It’s finally done. Yesterday I finished my tenure application and now it’s out of my hands. The department will vote in January, then it goes to the Dean, then the Provost, then the President. I’ll find out in April. Until then, I’ll just keep plugging away and getting some more research out so I can hopefully update it in early 2010 with another journal acceptance. And hopefully blogging a bit more.

Our employment contract states that for teaching faculty, “effective teaching shall be the principal proportion of the five criteria considered in evaluation.” (For the record, the five are: effective teaching, scholarly or creative achievement or research, evidence of continuing preparation and study, contributions to student growth and development, and service to the university and community.) Part of effective teaching is trying new things, making changes, and improving your course. Sometimes those changes don’t quite work out the way we thought they would, but if we don’t try, we’ll never know if they work or not.

I am so thankful now that years ago I put our student evaluation process online instead of the traditional paper evaluations. Students have the chance to complete it at a time that is convenient to them, and they write a TON of comments that are more specific and helpful than the ones I got when I was using paper. I’ve tried to focus on the answers I’ve received to “What are the weak parts of the course that could be improved?” and have been fortunate to receive some really great suggestions from students. A few years ago, a few students suggested using an in-class exercise as a way of breaking up a 3-hour night class. I tried it the next semester and got great comments on it, so I’ve added it to almost all of my courses. That’s just one example. There are many more.

And that’s why I’m writing this post today, as another semester comes near to an end. Students: please take your evaluation process seriously. Give your professors useful comments. If they’re not doing something well, tell them how they can improve. (As I tell my students: if you think I suck, don’t just say “you suck” — tell me exactly WHY I suck so I can try to suck less in the future.) If you want your professors to care and to really do a good job, then you have to do your part to give them information they can really use. Don’t just say “I don’t like the homework.” Explain exactly why you don’t like it and suggest how it could be changed in the future. Sure, some of your professors are so set in their ways that they’ll probably ignore your suggestions anyway, but there are enough of us out there who really want to improve that it’s worth a shot. Chances are that some of the useful things your professors are doing in class now are the result of a student giving feedback years ago. And it’s probably also the case that your less-than-effective professors aren’t even sure what they’re doing wrong — or if they know, they don’t quite know how to fix it.

So be specific, be constructive, and be creative in your comments and suggestions, and we’ll all be better off for it.

As a libertarian, my general notion is that before government takes over, we should try liberty and free markets first. I’m radical like that. And when government intervenes and the problem isn’t fixed, perhaps the solution is not even more government intervention.

But whenever that argument is put to someone who disagrees, they often counter by saying, ”Government isn’t bad. Government is people.” That’s the argument used by frequent O’Reilly Factor guest, Dr. Mark Lamont Hill in a special by John Stossel.

But just because there are people in government, and we want to believe that people are generally good (despite all evidence to the contrary), that doesn’t mean that government is therefore good. By that logic, gangs and drug cartels are good. They are all made up of people, too, right? I’m not saying the government is as bad as a drug cartel (again, despite all evidence to the contrary). I’m trying to point out that the government is not just people, just as a firm is not just people.

What is a firm? Ask 10 economists and you’ll get 10 different definitions, but my best attempt is this: a firm is a collection of assets, long-term contracts, people and incentive structures designed to maximize profits. Change the people in a company and you often get different results. Change the contract structures in place and you’ll get a different outcome — just ask Netflix, who proposed a different form of video rental business that has helped destroy the traditional video store like Blockbuster. Change the incentive structure for your employees and suppliers, and you’ll get a different outcome.

Some incentive structures are good, and people are rewarded for working hard. Other incentive structures are bad. Take those evil subprime lending banks. Loan officers had an incentive to make NINJA loans (no income, no job, no assets) because they were paid a loan origination fee. Why take the risk of making bad loans for your company? Because the company could sell them off to Fannie Mae and the risk was no longer their problem. The incentives and contracts that were in place induced utility-maximizing employees to behave in a certain way that, in the end, was destructive to the economy. The collapse of the housing market should not have been a surprise if you just followed the incentives that were created from a) The Community Reinvestment Act and regulations requiring banks to lend to less-than-qualified borrowers or face regulatory scrutiny, b) loan companies that pay their loan officers a commission of every loan they make, c) Fannie Mae’s policy to buy more subprime loans, and d) securitization of these loans so that the risk was spread over a wide swath of investors. That doesn’t mean the banks who made the loans were bad — it means the laws, regulations and incentives all combined to create a bad outcome. And instead of blaming the laws they put in place, people in Congress simply villify the banks.

I recently tried to save my university money by buying a 3-year membership to the Western Economics Association International instead of a 1-year membership. One year was $60, 3 years was $125. I opted for the 3-year “green” membership to save money and trees, which cost me $110. When I applied for reimbursement, so that the $110 would come from my professional development fees, I was told that I’m not allowed to buy a 3-year membership, and must buy a 1-year membership instead. Instead of being thanked for saving money for the university, I was told that we’re not allowed to do that. Do I think that the person who e-mailed me informing me of this policy is bad? No — she’s just doing her job. There’s a reason for the rule (so that all payments are counted in the right fiscal year), but that doesn’t make it a good rule overall.

So when people like myself say they distrust government, or think government is bad, please don’t counter with the simplistic argument that “government is people.” Government is a set of laws, institutions, and regulations that often end up rewarding people for behaving in ways that are not optimal for the economy or society as a whole.

I lost my fantasy football match-up last week 98.1 to 98.3.

What made it worse is that I had three starting players score less than 2 points. If I had started anybody else on my bench instead of any of those three people, I would have won.

One of the reasons fantasy football can be so aggravating is that your mistakes stare you in the face. You can clearly see all the wrong decisions you made and, if you lose, they can haunt you on Monday morning.

I’ve mentioned before on this blog that one of the difficulties with economics, especially macroeconomics, is that we cannot run experiments like the natural sciences can. Biologists can tweak one variable in a petri dish and see how an organism responds to it. We can’t tweak one variable in an economy and see how the economy responds because the real world isn’t a controlled experiment. While we’re changing taxes and spending, a million other things in our world are changing at the same time, and all of those come together to impact the economy. Thus, we rely on economic models with dozens of assumptions, usually based on prior performance. And in an economy that is ever-changing, many of those are likely inaccurate today. The least you can do, as a responsible economist, is to try to be realistic in your assumptions. Unfortunately, back in March, the CBO couldn’t even do that much.

The notion of a job “saved or created” is an unprovable statistic. Even the CBO’s latest report on the effect of the stimulus puts the number of jobs “saved or created” at a range between 1.9 and 4.8 million, depending on different multiplier estimates. Call me crazy, but when the high estimate is 2.5 times as much as the low estimate, it makes me not put a lot of faith in the model you’re using. Imagine if the local weatherman announced that tomorrow’s high would be somewhere between 30 and 75 degrees.

If only the economy were more like fantasy football. We could see what would have happened if we had done things differently. And while it might reveal that we made some bad decisions, and they might haunt us because people’s livelihoods were at stake, at least we would be able to examine the situation critically and learn from it so that we don’t keep making the same mistakes over again.

And on that note, I have to drop a few players from my team.

Republicans say:

President Obama’s spending spree is pushing our deficit to record levels, and the enormous national debt that he is heaping on this country jeopardizes our very future. Getting our deficit under control is the most important thing we need to do right now.

BUT…we should extend all the tax cuts, even on those earning over $250,000, even though it will cost us $70 billion per year for the next ten years.

Democrats say:

The Republicans don’t really care about the deficit and are fiscally irresponsible — after all, they had no problem passing Medicare Part D even though it wasn’t paid for. Giving continued tax breaks to the wealthiest among us is going to cost $70 billion per year , and we can’t afford that.

BUT…we have no problem using that same $70 billion for different kinds of tax cuts and spending increases that we like.

Last night I saw a piece on ABC World News Tonight, and here’s the link to their online version of it. It says that in most major cities, young women (under 30) who have no kids and are not married earn about 8% more than men. In some cities, New York for example, the difference is as high as 17%.

Now, if I were the director of a Men’s Center, I would issue a public statement about how this is clearly unfair to men, an obvious sign of gender discrimination. I might even have a bake sale to raise funds to raise awareness of the unfairness of it all. But that would obviously be ridiculous…there’s no such thing as a Men’s Center (even though we’re a minority at almost every college in the country).

The main reason cited in the article is actually a bit of speculation, since no analysis of the educational levels and/or occupation of women vs. men is reported. But the apparent cause is a simple one: women make up 60% of college graduates these days, and college graduates earn salaries about twice what high school graduates thus, thus women earn more money. The “gender gap” has been narrowing for decades as the composition of college graduates has been changing, so this is hardly a surprising result.

(Of course, if you look into the “gender gap” and correct for occupation and education, you’d see that all but 5% of the gap disappears. Yet directors of Women’s Centers keep citing that women make 78 cents for every dollar a man earns, as if that is really the statistic that is relevant for determining discrimination. That would be like me citing the fact that the composition of the NFL is 70% black, and then jumping to the conclusion that white players are clearly being discriminated against. It’s a statistical fact, but it doesn’t tell you anything about why it’s a fact. For more, see an old favorite of mine.)

But let’s get back to this article. The interesting thing is that it is only single childless women who get paid more than men. Women are more likely to take time off of work during/after pregnancy, and also more likely to drop out of the labor force for extended period of time after having children. Whether that’s “fair” or a result of old-school societal norms that force them to be at home while their husband “gets” to work is beside the point — it’s a fact. And it’s a fact that business should be accounting for. If I have two people, one of whom is more likely to drop out of the workforce and make all the training they received wasted, I’m going to pay that person less because my expected return on them is lower. If someone demands equal pay but does not have equal workplace expectations, that’s not equal at all. Until men can have kids, firms are likely to expect women to work fewer years. It’s that simple. And if men giving birth is anything like it was in the movie Junior (in which my good friend Dana Wagner, aka Studio Compton, has a small extra appearance), it’s probably not something you want anyway.

(Note: This is also a bit of a self-fulfilling prophecy: firms believe women will be less likely to stay in the work force, so they pay them less as a result, and then women find the choice to stay home more appealing because the opportunity cost of doing so is lower. Thus, women are more likely to leave the work force, and employers feels justified in paying them less. It’s like when I was a teenager and my friends and I would go to a restaurant: the server would assume we were going to tip poorly, so we would get poor service, and then we would of course tip poorly.)

By not having kids and, in fact, not even being married, these women are giving their employers a signal about their commitment to the job, and they are being rewarded with higher pay. And they’d likely get even higher pay if they could enter into a contract with their employee to waive maternity leave rights (thereby making an even stronger commitment to staying in the work force), and saving their employers a large expected expense in the future. After all, not every women wants to have children (despite what Dr. Bob might tell you). But thanks to the Family and Medical Leave Act, that kind of contract would be illegal because Big Brother has determined that you should not be allowed to waive your rights to maternity leave, even if you never plan on having a child.

So all the single ladies (all the single ladies), congratulations on getting the money you rightfully deserve (and have probably been getting for a while now, despite protestations by Women’s Center directors to the contrary). Just remember one thing: if it weren’t for big government intervening to “protect” you, you’d probably be making even more money than you are.

(Wow, just realized I haven’t written anything this month. I’m up for tenure this year and am working on a bunch of stuff, but I’ll try to do better than once a month.)

I was listening to some talk radio yesterday and the host was talking about the absurdity of taxing a company (health care companies in general, pharmaceutical drug companies in particular) to subsidize its customers. His argument went like this: I sell a product of my own invention, a pill, for $10.00, and that price includes a decent profit margin for my efforts. The government thinks the price is too high and people can only afford $8.50, so they tax me $1.50 and then give that $1.50 to the customer so they can afford the product. His argument was that when you tax him $1.50, he’s just going to raise the price by $1.50 so he can keep the same profit as before. Thus, the new price is $11.50 and customers getting the subsidy end up paying $10.00, leaving them in exactly the same position as before.

Sounds good, but there’s a significant problem with his argument. The only way that prices rise by the entire $1.50 is if you have a competitive market with zero economic profit — thus, prices HAVE to rise by $1.50 just for him to stay in business. But he prefaced the entire argument by saying this was his intellectual property and he included profit in his prices. This implies he has market power (the ability to raise prices above marginal cost and not lose all his customers). Thus, his assumptions contradict each other.

When firms have market power, they should produce where marginal revenue equals marginal cost (MR = MC, aka the “golden rule of profit-maximization”). If MC rises by $1.50 because of the tax, the firm should cut back output until MR rises by $1.50 also. Since the MR curve has twice the slope of the demand curve (if demand is linear), reducing output so that MR rised by $1.50 results in prices rising by $0.75. Thus, he should charge $10.75 for his product and the subsidized consumer ends up paying $9.25.

He’s right that the consumer won’t end up paying the $8.50 that the government wanted, but wrong in saying that he’ll just pass the entire tax onto his customers. Granted, he COULD do that, but he would be losing more money than he would by only passing on half the tax. He’d keep the same profit margin on each unit, but the higher price would cut back his sales volume and his total profit will be lower. Mitigating the price increase a bit reduces his profit margin, but he sells more units and profit ultimately is higher (lower than without the tax, of course, but higher than if he raises prices by the full $1.50).

This is just one example of the overuse of “supply and demand.” When people think about economics, the first thing they say is “supply and demand.” The problem is that model only works when markets are perfectly competitive (lots of firms making the exact same product, like in most agricultural markets). And if there’s any market that is not perfectly competitive, it’s pharmaceutical drugs. When you apply principles of supply and demand to non-competitive markets, your conclusions are wrong.

If there’s anything the financial crisis and its proposed remedies should have taught us, it is this: assumptions matter. For example, Christina Romer’s model predicted that unemployment would not exceed 8% if we passed the stimulus bill, and clearly it was wrong. Why? Maybe the economy was worse than they thought. And perhaps it’s also partly because her model did not account for the way consumer behavior changed. Before the recession, the personal saving rate in the US was around 2%. Given that, it may seem reasonable to think that if you give people a job or give them tax cuts they’ll go out and spend all of this new disposable income, so firms will have to produce more output and hire more people. Thus, we were told the stimulus bill would “save or create” 3 million jobs. But that’s not what happened. After the recession, the personal savings rate tripled to about 6% for the last 2 years.  People are paying down debt to increase their ability to get credit, and saving what they can because they’re worried they might lose their jobs.

So the conditions on which the model was based changed, which makes one wonder how many jobs were actually “saved or created?” Surprisingly, the White House is still claiming 3 million jobs. This seems curious, when the White House also says that the economy was so much worse than they thought it was, and consumers aren’t spending as much as they assumed the would. Baffling.

This article sheds some light on the situation. In its latest report, the CBO says about 750,000 jobs were directly paid for by stimulus money, but notes that we can’t say all of these jobs were “saved or created” because “some of the jobs included in the reports might have existed even without the stimulus package, with employers working on the same activities or other activities.” And they’re not counting a job the way most of us would think of it, as a “job-year” — so if stimulus money funds someone in a job for two weeks, it counts as a job. And what about the indirect effect on the entire economy? According to the CBO, the stimulus “increased the number of people employed by between 1.4 million and 3.3 million,” which the article notes is ”not far from the administration’s claim that the stimulus ’saved or created’ 3 million jobs.”

I have two major problems with this. First, between 1.4 and 3.3 million is a pretty wide margin of error. Only if all the ”best-case scenario” assumptions hold do we come close to the 3 million jobs that the White House claims on its web site it has ”saved or created,” and the fact that the unemployment rate went higher than expected and consumers are saving more money than they used to should be an indication that these best-case scenarios are not realistic.  Second, if you read the actual report, you’ll see that the high estimate used for the government spending multiplier is 2.5. You may remember that the multiplier used by Romer initially was only about 1.7, and that was used to say that the stimulus bill would create 3 million jobs. And that was when people were spending almost all of their income. Now, when people are saving more than before, the CBO is using a multiplier of 2.5 so that it can say there’s a chance the stimulus bill saved 3 million jobs. Hogwash.

When your model is proven wrong by the facts, perhaps you should adjust the model before making claims about counterfactuals whose validity come only from the model you use. In this case, the multipliers should be revised downward, not upward. And when talk show hosts make claims about the impact of government policies, it behooves them to realize that the real world is a bit more complicated than a simple model of supply and demand. It might not make for good talk radio, but it would certainly make them more credible.

A friend of mine from graduate school, Art Carden, has developed an interesting way of credibly committing to doing things. When he has work that absolutely, positively has to be done by the end of the day, he’ll post on Facebook: “Art is going to finish X by the end of the day, or he owes [insert person's name here] $100.” (Art — I think you should change it to “the first person who likes this status” as a way of making people pay attention to you more; just a thought.) Or he has even changed it to “Art will not be on Facebook for the next 24 hours, and will pay $100 to anyone who catches him on Facebook.” If at any point Art fails to meet his goal, he’ll pay $100. And if he doesn’t, then the next time he tries to make a commitment like that on Facebook, the person he cheated will probably post something on Art’s status calling him a liar, and at that point Art can no longer expect people to hold him accountable.

I brought this up in my Managerial Economics class yesterday while we were discussing the Stackelberg model of duopoly, and was mentioning that a big public announcement of a new factory or purchase contract is one way for a firm to commit to a high level of output even in the fact of competition. Making commitments public is a great way of ensuring that you’ll actually follow through with them. If you don’t, nobody will believe you and it’s much harder to get anything done in the future.

It reminded me of an episode of 20/20 that ABC did a few years back about game theory. As part of the story, they took a half dozen significantly overweight people that had been trying to lose weight for years and never seemed to be able to do it, and told them they would help them lose weight. Why would the results be different this time? The participants all signed a contract, agreeing to let ABC take pictures of them in their bathing suits (bikinis for women, speedos for men) at the start of the weight loss challenge and, if they did not meet their weight loss target, ABC would show those pictures on the broadcast.

By making these people credibly commit to taking their weight loss seriously, game theorists expected that they would actually be successful. And they were basically correct. All but one of the people met their weight loss target, and they all said that the threat of public humiliation was a significant factor. So ABC showed the picture of the woman who failed, right? Wrong. After creating a whole piece about the importance of credible commitment, ABC chickened out and did not show the bikini picture of the woman who did not lose weight because they didn’t want to embarrass her. I don’t think it’s any coincidence that ABC hasn’t done anything like that again. After all, who would believe them?

[On a related note, my girlfriend points me to www.flaab.com, where people make public statements combining both monetary loss and humiliation that are supposed to ensure they achieve their weight loss goals. I doubt the monetary pledges are legally binding, and I'm not sure that the shame of a small online community of strangers is enough to be effective, but I guess it might work for some people.]

I am sick of politicians lying to us. They break promises all the time. Guantanamo’s still open, six months after we were promised it would be closed. People earning less than $250K have seen their taxes increase, when President Obama promised they would not. Republicans say they’re for states rights, until there’s an issue they don’t like and then the federal government must intervene (Terry Schiavo, anyone?). The excuse is “it’s just politics.” It’s not a lie, it’s a “misstatement” or a “factual inaccuracy” or they were “taken out of context.” If “it’s just politics” means you get to lie to your constitutents and not follow through on your promises, that’s not an excuse for politicians — it’s an indictment of our political system.

So I propose something new. Politicians should figure out exactly what their most important issues are and take a public stand. Not just a “political” stand where you say one thing and can back out of it. Have a press conference and sign a pledge that says: “I agree to do X while in Congress, and if I don’t do it, I agree to …”

You can fill in the blank on your own, but I have a few ideas. How about stating that you will not run for office when your term is up? Or how about putting a significant portion of your wealth in an escrow account and agreeing that should you violate the specific pledge you have taken, that money will be donated to charity?

Very few politicians have any credibility left. They keep making promises, then breaking them, and we keep re-electing them. Now that I think about it, we as voters don’t have much credibility either. You can change that: vote out anybody who has ever lied to you. Then maybe the voters will gain some credibility and politicians will be forced to actually tell the truth.

This morning I saw a new commercial for Ally bank, which you can view here. If you haven’t seen it, please watch it now so I don’t have to describe it below. It only takes 30 seconds.

Normally, I actually like the Ally bank commercials, using simple situations with children to show that some things banks do are wrong and Ally doesn’t do them. They’re funny and they make their point cleverly. (That they have to use children to make their point makes me wonder how stupid they think people are, but that’s a whole other issue…)

Ally is saying it’s unfair to give the new kid ice cream, and if you’re the less new kid you sympathize with him. Most of us went through it with cell phone companies at one point before they started equalizing the promos for new and existing customers. When new customers get a bonus that existing customers don’t get, that just doesn’t seem fair, right? We should all be treated equally, right?

Wrong.

It sounds great, but you have to see how treating everyone equally will actually play out in the market. In this case, credit card companies offer teaser rates to convince people to open up new lines of credit or transfer existing lines. I’ve done it — transferring higher balances to 0% for a year, knowing full well the rate will go up after that year, but in the meantime I’ve saved hundreds of dollars. If Ally is going to treat everyone equally, they either have to give everyone a year at a really low interest rate or give nobody that year. As the commercial makes clear, Ally doesn’t give anybody teaser rates.

The commercial is cute, but it plays on our notions of fairness in a twisted way. If Kid A is getting ice cream but Kid B isn’t, most of us think the fair solution is that both kids should get ice cream. But if you actually take this commercial to its logical extension, nobody’s getting ice cream. An honest commercial would have both kids going up to the ice cream cart and the man saying, “Sorry, new kid — since I can’t give him a scoop, I can’t give you a scoop. Nobody gets ice cream here.”

I always tell my students that when I grade their exams and homeworks, it’s not an exact science. I try to be consistent, but when you’re giving partial credit, sometimes you give one student 8/10 for an answer and another student 8.5/10 for a very similar answer. Usually there’s a slight difference, but sometimes after a long night of grading the words start to blur and I just make a mistake. I tell students to compare their grades with their friends’ to see if the grading on each question is consistent. And if they find a situation where their answers appear to be the same but their grades are different, they should bring their exams up to me. My remedy for the situation: I will either explain how their answers are different and why that resulted in a difference in their scores or, if the answers are basically the same, I will mark the 8.5 down to an 8 so that everything is fair. I say that as a joke, and they all laugh because it’s so obviously unfair to the student who received the 8.5

But that’s exactly what Ally is so proudly doing here.

I watched President Obama’s speech last night knowing it would be turn to cap-and-trade and clean energy, where he said this:

As we recover from this recession, the transition to clean energy has the potential to grow our economy and create millions of jobs -– but only if we accelerate that transition

I’ve heard this before, and I’ve heard the Republicans counter with the idea that it will ruin our economy. They cite the example of Spain, which Obama praised for their “green jobs,” where estimates are that 2 jobs were lost for every 1 green job created. And it got me thinking in big picture terms about this insane focus on jobs, jobs, jobs. If jobs are all that matter, then we should just take every employed person and make them work fewer hours so that the unemployed people are needed. But is that really good for our economy?

The advancements in real GDP per person (one measure of standard of living, as it is a measure of how much “stuff” someone can buy in a year) that we have had in the last century have come about through two things: technology and ingenuity. Technology inspires new products that create their own new industries, and also allows firms to do more with less. Ingenuity provides the fuel for constant change, new products and new ways of doing things.

One of the first posts I ever wrote here was about looking at progress by examining how long it takes one to work to buy a product. If products become cheaper, you have to work fewer hours to afford them, so you can either enjoy more leisure time or use your leftover income to buy more things. Since both of these are good things, we should want products to become cheaper.

Technology and ingenuity are driven by the goal of doing more with less, and for most firms that means fewer workers, not more. If you can find a new way of doing things, or a new machine you can use, and it allows you to fire people, as a profit-maximizing firm you are supposed to do that. Employment increases when this technological advance reduces costs, allowing you to lower prices, and in turn increasing the quantity of the product that consumers want to purchase. (From an intermediate micro approach, when the cost of capital falls, there is a substitution effect and an output effect. The substitution effect is that you use more capital and less labor. The output effect is that at lower cost, you can now produce more output. Whether employment increases or decreases depends in part on elasticity of demand and how responsive consumers are to the price cuts.) Similarly, when consumers try to find the best deal, it forces firms to cut costs and be efficient — and in this way the “invisible hand” of the market gives rise to an efficient result. Just focusing on consumer greed misses the point. Likewise, chastising firms for cutting jobs in one business ignores the end result that we get more efficiency and eventually those workers find jobs in new industries.

But doing more with less is not what President Obama is talking about at all. He wants to do less with more. He wants us producing less energy and using more workers to do it.

He said that he wants to make green energy the most profitable form of energy — but he wants to do this by taxing all other forms of energy. On the campaign trail, he said that under his program “electricity rates would necessarily skyrocket.” These two things are inconsistent with job growth in the economy.

It would be one thing if green energy were cheaper than other forms of energy, and by using this cheaper form of energy we could have even more energy than before, and this increased the amount of energy people used and this in turn created more green jobs. But that’s not going to happen. He wants us to produce LESS energy, not more. And he wants to increase the price of energy, not decrease it.

I don’t understand how requiring more people to produce the same amount of energy is a good thing. If you want to focus on the environmental impact, and fewer oil spills, in your push for cleaner energy production, that’s fine and I will cede that point. (It’s a difference of priorities, not economics.) But he’s also trying to make the claim for this move towards clean energy by claiming that it will create green jobs. And that simply ignores the facts that this increases energy costs to consumers, and this will cost us in other industries, as consumers have less disposable income — similar to what happens when gas prices increase.

The focus should be on output, not jobs. When a new textbook comes out and they add hundreds of new pages but don’t really say anything new, that’s not a good thing; that’s a waste of my students’ time. Increasing the inputs required without notably increasing the output is what we call inefficiency. This is what Obama wants to do — use more labor to produce our nation’s energy. Never before have I heard that using more labor to do a job is a good thing. By his logic, it’s a better result when I spend a lot of time working on a task instead of when I’m really good at it and get it done in half the time. I wonder what the economic advisors to this President are thinking.

This same kind of argument is at play in the California Senate campaign. The main argument I hear all the time from Democrats about Carly Fiorina, former CEO of Hewlett-Packard, is that she outsourced 30,000 jobs on her watch. Post dot-com bubble, HP was in a precarious position. She found that she could save the company by outsourcing some jobs and cutting those costs, and eventually the company doubled in size. On net, the company actually increased total American jobs because it was healthier and could expand in other areas. Focusing on a few specific jobs that were lost ignores the big picture, where total jobs increased.

Similarly, President Obama focuses on a few million green jobs that will be created by a cap-and-trade bill. But he downplays the facts that costs per kilowatt-hour will increase, and he ignores the simple principle that when we produce more output with less labor, it grows the economy and eventually spurs employment in other areas.

Economists say there is no such thing as a free lunch. Unless you live in Clayton, Missouri (a high-income suburb of St. Louis). A new Panera location there is trying out a new business model. It offers the same menu as its other locations across the country (with prices shown on the menu), but consumers pay whatever they feel like paying. This is what we call first-degree price discrimination, or personal pricing. Ideally, the company has individuals pay as much as they are willing to pay but there is no way of enforcing that here. Peer pressure will likely do that, but there is no guarantee.

As the article mentions, there are two very different groups of customers that would potentially visit the location: 

The clientele at the Clayton location is a mix of well-to-do attorneys and bankers from Clayton, as well as lower-income customers who work nearby or are visiting the sprawling St. Louis County offices and courthouse nearby. Miller, the cashier, said most customers paid full price for their meals Monday, but some took a discount of a few dollars, or paid half-price.

In order for price discrimination to work, there have to be different types of customers, and that’s definitely the case here. The main question is whether the increased volume of sales by lower-income customers will more than make up for the decrease in profit margins on those sales. Another question is how many of the well-to-do customers will actually pay more than the listed menu price. The data on this experiment would be incredible; I might have to make a phone call here. 

There is one more wrinkle to this story though. This Panera location is separate from the national chain. Listed as a non-profit, it does not have to pay taxes. Instead of paying for the food, customers provide “donations.” Customers save on sales taxes, the company does not have to pay taxes on its profits nor sales taxes on the supplies it purchases.

So why do it? Maybe it’s a public relations gimmick for the main company. Maybe the profits earned by this company can be used to fund the charitable contributions that Panera would normally do, so their profits from the for-profit branches of the chain can be used in other ways. Maybe they want to see if it would work in their for-profit chains. Either way, it’s an interesting experiment.

*Yes, I know it’s not a free lunch. Somebody’s paying for the lunch — whether it’s the high-income customers subsidizing the low-income customers, or the taxpayers subsidizing them by not collecting tax revenues. What can I say? I had trouble thinking of a catchy title to this post.

UPDATE: I’ve sent them an e-mail asking them if there is any way of acquiring their data. Based on past experience, I’m not optimistic, but sometimes people surprise you.

Yesterday, the Senate Energy Committee held hearings about the offshore oil rig that exploded and has to date released somewhere upwards of 4 million gallons of oil. Senators grilled executives from BP (who operated the well), Halliburton (who performed maintenance to the well), and Transocean (who dug the well). Most of the media reports on it mention the blame game that occurred, with each company blaming the other. But what struck me was what Senator Maria Cantwell (D-Wash) said in her questioning of Lamar McKay, president of BP America.

McKay: We have said exactly what we mean: We’re going to pay all legitimate claims.
Cantwell: So harm to the fishing industry, both short term and long term, you’re going to pay?
McKay: We’re going to pay all legitimate claims.
Cantwell: If it’s an impact on business lost from tourism, you’re going to pay.
McKay: We’re going to pay all legitimate claims.
Cantwell: To the state and local governments for lost tax revenue, you’re going to pay.
McKay: Question mark.

What happened was an accident. The investigation will determine whether it was due to negligence or not, but if we are to believe that the evil greedy oil companies are in fact as evil and greedy as some politicians and pundits say they are, then clearly there was no intent to release millions of barrels of oil that could have been sold instead for a handsome profit.

Cantwell’s initial questioning is on the mark. Presuming that it should not be the government’s job to pay unemployment insurance claims for people who lost their jobs because of the oil spill (which I agree with), Cantwell wants to make sure that BP is going to compensate those who were affected by the oil spill. McKay’s refrain of “We’re going to pay all legitimate claims” gets boring quickly, but he really has no choice. He can’t say they’ll pay every single possible claim or BP will see more fraudulent claims than Medicare. There has to be a legitimate legal process by which people make a claim for damages and provide evidence of their injury. It’s the last part of her questioning that strikes me as odd and I don’t know what to make of it. Here it is again:

Cantwell: To the state and local governments for lost tax revenue, you’re going to pay.
McKay: Question mark.

(I have to say that I love McKay’s answer here. Instead of saying “I don’t know” or “We’ll have to see about that,” he says “Question mark.” The only thing I would have liked more is if, in response to a question about whether BP will pay all legitimate claims, he would have said, “True dat.”)

Now, there are two different things that Cantwell could mean by “tax revenue” and, without knowing her intent, I don’t know whether she’s simply ignorant or a tyrant.

Scenario 1: Cantwell is talking about the lost tax revenue on tourism and fishing.

If this is what she meant, the answer is simple: Cantwell is simply uninformed about the tax implications of legal cases and settlements. Since 1996, a legal settlement or court award is considered ordinary taxable income unless it is a personal injury claim, which this is not. Damages for interference with business operations are taxable income. Any payments by BP to businesses affected by the oil spill would be treated as taxable income and state and local governments would get their money that way. (If this were not the case, two companies could both avoid taxes by simply taking turns suing each other and settling out of court.) Senator Cantwell need not worry about the government getting its money…although she might want to look up the law before grilling people to avoid looking so ignorant.

Scenario 2: Cantwell is talking about the lost tax revenue on oil production income.

This one is much more ominous. Oil companies have made a tidy profit in the last few years. Politicians like Hillary Clinton wanted to “take” those profits (20 seconds in) and use them for causes they deem worthy. Representative Maxine Waters would take those profits and “socialize” them. (Her statement is at 1:15 in and I don’t know what’s scarier: that she wants the oil industry to be run by a government that can’t balance a budget, or that it takes her 10 seconds to find the words for government takeover; I think it’s also a bit of a Freudian slip when she says “socialize” instead of the appropriate word, “nationalize.”) One could interpret Cantwell’s statement as in implication that the government is entitled to those profits whether BP actually makes them or not, as I initially did when I heard her words.

If this is what Cantwell meant, it’s a harbinger of bad things to come. Almost as bad as Obama saying that things just work better when we “spread the wealth around.” Unfortunately, in the creeping expansion of government that has happened in the last two years, this kind of thing is all too familiar. The government feels entitled to your money. With the current federal budget deficit and many states in deficit, they need your money. Only if you’re “rich” of course; the poor shouldn’t have to pay any taxes at all and should just get free government. Except if they smoke. That’s bad, and since we’re going to pay for everyone’s health care, we have to punish those evil smokers, even the poor ones. Or if they choose not to buy a federal HHS Director-approved health insurance policy and instead choose to buy a catastrophic plan and save the rest of their money to pay for their own regular medical care. Then we have to tax them because, even though that strategy might save them money and not adversely affect anyone, they aren’t doing what the geniuses in Washington feel is best.

This week, the Minnesota legislature voted to raise income taxes. (Again, don’t worry — it’s only those rich people. I’m starting to wonder what we would do if we didn’t have them around.) City governments are raising property taxes, fines and fees. Pennsylvania issues a commercial threatening people who have not paid taxes that they will be hunted down and found. Some local governments are actually charging you if you have an automobile accident and the police have to come to the scene.

There is a pattern here.

Gone are the days of limited government and individual responsibility. You are not allowed to determine how much salt you can put in food. (If you’re a fan of gluttony, watch Man vs. Food now while you can; in a few years, most of the featured meals will be illegal and the show will be gone.) The President says that “at some point, you’ve made enough money” even if you’ve made it legally. And now, depending on how Cantwell’s statement is interpreted, the government may be entitled to the fruits of your labor whether you actually produce or not. From each according to his ability, indeed.

What’s yours is not yours. The government simply allows you to have some of it.

At least for now.

(Alternate Title: Will Someone With an Actual Solution PLEASE STAND UP?)

I’ve been trying to let more political things slide so it doesn’t make me crazy, but today’s roundtable on ABC’s This Week was so chock full of insanity that I had to post.

First, Al Sharpton is asked what the state of Arizona is supposed to do about their illegal immigration problem. Rev. Sharpton does not answer that question at all, putting it back on the federal government saying “the federal government is supposed to make immigration policy.” (Shame on Jake Tapper for not following up and asking him to actually answer the question about what states should do when the federal government does not do their job.)

Sharpton is no fan of the bill and is organizing a protest on Wednesday. He says it is not about protecting illegal immigrants; it is about protecting legal Hispanics who might be racially profiled. There is validity to his point if you believe that police will not follow the law. (Technically, the law doesn’t do that; but the executive order that Governor Jan Brewer signed the day she signed the law specifically prohibits racial profiling.)

[Aside: We can differ about the extent to which this would be done. Those who have a problem with this bill, mostly liberals, seem to believe that police just love racially profiling and will do it whenever they have the chance; then they say it's unfair that they get a bad rap about their stance on law and order. And it's wrong to presume that someone with brown skin is an illegal alien, but apparently it's totally justifiable to just presume cops are racist. The presumption of innocence works both ways.]

Sharpton’s evidence that the law goes too far in impinging on citizens’ rights? “The recognition of that is the state of Arizona’s legislature just refined what they said over the weekend. They conceded that we’re right and they had to refine it.” Sharpton’s argument is this: the law is bad, and we know it is bad because they had to fix it.

Never mind the fact that the bad parts of the bill WERE FIXED BY THE LEGISLATURE. Sharpton’s mad about parts of the bill that were fixed just days later, and he’s holding a protest over a bill that has been refined and improved. At this point, my brain is starting to hurt just a little bit making sense of this.

George Will tries to make an argument that, when you go to a courthouse, you have to show ID, so why is it unreasonable to ask people for ID, especially when federal immigration law requires all legal immigrants to carry their immigration papers on them at all times, and has done so for over a half century? Sharpton has a very good response to him: EVERYONE at the courthouse has to show ID, not just people that might look like illegal immigrants. I actually agree with Sharpton on this. One solution is to simply ask everyone for ID any time they come in contact with police officers, or any time they use government services. It would seem that the standard Sharpton wants is that everyone has to be asked for ID then, right?

Wrong. When asked about the Democrats’ new bill that would require everyone to show a national ID card for employment purposes, Sharpton doesn’t like that either, saying, “I would have some very serious questions with some aspects of the Democratic bill but I’m going to see what ultimately ends up being the Democratic bill and I’m sure a lot of us in the civil rights community will question parts of it.”

Let me get this straight. Sharpton doesn’t like when people are selectively required to show ID, but now apparently doesn’t like when people are all required to show ID. Not sure what Sharpton actually wants to do about immigration? Neither is George Will, who then asks him, “What enforcement of immigration laws do you support?” Sharpton never answers this question. Neither Jake Tapper nor George Will can get Al Sharpton to say what either states or the federal government can do to enforce immigration laws.

Rev. Sharpton has no solutions, but he throws a darn good rally. And did you catch the double standard he applied there?

In talking about the Republican bill, he ignores the fact that the legislature has amended the bill to improve and refine it; improvements don’t matter, it’s a bad bill and we’ll pass judgment based on the initial bill. In fact, we’ll throw a protest to show our displeasure with the initial bill, even though there have been changes.

But in talking about the Democratic bill, he doesn’t want to pass judgment on the bill until it is improved and refined. Wouldn’t want to jump to any conclusions.

If that wasn’t bad enough, I have two words for you: Bill Maher. I watch his show on HBO every week. I don’t want to be accused by people of only listening to what people who believe what I believe have to say. It’s often frustrating, but it’s definitely educational. He usually has one Republican (if that) and two Democrats, along with himself. When John Bolton mad a statement about protecting our country from terrorism, about 4 people in his audience applauded. Bolten responded, “You let in Republicans?” If you’ve ever watched the show, it’s clear that Maher is a liberal, as is his audience, and his show clearly slants left. He used to be a libertarian but now it would be a stretch to call him that, because he wants more government intervention in almost everything (except for drugs, of course; we all know Bill likes him some weed). He says outlandish things and then uses the excuse that he is a comedian to not be held accountable for them, much like Al Franken does. It was the first time I can remember ABC putting a comedian on a political roundtable and it was to their detriment.

He starts off by playing the “Republicans and conservatives are racists” angle here: “But government intrusion, you know, government power, is something that really bothers conservatives unless it’s directed toward people who aren’t white. It does seem like there’s some of that going on there.”

Tapper counters Maher’s statement with statements by Republican officials condemning the Arizona law. George Will says, “Mr. Maher just said, if I heard him right, that conservatives basically are racists and they like government intrusion only against people who aren’t white.”

Maher clearly said the second part of that. While he didn’t specifically say that conservatives are racists, a) it is undoubtedly implied in his statement, and b) Will did qualify it with the word “basically.”

Katrina van den Heuvel apparently hasn’t been listening to anything that was said, as she says, “I didn’t hear that.” It seems some Democrats want to have it both ways: they want to say that Republicans are racist, so that minorities will vote Democrat, but when confronted they want to say that they didn’t just play the race card. It’s disingenuous and shameful.

To clarify what he said, Maher says this: “Let me defend myself. I would never say, and I have never said, because it’s not true, that Republicans, all Republicans, are racist. That would be silly and wrong. But nowadays, if you are racist, you’re probably a Republican.” Sounds an awful lot like: “Not all Muslims are terrorists, but all terrorists seem to be Muslims.” When people say that, they are called racist. Hopefully that same standard will be applied to Bill Maher. But I doubt it will because, after all, he’s just a comedian.

When Jake Tapper asks him at the end of the discussion, “Bill, what should be done to protect the border?” his response is, “I pass.” He and one or two others laugh. But this is not funny. You’re on a political talk show about serious issues and you pass judgment about those that make policy, even implying that they are racist, but when asked to come up with one policy suggestion, you have absolutely nothing to contribute. I’ve been looking for a reason to cancel my HBO subscription for a while. I think I’ve just found it.

This is the problem with “political dialogue,” if it can even be called that, in America these days. Both Sharpton and Maher want to condemn people who make policy decisions to confront real problems they face because these people made decisions that Sharpton and Maher think are wrong. But when asked what decisions they would make in the face of those problems, neither one of them even tries to answer the question. It’s shameful.

Matthew Dowd, another panelist on today’s program said, summarized it well: “To me, this conversation is another example of why people that tune in and people that think they’re going to get an answer from Washington, from Democrats or Republicans, on almost any issue, whether it’s protecting the environment, whether it’s stopping things on Wall Street, whether it’s immigration reform, whether it’s enforcement of any law. That is why they’re fed up.”

Until someone has an actual solution to something they claim is a problem, I’m not going to listen to what they have to say any more, and you probably shouldn’t either. As they say in economics, if you don’t like the model I’m using, it’s your duty to tell me how to fix my model or show me that another model will yield better results. You may not like how I do something, but unless you can show me what you would do instead and how it would solve the problem better, you’re not a political thinker. You’re just a critic.

I don’t remember much about the IQ test I took when I was 7 years old. But what I do remember is I was asked if I knew what the difference was between an optimist and a pessimist. I said I didn’t know what a pessimist was, but an optimist is an eye doctor.

Monday night’s Introduction to Economics was our last class of the semester. I don’t usually get much back-and-forth in my principles classes because I have so much to get through, but for some reason this semester was different. I think I have become better at handling questions, answering them in a way that invites others to give their opinions as well. And I think that the students in this class were just very inquisitive and outgoing.

At the end of class, one of my students asked if I thought that, as a whole, economists make better financial decisions than non-economists. I told her that I think that on some things they do, especially when it comes to smart long-run investing and retirement strategies. I have no empirical evidence for that, but from what I know about other economists I have encountered, I believe that to be true. But I also know economists, including myself, who have made some of the same mistakes that every other person makes: too many credit cards, not enough down on a house, interest-only and adjustable rate mortgages, etc. Many of them are very frugal and willing to shop around to save a buck, but a lot of them aren’t. And the ones that are frugal likely spend too much time trying to save money — when I went looking for a digital camera a few years ago, I went to a dozen different stores before finally going to Sam’s to buy one. I allocated an inefficient amount of my time to finding a better deal. So, no, we’re not all rational and we don’t all behave the way our textbooks tell us we should behave.

Personally, I don’t save enough. Years ago when I finally bought my two flat-screen televisions, I financed them. Granted, it was at 0% for 2 years, so it was a good deal. But a) if I had missed a payment I would have owed about $1,000 in back-interest, so I was taking a risk delaying the payment; and b) I was still buying something I didn’t exactly need at the time and probably shouldn’t have bought.

Ultimately I concluded that while I think we do make some smarter decisions than the general population, I think we probably suffer from the same mentality as the rest of our society in not saving enough. The national debt is set to reach 90% of GDP in the next 10 years. Heading into the most recent recession, saving rates were actually negative in this country. Is it irresponsible? Sure. But I don’t think that’s really the source of the problem.

Ultimately, I think the reason that Americans don’t save enough is because we’re optimists. We think there is always going to be a better tomorrow, so we don’t have to save now because eventually things will work out. As I said that in class, I saw nodding heads everywhere. I don’t think I’ve ever seen that much agreement on anything in a class. I think that attitude was a major factor behind the housing bubble: things will always get better.

The booming economies of the 80’s and 90’s have spoiled many of us, myself included. Our grandparents or great grandparents lived through the Great Depression and, as a result, they knew that there wasn’t always a better tomorrow. Sometimes you have to buckle down and make the hard sacrifices because you never know if tomorrow will be worse than today.

The Great Recession has been a wake-up call for families across America. We’re saving more now, which is undoubtedly a good thing. Sure, it’s taking us longer to get out of the recession because we’re not spending our money, but when we finally emerge from it we’ll be on better financial footing. Every President chastises Americans by saying that we don’t save enough, but then through their words and actions they basically say “But please don’t start saving on my watch, because if you do we’ll go into a recession and I’ll lose my job.” Well, at some point we have to start saving more and this recession was the catalyst for that.

Because of the state budget sitution, I’m not sure if I’m going to have a job at SCSU after 2010-11. I’m trying to save more now just in case. I probably should have been doing it before but, like everybody else, I was just assuming that things would improve. Now, like the rest of us, my eyes are wide open. It’s a rude awakening, but I’m better for it.

I harp enough on Democratic policies and economic claims that cannot be supported by facts, so I thought I’d do the same for the other side of the aisle, people like Sean Hannity that parrot the Republican argument repeatedly that tax cuts increase revenues, no matter when or where they occur. They point to the Reagan tax cuts, where the highest marginal tax rate on income was reduced from 70% to 35%. They look at the fact that tax revenues doubled from 1980 to 1990, and therefore use a simple “post hoc ergo propter hoc” analysis to say that one caused the other. But what’s worse is that they use that example and apply the logic to any and all tax cuts, as John McCain did in an interview with the National Review, where he said that tax cuts “as we all know, increase revenues.”

I’m reading the latest version of Naked Economics by Charles Wheelan and I highly recommend it. I’ve read other books like it (The Accidental Theorist, the Armchair Economist, etc.) and I think this one is the best. In discussing the effects of taxation, Dr. Wheelan includes the following footnote:

There is a subtle but important analytical point here. Those who argue that tax cuts increase government revenues often point out, correctly, that government revenues are higher after a major tax cut than before. But this is not the appropriate comparison to make. The question we should ask is whether government revenues after the tax cut are higher than they would have been if there had not been a tax cut.

Dr. Wheelan is correct to point this out, as it is often overlooked. Yes, tax revenues went up during the 1980s when we cut tax rates. They also went up in the 1990s when we increased tax rates. And they went up in the 2000s after the Bush tax cuts. If you look at any 10-year period in which the economy doesn’t tank (which Republicans always do to make their case), they’ll ALWAYS go up because of a) population growth, and b) inflation.

But let’s get back to Dr. Wheelan’s point. It relies on a counterfactual: what would tax revenues have been in 1990 if Reagan had not lowered tax rates in 1981? The simple answer is: we’ll never know. And the reason we’ll never know is that the relationships between economic variables depend on the institutions and rules that are in place: change the laws and taxes and you change how people respond. And you can’t use the relationships from the 1970s because many other things changed from the 70s to the 80s, not just tax rates.

The same counterfactual-based argument is made by President Obama, who says that, despite the fact that his stimulus bill was supposed to keep unemployment below 8% and create millions of jobs, unemployment went above 10% (and is still at 9.7%) and we lost millions of jobs, the stimulus was a success. This analysis is based on the behavior of an economy that no longer exists, multiplier estimates based on years when people were confident in spending and people borrowed more money than they do now. It’s all based on improvable assumptions about a world that does not exist.

So just as Obama should be careful about claiming success when his numbers are down, so should Republicans be careful about claiming that tax cuts increase revenues. They may increase economic activity and create jobs, but if they’re small they won’t do enough of that to offset the loss in tax revenue from the rate cuts. If you want to cut the budget deficit, grow the economy through smarter regulation, and cut wasteful government spending (and not just so you can add another entitlement program).

And while we’re debunking tax myths, here’s another one. For those who say the Bush tax cuts and Reagan tax cuts benefited the rich, I would invite you to look up the facts. Obviously, any tax cut is going to benefit the people who pay the most in taxes, just as a decrease in the price of a good is going to benefit those who actually buy the good and have no impact on people who don’t. (That’s your economics no-brainer for the day.)

But how did they affect the distribution of taxes paid? After both of those tax cuts, the share of federal income taxes paid by the highest 1% of income earners increased. From 1981 to 1988, the share increased from 17.6 to 27.5, while the amount of income tax paid by the bottom 50% fell from 7.5% to 5.7%. In 2007, the share of federal income taxes paid by the highest 1% of income earned was 40.4% (almost double their share of income earned, 22.8%). In 2000, before the Bush tax cuts, these people paid 37.4% of taxes. To wealthy people benefit from tax cuts? Yes, because they pay the most in taxes. But they actually make the distribution of tax liability more skewed in favor of the poor, not less.

*See Virginia Postrel’s analysis of the 1986 tax cut.

I’m saddened by the news that Belgium is close to banning the burka.

Muslim immigrants have had a difficult time assimilating in some European countries and this certainly isn’t going to help. I understand and am in favor of some of the rules that some European governments have had to impose, like the one saying you have to actually show your face on your identification card so the government can actually identify you. Call me crazy, but if your face isn’t showing, it’s not a useful means of identification.

But when it gets to the point where you ban an article of clothing for women, one that has important religious meaning, because you’re afraid that male terrorists could wear them and move about unknown, I almost don’t know what to say. It makes me want to get up on my soapbox and do my best Keith Olbermann impression: “How DARE you, sir! Have you no SHAME?”

After 9/11 when Muslim groups like CAIR were saying that it was unfair that more Muslims were screened in airport security, I was admittedly not very sympathetic to their concerns. I have always said that if white, blue-eyed, blonde males ages 30-40 were bombing train stations, then I would have no problem going through extra security when I went to board a train. I would be mad at the people who were doing the bombing, who were tarnishing my image, not at the people who had to put me through greater security to ensure I was not one of the bad guys. I would be sympathetic to the government and understanding of their need for hightened scrutiny of people who looked like me.

But I think this goes too far. If this law passes, it’s going to set back relations with the Muslim community in Belgium, without question. Perhaps that’s part of the agenda here: make them feel unwanted and maybe they’ll leave and some other country can worry about them instead. I wish I weren’t so cynical, but it’s hard not to be at a time like this.

I know European countries do not appreciate rights and freedoms to the extent that we do. Denying the Holocaust is a crime in Austria, for example. Some will say that this kind of thing could never happen in this country. I would hope that is true. But we live in an age where many on the political left look to Europe for guidance; where some Supreme Court justices pay more attention to European law than the U.S. Constitution, for example. At the same time, some on the right would say that in the name of a war that may potentially last forever, we should be able to infringe on individual rights granted to us in the Constitution.

Let this example from Belgium shatter the myth forever that a more European society, with a stronger government presence and fewer civil liberties, is something to which America should aspire.