Thanks for the response; it is only through such repartee that we learn from each other’s perspective. However, I have to clear a few things out.

First off, I am not against having a government. Like Milton Friedman, I do not like big governments. I agree that the government is an important player in protecting and providing necessities for its citizens, what I do not agree with is having a government that conducts farcical stress tests on banks and bails out companies that are underperforming. Furthermore, I was not saying that without government intervention the markets would be completely predictable. However, I do stand by the fact that government intervention causes more uncertainty which results in randomness. This is not only my view but basic economic theory. Alan Greenspan is a weak argument to bring up (to support government intervention), as he was one of the biggest proponents for keeping regulation on derivatives to a minimum. Conversely, it was partly his fault that we are in this mess because he refused to increase the interest rates during the booming years of the economy.

It is hard to say that the New Deal era was the best way to control the economy when you are comparing a time of coming out of economic depression with a time you are going into one. However, I do agree some good things happened with the New Deal, such as the Glass?Steagall Act, which separated commercial and investment banking. This law no longer exists with companies like Goldman Sachs and American express becoming bank holding companies, something made possible with the creation of TARP. Furthermore, the government does not have the same amount of money to spend as the deficit has more than tripled since the New Deal era. The money that the government has been spending has been questionable at best. The first installment of TARP was a joke with no one knowing the criteria set for receiving government handouts. The intention of the TARP funding was to help struggling banks and the housing market, however due to inefficient regulation we had gaping loopholes that allowed insurance companies to buy small banks just so they could receive a handout. Even if government spending was done in an efficient manner, it is important to realize that though government spending does play an integral role in getting the economy out of a depression/recession eventually the rest of the economy has to take over. I believe it was Margaret Thatcher who said “The problem with socialism is that you eventually run out of someone else’s money.” With the deficit well past 11 trillion, I think we should take a minute and reflect on her quote.

You bring up the fact that I pick on auto manufacturers and do not talk about large investment banks like Goldman Sachs. I did not mention the banks not making changes and/or taking money for two reasons. One, the banks did change; they had to change their bonus structure as well as the amount of leverage they took on (amongst other changes). Earlier, banks were leveraging up to 30-1 and are now down to as low as 14-1. Furthermore, bank executives from Goldman did not go begging congress for money, it was the BIG 3 who wanted the bailout and did not want to change. Last time I checked, the government forced all of the big banks to take TARP funds in order to not single any one bank out. That said, the government has not been able to recover the principal lent to the auto makers, where as the government has taken profits of about $1.4 billion on its investment in Goldman Sachs, $1.3 billion on Morgan Stanley and $414 million on American Express. The five other banks that repaid the government—Northern Trust, Bank of New York Mellon, State Street, U.S. Bancorp and BB&T—each brought in $100 million to $334 million in profit. It’s easy to blame the investment banks for taking all the tax payers money and giving nothing back, but the facts tell a different story.

As for the CARS program, the program was set to help the US automaker, Toyota has an 18.9 per cent share of vehicles bought so far, putting it ahead of General Motors with 17.6 per cent and Ford with 15.4 per cent. Chrysler is in fifth place, after Honda. What is funny to me is that GM had a 19.6 per cent share of the overall US light-vehicle market in the first seven months of this year, compared with Toyota’s 16.3 per cent, according to Autodata, a New Jersey-based market research firm. Is the program really helping the US Auto Companies? And as far as the program was created to helping those with ‘94 Berettas or ‘88 Novas, this strangely reeks of the same problem we faced with the housing market. Just like everyone “in theory” deserves a new home, a new car may sound nice but is not feasible. However, if for a minute I agree with you, then my point comes up again: Why should only certain cars qualify? Why can’t someone with a ‘96 Sentara get the deal as well? I am not even going to get into how people with old cars that did not qualify for cash for clunkers are not being able to get a decent amount for their cars because the CARS program is giving $4000 dollars for vehicles that are worth $800. My problem is not so much with the deal, but with the premise of it being for the common man, yet the stipulations on it tell a different story.

I kicked Facebook. Send me your email saying hello. I might got to Chicago at the end of October and we should grab a bit to eat while i’m there.

I’d like to chat about Islamic Finance.

mt

First, I agree with you that consumers are “informed” when it comes to nutritional information. However, nutritional labeling is extremely complicated, especially for the average consumer, and I would argue that many people do not understand what the labels mean. For example, without searching the Internet, could you honestly explain what monosodium glutamate, thiamin mononitrate, maltidol, sodium bicarbonate, and sodium aluminum phosphate are and whether or not I should avoid some of the ingredients and not others? If you can, I suspect you either a) were a science major, or b) are abnormally well-informed. Do you think that the average consumer, with a high-school education or less could? What about a very smart liberal arts student specializing in Shakespearian prose? I suspect most would probably not be able to make an accurate differentiation despite being “informed by the boatload.” However, if they suddenly noticed that the cost of unhealthy items such as candy went up, they may “get the point” and try something else (hopefully something healthier!).

Second, your assertion that consumer behavior toward alcohol and (especially) cigarette consumption has shown “demonstrably little… change” as a result of the addition of taxes is simply incorrect. In fact, over the last fifty years, smoking rates have dropped dramatically, from a record high of 45% of the population being smokers in 1954 to approximately 20% in 2008 (Saad 2008). Granted, the massive drop off in smoking rates is not entirely attributable to taxes, but a combination of many initiatives (including public education regarding the risks associated with smoking), taxes can and do have an effect on consumption. For instance, a study by Flewelling, et al. (1992) showed that the first-year impact of the 1989 California tax increase on cigarette consumption coincided with a 5% – 7% decline in consumption. This is just one of many examples I could point to proving that the taxes do indeed work.

I concede that alcohol consumption has not seen the drop off rates that smoking has (though studies such as the Framingham study have shown moderate drops in consumption over the past fifty years), but I still think alcohol taxes are a good idea, especially if the proceeds fund alcohol education programs. This is because even though alcohol consumption can be beneficial when consumed in moderation (something that cannot be said about smoking or many of the ingredients found in junk foods, regardless of what the Corn Refiners Association tells you), the health benefits turn to detriments with only a slight increase in consumption. Thus, while you or I may be capable of monitoring our intake of alcohol in such a way as to experience only the health benefits and not the detriments, I am not convinced that all are capable of this feat. Thus, a governmental “nudge” such as an alcohol tax may be helpful. This is especially true amongst those lacking the education that you (I suspect) and I have received regarding the costs and benefits associated with consuming alcohol (e.g., the increased risk of liver damage—an unpleasant cost—versus the ability to dance like Baryshnikov after a few pints—an obvious benefit).

Finally, the slippery slope argument you present is not convincing. Though I concede that my “I know it when I see it” recommendation is far from scientific, I do believe that there should be some room for common sense when determining the answer to questions such as “what is or is not candy” or “what is or is not an obscenity.” Also, your supposition that a vague candy tax would “creep into new categories” ignores the question of whether or not a general—perhaps more clearly defined-tax has merit. If a candy tax lowers consumption of an unhealthy food, though still leaving the option available to consume as much as you like, isn’t that a good thing? And as far as the candy producers are concerned, if they are fearful of taking a profit hit as a result of new taxes aimed at lowering consumption, perhaps they should start selling something that isn’t detrimental to society.

Also, if you have a tax with vague limits it will slowly creep into new categories whenever the municipal purse is getting tight. The notable problem with the obscenity ruling is that putting Potter Stewart at every checkout line would make grocery shopping into purgatory. Notice how we still have no legal standard for pornography.

This is because, first of all, it provides the consumer with a clear message (i.e., modern medical science has decisively proven that you should not eat a lot of candy because it can have detrimental health effects when consumed in large amounts, thus we are going to tax you on it so that you might consume less), but, at the same time, still allows the consumer to purchase as much candy as he or she can stomach. No one is prevented from exercising his or her “right to diabetes” but instead gently pushed to make a better decision. This would be particularly helpful for the least educated and poorest members of society, who have the highest obesity and diabetes rates and the lowest amount of disposable income (and thus susceptibility to the tax).

With regard to determining what is or is not candy, and hence worthy of the tax, that one is easy. I would simply point to the now famous remark made by Justice Potter Stewart while defending his position on Jacobellis v. Ohio (an obscenity ruling): “I know it when I see it.”