Archive for September, 2009

Coercion

September 30, 2009

Here’s a good example of it:  State to mom: Stop baby-sitting neighbors’ kids

Some neighbors have a voluntary arrangement between neighbors where everyone involved comes out ahead.  One mom lets several neighbor kids in her home before the school bus arrives.  The state of Michigan says she’s violating the law and needs to stop it.

At least if you read a little further, it sounds like some common sense is prevailing in the upper echelons the state government.

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A Few Good Columns

September 30, 2009

The first from John Stossel.  In it, he links to and quotes from a blog post from Mario Rizzo.  One interesting quote regarding the stimulus package:

At the outset of the Obama Administration, as Greg Mankiw reminds us, their economists laid out a series of predictions about where the unemployment rate would be with the stimulus package and without it. Currently, the economy is doing worse than their predictions of unemployment without the stimulus and, of course, much worse than the predictions with stimulus.

The stimulus apologists are ignoring the original prediction based on a model. By that prediction the stimulus is doing harm.

History shows us that several financial crises in the U.S. healed on their own rather quickly prior compared to financial crises after the 1930s, when it became en vogue for government to try and right the ship.

Another good column from Walter Williams, Is Disagreement with Obama Racism?

Race is no longer the problem that it once was. That doesn’t mean there are not white and black bigots and that every vestige of racial discrimination has been eliminated. What little racial discrimination remains is nowhere near the insurmountable barrier it once was. For the most part, white bigots are no longer respected among whites and I look forward to the day when black bigots are no longer respected among blacks.

When one says that race is no longer the problem it once was, it is not the same as saying that there are not major problems that confront a large segment of the black population. Grossly fraudulent education is a major problem but it has nothing to do with racial discrimination as evidenced by the fact that the worse education received is in the very cities where blacks dominate the political structure. Crime is a major problem but it has nothing to do with racial discrimination, particularly in light of the fact that blacks commit most of the violent crime in America and well over 90 percent of their victims are black. The fact of a 70 percent illegitimacy rate and only 35 percent of black children raised in two-parent homes is a major problem but it has nothing to do with racial discrimination.

Americans should disavow and not fall prey to the racial rope-a-dope being played on us by the nation’s race hustlers.

Really?

September 29, 2009

Russ Roberts at Cafe Hayek posted a link to this story in yesterday’s Wall Street Journal.

The Obama administration is close to committing as much as $35 billion to help beleaguered state and local housing agencies continue to provide mortgages to low- and moderate-income families, according to administration officials.The move would further cement the government’s role in propping up the housing market even as some lawmakers push to curb spending at a time of rising debt.

If this doesn’t cause you to stop and ponder the New Era of Responsibility, you may want to check your pulse.  This one disturbs me on several levels.

  1. This isn’t responsible.
  2. This sounds very much like the root cause of the stuff that got us into the previous mess – making home loans available to people who can’t afford them.
  3. This is a blatant and perfect example of how political pressures limit government’s ability to do stuff that sound politically popular on the surface, but have bad results.
  4. It perpetuates the idea that home ownership is right for everyone, rather than it being right mainly for the people who actually exhibit the responsible behaviors that usually qualifies one to own a home.

Thomas Sowell’s Brainy Bunch

September 29, 2009

Here’s a good read today from Thomas Sowell.  Some key words:

There is usually only a limited amount of damage that can be done by dull or stupid people. For creating a truly monumental disaster, you need people with high IQs.

Such people have been told all their lives how brilliant they are, until finally they feel forced to admit it, with all due modesty. But they not only tend to over-estimate their own brilliance, more fundamentally they tend to over-estimate how important brilliance itself is when dealing with real world problems.

Many crucial things in life are learned from experience, rather than from clever thoughts or clever words. Indeed, a gift for the clever phrasing so much admired by the media can be a fatal talent, especially for someone chosen to lead a government.

Smarts creates a dangerous veneer of legitimacy for many.  I prefer experience, as does Sowell, but I’m also skeptical of that.  I prefer results, but take those with grain of salt.

Back in 2005, Paul Johnson wrote a column in Forbes called Five Marks of a Great Leader.  He had some things to say about smart people too.  Two of the five marks were judgment and sense of priority.

What makes a person judge wisely? It is not intelligence, as such. Clever people with enormously high IQs often show scarifyingly bad judgment. Nor is it education. When I need advice, I rarely turn to someone with first-class honors from a top university. I turn to someone who has knocked about the world and cheerfully survived “the slings and arrows of outrageous fortune.” One man to whom I turned for his judgment was Ronald Reagan. Though not a scholar by any gauge, he almost invariably judged correctly on the few big issues that really matter.

Being able to judge well is often linked to an ability to mix with and learn from other people–not so much from experts but from common people, those who lack the arrogance of power or the desire to show off their intelligence but who nevertheless think deeply about life’s trials. A person of judgment develops the habit of asking questions of such wise people and listening to their replies.

In running a country or a vast business, one is faced with countless problems, huge and insignificant, and has to make decisions about all of them. Clever leaders (I’m thinking of Jacques Chirac) often have a habit of pouncing on minor issues and pushing them at all costs, even to the detriment of their real interests. Sorting out the truly big from the small takes an innate horse sense that’s not given to most human beings. It has little to do with intelligence, but it is nearly always the hallmark of a great leader.

Milton and Rose Friedman on Adam Smith’s Key Insight

September 29, 2009

From the Introduction of Free to Choose:

One set of ideas was embodied in The Wealth of Nations, the masterpiece that established the Scotsman Adam Smith as the father of modern economics.  It analyzed the way in which a market system could combine the freedom of individuals to pursue their own objectives with the extensive cooperation and collaboration needed in the economic field to produce our food, our clothing, our housing.  Adam Smith’s key insight was that both parties to an exchange can benefit and that, so long as cooperation is strictly voluntary, no exchange will take place unless both parties do benefit.  No external force, no coercion, no violation of freedom is necessary to produce cooperation among individuals all of whom can benefit.

And from  Chapter 1:

The key insight of Adam Smith’s Wealth of Nations is misleadingly simple: if an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it.  Most economic fallacies derive from the neglect of this simple insight, from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.

Lub Dub

September 28, 2009

“It’s the heartbeat of the world.  What seemed like a good idea five or ten years ago, isn’t a good idea now and it must be reversed.”

That’s how a colleague described the “Lub Dub Cycle” to me several years ago.  He credits one of his former bosses for educating him on the cycle.   Since then, I’ve seen it as a driving force in many things – business, politics, public opinion, sports trends, financing economic growth, subprime mortgage lending, elections, philosophy – just to name a few.

I was most recently reminded of it this past weekend when my wife and I visited with a friend on our hometown’s city centre, or The Square, as locals call it.  The city recently undid a works project taken on about 30 years ago around the town’s courthouse to make The Square modern and help employment.  Now, after undoing that work, the area around the courthouse looks the same as it did 50 years ago.

While our society tends to move forward providing us with high quality of life compared with our ancestors, much of our motion is governed by the Lub Dub Cycle.  I’m not sure Lub Dub is avoidable.  I don’t believe we’ll ever know what things will move us forward and what things will not until we try.  But, when undergoing a project it might be worth considering the Lub Dub.

You Aren’t Entitled to Anything

September 28, 2009

Several weeks ago, my pal Raoul Lufberry sent me this story from the Wall Street Journal, Why Your Coach Votes Republican.

Lou Holtz sums up the parallels between football and conservative principles:

You aren’t entitled to anything. You don’t inherit anything. You get what you earn—your position on the team. You’re treated like everybody else. You’re held accountable for your actions. You understand that your decisions affect other people on that team…There’s winners, there’s losers, and there’s competitiveness.

Good Column on Life Expectancy

September 28, 2009

Thank you Mary Josee-Kravis for this excellent debunking of the use of life expectancy as a measure health care effectiveness.   Some key words:

U.S. life expectancy at 65 (17.1 more years for males and 20 for females) is higher than in the U.K. and Germany. The more important point, however, is that life expectancy reflects not only health care but also diet and lifestyle. A raw match of life expectancy against health care spending is naive.

Take road fatalities: The U.S. holds the unenviable record of one of the highest rates in the developed world. Its road mortality rate is 15 per 100,000 people compared with 6.6 in Japan, partly because we drive more. Would universal health care shorten commutes or stop speeding? Would driver-distracting cell phones be shelved and more seat belts worn if there were universal health insurance?

Here are some stats I haven’t seen elsewhere:

The Organisation for Economic Co-operation & Development reports that 32.2% of Americans are obese. The OECD average is 14.6%, with Japan at 3%, France 9.5%, Germany 13.6%, Canada 18% and Australia 21.7%. Obesity isn’t caused by the health care system, but it does reduce life expectancy. It’s a lifestyle choice whose expenses are borne by everyone. Costs attributable to obesity account for almost 10% of health care spending in the U.S. In Canada the corresponding figure is from 2% to 3.5%.

Obese Americans spend an average of 36% more for health services and 77% more for medications than people of normal weight. They are 20 times as likely to develop diabetes, 2.5 times as prone to heart disease and twice as vulnerable to cancer, hypertension and asthma. Will health care reform cut portion sizes? A more pertinent question: Will obesity be classified as a preexisting condition preventing insurance companies from providing incentives for healthier life choices?

Supply and Demand Refresher

September 28, 2009

More words from Milton and Rose Friedman:

Economists may not know much.  But we know one thing very well:  how to produce surpluses and shortages.  Do you want a surplus?  Have the government legislate a minimum price that is above the price that would otherwise prevail.  That is what we have done at one time or another to produce surpluses of wheat, of sugar, of butter, of many other commodities.

Do you want a shortage?  Have the government legislate a maximum price that is below the price that would otherwise prevail.  That is what New York City and, more recently, other cities have done for rental dwellings, and that is why they all suffer or will soon suffer from housing shortages.  That is why there were so many shortages during World War II.  That is why there is an energy crisis and gasoline shortage.

This is how the law of supply and demand should be introduced.  This makes intuitive sense to most people.  It’s much more intuitive than the supply and demand curves.

Obvious Questions

September 25, 2009

In 1980, Milton and Rose Friedman wrote these words in their book Free to Choose regarding the energy crisis of that day:

Government officials, newspaper reports, and TV commentators regularly attribute the energy crisis to a rapacious oil industry, or wasteful consumers, or bad weather, or Arab shiekhs.  But none of these is responsible.

The subtle and sophisticated people who fill the newspaper columns and the airwaves with such silly explanations seem never to have asked themselves the obvious question: why is it that for a century or more before 1971, there were no energy crises, no gasoline shortages, no problems about fuel oil–except during World War II.

There has been an energy crisis because government created one.

To the despair of every economist, it seems almost impossible for most people other than trained economists to comprehend how a price system works.  Reporters and TV commentators seem especially resistant to the elementary principles they supposedly imbibed in freshman economics.

Obvious questions never get asked.

Much like in the energy crisis in the 70s, the usual suspects get blamed for our present day crises – bad mortgages, high gasoline prices and problematic health insurance.   Companies, CEOs, traders, greedy salespeople are the bad guys.  Unpopular politicians catch some blame too, but it’s usually misplaced and based more on how well the media and general public like the politician.

Obvious questions: Are these the right things to blame?  Why do some industries rarely or ever have crises and some seem prone with crisis?  What are the possible causal differences in these industries and how exactly do those causes generate the problems in one industry or not in another?