Markets in Everything: Professional Mourners

From The Korea Herald:

Hu Xinglian kneels before the corpse of Liang Zhicai and, with one hand on his metal coffin, lets out a piercing wail. But Hu is not at all grief-stricken ― she is a professional mourner.

In parts of China, where rural pre-burial rituals are still observed, mourners known as “kusangren” are hired to guarantee that a funeral is a spectacle in grief. And 53-year-old Hu is up to the task.

She comes to work with a full sound-system, multi-color spotlights and the six members of her band, “The Orchestra of the Star and River of Chongqing.”

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Korea’s Debt Conundrum

The Joong-Ang Daily ran a fascinating feature yesterday on South Korea's public debt structure, and the growing problems associated with how to accurately account for it. I know, the words "fascinating" and "public debt" do not typically find their way into the same sentence, but given the roots of the current global economic crisis and the eventual reunification of the two Koreas, the debt situation in South Korea deserves attention.

As the article notes, the South Korean government will soon expand its guarantee of the Korea Land and Housing Corporation's debt (LH), allowing the already-troubled public enterprise to raise further funds for projects such as the construction of cheap housing. At the end of 2010, LH had more than $115 billion in debt, and the impending guarantee will put the government on the hook for all that and whatever debt is incurred in the future. Apparently, no one in these parts bothered to re-read their history of U.S. government housing policy (for instance, here) and the ill-effects it engendered. Why do I suspect that the government's tango with LH will not end well?

The Joong-Ang piece also includes this juicy tidbit:

The debate over whether public institutions’ debt should be classified as national debt has been going on for a while, and it is still a thorny issue in government circles.

Korea is moving to include debt held by public companies in its national debt - except the really debt-saddled ones.

After all, it wouldn’t be inaccurate to consider public institutions’ debt incurred from state-run projects as part of the country’s national debt. But for obvious reasons the central government mostly resists the move, lest Korea’s national debt rise.

But really: call it what you will, it's all national debt. The South Korean government - i.e. taxpayers - is ultimately on the hook for any debt incurred by public corporations, but by not including the debt on the state's balance sheet, politicians can avoid facing up the problem until, well, the debt bomb explodes.

Fortunately, according to the Samsung Research Institute, the ratings agencies do take all public debt into account when calculating South Korea's credit rating, keeping local bureaucrats a bit more honest on these matters than they might otherwise be. The real question, however, to which the article casually alludes, is whether South Korea even needs many of these public organizations, particularly when they can't operate in the black. Time for some more privatizations, methinks.

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Freedom in the 50 States

We tend to hold singular images - i.e. stereotypes - of any one country in our mind: North Korea is a repressive police state; France is a country of effete snobs; Canada is that frozen, somnolent land up north. Study a country in any depth, however, and you'll quickly realize just how much variation there is within a single geographic boundary, be it cultural, political, or economic. And the larger the country, the greater these differences tend to be.

As evidence of this, I direct your attention to the Mercatus Institute's annual ranking of freedom in the 50 American states. The report grades the states on their policy performance in areas that affect both individual freedom (drug laws, civil union recognition, asset forfeiture, etc.) and economic freedom (e.g. fiscal policy, regulatory framework). The report is worth reading, either in summary or in its entirety, but here, for your quick reference, are the highest and lowest-ranked states:

The five most free states in the union: New Hampshire (#1), South Dakota, Indiana, Idaho, Missouri.

The least free states: Massachusetts (#46), Hawaii, California, New Jersey, New York.

On a personal note, I was pleased to see that the state of my birth (Idaho) placed in the top five and that my home state of Oregon made a leap from #27 in 2010 all the way up to #8 in this year's rankings. Nice work, Oregon: I wasn't sure you had it in you.

Here's a scatter plot showing where the individual states rank on each of the two main indicators. Personal Freedom is on the Y-axis, while Economic Freedom occupies the X-axis (click to enlarge):


Why, you ask, do these rankings matter? Well, as the report's co-author, William Ruger, explains in the video above (or here), a higher freedom score (in addition to being a worthy end in itself) correlates with greater in-migration, whereas the lower-ranked states - most notably California and New York - have seen a mass exodus of residents in recent years. Furthermore, economic freedom correlates with better economic growth and increased opportunity for residents.

Back in 1970, the economist A.O. Hirschman wrote of the choices that face individuals when faced with products or services (be they commercial or political) that are declining in quality. Hirschman argued that these folks had two real choices: voice or exit. That is, if your state government seems determined to flush the state down the crapper, you can either stick around and hope that your bellyaching elicits a positive change, or you can pack your grip and catch the first stagecoach out of town - in this case, to New Hampshire, South Dakota or Indiana.

Or, in my case, to South Korea (which, by the way, currently ranks 35th on the Heritage Foundation's "Economic Freedom of the World Index").

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The Right to _____ at the Expense of _______.

A few months back, I re-posted Art Carden's suggestion for the perfect college liberal arts paper topic, which went as follows:

Fill in the blanks. ‘Everyone has the right to ____________ at the expense of __________.’ Write what you put in the first blank on your right hand and what you put in the second blank on your left hand. Between now and the end of the semester, write a twenty-page essay in which you explain precisely how you propose to see that the rights on your right hand are guaranteed by the people on your left hand.

Apparently seeking to compose such a paper, this Virginia prison inmate has filled in the blanks with "sex change operation" and "taxpayers." Hey, you can't blame a man/woman for trying.

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Concentrated Benefits, Dispersed Costs

In The Logic of Collective Action, Mancur Olson laid out the theory of "Concentrated Benefits and Dispersed Costs," by which Olson meant that well-organized groups who stand to lose or gain a great deal (usually, though not always, financially) if a certain government policy is changed will have more impact on the policy process than unorganized individuals whose interests oppose these organized groups and whose total numbers may be greater.

Need an example? Look no further than a decision this week by the South Korean Health Ministry to leave in place a restriction that allows over-the-counter drugs to be sold only in certified pharmacies (rather than allowing items such as aspirin, Tylenol, etc. to be sold in supermarkets). The Ministry - and the ruling Grand National Party - apparently balked at lifting this restriction in the face of pressure by the Korean Pharmaceutical Association (KPA).

According to the Joong-Ang Daily, the general public favors removing this restriction for the sake of convenience and even President Lee Myung-bak was upset by the Health Ministry's decision. Why, then, does the restriction remain?

Quite simply, the members of the KPA are well-organized and stand to lose a great deal of money if their monopoly on the sale of these drugs is removed. You can be damn sure, therefore, that they've spared no time or money in persuading the government to their way of thinking.

Individual consumers, meanwhile, continue to pay more for their Tylenol and are inconvenienced by having to find a pharmacy whenever they have a headache (heaven forbid they get that headache on Sunday, when most pharmacies are closed). These consumers, however are also busy people with jobs, families, and other demands on their time. In short, these individual customers have scant time to organize themselves and lobby the government in the hopes that such activity will save them a few minutes or a bit of money when they buy aspirin. Yet, when we add up the total cost inflicted upon all consumers by this restriction we see that such a restriction on the sale of OTC drugs does more social harm than good.

Show me a seemingly nonsensical government economic policy - protectionism, subsidies, etc. - and the odds are better than even that I can show you a case of concentrated benefits and dispersed costs.

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