Tuesday, May 31, 2011

Kudos to Bob Hall


By way of Greg Mankiw and Tyler Cowen, I was referred to a wonderful 2009 essay by my colleague and flat tax collaborator Bob Hall, “Managing Your Career as an Economist After Tenure.”

Bob warns against alluring diversions from important work as an economist once tenure is attained.  These include writing textbooks, derivative articles of a seminal piece, writing too much of inferior quality, consulting, and government service.  “...you stand a good chance of permanent alteration from even a year or two in Washington.  Potomac fever is contagious and incurable.”

This advice is brave, courageous, and bold.  At Hoover and Stanford, Bob has no less than 10 economist colleagues who have spent considerable time in the federal government in Washington.

Friday, May 27, 2011

Confucius Analect of the Week, May 27, 2011


“The Master recognized four prohibitions:  Do not be swayed by personal opinion; recognize no inescapable necessity; do not be stubborn; do not be self-centered.”  (James R. Ware, Chapter IX, Verse 4)

The Master also wants to wish his American students a safe and happy Memorial Day.

Wednesday, May 25, 2011

Swiss Watches Are the New Growth Industry


Thoughtful Ideas spent last week in Central Europe attending a conference on global regulation and other events.

TI departed home from Zurich International Airport.  As might be expected, the airport’s duty free shops feature the full range of Swiss-brand watches, from the low-cost Swatch brand to top of the line luxury watches.  By far the largest selection is  Rolex watches ranging in price from $5,000 to $50,000.

Most of the customers at the Rolex counter were mainland Chinese.  TI knows sufficient Chinese to identify Chinese passports and understand basic Chinese conversation.  I observed a smiling Chinese gentleman admiring the watch he bought.

The Chinese middle class can afford to travel and buy luxury items in increasing numbers.  I fully expect the Rolex display to increase in size in coming years, and the same for ladies’ clothing and handbags.

Buying in Europe insures the purchase of the real thing, not a fake knockoff.  Returning from Europe with the real luxury item carries status in China.  Also, duty-free saves the VAT that that is paid on retail purchases inside China.

I will not be surprised to see want ads placed by Swiss companies for skilled watchmakers to meet the growing demand from Chinese travelers.

Tuesday, May 24, 2011

Mao Zedong Was a Generation Too Soon


In early summer 1957, Mao Zedong, chairman of the Chinese Communist Party, launched a famous campaign: “Let a hundred flowers blossom and a hundred schools of thought contend.”  Mao’s objective was to advance progress in the arts and sciences.  Instead the campaign produced an outburst of criticism against the Chinese Communist Party and its policies.  Mao ordered a crackdown bringing the campaign to a quick close.

If only Twitter, Facebook, and social media had existed in 1957.  Today the blogosphere is replete with hundreds of flowers blossoming and hundreds of schools of thought contending across a broad range of topics.  Efforts to constrain schools of thought typically fail.  Millions are free to speak their minds in plain language, or coded language if necessary.  Monopolies and oligopolies of thought are giving way to real diversity of thought.  Viva la revolution!

Monday, May 23, 2011

Coping With Islamic Extremists

There are several Muslim groups that oppose, sometimes violently, predominantly Western Christian countries and Israel.  They include Al-Qaeda, Taliban, Hamas, Hezbollah, Abu Sayyaf, Wahhabi, Salafi, Islamic Jihad, and Muslim Brotherhood.

Which, if any, can be persuaded to recognize Israel and accommodate the U.S.?  With Usama bin Laden out of the way, can the Taliban be induced to give up their violent ways and become peaceful participants in a democratic Afghanistan?  Or, was the Taliban revenge attack that killed 80 police recruits in Pakistan proof to the contrary?

Can one or more of these groups be bought off with cash and diplomatic gestures?  Does the U.S. have a coherent policy in dealing with the threats from radical Islam?   Or, will the U.S. continue to respond in what looks like an ad hoc manner, trying to take out Qaddafi but politely asking Syria’s Assad to show restraint, and the leaders of Yemen and Bahrain to undertake political reforms.  "Oh what a tangled web we weave..."

Friday, May 20, 2011

Confucius Analect of the Week, May 20, 2011

“Because of his lies Duke Wen of Chin must be considered less than upright.  Because of his uprightness Duke Huan of Ch’i did not lie.”  (James R. Ware, Chapter 14, Verse 15)

Are there ten politicians in America who match the uprightness of Duke Huan of Ch’i?  Remember what Mara Liasson of the Fox News All-Stars said on television about a politician some time back: “Lying is a benign accusation.”

Thursday, May 19, 2011

Why President Obama is Likely to Win Reelection


President Bill Clinton, in my opinion, was the greatest talker in Western civilization since Pericles.  He ate Republican opponents for breakfast, and still had the rest of each day to pursue his agenda.

Great as were Clinton’s oratorical skills, Obama’s are even better.  His gift of gab is so electric and compelling that he can probably persuade enough voters to give him the 270 electoral votes he will need for a second term, even if the economy remains weak and gasoline prices remain high.

A variation on one of Lincoln’s quotes is applicable:  you only need to persuade a majority of the electorate to vote for you a second time.  That he should be able to accomplish.

Would it be so bad to have Republicans control the House and Senate and Obama the White House.  Gridlock worked pretty good during 1995-2000.

Wednesday, May 18, 2011

"On Liberty"

In 1859 John Stuart Mill published “On Liberty,” one of his defining essays.  Here is a sample of lines that merit serious consideration.

The tyranny of the majority “practices a social tyranny more formidable than many kinds of political oppression.”  The Six Great Humanistic Essays of John Stuart Mill (New York:  Washington Press Square, 1963, p. 130)

“...the tyranny of the prevailing opinion and feelings...prevent the formation of any individuality not in harmony with its ways...”  (130-31)

“...there is also in the world an increasing inclination to stretch unduly the powers of society over the individual, both by the force of opinion and even by that of legislation:...”   (139)

“We have now recognized the necessity to the mental well-being of mankind...of freedom of opinion and freedom of the expression of opinion...”  (176)

“The despotism of custom is everywhere the standing hindrance to human advancement...”  (194)

Are these statements compatible with political correctness?

Tuesday, May 17, 2011

Egypt Spring.....To Be Followed by Egypt Winter?

The euphoria over Egypt’s “spring democratic revolution” may have been a bit premature.

Several troubling trends have emerged.  Muslim partaies are organizing for an electoral majority in September’s parliamentary elections.  If successful, they promise to impose Sharia Law.

Several presidential candidates are campaigning on a platform to reset relations with Israel.  What that could bring is cutoff of natural gas exports to Israel, renegotiating the Egypt-Israel peace treaty, and closer relations with Iran, to name a few.

Muslims are burning Coptic Christian churches and provoking religious conflict.  Christians may have to leave Egypt, as has about half of Iraqi Christians since the U.S. invasion in 2003.

And it’s only the middle of May.

Are these the objectives of U.S. foreign policy?  Just asking...

Monday, May 16, 2011

Illegal Immigrants Do Work Americans Won’t Do


Proponents of “comprehensive immigration reform,” a combination of stronger border control measures and a path to citizenship for those already here who may have entered illegally, argue that those already here and even more immigrants will be needed in the future to do the jobs lawful resident Americans won’t do.

Jobs Americans won’t do with unemployment at 9%, combined unemployment and underemployment over 16%, and several percent of the population having dropped out of the labor force no longer looking for work taking the total close to 20%.  Huh?

What if every year hundreds of thousands in the resident population decide to stop doing the jobs they formerly did because they don’t want to do them anymore?   Should we say “fine,’” and call for more low-wage immigrants to do that work?  And, by the way, widen the income gap between the well-to-do and the poor?  Is there any limit to this behavior?

Friday, May 13, 2011

Confucius Analect of the Week, May 13, 2011

Having read that 47% of the population of Detroit is “functionally illiterate,” Confucius is beside himself with despair.

How, he wants to know, is America going to win the future, to compete successfully with China, if nearly half the population of a major American city is functionally illiterate?  Not much point in offering Detroit another analect on the benefits of learning, is there?

Or, is “win the future” just political rhetoric?

Tuesday, May 10, 2011

Stanford Economics Major Becomes Successful Digital Entrepreneur

The Washington Post ran a weekend feature story on a thin pretty brunette who majored in economics at Stanford (class of 1994), and who recently discovered the magical, profitable, golden world of self-published e-books.  The lengthy article, with photos, explains her explosive growth in sales and revenue when she augmented her traditional print books with self-published, self-promoted e-books.

The young lady, with a husband, two children, and a home in the Sonoma California foothills, is Nyree Belleville, with three noms de plume: Bella Andre (for adult readers), Lucy Kevin (for tweens, teens, and young adults), and Bella Riley (for all ages).

By way of disclosure, her maiden name was Rabushka, and I am the proud father.

Monday, May 9, 2011

Scottish Nationalism Surges

Since the first election of members to a Scottish Parliament in 1999 (following the 1998 Scotland Act), Alex Salmon’s Scottish National Party (SNP) won an absolute majority of 69 of 129 seats on May 5, 2011.  He now has the votes to propose a Scottish independence referendum, an aim in the SNP’s policy platform.  Here’s hoping.

Why?

If Scots vote for and attain independence, it will be important for party leaders to establish policies that encourage firms and individuals to invest and do business in Scotland.  A quick way is to follow the examples of Central and Eastern Europe by enacting a low flat tax on individuals and corporations.

Continuing with the dream, a flat tax breakthrough in Scotland would open the door to other Western European countries taking steps to remain competitive, hopefully moving away from the tradition of steeply graduated high taxes to a low flat tax environment.

By way of disclosure, I have numerous in-law aunts, uncles, and cousins scattered throughout Scotland.

Friday, May 6, 2011

Confucius Analect of the Week, May 6, 2011

Confucius was in Lexington, Kentucky, getting ready for the Kentucky Derby.  As was his wont, he offered an analect for the occasion.

“When his stable was burned the Master returned home from the palace and inquired, ‘Was anyone injured?’  He did not ask about the horses.”  (James R. Ware, Chapter X, Verse 11)

Upon hearing his analect, Derby officials promptly escorted Confucius out of town.  Evidently Confucius did not understand the market value of Derby racehorses.

Confucius wants to wish all you moms out there “Happy Mother’s Day.”

Thursday, May 5, 2011

What Are Our Values?

With the passing of Osama bin Laden, the chattering classes on cable television, talk radio, and the new and old media have renewed their discussion on “what are our values.”  Going forward, should the U.S. engage in torture (even if torture provided the information to find bin Laden), wiretaps, preventive wars (Iraq invasion), killing foreign leaders and their family members (bin Laden and Qaddafi), and other aggressive actions?

The debate is really about the contents of one word: “our.”

Take the Hoover Institution.  Over the years it has developed a reputation as a home for conservative scholars and former government officials.  I and several of my colleagues disagree with members of the recognized Hoover foreign policy community.  Speaking for myself, I favor prompt full withdrawal from Iraq and Pakistan; they cost too much for a country borrowing 40% of its annual federal government spending. I oppose intervention in Libya and Syria.  Let the contending parties fight it out and limit U.S. measures to consequential direct threats to Americans and American vital interests.  I oppose trying to teach democracy to Middle East countries.  In the past few days (May 4-5, 2011), several dozen Iraqis have been killed and over a hundred wounded in suicide attacks, despite eight years of American occupation.

On domestic economic, social, and cultural matters, there is considerable variety of opinion within Hoover.  There is no consensus on a flat tax, a balanced budget amendment, pro-choice or pro-life, pro- or anti-climate change measures (or even if it exists), and other issues.

This post cites Hoover as just one an example of conflicting views and values on foreign and domestic policies and values.  Similar differences pervade think tanks, universities, talk radio hosts, and cable television programs.

So what exactly is “our?”  In the last analysis, “our” is rhetoric, whatever list of values an individual asserts to support his specific policy views and choices.  "Our" is Rousseau's "general will," the will of all, in modern parlance.  Or, I should say, the denial of diversity of opinion.  Unless, that is, diversity is our values, in which case there can be no consensus on a specific set of values.

Tuesday, May 3, 2011

Oh Canada!!!

On May 2, 2011, Conservative Prime Minister Stephen Harper’s party won an absolute majority, 164 out of 308 seats, in Canada’s House of Commons after governing as a minority during the past five years.  This is a remarkable turnaround from the 1993 election when the Progressive Conservative Party won only 2 (yes, 2) seats, a staggering defeat from 169 seats in 1988.  The Progressive Conservative Party was more progressive than conservative (a.k.a. “compassionate conservatism”).  Harper’s return to real conservatism has transformed Canada’s political and economic landscape.

Harper comes from Alberta, the province in Canada with a low, flat, provincial income tax.  The Conservatives are strong in the Western provinces and Ontario.  Harper plans to reduce the current 16.5% corporate tax rate to 15%.

Perhaps Harper could loan the Republican Party some of his advisers to help with tax reform and other real "conservative" policies.

Monday, May 2, 2011

Observe Faculty Deeds, Not Words

Every morning the BBW (Brilliant Beautiful Wife) and I complete the same two-mile walk around the neighborhood (limited to Stanford faculty and high administrative staff).  The largest segment is twice around a condominium development of 180 units.  Each owner has a garage and an additional space in nearby parking areas.  Most use the garage for storage.

This morning I counted 115 vehicles, sedans, SUVs, CRVs, station wagons, light trucks, and sports cars parked in the spaces near the condos.  Eight were GM, Chrysler, and Ford, made by union labor in Detroit or another U.S. plant.  The remaining 107 vehicles were largely Japanese (Honda, Toyota, Subaru, Nissan) and German (VW, Mercedes, BMW).  Many were likely made in non-union southern American plants.

Stanford resident voting results are concentrated in several precincts that are published after an election.  Typically 75-80% vote for Democrat candidates.  Democrats claim to be the party of union, working, middle-class households.  Detroit auto workers are among the leading union supporters and beneficiaries of Democrat politicians.

It seems that Stanford faculty and staff prefer non-union Japanese and German vehicles.