De facto eminent domain

Business, Democracy, Vulgar Politics
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Building owner Ricky Wong is being shafted by NYC’s Landmarks Preservation Commission, but it’s his fault because he should have known better than to think that “the land of the free” was anything other than an empty slogan when it comes to property ownership.

As the Real Deal reports:

Five months after the Department of Buildings approved his proposal for renovation, Wong received a letter on June 7 from the [LPC] commission telling him that they wanted to designate his three-story building — a specimen of the early 19th-century Federal style — as a city landmark. That designation would likely prevent Wong from adding four stories, a project he’d been planning since he bought the building in 2003.

The targeted site for LPC destruction

In contrast to the vanilla eminent domain takings, Landmarks is the fullest expression of centralist planners to control and shape the living environment of society to their whim but at your expense. In the standard eminent domain scenario, the owner can at least expect some monetary compensation for the theft forced transfer of his property. On the other hand, when a building is subject to a Landmarks designation, the legal owner ?remains, but in reality he is reduced to the role of an unpaid property custodian for the city government.

He may no longer do whatever he feels is the best and highest use of his property. Any minor renovation or visible alterations to the exterior will have to wait for a committee hearing with all the requisite filing fees, architectural drawings and paperwork filings in the meanwhile. Potential business lessees that may have an interest in the retail space will have to file proposals with Landmarks which include architectural renderings of the intended build-out in order to obtain approvals that certify that their usage and signage is in conformity with Landmarks’ tailored material and color lists, often with attached samples of awning fabrics or paint colors. None of this comes cheap of course. Many potential businesses balk at the steep barrier of entry and seek less prohibitive locations.

Like any city with zoning restrictions, the sales price of a building is determined not only by the existing structure, but what can be built given the zoning envelope. It is reprehensible enough that zoning regulations are the norm, but it’s a lot worse when someone purchased something with the reasonable expectation that they would be able to profit by maximizing the structure within the proscribed limits and find themselves in a situation quite beyond their control in which not only will they not profit, but stand to lose based on how much they will have overpaid for that property.

The NY Observer notes that:

In the months since January, Mr. Wong hired an architect and gutted the structure, knocking down all interior partitions. But then, on June 7, the LPC sent a letter.

“I spent all the money already,” Mr. Wong said. “And now they turn it into a landmark. I have no idea how they want me to do it. Of course, I don’t want it to be a landmark building. Then all my money is gone.”

Mr. Wong bought the building with the expectation of adding on additional stories. He was willing to pay the price based on this assumption, a quite normal one. But when some overly-nosy neighbors got wind of his plans, they contacted the commission in the hope of stopping the project, one they did not desire in their neighborhood among a number of others.

If the building is ultimately designated a landmark, Mr. Wong will have lost much his invested money and time, something which should trouble anyone who stands for private property rights.

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Hoppe: The Property And Freedom Society — Reflections After Five Years

(Austrian) Economics, Anti-Statism, Democracy, Immigration, Political Correctness, The Left, The Right, Vulgar Politics
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I was privileged to attend to the Fifth Annual Meeting of the Property and Freedom Society last week. It was held in beautiful Bodrum, Turkey at the Hotel Karia Princess, from June 3-7, 2010. The list of speakers may be found in the Program. This is my second, having also attended the inaugural meeting in 2006. I’ll put up another blog soon with more details about the event, but for now let me say it was without a doubt the best liberty related event I’ve ever attended. And two of my fellow TLS co-bloggers also attended–Gil Guillory and Juan Fernando Carpio.

Group photo2 from the Fifth Annual Meeting, June 2010, Hotel Karia Princess, Bodrum
Group photo from the Fifth Annual Meeting, June 2010, Hotel Karia Princess, Bodrum

Professor Hoppe’s opening address, “The Property And Freedom Society — Reflections After Five Years,” is published here on The Libertarian Standard today. It’s a fascinating, informative, and perceptive overview of various libertarian paleo- and related alliances over the years.

Hoppe surveys the mistakes of former alliances, and lessons learned; and also devastatingly illustrates how the state has coopted even most free market think tanks into serving the state’s aims:

The strategy of Hayek and of the Mont Pelerin Society, then, had to fail. Instead of helping to reform—liberalize—the (Western) State, as they intended (or pretended?) to do, the Mont Pelerin Society and the international “limited-government” think-tank industry would become an integral part of a continuously expanding welfare-warfare state system.

Indicators for this verdict abound: The typical location of the think tanks is in or near the capital city, most prominently Washington, DC., because their principal addressee is the central government. They react to measures and announcements of government, and they suggest and make proposals to government. Most contacts of think-tankers outside their own institution are with politicians, government bureaucrats, lobbyists, and assorted staffers and assistants. Along with connected journalists, these are also the regular attendees of their conferences, briefings, receptions and cocktail parties. There is a steady exchange of personnel between think tanks and governments. And the leaders of the limited government industry are frequently themselves prominent members of the power elite and the ruling class.

Most indicative of all: For decades, the limited government movement has been a growth industry. Its annual expenditures currently run in the hundreds of millions of dollars, and billions of dollars likely have been spent in total. All the while, government expenditures never and nowhere fell, not even once, but instead always and uninterruptedly increased to ever more dizzying heights.

And yet, this glaring failure of the industry to deliver the promised good of limited government is not punished but, perversely, rewarded with still more ample funds. The more the think tanks fail, the more money they get.

The State and the free market think tank industry thus live in perfect harmony with each other. They grow together, in tandem.

As for lessons learned:

…

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Was it worth it?

Democracy, Education, Finance, Vulgar Politics
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Well, as predicted (by me), in pursuit of one of Connecticut’s US Senate seats, Peter Schiff wasted a lot of time and money, and was forced to refrain from making several television appearances on financial news programs (due to campaign laws). He placed an embarrassing third:

Former professional wrestling maven Linda McMahon capped an improbable entry into politics Friday night when she captured the Republican Party endorsement for the U.S. Senate during a raucous Republican convention at the Connecticut Convention Center.

McMahon edged former U.S. Rep. Rob Simmons after dozens of delegates switched their votes at the conclusion of the first ballot. She received 737 votes to 632 for Simmons and 44 for economist Peter Schiff.

…

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An Astounding New Theory of Regulation

Corporatism, Democracy, Legal System
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The usual theory for the need of regulation — and by this I mean micromanaging regulation, not the erection and maintenance of rule-of-law standards — is “market failure.” Economists of a skeptical bent note that most of the egregious practices that seem to require regulation are better seen as simple acts of rights violations (as in the case of fraud) or rational acts in a context where rights have not been firmly established (as in a property commons). The rational response, in both cases, would be to install and maintain institutional practices that define and defend rights, property rights in particular.

Against this position, Paul Krugman:

[T]he libertarian alternative to regulation — just use tort law to make people pay for the damage they cause — doesn’t work in practice, because when push comes to shove politicians will shield the rich and powerful from paying the real cost.

So Krugman’s case for robust regulation is not market failure, nor institutional failure due to a lack of articulation of good rules, but, instead, a clear-cut case of political failure. The market could work, he’s saying, if politicians would let basic government institutions (legal adjudication, in particular) and employees do their work.

Quite an admission, it seems to me.

I have not been following Krugman’s posts on the subject. But he goes on to relate the state of the debate he’s having on his blog:

Commenters say, but isn’t that an equally strong reason to believe that regulation won’t work either?

And at this point we should expect a careful refutation of Kenneth Arrow’s mathematical demonstration why democratic politics cannot ever articulate a constant standard.

No such luck. Instead we get this:

Well, here’s the thing: regulation demonstrably does work where tort law doesn’t. Consider the environmental issue: in reality, the perpetrators of oil spills never pay most of the cost; but in reality, environmental regulation has led to much cleaner air and water. (Look up the history of Los Angeles smog or the fate of Lake Erie if you don’t believe me.)

So why does regulation work? If polluters can buy off the system ex post, after a disaster, why don’t they manage to totally corrupt regulation ex ante? There’s a lot to say about that, and I’m sure there’s a literature I haven’t read. But one thing we tend to forget in this age of Reagan is the importance and virtues of a dedicated bureaucracy: when you have professional government agencies with a job to do, and treat them with respect, that job often gets done.

Regulation does work better in some cases. That seems easy to explain. Why does it work as well as it does? Because it’s allowed to.

It’s rather like saying “private guards and adjudicators cannot control crime as well as the thugs we place on the police force, because our police force regularly beats up the private guards and adjudicators.”

Or saying, as some antebellum whites did say, “Africans-Americans are not capable of learning, so we must keep them as slaves,” while preventing them from accessing the tools of education.

And yes, there’s a vast literature that Krugman has not read. I haven’t read all of it, either. But I’m at least aware of it, and can provide citations, should Krugman actually have an interest in doing some actual research, rather than shoot from the hip.

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What’s the Real Message from Those GM Ads?

Business, Democracy, Humor, Immigration, Nanny Statism
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“Whatever the State saith is a lie; whatever it hath is a theft.”
~ Nietzsche

There is no shortage of reporting about GM CEO Ed Whitacre’s recent series of TV ads touting GM’s ostensible early repayment of federal loan money.  Fox News, or as I like to refer to it, Faux News, is all over it.  A website known as Video Café – Crooks and Liars has posted a very good review of the coverage, along with a YouTube video of the actual ad, for those who have not seen it.

Here’s what shocks me about the ad:  Nothing.

It strikes me as pretty obvious that GM had to expect that someone would find out about their using loan money to repay loan money at some point.  Did Whiteacre, clearly a man with intelligence, credentials, and connections, think nobody would put 2-and-2 together?  Of course not.  He didn’t care.  He knows it doesn’t matter.

Indulge me as I recount one of my favorite jokes to begin illustrating why.

A burned-out executive moves to the hills to escape the rat race.  He moves into an old cabin in what he believes to be sparsely-populated woods and starts his new life.  He hopes to decompress and recharge and maybe re-connect with the fast-paced life he once knew at some later point.

One day, he hears a knock on his door.  In walks a man wearing nothing but a pair of tattered overalls, some old work boots, and a broad smile.  “Hey there, neighbor!” exclaims the man.  “My name is Enoch and I’m your neighbor!”

Initially taken aback, the executive-turned-hillbilly gathers himself and extends his hand.  “Pleased to meet you, Enoch.  My name is, Bill Exeter.  I just moved here from the Big City.”  Bill figures it is about time he got more acquainted with his new environment anyway.

Enoch begins, “Well, Bill, I just wanted to invite you to a little gathering at my house on Friday.”  What great timing!  Bill can relax a little and meet some of his neighbors too.  Sensing Bill might be a little uneasy about coming to a strange neighbor’s house, Enoch begins to pitch the party.

“Listen Bill, I need to warn you.  My parties tend to get a little wild.”  Bill smiles, feeling better about his new neighborhood.  Enoch continues, “I can almost guarantee that there will be massive consumption of homebrew alcohol.”

Bill thinks, “Sounds good!” and responds, “Enoch, I can hold my liquor!”

Enoch continues, “Well then, I should probably also mention that this consumption of alcohol tends to make my guests a little bawdy.  As a matter of fact, things got bad enough last time that there was wild sex during the party!  I expect this one to be more of the same.”

Bill has been away from the rat race for long enough that the possibility of sex sounds good.  “Well, Enoch, I’m no virgin, if I must say so myself.”

Enoch continues, “OK.  I should also probably mention that fights tend to break out in the aftermath of many of my gatherings, especially after the sex.”

Bill, still happily pondering the possibility of sex, confidently says, “Hey Enoch, I can handle myself.”

Enoch ends with, “Excellent!  I’ll look for you around 8:00 this Friday then.”  Enoch turns to leave the house.

Just before Enoch closes the door behind himself, Bill yells, “Hey Enoch!  What should I wear?”

Enoch shrugs his shoulders and says, “It don’t much matter.  It’s just going to be the two of us.”

<Rim Shot>

The key point—the understanding that is manifested over and over in U.S. politics—is contained in that punch line:  It doesn’t much matter anyway.  GM received the TARP money, even though it is not a financial firm.  One might argue that since GM used to own GMAC—its erstwhile lending mechanism—it qualifies as a financial firm.  That strikes me as a stretch, but that does appear to be the partial mechanism GM used to get the cash.  Certainly, the TARP money was specifically for financial firms.  According to Wiki:

The Troubled Asset Relief Program, commonly referred to as TARP, is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector. It is the largest component of the government’s measures in 2008 to address the subprime mortgage crisis.

GM mismanaged and underperformed its way into a deep financial hole.  It didn’t much matter.  The responsibility for GM’s problems rested with GM.  It didn’t much matter.  In the aftermath of all that underperforming, GM had the gall to ask the government for some cash, a huge wad of cash, and acquired that money for both GM and GMAC.

The overwhelming majority of Americans did not think any firm should be bailed out.  It didn’t much matter.  Congress gave money ostensibly aimed at saving the financial sector from the subprime mortgage crisis to a troubled automobile manufacturer with a management and sales crisis.

The American taxpayer was under no obligation to GM, its shareholders, or its employees. It didn’t much matter.  GM got the cash.  They have now paid back some of the early money with some of the later money, and have gone on TV to brag about it, despite the fact that such an obvious ruse should be found out.  It didn’t much matter.

While some of this behavior initially upset me, looking back on it—particularly in context with the normal behavior of the State—I see that my anger was misplaced.  The State generally and its agents in particular spew forth all manner of unmitigated, easily-identifiable equine feces on a routine basis.  Think not?   Here’s a recent sampling of talking points that have, inexplicably yet inexorably, fallen from the mouths of our leaders:

“They hate us for our freedoms.”  (This phrase is generally uttered in regard to Islamic terrorists wanting to attack the U.S.  Somehow the fact that other equally-free countries are not being similarly attacked gets obscured.  Some have argued, persuasively, that such a designation as “free” for the U.S. is a little dicey anyway.)

“… too big to fail.”  (What does this even mean?  Can a firm be too small to fail as well?  Can a firm be too big to succeed?  Can a firm be too small to succeed?  What does size have to do with the economic realities of losing money at business?)

“You’re either with us or you’re with the terrorists.”  (That a reasonably-intelligent representative of the species Homo sapiens could say something this insipid and not be placed in a padded room—wearing a straitjacket and a mouth guard—speaks to the awesome power of patriotism, and stupidity, but maybe not in that order.)

“Illegal immigration represents a danger to the future of the U.S.”  (The U.S. didn’t even have a comprehensive set of regulations on immigration until 1952.  The Constitution doesn’t even mention immigration in those terms.  Hell, damned-near everyone in the U.S. except for the people who were already here when America was “discovered” is an immigrant or descended from one anyway.  Here’s my question:  When does an immigrant become a visitor or a guest?)

“We fight them over there so we don’t have to fight them here.”  (C’mon.  Does anyone think the U.S. was in danger of being invaded by terrorists?  Really?  The truth of the matter is this:  The U.S. military murders innocents abroad.  Call me touchy, but that might upset me too.)

So Ed Whiteacre went on television, in an ad ironically entitled “Trust” and bragged about GM “putting people back to work” and how GM had “repaid their loan in full, 5 years ahead of schedule.”  Don’t hate the playa!  He was only doing what politicians do to the American public on a regular schedule:  lie for specific gains, to an audience who wants to hear the lies, while knowing that even if the lie is found out, it won’t matter that much anyway.  Consider:  Since anyone who was seriously considering buying a GM car probably didn’t care about the bailout, what’s the downside of trying to rope in a few other suckers via bogus advertising?  Moral hazard epitomized.

Is GM going to stop getting government bail-out money?  Nope.  Will any subsequent event preclude the next chronically mismanaged firm from getting a boatload of statist cash?  Not likely. Will the skilled propagandists who do their best to lead rank-and-file Americans around by the nose change their tactics?  Absolutely not.

It doesn’t much matter.  It’s just them and our money—taken at gunpoint—anyway.

(Cross-posted at LRC.)

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