Saturday, January 31, 2004

Politics: Electability vs. Marketability

I’m getting tired of media commentators arguing over which Democratic presidential candidate is the most “electable”. Not that I think the underlying conceptual debate is invalid, but the term “electable” itself is highly misleading. For example, the conventional wisdom is that John Kerry beat Howard Dean in New Hampshire because the former was considered more “electable”, i.e. that he’s more likely to defeat President Bush. But that’s not electability. Dean is perfectly capable of winning elections—he’s done so numerous times in Vermont. The only people that aren’t “electable” are those ineligible or unwilling to hold office. Richard Nixon, for example, is not electable because he’s dead.

When people say a candidate’s “electable”, they mean to say he’s marketable. The Democrats are trying to nominate a candidate to defeat Bush. Since most voters aren’t Democrats to begin with, the party must select a candidate that can appeal to these non-Democratic voters. Democrats will vote for anyone with a (D) next to their name. But convincing other people they need to vote Democratic—well that’s the classic definition of marketing.

Ten years ago, New York Republicans nominated unknown state senator George Pataki to run against three-term incumbent governor Mario Cuomo. Pataki had neither the resume nor the intellect of Cuomo. Yet Pataki, now himself a third-term governor, was a marketable politician: I’ve always said Pataki’s greatest asset was that he looked like the governor. For voters who can’t discern a great ideological difference between the major parties, that can be enough to close the deal.

John Kerry has that Pataki-like quality of looking like a president. Kerry’s lack of substance relative to other Democrats is almost an afterthought. Dean became unmarketable in the eyes of many after his Iowa concession screed. For Dean, it was a Dukakis-in-the-tank moment. If Kerry doesn’t have a similar visual moment in the next few weeks, many Democrats will stick with him despite the obvious flaws.

Antitrust: Regulatory Idol

Remember the first rule of antitrust: Anything can be an antitrust violation. Even the mind-numbingly awful Fox series “American Idol”, according to a report in Thursday’s Wall Street Journal:
European regulators assessing the proposed merger of Sony Corp.’s Sony Music Entertainment and Bertelsmann AG’s BMG appear to be grappling with a basic issue: Should the combined company be considered just a developer and marketer of artists? Or should it instead be considered an integral part of the broader media-and-entertainment empires of both parents?
. . .
A questionnaire sent by EU officials to other players in the music industry last week provides some insight into the EU’s lines of inquiry . . . [t]he document [] asks how the recorded-music market is affected by such television formats as Britain’s “Pop Idol.” A production company owned by Bertelsmann produces “Pop Idol” and its cousins, including “American Idol” on News Corp.’s Fox network in the U.S. Winners of those shows record on BMG, and their albums have been big sellers.

“The argument by opponents of the merger is that these TV shows take unknown artists and make them household names at very low cost, and that gives them an unfair advantage” over other music companies, says Lorna Tilbian, a media analyst at Numis Securities in London.
This is yet another good example of the European antitrust mentality. In the U.S., even our antitrust regulators would applaud a company that produces a popular (albeit annoying) product at low cost. Traditional “artist and repertoire” costs are the source of much of the music industry’s recent decline. The old business model for developing artists simply isn’t profitable. That’s why there are a declining number of major record producers.

But in the EU’s collective mind, there is nothing that justifies one competitor in a market acting to propel himself over other competitors. Success is an “unfair advantage” to Europe’s socialist bureaucrats. And keep in mind, this is a conservative mentality, since the regulatory objective is to keep the market where it is, free of any innovation that might disrupt the balance of power.

Antitrust: The Battle for PeopleSoft

On January 19, the Wall Street Journal’s lead editorial discussed Oracle’s ongoing hostile takeover bid for PeopleSoft. By their very name, hostile takeovers create animosity among rival management factions. But as the Journal’s editorial, “The Oracle of Antitrust”, noted, the real hostility towards the takeover is coming from a party with no direct financial interest in the outcome—the Department of Justice:
Oracle has been laboring to conclude its $7.3 billion hostile takeover bid for software competitor PeopleSoft for about seven months. PeopleSoft hasn’t made things easy, with its lawsuit and its refusal to allow its shareholders to vote on the offer. But the real headache has come courtesy of the Justice Department Antitrust Division, which has been probing the deal with its usual largo tempo and seems to be searching for a reason to say no.

Perhaps [Oracle CEO Larry] Ellison should ask [Microsoft chairman Bill] Gates for advice. Oracle was, after all, one of the leaders of the high-tech tong that invited Justice to make itself at home in Silicon Valley. It didn’t like competing against Microsoft, so it called in the Clinton Administration’s legal hobblers to help. But instead of leaving town after they pounded Microsoft, the lawyers and bureaucrats have settled in and are now looking for new markets to deconstruct.
Antitrust is like any other industry: It must expand into new markets or perish for lack of business. The technology revolution of the 1990s caused an antitrust counter-reformation during the second Clinton and current Bush administration. This is not a partisan product. Republicans and Democrats both support antitrust as a core regulatory principle. President Bush’s FTC has actually been more aggressive in inventing new antitrust markets to control, to the point where a company may be accused of monopolizing the market for its own product.

Technology is particularly vulnerable to antitrust expansion because of its dynamic nature. Antitrust relies on static market analyses; a regulator looks at the current situation and presumes he can predict the future with near-certainty. But technology almost always defies static prognostication. But antitrust regulators need only fool you long enough to get their foot in the door, and once they’re in, they can’t be expelled.

The Journal editorial correctly argues, “No slow-moving regulator can hope to keep up with a technology industry whose definition of long term is 10 minutes.” Many people would dispute that statement, however. Among them is PeopleSoft’s current CEO, Craig Conway, who is trying to thwart the Oracle takeover to save his own job. In a letter to the Journal published January 26, Conway insists “[t]he antitrust issues here are significant”, and that the Journal’s “observation that the Justice Department is simply not capable of understanding the technology industry is also wrong—not to mention patronizing”.

The problem is not that the DOJ is incapable of understanding the market; it’s that they choose not to. In case after case, the DOJ (and FTC) willfully ignores existing market definitions created by businessmen in favor of arbitrary, irrational market definitions created by government lawyers. And what is truly “patronizing” is the notion the DOJ knows how to run the marketplace in any industry, when many government lawyers haven’t spent a day of their lives earning a living in the private sector.

None of this is to say the Oracle-PeopleSoft deal makes good business sense. I don’t consider Oracle’s Ellison to be a virtuous or honest businessman. But it’s hard to support a man like PeopleSoft’s Conway, who went running to the government the minute the market got too unpleasant for him.

Thursday, January 29, 2004

Rights & Reason: Declaring a New War

In my Initium for this week, I call for a "War on Altruism", led by the nation's business leaders. I suggest enlisting two particular candidates to lead the fight—Microsoft's Bill Gates and Hewlett Packard's Carly Fiorina.

The Culture: A Noble Subsidy Embiggens the Smallest Artist

This doesn't particularly enrage me, but I have a feeling this may throw some conservative activists into a Dean-like frenzy:
President Bush will seek a big increase in the budget of the National Endowment for the Arts, the largest single source of support for the arts in the United States, administration officials said on Wednesday.

The proposal is part of a turnaround for the agency, which was once fighting for its life, attacked by some Republicans as a threat to the nation's moral standards.

Laura Bush plans to announce the request on Thursday, in remarks intended to show the administration's commitment to the arts, aides said.

Administration officials, including White House budget experts, said that Mr. Bush would propose an increase of $15 million to $20 million for the coming fiscal year, which begins Oct. 1. That would be the largest rise in two decades and far more than the most recent increases, about $500,000 for 2003 and $5 million for this year.
Just after the State of the Union, the White House promised critics they would hold the line on federal spending. We knew that was a lie, and the NEA increase proves it. The president just can't say no to any "charitable" cause, meaning any government program that spends money.

To be fair, many congressional Republicans already slobber over the NEA. My favorite is Iowa Rep. Jim Leach, who argued, "Government involvement is designed to take the arts from the grand citadel of the privileged and bring them to the public at large. This democratization of the arts ennobles the American experience." That's funny, because I would think leaving the support of the arts to the free market would make things more democratic, since consumers could decide for themselves which artists and disciplines to support. But maybe capitalism doesn't "ennoble[] the American experience".

I wonder if the NEA ennobles the American experience the way a noble spirit embiggens the smallest man, as Jebediah Springfield once said. Probably not.

Wednesday, January 28, 2004

Politics: Bush/Giuliani (or maybe Bush/Allen or Bush/Owens)

MSNBC gossip columnist Jeannette Walls claims “[a] well-placed source says that the president will ‘most likely’ drop Dick Cheney from his reelection ticket and his first choice for a replacement is former New York City mayor Rudolph Giuliani”. The source said “Cheney’s health” will be given as the official reason.

It was only a matter of time before someone brought the “dump Cheney” rumor out. It’s actually not a bad idea. Not because of anything Cheney has done, but because a second-term president needs to groom a successor. Cheney is an odd vice president in that there’s virtually no chance he’ll run for the top job himself. The first-term justification for Cheney was that he provided an experienced foreign and military policy hand for a domestic policy president. But now Bush has that experience, and his opponents have virtually none. Cheney is no longer really needed.

But Giuliani is a lousy replacement. Although the former mayor deserved praise for his post-9/11 management of New York, let’s not forget Giuliani was also a power-abusing U.S. attorney and a largely anti-individual rights mayor. Many of Mayor Michael Bloomberg’s excesses can be traced to Giuliani-era policies. Beyond that, Giuliani’s political profile—a liberal Northeast Republican—completely contradicts Bush’s conservative reelection profile. True, political marriages often meld contradicting philosophies, but given the State of the Union’s heavy emphasis on conservative appeasement, I don’t see the campaign leadership pushing for Giuliani.

I suspect Walls’s “well-placed source” is a pollster within the campaign or the Republican National Committee. This is exactly the kind of question an overeager pollster asks: Would you vote for President Bush if Rudy Giuliani replaced Dick Cheney as vice president? This reminds me of a story Mary Matalin told about the brief “dump Quayle” movement in Bush the Elder’s reelection campaign:
Dump Quayle rumors popped up at the drop of a hat . . . In the middle of our defense of our Veep, the campaign received a bombshell. All previous data had shown that the vice-presidential candidate had no statistical impact on an election, one way or another. Now, for the first time in modern polling, data indicated that a vice president—Quayle—was a drag on the ticket.
. . .

Though this secret memo included several modifying caveats (e.g., press and party reaction, which might mitigate the positive effects of removing him), its findings were so unique and unsettling that they reopened the debate among Bush’s closest friends. It took several forms: Move Quayle to Defense, Defense Secretary Dick Cheney to State, Secretary of State Jim Baker to chief of staff; or, get Quayle off, put Colin Powell on.
Personally, I can’t imagine how making Dan Quayle secretary of defense would have improved Bush I’s polling numbers, but that’s just me.

Back to my earlier argument: Replacing Cheney makes sense if Bush is looking to elevate a potential successor. Tom Ridge is the obvious candidate in this regard, though my short list would also include Senator George Allen of Virginia and Colorado Governor Bill Owens. (When I say “my short list”, I mean these are the candidates that make the most logical successors from Bush’s view; I’m personally skeptical about any of these men as president).

Capitalism & Law: Reflexive Regulating

Virginia Postrel criticizes the Boston Globe for taking this criticism of FDA Commissioner Mark McClellan:
"He's really been a disaster, possibly the worst commissioner I've seen," said Dr. Sydney Wolfe, director of health research at consumer group Public Citizen in Washington. "He is more well-liked by the pharmaceutical industry than any other commissioner I can remember."
Postrel notes that “Wolfe doesn’t point to any bad policy outcomes. But McClellan doesn’t share his reflexive hatred of the pharmaceutical industry, so he must be bad.”

In one sense, however, Wolfe’s statement is logically consistent. Regulation itself is a preemptive condemnation of a business or industry. It is the opposite of objective law. Regulation assumes a business’s activities are illegal unless the business can show otherwise. Objective law, by contrast, protects the right of individuals to act unless the state can show that action violates the rights of others. Regulation does not protect individual rights, but the “public interest”, which simply means the arbitrary whims of the regulators.

The FDA presumes pharmaceutical companies will produce unsafe and worthless products unless the government regulates drug development. Thus, it’s consistent for Wolfe to argue an FDA commissioner should view the pharmaceutical companies with suspicion, even hatred. They are the enemy of the “public interest”, and the FDA is its guardian.


Under the big anti-spam bill passed by Congress last year, the FTC is required to "establish a mark or notice" that must be included with any unsolicited e-mail advertising "adult" content. After much thoughtful consideration by well-paid FTC attorneys and staff, the Commission issued a proposed rule today prescribing the required mark:
The FTC proposes to adopt a rule prescribing the phrase “SEXUALLY-EXPLICIT-CONTENT: ” as the mark or notice mandated by the CAN-SPAM Act. The proposed rule also would follow the intention of the CAN-SPAM Act to protect consumers from unwitting exposure to pornographic images in spam, by requiring this mark to be included both in the subject line of any e-mail message that contains sexually oriented material, and in the electronic equivalent of a “brown paper wrapper” in the body of the message. This “brown paper wrapper” would be what a recipient would initially see when opening a message containing sexually oriented material. It would include the prescribed mark or notice, certain other specified information, and no other information or images.
Since Congress made the FTC do this, I won't blame the commission for this fairly obvious waste of government resources. Still, you have to wonder what transpired at the meetings to decide "SEXUALLY-EXPLICIT-CONTENT" was the best notice to use. Apparently "GIRLS-GIRLS-GIRLS" wasn't enough warning.

The Culture: The Nanny State

Andrew Sullivan writes in Time Magazine about the descent of the Bush administration into what he describes as "Big Government moralism."

Once upon a time, Republicans believed in leaving it to the private and voluntary sectors to do the important work of building citizenship and values. Remember the "thousand points of light?" These days those lightbulbs need government subsidies. One of the key beliefs of this President is that federal money should be funneled to religious groups that blend proselytizing with important social work. His faith-based initiative largely withered on the vine, but he has done what he can. In last year's State of the Union message, he proposed almost half a billion dollars to pay for mentors for disadvantaged high school students or the children of prisoners. This year he proposed an extensive government program to coach newly released ex-cons into better lives. Ever wonder who these government-backed mentors are? And what exactly they're preaching? Maybe you should, because you're paying for them.
But can it really be said that Republicans have ever consistently stood for limited government? Ayn Rand made the following observations in her essay "Conservatism: An Obituary":

It is generally understood that those who support the "conservatives," expect them to uphold the system which has been camouflaged by the loose term of "the American way of life." The moral treason of the "conservative" leaders lies in the fact that they are hiding behind that camouflage: they do not have the courage to admit that the American way of life was capitalism, that that was the politico-economic system born and established in the United States, the system which, in one brief century, achieved a level of freedom, of progress, of prosperity, of human happiness, unmatched in all the other systems and centuries combined--and that that is the system which they are now allowing to perish by silent default.

If the "conservatives" do not stand for capitalism, they stand for and are nothing; they have no goal, no direction, no political principles, no social ideals, no intellectual values, no leadership to offer anyone.

Yet capitalism is what the "conservatives" dare not advocate or defend. They are paralyzed by the profound conflict between capitalism and the moral code which dominates our culture: the morality of altruism. Altruism holds that man has no right to exist for his own sake, that service to others is the only justification of his existence, and that self-sacrifice is his highest moral duty, virtue, and value. Capitalism and altruism are incompatible; they are philosophical opposites; they cannot co-exist in the same man or in the same society. The conflict between capitalism and altruism has been undercutting America from her start and, today, has reached its climax.
That was in 1966. The conservatives since then have hardly changed. As Sullivan observes:
There has always been a tension in conservatism between those who favor more liberty and those who want more morality. But what's indisputable is that Bush's "compassionate conservatism" is a move toward the latter--the use of the government to impose and subsidize certain morals over others. He is fusing Big Government liberalism with religious-right moralism. It's the nanny state with more cash. Your cash, that is. And their morals.

The trouble is there are few voices that are willing to address the real problem. Many on the right question Bush's spending, but few, if any will challenge Bush on his religious faith. When a mistaken moral premise remains unchallenged, nothing positive can come from it.

Tuesday, January 27, 2004

Rights & Reason: Blair Stumbles on Education

Tony Blair’s government barely survived a key vote in the House of Commons taken just a few minutes ago. Blair and his education secretary, Charles Clarke, have been pushing a package to reform the fee structure for English universities, all of whom fall under government control. This afternoon’s vote was on a preliminary motion to allow the reform bill to proceed to committee. Blair normally enjoys a Labour Party majority of 161 votes in the Commons; today’s vote went 316-311 for the government, a majority of just five votes. A defeat would have probably led to an official vote of confidence in the government.

The British have traditionally subsidized undergraduate education. In 1998, the Labour government instituted a fixed-fee rate for universities. Under this system, students paid an upfront fee of £1,125 per year (the fee was reduced or waived for lower income families). Students take out loans to pay these fees and their living expenses, and pay them back after they graduate when they earn more than £10,000 annually. Keep in mind, the £1,125 covers only a small fraction of the university’s expenses—the taxpayers still foot more than 90% of the bill.

Under the new Labour proposal, the upfront fee will be replaced in 2006 with an annual fee set by the individual university—no more than £3,000—which students will repay after they graduate and earn more than £15,000 annually. This means the government will basically loan students the money to attend school. But unlike a traditional loan, there will be no interest charged, and the amount to be repaid will be based on a student’s post-graduation income, not the amount borrowed. In practice, a student earning £18,000 after graduation will only “repay” £5.30 per week—or about £265 annually. The debt will be entirely written off after 25 years, a protection for those who don’t work in profitable fields or remain unemployed.

By American standards, both the existing British system and the proposed reforms are socialist nonsense. But even Labour’s modest reforms caused a major backlash. Many Labour parliamentarians want fees abolished altogether; they would increase taxes (on the wealthy, of course) to fully subsidize all undergraduate education. Labour opposes any effort to “marketise” the university system. They want education to remain a socialist program immune from market competition. This is why allowing the universities any discretion in setting charges is politically unpopular. To guard against opposition, Blair insists the £3,000 annual price cap may not be raised until at least 2009, and only then by a direct vote of both houses of Parliament. Blair may be a reformer, but he is not a capitalist.

This is what happens when you classify education, or any service, as a “right”. You’re left with arbitrary price controls set by politicians, persistently under-funded universities, and a system that cannot respond to changing demands. Opponents of Blair’s plan don’t want to see Britain go down the American road of having people choose a university based on ability to pay. But our system, imperfect as it is, offers not only a larger, more dynamic market for higher education; it also avoids the trap of being a constant drain on taxpayer revenue. We have the government-run elementary and secondary schools for that.

(And yes, there are many state government-run colleges in the U.S., but these schools still must compete in the market against private-sector schools. American politicians are also not as committed to socialism as their British counterparts, since almost all state universities here charge tuition that far exceeds the modest amounts being protested in England.)

An issue like this exemplifies the widening philosophical chasm between Europe and America. In this country, the movement towards free markets is growing, despite the opposition of establishment leaders. But across the pond, socialism maintains its death grip on the population. For this reason, I give Tony Blair credit for even trying to address the tuition issue. His reforms won’t produce much substantively if enacted, but his willingness to stake his government’s survival just to move the rock a few inches shows a level of character this country’s president would never demonstrate.

The burden now falls to Britain’s conservatives to develop a more substantial plan for reforming university financing, because Tony Blair cannot go any further without committing political suicide. Michael Howard, the new Tory leader, has suggested the idea of partially privatizing Britain’s universities, meaning they would subsidize undergraduate education from institutionally-controlled endowments rather than taxpayer coffers. Howard’s specific plan is still unknown, but he must act quickly to seize control of this issue.

The Culture: Essentials and Nonessentials

I've seen the Dean scream from last week's Iowa caucus. I don't get how it reveals Howard Dean to be unbalanced.

There are a multitude of reasons to oppose the Dean candidacy. Dean's strident opposition to the war in Iraq, his desire to raise the taxes of the productive, his willingness to expand the size of government far beyond even the recklessness of the worst Republican, all disqualify him for the presidency. The Dean scream does not. All the man did was deliver an impassioned speech to rally disheartened supporters after a disappointing defeat.

Yes, there was a certain pro-wrestling flair to the speech. But the scream alone is not a disqualification for anything, except perhaps the job of librarian.

I want to see Dean defeated for the right reasons. To see him defeated because of a triviality, when he represents a host of vicious views, in my mind, is what is really unglued about this campaign cycle.

Capitalism & Law: Muzzling Martha's Defense

The next time you hear President Bush or Attorney General Ashcroft argue they need more powers, under the Patriot Act or what-not, to make America safe from its enemies, consider what's transpired in the Martha Stewart trial:
Among the limitations placed by Judge Miriam Goldman Cederbaum [on Martha Stewart's defense team] were the inability to say that the home decorating expert was being prosecuted for proclaiming her innocence in the case or for asserting her First Amendment right to free speech.

The defense also is barred from saying that the securities fraud charge Stewart faces is a novel application of securities laws, and from making statements that would tend to show the government's motives in investigating or prosecuting Stewart were improper. The defense also can't say that the fact Stewart and former broker Peter Bacanovic aren't facing criminal insider trading charges means the government doesn't believe they committed such a crime.
In other words, Stewart is being denied her right to present a defense theory consistent with the facts of the case. And for all of the president's bemoaning "judicial activism" in last week's State of the Union, the judge in Stewart's case appears set to gift wrap a conviction for the prosecutors. Funny how the president never considers prosecutors "activist," only the judges who put individual rights ahead of government power.

Culture: Affirmative Action for Directors?

The Oscar nominations are out. The only thing I find interesting about that is Sofia Coppola's nomination for best director for "Lost in Translation." I haven't seen the film, but what's noteworthy is that Coppola is only the third woman ever to be nominated for best director. That's interesting given the Hollywood establishment's strident, often militant leftism. They never tire of lecturing the rest of America on its alleged homophobia, sexism, racism, etc., yet the establishment itself remains dominated by white males. This is similar to how colleges promote affirmative action as a necessity, yet there are only four black head coaches among the 117 Division I-A football schools. It's a curious double standard with no obvious explanation.

Then again, maybe Ms. Coppola was a "legacy nomination," given her father is the Oscar-winning director Francis Ford Coppola.

Politics: Is Kerry's Fate Sealed?

If John Kerry wins the Democratic presidential nomination, history strongly suggests he’ll lose to President Bush in November. Here’s the telling statistic: In the past 21 elections, only five serving senators received their party’s presidential nomination, and only two of those—Warren Harding and John Kennedy—won the general election. Harding and Kennedy both ran in elections where there was no incumbent president standing for reelection. The other three senators that were nominated lost to sitting presidents: Barry Goldwater to Lyndon Johnson, George McGovern to Richard Nixon, and Bob Dole to Bill Clinton.

In the last 14 elections where the Democrats did not run an incumbent president, the party nominated a governor eight times, a vice president three times, a senator twice, and a former ambassador once (the anomalous 1924 nominee, John W. Davis, chosen on the 103rd ballot). The strong preference for governors in non-incumbent elections exposes the shallowness of the 2004 Democratic field. The only governor to run is Vermont’s Howard Dean, hardly a national leader before his campaign staff discovered blogging and Meetups.

The lack of a more prominent governor or governors is due to the fact the Democrats have no such figures. Before the 2002 elections, Democrats held the governorships of just two of the ten largest states, and one of those governors was California’s recalled Gray Davis. While Democrats did capture and hold five of these ten governorships in 2002, contemporary politics eschews new governors running for president. This gives Democrats a decent bench for 2008, but left them practically barren for this year. The result is a trio of mediocre senators, an unusually angry ex-Vermont governor, a retired general fired for incompetence, and Al Sharpton seeking the nomination.

A senator’s career consists largely of pandering to narrow interest groups and contradicting oneself on important issues. This is why senators tend to make poor national candidates. They lack the executive experience of a governor or a vice president, and they generally have a body of contradictory positions littering the Congressional Record. One reason Kennedy and Harding succeeded, I suspect, is that neither man compiled much of a record to speak of while serving in the Senate. By contrast, John Kerry has spent years trying to be all things to all people, and even a mild examination of his record will expose him as a fraud.

Monday, January 26, 2004

Rights & Reason: Taxing Fairness

ABC's John Stossel debunks the core economic policy of the entire Democratic presidential field:
According to presidential candidate Al Sharpton, "The top one percent in this country pays very much less than ten percent, very much less than five percent."

Sharpton said he thinks the wealthy should pay "somewhere around 15 percent."

But that's so silly because — and I bet most of you don't know this — the IRS says the richest 1 percent of taxpayers already pay 34 percent of all income taxes. Twice what Sharpton wanted them to pay.

Still you may feel the rich should pay even more. It's a tempting thought, since they have so much.

But let's remember the facts: the top 1 percent of Americans — those who earn more than about $300,000 a year — pay 34 percent, more than a third of all income taxes, and the top 5 percent, those making over $125,000, pay more than half.
The purpose of taxation is to finance government operations. But the purpose of the "progressive" income tax is to forcibly redistribute wealth from those who earn it to those who demand it. It's a remarkably simple principle that most politicians are incapable of acknowledging.

But ignoring reality has consequences. When politicians raise taxes on the rich and pass other laws designed to prevent wealth creation—i.e. regulation—the result is massive budget instability. The California budget crisis that swallowed former Gov. Gray Davis was due to this "soak the rich" mentality, as Sacramento Bee columnist Daniel Weintraub explains:
California's skewed income distribution, combined with progressive tax rates, means that the people at the very top of the income heap pay a very high percentage of the personal income tax collected in this state.

Their extraordinary, onetime income surge at the end of the last century provided most of the new tax revenue that legislators and former Gov. Gray Davis used to raise teacher salaries, increase welfare benefits and expand eligibility to state-provided health care. But the decline that followed also accounted for most of the revenue drop that contributed to the state's fiscal crisis. And as of the most recent tax year, they hadn't hit bottom yet.

The million-dollar earners peaked in 2000, when 44,000 of them -- about enough to fill your average baseball stadium -- reported incomes totaling $172 billion and paid more than $15 billion in taxes. The tax take from that relative handful of returns accounted for more than one-third of all income tax paid in the state.

The next year, the number of returns reporting incomes that high slumped to 29,000. Their combined income also declined, by nearly half, to $95 billion. And here was the killer: Their tax liability dropped from $15 billion to just under $8 billion.
Any wealth redistribution scheme will ultimately collapse under its own weight: Social security will fail because eventually the present workforce won't earn enough to support the growing beneficiary population; Medicare will fail when the government cuts reimbursements to the point where doctors stop participating; government schools will crack under pressure from private competitors and home educators. The only defense mechanism the government has is to raise taxes and prevent competition. But these alternatives only prolong the inevitable.

Antitrust: Open-Wheel Warfare

The ongoing civil war in open-wheel motorsports took an interesting turn last Thursday when the Indy Racing League offered to buy the assets of their bankrupt rival, Championship Auto Racing Teams. The IRL split from CART in 1996 over philosophical differences, with the newer circuit running exclusively on oval tracks mostly in the U.S., while CART maintained an international series on various forms of racetracks.

IRL’s growth has been steady but hardly NASCAR-like. CART has declined in popularity and had already lost $78 million in the first nine months of 2003, which led to the bankruptcy filing. Unlike the IRL and NASCAR, which are privately owned, CART is a publicly trade corporation. This has traditionally been a bad model for professional sports, which is why you don’t see many leagues incorporate. And even though CART is the older of the two open-wheel series, IRL is owned by the family that owns the Indianapolis Motor Speedway, which not coincidentally runs the Indy 500. That race has lost some of its luster since the CART split, but it’s still the most profitable and publicized open-wheel race of the year.

The IRL is the second bidder for CART’s assets. The first bidder, Open Wheel Racing Series LLC, plans to run a full race series in 2004. The IRL’s plans for CART remain sketchy, though it’s unlikely they would run a competing series. I won’t comment on which bid is stronger, but I can already see a potential antitrust complication: If the bankruptcy judge goes with the IRL bid, then Open Wheel group could turn around and file an antitrust suit, claiming the IRL is attempting to eliminate competition in the “open wheel motorsports” market. The fact that neither circuit can hold a candle to NASCAR or other sports leagues won’t matter to an antitrust case. Nor will CART’s financial insolvency be considered relevant, since failure isn’t an antitrust defense.

It also wouldn’t matter that a CART-IRL merger would be the best thing for the industry right now. Even under private ownership, CART will never be profitable because it lacks substantial base support in the United States and it doesn’t have the Indy 500. ESPN’s Robin Miller explains how the two series could be reunited:
The assets purchased by OWRS include seven profitable events at Long Beach, Calif., Toronto, Montreal, Vancouver, Mexico City, Monterrey, Mexico and Surfer's Paradise, Australia, that draw big crowds. Cleveland made a bit of a comeback this season and Elkhart Lake remains the truest test of road racing in North America. St. Petersburg showed great potential in its debut.
They're all worth saving, plus Milwaukee, which the IRL is already going to for the first time in 2004.

Putting those 10 with the IRL's best tracks (Texas, Kentucky, Kansas City, Chicago, Phoenix, Fontana, Motegi and Indy) might be the kind of mix that would reinvigorate fans, manufacturers, drivers and sponsors.

"Let's go by the theory that open wheel racing will be unified again," said [Paul] Gentilozzi, who does most of the talking for OWRS. "We need a 20-race season with 10 great road courses or street circuits and 10 great ovals.
IRL remains committed to a principally oval series, and this philosophical divide is the greatest roadblock to unifying open-wheel racing. But this is a situation that calls for compromise in the name of pursuing business success and greater profits. Whatever the bankruptcy judge decides, let’s hope CART’s downfall doesn’t become another excuse to enrich antitrust lawyers.

Capitalism & Law: Punting on Antitrust

The Supreme Court punted on the Andrx case today, delaying a decision on accepting the case until the Solicitor General files a brief “expressing the views of the United States”. This is the second antitrust case this term where the Court has done this: Last fall, the Court delayed a decision on 3M’s appeal of a $68 million antitrust judgment until the Solicitor General could, er, tell Justice O’Connor what to do.

I know there is some appellate law justification for the practice of delaying consideration of a petition and inviting the Solicitor General to file a brief. But there was nothing stopping the Solicitor General from filing a brief during the same time everyone else—including, in this case, CAC—had to file. The fact the Justice Department chose not to file should be sufficient for the justices. After all, if the Court grants Andrx’s petition, the Solicitor General can still file a brief at the merits stage.

The reliance on these so-called “invitation” briefs demonstrates, to me, the increasing institutional paralysis of the current Court. Justice O’Connor is a major culprit in this. She does everything in her power to avoid making a decision on the merits of important cases. But the rest of the Court must share the blame. In the Andrx case, there are no rational grounds for refusing to hear the case: There is a clear circuit split on an issue of major importance. We’re talking about billions of dollars in potential liability—in this and future cases—if Andrx loses. If the Court can’t accept this case without asking for Ted Olson’s permission, then they’re completely worthless as a judicial institution.

Sunday, January 25, 2004

The Culture: American Mobility

Below is a fun application that allows you to make a visual representation of everywhere you have traveled in the US. By my count, I've been to 37 of the 50 states, most on road trips.

create your own visited states map

On one hand, it's amazing that at 34, I've seen so much of America. On the other hand, since there is simply so much to see, I wonder if I could ever truly clam to have seen all that makes up the soul of America.

Yet what I think is most incredible is when one considers when America was founded, years ago, our forefathers feared that there would be insufficient communication between the states to bind the union together. In his will, Washington left a portion of his estate to what later became George Washington University for the sole purpose of creating an institution where students from all across America could leave their regional prejudices behind and study together under a common banner.

Now, 200 years later, a young man can visit almost two-thirds the nation and do so on a meager budget. In many ways, America is an amazing nation.

Saturday, January 24, 2004

Rights & Reason: Treating Cancer by Killing the Market

My colleague Daryl Cobranchi points out this particularly irrational proposal from Delaware Governor Ruth Ann Minner's state of the state address:
Let me turn now to the opportunity we have to combat one of the most serious health issues facing Delawareans: cancer...We now know, thanks to research completed this year, that cancer victims without health insurance receive less than 60 percent of the health care that cancer patients with health insurance get. This means that health insurance for cancer victims can be the difference between life and death...I am asking the General Assembly to make Delaware the first state in the country to guarantee health insurance for every person in the state diagnosed with cancer. Some will say, “no other state has done it.” To them I say, it’s about time that someone did, and Delaware will lead the way.
Daryl points out that "singling out a single class of diseases is the obvious first step to universal health coverage." But there's another danger: If a state government makes insuring cancer patients a government policy, than the state will also seek to reduce its insurance costs—i.e. risks—by targeting any behavior that may cause cancer. We've already seen this happen with tobacco. State governments justified their extortion of cigarette makers by pointing to the large "public health" expenditures treating illnesses with some connection to smoking. This same strategy is now being pursued by trial lawyers against food companies—fattening foods increase the risk of heart disease and diabetes.

Of course, advocates of state power never stop to consider the idea that ending state subsidies for risky behaviors (such as overeating and smoking) via health insurance would cause individuals to take more responsibility for their own behaviors. Personal responsibility, however, is an anathema to the regulatory crowd, since it implies people can act to affect their own lives without state intervention.

And yes, I realize that many cancer patients do not engage in an identifiable risk behavior that causes their cancer. But the personal responsibility principle still applies. A man's need does not create a right to demand others help him. But when a disease affects a wide section of the population, a market will arise for financing research and treatment. Indeed, one of the consequences of government-directed healthcare research is that diseases are prioritized according to political pull rather than objective need. Rarely will you hear a politician propose a cut in AIDS research to fund research on prostate cancer, even though the former is fully preventable in most cases.

Friday, January 23, 2004

Sports: A Bronx Cheer for Brooklyn

The owners of the New Jersey Nets agreed today to sell the team to a group headed by Brooklyn developer Bruce Ratner, who will move the team to an arena yet-to-be-built in Brooklyn. My response to the return of professional sports to Brooklyn? Moral condemnation. I have nothing against the borough, but no city deserves a franchise when they trample on private property rights to get it:
The arena is merely one part of an ambitious development plan crafted by Ratner. The well-known developer built the MetroTech Center in Brooklyn, home to the city's fire department headquarters, along with banking and other offices.

The 19,000-seat arena would sit amid thousands of apartments, hundreds of thousands of square feet of shopping space and more than 2 million square feet of offices. Most of the $2.5 billion project would sit atop a Long Island Railroad yard owned by the Metropolitan Transportation Authority, a state agency controlled by Pataki.

From the state, Ratner needs both air rights and a condemnation power to take nearby homes and businesses. The developer estimates about 150 homes would be affected, although neighbors fear the number would be higher.

Residents of the upscale neighborhood of Prospect Heights, which adjoins the site, have promised to sue to block what they said would be an unconstitutional use of the government's eminent domain power for private rather than public benefit.

An MTA official said Ratner had yet to formally approach the agency and it was far from certain that the agency would sell him the air rights, let alone provide them at less than market price.

The state's role could allow Ratner to avoid much of the city's lengthy and stringent land-use approval process. Opponents charge that's one of a number of advantages bestowed on Ratner because of his political connections.

Ratner has held high-level positions in two mayoral administrations, and was once appointed by Pataki to study the possibility of luring the Dodgers back to Brooklyn.
The MTA official is either dumb or lying. New York State routinely seizes private land for resale to favored private interests at below-market value. Many of us are still smarting over the state's seizure of private buildings to construct the New York Times' new headquarters. If Ratner doesn't get his way, it will only be because he didn't curry enough favor with the right officials. But I suspect Governor Pataki and Mayor Bloomberg will roll-over without much resistance.

Antitrust News: Andrx on the Clock

Today the Supreme Court's justices are privately conferring to decide the fate of several petitions for certiorari, including the one in Andrx Pharmaceuticals v. Kroger Co. et al. CAC previously filed an amicus brief in support of Andrx's petition, which seeks to overturn a Sixth Circuit ruling requiring settlements in patent litigation to be subject to a "per se" antitrust rule. This means a settlement between private parties automatically violates antitrust law if third-party consumers object. The Sixth Circuit's ruling has already been disputed by the Eleventh Circuit, which ruled patent litigation settlements are subject to the (allegedly) lower "rule of reason" standard in antitrust challenges.

The Court is expected to issue an orders list on Monday at 10 a.m., at which time we should learn the fate of Andrx's petition.

Philosophy, Culture & Politics: The Philosophic State of the Union

Skip Oliva takes a philosophic look at President Bush's State of the Union speech today at Initium.

Rights & Reason: Bush Lies on Health Care

John Kerry’s stump speech focuses on the “right” to health care—just eliminate the “creed of greed” and the profits of HMOs and drug companies, and everyone can have all the health care they’re entitled to. Ted Kennedy, in support of his man Kerry, wants to force private businesses to fully subsidize their employees’ health costs. It’s nice to see the left never learns and never apologizes for its ways.

It’s hard to get too upset over this. Democrats are Democrats, after all. What does annoy me, however, is this passage from the president’s State of the Union address:
A government-run health care system is the wrong prescription. By keeping costs under control, expanding access, and helping more Americans afford coverage, we will preserve the system of private medicine that makes America’s heath care the best in the world.
This statement is a complete lie. America already has a “government-run health care system.” It’s called Medicare. And managed care firms are not capitalist entities. They’re byproducts of the government’s efforts to forcibly control health care prices. The president’s prescription drug program will eventually lead to similar price controls on pharmaceuticals.

Bush is only quibbling with the system’s form, not its substance. His administration prosecutes any physician that tries to independently negotiate prices with HMOs as an antitrust offender. He accepts the government’s basic role in “expanding access” and controlling costs. And he’s promised to veto any substantial changes to the prescription drug benefit. Where exactly is the free market in all of this?

Bush’s apologists will point to the health savings accounts provision of the prescription drug bill. That’s a trinket, nothing more. The HSA is a symbol of this administration’s approach to health care: The government will allow you to keep some of your money to pay for your own healthcare expenses. How thoughtful. But if the president was genuinely committed to “private medicine,” he would, at a minimum, allow all healthcare expenses to be deductible from an individual’s income tax. He would also permit individuals to opt-out of paying for or using the Medicare system. But don’t hold your breath waiting for that to happen. You’re more likely to see free market reforms from John Kerry than George Bush.

Thursday, January 22, 2004

Rights & Reason: Gay Marriage, Inc.

I’ve just completed a lengthy review of the State of the Union, which will be posted at Initium later tonight. But while this topic is fresh in my mind, I wanted to comment here on President Bush’s opposition to gay marriage. As in the past, Bush’s policy is to “defend the sanctity of marriage” from any institutional change, even if that means amending the Constitution. The conservative argument has always been based on the principle that marriage is the single indispensable building block of society, and that permitting homosexuals to marry one another would destroy the institution’s fundamental value.

Bush uses the term “sanctity” for good reason. Like most conservatives, he views marriage as a God-based institution, a product of Biblical command and tradition. But in truth, marriage is a man-made institution. This shouldn’t come as a shock to anyone, yet this objective fact is always ignored by gay marriage opponents. Indeed, different societies structure marriage differently. Islamic societies permit polygamy. Many societies promote arranged, non-consensual marriages. Even some western European countries forbade divorce until recently. In the United States, the differences in marriage among states is generally cosmetic—Nevada has no waiting period, for example—but still the institution itself remains a product of man’s creation and control.

Nick and I were discussing this question last night, and the analogy we developed was that of a corporation. The corporation is a fundamental institution of capitalism—it provides a stable mechanism for raising capital and organizing individuals into large groups—but this does not make the corporation a sacred or infallible institution. The same is true of marriage. It is a man-made institution that provides a stable mechanism for raising children and organizing individuals into families. This does not, however, mean that permitting new marital structures will endanger existing ones. Gay marriage is no more a threat to existing marriage than LLCs are to publicly-traded corporations, even though the LLC is a relatively new invention of law.

Rights and Reason: The right to bear arms

A proper government receives its power from the people; governments are delegated the individual's right to retaliatory force and the government places that right under the rule of law. The better a society is able to place the right to retaliatory force under the rule of law, the better and more efficiently men are able to resolve their disputes peaceably.

There is one element to the right to retaliatory force that can never be delegated, and that is the right to take immediate deadly action against an immediate deadly threat. Yet this obvious expression of the individual's right life is inconsistantly protected, both in terms of whether the individual is legally permitted to carry a firearm, and what kind of firearm he may carry.

I hold that an individual ought to be able to legally carry weaponry sufficient to protect himself from any individual in his immediate view. I hold that any man-portable direct fire weapon with a range within the bounds of unaided human sight should be available to the citizen. I see no reason to draw a distinction between semi-automatic fire and automatic fire, or the caliber and shape of the weapon. An individual has a fundamental right to protect himself from another individual within his sight.

I hold the right to respond to any other threat is the province of government. Threats of a larger nature are properly 'nationalized' and placed under objective rules and controls. No man, for example, may a man own a tank; such weaponry is beyond what one needs to respond to an immediate threat and there is no legitimate justification for an individual to own such a weapon. Nor may a man own a flamethrower, which is an indiscriminate weapon inappropriate for self-defense. Nor may a man own a nuclear bomb; such weapons are devices used by nation-states against other nation-states, and their control must be placed under strict guidelines and limited to only certain uses.

Now consider governments that place an outright bans on the legal possession of firearms, such as the District of Columbia. When the law banning firearm ownership in the District was first enacted, a suit was brought against the police department for failing to provide immediate policing on the level that would be available to an individual if he was permitted to be armed in self-defense. Amazingly, the courts ruled that the government was under no such obligation to provide immediate protection to its citizens. There, citizens are left literally naked against immediate threats against their life and property, and the deplorable crime rate in the District is the telling consequence of such a view.

Frankly, I find it appalling that such misguided logic is allowed to stand. Those of us who choose to arm ourselves do so because we value our lives. Accordingly, I say this: we must give equal vigor to defending the freedom of action necessary to sustain our lives as well. And just as we would not hesitate to confront an attacker, we must not hesitate to confront our leaders when they fail to defend our rights. The tools may be different, but the intent must always remain the same.

Antitrust News: Cato on Antitrust

Next Thursday the Cato Institute is holding a policy forum entitled "Antitrust in the High-Tech Marketplace: The Real Irrational Exuberance?" Here's Cato's description of the event:
The Department of Justice's Antitrust Division appears prepared to block Oracle's proposed $7.3 billion merger with PeopleSoft on the grounds of monopoly power in "business enterprise software." Similarly, a merger between EchoStar and DirecTV was halted. State attorneys general and even the European Union are increasingly scrutinizing mergers in the technology sector. Clearly, the Microsoft settlement did not end antitrust activism.

If Washington policymakers conclude that the technology marketplace is incapable of policing itself and that corporate breakup or aggressive market-definition policies qualify as sensible public policy, then what government intervention in the technology sector markets is off limits? Many economists object to such intervention in new business models—especially when the theories behind intervention are themselves highly questionable.

What does the future hold for technology companies and the competitive environment? Join us as our panelists analyze and debate the broader role of antitrust policy in the high-tech economy and a possible reform agenda.
The FTC has been particularly aggressive during the Bush administration in pursuing technology companies based on questionable market definitions. This is not surprising, given that the FTC's antitrust chief was, in the private sector, one of the lawyers behind the original Microsoft case. And if you think the White House considers aggressive antitrust enforcement to be in conflict with their call (reiterated in Tuesday's State of the Union address) for reduced business regulation, than you don't understand conservatives. In the minds of "free market" conservatives like FTC chairman Tim Muris, antitrust is the alternative to regulation, since it acts on a case-by-case basis without articulating any hard-and-fast principles.

Wednesday, January 21, 2004

Rights and Reason: Virginia's concealed carry law

I don't write much about local issues, but ROR reader Mike Walker passed this story on to me and I could not resist.

In the 1990's, the Virginia legislature guaranteed the recognition of its citizens' right to self-defense via its Concealed Handgun Permit law. That law guarantees a Concealed Handgun Permit to citizens who have not otherwise forfeited their rights to gun-ownership and who have proven their ability to effectively use a handgun with certified training.

Since the enactment of the Concealed Handgun Permit system, over 100,000 permits have been issued in Virginia. In that time, permit holding Virginians’ have been spared from violence and death at the hands of thugs, murderers and rapists because they were armed. The vast majority of these acts of self-defense do not involve even a single shot fired; the mere fact that victims were able to show that they were capable of defending themselves was enough to deter an attacker. And contrary to the predictions of the opponents of concealed carry, Virginia has not turned into the "Wild West" after adopting Concealed Handgun Permits—it has turned into a place were lawful citizens can live their lives with the ability to protect themselves from violence and criminals.

Yet despite all the success of the Virginia Concealed Handgun Permit law, there is a flaw in the law that threatens the safety and security of permit holders. The current law denies the permit holder the means to defend himself on his way to, at, and coming from, restaurants serving alcohol. The current law also encourages the leaving of handguns in cars while their owners enjoy a good dinner, leaving lethal weapons vulnerable to theft.

The premise that the current law prevents persons from carrying concealed weapons in alcohol-serving establishments is true only insofar-as it prevents law-abiding citizens from doing so. Criminals have been, and will keep violating this law now and in the future, and by their nature, they will not be caught nor punished.

The fact is that one’s right to use a firearm in defense against a deadly threat does not disappear just because one has entered a restaurant. If the legislature wishes to protect the people from permit holders using firearms under the influence of alcohol, it ought to prohibit the specific conduct of the permit holder, and not his mere location.

Using a firearm in self-defense ought not to be subject to arbitrary restrictions. The prohibition against alcohol and guns is common sense. The prohibition against guns and restaurants is not.

Virginia Senate Bill SB579 would correct this deficiency, and I urge Virginia ROR readers to support it.

Politics: Sacking Tom Brady

I will post a lengthy analysis of the State of the Union on Wednesday afternoon. I'm going off the written copy published by the White House, since I make a habit of not watching these speeches on television. But several people who watched the broadcast mentioned the camera cut to New England Patriots quarterback Tom Brady, sitting in the first lady's box, when the president called on professional sports leagues to "get tough" on steroid use. If I'm Patriots owner Bob Kraft or NFL Commissioner Paul Tagliabue, I'm on the phone right now screaming at the top of my lungs at the White House communications office. This was a total setup. They invited Brady to attend the speech, and they knew that the minute steroids were mentioned the camera would find their honored guest. Of course Brady has never done anything to cause anyone to doubt his physicial and personal integrity, but that matters little when the White House needs to score cheap political points by "getting tough" with those evil professional sports leagues. I never realized the axis of evil included the New England Patriots. (Well, it does if you live in Oakland, but that's another story...)

Tuesday, January 20, 2004

Idiotic Quote of the Day: John Kerry

This from the mouth of John Kerry, the haughty, French-looking Senator (who by the way served in Vietnam) on CNN TV (as reported by The Command Post): "Healthcare is not a privilege for the wealthy and the powerful ... it is a right for all Americans, and we will make it available to all Americans."

Let's see here--I exist and I am an American, therefore, I deserve my health care to be provided for me. Yet the wealthy and powerful will not respect my rights. I shall vote for John Kerry and he will break them.

If John Kerry does in fact win the Democratic nomination and he goes on to defeat George Bush in the general election, with logic like that, I say the people will fully deserve his presidency.

Rights & Reason: Popular Elitism

Howard Dean offered this bizarre assessment of the nation’s education policy in today’s Wall Street Journal:
"Question: Do your children attend public or private schools?

"Answer: Public schools. Public school education in this country is excellent. I'm tired of right-wing politicians bashing the public school system whose failures are often due to lack of attention to early childhood education between the ages of zero and three."
Dean’s answer conveys two messages: First, parents are to blame for any failures of the public school system, because teachers are government employees, and therefore presumptively correct. Second, the public school system will never be completely successful until all children—starting at birth—are under government supervision. Both messages are consistent with a totalitarian philosophy. They also remove any veneer of “populism” from Dean’s candidacy. He is an elitist, pure and simple, who believes the true enemies are those who question the morality of the state’s intervention into the personal affairs of man. While Dean is not quite a Nazi, his use of the term “right-wing politicians” is synonymous with Hitler’s use of the Jews as a scapegoat.

Elitists like Dean seek power to impose their ideology on the public. Populists, by contrast, merely exploit the passions of the day to curry favor with the electorate. Populism qua populism is morally neutral; it can produce good or bad results depending on the ethics of the people. But political elitism is always dangerous, because it is only practiced by those who favor a form of government based on principles other than individual rights and capitalism.

Monday, January 19, 2004

The Courts: Pickering & Parliamentary Law

Conservatives have applauded President Bush’s recess appointment of Judge Charles Pickering Sr. to the U.S. Court of Appeals for the Fifth Circuit. Leftists, conversely, have condemned the White House’s end-run around the Senate filibuster that’s stalled Pickering’s nomination for nearly four years. I have to say, I can’t support the president’s decision here, not because I oppose Judge Pickering, but because this is a poor use of the recess appointment power.

A couple years ago, Howard Bashman and I got into a blog-debate over the constitutionality of recess appointing federal judges. Bashman argued that Article III judges must have life tenure, and that the recess appointment’s limited tenure creates an irreconcilable conflict with that requirement. I conceded the conflict, but argued the Framers clearly gave the president the ability to make any appointment via the recess clause, without regard to the other provisions of the Constitution. In the context of the early American government, this made perfect sense: Congress was generally in session only from December thru March, leaving as much as nine months between Senate sittings. Most federal district courts only had one judge in those days, making recess appointments a necessity to ensure a functional judiciary.

If the Fifth Circuit were in immediate need of a judge, then President Bush would be acting responsibly in making a recess appointment. But such an appointee should either be a temporary judge who will not be nominated for the permanent position, or a permanent nominee that the Senate is unlikely to oppose. Using recess appointments to exert political leverage over the Senate is irresponsible, albeit constitutional. Certainly this does nothing to mollify existing opposition to Judge Pickering.

But what of the fact Pickering’s nomination has not come to a vote because of the Democratic minority’s filibuster? Republicans argue this is an unconstitutional act that justifies the recess appointment. I disagree. The Constitution directs each chamber of Congress to adopt its own rules of proceeding. The filibuster is permitted under Senate rules, subject to a three-fifths vote invoking cloture. By itself, this is not a bad rule. The Senate traditionally permits unlimited debate to ensure the minority’s voice is not stifled. In recent decades, however, the Senate has used the filibuster to prevent debate rather than to ensure it. Now the mere threat of a filibuster prevents consideration of a nominee or legislation. This practice violates good parliamentary practice, but it is still constitutional, because the Senate can end this practice whenever it wants. That the Senate has not done so is a testament to the lack of leadership from the Republican majority, which could exercise its majority prerogative to simply bring Pickering’s nomination to a vote.

This is what’s known in Washington circles as the “nuclear option”, because it means ignoring the Senate rules’ own provision that no rule can be amended without the consent of two-thirds. Many scholars, notably Douglas Kmiec, argue the two-thirds rule is actually unconstitutional, because it binds succeeding senates to existing rules without permitting a simple majority to change them. I agree with this reasoning. If a simple majority simply ignored the filibuster rule—on grounds that there’s no actual debate taking place over Pickering’s nomination, merely obstruction—this decision would be sound parliamentary and constitutional law. Yes, the Democrats would object, but the presiding officer (a Republican) would overrule that objection, and it only takes a majority to sustain the chair’s decision on appeal. This would end the deadlock over judicial nominations in an instant, and if the Democrats are unhappy, then they can take it to the voters and ask for a majority of the Senate and the White House back.

Sunday, January 18, 2004

Politics: The Real Campaign

Below I discussed what was likely to happen in the presidential race. The comments to that post focus on whether President Bush should be reelected. On this question, I am largely agnostic. After following the race for much of 2003, I’ve concluded the 2004 presidential campaign is largely an exercise in political theater without any major ideological battles.

The conventional view is that presidential elections are important. But history tells us this isn’t always the case. The 1984, 1988, and 1996 elections presented idea-free campaigns. The 1976 election was closely contested between two candidates of similar ideas, with only the residue of Watergate dividing popular loyalties. And of the three most recent elections where the White House changed parties—1980, 1992, and 2000—none resulted in much permanent change to the post-New Deal welfare state. The only clear change brought by these three elections was a temporary shift on the issue of taxes. In 1980 and 2000, Republican administrations made short-term tax cuts without cutting spending, and in 1992 a Democratic administration raised short-term taxes without cutting spending. The result is basically the same: A higher percentage of the U.S. economy goes to support government programs.

The most important election of the past 30 years came in 1994, when Republicans won control of Congress and a majority of state governorships. This victory had the potential to undo a great deal of the damage done by a century of statism. But the victory proved short-lived. Congressional Republicans abandoned much of their ideology after the government shutdowns of 1995, and Republican governors spent the budget surpluses of the 1990s to get themselves reelected.

The war in Iraq makes the 2004 election appear more important than it is. In truth, the Bush administration did little more there than cleanup the mess left by the past two administrations. Beyond the decision to go to war, which was correct, this president has shown little leadership in actually managing the postwar situation. George Bush is a checklist manager: He sets a limited agenda and sticks to it, with no understanding of the underlying principles or interrelated concepts affecting his agenda. This style of leadership rarely works in the long term.

But when you take Iraq off the table, you see the presidential race is nothing more than a beauty contest. Thus, I plan to cast a blank ballot for president this year (though I still plan to vote). Where our attention should be cast is rebuilding Congress. The Republicans will enjoy a majority in the House for some time, thanks largely to partisan redistricting. The challenge now is to upset the incumbent-protection racket that prevents genuine competition for most House seats. If we can put even a dozen pro-individual rights Republicans in the House, we can start to build a platform for a radical capitalist agenda. At an absolute minimum, a dozen good Republicans can prevent the corrupt Republicans from inflicting any more major damage, such as the Medicare bill or campaign finance “reform”.

The presidency is the show-pony of politics today. Congress is the substance. The sooner people understand this, the sooner we can get to work rebuilding America.

Saturday, January 17, 2004

Politics: Handicapping the Field

Since the Iowa caucuses are Monday, I thought I’d contribute my two bits of political analysis on the Democratic presidential contest. The one thing I’m certain of is that after Iowa and New Hampshire, there will be no more than three candidates left in the competitive field. The political market, like any market, has a scarcity of resources, in this case money, free media, and paid media. Except for Howard Dean, none of the Democrats have enough resources to withstand poor showings in both early contests. This is why Dean is the frontrunner. The question now becomes, who will rise to the other two spots in the final field of three? There are five contenders for the two spots: Dick Gephardt, Joe Lieberman, John Kerry, Wesley Clark, John Edwards, and Al Sharpton.

Gephardt has the most potential, and paradoxically the most to lose in the first two states. He appeals to a core Democratic value, trade protectionism, and his tenure as House minority leader gives him the most experience of all candidates in working with Congress and the party’s various factions. But if Gephardt doesn’t finish at least second in Iowa and New Hampshire, he won’t be able to raise enough money to purchase paid media in the larger states. Because Dean already has the backing of the public-sector labor unions, Gephardt cannot rely on AFL-CIO support to insure him.

Lieberman is the favored candidate of the moderate Democratic establishment (the New Republic-DLC crowd). He has no chance to win. Lieberman may be a pragmatist darling, but there is also no issue or constituency he can rely on for base support. This lack of political “hard capital” makes it impossible to raise the “soft capital” to actually win delegates.

Kerry remains the betting favorite to emerge from the early contests as Dean’s primary challenger. If that does happen, it virtually ensures Dean’s nomination. Kerry has all of Lieberman’s liabilities without any of Lieberman’s media credibility. He was a fraudulent candidate from the start.

Clark is even more of a fraud than Kerry. He has no agenda aside from seeking power. This makes him an appropriate heir to Bill Clinton, but Clark has none of Clinton’s talent for retail politicking and media management. He will almost certainly drop out if he doesn’t finish better than third in New Hampshire.

Edwards is the only candidate with a chance to stop Dean. His decision to avoid the early anti-Dean onslaught was rewarded with an endorsement by the Des Moines Register, Iowa’s statewide newspaper, and this should translate into at least a third-place finish on Monday. Edwards has the “upside” that Lieberman and Kerry lack, meaning he will attract money and free media should he finish well in New Hampshire. And if Edwards can’t make a run, he’ll emerge as an early favorite to be Dean’s running mate.

Sharpton will not win the nomination, but his potential impact on the race should not be discounted. Since he’s unlikely to fare well in Iowa or New Hampshire, the first real test for Sharpton will come in South Carolina. If he’s able to sustain himself, Sharpton could become the voice of minority disaffection with Dean and the “white Democratic” establishment. There is substantial discontent within this faction of the party, and it’s only a matter of time before it manifests itself. Remember what happened to George Bush I in 1992, when Pat Buchanan won enough support to force the White House to give him a primetime speaking slot at the convention. Buchanan’s now-infamous “cultural war” speech proved to be the iceberg that sunk Bush’s Titanic campaign. Sharpton could serve a similar function for Dean.

To sum up, I see Dean, Kerry, and Edwards emerging from New Hampshire as the three candidates of consequence, with Al Sharpton hanging out in the background. Since Kerry won’t win, the question is, will he get out of the race quickly enough to bolster Edwards’ chance of toppling Dean? The longer Kerry remains in the race, the more likely it’s Dean accepting the nomination in Boston.

Finally, since it’s never too early to speculate, I’d consider the possibility of Dean throwing caution to the wind when selecting a vice president. Edwards would be the safest choice, but if by the convention Dean feels his back is against the wall, he might take a stupid risk to invigorate his base. After this week’s endorsement, I think Carol Mosley-Braun is precisely the type of person a panicked Dean would consider. And if you think a Dean-Braun ticket is beyond the realm of possibility, I have two words for you: Dan Quayle.

The Culture: Politicians of all stripes . . .

Here's one to ponder:

John Kerry, battling in a leadoff contest far too close to call, said Saturday that rivals for the Democratic nomination for president are trying to dampen his momentum with a "smear effort."

Two other candidates, Howard Dean and Dick Gephardt, circulated to reporters on Friday comments Kerry made five years ago indicating he would drastically scale back the U.S. Department of Agriculture and revamp farm subsidies. Iowa is dominated by farming, and politicians of all stripes here support subsidy programs. [AP] (empasis added)
Wouldn't that make them politicians of the same stripe?

Antitrust News: Microsoft Still Accused of Antitrust Acts

Once under the antitrust's boot, always under antitrust's boot. Consider the following:

One of the most important provisions of the antitrust settlement negotiated with Microsoft Corp. is falling short of the federal government's hopes that it would energize rivals of the world's largest software maker, the Justice Department acknowledged Friday.

U.S. antitrust lawyers told the trial judge they are increasingly uneasy that efforts to persuade competitors to license Microsoft's Windows technology for their own software products "are not likely to spur the emergence in the marketplace of broad competitors to the Windows desktop."

The landmark antitrust settlement compels Microsoft to offer its technology to competitors to build products that seamlessly communicate with computers running Windows software. When the settlement was negotiated, the judge and government lawyers described that requirement as among its most significant provisions toward restoring competition in the technology industry.

Government lawyers told U.S. District Judge Colleen Kollar-Kotelly in court papers that Microsoft's licensing agreements have turned out too complex and potentially too expensive for competitors.

The Justice Department said Microsoft has agreed to change the agreements. But even after changes are made, government lawyers warned, Microsoft "cannot foresee with confidence that the improvements will be sufficient and remove the need for further changes."

Microsoft said it will lower prices and make agreements as attractive as possible for its business rivals, but it argued that it shouldn't be held responsible if competitors choose not to use its Windows technology for their products.

Unsatisfied that the license offers were effective enough, the trial judge urged government lawyers in October to investigate why only nine companies had paid Microsoft for licenses. The government said Friday that number has climbed to 11, and Microsoft said it was negotiating with 20 more. [AP]
The issue here is that Microsoft's competitors don't wish to license Microsoft software. Yet under the aegis of its antitrust settlement with Microsoft, the government is now holding Microsoft to an impossible standard: Microsoft's competitors must license Microsoft's software, and Microsoft must do whatever it takes to secure those licenses.

Under terms such as these, Microsoft has lost the right to its property. It may own its software products in a nominal sense, but in reality, its property only exists to serve the interests of others.

And it is this destruction of property rights that makes antitrust the "Magna Charta of free enterprise."

Friday, January 16, 2004

Capitalism & Law: Competing Directors

The FTC issued a new rule today raising what's known as the Section 8 threshold. Under Section 8 of the Clayton Act, a person may not serve as a director or officer of two competing corporations. The threshold for applying this rule is whether each corporation has a combined capital, surplus, and profits exceeding a given amount. The FTC raises this figure annually based on changes in GNP. The new threshold announced today sets the floor at a combined $20.09 million or total "competitive" sales of $2.009 million.

Like everything in antitrust, these standards and figures are wholly arbitrary. The FTC gets to decide what sales are "competitive" or how the combined capital, surplus, and profits figure is calculated. And on a more basic level, there's simply no cause for banning individuals from serving two "competing" companies. Remember, companies exist to make a profit for their shareholders; competition is a secondary function. If two competitors feel they can benefit from sharing the services of an individual, then that is their prerogative. It may not be a good idea, but that judgment should not be made by the FTC.

Thursday, January 15, 2004

The War: Thanks for nothing

So much for the liberty loving people of Iraq.

Shouting "no to America!" tens of thousands of Shiite Muslims took to the streets Thursday to protest a U.S.-backed formula for choosing Iraq's new legislature.

The protest came as an aide to Iraq's foremost Shiite cleric, Grand Ayatollah Ali al-Husseini al-Sistani, warned that he might issue a fatwa, or religious edict, rejecting a U.S.-backed government if his demands for direct elections are ignored.

The turnout in Basra, estimated by British soldiers at up to 30,000, was the biggest protest organized by Shiite clerics against the power transfer plan.

The United States wants regional caucuses to choose a new parliament, which will then select an Iraqi administration. It says security is too poor and voter records too incomplete for fair elections.

The clerics want direct elections, fearing the caucuses may be rigged to keep Shiites out of power.

The Americans are also wary of elections because of who might win. With Iraq in turmoil, Islamic radicals or Saddam Hussein's Baath party might dominate a vote simply because they have the best organizations. [AP]
Isn’t that gratitude.

It is obvious the Iraqi people do not fear us. It is unimaginable that there would be tens of thousands on German’s protesting against the United States after the American defeat of Nazi Germany. Yet this mystically-driven Iraqi rabble thinks it has the right to tell us “no” after giving the world Saddam Hussein for the past 30 years. It does not.

Individual ruin is only fate worthy of any in Iraqi who would raise a fist against the United States of America. The Bush administration speaks of making Iraq an example to the rest of the Arab world. If today’s protests are any indication of what that example is to be, it is the wrong one.

Rights and Reason: When is one's man need a mortgage on the life of another?

When one lives in Venezuela. According to Reuters:

The poor, oil-rich nation is considering decriminalizing the theft of food and medicine in cases where a thief is motivated by extreme hunger or need.

Supreme Court Judge Alejandro Angulo Fontiveros told Reuters on Wednesday that the so-called "famine theft" clause should be part of a broad penal code reform measure for humanitarian reasons.

"This is a guide for judges to avoid injustice," said Fontiveros, who is in charge of drafting the reforms. "They lock up for years a poor person who lives in atrocious misery and what they need is medicine."

Under Fontiveros' proposal to the Supreme Court, those who take food, medicine or inexpensive goods without using violence to ease hunger caused by prolonged, extreme poverty would not be punished.
I think the relevant appraisal comes from Ayn Rand’s Atlas Shrugged:

"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world?' You are.

Antitrust News: Mountain Online

The Justice Department has now made its brief opposing my appeal in U.S. v. Mountain Health Care available in HTML format.

Rights & Reason: The Internet's "Sacred" Duty

FCC Chairman Michael Powell recently addressed the National Press Club on "The Age of Personal Communications: Power to the People." Much of his talk was a simple overview of new and emerging technologies, such as Internet voice protocol. But like most everything Powell has said and done as FCC chief, he tried to mix contradictory premises. First he talked about the need for regulators such as himself to exercise restraint:
Government can make things better, but Government, too, can make a mess of things. It is particularly prone to the latter when addressing budding technology developments that it does not yet fully understand or appreciate. Regulation can smother the risk-taking oxygen young entrepreneurs need to survive. They can weigh down innovation with forms and filings and drain capital by adding significantly to the costs of the service. And the cost of government compliance can mean higher, less competitive, prices for consumers.
Nice rhetoric, but then Powell contradicts himself a few paragraphs later when he reaffirms the FCC's core mission:
Communications is probably one of the most powerful attributes of mankind. Few capabilities in our society have a greater impact on our community than communications. Thus, as it has long been, communications policy is more than the efficient allocation of goods and resources. It is about people; their access to information and their development of community and personal relationships. I believe it a sacred duty to continue to protect important social values through the great digital migration.

First among equals is the unflinching commitment to universal service. We must make sure that the digital migration brings the technologies of today and tomorrow to every single American at affordable prices. This year we will continue to tackle important universal service reforms that ensure that the nation can continue to pass into a new era, while not sacrificing its inviolate commitment to all Americans.
Whenever a government official speaks of a "sacred duty," I get nauseous. And not surprisingly, the sacred duty here is an altruist cause, ensuring "universal service". This means the government will tax those people who choose to live in abundant communications markets, such as big cities, to provide "service" to those who choose to live in rural, less populated areas. Why I have a sacred duty to fund broadband access for folks living in Montana escapes me. Thankfully, we have highly qualified antitrust lawyers like Michael Powell to make these decisions for me.

Antitrust News: Banking Frenzy

J.P. Morgan Chase & Co. will acquire Bank One Corp. for $58 billion in stock, creating a banking giant with $1.1 trillion in assets. Obviously the deal requires approval from antitrust regulators, but that's unlikely to be a major problem. The Justice Department, which has jurisdiction over banking mergers, generally doesn't challenge these type of deals. That doesn't mean, however, the lawyers won't nitpick. Expect to see the DOJ perform a gut-wrenching analysis of this deal market-by-market, and possibly extract a few token divestitures in some cities to prevent "reduced competition".

The Proper Mission of Government: Spaced Out

Yesterday, President Bush proposed an extra $1 billion dollars in spending for NASA over the next five years as part of his plan to put a permanent base on the moon and land astronauts on Mars.

In a speech prepared for delivery Wednesday, Bush is calling for a lunar base to be established within two decades and a manned landing on Mars sometime after 2030, an official said.

The proposal comes after members of Congress and others have called for a new national vision for the National Aeronautics and Space Administration, urging a human space initiative that would reinvigorate an agency wounded by last year's loss of space shuttle Columbia and trapped by expensive projects that limit manned spaceflight to low Earth orbit.

Bush, speaking with reporters Tuesday on a trip to Mexico, said his plan centers on human exploration of space.

"The spirit is going to be one of continued exploration ... seeking new horizons and investing in a program that ... meets that objective," he said.

His proposal for $1 billion over five years, in effect, would provide startup funds for highly complex projects that could take decades and may require hundreds of billions of additional dollars to complete. [AP]
The space program is funded by tax dollars—the redistribution of wealth from one person to another. While space research is perhaps the least offensive recipient of government funding, the fundamental problem remains: space research has nothing to do with the legitimate function of government. And while it is often argued that the value of technological spin-offs justifies government involvement in space, it must not be forgotten that those spin-offs are the fruit of a poisonous tree.

It’s also interesting that for all the prattling about competition being so important and antitrust being the Magna Charta of free enterprise, few take issue with the government’s monopoly in space. What businessman could hope to compete with the government lifting payloads into space? How high is the regulatory burden placed on vehicles built and launched by private enterprise? Where the justice in a tax-fed government agency deciding what is to be the priority in mankind’s development of space?

But perhaps the cruelest aspect of the government’s involvement in space is the fate of the scientists and engineers who do produce incredible technological achievements. The men and women who make spaceflight possible are heroic. Yet as the Apollo space program showed, when these engineers and scientists achieve all that is asked of them, they will see their budgets slashed and their achievements ignored. I say the work of these heroes ought not to hinge on the political whims of the day.

And today’s space program does look like an exercise in whim worship. What value comes from re-landing men on the moon, or landing men on Mars, when robotic probes can more efficiently carry out the mission? Why do we have a space station that is more a platform for giving idle ex-Soviet space engineers something to do with themselves than a means for engaging in groundbreaking scientific research? Freedom in space—freedom from government funding, control and prioritization—would put the best minds where they would bring the most value, and not subject these minds to the misbegotten whims of political masters.

The pioneering of space is an incredible achievement of mankind and of the United States in particular. It is said that this renewed interest in space comes off the heels of the Columbia disaster, and is meant to serve as a tribute to their memory. Perhaps, but I say the best tribute to the heroes of space exploration, both living and dead, would be bring to wilds of space the same level of freedom that once made it possible for men to settle the wilds of the American continent.

Wednesday, January 14, 2004

Antitrust News: Foreign Preemption

Yesterday I noted the FBI existed to serve the Justice Department, not the government as a whole. Today the Bureau demonstrated what I meant. The Wall Street Journal reports that last weekend, "[FBI] agents subpoenaed Philippine executives attending an industry conference in Hawaii, ordering them to appear before a Honolulu grand jury this week." Is this a new terrorism case? Hardly. The grand jury is investigating antitrust charges against several Philippine phone companies. Specifically, the Justice Department is meddling in a year-long dispute between the Philippine companies and their American counterparts, who claim to be the victim of a price-fixing conspiracy involving fees charged by the foreign telephone companies for processing international calls originating in the U.S.

According to the Journal, this dispute was largely settled before the DOJ convened its grand jury. Over the last few months, U.S. and Philippine companies settled their differences over the fees. In other words, the market took care of itself. But that has little impact on the DOJ's thinking. After all, DOJ lawyers need to justify their budgets and offices, and they can't do that by accepting a private settlement of a private business dispute.

And incidentally, the Journal also reports that neither the FBI nor the DOJ bothered to inform the Philippine government of this investigation beforehand. Philippine President Gloria Arroyo--a strong U.S. ally--"demanded that the U.S. explain the Justice Department's action". Arroyo is right to be angry: Price-fixing is not illegal in the Philippines. But the DOJ "has long claimed the authority to prosecute foreign firms or individuals if their actions affect U.S. commerce." In Bush administration parlance, this means the U.S. will engage in "preemption" against foreign businesses who follow their nation's laws but don't share the DOJ's enlightened view of antitrust.

Meanwhile, the U.S. needs the Philippines as an ally in the battle against Islamic militants (aka the "War on Terrorism"). Given that the FBI, the nation's chief domestic counterterrorism agency, is spending its time harassing our friends over a non-issue, one must question whether the Bureau is more interested in protecting Americans from terrorism, or protecting the jobs of their bureaucratic overseers at the DOJ's Antitrust Division.

CAC News: Back On the Air

I will be making a return appearance on Fox Sports Radio's "Steve Czaban Show" on Thursday evening at 9:30 p.m. Steve and I will discuss antitrust issues facing the Bowl Championship Series.

The Culture: Memorial to a Marriage

A good friend of the Center, art historian Lee Sanstead is an expert in romantic realism. Sanstead travels far and wide to capture romanticism in perhaps the only place where its reign is unquestioned: America’s cemeteries. He recently photographed the sculpture of artist Patricia Cronin. The artist is 40-years-old, and this sculpture, featuring her and her lover is to be her tombstone. [More photos here]

I expect that as knowledge of this work spreads, it will be damned by the opponents of gay equality from pulpit to statehouse—damned as un-Christian, indecent and wicked. After all, it is expressions such as Cronin’s that supposedly degrade the institution of marriage. By this standard, a sculpture of a homosexual, alone and unloved, is all that any gay really deserves.

I say this: it will be a welcome day when all one sees in a work such as Cronin’s is the artist’s sublime appreciation for love.

Antitrust News: Monopolizing Imaginary Markets

Yesterday the FTC, in an odd moment of humility, decided not to challenge the 2001 acquisition of Novazyme Pharmaceuticals by former competitor Genzyme Corporation. Lately the FTC staff has been demanding the Commission undo mergers after the fact when anticompetitive harm is magically “discovered.” This is what happens when you have 300 antitrust lawyers on staff with nothing to do.

Anyway, what makes this investigation noteworthy is that the market allegedly monopolized by this merger does not yet exist. Prior to 2001, both companies engaged in research to develop a treatment for Pompe disease, a rare ailment affecting about 10,000 infants and children worldwide. Because the disease is rare, the federal Orphan Drug Act gives the first company to develop a treatment seven years of market exclusivity. Research has continued on Pompe disease since the merger, but no treatment has actually been tested and marketed.

Three FTC commissioners, led by Chairman Timothy Muris, said, “[t]he facts of this matter do not support any a finding of any anticompetitive harm.” Muris charitably notes the merger may actually hasten the development of a Pompe treatment and save lives. This is a rare moment of lucidity from Muris, whose three years in office have been marked by his various rampages against businesses he doesn’t like (or businesses that didn’t hire him as a consultant when he was in private practice). But in this case, Muris admits there’s no evidence to conclude any consumer will be harmed.

Commissioner Mozelle Thompson disagreed, and he took the conventional antitrust view that the merger created a “monopoly” by eliminating the rivalry between the two companies. Keep in mind, this “monopoly” is for a market that does not yet exist, since there is no actual product on the market to treat Pompe disease. But facts are generally irrelevant in antitrust cases. What matters, Thompson argues, is that we have competition in developing a cure. Without competition, he believes, there is no innovation. And in a truly egomaniacal statement, Thompson asserts, “[P]rotecting innovation competition has been a Commission success story over the past decade. Our actions have directly benefitted [sic] competition and consumers, and these actions have sent a strong signal of support to innovators.” In other words, the FTC is responsible for market successes, because it thwarts the anti-consumer actions of greedy producers. If you believe Thompson’s view, than you are not a capitalist. The FTC has never benefited any consumer. They are not experts in any market, but experts in manipulating process to benefit those who curry political favor.

The fifth commissioner, Pamela Jones Harbour, abstained from the vote but issued a statement largely mirroring Thompson’s “antitrust lawyers know best” view. This is no surprise, since Harbour spent most of her career running the antitrust division of the New York attorney general’s office. Her statement actually cuts to the heart of the matter, especially where she says, “Competition drives innovation, a crucial element in increasingly global markets.” This is the most important concept to understand. The FTC, and antitrust lawyers generally, believe that competition is the foundation of capitalism, and that without constant competition, “monopolist” firms will ground the economy to a halt.

True capitalists, however, see right through this charade. We know that competition is a byproduct of capitalism, not its source. Capitalism is a social system where all property is privately owned and individual rights are enforced by the government. Competition may or may not occur in a particular market, but it is not an essential element. What Harbour and her colleagues fail to understand is that innovation occurs because businesses seek to achieve, not because they seek to compete with one another. Nor does the FTC understand that competition cannot be artificially regulated. Of course, artificial regulation is the FTC’s reason for existing. Why else do they need a staff of hundreds to define “relevant markets” and develop complex, meaningless antitrust theories?