Marginal Revolution

...two steps back...

Gerhard Schroeder's...Social Democratic Party (SPD) said yesterday it would campaign for a new "tax on the rich."  The party's top executive...said its electoral manifesto would include a three-point surcharge, to be added to the top 42 per cent rate of income tax, for anyone earning more than 250,000 Euros.  Franz Muentefering, the SPD chairman...made clear it was intended more as a psychological [sic] than as a fiscal step.

The surcharge is intended to "rally disaffected voters."  The quotation is from the 27 June Financial Times.  Here are some previous posts from the series: "The Earthquake that is Germany."

Big Blogger(s) is watching you

In Korea, a woman's dog [****] on the train. When people on the train asked her to clean up the mess, she became belligerent.

Then bloggers, including one with a camera, got to work:

Within hours, she was labeled gae-ttong-nyue (dog-****-girl) and her pictures and parodies were everywhere. Within days, her identity and her past were revealed. Request for information about her parents and relatives started popping up and people started to recognize her by the dog and the bag she was carrying as well as her watch, clearly visible in the original picture.

Here is the link.  Here is Daniel Klein on reputation.  Here is a relevant image.

Cinematic box office is down around the world

It is not just in the U.S., here are a few of this year's declines:

Germany: 14 percent

Spain: 9 percent

Australia: 11 percent

France: 13 percent

Japan: 10 percent for domestic films, 25 percent for Hollywood films.

Italy: 17.8 percent

Here is the full story, and I do not expect the watchable but philosophically lackluster War of the Worlds to change these facts.

Is it the Internet taking our time and attention?  Illegal downloads?  The hot summer in Europe?  The mediocrity of this year's Hollywood fare?  High prices?  The narrowing of the DVD release window from an average of four months to a forthcoming two months?  And don't forget, if you remove Passion of the Christ from the numbers -- a unique cinematic phenomenon if there was one -- this year is just about on a par with last year, at least in the U.S..  George Lucas notes that movie attendance has been declining since WWII.  Stay tuned...

Scary political threats

Many ownership worries are circulating, and not just about Maytag in the hands of the Chinese:

Major League Baseball hasn't narrowed the list of the eight bidders seeking to buy the Washington Nationals and some Republicans on Capitol Hill already are hinting at revoking the league's antitrust exemption if billionaire financier George Soros, an ardent critic of President Bush and supporter of liberal causes, buys the team.

"It's not necessarily smart business sense to have anybody who is so polarizing in the political world," Rep. John E. Sweeney (R-N.Y.) said. "That goes for anybody, but especially as it relates to Major League Baseball because it's one of the few businesses that get incredibly special treatment from Congress and the federal government."

Rep. Tom M. Davis III (R-Va.), who was a strong supporter of bringing a baseball team to Virginia, told Roll Call yesterday that "Major League Baseball understands the stakes" if Soros buys the team. "I don't think they want to get involved in a political fight."

Here is the full story.  I am also appalled that this kind of political threat is not viewed as a) a major scandal, and b) headline news.  It is time to seize back the Republic, no?

How many pages must you read to know?

I am writing this after only ten fun-filled pages of John Twelve Hawks's The Traveler, the new publishing sensation.  I dragged Alex and Robin Hanson to Borders after lunch yesterday and picked up a copy from the front table on the first day of release.  Is it a spy story?  Fantasy?  Science fiction? 

The author, by the way, claims to "live off the grid," here is a profile (of sorts).  To maintain his anonymity he (supposedly) speaks only by satellite phone to his publisher and agent.  Here is the book's entertaining website, which includes Q&A with the author.  Here is a strong Janet Maslin review, from The New York Times.

Freakonomics Too

The latest Wall Street Journal Econoblog features yours truly and Bryan Caplan.  Instead of debating, Bryan and I talk about our favorite freakonomics from people other than Levitt and Dubner.  We hit on some themes familiar to this audience and some new material. 

Unocal and China

Michael Higgins who blogs at Chocolate and Gold Coins but is writing in the comments section of Crooked Timber asks a good question about the CNOOC bid.

If Unocal went out of business, would we have cared? If China had spent $10 billion on new tanks, would we be quaking in our boots? (I’m glad they are not doing this). But if neither happens but instead one Chinese company buys Unocal and keeps their employees employed, we should be concerned?

Although I didn't get into this in my original post, it's also not clear to me what we gain by "owning" Unocal.  If the assets of Unocal are in America or an ally then CNOOCs bid gives us greater power over China not less.  If the assets are in Asia then in the event of a major conflict we would have to use the military to control the assets whether we own them or not. Steve Carr, also writing in the comments section of Crooked Timber, expresses this point well.

The United States doesn’t own, in any sense, Unocal’s reserves—the vast majority of which are, by the way, in Asia. So it’s not losing anything, because it doesn’t have anything. If, in this imaginary future that Krugman is conjuring, the US wants those reserves, it will have to take them by force—first nationalizing Unocal (or whatever American company comes along to pick up Unocal if the CNOOC bid is dropped) and then seizing and defending the reserves militarily against the Chinese (who, in Krugman’s model, will presumably be trying to take them). If Unocal is bought by CNOOC, and we want the reserves, we’ll again have to take them by force from a public company. The second seems mildly more difficult than the first, but in both cases you’re talking about a massive use of military force to secure energy resources. If we do end up in that future, I have a hard time believing that who owns the deed to the natural-gas fields in Indonesia is going to make much of a difference to anyone.

There is, then, no real downside (in strategic terms) to letting the deal go through. But there’s a real downside to blocking it: alienating China, making it clear to them that we perceive them as an enemy, looking like hypocrites in the eyes of the world, interfering with rights of Unocal shareholders, etc.

Other good comments from Tino at Truck and Barter.

An Eminent Domain Case that I Favor

If rich, powerful people were subject to eminent domain I think the Kelo decision would have been decided differently.  Logan Clements has a good idea for a new hotel project.

Monday, June 27, 2005

Mr. Chip Meany
Code Enforcement Officer
Town of Weare, New Hampshire
Fax 603-529-4554

Dear Mr. Meany,

I am proposing to build a hotel at 34 Cilley Hill Road in the Town of Weare. I would like to know the process your town has for allowing such a development.

Although this property is owned by an individual, David H. Souter, a recent Supreme Court decision, "Kelo vs. City of New London" clears the way for this land to be taken by the Government of Weare through eminent domain and given to my LLC for the purposes of building a hotel. The justification for such an eminent domain action is that our hotel will better serve the public interest as it will bring in economic development and higher tax revenue to Weare.

As I understand it your town has five people serving on the Board of Selectmen. Therefore, since it will require only three people to vote in favor of the use of eminent domain I am quite confident that this hotel development is a viable project. I am currently seeking investors and hotel plans from an architect. Please let me know the proper steps to follow to proceed in accordance with the law in your town.

Thank you.

Sincerely,

Logan Darrow Clements
Freestar Media, LLC

Addendum: The hotel is to be called the Lost Liberty Hotel.  You can pledge to stay at the hotel if it is built, thereby demonstrating its public value, at Pledge Bank which uses assurance contracts to overcome prisoner's dilemma problems.  Thanks to Travis Corcoran for the link and starting the pledge.

The Grokster decision won't much affect illegal file-sharing

Yes it might stifle technological innovation, but it won't stop or perhaps even diminish illegal file-sharing.  You might recall that the major file-sharing service KaZaA is missing from the suit, as it falls under Australian law.  Yes there is a suit in Australia but what matters in the longer run is the strength of the most permissive international ruling.  Our Supreme Court is unlikely to fit that bill.

Reason.com adds more.  David Post has a detailed analysis of the case.

Krugman: Illiberal Demagogue

Paul Krugman used to be a liberal economist; no longer.  His abandonment of economics has long been plain, Krugman's abandonment of liberalism was announced in yesterday's commentary on China.

What really upset me about Krugman's column is not the bizarre economics but the illiberal politics.  In the last twenty years China's economic growth has lifted hundreds of millions of people out of poverty and nearly unspeakable deprivation.  China's abandonment of communism is one of the great humanitarian events of all time.  And what does Krugman have to say about this improvement in well being?  (I paraphrase).

'Watch out.  Now is the time to panic. Their gain is your loss.'

It's hard to over-estimate how awful Krugman's column is.  Consider this:

China, unlike Japan, really does seem to be emerging as America's strategic rival and a competitor for scarce resources... 

'Strategic rival' is the kind of term that would-be Metternichs throw about to impress their girlfriends but what does it mean?  Everyone is a competitor for scarce resources.  Even those nice Canadians compete with Americans for scarce resources.  Are Canadians a strategic rival to be feared? 

The real question is how do rivals compete?  Do they compete with war or by trade?  China is moving from the former to the latter but shockingly Krugman prefers the former.  Exaggeration?  Consider this statement:

...the Chinese government might want to control [Unocal] if it envisions a sort of "great game" in which major economic powers scramble for access to far-flung oil and natural gas reserves. (Buying a company is a lot cheaper, in lives and money, than invading an oil-producing country.

So what does Krugman recommend?  Blocking the bid for Unocal.  In other words, support China's fear that they may be cut off from oil and encourage the invasion of an oil-producing country.

Nothing can harm the prospects for world peace more than the vicious idea that we do better when they do worse. The Chinese and Americans people already have enough mercantilists, imperialists and “national greatness” warriors pushing them towards conflict, what we need on this issue are liberal economists like the wise Brad DeLong who writes:

It is very important for the late-twenty first century national security of the United States that, fifty years from now, schoolchildren in India and China be taught that America is their friend, that it did all it could to help them become rich. It is very important that they not be taught that America wishes that they were still barefoot and powerless, and has done all it can to keep them so.

How is it that Brad DeLong and I should agree so completely?  It is because neither of us has forgotten our heritage as economists.  Here then is the enlightened humanity and wisdom of the first liberal economist. 

Each nation foresees, or imagines it foresees, its own subjugation in the increasing power and aggrandisement of any of its neighbours; and the mean principle of national prejudice is often founded upon the noble one of the love of our own country. The sentence with which the elder Cato is said to have concluded every speech which he made in the senate, whatever might be the subject, 'It is my opinion likewise that Carthage ought to be destroyed,' was the natural expression of the savage patriotism of a strong but coarse mind, enraged almost to madness against a foreign nation from which his own had suffered so much. The more humane sentence with which Scipio Nasica is said to have concluded all his speeches, 'It is my opinion likewise that Carthage ought not to be destroyed,' was the liberal expression of a more enlarged and enlightened mind, who felt no aversion to the prosperity even of an old enemy, when reduced to a state which could no longer be formidable to Rome. France and England may each of them have some reason to dread the increase of the naval and military power of the other; but for either of them to envy the internal happiness and prosperity of the other, the cultivation of its lands, the advancement of its manufactures, the increase of its commerce, the security and number of its ports and harbours, its proficiency in all the liberal arts and sciences, is surely beneath the dignity of two such great nations. These are all real improvements of the world we live in. Mankind are benefited, human nature is ennobled by them.