Coyote Blog

Last weekend I was watching an NFL game (I forget which one) and the team, which already had a solid lead, was considering going for a TD rather than a field goal at fourth and goal.  The announcer was going "Bad idea, bad decision.  Take the field goal and the sure points.  You don't want to risk getting the other team back in the game with the emotional prop of stopping you at fourth and goal."  Well, the team went for it and made the touchdown, after which the announcer said "I guess it was a good decision after all."

But was it?  If you choose to hit a nineteen in blackjack, and pull a deuce, was it a good decision?  If you  placed a 50-50 bet that a normal die roll will come up with a "6", and it does, was that a good decision?  I would say no.  I would argue that both decisions were bad decisions, despite the fact they happened to yield positive results for the decision-maker.  The reason is that, given the information the decision-maker had at the time of the decision, both moves have an expected value less than zero.

I won't bore my audience with a digression too far into expected value and decision trees.  Suffice it to say that the standard approach for making decisions in uncertainty is to list the possible outcomes of the decision, assign values and probabilities to each outcome, and then total up the sums.  The decision that yields the highest value times probability is the is the one that you would expect, on average, to yield the highest value.   Take the example of the bet on the die roll above.  If you bet a dollar, you would win a dollar on a roll of "6", which is a 16.7% probability.  You would lose a dollar on a roll of 1-5, which is a 83.3% probability.   The value of the "don't bet" decision is zero.  The value of the "bet" decision is 16.7% x $1 plus 83.3% x -$1 equals -$0.67.  So the "no bet" decision is best, since at zero it is higher than the negative outcome of the "bet" decision.  Here is a more complete discussion of the decision tree process.

A couple of provisos:

• When the situation is more complex, the trick of course is to assign the right values and probabilities.  We can assign these exactly for cards and dice, but it's a little harder for something in the business world, like say Enron's decision to enter the broadband business.  But managers are paid the big bucks to do their best.  And managers have tools at their disposal to manage their lack of information.  For example, once you build a base-case, you can ask questions like  "OK, I am not sure about the size of the broadband market, but how large does it have to potentially be to offset the risk involved."
• Like many real-world processes as the approach the asymptotes,  things get a bit squirrelly for really small probability events, particularly when they have very large financial values (positive or negative) attached.  Small probability positive events are essentially a lottery, and many people buy lottery tickets, even though we know the expected value is less than the price.  I play blackjack too, despite a negative expected value, because I get non-monetary benefits from the play.  Small probability negative events are called disasters, and are things we insure for.  Many times the decision to buy insurance has a negative expected value, but we do it anyway because we would sleep better at night knowing that we may be throwing away a little expected value, but we have pre-empted an event that would bankrupt us.  Here we get into interesting topics of risk profiles and risk tolerance, which I will avoid.

Unfortunately, in evaluating historical decisions, we often ignore the state of facts and risks the decision-maker faced at the time of the decision.  We argue Mead should have pursued Lee harder after Gettysburg, because we know now Lee's army got trapped behind a swollen river. The Chargers shouldn't have traded half their assets** to move up one spot in the draft to get Ryan Leaf.  And Enron should not have entered the broadband business.   We treat the decision makers in each of these as boneheads today (we even threw Skilling in jail, as much for his failed business decision as for any fraud).  But all of these evaluations are based on the outcomes, not on what the decision-makers were facing at the time.  Mead had been in charge of the army for less than a week, had driven Lee from a battlefield for the first time ever, and had a primary charge of defending Washington.  It is hard to believe today, but the Peyton Manning and Ryan Leaf were considered nearly equivalent in quality in the '98 draft, and the Chargers trade might have been perfectly appropriate if they had actually gotten a Manning-quality quarterback.  Enron's vision of broadband looked like it would become an enormous business, which in fact it did, just five years too late for them.

** The Chargers traded an inventory of picks and players to the Arizona Cardinals, who, true to form, did nothing with this goldmine.  The Cowboys, by contrast, arguably built a whole dynasty in the 90's off the slew of picks they got in the Herschal Walker trade with Minnesota.

I had to say that this, from Janna Goodrich as quoted by Kevin Drum, is absolutely hilarious:

Education is one of the best engines for upward mobility and poor
students cannot afford to pay for higher education on their own. Their
families don't have the physical collateral to borrow money in the
private financial markets nor the savings to pay for the tuition
outright....But if we gave poorer students mostly grant-based aid we'd
be asking for the rest of the society to subsidize those who are one
day going to be wealthier than the average citizen. Two different
concepts of fairness or equality are at play here and I'm not sure if
both of them could be achieved at the same time.

Can you just see the liberals getting twisted in knots?  Oooh, helping the poor is good, but if we send them to college and they get rich, then we are helping rich people, and that's baaaad.  Its like that logic problem where a card says "the statement on the other side is false" and on the other side says "the statement on the other side is true."  Only a liberal could take the happy story of a poor kid going to college and getting rich and turn it into bad news.  I never thought about what a problem education was for liberal ethics, in that it converts sainted victims (e.g poor) into evil exploiters (e.g. rich).  Maybe that explains why they oppose school choice?

By the way, I have about zero sympathy for this whole grants in education discussion.  From an incentives standpoint, it is perfectly reasonable to ask people who are getting public money for self-improvement to share the risk with the public through the debt and repayment obligation they take on.  A lot of people today already don't take good advantage of the opportunity they have while in college, and this is certainly not going to get any better if we give them a free ride rather than loans.

The second problem I have with public funding of grants for education is that colleges and their alumni groups can decide to fix this problem privately if they so desire.  My school (Princeton) makes a commitment that everyone who gets into the school, not matter how poor, will get a financial aid package that will make it possible to attend.  And, the financial aid is all in grants such that the student graduates from one of the most expensive schools in the country debt-free (and yes, the incentives problem worries me some).  All with private money.  We are able to do this because our school makes it a priority and our alumni give the money to make it happen.

I know what you are going to say -- Princeton is full of rich people, so they can afford this.  Yes and no.  First, our alumni do pretty well for themselves, but they also have to help fund financial aid for the highest tuitions in the country.  Other schools with lower tuitions have a lower bar to clear.  Second, while Princeton alums may be wealthier per capita, our alumni population, because we are a small school, is probably one tenth the size of a Berkley or a Texas.  As a result, schools like Texas almost certainly have a much wealthier alumni group in total.  But few of them give back.  It's not a priority for them to create financial aid money for incoming students (instead, T Boone Pickens gives $125 $165 million to the OU OSU football program).  So don't come crying to me that students at your schools need government grants -- you could have funded such a program at your school privately if you had made it a priority.

Postscript: My dad ran numerous fund raising initiatives at the University of Iowa for years.  After decades of effort, I think he has finally despaired of getting state school alumni to donate money for something other than the sports program.

Update:  OK, that's what I get for making a throw-away statement without fact-checking.  Boone Pickens actually gave $165 million to the athletic programs of Oklahoma State, not OU.  I got a bunch of aggrieved emails on this.  Sorry.  Being from Texas, I get all that stuff up in the trans-Red-River region mixed up.

I originally got to this post at Carls Talk because of the cool map I put in this post.  However, I was really struck by his lament that foreign companies won't sell into Norway because it is too small.  Given that Norway has a trade surplus, you would think that given all the whining in the US about trade deficits that everything would be hunky-dory in Norway and that they would be thrilled that foreign companies wouldn't sell there.  But check this out:

When seeing Norway's GDP in the context of this map, one realizes
why Norway often is one of the last countries U.S. companies consider when
expanding to Europe.

Norway might be an unattractive market when considering expansion
because the market is so small and as a result there is little domestic
competition.  This  has enabled local players to
build monopolies or duopolies with substantial  entry-barriers in many
industries.  Furthermore, the government has sheltered the domestic
market against international competition by adding a hefty import tax
and inconvenient delivery methods on goods purchased outside the
country, rendering international online merchants at a disadvantage
when competing on price and convenience.

On the flip side, if you manage to establish your business here, you
can overcharge your customers and get away with horrendous customer
service.  The average Norwegian customer is not used to good service
and competitive prices.  Online merchants are slow.  Recently it took
four weeks before I received a book shipped to me from a local
merchant.  On a recent trip I recently purchased shoes for our kids in
the U.S.  The selection was superior, and the price:  1/4th of what the
local Norwegian merchant was charging. 

Gee, you mean there is a price consumers pay for protectionism that might offset a few job gains in sugar growing and textiles?

I am having trouble tracing this map all the way to its source, but I thought it was cool enough to show here (via TJIC and Carls Blog).  The map renames each state with a country that has approximately the same GDP as that state.

Check out Russia / New Jersey.  And is it really saying New Zealand and the District of Columbia have the same GDP?

Update:  If you enjoyed this post, check out our (free) comprehensive
guide to the skeptics arguments concerning man-made global warming.

My business had its worst results in five years.  Where is my disaster aid?   So while the California Attorney General is suing car makers for global warming and the state is rolling out an anti-warming plan, the Governator is seeking disaster aid for a big freeze?  Seems like they are working against themselves.

I think the citrus farmers should file a class action suit right away against makers of fuel efficient cars and hybrids.  I mean, wouldn't that be hilarious?

It looks like Ron Paul will run for president again, though this time as a Republican (he ran as a libertarian a while back).  Don't let the "Republican" tag fool you.   He is the same libertarian, but this time he is going to try to shake up the Republican party.  (Here is his web site)

This is great news -- particularly given that the Republicans turned on the libertarian wing shortly after the last election  (presumably they feel they lost because they were not statist enough).  It is thrilling to see a legitimate, non-fruitcake libertarian candidate running on a major party ticket. 

This could make the Arizona primary, which is early in the race, a real event.  Arizona's Republican party nabobs are strong McCain guys.  Pitted against McCain and the party leadership is a Republican rank and file that has a strong Goldwater-libertarian streak and that is a bit tired of McCain's shtick.   This may be the first primary in years (maybe ever) that I have gotten excited about.

I went to a dinner with a group of local libertarians who have been meeting for decades.  We had a very interesting discussion on government centralization vs. decentralization concerning which approach has been and can expected to be in the future a better framework for protecting liberty (A similar discussion has been raging in the blogosphere, as represented by this post at Volokh and here).  It has been a long time since I have not been the most radical anarchist in the room, so I had a great time. 

This observation is apropos of nothing, but I have noticed something odd about the sales efforts of companies.  They seem to be either too aggressive or downright dormant.

I answer my own phone at work, so every day I hear the parade of people calling me asking for the "person who purchases your printer supplies."  Certain industries, including toner, office supplies, telecom, etc. seem to have irritatingly aggressive sales forces.

And then we have companies like Wham-O.  Yes, the toy guys.  We opened a new snow play area and are selling hundreds of plastic sleds a week.  Unfortunately, we can't find any manufacturer to talk to us about a distribution deal.  So one of my managers spends a part of each week combing every Sams Club and Wal-Mart in Northern Arizona to buy plastic sleds for resale.  I have called Wham-O, a large maker of these sleds, about twenty times.  I have talked to many different people.  I have been referred to several different reps and even the head of the sales department.  And no one will return my call, despite a plea that I want to buy hundreds of sleds a week. 

It is possible that in this Wal-Mart world, volume of this size from one retail outlet is not worth pursuing, but this casualness about making a sale really amazes me.  I would chalk it up to some unique circumstance at Wham-O, but I have had this experience with a number of other companies.  I can't tell you how many times I have left plaintive messages to firms saying "I want to buy a bunch of your product, can someone please call me back to tell me how."

Weird.  Fortunately, we finally had a Canadian company today actually returned our calls and was more than happy to sell us large lots of their product.  Oops, there goes the trade deficit.

I am really reluctant to post stuff like this without some independent vetting, because so many groups out there will distort reality into pretzels.  That being said, anyone know if this is accurate?  Or maybe point us all to a better source and/or debunking in the comments?

    "Section 220 of S. 1, the lobbying reform bill currently before the Senate, would require grassroots causes, even bloggers, who communicate to 500 or more members of the public on policy matters, to register and report quarterly to Congress the same as the big K Street lobbyists. Section 220 would amend existing lobbying reporting law by creating the most expansive intrusion on First Amendment rights ever. For the first time in history, critics of Congress will need to register and report with Congress itself.

    "The bill would require reporting of 'paid efforts to stimulate grassroots lobbying,' but defines 'paid' merely as communications to 500 or more members of the public, with no other qualifiers.

    "On January 9, the Senate passed Amendment 7 to S. 1, to create criminal penalties, including up to one year in jail, if someone 'knowingly and willingly fails to file or report.'

Mark Tapscott covered this issue here, but I am still not sure I have an accurate read on all this.

Update:  See comments.  As I feared, the above may distort the issue.  Brandon Berg thinks the law kicks in when you communicate to 500 or more members of the public on policy matters and get them to contact Congress.  It is not at all clear why I should have to register to perform such an activity, but this is narrower than implied in the press release above.

Update #2:  I am becomming increasingly convinced that Lieberman and McCain are the same guy.  Even down to their desire to protect incumbent politicians from political speech.

Update #3:  Jacob Sullum is also skeptical that the law is really as broad as advertised above.

As I wrote before, the new Democratic Congress try to end certain subsidies received by major oil companies.  All fine and good, at least as long as it is really a subsidy and not just an contract obligation they would like to get out of.

One might be led to believe that the Democrats were finally going to address the corporate welfare issues they have been promising to deal with for years.  Unfortunately, it appears that they are really only looking for an excuse for some populist demagoguing against Exxon.  Subsidies still appear to be A-OK:

The Cato Institute's Jerry Taylor and Peter Van Doren are all in favor of eliminating energy subsidies.  By that measure, they find
the House Democrats' 100-hour energy legislation -- H.R. 6, the
Creating Long-Term Energy Alternatives for the Nation Act (aka the
"CLEAN Energy Act") -- to be quite a disappointment.

Energy subsidies, of course, have been a historical disaster.  If you have ever traveled around California, a common site you will see is 1) Windmills that are not working and 2) Rooftop solar fixtures that appear badly broken.  That is because these facilities were installed cheaply as subsidy magnets, rather than actual, you know, investments that made any sense.   Here in Arizona, every third rich persons SUV has this Arizona environmentally-friendly license plate that says the truck is dual-fuel.  When I moved here, I though that was kind of cool.  I know several countries that have good CNG (compressed natural gas) economies in their transportation sector.  It turns out, though, that none of these vehicles actually fill up with anything but gasoline.  Several years ago Arizona had a subsidy for buying dual-fuel trucks that exceeded the cost of conversion, so that everyone did the conversion as a money-maker. 

And these are far from being the worst.  How many billions have been sunk into R&D rat-holes that have produced nothing except some professor's tenure?  Remember that alternative energy and energy conservation technologies are among the hottest sectors in venture capital nowadays.  The VC's I know can't get enough of these projects, and are project rather than money limited.  This means that every subsidy and grant for energy can only go to one of two places:

• Projects that are already going to be privately funded, so that all they do is displace private funding, which makes them a total waste of taxpayer money
• Projects that were rejected for private funding as uneconomic or unpromising, such that the spending is a waste unless you assume Congressmen and government bureaucrats are sharper than VC's in picking investments.

My observation is the two political parties differ on subsidies only in terms of style.  The Democrats appear to have no problems with subsidies as long as they go to sympathetic and fashionable companies (e.g. Google via net neutrality) rather than companies they have deemed to be unfashionable (e.g. Exxon).

I am skeptical of some but not all global warming claims, but must admit that even as a skeptic, I find this argument by James Lewis uncompelling:

Now imagine that all
the variables about global climate are known with less than 100 percent
certainty. Let's be wildly and unrealistically optimistic and say that
climate scientists know each variable to 99 percent certainty! (No such
thing, of course). And let's optimistically suppose there are only one-hundred x's, y's, and z's
--- all the variables that can change the climate: like the amount of
cloud cover over Antarctica, the changing ocean currents in the South
Pacific, Mount Helena venting, sun spots, Chinese factories burning
more coal every year, evaporation of ocean water (the biggest
"greenhouse" gas), the wobbles of earth orbit around the sun, and yes,
the multifarious fartings of billions of living creatures on the face of the earth, minus,
of course, all the trillions of plants and algae that gobble up all the
CO2, nitrogen-containing molecules, and sulfur-smelling exhalations
spewed out by all of us animals. Got that? It all goes into our best
math model.

So
in the best case, the smartest climatologist in the world will know 100
variables, each one to an accuracy of 99 percent. Want to know what the
probability of our spiffiest math model would be, if that perfect world existed?  Have you ever multiplied (99/100) by itself 100 times? According to the Google calculator, it equals a little more than 36.6 percent.

The Bottom line: our best imaginable model has a total probability of one out of three. How many billions of dollars in Kyoto money are we going to spend on that chance?

Yes, there is a point to be made that climate is really complicated.  However, I can still make correct and valid directional predictions without knowing the exact state of every variable.  For example, I can say with some certainty that, at least here in Arizona, that the temperature at 4PM is going to be higher than the temperature at 4AM, and probably by many degrees.  I can make this statement despite having no idea what the temperature at either time actually is.

I think one can say that the hypothesis is pretty strong that man-made CO2 is increasing atmospheric CO2 concentrations which in turn is causing some warming.  Where Mr. Lewis probably has a point is on the issue of positive and negative feedbacks.  Most of the warming in the estimates in productions like "An Inconvenient Truth"  relies not on just CO2-driven warming, but warming from a variety of feedback processes.  These feedbacks are really really complicated and not well understood.  I discuss this issue of feedbacks both here and here and here.

(HT Maggies Farm)

It is an interesting experience negotiating as a buyer when you know two things:

• Seller has marginal cost approaching zero
• Seller has lots of competitors who, for my purposes, provide equivalent service

In this case, I was calling Network Solutions to transfer my domain name registrations to GoDaddy, because GoDaddy is substantially cheaper.  Network Solutions sent me a renewal letter to renew at $34.99 a domain.  Yuk!  I began the process of transferring these domains to GoDaddy, who charges in the $8 range.  (By the way, I have been very happy with GoDaddy for my registrations and hosting of simple sites).

Unfortunately, I had a problem with the transfer -- I needed an authorization code for each domain from NetSol and was not sure how to get it, so I had to call their customer service.  Like a good rep, the person asked me why I was leaving, and I said it was because NetSol was too expensive. 

This is where it got interesting.  First, he said that I could stay at Network Solutions and pay just $16 a domain.  I told him forget it, it was still too high.  After some back and forth, and his getting the information I had called for, he finally offered $8 a domain.  That is nearly an 80% discount from the rate they first offered me, and is lower even than the 100 year renewal (LOL) they offer for $9.99 a year.  I turned it down, because it was too late and I was already consolidating my accounts at GoDaddy.

However, if there are those of you out there who are with Network Solutions and want to stay, but want a discount, call their customer service (not tech support) number, click the options for "transfer domains away from Network Solutions".  When you get a guy, tell him you need the authorization number on the domain to transfer it to GoDaddy (this is true).  When he asks you why you are transferring, tell him NetSol is way more expensive than GoDaddy.  And then let him run.  I didn't even ask for a discount.  He just kept throwing them out at lower and lower price levels after I turned each one down.

When you or I sign a bad contract, we have to live with it.  Did you sign up for a mortgage you can't afford anymore?  Sorry, you can find a way to suck it up financially, you can have the bank take your home, or you can declare bankruptcy and try to sort things out.  As a farmer, did you pre-sell your crops for what now looks like too low of a price?  Sorry, better luck next year.  What you and I don't get to do (and with good reason) in these situations is call for a mulligan and arbitrarily rewrite the terms of the contract the way we would like them today.

But the government, apparently, gets to do just that.  A while back I wrote about a series of court cases regarding wholesale electricity contracts in California:

Mike Gibberson
links a pair of court decisions that may set back any progress made in
deregulating at least the wholesale electricity markets.  In a series
of suits, the State of California is seeking a mulligan, asking the
court to rule that wholesale electricity contracts it entered into in
2000-2001 should be voided because the price was too high and FERC did
not have the authority to allow blanket market-based rather than
cost-based electricity pricing.  And the judges seem to agree:

The panel held that prices set in those bilateral transactions pursuant
to FERC's market-based program enjoyed no presumption of legality.

I
don't think there is anything more depressing to a good
anarcho-capitalist like myself than seeing the government rule that a
price negotiated at arms length by the free will of consenting, and in
this case well-informed adults enjoys "no presumption of legality."  If
not, then what does?  Is that where we are heading, to a world where no
voluntary actions enjoy a presumption of legality?

By the way, one has to remember that this is not a case of an
impoverished high school drop-out in East St. Louis signing a high
interest rate loan he didn't understand.  This is the case of highly
paid electricity executives and government electricity officials
signing electricity contracts.  It is as ridiculous to argue that they
were somehow duped in buying the one and only item they ever buy for
resale as to argue that Frito-Lay somehow shouldn't be held responsible
for the price it negotiates for potatoes.  These electricity companies
knew they had obligations to supply power at retail at certain rates
and failed to lock up enough supply in advance.  Whether Jeff Skilling
gamed the short-term spot market is irrelevant - the utility executives
were at fault for finding themselves beholden to the spot market for so
great a volume of electricity, and doubly at fault for taking this
power at insane rates when other lower cost options were available to
them (such as cutting off customers on interruptible contracts).

Apparently, Congress is doing it again, this time with offshore oil royalty rates.   They WSJ($) picks up the story:

The Democrats also insist that the big five oil
companies have received sweetheart deals from the government that have
ripped off taxpayers. So let's take a closer look. The most
controversial issue involves $6 billion in royalty payments that oil
companies are said to owe the government for oil pumped from federal
waters. The facts suggest otherwise.

These were leases for drilling rights in the Gulf of
Mexico signed between oil companies and the Clinton Administration's
Interior Department in 1998-99. At that time the world oil price had
fallen to as low as $10 a barrel and the contracts were signed without
a requirement of royalty payments if the price of oil rose above $35 a
barrel.

Interior's Inspector General investigated and found
that this standard royalty clause was omitted not because of any
conspiracy by big oil, but rather because of bureaucratic bungling in
the Clinton Administration. The same report found that a year after
these contracts were signed Chevron and other oil companies alerted
Interior to the absence of royalty fees, and that Interior replied that
the contracts should go forward nonetheless.

The companies have since invested billions of dollars
in the Gulf on the basis of those lease agreements, and only when the
price of oil surged to $70 a barrel did anyone start expressing outrage
that Big Oil was "cheating" taxpayers out of royalties. Some oil
companies have voluntarily offered to renegotiate these contracts. The
Democrats are now demanding that all these firms do so -- even though
the government signed binding contracts.

The Democratic bill strong-arms oil companies into
renegotiating the contracts or pay a $9 per barrel royalty fee from
these leases. If the companies refuse, they lose their rights to bid
for any future leases on federal property. So at the same time that the
U.S. is trying to persuade Venezuela and other nations to honor
property rights, Congress does its own Hugo Chávez imitation.

Note: This is an update of this post, where I got these royalty issues both wrong and right.

Though Cathy Young's article has the opposite title, I actually think that the global warming debate is cooling off a bit, with a bit more reason creeping into a debate so far dominated by ideologies as much as science.  More and more voices like this one are starting to be heard:

Mark Kleiman, a professor of public policy studies at UCLA and a
self-identified liberal, noted this recently on his blog. Writes
Kleiman, "To those who dislike a social system based on high and
growing consumption and the economic activity that supports high and
growing consumption and maintains high and growing demand (a dislike
with which I have considerable sympathy), to those who think that the
market needs more regulation by the state, to those who think that
international institutions ought to be strengthened . . . global
warming is a Gaia-send" -- since it justifies drastic worldwide public
action to curb production and consumption. (Gaia, the ancient Greek
goddess of the earth, is a term used by many ecologists to refer to the
earth as a living entity.) While Kleiman sympathizes with
environmentalists, he notes that "their eagerness to believe the worst"
-- for instance, in Al Gore's documentary, "An Inconvenient Truth" --
"is just as evident as the right wing's denialism."

As an
analogy, Kleiman cites many social conservatives' attitude toward the
AIDS epidemic, which has been used to portray sex outside monogamous
heterosexual marriage as fraught with deadly peril and to preach the
message of premarital abstinence. (Kleiman doesn't explicitly say this,
but his comments hint at another abuse of science: Many conservatives
and gay rights activists, for different motives, have exaggerated the
fairly tiny risk of HIV infection from heterosexual sex.)

The
analogy between AIDS and global warming also extends to attitudes
toward ways to remedy the problem. The religious right, Kleiman points
out, pooh-poohs condoms as a way to reduce the spread of sexually
transmitted diseases because the effectiveness of such a remedy would
undermine the abstinence message. Similarly, those on the left who
embrace environmentalism as their substitute religion don't want to
hear about scientific and technological solutions to climate change --
from nuclear power to geoengineering, the artificial manipulation of
the global environment -- that do not include stepping up regulation
and curbing consumption.

There is a growing number of voices in
the scientific community that reject both denialism and alarmism on
global warming. Roger Pielke, an environmental science professor at the
University of Colorado, calls such people "nonskeptical heretics" --
those who believe that human-caused global warming is a real problem,
but one that can be met in part with technological management and
adaptation. Mooney has come to embrace such a viewpoint as well.

The NY Times actually chimed in on this same topic.  And I for a while have been promoting a skeptical middle ground in the global warming debate.

Update: Increasingly, folks seem to want to equate "skeptic"
with "denier."  If so, I will have to change my terminology.  However,
that would be sad, as "skeptic" is a pretty good word**.  I accept there
is some CO2 caused warming, but I am skeptical that the warming and its
effects are as bad as folks like Al Gore make it out to be (explanation here), and I am
skeptical that the costs of an immediate lock-down on CO2 production
will outweigh the benefits.  That is why I call myself a skeptic.  If
that is now a bad term, someone needs to suggest a new one.

**Though I can't help but be reminded of the great Tonya Harding interview on the Dan Patrick Show, where the famous hubcap-wielder and kneecap-breaker said  "I'm not going to make a skeptical of my boxing career."

Growing up, my dad was a corporate executive in an industry where family members were routinely kidnapped and held for ransom in various countries.  As a result, I had a no-travel list of countries I could not visit, which included unsurprising entries like certain third world nations but also included countries like Italy and Germany, which we forget were plagued with Red Brigade kidnappings in the 1970's.

Foreign executives may have to add the United States to their no-travel list, as the US steps up its campaign of arresting people for activities they engaged in outside our country and which were legal in their home countries:

The founders of the online payment service Neteller have apparently been arrested  at airports in New York and Los Angeles.

It's
not yet clear why they were arrested. But it's worth noting that
Neteller, which is based in the Isle of Man, is the only offshore
online payment service that decided to continue to allow its U.S.
customers to do business with online gambling sites after the new bill
banning such transactions passed at the end of the last Congress.

And of course, U.S. officials have made a habit of late  of arresting high-profile offshore gambling executives when they pass through the U.S. to switch planes.

If an American, changing planes in Saudi Arabia, was arrested for being gay, or not wearing a burka, we would be outraged.  Brits should similarly be outraged that their subjects are being thrown in US jails for activities that are perfectly legal in their home country.

QandO reports that Dennis Kucinich is trying to resurrect the fairness doctrine in media, reassigning the FCC the task of policing political speech in broadcast media:

The Presidential candidate said that the committee would be holding
"hearings to push media reform right at the center of Washington." The
Domestic Policy Subcommittee of the House Government Reform Committee
was to be officially announced this week in Washington, D.C., but
Kucinich opted to make the news public early.

In addition to
media ownership, the committee is expected to focus its attention on
issues such as net neutrality and major telecommunications mergers.
Also in consideration is the "Fairness Doctrine,"
which required broadcasters to present controversial topics in a fair
and honest manner. It was enforced until it was eliminated in 1987.

Usually, you can be sure that when a politician talks about the government intervening for "fairness" in free speech, it means that he wants the government to push his political point of view and squash others.  The only surprise is that Kucinich is totally up front about this:

Kucinich said in his speech that "We know the media has become the
servant of a very narrow corporate agenda" and added "we are now in a
position to move a progressive agenda to where it is visible."

So, having failed in the marketplace, and with well-funded entrants like Air America, Kucinich wants the government to force media companies to promote a progressive agenda on the airwaves.  Yuk.

Update: Q&O is on fire, with a great followup post here.

Has the Romance Gone Out of Travel?

Yes.  But I disagree somewhat with the reasoning.  One writer argues travel has lost its romance because it is too easy.  Sorry, but travel has lost its romance because it is too hard, though hard in a different way than it was fifty years ago.  In 1957, travel was difficult like a safari.  In 2007, travel is difficult like getting a hip replacement in the British medical system. 

Hawaii is probably our family's favorite destination, but I have found that on most occasions, all the positive karma I build up through a week there evaporates on the trip home.  In selecting a ski resort for spring break, we chose the resort that represented the easiest travel experience rather than necessarily the best ski experience (we go to the Park City UT area because it is a short direct flight from Phoenix and an easy 45 minute mostly Interstate drive from the Salt Lake City airport. 

Via Hit and Run:

As part of their 100 hours, the House plans to pass legislation that
would enable the federal government to negotiate Medicare Part D drug
prices.

My experience is that when the government "negotiates" prices via their standard procurement processes, they end up paying higher prices than a private firm might (see "$6000 hammer").  I am not a very experienced political observer who understands all the insider-speak, so maybe someone out there can tell me.  In this context, does "negotiate" actually mean "use the government's fiat power to demand that prices be set at whatever hell level they want?"

If it is the latter, then does anyone really believe that with populist political pressures, prices are going to be set anywhere near high enough to continue to justify intense drug R&D?  Already most of the world pays just above marginal cost for drugs, such that we in America pay for most all the drug R&D that occurs  (a form of charity we never get credit for).  If the US government "negotiates" US drug prices down to marginal cost, who will be funding the new life extension therapies I will be needing in about 20 years?

Update: One clarification based on the comments.  There is nothing wrong per se with American drug companies selling pharmaceuticals outside the US near marginal cost.  Profit is where you find it.  However, the issue is that US politicians tend to use these international drug prices as a benchmark, as in "US customers should get the same low price foreigners are getting."  The result is all the drug re-importation battles we have from time to time.  (By the way, its funny that politicians who support drug re-importation to reduce the US drug price differential vs. other countries never seem to apply the same solution to the entirely parallel situation of other countries having much lower labor costs than ours -- in fact in these cases they actively resist labor re-importation, which we also call immigration or outsourcing.)

A second point I want to make is that we cannot say for certain whether US customers are getting a good value or a bad value at current drug prices, though both supporters and opponents of the current health care system try to draw conclusions about the "fairness" of drug prices.  This is an odd situation to be in.  In other situations when people challenge the "fairness" of pricing, say gasoline prices, we libertarians can always retort "Well, buyers and suppliers both agreed to the transaction at X price, so X price was fair for both."   

But we can't do this with drug prices.  The reason we can't determine whether individuals are getting a good value is that, as I wrote at length in this post, our health care system is not structured in a way where individuals make cost-benefit tradeoffs for themselves.  Our employer's insurance company, via their coverage policies, or the US Government, via its rule-making and tort law, make these trade-offs for us.  Some drugs you might never pay for yourself, but you take because your insurance company pays for them.  Some drugs (e.g. Vioxx) you might dearly love to take, but the American litigation mess effectively precludes your access to it.  My suspicion is that, given the value I put on my life, prices for many US drugs are still a bargain for me, but who knows what trade-offs other people would make in a free society?  At the end of the day, we don't know what the real market price for pharmaceuticals is.  All we can say with confidence is that whatever price the government "negotiates," it will most likely be wrong.

A while back, a question went around the blogosphere:  Are there any science fiction writers that we might legitimately label "literature" in fifty or a hundred years?  I think there may be several, but my first nomination is for Neil Stephenson.  Now, its hard to call him a purely science fiction writer, since he bounces around between future, present, and past, but anyone who wrote the incredible "Snow Crash" has got to be labeled, at least partially, a science fiction writer.

I just re-read Cryptonomicon for the second time, and what struck me, beyond just being an engaging story, is the incredible quality of his writing.  In an bit of good timing, Catallarchy actually has a post up with some short excerpts from Cryptonomicon.

Michael Cannon at Cato has an analysis of who will be paying for California's health care free lunch.  If the answer is "not-Californians" and if there is no such thing as a free lunch, guess who?  (Hint: Check mirror).

Perhaps the central touchstone of the women's movement has been the ownership and decision-making for one's own body, starting of course with the freedom to choose an abortion, but extending into a number of other health and sex-related issues. 

What amazes me, though, is how quickly all this is chucked out the window when it comes to having the government take over health care.  Because many of the exact same people who have campaigned for the primacy of a person's decision-making for their own body are also strong supporters of government funded universal health care.  And I can't think of anything less compatible with individual decision-making for one's own body than having the government run health care. 

The demands for universal health care general come from two complaints:

1. Health care is too expensive and is more than I can afford
2. Health care quality is low.  In this category, by far the most common complaint is that "my insurance won't pay for X procedure that I want, or Y level of care, etc."

Neither is a surprising complaint, given how our health care system is currently set up, and both are highly related to one another.  The key problem in the US health care system is that, unlike just about any other product or service you and I purchase, the typical individual is not presented with a cost-quality tradeoff.   Since most of us have a fixed price insurance plan, we couldn't care less how much anything costs, and in fact, like an all-you-can-eat buffet, our incentive is to use as much as possible. 

This puts the insurance companies in the odd position of having to make cost-quality tradeoffs for us, via their coverage and treatment rules.  But when they try to cut costs by narrowing or limiting certain treatments, consumers tend to get the government involved to remove these limitations.  They either do this though legislation (many states now have onerous requirements on what procedures insurance companies must pay for in that state) or through litigation (the threat of lawsuits pushing doctors into expensive defensive medicine, asking that every conceivable test be conducted).  In other words, people take their dissatisfaction with #2 above to the government, who acts, pushing up costs and making problem #1 worse.

Until we find ourselves in a Strossian post-scarcity world, someone is going to have to make this cost-quality tradeoff for our health care.  Even if it is never discussed, this is the most important design factor in any health care system.  There are only three choices:

• Individuals make these choices for themselves, paying for their health care and making their own decisions about whether certain procedures are "worth it".  - OR -
• Insurance companies make these choices for us.  (I am not sure this is even a choice any more, as government micro-management seems to be pushing this de facto into the next choice). - OR -
• The government makes these choices for everyone

So, folks that are pushing for government-funded universal health care are in fact saying "I want the government to take over decision-making for my body."  Yuk!  Where are the feminists when we need them?

Beyond just ceding to the government decisions such as whether its really worth it for dad to get his new hip joint, there is another chilling factor, which I have written about a number of times.  Government health care will act as a Trojan Horse for nanny fascism.  Because, you see, if the government is paying to fix your body, then you can't be trusted to do whatever you want with your body.  By paying for your health care, the government has acquired an ownership interest in your body.  You want that Wendy's cheeseburger?  Sorry, but the government can't allow that if it is paying for your health care.  Likewise, it is not going to allow your kid to play dodge ball at all or to play soccer without a helmet -- can't afford to fix all those broken bones.   And no swing sets or monkey bars either!

Already, when its only affects us as individuals, the government is poking its nose into micro-managing our lives.  Just think what will happen when the government has a financial incentive, in the form of health care costs, to do so!  Eek! In fact, it is already happening:

People who are grossly overweight, who smoke heavily
or drink excessively could be denied surgery or drugs following a
decision by a Government agency yesterday.  The National Institute for Health and Clinical Excellence (Nice) which
advises on the clinical and cost effectiveness of treatments for the
NHS, said that in some cases the "self-inflicted" nature of an illness
should be taken into account.

Or here in the US:

New York City is at the forefront of this new public health movement. In
January, city health officials began
requiring
that medical testing labs report the results of blood sugar tests for all
the city's diabetics directly to the health department. This is first time
that any government has begun tracking people who have a chronic disease.
The New York City Department of Health will analyze the data to identify
those patients who are not adequately controlling their diabetes. They will
then receive letters or phone calls urging them to be more vigilant about
their medications, have more frequent checkups, or change their diet....

So what could be wrong with merely monitoring and reminding people to take
better care of themselves?  New York City Health Commissioner Thomas Friedan
has made it clear that it won't necessarily end there. If nagging is not
sufficient to reduce the health consequences of the disease, other steps
will be taken. Friedan
argues
that "modifications of the physical environment to promote physical
activity, or of the food environment to address obesity, are essential for
chronic disease prevention and control." Friedan envisions regulations for
chronic disease control including "local requirements on food pricing,
advertising, content, and labeling; regulations to facilitate physical
activity, including point-of-service reminders at elevators and safe,
accessible stairwells; tobacco and alcohol taxation and advertising and
sales restrictions; and regulations to ensure a minimal level of clinical
preventive services."

Read that last paragraph.  That's just the starting point for where the government will go when it starts paying for all our health care.

Postscript:   This is a very hard topic to discuss with people, because they are so ingrained with the way the market is set up today.  When I started working for myself, I told my wife that we needed a high-deductible medical plan, to protect us from a health disaster, but we would just self-pay for dental costs.  "What?"  She said.  "You can't pay for your own dental - you need insurance.  We can't go without insurance.  That's all you hear on TV, the problem of not having insurance.  We'll be one of those people!"  I patiently explained that it was almost impossible for us to face a dental problem that would bankrupt us, and that for any conceivable level of dental care, it was cheaper to just pay the bills than get dental insurance.  Eventually, she relented.

We have been paying our own dental bills for years now, and have saved thousands vs. the quotes I got for insurance.  The other day we had an issue that perfectly highlights why 3rd party payer systems cause problems.  My wife chipped a tooth.  She was presented with two choices:  To file it down for nominal cost, or to do a major repair which would cost $500.  She asked me my advice on which to do, and I said "its your mouth.  You know what else we might use $500.  You make the tradeoff."  I am not even sure what decision she made.  It is simply impossible to make this kind of decision for someone else.  Everyone will make it differently.  A government-payer system would only have two options:  1)  don't allow anyone to get the expensive fix or 2)  force taxpayers to pay for everyone to get the expensive fix.  Both solutions are wrong.  Such is the problem with all single-payer systems.

When the Democrats lost control of Congress in such dramatic fashion in 1992, many thought it would be a wake-up call for the party, forcing it to check some of its premises.  In fact, the Democrats never really changed much after 1992 and really have only recovered power because the Republicans have done such a fine job of blowing their own foot off.

Likewise, the Republicans after losing power in 2006 are showing absolutely no hints of dealing with the issues that got them tossed out of office.  In fact, they seem hell-bent on purging their brightest reformers, announcing recently that Jeff Flake will be stripped of his judiciary committee post.  Sorry Jeff, but you are still Coyote Blog's favorite Congressman.  Why?  Here is a sample:

Reason: What policies could a GOP-run Congress enact that would appeal to libertarians?

Flake: At this late date? Adjournment.

You gotta love the reliably liberal Tucson Citizen, which bends over backwards to (almost) blame Flake for his own dismissal because, well, because his uncle Jake*, a prominent state politician, once did the same thing to someone else.  Think about all your uncles and aunts -- would you want to be held accountable for all their actions?

*For an Arizonan, the elder Flake is best known as "Jake Flake from Snowflake" if you can believe it.

The reaction of the Duke faculty to the alleged "rape" by the LAX team has been eye-opening.  The reaction to the student's non-guilt is terrifying.  Far be it for academics to let facts get in the way of a really good chance to sow some race hysteria.  (HT Maggie's Farm).  One bit:

Karla Holloway has resigned
her position as race subgroup chair of the Campus Culture Initiative,
to protest President Brodhead's decision to lift the suspensions of
Reade Seligmann and Collin Finnerty. "The
decision by the university to readmit the students, especially just
before a critical judicial decision on the case, is a clear use of
corporate power, and a breach, I think, of ethical citizenship," said
she. "I could no longer work in good faith with this breach of common
trust.

I am not sure what "critical judicial decision" she is referring to, except perhaps Nifong's disbarment

This is pretty good, and not just because it is drawn by my Princeton '84 classmate Henry Payne.  HT:  Cafe Hayek.   Update: Apparently, these cartoon links are not permanent, and new cartoons replace the link, making it meaningless, so I have deleted it.

By this definition of "not normal", I am not normal either.  I share with Tabarrok the strong sense that the New Deal (combined with shockingly stupid use of Wilson's Federal Reserve and of course rampant scorched-earth protectionism) extended rather than shortened the Great Depression. 

Imagine, increasing the power of
unions to strike and raise wages during a time of mass strikes and mass
unemployment. Imagine thinking that cartelizing whole industries
thereby raising prices and reducing output could improve the economy.
Not everything Roosevelt did was counterproductive - he did end
prohibition (although in order to raise taxes) - but plenty was and
worst of all was the uncertainty created by Roosevelt's vicious attacks
on business.

One of the things I think we have done historically is understate the true degree to which Roosevelt showed himself willing to take the country down the road to socialism, or more accurately, Mussolini-style fascism. Via David Gordon:

Roosevelt never had much
use for Hitler, but Mussolini was another matter. "'I don't mind
telling you in confidence,' FDR remarked to a White House
correspondent, 'that I am keeping in fairly close touch with that
admirable Italian gentleman'" (p. 31). Rexford Tugwell, a leading
adviser to the president, had difficulty containing his enthusiasm for
Mussolini's program to modernize Italy: "It's the cleanest "¦ most
efficiently operating piece of social machinery I've ever seen. It
makes me envious" (p. 32, quoting Tugwell).

Why did these
contemporaries sees an affinity between Roosevelt and the two leading
European dictators, while most people today view them as polar
opposites? People read history backwards: they project the fierce
antagonisms of World War II, when America battled the Axis, to an
earlier period. At the time, what impressed many observers, including
as we have seen the principal actors themselves, was a new style of
leadership common to America, Germany, and Italy.

Once more we must avoid a
common misconception. Because of the ruthless crimes of Hitler and his
Italian ally, it is mistakenly assumed that the dictators were for the
most part hated and feared by the people they ruled. Quite the
contrary, they were in those pre-war years the objects of considerable
adulation. A leader who embodied the spirit of the people had
superseded the old bureaucratic apparatus of government.

If you don't believe me, it is probably because you are not familiar with the National Recover Act (NRA) -- the famous "blue eagle".  This program was the very heart of Roosevelt's vision for the American economy, a vision of cartelized industries managed by government planners. (via Sheldon Richman of the Concise Encyclopedia of Economics):

The image of a strong
leader taking direct charge of an economy during hard times fascinated
observers abroad. Italy was one of the places that Franklin Roosevelt
looked to for ideas in 1933. Roosevelt's National Recovery Act (NRA)
attempted to cartelize the American economy just as Mussolini had
cartelized Italy's. Under the NRA Roosevelt established industry-wide
boards with the power to set and enforce prices, wages, and other terms
of employment, production, and distribution for all companies in an
industry. Through the Agricultural Adjustment Act the government
exercised similar control over farmers. Interestingly, Mussolini viewed
Roosevelt's New Deal as "boldly... interventionist in the field of
economics." Hitler's nazism also shared many features with Italian
fascism, including the syndicalist front. Nazism, too, featured
complete government control of industry, agriculture, finance, and
investment.

And further, from John Flynn's The Roosevelt Myth via Anthony Gregory:

[Mussolini] organized each trade or industrial group or professional
group into a state-supervised trade association. He called it a
corporative. These corporatives operated under state supervision and
could plan production, quality, prices, distribution, labor standards,
etc. The NRA provided that in America each industry should be organized
into a federally supervised trade association. It was not called a
corporative. It was called a Code Authority. But it was essentially the
same thing. These code authorities could regulate production,
quantities, qualities, prices, distribution methods, etc., under the
supervision of the NRA. This was fascism. The anti-trust laws forbade
such organizations. Roosevelt had denounced Hoover for not enforcing
these laws sufficiently. Now he suspended them and compelled men to
combine.

And read this to see the downright creepy Soviet-style propaganda Roosevelt used to promote the NRA.  One example:

A hundred thousand schoolchildren
clustered on Boston Common and were led in an oath administered by
Mayor James Michael Curley: "I promise as a good American citizen to do
my part for the NRA. I will buy only where the Blue Eagle flies."

The fact that the worst of the NRA was dumped by the Supreme Court, and eventually by FDR under pressure, cause us to forget what businessmen in the 1930's were seeing.  The unprecedented fall in asset prices in the early thirties would normally have started to attract capital, at least from the bottom-fishers.  But any reasonable observer at that time would have seen the US government on a path to controlling wages, prices, capacity, etc  -- not an environment conducive to investment.  In fact, under Roosevelt's NRA industry cartels, its not clear that private industrial investment was even legal without the approval of the Code Authority for that industry.

People look back fondly and give credit to the CCC and large public works programs for our recovery, but in fact these programs were necessary because FDR's New Deal, and particularly the NRA, made private investment dry up.

Postscript:  By the way, questioning the greatness of the New Deal is one of those issues that will get you labeled a wacko almost as fast as being a climate change skeptic.  Here is Janice Rogers Brown getting slammed for questioning the New Deal.