Thomas Sowell discusses ‘Economic Facts and Fallacies’

Peter Robinson speaks with Thomas Sowell about his 2007 book Economic Facts and Fallacies in which Sowell exposes some of the most popular fallacies about economic issues. Sowell takes on the conventional thinking on a wide swath of Americas economic life, from male-female economic differences to income stagnation, executive pay, and social mobility to economics of higher education.

The inconsistent logic behind criminalizing prostitution

In George Carlin’s 2001 book Napalm and Silly Putty, Carlin briefly articulated the inconsistency behind criminalizing prostitution:

I don’t understand why prostitution is illegal. Selling is legal, f****** is legal. So, why isn’t it legal to sell f******? Why should it be illegal to sell something that’s legal to give away? I can’t follow the logic. Of all the things you can to do a person, giving them an orgasm is hardly the worst.

Prostitution follows the same logic as organ sales. (Which I discussed here and here). It is legal to donate a kidney–or sex–yet it is illegal to sell any of the two. There are two fundamental problems with this arrangement: First is the blatant inconsistency of prohibiting the sale of something that is legal to give away. The second is the injustice of restricting an individual’s freedom to do what he wishes with his own body.

If an individual voluntarily chooses to sell his kidney to another, and both agree to the exchange free of coercion, the government has no prerogative to intervene. The same applies to sex. If two people agree to trade sex for an agreed price free of coercion, the government again has no prerogative to intervene. In both transactions, no third parties are harmed thus eliminating any justifitcation for government interference.

Friedman Legacy Day

I realize my colleague has already posted concerning Milton Friedman, but I feel compelled to add one of my own. The impact that Dr. Friedman has had on my worldview is extraordinary to the point where it would be nearly impossible to overstate it. As today is Dr. Friedman’s birthday and Friedman Legacy Day, I’d like to post a couple of my favorite Milton Friedman quotes:

Industrial progress, mechanical improvement, all of the great wonders of the modern era have meant little to the wealthy. The rich in ancient Greece would have benefited hardly at all from modern plumbing — running servants replaced running water. Television and radio — the patricians of Rome could enjoy the leading musicians and actors in their home, could have the leading artists as domestic retainers. Ready-to-wear clothing, supermarkets — all these and many other modern developments would have added little to their life. They would have welcomed the improvements in transportation and in medicine, but for the rest, the great achievements of western capitalism have rebounded primarily to the benefit of the ordinary person. These achievements have made available to the masses conveniences and amenities that were previously the exclusive prerogative of the rich and powerful.

~ Free to Choose (1980)

There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.

~ Fox News interview (May 2004)

Much of his work was at a level of economic insight that can only be considered “genius”. Yet, as the above quotes show, his genius was matched by his abilities as a teacher. If ever there was a friend of the “common man”, it was Dr. Friedman. God bless Milton Friedman: one of the greatest friends the Individual ever had.

US Census Bureau: New York spends most money per pupil, Utah the least

Data released this week from the shows the average American state spent $9,666 per pupil in 2007, a 5.8 percent increase over 2006. New York State’s public schools spent $15,981 per pupil in 2006, more than any other state.

After New York, the states that spent the most per pupil were New Jersey ($15,691) and the District of Columbia ($14,324). Tennessee ($7,113), Idaho ($6,625) and Utah ($5,683) spent the least per pupil.

Here are the full rankings:

HT: Economix

Is it always greener to take public transportation?

Jacob Leibenluft asks if it is always greener to take public transportation:

Last year, the Lantern pondered how you could make your turkey dinner greener—and even contemplated the heretical idea of eating Thanksgiving chicken instead. But while cooking a more carbon-conscious meal is a good step, the steps you take to get to the table in the first place can have a much greater environmental impact.

To answer the question of how to best make your trip home, the Lantern calls your attention to a recent study conducted by Mikhail Chester and Arpad Horvath, researchers at the University of California-Berkeley. When we typically think of the environmental impact of driving, we focus on the energy and emissions associated with moving a car, say, 30 miles. In reality, that sort of analysis is incomplete: How the car is made, how the road is built, and even whether the roads have been salted because of ice all have some effect, too. And while those effects are spread out over many cars and many different trips, they still take a toll. When we start thinking about train travel, the infrastructure matters even more, since getting a rail line up and running requires enormous amounts of construction and manufacturing.

The UC-Berkeley analysis tries to get a more complete picture of how we travel by taking all these variables into account—down to the impact of planting grass on the side of the road. Chester and Horvath’s data suggest that riding in the average train is a significantly greener choice than the average car or plane. For example, they find that Caltrain (a system similar to Amtrak, averaging 155 passengers per train) produces less than half as many greenhouse-gas emissions or particulate matter per passenger mile compared with driving a sedan (average passengers: 1.58). (The sedan comes out better when it comes to sulfur dioxide but much worse on volatile organic compounds.) And on Thanksgiving weekend, when trains are certain to be full and cars are likely to spend a long time idling in traffic, rail is easily a better option.

But you can come up with examples in which driving a car looks better. A train produces more emissions per trip than any car, bus, or truck; it makes up for that fact environmentally because it carries a lot more people. It stands to reason, then, that if you ride in a full sedan on a day when the train is pretty empty—and, in particular, if you are in a fuel-efficient car—the car could conceivably be greener per passenger mile. (The study says a car would need to have about three passengers—double the average—to break even environmentally with the typical train.) The numbers are even more striking for buses, which can experience extreme variability in ridership between peak and nonpeak hours. At peak hours—with 40 riders onboard—the Berkeley researchers find that buses often look like the greenest option, producing fewer greenhouse-gas emissions than even the average train per passenger mile. At off-peak hours, a bus looks a lot worse, performing even more poorly than a gas-guzzling pickup truck.

I touch on this topic in an earlier post.

Quote of the Day

The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.

~ Milton Friedman

Happy Birthday Milton Friedman

Today, July 31, 2009. would have been Milton Friedman’s 97th birthday.

“The show was essentially me making a point, and he [Milton Friedman] making a two-sentence rebuttal which totally devastated my point, and then me sitting there with my mouth hanging open, trying to think what to say.” ~ David Brooks, New York Observer

Friedman once said,

“Freedom is not the natural state of mankind. It is a rare and wonderful achievement. It will take an understanding of what freedom is, of where the dangers to freedom come from. It will take the courage to act on that understanding if we are not only to preserve the freedoms that we have, but to realize the full potential of a truly free society.”

The world will miss you Milton Friedman, whether they realize it or not.

Yaron Brook Discusses Government Growth

Dr. Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, is scheduled to appear on the Glenn Beck program on Fox News Channel today, Thursday, July 30th to discuss the alarming growth of government programs. The show starts at 5 p.m., Eastern time (2 p.m., Pacific time) and  Dr. Brook’s segment should begin at 5:40 p.m., Eastern time.

If you miss Dr. Brook, check back here as we’ll try to locate the interview and post it. In the meantime, here are some videos of Dr. Brook in April, 2008:

Can interest rates be kept in check without the Federal Reserve?

Does unregulated capitalism result in pollution and inadequate health care for children?

UPDATE:

The Times They Are A-Changin’

It’s my opinion that most Americans view the state of freedom as natural, while slavery (by which I mean any forced subordination to a higher temporal power) is viewed as an aberration.  This is wildly inconsistent with the record of history – as I fear the United States of America will soon be living proof of.

“The biggest problems that we’re facing right now have to do with George Bush trying to bring more and more power into the executive branch and not go through Congress at all. And that’s what I intend to reverse when I’m president of the United States.” – Sen. Barack Obama, March 31, 2008

To say President Obama failed to follow through on this promise is an understatement. By appointing a virtual army of “czars” — each wholly unaccountable to Congress yet tasked with spearheading major policy efforts for the White House — in his first six months, the president has embarked on an end-run around the legislative branch of historic proportions.

To be sure, the appointment of a few special officers to play a constructive role in a given administration is nothing new. What is new is the elevation of so many czars, with so much authority on endless policy fronts. Vesting such broad authority in the hands of people not subjected to Senate confirmation and congressional oversight poses a grave threat to our system of checks and balances.

At last count, there were at least 32 active czars that we knew of, meaning the current administration has more czars than Imperial Russia.

Full article: “Obama’s 32 Czars”

This article brings to mind a quote from President Ronald Reagan:

Freedom is never more than one generation away from extinction. We didn’t pass it on to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children what it was once like in the United States when men were free.

Barack Obama has shown very clearly, through his various acts as President, that he does not value individual liberty. But he is not the problem, only a symptom. Americans have taken liberty for granted, and as such they have not sought to understand the underlying principles that are essential to the continued existence of liberty. Without a basic understanding of these principles, we have for too long been willing to elect politicians that do not put these principles into practice. Both sides of the aisle have been complicit in this. The political ideology of collectivism is a cancer that has been growing in this country for many years – one that we’ve ignored. And, like all cancers, pretending it does not exist in no way detracts from its malignancy. How do you rid a body of cancer? Cut it out at the source. What is the source of the collectivist cancer in our society’s ideology? The removal of principles from our consciousness. Until and unless we once again become creatures of the mind rather than our feelings or impulses, we will never again know the liberty that has made this country great.

GDP: A Thing of the Past

I’m consistently dumbfounded by the outdated ideas thrown around by the powers that be. President Obama’s election was supposed to bring “change,” but instead we’ve returned to antiquated economic ideas that have long been debunked. Using such Keynesian-style government spending programs to stimulate our economy is attune to reintroducing oil lamps to heat our homes. As I remember, there was a movement called “Monetarism” championed by Milton Friedman, winner of the Nobel Prize in Economics (it could be argued that he won the prize for his repudiation of Keynesian economics).

Taxpayer-funded auto manufacturing and protectionist trade policies may increase American production (output), but they do nothing to create real value for the individuals who, ultimately, comprise our economy. For a full, clear explanation of the theory and numbers behind this argument, I suggest reading the article below.

Most important, we must remember how very “Soviet Union” GDP figures are. Indeed, the Soviets and Chinese weren’t so much lying about economic growth during their years under the thumb of communism, as output was and is only part of the equation. No doubt both countries produced a great deal of “stuff” during the Cold War years, but they did so in incredibly wasteful ways.

For one to take GDP seriously is the equivalent of an investor only buying shares of companies that generate a lot of revenue. No doubt revenue matters, but the more important calculation has to do with whether the revenues gained are achieved profitably. Absent profits or the presumption of future profitability, revenue doesn’t mean a whole lot.

So while rising GDP figures certainly can signal overall economic health, they don’t always correlate with strong market returns due to the greater importance attached to the kind of economic activity engaged in on the way to output. GDP is a Keynesian number of the past that doesn’t account for profitable economic activity aided by economic specialization outside these fifty states.

Full article: “Why Investors Should Ignore GDP”

HT: Club for Growth