Archives: 07/2008

Crime vs. Terrorism in Providence

The New York Times reports that Providence’s police would prefer to spend their federal grants on crime rather than terrorism. That is because there is crime in Rhode Island but no terrorism.

This conflict is national, as I discussed here. Because our domestic counter-terrorism bureaucracy is largely our crime-fighting bureaucracy, the more you chase terrorists, the less you chase criminals. Some of the counter-terrorism money is new, but much of it comes by cutting back on other things. The FBI only has so many agents and the Justice Department so much grant money. Police officers only have so much time.

The result is pressure to divert counter-terrorism resources to crime-fighting. There are not enough terrorists to go around, so terrorist fusion centers become all-hazards fusion centers. Police departments try to use counter-terrorism funding to buy things - like police cars - that aid their actual work. Scandals about misused homeland security funds follow. But maybe the misallocating police had a better grasp on local risks than the grant-giving feds.

This was all summarized by the Wire. Early on, Detective McNulty struggles to interest the FBI in his investigation of Baltimore drug dealers, going so far as to call them terrorists to try to meet FBI criteria. Later, as a beat cop, he complains about the uselessness of a counter-terrorism course but uses notebooks they give him there for his kids’ school supplies.

India’s Doha Obstructionism

I was on the floor of the Cancun Convention Center when the September 2003 WTO ministerial conference officially ended in failure.  What struck me the most about the abrupt termination of the conference was the absolute jubilation with which the Indian trade delegation and its posse of reporters and NGO cheerleaders greeted the news.  There were high fives and hugs and ear-to-ear smiles.

At the time, I thought it odd that the Indians should be so gleeful about the failure of the conference, when, after all, India and other developing countries had so much to gain from a Doha agreement.  True, the U.S.-European agricultural proposal at Cancun was a farce, and developing countries were right to object.  But the negotiations were in tatters on that day and it was highly questionable that they would ever resume – hardly a reason for celebration.

Technically, the negotiations resumed the following summer.  But the Doha Round has never fully recovered from the Cancun meltdown.  The same divisions exist.  The same sense of victimization persists.  The same issues remain unresolved. The same preposterous mercantilist arguments endure.  And the same outcome should be expected from this week’s “do-or-die” ministerial meeting in Geneva.

Though the stasis has been attributed to United States and European stinginess on agricultural liberalization, there is plenty of blame to go around for Doha’s failure. It occurred to me sometime soon after witnessing the Cancun jubilation that a meaningful Doha deal would remain elusive because too many developing country trade ministers get too much political mileage back home when they are seen standing up to the U.S. and Europe.  Kamal Nath, India’s commerce minister, revels in his role as David to the Western Goliath. (Although his portrayal of David as an arrogant, condescending Narcissus makes you want to cheer for the Philistine giant.)

It’s always all about politics, and if the politics of denying progress on trade negotiations pays higher dividends to the participating politicians than the politics of bringing home a deal, then no deal will happen.  With each criticism or rejection of a U.S. or European offer, Nath’s political standing at home moves up a notch. He’s tapped into a post-colonial nationalism (southism, really) that has gained confidence with the emergence of his and other developing-country economies, and is energized by the thrill of seeing the West get its comeuppance.

Nath will continue to play this card because he doesn’t believe that India needs a Doha deal. Or, more aptly, he knows there is greater opposition (political cost) to securing a comprehensive Doha deal (which would require India to “lock in” the tariff liberalization it has undertaken unilaterally over the past several years) than there is demand in India (political benefit) for liberalization abroad. The Indian economy has grown handsomely this decade, which is reflected in the prideful attitudes of its political leaders (nevermind the fact that 300 million Indians still live on less then $1 per day).

To compound the problem this has created for the negotiations (which requires consensus from 153 members to reach agreement), since Cancun India has been speaking for most developing countries (and certainly the least developed countries). Thus, Nath’s hard line has become the hard line of 80 percent of the WTO delegations.

The belief that rich-country trade barriers are a primary cause of poor-country poverty, and that poor-country barriers are needed to overcome poverty, remains prominent in developing countries. But what would happen if there were no rich-country barriers, yet poverty remained? How would the politicians explain continued poverty in the absence of repressive rich-country barriers?

Losing the capacity to scapegoat external forces would be another big cost to developing country politicians, like Nath.

Excessive Cold vs. Excessive Heat: Costs of Hospitalization

“Excessive Heat Can Run up Hospitals’ Bad Debt Expense for Treating the Uninsured: Report,” trumpeted a trade publication called Inside ARM (Inside Accounts Receivable Management).

The first paragraph informed us that, “ A report by the Agency for Healthcare Research and Quality suggests hospitals may find they are treating more uninsured patients suffering from heat exposure and exhaustion, resulting in more medical bad debt.”

Turns out that about 6,200 people were hospitalized in 2005 due to excessive heat and weather conditions, at an average cost of $6,200.

But in the penultimate paragraph of the report, we find out that 6,500 were hospitalized due to extreme cold weather conditions at an average cost of $12,500 per stay because the hospitals stays tended to be longer.

Final tally:

Hospitalization costs from exposure to extreme heat – $38.4 million

Hospitalization costs from exposure to extreme cold – $81.3 million.

Wonder what the numbers would have looked like, absent any global warming, which should have increased minimum temperatures more than maximum temperatures or, more importantly, had there been no greenhouse gas producing air conditioning or heating.

Losing Faith in What?

In the Los Angeles Times, Peter Gosselin offers a “news analysis” on the theme that “Americans may be losing faith in free markets.”

For a generation, most people accepted the idea that the core of what makes America tick was an economy governed by free markets. And whatever combination of goods, services and jobs the market cooked up was presumed to be fine for the nation and for its citizens — certainly better than government meddling.

No longer.

This kind of crisis of confidence occurs every time the economy temporarily heads south — which it inevitably does from time to time. What does this tell us? It tells us that people do not understand the economy very well. And what do stories like Gosselin’s tell us? That most journalists don’t either.

But economic downturns do offer the motivated reporter an opportunity to speculate on the possible political consequences of unflagging public and media ignorance. The causes for our current economic troubles are evidently too complex to fathom, so instead of writing intelligibly about what is actually happening and why, we are asked to wonder (hope? fear?) whether voters can be made to demand a “New Deal Lite,” before the economy regains steam and we become too satisfied to regulate ourselves into oblivion.

It would be useful if journalists could find a way to report on the actual nature of the American economy. This would be a real public service. The American economy is in fact a byzantine amalgam of market and state institutions enmeshed in a thicket of regulation. Gosselin maintains that “most people” in the U.S. think there is something out there called “the free market” that operates without “government meddling.” I’m not really sure that most people think that, but it seems Gosselin does, because he goes on to structure his “news analysis” as if the story is that dissatisfaction with a kind of laissez faire we do not have may be generating demand for basically the kind of dirigisme we’ve already got. But since economic systems we haven’t got can’t cause our economic problems, the result is confusion.

Consider the fact that the Federal Reserve is a central planning committee. We are lucky, I think, to have intelligent, highly professional planners, but there are in-principle limits to what they can do with limited information, and so there is no way they are not going to get it wrong sometimes, or a lot of times. The housing “bubble,” which has turned out very badly for a lot of people, and the historically high price of gas, which is to a large extent a function of the low value of the American dollar, probably has had a lot to do with the policies chosen by our monetary central planners. Failures of government planning don’t discredit free markets. Rather, they suggest free markets might be worth trying some time.

Did the ratings agencies and investment banks screw up royally in their assessment of the risk of certain classes of mortgage-backed securities? Yes they did. Did assurances of bailouts, implicit and explicit, from the government to the financial industry encourage dangerous risk-seeking? Yes they did. Many market institutions, like our advanced financial markets, are very far from being self-organizing outgrowths of unregulated market exchange. Instead they are, by and large, creatures of the vast body of law and government regulation that defines the rules of market exchange — that determine what may be bought and sold, and how — and are tightly integrated with more or less freestanding government institutions like the Fed. When these markets stumble, it’s just a rookie mistake of political economy to see that as problem with markets, per se, rather than as a problem with the way regulation and government institutions happen to have structured those markets and thereby structured the incentives of the individuals and firms that act within them.

Here’s another example of the mixed economy. Food is expensive these days, which hits poorer Americans especially hard. Part of the price hike is due to normal market forces; supply has yet to catch up with the increased demand from the rising middle class in China and India and elsewhere. But a large part of it comes from our own government’s frankly idiotic policy of subsidizing corn ethanol, which pushes up the price of all sorts of foods, from wheat to milk to meat. So the conclusion we should draw from this is what? Damn you free market!?

Gosselin winds down on what to many must be a hopeful note:

Historians watching the nation’s current economic and financial troubles say that just because Americans don’t throw up their hands about markets and rush to an opposite pole, such as socialism, it doesn’t mean that change isn’t underway.

As UC Davis’ Rauchway pointed out, the devastating panics and depressions of the late 19th century eventually resulted in the progressive reforms of the early 20th century and, later, the New Deal of the 1930s.

Before we get too excited about “progressive reforms” once again saving capitalism from itself, perhaps we should try a little harder to comprehend the way the actually-existing economy works (journalists might think about helping with this!), so that we can pinpoint the most likely institutional causes of the recent gloom and effectively focus our reforming zeal. Were the media willing or able to explain how our mixed economy actually functions, this downturn might just as well inspire a loss of faith in the government meddling we’ve already got. But what would be the point of writing an article like that?

Preschool is a ‘Magic’ Answer

I’ll get to the boring Oklahoma data dispute soon, but first I’d like to respond to a small point in my ongoing debate with Sara Mead of the New America Foundation.

Mead thinks I’m being uncharitable in my characterization of how she and the New America Foundation approach preschool policy: “And, Schaeffer is most definitely wrong, given our commitment to pre-k as one part of a broader school reform agenda, to lump me in with the silver bullet crew.”

First, I’ve never said that these folks claim preschool is a silver bullet, or an inoculation, or what-have-you. I’ve said they wildly oversell what preschool can do. But I guess I should have looked more closely at their website, which seems more nuanced than I first thought.

From their website’s Education Policy Program Overview: “Early Education. There is no magic answer in education policy, but preschool comes close.”

I didn’t expect to agree with their characterization … preschool really is close to a “magic” answer! It provides the illusion of an answer to our educational problems. But that’s all it is: an illusion.

Preschool is, at best, of marginal long-term value to at-risk children. The real answer to our educational problems lies in reforming the k-12 system.

Instead of chasing magical solutions like universal pre-k, we should focus on the one proven and potentially systemic k-12 reform: educational freedom.

The Mechanics of Government Gaining Ground

Over at the new WashingtonWatch.com blog, I’ve posted a piece illustrating the simple modern mechanics of something Jefferson warned against: “The natural progress of things is for liberty to yield and government to gain ground.”

Congress is considering a bill to cancel the scheduled termination of a commission that studies minority veterans issues. It would only cost three cents per U.S. family to keep it going, but it’s one of nearly 10,000 bills of all different stripes pending in the current Congress.

Did minority veterans fight for a country where each group looks to the government for special treatment or a little cut of the loot from taxpayers? Or for the country where the people’s spirits are still free?

Losing Elections, Losing Wars

Senator John McCain’s advisers evidently told him to crank up the rhetoric a bit yesterday, because his longstanding stump speech line about “rather lose an election than lose a war” became this:

When we adopted the surge, we were losing the war in Iraq, and I stood up and said I would rather lose a campaign than lose a war. Apparently Sen. Obama, who does not understand what’s happening in Iraq or fails to acknowledge the success in Iraq, would rather lose a war than lose a campaign.

There’s something strange about the logic of that statement. McCain’s implying that “losing” the war will win Obama the election — that the American people want to “lose.”

And, it turns out, by McCain’s definition of losing, he’s correct. A Rasmussen/FOX survey reports today that 63% of Americans want troops home from Iraq within one year:

Twenty-four percent (24%) would like to see the troops brought home immediately while 39% say they should be brought home at some point within a year.