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Posts Tagged ‘Cost-Benefit Analysis’

Well, another loser killed a bunch of people, this time in Santa Barbara, California.

Which gives gun control zealots an opportunity to seize upon the tragedy to recycle their calls to restrict private firearms ownership and otherwise erode the Second Amendment.

But I’m not too worried that they’ll succeed. The evidence is simply too strong that gun ownership reduces crime. The research shows that criminals are less aggressive when they fear potential victims may be armed.

Moreover, they don’t even have practical proposals. Here’s some of what Jacob Sullum wrote for Reason.

None of the items on the anti-gun lobby’s wish list makes sense as a response to the crimes of Elliot Rodger, the 22-year-old college student who murdered Martinez’s son and five other people on Friday night. …the Isla Vista massacre, which took place in a state with firearm laws that are among the strictest in the nation, exposes the false promise of policies that aim to prevent violence by limiting access to weapons. …The only specific policy Gross mentioned was “expanded background checks.” But California already has those: All gun sales in that state, including private transfers, must be handled by licensed dealers, and every buyer has to be cleared by the California Department of Justice…

Sullum continues.

Rodger passed those background checks because he did not have a disqualifying criminal or psychiatric record. …Yes, Rodger was depressed, socially isolated, and desperately lonely. But how many people who fit that description become mass murderers? The difficulty of predicting which of the world’s troubled oddballs will turn violent is the reason “expanded background checks” cannot stop this sort of crime.

Good point. Heck, if getting rejected by the opposite sex was a predicate for mass murder, I would have been a potential killer in high school.

So what might have worked? Perhaps, in a leftist fantasy world, outright confiscation of 300 million guns. Though that would lead to massive civil disobedience.

Not to mention they would have to impose controls on knives and cars.

One can imagine policies that might have stopped Rodger, but they are neither practical nor constitutional. If the government not only banned guns but somehow managed to confiscate the 300 million or so Americans already own, that would have put a damper on Rodger’s plans, although he used knives to kill half of the victims who died and used his car to injure others.

And here are some excerpts from analysis by the invaluable John Lott. He starts by observing that the already-existing gun control rules in California were utterly ineffective.

As usual, the media news stories got fundamental facts wrong here. Of particular interest, half the people killed here were stabbed to death. Also, you won’t hear this in the news, the magazines that the killer used were also apparently limited to holding no more than 10 rounds (note that the Sheriff said that all the magazines were legal under California law). Obviously neither point fits the gun control check list.

More important, the anti-gun policies in California may have made it easier for the killer.

Santa Barbara County, where the attack occurred, is essentially a gun-free zone. As of February 2014, there were only 53 individuals with a concealed handgun permit in Santa Barbara County. With an adult population of 337,000, that is a rate of just 0.016 percent. The few people allowed to carry are undoubtedly politically well connected individuals who were unlikely to have been in the part of town where this attack occurred. As we have seen over and over again, these multiple victim killers deliberately select locations where victims are unlikely to be able to defend themselves.

Indeed, in another article, Lott notes that the nutjob carefully planned his attack to minimize the chances of being stopped by a law-abiding person with a gun.

Rodger spent over a year and a half meticulously planning his attack. His 141-page “manifesto” makes it clear that he feared someone with a gun could stop him before he was able to kill a lot of people. …Deterrence matters. As my research with Bill Landes at the University of Chicago found, letting people defend themselves doesn’t just prevent these attacks from occurring, it also limits the harm should the attack occur.  At some point, the fact that virtually all these mass shootings take place where victims are defenseless is going to have to matter.

To be sure, there’s no way to fully prevent crazed and evil people from doing bad things. But public policy can tip the scales in one direction or the other.

That’s why we should focus on policies that discourage bad guys by changing their cost-benefit calculations, such as making it easier for victims to defend themselves.

Not that I expect our statist friends to grasp this economic insight. It seems gun control is a faith-based policy, as captured by this amusing image.

Gun Control Stupid

The same message can be found in this Chuck Asay cartoon and these satirical images.

P.S. I shouldn’t stereotype all leftists as being naive on firearms and gun control. As you can read here and here, there are some who put reason ahead of ideology.

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Time for another great moment in red tape.

I wrote a couple of weeks ago that banks treat customers poorly in part because of bad laws and regulations from Washington.

Money laundering laws were adopted beginning about 30 years ago based on the theory that we could lower crime rates by making it more difficult for crooks to utilize the financial system. There’s nothing wrong with that approach, at least in theory. But these laws have become very expensive and intrusive, yet they’ve had no measurable impact on crime rates. …politicians and bureaucrats have decided to double down on failure and they’re making anti-money laundering laws more onerous, imposing ever-higher costs in hopes of having some sort of positive impact. This is bad for banks, bad for the poor, and bad for the economy.

You may think that only cranky libertarians are unhappy about this system.

But that’s not the case. Three professors with expertise in criminology, justice, sociology, and public policy wrote a detailed assessment of policies on anti-money laundering (AML) and combating the financing of terrorism (CFT).

Given the establishment pedigree of the authors, the finding of the report are rather shocking. The report’s introduction hints that the whole apparatus should be called into question.

To date there is no substantial effort by any international organization, including the IMF, to assess either the costs or benefits of an AML/CFT regime.  The FATF system has proceeded as if  it produces only public and private goods, not public or private “bads” or adverse by-products  against which the “goods” have to be weighed.   The Fund staff itself has raised questions about whether its substantial investment in the 3rd round has yielded adequate returns. It is not known what value that investment produced for the FATF or the Fund’s core objectives.  There needs to be more open acknowledgement of actual and potential financial costs of AML/CFT controls, their potential misuse by authoritarian rulers, and possible adverse effects on populations that rely on remittances and the informal economy, as well as potential negative impacts on NGOs and parts of civil society.

And when you dig into the details of the report, you find some surprisingly blunt language.

Basically, there’s no evidence that these policies work, and lots of evidence that they impose real harm.

Benefits of the FATF AML/CFT system have not been demonstrated. Although there may be benefits known to international organizations, governments, regulators, and intelligence agencies, no systematic efforts have been made by the FATF network of IOs or countries or institutions to demonstrate benefits. …Standards and Methodology proceed as if the implementation of an effective AML/CFT regime delivers only public and private goods and imposes no public or private “bads.” This study has learned of no significant effort by any of the standard-setting or assessor bodies to undertake a cost-benefit analysis… Little consideration has been given, they say, to the costs of implementing an AML/CFT regime, and little evidence has been adduced to demonstrate that the costs produce commensurate benefits in their own or indeed in any other jurisdiction. …Costs are substantial whether construed broadly or narrowly. …Moreover, an AML/CFT regime generates substantial costs on the financial sector in terms of money-laundering compliance staff and software procurement. Entire industries have grown around consulting and advising businesses and governments on AML/CFT compliance… Particularly strong views were expressed by bankers about excessive costs of misplaced demands upon the financial industry for surveillance of customers.

The report notes that poor people are among the biggest victims.

AML laws and regulations may adversely affect access of marginal groups whom FATF documents describe as subject to “financial exclusion” from the formal financial system. The more onerous the burdens placed on individuals, companies, and NPOs in countries where there is a substantial informal and cash economy, the more likely they are to opt out of the formal economy for reasons of cost. …Money laundering and counter-terrorism measures can reduce the volume of overseas remittances to the most vulnerable populations in the poorest countries. …Administrative and financial costs imposed on voluntary associations, most of which are very small and poorly funded, can threaten the survival of small associations

By the way, the World Bank also has acknowledged that these counterproductive laws are very bad for poor people, oftentimes disenfranchising them from the banking system

Last but not least, kudos to the authors for making the very relevant point that the destruction of financial privacy is a boon for authoritarian governments.

Numbers of experienced assessors have observed that a fully functioning AML/CFT regime in some countries has provided tools for authoritarian rulers to repress their political opponents by denying them banking or other facilities, increasing surveillance over their accounts, and prosecuting or penally taxing them for  non-disclosure, in addition to opening up more opportunities for illegal extortion for private gain. This weapon can be applied against persons/organizations already in the formal financial system.

It’s worth pointing out that this also explains why it’s so dangerous to have governments collecting and sharing tax information.

But let’s stick to the issue of money laundering. Now let’s look at two case studies to get a sense of how these laws impose real-world harm.

We’ll begin with an article in The Economist, which looks at how Western Union’s ability to provide financial services has been hampered by heavy-handed (yet ineffective) laws and regulation.

It seems like this is a company providing a very valuable service, particularly to the less fortunate.

Western Union’s services are essential for people who do not have bank accounts or are working far from home. …Western Union helps to bolster trade and disperse the world’s wealth.

But the statists don’t care.

Someone, somewhere, may want to transfer money for a nefarious purpose. And rather than the government do its job and investigate actual crimes, politicians and bureaucrats have decided that it’s easier to make Western Union spy on all customers.

…these laudable activities conflict with another pressing goal: impeding money laundering. Rules to that end require financial institutions to know who their customers are and how they obtained their money. These requirements transform the virtues of Western Union’s model—the openness and breadth of its network and its willingness to process vast numbers of small transactions—into liabilities.

And the heavy boot of government came down on the company, forcing Western Union to incur heavy expenses that make the system far more expensive for consumers.

Western Union struck a far-reaching compliance agreement with Arizona’s attorney-general in 2010. It agreed to adopt 73 changes to its systems and procedures, to install an external monitor to keep tabs on its conduct and to fund the creation of a new enforcement entity, the Southwest Border Anti-Money Laundering Alliance. Many of the recommendations were highly detailed. Western Union has, for example, set up a system to monitor transactions that takes into account factors such as the seasonality of marijuana harvests and illegal immigration. It is conducting background checks on agents and their families. Such efforts have turned out to be difficult and expensive. …Western Union’s shares have been jolted several times. Earlier this month Western Union said it would be subject to independent monitoring for an extra four years. It faces big fines and criminal prosecutions if it fails to meet the stipulations in the compliance agreement.

Let’s look at another real-world consequence of the AML/CFT regime.

You’ve heard of “driving while black,” which describes the suspicion and hostility that blacks sometimes experience, particularly when driving in ritzy neighborhoods.

Well, DWB has a cousin. It’s BWR, otherwise know as “banking while Russian.” And the stereotype has unpleasant consequences for innocent people.

Here are some passages from a story in the New York Times.

We had sold our apartment in Moscow, jumped through an assortment of Russian tax hoops and transferred the proceeds to the United States, where we now lived. It made me nervous to have all that money sitting in one virtual clump in the bank — but not nearly as nervous as having the card connected to it not work. The experience was also humiliating. In one moment, I had gone from being a Citigold client to a deadbeat immigrant who couldn’t pay for her son’s diapers. I called Citibank as soon as I got home. …”Who closed it?” I was working hard not to sound belligerent. “And where is my money?” …It was Citibank. “I see that because your transactions indicated there may be an attempt to avoid complying with currency regulations, Citibank has closed your account,” the woman informed me. …“Why wasn’t I notified?” “The cashier’s check will serve as your notice.” Citibank had fired me as a client.

Why would a bank not want customers?

Because the government makes some clients too costly and too risky, even though there’s no suggestion of wrongdoing.

Other than ethnicity.

I wasn’t entirely surprised. This had happened to other Russian-Americans I know, including one of my closest friends and my father. My friend had opened her account at a local bank in the United States when she got her first job, at age 13. Her accounts were summarily closed in 2008, while she was working in Russia. The bank, which had been bought by Sovereign in the meantime, would not state a reason for firing a client of 27 years. My father, who immigrated to the United States in 1981, had his accounts closed by BankBoston in 2000, when he was a partner in a Moscow-based business. His lawyers pressed the bank on the issue and were eventually told that because Russians had been known to launder money, the bank applied “heightened scrutiny” to accounts that had a Russia connection. It had closed “many” accounts because of what it considered suspicious activity. Like other kinds of ethnic profiling, these policies of weeding out Russian-Americans who have money are hardly efficient.

But the main thing to understand is that the entire system is inefficient.

Laws were adopted with the promise they would reduce crime. But just like you don’t stop crime by having cops hang out at Dunkin’s Donuts, you also don’t stop crime by creating haystacks of financial data and then expecting to make it easier to find needles.

For more information, here’s my video on the government’s failed money laundering policies.

P.S. This map shows you the countries considered most at risk of dirty money, which should make you wonder why anyone is foolish enough to think that higher costs on American banks will make a difference.

P.P.S. You probably didn’t realize there was such a thing as money laundering humor, but you’ll enjoy this joke featuring President Obama.

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Last June, in response to a question about indiscriminate spying by the National Security Agency, I made two simple points about the importance of judicial oversight and cost-benefit analysis.

I want – at a minimum – there to be judicial oversight whenever the government spies on American citizens, but I also think some cost-benefit analysis is appropriate. Just because a court has the power to approve snooping, that doesn’t mean it’s a sensible use of law enforcement resources.

Nothing since then has changed my mind.

Indeed, I’m perhaps even more skeptical of untrammeled government power and ability to spy on citizens for the simple reason that I don’t trust politicians.

Just look at how the White House turned the supposedly professional IRS into a partisan political operation. The government had power, ostensibly for a legitimate reason, but politicians and bureaucrats then used the power is a grossly improper fashion.

On the other hand, I know there are people out there who hate America. And they don’t just hate us because we’re intervening in the Middle East. I suspect many of them would want to kill us even if we had a perfect libertarian foreign policy of non-intervention and peaceful global commerce.

Now we learn from a report in the Washington Post that government has become bigger and more powerful and that our privacy has been violated as part of the NSA’s spying, yet there have been no benefits. As is zero. Nada. Zilch.

Here are some excerpts.

An analysis of 225 terrorism cases inside the United States since the Sept. 11, 2001, attacks has concluded that the bulk collection of phone records by the National Security Agency “has had no discernible impact on preventing acts of terrorism.” In the majority of cases, traditional law enforcement and investigative methods provided the tip or evidence to initiate the case, according to the study by the New America Foundation, a Washington-based nonprofit group.

But perhaps, you may be thinking, this is merely the predictable conclusion of a group that is predisposed to be skeptical. That’s a fair concern, but the article also has some very compelling corroborating evidence.

The study, to be released Monday, corroborates the findings of a White House-appointed review group, which said last month that the NSA counterterrorism program “was not essential to preventing attacks” and that much of the evidence it did turn up “could readily have been obtained in a timely manner using conventional [court] orders.”

So not only do outsiders find little to no value in NSA spying, but even hand-picked insiders couldn’t come up with any evidence to show that the program was effective.

But you won’t be surprised to learn that defenders of the NSA have come up with a can’t-miss way of defining success.

Senior administration officials…say it has been valuable in knocking down rumors of a plot and in determining that potential threats against the United States are nonexistent. Director of National Intelligence James R. Clapper Jr. calls that the “peace of mind” metric.

Yes, your eyes did not deceive you.You actually read correctly. The government wants us to acquiesce to a loss of privacy because we will learn that there are no threats and we’ll have “peace of mind.”

That has to be the lamest justification for government power that I’ve ever read.

This is even more preposterous than asserting that we should squander $1 trillion per year on anti-poverty programs, not because that redistribution will help the poor, but rather because it makes leftists feel better about themselves.

That being said, supporters do have a somewhat powerful comeback.

Michael Morell, a former acting CIA director and a member of the panel, said the program “needs to be successful only once to be invaluable.”

Indeed, I suspect this is the main reason why ordinary people might support the NSA.

But I disagree with Mr. Morell because he asserts that a single example of success would be invaluable. The article, for instance, cites one “victory” for the NSA surveillance program.

…the program provided evidence to initiate only one case, involving a San Diego cabdriver, Basaaly ­Moalin, who was convicted of sending money to a terrorist group in Somalia. Three co-conspirators were also convicted. The cases involved no threat of attack against the United States.

I’m glad that a foreign terrorist attack was blocked, but is that really “invaluable”? Does that “victory” justify a very expensive and very intrusive NSA monitoring regime?

As I’ve acknowledged before, I don’t know enough about terrorism to offer an informed viewpoint. But I have studied a similar issue, money laundering laws, and that research leads me to be very suspicious about the NSA.

These laws were put in place with the excuse that government would collect and analyze large amounts of data to help deter crime.

All the evidence, however, shows that these laws are a costly failure. The invade our privacy, hurt the poor, impose high regulatory costs, and have little or no impact on underlying crimes.

Just something to keep in mind when people argue that government should have more power and authority.

P.S. At least the revelations about NSA spying have generated some first-rate political humor.

P.P.S. Keep in mind that the NSA is just one cog in the machinery of government. So if you’re worried about the NSA’s intrusion and power, then you should also worry about the power of the IRS. If you’re concerned about the IRS’s authority, then you also should fret about the Obamacare exchanges. And if you think the Obamacare exchanges give the government too much knowledge and power, then you should be agitated about “know-your-customer” laws that require banks to spy on their customers. And if you’re not happy about those money-laundering rules, then you surely should be dismayed about asset-forfeiture rules. And if you don’t approve of government stealing property, then maybe you don’t like government accumulation of power for the Drug War. And if the failed War on Drugs rubs you the wrong way, then perhaps you…I better stop now. I think you get the point.

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It’s no secret that I think we have too many government bureaucrats and I’ve shared very strong evidence that most of them are grossly overpaid.

I also have shown some data suggesting that they don’t work very hard, though I confess to mixed feelings about that factoid since I’d rather have some bureaucrats goofing off all day. After all, the economy would be even more burdened if they were being zealous and harassing additional people in the economy’s productive sector.

As an economist, one of my broad concerns is that taxpayers are picking up the tab for bloated bureaucracy. But I’m also worried for another big reason. We get less prosperity when too many people are being lured into government jobs. Simply stated, those people could be contributing to economic output if they instead were employed in the private sector.

In other words, our living standards depend on how productively we utilize labor and capital.

But we need to be careful about how we define “private sector.”

Why? Because not all private jobs are created equal. There are millions of government contractors, for instance, and many of those people should be considered part of a “shadow bureaucracy.” Too often, they’re doing things that are just as wasteful and inefficient as their bureaucrat counterparts, but they don’t show up in the Labor Department data as part of the government workforce.

Another example of the wrong kind of private employment is the so-called compliance sector.

Here are some excerpts from a report in The Hill about “compliance officers” hired by private companies.

A growing thicket of federal regulations under the Obama administration has contributed to an employment spike in at least one corner of the job market: the increasingly vital compliance industry.  ObamaCare, the Dodd-Frank Act and other large federal undertakings have led to an outpouring of new agency rules derided by business groups and defended by advocates.  But the regulations have also been a boon for professional compliance officers paid to help companies understand and adapt to the new requirements.  …Data kept by the Bureau of Labor Statistics (BLS) shows an 18-percent increase in the number of compliance officers in the United States between 2009 and 2012.

The article continues, including data showing that the compliance sector is getting bigger, costing lots of money, and that the problem began before Obama took office.

At last count, there were an estimated 227,500 compliance officers employed in the United States, according to the BLS. The bureau defines a compliance officer as an employee responsible for evaluating conformity with laws and regulations. …Compliance officers make an average of just under $65,000 annually, a gross national labor cost of roughly $14.7 billion, according to the BLS data. …for small firms without the resources to hire their own full-time compliance staff, adapting to new regulations can be an expensive proposition, said Sam Batkins, director of regulatory policy for AAF. …The expansion of the compliance industry did not begin under President Obama and is not solely linked to the healthcare and Wall Street reform bills. The AAF analysis found a 122-percent increase of compliance officers over the past 10 years.

Gee, maybe we can get to the point where our entire economy is nothing but government bureaucrats and compliance officers. With enough of both categories, we could have full employment!

Of course, there would be one tiny little problem since nothing would get produced. And with nobody generating any income, there wouldn’t be any money to pay for the paper pushers from both government and the private sector.

But as we’ve seen from nations such as Greece, politicians generally don’t grasp this simple point until it’s too late.

Though let’s give a shout out to the former left-wing President of Brazil, who irritated his socialist supporters by making a seemingly elementary observation that you have to have production before you can have redistribution. Heck, even rock stars are beginning to realize that capitalism is the right approach if you want better lives for the less fortunate.

So maybe there’s hope.

Let’s close by issuing a couple of important caveats. Notwithstanding my occasionally overheated rhetoric, not all government jobs are bad jobs. Similarly, I don’t want to imply that all compliance jobs in the private sector are wasteful and inefficient.

To be more specific, I mean those statements in the narrow sense that companies doubtlessly are trying to adapt to all the new regulatory burdens in the least costly manner possible. So the jobs they are creating make sense, given the reality that firms are being buried under a blizzard of red tape.

But I also mean it in the broad sense that there are some regulations that pass a cost-benefit test, and compliance officers resulting from those regulations presumably are part of such calculations. Even a cranky libertarian like me, for instance, won’t lose sleep about compliance officers in a nuclear power plant or at a medical lab doing research on the Ebola virus.*

*But allow me to point out that a genuinely free market would have something akin to compliance officers because of “private regulation.” As I explained last year, “the profit motive creates mutually reinforcing oversight,” and we can be quite confident that market forces would do a better job of protecting us at lower cost.

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I’m a very straight-laced guy. Some would even say boring. I’ve never done drugs, for instance.

But not because they’re illegal. I’ve never done drugs for the reason that I’ve never smoked cigarettes. Just doesn’t seem like a smart thing to do. And I encourage friends and family to have the same approach.

That being said, I’ve never thought we should criminalize things simply because I don’t like them.

Particularly when it would make a lot more sense to focus law enforcement resources on stopping crimes against people and property. This new video from Learn Liberty explains further.

But this isn’t about cost-benefit analysis. Watch this powerful video from Reason TV about how one family has been victimized by drug prohibition.

Now ask yourself what purpose it served to have local cops basically entrap that unfortunate kid? If you come up with an answer, you have a very creative imagination.

Also keep in mind that the War on Drugs is the reason why politicians imposed costly and ineffective anti-money laundering laws. As well as disgusting and reprehensible asset forfeiture laws.

One misguided government policy leading to two other bad policies. That’s Mitchell’s Law on steroids!

P.S. Drugs do impose costs, but they’re mostly incurred by moronic users. Though there sometimes are collateral victims, such as kids whose parents allow their lives to get messed up. That’s why it would be nice if drugs somehow didn’t exist. Heck, the same things could be said about booze. Or tobacco. But they do exist. The libertarian position isn’t that these things are good. Instead, our position is that prohibition does more harm than good.

P.P.S. Just in case you think I’m an outlier, I invite you to read the thoughts of John McCain, John Stossel, Mona Charen, Gary Johnson, Pat Robertson, Cory Booker, and Richard Branson.

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I want government to successfully and rationally fight crime and stop terrorism. That’s a perfectly appropriate libertarian sentiment since protecting life, liberty, and property are among the few legitimate roles for government.

But I don’t want to give bureaucrats carte blanche to monitor our lives and I don’t want to waste money in those cases where it is proper for the government to snoop on bad guys.

And those are some of the sentiments I expressed in this panel for Forbes on Fox.

My wonkish concern for cost-benefit analysis and corporate welfare is not empty posturing. There’s real money involved.

Here’s some of what CBS News reported on the issue.

How much are your private conversations worth to the U.S. government? Turns out, it can be a lot, depending on the technology. …AT&T, for example, imposes a $325 “activation fee” for each wiretap and $10 a day to maintain it. Smaller carriers Cricket and U.S. Cellular charge only about $250 per wiretap. But snoop on a Verizon customer? That costs the government $775 for the first month and $500 each month after that… Industry says it doesn’t profit from the hundreds of thousands of government eavesdropping requests it receives each year… “What we don’t want is surveillance to become a profit center,” said Christopher Soghoian, the ACLU’s principal technologist. But “it’s always better to charge $1. It creates friction, and it creates transparency” because it generates a paper trail that can be tracked. …The FBI said it could not say how much it spends on industry reimbursements because payments are made through a variety of programs, field offices and case funds.

I confess that I’m not an expert – or even a novice – on the details of law enforcement, but I’m glad that my speculation on the low cost of setting up a wiretap seems to have been accurate. At least based on this excerpt from the article.

In 2009, then-New York criminal prosecutor John Prather sued several major telecommunications carriers in federal court in Northern California in 2009, including AT&T, Verizon and Sprint, for overcharging federal and state police agencies. In his complaint, Prather said phone companies have the technical ability to turn on a switch, duplicate call information and pass it along to law enforcement with little effort. Instead, Prather says his staff, while he was working as a city prosecutor, would receive convoluted bills with extraneous fees. The case is pending.

This article, as well as the Forbes on Fox debate, deal with general law enforcement, not the controversy about NSA data collection and monitoring.

But I can’t resist sharing this excellent bit of NSA-related humor that arrived in my inbox.

NSA Obama Humor

Very similar in quality and theme to this great set of images.

And if you appreciate political cartoons on this topic, here are some of my favorites. I think the one featuring Nixon and Bush is the best of the bunch.

Last but not least, here are my thoughts on the NSA/Snowden controversy if you want some non-humorous analysis.

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To save readers some time, the honest answer to the question is that I don’t have many profound thoughts about the controversy surrounding Edward Snowden and snooping by the National Security Agency.

But since I’ve been asked by several people to pontificate on the matter, I won’t let trivial obstacles such as lack of knowledge or absence of expertise preclude me from giving a response. Heck, I’ve written about drone attacks, and terrorism policy, and my knowledge in those areas may be even less than the President’s understanding of the economy!

Normally, when I’m in the dark about some matter of public policy, I simply see what some of my Cato colleagues have said about an issue. But as you can see here, here, and here, those experts are split on the topic (brings to mind the joke about the politician who, when asked his position on some legislation, said “some of my friends are for the plan and some of my friends are opposed, and I always stick with my friends).

So I reckon I’ll just wing it with a couple of observations and a concluding thought about patriotism.

As I noted a couple of weeks ago, I want – at a minimum – there to be judicial oversight whenever the government spies on American citizens, but I also think some cost-benefit analysis is appropriate. Just because a court has the power to approve snooping, that doesn’t mean it’s a sensible use of law enforcement resources.

I confess I don’t know whether NSA snooping is a good use of time and energy, but I’m skeptical. Why? Because we don’t find much common sense in areas where I do know enough to run my mouth, such as money laundering laws and Transportation Security Administration rules. So why is NSA snooping any different?

It probably isn’t. As such, I side with other Americans in not wanting to give up my liberties simply because some politicians say our security is threatened.

That being said, I find myself irked by Mr. Snowden’s behavior. Some people believe he is a genuine patriot (in the proper sense of the word) motivated by libertarian principles, but the fact that he fled to Russia (perhaps en route to Cuba, Venezuela, or Ecuador) doesn’t reflect well on him.

For all its flaws, I rank the United States far above places such as Russia, China, and assorted Latin American thug regimes.

I understand that Snowden presumably wants to go someplace where he can’t be snatched by American officials, but he will cross the line and unambiguously become a traitor in my eyes if he gives sensitive material to unfriendly foreign governments.

And by sensitive, I don’t necessarily mean classified. I’m sure the federal government goes way overboard in labeling material as secret or classified. I’m talking about information that could compromise the security of the United States.

I’m guessing Edward Snowden has such information. If he shares it with hostile governments, he’s a bad person.

P.S. Here’s a humorous look at Obama-approved snooping.

P.P.S. If you think I’m being too hard on Snowden, you’ll probably beat my libertarian score on this comprehensive test.

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After the financial crisis, the consensus among government officials was that we needed more regulation.

This irked me in two ways.

1. I don’t want more costly red tape in America, particularly when the evidence is quite strong that the crisis was caused by government intervention. Needless to say, the politicians ignored my advice and imposed the costly Dodd-Frank bailout bill.

2. I’m even more worried about global regulations that force all nations to adopt the same policy. The one-size-fits-all approach of regulatory harmonization is akin to an investment strategy of putting all your retirement money into one stock.

I talked about this issue in Slovakia, as a conference that was part of the Free Market Road Show. The first part of my presentation was a brief description of cost-benefit analysis. I think that’s an important issue, and you can click here is you want more info about that topic.

But today I want to focus on the second part of my presentation, which begins at about the 3:40 mark. Simply stated, there are big downsides to putting all your eggs in one regulatory basket.

The strongest example for my position is what happened with the “Basel” banking rules. International regulators were the ones who pressured financial institutions to invest in both mortgage-backed securities and government bonds.

Those harmonized regulatory policies didn’t end well.

Sam Bowman makes a similar point in today’s UK-based City AM.

Financial regulations like the Basel capital accords, designed to make banks act more prudentially,  did the opposite – incentivising banks to load up on government-backed mortgage debt and, particularly in Europe, government bonds. Unlike mistakes made by individual firms, these were compounded across the entire global financial system.

The final sentence of that excerpt is key. Regulatory harmonization can result in mistakes that are “compounded across the entire global financial system.”

And let’s not forget that global regulation also would be a vehicle for more red tape since politicians wouldn’t have to worry about economic activity migrating to jurisdictions with more sensible policies – just as tax harmonization is a vehicle for higher taxes.

P.S. For a more learned and first-hand explanation of how regulatory harmonization can create systemic risk, check out this column by a former member of the Securities and Exchange Commission.

P.P.S. Politicians seem incapable of learning from their mistakes. The Obama Administration is trying to reinflate the housing bubble, which was a major reason for the last financial crisis. This Chuck Asay cartoon neatly shows why this is misguided.

Asay Housing Cartoon

P.P.S. Don’t forget that financial regulation is just one small piece of the overall red tape burden.

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A reader wants to know if I think the American people are becoming more statist over time.

I’m conflicted. More and more people get lured into some form of government dependency every year, and this suggests Americans eventually will adopt a  European-style moocher mentality.

This worries me.

On the other hand, I periodically see polls suggesting that the American people have very libertarian views on key issues.

These are encouraging numbers. And here’s another bit of good news. A recent poll by Fox News found that a plurality of Americans would not give up personal freedoms to reduce the threat of terrorism. What’s especially remarkable is that this poll took place immediately following the bombing of the Boston Marathon by the welfare-sponging Tsarnaev brothers.

Terrorism Freedom Tradeoff

Interestingly, I had a conversation with a left-leaning friend who said this poll showed that Americans were a bunch of “paranoid nuts” because this poll showed that they viewed their government with suspicion.

But perhaps people are simply rational. I had an intern look up data on the probability of getting killed by a terrorist. He found an article from Reason that reported.

…a rough calculation suggests that in the last five years, your chances of being killed by a terrorist are about one in 20 million. This compares annual risk of dying in a car accident of 1 in 19,000; drowning in a bathtub at 1 in 800,000; dying in a building fire at 1 in 99,000; or being struck by lightning at 1 in 5,500,000.

In other words, the odds of being killed by a terrorist are very low. And with the risk so low, why give up liberty? Particularly when it’s highly unlikely that sacrificing more of your freedom will actually reduce the already-low threat of terrorism.

This reminds me of the money laundering issue. Just a few decades ago, there was no such thing as anti-money laundering laws. Then politicians decided we need these laws to reduce crime.

These laws, we were told, would give law enforcement more tools to catch bad guys and also reduce the incentive to commit crimes since it would be harder for criminals to enjoy their ill-gotten gains.

That sounds good, but the evidence shows that these laws have become very expensive and intrusive, yet they’ve had no measurable impact on crime rates.

So how did politicians respond? In a stereotypical display of Mitchell’s Law, they decided to make anti-money laundering laws more onerous, imposing ever-higher costs in hopes of having some sort of positive impact.

This is bad for banks, bad for the poor, and bad for the economy.

So when I see polls showing the American people are skeptical about surrendering freedom to the government, I don’t think they are being “paranoid.” I think they’re being very rational.

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This may be a sign of the apocalypse, but I’m going to praise a government agency.

In the past, I’ve scorched the Transportation Security Administration for pointless and foolish “security theater.”

  1. I’ve commented on the TSA’s incompetence.
  2. I’ve shared some horror stories about TSA abuse.
  3. And I’ve posted many jokes about the Keystone Cops of airport security (for more laughs, see this, this, this, and this).

But I’m willing to admit when the government makes a wise decision (even if all they’re doing is reversing a previous dumb decision), and the TSA’s policy on pocket knives deserves some applause.

Here are some details from a CNN report.

The nation’s aviation security chief on Thursday defended his recent decision to again permit knives aboard commercial flights, despite concerns from major airlines and their flight crews, and sharp criticism from some members of Congress. …He said small knives no longer pose a threat to aircraft security, which now emphasizes bomb detection. “A small pocket knife is simply not going to result in the catastrophic failure of an aircraft and an improvised explosive device will,” he said. “And we know, from internal covert testing, searching for these items, which will not blow up an aircraft, can distract our officers from focusing on the components of an improvised explosive device.” Small knives were banned along with a host of other undersized sharp objects like nail clippers, screwdrivers and cosmetic scissors, following the 9/11 al Qaeda hijack attacks on the United States.

I’ll be particularly happy if the new policy allows softball bats, since I sometimes have to fly to out-of-town tournaments with my over-50 team.

The rules also allow passengers to carry up to two golf clubs, certain toy bats or other sports sticks — such as ski poles, hockey sticks, lacrosse sticks and pool cues — aboard in carry-on luggage.

For skeptics out there, here’s the simple reality. In the post-9/11 worlds, passengers will not allow dirtbags to take over a plane with small knives, golf clubs, or any of the items being allowed on planes.

Chill, folks, this is not a threat

The TSA is correct to focus on things that represent bigger real-world threats.

P.S. I should also applaud the TSA’s “pre-check” program. I’m actually at Dulles Airport right now, having breezed through the new screening process that allowed me to keep on my shoes and jacket and to keep my laptop in its bag.

P.P.S. To show that I’m not getting too soft in my old age, I still think the TSA is inefficient and incompetent, and I invite everyone to peruse this remarkable info-graphic.

P.P.P.S. And because I don’t think the government should discriminate (even when it’s discriminating in my favor), I still object to special checkpoint lines for frequent flyers and first class passengers.

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Obama imposed a big tax hike last year.

But I’m not talking about the fiscal cliff and the President’s class-warfare trophy of higher tax rates on those evil rich people. That happened this year.

Instead, I’m referring to the increase in the regulatory burden.

Here are some excerpts from a report in The Hill.

The Obama administration issued $236 billion worth of new regulations last year… The analysis from the American Action Forum, led by former Congressional Budget Office Director Douglas Holtz-Eakin, found that the administration added $216 billion in rules and more than $20 billion in regulatory proposals in 2012. Complying with those rules will require an additional 87 million hours of paperwork, the report said. The group put the total price tag from regulations during Obama’s first term at more than $518 billion. …The Environmental Protection Agency racked up the most in regulatory costs last year, according to the report, issuing $172 billion worth of rules. Regulations from the healthcare reform law tacked an additional $20.1 billion in costs onto the economy.

This isn’t pocket change. Indeed, $236 billion is almost four times as much money – measured annually – as Obama’s tax hike. And the vast majority of that burden will be borne by ordinary citizens, not just the so-called rich.

But the article includes a very important caveat.

Though the study lists the costs of regulations, it does not calculate any benefits that might have resulted from them.

That’s an important point, which is why it would be nice if the government engaged in some honest cost-benefit analysis. Some regulations impose modest costs and generate meaningful benefits. Mandating that cars include seat belts would be a good example.

Cartoon regulatory octopusBut other regulations impose costs far in excess of potential benefits, such as all the red tape accompanying Obamacare, the regulatory tsunami of Dodd-Frank, and the never-ending plethora of EPA rules.

Many people complain about the high cost of regulation. Heck, I’m one of them. I’ve shared some very disturbing numbers about the burden of red tape.

But maybe it’s time to step back and look at the bigger picture. More specifically, we should ask whether there is an alternative to government regulation. John Stossel says yes, arguing that private markets are remarkably effective in protecting consumers without the involvement of government.

He starts his column by noting that the regulatory nightmare is getting worse.

The bureaucrats never stop. There are now more than 170,000 pages of federal regulations.

But then he explains that private rules are just like regulation, but without a role for clumsy and ineffective government.

It is scary to think about a world without regulation. Intuition leads us to think that without government we’d be victims of fraud… But our intuition is wrong. Consider this: An entire sector of the economy operates almost entirely without government controls. Complete strangers exchange big money there every day. It’s the Internet. It does have regulation, just not government regulation.

He mentions the innovative private regulation of companies such as PayPal and eBay.

PayPal invented a new form of regulation. “They developed a private fraud detection system, where they used computers to say, ‘This might be fraudulent,’ and then it would send it to a human to investigate that.” That dramatically reduced fraud, and PayPal thrived. EBay’s business model is also threatened by fraud. How can a buyer trust that, say, a seller will actually deliver a $25 pack of baseball cards and that the cards will be what he claims they are? In theory, you could sue; but in practice, our legal system is too slow and costly for that. So eBay came up with self-regulation: The buyers rate the sellers.

And he also explains how stock markets originally relied on private forms of regulation.

Did you know that stock markets began without government regulation? …the first stock exchanges developed in London in the 1700s: “Government refused to enforce all but the most simple contracts. Nevertheless, brokers figured out how to do short sales, futures contracts, options contracts — even though none was enforceable by law.” They came up with private enforcement. “They traded in coffeehouses. And after a while, they decided: ‘Let’s enforce rules within this coffeehouse. If you default, you’re going to get kicked out of the coffeehouse, and we’re going to call you a lame duck.'”

Unfortunately, the trend is for more government, even though much of red tape produced by Washington doesn’t pass the cost-benefit test.

Years of consumer reporting have taught me that such private regulation is better for consumers than the piles of rules produced by our bloated government. Worse, government’s micromanagement stifles innovation. Companies now invest in lawyers and “compliance officers,” rather than engineers and creators.

John’s column is music to my ears. I wrote an entire article for Townhall based on the premise that “the profit motive creates mutually reinforcing oversight” to protect the interests of consumers.

In other words, private companies don’t maximize profits by poisoning, killing, mistreating, and abusing their customers. And even if they thought that was a means of getting rich, other private companies such as banks and insurance companies would have a profit-maximizing incentive to stop bad behavior.

That doesn’t mean there’s no role for government. Even a libertarian system, for instance, would have a legal system enabling people to get compensation when they suffer losses because of negligence.

The question before us, though, is whether the pendulum has swung too far in favor of command-and-control regulation from Washington.

To answer, let’s close this post with some examples of regulatory idiocy from government bureaucracies.

Does anyone think the private sector would impose rules like this?

Remember, if government is the answer, you’ve asked a very strange question.

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There’s a lot to like about Texas. The state has no income tax, for instance, which we know is a good recipe for faster growth and more prosperity.

That’s one of the reasons why the Lone Star State kicks the you-know-what out of California in the battle to attract jobs and investment.

But Texans also have a more sensible approach to thwarting crime. Some of them apparently took my IQ test, which asks whether murderers prefer armed victims or unarmed victims, and they wisely concluded that the ability to shoot back is a lot better than cowering in a corner (you can see the California mentality in the third image in this post).

So one school district allows teachers and staff to carry concealed weapons. Here’s some of what’s reported in the Fort Worth Star Telegram.

David Thweatt, superintendent of the tiny Harrold school district in northwest Texas, believes his staff is ready. Besides special locks and security cameras, an undisclosed number of staff members and teachers carry concealed handguns. Thweatt said the “guardian plan,” which drew international attention when it was implemented in 2008, definitely enhances student safety. “Is that 100 percent? No,” Thweatt said Friday in a telephone interview. “Nothing is 100 percent. But what we do know is that we’ve done all we can to protect our children.” At the time the plan was put in place, Harrold, about 150 miles northwest of Fort Worth, was the only known public school district in Texas and the U.S. that allowed staff members and teachers to carry concealed weapons. Thweatt said he knows of some other district that have since adopted similar policies, but declined to name them. …Board members approved the measure because the district is at least 20 minutes from the nearest station of the Wilbarger County Sheriff’s Department. …Thweatt said he wanted to minimize casualties that could quickly increase while waiting for deputies. He didn’t want a plan where you “lock yourself in your closet and hope that an intruder won’t hurt you.” …There has not been an incident on his campus, and Thweatt doesn’t expect one.

The last part of the excerpt tells you all you need to know. There have been no mass shootings and the superintendent doesn’t expect any.

Some leftists doubtlessly will fret that a crazy teacher might bring a gun to school and start shooting people. What they apparently don’t understand, though, is that a crazy teacher already has that ability. Or, as we tragically witnessed in Connecticut, some other nutjob can come to a school and engage in a killing spree.

But in Harrold, Texas, at least there are people who can shoot back.

I know I would rather send my kids to school in Harrold than to someplace that advertises itself as a gun-free zone.

And if this poster is correct, Israel puts common sense above anti-gun ideology.

You can enjoy some humor about so-called gun-free zones by clicking here.

And since this post is about Texans and the second amendment, this bit of humor is always popular. As is this example of a Texas police exam and this story of Texas, California, and a coyote.

Speaking of California, let’s engage in a bit more mockery of the Golden State.

P.S. Let’s allow Alabama to make a cameo appearance in this post since this image is entertaining in more  ways than one.

(h/t: Ben Domenech, via Erick Erickson)

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I wrote earlier this month about an honest liberal who acknowledged the problems created by government dependency. Well, it happened again.

First, some background.

Like every other decent person, I was horrified and nauseated by the school shootings in Newton, Connecticut.

Part of me wishes the guy hadn’t killed himself so that he could be slowly fed into a meat grinder.

And my friends on the left will be happy to know that part of me, when I first learned about the murders, thought the world might be a better place if guns had never been invented.

Sort of like my gut reaction about cigarettes when I find out that somebody I know is dying of a smoking-related illness or how I feel about gambling when I read about a family being ruined because some jerk thought it would be a good idea to use the mortgage money at a casino.

But there’s a reason why it’s generally not a good idea to make impulsive decisions based on immediate reactions. In the case of gun control, it can lead to policies that don’t work. Or perhaps even make a bad situation worse.

I’ve certainly made these points when writing and pontificating about gun control. But I’m a libertarian, so that’s hardly a surprise. We’re people who instinctively are skeptical of giving government power over individuals.

But when someone on the left reaches the same conclusion, that’s perhaps more significant. Especially when you get the feeling that they would like ban private gun ownership in their version of a perfect world.

That’s why I heartily recommend Jeffrey Goldberg’s article in The Atlantic.

Here are some of the most profound passages in the article, beginning with a common-sense observation that there’s no way for the government to end private gun ownership.

According to a 2011 Gallup poll, 47 percent of American adults keep at least one gun at home or on their property, and many of these gun owners are absolutists opposed to any government regulation of firearms. According to the same poll, only 26 percent of Americans support a ban on handguns. …There are ways, of course, to make it at least marginally more difficult for the criminally minded, for the dangerously mentally ill, and for the suicidal to buy guns and ammunition. …But these gun-control efforts, while noble, would only have a modest impact on the rate of gun violence in America. Why? Because it’s too late. There are an estimated 280 million to 300 million guns in private hands in America—many legally owned, many not. Each year, more than 4 million new guns enter the market. …America’s level of gun ownership means that even if the Supreme Court—which ruled in 2008 that the Second Amendment gives citizens the individual right to own firearms, as gun advocates have long insisted—suddenly reversed itself and ruled that the individual ownership of handguns was illegal, there would be no practical way for a democratic country to locate and seize those guns.

Which is why prohibition was a flop. Which is why the current War on Drugs is so misguided. And so on and so on.

The author then wonders whether the best way of protecting public safety is to have more gun ownership.

Which raises a question: When even anti-gun activists believe that the debate over private gun ownership is closed; when it is too late to reduce the number of guns in private hands—and since only the naive think that legislation will prevent more than a modest number of the criminally minded, and the mentally deranged, from acquiring a gun in a country absolutely inundated with weapons—could it be that an effective way to combat guns is with more guns? Today, more than 8 million vetted and (depending on the state) trained law-abiding citizens possess state-issued “concealed carry” handgun permits, which allow them to carry a concealed handgun or other weapon in public. Anti-gun activists believe the expansion of concealed-carry permits represents a serious threat to public order. But what if, in fact, the reverse is true? Mightn’t allowing more law-abiding private citizens to carry concealed weapons—when combined with other forms of stringent gun regulation—actually reduce gun violence?

He cites examples where armed citizens stopped mass killings.

In 1997, a disturbed high-school student named Luke Woodham stabbed his mother and then shot and killed two people at Pearl High School in Pearl, Mississippi. He then began driving toward a nearby junior high to continue his shooting spree, but the assistant principal of the high school, Joel Myrick, aimed a pistol he kept in his truck at Woodham, causing him to veer off the road. Myrick then put his pistol to Woodham’s neck and disarmed him. On January 16, 2002, a disgruntled former student at the Appalachian School of Law in Grundy, Virginia, had killed three people, including the school’s dean, when two students, both off-duty law-enforcement officers, retrieved their weapons and pointed them at the shooter, who ended his killing spree and surrendered. In December 2007, a man armed with a semiautomatic rifle and two pistols entered the New Life Church in Colorado Springs and killed two teenage girls before a church member, Jeanne Assam—a former Minneapolis police officer and a volunteer church security guard—shot and wounded the gunman, who then killed himself.

The author also punctures the left’s mythology about concealed carry laws.

In 2003, John Gilchrist, the legislative counsel for the Ohio Association of Chiefs of Police, testified, “If 200,000 to 300,000 citizens begin carrying a concealed weapon, common sense tells us that accidents will become a daily event.” When I called Gilchrist recently, he told me that events since the state’s concealed-carry law took effect have proved his point. …Gilchrist’s argument would be convincing but for one thing: the firearm crime rate in Ohio remained steady after the concealed-carry law passed in 2004.

Goldberg elaborates.

Today, the number of concealed-carry permits is the highest it’s ever been, at 8 million, and the homicide rate is the lowest it’s been in four decades—less than half what it was 20 years ago. (The number of people allowed to carry concealed weapons is actually considerably higher than 8 million, because residents of Vermont, Wyoming, Arizona, Alaska, and parts of Montana do not need government permission to carry their personal firearms. These states have what Second Amendment absolutists refer to as “constitutional carry,” meaning, in essence, that the Second Amendment is their permit.) Many gun-rights advocates see a link between an increasingly armed public and a decreasing crime rate. “I think effective law enforcement has had the biggest impact on crime rates, but I think concealed carry has something to do with it. We’ve seen an explosion in the number of people licensed to carry,” Lott told me. “You can deter criminality through longer sentencing, and you deter criminality by making it riskier for people to commit crimes. And one way to make it riskier is to create the impression among the criminal population that the law-abiding citizen they want to target may have a gun.” Crime statistics in Britain, where guns are much scarcer, bear this out. Gary Kleck, a criminologist at Florida State University, wrote in his 1991 book, Point Blank: Guns and Violence in America, that only 13 percent of burglaries in America occur when the occupant is home. In Britain, so-called hot burglaries account for about 45 percent of all break-ins. Kleck and others attribute America’s low rate of occupied-home burglaries to fear among criminals that homeowners might be armed. (A survey of almost 2,000 convicted U.S. felons, conducted by the criminologists Peter Rossi and James D. Wright in the late ’80s, concluded that burglars are more afraid of armed homeowners than they are of arrest by the police.)

That last bit of info is very powerful. The bad guys are more afraid of armed homeowners than the police. Surely, as I explained here, that tells us that gun ownership lowers crime.

Here’s another no-sh*t-Sherlock observation from the article.

It is also illogical for campuses to advertise themselves as “gun-free.” Someone bent on murder is not usually dissuaded by posted anti-gun regulations. Quite the opposite—publicly describing your property as gun-free is analogous to posting a notice on your front door saying your home has no burglar alarm. As it happens, the company that owns the Century 16 Cineplex in Aurora had declared the property a gun-free zone.

I recently mocked the idea of gun-free zones with several amusing posters. It’s unbelievable that some people think that killers care about such rules.

One place that isn’t likely to see any massacres is Colorado State University.

For much of the population of a typical campus, concealed-carry permitting is not an issue. Most states that issue permits will grant them only to people who are at least 21 years old. But the crime-rate statistics at universities that do allow permit holders on campus with their weapons are instructive. An hour north of Boulder, in Fort Collins, sits Colorado State University. Concealed carry has been allowed at CSU since 2003, and according to James Alderden, the former sheriff of Larimer County, which encompasses Fort Collins, violent crime at Colorado State has dropped since then.

I also recommend this video, which makes fun of those who support gun-free zones.

Here is Goldberg’s conclusion.

But I am sympathetic to the idea of armed self-defense, because it does often work, because encouraging learned helplessness is morally corrupt, and because, however much I might wish it, the United States is not going to become Canada. Guns are with us, whether we like it or not. Maybe this is tragic, but it is also reality. So Americans who are qualified to possess firearms shouldn’t be denied the right to participate in their own defense. And it is empirically true that the great majority of America’s tens of millions of law-abiding gun owners have not created chaos in society.

Goldberg’s article, by the way, doesn’t even mention the value of private gun ownership when government fails to maintain public order, as occurred after Hurricane Sandy and during last year’s British riots.

I have a couple of final things to share, including this this video about a woman who lost her parents because she decided to obey a bad government law. And here’s a great study from Cato about individuals using guns to protect themselves.

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I recently commented on some astounding numbers showing that each regulatory bureaucrat destroys 100 jobs in the productive sector of the economy.

That’s obviously terrible news. Heck, it would be awful if each bureaucrat caused the destruction of 2 private-sector jobs.

But here are some excerpts from a John Stossel column about how the bureaucrats at the Food and Drug Administration cause people to suffer and needlessly die.

Recently, there have been shortages of some medicines. Cancer patients can’t get drugs they need. Why not? One reason is that a big drugmaker shut down for a year in part to meet Food and Drug Administration rules. The FDA makes it so expensive and difficult to sell drugs that there isn’t an eager pack of companies rushing to the fill the gap. …Does the FDA say it’s sorry for its part and back off? Of course not. Regulators almost never do that. In fact, the FDA wants more power. It wants to regulate how your doctor uses his smartphone. I’m not kidding! The FDA wants the power to approve mobile medical apps that let doctors monitor patients’ vital signs over their phones. As one doctor put it, “Even though I’m away from the hospital, I can still look at … real-time wave form data just as if I were at the patient’s bedside.” Sounds great. It makes doctors more efficient. But the FDA basically says, “No, you just can’t put something on your phone if it’s a medical device. What if it doesn’t work right? We have to approve it first.” …what’s the harm in running apps past the regulators? …There’s a big cost to the public when companies submit applications and then wait years for FDA approval. “We’re losing time, precious time that lives are dependent upon,” Emord said. “MIM Software developed a simple mobile device that would combine MRI images, PET scans, CAT scans all together and produce a super image that was better for diagnosis … right on your phone. To get that through the agency, it took two and a half years and cost some hundreds of thousands of dollars. All the while it could have been in use, and ultimately it was approved.” Lawyers and reporters encourage bureaucrats to move slowly. If something goes wrong, the media make a huge fuss about it, and the class-action parasites pounce. But when the FDA delays a device for years and people die, we don’t report that. We don’t even know who the victims are. Useful HIV drugs were available in Europe for years before the FDA approved them for use here. A doctor at the Cleveland Clinic invented a medical app that helped physicians calibrate the amount of radiation to give to women with breast cancer. The FDA demanded so much extra and expensive proof of its safety that he abandoned it. The FDA’s caution leads many companies to just give up on potentially lifesaving ideas. Yet I don’t hear companies complaining. “If you raise your head above the parapet and you become vocal in your criticism, the FDA remembers like an elephant and will stamp you out of existence. They’ll punish you. It’s so much discretion in their hands. They sit like emperors reigning over this stuff.”

I used to think it was bad news that politicians wanted to force us to use inferior light bulbs, substandard washing machines, and toilets that don’t flush properly.

But now that they’re regulating us to death, maybe people will get upset.

P.S. The prize for the craziest bit of red tape still belongs to Japan, where the government actually regulates providers of coffee enemas.

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Life is filled with risk. We can deal with that two ways. The first option is to allow people to make educated choices, thus promoting individual responsibility. The second option is to have politicians micro-manage our decisions, thus promoting passivity.

Not surprisingly, America is drifting in the wrong direction, allowing busybodies to regulate every aspect of our lives.

Here’s an excerpt from the Seattle newspaper about an example of what I call the wussification of America. But it’s really more the infantalization of America.

People who hope to beat the summer heat by swimming, floating or boating on rivers in King County must wear a life vest or face an $86 fine. …”This council sometimes thinks it’s everybody’s mom,” said Councilwoman Kathy Lambert, who voted “no.” …The law appears to be the first of its kind in the state. …it didn’t appear any other county required swimmers to wear the devices. …Opponents who spoke before the Council said sheriff’s deputies had better things to do than to write tickets for people on waterways and would be better off focusing on people engaging in dangerous behavior. …Current state law requires that kids 12 and under must wear a live vest when on a boat that is less than 19 feet long. The new county law says everybody must wear the vests when they are on rivers… It applies to people tubing, rafting, using a surfboard, canoe or kayak. Swimmers or people wading more than 5 feet from shore or in water more than 4 feet deep would also have to wear life vests.

I suppose it would be appropriate to mention that this kind of intervention has costs. When government creates the illusion that there is little or no risk, it lures people into behaving more recklessly. The housing mess is a good example. Government subsidies and guarantees caused a boom-bust cycle largely by making it seem like housing was a risk-free investment.

Mandatory life jackets are a different situation, to be sure. Maybe they would encourage people to behave more recklessly, thus offsetting the presumed benefits, but that’s an empirical matter. I’m more worried about the signal sent by such interventions – i.e., that people no longer should think for themselves and instead we can rely on Big Brother to safely guide us through life.

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I’m an over-protective parent. Even now, with my kids ranging between 18 and 23, I will try to herd them together while skiing so I can follow them down the slopes and watch for potential injuries. And I never got them a jungle gym when they were young, even though I somehow managed to survive childhood with one in my backyard.

But at least I recognize what I’m doing. And I certainly would never consider imposing my mother-hen impulses on the overall population.

I’m not surprised to discover, however, that bureaucrats in New York wanted to go way overboard with regulations to ban just about anything with even tiny risks of injury. This list included things such as archery and rock climbing, which might cause me to fret, but also things such as (I’m not joking) kickball and tag.

With those standards, you may as well require kids to be enclosed in bubble wrap every morning.

The only good news is that people found out about the state’s regulatory overreach and the government was forced to cancel the rules after widespread mockery.

Here are some excerpts from a story by NBC in New York.

Day camp games like tag, wiffle ball, Red Rover and kickball are no longer at risk in New York after state health officials yanked a proposal that threatened the future of those mainstays of child’s play. Towns, villages and other camp operators had begun revamping upcoming indoor summer programs after the Department of Health sent out a long list of familiar games and activities it said presented a “significant risk of injury” and needed to be regulated more closely. …On Tuesday, Richie, a Republican whose district includes three mostly rural north-central New York counties, said she was pleased by the reversal. “At a time when our nation’s No. 1 health concern is childhood obesity, I am very happy to see that someone in state government saw we should not be adding new burdensome regulations by classifying tag, Red Rover and Wiffle Ball as dangerous activities,” she said. “I am glad New York’s children can continue to steal the bacon and play flag football and enjoy other traditional rites of summer.” The proposal would have revised the definition of a summer day camp to include potentially risky organized indoor group activities like archery and rock climbing — as well as things like kickball, tag and Wiffle Ball. Ritchie said that would have required camps in many smaller towns and villages to add staff such as nurses and pay $200 for a state permit. Other critics argued the regulation was a hysterical approach that stood to take all the fun out of summer.

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I try to visit the Drudge Report  once a day because he has a knack for finding quirky stories. One of his recent gems is a report from the UK-based Sun about an obese man who is suing the government’s healthcare system because he got close to 1200 pounds (assuming I’m right about a “stone” being 17 lbs) before getting weight-loss surgery. [CORRECTION: A "stone" is 14 lbs, so he was close to 1000 lbs]

Man mountain Paul Mason plans to sue the NHS – claiming they ignored his plight as he rocketed towards 70 stone. …Paul said: “I want to set a precedent so no one else has to get to the same size….” At his heaviest Paul was eating 20,000 calories a day – ten times what a normal, healthy man should consume – and the cost of caring for him is thought to have hit £1million in 15 years. …He finally had the £30,000 operation last spring but before it could take place floors at St Richard’s Hospital in Chichester, West Sussex, had to be reinforced at a cost of £5,000 to take his weight.

I’m not a fan of Britain’s wretched health system, but my immediate instinct is to take the side of the NHS and make some snarky comment about personal responsibility. Perhaps, for instance, we should ask Mr. Mason whether a government official was holding a gun to his head and forcing him to eat an average of 20,000 calories every day?

But that’s too easy. So I got to thinking about the public policy issues involved, particularly in the context of second-best solutions. In other words, if I’m not allowed to assume an ideal policy such as the dismantling of the National Health Service and restoration of a genuine free market, how would I deal with the issues raised in this story? There are two difficult questions we have to decide.

The first quiz deals with how to spend taxpayer money, combined with a bit of moral hazard analysis. Which option would you pick?

A. The NHS should have given him the operation right away to save money for the taxpayers in the long run. The operation cost nearly $50,000, but he was already costing taxpayers (I assume) $100,000 every year. Sounds like a smart investment that will pay for itself in just a few years.

or:

B. The NHS should not have given him the operation at all because that is akin to forcing taxpayers to subsidize personal irresponsibility.Moreover, it sends a signal to others that it will be marginally less costly to engage in similar self-destructive behavior. Last but not least, taxpayers probably will still pay through the nose to subsidize Mr. Mason’s annual expenses.

Our other quiz is about Mr. Mason’s lawsuit. As noted above, part of me thinks this case has no merit, but the article notes that it took five years before the NHS got him in the operating room after an initial surgery was canceled. In other words, it appears the lawsuit is happening because of the incompetence and waiting lines of a government healthcare system, so the real issue is the remedy. Which option would you pick?

A. Mr. Mason should win the lawsuit, both to compensate him for the government’s presumed incompetence and to punish the NHS for being so inefficient.

or:

B. Mr. Mason ate his way into trouble, so doesn’t deserve to win his lawsuit. Regarding the NHS, it is horribly inefficient, but any court-imposed damages would just get passed on to taxpayers, so there’s no possible upside.

So how do I answer these questions, assuming the Sun reported all the relevant facts and did so correctly?

For the first question, I reluctantly pick A. I’m guessing that the surgery will somewhat reduce the long-run burden that Mr. Mason is imposing on taxpayers. I realize there’s a genuine moral hazard issue, and that decisions like this make is marginally easier for other people to become morbidly obese (and thus impose costs on taxpayers), but my gut instinct is that surgery is still the best choice from a cost-benefit perspective. Finally, even though I’m not overflowing with sympathy for Mr. Mason, I’m a sucker for happy endings and maybe this will turn his life around.

For the second question, I do realize that governments should not be immune from lawsuits. And I say that even though it galls me that taxpayers pay for any damages awarded, either directly or because tax dollars are used to purchase insurance policies (it would be much better if successful lawsuits meant that damage awards were financed by cuts to agency budgets and/or reduction in bureaucrat pay, but I’m only allowed second-best solutions here). Nonetheless, I still pick B, and I make that choice with a decent degree of confidence. My decision is based two factors. First, I don’t want taxpayers to pay even more just because the government is incompetent. In many cases, that might not matter, but now we come to the second key factor, which is that Mr. Mason’s problems are self-inflicted.

To be sure, a court might be bound by the law rather than what’s right and therefore rule differently, but we already know from a previous blog post that I’m not similarly constrained.

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For those who follow the Drudge Report, you’ve presumably seen several stories about “Big Sis” and her plans to require either body imaging or a full pat down. I’ve always viewed this as a cost-benefit issue. There are crazies out there who want to blow up planes, so it is a legitimate function of government to figure out sensible ways of stopping this from happening.

But is the Secretary of Homeland Security, Janet Napolitano, using a sensible approach? Setting aside issues of modesty and privacy (as well as possible radiation risks), will this new approach stop terrorists? Steve Chapman of the Chicago Tribune is not overly optimistic.

When it comes to protecting against terrorism, this is how things usually go: A danger presents itself. The federal government responds with new rules that erode privacy, treat innocent people as suspicious and blur the distinction between life in a free society and life in a correctional facility. And we all tamely accept the new intrusions, like sheep being shorn. Maybe not this time. …The agency is rolling out new full-body scanners, which eventually will replace metal detectors at all checkpoints. These machines replicate the experience of taking off your clothes, but without the fun. They enable agents to get a view of your body that leaves nothing to the imagination. …Besides the indignity of having one’s body exposed to an airport screener, there is a danger the images will find a wider audience. The U.S. Marshals Service recently admitted saving some 35,000 images from a machine at a federal courthouse in Florida. TSA says that will never happen. Human experience says, oh, yes, it will. For the camera-shy, TSA will offer an alternative: “enhanced” pat-downs. And you’ll get a chance to have an interesting conversation with your children about being touched by strangers. This is not the gentle frisking you may have experienced at the airport in the past. It requires agents to probe aggressively in intimate zones — breasts, buttocks, crotches. If you enjoyed your last mammography or prostate exam, you’ll love the enhanced pat-down. …Though the harm to privacy is certain, the benefit to public safety is not. The federal Government Accountability Office has said it “remains unclear” if the scanners would have detected the explosives carried by the would-be Christmas Day bomber. They would also be useless against a terrorist who inserts a bomb in his rectum — like the al-Qaida operative who blew himself up last year in an attempt to kill a Saudi prince. Full-body scanning will sorely chafe many innocent travelers, while creating only a minor inconvenience to bloodthirsty fanatics.

I travel enough that all I care about is getting through the security line without losing an hour of my time. But I’ve been through these machines and they don’t seem to speed up the process (and if anybody checked me out, at my age, I’d be flattered). So chalk this up as another victory for senseless government policy.

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A new study from the Small Business Administration’s Office of Advocacy concludes that annual regulatory costs jumped by nearly $600 billion between 2005 and 2008. Thanks to the Obama Administration’s big-government agenda, the burden of red tape today doubtlessly is much higher, but the 2008 estimate is enough to generate some very sobering numbers. A $1.75 trillion regulatory cost works out to be more than $15,500 for every household and more than $8,000 for every employee in the country. Red tape is especially challenging for smaller firms, as noted in these key findings from the summary:
The research finds that the total costs of federal regulations have further increased from the level established in the 2005 study, as have the costs per employee. More specifically, the total cost of federal regulations has increased to $1.75 trillion, while the updated cost per employee for firms with fewer than 20 employees is now $10,585 (a 36 percent difference between the costs incurred by small firms when compared with their larger counterparts).
To be sure, some forms of regulation, such as environmental protection, generate benefits. There generally are not good estimates needed to produce cost-benefit analyses, but it is quite likely that the costs are much higher than necessary – particularly for economic regulation, the burden of which is more than three times larger than the costs of environmental regulation.

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National Review has a column reviewing a new book, 3 Billion and Counting, that dissects the harsh human cost of banning DDT. There are things that should be banned, of course, but such decisions should be based on sound science and cost-benefit analysis. Sadly, that’s not what happened with the politically-motivated decision to ban this particular pesticide. 
3 Billion and Counting, which premieres this Friday in Manhattan, was produced by Dr. Rutledge Taylor, a California physician who specializes in preventive medicine. His film will both shock and anger you. DDT was first synthesized in 1877, but it was not until 1940 that a Swiss chemist demonstrated that it could kill insects without any harm to humans. It was introduced into widespread use during World War II and became the single most important pesticide in maintaining human health for the next two decades. The scientist who discovered the insecticidal properties of DDT, Dr. Paul Müller, was awarded the 1948 Nobel Prize in Physiology or Medicine for his work on DDT. (In the 1940s and 1950s the chemical was the “secret” ingredient in a popular new cocktail, the Mickey Slim: gin, with a pinch of DDT.) In 1962, Rachel Carson’s lyrical but scientifically flawed book, Silent Spring, argued eloquently, but erroneously, that pesticides, especially DDT, were poisoning both wildlife and the environment – and also endangering human health. …In Ceylon (now Sri Lanka), DDT spraying had reduced malaria cases from 2.8 million in 1948 to 17 in 1963. After spraying stopped, malaria cases rose sharply, reaching 2.5 million over the next decade. Scientists have never found an effective substitute for DDT — and so the malaria death rate has kept on soaring.

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Steve Chapman of the Chicago Tribune makes several excellent points in his column on the recent salmonella scare, commenting on the absurd tendency to reward government bureaucracies that screw up. But more important, he explains that there are very strong incentives for safety in an unfettered marketplace. The fundamental issue, though, is that there is no way of completely eliminating risk in society, so the responsible approach is finding the best ways to minimize risk without imposing excessive costs. Relying on free markets is surely the best answer, though the government does have a role. As Chapman notes, a well-functioning tort system ensures that companies can be punished by people who suffer damages. Command-and-control regulation, by contrast, is a very expensive and inflexible approach.

In the private sector, entities that fall short of doing their jobs find themselves forced to shrink. In the public sector, the opposite is typically true. Failure is an option, and often a beneficial one. The Federal Reserve Board and Treasury facilitated the 2008 financial crisis? Then obviously we have no choice but to give them even more responsibility. The Securities and Exchange Commission let Bernie Madoff rob investors? A bigger SEC will be a smarter SEC. Just once, I’d like to see a government official say, “We blew it, and you know what? If you give us another chance, we’ll probably blow it again.” But so far, my hope has not availed. It’s true that the FDA is charged with assuring food safety. But really, the government can’t do that. The task is too big and too complex. Fortunately, it doesn’t have to do it, because the pressures of competition force producers to make sure their goods are clean and wholesome. What goes curiously unnoticed is that egg suppliers and grocery stores have nothing to gain from sickening their customers — and a lot to lose. It doesn’t take many obvious hygiene lapses for a company to get a bad reputation, and a bad reputation can be catastrophic. In 1971, a New York man died of botulism after eating a can of Bon Vivant soup. If you’ve never heard of Bon Vivant soup, there’s a simple explanation: In no time at all, the company was bankrupt and the brand was as defunct as William McKinley. The farms implicated in this episode are likely to find themselves oddly short of buyers in the coming months, if not years — unless they can prove they have taken drastic steps to clean up their act. But the burden of proof will be on them. They can also expect to be sued for huge sums of money. Meanwhile, there are plenty of other companies that didn’t screw up, whose wares will be more attractive going forward.

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