Freedom Line Blog

“Transaction costs” are a familiar concept to any Economics 101 students today. Simply put, transaction costs are the costs other than the price that are incurred in trading goods or services. (Time and energy are two of the most obvious transaction costs.)

Given the universal acceptance of the idea of transaction costs, it might come as a surprise that the term wasn’t coined until the 1930s by Nobel Prize-winning economist Ronald Coase.

Coase died last week at age 102, spurring a number of glowing and well-deserved tributes. Perhaps none was more useful in explaining Coase’s impact to economics than an op-ed featured in The Times of London by author and Wall Street Journal columnist Matt Ridley:

Coase spent much of his career in the US, winning the Nobel Prize for Economics in 1991. His fame rested on two papers. The first, in 1937, explained why companies exist — islands of central planning in a sea of market negotiation. His answer was “transaction costs”: you could order a car from the suppliers of its many parts, but it’s a lot simpler to get Henry Ford to assemble it for you.

Not only do companies lower the cost of goods by co-ordinating production, they depend on having a reputation for doing so. You cannot know all the suppliers with whom you might deal, let alone if they can be trusted. Firms such as Amazon spring up to save us these transaction costs.

Companies also face transaction costs: for renting buildings, employing accountants and managers and so on. Coase taught us that the ideal size of a company will be set by the interplay of lower co-ordination costs through central planning and higher transaction costs associated with holding managers accountable.

This is a penetrating insight for markets and government. Steam and electricity, by making production lines possible, lowered co-ordination costs, making bigger firms viable. But bigger companies, like bigger government bureaucracies, have higher management costs. The difference, of course, is that profits in the marketplace signal whether firms are too big or too small.

Coase was not the tireless defender of free markets and competition that contemporaries such as Milton Friedman or Friedrich Hayek were, but his research led to a tremendous amount of skepticism about government’s ability to produce, manage or regulate efficiently and effectively. For that, all devotees of freedom and individual liberty owe Coase a debt of gratitude.

How bad has President Barack Obama mishandled his possible Syria bombing campaign?

“…President Obama finds himself in the biggest and ugliest public mess of his career, with a total policy meltdown playing out on the front pages and cable TV studios of the world,” writes Walter Russell Mead.

“It is like a slow motion Bay of Pigs, unrolling at an agonizing, prestige wrecking pace from day to day and week to week. It is almost impossible to defend whatever policy he actually has in mind at this point, yet the consequences of a congressional vote that opposes him are grave.”

Mead’s allusion to JFK’s Bay of Pigs fiasco is instructive. In 1961, the Kennedy administration armed and sent 1,400 Cuban exiles to topple Fidel Castro. However, they didn’t have air support or reinforcements from the U.S. military, and were quickly defeated.

Like Obama, Kennedy wanted to ‘send a message’ on the cheap, and got what he paid for.

The consequences to America were nearly disastrous. Not only did Castro and his Soviet Union patrons humiliate the United States in front of the world, they interpreted the defeat – and the resulting timidity – as a free pass to put ICBMs 90 miles from Florida. Without the Bay of Pigs fiasco as a precursor, it is almost impossible to imagine the following year’s Cuban Missile Crisis.

With this in mind, Members of Congress should be extremely skeptical about the Obama administration’s claim that those we attack won’t be “arrogant and foolish enough to retaliate.”

History indicates otherwise, and in ways we can’t easily predict.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Buried within the federal government’s $3.8 trillion budget are thousands of instances of waste, fraud and abuse of your hard-earned tax dollars. Here are three of the more ludicrous examples of government waste that we stumbled upon this week:

1)  The federal government wastes up to $8 billion annually maintaining its massive stash of vacant properties. How many unused properties does the federal government own? No one knows. It seems the government doesn’t care enough about taxpayers to keep track of how many vacant federal properties Americans are paying to maintain. Big Government estimates there are as many as 77,000 properties currently owned or leased by the federal government that are sitting empty.

Even if Congress and federal bureaucrats had the sense to sell the properties (a move that would help reduce the deficit by generating billions in revenue), an outlandish and outdated 1987 law “forces properties first to be offered to other federal agencies, then state agencies and finally offered for use as homeless shelters before they can be sold.” As a result, the process of selling off an unneeded building can take a decade – and taxpayers are stuck paying for the property’s maintenance and upkeep throughout the entire lengthy process.

2)  A new version of the $100 bill is scheduled to be released on October 8. The bill, which was supposed to be in circulation in 2011, has been plagued with problems and setbacks. “The first batch ended up with a blank spot, and the second round was lifted by thieves on their way to the Federal Reserve,” according to a CBSMiami/CNN article.

Now, because the U.S. Mint failed to properly plan for how the paper used for the new bills would soak up ink, the new Benjamins will use $4 million more worth of ink than estimated. The Mint promises the problem can be fixed in future rounds of printing. For now, however, taxpayers are on the hook for the mistake.

3)  The National Institutes of Health wasted $49,198 in hopes of improving “our understanding of the relation between alcohol use and within-session gambling behavior.” In other words, researchers hope to verify the already obvious reality that getting drunk as a skunk leads to losing money at a casino.

In order to perform the study, 21 to 30-year-olds played video poker while getting increasingly plastered on taxpayer-funded alcohol. The research, not surprisingly, was conducted at Arizona State University — a notorious party school.

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CDT to 6:00 p.m. CDT (that’s 5:00 p.m. to 7:00 p.m. EDT) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn: Meeting Nonsense with Commonsense.”  Today’s guest lineup includes:

4:00 CDT/5:00 pm EDT:  Pete Sepp, Executive Vice President of National Taxpayers Union – NTU’s 3^rd Annual “No-Brainer List” of Congressional Bills;

4:30 CDT/5:30 EDT:  RJ Smith, Distinguished Fellow at the Competitive Enterprise Institute’s Center for Energy and Environment – Federal Control of Land and Environmentalist Deception;

5:00 CDT/6:00 pm EDT:  Sally Pipes, President and Chief Executive Officer of Pacific Research Institute – ObamaCare and Employer Health Care Cuts; and

5:30 CDT/6:30 pm EDT:  Captain Glenn Sulmasy, Center for National Policy’s Homeland and National Security Law Fellow – Syria.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.

I sometimes find the best way to settle your views on an issue is not to read the opinion of those you admire, but rather those whom you despise. Even my favorite thinkers go astray sometimes. The hacks are slightly more consistent.

One of the kings of errancy is the Washington Post’s Eugene Robinson, who spends today’s column trying to act as a moral backstop for President Obama in regard to Syria. It’s a throwaway remark early in the piece, however, that gets my hackles up:

At Wednesday’s hearing before the House Foreign Affairs Committee, I thought for a moment that [Secretary of State John] Kerry was going to blow. Rep. Jeff Duncan, R-S.C., launched into a self-righteous soliloquy about Benghazi, the IRS, the National Security Agency and what he portrayed as Kerry’s longtime aversion to using military force.

Kerry, you may recall, is a highly decorated Vietnam combat veteran. Duncan is an armchair warrior.

A few quick thoughts:

— I’ll grant you that Duncan comes off as a blowhard in his questioning of Kerry. Hearings on the possibility of war are about as serious a task as a member of Congress faces and his insistence on turning it into a glorified campaign ad are both misplaced and unimpressive. He comes off like a guy trying to sell you insurance at a funeral. That being said, non sequitur droning constitutes about 90 percent of all congressional questioning. You know who used to be the king of that? John Kerry. So forgive me if I can’t muster sympathy when he’s on the receiving end of the same kind of firehose-intensity stream of inanity he spent over two and a half decades dispensing.

— I’ve never understood why, in a nation that from its inception has insisted upon civilian control over the military, we try to settle policy arguments by determining who’s the closest approximation of Leonidas. You know who else was an “armchair warrior”? Franklin Roosevelt, who prosecuted World War II and never served in the military. Abraham Lincoln spent three months in the Illinois State Militia.

And Mr. Robinson should be careful about tying credibility on foreign affairs to time in uniform. Barack Obama didn’t serve. Neither did Joe Biden. And neither did Eugene Robinson, who spends the rest of this column telling us how we should think about Syria.

Liberals spent the last decade mocking conservative “chicken hawks” who had never served in the military but advocated for American intervention overseas. It was a bogus argument then and it’d be bogus (if not satisfying) to turn it back on them now. If we’re going to debate ideas, let’s do it on the merits, not according to the resumés of the people advancing them.

In this week’s Freedom Minute, CFIF’s Renee Giachino discusses the failure of First Lady Michelle Obama’s Healthy, Hunger-Free Kids Act and explains that “government has neither the right nor the ability to make our personal, private decisions for us.”

Earlier today, Rick Klein, Political Director for ABC News, tweeted out that 217 members of the House of Representatives have gone on record “as likely to oppose authorizing military force against Syria,” giving those opposed to the resolution a majority in the lower chamber (if we have any pedants in the audience shouting about the fact that it takes 218 to reach a majority, note that Alabama and Massachusetts both currently have one vacant seat).

Now, “likely to oppose” isn’t the same thing as definitely voting no, but anyone who’s staking out territory this early in the process is disproportionately likely to to stick to his guns. And it’s clear that the momentum on this is all going in one direction — and it’s not the president’s.

That’s remarkable, but not particularly surprising. Sometimes you can get a member to vote against his political interest for the sake of ideology. Sometimes you can get him to vote against his ideology for the sake of his political interest. But when both are imperiled simultaneously, the whipping gets much harder. That’s precisely the case with a potential military offensive that polls terribly and hits intellectual pressure points for liberals and conservatives alike.

One dispiriting aspect of this debate is the chorus of conservative voices such as Jennifer Rubin, Hugh Hewitt, and Bret Stephens who’ve conflated opposition to feckless, limited airstrikes in Syria with “isolationism.” It may be fair to say that nearly all isolationists are opposed to taking action in Syria. It does not follow, however, that all who are opposed to taking action in Syria are isolationists. The scope of opposition is far too large to be constituted entirely (or even primarily) of those opposed to American action overseas in all but the most limited circumstances.

I suspect that there are a fair number of conservatives like me — as far removed from the reflexive international reticence of Rand Paul as we are from John McCain’s “anytime, anywhere, for any reason” school of intervention — who just don’t see the strategic payoff here, especially given the manner in which the Obama Administration would be likely to conduct the fight.

America has played too fast and loose with defining our national security interests in recent years. Doing so again — especially when it’s clear that the Obama Administration has no plan that will actually result in a change of circumstances on the ground in Syria — is an exercise in futility. The measure deserves defeat.

What does state tax policy have to do with wins and losses in the NFL? Potentially a lot, according to an editorial in the Washington Times.

During a recent luncheon, Houston Texans star running back Arian Foster implied that part of the reason he chose to re-sign with the Texans last year was due to the lack of an income tax in the Lone Star State.

Foster appears to be part of a growing movement of NFL players considering how state income tax rates impact their bottom line when deciding where to play.

It makes perfect sense. As the Washington Times editorial points out that NFL players receive “only 17 paychecks a year, nine of which are subject to state income taxes in the town where their home games are played, and the remaining eight are taxed according to the location of away games.”

The editorial continues:

Since salary caps limit how much NFL teams can pay players, the biggest difference in what players can earn from one team to the next often comes down to home-state income taxes. This can range from zero in Florida, Tennessee, Texas and Washington state to 8.82 percent in New York, 8.97 percent in New Jersey and 13.3 percent in California.

Last year, when Mr. Foster earned $18 million, he didn’t have to pay state or local income taxes on any of the money he earned in Texas. If, however, he played for the San Francisco 49ers or the San Diego Chargers, Mr. Foster would have shelled out more than $1.2 million to California bureaucrats.

As more top free agents begin to take state income tax rates into consideration, organizations in high-tax states such as the Cleveland Browns, Oakland Raiders, Minnesota Vikings, Buffalo Bills, New York Jets and New York Giants could be hard-pressed to lure talent. Teams in low- and no-income-tax states such as the Dallas Cowboys, Seattle Seahawks, Miami Dolphins, Indianapolis Colts, Denver Broncos and Tennessee Titans will increasingly be in a better position to sign quality players and, ultimately, succeed on the field.

Still think state taxes can’t determine winners and losers in sports? Just look at the NBA where teams are even more restricted in the salaries they can offer players. The editorial points out that “over the past nine years, teams located in the 10 lowest-taxed cities in the NBA reached the NBA Finals 10 times, winning six championships. During that same span, only three times did a team playing in an NBA market with one of the 10 highest income-tax burdens appear in the Finals.”

A highly regarded separation of powers expert says the Senate Foreign Relations Committee’s oddly worded resolution to authorize military force in Syria might be more expansive than its drafters intend, according to the Washington Times.

At issue is the resolution’s use of the words “limited and tailored” in the phrase giving President Barack Obama power “to use the armed forces of the United States as he determines to be necessary and appropriate in a limited and tailored manner against legitimate military targets in Syria…”

Louis Fisher, a former long-time expert at the Congressional Research Service and author of a leading treatise on presidential war powers, says the word choice is unprecedented and could be so vague that it creates space for an escalation.

“What could possibly be the meaning of ‘limited and tailored’? I doubt if I’ve ever seen the word ‘tailored’ in a bill,” Fisher told the paper. “Even if the ‘intent’ of Congress is a limited war, war has its own momentum.”

In other words, use of the word ‘tailored’ in the resolution can mean anything to the clever lawyers who will twist it however they please, so in reality that word, and any limiting effect it is designed to have, is meaningless.

It is impossible for me to imagine that the people drafting this resolution don’t know this. Therefore, it seems almost certain that the underlying intent here is to sound like they are limiting the President’s options while in fact not doing so at all.

If we’re going to bomb Syria then we are going to war with Syria. If that’s in America’s national security interest, Congress should declare it in unambiguous language.

To my mind it’s better to do nothing than to say something that means nothing.

Otherwise, Congress is just lying to itself so that it can act outraged when the President uses the resolution to wage a war the Senate and House impliedly authorized.

McClatchy news ran a piece yesterday describing how President Barack Obama’s seeming indecision on striking Syria is being interpreted by Middle Easterners.

“Obama’s abrupt decision on Saturday to delay the strikes that seemed just hours away is being seen in the region as the latest confirmation of an incoherent U.S. approach of mixed messages and unfulfilled threats that have driven America’s standing to a new low,” the paper said, citing numerous interviews with Syrian rebels and others.

The confusion wasn’t helped during Secretary of State John Kerry’s remarks to the Senate Foreign Relations Committee. There, the Vietnam veteran and anti-war hero did an about-face. Without a hint of irony he argued that in asking for congressional approval to fire missiles at Syria “President Obama is not asking America to go to war.”

Instead, the President was “asking only for the power to make clear, to make certain, that the United States means what we say,” when the Commander-in-Chief threatens military force.

But the fact remains that firing missiles into another country is an act of war, a fact that didn’t escape Senator Bob Corker (R-TN) before heading into the hearing.

“This is the most serious policy decision any senator will make,” reports the Daily Caller. “Authorizing the use of military force is, let’s face it, is a declaration of war against another country, no matter how limited it is, that’s what it is.”

Kudos to Senator Corker for saying the truth out loud. He understands the real world consequences of this decision, as do the Syrian rebels, Syrian President Bashar Assad and every other sentient being paying attention.

So far, the Obama administration is doing itself no favors by pushing forward an ad hoc, incoherent rationale for bombing a government whose actions – while immoral and deplorable – don’t necessarily threaten America’s national security interests.

It was quickly apparent to anyone watching television last weekend that college football is back. On channel after channel, dozens of games were broadcast from packed stadiums courtesy of million and billion dollar television packages. Sure college football is rooted in pageantry and tradition, but the reality is that the sport has become a big business. How big? Over $2.2 billion annually.

But the young men whose talents generate astronomical sums of cash for television networks, apparel makers, the NCAA and their colleges earn, at best, a scholarship worth — including all perks — about $40,000 a year.

The value of a scholarship is dwarfed by the amount of money a star college football player earns for his school. Sports economist Robert Brown discovered that college football players who make it to the NFL were worth as much as $2.6 million to their colleges — and those figures were compiled in 2005, so that figure is substantially higher today.

College football players (and basketball players, for that matter) have startlingly little to show for carrying a billion dollar industry on their backs. They aren’t even allowed to earn a stipend from their school and, because of training and practice schedules, they can’t hold down a job like most college students. As a result, college football players are mired in a state of persistent poverty. For that reason, major college athletes have been compared, fairly, to sweatshop workers and even slaves.

Can anything done to correct this unreasonable treatment and inject reasonable market forces into the arena of college sports?

Some argue that Title IX, the (unnecessary and offensive) federal requirement aimed at increasing female participation in college sports, would prevent football players from earning a stipend. They argue that stipends would have to be doled out evenly to participants in all sports, not just athletes in profit-generating sports like football and men’s and women’s basketball. That argument, however, is incorrect.

Title IX requires equal spending on athletic scholarships for males and females in relationship to the population of men and women students at a given college. It doesn’t, however, require equal funding.

The reality is there is only one thing preventing the NCAA and universities from coming up with a stipend system to share a small amount of their revenues with players — greed.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

The average European man has grown 4.33 inches taller in the past 100 years, according to a new study produced by the University of Essex and the Australian National University in Canberra. Researchers cite a previously demonstrated link between decreased infant mortality and increased height as one reason for the growth spurt. The study’s author, Timothy Hatton, also says smaller family sizes are related to an increase in height, as are improved food availability and disease reduction.

News of the increase in average height has been met with cheers by American media. After all, it reflects a significant improvement in health — at least among European males, the focus of the study. Oddly, the media refused to celebrate last year when a British medical journal reported that obesity is now a bigger health crisis globally than hunger.

Malnutrition and other hunger-related illnesses have killed more people throughout human history than any other cause. Now, thanks to the development of high-yield, disease-resistant crops, synthetic fertilizers and pesticides — not to mention the increase in capitalism and free trade throughout the world — there is more than enough food to feed every person on Earth. Hunger and malnutrition today are almost exclusively a result of failed government food distribution policies.

The increase in height brought on by lower infant mortality rates and smaller families is exciting news. But it pales in comparison to the fact that, because of cheap, easily available food made possible through private innovation and market forces, humans throughout the world are now living longer and healthier than ever before.

And that obesity epidemic? Well, it turns out that it has been greatly exaggerated.