The Blue Grotto

Fascinating Economics Column (Really): Quantifying "Intangible Wealth"

     Check out this excellent column about a new World Bank study (believe it or not. . .) that attempts to quantify the value of various intangible factors to economic development, prosperity, and productivity. 

     It should be required reading for all people who believe that the prosperity game is played by either distributing or redistributing existing wealth, or by adjusting the government's "money hose" from "Deluge" to "Drencher" to "Tsunami." 

     The next time Bono makes a splashy plea (let's run with the water metaphor, shall we?) for more economic aid to Africa, readers of this column will be able to stand up and say "Hold the phone, Mr. Self-Inflating Airbag!"  Before cutting checks, how about reviewing and stopping to think about things like "efficient judicial systems, clear property rights and effective government." 

     The rule of law is the favorite intangible factor of the Grotto.  What does it do to the entrepreneurial spirit if the law is an ever-changing lever of social engineering?  How would you feel if you had to take your best idea and try to make it work in Venezuela?  Pretty nervous, and a little less enthusiastic about the whole thing, I would guess. 

     Well, here's the column:

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The Secrets of Intangible Wealth

By Ronald Bailey

September 29, 2007

   

A Mexican migrant to the U.S. is five times more productive than one who stays home. Why is that?

The answer is not the obvious one: This country has more machinery or tools or natural resources. Instead, according to some remarkable but largely ignored research -- by the World Bank, of all places -- it is because the average American has access to over $418,000 in intangible wealth, while the stay-at-home Mexican's intangible wealth is just $34,000.

But what is intangible wealth, and how on earth is it measured? And what does it mean for the world's people -- poor and rich? That's where the story gets even more interesting.

Two years ago the World Bank's environmental economics department set out to assess the relative contributions of various kinds of capital to economic development. Its study, "Where is the Wealth of Nations?: Measuring Capital for the 21st Century," began by defining natural capital as the sum of nonrenewable resources (including oil, natural gas, coal and mineral resources), cropland, pasture land, forested areas and protected areas. Produced, or built, capital is what many of us think of when we think of capital: the sum of machinery, equipment, and structures (including infrastructure) and urban land.

But once the value of all these are added up, the economists found something big was still missing: the vast majority of world's wealth! If one simply adds up the current value of a country's natural resources and produced, or built, capital, there's no way that can account for that country's level of income.

The rest is the result of "intangible" factors -- such as the trust among people in a society, an efficient judicial system, clear property rights and effective government. All this intangible capital also boosts the productivity of labor and results in higher total wealth. In fact, the World Bank finds, "Human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries."

Once one takes into account all of the world's natural resources and produced capital, 80% of the wealth of rich countries and 60% of the wealth of poor countries is of this intangible type. The bottom line: "Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity."

What the World Bank economists have brilliantly done is quantify the intangible value of education and social institutions. According to their regression analyses, for example, the rule of law explains 57% of countries' intangible capital. Education accounts for 36%.

The rule-of-law index was devised using several hundred individual variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations. The latter include civil society groups (Freedom House), political and business risk-rating agencies (Economist Intelligence Unit) and think tanks (International Budget Project Open Budget Index).

Switzerland scores 99.5 out of 100 on the rule-of-law index and the U.S. hits 91.8. By contrast, Nigeria's score is a pitiful 5.8; Burundi's 4.3; and Ethiopia's 16.4. The members of the Organization for Economic Cooperation and Development -- 30 wealthy developed countries -- have an average score of 90, while sub-Saharan Africa's is a dismal 28.

The natural wealth in rich countries like the U.S. is a tiny proportion of their overall wealth -- typically 1% to 3% -- yet they derive more value from what they have. Cropland, pastures and forests are more valuable in rich countries because they can be combined with other capital like machinery and strong property rights to produce more value. Machinery, buildings, roads and so forth account for 17% of the rich countries' total wealth.

Overall, the average per capita wealth in the rich Organization for Economic Cooperation Development (OECD) countries is $440,000, consisting of $10,000 in natural capital, $76,000 in produced capital, and a whopping $354,000 in intangible capital. (Switzerland has the highest per capita wealth, at $648,000. The U.S. is fourth at $513,000.)

By comparison, the World Bank study finds that total wealth for the low income countries averages $7,216 per person. That consists of $2,075 in natural capital, $1,150 in produced capital and $3,991 in intangible capital. The countries with the lowest per capita wealth are Ethiopia ($1,965), Nigeria ($2,748), and Burundi ($2,859).

In fact, some countries are so badly run, that they actually have negative intangible capital. Through rampant corruption and failing school systems, Nigeria and the Democratic Republic of the Congo are destroying their intangible capital and ensuring that their people will be poorer in the future.

In the U.S., according to the World Bank study, natural capital is $15,000 per person, produced capital is $80,000 and intangible capital is $418,000. And thus, considering common measure used to compare countries, its annual purchasing power parity GDP per capita is $43,800. By contrast, oil-rich Mexico's total natural capital per person is $8,500 ($6,000 due to oil), produced capital is $19,000 and intangible capita is $34,500 -- a total of $62,000 per person. Yet its GDP per capita is $10,700. When a Mexican, or for that matter, a South Asian or African, walks across our border, they gain immediate access to intangible capital worth $418,000 per person. Who wouldn't walk across the border in such circumstances?

The World Bank study bolsters the deep insights of the late development economist Peter Bauer. In his brilliant 1972 book "Dissent on Development," Bauer wrote: "If all conditions for development other than capital are present, capital will soon be generated locally or will be available . . . from abroad. . . . If, however, the conditions for development are not present, then aid . . . will be necessarily unproductive and therefore ineffective. Thus, if the mainsprings of development are present, material progress will occur even without foreign aid. If they are absent, it will not occur even with aid."

The World Bank's pathbreaking "Where is the Wealth of Nations?" convincingly demonstrates that the "mainsprings of development" are the rule of law and a good school system. The big question that its researchers don't answer is: How can the people of the developing world rid themselves of the kleptocrats who loot their countries and keep them poor?

Mr. Bailey is Reason magazine's science correspondent.

Exciting "Irony" / Tax Policy Post!!!

  "Karl Marx's vision of a socialist society included a progressive income tax, where higher income people pay not just more tax, but higher rates on their income. Ironically, while the U.S. and Western Europe tend to embrace capitalism, they adopted Marx's progressive income tax. Yet nine of the East European and formerly communist countries have abandoned it for a flat tax, where only one tax rate is applied to all income. And now Bulgaria and the Czech Republic are considering joining the flat taxers with a single 10% rate. Having spent decades under communist rule, formerly communist countries are ready to cast off Marxist policies that stifle economic growth--like the progressive income tax. So when will the capitalist countries also abandon their Marxist policies?"

    Merrill Matthews Jr., Institute for Policy Innovation

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"People Are Too Damn Dumb to Know the Difference. . . ."

     The full quote at the beginning of the below column makes me think of the actors skillfully playing the parts of "ordinary Americans" in those BP commercials.  You know the ones.  There's the concerned guy on the city street wondering aloud if oil executives have ever, perhaps, thought of the pros and cons of renewable energy sources.  There's the midwestern farmer standing next to the field he's plowed for fifty years pontificating about how we need to dispense with fossil fuels (I can only assume the farmer/energy analyst has run the numbers and come to his conclusions with a few facts, rather than just relying on what he might have heard some genius like Matt Lauer say).

     Please enjoy this column about the biases that people hold when looking at the world.  It's not just the people you see wandering aimlessly through the mall who grasp the issues at about the same level as a golden retriever.  Some of the most breathtakingly dumb people I've met have fancy degrees from the most prestigious institutions of higher learning (or at least what used to be called learning - now more like indoctrination). 

     Read on to learn about evil CEOs who greedily conspire to manufacture undeserved profits, the immorality of creative destruction in the jobs market, and the terrifying and ominous balance of trade non-issue!

     As usual, Grotto fall-term interns have highlighted important passages at the Editor's direction.

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Stupid, Ignorant or Biased?
By Walter E. Williams
Wednesday, September 19, 2007

President Franklin D. Roosevelt's closest adviser and architect of the New Deal, Harry Hopkins, advised, "Tax and tax, spend and spend, elect and elect, because the people are too damn dumb to know the difference." Professor Bryan Caplan, my colleague at George Mason University, sheds some light on Hopkins' observation in his new book, "The Myth of the Rational Voter: Why Democracies Choose Bad Policies."

Caplan is far more generous than Hopkins. Instead, he says people harbor economic biases, several of which he discusses. There's the anti-market bias, the failure to believe that market forces determine prices. Many believe that prices are a function of a CEO's intentions and conspiracies. If a CEO wakes up feeling greedy, he'll raise prices. They also believe that profits are undeserving gifts. They fail to see that, at least in open markets, profits are incentives for firms to satisfy customers, find least-cost production methods and move resources from low-valued to high-valued uses.

Then there's the make-work bias, where many believe that labor is better to use than conserve. Thus, the destruction of jobs is seen as a danger. Technology, as well as outsourcing, throws some people out of work. Caplan reminds us that in 1800 it took nearly 95 of every 100 Americans, working on farms, to feed the nation. In 1900, it took 40. Today, it takes three. Workers no longer needed to farm became available to produce homes, cars, pharmaceuticals, computers and thousands of other goods. Caplan doesn't make the equation, but outsourcing, just as technological innovation, frees up labor to produce other things as well.

Next is the anti-foreign bias. Caplan explains that there are two methods for Americans to have cars. One is to get a bunch of workers into Detroit factories. Another is to grow a lot of wheat in Iowa. You harvest the wheat, load it on ships sailing westward on the Pacific Ocean, and a few months later the ships reappear loaded down with Toyotas. We have cars as if we produced them. In other words, exchange is an alternative method of production.

Added to the anti-foreign bias is the balance-of-trade fallacy. Caplan says that nobody loses sleep over whether there's a trade balance between California and Nevada, or between him and iTunes. Trade balance fears arise only when another country is involved. The fallacy is not treating all purchases as a cost but only foreign purchases as a cost. There might be another bias as well. Caplan reports that, according to an opinion survey, 28 percent of Americans admitted they dislike Japan but only 8 percent dislike England and a scant 3 percent dislike Canada.

People have a pessimistic bias where they believe economic conditions are not as good as they really are and things are going from bad to worse. This is the message of doomsayers, but the reality is quite different. By any measure of well-being, Americans at the start of this century are far better off than Americans at the beginning of the last century. Perennial doom-and-gloom predictions about resource depletion, overpopulation and environmental quality are exaggerated and often the opposite of the truth. Preaching doom and gloom has been beneficial to the political class. They use it to gain more power and control.

Caplan is one of George Mason University Economics Department's up-and-coming young scholars. In fact, I'm proud to say, he was hired during my department chairmanship. "The Myth of the Rational Voter: Why Democracies Choose Bad Policies" is a highly readable and interesting political-economic discussion of why we choose bad policies. Those policies are harmful to the general public but beneficial to particular interest groups who gain from restrictions on peaceable, voluntary exchange. Maybe that's why our founders loathed a democracy and gave us a republic -- which we've lost.

Dr. Williams serves on the faculty of George Mason University as John M. Olin Distinguished Professor of Economics and is the author of More Liberty Means Less Government: Our Founders Knew This Well.

"We Didn't Progress from 4-inch Black-and-White Cathode Ray Tubes to 4-foot Flat Panels Because the Government Raised Television Standards. . . ."

     Required reading for liberals and bureaucrats:

At This Rate, They'll Be Churning Out Teachers Clad in Little Kim Jong Il Uniforms Instead of Graduation Gowns!

     What the hell is going on?  Read the following column and ask yourself if this indoctrination crap is happening in America or in some long lost George Orwell novel.

     Wanna be a teacher?  Better be ready to fight "oppression" as part of your daily job. 

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Indoctrination 101
By John Leo
Tuesday, September 11, 2007

In 1997, the National Association of Social Work (NASW) altered its ethics code, ruling that all social workers must promote social justice "from local to global level." This call for mandatory advocacy raised the question: what kind of political action did the highly liberal field of social work have in mind? The answer wasn't long in coming. The Council on Social Work Education, the national accreditor of social work education programs, says candidates must fight "oppression," and sees American society as pervaded by the "global interconnections of oppression." Now aspiring social workers must commit themselves, usually in writing, to a culturally left agenda, often including diversity programs, state-sponsored redistribution of income, and a readiness to combat heterosexism, ableism, and classism.

This was all too much for the National Association of Scholars. The NAS has just released a six-month study of social work education, examining the ten largest programs at public universities for which information was available. The report, "The Scandal of Social Work," says these programs "have lost sight of the difference between instruction and indoctrination to a scandalous extent. They have, for the most part, adopted an official ideological line, closing off debate on many questions that serious students of public policy would admit to be open to the play of contending viewpoints."

Nine of the ten programs, the NAS reports, require students to accept the ideology-saturated NASW code of ethics to get a degree in social work. The University of Central Florida says students "must comply" with the code of ethics if they wish to remain in school. Failure to accept the code constitutes "academic misconduct" in the University of Michigan program and "can result in disciplinary action" at the University of Minnesota—Twin Cities.

"Diversity/multiculturalism" and "oppression" were among the most common themes in coursework. The report notes, "Although it's certainly true that racism has been oppressive in American history, it seems question-begging to assume that ‘oppression' is a leading cause of poverty in the modern U.S. And it is far from clear that the only pathway to a non-racist or egalitarian society passes through the gateway or multiculturalism."

The NAS called on government agencies at the federal, state and local level "to cease requiring that social workers hold degrees from CSWE accredited programs in order to be hired." By associating themselves with the ideological tests in the CSWE standards and NASW code, "such agencies violate constitutionally protected freedoms of speech and religious conscience."

At schools of education, the buzzword "dispositions" carries the message of politicized advocacy. Ed schools once required aspiring teachers to display only competence and knowledge. Then the amorphous criterion of "dispositions" appeared, referring vaguely to habits and attitudes that teachers must have. The National Council for Accreditation of Teachers of English (NCATE) said education departments could "include some measure of a candidate's commitment to social justice"—in effect ruling that public school teachers could be evaluated on their perceptions of what social justice requires.

This opened a door to reject candidates on the basis of thoughts and beliefs. It also allowed ed schools to infer bad character from a political stance that the schools opposed. At Washington State University, where the college of education tried to expel a conservative student, the dean was asked whether Justice Antonin Scalia could pass a dispositions test at her school. "I don't know how to answer that," she replied.

Interventions by free speech and religious liberties groups induced a few schools to back down in well-publicized cases of abuse. At Missouri State University's undergraduate social work program, Emily Brooker received a "C" after complaining that professor Frank Kauffman "routinely engaged in leftist diatribes." Kauffman instructed Brooker's class to write the state legislature urging legal approval of adoption by gays. She refused on religious and moral grounds. As a result, Brooker was brought up on very serious charges; to get her degree, she had to promise to abide by the NASW code. After graduation, she sued and won a settlement.

In an attention-getting article, Stanford education school professor William Damon wrote that ed schools "have been given unbounded power over what candidates may think and do, what they may believe and value." In what seemed to be an exercise in damage control, NCATE president Arthur Wise said he agreed with Damon that it is not acceptable for ed schools to assess social and political beliefs.

Still, the ideology behind disposition theory and social justice requirements is intact and strongly holds sway in the schools. It dovetails with the general attitude on campuses that promoting liberal advocacy in the classroom is legitimate and necessary. So long as government agencies collaborate with the social work programs and ed schools, reform will remain a long way off.

John Leo is editor of MindingTheCampus.com and a former contributing editor at U.S. News and World Report.

Sorry, Demagogues: Pull Back the Curtain on Gasoline Price Volatility and You'll Find the Very Dull Law of Supply and Demand, not an Evil Wizard of Big Oil!

     Yawn.  If you're not a liberal, don't bother reading this article about the law of supply and demand, because, unlike the liberal, you probably grasped the concept in sixth grade.

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Economics vs Politics
By Paul Greenberg
Monday, September 17, 2007

With gasoline prices now only medium outrageous, Gentle Reader may have forgotten how eager politicians were last year to find someone to blame when the pain at the pumps was off the charts.

The usual congressional investigation was hastily called, the usual outrage expressed, and the usual suspicions voiced with the usual lack of any economic effect. Then the political ritual was concluded, prices fell in the normal course of economic events, and few now ask whether there was anything to all that talk. It's a question worth asking as a lesson in politics - and economics.

Mark Pryor, the junior senator from Arkansas, was one of those making roundhouse accusations back then. In search of the nearest scapegoat for high oil prices, he settled for the same old one: dastardly Big Oil. The senator was out to protect us, so he said, from "the greed and profiteering in the oil marketplace" - not to mention economic literacy.

So what happened? Even though Sen. Pryor joined a number of his colleagues in trying to bully the Federal Trade Commission into cooking up some evidence to back up his conspiracy theory, all the FTC could do was reach the same conclusion it usually does: There was no substance to his charges.

Once again the bogeyman turns out to be nothing more sinister than the law of supply and demand. Sure enough, when supply dwindles and demand goes up,so do prices. Big surprise.

But every time gas prices go up, a certain kind of politician is shocked, shocked! Or at least pretends to be. And demands an investigation. Which is a lot easier than taking Economics 101 all over again.

Naturally the politician blames some vague, amorphous monster out there like Big Oil rather than the real-life owner-operator of your neighborhood filling station. After all, the little guy votes.

And it's too much trouble to think this thing through - as Henry Hazlitt did in his dandy little primer, "Economics in One Lesson."

To quote Mr. Hazlitt, "we cannot hold the price of any commodity below its market level without in time bringing about two consequences. The first is to increase the demand for that commodity. Because the commodity is cheaper, people are both tempted to buy, and can afford to buy, more of it. The second consequence is to reduce the supply of that commodity. Because people buy more, the accumulated supply is more quickly taken from the shelves of merchants. But in addition to this, production of that commodity is discouraged."

Gosh, just like gasoline last year.

If there's an avaricious cartel setting oil-and-gas prices, it's called OPEC. But oil sheikhs and Venezuelan caudillos are scarcely subject to a congressional investigating committee.

If there's a conspiracy at work here, it's the dismal science itself -economics. It's been refuting demagogues ever since they've been taking advantage of our anger, suspicion and ignorance. Hey, somebody's got to be blamed when we're unhappy. Especially somebody rich and powerful. What better scapegoat than Big Oil?

The art and science of economics may never be as simple or dramatic as Mark Pryor's populist rhetoric. But the study of economics may have the great advantage of clarifying things rather than hopelessly muddling them. Attached as we all may be to our own favorite conspiracy theory, along comes an actual investigation, and it goes poof. Which is just what's happened,again, to Mark Pryor's.

To quote the latest report from the FTC's investigators, whose prose isn't exactly scintillating: "The 2006 price increases were caused by a confluence of factors reflecting the normal operation of the market."

Aw shucks. And just when we were getting the tar and feathers ready for those oil executives.

And what were the factors that drove gas prices higher last summer? Among them, greater demand for fuel by vacationers (another big surprise), the still lingering effects of hurricanes (Katrina and Rita) that shut down refineries along the Gulf Coast, reduced oil refining capacity as producers switched to ethanol, and, as you might have expected, greater demand for both crude oil and ethanol. What, no conpiracy? How boring.

Once again the FTC found no evidence that gas prices were being manipulated by some sinister cabal in this country's boardrooms. Despite Senator Pryor's demand for more government regulation of gas prices (shades of Jimmy Carter's long lines back in the '70s), the FTC couldn't come up with any facts to support him.

This isn't the first time a sleek conspiracy theory has run aground on the rocky shore of fact. To quote Joseph Simons, a former director of the FTC's Bureau of Competition: "The FTC has looked at the same phenomenon, which occurs almost every year, year after year, and they get the same result. Why people think it's going to come out any different the next time is unclear. It's a waste of taxpayers' money."

But it's not a waste of ambitious politicians' efforts. They get to posture before the cameras and demand ACTION! -even if it's precisely the wrong kind.

The pols may be wrong again and again, year after year, but think of the advantages. They're able to strike while public anger is at its zenith, appease their louder and less thoughtful constituents, and they never have to say they're sorry by the time gas prices fall and the public's interest in the subject has waned. (Somehow they never get around to demanding a probe when gas prices go down.)

That's the way it is with wild accusations; the facts may never catch up. Or if they do, the story is relegated to the business section. Ho hum.

The price of gasoline may rise and fall and rise again, like that of any other commodity, but the market for demagoguery remains remarkably stable.

Is It "Unfair" That a TV Set Is 364 Times More Expensive Than a Gumball? (For the "Liberal Zero-Sum Thinking" Collection)

     When liberals think about economics, which I suggest is a very rare event, two scenarios unfold.  One:  Whichever liberal happens to be writing the capitalism-bashing article (usually some loser journalism major who wakes up to find himself high up in the ranks of a widely-read newspaper) has never taken a moment to think about some very basic economic concepts.  Two:  The liberal knows deep down inside that certain economic laws, like that old favorite concerning supply and demand, cannot be repealed any more than can the law of gravity, but then willfully decides to ignore this fact.  See, this savvy liberal (usually a Democratic Senator or Congressman) knows that you CAN actually fool most of the people most of the time, and if you speak gravely into a microphone enough times about the evils of capitalism and the "inequality" it produces, you'll probably win some elections!

     Please enjoy the underlined passages if you are in a rush. . . .

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In Defense of CEO Compensation
By Robert Murphy
Thursday, September 13, 2007

If someone wants to bash corporations and the "excesses" of raw capitalism, there's no easier target nowadays than CEO pay. Recently critics were in a tizzy over a report claiming that CEOs make 364 times what the average worker earns. For example, in this MSN article Michael Brush declares:

In recognition of the just-completed Labor Day weekend, I'd like to offer a salute to American workers, who the United Nations just reported are second only to Norway's laborers when it comes to productivity.

And now, a bit of bad news for those same workers: You're not getting credit for that productivity. Instead, top executives at your companies are reaping the rewards in the form of increasingly fat paydays.

It's sad that this is the level of economic literacy among the media. If the press ignored advances in other scientific fields as much as they do in economics, we'd see weathermen advising readers to offer sacrifices to the rain gods.

What Mr. Brush apparently doesn't realize is that there isn't a fixed pie of income, such that high pay for CEOs necessarily translates into lower pay for workers. He's also ignoring the fact that competition impels companies to pay workers what they're generally worth. If Company A were paying its workers $25,000 per year when the workers were really adding $30,000 to the bottom line, why wouldn't Company B offer them a few thousand dollars more to switch?

In our increasingly global economy, certain individuals are incredibly productive and can command incredibly high earnings as a result. Corporate executives really do perform valuable tasks, and it really does make a difference who is running the company. Once we concede that productive individuals will earn more than less productive ones, the fact that some make 364 times what others do is largely irrelevant. After all, a TV set might be 364 times more expensive than a gumball. Is that "unfair" or does it merely reflect the forces of supply and demand?

Fortunately, some financial commentators would concede my points above. What these people object to, however, is CEOs making a bundle even when they fail. This viewpoint is expressed in a recent BusinessWeek piece by Bill George:

The public is outraged these days over CEO compensation, with good reason. Far too many chief executive officers get paid large sums even when they don't perform. I believe that CEOs should be well-paid when they do perform, but there is no justification for paying for nonperformance.

Now this raises an interesting question: Why in the world would shareholders agree to compensation schemes that are so "obviously" ridiculous? It offends the public (and Bill George) when Home Depot's "former CEO Bob Nardelli [received] a $200 million termination settlement after declines in market share and shareholder value." Yet the people who should really be upset are Home Depot shareholders. Are we to conclude that shareholders care less about their money than outside observers?

Let's not rush to judgment. It's risky to take a job as CEO. Highly talented individuals know that, despite their best efforts, they might perform poorly. Indeed, maybe a company has dug itself into such a hole that nobody could prevent the stock from falling. Now imagine that you are such a person, and you could (say) get a sure $10 million working in some other capacity with much less stress. Your other option is to take the job as Home Depot's CEO, where you will earn $250 million if the stock price goes up, but $100,000 if the stock price tanks. Does that sound like a good deal? Would Home Depot attract many qualified candidates with such a proposal?

Obviously I am simplifying matters, and in the real world companies have all sorts of mechanisms to align the long-run incentives of management with the shareholders. My point, however, is that the typical critic who spends five minutes thinking about the issue often overlooks the large element of risk. If corporations don't want to simply hire daredevils, they will need to have lucrative contingencies in place in case things turn sour. No one objects to this at the lower levels, either: If the stock price tanks, nobody expects the janitor to give back half his salary.

Finally, I should deal with the objection that in the real world, shareholders can't exercise control over management. This is true to varying degrees. But the market has an elegant solution to bloated management who fritters away shareholder value: the corporate raider. Ironically, the government's restrictions on so-called hostile takeovers make it harder for shareholders in large corporations to clean house and install managers who will look out for their interests. As usual, the imperfections of the marketplace can be traced to the unintended consequences of earlier government interference.

Robert Murphy has a Ph.D. in economics and is the author of The Politically Incorrect Guide to Capitalism (Regnery 2007).

Smart Countries Sprinting to See Who Can Get Their Tax Rates Lowest Quickest

     Read this and then compare to any Democratic candidate's creaky, outdated, terrible tax ideas.

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Reaganomics 2.0

By Stephen Moore

August 31, 2007

Earlier this year the cover of Time Magazine depicted Ronald Reagan with a tear running down his cheek -- the message being that the political class has abandoned the Reagan legacy. There's no doubt Reagan's pro-growth, tax cutting philosophy is in full-scale retreat: This Congress has proposed higher tax rates on personal income, capital gains and dividends. Ironically, the Reagan economic philosophy of lower taxes, less regulation and free trade has never been more in vogue abroad -- so much so that it has become the global economic operating system.

Let's call this phenomenon Reaganomics 2.0.

In the Pacific Rim nations, for example, Malaysia, New Zealand, Singapore, Taiwan and Vietnam all have cut taxes this year or have plans to do so. Singapore has cut taxes multiple times in recent years and it now operates with no capital gains tax.

But the remarkable attitudinal shift on taxes has been in Europe, which in the 1980s and '90s showcased their gold-plated social safety nets, boasted of their citizens' willingness to pay high tax rates to maintain them and were openly contemptuous of the Reagan tax-cutting philosophy. Now those same nations of old-Europe seem to be in a sprint to see which country can get their tax rates lowest quickest. Nicholas Vardy, the editor of "The Global Guru" economic newsletter calls the phenomenon "Europe's Reagan Revolution."

French President Nicolas Sarkozy has plans to cut his country's business income tax by at least five percentage points as part of his economic rehabilitation plan. Spain and Italy are negotiating plans to lower their corporate tax rates, and the U.K. already did so earlier this year. Sweden and Russia last year eliminated their estate taxes because they said the tax was economically counterproductive. In Germany under Chancellor Angela Merkel, the corporate tax rate has been reduced to less than 30% from 39%.

Some of this tax chopping in Old Europe is a response to the success of the U.S. tax rate reductions and the fast pace of job creation that ensued from economic growth -- though few European officials will acknowledge that reality. But a bigger factor more recently has been the impact of the flat-tax revolution in Eastern Europe. Dan Mitchell of the Cato Institute says there are now 14 nations with flat taxes, 10 of them in nations formerly behind the Iron Curtain. "The pace of tax reform in these nations is so frantic, that it's hard to keep up to date with the changes," he says. Poland hasn't yet established a flat tax, but recently cut its business tax to 19% from 27%.

Austria cut its corporate tax rate to keep pace with its neighbor, Slovakia which recently adopted an 18% flat tax. Singapore is cutting taxes to compete with its 16% flat-tax rival Hong Kong. Northern Ireland wants to cut its tax rates so that it can compete with the economic gazelle of Europe, the Republic of Ireland. In 1988 Ireland was a high-unemployment stagnant economy with a 48% corporate tax rate, today that rate is 12.5% and the rest of the world is now desperate to match its economic results. Meanwhile German Finance Minister Peer Steinbrueck sold the latest tax cuts as "an investment in Germany as a business location."

The idea that jobs, businesses and wealth follow low tax rates is widely accepted. Nguyen Van Ninh, head of the Department of Taxation in Vietnam is typical. He concedes that the corporate tax cuts may lose revenues, but "on the other side, the business environment will become more and more attractive, resulting in increased investment."

This is all very good news -- except in the U.S. Arthur Laffer, one of the architects of the Reagan tax policies, believes that one major explanation for the strength of the euro and the weakness of the dollar in recent years, is the divergent paths on tax policies on the two sides of the Atlantic. Europe is cutting levies, while the only debate among the political class in Washington is how high to jack them up.

Still, it is a testament to the Reagan economic revolution launched in 1981 that, a quarter century later, global tax rates are 25 percentage points lower on average today than in the 1970s. And those figures don't even include this latest round of chopping under Reaganomics 2.0. The enactment of supply-side policies is helping ignite one of the strongest and longest world-wide economic expansions in history. Yet few are giving Reagan or his ideas the credit. Mr. Vardy points out that there are only two official statues of Reagan in Europe. Last month the Poles unveiled one financed by an American entrepreneur. The first was erected in Budapest to commemorate Reagan's "tear down this wall" speech in Berlin. Now tax walls are being torn down.

Alas, there's only about one place on the planet where politicians hold Reaganomics in outright disrepute today -- and that is here. The Democratic leadership in Congress believes that tax rates don't matter much if at all, and that the Bush tax cuts were a giveaway to the rich. Presidential candidate John Edwards has even suggested a near doubling of the U.S. capital gains tax rate as part of his economic program, and his rivals all have schemes to soak the wealthy as well.

All of this threatens to move America from leader to laggard in the global race for job creation, capital investment and prosperity. Maybe that explains the tear rolling down the Gipper's cheek.

Read On To Find Out Why Unattractive Secretaries Should Be for Low Taxes. . . .

Economics and Property Rights
By Walter E. Williams
Wednesday, September 5, 2007

Economic theory does not operate in a vacuum. Institutions, such as the property rights structure, determine how the theory manifests itself. Similarly, the law of gravity isn't repealed when a parachutist floats gently down to earth. The parachute simply affects how the law of gravity manifests itself.

Failure to recognize the effect of different property rights structures on outcomes leads to faulty analysis. Think about several questions. Which lake will yield larger, more mature fish -- a publicly owned or a privately owned lake? Why is it that herds of cows flourished and buffalos did not? Who will care for a house better -- a renter or owner?

The answer to each question has to do with the property rights structure. In a publicly owned lake, everyone has the right to the fish. In order to assert his right, the person has to catch the fish. This leads to overfishing because the person who tosses back an immature fish doesn't benefit himself. He benefits someone else who will keep the fish. It's a different story with a privately owned lake. The owner needn't catch a fish in order to assert his rights and can let the fish mature. It's the same principle with buffalo and other wildlife that's publicly owned. Through various rules and regulations, governments, though imperfectly, attempt to solve this property rights problem with licenses, fishing and hunting seasons and setting limits on catch and size.

Private property rights force the owner to take into account the effect of his current use of the property on its future value. A homeowner has a greater stake in what a house is worth 10 or 20 years from now than a renter. An owner would more likely make sacrifices and take the kind of care that lengthens the usable life of the house. But owners have methods to make renters share some of the interests of an owner through requiring security deposits against damage.

There's a completely ignored aspect of the effect of restrictions on private property rights and that's restrictions on profits. Pretend that you're an owner of a firm. There are two equally capable secretaries that you might hire. The pretty secretary demands $300 a week while the homely secretary is willing to work for $200. If you hired the homely secretary, your profits would be $100 greater. But what if there were a 50 percent profit tax? The profit tax reduces your rights to profit and reduces your cost of discriminating against the homely secretary. Instead of foregoing $100 without the profit tax, you'd forego only $50 by hiring the pretty secretary. The more the cost of doing something goes down, predictably, the more people will do of it. Wherever private property rights to profits are attenuated, we expect more choices to be made by noneconomic factors such as race and other physical attributes. That's especially the case in nonprofit entities like government and universities.

You say, "Hold it, Williams, government and universities have preferential hiring policies in favor of racial minorities; so you're wrong." No. When it was politically expedient, government and universities were the leaders in racial discrimination against racial minorities. Now that it's politically expedient to discriminate in favor of racial minorities, government and universities are in the forefront. For example, in 1936, there were only three black Ph.D. chemists employed by all of the white universities in the U.S., whereas 300 black chemists alone were employed by private industry. In government, blacks were only 1 percent of non-Postal Civil Service workers in 1930. By the way, where did blacks make their entry into white universities? If you said in sports, the moneymaking part of the university, go to the head of the class.

There are numerous issues and problems that are otherwise inexplicable unless we take into consideration the property rights structure.

"Corporate Social Responsibility" Quote of the Day!

     "There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

    Milton Friedman

   

"Maybe the Kid Can't Read, But Look at the Bright Side, He's Smart!"

     Here's the latest column on how kids are being totally hosed by touchy-feely, lame schools and idiotic academic sub-standards:

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No Fad Left Behind
By Debra J. Saunders
Thursday, August 23, 2007

"Many Americans do not believe that the success of our students or of our schools can be measured by one test administered on one day, and I agree with them. This is not fair," Rep. George Miller, D-Calif., told the National Press Club last month.

As the House Education and Labor Committee he chairs is expected to roll out a draft for legislation to reauthorize the 2001 No Child Left Behind bill, Miller and fellow Democrats want to change NCLB testing.

Currently, the law requires that students be tested in math and reading every year between third-grade and eighth-grade, then once in high school. Miller explained he would add "multiple measures of success. These measures can no longer reflect just basic skills and memorization, but rather critical thinking and the ability to apply knowledge to new and challenging contexts."

On the one hand, Miller is right to push to improve NCLB. He wants to allow states to apply graduation rates toward their yearly NCLB progress scores and also would have states include history and science test scores.

On the other hand, when the education establishment touts testing for "critical thinking," that can be code for: Maybe the kid can't read, but look at the bright side, he's smart.

And when educrat groups -- such as the Forum on Educational Accountability -- recommend that NCLB add "comprehensive assessments systems," which would include portfolios (essays, drawing, reports) in order to offer "rich and challenging educational goals," beware. What sounds like more sophisticated testing could end up being more confusing and inconclusive. A kid who can draw does not mean a kid who can multiply.

"The great danger here is that it clouds the accountability system," noted Amy Wilkins, vice president of Education Trust, a nonprofit group that advocates for higher standards in K-12 education.

No Child Left Behind's mission -- to help all children read and compute at grade level -- puts basics first so that children have the fundamentals in place to tackle more challenging subjects. Testing for problem-solving and critical thinking skills would only allow children who don't know the basics to score higher than they should.

Miller spoke to me on the telephone Wednesday about "drill and kill" and "teaching to the test." That's the standard line against standardized multiple-choice tests.

"It's goofy, they (the anti-test crowd) talk out of both sides of their mouth," Wilkins noted. Some educators complain that NCLB tests are confined to low-level skills and that they have to spend all their time teaching to the test. But: "If they're such low-level skills, why do you spend so much time teaching them?"

Besides, Wilkins noted, the NCLB tests "should not be comprehensive and test every standard." She likened NCLB testing -- which can consume from a couple hours to a day per year per student -- to "a dipstick" that allows educators to see if kids are making adequate progress toward mastering grade-level skills, and then hopefully move on.

Will the new NCLB draft include portfolios? Miller told me that a state might be able to include portfolios for English-language learners -- if the state has no valid test for that group, and thinks it can put together a good package and if the U.S. secretary of education approves. If the House education committee limits portfolios to that narrow area, so be it.

But on a larger scale, forget it. Teachers, parents and students already complain that there are too many tests. So the answer is: Another test? I don't think so.

The time it would take for teachers to grade portfolios is prohibitive. Most important of all, subjective grading defeats the whole purpose of NCLB. Washington passed this law because schools have graduated too many students who were not performing at grade level. The remedy is not a test that would allow graders to paper over the sorry fact that children cannot read.

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"Moralizing for Me, But Not for Thee. . ."

     Here's an excerpt from Jonah Goldberg's latest column:

. . . The left claims to hate "moralizers." So any failure to live like Jesus while telling others to follow his example is an outrage, even the defining challenge of our lives. (In 2005, Democratic National Committee Chairman Howard Dean pledged, "I will use whatever position I have in order to root out hypocrisy.")

One solution to the hypocrisy epidemic, of course, is to have no morals at all. You can't violate your principles if you don't have any. Another solution: simply define down your principles until they are conveniently consistent with your preferred lifestyle. My own perfect moral code would mandate a strict regimen of not enough exercise, too much scotch and a diet rich in cured meats. Men would be religiously barred from taking out the garbage until their wives told them no less than three times to do so. "Thou Shalt Not Shave More Than Thrice Monthly": I'd never be a hypocrite if only the Bible gave us commandments like that.

But the left has another solution. Under its system, you can still be a moralizer. You can still tell people what to do and how to live. And, best of all, you can still fall short of your ideals personally while guiltlessly trying to use government to impose your moral vision on others. All you have to do is become a liberal moralizer.

Once you become a liberal, you can wax eloquent on the glories of the public schools while sending your kids to private school. You can wax prolix about the greedy rich while making a fortune on the side. You can even use the government to impose your values willy-nilly, from racial quotas and confiscatory tax rates to draconian environmental policies and sex-ed for grade-schoolers - all of which will paid for in part by people who disagree with you.

You don't even have to give up traditional religion, so long as you now define the teachings of your faith in perfect compliance with the Democratic platform. . . .

. . . The point is simply this: Hypocrisy is bad, sure. But it's a human failing that should fall upon the individual in question. What the left wants to do is use hypocrisy as a cudgel to declare that conservative ideals are categorically illegitimate because some conservatives fail to live up to them. But we all fail to live up to our ideals sometimes (just ask John Edwards, who wants get rid of everyone's SUV, save the one in his driveway). That's sort of why we call them "ideals." Most of us don't fall as far as Larry Craig seems to have fallen, but that's not necessarily an indictment of his arguments, it's an indictment of the man.

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Here's One You Might Find (If You're Lucky) Nestled in Tiny Print on a Back Page of the New York Times

How to Raise Revenue

Wall Street Journal

August 24, 2007

The Congressional Budget Office reported yesterday that the famously fearsome budget deficit is plummeting almost as fast as Congress's approval ratings. The deficit this fiscal year is expected to be $158 billion, a meager 1.2% of GDP. Since the Bush tax cuts of 2003, the budget deficit has fallen by $217 billion mostly because of a continuing torrid pace of revenue growth.

 

Quite a success story, but one that isn't likely to be embraced by House Ways and Means Committee Chairman Charles Rangel of New York. Last week he gave a sneak preview of his tax strategy for this fall by announcing he wants to put "more equity into the system." Mr. Rangel then provided the translation: It's time, he says, to "take a look at the upper [marginal tax] rate to see if there can be a more equitable distribution of the tax."

OK, let's talk equity. It's almost an article of faith on Capitol Hill these days that the Bush tax cuts tilted the income tax system in favor of the rich. If this were true, it would be reflected in the actual data on the distribution of the income tax.

For the Bush tax cuts to have been a give-away to the rich, people paying the higher marginal tax rates would have to be carrying a smaller share of the income tax load. But the IRS data indicate that they are not paying less. Instead, they are paying more -- lots more. More surprisingly, the richest 1%, 5% and 10% of the taxpayers are shouldering a larger percentage of the income tax burden at the federal level than the tax estimators said they would had the Bush tax cuts never materialized. The data nearby tell the story.

The preliminary 2005 data just released from the Treasury Department show more of the same. The amount of tax paid by those earning more than $1 million a year increased to $236 billion in 2005, up from $132 billion in 2003, the year of the tax cut. This was a 78% increase in taxes paid by millionaire households.

 

Another indication of the expanded tax base is that after the tax cuts there were more millionaires for Uncle Sam to tax. In 2003 about 182,000 Americans declared gross income of $1 million or more. In 2005 the number of millionaire households leapt to 300,000. The number of Americans with declared income of $10 million or more doubled to 13,000 from 6,000 in the years after the tax rate cuts. This is a "problem" only if Democrats have come to believe that earning money is an ignoble pursuit.

The boom in the stock and housing markets clearly had a lot to do with the expansion in the number of millionaires in America, but lower tax rates on capital gains and dividends also caused a huge jump in reported income. The National Bureau of Economic Research found an "unprecedented surge in regular dividend payments after the 2003" Bush tax cut. Likewise, the lowering of the capital gains tax was followed by a 150% increase in the amount of capital gains unlocked by the 15% tax rate. Lower tax rates expanded the tax base.

We hope that before "putting more equity into the system" Mr. Rangel also takes a look at the longer term picture on revenues and tax rates, because it shows that raising tax rates may not be a wise strategy. With a few exceptions, tax rates in America have been steadily falling for the past 25 years starting with the Reagan tax cuts of 1981. When Ronald Reagan entered the Oval Office in 1981, the highest tax rates on income, capital gains and dividends were roughly twice as high as today. The top marginal income tax rate in 1981, for example, was 70% compared to 35% today. These tax rate reductions haven't meant that the rich have escaped paying their "fair share" of taxes or that the burden has shifted to the middle class. The opposite has occurred. Over the past 25 years tax payments by the wealthy have continually risen almost in inverse proportion to the tax rates, as shown by the surprising results below. The real bite on the middle class comes from payroll and state taxes; include them and their tax share rises relative to the wealthy. So yes, cut those taxes, too.

The supply-side revenue effects on the rich are remarkable: Tax rates on higher incomes have been halved, but the federal tax share of the top 1% has nearly doubled. And the budget deficit has fallen. That's what happens when tax policy gets the incentives right.

The Closed Kingdom Is Beginning to Crack Open. . . .

NOTE: The Blue Grotto likes flags, so here's an image of the flag of Saudi Arabia:

(From the August 15, 2007 edition)

A Tipping Point in Saudi Arabia

By favoring merchants over clerics, Abdullah is making crucial reforms.

By Dana Moss and Zvika Krieger

Brussels; and Riyadh, Saudi Arabia

When Abdullah bin Abdul Aziz Al Saud was crown prince of Saudi Arabia, one of his most infamous decisions was banning the use of camera phones in 2004 – a demand from the country's Wahhabi clergy who claimed the devices were "spreading obscenity."

But the decision was quickly reversed when King Abdullah faced pressure from his government ministers and, allegedly, from a cadre of foreign businessmen who threatened to pull their companies from Saudi Arabia. "Abdullah was presented with a choice between the Wahhabis and good business," says one Riyadh-based businessman. "His decision [for the latter] was clear."

It is a decision that Abdullah has made time and again over the course of his reign as king, which hit its two-year mark this month. By sidelining the traditional clergy in favor of the merchant classes and more progressive religious voices, Abdullah has been challenging the "great bargain" of the Saudi state – namely the empowerment of the Wahhabi ulema (hard-line Islamic scholars) in exchange for their sanction of the House of Saud.

This unlikely reformer, who has unofficially led the kingdom since King Fahd's stroke in 1995, has propelled the country through a radical transformation. From accession to the World Trade Organization to the billion-dollar overhaul of the educational system to increased criticism of the religious "police" who enforce a strict interpretation of Islamic sharia law, the closed kingdom is beginning to crack open.

'The oil boom is over'

These reforms come at a critical time. Saudi Arabia is barreling toward an economic and social crisis if it does not act fast. Almost 75 percent of Saudi citizens are under age 30 and youth unemployment is approaching 30 percent – a potential breeding ground for terrorists and regime dissidents. Current high oil prices are not enough to paper over the economic ravages of the past two decades. "The oil boom is over and will not return," Abdullah told his subjects. "All of us must get used to a different lifestyle."

Economic restructuring of the kingdom is no easy task, nor can it be separated from social reform, such as increasing women's participation in economic life and creating a business environment and laws suitable for foreign companies.

Faced with resistance from the conservative official ulema, Abdullah has adopted a strategy of "circumvention" to coerce these reforms – officially toeing the Wahhabi line, but quietly giving more leeway to the private sector.

Education, for example, had traditionally been firmly under Wahhabi control, with a focus on creating more imams than businessmen. But this won't help a country striving to become an international powerhouse. So private universities – previously shunned by the religious elite because of their relative independence – have recently been legalized, with a half-dozen Western-style institutions slated to open soon. The new King Abdullah University for Science and Technology, the kingdom's first coeducational institution, is an Abdullah initiative to create a global leader in technological innovation. He tasked the relatively secular Ministry of Petroleum and Mineral Resources with running the project, keeping it away from the fundamentalists.

By sidelining the ulema, Abdullah has been forced to find a new source for religious legitimacy in order for him and his successors to rule over "the land of the two holy mosques."

His strategy has been to allow a wider base of voices to speak for Islam, both Sunni and Shiite. He instituted an annual forum titled "National Dialogue," which invited a variety of prominent intellectuals to make their views heard.

The forum included Sunni scholars such as Safar al Hawali, a former member of an opposition grouping called the "Awakening Sheikhs," many of which had been previously imprisoned for their biting criticism of palace policy.

Other invitees included prominent Shiite thinkers – a distinct change from earlier years, when the highest religious authority in Saudi Arabia had declared Shiites to be "apostates." Most important, the official ulema were pointedly left off the guest list.

Some have criticized the weak translation of the forum's rhetoric into real action. Yet even its existence is an accomplishment, and a new building has been set up in Riyadh to host this forum. This is a sign, in the words of Saudi Arabia expert Jean-François Seznec, of how the "National Dialogue" is becoming "systematized and routinized," reflecting long-term changes in the regime's attitude.

Of course, Abdullah's reforms have been highly limited when compared with Western expectations.

The country is still an iron-fisted dictatorship: The much-heralded municipal elections of 2005 excluded women, and the trumpeted majlis (parliament) remains a body undemocratically appointed by the king. Women can't drive, and religious freedom is nonexistent. Fundamentalist forces also remain significant in the kingdom, with characters such as Prince Naif, the ultra-conservative interior minister, still wielding enormous power.

Economic impetus for reform

At 83 years old, Abdullah's time left in office may be short, and it is uncertain that those next in line to the throne will have the will or the ability to continue making crucial reforms.

The challenges facing the desert kingdom require highly tuned maneuvering skills. Reformers are counting on the durability of Abdullah's reforms regardless of his successor. His legacy is likely to be protected by the new economic elite he is helping to create.

"You can't bury your head in the sand and expect to become a global economic power," said one administrator at a new Western-style university in Saudi Arabia. "The king knows this, and he's ready to accept the consequences of reform."

• Dana Moss is a senior fellow for Middle Eastern Studies at the Transatlantic Institute in Brussels. Zvika Krieger is a Middle East-based special correspondent for Newsweek magazine.

The Politics of Envy: Turning a Vice Into a Virtue. . .

     This column mentioned the amazing study cited by the Grotto a month or two back, in which "a majority of people said they would rather make $50,000 if others earned $25,000 than earn $100,000 if others were making $200,000."

"With the exception of the self-esteem movement, which glorifies pride, it's difficult to imagine another area where we so shamelessly tout a sin as the basis of public policy."

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Envy: The Underrated Sin
By Jonah Goldberg
Friday, August 17, 2007

As my wife will attest, I often suffer from futterneid. This is the term Germans use to describe the envy we feel when, for example, someone orders a better meal than ours. I'm also prone to schadenfreude, the tendency to take pleasure in the misfortune of others. So if I get the braised short ribs and you get stuck with the snail tartare, your futterneid will fuel my schadenfreude.

Perhaps it's no coincidence the Germans have so many words for the chillingly petty emotions that run like cold streams through the human heart. Poor, dark and divided, Germany was an ideal location to harbor resentment against one's neighbor, be he a slightly more prosperous farmer, a Jew, a Catholic or even a nation. Latecomers to unification, industrialization and empire, Germany's 20th-century thirst for war and conquest might be blamed less on high-fallutin' philosophical theories or Romantic poetry and more on plain old envy. The Germans craved their "moment in the sun" and they were going to have it, no matter what.

Don't worry, this isn't a column about Germany. Rather, it's about envy, which Thomas Aquinas defined as sadness for the good of others.

We almost never discuss envy anymore. "One may admit to pride, avarice, lust, anger, gluttony, and laziness, and one may even boast of them," Gonzalo Fernandez de la Mora wrote 20 years ago in "Egalitarian Envy." "There is only one capital sin no one admits to: envy. ... Its symbol ought to be a mask." This is a shame; the most pathetic of the seven deadly sins is perhaps the most consequential.

Indeed, just look again on the 20th century. Envy turned Germany cruel. In Russia, the ideology of envy - socialism - likewise ran amok under the label Bolshevism and threatened to overrun the world.

The consequences of envy run even deeper. It will never be known how many millennia man endured in misery and darkness under the moldering blanket of envy. Helmut Schoeck writes in his timeless masterpiece, "Envy: A Theory of Social Behavior," that whole societies, hobbled by envy, rejected innovation and prosperity, preferring the arrested development of all to the advancement of the few.

In primitive societies, "No one dares to show anything that might lead people to think he was better off," Schoeck observed. "Innovations are unlikely. Agricultural methods remain traditional and primitive, to the detriment of the whole village, because every deviation from previous practice comes up against the limitations set by envy."

Bigotry has many wellsprings, but it always draws on the groundwater of envy. "How can that (choose your slur) have two horses when I only have one?" the envious man asks. Hence August Bebel's famous description of anti-Semitism as the "socialism of fools."

In America, we have our own politics of fools. John Edwards leads an all-star cast of liberal politicians and intellectuals (Edwards is decidedly not the latter) who worship at the altar of Invidia, praying that she will exact penance from the undeserving half of our "two Americas."

Like the "scientific socialism" that concealed envy behind a slide rule, today's liberals invoke social science as justification for their covetousness. In one famous study, a majority of people said they would rather make $50,000 if others earned $25,000 than earn $100,000 if others were making $200,000.

Such studies are deeply flawed. For starters, as Arthur Brooks notes in the current edition of City Journal, they don't address the question of whether people would be happier in a world of total equality. Rather, they ask whether people would be happier in a world of inequality so long as they could be richer than everybody else.

More damning, however, is that these studies turn a vice into a virtue. With the exception of the self-esteem movement, which glorifies pride, it's difficult to imagine another area where we so shamelessly tout a sin as the basis of public policy. All men lust in their hearts; shall we dole out concubines for those of us who can't live like Hugh Hefner?

Envy has its social utility, of course. Schoeck argues, along with Nietzsche, that envy helped hone our sense of justice. Fine. But America is supposed to be different, in part because unlike, say, Germany or Russia, America had no feudal past and hence lacked the historic breeding swamps of envy. America's egalitarianism is supposed to be political and nothing more: No man is the involuntary servant of another. Beyond that, he is the captain of his self.

The man who orders a better meal than me has done no harm to me. And it is no man's (or bureaucrat's) job but my own to cool the fever of my futterneid.

The Self Esteem Fraud: "Outlawing Competition and Celebrating Mediocrity"

     Three cheers for this column by a junior in college.  I've done some big-time underlining in hopes that you'll skim it.  At least check out the priceless part about "independent spellers!"

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The Self Esteem Myth
By Ashley Herzog
Thursday, August 9, 2007

Once upon a time – a time you probably don’t remember if you’re younger than 30 – American schools sought to teach children self-control, personal responsibility, and respect for others, especially adults. Students were corrected when they made mistakes and reprimanded when they slacked off or talked back. Most unfathomable to the current education establishment, teachers assessed students on qualities such as “gets along well with others” – and some children actually flunked. In the eyes of schoolteachers and parents, shaping kids into productive and responsible citizens was more important than protecting their egos.

Then, sometime in the 1970s, schools began to embrace the peculiar notion that kids should never be criticized or feel self-doubt. The “self-esteem” movement was born – and ushered in a generation of kids who think they can do no wrong.

In her new book, “Generation Me: Why Today’s Young Americans Are More Confident, Assertive, Entitled – And More Miserable than Ever Before,” Dr. Jean Twenge documents the spectacular failure of the self-esteem movement, from its birth in the 1970s to the present. Despite enthusiastic predictions to the contrary, raising kids’ self-esteem does not make them more successful or productive. It does, however, train them to always feel good about themselves, even when they do bad things.

Twenge makes clear the difference between self-esteem and self-respect. Self-respect – a value taught to older generations – is achieved gradually, by behaving morally and accomplishing things. Self-esteem is an entitlement. As Twenge explains, “most [self-esteem] programs encourage children to feel good about themselves for no particular reason.”

Is that really such a bad thing? According to Twenge, who spent years researching the subject, the answer is yes. Numerous studies show basically no relationship between high self-esteem and academic achievement, strong work ethic, or harmonious relationships with others.

In fact, Twenge’s research suggests that the self-esteem movement has wreaked havoc on schools. Instead of teaching children to learn from their mistakes, “There has been a movement against ‘criticizing’ children too much…One popular method tells teachers not to correct students’ spelling or grammar, arguing that kids should be ‘independent spellers’ so they can be treated as ‘individuals.’”

Elementary school students spend hours creating “All About Me” projects and reading books titled “Everyone Is Special,” but less time learning basic skills. Unsurprisingly, Twenge notes, “American children scored very highly when asked how good they were at math. Of course, their actual math performance is merely mediocre, with other countries’ youth routinely outranking American children.”

Grade inflation is appallingly high, as schools pass out good grades in order to avoid bruised egos. As Twenge reports, “In 2004, 48 percent of American college freshmen – almost half – reported earning an A average in high school, compared to only 18 percent in 1968, even though SAT scores decreased over the same period.” Students often demand good grades for substandard work, and their parents act as reinforcements: “Teachers described parents who specified that their children were not to be corrected or ‘emotionally upset,’ who argued incessantly about grades, and even one father who…challenged a teacher to a fistfight.”

Of course, children have no motivation to work harder when their schools outlaw competition and celebrate mediocrity. Many schools now refuse to publish the honor roll, since it might hurt the self-esteem of students who didn’t make the grade. According to the touchy-feely pop psychology of the current education establishment, recognizing high achievers is unnecessary and cruel. Twenge offers an example: “11-year-old Kayla was invited to the math class pizza party, even though she managed only a barely passing 71. The pizza parties used to be only for children who made A’s, but in recent years the school has invited every child who simply passed.”

While the self-esteem movement hasn’t made children any smarter, it has made them more self-centered, manipulative, and indulgent. Cheating in schools is on the rise, with 74 percent of high school students admitting to cheating in 2002. The link to the self-esteem movement is clear: if everyone deserves to feel good regardless of how they behave, why should a student feel bad about stealing a copy of the final exam? It doesn’t mean he’s a bad person. The self-esteem movement has indeed had enormous effects on children born since the 1970s – and almost none of them are good. The California Task Force to Promote Self-Esteem and Personal and Social Responsibility spent a quarter-billion dollars trying to raise Californians’ self-esteem, only to find that it had no effect on teen pregnancy, juvenile delinquency, drug abuse, or chronic welfare dependency. On the other hand, people with high self-esteem tend to be unwilling to take responsibility for their own failures and bad behavior.

There is one personality trait that is definitely linked to achievement, and that is self-control. Although “discipline” and “obedience” have become dirty words in the education establishment, people with high levels of self-control are the most likely to succeed. They earn higher grades and finish more years of education, and they’re less likely to abuse drugs or have children out of wedlock. As Twenge says, “Self-control predicts all of those things researchers had hoped self-esteem would, but hasn’t.”

This short column cannot do justice to Twenge’s meticulously researched and revealing book. However, it’s a must-read for parents and teachers who hope to unravel the myth of self-esteem.

Ashley Herzog is a junior at Ohio University, studying journalism, and lives in Avon Lake, Ohio.

Exciting Healthcare Quote of the Day!

     

     Excerpt from a John O'Sullivan article in NR:

"All health-care systems aim to achieve three things: (a) cost control, (b) universal access, and (c) provision of the full range of medical services. Alas, only two of these can be achieved simultaneously by any system. Pick (b) and (c), for instance, and costs will spiral out of control. But all three can at least be reconciled — automatically and efficiently — in a free-market health system by the price mechanism. Once demand for health care is no longer limited by price, however, it will rise indefinitely until it consumes the entire national income. Nations with universal health systems in effect deny this. They promise their citizens good-quality health care free at the point of consumption. How do they keep their promise?"

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"It's Time We Got Over the Myth That the Government Helps the Heroic Family Farm."

      

     The two main points, for busy Grotto readers:

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1)  "Dairy farmers in New Zealand get along perfectly well without subsidies : 'Ever since a liberal but free-market government swept to power in 1984 and essentially canceled handouts to farmers -- something that just about every other government in an advanced industrial nation has considered both politically and economically impossible. ... Output has soared.'"

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2)  "Most crops are not subsidized. Yet we have no shortages of fruits, vegetables, livestock and poultry. America has plenty of peaches, plums, peas, green beans, etc., and farmers who grow those crops do fine. What makes wheat, cotton, corn, soybeans and rice different?"

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Dead Men Farming
By John Stossel
Wednesday, August 15, 2007

By now you've probably heard that a new Government Accountability Office (GAO) report states:

From 1999 through 2005, the USDA "paid $1.1 billion in farm payments in the names of 172,801 deceased individuals. ... 40 percent went to those who had been dead for three or more years, and 19 percent to those dead for seven or more years." One dead farmer got more than $400,000 during those years.

And they say you can't take it with you.

Defending the USDA, the GAO adds, "The complex nature of some farming operations -- such as entities embedded within other entities -- can make it difficult for USDA to avoid making payments to deceased individuals."

Exactly. The agricultural section of the U.S. code is nearly 1,800 pages.

There's an easy way to avoid such absurdities: Abolish all farm subsidies.

Why are taxpayers forced to pay farmers $25 billion a year? Sure, farmers face droughts and floods, but that's been true since Moses' day. They can't say they weren't put on notice that farming has risks. Running a restaurant or a software company entails risks, too, but we don't guarantee their continued operation. Those businesses and America are stronger for it.

Farm subsidies are popular with politicians because Big Agriculture lobbies hard, and many people believe that without subsidies, we wouldn't have a reliable food supply.

But what an insane myth that is. As I wrote in "Myths, Lies, and Downright Stupidity", most crops are not subsidized. Yet we have no shortages of fruits, vegetables, livestock and poultry. America has plenty of peaches, plums, peas, green beans, etc., and farmers who grow those crops do fine. What makes wheat, cotton, corn, soybeans and rice different?

Last week, the New York Times reported that dairy farmers in New Zealand get along perfectly well without subsidies : "[E]ver since a liberal but free-market government swept to power in 1984 and essentially canceled handouts to farmers -- something that just about every other government in an advanced industrial nation has considered both politically and economically impossible. ... [O]utput has soared."

Yet in America, our congressmen enact a 742-page farm bill that, among other things, includes 10 times more money than in 2002 for "specialty crops," including citrus, tomatoes and melons, and an amendment to include goat meat in the mandatory Country of Origin Labeling Program.

An amendment that would have withheld subsidies from farmers with incomes of $250,000 or more was rejected by the House.

The farm program is repulsive welfare for the rich. The average farmer earns much more than the average American.

And even rich nonfarmers have received subsidies -- among them the late Ken Lay of Enron; Ted Turner, founder of CNN; my ABC colleague Sam Donaldson; and banker David Rockefeller.

And how absurd is this? "After handing out commodity subsidies that pay farmers to plant more crops," Heritage Foundation senior fellow Bruce Riedl notes, "Washington then turns around and pays other farmers not to farm 40 million acres of cropland each year -- the equivalent of idling every farm in Wisconsin, Michigan, Indiana and Ohio".

It's time we got over the myth that the government helps the heroic family farm. Riedl points out that "federal farm policies specifically bypass family farmers. Subsidies are paid per acre, so the largest (and most profitable) agribusinesses automatically receive the biggest checks."

Besides all the obvious ones, there's another reason to end farm subsidies. They show us to be hypocrites. How can we preach free trade in talks with developing nations when we subsidize farmers who then dump their crop surpluses in poor countries and wreck their domestic farms?

Give me a break.

John Stossel is an award-winning news correspondent and author of Myths, Lies, and Downright Stupidity: Get Out the Shovel--Why Everything You Know is Wrong.

How Do These Charlatans at CAIR Live With Themselves?!

CAIR They Go Again!
By Joel Mowbray
Friday, August 3, 2007

Just over 24 hours before a scheduled speech it hosted by commentator Robert Spencer, Young America’s Foundation found something unexpected sitting in the fax machine: A thinly veiled threat of a lawsuit if the group allowed the talk to happen as planned.

Near the end of the one-page missive is the rather unsubtle sentence: “Our clients have instructed us to pursue every available and appropriate legal remedy to redress any false and defamatory statements that are made at the session.”

Although YAF, which is the nation’s largest conservative group catering to high school and college students, is used to campus leftists attempting to silence the right-wing speakers it helps sponsor, the apparent lawsuit threat likely came as a shock.

The attempted bullying, however, comes as little surprise to anyone familiar with the organization behind the move: CAIR, the Council on American-Islamic Relations.

For years, CAIR has attempted to stifle debate and prevent inquiry into the domestic spread of radical Islam. Conservative columnist Cal Thomas was the latest target, when CAIR attempted to drum him out of his role as an official commentator at WTOP radio in Washington, D.C. The group was emboldened by its success in the same city two years earlier, when it got then-Disney-owned WMAL to can talk host Michael Graham. Similar such smear campaigns are legion.

If only CAIR could muster the same contempt—or any contempt, for that matter—for Islamic terrorists.

Contrary to the letter’s claim that the group “has consistently taken a principled position against terrorism and extremism,” CAIR simply has not done so. Never has CAIR condemned by name Islamic terrorist organizations Hamas and Hezbollah. Given the opportunity to condemn Hamas by Newsweek last December, CAIR executive director and co-founder Nihad Awad refused, claiming that the question was “the game of the pro-Israel lobby.”

While CAIR incessantly hypes its 2005 fatwa against terrorism and extremism, the document intentionally avoided defining the two terms. Fundamentalist Muslims who wish harm upon the U.S. and Israel do not consider themselves “extreme.” Nor do Hezbollah and Hamas believe that they are terrorists.

This is CAIR’s modus operandi: appearing to oppose terrorism, while simultaneously leading the charge against those who actually seek to thwart it.

Its approach to the lecture circuit is no different.

Spencer, who has courted controversy with his JihadWatch.org web site and his best-selling book, The Politically Incorrect Guide to Islam, is a genuinely provocative figure with whom reasonable people can disagree. There’s little doubt, however, that he is a legitimate contributor to the public debate.

The threatening letter states that Spencer “has a history of false and defamatory statements.” Interestingly, CAIR couldn’t cite even one “false and defamatory statement.”

But no matter what statements Spencer critics might dig up, none could put him in the league of some of the characters who have headlined CAIR conferences.

CAIR’s primary objection in its attempted legal blackmail was that Spencer is “a well-known purveyor of hatred and bigotry.” But if the group objects to “purveyors of hatred and bigotry,” why would it feature a neo-Nazi at several of its conferences?

Speaking at various CAIR functions in New York, New Jersey, and Florida was Bill Baker, whom CAIR-NY billed as a “renowned Christian scholar.” This “renowned Christian scholar” is someone with a history of vicious anti-Semitism who for a time in the 1980’s ran the Populist Party, an organization populated by neo-Nazis and Klansmen.

But a neo-Nazi is not out of place in the CAIR universe. At a CAIR co-sponsored event in 1998 at Brooklyn College in New York, speaker Wagdy Ghuniem roused the crowd with a stirring ditty that contained the lyrics: “No to the Jews, descendants of the apes.” (Transcript provided by the Investigative Project.)

Also on the menu at CAIR functions are 9/11 conspiracy theories, not surprising since it appears that the group’s leader doesn’t believe that Osama bin Laden was behind the attacks.

British journalist Yvonne Ridley, who suffered Stockholm Syndrome after being kidnapped by the Taliban and subsequently converted to Islam, asked at a 2003 CAIR-NY event, “Why would the Bush administration allow 9/11 to happen?” Her answer? “Because to use the war on terrorism became a useful bogus cover for achieving wider strategic geo-political objectives.” (Transcript provided by the Investigative Project.)

Stepping to the podium after Ridley's remarks was Awad, CAIR’s co-founder and executive director. Rather than chastise Ridley for her claim that it was Bush, and not bin Laden, behind 9/11, Awad indulged her delusions: “Also, having listened to sister Yvonne, there are many theories of course about 9/11. And there are many unanswered questions, and we always ask for answers.”

Given CAIR’s track record, YAF had no qualms ignoring CAIR’s threats. The speech happened Thursday, just as scheduled. But even with the possibility of a lawsuit, YAF would never censor a legitimate speaker; freedom of speech goes to the core of the group’s values. “CAIR picked the wrong group to bully and intimidate,” notes YAF spokesman Jason Mattera.

Plenty of reasonable people can take substantive issue with Spencer—and plenty do—but shouldn’t CAIR be more troubled by neo-Nazis, 9/11 conspiracy theorists, and Islamic terrorists?

Joel Mowbray, who got his start with Townhall.com, is an award-winning investigative journalist, nationally-syndicated columnist and author of Dangerous Diplomacy: How the State Department Threatens America's Security.

"International Competitiveness for Dummies"

We're Number One, Alas

The Wall Street Journal

July 13, 2007

Some good news on the tax cutting front: Last week lawmakers approved an 8.9 percentage point reduction in the corporate income tax rate. Too bad the tax cutters are Germans, not Americans.

 

There's a trend here. At least 25 developed nations have adopted Reaganite corporate income tax rate cuts since 2001. The U.S. is conspicuously not one of them. Vietnam has recently announced it is cutting its corporate rate to 25% from 28%. Singapore has approved a corporate tax cut to 18% from 20% to compete with low-tax Hong Kong's rate of 17.5%, and Northern Ireland is making a bid to slash its corporate tax rate to 12.5% to keep pace with the same low rate in the prosperous Republic of Ireland. Even in France, of all places, new President Nicolas Sarkozy has proposed reducing the corporate tax rate to 25% from 34.4%.

What do politicians in these countries understand that the U.S. Congress doesn't? Perhaps they've read "International Competitiveness for Dummies." In each of the countries that have cut corporate tax rates this year, the motivation has been the same -- to boost the nation's attractiveness as a location for international investment. Germany's overall rate will fall to 29.8% by 2008 from 38.7%. Remarkably, at the start of this decade Germany's corporate tax rate was 52%.

All of which means that the U.S. now has the unflattering distinction of having the developed world's highest corporate tax rate of 39.3% (35% federal plus a state average of 4.3%), according to the Tax Foundation. While Ronald Reagan led the "wave of corporate income tax rate reduction" in the 1980s, the Tax Foundation says, "the U.S. is lagging behind this time."

Foreign leaders are also learning another lesson: Lower corporate tax rates with fewer loopholes can lead to more, not less, tax revenue from business. The nearby chart shows the Laffer Curve effect from business taxation. Tax receipts tend to fall below their optimum potential when corporate tax rates are so high that they lead to the creation of loopholes and the incentive to move income to countries with a lower tax rate. Ireland is the classic case of a nation on the "correct side" of this curve. It has a 12.5% corporate rate, nearly the lowest in the world, and yet collects 3.6% of GDP in corporate revenues, well above the international average.

The U.S., by contrast, with its near 40% rate has been averaging less than 2.5% of GDP in corporate receipts. Kevin Hassett, an economist at the American Enterprise Institute who has studied the impact of corporate taxes, says the U.S. "appears to be a nation on the wrong side of the Laffer Curve: We could collect more revenues with a lower corporate tax rate."

If only the tax writers in Washington would heed this advice. Congress is moving in the reverse direction, threatening to raise the tax rate on corporate dividends, which is another tax on business income. There's also movement in the Senate to raise taxes on the foreign-source income of U.S. companies. The effect would be to raise the marginal tax rate for companies that base their corporate headquarters abroad.

But one reason those countries chose to move to the Cayman Islands and elsewhere is because of the high U.S. corporate tax rate. The Laffer Curve analysis indicates that these corporate tax increases are likely to raise little if any additional revenue, because companies will have a new incentive to move even more of their operations out of the reach of the IRS.

For all the talk of "tax equity," this is also a recipe for further inequality by driving more capital offshore. Research from Mr. Hassett and others has shown that high corporate tax rates reduce the rate of increase in manufacturing wages (See our editorial, "The Wages of Growth¹," Dec. 26, 2006.). For that matter, most economists understand that corporations don't ultimately pay any taxes. They merely serve as a collection agent, passing along the cost of those taxes in some combination of lower returns for shareholders, higher prices for customers, or lower compensation for employees. In other words, America's high corporate tax rates are an indirect, but still damaging, tax on average American workers.

One immediate policy remedy would be to cut the 35% U.S. federal corporate tax rate to the industrial nation average of 29%. That's probably too sensible for a Congress gripped by a desire to soak the rich and punish business, but a Democrat who picked up the idea could turn the tax tables on Republicans in 2008. Meantime, as the U.S. fails to act, the rest of the world is looking more attractive all the time.

Double Standard Column of the Day. . .

Why "Islamophobia" Is a Brilliant Term

By Dennis Prager

Tuesday, July 31, 2007

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© 2007 

What do anti-Semitism, racism and Islamophobia have in common?

In fact, nothing.

But according to Islamist groups, Western media and the United Nations, they have everything in common. Anti-Semites hate all Jews, racists hate all members of another race, and Islamophobes hate all Muslims.

Whoever coined the term "Islamophobia" was quite shrewd. Notice the intellectual sleight of hand here. The term is not "Muslim-phobia" or "anti-Muslimist," it is Islam-ophobia – fear of Islam – yet fear of Islam is in no way the same as hatred of all Muslims. One can rightly or wrongly fear Islam, or more usually, aspects of Islam, and have absolutely no bias against all Muslims, let alone be a racist.

The equation of Islamophobia with racism is particularly dishonest. Muslims come in every racial group, and Islam has nothing to do with race. Nevertheless, mainstream Western media, Islamist groups calling themselves Muslim civil liberties groups and various Western organizations repeatedly declare that Islamophobia is racism.

To cite three of innumerable examples: The Guardian published an opinion piece titled, "Islamophobia should be as unacceptable as racism"; the European Union has established the European Monitoring Center for Racism and Xenophobia; and the B'nai B'rith Anti-Defamation Commission of Australia notes that "Muslims have also been the target of racism in Australia, often referred to as Islamophobia."

Even granting that there are people who fear Islam, how does that in any way correlate with racism? If fear of an ideology rendered one racist, all those who fear conservatism or liberalism should be considered racist.

Of course, some may argue that whereas conservatism and liberalism are ideas, Islam is a religion, and while one can attack ideas, one must not attack religions. It is, however, quite insulting to religions to deny that they are ideas. Religions are certainly more than ideas – they are theological belief systems – but they are also ideas about how society should be run just as much as liberalism and conservatism are. Therefore, Islam, or Christianity, or Judaism, or Buddhism should be just as subject to criticism as conservatism or liberalism.

However, the only religion the West permits criticism of is Christianity. People write books, give lectures and conduct seminars on the falsity of Christian claims, or on the immoral record of Christianity, and no one attacks them for racism or bigotry, let alone attacks them physically. The head of the Anti-Defamation League announces that conservative Christians are the greatest threat to America today, and no one charges him with racism or Christianophobia.

The statement may be an expression of hysteria and of ignorance, but not of racism. But if one says that Islam does not appear compatible with democracy or that the Islamic treatment of women is inferior to the West's, he or she is labeled a racist Islamophobe.

One might counter that maligning people for criticism is not only true of those who criticize Islam, it is also true of critics of Israel and of America – the former, it is said, are immediately labeled "anti-Semitic" and the latter are immediately labeled "unpatriotic." Neither is true at all. Both are, and I use this word rarely, lies.

No one is labeled anti-Semitic for merely criticizing Israel. People are labeled anti-Semitic for denying Israel's right to exist, for siding with those who wish to exterminate it or for singling out the Jewish state alone among all the nations of the world for attacks that most other countries deserve far more.

And no one in any responsible capacity has called anyone "unpatriotic" just for criticizing America. Sen. Hillary Clinton claimed during the last Democratic presidential debate that the Defense Department called her "unpatriotic" for asking whether the Defense Department has a plan to withdraw American troops from Iraq. Yet the term "unpatriotic" was not only not used in the response to the senator, it was not even hinted at.

The fact remains that the term "Islamophobia" has one purpose – to suppress any criticism, legitimate or not, of Islam. And given the cowardice of the Western media, and the collusion of the left in banning any such criticism (while piling it on Christianity and Christians), it is working.

Latest proof: This past week a man in New York was charged with two felonies for what is being labeled the hate crime of putting a Quran in a toilet at Pace College. Not misdemeanors, mind you, felonies. Meanwhile, the man who put a crucifix in a jar of urine continues to have his artwork – "Pi-- Christ" – displayed at galleries and museums. A Quran in a toilet is a hate crime; a crucifix in pee is a work of art. Thanks in part to that brilliant term "Islamophobia."

Sunk vs. Marginal Costs in Economics and Life!

     Here's a good column for your basic economics file. 

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Economic Thinking
By Walter E. Williams
Wednesday, August 1, 2007

Historical costs, sometimes called sunk costs, are irrelevant to decision-making because they are costs that have already been incurred. That's something that's not intuitively obvious, even for some trained economists. On a couple of occasions, I've recommended to a graduate student, having difficulty with his Ph.D. dissertation, that it might be wise to start all over again with a different topic. The response:

"Professor Williams, but I've spent so much time on the dissertation so far." I reminded the student that the time already spent should have nothing to do with his decision to either stick with his chosen topic or choose another one. His question should be: Which choice, sticking with the chosen topic or choosing another, will more readily lead to successful completion of his doctorate?

When Hurricane Katrina struck the Gulf Coast, gasoline prices started rising immediately. Some people couldn't understand why prices rose for gasoline already in the pipeline long before Katrina struck. The fact that prices for gasoline produced before the disaster rose led to charges of price gouging. Many people believed that historical costs, what a retailer paid for it, should determine price.

That's patently wrong, and a simple example will demonstrate it. Say you've been selling me coffee from your large inventory for $4 a pound. A crop disaster in Brazil spikes the world coffee price to $10 a pound. What will you charge me now? If you said at least $10, go to the head of the class. Why? Because the opportunity cost, or replacement cost, of coffee is now $10. What coffee cost before the disaster is irrelevant.

You say, "Williams, I'm not greedy. I'd sell it to you for $4 until I ran out." That's great. I'd buy it from you for $4 and resell it for the world price of $10.

At the time of Katrina, gasoline retailers couldn't replace their gasoline at yesterday's prices. In other words, gasoline prices, coffee prices and any other price reflect conditions in the market today, not yesterday.

Today's debate over the Iraq War is so often discussed in terms of whether it should have been initiated in the first place, our faulty intelligence about Hussein's possession of weapons of mass destruction, and whether the Bush administration lied to the American people. Whether these observations and charges are true or false should in no way be a part of today's decision-making, for history is one of those immutable facts of life. We can change the future, but we cannot change the past, though we can learn from it.

The only costs relevant to decision-making are what economists call marginal or incremental cost; that's the change in costs as a result of doing something. That cost should be compared to the expected benefit. Think about pollution. Getting rid of pollution is a no-brainer. All that the authorities of, say, Los Angeles would have to do is to mandate that all pollution-emitting sources shut down. That would mean no driving, no manufacturing, no airplanes, no power generation and no lawn mowing. Angelenos would have perfectly clean air, but I doubt whether they'd agree that it's worth the costs. That means perfectly clean air is non-optimal, and so is perfectly dirty air. The question is, how much clean air do we want and at what cost? In other words, we should compare the additional benefit of cleaner air to the additional costs of getting it.

The idea of weighing the costs of doing something against its benefits are part and parcel of intelligent decision-making. If we only look to benefits, we'll do darn near anything because everything has some kind of benefit.

Dr. Williams serves on the faculty of George Mason University as John M. Olin Distinguished Professor of Economics and is the author of More Liberty Means Less Government: Our Founders Knew This Well.

Free Markets in a Nutshell

     Here's a good excerpt from a July 18th Walt Williams column:

"First, let's establish a working definition of free markets; it's really simple. Free markets are simply millions upon millions of individual decision-makers, engaged in peaceable, voluntary exchange pursuing what they see in their best interests. People who denounce the free market and voluntary exchange, and are for control and coercion, believe they have more intelligence and superior wisdom to the masses. What's more, they believe they've been ordained to forcibly impose that wisdom on the rest of us. Of course, they have what they consider good reasons for doing so, but every tyrant that has ever existed has had what he believed were good reasons for restricting the liberty of others. . . .

Economic planning is nothing more than the forcible superseding of other people's plans by the powerful elite. For example, I might plan to purchase a car, a shirt or apples from a foreign producer because I see it in my best interest. The powerful elite might supersede my plan, through import tariffs and quotas, because they think I should make the purchases from a domestic producer."

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"Bad Ideas Have Consequences" Series (Minimum Wage Subcategory)

Minimum Wage, Jobless Kids

July 3, 2007  (Wall Street Journal)

Congress recently raised the federal minimum wage to $7.25 an hour by 2009, in the name of helping low-income families escape poverty. But a sobering new report from the New York City-based Center for an Urban Future shows how minimum-wage laws are already hurting the unskilled and inexperienced.

The "Summer Help" study assesses New York City's publicly funded Summer Youth Employment Program (SYEP), which each year matches tens of thousands of young people between the ages of 14 and 21 with employers ranging from the local library to investment banks. New York's teen employment rate is 16.9%, the lowest of any big city and half of the 34.6% national average. The program provides these young people with a valuable introduction to the labor market, not to mention some spending money and less idle time to make mischief.

Today, however, the New York program serves 20% fewer young adults than it did in 1999, and last year it turned away 30,000 mostly black and Latino applicants. The report cites minimum wage-increases in the Empire State -- one of 30 states that mandates a minimum higher than the federal floor -- as a factor in the program's decline.

"The higher state minimum wage that went into effect in 2005," writes author David Jason Fischer, "added to the challenge of funding SYEP by increasing the cost per participant, making it difficult to keep SYEP enrollment levels the same without year-over-year budget increases or additional administrative cuts." New York's minimum wage increased once again this year to $7.15 from $6.75, adding another $3.5 million in costs.

The harm from minimum-wage laws is well-documented, and even government job programs aren't immune. As an antipoverty measure, these laws are inefficient because most people who are poor already earn more than the minimum, and most who do earn the minimum aren't living in poverty. They are retirees, homemakers, part-time workers, and teenagers in the Big Apple -- fewer of whom will have summer jobs in the future thanks to the higher minimum wage.

Is the Goal to Get More Tax Revenue from the Rich, or to Punish Them?

     Here's the latest column for the "Everyone is entitled to their own opinions, but not their own facts" file.  It exposes not only the incredibly stupid zero-sum thinking of the Left, but also its obsession with punishing the success of the successful over maximizing prosperity.

     Read the part about the Mellon tax cuts of the 1920s and then tell me you're for higher marginal tax rates.  Then I'll ask you how you're enjoying whatever you're smoking.   

     Here's a photo of your average Liberal comtemplating tax policy (my apologies to Bob Marley, by far my favorite musical artist):

Wanna Raise Taxes on the Rich?

Reduce the marginal tax burden on success

By John Tamny

In an excellent column featuring just a few of the many silly predictions made by mainstream economic thinkers of days past, Forbes’s Rich Karlgaard noted the back-cover description of MIT economist Lester Thurow’s 1980 book, The Zero-Sum Society: “the American economy will not solve its most trenchant problems — inflation, slow economic growth, the environment — until the political economy can support, in theory and in practice, the idea that certain members of society will have to bear the brunt of taxation and other government-sponsored economic actions.”

Just as the U.S. was about to begin an almost uninterrupted economic expansion that continues to this day, by way of marginal tax cuts that stimulated the growth that licked inflation, Thurow proposed an economic plan that would have set growth back, reduced money demand, and made environmental projects less pressing (as they would have been difficult to introduce amidst sub-par growth). However, while his assumptions were proven wildly incorrect, economic history in a strange way has proven him right for the wrong reasons.

What Thurow misunderstood was a basic truth showing that the best way to raise taxes on the rich, or to get the rich to foot more of the federal government’s spending, is to reduce the marginal tax burden on their success. In short, you raise taxes by cutting the marginal rate of taxation, not by increasing it.

Ahead of the Mellon tax cuts of the 1920s, a New York Times editorial put it this way: Treasury Secretary Mellon “wants in reality to get more money out of [the rich] than they are now paying. But he proposes to do it by making their rate of taxation lower.”

The next few years greatly vindicated the assumptions made by the editorialists at the New York Times. While the percentage of federal taxes paid by earners in the $100,000-plus category was 28 percent in 1921, by 1928, when the top rate was 25 percent, the $100,000-and-over earners accounted for 61 percent of all federal tax receipts.  Conversely, those who earned $10,000 and less saw their share of the federal tax burden decline from 22.5 percent to 4.5 percent. As the late Warren Brookes pointed out, the Mellon tax cuts that set the stage for the Roaring ’20s were “the most ‘progressive’ in history.”

Moving to the 1960s, President Lyndon Johnson pushed through tax cuts proposed by President Kennedy that lowered the top tax burden from 90 to 70 percent. Walter Heller (chairman of the Council of Economic Advisors under Kennedy) later admitted that the lower rate on top-earners similarly proved progressive when it came to the “rich” increasing their contribution to federal revenues.

When Thurow’s book debuted, the top tax rate was 70 percent and the top 1 percent of earners delivered 15 percent of federal revenues. Fast forward twenty-seven years: With the top rate at 35 percent, the top 1 percent provide 34 percent of federal income-tax receipts.

The simple reality behind wealth creation is that it occurs when society’s most productive members are left to innovate as freely as possible from governmental roadblocks to growth. With tax rates well down from their 20th century highs, there are far greater incentives today to attempt new ideas that lead to new products and higher paying jobs. On the inflation front, products and jobs, at the core, are money demand — which means growth-stimulating tax cuts are the single best antidote to inflationary pressures.

Thurow, alas, was wrong all over. However, he should be given his due for noting that improvements to society will only occur in an economic environment where the “rich” are paying far more than their fair share. It simply comes down to how they pay it. For one, high incomes rarely reveal themselves when the penalty for doing so is excessive expropriation. And the idea of increasing the tax revenues supplied by America’s rich is incomplete absent the basic understanding that marginal tax cuts are the best way of achieving this goal.

— John Tamny is editor of RealClearMarkets.

Egalitarian Hand-Wringing (for the "Politics of Envy" File)

     Here's a good column by Arthur Brooks (you'll remember him as the guy who wrote the book people were talking about last Christmas that showed through extensive research how much more conservatives give to charity than liberals). 

     It addresses the Left's obsession with equality of outcome over equality of opportunity.  He even trots out research showing that a majority of people would rather make $50,000 a year against their neighbor's $25,000 than make $100,000 while others make $200,000. 

     Democratic candidates and Liberal income-redistribution enthusiasts have obviously read this research, too.

    All that aside, his point is that a world in which there's no hope for absolute advancement is the one in which people are more concerned with their relative wealth, and that economic mobility, not equality, can be connected to happiness.

     Here's an appropriate photo:

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The Left's "Inequality" Obsession

By Arthur C. Brooks

July 19, 2007 (Wall Street Journal)

The U.S. is a rich nation getting richer. According to Census figures, the average inflation-adjusted income in the top quintile of American earners increased 22% between 1993 and 2003. Incomes in the middle quintile rose 17% on average, while the incomes in the bottom quintile increased 13%. Over the 30 years prior to 2003, top-quintile earners saw their real incomes increase by two-thirds, versus a quarter for those in the middle quintile and a fifth among the bottom earners.

Reason to celebrate? Not according to those worried that the rich are getting richer faster than the poor are getting richer. The National Opinion Research Center's General Social Survey (GSS) indicates that in 1973, the average family in the top quintile earned about 10 times what the average bottom-quintile family earned. Today that difference has grown to almost 15 times greater. Thus Sen. Barack Obama complains that "the average CEO now earns more in one day than an average worker earns in an entire year." John Edwards has famously spoken of the "two Americas," while Sen. Hillary Clinton characterizes today's economy as "trickle-down economics without the trickle." She declares that a progressive era is at hand because of "rising inequality and rising pessimism in our work force."

The general view among liberals is that economic inequality is socially undesirable because it makes people miserable; they propose to solve the problem through redistributive policies such as higher income taxes. As a scholar working in the field of public policy, I have long witnessed egalitarian hand-wringing about the alleged connection between inequality and unhappiness. What first made me doubt this prevailing view was that when I questioned actual human beings about it, few expressed any shock and outrage at the enormous incomes of software moguls and CEOs. They tended rather to hope that their kids might become the next Bill Gates.

And in fact, the evidence reveals that it is not economic inequality that frustrates Americans. Rather, it is a perceived lack of opportunity. To focus our policies on inequality, instead of opportunity, is to make a serious error -- one that will worsen the very problem we seek to solve and make us generally unhappier.

The egalitarian argument against inequality starts with the claim that income is all relative: Above a basic subsistence level, they say, we care more about our financial position relative to others than about our absolute income. Experimental studies are often cited that appear to bear this idea out.

In one such study, two-thirds of subjects said that they would be happier at a company where they earned $33,000 while their colleagues earned $30,000 than at one where they earned $35,000 while their colleagues earned $38,000. In another experiment, 56% of participants chose a hypothetical job paying $50,000 per year while everyone else earned $25,000, rather than a job paying $100,000 per year while others made $200,000. Thus, the thinking goes, the very fact that some people have less than others leads to unhappiness, even without deprivation.

Moreover, the redistribution of income taxed at higher and higher levels, according to egalitarians, does not really hurt the rich, because they tend to use their "excess" incomes to purchase what they do not "need," such as luxury cars and outlandishly large houses. Some go even further, arguing that we should tax the economically successful explicitly to discourage them from working, since their work will only make them richer and thus sadden the less successful. Says British economist Richard Layard, "If we make taxes commensurate to the damage that an individual does to others when he earns more" -- the damage to others' happiness, that is -- "then he will only work harder if there is a true net benefit to society as a whole. It is efficient to discourage work effort that makes society worse off."

But the egalitarians misinterpret the experimental evidence. The studies cited above don't necessarily tell us that people would be happier in a world of total equality. Rather, they indicate that if there is no apparent prospect for getting ahead themselves (as there indeed was not in the experiment), people will focus instead on having more than others -- even to the point of neglecting their financial interests.

There is a fundamental reason to doubt the link between economic inequality and unhappiness. If the egalitarians are right, then average happiness levels should be falling. They aren't.

The GSS shows that in 1972, 30% of the population said that they were "very happy" with their lives; in 1982, 31%; in 1993, 32%; and in 2004, 31%. In other words, no significant change in reported happiness occurred -- even as income inequality has increased significantly.

The data do tell us that economic mobility -- not equality -- is associated with happiness. The GSS asked respondents, "The way things are in America, people like me and my family have a good chance of improving our standard of living -- do you agree or disagree?" The two-thirds of the population who agreed were 44% more likely than the others to say they were "very happy," 40% less likely to say that they felt "no good at all" at times, and 20% less likely to say that they felt like failures. In other words, those who don't believe in economic mobility -- for themselves or for others -- are not as happy as those who do.

Perhaps in a world where there is no opportunity for advancement, an important concern is how one's income measures up to others. In the real world where people believe there is opportunity, however, one's own income potential matters a great deal more than what others are earning. Some studies even find that the happiness of workers rises as the incomes of others climb relative to their own, because they see the incomes of others as evidence of what they themselves can achieve.

Believing in mobility, then, helps make people happy. Is this belief a delusion? Does economic mobility actually exist in America today? It does.

The U.S. Census Bureau, the Urban Institute and the Federal Reserve have all pointed out that, as a general rule, about a fifth of the people in the lowest income quintile will climb to a higher quintile within a year, and that about half will rise within a decade. True, a significant proportion of people will fall over the same period. But the studies nevertheless put paid to the claim that economic mobility is in any way unusual. Millions and millions of poor Americans climb out of the ranks of poverty every year.

Those who don't rise will probably not become happier if we redistribute more income. Indeed, the effect may be just the opposite. Redistributionist policies tend to reduce incentives to create wealth, which means less economic growth and fewer jobs, and less charitable giving -- all to the detriment of those lower on the income scale. But more important, redistribution can, as the American welfare system has shown, turn beneficiaries into demoralized long-term dependents.

An accurate and constructive vision of America sees a land of both inequality and opportunity, in which hard work and perseverance are the keys to jumping from the ranks of the have-nots to those of the haves. This vision promotes policies focused not on wiping out economic inequality, but rather on enhancing economic mobility. These policies include improving educational opportunities, addressing cultural impediments to success, enhancing the fluidity of labor markets, searching for ways to include all citizens in America's investing revolution, and protecting the climate for entrepreneurship.

To focus our policies on opportunity, instead of equality, will address Americans' real concern, and make us happier to boot.

Mr. Brooks is a professor of public administration at Syracuse University's Maxwell School of Public Administration and a visiting scholar at the American Enterprise Institute. This essay is adapted from a forthcoming article in City Journal.

Freedom and Prosperity: Nothing To Do with Bureaucrats Managing Society. . .

How Many of the Eighth-Graders You Know Would Ace This Exam?

     If you've ever read The Blue Grotto, you are well aware that nothing makes the Editor want to hold his own head underwater until his body goes completely limp like the touchy-feely trend in education that believes that if we coddle schoolchildren, let them set their own educational agenda based upon what gives them the most near term satisfaction, and never, ever put them in a situation where the stresses and struggles of competing academically (or athletically for that matter) might possibly dent their fragile self esteem. 

     When you read the statistics on the percentages of Americans know who the vice president is or who can name even a handful of the state capitals, it should make you want to laugh and then immediately cry.  When these idiots emerge from the warm and fuzzy Feel-Good Bubble and enter the real world, their lives will be turned upside down and they'll all have to end up working at McDonald's.

     Here's an 1895 eighth grade final exam from the public school in Salina, Kansas.  It was taken from the original document on file at the Smokey Valley Genealogical Society and Library in Salina , KS, and reprinted by the Salina Journal.  The kids were given five hours to complete the exam.

     .

8th GRADE FINAL EXAM

Grammar (Time, one hour)

1. Give nine rules for the use of Capital Letters.

2. Name the Parts of Speech and define those that have no Modifications.

3. Define Verse, Stanza and Paragraph.

4. What are the Principal Parts of a verb? Give Principal Parts of lie, lay and run

5. Define Case, Illustrate each Case.

6. What is Punctuation? Give rules for principal marks of Punctuation.

7. Write a composition of about 150 words and show therein that you understand the practical use of the rules of grammar.

Arithmetic (Time, 1.25 hours)

1. Name and define the Fundamental Rules of Arithmetic.

2. A wagon box is 2 ft deep, 10 feet long, and 3 ft. wide. How many bushels of wheat will it hold?

3. If a load of wheat weighs 3942 lbs ., what is it worth at 50 cts/bushel, deducting 1050 lbs. for tare?

4. District No. 33 has a valuation of $35,000 What is the necessary levy to carry on a school seven months at $50 per month, and have $104 for incidentals?

5. Find cost of 6720 lbs. coal at $6.00 per ton.

6. Find the interest of $512.60 for 8 months and 18 days at 7 percent

7. What is the cost of 40 boards 12 inches wide and 16 ft. long at $20 per meter?

8. Find bank discount on $300 for 90 days (no grace) at 10 percent.

9. What is the cost of a square farm at $15 per acre, the distance around which is 640 rods?

10. Write a Bank Check, a Promissory Note, and a Receipt.

U. S. History (Time, 45 minutes)

1. Give the epochs into which U. S. History is divided.

2. Give an account of the discovery of America by Columbus.

3. Relate the causes and results of the Revolutionary War.

4. Show the territorial growth of the United States .

5. Tell what you can of the history of Kansas .

6. Describe three of the most prominent battles of the Rebellion.

7. Who were the following: Morse, Whitney, Fulton, Bell, Lincoln, Penn, and Howe?

8. Name events connected with the following dates: 1607, 1620, 1800, 1849, and 1865.

Orthography (Time, one hour)

1. What is meant by the following: Alphabet, phonetic, orthography, etymology, and syllabication?

2. What are elementary sounds? How classified?

3. What are the following, and give examples of each: Trigraph, sub vocals, diphthong, cognate letters, and linguals?

4. Give four substitutes for caret 'u'.

5. Give two rules for spelling words with final 'e.' Name two exceptions under each rule.

6. Give two uses of silent letters in spelling. Illustrate each.

7. Define the following prefixes and use in connection with a word: bi, dis, mis, pre, semi, post, non, inter, mono, sup

8. Mark diacritically and divide into syllables the following, and name the sign that indicates the sound: card, ball, mercy, sir, odd, cell, rise, blood, fare, last.

9. Use the following correctly in sentences: cite, site, sight, fane, fain, feign, vane, vain, vein, raze, raise, rays.

10. Write 10 words frequently mispronounced and indicate pronunciation by use of diacritical marks and by syllabication.

Geography (Time, one hour)

1. What is climate? Upon what does climate depend?

2. How do you account for the extremes of climate in Kansas ?

3. Of what use are rivers? Of what use is the ocean?

4. Describe the mountains of North America.

5. Name and describe the following: Monrovia , Odessa, Denver, Manitoba , Hecla, Yukon, St.Helena, Juan Fernandez, Aspinwall & Orinoco.

6. Name and locate the principal trade centers of the U.S.

7. Name all the republics of Europe and give the capital of each.

8. Why is the Atlantic Coast colder than the Pacific in the same latitude?

9. Describe the process by which the water of the ocean returns to the sources of rivers.

10. Describe the movements of the earth. Give the inclination of the earth.

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"The Dogs of Resentment"

     I guess I'd be as sour, crabby, jittery and unhappy as most liberals if I had been hoodwinked into buying into an outlook as off the mark as the "zero-sum" view of the world.

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Zero-Sum Fallacies

Rich Karlgaard - 7/23/07 (from Forbes.com)

The mood in America regarding stocks and the econ-omy turned palpably sour this summer. Blackstone's IPO let loose the dogs of resentment. Republicans and Democrats raced to the nearest microphone to express outrage. Chuck Grassley (R--Iowa) accused Blackstone of "screwing the middle-income taxpayer" because the firm paid the capital gains tax rate on sweat-equity profits, as entitled by the federal tax code. What's new about that? Every private equity and venture capital firm in the U.S. has paid that rate since 1978, when it was lowered from 49% to 28%.

That's why the rate was lowered, Chuck! To stimulate innovation!

Has private money screwed America? Not at all. During the 1979--2007 period risk capital flowed into virgin fields and America recovered its entrepreneurial chops. Think of Apple, Sun Microsystems, Microsoft, Dell, Oracle, Cisco, Palm, Yahoo and Google. All started little and have grown mighty. All were backed by private money, "screwing the middle-income taxpayer."

I wish Senator Grassley would give it a rest. He won't, of course. Politicians can't help themselves. They live in a world defined by limits. There is only one President and 100 senators and 435 congressmen. One blowhard's win is another blowhard's loss in the lowlands east of the Potomac. Thus Blackstone's rewards, according to Grassley, can only hurt the rest of us. In late June Congressman Sander Levin (D--Mich.) took the zero-sum fallacy further when he introduced a bill that would end the 15% cap gains tax preference for most private partnerships: private equity, hedge funds, venture capital firms, real estate partnerships and oil and gas deals.

Wrong Then, Wrong Now

Politicians aren't the only ones with flattened vision. At the dawn of the U.S. economic boom in 1980 MIT economist Lester C. Thurow looked backward into the dark night. He called his sad new book The Zero-Sum Society: Distribution and the Possibilities for Economic Change. Here is a description on Amazon:

"Interpreting macroeconomics as a zero-sum game, Thurow proposes that the American economy will not solve its most trenchant problems--inflation, slow economic growth, the environment--until the political economy can support, in theory and in practice, the idea that certain members of society will have to bear the brunt of taxation and other government-sponsored economic actions."

That yawner of a 58-word sentence gives you the flavor of the book. Nevertheless, the famed Harvard economist John Kenneth Galbraith called Zero-Sum Society "an extraordinarily good and lucid examination of current economic difficulties." Galbraith was wrong about prose and prophecy. It was a horrible book and a crimped way of looking at economics and the human spirit. President Ronald Reagan neglected to read it. One assumes the founders and backers of Apple, Sun Microsystems, Microsoft, Dell, Oracle, Cisco, Palm, Yahoo and Google passed on it, too.

Zero-sum implies no net progress in human affairs. The facts scream otherwise. Global production in 2006 amounted to $66 trillion, or $10,200 per person. Two hundred years ago per capita income was about $300. Five thousand years ago it was equivalent to $200. For the mass of mankind there was no detectable economic progress for 4,800 years. Then came the Industrial Revolution with its hockey-stick curve in income and life span.

Yet the zero-sum myth lives on. Like a retrovirus it burrows and hides and waits. In 1968 it popped up in the form of a bestselling book by Paul R. Ehrlich entitled The Population Bomb. As investor Gary Alexander recounted in a recent speech: "[Ehrlich] opened famously by saying, 'The battle to feed [all of] humanity is over. In the 1970s and 1980s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now.' Writing in Ramparts magazine, Ehrlich went even further, 'Millions of people will soon perish in smog disasters in New York and Los Angeles … the oceans will die of DDT poisoning by 1979 … the U.S. life expectancy will drop to 42 years by 1980, due to cancer epidemics.' Hepatitis and dysentery would sweep America by 1980 and nearly all of us would wear gas masks. Over 65 million Americans would starve in the 1980s, leaving only 22.6 million starved Americans alive in 1990."

Then, to Ehrlich's apparent dismay, the inventive human spirit intervened.

While Ehrlich was gnashing his teeth, Alexander writes, "Dr. Norman Borlaug was launching the Green Revolution, which has managed to feed billions more people on moderately more arable soil than in the 1960s. Instead of starving against our will, millions of us are trying to starve voluntarily--by dieting. Food is far cheaper, relative to the overall growth of the cost of living, than in the 1960s. From 1977 to 1994 food costs fell 77% in real terms."

Undeniable progress. Yet the zero-sum virus lives! You can find it today lurking inside these political canards: Energy is running out. Earth is burning up. Immigrants take American jobs. Imports wreck American industries. Taxes must go up to balance the budget. Americans spend too much on health care. Nor is corporate management immune to zero-sum thinking. Consider these oft-heard sayings: Our market is mature. We'll have to add services to boost margin. We'll have to merge with Company X to grow revenue. Let's build a patent wall. Let's sue, sue, sue.

What do you think? Send your favorite zero-sum fallacies to [email protected].

Read Rich Karlgaard's daily blog at http://blogs.forbes.com/digitalrules or visit his home page at www.karlgaard.com

Malthusian Blindspot: Humanity's Bottomless Capacity for Innovation

"And both right and left will agree that the rule of law - including fair courts and government transparency - is the single most important contributor to a nation's wealth."

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The Wealth Between Our Ears
By Jonah Goldberg
Wednesday, July 4, 2007

What if humanity disappeared tomorrow?

According to Alan Weisman, author of "The World Without Us," in an interview with Scientific American, nature would reclaim the planet awfully quickly. In the event of an ecumenical rapture or a "12 Monkeys"-style plague, Manhattan's suppressed underground rivers would quickly reclaim the Big Apple's core, mosquitoes would thrive, feral cats would rule the roost, and the Statue of Liberty would wait for an enraged Charlton Heston who, like Godot, would never arrive.

Weisman isn't concerned with what might eradicate humanity; he's just interested in what the world would be like without us. People have long been fascinated by such ideas. There's even an environmental fringe group called the Voluntary Human Extinction Movement, dedicated to the dream of Earth returned to the pastoral bliss of the noble savage, hold the noble savages.

More typical, however, is the fixation on imagining the world emptied not of everybody but of everybody else. That was the plan of several James Bond villains, countless sci-fi writers and more than a few eugenicists who fantasized about starting from scratch with just a handful of humans.

The seductiveness of such daydreaming stems from a view of humans as a burden rather than a boon. It was the British economist Thomas Malthus more than anyone else who introduced the phobia that humanity reproduced itself at unsustainable rates. That thinking led to such apocalyptic egghead porn as Paul R. Ehrlich's 1968 treatise, "The Population Bomb," in which the biologist predicted that 65 million Americans would die amid global starvation in the 1980s. In case you missed it, that didn't happen.

The blind spot in the Malthusian vision is humanity's bottomless capacity for innovation. The "green revolution," for example, largely eliminated food scarcity.

In other words, our wealth is really all in our heads. Literally.

In the United States, for example, less than a fifth of our wealth exists as material stuff like minerals, crops and factories. In Switzerland, cuckoo clocks, ski chalets, cheese, Rolex watches, timber and every other tangible asset amount to a mere 16 percent of that country's wealth. The rest is captured by the expertise, culture, laws and traditions of the Swiss themselves.

These numbers come from Kirk Hamilton, a World Bank environmental economist and lead author of a new study, "Where is the Wealth of Nations?" (available at worldbank.org). In a fascinating interview in Reason magazine, Hamilton explains how, when measured properly, "natural capital" (croplands, oil, etc.) and "produced capital" (factories, iPods, roads, etc.) are the smallest slices of the economic pie. What Hamilton calls "intangible capital," which includes the rule of law, education and the like, is by far the biggest slice. The entire planet's "natural capital accounts for 5 percent of total wealth, produced capital 18 percent and intangible capital 77 percent.

This makes some intuitive sense. We'd all rather be the man who knows how to fish than the man given a fish. Or think of it this way: The Malthusian thinks only about hardware, when the money is in software and design. China makes America's iPods; America collects the profits.

Also, the richer a country gets, the less it needs to live off its natural resources. Therefore, it becomes cheaper - and more popular - to protect the environment. This has been the trend in Europe and America, and hopefully it will be around the world.

This sea change in economic thinking doesn't cut easily along the left-right political axis, and its implications could be profound. "Root-causes" liberals can find a great deal of satisfaction in the emphasis "Where is the Wealth of Nations?" places on education. According to Hamilton, education explains about 36 percent of a country's intangible wealth. Conservatives can find solace in the importance of property rights and, moreover, in the confirmation that not all cultures are equal - at least when measured on their ability to produce and sustain wealth. And both right and left will agree that the rule of law - including fair courts and government transparency - is the single most important contributor to a nation's wealth.

A potential lesson for the World Bank may be that building roads, dams and factories in the Third World is a fool's errand until those nations have the intangible capital required to maintain such things. The Marshall Plan's success in rebuilding Europe after World War II stemmed not from the U.S. footing the bill for concrete and bulldozers but from the intangible capital locked in the hearts and minds of everyday Europeans.

In an odd way, I think this complements Weisman's depiction of a post-human future. The greatest symbols of our civilization - from skyscrapers to libraries - not only count for a mere fraction of our wealth, they would turn to dust and rubble if we disappeared. The hardware is nothing; the software, everything. All that civilization is and can become exists within us. If we forget that, we forget literally everything.



Copyright © 2006 Salem Web Network. All Rights Reserved.

Jonah Goldberg is editor-at-large of National Review Online.

Enough of the "Immorality" of Scrutinizing the New Deal.

Compelling article, especially the parts about WWII and the Cold War. . .

.

The Real Deal

By Amity Shlaes

The Wall Street Journal

June 25, 2007

The late Arthur Schlesinger, Jr. was a true liberal -- a man who welcomed debate. Just before he died this winter, he wrote, quoting someone else, that history is an argument without end. That, Schlesinger added, "is why we love it so."

Yet concerning Schlesinger's own period of study, the 1930s, there has been curiously little argument. The American consensus is Schlesinger's consensus: that FDR saved democracy from fascism by co-opting the left and far right with his alphabet programs. Certainly, an observer might criticize various aspects of the period, but scrutiny of the New Deal edifice in its entirety is something that ought to be postponed for another era -- or so we learned long ago. Indeed, to take a skeptical look at the New Deal as a whole has been considered downright immoral.

 

The real question about the 1930s is not whether it is wrong to scrutinize the New Deal. Rather, the question is why it has taken us all so long. Roosevelt did famously well by one measure, the political poll. He flunked by two other meters that we today know are critically important: the unemployment rate and the Dow Jones Industrial Average. In his first inaugural address, Roosevelt spoke of a primary goal: "to put people to work." Unemployment stood at 20% in 1937, five years into the New Deal. As for the Dow, it did not come back to its 1929 level until the 1950s. International factors and monetary errors cannot entirely account for these abysmal showings.

When I went back to study those years for a book, I realized two things. The first was that the picture we received growing up was distorted in a number of important regards. The second was that the old argument about the immorality of scrutinizing the New Deal was counterproductive.

The premier line in the standard history is that Herbert Hoover was a right-winger whose laissez-faire politics helped convert the 1929 Crash into the Great Depression. But a review of the new president's actions reveals him to be a control freak, an interventionist in spite of himself. Hoover signed the Smoot-Hawley Tariff Act, which worsened a global downturn, even though he had long lived in London and understood better than almost anyone the interconnectedness of markets. He also bullied companies into maintaining high wages and keeping employees on their payrolls when they could ill afford to do so. Perhaps worst of all, he berated the stock market as a speculative sinner even though he knew better. For example, Hoover opposed shorting as a practice, a policy that frightened markets at an especially vulnerable time.

The second standard understanding is that the Brain Trusters were moderate people who drew from American history when they wrote the New Deal. If their philosophies were left wing, then that aspect ought to be treated parenthetically, the attitude was. But the leftishness of the Brain Trust was not parenthetical. It was central.

In the summer of 1927, a group of future New Dealers, mostly junior professors or minor union officials, were received by Stalin for a full six hours when they traveled on a junket to the Soviet Union. Both Stalin's Russia and Mussolini's Italy influenced the New Deal enormously. The Brain Trusters were not, for the most part, fascists or communists. They were thoughtful people who wrote in the New Republic. But their ideas were wrong. Their intense romanticization of the concept of the economy of scale ignored the small man. One of the New Dealers from the old Soviet trip, Rex Tugwell, even created his very own version of Animal Farm in Casa Grande, Ariz. As in the Orwell book, the farmers revolted.

The third familiar story line in the received wisdom about the New Deal is that, while it may not have been perfect, it did inspire the American people and tide them over. Here the emphasis is wrong. Roosevelt's radio voice may have inspired -- yes. But the New Deal hurt the economy, and that mattered more. At some points Roosevelt seemed to understand the need to counter deflation. But his method for doing so generated a whole new set of uncertainties. Roosevelt personally experimented with the currency -- one day, in bed, he raised the gold price by 21 cents. When Henry Morgenthau, who would shortly become Treasury Secretary, asked him why, Roosevelt said that "it's a lucky number, because it's three times seven." Morgenthau wrote later: "If anybody ever knew how we set the gold price through a combination of lucky numbers, etc., I think they would be frightened."

The centerpiece of the New Deal, the National Recovery Administration (NRA), was perverse. The premises of its codes were ones anyone would reject outright today -- the concept that price cutting caused deflation, for example. Everyone, even Roosevelt's own agonized advisers, understood this. The poet Ogden Nash wrote a poem that captured the inanity -- its title was "One from One Leaves Two":

Mumblety-pumbledy my red cow
She's cooperating now
At first she didn't understand
That milk production must be
planned
She didn't understand at first
She had to either plan or burst

A think tank produced a report of 900 pages in 1935 concluding the NRA "on the whole retarded recovery" (that think tank was the Brookings Institution). Some of the great heroes of the period were the Schechter brothers, kosher butchers who fought the NRA all the way to the Supreme Court and won. Their case was not only jurisprudential but also based on common sense -- management from above was killing recovery. The Schechter case is as important to history, as, say, the Gideon case that Anthony Lewis wrote about in his great book about the right to counsel, "Gideon's Trumpet." Where is the "Gideon's Trumpet" for free marketeers?

The fourth rule we learned is that Roosevelt's call to "bold, persistent experimentation" was, on balance, good. But this conviction ignores the cost of uncertainty, as the economic historian Robert Higgs first pointed out. Today we know that unknown unknowns are inherently destabilizing. Roosevelt, a man of impulses, changed policies routinely. He moved from supporting big business to attacking it to supporting it again, many times in his presidency.

On some days, as Anne O'Hare McCormick, a Maureen Dowd of her time, wrote during FDR's second term, Roosevelt was the personification of "the Dutch householder who carefully totes up his accounts every month and who is really annoyed, now that he is bent on balancing the budget, when Congress can't stop spending." Other days he was a big spender.

Uncertainty caused markets to freeze in fear; so did investment -- the old New Yorker cartoons of the plutocrats in the salon were true. Yet Roosevelt counterattacked by compiling lists of the wealthy to prosecute -- his administration prosecuted the Alan Greenspan of the day, Andrew Mellon, until Mellon died. Roosevelt's administration pushed a plan for an undistributed profits tax to eat the essence out of companies. Policies like this caused the most unnecessary part of the Depression: the Depression within the Depression of the late 1930s.

The final line in the traditional story is that Roosevelt's government offices were somehow better than their private sector counterparts -- when it came to utilities, for example, we learned that only the federal government could electrify backward rural areas. This is a false memory, for there was a company that already planned to light up the South, Commonwealth and Southern. David Lilienthal of the Tennessee Valley Authority set out to gut it, and succeeded. But the battle over electric power was also, literally, a power struggle between coequals, not a contest between a good policeman and a sinning company.

The most useful economic philosophy for understanding what went on is not Keynesianism. It is the public choice theory of James Buchanan and others, which says that government is a competitor that will annihilate what comes in its path.

So why has it taken so long to revisit this period? The first reason is that the Great Depression was a disaster. From the Crash to the Dust Bowl and the floods, it all felt like a permanent Katrina, and Americans suspended disbelief. But the reality was that the depression did not mean permanent Katrina -- indeed, we see now that that downturn was the exception in the century, not the rule.

The next reason we hesitate is World War II. War always trumps economics. New Deal critics were right on the economy, but they were wrong in their estimations of Hitler. To write sympathetically about the Liberty Leaguers is seen, even today, as siding with the appeasers. The incredible rightness of FDR's war policy obscures the flaws in his prior actions.

The Cold War also played a role in delaying examination of the 1930s. Nearly all writers today -- whether they write policy or history -- make a point to avoid being classed with Sen. Joseph McCarthy and the House Un-American Activities Committee. But that fear of being labeled as a red-baiter prevented the necessary discussion of the counterproductive policy of the 1930s.

In the Cold War, there was also the assumption that Europe certainly, or even the U.S., might conceivably go communist. The premise therefore was that safety nets -- from Social Security in the U.S. to codetermination in German boardrooms -- were necessary to prevent such an event. Bismarck's social democracy and Roosevelt's New Deal were therefore glorified as justified.

In the past half-century, we have learned that much of our capital comes from the private sector, not the public sector, and that most of our growth inheres in the private sector. After the 1980s and 1990s we know that markets can do much of the work that Roosevelt believed only government capital could do.

My own sense is that there is a final reason we have all paused at the New Deal -- a generational one. To insult the New Deal is to insult the Social Security that we, our parents, or grandparents receive. The Baby Boomers have a reputation as being selfish. But their reverence in regard to Social Security, not to mention Medicare Part D, is overly unselfish, and comes out of misplaced filial piety. Younger Baby Boomers and the generations after them will doubtless pay higher taxes because of our current unwillingness to criticize entitlements. Americans owe them as much as we owe senior citizens.

After all, the argument of markets has its own powerful morality. It is immoral to cause unemployment by pretending that a big government policy is morally necessary. When Andrew Mellon and Calvin Coolidge put through their tax cuts in the 1920s, they made the efficiency argument that supply-siders make today: lower rates could yield, they posited, higher revenues. But they also had a moral argument: high taxes were wrong, confiscatory and illiberal, in the classical sense. You can acknowledge this without being a Roosevelt-hater.

Schlesinger, who so often contributed to these pages, has already issued the invitation. It is more than time that the rest of us took him up on his offer.

Miss Shlaes, a Bloomberg columnist and visiting senior fellow at the Council on Foreign Relations, is author of the just-published "The Forgotten Man: A New History of the Great Depression" (HarperCollins), from which this is adapted.

COLUMN OF THE WEEK: "For Each Course on Rap Music or Black Feminism, One on King Lear or Latin is Lost."

     This column by the dazzlingly smart Victor David Hanson whacks the nail squarely on the head.  It definitely hits home with me, as I was totally screwed at Exeter by a collection of "cutting edge" teachers who assigned book after book on critical, pressing topics like the plight of oppressed pygmie lesbians while jettisoning Shakespeare and other building blocks of Western literature and civilization.

     In the zero-sum game of Exeter's curriculum, I lost and nobody won.

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[This one's so good that I've underlined passages for the super-busy Grotto reader base.]

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A Few Quotes of the Day from Today's Thomas Sowell Column. . .

"Does anybody seriously believe that "hate speech" prohibitions will be applied to Muslims demonizing Jews, to blacks demonizing whites, or to women demonizing men?"

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"The same people who think it was wonderful that the Warren Court forbad government to assign children to schools on the basis of race think it is terrible that the current Supreme Court has recently stopped local governments from assigning children to schools on the basis of race."

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"Many people who have never run one business for one day are nevertheless confident that they know corporate CEOs are not worth as much as they are paid."

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In America, We Get to Write the Scripts of Our Own Lives.

What's So Great About America
By Dinesh D'Souza

Monday, July 2, 2007

In recent years, we’ve heard a great deal about “why they hate us” and about why America is so bad. What the critiques often miss is what is good and even great about America. As an immigrant who grew up in Mumbai, India, I believe that the patriotism of Americans would be strengthened if people had a better understanding of why this country is unique.

In my book What’s So Great About America, I ask: Why do millions of immigrants seek every year to come to America? Why is the idea of America so fascinating and attractive to people—especially young people—around the world?

Critics of America, both at home and abroad, have an easy explanation for why the American idea is so captivating and why immigrants want to come here. The reason, they say, is that America represents “the bitch goddess of success.” In this view, immigrants flock to the United States for the sole purpose of getting rich. The critics hope to demean America by associating it with greed and selfishness. Their explanation, however, is so partial that it amounts to a distortion. It misses the deepest source of America’s appeal.

There is enough truth in the critics’ account to give it a surface plausibility. Certainly America offers a degree of mobility and opportunity unavailable elsewhere, not even in Europe. Even more significant, America gives a better life to the ordinary guy than does any other country. Let’s be honest: rich people live well everywhere. America’s greatness is that it has extended the benefits of affluence, traditionally available to the very few, to a large segment in society. We live in a nation where “poor” people have TV sets and microwave ovens, where construction workers cheerfully spend $4 on a nonfat latte, where maids drive very nice cars, where plumbers take their families on vacation to the Caribbean. Recently I asked an acquaintance in Bombay why he has been trying so hard to relocate to America. He replied, “I really want to move to a country where the poor people are fat.”

The typical immigrant, who is used to the dilapidated infrastructure, mind-numbing inefficiency, and multi-layered corruption of Third World countries, arrives in America to discover, to his wonder and delight, that everything works: the roads are clean and paper-smooth, the highway signs are clear and accurate, the public toilets function properly, when you pick up the telephone you get a dial tone, you can even buy things from the store and then take them back. The American supermarket is a thing to behold: endless aisles of every imaginable product, 50 different types of cereal, innumerable flavors of ice cream. The place is full of unappreciated inventions: quilted toilet paper, fabric softener, cordless phones, disposable diapers, and roll-on luggage.

So, yes, in material terms America offers the newcomer a better life. Still, the material allure of America does not capture the deepest source of its appeal. Consider how my own life would have been different had I never come to America. I was raised in a middle-class family in Mumbai. I didn’t have luxuries, but I didn’t lack necessities. Materially my life is better in the United States, but the real difference lies elsewhere.

Had I stayed in India, I would probably live my entire existence within a five-mile radius of where I was born. I would undoubtedly have married a woman of my identical caste and religious and socioeconomic background. I would have faced relentless pressure to become an engineer, like my father, or a doctor, like my grandfather. My socialization would have been entirely within my own ethnic community. I would have had a whole set of opinions that could be predicted in advance.

Because I came to America, though, I have seen my life break free of these traditional confines. In college I became interested in literature and politics, and resolved to make a career as a writer, which is something you can do in America, and cannot easily do in India. I married a woman of English, Scottish, French, and German ancestry.

Eventually I found myself working in the White House, even though I was not an American citizen. I cannot imagine another country allowing a non-citizen to work in the inner citadel of its government.

In most of the world, even today, your identity and your fate are largely handed to you. In America, by contrast, you get to write the script of your own life. What to be, where to live, who to love, who to marry, what to believe, what religion to practice—these are all decisions that, in America, we make for ourselves. Here we are the architects of our own fate.

The “self-directed life” is the incredibly powerful idea that is behind the worldwide appeal of the United States. Young people throughout the world find irresistible the prospect of being in the driver’s seat of their own destiny. So, too, the immigrant discovers that America permits him to break free of the constraints that have held him captive, so that the future becomes a landscape of his own choosing.


Copyright © 2006 Salem Web Network. All Rights Reserved.

Dinesh D'Souza's new book The Enemy at Home: The Cultural Left and Its Responsibility for 9/11 has just been published by Doubleday. D’Souza is the Rishwain Fellow at the Hoover Institution.

According to the U.N., the Darfur Genocide Is Caused By, What Else? Global Warming!

     A few weeks ago I wrote in despair that I thought the whole U.N. might be an elaborate comedy scheme in which someone would eventually pop up from behind a bench in Dag Hammarskjold Plaza and cheerily announce "You're On Candid Camera!" 

     The new U.N. General Secretary, Ban Ki-moon, said the other day that the genocide in Darfur is ultimately caused by global warming.  I take this assertion as proof that my hypothesis is correct.

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The Darfur Genocide and Global Warming
By Fred Thompson
Thursday, June 28, 2007

Recently, the new UN Secretary General Ban Ki-moon said that the root cause of the current genocide in Darfur is … global warming. Now if you've been following the tragedy of the Darfur region in the African nation of Sudan, you know how absurd that statement is.

There's not room here for even a good summary, but let me make a few points. Sudan straddles the line between Christian African and Muslim Arabic cultures, bordering Egypt and Libya on the north. Bloody regional warfare stretches back centuries but, in modern times, the country has been in pretty much of a constant state of war since the 1950s. It's safe to say that millions have died in wars that are often aimed at control of the rich oil fields in the South. Today, however, the vastly reduced African Christian population isn't even involved. Two Muslim factions, divided along racial lines, are fighting for control of Darfur.

Now it’s true that the return of cyclical droughts has made agriculture and life more and more difficult for the people in the region. The impact of the weather, however, doesn’t approach the destruction that generations of warfare have worked on the land and the people. With peace and freedom, the economy of Darfur could have easily adapted to any climate change – no matter the cause.

Why, then, would the new UN Secretary General blame climate change? I think it’s pretty obvious.

Blaming the Islamic government and groups that have manipulated events in Sudan will get him nothing but enemies. Blaming global warming, however, is basically the same thing as blaming America. America is by no means the only major source of greenhouse gases, but we've taken the most political heat. The reason is that congress rightfully balked at ratifying the Kyoto international climate treaties during the Clinton presidency.

There is simply no downside to blaming America, because Americans don't punish their ideological foes. From the UN, we don't even require sanity sometimes. And there might even be an upside to blaming us, since there are Americans who suffer from such ingrained feelings of guilt, they’ll support increased aid to both the UN and Sudan.

There is a lesson to be learned here, though. UN Secretary General Ban Ki-moon is arguably the most powerful man in the international community today. We know he's unwilling to blame those who actually gave the orders to commit genocide in Darfur. And apparently he's happy to shift the blame for ongoing deaths to those living peaceful, productive lives in the West.

Now hopefully we can work toward international cooperation with regard to environmental policies that make sense. It’s not very encouraging though when the head of the world’s leading international body uses climate change as an all purpose excuse in order to avoid hard realities.

Fred Thompson is an actor and former Senator. His radio commentary airs on the ABC Radio Network and he blogs on The Fred Thompson Report.

Let's Hear It for Socialized Medicine!

From National Center for Policy Analysis:

BRITISH GOVERNMENT COMES CLEAN ON HEALTH SERVICE QUEUES

The British government and National Health Service (NHS) recently acknowledged the country's wide gap between patient admittance and treatment, in its first attempt to tell the full truth about health service queues in England, says John Carvel, social affairs editor at the Guardian.

According to a NHS Department of Health analysis:

• One in eight NHS hospital patients still has to wait more than a year for treatment
• Some 30 percent waited more than 30 weeks and 12.4 percent more than a year.
• In Swindon and in Brighton, less than a quarter of patients were treated within 18 weeks.
• Overall, 208,000 people admitted in March showed only 48 percent were within the operating theater within 18 weeks of a General Practitioner (GP) sending them for hospital diagnosis.

The shadow health secretary, Andrew Lansley, said the figures revealed "a postcode lottery in access to care."  For many treatments, the 18-week target was not ambitious enough.  "On the continent waits of this kind would be regarded as outrageous.  But a one-size-fits-all target will distort clinical care and damage the NHS."

And Norman Lamb, the Liberal Democrat health spokesman, added: "Behind the statistics, thousands of sick people are still waiting more than a year for hospital treatment.  This is a daily tragedy."

Source: John Carvel, "One in eight patients waiting over a year for treatment, admits minister," Manchester Guardian, June 8, 2007.

How About If All Supermarkets Were Government-Run?

     Liberals who kowtow to the teachers' unions and act as if throwing good money after bad will provide the answer to the embarrassingly laughable education that kids get these days have willfully decided that they're not interested in facts.  They are interested in sounding as if they care about the kids, when it's being proven each and every day that increasing the money spent per student accomplishes zilch.  The evidence suggests that another strategy might be needed. 

     I especially like his points about "public financing" vs. "public production" of education.

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Competition or Monopoly
By Walter E. Williams
Wednesday, June 13, 2007

Are consumers better off with a competitive or monopolistic provision of goods and services? Let's apply that question to a few areas of our lives.

Prior to deregulation, when there was a monopoly and restricted entry in the provision of telephone services, were consumers better off or worse off than they are with today's ruthless competition to get our business? Anyone over 40 will recognize the differences. Competition has provided consumers with a vast array of choices, lower and lower prices and more courteous customer care than when government had its heavy hand on the provision of telephone services.

What about supermarkets? Would consumers be better off or worse off if one or two supermarkets were granted an exclusive monopoly in the provision of grocery services? The average well-stocked supermarket carries over 50,000 different items, has sales, prizes and pursues many strategies to win customers and retain their loyalty. Would they have the same incentives if they were granted a monopoly?

The government gives poor people food stamps. Would poor people be better off or worse off if, instead of being able to use their food stamps at any supermarket, they were forced to use them at a government store?

There's abundant evidence that suggests consumers are better off when providers of goods and services are driven by the profit motive where survival requires a constant effort to get and keep customers. Under what conditions can businesses survive, providing shoddy services, fewer choices, at higher and higher costs, without pleasing customers? If you said, "Where there's restricted competition and a government-sanctioned monopoly," go to the head of the class. There's no better example of this than in the case of government education.

ABC News anchor John Stossel produced a documentary aptly titled "Stupid in America: How We Cheat Our Kids" that gives a visual depiction of what's often no less than educational fraud. During the documentary, an international test is given to average high school students in Belgium and above-average New Jersey high school students. Belgian kids cleaned the New Jersey students' clocks and called them "stupid." It's not just in Belgium where high school students run circles around their American counterparts; it's the same for students in Poland, Czech Republic, South Korea and 17 other countries.

The documentary leaves no question about the poor education received by white students, but that received by many black students is truly disgusting and darn near criminal. Stossel interviewed an 18-year-old black student who struggled to read a first-grade book. ABC's "20/20" sent him to Sylvan Learning Center. Within 72 hours, his reading level was two grades higher.

"Stupid in America" included one story where a teacher sent sexually oriented e-mails to "Cutie 101," a 16-year-old student. Only after six years of litigation was the New York City Department of Education able to fire the teacher, during which time the teacher collected more than $300,000 in salary.

The solution to America's education problems is not more money, despite the claims of the education establishment. Instead, it's the introduction of competition that could be achieved through school choice. Most people agree there should be public financing of education, but there is absolutely no case to be made for public production of education. We agree there should be public financing of F-22 fighters, but that doesn't mean a case can be made for setting up a government F-22 factory.

A school choice system, in the form of school vouchers or tuition tax credits, would go a long way toward providing the competition necessary to introduce accountability and quality into American education. What's wrong with parents having the right, along with the means, to enroll their children in schools of their choice?

Dr. Williams serves on the faculty of George Mason University as John M. Olin Distinguished Professor of Economics and is the author of More Liberty Means Less Government: Our Founders Knew This Well.

"Communism Has Failed to Retain Enough True Believers Who Would Murder On its Behalf."

Of All the Terrifying Nations to be Worried About, These Idiots Focus On. . . Israel (for the "Am I On Candid Camera?" Files)

Boycotting the Jews

June 5, 2007 (Wall Street Journal)

Palestinian rocket attacks against Israeli civilians are intensifying, Hamas leaders are calling for the destruction of the Jewish state and Gaza descends into chaos. For the British left that naturally calls for a boycott of, you've guessed it, Israel.

Britain's University and College Union last Wednesday urged its 120,000 members to shun Israeli academic institutions. The next day, Unison, representing 1.3 million public-service employees in the U.K., said it will discuss a boycott against Israeli goods at its annual conference starting June 19. This follows a call in April by 130 British doctors to expel Israel from the World Medical Association and a call that same month by the National Union of Journalists to boycott Israeli goods.

In the case of the university teachers, boycotts violate the very essence of academia, the free exchange of ideas and research. But the obsession with Israel has little to do with unbiased scientific inquiry; instead, it's a perversion of the truth. For the professors' union, Israel is supposedly an "apartheid state" uniquely deserving of punishment. The same holds for the other groups listed above.

Not every criticism of Israel is anti-Semitic. But the inverse, that criticism of the Jewish state is never anti-Semitic, can't be true either. To judge Israel by standards different than those applied to any other nation is racist in effect if not intent. That racism has become the British left's not so new defining ideology.

The Lawn Guy, the Grocer, the Rancher, and the Brewer

     If 99% of all teachers weren't anti-capitalist Leftist radicals, they might consider teaching helpful parables like this one to bring to life for students some of the thinking behind free markets, and why they are not only efficient, but morally right.

     It beats making the kids sit around a "Tree of Peace."

     An excerpt from Walt Williams' June 6th column on Townhall.com:

.

     "Liberals often denounce free markets as immoral. The reality is exactly the opposite. Free markets, characterized by peaceable, voluntary exchange, with respect for property rights and the rule of law, are more moral than any other system of resource allocation. Let's examine just one reason for the superior morality of free markets.

     "Say that I mow your lawn and you pay me $30, which we might think of as certificates of performance. Having mowed your lawn, I visit my grocer and demand that my fellow men serve me by giving me 3 pounds of steak and a six-pack of beer. In effect, the grocer asks, "Williams, you're demanding that your fellow man, as ranchers and brewers, serve you; what did you do to serve your fellow man?" I say, "I mowed his lawn." The grocer says, "Prove it!" That's when I hand over my certificates of performance -- the $30.

     "Look at the morality of a resource allocation method that requires that I serve my fellow man in order to have a claim on what he produces and contrast it with government resource allocation. The government can say, "Williams, you don't have to serve your fellow man; through our tax code, we'll take what he produces and give it to you." Of course, if I were to privately take what my fellow man produced, we'd call it theft. The only difference is when the government does it, that theft is legal but nonetheless theft -- the taking of one person's rightful property to give to another."

I'll Put My Money on the Hamas Kids, Not the Pathetic Kids of the Jello-Spined, Feeble Western Parents.

     OK, I've had enough.  I'm about to tie a cinder block to my neck and do a pencil dive into the harbor, and I don't even have children! 

     Check out the scenarios in the following column.  What the hell is going on?  Do today's Western parents WANT their children to fail?  A "Tree of Peace" to indoctrinate toddlers?  How about the British schools that are worried that hand-raising unfairly handicaps quiet children?

     Note to parents:  When your children get out into the real world, nobody's going to give a  #%$#% if your kid is shy or quiet. 

     If I had gone to schools that had let me set my own agenda and created for me a warm and fuzzy cocoon of "sensitivity," I can guarantee you that I'd be a miserable, bitter loser (as opposed to a happy-go-lucky, often-in-error-never-in-doubt loser)! 

     I was born with genes that make me naturally veer towards the more "timid" end of the spectrum, and it has only been through an education at somewhat draconian, unforgiving, hard-nosed schools (Shore Country Day and Exeter) that I emerged even slightly prepared to bang into the brick wall of the real world.  Secondary schools are sometimes called "Prep" schools.  That's because they're supposed to help prepare kids for life.  Hugging a "Tree of Peace" and not keeping score in soccer games to avoid hurting the feelings of the losers do not fall into the category of preparation for life.      

     I feel terrible for these poor kids.  Education, and even more importantly the child-raising that goes on in the home, are supposed to prepare kids for life, not prolong the protected environment of the womb.  Gimme a break!    

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Jewish World Review 

June 5, 2007

Children of Jihad vs. Children of the West

By Michelle Malkin

"What is your most lofty aspiration? Death for the sake of Allah!"

That is the charming verse kindergarteners in a Hamas classroom chanted last week during their graduation ceremony. The girls dressed in butterfly costumes. The boys donned camouflage, black masks, green bandanas and toy semi-automatic rifles. The video aired by the Middle East Media Research Institute (www.memritv.org) features the children wielding swords and guns while mimicking paramilitary exercises.

And how are we preparing the children of the West to defend themselves against these little soldiers of Allah?

Scene 1: In New York City, one nursery school dragged 3-year-old toddlers to the office of Rep. Eliot Engel (D-Bronx/Westchester/Rockland), where they sang "It's a Small World" around a 12-foot "Tree of Peace." The New York Press reported last week:

"The handmade tree, crafted by 17 children during pre-school class time, was a statement against American troops remaining in Iraq, and a call to pursue peaceful paths to end all world conflicts. This gift, however, seemed more like a Trojan horse, designed to gain an invitation inside so that the children's far-left leaning parents could rail against the war and the congressman's initial vote in support of it."

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The children's teacher, Valerie Coleman-Palansky, defended the stunt thusly: "I think it's appropriate for 3-year-olds to know that the world needs to be a peaceful place for everybody to live in and a safe place for everybody to live in."

Perhaps it's time for Ms. Coleman-Palansky to acquaint herself with the Palestinian Mickey Mouse. The chant of the little jihadists drowns out the Disneyfied reverie:

"What is your most lofty aspiration? Death for the sake of Allah!"

Scene 2: I have a pet peeve. It goes beyond the antiwar indoctrination rampant in American schools. At the playground and at the mall, I see 5-, 6- and 7-year-olds walking around with pacifiers in their mouths. Kids old enough to feed and dress themselves. Kids old enough to figure out the remote control and cell phone. Standing upright, suckling on brightly colored binkies.

Where are the parents to yank the rubber from their mouths and force them to grow up? When did child pacification usurp the responsibility of child-rearing?

Scene 3: America is not alone in immersing its future generations in the culture of coddling. British educators have now determined that "asking pupils to put their hands up when they think they know the answer to a question in class could make quiet children fall behind," according to the London Telegraph. To spare students from this awful terror, the British Department of Education is now recommending that children be given 30 seconds of "thinking time" before being asked to answer or told to discuss questions in pairs before answering. Instead of teaching students to conquer their shyness and stand up for themselves, educators will be encouraged to pamper them in emotional bubble wrap.

On a separate front, British schools will be administering "happiness tests" to children as young as 4 to ensure high self-esteem. The Telegraph reports that the government has spent 20 million pounds on an "emotional literacy initiative" that promotes activities such as "worry boxes," where pupils write down their anxieties and post them into a box, and "emotional barometers," which pupils can use to show classmates the strength of their feeling about a subject.

I return to the video of the Hamas kindergarten class. Their "emotional barometers" break through the roof as one toddler with plenty of self-esteem leads the rest in a bloodthirsty call and refrain:

"What is your path? Jihad!"
"What is your path? Jihad!"

Back in London, the tots are taking their mental health quizzes. Teacher asks: "How do you feel?" The sheeple answer: "I've been feeling optimistic about the future."

Pardon me while I go fill my worry box. It's a small world, after all.

Recipe for Disaster: Government, Not Impersonal Market Forces, Allocating Wealth and Opportunity

     Here's a pretty good articulation of the difference between the liberal's worldview and that of the conservative.  Bonus: it touches on the critical point that "capitalism does not merely make people better off, it makes them better" (see Blue Grotto archives for Atlas Shrugged excerpt on this point!).

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May 31, 2007

The Case for Conservatism

By George Will

Washington -- Conservatism's recovery of its intellectual equilibrium requires a confident explanation of why America has two parties and why the conservative one is preferable. Today's political argument involves perennial themes that give it more seriousness than many participants understand. The argument, like Western political philosophy generally, is about the meaning of, and the proper adjustment of the tension between, two important political goals -- freedom and equality.

Today, conservatives tend to favor freedom, and consequently are inclined to be somewhat sanguine about inequalities of outcomes. Liberals are more concerned with equality, understood, they insist, primarily as equality of opportunity, not of outcome.

Liberals tend, however, to infer unequal opportunities from the fact of unequal outcomes. Hence liberalism's goal of achieving greater equality of condition leads to a larger scope for interventionist government to circumscribe the market's role in allocating wealth and opportunity. Liberalism increasingly seeks to deliver equality in the form of equal dependence of more and more people for more and more things on government.

Hence liberals' hostility to school choice programs that challenge public education's semi-monopoly. Hence hostility to private accounts funded by a portion of each individual's Social Security taxes. Hence their fear of Health Savings Accounts (individuals who purchase high-deductible health insurance become eligible for tax-preferred savings accounts from which they pay their routine medical expenses -- just as car owners do not buy automobile insurance to cover oil changes). Hence liberals' advocacy of government responsibility for -- and, inevitably, rationing of -- health care, which is 16 percent of the economy, and rising.

Steadily enlarging dependence on government accords with liberalism's ethic of common provision, and with the liberal party's interest in pleasing its most powerful faction -- public employees and their unions. Conservatism's rejoinder should be that the argument about whether there ought to be a welfare state is over. Today's proper debate is about the modalities by which entitlements are delivered. Modalities matter, because some encourage and others discourage attributes and attitudes -- a future orientation, self-reliance, individual responsibility for healthy living -- that are essential for dignified living in an economically vibrant society that a welfare state, ravenous for revenues in an aging society, requires.

This reasoning is congruent with conservatism's argument that excessively benevolent government is not a benefactor, and that capitalism does not merely make people better off, it makes them better. Liberalism once argued that large corporate entities of industrial capitalism degraded individuals by breeding dependence, passivity and servility. Conservatism challenges liberalism's blindness about the comparable dangers from the biggest social entity, government.

Conservatism argues, as did the Founders, that self-interestedness is universal among individuals, but the dignity of individuals is bound up with the exercise of self-reliance and personal responsibility in pursuing one's interests. Liberalism argues that equal dependence on government minimizes social conflicts. Conservatism's rejoinder is that the entitlement culture subverts social peace by the proliferation of rival dependencies.

The entitlement mentality encouraged by the welfare state exacerbates social conflicts -- between generations (the welfare state transfers wealth to the elderly), between racial and ethnic groups (through group preferences) and between all organized interests (from farmers to labor unions to recipients of corporate welfare) as government, not impersonal market forces, distributes scarce resources. This, conservatism insists, explains why as government has grown so has cynicism about it.

Racial preferences are the distilled essence of liberalism, for two reasons. First, preferences involve identifying groups supposedly disabled by society -- victims who, because of their diminished competence, must be treated as wards of government. Second, preferences vividly demonstrate liberalism's core conviction that government's duty is not to allow social change but to drive change in the direction the government chooses. Conservatism argues that the essence of constitutional government involves constraining the state in order to allow society ample scope to spontaneously take unplanned paths.

Conservatism embraces President Kennedy's exhortation to "Ask not what your country can do for you -- ask what you can do for your country," and adds: You serve your country by embracing a spacious and expanding sphere of life for which your country is not responsible.

Here is the core of a conservative appeal, without dwelling on "social issues" that should be, as much as possible, left to "moral federalism" -- debates within the states. Regarding foreign policy, conservatism begins, and very nearly ends, by eschewing abroad the fatal conceit that has been liberalism's undoing domestically -- hubris about controlling what cannot, and should not, be controlled.

Conservatism is realism, about human nature and government's competence. Is conservatism politically realistic, meaning persuasive? That is the kind of question presidential campaigns answer.

(c) 2007, Washington Post Writers Group

The Haircut. . .

     One day a florist goes to a barber for a haircut. After the cut he asked about his bill and the barber replies: “I’m sorry, I cannot accept money  from you; I’m  doing community service this week”.  The florist is pleased and leaves the shop. Next morning when the barber goes to open there is a thank you card and a dozen roses waiting for him at his door.

     Later, a cop comes in for a haircut, and when he goes to pay his bill the barber again replies:  “I’m sorry, I cannot accept money from you; I’m doing community service this week.” The cop is happy and leaves the shop.   Next morning when the barber goes to open up there is a thank you card and a dozen donuts waiting for him at his door.

     Later, a Republican comes in for a haircut, and when he goes to pay his bill the barber again replies: “I’m sorry, I cannot accept money from you; I’m doing community service this week.”  The Republican is very happy and leaves the shop. Next morning when the barber goes to open, there is a thank you card and a dozen different books such as “How to Improve Your Business” and “Becoming More Successful.”

     Then a Democrat comes in for a haircut, and when he goes to pay his bill the barber again replies:  “I’m sorry, I cannot accept money from you; I’m doing community service this week.”  The Democrat is very happy and leaves the shop. The next morning when the barber goes to open up, there are a dozen Democrats lined up waiting for a free haircut.

     And that, my friends, illustrates the fundamental difference between Left and Right.

The "Double Thank-You" Is an Excellent Lesson in Basic Economics.

The Double "Thank-You" Moment
By John Stossel
Wednesday, May 30, 2007

Some people hate me because I defend free markets. Once someone accosted me on a New York City street and said, "I hope you die soon."

Why the hostility to commerce? What could be more benign than the freedom to trade with whomever you wish?

I suspect ignorance about economics leads many to believe that when two people exchange goods and money, one wins and the other loses. If rich capitalists profit, the poor and the weak suffer.

That's a myth.

How many times have you paid $1 for a cup of coffee and after the clerk said, "thank you," you responded, "thank you "? There's a wealth of economics wisdom in the weird double thank-you moment. Why does it happen? Because you want the coffee more than the buck, and the store wants the buck more than the coffee. Both of you win.

Economists have long understood that two people trade because each wants what the other has more than what he already has. In their respective eyes, the things traded are unequal in value. But this means each comes out ahead, having given up something he wants less for something he wants more. It's just not true that one gains and the other loses. If that were the case, the loser wouldn't have traded. It's win-win, or as economists would say, positive-sum.

We experience this every time we have that double thank-you moment in a store or restaurant.

It doesn't matter that you wish the price of coffee were lower. We want the price of everything to be lower (except the price of what we're selling, whether it's our products or labor). What matters is that you bought the coffee for a buck.

The story doesn't change if you buy from someone in another city or another state. It doesn't change even if you buy from someone in another country.

That's why I worry when I hear politicians say things like, "I believe in free trade, but it has to be fair trade". That particular quote is from a presidential contender, Mike Huckabee, former governor of Arkansas.

"Fair trade" is code for protectionism disguised as retaliation against other countries that may or may not practice protectionism, and it's a bad sign when even Republicans talk about "fair" rather than "free" trade.

We should practice free trade no matter what others do. Why? Because freedom is good in itself. If foreign governments want to hurt their citizens, it's no reason for ours to hurt us.

People who live in different countries are divided by a political boundary, but boundaries are accidents of history or the results of politicians' arbitrary decisions. Political boundaries are economically irrelevant. When left free, people trade across them as naturally as they do across state lines. Trade is trade. Buyer and seller both benefit. "Thank you." "Thank you ."

If you're worried about a trade deficit with, say, China, imagine that China became the 51st state. We'd immediately forget all about that so-called deficit. Who cares if New York runs a trade deficit with Pennsylvania? As Adam Smith wrote, "Nothing . . . can be more absurd than this whole doctrine of the balance of trade."

Sheldon Richman expands on these ideas in The Freeman magazine, writing, "In reality, then, there are no imports and exports. There is only what I make and what everyone else makes. ... Few people would want to live just on what they themselves could make."

Once we choose trade over self-sufficiency, we're just arguing about how big the free-trade zone should be. Since trade is always mutually beneficial, the answer is: The bigger the free-trade zone the better.

Worldwide is best of all.

Next week I'll report on the orgy of hand wringing and commerce-hatred fed by media reports of this month's new "record price" of gasoline. By the way, it's not a record.

John Stossel is an award-winning news correspondent and author of Myths, Lies, and Downright Stupidity: Get Out the Shovel--Why Everything You Know is Wrong.

What Would America Do If Canadian Soldiers Were Firing Dozens of Missiles Every Day Into Buffalo, N.Y.?

Living in Terror
By Fred Thompson

Wednesday, May 30, 2007

Let me ask you a hypothetical question. What do you think America would do if Canadian soldiers were firing dozens of missiles every day into Buffalo, N.Y.? What do you think our response would be if Mexican troops for two years had launched daily rocket attacks on San Diego -- and bragged about it?

I can tell you, our response would look nothing like Israel's restrained and pinpoint reactions to daily missile attacks from Gaza. We would use whatever means necessary to win the war. There would likely be numerous casualties on our enemy's side, but we would rightfully hold those who attacked us responsible.

More than 1,300 rockets have been fired into Israel from Gaza since Palestinians were given control two years ago. Israelis, however, have gone to incredible lengths to stop the war against them without harming Palestinian non-combatants. But make no mistake, Israel is at war. The elected Hamas government regularly repeats its official promise to destroy Israel entirely and replace it with an Islamic state. Hamas openly took credit for killing one woman and wounding dozens more last week alone.

The Palestinian strategy is to purposely target and kill Israeli civilians. Then, when Israel goes after those launching the attacks, Palestinians claim to be the victims. If Palestinian civilians aren't hurt in the Israeli attacks, they stage injuries and deaths. Too often, they garner sympathy and support from a gullible or anti-Semitic media in the international community.

Israelis, themselves, are often incapable of facing the damage they inflict in self-defense. Knowing this, Islamic extremists are using their own populations as human shields.

I'm beginning to wonder how much longer this vicious plot will work though. International sympathy for Palestinians has diminished as the same Islamofascist extremists have brought havoc to Madrid, Bali, Somalia, London and elsewhere. More importantly, Israelis themselves are suffering so badly, they may be on the verge of losing their sympathy for the people who have sworn to kill them.

Imagine what it would be like to live, knowing that a rocket could fall on you or your children at any minute. Half of those who live nearest to Gaza have fled their homes. Those remaining are traumatized by daily warning sirens and explosions.

The irony is that Israel has the military might to easily win the war that is being waged against them today. They haven't used that might, in the past, out of compassion for Palestinian civilians and because it could trigger a wider regional conflict.

That balance of power is about to change, though. If Iran develops nuclear weapons, the very existence of this tiny nation of Israel will be threatened. The Iranian regime has left little doubt that it intends to see Israel "wiped off the map.” Hamas is using the same language, not coincidentally, and has announced it will begin launching missiles into Israel from the West Bank too.

If the world doesn't act to stop Iran's nuclear ambitions, it must be prepared for the consequences of Israel defending itself.

Fred Thompson is an actor and former Senator. His radio commentary airs on the ABC Radio Network and be blogs on The Fred Thompson Report.

This One's Either Entitled "Prices: Messengers Carrying the News of Supply and Demand" or "Obscene Profits vs. PG-13 or G-Rated Profits" or. . .

. . . "Demagoguery Beats Data."

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A War of Words: Part II
By Thomas Sowell
Wednesday, May 30, 2007

With gasoline prices rising, political rhetoric is rising even faster. Liberals in Congress and in the media have launched a war of words, whose net result may well be a demand for some form of price control.

Price controls are not a new idea. There have been price controls in countries around the world. There were price controls during ancient times in Babylon and in the Roman Empire.

Whatever the hopes that may have inspired price controls, economists have studied their actual consequences, which have been remarkably similar from one place to another and from one time to another -- and almost invariably bad.

That history has even included higher prices in places with price controls. For example, New York and San Francisco have severe rent control laws -- and some of the highest average rents in the country.

But those pushing for price controls on gasoline are not likely to go into facts about the consequences of price controls, much less go into the economics that explains why such bad consequences have repeatedly followed price controls.

This issue, like so many others, is likely to be settled on the basis of rhetoric. And, on that basis, the left has always had the advantage. As former House Majority Leader Dick Armey -- an economist by trade -- has put it: "Demagoguery beats data" in political battles.

The demagoguery in this case is that "price gouging" and "greed" explain rising gasoline prices -- and that price controls will put a stop to it.

It is an exercise in futility to try to refute words that are meaningless. If a word has no concrete meaning, then there is nothing that can be refuted. "Price gouging" is a classic example.

The phrase is used when prices are higher than most people are used to. But there is nothing special or magic about what we happen to be used to.

When the conditions that determined the old prices change, the new prices are likely to be very different. That is not rocket science.

How have conditions changed in recent years? The biggest change is that China and India -- with more than a billion people each -- have had rapidly growing economies ever since they began relaxing government controls and allowing markets to operate more freely.

When there are rising incomes in countries of this size, the demand for more petroleum for both industry and consumers is huge. Increasing the supply of oil to meet these escalating demands is not nearly as easy.

In the United States, liberals have made it virtually impossible, by banning drilling in all sorts of places and preventing any new refinery from being built anywhere in the country in the last 30 years.

Prices are like messengers carrying the news of supply and demand. Like other messengers carrying bad news, they face the danger that some people think the answer is to kill the messenger, rather than taking steps to change the news.

The strongest proponents of price controls are the strongest opponents of producing more oil. They say the magic words "alternative energy sources" and we are supposed to swoon -- and certainly not ask any rude questions like "At what cost?"

Then there are the famous "obscene" profits of oil companies. Again, there is no definition and no criterion by which you could tell obscene profits from PG-13 profits or profits rated G.

There is not the slightest interest in how large the investments are that produced those profits. Relative to the vast investments involved, oil company profits do not begin to approach the rate of return received by someone who bought a house in California ten years ago and sells it today.

Oil company executives make big bucks incomes, almost as much as liberal movie stars who are never criticized for "greed." And if Big Oil CEOs worked for nothing, it is unlikely to be enough to bring the price of a gallon of gas down by a nickel.

But facts are not nearly as exciting as rhetoric -- and the role of most political rhetoric is to be a substitute for facts.

Thomas Sowell is a senior fellow at the Hoover Institute and author of Basic Economics: A Citizen's Guide to the Economy.

For Liberals, It's Equal Outcomes, Not Equal Opportunity, That Matter (from the "Class Warfare" files)

     Umm, Senator Clinton, they've tried this, and it's called Socialism. . . .

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It Takes a Socialist Village
By Cal Thomas
Thursday, May 31, 2007

Senator and Democratic presidential candidate Hillary Clinton has unveiled her economic vision. Should she be given the power to implement it, we can say goodbye to the prosperity and opportunity we have enjoyed since the Reagan years.

In a speech at Manchester School of Technology in New Hampshire, Clinton said it's time to replace President Bush's "ownership society," which she called an "on your own" society, with one based on shared responsibility and prosperity.

Clinton said she prefers a "we're all in it together" society: "I believe our government can once again work for all Americans. It can promote the great American tradition of opportunity for all and special privileges for none."

Doesn't such a society already exist elsewhere? It's called socialism, where government has sought to make all things economically equal and the only equality is that all are equally poor. Wasn't defeating such a society precisely why we fought and won the Cold War? Why does Senator Clinton wish to embrace the principles of the losing side?

Clinton has merely updated the old and discredited (except among socialist dictators) Karl Marx saying: "From each according to his ability, to each according to his need."

Clinton's remarks came before students at a school whose purpose is to train high school kids for careers in the construction, automotive, graphic arts and other industries. She told them, "We have sent a message to our young people that if you don't go to college . . . that you're thought less of in America. We have to stop this."

Her assertion is bunk, but it is the typical class warfare bunk that comes from rich white liberals who want to take money from one group of people and give to others who didn't earn it in hopes they will become loyal Democratic voters.

This is not the philosophy that made America what it is. This is not a land of equal outcome, but of equal opportunity commensurate with one's talents, interests and drive.

In his "The Wealth of Nations," Adam Smith wrote: "It is the highest impertinence and presumption, therefore, in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expense. . . . (Kings and ministers) are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will."

I am not robbed by people who have more money than me. I am robbed by a government that wants to penalize my industry and give increasing portions of what I earn to people who do not emulate my principles, morals and ethics.

What have we come to? We once taught our young people the virtues of hard work, saving, personal responsibility and accountability for one's actions, chastity before and fidelity and commitment in marriage, honesty, integrity and virtue - not to mention the Ten Commandments (especially the one about not coveting that which belongs to your neighbor). We now teach them entitlement, victimhood, class envy and rights to other people's money. When one robs a bank, it's a crime. When government takes our money, it's called a tax. Same result.

There is something else about Clinton's speech that offends. She suggested that students at a technical high school are inferior to those of higher social rank. This, too, is typical white liberal bunk. Has it occurred to her that many students prefer technical careers - and some make an excellent living at them - to the jobs held by the elites and that some of those jobs (like politician) fit them for nothing of value and turn them into professional snobs?

Senator Clinton should consider the wisdom of a former president, who said, "The collection of any taxes which are not absolutely required, which do not beyond reasonable doubt contribute to the public welfare, is only a species of legalized larceny. . . . The wise and correct course to follow in taxation is not to destroy those who have already secured success, but to create conditions under which everyone will have a better chance to be successful." (Calvin Coolidge inaugural address, March 4, 1925)

Now there's a real economic vision!

Cal Thomas is America's most widely syndicated op-ed columnist and co-author of Blinded by Might.

Saying That a Corporation Makes "Obscene Profits" Is Like Saying a Baseball Star Hits an "Obscene" Number of Home Runs. . . .

     What planet do these people live on?  The last time I checked, the purpose of establishing a company is to make profits, preferably ones that Chuck Schumer might call "obscene."  It means you're doing an excellent job.

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No Such Thing as Obscene Profits
By Michael Medved
Wednesday, May 16, 2007

That’s certainly the case with the words “obscene profits” --- regularly applied to the recent success of the big oil companies.

We’ve all heard the protestations by various poseurs and politicians, who want to investigate or restrain or regulate or apply punishing taxes to the “obscene profits” of big oil.

The best response to these demagogues and lunatics would be a flat-out declaration: profits are never obscene.

Losses, on the other hand, can be obscene – disastrous, damaging, deadly to employees, stockholders and, ultimately, the public.

Auto companies have suffered major losses --- obscene losses, if you will – so does that make them more virtuous than oil companies?

Profit isn’t a shameful accident for corporations --- it’s their very reason for being. Big profits help them do more of what they did to make the profit in the first place. In the case of oil companies, that means more exploration, development, drilling, pumping, refining, transporting and marketing of the oil that fuels every aspect of our economy. Their profitability indicates that they’ve done an excellent job of doing what the public needs and wants, just as the losses by American auto makers suggest that they’ve done a terrible job at giving the public cars we want to buy.

Why should commentators and politicos abuse companies that do an outstanding job, and call for more support for those corporate citizens that do a lousy job? If we punish success and reward incompetence, that constitutes a sure-fire formula for more incompetence and less success.

Of course, some leftist might say that the profitability of oil companies is no more praiseworthy than the success of drug dealers, tobacco companies, the makers of fattening junk food, and other enterprises that feed damaging addictions.

But sane citizens ought to laugh at the ridiculous idea that the organizations that produce fossil fuel to feed our cars and our industrial base deserve derision as “oil pushers.” Energy companies provide an essential service for the entire society, and for all its members who happen to enjoy the highest standard of living, with the greatest freedom of choice, in the whole history of humanity.

Of course, at the moment it’s frustrating to pay more at the pump, but oil profits aren’t the culprit, nor would punishment of the energy companies help to bring down the cost of fuel. When businesses pay a heavier burden in taxes, it doesn’t make prices go down; it generally forces prices to go up, whenever companies can pass on the cost to the consumer. The idea that “windfall profit taxes” would cause oil companies to charge less flies against every rule of economic reality. If you add to the cost of production with new levels of governmental taxation or regulation it means that either prices go up or else profits go down – meaning less incentive for production, less production and, inevitably, higher prices.

Moreover, any attempt to “cap” the price of gas at the pump in the US would prove massively counterproductive. If oil companies receive less money for their products from American consumers than they do from consumers in Europe, Asia and elsewhere, isn’t it obvious that they’ll divert most of their production to those economies where they receive the best prices? In other words, if energy companies couldn’t sell their products in the US for market prices, they’d send them to hungry, surging markets in the rest of the world for top dollar, creating a US gas shortage that would prove far more damaging than even $3.50 a gallon.

Despite the disruption of war and hurricanes and capricious government regulation, big oil companies have managed to insure the steady, uninterrupted supply of energy that fuels every aspect of our personal and business lives. The profits they’ve generated while answering these needs hardly count as “obscene.” The only real obscenity involves the inane liberal conviction that companies or individuals engaged in legal, constructive endeavors should ever feel ashamed or apologetic about their success.

Michael Medved is a film critic, best-selling author and nationally syndicated radio talk show host.

Victims of Communism Memorial to be Dedicated June 12th in D.C.

     The dedication will take place at the Memorial site at the intersection of Massachusetts Ave., N.W., New Jersey Ave., N.W., and G St., N.W., two blocks from Union Station and within view of the U.S. Capitol.

 

     The Victims of Communism Memorial Foundation, a non-profit organization, was established by an Act of Congress to build a memorial in Washington, DC to commemorate the more than 100 million victims of communism; to honor those who successfully resisted communist tyranny; to educate current and future generations about communism's crimes against humanity; and to pay tribute to those who helped win the Cold War. [from the site]

Note to Big-Hearted, Unselfish, Caring Folks: You Can't Be Generous, Compassionate and Loving by Giving Away SOMEBODY ELSE's Property!

     If there's a hungry, naked homeless person languishing in the street outside of my house, I am called upon to feed and clothe that person.  However, I am not free to walk into YOUR house, rifle through YOUR coat closet, and take YOUR food to help the person.  That's called stealing.

     Here's a good column on the topic:

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The Good Samaritan, Generosity and Illegal Immigration
By Frank Pastore
Sunday, May 27, 2007

How should a Christian view illegal immigration?

I’ll assume you’re already familiar with how the debate frequently goes. Basically, both sides toss verses at one another. Those who favor amnesty cite “alien-stranger-hospitality” passages. Those who favor legal immigration cite “law” passages.

Perhaps the story of the Good Samaritan can help:

And a lawyer stood up and put Him to the test, saying, “Teacher, what shall I do to inherit eternal life?”

And He said to him, “What is written in the Law? How does it read to you?” And he answered, “You shall love the Lord your God with all your heart, and with all your soul, and with all your strength, and with all your mind; and your neighbor as yourself.”

And He said to him, “You have answered correctly; do this and you will live.” But wishing to justify himself, he said to Jesus, “And who is my neighbor?”

Jesus replied and said, “A man was going down from Jerusalem to Jericho, and fell among robbers, and they stripped him and beat him, and went away leaving him half dead. And by chance a priest was going down on that road, and when he saw him, he passed by on the other side. Likewise a Levite also, when he came to the place and saw him, passed by on the other side. But a Samaritan, who was on a journey, came upon him; and when he saw him, he felt compassion, and came to him and bandaged up his wounds, pouring oil and wine on them; and he put him on his own beast, and brought him to an inn and took care of him. On the next day he took out two denarii and gave them to the innkeeper and said, ‘Take care of him; and whatever more you spend, when I return I will repay you.’ “Which of these three do you think proved to be a neighbor to the man who fell into the robbers’ hands?”

And he said, “The one who showed mercy toward him.”

Then Jesus said to him, “Go and do the same.” (Luke 10:25-37)

What can this teach us?

The Samaritan is honored as “good” for showing mercy to the beaten man because he used his own time, effort and resources to do so. It was he that took the time to bandage the wounds. It was he and his beast that transported the beaten man to the inn. It was his money that paid for the recovery.

There are a number of important lessons to be learned here. First, I cannot be generous, compassionate or loving by giving your property away. I cannot fulfill the commandment to “love my neighbor as my self” by using your land, your property, your house or your money to do so.

The Good Samaritan is good because of his generosity with his own resources. Why then are so many Christians eager to spend my money or the resources of others (through tax revenue) on what God is calling them to do?

Why are they so insistent that I should give more money to the poor, when they are free to give all that they own without restraint? Why do they want to raise my taxes—seize my property—as they portray themselves as compassionate and caring? Have they forgotten the commandment not to steal (Exodus 20:15)?

There is at least one more lesson we can derive that is valuable for the immigration debate: Private property is secured and protected by our ability to lock our doors and close our gates. Locked doors on private homes can be compared to secure borders to the national economy. Both protect the private assets that are on the other side; both elevate the value of the rule of law.

“Christian” supporters of open borders and amnesty using carefully-selected Bible verses need to be honest. Call your attempt to be generous with the property of others what it is: a form of theft. And call your socio-economic political public policy what it is: socialism.

And, if you—in effect—raise your own taxes by freely choosing to donate more of your own money to the poor of the third world, you might come a little closer to actually becoming…

Good Samaritans.