Forget about price controls. The Venezuelan government finally figured it out. The country is facing an acute shortage of toilet paper because people are eating too much. The head of the National Institute of Statistics released a survey yesterday that shows that Venezuelans “are eating three times a day or even more.” Thus the shortage.

However, Venezuelans don’t have to worry any more about eating in excess. Their National Assembly just approved the importation of 39 million rolls of toilet paper.

The beauties of Socialism.

I’ve watched the congressional hearings on the IRS scandal, and like others, have been appalled at the glib performance of former IRS Commissioner, Douglas Shulman. Shulman isn’t taking an ounce of blame for the mess even though he headed the agency from 2008 to 2012. Dana Milbank reviews his slippery and rather arrogant performance in the Washington Post today.

Unfortunately, we can’t fire the Bush-appointee and Democratic-donor Shulman because he’s already escaped to the private sector. But we can fire other misbehaving IRS workers when we unravel the mystery of who ordered the political targeting.

Politico wrote yesterday that “heads won’t roll at the IRS.” The article is right that it is very difficult to fire federal workers, and I’ve written about the extremely low federal firing rate. The article says that 8,755 people were fired last year. But that was out of 2.1 million civilian federal employees, or just 0.4 percent of the total.

Politico notes that strong civil service protections are a big hurdle to firing. But just as important, I think, has been the unwillingness of federal managers to put the time and effort into removals. It’s much easier for managers to move troublesome employees off to a quiet office to get them out of the way, or to transfer them out of their section.

Also note that it is the firing rate of poor performers that is especially low in the federal government, meaning workers who are lazy or produce poor work. One barrier to their firing is that managers often give these workers good performance reviews because they don’t want to rock the boat.

However, a larger number of federal workers are fired for misconduct—such as willfully ignoring laws and regulations—and that is what we are talking about with the IRS scandal. Recent incidents in the beleaguered Transportation Security Administration (TSA) indicate that federal workers can be fired for misconduct:

• 400 TSA workers have been fired for stealing items from passenger bags.
• 5 TSA employees in Fort Myers were fired for violating screening rules.
• 28 TSA workers in Honolulu were fired for violating screening rules.
• The TSA proposed firing 25 workers in Newark for screening failures, and 4 were eventually removed.
• The TSA proposed firing 12 workers at the Charlotte airport.

Aside from the thefts, the other TSA firings seem to have been for actions no more troublesome than that of IRS employees. IRS employees were apparently not just failing to follow proper protocol, but were proactively inventing new procedures that undermined fundamental rules for nonpartisan, neutral, and fair treatment of taxpayers.

So far President Obama has “fired” acting IRS Commissioner Steven Miller, although Miller had planned to retire in June anyway. But more heads should roll in the IRS scandal, and despite Politco’s cautionary note, I’m guessing that they will roll.

Lois Lerner is lucky that she’s testifying at a congressional hearing rather than at a criminal trial. In a courtroom, if Lerner were a defendant, then she couldn’t have simply read an “opening statement” and then refused to testify further; her statement would’ve “opened the door” to questioning about the subjects she raised (and then there are further wrinkles in civil, as opposed to criminal, cases). Before the House Oversight Committee, however, Lerner is merely a witness at an investigative hearing—and one compelled to attend by subpoena, no less—so she can “selectively” invoke her Fifth Amendment right not to answer particular questions that may incriminate her or to cut off questioning altogether.

Still, Lerner said four things that should pique Congress’s interest: (1) “I have not done anything wrong.”; (2) “I have not broken any laws.”; (3) “I have not violated any IRS rules or regulations.”; and (4) “I have not provided false information to this or any other committee.” The committee should do all it can to investigate Lerner’s understanding of the laws and regulations she was applying, and how her previous oral and written testimony comport with the IRS malfeasance under review. 

It certainly looks fishy that Lerner has decided not to answer questions on these issues, but Rep. Darrell Issa (R‑CA) can’t force her to do so.

What he can do is call Lerner back and have her prior testimony read, asking how her current knowledge of what went on compares to her earlier statements — and any other questions the committee has. This would force her to “plead the Fifth” on every question, which would put pressure on the IRS and its political masters, even if Lerner doesn’t have to answer. He could also, now if there’s enough evidence of wrongdoing already or later if there will be by the end of the investigation, move for a criminal indictment. 

While doing some historical studies in preparation for an article in Cato’s Regulation magazine, we found that we once discovered the information equivalent of antimatter, namely, “anti-information”.

This breakthrough came when we were reviewing the first “National Assessment” of climate change impacts in the United States in the 21st century, published by the U.S. Global Change Research Program (USGCRP) in 2000. The Assessments are mandated by the Global Change Research Act of 1990. According to that law, they are, among other things, for “the Environmental Protection Agency for use in the formulation of a coordinated national policy on global climate change…”

One cannot project future climate without some type of model for what it will be. In this case, the USGCRP examined a suite of nine climate models and selected two for the Assessment. One was the Canadian Climate Model, which forecast the most extreme warming for the 21st century of all models, and the other was from the Hadley Center at the U.K Met Office, which predicted the greatest changes in precipitation.

We thought this odd and were told by the USGCRP that they wanted to examine the plausible limits of climate change. Fair enough, we said, but we also noted that there was no test of whether the models could simulate even of the most rudimentary climate behavior in past (20th) century.

So, we tested them on ten-year running means of annual temperature over the lower 48 states.

One standard method used to determine the utility of a model is to compare the “residuals”, or the differences between what is predicted and what is observed, to the original data. Specifically, if the variability of the residuals is less than that of the raw data, then the model has explained a portion of the behavior of the raw data and the model can continue to be tested and entertained.

A model can’t do worse than explaining nothing, right?

Not these models! The differences between their predictions and the observed temperatures were significantly greater (by a factor of two) than what one would get just applying random numbers.

Ponder this: Suppose there is a multiple choice test, asking for the correct temperature forecast for 100 temperature observations, and there were four choices. Using random numbers, you would average one-in-four correct, or 25%. But the models in the National Assessment somehow could only get 12.5%!

“No information”—a random number simulation—yields 25% correct in this example, which means that anything less is anti-information. It seems impossible, but it happened.

We informed the USGCRP of this problem when we discovered it, and they wrote back that we were right, and then they went on to publish their Assessment, undisturbed that they were basing it models that had just done the impossible.

The newest posting at Lib​er​tar​i​an​ism​.org is a 1979 speech by Nathaniel Branden, from the largest-ever convention of the Libertarian Party, titled “What Happens When the Libertarian Movement Begins to Succeed?” Alas, it’s audio-only, unlike all the classic videos at Lib​er​tar​i​an​ism​.org. But it’s still vintage Branden, and quite interesting. The site’s multimedia editor, Evan Banks, drew my attention to this part of the speech (starting around 22:22) that I think has a lot of relevance to the work we do at Cato and the attempts at persuasion by libertarians generally:

So it becomes very interesting to ask ourselves — and obviously I don’t wish to imply this applies to all of us, it doesn’t — but these are trends to watch for in ourselves and in our colleagues. So it becomes interesting to ask ourselves: Okay, suppose that I or my friends or my colleagues, while genuinely believing in these ideals, at the same time have this unrecognized negative self-concept of which Branden speaks. That means that my self-sabotaging behavior wouldn’t happen on a conscious level, but it would happen. How would it happen? What kinds of mistakes might we make?

Well, for example, suppose that you’re talking with people that don’t already share your views, and yet you believe your views have evidence and reason to support them. Now, if you really believe that you’re in this to win; to see your ideas prevail, then you give a lot of thought to how to become a good communicator, how to reach human minds, how to appeal to human intelligence. What do you do if you’re really in it to keep proving that you’re a heroic–but doomed–martyr? What do you do if your deepest belief [about people that don’t already share your views] is, “You’re never going to get it. You’re hopelessly corrupt. I may be one of the two or three last moral people on Earth. What am I doing at this party anyway?”

[laughter]

You engage in a lot of flaming rhetoric — you talk about statists, you talk about looters, you talk about parasites in contexts where you KNOW this language is Greek to your listener. Why should you care, your dialogue isn’t directed to him anyway — it’s directed to the spectator — you watching you being a hero. HE knows what you mean — don’t get confused over the fact that your listeners don’t, the show isn’t for them anyway.

So, one of the signs that we want to look out for, and one of the most important signs, happens in how we approach communication. Are we really out to reach human beings? Are we really out to build a bridge to somebody whose context may be very different from our own? Do we still remember that a lot of what we now regard as self-evident once upon a time wasn’t self-evident? Or do we walk into a conversation on the premise: I’ll give you one chance, after which you’re irredeemably evil?

[laughter]

You see, that could be called a communication problem, but I think it would be too superficial to describe it in that manner. I would call it a “phony image” problem: you’re not in it to win, you’re not in it to persuade, you’re not in it to convince, you’re not in it to reach out and touch another human mind; you’re out to make yourself out as the lowly unappreciated misunderstood heroic martyr you always knew you were, ever since your mother gave more attention to your brother.

[laughter]

Perhaps communication is one of the chief areas where this problem manifests. Another example in the area of communication, it occurs to me, is libertarians who cannot seem to come off the level of extreme generality. Once they have made up their mind that — for example — welfare programs are inappropriate or improper, and ultimately immoral, that’s the end of the conversation. They’re not interested in dealing with the perfectly natural questions that perfectly civilized decent people are going to ask next about the very real problems of people in our particular world. They don’t think in terms of responsible answers, they don’t think in terms of voluntary solutions, they don’t think in terms of developing highly concrete, highly specific libertarian alternatives. 

Why don’t they? Because they never believed they could persuade anyway. To invest that much thinking you have to really think you could make a difference. To do your homework, to master the subject, to know how to argue beyond the very general level you have to really believe you can make a difference.

What if you don’t, BUT you want to play in the game? You climb up on your white horse, confine [yourself] to generalities, and curse those who aren’t convinced. 

The AP reports some bad news for anyone seeking a little security and predictability in the US and global energy markets:

Energy Secretary Ernest Moniz said Tuesday he will delay final decisions on about 20 applications to export liquefied natural gas until he reviews studies by the Energy Department and others on what impact the exports would have on domestic natural gas supplies and prices.

Moniz, who was sworn in Tuesday as the nation’s new energy chief, said he promised during his confirmation hearing that he would “review what’s out there” before acting on proposals to export natural gas. Among the things Moniz said he wants to review is whether the data in the studies are outdated.

A study commissioned by the Energy Department concluded last year that exporting natural gas would benefit the U.S. economy even if it led to higher domestic prices for the fuel.

The AP adds that Secretary Moniz justified this delay as his “commitment” to Senate Energy Committee Chairman Ron Wyden (D‑Ore.) who opposes natural gas exports and has criticized the DOE study. Moniz’s statement comes just days after his department (quietly, on a Friday) approved one pending export application—moving the grand total of approvals to two out of 20 total applications, most of which have been sitting on DOE’s desk for several years now.

And who says the U.S. government isn’t swift and efficient?

Government sloth aside, these two recent announcements raise a host of serious concerns. As I explained in a recent blog post summarizing my Cato Institute paper on crude oil and natural gas exports, the immediate approval of all natural gas export license applications, as well as broader reform of the system itself, is an economic and political no-brainer. This is because the current licensing systems—and the de facto export restrictions that they create—raise a raft of economic, legal and political problems. For example, the discretionary restrictions on exportation—reinforced by the last week’s developments—likely violate the United States’ WTO obligations and directly contradict longstanding U.S. government support for American exports and opposition to other countries’ export restrictions.

Moreover, and contrary to Moniz’s assertions, the evidence of the economic benefits of fossil fuel exports isn’t isolated to a single DOE study, but has been repeatedly and thoroughly established by government, think tanks, and industry and consumer groups. For these reasons, there is wide, bipartisan support in Congress and the U.S. business community for immediately approving all pending natural gas export applications. The only groups that oppose these exports are the strange bedfellows of misguided environmentalists (who fear that additional exports will lead to increased fracking) and self-interested, gas-consuming industries (who want that cheap gas all to themselves, regardless of the broader economic or trade policy harms).

More broadly, these recent developments demonstrate the government-created uncertainty plaguing not only American energy producers, investors, and workers, but many other of their fellow Americans. As I noted in February:

By depressing domestic prices and subjecting export approval to the whims of government bureaucrats, the U.S. licensing systems retard domestic energy production, discourage investment in the oil and gas sectors, and destabilize the domestic energy market. Artificially low prices prevent producers from achieving a sustainable rate of return on the massive up-front costs required to drill and extract oil and gas, and investors lack any assurances under the discretionary licensing systems that domestic prices will not collapse when output increases. Such concerns have led the IEA to recently warn that U.S. export restrictions put the “American oil boom” at risk.

In short, current uncertainty retards highly capital-intensive domestic energy investment, production, and hiring, thereby destabilizing the market and curtailing economic growth. And what better example of such uncertainty is the surprise approval of one gas export application quickly followed by a single bureaucrat’s announcement that—in order to keep a “commitment” to a single U.S. Senator—no others will be approved until he personally is satisfied with widely-supported data that have been before his agency for months?

Unfortunately, this type of uncertainty pervades U.S. trade and economic policy. Whether it’s bailing out Detroit and the UAW at the expense of certain private investors, or heavily subsidizing green energy through supposedly temporary tax breaks, or negotiating restrictions on Japanese auto imports as Japan’s “entry fee” into the Trans-Pacific Trade Negotiations, or implementing last-minute tax hikes or spending increases, the U.S. government seems intent on substituting the whims of politicians and bureaucrats for predictable, constitutional, free market fiscal policy. As a result, our American “whimsy-conomy” sputters along.

It would be crazy to think that U.S. policymakers can eliminate this rampant uncertainty overnight, but they could at least begin the process by reforming our archaic and problematic energy export laws to freely permit the exportation of all energy products, regardless of type or origin. Such a policy change would help the economy, bring U.S. policy into compliance with our trade commitments, have strong political support, and take America’s energy future out of the hands of unelected bureaucrats like Secretary Moniz. 

If they can’t undertake these simple and obviously necessary reforms, the rest of the whimsy-conomy doesn’t stand a fighting chance.

Iran’s Guardian Council announced yesterday that former president Ali Akbar Hashemi Rafsanjani has been barred from Iran’s presidency poll—reportedly due to his old age and debilitating health. In recent weeks, speculation over a Rafsanjani comeback bid had spurred some optimism among Iranians who recognize that their broken economy desperately needed a jolt. Some Iranian voters have described him as a “master of the economy” and the solution to their economic woes. However, a closer look at Iran’s misery index shows just how fatally flawed this perception is.

There is little doubt that the economic policies of current president Mahmoud Ahmadenijad have been a disaster. Even before the United States and European Union imposed economic sanctions over Iran’s nuclear program, Iran’s economy was hardly in good shape.

For decades, the Iranian economy has been cobbled together by a coalition of conservative clerics and Revolutionary Guard commanders. The resulting bureaucratic monstrosity has employed mandates, regulations, price controls, subsidies, a great deal of red tape, and a wide variety of other interventionist devices. Not surprisingly, Iran ranks near the bottom—145th out of 183 countries—in the World Bank’s Doing Business 2013 Ranking, which measures the vitality of free markets and the ease of doing business.

You might wonder, with all this sand in the gears, how has the Iranian economy been able to sustain itself and grow (until recently)? The answer is—you guessed it—oil.

Returning to Rafsanjani—the so-called master of the economy—the record, as revealed by the Iranian misery index, suggests that he would not have been able to fix Iran’s current economic mess. His time in office was, simply put, an economic failure.

So, just what is the Iranian misery index? The index is the sum of the inflation, interest and unemployment rates, minus the annual percentage change in per capita GDP. Iran’s misery index for the 1991–2012 period is presented in the accompanying chart:

It must be stressed that Iran’s true inflation, interest, and unemployment rates are all probably higher than those reported by the government. In consequence, the true level of the misery index is probably much higher than the one reflected in the chart. That said, the pattern of “ups” and “downs” in the index is reliable.

Clearly, the Rafsanjani years were a bit of a rollercoaster ride, with a dramatic increase followed by a sharp reduction, and then a final up-tick in the level of economic “misery.” By the end of his term, Rafsanjani had actually raised the misery index score from an initial 34.41 to 48.28—in short, during the Rafsanjani years, economic misery increased. Indeed, high inflation rates and slow economic growth were the defining characteristics of his tenure in office.

Although current president Ahmadinejad has undoubtedly left the Iranian economy in shambles, Rafsanjani’s presidency was, in economic terms, hardly anything to write home about.

Even before the brief spell of hyperinflation in October 2012, the Iranian economy was nearly crippled by high unemployment rates and economic recession. It is little wonder, then, that the Iranian people want a “master of the economy” for their next president. Yet, it is not a “master of the economy,” but an economic liberator that the Iranian people should be searching for. Until Iran pares back its Soviet-style command economy, it is doubtful that anyone will be able to “master” the Iranian economy.