Big Bureaucracies Beget Bad Behavior

One of the problems with big government is that it stimulates the worst sort of behavior from people and attracts legions of cheaters on the inside and outside.

On the outside, the more than 2,300 federal subsidy programs are under constant assault by dishonest individuals, businesses, and criminal gangs. The improper payment rates for the earned income tax credit and school breakfast programs, for example, are more than 20 percent. Medicare and Medicaid are ripped off by tens of billions of dollars a year. It’s a sad reality that when the government dangles free money, millions of people will falsify application forms to try and get some of it.

You Ought to Have a Look: Smoke, Clouds and Snowfall

You Ought to Have a Look is a feature from the Center for the Study of Science posted by Patrick J. Michaels and Paul C. (“Chip”) Knappenberger.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary.

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In this week’s YOTHAL edition, we’ll focus on some recent climate science findings that deserve further mention and are worthy of a deeper dive. If and when you have the time and/or inclination, you ought to have a look.

First up is a collection of papers that describe the results of a several experiments looking into cloud formation—or rather, into the availability and development of the aerosol particles that aid in cloud formation. The tiny aerosols are called cloud condensation nuclei (CCN) and without them, it is very difficult for clouds to form. 

It’s well known that sulfate particles, formed as a by-product of fossil fuel burning (primarily coal and oil), make for a good source of CCN. In fact, the change in cloud characteristics resulting from this form of air pollution are thought to have asserted a cooling pressure on the earth’s surface temperature—a cooling that has acted to offset a certain portion of the warming caused by the co-incidental emissions of carbon dioxide and other greenhouse gases.

Abusive California Labor Law to Be Considered by State’s High Court

California has a “mandatory mediation and conciliation process” whereby unions can force agricultural employers into collective bargaining and also bind the employers to the terms of a collective-bargaining agreement drawn up by a “neutral” mediator. This is the only such compulsory-bargaining law in the country. 

One employer successfully challenged the process in the California court of appeal on the grounds of “class of one” discrimination (treating this employer differently than others)—and separation-of-powers violation. That ruling is now on appeal to the California Supreme Court.

Cato has joined the National Federation of Independent Business and four agricultural associations on an amicus brief supporting the farming company. We argue that the compulsion regime is unconstitutional for two reasons.

First, it imposes mini-labor codes to govern the relations of individual employers and their employees’ unions. It doesn’t provide any safeguard to ensure that similarly situated employers or unions will be treated similarly. It allows mediators to wield legislative authority irrationally and arbitrarily. It therefore denies affected parties the equal protection of the laws, in violation of the U.S. and California Constitutions.

Second, the compulsion regime delegates substantial legislative authority to private-party mediators. It doesn’t provide these mediators with any goal or purpose that they must achieve in drafting collective bargaining agreements. It doesn’t give them any standard or rule by which to achieve any goal or purpose. It fails to establish any adequate safeguards against the abusive exercise of the power delegated. The compulsion regime therefore violates the non-delegation doctrine—delegating legislative powers to an executive agency—and the separation of powers.

In the case of Gerawan Farming, Inc. v. Agricultural Labor Relations Board, the California high court should affirm the judgment below.

What the Overstay Rate Tells Us about Border Security

There are two ways to become an illegal immigrant in the United States.  The first is to enter illegally, usually across the Southwest border.  Those folks are sometimes called EWIs, short for entered without inspection.  The second way to become an illegal immigrant is to enter legally and then lose legal status, often by overstaying a temporary visa.  

The majority of new illegal immigrants were EWIs until recently.  A recent paper by Robert Warren and Donald Kerwin at the Center for Migration Studies found that overstays accounted for 58 percent of new illegal immigrants in 2012, a rapid increase over the course of a decade (Chart 1).

Chart 1

Overstays as a Percent of all Illegal Entries

 

Source: Warren and Kerwin.

 

At an immigration hearing last week, several witnesses emphasized that continued illegal immigrant entries along the Southwest border and a rising percentage of overstays mean that America’s immigration system is insecure.  In contrast, the higher overstay rate is evidence of fewer illegal immigrants crossing the border as EWIs. 

In calculating the percent of new illegal immigrants who are overstays, the number of EWIs is in the denominator added to the number of overstays.  The number of overstays is the numerator.  The falling number of illegal immigrants crossing the Southwest border without inspection shrinks the denominator on its own, thus boosting the overstay rate.  The surge in the overstay rate is not a lack of security at points of entry and exit but caused by a yuuuuge fall in illegal immigrants crossing the border. 

As evidence for that, I kept Warren and Kerwin’s estimates of the overstay population unchanged but held constant at 2000 levels the number of illegal immigrants entering without inspection.  In other words, I didn’t change the flows in the overstay population but just froze the number of illegal immigrants entering without inspection at the higher 2000 number.  Doing that lowers the 2012 overstay rate to 24 percent – less than half of the rate it actually was and lower than at any point during the entire 30 year period in their paper.

Warren and Kerwin admit that their overstay rate results are sensitive to their estimates of EWIs and how many overstays actually stay long enough to become illegal immigrants.  Small changes in those numbers can shift their findings dramatically.  However, the relationship between the number of CBP apprehensions and the overstay rate supports my simple point (Chart 2).  As the number of apprehensions fell because fewer immigrants attempted to enter the United States, overstays provided a greater percentage of new illegal immigrants.

Five Facts about the Minimum Wage

1. A dozen California metropolitan areas – including big cities like Fresno, Stockton, Bakersfield and Modesto – already have unemployment rates from 8.0% to 18.6%. Yet California’s statewide minimum wage is now scheduled to rise every year through 2022.

2.  News reports imagine that raising the minimum wage will push up other wages, so average wages would supposedly rise more quickly. On the contrary, three of the four most recent increases in the federal minimum wage were quickly followed by prolonged stagnation in average wages.  change in avg and min wage

3. In 2015, twice as many earned less than the $7.25 federal minimum wage (1,691,000) as the number paid that minimum wage (870,000).

4. Every time the federal minimum wage has been increased the number earning less than that minimum always increased dramatically.  This was not just true of teenagers but (as the graph below shows) also for those over 25.  When the minimum wage is pushed up faster than the market would have moved it, the effect is to greatly increase the proportion of jobs paying less than the minimum (including working for cash in the informal economy).  Employers offering less than the minimum, legally or otherwise, then enjoy a flood of unskilled applicants unable to compete for scarcer opportunities among larger businesses subject to minimum wage laws. Such intensified rivalry for sub-minimum-wage jobs then pushes the lowest wages even lower.more were paid less than min when min wage went up

 5. Regardless of federal, state or city laws, the actual minimum wage is always zero.

Do Negative Climate Impacts on Food Production Lead to Violence?

Introducing their important work, Buhaug et al. (2015) note that earlier research suggests there is “a correlational pattern between climate anomalies and violent conflict” due to “drought-induced agricultural shocks and adverse economic spillover effects as a key causal mechanism linking the two phenomena.” But is this really so?

Seeking an answer to this question, the four Norwegian researchers compared half a century of statistics on climate variability, food production and political violence across Sub-Saharan Africa, which effort, in their words, “offers the most precise and theoretically consistent empirical assessment to date of the purported indirect relationship.” And what did they thereby find?

Buhaug et al. report that their analysis “reveals a robust link between weather patterns and food production where more rainfall generally is associated with higher yields.” However, they also report that “the second step in the causal model is not supported,” noting that “agricultural output and violent conflict are only weakly and inconsistently connected, even in the specific contexts where production shocks are believed to have particularly devastating social consequences,” which fact leads them to suggest that “the wider socioeconomic and political context is much more important than drought and crop failures in explaining violent conflict in contemporary Africa.”

“Instead,” as they continue, “social protest and rebellion during times of food price spikes may be better understood as reactions to poor and unjust government policies, corruption, repression and market failure,” citing the studies of Bush (2010), Buhaug and Urdal (2013), Sneyd et al. (2013) and Chenoweth and Ulfelder (2015). In fact, they state that even the IPCC’s Fifth Assessment Report concludes “it is likely that socioeconomic and technological trends, including changes in institutions and policies, will remain a relatively stronger driver of food security over the next few decades than climate change,” citing Porter et al. (2014).”

And so we learn that alarmist claims of future climate-change-induced reductions in agricultural production that lead to social unrest and violent conflicts simply are not supported by real-world observations.

 

References

Buhaug, H., Benjaminsen, T.A., Sjaastad, E. and Theisen, O.M. 2015. Climate variability, food production shocks, and violent conflict in Sub-Saharan Africa. Environmental Research Letters 10: 10.1088/1748-9326/10/12/125015.

Buhaug, H. and Urdal, H. 2013. An urbanization bomb? Population growth and social disorder in cities. Global Environmental Change 23: 1-10.

Bush, R. 2010. Food riots: poverty, power and protest. Journal of Agrarian Change 10: 119-129.

Chenoweth, E. and Ulfelder, J. 2015. Can structural conditions explain the onset of nonviolent uprisings? Journal of Conflict Resolution 10.1177/0022002715576574.

Porter, J.R. et al. 2014. Food security and food production systems. Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. Ed. C.B. Field et al. (Cambridge: Cambridge University Press) pp. 485-533.

Sneyd, I.Q., Legwegoh, A. and Fraser, E.D.G. 2013. Food riots: media perspectives on the causes of food protest in Africa. Food Security 5: 485-497.

A Monetary Policy Primer, Part 5: The Supply of Money

In previous installments of this primer I’ve tried to convince you, first, that monetary policy is ultimately about keeping the available quantity of money from differing substantially, if only temporarily, from the quantity demanded and, second, that doing this boils down in practice to having a money stock that adjusts so as to maintain a steadily-growing level of overall spending on goods and services.

If we’re to pick the right arrangements for achieving this goal, we’d better have a good understanding of the determinants of an economy’s money stock, and of how that stock can be made to expand or contract just enough to keep total spending stable.  Although I eventually plan to talk about monetary arrangements that might make maintaining a steady flow of spending a lot easier than our present system does, for now I’m going to stick to discussing how the same goal might be achieved, at least in principle, in our present monetary system or, more precisely, in the system we had until the subprime crisis of 2008.  (A later post will discuss how things have changed since the crisis.)  This means talking about the Fed’s “instruments of monetary control,” which include devices for regulating the total quantity of bank reserves and circulating Federal Reserve notes, and also for regulating the quantity of bank deposits and other forms of privately-created money that will be supported by any given quantity of bank reserves.

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