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Like Flawed Honest Abe, Singh Should Aim for greatness

June 27, 2013 in Economics

By Swaminathan S. Anklesaria Aiyar

Swaminathan S. Anklesaria Aiyar

As prime minister Manmohan Singh enters his final year in office, he is likely to be hoping to go down in history as the man who made India a miracle economy, growing at 8.5 per cent a year. However, after a series of scandals, critics say he stands to be remembered for presiding over New Delhi’s most corrupt regime ever.

Nobody doubts his personal integrity. He has long been seen as an honest man struggling against the tide in dishonest times. But the Teflon is finally wearing off. In May he tried to save the jobs of two ministers: one accused by the Supreme Court of interfering in a probe of an alleged coal mines allotment scam; the other following the arrest of his nephew over a disputed bribery allegation. Both ultimately had to resign.

The Supreme Court accused Mr Singh of trying to convert the Central Bureau of Investigation, which is examining the coal case, into a “caged parrot”. Columnists who once sympathized with him now say he is tainted by complicity.

Mr Singh’s place in history as an economic reformer is assured but he should aim for a higher goal.”

I think history will judge him more positively: it usually lionises people achieving difficult goals in tainted times. Consider, for example, Abraham Lincoln, as portrayed in last year’s Oscar-winning biopic. Lincoln graphically shows the dirty tricks and bribes the 16th US president used to ensure passage of the bill abolishing slavery. Yet this did not diminish his heroic stature, in the film or in history books. Indeed, he is popularly remembered as “Honest Abe”.

American politics was highly corrupt in Lincoln’s time. There was no permanent civil service, so hundreds of important (and lucrative) positions could be given by the president to his supporters. “To the victor the spoils” was the motto of the day. It could also be the motto of contemporary Indian politics.

Lincoln was not an idealist demanding freedom from slavery as a fundamental right. Rather, he held that the constitution gave each state the right to keep or abolish slavery. He won the Republican nomination to run for president in 1860 because delegates thought his moderate stance would win more votes than outright abolitionism, especially in the border states between north and south (Missouri, Kentucky, Maryland and Delaware).

Lincoln tried hard to avoid …read more

Source: OP-EDS

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Clinton Has No Room to Call Obama a 'Total Wuss'

June 27, 2013 in Economics

By Doug Bandow

Doug Bandow

Despite his evident reluctance to take America into the Syrian civil war, President Obama appears to be traveling down that road step-by-step. It may be pure coincidence, but the president acted only after being criticized by Bill Clinton.

The former president warned that the current occupant of the Oval Office could end up looking like a “total wuss” and being “lame” if Obama did not intervene in the Syrian killfest. Clinton also said that the president risks looking like “a total fool” if the latter acts cautiously in response to opinion polls.

Of course, former President Clinton always has had a curious view of the purpose of war. He once expressed his frustration that he likely would not be considered a great president without prosecuting a war.

Of course, former President Clinton always has had a curious view of the purpose of war.”

Clinton is an odd person to accuse someone of looking like a “total wuss” and “a total fool” and being “lame.” I’m not thinking about storied assignations in and out of the Oval Office. I’m thinking about draft avoider/evader Clinton who, when his nation called him to serve in a similarly messy conflict more than four decades ago, turned out to be “lame” and look like a “total wuss” and “a total fool.”

Vietnam was a stupid war in which tens of thousands of fine Americans died as a result of dumb decisions by foolish Washington policymakers. I respect those who served; I don’t blame those who avoided serving. Happily I turned 18 after the draft had ended and U.S. troops had gone home.

However, in 1964 Clinton went to Georgetown University and received a 2-S student deferment. As he neared graduation four years later his classification was changed to 1-A, making him a prime candidate for conscription. Then ensued months of complicated machinations. The details are contested and the truth long ago was lost to time, but events do not place the young Clinton in a good light.

Ultimately, after he didn’t show up for induction while employing various stratagems to keep the draft board at bay, he was admitted to the University of Arkansas ROTC program, which earned him a deferment and the classification of 1-D. But he didn’t enroll as promised, heading off to Oxford University instead.

He was reclassified 1-A, but Selective Service’s move to a lottery, and his high number (311), kept him out of uniform. Afterward …read more

Source: OP-EDS

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Sen. Rand Paul on Fox News' Hannity – 6/25/13

June 26, 2013 in Politics & Elections

…read more

Source: RAND PAUL

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“Cultural Entrepreneurship”

June 26, 2013 in Economics

By Peter G. Klein

I am wary of adding yet another conceptual margin for entrepreneurial action but I highly recommend a new (and for the moment, ungated) paper in the Scandinavian Economic History Review by the distinguished economic historian Joel Mokyr on “cultural entrepreneurship.” Starting from a broadly Schumpeterian perspective, Mokyr focuses on individuals who introduce and disseminate novel ideas:

[E]ach individual makes cultural choices taking as given what others believe. It is not a priori obvious how that affects one’s choices. It may affect them positively because conformism implies that there is some social cost associated with deviancy, or because people may reason that if the majority believes a certain thing, there may be wisdom in it (thus saving on information costs). But there can be a reverse reaction as well, with non-conformists perversely rebelling against existing beliefs. What matters for my purposes is that for a small number of individuals, the beliefs of others are not given but can be changed. I shall refer to those people as cultural entrepreneurs. Their function is much like entrepreneurs in the realm of production: individuals who refuse to take the existing technology or market structure as given and try to change it and, of course, benefit personally in the process. Much like other entrepreneurs, the vast bulk of them make fairly marginal changes in our cultural menus, but a few stand out as having affected them in substantial and palpable ways.

Succinctly expressed: “cultural entrepreneurs are the creators of epistemic focal points that people can coordinate their beliefs on.”

Mokyr’s focus, like Schumpeter’s, is not entrepreneurship per se, but its effects, particularly on long-run economic growth, and his entrepreneurship construct is somewhat undertheorized. But he provides fascinating examples, ranging from Mohammed and Luther to Francis Bacon, Isaac Newton, and Adam Smith. He focuses in particular on Bacon and Newton, describing Bacon’s work as “the coordination device which served as the point of departure for thinkers and experimentalists for two centuries to come. The economic effects of these changes remained latent and subterranean for many decades, but eventually they erupted in the Industrial Revolution and the subsequent processes of technological change.” Newton and the Royal Society “raise[d] the social standing of scientists and researchers as people who should be respected and supported and [provided] them with a comfortable material existence.” (Mostly good.)

I’m not an expert on cultural theory or history and am not sure how much the “cultural entrepreneur” construct ads to our understanding of cultural change …read more

Source: MISES INSTITUTE

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SNAP Theatrics Fall Flat

June 26, 2013 in Economics

By Michael D. Tanner

Michael D. Tanner

It has become a set piece of political theater for liberal Democrats, carried out in recent weeks by everyone from New York mayoral candidate Anthony Weiner to Connecticut senator Chris Murphy and a bevy of congressmen: attempting to eat on the $4.50-per-day food budget supposedly provided by the Supplementary Nutrition Assistance Program (SNAP), the program formerly known as “food stamps.” While always good for a headline, and generally accompanied by amusing photographs of the bizarre meals the politicians cobble together on their meager budget, the so-called SNAP challenge is also arrant nonsense.

To start with, virtually no one in America actually has to eat on just $4.50 per day. That number is derived by simply dividing the SNAP program’s budget by the number of recipients, arriving at an average benefit of $133.44 per month, or roughly $4.45 per day. However, that doesn’t tell us much about the size of the benefit that most families actually receive. For instance, SNAP benefits increase with family size. Thus, a family of four would receive $668 in benefits.

The food program subsidizes junk food, is rife with fraud, and is not targeted at the poorest.”

More important, the SNAP payments are not intended to be a family’s sole food income. As Washington Post fact checker Glenn Kessler pointed out, in pulling out a pair of Pinocchios for the SNAP challenge: “Note that the name of the program refers to ‘supplemental’ assistance.” SNAP benefits vary with income. Individuals with low incomes receive much higher SNAP benefits. Conversely, those individuals receiving the lowest benefits — say, $4.50 per day — are doing so precisely because they have other sources of income.

Indeed, the poorest SNAP recipients are almost universally receiving other welfare benefits, especially Temporary Assistance for Needy Families (TANF) and Medicaid. We should remember that there are actually 126 separate federal anti-poverty programs, and while no one receives benefits under every one of those programs, most poor people are eligible for benefits under multiple programs. SNAP isn’t even the only federal food program: There are currently 21 different programs providing food or food-purchasing assistance, administered by three different federal departments and one independent agency.

The latest dustup over SNAP was spurred by $20.5 billion in cuts to SNAP over the next ten years that were included in the late, unlamented farm bill. Democrats complained that those cuts were “a poison pill” that forced …read more

Source: OP-EDS

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Costly Climate Change Intervention

June 26, 2013 in Economics

By Paul C. "Chip" Knappenberger

Paul C. “Chip” Knappenberger

On Tuesday, President Obama announced a series of executive actions aimed at reducing greenhouse-gas emissions, with hopes of mitigating climate changes. His “Climate Action Plan” is neither necessary nor effective, but it will be costly.

By promoting limits on greenhouse-gas emissions from U.S. power plants while increasing “green”-energy incentives, the president is trying to steer our energy choices away from the free-market course and toward the direction of his liking.

Americans will pay more to make clean energy cleaner.”

This is a dangerous undertaking, and one with a far-from-certain outcome. Government intervention in financial markets was the root of the Great Recession. Government intervention in the energy market carries an even greater risk, as energy drives everything.

The justification for this risk is just not there.

U.S. greenhouse-gas emissions are already on the decline and have been for about a decade now. The majority of this downward trend is not the result of government regulations restricting greenhouse-gas emissions, but rather technological innovations in the energy industry. Techniques such has horizontal drilling and hydraulic fracturing, commonly known as fracking, have opened expansive natural gas and oil reserves that were considered unrecoverable only a few years ago.

Consequently, cheap, reliable electricity produced by coal is being replaced by even cheaper, reliable electricity from natural gas.

Because of its chemical makeup, natural gas, when burned, produces about half the amount of greenhouse gas emissions as burning coal. Therefore, as natural gas replaces coal as fuel for generating electricity, our greenhouse-gas emissions fall.

Granted, this is an unforeseen outcome. Natural gas fracking was developed to produce a cheaper fuel and outperform the competition, not to produce less greenhouse-gas emissions. The net result, though, is exactly the type of outcome that Mr. Obama wants to happen — a reduction of greenhouse-gas emissions — and it has been achieved without government incentives, taxes, or restrictions.

All the government had to do was stay out of the way.

In fact, it is arguable that had the government imposed regulations handicapping fossil fuels, these production techniques — now a cornerstone of Mr. Obama’s Climate Action Plan — may never have been fully developed as research efforts could have been diverted elsewhere.

Greenhouse-gas emissions in the U.S. are falling at a rate that is greater than the one laid out in the president’s plan. So why get involved at all?

When it comes to significantly slowing human-caused climate change — the reason …read more

Source: OP-EDS

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Supreme Court Recognizes Jim Crow’s Demise, Restores Constitutional Order

June 26, 2013 in Economics

By Ilya Shapiro

Ilya Shapiro

The way that Chief Justice Roberts began his opinion in Shelby County v. Holder shows what’s really at stake in the case. (Hint: it’s not whether the federal government can protect racial minorities’ voting rights.) It really provides the key to the decision, even though, unlike many opinion preambles, it doesn’t explicitly state what the Court’s ultimate ruling is.

Parsing this opening section gives you all you really need to know about the modern Voting Rights Act, save one bit that I’ll explain afterwards. To make this easier, I’ve grouped all the sentences by the logical points that Roberts makes — all bullet-points are direct quotes — and then summarized those points:

  • The Voting Rights Act of 1965 employed extraordinary measures to address an extraordinary problem.
  • Section 5 of the Act required States to obtain federal permission before enacting any law related to voting—a drastic departure from basic principles of federalism.
  • And
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Supreme Court Rules DOMA Unconstitutional; Gay Marriage Legal in California

June 26, 2013 in Economics

The Supreme Court on Wednesday struck down the Defense of Marriage Act as “unconstitutional as a deprivation of the equal liberty of persons that is protected by the Fifth Amendment.” In the Hollingsworth v. Perry (Prop 8) case, the Supreme Court found that the Ninth Circuit was without jurisdiciton to consider the district court appeal, and remanded the case with instructions to dismiss. Comments Cato scholar Ilya Shapiro, “Today, the Court upheld the equal liberty and dignity of all individuals, regardless of sexual orientation.”

…read more

Source: CATO HEADLINES

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Connell on Machlup

June 26, 2013 in Economics

By Peter G. Klein

Carol Connell, author of several insightful articles on Fritz Machlup (including “Fritz Machlup’s Methodology and The Theory of the Growth of the Firm” in the 2007 QJAE), has a new book, Reforming the World Monetary System: Fritz Machlup and the Bellagio GroupThe book deals with Machlup’s attempts in the 1960s to organize a group of elite economists to make recommendations on international monetary policy. No one in Machlup’s group, including Machlup himself, recommended a return to the international gold standard, which led to a temporary falling-out between Machlup and Mises.

…read more

Source: MISES INSTITUTE

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“Banish Fractional Reserve Banking for Real Reform”

June 25, 2013 in Economics

By Joseph Salerno

. . . says Thomas Mayer, a former IMF economist and former Chief Economist of Deutsche Bank Group and Head of DB Research, and now a Deutcshe Bank Senior Advisor. In a letter today to the Financial Times, Mayer writes:

But no reform can make banking really safe as long as the industry operates within a fractional reserve system, where banks create “inside” money (for example sight deposits) by extending credit and promise to exchange this against “outside” money at any time on demand.

Mayer goes on to cite Austrian monetary and business-cycle theorist Jesus Huerta de Soto on the causal connection between fractional reserves and banking crises throughout history. He points out: “Since there is no single state in the eurozone able to bail out banks in a systemic crisis, a banking regime without state backing is needed.” He concludes his letter with a four-step plan for “comprehensive” banking reform that would implement just such a regime:

First, define as safe an asset that can be converted any time and under any circumstances at face value into legal tender. Second, create safe (“insured”) deposits by requiring banks to back them fully with reserves at the central bank. Third, create a cascade of loss-absorbing bank liabilities, starting starting with bank equity and ending with investor deposits (not subject to the 100 percent reserve holding). Fourth, make banks treat eurozone government bonds as assets that can default and help them to reduce their holding of these bonds.

Mayer discusses his proposal for 100 percent reserves in more detail in a policy paper published by the Centre for European Policies Studies.

…read more

Source: MISES INSTITUTE