Negative Consequence #6: Dishonesty and Disrespect for the Law

Governments are imperfect at detecting and punishing violations of their laws and regulations. Much avoidance and evasion therefore occurs, and people who obey the law lose out relative to people who do not. That is, the honest suffer relative to the dishonest, and everyone learns that laws are for suckers.

The most obvious policies with this feature are prohibitions against vice, but many others exhibit it as well: speed limits and other traffic rules, safety and health regulation, affirmative action, complicated tax codes, campaign finance regulation, environmental policies, and so on. So government interventions foster the attitude that rules are “made to be broken.”

In some instances, of course, government “rules” make sense even though violations will occur and some violators will never be caught or punished; laws against violence or theft are the classic illustrations. But these are the exceptions, and they differ from the cases discussed above. For murder or theft, everyone agrees the actions harm innocent third parties, and everyone wants the rules obeyed. This does not apply to a large fraction of government policies, most of which prevent mutually beneficial exchange. When people violate such rules, most people recognize that this is beneficial for the violators and does not necessarily harm anyone. Thus, skepticism and non-compliance are likely.

The New York Times Co. plans to narrow the size of its flagship newspaper and close a printing plant, resulting in the loss of 250 jobs, the company said in a story posted on its Web site late on Monday...

The newspaper will be narrower by 1 1/2 inches. The redesign will result in the loss of 250 production jobs, the company said...

The narrower format, offset by some additional pages, will reduce the space the paper has for news by 5 percent, Executive Editor Bill Keller said in the article.

According to federal surveys, the typical private school’s tuition is only about half what a public school spends per pupil... General Motors would not celebrate the news that its $40,000 Cadillac performed almost as well as a $20,000 Honda. It would not have its dealers put up signs reading: “Why Pay Less? Our Cars Are Nearly As Good.” But that’s the logic of the teachers’ union leaders who want to prevent students from getting vouchers and taxpayers from saving money.

The old Times Building is now owned by Tishman-Speyer Realty Corp. Being the new owners, they sent a fire inspector about four months ago to check out the nooks and crannies of their building. On the 14th or 15th floor there is a quite large room that NO ONE ever enters. About two months ago I'm riding in the freight elevator with a few custodial gents. They're poring over an old payroll book. I ask them where they got it, and they tell me that they've been dumping shelves and shelves of them dating back to the turn of the last century (1900). The fire inspector and Tishman said "they're a hazard." I'm stumped. Didn't the NYT want ANY of them? For a historian they're the raw material of history. For example: what did that elevator operator and reporter earn in 1904? How many hours did they work?

The real compelling facts would be the roster of reporters. Before the 1920's stories rarely had bylines. Here were the lists of reporters whose names have been lost to history. Why not donate them to the Museum of the City of NY? Or the NY Historical Society? Out of hundreds, only two were salvaged -- one from 1906 with Adolph Ochs' signature signing off every week on the pay of these unknown men who made the paper the Great Gray Lady.

As I was looking at the payroll books I saw a bound volume of the Times from September 1963, and a bound volume of the "Western Edition" that spanned about two years. One of the men working on the removal noted that "there were hundreds of them." (Remember it took 3 to 4 months to clean out the room.) I opened the Sept 63 volume and laughed ... a hearty blackly humorous chuckle. On most pages where there was no byline, someone had inked in and revealed the names of the writers. "Special to the NYT ..." Mysteries uncovered. The writer of each editorial was also noted. (Herbert Matthews, Abe Raskin, on and on...) Of course!!! These were the bound REFERENCE copies FOR THE RECORD. All dumped in the year 2006. I don't know if there was a complete run of the paper. I doubt it. But even 50 years of them would have been valuable.

So who's to blame? Certainly not the janitors. They were following orders from above. Upper level management was asked and they passed it on down to (I think) Corporate Records (different than the Family and Company Archives), who also passed. No one with any, as they say in Yiddish, "saychil," historical understanding, ever bothered to look at them. They would have known right away that these volumes were priceless. I told [a colleague] about the loss, and he said, "Why didn't they ask me?" Because that would have meant more work.

It's a dangerous time here on W. 43rd St. We're moving into smaller digs so the emphasis is to dump, and since "everything is on the Internet," who needs this &*?!*%? I hold the Philistines controlling the Temple to blame for this disheartening wound.

The irony is that I heard several times that these bound volumes (of the daily) had been dumped years ago. A very cruel joke. Long gone, then they reappear for an instant, and then gone again ... forever.

I laughed quite a bit -- and then I was heartsick.

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As we began packing for our trip to France, my wife urged me to buy a Speedo bathing suit for the trip. The key feature is the skimpy, minimalist style, not the brand per se. And the explanation is not that my wife thinks I lood good in such attire; few 49 year olds should even say the word "Speedo."

The reason instead is that during our stay in Toulouse in 1997 we discovered that public swimming pools require men to wear Speedos rather than the "shorts" style more common in the U.S. The official explanation from the pool was that Speedos are more sanitary. The unofficial explanation from friends was that this policy discouraged "youth from the banlieues (suburbs)" from visiting the pool.

It turns out, as I should have predicted, that the hotel pools we are visiting on this trip have no policy about Speedos. I forgot to pack a non-Speedo suit, however, so my family had a good laugh at my expense. My daughter's best friend had a similar experience a few years ago, when her father was forced to "go Speedo." The exact quote was, "The sight of my Dad in a Speedo is something one does not easily forget."

...the results of CGE models flow from the presuppositions of their authors. Most empirical exercises confront theory with numbers—they test theories against the data; sometimes they even reject them. CGE models, by contrast, put numbers to theory. If the modeller believes that trade raises productivity and growth, for example, then the model's results will mechanically confirm this. They cannot do otherwise. In another context, Robert Solow, a Nobel prize-winner, has noted the tendency of economists to congratulate themselves for retrieving juicy plums that they themselves planted in the pudding.

On Sept. 21, 2001, rescuers dug through the smoldering remains of the World Trade Center. Across town, families buried two firefighters found a week earlier. At Fort Drum, on the edge of New York's Adirondacks, soldiers readied for deployment halfway across the world.

Boards of directors of scores of American companies were also busy that day. They handed out millions of bargain-priced stock options to their top executives.

But hold up, how exactly did those boards know that the options grants were, as the Journal points out, “bargain-priced”? The answer is, they didn’t (assuming the options were at-the-money). More importantly, they couldn’t have known. The grants were based on nothing more than faith in the future, which was hardly in overabundance at the time.

It’s true that stocks nosedived when the markets reopened, but that doesn’t by itself mean the options were a bargain. After all, the market had already been falling and it continued to fall for more than a year. In fact, the S&P 500 was still below its pre-9/11 level nearly three years after the attacks (and, of course, those soldiers readying themselves).

my first words coming out of surgery are so important. They have got to tell the world—and convince myself—that I am all there. Of course, there are the obvious jokes about brain surgery ("Well, it wasn't exactly rocket science") and about those wires in my head ("Can you hear me now?"). There is Dada ("I am the Defense Minister of Poland. Who the hell are you?"). And slapstick ("I feel as if I've lost 10 pounds ... uh oh"). I'm still working on it... Editor's note: Kinsley's surgery took place on July 12 and went fine. His first words were, "Well, of course, when you cut taxes, government revenues go up. Why couldn't I see that before?"

Negative Consequence #5: Arbitrary Redistributions

A different negative of many government policies is arbitrary redistributions of income. Reasonable people can disagree about how much governments should transfer to the poor and whether government should redistribute from richer to poorer more generally (such as via progressive income taxation). But when the redistribution is random, or from low to high income, or just among people of similar income, it is all cost and no benefit.

Interventions cause arbitrary redistributions for two reasons. Many government policies aim to redistribute, but in stupid ways. Agricultural subsidies seek to help farmers, but this is not a sensible goal since most farmers are not poor. Tariffs, quotas and other trade restrictions are meant to protect certain industries, but this is a bad objective since market forces rather than political connections should determine which industries thrive and which fail. Bailouts for particular companies, such as General Motors in 1970s or the airlines after 9/11, are further examples.

Government also causes arbitrary redistribution even when policy has defensible objectives. Consider government construction projects, whether for housing, schools, roads, or hospitals. Governments typically contract out for this work. Some firms get the contracts and others do not. In principle government could auction off the work to the most efficient supplier, but in practice this is messy. Thus some companies – not necessarily the deserving ones – get rich. This redistribution, moreover, is avoidable. Vouchers for education, for example, would mean governments do not need to build schools at all.

Examples of businesses that benefit from government intervention are numerous: firms that make air pollution scrubbers for manufacturing plants; data processing firms that process Medicare claims; financial services firms that administer private accounts; psychometrics firms that design high-stakes tests; advertising firms that run anti-drug media campaigns; security firms that sell scanning equipment to the Transportation Safety Administration.

The fact that some firms benefit from government largesse does not by itself make the interventions undesirable. But it encourages businesses to engage in unproductive effort to win these pots of money, and even worse to promote creation of these windfalls in the first place. Thus the scope for “rent creation” and “rent seeking” is one more reason for caution in creating government programs in the first place.

"They were asking me to pay taxes on money I didn't have," Payre said. "I had no choice but to leave the country."

On average, at least one millionaire leaves France every day to take up residence in more wealth-friendly nations, according to a government study.

..."France is penalizing success in a big way," argued Payre, who is now 43 and has started a new company in Brussels that he said did nearly $32 million in business this year. "The loss in income for the government is the smallest part. The big issue is the loss of all that creative energy this country is dying for."

Payre said that when he decided to leave his high-tech company, Business Objects, in 1997, he owned shares that were worth $110 million -- on paper. French tax authorities required Payre to pay a wealth tax of 2.2 percent on the shares, based on what the shares would have been worth had he sold them at the market's highest point.

But Payre said that he didn't have access to them because of stock market regulations that limited his ability to sell and that, in any case, a market dip had devalued the shares below that peak.

The wealth tax -- officially called the solidarity tax -- is collected on top of income, capital gains, inheritance and social security taxes... Wealthy citizens' tax bills can be higher than their incomes, according to tax analysts. President Jacques Chirac's government attempted to rectify that disparity last year with changes intended to guarantee that no one would pay more than 60 percent of income in taxes. But many businesspeople say actual maximum tax rates still hover at around 72 percent.