Durham's Bull

Biofuels and the Environment

"Spurred by federal subsidies and two years of surging commodity prices, farmers increasingly are digging up the grass to plant crops, raising concerns among cattle ranchers, hunters and environmental groups about the future of land where Sioux hunters chased grazing buffalo a mere century and a half ago."

A nice piece in today's Post examining the law of unintended consequences, biofuels edition. 

We have already seen the impact of federal subsidies on corn prices in Mexico, and the subsequent protectionism that was induced. 

This is perhaps even more striking because the outcomes we are seeing seem to be in direct contradiction with the stated goals of our federal biofuels policy. 

The knowledge problem is as relevant today as it was when Hayek wrote of it in 1945.  We should be mindful of this as the next round of government directed stimulus efforts are constructed and implemented.

Asinine Agricultural Policy

There's a nice piece in today's Times spotlighting the lunacy which we like to call agricultural policy.

Sentence of the Day

"It's odd to watch a political party arise for no other reason than to prove the existence of public choice theory, then demand to be elected because it's the only party that really understands the implications of public choice theory."

From Ezra Klein, reporting on the Dept of Agriculture's denial of Creekstone's right to test its own livestock for mad-cow disease.

This is just one of the many problems with one-size fits all regulation.  I understand that the trade-offs between economies of scale and the needs of innovators can be hard to balance at times, but this sort of issue could be solved fairly simply by moving from means-based regulation to ends-based regulation. 

Rather than punishing someone for not following your rules, punish them when they actually cause harm. 

Doha Delight

"The United States is ready to cut its ceiling for trade-distorting farm subsidies to $15 billion a year to help unblock talks for a global trade deal, U.S. Trade Representative Susan Schwab said on Tuesday."

Victory.

It's not quite as good as it sounds - $15 billion is still a lot of cash.  That said, the cap is over 2/3 lower than it used to be - and that is progress.

The History of Speculation

A nice 0p-ed from today's Times documenting the history of the political scapegoating of Wall St.

Excerpt:

"Over all, there is limited evidence that anything other than economic fundamentals is driving the recent run-up in commodity prices. The main driving factors in the energy markets include strong demand from China, India and other developing nations, a lack of growth in crude oil production and United States monetary policy. In the grain markets, driving factors are, in addition to monetary policy and demand from developing nations, the diversion of row crops to biofuel production and unfavorable weather that has hurt harvests."

Cuba Libre?

"In recent months, he has allowed Cubans with enough money to buy cellphones and computers, which had previously been restricted. He has allowed them to rent cars and visit tourist hotels and opened up the possibility of private taxis. And he has taken the limits off state salaries, allowing for productivity bonuses."

The cracks in the foundation are being laid.