Mexican President Felipe Calderón seems to be experiencing a dramatic change of mind regarding his war against drug cartels. Soon after a drug gang set fire to a casino in Monterrey a few weeks ago killing 52 people, Calderón told the media that ““If [the Americans] are determined and resigned to consuming drugs, they should look for market alternatives that annul the stratospheric profits of the criminals, or establish clear points of access that are not the border with Mexico.” Many people interpreted that as a veiled reference to drug legalization.

Yesterday, during a speech to the Americas Society and Council of the Americas in New York, Calderón was at it again: “We must do everything to reduce demand for drugs,” he said. “But if the consumption of drugs cannot be limited, then decision-makers must seek more solutions—including market alternatives—in order to reduce the astronomical earnings of criminal organizations.”

After launching a military offensive against drug cartels that has resulted in approximately 42,000 people killed in drug-related violence thus far, it appears that President Calderón has finally realized that the war on drugs is a futile endeavor and that drug legalization is the only alternative to the mayhem.

Calderón has flirted with an alternative approach before. A year ago, he said that it was “fundamental” to have a debate on drug legalization. Shortly afterwards, Colombian President Juan Manuel Santos openly supported the call for a debate. However, Calderón soon recanted, firmly stating that he was against legalization, and the possibility of a high-level hemispheric debate on drug reform died there.

If we take his recent statements seriously, perhaps the massacre in Monterrey finally broke Calderón’s faith in his war on drugs. His two immediate predecessors, Ernesto Zedillo and Vicente Fox, have been vocal proponents of drug legalization in the years since they left office. Calderón still has over a year left in his term. He has been very assertive in the past, demanding that Americans reduce their demand for drugs and change their gun laws in order to curb violence in Mexico. But his rhetoric has proven fruitless time and time again, all the while thousands have needlessly died. Calderon must remain assertive towards Washington, but now he should demand a change in drug policy in the U.S.

Nothing will reverse the damage that his war against drugs cartels has inflicted on his country. But Felipe Calderón could do his country a great service if he becomes the first sitting president to raise his voice to Washington and demand an end to the war on drugs.

Tom Palmer is very fond of this quotation from Voltaire on the connections among commerce, toleration, and the erosion of prejudice:

Go into the Exchange in London, that place more venerable than many a court, and you will see representatives of all the nations assembled there for the profit of mankind. There the Jew, the Mahometan, and the Christian deal with one another as if they were of the same religion, and reserve the name of infidel for those who go bankrupt. There the Presbyterian trusts the Anabaptist, and the Church of England man accepts the promise of the Quaker. On leaving these peaceable and free assemblies, some go to the synagogue, others in search of a drink; this man is on the way to be baptized in a great tub in the name of the Father, by the Son, to the Holy Ghost…

You can find it in Tom’s essay “Globalization and Culture,” which is included in Realizing Freedom: Libertarian Theory, History, and Practice.

I found a very similar thought in a Wall Street Journal review of the book Ghetto at the Center of the World by Gordon Mathews. The book focuses on “the most notorious flophouse in Asia,” which accommodates people from all over the world, but especially from Africa and South Asia and especially merchants who trade cheap Chinese-made goods to buyers from other countries. The review notes:

Interpersonal relations at the building, the author says, might not be reliably friendly, but “they are generally peaceful.” He adds: “As a Pakistani said to me vis-à-vis Indians, ‘I do not like them; they are not my friends. But I am here to make money, as they are here to make money. We cannot afford to fight.’ ”

Voltaire and Mathews, like many other observers, have noticed that people trying to make money don’t generally get too upset about other people’s race or religion. This is part of the “doux commerce” or “sweet commerce” thesis that goes back to the Middle Ages. Albert O. Hirschman wrote about it in 1982, and much of Deirdre McCloskey’s current work explores the idea of “doux commerce” and bourgeois virtues.

After having risen for decades, global economic freedom has fallen for a second year in a row. That’s according to Economic Freedom of the World: 2011 Annual Report co-published today with the Fraser Institute. The average global economic freedom score rose from 5.53 (out of 10) in 1980 to 6.74 in 2007 and has fallen to 6.64 in 2009, the last year for which data is available.

As the graph below shows, the United States has had one of the largest declines in the past decade. It now ranks in 10^th place compared to 3^rd in 2000, largely due to higher government spending and lower ratings on “rule of law” measures. The report documents the strong, positive relationship between economic freedom and a range of indicators of standard of living including wealth, economic growth, longer life spans, better health care, lower poverty, civil and political liberties, and so on. Economic freedom is central to human progress. As the response of activist governments to financial and ongoing debt crises fails to address underlying issues responsible for low growth and high unemployment, this report is an important empirical reminder about the wide-ranging consequences of politics or markets in determining the use of resources.

The White House’s release of its “Open Government Action Plan” today is timely. We’ll be rolling out the product of several months’ work on government transparency Friday at an event called “Publication Practices for Transparent Government: Rating the Congress.”

The paper we’ll release commences as follows:

Government transparency is a widely agreed upon goal, but progress on achieving it has been very limited. Transparency promises from political leaders such as President Barack Obama and House Speaker John Boehner have not produced a burst of information that informs stronger public oversight of government.

The reason is not lack of planning documents, meetings, or websites, as reading the White House’s announcement today might suggest, but lack of specifically prescribed data publication practices that foster transparency. The government should publish data about its deliberations, management, and results in ways that make it amenable to all the varied uses of websites, researchers, reporters, and the public at large.

We’ll be grading the Congress on how well it’s doing with publication of data about formal legislative process. Congress is first because it’s low-hanging fruit. We’ll soon be turning to information the executive branch can make more transparent: budgets, appropriations, and spending.

The programs featured by the White House today—a new “We the People” petition platform, whistleblower protection, and an “Extractive Industries Transparency Initiative”—are fairly tangential. Fuller government transparency will be a product of specific good publication practices applied to data about the government’s deliberations, management, and results.

More information, and registration for Friday’s event, can be found here.

Yesterday, I came across a short Atlantic essay on the plight of children in Accra’s Abogbloshie slum entitled “The Hardware Scavengers of Ghana.” One particular sentence stood out for succinctly crystallizing the problem, and for its near-perfect internal inconsistency: “These kids are shortening their lives, but they don’t have any other options.”

You see, if they have no other options, the toxic job of electronics recycling—burning insulation off copper wires, applying degreasing solvents with bare hands, and so on—is extending their lives, not shortening them. According to the underlying article and interview on Mongabay​.com, many of the recyclers come from Northern Ghana to escape poverty, maltreatment, “food insecurity,” and sectarian strife. The choice is not between recycling and school. It is between encountering carcinogens and neurotoxins or encountering violence, starvation, and death.

The Atlantic and Mongabay​.com articles focus on the environmental and biological consequences of e‑waste, and the responses they broach do the same. The Ghanian government might limit import of used electronics, but this would shrink the nation’s access to valued and productive communications equipment. Had it the capacity, the government might try to prevent dumping of e‑waste where these recyclers can access it.

Solving the problem of e‑waste might be a comfort to readers of the Atlantic concerned with their own environment and susceptibility to cancer. But if the statement about poor Ghanians’ options is true, such “solutions” would consign children and young men to death of starvation, violence, and war. That’s not the outcome I would prefer, even if it’s hidden from me.

A couple of lessons emerge from this compact tale. One is: never, ever invite me to your cocktail party. I will go about picking the scab off group consensus on faraway economic and social problems. And I will say, “See? That redness and pus? You haven’t fixed this.”

More importantly, the solutions that extend the lives of electronic waste recyclers may have nothing to do with controlling “e‑waste.” These articles frame the problem as we would in the green, wealthy west. Economic development of all kinds in Ghana may give these youth better options than e‑waste recycling, according them sustenance and safety, and perhaps eventually access to education.

I don’t know what improvements in trade policy (ours or theirs), rule of law, taxation or regulation might bring the wealth to Ghana that sustains its people better. I wish Ghana the relative luxury of controlling toxic waste, moving people from slum to suburbs, and so on. But if softness in our hearts leads us to soft-headedly sweep Ghana’s poorest from bad health conditions into conditions of death by starvation and violence, I think that would compound the tragedy.

It’s hard to keep track of all the tax hikes that President Obama is proposing, but it’s very simple to recognize his main target — the evil, nasty, awful people known as the rich.

Or, as Obama identifies them, the “millionaires and billionaires” who happen to have yearly incomes of more than $200,000.

Whether the President is talking about higher income tax rates, higher payroll tax rates, an expanded alternative minimum tax, a renewed death tax, a higher capital gains tax, more double taxation of dividends, or some other way of extracting money, the goal is to have these people foot the bill for a never-ending expansion of the welfare state.

This sounds like a pretty good scam, at least if you’re a vote-buying politician, but there is one little detail that sometimes gets forgotten. Raising the tax burden is not the same as raising revenue.

That may not matter if you’re trying to win an election by stoking resentment with the politics of hate and envy. But it is a problem if you actually want to collect more money to finance a growing welfare state.

Unfortunately (at least from the perspective of the class-warfare crowd), the rich are not some sort of helpless pinata that can be pilfered at will.

The most important thing to understand is that the rich are different from the rest of us (or at least they’re unlike me, but feel free to send me a check if you’re in that category).

Ordinary slobs like me get the overwhelming share of our income from wages and salaries. The means we are somewhat easy victims when the politicians feel like raping and plundering. If my tax rate goes up, I don’t really have much opportunity to protect myself by altering my income.

Sure, I can choose not to give a speech in the middle of nowhere for $500 because the after-tax benefit shrinks. Or I can decide not to write an article for some magazine because the $300 payment shrinks to less than $200 after tax. But my “supply-side” responses don’t have much of an effect.

For rich people, however, the world is vastly different. As the chart shows, people with more than $1 million of adjusted gross income get only 33 percent of their income from wages and salaries. And the same IRS data shows that the super-rich, those with income above $10 million, rely on wages and salaries for only 19 percent of their income.

This means that they — unlike me and (presumably) you — have tremendous ability to control the timing, level, and composition of their income.

Indeed, here are two completely legal and very easy things that rich people already do to minimize their taxes — but will do much more frequently if they are targeted for more punitive tax treatment.

1. They will shift their investments to stocks that are perceived to appreciate in value. This means they can reduce their exposure to the double tax on dividends and postpone indefinitely taxes on capital gains. They get wealthier and the IRS collects less revenue.
2. They will shift their investments to municipal bonds, which are exempt from federal tax. They probably won’t risk their money on debt from basket-case states such as California and Illinois (the Greece and Portugal of America), but there are many well-run states that issue bonds. The rich will get steady income and, while the return won’t be very high, they don’t have to give one penny of their interest payments to the IRS.

For every simple idea I can envision, it goes without saying that clever lawyers, lobbyists, accountants, and financial planners can probably think of 100 ways to utilize deductions, credits, preferences, exemptions, shelters, exclusions, and loopholes. This is why class-warfare tax policy is so self-defeating.

And all of this analysis doesn’t even touch upon the other sure-fire way to escape high taxes — and that’s to simply decide to be less productive. Most high-income people are hard-charging types who are investing money, building businesses, and otherwise engaging in behavior that is very good for them — but also very good for the economy.

But you don’t have to be an Ayn Rand devotee to realize that many people, to varying degrees, choose to “go Galt” when they feel that the government has excessively undermined the critical link between effort and reward.

Indeed, if Obama really wants to “soak the rich,” he might want to abandon his current approach and endorse a simple and fair flat tax. As explained in this video, this pro-growth reform does lead to substantial “Laffer Curve” effects.

But you don’t have to believe the video. You can check out this data, straight from the IRS website, showing how those evil rich people paid much more to the IRS after Reagan cut their tax rate from 70 percent to 28 percent in the 1980s.

Many of the best jobs for computer programmers are concentrated in the San Francisco Bay Area, where dozens of innovative software companies—Google, Facebook, Apple, Intel, Cisco, Adobe—are located. This concentration of innovative, rapidly-growing firms shows up in income statistics. For example, the average wage in the San Jose metropolitan area, around $80,000, is among the nation’s highest.

Yet strangely, the Bay Area as a whole has been growing slowly. Between 1990 and 2000, the population of the Bay Area grew by 12.6 percent, slower than the 13.2 percent growth rate of the nation as a whole. Between 2000 and 2010, the Bay Area grew by just 5.4 percent, barely half the 9.7 percent growth rate of the nation as a whole. Compare that to the Phoenix metropolitan area. Despite dramatically lower wages (the average is less than $50,000) it attracted enough people to grow by a whopping 45 percent in the 1990s, and by 29 percent in the last decade.

A major factor is a severe shortage of housing in the Bay Area. Lots of people would like to live there, but the supply of homes hasn’t kept up. As a result, the median home in the Bay Area cost about $600,000 in 2009. This means that even though Silicon Valley firms offer some of the nation’s highest wages, many families can still increase their standard of living by moving to cities like Phoenix, where the median home costs about a third as much.

This pattern has been with us for long enough that most of us just take it for granted. Everyone knows that large cities are outrageously expensive, and that families often have to move to less glamorous cities to find homes they can afford. But in his new book The Gated City, Ryan Avent argues that this complacency is misguided. Living in the heart of a large city will never be as cheap, per square foot, as living in an outer-ring suburb. But the enormous discrepancy in housing costs between Silicon Valley and the Sun Belt is mostly a result of government regulations, not the inevitably higher costs of urban life.

In the 19th Century, the most innovative cities tended to also be the fastest growing. New York, Chicago, and Detroit all grew by an order of magnitude in the late 19th and early 20th centuries as key American industries grew in them. Skyscrapers sprang up in these cities’ downtowns. In New York and Chicago especially, developers built dense, walkable neighborhoods to accommodate the surging demand for housing. And this, in turn, helped keep supply in balance with demand and avoided large price increases.

This isn’t happening in Silicon Valley. If Wikipedia is to be believed, the tallest skyscraper in San Jose, the self-styled capital of Silicon Valley, is a pathetic 22 stories tall. Silicon Valley continues to be dominated by low-density, suburban patterns of development, even as housing prices have skyrocketed.

Why is this happening? In a nutshell, it’s because high-density development is illegal. The city of San Jose has 350 pages of regulations that place an effective ceiling on building density. The regulations include minimum lot sizes, minimum building setbacks, maximum building heights, minimum parking requirements, and so on. Of course, developers can apply for exceptions to these rules, but when they do so, city officials are besieged by what Avent calls NIMBY’s (“Not In My Back Yard”), local activists who strenuously oppose having more people live or work in their neighborhoods.

Avent argues that this isn’t just an aesthetic or lifestyle dispute between those who like the suburban lifestyle and those who prefer to live in cities. By strangling the growth of America’s densest and most productive cities, restrictive zoning laws actually make the nation poorer. When an engineer leaves his $80,000 job in Mountain View for a $60,000 job in Scottsdale, he may wind up with a larger house and more disposable income. But the economy as a whole becomes less productive. In a free market, developers would be allowed to supply more housing in Mountain View so that engineer could enjoy a higher salary and an affordable home. And the phenomenon isn’t limited to the Bay Area. Large, coastal cities like New York and Boston also have high wages but anemic population growth. Meanwhile, people flock to cities like Atlanta, Las Vegas, and Charlotte with lower wages but cheaper housing. Deregulation would not only allow more people to enjoy life in America’s most dynamic cities, but it would have a real impact on the nation’s economic growth.

The Gated City is a Kindle Single. It’s just $2, and short enough that you’ll be able to finish it in an afternoon.