March 2007

March 31, 2007 9:09PM

NYT Clueless on Libertarianism

In Sunday's New York Times, Times economics columnist David Leonhardt reviews Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement by Brian Doherty.

It might have made sense to get a libertarian, or someone familiar with the libertarian movement, or a political historian to write the review. Instead, the Times turned to someone who knows something about economics. Since the Times is the most important book review venue in the country, it's worth taking a close look at Leonhardt's complaints.

The first half of the review retells the story of Ayn Rand and the Objectivists, which is fine. It's an interesting story, though it's probably the part of the book most likely to be already familiar to Times readers. After the Randian opening, Leonhardt writes:

The story of the American libertarian movement, like the story of its most famous salon, has been a combination of small numbers and big influence. It has never really emerged from the fringe, for the simple reason that most Americans want their government to educate the young and care for the old. But over the last few decades, they have also grown increasingly skeptical of collectivist policies that go beyond the basics. Libertarian thinkers — Rand, Milton Friedman, Murray Rothbard and others — have helped foment this skepticism and then enthusiastically pointed to the alternative.

Fair enough. Most movements are small, even those that have big effects. "Fringe" is a subjective issue; if a movement produces several Nobel laureates and a chairman of the Federal Reserve Board, and plays a role in such policy reforms as the end of the draft, deregulation, sharply reduced taxes, and freer trade, is it still on the fringe?

Read the rest of this post »
March 31, 2007 1:48PM

Heartland Insurgency

On Tuesday, it was Nebraska senators Chuck Hagel (R) and Ben Nelson (D) who provided the winning margin for a Senate bill to begin a phased withdrawal of troops from Iraq.


Today it’s five‐​term congressman Lee Terry (R‑Neb.) deciding that Attorney General Alberto Gonzales should resign.


Pretty soon, the neocons are going to be calling for an invasion of Nebraska.

March 31, 2007 1:47PM

Government Should Not Interfere with Company Pricing Decisions

It is currently illegal for a company to insist that a retailer sell a product at a certain price. Politicians claim that this policy, known as resale price maintenance, results in higher prices. This surely is true, but the key question is why a firm would want to insist on higher prices, especially since the retailer reaps the benefit?


The answer, as Steve Chapman explains in his column, is that some products are more likely to do well if the retalier has an incentive to give potential consumers more time, advice, and service. But this won’t happen if consumers can benefit from this attentiveness at one store and then buy the product at another store:

For a manufacturer to make an agreement with retailers to sell only at a specified minimum price is illegal — even when it promotes competition and offers benefits to consumers. …[E]stablished federal law … treats resale price maintenance agreements as invariably malignant. …The assumption is that if you let manufacturers control retail prices, they’ll hose consumers for their own profit.


But if they wanted to hose consumers, they could just raise the wholesale price they charge to retailers. That way, they would get the full proceeds of the rip‐​off, instead of sharing them with stores. So it’s reasonable to assume there is some motive besides price‐​gouging at work.


…Why would a company making purses or televisions or running shoes want to keep prices at a certain minimum? Maybe to induce stores to offer exceptional service or technical assistance. A store can afford to do that only if it can charge a commensurate price. But a service‐​oriented store can’t charge a commensurate price if a consumer can come in, get lots of help and then go across the street to Discounts Galore and buy the item at 30 percent off. By setting a floor, the manufacturer can prevent “free‐​riding” by bargain outlets.


In our hypercompetitive retail environment, if the strategy doesn’t serve customers, manufacturers who use it won’t survive. Consumers who can’t get one brand at a discount price will defect to other brands.

March 31, 2007 1:42PM

Sweden Repeals Wealth Tax

Globalization has been an ally of taxpayers. Because it is increasingly easy for jobs and capital to cross borders, politicians are being forced to eliminate or reduce taxes that penalize productive behavior.

The latest example comes from Sweden, which is now eliminating its tax on wealth:

Maybe the next Bjorn Borg won't feel compelled to move to Monaco now that Sweden plans to scrap a decades-old "wealth" tax that imposes levies on assets — not just on income. ...The move, expected to be approved by parliament later this year, underscores the country's efforts to keep successful Swedes and their capital at home by changing its fabled but costly welfare state.

"It's not sustainable to keep taxes that radically diverge from other countries," Finance Minister Anders Borg, who is not related to the tennis great, told The Associated Press on Thursday. "Not if you want the money to stay in the country."

Sweden is not alone. The article notes that other nations have been forced to eliminate this punitive levy on capital:

Read the rest of this post »
March 31, 2007 1:36PM

Is Giuliani a Supply‐​Sider?

Writing in the Wall Street Journal, Steve Forbes endorses Rudy Giuliani and makes a reasonably compelling argument that he believes in smaller government:

Rudy Giuliani…cut taxes and the size of government.… Mr. Giuliani delivered, overcoming the initial resistance of the overwhelmingly Democratic City Council. He ultimately prevailed 23 times, including cuts in sales, personal income, commercial rent and hotel occupancy taxes.


…Mr. Giuliani always made fiscal discipline a priority: instructing city commissioners to cut agency budgets even when the deficits had turned to surpluses. Mr. Giuliani set out to cut the size of city government, insisting that New York should live within its means. New Yorkers saw their quality of life improve with more effective delivery of services while the bureaucratic ranks were being thinned by nearly 20,000 — a near 20% decrease in city headcount, excluding police officers and teachers.

But there are reasons to question Giuliani’s pedigree. In a post on the New York Sun’s political blog, Ryan Sager quotes Giuliani trashing the flat tax:

“It [the flat tax] would really be a disaster and it’s totally inconsistent with the movement of the Republican Congress toward giving more responsibility to state and local government,” Mr. Giuliani said on CNN’s “Capital Gang,” on March 9, 1996.

To be sure, even good policymakers sometimes say silly things because of competing political interests. Nonetheless, it is difficult to reconcile Giuliani’s recent supply‐​side rhetoric with his harsh 1996 statement. If he had merely expressed concern, that would be understandable, but claiming that a flat tax would be a “disaster” suggests a genuine hostility to the flagship policy goal of supply‐​side economics.

March 30, 2007 3:10PM

‘Security Is the New Freedom’

That's what David Brooks declares in yesterday's New York Times. In the column, he argues (yet again) that limited-government conservatism is dead, and that what should take its place is an orientation that focuses less on "negative liberty (How can I get the government off my back) and more [on] positive liberty (Can I choose how to live my life)." We also learn from Brooks that since "The 'security leads to freedom' paradigm is a fundamental principle of child psychology," it must be the right way to look at man's relationship to the state.

Since Brooks cites Tyler Cowen's contribution to Cato Unbound, now's as good a time as any to carp about that essay. I can't agree with Professor Cowen that the libertarianism of the future ought to share the Left’s focus on ‘positive’ liberties and make its peace with big government. The 21st century libertarianism he'd like to see, a doctrine that seems to view principled distrust of government as an anachronism, isn't libertarianism at all. It's modern liberalism with a greater appreciation for markets — Thomas Friedman without the mixed metaphors. If modern liberalism moves in that direction, the world will be better off, and if libertarians can help encourage that transition, we should.

Yet I don't understand why the continuing resilience of the welfare state constitutes an "intellectual crisis" for libertarianism. An ideology is in intellectual crisis, it seems to me, when certain of its core tenets turn out to be wrong. That people still like the idea of free stuff from government doesn't count unless libertarianism has been in crisis from its inception.

In any event, my guess is that any political prediction that Cowen, I, or any other aspiring Hari Seldon might choose to make will, in a matter of decades, look as quaint as one of those 1950s magazine pieces on our Jetsons-style future. Given the difficulty of predicting the future, we might do better to focus on what's true instead of what we believe to be politically possible.

If the welfare state impedes human flourishing, if the drug war is an abomination, if the New Deal constitutional revolution was an intellectual fraud from top to bottom, then libertarians ought to say those things. Because they're true. Because they're not said often enough. And because describing the world accurately is the first step towards changing it.

Read the rest of this post »
March 30, 2007 2:03PM

Another Loss for the Online Gambling Nannies

I have yet to digest the official ruling (for the most committed trade nerds, it’s available here), but the United States has been dealt yet another blow in its dispute with Antigua and Barbuda over Internet gambling.


According to a World Trade Organization report released to the public today, the United States has not complied with the rulings and recommendations of a previous panel’s verdict that the United States’ ban on online gambling services was in violation of its commitments to the WTO (more here). Translation: the United States has not made any changes to its restrictions on gambling over the Internet that would make its laws WTO‐​consistent.


The United States will probably appeal this latest ruling, but if it loses that appeal and continues to refuse to change its laws, then the state of Antigua and Barbuda could retaliate to recover the damage that it claims has accrued to its online gambling industry as a result of the U.S. ban. Retaliation usually involves placing tariffs on the goods of the offending country, in this case the United States. (That is, of course, an economically insane way of “punishing” the violator, but I digress.)


Radley Balko is hoping that Antigua and Barbuda will instead choose to kick the United States where it hurts, and suspend its obligations to protect the intellectual property rights of American companies.