Porn on the iPhone? You Don't Say.

"It's a maxim of technology: Invent the newest gadget and the porn industry will find a way to cash in," writes Joel Schectman of the AP in this article about the smutty potential of the latest smart phones.

Schectman is correct, of course but I'll go him one further. Throughout human history, whenever a new medium of communication has emerged, humans have invariably rushed to use it for porn, with or without a porn industry to coordinate the effort. Hell, porn even predates gadgets.

The internet, the VCR and camcorder, the first motion picture cameras, photography - these technologies hadn't been around for five minutes before someone piped up and said, "hey, I know, let's get some shots of people screwing." And before photographic images, humans used words: while Gutenberg's printing press may have allowed for more people to get their hands on the Bible and other high-minded works of literature, what the machine really did was spawn the first mass circulation of "adult material."

Even the earliest homo sapiens, doodling on the walls of European caves, quickly realized that their ability to render visual representations of their surroundings meant that they could draw pictures of creatures bonking one another. Oh sure, scholars now refer to these earliest words and images as "erotic art." But come on, erotic art is simply the porn we like.

Steve Jobs may not like that his precious iPhone is being used as a ticket to the porn buffet, but given human history in these matters, he shouldn't be surprised.

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"This is Not Political," said the Politician

If a politician found he had cannibals among his constituents, he would promise them missionaries for dinner.

-H.L. Mencken

It's a wonder to me that anyone takes politicians seriously, particularly when those politicians get up on their moral high horse. Case in point: Over the past week, South Korean President Lee Myung-bak, a former CEO of Hyundai Engineering and Construction, has taken to scolding local conglomerates for not feeling "socially responsible" and for not understanding the "sentiments of the lower class," whatever those phrases mean.

Of course, this comes from the man who earlier this year pardoned Lee Kun-hee, patriarch of the Samsung empire, who had been convicted on charges of financial hanky-panky relating to control of said empire. How this pardon affected the sentiments of the lower class is something that has yet to be explained.

Pardon me, then, if I am unmoved by President Lee's supposed concern for the little fellow. If he was truly motivated to help the lower and middle classes of society - or, indeed, South Korea as a whole - President Lee would have taken the first step toward demanding accountability from conglomerate heads by letting the conviction of Lee Kun-hee stand.

Not that President Lee, whose Grand National Party took a sound spanking in the recent elections and is now gearing up for another tight by-election this week, would stoop to political pandering. Heavens, no:

The Blue House, however, warned against the view that it was engaged in conglomerate-bashing for political purposes.

“The president’s attempt to find a model of co-prosperity between conglomerates and small companies is different from the past administration’s populist, anti-conglomerate policy,” said a senior ruling party official.

“A centrist pragmatism and working-class friendly principles have always been Lee’s philosophy,” said a senior Blue House official. “It should not be seen that Lee’s ideological coordinate has leaned to the left.”

So this is not political. The president has not leaned to the left, but rather he is merely talking like a left-wing politician. So it's just a charade, but it's not political.

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The Upside of Irrationality

In this video, the ever-interesting Dan Ariely talks about the problems of getting humans to do what is good for them in the long term even as those actions are unpleasant in the short term. How should doctors get patients to take their medication properly and on time, for instance? Or how should companies structure executive compensation packages to encourage sound long-term decisionmaking?

As Ariely points out, the climate change problem is perhaps the perfect example of the long-term vs. short-term conflict:

Can we get people to care about global warming? I think the answer is basically no. If you wanted to design a problem that people would not care about, it would basically look like global warming. It has all possible elements that get people not to care: it's long in the future; uncertain; will happen to other people first; we don't see anybody suffering; we don't see any residue of it; and anything we do individually is a drop in the bucket. These are all the elements that get people not to care, and we just put them together in global warming. So the question is, can we get people to care? Can we get people to wake up in the morning and feel urgency about the environment?

Then again, perhaps we should be relieved that more people don't feel a sense of urgency about the environment, as urgency often turns into panic and leads people embark upon expensive, ecologically harmful boondoggles.

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Lee Myung-bak and His Interest Problem

Yet again, the old adage bears repeating: Beware the rising tide of good intentions.

As I wrote yesterday, South Korean President Lee Myung-bak has his undies in a bunch over the interest rates charged on loans by non-bank "capital firms," rates which can run 30-50%, depending on which day you happen to hear Chin Dong-Soo, chairman of the Korean Financial Services Commission, speak. It's an expensive price to pay for using someone else's money, to be sure, and it has prompted President Lee to label the interest rates a form of "loan sharking" and a "social injustice."

Well, as I feared might happen, Lee and Chin are now determined to go beyond political grandstanding and actually "do something" about these high interest rates. And anytime a politician gets a bug up their ass and sets out to "do something," you know you'd better bar the doors and hunker down for the coming storm of unintended consequences.

Just for fun, let's imagine for the moment that the President is motivated here by a genuine desire to help people, and not just by political calculation. With our imagination hats on, let's suppose that the government steps in and puts a cap on the amount of interest that can be charged to borrowers - nothing more than 20%, for example. What will happen to all of those borrowers who are only creditworthy at, say, 25%? Obviously, they'll either have to go without the funds or find other means to obtain the money they need. Most likely, as FSC Chairman Chin rightly observes, many of these people will turn to real loan sharks who will charge them far more than 25% for a loan, and may even take a kneecap or two if the borrower fumbles in repaying the money. Other desperate folks might turn to gambling, legal or otherwise, in the hopes of scraping together some necessary cash, or perhaps they'll hock some of their possessions at a pawnshop (somewhat less common in South Korea, but they do exist). In any event, it's not clear how anyone benefits in this situation. I only hope the government, if and when it decides to limit interest rates, will assemble and release the statistics for how many would-have-been borrowers turn to these other sources for money.

Sure, under the current system, some people take out loans that run counter to their best interests. How, though, does President Lee claim to know who these people are? These loans represent a voluntary agreement between the borrower and lender, and in taking out the loan the borrower has evidently decided that doing so is better than the next best option. No one can honestly judge what interest rate is "too high" for another person, and I fail to see how removing a choice from someone who already has a limited range of choices actually helps that person. Quite simply, in seeking to cap interest rates, President Lee is effectively saying that South Korean citizens are too stupid or childish to manage their own affairs.

I have no statistics at hand, but I suspect that if we looked into the balance sheets of these lenders, we would find that their profitability differs little from that of firms in other sectors (as is true of the much-maligned "payday loan" industry in the United States). Beyond the obvious risk of lending to folks with spotty or nonexistent credit histories, I'd bet that these creditors face high per-store and per-loan fixed costs in what is probably a fairly competitive market. Would President Lee's opinion of these lenders change if he were to learn that they have a pedestrian 3-5% rate of profit?

Another worrisome possibility, of course, is that the South Korean government will decide to make its own loans to these high-risk borrowers, thus crowding out the current stable of capital firms. Of course, this will not reduce the risks inherent in such loans, nor will it eliminate the fixed costs. Rather, such a move would merely shift the risk and costs to taxpayers, who would be on the hook for the inevitable defaults that cause capital firms to charge the current interest rates. As Frédéric Bastiat reminds us:

It is indeed a singular thing that people wish to pass laws to nullify the disagreeable consequences that the law of responsibility entails. Will they never realize that they do not eliminate these consequences but merely pass them along to other people? The result is one injustice the more and one moral the less.

President Lee and the FSC would do well to collar their moral outrage and realize that most people, most of the time, know what they're doing and do not need politicians to babysit them.

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A Matter of High Interest

Here's my latest letter to the Joong Ang Daily newspaper:

You recently reported on President Lee Myung-bak's shock and dismay at learning of the high interest rates charged by local non-bank "capital firms" in South Korea. Lee called these interest rates, which can be as high as 40-50%, a form of "loan-sharking" and "social injustice" ("Lee slams capital firms for high rates," 23 July, 2010).

I wonder if President Lee has paused to consider the underlying realities of this type of loan. As the article notes, the borrowers seeking such loans often have poor credit histories, and thus the higher interest rate merely reflects the added risk of lending to this person. Moreover, these loans are usually better than the alternative: as Financial Services Commission chairman Chin Dong-Soo pointed out, actual loan sharks charge much higher rates of interest and, what's more, tend to have their own unique methods of coercing repayment.

Given his apparent financial expertise, I suggest that the president lend some of his own considerable fortune to these high risk borrowers at "socially just" interest rates. Until he is willing to do this, I hope that he will spare us his moral indignation about an area from which he is far removed in both specific knowledge and general circumstance.

Sincerely,
Aaron McKenzie
Seoul

Update: The Joong Ang published this letter on 27 July, 2010.

* * *

President Lee's latest histrionics are the perfect occasion to reprint this wisdom from Jeremy Bentham:

A man is in one of these situations, suppose, in which it would be for his advantage to borrow. But his circumstances are such, that it would not be worth any body’s while to lend him, at the highest rate which it is proposed the law should allow; in short, he cannot get it at that rate. If he thought he could get it at that rate, most surely he would not give a higher: he may be trusted for that: for by the supposition he has nothing defective in his understanding. But the fact is, he cannot get it at that lower rate. At a higher rate, however, he could get it: and at that rate, though higher, it would be worth his while to get it: so he judges, who has nothing to hinder him from judging right; who has every motive and every means for forming a right judgment; who has every motive and every means for informing himself of the circumstances, upon which rectitude of judgment, in the case in question, depends. The legislator, who knows nothing, nor can know any thing, of any one of all these circumstances, who knows nothing at all about the matter, comes and says to him—"It signifies nothing; you shall not have the money: for it would be doing you a mischief to let you borrow it upon such terms."—And this out of prudence and loving-kindness!—There may be worse cruelty: but can there be greater folly?

The folly of those who persist, as is supposed, without reason, in not taking advice, has been much expatiated upon. But the folly of those who persist, without reason, in forcing their advice upon others, has been but little dwelt upon, though it is, perhaps, the more frequent, and the more flagrant of the two. It is not often that one man is a better judge for another, than that other is for himself, even in cases where the adviser will take the trouble to make himself master of as many of the materials for judging, as are within the reach of the person to be advised. But the legislator is not, can not be, in the possession of any one of these materials.—What private, can be equal to such public folly?

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The Paradox of Plenty: South Korea and Afghanistan

South Korea should consider itself fortunate to have no natural resources. No oil, no uranium, no diamonds, no gold, no copper. Nothing, really. Oh sure, the Koreans once exported a fair amount of tungsten, but for all practical purposes this is a country with nothing in the ground worth extracting other than a few old gimchi pots. As a result, the South Korean people and government were forced to look elsewhere for their wealth, as were the folks in Hong Kong, Singapore, and Taiwan. In these states, governments depended for their revenue on the actual creation of wealth and thus enacted policies that encouraged productive activity.

These so-called Asian Tigers are an answer to a question put to me, only half in jest, the other day: Why is it that most of the world's natural resources are concentrated in the most ramshackle, tinpot countries? Nigeria and Venezuela have all that oil. Sierra Leone is positively encrusted in diamonds. Zambia is loaded with copper. Turkmenistan and Uzbekistan are downright gassy. Given the choice, however, you probably wouldn't choose to raise your children in any one of these places, and for good reason. Turns out that, as economists and political scientists have long known, natural resource wealth is often more burden than boon, hence what is known as the "paradox of plenty" or the "natural resource curse." As Thomas Palley writes:

[The paradox of plenty] occurs because the income from these resources is often misappropriated by corrupt leaders and officials instead of being used to support growth and development. Moreover, such wealth often fuels internal grievances that cause conflict and civil war. This pattern is widely referred to as the "natural resource curse" -- natural resource wealth creates stagnation and conflict, rather than economic growth and development.

The natural resource curse is vividly illustrated in Angola, where an International Monetary Fund fiscal audit has been unable to account for hundreds of millions of dollars of oil revenues. In Nigeria, Cameroon and the Republic of the Congo, oil wealth has failed to generate development, and has instead generated deep-seated corruption that retards growth. Sudan is marked by strife over oil. And in Aceh, Indonesia, regional separatism has been fanned by secrecy about oil payments and public misunderstanding about their scale. 

How might history have been different if, in the 1950s and 1960s, the likes of Rhee Syngman and Park Chung-hee had found themselves in control of vast oil or mineral reserves? Thankfully, they didn't. 

Sadly, then, I find it hard to cheer the recent news that as much as $1 trillion in untapped mineral wealth might lie beneath the soil of Afghanistan. Sure, we're all happy for anything that might improve the material condition of that luckless country, but history doesn't suggest that a windfall of natural resource money will be much of a blessing. Just ask the people who live in the purple countries in the map above, many of which rely on natural resources for their livelihoods. 

Writing yesterday in the International Herald-Tribune, Paul Collier of Oxford University expressed similar concerns about Afghanistan's recent mineral discoveries:

To build trust, the Afghan government must be open about any deals it makes with foreign companies. It has already shown it has room for improvement in this regard: the country’s first extraction deal, for copper, was won by the Chinese in murky circumstances — the minister of mines was accused of taking a $30 million bribe. But now Kabul has signed on to the Extractive Industries Transparency Initiative, a set of disclosure standards created seven years ago by an international organization of governments, civil society and business. 

Again, though, using history as a guide, I wouldn't place any bets on the Afghan government  finally getting its act together now that mineral wealth has entered the equation. The countries that both have a wealth of natural resources and are liberal, free market democracies (such as Canada, Britain, Norway, and the United States) tend to be those that had good governance in place before their resources became, well, resources (Botswana, with its diamonds, is a notable exception to this rule).

If anything, I worry that Afghanistan's mineral wealth might only make matters worse for the Afghan people. 

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China Factors in U.S.-South Korean Relations

From Stratfor:

One of South Korea's more intriguing foreign policy tasks in the coming years will be to decide how it balances its relationships with the United States and China. In the grand sweep of history, China has arguably had the greatest influence of any country over South Korean culture and politics. The Korean War, however, brought the United States into the picture and for the first fifty years or so after the war, most South Koreans had little doubt about where their interests lay. This alliance with the United States, of course, continues to this day, and the strength of it is visibly illustrated by the 28,500 US soldiers currently stationed in South Korea.

Yet, as China becomes a more prominent player in the international arena, South Korea will find itself torn in two directions. On the economic front, for instance, while the US remains the world's largest economy, China is now South Korea's largest trading partner. How will South Korea juggle competing demands in the event of an economic dispute between the US and China? Furthermore, as the video notes, South Korea has to be increasingly concerned with how its military alliance - and specifically the joint exercises - with the US will be perceived on the other side of the Yellow Sea.

Fortunately, South Korea is no longer the penniless runt of Asia, having become an increasingly prominent actor on the world stage in recent years. The rise of China, and the opportunities this has created for South Korea, may give the country leverage in its dealings with both China and the US. I'll be curious to see how South Korea plays whatever cards it may have.

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The Myth of the Early Adopter Nation

For a country that prides itself on being one of the most wired nations on earth, and being full of "early adopters," South Korea sure can be slow at adopting the latest in trendy tech items when those gadgets come from overseas companies. Fortunately, the brief hiccup surrounding the Korea Communications Commission's approval for the Apple iPad was resolved quickly, but as this article notes the entrance of the iPhone 3G  into Korea was delayed for so long that it became known as "next month's phone." 

Now, the iPhone 4G has been left off of Apple's list of countries set to receive the iPhone as of 30 July. Depending on who you ask, the problem is either that the KCC hasn't approved the latest iteration of Apple's smartphone, or that Korea Telecom never submitted a petition for its approval. Either way, this tech savvy country isn't looking so savvy at the moment.

Korea, you did well to get yourself wired up. Now, how you doin' on the wireless front?

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What to Do About North Korea?

Here's the video from a policy forum hosted by the Cato Institute on 14 July, 2010 and featuring Stephen Linton, Chairman and Founder, Eugene Bell Foundation; Karin J. Lee, Executive Director, The National Committee on North Korea; Doug Bandow, Senior Fellow, Cato Institute; moderated by Ted Galen Carpenter, Vice President for Defense and Foreign Policy Studies, Cato Institute.

The event summary, from the Cato website:

Yet another crisis has enveloped the Korean peninsula as the sinking of the South Korean naval vessel Cheonan has triggered a spate of provocative statements and military threats. But American policymakers have virtually no window into decisionmaking in the North. Stephen Linton travels regularly to the Democratic People's Republic of Korea as part of his work with the Eugene Bell Foundation, which provides medical assistance to needy North Koreans. He will discuss what he has learned about Pyongyang's international objectives and suggest possible strategies for the U.S. to use in engaging the North. Karin Lee of the National Committee on North Korea and Doug Bandow of the Cato Institute will comment on Dr. Linton's remarks.

I wonder what Mr. Bandow might have to say on this matter.

For a quick overview of the event, have a look at Tad Farrell's report over at NKNews. 

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Hello, Can I Tell You About the Real World?

"When you bring on a professor and when you bring on a politician, they are unaccountable. If Jeffrey [Sachs] is wrong, he will survive in tenure. If I'm wrong, I'll go bankrupt, alright? Who do you want to bet with?"

-Hugh Hendry, Hedge Fund Manager

As a general rule, I try always to maintain a sense of humor and a polite tone when engaging with other people in political and economic discussions. Not that I always succeed, of course, but I've found that you're more likely to gain  someone else's ear by showing that your own are open and that you don't take yourself too seriously. Russ Roberts, the host the Econtalk podcast, is a master of this and I try to emulate his approach as much as possible.

But.

Watching other folks go at it hammer and tongs sure is fun, isn't it? Even as I enjoyed  the congenial discussion between Ralph Nader and Andrew Napolitano in this week's After Words podcast, I have to admit a week spot for watching two smart people draw their verbal swords in disagreement.

And so, I give you the following two videos, featuring the British hedge fund manager Hugh Hendry, who first came to my attention via this IHT article yesterday. He is, at various times, contrarian, abrasive, dismissive, and altogether a joy to watch. The IHT article is well worth a read, too, for Hendry's views on the possibillty of a coming financial crash in China. The Middle Kingdom, says Hendry, is like Starbucks: great at generating rapid growth, but not so hot at creating actual wealth. For some intuitive reason that I can't quite articulate, I suspect he might be right.

But then, I have a weakness for anyone who looks an academic in the eye and says, "hello, can I tell you about the real world?"

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Must Watch/Listen: Ralph Nader and Andrew Napolitano on Book TV

On C-Span's Book TV this week, Ralph Nader interviews Andrew Napolitano about Napolitano's latest book, Lies the Government Told You. It's a lively, friendly discussion and I was impressed by just how much and how often Nader, a hero of the political left, and Napolitano, a self-described "true north libertarian" and Fox News host, find themselves in agreement. As you'll see, however, the two men clearly differ in the confidence they have in the ability of the government to effectively regulate industry or to promote consumer protection. One point on which both agree, however, is that, to quote F.A. Hayek, "'emergencies' have always been the pretext on which the safeguards of individual liberty have been eroded."

You can - and should - watch the program here, or subscribe to the After Words podcast here.

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The North Korean Refugee Conundrum

In unconnected but closely related recent articles, the Joong Ang Daily and the Los Angeles Times have highlighted one of the most thorny challenges that awaits South Korea if and when the country reunifies with North Korea: the integreation of the North Korean people into an open, globalized South Korean society. In fact, the problem is already upon South Korea, as the total number of North Korean defectors to reach South Korea since the Korean War is expected to top 20,000 this year. This issue has received added attention of late due to the reportedly poor health of North Korean leader Kim Jong-il, and due to the increased tensions on the Korean peninsula following the sinking of the South Korean Navy corvette Cheonan in March, 2010.

The Joong Ang's piece essentially corraborates Gregory Rodriguez's piece in the LA Times, in which Rodriguez speaks with the journalist (and North Korean defector) Kang Chol-Hwan. Kang, author of the highly-recommended The Aquariums of Pyongyang, doesn't see the North Korean state surviving long enough to field another World Cup team, and he's worried that South Korea - both the people and the government -  is unprepared for the reality of reunification:

[Kang] suspects South Koreans are too wrapped up in their search for wealth and status to even understand the horrors of the North Korean regime. Not only does he feel they lack "the internal courage to see the essence of evil," but Kang doubts the South Korean public's genuine desire for reunification.

In fact, according to opinion polls, many South Koreans do fear that the collapse of the North would see their country overrun by 23 million of their ethnic brethren scrambling for food and shelter. They may well be right: In Germany, the cost of unification proved to be a heavy burden on the new nation. And 20 years later, the divisions between East and West have yet to be healed.

You'll be doing yourself a service by reading the LA Times article and, even more, by making The Aquariums of Pyongyang the next book you read. 

Whatever the hurdles, South Korea has, in my opinion, political, practical, and humanitarian obligations to allow North Korean defectors into the country and to find a way to integrate them into society. The process, however, is bound to be ugly as South Koreans learn to accept the North Koreans in their midst.

On the political front, Articles 2 and 3 of the South Korean constitution still identify the administration in Seoul as the only legitimate government on the Korean peninsula and, thus, all North Koreans are technically citizens of South Korea. However inconvenient this provision may be, renouncing it would be equally unpalatable. As Andrei Lankov writes: “An open renouncement of this decades-old position would be fraught with numerous ideological and legal problems because it would imply the renouncement of the long-standing fiction of ‘one Korea.’” If South Korea wishes to renounce this portion of its constitution, perhaps it should give up the notion of reunification altogether.

In more practical terms, South Korea is almost certain to be the Korea that survives in the long term, and it will in all likelihood have to absorb North Korea and its population eventually. As the Joong Ang article notes, current experiments in this integration process (while the number of refugees is still relatively small) will hopefully pay dividends later when the actual flood begins. I know, I know: in an idea world, the integration of North and South Korea will be a gradual process, giving all sides time to acclimate themselves to the new scenario. History, however, has a way of arriving unannounced and, as such, South Korea  had best be prepared for waves of refugees. As I said above, though, no fair throwing up your hands now and closing the gates to North Korean refugees while still claiming to desire and  to work toward reunification.

Finally, even if toppling the North Korean regime by military force were an option, events of the last decade have shown that regime change is not a surefire path to improved conditions for the local population. So, if South Korea is unable or unwilling to march to Pyongyang, the least it can do is take in those North Koreans who are able to escape - if not on consititutional or pragmatic grounds, then on humanitarian grounds. China, which classifies North Koreans not as refugees but as economic migrants, sends North Koreans back from whence they came, where they face severe punishment and often death. If nothing else, then, South Korea - which claims to stand for the freedom and dignity of Koreans  - has a moral obligation to give North Korean refugees a shot at a decent life.

This problem of integration, however, is likely to get worse before it gets better. 

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Of Experts and Knowledge

Seems Jonah Goldberg and I share the same concerns where US financial reform - and, more broadly, government omniscience - is concerned. Goldberg's column dovetails with my recent post about dictators and is well worth a read in its entirety.

...The literature on the unintended consequences of policies crafted by experts is at least as old as the field of economics. Frédéric Bastiat, the great 19th-century economist, noted all that separated the good economist from the bad is the ability to appreciate the possibility of the unforeseen. Nobel Prize-winning economist Friedrich Hayek demonstrated that healthy economies couldn't be controlled by experts, because the experts will always have a "knowledge problem." They can never know all of the variables and never fully predict how their theories will play out in reality.

 

Right now, Congress is debating a financial-reform bill that simply commands that regulators predict when an unforeseen crisis will occur. This is like demanding that regulators know when stocks will go up or down. If they knew that, they wouldn't be regulators--they'd be billionaires.

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Death of a Boring Woman

As I've written here before, I can only imagine how tricky it must be for local newspaper editors in Boring, Oregon to not sound like they're  editorializing on the subjects of their stories when writing headlines about the local goings-on.

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Human Rights = 437 Brands of Toothpaste

 

Amazing, isn't it, how quickly the luxuries of life in a wealthy society turn into "rights?" 

The latest "right," according to this article in Wednesday's edition of the Joong Ang Daily is the "right to choose" from at least 40,000 items at Lotte Mart, rather than from a paltry 34,000. 

In a move that immediately drops them into the same vile ranks as North Korea and Burma, however, local big box retailers are trampling upon the rights of South Koreans by scaling back the number of products they carry in their stores. Will the action help the stores' bottom line? Is it part of an evil plot? Well, says the article, "industry watchers are divided on whether the philosophy will work, or whether it will be perceived by customers as a stingy limitation of their right to choose."

With this article in hand, I'm going to march down to the nearest E-Mart tomorrow and inform them that, in accordance with my human rights, they must start stocking my preferred deodorant and decent coffee - at  reasonable prices, of course. And  I want blackstrap molasses, too, since we're on the subject of my inherent dignity. I'll have no dickering on the matter either: my inalienable right to choose these items demands that E-Mart be obligated to provide them to me, whether doing so is profitable for the store or not. 

So get jumping, E-Mart, and start stocking that deodorant and molasses. In fact, as my right, I demand molasses-scented deodorant.

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Gary Becker on Immigration Tariffs

“When I mention this to people, they sometimes go hysterical.”

- Gary Becker, on the subject of immigration tariffs

Gary Becker, the Nobel Laureate and Professor of Everything, recently gave the annual Hayek Memorial Lecture at the Institute for Economic Affairs in London. In his talk, he focused on the issue of immigration, which, given the bickering over the topic in Arizona and in Australia, is timely indeed.

A few notes from, or related to, the lecture:

• Roughly 80 countries currently have birth rates below the level needed to maintain their current populations. As I wrote recently, this is a looming challenge for South Korea.

• In the United States, most immigration policy (i.e. restrictions and admissions) is not based on work- or skill-related criteria. According to Becker, immigration into the United States is largely for the purposes of family reunification and humanitarian resettlement. These are, of course, fine and noble reasons to allow people into the country, but what is the U.S. sacrificing by not allowing more skilled (and, indeed, unskilled) workers into the country?

• Due to expansive welfare states and, more importantly, the challenge of political integration, Becker is reluctant to endorse a return to the days of virtually unlimited immiration. As to the "welfare state argument," Don Boudreaux recently responded (to Milton Friedman actually) here.

• Given the problems with the current immigration regime in the United States, then, what does Becker propose? He suggests the U.S. put a price tag on immigration and offer entry to anyone (aside from the "obvious undesirables") willing to pay. How does he defend such a provocative idea? Have a look for yourself and find out - the video is worth your time.
  

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KIDA: Conscription in Korea 'Should Be Phased Out Slowly'

If you happen to be born a man in South Korea, you'll almost certainly be required to give up nearly two years of your life at some point to military service. In the last decade, an increasing number of people in South Korea have begun to debate the ethics and efficacy of conscription, and the service term has been reduced over the years, but the system won't disappear anytime soon. The best we can hope for, according to the recommendations of a scholar at the Korea Institute for Defense Analysis (KIDA), is that the government will phase conscription out slowly.

As this recent article in the Chosun Ilbo points out, the KIDA estimates that South Korea would need to spend an additional six trillion KRW per year if it replaced conscripts entirely with volunteers. While this is no small sum, it is a price worth paying, for both practical and ethical reasons.

At present, the service term for conscripts in South Korea is 21 months, though this is expected to come down to 18 months by 2014. In at least one important regard, soldiering is like any other job: the skills required to be successful take time to teach and to learn.  Some estimates say that at least 1-2 years is required to turn your average goofball into a competent soldier. Yet, in South Korea most soldiers are not even in the service beyond the second year, and the political climate is such that no one wants to increase the mandated service period. 

I wonder, too, about discipline and morale. True, most Korean men form lasting personal ties with their fellow soldiers, but they also tend to describe their military service as a two-year waste of time. So, while I can't speak to the emotional state of  the Korean conscript, I wouldn't want to be a commanding officer charged with leading men who didn't want to be in the military in the first place. 

Finally, we should be troubled by the ethical implications of conscription. The right to freely choose our occupation is one of our most important freedoms and mandatory military service tramples upon it. South Korea, of course, faces an existential threat on its northern doorstep, but what does it say that South Korea - the country supposedly representing the side of liberty - must force its own citizens to defend their nation?

Under a system of voluntary military service, the Military Manpower Administration would have to persuade Korean citizens, by appealing to their patriotism and their pocketbooks, that defending the country was worth their time. Enticing volunteers into the military would cost more money than is currently devoted to the measly salaries paid to conscripts, but then, paying workers at a company costs more than simply enslaving a workforce. Hyundai, however, is not allowed to simply say, "well, convincing people to work for us is too expensive, so we'll just press-gang them into work at our shipyard." Why, then, should the state be permitted to do this?

Yes, a professional, volunteer military would likely be more expensive for South Korea.  What the country has at present, though, is a relatively cheap system of forced labor and of questionable quality. Could it be that a volunteer military would be more effective? And might it not be worth the extra money to have a more ethical system?

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Musical Tuesdays: Metallica in the USSR (1991)

In search of something else, I recently came across a piece of Metallica concert footage, filmed in 1991 in Moscow. I don't claim to be the world's biggest Metallica fan, but the notion of the band performing in the Soviet Union piqued my interest.

And it is an exhilirating video, even if you're not partial to the music itself. Metallica was playing in Moscow as part of the Monsters of Rock tour, along with AC/DC and Pantera, and upwards of 500,000 fans turned out to see the show. Watching hundreds of thousands of people let loose to one of the world's biggest rock bands after seventy-plus years of Soviet attempts to crush individual freedom sends a chill up the spine when one considers the historical significance. After all, such an event could likely not have happened even five years earlier, and even at the time of filming this was, as said, still the Soviet Union (which did not formally dissolve for three more months). Hell, Metallica had a way of making American parents squirm and wish their kids didn't listen to such music. I can only imagine what the members of the Politburo made of the ruckus in their back yard as the band tore through "Enter Sandman" (although legend has it that Mikhail Gorbachev personally invited them back to play the USSR).

Still, as PJ O'Rourke once wrote, "there's a whiff of the lynch mob or the lemming migration about any overlarge concentration of like-thinking individuals, no matter how virtuous their cause." In a sense, the video shows a scene just as collectivist as anything the party apparatchiks could have cooked up.

That said, I'm for anything that makes totalitarian governments uncomfortable, which is why I look forward to the day when Metallica (or perhaps someone a bit younger) plays the main square in Pyongyang.

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Hiking Korea's Mountain Spine: The Baekdu-Daegan Guidebook

A couple years back, I happened to be at the Seoul chapter of the Royal Asiatic Society for a presentation by a trio of fellows who had hiked the entirety of South Korea's portion of the Baekdu-Daegan trail. This moutainous spine actually runs from Jiri Mountain in the far south to Baekdu Mountain on the North Korea-China border. For obvious reasons, however, hiking clear to China just ain't happening these days. Still, the South Korean leg of the trail has plenty of hiking to offer.

Fortunately, the presenters from that night at the RAS - Roger Shepherd, Andrew Douch, and David Mason - have finally come out with their promised guidebook to the trail. The publisher is Seoul Selection, which has a well-deserved reputation for putting together nice-looking tomes with beautiful photography, as evidenced by its guide to Seoul.

Full disclosure: I haven't yet used this guide to the Baekdu-Daegan, and so can't speak to its usefulness. Please let me know, then, if you have a chance to test drive it on some of these trails.

h/t: The Marmot's Hole

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A Few Concerns About U.S. Financial Reform

First, the Reason video above spells a few of the most obvious flaws in the current financial regulatory reform bill. Surely you can spare two minutes of your day to have a look at it.

As the financial reform bill wends its way through the US Congress, however, I've had a few other, perhaps deeper, worries on mind. Fortunately, I'm not alone in my concerns. Unfortunately, the current legislation is unlikely to alleviate this anxiety.

Writing way back in 2008, David Brooks pinpointed one of the chief problems with relying on government regulators - even if they're the nicest, smartest, most well-intentioned folks on the block - to keep the financial system in check:

We're going to need regulators who can anticipate what the next Wall Street business model is going to look like, and how the next crisis will be different than the current one. We're going to need squads of low-paid regulators who can stay ahead of the highly paid bankers, auditors and analysts who pace this industry (and who themselves failed to anticipate this turmoil).

And like Arnold Kling, I worry that the new regulations will fool people into thinking that all problems are now solved. Trouble is, no two financial crises are ever quite the same, which means that regulators always seem to be fighting last year's war, as it were. Kling writes:

...financial regulation is not like a math problem, where once you solve it the problem stays solved. Instead, a regulatory regime elicits responses from firms in the private sector. As financial institutions adapt to regulations, they seek to maximize returns within the regulatory constraints. This takes the institutions in the direction of constantly seeking to reduce the regulatory “tax” by pushing to amend rules and by coming up with practices that are within the letter of the rules but contrary to their spirit. This natural process of seeking to maximize profits places any regulatory regime under continual assault, so that over time the regime’s ability to prevent crises degrades.

Finally, as George Will has noted, a concentration of political power - and regulation is an extension of political power - tends to give more power to those who can afford to lobby those who hold that power. That is, if legislators and regulators have extensive power to pick winners and influence outcomes, a firm such as Bank of America will be more willing to hire this fellow to see that its interests are protected in the writing of legislation and regulation.

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Of Dictators Benevolent and Benign

Russ Roberts, via Twitter, recently posed the following question: "Has there ever been a benevolent dictator or even a benign one? Is there any leader with absolute power who is or wasn't absolutely corrupt?"

This is a question of particular relevance for South Korea, given that the country was ruled for nearly two decades by Park Chung-hee, who took power in a military coup in 1961 and only left office when he was gunned down by his own spy chief in 1979. Park's rule also coincided with the period of South Korea's economic take-off, when the country took the first steps from global guttersnipe to material prosperity. As a result, Park is often labeled as a "benign dictator" or a "developmental dictator," a leader who brooked no dissent but who ultimately had noble intentions. And by most accounts, Park was not himself a corrupt person, though the statist economic system he fostered likely contributed to systemic corruption.

Yet, as Bryan Caplan pointed out in the latest Econtalk podcast with Roberts, people too often assume that a leader who is not corrupt is therefore a good person and a good leader. Caplan cites the example of Joseph Stalin, who by most accounts lived a very modest life but nevertheless murdered millions of people. While Park did not kill as many people as Stalin, he was by most indications an egomaniacal narcissist who thought himself capable of running other people's lives and who had no problem imprisoning, torturing, and murdering people who had the temerity to challenge his vision of progress. So while Park may have created an environment conducive to economic growth, one must ask if the price was worth paying, while at the same time bearing in mind that poverty claims countless lives through malnutrition and disease. Was this a necessary trade-off? If so, who gets to decide that such a bargain is necessary?

Certainly, South Korea lucked out where the Dictator Lottery is concerned. Historically, countries which fall into the grip of such leaders are far more likely to wind up with a Kim Jong-il or a Ferdinand Marcos than they are a Park Chung-hee or a Lee Kuan Yew, which is why I cringe when the commentariat suggests that dictatorships might actually be a better way of reaching the "right solutions." Dictatorships simply don't have a good track record, either on human rights or on the achievement of material well-being, which is why the smart bet is usually against their "success."

The more interesting question, to which Roberts and Caplan alluded on Econtalk, pertains to the incentives and constraints faced by dictators (King Leopold II of Belgium is an especially interesting case). That is, what leads some dictators, such as Lee in Singapore and Park in South Korea, to focus on real improvements in living standards for their subjects even as they often disregard human rights, while others such as Robert Mugabe in Zimbabwe or Saparmurat Niyazov in Turkmenistan do little except trample human rights and simply become repressive despots? Like Bruce Bueno de Mesquita, I doubt that Park or Lee are simply better, more benevolent individuals than Mugabe or Niyazov. More likely, Park and Lee faced constraints and pressures not felt by the others.

And on a related note, here's Foreign Policy's ranking of the worst dictators currently on the global ballfield.

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