps that scientific “outsiders” can, or even must, help save the day:

When it comes to pointing out errors in published work, social media have been necessary. There just has been no reasonable alternative. Yes, it’s sometimes possible to publish peer-reviewed letters in journals criticizing published work, but it can be a huge amount of effort. Journals and authors often apply massive resistance to bury criticisms.

Gelman’s post, although lengthy, is well-worth the effort—especially interesting is his timeline of events that have transpired, rapidly, over the past 5-6 years that have illuminated the “replication crisis” in today’s science. While Gelman’s post is aimed more specifically to the field of psychology, it is much more generally applicable. It’s a great companion piece to the many others that we have recently been documenting in these pages that illustrate that something is rotten in the state of Science.

And finally is a blog post by Blair King, author of the blog “A Chemist in Langley.” Blair is a self-affirmed “lukewarmer” pointing out that “I agree with the fundamental science of climate change. I acknowledge that the anthropogenic addition of Tyndall gases into the atmosphere will have an effect on global climate. As such, I agree with consensus (as presented by the IPCC) on the topic of climate change. “ but that “As a Lukewarmer my primary difference with the alarmists is that I believe that the climate’s sensitivity to carbon dioxide is on the lower end of the consensus scale presented by the IPCC. “

In his post, “On Lukewarmism, denial and a look at the state of the environmental movement,” Blair describes how nasty life can be for lukewarmers—or anyone else for that matter—who doesn’t toe the activist line that climate change is a huge threat to mankind and drastic steps must be immediately taken in attempt to mitigate it. Blair writes:

This blog post started as a light lark about the internecine battles between climate activists but has ended up as a state-of-the-union sort of piece that refutes a lot of malicious slander being directed my way by the likes of Miriam (SouBundanga) O’Brien and her acolytes who have filled my twitter feed with their rubbish, lies and insults. It puts some thoughts together in one place and describes where my mind is on the topic of Lukewarmism, climate change “denial” and the current state of the environmental movement.

Be sure to read the whole thing to get an idea of how climate activists can go off the rails.

“Bad behavior” it seems, should be included in the list of things “consistent with” anthropogenic climate change.

After spending some years in both legislative and regulatory policy roles, I’ve come to even more strongly believe that almost everything you really need to understand regulation can be found in Peltzman’s classic 1976 extension of Stigler’s original economic model of regulation. Almost everything. What I find lacking is recognition of the importance of both outright ignorance of the “correct” policy solution, along with cognitive biases on the part of policymakers. While I reach slightly different conclusions for the structure of policy implementation, I follow Rachlinski and Farina(2002) in framing the inquiry around two models of government error: Public Choice and Cognitive Failure.

While still largely ignored within mainstream academia, the central framework of Public Choice theory, that actors in the political realm pursue rational self-interest, appears to have been largely embraced by popular political commentators from Senator Elizabeth Warren to Presidential Candidate Donald Trump. The notion that “the system is rigged” clearly resonates with the public. For some the obvious solution has been to further insulate regulators from the political process: witness the structure of the Consumer Financial Protection Bureau (CFPB) created by the Dodd-Frank Act.

The “protecting” of regulators from the political process is, however, based upon the belief that the “correct” policy is obvious and is simply being blocked because regulators are “captured” by those they regulate. Insulate the regulators, and like magic, you get the right policy.

A challenge to this argument is the performance of the Federal Reserve, arguably the most independent of regulators. Yet its performance before and during the crisis has been widely criticized. The creation of the CFPB was in part a reaction to the perceived failures of the Fed in the area of consumer protection (for a counter argument, see Bernanke’s recent book). Capture at the Fed is often invoked as resulting from having bankers on the regional bank boards, but the consumer protection rules were not written by the regionals but by the Washington-based Fed board.

If not direct capture, then invoked is the notion of “cognitive capture” in explaining the Fed’s (in)action. In this instance the Fed comes to identify with the values and world view of Wall Street and/or economists. There is much merit in this view, and I certainly see it as a fact that “regulatory capture has resulted in an excess sensitivity of the Fed to financial market and financial sector concerns and fears and in an overestimation of the strength of the link between financial market turmoil and financial sector deleveraging and capital losses on the one hand, and the stability and prosperity of the wider economy on the other hand (Buiter 2008).”

But this type of capture does not seem to come from a “revolving door” or Congressional pressure or any of the standard avenues. It appears to come from the transmission of information.

Regulators rely on external parties, often industry, to gather information about the health of the economy and about the impact of regulation on the economy, as well as on specific industries. The problem of representativeness bias, however, arises in determining whether the information is indeed reflective of the overall economy. The NY Fed, for instance, heavily interacts with a small number of banks that are “primary dealers.” Such is a function of how monetary policy is currently conducted. If a primary dealer is experiencing problems and asking the Fed for assistance, the Fed may well conclude many other banks also need assistance. I would suggest this was indeed the case in 2008.

Bankers and economists are not the only parties subject to cognitive capture, nor the only parties able to project it. As there appears to be little evidence that America is suffering from a mandated arbitration crisis, one has to wonder why the CFPB has spent so much effort trying to eliminate it. Perhaps we shouldn’t be surprised that an agency staffed by lawyers is subject to cognitive capture by the general legal profession. The point is not that lawyers are any better (or worse) than economists, the point is that all of us are subject to potential cognitive capture. No one is immune.

Given that everyone is subject to capture, cognitive and otherwise, what structures can reduce this? One solution is, as Stephan Bainbridge has suggested, a board structure. Such could help bring diverse voices to bear on a problem, forcing policymakers to consider alternative viewpoints and recognize their own biases. In this sense, we should follow Cass Sunstein’s call for encouraging more dissent.

Recently Schnakenberg and Turner (2016) have formalized a model where attempts to eliminate capture by limiting influence (the CFPB model) results in less informed policymaking. Are our only choices biased, ignorant policymaking versus captured policymaking? Again here is where checks-and-balances can improve regulatory outcomes. For instance, the President’s Council of Economics Advisors has often stood as an independent voice within the executive branch against agency proposals favoring the constituents of said agency (for example see Hargrove and Morley 1984).  The Office of Management and Budget has often served a similar role.  External review of agency decision-making, whether by the Courts or independent bodies such as the GAO, offer some potential for reducing cognitive capture (See Seidenfeld 2002).

Attempts to require greater agency accountability have often been opposed as favoring special interests. Yet the notice and comment process under the Administrative Procedures Act (APA) has greatly leveled the playing field in terms of influencing agencies. Prior to the APA, agency rule-makings often looked like the machinations of an industry cartel. While the APA has undoubtedly increased the length of the rule-making process, it has also improved it, without inhibiting government’s ability to act. Ultimately expediency in government is the friend of special interests, not the public.

I’ve argued above that the most fruitful avenue for reducing regulatory capture is to impose more checks-and-balances on our agencies, reversing recent trends toward expediency. Of course in many cases, Fred McChesney had it right when he wrote, “the one unambiguous solution for reducing rent extraction is reducing the size of the state itself and its power to threaten, expropriate, and transfer.”

[This article originally appeared on Pro-Market, the blog of the Stigler Center at the University of Chicago Booth School of Business.]

Megaupload.com was once the 13th most popular website on the internet, with more than 82 million unique visitors and a billion total page views during its seven-year operation. The site allowed people to store files on the cloud for later use—and some users inevitably stored copyrighted TV shows, films, songs, and software. In 2012, the U.S. government charged the site’s owner, Kim Dotcom, and its operators with conspiracy to commit copyright infringement. The defendants are currently resisting extradition to the United States (Dotcom lives in New Zealand), as is their right under extradition treaties.

In 2014, the seemingly frustrated government moved to seize the defendants’ considerable assets in a civil-forfeiture action, claiming that the assets are probably connected to the alleged criminal activity. The government had a major problem, however, as the assets that they were seeking to seize were not located in the United States, but in Hong Kong and New Zealand. Under traditional rules of in rem jurisdiction—a legal theory that allows courts to gain jurisdiction over property—the court must have “control” over the property to entertain the claims, which the district court did not have in this case.

The district court, however, ignored fundamental principles of statutory construction, and agreed with the government’s argument that a federal statute—conferring only venue to the district courts in cases where property was located outside of the United States—also expanded the court’s jurisdiction and fundamentally altered the traditional requirement that courts have control over the property to assert jurisdiction over it.

This misreading of the statute also created a serious constitutional issue under Article III. It is a fundamental constitutional rule that federal courts can’t issue mere “advisory” opinions. When a court lacks control over property located in a foreign country, it necessarily relies on another sovereign to enforce that order, making it advisory as to how the other sovereign should enforce the judgement.

To make matters worse, the court here also “disentitled” the defendants from presenting evidence that their property was not subject to seizure. Under civil-forfeiture laws, the government can take property without an underlying criminal conviction based only on the allegation of a crime. Those whose property has been seized can get it back by proving that their property is “innocent.” The government, however, is preventing the defendants from even making that argument. Using the “fugitive disentitlement” doctrine, the government is blocking the defendants from challenging the forfeiture.

Fugitive disentitlement has historically been applied only to criminals who escaped custody while appealing a conviction, the idea being that a court could decide to dismiss the appeal because any judgment would be unenforceable against an absent defendant. Here, the government has decided that, because the Megaupload defendants aren’t coming to the United States to defend their property, they are “fugitives” who have lost the ability to defend against that seizure—and the district court agreed. The U.S. Court of Appeals for the Fourth Circuit then wrongly upheld the district court’s holding, so Cato, along with the Institute for Justice, have filed an amicus brief asking the court to hear the case en banc (all the judges on the court).

We argue that the district court’s reading of the federal statute was not in line with fundamental statutory construction principles and that it’s unconstitutional for the government to use fugitive disentitlement in civil forfeiture proceedings against non-fugitives. The Fifth Amendment’s Due Process Clause requires an opportunity to be heard and an opportunity to defend against government-initiated actions against your property—even if you’re a dotcom millionaire living abroad.

The Fourth Circuit will decide whether to rehear United States v. Batato later this fall. If it declines to do so, the Supreme Court will have an opportunity to take the case – possibly before the end of the new term that just started today.

Pages