2011 in Review

The Stone Soup blog was viewed about 22,000 times in 2011. In 2011, there were 24 new posts, growing the total archive of this blog to 121 posts. The busiest day of the year was January 21st with 1,464 views. The most popular post that day was How The Other Side Thinks.

The most popular referrers were: facebook.com, reddit.comtumblr.com, afternoonsnoozebutton.com, and twitter.com. Some readers found us through search terms. The most popular searches were: “antibiotic[s]” (1,074), “christopher hitchens [smoking]” (584), “vietnam war medals” (65), “leaders” (64), and “importance of export” (48). A few of the more amusing search terms include: “did andy dufresne kill his wife” (9), “farm subsidies are good” (3), and “where does america rank?” (2).

Attractions of 2011:

Here are the posts that got the most views in 2011.

1. How The Other Side Thinks – 6,785 views

2. The Antibiotics Shortage and How to Solve It. – 1,842 views

3. Guest Post: A Deserved Toast To Christopher Hitchens – 935 views

4. Federal Funding Received by State per Dollar Sent. – 773 views

5. Recipe: The Best Braised Short Ribs, with Coffee and Chili – 628 views

 

A few of our favorite posts by author: 

Alex Taubes – Summer Vacation and Teachers

Thomas Miller – A Regruntled Democrat on the State of the Union

David Yin – How The Other Side Thinks

Josh Morrison – the kidney donation series, thus far:

1. My Kidney Donation

2. Pre-Op Testing — Blood Work

3. Vegetarianism and Kidney Donation

4. Hurry Up and Wait

5. False Starts

6. A New Normal

7. Day (after the Day) of Days

8. Not So Easy 

 

Thanks for reading Stone Soup in 2011!

In Defense of Clarence Thomas

(This piece was cross-posted at the HLPR blog, where I’ve been writing this semester, but I had long-ago intended it as part deux of the “In Defense of” series, which started with farm subsidies.)

I recently asked my Facebook network which Supreme Court justice, modern or historical, would they elect to partner with on a Constitutional Law final exam, assuming the justice had taken the class with them that semester. John Marshall, Oliver Wendell Holmes Jr., Robert Jackson, and William Brennan were predictable choices as powerful writers and influential molders of constitutional thought. Scalia, well-known for his bombastic style yet clear exposition of facts and law, was popular. Clarence Thomas received no votes. Perhaps it is to be expected that among the constellation of judicial stars, Thomas would pale in popularity–his legacy, after all, has yet to be defined. No doubt for others his judicial philosophy, hewing tightly to original intent and historical understanding, leaves progressive-minded comrades ill at ease. Yet if a motivating factor for unpopularity is Thomas’ silence at oral argument, I would ask my friends to reconsider.

Clarence Thomas joined the Supreme Court in October 1991. On February 22, 2006, Thomas posed a question during oral argument, and has stayed silent ever since. His silence has been the subject of much commentary and speculation, and perhaps inevitably, ridicule and accusations of un-intellectualism. This disparaging category of charges is unfair, and deserves some scrutiny.

In a piece on the fifth anniversary of Thomas’ silence, Adam Liptak of the New York Times quoted a law review article which opined: “If Justice Thomas holds a strong view of the law in a case, he should offer it . . . It is not enough that Justice Thomas merely attend oral argument if he does not participate in argument meaningfully.” One Huffington Post author, writing on important questions Thomas had asked, noted, “. . . Thomas’ silence has also left many casual observers — that is, ordinary American citizens — with the impression that the man either does not care about the cases or cannot intellectually compete with his colleagues.”

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Federal Funding Received by State per Dollar Sent.

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During the presidential debate for Bartlett’s reelection in The West Wing, the Democratic president turns to the Republican nominee and says:

“There are times when we’re fifty states and there are times when we’re one country, and have national needs. And the way I know this is that Florida

didn’t fight Germany in World War II or establish civil rights. You think states should do the governing wall-to-wall. That’s a perfectly valid opinion. But your state of Florida got $12.6 billion in federal money last year – from Nebraskans, and Virginians, and New Yorkers, and Alaskans, with their Eskimo poetry. 12.6 out of a state budget of $50 billion. I’m supposed to be using this time for a question, so here it is: Can we have it back, please?”

Like Governor Ritchie and the Republicans in the West Wing, real-life Republicans and Tea Partyers abhor big government. But as President Bartlett pointed out, we do not operate as a collection of states, and the federal government gives considerable aid to the various states to supplement state funding. This is inevitably a redistribution from wealthier states to poorer states–from Wall St. and Silicon Valley to Main St. and Tin Pan Alley. But the latter is not so grateful for the assistance of the former, and even as they accept federal dollars, Republicans vilify the source of their extra income.

Above we see two maps of the United States. The one on the bottom is a familiar Electoral Map from Bush v. Kerry, 2004. On the top is a map I created (alas, I could not find a snazzier map-making program) using data from the Tax Foundation. It shows Federal Dollars Received by State Per Dollar Sent to Washington. Notice anything? To a large extent, the red states correlate from map to map. That is, Republican states in favor of smaller government were actually the biggest beneficiaries of big government. For every dollar Mississippi sent to the federal government, it received $2.02; for every dollar New Jersey sent to the federal government, it saw only $0.61. Yet Mississippi voters don’t berate their Senators and Representatives for being so effective at bringing home the bacon. In Mississippi, the 2007 budget was composed of $8.4 billion from state-source funds, and $5.9 billion from federal funds. Over 40% of Mississippi’s state budget that year came from the federal government, and of that over half came from out-of-state taxpayers, including liberal elites in places like New Jersey, New York, and Connecticut. Can we have it back please? (funnily enough, Gov. Ritchie’s Florida just about breaks even at $0.97 received per dollar sent. The other odd blue state, Texas, is also close at $0.94.)

The other irony is that, living in D.C., I see license plates every day that complain “Taxation Without Representation”, and lawn signs campaigning for DC Voting Rights. Yet although New Mexico and Mississippi have the highest returns of any states, the District of Columbia blows them out of the water. For every dollar D.C. sent to the Treasury, the federal government paid $5.55 back. For that kind of money, I’d happily trade the services of my representative, Scott Garrett from the NJ-5th.

Full rankings of federal funding below the fold:

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Recipe: 10-Minute Mussels

Like a lot of humble working-class fare in recent years, moules frites has been elevated to bistros and fancy dining rooms. At NYC’s Flex Mussels, 17 different versions of the classic Belgian dish anchor the menu, for $18 (classic) to $21 (“Maine”: w/ lobster, smoked bacon, corn, white chowder, parsley). I much prefer to make mussels at home because I don’t feel like choosing between paying $20 for mussels (seriously, they’re only $3.99/lb. at Whole Foods), or getting food poisoning at a less reputable establishment. Fortunately, they’re incredibly easy to make. Here’s a simple recipe that takes less than 10 minutes from beginning to end, and tastes great!

Ingredients:

1 lb. Mussels (per person)

4 cloves garlic, chopped

1 Andouille or Chorizo sausage, sliced

1/2 bunch Parsley, chopped roughly

2 tbsp. Butter

1 cup White Wine or Dry Vermouth

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Instructions:

1) Clean your mussels by scrubbing them under cold water, and pulling off the “beards”. There are only two things to know about eating mussels safely: (a) Don’t buy/use any raw mussels that are already opened. Ask the fish monger to sort them out if you’re buying by the pound. (b) Don’t eat any cooked mussels that haven’t opened. Do not force them open.
2) Heat a pot with a lid, preferably a clear lid. Add butter to hot pot. Add sausage, and cook through. The sausage is obviously optional, though I think it enriches the broth and gives it a bit of a smokey flavor. You can leave it out, but in that case I might add a diced shallot. Add garlic, brown.
3) Add cleaned mussels. Quickly sprinkle some salt (not too much, the mussels are naturally salty from the sea), and pepper. Add chopped parsley and splash over white wine. Cover quickly with lid.
4) While holding down the lid, vigorously shake the pot back and forth to turn over the mussels. Once the mussels open from the steaming, they are cooked–this took 90 seconds for 1 lb; I can’t imagine it taking more than 3-4 min. even for larger portions. Some recipes say 8-10 minutes… but that will completely overcook them. Live dangerously, I say.
5) Portion mussels into bowls, remember to throw out unopened mussels. Pour over broth, and mop it up with warm, crusty bread!

Earthquakes and Efficient Markets Theory

The Efficient Markets Hypothesis is an oft-debated theory in financial economics, and important to consider for people who want to make money by “beating the market.” In particular, it implies that it is difficult for investors to outperform the market in the long-term. Investopedia describes EMH as saying that “at any given time, prices fully reflect all available information on a particular stock and/or market. Thus, according to the EMH, no investor has an advantage in predicting a return on a stock price because no one has access to information not already available to everyone else.” (note: this also assumes regulation that makes relevant information public, and market liquidity).

Today I wanted to contribute evidence against the Efficient Markets Hypothesis, and give a somewhat cynical example of a specific missed opportunity to profit immensely from a natural disaster.

  • On Friday March 11, 2011 an earthquake measuring 9.0 on the Richter scale struck near the coast of Japan’s main island of Honshu. This earthquake occurred at 2:46pm local time in Tokyo.
  • The Tokyo Stock Exchange closes at 3pm local time.
  • Japan has a $1 billion earthquake early-warning system comprised of over 1000 GPS-sensors, that gave people “enough time for people to switch off their gas lines and get beneath a table or a door frame. And was especially helpful to those in Tokyo who were 230 miles from the epicenter and therefore may have had an additional 80 seconds to prepare.”
  • On Monday following the earthquake and tsunami, “[Japanese construction firms] Hazama Corp. and Kumagai Gumi, for example, jumped more than 40 percent, and Kajima Corp., one of the biggest in the sector, rose 22.2 percent. Many others saw gains of well over 10 percent.” It was also very possible to make money from shorting stock in companies like Toyota and Sony, but slightly riskier, so for now let’s only consider the companies that saw huge gains.
  • Trading for Hazama Corp. closed at 73.00 on Friday, March 2011.

What’s the missed opportunity here? Apparently no intrepid/cynical trader had a computer program that would (1) Link to the earthquake early warning system and know instantly when a 8.5+ earthquake was on its way, (2) use the two minutes of notice to vacuum up construction company stocks. Notice that the design of the earthquake detection and early warning system incorporates high confidence that an earthquake is real and dangerous. And the risk appears very low as long as you don’t overpay for these stocks, since they seem to trade at very stable prices. The profit-potential was large: one-day returns in the double-digits.

Perhaps no one did this because of the morally-questionable nature of profiting from human suffering (something to cover in a future post). But given that speculators routinely show no qualms in profiting from failure or disaster in other cases, and in some ways may even induce it (e.g. short-selling), I have to suspect that this is an example of market inefficiency.

restaurant review: A taste of North Korea at Pyongyang Soondae (Northern Virginia)

Pyongyang Soondae

6499 Little River Turnpike, Alexandria, VA

A while back I read my friend Tao’s Facebook note detailing an exciting culinary adventure. While visiting Dubai, he found a restaurant called Okyru-Gwan that serves North Korean food. It’s operated by the state of North Korea, and the other branches are in Beijing and Cambodia–expansion to the United States seems unlikely. Despite the small size of the peninsula they share, North Korean food is apparently different from food in the South, and as a foodie I envied Tao’s opportunity to sample such an exotic product, and was dismayed that the only apparent place to find it was at an institution that serves as a source of foreign currency and money laundering for Kim Jong-Il.

Then a few weeks ago I read a great article in everyone’s favorite local D.C. publication, the Washington City Paper. They reviewed a restaurant owned and operated by North Koreans. The owner is a North Korean woman who formerly worked as a spy before defecting (her story is quite thrilling, so I encourage you to read the article), and now lives in Northern Virginia. Not only does her restaurant serve authentic North Korean food, it employs many North Korean refugees. I knew I had to visit Pyongyang Soondae. Not only would I get to eat a new food, and in so doing travel to a new and completely restricted place, but I would thumb my nose at Kim at the same time by supporting the economic activities of North Korean refugees.

Let me diverge from the restaurant review for a moment and discuss an anxiety I feel when eating food from cultures that typically do not dine as sumptuously as Americans: Is it wrong to enjoy large, protein-rich meals prepared in the style of Ethiopia, Laos, or North Korea when actual people in those countries rarely eat protein abundantly, and millions are starving in North Korea? Perhaps conveniently, I’ve concluded ‘no’. Few would say that tourism to Laos or Ethiopia and observation of their history and culture is wrong, even if most residents of those countries couldn’t share that experience, perhaps because foreign tourism directly benefits a local economy. At a place like Pyongyong Soondae, where our own waitress had escaped North Korea, eating there, in some small way, supports the livelihoods of those who represent by their very survival a courageous opposition to tyranny. Second, there’s the common reaction of “you had North Korean/Ethiopian food? What is that, dirt and worms?” Such trite jabs are ultimately mistaken–while the current populations of those countries may be impoverished, their culture and history are still rich, and their pride in their civilization is not diminished. I’m a big fan of No Reservations, and you can see on the show how his hosts in poorer countries pull out all the stops and prepare veritable feasts for Bourdain and his crew. Every country has some version of the Greek xenia–the guest-host relationship–and all over the world guests are feted precisely to impress them with the special offerings of a family, a heritage, or a country. On a more abstract level, I like to think of ideas as engaged in an evolutionary game of survival. We want our values to be shared, because the more adherents the more powerful (and perhaps the more validated) the idea, and because with greater numbers our ideas can survive the attrition of time. So in that way, I don’t think it’s callous to enjoy the cuisines of poor countries, because we pay tribute to them in broadening our horizons, and with our appreciation we strengthen the fitness of their culture. Anyway.

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How are the U.S./Japan/Sweden different from U.K./China/Norway?

I took a list of the top 30 economies in the world, and sorted them by one variable. 

These countries were in one group: United States, Japan, Italy, Russia, Spain, Mexico, Netherlands, Belgium, Sweden, Saudi Arabia, Taiwan, Austria, South Africa, Iran, and Thailand. (15)

These countries were in the other: China, Germany, France, United Kingdom, Brazil, Canada, India, Australia, South Korea, Turkey, Indonesia, Switzerland, Poland, Norway, and Argentina. (15)

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On what variable were they sorted?

Find out below the fold…

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LCD Soundsystem, Ticket Pricing, and IPOs

LCD Soundsystem is one of my favorite bands, and the favorite band of Stone Soup guest blogger Thomas. Unfortunately, they will no longer be producing music together, and planned a final, farewell show at Madison Square Garden. This farewell show is the subject of much media frenzy because, apparently, no one was able to get tickets for it. One Slate writer recounts her experience trying/failing to get tickets:

At 11 a.m. on Friday, Feb. 11, Ticketmaster was scheduled to put tickets to the show on sale. At exactly 10:50 a.m. on Friday, I went to Ticketmaster’s site and set up the appropriate purchase page. At 10:58, I started refreshing constantly. At 11, poised and ready, I got … nothing. The site said there were no tickets available. I reloaded the page madly, and then tried with a new browser window. No tickets. Not even in the nosebleed section.

Twitter was abuzz with chatter on how it was impossible to obtain LCD Soundsystem tickets. The Onion’s AV Club joked, “Anyone who’s glanced at their Twitter feeds this morning knows that the inability to purchase tickets to LCD Soundsystem’s Madison Square Garden farewell show rivals Mubarak’s exit for topic du jour.”$50 tickets appeared shortly thereafter for thousands of dollars apiece on reseller websites like StubHub. As the Slate article explains, and as the LCD Soundsystem frontman James Murphy ranted about, the problem was caused by scalpers who used computer programs to circumvent Ticketmaster’s [pathetic?] Captcha system and snap up all the tickets within seconds of release. A few pre-sales, and hold-backs from the band and venue, may have reduced the actual ticket supply. The illegality of paperless tickets (in New York)–where fans must present the purchasing credit card on the night of the concert–eliminated one method of solving the scalping problem. Anyway, Murphy mitigated the problem by announcing the band would play four additional shows at Terminal 5 before the MSG concert, which he hoped would depress ticket prices for the MSG show and, in an ideal world, screw over the scalpers a little bit.

A lot of people have mourned the naivete of James Murphy, and called for an auction-based system where fans could buy tickets closer to their actual value. Matthew Yglesias writes:

Optimal allocation of LCD Soundsystem tickets requires demand-responsive ticket pricing. But good rock bands are not composed of narrow-minded amoral profit-maximizers. Consequently, they’re motivated to price tickets at a lower level than the market will bear leading, in turn, to middlemen getting the rents. What’s needed is a way for bands to price tickets at demand-responsive levels in a way that’s consistent with the norm that the guys in a cool band shouldn’t be narrow-minded profit-maximizers. The best solution here, I think, is charity. Someone (Bono?) needs to set up a trust fund to which bands will allocate the excess revenues that accumulate when the market price of concert tickets exceeds the “fair” price as determined by the bands’ moral intuitions. In that case, instead of a situation where “[t]ickets with a face value of $49.50 were going for 12 times that” on a secondary market you’d have a scenario where tickets are going for $500 and $450 out of that goes to the trust fund. The fund could take the money and give it to poor people in Africa and India.

In fact, I don’t think there’s anything suboptimal about the ticket pricing. The goal of selling tickets is not merely to make money, or even to ensure your fans can see you, but to generate buzz about your music/record and in so doing increase sales. Buzz is created when there is high demand for a scarce product–when tickets are unobtainable, not when the price is set high enough that just enough people buy them to fill the venue.

Felix Salmon blogs about this (coincidentally I had the same idea and started writing this post on the 17th, but I was too lazy to finish it, and he published it on the 19th) and compares it to IPO pricing.

People sympathetic to the band, like Rob Cox, claim that LCD Soundsystem and its promoters didn’t understand the economics of scarcity when they put the MSG tickets on sale. I, by contrast, think they understood the economics of scarcity all too well — and successfully used it to generate buzz and publicity. What really happened here, I think, is akin to the IPO of theglobe.com back in 1998, where the supply of new shares was so tiny that the price soared from $9 to $97 on the first day of trading. In turn, that generated lots of headlines, and ensured that the number of people who had heard of the website increased by orders of magnitude.

Supply and demand for concert tickets aren’t static numbers which then get reflected in prices. There are complex feedback loops here too: scarcity and price mechanisms can feed back into increased demand for tickets. Certainly this story has meant a large increase in the number of people who know that LCD Soundsystem is playing its last-ever gig at MSG in April. It’s surely naive to think that all the second-order effects here were completely unintended.

In fact this occurs all the time in IPOs. For an investment bank (underwriter), setting the price for an IPO can be tricky because since there is no existing trading of shares, it can be hard to value the company and decide how much to pay for an unknown quantity. In a phenomenon called “underpricing”, the share of an IPO will tend to jump up significantly within the first day of trading, i.e. there is a large percentage difference between the “offer price” and the share price traded on the first day:

Since the 1960s, this ‘underpricing discount’ has averaged around 19% in the United States, suggesting that firms leave considerable amounts of money on the table. Underpricing has tended to fluctuate a great deal, averaging 21% in the 1960s, 12% in the 1970s, 16% in the 1980s, 21% in the 1990s, and 40% in the four years since 2000 (reflecting mostly the tail-end of the late 1990s internet boom). Clearly, underpricing is costly to a firm’s owners: shares sold for personal account are sold at too low a price, while the value of shares retained after the IPO is diluted. In dollar terms, IPO firms appear to leave many billions ‘on the table’ every year in the U.S. IPO market alone.

There are many theories rationalizing this apparently irrational phenomenon (many addressed in the paper linked to above), and they can also be made to apply to concert ticket pricing. Julian Franks argues that it is advantageous for the pre-IPO shareholders to underprice because it leads to oversubscription and rationing–an investment bank will have to reduce the block size of shares sold to their customers because so many of them want to purchase the IPO, and the bank wants to satisfy many customers. This rationing can create diffuse shareholder rights, and discrimination on who is sold large shares of the company. From a band’s point of view, cheap ticket prices may be better if you want the opportunity for poorer, younger, and more hip/exciting fans to predominate in the audience rather than wealthier, but more subdued fans–Brooklyn vs. Westchester. They’d rather have fans willing to camp out for tickets, than those who will only click a button to pay higher prices.

Underpricing is also beneficial for the underwriters of an IPO. The paper cites a study which “find[s] that overpricing (but not high levels of underpricing) lead to a decrease in the lead underwriter’s own stock market value, whereas moderate levels of underpricing are associated with an increase in stock market value”. One explanation is that underpricing and the subsequent rise in stock price enhances the reputation of the underwriter because the IPO went really well, and future companies will seek to go public with that underwriter. Similarly, a sold-out venue or sky-high ticket prices is much more beneficial to the reputation of a band manager or concert organizer than an event that is full, but with no additional demand for tickets.

So when LCD Soundsystem and other bands decide to offer their tickets at low face-value prices, they’re making a strategic economic decision that is mirrored by companies like VISA and I-banks like Goldman Sachs–hardly the stuff of charitable fools. Even if paperless tickets were made legal, or some perfect Captcha system emerged to prevent any scalper from purchasing a large quantity of tickets (but secondary markets like StubHub would still exist), bands and band managers would/should still endeavor to underprice their tickets.

Constitutionality of the Individual Mandate, and Regulating “Economic Inactivity”.

A friend of mine had dinner last week with one of her friends who was in town for the American Conservative Union’s Conservative Political Action Conference (CPAC), and asked for some tips on talking to a hard-core conservative about health care reform, especially in light of two rulings from federal judges in VA and FL that invalidate ACA in part, or in toto. Instead of sending her a list of articles that I had read, I thought I’d summarize my impressions in a blog post. (Apologies if you’ve read all these arguments elsewhere, already.)

For many conservatives, the central problem with the Affordable Care Act is the “individual mandate”. Prof. Randy Barnett, of Georgetown Law, wrote early on in an op-ed in the Washington Post:

But the individual mandate extends the commerce clause’s power beyond economic activity, to economic inactivity. That is unprecedented. While Congress has used its taxing power to fund Social Security and Medicare, never before has it used its commerce power to mandate that an individual person engage in an economic transaction with a private company.

But, as many more qualified legal scholars have noted, Congress does not rely on the Commerce clause alone. The power to “to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes”, while broadly conceived in such cases as Wickard and Raich, is being used to regulate the insurance industry–to create health care exchanges, to prohibit discrimination against preexisting conditions, etc. The idea that in order to have insurance we must have everyone participate–the so-called “individual mandate”–is empowered by the Necessary and Proper clause.

The owner of this home was taxed for inactivity.

Universal participation in health insurance was deemed necessary by Congress for the effective operation of that scheme, that is, the risk pool will be insufficiently large, or the elimination of preexisting conditions limits would encourage selection bias. As Prof. Tribe points out in a recent op-ed, it was necessary to Scalia, concurring in Raich, when the federal government quashed even small, purely intrastate marijuana operations: “Our cases show that the regulation of intrastate activities may be necessary to and proper for the regulation of interstate commerce in two general circumstances.” In the landmark case McCulloch, Chief Justice John Marshall writes: “Take, for example, the power ‘to establish post-offices and post roads’ [an enumerated power of Congress]. This power is executed by the single act of making the establishment. But, from this has been inferred the power and duty of carrying the mail along the post-road, from one post-office to another. And, from this implied power, has again been inferred the right to punish those who steal letters from the post-office, or rob the mail.” So even though postal carriers were not mandated by the Constitution, and even though Congress is not supposed to deal with intrastate commerce, both of those things are necessary to the achievement of Congress’ constitutional ends. That is, Marshall explained, if “the end be legitimate,” then “all means which are appropriate, which are plainly adapted to that end… are constitutional.”

Of course, as many people have pointed out, the government is not creating a “mandate” in the sense that it will jail you for your “economic inactivity”. It is going to tax your income if you aren’t paying health insurance premiums. So the part of the Constitution that specifically relates to the individual mandate is in fact the General Welfare Clause, whereby “Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States…” And the decision on what constitutes “general welfare” is for the democratically-elected Congress to decide, not activist judges. Justice Cardozo wrote in Helvering v. Davis:

“The line must still be drawn between one welfare and another, between particular and general…There is a middle ground or certainly a penumbra in which discretion is at large. The discretion, however, is not confided to the courts. The discretion belongs to Congress, unless the choice is clearly wrong, a display of arbitrary power is not an exercise of judgment. This is now familiar law.”

So far we’ve talked about whether the government can regulate your “economic inactivity”, I also wanted to give an example in which government clearly does regulate your “economic inactivity”.

One example is blight law. In Virginia, for example, if a property is vacant, or subject to many complaints, or is in a dilapidated condition or lacks normal maintenance or upkeep, it may be subject to a blight declaration:

After the owner is notified that the property is blighted if the property owner does not remove the blight or present an acceptable plan to cure the blight within a reasonable period of time, under powers granted under the Code of Virginia, the County can declare, by ordinance, any blighted property as a nuisance and then compel the abatement of the nuisance.

If the owner or owners fail to abate the nuisance, the County may do so and charge and collect the cost thereof from the owner of the property in any manner provided by law for the collection of state or local taxes.

In San Francisco:

But if the property is privately held, the DPW will have to determine the owner’s name and then contact that person about the applicable code violations. The owner will receive a notice from the city giving him or her 30 days to clean up and/or repair the property. If the owner does not respond or comply, the DPW may go there and do the work, billing the owner for the services or placing a lien against the property for repayment.

Mike Dorf pointed out that governments can also mandate positive actions in other arenas: jury duty, schooling your children (state gov.), Selective Service, and even vaccination. Jury duty, for example, is necessary if the federal government is to provide the juries alluded to in the Bill of Rights, in the course of prosecuting federal crimes. And for the originalists out there, as early as 1792, Congress passed a militia act (since repealed) that required citizens between 18 and 45 to “provide [themselves] with a good musket or firelock, a sufficient bayonet and belt, two spare flints, and a knapsack, a pouch, with a box therein, to contain not less than twenty four cartridges, suited to the bore of his musket or firelock, each cartridge to contain a proper quantity of powder and ball; or with a good rifle, knapsack, shot-pouch, and powder-horn, twenty balls suited to the bore of his rifle, and a quarter of a pound of powder”.

In the blight example these are state laws, but they derive that power from the same type of police or taxation powers as the federal government, and philosophically the theory is the same. So it’s clear that “economic inactivity” is still “activity” in the sense that your inaction can effect commerce generally–an unwillingness to maintain your property can be a nuisance and eyesore for a community, an unwillingness to educate your kids creates dumb citizens, and an uninsured person will impact the health care system by going to emergency rooms when they do get sick, or relying on family and friends to support them when they get ill. A 2008 Kaiser study finds that “the uninsured will spend $30 billion out-of-pocket for health care in 2008 while receiving $56 billion in uncompensated care, three quarters of which will be from government sources.” It is equally clear that the government can, and currently does, regulate “inactivity”, the government can compel behavior, and at the very least, the government can tax.

In Defense of Farm Subsidies

A while ago I thought it would be fun to have an “In Defense Of” series that would present arguments for some oft-not-supported causes. Stay tuned for Defenses of Robert Bork and Clarence Thomas…

While debating for Columbia, Josh and I were also responsible for teaching debate to interested students. One aspect of the style we participated in was that the government team proposed the “case” in each round, and unlike [m]any high school debate formats, the “case” was unrestricted by any previously determined resolution. However, there were a handful of prohibitions designed to keep the rounds fair, and one of these was the injunction against “tight cases”–ideas that were so obviously true or one-sided that no matter how well the opposition side argued, they wouldn’t be able to defeat the case. A good example, often used in philosophy, of this is the moral proposition that “we should not torture innocent babies for fun”. Another common example used in illustrating a “tight case” was “the government should end farm subsidies”.

There is a litany of reasons against farm subsidies, which I will briefly mention. Budget hawks harp on their enormous expense. Direct aid to farmers totals around $15-20 billion each year, and one report that aggregated indirect subsidy (i.e. programs for irrigation, export credits, nutrition food aid and loan guarantees) claimed that total direct and indirect aid exceeded $180 billion. Health-conscious critics like Mark Bittman will point out that overproduction of corn allows the cheap production of high fructose corn syrup and all the sugary, diabetes-causing products it engenders, not to mention the corn-fed snack industry. For those who oppose the conglomeration of power in the hands of a few, the Farm Bill disproportionately pays out to large agribusinesses, and not small farmers. Overproduction of wheat, corn, livestock require oil-based fertilizers that destroy the soil and environment. And finally, though I may be missing a few reasons, farm subsidies allow American food producers to dump cheap wheat and corn on the world market, and destroy the livelihood of local farmers in developing countries where agriculture is the primary comparative advantage. Without food subsidies, the argument goes, these local farmers would either be self-sufficient feeders, or could sell their foodstuffs in the market at the same price as American companies.

Let’s look at the last point a little bit. I found a website that showed world production of the three most important cereals: corn, wheat, and rice. (albeit from 2003).

Corn Total Production, Mt %world prod. yield, Mt/ha
World 637,444,480
United States 256,904,560 40.3 8.92
China 114,175,000 17.9 4.85
Brazil 47,809,300 7.5 3.7
Mexico 19,652,416 3.1 2.53
Argentina 15,040,000 2.4 6.47
Wheat
World 549,433,727
China 86,100,250 15.7 3.91
India 65,129,300 11.9 2.62
United States 63,589,820 11.6 2.97
Russia 34,062,260 6.2 1.71
France 30,582,000 5.6 6.23
Rice
World 588,563,933
China 166,417,000 28.3 6.07
India 132,013,000 22.4 3
Indonesia 52,078,832 8.8 4.54
Bangladesh 38,060,000 6.5 3.43
Vietnam 34,518,600 5.9 4.63

One thing I found interesting was theyield, or metric tons of a commodity produced for each hectare planted. The United States, for example, produces 8.92 metric tons of corn per hectare, but the productivity ranges widely, down to Russia’s meager 1.71 metric tons of wheat per hectare. It seemed to me that richer countries generally had higher yields than poorer countries, and in fact a country like Eritrea yielded only 0.24 Mt/ha for wheat and 0.33 Mt/ha for corn. Kuwait and Qatar, on the other hand, have double digit yields of 20 and 12.5, respectively, for corn, despite not being known as particularly fertile places. This makes sense, because a major component of your yield is whether you can afford fertilizer, pesticides, genetically modified crops, or modern machinery. This is not to say that some poorer developing countries do not have excellent climates for agriculture–Egypt, for example, has corn:wheat:rice yields of 7.71, 6.15, and 9.43. Clearly it has retained its historic reputation as a regional breadbasket.Yet even in Egypt, after the building of the Aswan dam, cereal production hasn’t been the same and the country is now the world’s largest importer of wheat.

Just as obviously, it is not so that developing countries have a comparative advantage in agriculture. It seems foolish, in retrospect, to lump together countries like Egypt and Eritrea, which has less than 0.5 yields for both corn and wheat. Even though agriculture is the main economic activity of that latter country, it is subsistence agriculture at best–plagued by manmade disasters like war and deforestation, but also by erosion, drought, and insect infestations. Comparative advantage should not be measured in terms of what uneducated people with time on their hands can traditionally do–modern agriculture is for those with good soil, temperate climate, adequate rainfall, and the technology to maximize those geographical advantages. Nor is it profitable to be an agrarian society, where the majority of people are involved in farming; on the contrary, a nation of small farmers is usually quite impoverished. The fact that America feeds poor people in Africa through cheap corn and wheat, brought about by farm subsidies, is a good thing for countries that don’t have the god-given nor man-made tools to grow as efficiently, and their real comparative advantage is not time for agriculture, but cheap labor galvanized into factory work (think China, Thailand). (note: some Western African countries have a comparative advantage in cotton, but, as far as I know, not wheat/corn/rice).

The other thing I found interesting was that the United States is a Top 5 Producer of both Corn and Wheat, and ranks 11th in terms of Rice. The corn production is astounding: over 40% of the global supply! Recent news has been dominated by coverage of political protests in Egypt and Tunisia, and the specific timing is often attributed to rising food prices. Indeed similar riots occurred in Egypt in 2008, when there was also a wheat shortage, and food prices are higher in 2011 than in 2008, in fact the highest ever since the UN’s Food and Agriculture Organization began indexing prices in 1990. Already, half the Egyptian family’s budget is spent on food. Other Middle Eastern rulers are taking heed. In Bahrain, King Hamad raised government subsidies on flour, poultry, and meat. “Algeria, Libya and Jordan have either relaxed food taxes or duties on food imports or cut prices of staple food. Elsewhere in the Gulf, Kuwait recently introduced a generous stipend and free food for its citizens until March 2012 to ease the pain of higher costs.” Note the benevolence of these dictators is targeted toward food.

Why are wheat prices suddenly so high? The heat wave and fires in Russia/Ukraine, combined with floods in Australia severely diminished the harvests of those major exporters. India and Pakistan both suffered flooding as well. Russia, the world’s 6th largest exporter of wheat, canceled exports. Now China may also be contributing to the problem, as major agricultural regions face the worst drought in centuries, as reported yesterday in the NYTimes. China is a self-sufficient nation with very little exporting or importing, though with many mouths to feed, and a poor harvest could make China’s rich government, with $2.85 trillion in foreign exchange reserves, a big buyer in the international arena, raising prices in an already unstable market.

What does this have to do with farm subsidies? They were originally created in the U.S., in response to the Great Depression, to combat boom-and-bust pricing patterns for agriculture. In bumper years, prices would plummet and it’d be hard to make a profit in an oversaturated market. In lean years, farmers would lose their harvests and need to take on loans just to replant, while the consumer suffered from fluctuating prices. Government subsidies provided a price floor, and income was guaranteed no matter how low prices got. In return, farmers were incentivized to overproduce–there was, after all, a buyer of last resort–and food became cheap and plentiful.

Now in the United States we don’t worry about expensive food; our problem is overeating. But the food riots across in the world, in Manila and Mexico, Cairo and China, remind us why we spend in order to have years of plenty. If America stopped its farm subsidies and American farmers produced only what was domestically needed and a little more, no longer flooding the world market with cheap wheat and corn, would this unpredictable world food crisis have been even more severe? Would the food crisis be better if the U.S. had never had farm subsidies to begin with, and there were small farmers in developing countries trying to feed the Sphinx and the Dragon? Food protectionism costs a lot, no question. But in these modern times with poor countries developing slower than their populations are growing, food security affects global stability. America is no longer merely protecting itself from hunger, but, as an able producer of surplus food, serves as bulwark against global hunger–the farmer of last resort.

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