Another Assault on Property Rights

A group of NIMBY enviro lawyers in Florida is trying to generate support to amend the state constitution. They want to subject major zoning reclassifications to approval by local referendum.

While I’m generally opposed to zoning, for property-rights and practical reasons (zoning tends to ossify the civic status quo), I was initially sympathetic to these guys because I thought their scheme might introduce more openness, consistency and accountability into the politicized zoning process. Let citizens have only themselves to blame for major zoning decisions.

But then I looked at the group’s web site and realized that my initial impression was naive. I had thought that the idea here was to make the system more accountable. However, the referendum advocates appear to be most interested in making the zoning reclassification process so burdensome as to halt development. They want to limit development to only those projects which are approved by socialist master-plans drawn up by unaccountable local-government planning agencies. They believe that a referendum requirement for major zoning changes would make it extremely difficult to change those master plans, and that this rigidity would be a good thing.

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Politicians vs. Information

Martin Devon comments thoughtfully about an innovative approach to evaluating geopolitical risk. He also quotes a couple of idiot pols who are agin’ it.

If you can create a real-money market in risk evaluation, it’s usually a good idea to do so, if only for price-discovery (in this case, risk discovery) purposes. People in the aggregate, voting with their own money, generally make better bets than do individuals who are merely writing position papers. And creating a market in risk assessment facilitates the pooling and hedging of risk. Of course these are the same principles that underlie insurance markets, which may be why some pols don’t like them. Imagine: individuals and businesses dealing with risk on their own, without needing politicians to “help” them. Too bad there’s no organized market for hedging away Congressional risk.

UPDATE: From Instapundit’s post on this topic and the comments here, there seem to be several objections to this idea. I paraphrase some objections (italics), below, and then respond. (Feel free to leave additional comments if I left anything out.)

Moral hazard: terrorists or other bad guys might cash in by betting in advance of their own terror attacks, or by committing terror attacks solely to make money. There is also incentive for govt officials, journalists, et al to manipulate the market by hyping nonexistent risk and then taking the other side of trades made by people who are betting on an attack.

There may be reason for concern, but it’s already possible to bet on terrorism: all you have to do is buy a large quantity of stock-index puts. And trades of this type, especially in a market dedicated to terrorism risk, would serve a valuable function by telling the world that something was up (in much the same way as an out-of-nowhere jump in the price of a stock may suggest that a takeover bid is imminent). The more narrowly tailored the market was — e.g., an assassination market for a particular leader — the more useful the information so transmitted would be. I think the benefit would probably outweigh the moral hazard, though I may be wrong.

With respect to people falsely hyping nonexistent terror attacks, markets are effective at discriminating this kind of false alarm. The first time it happened the market would probably move significantly, but after one episode of crying wolf the same tactic might not work again. It might also be possible to create legal penalties for false alarms. Such penalties wouldn’t deter everyone, but would at least impose a high expected cost on anyone who had something to lose, e.g., government officials and journalists, who are also the kinds of people most likely to be able to move the market by hyping terrorism concerns.

Innocent people might avoid participating in the market because there is a hypothetical risk that they would be arrested for knowing too much if they profited from terrorism predictions.

I don’t know. Whether this is an issue probably depends on how many people use this market and how much sense the government has. And it’s only a problem if they arrest innocent people. If they arrest guilty people it’s a benefit.

Information about pending terrorism is by nature private, and therefore public markets such as the envisioned terrorism-futures market would not be useful to predict attacks. As Glenn Reynolds put it:

An InstaPundit reader who is too smart to be in Congress emails with a more meaningful criticism: the futures market won’t identify “unknown unknowns,” since the betting — as with ordinary futures markets — must take place within the context of standard “products.”

It’s true that a public market would not discount private information, a.k.a. “unknown unknowns.” That’s generally true of markets. However, markets have a good record of making predictions based on publicly available information. The mistake is to compare a futures market to a crystal ball. The real comparison should be between the futures market and “expert” analysts who have no accountability for their biases. Markets look good by this standard, and the government could still do its own private research, much as financial firms do proprietary research in stock and futures markets, to supplement what it learned from public terrorism-risk markets.

Also, private information may become public if there’s money to be made. That’s a big advantage of markets in this case, as publicizing incipient terror attacks brings better countermeasures or the possibility that the terrorists will call off their attack.

It’s wrong to bet on misfortune and people’s deaths.

If this assertion is true, insurance is immoral, as are futures markets in agricultural commodities (betting on crop failures!) and stock indices (betting on, um, misfortune and people’s deaths). These markets are insurance by another name and are just as useful.

The reinsurance industry already does what terrorism futures are supposed to do.

This is partly true, though the reinsurance market operates largely out of the public eye and therefore may not transmit information as well as a futures market would. But if it’s really true that a futures market is unnecessary, then a futures market won’t succeed. It’s impossible to know for sure without trying.

If we’re lucky, someone overseas, like Tradesports, will start offering systematic opportunities to bet on terror-attack odds. Unfortunately, DARPA’s idea has unleashed so much demagoguery by American pols that it may be some time before anyone will be willing to set up such a futures market, even outside of the U.S. Pity.

Virginia Postrel has additional relevant links here.

Castro Regime About to Collapse? Let’s Push It

Paul Marks at Samizdata speculates about the end of Castro. It’s a familiar discussion. Predictably, the reader comments are full of jabs about the U.S. embargo, with one or two blame-the-U.S. assertions thrown in. Most of these arguments are beside the point.

One of the U.S. govt’s bigger blunders in recent decades was not overthrowing the Castro regime when it would have been relatively easy to do so. Instead we played around with tepid subversion and lost our nerve after a half-assed invasion which we allowed to fail.

Since then we haven’t had the will to do anything serious, and the result has been the transformation of the most advanced country in Latin America into a festering dung heap, and the destruction of the dreams, freedom and life potential (and in many cases the lives) of several generations of its citizens. The embargo is a sideshow that won’t change any of this.

Yet God forbid anyone suggests we deal with the root of the problem by overthrowing the Cuban regime. No, can’t have that — we must have stability. (Where else have we heard that recently?) Never mind that the vast majority of Cuban immigrants from the supposedly disastrous 1980 Mariel boat lift have been successfully integrated into U.S. society. Never mind that the Cuban populace is increasingly unhappy. Never mind that Cuba is militarily weak. No, we must take no risks. We must wait Castro out, even though doing so may consign more generations of Cubans to wasted lives; and even though it’s conceivable that, absent external pressure, the communist regime will survive Castro.

If we can consider destabilizing Iran, we should consider destabilizing Cuba. The risks of not acting may not be as great in the case of Cuba as for Iran or Iraq, but neither are the risks of taking action. Cuba is a damaged society and would take years to recover to a point where it would contribute more than emigrants to the Caribbean region, but that’s a reason to start the process ASAP. Just as the Middle East will be a better place with a democratic Iraq and Iran, so the Americas would be better without a dysfunctional communist kleptocracy led by a senile thug. Bush may have more important things on his mind, and our foreign-policy bureaucracy and think tanks may have given up on Cuba long ago, but perhaps it’s time to reconsider our tacit policy of non-intervention.