Monday, December 28, 2009


Some moron tried to blow himself up on Christmas day. Fortunately he was a moron, and therefore unsuccessful but even morons get lucky now and then. Why do we as a country waste resources screening grandmas and grandpas versus using profiling? This is simple folks, limited resources must be used to target the most likely threats. Clearly looking at everyone doesn't work (as this episode has demostrated) so maybe we should try a different tact.

It just goes to show you, government, regardless of who administers it, is incompentent. Our safety is the most essential duty and they failed miserably. I suppose there's a lesson in here somewhere.

Tuesday, December 22, 2009

Government is greed

Misdirection is what magicians call it. They guide your eyes to see what they want while they perform the trick where you are not looking. Politicians call it success. They rob Peter to pay Paul, and abracadabra, money from thin air! Most of us never learn how magic tricks are performed, we like the illusion, we like fantasizaing that magic does exist. It doesn't.

But misdirection is only one half of the political magic trick. The other half is a bribe to convince you that magic is real. It relies on complicitly to look the other way while Peter is robbed. They pay so you will believe that your fantasy is real, money from thin air!

Taking government money is not an endorsement of magic, it is the denial of reality. People take it because it's there. People take it, because to them, Peter doesn't exist, he's where you aren't looking. People take it for precisely the reason Capitalism and the Free Market are so vehemently denigrated: greed.

Tuesday, December 15, 2009

"isms" and other nonsesne

Capitalism is the bogey man of the left and socialism of the right. Every time I get into political debates, people tend to throw around meaningless statements such as capitalism doesn't work or socialism works in theory. How can one argue against things counter to reality? You can't and that's where the political debate ends and conjecture takes over. If only we had a purely capitalistic or socialistic model, then it would work. Well I have news for you, there is no such thing as pure capitalism or pure socialism, there's life and the world we live in.

"isms" are ammunition for the weak. Instead of debating specific policies or principles, people conduct an attack on the "ism". What they are doing is dehumanizing their opponent and placing him into a box. His thoughts and ideas are no longer his own, but that of the "ism". And if the "ism" is evil, so is he. The real kicker is that no one can actually define what the "ism" means. No one knows and if you ask 100 people they will come up with 100 different answers. And its always the case that the "ism" changes to suit the charge.

"isms" are pathetic and those that use them are equally so. If you want to debate, then let's debate actual policy, and not the merit or demerit of some theoretical philosophy. I am an individual with thoughts and ideas of my own. So are you.

Wednesday, December 9, 2009

Political Strategy

Here's a strategic suggestion for the Republicans when debating the Democratic health care bill. Rewrite the bill in less than 2000 pages, say 100. Taking the Democratic bill and enumerating all its important points in 100 pages would inevitably raise an obvious question: What's in the other 1900 pages? This would make a great commercial.

Monday, November 30, 2009

Services and Costs

On my way back to Texas from Michigan, I was reading the Detroit News and came across a great point. Apparently, my home state of Michigan has a flat income tax, meaning they pay 4% (I think) on all wages above a certain amount. Now the current debate there is whether or not this flat tax should be converted to a progressive tax, similar to federal income taxes.

One astute commenter remarked that taxes are used to pay for government services. Think of it as a car pool, if 4 people share the car, then each should pay 1/4 of the cost. Economically this makes a lot of sense. Especially when you realize that if one person only paid 1/16 or the cost, that would have a profound effect on his decision of whether or not to car pool. The same is true for any good or service. Our desire for that service goes up or down depending on the cost. Remember that.

There are many of us who worry that too many people don't pay taxes, or don't pay enough taxes. The worry is simple. Government provides goods and services and they have a cost. If one doesn't pay those costs, then the calculus of utilizing those services is distorted and bad things happen.

As a society, we believe in helping those in need. On some level the desire for a progressive taxation system is designed to do just that. The problem with that system is it has a very undesirable side effect, it hides the costs of government. A more desirable system is to directly transfer wealth from those who have it, to those who don't. And then let EVERYONE pay EQUALLY for the costs of government.

Thursday, November 19, 2009

Is simplicity a partisan issue?

Who is against simplicity? Isn't it a generally accepted axiom that simplicity is preferred over complexity? There's even an acronym for it: KISS, Keep It Simple Stupid. I think simplicity is great and I can't fathom why promoting simplicity should be a partisan issue. Below are some simple questions that should have you scratching your head wondering: why is this so complex?

Why do we pay taxes?
-To pay for government services. Sounds simple enough.

Who should pay taxes and how much should each person pay?
-It appears that we all believe in a progressive tax system. Those with more ought to pay more.

So why do we have so many different taxes?
-We have payroll taxes, income taxes, sales taxes, excise taxes, corporate taxes, captital gains taxes, death taxes and probably many more I know noting about but unwittingly pay. It almost seems as if someone, somewhere, has deliberatly made the tax code ridicuously complicated.

Here's a crazy idea, let's have a stupidly simple (some might even call it genius) tax system. We have a single tax on individual income that is progressive. It generates revenue in the simplest possible form and soaks the the rich pay their fair share. That's it, no corporate income taxes, no federal sales taxes, no taxes for the privilege of dying, just one fat tax which does exactly what we need it to. Generate revenue to pay for government services. Who's against that and why?

Tuesday, November 17, 2009

Thank G-d for China

Starve the beast used to be the siren song of the right. Take away government's ability to spend and spending will be restrained. Unfortunately, the beast can print money and it doesn't have an appetite for restraint. Our country is heading towards a fiscal meltdown and it's only a matter of time. The economic policies being advocated by the Obama administration and the Democratic Congress are awful. They refuse to acknowledge this, because that would temper the beast.

Ultimately, nature enforces reality on a reluctant people, but we have been blessed with a gift, a warning shot, and we have the Chinese government to thank for it. One of the beauties of the marketplace is that it pits self interest against self interest. Caveat emptor, or "let the buyer beware" forces us to smartly distrust those we do business with. China is quickly waking up and their trust of the monetary and economic policies of the United States can kindly be described as circumspect. They have massive skin in the game, trillions of potentially worthless pieces of paper.

Every party has a point of view, and we can discover their biases by looking at their incentives. The United States owes trillions of dollars to the Chinese and others. It has a huge incetive to devalue it's currency in order to reduce that debt. The Chinese exist on opposite side of this spectrum. They own trillions of dollars and they don't want them to become worthless pieces of paper.

China is not the only US creditor; millions of Americans are also creditors to the US government. The difference, is that China is not a dispersed mass of economically ignorant people. China is a centralized regime with brilliant economists who see the writing on the wall. The United States is contemplating welching on it's debt. They are letting us know and thank G-d for that.

Friday, November 13, 2009

Health care and abortion

I am sure the writer of the following letter is opposed to restricting abortion in any sense. However, this is one line of argument that lacks logical cohesion. It supports the fallacy that insurance is about "pooling" risk, it isn't. What one ought to pay for insurance is the real expected cost for that person. Indirect subsidies are not insurance in any meaningful sense, except a political one.
To the Editor:

I would like to ask those people who, as a matter of conscience, do not want to see tax money being used to finance legal abortions where they think the money to finance that coverage comes from now. It comes out of their pockets, in the premiums they pay to their insurance companies.

Those who fought against the financing of abortions in the present health care reform bill may have good reasons for having done so, but pretending that keeping taxpayer dollars out of the equation somehow relieves them of financial complicity is a denial of reality.

Elizabeth Fuller
Peterborough, N.H., Nov. 10, 2009
Ms. Fuller is right in that the current insurance system acts upon a subsidization scheme, not on sound insurance principles. Basically, health insurance is insurance in name only. The conclusion drawn has the premise that this subsidization scheme is proper, it is not. We should end this indirect subsidization within the health insurance market and therefore allow people to pay for their own abortions. When will people admit that abortions arise out of controllable behavior. You don't come down with pregnancy. As someone who is not morally opposed to abortion, I find the inability to acknowledge this disturbing.

Thursday, November 12, 2009

Couldn't see this one coming

I was listening to Rush Limbaugh the other day and he made a great point. In the health care debate, the talk is never of creating more health care, never of increasing the supply, only of controlling costs, rationing care, sacrifice. One of the differences between the market and government, is that the market incentivizes creation, government doesn't. Here is a yet another New York Times letter from a disenchanted liberal lamenting the distribution of the H1N1 vaccine.
To the Editor:

Re “Officials Defend Distribution of Flu Vaccine to Companies” (news article, Nov. 6):

The defense by officials at the New York City Department of Health and Mental Hygiene of the distribution of thousands of doses of H1N1 vaccine to Wall Street firms is outrageous.

As an attending physician in pulmonary and critical care medicine, I find it disheartening that health care officials in New York City are not properly prioritizing those who require vaccination. The Centers for Disease Control and Prevention has clearly deemed that pregnant women, children, health care workers and people with underlying chronic medical conditions be vaccinated first.

As someone who cares for hundreds of patients with chronic respiratory disease, including young asthmatics on disability, I am deeply disturbed by the fact that my patients have no access to the vaccine.

It is difficult to fathom that physicians and nurses who work for large corporations have been empowered to distribute the vaccine and decide who meets the criteria for receiving it, whereas those of us who care for chronically ill patients, who are most at risk from H1N1 infection, have no access.

Although corporations that have access to the vaccine should, in theory, be following the guidelines set out by the C.D.C., the greatest need for the vaccine is clearly in our city’s hospitals and clinics.

Gail E. Schattner
New York, Nov. 6, 2009
Surprisingly I agree that the system ought to triage the use of a scarce medical resource. But why Mr. Schattner is surprised by the politization of this is beyond me. When will we learn that our governers are not saints?

Nevertheless, it's ironic that it never occurs to Mr. Shattner or the New York Times that reducing triage, aka rationing, ought to be the ultimate goal. Let prices reflect demand and encourage more supply from greedy capitalists. Fighting over who gets what and why will not provide everyone with more.

Wednesday, November 11, 2009

I'm from Stanford b*tch

Can anyone explain what being from Stanford has to do with the point he is making?
To the Editor:

Re “For Therapists in the Military, Painful Stories” (front page, Nov. 8):

It is striking to me as a trauma psychiatrist how much you focused on what was in Maj. Nidal Malik Hasan’s head and not on what was in his hands. He got onto a secure military base with two highly lethal civilian handguns, one of which could fire a bullet a second without reloading.

Our nation is infected with an epidemic of firearms, almost one for every person in the country. When you mix that many high-powered weapons with people, bad things will happen, like drinking and driving.

While Major Hasan may have suffered some secondary traumatization from listening to patients, he had not even been to a combat zone, and as your article concluded: “There are a lot of others who are worse off than him.”

Post-traumatic stress disorder doesn’t kill people. Guns kill people.

David Spiegel
Stanford, Calif., Nov. 8, 2009

The writer is associate chairman of the department of psychiatry and behavioral sciences, Stanford University School of Medicine.

Good meaning liberals

In my opinion, there are two types of liberals, naive well intentioned and the rest. There's a saying that if you are young and not liberal, you don't have a heart. If you are old and not Republican, you don't have a brain. I don't know how much truth there is to this adage, but this post goes out to all the well intentioned liberals who either don't know any better or close their eyes to reality. You are the hope for compromise between us and it is to the honesty within you that I appeal. Despite our differences, remember this: our goals are the same. Never forget that.

The world is unfair. That's a reality. Well meaning liberals want to change reality. They see inequality and suffering and demand that it stop. Any world less than ideal is a world for them to improve. And improve they must because reality is not ideal. It is unfair. And that is the essential fallacy of their beliefs, the fallacy of the young, the fallacy of innumerable possibilities not yet tempered by the harshness of life. The heart wants what it wants, but your elderly self reveals an inconvenient truth: You cannot change reality.

Idealism is not evil, in it's way it is noble. My only request to good liberals out there is not to confuse idealism with reality. You believe in noble causes, then believe in them sincerely. And understand that nobility doesn't allow you to ignore hypocrisy nor to ignore evil in the name of the greater good. If you are an honest liberal then call out all evil, even if it lowers the esteem of someone not worthy of your esteem.

In case this is not clear, here is an example of a "bad" liberal. Someone who ignored evil because it fit his paradigm of an idealistic world. The Wall Street Journal shows how John Kenneth Galbraith betrayed progressives by stating:
How the Soviets scrambled to keep up. After one of his chummy sight-seeing tours of Moscow in 1984, the Harvard economist John Kenneth Galbraith wrote an article about his trip for The New Yorker. The Soviet's "great material progress" impressed him, as did the look of "solid well-being of the people on the streets."
He should have known better, he did know better, but he was not honest with himself. He endorsed suffering because he was too weak.

Here are some things I expect good liberals to believe in.
  • Be against the Employee Free Choice Act - This takes away the secret ballot for union workers

  • Be against giving any subsidies to wealthy Americans - The only moral position for redistribution is for those in need. How can anyone justifying taking from one person and giving it to another for any other reason. This implies means testing for any and all programs that redistribute wealth

  • Be for school choice - It is abhorrent to condemn students to decimated schools because this isn't the ideal situation.

  • Speak out against blatant hypocrisy in either party. I want to hear you loudly condemn Al Gore's carbon footprint as loudly as you decry George W. Bush.
There are many more examples I could cite, but the point is that to be honest with yourself requires that you call out everyone, not just the other side. Are you a liberal I can work with? Are you a good or a bad liberal?

Tuesday, November 3, 2009

When you're right, you're right

When we started the New Liberal Democrat venture we wrote a little manifesto to explain our beliefs. Scary how dead on we were. In today's Wall Street Journal, one op-ed uncannily resembles our manifesto.
As a liberal she carries around in her head the liberal paradigm of how the world works and what needs to be done to make it work better. There's nothing wrong with that. We all use paradigms to make sense of what we see around us and couldn't get along without them. Unfortunately, the basic liberal paradigm hasn't shifted in a hundred years, while the world we live in has changed utterly since the late 19th century, when modern liberalism was born.

What is that paradigm? The basic premise is that the population is divided into three groups. By far the largest group consists of ordinary people. They are good, God fearing and hard working. But they are also often ignorant of their true self-interest ("What's the matter with Kansas?") and thus easily misled. They are also politically weak and thus need to be protected from the second group, which is politically strong.

The second group, far smaller, are the affluent, successful businessmen, corporate executives and financiers. Capitalists in other words. They are the establishment and it is the establishment that, by definition, runs the country. They are, in the liberal paradigm, smart, ruthless and totally self-interested. They care only about personal gain.

And then there is the third group, those few, those happy few, that band of brothers, the educated and enlightened liberals, who understand what is really going on and want to help the members of the first group to live a better and more satisfying life. Unlike the establishment, which supposedly cares only for itself, liberals supposedly care for society as a whole and have no personal self-interest.
And here's a snippet of our manifesto:
What is the best way to help men? This depends on how one views the nature of man. There are those who believe most people fit into one of three categories: the incapable, the weak, and the strong. They presume that if incapable people were allowed to attend to their own affairs, they would succumb to their irrational desires and irresponsible behaviors. They believe weak people are trapped in their present situation and unable to achieve due to forces beyond their control. They are convinced that the strong people exploit both the incapable and the weak.

These same people regard themselves as part of a distinct elite fourth category. One whose duty it is to shepherd the incapable and the weak from exploitation by the strong. They believe that their guidance and supervision is necessary for society to function, and that government is the instrument necessary to accomplish this.

Political Strategy for Dummies

1. Come up with solutions to people's problems
- You would think this would be obvious. The issue is that what I view as a problem others do not view as a problem. This is a case where perception determines reality. If you think income disparity is a problem, even though both people are fairly well off, then it's a problem. It's not the job of a politician to belittle your concern. It's the job of the politician to address it and come up with a solution.

2. Words matter
- Never implicitly weaken your argument by using incorrect terminology. The current health insurance debate is a perfect example. What's being described as insurance is really a system of subsidies. Whenever people opposed to reform use the term insurance to describe a subsidy they strengthen the false premise that increasing the risk pool can lower costs (it cannot). The Republicans would be much more successful if at every opportunity they reiterated that what the Democrats are proposing are indirect subsidies. Then they could argue for direct subsidies and shatter the entire fiction which is health insurance reform.

3. Be for good things and against bad things
- It's still perception stupid. People care far more about intentions than actual results. Therefore, to be successful, it is paramount to always be against inequality, unfairness, and any other bogeyman out there. It is also necessary to be for everything good. How we get there is the difference between us and them, but never fail to take the opportunity to tell the public that you want every child to have a world class education. And never state that it is acceptable for some children to be left behind (even though this may be inevitable).

4. Simplify, simplify, simplify
- Two posts ago I attempted to argue against spending as a means to stimulate the economy. Was I right? Who knows. I do know that very few people will ever take the time to think about economics and what politicians are telling them. Appealing to complicated arguments is bound to fail. Any argument must be so simple that it cannot be misunderstood. Or conversely, it must be simple enough to understand, i.e. cheating is wrong and they are cheating.

6. Absolutes are for suckers
- The constitution is dead, get over it. Any appeals to some unalterable document or some absolute right and wrong might make you feel better but will not change a damn thing. If your goal is to move the train in the right direction, then it's necessary to get off your soapbox and advocate ideas that stand a chance in hell of being adopted. It may not be ideal, but it will be better than the status quo.

7. Human nature doesn't change, it adapts
- Propose ideas which self regulate human behavior. These are called self regulating processes and a good example is the procedure your mother gave you for dividing a cake. One person slices and the other gets to choose. This process ensures that neither party can cheat. Don't propose solutions which require a super human (is incorruptible, etc.) to work. And remember to point out this flaw when criticizing other solutions.

8. Appeal to emotions over logic
- Unless you're Spock, logic doesn't get you out on the street, emotions do. All good politics appeal to base emotions and people's native sense of right and wrong. For instance, everyone knows that stealing is wrong. If you want to demonize your opponent's argument, an effective way of doing so is to conflate his argument with stealing. Now when the public thinks of his argument they will think of stealing and associate the same negative connotations.

Thursday, October 29, 2009

What about H1N1?

I am really starting to like the New York Times letters to the editor. They are so rife with misconceptions that it's like taking candy from a baby. Here are a few backward comments and one excellent one (who'd thunk it) from today.
I’ve been amazed at the photos of people — Democrats and Republicans — standing in long lines waiting for vaccines. Yet I have not read one complaint that the vaccines are free.

It appears that when a health issue directly and imminently affects individuals and their families, they quickly forget their objections to government-provided health care. No doubt, it is because they are suddenly able to imagine themselves, or worse, their child, lying in a hospital bed, clinging for life. The moral obligation of vaccinating the population as a national endeavor becomes obvious.

It is a shame that these same people are unable to imagine themselves, or someone they love, in a similar hospital bed, trying to overcome cancer, or heart disease or even just a broken ankle, and embrace the same moral obligation to provide all our citizens with national health care.

Duane Nelsen
Chicago, Oct. 25, 2009
I must applaud Mr. Nelsen for exposing what free health care for all means: long lines and waiting times. I wonder if he has considered the true cost of this "free" vaccine for a lawyer who makes $200 an hour and waits 2 hours in line to get a shot? Or how about for the average American making roughly $20 an hour? Oh and let's not forget the most important point mistakenly articulated in this article, there isn't enough vaccine to go around! Now that's a real bargain.

A moment of sanity. Thank god.
In August, a presidential panel estimated that up to 90,000 Americans could die from the H1N1 virus. Yet millions of Americans are still unable to obtain the vaccine because there has not been enough produced. Why is no one holding the Obama administration accountable for this looming public health disaster?

For months, the administration and Congress have been focused on the overhaul of the health care system. While reform of the health care system is certainly an important long-term problem, the lives of tens of thousands of Americans actually hang in the balance today.

How can we trust our government to handle a large, complex, long-term problem like the entire American health care system when it seems so inept at handling a single disease in a single year?

David F. Eisner
Westport, Conn., Oct. 25, 2009
Yeah, you would think this would give one pause to overhaul one sixth of the economy. Also, let's not forget that a Democrat is in office so we can't blame this on Republican incompetence (we were told that Katrina happened because Bush and his stooges were idiots). I am not so partisan. I think government incompetence is prevalent in both parties.

The letter below exemplifies what happens when government rations instead of the free market.
The one group nobody seems to consider is in the epicenter of the H1N1 virus. Ask yourself, who is exposed to it every day? Who touches the items of ill people all the time?

Where does the epidemic hit the hardest? In schools. Who is most at risk? The teachers.

And if teachers get sick, who will teach the children? Why aren’t teachers in the first group to get the vaccine?

Emily Farrell
Media, Pa., Oct. 26, 2009

The writer is a high school teacher.
I can't wait for a politician to come along and claim that they are the ones most important to society and should get the shot first. Or how about police and firemen, airline pilots, community organizers, etc. The voices from every direction will fight each other and plead with government to get the scarce resource. And if I didn't know any better, I might even call them special interests.

Tuesday, October 27, 2009

Does spending == stimulus

The New York Times is demanding yet another round (the third at last count) of stimulus spending. The question, other than what's the definition of insanity, is why did they think it would work before? The rationale for spending as a means of stimulating consumption is succinctly summed up by the Times:
The Senate could take a step in the right direction by extending unemployment benefits without further delay. That is the single most effective way to boost consumption — which, in turn, preserves jobs — because it creates spending that would otherwise not occur.
The key to the entire Keynesian argument is that the government can induce a shift in behavior through spending. While I admit to being no expert on Keynes and his economic philosophy, let's examine this implicit assertion.

Let's look at the simplest economy imaginable, canonically speaking, Robinson Crusoe on a desert island. Examining all economic activity there is easy. It consists of whatever Mr. Crusoe wishes to produce. There is no trading or anything else going on. In this simple example, production consists of, well...what he produces, but what is the equivalent of spending? Generally, we think of spending as buying something, but in this case there is nothing to buy. The reality is that there is no such thing as spending for Mr. Crusoe or for the rest of us. What Mr. Crusoe can do is make something and use it (known as consumption). What we think of as spending is really a synonym for trading (more on that later).

Later. Now let's complicate life a bit and introduce Mrs. Crusoe to this formerly idyllic island. Now the economy consists of both what Mr. Crusoe produces and what Mrs. Crusoe produces. Each can now trade with the other (or not). The catch is that in order for them to trade, they must value what the other produces more than what they produce. When they do trade, they are essentially spending one good for another good. Mr. Crusoe spends apples in order to get oranges from Mrs. Crusoe. Note that all the apples and oranges are still there. It isn't until Mr. Crusoe eats an apple that consumption takes place. Spending is trading, consumption is using up what has been produced.

Would you believe that even on a deserted island we have problems with the economy. In fact, we had problems even before Mr. Crusoe's better half showed up. The problem is that value is fickle, it can change at any point in time and for no reason. Value is in the eye of the beholder and only in the eye of the beholder. Value has no meaning outside of Mr. Crusoe. In other words, what Mr. Crusoe thinks is valuable defines what is valuable and he can destroy value simply by thinking something is not valuable. This may sound obvious, and it is on a desert island with only Mr. Crusoe. But today, in a not so deserted island, the same holds true for all of us.

Imagine that on Monday Mr. Crusoe really wants a coconut hat. He sets forth to make it and on Tuesday he realizes that he really doesn't want a coconut hat. On Monday the coconut hat was worth something, on Tuesday it is worth squat. Is this irrational, yes, but so are we. We are not concerned with rationality, only with value. The reality is that something that had value on Monday to Mr. Crusoe no longer has any value on Tuesday. You see, even in this exceptionally contrived example there is always a risk that our preferences change and value is destroyed.

Now when we introduce other actors into the economy such as Mrs. Crusoe this risk of our preferences changing and value disappearing grows. Imagine that Mr. Crusoe produces an orange in anticipation of spending it (trading it to Mrs. Crusoe) so that he can get an apple. Notice how he risks not only his preferences for apples changing but also he risks Mrs. Crusoe's preference for oranges changing. Either one of those destroys the value of what has been produced. As more and more people join our island, the risks increase. Of course, there are a myriad of benefits to compensate us for those risks, but they are there.

But back to the basics again. When our wants are based on habitual wants and desires, the risk of our preferences changing is small. Food, shelter, and sex are some of the most basic of all desires and it should be no wonder why one is the oldest profession. But when we get richer and our wants are for things not so habitual, say watching a football game, then the risk of our preferences changing is high. A starving man will not accept a football game as payment.

We are a very rich society and most of the things we value are arbitrary in nature. Video games, huge houses, fancy cars, ipods, etc. These things have value for sure, but that value is subject to a lot of risk because they aren't tied to survival, the most basic and consistent desire of all. In the hierarchy of things, secondary items have value only once our basic needs are met.

So this brings us back to the New York Times:
The Senate could take a step in the right direction by extending unemployment benefits without further delay. That is the single most effective way to boost consumption — which, in turn, preserves jobs — because it creates spending that would otherwise not occur.
First, the New York Times confuses consumption with spending. Consuming things that have been produced doesn't create anything. What they mean is that when I eat an apple (consumption) that I will want another one and I will produce an orange (production) and trade (spend) to get another apple. Implicitly there is the notion that people are not trading but nowhere is it explained why. Well, the answer is that in response to real conditions of the economy and uncertainty about the future, people's preferences have actually changed and the real value of certain products has been destroyed.

The assumption is that by printing funny money we can change back the preferences of people to what they were before. I do not believe this is true. The first goal of our economic policy ought to be to restore confidence in the economy and in people's lives. I believe that as a result of people's fear they have shifted what they value from secondary niceties to putting money in the bank for a rainy day. Only when people do not fear the future will the value for secondary items go back up in real value, which is completely arbitrary. The New York Times solution doesn't address the cause of the problem (uncertainty leading to a shift in value throughout the economy) and only looks to address the effect (lack of trade of certain items). Like the many stimulus packages we have had so far, another one via the extension of unemployment benefits will not work.

Tuesday, October 20, 2009

More Health Care Folly

One thing I have noticed in the NY Times letters to the editor, is their excessive use of appeal to authority. It often goes like this: blah, blah, blah, I'm a professor at Stanford, b*tch!

Today the New York Times has just the right mix of professional and amateur dolts.

In the Senate Finance Committee’s bill, that is the bronze plan, which requires that insurers cover only 65 percent of medical bills, leaving a whopping 35 percent to the patient. Many will forgo beneficial services because they will not be able to afford the out-of-pocket costs...


Stephen M. Davidson
Boston, Oct. 18, 2009

The writer, a professor at the Boston University School of Management, has written a forthcoming book about health care reform.
Perhaps in his book he can go over the concept of spending what you can pay for. His argument is that if people are forced to directly pay the 35% of expenses for health care, they might <gasp> consume less care. No, no, no. We can't have people rationing their own care given their own values and preferences. Let's pretend that unlimited care is possible and then have the government backdoor rationing because the tooth fairy doesn't exist.

And then there's the obligatory, it's not Obama's fault comment:

Rather than camping out in this so-called Frustrated Left crowd, perhaps Mr. Blumenauer should find his backbone and stand up for a public option. We have a Democratic majority, yet the Democrats in Congress seem to have forgotten that.

If a public option dies in Congress, Mr. Blumenauer will be more at fault than President Obama.

Jane Endacott
Portland, Ore., Oct. 18, 2009
Here is my favorite, it's the jews! OK, they didn't say that, but jews have historically played the role of greedy middlemen, the moneychangers.
Why do health insurers hold a privileged place in health care at all? They make no diagnoses, empty no bedpans, build no hospitals, sweep no corridor floors. Health insurers are little more than overpaid, profiteering middlemen who produce very little.


Dennis Sentilles
Rocheport, Mo., Oct. 15, 2009
Mr. Sentilles, insurers actually produce something of value to society. It's called insurance and it's apparent you don't understand how it functions. Hopefully you can catch my next class on LiveAmerica.

And finally there is the, "oops, I mistakenly argued my opponents position" comment:
...Hawaii has achieved this top-functioning status without fancy payment-by-diagnosis schemes or forcing physicians into large groups. (It also helps that Hawaii has avoided overbuilding of expensive technology.)

I only wish the folks in Washington would learn from Hawaii!

Sarah K. Weinberg
Mercer Island, Wash., Oct. 17, 2009
The writer is a retired pediatrician.
Let's hope that Washington doesn't learn that we can keep costs down by preventing expensive life saving technology onto the market!

Compassion misplaced

Gotta love NY Times and its readers. Here is a letter that begs for criticism:
To the Editor:

Re “Fellow Inmates Ease Pain of Dying in Jail, and Glimpse New Life” (“Months to Live” series, front page, Oct. 18):

As a former prisoners’ rights lawyer now working in the end-of-life field, I find it commendable that some prisons are providing hospice services to dying inmates, using inmate volunteers. Clearly, both benefit, and such programs should be expanded, as hospice generally ensures that the dying receive the best end-of-life care.

But too many inmates are now dying in prisons when they could be safely released to die at home with hospice care and the support and comfort of loved ones. Procedures should be established or expanded for compassionate release to make this happen.

David C. Leven
Executive Director
Compassion and Choices
of New York
New York, Oct. 19, 2009
I wonder how much compassion some of the prisoners showed to their victims in their end-of-life "care". People are generally put in prison because they did something very bad. They are being punished for their crimes and removed from society in order to keep us safe. I get the feeling that Mr. Leven feels that punishment in and of itself, i.e. dying in prison, is cruel.

Saturday, October 17, 2009

The fight's not over

It seems that time heals all wounds, or maybe we just forget. Health care reform is back and being ramrodded through Congress. The good thing is that some Democrats are nice enough to keep this argument front and center. I thank them for yet another opportunity to point out the insanity of their plan. Paul Krugman sets out to dispel a report critical of the health care bill. You have to think even he doesn't believe the nonsense he writes. He starts with an acknowledgement of common sense:
The motivation for the AHIP report seems to have been the decision by the Finance Committee to weaken the penalties for individuals who don’t sign up for insurance, even as it retains regulations requiring that insurers offer the same policies to everyone, regardless of medical history. The industry worries that some people will game the system, remaining uninsured as long as they’re healthy, then signing up when they get sick.

This is, believe it or not, a valid concern. Many health-care economists believe that a strong individual mandate, requiring that almost everyone sign up, will be needed to make health reform work. And the Finance Committee probably did weaken the mandate too much.
Believe it or not! Oh my god, the critics have a point! Yes Mr. Krugman, if you guarantee that no one can be refused insurance, then why wouldn't you buy insurance at the point at which you get sick? DUH! Interestingly, the market solution would be not to guarantee coverage, thereby making people responsible. Of course, the average American is irresponsible, so let's force them to buy coverage. What's the reason for the low penalty, pure political calculation.
As I said, the individual mandate probably should be stronger than it is in the Finance Committee’s bill. But there’s a reason the mandate was weakened: fear that too many people would balk at the cost of insurance, even with the subsidies provided to lower-income individuals and families...
When your leaders deliberately put forward a bill that even the most liberal nut points out is problematic, it's time to wake up to their true intentions. Here is some more nonsense from Mr. Krugman.
One argument was particularly striking: the claim that attempts to limit Medicare spending would lead to higher insurance premiums. In fact, the report assumes that 100 percent of any reduction in Medicare payments to hospitals will translate into higher costs for patients with private insurance.

The only way to justify this claim is to assume that all hospitals are purely charitable institutions, charging as little as they possibly can. Now, some hospitals may fit this description. But all of them?

What’s more, this argument stands the usual logic of markets on its head: if you believe AHIP’s story, competition raises prices instead of reducing them. And it doesn’t matter where the competition comes from: anyone who gets a better deal, whether it’s Medicare or a private insurer, makes life worse for everyone else. I don’t believe that, and neither should you.
Now that President Obama has won a Nobel Prize, I can safely reduce it's prestige in the case of Mr. Krugman. In essence, his argument is that insurance companies are ripping people off. The private "greedy insurance industry" is evil and government good. Let's conduct a more rigorous analysis.

Ask yourself what is the minimum price a hospital can charge for a service. If you said, the cost of the service, go to the head of the class. What's the maximum it can charge? That's a tougher question. It wants to charge the profit maximizing price. Sometimes it doesn't charge that price; sometimes, it charges just a little above it's costs. Why you ask? Competition. The reason the report assumes that reductions in Medicare translate into higher costs for private insurers, is because health care companies are not making excessive profits.

Today, private companies are subsidizing medicare similar to the way Americans subsidize the costs of drugs for non-Americans. If a service costs $100 to produce and Medicare pays $90, then how is the $10 shortfall accounted for. Obviously this cannot continue for long unless we want doctors to go out of business. What happens is that the private insurance market pays $110 for the same service. That way the doctor's and hospitals can stay in business. For every dollar Medicare pays below what it actually costs to produce the service (profits are a necessary cost by the way) the private market must pay more. Otherwise, revenue will not cover the costs. The only way for Mr. Krugman's argument to hold water, is if the insurance company was making excessive profits for a service. In that scenario, they would eat the reduction in payments by Medicare (this also assumes that Medicare is charging the "right" price). This is not true. If it were, then non-profit companies, which already exist in the market, would dominate. They don't.

Don't stop the fight. Contact your congressman and urge them to resist this bill. There are better ways to improve things than a deliberate, stealth attempt for government control of health care.

Monday, October 12, 2009

Welcome the Machines

My last post was supposed to be interesting. I think I failed, but if anyone was curious, here is the point I was attempting to make. The economy grows because of gains in efficiency. The machines allow fewer people to make more stuff. The fallacy with cursing machines (and foreigners) for stealing jobs is the assumption that displaced workers can't do anything else. People always assume that there are a limited number of jobs. The contrary is true. Jobs are something that are created and they can only be created when resources are freed because of efficiency gains. It is because of the machines that new products and services can be developed.

It is true that some people are displaced which can be very difficult. But that is the price we as a society pay for progress. There is no way to have progress without "creative destruction". The solution is not to impede progress but to mitigate the human suffering caused by it.

The same holds true for offshoring. Cheaper labor is no different than creating a cheaper machine. In both cases efficiency has been increased and society as a whole is better off.

To see why the system is better off we have to consider what wealth was in the system before and after the efficiency gains. In order to do this, we have to figure out what company X produced. That wasn't mentioned so let's assume it produced apples, I like apples. Company X consisted of 100 employees all employed in producing apples. Let's say they made 100 apples. It doesn't matter how much those apples are worth in terms of money, all we care about is the number of "things" in the system. In reality, this is the true measure of wealth, not money. Money is a tool, but I'll talk about that in another post. Right now all labor and capital is employed in producing 100 apples. This is therefore the current maximum production of the system.

All of a sudden someone makes a machine which replaces every single employee. The machine produces the same 100 apples as before. What happens to the displaced workers? Do they sit around and do nothing? No, we are not European. In America, available labor gets to work and creates new products and services. Let's imagine that those newly freed resources make cellphones. I like cellphones because I am old enough to remember that cellphones didn't exist 20 years ago. Pretty amazing when you think about it and a good example of a new product that is now ubiquitous. For the sake of argument let's say the 100 workers produce 100 cellphones.

Now let's examine the wealth in the system before the machine and after.
Before: 100 apples
After: 100 apples, 100 cellphones.

In both situations there are only 100 people. This means that on a per capita basis the second scenario is clearly better. This is indisputable. We may have issues with how to distribute the new bounty of cellphones, but that is a separate issue. In fact, it may have been the case that we had problems distributing apples, but I digress. The point is, if we want the system (and it's principal components, namely people) to become better off, we need to build more machines and utilize lots more cheap foreign labor. Or to say it another way, we need to promote efficiency gains in all their possible forms.

Thursday, October 8, 2009

Beware of the machines

Progress is a positive word. But progress implies change and change implies a different state of affairs than we have today. The biggest fallacy promoted in economic thinking is that how things are is the only way they can be. True progress means that tomorrow will be different, but it also means the destruction of today.

Is offshoring progressive? Offshoring involves transferring jobs from the United States to foreign countries in search of cheap labor. Let's look at the economics:

  • Company X has 100 workers that it pays $100/hr
  • Company X replaces those workers with foreign workers and pays them $5/hr
  • Total cost before offshoring: 100 * $100 = $10,000
  • Total cost after offshoring: 100 * $5 = $500
  • Benefit to Company X: $10,000 - $500 = $9,500
We can't forget about the workers. The U.S. workers are out of jobs. The foreign workers now have jobs. On net, it seems the U.S. workers have been screwed.

This is the progressive view of the world and it appears progress is bad for workers and good for business. I disagree. Let's ask another question, is efficiency progressive? Back to the economics:
  • Company X has 100 workers that it pays $100/hr
  • Company X builds a machine which replaces the workers. The machine costs $500
  • Total cost before efficiency gain: 100 * $100 = $10,000
  • Total cost after efficiency gain: $500
  • Benefit to Company X: $10,000 - $500 = $9,500
Once again we must consider the workers. The U.S. workers are out of work. No foreign workers have been employed. Replacing people with machines is even worse than offshoring. Only the company benefits, everyone else is screwed.

Something doesn't make sense here. Forget about offshoring for a minute and only consider efficiency gains, i.e. the machines. It would seem that productivity gains are a loss for laborers. Every machine puts people out of work and they only benefit companies. But we know that over the short course of the last century machines have proliferated and the standard of living has increased. How can this be?

I won't answer the question but I will preempt one line of argument. It is not the case that the reason we have progressed is because the machine needs someone to build it or to maintain it. Even if this were true, the sheer number of workers necessary to build the machine and maintain it are far less than before. This means that more people lose jobs rather than gain jobs as a result of the machine.

I am a big believer that I cannot force people to want to know. People who want to know must figure it out on their own. So if you want to understand, here are some questions to get you thinking on the right track:
  • What happened to all the farmers we used to have?
  • Did your parents have cell phones?
  • Why has our economy transitioned into a service economy and what does that mean?

Score one for the NY Times

A useful adage to keep up employee moral is, "catch 'em doing something good." Gail Collins writes in the New York Times today that Charlie Rangel should step down as chairman of the Ways and Means Committee because he has problems paying his taxes. She states:
Whenever a powerful committee chairman has so many problems that you need a timeline to keep all the allegations straight, he is a liability. When those problems revolve around things like failure to pay taxes, it is not a good plan to have him be in charge of tax policy.

Despite my great stake in keeping Rangel in his current post of power, I’m not prepared to argue that you can have a chairman of the tax-writing committee who failed to declare $75,000 in rental income on a Caribbean villa on his tax returns. Or one who seems to think you can turn yourself into a resident of two different cities if it gets you cheaper housing — and that the House only requires its members to list their financial assets beginning with the letters F through M.

But this is a test of whether the Democrats will follow through when it’s really, really hard.

There are tons of people in Congress who have huge egos and an impatience with the minor irritations of life. If the Democrats made Rangel step down, it would be a reminder that holding public office means you have to be more conservative about drawing the line between proper and improper behavior than your humblest constituent.
Kudos, Ms. Collins.

Tuesday, October 6, 2009

American Exceptionalism

Exceptional – adjective
1. forming an exception or rare instance; unusual; extraordinary:

American Exceptionalism is not about explaining America's greatness but the fact that America's greatness is so exceptional. Exceptional, because Americans aren't intrinsically better than anyone else. No where does an "American" gene exist which imbues us with superior qualities. The simple truth is that in all respects our genetic makeup is patently unexceptional.

So how then, in a speck of time, has a country populated by ordinary people developed into the greatest nation in the history of the world? Free market capitalism. It is free market capitalism which takes ordinary intelligence and transforms it into extraordinary wealth. It is free market capitalism which settles disputes between people without the necessity of force. And it is free market capitalism that is the singular difference between us and the rest of the world.

Americans need to take heed because we face a crossroads. Somewhere we have lost our way and have begun to think we are unique, evolved, special. That it's in our genes. It is not. The only thing unique is the structure of America. That structure is special and it's what fools us into believing we are special. Take away free market capitalism and America is just like all other nations. It's people already are.

Friday, October 2, 2009

Is Life a Disease?

The New York Times goes off the deep end again. From the source:
Critics of pending health care reforms claim they want to ensure that the government does not thrust itself between patients and doctors to dictate what medical procedures can be performed. Yet many are trying to do just that when it comes to one legal and medically valid service: abortion.
Why is the New York Times surprised by this? Abortion is an extremely divisive issue. No one should be shocked that citizens morally opposed to abortion would not want public funding (read: their money) used to support abortion. The conflict the New York Times is so perplexed about is a direct result of government interference in health care. Remove government from the debate and the conflict disappears.

The other problem here is the New York Times is treating pregnancy as a disease. It is not. Pregnancy is a consequence of controllable behavior. If one does not wish to have a child and needs an abortion then there is a simple solution. Don't have sex. That might offend some who see their right to engage in any behavior as unfettered, but the issue is not one of right but of responsibility. If you want to play then it is your responsibility to pay the cost.

The New York Times believes in the right to abortion and the lifestyles which necessitate them. It is inappropriate to force people to subsidize those lifestyles in the name of medical care.

Wednesday, September 30, 2009

Capitalism: A Love Story

I want to see this movie. I really want to see this movie. But I won't. I won't because I believe in capitalism and it's many virtues. One of those being my choice on how to spend my hard earned money. In every transaction we always have the ability to walk away and that's what I am going to do. I only wish Mr. Moore would indulge me by living up to his virtues.

A little while ago I wrote a post, "Would you cure cancer?". That post talked about up front costs and marginal costs of production regarding drugs. It just so happens that movies are just like drugs. It takes millions to make a movie, but once it is made, seeing it is practically costless. I mean, how much more does it cost for one extra person to sit in an empty theatre? So I implore Mr. Moore: Help me, help you destroy capitalism and give me a free ticket. I need it!

Monday, September 21, 2009

Words used to mean what they meant

When words lose meaning it becomes impossible to communicate. We New Liberal Democrats, more than anything else, believe in transparency. Transparency as in Occam's razor, as in simpler is better. A simple tax is better than a convoluted tax. Giving people money is better than insanely complicated schemes to help people. Being the skeptics we are, we find complication fishy. Who benefits from this complication and why aren't they willing to just say what they mean?

Words are misused to deceive. If you're argument is superior it is imperative that other's don't change the meaning of your words. The Republicans have made a strategic error in the health care debate. There is no such thing as insurance for people with pre-existing conditions. Below we have two Republicans arguing for their version of health care:
In 2006, the Republican Congress and President Bush passed legislation encouraging states to create "high-risk" pools where those with pre-existing conditions could receive coverage at roughly the same rates as healthy Americans. State-based high-risk pools spread the cost of care for those with chronic diseases among all insurers in the market. The additional cost of their care is subsidized by the government.
Wrong, wrong, wrong. If you read between the lines, they are not providing insurance at all. They are promoting that private insurers provide a subsidy. They'll charge everyone else a bit more making up the rest with what...a subsidy from the government. Why propose a backdoor subsidy through the private insurance market instead of a direct subsidy to people with pre-existing conditions? You got me, but it accomplishes one thing: it makes it sound reasonable that you can insure something that is un-insurable. Brilliant!

Next we have our fearless leader talking about the healthcare penalty on George Stephanopoulos's show:
Mr. Obama: "No. That's not true, George. The—for us to say that you've got to take a responsibility to get health insurance is absolutely not a tax increase. What it's saying is, is that we're not going to have other people carrying your burdens for you anymore . . ." In other words, like parents talking to their children, this levy—don't call it a tax—is for your own good.

Mr. Stephanopoulos tried again: "But it may be fair, it may be good public policy—"

Mr. Obama: "No, but—but, George, you—you can't just make up that language and decide that that's called a tax increase."

"I don't think I'm making it up," Mr. Stephanopoulos said. He then had the temerity to challenge the Philologist in Chief, with an assist from Merriam-Webster. He cited that dictionary's definition of "tax"—"a charge, usually of money, imposed by authority on persons or property for public purposes."
Why wouldn't Mr. Obama want to call this a tax? The answer is obvious, taxes have a negative connotation. Liberals should be outraged by this but I doubt anyone is losing sleep.

If it walks like a duck, quacks like a duck, looks like a duck, the New Liberal Democrats will call it a duck

Friday, September 18, 2009

Mafia Wars is life

Video games are great in that they are entertaining and enlightening. In my quest for the biggest, baddest mafia of them all, I've run into some rivals who wanted to take me down. They attack me, rob me, and even punch me in the face! What really gets me though, is when I am robbed by a weaker mafia. The game designers decided that you can only defend yourself in proportion to your level - call it the escalation doctrine. Even though I am absolutely stronger than my opponent, I am unable to protect my property. What's a mobster to do? Kill! Kill! Kill! Because I can attack my rival with impunity, I go after them with everything I got. Alas, my vengeance is tempered by the genius game designers. For some reason, I cannot kill my opponent, only continuously nick them. This leaves me and my rival in a pickle. We are left with begging and bribing other players to do our dirty work for us. So often have we put "hits" on the other, that we are scant to expose ourselves in the open. Right now, I am typing this from an undisclosed location.

What lesson should be learned from all of this? To find out, we need to turn to that seventies cult phenomenon, Star Trek. In episode 23, "A Taste of Armageddon", Kirk and the gang land on a planet at war, only it's a very "civil" war. Instead of bombs and bullets, they fight their wars using computer simulations. People still die, by voluntarily committing suicide, but society and culture remains intact. Kirk sees the inhumanity in fighting a humane war. He destroys the computers and forces a decision: Fight for real or make peace. They make peace.

Back to my mafia. My hands are effectively tied, and I am only allowed to use proportional force. If the game designers had allowed me to use my full strength and punish my opponent, he would quit. The irony is that the cost to my opponent is far greater with this prolonged conflict than if I had obliterated him. A lesson applicable to real life as well.

Monday, September 14, 2009

More health care truth telling

I would really like to hear a cogent argument defending the liberal position on health care. The only thing I could possibly agree with is universal coverage as a goal. Other than that, their approach is egregious and should be denounced by all sides. In today's Wall Street Journal, Scott Harrington has a good op-ed dispelling myths, and dare I say lies, from Mr. Obama.

Mr. Obama uses that infamous political ploy (unfortunately used by all politicians) of presenting the uncommon case as if it were the common case. In Mr. Obama's speech he cites two cases where coverage was denied due to inaccuracies in the original applications. Mr. Harrington writes:
These two cases are presumably among the most egregious identified by Congressional staffers' analysis of 116,000 pages of documents from three large health insurers, which identified a total of about 20,000 rescissions from millions of policies issued by the insurers over a five-year period. Company representatives testified that less than one half of one percent of policies were rescinded (less than 0.1% for one of the companies).
Life's not perfect, only 99.5% don't have problems...okay, let's overhaul the nation's medical system! I would bet that even within Medicare and Medicaid they also have issues with .5% of their populations. Nothing is perfect, not even Mr. Obama and his proposed plan. Mr. Harrington continues:
If existing laws and litigation governing rescission are inadequate, there clearly are a variety of ways that the states or federal government could target abuses without adopting the president's agenda for federal control of health insurance, or the creation of a government health insurer.
Exactly. We don't need a completely different health care system to fix this problem.

Then Mr. Obama talked about the lack of competition in Alabama and how this leads to insurance companies treating their customer's badly by jacking up rates. Mr. Harrington replies:

In fact, the Birmingham News reported immediately following the speech that the state's largest health insurer, the nonprofit Blue Cross and Blue Shield of Alabama, has about a 75% market share. A representative of the company indicated that its "profit" averaged only 0.6% of premiums the past decade, and that its administrative expense ratio is 7% of premiums, the fourth lowest among 39 Blue Cross and Blue Shield plans nationwide.


In addition to these consumer friendly numbers, a survey in Consumer Reports this month reported that Blue Cross and Blue Shield of Alabama ranked second nationally in customer satisfaction among 41 preferred provider organization health plans. The insurer's apparent efficiency may explain its dominance, as opposed to a lack of competition—especially since there are no obvious barriers to entry or expansion in Alabama faced by large national health insurers such as United Healthcare and Aetna.

1. If profits are evil and Blue Cross and Blue Shield are non-profits, then why does Mr. Obama has a problem with Alabama? Wouldn't the public option basically be federally administered Blue Cross and Blue Shield? Maybe, just maybe, the problem has nothing to do with profits.

2. Looking at an effect without examining the cause is plain foolish. Isn't it possible that Blue Cross and Blue Shield have a greater market share because they are a better run company than their competitors? That's the funny thing about competition, sometimes one guy wins. It doesn't always look like the idealized state sponsored pseudo competitive landscape government envisions.

I'm still waiting for that cogent argument....

Friday, September 11, 2009

All in the family

In a totally unrelated story, the Wall Street Journal inadvertently proves my point about families in politics (emphasis mine)
Consider what happened in 1994. Republican Gov. Pete Wilson, vying for re-election, was down 23 points in March. Then Melvin Carter, who had been convicted of a dozen rapes in 1982 and sentenced to 25 years in prison, was suddenly released thanks to time-off for good behavior. Democratic challenger Kathleen Brown said Carter's release was evidence Mr. Wilson was soft on crime.

The Republican counterpunch was devastating: The "good-time credits" law that let Carter out had been signed by Ms. Brown's brother, Jerry Brown, when he was governor. And it was her father, Pat Brown, who as governor appointed the judge who refused to correct a sentencing error that would have doubled Carter's punishment. Ms. Brown never recovered. She lost by 15 points.
My daddy was governor, my brother was governer, I guess it's my turn. If another Bush runs for President, I'm protesting.

Thursday, September 10, 2009

Yet Another Reason You Should Support Vouchers

If you aren't reading George Will, you need to start. In his awesome column today, he talks about Republican candidate for California governor Steve Poizner:
...but Steve Poizner has surmounted other obstacles, as when he volunteered to teach without pay in an East San Jose high school. After he sold, for $1 billion, one of the technology companies he founded after moving to California from Texas, and after serving as a White House fellow, he walked into San Jose's school district office, explained that he graduated No. 1 in his class at the University of Texas, earned a Stanford business degree and now wanted to teach American government to high school seniors. A functionary declared: "Nothing you have said qualifies you to be in the classroom."

Undeterred, he placed calls to the district's 12 high school principals. Eleven did not return his calls. The 12th, whose students were mostly from working-class Hispanic families, gave Poizner the opportunity he describes as the hardest, and most rewarding, thing he has ever done.
Any system which doesn't allow someone as qualified as this to teach is already failed. I bet there are tons of parents who would be happy to have their kids taught by this guy and others who don't have the right "qualifications". If only they had money so they could make the choice for themselves.

Wednesday, September 9, 2009

Living is a Privilege

I remember when I got a driver's licence and some smart ass kid (probably me) asked why we needed one. The answer, "driving is a privilege, not a right". That makes a certain amount of sense. No one has to drive. It may be inconvenient but you can live without it. The president concerns me when he advocates an individual mandate for health care:
That's why under my plan, individuals will be required to carry basic health insurance - just as most states require you to carry auto insurance. Likewise, businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers...
People do not choose to be born, so it is certainly not appropriate to compare a health care mandate to an auto insurance mandate. This is government attempting to control you. Their justification? They choose to pay for some folks who don't have health insurance. Who thinks it is appropriate to punish responsible people for the sake of those that are not responsible? I don't.

You may say that not everyone without insurance is irresponsible. True, it may be because they don't have enough money. That's an easy problem, give them money. The only people who need a mandate are the irresponsible. Should mandates be demanded for everything where some of us are irresponsible?

How many people are irresponsible anyway? I don't think the vast majority of Americans are irresponsible. Should we design a system based on the premise that a significant number of Americans are irresponsible? Here's an idea, treat irresponsible people different than responsible people. We deserve it.

Severe Lack of Altruism

I listened to President Obama's speech and heard him emphasize the need for a public option in order to level the playing field. According to the president:

...Without competition, the price of insurance goes up and the quality goes down. And it makes it easier for insurance companies to treat their customers badly - by cherry-picking the healthiest individuals and trying to drop the sickest; by overcharging small businesses who have no leverage; and by jacking up rates.

Insurance executives don't do this because they are bad people. They do it because it's profitable. As one former insurance executive testified before Congress, insurance companies are not only encouraged to find reasons to drop the seriously ill; they are rewarded for it. All of this is in service of meeting what this former executive called "Wall Street's relentless profit expectations." avoiding some of the overhead that gets eaten up at private companies by profits, excessive administrative costs and executive salaries, it could provide a good deal for consumers...
Let me get it straight. The reason a public option would operate more efficiently than normal insurance is because it doesn't have to concern itself with profits. Fine, but is there only one entity in the entire United States willing to forgo profit for the public good? Last I checked, over 100 million people voted in this country and over half of them for Obama. I would venture to say most Obama voters support a public option, i.e. a non-profit insurance company. One that can resist, "Wall Street's relentless profit expectations." Are you telling me, that out of over 50 million people, there isn't one person who would be willing to create this altruistic company?

I actually have more faith in my fellow man. I think private charities have tried to do exactly what the public option is supposed to do. They haven't solved the problem because what Mr. Obama is telling the American public is not correct. Your insurance costs are not high because of profit driven companies. President Obama would like it to be that simple: profits bad, governments good. Take away the profits and all will be peachy. Well, we can already take away profits. No one is stopping anyone from doing just that. In a free market, if someone wants to start a company and not take a profit, they can do so. If Mr. Obama is correct and profits are the problem, that company will dominate the market and "protect" consumers.

Either Mr. Obama is wrong, or there is not a single altruist in the entire United States. I'm betting on the former.

Tuesday, September 8, 2009

David Brooks gets something right

David Brooks writing in today's New York Times hits the nail on the head. He is talking about a new quarterly magazine called National Affairs devoted to tackling public policy questions in a rational way. He makes two great points in his piece:
...Can the state do anything to effectively promote virtuous behavior? Because when you get into the core problems, whether in Washington, California or on Wall Street, you keep seeing the same moral deficiencies: self-indulgence, irresponsibility and imprudence.
In essence, the problem is human nature and whether or not state action can modify it.
[Ron Haskins] points out that the surest way to achieve mobility is still the same: get married, get a degree, hold on to a job. “Poverty in America is a function of culture and behavior at least as much as of entrenched injustice,” he writes. But how does government alter culture?
All public policy needs to be based on what people are versus what they ought to be. Government probably cannot change human nature, but it can create environments and incentives for positive cultures to emerge. It's called capitalism.

Monday, September 7, 2009

Would you cure cancer?

Why do pharmaceutical companies make drugs? Profit, like all other companies. They make profit by selling drugs for more than it costs to produce them.

Some products require lots and lots of up front costs, but little additional cost. Microsoft's Windows operating system is an example. Microsoft spends millions of dollars on highly paid engineers to write the software before they sell even one operating system. Once the software is written, it doesn't cost much to transfer it onto a CD. At this point, the marginal cost of production (i.e. the cost to produce one more) is very low. Microsoft must charge a price high enough to recoup the marginal cost of production and the up front investment. This is why we have patent laws. Patent laws prevent other companies from stealing Microsoft's up front investment.

The pharmaceutical industry works in the same way as the software industry. Companies pay scientists millions to develop drugs before a single dose is made. Once the formula for the drug is developed, the marginal cost of producing it is very small.

Let's say some company developed a drug that cured cancer. If they want to make a profit or break even, they would have to charge a price that far exceeds the marginal cost of production. Economically speaking, this is indisputable.

Politically, we have a problem. We have a drug that cures cancer but there will be some people who cannot afford it. These people, they'll say, will die because of greedy capitalists. The drug should be free to all those who need it. What kind of society let's people die because they don't have the money? Not this one. Inevitably, politicians will impose price controls or outright force companies to give the drug away.

Reality is that the drug cannot be developed without paying for it. Paying for it requires recouping the costs. If those costs are not recouped, the drug will not be developed.

Cancer is an extreme example, but we have many new drugs which only exist because we pay for them. Government can be very successful at bending the cost curve down. All they have to do is not pay for things. It's a fallacy to think lives are only lost when greed prevents someone from receiving the latest drug. Far more lives are lost when the latest drug doesn't exist.

Saturday, September 5, 2009

War is not the answer

In this weekends Wall Street Journal, Fred Kagan of the American Enterprise Institute has an op-ed regarding the war in Afghanistan. He argues that we must "win" in Afghanistan to help promote a more stable Pakistan. When will conservatives learn that acting like liberals on foreign policy is idiotic?

Mr. Kagan states:
Winning the war in Afghanistan—creating a stable and legitimate Afghan state that can control its territory...
Conservatives used to scoff at the absurdity of classifying all problems as "wars". The "war" on poverty comes to mind. Recently, we have joined the insane train and also waged wars which aren't really wars. Who is so scared of the bogeyman that they need to fight a "war" on terror?

First of all, this is an abuse of the language and it needs to stop. Why do people attempt to change the meaning of words? Simple, it's to evoke feelings and emotions related to the original definition and apply them to something wholly different. Kind of like calling it discrimation when people with pre-existing conditions are denied insurance. It's disingenous and dangerous.

Here is what war should/used to mean (taken from Merriam Webster):
- a state of usually open and declared armed hostile conflict between states or nations

In Mr. Kagan's statement, who is the nation or state we are fighting? There isn't one. His aim is to create a better afghanistan, a noble conviction for sure, but not a war. Wars have ends. Someone wins and someone loses. Mr. Kagan has ambition without end. Some say war is hell. I agree. Let's not listen to folks like Mr. Kagan who aim at prolonging it.

Tuesday, September 1, 2009

Too rich to care

It's apparent to me that as society becomes richer it becomes more socialist. The reason I think is that the cost of socialism becomes relatively less and therefore more tolerable. My favorite example (because I made it up) has to do with bread.

Let's say we are a poor country and everyone has one loaf of bread. There is no extra food, that loaf of bread is it and without it, people will starve. Imagine that government comes along and demands 10% of that bread. What do you think the reaction will be? Obliviously people will resist. Their choice is between living and paying the bread tax.

Alternatively, society becomes richer and everyone has 10 loaves of bread. It only takes one to live, the rest makes you a fat American. If the government comes along and demands 10%, what will your reaction be? You'll probably give it to them. The cost of resisting is more than the cost of being a bit skinnier. I imagine that you wouldn't protest even if the government demanded 50% of your bread. Certainly not as much as when you only had one loaf.

While affluence is something we all desire, it is also an anathema to liberty. Wealth raises the cost of opposing encroachments on liberty. One would go to war to protect his daily bread. No one would go to war to guarantee he had six loaves of bread instead of five. The only way to ensure liberty is to raise the cost of the encroachments upon it.

Monday, August 31, 2009

Dumb Luck

D.C. mayor Adrian Fenty is embroiled in a minor controversy regarding where his kids are attending school. According to the Washington Post:
Fenty (D) has repeatedly declined to discuss how he enrolled his children at Lafayette, one of the District's most coveted elementary schools, rather than West Elementary, his neighborhood school.
It seems many parents also try to get their children into other schools:
About half of all D.C. public school students attend a school outside their neighborhood. Parents seeking an out-of-boundary school enter a lottery in which they can pursue spots at up to five schools.
The controversy centers on whether or not any rules were broken getting his kids into the other school. Frankly, it doesn't matter. What matters is that children of caring parents want to get their kids out of failing schools and into better ones. The mayor may or may not have received special treatment (chances are good he did), but the fact that waiting lists exist means that some people who want to attend better schools are trapped in failing schools. This is the tragedy that results from a monpolized public school system. In a market for education no one would be trapped in any failing school. Those schools would go out of business because caring parents would send their kids elsewhere.

What if the Mayor were unlucky (assuming no favored treatment) and his kids weren't selected? Do you think he would have sent his kids to a failing school because he didn't win the lottery? Of course not, he has money and he would have used it. Getting a good education schouldn't be a matter of luck. School choice is what people with means already have, how about that for the rest of us.

Friday, August 28, 2009

It's stupid to rely on smart people

In a previous life, I worked as a computer programmer and I met a lot of really smart people. They were so smart in fact, that they understood 1/10 of the computer system. The computer system, a fairly sophisticated firewall, is just one of many developed at that company. There are thousands of companies like that one and they all have lots of very smart people who only understand fragments of computer systems. Work one day as a programmer and you will be humbled.

The danger in being smart is that you are relatively smart. You understand lots of simple things, you excel at many more simple things, and people count on you to get simple things right. People don't realize that you are only good at simple things, because what is absolutely simple is relatively difficult (i.e. smart people find it easy, the average person doesn't). The reality is that an extremely smart person is incapable of fully understanding a moderately sophisticated computer program. This should paint a clear picture of the limits on human intelligence. Maybe we'll learn some humility when Big Blue puts the smack down on the next Kasparov.

Society is far more complex than a computer program. What chance does a really really smart person have to figure out society if they can't figure out a computer program? Absolutely none. There is too much information and too little ability to process that information. Humans as a species just aren't that smart.

Here lies the problem with smart people. Because we perceive their intellect to be higher than it really is, we trust them too much. If some idiot came along and proposed a grand scheme to make over society you would laugh him out of the room. But a genius proposes the same stupid idea? Let the genius run with it...he must know something we don't know..he's a genius! Beware of geniuses bringing solutions, they're only human.

Wednesday, August 26, 2009

Aristocratic arrogance is alive and well

Boy do I wish Hillary had won the nomination. Just think...Bush, Clinton, Bush, Clinton. No, not a broken record, just a broken electorate. What is wrong with us? 300 million citizens and these are the best we can come up with? An editorial on Senator Kennedy's death by Michael Barone piqued my interest.
When he took office, Ted Kennedy's résumé was brief. He'd been expelled from Harvard for cheating on a Spanish exam...

...he drove off a bridge on Chappaquiddick Island off the Massachusetts coast. Ted Kennedy swam away but his passenger, Mary Jo Kopechne, drowned. His failure to notify authorities of the accident removed him for at least a time from any presidential consideration.

Nevertheless, he was re-elected to the Senate and served continuously until his death yesterday.
Let me get this straight, killing someone because of your recklessness doesn't permanently take you out of presidential contention? President, no that would be ridiculous, Senator sure! Am I the only one who is horrified by the nepotism and sense of entitlement in our political system. The Kennedy's are simply one of the most egregious examples, but there is definitely a familial aspect to the nation's political class. A few of the multitudinous examples:
  • John F. Kennedy was president, his brother Robert Kennedy a U.S. attorney, his other brother Ted kennedy a Massachusetts Senator.

  • Both Vice President Al Gore and his father were senators from Tennessee.

  • George W. Bush's father was president, His brother, Jeb Bush, governor of Florida, and his great-grandfather a U.S. senator.

  • Bill Clinton was president, Hillary Clinton was Senator and is Secretary of State.

  • Colin Powell's son is chairman of the Federal Communications Commission.

  • Sen. Mitch McConnell's wife, Elaine Chao, was secretary of Labor.

  • Supreme Court Chief Justice William Rehnquist's daughter, Janet, was inspector-general of the Department of Health and Human Services.

  • Congressmen John Dingell, Charles Gonzalez, Jim Duncan, and Harold Ford have all held the same seats their fathers held.

  • The fathers of Nancy Pelosi, Jon Kyl, Chris Dodd, and Bob Bennett were all Congressman.

  • Sen. Frank Murkowski, R-Alaska, gave up his Senate seat to become his state's governor and appointed his daughter to fill his position.

  • Senator Carl Levin and his brother Congressman Sander Levin.

  • Kwame Kilpatrick is the son of Congresswoman Carolyn Cheeks Kilpatrick.

  • Senators Robert F. Bennett and Mark Pryor are both the sons of senators.

  • Olympia J. Snowe is the wife of former Maine Governor John R. McKernan.

  • Former Massachusetts Governor Mitt Romney is the son of George Romney, a former Michigan governor.

  • Senator Elizabeth Dole, wife of Senator Bob Dole.

There are loads more examples on Something seems wrong when so few families completely dominate our political landscape. For gods sake, high school elections in Mississippi have more diversity. For change we can believe in, how about we start with the last name.

Monday, August 24, 2009

Replacing the welfare state

Charles Murray thinks we should replace the welfare state by giving people money directly and I agree. A few excerpts from a Wall Street Journal article describing the "Plan":
The place to start is a blindingly obvious economic reality that no one seems to notice: This country is awash in money. America is so wealthy that enabling everyone to have a decent standard of living is easy. We cannot do it by fiddling with the entitlement and welfare systems--they constitute a Gordian Knot that cannot be untied. But we can cut the knot. We can scrap the structure of the welfare state.

Instead of sending taxes to Washington, straining them through bureaucracies and converting what remains into a muddle of services, subsidies, in-kind support and cash hedged with restrictions and exceptions, just collect the taxes, divide them up, and send the money back in cash grants to all American adults. Make the grant large enough so that the poor won't be poor, everyone will have enough for a comfortable retirement, and everyone will be able to afford health care. We're rich enough to do it.


For now, let me turn to a larger question: Assuming that the technical questions have answers, do we want a system in which the government divests itself of responsibility for the human needs that gave rise to the welfare state in the first place? I think the reasons for answering "yes" go far beyond the Plan's effects on poverty, retirement and health care. Those issues affect comparatively small minorities of the population. The more profound problem facing the world's most advanced societies is how their peoples are to live meaningful lives in an age of plenty and security.

Sunday, August 23, 2009

Medicare and Social Security = Wrong and Wronger

Both the left and the right should agree to do something about these hideous programs and here's why:

These are regressive taxes - Every working American (and non-American) pays social security and medicare taxes regardless of how small there income is. Currently, you pay 6.20% on the first $106,800 of income for social security. You also pay 1.45% on every dollar of income with no cap. Not only do you pay this amount, but your employer matches these contributions. This makes the effective tax paid 15.30% on the first $106,800 and 2.90% on every dollar after that. It doesn't matter whether you make $1,000, $10,000 or even $100,000 per year, you pay exactly the same rate. Isn't our tax system supposed to be progressive? These taxes certainly are not and should be opposed on that ground alone.

There is no income cap on receiving benefits - One justification for redistribution of wealth is to help the less fortunate. This at least has some moral ground to stand on. It is incomprehensible to redistribute wealth from those that do not have it to those that have it. This Robin Hood in reverse craziness is exactly the case in Social Security and Medicare. It doesn't matter if you make tens of millions of dollars, you receive social security like everyone else. This rich person is receiving taxes paid by someone far less fortunate. This is absurd and immoral.

These are hidden taxes - There's only one reason you only see what you pay into social security on your paycheck: to trick you into thinking you are paying less in taxes. The reality is that YOU, not your employer, pay the full tax. The vast majority of us (those with incomes less than $106,800) pay an outrageously high 15.30% of our income into these redistribution taxes. Why doesn't your employer actually pay this tax? Let's think about it. You own a company and need to hire someone, the only thing that matters is the employee's total cost. That cost consists of their wage and taxes. The fact that an employer hires you means that your compensation must be worth both the wage and taxes. The employer is completely indifferent as to how that compensation is distributed. He pays $100/hour for your labor. It doesn't matter if you receive the entire $100 or you receive $70 and the government receives $30, the cost to him is the same. Make no mistake, you bear the full cost of taxes paid by the employer on your behalf.

First, if we are to use the power of government to help out the less fortunate then let's do so. Social Security and Medicare both fail on this account and should be modified to align them with our basic sense of morality. Second, it's bad public policy to implement hidden taxes. This hides the true cost of government and distorts incentives. Government services cost money and we should make those costs transparent so everyone can make informed decisions. Our current system is designed specifically to hide those costs. This is immoral.

Friday, August 21, 2009

Don't you know you're supposed to bow?

Someone needs to teach the public some manners according to the NY Times:
We are all familiar with the right to bear arms and the noisome extremes indulged by its zealots. But is there no sense of simple respect due the nation’s elected leader when he ventures forth among the citizenry?
How is bringing a gun a sign of disrespect? Perhaps they meant to say:
We are all familiar with the right to question the government at town halls and the noisome extremes indulged by its zealots. But is there no sense of simple respect due to the nation's leader when he ventures forth among the citizenry?
The NY Times problem is that they see every gun owning American as a time bomb ready to explode. In their distorted view, owning a gun is an implicit threat to your fellow man and it follows that guns at Obama's town halls are a threat on his life. Of course nothing happened... but it could have:
That is hardly reassuring, especially this summer when so many protestors seem to consider primal rage a reasoned political statement.
When Mr. Obama held a town hall meeting in Portsmouth on Aug. 11, gun-packing protestors were also there. As the television cameras zoomed in, one man preened as if in the O.K. Corral, his holstered gun strapped proudly to his thigh. What’s next? Citizens strolling in helmets and camouflage flak jackets?
Of course, gun toting zealots must be the protestors, no reasonable person would own a gun. And isn't it clear they were looking for a shootout, just like at the O.K. Corral. Yeah, that's a fair characterization of law abiding citizens.

Who competes with whom?

In today's NY Times, Paul Krugman states:
Clearly, investors believe that co-ops would offer little real competition to private insurers.
Mr. Krugman see's only two players in this game: Private companies and the government. Apparently private companies don't compete with each other.

What the health care debate is really about

From today's WSJ:
All these concerns are real and matter. But the larger point is that Democrats aren't proposing a subsidy to enable people to get the care they need. Rather they want to shift decision-making authority from the American citizen to the government bureaucrat.

These proposals are yet another manifestation of the no-growth, redistributionist mindset, combined with an elitist, authoritarian philosophy of government. To buy into them and ignore the reality they've produced elsewhere is to love humanity more than human beings, and value utopian ideals of equity over the tremendous individual costs they inflict.

In these proposals, human beings aren't individuals with freedom to contract as they see fit and make their own best judgments, but interchangeable widgets for whom rules should be fashioned and enforced based on age, or quality of life, or some other metric. Bureaucrats would evaluate whether one is young enough to warrant a pacemaker or a hip, or sufficiently long gone from a hospital to justify readmission. Medicine would become a one-size-fits-all bureaucracy, not an art, in which the physician would face real risks for deciding that the bureaucratically approved "effective treatment" isn't what works in a particular case.

It makes no sense to try to achieve a bipartisan consensus when the fundamentals underlying the Democratic approach are so contrary to the entire foundational idea of who we are as Americans. We're the country that believes that individuals have the right not to have their decisions interfered with, and that individuals are best able to make those decisions that most affect their life and happiness. Nothing could be more central to that than the ability to control one's own health and the health options of loved ones.

There is much that needs reforming in health care, and everyone wants to make sure that those who are genuinely uninsured because of pre-existing conditions, for example, have access to coverage and care. But the Democratic proposals use those real problems as a stalking horse to achieve very different goals. Would-be Republican deal-brokers should stand aside. They need to understand how the rest of us see this: That this is not just about the normal compromise of politics, but the core of what America is and will be.

Once the left's health-care vision is in place, it will be almost impossible to undo. If this takeover isn't worth resisting, what is?