Monday, May 11, 2015

The Problem in California is a Shortage of Economic Understanding, Not Water

By Walter E. Williams

Californians are experiencing their third year of drought. Headlines read: "Current California Drought Is Driest In State's History; Scientists Fear 'Megadroughts' On Their Way." "Global Warming Upped Heat Driving California's Drought." Then there are scientific claims such as, "There's a rapidly growing body of scientific research finding that California is in the midst of its worst drought in over a millennium (and) global warming has made the drought worse." A Stanford University study said, "Human-caused climate change helped fuel the current California drought." One news outlet summarized the conclusions of a group of environmentalists this way: "California's severe and ongoing drought is just a taste of the dry years to come, thanks to global warming."

Let's examine a few drought facts.

California experienced eight major droughts in the 20th century, according to the U.S. Geological Survey. They ranged from two years to as long as nine years, such as that which occurred from 1928 to 1937. In the previous century, there was the bitter drought of 1862-65, which was a catastrophe for the state of California — made worse by a smallpox epidemic. Scott Stine — professor of geography and environmental studies at California State University, East Bay — said that all of these modern droughts were minor compared with California's ancient droughts of 850 to 1090 and 1140 to 1320. One wonders whether California Gov. Jerry Brown and his cadre of environmental extremists would attribute those ancient droughts to man-made global warming.

A large part of California's water problem has economic roots. Whenever there's a shortage of anything — whether it's water or seats at a baseball stadium — our first suspicion should be that the price is too low. California agriculture consumes about 80 percent of the state's delivered water, and it has been exempted from many of California's new restrictions. On top of that, agricultural water users pay a much lower price than residential users. In other words, California's farmers are being heavily subsidized.

The Imperial Valley, located in the southeastern part of the state, is geologically a desert. Nonetheless, its farmers grow large quantities of potatoes, cauliflower, sweet corn, broccoli and onions. These crops would not be produced without there being subsidized irrigation and other state and federal subsidies. I need someone to show me that there is such a desperate need for somewhere to grow potatoes, corn and other crops that we need to subsidize making a desert bloom.

Western water is mostly controlled by the U.S. Congress and its Bureau of Reclamation. Through lobbying efforts, the Bureau of Reclamation is controlled by growers and other special interests. Water is distributed in California and other Western states not by market prices but by the political process. Agricultural interests have disproportionate political power. That means that agricultural interests receive taxpayer-financed handouts.

California farmers argue that without federal and state government subsidies, crops could not be grown in desert areas. That's a foolish, self-serving argument. If I were an Alaskan wanting to use government subsidies to build hothouses to grow navel oranges, I could use the same argument: Without government subsidies, I couldn't grow navel oranges in Alaska.

Some of California's water conservation regulations are mindless. It is illegal for servers in bars, restaurants and cafeterias to serve water unless customers ask. The amount of water that people drink per day is a trivial part of total water consumption. Estimates vary, but each person consumes 80 to 100 gallons of water per day flushing toilets, bathing and for other residential purposes.

Another California water conservation effort is "drought shaming." That's when vigilantes call water utility hotlines to snitch on their neighbors who are watering lawns, washing cars or filling pools. One wonders whether there might arise an anti-vigilante movement to punish the vigilantes.

The bottom line for solving California's water problem is that there needs to be a move toward a market-oriented method for the distribution of water. Government management has been a failure.

Walter E. Williams is a professor of economics at George Mason University and author of Race & Economics: How Much Can Be Blamed on Discrimination?

Thursday, May 7, 2015

The Power Brothers by Max McNabb

Old man Power didn’t want his sons to be cannon fodder in the First World War. Jeff Power told his boys, John and Tom, not to register for the draft. The rich man’s war had nothing to do with them. In 1918, the Power family, originally from West Texas, had a gold mine to work in Arizona’s Gila Valley.

“They reacted the way Texans would react,” historian Jeff Robenalt says in the documentary Power’s War. “They didn’t cause the war… they didn’t make the draft. Why should they register for it?”

The young brothers planned to remain in the Galiuro Mountains until the war ended, then everything would blow over. But the US government had other plans. On February 9, 1918, Deputy US Marshal Haynes, Sheriff McBride, and Deputy Kempton met with volunteer Deputy Kane Wootan. The lawmen rode up into the mountains to arrest John and Tom Power for failing to register for the selective draft.

All four of the lawmen were members of the Mormon Church. Writer Roderick Roberts notes the Gila Valley was heavily Mormon and the Power family’s status as non-Mormon newcomers caused some of their neighbors to view them with hostility. The Powers claimed the Wootans wanted their gold mine and were willing to use the WWI conscription to take it. Sheriff McBride served as chairman of the county draft board. If John and Tom were drafted, their father couldn’t work the mine alone and would have to sell.

Just before dawn, the sound of startled horses woke Jeff Power in the family cabin. He stepped to the door and opened it. A voice in the darkness shouted, “Throw up your hands!”

Jeff Power raised his hands. Three shots cracked and the old man fell, shot down in his own doorway.

The gunfight that followed was the deadliest in Arizona history. The posse fired into the cabin. John and Tom Power grabbed Winchesters and fought back. The family’s hired hand, an ex-Army scout named Tom Sisson, took cover. When the smoke cleared, Jeff Power and three lawmen were dead, a fourth escaped, and the Power brothers had suffered wounded eyes from flying splinters and glass. The attackers never identified themselves as lawmen. Only after standing over the bodies did the Powers realize the dead men wore badges.

Read the rest at Max McNabb's website.

Sunday, March 15, 2015

Water Rationing: The Bureaucrat's Solution

A crisis is a terrible thing to waste if you're a statist.  So, the drought in California presents a great opportunity for more bureaucracy, corruption, and waste.  It also presents an opportunity for the free market pricing system, but that of course is not on the table.

Water Rationing: The Bureaucrat's Solution

Oil Industry Bailout

The government plans to buy oil to drive up its price.  Capitalism serves the consumer.  The consumer is not being served, oil companies are.

Oil Industry Bailout

Tuesday, March 10, 2015

How central banking works

The Mises Institute has a link to a site where you can find an out-of-print booklet called Modern Money Mechanics: A Workbook on Bank Reserves and Deposit Expansion, published originally by the federal reserve bank of Chicago.  For those interested in how the current monetary system works, it is not completely unreadable and is consistent with my understanding, though it refers occasionally to M3, an outdated money supply measure.  Here is an excerpt:

Let us assume that expansion in the money stock is desired by the Federal Reserve to achieve its policy objectives. One way the central bank can initiate such an expansion is through purchases of securities in the open market. Payment for the securities adds to bank reserves. Such purchases (and sales) are called "open market operations."

How do open market purchases add to bank reserves and deposits? Suppose the Federal Reserve System, through its trading desk at the Federal Reserve Bank of New York, buys $10,000 of Treasury bills from a dealer in U. S. government securities.(3)  In today's world of computerized financial transactions, the Federal Reserve Bank pays for the securities with an "telectronic" check drawn on itself.(4) Via its "Fedwire" transfer network, the Federal Reserve notifies the dealer's designated bank (Bank A) that payment for the securities should be credited to (deposited in) the dealer's account at Bank A. At the same time, Bank A's reserve account at the Federal Reserve is credited for the amount of the securities purchase. The Federal Reserve System has added $10,000 of securities to its assets, which it has paid for, in effect, by creating a liability on itself in the form of bank reserve balances. These reserves on Bank A's books are matched by $10,000 of the dealer's deposits that did not exist before.

If the prose in the above gets too thick to be digested, try Murray Rothbard's The Mystery of Banking (PDF), especially Chapter XI.  CENTRAL BANKING: THE PROCESS OF BANK CREDIT EXPANSION, beginning on page 161.

Rothbard also explains in detail (pp. 47-55) the counterfeiting process, beginning with a monetary system based on gold coin and extended to one based on irredeemable paper money.  

Oddly enough, the FRB of Chicago doesn't mention counterfeiting in its explanation.

Sunday, March 8, 2015

Snowden is not the story

John Naughton at The Guardian writes:

His was not some opportunistic smash-and-grab data heist, but a considered, informed selection of cases where he thought that the National Security Agency was violating the US constitution and/or circumventing its laws. Snowden was clearly no stereotypical left-wing dissident; he seemed closer to what US constitutional lawyers called an “originalist” – someone who regards the constitution as a sacred, inviolable document that citizens – and their governments – must continue to respect and adhere to. If Snowden were in the US today, I suspect he would be a supporter of Rand Paul.


The U.S. government responded to Snowden's revelations exactly as a gangster organization would. And a big chunk of the propagandized public went along with their supreme leaders.

Read the full story.

Don’t trust your phone, don’t trust your laptop – this is the reality that Snowden has shown us

Stop the Gas Tax Hike

Here is what I sent my representatives in D.C.  I encourage you to do something similar by going here.

I know you're under a lot of pressure, but consider that any proposed tax increase, no matter how it's labeled or what alleged need it fulfills, is a catalyst for activism -- as you're now witnessing.  Your job is to represent the people in your district.  They don't want a tax increase.  They don't like taxes, period -- it's an American tradition.  Can we agree on that?  A tax, any tax, is an act of theft, and Americans don't like to be robbed.  Government schooling has convinced them that a good citizen must accept some taxation, but they will only tolerate so much.

No amount of political lipstick will make a gas tax hike attractive.  The money people are currently "saving" from low gas prices belongs to them, not government bureaucrats.  A gas tax hike amounts to nothing less than one more armed hold-up.  To repeat: No one likes to be robbed.

Make it clear to your big donors that their money will not replace a large majority of voters.