Coyote Blog

Via TJIC:

In his commencement speech at Southern New Hampshire University
this morning, Obama - like most commencement speakers - delivered a
call to public service; unlike many, however, he also warned against
the charms of doing what most college graduates set out to do: Make
money.

"In a few minutes, you can take your diploma, walk off this
stage and go chasing after the big house and the large salary and the
nice suits and all the other things that our money culture says you
should buy.

"But I hope you don't. Focusing your life solely on making a
buck shows a poverty of ambition. It asks too little of yourself. And
it will leave you unfulfilled," he told the crowd.

This statement would certainly be true in 18th century European monarchies, in Soviet Russia, in third world Kleptocracies, in Cuba, and in Chavez's Venezuela.  Because making money in these environments is a zero-sum game, and the only way to get rich is to loot it from some poor schmuck who is actually creating the value.

But here in America, we (mostly) have this cool system called capitalism.  In capitalism, all interactions are based on the voluntary self-interest of the parties involved.  This means that one only can "make a buck" by doing something or making something that is of value to another person.  And only by successfully serving the needs of a LOT of people does one get really rich. 

TJIC's conclusion is wonderful:

Far better that they spend their life

• majoring in political "science"
• working for a meaningless non-profit
• trying to register more people to vote so that the negative-sum game of politics can have more credibility
• helping political partisans redrawn electoral district boundaries in the same negative-sum game of politics
• being a senator, pushing for more regulations and tax increases

That, clearly, is a fulfilling life.

Let the suckers create value.

The best and brightest should just steal it, and move it around
(while taking some portion of it for themselves, and destroying another
portion of it).

Beware of people who try to demonstrate how much they "care" using other peoples' money.

FIRE points out yet another university that is attempting to restrict speech it does not agree with, in the name of, uh, freedom or something.  The university's Student Union proposed to close down the campus humor magazine that made a joke about race relations.  The reason?

Specifically, in response to the "overtly racist, sexist, and generally
offensive articles, statements, and images published in the Spring
Issue of Gravity Magazine," and because the publication of this joke
had caused "members of our community to feel "˜unsafe,' "˜powerless,'
"˜unsupported,' "˜harassed,' and "˜threatened;'"

Now, this university is private, so I suppose as a private body they can define acceptable speech in their private confines any way they want (just as my kids dropping F bombs is legal by the first amendment, but banned in my household).  However, I fear that the folks involved do not understand that they need to leave these attitudes behind when they leave their private little cocoon university, because speech that hurts your feelings is not illegal, thank goodness, in the rest of the country. 

Unfortunately, it is almost too much to ask nowadays that universities understand that, as Louis Brandeis wrote, the best response to speech you don't like is more speech.  The rich irony comes from the fact that this occurred at ... Brandeis University.  The freaking place was named after the man who wrote:

Those who won our independence believed"¦ that freedom to think as
you will and to speak as you think are means indispensable to the
discovery and spread of political truth; that without free speech and
assembly discussion would be futile; that with them, discussion affords
ordinarily adequate protection against the dissemination of noxious
doctrine"¦

They recognized the risks to which all human institutions are
subject. But they knew that order cannot be secured merely through fear
of punishment for its infraction; that it is hazardous to discourage
thought, hope and imagination; that fear breeds repression; that
repression breeds hate; that hate menaces stable government; that the
path of safety lies in the opportunity to discuss freely supposed
grievances and proposed remedies; and that the fitting remedy for evil counsels is good ones.

Fear of serious injury cannot alone justify suppression of free
speech and assembly"¦ To justify suppression of free speech there must
be reasonable ground to fear that serious evil will result if free
speech is practiced"¦ [N]o danger flowing from speech can be deemed
clear and present unless the incidence of the evil apprehended is so
imminent that it may befall before there is opportunity for full
discussion. If there be time to expose through discussion the
falsehoods and fallacies, to avert the evil by the process of
education, the remedy to be applied is more speech, not enforced silence. Only an emergency can justify repression.   (Emphasis added.)

Check out the FIRE article to learn much more about the events in question, including what the original joke was.

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
ago.

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.

John Tamny in TCS Daily:

In a recent Los Angeles Times op-ed, "Overselling Capitalism,"
University of Maryland Professor Benjamin Barber wrote of the "crisis"
in the capitalist mindset, where the "'Protestant ethos' of hard work
and deferred gratification has been replaced by an infantilist ethos of
easy credit and impulsive consumption that puts democracy and the
market system at risk."

Wow, I must not have gotten the memo.  Here I have been plugging negative numbers into my 1040 for three or four years in an attempt to build a business and some future wealth, and it turns out that deferred gratification is out of style.   (TJIC also did not get the memo)

Here is a big reality check for professor Barber:  The fact that a few mortgage companies got overly generous in extending mortgage credit does not mean that the work ethic and entrepreneurship is dead.  In fact, they are virtually unrelated topics.  If the price of something is reduced, more is going to be consumed.  Suppliers of credit reduced the price of credit, too far as it turned out to make a profit, and more was consumed.  This does not represent so tragic change in the human makeup, it is just supply and demand at work, like normal, and some bad business judgement. 

In fact, I can't get over the class-based condescension that seems to fill every nook and cranny of the commentary on the mortgage bubble bursting.  When in the late 1990's, rich VC's provided too much money too cheaply to yuppies running Internet companies, I don't remember anyone lamenting a shift in human motivation or a failure of capitalism.  But when banks provided too much capital too cheaply to lower income people for home mortgages, suddenly all those lower-income people are representative of the failure of capitalism and the work ethic.

A few years ago I coined the term "Intellectual Welfare."  I originally devised he term to describe Social Security, where it was arguable that most people in the program were not receiving a transfer payment, but they were instead receiving for-your-own-good government restriction of individual choice.  In the case of Social Security, government takes over the management of some of our retirement savings (at an appalling cost) because we lunkheads can't be trusted to manage our own savings for ourselves.

I was going to prepare a similar post about cries for regulation in the sub-prime credit market, but Alex Tabarrok did it already:

Roubini and others generating hysteria about defaults in the
mortgage market are credit snobs - they think credit is something that
only the rich can handle.  Just look at the language that Roubini uses
to analogize borrowers - they are "reckless patients" who "spent the last few years on a diet of booze, drugs and artery clogging junk food."  Similarly, the Washington Post tells us that it's the end of the "borrowing binge."

Yeah, we get it.  Credit is ok for us, the "sober" borrowers but poor people can't
handle credit.  Too much credit among the poor generates decay and
social pathology.  Credit must be regulated.  We can't, for example,
have credit stores in poor neighborhoods.  Don't you know that credit is bad for people without self-discipline?   Let the poor buy on installment credit?  That's unconscionable.  Today's furor over sub-prime mortgages is the same old story.

Update: This really ticks me off:

Representative Barney Frank, the Massachusetts Democrat who heads
the House Financial Services Committee, said in an interview on Friday
that he intended to move legislation in the coming weeks. He said the
measure he was preparing would discourage abusive loans by imposing
legal liability "up the chain." It would give borrowers and others the
ability to sue the Wall Street firms that package those mortgages and
then sell them as mortgage-backed securities, as well as the purchasers
of those securities in the secondary market.

"Anybody, including the original borrower, can make a claim, and the
liability would go up the chain," he said. "People say it may
discourage certain kinds of lending. But that's precisely what we want
to do. We will pass a bill that won't allow companies to loan people
more money than they can pay back or loans for more than the value of
the house."

GRRRR.  Does no one remember what it was like to get a mortgage before they were so easily securitized?  The paperwork in the credit application was horrendous, as was the time it took to complete the mortgage.  Today they check two or three numbers, and if these numbers match the requirements of the Wall Street companies that package the loans, the loan is approved.  This legislation, which is aimed at slamming the securitization process, will hurt everyone.  All of our lives will be made worse so a few politicians can demagogue an issue that will be forgotten in 12 months. 

A CBS poll says about 2/3 of Americans think the government should provide health care for all.  Many in the poll think the government would suck at it (about half said the government would do a worse job, and less than a third think it would do a better job). 

Given how important health care is to people, I find it hard to reconcile these two opinions.  If I had to guess, most people who say they are for government health care implicitly imagine a two-tier system, where they would still get the good care they have today, but poor people who people imagine are without care today (actually they tend to be without insurance, not without care) would get a suckier second tier of health care run by the government.

But I don't think this is a realistic view of what they will get with universal health care.  No government-run universal health care system is ever going to be politically stable with two tiers.  You are going to have to end up with a system that some poor people get better care but the rich and middle class end up with a worse system.  That is the reality of every government run health care system in the world.

I would love to see the answer to this poll question:

"Would you support a system of government-run universal health care that guaranteed health care access for all Americans, but would result in you personally getting inferior care than you get today in terms of longer wait times, more limited doctor choices, and with a higher probabilities of the government denying you certain procedures or medicines you have access to today."

A while back, at our local libertarian discussion group, we spent an evening discussing centralization vs. decentralization of government, and whether one or the other better protects individual liberties. 

Many libertarians argue for decentralization.  The anarchists in the room will argue for the ultimate decentralization, all the way to the individual level, essentially voiding the concept of government altogether.  Others who are more amenable to some government argue for decentralization because it tends to allow for competition, with citizens voting with their feet and wallets for more favorable tax and regulatory regimes.

On the other hand, the US provides historical examples of the benefits of federalism in protecting individual rights.  Certainly the abolition of slavery and later of Jim Crow laws were a positive outcome from the feds, as are the enforcement of Bill of Rights protections on the states.  I would personally love to see a federal system like our own with all legislative power held as locally as possible, but with a federal government whose main purpose domestically was not taxation/regulation/legislation but instead enforcement of a more robust Bill of Rights and nullification of state and local law that violated protected individual freedoms.

Anyway, one topic related to decentralized authority was jury nullification.  Jury nullification is the ability for juries to rule on the law, rather than guilt or innocence.  An example might be "the jury thinks Joe is guilty of smoking pot, but we don't think smoking pot should be illegal, so we are going to let Joe go."  Most state law technically does not allow juries to rule on the law itself, but as a practical matter there is no way juries can be prevented from doing so  (Prosecutors really go non-linear over jury nullification -- I remember Patterico had a long series inveighing against it.)

Anyway, as you might imagine, the libertarians in the room mostly love jury nullification.  Despite being a good anarcho-capitalist, I disagreed. I understood that most of the examples people brought up did indeed demonstrate that jury nullification could be a tool for protecting individual rights.  However, I believe that nullification could equally be a tool of oppression.  For example, in criminal law, take the Enron-Skilling trial.  I am not saying this happened, but one could certainly imagine a properly inflamed jury saying "well, we don't think he is technically guilty beyond a reasonable doubt on the charges based on the evidence here in court, but he's rich and Enron failed and people lost money and we're pissed off, so we will find him guilty.  They would be saying "what he did was not a violation of the law, but it should be, so we are sending him to jail." This is just as much jury nullification as my previous example.

I don't think this kind of anti-individual-rights jury nullificatin happens often in criminal court, but I do think it is happening a lot in civil court.  In fact, I think one way you could summarize what is wrong with torts and litigation in this country is that we are seeing rampant jury nullification in favor of wealth redistribution.  Juries are ignoring the law, the facts of the case, and all reason for one and only one consideration:  "One guy in the room is rich, one guy is not, and I have a chance to take money from the rich guy and give it to the poor guy."  For while it may be hard in America to get 51% of the voters to support substantial increases in wealth distribution, smart lawyers like Peter Angelos and Jon Edwards have figured out that it is not that hard through voi dire to get at least seven or eight such votes in a room of twelve people.

Particularly if you are good at venue-shopping:

In Race, Poverty and American Tort Awards (and here),
Eric Helland and I show that tort awards increase strongly with county
poverty rates especially with minority poverty.  A 1% increase in black
poverty rates, for example, can increase tort awards by 3-10 percent
with a similar increase in Hispanic poverty rates.   Careful forum
shopping can easily raise awards by 50-100%.

Anthony Buzbee, a famed plaintiff's attorney, inadvertently let the
cat out of the bag recently when talking about Starr county in Texas.

"That venue probably adds about seventy-five percent to the value of
the case," he said. "You've got an injured Hispanic client, you've got
a completely Hispanic jury, and you've got an Hispanic judge. All
right. That's how it is."

In other parts of Texas, Buzbee went on, a plaintiff may have the
burden of showing "here's what the company did wrong, all right? But
when you're in Starr County, traditionally, you need to just show that
the guy was working, and he was hurt. And that's the hurdle: Just prove
that he wasn't hurt at Wal-Mart, buying something on his off time, and
traditionally, you win those cases."

The problem with letting juries write law in the jury room is that there are no Constitutional protections at all.  If they want to make the law, at least for that day, read that homeowners are liable for injuries suffered by burglars trying to break into their house, then that is what the law becomes, fair or not.  If they want to make the law read that drug companies shouldn't sell painkillers that have any risk at all, then that is what the law is, and the rest of us 300 million minus twelve people have to live with fewer choices for managing our migraines. 

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

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

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

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

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

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

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

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

Lawrence Lessig in Wired, via Reason's Hit and Run:

I was one of those reluctant regulators. As the evidence
of Microsoft's practices became clear, I remember well thinking, "Of
course the government needs to do something." And I remember very well
the universal impatience with the notion that the market would solve
the problem. How could it, when any other company was likely to behave
just as Microsoft did?

We pro-regulators were making an
assumption that history has shown to be completely false: That
something as complex as an OS has to be built by a commercial entity.
Only crazies imagined that volunteers outside the control of a
corporation could successfully create a system over which no one had
exclusive command. We knew those crazies. They worked on something
called Linux.

I wanted to believe that Linux would prevail. But
I'm a lawyer, and lawyers aren't programmed to see how profitable
innovation might happen without commercial control. I didn't like the
idea of regulation; I just didn't see any alternative. The suits would
always beat the rebels. Isn't that why they were so rich?

But they never really learn, do they, and Lessig is at it again with net neutrality.  Both cases have in common that the issues have very little to do with consumers, and more to do with protecting other entrenched interests.  (Sun and Netscape in the Microsoft case, Google and Yahoo in the case of AT&T and net neutrality).

I have long suspected that there are substantial problems in the income data that folks on the sky-is-falling side of the inequality and risk debate are using.  One point I have made several times is that rising entrepreneurship tends to void many of the conclusions made by these folks who are commenting from an "everyone is an office or factory worker" paradigm.  In particular:

• Entrepreneurs have much riskier income profiles.  To a statistician mining tax returns, I look like I have fallen from a good upper middle-class job into, well, poverty for the first two years of my new company.  I haven't, but my data point is being used by Jacob Hacker and others to say that somehow there is a great risk-shift that is being foisted on the middle class against their will.  In fact, I and the growing number of people who run their own small businesses choose this life.
• The introduction of the "S-corporation" means that an increasing amount of entrepeneurial income is showing up on 1040's.  With C corporations, the incentive was to delay taking any income from the company for as long as possible to avoid double taxation, preferably taking it at time of the company's sale.  With S-Corporations, there is no double taxation problem so corporate income flows through to the individual 1040.  Business owners are suddenly reporting more income not because they are making more, but because they are recognizing it in a different way in a different tax form.  Much of the rich getting richer is actually just the rich recognizing their corporate income in small businesses in a different way.

Much more here from Chris Edwards at Cato, reporting on an interesting report coming soon from Alan Reynolds.

It would be tough for me to single out my single least favorite member of my alma mater Princeton's faculty.  However, Peter Singer would certainly be in the running.  TJIC fisks some of Singers recent writing in the NY Times.  I will leave you to read his thoughts, except I wanted to comment on this paragraph of Singer's:

"¦The rich must - or so some of us with less money like to assume -
suffer sleepless nights because of their ruthlessness in squeezing out
competitors, firing workers, shutting down plants or whatever else they
have to do to acquire their wealth"¦

I could probably write a book just from this quote, but let me just focus on two responses:

• It helps prove my long-time observation that politicians, artists, and academics of a socialist bent who frequently criticize business have absolutely no idea what they do day to day or how they make money or create value.  Most have been an artist/academic/politician since the day they left school, and if they have held a real job in the value-creation part of the world, it is seldom as any type of manager or supervisor.  Singer knows no more about wealth creation than I do about sub-atomic particles.  The amazing thing, though, is that the NY Times would never quote me on sub-atomic particles but frequently gives Singer a platform to hold forth about wealth creation.  Economics is a science too, just as much as physics.  As I said in that linked post:

Economics is a science.  Willful ignorance or emotional
rejection of the well-known precepts of this science is at least as bad
as a fundamentalist Christian's willful ignorance of evolution science
(for which the Left so often criticizes their opposition).  In
fact, economic ignorance is much worse, since most people can come to
perfectly valid conclusions about most public policy issues with a
flawed knowledge of the origin of the species but no one can with a
flawed understanding of economics.

• Read the statement, and really think about what he says, remembering that he really believes these exact words.  Forget about the squeezing out competitors part -- presumably we capitalists are just bashing each other so this is likely the least of his arguments (not to mention how many people Singer likely "squeezed out" in the competition for scarce tenure and professor positions at Princeton).  Think about his statement that the way wealth is created is by "firing workers" and "shutting down plants."  So the logical implication is that the corporation who ends up with no workers and not assets will be the richest?  And here all this time I have been stupidly growing my company by trying to hire more good people and add on productive assets. 

Singer is as qualified to write about business practices as I am to write about South East Asian mating rituals.  Each of us is equally experienced and knowlegeable about these topics.  Somehow, though, the NY Times sees fit to publish Singer and my beloved University pays him to teach.  Unbelievable.

Phoenix is in the process of tearing up half the city to put in its first light rail line.  There seems to be a hard core of people out there who get a huge hard-on for light rail, and I just don't get it.  Some random observations:

• We are building light rail that is essentially a "trolley."  This means it runs at street levels, often down the median strips of roads, and has to stop at stoplights just like cars and buses.  My question is, in this configuration, how is light rail any different than a bus?  Except for the fact, of course, that it is far more expensive and far less operationally flexible. 
• The system is not up and running yet, so I have not seen ridership numbers, but I will make a bet:  If we take the entire cost of the system's construction, plus its annual operating losses/subsides, I will bet that we could have bought every regular rider of the rail system a nice car instead and gas for life cheaper than the cost of the rail system.
• It looks to me like the rail system will actually increase congestion.  For most of its route, it is removing lanes from busy roads, and by running down the middle it will make left turns more difficult and complex. 
• Supporters of these systems point to NY or London as examples of what we can achieve.  Bullshit.  No city that has embarked on this light rail stuff has had the success or the political will or the money to build out a network with the critical mass that these larger cities have.  Most end up with orphaned routes (see LA, for example) that don't tie into anything. 
• Phoenix is the last city on the planet that a rail based system should work for.  I don't have the book in front of me, I will have to get it from home, but I remember a book on urban development that showed Phoenix had the flattest population density distribution of any city studied.  What this means is that we don't have a city center and suburbs - it means that we are basically all one big suburb.  So there are no single routes (for example in Chicago from the northern suburbs into downtown) that have any critical mass of traffic.  People are driving from everywhere to everywhere.  In fact, my suspicion has been that there are a group of politicians and business people who want to try to create a downtown area, and are using massive public funds in the form of light rail lines converging on the city center to try to jump-start such development.
• The Commons Blog has a link-rich post on the failure of the Portland light rail system, supposedly the model all light-rail promoters point to.

Update:  Jackalope Pursuivant has more on Phoenix light rail

Prior to the election, folks on the left were pushing the idea that US wages had been stagnating.  Often this argument was a subset of a zero-sum class warfare rant, complaining that though the economy has grown, the "rich" have taken all the gains.

There were always two problems with the hypothesis that real wages were stagnating:

1. "Wages" are only a part of total compensation.  In fact, I don't think anyone denies that real compensation (wages plus benefits) has been growing, and it would not surprise me that non-wage compensation, like health care, has grown much faster than wages.  A discussion about only one component of total compensation is nearly irrelevant.
2. Even if the average is stagnating, that does not mean that the wages for individuals is stagnating.  What is actually going on is that everyone's real wages are improving, but new low-skill low-wage immigrants and teenagers move in behind them and bring the average down.  If you showed real wages for people who were in the work force in 1980 without any entrants after that, average wages would be way up.  The average is less important, from a general well-being standpoint, than what is happening to individuals.

The New York Sun (Hat tip: Most all the libertarian blogosphere) that also takes on these issues.  The author makes the further distinction between individual and family income, and argues you also need to correct for changing family sizes.

The American family has
shrunk due to changes in society, such as more divorces, longer
life-expectancy for women, and fewer children. So family income in 2004
cannot correctly be compared to family income in 1964 "” today's family
income is spread around fewer people.

Adjusting for decreasing family size, real median family income is
13% higher than in 1994, 22% higher than in 1984, 37% higher than in
1974, and 88% higher than in 1964. That's a significant increase.

From our American point of view, we usually think of the attack by the Japanese at Pearl Harbor fifty-five 65 years ago as the main Japanese objective at the time.  In fact, the attack on Pearl Harbor was merely a screening move, an attempt by the Japanese to limit the US's ability to respond to its main objective -- seizure of resource-rich targets in Indonesia and Southeast Asia. 

The Japanese in 1941 shared many of the beliefs that are disturbingly common today.   They believed that their country had to be "self-sufficient" in key industries and resources.  And, they had a huge distrust of foreigners and international trade.  Lou Dobbs would have been very comfortable with them.  The end result of believing in self-sufficiency was that Japan eschewed peaceful trade as a way to gain resources in favor of colonialism and military intervention.  To some extent, the European colonialism of the 19th and early 20th centuries stemmed from the same beliefs.

As an island nation, Japan had developed a rich and complex social
structure. It resisted westernization by sealing itself off from
contact with the outside world, particularly Europe and the United
States. By the early twentieth century, though, Japan's efforts to
achieve self-sufficiency were failing, for the nation lacked its own
raw materials and other resources. Some members of the ruling class
argued that Japan could grow and prosper only by modernizing and
adopting Western technology. Japanese nationalists, though, advocated a
different path: the establishment of an empire that would not only
elevate Japan's stature in the eyes of the world but also guarantee
access to the resources the nation needed. Moreover, many members of
the nation's traditional warrior class"”the Samurai"”were embittered by
the aftermath of World War I. Japan had backed the victorious Allies,
but the Samurai believed that in the peace negotiations following the
war the United States and Great Britain had treated Japan as a
second-class nation. They, too, longed to assert Japan's place in world
affairs.   [answers.com]

After WWII, the Japanese gave up colonialism and military intervention in favor of arms-length trade.  And, as a result, grew through peaceful exchange into being the wealthy world power that militarism and "self-sufficiency" could never achieve.

Postscript: Some might argue that the Japanese were forced to give up on trade in favor of militarism by the US embargoes.  This is a particularly popular explanation among the "America-is-the-source-of-all-evil" academics, that the Japanese would have peacefully traded for all their needs if only we had let them.  This viewpoint is silly, and completely ignorant of the goals and philosophies of those running Japan.

The Japanese desire to be resource self-sufficient is always there, and the embargoes were a result of previous military adventures by the Japanese to gain colonies by force in Korea and China, as well as Japanese threats to invade southeast Asia.  Japanese militarism to achieve "imperial self-sufficiency" predated western embargoes by many, many years.  The western embargoes may have forced the Japanese hand to move quicker than they might have, but their moves into resource-rich Indonesia were probably coming soon anyway, just as similar moves in Korea and China had been going on for a decade.

To be fair, today's self-sufficiency advocates are passive and xenophobic rather than aggressive and xenophobic, as the Japanese were.  This is at least a small improvement, and means that they prefer to quietly sink into squalor rather than going out with a bang (two bangs?) as the Japanese did.

Update:  Memories of the Pearl Harbor attack.  And the Arizona Republic comes through with a good series on the death of the USS Arizona.

I guess it's inevitable come election time, but a cottage industry has arisen of late to spread the word that the US economy is broken and that conditions for all but the rich are actually eroding.  This historically has been a winning strategy -- Remember, in late 1992 Bill Clinton campaigned with the absurd (but generally unchallenged in the media) contention that it was the worst economy since the Great Depression.  Most of the lamentations about the current condition of the poor and middle class are presented with the standard populist baggage that the economy is zero-sum, and these groups ills are somehow related to and the result of the income growth of the very rich.

Jacob Hacker of Yale now adds to the chorus, arguing that in addition to worse material fortunes, the middle class faces more risk.  As someone who gave up a good, high-paying job in corporate America for the risk roller coaster of running by own business, I have little sympathy -- after all, I am part of his trend and I happily chose my path.  And its astonishing to me in this day and age anyone can argue that we have too much of a culture of personal responsibility.  Please.

However, rather than fisking this in depth, I will leave the task to my much more capable ex-roommate from Princeton, who also happens to be a senior something-or-other at Cato, Brink Lindsey:

But if we're talking about
security from material deprivation, that's a different story. Let's
start with the biggest risk of all: that of premature death. Back in
1970, during Mr. Hacker's golden age of economic stability and
risk-sharing, the age-adjusted death rate stood at 12.2 deaths per
1,000 people. By 2002, it had fallen more than 30%, to 8.5 per 1,000.
In particular, infant mortality plummeted to 7.0 from 20.0, while the
number of Americans killed on the job dropped to three per 100,000
workers from 18.

Next, look at the two main
indicators of middle-class status: a home of one's own and a college
degree. Between 1970 and 2004, the homeownership rate climbed to 69%
from 63%, even as the physical size of the median new home grew by
nearly 60%. Back in 1970, 11% of Americans 25 years of age or older had
a college or higher degree. By 2004, the figure had risen to 28%.

As to consumer possessions, the
following comparison should suffice to make the point. In 1971, 45% of
American households had clothes dryers, 19% had dishwashers, 83% had
refrigerators, 32% had air conditioning, and 43% had color televisions.
By the mid-1990s all of these ownership rates were exceeded even by
Americans below the poverty line.

No matter how the
doom-and-gloomers torture the data, the fact is that Americans have
made huge strides in material welfare over the past generation. And
with greater wealth, as well as improved access to consumer credit and
home equity loans, they are much better prepared to deal with the
downside of increased economic dynamism.

Mr. Hacker leans heavily on his
findings that fluctuations in family income are much greater now than
in the 1970s. But research by economists Dirk Krueger and Fabrizio
Perri has shown that big increases in the dispersion of income have not
translated into equivalent increases in consumption inequality. In
other words, most Americans are able to use savings and borrowing to
maintain stable living standards even in the face of economic ups and
downs. And those standards are much higher than those of the
all-in-the-same-boat era.

Mr. Hacker, however, shows little
interest in providing such context or balance. Fully committed to what
could be called a "free market bad, big government good" narrative, he
simply ignores data that point in the other direction. Thus he
lambastes reforms such as Health Savings Accounts and Social Security
privatization for shifting risks onto individuals while failing to
mention that the policy status quo imposes massive risks of its own.

I know Brink has been finishing up his new book.  I would love to see him start blogging again.

More Thoughts:  I have a couple of thoughts of my own on the risk issue:

• Risk, I guess defined as income volatility, may be higher for the average person today that it was in 1970.  However, in a broader context, it is still drastically lower than any time in history or than in most places in the world.  Certainly pre-WWII people had substantially more risk in their income, particularly in the agricultural sector, which dominated the economy of this and other countries through most of history.  In subsistence agricultural economies, every year even the most productive and competent people face not just the risk of income loss but starvation and extinction through factors wholly beyond their control.
• The vast majority of the risk reduction people experienced in this country after WWII came from the operation of the private market economy, and not from government programs.  It was the incredible productivity growth, export growth, and technology growth of American industry that provided whatever security people might be nostalgic for.
• Further, the author worries about a risk-shift.  But in the 50's and 60's, there was very little risk in the system.  Corporations faces little risk in world markets, executives at corporations faced little risk to their jobs, and most workers faced little risk.  There has not been a risk shift -- this implies there was once some Atlas that bore the burden of all this risk and has now shrugged.  One might argue that there is more risk in the whole system - corporations are not guaranteed their market share so workers are not guaranteed their jobs.  The author tries to make it a populist argument, as if rich folks are shrugging off risk onto the poor.  The fact is that everyone faces more income volatility today, from largest corporation to lowest paid worker.  The good news, as Mr. Lindsey points out, is that this volatility is around a much higher mean.
• The costs of income security programs were always funded by workers
  themselves.  There was never a time when this security was provided by a mythical "someone else".  General revenue programs like welfare and defense over
  the last 30 years have been effectively funded by "the rich", since by
  any definition, that is who pays the income taxes.  However, programs
  like social security, Medicare, and unemployment are all based on
  payroll taxes with caps that mean that most of the tax is paid for by
  the poor and middle class themselves  (some of these are technically
  paid as a percentage of wages by the employer, but trust me that they
  have the same effect on take-home pay as if they had been deducted
  directly from the employee's check).  To the extent workers have
  security, it is only because they have been forced to buy and pay for
  an insurance policy.  So again, there can be no shift, because the workers bore the cost of the insurance themseleves.  Are they getting good value for this insurance?  I don't know --
  nobody knows.  Many reform proposals the author worries will further
  increase risk in fact are structured to put this insurance premium back
  in the hands of the worker, to let him or her decide if and how they
  want to spend it to insure themselves.
• The current obsession with this topic of risk strikes me as a case of white collar bias.  I am not sure anyone but the highest seniority workers ever had this mythological income security in the blue collar sector.  Layoffs and technology-based job obsolescence that created turmoil for blue-collar workers never seemed to touch white collar workers in the same way.  My sense is that what's new today is that middle class white collar workers are now facing these same forces of change, in many industries for the first time.  In fact, a skilled machinist is probably more secure in his job today than an account paybables clerk.  For years, the left has joined unions in criticizing companies like GM for continually cutting blue collar jobs without touching bloated white collar payrolls.  It's odd to see them jump suddenly to the other side of the issue.
• I hate to point out the obvious, but what government income-risk-management program has gone away since 1970, other than welfare reform?  Social Security, unemployment insurance, food stamps -- they all exist, most at levels higher than 1970.  Government-funded health care programs cover far more people for far more stuff.
• Certainly some private practices have changed that may affect employee risk.  It is interesting that the author mentioned 401K's.  To Hacker, shifting from defined benefits pensions to 401K's is an increased risk.  I am sure he would point in part to plans like Enron's where 401K holders took a bath because they were encouraged to funnel a lot of their savings into Enron stock.  But most 401K plans don't work that way, and it does not matter since defined benefit plans are even worse.  Defined benefit plans presuppose that the company you work for will remain financially solvent for decades, and they assume workers will never switch jobs, since they are not very portable.  Defined benefit plans are horrible for workers  -- it reduces their flexibility and increases their risk.  401K's are a fabulous, worker-empowering invention and are bad only for a few union leaders and large pension fund managers (e.g. Calpers) who gain political power by virtue of the money they control.
• Yes, many jobs are less stable, but there is no evidence that there are long-term unemployed people out there.  The nature of the people losing work and the job market today has changed, such that there are much better tools to find new work, and there is more work out there for their skills.  White collar workers today probably find new work easier than blue collar workers in West Virginia ever did in the 1950's and 1960's when the mines closed.  My guess is that most everyone from Enron has found a new job (or jail cell).  There are people in Appalachia who still haven't found a job 40 years after the mine closed.

A frequent topic of this blog is to point out situations where technocrats translate their distrust for individual decision-making into the justification for government control. 

Kevin Drum provides me with one of the best examples I have seen of late of this phenomena of using distrust of individual decision-making to justify government intervention, in part because he is so honest and up-front about it.  I usually try not to quote another blogger's posts in total, because I want to give folks an incentive to go visit the site, but in this case I need to show the whole thing (the extensive comments are still worth a visit):

If we treat healthcare like any other market, allowing consumers
free rein to purchase the services they like best, will it produce high
quality results? A recent study suggests not:

Researchers
from the Rand Corp. think tank, the University of California at Los
Angeles and the federal Department of Veterans Affairs asked 236
elderly patients at two big managed-care plans, one in the Southwest
and the other in the Northeast, to rate the medical care they were
getting. The average score was high "” about 8.9 on a scale from zero to
10.

....In the second part of their study, the medical researchers
systematically examined 13 months of medical records to gauge the
quality of care the same elderly patients had received....The average
score wasn't as impressive as those in the patient-satisfaction
surveys: 5.5 on a 10-point scale. But here's the interesting part:
Those patients who graded the quality of their care as 10 weren't any
more likely to be getting high-quality care than those who gave it a
grade of 5. The most-satisfied patients didn't get better medical care
than the least-satisfied.

Surprise! Patients are
poor judges of whether they're getting good care. And if consumer
preferences don't map to high quality care, then a free market in
healthcare won't necessarily produce better results or higher
efficiency, as it does in most markets.

Back to the drawing board. Perhaps a national healthcare system
would be a better bet to reduce costs, cover more people, provide
patients with more flexibility, and produce superior outcomes. After
all, why are we satisfied with allowing the French to have a better
healthcare system than ours even though we're half again richer than
them?

There is it, in black and white:  Most of you individual slobs out there cannot be trusted to make good health care decisions for yourselves, so the government should do it for you.  (And by the way, who the hell thinks the French have a better health care system, but that's off-topic for today).

Here is the false premise:  If the intellectuals who ran the study judged that the individuals involved were getting poor care when the individuals themselves thought is was good care, this does not necessarily mean the individuals being studied were wrong.  It may very well mean they have different criteria for judging health care quality and value.  In fact, what goes unquestioned here, and I guess the reader is supposed to swallow, is that there is some sort of Platonic ideal of "high-quality care" that the people who run this study have access to.

But this is ridiculous.   Does high-quality mean fast?  painless?  private?  successful?  pleasant? convenient?  I, for example, have all the patience of an 8-year-old who just ate three pieces of birthday cake washed down by two Cokes.  I need stuff now, now, now.  I hate gourmet restaurants where meals take 3 hours.  Many gourmands, on the other hand, would probably shoot themselves before eating some of the food I eat.  We have different standards.

Let's take an example from another industry:  Cars.  Every year, the "experts" at Consumer Reports and Car and Driver try out all the new cars and publish the two or three they think are the best.  So, does this mean that everyone who does not buy one of these cars selected by the experts as the best are making a bad decision?  Does this fact tell us the government should step in and buy their cars for them because they can't be trusted to make the right evaluations?   NO!  Of course not.  It means that the people who buy other types of cars have different criteria and priorities in judging what a "high-quality" car is.  Some want high gas mileage.  Some want a tight interior with leather.  Some want a big honkin' engine.  Some want a truck jacked way up in the air.  Some want room to carry five kids.   You get the idea.

There are at least two better explanations for the study results.  Let's first be clear what the study results were:  The study found that the patients studied graded health care differently than did the people who ran the study.  That's all it found.  This could mean that the intellectuals who ran the study and the individuals studied judged care on different dimensions and with different priorities.  Or it could mean that the individuals studied had incomplete information about their care and their choices.  Neither justifies a government takeover of the industry.  (In fact, to the latter point about information, markets that are truly allowed by the government to be free, which health care has not, often develop information sources for consumers, like the car magazines mentioned above.)

The thinking in Drum's post betrays the elitist-technocratic impulses behind a lot of the world's bad government.  Look at "progressive" causes around the world, and you will see a unifying theme of individual decisions that are not trusted, whether its a poor Chinese farmer who can't be trusted to choose the right factory work or an American worker who can't be trusted to make her own investment decisions for retirement.

Postscript:  In some past era, I might have called this one of the worst excuses for fascism I had ever heard.  Unfortunately, Brad DeLong recently took that title with his post that the government needs to take even more money from the rich because the rich are ostentatious and that hurts other people's feelings.  No really, I don't exaggerate, he said exactly that.  If somehow you have missed this one, look here.

Kevin Drum takes the following statistic:

As a result, wages and salaries no longer make up the smallest share of
the gross domestic product since World War II. They accounted for 46.1
percent of all economic output in the second quarter, down from a high
of 53.6 percent in 1970 but up from 45.4 percent in the spring of 2005.

And declares it to be a bad thing.  He doesn't really explain, but as a frequent reader of his site I can guess his issue is that he interprets this statement as a sign of the weakening fortunes of the American wage earner.

Isn't it really dangerous to leap to such a conclusion?  I can think of a number of perfectly innocuous, even positive trends that would cause such a shift:

• Aging of population means more people retirement age who take their income in form of dividends, investment returns, pensions, social security, etc., none of which are included in "wages"
• Ownership of investment assets, and thus income from these assets, has spread from just the rich to the middle class, meaning most people get more of a share of their personal income from investments and asset (e.g. house) appreciation
• Entrepreneurship rates are way up since 1970.  This means many more people, particularly in the middle class, have given up working for someone else for a wage and now work for themselves for a business profit.

I know Drum wants to interpret it as a "the poor are poor because the rich take all the money" zero sum game.  Anyone know what is really going on behind these numbers?

Phoenix hit with rains and flooding.  Where's FEMA?  Where's Bush?  Where's my $2000 Visa card?  The government is intentially ignoring us because, uh, we're all rich white people with plastic surgery.  I heard that tens of refugees were all trapped in a local Hooters for hours and hours with no national gaurd to protect them. 

Below is the Indian Bend Wash mentioned in the article, which is next to my house:

LOL, the whole town was laughing at the national coverage our morning rainstorm got.  Drive time DJ's were particularly mocking Wolf Blitzers breathless commentary.  They were interviewing people who had panicked calls from out of town relatives who had seen the coverage, only to meet with confused shrugs of local residents who may not even have noticed.

The rain lasted barely longer than an hour, and the streets were dry by the time I went to get the kids from school.  We did have flash flooding in our "washes" (what we call dry river beds) but that is to be expected since desert soil does not absorb water quickly and so you get a lot of water runoff.  Also, Phoenix has few storm sewers -- it accepts the fact that things flood once every two years or so, and accepts the costs involved as cheaper than building more infrastructure, which I think is correct.  The golf course is flooded (creating a new island-green) because that's where we put golf courses here - in the dry river bottoms.  The grass grows better there and the land can't be used for anything else and its only a couple of adays a year they get flooded out.

(By the way, yeah, I know I screwed up stitching together the panorama - some of the tree trunks don't match.  I was in a bit of a hurry)

I have tried many times to combat the absurdity of zero-sum economic thinking.  Unfortunately, Democrats seem to be testing income-inequality messages as their lead horse to ride in the upcoming elections, so we are going to hear a lot more of it.  It bothers me even more when smart liberals like Kevin Drum buy into the zero sum thinking.  To his credit, he doesn't totally buy into this mess from Paul Krugman:

The concern [is] that, through mechanisms we're not entirely sure of, the very richest are siphoning off the economic growth before it flows through the middle and lower classes. The worry is about the distribution of growth, but the suspicion is that the distribution is being warped by the sheer level of inequality.

But then he goes onto say nearly the same thing:

I'm not sure this gets the mechanism quite right, though.  There are two basic ways that unequal growth can happen:

1. The rich suck up vast amounts of income growth, and this leaves very little money for the middle class. Thus, wages for the middle class are stagnant or, at best, rising slowly.

2. Middle class wages are kept stagnant, and this frees up vast amounts of money from economic growth. The money has to go somewhere, and it goes to the rich.

Now, obviously, it doesn't have to be one or the other. It could be both. But I suspect there's a lot more analytic power in #2 than in #1.

And finally, this stupendously ridiculous statement:

After all, the income from economic growth has to go somewhere, and if it's not going to the middle class it's going to end up going to the rich. Where else can it go?

What's bizarre about all of these statements is it treats wealth, and in this case specifically income growth, like a phenomena that is independent of individuals and their actions.  They treat income growth like it is a natural spring bubbling up from the ground, and a few piggy people have staked out places by the well and take all the water before the rest of us can get any.

Wealth and income growth comes from individual action.  Most rich people are getting more rich because they are intelligently investing and taking risks with their capital, applying the output of their mind to create new wealth.  There is no (none, zero, 0) economic correlation that says that if the rich get really rich, then there is less left over for the poor. 

Here is his solution:

Now, there's certainly no reason to reduce marginal tax rates on the hyper rich in an effort to make inequality even worse than it otherwise would be. But as unjustified as this is, tax cuts aren't the main issue. Median wages are. Focus government policy like a laser on improving the wages of the middle class, and reductions in income inequality will follow.

And how the hell does he suggest the government do that?  Seriously.  Can anyone tell me one single thing the government can do to improve middle class wages that does not involve tax policy?  Well, we can back into his solution from this paragraph where he lists things the government can do that are bad for the middle class:

Appoint members to the Federal Reserve who are obsessed with inflation and act to cool down the economy at the least sign that average hourly wages are rising. Make it harder to form unions in new industries, thus reducing the bargaining power of the working class. Support free trade agreements that put downward wage pressure on low-income workers. Support tax and deregulation policies that make middle class jobs less secure.

So presumably, his solution to increasing middle class wages is: 1) allow inflation to run at a higher rate 2) encourage unionization  3) adopt protectionist measures for uncompetitive industries and stifle free trade  4) increase regulation on businesses and reverse deregulation in industries (presumably like airlines and telecoms).

I'm no Julian Simon, but if we could structure a bet as to whether these policies would help real middle class wages, I would sure take the opposite side from Mr. Drum.

Here is my theory for what is going on, if you even accept that middle class income stagnation is real and not a symptom of our difficulty measuring the benefit of improving products and technologies.  I think much like technological advances from time to time in the past have caused restructurings in the labor market for blue collar workers, we are going through the same thing, really for the first time, with white collar middle class workers.  Technology and globalization offer all sorts of opportunities for companies, and the result is a real restructuring of how many types of white collar workers are used.  Until this restructuring is complete, wages may stagnate, since any wage pressure will just lead to companies implementing changes from their backlog of streamlining opportunities.

At some point we will work through this, and wages will rise again.  If anything, I think the government does damage by slowing this process down.  Note that nearly every one of Drum's suggestions would slow or stop this restructuring.  This is one of the ironies of progressives -- despite their name, what they don't like about capitalism is the change.   They want safety and predictability from the inherently unpredictable.  So protectionism slows global outsourcing, and also reduces the pressure for cost improvement.  Regulation tends to lock in current practices and make changes harder.  Ditto strong unions.

One of the reasons I like some of what Bill Clinton did was that in the early 90's, he faced tremendous pressure to take many of these same steps, trying to halt the economic restructuring that was occurring due to competition from Asia.  He didn't have the government step in, though, and he supported free trade, and the country thrived.  His fellow Democrats (including his wife) should learn from that.

update:  A real economist (unlike me and probably Paul Krugman) discusses inequality and unionization

update #2:  More real economists, this time the awsome guys at Cafe Hayek, pile on.

Why even bother to filibuster when you can put legislation on secret hold.  While this story is highly ironic, I suppose the Senator involved has to at least be credited with consistency in his/her opposition to transparency for putting a "secret hold" on a bill to increase the public's visibility of the earmark process:

Yet most Senators clearly have no desire to shine a light on their
spending practices, and at least one -- perhaps more -- has placed a
"secret" hold on the legislation. Normally the architects of these
holds are exposed within a few legislative days, but with Congress on
recess the masked spender has so far evaded capture and public scrutiny.

Porkbusters, a grassroots outfit that fights government waste, found
this untransparent move to stymie government transparency a bit rich,
and last week launched a campaign to unveil the blocker's identity. It
has asked its members to call on their Senators to disavow the hold,
and the responses are trickling in. The group, which is tracking the
results on its Web site (www.porkbusters.org), still has the pictures
of 91 Senators under its "Suspect" list. The nine Senators who have
denied placing the hold are now listed as "In the Clear"; they are
Senator Coburn, Barack Obama, Mary Landrieu, David Vitter, John McCain,
Ron Wyden, Richard Shelby, Jim Inhofe and Jeff Sessions.

If Congress insists on spending like there's no tomorrow, at least
the Members could let the voters see what they're spending it on by
passing Senator Coburn's reform. Will the real secret Senator please
stand up?

One of the ways I like to pass the time on long drives (we went to San Diego this week with the kids) is to listen to audio books in the car.  For this trip, my wife picked out Kenneth Davis's Don't know much About History.  This particular version had been edited down to a quick 3-1/2 hours.

Its of course impossible to edit American history down to this short of a time, but we thought it might be enjoyable for the kids.  Also, I am used to the general "America sucks and its heros suck too" tone of most modern revisionist history, so I was kind of prepared for what I was going to get from a modern academician.   But my God, the whole history of this country had been edited down to only the bad stuff.  Columbus as a source of genocide -- the pettiness of American grievances in the revolution -- the notion that all the ideals of the Revolution were so much intellectual cover for rich men getting over on the masses -- the alien and sedition acts -- slavery -- massacre of Indians and trail of tears -- more slavery -- civil war -- mistreatment of the South after the war by the North -- more massacre of Indians -- Brown vs. board of education -- the great depression as the great failure of laissez faire economics -- did Roosevelt know about Pearl Harbor in advance -- McCarthyism -- racism and civil rights movement.   All of this with numerous snide remarks about evil corporations and rich people and the never-ending hosing of the poor and women/blacks/Indians (often in contexts entirely unrelated to what he is talking about, such that the remark is entirely gratuitous).

That's as far as we have gotten so far, but I am really giving you a pretty honest outline of the segments.   I have zero problem admitting that America's treatment of its native populations was shameful and worth some modern soul-searching.  Ditto slavery.  But to focus solely on this litany, with nothing about the rising tide of standard of living for even the poorest, of increasing health and longevity, of the intelligent ways we managed expansion (like the homestead act), of having the wealth and power to defeat fascism and later communism in the 20th century when no one else could do it.  Of creating, in fits and starts and with many long-delayed milestones, the freest country in the world.  Of a history where every other democratic revolution of the 18th and 19th century failed and fell into chaos and dictatorship but this one succeeded.  He begins the book by saying that he is bravely going to bust all the myths we have grown up with, but in essence helps to reinforce the #1 myth of our era:  That America is a bad actor on the world stage and less moral than the countries around us.

Which of course, is insane.  And remember, I am the first one to criticize our government over any number of issues, but the moral relativism that academics apply to America represents a shameless lack of correct context.  To borrow from a famous saying, I am willing to admit that America has the most shameful history, except for that of every other country in the world.

Postscript: I don't even deny that a book with the premise that "schools and media often gloss over the bad stuff, so I want to let you know that America has a dark side too" would be a perfectly viable project.  However, this book represents itself as a general history text, and does not claim this particular mission as its context.  By the way, I am not sure what country he is living in if he thinks this stuff is not taught in schools.  My kids' schools totally wallow on all the bad stuff - the racism, the environmental problems, etc.  I would be willing to bet more graduates of public schools today could answer "Maintenance of slavery" to the question "what was the biggest failure of the Constitution" than they could answer the question "Why did the US Constitution succeed when so many other democratic revolutions failed?"  The latter is a much more interesting question.  Of course, in this audio book, predictably, Mr. Davis addresses the former in great depth and never even hints at the latter.

I am sure that, since I sort-of live in Scottsdale, you have all been waiting for me to comment on this:

  It started out small, with people all across the country nicknaming this city "Snottsdale."

Then came the reality television show about a local women's book club
where members spend almost no time delving into fine literature but
endless hours discussing Botox, marrying for money and the latest
fashions.

Soon after began the headlines about America's most
famous porn queen buying a Scottsdale strip club and the city's rapid
response: an ordinance that would prohibit dancers from being closer
than 4 feet from clients.

And then--as if all that hadn't been
enough--a guy from Las Vegas carpetbagged into town and opened a
restaurant named after a not-to-be-mentioned-in-polite-company part of
the female anatomy.

I say that I sort-of live in Scottsdale, because I actually live in neighboring Paradise Valley, another suburb of Phoenix, but since almost all the famous people listed in the article as Scottsdale residents actually live in PV, I guess I must count as Scottsdale too.

Anyway, here is my comment:  I think it is freaking hilarious.  Any city that actually spends tax money and chamber of commerce funds to advertise itself nationally as a rich enclave deserves what it gets.  If you try to advertise yourself as the next Beverly Hills 90210, you shouldn't be surprised when the media treats you like, well, Beverly Hills 90210. 

I will say that growing up in Houston and living in Dallas for years has somewhat immunized me to the hijinx of the tacky biologically-augmented nouveau riche.  While those who grew up in the Scottsdale that was the quiet horse town seem to be pretty bent out of shape by the town's new reputation, I don't see many of them complaining about the increases they have had of late in their real estate values.  And if the rich scene is more like Paris Hilton than like a Literary Lions Ball at the Met, well, at least it has some entertainment value.  (Though not too much, since CBS is cancelling their reality show).

The best feature of Scottsdale has to be school functions, because Scottsdale does lead the nation on the hot mom index.  I remember when we first moved here both my wife and I were floored at the women at the first school function we attended.  Heck, I still volunteer to drive the kids to school in the morning.  And don't even get me started about women at the Phoenix Open -- there is a reason the tournament is still a favorite among tour players despite the roudy crowds.

In conclusion, returning to the article, I couldn't have said it better than this:

"Oh, get over it," she said. "So what
if people want to make fun of us? Every city has its own particular
brand of strangeness. For some it may be gangs or drugs or troubled
youth. We just happen to have some over-Botoxed blonds with oversexed
tendencies."

Anyone who actually believed that McCain-Feingold was about cleaning up politics rather than just protecting incumbent political jobs can now disabuse themselves of that notion.  It has become clear that election finance laws are pure Machiavellian politics, passed by those who think it will work to their benefit (ie help them in the next election) and opposed by those who think they will be hurt by it.  Principle almost never plays a part any more.

On April 5, House Republicans voted to limit the speech of 527 groups, who up until now were exempt from McCain-Feingold speech restrictions.  Republicans generally supported the restrictions, despite years of saying that money does not tarnish politics, because, well because Democrats were better last election than Republicans at raising money via 527's.  Democrats, who historically as a party have supported campaign finance and speech restrictions and eagerly voted for McCain-Feingold, oppose the legislation for no principled reason except that 527's are working for them.  Democrats will therefore likely prevent this bill from passing the Senate.

George Will has a nice column lambasting the Republican Congress:

If in November Republicans lose control of the House of
Representatives, April 5 should be remembered as the day they
demonstrated that they earned defeat. Traducing the Constitution and
disgracing conservatism, they used their power for their only remaining
purpose -- to cling to power. Their vote to restrict freedom of speech
came just as the GOP's conservative base is coming to the conclusion
that House Republicans are not worth working for in October or
venturing out to vote for in November.

The "problem" Republicans
addressed is that in 2004 Democrats were more successful than
Republicans in using so-called 527 organizations -- advocacy groups
named after the tax code provision governing them. In 2002 Congress
passed the McCain-Feingold legislation banning large "soft money"
contributions for parties -- money for issue-advocacy and
organizational activities, not for candidates. In 2004, to the surprise
of no sensible person and most McCain-Feingold supporters, much of the
money -- especially huge contributions from rich liberals -- was
diverted to 527s. So on April 5, House Republicans, easily jettisoning
what little remains of their ballast of belief in freedom and limited
government, voted to severely limit the amounts that can be given to
527s.

He captures a priceless quote that gets at the heart of why Congressional incumbents love these campaign finance laws:

Candice Miller (R-Mich.) said that restricting 527s would combat
"nauseating ugliness, negativity and hyperpartisanship." Oh, so that is
what the First Amendment means: Congress shall make no law abridging
freedom of speech unless speech annoys politicians.

Props, by the way, to my Representative John Shadegg for his no vote, as well as to my favorite Congressman Jeff Flake, who voted no as well.

Congrats to John Scalzi for his Hugo nomination for "Old Man's War".  I hope he wins.  I read a lot of science fiction including several of the other nominated books but Old Man's War was one of those instant classics, a book that 25 years from now could easily be included in a best of science fiction series.  I also have to agree with Glenn Reynolds on the accesability of his work.  If I wanted to get someone excited about science fiction, I would likely hand them "Enders Game", "The Foundation", and "Old Man's War"*.  I just finished Vernor Vinge's "Deepness in the Sky", which was awesome.  It and his previous book "Fire Upon the Deep" are beautiful and rich and deep and textured masterpieces, but I would never hand them to a SciFi first-timer.  SciFi needs writers who bring the general population back to SciFi, and Scalzi along with Card and a few others will certainly help.

* Honestly, if you rank yourself as someone who hates or just doesn't read science fiction, give just one or two of these three a try.  Scifi is not all cute robots and Imperial Star Destroyers.  And for those looking for the next step beyond these books for more hard-core stuff I might suggest classics like "Mote in God's Eye", "Ringworld",  "Dune", or about anything by Louis McMaster Bujold.  After that, your ready for anything, from Charles Stross to Harlan Ellison (the latter if you want a good downer).

I was stuck in the airport at Salt Lake City on Sunday for a bit due to a large snowstorm** and I was trapped watching the CNN airport channel (which certain airports make unavoidable -- you can't get away from the TV's in a way reminiscent of a variety of distopian novels).  Anyway, I heard some discussion about differences between poor and rich nations, and all the usual easy-to-prove-false memes came out to explain the differences.  Natural Resources:  So why do resource-rich Russia and sub-Saharan Africa do so poorly?   Colonialism:  How do you explain Hong Kong, Australia, and Canada?  Exploiting labor:  So why aren't the most populous countries the richest?  Luck:  How do countries like Haiti have so consistently bad luck for over 200 years?

So here is Coyote's First Theorem of Wealth Creation, first expounded in this post on the zero-sum economics fallacy:

Groups of people create wealth faster in direct proportion to the degree that:

1. Their philosophical and intellectual
   culture values ordinary men (not just "the elite", however defined) questioning established beliefs and social patterns.  This is as opposed to having a rigid orthodoxy which treats independent thinking as heresy.
2. Individuals, again not just the elite, have the ability through scholarship or entrepreneurship to pursue the implications of their ideas and retain the monetary and other rewards for themselves.  This is as opposed to being locked into a rigid social and economic hierarchy that would prevent an individual from acting on a good idea.   

China, for example, just by cracking open the spigot on #2, however inadequately, has gone from a country with mass starvation in three or four decades to one where the worry-warts of the world are scared of juvenile obesity.  To a large extent, this theorem is really just a poor restatement of Julian Simon's work.  Simon's key point was that the only relevant resource was the human mind, from which all wealth flows.  All I have done is break this into two parts, saying that to create wealth a society has to value the individual's use of his mind and has to allow that individual free reign to pursue the products of his thinking.

One of the applications where I think this is useful is to explain the great millennial hockey-stick curve.  No, not the temperature hockey stick, which purports to show acceleration of global warming, but the wealth curve.  The world's growth of per capita wealth was virtually flat for a thousand plus years, and then took off in the 19th and 20th centuries.  I previously explained this hockey stick using my wealth creation theorem:

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
2. 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.  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. 

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.

Update:  This article from Frank Moss, linked at Instapundit, takes these same concepts forward into the future.

What role will startups play in the future?

I see tremendous economic growth from startups from 10 years ago.
Entrepreneurs will go from the 1,000 startup ventures funded in the
last 10 to 20 years to ideas coming from people working together in
network-based environments, using computers to dream up innovations in
a way they never did before. It could be people in developing countries
with low-cost computers.

You talk about education and the bottom-up effect that millions
more people will play in societal advances. How do you see this
unfolding?

We will undergo another revolution when we give 100 million kids a
smart cell phone or a low-cost laptop, and bootstrap the way they learn
outside of school. We think of games as a way to kill time, but in the
future I think it will be a major vehicle for learning.

Creative expression (is another area). No longer will just a few
write or create music. We will see 100 million people creating the
content and art shared among them. Easy-to-use programs allow kids to
compose everything form ringtones to full-fledged operas. It will
change the meaning of creative art in our society.

We are already seeing early signs of it in blogs. The source of
creative content is coming from the world. That revolution will go well
outside of the written word to all forms of visual and performing arts.

** Kudos by the way to the SLC airport - when I drove in, I couldn't see 10 feet in front of me on the road due to the snow, and I was sure that I would be trapped for the day.  Living in Phoenix, where air traffic is backed up if someone sneezes on the runway, I didn't think any planes would be landing and taking off for hours.  In fact, operations continued right through the blizzard, and my flight was delayed less than an hour, including de-icing time.  Amazing.  Now if only the SLC airport could increase their security capacity - its only been, what, 4.5 years since 9/11 and most airports seem to have licked this problem.