May 2004 Archives

is outrageous! No wonder companies are fleeing the state. Despite the deep economic problems that the wasteful spending habits or our CA legislature have gotten us into, our senators seem to think it's good use of their time to regulate and innovative service from one of California's most exciting and fastest growing companies. This will drive business out of the state and continue to damage our state economy.

I was stunned and depressed when I learned recently that for the first time, the majority of the money from California-based venture funds is being invested in companies OUTSIDE of California. California has one of the worst tax, regulatory, labor rules, and tort/legal environments in the country and it seems to be getting worse. And the legislature obviously just doesn't get it! How many businesses will have to follow HP and Intels lead by moving their teams and their expansion out of state and out of country before the politicians realize that we have a lot to lose by killing the golden gooses that drive growth and prosperity in this state.

If you don't like GMail, don't use it! Don't email to GMail addresses! But why should the CA legislature deprive us of the choice to use GMail, in the way Google built it, if we so decide? Let's be clear: this law deprives users of choice. It would prevent Google from producing a service that users could benefit from--if they choose!

I'm appalled.

Here’s an excerpt:

California senators in one house of the state's law-making body have backed Senator Figueroa's bill to limit what Google can do with the Gmail messages.

The bill aims to make Google scan messages in real time and ban it from producing records of what people are mailing each other about.

It would also bar the Californian company from collecting personal information from Gmail messages and selling it to other firms.

From a Pew study cited in this piece: Survey Finds Angst-Strained Wretches in the Fourth Estate (washingtonpost.com). "At national outlets, 34 percent describe themselves as liberal, 54 percent as moderate and 7 percent as conservative."

fool me twice, shame on me. From WSJ.com: Paul Ehrlich has never been right. Why does anyone still listen to him? Excerpt:

[Ehrlich] is a reverse Cassandra. In "The Illiad," the prophetess Cassandra makes true predictions and no one believes her; Mr. Ehrlich makes false predictions and they are widely believed. The gloomier he is and the faultier he proves to be as a prophet, the more honored he becomes, even in his own country.

Thanks to David Henderson for raising an issue that gets far too little attention: the problem isn't so much WHICH government (Democratic or Republican) can protect us but how well equiped government is to protect us in the first place. As we know from economics, and as David Henderson reminds us in this column entitled "Maybe Clarke and Rice Are Both Right," there are limits to central planning. I'm not suggesting that we scrap centrally planned national security, but we should be aware of its limitations and act accordingly. Here's an excerpt in which Henderson refers to Nobel economist Friedrich Hayek:

Central economic planning can't work, explained Hayek, because no small number of people at the top, however brilliant or informed, can aggregate all the trillions of pieces of data needed to plan an economy well. The main information that matters in real time is what Hayek called "knowledge of particular circumstances of time and place" and this information is necessarily decentralized: it exists only fleetingly in the minds of millions of people. Forbid people from acting on their information, argued Hayek, and the information won't be used. That, plus lack of incentives, is why crops rotted while waiting for railway cars and why the wrong sizes and types of steel were produced regularly in the Soviet economy. In a free-market economy, by contrast, people have both the incentive and the ability to use their information. For instance, the shipper who earns his living by using otherwise empty or half-filled journeys of tramp steamers is performing a useful function based on special fleeting knowledge not known to others.

Hayek's argument applies whether the good being produced is food, steel, or internal security.

Reading this passage by Steve Chapman referenced by Dan Drezner:

If Chicagoans loathe everything Wal-Mart represents, of course, they can easily defend themselves by declining to shop there. But the people in the neighborhoods where the stores are planned (one on the South Side and one on the West Side) bear an uncanny resemblance to other Americans in (a) their desire for a bargain and (b) their preference not to have to travel far to get it. The danger, from the standpoint of the critics, is not that Chicagoans will detest Wal-Mart but that they'll like it.

reminds me of Thomas Sowell's discussion of the different visions of "power" in his book "A Conflict of Visions." According to Sowell, adherents to the "unconstrained" and the "constrained" vision tend to view power very differently. In the first case, power is seen as the ability to influence, whether by coercion or persuasion—so I have "power" over you if I can convince you to buy from me by offering a better deal than the next guy. But those with the "constrained" vision view power in a fundamentally different way: it is the application of force, not simply offering a compelling choice. By offering you a better deal I haven’t eliminated options for you, only added them, so this is not "power" that we should be concerned with. Those with the constrained vision tend to be concerned more with process—and in the case of Wal-Mart offering better prices there is not force being exerted on consumers. Whereas those with the unconstrained vision tend to worry less about process and ore about outcomes: regardless of how they do it, Wal-Mart is influencing behavior (i.e. they sell tons of stuff!) and that is power. This is why when liberals and conservatives discuss the "power" of corporations, they often aren’t even talking about the same fundamental concept.

Who would have thought: Conservative Punk Magazine? Excerpt:

ConservativePunk.com will finally allow conservatives who have decided to keep their punk ideals alive a place to air their thoughts on government, liberal counterparts and music. It is being released this year to help inform America's youth about the upcoming election and let them make up their own minds, rather than push liberal sentiment down their throats. Nick Rizzuto, the founder of ConservativePunk.com hopes that this site will energize and excite young people to come to their own conclusions and hopefully register to vote this year. He hopes to inform young people of more conservative ideals and hopes that they will be unafraid to say that they are a "conservative punk".

Kurt Vonnegut splices together a string of cliches in this screed: Cold Turkey. IMO it is utterly lacking in perspective, but the rant undoubtedly speaks for many. Here's just one chestnut:

But I know now that there is not a chance in hell of America's becoming humane and reasonable. Because power corrupts us, and absolute power corrupts absolutely.

Allow markets to work, of course. John Cogan, Glenn Hummard, and Daniel Kessler review what the root problem is with our health-care trouble is and what solutions naturally follow in this piece in the WSJ. Excerpt:

Free markets are a proven way to discipline costs, encourage innovation and increase quality. The starting point to fixing the health-care system is recognizing that a handful of existing public policies prevent markets from working, and then changing them. Poorly conceived federal tax policies, insurance regulation, and barriers to entry, in particular, have insulated consumers from costs and inhibited competition.

Rising costs lie at the heart of the health-care problem. Each percentage-point rise in health-insurance costs increases the number of uninsured by 300,000 people. This also creates a vicious cost spiral because when healthy individuals opt out of insurance, the costs for the remaining insured rise. The recent increase in costs also has impacts beyond the health-care market. For many employees, rising insurance costs have become a serious drain on their disposable income. The typical worker now pays $750 more per year for insurance than just three years ago. ...

Using third parties to pay for health care is so pervasive that we accept it as a natural part of the health-care system. Yet there's nothing natural about it. Food and shelter are even more basic to our well-being, but we don't use insurance to buy bread or repair broken windows. ...

Leveling the playing field between employer-provided insurance and out-of-pocket payments is an essential step to fixing health care. Either the tax exemption for employer-provided health insurance must be repealed or a broad-based tax deduction for out-of-pocket expenses must be created. The former faces enormous political barriers (it would add about $1,500 to the typical family's annual tax burden) and would ignore a positive effect of encouraging everyone to have private insurance coverage.

I've been getting a lot of Google hits from people who seem to be looking for information on R2I (that is the letter "I") but are typing in the number "1" instead--and getting this site. R21 and R2I are totally different things--couldn't be more different actually, the former being a site dedicated to the cause of freedom the latter being an interrogation technique. For more on R2I, see this this piece in the Guardian Unlimited: UK forces taught torture methods.

Nice to see Terry Anderson paying homage to the late Julian Simon in both name and principle in this column in The Sun News. Anderson, who heads PERC, makes the case for how markets can lead to rapid environmental improvements--and reminds us that prosperity is the friend, not the enemy, of the environment in many ways. There is also a caution in here about sacrificing economic growth for the sake of envuironmental protection--the net effect may be more harmful than helpful. Excerpt:

Hansen ends on an optimistic note, saying "the [new technologies] required to halt climate change have come into being with remarkable rapidity." This statement would not have surprised economist Julian Simon. He saw the "ultimate resource" to be the human mind and thought it to be best motivated by market forces.

Because of a combination of market forces and technological innovations, we are not running out of natural resources. As a resource becomes more scarce, prices increase, thus encouraging development of less-expensive alternatives and technological innovations. Just as fossil fuel replaced scarce whale oil, its use will be reduced by new technology and alternative fuel sources.

Market forces also cause economic growth, which in turn leads to environmental improvements. Put simply, poor people are willing to sacrifice clean water and air for economic growth. But as their incomes rise above subsistence, "economic growth helps to undo the damage done in earlier years," said economist Bruce Yandle. "If economic growth is good for the environment, policies that stimulate growth ought to be good for the environment." ...

Global-warming policy analysts agree that greenhouse gas regulations such as those proposed at Kyoto would have negative effects on the economy. Therefore, as McCormick warns, we should take great care that regulations in the name of global warming "not kill the goose that lays the golden eggs."

An in depth report of bills passed by the CA legislature that are harmful to high-tech business in California, compiled by Cathy Baker and Sonia Arrison of the Pacific Research Institute. The executive summary:

The technology sector is an important part of California’s economy, creating jobs and innovative new products for the benefit of the entire state. The technology bust, lingering effects of the energy crisis, and general economic downturn have taken a toll on the industry in the last few years.

One would expect the California legislature to enact policies that aid recovery and growth. Instead, California has pursued a negative legislative environment for technology businesses, further exacerbating the industry’s downturn. One way to discourage poor policymaking is to encourage discussion of past mistakes and shed light on which actors in the legislature are most involved in making them.

This report examines the 10 worst bills affecting the technology sector that were introduced in the 2001-2002 legislative session. The bills were chosen on the level of impact they would have on the productivity of the technology sector from an economic perspective, and second, by how technology-specific they were.

And here are the "10 Bills Most Harmful To Technology Businesses in California:"

1. AB749: Workers’ Compensation
2. SB40: Unemployment Insurance
3. AB2845: Ergonomic Standards
4. SB1523: CRT (Cathode Ray Tube) Recycling Fees and Program
5. SB1661: Paid “Family” Leave Program
6. AB2065: Tax Omnibus
7. SB20: Displaced Janitors
8. AB2297: Online Privacy and Disclosure Act of 2002
9. AB2989: Mandated Severance Pay
10. SB147: Employee Monitoring

Niall Ferguson urges patience in Iraq. Excerpt:

In an important but under-reported speech in June 2003, the former leader of the British Liberal Democrat party, Paddy Ashdown, reflected on the "principles of peace-making" he had learned in his capacity as the international community's high representative in Bosnia and Herzegovina. His seventh point was: "[To] avoid setting deadlines, and settle in for the long haul. . . . Installing the software of a free and open society is a slow business. It cannot be done . . . in a year or so. . . . Peace-keeping needs to be measured not in months but decades. What we need here . . . is 'stick-to-it-iveness' . . . the political will, the unity of purpose, and the sheer stamina . . . to see the job through to lasting success. That means staying on, and sticking at it, long after the CNN effect has passed."

Very interesting difference of perception between Bush supporters and Kerry supporters (and conservatives and liberal) in this Rasmussen Reports survey that asks whether the US is fair and decent and a good role model, or not. Excerpt:

A Rasmussen Reports survey found that 64% of voters believe that American society is generally fair and decent. Additionally, 62% believe the world would be a better place if other countries became more like the United States.

However, while a solid majority views the nation in this way, there are significant differences of opinion among partisan, ideological, and political fault lines.

Among Bush voters, 83% say that American society is generally fair and decent. Just 7% say it is basically unfair and discriminatory.

While Bush voters are united behind this perception, Kerry voters are divided--46% say fair and decent while 37% say unfair and discriminatory.

Eighty-one percent (81%) of Bush voters also believe the world would be better if other nations were more like the United States. This view is shared by just 48% of Kerry voters.

From an ideological perspective, 74% of conservatives say the world would be better if other nations were more like ours. Just 15% of conservatives believe it would be worse.

However, among self-identified liberals, the numbers are 49% better and 37% worse. A plurality of those who say they are very liberal believe the world would be in worse shape if other nations were more like ours.

I got a chuckle out of this: The Machete' of Truth's Blog of Truth: Democrat vs. Republican Experts square off. The issue: The Minimum Wage.

Affleck, who earns millions per screen appearance, appeared alongside Massachusetts Senator Ted Kennedy to urge lawmakers to increase the federal minimum wage from its current five dollars and 15 cents per hour to seven dollars per hour....
...
Milton Friedman speaks out on this very important issue: "Minimum wage laws cost jobs. Employers cut out, or mechanise, jobs that are not worth the minimum rate to them. Worst affected are the inexperienced young people, those with poor skills, and minorities."
...
Wow, talk about a toss up...

Very moving. Excerpt:

The indictment of the West is that it is shamelessly materialist, soulless, obsessed with celebrity, entranced by superficiality, addicted to the spin of appearances, the cult of contemporaneity. Much of this is, of course, true. But it is only part of the truth. It is also true that another America and another West exists. An America that is now risking the lives of its youngest and brightest to protect others; an America that is spending billions to reconstruct a devastated country and is happy to do so through a barrage of hatred and resentment; an America where, beneath the glittering surface, real virtues - of sacrifice and honor and duty - actually do endure. "There is in Pat Tillman's example," senator John McCain said last week, "in his unexpected choice of duty to his country over the riches and other comforts of celebrity, and in his humility, such an inspiration to all of us to reclaim the essential public-spiritedness of Americans that many of us, in low moments, had worried was no longer our common distinguishing trait."

Can someone tell me exactly what the point of this fatuous piece by Gary Rivlin in The New York Times called "Google Goes Public? The Rich Get Richer" is? Thanks Gary for the sparkling insight that the Google IPO may in fact make some people "richer." The article is dripping with the implication, though never has the courage to actually say, that this is in fact not a good thing. Class warfare by headline, with a wink to those who want to stew in the fact that they are on the outside looking in. There they go again, those rich getting richer--what is to be done?

Since this article was totally devoid of any, I feel some perspective is needed. First, there are a lot more people getting richer from Google than the previously rich. In fact, while a relatively small number of wealthy people will increase their wealth by a small percentage (and a few will increase it by a huge percentage) many previously non-rich will now enter that category. In addition to the employees, investors, and partners who will benefit, communities and customers will also benefit. In fact, perhaps the greatest value from Google will not be directly from the company but from the productivity that a successful approach to organizing the Internet brings to countless enterprises around the world.

"Productivity" is not a sexy term to most folks, but it's productivity that prevents life in this world from being a zero-sum proposition. It's why the rich can get richer by not taking from the poor, but with the poor getting richer themselves. So let's remember, that the rich may be getting richer from Google, but the non-rich will undoubtedly, as a percentage of their means, become richer still.

So if the wealth creation will be far more extensive and far more meaningful for the non-rich than for the rich, what's the point of this article? Indulging envy, perhaps? There seems to be a large trade in that these days, especially in various political campaigns and the national media. But the problem is that inevitably when people explain away their own envy the bogeyman emerges: greed. How else to defeat the uncomfortable impulse that makes us envious of others’ success than by condemning the successful for being greedy? What are those rich people doing making even MORE money? Shouldn’t they be doing something useful?

And this gets to the point: while it's not politically correct to say it, it's good for all of us for the rich to get richer. We should want as a society for resources to be put to their highest use, and we are all better off when savvy investors effectively bet on risky ventures that create wealth. Let's say it again: we are not in a zero-sum game—the pie can get bigger. The uncomfortable reality is that many of the folks who are best able to evaluate smart risks are not poor and are not in the government. It may be more personally gratifying, and socially acceptable, for the rich to "give back" rather than invest, but this may not lead to the most productive outcome for society. Many investors lost a lot of money in recent years, let’s remember that the Google success was the result of folks risking wealth—the rich aren’t getting richer for free.

Finally, let me make a point that few realize: it was basically illegal for the non-rich to have invested in Google. Through a perverse, paternalistic rational the state "protects" the non-wealthy from making investments in private companies like Google, lest they do so imprudently. That’s right, many legal and regulatory hurdles have been constructed for your protection making it very difficult for private companies to let anyone other than "accredited" (i.e. rich) investors make these bets. While it is undoubtedly true that if the average Joe were able to invest in private companies then the average Joe would often get fleeced, but these rules that protect the irresponsible while inhibiting the responsible only nurture a society in which we get more of the former and fewer of the latter. The point it this: the very class warriors who make political hay out of "rich getting richer" rhetoric are the same ones who have made it virtually impossible for the non-rich to play in the same sandbox. So perhaps Mr. Rivlin could have stopped to ask the question why so many "rich" invested in Google -- it may have been more useful to have explored who was denied this opportunity than who may profit from it.