Eleutherian

I apologize for the long hiatus since my last post. I've had this story on my desk for weeks, but the sheer brilliance of it finally brought me back to this blog.

New York City's first completely non-smoking apartment building will soon open at 1510 Lexington Avenue. Residents will be prohibited from smoking both inside and within the immediate outside perimeter of the building.

This story might upset a lot of people - after all, the building is banning a legal activity. However, allow me to explain my positive excitement over this news.

The government did not have a finger in this decision. This is not a public housing project. Rather, this is a private, family-owned apartment building that saw unmet market demand for smoke-free housing. CBS New York reported:

And even with a surplus of apartments on the market, Kenbar [Management] feels theirs will be in demand. Backing that up was a Zogby poll in July, which found that 58 percent of New Yorkers would be willing to pay more for a smoke-free home.

If you want to be free to smoke in your apartment - fine, live someplace else.

All levels of government can learn a valuable lesson from this story. There is no need to force private businesses to ban smoking in their establishments. If a market for smoke-free establishments exist, the private sector will respond to it. The government will cause more harm than good by intervening in these matters that lie outside its proper scope.

For example, Ireland's smoking ban in pubs has been highly lauded around the world. However, it is not as widely known that in the first year of the smoking ban, over 100 pubs went out of business. According to Stephen Kelly, chief executive of the Federation of Retail Licensed Trade:

The much-promoted view that non-smokers would be rushing to premises has not materialised. We expect another 100 to close next year.

If non-smokers want to spend their money only at smoke-free establishments, the private market will react far more appropriately than the government in taking actions to accept their money. Government intervention is tailored to only meet the needs of the majority (or, more specifically, the majority of the electorate). The private market, on the other hand, meets the needs of every individual - an incomprehensible concept to supporters of big government.

Child labor is a sensitive subject for many people around the world. However, this must not discourage objective analysis of the practice. A simple search for "benefits of child labor" turns up very little relevant information. Due to the sensitive nature, I recognize that not everyone will appreciate this post, but I hope you can appreciate the spirit in which it is written - the spirit of reason over emotion.

I want to remove your cultural blinders with regard to child labor. In most of the more developed countries of the world, child labor is seen as a dark memory from the past, virtually inexistent in these countries today. However, stating the obvious, not all countries developed at the same rate. Many countries are significantly less developed, and as such, child labor practices are still common.

Before going further, I feel obligated to draw a distinction between forced and unforced child labor. Forced child labor includes any form or slavery or indentured servitude, including prostitution. While adult prostitution is a legitimate enterprise, children are not mindful beings with regard to sex.

Unforced child labor includes agricultural and factory work, barring the previously stated distinctions. These children are free to work or not to work. No one is forcing them to hold these jobs. This is unforced child labor, and it should not be condemned by people not living in the given country.

Growing up in the United States, I was only eligible for one kind of job at the age of thirteen - agricultural work (with strict limitations on the number of hours and the times of day I could work). No one forced me to work. I wanted to work. However, the International Labour Organization would still have classified me as a child laborer - and therefore, someone needing rescued. I did not need rescuing and neither do many of these children who want to earn a little extra money to help their families - or simply to stay alive.

In some countries, there are more orphans than orphanage capacity. These children must not only sustain themselves but also any siblings they may have. Why should they not be allowed to earn income? Why do foreign governments pressure these countries to prevent these children from earning an honest living?

Before factory jobs were available in these countries, many children simply died. These "sweatshops" pay wages significantly lower than the wages in more developed countries, and sometimes significantly lower than wages after you factor for purchasing power parity. However, they are still better than other job alternatives.

I have seen the jobs and working conditions of children in non-factory jobs in several lesser developed countries. Instead of hauling large amounts of recyclables or firewood over long distances, these children could be sitting in a factory making textiles, AND earning higher wages. Why should we deny them this luxury?

I am stating the obvious to say that child labor creates a trade-off between labor and education. However, if your choices are death and education, would you really choose education? Education is a goal many families in lesser developed countries hope to attain for their children. Studies show, and I have seen with my own eyes, that when these families receive any surplus income at all (after paying for their basic necessities), any children who were working are sent back to school instead.

Child labor is an unfortunate practice that prevents children from receiving a proper education. However, it is also a godsend to many children and families who would otherwise not earn enough money to survive. Allow these lesser developed countries the chance to improve their situations themselves rather than pressuring them to adopt our customs, which evolved only after achieving a more advanced state of development.

Due to an increased work schedule and the necessity of studying for the GRE and foreign languages, I will be posting less frequently. However, in place of short, daily posts, I will post longer, more detailed analysis of current events and various policy issues. I hope you continue to follow.

China holds a lot of U.S. dollars. They essentially fund our continued deficit spending. We hear many reasons as to why they continue to hold and acquire more U.S. currency. We hear almost as many reasons why this is a dangerous situation. Unlike many of these supposed explanations, this analysis is not meant to scare you.

The reason China continues to acquire more and more U.S. dollar assets is because their economy has failed to evolve from the export-driven model that has raised them to where they are today. In order to sell goods in the United States, Chinese companies (or the government) must be willing to accept U.S. dollars as payment. Since China exports a greater monetary value of goods to America than it imports from the U.S., China is left holding excess quantities of dollars (and large quantities at that).

The U.S. government only sees that we import more than we export - and fools themselves into thinking this is a problem. The government has correctly identified one reason for this trade imbalance: China's fixed exchange rate. However, it is mistaken in its attempts to change this.

China manipulates its currency more than most countries. For years, the U.S. government has pressured China to relax its control over the currency (while increasing control over its own currency with each passing year). This is not a healthy solution to the "problem." Because China manipulates its currency, China essentially is forced to extend the United States an unlimited line of credit. China's strictly controlled exchange rate only hurts China.

As for what China does with their dollar reserves - they invest it - and often in (or with) American enterprises at that! In 2008, Chinese state-owned enterprises invested $35.7 billion overseas, including the $14 billion purchase with U.S.-based Alcoa of a 12 percent stake in Anglo-Australian miner Rio Tinto Ltd.

If the U.S. government doesn't shoot itself in the foot by either pressuring China or prevent Chinese companies from investing in the U.S. (which almost always strikes me as absurd), we'll find that China's dollar reserves will eventually make their way back.

Of course, lowering our tax rates will do a great deal toward expediting this process (and have the pleasant effect of decreasing the use of overseas tax havens).

Dwight Filley begins Risk Homeostasis and the Futility of Protecting People from Themselves by stating:

There is a growing body of evidence...that points to the surprising conclusion that most coercive measures intended to increase safety either have no effect or an opposite effect. Thus for example, when the government mandates the use of automobile seat belts, fatality rates do not decrease as expected. This counter-intuitive result is consistent across a broad range of governmental attempts to protect people from themselves.

I firmly support the risk homeostasis theory, and in reading on it lately, I just as strongly believe it applies to the environment. Particularly, environmental homeostasis applies to government mandated fuel economy standards.

Here's a story that may sound familiar. An environmentally conscious person who normally takes mass transportation to work every day buys a Prius (or another highly fuel efficient vehicle). The government may have even influenced the decision by providing an economic subsidy. Now, this person feels better about driving to work over taking mass transit.

Yes, the vehicle travels many miles for every gallon of fuel. However, the mass transportation system is still running. Every efficient gallon of literal fuel adds figurative fuel to the problem. This environmentally conscious person became comfortable in the thought of driving a vehicle with admirably-high fuel efficiency, forgetting the reason why mass transportation was the favored option all those previous years.

When the government manipulates the market, more harm occurs to the environment than would otherwise result from individuals making decisions according to their own free will (i.e. free from coercion). Forcing the automobile industry to increase fuel efficiency standards or providing economic subsidies to individuals who purchase more fuel efficient vehicles distorts the market and changes behavior. Ironically, the government's fuel efficient mandates and market manipulations will lead to increased subsidies for government-run public transportation systems, further hurting taxpayers, the economy, and the environment.

I try not to repost often on this blog, but Greg Mankiw posted a couple gems on judging economic downturns. I will try to condense the two posts:

• Judging Downturns
• Judging Downturns II

The question: Does comparing the decline in real GDP provide the best comparison of recessions?

According to this method, the current recession is the worst since the Great Depression. However, Mankiw is quick to point out:

Note that the phrase the worst since the Great Depression may inadvertently lead the reader to think that we are somehow getting close to the Great Depression in severity. As the chart shows, that is not at all the case.

One might wonder why the unemployment rate was higher in the 1982 downturn if that recession had a smaller decline in GDP. Part of the answer is that the 1982 recession followed closely after the 1980 recession, from which the economy had not fully recovered when the next downturn began.

This second paragraph implies that the 1982 recession may have been more severe than this method indicates. By this logic, the more comparable (using this method) 1957 recession was likely more severe, too (following the 1953 recession so closely).

An economist at an unnamed financial firm responded to the first post, and Mankiw reposted his analysis. The anonymous contributor begins by stating:

I prefer the unemployment rate for historical analysis. In olden days, it was likely better measured than real GDP. And before 1947, there is no quarterly real GDP.

He provided the following chart, depicting the difference between the civilian unemployment rate and the natural rate of unemployment as defined by the CBO.
This method places the current recession at just about the severity of the 1982 recession. As the current unemployment rate will likely continue to increase, it is rather safe to assume this recession will surpass it. However, we must take care to remember Mankiw's words regarding the proximity of the 1982 recession to the 1980 recession.

The contributor continues:

Another way to gauge the slack is to focus on a single demographc. Let's take married men, spouse present. They are the most stable segment of the labor forcce [sic], and here is their unemployment rate:

It has been terrible this time, but not as bad as the early-1980s. Why this time seems worse is the unemployment rate for teenagers is a record high. I think we should give some blame to 3 consecutive annual hikes in the minimum wage.

I have previously posted on the effect of the latest minimum wage increase.

I encourage you to read the full posts, especially the contributor's analysis in the second link.

The Local, an English-language Swedish news site, reported that the Swedish Film Institute gave 500,000 kronor ($69,000) in taxpayer money to fund a feminist pornographic movie:

Engberg has also tried to make feminist porn before, which has resulted in a lesbian porn film and a film of women's' [sic] facial expressions at the point of orgasm. Her vision is to get make [sic] the porn industry more appealing to women, all in the name of feminism. She also claims that women's sexuality is more multi-faceted than men's.

But to argue that girls having sex with girls and women masturbating is somehow a good alternative to mainstream porn feels like a completely alien concept to me, and to many other women. Furthermore, most people would agree that the state should not fund pornography. And when it does, should it really only benefit women, all in the name of equality? If a man had sought and received similar funding for ‘regular’ porn, it wouldn’t have taken long before there was an outcry from supporters of equality between the sexes.

I am glad the author of this article acknowledges that the government should not fund pornography and should not fund initiatives that only benefit certain groups in the name of equality. These are positive developments that demonstrate why Sweden is shifting away from its socialist tendencies at a time when other countries (e.g. the United States) are regressing.

However, the author passed on the opportunity to take this line of thought a step further by stating that the government should not be in the business of funding movies in general (pornographic or not). After all, the classic Swedish Film The Seventh Seal didn't receive public funds.