That was the title of the contribution I submitted to the New York Times online “debate” about the Boy Scouts of America’s decision to maintain its anti-gay membership policy.

Here’s my conclusion:

The scouts are fully within their rights to maintain that exclusive policy—private groups should be able to discriminate on whatever basis they wish—but it’s a shame that many Americans associate scouting with that constitutionally protected policy instead of the organization’s valuable core mission of providing a unique space where boys can grow and develop into honorable men.

The editors thus changed the title of my piece to “Free to Discriminate,” which is only one part of what I said, but in any event should get more people to click on my piece in anger. Read the whole thing.

The mess in Europe has been rather frustrating, largely because almost everybody is on the wrong side.

Some folks say they want “austerity,” but that’s largely a code word for higher taxes. They’re fighting against the people who say they want “growth,” but that’s generally a code word for more Keynesian spending.

So you can understand how this debate between higher taxes and higher spending is like nails on a chalkboard for someone who wants smaller government.

And then, to get me even more irritated, lots of people support bailouts because they supposedly are needed to save the euro currency.

When I ask these people why a default in, say, Greece threatens the euro, they look at me as if it’s the year 1491 and I’ve declared the earth isn’t flat.

So I’m delighted that the Wall Street Journal has published some wise observations by a leading French economist (an intellectual heir to Bastiat!), who shares my disdain for the current discussion. Here are some excerpts from Prof. Salin’s column, starting with his common-sense hypothesis.

…there is no “euro crisis.” The single currency doesn’t have to be “saved” or else explode. The present crisis is not a European monetary problem at all, but rather a debt problem in some countries—Greece, Spain and some others—that happen to be members of the euro zone. Specifically, these are public-debt problems, stemming from bad budget management by their governments. But there is no logical link between these countries’ fiscal situations and the functioning of the euro system.

Salin then looks at how the artificial link was created between the euro currency and the fiscal crisis, and he makes a very good analogy (and I think it’s good because I’ve made the same point) to a potential state-level bankruptcy in America.

The public-debt problem becomes a euro problem only insofar as governments arbitrarily decide that there must be some “European solidarity” inside the euro zone. But how does mutual participation in the same currency logically imply that spendthrift governments should get help from the others? When a state in the U.S. has a debt problem, one never hears that there is a “dollar crisis.” There is simply a problem of budget management in that state.

He then says a euro crisis is being created, but only because the European Central Bank has surrendered its independence and is conducting backdoor bailouts.

Because European politicians have decided to create an artificial link between national budget problems and the functioning of the euro system, they have now effectively created a “euro crisis.” To help out badly managed governments, the European Central Bank is now buying public bonds issued by these governments or supplying liquidity to support their failing banks. In so doing, the ECB is violating its own principles and introducing harmful distortions.

Last but not least, Salin warns that politicians are using the crisis as an excuse for more bad policy — sort of the European version of Mitchell’s Law, with one bad policy (excessive spending) being the precursor of an additional bad policy (centralization).

Politicians now argue that “saving the euro” will require not only propping up Europe’s irresponsible governments, but also centralizing decision-making. This is now the dominant opinion of politicians in Europe, France in particular. There are a few reasons why politicians in Paris might take that view. They might see themselves being in a similar situation as Greece in the near future, so all the schemes to “save the euro” could also be helpful to them shortly. They might also be looking to shift public attention away from France’s internal problems and toward the rest of Europe instead. It’s easier to complain about what one’s neighbors are doing than to tackle problems at home. France needs drastic tax cuts and far-reaching deregulation and labor-market liberalization. Much simpler to get the media worked up about the next “euro crisis” meeting with Angela Merkel.

This is a bit of a dry topic, but it has enormous implications since Europe already is a mess and the fiscal crisis sooner or later will spread to the supposedly prudent nations such as Germany and the Netherlands. And, thanks to entitlement programs, the United States isn’t that far behind.

So may as well enjoy some humor before the world falls apart, including this cartoon about bailouts to Europe from America, the parody video about Germany and downgrades, this cartoon about Greece deciding to stay in the euro, this “how the Greeks see Europe” map, and this cartoon about Obama’s approach to the European model.

P.S. Here’s a video narrated by a former Cato intern about the five lessons America should learn from the European fiscal crisis.

No, the U.S. Postal Service won’t close on August 1^st because it can’t afford to make a required $5.5 billion payment into a federal fund for postal retiree health benefits. Yes, the entire situation with the USPS is a mess. But when you have politicians ultimately trying to run a commercial operation, constant clean ups in aisle four are to be expected.

Here’s the situation:

1. The USPS is bleeding billions of dollars in red ink and has just about maxed out its line of credit with the U.S. Treasury.

2. In April, the Senate passed a bill that would buy the USPS time by effectively kicking the can down the road.

3. A more aggressive bill in the House sponsored by Rep. Darryl Issa (R‑CA) is unpopular with the postal unions, Democrats, and apparently enough Republicans that the votes are reportedly not there to get it passed. And if the votes are there, the House Republican leadership doesn’t appear to be interested in bringing it to the floor.

4. Even if the House passed a bill, it wouldn’t be easy for House and Senate conferees to hammer out a compromise given the differences between the two bills. Because there isn’t much space left on the legislative calendar, and it’s an election year, it’s hard to imagine that there would be enough time to get something done to avert a default.

5. It is possible that language will be added to appropriations legislation that postpones the payment. For example, every year Congress includes language requiring the USPS to deliver mail six days a week.

Again, no, the USPS won’t shut its doors in the event that it defaults on the payment. Beyond that, I’m admittedly not sure what – if anything – would happen. I operate on the assumption that the federal government can do whatever it wants. That means Congress, USPS management, and postal stakeholders will probably just continue to haggle over what to do.

The postal unions will continue to concentrate their fire on the mandatory postal retiree health benefit payments, which they argue Congress should simply make disappear. As I recently explained, however, “eliminating the payments won’t put the USPS in the black, and it would merely set the stage for a major taxpayer bailout down the road.” In fact, I believe policymakers should be asking themselves why postal employees should continue to receive a benefit that a small – and declining – share of private sector workers enjoy.

From a Cato essay on privatizing the USPS:

Opponents of pre-funding USPS retiree health benefits argue that private companies and the rest of the federal government are not legally required to do so. That is largely irrelevant. Retiree health care coverage is an increasingly rare perk in the private sector, and the federal government’s financial management is nothing to emulate. In 2008, only 17 percent of private sector workers were employed at a business that offered health benefits to Medicare-eligible retirees, down from 28 percent in 1997.

Note: For those interested in postal policy, Michael Schuyler has a new – and very interesting – paper out on the USPS and stamp prices. Of course, I want the USPS to be privatized and the market to set postage prices. However, if given the choice between a taxpayer bailout and a postage hike, I say hike away.

I’ve long been meaning to write something about the bearing of free banking on the problem of counterfeiting—a topic I addressed only very briefly in Theory of Free Banking. Since that time, although quite a lot has been written about the general subject of counterfeiting, hardly anything has been said about whether or not having competing banks of issue would make matters worse.

Conventional wisdom has it that having many banks of issue instead of just one makes life easier for counterfeiters. This wisdom draws heavily on the United States’ antebellum experience, while overlooking the experiences of arrangements more representative of genuine free banking, including those of Scotland between 1770 or so and 1845 and of Canada during the late 19th and early 20th century. Evidence from these other episodes points to a rather different conclusion, while suggesting that extant theoretical models of counterfeiting overlook ways in which competitive note issue can actually make counterfeiting less rather than more lucrative than it is when currency is supplied monopolistically.

I hope readers of this forum will forgive my setting forth, as a framework by which to gain a better understanding of the ways in which plural note issue bears upon the problem of counterfeiting, a very simple formal representation of a prospective counterfeiter’s anticipated profit, π. Let

π = ND – CcN – FP,

where P = g(Cc, Ca, N, D, T, B), Cc = c(Ca), F = f(N,B), Ca = d(B), and T = t(B). Here N stands for the number of counterfeits placed into circulation, D for their denomination, Cc for counterfeits’ average unit cost of production, F for the penalty or a counterfeiter incurs if caught (which may depend on the number of counterfeits he is found guilty of having uttered), P for the probability of detection, Ca for the unit cost of a genuine note, T for a note’s average “turnover” time, that is, time spent in circulation before returning to its (purported) source, and B, finally, for the number of legitimate banks of issue. The presumed derivatives are Cc’ > 0, f’(N) > 0, f’(B) < 0, g’(Cc) < 0, g’(Ca) > 0, g’(N) > 0, g’(T) > 0, g’(B) < 0, d’ > 0, and t’ < 0.

Standard treatments of the counterfeiting problem, to the extent that they allow for the possibility of plural note issue at all, have tended to treat the number of banks of issue, B, as increasing the anticipated profitability of counterfeiting by directly reducing the likelihood of prosecution, an effect allowed for here by the last element in P: this effect stems from the extra information costs that must be incurred by persons seeking to distinguish genuine from counterfeit notes as the variety of genuine notes increases. The practically exclusive emphasis upon this influence reflects the tendency of researchers to look upon antebellum U.S. experience, with its huge numbers of relatively small banks, and consequent need for “Counterfeit Detectors” to keep bankers and retailers informed of the correspondingly large numbers of known counterfeits, as representing the typical consequences of plural note issue.

As anyone who is familiar with the free banking literature, or simply with more informed writings on U.S. banking history, knows, the U.S. case was a by-product of legal restrictions, chief among which were laws prohibiting most banks from having branches, while prohibiting banking altogether in some states and territories. These circumstances turned under-banked regions into dumping grounds for the worst of the authentic banknotes from other parts of the country, while in turn creating easy opportunities for counterfeiters to add their products to an already disorienting melange.

But the U.S. experience was unique. Other plural note issue systems, like those of Scotland and Canada, involved not thousands or even hundreds but no more than a few dozen banks of issue, most of which had extensive branch networks. The number of distinct banks was small enough to allow retailers to familiarized themselves with legitimate note varieties. Yet in combination with branching it was more than large enough to provide for notes’ active redemption, that is, for their regular absorption by the clearing and settlement system, by which they were sent back to their reputed sources. In the Scottish system, for instance, it took eleven days or so for a note to return to its source after having first been paid out—a speed not so different from that for modern checks. This translated into a high annual turnover (T) of about 33. In contrast, notes of a monopoly issuer might remain in circulation for several months, if redeemable in specie. If not, they might remain afloat until too badly worn to circulate, which could mean years.

What difference does turnover make? That it matters a great deal becomes apparent as soon as one considers that in the vast majority of instances counterfeits are discovered, or at least discovered and then reported, not by members of the general public or by non-bank merchants, but by bankers themselves, and especially by the banks whose notes have been counterfeited. There are two simple reasons for this. First, the tellers at these banks are the persons best equipped to distinguish their banks’ authentic notes from even clever counterfeits. Second, they have the strongest incentives both to be on the lookout for fake notes and to report fakes that they discover instead of merely refusing them or attempting to fob them off on others. The last point is true in part because, if persons other than a bank’s employees report a counterfeit of a bank’s notes, they may suffer a loss equal to the value of the reported notes. (Importantly, although this last deterrent has generally been in effect in monopolistic currency arrangements, it was sometimes absent in competitive ones.)

The significance of turnover, then, is that, the higher the rate of turnover of any bank’s notes, the greater the risk a counterfeiter faces of having, first his counterfeits, and then himself, discovered. High turnover means a greater chance that counterfeits will be detected within any given span of time, and consequently a greater chance of them being detected after a small number of transfers only, which increases the odds of their original “utterers,” and therefore the counterfeiters themselves, being caught.

A second, indirect way in which currency competition deters counterfeiting, which also has something to do with turnover, is by inducing note issuers to devote more resources to making their notes counterfeit-resistant. This follows from the fact that especially convincing counterfeits can fool even a bank’s own expert tellers, causing it to suffer losses by redeeming counterfeits. The extent of such losses will be greater, for any given volume of counterfeiting, the greater the turnover (and hence the lower the float) associated with an issuer’s currency. In the extreme case of a monopoly issuer of fiat money, which is of course never called upon to redeem its notes, the risk in question is nonexistent, and the incentive to invest in counterfeit-resistant notes is correspondingly low.

Finally, the presence or absence of competing issuers can influence would-be counterfeiters’ expected profits in at least one other way. This is by having some effect on the penalties or fines to which successfully prosecuted counterfeiters are subject. Here the difference is not so much economic as political, consisting of the fact that counterfeiting of the notes of a monopoly bank of issue has often been treated as a crime equivalent to the counterfeiting of official coin, and often, therefore, as a capital offense, whereas the counterfeiting of competitively-supplied banknotes has in contrast generally been a misdemeanor, if indeed it has been considered a crime at all.

The upshot of all this is that competition in currency can serve either as a deterrent or as a stimulus to counterfeiting. Whether it serves one way or the other depends on the importance of the “turnover” and “anti-counterfeiting investment” effects on one hand and those of “information cost” and “reduced penalty” effects on the other. Theory alone—at least the sketch of a theory considered here–therefore doesn’t warrant the conventional conclusion that currency competition means more counterfeiting. The matter calls for a closer look into the historical evidence, to which I will turn in a second installment of these “notes.”

We now have the technical details of the absurd Olympic uniform controversy, as the proposed Senate legislation is available. Some key excerpts:

(a) In General- The [United States Olympic Committee] shall adopt a policy with respect to uniforms to be worn by athletes during ceremonies that are part of the Olympic Games, the Paralympic Games, or the Pan-American Games that requires the [United States Olympic Committee]–

(1) to purchase or otherwise obtain only uniforms that meet the requirements described in subsection (b); or

(2) to make publicly available a detailed justification of the reasons the corporation purchased or otherwise obtained uniforms that do not meet those requirements.

(b) Requirements- A uniform meets the requirements described in this subsection if the uniform, including accessories, such as ties, belts, shoes, and hats, meets the standards of the Federal Trade Commission for labeling as ‘Made in USA’.

What I found interesting was that the U.S. Olympic Committee does not actually have to use domestically made uniforms. In fact, they have another option, which is “to make publicly available a detailed justification of the reasons” why they “purchased or otherwise obtained uniforms that do not meet those requirements.” In this regard, perhaps they can utilize this option by simply reposting some of my colleague Dan Ikenson’s recent commentary:

Trade is not a competition between “our producers” and “their producers.” In fact, U.S.-based firms benefit from collaborating with foreign firms by carving up the production process into distinct functions and processes that suit each location’s efficiencies and strengths. Just as trade enables U.S. consumers to benefit from lower-cost final goods, globalization enables U.S. producers to benefit from access to lower-cost resources put into the manufacturing system. That enables them to compete more effectively at home and abroad.

Another passage from the legislation is a bit more mysterious:

(d) Compliance With Trade Agreements- The policy adopted under subsection (a) shall be applied in a manner that is consistent with the obligations of the United States under all applicable trade agreements to which the United States is a party.

The only way I can think of to apply this policy consistently with U.S. trade obligations is not to follow it.

(For the record, with reference to the accessories described in the legislation, here is the breakdown of my outfit today. My tie was made in the USA, my shoes were made in Brazil, and my belt was made in China. I’m not wearing a hat.)

This weekend, the New York Times reports on a sweeping electronic surveillance operation carried out not by he FBI, NSA, or CIA, but by… the Food and Drug Administration. Not only that, but correspondence from several congressional offices apparently got swept up in the dragnet—and inadvertently posted publicly:

What began as a narrow investigation into the possible leaking of confidential agency information by five scientists quickly grew in mid-2010 into a much broader campaign to counter outside critics of the agency’s medical review process, according to the cache of more than 80,000 pages of computer documents generated by the surveillance effort. [.…]

Members of Congress from both parties were irate to learn that correspondence between the scientists and their own staff had been gathered and analyzed.

Representative Chris Van Hollen, a Maryland Democrat who has examined the agency’s medical review procedures, was listed as No. 14 on the surveillance operation’s list of targets — an “ancillary actor” in the efforts to put out negative information on the agency. (An aide to Mr. Van Hollen was No. 13.) [.…]

Senator Charles E. Grassley, an Iowa Republican whose former staff member’s e‑mails were cataloged in the surveillance database, said that “the F.D.A. is discouraging whistle-blowers.” He added that agency officials “have absolutely no business reading the private e‑mails of their employees. They think they can be the Gestapo and do anything they want.”

As Marcy Wheeler notes, there’s an irony here, in that Grassley is a supporter of the FISA Amendments Act, which authorizes warrantless, programmatic surveillance by the NSA of international communications of Americans. (The NSA has never, of course, required a warrant to purely foreign communications.) Supporters of this authority constantly insist that it is not about “spying on Americans” because the nominal “targets” of these interception programs must be located abroad—even though the authority would only be necessary when those targets were communicating with Americans. Here, it seems clear that the FDA managed to gather a good deal of information about the activities of these two members of Congress, even though it was only the correspondence of the scientists employed there that was directly monitored. So perhaps the privacy implications of surveillance don’t stop with the formal “target”?

Historically, the improper political use of information gleaned from surveillance has often taken circuitous routes—as documented in the Church Committee Reports of the 1970s. During the Johnson administration, the FBI became curious what Anna Chennault—a close confidant of then-candidate Richard Nixon—was promising the South Vietnamese should Nixon win the White House. But, as an internal FBI memo explained, “it was widely known that she was involved in Republican political circles and, if it became known that the FBI was surveilling her this would put us in a most untenable and embarrassing position.” Instead, they “targeted” her Vietnamese contacts, with the same effect.

In other cases, the acquisition of politically useful domestic information seems to have been more of a happy side-effect. Under John F. Kennedy, the FBI wiretapped lobbyists and lawyers employed by the Dominican Republic—as well as several Agriculture Department officials, and the secretary of Agriculture Committee Chairman Harold Cooley—in order to investigate whether the Dominicans were using bribery to influence policy. What they got instead, it seems, was quite a lot of helpful intelligence about who was in line with or opposed to the president’s agenda, as well as who might be persuadable—and by what means. This intelligence, the FBI later concluded in internal documents, “contributed heavily to the Administration’s success” in getting its preferred bill passed.

Here, we have a case where a “leak investigation” seems to have morphed into a broader effort to shield a government agency from criticism, including from members of Congress. Perhaps legislators show so little will to limit the NSA’s spying powers because they’re convinced nothing similar could ever happen at that agency. Or perhaps it’s that they’d prefer not to find out.

Raised on Hoecakes catches a NHTSA impaired-driving program telling a whopper:

“THE DAYS OF BEATING A DRUNK DRIVING ARREST HAVE BEEN RULED EXTINCT.…

“If you are arrested, you will be prosecuted and likely lose your license, money and car.”

As Raised on Hoecakes says:

Cool, huh? Only one problem: it isn’t true. Someone missed the memo telling judges to make arrests for DUI a resulting conviction 100% of the time.” In Florida, to take one state he says is representative, there were 55,722 DUI tickets and 33,625 DUI convictions in 2011, and although not all cases are closed the same year they begin, the estimated conviction rate still must run closer to 60 percent than 100 percent. Nor is it true that all arrests result in prosecution: prosecutors decline to press some charges where they deem the evidence in hand to be weak, and almost everyone, with the possible exception of certain hosts of TV crime shows, agrees that’s as it should be.

I suppose the generous way to interpret untruths like the ones on this poster would be as a fancier way to say, “Don’t drive drunk, you’ll get caught.” But they also send a rather more disturbing message: “If arrested on DUI and you believe the government’s case against you is weak, better not fight, just take a plea. Because it doesn’t matter how strong your defense is, a judge won’t save you.

Presumably that second message is unintentional.

[Cross-posted from Overlawyered. Earlier on government as false advertiser here.]