Monthly Archive for July, 2011

The Institute For Justice Shows Results

One of my favorite organizations is the Institute For Justice. It is an extremely successful organization that fights against the powers of the government in areas where there are little other organizations doing so. For example, there  is the licensing fight – an especially discriminatory and arbitrary arm of the government that gets little attention – where the District of Columbia government threatened hairbraider Pamela Ferrell and her husband Talib-Din Uqdah with fines and jail time for practicing their craft without an unnecessary government license. The license would have been expensive, and worse, unnecessary, as the barbers license had no class for hair braiding – a predominantly African American practice. The Institute for Justice took the case and won! See more here.

[youtube:http://www.youtube.com/watch?v=2tjTheDqQrw&feature=youtu.be]

Then there is the case of the El Paso governments war on taco trucks. Prodded by restaurants afraid of the competition, the El Paso government tried to ban taco trucks in the area. So the Institute for Justice stepped in.

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It also fought against the state of Arizona in its attempt to regulate eyebrow threading.

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Then there is the case of Atlanta’s war against street vendors.

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But a case that has hit close to home is the Institute for Justice’s recent victory against the city of National City on eminent domain. The Liberator today explains:

The Institute for Justice has obtained a victory in the long running dispute between National City and the Community Youth Athletic Center, which was designated as blighted in order to allow seizure of the gym by the city so that an influential developer can build luxury condos…National City took the route of declaring the area “blighted” by paying a private consultant to produce a report allegedly proving the blight. However, they then refused to provide the details of the report.“. . .the Court also held that when the government retains a private consultant to perform government functions—in this case, documenting the existence of alleged “blight” in National City—documents that the private consultant produces are public records subject to disclosure under the California Public Records Act. The Court also set a clear standard for what government agencies have to do in searching the records of their private consultants in response to a Public Records Act request.”

National City, for readers unfamiliar with the area, is one of San Diego’s low income neighborhood. The Barragan family have run the gym primarily as an alternative outlet for gangmembers who want a way out of the gang. The gym has been successful and the residents of National City hold the gym and the family in high regard (to read a moving article on how a 2006 tragedy to the Barragan family was dealt with by the community, see here).   But this didn’t matter to the greedy politicians who cared more about money than doing whats right. Luckily for the Barragan family and the community of National City, the Institute for Justice stepped in.

[youtube:http://www.youtube.com/watch?v=8pB_TmpSjJI]

The Institute for Justice doesn’t stop there, it also helps fight for school choice, property rights, and other cases involving economic liberty.There are three things that make the Institute for Justice unique: first, it helps those who need help the most. Mostly the poor and recent immigrants. How could a poor immigrant from Africa trying to make a living hair braiding have paid for a lawyer on her own? Or the taco truck owners? Or the Barragan family in the low income neighborhood of National City? Second, it targets laws that primarily harm the poor and minority. Third, it has a strong winning record. Few other organizations could say the same.

The Deregulation Era And Developing Countries

Lefties often label the era from the late 1970’s to today as the era of deregulation where wages stagnated, income inequality increased, and overall the rich got richer at the expense of the poor. They argue that we should go back to the economic era from roughly the end of WWII, to the late 1970’s. That was an era of unprecedented economic growth, rise in wages, and reduced inequality.

Now, there are various answers that could be given to such claims (see here, here, here and here for a few) but my favorite is to look at the ‘deregulation era’ from the eyes of poor people around the world. If your concern is the worlds truly poor – those living in absolute poverty – the ‘deregulation era’ is an absolute god sent.

Take Hans Rosling, who gave a Ted Talk on this very thing – showing how our preconceived notions of poor countries are extremely outdated, see here. He shows that many countries, especially in Asia, but also Latin America and Africa, that have been poor for so long are now quickly moving up the economic ladder. But this was in 2007, the leftist replies, surely it’s outdated, no?

But then a couple of prominent economists noticed the same thing. MIT’s Maxim Pinkovskiy and Columbia’s Xavier Sala-i-Martin published a paper showing:

The conventional wisdom that Africa is not reducing poverty is wrong. Using the methodology of Pinkovskiy and Sala-i-Martin (2009), we estimate income distributions, poverty rates, and inequality and welfare indices for African countries for the period 1970-2006. We show that: (1) African poverty is falling and is falling rapidly; (2) if present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time; (3) the growth spurt that began in 1995 decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for mineral-rich as well as mineral-poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below- or above-median slave exports per capita during the African slave trade.

The authors explain their findings here. The New Republic as well as Blue Matter blog comment here and here.

Matthew Yglesias quotes another study from the World Bank:

Just over 25% of the world’s population (1.4B people), lived in extreme poverty in 2005, according to a report released this month from the World Bank (”Global Economic Prospects 2009: Long-term prospects and poverty forecasts“). This has fallen from 42% in 1990, when the bank first published its global poverty estimates. All regions of the world have seen gains. Rapid economic growth east Asia in particular has led to a dramatic decline in global poverty. In China the share of the population getting by on $1.25 a day, or less, fell from 60% to 16%.

The Economist magazine has more here.

Matthew Yglesias later comments:

Amidst all these problems in the United States, it’s worth recalling that for much of the world these are actually the best of times…

American politics is, naturally, going to remain focused primarily on the problems of Americans. But ultimately the problems of poor people in the developing world are much more severe than any of our problems, and growth in poor countries is extremely good news.

Even the Huffington Post picked up on the drastic change:

In the 1990s, “people could only feed themselves, and some even starved. Children could not afford to go to school, and many could not even finish primary school,” said Liu Jiandang, a 41-year-old former farmer. “Now, we’ve got paved roads, new houses, phones and vehicles. I run a hotel that can host 20 to 30 tourists and some rooms have TV sets, air conditioners, hot water and bathrooms.”

With her profits topping 50,000 yuan ($7,000) a year, Liu can afford to send her 19-year-old son to vocational college and her 10-year-old daughter to primary school. “Our lives are so much better than before,” she said.

Okay – you say, but surely the financial crisis has reversed most of these trends, right? The answer is no. According to Dani Rodrik, professor at Harvard Universities International Development program, writes:

For the first time ever, developing countries as a group grew have been growing faster than industrial countries. Not only that, as the figure makes clear, the growth differential between the two groups has been widening in favor of the poor countries.

And it isn’t just China, India, and a few countries that have been doing well. For a change, Africa and Latin America actually experienced some convergence with rich countries over the last decade.

Many analysts have projected these trends forward and predict rapid global growth, largely off the back of emerging and developing nations. In the words of a Citigroup report, “this time will be different.”

He provides this eye opening graph:

The Growth Of The Poor

Notice the dramatic turnaround, starting around the 1980’s and moving upwards quickly thereafter. This is all GREAT news from a developing countries perspective and it seems like the great recession hasn’t slowed it down!

What would the future look like if this trend is to continue? Tim Taylor gives the numbers:

To get a sense of the change, compare the rank order of the economies of the world in 2009 and 2050.  In 2009, the U.S. is the world’s largest economy. By 2050, U.S. economy will be about 2.5 times as large–and is projected to be in third place in absolute size, behind China and  India.  What other countries move up the rankings notably by 2050? Brazil, Mexico, Indonesia, Turkey, Nigeria, and Vietnam. To my 20th century mindset, some of those countries just don’t seem like global economic heavyweights. Time to start adjusting my mind to the coming realities.

More can be found on his blog post here.

The private sector is catching on too, as Alan Taylor, a Senior Adviser at Morgan Stanley wrote in Foreign Affairs magazine:

A broad range of economic figures suggest that emerging markets are catching up to developed markets. As the Great Recession fades, this trend is likely to continue. The emerging-market history of low growth and high volatility is fading, while developed markets are experiencing more instability and financial impairments. Emerging markets have decreased their debt-to-GDP ratios, even as developed markets, including the United States and some in Europe, are letting theirs rise. In a sign of convergence between emerging and developed markets, health and schooling levels in emerging-market countries are now comparable to those seen in developed markets around 1975, with the gap continuing to narrow. And average levels of political and economic freedom in emerging markets have also improved dramatically in the last two decades. Although emerging markets have not yet achieved parity with developed markets…they now appear more stable and better positioned to enjoy sustained growth than they did a generation ago.

Even Jay Ulfelder is convinced, he writes:

To my mind, the trends Alan Taylor identifies are the start of the big development story of the 21st century. After a century in which the global political economy was primarily characterized by the yawning gap in wealth and power between the so-called First and Third Worlds, that gap is finally narrowing. Economic growth is accelerating in countries long mired in a “poverty trap,” and the economic and political benefits of that trend are extending to more and more of the world’s human population. Hundreds of millions of people still live in abject poverty, under authoritarian rule, or both, but the share of the global population living in deep poverty is notably lower than it was just a couple of decades ago, and the economic takeoffs occurring in many long-poor countries suggest that trend is only broadening.

I leave you with a quote from a study on this very thing from the Brookings Institute (pdf) :

The greatest surprise, however, is the one taking place in Sub-Saharan Africa. Between 1980 and 2005, the region’s poverty rate had consistently hovered above 50 percent. Given the continent’s high population growth, its number of poor rose steadily. The current period is different. For the first time, Sub-Saharan Africa’s poverty rate has fallen below 50 percent. The total number of poor people in the region is falling too.

If you consider all humans of equal value, regardless of race or nationality, the ‘deregulation era’ has to be considered a great era and a positive change over previous periods of human history – and this is true, even assuming the worst case assumptions of the liberals and lefties of the world.

Update: More here, here and here(pdf).

Republican States Have The Best Public Schools

More evidence that teachers unions are an impediment to education reform:

When it come to excellence in education, red states rule—at least according to a panel of experts assembled by Tina Brown’s Newsweek.

Using a set of indicators ranging from graduation rate to college admissions and SAT scores, the panel reviewed data from high schools all over the country to find the best public schools in the country.

The results make depressing reading for the teacher unions: The very best public high schools in the country are heavily concentrated in red states.

More here.

Boeing And Movement – As American As Apple Pie

Harvard economist Edward Glaeser writes:

Americans, and their companies, have long benefited from their freedom to move throughout our country.

In the 19th century, we moved in search of natural resources, exchanging the stony soil of New England for the rich soil of Iowa. In the 20th century, Americans were more likely to migrate in search of better political environments, like the blacks who fled the Jim Crow states of the South.

The profound role that mobility has played in our country, enabling repeated reinvention, causes me to be deeply worried about the possibility that a National Labor Relations Board complaint will preventBoeing Co. (BA) from moving plane production from Washington state to South Carolina.

That is just the beginning. The full article is worth your time. It can be found here.

The Progressive Magazine On Ha-Joon Chang’s Book

I got back from a five day trip to Chicago yesterday, and as such, was able to catch up on a lot of my magazine reading. A review that caught my attention was Amitabh Pal, of The Progressive Magazine, review of Ha-Joon Chang’s recent book 23 Things They Don’t Tell You About Capitalism. For those unfamiliar with Ha-Joon Chang, he is a heterodox economist who is a prominent supporter of industrial policy – a view largely shunned by mainstream economists.

Amitabh Pal gives a list of the positives and negatives of the book (some I agree with, some I don’t) but the part of the review that most caught my attention was this part:

Chang’s Achilles heel is his fixation with industrial policy, which he views as the road to salvation for poorer nations. Only if countries protect their infant industries, nurture them in various ways, and allow them to mature can they ascend to prosperity, he says.

But a number of nations have tried this with little success, the biggest example being India, where family-run conglomerates used protectionist policies to instead foist the most shoddy, substandard products on hapless Indian consumers (the dominant car model until the late 1980s was based on a 1950s British Morris Oxford).

The obvious difference between India and Chang’s native  South Korea was that big business in India held sway over the state, rather than the other way around in South Korea, as delineated in Vivek Chibber’s Locked In Place: State-Building and Late Industrialization in India. Chang sidesteps such issues.

What I find most interesting is that  Amitabh Pal’s rebuttal is nearly identical to the standard economic criticism of industrial policy: namely, if a countries government is independent enough to properly implement industrial policy, the country likely doesn’t need it, and if the government is too corrupt, industrial policy only makes things worse.

I find it interesting that one of the most prominent proponents of industrial policy, in arguing for industrial policy, completely avoids dealing with a central criticism head on. But I admit, I have personally not read the book – so maybe Amitabh Pal completely missed it?

I cannot seem to find the online version of the review, but it was listed in the printed edition of April’s publication.

Quote Of The Day

“I’ve written numerous times over the last year about rapidly worsening perceptions of the U.S. in the Muslim world, including a Pew poll from April finding that Egyptians view the U.S. more unfavorably now than they did during the Bush presidency.  A new poll released today of six Arab nations — Egypt, Lebanon, Jordan, Saudi Arabia, the United Arab Emirates and Morocco — contains even worse news on this front” — Glenn Greenwald

Quote Of The Day

“BTW, progressives like Yglesias often point out that no matter what they say, the GOP is devoted single-mindedly to one goal, and one goal only—lower tax rates for the rich.  And I have to agree that that is an obsession of many GOP economists.  But then why the strange pattern of state income taxes around the country?  Income taxes are often higher in conservative Republican states in the South, than in liberal Massachusetts.  Even more surprisingly, the rich in the South are especially likely to be Republicans (as compared to the rich in Boston, NY and LA.)  Yes, there are some GOP states with no income tax (Texas, Tennessee and South Dakota.)  But there are also swing states (Nevada, New Hampshire and Florida) and even one liberal state (Washington.)  Why don’t the southern and Rocky Mountain GOP states at least cut the top rate down to Massachusetts levels (5.3%)?” —Scott Sumner, Economist

Quote Of The Day

“In my opinion, mortgage loan modifications are the biggest macroeconomic mistake of the Obama Administration. I could not tell you whether the stimulus bill helped or hurt. I am skeptical that the health care bill or the Dodd-Frank bill had much effect. But I am pretty sure that I was right in 2008 when I said that the housing crisis would be prolonged by efforts to modify mortgages. As you look around for places to cast blame for the depressing job statistics, do not overlook loan modifications.” — Arnold Kling, economist

Setting The Record Straight On Herbert Hoover

Megan McArdle writes:

Hoover did not tighten up on spending.  According to the historical tables of the Office of Management and Budget, spending in 1929 was $3.1 billion, up from $2.9 billion the year before.  In 1930 it was $3.3 billion.  In 1931, Hoover raised spending to $3.6 billion.  And in 1932, he opened the taps to $4.7 billion, where it basically stayed into 1933 (most of which was a Hoover budget).  As a percentage of GDP, spending rose from 3.4% in 1930 to 8% in 1933–an increase larger than the increase under FDR, though of course thankfully under FDR, the denominator (GDP) had stopped shrinking.

This spending represented a substantial increase over the Coolidge years (outlays had been steady between $2.85 billion and $2.95 billion since 1924).  And in real terms they represented a very substantial increase, since both nominal and real GDP were falling.

Hoover did not tighten up on spending.  According to the historical tables of the Office of Management and Budget, spending in 1929 was $3.1 billion, up from $2.9 billion the year before.  In 1930 it was $3.3 billion.  In 1931, Hoover raised spending to $3.6 billion.  And in 1932, he opened the taps to $4.7 billion, where it basically stayed into 1933 (most of which was a Hoover budget).  As a percentage of GDP, spending rose from 3.4% in 1930 to 8% in 1933–an increase larger than the increase under FDR, though of course thankfully under FDR, the denominator (GDP) had stopped shrinking.This spending represented a substantial increase over the Coolidge years (outlays had been steady between $2.85 billion and $2.95 billion since 1924).  And in real terms they represented a very substantial increase, since both nominal and real GDP were falling….

Hoover did not tighten up on spending.  According to the historical tables of the Office of Management and Budget, spending in 1929 was $3.1 billion, up from $2.9 billion the year before.  In 1930 it was $3.3 billion.  In 1931, Hoover raised spending to $3.6 billion.  And in 1932, he opened the taps to $4.7 billion, where it basically stayed into 1933 (most of which was a Hoover budget).  As a percentage of GDP, spending rose from 3.4% in 1930 to 8% in 1933–an increase larger than the increase under FDR, though of course thankfully under FDR, the denominator (GDP) had stopped shrinking.This spending represented a substantial increase over the Coolidge years (outlays had been steady between $2.85 billion and $2.95 billion since 1924).  And in real terms they represented a very substantial increase, since both nominal and real GDP were falling.

Economic Growth Over The Years

Timothy Taylor explains:

Over the last 2010 years, 55% of total economic output happened in the 20th century, and an additional 23% of the total in just the first 10 years of the 21st century.About 28% of the total years of human life lived in the last 2010 years happened during the 20th century, and about 6% of total years of human life lived in the last 2010 years happened in the first 10 years of the 21st century.

Quote Of The Day

“I do get the point that if you are young and idealistic and want your work to have a goal of alleviating poverty, working for a typical business may seem unlikely to relate to your objective. But it’s hard to know. Has poverty in India and China been reduced more by the action of aid agencies or by the fact that those countries are now embedded in the supply chains of U.S. service and manufacturing firms?” — Arnold Kling 

Science Knowledge And Global Warming Belief

I found this surprising:

A new study by the Cultural Cognition Project, a team headed up by Yale law professor Dan Kahan, shows that people who are more science- and math-literate tend to be more skeptical about the consequences of climate change. Increased scientific literacy also leads to higher polarization on climate-change issues

More can be found here.

Quote Of The Day

“… there is no hard and fast distinction between cyclical and structural unemployment. For instance, if structural unemployment in American has risen closer to European levels, it may be partly due to the decision to extend unemployment insurance from 26 weeks to 99 weeks, and to increase the minimum wage by over 40% right before the recession. Does that mean that demand stimulus cannot lower unemployment? No, because the maximum length of unemployment insurance is itself an endogenous variable. If stimulus were to sharply boost aggregate demand it is quite likely that Congress would return the UI limit to 26 weeks, as it has during previous recoveries. For similar reasons, the real minimum wage would decline with more rapid growth in demand. Aggregate supply and demand are hopelessly entangled, a problem that many economists haven’t fully recognised.” — Scott Sumner, guest blogging on The Economist Blog