Government – Page 130 – artdiamondblog.com

Mackerel Money: “If a Dog Eats It, It’s Dog Food”

Mackerel on left; Larry Levine on right. Source of photo and image: online version of the WSJ article quoted and cited below.

In discussing the nature of money, my Wabash College economics professor, Ben Rogge, used to say “if a dog eats it, it’s dog food.” (The moral being that, if people use it as money, it’s money.)
There are many examples of unusual money: large stones, cigarettes, and now mackerel (see the article quoted below).
P.S. In an earlier entry, I worried that Rupert Murdoch would kill the WSJ‘s quirky trademark front-page article. Score one for Rupert’s ability to change his mind for the better, when it matters.

(p. A1) When Larry Levine helped prepare divorce papers for a client a few years ago, he got paid in mackerel. Once the case ended, he says, “I had a stack of macks.”

Mr. Levine and his client were prisoners in California’s Lompoc Federal Correctional Complex. Like other federal inmates around the country, they found a can of mackerel — the “mack” in prison lingo — was the standard currency.
“It’s the coin of the realm,” says Mark Bailey, who paid Mr. Levine in fish. Mr. Bailey was serving a two-year tax-fraud sentence in connection with a chain of strip clubs he owned. Mr. Levine was serving a nine-year term for drug dealing. Mr. Levine says he used his macks to get his beard trimmed, his clothes pressed and his shoes shined by other prisoners. “A haircut is two macks,” he says, as an expected tip for inmates who work in the prison barber shop.
There’s been a mackerel economy in federal prisons since about 2004, former inmates and some prison consultants say. That’s when federal prisons prohibited smoking and, by default, the cigarette pack, which was the earlier gold standard.
Prisoners need a proxy for the dollar because they’re not allowed to possess cash. Money they get from prison jobs (which pay a maximum of 40 cents an hour, according to the Federal Bureau of Prisons) or family members goes into commissary accounts that let them buy things such as food and toiletries. After (p. A16) the smokes disappeared, inmates turned to other items on the commissary menu to use as currency.
. . .
Mr. Muntz says he sold more than $1 million of mackerel for federal prison commissaries last year. It accounted for about half his commissary sales, he says, outstripping the canned tuna, crab, chicken and oysters he offers.
Unlike those more expensive delicacies, former prisoners say, the mack is a good stand-in for the greenback because each can (or pouch) costs about $1 and few — other than weight-lifters craving protein — want to eat it.
So inmates stash macks in lockers provided by the prison and use them to buy goods, including illicit ones such as stolen food and home-brewed “prison hooch,” as well as services, such as shoeshines and cell cleaning.
The Bureau of Prisons views any bartering among prisoners as fishy. “We are aware that inmates attempt to trade amongst themselves items that are purchased from the commissary,” says bureau spokeswoman Felicia Ponce in an email. She says guards respond by limiting the amount of goods prisoners can stockpile. Those who are caught bartering can end up in the “Special Housing Unit” — an isolation area also known as the “hole” — and could lose credit they get for good behavior.

For the full story, see:
JUSTIN SCHECK. “Mackerel Economics in Prison Leads to Appreciation for Oily Fillets; Packs of Fish Catch On as Currency, Former Inmates Say; Officials Carp.” The Wall Street Journal (Thurs., OCTOBER 2, 2008): A1 & A16.
(Note: ellipsis added.)

The classic article on cigarette money, is:
Radford, R.A. “The Economic Organization of a P.O.W. Camp.” Economica, New Series 12, no. 48 (Nov. 1945): 189-201.

Economist Arrested for Speaking the Truth

Detained Latvian economist Dmitrijs Smirnovs. Source of image: online version of the WSJ article quoted and cited below.

(p. A1) RIGA, Latvia — Hammered by economic woe, this former Soviet republic recently took a novel step to contain the crisis. Its counterespionage agency busted an economist for being too downbeat.

“All I did was say what everyone knows,” says Dmitrijs Smirnovs, a 32-year-old university lecturer detained by Latvia’s Security Police. The force is responsible for hunting down spies, terrorists and other threats to this Baltic nation of 2.3 million people and 26 banks.
Now free after two days of questioning, Mr. Smirnovs hasn’t been charged. But he is still under investigation for bad-mouthing the stability of Latvia’s banks and the national currency, the lat. Investigators suspect him of spreading “untruthful information.” They’ve ordered him not to leave the country and seized his computer.
Finance is a highly touchy subject in Latvia, one that the state tries, with unusual zeal, to shield from loose tongues. It is a criminal offense here to spread “untrue data or information” about the country’s financial system. Undermining it is outlawed as subversion.
So, when the global financial system began to buckle this autumn, Latvia’s Security Police mobilized to combat destabilizing chatter about banks and exchange rates. Agents directed their attention to Inter-(p. A19)net chat rooms, newspaper articles, cellphone text messages and even rock concerts. A popular musician was taken in for questioning after he cracked a joke about unstable Latvian banks at a performance.
Just one problem: Much of the speculative buzz now turns out to ring true.
. . .
In Latvia’s Soviet past, officials routinely blamed their problems on saboteurs or other scapegoats. “This is part of our political culture,” says Sergei Kruks, a media-studies lecturer. “If the state doesn’t have a solution, it has to find someone to blame.”

For the full story, see:
ANDREW HIGGINS. “How to Combat a Banking Crisis: First, Round Up the Pessimists; Latvian Agents Detain a Gloomy Economist; ‘It Is a Form of Deterrence’.” The Wall Street Journal (Mon., DECEMBER 1, 2008): A1 & A19.
(Note: ellipsis added.)

European Commission Now Lets Consumers Buy Ugly Vegetables

(p. A6) BRUSSELS — Misshapen fruit and vegetables won a reprieve on Wednesday from the European Union as it scrapped rules banning overly curved, extra knobbly or oddly shaped produce from supermarket shelves.

Ending regulations on the size and shape of 26 types of fruit and vegetables, the European authorities killed off restrictions that had become synonymous with bureaucratic meddling.
The rising cost of commodities also persuaded the European Commission that there was no point in throwing away food just because it looked strange.
As of July, when the changes go into force, these standards for the 26 products, as varied as peas and plums, will disappear. European shoppers will then be able to choose their produce whatever its appearance.

For the full story, see:
STEPHEN CASTLE. “Europe Relaxes Rules on Sale of Ugly Fruits and Vegetables.” The New York Times (Thurs., November 13, 2008): A6.

Eastman Was a Self-Financed Entrepreneur

Mark Casson has argued that the more original the entrepreneur’s innovation, the more likely he will need to finance all, or a large part, of it himself. To the extent that this is true, it represents an important argument for allowing the accumulation of wealth (and thereby an argument against substantial personal income, and inheritance, taxes.)
Here is an example, consistent with Casson’s argument, of a self-financed entrepreneur:

(p. 36) The idea of loading film into a camera, snapping the picture and then sending the film to a store to be processed was the brainchild of an American from Rochester, New York, called George Eastman. One day in 1879, at the bank where he had worked since leaving school at the age of fourteen, he didn’t get the promotion he was expecting. So he left and used his savings to set himself up as a “Maker and Dealer in Photographic Supplies.” At this time, picture taking was a messy, cumbersome and expensive business, involving glass-late negatives, buckets of chemicals an monster wooden cameras. When Eastman had finished his experiments with the process, his slogan promised, “You press the button. We do the rest.”

Source:
Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible – and Other Journeys. Boston: Back Bay Books, 1997.

Government Regulation Kills the River City Star

We enjoyed several cruises on the River City Star over the past many years. Apparently no more.
It is silly to think that Homeland Security regulations can make us significantly safer when traveling on the River City Star.
I judge the risks as small, and the best way to prepare for whatever risks there are, would be to take the sorts of steps advocated by Amanda Ripley in her book The Unthinkable. One of the main lessons of her book is that it is not primarily government regulations and professionals that make us safer, but the alertness and preparation of regular people.
Maybe Homeland Security disagrees with my assessment of the risks. But who are they to tell me what risks I am not permitted to take? (That’s what they are in effect doing when they increase the costs of sailing the River City Star to the point that it is turned into a non-sailing restaurant.)

(p. 1B) The River City Star will make its final voyage Thursday to a new home in Plattsmouth, where it will become a floating restaurant. Two new riverboats will replace it along Omaha’s riverfront.
The Star, previously called the Belle of Brownville, operated as an excursion boat for cruises for more than 40 years.
Larry Richling, the boat’s most recent owner, said he decided to sell the boat because federal regulations for boats capable of carrying more than 300 passengers became too costly after the 9/11 terrorist attacks.
The smaller boats, each with a capacity of 149 passengers, fall in a different category with fewer regulations, he said, and will be cheaper to operate.
. . .
(p. 2B) “There’s nothing wrong with the boat. The boat is in fantastic condition,” Richling said.
Richling said he would have had to invest at least $500,000 in the River City Star to meet Homeland Security Department requirements, but those requirements won’t apply if it is permanently docked.

For the full story, see:
CHRISTINE LAUE. “River City Star Going South; Boat Will Become a Plattsmouth Restaurant.” Omaha World-Herald (Thursday, December 4, 2008): 1B-2B.
(Note: ellipsis added.)
(Note: the online version of the title was: “River City Star Making Final Voyage.”)

Regular Citizens Perform Vast Majority of Disaster Rescues

Source of book image: http://www.cleveland.com/arts/index.ssf/2008/06/the_book_the_unthinkable_expla.html

The most important message of this book is a very important message indeed. That message is that overwhelmingly, disaster survival and rescue depends on the actions of regular people, not the actions of professional lifesavers. (Very often, the professionals cannot get there quickly enough, or in sufficient numbers, to get the job done.)
This message, is itself worth the price of the book—if it were sufficiently understood, it would have enormous implications for individual preparedness, and government policy. (Think about the implications, for instance, for whether individual regular people should be allowed to carry guns.)

(p. xiii) These days, we tend to think of disasters as acts of God and government. Regular people only feature into the equation as victims, which is a shame. Because regular people are the most important people at a disaster scene, every time.

In 1992, a series of sewer explosions caused by a gas leak ripped through Guadalajara, Mexico’s second largest city. The violence came from below, rupturing neighborhoods block by block. Starting at 10:30 A.M., at least nine separate explosions ripped open a jagged trench more than a mile long. About three hundred people died. Some five thousand houses were razed. The Mexican Army was called in. Rescuers from California raced to help. Search-and-rescue dogs were ordered up.
But first, before anyone else, regular people were on the scene saving one another. They did incredible things, these regular people. They lifted rubble off survivors with car jacks. They used garden hoses to force air into voids where people were trapped. In fact, as in most disasters, the vast majority of rescues were done by ordinary folks. After the first two hours, very few people came out of the debris alive. The search and rescue dogs did not arrive until twenty-six hours after the explosion.

Source:
Ripley, Amanda. The Unthinkable: Who Survives When Disaster Strikes – and Why. New York: Crown Publishers, 2008.

Fred Thompson Satirizes Current Economic Bailout Policies

Source of image: screen capture from the Fred Thompson video commentary described, and linked-to, below.

My brother Eric alerted me to a wise and witty video commentary by former Senator Fred Thompson satirizing current government bailout policies. The video has been posted to multiple locations. Here is the link to the posting on YouTube:
http://www.youtube.com/watch?v=RKc4XFK0iVY

75th Anniversary of End of Prohibition

(p. W8) “Prohibition went into effect on January 16, 1920, and blew up at last on December 5, 1933 — an elapsed time of twelve years, ten months and nineteen days,” H.L. Mencken wrote shortly after ratification of the 21st Amendment to the Constitution eliminated the 18th Amendment. “It seemed almost a geologic epoch while it was going on, and the human suffering that it entailed must have been a fair match for that of the Black Death or the Thirty Years War.”

The demise of Prohibition, 75 years ago . . . , is something of a cause for celebration, and it will be treated as such with Repeal Day parties in Washington, Chicago, New Orleans, San Francisco, New York and elsewhere. . . .
. . .
Temperance advocates had argued Prohibition would usher in an era of sober moral rectitude. When it didn’t quite work out that way, public opinion began to turn against the drys. They joined those who opposed Prohibition because it had handed new and oppressive powers to the federal government. Charles Lindbergh’s father-in-law, Dwight Whitney Morrow, won a Senate seat from New Jersey in 1930 running as a Republican against Prohibition. He argued that it had caused Americans to “conceive of the Federal Government as an alien and even a hostile Power.”
And yet, it was finance that finally did Prohibition in. As the nation sank into the Depression, tax revenues dwindled. The prospect of capturing all the liquor excise taxes that had for a decade been missing (and, in effect, had gone into the pockets of bootlegging mobs) was alluring to Democrats and Republicans alike. Pierre du Pont lobbied his fellow plutocrats to support repeal in the vain hope that liquor taxes would replace income taxes. But the New Dealers saw repeal as creating a vast pile of money with which to fund expansive new government programs. Not only did Prohibition and its enforcement increase the size and scope of the federal government, but so did Prohibition’s repeal.

For the full story, see:
ERIC FELTEN. “HOW’S YOUR DRINK; Celebrating Cinco de Drinko.” The Wall Street Journal (Fri., NOVEMBER 28, 2008): W8.
(Note: ellipses added.)

Tears Flow for Delta Queen “All Because of a Stupid Law”

Source: online version of the NYT article quoted and cited below.

(p. A16) CINCINNATI — For more than a year now, fans of the Delta Queen, America’s last original paddle-wheeled, steam-driven, overnight passenger boat, have done everything they could to keep it plying the country’s rivers.

They have written letters, signed petitions and enlisted stars like the actor Hal Holbrook (who has played Mark Twain) to support their cause. They even tried to shame Congress into granting another exemption from a federal law that would normally ban the Delta Queen from operating because it is largely made of wood.
But as it pulled away from her dock here into the Ohio River on Tuesday night, tears flowed among passengers, crew members and some of the hundreds of onlookers.
That was because, to date, no exemption has been granted and the current exemption expires at the end of October. As a result, the 10-day cruise to Memphis could well be the Delta Queen’s last commercial voyage.
. . .
“We’re just here to say goodbye,” said Dick Schroeder, 72, a lifelong Cincinnati resident who came to watch this potential last departure with his wife, Mary, and daughter, Patricia Fanning.
“I just don’t know why it has to go, all because of a stupid law,” Mr. Schroeder said.

For the full story, see:
SEAN D. HAMILL. ” Paddle-Wheeler’s Fans Seek a Reprieve.” The New York Times (Weds., October 22, 2008): A16.
(Note: ellipsis added.)

“We Will Stay a Laissez-Faire Economy”

“Andrus Ansip, leader of Estonia, an ex-Soviet Republic.” Source of caption and photo: online version of the NYT article quoted and cited below.

An earlier entry suggested that Estonian Prime Minister Andrus Ansip’s support for Steve Forbes’ flat tax, had helped Estonia achieve a high rate of growth.
Apparently there is some sentiment in Estonia to stay the course:

(p. B6) TALLINN, Estonia — For nearly two decades, Estonia embraced capitalism with such gusto that it seemed to be channeling the laissez-faire philosophy of Milton Friedman. From its policies meant to attract foreign investors to its flat tax and freewheeling business culture, it stood out as the former Soviet republic most adept at turning post-Communist chaos into a thriving market economy.
Now Estonians, and some of their Baltic neighbors, are slogging through their first serious economic downturn since liberation from the Soviet grip in the early 1990s.
. . .
Whatever happens, government officials say there will be no betrayal of Friedman’s philosophy. “We will stay a laissez-faire economy,” said Juhan Parts, Estonia’s minister of the economy.
. . .
“I’m an optimist,” said Marje Josing, director of the Estonian Institute for Economic Research. “Fifteen years ago things looked bad, but they managed. A little real-life pressure won’t hurt.”
Indeed, so far the downturn has done little to discourage Estonia’s ambitious entrepreneurs. If anything, it has made them look more avidly elsewhere for growth.
“Estonia may be a small country,” Tarmo Prikk, chief executive of Thulema, an office furniture maker, said with a laugh. “But my ego is bigger.”

For the full story, see:
CARTER DOUGHERTY. “Estonia’s Let-It-Be Economy Is Rattled by Worldwide Distress.” The New York Times (Fri., October 10, 2008): B6.
(Note: ellipses added.)

Obama’s Tax Policies Would Be “a Significant Step Towards” Another “Great Depression”

Lee Ohanian is the co-author of a much-cited article in the highly-ranked Journal of Political Economy on the economics of the Great Depression. Below is a paragraph from his recent analysis of our current situation:

(p. A17) I am particularly concerned about bad policies because significantly higher taxes have been proposed by Barack Obama. His plan would raise the marginal tax rate on the most productive workers more than 10 percentage points — an increase that would bring us near Western European levels. His plan would also raise capital income taxes, taxing capital gains and dividends at 20%, compared to a 15% rate under Sen. John McCain’s plan. A five percentage-point difference might strike you as small, but it is not. I have calculated that a five percentage-point difference in overall capital income taxation over the long haul is equal to a difference in the nation’s capital stock of about 18%. This means a 6% difference in GDP and a 6% difference in the average wage rate. This means that real GDP and the average wage would fall, gradually but persistently declining about 6% after 25 years. That’s not quite a Great Depression, but a significant step towards one.

For the full commentary, see:
LEE E. OHANIAN. “Good Policies Can Save the Economy; Why we need lower tax rates and more skilled immigrants.” The Wall Street Journal (Weds., OCTOBER 8, 2008): A17.

The academic article co-authored by Ohanian is:
Cole, Harold L., and Lee E. Ohanian. “New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis.” Journal of Political Economy 112, no. 4 (August 2004): 779-816.