The role of prices

Debating politics is fun but frustrating. So I think I'll entertain myself and talk about prices and the important role they play in any economy.

The proper role of prices is to convey information about the state of affairs in the real world so individuals can take meaningful action.

Every one of us makes decisions based on the best information we have. And making good decisions is very difficult even with good information. But given bad information, it's impossible to make good decisions. Therefore, better information allows us to make better decisions. Prices are one mechanism for getting us that information.

When prices reflect reality, say when the price matches supply with demand, things work fairly well. All who want something are able to get it. But when prices don't reflect supply and demand, problems ensue.

Imagine a hotel which sells rooms for $100/night. Normally there are only so many people who want hotel rooms and everyone who wants one can buy one. Now say that there is a convention in town and demand for hotel rooms shoots up. The price will also rise. This is very useful because by means of the price, we are told that something fundamental has changed. You don't even have to know why the price has risen, only that it has in order to make a better decision. Given a higher price you may decide to postpone your trip or go somewhere else. Clearly, the new information would in some way modify your decision.

But let's assume the price was not allowed to rise because that would not be "fair". In this case, there is no ready information telling you that a convention is in town. You have no idea that the situation has changed. As a result your decision on whether to go or not is based on a false information and your trip is a bust.

The better prices reflect reality, the better decisions individuals can make. Many people don't like prices because they discriminate between those with money and those without. That's true, but any system must discriminate between people. There are limited resources and unlimited wants and rationing (it's not a four letter word, but a reality of life) is the only mechanism we have to deal with the situation. Prices allow individuals to self ration, to decide what it is they value most and devote their resources accordingly. There are other types of rationing that involve someone else deciding what you want most. That's the four letter word variety.

As a society we can make a choice that some basic goods should be available to all. The way to do that is to give people the necessary resources to purchase those goods, not to manipulate the pricing system which literally informs us of the world.

A lost catcher

I vaguely remember reading "Catcher in the Rye" and I have no idea what's it's about. But I found this Letter to the Editor in the New York Times very appropo (JD Salinger - the author - passed away recently and was known for being a recluse).

To the Editor:

J. D. Salinger dies, and everyone is commenting on what his writing means to them, to us all, on what it means, period. They are happy to explain it.

I wonder if this is the sort of thing he couldn’t stand.

Matthew Barritt
Ann Arbor, Mich., Jan. 29, 2010

Words of Will

Some gems from George Will commenting on the president's State of the Union speech.

He called for a third stimulus (the first was his predecessor's, in February 2008) although the s-word has been banished in favor of "jobs bill." It will inject into the economy money that government siphons from the economy, thereby somehow creating jobs. And you thought alchemy was strange.

If at first..er..second you don't succeed, keep ramming wasteful government spending down everyone's throat. Let us not forget that the second stimulus hasn't even been spent on all those "shovel ready" projects.

Acknowledging that the longer the public has looked at the legislation the less the public has liked it, he blamed himself for not "explaining it more clearly." But his faux contrition actually blames the public: The problem is not the legislation's substance but the presentation of it to slow learners.

I know, maybe another speech will do the trick. A speech to counter all the lies being spread by special interest groups; lies concerning trivialities such as:

• The Cornhusker Compromise


• The Louisana Purchase


• Everyone's equal unless you belong to a union


• Falsely claiming deficit neutrality because ten years of revenue is used to fund six years of expenses


• 500 billion in Medicare cuts that will materialize if we only pass this bill - but wait, we could do that WITHOUT passing the bill


• There's absolutely no reason to restrict health care purchases across state lines, but that's a non-starter because...actually no reason, our actual aim is to nationalize health care and we don't really want to try any other solutions


• No one has read the 2000 page bill


• <Add your own here>

Anyway, on to another gem:

Obama's leitmotif is: Washington is disappointing, Washington is annoying, Washington is dysfunctional, Washington is corrupt, verily Washington is toxic -- yet Washington should conscript a substantially larger share of GDP, and Washington should exercise vast new controls over health care, energy, K-12 education, etc. Talk about a divided brain.

As everyone knows, we want a lean, mean, responsive government which can surely be accomplished by being in charge of everything.

What doesn't kill you makes you cocky

On C-Span this weekend, Nicole Gelinas was promoting her recent book, "After The Fall", and made a fantastic point.

The jist of her book seems to be that financial markets should have a standard leverage ratio set for different asset classes. For example, mortgages typically used to require 20% down and you could only get one for 2.5 times your income. This served us well for a long time and it naturally dissuades bubbles because it is very clear when there is a deviation from the standard. I don't know how robust her conclusion is, and I look forward to reading her book, but on to her amazing point.

She remarked that when we have a crisis, such as the one we have had, no one involved thinks of the mistakes they made or the actions they didn't take. Quite the contrary, those in charge during the crisis often see themselves as saviors, as if their actions alone prevented an even bigger crisis. And that their special genius is what did it. Instead of failure humbling them, it emboldens them. And monumental failure leads to monumental hubris.

She couldn't have been more spot on. We see it all the time with this crisis: if the government hadn't had done this or that, the world would have come to an end. Banks were bailed out, clunkers were pushed, and it all had to be done NOW! Hogwash. No one knows what would have happened, and they still don't. Instead of acknowledging their utter ignorance and imcompetence, they pat themselves on the back for bearing witness to the worst economy in decades. And when the economy bounces up from bottom, which it MUST inevitably do, they take it as a sign from G-d that their genius is necessary to lead us. Government, is the only entity which celebrates it's success because the end of the world didn't happen.

Incentives Matter

While getting my MBA, I was happy to learn one very important lesson: incentives matter. This shouldn't be a controversial statement, but when broadly applied complications arise; because if we are to believe this statement's veracity, there is an underlying premise which some cannot come to terms with.

In order for incentives to matter we must acknowledge the immutability of our nature. To be more clear, incentives can only matter when there is a static relationship between inputs and outputs. That we are predictable and act in predictable ways.

I believe most people are selfish by nature. That people generally prefer their own welfare to that of others and when given the chance, they will act in their own self interest. Someone else believes people hate to lose more than they love to win (a Nobel prize winning insight). These general statements about people may or may not be true, but if we are ever to make sense of people and their actions, we have to adopt some view of human nature.

Human nature must be constant for incentives to matter. Anyone developing policy that affects people must do two things: discern human nature and deal with it. The biggest problem we face is believing that systems which require men to act against their natures have any chance of success. They don't. Remember, "If men were angels..."

More to free speech than flag burning

A few days ago, the Supreme Court struck down some provisions limiting the political speech of corporations. I personally agree with their decision. But I am no lawyer, only a political observer, so it was nice to see the New York Times have a conniption fit over the ruling. Their dismay amuses me only slightly less than their consistent inconsistency and what one might classify as hypocrisy. Some observations:

The founders of this nation warned about the dangers of corporate influence. The Constitution they wrote mentions many things and assigns them rights and protections — the people, militias, the press, religions. But it does not mention corporations.

Yes, it's true. The constitution does not mention many things such as: Social Security, Medicare, Universal Health Care, etc. In fact, there are an infinite variety of things it doesn't mention. The Constitution, if the New York Times actually cared, was intended as a limitation on the power of the Federal Government. What it mentions are only those powers enumerated, i.e. an explicit list of powers the Federal Government actually has. Let's dispense with the pretense that the New York Times gives a damn about the Constitution. To them the Constitution is a living document, meaning arbitrary. The only thing that matters is that the New York Times doesn't see speech from a corporation (corporation being entities comprised of individuals - you and me) as beneficial, and that is the only reason they oppose it.

This issue should never have been before the court. The justices overreached and seized on a case involving a narrower, technical question involving the broadcast of a movie that attacked Hillary Rodham Clinton during the 2008 campaign. The court elevated that case to a forum for striking down the entire ban on corporate spending and then rushed the process of hearing the case at breakneck speed. It gave lawyers a month to prepare briefs on an issue of enormous complexity, and it scheduled arguments during its vacation.

Breakneck speed oh my! Where was the outrage over health care reform? Do 300 page amendments at two in the morning mean anything to these people? Votes on Christmas Eve? I am envious of their shamelessness.

The Citizens United ruling is likely to be viewed as a shameful bookend to Bush v. Gore. With one 5-to-4 decision, the court’s conservative majority stopped valid votes from being counted to ensure the election of a conservative president. Now a similar conservative majority has distorted the political system to ensure that Republican candidates will be at an enormous advantage in future elections.

Yes, it's a conspiracy folks. Conservative judges never actually make decisions based on law. They practice law beneath a thin veneer of partisanship constantly scheming to elect Republicans. Bush is out of office, Obama and the New York Times need to learn to deal with it - btw, take those damn stickers off your cars! Also, let me get this straight, now Republicans will supposedly have an advantage. Doesn't this imply that Democrats currently have an advantage? Nothing to see here folks, move along...

The bottom line is this, more speech is better speech. Talking is only dangerous when you view people as incapable sheep. The New York Times believes that people don't think, they view people as mindless drones obeying whatever some political spin-meister pumps in through the TV. One only has to look at the Democrats disconnect for why health care failed. If only people knew the "truth" and not the lies told by opponents. Well, people figured out the "truth" and Senator Brown is going to Washington. People are not stupid and if they are completely incapable of discerning blatant propaganda hurled at them from corporations, our democracy is on very shaky ground indeed. I for one, believe people should hear all sides of an issue, even from those "greedy" corporations, and the shareholders who happen to own them.

I'm the radical?

I love to debate. I especially love to debate liberals who are so obtuse they only look at things through a one-way mirror. From their view point, the other side is ideologically rigid and not open to the facts. Well, judge for yourself on this rather interesting facebook exchange (names have been hidden):

Our problems, which can be summed up as the decline of the middle class, have been so resistant to solutions that the readiest and most reasonable stance is profound skepticism. It is so much harder politically to do something affirmative than to stand in the way and say it can't be done. Obama has made his job all the more difficult by trying to do something--and in some cases succeeding--without offering much of a challenge to the people standing in his way. So he pays the price, and they do not.

My goal was to not post about Mass... But, I find the above quote from George Packer too insightful to resist.

Adam Freund: No surprise that I disagree with this. The one challenge I would throw out is the implicit assumption that the middle class has declined. It's not true, we average Americans live a very abundant life. When I listen to the other side, they are invested in a very dark narrative about the average American life which I find disturbing, depressing, and most importantly contrary to reality.

Well Intentioned Liberal 1: Really? You want to hang your argument on the relative strength of the modern middle class? My favorite part is that instead of offering real evidence you offer your personal observation that things look pretty good. How did your comprehensive survey of the American middle class go? I guess the growing gap between rich and poor, epidemic of uninsured, record joblessness, bankruptcy, and mortgage foreclosures are all an artifact of whiney liberal perception. You know, "the other side" (it's us vs them, baby!). They are missing the larger point: we can now get super cheap electronics and a bag of tube socks for $1!

Well Intentioned Liberal 2: I haven't done any empirical studies, but I do work for a legal aid office. Each applicant reports their income and education. We have been troubled to see how many applicants qualify for our services, when they would not have six months or a year ago. These are middle class people with good educations. They have lost their jobs or, while technically employed, have been forced to accept wage decreases, or cuts in hours they work.

I make a good living as an attorney, but I could not afford my mortgage (which is underwater by the way) for more than a couple months if I lost my job today.

Americans work longer for a lower standard of living than we used to enjoy. Meanwhile, the ultra rich profit more than ever. The same banks that accepted taxpayer bailouts channel that money into excessive executive bonuses, while declining small business loans, and charging record overdraft fees. The minute they accepted the bailout, they lost the right to the "hey, that's capitalism" argument. It's wrong.

I do like tube socks though.

Adam Freund: It's not "whiney" liberal perception I am arguing against, just liberal perception in general. "growing gap between rich and poor, epidemic of uninsured, record joblessness, bankruptcy, and mortgage foreclosure". The reason the gap between rich and poor is also cited is because the absolute lives of poor Americans is pretty darn good. Additionally, the gap doesn't track individuals, but classes of different people at different points in their lives, so the statistic is highly misleading. Think of yourself now compared to 10 years ago, you are richer today than then, but the gap being measured is really between you now and you ten years ago. Life's not perfect for everyone, but the inherent pessimism in liberalism is seriously depressing.

Well Intentioned Liberal 2: Ten years ago Bush and Gore were debating what to do with the budget SURPLUS. Our econ professors were telling us that we were living in unprecedented prosperity. Now, not so much. Anybody visited Detroit lately?

Much of our current financial woes (and foreign policy headaches) were caused by willful ignorance. There is plenty of blame to go around. The driving force was people behaving under a view of how they wished the world was, instead of an honest look at the way the world is. "Home prices will go up indefinitely". "We'll be greeted as liberators". "The absolute lives of poor Americans is pretty darn good".

I wish I could choose a political stance based on which ideology was less depressing. If I did, it wouldn't change the facts on the ground. That being said, I am not pessimistic at all. I believe there are creative solutions to these challenges we face. The answer lies in a return to community and yes, moral values*, not to mention and a serious re-evaluation of our wants and needs.

*like feeding the hungry, healing the sick, caring for the elderly, protecting the next generation, that kind of thing.

Well Intentioned Liberal 1: Adam, your knee jerk contempt for anything that might be characterized as liberal seriously undermines your credibility. I'm frequently reminded in your posts that you filter your conclusions through a rigorous us versus them paradigm that undermines any serious discussion of nuance or policy. There are more than two perspectives in most situations.

There are plenty of flaws in the quote I originally posted. It's a broad generalization. Yet, you chose the most viscerally political component to react to, despite the fact that it is secondary (though it is important!) to the main point. Another example would be in our discussions over healthcare; you get more worked up over nomenclature (is it technically 'insurance' or something else?) than you do about the tragic outcomes that need to be addressed. You defend radically free markets without bothering to detail what outcome you want. Sometimes I think ideological purity is more important to you than real world outcomes/consequences.
Put another way, you will always be able to find a liberal bogeyman but you do so at the expense of objective reality.

Adam Freund: Well Intentioned Liberal 1, you are entitled to your opinion but I believe it to be flawed. I am no ideological purist and I see you as far more of one. But that is not important. Nor is my credibility (and why the implicit questioning of mine, do I question yours?). I say exactly what I believe and I have come to those beliefs through very rigorous thought and experience.

I believe in Free Markets because that is the best way to improve the lives of all people, bar none. It also preserves liberty, your ability to succeed, and yes your ability to fail, that makes life worth living.

I am all too happy to discuss real world outcomes in the policy arena. Well Intentioned Liberal 2's post discussing the policy he would like to see is more of a wish list than anything real. Who is against feeding the hungry, etc. Why do you not call that out? As far as our discussion on healthcare, the reason it's important to distinguish insurance from a subsidy is because they serve two different functions.

Insurance is a positive economic transaction for both the insurer and the insured based on sound actuarial principles. The reason I stress this point, is that the now defunct health care reform attempted to define insurance on unsound actuarial principles. Charging less than it actually costs to insure someone causes companies to go bankrupt. I fail to see ideological purity in that statement.

As I have maintained, if we want to insure those without insurance, we can simply give them the money directly to purchase health insurance. That, in my opinion, is the proper role of a subsidy and it is transparent to boot.

Well Intentioned Liberal 1: Noted. And you are right, I didn't point out the logical strawman in Well Intentioned Liberal 2's post. It goes to the point I was making though; he talks about what he wants to achieve and hopefully makes observations that inform that goal.

As you just made clear, there is only one way to achieve what we want for our world as citizens, radically free markets. The means has become your ends. When you start with the assumption that your pure process is the only way, regardless of the mental gymnastics required to make it fit, your observations will be skewed. This is why I call you ideologically rigid: you elevate process over outcome.

Adam Freund: How would Well Intentioned Liberal 2 go about achieving his outcomes? Does it matter to you? At no point do I say I want anything less than what Well Intentioned Liberal 2 desires, the only difference is that I actually take into account how and if those outcomes are achievable.

I didn't use the word "radical" to describe free markets. There is nothing radical about letting people choose what they wish to buy and from whom. Explain how that is radical?

It does take some mental gymnastics to understand how profits and losses work within the Free Market to channel resources to their highest valued uses, thereby making everyone much better off. It's hard to see how the Free Market enables competition to keep the wolves of business honest by fighting with each other. The Free Market is hard to understand, that's why most people take the easy route and believe that some "music man" of the government can take care of them better.

Here's an outcome I want, better schools for our kids. Here's my proposal, give everyone vouchers to pay for their kids education. This lets parents select the schools they feel give their kids the best opportunity to succeed. This introduces competition into the school business because schools that don't serve the interest of the children will have no customers. Eliminate teaching certification so that people with advanced degrees (like everyone reading this) can say fuck it, I want to teach and do it right away. Would you support any of these proposals? Why or why not?

Well Intentioned Liberal 1 This has gone from public to personal. My fault. 100% if you would like to continue, feel free to email me at . There's no need to continue this vein in a public thread.

Morality's Cost - Part 3

War sucks. Despite what some crackpot economists may argue, war is NOT good for the economy. At best, war enriches some at the expense of others; but unlike a silent thief, destruction always ensues in war's wake. Just the threat of war causes nations to divert resources for their defense, and even when war is successfully waged, the victor usually has a bloody nose.

The beauty of the Free Market is that in seeking our own self interest we naturally depend on each other more and more. This interdependence makes fighting less valuable. If China makes cheap goods that we buy, then one consequence of war, besides a bloody nose, is the loss of cheap goods. Multiply our interdependence, and you multiply all the benefits lost when we fight.

When things are simple, when there is little interdependence, war makes economic sense. Nations plunder other nations because the benefit outweighs the cost. But when we benefit from trading with our enemies, plundering loses it's allure. The Free Market increases our interdependence and wars are less and less likely as a result. Morality has got nothing to do with it.

I like the way he puts it

Warren Buffet in today's Wall Street Journal:

It's, you know, probably if you're going to spend close to 800 billion on a stimulus bill, I think it could have been done in a way that had more immediate impact. But, you know, what we saw with the stimulus bill, was it 8,000 earmarks or something? I mean, that is the sort of thing that is depressing to the American public. It's depressing to me. That is old-style Washington squared.

Great Letters to the editor

From today's Wall Street Journal:

Some Are More Equal Than Others

Democratic leaders recently announced a breakthrough in their attempt to pass the health bill, agreeing to exempt union workers until 2018 from the 40% excise tax they plan to impose on "Cadillac" health benefits ("Health Negotiators Search for More Revenue; Criticism of Unions' Five-Year Tax Exemption Mounts as Lawmakers and the White House Consider Ways to Pay for It," U.S. News, Jan. 16).

This agreement, reached in a secret, backroom deal, not only violates President Barack Obama's promise of transparency, but conflicts with his avowed political philosophy. Classic liberalism is based on the equality of individual rights, which entails the denial of all individual prerogatives. The Democrats, however, are creating a situation where two workers, one a union member and the other not, who come from a similar background, make similar income and have similar benefits, will pay dramatically different taxes based on the proclivity of one group to vote for a particular party.

While this may be just another sordid example of how Washington works, it demonstrates how morally bankrupt the system has become.

Pete Hetherington

Houston


I thought the Constitution promised equal protection under the law for every citizen. Many in Congress, however, seem to believe that some people (those who live in, say, Louisiana or Nebraska, or who belong to powerful labor unions) are more equal than others. I'm afraid they've been reading "Animal Farm." Perhaps they should reread the Constitution instead.

Laura Nielsen

McLean, Va.


Where is the sense of scandal that this represents?

Zackary D. Barron

Marlborough, Mass.

We may yet survive

Hallelujah! The good folks of Massachusetts have renewed my faith in humanity. Even in the Bluest of Blue states, where they bleed red on the outside, a moment of temporary sanity has prevailed. Scott Brown won! Thank g-d.

Hopefully, now that we have stepped back from the brink we will not rest on our laurels. The reality is simple, unless Republicans enact health reform, some version of Obamacare will happen in the future. National health care has been delayed, not defeated and Medicare, Medicaid, SCHIP are no less gargantuan today than they were yesterday.

To keep this issue at bay in the future, Republicans MUST do one thing: offer a simple universal health care solution. All they have to do is provide a subsidy for those under a certain income level. As long as approximately 95% of Americans have health care, it will be near impossible to dislodge that entrenchment.

Additionally, a few other good ideas:

• Let people purchase health care across state lines


• Put incomes limits on Medicare recipients(hint: turn it into Medicaid 2)


• Enact a law which stops companies form selling drugs cheaper to foreigners and forces us to subsidize their cost


• Enact malpractice reform

Monopoly is only a game

Currently, the supreme court is deciding whether or not the NFL is a monopoly. Let me save them some time, who cares!

Theoretically, monopolies can be bad. The danger is if one company (the monopolist) corners some market, they can charge a ridiculously high price. We have laws on the books to deal with this. When a company has too much power within a market, we force them to let competition in. The thinking is that as long as competition exists, no one company can charge exorbitantly high prices. In theory, this makes a certain amount of sense.

My beef isn't with the theory, but the reality. Surely, the most important aspect of a monopoly is what it monopolizes. Being the sole producer of oil or wheat is far more important than being the sole producer of Bobble heads or in this case, football. Why does it matter if football is crazy expensive? It doesn't. No one needs football to live, and there are a myriad of other entertainment choices out there. The consumer doesn't need Government to protect them from the NFL, he can simply turn the channel or go even so far as to spend time with his family. Football, like monopoly, is only a game. Let's hope the Supreme Court treats it as such.

Government can say anything

My brother is a perfect example of the principle, use it or lose it. He used to be a smart guy, but lately he has taken a short cut in his thought processes, so short that he has stopped thinking entirely. So there we are, debating the recent credit card legislation, and he laments that the law is ineffective because there is a six month window allowing credit card companies to change rates before they are locked down. He goes on to say that this all could have been avoided if only Congress had been smarter and eliminated this loophole. I tell him it doesn't matter, that the entire idea of government trying to impose price controls on credit is foolish. And then he says it...I shudder..."government can do anything." Technically he's right, government can impose whatever legislation they want, what they can't do is change the laws of economics. God made man and those, and both are inviolable.

Credit is like any other product, it has a cost. That cost is reflected in borrower's default rates and consequently, those borrowers with higher default rates cost more. Hence, credit card companies charge those customers a higher rate of interest. Now it shouldn't take a rocket scientist to figure out that if you force credit card companies to charge a lower interest rate to people with a higher risk of default, the credit card companies will go broke. There's a reason those customers were charged more, they cost more. The question for my brother is this: what is the consequence of Government dictating the lower rate of interest (also known as price controls)? Will the cost change? No. Well, if the cost doesn't change, something else must.

Here's what will happen, riskier customers will no longer be able to get credit (also known as a shortage) because what can be charged is less than what it costs. It doesn't matter whether Congress dictates this immediately or six months from now. Congress' political magic tricks can never have any effect on reality.

Stunning

Great post::

From the White House press briefing today, Press Secretary Robert Gibbs responding to queries from ABC’s Jake Tapper:

Q: If I can just follow up on a question I asked yesterday? Now that the details of the deal with the labor unions have been made public, why is it fair for individuals who have so-called Cadillac plans that have been negotiated through collective bargaining agreements to be exempt until 2018 from the proposed excise tax, whereas those who might be in the exact same situation but are not part of labor unions — even if they want to be and their company resisted, or many they’re in right-to-work states — why is it fair for one group to not get a tax and others to –

MR. GIBBS: I would say this. I’ve asked to see what numbers they can run. We’re talking about an exceedingly small number of people I think that the premise of your impact would impact.

Q: It’s a big tax, though, 40 percent.

MR. GIBBS: Well, it’s a 40 percent tax on the insurance company for the excess of their policy over the threshold, right? So the new threshold is at $24,000, right? So –

Q: But if it wasn’t a big deal, the labor unions wouldn’t have pushed so hard to be exempt from it until 2018.

I challenge anyone to justify why union members should be treated differently than everybody else?

Morality's Cost - Part 2

Continuing on a theme, another example of our enhanced morality can be seen in the area of Equal Rights.

While some feminist brute might argue that men and women are equal, I'm confident most men can take her. Believe it or not, men and women differ and the most obvious of our differences can be seen in physical strength. Men are stronger than women, case closed.

But feminists shouldn't despair in their crusade for equality, because today, physical strength doesn't really matter. Unless you are an Army Ranger stud, most people work in a cubicle like me. They sit and type and live the sedentary life millions of years of evolution has prepared them for. Actually, evolution probably had other plans, but today's reality is that brains matter considerably more than brawn. In the intelligence department, women are more than up to the challenge.

We take equal rights for granted, but how and why they came about so rapidly should not be overlooked. The reason is simple economics (and self interest which is human nature's driving force). An employer's self interest dictates that he hire the best person for a job. As the qualifications for a job shift from manual labor to intellectual labor, the economic disparity between men and women narrow. In effect, men and women are more equal.

The point to remember is that at no point did any lightbulbs go off and society spontaneously declared, "Let there be equality!" For thousands of years society was perfectly content with inequality. It wasn't until men and women were actually equal from an economic perspective that society changed its tune. It was only when being immoral imposed a cost on society (i.e. the intellectual labor of women was undervalued) that we ceased our immorality.

Let's be thankful, that in the area of economics men and women are essentially equal, but never forget that it is our self interest and not some unfailing sense of right and wrong that shapes our morality.

If only she weren't a fool

First, the word "stakeholders" is code for liberal intrusiveness into your life. Teachers may or may not have your kid's education as their number one priority, but I know one group that does, you. Of course, liberals lie to themselves and think they care more about your children than you do (of course when the shit hits the fan they are having a double mocca latte complaining about injustice in the world). They claim that your child's education affects them and I'll admit, it's true, but only in the butterfly flaps its wings and causes a tsunami sense. This is a straw man argument specifically advocated to legitimatize the control of you and your children. Everything affects everyone, so everyone is a stakeholder and therefore any regulation of your conduct is justified.

But that's a side point, a letter to the editor in today's Wall Street Journal inadvertently makes a very good point (emphasis mine):

We Teachers are Right to Be Wary
Your editorial "Unions v. Race to the Top" (Jan. 7) on the U.S. Department of Education's Race to the Top program gets it exactly backward. The grant competition puts a premium on collaboration among all stakeholders, and for good reason: It is the only way to ensure that all children are provided with the education we would each want for our own child. However, your editorial supports what is, in too many places, the status quo—namely state officials running roughshod over teachers and anyone else who wants to weigh in on school improvement.

Teachers' top priority is their students. That's why they are withholding support for Race to the Top applications in states where the process has been more like a dictatorship than a partnership, and where the so-called reforms would do more harm than good. Teachers in Florida and Minnesota have been clear that they want to be a part of the process. But they have refused to be rubber stamps. In some cases, teachers were asked to OK the application before they were allowed to read it. Only a fool would sign an important document without reading it, and teachers are no fools.

For the record, classroom educators support school improvement efforts that are backed by research, developed with their input, and focused on helping kids learn. That's why teachers in Louisiana and Ohio, who were involved in the application process and treated as full partners, have been supportive of their states' applications. But teachers won't buy a pig in a poke, especially when their students' education is at stake.

Randi Weingarten
President
American Federation of Teachers
Washington

Great point Ms. Weingarten, only fools would sign legislation without reading it. Oh, by the way, what's your view on Obamacare?

Where's the outrage?

Obama promised transparency on health care. He said he would show it on C-Span but now he has reneged on that promise. Why haven't I heard any liberals complaining about this? This should not be a partisan issue, everyone should be concerned that massive government legislation is being conducted behind closed doors.

You can see his promises here.

Below is Brian Lamb's open letter to the Obama administration

As your respective chambers work to reconcile the differences between the House and Senate health care bills, C-SPAN requests that you open all important negotiations, including any conference committee meetings, to electronic media coverage.

The C-Span networks will commit the necessary resources to covering all of these sessions LIVE and in their entirety. We will also, as we willingly do each day, provide C-Span’s multicamera coverage to any interested member of the Capitol Hill broadcast pool.

Since the initial introduction of the America’s Affordable Health Care Act of 2009 in the House and the Patient Protection and Affordable Care Act in the Senate
C-Span has televised literally hundreds of hours of committee hearings, markups and floor debate on these bills for the public to see. And importantly, we have archived all of this video for future generations to study in the C-Span Video Archives.

President Obama, Senate and House leaders, many of your rank-and-file members, and the nation’s editorial pages have all talked about the value of transparent discussions on reforming the nation’s health care system. Now that the process moves to the critical stage of reconciliation between the chambers, we respectfully request that you allow the public full access, through television, to legislation that will affect the lives of every single American.

We hope you will give serious consideration to this request. We are most willing to employ the latest digital technology to make the cameras, lights and microphones as unobtrusive as possible.

Please contact me if I can answer any questions.

Sincerely,

Brian Lamb

President Obama, the American public is waiting...

Morality's Cost

I have a theory. We are more moral today because it costs us less/benefits us more than it did in the past. In fact, I would say our sense of morality is always directed by a cost benefit analysis.

Most people today regard slavery as an immoral institution, but for thousands of years, the majority of human history, slavery was quite common. Slavery was not unique to any one nation or group of people and it would be hard to make the case that when slavery was prevalent, most people deemed it immoral. But today, times have changed and slavery is seen as an irredeemable sin. Slavery is this nation's most visible scar and it's unthinkable that any moral person could tolerate its existence.

I personally regard slavery as sinful, but I doubt that my morality came about due to divine intervention. In my opinion, it's unlikely that I, my ancestors, and the rest of humanity have evolved significantly in the last 300 hundred years. Natural selection works, but not quite that fast. It's not like a switch turns on, a light bulb appears, and we say, "hey, slavery is wrong let's stop it!" That sort of absurd arbitrariness works when you turn 18, just not in the course of human history.

The reality is that we have not changed internally, but something external has caused us to modify our behaviors. Something in our environment has changed the calculus regarding the benefits and cost of slavery. Let's think for a moment. Despite notions to the contrary, having slaves is not free. You must feed, clothe, and watch them. They are your property and your responsibility. The only rational reason for keeping slaves is that their labor is worth more than the cost. At some point, owning slaves becomes a negative trade off and even keeping them for some morbid amusement is not economically justified.

In the end, it's our self interest that inevitably drives us. When the outside environment makes one action too costly, we evolve our behaviors, we evolve our morals, so that the previous action is regarded as unwise, wrong. Slavery, in regards to the individual's self interest, simply doesn't make economic sense. Not only is it immoral, it is stupid, and that makes being moral a whole lot easier. A wise person doesn't tempt fate, he also doesn't test his morality by lowering it's price. Capitalism is the evolutionary mechanism which has funneled our self interest against the evils of slavery. Capitalism makes slavery immoral and that's why all good people should support it.

Marketing the unconstitutionality of Obamacare

Recently, the Wall Street Journal has been arguing that the pending health care legislation (what's in those 2,000 pages anyway?) is unconstitutional. In fact, even NPR is debating this, so I know it's serious. While I agree this is a necessary debate, the problem is that it is too little, too late. At this point, these justified concerns look like a last gasp attempt to halt a piece of legislation that conservatives happen to disagree with instead of a truly principled objection. Equate it to a prosecutor who changes the theory of the crime after each previous one is discredited. Every new theory has that much less legitimacy in the eyes of the jury.

Strategically, this issue should have been raised from the very beginning (I am sure some did). Early on, the debate should not have focused only on the efficacy of the health care legislation, but its legality (in fact this should have been primary). Republicans need to project an image of a party that believes in principles at all times, not only when it is politically expedient. Unfortunately, they have spent the last year missing a golden opportunity.

GDP = C + I + G + X

This is a Keynesian equation representing the measurement of a countries GDP. GDP stands for Gross Domestic Product, the other letters in the equation stand for Consumption, Investment, Government, and net Exports. The question one ought to ask is why are we using this equation for GDP when there is a simpler one. You see, GDP is essentially the total goods produced multiplied by the price of each one of those goods. In theory, one could simply take stock of everything we make in one year and then sum up the prices of all those things. This, however, is impractical, so very smart people have come up with this indirect alternative.

Physics is very cool and I remember learning about gravity, or the attraction between masses. It turns out that the original equation that Newton developed is based not on something fundamental, but on observation. It is a reflection on what we see, not the cause of it. GDP is supposed to be a measure of some fundamental value within society. We don't know this value, no one does. We take a measurement, use it as a proxy for this value. It is blunt, indirect, and dangerous.

What some economists have done is attempt to game the measurement in hopes of changing reality. This would be patently absurd in some other sphere of measurement. Software companies used to measure the productivity of their programmers by counting the lines of code produced. Programmers, those smart chaps, started to produce more lines than necessary. The measurement indicated higher productivity, it was wrong. We can fiddle with what is measured, but never forget that measurement is not the underlying cause of something.

Back to the infamous equation for GDP. What we want to measure is the value of a country. This cannot be done, and what can be done is crude and imprecise. Nevertheless, what is worse is the idea that gaming a certain factor in the equation can actually have an effect on real value. According to this equation if we simply increased consumption (C) our GDP would go up and hence we as a country would be richer. Or we could increase government spending (G) and once again we would be awash in riches.

There's a flaw somewhere. Clearly we cannot spend (consume) our way into prosperity. The bigger flaw is thinking that this equation used for measurement can have any effect on reality at all.