Archive for April 2007

Someone Check the Thermostat! Part 2

In the past, I have argued that it is odd that climate scientists ignore the changes in solar activity in their models.  Despite the fact the sun's activity is at a very high level (vs. the past several hundred years) the most recent IPCC report says they think that earth's temperatures would have fallen in the 20th century absent anthropogenic effects.  So then why is this happening:

Mars is being hit by rapid climate change and it is happening so fast that the red planet could lose its southern ice cap,
writes Jonathan Leake.

Scientists from Nasa say that Mars has warmed by about 0.5C
since the 1970s. This is similar to the warming experienced on Earth
over approximately the same period.

Since there is no known life on Mars it suggests rapid changes in planetary climates could be natural phenomena.

mechanism at work on Mars appears, however, to be different from that
on Earth. One of the researchers, Lori Fenton, believes variations in
radiation and temperature across the surface of the Red Planet are
generating strong winds.

a paper published in the journal Nature, she suggests that such winds
can stir up giant dust storms, trapping heat and raising the planet's

Almost every planet in the Solar System has been found to be warming over the last several decades.  At what point do we turn our attention, at least in part, to Mr. Sun?  (Hat tip Q&O Blog)

Clutch Hitting

Last year, Alex Rodriguez was Mr. Choke, because he was perceived as batting less well when the game was on the line.  This year, he has hit a few walk-off homeruns, and he is the new Mr. Clutch.

Clutch hitting is one of those baseball notions that are constantly argued about.  A short summary of the ongoing argument is:  Inside baseball guys swear it is a true phenomena;  statisticians generally cannot find it.  I tend to believe that few if any players have consistently elevated their hitting in clutch situations, but you can find players whose hitting is worse, where the mental stress takes a toll.   Tom Kirkendall points to this great blog I have never visited before called "Fire Joe Morgon."  I am presuming the name is a reference to the fact that former player Joe Morgon has effectively staked himself out as the defender of baseball conventional wisdom against the assault of the Bill James / Billy Bean statistics guys.  He has a great long post showing the absurdity of some of the clutch hitting claims.  This one got him started:

It was a week ago today, fewer than 24
hours after the Pirates had put down a sizzling St. Louis rally in the
ninth inning, that catcher Ronny Paulino reflected upon it and offered
this surprising tidbit.

"You know what the key was to that whole inning?" he said. "When David Eckstein got hit by that pitch."

Say what?

Hitting Eckstein -- not intentionally -- loaded the bases and,
ultimately, forced closer Salomon Torres to pitch to Albert Pujols with
a one-run lead.

"Doesn't matter," Paulino said. "Eckstein's the guy you don't want to face there."

a lot of stupid stuff in this article. I am happy to say -- since I get
bored of disparaging journalists only -- that most of it is said by
actual baseball players. That's new and fun!

Eckstein's career EqA is .260, which is exactly league average. Albert
Pujols's career EqA is .341, which is easy, don't-even-think-twice Hall
of Fame shoo-in. Anyone who ever wants to pitch to Albert Pujols over
David Eckstein in any situation, including pick-up whiffle ball games
at family barbecues when Pujols has dengue fever and Eckstein gets to
use one of those over-sized red bats while Pujols has to hit with a
live cobra, is a goddamn moron of the highest order.

Derek Jeter is generally considered the hands-down clutch playoff hitter in baseball today.  Everyone in baseball, almost to a man, will say that Jeter steps up in the playoffs, so we see this:

Derek Jeter's Career Splits: .317/.388/.463

Derek Jeter's Career Postseason splits: .314/.384/.479

Clutch is actually Mr. Exactly the Same No Matter What Month You Are
Talking About. He is Mr. Equally Excellent Hitting SS Every Month from
April to November. He is Mr. Outrageously Similar Statistics Every 30


Does Anyone Want This Standard Applied to Them?

OK you folks out there -- ask yourself if you would like the following standard for going to jail applied to yourself.

Over the weekend, Dr. Hurwitz was convicted on drug trafficking charges when it was found that some of his patients were reselling their pain pills without his knowledgeJohn Tierney interviewed several of the jurors: (via Hit and Run)

The evidence in the case "“ including conversatons during office
visits that were furtively recorded by patients cooperating with
narcotics agents "“ showed that Dr. Hurwitz was being conned. On one
recording, a patient who'd been selling his OxyContins bragged to his
wife (and fellow dealer) that Dr. Hurwitz "trusts the [expletive] out
of me."

"Those patients used the doctor shamelessly," said a juror I'll call
Juror 1. (All three jurors, citing the controversy over the case, spoke
to me on condition of anonymity, so I'll refer to them by numbers.)
This juror added, "They exploited him. I didn't see him getting
anything financial out of it. Many of his patients weren't even paying
him. He had to believe that he was just treating them for pain."

The other jurors agreed. "There was no financial benefit to him that
was very evident to us," Juror 2 said. "It was a really hard case for
all of us. I think that Dr. Hurwitz really did care about his patients."

So why convict him? "There were just some times he fell down on the
job," Juror 2 said. The third juror echoed that argument using the
prosecution's language: "There were red flags he should have seen."

Plenty of doctors would agree that he should have paid more
attention to those warning signs. Plenty would agree that he fell down
on the job. Some have already said he should have lost his medical
license. But falling down on the job is generally not a criminal
offense, especially when there's no criminal intent.

Any of you want to go to jail for making a mistake on the job?  Note that this was NOT a malpractice case, and jurors were told that it was not.  Hurwitz was convicted, in effect, for caring about and trusting his patients.  Is this the message you want your doctor to get, that he should not trust what you say and should avoid fully treating your pain?  Because that is the message your doctor just received.

Related case of Richard Paey here, who went to jail for 25 years for what a jury decided was over-medicating his pain.

A Quick Thought Experiment

Which country has more power over us?  Is it China, who could suddenly try to sell our assets back to us at cut rate prices, thereby, uh, taking a huge financial loss for themselves to temporarily roil our markets.  Or is it Venezuela, who can (and has) simply seized all the assets in their country owned by Americans and repudiated its debts?

Not clear enough?  OK, lets go back to the cold war.  Let's say the USSR had lent our government a trillion dollars or so, thereby holding lots of dollar denominated US government debt.  Let's say they also made massive investments in US land and buildings.  Would we have said, "boy, they have us now?"  No.  I mean, hell no!  We'd have their money, they'd just hold our paper.  If the Russki's got adventurous in Afghanistan, we could just say, sorry, we are going to stop paying on all those bonds you hold until you get out.  This situation is so clear that in fact it was the USSR's strategy to do just the opposite, ie to borrow as much as possible from the west, taking western money to fund their economy while creating a threat of loan default they could use strategically.  American hawks argued that it was insane to lend to the USSR, because this gave them leverage over us. 

Dual Booting Vista

I have written in the past that I have a number of problems with Vista.  However, I bought a laptop for which I had no choice but to accept Vista installed.  I have not really been pleased with the interface -- as is Microsoft's wont, every option you really use is in a new place in this version.  Hopefully I will get used to it, but I never, for example, was able to get used to the XP-style control panel, so I am not sure.

One thing Vista does NOT do very well is legacy games, particularly on a laptop where having up-to-date graphics drivers depends on the computer, rather than the chip, manufacturer  (I am not sure why, but you can almost never use the generic Nvidia drivers for Nvidia cards on a laptop).  Many copy protection schemes in older games will not recognize the CD in the tray in Vista, and a lot of legacy hardware components will never have Vista drivers written for them.

So I embarked on trying to dual-boot Vista with XP on a system that already had Vista installed on the whole hard disk out of the factory.  It turned out to be tedious, but following these directions got me there perfectly  (these directions cover going from XP to Vista+XP).  I used Gparted to change the partitions around, which was much easier than I thought it would be, and EasyBCD is an awesome product  (both are freeware).  The only problem I had was the same as the one in comment #52 of the article, but the link and workaround linked there solved the problem for me.

I don't think I would have a total noob try this, but it also isn't some complicated haxor procedure either.  Highly recommended for those of you with legacy software and equipment who want to try Vista or are stuck with it on your new computer.

The Kind of Philanthropy I Hate

I value many of the same things - open space, wilderness, wildlife - that environmental activists value.  The difference is that I do not wish to achieve my goals by force.  For years I have donated money to various environmental funds that focus on using private funds to buy land for preservation (the Nature Conservancy being the most famous of these, though it has had some problems of late).  I particularly eschewed donating to groups who used most of their funds for lobbying.  These groups are using their funds to try to buy government coercion to back whatever goals they are seeking, often including taking more money from me by force and limiting my rights to manage my own property as I see fit.  I hate that.

Which is why I am very disappointed in the recent actions of Bill Gates.  To date, Gates has dumped billions of his own money into trying to improve public schools.  I personally think that to be useless**, that the management and incentives of government monopoly schools are broken and no amount of money can fix them.  However, it was his money and God bless him for trying.

However, it appears Gates is tired of the slow progress, and is taking the great second-rater escape clause, using his money now not to fund improvement programs but to lobby the government to spend more of my money:

Eli Broad and Bill Gates, two of the most important philanthropists in
American public education, have pumped more than $2 billion into
improving schools. But now, dissatisfied with the pace of change, they
are joining forces for a $60 million foray into politics in an effort
to vault education high onto the agenda of the 2008 presidential race.

** I have written several times about the dynamics of organizations and management, but it is my belief that there comes a time when certain managements and cultures are beyond saving, and the only solution is for the market to let them fail and have their assets and people be taken in by more dynamic organizations.  I wrote about this in the most depth in the context of GM, in a post on corporate DNA and value creation:

A corporation has physical plant (like factories) and workers of
various skill levels who have productive potential.  These physical and
human assets are overlaid with what we generally shortcut as
"management" but which includes not just the actual humans currently
managing the company but the organization approach, the culture, the
management processes, its systems, the traditions, its contracts, its
unions, the intellectual property, etc. etc.  In fact, by calling all
this summed together "management", we falsely create the impression
that it can easily be changed out, by firing the overpaid bums and
getting new smarter guys.  This is not the case - Just ask Ross Perot.
You could fire the top 20 guys at GM and replace them all with the
consensus all-brilliant team and I still am not sure they could fix

All these management factors, from the managers themselves to
process to history to culture could better be called the corporate
DNA.  And DNA is very hard to change.  Walmart may be freaking
brilliant at what they do, but demand that they change tomorrow to an
upscale retailer marketing fashion products to teenage girls, and I
don't think they would ever get there.  Its just too much change in the
DNA.  Yeah, you could hire some ex Merry-go-round executives, but you
still have a culture aimed at big box low prices, a logistics system
and infrastructure aimed at doing same, absolutely no history or
knowledge of fashion, etc. etc.  I would bet you any amount of money I
could get to the GAP or the Limited faster starting from scratch than starting from
Walmart.  For example, many folks (like me) greatly prefer Target over
Walmart because Target is a slightly nicer, more relaxing place to
shop.  And even this small difference may ultimately confound Walmart.
Even this very incremental need to add some aesthetics to their
experience may overtax their DNA.

Corporate DNA acts as a value multiplier.  The best corporate DNA
has a multiplier greater than one, meaning that it increases the value
of the people and physical assets in the corporation.  When I was at a
company called Emerson Electric (an industrial conglomerate, not the
consumer electronics guys) they were famous in the business world for
having a corporate DNA that added value to certain types of industrial
companies through cost reduction and intelligent investment.  Emerson's
management, though, was always aware of the limits of their DNA, and
paid careful attention to where their DNA would have a multiplier
effect and where it would not.  Every company that has ever grown
rapidly has had a DNA that provided a multiplier greater than one...
for a while.

But things change.  Sometimes that change is slow, like a creeping
climate change, or sometimes it is rapid, like the dinosaur-killing
comet.  DNA that was robust no longer matches what the market needs, or
some other entity with better DNA comes along and out-competes you.
When this happens, when a corporation becomes senescent, when its DNA
is out of date, then its multiplier slips below one.  The corporation
is killing the value of its assets.  Smart people are made stupid by a
bad organization and systems and culture.  In the case of GM, hordes of
brilliant engineers teamed with highly-skilled production workers and
modern robotic manufacturing plants are turning out cars no one wants,
at prices no one wants to pay.

Changing your DNA is tough.  It is sometimes possible, with the
right managers and a crisis mentality, to evolve DNA over a period of
20-30 years.  One could argue that GE did this, avoiding becoming an
old-industry dinosaur.  GM has had a 30 year window (dating from the
mid-seventies oil price rise and influx of imported cars) to make a
change, and it has not been enough.  GM's DNA was programmed to make
big, ugly (IMO) cars, and that is what it has continued to do.  If its
leaders were not able or willing to change its DNA over the last 30
years, no one, no matter how brilliant, is going to do it in the next

What the Hell Is the Difference?

TJIC has a great response to an article describing how Nigerian politicians take money from the oil industry and use it as payments to 10% or so of the voters in order to get re-elected in perpetuity.  He says:

The difference between corrupt Nigerian democracy and glorious American
democracy is that (a) OUR government does not steal oil money, it
steals money from all sorts of industries; (b) closer to 50% of the
populace gets bought off with the loot.

What the hell is the difference, really, except we do it up front, within the "law", while Nigerians do it under the table.  Based on this, I would add a third difference to TJIC's two:  (c) at least the Nigerians treat the behavior as wrong and do it under the table -- our politicians are right up front about it.

Does the Hippocratic Oath Make Doctors Our Slaves?

In the beginning, human rights were things we could enjoy by ourself on a desert island.  Speech, assembly, the ability to make decisions for our own life, to keep the product of our own labors -- these are all rights that don't require other people to make them real.  The only role for government is merely to keep other people from trampling on these rights by the use of force.

And then, in the 20th century, we invented new rights -- the "right" to sustenance, to be clothed, to have shelter, to be educated, to have health care.  These were not the passive rights like freedom of speech.  For example, the right to shelter did not mean that we were free to go and build ourselves a shelter and have it protected from attack or burglary by others.  No, it has come to mean that if we don't have shelter, either through hardship or fecklessness, it should be provided for us. 

I hope you can see the difference.  These new rights require action by someone else.  They require that someone, by force if necessary, be made to provide us these things, or at least be made to forfeit wealth which is used to purchase these things for us.   These new rights are not only different from traditional rights like speech and property, but they are 180 degrees opposite.  The old-style rights established that no other person has a call on our mind, our bodies, or our labor.  The new-style rights establish the opposite, that we do have a call on someone else's mind and labor.  In fact, these news-tyle rights are not rights at all, but dressed up slavery.  Because no matter how you try to pretty them up, the fact is that none of them have any meaning unless force can be used to make someone provide the object in question, whether it be health care or education or housing.

Now when we libertarians begin calling things like this slavery, the average American turns off.  Oh, you libertarian guys, always exaggerating.  But Eugene Volokh brings us a great example that proves otherwise.  Libertarian Dr. Paul Hsieh wrote what I thought was a pretty reasonable letter to the Denver Post:

Health care is not a right, and it is not the proper role of
government to provide health care for all citizens. Instead, this
should be left to the free market. It is precisely the attempts of the
governments of countries like Canada (or states like Tennessee) to
attempt to mandate universal coverage which have led to the rationing
and waiting lists for vital medical services. Similar problems are
already starting to develop in the Massachusetts plan as well. Any plan
of government-mandated "universal coverage" is nothing more than
socialized medicine, and would be a disaster for Colorado.

Paul S. Hsieh, M.D., Sedalia

Denver Post columnist Jim Spencer is scandalized by Dr. Hsieh's position:

The craziest letter to the editor that I've read in some time came
from a physician who claimed that Coloradans have no right to health

Seems the guy not only forgot his Hippocratic oath but also the law.

If you're sick enough or badly injured, they have to treat you at the emergency room regardless of your ability to pay.

The doctor aimed his editorial rant against socialized medicine. But
he wrote it because a state blue-ribbon commission is now cobbling
together a plan for medical treatment and prescription drugs for

First, it is depressing how deeply these new non-rights are embedded even in the freest country in the world -- so much so that the reporter considers it the craziest notion in the world that free health care might not be a human right.  (I have a thought problem for you -- if free health care is a fundamental human right, and a group of us are stranded on an island with no doctor, how do we exercise our right?)

Second, the fact that something is written into the law does not make it a right.  Rights flow from man's nature (or from God, depending on your beliefs) and NOT from the government.  The fact that the government legislates against free speech does not change my right to free speech, it just marks itself as a bad government.  On the other hand, if the government legislates that we all get free plasma TV's, it does not change the fact that man does not have the inherent right to a plasma TV. 

Third, and I think most interesting, is how Mr. Spencer is using Dr Hsieh's Hippocratic oath as a club.  In effect he is saying "you swore an oath and now you are obligated to provide us all with health care at whatever price, including zero, we wish to pay for it."  Mr Spencer demands the right to health care -- and Mr. Hsieh is going to provide it at any price the government demands because his Hippocratic Oath forbids him to do otherwise.  Very unsubtly, Mr. Spencer is treating Dr. Hsieh as his and society's slave, and he is appalled that the slave has talked back to the masters.

  I could not let this other paragraph in the article go. 

"Insurance companies are not in the
business of providing quality, equitable health care," [health care reform advocate] White explained.
"They're in the business of making money. I said, 'OK, let's fix this
once and for all.' This establishes a single- payer system."

I just love the people that treat "making money" and "quality service" as incompatible.  Because its just so easy to make a crappy product and sustain profits over a number of years.  Here is an exercise:  Name 10 private for-profit businesses that make a quality product or service.  Gee, how about Apple, Sony, Toshiba, GE, Home Depot, UPS, Wal-Mart, etc. etc.  You get the idea.  Now name 10 government run agencies that provide a quality service.  Gee there's the post office, uh no, not really.  DMV?  no.  VA hospital?   no.  Amtrak?  no.  OK, name one.

Further Thoughts on Social Security

Given my emails, I don't think I explained my first point in this post on Social Security very well:

If you are below 50 and in the top 40% of earners, do NOT expect to get
any Social Security benefits.  Live with it.  Up until now, wealthy
people have received SS retirement benefits as an expensive PR campaign
to convince everyone that SS is an insurance program, not a welfare
program.  Well, I have run the numbers, and it is at least 83% welfare.
The only alternative to defending these benefits will be to suffer
through substantial tax increases which will be disproportionately paid
for by the same richest 40% who would lose their benefits.  Given the negative rates of return that SS pays
on your payroll taxes, each extra dollar that taxes are raised will
only yield well under a dollar (present value) in benefits. So give up
on the benefits, campaign to keep taxes down, and start saving on your

Let me try again.  When the crunch comes in a decade or so, the first thing that is going to happen is that the wealthiest people are going to lose their benefits.  Yeah, I know, not fair, but does it surprise you?  For years, Social Security advocates have desperately clung to the argument that Social Security is not welfare, it's insurance.  That is why benefits for the wealthy still exist at all.  But when crunch time comes, the wealthy, as usual, are going to get thrown overboard first.

If you are in the wealthiest 40% or so, here is what it will take to save your Social Security benefits:  New taxes.  These taxes will either be additional payroll taxes or additional income taxes.  If they are payroll taxes, my guess is that the main tax increase will be eliminating the top cap on earnings subject to the tax;  in other words, most of the new payroll taxes will be on the highest earners.  If the new taxes are income taxes, then rest assured that they will be on the top 40% of earners, since it is the top 40% who pay virtually all of the income taxes in this country today.

So, to save your benefits, you are going to have your taxes increased.  And since Social Security, like every government program, is leaky, and since it pays a negative rate of return, you are going to have to pay present value of more than a dollar of taxes to save present value of a dollar of benefits.  That is a bad investment.  If you are still in your productive years, be ready to see your benefits go bye-bye and fight like hell to keep taxes down.  And save, save, save.

Capitalism Rorschach Test

The current failures in the subprime mortgage market, both of borrowers and lenders, has become one of those classic Rorschach tests where people self-identify by what description they apply to the market fallout.  Views on capitalism, free interchange, and individual responsibility are all tied up in the choice between:

  1. Businesses recognized an opportunity to expand the mortgage market by offering mortgages to poorer, riskier borrowers and managing the risk by securitizing these loans and reselling them in the increasingly robust institutional market for such loan packages.  While certainly in it for the profit, this move was consistent with the long-term trend in the US to wider home ownership.  It turned out, however, that almost everyone involved were working off some poor assumptions.  Borrowers over-estimated their ability to pay and counted too much on the continued upward trajectory of real estate values.  Lenders made a number of bad credit decisions, something not wholly surprising in a new market.  And institutions and other investors under-estimated the risk in these packages, particularly the systematic risk associated with falling housing prices.   The sub-prime market will likely re-emerge, but with everyone smarter the next time around.  Huge losses give lenders and institutions all the incentive they need to change their behavior in the future.
    -- OR --
  2. Unscrupulous lenders created the sub-prime market as a way to make a quick buck off of naive and inexperienced borrowers.  They tricked these borrowers into taking on more debt than they could handle in order to get large up-front fees.  Institutions were not arms-length investors, but were explicitly knowledgeable and "in on" this con.  Their goal was to sell worthless bonds to unsuspecting investors.  The fact that the lenders and institutions are taking the biggest losses in the market collapse is not a sign that they are innocent, but that the market fell apart faster than they expected, so they had not had the chance to unload the securities on duped individual investors.  Without regulation, lenders and institutions will continue committing these same crimes and poor people have proven that they need outside help to make good decisions with their money.  Congress needs to step in and prevent poorer borrowers from being offered mortgages in the future, and institutional investors need to be held financially accountable when borrowers take on more debt than they can handle.

Update:  There are several comments that say "can't it be both?"  Surely there can be simultaneous examples of both in the same market, but, as an example, proponents of #2 talk as if theirs is the dominant explanation, and are proposing legislation on that basis. 

Recognize that you have to really believe #2 all the way to even consider some of the draconian measures that Congress is entertaining.  There is legislation that is being seriously considered at this moment
that will fundamentally change the entire mortgage market, not just the
sub-prime piece, for the worse.  In particular, Congress is considering making financial institutions that invest in securitized batches of mortgages liable for any illegal lending practices of the originator.  This will effectively kill the securitization process.  Many of you younger folks won't know what that means, but in effect it will send us back to the mortgage process of the 1970's, which I promise you really, really sucked.  This will make it much harder for everyone to get mortgages.  Since securitization, there are an order of magnitude more mortgage competitors, the mortgage approval and application process take about 1% of the time it used to, rates are lower, and there is much more flexibility in mortgage design. 

Accounting for Offsets

Anybody who has been a part of a productive business (e.g. so this excludes almost all politicians and academics) will probably have experience with some type of profit improvement program.  Usually you are doing about a hundred things simultaneously to reduce costs.  When costs actually go down, you find yourself scratching you head - what actually made the difference.  Everyone will claim that their program or initiatives saved the company X amount of money, but when you add up all the X's, you get a number four or five times the actual improvement. 

Well, apparently the same dynamic occurs in carbon offsets:

An investigation by the Financial Times
suggests that many carbon offsets are illusory, and that there is
little assurance that purchasing carbon offsets does much of anything
to reduce carbon dioxide emissions. Specifically, the report found:

Widespread instances of people and organisations buying worthless
credits that do not yield any reductions in carbon emissions.

- Industrial companies profiting from doing very little "“ or from
gaining carbon credits on the basis of efficiency gains from which they
have already benefited substantially.

- Brokers providing services of questionable or no value.

- A shortage of verification, making it difficult for buyers to assess the true value of carbon credits.

Who in the world would have every predicted this?  Well, it turns out a lot of people did, including me.  For example, I suggested that companies like Terrapass are probably selling their CO2 offsets at least three times:

  1. Their energy projects produce electricity, which they sell to
    consumers.  Since the
    electricity is often expensive, they sell it as "CO2-free"
    electricity.  This is possible in some sates -- for example in Texas,
    where Whole Foods made headlines by buying only CO2-free power.  So the
    carbon offset is in the bundle that they sell to
    electricity customers.  That is sale number one. 
  2. The company most assuredly seeks out and gets
    government subsidies.  These subsidies are based on the power being
    "CO2-free".  This is sale number two, in exchange for subsidies. 
  3. They still have to finance the initial construction of the plant, though.  Regular heartless
    investors require a, you know, return on capital.  So Terrapass
    finances their projects in part by selling these little certificates that you
    saw at the Oscars.  This is a way of financing their plants from people
    to whom they don't have to pay dividends or interest "”just the feel-good
    sense of abatement.  This is the third sale of the carbon credits.

I also suggested that there is an incredible opportunity for outright fraud:

This type of thing is incredibly amenable to fraud.  If you sell more
than 100% of an investment, eventually the day of reckoning will come
when you can't pay everyone their shares (a la the Producers).  But if
people are investing in CO2 abatement -- you can sell the same ton over
and over and no one will ever know.

Finally I argued that many of the abatement numbers make no sense:

Something smells here, and it is not the cow-poop methane.  This 100,000 pound [CO2 Offset] coupon retails for $399.75 (5x79.95) on the TerraPass web site.
First, this rate implies that all 300 million Americans could offset
their CO2 emissions for about $100 billion a year, a ridiculously low
figure that would be great news if true. 

Lets look at solar, something I know because I live in Arizona and have looked at it a few times.  Here is the smallest, cheapest installation
I can find.  It produces 295 CO2-free Kw-hours in a month if you live
in Phoenix, less everywhere else.  That is enough to run one PC 24
hours a day -- and nothing else.  Or, it is enough to run about 10
75-watt light bulbs 12 hours a day -- and nothing else.  In other
words, it is way, way, way short of powering up a star's Beverly Hills
mansion, not to mention their car and private jet.  It would not run
one of the air conditioning units on my house.  And it costs $12,000!
Even with a 20 year life and a 0% discount rate, that still is more
than $399.75 a year.  For TerraPass's offset claim to be correct, they
have to have a technology that is one and probably two orders of
magnitude more efficient than solar in Arizona.

[update:  Al Gore's house 221,000 kwH last year.  Call it 18,400KwH
per month, that would require about 62 of these solar installations for
$744,000.  I don't think $399.75 is really offsetting it]

Social Security: Some Advice

MaxedOutMamma has a pretty good overview post on the economics of funding Social Security and Medicare over the next 30 years or so. 

So the real issue is not
those fictional bonds in the surreal trust fund. The real issue is
whether the American taxpayer will be able to pay for all its current
programs as well as Social Security and Medicare without paying double
or triple the percentage in income taxes the American taxpayer is
paying now. Because that is not going to happen. Forget all this
jibber-jabber about moral issues. That is not going to mean a thing to
the man earning the equivalent of $28,000 today in 2023 when he is
asked to pay much more of that money so that some 67 year old with
several millions of assets can get his or her scheduled Social Security

Nothing really new here, but the picture is always worth reviewing (she has lots of nice graphs showing the coming spending overhang).  Politicians' ignorance of (and ignoring of) this problem would shock me if I had any regard left at all for politicians.   I wanted to offer some random observations:

  1. If you are below 50 and in the top 40% of earners, do NOT expect to get any Social Security benefits.  Live with it.  Up until now, wealthy people have received SS retirement benefits as an expensive PR campaign to convince everyone that SS is an insurance program, not a welfare program.  Well, I have run the numbers, and it is at least 83% welfare.  The only alternative to defending these benefits will be to suffer through substantial tax increases which will be disproportionately paid for by the same richest 40% who would lose their benefits.  Given the negative rates of return that SS pays on your payroll taxes, each extra dollar that taxes are raised will only yield well under a dollar (present value) in benefits. So give up on the benefits, campaign to keep taxes down, and start saving on your own.
  2. If you have some control of when you you earn your lifetime income, try to earn as much as you can in the next 10-15 years.  After that, taxes are almost sure to go up substantially.  It would not surprise me to see top marginal rates back well above 50% again.
  3. Democrats in Congress are pushing for new welfare programs, particularly socialized medicine, right now because they must understand that in 10 years, the window for major new spending programs will be closed.  The pressures in a decade will be for program cutbacks as costs really start to balloon, and I can't imagine that new transfer programs will be taken seriously as the old ones eat up a larger and larger part of GDP.  Of course, my point is that this is the last time that such a program would be politically feasible.  From a financial management point of view, we are past the point where adding major new social programs makes any sense.  In fact, adding such a program now would be like a guy who has gotten over his head and knows he can't pay his credit card bills taking his last money out of the bank and buying a plasma TV.

Correction on Life Expectancy

Bird Dog writes me with a correction to my statement that even the poorest today enjoy much longer life spans than folks 100 years ago.  He writes:

In the past, average life span was short, due to infant and childhood
mortality, and young adult mortality, due to infectious disease. It's a
statistical error, really.
There was a bi-modal mortality, peaking in the early teens, and again
in old age. Infant mortality was high.  That youth mortality has been
eliminated by antibiotics, so we no longer have a bimodal mortality graph. But
that youth mortality falsifies the historical averages, giving the
appearance of a lower life span than today..

That is a valid point.  Of course, the much longer average life span has meaning, just not in the exact way I implied.  In a previous article, I formulated this difference more carefully, and in a way I think is consistent with Bird Dog's observation:

1)  A hundred years ago, you would have been more likely, by an order of magnitude, to see at least one of your kids die.  Even in my father's generation (born in 1922) it is unusual to find anyone who did not lose a brother or sister young, as both my mom and my dad did.

2)  Many people from centuries past lived as long as we today might expect.  Thomas Jefferson, George Washington, and John Adams all lived to ages we would even today call "old".  However, I would venture that most of these folks' lives in their last ten or twenty years was of much lower quality than our lives at these ages today.  We may not live much longer, but our last 10-20 years are much more enjoyable.  My father-in-law was biking and white-water kayaking in his seventies right up to his untimely death in a car accident.  Among other things, teeth, eyes, and joints are all body parts that tend to fail in a non-terminal manner.  We can fix many of the age-induced problems with these parts, and while it may not extend life, it sure as hell extends living.

Proletarianizing the Middle Class

I have been reading and studying Karl Marx in the last week as a part of a European History course I am taking that focuses on the 19th century.  In the context of Marx, it was interesting reading the NY Times recent article on income inequality (the newspaper is not comfortable unless it has visited this topic at least once every week or so).  You might think that I would latch onto this quote from the Times (HT: TJIC)

The top 0.1 percent of earners"¦ now brings in 11 percent of the
nation's total income, triple the share that they did just a generation

And indeed, I have written on the implied zero-sum fallacy any number of times, including just yesterday.  Implied in this one sentence from the Times is what I call the "bubbling spring" theory of wealth, where wealth and income just sort of magically appear, like a spring out of the ground, and the rich are all those piggy people up front taking more than their fair share of the water.  Of course this is ludicrous, because it implies that if the wealthy made less money, then the poor would make more.  In fact, the reality is that if the wealthy made less money, then the nation's total income would be lower.

But this is not what caught my attention.  What was new to me in my recent study of Marx was his writing on the tactics of socialist revolution.  Specifically, he spent a lot of time talking about the need to "proletarianize the middle class."  He knew that to have a successful socialist revolution, the middle class had to be made to feel marginalized and put upon by the system.  If he had lived long enough, he would have said that socialist revolution failed to occur in countries like Britain because the middle class became too large and too successful.

In this context, then, I found this quote from the Times most interesting:

There is now a big push in both Washington and state capitals to come
up with policies that can alleviate middle-class anxiety.

The author himself editorializes:

There is now a big push in both Washington and state capitals to come
up with policies that can alleviate middle-class anxiety. That's all
for the good. In fact, it is overdue.

What middle class anxiety?  The middle class is doing better than ever, except that there has been a concentrated media campaign by the Times and others, abetted by various politicians on the left, to try to make the middle class feel anxious and marginalized.  To the author's credit, he observes that while "Layoffs seem to happen more frequently than they once did," the actual evidence for increased volatility is really not there:

Only later do you come to the surprising part: there is the same
amount of variability now that there was in the 1980s and 1990s. In
journalism, this is known as burying the lead.

"Intuitively, you would think volatility is increasing," said Senator Charles E. Schumer, Democrat of New York, who along with Senator Jim Webb
of Virginia requested that the study be done. "But it isn't, which I
guess shows that the American economy has always been very flexible."

What the author does not explain is, if the increase in volatility is not real, then why do so many people believe it to be true?  The answer, of course, is that his employer, among others, have been pushing a PR campaign for years to convince the middle class that their lot sucks.  Why?  Well, read your Marx.

Lou Dobbs and Howard Beale

Is it just me, or does anyone else sense that, after years of being moderately normal on the air, someone took Lou Dobbs into the back room a few years ago and changed his outlook on life in a manner similar to Arthur Jensen taking Howard Beale aside in the movie Network?  He really seems to have turned into the first prophet of the secular religion of xenophobia and racial purity, much the same way that Howard Beale spread the religion of corporate feudalism before the network finally had to "take him out" for poor ratings.

Wealth Creation and the Zero-Sum Fallacy

This is an update of an article I post every year or two around tax day.  I was going to skip this year, but tomorrow is the premiere of a show (which I have not seen yet) called the Ultimate Resource which seems to be named after Julian Simon's great book, and looks to be focused on many of the same issues I address in this post.

One of the worst ideas that affect public policy around the world is that wealth is somehow zero sum - that it can be stolen or taken or moved or looted but not created.  G8 protesters who claim that poor nations are poor because wealthy nations have made them that way;  the NY Times, which for years has flogged the idea that the fact of the rich getting richer in this country somehow is a threat to the rest of us; Paul Krugman, who fears that economic advances in China will make the US poorer:  All of these positions rest on the notion that wealth is fixed, so that increases in one area must be accompanied by decreases in others.  Mercantilism, Marxism, protectionism, and many other destructive -isms have all rested on zero-sum economic thinking.

The (Incorrect) Physics Analogy

My guess is that this zero-sum thinking comes from our training and intuition about the physical world.  As we all learned back in high school, nature generally works in zero sums.  For example, in any bounded environment, no matter what goes on inside (short of nuclear fission) mass and energy are both conserved, as outlined by the first law of thermodynamics. Energy may change form, like the potential energy from chemical bonds in gasoline being converted to heat and work via combustion, but its
all still there somewhere.

In fact, given the second law of thermodynamics, the only change that will occur is that elements will end in a more disorganized, less useful form than when they started.  This notion of entropic decay also has a strong effect on economic thinking, as you will hear many of the same zero sum economics folks using the language of decay on human society.  Take folks like Paul Ehrlich (please).  All of their work is about decay:  Pollution getting worse, raw materials getting scarce, prices going up, economies crashing. They see human society driven by entropic decline.

Wealth Is Demonstrably Not Zero-Sum

So are they wrong?  Are economics and society driven by something similar to the first and second laws of thermodynamics?  I will answer this in a couple of ways.

First, lets ask the related question:  Is wealth zero sum and is society, or at least the material portions of society, always in decline?  The answer is so obviously no to both that it is hard to believe that these concepts are still believed by anyone, much less by a large number of people.  However, since so many people do cling to these false notions, we will spend a moment or two with it.

The following analysis relies on data gathered by Julian Simon and Stephen Moore in Its Getting Better all the Time:  100 Greatest Trends of the Last 100 Years. In fact, there is probably little in this post that Julian Simon has not said more articulately, but if all we bloggers waited for a new and fresh idea before we blogged, well, there would not be much blogging going on.

Lets compare the life of an average American in 1900 and today.  On every dimension you can think of, we all are orders of magnitude wealthier today (by wealth, I mean the term broadly.  I mean not just cash, like Scrooge McDuck's big vault, but also lifespan, healthiness, leisure time, quality of life, etc).

  • Life expectancy has increase from 47 to 77 years
  • Infant mortality rates have fallen from one in ten to one in 150.
  • Average income - in real dollars - has risen from $4,748 to $32,444

In 1900, the average person started their working life at 13, worked 10 hours a day, six days a week with no real vacation right up to the day they died in their mid-forties.  Today, the average person works 8 hours a day for five days a week and gets 2-3 weeks of vacation.  They work from the age of 18, and sometimes start work as late as 25, and typically take at least 10 years of retirement before they die.

But what about the poor?  Well, the poor are certainly wealthier today than the poor were in 1900.  But in many ways, the poor are wealthier even than the "robber barons" of the 19th century:  Just check out this comparison!  Today, even people below the poverty line have a good chance to live past 70.  99% of those below the poverty line in the US have electricity, running water, flush toilets, and a refrigerator.  95% have a TV, 88% have a phone, 71% have a car, and 70%have air conditioning.  Cornelius Vanderbilt had none of these, and his children only got running water and electricity later in life.

To anticipate the zero-summer's response, I presume they would argue that the US somehow did this by "exploiting" other countries.  Its hard to imagine the mechanism for this, especially since the US did not have a colonial empire like France or Britain, and in fact the US net gave away more wealth to other nations in the last century (in the form of outright grants as well as money and lives spent in their defense) than every other nation on earth combined.  I won't go into the detailed proof here, but you can do the same analysis we did for the US for every country in the world:  Virtually no one has gotten worse, and 99.9% of the people of the world are at least as wealthy (again in the broad sense) or wealthier than in 1900.  Yes, some have slipped in relative terms vs. the richest nations, but everyone is up on an absolute basis.

The (Correct) Physics Analogy

Which leads to the obvious conclusion, that I shouldn't have had to take so much time to prove:  The world, as a whole and in most of its individual parts, is wealthier than in was in 1900.  Vastly more wealthy.  Which I recognize can be disturbing to our intuition honed on the physical world.  I mean, where did the wealth come from?  Out of thin air?  How can that be?

Interestingly, in the 19th century, scientists faced a similar problem in the physical world in dating the age of the Earth. There was evidence all around them (from fossils, rocks, etc) that the earth had to be hundreds of millions, perhaps billions of years old. The processes of evolution Darwin described had to occur over untold millions of years.  Yet no one could accept an age over a few million for the solar system, because they couldn't figure out what could fuel the Sun for longer than that.  Every calculation they made showed that by any form of combustion they understood, the sun would burn out in, at most, a few tens of millions of years.  If the sun and earth was so old, where was all that energy coming from?  Out of thin air?

It was Einstein that solved the problem.  E=mc2 meant that there were new processes (e.g. fusion) where very tiny amounts of mass were converted to unreasonably large amounts of energy.  Amounts of energy so large that it tends to defy human intuition.  Here was an enormous, really huge source of potential energy that no one before even suspected.

The Human Mind Has Huge Potential Energy

Which gets me back to wealth.  To balance the wealth equation, there must be a huge reservoir out there of potential energy, or I guess you would call it potential wealth.  This source is the human mind.  All wealth flows from the human mind, and that source of energy is also unreasonably large, much larger than most people imagine.

But you might say - that can't be right.  What about gold, that's wealth isn't it, and it just comes out of the ground.  Yes, it comes out of the ground, but how?  And where?   If you have ever traveled around the western US, say in Colorado, you will have seen certain hills covered in old mines.  It has always fascinated me, how those hills riddled with shafts looked, to me, exactly the same as the 20 other hills around it that were untouched.  How did miners know to look in that one hill?  Don Boudroux at Cafe Hayek expounded on this theme:

I seldom use the term "natural resource." With the possible exception of water, no resource is natural. Usefulness is not an objective and timeless feature ordained by nature for those scarce things that we regard as resources. That is, all things that are resources become resources only after individual human beings creatively figure out how these things can be used in worthwhile ways for human betterment.

Consider, for example, crude oil. A natural resource? Not at all. I suspect that to the pre-Columbian peoples who lived in what is now Pennsylvania, the inky, smelly, black matter that oozed into creeks and streams was a nuisance. To them, oil certainly was no resource.

Petroleum's usefulness to humans "“ hence, its value to humans "“ is built upon a series of countless creative human insights about how oil can be used and how it can be cost-effectively extracted from the earth. Without this human creativity, oil would objectively exist but it would be either useless or a nuisance.

A while back, I published this anecdote which I think applies here:

Hanging out at the beach one day with a distant family member, we got into a discussion about capitalism and socialism.  In particular, we were arguing about whether brute labor, as socialism teaches, is the source of all wealth (which, socialism further argues, is in turn stolen by the capitalist masters).  The young woman, as were most people her age, was taught mainly by the socialists who dominate college academia nowadays.  I was trying to find a way to connect with her, to get her to question her assumptions, but was struggling because she really had not been taught many of the fundamental building blocks of either philosophy or economics, but rather a mish-mash of politically correct points of view that seem to substitute nowadays for both.

I picked up a handful of sand, and said "this is almost pure silicon, virtually identical to what powers a computer.  Take as much labor as you want, and build me a computer with it -- the only limitation is you can only have true manual laborers - no engineers or  managers or other capitalist lackeys".

She replied that my request was BS, that it took a lot of money to build an electronics plant, and her group of laborers didn't have any and bankers would never lend them any.

I told her - assume for our discussion that I have tons of money, and I will give you and your laborers as much as you need.  The only restriction I put on it is that you may only buy raw materials - steel, land, silicon - in their crudest forms.  It is up to you to assemble these raw materials, with your laborers, to build the factory and make me my computer.

She thought for a few seconds, and responded "but I can't - I don't know how.  I need someone to tell me how to do it"

The only real difference between beach sand, worth $0, and a microchip, worth thousands of dollars a gram, is what the human mind has added.

The economist Julian Simon is famous for his rebuttals of the zero summers and the pessimists and doom sayers, arguing that the human mind has unlimited ability to bring plenty our of scarcity.

"The ultimate resource is people - especially skilled, spirited, and hopeful young people endowed with liberty- who will exert their wills and imaginations for their own benefit, and so inevitably benefit not only themselves but the rest of us as well."

A Framework For Wealth Creation

As a final note, it is worth mentioning that the world still has only harnessed a fraction of this potential.  To understand this, it is useful to look back at history.

From the year 1000 to the year 1700, the world's wealth, measured as GDP per capita, was virtually unchanged. Since 1700, the GDP per capita in places like the US has risen, in real terms, over 40 fold.  This is a real increase in total wealth, created by the human mind.  And it was unleashed because the world began to change in some fundamental ways around 1700 that allowed the human mind to truly flourish.  Among these changes, I will focus on two:

  1. There was a philosophical and intellectual change where questioning established beliefs and social patterns went from being heresy and unthinkable to being acceptable, and even in vogue.  In other words, men, at first just the elite but soon everyone, were urged to use their mind rather than just relying on established beliefs.  In this formulation, I use "beliefs" in its broadest possible meaning, encompassing everything from the belief that the earth is the center of the universe to the belief that music has to be sold in stores on physical media There were social and political changes that greatly increased the number of people capable of entrepreneurship.  Before this time, the vast vast majority of people were locked into social positions that allowed them no flexibility to act on a good idea, even if they had one.  By starting to create a large and free middle class, first in the Netherlands and England and then in the US, more people had the ability to use their mind to create new wealth without the encumbrance of artificial state-imposed class limits or mind-numbing regulatory barriers.  Whereas before, perhaps 1% or less of any population really had the freedom to truly act on their ideas, after 1700 many more people began to have this freedom.
  2. So today's wealth, and everything that goes with it (from shorter work hours to longer life spans) is the result of more people using their minds more freely.

The problem (and the ultimate potential) comes from the fact that in many, many nations of the world, these two changes have not yet been allowed to occur.  Look around the world - for any country, ask yourself if the average person in that country has the open intellectual climate that encourages people to think for themselves, and the open political and economic climate that allows people to act on the insights their minds provide and to keep the fruits of their effort.  Where you can answer yes to both, you will find wealth and growth.  Where you answer no to both, you will find poverty and misery.

Even in the US, regulation and the inherent conservatism of the bureaucracy slow our potential improvement.  Republicans block stem cell research, Democrats block genetically modified foods, protectionists block free trade, the FDA slows drug innovation, regulatory bodies of all stripes try to block new business models.

All over the world, governments shackle the human mind and limit the potential of humanity.

Postscript: From the press release for the Ultimate Resource, showing why the show has me interested:

Free Market incentives are spectacularly changing lives over much of the world. In the last 25 years, hundreds of millions of people-- 400 million in China alone-- have climbed out of the dire poverty of living on less than $1 per day. It is the largest movement out of poverty in human history.

Yet, two thirds of the world's population-- four billion people-- still does not have the tools to thrive in free markets. Forced to operate outside the rule of law, they have little education, no legal identity, no fungible property, no credit, no capital, and thus few ways to prosper.

This documentary is the story of what can happen when ordinary people around the world are given the tools to help themselves. "The Ultimate Resource" is people-- skilled, spirited and hopeful people, who are using their wills and imaginations for their own benefit, and, inevitably, they will benefit the rest of the world, as well.

What He Said

From Michael Cannon at Cato:

There's a lesson here for those who want to cover the uninsured: focus on the incentives facing the 250 million Americans who have
health insurance, not on the estimated 45 million who don't. If the
federal government stopped encouraging people with health insurance to
be less careful consumers, then coverage would be more affordable, the
number of people without coverage would shrink, and the quality of care
would improve.

My family just switched to a high deductible policy, and its amazing how much our behavior has changed.  We question doctors now -- do we really need that?  We had to take my son in for a CT scan on his head (he got hit by a line drive at the hot corner the other day) and we actually asked the price before we scheduled an appointment.  When was the last time you asked the price of any medical procedure or visit?

PS- The son is fine, but half his face looks like its been inflated with a high-pressure pump.

You Know You Have A Pitching Problem When...

The New York Yankees scored 6-5-6-8 runs in their last four games, for a total of 25, and lost all four games.

School Choice, But Only for the Most Irritating Parents

A while back, I wrote about wealthy, legally savvy parents exploiting disabled-education funds to get their high achieving kids into private schools, paid for by the state.  Apparently we can't get $6000 vouchers, but this is legally OK, if you are persistent enough in gaming the system:

In Sonoma County, for example, a family recently enrolled its child in an
out-of-state boarding school, then billed its district not only for tuition,
but airfare, car rental, hotel, cell phone calls, meals, tailoring, new
clothes, an iBook computer, stamps, tolls, gas and 13 future round-trip visits.
Total tab: $67,949....

Here is the mom, in this case, explaining her son's "disability" which justified this largess

"He was not offered the classes that I thought he needed," the mother
said. "If my son didn't get what he needed, my fear was that he would drop out
of school.'' 

She acknowledged he had never been a discipline problem. The hearing
records describe him as a "young adult who is likable, friendly, energetic and
highly motivated. He is physically active, plays lacrosse and soccer, and
enjoys wakeboarding and snowboarding."

"He's a model child," she said. "However, his frustration and anxiety were
so high that I could see that this is the type of person who, out of
frustration, turns to drugs or something that he shouldn't be doing."

Well, the good news, I hope, is that the Supreme Court is set to review this kind of legal abuse of the ADA and other disable rights legislation:

the Supreme Court has accepted for review a case in which, according to
the New York Times's account, a former chief executive of Viacom did
not even give a public school program a try before enrolling his son in
a private school and demanding that New York City pick up much of the
resulting bill. The New York Times's account is distinctly
unsympathetic toward the parent, and quotes Julie Wright Halbert,
legislative counsel for the Council of the Great City Schools, as
saying: "Many wealthy, well-educated people are gaming the system in
New York City and around the country."

Let's have school choice for everyone, not just for the well-connected, legally savvy, or downright irritating.

And the First to Violate Net Neutrality is ... The Government!

I have never been very excited about the concept of "net neutrality."  Various bills in Congress trying to enforce this strike me as Trojan horses for regulation of the Internet, and are at best the attempts by one segment of the population to enforce their vision of the Internet via the coercive power of the government. But more on this in a second.

The City of Boston has a free municipal Wi-Fi network  (I aired some of my objections to this here).  By using this "free" wi-fi network (which is free only in the sense that you paid for it via taxes rather than use fees) you apparently must accept government filtering of the content, which caused Boing-Boing to get blocked the other day, for some "arbitrary and capricious" reasons.  Readers may remember I already dinged Boston once when it used its government power to try to block free competitors.

So despite all the panic that evil capitalist broadband suppliers will somehow block or skew content from certain content suppliers, it turns out that the government, acting as broadband supplier, is the first to do so.  Fortunately, Bostonians have many free competitors to the municipal service that provide uncensored access to the Internet.  But without those private options, they would be enjoying the Chinese Internet experience.

Which gets us back to the issue of accountability.  In short, socialists distrust individual self-interest and the market as accountability tools, and believe the government is much more accountable, and therefore trustworthy, than any private institution.  What amazes be is that anyone with a working knowledge of history can continue to believe this.  Take any issue:

  • Corruption?  Sure there was Enron and Worldcom, but any crimes at these institutions are trivial compared in both magnitude and frequency to the financial abuses of government.  Take pensions as one example.  Maybe 10-20 out of 500 of the companies in the DJIA have underfunded pensions, with some money put away but not enough.  But probably 99 out of every 100 municipalities you can name have underfunded pensions, and in most cases these not only have too little money put away, they have ZERO!
  • Worker health?  Almost all private work environments are incredibly safe -- the very fact that we are worried about carpal tunnel syndrome should tell you something.  But what about in the past?  Well, take one of the highest profile cases of worker harm, that of long-term asbestos exposure.  A huge number of the worst asbestos cases are people exposed in government naval yards.  Government naval yards, for decades, eschewed basic worker protections from asbestos that were common in private industry.
  • Environment?  One only has to look at the superfund site list and see that government sites are represented way out of proportion to their economic activity.  This is not to say their are not god-awful private sites, created either through ignorance or willful disregard, but you will find that the government was at least as active a polluter as even the worst private polluters.   Or look around today, at water quality.  The number of private contributors to water problems is nearly nil.  Most modern water pollution problems are caused by governments (Boston's "solution" to piping raw sewage into the harbor was to... lay a longer pipe and dump it further out in the ocean).
  • Monopoly?  It is hard to find, in history, any stable private monopolies.  Perhaps the most famous, Standard Oil, was losing market share rapidly due to private forces at the time of its breakup.  Government monopolies, however, can last forever despite high prices and crappy services.  Just look at public education.
  • Commerce?  Those who are frequent readers will know that I buy some product from the government, and they are by far my worst, hardest to deal with, and most abusive vendor.

Getting back to the issue of net neutrality, let's take a look at what accountability-enforcement tools a private individual has over a private vs. a public broadband supplier.  If I don't like my private broadband supplier, I can make a phone call and switch to one of several others.  Time elapsed:  About 30 minutes.  If I don't like my public broadband supplier, I could switch to a private company.  But this is really a libertarian end-around to the socialist problem.  To be fair, we need to look at a pure socialist system and evaluate the accountability tools in this system.  So, assuming the government entity has enforced a monopoly position for itself (like in education or the postal service), I would have to muster a grass roots campaign and likely millions of dollars to force any changes through an entrenched and brain-dead legislative body.  Time elapsed:  From 3 years to never.

Anti-Trust is Anti-Consumer

This is part 158 or so of a series of posts on how anti-trust law is often portrayed as being pro-consumer, but whose effect in practice is usually just to politically powerful competitors rather than consumers.

I have written a couple of posts on the National Association of Broadcasters hypocritical opposition to the Sirius-XM satellite merger. Radley Balko takes on this same topic:

So when XM and Sirius announced a highly-publicized merger this
year, everything changed for the NAB. Clearly, the two startups it so
feared for so long were floundering. And with no other licensed
satellite providers around, the NAB's position on the merger became
clear: What's bad for satellite is good for the NAB. So the NAB would
oppose an XM-Sirius alliance.

Problem is, the only colorable
argument against the merger is that it would create a monopoly for
satellite radio. XM and Sirius cleverly (and probably accurately)
headed that objection off by noting that satellite radio competes with
a variety of technologies for the listener's ear. This put the NAB in
an awkward position. The lobby would have to argue that despite its
15-year effort to derail satellite radio, satellite radio was not a
competitor. Of course, the harder the NAB fights and the more money the
NAB spends to promote this message, the clearer it becomes that the NAB
fears the competition posed by an XM-Sirius alliance. In effect, the
more the NAB fights the merger, the more it undermines its own argument
against it.

But the NAB has a lot of clout, since it controls most of the media.  Here, for example, is the Boston Globe whoring for the NAB without mentioning that their parent company is a member of the NAB.

Look at the Pollution! Oh, its Water, Never Mind

I think most of us are familiar with the clever movie poster for An Invconvinient Truth, with the smoke from a factory swirling into a hurricane:


In fact, this same picture of a white plume coming from a factory or power plant stack is often used to illustrate articles on pollution.  Just searching the first page of images googling "air pollution" gives us these relatively similar images illustrating air pollution articles:

Ap1 Ap2 Ap3 Ap4

Ap5 Ap6 Ap7 Ap8

Here is a big Roseanne Rosanadana Emily Litella moment for all of you using these images:  The big white cloud coming out of all those stacks is steam.  Water vapor.  H2O.  Though actually a much more powerful greenhouse gas than CO2, no one has had the temerity to label water a pollutant (except in that great Bullshit! issue when Penn & Teller get environmentalists to sign a petition banning dihydrogen monoxide).  All of these guys are using big plumes of water vapor to panic people about pollution.  That is because most pollutants emitted by combustion are invisible.  Visible smoke was licked by most plants decades ago (here is the only "factory" picture in the google search I could find with actual smoke). 

Just to avoid being misunderstood, my point is not that pollution is OK because it is invisible.  My point is that these scare pictures are yet another example of how environmentalists feel its OK to ignore science to advance their agenda in public.  Sometimes they even go further, as Small Dead Animals points out, resorting to photo-shopping to make things seem worse, but the dreaded steam plumes are still there front and center.  (I noticed that several of the pictures above where photographed at sunset.  I thought at first this was to make them look prettier, but maybe they liked the effect because it made the steam look browner without photo-shopping).

I did not go too deep into the Google search, but I went far enough to award my personal favorite for a scare picture that has nothing to do with the point being made:


This one is a classic, with the sad-faced little girl and her asthma** inhaler super-imposed over a scene of "industrial pollution."  Except, the scene is from a nuclear power plant!  The unique shaped cooling tower is almost exclusively used on nuclear power plants, but the ultimate proof is the small nuclear reactor containment dome you can see to the right.  That plume, which is supposed to represent pollution, has to be 100% water.  There are no combustion products at a nuclear plant, and even if there were, given the way the cooling tower works, this can only be water vapor coming out of the cooling tower.  The really sad and pathetic thing is that this illustration is from the air pollution site at Battelle, which is a world-renowned private scientific and technical organization. 

What's my point?   I think that scientists and academics, in their increasing arrogance, have no respect for the general public.  The only way I can consistently interpret scientist's actions, for example around the global warming debate, is to hypothesize that they consider truth and facts important when talking to other scientists, but irrelevant when talking to the public because, in their mind, the public is stupid and its OK to tell them anything.  I will leave you with this
from National Center for Atmospheric Research (NOAA) climate researcher and global warming action promoter,
Steven Schneider:

[In talking to the public about the climate] We have to offer up scary scenarios, make simplified, dramatic statements,
and make little mention of any doubts we have. Each of us has to decide what
the right balance is between being effective and being honest.

** By the way, there is growing evidence that increasing reported asthma rates are not correlated with outdoor air pollution. I wrote about this here, and hypothesized that the growth in asthma has coincided with the post-70s-energy-crisis steps everyone has taken to better insulate and seal up their houses and buildings, making indoor air pollution more of a problem.

Update: I started to think the dome I was calling a nuclear containment building might be telescope dome on the top of the building below.  It's not.

We Have Got To Stop BioFuel Subsidies Right Now

I have no problem if someone wants to compete out there in the free market producing fuel from corn or switchgrass or whatever.  But we have got to stop the subsidies right now, before it is too late.  Biofuels do absolutely nothing, zero, zippo to change CO2 production, and some studies show they make CO2 output worse when you consider the whole production cycle.  This is not to mention the effect biofuels will have in putting more wild and forest land under the till. 

I can't see any conceivable benefit to the economy from subsidizing biofuels, except some hazy notion of energy independence which has limited economic value and which will never be achieved with biofuels  (we will have jacked up the price of corn so high we can't feed cattle long before biofuels make even a minor dent in oil imports).  My only guess as to true motivation is that people want to spite Exxon and Shell, but if you don't like those companies, you really aren't going to like Archer Daniels Midland. 

Biofuels, given current technology, are a pure product of politics.  They are a massive subsidy of Midwestern farmers that the recipients can claim is not really a subsidy.  If the first presidential primary were in Nevada rather than Iowa, you would never hear a word from politicians about ethanol.

But here is the reason we need to end the subsidies right now.  [emphasis added]

A $400-million integrated biodiesel and ethanol refinery the first
complex of its kind in North America will be built in central Alberta.

by Dominion Energy Services, LLC a Florida-based group with pioneering
ties to Calgary's natural gas marketing sector investors that include
$45-billion US private equity fund The Carlyle Group LLC and affiliate
Riverstone Renewable Energy Infrastructure Fund I, LP said Monday they
have finalized plans for the facility....

Alberta Agriculture Minister Doug Horner noted the "world-class"
Dominion plant follows the provincial government's recent, $239-million
over five years initiative to boost biofuels production. The province
will provide a 14-cent per litre production credit to the facility
.  [for those rusty on the metric system, that is 56-cents per gallon or $23.53 per barrel]

Companies are currently building massive subsidy-magnets biofuel plants.  Once these investments are in place, there is going to be a huge entrenched base of investors and workers who are going to wield every bit of political power they can to retain subsidies forever to protect their jobs and their investment.  Biofuel subsidies will be as intractable as peanut and sugar subsidies and protections.

Update:  Radley Balko mentions another great example.  For various post-prohibition reasons that may or may not have made sense at the time, state laws prohibit retailers from buying alcoholic beverages straight from the manufacturer - e.g. Costco cannot buy direct from Anheiser-Busch.  Wholesalers who emerged to fill the legally required middleman role became rich.  Since then, even thought this 3-layered distribution requirement makes zero sense, it has become impossible to change it because the wealthy distributors who owe their fortunes to the requirement block every move to deregulate.

I Wish I Was in the Land of ... Subsidy

John Sugg at Reason has a review of corporate relocation subsidies down South, and the picture is not pretty:

Jurisdictions across the nation offer such inducements, which
include tax abatement, land acquisition, construction subsidies,
training subsidies, and outright cash grants. Nationally, relocation
incentives total about $50 billion a year, according to the WHR Group,
SIRVA, and other relo­cation consultants. (Such consultants often
collect as much as 30 percent of the grants they negotiate for the

It's hard to get a precise total of the dollars
involved, but almost every major business relocation in the South is
accompanied by a cornucopia of publicly funded grants, despite ample
evidence that the subsidies have little impact on corporate site
selection. Other regions of the nation, especially ones experiencing
protracted economic downturns, are increasingly emulating the South.
The politicians involved rarely consider broader tax and regulatory
changes that would make their states more attractive to all businesses,
outside and homegrown....

Trendy businesses"”particularly technology firms"”have the greatest
leverage in demanding government subsidies. In February, for example,
biofuel manufacturer Range Fuels, based on lit­tle more than its word
that it could deliver a economically competitive product, was offered
$6 million in state cash, a 97-acre tract in central Georgia, and a set
of tax abatements. At best, the company will employ 70 people.

He's got tons of examples, so you should read it all, but this one sounded just like something out of Wisconsin in Atlas Shrugged:

One business that benefited from such subsidies was the Real Silk
Hosiery factory, which opened in Durant, Mississippi, in the late
1930s. Real Silk rented its factory from a state agency for $5 a year,
enjoyed tax incentives, and had public agencies train its employees and
even build their homes. The Durant plant was shuttered in the mid-'50s.
Like many other Southern industrial facilities abandoned by owners
seeking better deals elsewhere, it closed before the industrial revenue
bonds were paid off. Writing in Time in 1998, reporters Donald Bartlett
and James Steele noted that Mississippi "was the poorest state in the
nation when its corporate-welfare program began in 1936."¦62 years and
hundreds upon hundreds of millions of dollars in economic incentives
later, it remains dead last in per capita income."

In the past, I have observed that the "game" of competitive relocation subsidies between local authorities is very similar to a prisoner's dilemma game.  In the prisoner's dilemma, two prisoners are given a choice: To confess and rat out their partner or to stay silent.  If both stay silent, they get 10 years each in jail.  If one rats out the other, but the other stays silent, the talker gets 5 years and the silent one gets 30 years.  If they both talk, then they both get 20 years.  In this game, each person has the incentive to talk, since for any set of actions of their partner, they are better off talking than not talking.  The irony is that when they both inevitably talk, they end up worse off than if they had stayed silent.

I see the relocation subsidy game as very similar, replacing "state official" for prisoner and "subsidize" for "talk."  Quoting from myself:

In a libertarian world where politicians all just say no to
subsidizing businesses, then businesses would end up reasonably evenly
distributed across the country (due to labor markets, distribution
requirements, etc.) and taxpayers would not be paying any subsidies.
However, because politicians fear that their community will lose if
they don't play the subsidy game like everyone else (the equivalent of
staying silent while your partner is ratting you out in prison) what we
end up with is still having businesses reasonably evenly distributed
across the country, but with massive subsidies in place.

To see this clearer, lets take the example of Major League Baseball
(MLB).  We all know that cities and states have been massively
subsidizing new baseball stadiums for billionaire team owners.  Lets
for a minute say this never happened - that somehow, the mayors of the
50 largest cities got together in 1960 and made a no-stadium-subsidy
pledge.  First, would MLB still exist?  Sure!  Teams like the Giants
have proven that baseball can work financially in a private park, and
baseball thrived for years with private parks.  OK, would baseball be
in the same cities?  Well, without subsidies, baseball would be in the
largest cities, like New York and LA and Chicago, which is exactly
where they are now.  The odd city here or there might be different,
e.g. Tampa Bay might never have gotten a team, but that would in
retrospect have been a good thing.

The net effect in baseball is the same as it is in every other
industry:  Relocation subsidies, when everyone is playing the game, do
nothing to substantially affect the location of jobs and businesses,
but rather just transfer taxpayer money to business owners and workers.

I conclude with this from Sugg's piece:

Holladay, who has headed state economic development agencies in
Georgia, Mississippi, and South Carolina, remembers a conversation with
Zell Miller, then governor of Georgia, at a National Governors
Conference in the '90s. "The topic of subsidies came up," he recalls.
"Zell asked me, "˜Is there any way to end this foolishness?' I answered,
"˜The only way I know is to not elect any more governors.'"‰"

Still My Favorite Abortion Observation

From Glen Wishard:

Make no mistake, then - the Supreme Court is no longer the Supreme
Court of past fame. It is now the National Abortion Tribunal, and its
members are no longer jurists, they are the Keepers of the Abortion
Toggle Switch.


Fig. 1A. Abortion Toggle Switch, closed.
Suction motors will engage.

As we can see from the schematic diagram above, the Abortion Toggle
Switch is currently in the closed (ON) position. The entire purpose of
the so-called Supreme Court, as current wisdom understands that
purpose, is to stare at this switch all day wondering whether they
should play with it or not.

Now this is a sad state for this once-great court to have fallen to,
and makes me wonder if we don't need another court to assume the
neglected responsibilities of the current one. Then the Abortion Toggle
Switch could be moved to some remote corner of the public's attention,
and the various abortion partisans could play their endless game of
Keep Away without buggering up the entire constitutional process.