Dave Friedman's Soul of Wit

Disinfectant

Disinfectant.

Via Coyote Blog.

Brandeis if you don't get the reference.

Environmental Law

Jonathan Adler explains why he specializes in environmental law, despite not being a liberal:

My primary answer is that I find environmental law very challenging and rewarding because of the nature of the trade-offs involved. On the one hand, environmental law concerns our efforts to protect human health and the world around us. Failure to provide for environmental protection can leave the world a less safe, less vibrant, and less beautiful place. On the other hand, because environmental concerns are ubiquitous, environmental law itself can pose a serious threat to individual liberty. Today, environmental protection is probably the only intellectually respectable basis for urging policies that amount to central planning. As I see it, the stakes are enormous on both sides, making this a challenging and important field, and one that is worth far more serious attention from those who generally prefer limited government.

To which my response is: The Skeptical Environmentalist.

Hedge Funds and the SEC

If you were skilled enough to understand hedge funds' trading strategies, why would you work for the SEC?

Therein lies the obvious question that arises in light of the SEC's attempts to regulate the hedge fund business.

The theory is that by opening up funds' books to regulators, regulators can spot trouble before it starts, and the financial markets (and, by implication, investors) can avoid the blow-ups that occasionally occur, such as happened with Long Term Capital Management.

But being able to divine risks in complex trading strategies requires, well, a large degree of quantitative skill and market knowledge. One would think that those who have the requisite math skills would rather be earning money than playing market regulator.

Now, one can debate the merits of hedge funds, and one can even contemplate the idea that government ought to ban them outright. But arguing that hedge funds ought to open their books to regulators so that regulators can spot trouble before it starts implies that, were Long Term Capital's books open, regulators could have spotted trouble where Nobel laureates could not.

That is simply absurd.

UPDATE: The Wall St. Journal's Jesse Eisinger writes of such regulation:

Another benefit is that a hedge-fund census would give the SEC improved perspective. Hedge funds are diverse entities, engaged in sophisticated strategies. It is clearly to the rest of the market's benefit if the chief market regulator knows generally who and what is out there to better anticipate potential problem areas and crises.

What hedge funds should realize is that registration is good for them. The industry is attacked for being secretive, under-regulated and engaged in risky behavior. The reality is much more benign, especially since most hedge funds take fewer risks than typical, long-only mutual funds. Their name derives from the fact that they hedge their bets -- often by betting on declines in stocks and indexes by selling them short -- to avoid volatility. Registration would make hedge funds loom less ominously in the public consciousness.

I responded, via email:

Seems to me that most of the people who argue for hedge fund registration do so on the basis of the idea that the SEC would be able to spot trouble where hedge fund managers cannot.

This presupposes that poorly paid, ill-educated SEC bureaucrats will be able to divine portents of trouble in complex trading strategies where Nobel Laureates (i.e., Long Term Capital Management) cannot.

I'm dubious about that proposition, to say the least.

One can argue against hedge funds, and claim that government should ban them outright (an argument I don't support) and one can argue that they should be free of regulatory oversight (caveat emptor, essentially). But to argue that hedge funds should have to register, so that their trading strategies can be monitored, lest another Long Term Capital Management creep up is to assert that bureaucrats are prepared to make intelligent decisions on trading strategies that fewer thna 1% of Americans can discern. The idea that bureaucrats can react in real time to anything, especially something as complex and fast-paced as trading strategies, is to imbue bureaucrats with an alacrity and intelligence utterly missing from their job description.

I don't see how hedge fund registration will do anything but create more paperwork for more people and waste yet more tax money.

Retirement

Well, it looks like Americans, who can't be trusted to manage their own finances if the government is to be believed, are doing just that:

Americans are increasing the size of their retirement nest eggs at a good clip, despite concerns that the country as a whole isn't saving enough.

Data to be published this week by the Investment Company Institute show that total U.S. retirement assets grew about $1 trillion between 2004 and 2005, to $14.3 trillion at the end of 2005. The ICI, which represents the mutual-fund industry, also found that investors held $7.3 trillion in individual retirement accounts and defined-contribution plans at the end of 2005, about half of the total retirement assets.

The ICI will report its numbers this week in its 2006 Fact Book, as part of a wide-ranging annual look at the fund industry. The data is considered an early and important snapshot of the retirement market each year. ICI numbers on IRAs and defined-contribution plans, for example, will be incorporated into government data.

The overall asset growth as reported by the ICI follows two years of expansion at a similar pace, after a period between 1998 and 2002 when retirement assets flatlined and even decreased due to the bear market.

There were $14.3 trillion in retirement assets at the end of 2005, compared with $13.5 trillion and $12.2 trillion for 2004 and 2003, respectively. Starting in 1999, retirement assets flattened out for several years, and dipped significantly in 2002.

Can we quit the canard that man is incapable of providing for his future? Government is not needed.

On Welfare and Wealth

Charles Murrary writing in OpinionJournal, about how to solve the seemingly intractable problems of Social Security and welfare:

The place to start is a blindingly obvious economic reality that no one seems to notice: This country is awash in money. America is so wealthy that enabling everyone to have a decent standard of living is easy. We cannot do it by fiddling with the entitlement and welfare systems--they constitute a Gordian Knot that cannot be untied. But we can cut the knot. We can scrap the structure of the welfare state.

Instead of sending taxes to Washington, straining them through bureaucracies and converting what remains into a muddle of services, subsidies, in-kind support and cash hedged with restrictions and exceptions, just collect the taxes, divide them up, and send the money back in cash grants to all American adults. Make the grant large enough so that the poor won't be poor, everyone will have enough for a comfortable retirement, and everyone will be able to afford health care. We're rich enough to do it.

Consider retirement. Let's say that we have a 21-year-old man before us who, for whatever reasons, will be unable to accumulate his own retirement fund. We accumulate it for him through a yearly contribution for 45 years until he retires at age 66. We can afford to contribute $2,000 a year and invest it in an index-based stock fund. What is the least he can expect to have when he retires? We are ridiculously conservative, so we first identify the worst compound average growth rate, using constant dollars, for any 45-year period in the history of the stock market (4.3% from 1887-1932). We then assume our 21-year-old will be the unluckiest investor in American history and get just a 4.0% average return. At the end of the 45-year period, he will have about $253,000, with which he could purchase an annuity worth about $20,500 a year.

That's with just a $2,000 annual contribution, equivalent to the Social Security taxes the government gets for a person making only $16,129 a year. The government gets more than twice that amount from someone earning the median income, and more than five times that amount from the millions of people who pay the maximum FICA tax. Giving everyone access to a comfortable retirement income is easy for a country as rich as the U.S.--if we don't insist on doing it through the structure of the welfare state.

Whenevr an idea, which disintermediates government, is proposed, it is necessarily a good idea. (With the obvious exceptions, of course, of waging war and executing murderers.)

Business Needs Skilled Immigrants

Lost in the debate about illegal immigration is the basic fact that many of our nation's companies are desperate for skilled workers. When the United States makes it easy for foreigners to study here, but then severely restricts how many of those foreign-born students can work here after graduation, what we have is a perfect example of government ineptitude. The Wall St. Journal explains:

According to a new study by the National Foundation for American Policy, our broken system for admitting foreign professionals also contributes to outsourcing. Since 1996 the 65,000 annual cap on H-1B visas has been reached in most years, sometimes only weeks into the new year. This leaves employers with the choice of waiting until the next fiscal year to hire workers in the U.S. or hiring people outside the country.

"Many companies concede," says the report, "that the uncertainty created by Congress' inability to provide a reliable mechanism to hire skilled professionals has encouraged placing more human resources outside the United States to avoid being subject to legislative winds." Last week computer maker Dell Inc. announced that it hopes to double its workforce in India to 20,000 within three years. There's another such announcement by some company nearly every day.

This weekend's big-city immigration demonstrations focused on the debate over the estimated 11 million illegals already in the country. But the U.S. labor market has also long been a magnet for highly skilled and educated foreigners, many of whom attend school in America at some time in their lives. In a world where these brains have more options than ever in Asia and Europe, we drive them away at our economic peril.

Protectionists will argue that these foreigners will just take jobs that Americans could otherwise have. But these people tend to be doctors, engineers, architects, computer chip designers, and other highly skilled professionals, for whom there has always been a greater demand than supply. That the demand for these workers outstrips the supply of such workers explains why many doctors, engineers, architects, and computer chip designers earn income far in excess of what members of Congress earn; were the war for talent on Capitol Hill as fierce as it is in growing industries, one would expect similarly talented American citizens to pursue legislative jobs.

Gates on Immigration

Bill Gates on immigration:

Mr. Gates said that Microsoft does 85% of its R & D work in the United States because it wants its computer scientists interacting directly with its program managers and its marketing people on its own campus. He said he has a hard time understanding the logic of those who decry the outsourcing of American jobs, yet are reluctant to facilitate bringing the high-skill people who are catalysts for economic growth. "People just shake their heads at what kind of a central planning system would say having 65,000 smart people come in, that's OK, but 70,000 smart people, no."

More:

Unemployment among computer and mathematical operators is less than 3%. Mr. Gates said, "If you're graduating from a reasonable university in this country, with a degree in computer science, you have many job offers." The House has responded to public pressure to close the borders to illegal immigration and seems incapable of distinguishing that problem from the value of encouraging high-skill workers to bring their talents to the United States.

USDOJ vs Google

The Wall St. Journal's Jason Fry summarizes why government lawyers are faced with a hopeless mandate in protecting kids from porn:

t's worth arguing about how COPA's "community standards" should be interpreted, or whether the law would bar teens from health-related or artistic sites. But that ignores a basic flaw with COPA: Even if it were perfectly constructed and didn't catch non-porn sites in its net, it would hardly keep kids safe online. Among those porn purveyors not affected: run-of-the-mill commercial porn sites run from Amsterdam or the Azores; dodgy overseas porn merchants who've thrown up sites full of dirty pictures and laced with malware; fly-by-nights creating and abandoning ad-laden porn blogs at speeds that far exceed court filings; and people whose hobby is collecting or making porn and who don't mind sharing. That's a lot of porn sites right there -- too many to rest easy if you've got a 12-year-old using the PC unsupervised. A typical Justice Department release on COPA promises that "the department will continue to work to defend children from the dangerous predators who lurk in the dark shadows of the World Wide Web." But COPA doesn't venture into those dark shadows -- it polices the comparatively well-lit precincts in which U.S. commercial enterprises dwell. [Emphasis mine.]

It goes without saying that if you want to protect your kid from seeing Jenna Jameson in all her splendor, the US Department of Justice is not your answer. Controlling your kids' behavior online is a better answer. If you don't know how to control your kid's behavior, do one of the following: (1) put your kid up for adoption (the cost efficient option), (2) eliminate computers from your household (the option that inculcates in your children ignorance about a tool on which they will have to depend for the rest of their lives), or (3) install monitoring software on your PC and configure it (the option which requires independent thinking on the part of the parent.)

People being rather stupid and lazy, it is doubtful that many parents want to have to think about what sites their children can and cannot visit, but option 3 is the only one that poses a realistic chance of keeping from juvenile eyes those sites that are more appropriately viewed by me.

Idiots

Posted without comment:

A government Web site that aims to serve as a one-stop shopping point for scholars and others in search of federal grants is creating headaches for users of Macintosh computers.

The site's electronic forms for would-be applicants aren't Mac-compatible. "Frustration kind of goes through the roof," said Mark Tumeo, vice provost for research and dean of the college of graduate studies at Cleveland State University.

He said about 30 percent of the systems used by his university's scientists and others are Macintosh computers. Those with Macs are having to seek out Windows-based PCs in order to fill out the applications. Tumeo estimated several hundred grant applications are affected by the glitch, which was first reported by The Washington Post.

The idea behind the new government Web site, Grants.gov, is to streamline the process of applying for grants by reducing paper applications and replacing them with electronic ones. It also serves as a resource point for the 26 federal grant-making agencies that award over $400 billion in grants each year.

Calls to Grants.gov and the Health and Human Services Department, a managing partner for the program, were not immediately returned Monday.

The Post said HHS helped choose a small Canadian firm called PureEdge Solutions to create the electronic forms, which only work with Microsoft's Windows operating system. PureEdge is said to be working on a fix.

On How Government Programs are a Waste

Odds are, if you are an successful entrepreneur, government is something to be avoided, not embraced. And a recent study supports that claim:

Many small-business owners might not know what they're missing.

More than nine out of 10 owners of small businesses haven't worked with any federal agency to receive support of any kind, according to a survey conducted last month by Suffolk University in Boston and American Management Services, a consulting firm based in Orlando, Fla.

The majority of owners said they didn't contact federal agencies for assistance because they didn't know which ones could help, what they could offer, or, if their businesses would qualify for help.

Less than a fifth of those polled said they had no need for help, and that was the reason they hadn't sought assistance.

Others thought it would be too much trouble, with 18% saying they didn't have the time or resources to apply, 14% that there would be too much paperwork, while 6% said they wouldn't trust the federal government with their business information.

There are numerous services provided by the agencies that small businesses are simply unaware of, says George Cloutier, chief executive of American Management. Everything from finding overseas partners and loans to training for everyday tasks can be found, says Mr. Cloutier, and much more should be done to make owners aware of what is available.

My bet is that entreprenurs have too many other things going on their lives for them to focus on navigating the labyrinthine halls of bureaucracy. Aside from some minority-owned businesses that suck from the teat of the federal register, most entrepreneurs are more interested in building their business, not filling out paperwork.

The Department of Transportation Supports Killing Fewer People

Sam Kazman, General Counsel of the Competitive Enterprise Institute, argues in this morning's Wall St. Journal that the Department of Transportation is interested in killing fewer of the citizens whose lives it is supposed to protect:

We'll be killing fewer people in the future.

This is the unstated message of the Department of Transportation's current proposal, open for public comment until Nov. 22, to reform its automotive fuel-economy program, known as CAFE (Corporate Average Fuel Economy). There is a documented trade-off between fuel economy and vehicle crashworthiness -- larger, heavier cars get fewer miles per gallon, but also have lower death rates. DOT hopes to reduce that trade-off by making the standard more flexible (creating a larger set of vehicle categories) while raising overall mpg requirements.

CAFE will still be lethal, of course, but it might not become much more lethal than it already is. If you think that's a grisly stance for a federal agency, there are two things to keep in mind. First, this is the best that any administration has ever done to address CAFE's safety risks. Second, the alternative proposals that have popped up in the last few weeks are even deadlier.

DOT has long admitted that vehicle downsizing is a major means for raising fuel economy, and that larger, heavier cars are generally safer in crashes. Only rarely has it connected these factors and admitted that CAFE reduces safety, and in the program's 30-year history DOT has never attempted to quantify CAFE's death toll or lowered a standard to reduce that toll.

The "Reformed CAFE" plan is DOT's first attempt to openly alleviate CAFE's safety impact. That's more than can be said of other proposals that have come forth in the wake of gas-price spikes. Talk of higher fuel-economy standards continues to pop up, most recently in the budget reconciliation debate as a bargaining chip to secure greater offshore and Alaska drilling rights. One bill in Congress would mandate 30% higher fuel economy in the next decade; another even more. States such as California and New York are adopting carbon-dioxide emission reductions in the name of global warming that are equivalent to CAFE-style fuel-economy mandates.

Why would the government want to adopt standards that result in fewer deaths? That seems a shocking idea, no?