Some of you people just about missed it...

Dale Franks tells you all you need to know from the State of the Union address.

For Tim Kaine's response, read Jeff Goldstein.

Enemy of my enemy

Russia's and China's recent announcement that they will support referral of Iran to the U.N. Security Council is emphatically not a breakthrough against Iran. China and Russia, permanent members of the security council and holders of veto power over all its actions, agreed to refer Iran to... the security council! How exactly does this constitute a breakthrough?

Both China and Russia have mutually profitable relations with Iran, selling knowledge and weaponry in exchange for influence and export contracts. They wish to maximize, not the extent of these dealings, but their profitability. To this end, it is in their interests to weaken Iran's bargaining position so that a given investment [of armaments] will yield greater returns. A referral to the security council, where America and Europe are known to stand against Iran, will make them the brokers of Iran's future.

In other words, the referral of Iran to the security council should not be interpreted, even conjecturally, as a harbinger of action against Iran. Rather, it is a profit-seeking maneuver from Iran's provisional supporters, increasing their leverage over Iran for their own purposes. They will not allow the UN to act, but they can use the UN to gain concessions from Iran; the outcome will be, not sanctions or regime change, but a flurry of export contracts and infrastructure deals.

[HT: McQ&O. This post is expanded from a comment I made there.]

Working the Press

In a sharp essay entitled The Submarine, Paul Graham gives an insider summary of how P. R. firms create "news". The footnotes are also interesting:

[3] Different sections of the Times vary so much in their standards that they're practically different papers. Whoever fed the style section reporter this story about suits coming back would have been sent packing by the regular news reporters.

Despite his Quixotic attachment to Lisp, Mr. Graham is a worthy and reliably interesting essayist; his best effort is probably How To Make Wealth.

Seasons in the Sun

One of the main points of the Democratic party's recently announced "innovation agenda" is increasing the prevalence of college education. Rahm Emanuel has phrased it most explicitly:

One, we make college education as universal for the 21st century that a high school education was in the 20th.

Describing such a program as "long on vision and short on specifics" may be the prearranged storyline of the news coverage; but it is hard to see how a program offering us yesterday's solutions tomorrow is displaying "vision".

Undereducation and underemployment are not only economically inefficient; they are also wasteful of the human spirit. Structural problems in higher education in the United States today [here I do not consider the pitiful state of many public primary programs] lead to three such destructive sinks of potential:

1. Those who find themselves underemployed, especially women attempting to reestablish a career after raising children, are often crushed by the rigidity of the accreditation and hiring processes.
2. Those considering a trade career, which does not require a college education, cannot undertake it without permanently disqualifying themselves from high-status white-collar work. Thus there is a proliferation of uncaring students motivated only by the desire to keep alive some vague hope.
3. College itself. Many, and possibly a majority, of college students have no desire to learn and are not being taught anything they care about or need. They are there because it's a good time, because their parents are paying for it, and because -- as noted before -- there is no second chance.

The common structural problem should by now be clear: it is the concept of college as something you do once, at a certain age. A real vision of higher education is one which looks to break down this limitation.

If a nineteen-year-old boy wants to be a plumber, make a bit of money and maybe buy an apartment, society should be eager to support that. But our current system does the opposite: it tells that boy that unless he goes to college, now, then he has no chance of ever being anything more than a plumber. And it tells the truth.

In China or India, young children are tested ruthlessly, and by the age of ten the chosen one or two percent have been shifted into fast-paced schools, the rest left behind. Even in England, a boy's fate is largely fixed at thirteen, when the elite upper schools make their admissions decisions [for girls, it is eleven]. America is meant to be the land of second chances, of "late binding", of letting people freely search for their own way of contributing. Let's start acting like it.

More Reality (II)

Mr. Whitlock seems to have forgotten, so here's another 24 hours' worth of news on the NHS:

A billion-pound budget shortfall [about $45 for each person in England] has caused closings and cancellations;

NHS hospitals are ripping off friends and relatives calling into the hospital (and there's something dodgy about the parking, too);

The service remains a political football;

But in Scotland, there's a motion to make all prescriptions free!



Missed by a day: a review article on where recent budget increases have gone, and a back-and-forth with the press.

A New Calumny

In a comment thread at Washington Monthly, one "Castor Troy" writes:

Actually, Iran's threat is the one thing which should have western nations considering direct removal of its government.... And, had we not invaded Iraq, we would probably be in an excellent position to make this happen.

"tbrosz" responds:

I hear this a lot from liberals. Of course, if we had not invaded Iraq, most of the people saying "if only" would then be screaming bloody murder about the Cowboy Bush getting ready to invade Iran. And every last anti-war tirade we've been hearing about Iraq, down to the last talking point, would be exactly the same.

This is correct, but in fact understates the case. How could any system of international "law" which did not mandate the forcible deposal of Saddam -- given a record which appeared more dangerous than Iran's does today, and a long history of UN resolutions -- possibly support any action against Iran in 2006?

If America had not invaded Iraq, the option of force against Iran would be completely off the table, and the Iranians would know this with certainty. "Peace" protestors who complain of the present difficulty of military action against Iran should keep that in mind.

Castor Troy's talking point is, in short, a neat reversal of the real truth -- that the invasion of Iraq was an expenditure of blood and treasure not only for its own sake, but to rebuild the credibility which is our only tool for effecting future change without invasions. Mr. Troy and his ilk have so far forgotten this, that they wildly claim that the presence of 150,000 American troops at their border is somehow emboldening Iran's Mullahs.

[This is extended from a comment I made in the above-referenced thread. I have written on this subject before, in my extended post on Will.]

The Plantation

It seems likely that Hillary Clinton's unbalanced "plantation" remarks, made yesterday to a "mostly black audience", will provide powerful ammunition against her in any national race -- especially when video of them is juxtaposed with video of Condoleeza Rice sounding empowered.

On the other hand, perhaps it should be a relief that Mrs. Clinton is not so calculating that she can't be tempted to excess by the roar of an approving crowd.

On Tradesports, neither Clinton nomination futures nor party-line election futures were visibly affected.

Theory of Illegal Goods

I expect that a lot of attention will be given to the recent paper by Becker, Murphy and Grossman, titled The Economic Theory of Illegal Goods: The Case of Drugs. An early draft can be found here [courtesy of Marginal Revolution].

Their claims are striking:

The authors demonstrate how the elasticity of demand is crucial to understanding the effects of punishment on suppliers. Enforcement raises costs for suppliers, who must respond to the risk of imprisonment and other punishments. This cost is passed on to the consumer, which induces lower consumption when demand is relatively elastic. However, in the case of illegal goods like drugs--where demand seems inelastic--higher prices lead not to less use, but to an increase in total spending.
In the case of drugs, then, the authors argue that excise taxes and persuasive techniques –such as advertising--are far more effective uses of enforcement expenditures.
"This analysis…helps us understand why the War on Drugs has been so difficult to win…why efforts to reduce the supply of drugs leads to violence and greater power to street gangs and drug cartels," conclude the authors. "The answer lies in the basic theory of enforcement developed in this paper."

The actual accomplishments are far more modest, and fall short of the grandiose excerpt above in two major ways. First, on p. 20, we see the disclaimer:

An optimal monetary tax on a legal good is still always better than optimal enforcement against an illegal good. The proof assumes that the government can choose optimal punishments for producers who sell in the underground economy, and that demand for the good is not reduced by making the good illegal.

[All emphasis mine.] The second assumption, together with the authors' implicit assumption that the punishments for illegal drug trafficking can be reduced to an equivalent monetary value, renders their much-hyped conclusion little better than a tautology.

This assumption also underlies their second major conclusion. On p. 23:

Indeed, the optimal monetary tax would exceed the optimal price due to a war on drugs if the demand for drugs is inelastic -- as it appears to be -- and if the demand function is unaffected by whether drugs are legal or not -- the evidence on this is not clear.

One of the costs of the war on drugs is the cheapening of what it means for an activity to be "illegal". If, and only if, this degradation has already progressed to utter completion, then Becker et al. are justified in their conclusion that drug interdiction should be replaced with a tax regime.

It would be more socially productive to avoid this cheapening by setting a truly enforceable boundary of legality, so that the social stigma against illegal actions could be enlisted to reduce drug use without being wasted in an unwinnable battle. I suspect that this might be accomplished by legalizing (with heavy taxes) the less damaging drugs, drawing a defensible line against the worst ones. The bright line between legal and illegal is one of the government's chief assets, and to date its deployment has been absymal.

We now turn to the second conclusion, that the socially optimal level of consumption could be lower under legalization and taxation than it is presently. Here the authors have pursued their mathematics outside the realm of reason.

To see this, first suppose that the penalties for underground production and distribution in their new regime are equal to those in the current regime, and that the taxes are such that neither legal nor illegal producers have an advantage. This leads to the same price, and thus [accepting for the moment the highly questionable assumption above] to the same demand, in the old regime as in the new. Raising the taxes further without harsher enforcement would drive legal producers away, recovering the present equilibrium; only the name of the crime would have changed. To increase prices above today's equilibrium would require both higher taxes and more stringent enforcement.

Translating that back to the language of policy, an overall reduction in drug use would stem from legalization only if the penalties for illegal production and distribution of a legal drug [in the new regime] exceeded those for illegal production and distribution of an illegal drug [in the present regime]. Only if we are to penalize tax evasion more harshly than cocaine trafficking will we see this drop in demand.

[Since tax revenue is, ceteris paribus, a social good, it is indeed economically optimal to penalize tax evasion more harshly than other crimes. But society does not seek this optimum.]

Of the suggested benefits of legalization, then, one is contingent on the war on drugs being already lost, and the other on an implausible and morally dubious style of enforcement. This paper hints at the questions which should drive policy, but its own offerings do not appear valuable.

NGRI

Though "Gorgeous" George Galloway's reported behavior on England's Celebrity Big Brother has been hilariously bizarre [Greg Gutfeld seems to have the best description], a dark thought prevents me from experiencing unalloyed delight. His antics are, frankly, insane; and as such they may permit him a defense at his likely perjury trial.

Numerology

If I has written this article, around a table beginning

1. John Kerry, D-Massachusetts: $163,626,399
2. Herb Kohl, D-Wisconsin: $111,015,016
3. John Rockefeller, D -West Virginia: $81,648,018
4. Jon Corzine, D-New Jersey: $71,035,025
5. Dianne Feinstein, D-California: $26,377,109
6. Peter Fitzgerald, R-Illinois: $26,132,013
7. Frank Lautenberg, D-New Jersey $17,789,018
8. ...,

I would not have stated that "The top three wealthiest senators are Democrats," even if it was factually true. Bias or mere stupidity?

The striking feature of the full table is that those over $5 million are generally Democrats (11 of 16), while those from $1 to $5 million are generally Republicans (17 of 24).

The Treatment

Eric Raymond is unimpressed, and doesn't care who knows it.

More Reality

Kevin Drum is yet again singing the praises of socialized medicine:

To absolutely no one's surprise, overall healthcare costs rose at a breathtaking rate yet again last year. Healthcare now accounts for 16% of U.S. GDP, compared to about 10-11% in our nearest competitor.

And what do we get for all that dough? Not much.

... it's still hard to believe that more Democrats aren't willing to put their reputations behind a genuinely sane, comprehensive, modern national healthcare plan. Not a patch, not "catastrophic insurance," and certainly not HSAs. After all, lots of countries already have decent systems for us to borrow ideas from, and citizens in those countries generally have greater choice of physicians, better (and more equal) care, lower costs, wider coverage, and better outcomes.

This persistent idea that the socialized systems of Europe offer superior healthcare is simply an ahistorical folly. On a day of your choice, just search Google News for "NHS" to taste the fate of those dependent on government care. I chose today, and found:

• A mental healthcare crisis, with undersupply meaning that patients were farmed out to the private system (at up to $444,000 per year);
• A patient whose heart surgery was cancelled to shorten the waiting list;
• The drug Ebixa, for Alzheimer's disease, pronounced "too expensive" at $4.25/day and effectively banned; and
• A followup on the continuing dental crisis [caused by payments to practitioners set below market rates] which makes it effectively impossible to sign up for any NHS dentist.

All these articles are less than 24 hours old. I could, quite literally, do this post every day of the year. Is this the medical system you want in your own country? And, if so, may I ask that you move somewhere they already have one?

Luckhurst in 2005

A truly magnificent insult, from an article I scrounged up for a comment to the prior post:

The present education secretary, Ruth Kelly, has had two children while in office and there’s no evidence that motherhood has made her any more incompetent than before.

One Voice

In the course of a post on "Cleaning up Washington", Brad Plumer manages to put in a plug for proportional representation:

That means: Proportional representation, publicly-financed elections, third parties...

Meanwhile, Peter Hitchens -- who, unlike Mr. Plumer, has actually experienced proportional representation and multiparty government -- describes what it means in practice:

Labour and the Tories are like a pair of corpses, stiff with rigor mortis, propping each other up. They no longer represent the true divisions in British society, which is why Labour can win only 22% of the popular vote, and the Tories a mere 20%. It is astonishing to think that neither of the major parties opposed the Iraq war; that neither resists the introduction of civil partnerships, devolution or the Northern Ireland peace process; that neither advocates withdrawal from the EU, a return to selective education or the reintroduction of the death penalty. Every important issue is left undebated and unexamined while the frontbenches quibble over trivia.

Of course, Mr. Plumer's political ends are far more widely approved in coastal cities, and in particular inside the Beltway, than in the nation as a whole. Thus his hankering for proportional representation is either strikingly ingenuous, or equally disingenuous. I suspect that he knows full well where it leads, and advocates it as a means not to empower the people, but to silence them.

Mr. Plumer would do well to bear in mind that this worm has not finished its turn, and that the Eurosceptic, elitist, death-penalty-supporting, Iraq-war-opposing, gay-marriage-banning, devolution-hating majority in England is fully aware that it is being railroaded, sacrificed, victimized, bloodied, undermined, fleeced and generally ignored. To prevent the emergence of extremists, Britain [and continental Europe, even more so] have gradually repressed opposing speech and banned extremist parties; but this process will be made more difficult by economic hardship and cannot continue indefinitely.

As Old Europe's democracies become increasingly unattractive and undemocratic, perhaps the role of proportional representation in their fall will be recognized. Perhaps it will become so clear that Mr. Plumer will conveniently forget that he ever advocated such a thing.

[Update 10 January: Mr. Plumer points out that Britain does not have a proportional system. Details are in the comments, for those wishing to decide if I've tarred with the wrong brush.]

Betting Man

On Tradesports, Alito futures continue to creep upwards, with the mid-market confirmation probability now trading at 91.75%. Interestingly, the "60 or more votes" contract has not strengthened commensurately, so the market implied probability of a filibuster is apparently dropping.

The chance of a successful filibuster (50 votes in favor, but no confirmation) is 1.6 bid, 4.8 offered (wide because it's a spread between two contracts).

Entropy

People are making a lot of hay from the scandal aurrounding Jack Abramoff. But on a timescale of years, rather than months, the one and only meaningful consequence of the affair will be whether the transparency of political cash flows has increased.

Roger L. Simon, who has never been shy about calling for transparency at the U.N., is silent on this issue. So is media-transparency maven Jeff Jarvis. Others are seeing only a Democratic opportunity, or a pressure point to move Republicans back toward small government.

Unless you are an influence-peddler yourself, you should be ignoring all that bird food and concentrating on the one thing that can make a lasting difference: transparency.

Choosers

John Henke is worried about the possible impact of Chinese divestment [or even diversification] on the U.S. economy:

The markets can adjust to a slow leak; a quick pop might turn the disequilibrium into an immediate crisis.

I've been wondering whether the Chinese strategy might not be to create an US dollar bubble, so that they can engineer a sudden US economic crisis at a time strategically useful to China.

I think the American position is very much stronger than Mr. Henke fears. Consider the old saying: "If you owe the bank $1 million, you have a problem; if you owe $100 million, the bank has a problem."

China's strong-currency policy impoverishes the Chinese on average, but it creates more jobs (though each is lower-paying in dollar terms). That is, it spreads prosperity as widely as possible, at the cost of it being thinner than the most successful would like. The Chinese government is structurally bound to this policy, as it is their best tool for preventing widespread unrest.

In the markets, the USD yield curve continues to invert (i.e., rates are low at the long end) -- not the action of a trading community that expects China to soon be dumping long-dated U.S. debt.

Ten Americans

There has been a challenge recently, following the BBC's compilation of a list of the "ten worst Britons", to name the ten worst Americans. Most participants, however, have compiled their lists without regard to chronology, which is very different from the BBC's one Briton per century. The American equivalent is, I think, to divide the time since 1755 into 25-year blocks. In each of these, we hope to find one of America's worst.

I am biased towards those who made a broad negative impact, rather than the Jeffrey Dahmers of the past.

1755-1780: Benedict Arnold is the only name that comes to mind, though his treason did less harm than Horatio Gates's incompetence.

1780-1805: Aaron Burr laps the field: Vice President, killer, and traitor.

1805-1830: erm, I don't have a good candidate here.

1830-1855: John C. Calhoun, resigned from national office to become the foremost defender of slavery.

1855-1880: Nathan Bedford Forrest, Confederate General and KKK founder, seems to have the strongest case. Some have argued for Jefferson Davis, who I think was mostly a functionary.

1880-1905: William Jennings Bryan, perhaps, for his indefatigable work for the wrong causes. He was for imperialism before he was against it!

1905-1930: Alphonse Capone, greatest of the crime lords and the one who did the most to pervert the courses of justice and democracy.

1930-1955: J. Edgar Hoover needs no introduction.

1955-1980: Ken Goodman, who (with Frank Smith) popularized the "whole language" movement and bequeathed to us half a generation of illiterates. Or we could bring back Mr. Hoover for a reprise, opening the World War II slot to a contender like Axis Sally.

1980-2005: "Pat" Robertson, the archetypal idiotarian, who has systematically inflamed the culture wars and done more than anyone to discredit the very idea of moral decision-making. An idiot useful to extremists of both sides; a malevolent tool.