Our Utterly Corrupt Politics October 31, 2007Posted by federalist in Government, Taxation.
“Vote for me, and I will take money from somebody else for your purposes.” We have allowed our federal system of government to degenerate into civilized mob rule. The only difference between modern American democracy and Communist rule is that Americans demand that more than one political party conspire to rob minorities to cement their power. This is surely not the American dream.
The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C’s interests, are entirely overlooked. I call C the Forgotten Man. For once let us look him up and consider his case, for the characteristic of all social doctors is, that they fix their minds on some man or group of men whose case appeals to the sympathies and the imagination, and they plan remedies addressed to the particular trouble; they do not understand that all the parts of society hold together, and that forces which are set in action act and react throughout the whole organism, until an equilibrium is produced by a re-adjustment of all interests and rights. They therefore ignore entirely the source from which they must draw all the energy which they employ in their remedies, and they ignore all the effects on other members of society than the ones they have in view. They are always under the dominion of the superstition of government, and, forgetting that a government produces nothing at all, they leave out of sight the first fact to be remembered in all social discussion – that the State cannot get a cent for any man without taking it from some other man, and this latter must be a man who has produced and saved it.
Worth reading in full.
Lazy Law October 30, 2007Posted by federalist in Government, Judiciary.
Tim Wu delves into fascinating examples of what I would call lazy law: The legislature passes all sorts of laws, but the executive only enforces the ones that are generally palatable, or in which the public has particular interest at a particular point in time. There are adherents to the philosophy of prosecutorial discretion but to me this system seems upside down.
The problem is that this system leaves our legal landscape littered with laws that lie in wait like landmines. Anyone who steps on them is at the mercy of the prosecutorial authority. If the authority is looking to score political points (e.g., Spitzer, Nifong) or is being pressured by a special interest, or is simply in a bad mood, then a hapless citizen following a well traveled path gets blown up.
Our system of government is not designed to impose an appropriate level of accountability on prosecutors who enjoy such discretion.
The Public Pension Pay Problem October 29, 2007Posted by federalist in Finance, Government, Pensions.
add a comment
The WSJ outlines a predicament facing public pension funds: With many billions of dollars in assets, the effect of the fund managers on this public welfare can be enormous. But government entities have a hard time paying the going rate for financial talent — successful private fund managers with billions in assets will certainly make seven figures each year, but the highest public-sector salaries are traditionally in the low six figures (often customarily bounded by the salary paid to the governor).
My philosophy is that government shouldn’t be in the business of money management. Pension liabilities should be outsourced to insurance and investment management companies. After all, it’s a competitive private industry. There’s no reason to think that government could do it better (and there’s bountiful evidence that political meddling drives performance down). And there is no reason for taxpayers to shoulder the risk of underfunded defined-benefit liabilities, which occurs frequently in public pension systems.
Of course, governments will pay for good money management one way or another. If they outsource it the politically unpalatable salaries will be disguised behind management fees, but they will still be there.
Don’t Give Your Rebate To Your Realtor October 10, 2007Posted by federalist in Real Estate.
I have written before about grotesque inefficiencies in the market for real estate brokerage. Rent exhaustion, illegal cartels, unethical behavior and conflicts of interest. All of these industry features have only grown with the explosion in real estate values.
On my other blog I outline a solution to the hazards facing consumers that fits almost entirely within the present paradigm of the brokerage industry.
Moral Hazards in Life Insurance: The Suicide Exclusion October 8, 2007Posted by federalist in Finance, Healthcare, Human Markets, Open Questions.
I was surprised to discover that life insurance policies cover suicide after a two-year “exclusion” period. (I.e., after two years of paying premiums an insured can kill himself and the insurance company will pay out the full benefit.) I was even more surprised to discover that nobody writes life insurance with a total suicide exclusion. A few observations:
- Obviously the fact that life insurance covers suicide creates a tremendous moral hazard. People with active life insurance have a financial incentive to commit suicide! There is ample evidence that this incentive has a real effect, as detailed in Samuel Hsin-yu Tseng’s paper, “The Effect of Life Insurance Policy Provisions on Suicide Rates.”
- As far as I can tell, the exclusion period stems from a majority of state regulations. Life insurance is regulated at the state level, and (as of 2005, ibid. page 4) 36 states require life insurers to cover suicide after no more than two years of the policy being active.
- As a consumer I would like to be able to buy insurance contracts that don’t pay a suicide benefit. Such policies would be substantially cheaper.
- The irony: Our government forbids anyone from being compensated for donating organs to save the lives of others (supposedly because of the moral hazard of such an incentive), yet it requires insurers to create an incentive to commit suicide!
A Standard for Regulating Private Property October 1, 2007Posted by federalist in Government Regulation, RKBA.
I actually found a reasonable person who is more libertarian than me. (I would almost call him an anarchist, but he chafes at that term, and he does reason from Natural Law, so I’ll say he’s libertarian.) While discussing the legitimacy of registering and licensing motor vehicles traveling on public roads, I found myself referring back to ideas I initially expounded on the subject of private weapon ownership.
I think I have a cleverly simple regime for regulating dangerous devices of every kind — so simple that it could satisfy both the most coddling regulator and (maybe even) the more die-hard libertarians.
The interesting thing about this subject is that the nature of the question has changed substantially over the last 200 years. When the great thinkers of the eighteenth century were addressing natural rights, an individual man could not himself wield much more power than could be exercised through a steel blade, flintlock firearm, horse, or barrel of black powder. An accident or aggression by an individual could only result in very limited damage to the lives and property of others. In contrast, modern motor vehicles and high explosives enable an individual to exercise destructive power far out of proportion to anything a man can naturally repay.* Hence the demands on government to restrict the rights of individuals to own dangerous and destructive property.
Our present government takes an ad hoc approach to this problem. Passenger cars are regulated in a rather costly and inefficient fashion. And still we find people on the road who probably should not be allowed to drive, or who don’t carry enough insurance to cover the damage they cause in accidents. Meanwhile less dangerous items, like switchblades and certain firearms, are absolutely prohibited from even the most competent private citizen.
From a government perspective it should not matter whether a destructive device is a vehicle or a weapon: The ultimate question is how much damage it could cause if accidentally or intentionally used against another person or his property. Science gives us a useful way of measuring destructive power, and my proposal would be to standardize registration and insurance requirements on this basis.
For example, a young child or certifiably insane person should not be allowed to own or operate any MegaWatt-class device. Any responsible person should be allowed to operate any destructive device so long as they post bond or insurance against its misuse (accidental or intentional). For example, a modern passenger car is roughly a 10MW device, and should require a $100k bond. I was surprised to discover that even many handguns are 10MW devices, but that’s the way the numbers go. Fortunately, we don’t need a separate regulatory regime for higher-grade devices. Commercial trucks and large-bore firearms could rate up to 100MW. Light jets are around 500MW. Grenades and pyrotechnics are up to 1 GigaWatt. Heavy jets are up to 50GW. Detonators might be effectively TeraWatt devices, since many common chemicals can be detonated in large quantities. I don’t particularly like the way these numbers pan out, since our present regulatory regime leaves plenty of loopholes. But at least this would offer a consistent and principled basis for regulation, instead of political caprice.
*I know I’m crossing thin ice here, since one of the classic objections to the Second Amendment is that the Founding Fathers didn’t contemplate modern weapons. Suffice it to say that this argument is meant to help libertarians accept a basis for government regulation, not to provide an argument for discriminatory regulation. If you don’t believe that human beings have a natural right to keep and bear arms for the individual defense of life and property, then I just hope you always end up on the short end of the Nanny State.