July 17, 2015 3:52 PM
There’s a lot being written these days about income (and wealth) inequality, and how a free market economy allegedly exacerbates the divide between the rich and the poor. Statistical measures of inequality look at income groups in the aggregate, though—they don’t tell us which people are in those low and high income groups, or how the composition of those groups change over time. As the George Mason University’s Tyler Cowen wrote in The New York Times earlier this year:
Income inequality and economic immobility are often lumped together, but they shouldn’t be. Consider the two concepts positively: Income equality is about bridging the gap between the rich and the poor, while economic mobility is about elevating the poor as rapidly as possible. Finding ways to increase economic mobility should be our greater concern.
And as it turns out, there is a great deal of mobility between income groups in the United States. Today in MarketWatch, Prof. Steve Horwitz of St. Lawrence University reminds us that, because of the dynamic nature of a capitalist economy, anyone can end up at the top of the income scale:
What economists call income mobility continues in this country over the course of any individual’s lifetime and across generations. Being poor at any specific point in time, or being the child of poor parents, does not mean people are unable to move up the income ladder. In the same way, there is no guarantee that those at the top will stay there.
The usual rhetoric about income inequality focuses on how the share of total income held by the top 20% has grown while that held by the bottom 20% has fallen over the last few decades. That’s true, but it ignores the question of whether the same people are in the top and bottom from year to year.
July 17, 2015 9:13 AM
Will Saletan has an exhaustively researched and cogently argued piece at Slate on the dishonesty of the anti-biotechnology activists and the harm they have caused. He lays out, for all to see, the naked truth about their efforts. It has nothing to do with the truth. They only care about pushing their agenda, even if it comes at the cost of human lives. As Saletan writes, “[t]hey want more studies. They’ll always want more studies. They call themselves skeptics. But when you cling to an unsubstantiated belief, even after two decades of research and experience, that’s not skepticism. It’s dogma.”
Saletan describes the tactics employed by activists to hoodwink the public and politicians. Fear-mongering, misinformation, and information-overload are particular effective. Fear-mongering is the easiest one: they can simply say, “We don’t for sure that this thing is safe.” And because science is hard and usually involves reading long, boring blocks of text, few people will bother to dig deeper. Those who do will find plenty of intentional misinformation or manipulation of research. As Saletan points out in this passage:
Schubert systematically distorted the evidence…Schubert said the study found that “smokers who supplemented their diet with beta-carotene had an increased risk of lung cancer.” He neglected to mention that the daily beta carotene dose administered in the study was the equivalent of roughly 10 to 20 bowls of Golden Rice. He also failed to quote the rest of the paper, which emphasized that in general, beta carotene was actually associated with a lower risk of lung cancer.
One feature of their methods Saletan left out is the role played by the media. Anti-biotech activists rely on journalists to create an echo-chamber for their baseless claims. In this digital age it’s all about them clicks. And putting up a headline like “Study Finds Golden Rice Causes Cancer!” will get a lot more attention than a title like “Study shows smokers who supplement diet with beta carotene at increased risk for lung cancer, but for everyone else beta carotene has benefits.” For one thing, it is way too long (fire that headline writer), but it is simply not as shocking and therefore less likely to motivate someone to read it. So, most journalists just republish whatever was written in a study’s press release; few have the time to slog through entire research papers.
And this is what activists count on. They count on individuals and media outlets being too limited in time and interest to actually verify their claims. Sometimes this gets them into trouble, like when a clever journalist published a bunk paper on how chocolate can help people lose weight and then wrote a piece about reporters being gullible. But most of the time, nobody is the wiser and the misinformation gets filed away in the back of peoples’ minds, slowly building a basis for them to “instinctually” share the activists’ bogus claims.
July 17, 2015 9:00 AM
The Freeman has an excellent article by FEE advisory board member Robert Anthony Peters on economic lessons in popular culture—in this case focusing on the wealthiest of Disney’s characters, Scrooge McDuck. It may seem odd to look for pro-capitalist storylines from a character named after literature’s most famous miser, but Peters explains how the character’s originator, Carl Banks, made Scrooge McDuck an exemplar of the virtues of hard work, honesty, and strategic thinking.
In a series of stories that highlighted economic concepts like subjective value, mutual gains from trade, and entrepreneurship, Banks sent Scrooge and his grand-nephews on a series of adventures in which they manage to escape peril and achieve success through quick thinking and smart financial decisions. He debunked utopianism a la Jonathan Swift when the gang visits “Tralla La,” a mystical land where greed is allegedly unknown, and showed the potential of free exchange in “Maharajah Donald,” a story in which Huey, Dewey, and Louie start off with an old pencil stub and end up, after a series of shrewd trades, with enough money to buy a steamboat ticket all the way to India.
And Banks certainly didn’t stumble upon these pro-market parables by chance. When he was writing for Uncle Scrooge comics, he knew he was confronting the collectivist trends of the mid-20th Century, once saying “I’m sure the lesson I preached in this story of easy riches will get me in a cell in a Siberian gulag someday.” Fortunately Banks escaped the gulag, and generations of viewers have been enriched because of it. Scrooge McDuck’s persona as a frugal but talented and honorable person even persisted into the 1980s cartoon series DuckTales, in which Uncle Scrooge delights in a fortune made through wise investments and honest deals.
If you’ve got young children, you might want to brace yourself for 2017, when Disney will be launching a DuckTales re-boot to be broadcast on Disney XD. Let’s hope the spirit of Carl Banks will continue to guide the writers and producers in the 21st Century version.
July 16, 2015 1:15 PM
Yesterday, July 15, 2015, CEI filed a petition for writ of mandamus with the D.C. Circuit Court of Appeals. Our suit requests the court enforce its July 15, 2011, decision that found the TSA’s deployment of body scanners in violation of the Administrative Procedure Act. The 2011 court ordered the TSA to “promptly” open a rulemaking proceeding and produce a final rule. Yesterday was the four-year anniversary of the court order and we still do not have a final rule to evaluate and potentially challenge. In fact, given that TSA has been rolling out body scanners since 2007, they have been violating the APA for eight years.
Other than CEI, petitioners are the National Center for Transgender Equality, The Rutherford Institute, CEI President Lawson Bader, and yours truly, in our capacity as private individuals. CEI’s attorneys are representing the petitioners.
Our primary interest in this case is ensuring the TSA is forced to follow the law. However, results of a classified Department of Homeland Security Inspector General audit were leaked to and publicized by ABC News on June 1. The failure rate was an astounding 96 percent. So, not only is the TSA violating the law by deploying these machines, the machines likely don’t even work as advertised, as we and others have alleged in the past.
The summary of our argument can be found here. The full complaint is here. For more from CEI on TSA’s illegal body scanner policy, see our 2013 comments to the agency and a 2012 op-ed by former American Airlines CEO Robert L. Crandall and myself summarizing our amicus brief in EPIC v. DHS.
July 16, 2015 12:47 PM
A few months ago, statistician and risk analyst Nassim Nicholas Taleb, known mostly for his intriguing 2007 book The Black Swan, teamed up with a handful of colleagues to write a “scholarly” diatribe claiming to demonstrate that “what appear to be small and reasonable risks” with GMOs may “accumulate inevitably to certain irreversible harm.” Therefore, the precautionary principle “should be used to prescribe severe limits on GMOs.” The paper received a lot of attention in scientific circles, but was roundly dismissed for being long on overblown rhetoric but conspicuously short on any meaningful reference to the scientific literature describing the risks and safety of genetic engineering, and for containing no understanding of how modern genetic engineering fits within the context of centuries of far more crude genetic modification of plants, animals, and microorganisms.
Well, Taleb is back, this time penning a short essay published on The New York Times’s DealB%k blog with co-author Mark Spitznagel. The authors try to draw comparisons between the recent financial crisis and GMOs, claiming the latter represent another “Too Big to Fail” crisis in waiting. Unfortunately, Taleb’s latest contribution is nothing more than the same sort of evidence-free bombast posing as thoughtful analysis. The result is uninformed and/or unintelligible gibberish.
For example: “The statistical mechanism by which a tomato was built by nature is bottom-up”. The tomatoes we eat today are vastly different than those produced by nature. In the wild, tomatoes are poisonous, marble-like berries. The cultivated tomatoes we eat today are the products of vast genetic changes wrought by human hands. More to the point, what does it even mean that tomatoes were built from the bottom up? Surely Spitznagel and Taleb aren’t claiming tomatoes themselves suggested to we humans what genetic changes to make? On its face, the statement may sound profound, but it simply defies meaningful comprehension.
“... by tinkering in small steps ...” Sure, early farmers tinkered in small steps. Then the 20th Century came along, and breeders began making many giant leaps in genetic manipulation -- long before the advent of recombinant DNA in the 1970s. For six or seven decades, breeders have been making macro genetic changes using tools like induced mutation breeding, protoplast fusion, and wide crossing, all of which result in changes to the genetic composition of plants that are orders of magnitude greater than those which result from genetic engineering. What, I’d like the authors to explain, makes the alteration of a single gene or small number of genes in an organism a bigger step than randomly scrambling whole genomes via mutation breeding?
July 15, 2015 1:19 PM
An average of around 70 rules and regulations are issued every week. There were 3,554 in 2015, and have been 1,693 in 2015 as of today.
Rules appear, but rarely are rolled back even though the administration’s “Retrospective Review of Regulations.” E.O. 13563 calls for agencies to:
[P]periodically review its existing significant regulations to determine whether any such regulations should be modified, streamlined, expanded, or repealed so as to make the agency’s regulatory program more effective or less burdensome.
(Gotta love the word “expanded” tossed in there.) Enforcement is unclear and rollbacks amount to a drop in the bucket and. Although prospects are dim, some in Congress is looking again at review and sunsetting of regulations.
Sens. Mark Kirk (R-Ill.) and Steve Daines (R-Mont.) introduced the “Small Business Regulatory Sunset Act”; versions appeared in this (S. 846) and the prior congressional session. It calls for agencies to publish plans for review of small business rules, assemble comments from the affected and sunset rules after seven years unless agencies reaffirm (see this coalition letter in support).
Similarly Sen. Roy Blunt’s (R-Mo.) “Regulatory Review and Sunset Act“ (S. 1067) (The House version is H.R. 2010 from Rep. Randy Hultgren) provides for reviews of the heftiest of rules and for assessments of whether they should be “continued, modified, consolidated, or terminated.”
This isn’t new; President George H.W. Bush issued regulatory moratoria and review back in the early 1990s. And upon entering office, President Obama’s chief of staff announced a regulatory freeze of the second President Bush’s pending rules in the first press release the administration issued. These freezes didn’t reduce the march of rulemaking much. The Federal Register popped back up to where it had been as if nothing had occurred, even hitting record levels recently.
Legislation like sunsetting matters since campaigns of a few months are inadequate to examine the fruits of an intense, thorough audit; plus rules often implement statutory requirements and are exempt from executive waiver and so require law. (Normally, that is; with respect to the Patient Protection and Affordable Care Act, waivers were applied via bulletin, memo and press release by the Internal Revenue Service.)
Obama’s unilateral waivers notwithstanding, getting regulations off the books requires the same laborious public notice and comment procedures of a new rule (well, that new rules are supposed to, but may not actually, get).
July 15, 2015 1:15 PM
American Enterprise Institute president Arthur Brooks has a new book out this week, The Conservative Heart: How to Build a Fairer, Happier, and More Prosperous America. In the past, Brooks has expressed concern that a large portion of the American public doesn’t believe that conservatives (and libertarians) have much of a heart—that they don’t care much about the problems of the poor and disadvantaged. He has made countering this impression a major part of AEI’s mission, sponsoring events like AEI’s “Vision Talks,” in particular this one from last June, titled “A Conservative Vision for Social Justice,” which featured Brooks himself as well as former New York City social services guru Robert Doar and Bloomberg View columnist Megan McArdle.
In the book, Brooks observes that the spread of the institutions of free market capitalism has been consistent with dramatic reductions in poverty around the world—the percentage of people living in “starvation-level” poverty, for example, had declined 80 percent since 1970. And he names the five institutions that he thinks have been most important: globalization, free trade, property rights, the rule of law, and entrepreneurship. With this history of increasing prosperity, one would think that a capitalist economic system would be pretty popular among advocates for the poor. But, of course, Brooks reminds us of the paradoxical reality that we see today.
…it is precisely the loudest champions of free enterprise—the heroes of poverty relief in the developing world—who the public trusts least to fight for struggling people here at home. Conservatives have the most effective solutions for human flourishing in our intellectual DNA. Our ideas have lifted up people all over the world. But the American people do not trust us to put those principles into practice to help those who need help right here.
July 15, 2015 10:46 AM
Two weeks ago, the Export-Import Bank’s authorization lapsed. The agency remains open, but is not allowed to consider new loans or other projects. It may only maintain its existing portfolio, which will wind down over a period of several years.
In an op-ed over at Inside Sources, I take a look at what’s next for Ex-Im:
Rarely does a federal agency shut its doors — the Civil Aeronautics Board closed in 1985, and the Interstate Commerce Commission followed suit in 1995, but that’s about it. Twenty years later, will Ex-Im add its name to this short list? What will happen then? Should the agency be revived?
The short answers are that nobody knows if it will actually close, not much will happen in the short run either way, and the agency should not be revived.
In the time since I wrote the piece, it’s begun to look like Ex-Im reauthorization may be folded into the highway bill extension Congress will consider later this month, but nothing is concrete yet.
Read the whole thing here.
July 14, 2015 11:11 AM
Once upon a time critics of corporate America complained that executive salaries were too high, and too often disconnected from the performance of the firm. Senior managers are making millions while the company loses money—where’s the logic in that? So today many firms, including large banks and other financial services companies, have performance-based compensation packages—at least some of the money executives make is tied to the firm’s annual profits. Now incentives are aligned smartly, right?
A potential complication creeps in, however, when a firm needs to restate its earnings. If a major deal goes south and restated earnings are lower than they were initially reported, perhaps we should restate an executive’s compensation as well, the thinking goes. This is the idea behind a provision of the Dodd-Frank Wall Street “Reform” Act. As Andrew Ross Sorkin reports in The New York Times, the Securities and Exchange Commission is currently working on a new rule which would expand this “clawback” concept from where it is already in force among Wall Street firms to all publicly traded companies. If restated profits were lower than they were in the year in which performance-related compensation was paid out, the company can demand that some of that bonus be repaid—as long as three years later.
July 13, 2015 4:41 PM
The Competitive Enterprise Institute's newest film project, I, Whiskey: The Spirit of the Market, is currently in production, and you can help make it a success. We’re supporting the project with a crowd-funding campaign at Indiegogo, the largest global fundraising site, just launched today.
I, Whiskey is our next installment in the I, Pencil Film Series. It will be a story about the power of human ingenuity, the market, and how these forces work together to give us the many wonderful innovations and products that enrich our lives every day.