Minor Thoughts from me to you

SEUI chief Andy Stern:

When you have higher wages, people aren't poor, they get to eat, they get to live a better life and have a social safety net.

That's the fallacy of unionization right there. People who have a job are better off. But what about people who don't have a job? They're not better off. They don't have higher wages -- they have no wages.

It's precisely those higher wages that keep them out of a job. An employer that can employee someone at $7.25 an hour might not be to employee them at $8.25 an hour. For a full-time employee, a difference of $1 an hour is a difference of $2,040 dollars a year. For small businesses that can be the difference between profitability and non-profitability.

Andy Stern says that Western Europe is a good model for America to follow. I wonder if he's thinking of Germany's 7.1% unemployment, Spain and Belgium's 8.1% unemployment, or France's 8.7% unemployment. While life is great for employed, unionized workers in those countries, it's terrible for the workers without a job.

Who are you most concerned about?

A free market economy is always generating new ideas, finding new ways to use people and materials, finding new ways to cut waste and improve lives. For today's example, look no further than the grass on next Sunday's football games. In most cases, that's not grass that's FieldTurf. It's not just a clever product. It's a product that was unimaginable a generation ago. It's a product that FDR's bright boys never would have dreamed up, but that many organizations wouldn't want to do without.

What is FieldTurf?

FieldTurf's inventors were sportsmen - not carpet makers. Former players and coaches, not turf salesmen. They approached the challenge from a completely different perspective. They wanted to develop a synthetic system that offered the beneficial biomechanical properties of natural grass, combined with the best attributes of a durable synthetic system: all-weather playability, low maintenance, and unlimited playing time.

The idea was simple. Looks Like Grass... Feels Like Grass... Plays Like Grass. But the technology to make it happen was not simple at all. After several years of hard work, after trials, tests, consultations with players, coaches, trainers and doctors, sample plots, equipment modifications, and countless formulations, FieldTurf was born.

FieldTurf is fundamentally different from all others. Stable, firm not spongy, non-abrasive and uniform in traction, FieldTurf is engineered to play and feel like natural grass. On FieldTurf, players perform with confidence - and never experience the accelerated fatigue and muscle / joint stress associated with lightweight, rubber- filled systems. Like blades of natural grass, FieldTurf's fibers are soft and easy to slide on. They are surrounded and stabilized by FieldTurf's patented, heavy fill - the «artificial earth» that so clearly sets FieldTurf apart. Composed of smooth, rounded silica sand and cryogenically frozen and smashed rubber particles, FieldTurf's patented infill is engineered to stay «in suspension» providing years of proper biomechanics, shock absorbency and durability. A patented process of precision layering ensures infill uniformity. The result is a stable, resilient, predictable place to play - grass-like performance of the highest quality.

FieldTurf revolutionized the turf industry, and in many ways, the entire world of sport.

Why is FieldTurf so vital to so many organizations?

Installation of a FieldTurf field eliminates the use of harmful pesticides, fertilizers and herbicides, while at the same time, removes over 40,000 tires from landfill sites.

FieldTurf requires no mowing, fertilizing, reseeding or watering. A typical soccer / football field can use between 2.5 million and 3.5 million gallons of water per year.

FieldTurf saves a billion gallons of fresh water every year. Coupled with reduced labor costs related to maintenance, equipment and elimination of costs for supplies such as fertilizers, herbicides, and pesticides, many of our clients report a reduction in maintenance costs of as much as $30,000 to $60,000 per field, per year.

"The safety of athletes and communities is, and always has been, the number one priority at FieldTurf," said FieldTurf Tarkett CEO Joe Fields. "Our commitment to the environment ensures that our products are constantly being tested to ensure safety. The FieldTurf system has worked wonders for organizations all over the world as a product that reduces water consumption and pollution caused by chemical use, while increasing playing time, reducing injuries and promoting a healthy lifestyle." The installation of FieldTurf eliminates the use of harmful pesticides, fertilizers, herbicides and fungicides, while at the same time removes thousands of tires from landfill sites. FieldTurf requires no mowing, fertilizing, reseeding or watering. FieldTurf helps organizations earn the necessary points needed for U.S. Green Building Council LEED certification. FieldTurf's reused rubber content and water use reduction, among other factors, can contribute up to 10 points towards LEED certification.

I love this! It allow organizations to cut down on the usage of lawn mowers -- and all of the gasoline and pollution that go along with them. It allows organizations to cut down on fertilizers, herbicides, and pesticides. This not only saves wear and tear on the environment, it also saves money. Not only that, it allows athletes to play sports in the desert. This is important for everyone in the deserts of California, Nevada, and Utah, where water is scarce.

What about that rubber content? Well, check out the rubber re-use.

The FieldTurf infill contains three times more material than any of our competitors. That's 560,000 lbs. more infill per field! ... Our infill is layered to deliver perfect biomechanical performance. A stabilizing ballast of silica sand enhances vertical drainage. Multiple layers of sand and cryogenic rubber follow, which provide energy restitution, proper cleat penetration with quick twist and release and improved Gmax. A final top layer of larger sized cryogenic rubber granules completes the system.

FieldTurf is taking tons of tire out of landfills every year and putting it into American sports facilities. What a great country.

I imagine the FieldTurf company is getting filthy rich off of their product. And why shouldn't they? Their engineers have designed a product that's better -- and more environmentally friendly! -- than real grass. Whodathunkit? It's worth repeating that this entire industry would have been unimaginable 100 years ago. While we're busy worrying about today's economy, somebody somewhere is thinking up the next great idea. Whatever it is, it's something that we can't imagine.

A few days ago I said that we shouldn't be afraid of the future. It's impossible to predict where the next round of innovation will come from, but it always comes. Economists love to talk about "creative destruction" -- the idea that the market will destroy old, inefficient, unneeded businesses and create new, efficient, needed businesses instead. But how does creative destruction work? How can a business failure of a business slump lead to a new business?

Let's look at Bonobos. Not the primates, the pants company. Here's how they describe themselves.

Bonobos exists to solve two problems we had ourselves. (1) Men's pants do not fit well; they are either baggy, frumpy, and unflattering. Or way too tight. We make pants that fit and look better, on most gents and especially on guys with athletic builds. The second problem (2) is retail. How could we enjoy paying 120% markup to try on clothes in an uncomfortable public environment where sales associates--who are total strangers--either scrutinize our figures, or pay no attention to us at all? Meanwhile, pricing games are no fun. We're tired of waiting for sales... but paying full price makes no sense when inevitably everything will go on sale. We got tired of the traditional retail shopping experience. So we are building a different kind of clothing company, one that offers a fantastic customer experience, innovative low-cost distribution, and a stylish product that fits well.

Their pants are sold only online and at a steep discount, compared to traditional mens' pants. Now, $100 a pop is still too expensive for me (I tend to dress sloppy because I can), but it's cheap for the market they're entering. And they're definitely being helped by the lousy economy. Check out Smart Money's recent profile of the company.

Turns out that even in a downturn, the number of business start-ups is pretty constant, hovering at around 640,000 a year. Economic slumps typically last six months, so they don't tend to affect entrepreneurial plans that have been years in the making. Nor is the start-up success rate hurt by the vagaries of the business cycle, says Brian Headd, economist at the Small Business Administration.

There are actually advantages to starting up in tough times. You get a year or two to iron out kinks before the buying climate picks up, notes Bob Goodson, president of YouNoodle, a San Francisco-based entrepreneurial networking site. Overhead costs are lower, commercial space is easier to find, and there's less competition for talent. Bonobos, for example, was able to save up to 15 percent on salaries for junior staff, and found associates willing to work 30-day trial periods without permanent job offers -- which would have been impossible in a hot economy.

Jobs are being destroyed in the banking, investment, and construction industries. In exchange, jobs are being created in other industries. New companies are hiring the newly available talent and investing in the suddenly cheaper resources around them. New companies and new ideas will grow out of the ashes of our current crash & burn economy. Just wait and see.

Recently, UCLA confirmed my belief that Franklin Delano Roosevelt was one of America's worst Presidents. He not only did more than any other politician to create interst group politics, he not only centralized and increased government power to an unprecedented degree, but he prolonged the Great Depression by at least 7 years. That was the conclusion recently reached by UCLA researchers.

After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."

In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.

... In the three years following the implementation of Roosevelt's policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.

Meanwhile, prices across 19 industries averaged 23 percent above where they should have been, given the state of the economy. With goods and services that much harder for consumers to afford, demand stalled and the gross national product floundered at 27 percent below where it otherwise might have been.

"High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."

The policies were contained in the National Industrial Recovery Act (NIRA), which exempted industries from antitrust prosecution if they agreed to enter into collective bargaining agreements that significantly raised wages. Because protection from antitrust prosecution all but ensured higher prices for goods and services, a wide range of industries took the bait, Cole and Ohanian found. By 1934 more than 500 industries, which accounted for nearly 80 percent of private, non-agricultural employment, had entered into the collective bargaining agreements called for under NIRA.

Cole and Ohanian calculate that NIRA and its aftermath account for 60 percent of the weak recovery. Without the policies, they contend that the Depression would have ended in 1936 instead of the year when they believe the slump actually ended: 1943.

NIRA's role in prolonging the Depression has not been more closely scrutinized because the Supreme Court declared the act unconstitutional within two years of its passage.

"Historians have assumed that the policies didn't have an impact because they were too short-lived, but the proof is in the pudding," Ohanian said. "We show that they really did artificially inflate wages and prices."

Even after being deemed unconstitutional, Roosevelt's anti-competition policies persisted -- albeit under a different guise, the scholars found. Ohanian and Cole painstakingly documented the extent to which the Roosevelt administration looked the other way as industries once protected by NIRA continued to engage in price-fixing practices for four more years.

The number of antitrust cases brought by the Department of Justice fell from an average of 12.5 cases per year during the 1920s to an average of 6.5 cases per year from 1935 to 1938, the scholars found. Collusion had become so widespread that one Department of Interior official complained of receiving identical bids from a protected industry (steel) on 257 different occasions between mid-1935 and mid-1936. The bids were not only identical but also 50 percent higher than foreign steel prices. Without competition, wholesale prices remained inflated, averaging 14 percent higher than they would have been without the troublesome practices, the UCLA economists calculate.

Many people are blaming the mortgage crash on the repeal of the Glass-Steagall Act -- the 1999 Gramm-Leach-Biley Act. But did Gramm-Leach-Bliley cause the crash? I don't think so.

First, Glass-Steagall created a "wall of separation" between investment banking and commercial banking. Investment banks create and sell securities in the investment markets. Commercial banks earn money by offering deposits and making loans (home, auto, business, etc). Glass-Steagall said that commercial banks couldn't offer securities in the investment markets and investment banks couldn't offer loans or deposit accounts.

The law had been steadily weakened before being repealed:

The 1933 Glass-Steagal Act that prohibited commercial banks from owning investment banks, and vice versa, had been steadily weakened since the 70s by an increasingly diverse and complex new financial reality. Waivers from regulators for merger became routine and the 1998 merger between Travelers and Citigroup functionally repealed the law. Gramm-Leach-Bliley only put a de jure stamp of approval on a de facto regulatory framework.

Second, how did allowing a merger between investment banks and commercial banks cause the crisis? Investment banks were primarily buying mortgages from commercial banks. Commercial banks weren't creating the mortgage backed securities, they were selling mortgages to investment banks who then created the securities.

The rest of the previous link offers more details:

In fact, the evidence so far shows that Gramm-Leach-Bliley has helped soften the blow to taxpayers by allowing commercial banks to take over trouble investment firms. Just look at which organization's have failed:

• Bear Stearns was an investment bank before it was sold to JP Morgan Chase (which includes a commercial bank).
• Fannie Mae and Freddie Mac were government sponsored entities before the government bought them.
• Lehman Brothers was an investment bank before it want bankrupt.
• Merrill Lynch was an investment bank befor it was sold to Bank of America (which is a commercial bank).
• AIG is an insurance company with no commercial banking division.

Remember, Glass-Steagal was passed to protect commercial banks from failure by forbidding them from investment bank practices like trading in securities and underwriting stocks and bonds. As you can see above non of the failed institutions are commercial banks that got in trouble through risky investment banking. Instead, it is the commercial banks that are providing some stability to the system by purchasing troubled investment banks. Without Gramm-Leach-Bliley they would not even be allowed to technically do this.

Alex Tabarrok and Tyler Cowen say the same thing, but both include links to scholarly sources and papers to back up their point. Megan McArdle also dubunks this myth and includes these interesting notes:

They can't say it more directly because it's moronic. Even if you ignore the economic history indicating that Glass-Steagall didn't help the crisis it was meant to solve--even if you assume, arguendo, that the repeal was a bad idea--there's simply no logical reason to believe it had anything to do with the current mess.

Securitization was not introduced in the 1990s; it was invented in the 1970s and became popular in the 1980s, as chronicled in Liar's Poker. (As an aside, if you haven't read it, you really must. Especially now).

GLB had nothing to do with either lending standards at commercial banks, or leverage ratios at broker-dealers, the two most plausible candidates for regulatory failure here.

Most importantly, commercial banks are not the main problems. If Glass-Steagall's repeal had meaningfully contributed to this crisis, we should see the failures concentrated among megabanks where speculation put deposits at risk. Instead we see the exact opposite: the failures are among either commercial banks with no significant investment arm (Washington Mutual, Countrywide), or standalone investment banks. It is the diversified financial institutions that are riding to the rescue.

Last Christmas I asked for -- and received -- a SIGG water bottle. After checking it out for a while, my wife decided that she wanted one too. Now our daughter wants in the action. Although she's only 18 months old, she loves carrying Mommy's SIGG around and drinking out of the sports top.

Tonight, I figured that I'd hop online and start looking at bottle designs for the little one. I hopped online, but I couldn't look at bottle designs. SIGG's recent popularity has overwhelmed the small, Swiss company.

Due to the incredible demand for SIGG bottles, we are forced to close down the MySIGG shop. We are also unable to supply any other Internet business for Sigg Brand. Our Swiss factory is working around the clock to produce and ship more bottles to us, but the demand has currently and for the near future - exceeded the supply.

Huh.

Now let us tell you what we are doing at SIGG Switzerland to manage this situation:

• Reconfiguring our SIGG Switzerland facility and adding new equipment.
• Hiring new production workers and having them work around the clock, 3 shifts and weekends.
• Allocating 50% of our global production for North America.
• Once summer is over - we will be able to re-assess our supply situation and react.

Might I offer a humble suggestion? Try a little price gouging. Jack up the prices. It would be good for your customers. Right now, SIGG water bottles are sold out across the internet. Good luck finding an online store that still has some in stock. Higher prices would drive down the demand leaving some supplies available. While the water bottles would be more expensive, customers that really wanted to buy one now would be able to.

Higher prices would be good for SIGG too. Higher prices would enable them to expand more quickly, to pay their workers better (bonuses for those 3 shifts and weekends!), and to invest in more equipment and quality controls.

Apparently, SIGG is choosing to be "nice" by not gouging their customers. I wish they would "gouge" me. Then I might actually be able to afford one of their bottles.

This sounds fairly dire.

Oceans on the Precipice: Scripps Scientist Warns of Mass Extinctions and 'Rise of Slime'.

Human activities are cumulatively driving the health of the world's oceans down a rapid spiral, and only prompt and wholesale changes will slow or perhaps ultimately reverse the catastrophic problems they are facing.

Such is the prognosis of Jeremy Jackson, a professor of oceanography at Scripps Institution of Oceanography at UC San Diego, in a bold new assessment of the oceans and their ecological health. Publishing his study in the online early edition of the Proceedings of the National Academy of Sciences (PNAS), Jackson believes that human impacts are laying the groundwork for mass extinctions in the oceans on par with vast ecological upheavals of the past.

He cites the synergistic effects of habitat destruction, overfishing, ocean warming, increased acidification and massive nutrient runoff as culprits in a grand transformation of once complex ocean ecosystems. Areas that had featured intricate marine food webs with large animals are being converted into simplistic ecosystems dominated by microbes, toxic algal blooms, jellyfish and disease.

As far as I know, private property doesn't exist in the ocean. No one can "own" a portion of the ocean or have clear property rights to fishers. Therefore, few people have a financial incentive to conserve the ocean's resources. Instead -- because of the tragedy of the commons -- they have an incentive to use as much of the ocean's resources as they can possibly grab. Nutrient runoff and trash are a problem because no one owns the water and can sue polluters.

What a shame.

We should privatize the oceans before it's too late to save them. Mother Earth is depending on us to do the right thing.

For more information on the tragedy of the commons, you may be interested in a conversation between Russ Roberts and Bruce Yandle on "cooperative ventures such as incorporating a river, the common law, and top-down command-and-control regulation to reduce air and water pollution". It's really not as dry as it sounds!

The Southeast has been experiencing drought conditions for over two years now. Many residents don't want to watch their lawns turn brown or their flowers die off. So, they're drilling their own wells.

While Atlanta's main water source, Lake Lanier, has sunk 15 feet below desired levels and ordinary families have let their lawns go brown, affluent residents are paying thousands of dollars to hydrogeologists and drilling companies to scout their estates for underground water to draw from whenever they please. The Fulton County Department of Health and Wellness in Atlanta has issued 305 well permits to homeowners and businesses since the beginning of this year -- 36% more than for 2006 and 2007 combined. Homeowners who have obtained permits include film director Tyler Perry and Atlanta Braves pitcher Tom Glavine, according to county records. In Raleigh, N.C., 95 permits have been issued this year, compared with 46 last year and 19 in 2006. And Orange County, N.C., which includes Chapel Hill, has had such an influx of applications that it raised the price of a permit 65% to $430 on July 1.

Sadly, many people are angry about this display of initiative and investment.

Jason Cooper, who lives in Asheville, N.C. and whose lawn is currently the color of straw, is frustrated by rich people pampering their grass. "The fact that people would circumvent water restrictions in order to keep their lawns green amazes me," Mr. Cooper says. "But I realize that around the world, the people with the most money tend to hoard scarce resources."

Hoarding scarce resources? Hardly. These people are increasing the amount of usable water in their neighborhoods. Rather than taking water away from their neighbors, they're producing new water.

The new wells in Atlanta and Raleigh aren't the shallow wells that are sometimes found in backyards, particularly in areas that aren't on sewer lines. Building one of the new deep wells is a messy and noisy process: Drilling companies bore holes usually 300 to 600 feet deep into fractured rock and then extract the water with an electric pump discreetly hidden in the shrubbery or concealed by a $400 faux rock. Sometimes residents buy plaques with gold lettering to politely and unabashedly tell folks they're using their own well water, not the city's supply. Total installation cost ranges from $5,000 to $25,000 -- a drop in the bucket for the type of owner who spends several hundred thousand dollars on landscaping.

Ironically, there is no opportunity for profits that would allow this water to be shared with the rest of the area. Water rates are regulated by local governments and don't rise and fall according to supply and demand. If water rates did rise according to supply and demand, the cost of water would be sky-high across the Southeast. That would give these residents an incentive to drill the wells and sell the water to their neighbors. Instead of using the water for their own lawns, they'd have an incentive to distribute the water to someone else.

Sadly most of the U.S. is covered by regressive, in-humane laws and no one is allowed to profit off of water supplies. What a shame.

Bryan Caplan has some great advice to live by: Two Heuristics to Live By When You Don't Know What You're Doing:

When we see people making bad decisions - whether as consumers or voters - we often blame the "complexity" of the issues they face. If Ph.D. economists can't figure out the best mortgage to use, how can we expect the average borrower to do so? If health policy experts can't agree on how to fix the U.S. medical system, what is the typical voter to think?

But if complexity is your only demon, I've got two simple rules of thumb to exorcise him. Here goes:

1. If you don't have clear and convincing evidence that doing something is better than doing nothing, do nothing.

2. If you know that doing nothing is bad, but don't have clear and convincing evidence that one action is better than another, do the simplest, standard thing.

I frequently apply these rules to my consumption decisions. Until I'm convinced that a product will make my life better, I just don't buy it. I might enjoy a big plasma T.V., but until a seller clearly explains how he's going to painlessly install it in my house, I'm not buying one. If I do decide in favor of a plasma T.V., but remain confused about which one to buy, I'll probably just get the biggest one that CostCo carries.

In the mortgage market, similarly, my heuristics say: (a) Rent until it's clear that buying will improve your life; and (b) Get a standard 30-year fixed-rate mortgage from an established lender. Don't buy a house you might not be able to afford by signing a contract you can't explain to your friends.

As I've mentioned in the past, I enjoy reading a few economics blogs. Lately, oil prices have been a hot topic -- why are they high?, are they too high?, are they too low?, are speculators driving up the price, etc. It's been a fascinating discussion.

Yesterday, Arnold Kling suggested that it's more likely that oil prices were too low last year than that oil prices are too high this year. In other words, we're not in an "oil bubble" created by evil speculators.

Early in 2007, the price of oil was $60 a barrel. Recently, it has been above $130 a barrel. Which of the following does Paul Krugman believe:

(a) market fundamentals justified $60 a barrel then, and they justify $130 a barrel now; or

(b) market fundamentals justified a much higher price in 2007?

I believe that (b) is more likely to be true, meaning that we had what Tyler Cowen calls an "anti-bubble" in oil.

(Via EconLog.)

I don't know if he's right or not, but I suspect he could be. I don't think demand has gone up that much between this year and last year. Maybe people are just now realizing how fundamentally the Indian and Chinese demand for energy is going to change the world?

With the spring weather that we had this year, eating local doesn't look like such a great idea:

The floods that damaged farms in southern Wisconsin will likely result in fewer fruits and vegetables at farmers' markets this summer and help boost already high prices for organic eggs and meat at grocery stores in the fall.

A cool spring meant many farmers were about two weeks behind in planting. The storms struck just as their first plants emerged from the ground.

"Twelve inches of water falling on, say, this field of beets that were just starting to peak through the soil, it just washed them away," de Wilde said. "They couldn't withstand that kind of deluge."

Organic corn fed to livestock that provide organic eggs, chicken, beef and pork was barely 4 inches high, half of what it should have been, said Eric Newman, vice president of sales for La Farge-based Organic Valley, the nation's largest cooperative of organic farmers.

Thankfully, today's progressive consumer can secure an organic diet no matter what the local market is like:

California supplies over half of the nation's organic fruits and vegetables and should be able to make up for losses in Wisconsin and other flooded states, Newman said.

It's a good thing we have a robust, distributed economy. Even though local farms are having a tough time, we won't have to worry about anyone starving or eating an unbalanced diet.

This morning, General Motors announced that it would be closing four plants -- including the Janesville, Wisconsin plant. Everyone was talking about the news today. Most of the talk centered around who to blame. The most popular candidates were President Bush; the evil, greedy managers of GM; and even President Reagan (!).

Governor Doyle's opinion:

"Bad corporate decision kept these lines turning out gas guzzlers as fuel prices went from 2 dollars to 3 dollars and now to 4 dollars per gallon.

"Now we stand here, carrying the burden of those bad corporate decisions -- failed leadership that culminated in a calculation that left out the very heart of this company, the workers who built"

Senator Obama's opinion:

"Unlike John McCain, I'm not in this race to extend the failed Bush economic policies; I'm in this race to end them," Obama said. "I've proposed investing $150 billion over ten years in green energy and creating up to five million new green jobs. We'll finally provide domestic automakers with the funding they need to retool their factories and make fuel-efficient and alternative fuel cars. And we'll invest in efforts to make sure that the cars of the future are made where they always have been -- in the United States. Because the fight for American manufacturing is the fight for America's future -- and I believe that's a fight this country will win."

As I read through the various articles, I noticed a few hints about why American automakers might need funding to produce fuel-efficient cars.

High Labor Costs:

In the past, costs generally were too high for Detroit automakers to turn a profit on small U.S.-built cars. But [Chief Executive Rick] Wagoner said GM has lowered costs enough with new labor contracts and other measures to turn a profit.

"The direct answer is we need to," Wagoner told reporters. "We believe we can build a car there profitably."

Generous Benefits:

Fisher said some of the hardest hit residents will be those employed by suppliers and other businesses dependent on GM, noting that GM often has been called "generous motors" for its pay and benefits.

That corporate generosity -- often granted at the barrel of a UAW gun -- destroyed GM's ability to make a profit on small cars. Because of high labor costs, GM only earned a decent profit on the more expensive trucks and SUVs. With gas costing $4 gallon GM can no longer afford to keep producing gas hogs -- or keep employing a pricey workforce.

Finally, it's interesting to note that Senator Kohl believes only the government is capable of retraining GM's employees.

"With the announcement that General Motors plans to close this plant, thousands of skilled and dedicated workers face a stark future of employment and financial uncertainty," Kohl said. "Secretary Chao seems to understand the severity of the situation and assured me that the Labor Department would take immediate steps to retrain workers at the plant. Only then can these employees learn new skills necessary to finding new jobs."

Silly me. This plant has been on life support for quite a while. I thought that the employees might have taken that as a warning sign to improve their own skills and start learning a new trade.

And, yes, I do feel for these workers. I can sympathize with the fear that comes from losing a steady income and facing an uncertain future. In some measure, the future is always uncertain. I prefer to always plan for that uncertainty, as best as I possibly can. I never want to just assume that if I ignore the uncertainty -- or appeal to Washington -- that it will just go away.

When is a monopoly not a monopoly?

"If Barnes & Noble does buy Borders, we're facing a real monopoly," she said, though such a deal would also be likely to receive regulatory scrutiny. "We would see an initial deep discounting, trying to keep or attract the Borders customers to Barnes & Noble."

Meade argues that Barnes & Noble would gain a "monopoly" position, if it bought Borders. I don't think that word means what she thinks it means. Her quote comes from an article on The Changing Bookstore Battle.

Barbara Meade could not resist a little schadenfreude. After the Borders bookstore chain announced recently that it was exploring "strategic alternatives" -- corporate lingo for "there's trouble" -- the co-owner of the independent store Politics and Prose, which has held on against the chain's cost-cutting competition, took note in her online newsletter.

"We have never been tempted by the allure of corporate imperialism -- invading new book markets, slashing prices, demolishing the competition, and then back to business as usual, poor inventory and poor customer service," Meade wrote, reporting that "Borders announced a shift in direction from selling books to selling the whole business."

While it is tempting to marvel at, or even gloat about, the potential demise of a tough competitor, analysts and publishing industry executives say Borders's troubles are emblematic of an ironic shift in book selling. Large corporate booksellers, once an enemy of the little guy, now have enemies of their own: Amazon.com and big-box retailers like Costco and Target are taking on Borders with even deeper discounts than the chains used against the independents.

Barbara Meade, Amazon, Costco, Target -- it seems like Barnes & Noble would still have plenty of competition, even after buying Borders. What monopoly is Barbara Meade referring to?

It seems that some people get annoyed when used book sellers visit library book sales.

Book dealers armed with handheld ISBN scanners are threatening to take over the used book sales run by volunteer fundraising groups for the Madison Public Library system, Morris said.

The scanners tell them how many copies of a title are in circulation and what it generally sells for -- powerful information to have if your aim is to find cheaply priced books that can be sold online for much more than you paid.

"You see them just literally hunched over ... shelves of books," Morris said, blocking book lovers like him from perusing the titles and maybe picking up a bargain they actually intend to read.

Thomas Boykoff, president of the board of directors for the Central Library Friends group, and Margaret Rentmeesters, who manages the book store at the library, acknowledge that the book dealers have become more common at book sales over the last two or three years.

But profit sometimes motivates unpleasant behavior.

"They sort of claim an area," Boykoff said, "Some of them just don't give a damn."

How horrible! How, how ... profit-driven! How evil! Or is it?

I love reading, but I just don't have time to get out to library book sales. While I wish I could, the timing just never quite works out.

Thankfully, there are people out there willing to trade their time for my money. They'll pore over the stacks, weeding through the books that no one wants, to find the books that someone wants. Then they'll list these books on Amazon.com, Half.com, Alibris, Deal Oz, AbeBooks, Powell's Books or other similiar sites. I can browse the online sites, find what I want, and have it delivered directly to my door.

These book sellers are no nuisance. They're a blessing and I'm grateful for them.

The economy seems to be staggering around and politicians everywhere are eager to stimulate it back into coherence. But nothing paralyzes a business more than uncertainty about whether it its investments will earn a tidy profit or a large tax bill. Nothing frees a business more than certainty and predictability. With the Bush tax cuts set to expire soon, there's a large amount of uncertainty in the air.

Until they know who won the election, businesses may not be willing to invest in new equipment or jobs. The Independent Institute makes this point particularly well:

Even so, there is another reason that any economic benefits ultimately generated by the stimulus plan will be fleeting at best. The federal government has no means of its own, so the $168 billion needed to finance the package can come from just three sources: taxing, borrowing, or printing money. For obvious political reasons, raising taxes is not an option during the run-up to an election. The economic stimulus plan thus will be paid for through a combination of new deficit spending and currency creation. The former implies higher future taxes to pay interest to bondholders and to retire the debt when it matures; the latter adds to the inflationary pressures already evident in the economy. Both impose a heavier burden on the private sector, and auger slower rates of economic growth in the years to come.

If our elected representatives truly were interested in jumpstarting a sluggish economy, they would have acted to reduce uncertainty about future tax bills by cutting marginal income tax rates now and forevermore. Predictably, they chose political grandstanding instead.

Here's another symbol of how rich our country is: the Aston Martin DB6 Couch:

This couch is an exact replica of an Aston Martin DB6 rear end. It's painted in a classic Aston Martin color, Silver Birch. The red leather is finished off with a Y-stitch on each cushion. Polished to perfection, this couch would look good in a garage full of Astons. You might not want to put this work of art in the garage though, at over $7,300 the thought of accidentally getting a little grease on the car couch might make you think twice. The limited edition couch comes with an engraved number plate and is available in any color scheme you would like. Matching headrests are not included.

We're rich enough that someone can make a couch that looks like a cars. Not only can the bright entrepreneur sell said couch, he can make a profit on it as well!

Next up: If enough people to buy the couch, competitors will enter the market in search of similar profits. As supply rises, prices will decrease. Soon, everyone can own their piece of an Aston Martin DB6. Start buying people -- I want my cheap DB6 couch!

I really, really don't like the idea of John McCain as the GOP nominee for 2008. Thankfully, every time I try to fool myself into thinking that he might not be a bad candidate, he reminds me of why I don't like him.

Take the mortgage "crisis" for instance. He was asked about it in a recent debate. Here's what he had to say:

I think that we've got to return to the principal that you don't lend money that can't pay it back. I think that there's some greedy people on Wall Street that perhaps need to be punished. I think there's got to be a huge amount more of transparency as to how this whole thing came about so we can prevent it from happening again.

When a town on Norway is somehow affected by the housing situation in the United States of America, we've gotten ourselves into a very interesting dilemma.

If necessary, we're going to have to take additional actions and particularly in cleaning up a mortgage. A mortgage should be one page and there should be big letters at the bottom that says, "I understand this document."

We ought to adjust the mortgages so people who were eligible for better terms, but were somehow convinced to accept the mortgages which were more onerous on them. We need to fix the rating systems, which clearly were erroneous in their ratings, which led people to believe that there were these institutions which were stable, which clearly were not.

(Via In the Agora.)

A few comments here. What about personal responsibility? A lot of people tried to buy homes that they couldn't afford. Isn't that a form of greed? I think both the borrowers AND the lenders were greedy. I think both should suffer the consequences of their actions.

Secondly, Senator McCain says that "erroneous ratings systems" fooled people into investing in unstable institutions. Maybe, just maybe, those institutions were stable right up to the point where they started making poor investments. Sometimes it takes a while to tell the difference between a poor investment and a risky, but worthwhile, investment. Maybe investing is risky business. Maybe people shouldn't invest in new, speculative investments unless they can afford to lose their money. Maybe Senator McCain should admit that he's not God and can't remove all risk from people's lives.

Thirdly, about that "town in Norway [that's] affected by the housing situation in the United States of America". It's called risk management. It's a way for companies to lower the risk of a new investment by spreading the risk across more investors. Companies won't make a lot of investments unless they can find a way to decrease the risk of the investment. Because the risk could be spread worldwide, companies made many loans that they never would have otherwise made. True, some of the loans went bad. But many of the loans went to people who were able to pay them off. Would you prefer that banks stopped lending money to risky borrowers?

Senator McCain, please leave the market alone. Your uninformed, ignorant meddling will only make things worse.

Dear Rob,

I'm sorry that none of the presidential candidates are addressing your pet issue, overpopulation. There's a good reason for their avoidance, however. Overpopulation simply isn't that much of a problem. The entire world population, living with the same population density as New York City, could fit into the state of Texas. If that's too crowded for you, the entire population of the world could fit into the United States, with the same population density as Madison.

That would still leave the entirety of Europe, Asia, South America, the Indian subcontinent, Australia, Canada, Mexico, and Alaska, and Hawaii as both wildlife preserves and sources of food.

Furthermore, the industrialized nations are the world's most efficient agricultural producers. As the third-world countries grow wealthier, they will increase their own crop yields and grow food more efficiently. Far from running out of food, their wealth will enable them to produce more food at a lower cost. As these societies become wealthier, their birthrate will decrease (mimicking what has already happened in the industrialized world) and the earth's population will stabilize.

That is why politicians are "ignoring" the problem. It's because there really isn't a problem to begin with.

Mary Anastasia O'Grady wrote in the Wall Street Journal about the findings of the latest Index of Economic Freedom.

"The evidence is piling up that neither government nor multilateral spending on education and infrastructure are key to development. To move out of poverty, countries instead need fast growth; and to get that they need to unleash the animal spirits of entrepreneurs.

The nearby table shows the 2008 rankings but doesn't tell the whole story. The Index also reports that the freest 20% of the world's economies have twice the per capita income of those in the second quintile and five times that of the least-free 20%. In other words, freedom and prosperity are highly correlated.

Why are some countries so poor? Why is the U.S. so much richer than countries like India? Is it because the U.S. gobbles up the wealth of the world and doesn't play nice with other countries? Not really, no.

In "Narrowing the Economic Gap in the 21st Century," Stephen Parente, associate professor of economics at the University of Illinois at Urbana-Champaign, debunks several World Bank myths by showing that it is not the resources -- land, workforce and capital -- of an economy that play the most important role in explaining higher income countries. Instead it is "the efficiency at which a society uses its resources to produce goods and services."

Mr. Parente cites the microeconomic research of McKinsey Global Institute, which estimates that modern industry in India could take a huge bite out of its productivity gap with U.S. competitors by simply upgrading production techniques. India doesn't need another multilateral education project. It needs to tap into knowledge already available in successful economies -- the information and technology is out there. The trouble is that it is unavailable in many countries like India, because government barriers and constraints to limit competition make access difficult or impossible.

In other words, the U.S. is richer because American workers do more with what they have, not because they have more to do something with.

Don Boudreaux puts it quite nicely.

As Julian Simon taught us, the ultimate resource is the free human mind. A land rich in petroleum, arable land, and iron ore and other minerals is useless to a society of humans incapable of rational thought and intolerant of change. Nor would such a land of potential plenty realize its potential if its inhabitants are restrained by tyranny or by widely shared misconceptions that individual enterprise, innovation, profit, and the pursuit of worldly pleasures are degrading or sinful.

But unleash people from the countless foolish and rent-seeking constraints imposed by government and from constraints imposed by their own superstitions and they will create resources. They will flourish and prosper, not only materially but also culturally and intellectually. A free people can and will build a dynamically prosperous society in even relatively barren and inhospitable places such as New England, Arizona, and Hong Kong. An unfree people will languish in poverty even in lush paradises such as much of Central and South America and in lands teeming with 'natural' resources such as Congo and Russia.

(Via Cafe Hayek: Freedom and the Ultimate Resource.)

I was just flipping through my newsreader and saw an interesting headline: Tata Pulls Ford Units Into Its Orbit:

Tata Motors said that it was entering detailed talks with Ford about the takeover of Jaguar and Land Rover, confirming what investors and analysts have anticipated for months.

I've been reading The Downing Street Years by Margaret Thatcher lately. Early in her prime ministership, Lady Thatcher had to decide what to do with Land Rover -- at the time an ailing government owned company. I haven't yet read what her ultimate decisions were, but somewhere along the line it was sold at least once and now Ford owns it.

According to this article, Ford may sell Land Rover to Tata Motors, an Indian owned company. It wasn't that long ago (cosmically speaking) that Britain "divested" itself of India. Now, in a manner of speaking, India may be taking over a part of Britain.

I find that both slightly amusing and a great symbol of how much richer the world is becoming.