Bastiat’s Bastions

Responding to McCain’s sole zinger line in the final debate, “If you wanted to run against George Bush, you should have run for president four years ago,” Obama compared McCain’s voting record with the White House position and pointed out that McCain voted with the Bush White House 90 percent of the time. Then Obama repeated that old line “And if it walks like a duck….”

In a now well-known interview, Obama’s running mate, Joe Biden, laughed off a question about Obama being a socialist. Well, there are very few admitted socialists elected to office in this country. And to my knowledge, only one avowed socialist elected to any national office in the last 30 years, Bernie Sanders from the state of Vermont (see this article in the New York Times Magazine from January 21, 2007 by Mark Leibovich). Sanders calls himself a social democrat but has officially run as an Independent over the years.

I started to wonder how close Obama’s voting record was to Senator Sanders, since the closeness of McCain’s vote turned him into George W. So I went to the website of the U.S. Senate and found the Senate roll call votes here. Both Obama and Sanders are freshmen Senators in the 110^th Congress, so it makes their voting records easy to compare.

In one crucial respect, their voting records are quite different. Senator Sanders missed only 6 out of 655 votes held in the Senate in the 110^th Congress, voting over 99% of the time. Obama, on the other hand, had voted only 36% of the time in 2008 and slightly less than 54% of the time in the 110^th Congress (2007 and 2008 combined). Of course, Obama ran for president and Sanders did not. Still, by August 3, 2007, Obama had already missed more votes in the U.S. Senate than Sanders had by October of this year. And there weren’t any primaries to run for before that August date.

After excluding the many votes that Obama did not cast and the few that Sanders could not cast, there were 348 votes where both voted. Of these 348 votes, Obama voted with Sanders 320 times, or 92% of the time.

Certainly, Obama’s redistribution policies and his proposed takeover of the U.S. health care system, his agreement (like McCain and Bush) to take over banks and help out the auto industry, his plan to take away the secret ballot from workers for union representation elections and his proposal to lift the minimum wage to one that compares to what the French have (which has led to widespread minority youth unemployment and riots there), all show that

Obama has the socialist walk and quack down pat.

With a voting record that matches the voting record of an avowed socialist, how can Obama deny being a socialist? Bernie Sanders doesn’t.

-MC

One of most viewed economics blogs is Steve Levitt’s Freakonomics New York Times blog.  Levitt is the primary author of the “bestselling” non-fiction book, Freakonomics.  Take a look at what Levitt’s colleagues, Doug Diamond and Anil Kashyap (all at the University of Chicago) have to say about what has gone on these last few weeks with bailouts and failures of financial institutions.

-MC

Last year, at this blog site I wrote about the terrible drought facing Atlanta and their trouble dealing with it.  And now, after facing two years of below average rainfall, Gov. Schwarzenegger has declared a drought in California. (And see this article on California’s problems, too.)

The availability of a sufficient supply of fresh water is getting to be a more frequent problem in the U.S. and in the rest of the world, and the problem is likely to be getting worse, not just because of global warming, though that may be a contributing factor, rather because of our institutions governing or perhaps, failing to govern the way we extract and use water from our aquifers, well water.

The financial gurus of New York and London are now seeing shortages of water as the major problem of this next century (as suggested in this article from the U.K.’s The Telegraph), as being more of a problem than rising food prices or rising energy costs.

Our energy troubles and rising food prices are making things even worse for our water prospects.  With more emphasis being placed on agriculture for “growing” energy, the water tables, our aquifers, will get tapped more and more as many farmers continue to tap into those aquifers, our main source of pristine water, for wells for irrigation rather than for human consumption as drinking water. 

Lord Stern in the Telegraph article was right that water from aquifers is not a renewable resource and that the problem is that we have never priced water, especially water from aquifers, well water, in a way that reflects its scarcity (by contrast, surface water is renewable through regular evaporation and condensation cycles).

Another problem with water from aquifers is that aquifers are an open-access common property resource. In legal terms, this is referred to as res nullius property rights.  Anyone can take water from aquifers and face no charge for the depletion of this resource.  As far as I know, no state charges those who deplete aquifers.  Such a charge, a depletion allowance, would be cause for farmers and others who mine our aquifers for one of our most crucial resources, water, to be careful of how they use it.  Since it is now almost free to the user, the way that sunlight is, those who mine it pay no attention to the future value of the water, because they cannot profit by that future value—if they don’t use it now, somebody else will.  Unlike sunlight, our aquifers are replenished at a such a slow rate that the replinishment rate is of little consequence relative to our use.  Of course, also unlike sunlight, our aquifers have been built up over centuries, but are being depleted rather rapidly. 

Farmers have more incentive to use underground water to irrigate fields, where much of the water evaporates, than to divert water from streams in canals or pipelines, relying on less pristine surface water.  Of course, cities and suburban residents also contribute to this depletion as well.  Some businesses, such as some electricity generating firms, are also contributing to this overuse of water.  The problem is not who is depleting it, but rather that we all refuse to face the real cost of using water from wells, rather treating it as free.  However, the more water we pump from our aquifers, the less will be available in the future.  Cities that rely on water wells will be in for a shock when they drill ever deeper and still can find no subsurface water.

This is the same problem that led to the over-hunting of the American Bison.  A hunter could not own the beast alive, but could own any bison he killed.  To the society as a whole, the bison were worth more alive, but to the individual hunter, they were only worth something dead.  Water left in the aquifer is worth more to society than water that is mostly allowed to evaporate in a field.  Farmers and otherw who use well water can only get value from the water they pump out of the ground rather than the water they keep in the ground.  Hence, water from our aquifers is being pumped out at alarming rates, mostly to evaporate into the air and fall as rain elsewhere.  We need to change the property rights concerning sub-surface water.

-MC

In this article from the New York Sun on the current demand and supply of food in the U.S., the author, Josh Gerstein, seems to miss the “whys” and the “hows” that supply and demand ever come into balance in the first place. As every college student who has taken an introductory economics course should know, shortages are short lived and self correcting when prices are allowed to adjust. The prices of commodities increase in response to increases in demand and decrease in response to increases in supply. The price of the commodity, when it is allowed flexibility, performs the function of rationing the good according to its scarcity.

The price of rice, wheat, corn, and any other agricultural commodity, and anything else, for that matter, reflects the scarcity of the good, and will increase in the face of shortages, both by choking off the amount buyers seek to buy and by providing an incentive to sellers to increase production at the same time. This makes shortages short lived or self correcting. Rationing by price is already ongoing and is nothing new, not as Gerstein puts it: ”Many parts of America, long considered the breadbasket of the world, are now confronting a once unthinkable phenomenon: food rationing.” In other words, if he were speaking of price rationing, he would not have suggested that rationing has never happened.

By food rationing, Gerstein could have only meant the sort of rationing we saw with gasoline or food and almost everything else was in WWII. What he fails to see is that any of these measures beyond price rationing, such as requiring coupons or limiting the amount that people can purchase, are both unnecessary and counterproductive. If the price is allowed to perform its natural function in a society, sellers, when they see that re-marking their prices is cost effective, raise their prices in the face of shortages and lines of buyers who can’t seem to get enough at the current price. Not only do these higher prices work to subdue consumers’ requests for “more, please,” but also brings to market any segment of previous harvests that speculators saw fit to hold back from the market. In addition, when farmers see these higher prices for their crops, they increase their efforts both by attempting to grow more per acre and by planting more acres. They become less willing to take home builders’ and mall developers’ offers for their land.

Prices are incentives to both the buyers and the sellers. When buyers and sellers are out of sync with one another, the prices they face bring them back into harmony. If prices are kept artificially low by some legal limit on prices, buyers will no longer conserve nor will producers to seek to be increase production. Rationing of the WWII variety or the odd-even days of gasoline rationing in the 70s will only come about if there is a persistent shortage.

Shortages persist under three basic conditions: first, when there is some sort of price cap is placed on the commodity, second, when those who decide the price do not profit from the sale of the commodity, and finally, when there is only a single buyer of the good or service, as there is with nurses. None of these is the case with food. Shortages will, however, occur in certain countries where prices of food are capped and in socialist countries where sellers of food do not profit from good business decisions. Rationing of food by anything but price in the U.S. is both unlikely and unnecessary.

Here is an article from the London Times-online, that gets it right.Some past blog posts on shortages here on Bastiat’s Bastions:

John Barleycorn DownUnder

Revenge of John Barleycorn

Bread and Circuses in Egypt

Water Shortages in Atlanta

Gasoline Rationing in Iran

Rationing in Zimbabwe

Chavez and Rationing

Chavez

–MC

Here is a comment I recently posted to a blog post by Don Boudreaux on his blog, Café Hayek.

Read Don’s Nov. 4^th post here.

Don,

Could it be that those who argued against the draft in the 1970s, many good economists, such as Bob Tollison and Roger Miller, were wrong in just not being thorough enough in their analysis? While they correctly noted that the draft was a more costly way to raise an army, they somewhat failed to note the public choice results of the change to an all-volunteer force. In Bob’s case, this means not making a point that he was making over and over again about the nature of public interest legislation. That point is that when benefits of some proposal are concentrated while the costs are spread out rather thinly and evenly, the legislation will see little opposition and is more likely to be passed. The opposite is, of course true as well, that when the costs are concentrated but the benefits are spread out thinly and evenly, the opposition will be tough and it will be difficult to carry. In a way, this is part of the problem that Anshu Sharma noted in his Nov. 4th post. When benefits are widespread, but low to most, people do not “feel” or perceive those benefits and do not favor them, so special interest legislation prevails over public interest or public goods legislation.

When we went from the draft, which unfairly concentrated the costs of war onto those who were being drafted, to a so-called volunteer force or more correctly, a professional force, or a mercenary force, we change it from one where the costs are less concentrated on the soldiers and are spread across all taxpayers, thus decreasing opposition to military involvement.

Still, to the extent that military involvement is defensive (and so, one of the few real public goods) and not mere imperialism, then at least the benefits to military activity are spread out as well, and here voters will be mostly unmotivated either for or against the military activity. In which case, national defense, a public good, will not suffer from this special interest bias against public goods.

So here I am having come full circle. Tollison, Miller and other economists in the 70s who fought against the draft made no errors of omission in doing so. Moving from a draft to a professional force removed the public choice bias against proposals that have costs that are concentrated on a few.

One other point should be made against Reinhardt’s characterization of our troops in Iraq mentioned by one of the other commentators. If Reinhardt thinks that troops now are cannon fodder, under a draft it would be worse. When troops are easy to replace by going back to the draft board and telling them to send more, current troops are not as well treated and are more likely to be thought of expendable. In the 25 or so years since the draft was ended, I cannot think of a single “they were expendable” case, as we had with Iwo Jima or D-Day. When we rely upon paid troops and must pay “compensating differentials” to attract troops, minimizing the human risk of war suddenly becomes more important.

Morris Coats