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May 2013

Want to know why CEOs make so much money?

Last Thursday after the market closed Proctor & Gamble replaced its CEO. It was a surprise. On Friday P&G stock rose $3.18/share (4.04%) while the S&P was nearly unchanged. And there wasn't, apprently, any other significant news about P&G. So that means the market's estimate--it doesn't have to be right, but economists think it's a pretty good guess--is that the new CEO's worth to P&G is $3.18/share times 2.74 billion shares outstanding, about 8.71 billion dollars.

If that estimate is correct, a few million dollars a year, or even a few tens of millions of dollars a year, is chicken feed.

"What happens when you try to give away money?"

You usually get a waste of scarce resources, aka "rent seeking".  This simple fact is a stake through the heart of the Liberal enterprise. 

Helpful readings:

"Rent-Seek and You Will Find". Further exposition from Professor Munger.

Two notable examples among many that could be offered: "California cities, counties find funds to hire Capitol lobbyists" and "Get Rich or Deny Trying: How to Make Millions Off Obama".

Just because it's so broad in scope: Seth Roberts's "Rent-Seeking Experts".

Just because it's so right: Michael Marlow's The Myth of Fair and Efficient Government: Why the Government You Want is Not the One You Get". (Link goes to Google Books where you can read the Preface and Chapter One.)

Finally, "Why 'Rent-Seeking'?" Explains the importance of this idea to Public Choice economics, and proposes a less nerdy, more descriptive substitute term: "privilege seeking".

Libertarians can raise all kinds of objections to government intervention and its associated rent-seeking, but for non-libertarians, the use of the language of privilege might be especially helpful in tapping into their belief in equality — a belief that libertarians should share since it is a part of the liberal tradition. Whatever one’s view of the market, if one thinks people should be equal before the law, then one should object to government privileges. Whenever we talk to the general public, we should avoid the use of “rent-seeking” and use “privilege-seeking” instead. Not only is it less confusing, it names the problem for what it is and suggests that an important feature of the libertarian world is the absence of such privilege.

And privilege seeking brings us to a serious problem thought to be a failure of markets but which is equally, or more so, a failure of government: crony capitalism. Crony capitalism is the pursuit by business of government favors and privileges and is possible only if government has favors and privileges to give. The Left--the Occupy movement--and the Right--the Tea Party--agree it's bad: bipartisanship at last! But they differ in the solution. I'd agree with those who advocate restricting government power.

Continue reading ""What happens when you try to give away money?"" »

In Praise of Paranoia

This is so, so right. Bet on Madison and give the points. 

To listen to the amateur philosophizing of Obama and Blow is to be unhappily reminded of a 1767 essay, “On Public Happiness,” in which that execrable Frenchman Jean-Jacques Rousseau argues terrifyingly that one should “give man to the State or leave him entirely to himself.” This dichotomy — pristine solitude or total immersion in the State — is both false and dangerous. Yet Obama shows a particular fondness for it. The government cannot become tyrannical, it essentially holds, because, as Obama seems never to tire of intoning, the government is us. How many times has he insinuated that those who issue warnings about government are “anarchists”?

James Madison, writing as “Publius” in Federalist No. 47, insisted that it didn’t matter whether tyranny was “hereditary, self-appointed or elective,” because tyranny was tyranny. Who cares whether l’état, c’est moi or l’état c’est nous? “Even under the best forms of government,” Jefferson recognized, “those entrusted with power have, in time, and by slow operations, perverted it into tyranny.” Alas, in the age of universal suffrage, this truth has been lost on many. In response, we might insist more loudly that democratization does not necessarily equal government virtue and recall that the Bill of Rights effectively presumes that government is guilty, holding as it does that government may not intrude in certain areas of life however good it claims to be, and that the people may not be asked to relinquish their ultimate checks on power however secure they feel themselves to be. This is nothing short of codified paranoia, and America is better off for it.

Some people just don't get it

And, sadly, they probably never will.

Case in point: "Everybody's Moving to Texas for Some Reason".

According to new Census Bureau data released today, Texas is home to eight of the 15 fastest-growing cities in America over the past year. Percentage-wise, nowhere in America grew as fast as San Marcos, Texas. Also among the nation's ten fastest growing cities: Midland, Texas; Cedar Park, Texas; Georgetown, Texas; and Conroe, Texas.

What is it that makes Texas so attractive? 

Life is different in the U.K.

Take soccer for example:

At St. James’ Park, the Newcastle stadium, the menu in the away-fans’ snack area consisted of one type of entree — meat pies in various flavors — and eight types of alcoholic beverage. “Three-course meal: 7.80 pounds!” advertised a sign. Course one: meat pie. Course two: flavored vodka drink. Course three: Twix bar.

At the Aston Villa game in Birmingham, Steve James, 47, took time out from chanting obscene remarks at the visiting Chelsea players to observe that because the game started early in the afternoon, the fans had had less drinking time than they might have liked.

Take himself.

“I have only had 11 beers so far,” he said. “I met my mates at a bar at 8 in the morning and had a bacon and egg sandwich and four pints of cider,” cider being an alcoholic drink here. “On the train, I had a few more. Then I had six in a bar when I got here, and a couple at halftime.”

Except for his addition problems, James did not seem drunk at all. “I don’t like to be uncontrollable or not know what I’m doing,” he said. “I have my limit.”

What is that?

“I have no idea,” he said.