The UnderGrad

In the News

2010-05-14T21:45:00.002-04:00

I leave for Costa Rica Wednesday, out of Orlando ($285 vs. flying out of Jax for $600+!!). I'm going alone, and I've only barely been out of the southeastern region of the U.S. in my entire life. I'm really looking forward to this, as I believe it will be a significant chapter in my long journey of personal development. I paid a very large, non-monetary price for this trip, and the closer I get to it, the more all signs say GO. I'll surf while I'm there, and I'm planning to do some yoga classes, too. I'm hoping I can find a cheap golf range to play at, and hopefully I'll find a job. I don't plan to sleep much at all, and I will probably drink a lot less coffee and beer and eat a lot more fruit and protein bars.

When I get back, I'll waste no time in heading to Tallahassee for FSU's Applied Master's program in Economics. I don't plan on working the entire year, for I wish to dedicate it wholly to the program and, probably more importantly, to learning another language and furthering my knowledge of economics. Towards the end of my senior year, I was starting to pull everything together that used to confound me before. Economics is itself like a language, and I feel I'm really starting to not only learn it for myself but also to develop my own dialect. Call it arrogant, but I believe I can put a new emphasis on it all, that is, make it accessible to new and otherwise indifferent crowds of people. I know exponentially more now than I did a year ago, and that's with working 25+ hours a week and taking nonsense classes at the same time. Anyway, I'm almost more excited to go to Tallahassee than I am Tamarindo. Who would've thought?

I'll probably rename the blog when I get back. I think I'm going to make a blog about my adventures in Costa Rica, but I don't want to commit to anything because I'm not sure what computer access will be like while I'm there. I won't have a phone or my own lap top, either (or even a camera!).

It's funny, I was so ready to get out of school. Now I just want back in. Well, not exactly. But these in-between times are so boring that I don't know what to do with myself. This will all be different in less than a week!

I come back July 28th. See ya then.

The Market Test

2010-04-22T13:54:00.005-04:00

Last night I was at a bar at the beach that featured "Mensday Wednesday," a night where men drink free from 10-12. I'm always very wary about "free stuff," because there is always a catch. Last night was no different, and I'll list what these draw backs were:

1) Men did drink free, but not just any beverage. In fact, only one drink was "free," the house "lager," which I'm pretty sure was poured from a keg of Milwaukee's Best. It was disgusting.

2) Guys were given ~5 oz. dixie cups with which to drink from. Now, this wouldn't be too much of an issue if it wasn't for the fact that the keg was behind the bar, and you had to wait for the bartender to get you a refill. And since most guys had the "free" mentality, tips were not forthcoming, thus the bartender had very little incentive to give you snappy service. The lines were notorious.

3) The keg ran out at 11:19 PM and was not refilled. So, really, it was "Mensday Wednesday" for 1 hour and 19 minutes.

Needless to say, I refused to stand in a ridiculous line for a 5 oz. portion of horse spit beer. Pabst Blue Ribbons were $2, and I was happy. I will not go back to this bar on a Wednesday, and I think many other people feel the same. The market has spoken.

So, I argue that "free stuff" actually has costs, though not monetary, that are much greater than a dollar price. Last night there was little drinking taking place, and neither the bar tenders nor the customers were very happy (which was the total opposite of what everybody wanted before they went out). Sure, some people saved a few dollars, but I'd be willing to bet that on net, most everybody suffered psychic losses.

Reminds me of "free admission" at Chuck E. Cheese. Sure, it's free, and even the games are cheap, but the quality of service is poor, games are poorly kept, and there's a gang member at every quarter slot. I'd go there if the price were higher.

Graduation

2010-04-20T23:45:00.003-04:00

So, I graduate from college in a little over a week with my B.A. in Economics and minor in math. Alas, I must rename my blog, lest I mislead serious readers into thinking I'm a know-nothing college kid (because now I'm a know-nothing graduate). What should I rename the 'ol blog?

I'm remembering a South Park episode, where Eric Cartman describes his experiences at theme parks... and amongst his recollection he says something about, "cantankerous kinks" or something to that effect.

Hmmm. This blog is about cantankerous kinks, isn't it?

The search continues.

Update: Cartman doesn't talk about cantankerous kinks but instead "rare Kartankulas plinks!" I found the transcript on the net (not the video because my computer is far too slow to watch it). I thought the part where Cartman talks about lines was so great that I'm uploading the transcript of that part here, as follows:

Cartman: Oh, but I'm not buying the park to get people to come.

Mr Foon: You... you're not?

Cartman: No no no! I'm buying it to keep people out! [Chris and Frank look at each other] Don't you see? Forever it has been my dream to have my very own theme park, so that I could be alone in it, all day, every day. I love theme parks. [zoom in] But the lines! Everywhere you go, people, crowds, [shot of people waiting to enter "The Mine Shaft"] The rides are great, but... [a shot of crowds on Main Street] All the lines, lines, LINES! [shot of people waiting to enter a ghost ride, another shot of a kids' mine shaft ride; another of Cartman pissed off, eyes squeezed shut, with waiting times floating past him] If there's one thing I hate, [a shot of two lines of people entering his head] all the lines, lines, lines, LINES!! [opens his eyes, and a moment later...] And then there get to be so many people [his eyes roll around independently of each other] that they make FastPass. [a shot of people in a FastPass line] So then there's lines for FastPass. [zoom out to show Cartman in line for a FastPass] You stand in line to get a ticket to stand in line later. Then there's lines for the bathrooms [two lines for the Waterworks Restrooms], lines for the drinks [Astro Food line], lines for cantakuras [Seussian characters play strange instruments for the people in line] and rare Kartankulas Plinks! [a vendor sells them - they are a fruit treat shaped like strawberries] ...And, so you see, this park is for me. Nobody else will be allowed in it. [Emphasis added]

Teacher's Unions and Unemployment

2010-04-19T23:40:00.003-04:00

I read a very profound statement in Man, Economy, and State today that, although known to any worthwhile economist, is almost vaguely or not even treated at all in high school and college econ principles texts. I'm on Rothbard's chapter on monopoly. The passage (pp.707-708) is as follows:

"[When] [t]he union has thus achieved a restrictionist wage rate... a sacrifice has been made... there are now fewer workers hired... What happens to them? These discharged workers are the main losers in this procedure. Since the union represents the remaining workers, it does not have to concern itself, as the monopolist would, with the fate of these workers. At best, [the unemployed workers] must shift... to some other-nonunionized- industry. The trouble is, however, that the workers are less suited to the new industry. Their having been in the now unionized industry implies that their DMVP in that industry was higher than in the industry to which they must shift; consequently, their wage rate is now lower."

But this next part is what I find amazing, that I've never read in any formal textbook (but is so elementary). Rothbard continues:

"Moreover, their entry into the other industry depresses the wage rates of the workers already there. Consequently, at best, a union can achieve a higher, restrictionist wage rate for its members only at the expense of lowering the wage rates of all other workers in the economy." [Emphasis added]

I do believe there exists economic laws irrespective of time and place. In this case, an increase in supply will decrease the equilibrium price- in this case, the price of labor, or the wage rate. So not only do labor unions use the heavy hand of the government to force employers into negotiations (and more importantly, settlements), but also these entities decrease everybody else's standard of living in the form of decreased wages by the reallocation of previously employed workers.

Let us not think that unionization in this and other countries is such a small proportion of the labor force, either; this analysis applies in full to occupations and industries that require intense licensing (e.g., medical services) and that outright prohibit competition (e.g., public utilities, public schooling).

Some people might object that public schooling is subject to the constraints of competition via private schools. This is untrue for many reasons, but principally, two: 1) Private schools are subject to many, if not all, of the same requirements concerning curriculum and facilities; they can scarcely operate outside of the realm of what the state legislature will let them. 2) Education is compulsory; kids can't choose whether to go or not. Consumer choice is the backbone of competition: By eliminating a vast array of choices available to children and young adults, be it the workforce or some other way to spend their initial 18 years of life, compulsory education has eliminated a large part of what constitutes competition. Thus, even if argument (1) is granted, the fact that kids have to attend school means that both public and private schools don't have to try nearly as hard to maintain a level of quality and price that would impel ordinarily free children to attend.

It's as if all adults were forced to buy magazines of a certain type. Before such a mandate was enforced, magazines had to compete amongst the thousands of other products that you would have ordinarily bought with your money (not just other magazines). But it's worse than this where schooling is concerned, because on top of eliminating substitute products to spend your tuition money on, the educational establishment is cartelized and monopolized to hell and back. You have the worst of both worlds in the case of schooling, because at least in the magazine example wider profit margins would encourage entrepreneurs to enter the forced magazine industry. Where schooling is concerned, that's not a viable option. To modify our magazine example, adults are forced to buy the kind of magazines that are cartelized and will blow any of its competitors to smithereens with brute force. Now imagine the kind of quality of magazines you'd expect to read.

Back to my original point, this monopolization of sorts not only dis-employs the workers in the original industry but also decreases the wages of everybody else as those workers find work elsewhere. Multiply that by the amount of licensing and paperwork it takes to work in any given occupation, and it's no wonder why U6 unemployment is at 16.9 % (and why we have to use 6 different measures in the first place ;) )

Accounting Tricks

2010-04-15T15:51:00.003-04:00

Would somebody mind explaining to me how people who live off taxes pay taxes? The two concepts are mutually exclusive: you're either a net tax consumer or a net tax payer.

I know, he has book sales, blaze blaze, but I'm speaking of a larger "phenomenon" where we think in terms of every laborer/property owner/etc. paying taxes. This is simply false, as one must fall into the category of net consumer or net payer of taxes relative to all the 'benefits' received from the guvamint.

Saying that public officials, like the vice president or the mayor, or college professors or the city garbage guy all pay taxes is ridiculous, because they all derive their incomes from taxation. The "paying out of taxes" at the end of the day is an accounting maneuver, nothing more.

Think of it like this: A man sticks you up in a dark alley for whatever is in your pockets. You scream and plead with him that you need that money for rent and dinner, but he doesn't listen, and insists that you throw your wallet into his bag. He assures you, "Hey, now, I'm in this just as much as you are," as he throws his own wallet into his bag. He then walks off with the bag.

I feel better, don't you?

The Economics of Credit Reports

2010-04-14T10:28:00.004-04:00

I stumbled upon a Mises.org video originally aired on CNN that pits J.H. Hubert against some "consumer advocate." Hubert argues that credit checks for potential employees are, by common sense, indicative of a given employee's work reliability, that is, a lower score should be positively correlated with more work absences, tardies, etc. as compared to a person with a higher credit score. I like the argument because it is intuitively appealing. The "consumer advocate," however, maintains that there are no statistical studies proving that this correlation necessarily holds, and so employers shouldn't be allowed to discriminate on the basis of a FICO score.

Riiight. Empiricists sound really dumb sometimes.

But, I went through 3/4 of the video and didn't hear the most basic argument from an economics standpoint come up, that is, that if the demand for laborers with lower credit scores fall, then the demand for laborers with higher credit scores must by de facto increase, establishing a wage differential between the two classes. If, as our "consumer advocate" maintains, there really is no difference between work reliability and overall performance between the two classes, then there are profits to be made by "daring" entrepreneurs willing to hire from the lower-scoring group. These profits would be noticed by other entrepreneurs, and over time, the demand for lower-scoring laborers would increase which will, by default, decrease the demand for higher-scoring laborers, eliminating any wage differential between the two groups.

Thus, our "consumer advocate's" argument is shown to be a paper tiger, because there's really nothing to worry about.

Unless we assume that employers are stupid and can't recognize profit opportunities. But if this is true, why doesn't our "consumer advocate" become a hiring manager somewhere, making the big bucks by hiring people with poor credit?

Frankly, I like the argument that, "It's my business, my job that I'm looking to give to somebody else, and it's nobody else's damn business who I hire for it."

Sin Escolaridad Más

2010-04-13T23:50:00.002-04:00

I went to the library today and checked out two books in spanish, those being La Casa en Mango Street and Che Guevara Habla a la Juventud. Ever since late August of '09, I've been learning the spanish language. I used Rosetta Stone for 5 months, and since January I've been reading spanish books with a spanish dictionary nearby. I can read most simple things and understand it spoken to me, but speaking it is another story. Hence why I'm going to Costa Rica for 3 months on May 19th, and the rest is history.

Anyway, La Casa en Mango Street is a book that I was assigned when I was in Spanish III in high school. I remember the very day I was assigned the book, and how I stared blankly at its pages with not an ounce of hope in my soul that I'd get through it. I defeated myself, in a way, for I didn't read the book (nor pass the class). I didn't give a damn, frankly.

But now, in a span of 8 months, I can read this book! I flip through the pages with almost ease, sounding out the beautiful letters aloud as if I were painting a Rembrandt. I'm absolutely amazed at the results that I (or anybody) can achieve when I actually want to do something. Foreign tongues used to scare the bajezzas out of me, but I'm very much looking forward to learning both french and german come next August. It has little to do with IQ and everything to do with the will to learn.

What does this have to do with political economy or economics?

Compulsory schooling is a sham. I graduated believing that the professors were supposed to teach me something, that more schooling and more training and more formal education were my vectors to success. This is so incredibly and emphatically untrue that I pity all those graduating seniors going on to Harvard and Yale and the like. You know, the kind of people that look at a recession and say, "Hope I'm not out of the job..." Because now, I can look at a recession and say, "I don't feel like participating in this. I can always create my own job, anyway." Compulsory schooling, by its very definition, cannot teach you this skill because you aren't allowed to choose among the skills and talents you're best at and further develop.

From my 18+ year experience in school, and my substitute teaching experience, and my sister's experiences, and all the tutoring I've done during college, I've realized that compulsory schooling sucks the drive and the need to learn, to better oneself, out of most people. These students are so damn reliant on the professor to hand them knowledge that they don't even realize they were born with their own faculties. Compulsory schooling is worse than inefficient and futile;

it's immoral.

Entrepreneurial Idea?

2010-04-12T23:54:00.003-04:00

I was thinking tonight about items that have big prices but can be shared among consumers. For example, computer programs such as Microsoft Office or the language learning program Rosetta Stone, are both on the expensive side as far as single consumers go, especially if neither products will bring with them monetary remuneration.

But, perhaps, a Craig's List of sorts could be set up for isolated consumers wanting to go in with other consumers on such products? For instance, I want Rosetta Stone French and RS German, and I'm sure another consumer SOMEWHERE in the world wants to do the same, and the RS software can be used twice. Not only would this 'sharing' cut the $600 price in half, but also both me and the other customer would be less willing to rip an illegal copy off the internet. Thus, both consumers and producers are made better off.

Of course, how many consumable goods can be duplicated in such a way as computer programs? I can only think of things like Photoshop, Office, and Rosetta Stone. The products have to be duplicable. I think.

Either way, this idea does set up an information exchange, which is essential to markets. I think it would work, though it would not necessarily bring in big profit margins to the host of the exchange. Would some products be made so incredibly accessible to previously isolated consumers that product prices would rise substantially? No telling, but I like the idea.

Hmmmm.

More on Strawberries and Such

2010-04-12T11:52:00.002-04:00

Back to our Strawberry producers here, it's obvious that because the strawberry farmers were destroying their crops, they made entrepreneurial errors. That is, the decision to continue producing strawberries that was made before the growing season was wrong. Obviously, these producers should have invested less time/labor/capital/other resources in the production of strawberries than otherwise. If the strawberry farmers could go back in time, they would correct for this error, and reduce the amount of factors that went into the production of their crops.

But they can't go back in time. They look to the future with their presently owned resources and products, and make decisions based upon future prospects. Destroying some of their surplus crop raises the per unit price of strawberries, enabling them to produce more than otherwise in the future.

I think that's what our strawberry critics forget: production is future oriented. Producers can't look at the past and base their production decisions off of this alone. What the critics are asking strawberry farmers to do is to compound the errors already made in production. Assuming that strawberry farmers could go back in time, it's as if the critics are asking them not to, to instead produce so many strawberries as to reduce their profit margins and hence their incentives and abilities to continue with production in the future, and ultimately to serve the demand of consumers in the market.

In other news, William Easterly's The White Man's Burden was a fantastic read about the follies of foreign aid, about how local, on-the-ground strategies that attack small problems related to poverty and squalor are often much more effective than grand utopian schemes of eliminating an entire feature of poverty (say, hunger or AIDS) in one fell swoop. I feel as though I understand the IMF, World Bank, etc. much better than I did a month ago. Without giving them much justice, I would have to say they're mostly 'bureaucratic clap-traps:' Big talk without the strategies to make for effective walk.

But, I've been told that I have a bad case of confirmation bias.

Bad Argument

2010-03-30T10:49:00.004-04:00

I've read and talked to a lot of people whom are opposed to the recently passed healthcare legislation. Often, they have really good points as to why it's no good and won't achieve its ends. However, there's a defense that even many respectable economists use that I believe is lame. That is, that

"a clear majority of Americans oppose this healthcare bill."

Brushing aside the fact that we have no idea if a "clear majority" opposes this or not because most people haven't ever talked to a pollster in their lives, this argument is fundamentally flawed. It rests on the premise that majorities mean something, that if a majority of Americans wanted this bill, then it'd be OK.

It means that the mass genocide of Jews in the late '30s and early '40s was OK only if a majority of Germans gave the thumbs up; that bombing the WTC was only OK if a majority of extremists agreed; and that Chinese communism is justified only if most of its citizens don't mind.

This is clearly ridiculous.

Majority opinion confers absolutely no legitimacy upon any argument whatsoever. Even if 100% of all people believed that healthcare legislation was right (and thus could lower costs), or that protectionism was good for them, or that 2 x 1 = 89, they are still in every case wrong. It doesn't matter how many idiots they have on their side.

Strawberry Fields Forever

2010-03-29T02:56:00.002-04:00

TBO: "Wholesale prices that were $17 to $19 for a flat of eight containers have now fallen to $5 to $6 a flat, Grooms and Parke said. Parke said some farmers have tried shipping berries to stands to sell on consignment, but if they only return $3 a flat on each shipment, they lose money on each deal."

No, it's greed, according to Yahoo!. Apparently, the right thing for everybody to do is run at losses; let's just produce things that nobody wants to pay for. Or at least that's what the homeless shelter folks would have us do. In a way, though, they are a loss that society is running itself. They know no better.

In other news, I spoke to a German family at work today. I overheard them speaking their native tongue, and not knowing what it was at first, I inquired about their nationality, and followed up with a terrific joke. The conversation went like this:

Me: "What nationality are y'all?

German Father: Jocularly, "We're German. Is that OK with you?"

Me: "Well, sure, I guess we can all forgive and forget, right?"

German Family: Silence.

The parents looked stunned and confused. The children just looked confused. Did he really say that?

Yes, yes I did.

In Other News...

2010-03-22T02:03:00.003-04:00

In the neon circle: What's in the bill is irrelevant now. Not like anybody besides the privileged political class and wealth looters need to know the 'benefits,' anyway.

In the red: Notice that there has never been a "Pepsi shortage" or a "sock shortage?" Yet when an entire populace of a state is made to fund public utilities, we face blackouts, shortages, congestion, and overall piss-poor quality relative to most other goods consumed freely. Even in the light of this, they still got 216.

What a joke.

Deflation vs. Malinvestment

2010-03-14T09:37:00.003-04:00

Reading through an investor's newsletter this morning, I came across snippets that almost contradict each other. I'll explain that. But it's as though some (most) mainstream investors and academicians want to have the cake and eat it too. It's like me going to work, hoping it's not busy, and still making bank; it ain't happening.

This guy says: "Now, there is no exact way to determine the right size of the money supply. It definitely needs to grow each year by at least the growth in the size of the economy, the population, and productivity, or deflation will appear. But if money supply grows too much then you have inflation." [Emphasis mine]

He clearly injects the deflationary bogey, and of course doesn't explain the implications of it, but instead implies that it is clearly and at all times bad and catastrophic, which is emphatically untrue. We'll see why here:

"More than five million homeowners are behind on their mortgages; There are over six million Americans who have been unemployed for at least six months, a record 40% of the ranks of the jobless; The private capital stock is growing at its slowest rate in nearly two decades; Roughly 30% of manufacturing capacity is sitting idle; Nearly 19 million residential housing units, or about 15% of the stock, is vacant; Commercial real estate values are down 30% over the past year; The average American worker has seen his/her level of wealth plunge $100,000 over the last two years, even with the recovery in equity markets this past year; Bank credit is contracting at an unprecedented 15% annual rate so far this year as lenders sit on a record $1.3 trillion of cash" [Emphasis mine]

I've highlighted the words and phrases that are ubiquitous in any recession that the Fed (or any central bank) has presided over, those being 'unemployed, low stock growth rate, idle capacity, vacancies, decreased values, decreased wealth, decreased credit.'

I have studied under the school which says that if you fear deflation, and combat it with low interest rates and artificial injections of liquidity in the market, you're going to get all of the bad things associated with bad investments, namely, idle stock, underemployment, and lower asset values. You cannot avoid the former without encountering the latter.

Deflation is not bad per se (Ask the 1880s). There is no reason to believe that long-term deflation is anymore pernicious than long-term inflation. I've simplified it, but succinctly put, expectations matter. More on that here.

4,051 Decks of Cards

2010-03-10T23:18:00.001-05:00

were used to make this incredible structure. I couldn't embed that particular video, but here's another of the same man:

Wake Me Up Tomorrow

2010-03-09T13:17:00.002-05:00

"The Federal Reserve is currently rolling over all maturing Treasury securities, but in the future it may choose not to do so in all cases."

From Bernanke's testimony on the Fed's exit strategy, before the Committee on Financial Services, U.S. House of Representatives, in Washington, D.C. on February 10, 2010.

Cultural Economics

2010-03-03T20:46:00.002-05:00

I watched most of "Life and Debt" tonight, in my ongoing search for information regarding the IMF, World Bank, etc. It's a documentary about IMF and World Bank loans that are often granted on harsh terms and with less regard to the borrower's interest as compared to the lender's (remember, these loans are for the specific purpose of advancing the borrower, not the lender). Also probed was globalization and the opening up of Jamaica's ports in conjunction with the devaluing of Jamaica's currency, and how these actions destroyed many domestic industries. All the while, the movie is narrated by a woman who has an obvious disdain for western culture and wealth.

But, it was a good experience. I wasn't convinced by its anecdotal evidence of the evils of free trade. However, I was intrigued by how much the U.S.'s protectionist policies (subsidies & tariffs) adversely affected Jamaica's wellbeing (e.g., Chiquita and Dole bananas are protected Latin American imports). Also intriguing, the IMF insisted upon devaluation based upon their snap shot of the world market, in order to boost Jamaican domestic industry relative to the rest of the world. But because Jamaica is so dependent on exports, many domestic industries (and citizens) suffered in the long term.

And it goes on and on. The video was mildly educating, more so for people who are already familiar with the system, to give them a human emphasis on textbook economics.

I'm coming to see economic development more and more something that cannot be forced upon people. IMF and World Bank loans, whether they come with strict conditions or not, tend all the more to destabilize global resource flows: there are just too many variables to account for. On the one hand, you can devalue a country's currency to stimulate domestic industry, but on the other hand, doing this will destabilize domestic industry. Or, liberating trade barriers subjects smaller economies to un-liberated trade barriers of large countries, hurting the small countries all the more; this is, of course, not an argument against opening up trade barriers, but instead against protectionism as a whole. However, now you have an entire community of folks who think that free trade impoverished their culture. Are you better off in the grand scheme of things?

Also interesting in my studies of these organizations is how efficiently (that is, inefficiently) knowledge can travel between agents at the top level to the people that they're trying to help. You have westernized, government-sponsored loan agencies attempting to help third-world, non-english speaking cultures. There's so much that can and does go wrong, and yet, the IMF and World Bank are still here.

A Follow-up

2010-03-03T01:01:00.005-05:00

I want to make it clear that cutting the salt intake of Americans is not the aim of an "industry crackdown." It's simple: people who aren't dieing from high blood pressure-related complications will die from something else. After all, people must die at some point. Thus, life-sustaining care will manifest itself in some other area, and that's something that the study doesn't take into account.

Let me reiterate: let's assume that the tax on salt would indeed cut salt intake by 6 percent, and "[result] in 327,892 fewer strokes and 306,173 fewer heart attacks." Let us assume further that the cut in salt consumption would make many high blood pressure medications superfluous, saving the government money in these areas insofar as people use government assistance programs and the like. This is not unreasonable, per se, and I wouldn't debate it.

But we must consider that often, individuals with high salt intakes have a bad diet to boot, and there arises a whole caboodle of problems that, frankly, kill people. If we're still talking about people who use the government dole to pay for their medical care, there's no reason to believe that a new set of complications wouldn't be covered by such aid. Worse, still, is if people live longer while on government medical aid; costs haven't decreased in such a scenario.

The problem with this study is that it's just a snapshot of the state of things minus people with high blood pressure. This is understandable, but no less fallacious, considering the impossible task it would be to map out all the other scenarios and ways that people could die if not from high blood pressure-related complications, and how these paths would affect medical costs for the government.

It's like justifying a tax on tobacco by citing lower medical costs. But that's dubious, if smokers die at a younger age, requiring less medical care than otherwise, thus saving money in the long-run.

So, it isn't about costs. It never was/is/will be about costs, because the government multiplies the cost of anything it breathes legislation on.

Instead, this is about control. Every damn thing they do is about controlling every facet of your life.

The Elephant and the Ant

2010-03-02T01:04:00.007-05:00

This is why you don't give anybody the authority to take your income and monopolize arbitration.

"Working with the food industry to cut salt intake by nearly 10 percent could prevent hundreds of thousands of heart attacks and strokes over several decades and save the U.S. government $32 billion in healthcare costs, U.S. researchers said on Monday."

The U.S. government wouldn't have to save a damn dime in healthcare costs if it wasn't in the entitlement field in the first place.

"The team estimated that a government-industry effort could cut Americans' salt intake by 9.5 percent."

There is no "government-industry effort" when the former party has compulsory jurisdiction over the latter. As Thomas Sowell put it, "When there is a partnership between an ant and an elephant, who do you suppose makes the decisions?"

The writers of this article know that the above is true, because just a few lines later they write,

"By contrast, a tax on salt would cut salt intake by 6 percent, resulting in 327,892 fewer strokes and 306,173 fewer heart attacks, the team calculated... If cooperation is not voluntary, new regulations on sodium content of processed and prepared foods might be necessary..."

With this said, I must observe that conservative pundits are too late when they talk about the dangers of giving more control to the government over our health matters. This article clearly proves that they already have too much control.

49 Stars And Counting

2010-02-28T09:37:00.002-05:00

Hope you saved your Haiti-aid receipts: Another quake, this time in Chile.

Thankfully, however, this one didn't wreak near as much destruction, so we won't have to see humanitarian plight every time we turn on the tube. That is by far the worst part about disasters, disease, and celebrity deaths/scandals: I have to see/hear about it everywhere I go.

And before you say it, I'm not insensitive. I just don't care much for countries that deliberately made themselves poor through inane policy over the years. You can cite "building codes" all day long as a major factor in saving lives, but that's not necessarily true, because building codes keep marginal builders out of the market, possibly hurting a far greater number of people that don't have a natural disaster speaking up for them.

Have you noticed that H1N1 hype has just plummeted to nothingness? What happened to all of that? Kind of like every other potential plague... false alarm. This is why I don't take media hype seriously, even when it involves tsunamis and food poisoning. It never materializes like the professionals say it will.

And I was looking forward to having only 49 states. One step closer to smaller government, eh?

Around The World In A Few Weeks

2010-02-25T00:07:00.004-05:00

There is a dearth of formalized material about the international monetary system relative to the Fed, U.S. fiscal policy, and many other macroeconomic features of the U.S. economy in standard macro and monetary textbooks, or so I've found.

So, I spent a lot of today looking for stuff that would help me better understand it all. I started my search with the IMF, because it seems very political and thus should put a human face on these concepts for me.

I found a book about World Bank and IMF aid to Pakistan. It's pretty decent, even though it relies exclusively on econometrics and empirical analysis. I read a bit of it today, and have established that as far as Pakistan goes, between 1972 and 1999, IMF aid is negatively related to gross output. Imagine that!

I found a 33 minute video with Paul Krugman and some other important guys. It was not helpful at all; it was more of an emotional appeal about the conditionalities of IMF loans, if you could even call it that, than an educational video about the causal mechanisms of the IMF. I saw one on Jamaica a year ago, before I cared about this stuff, and it played the same guitar string. This reaffirms my suspicion that the IMF is very politicized, at least externally, and like so many other issues plaguing economic debates, true knowledge of the subject is possessed by few.

Tonight I went to Wikipedia to learn about IMF SDRs, and then to CATO to learn why SDRs will likely never become an international currency.

All in all, a productive day. I'm going to dabble on the IMF for another week, then onto the World Bank, and then so on.

No Good

2010-02-24T21:00:00.002-05:00

I was looking over an intro Macroecon book, through the chapter about the Fed and specifically the federal funds rate. Here's what I found funny:

"Memory Hint- Are you trying to keep the federal funds rate and the discount rate straight in your mind? The words "federal funds" begins with two f's. If you push them together, they look like two sleeping bags side by side. You can use this to help you remember the federal funds rate is the overnight lending rate."

Really, sleeping bags? Let's see... "ff". Nope, horrible. That 'trick' is more to remember than what the fed funds rate is itself, anyway.

Cute, but fail.

The Problem That Begets The Rest

2010-02-23T13:10:00.005-05:00

Dr. Mario Rizzo talks here about French politicians getting their panties in a knot over a restaurant chain serving halal food in order to attract Muslim customers. From what I hear, French society is quite secular and worships at the alter of 'reason.'

I translate this as worship of political correctness and everything that is not individualism. Notice that non-ecclesiastical governments specifically discourage religion, nonviolent crimes, and anything else that doesn't propagate and extend their sphere of control. That is largely the state of affairs in many OECD countries, and the U.S. takes a few steps down this path every day.

I bring this up because Dr. Rizzo hits upon a theme that pervades my thought:

"Even more fundamentally, private property involves the right of private individuals to make decisions about resource use. And since some uses are incompatible with others, private property must imply the right to exclude." [Emphasis mine]

Very few people follow that last line of reasoning to its logical conclusion, and even Dr. Rizzo himself is, I'm pretty sure, a supporter of democracy as a form of government. The right to exclude, however, precludes this possibility.

If there was one idea that would bring about a revolution in the way policy is designed and the way people live their lives, it is that a civil society can only be based on the right to exclusion. If more folks realized this and accepted it, I feel that many 'problems' would be exposed for the paper tigers that they are and would be solved instantaneously.

Instead, ignorance of exclusion lands us right where we are today.

Some People Just Don't Get It

2010-02-22T10:44:00.005-05:00

It's incredible how supporters of the left think they can engineer the economy like it's nobody's business. It doesn't matter how many times price controls fail; they're going to do it, anyway. Take, for instance, the following:

This is the Yahoo! news feed. The first link I've circled is a link to a video of Obama's new healthcare proposal, which involves, among other things, "giving the federal government new power to block excessive rate increases by health insurance companies,” [NY Times]. The link right below it leads to a story discussing the 'hidden' consequences of recent credit card reform, which involves, among other things, a restriction of overall consumer credit and annual fees that had been up to this point done away with for many credit card customers.

They're like the zombies in video games that walk into a closed door, and because they don't know how to open it, they just keep walking into it, hoping the result to change. They see only what's on the other side of the door, but have no idea about how to get there.

Racism as a Consumer's Good

2010-02-21T00:11:00.005-05:00

Legal Insurrection blogged here about the concept of "white privilege," and how there is an actual organization out there that aims to "Involve a multitude of people... in the discussion of how white privilege, white supremacy, and oppression affect their everyday lives." There is an annual "White Privilege Conference" going on and I'm assuming that this is somewhat pervasive throughout particular universities and community activist groups around the nation. The WPC webpage (or an affiliate, I don't care) is here, so you know I'm not making this up. I will not, however, give these nobodies anymore space than I already have on this blog.

Instead, I want to break out the horse pill that nobody can seem to swallow: I don't see racism as a bad thing, per se. I don't see the preservation of culture, habit, and familiarity as a social bad. On the contrary, racially homogeneous communities have a knack for remaining tightly knit and cooperative amongst themselves (Think Jewish ghettos and Asian communities within this country). I'm no expert, and I am not saying that high correlation of relatively peaceful interrelationships and racial homogeneity is causation. But the urge to associate with like-minded, physically similar folks with a common lineage is not something to spurn. I'm willing to bet that 'racist' inclinations are ingrained on the biological level. That is, nature is often the primary cause of racist sentiments, and nurture then exacerbates those natural tendencies. This need not always be the case, but at the same time, if the foregoing is even sometimes true, then it implies that anyone and at anytime, be him black, white or else, is biologically inclined to discriminate.

This does not imply racial violence, but this does mean that there exists the possibility that white (black) business owners will tend to higher a white (black) man over a black (white) man, given both are of equal skill. This does mean that racially integrated communities will have 'disintegrating' tendencies, and no amount of social engineering can change that.

If this is the case, then the WPC and all similar movements are futile. Even if we somehow erased history clean of all racial bigotry and pernicious discrimination, it would still manifest itself as a social preference. Kind of like how I don't like the taste of carrots, but I love me some raw salmon.

I can't apologize for that.

A Follow-up

2010-02-20T00:33:00.003-05:00

While fresh on private property rights, I must go back to my previous post about ridiculous "libertarians" and "economists."

Yesterday, a man crashed his plane into an IRS office. He is quoted as saying before the crash,

"I have had all I can stand. I choose not to keep looking over my shoulder at 'big brother' while he strips my carcass."

Although I don't agree with the means this man employed to get back at 'big brother,' I think it is unjustified to say that he was unjustified. This goes back to the theory of law and property that I subscribe to (here in MP3). Essentially, I own 1) myself, 2) anything that I appropriate that is not already appropriated, and 3) I am free to exchange with others and can come to own the property that I acquire in exchange. This is the foundation of a civil and functional society. Thievery is inherently self-defeating because there is no justification for giving any number of people the authority to take from others what was not originally appropriated or exchanged for themselves. If one man can do it, all men will do it.

The way that a private property society is reinforced is simply self defense. I am justified for hitting back when the thief hit me first. So, is our IRS bomber doing what he has the right to do? I'd say so. I don't think that in the long run it does us any good, but it cannot be denied that he focused his attack on the very agency that robs him. The workers within might be semantically 'innocent,' but most people in this country support taxation and thus, whether they are aware that they are technically thieves or not, they are apart of the problem. Call me self-righteous, but I am sticking to a firmly-grounded gun.

This is why I was so hot at Tyler Cowen for saying that there "exists a case for a VAT." This is simply not true. There is never a case for taxation, be it income, value-added, property, etc. There is never a case for thievery. I know it allows economists to dabble and play and have a grand time, but taxation is not justifiable.

Moreover, even if we discount the private property theory of law and look at this issue from a purely 'economic' standpoint, hooking up the federal government to another form of life support will not get us any closer to long-run equilibrium. This kind of cop-out obfuscates the issue at hand, and that issue is the monopolization of the use of force. This pernicious detail is the bleeding, pumping heart of our economic woes, and it should not be forgotten.

Avatar: A Libertarian Exercise

2010-02-20T00:09:00.005-05:00

I saw Avatar for the second time tonight (but in 3D IMax). It was entertaining, not amazing, and I wouldn't have ever seen it again had it not been for the 3D part. I found many politically interesting things, though:

This is the main character, Jake Sully, fighting the evil humans at the end of the movie. He's fighting humans because they want to extract a precious mineral, unobtainium (valuable stuff), from the Navi's (the blue people) home world. Extraction involves destroying the Navi's sacred trees and land, and all the wildlife therein.

James Cameron is a leftist, and the entire movie reeks of corny environmentalism and hatred of anything capitalist and U.S. military (it's great how the 'agenda' always pits those two on the same side, ain't it?). I found it funny, though, that towards the end of the movie, Jake Sully makes a speech to his Navi buddies that they will not let the 'sky people' (humans) take their land. Essentially, the movie ends up being about a battle for property rights. Cameron, whether he knew it or not, blew the chance of Avatar being a propaganda piece for environmentalism. Environmentalism scorns private property, because property owners usually don't care about slugs and ferns as much as environmentalists would like them to.

Cameron, though, couldn't pull out the unifying climax at the end without a rallying point. That rallying point had to be the land owned by the Navi. Americans wouldn't have bought anything less than that. Our culture does not think in terms of the commune-ideal that intellectuals and utopian leftists would like them to.

Even if a given culture did, I'd hesitate before saying that this movie would have been nearly exciting had there not been a battle over property. Think about any 'epic' movie, from Braveheart, to Dances With Wolves, and even Star Wars: they all revolve around pitting property-takers against property-owners.

Ironic, but one could argue that this movie is way more libertarian than it is leftist.

I Don't !@#@$&* Know

2010-02-18T23:40:00.003-05:00

When guys like this write stuff like this, I feel like I've been asleep at the wheel the entire time.

Sometimes I'm not sure if they do it just to get hits on their blogs/books/TV shows/etc. or if they really are as ridiculously eccentric as they appear to be. If the former, all the more power to you. You remind me of an unamusing Glen Beck, and nobody was really taking you seriously in the first place. You're a no-count.

If the latter, please, stop. Go home. Stay inside and unplug the router. Your 'hit' books were a waste of time, anyway. Your writing style is no fun to read, and the only person more confused than each of your ardent followers is yourself.

My criticism stems from reading books and articles from 'professionals' like the guy above, not just this particular article. Specifically, their writing style and subject matter is so aberrant that it's annoying. Reminds me of economists and sociologists that claim they'll have you "looking at the world totally anew after you hear/read this!" Except, I never do. I only become more cynical about working with these total narcissists in the future, and maybe accidentally reading three or less words from them again.

Maybe I'm just not the kind of reader I need to be to stomach their silliness. I've always liked textbooks and straight facts focused on a subject, not books on how to get my kids to do the dishes and where I should eat at in New York, both in the same book.

Maybe I'm dumb. Honestly, I really think it might be this one. So many people have wet dreams about guys like this; what's my problem?

1.5 Years In The Making

2010-02-17T22:23:00.005-05:00

I've studied economics at an increasing rate over a 1.5 year span. I started with neoclassical textbooks, then read Reisman, and then was introduced to Mises and the Austrian school. However, I really didn't know much about anything until I read Man, Economy, and State last summer. Until then, I didn't have a reliable paradigm to work off of. Sure, I had knowledge of political economy and the like, but nothing that really let me sink my teeth into economic history, abstract theory, predictions, etc. Also, in acquiring my B.A., I've been bogged down by math and science classes that, in their own right, are interesting, but have nothing to do with economics. I'm really hoping I get into the school of my choice so I can dedicate in full my next few years to this stuff.

But if I had to do it all again, or, if I could give somebody just starting out some advice on how to go about acquiring a solid economics background, I'd say this: Start with Rothbard's Man, Economy, and State (Do not purchase the study guide). Then immediately follow with Landreth and Colander's History of Economic Theory. Then, go back to Man, Economy, and State, and in tandem with this, dabble on the footnotes and recommended readings of MES, to acquire a firmer understanding of the subject matter. After this (or alongside), I strongly recommend a neoclassical monetary economics book: Checchetti's Money, Banking, and Financial Markets is really good (get one from another author to gain a broader point of view, too). After these, one should be well-equipped to tackle Human Action, any of Hoppe's books, Knight's Risk, Uncertainty, and Profit, and the list goes on. This should all take about 1.5 years, and would leave one with plenty of time to complete all other undergraduate work, no matter the degree.

One might say that my recommendations are lop-sided, but that's wrong. I had to work my way through the muck and nastiness of the books that leave you with nothing to remember or think about in the long-term.

For instance, I made the mistake of reading Human Action when I was just starting out. I wanted to be ahead of the game, but it left me feeling more lost than I had started. And, I wasn't able to enjoy gems like this:

"Animals are bestial and inhuman precisely because they are such as the iron law of wages imagined workers to be." (Mises, Human Action, 1963, p.628).

The above statement is made so much more appreciable when you have a knowledge of not only who Malthus is and why animals are factors of production, but also when you realize the controversies that surround(ed) such thought, too. The above statement is also the more special when you realize how many economic historians look upon Menger, Mises, and the Austrian school with ignorance, disdain, pompous arrogance, and as "ideologically biased." You realize that the mainstream is flat wrong concerning the school, and it leads you to question the assumptions you've carried your entire life about 'facts,' science, and mainstream scholastic thought.

I'm really enjoying reading Man, Economy, and State again, and going through the footnotes and the actual texts that Rothbard cites (like Mises!). It makes me look forward to the next 30 years, and the work I will pioneer.

The End

2010-02-16T11:17:00.000-05:00

is near. April 30th, 2010, at 4 PM, I will no longer be an "undergrad."

Who Cares About Bill?

2010-02-12T19:56:00.005-05:00

AP sent me the above photo early this morning. Don't worry, Willy, I'm second to Twitter with my girlfriend, so I know how you feel.

But really, does anybody care about Bill Clinton anymore? Not like this guy made front page news with his heart, and I can't even find any stories on Yahoo!'s main page anymore. I'm willing to bet Fox news lost revenue when they ran the alert on their network.

If 1) how many stories about a particular event are written and 2) how long any particular story stays alive is any indication of consumer preference/interest, Bill Clinton ranks low.

Update: Yesterday, the 11th, Bill ranked #2 on Google's 'Hot Searches' list. Today, he doesn't even make the top 20.

I rest my case.

Trash On The Steps

2010-02-11T20:29:00.004-05:00

Look very closely at this picture. Notice the 14 or 15 people shoveling the Capitol steps, on a day when the Capitol is closed due to snow. Also notice that only 2 out of the 14 or 15 are actually shoveling; the rest are looking around in a stupor (I've arrowed them). Also notice how much snow is still left on the ground even with all that "man-power."

I wish I could say that if it wasn't for the stimulus, this wouldn't be happening, but that's false. This happens every season. And then this caption elsewhere:

I wish Washington would stay frozen. Our standard of living would go way up.

My Trump Card

2010-02-04T02:33:00.003-05:00

Rothbard's articulation of utility being an ordinal, and not a cardinal, concept comes in handy. When all else fails, I pull it out of my little bag of econ tricks. I did it just now in a paper I wrote about open markets for organs, and how the Organ Transplantation Act of 1984 kills people. I tried to upload the paper to the blog but I don't think I can upload files here.

Anyway, what stinks about such a trump card is that it's unheard of in the mainstream. By accepting Rothbard's point, you have to also accept the fact that coercive government as a whole is not only pernicious but unjustifiable, too. So, by default, I can't really use this defense outside of free market circles.

Does anybody know of a good refutation of Rothbard's welfare analysis?

Fed Stuff

2010-02-01T10:08:00.002-05:00

Dr. Robert Murphy here writes in totally unambiguous words and terms, what the Fed is. He attacks it with more force and on more points than I did below.

It's a damn shame that not only does my Monetary Economics book (for Junior/Senior college students) not connect the dots about the giant counterfeiter called the Fed (but instead feigns justification for it), but it and all other Monetary books I've looked at about the Fed simply leaves out one or more features of the Fed-Treasury connection altogether.

The following connection is the one that I've never known about, that NO macro nor monetary book has ever disclosed, and in fact I just learned about it today:

The Fed can roll over the U.S. Treasury's bonds that come to maturity. The Fed can give rain checks on debt due to it by Uncle Sam.

"You know, I'll just pay for my 3.8 trillion dollar budget... ummm... never!"

Between artificially low interest rates the Treasury already gets to borrow at (because the Fed remits its 'profits' on interest back to the Treasury) and the fact that the Fed's demand for Treasury securities pushes up the bond price and thus lowers their yields, PLUS the Treasury never having to pay a debt in full, there is no surprise as to why the govamint might want to take over, in full, the health industry. We now realize that taxation is not primarily a means to raise revenue but is instead for exacting retribution and to better mold the social landscape into their ideal community.

The government controls its own wallet, plus the prices people pay for its 'services.' It also controls most educational institutions and the methods taught therein, thus it has considerable sway over intellectual opinion. If it can get its hands around the health industry AND legislate over a natural byproduct of our metabolism (CO2), the private sector will be completely enslaved by the public apparatus. You can't vote your way out of a situation like that.

My Monopoly Position

2010-01-31T00:57:00.004-05:00

That's right, I have one and I didn't even have to use the govamint to get it!

O'Charley's, a restaurant two buildings down from my place of employment, went belly-up this morning, and less competition means more profits for me! Now it's us versus Christopher Seafood Co., all alone in the wide-open parking lot of Wal-Mart, Tropical Smoothie, and Ross. Yes, we were getting quite a few O'Charley's residuals all day, and I did pretty handsomely for a Saturday.

I figured I'd go and sabotage Christopher's grills or refrigerator compressor (even better because they'll likely serve spoiled food before they know it's ruined, and they'll have a law suit on their hands), thus solidifying our locational monopoly at the southwest corner of Kernan and Atlantic Blvd.!

All in a day's work. Long live Me, the King.

Wait... damn it. I just realized that I'm sure to be reported to the FTC and the DOJ Antitrust Division.

Crap.

An Inverse Business Cycle

2010-01-29T00:54:00.004-05:00

Consider this: If the U.S. treasury can issue securities purchasable by private brokers and individuals, and if the Fed can and emphatically does purchase these same securities through open market purchases as a way to maintain interest rates and the integrity of the financial market, and if any profits that the Fed makes above its 'operating costs' goes back to the treasury, then:

1) Isn't Uncle Sam essentially getting loans at a big discount? Here's how I see it: tax revenues pay back the bonds issued by the treasury that are in hands of the Fed. The Fed pays itself and returns what's left over to treasury. Depending on how much is left over determines the discount on the loan. Now, I haven't stated anything new here, for this is what this guy is saying. In fact, Machaj calls it the modern "print on demand" scheme, and he's right. But he's missing something, and that's my number 2 point.

2) As this is totally unscripted and I have no facts to back this up, but instead a strong intuitive argument, the Fed turns up the heat in times of economic crises with its massive open market purchases and low fed funds target rates. I'd be willing to bet that more treasuries, and I mean significantly more, treasuries are purchased in times of economic downturns (In fact, the current recession is proof of this). But if this is true, then referring to 1), a significant amount of that money goes straight back to the treasury. And if this is true, then one could argue that the government has a business cycle that is the opposite of the one characterizing the private sector. That's right: Uncle Sam benefits off of our misfortune.

Add my second point onto the fact that in times of crises, popular liberal tax-whatever-moves and Keynesian spend-whatever-isn't-nailed-to-the-floor policies run rampant, and we have a knarly witch's brew of government mayhem. This theory explains more comprehensively why the current administration does nothing to make more attractive investment prospects at home; this explains why trillion-dollar deficits, over-reaching climate bills, and a total takeover of the U.S. health industry are all on the table and being played. This is precisely why the congress and president scoff at anything related to making and maintaining jobs in the private sector. This crisis is exactly what they want to happen; they couldn't do this stuff without it.

Economic recovery = Bad news for the nanny state. End of story.

The Ivy League Paradox

2010-01-27T23:45:00.009-05:00

Universal education, or state-mandated education for all, is prevalent throughout the civilized world. Ironically, it is the scissor that cuts the threads of civilization. Forget the Paradox of Thrift. I call this the Ivy League Paradox.

Instead of intensifying the social division of labor in terms of education and intellectual endeavors, universal education dumbs down the content & concepts of its courses in order to be 'all-inclusive.'

In the free market, folks tend to find themselves in places where their needs and wants are best met, that is, where they can obtain the most resources while at the same time enjoying the greatest psychic benefit. The only way, short of theft and thievery (which is inherently discouraged in the market), that man can provide for his wants is to serve others in exchange relationships. Man realizes that if he is to maximize his wealth, it is in his interest to do that which society values most. Man will also take into account the disutility of labor, and through his judgment man will weigh such disutility in light of the gain to be made through the providing of wants of others. Only men on the individual level can pursue and obtain the right mix of these two factors in order to maximize their overall psychic benefit, because only they truly know what makes themselves happy.

Even in the hampered market we live in, we see the division of labor at work every day. College kids choose a major to their liking while at the same time weighing the incomes associated with their choices; Steve Jobs, excellent at entrepreneurship, makes great products that others can only dream about doing; Brett Favre and Drew Brees are quarterbacks for the NFL, as opposed to investment bankers and limo drivers; people with high time preferences and little resolve to acquire an advanced education tend to find themselves in entry level positions, such as restaurant cooks and ditch diggers, where they balance their own disutility of labor in the form of studying and specializing in a specific field against their desire for income and wealth. Even in the absence of state planning, everybody kind of goes where they not only want to go but also where they are best suited to go, relative to the desires of everybody else. I don't want Brett Farve managing my finances and I sure as hell don't want my coworkers at the restaurant operating on my heart and prescribing my Dad's medications.

Enter compulsory education, mandated by the State. People who have no desire to educate their minds, must. People who have not the ability to make anything of a formal education, must still go through the motions, even though it benefits nobody except those that derive a psychic income from the knowledge that 'society is smart.' Instead of folks entering the workforce at age 10, providing for others goods and services that they desire, and moreover finding out what they are best at doing at an early age and then specializing in that field, they must delay their talents and skills. People who otherwise would have been brilliant landscapers, excellent mom-and-pop store managers, shrewd investors and ingenious inventors are likely stuck in the theoretical mathematics department at a small college, or are integrated into a political machine vying for power, or were disenchanted with the whole process and now produce bastard children. Anecdotal hyperbole, but very real. But this is the paradox: what was supposed to produce more geniuses, a generally better-educated populace, and at the very least a literate body of citizens is failing to do so, and this failure is inherent in the very nature of compulsory education.

Imagine compulsory swim teams and running squads: Few individuals are biologically capable of such activities. If participation in these sports were mandated and forced upon a population, any standards currently in place for those who run because of innate ability or the sheer will to do so would ipso-facto have to fall in intensity in order to produce an acceptable 'pass rate.' That is, the quality of runners as a whole would fall relative to what it would have been. This has to happen or else the program is exposed as the fraud it is because half or more of all entrants are failing out. The resources dedicated to bring everybody up to the level of the 'ideal runner' are being wasted, and instead are producing something else that nobody not only intended to produce, but didn't want in the first place.

Ivy league institutions and gifted programs prove far too much. The reason for their existence underlines the fact that not everybody, and in fact very few individuals on earth, are capable of the intense intellectual division of labor called scholarly education. These institutions are in fact outgrowths of the division of labor, whereas mandatory public schools and community and public colleges, financed by taxpayer compulsion, are physical manifestations of the revolt against intellectual specialization. Granted, even Ivy league schools are funded by the taxpayer, they are still given sizable grants by private individuals, far more than are generally public institutions. If this is not enough, look no further than at the scholars at think tanks such as the Mises Institute, which is provided for solely by donor contributions and product sales, and produces outstanding work, judged so by its customers.

You can well guess what the state of education would look like in a free market. Think a lot less grade schools and 2- and 4-year universities, and a lot more specialized institutions with extremely stringent requirements, funded by donor contributions and corporate support. Indeed, why would customers of failing school systems continue to shell out dollars for those students who have no interest in learning, and more so for students who will not apply anything he learned to the practical world after schooling? The fact that education is at current compulsory proves this feature of a free market.

What Spending Freeze?

2010-01-26T20:16:00.007-05:00

Liberal pundits and bloggers across the net, found

here

here,

are decrying Obama's upcoming proposal for a spending freeze, and comparing it to the likes of Herbert Hoover.

I've pulled a chart from the Budget of the United States Government, and right below we can see federal spending during Hoover's time as President (March 4, 1929 – March 4, 1933), and I've included a few years before and after, too:

I've made it perfectly clear with clever arrows and plus signs that total outlays increased every year of Hoover's presidency. Granted, this does not prove that spending is less than it otherwise would have been, but not only is Hoover not of the thrifty magnitude the pundits above describe him to be, I can't even find on record talk about some federal "spending freeze" during the 1929-1933 era. None of the pundits site this alleged factoid, and I've looked through a history teacher and Wikipedia. I'd like to believe that these folks are more than just talking points, so if you know something I don't, enlighten me!

I Told You I Was Good

2010-01-21T21:54:00.003-05:00

Who needs a college degree? I told you here that there does exist a market for endangered species.

I was right according to this, and according to elementary economic theory, but who believes that silly stuff anymore.

Thanks, Dr. Perry.

Pragmatists Aren't From Mars, After All

2010-01-20T23:18:00.004-05:00

On the one hand, Haitian immigrants might expropriate our property through the vote. They might not. Is this a mark against open immigration as such? I concede: Of course not, but instead it is a mark against majoritarian rule (the similar critique applies to my concerns with the welfare state and its usage by immigrants, too). I am obviously concerned, however, with the state of how things actually are. But Block is right (here) that being a pragmatist and going against your philosophical starting point is or can be a slippery slope.

Makes me think: What if, tomorrow, the U.S. found out that, say, Costa Rica has been plotting against it for decades, and has the complete capacity and intent on blowing every square mile of U.S. territory to bits? In fact, the U.S. knows when Costa Rica is going to do this, and the U.S. also knows where such weapons are located (no, really, we know this time) and could peremptorily strike first, preventing the whole shabang.

Is military intervention justified?

Certainly not from a Libertarian point of view. U.S. military intervention would involve the expropriation of resources via taxation of U.S. citizens, and if just one taxpayer said, "To hell with ya," it is unjustifiable insofar as the so-called 'non-aggression axiom' is concerned, the very axiom that the branch of libertarianism I am familiar with is based upon (I am excluding the possibility of a private military/defense force for illustrative purposes).

So, it's plausible that the U.S. is blown off the map by sticking to Libertarian principle. That's right, my nonexistent white culture: gone, along with all my buddies and family members.

Clearly here, it would pay, like it would with immigration above, to be a pragmatist, at least in the short run. The question is this: Even if we know as a metaphysical certitude that immigrants from country X are going to use the ballot box and the welfare state to expropriate our property and convert our kids to baby-vacuuming atheists and thus ruin our society, should we then step in and violate the initial axiom by fighting against immigration, or should we focus our efforts on the welfare state and the ballot box as such?

I do not condone Mr. Greenspan, as I hate the Fed with every bone in my body.

But I understand. It is a difficult decision to make.

Best Way to Help Haiti?

2010-01-17T22:44:00.009-05:00

Art Carden argues at the Division of Labour blog that the best way to help the poor is to conduct an open-borders policy, thereby enabling individuals with fewer opportunities for economic advancement to come here and pull themselves up by the boot straps, or something like that. As much as I love Carden's lecturing style, he's dead wrong with this one, as are all other libertarians whom preach an 'open-borders' policy.

It would be one thing if all land was owned by individual, private owners: this includes buildings, homes, businesses, parks, roads, and all other land that possesses value. Then, we wouldn't be talking about an open- or closed-borders policy in the first place; the decision to include or exclude foreigners (this includes anybody not given advanced permission to enter a specific property) would operate on an individual basis, that is, property owners deciding what is best for the value of their own properties. In this way, no state is involved, and no board of bureaucrats and satraps decide for the community what's best for them, be it multiculturalism, isolationism, or otherwise. Business owners can exclude anybody based on any criteria if he so pleases, be it race, age, sex, religion, haircut, number of teeth, etc. We would expect that miscreants, delinquents, hoodlums, and any other type of human black sheep to be excluded from social exchange on any given property, as this would raise that property's value. This and similar policies would discourage such behavior, and if one considered such nefarious actions a psychological 'good,' he of course could admit the lowlifes on his own turf.

In present-day America, however, the situation is very different. The state owns the interstates, highways, 'public property,' considerable airspace, and even residential homes. The government has also made it illegal to exclude individuals from privately owned property on any physical basis, before a crime of some sort has been committed. One cannot discriminate when selling property, and no matter who you are or virtually what kind of criminal background you possess, if your income is low or nonexistent, you qualify for housing, food stamps, and other kinds of aid (cell phones, cable television, etc.). We see how our current society is strikingly different from a private property-based society, where there is no state to willy-nilly its subjects based upon the current political fashion.

Now, the problem with an open borders policy in our current society is this: Even if we assume that foreigners net an economic benefit to society, that is, that whatever malfeasance and misconduct they exhibit is outweighed by their labor productivity and diligence, we cannot say that society as a whole is better off. Humans do not derive psychological benefit just from economic, real-dollar profits and higher material standards of living. Those same foreigners who are economically profiting society might just as well be culturally degrading it at the same time. With state-owned roads and without the ability to exclude anybody short of blatant criminal misconduct, anybody can waltz into my store, move into my community, and utilize the public services system (transportation, education, etc.) as they please. Any reprobate can indirectly contribute to the degradation of norms, customs, religion, etc., of a society, thereby making many of its members worse off, even if the foreigner is assumed a saint in his own right.

Perhaps I see this more clearly than most; where I come from, "white" is a pejorative. I grew up fighting my middle school years away because of my white mannerisms, and in my neighborhood, I was violently excluded from an entire section by blacks my own age. I can't say the word 'nigger' in public, and to scoff at MLK day is heresy. Since I graduated, I have gone back as a substitute teacher to many black schools, only to hear black and hispanic numb skulls calling each other white, cracker, and uncle Tom. I cannot walk through the mall with my girlfriend on a Saturday night, lest we be subjected to racist and sexist heckling on the part of the overgrown baboons who populate these places. I have no real culture to call my own, because in places where white culture does manifest itself, such as the confederate flag and white hoods, they must be displayed in private, if at all. In fact, it is worse than mere white discrimination: blacks are extolled because of their misfortunes and ill-treatment in the past, and every day whites are made to feel sorry for actions that they themselves had absolutely nothing to do with. Holidays, months of the year and even presidential elections have come to stand more about race than any sort of substance.

I understand that similar situations can happen in a private property-based society, but I have serious doubts as to whether or not the situation a white male faces today is the same as a white male would have faced had landowners themselves been able to decide in full who it is they include or exclude on their own properties. My guess is, those who seek to suppress 'white' characteristics would be excluded from social interaction insofar as it takes place on property owned and operated by whites, because such nobodies would tend to depress their values.

In our current day, and on a much larger scale, there exists preferential hiring, diversity requirements (immigration and labor), minority scholarships, food stamp and welfare programs, and blatant reverse discrimination called 'affirmative action,' ALL of which assist other races and income classes at the expense of middle- to upper-class whites.

And this brings me to what I set out to destroy: open immigration, specifically for destitute Haitians. Haiti is the poorest country in all of the Americas, where more than 80% of its population lives in utter poverty. English is not a main language there, and foreign aid makes up roughly 40% of the government's budget. I'm willing to guess most Haitians are not familiar with classical liberal-libertarian property law and capitalism even on a primitive level, and thus most are friendly towards government interventionism. At best, then, open immigration from Haiti would import creole-speaking statists who hopefully will never have the opportunity or intelligence to vote. Importing them 'out of poverty' would make them better off at the expense of the communities they found themselves in, communities that had little to no say in who they wanted to import in the first place. Why must relatively free Americans be forced to suffer this kind of forced integration? This has become some sort of libertarian predilection that is utterly inconsistent with human welfare and the freedom of choice. 'Open-borders' in today's America is a euphemism for letting vagabonds and derelicts trample over what's left of property rights.

I understand that Haiti sucks right now, but that's not my fault. Their own government prohibits the preservation of private property rights and the movement of goods, services, and humans from one area to another. Importing crime, poverty, and ignorance into America via 'open borders' will not help their situation in the long run, and it certainly will not make mine any better off.

Ask me if I think it's fair to open up borders that I pay for in taxes, whether I like it or not, to at best creole recluses, and at worst human trash, subjecting my friends, family members, and even myself, to forced acculturation.

My answer is an emphatic no.

Synonym and Antonyms

2010-01-13T21:27:00.004-05:00

Usury, the lending of money at relatively high rates to borrowers, is listed in Roget's 21st Century Thesaurus as follows:

Main Entry:	usury
Part of Speech:	noun
Definition:	lending money at a high interest rate
Synonyms:	exploitation, stealing (emphasis mine)

Apparently, time preferences are equivalent to criminal acts. A lending money to B at an interest rate above the market 'range' is immoral and exploitative.

This, of course, makes absolutely no sense. In the first place, it's hard to criticize a 'high' rate as such because that very rate is a component of the going market rate itself (assuming there is such a thing as a market rate). But of course, there is no uniform market rate, like there might be a uniform price for, say, Ramen Noodles or golf socks, because whereas these are uniform goods, the interest rate itself depends in large part upon the borrower of the money, and let us not forget that money borrowers are anything but homogeneous. Some borrowers have poorer credit histories than others; some need greater amounts of money than others; some need a specific amount of money longer than others, etc. Enter the interest rate, the price of borrowed funds, that approximates these varying circumstances. All else equal, those who are better at paying back borrowed funds can borrow money for cheaper; those with little or no collateral or equity to buffer against unforeseen losses find it more expensive to borrow money, etc.

With my example above, it's all too plain to see why 'usury' laws are completely ridiculous. In the unhampered market, what is considered an 'usury' rate is simply a rate that reflects competitive market conditions on the lender's side (monopoly position, etc.) and the borrower's relative risk-level. Usury laws that dictate how high of an interest rate can be charged on loans only serve to exclude market participants. Put simply, if you are a borrower such that the market determines your interest rate to be substantially higher than most other borrowers, the government steps in and makes it illegal to loan you money. End of story.

What struck me sour, though, was that the dictionary labels the equivalent of peaceful market exchange rates, however high as they may be, as exploitation, when it is the government and its usury laws that actually do the exploitation by excluding classes of borrowers from the starting line.

Negative Returns

2010-01-10T23:05:00.002-05:00

When password requirements become too onerous, the level of protection decreases. Consider passwords of enormous complexity: x amount of numbers, y amount of capital letters, and z number of character entries. There is no easy way to remember such a complex combination, so a given account holder would now store the password on his PC, in a relatively easy location, such as his personal folder. Family members, roommates, and anybody else (all of which were the most likely to access his account in the first place) with the capability of accessing his computer will be able to find this information relatively easy, and thus the ridiculous requirement guaranteed a break-in.

Even if we relax one of the parameters, it is likely that protection will still be compromised. Consider a single requirement of only z number of character entries, say, 15. I will now string words together that make up a silly sentence, or perhaps my full name, or the like, whereas before I could have remembered a small set of 4 random numbers that excluded anybody else with ease.

Of course, none of this is guaranteed, but I do question the effectiveness of password requirements. However, they have guaranteed excluding somebody from the account with unbelievable reliability:

Me, the account holder!!!

What if Erwin Hunted Endangered Species?

2009-12-01T22:38:00.010-05:00

Or what if I did? After all, animal-rights activists don't play by the rules. If they did, they could decide that the population of a particular species is too sparse, and if they wanted to increase its numbers or preserve them, nobody would stop them from buying the property the animal is on and caging it or fencing it off. If somebody already owns the land on which the animals resides, the activist could bid for the animal in question; either way, the market has for 'endangered species,' like every other valuable commodity, a solution that doesn't involve anybody having to compel anybody else with a big stick made of solid fiat.

Instead, animal-rights activists lobby intensely for the preservation of these animals, which involves zoning and restrictive property rules. This only hampers the intensification of the division of labor, drives the price of surrounding land up, and at the end of the day, we're all subsidizing the valuables that nobody really values, at least not enough to buy those valuables themselves.

So, I've decided to take it upon myself to hunt down endangered species of all kinds. If animal-rights activists don't want to play by the rules of the market, which is a system based on mutual cooperation and peaceful exchange, then I certainly won't play by their statist rules. If they don't have anything to protect anymore, maybe they'll leave the rest of us peaceful market participants alone. I'm going to hunt bald eagle, red wolf, polar bear, Florida cougar, African elephant, and any other specie I can get my shells in. Endangered plants aren't exempt from a good weed-wacking and a dose of NaOH, either. It'll be great fun, all at the statist's expense.

What'd your econ teacher tell you about unintended consequences when fooling around in the market?

*Update: Check this out. Turns out what I described above is a third degree felony in the state of Florida, subjecting me to a term of imprisonment not exceeding 5 years.

Let's do it.

Enemies of Private Property

2009-11-27T21:41:00.008-05:00

Many blogs have "Markets in Everything"-type posts; I instead will have "Enemies of Private Property" posts. If I come upon a more clever title, I'll use it.

My inaugural jerk of mankind is none other than Martin Luther King, Jr. I am absolutely tired of race-baiters such as Al Sharpton and Jesse Jackson, all the way down to "libertarians/conservatives" such as Glenn Beck and Mark Levin, praising this enemy of private property. King did not stop short of discouraging Jim Crow laws and segregation on state-owned grounds; on the contrary, King lobbied heavily for the Civil Rights Act of 1964, which destroys the precious notion of private property probably most effectively in Title II:

"All persons shall be entitled to the full and equal enjoyment of the goods, services, facilities, and privileges, advantages, and accommodations of any place of public accommodation, as defined in this section, without discrimination or segregation on the ground of race, color, religion, or national origin.

Each of the following establishments which serves the public is a place of public accommodation... any inn, hotel, motel, or other establishment which provides lodging to transient guests... any restaurant, cafeteria, lunchroom, lunch counter, soda fountain, or other facility principally engaged in selling food for consumption on the premises... any motion picture house, theater, concert hall, sports arena, stadium or other place of exhibition or entertainment."

I need not go any further with this analysis because it is obvious that the Civil Rights Act of 1964 made absolute haste in destroying the definition of private and public property. The necessity of the ability to exclude others from privately-owned property is made perfectly clear when we realize that without this power, anybody could at any time rape our bodies, sleep in our beds, and drink our beer without reservation. State education has so baldly obfuscated this obvious point that to say anything negative about King is simply heresy.

King was also supportive of economic reparations and the idea of some form of "economic justice," which has long been popular amongst intellectuals and politicians. I need not talk about this because anybody not under the influence of heroine can point out the fallacies in such thinking.

Narcissism to the nth Degree

2009-11-24T00:47:00.004-05:00

The more I study math, the more I come across theorems with special names, often indicating who came up with the theorem in the first place. Consider the Cauchy-Schwarz inequality or the Rao-Blackwell theorem, or even the notorious Pythagorean theorem (catchy, aren't they?). Econometrics is loaded with these oh-so-cleverly named theorems, and I'm sure the physical science world is, too.

Now, because these theorems are factual statements about the real world, which embody all available knowledge that we have about it at present, and since these theorems in no way changes the composition of reality, I conjecture that Rao, Blackwell, Cauchy, and the rest of the Harlem Globetrotters were likely a bunch of otherwise trifling and paltry dweebs in the social realm, whose only hope of losing their virginity was for a hefty fee at a whore house. Instead of possessing even a shred of modesty and prudery, these pretentious boobs were impelled to slap their name brands onto the math homework of every enervated senior math student across the globe. Let's get it straight: These are not "Newton's Laws," and Poisson the man was irrelevant to the existence of the actual distribution. That is, these factual statements and equalities exist independent of the men whom discover them, and so it's quite silly to me that anybody should name these observations after themselves.

So here's to the guys who just weren't good enough to leave their mark anywhere else in life, who couldn't even stop their mentally-retarded bed partners from aborting the one modest chance they had at passing on their last names. Now, I'm taking a break from reproductive success to memorize your 'glory.'

My Kind of Superhero

2009-10-12T22:54:00.005-04:00

Incredibly cogent and compelling, Steve Wynn, CEO of Wynn Resorts in Las Vegas, serves up a brilliant riposte to the economic know-nothing governor of Michigan:

Mr. Wynn reminds me of my favorite superhero of 2009, Rorschach from the comic-turned-movie Watchmen:

Rorschach was the guy who had no qualms with doing whatever it took to uphold justice. He was no moderate, to say the least.

Inequality is a Great Thing

2009-10-09T10:52:00.002-04:00

Don Boudreaux over at Cafe Hayek makes an excellent point about income inequality:

If some persons are robbed of their property or are unfairly blocked from pursuing economic opportunities, that’s wrong and should be stopped. If some persons are so poor that they lack life’s barest necessities, they should be helped. (How best to help them is a different issue.) But neither of these problems has anything to do with income inequality. We would want to correct these problems even if doing so would make the income distribution more unequal.

He's exactly right that when a man should be helped is a separate issue from how he should be helped. 'Income equality' is a ruse (for many people, not all), because the desire to help those without basic amenities would still exist even within an egalitarian society. The whole notion of 'income equality' is an attempt to divorce cause from effect, the production of wealth from the earning of wealth.

I want to somehow incorporate the notion of the 'distribution of knowledge' in society, and how income inequality reflects it. But I'm not sure I can make it pithy enough.

Total income equality implies that all services in society are valued quantitatively, relative to money, the same by everybody. That means that water production, diamond production, Yuengling production, education, fine food, fast food, and on down the line, all of it is valued equally by everybody, thus rendering all producers of a product with equal incomes. This is obviously absurd because if I valued everything equally I wouldn't have much of any one thing to enjoy, because my income would be stretched so incredibly thin. If you could somehow partition people to value whole blocks of specific amenities all by themselves, so that they'll get greater amounts of homogeneous valuables, this would still be contradicted by the fact that all people still need water and food (thus ruining a partition scheme), and this demonstrates that some items will by the nature of being human be valued to a greater extent than other items.

In this way, income inequality reflects the vast unequal preferences of each and every member of society.

To deny this would consequently deny ourselves from enjoying our respectively unequal preferences.

Count your IQ, Instead

2009-10-07T09:52:00.003-04:00

Mother Jones -- Good news for haters of the nanny state: New York City's new law requiring calorie counts on chain restaurant menu boards doesn't appear to be making any difference. In fact, it might be causing people to eat more.

The results were pretty dismal: only about half the respondents even noticed the calorie counts and only 15% said they influenced their choice. But the receipts told an even more dismal story: overall, people actually purchased more calories after the law went into effect.

The second time I went to NY is the time I really despised it, in no small part due to fast-food calorie counts by every item required by its legislators. I assumed it to be damaging in the long run to smaller businesses that can't afford such requirements, and either way, its subtly-fashioned tyranny at its best. More so, I figured it wouldn't do any good because we already have calorie counts on the back of chip bags and cereal boxes in the super market, and if you haven't noticed lately, chips have their own aisle, as well as soda. Obviously, people don't care about calories as much as the satraps in Washington would like them to.

Anyway, this post killed two birds, in that it relates to my last post about condoms. Though not statistically significant, the results of this study found that consumption actually increased. Who'da thought? Now, because of the absence of statistical significance, I wouldn't go around saying it's a done deal, but just like the condom issue, we cannot a priori assume that what we do, even in totally fiat ways, will get the job done. In fact, we'll often find that government fiat actually encouraged the opposite kinds of behavior!

Now, will the bureaucrats running NY pull the calorie requirement off the table? Ask me if I like public schools, instead. This runs with my theory (which I can't really call it mine because I know other people have written about it [Hayek, but I did pioneer my brain into it before I read Hayek]) that governments have extremely poor feedback mechanisms. Hot issues take center stage often just one time, and no matter what the effects specific legislation actually procured after-the-fact, we are more often than not stuck with it.

'Condoms' in Society, Not 'Knowledge'

2009-10-06T19:44:00.006-04:00

Though my interests lie mainly with political economy, I do have those nerdy economic thoughts popping into my head from time to time. Now, I'm sure research has been done on what I'm about to propose, but either way, I know of no research.

Let's assume that condoms encourage more sex in society, because the use of condoms decreases the odds that one will knock somebody up or come down with the bug, which people consider bad, and generally seek to avoid these conditions. This may or may not be an accurate assumption, for one could counter that people are going to have sex just as much, with or without protection. True as that might be, it is an empirical question that I won't consider here.

Now, because people have more sex because of the existence of condoms, can we a priori say that societies using condoms will have lower incidences of STD contractions and unwanted pregnancies?

I think not.

Consider that a) condoms break, b) condoms possess a small margin of error without breaking, i.e., they don't prevent STDs and unwanted pregnancies sometimes, albeit a very small percentage of the time.

It comes down to an empirical question about the society at hand. Do the members of a particular society have so much more extra sex as to make the 'small percentage of the time' quite large in absolute numbers? That is, does the presence of condoms actually increase the frequency of STD contractions and unwanted pregnancies?

There are idiosyncratic situations that may or may not be considered significant, such as the scenario of the guy who thought he had a condom in his wallet, but found out he was wrong when it came to go-time, and said, "Screw it."(pun intended) This certainly does happen, but does it happen frequently relative to being right about having a condom?

Taking a guess, I would say that the presence of condoms in society generally gets the job done, considering the population growth of 3rd vs. 1st world countries, blaze blaze. But this issue isn't why I pose the question.

Instead, I'm questioning automatic assumptions that people have, regardless of having any evidence to support what they believe. Indeed, I've never looked into the effects that condoms have on societies, but I've always carried the notion that they generally decrease the rate of unwanted pregnancies and disease.

This is kind of like how people automatically assume that the government can do what it sets out to do, with the right satraps. Or, that industrialization or Splenda is inherently pernicious to human health. These two, in my opinion, are the easy fallacies to catch. But what other assumptions do we carry that are totally false? Is this phenomenon prevalent?

Alright, OK, what I'm really asking is, What assumptions do I carry that are totally false?

This question has been asked in many different forms, and it is often what economic research is all about. I don't think there is any uniform answer. But it is food for thought.

Took the GRE

2009-09-30T10:46:00.002-04:00

What a joke. I say it because I took multiple practice tests and at one point I earned a 790 (math), and at another I missed half of the test (don't know the score equivalent). On the real deal, I earned a 750 (math) and a 590 (verbal). But I could just as easily have earned lower on both (or higher), considering that I was nervous as hell and hated the whole process.

It's funny how graduate schools have you take a test that doesn't reflect anything you've learned during your undergrad years. I understand that it's one measure of many that admissions folks look at, but sheesh. I hated the whole thing.

Totally didn't study for the verbal, with the exception of vocabulary flashcards. I figured, "I know english, and I know big words, so I will do well!" Wrong. But I also knew that GMU and NYU econ programs don't look too much at the verbal.

I wonder if you can retake the GRE piecewise? That'd be great, but I doubt it. It's meant to be an enduring (3 hour) process for a reason, I suppose.

All in all, a valuable lesson learned in what is my first step into the inanity that is graduate school.

My Thesis

2009-09-23T22:34:00.006-04:00

AP -- With [increased] demand, [bullet] prices have also risen.

"Used to be gold, but now lead is the most expensive metal," said Donald Richards, 37, who was stocking up at the Jefferson store.

Actually, no, not at all. But I did discover something interesting:

It takes lead to make bullets, for sure, and the price of lead did increase right around the presidential debates, where McCain was at his prime idiocy. No, really, what a mooncalf. I suppose I could compare lead's price activity relative to all other industrial commodities' prices around that time, maybe I'd be on to something!

But seriously, we do see a jump in Oct. '08 and Jan. '09. I wonder how much of the lead market firearms and ammunition take up.

Something's not right.

2009-09-23T21:55:00.005-04:00

AP -- Bullet-makers are working around the clock, seven days a week, and still can't keep up with the nation's demand for ammunition.

Shooting ranges, gun dealers and bullet manufacturers say they have never seen such shortages. Bullets, especially for handguns, have been scarce for months because gun enthusiasts are stocking up on ammo, in part because they fear President Barack Obama and the Democratic-controlled Congress will pass antigun legislation...

Demand has been so heavy at some Walmarts, a limit was imposed on the amount of ammo customers can buy. The cutoff varies according to caliber and store location, but sometimes as little as one box — or 50 bullets — is allowed...

At Jefferson Gun Outlet and Range in Metairie just west of New Orleans, owner Mike Mayer is worried individuals are going to start buying by the case.

"If someone wants to shoot on the weekend you have to worry about having the ammunition for them. And I know some people aren't buying to use it at the range, they're taking it home and hoarding it." [Emphasis mine]

Interesting, I'm guessing the managers at a place like Wal-Mart aren't allowed to ad hoc raise prices during times of high demand. Kind of neat, in that smaller businesses are able to better provide in times of turbulent demand. But this is merely a conjecture. Although, it seems as though Wal-Mart of all places would be savvy enough with their merchandise to raise prices in a timely manner, as opposed to limiting purchases (and thus limiting their own profit potential). I wonder if the government is somehow involved in the bullet business? Wouldn't surprise me at all.

I added the last two lines simply to say "What the hell?" What business is it of Mike Mayer's to be concerned with what the hell people do with the products they purchase from him? He uses the word "hoarding" as a pejorative, like storing bullets for rainy days is stupid. If that's his stance, he needs to clear out his bank account, sell his investments, throw all the canned goods in his pantry away, and donate any clothes he hasn't worn in the past 3 days to the local Good Will. We can't go halfway when it comes to hoarding, sir.

Sheesh, Mr. Mayer sounds like a Keynesian!

The Silver in the Sand

2009-09-22T10:08:00.002-04:00

AP -- President Barack Obama says the United States was slow to recognize the magnitude of climate change, but that Washington is moving swiftly to catch up...

Addressing the U.N. Climate Change Summit in New York, Obama said his administration has made the "largest-ever" American investment in renewable energy. And he called on other nations — the rich and the developing countries alike — to rise to the challenge.

Obama acknowledged that pursuing costly environmental clean up is difficult at a time when the world is trying to recover from a recession, but said it has to be done. The president said "we did not come here today to celebrate progress," saying the conference dramatizes the need for even more work...

"We understand the gravity of the climate threat. We are determined to act," Obama said. "And we will meet our responsibility to future generations."

Obama is under pressure to put political capital behind getting a serious clean-energy law at home and show that the U.S., an economic giant, will do its part to cut heat-trapping emissions. The U.S. House passed a bill this summer that would set the first mandatory limits on greenhouse gases, but a Senate version appears increasingly unlikely this year.

Calgary Herald -- When a leading proponent for one point of view suddenly starts batting for the other side, it's usually newsworthy.

So why was a speech last week by Prof. Mojib Latif of Germany's Leibniz Institute not given more prominence?

Latif is one of the leading climate modellers in the world. He is the recipient of several international climate-study prizes and a lead author for the United Nations Intergovernmental Panel on Climate Change (IPCC). He has contributed significantly to the IPCC's last two five-year reports that have stated unequivocally that man-made greenhouse emissions are causing the planet to warm dangerously.

Yet last week in Geneva, at the UN's World Climate Conference--an annual gathering of the so-called "scientific consensus" on man-made climate change --Latif conceded the Earth has not warmed for nearly a decade and that we are likely entering "one or even two decades during which temperatures cool."

While they deny it now, the facts to the contrary are staring them in the face: None of the alarmist drummers ever predicted anything like a 30-year pause in their apocalyptic scenario.

Even if warming was happening, there's no reason to believe the buffoons in the beltway could do anything close to efficient to mitigate it. It's pure politics at this point, and as for 2009, the U.S. will not take any action towards the global warming paper tiger. In a world in which the media isn't held hostage by its own ideology, you would expect a story like the one above to hold several headlines on multiple major newspapers. Instead, we get President blockhead all over the Internet damning the U.S.'s egregious industrialism.

I'm thankful that a more moderate, less aggressive democrat wasn't put into office in 2008. Obama has thoroughly stretched himself so incredibly thin (health care, energy, prodigal social spending for the next x years), and has stepped on board with much baggage (a less than impressive resume of friends and ties with a criminal organization [ACORN]), I'm going to be bold and predict that he's a one-term president. He hasn't done much of anything this year besides appeasing car manufacturers, a ~1.8 trillion dollar deficit, and pissing off a major fraction of this country with his agenda. I couldn't ask for a better president, in a way, because

The best Washington is a divided Washington.

The Ceiling's Leaking

2009-09-22T01:32:00.010-04:00

I don't mean to beat the dead horse, but it's better to see it graphically:

One should draw the conclusion to never, ever, ever listen to a politician when he/she talks about the other party spending at "unsustainable levels." It's hubris at best and hypocrisy at worst. I say this because the Republicans were responsible for the first 8 years of craziness and the democratic executive and legislative has, in only half a year, made all that look like frugality.

I am of course not saying that government debt doesn't distort interest rates and private investment; it does. Because I tend to agree that all government spending is consumption because of its compulsive nature, an increase in the national debt (different from above) makes the citizenry worse off. The 2008 gross federal debt was 9.99 trillion dollars, and it is estimated in 2014 to exceed 18.3 trillion dollars. That's an 85% increase; will we be even .0085% better off? I will be, because I have plenty to write about over the next few decades. But you won't be.

It's funny, we have a debt ceiling in this country, and it was raised to $12.104 trillion by the American Recovery and Reinvestment Act of 2009. Have you ever made an expenditure that automatically increased your budget? Nor have I!

Tom's Idea

2009-09-16T23:56:00.005-04:00

taken a little further. The original post is here, where Tom McMahon came up with the funny idea. But I think Americans feel like this:
Again, this was derived from Tom's original post. His 4-Block World is very entertaining and original, check it out.

The Cost of Society

2009-09-16T21:54:00.005-04:00

Sometimes so much ridiculous stuff goes on during the week in politics that writing about it is beyond me. Current events are sometimes so blatantly ensconced upon a faulty premise that I'm confused as to why anybody would argue about it in the first place. I ask myself, "are we really considering this policy," or "do people actually understand what that legislation would do in the long run?"

Short of feeling dejected, I wrote what follows over the summer. In it is what I believe to be the case for the free market, that the required knowledge to even govern (by compulsion) effectively approaches infinity on a long enough time line:

Thomas Sowell of the Hoover Institution points out that, “The transformation of Western economies from agriculture to industry brought with it a reduction in the proportion of the population consisting of autonomous economic decision makers. However much “consumer sovereignty” was retained, as producers their role as fixed claimants to some extent insulated them from the direct consequences of their own decisions, largely by limiting the scope of their decision making itself.”[1]

Indeed, perhaps the only fathomable drawback to the division of labor and its advancement lies in its virtue, i.e., that we as producers become ever more specialized as time passes. Consequently, we are farther removed from the producing of all of our needs; yet, politically, we retain much ability to shape the overall economic landscape of the country. Inevitably, a disconnection between knowledge and decision-making manifests itself, and as the division of labor progresses, knowledge becomes exponentially expensive. This is not an argument for or against a particular political philosophy, but on the contrary, the cost of knowledge is likely to be the culprit when pondering the utter disparity in today’s state of affairs and yesterday’s reality.

There is always the price system that enables anybody to realize the state of affairs, whether he chooses to or not. However, this is only as far as a market economy is concerned and even this realization incurs the cost of knowledge; it seems as though contemporary leaders default on such transactions, and are extolled for it to no end.

[1] Thomas Sowell, Knowledge and Decisions (Basic Books, Inc., 1980), p.164

The Wedding Planner

2009-09-11T10:43:00.003-04:00

WSJ -- The use of special White House advisers and the czar moniker itself go back decades, but government watchers say President Barack Obama has appointed an unusual number of senior coordinators, especially for a president so early in his administration. They have responsibilities ranging from health care and climate change to Afghanistan and the auto sector...

One concern about czars centers on the fact that many of these appointments aren't subject to confirmation by Congress. To have them running the government, rather than simply assisting the president, "is an affront to the Constitution," Mr. Alexander said. West Virginia Democratic Sen. Robert Byrd warned earlier this year that the growth of czars could sap congressional authority...

But it is true that the Obama administration has broadened the ranks of special advisers, in some cases giving large portfolios to officials who might have faced difficulties in a Senate confirmation process. Some Obama supporters acknowledge that a Senate vetting process would likely have uncovered earlier Mr. Jones's controversial past.

Obama's rhetoric about "obscene profits" and "discipline" in particular industries, "cutting cost" in health care and "stimulating competition" via government fiat is all very revealing. There's no doubt, this guy's a bona fide planner.

Planners have absolutely no clue as to how the economy, in its intricacies and complexities, even begins to function. The decisions of hundreds of millions and even billions of people all appear chaotic, disorganized, and even baneful. The notion of a "spontaneous order," that is, a functioning system of human interaction without the willful design of anybody at all, is totally antithetical to the planner's mindset. In his world, cost is always measurable and objective (it isn't), people benefit only at the expense of others in free trade (absolutely not), and statistics are the end-all be-all of economic science (when actually they only reveal a historical incidence that is not necessarily indicative of the future).

It should be no surprise that this guy has a large number of "czars" at his disposal. His modus operandi is making sure the individual is taken out of the decision-making picture as much as possible. This entire health care push is about exactly that, via making sure that competition is dead in the private sector so a public option is seen as the only solution.

However, I have about as much faith in Congress as I do in any of these "czars." So what are we losing, really?

It's a shame this guy has such a lust for central control. He'd make a great wedding planner or hotel manager. Maybe he could be the guy who organizes the Wal-Mart aisle layouts.

No, I'm not cynical.

What do Madoff and Obama have in common?

2009-09-09T10:55:00.001-04:00

The words of convicted swindler Bernie Madoff were apparently quite convincing to many people who were regarded as knowledgeable and sophisticated. If you go by words, you can be led into anything.

No doubt millions of people will be listening to the words of President Barack Obama Wednesday night when he makes a televised address to a joint session of Congress on his medical care plans. But, if they think that the words he says are what matters, they can be led into something much worse than being swindled out of their money.

One plain fact should outweigh all the words of Barack Obama and all the impressive trappings of the setting in which he says them: He tried to rush Congress into passing a massive government takeover of the nation's medical care before the August recess— for a program that would not take effect until 2013!

-Thomas Sowell, 09/08/09

Name that Scapegoat!

2009-09-08T14:26:00.004-04:00

The Washington Times -- A proposal to tax health insurance companies who offer the most expensive coverage plans is gathering support in a key Senate panel as a way to pay for a portion of the health care reform bill.

Sen. John Kerry, Massachusetts Democrat, has put together a proposal to tax the companies that offer so-called "gold-plated" insurance plans...

The idea from Mr. Kerry would tax the insurer instead of the purchaser, which so far seems to be the key to acquiring more political support...

"We're interested in it, not for the sole reason of raising money, although it would do that," Sen. Charles E. Grassley, Iowa Republican and chief GOP negotiator on health care, told Bloomberg. "We're interested in it as a discipline within health care."

Health care analysts say the proposal is politically viable in part because it gives lawmakers a way around the House's proposal to apply a surtax on wealthy Americans.

"There's a certain appeal to it," said Lewis J. Hoch, partner at Blank Rome LLP in Philadelphia. "I think a proposal which has the benefit of generating revenue and furthering the ends of health care reform is a win-win."

The idea is that the most expensive insurance plans drive up health care costs because consumers don't realize the true cost of the health care services they use.

So when all else fails, call your opponents names, pull out the pejoratives, and demonize the minority. It's incredible how politicians are extolled for serving the public good, and yet, the aforementioned is exactly how they operate. You know you're dealing with a bad argument if it refers to health care plans tailored to the needs of different people as 'Cadillac plans' or 'gold-plated.' The whole notion of 'taxing the insurer' is fallacious, because an insurance company is not a living, breathing entity, but instead is composed of individuals who must turn to the market for insurance, too; 'punishing the insurer' is just a nice way of saying punishing a particular group of people for political purposes.

Notice when the free market, composed of the nonviolent, autonomous decisions of free people, fails to tell them what they want to hear, our 'public servants' decide to enforce 'discipline' and 'restraint.'

Last time I checked, a restraint on liberty is called tyranny.

Interventionist Chaos

2009-09-07T16:46:00.003-04:00

That's how Hayek referred to our 'mixed economy.' He was absolutely correct, as this chart exemplifies:This is a plot of wages over time for federal and private workers. It's alarming to note that not only have the past two recessions not retarded the growth of federal wages as compared to private wages, but also, as it stands today, the average federal employee earns almost $30,000 more than the average private employee.

This is chaotic because the market, which uses prices to communicate information about all sorts of things, is made less efficient by the presence of an 800 lb gorilla named Uncle Sam. There is little coherence in turbulent times between federal employment (among many other things that the government does) and actual market conditions; the consequence is that the recession will manifest itself in other ways, chiefly, by further decreasing wages in the private sector, lengthening the duration of the recession, postponing credit market recovery, etc., etc.

I do believe these circumstances would be sharply mitigated if the state was not in charge of the money supply and delimiting what is and isn't money. Consider that state and local governments can't balloon their agencies and doles, without a more or less severe bite-back by the tax payers. Whereas the federal government can conceal its counter-fitting by inflationary stealth, state and local government finance operates in the open.

The situation is all the more chaotic, because many people look at the above graph or those like it and draw the conclusion that the government can do things that the private sector can't, that magnanimous legislators can somehow beat economic law and make us all better off. Thus, as has been the trend over the past 200 years, we become ever more entrenched in statism and bureaucracy. A mixed economy as a stable system is just false.

Perspicacious Pelosi

2009-09-04T01:23:00.005-04:00

I'd say this video illustrates the fact that many of our elected leaders feel themselves and their decisions above that of the common man. It is somehow not O.K. for private individuals who own private property to engage in the same practices that our magnanimous leaders indulge in.

Wake up, electorate.

Thanks, Mark Perry.

Gold and What to Do With It

2009-09-03T21:51:00.007-04:00

For a more or less elementary analysis on whether to invest in gold, I would say there are two broad considerations to be had:

1) Gold prices have multiplied within the past ten years, but the demand has especially grown since '08, and this is understandable, given the Fed's wickedly accommodative policies to "prevent a meltdown," and the general uncertainty/lack of confidence in the dollar that goes with the U.S. recession. I cannot help but be reminded of housing prices, and how they at one time multiplied year over year, too. I'm not making any direct comparisons, but I am versed in bubble economics to some degree. All I'm saying is that the stuff might not hit the fan as many people believe it will, leaving a lot of investors with surplus gold on their hands. With Bernanke's reappointment, and with seemingly everything that this administration does almost blowing up in its face (the precipitous drop in approval ratings hasn't been seen since the '60s), there could be extra political pressure on the Fed (yes, I said it)to tighten its wallet, I guarantee it. Regardless, rates will be targeted upwards eventually, either late this year or early next. For gold to "double" again, that is, break $2000/oz, I would imagine the Fed would have to keep its target (0%-.25%) for much longer or cook up some other kind of cockamamie idea.

2) Let us not forget about the $9 trillion debt over the next ten years, and that's just a prediction by the borrowers themselves. When the Fed does tighten, it will be at the same time that the spending in Washington really picks up, and I can't say specifically what will happen in particular sectors. However, if you've ever heard of the concept of "crowding out," I believe it's a fait accompli here. Interest rates will be especially prone to increasing in these ripe circumstances, and lending in the private sector will be adversely affected. That has negative implications for employment and the ability of businesses to pay back their debts; thus, I also believe that another recession, sooner rather than later, is not unreasonable. This would, of course, put pressure on other currencies and gold.

So, what do we conclude from this? I have no idea. I think this situation is much more unique than what some would have you believe, when they say to "look at the 1970s" or "remember 2001." I think there is some time yet to watch the tide of events, specifically, the health care debate, and the 2010 elections, among many other things. I wouldn't turn all my assets into gold just yet, but as a professor told me not too long ago, a %10 assets-in-gold insurance policy never hurt anybody in times like these.

Chart and other information can be found at Goldprice.org.

Ideas MUST be important if...

2009-09-03T00:33:00.001-04:00

Lord Keynes said so:

"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good and evil."

-J. M. Keynes, The General Theory of Employment, Interest, and Money, pp. 383-84.

With that, I agree with Peter Boettke here that someone will rise up and meet the challenges of the day, whether it be today, or tomorrow, or 428 years from now. And ideas are the way to go about it. Let us remember that ideas are not fixed relative to specific issues and concepts, but instead ideas are just as much influenced by time and place. This precludes the notion that the pool of ideas is fixed and once we're out of heroes, we're out of luck. No way.

Digressing a bit, when our more mainstream friends ostensibly are "for" the free market, but then turn around and write columns about how public vouchers for private schooling is a good idea, they're actually undermining the very cause they claim to support. Statism on the rocks with a splash of 7-UP is still statism. To substitute some mild form of statism to move in the general direction of freedom is a dangerous game; what if your idea does help the cause of publicly funded education? Who have you really helped, in the long run?

Advocating a particular policy specifically for the short term, as is characteristic of politicians, is exactly what we must divorce ourselves from. Hayek said it best, but let me paraphrase: Society's ethical principles are relatively fixed in the long-run; however, we must set forth to demonstrate to our peers that such principles are often in tumultuous conflict, and will not remain static; the pursuit of such contradictory goals will harm even greater values. So, in trying to realize semi-statism, we are only shooting ourselves in the foot, maybe blowing it off completely.

My point is, consistent ideas change the flow of events. Today, half-hearted apologists for Uncle Sam aren't ebbing the tide of things, but make it only worse. The men garnished with the most support are always those who are committed to a firm set of principles relative to their time. It is how this country was founded, it is how political philosophers and economists go down in the history books, and it is why we can turn on the radio every day from noon to three, expecting to hear one of the greatest voices of today. I believe this is the consequence of consistent ideas.

Tim Hawkins Can!

2009-09-01T22:09:00.000-04:00

Hilarious. Kudos to Mark Perry over at Carpe Diem.

Elasticity of Substitution...

2009-09-01T01:13:00.000-04:00

... means nothing more than that as the price of a particular good changes, the consumption of other goods change as well. If two goods are very much like each other, it is likely that if the price of one good were to increase, consumption of the good whose price remained the same will rise. This makes sense, considering that we usually like possessing more money to less, no?

Consumer product regulation is no different. Regulating the heck out of something, such as requiring licensing or specific safety features, increases the cost of consuming that something, whether that cost be in terms of money, or time, or complexity, for the consumer. Thus, the consumer will choose other items to attain an end. If the particular regulation aimed at increasing consumer safety, but in the process increased the costs of using a particular item so much as to encourage the use of other, less safe products, then at the end of the day all we have is a bunch of fat n' happy bureaucrats at the expense of consumer well-being.

Think of regulating ladders, by requiring ever-more advanced safety features that raises the cost of production, which decreases the supply of ladders on the market, which increases the sale price of ladders. It is likely that consumers will choose not to buy expensive ladders and instead opt to use chairs and watermelons and footballs to stand on to change the light bulb. Are we safer at the end of the day? I'd argue, no.

I would call such an analysis paradoxical, but it isn't, not at all. This is completely reasonable and should surprise nobody. But, I think that's the trick about economics. Many people don't consider it easy, because those same people might look at the issues with blind eyes. Emotion, that is, tends to play a far larger role concerning economic issues than more "objective" sciences, such as physics or biology.

That's why I really appreciate lecturers who can make economics entertaining. Art Carden did that this summer, at Mises University. His Mises page, with his lectures in MP3 format, are here. Making economics entertaining is among the many ways to get otherwise emotional people to see what "good intentions" result in.

Goin' Bananas with Statistics

2009-08-26T00:41:00.000-04:00

I'm playing around with IMF statistics because I was more or less inspired by a Washington Post article I read today about domestic sugar producers, protectionism, and sweeteners. Anyway, this chart displays the average price of Chiquita, Del Monte, and Dole bananas traded via the US Gulf (I'm not too familiar with the specifics of the trade contracts) on a monthly basis over the past year. In July of this year, one metric ton of bananas (2,205 lbs) traded for $828.73. That's $.38 per lb of bananas, and I believe the final retail price of bananas at Wal-Mart in Jacksonville, Florida is around $.55 per lb.

In other news, I have an elementary understanding of Microsoft Excel.

A Word on "Multipliers"

2009-08-25T00:32:00.000-04:00

Every Principles of Macro student will undoubtedly come across the Keynesian multiplier. This doctrine claims that an initial dollar spent, for investment purposes or by the government, is followed by a domino-effect of spending of ever-smaller portions of that same dollar. For example, if I buy a box of Mike and Ikes for $1, Raul the candy man will turn around and spend $.90 of that on a McBurger, and Ronald McDonald will turn around and spend, say, $.81 on a donut, and then Krispy Kreme turns around and buys a milk dudd for $.73, etc., etc. You see, my dollar goes a long way in "stimulating the economy," right? Wrong.

For the agog and masochistic reader, I refer you to Reisman, Capitalism, 690-691. But it's pretty simple without the intellectual explanation, and I think I can handle it:

Consider that Ronald McDonald received $.90 for a McBurger, and instantly spent $.81 on a donut. Ronald is left with $.09 to do something with. It is likely, and let us assume, that he pays his workers and repairs some equipment and whatnot with that $.09. So Ronald has a donut and paid some wages. Great, eh?

The problem with the Keynesian Multiplier Doctrine, however, is that it is so bold as to say that if we spent a greater portion of every dollar we receive on consumable items, instead of saving and investing that money, this would somehow stimulate growth and prosperity in the economy. So let us assume that Ronald spent $.81 on a donut, and $.07 on a gumball. That leaves him with only $.02 to pay wages to his workers, and repair equipment and expand. And Krispy Kreme will do the same, and on, and on, and on. Tell me, how on earth are we better off in this situation? If we spend greater amounts of our dollar on consumer goods, as opposed to productively spending it on workers and equipment, and saving and investing, who is materially better off? All that has happened here is that profits have increased, the end. As for business expansion, which leads to higher real wages for everybody in the economy, this doesn't happen.

And it is this simple. Mainstream economists extol consumer spending because it makes GDP look good, but in reality, high amounts of consumer spending means low amounts of productive spending. If, over time, businessmen spend all they make on consumer goods and neglect to repair their equipment and just maintain their existences, they will ultimately eat themselves out of house and home. It doesn't do me any good if nobody will hire me, either!

Let's walk away with two lessons here:

(1) That which is consumed must first be produced. If we spent 99% of every dollar on consumer goods, there would be no money left for productive expenditures on capital- and time-intensive goods; we would reduce ourselves to barbarism. Yea, GDP would look spectacular for a very few years, but that's the extent of it.

(2) Saving and investing in productive resources is the only route to material wealth and higher real wages. Consumer spending merely implies the purchase of what has been produced; only productive spending, through investment and non-consumer good purchases, will lead to business expansion and a greater amount of "stuff" for everybody.

Arguing Against Absurdity

2009-08-24T12:04:00.000-04:00

Don Boudreaux, over at Cafe Hayek, argues that those

"who argue that, because only a small percentage of the stimulus funds have actually been spent so far, the stimulus plan cannot be credited with whatever economic buoyancy we’ve seen lately,"

do so invalidly. He goes on,

"I believe that this argument is incorrect. A good Keynesian can (and should) point out that the very expectation that such massive government expenditures will happen goes a long way toward relieving the economically depressing anxiety of consumers, employers, and investors. That the spending hasn’t actually happened yet is less significant than the expectation that it will happen."

I argued in this same blog,

"... this presuppose[s] that consumers, employers, and investors are a) knowledgable about where the stimulus money will go and how deeply it will affect their own interests, and b) confident that it will be spent effectively[.]

Considering how fast the $787 billion, 1588-page 'stimulus' bill was rushed through congress, I think (a) is impossible. I doubt the authors of the bill have such knowledge.

I would say that (b) is a stretch, too, even if consumers, employers, and investors aren't well-versed in political economy, and don't realize the utter inefficiences that pervade bureaucratic management. That is, unless they KNOW that they will be directly subsidized in some way, (b) doesn't hold much water. Consider that the Cash-for-Clunkers could have had no effect whatsoever on purchases. I'm not saying that particular program was effective in the long run, but it undeniably bolstered sales while it was in effect, thus exacting the supposed end it was supposed to. Notice Democrats are calling it a 'success.'

The "expectations" argument gives too much credence to the power of government spending. I don't see that it is there, and thus I would be willing to say that you could use the argument that the stimulus plan has been ineffective, unless (a) and (b) could be proved."

Just because the premise (the stimulus plan) is Keynesian, doesn't mean the burden of proof is put on dissenters. Rather, the opposite. If Keynesians claim truth, they must be able to explain the ins-and-outs of their policy prescriptions and how they work.

The Results Are In

2009-08-23T10:44:00.000-04:00

But calling Cash for Clunkers "dumb" is a severe understatement. Cato's litany of items just scrapes the surface, too.

Mises on Mandatory Schooling; Kind of.

2009-08-22T01:32:00.000-04:00

The emphasis laid by sociologists upon mass phenomena and their idolization of the common man are an offshoot of the myth that all men are biologically equal. Whatever differences exist between individuals are caused, it is maintained, by postnatal circumstances. If all people equally enjoyed the benefits of a good education, such differences would never appear. The supporters of this doctrine are at a loss to explain the differences among graduates of the same school and the fact that many who are self-taught far excel the doctors, masters, and bachelors of the most renowned universities. They fail to see that education cannot convey to pupils more than the knowledge of their teachers. Education rears disciples, imitators, and routinists, not pioneers of new ideas and creative geniuses. The schools are not nurseries of progress and improvement but conservatories of tradition and unvarying modes of thought. The mark of the creative mind is that it defies a part of what it has learned or, at least, adds something new to it. One utterly misconstrues the feats of the pioneer in reducing them to the instruction he got from his teachers. No matter how efficient school training may be, it would only produce stagnation, orthodoxy, and rigid pedantry if there were no uncommon men pushing forward beyond the wisdom of their tutors.

-Mises, Theory and History

Truth Asunder

2009-08-20T13:43:00.000-04:00

Amazing how the Associated Press is the end-all, be-all for facts and palpable reality. Without the AP, I probably would never have learned algebra or how to open a beer. Calvin Woodward, an AP writer, magnate and merchant in certitude and verifiable truths, claims that many of the fears that Americans have over a public option or outright single-payer system in healthcare are "harsh, but not based on facts." Calvin explains that "Washington is not working on "death panels" or nationalization of health care," and that most respondents in a particular survey fret over taxpayer-funded abortions and the government having the power to decide when treatment should stop for old people, among other fears.

Without exploding the story line-by-line, I'm sure Calvin has it all wrong from the get go. His premise is severely flawed. He merely substitutes Washington's intent for actual circumstance. That is, if it ain't outlined in the bill, it ain't gonna happen, and all fears to the contrary are superfluous and moronic. I know this because of the nature of what a "public option" is, whether it is an outright takeover of the industry or just a single "competitor." What we have now is a price system that rations service according to how consumers value their dollars relative to health service. There are competing ends for dollars, like luxury and food, and thus consumers allocate their dollars accordingly. This is how the rationing goes, as any price system in any good operates.

Now, some consumers have more dollars than others, but this inequality is inherent in the very nature of man and is ineluctable. Trying to escape reality with a "public option" only shifts the burden, but does not eliminate it. Instead of a price system that rations the limited supply of medical services, allocation will be left to whoever is in charge of making the rules at the time. When there is no monetary constraint on medical demand, and with the supply of medical services relatively fixed, the only possible way to give service is to pick people, and this choosing will likely be based on age, lifestyle, productivity in society, etc. If Calvin can name some other way to hand out the doc's time, then that's fine, too. It won't change the fact that it is another way of rationing service, whichever way you look at it.

With that said, fears about "death panels" and pulling the plug on Grandma are not unwarranted. If I as the bureaucrat in charge only have (X) number of prescriptions available and I have (X +1) number of people demanding such prescriptions, I have no choice but to choose who doesn't get a prescription. I as the head bureaucrat can make my choice based on political favor, patient productivity (young people vs. old people), moral judgments, etc., etc. This is exactly what Sarah Palin meant by "death panels," specifically, a board of bureaucrats will have to decide which group of peoples or particular individuals do not get a share of the limited supply of medical services. The truth is harsh, but reality usually is. This is not a lie, but instead a logical deduction based on the fact that in reality, needs are unlimited, but means are not. If I sat upon a panel, it would only make sense for me to exclude the least productive members of society from healthcare if it meant that otherwise children and healthy taxpayers were to be sacrificed.

As for the government being simply a "competitor" in the healthcare field, Thomas Sowell said it best: "When there is a partnership between an ant and an elephant, who do you suppose makes the decisions?" Because competing firms must cooperate even in the dog-eat-dog world of business, this statement completely applies. Saying that the government option is a form of competition is like giving steroids and flippers to Michael Phelps and calling it "fair" as far as French, German, and English swimmers are concerned.

Their Modus Operandi

2009-08-19T12:07:00.000-04:00

Headline: AP reported late Wednesday morning that

"... Chase Card Services, a unit JPMorgan Chase $ Co., said Wednesday it will now offer a rewards card designed for wealthy customers.

The new card, called Chase Sapphire, is designed for the top-earning 15 percent of U.S. households. It offers travel services, access to round-the-clock customer service and a rewards program."

The entire story, which can be found here, is a stunning 72 words. I found it on the front page of Yahoo. You might ask why I find this relevant; I ask why the Associated Press finds this relevant. This is not directly related to any contemporary event, nor can the majority of folks in America be concerned with it because most people are not relatively wealthy.

But we know why AP headlines such a story. It is how the news media operates, how they get a rise out of "the proletariat." This story is a paragon of the wealth envy that pervades the general public. There is no doubt in my mind that this story serves to piss people off. Consider that SafeLink Wireless, a program that was created by the government to provide discounted or free telephone service to income-eligible consumers, has been available for tens of months now and has yet to receive front page coverage, though such press would undoubtedly make indignant tax-paying citizens. But because SafeLink is for poorer individuals, there's no fun in making a ruckus out of it, lest ye be known as uncompassionate and a capitalist pig.

Wealth envy is painstakingly obvious when it comes to America's democratic processes. It is why the 'rich' are soaked with most of the public debt in this country, year over year. Our founders knew of wealth envy, hence why originally states were allowed to discriminate voters based on property holdings; it was a system that sought guidance by the most productive of citizens, contrary to what your history teacher might have told you back in the eighth grade. But today, wealth is taboo, in a country where the poor are exalted and the word 'rich' is a pejorative.

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasure. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship."

-Alexander Tyler

Brazen Bureaucracy

2009-08-18T15:22:00.000-04:00

I just got home from NYC, glad to be here. It was a productive trip, though. The public subway system was incredibly entertaining, because not only did this government-owned entity advertise itself on its cars more than private entities, its own advertisements sought to convince riders to be thankful for the subway system.

One advertisement proclaimed the long, overdue need for line additions due to overcrowding on a particular line. That same advertisement lauded the city's efforts to complete a new line by 2015, and even stated that 'yes, it's overdue, but still excellent news.' Talk about tooting your own horn! May I ask, excellent news to whom? Personally, I think more excellent news would be to turn the entire operation over to private entrepreneurs. Maybe the guy sitting next to me thought there isn't any need for another line; but who's to know, when the government runs the show? This is a prime example of what happens when the government is in charge: Instead of letting a price system most efficiently ration a good, we have overcrowding and shortages of service. And when the government does decide to do something, it's extolled as 'excellent news.' It doesn't matter if the new line is economically efficient, because the government doesn't have to earn its own resources, outside of taking it from the taxpayers of Manhattan.

Another advertisement commended and affirmed its services by comparing the price of the subway 20 years ago to now (one-ride 20 years ago cost $1.86 in 2008 dollars). The only problem with the comparison was that the 1986 fare was standard, that is, nobody had to buy an unlimited fare for a period of time, like a 7-day unlimited ride card or 30-day unlimited ride card, so nobody had to oblige themselves to more expensive cards. Today in NYC, you have several choices. If you compare apples to apples, and buy a one-ride fare, it's going to cost you $2.00. Of course, you can buy unlimited ride cards at higher prices, and depending on how often you ride the subway, the per fare price will likely fall below $1.86. But you see, in the city government's upside-down world, they can arbitrarily average rides anyway they want. Hell, they could feasibly say that, per ride, fares for 30 day cards are close to $.05, if they decide that New Yorkers ride the subway that much. Also, they forget to point out that the difference between then and now is that you have less frequent riders subsidizing more frequent riders. That's exactly what this is. Indeed, the NYC subway system seeks to compare apples to oranges, and add numbers with unlike denominators. Their comparisons are crap, and yet, because they have a monopoly privilege over the entire underground transportation system, they get away with it and all the other spewed propaganda.

And they actually had the chutzpah to play a recording thanking us for riding the metro system on the way out.

I don't have to try to make this sound stupid.

2009-08-07T22:06:00.000-04:00

I decided that things couldn't possibly be as absurd as they sounded, and decided to hop on over to www.cars.gov and try out some trade-ins. Boy, was I surprised!

Turns out, I could turn in a '96 Ford F-150 (13 mpg) for a brand new Cadillac SRX all-wheel drive (19 mpg) along with a $4500 rebate. That's right, Uncle Sam has decided to subsidize its wealthy at the expense of... all of us as taxpayers! Lets not forget that the SRX isn't even "environmentally friendly." (As if that really mattered)

Perhaps luxury vehicles aren't your fancy and you're in the mood for a real gas-guzzlin' war hog! Fret not, I was eligible for a sterling Ford F-150 Pickup 4-wheel drive (15 mpg) along with a $4500 rebate! Well, hot damn! Screw the environment, ya know? Trees only get in the way of muddin' and huntin' with my new pickup truck, and polar bears eat people!

I really can't say I know of a coherent reason why this subsidy program exists. It's not for the environment, because many of the eligible cars are not "green." It's not for the poor/middle class because the government is subsidizing vehicles as expensive as Mercedes (Benz GL350, diesel fuel, 19mpg). This is certainly not for the economy, because as I stated in my last post, this program is basically creating a 'boom' that will eventually find its 'bust' once it goes off federal funding. I can't even make the argument that this is for American auto labor unions because foreign manufactured vehicles are receiving the subsidies, too.

I can say that a horrible consequence of this is the destruction that the traded vehicles will go through. No, really, the government is mandating that all trade-ins are to be scrapped. What the hell will that do to the used car market over the next few years? Ultimately, less used cars will be available on the market, driving the price of those remaining vehicles up more than they would have been. Now, who buys used vehicles? That's right, the poor/middle class, and small businessmen. These groups will be hardest hit by such erroneous policies. Let us not even begin to discuss the greater proportion of loan defaults that are going to occur under this brainless scheme, and thus putting even more pressure on demand in the used car market.

Decisions, decisions

2009-08-07T11:52:00.000-04:00

Man, the 'Cash-for-Clunkers' program is really a hit! In fact, it caused such a buying frenzy that today our President increased its budget by 200% and gave it more time! With all of these 'green' cars on the road, I can practically hear the ice caps reforming at the poles and the polar bears gettin' it on to replenish their population. All hail the Democrats!

Back to reality, this program is a sterling example of how political incentives are increasingly crowding out any sort of economic incentives when it comes to this country. Instead of our President or Senators realizing that perhaps they provided for too generous of a voucher and that they should cut back on the voucher amount, they triple the budget for it. Eerily similar to the push for universal health insurance, where the government already can't handle its obligations to Medicaid and Medicare.

Of course, I think the entire shabang is ridiculous. These vouchers are kind of like those stimulus checks we received last summer, you know, the ones that would 'prevent the economy from free falling into a recession.' These vouchers in large part managed to impel people to either 1) fore go purchasing a vehicle until the rebate was available or 2) buy a vehicle NOW instead of later. I'm sure some people who wouldn't have bought otherwise did because of this program, but still, this is probably negligible considering the unemployment rate is 9.7% and I doubt many folks seek to get involved in extraneous contracts and obligations. This is not a long term solution to anything remotely having to do with the economy.

The democrats got what they wanted, that is, more green cars and happy constituents. But what about the GoodYears and the PepBoys, who won't be repairing as many vehicles this summer and fall? What about the industries that would had benefited from the money that was taxed and used to support the voucher program? What's going to happen to the American auto industry when sales do finally slump? Vouchers and bailouts can only go so far until the people become indignant.

The government is truly picking the winners and losers nowadays.

Sounding Silly

2009-08-05T14:04:00.000-04:00

This is an audio segment from 2006 featuring Walter Block, scholar at the Mises Institute, and Jared Bernstein, a director at the Economic Policy Institute, debating the minimum wage and its effects on the employment of 'the poor.'

(8/13/2006, Marty Nemko radio show; Direct Link)

The federal minimum wage was recently raised to $7.25 an hour. I find it funny that those who support the minimum wage in general do it not on the grounds that it doesn't actually increase unemployment (some actually support that notion), but instead that the increase in poor-person purchasing power outweighs any loss in employment. Then they go on about empircal studies this and consumer spending that, blaze blaze. They never try to refute the fact that making it more expensive to hire somebody means employment necessarily decreases. I wish it was more complex than this, to make it somehow worth intellectual debate, but it isn't. If i'm a burger flipper, and I churn out $7/hour worth of value to the company, and if my employer is forced to pay me $7.25/hour, it really doesn't pay to keep me on the payroll anymore. Simple as that. We can quibble all day long about purchasing power effects and what's better or worse, but a priori minimum wage laws will cause the unemployment of marginal workers, that is, workers who barely pay for themselves.

The minimum wage hurts most those individuals who are unskilled, or handicapped. Whereas a restaurant could hire a blind man to roll silverware set-ups for $4/hour and it would add value to the output of the company, whereas hiring a young, unskilled floor sweeper for $3.50/hour would not only pay for itself in terms of restaurant cleanliness but also would teach that young man valuable work-ethic skills and discipline so useful for later in life, the minimum wage guarantees these things won't happen. These are marginal workers, who cannot pay for themselves in terms of employment after the minimum wage has been exacted. These are part of the unseen effects of intervention, and in unemployment statistics are often not counted, so as to make the picture seem a bit more rosy than it actually is.

That's not innovation, that's a liability!

2009-08-04T23:50:00.000-04:00

If Uncle Sam does manage to choke the remaining 'free' part of what is the U.S. health industry, say goodbye to Bill Nye and anybody else who thinks innovation is a good idea. Inventions and advances in any field tend to be costly when they're first introduced, but since the government isn't a profit seeking enterprise, and since they won't be employing a pricing scheme to ration service, there will be no way to cover the really costly stuff that would eventually make us all better off. And I was really looking forward to cybernetic limbs!

Sleeping with the Devil(s)

2009-08-04T11:44:00.000-04:00

The cover of the July 27 edition of Newsweek offers a gallant photograph of senator Ted Kennedy, and underneath it the words, "'We're Almost There,' The Long Struggle for Universal Health Care." Putting my general disgust for this man and what he stands for aside, I couldn't help but think of a phenomenon that seems to characterize so many people, and that is, that they are all about giving the utmost trust and prerogative to complete strangers.

The beauty about advanced trade is, even if I'm a total xenophobe anti-Semite bigot, I can still come to acquire my eggs and tuna fish at the end of the day, without unleashing doom on my producer. I have no idea who made my clothes, or who transported them to the distribution center, or who even thought stone-washed jeans were a good idea in the first place. In fact, I don't even have to know the name of the guy who works the cash register in order to buy them. They are concerned with producing and marketing a product that I want and am willing to pay them for, nothing less, nothing more.

But for whatever reasons, the voters in the robust American democracy seem to place so much faith into people that have a nice face and a smooth talk. Yes, I trade with complete strangers, but that's the beauty of it: I don't have to like them in order to get what I want. And, if they mistreat me, there's always another producer to fill the gap. With politicians, there is nobody else to fill the gap until the next election cycle, and if I'm not on the right side of the political spectrum, there's a good chance my interests are nil and none as far as they're concerned. Indeed, the people are usually assigned one and only one head political jockey, along with a team of bureaucrats and various functionaries whose only objective is, quite like the jeans maker on the market, to keep his job. However, keeping their jobs doesn't have to involve actually serving anybody well, but instead making an attractive appeal for more funding and greater controls to exact some purported noble purpose.

Bottom line: Politicians and their cronies face the same incentives that you do in life. If you're no saint, why are they any better? I'll stick with the market, where you are as successful as you are good at serving your fellow man.

The UnderGrad

In the News

The Market Test

Graduation

Teacher's Unions and Unemployment

Accounting Tricks

The Economics of Credit Reports

Sin Escolaridad Más

Entrepreneurial Idea?

More on Strawberries and Such

Bad Argument

Strawberry Fields Forever

In Other News...

Deflation vs. Malinvestment

4,051 Decks of Cards

Wake Me Up Tomorrow

Cultural Economics

A Follow-up

The Elephant and the Ant

49 Stars And Counting

Around The World In A Few Weeks

No Good

The Problem That Begets The Rest

Some People Just Don't Get It

Racism as a Consumer's Good

A Follow-up

Avatar: A Libertarian Exercise

I Don't !@#@$&* Know

1.5 Years In The Making

The End

Who Cares About Bill?

Trash On The Steps

My Trump Card

Fed Stuff

My Monopoly Position

An Inverse Business Cycle

The Ivy League Paradox

What Spending Freeze?

I Told You I Was Good

Pragmatists Aren't From Mars, After All

Best Way to Help Haiti?

Synonym and Antonyms

Synonyms:

Negative Returns

What if Erwin Hunted Endangered Species?

Enemies of Private Property

Narcissism to the nth Degree

My Kind of Superhero

Inequality is a Great Thing

Count your IQ, Instead

'Condoms' in Society, Not 'Knowledge'

Took the GRE

My Thesis

Something's not right.

The Silver in the Sand

The Ceiling's Leaking

Tom's Idea

The Cost of Society

The Wedding Planner

What do Madoff and Obama have in common?

Name that Scapegoat!

Interventionist Chaos

Perspicacious Pelosi

Gold and What to Do With It

Ideas MUST be important if...

Tim Hawkins Can!

Elasticity of Substitution...

Goin' Bananas with Statistics

A Word on "Multipliers"

Arguing Against Absurdity

The Results Are In

Mises on Mandatory Schooling; Kind of.

Truth Asunder

Their Modus Operandi

Brazen Bureaucracy

I don't have to try to make this sound stupid.

Decisions, decisions

Sounding Silly

That's not innovation, that's a liability!

Sleeping with the Devil(s)