Tracing consequences both seen and unseen.
David M. BrownWhat if there were deficit thinking, thinking deficit, on a desert island?
Posted at 1:43 am on August 9, 2011, by David M. Brown

Let’s attempt the program of “economic stimulus” on a desert island. Five persons have survived the shipwreck. Joe is good at gathering berries and reeds, and dressing wounds; Al is good at fishing, hunting and basket-weaving; Bob is good at making huts and gourd-bowls; and Sam, who wants to spend all his time sharpening sticks, and who regards any other kind of employment as beneath him, cannot produce a tool of any usefulness.

Let more and more of the resources that would have been exchanged in life-fostering and productivity-fostering trade between Joe, Al and Bob be confiscated by a fifth person, the king (who happens to have the only gun, a Kalashnikov that he grabbed from the ship before it crashed; elsewise no one would listen to him). And let this confiscated wealth (after a suitably large finder’s fee for the king has been deducted) be given to Sam to subsidize his slow and pointless blunt-stick production, since it would allegedly be unacceptable for Sam to have to accept alms in accordance with the sympathies and judgments of his fellows. And let the king perpetually demand more and more “revenue” to distribute and perpetually bray that criticism of his taxing and spending policies by “economic terrorists” is undermining confidence in the island’s economy.

What are the effects of this confiscatory and redistributive process on the prospects for the islanders’ survival? Discuss.

[Cross-posted to Davidmbrowndotcom.]


Filed under: Culture, Economic Theory, Efficiency, Finance, Food Policy, Gains From Trade, Government Spending, Health Care, Labor, Law Enforcement, Local Government, Market Efficiency, Nanny State, Philosophy, Politics, Property Rights, Taxes, Trade, Unintended Consequences
Comments: None
 

Sarah BrodskyBodies
Posted at 1:39 pm on September 14, 2010, by Sarah Brodsky

The company behind “Bodies… The Exhibition,” which is coming to Missouri in October, has received a lot of criticism for displaying cadavers it obtained from the Chinese Bureau of Police. At least one Missouri congressman has tried to prevent the exhibit from appearing at a mall in his district. But the St. Louis Post-Dispatch reports that “Bodies” will take place as planned, because Missouri’s Attorney General is letting the company get away with a wimpy disclaimer:

“Premier cannot independently verify the complete provenance of the human remains in this exhibition,” reads the disclaimer, which must be displayed at the mall and on the exhibit’s Web page.

It can’t verify the provenance? Are we talking about oil paintings and wine bottles here, or human bodies? The disclaimer would be clearer if it read, “We have no clue whether anyone would have wanted their body parts to be displayed here, but since they can’t speak for themselves, we’re happy to cash in.”

It seems particularly jarring that this company is allowed to blithely collect admissions fees when you think of all the people who would like to purchase human organs from consenting donors, but are forbidden by law. There are people who would sign and notarize all the consent forms, and who are not Chinese political prisoners, and who would receive some personal benefit from the transaction. So why don’t we let them go ahead and sell their organs, with a disclaimer that they can’t verify… what? Their own free will?

No, that’s illegal, because the government has decreed such a transaction so morally hazardous that even saving a life doesn’t outweigh the danger. But when someone wants to tack human remains up on a wall and sell tickets, they can do that if they just mouth the right words. After all, the show must go on.


Filed under: Culture, Health Care
Comments: None
 

Christine HarbinInefficaciousness: Hot New Trend?
Posted at 10:48 pm on March 30, 2010, by Christine Harbin

[NOTE: Since the original publication of this blog entry, the classification “libertarian paternalism” has been corrected to “liberal paternalism.”]

I recently had a conversation with my good friend Justin who lamented that he had received his third parking ticket this year from the city of Madison, Wisconsin for violating the alternate side parking rule. “Alternate side parking is a racket designed to part the citizens of Madison with their hard-earned cash,” he told me.

I think that Justin is onto something, and this raises an additional concern that I have about aggressive ticketing and selective taxes: liberal paternalistic policies frequently fail to accomplish their official purpose.

The parking tickets haven’t changed Justin’s behavior; he continues to park on the side of the road that is arbitrarily wrong. The city’s alternative-side parking rules are so confusing and difficult to appeal, even smart people like Justin get trapped. Of course, that’s OK with the city; they’ll receive a steady revenue stream from parking tickets.

Selective taxes on fatty food and soda are another example of liberal paternalism that doesn’t accomplish their official purpose, which is to trim waistlines in aggregate. In this example, there is not a scientific consensus on whether they will accomplish that which they allegedly intend. In a recent piece on the Huffington Post, Dr. Pamela Peeke explains how many studies that prove the contrary are being ignored.

Last September, the New England Journal of Medicine published a policy report by a group of distinguished experts that called for taxing sodas and other sugary drinks to fight obesity. The news media gave a lot of attention to the report. But last month, the press did not give much attention to a group of letters from prominent doctors published in NEJM noting that the report failed to cite any scientific evidence showing a tax would reduce the cumulative weight of Americans.

Furthermore, slapping selective taxes on soda will be inefficacious at reducing obesity because an individual’s risk of obesity is not a direct function of the amount of sugary beverages that she consumes. Dr. Peeke argues that it is the result of many factors instead — some relating to genetics, others to lifestyle choices.

Government actually has an incentive for these taxes to be inefficacious, because then it can continue to generate revenue from them. I consider this to be further evidence that the primary purpose of new taxes to raise more tax revenue to support the government’s spending habit. Just like the indoor tanning tax, selective taxes on sodas and fatty food would be a revenue generator first and a behavior deterrent second. These taxes would easily generate a considerable amount of income for state and local governments. In a previous post on Show Me Daily, I used a revenue calculator for soft drink taxes from the Rudd Center for Food Policy and Obesity at Yale University to determine that Missouri could generate $285 million in 2010 if it taxed sugar-sweetened beverages at $0.01 per ounce, or over $460 million if this tax were expanded to include diet-beverages.

[Cross-posted at Amateur Philosophy]


Filed under: Health Care, Nanny State, Taxes
Comments: 7 Comments
 

Caitlin HartsellFalse comparisons
Posted at 11:19 pm on March 29, 2010, by Caitlin Hartsell

After reading the comments that appeared on Andrew Veen’s re-posting of  Jen Pierce’s excellent post on a newcomer’s perspective of libertarian arguments, I wanted to address one of the major problems I’ve encountered when having political debate with libertarians and non-libertarians alike: false comparisons.

This is especially a problem when talking about health care, which admittedly is a difficult topic. The argument people sometimes present is “perfect government” (in which the efficient government delivers services efficiently) versus “imperfect markets.”  Other times, it’s “perfect markets” versus “imperfect government.” Neither is very useful, as what really needs to be looked at is the actuality of how markets and government play out. Any debate that happens needs to involve what can be realistically expected from both the market and the government.

Market solutions, even in “perfect markets,” are relatively upfront about their negative points. A market solution, like one for health insurance, may not “include” everyone; a competitive market will bring the price down to a certain point so as to include more people (and sometimes, even most people) but there may be people who are still priced out and cannot afford the service, or insurance, or good. This is a flaw that is often used to attempt to discredit the solution.

The problem is that the government solution has flaws that are not initially apparent. For instance, in places like Massachusetts, Canada, and Great Britain, everyone has health insurance and coverage, but that equates to long wait times and rationing of care and quality. A lack of competition (and an excess of bureaucracy) stifles innovation possibilities and slows any moves toward efficiency. Also, governmental solutions have the backing of the law behind them; if one is unhappy with the service, there are limited legal methods to bypass them.

(Tangential note: Some may argue that rationing happens currently in the system we have, but rationing by price is a very different and more efficient mechanism than rationing by political clout. At any rate, the current system is too distorted by special interests and governmental infrastructure to be considered a market.)

The case of the sick little girl that Jen mentioned draws upon another part of the argument oft overlooked by pro-government solution proponents: the role of private charities. In the competitive market solution, people have more money to spend on other goods, including private charity.  Private charities must do good work in order to garner further donations; so in the long-term, the better charities will receive the most money and make the most impact. The market may leave some people out, but the private sector can pick up the loose ends.

So, while the market solution admittedly does not “include” everyone, it is disingenuous to compare it to a governmental solution that does “include” everyone. Each has their own faults, but the market solution has mechanisms to fix them, whereas one must resort to the black market to get around the flaws in the governmental solution.

(Also posted at Lady Libertarian)


Filed under: Economic Theory, Government Spending, Health Care, Uncategorized
Comments: 1 Comment
 

Christine HarbinThe Indoor Tanning Tax: Behavior Deterrent or Revenue Generator?
Posted at 10:40 am on March 27, 2010, by Christine Harbin

The 10% tax on indoor tanning services is the government’s latest effort to save us from ourselves. From an article on CNNmoney:

An indoor tanning tax will therefore “serve as a signal from the federal government to young people that indoor tanning is dangerous and should be avoided,” said Dr. William James, president of the [American Academy of Dermatology].

This tax represents an unfortunate and disturbing trend in public policy: it’s disguised as a means to “nudge” people into improved behavior, but its primary purpose is to provide an additional revenue stream. This 10% tax on indoor tanning will generate a considerable amount of money: $2.7 billion over ten years. How could a politician resist? State and local governments are facing large deficits, and they are understandably trying to account for their expenses. Government wants individuals to stop their bad habits, but not completely, because then it will generate no revenue from them. If all Americans switched to spray tanners and vitamin D pills as a consequence of this tax, then Congress would have something else to exploit tax.

Moreover, these selective sales taxes assume that the government/”choice architect” actually knows what the “right” choice is for other individuals. Whether something is healthy is subjective; it depends on who you ask and when. Some herald indoor tanning as healthy because it is a source for vitamin D; others say that it is unhealthy because it increases an individual’s risk of melanoma. Also, government is notoriously swayed by the interests of lobbying groups instead of the interests of their constituents — corn syrup is not very nutritious, but it certainly secures a significant amount of assistance from the U.S. government.

I don’t know who to believe — the rent-seeking lobbyist trying to save his industry from an imminent leftward shift of the demand curve, or the U.S. senators who just want my tax money to fund their pet projects to please their constituents to secure their re-election. I’ve made the decision that the risks associated with indoor tanning outweigh the benefits for me personally, and I know that other individuals may come to a different conclusion in their cost-benefit analysis. As a libertarian, I disagree that it should be the role of government to tell individuals how to behave.


Filed under: Health Care, Nanny State, Taxes
Comments: 9 Comments
 

Justin M. StoddardWe Are All Children, Now
Posted at 12:46 pm on March 24, 2010, by Justin M. Stoddard

Like I said yesterday, when everybody is responsible for everybody else, the logical outcome is, well, this:

Proposal to ban toys in unhealthy kids’ meals

“One in three kids are overweight or are obese, and we’re finding out more and more that if you’re obese as a child, you’re going to have health problems your entire life,” said Yeager.

In an effort to combat the nation’s epidemic of childhood obesity, Supervisor Yeager is proposing Santa Clara County create an ordinance regulating fast food restaurants’ ability to offer toys or other incentives with kids’ meals.

“Ten out of 12 meals that are associated with the promotional toys are the high-caloric, high-fat, high-sodium meals,” said Yeager.

No empirical scientific data is alluded to. We are to take it at face value that giving toys away with children’s fast food meals is…bad. According to Mr. Yeager, it’s bad because these meals are “high-caloric, high-fat, high-sodium meals.”

Here’s a list of proposed questions for Mr. Yeager:

-What scientific studies have been conducted proving a correlation between fast-food toys and childhood obesity?

-If no scientific studies have been conducted, are we just talking about a feel-good, anecdotal trope, here?

-What experience to you have, personally, with the science of nutrition and obesity?

-What other items that are ‘bad for you’ are you willing to ban?

-Do you feel you have a right in assisting me in determining the choices I make for my children?

-If yes, why?

-Do you lay awake at night, fists clenched, with the knowledge that somewhere, somebody is enjoying themselves beyond your scope of control? (My apologies to H.L. Mencken).

The article ends thusly:

Supervisor Yeager expects such a public health ordinance banning fast-food toy incentives could draw a challenge from the California Restaurant Association, but that it would legally fall under the health and safety codes.

If it is passed, this would be the first such legislation in the nation.

It will be the first, but it most assuredly will not be the last. We are all children, now.

[Cross-posted at Shrubbloggers.]


Filed under: Health Care, Nanny State, Unintended Consequences
Comments: None
 

Justin M. StoddardUnintended Consequences II
Posted at 9:19 pm on March 23, 2010, by Justin M. Stoddard

I wrote earlier this evening about some possible unintended consequences of the newly signed health care legislation. While attending my daughter’s orchestral debut, I thought of a few more.

-An increase in the Nanny State.

I first heard this argument put forth in my Junior year at high school: “Seat belts should be mandatory because we pay for the uninsured drivers who would get hurt without wearing them.” Since then, this argument has taken on more manifestations than I care to acknowledge. We need to regulate trans-fats, salt, cigarettes, cigars, MSG, butter, alcohol, fast cars, ad infinitum…for the same reason.

It’s about to get a whole lot worse. ‘We’ not only pay for the uninsured, now, ‘we’ pay for everybody. Since ‘we’ pay for everybody, ‘we’re’ now responsible for everybody’s health.

This is in no way hyperbolic. It’s happening right now: Brooklyn Dem Felix Ortiz wants to ban use of salt in New York restaurants.

As absurd as this sounds (and we’ve all had our laugh), his reasoning is ominous:

Ortiz says his bill is designed to save lives, just like laws that ban the use of trans fats and require chain restaurants to post nutrition information.

“It’s time for us to take a giant step,” Ortiz said yesterday. “We need to talk about two ingredients of salt: health care costs and deaths.”

He claims billions of dollars and thousands of lives would be saved if salt was taken off the menu altogether.

On second thought, perhaps this consequence won’t be so unintended, after all.

-People are going to get sicker and more obese

There is good reason to believe that the fault of our country’s current “obesity crisis” can be placed directly at the feet of well-intentioned governmental interference based on incorrect science. If we can expect the government to have an ever increasing role in what we can and cannot put into our bodies (see above), it follows that people will be lead to the conclusion that the way to maintain a healthy diet is to decrease fatty foods (red meats, butter, natural fats, etc…) and increase the intake of complex carbohydrates in the form of grains (whole wheat breads, cereals, rice, oats). This is most certainly the exact wrong thing to do.

There is enough on that subject for a whole different post (one that I believe Eric will be undertaking, soon). For the purposes of this post, it will have to suffice to say that the current model (the government backed food pyramid) is based on wildly outdated and faulty science. But, even if you don’t believe that a low-carb, higher fat diet is the road to health, at least you had a choice in the matter. Doctors have slowly been coming around to the notion that low-carb lifestyles have terrific benefits. Can anyone doubt that obesity patients (and patients with Diabetes, blood sugar problems) will soon be robbed of those choices? If the government backed model is X, you can bet that when the government pays doctors who treat obese/diabetic patients that X will be the prescription. The result will be an inescapable negative feed-back loop.

-When everyone is forced to have health care insurance, only criminals won’t have health care insurance.

As snarky as that may sound, this legislation will make criminals out of a whole new class of people. It’s really rather simple. There are no provisions for those who want to opt out. If you’re a woman and you don’t want maternity coverage…tough. If you don’t want mental health coverage…tough. If you don’t want coverage at all, for reasons that, quite frankly, are none of anyone’s business…tough.

Oh, we’re assured (wink, wink) that nobody will actually end up in jail for not buying coverage, but don’t you believe them. The end result is always the same. It’s always force.

-We will see a sharp increase in mental health cases in this country.

Everyone must now be covered for mental health. This can be as innocuous as a couple of trips a year to your therapist or as serious as treatment for Schizophrenia or OCD or ADD. Psychotropic drugs (Prozac, etc…) will also be covered.

When something is universally offered at a price below market value, people are going to naturally take advantage of that something. I imagine we are going to see a rather steep incline in the number of people seen by mental health professionals. This, of course, leads to a whole separate Pandora’s Box of unintended consequences. How much more money will be funneled into mental health, thus creating another negative feed-back loop? More people see more mental health professionals, triggering more federal money pouring into the field of mental heath, triggering more people seeing mental health professionals, etc…

Also, will more people be forced to take psychotropic drugs either based on bad advice or against their will? That, too, may be a subject for a future post.

Unintended consequences are a powerful thing. I wish more people were able to think deeply about them before jumping on bandwagons, however well intentioned they may be.

[Cross-posted at Shrubbloggers.]


Filed under: Health Care, Unintended Consequences
Comments: 4 Comments
 

Wirkman VirkkalaA growing incredulity
Posted at 7:27 pm on March 23, 2010, by Wirkman Virkkala

The passing of the Democrats’ medical institution reform package, by clever and opaque political maneuvering, has angered many people. Though all ancient sages unite to advise us not to lose composure about things we cannot change, I, too, have been a bit angry about the recent events regarding what is popularly (and nauseatingly) called “health care reform.”

But what interests me at the moment is how risky the Democrats’ maneuvers are. We often say that politicians can’t accomplish much. Washington is riddled with gridlock; its prime movers are not merely dishonest and petty, but unable to take stands.

Here, however, regarding the nationalization of medicine in the United States of America, the Democrats have taken a daring stand. They are bucking the growing incredulity amongst Americans that government can solve our problems by taking control. For the past few decades, the long-term trend has been towards skepticism about large-scale government efficacy.

But this long-term trend has had its set-backs. The three biggest counter-trends to growing anti-statist opinion have pertained to

  1. War — There was a lot of support, early on, for the conquest of Iraq;
  2. Anthropogenic Global Warming Catastrophe — There was a huge surge, in recent years, in the belief that there had been recent global warming, that this was in some sense unique, that human civilization had caused it, that this would only grow more dangerous, and that government could (and must) solve it; and
  3. “Health Care” — A rising number of people had begun to see rising costs and spotty insurance for medical care as a problem requiring a national solution.

In each of these three counter-trends to the rising general incredulity over government efficacy, the wave of pro-government sentiment has recently waned. Spectacularly.

Regarding the advisability of conquering Iraq, the widespread support for this had ended before the end of George W. Bush’s final term in office. Even Republican legislators, today, are almost unanimous in realizing that the war was a mistake. The general consensus, now? War and conquest and remaking other polities is tough work, and we should always be super-cautious about engaging in such action.

AGW catastrophism hit its peak popularity in 2008, and is now in steep decline. The leaked emails from Britain were in no small part responsible for this. Careful criticism also had an influence. And, finally, the silly folk sayings confirming global warming itself probably did the most to undermine the position. People can only speak risible nonsense so long before laughing. (Al Gore and media folk were largely responsible for encouraging the idea that every storm, every heat wave, and every exceptional weather event provided “more evidence” that global warming was happening. Record-breaking cold spells and blizzards heralded as signs of “global warming” became a popular folk joke in 2009 and 2010.) The hard rhetorical barrage Americans had been hit with for years — from scientist-advocates, media folk, popular entertainers trying to look serious, and Al Gore — appeared to toughen them up, not convince them.

Finally, support for new national programs for medical insurance peaked last year. By the beginning of this year, popular support had dropped to below 40 percent.

And here’s where courage comes in. It is now risky for Democrats to unite around an unpopular issue.

What could they be thinking? I mean, we expect politicians to rally around popular causes, not unpopular ones. Politicians have demonstrated a rather consistent desire to get re-elected. So what gives? What do they hope for?

I can think of a few possibilities:

  1. Democrats hope that, like Social Security, the new program package will grow in popularity over its first 20 years after implementation. Social Security became the infamous “third rail” of politics, which one dare not be seen to criticize, from the ’60s though the ’80s and beyond. They hope for a similar effect with health care regulation and nationalization.
  2. Democrats know that they have only a limited time in majority, in united government, and feel they have to do what their core constituency really wants, before they lose control. They are hoping that it will be harder to repeal the medical reform package than it was to pass. (It is harder, in America, to repeal programs than it is to create them. This is fairly well established.) Think of it as their “Final Solution.”
  3. They know that it will likely be struck down in courts, and that this will rally their supporters to take on a new, bigger fight, which they can make hay over for years.
  4. They really are (or, perhaps more likely, want to be seen as) ideologues, to appeal to their core supporters in the government unions, people who by their nature think that government is the key to all progress (the sole sense in which they can be called “progressives” . . . that is, they believe only in the eternal progress of increasing size, scope, and efficacy of political and bureaucratic governance).

In these four scenarios, they come out as risk-takers. People of courage.

But, when you look at the hodge-podge of proposals that make up the reform package, they come off as something else again. I’ll let the reader name that “something else.”

Republicans have a huge opportunity for a comeback, here, but only if they stick to the theme that nurtures Americans’ justified incredulity. And the only way to make this stick is to attack the package not for such things as Death Panels and Abortion support — proof positive that Republicans tend to be a rather brain-dead group, so off-point are most of these issues — but for its long-term and wide-spread negative consequences.

This is hard work. I have not done it here. We have only just begun. Thinking “beyond Stage One” (as Thomas Sowell puts its), identifying the “unseen” as well as “the seen” (as Frédéric Bastiat put it), striving to discover the long-term effects as well as the near-term effects (as Henry Hazlitt put it) — these critical modes of thought aren’t easy. They require effort. They rub against the grain of enthusiasm. They seem treasonous to people who demand symbolic action, and identify themselves chiefly by the “good deeds” they do by merely supporting a political party.

Ah, and there’s why we don’t see Republicans normally taking to this agenda. The technique of honest and thorough social thought cuts both ways. It cuts against the right as against the left. It makes hash of simplistic arguments for war as it does against simplistic arguments for government handouts and regulations.

But there is one thing we, who try to practice economic criticism, can take solace in: Our agenda may not be the mainstream political agenda, but it does fit in, very nicely, with the common sense of the American people. Americans’ native skepticism over government may be superficial, but it is strong, and it is growing.

By applying economic thinking, and publicizing this thought, we strengthen the growing incredulity to statism in American culture, and prepare the way, perhaps, even for an eventual political success.


Filed under: Health Care
Comments: 3 Comments
 

Justin M. StoddardUnintended Consequences
Posted at 5:14 pm on March 23, 2010, by Justin M. Stoddard

It seems appropriate to start my first entry on this blog with a quote from Henry Hazlitt, author of Economics in One Lesson, which is the inspiration for the name of this new adventure.

“The most frequent fallacy by far today, the fallacy that emerges again and again in nearly every conversation that touches on economic affairs, the error of a thousand political speeches, the central sophism of the new economics, is to concentrate on the short-run effects of policies on special groups and to ignore or belittle the long-run effects on the community as a whole.”

By far, the aspects of economics I pay attention to the most are those of Unintended Consequences and opportunity costs. When Hazlitt talks of “the short-run effects of policies on special groups and to ignore or belittle the long-run effects on the community as a whole”, Unintended Consequences and Opportunity Costs come into play

Several such consequences/costs come immediately to mind when thinking of the current Health Care bill recently passed by Congress and signed into law by President Obama.

-We can probably expect new innovations in medical science to stagnate.

We can never know what amazing technology will never be invented simply because the money or the incentive no longer exists to invent that technology. This points to Bastiat’s Broken Window Theory Fallacy, which simply states that though a broken window may unexpectedly enrich the window maker, it impoverishes the person who must now replace the window. His money could have been spent on something else, entirely.

-We can probably expect a new wave of crackdowns on immigration.

Though I have some problems with Milton Friedman, he had it exactly right when he said, “You cannot simultaneously have free immigration and a welfare state.” I understand that ‘illegal immigrants’ are not explicitly covered under this new legislation, and there is a good deal of economic proof that immigration is a net boon to the economy, but we must face some inconvenient truths. There is a strong movement in this country to give millions of immigrants ‘amnesty’, meaning they will not only be in the country legally, they will be on the first step to obtaining citizenship.

Do not misunderstand me, I applaud the efforts to make this happen as I agree with open borders/immigration. However, as the majority of elected Republicans are against this, if it is passed, it will be because of the Democrats. I do not mean to be cynical here, but the legalization and naturalization of millions of immigrants as a political movement coming from the Left has to be repaid somehow. Namely, there will be millions more in the Democratic party 10 years hence.

This will cause a huge, irrational backlash against immigration. An ‘unintended consequence”. Instead of attacking the welfare state, Republicans and others from the right will score points by fear-mongering and know-nothingness. We can assuredly expect the passage of a National ID bill sometime in the near future, and that’s not even mentioning the hundreds of millions of more dollars that will go towards “protecting the borders”.

It is going to be interesting to see how this plays out.

[Cross-posted at Shrubbloggers.]


Filed under: Health Care, Unintended Consequences
Comments: 3 Comments
 

Henry Hazlitt"[T]he whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."
Henry Hazlitt, Economics in One Lesson
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