EclectEcon

The Tragic Folly of "Earth Hour": "Its vain symbolism reveals exactly what is wrong with today's feel-good environmentalism."

Bjørn Lomborg is one of the most realistic environmentalists I've ever read. He goes beyond alleged benefits and looks at costs and feedback effects, and he pays attention to the impacts of changed/distorted incentives. In a recent piece in Slate, he takes on the folly of Earth Hour, scheduled for March 23rd.

[T]he reality is that Earth Hour teaches all the wrong lessens, and it actually increases CO₂ emissions. Its vain symbolism reveals exactly what is wrong with today’s feel-good environmentalism.

... Hypothetically, switching off the lights for an hour would cut CO₂ emissions from power plants around the world. But, even if everyone in the entire world cut all residential lighting, and this translated entirely into CO₂ reduction, it would be the equivalent of China pausing its CO₂ emissions for less than four minutes. In fact, Earth Hour will cause emissions to increase.

As the United Kingdom’s National Grid operators have found, a small decline in electricity consumption does not translate into less energy being pumped into the grid, and therefore will not reduce emissions. Moreover, during Earth Hour, any significant drop in electricity demand will entail a reduction in CO₂ emissions during the hour, but it will be offset by the surge from firing up coal or gas stations to restore electricity supplies afterward.

And the cozy candles that many participants will light, which seem so natural and environmentally friendly, are still fossil fuels—and almost 100 times less efficient than incandescent light bulbs. Using one candle for each switched-off bulb cancels out even the theoretical CO₂ reduction; using two candles means that you emit more CO₂.[emphasis added].

... To green the world’s energy, we should abandon the old-fashioned policy of subsidizing unreliable solar and wind—a policy that has failed for 20 years, and that will fail for the next 22. Instead, we should focus on inventing new, more efficient green technologies to outcompete fossil fuels.

If we really want a sustainable future for all of humanity and our planet, we shouldn’t plunge ourselves back into darkness. Tackling climate change by turning off the lights and eating dinner by candlelight smacks of the “let them eat cake” approach to the world’s problems that appeals only to well-electrified, comfortable elites.

Related articles

The Use of Fossil Fuels and the GREENING of the Planet

Global Warming: It is NOT Settled Science

Hey Judge Lipps: Try again!

The judge in the infamous Steubenville, Ohio, rape case pronounced that the lesson from the case is that teens should be careful what they put on social media. From Slate,

In sentencing the boys to a minimum of one year in juvenile jail, Judge Thomas Lipps doled out some advice to their peers on how to avoid the same fate. He urged them "to have discussions about how you talk to your friends; how you record things on the social media so prevalent today; and how you conduct yourself when drinking is put upon you by your friends."

What? The only lesson in this case should be "Rape is wrong. Do it and you will be severely punished." Amanda Hess at Slate says it exactly right:

Unfortunately, Judge Lipps didn't warn teenagers to reassess the attitudes that led to this sexual assault in their community, or the beliefs that inspired bystanders to side with the rapists over the victim. Instead, he told them to watch how they “record things.” It sounds like [sic] he’s advising teens to cover their tracks better, not to prevent rapes in the first place. Social media is a way of life. Rape doesn’t have to be. And the more teens joining a discussion about it on social media, the better.

Cypriot Theft

From the NYTimes,

Under an emergency deal reached early Saturday in Brussels, a one-time tax of 9.9 percent is to be levied on Cypriot bank deposits of more than 100,000 euros effective Tuesday, hitting wealthy depositors — mostly Russians who have put vast sums into Cyprus’s banks in recent years. But even deposits under that amount are to be taxed at 6.75 percent, meaning that Cyprus’s creditors will be confiscating money directly from pensioners, workers and regular depositors to pay off the bailout tab.

I was first told about this situation yesterday by MA who sent me some early information.

It looks to me as if the Cypriot banks lost buckets and buckets of money by "investing" (actually speculating) in what they thought were low-risk mortgage-backed securities up until 2008. Then, in an effort to "stablilize" (i.e. bailout the owners of) the banks, the Cypriot gubmnt bailed them out, all in the name of protecting the depositors.

This sounds much like what happened in Ireland and threw their economy into such a spin. In order to reassure international investors, the gubmnt guaranteed deposits in the banks and in the process also guaranteed the bondholders of the banks. In Ireland, the gubmnt was able to fund the operation through increased taxes, spending cutbacks, and additional gubmnt bond issues. 

Cyprus doesn't have these options. The size of their bailout was about the equivalent of a full year's GDP for the country, and they simply could not raise taxes or cut spending enough to cover the bailout.

So they called on the IMF for help. And, no surprise, the IMF looked at the situation and saw no feasible way for the gubmnt to cover any loans the IMF might make to help them out. 

One option, for the Cypriot gubmnt to repudiate their debt, surely was considered. But debt repudiation would hurt the banks in the rest of the EU, and those banks and gubmnts likely lobbied the IMF to seek some other alternative. 

And that is when they settled on taxing deposits. This policy is horrendous. It is designed to steal wealth from large-depositor Russians who have tried to hide their money in Cyprus, but it will also hurt Cypriot businesses and people who have used the banks to save for (and plan for) their retirements, educations, etc.

My first reaction is "Since when did bondholders ever have a guarantee that their bonds would be repaid in full?" Ask the bondholders of pre-nationalized General Motors; ask bondholders of the Greek gubmnt. Why should bondholders of Cypriot gubmnt bonds or of Cypriot banks be protected from their inability or unwillingness to perform a fairly simple due diligence examination? A bond is not a guaranteed safe investment. Nor should it be.

My second reaction is that not only are Cypriots trying to drain their limits at ATMs, where total withdrawals until Tuesday are limited, but to the extent possible they will be using the internet and other options to prepay their credit card debts. I know that if I had $10K in the bank there, I'd try to put it on my paid up credit card balance and forego the interest income I might have earned in the bank to avoid the tax. But I don't know to what extent this is possible. 

In the end, I wonder if this will really happen. The parliamentary vote that was to have been taken today has been delayed until tomorrow. 

It was all started in the name of "protecting depositors" in banks that lost a lot of money several years ago. That sure seems ironic.

Related articles

Depositors burned, bondholders saved, a modern European bailout

Bailout Cuts Cyprus Bank Accounts, Withdrawals Barred

A look at Cyprus' decision to tax depositors

Cyprus parliament delays vote on bank deposits tax

The Cyprus precedent

Is Canada More Violent Than the US?

"Ironman" at the blog Political Calculations links to a number of comparisons and concludes that yes, Canada is more violent than the US (observing along the way, "At least Canadians are polite, eh? Just don't cross them...."). You may want to look into how and why he corrects for demographic differences, but here are some of his conclusions:

We break down the number of homicides per 100,000 by method for Canada and the most demographically-similar-to-Canada portion of the U.S. population, finding that Canada's much more strict laws regulating firearms "saves" about one life for every 100,000 people, although Canadian homicide offenders have adapted to the lack of firearms available to them by making murder more brutal. ...

We find that there's an additional price to be paid for saving that one life for every 100,000 people with strict gun control laws. It turns out that after adjusting for the major demographic differences between the two nations, Canada is a much more violent place than is the U.S.

 

Maybe the US Isn't As Violent As We Think...

Does the US really have fewer violent crimes per capita than the UK, Austria, Belgium, Holland, and even Sweden? Data reported in the Telegraph say it does (h/t Tom Hanna):

 [V]iolent crime in the UK ... increased from 652,974 offences in 1998 to more than 1.15 million crimes in 2007.

It means there are over 2,000 crimes recorded per 100,000 population in the UK, making it the most violent place in Europe.

Austria is second, with a rate of 1,677 per 100,000 people, followed by Sweden, Belgium, Finland and Holland.

By comparison, America has an estimated rate of 466 violent crimes per 100,000 population. 

I don't know if it is sloppy reporting or sly cooking of the data, but I see just "crime" in one place and "violent crime" in another. The article does caution about there being different measures in different countries, so be careful about the results here (and in every other cross-national study!).

But if the data correctly represent the situations, perhaps the rush to judgement about the US, violence, and guns is mistaken.

Related articles

I Used to be Pro Gun Control. If you are, too, please read this

Government: Violent crimes rose 18 percent in 2011

Violent crime drops in most O.C. cities

Hope and Change? Let's All Hope Melanie Phillips is Wrong

Melanie Phillips, writing after the US elections, said,

It is said that, with likely gridlock in Congress over domestic issues, Obama will concentrate on foreign policy. We should all shudder. So far, Obama has empowered Iran to destabilise the region; supported Islamist takeovers in Egypt and Libya; is backing al Qaeda affiliates in Syria; refused to come to the aid of Americans being attacked by al Qaeda in Benghazi as a result of which four American officials were murdered; and hung Israel out to dry against its genocidal Palestinian attackers. ....

Obama’s agenda has been crystal clear from the get-go: to increase the power of the state over the citizen at home, and to neutralise American power abroad. Four more years of this and he’ll almost certainly have succeeded.  The impact upon western security could be cataclysmic.

Britain and the Europeans love Obama because they think he will end American exceptionalism and turn the US into a pale shadow of themselves. What they don’t realise is that, all but lobotomised by consumerist rights, state dependency, victim culture, sentimentality, post-religion, post-nationalism and post-Holocaust and Empire guilt, Britain and Europe are themselves fast going down the civilisational tubes. (emphasis added)

If you want to see some more serious causes for concern, read the whole thing.

Six Steps to Inoculate Canada's Economy from the Likely Economic Problems that Will Soon Face the US

Ezra Levant recently wrote this article. Here I'm reproducing the important points he makes about Canada's economy. The Canadian economy is strong, partly because of its resource base, partly because of its comparatively low gubmnt debt and low gubmnt deficits, and partly because of the stability it provides for entrepreneurial decision-making. 

Note that Levant is only pointing out possible areas where private investors might pursue economic activity. He is NOT saying the gubmnt should invest in those areas; he is NOT saying the gubmnt should provide incentives in those areas. He is saying the gubmnt SHOULD implement policies that facilitate private decisions and private risk-taking. Unfortunately, though, that doesn't carry over to oil pipelines completely, and he still talks about oil as if "we" own it, whatever that means; that's dicey (see his point 6).

What should Canada do to protect ourselves from America’s continuing economic decline? Here are eight things:

1. Pay down Canada’s government debt. The U.S. is $16 trillion in debt, and is racking up another trillion a year. Its credit rating has been downgraded, and surely will be again. That means interest rates will rise and borrowing will be more expensive. It’s a vicious circle. We’ve got to get out of that whirlpool ourselves. Our deficit is on track to be eliminated by next year. We’ve got to keep running a surplus, and retire our debt.

2. Obama ran a class warfare campaign to soak the rich. Too bad, because the rich are the ones starting businesses and paying the lion’s share of taxes. More practically, as both John F. Kennedy and Ronald Reagan proved, lower tax rates actually increase tax revenues, as economic activity booms. Canada already has lower corporate tax rates than America. We need to keep taxes low to stimulate economic activity.

3. Low taxes could also start a northward “brain drain.” Let’s recruit the best and brightest from America to immigrate to Canada. Immigration Minister Jason Kenney recently returned from a similar trip to Ireland. Why not add on new recruiting trips to Silicon Valley, the Boston-area universities, New York and other pools of talent who might prefer our stronger economy and quality of life?

4. As a country of just 34 million people, we need more human capital. But we need more financial capital, too. Just to develop our oilsands could require $100 billion — more than Canadians could invest. What a perfect time to steer foreign investors away from riskier

U.S. assets and into Canada. We need to immediately modernize our foreign investment review rules, to avoid the confusion and uncertainty arising from our delays of $21 billion in proposed Petronas and CNOOC investments.

5. We need trade agreements with those parts of the world that are actually growing — especially Asia. The Conservatives are currently negotiating more trade treaties than ever before. Some, like with Panama, are small. Some, like with China, are rudimentary. But a few billion here and there starts to add up — and we need it all to offset our dependence on the U.S.

6. One of our biggest exports to the U.S. is oil — about 2.2 million barrels a day. But there are two problems with that: Because all of our oil is sold to the U.S., our oil sells for $25 per barrel less than if we could sell it to other customers at world prices. And there’s another risk: In his election night speech, Obama talked about “global warming” again — signaling that he may permanently block the Keystone XL pipeline to the U.S., or add a new carbon tax, or both.

That means it’s more important than ever to build new pipelines to the Pacific — not just the proposed Northern Gateway Pipeline, but the doubling of the existing Transmountain pipeline that already goes to Vancouver.

 

Justin Trudeau, Canada's next Liberal Leader?

I have no idea where Jack got this, and he has no cite for it, but we both agree that it is consistent with what we remember:

JustinT: "I am in love with Canada. I want to spend my life serving it."

Well... that's nice... he loves Canada and wants to be Liberal leader in his cushy MP job. Let's look at Justin's C.V. and see what he has done in his prior life and back up his "love" for Canada.

Justin Trudeau's C.V. :

Plan A:- BA, Literature (McGill - 4 years)

Plan B:- BA, Education (UBC - 2 years)

Plan C:- Supply teacher of drama, French, social studies

Plan D:- School of Engineering (U of Montreal - 1+ year withdrew)

Plan E:- Actor (CBC miniseries)

Plan F:- Master of Arts, Environmental Geography (McGill - 1 year withdrew)

Plan G:- Liberal MP, Papineau riding (4 years)

Plan H:- Liberal leader (2013)?

He quit teaching in 2002 and went back to school for a career change to Engineering. In 2008 he quit his Master of Arts program and decided to enter the world of federal politics in Papineau riding. So for 6 years he was kicking around as a professional student and actor... WOW, talk about being productive...!!!!

As I said, it rings true. As much as my liberal friends might be persuaded by the Trudeau mystique, I hope they'll look for more than hope, dreams, name, and mystique.

What's the Price Elasticity of Demand for Plastic Grocery Bags? what was the Trono city council thinking?

I love econ-o-geeky questions like this. In Trono, retailers have been required to charge five cents/bag instead of giving them away at the checkout. As a result, usage of the bags fell by 50%. 

So let's see. E = (% change in Qd)/(% change in P)

The % change in Qd is given as 50%, but what's the % change in price, given that it started at zero? Infinite? probably not. Arc Elasticity of demand might be a good stop-gap solution: The % change in P = 5 cents/(avg of beginning and ending price) = 5/2.5 = 2.0.

So in this case E = .5/2 = .25 (ignoring the negative sign for the change in Qd).

Why did it occur to me to post something like this after not having posted anything for a "few" days?

Here's why: the Trono City Council, having had a five cent charge on single-use plastic shopping bags in place, became frustrated with what or was not being done with the $5m revenue from the sales of these bags. So what did they do? They voted to ban all plastic single-use retail shopping bags as of Jan 01, 2013.

What a bunch of doinks (a technical term for econo-idiots).

The 5-cent charge was doing its job. It was discouraging the use of single-use plastic bags, and rather substantially at that. But because the city council was concerned that the proceeds were not going to environmental groups, they got their knickers in a knot, and banned the bags outright. Really. 

So even though the charge operated effectively as a Pigou Tax, councilors have scrapped it because some politically favoured groups were not receiving the proceeds? That is so stupid.

The effect of this outright ban will be two-fold:

1. Those groups will not receive anything as a result of this policy change. It won't make them any better off. 
2. Shops will be forced to switch to paper bags, the manufacture of which creates serious environmental problems and which are far less convenient for consumers.

I wonder if there`s an in-trade bet available for whether they'll reverse themselves. 

This kind of nonsense just piles on the problems of "regime uncertainty". How can people make sensible plans or reasonable future business decisions when politicians like these are running amok?

Scarcity, Rationing, and Death Panels

One of the fundamental principles in economics is that goods and services are scarce. People want more than is available and therefore choices must be made. 

The question is NOT "should things be rationed?" Rather, it is "How should things be rationed?"

This distinction is made clear to us every day, but possibly no more so than in the area of health care. When individuals are not required to pay for medical care, we tend to ask for more, better, and more expensive care. But the system simply cannot provide all of what we want at a zero price. And so choices must be made.

In many instances, who gets the goodies will be determined by who you know, who you are politically connected with, what your politics are.

In other instances, medical care will be rationed by our ability and willingness to pay (somewhat crass but realistic digression: if a given procedure will extend my life by 4 years and cost the gubmnt/taxpayers, say $400,000, I'll want to receive it; but if my heirs could have the money instead, I might choose to forego the treatment). 

And in some instances, death panels composed of persons with medical training (and political connections?) will decide how to ration scarce health resources. 

I have enough trouble with physicians who like to play god as it is. Giving them the ability and power to decide who should receive a heart, a kidney, or a cancer treatment adds to my concerns. 

For example, consider this story [h/t Rebekkah]:

When Kenneth Warden was diagnosed with terminal bladder cancer, his hospital consultant sent him home to die, ruling that at 78 he was too old to treat.

Even the palliative surgery or chemotherapy that could have eased his distressing symptoms were declared off-limits because of his age...

Thanks to [his daughter's] tenacity, Kenneth got the drugs and surgery he needed — and as a result his cancer was actually cured. Four years on, he is a sprightly 82-year-old who works out at the gym, drives a sports car and competes in a rowing team.

But it wasn't just her tenacity that saved her father. It was also her willingness to spend her own time and money combined with the fact that in the UK a private option to the National Health Service is available. In Canada, the gubmnt does not permit a private option.... unless you are willing to pay to travel to some other country (e.g. the US). 

Everyone needs to understand that health care, like every other good or service, is being rationed and will always be rationed. The only question is how will it be rationed? And so long as we refuse to let people pay for their own health care, we will have death panels, like it or not.

More on Eliminating the Penny in Canada

Scoop just sent me this link to the actual budget document.

I wonder how long it will take the US to follow our lead.

YES!! Canada will stop minting the penny!!

As my friends informed me earlier, Canada will stop minting the one-cent coin in the fall. From the National Post,

The Royal Canadian Mint will no longer make pennies as of this fall, with Mr. Flaherty calling the penny a “currency without any currency” that costs more than a penny-and-a-half to make. He suggested Canadians donate their stockpiled pennies to charity.

And from the Globe and Mail,

Perhaps the measure that will have the most visible and universal effect on Canadians is a plan to eliminate the penny. Starting this fall, the Royal Canadian Mint will no longer put pennies in circulation, saving the government $11-million a year and bringing Canada in line with countries such as New Zealand and Australia. (Consumers will be able to continue using pennies “indefinitely,” but prices will be rounded to the nearest five-cent increment if pennies aren’t available.)

There are some errors (I hope) in these stories and/or in Flaherty's statement. 

• It may cost a cent and a half to make a penny, but it also costs another 3-4 cents to distribute and collect them. And that's just explicit costs. See my earlier posts to look at the other costs.
• I hope the Globe meant "nearest 5-cents" not nearest 5-cent increment.

I'm ecstatic!!!

Correlation Is NOT Causation, Part 7,435,983: Canada's Robocall Scandal

The allegations of wrong-doing during Canada's last federal election are rife: people were directed to the wrong polling stations, people were phoned with misleading information and outright lies about various candidates, and further allegations have been made that many of the complaints were orchestrated by opposition groups.

One interesting question is whether any of these immoral, if not illegal, actions affected the outcome of the election. An early study indicated they did, but that study has been pretty seriously ridiculed and criticized here (h/t GN). The summary:

 A Note on Robocalls in the 2011 Federal Election

            Summary

Recently Prof. Anke S. Kessler of Simon Fraser University published a working paper on a regression model that suggests alleged robocalling had “a statistically significant impact on voter turnout and election results” by suppressing anti-Conservative turnout in 27 ridings in 2011.

I estimated her regression model using 27 other, similar ridings, where there were no robocall allegations (though the PMO may have used secret mind control devices to suppress anti-Conservative turnout). Not surprisingly (to me), Prof. Kessler’s model suggests that the effect of theentirely fictional mind control devices was greater than the effect of the alleged robocalls.

I have been upset by dirty tricks during elections ever since I first learned about the extent of them in All the President's Men. They upset and bother me now, too. But being upset about them should not colour our willingness to examine the issues critically.

 

Things Students at The University of Regina Should Consider and so should everyone else

The student union at The University of Regina has voted to support a campaign of boycotts, divestiture, and sanctions against Israel. While I will not defend absolutely everything Israel does or has done, here are some things the students there and everyone elsewhere should consider [from Melanie Phillips, "The Algorithm of Malice"]. I have added a number of additional points below this lengthy quote:

There are two big and connected points made by this little video. The first is that the widely-held belief that the Arabs were the only refugees from the Arab war against the newly reconstituted country of Israel (a war which started in 1948 and continues to this day) -- is totally untrue. There were many more Jewish refugees from Arab countries. As a result of the 1948 war, some 500,000 Arabs left Palestine – most of them as a result of having been told to do so by Arab regimes certain of destroying the new Jewish state. [emphasis added] But some 850,000 Jews were then attacked, stripped of their citizenship and ethnically cleansed from their homes in Arab states -- causing the destruction of ancient Jewish communities in those countries which had well predated the arrival of Islam in the Middle East. And what happened to those refugees? They were absorbed without fuss into Israel ..., where they form around half of the population, and into other countries.

The second point which is crucial to an understanding of this conflict is that the Palestinian refugee issue is entirely artificial and bogus.  Not only were the Arabs from Palestine deliberately refused access to other Arab countries [EE: again emphasis added. Note that there was no country called Palestine then. Just Lebanon, Syria, Jordan, and Egypt in addition to Israel.] in order to turn them – as a UN refugee official admitted – into an open sore as a weapon to be used against Israel. Even more astonishingly, the UN itself was a party to this malevolent strategy.

For it chose to treat the Palestinian Arabs differently from any other refugee group. All other refugees are dealt with by the UN Refugee Agency, whose goal is to re-settle them. But for the Palestinian Arabs, the UN set up the UN Relief and Works Agency (UNRWA) – whose [apparent] goal was to maintain the Palestinian Arabs as permanent refugees.

To that end, while in every other conflict refugees are defined merely as people who flee their homes, the UN decided that amongst the Palestinian Arabs refugee status would be transmitted from generation to generation. As a result, the number of Palestinian Arab ‘refugees’ has not diminished but risen over the years from 550,000 to 4.7 million. These are the people who are now said to deserve the ‘right of return’ to Israel.

Of course, the idea that 4.2 million of these people are actually refugees is totally absurd. If that standard was applied generally, the entire Jewish diaspora -- not to mention untold millions around the world who have been settled for generations -  could suddenly claim refugee status. ...

Now at long last Israel has begun to realise that yes, incredible as it seems, sentient people do actually believe such lies -- – and that if the free world is to be restored to the axis of reason, they must be countered head-on by the true facts of history. 

So long as there are rockets landing in Israel, so long as there are neighbouring governments pledged to annihilate Israel, and so long as there are terrorists bombing and killing civilians in Israel and threatening the very existence of its citizens, it makes all the sense in the world to me that the Israelis would create checkpoints and barriers. 

Keep in mind, too, that after Israel ceded the Gaza strip to the Palestinian Arabs living in Gaza (forcing the Israelis living there to leave!), much of the infrastructure they left in place was immediately pillaged. And of course the rain of rockets from Gaza continues with Hamas in control in Gaza now. Furthermore, people blamed Israel for the later blockade of Gaza when in fact Egypt participated in it as well. 

Finally, if you want to defend some downtrodden people, consider defending the residents of North Korea, Tibet, southern Sudan and Darfur, Cuba, and even many Venezuelans. But the plight of many Palestinian Arabs is at least as much the result of policies of neighbouring Arab countries who:

1. encouraged them (and mostly their ancestors) to leave Israel in 1948, promising to drive the Jews into the sea. Granted, some Arabs were indeed driven out of Israel, but most left voluntarily expecting to return only a few weeks later.
2. When Jordan, Syria, and Egypt failed in this war, they blamed the Jews for taking the property of those who fled. Furthermore despite their mistaken policies, these governments refused to accept the fleeing Palestinian Arabs as full-fledged citizens, instead forcing them to live in refugee camps.
3. There are tonnes more Arab students in Israeli universities than there are Jews in Arab universities.

Finally, remember that for centuries before World War I, the entire region was ruled by the Ottoman Empire. After WWI, the British had a mandate to govern the middle east and probably botched it (though it is not at all clear that at the time anyone could realistically have done much better, given the mutually exclusive competing claims and factions).

After WWII, the British slowly re-carved the region, creating Israel, among other countries. If the Palestinian and other Arabs of the region had accepted the initial partition of 1947-48, there would be no problem (well, okay, there would be much less of a problem). 

More Toothless Treaties from the EU

Once again European leaders have announced a treaty to deal with the sovereign debt crisis in Europe, most notably resulting from fiscal profligacy in Greece, Portugal, and Italy. These agreements are toothless. They have no enforcement mechanism, and they do nothing different from what the initial EU and Euro treaties did: they extract promises from all parties that they will act to reduce their annual deficits and, if they do, then other countries might help them through the difficult periods. From WaPo:

European leaders adopted a groundbreaking new treaty Monday that binds them to imposing caps on deficits and government debts to combat the painful financial crisis that has sabotaged prosperity across the continent and left it slipping toward recession.

The treaty, endorsed by 25 of the 27 European Union governments, was intended as a gesture to show skeptical financial markets that European governments are at last committed to gaining control over lax borrowing habits that over the last four decades have helped create dangerously high debts.

I nearly lost my coffee onto the computer screen when I read that. As the article further notes,

... [A] chorus of European officials and economists have questioned the wisdom of the treaty in the first place. The pact was unnecessary, they contend, because European rules — merrily ignored over the years — already forbid excessive government deficits ...

These promises might sound nice politically. But unless they can be enforced (how?), they merely prolong the agony and open the door for protracted gamesmanship. 

What will Germany (and France? others?) do if Greece (along with Italy and Portugal?) does not get its fiscal house in order? 

• Invasion and conquest are not likely options.
• Tell them they must try harder.
• And we really mean it this time.
• Kick them out of the EU and the Euro pact? 

The last option is the only realistic one. The only question is, how long before it happens, before Greece de facto defaults even more on its debt by abandoning the Euro, and consequently many financial institutions, counting on bailouts from the IMF and their own gubmnts, lose buckets of money? Or will the taxpayers of these countries hosting these banks once again be required to bail out the stockholders and creditors of those financial institutions? 

This is moral hazard, writ large on an international scale.

- - - -

Addendum: Stratfor points out that a variant of the first option listed above is not beyond the realm of possibility:

The German government proposed last week that a European commissioner be appointed to supplant the Greek government. While phrasing the German proposal this way might seem extreme, it is not unreasonable. Under the German proposal, this commissioner would hold power over the Greek national budget and taxation. Since the European Central Bank already controls the Greek currency, the euro, this would effectively transfer control of the Greek government to the European Union, since whoever controls a country's government expenditures, tax rates and monetary policy effectively controls that country. The German proposal therefore would suspend Greek sovereignty and the democratic process as the price of financial aid to Greece.

Though the European Commission rejected the proposal, the concept is far from dead, as it flows directly from the logic of the situation.

 The EU rejected this proposal. Understandably. How might the EU enforce it if Greece, at the last minute, refuses to hand over the controls to their gubmnt?

 

Is Multi-Culturalism a "Delectable Lie"?

Salim Mansur has recently published a book on multiculturalism, The Delectable Lie, published by Mantua Books. He was in Regina, Saskatchewan, last week, speaking about  and debating the topic with Khurram Awan. Salim Mansur is a professor of political science at The University of Western Ontario and, as regular readers of Eclectecon know, a good friend. Khurram Awan is an attorney who worked for a group of Muslims in their human rights cases against Rogers Communications, Maclean's magazine, and writer Mark Steyn. 

The deck was clearly stacked against Mansur, who has been described as a modern, moderate Muslim. There was virtually no advertising of the event at the university, despite my pleas that the event be advertised widely. And it appeared that about 80% or so of the audience was made up of friends of Awan.

Mansur's presentation focused on the contrast between 19th-century liberalism and many different cultures. He relied heavily on political philosophy, John Stuart Mill, and catch-phrases from the U.S. Declaration of Independence (probably a strategic error in presenting to a left-leaning, anti-US audience). He also cited incidents of honour killings in Canada and Pierre Trudeau's reported regrets about having supported multi-culturalism.

Awan focused on legal aspects, essentially saying that all cultures must abide by the laws of the land. 

I found the entire event extremely disturbing.

• Questioners were clearly hostile to Mansur and were allowed to make inappropriately long speeches themselves attacking him. One, in particular misquoted Mansur, misrepresented Mill, and attacked his reference to the US Declaration of Independence, all to audience nods and wild applause. 
• In response to all these questions, Mansur continued to emphasize that they would not be able to have these discussions in a country that doesn't value freedom as much as we do in Canada, and that is his concern. This point seemed to fall on deaf ears.
• When I asked Awan how to reconciled the freedoms of expression and religion when they come into conflict, he launched into a discussion of "hate speech", which was appropriate, and then mentioned "competition in the marketplace for ideas", a view to which most classical liberals subscribe. His only criticism of this view was that he thought Rogers had an obligation to provide a venue for opposing views so that this competition could take place. Afterwards, I took him to task for that position (not being allowed follow-up questions and not being allowed to make a speech myself). He admitted that he, himself, would feel no obligation to provide equal time for Mansur's views in his own speeches, but argued that Rogers had/has an obligation to provide equal space for people who oppose views like those of Mark Steyn.

Of course this is incorrect. When I called him on it, he alleged that Rogers has a monopoly in the media. Nonsense. The CBC and many other media outlets certainly provide support for views counter to those of Mansur or Steyn (or Ezra Levant, for that matter). Also, if the issue is one of monopolization of the media, that should be a Competition Policy issue, not a human rights issue.

• A Muslim woman complained that Corner Gas doesn't hire female comedy writers but that she is a writer for CBC's "Little Mosque on the Prairie." She somehow attributed her freedom to be a comedy writer in Canada to her Muslim faith, but the logic of that escaped me. Nevertheless, the audience applauded wildly. Once again Mansur's response essentially said that she is lucky to be in Canada, for surely Muslim women in other countries, where Muslim and Arab cultures dominate, would not have the freedom to pursue such interests. Again, the pithiness of this type of response seemed to slip right past the audience.

In Mansur's book, I am especially enamoured of his work on the clashes of freedoms. For example, on p119, he approvingly cites Dworkin's piece, "The Right to Ridicule."

The theme throughout his book is well-stated on p134:

Multiculturalism was promoted as a policy that would make for a tolerant, accommodating and peaceful society tending towards increased diversity as a result of open-door immigration policy. But tolerance of the intolerant, the accommodation of those who push extremism of one sort or another as the Islamists or the Khalistani Sikhs have done, under the cover of multiculturalism [EE: and, I would add, under the cover of "freedom of religion and charter guarantees] has amounted to the undermining of liberal democracy from the inside. This is the paradox of liberal democracy, its vulnerability resulting from its concerns to improve the conditions of living for its citizens and its commitment to remain true to its principles of freedom and individual rights even as some might want to subvert them.

As I blogged many years ago, when the freedoms conflict, freedom of expression must take dominance over freedom of religion. Otherwise intolerant religions will dominate.

Update: Here is yet another example of the clashes that can result as we try to work our way through the conflicts between various freedoms [h/t Jack].

Geert Wilders Visited London, Ontario, Yesterday: some quotes and photos

Geert Wilders, outspoken Dutch critic of Islam and producer of the (in)famous film, Fitna, spoke in London, Ontario, last evening, under a cloak of secrecy and surrounded by a wall of security. 

Wilders is a well-known public figure who sees Islam as more of an ideology than a religion. During his talk, he lambasted multiculturalism. Two quotes:

Multiculturalism is the biggest disease in Europe today.

And the reason for that?

Multiculturalism would not have been such a catastrophe if it weren't for Islam.

Because of his views, his public statements, his film, and his policy proposals, Wilders' life is constantly in danger. The organizers of the evening event, the International Free Press Society, refused to advertise the dates and locations of his talks while he is in Canada. Instead, we found out about them through word-of-mouth and then had to register before receiving the information [he does have two more talks planned while he is in Canada, in case you are interested; the information is available at the IFPS website]. 

Accompanying Wilders were about 10 security personnel from The Netherlands; also the RCMP had a large security contingent on hand. We all went through a security check before being admitted to the place where he spoke.

This is just plain wrong. People speaking about religion and ideology should not live in fear for their lives and the lives of their friends and families. 

Geert Wilders:

The warm-up act for Wilders was a dialogue between Ezra Levant (of human rights and freedom of the press fame in Canada) and Sam Solomon, a noted scholar of Islam and Sharia Law; it was mostly an interview of Solomon by Levant. During that interview, Solomon (who converted to Christianity and was at times quite coy about his past) proclaimed,

If you do not hate, you cannot be a complete Muslim.

Both Wilders and Solomon are very outspoken critics of Islam.

Here is a photo I took of Solomon and Levant ( all my photos from the event: twelve-times optical zoom, no flash, from about 50 feet away):

The session was introduced by Bjorn Larsen, who recently filmed a documentary about Caledonia, freedom, and property rights and who heads up the IFPS:

One more photo of Wilders, who was extremely engaging and compelling as a speaker:

The Chevy Bastiat

A very telling suggestion for renaming the Chevy Volt. The Coyote Blog points out that not only will the Volt Bastiat be expensive, it won't save much on fuel costs and it won't reduce the carbon footprint much [h/t Kip].

I am thinking about renaming the Chevy Volt the Chevy Bastiat.  Because the entire vehicle concept is based on the hope that people will ignore the unseen.  Specifically, those pushing the vehicle are hoping that buyers will just assume the electricity for the vehicle is free (after all it is not separately metered) and that the CO2 footprint is zero (despite the fact that in states like Michigan, an electric car is essentially powered by coal combustion.

For more on Frederic Bastiat, see this.

Update: a colleague writes, "I guess its more symbolism - almost like wearing a religious symbol.. The Chevy Hairshirt?" 

It Is OK for Teachers to Disagree with Some Political Views But Not Others? Guess which...

From FoxNews (Europe), [h/t BenS]:

A British teacher was fired from his job after complaining that some of his Muslim students were celebrating the Sept. 11 hijackers as "heroes," the Daily Mail reported.

Nicholas Kafouris, 40, who taught at East London's Bigland Green Primary School for 12 years, is suing the school for racial discrimination after he was allegedly forced from his post because he would not tolerate the remarks of his students.

Kafouris claims members of his class, some as young as eight years old, openly praised Islamic extremists in his classroom, hailing the terrorists behind the attacks of Sept. 11 as "martyrs," the Daily Mail reported.

Kafouris alleges the students told him they "want to be Islamic bombers when we grow up," and "the Christians and Jews are our enemies, you too because you're a Christian," according to the Daily Mail.

The Economics of Search, Love, and Marriage

Yesterday in my intro economics course, I introduced the economics of search, emphasizing that people continue to search for something so long as the expected incremental benefits of additional search outweigh the expected incremental costs. We then applied the concept to such things as searching for a shirt to buy, looking for references for a term paper, looking for someone to go home with from a party, and searching for a life partner.

After class, one of the students posted this Facebook update (presumably directed toward a member of the appropriate sex):

The marginal costs of additional search strongly outweigh the marginal benefits, therefore as a rational, maximizing individual, I love you ♥ .

Spies, Search, and the Economics of Information

In the search for information, we tend to continue our search so long as the expected incremental benefits exceed the expected incremental costs of additional search. This basic premise applies to all sorts of things:

• When searching for a new household appliance we might want to purchase, we don't "shop 'til we drop." Instead, we acquire some information about price and quality, inter alia, and then we stop looking at some point. We implicitly say, "the expected incremental benefits of additional search are exceeded by the expected incremental costs." Ms. Eclectic hates it when I talk like that. But we all tend to behave as if we are making that assessment.
• When searching for something we have misplaced, we do the same thing: we search so long as the expected benefits of continued search outweigh the expected costs.

And the list of applications goes on and on.... cars, jobs, mates, one-night stands, etc.

But now we learn that possibly the search for information by US spy agencies has gone beyond the optimal amount of search. At least that is the implication of this piece in the NYTimes:

As the military rushes to place more spy drones over Afghanistan, the remote-controlled planes are producing so much video intelligence that analysts are finding it more and more difficult to keep up.

It looks from the details in this article as if the spies are gathering more information than they can possibly use. At the same time, though, what would be the expected political costs of cutting back on spy-drone data collection?

• It may very well be that the data collection process has political benefits. 
• And the use of spy-drones may also have some deterrent effects on the enemy, making it less likely and/or more costly for them to engage in actions that spy drones could detect, even if not all spy-drone information is examined.

The Effects of Mass Immigration into Canada

Last week I received a copy of the Fraser Institute's latest book, The Effects of Mass Immigration. I took the book with me recently  when visiting a demographer friend, and he was quite impressed with it. His comments:

Finished it today.

Most impressed with all the chapters, including Salim's [EE: Salim Mansur, a mutual friend]. Most shocking statistics:

- only 20% of our immigrants come through the regular channels - the others are 'sponsored' or so-called 'refugees'

- Bill C-50 dropped, at the last moment, a provision to deny refugee status to those claiming from 'safe' countries already

- Despite Bill C-50, all those on the waiting list - now about 1 million, are guaranteed eventual admission (last minute cave-in by the government because .....?)

- Immigrants now cost us more than they contribute economically, mainly because of their 'inferior' quality of late.

The sad part of it all is that none of the authors seem to think any government in Canada will dare alter anything because of the votes.

Many thanks for lending me this one.

With that kind of praise, I guess I'll have to read it myself! Here is the link if you want to order a copy.

John Lott Opposes Big Brother Tactics as Obama Plans to Address Children in Schools

So much of this sounds like Big Brother and indoctrination. John Lott is on the right track with his criticism. And for those who have never read 1984 by George Orwell or his Animal Farm, please do so soon!

               .

Victor Davis Hanson Exposes Barack Obama

In this scathing column, Hanson points out all the distortions and outright lies we have been hearing:

I don't think he will any longer be able to "hope and change" his way out of tomorrow's controversies with mere rhetorical flourishes, since he has already exhausted his capital of credibility, and squandered his "this is our moment" trust.

Watch the faces of the press corps and the townhall throngs when he evades, and instead starts in with the cadences: The collective expression is to roll their eyes and sigh "not this again." And yet the alternative to hope and change is off-the-teleprompter pauses, and "inflate your tires/they're taking out our tonsils" folk mythology.

When Obama said he would be fiscally prudent, we got near $2 trillion deficits. When he said the debt would grow to $7 trillion over his tenure, you should nearly double that estimate. When he said Bush shredded the Constitution, he adopted most of the Bush plan from rendition to tribunals. When he said that he wished to move on, we got investigations of the CIA and the previous administration. When he said we'd have all combat brigades out by March 2008, we knew we could not. When he said anything about healthcare — it would save money, would not alter private plans, would not go to illegal aliens, etc — we already assumed all that was mendacious. When he says anything, we know now that it is either not true or will not be true or at best will only be partially true. [emphasis added]

And in the first seven months, there was a crass edge as well, whether measured by the jokes like ridiculing the Special Olympics or demagoguing those who go to Las Vegas or the Superbowl, or stereotyping the police who act "stupidly" and "profile." ...

Obama's crash in the polls has come with record speed, and is not just because all of his policies are both to the left of the voters and are at odds with a bait-and-switch veneer of moderation in the campaign. Just as important is this sense that Obama serially whines ("reset button," "Bush did it," etc.), and in his comments about doctors, insurance companies, Super Bowl attendees, Vegas visitors, the Special Olympics, the wealthy, the police, etc. shows a surprising meanness of spirit, at odds with the supposedly upbeat "no more red, no more blue state" campaign rhetoric. We know clearly that Americans do not like most of Obama's policies, but if they begin not to like Obama the man either, then he is in real Jimmy Carter-like trouble. The American people sense now that a Hugo Chavez or a Saudi prince gets far more deference than do other Americans, and they are quite tired of it.

Please read the entire column. It is priceless. [h/t AlanP]

[update: spelling of Barack corrected in title]

Some Holes in Canada's Immigration Policy

I would not have thought ten years ago that I would be expressing concern about immigration into Canada, but over time it has become fairly evident that there are some problems that need to be addressed. My friend, JA (a retired demographer) has set out some of them in some recent correspondence:

To me, our primary immigration policy, with its point system, seems reasonable enough, assuming the points are assigned in a rational way. The problems seem to be in to other areas:

1/ Abuse of the 'refugee' system

2/ Design and abuse of the 'family reunification' and sponsorship route.

The first is an absolute disgrace, and the government seems almost powerless to deal with it. The worst part seems to be the apparent inability to repatriate many who are, sometimes after years,  eventually denied by the board.

The sponsorship route results in the immigration of many who would never qualify under the points system, and who subsequently become a major drain on the system. The safety net is supposed to be the legal responsibility of the sponsor(s) to pay for all 'essentials' for a period of between 3 and 10 years, depending on the family status of person sponsored.The big exception is medical care, for which the sponsor is off the hook after 3 months. All brothers and sisters of the sponsor are eligible for sponsorship, provided the parents are also sponsored. If all family members are already here and off sponsorship status, the sponsor can sponsor anyone else. Such folks are not required to meet employability expectations.

As for the legal responsibility of the sponsors, it seems there are several ways to get out of it (attachment [EE: see below]). Some immigration lawyers no doubt sub specialize in just that. Social workers tell of many 'lost sponsor' South Asians in their case loads in many areas, all on welfare after the sponsor(s) reneged. As for the statistical burden involved, just try to find out!

I would propose that as in many areas of public life, our immigration policies are superficial, penned out to appeal to the big city electorate. Ignatieff can be counted on to pander to the immigration lobby, as he needs to lock up the Toronto vote. Harper would, I'm sure, like to do a major overhaul but in a minority situation, there is no chance.

Our options are limited, if we are dedicated to generous immigration targets. The pool is what it is. The real question is:  why is it is so important to stuff the country. Yes, I realize that pensions will suffer otherwise, but it's a choice I would make. Don't "Give us your poor, your tired, your huddled masses ...."

Here are the conditions that let sponsors off the hook:

On Sotomayer

George Jonas nails the situation [h/t Jack]:

If appeal court judge Sonia Sotomayor is elevated to the U. S. Supreme Court, it will be because of her flaws as much as her virtues.

Judge Sotomayor will get the nod because (a) she's a Hispanic woman, (b) she believes that being a Hispanic woman makes her more qualified to judge matters than people who aren't Hispanic women and (c) she's prepared to deny under oath that she believes what she believes.

Read the whole scathing thing.

Libertarian.NE.PalinDuh

I really find this summary from Today's Papers (Slate) hard to believe. Shows how out of touch I am with the real world.

[The USA Today] lead story is about how Sarah Palin's resignation actually "boosted her a bit among Republicans." A poll taken this week shows that Palin has become even more polarizing after her resignation as the vast majority of Republicans want her to become a national figure, and Democrats overwhelmingly want her to just go away. Fifty-five percent of independents agree with Democrats. Almost three-fourths of Republicans say they'd be likely to vote for Palin for president in 2012, while 51 percent of independents say they wouldn't. [emphasis added]

This is the social conservative wing of the Republican party, the wing that wants more gubmnt intervention in our lives. It is not the small-gubmnt libertarian wing which played such an important role in helping the US economy grow in the 1980s.

My prediction (possibly wishful thinking?) is that by 2011, Sarah Palin will have faded from the scene and will have zero real influence in the Republican party.

Confusion: Honduras

It seems pretty clear that the ousted president was behaving illegally and unconstitutionally.

As the general elections scheduled for November began to creep up, Mr. Zelaya decided to hold a referendum with the ultimate aim of allowing him to seek re-election. The move violated articles of the Constitution that forbid changes to the presidential limit of one four-year term and establish the legal procedure for constitutional amendments. The electoral court, the Supreme Court, the attorney general, Congress and members of his own party declared Mr. Zelaya’s intention unlawful. Then, on Sunday, the military stepped in.

At the same time, there should be ways to head that off other than by military coup. This piece from the Independent Institute illustrates the problem. Here is their summary:

The crisis in Honduras is, in a word, complicated. Although deposed President Manuel Zelaya bears the brunt of the blame for his ouster, the military actions against him were ill advised and play into the hands of Zelaya's anti-democratic allies in the region, according to Independent Institute Senior Fellow Alvaro Vargas Llosa.

Zelaya acted unconstitutionally by taking steps to seek reelection, and he followed that misdeed with an even more brazen one: breaking into the location of the impounded election ballots in an effort to distribute them. Yet the response from the Organization of American States has been to ignore Zelaya's dictatorial conduct, just as it ignored similar violations by Chavez in Venezuela, Morales in Bolivia, Correa in Ecuador, and Ortega in Nicaragua. Supporters of the military action may come to regret Zelaya's propaganda victory in a conflict that bodes poorly for the rule of law.

As the Honduras imbroglio illustrates, the trick for Latin America is to avoid the extremes of the left and the right. Vargas Llosa concludes: "Honduras' crisis should bring to people's attention this truth about Latin America today: The gravest threat to liberty comes from elected populists who are seeking to subject the institutions of the law to their megalomaniac whims. Given that scenario, the hemisphere's response to Honduras' crisis has undermined those who are trying to prevent populism from taking the region back to the times when it was forced to choose between left-wing revolution and military dictatorships." [emphasis added]

Also see Llosa's piece in the NYTimes on why the primary winner in Honduras could well end up being Hugo Chavez.

Is Sarah Palin Really as Much of an Idiot as She Seems?

Kip Esquire thinks so:

Folks, stop imagining a mystery where none exists: She’s an idiot. A real-life Chauncey Gardner. That’s all there is to her resignation. There is no “crazy like a fox” aspect to her announcement — it’s strictly “stupid is as stupid does.”

One of my friends last year thought that naming Sarah Palin to the Republican ticket was a stroke of genius. I was so convinced he was wrong that I made 50 bucks betting against him on the election outcome.

I think Kip's analysis is closer to correct.

Stress Tests, Risk, and Insurance

Why all the gubmnt intervention in the markets now? Why haven't the regimes of the past been sufficient for today's market conditions?

Stress tests for banks are a case in point. Surely we should expect that people who lend to banks would do a modicum of due diligence to make sure the probability the bank will go under would be miniscule. Shouldn't we?

Oops. I lend to banks all the time by depositing my money with them and I NEVER do a stress test. I never even consider the possibility that my bank might default on my demand deposits or my notice deposits. The banks have deposit insurance, and deposit insurance means I don't have to waste my time doing a stress test of every bank with which I might have dealings. Furthermore, due diligence by a deposit insurance company means that each depositor doesn't have to do its own due diligence: the insurer can capture some important economies of scale on behalf of all depositors.

Okay, so my deposits (i.e. my loans to banks) are insured (whether I like it or not). Then surely the insurance company is doing its own due diligence, making sure the banks remain sound and able to repay their depositors.

Oops again. Most bank deposits are insured by the FDIC in the US, a quasi-gubmnt institution, which ultimately means it is the taxpayers who are on the hook for risky decisions made by bankers. And even if the deposits were insured by private corporations (AIG's credit default swaps were a type of private insurance after all), then what happens if the private insurers take on too many risks? Once again the taxpayers are on the hook.

Cute, isn't it: if the banks and their insurers take risks and make money, they (and their stockholders) earn a lot of money. But if the banks and insurers take risks and lose money, it is ultimately the taxpayers who bear the downside risk.

And it is this asymmetrical reward-to-risk structure that induces (and in many people's minds justifies) gubmnt intervention in the form of stress tests for banks.

My own preference would be for lenders and insurance companies to bear the downside risk that accompanies their decisions. If they knew the taxpayers were not prepared to bail them out, they would be forward-looking and we would not have nearly so massive clean-up operations. But politically this probably isn't going to happen.

And I guess that is why we need diligent oversight on behalf of taxpayers. As a libertarian, I must say this rankles. I would prefer less gubmnt, but at the same time I understand our unwillingness politically to let small depositors suffer when bankers screw up.

But maybe if the bankers and insurers who screw up risked losing everything they own, they, themselves, might be more concerned about downside risks. And herein lies one possible solution for the future:

Stockholders and bond holders must be required to lose big from the current financial crisis. If they do, then in the future, they will work carefully to design incentive compatible reward structures for the executives of their firms so that the executives will face enormous losses if they screw up. This is at least a partial market solution to the insurance and risk problems that have evolved.