I think I would:

1) Ban the government from establishing any price or quota.  The idea here is to let market forces be market forces; allow sugar to be grown by whomever and allow it to enter the US market.  This would also get rid of the minimum wage and any racial quotas.  The best way to stop discriminating against race is to stop discriminating against race.  There could be an issue as far as environmental policy, and some may show concern for food and drug quality, but this is an issue for a larger post and discussion, I think. 

2) Whatever the government does for one, it must do for all.  I credit this to F.A. Hayek.  Essentially, the point here is to try and end the government picking winners and losers, or special groups.  I don’t raise crops, why shouldn’t I get money for not raising crops just like another farmer?  Why should industry or bank A get a bailout and not B or me? 

3) Repeal the 17th Amendment.  The states need to be represented in the government.  The House of Representatives is for the people.  This is trying to remove some of the populism that leads to a mobocracy instead of democracy. 

4) Privatize Health, Education, and Retirement.  At the very least, the states should be running these programs (Medicare, Social Security, School Funds) and not the federal government.  Fulfill our obligations in Social Security.  Debt spending doesn’t seem to slow down government spending anyhow.  These programs are a significant and growing debt issue. 

5) Disestablish the FED.  Tribute to Andrew Jackson.  I know this may sound crazy considering the wonderful job they’re doing now.  I believe a free banking system can work better (see George Selgin). 

6) Taxes.  I think the three best options are the fair tax, the Georgist property tax (tax the land, not the improvements), or a flat sales tax.  Considering the two, I’d probably favor the fair tax or sales tax and with that, remove tariffs on foreign goods.  Considering the complexity of this issue, it would probably take more than a day to really discuss and put in place the best option.  However, I’m positive that whatever we choose can’t be much worse than what we’ve already got. 

Of course there are several other things I would like to do, but maybe more minor in importance.  An example would be to remove the Selective Service Registration and NEA (why pay for a cross in a jar of urine?).  In reality, the shocks that would result from the above would also cause a significant recession (especially the ending of the FED), but would promote long term growth.  The first two, I think, would be the best of the six.  Unfortunately, I couldn’t think of any real way to say impeach judges who consider the Constitution secondary to international law or opinion. 

  The reason I chose Justice Kennedy boils down to the Rule of Law.  Paraphrasing Hayek in the Road to Serfdom, the rule of law boils down to the ability to accurate predict the outcomes of various situations in the legal system.  Kennedy’s lack of a strict overall philosophy makes any predictions difficult if not impossible.  Although I usually disagree with Ginsburg, Breyer, Souter and Stevens, and wouldn’t nominate them either, I can usually predict which way they vote.  They have fairly set philosophies, and can on occasion write brilliant opinions with them.  Both Kennedy and the now retired O’Connor lacked this consistency which is important in maintaining a Rule of Law. 

The other issue I find interesting is the fair tax debate.  The fair tax is being filibustered in many debates by people who do not understand the bill or argue against it with respect to no taxes.  Although I do not think the fair tax is perfect by any means, and it is easy to take cheap shots at it, I do think it’s a heck of a lot better than what we’ve got.  Some of the chief advantages I see are that it drastically simplifies our tax code, minimizes government knowledge of personal records, increases the efficiency of paying taxes, and can be more transparent than all the other taxes.  It also puts incentive on saving and removes the penalty on productivity.  However, there are things I don’t particularly like, such as the prebate.  But if that is what it takes to get rid of our current system, them I’m for it (but not Huckabee, the chief supporter of it). 

As you all know, we try to raise the money supply in such a way that it corresponds with economic growth to result in (relatively) stable prices.  (MV=PY)  This policy typically works fairly well, especially in light of other options, but this policy fails when there is a boost in total factor productivity.  Similarly, the gold standard was normally a good standard because usually gold grew at about the same as the economy.  Gold tended to stress the economy when our economy boomed and gold wasn’t keeping up.  (And there is good debate to which system works better.)  But back to my point, in the 90s, we had a boost in total factor productivity which made our economy grow faster than usual.  (http://www.boj.or.jp/en/type/ronbun/ron/wps/kako/data/iwp03e01.pdf)  The Feds response was to keep money growing in an equal pace to keep prices constant, which led to a period of “easy money.”  Not only did this cause the economy to outgrow itself, but this also allowed people to make bad loans and take on excessive risk. (Thus the housing market today.)  So when the total factor productivity growth slowed in 2000 (ibid), it put enough pressure to cause the first recession and continues to have impacts today.

What the Fed should have done is to allow deflation.  I guess George Selgin rubbed off on me a little.

“My main theme is that deflation isn’t always a bad thing, and that it can even contribute to overall macroeconomic stability so long as the rate of deflation mirrors the rate of productivity growth.  (It is also desirable for prices to rise when productivity suffers a setback, so my argument is for deflation in good times only.)  Many of today’s monetary theorists and central bankers reject this viewpoint, holding instead that monetary policy should aim at a more-or-less constant price level.  In my opinion, arguments for a constant price level or “zero inflation” fail to come to grips with the implications of productivity changes, which these arguments tend to ignore.” - Dr. Selgin, http://www.terry.uga.edu/~selgin/ (Also see the picture of Penelope there.) So basically, the Fed pushed too much money out there which caused a period of real strong growth, but in the long run leads to our current instability.

This is all speaking off the cuff, but it sounds pretty good to me and makes sense.  I haven’t put too much effort into it, but wondering what you’re thoughts are on this subject.

                The first type of extremist is one who will not permit any pollution whatsoever.  As idealistic as this policy may seem, it is impossible to achieve without either eliminating the human race or blasting all of us off into outer space.  The second law of thermodynamics simply stated is that no process can be 100% efficient.  This means that there are no perpetual motion machines and that every process must have some sort of waste.  So those who propose a system of “zero waste period” are faced with a scientific impossibility. 

                The second type of extremist is one who jumps on a policy and mandates it for all without considering any side effects.  When I worked at the capitol for a short time, one of the representatives told me that the Supreme Law of the land is the Law of Unintended Consequences.  Basically, this means that legislators, attempting to solve one problem, created several others in the process.  An example in environmental extremism is a proposed ban on some very mildly carcinogenic pesticides.  A consequence of this ban would be a higher price for fruits and vegetables, since less food would be able to be produced.  This results in less fruit and vegetables being eaten, especially by the poor, and therefore causes poorer nutrition and increased health problems, not less.  Legislation like this could turn a relatively minor risk into a major health crisis!  My current financial position allows me to afford the higher price of organic fruits and vegetables, but I’ve been in the position where it was regular fruit or no fruit at all.  Our current markets, through people freely cooperating with each other, allow individuals to make their own choice on what risks they are willing to undertake.

                There is one common thread for both extremists: the inability to think marginally.  Thinking marginally is weighing the benefits against the costs of an action for one more unit instead of an all or none attitude.  Consider a major oil spill; cleaning up the first bit of an oil spill by simply throwing a bucket in the water is fairly simple and cheap.  But at what point is that oil spill effectively clean?  Are we to work until the last atomic molecule of oil is out of the water?  By no means!  At some point, the costs of continuing are going to outweigh the benefits and that is the signal to stop.  One of the largest areas where marginal thinking is needed today is the debate over global warming.  Assuming that it is something man can control, should we?  Once again, we need to consider the costs of certain actions against the benefits.  To say that we must stop global warming at all costs is no different than the people who shout “zero pollution period.”  And diving headfirst into a problem of this nature without considering the full benefits and costs can make bad policies that amplify the problem.  For instance, some people argue that we need to switch from carbon based emissions to water based, but water vapor is eight times more significant as a greenhouse gas than carbon dioxide!

                Mandating certain actions always carry the risk of unintended consequences as mentioned above.  But when people are allowed to work without the heavy hand of regulation, more often than not, they function automatically to produce a better product.  The latest example is the new energy saving fluorescent light bulbs.  These bulbs do save energy over their lifetime.  However, they also increase the risk of mercury pollution and require a higher initial investment.  Now personally, the increased risk and cost are worth the savings.  And as we look at the market, many people are deciding the same thing!  People are voluntarily choosing to reduce their energy consumption by switching bulbs without government order, so there is no need to risk an involuntary mandate.  But what is it was a larger product, say energy efficient refrigerators?  The markets are still working, but slower because of a significant increase in initial investment.  Once again, the poorest individuals in our society may not have the money for such a large investment, but to refuse them an inferior refrigerator can mean increased food costs, since leftovers are not able to be kept, or even worse, food poisoning.  But as the rich continue to purchase newer and efficient refrigerators, not only do their older yet more efficient refrigerators enter the market at lower prices, but the manufacturers also tend to get better at making refrigerators so that the cost of new refrigerators are driven downwards.  Then the efficient products will be available to the poor families as well! 

                From these examples, a trend develops between prosperity and cleaner environments.  Simply stated, a person is more likely to surrender income for cleaner air when he is not starving.  A 1992 World Bank Development Report concluded that it is not true that pollution increases with growth; it follows an inverted “U” shaped curve.  One of the main components to this successful cleaner growth and towards a prosperous nation is clearly defined property rights.  When a person clearly owns his property, he is more likely to care and develop the land.  Additionally, clearly defined property rights are able to assign fines to the person who did the environmental damage.  It is no wonder that the worst environmental tragedies happen under centrally planned markets where private property is a crime! 

                Sometimes the market results can be improved by government action, but that doesn’t mean the government always improves situations where markets fail.  It is always prudent to weigh the costs and benefits and to think marginally.  Otherwise we may just end up with the worst of all worlds.

  The second one concerns one of the models that keeps coming up in another class: the export base model.  It states that in order for growth to happen, you need to export more than you import (more or less), and then a multiplier effect occurs that causes growth.  Personally, I think it stinks.  I sat for two days on one person’s version of the math behind it and found two math errors (Defining two different terms with the same symbol then subtracting them to zero as well as essentially dividing by zero to get growth to occur) surrounded by a bunch of useless and unnecessary math.  It conceptually doesn’t make sense, because as one book pointed out, given the global exports are zero, growth would be impossible.  It also showed no actually linkage to why exports would cause GDP to increase and ignored monetary phenomena.  Furthermore, it is not empirically shown to be true at all.  But once again, I wanted to know if I’m just completely missing the boat on this theory, if there is something to it.  It is the model that I really railed on in class, but it is also the main model for class.  So for the purposes of class, I kinda pushed the “I believe!” button and roll with it for now. 

  Fortunately, it looks like the class is somewhat rounded in its take on clusters.  One source, Buss, T. 1999 “The Case Against Targeted Industry Strategies,” Economic Development Quarterly 12:339, basically says it would be less popular if we just called it what it really is, central planning.  Of course, there are articles in favor of it, but probably the biggest thing I’ve noticed is how it is just a theme that keeps coming up again and again under different variations and buzzwords like “dynamic” and “innovation.”  This other article, http://www.washingtonmonthly.com/features/2001/0205.florida.html, basically is a different twist on the same old idea in that the city needs to target “gays and rockbands.”  So I think a good moral to this story is that if you know the origins of some of these theories, it becomes easier to know how to debunk them, or at least for the purposes of class, nod your head and now that it is still garbage under a different name. 

  One question I have is I can’t remember the name the title of the book referenced in the lecture which is supposed to be like the “Road to Serfdom” for urban planning.  And thanks again, Christa,  for the lecture. 

“Oh, meltdown. It’s one of those annoying buzzwords. We prefer to call it an unrequested fission surplus.” - Mr. Burns