Coyote Blog

I was talking to a Conservative friend the other day and mentioned that I was not watching the Oscars, that I just had not stomach for all the smug political virtue signalling.  He said that he knew why he and fellow Conservatives were not watching, but why me?  He observed that for most issues that would come up -- immigration, gay marriage, distaste for Trump -- that I probably would agree with most of what was going to be said.  My answer to him was in three parts

1. I am exhausted by the addition of politics to every sphere of life - there is nowhere to escape any more.  This politicization of everything, including sports and entertainment, has historically been a feature of totalitarian governments.  In Hitler's Germany, you couldn't just cut hair, but you had to be in the league of national socialist barbers and be ready with a plan for how your barbering was going to advance national socialism.  yuk.
2. People seem to like it when famous movie stars and sports stars espouse political opinions that they share.  I am not sure why.  I can only imagine that these folks are in their hearts unsure of themselves and thus get renewed confidence when some famous person agrees with them, like counting likes on Facebook or something.  I on the other hand already am pretty sure I am right and I have thought a lot about the issue including reading opposing opinions on it.  Nothing Martin Sheen or Beyonce says about the issue, unless it is related to the entertainment industry, is likely to either change my mind or make me more confident in my opinions.  In fact...
3. Hearing actors who I know to be dumb as a post agree with me using facile and hysterical reasoning is only likely to make me question whether I really feel good about agreeing with this dolt.  When Rosie O'Donnell agrees with me, it's time to rethink that issue.  I feel like I was stampeded into supporting the Iraq war in part due to the incredible lameness of a lot of the anti-war "arguments".  That was a mistake on my part, and I own up to it, but I still feel tempted to do the opposite of whatever Sean Penn says even when I agree.

(Note:  This is an update of this post based on a new set of economically illiterate people in the White House).

Repeat after me:  Y=C+I+G+X-M is an accounting rule.  It does not explain anything about the economy.  It is as useful to telling us anything interesting about the economy as the equation biomass=plants+animals+bacteria tells us anything about the ecosystem.

Apparently our new commerce secretary is totally ignorant of this fact:

[New Commerce Secretary Wilbur Ross] has a simple but misguided view of global trade. He believes that good trade policy yields a national trade surplus, while bad deals produce trade deficits—as if every country in the world could run a trade surplus. In an August letter to this newspaper, Mr. Ross wrote, “It’s Econ 101 that GDP equals the sum of domestic economic activity plus ‘net exports,’ i.e., exports minus imports. Therefore, when we run massive and chronic trade deficits, it weakens our economy.”

Who taught him that? Imports are subtracted in GDP calculations to avoid overstating domestic production, not because they make us poorer. Many domestic products wouldn’t exist without foreign components.

Here is his faulty logic.  The GDP (Y) is calculated by adding Consumer spending + Investment by Business + Government spending + eXports and then subtracting iMports.  Because imports are subtracted in the GDP equation, they look to the layman like they shrink the economy.  How do we grow the economy?  Why, let's reduce that number that is subtracted!  But this is wrong.  Totally wrong.   Anything that reduces imports (e.g. a tariff) will likely reduce C+I+G by the same amount.   The M term is there simply to avoid double counting.  It has no economic meaning in this context whatsoever.  I have tried many times to explain this, but let me see if I can work by analogy.

Let's say we wanted an equation to count the amount of clothing we owned.  To make things simple, let's say we are only concerned with the total of Shirts, Pants, and Underwear.   Most of our clothes are in the closet, so we say our clothes are equal to the S+P+U we count in our closet.  But wait, we may have Loaned clothes to other people.  Those are not in our closet but should count in our total of our owned clothing.  So now clothes = S+P+U+L.  But we may also have Borrowed clothes.  Some of those clothes we counted in the closet may be Borrowed and thus not actually ours, so we need to back these out.  Our final equation is clothes owned = S+P+U+L-B.  Look familiar?

Let's go further.  Let's say that we want to increase our number of clothes owned.  We want wardrobe growth!  Well, it looks like those borrowed clothes are a "drag" on our wardrobe size.  If we get rid of the borrowed clothes, that negative B term will get smaller and our wardrobe has to get larger, right?

Wrong.  Remember, like the GDP equation, our wardrobe size equation is just an accounting identity.  The negative B term was put in to account for the fact that some of the clothes we counted in S+P+U in the closet were not actually ours.  If we decrease B, say by returning our friend's shirt, the S term will go down by the exact same amount.  Sure, B goes down, but so do the number of shirts we count in the closet.  So focusing on the B term gets us nowhere.

But it is actually worse than that, because focusing on reducing B makes us worse off.  If negative term B rises, our wardrobe is no larger, but we get the use of all of those other pieces of clothing.  Our owned wardrobe may not be any larger but we get access to more choices and clothing possibilities.  When we drive the negative term B down to zero, our wardrobe is no larger and we are worse off with fewer choices.  Similarly, in the the economy, focusing on reducing imports does not grow the economy, it just serves to make us poorer by reducing our buying choices and increasing the cost of consumer goods as well as manufacturing inputs.

I don't want to say that it's impossible for increases in imports to drag the economy.  For example, if oil prices rise, the imports number measured in dollars will likely rise, and the economy could be worse off as we have to give up buying other things to continue to buy the oil we need.  But, absent major price changes, drops in exports more likely just mirror drops in C+I+G.  If consumers are hurting, they spend less on everything, including imported goods.   At the end of the day, none of these numbers (Mr. Keynes, are you listening?) are independent variables.

Postscript:  Here is another example.  Imagine a company with three divisions, D1, D2, and D3.  How do we compute the company's total revenue?  Well, typically we would add the revenue from the three divisions, so Total Corporate Revenue R = RD1 + RD2 + RD3.  Oh, but there is a problem.  Some of the sales from each of our divisions are to each other.  We only want to measure our true revenue from external sales, so we need to subtract intra-company sales from the total (this is a very typical step in conglomerate accounting).  So total company revenue R = RD1+RD2+RD3-IC, where IC are the total of intra-company sales within the company between divisions.  If you had a new CEO who looked at this accounting, and the CEO's first thought was "if we got rid of all these intra-company sales, surely we would have more revenue, because they are subtracting from total revenue in the revenue equation."  What would you do with this CEO?  If you knew the first thing about corporate accounting, you would fire him or her immediately for being a moron.  Just because the IC term is negative in the accounting equation does not mean that intra-company sales are a drag on revenues.  Eliminating intra-comapny sales would likely reduce revenues and profits as company insiders are forced to find new, less trusted, and more expensive sources for their purchases than buying internally.

It is possible to buy all sorts of infused liquors nowadays, but I have never seen my personal favorite sold in stores -- red pepper infused Tequila.  We first had margaritas made from pepper-infused spicy tequila in Pacific Beach at a restaurant called JRDN and since then it has been a favorite of ours.  Not finding any in stores, we make our own, cutting up 5-6 small red dried chili peppers and leaving them in the tequila for 1-5 days -- the length depends on how spicy you want it and how fresh the dried peppers are.  The first time you do it, you need to try it frequently as the spiciness is unpredictable.  Also, you may want it spicier for drinks where it gets diluted (e.g. margaritas) vs. just drinking straight.

My current favorite every day, reasonably-priced tequila is Cazadores (the one with the stag on the label).  IMO, it is way better than some more famous, and more expensive, brands like Patron.  The gift bottle show above was Cazadores Extra Anejo infused for about 4 days.

If I really want to blow it out, my favorite sipping tequila (do not make a margarita out of this stuff unless you light cigars with hundred dollar bills) is Clase Azul Reposado.  Pero, es muy caro!  If you do light cigars with hundred dollar bills, you can try the Clase Azul Ultra, but I have never had more than a taste given that it goes for thousands of dollars a bottle -- sort of neck and neck with a 23-year old Pappy Van Winkle.

PS-  as with most things that are harmless and enjoyable involving alcohol, this is probably illegal somehow.  Please do not turn me in to the FDA or BATF.

This is probably not someone readers would expect me to honor, but way back when I was 19 my first college internship was working for Michael Novak at AEI.  Mr. Novak was a friend of my dad's, and I always secretly wonder if my dad saw that I was migrating away from traditional Conservatism and thought some time with Mr. Novak would head this off.

I ended up going in a different direction from Mr. Novak, but I had an enjoyable summer working with him.  I spent most of my time in the Georgetown University library researching papal encyclicals and commentary on them.  For someone who grew up around much more fundamentalist religions in the South, the more overt intellectualism of Catholic writing was fascinating.  I learned a lot, and Mr. Novak was as kind and generous as someone could possibly be.  He did a lot to defend capitalism in a world where it was increasingly questioned, and even if I have very different epistemology than he, I thank him for his work.

Yesterday at an event called One Day University, I saw a talk by William Burke-White of Penn and formerly of the Obama state department (I think he was one of many consultants, but I can never figure out seniority from people's biographies - his is here).

Mr. Burke-White was discussing the liberal world order created by the US after WWII and recent decline / threats to this world order and American power.  He discussed five trends or forces driving changes, and you probably can predicts many of them.  He discussed the rise of new world powers (e.g. China), the rise of powerful NGO's (e.g. ISIS) and the expansion of the Internet (which can destabilize traditional powers).  All fine, I have no particular comment on that stuff.  He also discussed climate change, with a picture of Manhattan underwater, and though I am tempted, I won't even respond to that.

What caught my attention was his fifth point -- about income inequality.  He showed a slide with the meme that 8 people (Warren Buffet et al) had more wealth than something like half the world's population put together.   His conclusion was that the liberal world order had failed because so much wealth had been concentrated in a few hands.

Well, if American power and influence is declining in the world and Mr. Burke-White is an example of the thinking of the Obama administration over the last 8 years, I now have a better understanding of why.   Sure there are really rich people.   There were probably 8 really rich guys in 1400 (though they would have all been Kings and Emperors rather than private business people).  The really different, world-changing event over the last 50 years has been the emergence from poverty of over a billion people, as facilitated by market capitalism.  Never before in all of the history of the planet have so many people been pulled out of poverty in such a short time.  Never before has such a large percentage of the globe moved beyond pure subsistence farming.  If the leaders of this country find it impossible to communicate this simple good news, then of course the post-WWII liberal world order is going to struggle.

Look, I understand that baby boomers (a group of which I am barely a member) have a hard time figuring out how to cope with this country's many past missteps.  Yes, we have been ham-handed (and that is generous) in exercising our power and we have often failed to live up to our stated values.  But helping to unleash a wave of market capitalism on the world is among our true successes.   And this is the US's one true source of power, this wave of prosperity we have helped to birth.  Other supposed sources of our power -- a big military and atomic bombs -- are horrifying.  Market capitalism is our one source of strength that is genuinely positive.  If we are staffing the state department with people who don't get this, then no wonder we are losing influence in the world.

I am simply in awe of the Apple marketing machine, which has turned their tech product in to a quasi-cult.  The best illustration of this is the features being predicted and hyped for the 10th Anniversary iPhone.  The most common feature prediction is ... wireless charging.  Wireless charging is something I have had on not just my last but my last 2 android phones.   Apple was clearly the innovator who really invented the modern smartphone but for years they have been coasting on transferring features already proven in the android market and selling them at a premium to their loyal user base.

There are a lot of things to love about Apple products.  The worst thing about Android is the way individual handset makers clutter up the interface with their own (often inferior) user interface and bloatware.  Apple's walled garden is much more in control.  My last two phones have been a Nexxus (made by Google) and a Droid Turbo (also essentially made by Google) which avoided this third party BS, though I will say Samsung has gotten a lot better about this.

There are several things I think Android does better:

• The cloud.  The cloud just seems to work so much better on Android.  It integrates with my Google drive.  Photo uploading to the cloud works logically.
• Email.  The Apple email client sucks, so lots of Apple users use Gmail, but gmail and Apple seem to have an incompatibility every year or two.  Gmail and the google Calendar is always going to work with android.
• Music.  I love my old 160 GB ipod.  In fact, I have a second one I bought before Apple discontinued them.  If you want your music to reside on your device, then Apple is way way better than Android.  When I travel, this is the way I go. But, if you are ok with streaming, Android is better.  For free I uploaded my 50,00o song library to Google, it sits on their servers, and I can stream any part of it any time on my android devices.
• Kindle.  I read all my books nowadays on the Kindle.  Apple has banned book sales from the Kindle (ie when you finish part 1 and want to buy part 2).  Android apparently has not.

Every entrepreneur, I think, has his or her weird ticks.  One of mine is that I answer the main phone for our office here.  Granted, there are only a couple of us here (99.5% of our parks management people are actually in the parks, something that differentiates us from the government agencies we work with).  But answering the phone and sometimes directing calls is one way I sort of keep on top of what is going on.

Anyway, one result of this is I personally hear all the spam calls that come to our company,  of which calls to sell us merchant (ie credit card) processing services and to sell us toner are by far the most common.

Since I assume rational behavior by whatever firm is paying these people to make calls, I suppose they must get results.  But that amazes me.  Does some business after the 27th call asking to speak to the person who buys toner suddenly wake up and say, "Sure, send me some toner!" on the 28th call?  Ditto on merchant services.  In fact, though I put toner in the headline, merchant services amaze me even more as they are likely much closer to a buying company's core customer service processes than is printer toner.   Do people really buy based on cold calls?  I suppose they must.

It has been observed to me that this is just like the Nigerian email scam -- people are amazed folks still try this.  But in my mind it is different.  With an email scam, the costs are virtually zero so it costs nothing to spam zillions of people on the off chance one might be a hit.  For business sales, though, there has to be more of a cost to spam people.  (By the way, for this reason I proposed long ago that a tenth of a cent per email charge would end most spam and phishing.

I have done a lot of work with PERC on free market approaches to public land management and environmental issues.  It is a great group, and I have participated a couple of times in their summer programs.  They are currently accepting applications for their 2017 summer programs.

Ten years ago, we published an editorial from our Chinese sister publication Panda Blog.  Though some of the details of their government's financial actions have changed since then, the gist of it is still correct -- the Chinese government still engages in actions that they call "export promotion" and President Trump calls "currency manipulation".  So I think this editorial from the perspective of the Chinese consumer is still relevant:

Our Chinese government continues to pursue a policy of export promotion, patting itself on the back for its trade surplus in manufactured goods with the United States.  The Chinese government does so through a number of avenues, including:

• Limiting yuan convertibility, and keeping the yuan's value artificially low
• Imposing strict capital controls that limit dollar reinvestment to low-yield securities like US government T-bills
• Selling exports below cost and well below domestic prices (what the Americans call "dumping") and subsidizing products for export

It is important to note that each and every one of these government interventions subsidizes US citizens and consumers at the expense of Chinese citizens and consumers.  A low yuan makes Chinese products cheap for Americans but makes imports relatively dear for Chinese.  So-called "dumping" represents an even clearer direct subsidy of American consumers over their Chinese counterparts.  And limiting foreign exchange re-investments to low-yield government bonds has acted as a direct subsidy of American taxpayers and the American government, saddling China with extraordinarily low yields on our nearly $1 trillion in foreign exchange.   Every single step China takes to promote exports is in effect a subsidy of American consumers by Chinese citizens.

This policy of raping the domestic market in pursuit of exports and trade surpluses was one that Japan followed in the seventies and eighties.  It sacrificed its own consumers, protecting local producers in the domestic market while subsidizing exports.  Japanese consumers had to live with some of the highest prices in the world, so that Americans could get some of the lowest prices on those same goods.  Japanese customers endured limited product choices and a horrendously outdated retail sector that were all protected by government regulation, all in the name of creating trade surpluses.  And surpluses they did create.  Japan achieved massive trade surpluses with the US, and built the largest accumulation of foreign exchange (mostly dollars) in the world.  And what did this get them?  Fifteen years of recession, from which the country is only now emerging, while the US economy happily continued to grow and create wealth in astonishing proportions, seemingly unaware that is was supposed to have been "defeated" by Japan.

We at Panda Blog believe it is insane for our Chinese government to continue to chase the chimera of ever-growing foreign exchange and trade surpluses.  These achieved nothing lasting for Japan and they will achieve nothing for China.  In fact, the only thing that amazes us more than China's subsidize-Americans strategy is that the Americans seem to complain about it so much.  They complain about their trade deficits, which are nothing more than a reflection of their incredible wealth.  They complain about the yuan exchange rate, which is set today to give discounts to Americans and price premiums to Chinese.  They complain about China buying their government bonds, which does nothing more than reduce the costs of their Congress's insane deficit spending.  They even complain about dumping, which is nothing more than a direct subsidy by China of lower prices for American consumers.

And, incredibly, the Americans complain that it is they that run a security risk with their current trade deficit with China!  This claim is so crazy, we at Panda Blog have come to the conclusion that it must be the result of a misdirection campaign by CIA-controlled American media.  After all, the fact that China exports more to the US than the US does to China means that by definition, more of China's economic production is dependent on the well-being of the American economy than vice-versa.  And, with nearly a trillion dollars in foreign exchange invested heavily in US government bonds, it is China that has the most riding on the continued stability of the American government, rather than the reverse.  American commentators invent scenarios where the Chinese could hurt the American economy, which we could, but only at the cost of hurting ourselves worse.  Mutual Assured Destruction is alive and well, but today it is not just a feature of nuclear strategy but a fact of the global economy.

Security wall going up around the Eiffel Tower

The city of Paris is planning to build a permanent barrier around the Eiffel Tower and its two adjacent ponds in order to beef up security, replacing temporary protective structures that had been up as a result of recent terror attacks. It’s estimated that the structure, which will be bulletproof and able to stop vehicles, will cost the city 20 million euros (about $22 million). ...

Work on the perimeter is scheduled to start this fall, although plans are subject to approval. Once the project is complete, you’ll no longer be able to stroll leisurely under the massive steel tower, as you’ll first have to pass through a security checkpoint involving a metal detector and ID check before you can get up close to the base.

Nothing more romantic than a moonlight stroll under the Eiffel tower... and getting frisked by the French equivalent of the TSA.

By the way, if the Conservatives in this country need a better euphemism for their Mexican wall, here is a suggestion from the French:

While reports have said the wall be made of glass, Paris‘ deputy mayor Jean-François Martins wouldn’t confirm that to be true in a press conference last week — however, Martins did say, “It’s not a wall, it’s an aesthetic perimeter,”

If only the East Germans had been so clever with words, they might have won the Cold War.

Here is what you are paying your government to spend time on:

The age-old question has finally been answered: No, Snuggies are not clothing.

Earlier this month, a federal court ruled that Snuggies, the As Seen on TV 'blanket with sleeves', should be classified as blankets, and live as a separate entity from robes or priestly vestments.

The ruling followed the Justice Department's argument that Snuggies are apparel and not blankets, so they should be 'subjected to higher duties than blankets', reports Bloomberg.

Judge Mark Barnett of the Court of International Trade said during the trial that the Customs and Border Protection was in the wrong to classify Snuggies as apparel. Barnett cited the Snuggies' use of marketing as a blanket, specifically referencing its packaging with the phrase, "The Blanket With Sleeves!".

The judge added that those who purchase Snuggies may likely be "in the types of situations one might use a blanket; for example, while seated or reclining on a couch or bed, or outside cheering a sports team."

In Barnett's opinion, the addition of sleeves 'was not enough' to have the Snuggie be considered a piece of clothing. He added the use of sleeves allowed the Snuggie "to remain in place and keep the user warm while allowing the user to engage in certain activities requiring the use of their hands."

More so, Judge Barnett rejected the idea a Snuggie may also be similar in fashion to priestly vestments or scholastic robes which also use wide sleeves and a loose fit around the body. In his ruling, the judge argued that robes open from the front, and priestly vestments and scholastic robes have no opening on either side, so the role of a Snuggie as a garment is invalid.

Arnold Kling thinks about human nature:

I believe that humans in large societies have two natural desires that frustrate libertarians.

1. A desire for religion, defined as a set of rituals, norms, and affirmations that are shared by a group and which the group believes it is wrong not to share. Thus, rooting for your local sports team is not a religion, because you realize that it is not wrong for someone else not to root for your local sports team. But if you are against GMO foods, then you believe that those who disagree with you are wrong.

2. A desire for war. I think that it is in human nature to fantasize about battles against tribal enemies. War arises when those fantasies are strong enough to drive behavior.

Though he mentioned tribalism, I think tribalism needs to be pulled up to the top as one of the main two tendencies.  I commented:

I would have recast your second bullet point into a predilection for tribalism rather than a fondness for war. I think it is more all-encompassing. It is tribalism that leads to war, but it also leads to any number of other dysfunctional practices, like protectionism, immigration restrictions, etc.

In addition, tribalism is making it more and more difficult for basic politics to work, particularly for libertarians. As a libertarian, I used to make common cause with the Left on things like gay marriage and the Right on things like regulatory reform. This is increasingly hard to do -- if one does not hold all the group's other beliefs, they don't want to work with you on a narrow issue. Several years ago I was uninvited from co-chairing an effort on gay marriage because others in the group did not like my stances on unrelated issues like education choice.

A few weeks ago there was a bizarre spectacle of a woman who supports the imposition of Sharia law in the US helping to lead the women's march. What the hell? Countries with Sharia law often look like apartheid but for women rather than blacks. Why is is a leading women's advocate supporting such a thing?

This seeming contradiction makes sense, though, in the context of tribalism. The "other" tribe (the Right) opposes sharia law and is skeptical of fundamental Islam so our side must fully embrace it. There is no longer the possibility of any subtlety, like "I don't traffic in gross generalizations about Muslims and welcome them to this country but Sharia law (at least as practiced in some countries, I don't have the religious history chops to know if it is being interpreted correctly) has many things in it that are an abomination to individual rights and Muslims coming to this country are going to have to leave parts of that behind."

This is one of my emerging rules of politics:  if one political group holds a position that does not seem consistent or logical in the context of their other positions, assume they are holding this position because their rival political group has already staked out the opposite side.

Update:  In retrospect, most of what I am calling tribalism he is calling religion, so I think we are saying the same thing with different words.

Our company generally uses Verizon over other wireless carriers as it is almost always the only  wireless service we can reach in the very rural locations we operate.  But the one thing I have been critical of Verizon (and AT&T) in the past has been their international plans.  Even when paying for the plans, the rates were awful (50 cents per text, and $10 got something like 10MB or something equally pathetic amount of data).  For years I kept a T-Mobile phone, and later a Google Fi phone, in reserve as my international phone.  Sometimes I rented one of those international data cellular modems or smart phone with a sim card for the local country so I paid local non-roaming rates, but this was a hassle and still expensive.

Well, this has all changed, likely due to competition from T-Mobile and others.  Verizon now has a plan that for $10 a day, one can roam internationally and have access to all the same data, text, and talk limits and rates as in their domestic plan.  In other words, travelling international ly is basically seamless now with only a $10 upcharge per day.  And this is not one of those things you have to remember to go into the website to turn on just before the trip and then turn off.  The $10 is billed in any day Verizon sees you use the phone out of the country, otherwise there is no charge.  Our family also has this feature on some of our ipads and on my aircard.

This is simply an enormous improvement over the past, and while $10 a day is real money, it is trivial compared to the other costs of travelling internationally and historic costs of international roaming.

I still like Google Fi, but it is still dependent on domestic cellular networks that are inferior to Verizon's, at least as far as I am concerned spending a lot of time in the boondocks.

All these observations are good, but I will give you the first three:

1. The U.S. leads the world in health care spending per person, but not in health care outcomes. Many people look at that and say that health care costs too much in the U.S., and we should be able to get the same our better outcomes by sending less. Maybe that is correct, maybe not. That is not the point here. But–

2. the U.S. leads the world in K-12 education spending per student, but not in student outcomes. Yet nobody, says that education costs too much and that we should spend less. Except–

3. me. I believe that we spend way too much on K-12 educatio

Taxes are incredibly powerful things.  Tax something and you will get less of it.  But you might also get more of something you did not expect.  Taxes are the king of generating unintended consequences.  A huge part of human ingenuity (unfortunately) seems to be constantly geared towards evading taxes.  This is one reason I favor completely eliminating the corporate income tax -- way too many otherwise productive resources are marshaled towards managing the consequences of these taxes.

Last weekend I was in Cabo visiting a few friends and practicing my Spanish.  Many of the buildings in town (at least away from the resort areas) look like this:

This is a small retail commercial building with going concerns on the first floor (actually finished pretty nicely) but rebar and stuff sticking up from what looks like an unfinished second floor.   This is just one of many, many buildings that look like this.  My friend, who has run a resort in Cabo for decades, asked me what I thought was going on.  I said I assumed it was some sort of third world thing, perhaps a lack of financing that meant the first floor has to operate to generate cash flow for the second floor.

He answered that yes, there was very little financing for small business and real estate development so that sort of thing did happen.  But what was really going on here is tax management.  Until construction is completed, this structure is taxed as raw land rather than as a valuable commercial building.  It was typical practice to get approved for a two story building in the original plans, then stop construction after completing the first floor (which was all that was wanted anyway) and act like the building is still under construction.  Wala Voila (ed: lol, oops) -- ugly building but hefty tax reduction.

For those of you who want to write this off as a third world phenomenon, I will offer a similar example from personal experience.  Some years ago, because I did not have enough value-destroying investments in my life, I bought some raw land in Hawaii.  It is actually in a gated community, about half-built-out, but if you drive past my land you will likely see a cow on it.  What is a cow doing in a gated community on residential land?  Well, that is the point.  Without the cow, the land gets taxed as residential land.  With the cow, the land gets taxed as ranch land at perhaps a tenth the rate.  The homeowners association helps those of us with raw land to split the cost of the cows.

Update:  Here are the Hawaiian cows, next to one of my neighbor's front gate.  While they are more attractive than the exposed rebar on the building in Cabo, they serve the same purpose.

Sorry Trump supporters, your guys are not being "scrappy", they are being stupid.  In the same way that Harry Reid failed to understand that his party might some day be out of power and thus felt free to set precedents that are now helping the Republicans, Republicans will be out of power again some day and the precedents being set now will be used against them.  In fact, both parties are currently setting precedents we will have to live with the rest of our lives.

Two things in particular come to mind.  First is the bullying of judges.   This is just stupid.  Most senior judges are precisely the sort of folks who don't roll over to bullying, and in fact probably have a tendency to bare their teeth and fight back.  It is just simply insane for the Trump administration to make the statements they are making about pending cases and their judges.

Second, the censure last night of Elizabeth Warren was ridiculous.  I actually think the criticisms of racism of Sessions are dated and overblown, but so what?  They are perfectly reasonable criticisms to bring up in a confirmation hearing.  Just because Sessions is a Senator should not make him immune to criticism in confirmation hearings.  The Senate should recognize in their rules that criticizing a Senator in a confirmation debate is way different than criticizing a Senator in the normal course of Senate business. Of course, these Senate rules are exactly why Presidents love to nominate Senators for the Cabinet, because they tend to get a pass from their old colleagues.  Well, no more.

Kevin Drum laments that people are "Americans Flee America For Overseas Health Care Just Like Canadians."  My response in his comments:

I am confused by your using the word "flee". If I buy a Toyota, no one says I am "fleeing" the US manufacturing system. It is a global economy, and I don't know why the globalization of health care services is anything but a good thing. We have put so many barriers in the way of expanding capacity (licensing, certificates of need, FDA approvals, etc) and legislated so many artificial monopolies in health care, it seems perfectly reasonable, even good news, that competition for medical services is emerging from other countries.

In 1973, when Ford was rolling out such losers as the Pinto and the Mustang II, would the cars have been any better if the Ford designers had, say, a budget twice as large?  Or would the same people have continued to roll out the same bad cars, just more expensively, until competition from Japan and Europe forced American car makers to get their act together?

If you have not been to a Sears store lately, and you have lots of company.  If you do not shop at Sears, think about why.  Now, imagine that Sears were to double the number of employees in their local store.  Would that change your mind and suddenly send you into the store to shop?  No?

There are times when everything about an organization is broken -- its management, its culture, its strategy.  These organizations may have perfectly good people in them -- I have no doubt that the folks at Ford in the 1970's were capable people, as are the employees at my local Sears store.   I call all these factors "organizational DNA".  This is from years ago about a corporate example, but the same is true of any organization:

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.  ...

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.

I would argue that public schools in many parts of the country are in this situation.  Any organization can become senescent with value-killing DNA, but this process happens much more rapidly when there is no competition, as has been the case for public schools which have enjoyed a virtual monopoly enforced by the government (you can go to a competing school but you still have to pay for the government school you are not using).

If I am right, then the last thing you would expect to help is simply pouring more money into the same management, the same culture, the same organizational DNA.  But that is exactly what we have done.  That has been our lead strategy for 35 years, and still remains the preferred strategy of the Left.  Via Mark Perry:

Despite this history, President Obama's strategy was to throw even more money at the schools, and again it did not work:

One of the Obama administration’s signature efforts in education, which pumped billions of federal dollars into overhauling the nation’s worst schools, failed to produce meaningful results, according to a federal analysis.

Test scores, graduation rates and college enrollment were no different in schools that received money through the School Improvement Grants program — the largest federal investment ever targeted to failing schools — than in schools that did not.

The Education Department published the findings on the website of its research division on Wednesday, hours before President Obama’s political appointees walked out the door.

“We’re talking about millions of kids who are assigned to these failing schools, and we just spent several billion dollars promising them things were going to get better,” said Andy Smarick, a resident fellow at the American Enterprise Institute who has long been skeptical that the Obama administration’s strategy would work. “Think of what all that money could have been spent on instead.”

One will hear that criticism of public schools in unfair because they have all these great teachers in them.  Examples will be cited.   I say:  "Exactly!"  That is why change is needed.  Public schools are hiring good people and putting them in an organization and system where they deliver poor results.  Let's liberate this talent.

By the way, one of the misconceptions about school choice is that it necessarily means the end of public schools.  I find this an unlikely outcome, at least in most areas.  Competition from Japan meant that Ford lost some of its customers to Toyota, but it also meant that Ford became a lot better.

...Is that Julio Jones's catch may be forgotten.  Best reception I have ever seen in a lot of years of watching football.  Video here at NFL site

PS-  Run the ball three times after that catch, kick a field goal, and the Falcons would be your Superbowl champions.

A couple weeks ago I was having dinner with a couple of guys who fear and despise Trump.  I told them that all the marches in the streets were not going to affect Trump's behavior one bit, though it will affect the behavior of the Congress when (and if, given the new Imperial presidency, copyright Bush and Obama) they are called on to ratify some of Trump's actions.  I told them that the biggest check on Trump, at least in the near term on issues like immigration, was going to be American corporations.  As much as the Left may not like corporations, businesses need trade and immigration and free international travel to function in the global economy and they are not going to be happy about all of Trump's planned restrictions (you could see echoes of that last night in a number of the Superbowl commercials).

So of course the Left gears up a #DeleteUber campaign because Uber didn't participate in a taxi strike at JFK protesting Trump's immigration order.  Essentially, protesters who are mad at Trump for restricting travel are mad at Uber for, uh, not restricting travel.  In the end, all the #DeleteUber folks did was force the Uber CEO to quit Trump's advisory counsel.  Congratulations Left, you managed to remove a likely voice of reason from inside the White House.

I would happily join up with the Left in opposition to a lot of Trump's actions if I wasn't so absolutely horrified at their tactics.  There is no reason, no thoughtfulness at all.  Even the media participates in this dumbing down by simply refusing to making issues clear (e.g. continuing to call the 90-day visa timeout from 7 countries a "muslim ban").  And the first person from the Left who I hear criticize the anti-free-speech violence at Berkeley will be the first.

Update:  97 tech firms team up against Trump's immigration ban.  The problem with this approach is that I am not sure the "immigration ban", which is in fact a 90-day pause in issuing visas to folks from 7 countries, is actually illegal under current law and precedent.   Obama did something similar with Iraq at one point.   But I am happy to see them taking a shot at it -- in my mind a single person should not have this much power.  By the way, Amazon and Tesla did not sign, in part because their leaders still sit on Trump's advisory board.  The latter strikes me as a reasonable strategy, but I wonder how long the Left will allow them to remain inside the tent.

California is beautiful.  Many parts have great weather.  There are a lot of smart people there and some good schools.  Both my kids live there right now, though it is really expensive given the state and local governments' propensity to take many steps to limit the supply of housing.

But it is simply impossible to do business in.  Every single legislative session brings a series of new time-consuming and expensive regulatory requirements.  Despite California having some of the best recreation spots in the world, we have systematically reduced our business in California by 50%, and I have a moratorium in place on accepting new business (I won't even look at RFP's and proposals to avoid being tempted.)  I wrote about this process a number of times, including here.

This week, Hans Bader covers this ground and more in his article about businesses fleeing California to places like Texas.

It does not surprise me that service industries, particularly those that provide high-margin services to the wealthy, stay in California -- service businesses have to be close to their customers.  But it always blows me away when I see anyone manufacturing in California.  Why?  Move over the border into Nevada or Arizona or Mexico and costs go down a lot without any real increase in logistics costs.  California does not even want you there -- I am convinced they achieve most of their environmental goals merely by chasing folks over the border, exporting these issues rather than solving them.

For some reason, Wordoress has removed the underline button in the editor.  I can bold, and italicize, but not underline for some reason.  I have zero idea why there was such a burning need to eliminate this pretty basic feature of an editor.  I suppose I can go in an manually add in html codes, but why bother with an editor if I have to do that kind of cr*p.

Update:  There is a plugin to get it back.  The re-add and rearrange option it adds to the writing settings menu is the one I chose.  The underline button was always in a goofy spot and the re-arrange option puts it logically next to bold and italic.  Apparently, WordPress thought underlined text was confusing because users mistake it as a link, but I feel like my format I have adopted make the two pretty clearly different.  Also, I use wordpress as the engine for most of my business web sites, so we needed to be able to underline.

I just updated my climate presentation with data through December of 2016, so given "hottest year evah" claims, I thought I would give a brief update with the data that the media seldom ever provides.  This is only a small part of my presentation, which I will reproduce for Youtube soon (though you can see it here at Claremont-McKenna).  In this post I will address four questions:

• Is the world still warming?
• Is global warming accelerating?
• Is global warming "worse than expected"?
• Coyote, How Is Your Temperature Prediction Model Doing?

Is the world still warming:  Yes

We will use two data sets.  The first is the land surface data set from the Hadley Center in England, the primary data set used by the IPCC.  Rather than average world absolute temperature, all these charts show the variation or "anomaly" of that absolute temperature from some historical average (the zero point of which is arbitrary).  The theory is that it is easier and more accurate to aggregate anomalies across the globe than it is to average the absolute temperature.  In all my temperature charts, unless otherwise noted, the dark blue is the monthly data and the orange is a centered 5-year moving average.

You can see the El Nino / PDO-driven spike last year.  Ocean cycles like El Nino are complicated, but in short, oceans hold an order of magnitude or two more heat than the atmosphere.  There are decadal cycles where oceans will liberate heat from their depths into the atmosphere, creating surface warming, and cycles where oceans bury more heat, cooling the surface.

The other major method for aggregating global temperatures is using satellites.  I use the data from University of Alabama, Huntsville.

On this scale, the el nino peaks in 1999 and 2017 are quite obvious.  Which method, surface or satellites, gets a better result is a matter of debate.  Satellites are able to measure a larger area, but are not actually measuring the surface, they are measuring temperatures in the lower tropospehere (the troposphere's depth varies but ranges from the surface to 5-12 miles above the surface).  However, since most climate models and the IPCC show man-made warming being greatest in the lower troposphere, it seems a good place to measure.  Surface temperature records, on the other hand, are measuring exactly where we live, but can be widely spaced and are subject to a variety of biases, such as the urban heat island effect.  The station below in Tucson, located in a parking lot and surrounded by buildings, was an official part of the global warming record until my picture became widely circulated and embarrassed them in to closing it.

This argument about dueling data sets goes on constantly, and I have not even mentioned the issues of manual adjustments in the surface data set that are nearly the size of the entire global warming signal.  But we will leave these all aside with the observation that all data sources show a global warming trend.

Is Global Warming Accelerating?  No

Go into google and search "global warming accelerating".  Or just click that link.  There are a half-million results about global warming accelerating.  Heck, Google even has one of those "fact" boxes at the top that say it is:

It is interesting by the way that Google is using political advocacy groups for its "facts" nowadays.

Anyway, if global warming is so obviously accelerating that Google can list it as a fact at the top of its search page, it should be obvious from the data, right?  Well let's look.  First, here is the satellite data since I honestly believe it to be of higher quality than the surface records:

This is what I call the cherry-picking chart.  Everyone can find a peak for one end of their time scale and a valley for the other and create whatever story they want.  In economic analysis, to deal with the noise and cyclicality, one will sometimes see economic growth measured peak-to-peak, meaning from cyclical peak to the next cyclical peak, as a simple way to filter out some of the cyclicality.  I have done the same here, taking my time period as about 18 years from the peak of the 1999 El Nino to 2017 and the peak of the recent El Nino.  The exact data used for the trend is show in darker blue.  You can decide if I have been fair.

The result for this time period is a Nino to Nino warming trend of 0.11C.  Now let's look at the years before this

So the trend for 36 years is 1.2C per century but the trend for the last half of this is just 0.11C.  That does not look like acceleration to me.  One might argue that it may again accelerate in the future, but I cannot see how so many people blithely treat it as a fact that global warming has been accelerating when it clearly has not.  But maybe its just because I picked those darn satellites.  Maybe the surface temperatures show acceleration?

Nope.  Though the slow down is less dramatic, the surface temperature data never-the-less shows the same total lack of acceleration.

Is Global Warming "Worse Than Expected"?  No

The other meme one hears a lot is that global warming is "worse than expected".  Again, try the google search I linked.  Even more results, over a million this time.

To tackle this one, we have to figure out what was "expected".  Al Gore had his crazy forecasts in his movie.  One sees all kinds of apocalyptic forecasts in the media.  The IPCC has forecasts, but it tends to change them every five years and seldom goes back and revisits them, so those are hard to use.  But we have one from James Hansen, often called the father of global warming and Al Gore's mentor, from way back in 1988.  His seminal testimony in that year in front of Congress really put man-made global warming on the political map.  Here is the forecast he presented:

Unfortunately, in his scenarios, he was moving two different variables (CO2 levels and volcanoes) so it is hard to tell which one applies best to the actual history since then, but we are almost certainly between his A and B forecasts.  A lot of folks have spent time trying to compare actual temperatures to these lines, but it is very hard.  The historical temperature record Hansen was using has been manually adjusted several times since, so the historical data does not match, and it is hard to get the right zero point.  But we can eliminate the centering issues altogether if we just look at slopes -- that is all we really care about anyway.  So I have reproduced Hanson's data in the chart on the left and calculated the warming slopes in his forecast:

As it turns out, it really does not matter whether we choose the A or B scenario from Hansen, because both have about the same slope -- between 2.8C and 3.1C per century of warming from 1986 (which appears to be the actual zero date of Hansen's forecast) and today.  Compare this to 1.8C of actual warming in the surface temperature record for this same period, and 1.2C in the satellite record.  While we have seen warming, it is well under the rates predicted by Hansen.

This is a consistent result to what the IPCC found in their last assessment when they evaluated past forecasts.  The colored areas are the IPCC forecast ranges from past forecasts, the grey area was the error bar (the IPCC is a bit inconsistent when it shows error bars, including error bands seemingly only when it helps their case).  The IPCC came to the same result as I did above:   that warming had continued but was well under the pace that was "expected" form past forecasts.

By the way, the reason that many people may think that global warming is accelerating is because media mentions of global warming and severe weather events has been accelerating, leaving the impression that things are changing faster than they truly are.  I wrote an article about this effect here at Forbes.  In that I began:

The media has two bad habits that make it virtually impossible for consumers of, say, television news to get a good understanding of trends

1. They highlight events in the tail ends of the normal distribution and authoritatively declare that these data points represent some sort of trend or shift in the mean
2. They mistake increases in their own coverage of certain phenomenon for an increase in the frequency of the phenomenon itself.

Coyote, How Is Your Temperature Prediction Model Doing?  Great, thanks for asking

Ten years ago, purely for fun, I attempted to model past temperatures using only three inputs:  A decadal cyclical sin wave, a long-term natural warming trend out of the little ice age (of 0.36 C per century), and a man-made warming trend really kicking in around 1950 (of 0.5C per century).  I used this regression as an attribution model, to see how much of past warming might be due to man (I concluded about half of 20th century warming may be due to manmade effects).  But I keep running it to test its accuracy, again just for fun, as a predictive tool.  Here is where we are as of December of 2016 (in this case the orange line is my forecast line):

Still hanging in there:  Despite the "hottest year evah" news, temperatures in December were exactly on my prediction line.  Here is the same forecast with the 5-year centered moving average added in light blue:

Via Don Boudreaux