Just a few things I highly recommend to all of you, my treasured fans …

First, an interesting history of how the U.S. got into its current financial situation, from Reason. The Wall Street Journal talks about the spending habits of an Illinois law firm familiar to many in the Saint Louis area. Here is another Journal article about the difficulties firms are having in moving forward with public-private partnerships under present market conditions. And, yet, here is a New York Times story about one major public-private partnership moving ahead in Chicago — the privatization of Midway Airport. Finally, you might have already seen this widely read article about the bailout from economist Jeffrey Miron, at CNN, but it is worth a very careful read.

P.S.: Thanks to Jack and Dave for sending me two of these links!

The controversial plan to institute contractor licensing has slowed down in Saint Joseph. There is a very solid article about the dispute here in the News-Press. Unfortunately, while the vote has been delayed as a result of various controversies, it seems unlikely that the proposal will be defeated wholesale. To that end, it’s a good time to remind people of the op-ed I wrote about this exact subject in August, which the News-Press was kind enough to run.

Occupational licensing harms our economy, and does not protect consumers. I hope the Saint Joseph City Council realizes that.

Under the Missouri Constitution, no government agency can prohibit or punish people’s efforts to cooperate with each other as they strive to attain the best deals they can get in exchange for their labor. Last year, in Independence NEA v. Independence School District, the state’s Supreme Court was called upon to determine whether this right to bargain collectively applies to public employees as well as private ones.

The case came before the Court because the Independence School District decided to unilaterally modify the contract it had reached in collaboration with teachers’ union representatives. The district reasoned that, because teachers were specifically excluded from statutes providing a framework for collective bargaining with public-sector employees, the agreement with the teachers’ unions was not binding — because it had been reached through a sort of collective bargaining process. The Supreme Court disagreed. Even though previous decisions by the Court had limited the scope of the Constitution’s collective bargaining guarantees, the Court overturned those cases and held instead that all employees, including those in the public sector, are protected by the Constitution.

This win for the teachers’ unions has led to quite a conundrum across the state, which is discussed by a story in today’s Springfield News-Leader. In the decision’s aftermath, union officials called for legislators to pass a statute that would govern the collective bargaining process for teachers. Interestingly, however, the Missouri NEA and the MTSA (each of which represent a substantial percentage of teachers in many districts throughout the state) have very different ideas about what would make the best framework. The MNEA, which is the larger organization, wants a winner-takes-all solution in which a majority vote would decide on one union to handle representation for all of a district’s teachers. The MTSA, on the other hand, wants to establish negotiating committees that would allow for proportional representation from both unions. This sort of framework would assure MTSA teachers that their representatives had a seat at the negotiating table, even if a majority of teachers in the district were represented by the MNEA. In short, the teachers’ unions got what they asked for, and now they are each lobbying the state to mediate the resulting conflict.

This situation echoes the broader problem in our union-driven education system: The unions’ proposals call for the legislature to create a one-size-fits-all approach that will bind all of the state’s school districts and teachers. While a state-mandated approach undoubtedly serves the interests of the unions themselves, the idea is really pretty silly. Let the teachers sort out for themselves how to handle bargaining!

Imagine a hypothetical school district that employs 100 teachers, of whom 80 belong to the MNEA, 15 belong to MTSA, and five would prefer to negotiate their own contracts. Why couldn’t the district reach one agreement that would cover MNEA teachers, another that would cover MTSA teachers, and separate contracts to cover the five independents? Under this model, teachers would have a choice about which deal served them best — a union negotiation or an independent contract. If members of one union became disillusioned with their representation, they would have the option of switching to the other union or going independent, a model that would empower individual teachers. I think that’s a very good thing!

The unions, of course, would be appalled by this suggestion. A union wields power by presenting a united front on behalf of all the members of a profession, thus assuring that when potential employers don’t meet the union’s demands, no work will be done. Unions can only maintain this power by ensuring that workers will not seek independent employment agreements that deviate from the union’s demands. Under ideal circumstances, unions should secure cooperation from workers only through persuasion — convincing them that remaining in step with union goals is in their best interest. Unfortunately, however, unions sometimes turn to coercive threats when persuasion proves unsuccessful.

Tying back to the news story, one way to avoid this sort of risky intimidation — while achieving similar results — is for the unions to seek legislation that uses the power of the state to entrench their status and curtail dissent. It should be obvious, however, that it is not appropriate for the unions to use the legislature to accomplish what their reasoning cannot. Teachers (and school districts!) should be free to approach the bargaining table on their own terms, not on terms dictated to them by the unions or the legislature.

The Missouri Board of Pharmacy is alarmed that Justus Drugstore: A Restaurant doesn’t employ a licensed pharmacist. In case you’re wondering, the unusual name refers to a drugstore that once existed where the restaurant now stands. The restaurant doesn’t employee a pharmacist because you don’t need one to prepare food, but the Board of Pharmacy says that if you’ve got “drugstore” in your name, you’d better have a pharmacist on site.

Here’s the reasoning behind that:

Several speakers representing pharmacist trade groups said the law was necessary to prevent unlicensed people and potentially illegal Internet drug retailers from fooling customers into thinking they were regulated businesses.

I would expect people to realize the restaurant isn’t a regulated drug retailer when they see the menus, plates, and napkins. Or when they see the word “restaurant” in the name.

Here’s what the restaurant has to say:

We believe real food raised with painstaking care by local small farm producers, prepared lovingly by skilled artisans served in an ambient beautiful space is an experience everyone should enjoy. If we can’t make it from scratch, we won’t serve it.

Doesn’t sound like a pharmacy to me.

Missouri’s minimum wage is set to go up again in January. Here’s a thorough article in the Springfield Business Journal covering both sides of the issue very well.

The increase itself is not large as far as wages go, but I’m sorry it has to happen right now, when the economy’s not doing so well. This is a problem with tying the minimum wage to inflation — you don’t get to time the increases so as to soften the blow.

An article in the Post-Dispatch describes a campaign by a group of citizens who object to some children’s materials in the St. Louis County Library. Obviously, this is not the right blog for a discussion of proper reading choices for children. What I’d like to deal with here is the response of the library and of the campaign’s critics, and their accusation that making any of the requested changes would be “censorship.” Putting aside the issue of whether the changes would be a good idea, would they restrict anyone’s rights?

The suggestions include limiting what children can check out without a parent’s permission, creating a rating system that alerts people to sexual content in books, or moving the books in question to the adult section of the library.

If any of those proposals are unconstitutional, the library is already in trouble. Currently, children can’t check out interlibrary loan books themselves — that has to be done by a parent. (There are even some reference books that nobody can check out, and I haven’t heard accusations that the library is censoring the dictionary.) The library sorts books, deciding whether they are appropriate for adults or children. It even divides books by fiction and nonfiction, and there are separate sections for biography, mysteries, and other categories. The library decides whether any given book should be shelved with the biographies or in general nonfiction, or whatever.

Children’s books are labeled by grade level, a process that involves a lot of judgment calls. The library designates Alice in Rapture, Sort Of as a book for fourth- through sixth-graders. (This novel contains lots of discussions of “French kissing,” as well as mentions of boys groping girls’ breasts, etc.) Meanwhile, the library classifies These Happy Golden Years, in which about the most graphic thing that happens is that the protagonists hold hands, as appropriate for seventh- through ninth-graders. I’m not talking about some kind of proposed, unconstitutional rating system; this is the labeling system that the library uses right now. Regardless of the system’s merits, it’s incorrect to say that the library doesn’t make decisions — sometimes controversial decisions — when sorting books by audience.

Furthermore, the video and DVD section of the library contains all the usual warnings displayed on that kind of material, such as “PG-13 for Sexual Content.” Nobody calls that censorship.

Going beyond ratings and labeling, what if the library doesn’t purchase materials at all? Is that censorship? I’ve requested that the library purchase books, and my request was turned down because the small publisher that prints the books I wanted was not on the library’s list of publishers. The publisher is still free to publish, and I’m still free to buy the books at a store. I don’t think I or anybody else was censored by that incident.

This is a bigger issue than deciding which books are appropriate for children, a problem no library policy will be able to solve to everyone’s satisfaction. If we get used to hearing the cry of “censorship” over every library shelving decision, we’ll be less alert to real cases of censorship and less vigilant about protecting the right to free speech. We should focus on defending Phyllis Reynolds Naylor’s right to publish novels about teen sexuality, not her “right” to have them placed in the elementary school section of the library.

Figures from the U.S. Census Bureau were released yesterday, leaving us with good news and bad news. First, the good news: Across America, median household incomes rose by 1.3 percent between 2006 and 2007, creating a median income of $50,740. The great state of Missouri saw a 1-percent increase, moving our median household income to $45,114.

The bad news: Poverty rates increased drastically nationwide. Between 2001 and 2007, Missouri saw its overall poverty rate jump from 11.7 to 13 percent. More alarming is the 2.1-percent increase in Missouri’s child poverty rate, which means an estimated 240,671 kids are living below the poverty level.

With the price of food and gas going through the roof, it may well get worse. The city of St. Louis alone has seen its highest unemployment rates in 16 years. “Working class families are at a tipping point,” an observation that the St. Louis Post-Dispatch attributes to an area United Way researcher. There are many place we can point fingers, such as the poor economic climate and recent cutbacks in various plants. Nonetheless, something needs to be done.

Back in April, I noted that the Foundry Art Centre in St. Charles exercised “good fiscal planning” by asking the city (which the head of the Foundry’s board referred to as “daddy”) to give the Centre $100,000 to help them meet their budget of $645,000. It seems that this effort paid off, at least to an extent, as seven members of the City Council have advanced legislation that would donate $30,000 to the centre. This payment would be on top of the $2 million of taxpayers’ money that the city has already dedicated to the development of this organization. The city government is also planning to pay up to $10,000 to hire a consulting firm that would “recommend ways to improve the 4-year-old artist studio and exhibition facility’s operations.”

St. Charles has about 63,000 residents. Assuming that the city approves the $30,000 subsidy and the $10,000 consultation fee, it would mean that, on average, the city government has forced local taxpayers to contribute more than $32 for every man, woman, and child in the city in order to subsidize the Foundry’s presence in their community. In the meantime, the Foundry claims to draw more than 90,000 visitors per year, charging an admission fee of $2 per adult and $1 per student or senior citizen. It also hosts events, for which it charges rental and use fees. The rest of its operating budget seems to be drawn from private donations.

To be sure, I am all in favor of the fine arts. But it is exceedingly poor policy for a local government to force taxpayers to support businesses — even non-profit businesses — that otherwise could not support themselves. If an organization’s presence in the community is truly valuable, the market will provide the means for it to sustain itself. If the visitors to the centre are really impressed with what the Foundry has to offer, they should be willing to pay an additional dollar each in order to make sure that the organization can meet its budget.

Similarly, if the 90,000 annual visitors to the Foundry bring additional customers to nearby businesses, the benefited businesses should be willing to make donations that will keep the centre viable. But if the Foundry’s presence isn’t valuable enough to patrons or nearby businesses to warrant an additional dollar in admission price or additional donations, why in the world should taxpayers be forced to pick up the slack?

For all of you Mizzou Tiger fans, please don’t get your hopes up. This No. 1 ranking has nothing to do with college football. According to an article in the Southeast Missourian, a Ball State University study has ranked Missouri as the No. 1 state for manufacturing in the country. Of the 20 categories that the 2008 National Manufacturing and Logistics Report Card took into account, Missouri was placed at the top for low long-term health care costs, health care premiums, and property taxes.

These high marks in health care costs and premiums can be attributed in part to the passage of HB 818, which helped the Show-Me State show the rest of the nation how free-market health insurance reform is done. This bipartisan solution to the state’s health policy dilemma helps put employees in charge, freeing them to choose their own insurance policies, and puts employers in positions where they can now contribute directly to employees’ plans without the burden of mandated contribution amounts. Furthermore, health savings accounts and individual health plans are portable, so employees are protected even in case of employment changes.

Another key factor associated with our manufacturing job growth (which might easily be overlooked) was the massive tort reform legislation that was passed in 2005. The Ball State rankings represent tangible evidence that good things happen when states reform and alter legal systems in an effort to shut down abuses that lead to “jackpot justice.”

In the midst of a poor economic climate and recent cutbacks in various plants, the great state of Missouri still prevails. Great job, Missouri … let’s keep up the good work!

With all due respect to my colleague, Sarah, the most ridiculous regulation imposed on the food industry comes from the recent decision by the Los Angeles city government to ban new fast-food restaurants from opening in poor neighborhoods. There was an excellent piece on this regulatory nightmare written by William Saletan at Slate.com, and another for the Los Angeles Times by Joe Hicks, but I want to reiterate several of the reasons why this is such a terrible idea:

• The fast-food ban assumes that poor people can’t be trusted (and therefore have no right) to make decisions for themselves. This is paternalism at its ugliest, because it says that people’s freedom can and should be stripped from them if the majority believes their choices might prove to be unwise.
• The ban ignores the realities of these communities. As unhealthy as fast food can be, it is the most convenient, most affordable way for many people to get a meal. Even if someone in a poor community had the time to shop at a grocery store and fashion home-cooked meals, it is far more expensive to purchase fresh foods and the means to prepare them than it is to swing by a local fast-food restaurant. Especially with the escalating cost of food, families worried about day-to-day survival can’t always afford the luxury of securing the most nutritious meals.
• Fast-food restaurants provide jobs for unskilled workers. While, as Dave Chapelle’s satirical take on this issue points out, these sorts of jobs aren’t likely to end poverty, they do bring money into the community and offer a first step toward more profitable types of employment. The fewer fast-food restaurants in the community, the higher that area’s unemployment level will be.
• The ban prevents competition in the fast-food market. Los Angeles has only banned new fast food restaurants, insulating the existing businesses from competition. Not only does this alleviate some of the pressure to keep menu prices down, it also allows the existing companies to pay rock-bottom wages because workers have fewer alternative employers.

Unfortunately, as with many ill-advised government schemes, this one seems to be catching on.

Recently, the Institute for Justice released a response to criticisms aimed at their ongoing case against the regulation of interior designers. IJ’s original study, Designing Cartels, exposed arguments in favor of certification and licensure as baseless stabs at protectionism by current practitioners. Many objections leveled against the pro-regulation segment of the industry across the nation are identical to those relevant in St. Joseph’s consideration of contractor licensing.

The fact of the matter is, almost any attempt at regulation is orchestrated by industry insiders to address perceived threats to consumer satisfaction or public health. That alone wouldn’t be so troubling if the dangers they warned of were usually substantive. Personally, I see no need to use legislative tools like those that endorse the competency of doctors and nurses as prerequisites to practicing interior design.

In Missouri, interior design certification is handled by the Interior Design Council. Although individuals are still free to make decorating suggestions without the accreditation of a registered interior designer, the regulatory distinctions currently in place deny them the ability to advertise themselves competitively. The differences are akin to the distinction between a bookkeeper and a CPA. In the one case we sacrifice the virtues of a competitive free market to ensure that our bills are handled according to a standard. In the other, we endure higher prices and fewer alternatives in exchange for decorators who have spent superfluous amounts of time fulfilling coursework that is only questionably necessary to their trade.

There’s no question in my mind that the “Yes for Schools First” campaign would more accurately be called “Yes for Casinos First.” But schools would finish a close second if the initiative passes in November.

The initiative proposes eliminating the $500 loss limit in Missouri casinos imposed by the Missouri Gaming Commission, which says that casinos “shall insure through internal controls that no person shall lose more than five hundred dollars ($500) during each gambling excursion.”

If voters approve removing that regulation, casinos will respond by increasing the gambling tax from 20 to 21 percent. Why is that important to Missouri public education? The vast majority of those tax dollars go toward education spending in the state.

I know full well the criticisms that will be leveled at this post. Removing the loss limit preys on those addicted to gambling, for starters.

Gambling is not synonymous with casinos. Those who have problems would find a way to gamble — on the Internet, at poker night in their own homes, at their church bingo night, or even by traveling to other states. Attacking a lawful form of entertainment is an outlet for frustration with a different problem. And it’s an entirely legitimate problem. But removing temptation from one quarter isn’t the answer. It’s not the casinos that create the problem, just like it’s not the poker or bingo nights.

Another criticism is the extortionist bent to the initiative. It’s the nudge-nudge, wink-wink “let us get away with taking more money and we’ll kick some your way.”

It’s true that casinos are asking to be allowed to take more money, but in my line of thinking, they shouldn’t have to ask in the first place. Why is the loss limit now in place? Why should the government step in to tell me how much money I can spend on entertainment in any given evening?

Casinos are simply providing Missourians with an incentive to remove a regulation that limits their business. If the incentive is great enough, Missourians will respond. But it should be Missouri citizens who decide, not the government deciding for them.

And a final criticism is the rhetoric being used by the “Yes for Schools First” campaign. Many would say it’s a business deal cloaked in feel-good language. I’ve already acknowledged my misgivings about the wording of the initiative, and I’m not overly fond of the fact that casinos can use schools to make their business seem more altruistic.

Anyone who gives it half a thought knows casinos aren’t in it for the schools. They’re businesses, and they’re in it for profit. But why shouldn’t Missouri schools profit at the same time? You’d be hard-pressed to argue that a person who otherwise wouldn’t set foot in a casino will choose to gamble just to help the schools.

Missouri voters will have to carefully weigh their options this November. Gambling addiction is a serious problem, and not one I’m trying to make light of. But the gambling in question is legal in Missouri. And I simply do not believe that removing the casino loss limit will appreciably change the amount of gambling engaged in by Missouri citizens. The only change I anticipate is that it may become more localized.

And it will help Missouri schools.

If you have comments, please leave them below, or email me.

But these aren’t the same as the price-control induced lines from the 1970s. According to the Post-Dispatch, Rhodes 101 Service Station in Poplar Bluff, Mo., offered gas for $2.69 per gallon on Tuesday as part of a promotion with Big River Telephone. People waited in lines for nearly 45 minutes to get the savings, which amounted to $10–$25 per customer, according to one commenter. That comes out to $13.33–$33.33 an hour. This probably isn’t a very good deal for the average middle class American, who probably earns more than than that.

However, unlike the gas lines of the 1970s, which were induced by price controls, these people still had the option of spending a bit more money to get their gas immediately. If the lines had been induced by price controls, and thus existed nationwide, they would be much longer — and the lower price almost certainly wouldn’t be worth the extra wait. That is the lesson of price controls: The posted price of gas, or anything else, may be lower under price controls, but the price consumers have to pay skyrockets once you take into account their lost time and search costs.

The administration’s stimulus plan was bad enough, but this idea is really nothing more than legalized theft. In this proposal, they are targeting one specific group to take money from just in order to give it to a larger group. This idea is beyond repulsive.

The Contrarian has a great article over at MSN.com about the loathsome taxpayer bailouts that occur every time something fails in modern America. I recommend it without hesitation.

The Post-Dispatch reports that 2 million Americans will get a raise today. Why, you ask? They probably bet on the Brewers. … Actually, today the federal minimum wage increases by 70 cents, to $6.55 an hour. This is the second of three annual increases that will bring the minimum wage up to $7.25 an hour.

A raise for 2 million Americans sounds like a wonderful thing, almost too good to be true. Indeed, the Post-Dispatch reports one of the negative side effects:

The bad news: [...] some small businesses will pass the cost of the wage hike to consumers.

This is one of many things businesses can do to cope with an increase in any of their costs, whether or not that increase takes the form of labor costs, but this isn’t the only option. Suppose you run some sort of business that employs minimum wage workers, such as a restaurant or a car wash. Keep in mind that in running this business, your main goal is to maximize your profit — within the bounds of the law, of course.

Now, suppose the minimum wage rises, increasing your labor costs. What do you do to keep your profit as high as possible? Well, what would you do if anything else you bought increased in price, like, say, gasoline? You’d probably find a way to buy less of it, either by cutting back entirely or by finding some workable substitute. In this case, you would be trying to find ways to cut back on the use of unskilled labor in your business.

There are numerous ways to cut back unskilled labor. The Post-Dispatch already mentioned one: raising prices. How does this cut back on unskilled labor, you might ask? Higher prices will drive some consumers away, so your business won’t need as much unskilled labor as before.

There are also many substitutes for unskilled labor. You could hire someone more skilled, or replace the worker with machinery of some sort. Something as simple as adding a timer onto the fryers at a restaurant can cut the amount of labor needed to produce fried food.

Your could also find ways to decrease compensation without decreasing wages. Cutting benefits is one example. Or, you could remove some costly “luxury” like air conditioning, making the work environment less pleasant in the process.

The main question is, how much of each of these effects actually occurs? If businesses find ways to significantly cut the use of unskilled labor, unemployment among that group will rise, and perhaps so will unemployment in general. If businesses opt primarily to raise prices, low-income individuals will be hurt the most. If businesses instead cut non-monetary compensation, or reduce workplace amenities, the increase in wages seems to be a wash. A classic Show-Me Institute study has even more detail.

The intended goal of a minimum wage, of course, is to reduce poverty by helping low-income families. However, the minimum wage is a terrible policy tool for accomplishing that goal. According to another one of our classic studies, the typical minimum wage worker is still in school, living with a relative, and part of a family earning $57,000 a year. On the other hand, the typical poor worker is older, out of school, earning $9.58/hour, and the sole earner in a family with children. They are poor not because of low wages, but because they don’t work very many hours. In fact, only 25 percent of low-wage workers are below the poverty line. As a result, the study estimated that Missouri’s increase of the minimum wage to $6.50 would only reduce poverty by less than half of a percentage point.

Increasing the minimum wage won’t do much for most of the people it is intended to help, because it does a poor job of targeting them. Something that targets poor families explicitly and directly, like, say, the earned income tax credit, is far more effective at reducing poverty.

Kansas City’s mayor, Mark Funkhouser, is likely to appoint a new task force to help develop the urban core, the Kansas City Star reports. A number of ideas have already been tossed around, including:

• Create a private investment funding source, with the help of financiers and foundations, to assist small businesses with loans or in other ways.
• Provide college or vocational opportunities for needy high school students.
• Create work force training centers in distressed areas.
• Improve transportation and child care offerings to assist people in getting to work.
• Provide specific incentives to employers who hire people living in distressed communities.

Kansas City could follow a simple recipe for growth: low taxes, lax regulations, and strong property rights. Implementing this isn’t necessarily easy, however. To start, the city could repeal the earnings tax, because it provides strong incentives for productive people and businesses to locate elsewhere. A sales tax or a tax on the value of land could raise the same amount of revenue without having as much of a negative effect on growth. A general rule of thumb would be to avoid TIFs, tax abatements, tax credits, and other special tax exemptions. Consumers and businesses will take notice and move in … perhaps with the help of our handy tax estimator.

Are rising oil prices all bad? Well, they certainly increase the price of many things. We have already seen car companies take huge hits because of the increasing scarcity of oil. But this effect isn’t uniform across all industries. For example, the concrete industry is booming. One of the executives at J.M. Marschuetz Construction Co. tells us why:

“Who would have thought in a million years that concrete would cost less than asphalt?” asked Jason Marschuetz, the company’s vice president. “The oil prices are ultimately helping us because even though we’re getting hammered once — for diesel — the asphalt companies are getting hammered twice — for diesel and asphalt.”

Concrete and asphalt are substitutes for a variety of applications, including paving roads and driveways. When oil prices rise, concrete gets a little bit more expensive while asphalt gets much more expensive. The result? People use concrete instead of asphalt whenever they can. We should see this trend across the economy — goods and services which are relatively less dependent on oil should become cheaper relative to the oil-guzzling competition.

This is just one of the many ways in which we are less dependent on oil than one might think. Oil may be the cheapest alternative for a variety of applications at $130 a barrel, but if the price increases much, there are numerous ways to achieve the same ends that use less oil. In econo-speak, the demand for oil is more elastic than it appears.

Finally, keep in mind that all the people in the concrete industry see their incomes rise during the oil-induced boom. New jobs are created in the industry as well, because new plants are coming online — such as the plant in Ste. Genevieve. Chrysler workers may be out of a job because of rising oil prices, but new opportunities are opening up because of the same cause.

Continuing a series of blog posts that began in April 2007, and which was on hiatus until now, let us again consider the numerous atrocious ways government has entered our lives, from the most overreaching nanny-state activity to more complicated financial instruments. Sometime in the mid-’90s, Bill Clinton declared, “The era of big government is over.” How wrong he was.

The International Herald Tribune has a kick-to-the-gut article about how it is now the responsibility of the federal government to buy people a home and send kids to college. I am by no means an expert on these issues, but I find it offensive that the government steps in to save everyone from themselves. In this entire mortgage imbroglio, it always gets overlooked that people bear the responsibility for taking on too much debt to buy a house. Nobody forced them to buy more house than they could afford at an adjustable rate mortgage with no money down. And why is it now the federal government’s job to guarantee all the student loans for college? It just sickens me that so many people are so happy to have the government take care of them.

Now, we’ll go into the think tank world for Reason’s newest video from Drew Carey. I have had discussions with plenty of people who support these types of health mandates / control freak laws. (I, myself, can even see the benefits of a few of them, like smoking bans.) The crazy thing, to my mind, is that many supporters argue that because the public pays for the health costs of so many people, the government has a right to regulate the way we live — i.e., banning trans fats or forcing people to wear helmets when they ride a bike. The insane thing is that this argument always comes from people who support greater government involvemnt in health care (i.e., socialism), so they put themselves in the perfect circle of arguing for more socialism in health care out of some moral imperative, and then arguing for the right to control our lives out of fiscal responsibility in health care. The idea that maybe we should let people live their own lives and then let them deal with the consequences of their actions — which, in come cases, will be negative — does not seem to enter their mindset. That would, of course, be too much freedom.

How does all this connect to Missouri? Well, we are the nation’s leader in saggy pants ordinances, so we have struck a blow for decency and telling kids we don’t want to see their boxer shorts. It’s also a nice excuse to stop them and check them for drugs, while we’re at it. It’s all very depressing, and my mood is not helped by the fact that the Cardinals will now be playing in Stella Artois Stadium.

Yesterday, the governor signed a new immigration bill that, among other things, stiffened penalties for employers who knowingly hire illegal immigrants. Reporting on the bill, the Joplin Globe notes:

We realize there are workers willing to do work and businesses who need those workers. Those workers stimulate our economy by buying goods and services from local sellers.

But there is no reason for that work, and the economic side effects, to occur outside the law.

Agreed. Forcing immigrants to operate outside of the law has several undesirable consequences. First, and foremost, in my opinion, it hurts the illegal immigrants, who tend to be extremely poor people looking for a better life. By being forced to operate outside of the law, illegal immigrants can’t expect the same degree of police protection and contract enforcement as legal citizens. As a result, they are more likely to be subject to violence.

Second, it increases the likelihood that an immigrant will commit a crime in two ways. Immigrants who would rather obey the law are less likely to immigrate if it means they have to break the law, while law breakers see immigration as potentially more attractive. So, their illegal status changes the composition of immigrants to include more law breakers. Also, once immigrants arrive in the United States, they are more likely to break other laws, because they are already here illegally. Violence may even be used as a contract enforcement mechanism, because recourse to the courts is out of the question.

Finally, the illegal status for most immigrants decreases the overall amount of immigration, because preventative measures increase the costs of migration. This means the U.S. will have less of the most valuable resource on the planet: the human mind. Not only does an increase in population through immigration help our economy for the reasons the Globe lists, but more minds leads to a better chance for technological innovation.

So, it seems natural to conclude that the governor made a mistake, and should instead petition federal legislators for an easing of immigration restrictions. Instead, the Globe concludes:

[The bill is] a big improvement over current state law, which simply takes away tax credits and abatements as a penalty. Combine those with federal punishments, and employers now have severe consequences to fear.

Wait … what? The Globe seemed to agree that immigration benefits the U.S. economy, which includes Missouri. And an increase in legal immigration would entail more open borders. Here is the author’s rationale:

People who work in the United States should be paid a fair wage and granted certain workplace rights. Employers should not be able to take advantage of a worker’s legal status by paying substandard wages and offering no benefits.

Apparently, the author has never been to Mexico. There is a reason so many Mexicans migrate here illegally in order to work for employers “paying substandard wages and offering no benefits.” In Mexico, the wages are even lower and the benefits are worse. Simply by moving here, they improve their lot. If the issue is a concern for the welfare of the illegal immigrants, letting them come here illegally is much better than not letting them come at all.

Missourinet reports that the federal farm bill has increased the maximum loan under the Beginning Farmer Loan Program from $250,000 to $450,000. The rationale for this? According to Tony Stafford, director of the Agriculture Business Development Division within the State Department of Agriculture:

[...] too many young people are leaving the farm. He hopes the enhancement of the program will lure more Missourians to return to farming.

Au contraire; it is more likely that not enough young people are leaving the farm. There is nothing intrinsically important about farms. Farms are valuable because they do one thing: produce food. If we can produce more food with fewer farmers, great! Then people — the most important resource we have — are freed to work on something else of value.

Throughout the 20th century, U.S. farm output has increased despite the fact that fewer people have chosen to be farmers. According to the Federal Reserve Bank of Dallas:

Since 1948, agricultural production has doubled, while total input use, including labor, land and machinery, declined slightly. [...] Between 1948 and 1996, agricultural labor productivity increased more than eightfold. The number of people fed by one farmer has jumped from 15 in 1950 to 128 in 1995, including 34 outside the United States.

Because production doubled and productivity increased by a factor of eight, fewer people are working in agriculture despite this doubling of production.

In A.D. 1000, almost everyone was a farmer. Now, almost no one farms in industrialized nations. A quick comparison of living conditions seems to favor present times. You might object that the driving factor here is technology, not the amount of farmers we have. But you would be missing my point: The fewer people we have farming, the more people we have working on other things, like technological advances.

Farm subsidies such as the Beginning Farmer Loan Program only serve to slow down the tremendous gains in prosperity we have been achieving during the past couple of centuries. And for what? According to Stafford, to get a few Missourians back on the farm. Why, exactly, do we want them on the farm again?

Prime Buzz reports:

Missouri 6th District congressional candidate Kay Barnes today released a major policy stance on energy, a 5-point plan to deal with rising gas prices.

Naturally, I have a point-by-point response.

The 5 points of her new plan are:

• Increasing domestic drilling, by compelling oil companies to use the leases they currently have to drill on federal lands.

Increasing domestic drilling is a good idea to help alleviate the effects of the high price of gas in the short term. However, compelling oil companies to drill more is the wrong way to go about this. I’m not sure about the details of the leases to these federal lands, but I can suggest one way to structure them: If the leases were tradeable commodities (perhaps they wouldn’t be leases anymore) then we can expect whoever values the lease the most to purchase it — which probably would be whoever is willing to drill now. On the other hand, the oil companies may be betting that there is no end in sight, and holding oil in the ground until the price rises even more. If that is the case, a bit of pain now is much better than extreme pain later.

• Repealing tax breaks and subsidies for big oil companies, or redirect such subsidies toward renewable energy sources such as biofuels.

I’m all for making the tax system less complicated by removing exceptions, and I’m in favor of eliminating subsidies — but redirecting them toward biofuels is a bad idea. The incentive to develop alternatives is already huge, and not likely to be affected by government action. Attempts to manipulate the market may end up doing more harm than good.

• Supporting House-passed legislation directing the Commodity Futures Trading Commission to curb speculation in the energy markets. A so-called “Enron loophole” had previously exempted electronic energy traders from U.S. regulation.

Speculation actually eases the pain of economic change. When speculators bet on future price changes, they either prematurely increase or decrease the price, depending on what they think the future holds. This eases the pain of economic change because it makes price changes more gradual, rather than arriving as sudden shocks. These speculators also probably know more about future price movements than anyone else. After all, they are the ones with money on the line.

• Lowering federal trade and budget deficits, which would strengthen the value of the dollar when buying foreign oil, thus indirectly lowering the cost of oil.

A surefire way to strengthen the value of the dollar would be to raise interest rates by slowing the growth of the money supply. Barnes wouldn’t have control of that, however, so it’s hard to fault her for leaving this out. However, the high price of oil isn’t the only concern when it comes to manipulating exchange rates. A more favorable exchange rate means less foreign investment in the U.S., and fewer exports.

• Increasing fuel economy standards for cars and trucks, something that Congress started doing again for the first time in three decades when it passed higher fuel economy standards six months ago.

This will either be irrelevant or raise the cost of cars for the average consumer. It will most likely be irrelevant, because consumers are voluntarily choosing to buy more fuel-efficient vehicles. It’s amazing how well markets coordinate action.

This policy bundle seems rather questionable to me. There is some merit to at least part of some of the five points, but I have trouble throwing my hat behind any single policy on the list. I wonder what Kay’s opponent, incumbent Sam Graves, is proposing.

"Rains clog sewer system, residents asked to limit toilet use," the Kansas City Star reports. The hilarity of this headline should be apparent to anyone with a bit of schooling in economics. According to the article:

The Kansas Department of Health and Environment issued a statement Wednesday urging Sublette residents to curtail water usage and use toilets as little as possible. The statement said sewers will remain shut down until further notice.

I sincerely doubt that this statement will have much of an effect on water usage. A much more effective way to curtail water usage would be to simply raise prices, much like a private provider would do when the costs of supplying water temporarily but dramatically increase. In response to the higher price, water consumers would cut back on consumption. Only when the benefit to the consumer outweighed the cost to the water producer would water be consumed.

Admittedly, this is an imperfect solution because, as the article alludes to, the primary problem is not in water usage per se, but in the sewers. Ideally, sewage companies would be able to charge for each flush independent of how much water it uses, but this may be impractical. If these services were privatized, they might be provided by different companies, but the sewage company would have a strong incentive to pay the water company to raise prices.

Under the current system, both Kansas and Missouri get bureaucratic proselytization about when they can and can’t flush, rather than actual results, and that just stinks.

Dr. Philip Anderson, Dean of the St. Louis University School of Medicine, calls for tuition assistance for students studying to be primary care physicians over at the St. Louis Post-Dispatch. His rationale is that there aren’t enough primary care physicians, and tuition assistance would provide an incentive for young bright minds to move into the field.

I suspect that the supply of doctors is relatively inelastic, and thus tuition assistance woouldn’t have much of an effect on the number of primary care physicians available. The problem is that the supply of doctors is fundamentally limited by occupational licensing laws. It’s no secret that it costs an enormous amount of both time and money in order to become a doctor in the United States. As a result, there are fewer doctors than there would be otherwise, and those who do become doctors enjoy much higher wages. In the end, this hurts the average family who has to pay more for medical services — particularly low-income families who are already strapped for cash.

The standard argument for requiring doctors to be licensed is that this protects the public from fly-by-night operations that only endanger the public’s health. There may be some merit to this argument when it comes to invasive surgery. When it comes to things like treating a cold or giving birth, however, the argument loses much of its force. You simply don’t need an M.D. to effectively do many of the things doctors do. What this argument ignores, though, is that fully functioning adults are capable of making their own decisions. It may be a useful service to warn the public about the dangers of not using a doctor for any given medical need, but requiring the public to use a doctor only limits the options available.

Speaking of midwifery, as Justin Hauke notes, the Missouri Supreme Court has just upheld a law to legalize the practice. Midwifery provides a textbook example of how occupational licensing hurts both the consumer and the competition. The Post-Dispatch reports:

Doctors’ groups have fought efforts to loosen the regulations, arguing that midwives lack training and that pregnancies can quickly become dangerous.

Even if this is correct — and it probably isn’t — this issue is fundamentally a matter of personal choice. We don’t allow the government to treat us like children when we decide what to wear in the morning; why shouldn’t we insist on autonomy when it comes to health care?

My fellow bloggers  have written quite a bit more about midwifery in Missouri — for example: here, here, here, and here.

The Southeast Missourian reports that the potential ban on casino construction might cost local developers a promising opportunity in Cape Girardeau:

Because companies already operating casinos in Missouri are sponsoring the ballot measure through an initiative petition and have refused to negotiate for a share in the Cape Girardeau project, [businessman David] Knight said he must attract an out-of-state casino operator to take part. He intends to have an application ready if the ballot measure fails to make the ballot or if voters reject the proposal.

“We’ve got nobody left in Missouri to talk to,” Knight said. “We are proceeding on in the meantime and getting a gaming partner.”

Thanks to the rhetoric-charged protectionism of the initiative and the short-term moratorium it spawned, Missouri stands to lose a large development to out-of-state builders. It appears that although no one in-state is willing to begin a project that faces considerable risk of being legally prohibited in November, Mr. Knight will be able to find someone else who will help him build his casino. If the initiative never materializes as law, Missourians will watch as recent regulatory debacles negatively affect the state’s businesses. If ballot issue is passed, we will never know the damages caused to state revenues, recipients of casino taxes, and entrepreneurial individuals like Mr. Knight.

Criticism of the Anheuser-Busch deal has grown increasingly ridiculous. In a particularly glaring example of one-sided electioneering, the Post-Dispatch reveals (as if this were a shock) that Cindy McCain holds more than $1 million in Anheuser-Busch stock and stands to reap a significant windfall if the InBev deal goes through.

Shocking. You know who else stands to benefit? Me, probably you, and just about everyone else.

Who actually owns AB? The Busch family? Its employees? The city of St. Louis?

Let’s take a quick look at AB’s latest financial statements. The largest individual shareholder of Anheuser-Busch (owning about 5 percent of total shares) is Warren Buffet. Well, he’s from Nebraska, so obviously he’s an outsider. But what about institutional investors? Well, a British conglomerate owns about 6 percent. And Mr. August Busch? A whopping 0.2 percent (though I believe he has about 4 percent of the voting power)!

And you know who else owns AB? Me, along with several hundred thousand of my closest friends at Vanguard. And probably Barack Obama, Francis Slay, and Matt Blunt, too.

Saint Louis has no “right” to AB when only one percent of the entire company is owned by AB insiders. And more than that, how do Missouri governmental officials have a right to have any say in a shareholder decision whatsoever?

One comment in the Post-Dispatch article is particularly misguided:

[H]ow ridiculous to say that Barack Obama wants the brewery to remain American while Republicans want it to go. Hello!?! Republican (Ex Chief of Staff to Matt Blunt) Ed Martin is behind the “SaveAB.com” along with SEVERAL other Republican operatives.

I don’t see all of these Democrats in the city doing much to stop the deal.

As well they shouldn’t, because it’s none of their business. This is a decision for the 99 percent of the company owned by outside investors. That’s how a free-market economy works. As voting shareholders, we can each choose to vote however we please. But what we cannot do is ask our government to step in and force a decision on our behalf. There is nothing less American than that.

Apropos my last post, the Ste. Genevieve Herald reports:

Under Missouri law, customers must purchase electric power from the utility that owns the service territory in which the customer is located. The Holcim cement plant site lies in CEC’s [Citizens Electric Corporation] certificated service territory. However, Holcim wants to buy its power from nearby AmerenUE (a portion of the plant site lies in Ameren’s territorial boundary) because the cement company says there would be very significant cost savings due to Ameren’s considerably lower rates.

This is an example of one of the many ways in which the regulation of natural monopolies can create undesirable outcomes. Allowing Holcim to purchase its power from AmerenUE would increase competition in the energy market and thus put pressure on CEC to find ways to cut costs. In a normal functioning market, this is exactly what would occur. However, the state government has granted CEC an exclusive right to sell electricity within it’s geographic area — exactly the opposite of what would be beneficial for consumers. Do you smell perverse incentives? I do.

CEC defends itself, claiming that:

[...] the electric cooperative has the exclusive right to sell power to customers in its certificated service territory, adding that the contract signed by Holcim in 2002 binds the cement manufacturing firm, and that allowing Holcim to purchase power from someone else will jeopardize the utility and raise costs for other customers.

Part of the problem is that CEC is never jeopardized. In a market, firms must be efficient and innovate or cease to exist. CEC doesn’t have that problem, and thus can get away with inefficient operations and high prices. A consequence of the exclusive territorial right granted to CEC (and other utility companies in Missouri) is that the loss of one customer raises prices for other customers — but this is the symptom, not the disease. Treating the disease will almost always do a better job of solving the problem than treating the symptoms. In this context curing the disease entails removing state-enforced territorial monopolies and allowing competition at least the chance to break down natural barriers to entry.

According to the Springfield News-Leader:

The Public Service Commission is allowing Laclede Gas Company to charge customers an estimated additional $127 over the November through March winter heating season. Regulators have already approved similarly sized purchase gas adjustments for the Empire District Gas Co., AmerenUE, Atmos Energy and Missouri Gas Energy.

The natural gas industry is an example of a natural monopoly. A natural monopoly faces a unique cost structure, in which high fixed costs that present a significant barrier to entry for competitors combine with low marginal costs that allow the monopolist to set its price significantly higher than it would under competition. The textbook argument for regulating natural monopolies is that if regulators can force the monopoly to set its price equal to the marginal cost of the last unit produced (in this case, of natural gas), society benefits from higher levels of production and lower prices.

The problem is, that is one huge "if." In order for regulators to force natural monopolies to set their prices correctly, they have to know both what the correct price is and be motivated to enact the regulation necessary to correctly set the price. In real life politics, neither assumption seems likely. Only the monopolist has any real idea of what industry costs look like, and regulators almost assuredly have less information — especially given the incentive for the monopolist to inflate and misrepresent costs. In addition, regulators face perverse incentives to collude with the monopolist, as well as to prevent any changes — technological or otherwise — that threaten the need for the regulatory commission to operate, and thus for the regulator’s job to remain intact.

Deregulation is not without faults, but the primary benefit to be taken into account is the innovation it spurs. If any industry has abnormally high profits, such as under a natural monopoly, there is an extremely large incentive for outsiders to break down the high cost barriers to entry and compete with the natural monopolist. Under regulation, the natural monopolist is less likely to face this sort of competition and more likely to entrench itself with a static state of technology. In the long run, Missouri would probably benefit from deregulating various natural monopolies in order to let competition and innovation break them down.

We’ve praised Sen. Claire McCaskill repeatedly on this blog, but her comments about the InBev deal deserve some response:

“I was very upfront,” McCaskill said of her discussion with [InBev's CEO Carlos] Brito. After offering him a Budweiser and sipping one herself, she told him she would “do everything I could to stop this sale from going through … It’s a bad idea. I don’t want you to buy it. The people of Missouri don’t want you to buy it.”

Politicians never seem to understand how capitalism works. The InBev deal is not the government’s decision or the people of Missouri’s decision. It is the decision of the shareholders of Anheuser-Busch. If shareholders reject the InBev deal, AB stock will plummet. But that is the shareholders’ decision, not ours.

More from the article:

Speaking to reporters after, McCaskill blasted the proposal as a “premium profit for hedge fund investors” and said A-B is a strong company that has provided thousands of good middle class American jobs.

Anheuser-Busch displaced thousands of good middle class American jobs last year when it bought out Pennsylvania’s Rolling Rock. And despite a website that looks very familiar to another local website, there was no outcry (or even a tear) from Missouri public officials.

“We do not have a ‘For Sale’ sign on our front lawn in America,” she said.

Well, then maybe the government shouldn’t have gotten to the point where the American people owe $9.2 trillion dollars (of which about a third was accumulated under President Clinton, and another third under President Bush). If I owed trillions of dollars in debt, I might have to sell off a few possessions, too.

The Post-Dispatch (surprisingly) ran a pretty good reality check on the AB deal. And yours truly did, too.

One of the creators of the “SaveAB” website posted the following commentary on the Columbia Daily Tribune’s blog:

“Americans don’t want the Statue of Liberty bought by the Saudis or the Washington Monument purchased by the Chinese. Shareholders should resist choosing dollars over American jobs. Selling out to the Belgians is not worth it – because this is about more than beer: it’s about our jobs and our nation.”

While I certainly appreciate the sentiment and nostalgia surrounding the Anheuser-Busch drama, I cannot agree with the author’s logic. The InBev bid is a perfect example of what capitalism is all about — the migration of capital to the places where it can be used most productively. It is this free flow of capital that has powered the U.S. economy since its inception.

For example, during the past decade Toyota has created 36,632 new American jobs. Is Toyota destroying U.S. culture? No. It has been fundamental in fueling innovation in the automobile industry and ensuring that those 30-some-odd thousand families have a home to live in and food on their plates, and are able to contribute to the growth of the U.S. economy. In fact, there are currently more than 5.1 million Americans (4.4 percent of the entire labor force) employed by non-U.S. companies. If we deny Anheuser-Busch shareholders the right to choose whether to accept InBev’s bid, what are we saying about the long-term prospects of millions of Americans’ jobs?

Moreover, if foreign investment is such an “affront to democracy,” then why is the Missouri legislature paying Bombardier Aerospace (a Canadian airplane manufacturer) millions (of taxpayer money, no less!) to build a factory in Kansas City? If we rely on nationalistic sentiment, shouldn’t we demand that those jobs remain in Toronto? Or shouldn’t we demand that Anheuser-Busch bring back the jobs of the nearly 24,000 people it employs outside of the Saint Louis area? If we were to follow this kind of protectionist sentiment to its logical extreme, we would simply revert back to an economy of sustenance farmers, completely dependent upon our local economies for our entire means of production.

How “American” is that?