Innovation and Growth Cycles David Levine
15 Nov 2019 Leave a comment
in applied price theory, comparative institutional analysis, development economics, econometerics, economic history, economics of bureaucracy, economics of regulation, Federalism, financial economics, growth disasters, growth miracles, history of economic thought, income redistribution, industrial organisation, law and economics, Public Choice, rentseeking, survivor principle
Puerto Rico’s economy can’t handle the federal minimum wage
11 Jul 2015 Leave a comment
in applied price theory, applied welfare economics, Federalism, income redistribution, labour economics, labour supply, minimum wage, politics - USA, Public Choice, rentseeking Tags: federalism, living wage, Puerto Rico, sovereign default
Puerto Rico's economy can't handle the federal minimum wage. bit.ly/1IEJIEi http://t.co/D3mzOmlnJa—
Manhattan Institute (@ManhattanInst) July 07, 2015
Democracy in Australia
07 May 2015 Leave a comment
in constitutional political economy, Federalism, politics - Australia, Public Choice Tags: bicameralism, minor parties, new parties, protest votes, small parties, vote splitting
Vindicating my long-standing view that anybody can get into Parliament as long as they’re not a Trot, the Animal Justice Party has been elected to the New South Wales Legislative Council last month.
The federal and state upper houses in Australia a democracy at its finest with the voters getting what they voted for, good and hard. These upper houses are powerful, with the ability to reject any bill with varying limitations on their ability to reject or amend money bills in a few of the upper houses.
Many Australian voters – at least 20% now – don’t like the major parties , including the Greens so they vote for a wide range of minor parties and independents in upper house elections if only as a protest vote that will go back to the major parties if they lift their game. Voters don’t have this option of vote splitting and protest voting in Queensland because a Labour government abolish their upper house in the 1930s in the name of democracy.
All but one of the Australian federal and state upper houses is elected by proportional representation, often with the option of a group ticket. That is, instead of filling out every box to cast a valid vote, you vote above the line put in a 1 against party you prefer.
Under group ticket voting, the party whose group you voted for decides how your preferences are distributed, which plays a vital role in deciding who gets elected. More importantly, the small parties engage in preference swapping so that they accumulated enough second and subsequent preference votes to win the last seat.
The Tasmanian Legislative Council is the exception to proportional representation in Australian upper houses with 15 single member constituencies. Naturally, 12 of these 15 legislative councillors are independents. That’s a little bit low by historic standards in my home state were normally the political parties have no success in getting members elected to the Tasmanian upper house.
Minor parties and independents control the balance of power in most Australian upper houses, including the Federal Senate.
The 40 member Victorian Legislative Council is a mixed bag with the balance of power depending on which particular combination of Green plus minor party legislative councillors get together to support the governing Labour Party government. I must admire the Vote 1 Local Jobs party as a brand name.
In the 42 member New South Wales Legislative Council, the Liberal National Party government relies on the god squad and anti-pornography campaigners in the Christian Democratic Party for the balance of power. If they fall short, they can always turn to the Shooters and Fishers party.
In the 22 member South Australian Legislative Council, neither of the major parties are particularly popular, nor are the South Australian Greens. To pass a bill with 12 votes, the Labour Party government must string together its seven members with a combination of the South Australian Greens, the Family First Party, Dignity for Disability, an independent and the Nick Xenophon team. Good luck.
In the Western Australian Legislative Council, the Liberal National party government has a majority, so what the Western Australian Greens and the Shooters and Fishers Party legislative councillors think don’t matter that much.
The Western Australian Legislative Council is the only upper house in Australia elected all at one time for four-year terms. For the other upper houses, half of each is elected at each lower house election for six or eight years terms. Tasmania is again the exception to this with two or three of their legislative councillors elected every year for six-year terms.
In the 76 strong Federal Senate, what could not be a more mixed bags of independents, minor parties and minor party defectors and renegades control the balance of power.
The strength of democracy lies in the ability of small groups of concerned and thoughtful citizens to band together and change things by running for office and winning elections.
That is how new Australian parties in the 20th century such as the Australian Labour Party, the Country Party, Democratic Labour Party, Australian Democrats and Greens changed Australia. Most of these parties started in someone’s living room, full of concerned citizens aggrieved with the status quo.
In the 21st century, Australian democracy could not be more democratic, with a wide range of totally obscure new political parties winning seats in the state upper houses and Federal Senate at every election.
In a democracy, we resolve our differences by trying to persuade each other and voting at elections.
The Australian Federal democracy with upper houses elected through proportional representation show that democracy could not be stronger or work any better.
In Australia, it is possible for just about anyone except a Trot to win a seat at the next election on issues that are important to them because they don’t need that many others to share their concerns and aspirations to win that last upper house seat on preferences.
What happens when a metropolitan area has way too many governments – The Washington Post
20 Feb 2015 Leave a comment
in constitutional political economy, Federalism, politics - New Zealand, politics - USA, Public Choice Tags: local government
The OECD, in a report on the "Metropolitan Century" we’ve just entered, found across all of its member countries that when you double the number of municipalities per 100,000 residents within a single metropolitan area, regional labour productivity falls by 5 to 6 percent.
In short: the more little governments you have, the less productive the entire local economy is.
via What happens when a metropolitan area has way too many governments – The Washington Post.
Unfettered power loses its shine when it must be shared with your opponents for more than a brief time
05 Aug 2014 Leave a comment
in constitutional political economy, Federalism, James Buchanan, Public Choice Tags: democracy, Leftover Left, rotation of power, separation of powers
The rotation of power is common in democracies, and the worst rise to the top, so it is wise to design constitutional safeguards to minimise the damage done when those crazies to the right or left of you get their chance in office, as they will.
Too many policies and ideas of the Left assume that they are the face of the future, rather than just another political party that will hold power as often as not.
Privatisation and deregulation is a lot slower in a federal system with an effective upper house elected by proportional representation. Regulatory powers and public asset ownership is spread over different levels of federations, with different parties always in power at various levels at the same time, all worried about losing office by going to far away from what the majority wants.
The will of the people is constantly tested and measured in a federal system with elections at one level or another every year or so contested on a mix of local and national issues. Any failings of privatisation or deregulation in pioneering jurisdictions would quickly become apparent and would not be copied by the rest of the country. These errors could be undone where they originated by incoming progressive governments.
The Left may want to protect the rights of the unpopular and the unpleasant, and to want constitutional safeguards to slow an impassioned majority down is, in part, because they could be next if they lose the next election to the latest right-wing populist.
In a unitary unicameral parliament, those crazies to the right or left of you are tempered by an occasional general election only every 3 to 5 years. Little wonder that UK Labor reconsidered devolution, an assembly for London, and regional government after 15 years of Maggie Thatcher, good and hard, with her unfettered right to ask the house of commons to make or unmake any law whatsoever.
Developing positive alternatives on the Left includes what to do about the rotation of power and fettered versus unfettered parliamentary and executive power. The failure of the Left to develop its own constitutional political economy is a major strategic shortcoming. Frequenting wine bars, cafes and blogs muttering to each other ‘our day will come, our day will come’ is not enough.
State power was something that the classical liberals feared, and the problem of constitutional design is insuring that such power would be effectively limited.
Sovereignty must be split among several levels of collective authority; federalism was designed to allow for a decentralization of coercive state power.
At each level of authority, separate functional branches of government were deliberately placed in continued tension, one with the other. The legislative branch is further restricted by the establishment of two strong houses, each of which organised on a separate principle of representation
The merits of federalism
29 Jun 2014 Leave a comment
in Federalism, Public Choice Tags: federalism
- A divided government is a weak government.
- One great feature of the federal system is that we can try different policies in different states and see what works and what doesn’t.
- The laws of each state can more closely reflect local public opinion.
- The will of the people is constantly tested and re-measured in a federal system: elections at one level or another every year contested on local and national issues.
- People vote more often for different policy packages, rather than occasionally for a few up and down choices.
- The will of the people is constantly tested and re-measured in a federal system: elections at one level or another every year contested on local and national issues.
After 15 years of Maggie Thatcher, good and hard, British Labor reconsidered devolution because a federal state slows the impassioned majority down.
Who do members of parliament represent?
28 Jun 2014 Leave a comment
in constitutional political economy, Federalism, James Buchanan, Joseph Schumpeter, Public Choice Tags: consititutional design, Edmund Burke, federalism, James Madison, Jospeh Schumpeter, JS Mill, theories of representation
The theoretical literature on political representation focused on whether representatives should act as delegates or as trustees. James Madison articulated a delegate conception of representation. Representatives who are delegates simply follow the expressed preferences of their constituents.
The classical liberals of the 18th century were highly sceptical about the capability and willingness of politics and politicians to further the interests of the ordinary citizen, and thought the political direction of resource allocation retards rather than facilitates economic progress.
Governments were considered to be institutions to be protected from but made necessary by the elementary fact that all persons are not angels. Constitutions were a means to constrain collective authority. The problem of constitutional design was ensuring that government powers would be effectively limited.
- Sovereignty was split among several levels of collective authority; federalism was designed to allow for a deconcentration or decentralization of coercive state power.
- At each level of authority, separate branches of government were deliberately placed in continued tension, one with another.
- The dominant legislative branch was further restricted by the constitutional establishment of two houses bodies, each of which was elected on a separate principle of representation.
These constitutions were designed and put in place by the classical liberals to check or constrain the power of the state over individuals. The motivating force was never one of making government work better or even of insuring that all interests were more fully represented.
Members of parliament as trustees are representatives who follow their own understanding of the best action to pursue in another view. As Edmund Burke wrote:
Parliament is not a congress of ambassadors from different and hostile interests; which interests each must maintain, as an agent and advocate, against other agents and advocates; but parliament is a deliberative assembly of one nation, with one interest, that of the whole; where, not local purposes, not local prejudices ought to guide, but the general good, resulting from the general reason of the whole.
You choose a member indeed; but when you have chosen him, he is not a member of Bristol, but he is a member of parliament. …
Our representative owes you, not his industry only, but his judgment; and he betrays instead of serving you if he sacrifices it to your opinion.
Burke does not seem to be a fan of federalism and vote trading to protect minorities. Madison liked conflict and tension as a constraint of power and the size of government.
Schumpeter disputed that democracy was a process by which the electorate identified the common good, and that politicians carried this out:
• The people’s ignorance and superficiality meant that they were manipulated by politicians who set the agenda.
• Democracy is the mechanism for competition between leaders.
• Although periodic votes legitimise governments and keep them accountable, the policy program is very much seen as their own and not that of the people, and the participatory role for individuals is usually severely limited.
Modern democracy is government subject to electoral checks. John Stuart Mill had sympathy for this view that parliaments are best suited to be places of public debate on the various opinions held by the population and to act as watchdogs of the professionals who create and administer laws and policy:
Their part is to indicate wants, to be an organ for popular demands, and a place of adverse discussion for all opinions relating to public matters, both great and small; and, along with this, to check by criticism, and eventually by withdrawing their support, those high public officers who really conduct the public business, or who appoint those by whom it is conducted
Representative democracy has the advantage of allowing the community to rely in its decision-making on the contributions of individuals with special qualifications of intelligence or character. Representative democracy makes a more effective use of resources within the citizenry to advance the common good.
Justice Thomas as an unlikely hero for the marijuana decriminalisation movement – updated
05 Jun 2014 Leave a comment
in Federalism, law and economics, politics - USA Tags: decriminalisation of marijuana, division of power, drug laws, Justice Scalia, Justice Thomas, meddlesome preferences
The decriminalisation of marijuana possession by American states doesn’t really matter that much because it is still illegal under Federal law. Marijuana markets moved into the open in the states that decriminalised it because the federal authorities have chosen not to enforce their laws against these traders.
Justice Clarence Thomas is a radical view of the interstate commerce clause. This clause of the US Constitution at the height of the new deal was reinterpreted to allow Congress to regulate both interstate commerce and intrastate markets that affected interstate commerce.
The current interpretation of this clause supported by everyone on the US Supreme Court but Thomas is Congress can regulate the possession of marijuana because this affects interstate commerce. Justice Scalia explains:
…the Commerce Clause permits congressional regulation of three categories:
(1) the channels of interstate commerce;
(2) the instrumentalities of interstate commerce, and persons or things in interstate commerce; and
(3) activities that "substantially affect" interstate commerce.
As …the Court affirms today, Congress may regulate noneconomic intrastate activities only where the failure to do so "could … undercut" its regulation of interstate commerce.
… This is not a power that threatens to obliterate the line between "what is truly national and what is truly local.
Justice Thomas rejects this view and wants to return to the original meaning of the interstate commerce clause:
Respondent’s local cultivation and consumption of marijuana is not "Commerce … among the several States."
Certainly no evidence from the founding suggests that "commerce" included the mere possession of a good or some personal activity that did not involve trade or exchange for value.
In the early days of the Republic, it would have been unthinkable that Congress could prohibit the local cultivation, possession, and consumption of marijuana
and
If the Federal Government can regulate growing a half-dozen cannabis plants for personal consumption (not because it is interstate commerce, but because it is inextricably bound up with interstate commerce), then Congress’ Article I powers – as expanded by the Necessary and Proper Clause – have no meaningful limits.
and further:
If the majority is to be taken seriously, the Federal Government may now regulate quilting bees, clothes drives, and potluck suppers throughout the 50 States.
This makes a mockery of Madison’s assurance to the people of New York that the "powers delegated" to the Federal Government are "few and defined", while those of the States are "numerous and indefinite."
In closing, Thomas said:
The majority prevents States like California from devising drug policies that they have concluded provide much-needed respite to the seriously ill.
Our federalist system, properly understood, allows California and a growing number of other States to decide for themselves how to safeguard the health and welfare of their citizens.
The adoption of the view of Thomas could not be more unlikely. Most federal regulation in the United States is based on linking it to the power of the Congress to regulate interstate commerce and foreign commerce. Thomas once noted that:
[w]hen asked at oral argument if there were any limits to the Commerce Clause, the Government was at a loss for words
The decriminalisation of marijuana in the United States will have to be based on more and more states choosing to decriminalise in the hope that the Federal Government does not enforce its rather savage criminal laws on drugs in their state. That’s is what seems to be happening. Whether that will still happen when a Republican wins the White House in 2016 remains to be seen.
Three American States have even passed hopelessly unconstitutional right to try laws. These laws purport to allow the residents try experimental drugs that have not yet received approval of the Federal level by the FDA.
Even under the narrow interpretation of federal powers by Justice Thomas, these laws are unconstitutional. These laws nonetheless have social value because they are push the boundaries of the current political sense consensus.
This evaluation applies to marijuana decriminalisation laws too. They test the current boundaries and can create the possibility of social change through democratic action.
Many who want a strong central government forget that the social agendas of the crazies to the left and right of them will also be implemented all in good time at the national level as well. Power rotates in any democracy so with enough time the meddlesome preferences of most sides of politics will be legislated into law so that everyone ends up been annoyed and over-regulated and more than a few end up before the courts and even in prison.
A wiser course in constitutional design is to give the parliament as much powers as you might wish those wreckers and crazies that make up your political opponents to have when they come to office, as they surely must in six or nine years time. Even the British Labour Party took an interest in devolution and an assembly for London after 15 years of Maggie Thatcher, good and hard.
What’s going on in the EU with the electing of so many anti-EU candidates?
05 Jun 2014 Leave a comment
in constitutional political economy, Federalism, Public Choice Tags: European Union
The best achievements of European institutions have all stemmed from removing restrictions—to trade, travel, residency and financial transactions.
But for at least 30 years, the EU has mainly been in the business of imposing restrictions on everything from the judicial sentences that national courts can impose to the shape of the vegetables that Europeans get to eat.
Stealth Europe transmogrified into Busybody Europe.
Wall Street Journal via Managerial Econ: What’s going on in the EU?
Utopia, you are standing in it! 
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