The WSJ has an amusing story today about a battle over bike paths in San Francisco. The fundamental issue is whether bicycles contribute to air pollution. What? The argument in favor of viewing bicycles as polluters is this: the presence of bicycle in traffic causes motor vehicles to reduce speed and spend more time idling, thereby creating more pollution. The bicycles, in other words, have a secondary impact.

I’m not going to worry about the bicycles. But the issue raises an interesting question: what about mass transit? Do buses and light rail systems have a similar secondary impact? They must. Does anyone know the net effect on pollution? It must be circumstantial. But does anyone know the circumstances under which different forms of mass transit have different impacts on pollution? Has anyone thought to ask?

Unless you happen to govern a third world country, you probably don’t care about capital flows. Economists do. Economic theory says that liberalized capital flow should result in more capital, greater productivity, and higher wages. It’s nice to see some empirical data show up to confirm the theory. But, as you might expect, a lot of third world politicians are dead set against liberalized capital flow for reasons of national pride. And, as you might further expect, poor countries with stupid governments will remain poor countries until their governments change.

Of course, we’re not all that much better. Theory and evidence also encourage the free flow of goods and labor, both of which we strive mightily to restrict. We do a pretty good job on capital, so I guess that makes us not quite so poor and not quite so stupid, but still far below our potential.

One of the most maddening things I hear is the claim that such and so government project will create jobs. Government spending doesn’t create more jobs, it just changes the jobs that are done. Usually this means favoring low productivity jobs over high productivity jobs, making us all less wealthy. Isaac Morehouse explains.

There weren’t any WMDs. So, was the war a mistake? Here are two views: why it was a mistake and why it wasn’t. Both articles are thoughtful.

Here is a great explanation of the credit crisis. But read it carefully. You might conclude that current economic conditions are the result of low interest rates. However, as the author points out, low interest rates are normally a good thing. Did interest rates get too low?

I doubt it. While I generally adhere to the Austrian belief that central banks can mess things up badly by allowing central bank interest rates to deviate from market interest rates, I have to note that central banks are responsible for only 15% of money and credit (which, for all practical purpose, are the same thing). Central banks are less powerful than they were back in the day and they simply can’t push interest rates around to the extent they did in the past.

If blame is to be placed, it has to go to investors in general and pension funds in particular. Corporations (private pensions) and taxpayers (public pensions) have underfunded their pension funds. As the author points out, this forces pension funds to accept greater and greater risk in order to meet their payout objectives. High risk is called high risk for a reason, and it’s just a matter of time until the worst happens. We simply have had too much capital invested in the wrong things and not enough in the right things. Markets can correct for that, and they are, as painful as it might be. But markets can’t correct for people making promises they can’t keep,  which is where I believe we are.

If you plan on being the beneficiary of a pension fund, whether public, corporate, or union, you’d better have a fallback position!

I inadvertently destroyed this blog’s link to my Notebook of Online Tools. I’m restoring it and you might want to take a look since there’s been a lot of activity lately.

This is great!

Cato Unbound, which is one of the most thought provoking places on the Web, is starting a series on Global Warming. The first article is pessimistic about the possibilities of actually doing something, but many points of view will be presented.

I too am pessimistic about any of the Big Plans that are getting tossed around. Most Big Plans involve inflicting draconian hardships on everyone, despite the attempts of the Big Planners to hide the fact. Politicians have a strong instinct for self-preservation, so it strikes me as unlikely that they will support inflicting pain on voters. Even authoritarian governments will be reluctant to adopt unpopular Big Plans if the authorities themselves have nothing to gain.

But I also believe in the Long Tail. The essential problem behind Global Warming is excessive energy consumption. Each of us could do a lot in this regard, and many small contributions can add up to something huge. Global Warming worriers should focus less on Big Plans and more on individual level peer pressure. For example, behaviors such as owning a huge TV, owing an Xbox, and using too much air conditioning should be made to seem as socially acceptable as smoking or maybe torturing kittens. This takes cultural conditioning like was done with smoking. But the list of wasteful energy practices is long - almost like shooting fish in a barrel. Rock concerts, theater, and sports events? Staying up late at night? Snowmobiling, power boating, sightseeing? Owning too many clothes, too big a house? Ordering pizza deliveries? The waste goes on and on.

Global Warming could be stopped, or at least slowed down, by simple attitude and lifestyle adjustments. So if someone’s bugging you about global warming, ask them if they’re willing to lead by example - or do they want to wait for someone else to do something based on a Big Plan?

It is likely that the federal and state governments will see a huge shortfall in tax revenue over the next few years. The consequences will be different in different states, but every state will face pressures to cut spending, raise taxes, or both. Cutting spending will mean cutting popular programs, mostly entitlement programs for the feds and a variety of things at state levels. There will be populist calls for higher taxes on the rich. Of course, tax incidence means it won’t just be “the rich” who are impacted: taxes on producers ultimately are paid by consumers. Remember, all this was caused by people who tried to live beyond their means by gambling on real estate. You’ll pay for their mistake. And when we try to bail them out, youl’l pay even more. Get ready to tighten your belt.

With all the talk about how terrible the economy is, it’s nice to get some perspective. Ours is an affluent society and even poor Americans have a standard of living which strikes most of the world as incredibly luxurious. But I suppose it’s not human nature to be greatful, so we complain. Of course, things could be better, and they will be, as long as we avoid tampering with the wealth producing engine that got us this far. But many of us seem devoted to the idea that we should abandon methods that work and adopt methods that have repeatedly failed or try bold new experiments based on some clever new theory. This is a luxury that only a wealthy country can afford.