Streetwise Professor

January 27, 2024

The “Pause” on LNG Permitting: Another Manifestation of “Elite” Hatred of Humanity, and a Monument to Stupidity

Filed under: Climate Change,Commodities,Economics,Energy,Politics,Regulation — cpirrong @ 7:25 pm

The Braindead Administration–sorry, sorry, the Brandon–I mean Biden!–Administration (understandable confusion there)–has announced a pause on permitting on new liquified natural gas (LNG) terminals. And how long a pause? How ’bout to a quarter ’til never:

The review will take months and then will be open to public comment which will take further time, Energy Secretary Jennifer Granholm told reporters in a teleconference.

This policy, if one can dignify it with such an appellation, is a sop to the ecoloonies upon whom the administration depends for support:

The growth [in LNG exports] has set off protests from environmentalists, part of Biden’s base. Activists say new LNG projects can harm local communities with pollution, lock in global reliance on fossil fuels for decades, and lead to emissions from burning gas and from leaks of the powerful greenhouse gas methane.

In brief, the administration (regime, really) wants to kneecap the remarkable energy revolution of the past 20 years, which has seen technological innovations that have turned the US from a nation worried about where its next MMBTU would come from to a natural gas production powerhouse, and which have allowed others to share in its bounty with the world.

But you see, to the ecoloonies that’s the bad news. Really bad. Climate change, dontcha know.

But even evaluated on those (dubious) terms, the policy is demented. Because the ecoloonies don’t understand basic economics. They are myopic, linear thinkers who are incapable of analyzing the ultimate impact of their policy.

In their thinking, less LNG exports from the US equals less fossil fuel consumption equals lowers carbon emissions equals saving the polar bears. Even overlooking the (again dubious) last step in the logical chain (hey, I’m a a generous guy) the analysis is flawed. Where it definitely breaks down is the third, and arguably the second, steps.

Yes, reducing US natural gas output (by choking one source of demand) will reduce world natural gas production. But the resulting higher world price will induce higher output by competing producers (e.g., Qatar, Australia, PNG, Africa, etc.), resulting in a net decline in world gas production smaller than the decline in US production–and it is world production that matters when considering “well mixed” GHGs. Further, some production that would have otherwise been exported will be consumed domestically instead, meaning that a given decline in exports does not result in an equal decline in production.

But more importantly, the rise in the price of gas relative to other fuels–notably coal–will induce substitution towards those fuels. Since those fuels are more carbon intensive than natural gas, it is possible, and indeed likely, that the net effect of the policy would be to increase the output of GHGs.

So at the very least, the amount of reduction in GHGs resulting from this policy will be far smaller than the reduction in US LNG exports that it will cause, and plausibly will result in an increase of GHGs.

Well played! All pain, no gain!

But the economic idiocy of ecoloonies is an old story by now. Perhaps you’ve read of the recent finding that the ban on “single use” plastic bags in New Jersey led to a tripling of consumer plastics consumption because of the substitution effects that the ban induced. Again, myopic, linear, one-step ahead thinking led to a policy that produced perverse results.

The foregoing analysis focuses on only one dimension–GHG output. But one also has to consider the cost incurred to achieve any GHG gains (if there are any, that is). But trade-offs (costs vs. benefits) is not something that ecoloonies do. They are monomaniacs, and monomaniacs don’t evaluate trade-offs.

This policy will also shtup European allies, whom in the aftermath of the Russian invasion of Ukraine Biden promised would receive bountiful supplies of US gas.

To paraphrase Animal House: “You fucked up, Europe! You trusted Biden!”

The administration pinky swears that

the pause would not hurt allies, saying the plan will come with exemptions for national security should they need more LNG.

Yeah, because it’s just like turning the faucet on and off, right?

If you believe what they say, you are truly an idiot and probably believe they’ll respect you in the morning.

But none of this should be a surprise. After all, this is an administration that is infested with members of the “elite,” and which counts on the “elite” for its support. According to a recent Rasmussen poll:

An astonishing 77% of the Elites – including nearly 90% of the Elites who graduated from the top universities – favor rationing energy, gas, and meat to combat climate change. Among all Americans, 63% oppose rationing.

Face it. They hate your guts and want you to suffer. This “pause” on LNG exports is just another manifestation of their hatred.

January 22, 2024

Viva Javier Milei, Market Maximalist

Filed under: Economics,Politics,Regulation — cpirrong @ 2:23 pm

Javier Milei gave a remarkable speech at Davos last week. I won’t say it was a stemwinder, because unlike in his media and campaign appearances, here Milei’s mien was that of an academic delivering a paper at a conference, rather than that of a chainsaw wielding revolutionary. On substance, however, it was extremely provocative–and indeed an anathema to the assembled “elites” in Davos.

Milei robustly advocated the primacy of freedom, and made the moral as well as the utilitarian case for capitalism, and presented a trenchant criticism of socialism, collectivism, and statism. Apostasy–hell, heresy–at Davos. So three cheers!

A good part of Milei’s speech channeled Deirdre McCloskey: he recapitulated McCloskey’s account of the economic miracle of market capitalism that caused a manyfold increase in living standards in a few centuries after millennia of stagnation.

Indeed, Milei presented a maximalist case for the market. Milei is a trained economist, and many who are not trained economists may have missed the import of some of his more arcane and academic arguments. I’ll try to summarize them, and offer some commentary.

As his foil, Milei chose neoclassical economics–the economics of Alfred Marshall, and indeed of two economists (Milton Friedman and Robert Lucas) whom Milei obviously admires given he named three of his beloved dogs after them. Specifically, he took aim at the concept of “market failure” in the vein of Pigou and innumerable economic textbooks since.

Milei is a market Panglossian: he says flat out that there is no such thing as “market failure.” Full stop. Economic failures are solely the responsibility of the state and destructive public policies. Another full stop.

This strongly echoes the Coasean critique of the Pigouvian concept of “market failure.” Neoclassical economics largely ignores transactions costs. What is sometimes referred to as the New Institutional Economics, of which Transaction Cost Economics is a subset, introduces transactions costs as a fundamental concept. When transactions costs are considered, no wealth improving transactions remain unexploited. In this sense it can be said that the market never fails.

Where this argument becomes tenuous is when one considers what determines transactions costs, and whether government regulation can reduce transactions costs and therefore increase the gains from trade and exchange available to be realized through market processes. For example, diffuse harms from air pollution make negotiated deals to maximize welfare challenging. There are free rider problems and large number bargaining problems and asymmetric information problems that make pure “market” arrangements challenging. Perhaps government regulation is a welfare-improving way of overcoming these challenges.

That is, it is possible that sometimes governments can reduce transactions costs, or can be viewed as a transactions cost economizing way of allocating scarce resources. In a transaction cost free world, the allocation of property rights doesn’t matter. With transactions costs, this allocation can affect welfare. By defining property rights, governments might allow the market to reach a better allocation of resources.

But of course, as Milei correctly notes, governments can hardly expected to be altruistic and omniscient, so they are also quite capable of implementing destructive measures rather than constructive ones.

Milei’s market Panglossianism may be exaggerated, but it has the great virtue of pointing out the fundamental analytical problems with textbook “neoclassical” invocations of and treatments of “market failure,” and like Coase did, directing attention at the vitally important consideration these analyses ignore–transactions costs.

Milei also gave a stirring defense of monopoly. In some respects this can be viewed as a specific example of transactions costs in action: as the answer to an old Chicago econ prelim question (maybe it is still used–dunno) demonstrates, in the absence of transactions costs, the “deadweight loss” from monopoly power in the textbook analysis would not exist. Instead, “monopoly power” or “market power” would have only distributive rather than efficiency effects.

But Milei’s defense was somewhat different. The textbook analysis of monopoly is a static one. Following Schumpeter, and certain strands of modern growth theory, monopoly is the engine (or the effect) of the innovation that has driven the massive expansion of wealth and the widespread elimination of poverty that Milei rightly focused on in the beginning of his speech.

This is another maximalist position, but yet again it identifies and amplifies an important consideration that is far too often ignored in public and policy debates.

I would note, however, that it sits somewhat uncomfortably with his view that all failures are government failures. One of the primary dangers of large business enterprises generally, including those that could be characterized as “monopolies,” is that they exercise undue power over governments, and cause them to implement wealth-destroying policies that help these enterprises. How does one reap the benefits of innovation that results from (or may cause) large enterprises without incurring the costs from rent seeking by these enterprises?

As an economist I can quibble with the extent to which Milei pushed some of his economic arguments. But this is mainly a matter of identifying exceptions to the rules he lays down: I definitely see the rhetorical and persuasive benefits of stating the maximalist case, especially to an echo chamber of anti market and anti freedom “elites” who themselves routinely make maximalist claims. It is a challenge to a “smelly orthodoxy,” and such a challenge must be vigorously and provocatively issued in over to stand out against the droning Davos hive.

Once the debate shifts to where Milei went too far, the fundamental truths of his arguments are at least implicitly accepted. And the fundamental truths are these: emergent market orders, including “failures” such as monopoly power, are and have been for centuries the main engine of human progress, and that governments have been the main obstacle to human flourishing .

And this, in turn, will shine a bright light on the dark truth of Davos and the Davosians. Namely, that they are fundamentally anti-humanists who believe that there are too many humans, and humans are too rich. That is, Milei embraces a view of progress that is antithetical to modern misanthropic progressives.

Too many normal people don’t understand that about the Davosians. Attempting to counter Milei’s arguments forces them to reveal that fact. When the only answer to “capitalism made us rich” is “being rich is a bad thing” the battle is all but won.

So, Viva Milei!

January 15, 2024

Beware MLK Day Hypocrites

Filed under: Politics — cpirrong @ 1:01 pm

Martin Luther King was assassinated when I was in third grade. I remember the time well–in particular my parents listening in horror to radio reports of the riots that broke out after the assassination.

My elementary school had been fully integrated–through busing–when I was in second grade. The superintendent of schools–a guy named Gregory Coffin if memory serves (Coffin being a name that sticks)–had said that “integration is the goal of education.” In the years after King’s death, my elementary school held school-wide assemblies to honor King on his birthday.

In 2019, Evanston Township High School (which was routinely rated as one of the best, if not the best public high schools in the country in the 1960s and 1970s) introduced “affinity” classes that allowed black and Latino students (but not white students) to self-segregate into race-exclusive classes. (ETHS is no longer ranked so highly as it was in my day, by the way.)

Thus, in the 50 years after King’s death Evanston, Illinois transformed from a town that attempted to implement and honor King’s anti-segregationist vision to one that explicitly rejected it and embraced segregation.

Evanston’s transformation is emblematic of the nation’s transformation. The examples are too numerous to catalog, but one in particular tells the tale: the United States Air Force Academy instructions cadets to eschew “colorblind” as an ideal, and embrace “color conscious” instead.

In sum, King’s call to judge people not by the color of their skin but by the content of their character has been rejected by progressives in the United States. Not just rejected, but inverted.

Two recent examples illustrate this perfectly. When called out for failings of character, Claudine Gay and Fani Willis (the Atlanta prosecutor in the Trump election case) immediately claimed that their race was the reason for the criticisms directed against them. They have sought refuge in their skin color from judgments about their character. And the progressive left has largely lined up behind them.

Any progressive who celebrates King’s birthday today is the worst kind of hypocrite. His ideals are an anathema to their racialist and identitarian ideology, so in word and deed they daily reject and denigrate these ideals. They are the children of King’s foils, Malcom X and his ilk, and if they had a shred of intellectual honesty they would like Malcom X and others (e.g., Stokely Carmichael) heap scorn on King and his legacy on this day.

Intellectual honesty. Yeah, I crack myself up sometimes.

So beware the myriad hypocrites who today will express reverence for MLK on his day. Their deeds every other day of the year belie their true beliefs, which reject King’s vision root and branch.

This is probably the most deadly poison in the toxic brew of contemporary American politics. And if anything, it is getting worse not better. So use this day to fight back by honoring what King actually stood for, rather than genuflecting to his memory merely because of his race.

January 6, 2024

Joe Biden Waves the Bloody Shirt–Because Other Than That, He’s Got Nothin’

Filed under: Politics — cpirrong @ 7:38 pm

For at least the second time Joe Biden used an iconic Revolutionary War monument–this time Valley Forge–to attack his political foes as threats to the American government.

Apparently the irony of saying that insurrection is a really really really bad thing at the sites of crucial moments in America’s founding insurrection is lost on Joe. But of course, a lot of things are lost on Joe in his diminished mental state (which was never that acute to begin) with.

The most telling thing about this demagoguery is that it means that Biden is starting his campaign by going negative. The typical campaign trajectory is to start out positive and tout the candidate’s shining vision for the future, and then ramp up the negativity as election day nears. Biden obviously realizes he has nothing positive to offer. He has tried to hype his economic program, but “Bidenomics” is about as popular as antibiotic resistant venereal disease. Further, the country is extremely negative about pretty much everything his administration is doing–the border most notably.

So Biden has nothing to do but grab and wave the bloody shirt–because he has nothing else to run on.

And what a pathetic bloody shirt it is. As I noted at the time, the January 6 whatever was not a crime so much as it was a blunder–and plausibly a trap set by the Deep State into which some (unarmed) fools obligingly jumped. And the only blood that was spilled was that of a few of the alleged insurrectionists. The Civil War it wasn’t, despite the desperate attempts of the left to make it even worse than a conflict that resulted in the deaths of about 2 percent of the population.

The whole Trump-will-be-a-dictator-who-will-destroy-“our democracy” (vomit) narrative is palpably ridiculous.

I have serious problems with Trump. He caved to Fauci and the rest of that crowd on Covid–an example of the yawning gap between his pugilistic rhetoric and his pusillanimous actions. He pushed experimental vaccines. He was horrible–horrible–on spending and the size of government. He was a soft money guy pushing for lower interest rates like an American Erdogan. Although I could see the logic of a trade war with China, his anti-trade agenda was broader than that, and not defensible. His appointments were almost uniformly horrible, with the possible exception of some Supreme Court picks.

Against that, I would say that he was right on the border (and that disaster alone may win him re-election). His general aversion to military intervention overseas was also a relief. He was pretty good on regulatory matters. He was not a fanatic looking to transform radically the consumption and production of energy in the United States while chasing climate chimeras. And he was good on DEI.

And even on issues like spending and Covid he was far superior to Biden.

But regardless of how you evaluate Trump on these substantive issues, to paint him as a dictator who will abuse the powers of the state to destroy representative government (which we are supposed to have, as opposed to democracy, which we categorically don’t) is demagogic and delusional. Indeed, it is an inversion of reality.

What do dictators do? Peruvian dictator Oscar Benvenides’ quote provides a pithy description: “For my friends, everything. For my enemies–the law!”

No man in American history has been targeted by the state and in particular its law enforcement structures more viciously than Donald Trump. Even before he took office–hell, even before he was elected–the law was unleashed on him, foully. And the foulness has only metastasized. And the myriad instruments of the security state–the things that dictators wield to destroy their enemies–have also been employed relentlessly against Trump for around 8 years.

Now the Defenders of Democracy are striving mightily to deny Americans the right to vote for him–another move right out of the Dictator’s Playbook.

And the law has been employed against far more enemies of the regime than Trump.

“Projection” is therefore beyond inadequate to describe the left’s demonization of Trump as a would-be dictator. This demonization most likely reflects the desperation of a party that has nothing positive to offer combined with a haunting fear of karma–that Trump will do to them what they did to him.

That would be, well, karma. And karma is a bitch, no?

January 5, 2024

The Fall of Claudine Gay: Turning Questions of Fact Into Matters of Motive

Filed under: Politics — cpirrong @ 1:00 pm

Claudine Gay has resigned as president of Harvard. Claudine, we hardly knew ye!

Well, we did, actually, and all too well. And for those who are slow on the uptake her NYT cri de coeure proves who she is without a doubt: a dishonest dealer from the race card and victimhood card decks. Which only puts paid as to why she got the job in the first place despite a thin gruel CV.

Gay admits to “mistakes” and “errors” which she claims she addressed by “promptly [requesting] corrections from the journals in which the flagged articles were published.”

Oh, really? Was she previously unaware of her copying, and only requested corrections when found out?: such ignorance would only raise a huge host of other issues. And more substantively. She only requested corrections on the articles initially identified: subsequently many further instances have been flagged. Why didn’t she proactively (a) reveal these instances when the earlier ones were identified, and (b) request corrections on those as well.

No. Claudine Gay attempted a “modified, limited hangout.” Worked out about as well for her as it did for Nixon.

Subsequently other serious allegations have surfaced, notably regarding various data abuses in her published research. When queried about these some time back, she refused to supply her data to those questioning her–a clear ref flag. And you wonder about why there is a replication crisis?

I strongly suspect that Harvard realized that there was fire producing this smoke, and that such infractions couldn’t be semantically obfuscated with argle bargle like using “some material duplicated other scholars’ language, without proper attribution” rather than the direct and accurate single word “plagiarism.” So . . . adios! Claudine.

As many have noted, this won’t actually change anything. Gay’s rise to the pinnacle of academia is but a symptom of the deeper rot in these institutions, and her departure will not affect that rot one iota. Indeed, DEI is a hill academia will die on: Gay was merely a casualty in the battle.

The frenzied response not just in academia but among media sycophants reveals a complete lack of remorse, or even serious retrospection. Operating on the theory that the best defense is a good offense, myriad academics (especially at “elite” schools) and journalistic lackeys have directed their furious fire at those (like Christopher Rufo) who had the temerity to open Gay’s closet and rattle the skeletons it contains.

This is an example of the classic leftist/Marxist tactic of turning every question of fact into an issue of motive.

In reality, the truth of a statement or claim is independent of who makes it. But we know that the postmodern, progressive, crit theory types who infest academia don’t believe in truth. To them, it’s all about power.

And that is the core of the rot. The defense of Gay shows that that rot survives her defenestration.

The competition is stiff, but the AP wins the grand prize in the ad hominem attack-defense contest. In reacting to Rufo’s celebratory tweet, the AP retched up–I mean wrote:

On X, formerly Twitter, he wrote “SCALPED,” as if Gay was a trophy of violence, invoking a gruesome practice taken up by white colonists who sought to eradicate Native Americans.

In its never-ending campaign to racialize everything, and specifically to blame whitey for every ill in the world, the left digs, hits the bottom, and keeps digging.

They could have made their point by putting a period after “as if Gay was a trophy of violence.” As tendentious as that would have been, the AP felt obliged to inject yet another–and despicable–gratuitous racial attack.

And it reveals yet again the utter dishonesty and contempt for truth that infests almost all leftist rhetorical.

The statement’s dishonesty is revealed by its slipperiness. “Taken up by white colonists.” Taken up from whom? Native Americans (“Indians”) perhaps? Well, of course.

But the AP then insinuates that the practice was taken up as a part of a campaign of genocide. Whether or not such a deliberate campaign of eradication existed at all, and among “white colonists” generally, linking it to scalping suggests that it was an integral component of that campaign. As if that matters fuck all in the issue of Claudine Gay. It is just another wave of the racialist bloody shirt as an attempt to demonize her critics as inveterate racists and white supremacists whose criticisms are therefore beyond the pale.

After getting ratioed out the wazoo, the AP stealthily added that scalping “was used by some tribes against their enemies.” 1. Who knew? 2. Were those enemies “white colonists”? Would that make it OK?

Of course scalping was overwhelmingly a “gruesome” (hey–the AP agrees) practice engaged in first and foremost by Native Americans of virtually all tribes against all their enemies of all races.

Now, it was not exclusively an Indian practice. Some whites (and blacks) employed it as well. Crow Killer Johnson (lionized in a very different time in a movie starring Robert Redford) was notorious for taking and keeping the scalps of Crows and Blackfeet. Though that might have been the least objectionable of his desecrations: he was also known as Liver Eater Johnson, and not because he found elk and bison livers to be a delicacy.

Confederate guerrillas in Missouri, such as “Bloody Bill” Anderson and George Todd also took scalps of their Yankee enemies, both white and black.

But these were the exceptions. The rule was that scalping (and other forms of trophy taking and desecration of the dead) was a nigh universal practice among American tribes.

I have something of a personal interest in this. My GGGGGF Abel Sherman (I might be off by a G there) was infamously killed and scalped by a Delaware Indian named Silveheels in 1794 (supposedly the last white “colonist” killed by Indians in Washington County, OH). His tombstone reads “Here lyes the body of Abel Sherman who fell by the hand of the savage on the 15th of August 1794, and in the 50th year of his age.”

The hand of the savage! Where are the smelling salts?

Abel’s 18th century tombstone is preserved in the Cmapus Martius Museum in Marietta, Ohio. (At least, I think he hasn’t been canceled yet):

The details of his death and scalping, and the identity of the perp, are very well documented. His scalped body was found in the woods near what is now called Dead Man’s Creek. His long hunting shirt contained mayapples that he was apparently collecting when ambushed. His musket was found concealed in a hollow log.

As for the perp, some months later Silverheels wandered into a logging camp, and sitting around the fire after a few tugs from the jug, related his exploits during the late war. Among them, coming across an old white man picking mayapples, whom he slew and scalped, and then deposited the man’s musket in a hollow log.

Unbeknownst to Silverheels, one of the loggers in his audience was Abel Sherman’s son, who of course knew all these details. Silverheels was found shot dead shortly afterwards. Connect those dots.

There is a way to implicate white colonists here though. Silverheels bragged that the British in Detroit–who paid for scalps of American settlers–paid double the normal price for Abel’s because the old man had a double crown: Silverheels cut the scalp in half, each half with a crown, and sold the pieces to the British. So I guess the AP is right. Scalping was a gruesome practice taken up by white colonists–at least by proxy!

The point of this long digression–and it does have a point!–is to illustrate the fundamental dishonesty of the left, and in particular their utter disregard for the truth, and their willingness to distort realities in order to construct racist narratives that they use to club those who dare to challenge their racialist–and racist–policies. At a time when such inflammatory tactics need to be toned down, and indeed eliminated, the left turns them up to 11.

And that’s why Claudine Gray’s fate is all but irrelevant to the fate of American academia, or political discourse in America. She is merely an illustration of the rejection of merit and truth in favor of “critical” racialist narratives and politics, and the reaction to her demise demonstrates beyond cavil how viciously her ilk will fight to defend them.

January 1, 2024

Happy New Year!

Filed under: Uncategorized — cpirrong @ 3:07 pm

Happy New Year to all my loyal readers–and even to you traitors who read!

A few days from now will mark the 18th anniversary of this blog. That may make me seem old, but of course I started it as a small child.

Apologies for the sparse posting lately. Have been absorbed in work, and in a sojourn at my new medieval house. Well, new to me anyways: a medieval house can’t be new, can it?

The view from the front door:

Whence I will retreat during the zombie apocalypse. Or the 2024 election, which may be more or less the same thing.

I wish everybody a joyous and peaceful 2024. That didn’t work out so well in 2023, but let’s be optimistic.

Agency Problems, or, The Progs Lose Control Of Their Bodily Functions in Fear of How the SCOTUS May Rule

Filed under: Commodities,Derivatives,Economics,Politics,Regulation — cpirrong @ 2:43 pm

In the coming year the Supreme Court will rule in two cases that could result in the imposition of substantial constraints on the administrative state. Since federal administrative agencies are progressive pets, the prospect has the left freaking out. And I do mean freaking out.

The first case is Securities and Exchange Commission v. Jarkesy. Here Jarkesy is challenging the legitimacy of the SEC (and by implication other agencies) relying on internal administrative law judges (“ALJs”) to decide enforcement actions brought by the agency. Jarkesy argues that such cases should be tried in Article III courts (i.e., in federal court).

The Constitutional basis for his argument is compelling. Agencies flout the separation of powers: they combine legislative, executive, and judicial functions. In the case of enforcement actions like that against Jarkesy, the SEC brings the charges against the defendant/respondent, prosecutes the case, and if the agency uses an ALJ, tries the case and renders the judgment and assesses the penalty. The case is brought under regulations adopted by the agency in a quasi-legislative role (supposedly under powers delegated by Congress–an issue that is relevant in the other case I will discuss).

Jarkesy argues that being subordinate to, and accountable to, the agency, ALJs are not independent are subjecting him to their judgment violates his Constitutional rights, and in particular his right to due process.

As an empirical matter, Jarkesy has a compelling case. I recall that in an antitrust case, Justice Potter Stewart opined that the “only consistency” in such cases is “that the government always wins.” (That was in the 60s.). And that was before Article III courts. That is even more true in cases before ALJs in agencies like the SEC and FERC. (When is the last time a FERC ALJ decided against the agency in a big matter?)

Jarkesy therefore wants the trier of fact to be an ostensibly independent Article III federal court. He doesn’t want to have his fate decided by an ALJ who is effectively beholden to the commissioners who run the agency who are bringing the charges and prosecuting them.

Reasonable, no? But not to the progs. They are losing their sh!t over the prospect. Case in point, this article in the Atlantic–which is always a reliable barometer of prog opinion.

According to author Noah Rosenblum, this would represent The End of the World as We Know It.

It would “destroy the government”!!!!!!!! (He says this like it’s a bad thing!–JK).

Rosenblum’s argument veers between the hysterical and the dishonest.

This part in particular cracks me up:

Jarkesy’s second claim—that the internal adjudicator who first heard his case held too much independence—is especially galling. These adjudicators should be independent; the alternative would be to put their regulatory powers at the political whim of whichever administration might be in charge. 

The relevant question is “independent from whom?” The very essence of Jarkesy’s argument is exactly that ALJs are creatures of “whichever administration may be in charge.” “The political whim of whichever administration might be in charge” is precisely the problem, not the “alternative.”

Article III courts are about as independent of the current administration (whether it be the presidential administration, or the commissioners of an agency) as is possible–and that’s by the Founders’ design. ALJs are definitely not.

Rosenblum loses control over his bowels at the thought that allowing those accused by federal agencies be judged by, you know, federal judges will gut the ability of agencies like the SEC to prosecute financial crimes:

The SEC was created as an independent agency in 1934, after the financial crash of 1929, to thwart the sort of market manipulation that preceded the Great Depression; Congress has granted it additional powers over the years to continue protecting financial markets. Responding to catastrophes and guarding against market manipulation is exactly the kind of work that Congress should empower the executive branch to do. Requiring Congress to legislate in response to every new fraud some crook might dream up would not be a good use of its time. And there’s no reason to think that delegating authority to police markets runs afoul of the Constitution.

Requiring those who “police markets” to prove their cases beyond the relevant burden of proof (preponderance of the evidence in a civil case) to a truly independent trier of fact does not permit manipulators and fraudsters to run rampant, any more than requiring your local police and prosecutor to prove charges before a judge allows murderers and rapists to run rampant.

Given the stakes in federal securities cases, which can easily run into the tens or hundreds of millions, if not more, requiring prosecuting agencies to clear such a hurdle is eminently reasonable.

What is Rosenblum so afraid of? These people would be prosecuted before Article III courts under the same laws and regulations that they are currently prosecuted before ALJs. A decision adverse to the SEC in Jarkesy would not eliminate the Securities Act, or the Exchange Act, or the SEC regulations adopted pursuant thereto. It would just require the SEC to prove cases brought under those acts and regulations in an Article III court rather than on the agency’s home court.

Rosenblum’s ultimate argument is that Jarkesy is a scumbag:

George R. Jarkesy Jr., a right-wing activist and conservative-radio talk-show host.

Heaven forfend that such a MAGA man should have rights! Oh! The humanity!

The kind of ad hominem chickenshit to which the left routinely resorts to today, and uses to stamp “QED!!!!” on its argument. By doing so, Rosenblum betrays the substantive weakness of his arguments.

I note that many seminal Supreme Court cases involving fundamental Constitutional rights have involved scumbags. And the Supreme Court ruled–rightly–that scumbags have rights too.

It is interesting to note that the CFTC now brings most of its manipulation cases–you know, “exactly the kind of work that Congress should empower to the executive branch to do”–in Article III courts. Now, as it happens, there is a tangled and unrepresentative story behind this, namely that the CFTC ALJs proved to be particularly dysfunctional and inveterately opposed to the agency’s enforcement staff. (I have intimate knowledge and experience regarding this history.). But the why is no matter. The reality is that an agency can bring manipulation cases (and fraud cases, for that matter) in federal court. Requiring the SEC (and other agencies) to do so will not “destroy the government” or allow wrongdoers to run rampant.

Indeed, the CFTC’s experience in federal court–most notably, its loss in the DRW/Wilson case–demonstrates the virtue of forcing agencies to play in the big leagues. It reduces the probability of Type II errors, i.e., false convictions.

I also note that there are rights of private action for certain federal securities, antitrust, and commodities law violations. Here private plaintiffs can bring cases in federal court against alleged malfeasors. I believe that such private rights of action are more reliable deterrents of bad conduct than agency actions, for a variety of reasons. (Again, this observation is based on considerable experience and observation.)

The other case that has the progs’ undies in a bunch is FDA v. Alliance for Hippocratic Medicine. This case threatens to demolish so-called “Chevron deference,” a reference to the case Chevron v. Natural Resources Defense Council in which Justice Scalia (!) on behalf of the court opined that courts should defer to agency judgements in cases in which Congress did not unambiguously delegate authority. That is, when there are “gaps” in a statute pertaining to a regulatory agency, Article III courts should defer to agency decisions regarding on how to fill those gaps.

Alan Blinder (among others) fears the abrogation of Chevron deference. Blinder is less hysterical than Rosenblum in his criticism (a low bar to clear!) but substantively he is no more persuasive.

The gravamen of Blinder’s argument is that agencies are experts, and we should defer to their expertise: we are not worthy to challenge them, nor are federal judges!

This has been the mantra of progressives since, well, the Progressive Era. Blinder is channeling his inner Woodrow Wilson. (Scary thought, that.)

There are two major problems with this. The first–and arguably less important–is that their “expertise” is vastly exaggerated. I mean vastly. Again based on extensive personal experience, I conclude that this is definitely the case when it comes to complicated markets (e.g., electricity, commodity derivatives). And yes, I realize that these complexities challenge federal judges, but the relevant question is who is better to resolve these issues: on that, I come down firmly on the side of the judges.

The second is what economists call “agency problems”–which in the present context can be called Agency problems. That is, the progressive view endorsed by Blinder (and Woodrow Wilson et al) is that agency decision makers are acting in the public interest.

This view has been laughable since the 1960s when Stigler posited “capture theory,” and then others like Sam Peltzman and Gary Becker looked at how the regulatory sausage is really made. The Public Choice literature has also utterly discredited the public interest view.

In a nutshell: regulatory agencies have their own agendas and own incentives that are not aligned with the public interest, for myriad reasons.

As valuable and insightful as they are, even the Peltzman-Becker-type analyses are inadequate. They are best suited to model the regulatory laws legislatures pass. They posit a decision maker looking to maximize political support (“votes”). That makes some sense when modeling legislatures that are somewhat accountable to an electorate. But the problem raised by Chevron deference is that regulatory agencies are incredibly insulated from such electoral feedback. If you view Congress as an agent of the public, agencies are agents of agents of the public. As a result, their incentives are extremely attenuated, and they have considerable scope to implement their own agendas regardless of whether they comport with the public interest or not.

John Cochrane laments that a new theory of regulation is required, because the Stigler-Peltzman-Becker theories, and public interest theory, are inadequate. I agree that these theories are inadequate, but do not believe that there is a vacuum. Certain strands of public choice that treat bureaucracies as independent agents in their own right have much to teach here. I recommend the works of Gordon Tullock and James Q. Wilson in this regard. (Tullock was an amazing scholar whose work deserves close attention–even his work from nearly 60 years ago.)

Here’s my Cliffs Notes theory of regulation: a large unaccountable bureaucracy combined with Hayek’s “why the worst get on top.” Ideologues with agendas are attracted to agencies with power over their agendas. Ensconced in power, they are largely immune from external check. So ensconced, they wreak havoc, the public be damned.

People, I give you–the EPA.

That’s why deferring to these agencies is disastrous. Their “expertise”–really their specialization in subjects of particular interest to the ideologues who infest them–is positively dangerous when given free rein.

I hope that the Supreme Court decides in Jarkesy’s favor, and also hacks away at Chevron deference. That said, I realize that the Supreme Court usually splits the baby, and that ringing decisions that drastically curtail the scope of agencies’ powers are unlikely. Meaning that the war against the agencies–or more accurately, the war of the agencies against us–will continue.

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