Coyote Blog

If you were getting investigated by the IRS, and you gave the IRS the answers that they have been giving the public over Lois Lerner's and others' lost emails, do you think that the IRS would accept your answer?

By the way, a system crash that makes a hard drive totally unreadable is just vanishingly rare nowadays.  It is possible to corrupt certain system files in the root that will make it impossible to log on to the computer or access the hard drive files normally, but they are still there.  Something with the hard drive's motor or read heads could fail, but the data is still there.  Even if you highlighted every file in your hard drive and hit the delete key, they are still there.  When you hit delete they are taken out of the file directory and may get overwritten if you add new data to the computer, but without special software, it is actually hard to totally delete files (this is why you have to be careful when you donate or dispose of computers).  It actually can take the better part of an hour to really remove all files from a hard drive so that they are unrecoverable.

Given all this, I think the odds are that 6 or 7 computers of a group of senior leaders in the same office all crashed at roughly the same time in a way that wiped out all the data from their hard drives such that all data would be unrecoverable is simply beyond credulity.

Actually trying to understand how those you disagree with think, rather than just accepting some straw man version, can make one a much better debater.  Bryan Caplan's ideological Turing test is not just about empathy and being open to opposing arguments, but it also pays dividends in making better arguments for one's own positions.  I love how Jesse Walker begins his pitch to Conservatives against the death penalty:

The typical conservative is well informed about the careless errors routinely made by the Internal Revenue Service, the U.S. Postal Service, and city hall. If he's a policy wonk, he may have bookmarked the Office of Management and Budget's online list of federal programs that manage to issue more than $750 million in mistaken payments each year. He understands the incentives that can make an entrenched bureaucracy unwilling to acknowledge, let alone correct, its mistakes. He doesn't trust the government to manage anything properly, even the things he thinks it should be managing.

Except, apparently, the minor matter of who gets to live or die. Bring up the death penalty, and many conservatives will suddenly exhibit enough faith in government competence to keep the Center for American Progress afloat for a year. Yet the system that kills convicts is riddled with errors.

As most of you may know, our company privately operates public parks.  Just before Memorial Day, our largest contract (which covers a lot of our overhead) was shut down by a fire in the Sedona area.  Since that time, our landlord the US Forest Service has announced it is going to keep all of these locations closed indefinitely out of fear of flash flooding (fire-damaged hillsides create a lot more runoff in eve light rain due to loss of ground cover and chemical changes in the soil that make it less permeable).  I think they are over-reacting, but it is not my decision to make.

The result of this is I have been in total operational scrambling mode and may remain so for a while, reducing the amount of blogging I do.

Grade inflation is back in the news, as the Harvard Crimson reports that the median grade at Harvard is an A-.  This is clearly absurd.  It reminds me of some of the old Olympics judging where they had a 10 point scale but everyone scored between 9.7 and 9.9.  The problem is not necessarily that the mean is skewed, but that there is almost no room left to discriminate between high and low performance.

There is one potential way to combat this, and it was invented by colleges themselves.  Consider grading in high school.  My kids go to a very tough-grading private school where A's are actually hard to get.  The school sends (for Arizona) a fairly high percentage of its students to Ivy and Ivy-level schools, but the school produces someone with a perfect 4.0 only once every four or five years.  Compare that to our local public school, that seems to produce dozens of perfect 4.0's every year -- in fact since it adds a point for honors classes, it produces a bunch of 5.0's.

Colleges understand that a 3.7 from Tough-grading High may be better than a 5.0 from We-have-a-great-football-team High.  They solve this by demanding that when high schools provide them with a transcript, it also provide them with data on things like the distribution of grades.

Employers should demand something similar from colleges.  This is a little harder for employers, since colleges seem to be allowed to legally collude on such issues while employers can get sued over it.  But it seems perfectly reasonable that an employer should demand, say, not only the student's grade for each class but also the median and 90th percentile grades given in that same class.  This will allow an employer to see how the school performed relative to the rest of the class, which is really what the employer cares about.  And schools that have too many situations where the student got an A, the median was an A, and the 90th percentile was an A may get punished over time with less interest from the hiring community.

One way to get this going is for an influential institution to start printing transcripts this way.  The right place to start would be a great institution that feels it has held the line more on grade inflation.  My alma mater Princeton claims to be in this camp, and I would love to see them take leadership on this (the campus joke at Princeton during the Hepatitis C outbreak there was that at Harvard it would have been Hepatitis A).

Postcript - An alternate grading system from Harvard Business School:  When I was at HBS, they did not give A's and B's.  We had three grades called category I, II, and III.   By rule, the professor gave the top 15% of the class category I, the bottom 10% category III, and everyone else got a category II.  I actually thought this was a hell of a system.  It discriminated at the top, and provided just enough fear of failure to keep people from slacking.

Charles Frank of Brookings has looked at the relative returns of various energy investments in the context of reducing CO2.  The results:  The best answer is natural gas, with nothing else even close.  Solar and Wind can't even justify their expense, at least from the standpoint of reducing CO2.  Here is the key chart (Hat tip Econlog)

Note that this is not a calculation of the economic returns of these types of power plants, but a relative comparison of how much avoided costs, mainly in CO2 emissions (valued at $50 per ton), there are in switching from coal to one of these fuel sources.  Natural gas plants are the obvious winner.  It remains the winner over solar and wind even if the value of a ton of CO2 is doubled to $100 and both these technologies are assumed to suddenly get much more efficient.   Note by the way that unlike wind and solar (and nuclear), gas substitution for coal plant yields a net economic benefit (from reduced fuel and capital costs) above and beyond the avoided emissions -- which is why gas is naturally substituting right now for coal even in the absence of a carbon tax of some sort to impose a cost to CO2 emissions.**

I was actually surprised that wind did not look even worse.  I think the reason for this is in how the author deals with wind's reliability issues -- he ends up discounting the average capacity factor somewhat.  But this understates the problem.   The real reliability problem with wind is that it can stop blowing almost instantaneously, while it takes hours to spin up other sorts of power plants (gas turbines being the fastest to start up, nuclear being the slowest).  Thus power companies with a lot of wind have to keep fossil fuel plants burning fuel but producing no power, an issue called hot backup.  This issue has proved itself to substantially reduce wind's true displacement potential, as they found in Germany and Denmark.

There is no evidence that industrial wind power is likely to have a significant impact on carbon emissions. The European experience is instructive. Denmark, the world's most wind-intensive nation, with more than 6,000 turbines generating 19% of its electricity, has yet to close a single fossil-fuel plant. It requires 50% more coal-generated electricity to cover wind power's unpredictability, and pollution and carbon dioxide emissions have risen (by 36% in 2006 alone).

Flemming Nissen, the head of development at West Danish generating company ELSAM (one of Denmark's largest energy utilities) tells us that "wind turbines do not reduce carbon dioxide emissions." The German experience is no different. Der Spiegel reports that "Germany's CO2 emissions haven't been reduced by even a single gram," and additional coal- and gas-fired plants have been constructed to ensure reliable delivery.

Indeed, recent academic research shows that wind power may actually increase greenhouse gas emissions in some cases, depending on the carbon-intensity of back-up generation required because of its intermittent character.

 

** Postscript:  The best way to read this table, IMO, is to take the net value of capacity and energy substitution and compare it to the CO2 savings value.

The first line is just from the first line of the table above.   The second is essentially the net of all the other lines.

I think this makes is clearer what is going on.  For wind, we invest $106,697 for $132,030 $132,030 for $106,697 in emissions reduction (again, I think the actual number is lower).  In Solar, we invest $258,322 for $69,502 in emissions reduction.    For gas, on the other hand, we have no net investment -- we actually have a gain in these other inputs from the switch -- and then we also save $416,534.  In other words, rather than paying, we are getting paid to get $416,534 in emissions reduction.  That is not several times better than Solar and Wind, it is infinitely better.

Postscript #2:  Another way to look at this -- if you put on a carbon tax in the US equal to $50 per ton of CO2 that fuel would produce, then it still likely would make no sense to be building wind or solar plants unless there remained substantial subsidies for them (e.g. investment tax credits, direct subsidies, guaranteed loans, above-market electricity pricing, etc).  What we would see is an absolute natural gas plan craze.

One of the great joys of being in Princeton's class of 1984 is having master cartoonist (and libertarian, though I don't know what he would call himself) Henry Payne in our class.  For the last 30 years, Henry has made a custom birthday card for the class, which are mailed to each of us on the appropriate day.  This is mine from 2014

I started saving these a while back but I wish I had saved all 30.  I also have a caricature of me drawn in college by Henry, but it does not get a prized place on our wall at home because it includes my college girlfriend as well, which substantially reduces its value as perceived by my wife.  (In speaker-building there is a common term of art called "wife acceptance factor" or WAF.  Pictures of ex-girlfriends have low WAF).

Here is an example of some of Henry's great political work:

Check out this payback analysis that is being trumpeted for wind power:

US researchers have carried out an environmental lifecycle assessment of 2-megawatt wind turbines mooted for a large wind farm in the US Pacific Northwest. Writing in the International Journal of Sustainable Manufacturing, they conclude that in terms of cumulative energy payback, or the time to produce the amount of energy required of production and installation, a wind turbine with a working life of 20 years will offer a net benefit within five to eight months of being brought online.

So of all the scarce resources that go into producing wind power, if you look at only one of these (energy), then the project pays itself back in less than a year.  This is stupid.  Yes, I understand that there are some "green" energy sources (*cough* corn ethanol *cough*) that cannot even produce more energy than they consume, so I suppose this finding is a step forward from that.  But what about all the other scarce resources used in producing wind power-- steel, labor, engineering talent, concrete, etc?  This is roughly like justifying the purchase of an 18-wheeler truck by saying it will pay off all the vanadium used in its production in less than a year.

Environmentalists seem to all feel that capitalism is the enemy of sustainability, but in fact capitalism is the greatest system to promote sustainability that has ever been devised.  Every single resource has a price that reflects its relative scarcity as compared to demand.  Scarcer resources have higher prices that automatically promote conservation and seeking of substitutes.  So an analysis of an investment's ability to return its cost is in effect a sustainability analysis.  What environmentalists don't like is that wind does not cover the cost of its resources, in other words it does not produce enough power to justify the scarce resources it uses.  Screwing around with that to only look at some of the resources is just dishonest.

The one reasonable argument is that the price of fuels does not adequately reflect the externalities of Co2 production.  I don't think these are high but obviously there are those who disagree.  The right way to do this analysis is to say that wind power provides a return only if electricity prices are X (X likely being well above current market rates) which in turn reflects a Co2 cost of Y $/ton.  My gut feel is that it would take a Y -- a cost per ton of CO2 -- way higher than any of the figures that are typically bandied about even by environmentalists to make wind work.

Postscript:  I did not critique the analysis of energy payback per se, but if I were to dig into it, I would want to look at two common fallacies with many wind analyses.  1) They typically miss the cost of standby power needed to cover wind's unpredictability, which has a substantial energy cost.  In Germany, during their big wind push, they had to have 80-90% of wind power backed up with hot fossil fuel backup.  2)  They typically look at nameplate capacity and not real capacities in the field.  In fact, real capacities should further be discounted for when wind power produces electricity that the grid cannot take (ie when there is negative pricing in the wholesale market, which actually occurs).

I post this not because the odds are high any of you readers have had this issue but I want these numbers to be found on an internet search.

Both numbers were leaving a message saying they were from "Citi" or "Citicard" calling about my account (and that it was not a sales call).  Since I have no Citicorp credit cards or accounts of any type, and since they were calling a Google Voice number that I would never have put on an account (in fact don't even really use), I was totally suspicious.  When I called them they asked for my account number.  I said I did not have one but was calling to see what kind of scam they were running.  They said they were from Citicard and don't do scams, but could I give them my phone number.  I said I had to look it up, because they were calling a Google voice number I never use.  The moment I said that, they hung up on me, the universal indicator of a scamster giving up.

Update:  There is a legitimate Citi group with the same name.  It sounds to me that these folks at the numbers above are recording the legitimate Citi greeting replaying it on their lines.  But then their physical operator answers the phone completely differently than does the legitimate Citi operator.  The Citi group being spoofed is this one.

For some reason I do not fully understand, the people who pester me the hardest for jobs tend to work out the worst as employees.  I cannot think of a reason this should be true, so perhaps this is just an artifact of having only a few data points.   But yet again we recently had another person we had to terminate who pursued me literally for years for a job, only to be unproductive and ineffective in the job from day one.  For some reason energy and enthusiasm in the job hunt do not translate to energy and enthusiasm in the job.

I have come to think of these as Obama employees -- people who are brilliant and energetic in seeking a job, but ineffective and oddly unmotivated once they have the job.

Postscript:  Last year, we had about 300 seasonal employees.  Of these, perhaps 50-75 will choose not to return or will not be asked to return the following year, opening up that many positions for new hires.  For these 50-75 spots, we had over 22,000 applications last year.  And since many of these applications are for a couple, we really had well over 30,000 applications.  This makes us more selective than Harvard, lol.

I was reading Stephen Ambose's Band of Brothers the other day, and there was a story in there that really struck me.  One of the paratroopers was hauling his reserve parachute, something usually ditched right at landing, all over Europe with him.  When asked why,  he said he was getting married and he wanted the silk (what parachutes were made of at the time) for his wife's wedding dress.

For some reason this struck me as odd and economically irrational.  It took me a while to figure it out.  I was applying my intuition to the situation based on modern price levels, where the value of the silk would be just a minor part of a wedding dress -- the larger part of the value is in the design and cutting and sewing, ie the labor.  We live in a time where skilled labor is far more dear than basic materials, which are relatively cheap.  The hard part of making a wedding dress would not be getting the silk, but finding someone skilled enough to manufacture the dress.

This soldier grew up in the 1930's, where exactly the opposite conditions obtained.  Skilled labor was cheap.  In fact, unlike today, most every household likely had someone who could sew a dress in their spare time, labor that might well be donated for free to the wedding dress cause.  It was raw materials that were expensive, particularly those like silk that had to be imported at great expense from afar.

Since perhaps the 1970s, I believe that most campus police forces have had one primary mission:  Keep students out of the hands of local police, particularly on drug offenses.  Sure, they need to keep order and prevent property damage and break up fights and such, but underlying all of this has been a desire to keep any resulting discipline internal, to shield students from the local police force and criminal justice system that likely would be much harsher (particularly in some towns where there is substantial tension between town and gown).

By the way, none of this is particularly new.  You can read accounts from the middle ages about townies complaining that universities were sheltering their students from local justice (in those days students often carried some sort of clerical status in order to make them inviolate from local resident reprisal and to keep them out of the local justice system).

So given a mission to protect students from their own stupidity and from the harsher justice outside of campus, many campus police forces are entirely unprepared to handle true felonies with victims, such as forcible sexual assault.  The fact that campuses have been accused of burying these charges and covering them up is not surprising -- this is what campus police forces have been trained to do.

Unfortunately, the emerging solution of stripping male campus members of equal protection and due process rights is a horrible solution to this problem.  The right solution was to put these crimes in the hands of professionals outside of campus who are trained to deal with them.

via the Anti-planner:

Washington DC has proposed an anti-auto transportation plan that is ironically called “MoveDC” when its real goal is to reduce the mobility of DC residents. The plan calls for reducing auto commuting from 54 percent to no more than 25 percent of all workers in the district, while favoring transit, cycling, and walking.

This strikes me as just incredibly elitist.   There is no way the politicians and lobbyists who are writing this stuff are going to by cycling and walking or even riding a bus.  They are going to drive (or be driven).  This is about getting the hoi palloi off the roads and out of their damn way.

As Randal O'Toole points out, congestion pricing, if done correctly, could actually improve capacity, but he is skeptical it will be done correctly.

Over time, my understanding of the importance of the D-Day invasions has shifted.  Growing up, I considered these events to be the single key event in defeating the Nazis.  Listening to the radio this morning, this still seems to be the common understanding.

Over time, I have had to face the fact that the US (or at least the US Army) was not primarily responsible for defeating Germany -- the Russians defeated Germany, and what's more, would have defeated them whether the Allies had landed in France or not.  Check out the casualties by front, from Wikipedia:

The Russians defeated Germany.  Period.   And I don't think the western allies would ever have had the stomach to inflict the kind of casualties on Germany that were ultimately necessary to defeat her without Russian help.  To me, this is the great irony of WWII, that it was not ultimately a victory for democracy.  Only totalitarian Russia could defeat totalitarian Germany.  This thought often bothers me a lot.  It doesn't fit with how we want to view the war.

However, D-Day did have an important effect -- it kept Western Europe out of Soviet hands.  We did not know it at the time, but I would argue in retrospect that from mid-1944 on we were competing with Russia to see how Europe would get divided up after the war.  D-Day allowed the western allies to overrun most of Western Europe and keep it out of Soviet hands, perhaps an even more important outcome than just speeding the defeat of the Germans.  Sure, FDR gets grief for giving the farm away to Russia at Yalta, but what could he do?  The Soviet occupation of Eastern Europe at that point was a fait accompli.  What would have been FDR & Churchill's negotiation position at Yalta if their armies were not even on the continent (excepting Italy, where we might still be fighting in 2014 and getting nowhere)?

This is a re-post of an article I wrote in 2012.  I am re-posting it to demonstrate that recent stories about doctor shortages and wait times are absolutely inevitable results of government interventions in the health care economy.

My son is in Freshman econ 101, and so I have been posting him some supply and demand curve examples.  Here is one for health care.  The question at hand:  Does government regulation including Obamacare increase access to health care?  Certainly it increases access to health care insurance, but does it increase access to actual doctors?   We will look at three major interventions.

The first and oldest is the imposition of strong, time-consuming, and costly professional licensing requirements for doctors.  At this point we are not arguing whether this is a good or bad thing, just portraying its inevitable effects on the supply and demand for doctors.

I don't think this requires much discussion. For any given price for doctor services, the quantity of doctor hours available is certainly going to increase as the barriers to entry to the profession are raised.

The second intervention is actually a set of interventions, the range of interventions that have encouraged single-payer low-deductible health insurance and have provided subsidies for this insurance.  These interventions include historic tax preferences for employer-paid employee health insurance, Medicare, Medicaid, the subsidies in Obamacare as well as the rules in Obamacare that discourage high-deductible policies and require that everyone buy insurance rather than pay as they go.  The result is a shift in the demand curve to the right, along with a shift to a more vertical demand curve (meaning people are more price-insensitive, since a third-party is paying).

The result is a substantial rise in prices, as we have seen over the last 30 years as health care prices have risen far faster than inflation

As the government pays more and more of the health care bills, this price rise leads to unsustainably high spending levels, so the government institutes price controls.  Medicare has price controls (the famous "doc fix" is related to these) and Obamacare promises many more.  This leads to huge doctor shortages, queues, waiting lists, etc.  Exactly what we see in other state-run health care systems.  The graph below posits a price cap that forces prices back to the free market rate.

So, is this better access to health care?

I know that Obamacare proponents claim that top-down government operation is going to reap all kinds of savings, thus shifting the supply curve to the right.  Since this has pretty much never happened in the whole history of government operations, I discount the claim.  When pressed for specifics, the ideas typically boil down to price or demand controls.  Price controls we discussed.  Demand controls are of the sort like "you can't get a transplant if you are over 70" or "we won't approve cancer treatments that only promise a year more life."

Most of these do not affect the chart above, since it is for doctor services and most of these cost control ideas are usually doctor intensive - more doctor time to have fewer tests, operations, drugs.  But even if we expanded the viewpoint to be for all health care, it is yet to be demonstrated that the American public will even accept these restrictions.  The very first one out of the box, a proposal to have fewer mamographies for women under a certain age, was abandoned in a firestorm of opposition from women's groups.  In all likelihood, there will be some mish-mash of demand restrictions, determined less by science and by who (users and providers) have the best lobbying organizations.

My longer series of three Forbes articles on this and other economic issues with Obamacare begin here:  Part 1 Information, Part 2 Incentives, Part 3 Rent-Seeking

Update:  Pondering on this, it may be that professional licensing also makes the supply curve steeper.  It depends on how doctors think about sunk cost.

This chart illustrates a data analysis mistake that is absolutely endemic to many of the most famous climate charts.  Marc Morano screencapped this from a new EPA web site  (update:  Actually originally from Pat Michaels at Cato)

The figure below is a portion of a screen capture from the “Heat-Related Deaths” section of the EPA’s new “Climate Change Indicators” website. It is labeled “Deaths Classified as ‘Heat-Related’ in the United States, 1979–2010.”

The key is in the footnote, which says

Between 1998 and 1999, the World Health Organization revised the international codes used to classify causes of death. As a result, data from earlier than 1999 cannot easily be compared with data from 1999 and later.

So, in other words, this chart is totally bogus.  There is an essentially flat trend up to the 1998 switch in data definition and an essentially flat trend after 1998.  There is a step-change upwards in 1998 due to the data redefinition.  This makes this chart useless unless your purpose is to fool generally ignorant people that there is an upwards trend, and then it is very useful.  It is not, however, good science.

Other examples of this step change in a metric occurring at a data redefinition or change in measurement technique can be found in

• The hockey stick  (and here)
• Ocean heat content  (sorry, can't find the link but the shift from using thermometers in pails dipped from ships to the ARGO floats caused a one time step change in ocean heat content measurements)
• Tornadoes
• Hurricanes

Taken from a campground we operate in the UP of Michigan on Lake Superior, the white stuff is ice on the lake on May 28

You know that relative of yours, who last Thanksgiving called you anti-science because you had not fully bought into global warming alarm?

Well, it appears that the reason we keep getting called "anti-science" is because climate scientists have a really funny idea of what exactly "science" is.

Apparently, a number of folks have been trying for years to get articles published in peer reviewed journals comparing the IPCC temperature models to actual measurements, and in the process highlighting the divergence of the two.  And they keep getting rejected.

Now, the publisher of Environmental Research Letters has explained why.  Apparently, in climate science it is "an error" to attempt to compare computer temperature forecasts with the temperatures that actually occurred.  In fact, he says that trying to do so "is harmful as it opens the door for oversimplified claims of 'errors' and worse from the climate sceptics media side".  Apparently, the purpose of scientific inquiry is to win media wars, and not necessarily to discover truth.

Here is something everyone in climate should remember:  The output of models merely represents a hypothesis.  When we have complicated hypotheses in complicated systems, and where such hypotheses may encompass many interrelated assumptions, computer models are an important tool for playing out, computationally, what results those hypotheses might translate to in the physical world.  It is no different than if Newton had had a computer and took his equation Gmm/R^2 and used the computer to project future orbits for the Earth and other planets (which he and others did, but by hand).   But these projections would have no value until they were checked against actual observations.  That is how we knew we liked Newton's models better than Ptolemy's -- because they checked out better against actual measurements.

But climate scientists are trying to create some kind of weird world where model results have some sort of independent reality, where in fact the model results should be trusted over measurements when the two diverge.  If this is science -- which it is not -- but if it were, then I would be anti-science.

Bruce McQuain has an article on how McDonald's is closing some contract-operated fast food outlets at military bases.  The article speculates that the closures on new government minimum wage regulations for government contracts.

Frankly, I doubt this explanation.  I know something of the world of government contracting, and contractors in these cases routinely just pass on wage increases to their customers in the form of higher prices.  After all, their contracts give them a monopoly of sorts in these bases.

I would like to offer an alternative explanation.

In March, a new regulation took effect that all contractors with anything larger than a $50,000 a year contract with the government must go through an expensive affirmative action planning process for ALL of their locations, not just for the people involved in that particular contract (41 CFR 60-2.1  and 41 CFR 60-4.1)

We don't do government contracting work.  We lease government facilities, but get paid 100% by customers -- since we don't take government money, we are not a contractor.  But there is one exception.  We have a $52,000 a year contract to clean bathrooms near the campgrounds we operate in California.  Basically, we bid this contract at cost because we want the bathrooms cleaned well -- if they are not, it hurts our nearby businesses.

In this contract, we have government-mandated wage requirements under the Service Contract Act.  When these mandated wages go up, we just raise the price to the government in proportion.  No big deal.

We were informed that having this contract, under the new March Obama regulations, now made us liable to go through an expensive and time consuming affirmative action planning process for every location -- of which we have over 120 -- not just for this one contract.  So this one contract was going to force us to create 120 annual written plans and presumably get them approved by someone in the government.  No way.  I might have done it if I only had to do a plan for the contract, but it is just too much work to do this everywhere merely because I have a $52,000 contract on which I make no profit.  So we told the Feds we were dropping the contract.

I think it is very unlikely that private businesses will be accepting government contracts as 5 or 10% of their business any more.   This new regulation just imposes too much cost on the other 95% of the business.  Many will drop the government contracts.

I wonder if this is what is really going on with McDonalds.  A regulatory requirement that applied just to the base operations, like a minimum wage, strikes me as manageable.  But having these three or four contracts drive an expensive requirement to create some sort of affirmative action plan for every location - essentially every one of their tens of thousands of stores, so tens of thousands of plans - that would drive them out of these contracts VERY fast.

I have not been posting much of late.  The combination of all our locations opening for the season and a lot of regulatory compliance work in reaction to new laws was keeping me crazy.  Then Oak Creek Canyon caught on fire near Sedona.  We operate numerous locations in the canyon, so have been consumed with evacuation and helping customers.  So I won't be around much for a while.

I feel like I was way ahead of the pack on May 1 reminding everyone that the Left until recently held up the VA as a model for government health care.  I pointed to articles by Kevin Drum and Phil Longman in 2007, but since then others have highlighted articles by Paul Krugman and Ezra Klein that made the same point.  Klein said:

If you ordered America's different health systems worst-functioning to best, it would look like this: individual insurance market, employer-based insurance market, Medicare, Veterans Health Administration.

Paul Krugman said

Well, I know about a health care system that has been highly successful in containing costs, yet provides excellent care. And the story of this system's success provides a helpful corrective to anti-government ideology. For the government doesn't just pay the bills in this system -- it runs the hospitals and clinics.

No, I'm not talking about some faraway country. The system in question is our very own Veterans Health Administration, whose success story is one of the best-kept secrets in the American policy debate.

Supposedly, the reason for this success according to Drum and Longman was that ever-popular Lefty magic bullets, electronic medical records and preventative care.  On medical records:

"Since its technology-driven transformation in the 1990s...the VA has emerged as the world leader in electronic medical records — and thus in the development of the evidence-based medicine these records make possible." Hospitals that joined Longman's "Vista network" (his name for the VA-like franchise he proposes) would have to install the VA's electronic medical record software and would "also have to shed acute care beds and specialists and invest in more outpatient clinics." By doing this they'd provide better care than any current private network and do it at a lower cost.

On preventative care:

How is a supposedly sclerotic government agency with 198,000 employees from five separate unions outperforming the best the private market has to offer? In a word: incentives. Uniquely among U.S. health care providers, the VA has a near-lifetime relationship with its patients. This, in turn, gives it an institutional interest in preventing its patients from getting sick and in managing their long-term chronic illnesses effectively. If the VA doesn't get its pre-diabetic patients to eat right, exercise, and control their blood sugar, for example, it's on the hook down the road for the cost of their dialysis, amputations, blindness, and even possible long-term nursing home costs....The VA model is that rarest of health care beasts: one with a perfect alignment of interest between patients and providers.

Neither of these have ever proven in real life to actually lower costs in anything but tiny pilot programs, and there is a lot of reason to believe that while preventative care can improve health outcomes, it tends to increase costs.

I have said for years that at the end of the day, the only ideas government planners have for cost control are rationing (which leads to queuing) and cost controls on things it buys from private markets, like doctor time (which leads to shortages and more queuing).  This is why every health care system that offers free care to all comers, whether it be socialist systems in other countries or the VA or even an urban emergency room, has long queues.

In fact, the situation, as I think we will find at the VA, is worse.  Not only is the old pie being allocated differently (shifting from price-sensitivity to queue tolerance) but the pie of available supply is likely getting smaller as resources are consumed by government red tape and price controls drive suppliers out of the market.  The next stories will be about the staggering waste of money on red tape in the VA system, and the stories after that will be about a few VA users jumping the queue because of political connections.

This stuff is so inevitable that it was all addressed years ago in my three part series of Obamacare.  In that series, the issues were not failing exchanges and the mess we have seen so far, but the issues we are more likely to see over the long term.  The VA is merely a preview, but we shouldn't have needed a preview because we could have looked at countries like England.  Of course, if the media had any desire to honestly tell these socialized medical stories we would not get fawning profiles of the horrendous system in Cuba.

My Forbes series:

• part 1:  Information issues when one tries to replace prices with command and control
• part 2: Incentives issues in government management of health care
• part 3: Rent-seeking and special favors for the connected in health care

Arnold Kling argues that the root cause of mortgage and student debt problems is not the structure of mortgage and student debt contracts

What these forms of bad debt have in common, in my view, is that they reflect clumsy social engineering. Public policy was based on the idea that getting as many people into home “ownership” with as little money down as possible was a great idea. It was based on the idea of getting as many people into college with student loans as possible.

The problem, therefore, is not that debt contracts are too rigid. The problem is that the social engineers are trying to make too many people into home “owners” and to send too many people to college. Home ownership is meaningful only when people put equity into the homes that they purchase. College is meaningful only if students graduate and do so having learned something (or a least enjoyed the party, but not with taxpayers footing the bill).

This video from one of the relatively small category of male sopranos creates a bit of dissonance at first.  We have certain expectations of male and female vocal ranges.  The automatically functioning parts of my brain keep telling me "lip sync" when it is not the case.  From this article

Of course this guy got some similar grief, though via a different set of assumptions:

I mostly ignore, and tend to be skeptical of, most pronouncements on foods that supposedly kill us and foods that are supposedly superfoods.  I have a solid love of meat and have never let the fear of saturated fat stop me from enjoying a good steak from time to time.

I had heard that a lot of the "settled science" on saturated fat was iffy but I had no idea it was this bad.

Our distrust of saturated fat can be traced back to the 1950s, to a man named Ancel Benjamin Keys, a scientist at the University of Minnesota. Dr. Keys was formidably persuasive and, through sheer force of will, rose to the top of the nutrition world...

As the director of the largest nutrition study to date, Dr. Keys was in an excellent position to promote his idea. The "Seven Countries" study that he conducted on nearly 13,000 men in the U.S., Japan and Europe ostensibly demonstrated that heart disease wasn't the inevitable result of aging but could be linked to poor nutrition.

Critics have pointed out that Dr. Keys violated several basic scientific norms in his study. For one, he didn't choose countries randomly but instead selected only those likely to prove his beliefs, including Yugoslavia, Finland and Italy. Excluded were France, land of the famously healthy omelet eater, as well as other countries where people consumed a lot of fat yet didn't suffer from high rates of heart disease, such as Switzerland, Sweden and West Germany. The study's star subjects—upon whom much of our current understanding of the Mediterranean diet is based—were peasants from Crete, islanders who tilled their fields well into old age and who appeared to eat very little meat or cheese.

As it turns out, Dr. Keys visited Crete during an unrepresentative period of extreme hardship after World War II. Furthermore, he made the mistake of measuring the islanders' diet partly during Lent, when they were forgoing meat and cheese. Dr. Keys therefore undercounted their consumption of saturated fat. Also, due to problems with the surveys, he ended up relying on data from just a few dozen men—far from the representative sample of 655 that he had initially selected. These flaws weren't revealed until much later, in a 2002 paper by scientists investigating the work on Crete—but by then, the misimpression left by his erroneous data had become international dogma.

In 1961, Dr. Keys sealed saturated fat's fate by landing a position on the nutrition committee of the American Heart Association, whose dietary guidelines are considered the gold standard. Although the committee had originally been skeptical of his hypothesis, it issued, in that year, the country's first-ever guidelines targeting saturated fats. The U.S. Department of Agriculture followed in 1980.

Don't these guys know this is settled science?  These saturated fat skeptics must be in the pay of big cattle.

The cherry-picking and small sample sizes are unfortunately a staple of science, but I particularly laughed at the practice of assessing meat consumption during Lent.

I often criticize others for attributing 100% of any bad trend to their personal pet peeve.  To some extent I am guilty of that in my last post, where I blamed declining business formation on increasingly complex regulation and licensing.  I think there are good reasons for doing so -- I have spent the last 6 months passing up on business growth opportunities because I was too consumed with catching up on regulatory compliance minutia, particularly in California.  And I have watched as many of my smaller competitors who have fewer resources to dedicate to such compliance issues have left the business, telling me they could no longer keep up with all the requirements.

But there is seldom just one single cause for any trend in a complex, chaotic system (e.g. climate, but economics as well).  One other reason business formation may have dropped is the crash of the housing market and specifically in the equity many have in their homes.

Home equity has historically been an important source of capital for small business formation.  My first large investment in my company was funded with a loan that was secured by the equity in my home.  What outsiders may not realize about small business banking nowadays is that it is nothing like how banking is taught in high school civics.  In that model, the small business person goes to her local banker and presents a business plan, which the banker may fund if they think it is a good risk.

In the real world, trying to get such an unsecured loan from a bank as a small business will at best result in laughter.  My company is no longer what many would call "small" -- we will do millions in revenue this year.  But there is no way in the world that my banker of over 10 years will lend to my business unsecured -- they will demand some asset they can put a lien on.  So we can get financing of equipment purchases (as a capital lease on the equipment) and on factored receivables and inventory.  But without any of that stuff, a new business that just needs cash for startup cash flow is out of luck -- unless the owner has a personal asset, typically a house, on which the banker can place a lien.

So, without home equity, one of the two top sources of capital for small business formation disappears (the other top source is loans from friends and family, which one might also expect to dry up in a tough economy).

Postscript:  Banks will make cash flow loans if guaranteed by the SBA.  This is another whole can of worms, which I will not discuss today.  SBA loans are expensive and difficult to get, and the SBA has a tendency to turn the money spigot on and off at random times.  I have often wondered if the SBA helped to kill cash flow lending by banks.  First, why make risky small unsecured loans when you can get a government guarantee?  And second, with more formulaic lending criteria, SBA lending eliminated the need for loan officers who were good at evaluating business risks.  I can say from personal experience that the folks who can intelligently discuss a business plan and its risks are all gone from banks now (at least in the small business market).

Successful businesses often seek to cement their position and block new competition by running to government for legislation that blocks new entrants and/or makes it harder to compete for smaller upstarts.  One only need to look at the taxi cartel trying to kill Uber and Lyft to see exactly how this operates.  It is working:

This is a strategy that works with both Republican and Democrat politicians, which may explain why both Occupy Wall Street and the Tea Party shared opposition to cronyism among their complaints.

Of course there are other factors than just powerful incumbents blocking new competitors.  In California, regulations that make it just debilitating to try to run a business are also driven by the tort bar, which has created a thriving business in extracting settlements from companies over miniscule rules violations.  And the California government obliges by shifting the rules constantly, so companies are both constantly vulnerable and have to pay other attorneys to strengthen their immune systems against these assaults.