Archive for the 'General' Category

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The Washing Machine

Hans Rosling’s Ted Talk about the Washing Machine revolution and what it means to environmentalists:

If You Were Bill Gates, How Would You Solve Poverty?

If you were Bill Gates and had ten billion dollars to spend to solve poverty, what would you do? David Henderson, an economist at the Naval Postgraduate School, posed precisely that question to various economists at his school and those of us that read his blog. This is what I wrote:

I’ve actually been thinking about this a lot lately. What is the best form of charity? Clearly, just giving a bum on the streets money is a waste. He’ll probably just spend it on alcohol and is he really reformable? Clearly you want the money to go to something that is an investment – that grows, like paying for a poor persons college. Not only do you give them money, but its money that actually solves their problems – long term. But even that has its flaws. After all, they are living in the United States – our “poor”, are richer than 90% of the world.
So then the answer has to do with the worlds poor – not USA’s poor. India, Africa, China, places like that. But you dont want to just give it away either – it robs them of the dignity that comes with “earning”. One thing that I thought about is that when you visit poor countries, and someone offers you a service – say wash your windows, or clean your tires – you tip BIG. Not only are you hitting the target group, but you are rewarding them for a service, and having people participate in the economy makes us all better.

But now were at three qualities of efficient charity: a) targets the clearly truly poor, b) an investment that grows and solves their poverty long term and c) one that gives dividends to the rest of us.

As contrarian as it sounds, I am convinced that the best form of charity is giving jobs and education to the worlds poorest countries – like China’s new growth and capitalist turn. As Tyler Cowen mentioned in his book Economic Stagnation, you get alot of immediate growth and return when a poor population is brought into the world economy – through education, jobs and industrialization. China is at the same stage that the United States was say 100 years ago. And we can expect the same returns – as more and more people are given the opportunity to advance through higher education and innovation. Not only does this make the poorest people better off, but the rest of the world gets alot of the dividends (think of all the added medical innovations, technological innovations, and general increase in standard of living we will experience because of China’s 1 billion+ citizens increased standard of living).

So in the end: what would I do? Probably spend it on whatever makes businesses MORE likely to invest in China, India and other poor countries that bring them further into the economic fold and pull them and their people out of poverty. Maybe invite Intel to open up a training center and design center in a growing country – if the decision ends up losing money, you promise to refund them their losses. If not, you entice another company.

Something like a company insurance policy with the goal of targeting especially poor countries. That is what I would do.

Inequality In Context

World Inequality

George Mason University economics professor explains:

Along the horizontal axis are within-country income percentiles running from the bottom 5% (1st ventile) to the top 5% (20th ventile). Along the vertical axis are world income percentiles.

The graph shows that the bottom 5% of Brazilians are among the poorest people in the world but the top 5% are among the richest. Thus the vertical range of the curve tells us about within-country inequality.

Comparing between countries we see that the poorest 5% of Americans are among the richest people in the world (richer than nearly 70% of other people in the world). The poorest 5% of Americans, for example, are richer than the richest 5% of Indians.

Oil Economics

Economist David Henderson, in a book review, states oil economics that many environmentalists lack:

Another problem, state Hubbard and Navarro, is that America’s heavy oil dependence makes our economy far more vulnerable to slower growth and recessions triggered by sudden price increases. But because oil is traded in a world market, we are vulnerable to price increases whether we import all or none of our oil. So whether we produce all or none of the oil we use, an oil price increase hurts our consumers the same amount. To be sure, if we imported less oil and produced more domestically, a price increase would help our producers. But how would we put ourselves in the position of having more production? By guaranteeing a higher price to domestic producers. By insisting on higher-cost domestic production, we would avoid the possibility of more-expensive oil when prices spike for the certainty of more-expensive oil all the time.

The full review can be found here.

In Defense Of For-Profit Colleges

One of the biggest blind spots of policymakers and pundits is the inability to take target market into account. For example, you can’t just compare the wages of employees at Hilton Hotels vs Motel 6’s and conclude that Hilton Hotels are superior because the employees are paid more. You have to take the companies vastly different target market into account. Motel 6’s target a much poorer and cost sensitive segment of the economy, and so it’s understandable that they pay their employees less. In addition, Motel 6’s also hire from a lower socioeconomic level than does Hilton Hotels, so again you’d expect their pay to be lower (in exchange for lower productivity, ie education, ability to speak English, etc). What seemed like a bad wrap for the poor without taking target market into account, turns out to be an overall net gain when it’s included (who doubts that from the poor’s perspective, Motel 6’s are better than Hilton hotels?).

The same blind spot is apparent in the Wal-Mart vs union run grocery stores debate. Wal-Mart caters to a lower socioeconomic class, by hiring and providing cheaper products to those at the lower end of the income distribution. So it makes sense that their employees are paid less than their union run grocery stores counterparts, who cater to a higher socioeconomic class. Seen in that aspect, Wal-Mart is no different than the Motel 6. And since it’s our ghettos and poor areas that are plagued by unemployment, empty lots and general lack of opportunities, the Wal-Mart model is a superior model for the ghettos and poor areas.

The same blind spot resurfaces when talking about for-profit colleges. When comparing for-profit colleges to non-profits, critics will primarily focus on graduation rates and default rates, taking nothing else into account. But what happens when you take target market into account?

For-profit colleges tend to cater primarily to the marginalized segments of society: working mothers, high school drop outs, older people trying to change careers, and people who are in a rush to graduate. In other words, the riskier segment of society. The very same people that the non-profit education system often ignores.

Seen from this perspective, it’s expected that for-profit schools will be worse than non-profits when it comes to student debt. It’s expected because they cater to riskier students, so they are going to have a larger variance of outcome – whether that is graduation rates, or student loan repayment. But catering to a riskier segment of the population is not something that should be punished, it should be encouraged. Lets remember, for-profits are actually doing what we berate businesses to do – serve those at the bottom, often forgotten by others. They are a lot better at helping students who may have messed up through high school and want to change their lives around.

And this is without even mentioning all of the other benefits that come from for-profit colleges vs traditional colleges. For example, a significantly shorter time to graduation (averaging 3 years, when non-profits are getting closer to 6 years – a huge gain in opportunity cost), more income oriented majors (even the worst of the for-profit colleges will never have such time wasted majors like Chicano Studies, for example) and a clear path towards graduation. All benefits that primarily help the marginalized segments of society.

In the interest of full disclosure, I should mention that I graduated from a for-profit institution. I got my BS in 3 years. Before that I was a high school drop out (in 10th grade) with about a 2.0 GPA. I had only a GED and no community college credits. I was also the child of a poor single mother, living in Compton, Ca. The group of friends I currently run with all have similar stories – all of us grew up poor, are minorities and graduated from the same for-profit college. None of us received any grants (my mom refused to fill out the FAFSA – she always hated anybody knowing how much she made and was convinced I would find out). More importantly, in the for-profit college I went to there were others – not a majority, but certainly a strong minority – in the same situation I grew up in. It’s the privileged kids that were the exception at the for-profit college, not the the poor minorities.

All of us, also, are currently successful engineers. We all make around 6 figures a year or more. All of us with just the bachelors degree from the for-profit college (I have some undergraduate and graduate work at UCSD, but never completed a full degree there). Without a doubt, graduating from that for-profit college was the single best thing I could have done for my life. Without it, my life would have been very different.

Update: Matt Rognlie makes a similar point here.

Two Arguments In Favor Of Immigration

With the Arizona (anti-)immigration laws coming into affect soon, I have seen a lot of arguments in favor of immigration by those opposed to the Arizona laws. Most of them are either weak on economics, or miss the point completely. As a strong supporter of immigration, I thought I’d give two of my favorite arguments in favor of immigration.

My favorite argument in favor of immigration is that immigration is a huge boom to the immigrants themselves. It is, without a doubt, the strongest poverty alleviation tool in the history of man. Nothing else, no social program, no foreign aid, no economic reform, nothing, can so positively improve the lives of people like the freedom of an immigrant to move from an underdeveloped country to a developed country. The only way immigration is even debatable on humanitarian grounds is for one to assign almost zero importance to the welfare of the immigrants themselves. The argument is made stronger when you consider that immigrants also have a (small) net positive affect on the developed country. But even if you disagree, and believe that immigrants are a net loss to the receiving country, that loss would still have to be weighed against the overwhelming positive gain it gives immigrants themselves, almost always of which consist of the poorest members of the world. An impossible hurdle to overcome.

My second favorite argument in support of immigration, and this one specifically appeals to my libertarian and conservative friends, is that immigration is mutually exclusive from social programs. You have to pick: either an economy with abundant immigrants and low levels of social programs, or an economy with abundant social programs and low levels of immigrants. You can’t have both. Counter intuitive you say?

Not really:

Although poor immigrants are likely to support a bigger welfare state than natives do, the presence of poor immigrants makes natives turn against the welfare state. Why would this be? As a rule, people are happy to vote to “take care of their own”; that’s what the welfare state is all about. So when the poor are culturally very similar to the rich, as they are in places like Denmark and Sweden, support for the welfare state tends to be uniformly strong.

As the poor become more culturally distant from the rich, however, support for the welfare state becomes weaker and less uniform. There is good evidence, for example, that support for the welfare state is weaker in the U.S. than in Europe because our poor are disproportionately black. Since white Americans don’t identify with black Americans to the same degree that rich Danes identify with poor Danes, most Americans are comfortable having a relatively small welfare state.

Thus, even though black Americans are unusually supportive of the welfare state, it is entirely possible that the presence of black Americans has on net made our welfare state smaller by eroding white support for it.

Immigration is likely to have an even stronger counter-balancing effect on natives’ policy preferences because, as far as most Americans are concerned, immigrants from Latin American are much more of an “out-group” than American blacks. Faced with the choice to either cut social services or give “a bunch of foreigners” equal access, natives will lean in the direction of cuts. In fact, I can’t think of anything more likely to make natives turn against the welfare state than forcing them to choose between (a) helping no one, and (b) helping everyone regardless of national origin.

This is not something peculiar to one blogger, this is widely recognized on the left and the right. From Paul Krugman and Matthew Yglesias on the left, to Bryan Caplan, Jeffrey Miron and David Friedman (also here) on the right.

Taking the side of immigration over safety nets doesn’t just make sense economically, it also makes sense on humanitarian grounds. As Bryan Caplan explained:  “…unlike the welfare state, immigration has and continues to help absolutely poor people, not relatively poor Americans who are already at the 90th percentile of the world income distribution. There’s no reason for libertarians to make apologies to social democrats: Libertarian defenders of immigration are the real humanitarians in the world, and the laissez-faire era of open borders without the welfare state was America’s real humanitarian era.”

Greenwald vs Frum

I am admittedly weak on foreign policy and as of late I have been trying to catch up. I just finished Noam Chomsky’s book, Failed States and have tried to get my hands on as many debates as possible. So you can imagine my excitement when I found out that two of my favorite bloggers, David Frum and Glenn Greenwald, were doing a bloggingheads together. Both represent intelligently opposite sides of the political spectrum.

On my bicycle ride home today I was able to listen to the full discussion. Though it wasn’t as disagreeable as I expected, the ending of it does touch on important civil-liberty issues and gets to alot of the heart of the disagreement.

The full discussion is worth your time but if you could only listen to one section, I recommend the last ten minutes which I have cut below.

Milton Friedman On The Responsibility To The Poor

Just as true in 1978 as it is today.

The Effort To Keep Ethnic Studies Professors Employed

As someone who both grew up in Compton and attends UCSD, I feel compelled to comment on the recent race relation issues UCSD is having.  As most of you have probably already heard, the whole thing started when UCSD students, outside the campus, had a “Compton Cookout”, where participants were to wear “chains, rapper-style urban clothing by makers such as FUBU and speak very loudly.” Female participants were encouraged to be “ghetto chicks” with gold teeth, cheap clothes and “short, nappy hair.” Also, “The invitation said the party would serve watermelon, chicken, malt liquor, cheap beer and a purple sugar-water concoction called “dat Purple Drank.” It’s goal, apparently, was to mock Black History Month.

That was followed up a couple of days later by a Noose hung from the UCSD library.  With just this information at hand, it paints a very dim picture of UCSD and the racial climate on campus. Especially when you see pictures of students crying and claiming to be ‘afraid to walk to their car’.

Since I have taken many undergraduate and graduate courses at UCSD,  and my experience with the campus is the exact opposite – it is a welcoming campus and not in any way racist –  I was suspicious about the news allegations and decided to dig in deeper.

The first thing I found that contradicted the image the media tried to portray was that the main organizers of the Compton Cookout were Black.  This is how the main organizer defended his decision:


Right or wrong, he claims that the real reason of the Compton Cookout was “to bring the races together”, because “for one night everybody is on the same playing field”. Listen to the full interview. He even debates an ethnic studies UCSD professor on the appropriateness of the event.

Then comes the news story of the Noose.  The student who hung the noose was a female minority. She explains how it happened here:

The student claims in her letter that she and her friends were playing with a rope when one of them tied it into a noose.

“I innocently marveled at his ability to tie a noose, without thinking of any of its connotations or the current racial climate at UCSD. I left soon after with one of my friends for Geisel to study, still carrying the rope,” she writes. “After a bit of studying I picked up the rope to play with, and ended up hanging it by my desk. It was a mindless act and stupid mistake. When I got up to leave, a couple hours later, I simply forgot about it.”

Yet with all of these details left out, UCSD is still forced to cave to the wishes of the race police:

On Monday , the university outlined the actions it has taken to improve the school’s climate and cultural diversity. They include creating a task force to focus on recruiting minority faculty, forming a commission to address the campus climate, continuing to fund Faculty-Student Mentor Programs, ensuring ongoing funding for the Chancellor’s Diversity Office, identifying space for an African-American Resource Center on Campus and meeting with member of the Black Student Union at least once every academic quarter. (emphasis added)

So you see, it was all one big conspiracy to keep ethnic studies professors employed.

20 Years Is Not A Century

Obama, during the State Of The Union address, said:

“With all due deference to separation of powers, last week the Supreme Court reversed a century of law that I believe will open the floodgates for special interests –- including foreign corporations –- to spend without limit in our elections. (Applause.) I don’t think American elections should be bankrolled by America’s most powerful interests, or worse, by foreign entities. (Applause.) They should be decided by the American people. And I’d urge Democrats and Republicans to pass a bill that helps to correct some of these problems.”

Randy Barnett, professor of constitutional law at Georgetown Law Center, writes in the WSJ about Obama’s criticism of the Supreme Court:

Then there is the substance of the remark itself. It was factually wrong. The Court’s ruling in Citizens United concerned the right of labor unions and domestic corporations, including nonprofits, to express their views about candidates in media such as books, films and TV within 60 days of an election. In short, it concerned freedom of speech; in particular, an independent film critical of Hillary Clinton funded by a nonprofit corporation.

While the Court reversed a 1990 decision allowing such a ban, it left standing current restrictions on foreign nationals and “entities.” Also untouched was a 100-year-old ban on domestic corporate contributions to political campaigns to which the president was presumably referring erroneously.

That is a whole lot to get wrong in 72 sanctimonious words. Clearly, this statement had not been vetted by the president’s legal counsel. Solicitor General Elena Kagan, for example, would never have signed off on such a claim. Never.

Then there is the lack of any reference to the Constitution or First Amendment upon which the Court rested its decision. The president made a nakedly result-oriented criticism: Because interest groups and foreigners (gasp!) will allegedly get to influence our elections, the Supreme Court made a legal mistake. As though this is the way the Supreme Court should decide constitutional cases.

Oh, and how exactly is Congress supposed to override a constitutional ruling by the Supreme Court by enacting a statute? Or was the president merely urging Congress to evade it?

If the president, himself a Harvard Law School graduate, is going to criticize a judicial opinion, it is incumbent upon him to be legally accurate and responsible in his commentary. If that is too much to expect of a politician giving a nationally televised speech to the general public, then this again illustrates the inappropriateness of making this remark in this venue.

The full article can be found here.

Obama The Debater

Obama gave a speech and responded to questions at the House Republican retreat in Baltimore. See the full video on C-Span here. The transcript can be found here.

I disagree with Obama on many things. Alot of which he discussed in this video. But it is clear from the dialogue that Obama has a far better command of the issues than present day Republicans. He clearly cleaned their clocks in this discussion.

More On Majors And Why Chicano Studies Is Garbage

A frequent topic of discussion in my family is what university, what major and the return to investment my sister should pursue after finishing high school. My dad is a man of modest means and is the only bread winner in a family of five – 3 children of which, have yet to pursue a college degree. Aside from the financial help I provide, he has nobody else to rely on. My families situation is not that different from other minorities, at some point – regardless of grants and financial aid – you have to weigh the trade-offs and cost/benefit of sending your child off to college.

Long time readers of this blog know my position, which is fundamentally that the two most important variables are: what major you choose and the grades you get. Everything else is secondary at best and more likely irrelevant. I’m so extreme in my beliefs that I advised my dad that unless my sister chooses something in the hard sciences, he refuse to pay for her education (she would still be able to get her own grants, financial aid and his blessing – just not his money).  Also, despite the fact that my sister went to a good public school (my parents fake their address),  took advanced classes – AP and honors Math, Physics, English, History etc – and finished near the top of her class, I still advised her to go to a Cal State. Even the relatively cheap cost of the UC’s, had she applied (to avoid the temptation, she didn’t even apply) and been accepted, would not have been worth the costs, IMHO. The hiring premium between say a Berkeley student and a Cal Poly student is not that much (trust me, I’ve done interviews for my company) and it certainly doesn’t cover the long term debt difference the two schools would leave the student with (debt that comes not just from the tuition but also the living costs of living in the area). Factor in years of experience and, I strongly believe,  in the long run there is no difference between the two schools that cannot be attributed to personal characteristics (IQ, work ethic, connections, etc).

This is one of the main disagreements I have with Chicano Studies and the culture it creates for minorities entering college. A year or so ago I wrote:

One of the many things I dislike about Chicano Studies as a major is its over emphasis on “nonprofit activism” vs “personal interest”. In the status circles of Chicano Studies students, you are admired more for your desire to ‘build a community outreach center for disadvantaged children’ than for say, getting an engineering degree and ‘making the big bucks’….a kid from the ghetto is taking an enormous risk by accepting a low salary. They are, in effect, “putting all their eggs in one basket”. And unless they are the lucky ones, they are doomed to rear their next generation of children in the very same environment they were raised in.

I called it a luxury of the rich to pursue a college degree based solely on personal interest and void of personal gain. Some of my friends disagreed then. Some of my friends disagree now. They think I am too harsh in my advice on my sister. They think instead she should be able to ‘pursue her dreams and interests’ as if all family situations were the same (remember, my dad has finite dollars – every dollar spent on my sister is one less he can spend on the rest of the family…a high return is a necessity, not a luxury).

Well, for those who still disagree I point you to this well written advice column in The Chronicle of Higher Education. It’s not completely related but it still hints at the same conclusions and remarks I mentioned before – only better written and communicated. The full article really should be read in full but for those of you short on time, I quote below his concluding remarks:

As things stand, I can only identify a few circumstances under which one might reasonably consider going to graduate school in the humanities:

  • You are independently wealthy, and you have no need to earn a living for yourself or provide for anyone else.
  • You come from that small class of well-connected people in academe who will be able to find a place for you somewhere.
  • You can rely on a partner to provide all of the income and benefits needed by your household.
  • You are earning a credential for a position that you already hold — such as a high-school teacher — and your employer is paying for it.

Those are the only people who can safely undertake doctoral education in the humanities. Everyone else who does so is taking an enormous personal risk, the full consequences of which they cannot assess because they do not understand how the academic-labor system works and will not listen to people who try to tell them.

It’s hard to tell young people that universities recognize that their idealism and energy — and lack of information — are an exploitable resource. For universities, the impact of graduate programs on the lives of those students is an acceptable externality, like dumping toxins into a river. If you cannot find a tenure-track position, your university will no longer court you; it will pretend you do not exist and will act as if your unemployability is entirely your fault. It will make you feel ashamed, and you will probably just disappear, convinced it’s right rather than that the game was rigged from the beginning.

But please do read the article in full. It can be found here.

Is Racism Still Important?

A continued theme on Matthew Yglesias blog is that conservatives in general are more concerned with anti-racism than racism, this is how he explains it:

“…most conservatives, think that the preeminent racial problem in the United States is that white people are too put upon by political correctness. Conservatives are very very very concerned about this alleged problem of anti-racism run amok. And they’re very concerned about the alleged problem of reverse discrimination. But they don’t seem concerned at all about racism or discrimination and certainly not nearly as concerned as they about helping out the poor, put-upon white man.

This is actually true and though Yglesias views it as a flaw, I see it as a virtue. In fact, its one of the reasons why I find the conservative side more appealing than the progressive side. Just to be clear though, Yglesias is not saying that conservatives view racism as historically unimportant, or that racism is completely unimportant, cuz then I would agree with Yglesias that that is a flaw; no, Yglesias is chiding conservatives for not seeing todays racism as a bigger problem than todays “anti-racism”.

Of course racism is important, very important,  to those who are suffering under racism. If I was denied a job solely because of my race, I would be really pissed off and want some justice. However, as a policy issue I think racism is very low on the totem poll of problems (though not zero).

I like the way economist Walter Williams explained it:

Like the March of Dimes’ victory against polio in the U.S., civil rights organizations can claim victory as well. At one time, black Americans did not enjoy the same constitutional guarantees as other Americans. Now we do. Because the civil rights struggle is over and won doesn’t mean that all problems have vanished within the black community. A 70 percent illegitimacy rate, 65 percent of black children raised in female-headed households, high crime rates and fraudulent education are devastating problems, but they’re not civil rights problems. Furthermore, their solutions do not lie in civil rights strategies.

Civil rights organizations’ expenditure of resources and continued focus on racial discrimination is just as intelligent as it would be for the March of Dimes to continue to expend resources fighting polio in the U.S. Like the March of Dimes, civil rights organizations should revise their agenda and take on the big, non-civil rights problems that make socioeconomic progress impossible for a large segment of the black community.

In other words, racism as a source of minority failure is not all that important anymore.  Most real impediments to minority success – issues like illegitimacy rates, crime, failing public schools – are only loosely, very loosely I would argue, tied to race. But because race is such a hot button issue, these issues are difficult to talk about openly – ultimately harming the search for the cure. Bring up your concerns with crime in the ghetto, illegitimacy rates, the widening educational gap, or affirmative action and unless you walk a very tight line, you can be easily accused of racism. This censorship, namely, this “anti-racism”, hampers progress on such important issues (even some progressives agree, see here).

This is much more a problem on the left than it is on the right. The left tends to see the world through the prism of “racism” (and”class warfare”), making honest dialog on race issues extremely difficult – trust me, I’ve tried. The right, on the other hand, has a more balanced view on these issues and because of it you are able to go further in finding a cure.

Not only does overemphasis on racism result in unintended censorship on important topics,  but it also leads to a blinding force when searching for solutions. When dealing with the issues of illegitimacy rates, crime and failing public schools, for example,  the progressive tries hard to find its racist connection – however strained that connection may be. This is a serious stumbling block and is one of the main reasons why real educational reforms, whether it’s charter schools, vouchers, or even NCLB have all come from the right.

So I would argue that as far as real effective policy goes, emphasis on racism has now ran into significant diminishing returns, whereas the overemphasis on racism is a real roadblock to discussing important minority problems.

And it seems like Matthew Yglesias, ultimately, is not too far off. For example, in a separate post, he lists what he considers the real problems of racism today:

At any rate, I’ve made this point a million times, but it’s fascinating to me the kind of double standard conservatives apply to these issues. You never hear Rush Limbaugh decrying everyday racism against non-whites in the United States. You never hear him recounting an anecdote about an African-American man having trouble hailing a cab or being followed by a shopkeeper. He doesn’t do stories about how people with stereotypically “black” names suffer job discrimination. He doesn’t bemoan the fact that the United States has an aircraft carrier named after a fanatical segregationist.

What is interesting about this list is what type of “racism” it is: specifically, statistical racism (more here and here), or what economists call statistical discrimination. This type of “racism” is very different than the invidious racism that comes to mind when we think of racism: issues like being forced to sit in the back of the bus, forced segregation, laws against interracial marriages, poll taxes and so forth. Statistical discrimination, while still offensive, is based on statistics, not bigotry.

That is not to say that it is any less offensive to the person being statistically discriminated against but it makes a huge difference when looked at from a policy perspective. Take the claim “about an African-American man having trouble hailing a cab”, as an example. The reason that Blacks have trouble hailing a cab, specifically in New York City, is because Blacks have a higher crime rate than many other groups. A cab driver, being in an especially vulnerable position, has a strong incentive to ensure his safety but at the same time he also wants to make the most money he can. So every approaching customer gets put through some sort of subconscious statistical analysis: is this person more likely to rob me? Given that the cab driver has a limited amount of information to go on, race plays an important factor. This is not unique to white cab drivers either, cab drivers of every race, including Black cab drivers, show the same tendency of picking up Black passengers less than non-Black ones. While this may be offensive, from a policy perspective there is no practical way to prevent it – as long as the cab driver has an incentive to reduce the likelihood of robbery, and as long as being Black signals a higher probability for robbery, there is always going to be the desire to resist providing a cab when the cab driver deduces the risk is too high. The same general principle applies about stereotypically “black” names, see here.

The real gains in reducing statistical discrimination come not from government fiat but from the inside, as economist Bryan Caplan states,”If you really want to improve your group’s image, telling other groups to stop stereotyping won’t work. The stereotype is based on the underlying distribution of fact. It is far more realistic to turn your complaining inward, and pressure the bad apples in your group to stop pulling down the average.” Which is, btw, more likely when you don’t see racism behind every corner.

Besides, hasn’t Yglesias noticed that we have a Black President? How much of an impediment can racism really be in a country that elected its first Black president? John McWhorter has more here.

In Support Of Barney Frank

For repudiating stupid people like this:


People like this make me sick.

Limited Governments Best Friend: The CBO

Remember the Democrats claim that by empowering a new panel (the Independent Medicare Advisory Council) to recommend future spending reductions we could save several billions of dollars in healthcare costs? If this was before the creation of the CBO (1974, according to Wiki), such claims would be nearly impossible to disprove. Democrats could get away with making the claim and fiscally conservative politicians would have little to say in opposition. The whole debate would break down into a he-said she-said debate, with Republicans pointing to some economist at some University showing the proposal would barely save a few billion dollars and Democrats responding with their own economist and study arguing that it would save multiple billions. How would the average citizen distinguish who is right?

Of course, years after the policy changes had been put into effect, the truth would have come out – which is why in every single healthcare change, including the recent Massachusetts healthcare reforms, the healthcare policies have turned out to cost far more than people assumed – but by then the changes would have already been in affect for atleast a couple of years. New special interest groups would have already been created, and the government program, like any other government program, would become nearly impossible to stop.

But that was before the CBO had so much influence. Today, Democrats have to get their claims past the CBO and are having a very difficult time doing it. The latest is their claim that an Independent Medicare Advisory Council would save several billions of dollars. The CBO argues that that simply is not true, Donald Marron reports:

CBO estimates that the proposed legislation would save a paltry $2 billion over the next ten years, less than 1/500 of the 10-year cost of health reform.

This is on top of the earlier headaches the CBO has given Democrats.

Long gone are the days when Democrats could simply propose some theoretical cost saving legislation and ask the public to take it on good faith. Imagine if the CBO had existed when FDR was around? LBJ?

Although that doesn’t mean the CBO itself doesn’t have serious shortcomings, on the contrary, it too tends to underestimate the costs of policies, as it recently did in predicting the fiscal stimulus recovery (see here and here) but atleast now the Democrats proposals have to pass a higher standard than simply their word.

Keith Hennessey has more here.

Update: The Economist has more.