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Amity Shlaes: Blame the Economists

October 30, 2014 in Economics

By Ryan McMaken

John_Maynard_Keynes

Reading the news, one could be forgiven for coming to the conclusion that virtually all economists work for the government or the Fed, and that few of them have real (i.e., private sector) jobs. Of course, there are many practitioners of microeconomics who do an enormous amount of good in society for private clients. Austrian economists have long focused on microeconomics because only microeconomics focuses on the only unit that matters in economic action: the individual. The amount of sound, practical microeconomic wisdom found in Mises’s Bureaucracy, for example, is impressive.

In this article in the Wall Street Journal, Amity Shlaes examines the role of economists in the private sector, and the good many of them do. Macroeconomists, on the other hand, are another story. The macroeconomists, Shlaes notes, are guilty of “guildthink.” That is, macroeconomists in Washington exist in a closed system of like-thinking ideologues who shut out dissenting opinion:

When it comes to Washington policy, macroeconomists shut out innovative colleagues, some even of the sort Mr. Litan celebrates. The ruling macro-theorists, for instance, demonstrate an annihilating contempt for the Austrian School, which focuses more on individuals than aggregates. The same contempt is directed at Public Choice Theory, which predicts that governments will take advantage of market crises to expand in nonmarket sectors. Scholars from these schools do not win top positions at the Fed or at major universities and firms.

Such guildthink is what proved fatal just before 2008 and after. There were no Public Choice School theorists at the White House or powerful institutions to warn that there might be a housing bubble if government expanded its presence in the housing sector. Few elite economists warned that the administration might use a financial crisis to undermine bankruptcy precedent or socialize health care. Ironically, analysis by economists demonstrates the inefficiency of guilds, yet these scholars perpetuate their own. Until that changes, go ahead and blame the economists.

…read more

Source: MISES INSTITUTE

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Judge Napolitano Versus Forced Quarantines

October 30, 2014 in Economics

By Ryan McMaken

NNSA-NSO-1189

One can make the case that in a thoroughly decentralized and anarchistic (and therefore, more free) society, persons may find themselves in a state of practical quarantine because private owners of airlines, airports, lodging facilities, and even communities with private security may refuse entry or passage to persons suspected of being contagious. In such cases, persons would be restricted to places owned by themselves or by those who will agree to allow the person on the premises. Thus, in such a situation, a “quarantine,” practically speaking, is less like imprisonment and more like house arrest depending on negotiations with numerous private owners. In modern states, on the other hand, the widespread nature of “public goods” and prohibitions of discrimination by private owners often means that quarantine becomes a function of the central state and often ends up being little better than a jail sentence where the person in question is locked inside some official facility for a period of time.

Thus, quarantines (of a sort) can arise within a totally (or mostly) privatized society, but how they look and are carried out in practical terms can vary significantly.

For an example of the arbitrary, slipshod, and due-process-less way that American governments deal with such issues, we need only look to the case of the nurse in New Jersey who was being confined in spite of the fact that she had been proven to be Ebola-free. (Note: the situation for the nurse in Maine is significantly less heavy-handed)

In the US, travelers are subject to the arbitrary edicts of politicians who can imprison people with the stroke of a pen,with  no prior warning, and no due process. As Napolitano explains in this video, US governments have known about the Ebola outbreak since March, yet did not warn healthcare workers traveling to west Africa that they could be subject to quarantine upon return. Any responsible government body would have done so. When such persons returned, no steps had been taken (at least not in New Jersey) to administer a quarantine in any way that might be described as humane. As Napolitano notes, when they quarantined the NJ nurse in question, they “put her in a tent in a parking lot” and “gave her a porta potty and a granola bar.” It seems the government intended to keep her in these conditions for 21 days.

Moreover, the NJ government detained the woman …read more

Source: MISES INSTITUTE

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Book Review: Rothbard’s Making Economic Sense

October 30, 2014 in Economics

By Ryan McMaken

B575

Ben Kramer-Miller writes at Seeking Alpha:

Summary

  • A series of newsletter articles and shorter essays designed for the layperson interested in libertarian ideas and free market thought.
  • The book is highly entertaining and extremely accessible to people of all backgrounds.
  • Rothbard’s bluntness is appreciated in our sanitized, “PC” collective consciousness.
  • *Note that this book has been made available for free by the Mises Institute. You can find it here.

    Those who are looking for an introduction to Rothbard’s work and Austrian economics more generally should probably look at What Has Government Done To Our Money (also available at the Mises Institute) and discussed by yours truly here. But those who are interested in an informal, layman’s explanation of various economic (and political/social) phenomena as well as a work designed to be – in most places – anything but pedantic should consider reading through Making Economic Sense.

    Read the full article.

    …read more

    Source: MISES INSTITUTE

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    Forbes Takes Another Look Through the Austrian Lens

    October 30, 2014 in Economics

    By Mark Thornton

    Michael Pollaro writing at Forbes.com reexamines the implilcations of the ending of Quantitative Easing policy by the Federal Reserve: “The lion’s share of the supposed economic strength we see today is both artificial and unsustainable because it is built on malinvestments born out of the monetary largesse underwritten by the Federal Reserve’s policies. Normalize those policies; i.e., end QE and raise interest rates, and sooner or later those malinvestments will be liquidated. The supposed economic boom will turn to economic bust, and with that, a bust in the publicly traded equities that lay claim to those malinvestments.”

    Looking through the lens of ABCT, the dynamics here can be explained thus… For the past five-plus years, emboldened by the near zero interest (discount) rates fostered by the Federal Reserves, continually cashed-up investors and speculators have been bidding up the price/value of all financial assets, driving a wedge between the value of those assets as priced in their respective markets and their true value based on properly discounted, expected future cash flows.

    Now, in our minds, nowhere is this wedge greater than in the equity market. You might say wait a minute. Where’s the wedge? Don’t most broad-based market PE multiples – like the roughly 16 handle on the 12-month forward multiple of the S&P 500 – say otherwise? Have not company per share earnings been growing, especially recently, right along with equity share prices? Yes, but what strikes us is the reason for a good portion of that earnings growth; namely, it’s a function of the same swathe of money that has inflated equity share prices. We point to the unprecedented deluge of financial engineering programs orchestrated by company CEOs – refinancing tactics, stock buybacks, dividend hikes and of course M&A – financed off the back of the Federal Reserve’s QE purchases and ZIRP policies.

    So, when might this wedge in the equity markets be filled? Well, in accordance with ABCT, it will begin when the monetary largesse that is currently feeding the equity market boom (and financial engineering boom) abates. Could that be when the last vestiges of QE3 work their way through the financial markets? Or will it have to wait until the Federal Reserve begins raising rates? Perhaps the banking system will fill the void being left by the Federal Reserve with its own swathe of money creation? Maybe some cross-border capital flows …read more

    Source: MISES INSTITUTE

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    Poland to German Taxpayers: Subsidize our National Defense!

    October 30, 2014 in Economics

    By Ryan McMaken

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    Coming in Monday’s Mises Daily, Patrick Barron will explore the moral hazard that often plagues collective security organizations like NATO. Why be careful, responsible, and restrained with your own defense when you can get the taxpayers in a foreign country to pay for it?

    Today, the news from Europe illustrates this well. From today’s Open Europe news summary:

    Die Welt reports that “Poland is worried about the weakness of the German army”, citing Polish Defence Minister Tomasz Siemoniak, during a meeting with his German counterpart in Berlin yesterday, as saying that, “We need a strong German army which does not shy away from the responsibility of defending their allies.”

    Now, I can certainly understand that old nationalistic tensions mean that many Poles may still feel that Germany owes them something big time. But every German who actually invaded Poland is either dead or will soon be dead. And they’re certainly not paying much in the way of taxes. That burden falls to much younger workers, and it’s unclear how a foreign government’s demands for more loot will help German-Polish relations in the long run. Meanwhile, NATO is simply providing the means to further stoke such tensions.

    …read more

    Source: MISES INSTITUTE

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    ObamaCare's Medicaid Expansion Limits Medical Choices

    October 30, 2014 in Economics

    By Jeffrey A. Singer

    Jeffrey A. Singer

    The national debate over the Affordable Care Act’s Medicaid expansion is nowhere close to being finished. Just ask my patients, who were forced off their private insurance and into the failing, government-run health care program.

    This was one of the ACA’s (or ObamaCare’s) many unintended consequences.

    In the 27 states that have expanded Medicaid — including my state, Arizona — many middle-class individuals and families with private health insurance shopped around on Healthcare.gov for their 2014 health care plans.

    They reasonably assumed they could continue using their private plan, or perhaps even purchase a different plan that better fit their needs. Instead, they were forced into Medicaid because of their income level, whether they liked it or not.

    Startling results for a government-run health care system advertised as a quality substitute for private insurance.”

    You may be asking whether this is a big deal. After all, Medicaid is free for those who qualify for it. But this comes with significant trade-offs.

    In exchange for paying no money, Medicaid patients receive severely limited access to doctors and health care, ultimately leaving them with worse health outcomes.

    Two recent patients of mine illustrate these trade-offs. The first patient shows the dangers of Medicaid. She had recently undergone a full mastectomy to treat her breast cancer, making her a candidate for reconstructive surgery immediately following the initial procedure.

    Unfortunately, Arizona’s Medicaid expansion had recently pushed her out of private insurance and into Medicaid; her treatment options were severely limited as a result. Only one doctor in the area could perform the procedure, meaning she will have to wait up to nine months for her reconstruction.

    Had she not been forced into Medicaid, she would have enjoyed access to a number of qualified physicians. This would have let her receive the reconstructive surgery immediately after the mastectomy, dramatically lessening the disruption to her health and her life.

    The second patient demonstrates the freedom — and better health outcomes — for patients who don’t have Medicaid (and may not even have private insurance).

    The patient, a single mother not on Medicaid, had high family risk for breast cancer and an unexplained breast infection. She needed an MRI to ensure it was not cancerous.

    Working together, we found a physician who could conduct the scanning for an affordable, $300 cash payment.

    Even though she had no insurance at all, she received the treatment and tests she needed in a timely and affordable manner.

    The …read more

    Source: OP-EDS

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    Confronting the Afghan Narco-State: End the International Drug War

    October 30, 2014 in Economics

    By Doug Bandow

    Doug Bandow

    The U.S. government has failed to stop the drug trade at home. Washington also has not created a competent, effective, and honest central government in Afghanistan. How effective will Kabul be in limiting opium production when American troops go home?

    Not much.

    A new report from the Office of the Special Inspector General for Afghanistan Reconstruction reports that opium production last year was the highest ever, 209,000 hectares, up 36 percent from 2012. The average yield per hectare rose 11 percent over the preceding year. Potential production was up 49 percent. SIGAR observed that “opium poppy cultivation has far exceeded previous records. Affordable deep-well technology has turned 200,000 hectares of desert in southwestern Afghanistan into arable land over the past decade. Due to relatively high opium prices and the rise of an inexpensive, skilled, and mobile labor force, much of this newly-arable land is dedicated to opium cultivation.”

    Alas, the sky is the limit. SIGAR warned: “With deteriorating security in many parts of rural Afghanistan and low levels of eradication of poppy fields, further increases in cultivation are likely in 2014.”

    The total value of opium and related products was $3 billion, up 50 percent over the year before. Drug money permeates the economy, enriching friend and foe alike. Last year the United Nations Office on Drugs and Crime estimated that opium exports accounted for 14 percent of the country’s GDP. It’s not just warlords who profit. UNODC figured that “On average, poppy-growing households in Afghanistan continue to have a higher cash income than non-poppy-growing households.” Opium provides up to six times the net income of wheat, which has a similar growing season.

    Afghanistan and its Western-backers should recognize reality and abandon the futile and counterproductive campaign against the opium trade.”

    Unfortunately, the illicit trade has a significant negative impact. Explained SIGAR: “the narcotics trade poisons the Afghan financial sector and undermines the Afghan state’s legitimacy by stoking corruption, sustaining criminal networks, and providing significant financial support for the Taliban and other insurgent groups.” The Pentagon admitted that increased drug production frustrated U.S. efforts. The Afghan public is understandably cynical. When I visited the country Afghans called large homes behind high walls lining Kabul streets “poppy palaces.”

    Drug production exploded despite $7.6 billion spent by Washington alone to stop cultivation and distribution. Virtually every U.S. agency is involved: Drug Enforcement Administration, Department of Defense, State Department, and Agency for International Development. …read more

    Source: OP-EDS

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    Saving the GOP from Modern Know-Nothingism

    October 30, 2014 in Economics

    By Alex Nowrasteh

    Alex Nowrasteh

    Many in the GOP are jockeying for the soul of the party ahead of an anticipated 2014 midterm election victory. Social conservatives are eager to reassert their influence after repeated defeats over gay marriage. Fiscal conservatives make the case for a greater emphasis on runaway spending. And then there are the nativists, who contend that the future of the Republican Party lies in opposing immigration reform. Conservative radio host Laura Ingraham, for example, said last month that, “Immigration could be to 2016 what ObamaCare was to 2010.”

    Not if history is any guide. Consider the experience of California and Texas.

    When George W. Bush was governor of Texas from 1995-2000, he consistently reached out to the Hispanic community and supported immigration reform. Mr. Bush won his first gubernatorial election in 1994 with 25% of the Hispanic vote and was re-elected in 1998 with almost 40% Hispanic support. He left behind a solidly Republican Texas and a state party with a much friendlier reputation among Hispanics, along with the extra political support that entails. Two years later he won the presidential election with 34% of the national Hispanic vote and was re-elected with 40% in 2004.

    California’s Gov. Pete Wilson took another path. Facing a tough re-election campaign in 1994, the Republican decided to blame illegal immigrants for all of the state’s troubles. The result was that he and the rest of the state GOP were perceived as blaming all immigrants for California’s woes. Mr. Wilson won re-election but doomed the GOP for decades in that state.

    Republican pro-immigration policies have a long and successful history.”

    The GOP’s decline in California was dramatic. According to the Field Poll, the GOP gubernatorial candidates in 1986 and 1990 received 46% and 47% of the Hispanic vote, respectively. In 1994 Mr. Wilson received 25% of the Hispanic vote. In 1998, Republican gubernatorial candidate Dan Lungren received 17% of the Hispanic vote, giving Democratic candidate Gray Davis an 8.5-point lead in the general election.

    Democrat Bill Press ran a voter drive in heavily Hispanic East Los Angeles in the early 1990s. At that time, he recently explained in the Hill newspaper, “residents distrusted government so much, it was hard convincing them to register, let alone vote. At the same time, Democrats feared that, if Latinos ever did register, they’d sign up as Republicans, because most of them were Catholic, pro-family and pro-small business.”

    According to Mr. Press, who was …read more

    Source: OP-EDS

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    Obama's Needless War against the Islamic State Puts Americans at Risk: Washington Should Let ISIL's Neighbors Defeat the Caliphate-Wannabe

    October 30, 2014 in Economics

    By Doug Bandow

    Doug Bandow

    President Barack Obama is channeling George W. Bush. The former has assembled a grand coalition to fight a new Middle Eastern war. Only President Obama acted without legal authority and stuck the U.S. with most of the work. Why is Washington involved at all?

    The Islamic State is evil, but the organization’s raison d’etre is establishing a Middle Eastern caliphate, or quasi-state, not terrorizing Americans. In fact, grabbing territory provided the U.S. with a target for retaliation in response to any attack, something lacking with al-Qaeda and its many off-shoots.

    In calling the new campaign “counterterrorism” and ISIL fighters “terrorists” the administration engaged in egregious deception. Daniel Benjamin, who earlier handled counterterrorism in the Obama administration, observed that Washington officials were “all over the place describing the threat in lurid terms that are not justified.”

    In fact, intelligence officials admitted they had seen neither ability nor desire to attack America, at least before Washington targeted the Islamic State. Nicholas Rasmussen of the U.S. National Counterterrorism Center testified before Congress that ISIL primarily threatened American interests “inside Iraq right now.” Homeland Security Secretary Jeh Johnson said: “We know of no credible information that ISIL is planning to attack the homeland at present.”

    Indeed, the Islamic State broke with al-Qaeda over the latter’s emphasis on America, the “far enemy.” ISIL deployed an army engaged in conventional combat to conquer nearby lands. Even if the group established a “caliphate” of some permanence—so far the world’s 1.6 billion Muslim have not rushed forward to swear allegiance to Caliph Ibrahim, as Abu Bakr al-Baghdadi styled himself—the result, while unpleasant, would not by itself threaten vital U.S. interests. The murder of two Americans captured in the region was horrid but opportunistic. Morally abominable, yes. Cause for war, no.

    No doubt the world would be a better place without ISIL, with its extremist ideology, murderous tactics, and flagrant brutality. Even al-Qaeda disavowed the group. But that doesn’t make the Islamic State unique. Washington cannot rid the world of bad philosophies or people. Nor should it try, since its chief obligation is to protect the American people, not launch quixotic crusades for eternal peace.

    Washington has never had much success in fixing the Middle East. The U.S. has been bombing Iraq since 1991. ISIL would not exist but for America’s 2003 invasion. Saddam Hussein is dead, but so are more than 200,000 Iraqi civilians. Iran’s influence has soared and much of Iraq’s territory …read more

    Source: OP-EDS

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    Georgia Court Refuses to Intervene on Behalf of 56,000 Missing Voters

    October 30, 2014 in Blogs

    By Steven Rosenfeld, AlterNet

    And the time to appeal is running out.


    On Tuesday, a Georgia court refused to issue an emergency order adding more than 56,000 people to this fall's voter rolls.  

    Civil rights groups sued Georgia's Secretary of State, Brian Kemp, a Republican, claiming that he and county election offiials were not processing voter registration forms submitted by the New Georgia Project, which turned in more than 81,000 applications gathered in communities of color. The election officials claim they don't have the missing applications.

    Fulton County Superior Court Judge Christopher S. Brasher threw out the lawsuit, writing that the New Georgia Project “failed to allege, much less show, the counties' registrars past or continued failure to process voter registration applications.”

    The ruling might have a big impact on Georgia's already close U.S. Senate race and governor's race. Across the country, as early voting starts this week in a handful of states where rightwing governors face tight races and the Senate's majority is up for grabs, decisions by federal and state courts have been shaping voting with partisan implications.

    Most of the litigation is not about voter registration, but about new state-issued photo ID requirements to get a ballot. The Republican Party, nationally, has been behind most new laws that have made voting more cumbersome—and in some cases, impossible. But the GOP has not always been winning in court, despite what just happened in Georgia. In some states, Republican efforts to police the polls appear to be backfiring,

    That's the case in Wisconsin, where Republican Gov. Scott Walker is in a tight re-election fight and his new voter ID law was blocked by courts for this fall after a high-profile legal fight. In Pennsylvania, where another rightwing governor, Tom Corbett, is far behind in the polls, his voter ID law was also blocked by a judge this year. In Arkansas, the state Supreme Court also threw out a tougher voter ID requirement, which might boost turnout in a state with a close U.S. Senate race. Higher voter turnout is seen as possibly helping Democratic candidates, and negative press about the …read more

    Source: ALTERNET