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OpenMarket: April 2008

  • Fed Cuts Interest Rates, Triggering More Inflationary Pressures

    April 30, 2008 7:09 PM

    The Fed has cut interest rates again, reducing its key rate to 2 percent -- a real interest rate of less than zero, after taking into account inflation.  It will be about as ineffective (in stimulating the economy) as pushing on a string.  But it will trigger renewed inflationary pressures.  International investors are already disgusted with the Fed's inflationary attempts to bail out borrowers by chopping interest rates, and this will make them even more reluctant to invest in the U.S.


  • The Children's Crusade

    April 30, 2008 3:55 PM

    Steven Dubner asks whether children are responsible for the recent explosion of environmental concern.


    He's got a point. As well as the decidedly non-secular holiday of Earth Day, which appears to be celebrated at every public school in the US, my daughter's Brownie troop was assigned a project recently to learn about a foreign country. As well as learning about famous people, landmarks and so on, they had to tell the other Brownies "how they are green." Hmmmm.


    Yet this example of pester power at work would also help explain one phenomenon that is infuriating to the environmental movement. Consistently, Americans have said they are concerned about global warming, but when asked to rank it among urgent issues that action must be taken on, they rank it next to or right at the bottom. For instance, a Pew Research Center for the People and the Press poll in January found it ranked right at the bottom, tied with "making the Bush tax cuts permanent." Even a minority of Democrat supporters called it a "top priority." I suspect this is compatible with an agenda in the household set by people who don't have to make the hard decisions.


    What will be interesting is how this translates as these children leave school and start having to square living a "sustainable" life with working for a living and having to satisfy other needs. Perhaps they will put a higher value on the environment than their parents (and if prosperity continues to increase, I think this is going to happen in any event), but if times get hard as a direct result of environmental policy, then the choices made will be very interesting.


    Cross-posted from The Really Inconvenient Blog.


  • Law Limiting Gun Suits Upheld

    April 30, 2008 3:09 PM

    The Second Circuit Court of Appeals has upheld the federal law (PLCAA) limiting lawsuits against gun manufacturers over acts committed by criminals with guns, overturning a ruling by radical judge Jack Weinstein gutting the law.  (I earlier discussed how judicial case assignment procedures are manipulated so that the lion's share of landmark cases in New York's Eastern District mysteriously end up being decided by Judge Weinstein rather than his more moderate colleagues). 


    The Brady Center to Prevent Gun Violence has claimed that the law violates "separation of powers" by changing the outcome of pending court cases (an argument that, if taken to its logical conclusion, would require invalidating the 1964 Civil Rights Act because it legislatively overturned trespass convictions of civil-rights demonstrators who engaged in sit-ins).  I earlier commented on the Brady Center's hypocrisy in claiming that it is "judicial activism" for judges to strike down gun bans based on the Second Amendment, but not judicial activism for judges to strike down the democratically-enacted PLCAA based on unwritten separation-of-powers principles.


  • Put the Insurance before the Horse

    April 30, 2008 3:03 PM


    Cordelia Ashton is an angry woman; she feels that her insurance company is treating her unfairly. She feels this way because once her insurance company found out that she'd been keeping three horses on her property, they gave her an ultimatum: get rid of the horses, or we're dropping your policy.


    For her part, Ashton said she wouldn't be able to afford a higher insurance premium if she had to look for another provider.


    "Everything is high enough as it is," Ashton said. "It's not fair at all. Why are they picking on me?"


    The type of sentiment expressed by Cordelia illustrates how the concept of "fairness" has been lost in society these days.  Is her insurance company "picking" on her by using the facts of reality to determine what to charge her (or as the case may be, that the facts make it impossible for the company to know what to charge her)? Would it be fair to let Cordelia keep paying the same rates though the company cannot know whether they are charging her enough or whether other customers will end up paying for her?  Is it fair for Cordelia to ask others to subsidize a risky lifestyle she admittedly can't afford?


    She claims that the horses pose no additional risk, but this is a ludicrous assertion; one which her insurance company is clearly not willing to believe.  As an owner of horses, I can say from personal experience that, even if a horse isn't being ridden it can still do plenty of damage to anything or anyone within kicking range. From wild kicking fits to cribbing (a common activity horses engage in, consisting of biting and pulling on objects like fences and barn doors) horses are large, unpredictable liabilities.

  • Drill for Oil to Save the Environment

    April 30, 2008 11:34 AM

    In the Washington Post, Robert Samuelson's column "Start Drilling" points out that ethanol production is far worse for the environment than drilling for oil in Alaska's Arctic tundra, yet Congress promotes ethanol subsidies to reduce our reliance on foreign oil, even as it blocks drilling in the Arctic and "the Atlantic and Pacific coasts" that would do far more to reduce our reliance on foreign oil.   "What keeps these areas closed are exaggerated environmental fears, strong prejudice against oil companies and sheer stupidity," he writes.


    A news story today in the Post describes how ethanol production is devouring our food supply, even though a study shows that "greenhouse-gas emissions from corn and even cellulosic ethanol 'exceed or match those from fossil fuels and therefore produce no greenhouse benefits.' By encouraging an expansion of acreage, the study added, the use of U.S. cropland for ethanol could make climate conditions dramatically worse. And the runoff from increased use of fertilizers on expanded acreage would compound damage to waterways all the way to the Gulf of Mexico." 

  • We Told You So

    April 30, 2008 11:06 AM

    If you ever thought that governmental economic planning or market manipulation is a useful tool, take a look at this article in today's Washington Post on the impact of ethanol subsidies and mandates.   It underscores the fact that governments are much better at making mistakes and serving political interests than they are at solving problems!  CEI's energy analysts warned (see here, here and here, for example) about such folly, but politicians apparently are not prone to reason. 


  • Michigan Social Workers Seize Child Who Inadvertently Drank

    April 30, 2008 10:48 AM

    Michigan CPS workers seized a 7-year-old who drank lemonade that his father purchased for him without knowing that it contained a small amount of alcohol.  (As Ted Frank notes, when CPS seized the child, he had no alcohol in his system).  They put him in foster care for two days and refused to release him to his aunts.  Then they released him to his mother on the condition that his father, an archaeology professor, move out of the house until a full court hearing could be held.  After that later hearing, the father, found not guilty of child abuse, was finally allowed to move back into his own house.  If the professor "and his wife weren't upper-middle-class academics with access to the University of Michigan Law School clinic professors, it could have been much worse. 'Don Duquette, a U-M law professor who directs the university's Child Advocacy Law Clinic, represented Ratte and his wife. He notes sardonically that the most remarkable thing about the couple's case may be the relative speed with which they were reunited with Leo.'"


    CPS workers have an incentive to seize children, since the federal government gives states incentives for seizing and adopting out children, and CPS workers are more likely to be fired for failing to prevent child abuse than for wrongly seizing children, even if the seizure itself causes the child devastating psychological harm.

  • Ban the Smokes, Kill the Smokers

    April 30, 2008 3:47 AM

    The unintended consequences of government are wonderful to behold.  Impose a minimum wage and put poor, ill-educated teens out of work.  Raise auto fuel-economy requirements, and kill more people in accidents as they travel in smaller cars.  Ban cigarette smoking in local bars and restaurants, and cause more drunk driving accidents as smokers drive further to find more congenial locales.


    Reports the Economist:


    The problem with this, say Scott Adams and Chad Cotti, economists at the University of Wisconsin-Milwaukee, is that smoking bans seem to have been followed by an increase in drunk-driving and in fatal accidents involving alcohol. In research published in the Journal of Public Economics, the authors find evidence that smokers are driving farther to places where smoking in bars is allowed.


    The researchers analysed data from 120 American counties, 20 of which had banned smoking. They found a smoking ban increased fatal alcohol-related car accidents by 13% in a typical county containing 680,000 people. This is the equivalent of 2.5 fatal accidents (equivalent to approximately six deaths). Furthermore, drunk-driving smokers have not changed their ways over time. In areas where the ban has been in place for longer than 18 months, the increased accident rate is 19%.


    The findings, say the pair, are consistent with the suggestion that smokers are driving farther to alternative places to drink. This may be because they are driving to bars with outdoor seating, or to bars which are not enforcing the smoking ban.

  • GMU Law School Should Sue ABA Over Racial-Quota Mandates

    April 29, 2008 1:49 PM

    The American Bar Association is continually threatening to pull the accreditation of George Mason University Law School for failing to adopt illegal racial quotas in admissions.  That's what San Diego law professor (and member of the U.S. Civil Rights Commission) Gail Heriot notes in the Wall Street Journal.  The ABA first forced GMU -- one of the few law schools without a marked liberal bias -- to use what the ABA itself refers to as "preferential affirmative action admissions program" to radically increase its minority percentage from 6.5 percent to 19 percent.  But the ABA still wasn't happy with the results, which were insufficiently extreme for the ABA's quota-mongers (never mind that the qualified applicant pool for a law school of GMU's caliber is lower than 19 percent minority, as is the percentage of non-white lawyers even in heavily-minority states like California, so it's not as if having 19 percent minorities is a sign of discrimination.  Indeed, the ABA conceded that GMU has long had a "very active effort to recruit minorities," even before adopting racial preferences in admissions).  So now the ABA is demanding what are in essence racial quotas.

  • Heritage Speech

    April 29, 2008 1:40 PM

    I've just got back from delivering a speech at the Heritage Foundation on the subject of my book. I think it went well and the audience certainly seemed enthusiastic about it. You'll be able to watch it here when the webcast gets properly archived within a day or so. Thanks to ever-excellent John Hilboldt and his team for putting it on and to Ben Lieberman for hosting it.


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