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July 16, 2007 1:09PM

DC Government to Petition Supreme Court

The Mayor of Washington DC just announced that the city will ask the Supreme Court to reverse a landmark Second Amendment ruling from the DC Court of Appeals.


This is great news – as the whole idea of this lawsuit has been to get a good case up to the Supreme Court. Had DC officials not filed an appeal, they would have had to amend DC’s 30 year ban on guns, but they could have kept the case out of the Supreme Court. By filing an appeal, DC officials are hoping that the lower court will be reversed, but the risk is that the High Court will rule otherwise. For opponents of the DC firearm ban, it is nice to have a favorable precedent from the DC Court of Appeals – but it is even better to have a favorable precedent from the Supreme Court.


The ball is now with the Supreme Court. DC has decided to appeal but review by the High Court is hardly automatic. The Supreme Court declines to hear hundreds of cases every year. To hear a case, four justices must agree that a particular case ought to be heard. We will likely learn whether this case, Parker v. District of Columbia, will be reviewed when the Court reconvenes in early October, after its summer recess.


Background on the lawsuit here. Cato’s Second Amendment work is here.

July 16, 2007 12:35PM

Who’s Causing Trouble in Iraq?

This morning’s LA Times has an interesting piece on who is actually sowing the mayhem that continues to take place across Iraq:

BAGHDAD — Although Bush administration officials have frequently lashed out at Syria and Iran, accusing it of helping insurgents and militias here, the largest number of foreign fighters and suicide bombers in Iraq come from a third neighbor, Saudi Arabia, according to a senior U.S. military officer and Iraqi lawmakers.


About 45% of all foreign militants targeting U.S. troops and Iraqi civilians and security forces are from Saudi Arabia; 15% are from Syria and Lebanon; and 10% are from North Africa, according to official U.S. military figures made available to The Times by the senior officer. Nearly half of the 135 foreigners in U.S. detention facilities in Iraq are Saudis, he said.


Fighters from Saudi Arabia are thought to have carried out more suicide bombings than those of any other nationality, said the senior U.S. officer, who spoke on condition of anonymity because of the subject’s sensitivity. It is apparently the first time a U.S. official has given such a breakdown on the role played by Saudi nationals in Iraq’s Sunni Arab insurgency.


He said 50% of all Saudi fighters in Iraq come here as suicide bombers. In the last six months, such bombings have killed or injured 4,000 Iraqis.

And yet, apropos of all the recent saber‐​rattling against Iran that’s taken place lately, the most interesting line in the piece may be this one:

Both the White House and State Department declined to comment for this article.

Why do they have nothing to say about the Saudis?

July 16, 2007 11:54AM

Inside a Chinese Factory

Via Tom, here’s a fantastic series of posts by the guy who’s setting the Chinese supply chain to manufacture the Chumby, an Internet‐​enabled alarm clock. Here you can see videos of a Chinese factory floor, with workers assembling sneakers. Here is a story about the fanatical level of dedication he has seen among the workers at the factory — dozens of employees stayed at work until 3 AM while he debugged a flaw in the first run of devices, and then showed up again at 8 AM to resume assembly. And finally, here are some videos of Chinese workers doing extremely detailed work quickly and accurately.


Some peoples’ instinctive reaction to this story is no doubt to wring their hands about the exploitation of Chinese workers. It’s not hard to see why; wages are only about $0.60/hour, and the jobs are tedious. And indeed, when I was in college in the late 1990s, there were a lot of activists who did just that, agitating for the shutdown of “sweatshops” in China and elsewhere. But I think this suggests a better way to look at the situation:

The amazing part is that the Shenzhen factories were complaining that labor rates were way too high. Apparently, minimum wage for factories in other regions is much less, so they are seeing contracts migrate away from their factories and inland where labor is cheaper. Think about it – Americans complain about work going to Hong Kong, Hong Kongers complain about work going to Shenzhen, Shenzheners complain about work going inland China, and to Vietnam (apparently Vietnam is the new hotness for cheap skilled labor).

The low wages and tedious work of the early sweatshops were a temporary condition. The author reports that the minimum wage in Shenzhen has been increasing by about 30 percent per year in the last couple of years. As the workers in Shenzhen become more skilled and the companies develop better business relationships with Western companies, demand for the area’s manufacturing facilities rise. The companies expand their facilities and hire more workers, and the competition for workers then pushes up wages. And that, in turn, will lead companies to increasingly transition to more complex and lucrative activities. Firms in Shenzhen will specialize in manufacturing more and more complex products, and eventually some of them will begin designing and building their own products.


That’s what happened in postwar Japan, South Korea, and Taiwan, all of which have since achieved Western levels of affluence. The anti‐​globalization activists meant well, but in reality, the opportunity to become integrated with the global economy will do far more to help the average Chinese worker than anti‐​sweatshop laws could possibly have done.

July 16, 2007 9:48AM

Economics and Values

A recent NYT article has roiled the economics blogosphere by spotlighting several prominent economists who ostensibly challenge the "fundamental assumptions" of their field. A snippet:

“Economists can’t pretend that the consensus for free markets and free trade that existed 30 years ago is still here,” said Robert B. Reich, a public policy professor at Berkeley who served in President Bill Clinton’s cabinet.

Part of the reason is the growing income inequality and dislocation that global markets and a revolution in communications have helped create. Economists who question the free-market theories “want to speak to the reality of our time,” Mr. Reich said.

The article references some interesting material, including Alan Blinder's criticism of offshoring and David Card's provocative work ($) with Alan Krueger on employment and the minimum wage. However, contrary to its tone, the article is not (for the most part, anyway) about disagreements in economics — it's about disagreements over values.

Consider, for instance, this bit from Blinder's recent Washington Post op-ed:

And if the jobs do move offshore, displaced American workers may lose not only their jobs but also their pensions and health insurance. These people can be forgiven if they have doubts about the virtues of globalization.

Read the rest of this post »
July 15, 2007 9:48PM

Should We Execute Bad Regulators?

I just sent this letter to the editor of the Washington Post:

The lack of outrage about China’s horrific execution of a corrupt food and drug regulator in a recent editorial [“Rough Justice,” July 14] was itself outrageous.
 
Zheng Xiaoyu was put to death for (allegedly) taking bribes that enabled unsafe products to reach the market. The death toll thus far is hundreds of lives lost in China and Panama.
 
Dr. David A. Kessler was commissioner of the U.S. Food and Drug Administration (FDA) from 1991 through 1996. In 1988, researchers at Harvard University had demonstrated that widespread use of aspirin at the onset of a heart attack and daily for 30 days afterward could save 5,000 lives per year in the United States. Yet Dr. Kessler’s FDA refused to let aspirin manufacturers advertise that extremely important information until 1996. That policy resulted in as many as 30,000 unnecessary deaths during Dr. Kessler’s tenure. No one has ever accused Dr. Kessler of taking bribes. But he surely benefited personally from his position and from his aggressive regulatory policies, going on to be named dean of Yale University’s medical school.
 
If Dr. Kessler’s political opponents in the U.S. government had put Dr. Kessler to death for his actions as a regulator, I think the Post would denounce his execution as barbaric. But then why be so blithe about an equally barbaric execution in China?

I’m used to people valuing the lives of the FDA’s Type I victims more than the lives of its Type II victims. But valuing the lives of Type I victims more than the lives of the regulators themselves is a new one by me.

July 15, 2007 9:46PM

Norway’s Hypocritical Statists

The socialist government of Norway is leading a new campaign against tax havens. Norwegian workers can be thankful, though, that the state pension fund is not consumed by the same big‐​government ideology. According to a Norwegian newspaper, the oil‐​enriched fund invests billions of dollars in tax haven companies, thus ensuring that more money actually winds up in the hands of retirees rather than politicians. But if the Norwegian government’s anti‐​tax competition campaign is successful, all workers will be hurt since politicians all around the world will be more likely to raise taxes if they think the geese that lay the golden eggs cannot fly away:

Norway’s center‐​left government coalition has made an issue of battling offshore tax havens. Both Finance Minister Kristin Halvorsen and the minister in charge of foreign aid, Erik Solheim, have harshly criticized companies, both Norwegian‐ and foreign‐​owned, that avoid taxes by registering themselves in countries with low or non‐​existent tax obligations. At the same time, however, the state’s massive pension fund that’s fueled by Norway’s oil revenues has been investing billions in companies that are registered in tax havens. This includes companies “based” in places like the Cayman Islands, Bermuda and Cyprus. … Finance Minister Halvorsen has characterized Norwegians who invest in tax havens as a “provocation against Norwegian taxpayers.” She’s not demanding, though, that the state pension fund blacklist tax haven investments.

July 13, 2007 1:34PM

America’s Anti‐​Competitive Corporate Income Tax

The Wall Street Journal editorializes about America’s corporate income tax, which now has the dubious honor of imposing the highest rate in the developed world. This punitive system is bad for workers, as the WSJ notes, but it is even counter‐​productive for politicians because the high tax rate probably results in less tax revenue:

At least 25 developed nations have adopted Reaganite corporate income tax rate cuts since 2001. The U.S. is conspicuously not one of them. …Even in France, of all places, new President Nicolas Sarkozy has proposed reducing the corporate tax rate to 25% from 34.4%.


What do politicians in these countries understand that the U.S. Congress doesn’t? Perhaps they’ve read “International Competitiveness for Dummies.” In each of the countries that have cut corporate tax rates this year, the motivation has been the same — to boost the nation’s attractiveness as a location for international investment.


Germany’s overall rate will fall to 29.8% by 2008 from 38.7%. Remarkably, at the start of this decade Germany’s corporate tax rate was 52%. All of which means that the U.S. now has the unflattering distinction of having the developed world’s highest corporate tax rate of 39.3% (35% federal plus a state average of 4.3%), according to the Tax Foundation.


…Lower corporate tax rates with fewer loopholes can lead to more, not less, tax revenue from business. …Tax receipts tend to fall below their optimum potential when corporate tax rates are so high that they lead to the creation of loopholes and the incentive to move income to countries with a lower tax rate.


Ireland is the classic case of a nation on the “correct side” of this curve. It has a 12.5% corporate rate, nearly the lowest in the world, and yet collects 3.6% of GDP in corporate revenues, well above the international average. The U.S., by contrast, with its near 40% rate, has been averaging less than 2.5% of GDP in corporate receipts. …[M]ost economists understand that corporations don’t ultimately pay any taxes. They merely serve as a collection agent, passing along the cost of those taxes in some combination of lower returns for shareholders, higher prices for customers, or lower compensation for employees. In other words, America’s high corporate tax rates are an indirect, but still damaging, tax on average American workers.