Coyote Blog

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

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

The (Incorrect) Physics Analogy

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

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

Wealth Is Demonstrably Not Zero-Sum

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

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

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

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

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

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

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

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

The (Correct) Physics Analogy

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

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

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

The Human Mind Has Huge Potential Energy

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A Framework For Wealth Creation

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

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

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

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

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

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

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

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

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

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

From Michael Cannon at Cato:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

I conclude with this from Sugg's piece:

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

From Glen Wishard:

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

-----0-->0-----

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

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

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

I don't have any particularly intelligent analysis of the SCOTUS's upholding the constitutionality of a partial birth abortion ban, so I won't offer any.

However, I have a question for women's groups.  Groups like NOW support the federal government's constitutional right to ban breast implants,and in fact call for such a ban on the NOW web site.  Simultaneously, they oppose the federal government's constitutional right to ban partial birth abortions.

My question is:  How can you reconcile these two views?  Aren't these two procedures similar enough (both are elective medical procedures that are invasive of a woman's body) to be Constitutionally identical?  I understand that from a social conservative's point of view that the abortion procedure might warrant more legal attention if you believe there is a second life (ie the fetus) involved here.  But how do you justify that the feds should have more power to regulate and ban boob jobs than they have to ban one type of abortion?  And please, don't justify it because you think abortion is serious but breast implants are frivolous  Those are legislative and political arguments about what should and should not be done with the fed's power, not Constitutional arguments about what that power actually is.

The women's groups' application of their "its our body" and "pro-choice" positions have always struck me as incredibly selective.  It's a woman's choice to weigh the risks and benefits of an abortion, but apparently it's the government's choice to weight the risks and benefits of breast implants.  I wrote more about this selective libertarianism when I made a plea for applying the privacy and choice logic of abortion supporters to all aspects of government regulation.  I criticized NOW for another instance of selective libertarianism associated with government and women's bodies when NOW supported having the government limit a woman's choice to use Vioxx to relieve pain.

Here's the deal:  We need a gender-neutral third person pronoun.  I am tired of all the awkward constructions I have to concoct to use his or her in a grammatically correct and gender neutral fashion. 

I fully support the use of "they" and "their" as singular third-person pronouns, as in "Each person should bring their pencil" rather than "Each person should bring his or her pencil."  Unfortunately, this is not correct grammar today, so I just spent a few hours purging they's and their's from a draft novel.  However, English is a language that has always been open-source and bottom-up (in contrast to French).  Usages such as this tend to work their way into the language, as dictionary writers for the English language have generally considered themselves catalogers of the English-that-is rather than dictators of the English-that-should-be  (the book the Professor and the Madman is highly recommended).

XKCD took on this topic a while back.

It used to be that Instalanches were the gold standard for blowing out your server bandwidth.  An Instalanche occurred when Glenn Reynolds (or one of the other super-large bloggers) pointed his enormous traffic to an article of interest in some small blog.  The results were sortof like hooking your transistor radio to a high-tension power line.  This was the traffic chart from my first instalanche.

Today, most of my huge traffic spikes come when an article of mine moves up high on reddit or stumbleupon or del.icio.us  (I don't remember ever getting much from digg).  Right now my article on water pricing is on the front page of reddit, and the traffic spike is enormous. 

"Consensus" is an absurd word to apply to science.  It is more accurate to say that we have a series of hypotheses about the universe with varying levels of confidence.  LuboÃ…¡ Motl has a post to get all you physics geeks arguing:  His estimate of the probability certain hypotheses about the universe are correct.  Some examples:

• 99.999% - String theory is a mathematically consistent theory
  including quantum gravity, even non-perturbatively, at least in some
  highly supersymmetric vacua
• 99.999% - General relativity
  correctly predicts phenomena such as frame dragging and classical
  gravitational waves in the real world
• 99.995% - Black holes exist  ...
• 60% - At very high energy scales, a GUT theory with unified gauge
  interactions becomes more natural zeroth approximation: GUT is correct
• 50% - Supersymmetry will be found at the LHC
• 40%
  - The Hartle-Hawking wavefunction or its generalization that will
  require the author(s) to cite Hartle and Hawking correctly predicts
  non-trivial features of the initial conditions of the Universe...
• 0.0001% - Loop quantum gravity, with the metric as the only and
  well-defined degree of freedom and with quantized area, is a correct
  description of gravity in the real world at the Planck scale
• 0.00001%
  - One of the ESP phenomena measured in the Princeton lab actually
  exists and can be measured again with a similar equipment

Many more here.

Here are some of my own:

• 95% - Probability that the Raiders, Browns, and Lions will all botch their first draft picks next weekend
• 85% - Probability someone will introduce legislation in Congress in the next 7 days in direct response to the Va Tech shooting rampage
• 80% - Probability that man-made CO2 is contributing a non-zero effect to global temperature
• 70% - Probability that Barry Bonds will break the home run record this season
• 60% - Probability that Prince Charles will ever serve as King of England
• 50% - Probability that all-electric vehicles will make up more than 10% of the auto market in the US in ten years
• 5% - Probability that man-made CO2 will contribute more than 2 degrees C warming in the next 50 years
• 5% - Probability of meaningful earmark reform getting passed in Congress
• 5% - Probability that ethanol or other bio fuels will make any measurable reduction in oil imports.
• 1% - Probability that the costs of CO2 reduction will be less than the benefits of CO2 reduction
• 1% - Probability that a true libertarian candidate will be elected president in the next 20 years

I am reading a speech by Michael Mann, the author of the now famous climate hockey stick, which has been criticized by statisticians and climatologists alike.  In particular, I am fascinated by the claim that "there is a 95 to 99% certainty that 1998 was the hottest year in the last one thousand years."

Forgetting the problems with his analysis, and forgetting all the other evidence that we have that in the Medieval warm period, the earth was probably hotter than it was today, just look at that sentence on its face.  Is there any other context where we would take a scientists near certainty about the value of a climate variable 500 years before man even started measuring it as anything but quackery?  If there was a way to reasonably bet against the proposition that 1998 was the hottest year of the millennium, I would do so even as a 1:1 proposition, but would leap at the chance to take the bet at 20:1 or 100:1 odds, which is essentially what Mann is proposing when he says he is 95-99 percent certain.

Apparently the next "crisis" is that America is running out of water.  This is mostly an issue in the west, where growth is high and fresh water is rarer than in the east.  Here is one example of the brewing panic:

The growing human population is creating cities where desert or scrub
land used to be. Rainfall always has been and always will be in short
supply. Only so much water can be diverted from rivers to satisfy the
water needs of these desert dwellers. The aquifers are being drained.
Soon there will be demands to divert water from large inland lakes like the Great Lakes which would put those bodies of water in peril.

Oh my god, I can see it now - fish flopping on the muddy exposed bottom of Lake Michigan.

Look, the problem is not lack of water.  The problem is lack of market sanity.  Water in the west is regulated and sold in a hodge-podge of complex arrangements and negotiations.   The whole system is too complex to describe here, but at least one general conclusion can be safely drawn about the whole system:  Water is under-priced.   

For reference, lets look at my home city.  If building cities in the desert is the new evil, then I live in that great Satan called Phoenix.  And while my electricity charges are enough to get my attention (higher efficiency AC: check; compact fluorescent bulbs: check; solar: still too expensive), my water bill seldom grabs my focus.   

And now I know why.  Check out this analysis, conducted apparently by the city of Austin but which I found on the Portland Water Bureau's web site:

Can you believe it?  We here in Phoenix, out in the middle of the largest desert on the continent, during a multi-year drought (yes you can still have a drought in the desert), while everyone laments that Lake Powell and other reservoirs are getting sucked dry, Phoenix has one of the lowest water prices of any city in the country.  Can you get over the irony of Seattle having some of the highest priced water in the country and Phoenix the lowest?

And you know what - I have not seen a single article in any of our local media that has once mentioned this fact.  Look here -- the articles blame global warming and lack of conservation and development and too many lawns and not enough low-flow faucets and talk about the need for government rationing, but never once mention PRICE.  We have the scarcest water in the country and one of the lowest prices for water.  Talk about ignoring the elephant in the room.  I should have just labeled this post "Duh!"

And these are the consumer water prices.  The situation actually gets worse when you look at agriculture.  In most of the southwest, farmers get water prices subsidized below the rates paid by ordinary consumers.  When you combine these water subsidies with massive subsidies already rich groups get for growing crops in the desert from farm programs, you get an enormous distorted incentive to grow water-hungry crops that are totally inappropriate for the desert.

So here is my five minute plan:  We may be a ways away from creating an actual market in water, but in the mean time, the quasi-governmental agencies providing it need to raise the prices (to everyone) up to a level that demand matches supply.  More conservation will occur, and marginal commercial, residential, and agricultural development will disappear.  If the price goes high enough, someone may even go out and find a new, innovative source of water for the area. 

Unfortunately, this is just too dang easy, and, from reading recent articles in the media, not even in the menu of options being considered.  Government bureaucrats are much more comfortable with rationing and limitations on development, because it gives them more power and creates a new set of winners and losers who will donate more to future political campaigns.

Update: Daniel Mitchell at Cato has similar thoughts, based on water shortages in Florida of all places:

So here we are, in the spring of 2007, with rain below
average, with a low lake level, little else in the way of reservoirs,
and a water shortage. What is the response? Well, a rational response
might be to price a scarce commodity such that people will use it only
as they need it, and not frivolously. "¦Instead, we get the response of
the local commissars. So, not allowing the market to work, and not
allowing prices to provide signals to the participants, they have
decided to run our lives for us.

"¦I live at an odd numbered address. That means that if I want to
water my lawn, I can only do it on Monday, Wednesday and Saturday
mornings, from four to eight AM. I can water my plants with a hose on
the same days, but only between five and seven PM. My neighbors across
the street, and behind my house on the next block, get Sunday, Tuesday
and Thursday.

"¦Over thirty years ago, in the first OPEC oil embargo, the
government, rather than allowing prices to rise to account for the
reduced supply, told people when they could purchase gas based on the
parity of their license plate "” even one day, odd the next. My
recollection was that this did nothing to alleviate the shortage "” the
lines remained. The problem was only solved when Nixon-era price
controls on oil were lifted, the market was allowed to work, and oil
prices eventually (and it didn't take all that long) fell to historical
lows.

"¦[H]ere's a radical concept. How about pricing the commodity to the
market? Maybe, if people had to pay more for water to water their lawn,
they'd use less of it? Yes, I know that it's hard to believe, but there
really are some people out there who buy less of something if the price
is higher.

Update #2: The more I think of it, the more this situation really ticks me off.  In their general pandering and populism, politicians are afraid to raise water prices, fearing the decision would be criticized.  So, they keep prices artificially low, knowing that this low price is causing reservoirs and aquifers to be pumped faster than their replacement rate.  Then, as the reservoirs go dry, the politicians blame us, the consumers, for being too profligate with water and call for ... wait for it ... more power for themselves, the ones whose spinelessness is the root cause of the problem, to allocate and ration water and development.

With the northern victory in the Civil War, and the subsequent passage of the 13th amendment, slavery was formally ended in this country.  Specifically, the 13th amendment stated:

Neither slavery nor involuntary servitude, except as a punishment for
crime whereof the party shall have been duly convicted, shall exist
within the United States, or any place subject to their jurisdiction.

Unfortunately, over a century later, slavery has returned to the United States.  Today, through the exercise of political power and the redistribution of wealth that should never have been Constitutional, 55% of Americans hold the other 45% in bondage, living off the product of their efforts just as surely as the white plantation owners of the Old South lived off the sweat of their African slaves.  The basis for this new servitude, however,  is not race, or religion, or national origin, but productivity. (via TJIC)

From the Christian Science Monitor:

Slightly over half of all Americans - 52.6 percent - now receive
significant income from government programs, according to an analysis
by Gary Shilling, an economist in Springfield, N.J. That's up from 49.4
percent in 2000 and far above the 28.3 percent of Americans in 1950. If
the trend continues, the percentage could rise within ten years to pass
55 percent, where it stood in 1980 on the eve of President's Reagan's
move to scale back the size of government.

Meanwhile, Ari Fleischer writes in today's WSJ (sub req) that the
top 1% of income earners pay 37% of total income taxes, the top 10% of
income earners pay 71% of total income taxes, and the top 40% of income
earners pay 99% of total income taxes.

The latter analysis is a bit off because it does not include payroll taxes, but if you include these taxes you still have under 50% of Americans paying virtually all the taxes (table at top of this page includes payroll taxes) 

The second greatest failing of the Constitution as originally drafted (the first being legality of slavery) is the lack of clear protections for property and commerce.  As a result, the only protection we have against full confiscation of everything we own is the whim of the electorate.  Now that a clear majority of voters are on the receiving end of money confiscated from a minority of voters, how good is this last protection? 

We have become a nation of slaveholders, with the majority holding the productive minority in bondage.  Inserting government in the middle of this process as an agent, so the recipients of this slave labor don't have to get their own hands dirty, does not change the nature of the relationship one bit.  It just pretties things up for our conscience.

Update:  Is the word "slavery" over the top?  Maybe, and I guess I could be accused of trivializing the true horrors of African slavery in the 19th century.  So substitute the word "serfdom" for "slavery". 

Arizona is taking another typical step to protect incumbent businesses against new competitors:

"Arizona regulators have ordered a Seattle-based online home price estimator to stop doing business in the state." Zillow.com
has won wide popularity by applying algorithms to publicly available
data to come with rough estimates of the value of existing homes, which
it makes available for free through its site. The Arizona Board of
Appraisal says that Zillow should not be dispensing such information
without an appraiser's license.

Gee, we'd hate to give people the impression that a whole profession could be replaced by a few computer algorithms and some data base lookups.   I am not sure why, historically, but state governments have an incredible propensity to protect everyone in the real estate field from competition.  For years they have enforced licensing on real estate agents to help support that cartel that the Internet is only just now starting to break up.

By the way, here is another way you could write the headline for this news:  "Arizona Bans Giveaways.  Consumers Must Pay for Everything."  Oh, and my neighbor just sold his house.  The final price he got was within 4% of the Zillow estimate.  I will say that from the houses I am familiar with, they do a pretty good job (though I am sure they make mistakes, for example in neighborhoods with a lot of gentrification and a mix of old and new homes). 

One of the difficulties that climate scientists face is that it is not that easy to come up with a single global temperature.  Before satellites, with limited measurement points and 75% of the world under water, global temperature is not much more than a guess.  With satellites, the job is easier but not wholly straight-forward.

Spencer and Christy have been using NASA data for a while to try to compute a global temperature, and have released new results  (the top graph is the whole earth, the second is the northern hemisphere, the third is the southern hemisphere):

The first oddity is one that the climate community struggles with but downplays in public.  It is that increases in these tropospheric measurements should be, if the theory of CO2-based anthropogenic global warming is correct, higher than temperature increases observed on the ground.  In fact, just the opposite is true.  Why ground temperatures increases should be higher than troposphere increases is something no explained by the standard greenhouse models (but is explained by alternatives).

The second oddity is the difference between the northern and southern hemispheres.  As you can observe, there really has not been any warming in the last decades in the south.  Why should that be?  One might assume it is because CO2 is produced mainly in the northern hemisphere, but my understanding is that scientists a while back determined that there was incredibly good mixing in the atmosphere and that CO2 concentrations don't vary that much around the globe.  I know that the northern hemisphere tends to have more temperature variability at the ground, since it has more land and land heats and cools faster than over the sea, but I am not sure this is sufficient to explain the difference.

Newsweek:

The press needed there to have been a rape to keep the story going. It
was much too dull to consider that the lacrosse players deserved the
presumption of innocence.

Of course, there is nothing new under the sun, as I am sure you could find the same problem 100 years ago.  But it does give one perspective when the MSM tries to go all high and mighty on us, particularly the always arrogant NY Times, which cheer-led the virtual lynching and went out of its way to prop up the failing DA's case when nearly everyone else was starting to see the holes in it.  The Rutgers basketball team got an apology from the media figure that slighted them.  Don't expect the same treatment for the Duke boys.

One of the urban legends of the civics world is that is some project really requires investment for the long-term, the government needs to do it since private companies are too short-term profit focused. 

Over a series of posts, I have been showing just how terrible state run companies are at making long-term investments compared to private companies.   I showed the Mexican state oil company eschewing investment in favor of bloated patronage-based payrolls and social spending, and the nationalized Venezuelan companies doing the same thing.  What you see in both cases is that the state run oil companies are particularly bad at making investments to maintain production, investments that can be huge in the oil business.  Leftists have convinced themselves that oil companies make a fortune with little or no work, that oil extraction is kind of like clipping coupons.  But the maintenance of any infrastructure is hugely expensive, and takes a discipline and focus that the state does not have.  Belatedly, some of them are learning that producing oil takes real work and constant re-investment.  It bizarrely reminds me of Carl talking to Vernon in the Breakfast Club:
"You took a teaching position, 'cause you thought it'd be fun, right?
Thought you could have summer vacations off...and then you found out it
was actually work...and that really bummed you out"

But I don't want to imply that this is just a poor-country, banana republic problem.  Defenders of big government in the US will say that government can do all these things just fine, if only you have the right people in charge.  But under-investment in public assets, particularly in refurbishment, is a constant problem in the US as well.  Every Senator likes to get his name on building a new facility, but you don't get your name on a maintenance contract, so lots of things get built by the government but few get maintained.  Disney would never let its parks get as run down as the government
allows its public parks to get.  Wal-Mart (like most retailers) virtually rebuilds its stores every
twenty years, and would never let its infrastructure get as run
down as, say, the average US post office.

So I take as my example the Washington Metro system, one of the highest-profile public infrastructure projects in the country:

The Metro Rail system was built with federal dollars, with the
understanding that local governments would pay for its operation. But
no one was prepared to pay for rail reconstruction, which is
needed every 30 years or so and which costs a substantial fraction of
the original construction cost. Now, some of the system is approaching
30 years of age and is breaking down with increasing frequency.

The article, by Randal O'Toole of Cato, goes on to show another example of this same mindset:

Meanwhile, everyone is trying to ignore the gorilla in the corner,
which is that VTA's board wants to spend $4.7 billion to connect the
San Francisco BART system to San Jose. The agency only has enough money
to build to the edge of San Jose, but even if it had all the money for
construction, its general manager admits "we clearly do not have the money to operate the system." Nevertheless, the board recently voted to spend $185 million "” more than half of VTA's annual operating budget "” on preliminary engineering.

Meanwhile, VTA is still short on operating funds, so it is contemplating "eliminating or consolidating" service on more than a quarter of its remaining bus lines.

Yesterday was apparently the 300th birthday of Leonhard Euler, one of the greatest mathematicians of all time and perhaps the greatest that the average layman has never heard of. 

Euler is responsible for so much that is still important to modern mathematics it is hard to pin down his greatest achievement, but most will point to his famous equation that was sort of the unified field theory of mathematics, describing a relationship between all five of math's most important numbers:

I learned something the other day that might be interesting to you business and finance folks out there -- the constant "e" was first described by Jacob Bernoulli when he was studying compound interest rates.

Jacob Bernoulli discovered this constant by studying a question about compound interest.

One simple example is an account that starts with $1.00 and pays
100% interest per year. If the interest is credited once, at the end of
the year, the value is $2.00; but if the interest is computed and added
twice in the year, the $1 is multiplied by 1.5 twice, yielding $1.00×1.5² = $2.25. Compounding quarterly yields $1.00×1.25⁴ = $2.4414"¦, and compounding monthly yields $1.00×(1.0833"¦)¹² = $2.613035"¦.

Bernoulli noticed that this sequence approaches a limit for more and
smaller compounding intervals. Compounding weekly yields $2.692597"¦,
while compounding daily yields $2.714567"¦, just two cents more. Using n as the number of compounding intervals, with interest of 1/n in each interval, the limit for large n is the number that came to be known as e; with continuous compounding, the account value will reach $2.7182818"¦. More generally, an account that starts at $1, and yields $(1+R) at simple interest, will yield $"‰e^R with continuous compounding.

In the 20th century, we have gotten in a mind set that math is this strange discipline that lives purely out in the theoretical either.  But we forget that a lot of modern math was invented to solve real-world problems.  Newton invented calculus (yeah, I know, I haven't forgotten Liebnitz) to solve planetary motion problems, and it turns out "e" was invented to work with interest rates.

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.

Sometimes industries get nationalized, and they seem to do OK, at least for a while.  Sometimes when countries go socialist, and they appear to function well, at least at first (Sweden, for example, was held up as a model for a while).  I had a couple of thoughts on this topic as we seem to be at the precipice of nationalizing the health care industry in this country:

• Among some, the work ethic dies hard.  Medicine is a great example.  Because of how difficult it is to become a doctor in this country, the medical profession attracts very few people with poor work ethics.  One can see these folks continuing to work hard, even under socialized medicine where many of the incentives to do so have been taken away.  It can take a whole generation for socialism to kill the work ethic in an industry, but when it finally does so, the effect is dramatic.  For example, doctors in the US see 60% more patients in a day than doctors in countries with socialized medicine (ie everywhere else).  Eventually, though, the highest talent, most motivated people move on to other industries or occupations where their hard work is rewarded, and are replaced by a new generation of workers who are attracted to a job where only attendance (and sometimes not even that) is required.
• Incentives can work quickly, or they can take a while to operate.  Some incentives can work quickly -- for example, if on any given day, the government were to decide to cap gasoline prices twenty percent below the market level, we would see gasoline lines in less than a week.  On the other hand, the welfare program of the late 1960's provided incentives for out-of-wedlock births that took 20+ years to reach its peak.  Beyond the moral failures of socialism, one** of its practical failures revolves around incentives.  Customers get subsidized products or services, forgetting that that this will cause people to use more than is available.  Employees don't get rewarded for merit or hard work, but the system is constructed such that it won't work without these.
• Assets and capital equipment act like a storage battery.  Businesses that are purely human, like a restaurant, you can screw up in a week.  I think everyone has had the experience of going to a service business under new management and being really disappointed.  Capital-intensive businesses, particularly extractive ones, can be looted for decades by kleptocratic governments.   Even so, the game can't go on forever.

What drives me most crazy is when socialism's advocates answer criticisms about socialism's consistently dismal long-term results by saying "but it will work if only we can get the right people in charge" (usually this means the speaker and his/her cronies).  If you are a Star Trek fan, you will understand why I call this the "John Gill Fallacy."  As I wrote before:

Technocratic idealists ALWAYS lose control of the game.  It may feel
good at first when the trains start running on time, but the
technocrats are soon swept away by the thugs, and the patina of
idealism is swept away, and only fascism is left.  Interestingly, the
technocrats always cry "our only mistake was letting those other guys
take control".  No, the mistake was accepting the right to use force on
another man.  Everything after that was inevitable.

** Other failures of socialism include this.  And this:

You can't make better decisions for other people, even if you are
smarter, because every person has different wants, needs, values, etc.,
and thus make trade-offs differently.  Tedy Bruschi of the Patriots is willing to take post-stroke risks by playing pro football again I would never take, but that doesn't mean its a incorrect decision for him.

I am still getting the hard sell from cold-callers touting securities.  I am told this is because we small business owners are just behind dentists and doctors in terms of our capacity to make bonehead investments.

Before I proceed with this story, there are two things you need to know about me:

• I answer my own phone at the office
• I have never, ever listened to a sales pitch for an investment or security.  If I am in a good mood, I interrupt and say, "sorry, not iterested" before they can even name the stock.  If I am in a bad mood, I just hang up.

So the other day, I accidentally let one of them go further than I usually allow.  He said he was from Olympia Asset Management.  (There is an Olympia Asset Management web page, but I don't know if it is the same company and the web page has not been updated for several years.)  I let him run for a bit because a friend of mine runs a very well-respected financial planning firm with a different name but also with Olympia in the title, and for a moment I thought it might have been one of his folks.

Anyway, he proceeds to try to convince me that we have talked before and discussed a certain security.  "Remember me, we talked six months ago about ____".  Of course, I had never heard of the guy.  At this point I usually hang up, because I have heard this crap before -- it is a common pitch.  The best I can figure is that they are trying to give themselves more credibility by either:

1. Trying to imply that we have some kind of relationship we actually don't have.  Or worse...
2. Trying to convince me that he touted stock A six months ago, so now he can tell me stock A has gone up in price.  Many reputable brokers built their reputation by cold calling people and saying:  Watch these 3 stocks and see how they do and I will call you back in 6 months.  That way, you can evaluate their stock picking without risk.  The modern sleazy approach is to pick a stock that has gone up a lot in the last 6 months, and then call some harried business person and pretend you called them with that pick 6 months ago, hoping that they will give you the benefit of the doubt.

For some reason, maybe because I was bored, I decided to chat with him, and I had to admit that he was trained pretty well never to give up.  I interrupted him after the "do you remember" opening and said that we could not possible have spoken about a stock, because I always hang up on people within 5 seconds of knowing it is a stock pitch.  He said he had sent me a packet of information.  I said that he had not.  He insisted that we had talked, and that I had promised to write down the name of the stock on my calendar.  I told him I don't have a calendar  (which is actually true - I manage myself through a dysfunctional combination of memory and post-it notes).  Sensing weakness, I turned on him and said "gee, I was out of town a lot 6 months ago and am surprised you got hold of me.  What date did you call."  Then he starts getting all vague on me.  Anyway, I finally tired of the game and hung up but he never relented in his assertion that he and I had had a nice chat about some security.

Please, please.  Avoid these guys on the phone like the plague.  Several years ago I had a guy call me with some oil drilling "opportunity."  In that case, I also made an exception to my rule and listened to see just how bad this thing was going to be.  Finally I broke in and said "that's ridiculous, no one in their right mind would send you money for that."  He too was relentless, until I finally said "Look, I know Tony Soprano is standing behind you in the boiler room there and putting pressure on you, but I am not interested."  Then, without a pause, he starts telling me how he once threw a Molotov cocktail into the car of someone he didn't like.  I don't know if he was just having fun with me, but he was either wildly unprofessional or very creepy.  Beware, Beware, Beware.