Gordon Tullock, R.I.P.



10444565_10153334911167796_5877500791548779174_nMy friend and former colleague Gordon Tullock passed away on Election Day eve at the age of 92.

Gordon was one of the great polymaths of the past more than half-century. Known best as the co-author (with Nobel laureate James M. Buchanan) of The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962), Gordon invented the concept of what became known as “rent seeking” in a paper published in 1967 (the term actually was coined by Anne Krueger in 1974), contributed extensively to the literature of the law (owing to the high error rates of judges and juries in common law regimes, he favored continental civil law processes), and wrote much about the economic behavior of non-human societies (e.g., “The Coal Tit is a Careful Shopper” is one of my favorites). In The Social Dilemma, Gordon explored the benefits and costs of revolutions and coups d’état; he also brought his fertile mind to bear on autocratic regimes, which he observed correctly are much more prevalent in human history than democracies.

Many of us thought that Gordon should have shared Buchanan’s Nobel Prize and, until very recently, held out faint hope that a Nobel would be awarded to him for launching a vast literature extending his rent seeking logic, perhaps jointly with Anne Krueger. Alas, that was not to be.

In addition to co-authoring The Calculus, to which Gordon contributed some of the first applications of game theory to problems of collective decision making, he single-handedly launched the academic journal now known as Public Choice, was present at the creation of the Public Choice Society, and as journal editor fostered the careers of many young scholars by publishing their work. (It is for that reason that the journal’s publisher, Springer, funds the honorarium paid to the winner of the annual Gordon Tullock Prize for the selection by the journal’s current editorial team of the best paper published by a younger scholar in Public Choice.)

Gordon was famous for insulting his friends good-naturedly and not interacting much with people he didn’t particularly like. I count myself as one of Gordon’s friends because not long after I succeeded the late William C. Mitchell as book review editor of Public Choice, he remarked that I hadn’t been doing as bad of a job in that post as he had expected me to do.

Gordon was proud to say that he took only one undergraduate course in economics (taught by Hebert Simon) and that because he had not fulfilled all of his degree requirements prior to being accepted into (and later graduating from) law school, he didn’t even have a college diploma.

It is somewhat ironic that Gordon passed away on the day before Election Day 2014. He was famous for telling anyone who listened that he never voted. He practiced what he preached: voting is irrational, as public choice reasoning explains.

If you have failed unaccountably to become familiar with Gordon Tullock’s incredibly creative contributions to the literatures of public choice and beyond, a good place to start is the 11-volume Selected Works of Gordon Tullock, edited by the late Charles K. Rowley and published by Liberty Fund.

Gordon Tullock (1922-2014)



10444565_10153334911167796_5877500791548779174_nGordon Tullock, one of the founders of the sub-discipline of public choice, passed away November 3, at the age of 92. Public choice uses the methods of economics to analyze political decision-making, and Tullock’s book, co-authored with James Buchanan, The Calculus of Consent, was a pioneering work in public choice. It is the best-known work written by either Buchanan or Tullock, and many people thought that when Buchanan won the 1986 Nobel Prize in economics for his work in public choice, that prize should have been shared with Tullock.

Tullock’s contributions go well beyond his co-authored book. He wrote the first article on rent-seeking, he extended public choice analysis beyond the examination of democratic governments to look at other arrangements ranging from autocracy to anarchy, he was co-founder of the Public Choice Society, and founding editor of the journal Public Choice.

While other scholars worked in the area of public choice around the same time as Buchanan and Tullock (and even before), it was Buchanan and Tullock who turned occasional writing in the area into a movement, partly by starting the Public Choice Society, and partly by establishing the journal.

I recall Tullock explaining the importance of the journal as an outlet for scholarly writing in public choice. The mainstream journals in economics and political science did not view public choice as a part of their disciplines, and as a result, scholars working in the area often had a difficult time publishing their articles. Tullock’s idea was that if they could not get them published in those journals, having a journal that specialized in public choice would give them the opportunity to have their work published somewhere, and so would give scholars an incentive to work in the area. The journal Tullock founded is now very highly regarded by both economists and political scientists.

Tullock remained academically active, and was a regular attendee of the Public Choice Society annual meetings, until the past few years when his declining health curtailed his ability to travel.

Tullock’s impact on economics and political science was immense, and with his passing the world has lost a brilliant scholar.

Has Colorado Gone to Pot?



marijuana-plant-yes-or-noLast week I had the chance to spend a few days in Denver while giving a talk as part of the Exploring Economic Freedom Lecture Series at the Metropolitan State University of Denver (you can find a link to the video of my lecture on police militarization here).

After landing at the airport I received several text messages from family and friends asking if I was “walking through smoke clouds,” enjoying the “mile HIGH city,” or “stepped off the plane with a contact high.” These messages, all referring to Colorado’s legalization of marijuana this past January, reflect a broader idea about impact of drug legalization. Indeed, legalized marijuana is gaining traction throughout the U.S. In yesterday’s election, voters in Oregon, Alaska, and Washington, D.C. voted to legalize recreational marijuana in various ways.

Opponents of drug legalization often argue that the legalization of drugs would lead to rampant drug use, increases in crime, and higher rates of overdose. In 2012, Douglas County Sheriff David Weaver stated if Colorado legalized marijuana,

I believe there will be many harmful consequences. Expect more crime, more kids using marijuana and pot for sale everywhere. I think our entire state will pay the price.

A large body of literature, however, counters these claims, illustrating why drug legalization is likely to decrease crime, decrease overdose deaths, and decrease the use of hard drugs like heroin and other opiates.

Colorado provides a unique opportunity for a natural case study. Here is a state in which recreational marijuana was (for all intents and purposes) illegal one day and legal the next. So, since legalizing marijuana, has Colorado gone to pot?

Based on personal observation, I saw a few marijuana dispensaries in downtown Denver, but they weren’t at all pervasive. I failed to observe any roving gangs of potheads blasting Bob Marley music, eating entire bags of potato chips, or discussing their vast collection of Cheech and Chong sequels. The city looks like a healthy economic hub with lots of restaurants, shops, and other commerce.

But what do the statistics look like?

First, Colorado’s pot sales have hit a new high (pardon the pun). In September, recreational marijuana sales exceeded those of medical marijuana. This implies that customers who previously bought products on the black market are now going through legal venues, buying products from legitimate vendors. While sales are much higher, it does not appear that the use of marijuana among teens has increased.

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Second, crime rates have fallen. According to government sources the murder rate in Denver fell 42.1% in the first six months of legalization (this is compared to the same period the year before). Major crimes against property have fallen 11.5% and violent crime is down about 2%.

Third, the state of Colorado is making and saving money. As opposed to spending more resources to combat crimes involving marijuana, the Colorado Center on Law and Policy estimated the state would save between $12 million and $40 million as a result of legalization. As of June, the state collected some $4.7 million just in sales tax on marijuana. As of mid-July, the state boasted $25.3 million in taxes on pot. This number is expected to reach $60 to $70 million by the end of the fiscal year.

Opponents of broad drug legalization claim that such policies would mean increased crime, more drug addicts, a drain on state budgets, and more overdose deaths. The question of “how many addicts” and “how many deaths” is empirical. We can’t know beforehand how many addicts would exist in a world of legalized marijuana (or other drugs for that matter) or how many overdoses would occur every year. However, there is very good reason to believe that legalizing drugs would actually lower the likelihood of overdose. Such theories have seen empirical validation in a variety of studies, including recent research published by the Journal of the American Medical Association. The researchers found that overdose deaths in states with some form of legalized marijuana saw a 25% reduction in overdose deaths from other drugs.

What is the appropriate drug policy? It is important when analyzing programs to look at the facts. Does policy X achieve goals Y and Z? It may be the case that legalization works to combat issues like overdose and crime better than does outright prohibition. Without a doubt, current drug policies have largely failed to achieve their goals. When the DEA started its operations in 1973, they employed about 2,700 personnel with a budget of $74.9 million. By 2011, the DEA employed 10,000 people and maintained an annual budget of over $2 billion. Despite these efforts, overdose deaths, drug-related crime, and addiction rates have increased over the past 40 years.

It is clear that states are starting to consider the costs and benefits of other policies related to drugs. It’s high time the country as a whole does the same.

 

Administration Continues to Stonewall on Obamacare Exchange Enrollment



information-freedom-200x200Back in May, the U.S. Department of Health and Humans Services (HHS) suddenly stopped issuing monthly reports on enrollment in Obamacare’s health-insurance exchanges. The administration had used these reports to ramp up the cheer-leading for Obamacare’s “successful” recruitment of 8.1 million people by the end of the first open-enrollment period on March 31 (or, actually, sometime in mid-April due to omnipresent technical glitches).

In a report subsequently issued for another purpose, HHS (perhaps unwittingly) disclosed that only 2.3 million people were enrolled in private insurance via an Obamacare exchange. The other 8 million of the 10.3 million now considered enrolled are in the category of charity care called Medicaid.

On Halloween, HHS issued a report that looks exactly like the reports that it published through May 1. So, one might reasonably expect that if the administration could produce a report on May 1 that announced enrollment as of March 31, then the next report that it issued on October 31 could announce the numbers enrolled as of September 30.

No such luck.

The Halloween report covers sign-ups through June 30. Further, unlike the previous reports, it does not disclose data that HHS uniquely possesses—actual enrollment numbers reported by the Obamacare exchanges. Instead, it simply recycles surveys of estimates of the decrease in the number of uninsured Americans produced by Gallup-Healthways and non-HHS government agencies.

To be clear: Neither private polling firms nor other government agencies possesses the enrollment figures reported from the Obamacare exchanges. Only HHS has those data. And yet HHS continues to bury those data.

Such stonewalling can only serve to jeopardize claims about Obamacare’s “success”.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

The Malvinas versus Argentina



map-falkland-islandsI hope someone has the cheek to send Argentine President Cristina Kirchner a copy of the Statistical Yearbook 2014 published by the Falkland Islands Government—preferably without giving too many hints of their identity, if they want to avoid serious trouble. Regardless of what one thinks about the sovereignty issue, few documents in recent memory are more humiliating for Buenos Aires.

In 1982, of course, Argentina and the United Kingdom went to war over the Malvinas (Falkland Islands), an archipelago in the South Atlantic held by the Brits since the 19th century and to which Argentina has a long-standing claim. At the time, there was little more than sheep farming. Now the islands’ three thousand Kelpers boast a per capita GDP of $122,000, not far behind that of Luxemburg, the richest country. If we take oil and gas exploration out of the equation, its per capita GDP equals that of Japan. What a contrast with Argentina, now in a recession, whose per capita GDP is just over $11,000 (about $18,000 in purchasing power parity terms).

Lo and behold, the Malvinas’ success has come about thanks to private enterprise, property rights and commerce, while Argentina’s failure has resulted from the severe dose of statism inflicted by Kirchner. The government of the Malvinas represents only 12 percent of the value “added” to the islands’ economy (if one must accept the fact that the government can add value to an economy); private enterprise in everything from commercial fishing to organic agriculture, transportation and retail services, and hydrocarbon exploration has done the rest. This, in a territory where after the war the Falkland Islands Company sold the sheep farms it controlled to the government!

In Argentina, by contrast, the Kirchner government has gone from absorbing 27 percent of the wealth produced by its citizens every year to 46 percent. It has engaged in a frenzy of nationalizations, including the private pensions that constituted the basis of the nation’s savings, and overtaxed the most productive segments of the economy. The only private wealth that has grown in terms comparable to those of the Malvinas is that of President Kirchner herself—by a factor of ten.

While private enterprise has been active in hydrocarbon exploration in the Malvinas, in Argentina the authorities nationalized YPF, the main oil and gas producer (an affiliate of Spain’s Repsol) in 2012. Through price controls, they ruined the industry, which has suffered from undercapitalization and production deficits. Buenos Aires even tried to prevent oil exploration in the Malvinas by making it a criminal offense for energy companies to drill near the islands. While oil majors such as British Petroleum and Chevron kept away, others disregarded the threats. Which is why Premier Oil, Falkland Oil & Gas, Edison, Noble, Borders & Southern and others have been trying to get their hands on the oil believed to be lying under the sea bed surrounding the Malvinas. Some has been found, and Premier Oil is the closest to production.

If Argentina is ever to persuade the Malvinas folks that they will be better off becoming Argentineans, it will need to start by looking at what those tiny islands have done for themselves.

A word of caution. The problem with wealth creation is that even the government that makes it possible by removing obstacles will eventually be tempted to get its hands on it. The Falkland Islands Government is already talking about a 26 percent corporate tax on future oil production. It sounds as if the Kirchner spirit may be spreading across the South Atlantic...

Obamacare Premiums Increased Dramatically for Every Age Group in 2014



HealthPocket, an online insurance broker, has measured the increase in premiums for every age group in Obamacare versus the pre-Obamacare individual market. Their conclusion: Premiums increased by double digits for every age group.

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What I find really surprising is the increase in rates for 63-year olds: 37.5 percent for women and 22.7 percent for men. Recall that Obamacare forbids actuarially accurate underwriting by age. The difference in rates between older adults and younger ones can be no greater than three to one. This regulation must raise rates for younger people, because the actuarial consensus is that average health spending for 63-year olds is five times that of 22-year olds.

Politically, the purpose of squeezing the age bands is obvious: The younger person, who is unlikely to vote, subsidizes the older person, who is much more likely to vote. If Obamacare had reduced premiums for older adults, I expect it would be more popular than it is today. Now, HealthPocket does point out that these are unsubsidized premiums: Obamacare disguises these true premiums by offering health insurers tax credits to reduce the net premium people pay, thus fooling many into thinking that premiums have gone down.

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Another issue to note is the difference in changes for men versus women. Obamacare’s supporters made a big show about outlawing “discrimination” against women, and forcing insurers to charge the same rate for both sexes. Premiums for women of child-bearing age had been higher primarily because of the costs of childbirth. However, this turns around after child-bearing age: Men have higher costs. So, Obamacare caused a higher increase in premiums for older women than for older men.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

Hillary’s Right About Jobs



Hillary Clinton’s recent exhortation “Don’t let anybody tell you that it’s corporations and businesses that create jobs,” has been drawing a lot of flack from conservatives, but it’s pretty much true these days.

Back in the olden days, of course, businesses did create jobs. But now, not so much.

Here are the number of private sector jobs added during recent presidential terms:

PrivateMar2014

 

 

 

 

 

 

 

 

 

Of course, the number of jobs “created” (added) is only a part of the picture.

The other part is how those jobs measure up.

Public-sector jobs pay better on average than those jobs created by businesses. According to employee compensation data released by the Labor Department:

Employees in private industry received an average of $29.11 per hour in total compensation in June. That included $20.47 in salary and $8.64 in benefits. State and local government workers averaged $42.09 per hour in compensation. That included $27.16 in salary and $14.93 in benefits.

And job security is better in the public sector: it’s far harder to fire a public-sector employee, both due to a difference in applicable employment law—most private employees are employed under “at will” terms; most public-sector employees have a “right to ‘notice and a meaningful opportunity to be heard’”—and because public-sector employees are also far more likely to be unionized:

Public-sector workers had a union membership rate (35.3 percent) more than five times higher than that of private-sector workers (6.7 percent).

Even when they’re caught up in major scandals, public-sector employees are routinely allowed to “retire” rather than being fired, thus retaining their incredibly generous retirement packages, including pensions that often total more than their final salaries, and fully-paid health benefits.

Another factor to consider is that even when one is fired from a public sector job, it need not mean financial hardship. In California, three school superintendents were among the highest-paid employees in the state last year—including one taking home more than $600,000—when they were fired and received six-figure severance payments:

The data shows that both small and large public school districts awarded administrators six-figure salaries, sometimes with lifetime health benefits, low- or no-interest home loans and golden parachutes, even as California emerged from a financial crisis that forced huge cuts to social service programs for the poor and elderly.

[Californians being asked to approve higher taxes and more spending for "education" on tomorrow's ballot might want to think about this.]

Of course, the biggest problem with the consideration of public vs. private job “creation” is that public sector employment doesn’t actually produce anything with which to pay for those jobs, and is thus wholly dependent on the productivity of the private sector.

Unfortunately, the burden of regulations like Obamacare mean that more private-sector jobs are part-time, further immiserating private-sector employees, and leaving less from which the public sector can take to support itself in the style to which it has become accustomed. And with the full brunt of the Affordable Care Act’s not taking effect until after tomorrow’s elections, this dismal picture will only likely get worse.

Meanwhile, the very worst news is that less and less of the population is actually working at all, as shown in this graph of labor force participation:
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With little hope for relief from Washington’s regime uncertainty during the two years remaining until Mrs. Clinton’s presumed official run for the presidency, she may well wish that businesses and corporations did create jobs—surely it would be easier to win as alumna of an administration that presided over better times.

Election on Tuesday: Who’s Running?



9845970_SI’ve commented before on all the political spam I’m receiving in my email, most of it from the Democratic party (dccc@dccc.org). In many of their pleadings, they claim they are running against the Koch Brothers. (I like how they capitalize both their name and the B in Brothers.) And who’s running against the Koch Brothers? It appears that Hillary Clinton is.

In a recent email with the subject line “Accept Defeat” (which I’m already doing, because I don’t think I’ll feel like a winner no matter how the election turns out on Tuesday), the first line is, “We are completely out of ideas.” OK. But if you’re out of ideas, why would I want to support you?

A few lines later they tell me, “The Koch Brothers are pummeling us...” and here, I didn’t even know they were running. This email refers to an earlier email from Hillary Clinton. (I’m name-dropping here, trying to impress you with the fact that I get email from Hillary. It appears we are on a first-name basis.) The email goes on to say, “...it doesn’t even look like Hillary Clinton’s email can dig us out of this hole.”

Nobody else is mentioned in the email. It appears the Democratic Congressional Campaign Committee is trying to tell me the election is between the Koch Brothers and Hillary Clinton. When I vote next Tuesday (many libertarians will criticize me for doing this), I’ll be looking for these names on the ballot.

My direct complaint about this email is a small one, I’ll admit, but the larger lesson in the email is that political battles are more about pulling the emotional levers of voters than talking about issues, or even about candidates. If I gave them money, as they are requesting, what would happen to that money? How would it be spent? Their solicitation tries to push me to give only if I want to support Hillary or beat the Koch Brothers.

Messages like this must work, or they wouldn’t keep sending them. Surely they’ve done the research to know which messages are effective. And if this is the type of message that works, it makes me very uneasy about giving any responsibility for my well-being to the will of the majority, regardless of whether the majority decides to vote for the Koch Brothers or for Hillary Clinton.

Government Buries Evidence of Poor Access to Care under Obamacare



imagesThank providence for USA Today, which has given us yet another story describing how poor access to health care is under Obamacare.

People who fell for navigators’ sales pitches and signed up for Obamacare are discovering that it is junk insurance:

“The exchanges have become very much like Medicaid,” says Andrew Kleinman, a plastic surgeon and president of the Medical Society of the State of New York. “Physicians who are in solo practices have to be careful to not take too many patients reimbursed at lower rates or they’re not going to be in business very long.”

Kleinman says his members complain that reimbursement rates can be 50 percent lower than commercial plans.

“I definitely feel like a bad person who is leeching off the system when I call the doctors’ offices,” she says. Shawn Smith of Seymour, Ind., spent about five months trying to find a primary care doctor on the network who would take her with a new, subsidized silver-level ACA insurance plan.

Note: This person had a silver plan, not a bargain-basement bronze plan.

The Obama Administration, on the other hand, is doing whatever it can to avoid exposing these stories. When Obamacare was passed, its supporters made a big show about how the new law would force health insurers to be “transparent” about coverage. Transparency was even regulated!

At least, it was regulated—until now, when people might value some information about that which they are forced to buy for next year’s enrollment:

With health insurance marketplaces about to open for 2015 enrollment, the Obama administration has told insurance companies that it will delay requirements for them to disclose data on the number of people enrolled, the number of claims denied and the costs to consumers for specific services.

For months, insurers have been asking the administration if they had to comply with two sections of the Affordable Care Act that require “transparency in coverage.”

In a bulletin sent to insurers last week, the administration said, “We do not intend to enforce the transparency requirements until we provide further guidance.” (Robert Pear, The New York Times)

Well, I suppose that if people cannot get an appointment with a physician, it is pretty hard to disclose how much their treatment cost.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

Distorted Education Attack Ads Hide the Facts



SchoolPolitical campaigns across the country are heating up—thanks in no small part to all the hot air surrounding accusations about alleged “cuts” to education funding. As I explain in a recent USA Today column:

In North Carolina, Democratic Sen. Kay Hagan has been savaging her opponent, Republican N.C. House Speaker Thom Tillis, for allegedly cutting $500 million from the state’s education budget.

In the Wisconsin governor’s race, Republican Gov. Scott Walker is being attacked by challenger Mary Burke for allegedly engineering “the largest cuts to K-12 education funding in the history of our state.” In other races, the story is the same: more money is better; cuts (usually reductions in proposed increases) are seen as bad.

The reality is, average per-pupil funding nationwide exceeds $12,000, but only about 54 percent of that amount funds what’s broadly considered instruction. The rest goes toward administration, food service, capital projects, and debt.

What’s more, spending varies widely from state to state. Per-pupil funding ranges between less than $8,000 in Utah and Idaho, yet skyrockets past $28,000 per pupil in top-spender DC.

If the rationale behind the political ad campaigns were true, students in top spending states would outperform those in cellar-dweller spending states—but that’s not the case:

Moreover, according to the National Assessment of Educational Progress, average NAEP reading and math performance levels among low-income students (those who qualify for the national school lunch program) are virtually identical in the top- and bottom-spending states. In both cases they’re abysmal, with just one of five low-income students proficient in reading at both the fourth- and eighth-grade levels. In math, one in four low-income fourth-graders tests proficient (at both the highest and lowest spending levels), while even fewer eighth-graders are proficient—18% in the bottom-spending states, 20% in the top-spending states.

The question voters should be asking this election season isn’t which candidates promise to spend the most on education, but which ones will direct taxpayer funds to programs that actually improve student learning.

Parental choice programs empower parents to choose their children’s schools and have the best track records at improving student outcomes, including higher academic performance and graduation rates.

What’s more, because these programs cut out the hefty government middleman, they don’t have the biggest price tag, either.