The Electoral Map

This is pretty amazing - as of right now (and the last vote was cast almost 24 hours ago, so not sure if its still running) the outcome at this Ask 500 People's question of mine tracks perfectly with the voters' spectrum of about 40% Republican, 40% Democrat and the remainder as Independent/Swing/Don't Care/other :

The question is:

Government has a duty to help the poor and to regulate business.

A) No, government should stay out of the people's business.
B) Yes, this is the function of government.
C) Only if we vote for those things.

The results:

	No	Yes	Only if...
United States	40%	40%	20%

Planning Every Home

Here is a perfect example of the planning mentality driven by the need for order.

Arstechnica rails "We're in dire need of a national broadband strategy" because we have less broadband than other countries. Seeing something perceived to be a problem, the immediate conclusion is that government must fix it. Clearly, if the US is falling behind other countries in some area which the author deems important, then the US government must intervene on its behalf and both determine what is "wrong" and also "fix it."

Arstechnica links to further explanation of the right "strategy" and how our current one is wrong. They complain that the government "strategy" relies too much on the free market. The government says that intervention will distort the market and Arstechnica replies :

Is it too much to ask for some sort of vision? Some sort of leadership? Something along the lines of "a chicken in every pot and fiber to every home by 2012"?

Yes, its too much to ask. The assumption is that government must determine what the "right amount" of broadband is. Further, the assumption is that government should set the goal, determine whether it is being met and why, and finally take action to reach that goal. But, my dears, that is planning. It is a planning mindset, and leads to planning of the economy.

Just as you don't want government to ensure that chickens are raised and killed and delivered to your door, based on some fallacious notion that it is government's job to put "a chicken in every pot," neither should we expect government to ensure that we have broadband in every town or fiber in every home.

It is actually conceivable that we have the right amount of broadband right now. This may not be a "market failure." In fact, we could probably never determine whether there is some kind of failure here - be it caused within the market or by government. We can't know the "right amount" of broadband. But, also, here is the kicker:

I have lived in rural New Mexico. I know the facts. You can get satellite internet in the furthest reaches of the most absurd nooks and crannies of the four corners states and across the most ridiculous expanses of desert - for cheap. For much less than the median rural New Mexico household spends on other luxury items. If they want it, they can get it. This is true across the country - either satellite or cable or DSL is offered everywhere (the map shown by Arstechnica confirms this; nearly every spot on it has some kind of broadband, just apparently not as much as they have in Australia).

If demand is low, then fewer services are offered. In other words, if they don't want it, they don't get it. So it isn't there. If they do want it, guess what, someone offers it. If they want it, they can get it.

If they want it, they can get it.

One more time: we don't need government to spoon feed us.

A Race to the Bottom

Could it be that governments around the world are competing so hard for investment that they are actually going to bottom out on business taxation one day soon? This is the best sign I have seen in some time - since the big trend toward flat taxes by former communist countries - that indeed a small-government world is possible.

Note that I am not saying that tax trends overall have been good, but consider the evidence regarding business tax competition.

(1) Corporate income taxes are lower in all except four OECD countries than they were in 1986 -- unfortunately, overall taxes as a percent of GDP have gone up in every one. Seven OECD countries cut corporate rates between 2006 and 2007.

(2) The reduction in rates since 1986 and the low rates in OECD countries today are the result of conscious competition among countries for investment income. Because of this competition Germany, which has lagged other European Union countries in lowering corporate tax rates, wanted to force tax harmonization among member countries to prevent investment from fleeing. When this strategy failed, Germany was forced to start lowering its own corporate rate.

(3) The intent to compete ferociously, and without respite, is spelled out. In a testimony to the Canadian Senate Committee on Banking, Trade and Commerce, it was recommended that “the Canadian capital gains tax rate should be quickly be lowered to match the rate in the United States.”

The report then added that “the Committee also recommends that international competitiveness be the criterion guiding the choice of a capital gains tax regime, and that federal government be prepared to lower the tax until that criterion is met.” Canadians listened, and the current capital taxation in Canada is falling fast. By 2012 the federal corporate income tax rate will be 15% and the overall effective corporate rate will be the lowest in the G7 and, as the budget report gloats, it will be over 9 percentage points lower than in the US.

How low can they go? Maybe a little vicious competition can help bring a more reasonable tax system and lead to smaller government. Sadly, it may only be on the business side that government will care to compete. Yet "brain drain" does occur when individual income taxes are too high. As any anarcho-capitalist will tell you, competition is the best way to keep government in line. Let's hope we're beginning to see a trend toward tax competition.

The New Farm Bill: Agricultural Planning

In explaining consumer sovereignty, Mises said:

Neither the entrepreneurs nor the farmers nor the capitalists determine what has to be produced. The consumers do that.

And this is accurate - in a free market. However, the Farm Bill has effectively put an end to that truth, in the United States. Passing with a veto-proof majority, the new farm bill expands subsidies further, and gives yet more power of direction to farmers and corporations; and their legislative managers.

Originally enacted (under other names, such as the AAA) the farm bill was a central planning program to control agricultural prices and support employment and wages. Over the past 75 years it has changed its mission, but it is still used for planning purposes.

Today, senators reel off speeches about the importance of directing funds toward "sustainable" energy, ensuring low food prices, and feeding the poor. Meanwhile, they don't mind that their interest groups and constituents reward them with votes for the generous subsidies. While congress no longer attempts to restrict production by commanding the farmers to kill their pigs, they still set quotas and control prices.

Is it possible to get congress to abandon this massive central planning program? There is such a loud and broad constituency for it (farmers including big business, low income and welfare advocates, environmentalists, and those who just like government regulation) that it seems unlikely. However, congress does respond to the voter. Let him not be irrational.

Update - Washington Watch says:

H.R. 2419
The Farm Bill Extension Act of 2007
Costs $5,727.56 per family

Universal versus Quantitative

Economic Laws are universal. As Mises explained, contra Caplan, because supply and demand laws - marginal utility, preferring more at a lower price - are universal, it isn't a quantitative matter but a qualitative matter that maximizing output is better achieved with a free market solution. For the given ends (maximizing output), the best means are to allow the free market to work rather than intervene.

However, while this means that markets are better than socialism, does this mean all interventions are bad? Clearly the qualitative result - the end is better achieved with markets than socialism - is true. But how much better? That is the quantitative question. The answer is clear at the system level: a lot better. But, at the intervention level, one must weigh the objectives.

If the objective of a given intervention is only to maximize output, one need not ask the quantitative question: the market will better serve. But, if one has multiple ends: (1) raise the wages of the poorest worker (2) without reducing total output by very much, then the quantitative question surfaces. For, even if the only end is to increase the wages of the poorest worker, there is a time component, and total output will ultimately lead to lower wages in the long run for the poorest worker (if higher output over time leads to higher real wages of the poorest worker, over time).

This is where the Krugmans and Card & Kreugers (and Galbraiths, who dispute the condition) like to fight. Maybe the quantitative aspect isn't large enough to offset the first round effect of the command benefit. When they argue this line, some turn to "natural rights" arguments: it isn't right to command benefits. But an economist must look at the quantitative aspect of the universal truth, and weigh the losses against the benefits. How does total output respond? How does the universal rule of competitive wage setting and profit maximization induce the employer to respond to command wage hikes? How will the benefit accrue - will it at all? To whom will it go?

And hence economics becomes difficult, and dynamic, quantitative and empirical analysis is required. Hat tips to Mises, Caplan and the struggling economists on both sides.

Competition and Anarchy

Over at Distributed Republic, Micha Ghertner argues the competitive government position for libertarianism/anarchy:

I personally would much rather take the risk of letting isolated communities victimize their own members than the opposite risk of adopting a social rule whereby those with sufficient political power are free to "reproduce their ideologies and prejudices" upon all members of society, and not just a few sub-communities within it.

Many people tend to take a moral stance on anarchism: a democratic state should set the social rules, otherwise the strongest will brutalize - mobsters will take over and nobody will be safe. But, what if government currently is the mob boss? On the one hand, democracy is supposed to prevent that, but we all know that tyranny of the majority can oppress the minority (Hitler was democratically elected) so this argument is weak at best.

On the other hand, you have the idolization of the state as moral authority, which makes it dangerous. While the miniature states (or private security firms) can also take on this superior moral role, at least there would be more competition and free entry and exit from the states, so that minorities can easily escape persecution. Potentially they would also be less idolized if they were voluntary and competing.

Could this be a consequentialist morality argument for anarchy - that our values are more likely to be protected in a system with competition over moral authority?

Update: coincidentally, Arnold Kling just posted something on the same subject.