When my wife, son, and I flew back from San Francisco yesterday, the security scanners detected a small Swiss Army knife in my wife's purse. Shows the system works, right?

Not so much.  She cannot remember when she put the knife in her purse, but it was years ago and has therefore gone through security undetected on numerous occassions.

The latest Case-Shiller data indicate that housing prices increased in December for the 7th straight month.  Most news accounts regarded this as good news.

But between 2000 and 2006, housing prices rose 80-90 percent, and they are still 35-40 percent above the 2000 level.  If most of the 2000-2006 increase was a bubble, then housing prices should be lower, not higher, based on fundamentals.

In that case, the U.S. is continuing to overinvest in housing.  So the higher prices are bad news.

This does not imply that policy should attempt to lower housing prices; it should just not care one way or the other.

I have enjoyed watching the Olympics (short track is my favorite), but I'm glad the U.S. taxpayer did not foot the bill.   Apparently many Vancouverites are not persuaded the city got a good deal:

While hundreds of thousands of people have streamed onto the streets to enjoy (some of them to excess late at night) the Olympic party, there is still an undercurrent of crankiness and apprehension in the city. ...

Security costs, first estimated at $165 million, are now headed toward $1 billion.

So maybe the cost-benefit analysis mentioned in my earlier post, which concluded the Games are a loser for Canada, was too optimistic!

Microsoft Corp made its most vehement and public attack on Google Inc on Friday, calling its internet rival's actions potentially anti-competitive, and urging victims to file complaints to regulators.

The irony of  Microsoft trying to squelch competition via the antitrust laws is amusing. 

But the incident illustrates one key negative of antitust: companies that are losing in the marketplace encourage Justice or the FTC to prosecute competing firms, often with dubious justification.

Greg, a loyal reader,, emails me this query:

I live near Chicago Illinois. It must be one of the least libertarian places in the US. Chicago is famous for its preposterously large (and horrendously run) government. All this government has created very large operating deficits for the city, county and state. The government has gotten so big and burdensome that Chicago has had to think creatively to solve its debt problems.

Here's my dilemma: To solve their budget problems, Chicago has ironically been at the leading edge of some very libertarian-friendly policies.

For example, the city became one of the first municipalities to privatize a major tollway (the Skyway)... and is now trying to privatize a major airport (Midway). Chicago also privatized its parking meter operations. With that privatization, parking rates rose to a more competitive and unsubsidized rate. This deal has been criticized - but now more parking spaces are available and the company that runs the meters has upgraded all the facilities so that now people no longer need 500 quarters to feed the meters... you can pay with cash, credit card, etc.

The obvious paradox is that as government gets worse (and budgets get bigger), the city has resorted to more libertarian-friendly options. So what's the hopeful libertarian to do?

So does this mean that Frankin Roosevelt, Lyndon Johnson, George W. Bush, and Barack Obama are big time libertarians?

Every time I fly, the urge to rant about airport security becomes irrepressible.

But what exactly is the alternative to the current system? Specifically, what would happen if airlines and airports could design and pay for their own systems? Here are some possibilities.

1. Trusted flyer programs. To join, you undergo an extensive initial security check. From then on, you just show a high-security ID at the airport and skip all the screening. (TSA has experimented with these, but they have been small scale so far.)

2. Flights that prohibit carry-on luggage. In exchange for being bored for a few hours, you get faster screening and a cheaper flight.

3. Expanded air marshal programs, with both uniformed and undercover marshals on every flight. Terrorists realize their chances of success are minuscule even if they get a weapon on a plane, so less screening is necessary.

I have no idea whether any of these would be cost-effective. But I would like to see what the private sector could figure out if it were free to innovate, and I bet it would work better, at lower cost, than what TSA does now.

According to today's New York Times,

The Obama administration is planning to use the government’s enormous buying power to prod private companies to improve wages and benefits for millions of workers, according to White House officials and several interest groups briefed on the plan.

This kind of intervention cannot possibly be beneficial; it is an excuse for redistribution to organized labor and politically connected businesses.  It is hard to imagine a worse idea.

See also Alex Tabarrok's excellent critique at Marginal Revolution.

The marriage laws in Massachusetts specify the following:

No man shall marry his mother, grandmother, daughter, granddaughter, sister, stepmother, grandfather's wife, grandson's wife, wife's mother, wife's grandmother, wife's daughter, wife's granddaughter, brother's daughter, sister's daughter, father's sister or mother's sister.

No woman shall marry her father, grandfather, son, grandson, brother, stepfather, grandmother's husband, daughter's husband, granddaughter's husband, husband's grandfather, husband's son, husband's grandson, brother's son, sister's son, father's brother or mother's brother.

Presumably the demand for such marriages is small.  But should policy prohibit them?

Thanks to Joel Pollak for the tip (he noticed a sign with this information when he applied for his own marriage license).

Pollak is the Republican (libertarian sympathizing) candidate for the 11th Congressional district in Illinois; see here for more information.  I met Pollak recently when he visited Harvard.

See here for a faceoff over subprime lending between Pollak and Barney Frank; see here for a follow-up interview of Pollak by Greta Van Susteren.

In Butch Cassidy and the Sundance Kid, Butch hatches a plan to escape a posse and avoid culpability for the duo's past crimes by joining the Army.  The plan did not work for Butch and Sundance, but a similar scheme seems to have worked for Mathew Meineke:

A man who helped arrange a drug deal that brought a large amount of cocaine into Maine is being allowed to return to the Army - and do a second combat tour in Afghanistan.

Mathew Meineke faced the prospect of five years in prison because of the drug deal in 2006. Afterward, the Colorado native cleaned up his life, enlisted in the Army, and served in Afghanistan as a forward observer for his infantry unit from July 2008 to June 2009. While in Afghanistan, he was indicted.

This month, Meineke got a rare break. Defense lawyer Tim Zerillo asked federal prosecutors to consider dropping the charges, and they agreed to do that.

“All he wants to do is to be able to serve his country,’’ Zerillo told the Portland Press Herald. “His highest and best use is not in a federal prison, it’s in Afghanistan protecting us and everyone else.’’

Butch and Sundance would be proud.

My latest estimates of how drug legalization would affect government spending and tax revenue are here.  A quick summary:

The report estimates that legalizing drugs would save roughly $48.7 billion per year in government expenditure on enforcement of prohibition. $33.1 billion of this savings would accrue to state and local governments, while $15.6 billion would accrue to the federal government. Approximately $13.7 billion of the savings would results from legalization of marijuana, $22.3 billion from legalization of cocaine and heroin, and $12.8 from legalization of other drugs.

The report also estimates that drug legalization would yield tax revenue of $34.3 billion annually, assuming legal drugs are taxed at rates comparable to those on alcohol and tobacco. Approximately $6.4 billion of this revenue would result from legalization of marijuana, $23.9 billion from legalization of cocaine and heroin, and $4.0 billion from legalization of other drugs.

Two things to note:

The overall magnitudes are not huge; legalization would not materially affect the U.S. fiscal situation.  And only about one-third of the savings comes from marijuana, the only drug with any chance of being legalized in the near future.

The fact that legalization would reduce government expenditure and raise tax revenue is among the least significant arguments for legalization.  Far more important benefits are increased freedom for drugs users, reduced crime, improved public health, greater respect for civil liberties, and lower violence and corruption in source countries.

Aside: See here for a different proposal to legalize and tax "vice" (bottom paragraph).  Thanks to Bruce Barlett for the pointer.

I have three reactions to this news:

1. On balance, antitrust policy does more harm than good and should therefore be repealed.  Then the insurance exemption would be moot.

2. If we have an antitrust policy, I see no good argument for exempting the insurance industry.

3. I cannot figure out what health insurers are currently doing that violates the antitrust laws. So repeal of the exemption would make no difference.

Am I misssing something here?

According to the current plan, all combat forces are to leave by the end of August.  Yet

The top U.S. commander in Iraq said Monday that the planned withdrawal of all U.S. combat forces by the end of August could be delayed if conditions worsen in the coming months as Iraqis choose a new government.

Since violence has ticked upward in recent weeks (see, e.g., here), the likelihood of delay is real.  Recall my earlier prediction that the U.S.

will have at least 200,000 troops in Iraq / Afghanistan in November, 2012.

Aside: The same general who issued the above statement also announced this week that he supports open gay service in the military.

Rep. Ron Paul won the most support for the 2012 Republican presidential nomination in an unofficial straw poll of conservative activists attending an annual conference.

A libertarian from Texas who has railed against spending and the Federal Reserve, Paul won the Saturday contest at the Conservative Political Action Conference with 31 percent backing.

This straw poll does not mean much, but Paul's success does raise a crucial question for Republicans: are they going to lean conservative or libertarian?

Another libertarian the Republicans might nominate in 2012 is Gary Johnson, the former governor of New Mexico.  You can read about him here and here.  Full disclosure: I have been working with Johnson on his economic program.

California may soon place animal abusers on the same level as sex offenders by listing them in an online registry, complete with their home addresses and places of employment.

Is this a good idea? I think not.

First, as awful as animal abuse can be, it is ridiculous to think of animal abuse as similar to rape or molesation.  Animals are not people.

Second, registries for sex offenders seem unlikely to be the right policy.  If offenders still pose risks to others, keep them in jail.

In an earlier post, I stated that conservatives who decry federal spending are nevertheless loath to name specific programs they would cut.  One exception is Paul Ryan, whose "Road Map for America's Future" advocates substantial reductions in Medicare and Social Security spending. 

You can read an interview with Ryan in yesterday's NYTimes.  He's from Wisconsin, so he's a cheesehead!

Conservative commentary these days is fixated on U.S. fiscal imbalance and holds that we should address the imbalance with spending cuts, not tax increases.

Missing from most such commentary, however, is specifics about what expenditure to cut (see, e.g., Daniel Henninger's recent WSJ piece).

Conservatives recognize that addressing the debt in a serious way means cutting national defense, Social Security, and Medicare.  But conservatives support high spending on national defense, and they are unwilling, for reasons of political expendiency, to propose reductions in entitlements.

Libertarians also believe we must slash expenditure, but they are happy to name specific cuts.  Libertarians advocate U.S. withdrawal from Iraq and Afghanistan, which would save hundreds of billions of dollars per year, and they endorse major cuts or elimination of Social Security and  Medicare.

The public thus perceives the conservative position as disingenuous, the libertarian position as unelectable.  Take your pick.

In response to concerns that unemployment remains high despite the stimulus, President Obama said this:

"You can argue, rightly, that we haven't made as much progress as we need to make when it comes to spurring job creation." ... "That's part of the reason why I expect Congress to pass additional measures as quickly as possible."

The President's response assumes that the first stimulus worked, just not enough. That is possible, but maybe the Keynesian model that underlies the case for stimulus is just wrong.

Non-Keynesian perspectives suggest that additional spending or poorly designed tax cuts will harm the economy by distorting resource allocation.  More broadly, stabilization policy instills a belief that governments can moderate recessions, which encourages risk-taking and larger booms and busts.  A steady stream of  policy "remedies" creates uncertainty that discourages productive activity.

So maybe the treatment is worse than the disease.

My writings on drug legalization seem to generate a lot of interest from college and high school students (surprise).  Thus, I get many emails from students posing questions about my research, or requesting an intereview, or asking for a reprint.

One hight school student with whom I corresponded recently just sent me the following:

Sorry I never thanked you for talking to me about marijuana legalization. I got my internet privileges taken away for, funnily enough, smoking marijuana. So anyways, thanks.

I wonder if his parents see the humor!

On Monday, my son started the classroom portion of the state-mandated driver's education program.  He views it as a collasal waste of time, especially since it is eating his entire winter break.  In his opinion, the state should just administer an appropriate written test on the material and let students choose how much to prepare.  If they flunk, they study more until they pass (yes, he is a libertarian).

When my daughter took the course a few years ago, she said her class divided into four groups:

Front few rows: ultra nerdy private school kids who took careful notes on everything the teacher said.

Next couple of rows: nerdy public shools kids who sort of paid attention, but not diligently.

Third set of rows: non-nerdy kids of all flavors who paid little attention and played hangman, or texted each other, or read a book, or whatever.

Last set of rows: stoners who were quite obviously high/asleep for most of the classes.

Whenever media stories report a surge of deaths from heroin use, it turns out that more potent heroin has recently arrived in a particular city or town.  For example, a recent L.A. Times headline reads

Black tar moves in, and death follows

and the story goes on to explain that

The death was part of a rash of overdoses, 12 of them fatal, that shook Huntington that fall and winter. All were caused by black-tar heroin, a potent, inexpensive, semi-processed form of the drug that has spread across the United States, driven by the entrepreneurial energy and marketing savvy of immigrants from a tiny farming county in Mexico.

These deaths are due to prohibition.  In a legal market, information about potency would be readily available, so few users would suffer these accidental overdoses.