Let Us Keep Our Perspective
Don Boudreaux on the Gulf oil spill and perspective. His letter to The Washington Post editor is below:
Deborah Hahn writes: “Until the damaged BP well in the Gulf of Mexico is capped, please publish daily a front-page picture of wildlife covered in oil, in misery, dying, unable to be cleaned” (Letters, June 26). Ms. Hahn believes that “such pictures are needed to educate the public” about the “horrors of what oil accidents do to our fellow creatures.”
Oil accidents are indeed horrible. But they are the very visible downside of a product with an enormous upside – an upside so important and ubiquitous that, ironically, it has become invisible. It is to us as water is to fish.
So an even greater danger now is an economy polluted by a gusher of panic-driven crude legislation. To counter this danger, please also publish daily a picture of oil’s neglected benefits – such as people still alive because of pharmaceuticals and medical devices; men and women healthy because dangerous bacteria were killed by ammonia or kept contained by plastics; children and grandparents smiling because they’re able to visit each other having driven over roads made of asphalt or flown in airplanes powered by aviation fuel; your readers enjoying your paper (printed with ink!) because they wear eye’glasses’ made of plexiglass.
What really needs more media attention are the many marvels that, because they are so common, are taken for granted.
Sincerely,
Donald J. Boudreaux
The Evolution (or Mutation) of Modern Finance
Simple question. Is this good or bad?
No doubt the answer is extremely complex, not yet known and falls somewhere in between.
(HT: Seeking Alpha)
Smokescreens and Bailouts
Interesting thoughts from Arnold Kling on the Euro Crisis (which he believes is a misnomer). A snippet:
My view of the bailouts is that they are primarily to save French and German banks. All the talk about "saving the Euro" is a smokescreen.
I find it ironic to have an EU official warning about the collapse of democracy. The eurocracy is a very undemocratic organization, chronically in conflict with popular opinion. The bailouts are unpopular, and quite properly so. Any official who claims that that the bailouts should be undertaken in the name of democracy is a poseur.
My view of the bailouts is that they are primarily to save French and German banks. All the talk about "saving the Euro" is a smokescreen.
I find it ironic to have an EU official warning about the collapse of democracy. The eurocracy is a very undemocratic organization, chronically in conflict with popular opinion. The bailouts are unpopular, and quite properly so. Any official who claims that that the bailouts should be undertaken in the name of democracy is a poseur.
In Defense of PEDs?
Last week I was discussing Armando Galarraga's near perfect game with a friend of mine and made the following point:
I didn't see the game live, but when I heard about it, it more or less ruined my night. I don't know why, I don't know how, but in the pit of my stomach I felt absolutely awful. Around the same time, during Game 2 of the NBA Finals, with about two minutes left in the game, the refs blew a call where a ball out of bounds should have gone to the Lakers (this was the play where Garnett and Gasol were fighting over and it was determined that the ball went off Gasol). The refs consulted instant replay, as there was under two minutes left to play, but let the call stand, and thus blew the call. Rajon Rondo then hit a jumper to put the Celtics up five, and that was the game. The refs thus had an adverse effect on the outcome of the game.
Now the following day I barely heard a peep about this blown call, which quite possibly determined the outcome of an NBA Finals game. Yet for forty-eight hours all the sports talked about was Jim Joyce's blown call, which ultimately had no determination over the outcome of the regular season game.
Why is this? Why do we as fans place such emphasis on records like this? And if we believe these records are so important, more important than wins and losses, should we not simply legalize the use of steroids and other PEDs in professional sports, but actually mandate their use, as they will help increase the probability that the "greatest" records will be achieved?
The Increasing Popularity of Hayek
Via Tyler Cowen, Hayek's most popular work, The Road to Serfdom, is now the number one non-fiction seller on Amazon. My first post on this blog (and albeit not a very good one as I look back) was on this book.
Some More Thoughts on Protectionism
Commenting on this post, Rob makes the case the protectionism is a legitimate policy if it is done on grounds of morality. In other words, if Nation A decides to enact a protectionist policy against Nation B, it is legitimate only if its motivation is because of certain policies (say labor or environmentally related) that Nation A calls into question.
Let's remember that protectionist policies are government mandated policies, most notably enacted as price controls in the form of tariffs and subsidies. So protectionist policies are determined by government officials, not markets.
Rob claims he doesn't have faith in markets to make such decisions, but seems to believe government actors do. He concludes his comment by stating, "it is simply the right of a nation to decide what crosses their borders," which I interpret as meaning government officials possess the right to determine what crosses the nation's borders, and thus enter the marketplace.
Here are my issues with this view:
1. How is it determined what economic practices and policies are moral or not? For example, are sweat shops with "low" wages and "unsafe" working conditions "immoral"? Why? What role does bias, perception and relativism have to play in this determination?
2. Who is making these moral decisions? Why should they be trusted? What are the checks on their decision-making?
3. How far can we extend this moral governance? To domestic issues? To the state and local level? Where is the line drawn? Why there?
4. If markets are not to be trusted, why not?
5. Public Choice Theory would argue that political actors are more subject to the irrational emotions market actors are normally subjected to (greed and fear) because they have less "skin in the game." How are we to trust that they [political actors] are immune to these forces in these instances?
6. Trade has been one of the greatest catalysts of economic dynamism and productivity. What does limiting it, even on moral grounds, ultimately achieve, especially for those whom are being protected against and are thus at the greatest disadvantage?
7. Costs go far beyond regulatory costs. There are real price costs, opportunity costs, political costs, etc... How are these to be measured? What is the cost/benefit? For example, much of the reason the American-Cuban Trade Embargo is still in place is due to "moral" reasons (the fact that these so called moral motivations are so murky to begin with supports my first question). Now would anyone seriously argue, from an economic perspective, that the benefits of this policy have outweighed the costs?
8. Going back to relativity, what degree does the demand for safety, environmental protections, etc... have to play? If these are immutable laws, as supply and demand in whatever form often are, what is the point of attempting to legislate them away? What are the unintended consequences of doing so?
9. Finally, you [Rob] used Rawls' "Veil of Ignorance" thought experiment to claim that, "I can imagine situations in which I would design a world such that protectionism were allowed despite not knowing what country I would be born in." I think I may see your point, as the costs of racism, from our perspective, are far more visible than the costs of protectionism, especially on an anecdotal level. But that seems like a straw man to me. The negative effects still exist (and probably to a much greater degree) even if they don't grab the same headlines. In that sense, I think the Rawlsian line of reasoning shifts the emphasis of the argument in a different direction and thus doesn't have much relevance to this discussion.
To Discriminate or Not to Discriminate? That is the Question...
Via Cafe Hayek, here and here are two op-ed pieces I enjoyed on discrimination, in particular in regards to Rand Paul, Rachel Maddow and the Civil Rights Act of 1964. I actually think the whole argument is a straw man, but it's still fun to debate it.
The question is this: Should it be legal for private parties to discriminate against other private parties based on the formers' personal preferences?
Your Daily Dose of the Nanny State
Via The Big Lead:
New York City’s Public Schools Athletic League is examining pitch counts for high school pitchers and may introduce mandatory limits for next season.
Between this and the infamous salt ban, NYC is losing some serious street cred.
New York City’s Public Schools Athletic League is examining pitch counts for high school pitchers and may introduce mandatory limits for next season.
Between this and the infamous salt ban, NYC is losing some serious street cred.
Profile of Tyler Cowen
A short but interesting profile of my favorite contemporary thinker, Tyler Cowen, in The Washington Post. A snippet:
Cowen, based on his reading of thousands of books, thinks stories trick readers because they are filtered: Writers "take a lot of information and they leave some of it out," he says. His answer to the existence question meandered across philosophy and the reasons one might commit suicide, but in this profile, that response will be filtered out and replaced with a simpler set of facts about Cowen's own existence. As Cowen noted about the media in a recent book, "The tendency is to fit all facts into the format of a story, usually with a memorable protagonist, even when the reality is more complex."
(HT: Marginal Revolution)
Cowen, based on his reading of thousands of books, thinks stories trick readers because they are filtered: Writers "take a lot of information and they leave some of it out," he says. His answer to the existence question meandered across philosophy and the reasons one might commit suicide, but in this profile, that response will be filtered out and replaced with a simpler set of facts about Cowen's own existence. As Cowen noted about the media in a recent book, "The tendency is to fit all facts into the format of a story, usually with a memorable protagonist, even when the reality is more complex."
(HT: Marginal Revolution)
I Must Be Missing Something...
I know I'm oversimplifying it, and I'm sure Rob will correct me, or at least clarify some stuff, in the comments section, but is this situation really expected to be solved with more debt? Or is it just to buy time? Or is there another answer?
In my eyes, the bailout is a signal is investors, traders, speculators, whomever, that the eurozone will survive and become stable. And tt was a strong signal, just look at yesterday's equities performance.
But does it change anything fundamentally? Or is this thing just a really, really big Band-Aid for a patient with terminal cancer? Is painful chemo (revamping of fiscal austerity measures) the only real solution? (sorry for the horrible analogy).
It's way too early to tell.
In my eyes, the bailout is a signal is investors, traders, speculators, whomever, that the eurozone will survive and become stable. And tt was a strong signal, just look at yesterday's equities performance.
But does it change anything fundamentally? Or is this thing just a really, really big Band-Aid for a patient with terminal cancer? Is painful chemo (revamping of fiscal austerity measures) the only real solution? (sorry for the horrible analogy).
It's way too early to tell.
Well Said, Sir
A gem of a comment from commenter dietwald on a recent Cafe Hayek post:
Every year, the US allows the immigration of hundreds of thousands of non-English speaking, uneducated, unproductive people who spend years taking advantage of the education and health care system without bothering to pay back one dime until they have been here for two decades or more. They cost billions, and many of them never bother to become productive members of society at all. Many will engage in various crimes, even murder, and the government is doing nothing to make sure they don't come here in the first place.
They are called babies.
Almost all the arguments against uncontrolled immigration can be equally applied to uncontrolled births. Considering that most immigrants want little more than make a living by providing services to willing customers, its quite easy to argue that immigrants - illegal or not - are probably less costly and harmful to the US than babies.
Every year, the US allows the immigration of hundreds of thousands of non-English speaking, uneducated, unproductive people who spend years taking advantage of the education and health care system without bothering to pay back one dime until they have been here for two decades or more. They cost billions, and many of them never bother to become productive members of society at all. Many will engage in various crimes, even murder, and the government is doing nothing to make sure they don't come here in the first place.
They are called babies.
Almost all the arguments against uncontrolled immigration can be equally applied to uncontrolled births. Considering that most immigrants want little more than make a living by providing services to willing customers, its quite easy to argue that immigrants - illegal or not - are probably less costly and harmful to the US than babies.
Immigration Issues
Why should it be illegal for any person to come to the United States, assuming his intentions are peaceful and he is not likely to become a public charge or health risk?
Obviously the question makes some large assumptions, but I think it is a very good, sensible starting point on immigration from both a practical and philosophical perspective. It would force people to reveal their true beliefs, and, hopefully, force them to acknowledge their significantly biased, if not false, premises.
This is pure conjecture, but, as I have alluded to a few times in earlier posts, I think national borders are an obsolete concept that probably do more harm than good.
Mary Anastasia O'Grady of the The Wall Street Journal does something I have heard no one in the mainstream press do when talking about immigration; talk about the drug trade. And not only does she talk about it, but she does it very well. A snippet:
It’s tempting to couch the organized crime problem as an issue of sovereignty (i.e., Mexicans are invading!) but that ignores the role of the demand for drugs. The solution has to start with acknowledging that drug trafficking through Arizona—a key concern of citizens of that state—is the product of a complex set of federal policy failures.
You simply cannot talk about immigration and not mention The War on Drugs. Yet to mention drug prohibition today seems to be taboo, or those whom you speak with seem to cast you as a nut or a joke. I find this to be very unfortunate and a hinderance towards progress.
Tick, Tick, Tick...
Tyler Cowen lists twelve points on the Euro bailout, linking to some other sophisticated writers in the process.
Today is going to be a great day for equities, but I'm definitely bearish long-term on this move. I think Cowen's last point is his best:
12. How much time has the EU bought itself?
And that's the $64,000 question.
Today is going to be a great day for equities, but I'm definitely bearish long-term on this move. I think Cowen's last point is his best:
12. How much time has the EU bought itself?
And that's the $64,000 question.
Do You Support This?
I'm having trouble posting this video, so I'm just going to drop the link here.
WARNING: Content is graphic and disturbing.
The backstory on the video is the police were late on executing a warrant on a man suspected of holding "dealer-sized amounts" of marijuana. They found a misdemeanor amount, as well as some paraphernalia.
When we hear about instances like this, as I did when Radley Balko first reported on it, most of us tend to shrug our shoulders. We think it's stupid or unfortunate or the inevitable result of human error. And then we go about our day.
But when we see it, when we hear it, when we practically experience it ourselves, that is when we feel something else, something far more powerful, moving, and in this case, frightening, than just words on paper. After watching the video, did you not feel the horror of the seven-year old daughter? The fear and anguish of the mother? The shock, sorrow and humiliation of the father?
This, simply put, is domestic terrorism.
Do you support it? If so, why?
(HT: Megan McArdle)
Random Thoughts
In rural and suburban towns, why are street signs green? Often times the background of these signs, from the vantage point of a driver, are trees. In the spring, summer and early fall, that background is thus green. Now most drivers who are on the lookout for street signs are those reading directions and/or those who have little idea where they are going. So their focus is primarily on locating and reading the signs, as opposed to paying attention to the road and its surroundings. So wouldn't it make sense for these signs to be in red or another contrasting color so it would be easier for the driver to locate?
Protectionism vs Racism, continued
In his comment on my most recent post, Rob hints at an issue I feel I should have addressed in my post.
When we talk about state-compelled racism or protectionism (versus individual passive or aggressive stances), it is necessary to point out that the structure of the modern state lends itself very easily to international protectionist policy. This is not the case for state-compelled racism. For though it can be easily be mandated domestically (see slavery, Jim Crow laws, etc...), internationally it simply falls under the category of xenophobic protectionism. I don't know if Rob was arguing from this angle, but if he was, I find this argument more compelling than if it were to come from the individual passive or aggressive view. On the state level, comparing racism and protectionism as I was was a bit of an apples to oranges argument.
That being said, I have trouble buying Rob's externality argument. He is more or less advocating sanctions. I don't think this is sound trade policy and am not aware of many instances in history where growth and progress were the direct result of economic sanctions. My study of history, especially of 20th century history, has led me to believe that the more one opens one's borders the better off country will be in the long run.
But aside from us haggling over the economics, does Rob's argument suggesting that if Country A refuses to trade with Country B because A thinks B's domestic policies are reprehensible, they are doing the morally conscionable thing, hold water?
I don't know, but I think it's an interesting take. I'm going to mull it over for a bit and see what I can come up with.
Is Protectionism Worse Than Racism?
This Steve Landsburg post got me thinking about the above question (note: I have not read the column the said post is based on). I think if you were to ask a random sampling of (reasonable) Americans if racism was "bad", they would almost all say yes. On the other hand, if you were to ask the same sample if protectionism was "bad", I wouldn't be surprised if it was split down the middle, or even in favor of "no". So why is this?
As Landsburg points, racism and protectionism are simply two forms of discrimination; one is based on, well, race, and the other regional affiliation. Now Landsburg claims that his analogy isn't perfect because protectionism by necessity forces itself to act on another. I don't think this is true as I believe one needs to clarify the setting in which the policy is practiced. For instance, if I was a regular person who happened to be a protectionist to the extreme, I would buy a parcel of land in Montana and fend for myself beholden to no one. If I was the same person, but a racist to, say black people, I would attempt to find a community where no black people would ever be found. I could see if Landsburg was making an opportunity cost argument about protectionism (my withdrawal from society takes my skills from society and thus forces more people to take up more of a burden, as well as takes away any potential benefits I may have provided), but I didn't get the impression that was what he was referring to. Besides, one could probably make a very similar argument about the effects of racial discrimination.
But I think the real issue at hand is it worse for government to be protectionist or racist. As government has a monopoly over the use of force, its actions in the area of discrimination are far more powerful than any private entity.
(Yes, I know if an influential CEO is a protectionist or racist he is going to affect a significant number of people with his discriminatory policies, but in his case it would be a trade-off as he would be enduring the cost of significantly limiting the size of his potential resource pool. Government faces no such cost).
So, is it worse for government to implement racist policies or protectionist policies?
It's a moot question in my opinion. Both are stupid policies, and both are immoral policies. I don't believe either provide any benefits (except to certain special interests, but that's a topic for another day).
Yet that brings us back to our second and third questions. Why would a majority of people say racism is a bad thing, but protectionism not? Is there a discernible difference between the two that makes one worse than the other?
My guess is that is a combination of our [American] view of American History as well economic ignorance.
Breaking Bad - Episode 5
When Season 3 of "Breaking Bad" premiered I wanted to do an episode recap each week. Unfortunately I found that I don't really have the time to do so, at least to the level of quality I aspire to. Luckily, Hunter Stephenson of slashfilm.com has been doing this for Season 3, and has been doing a hell of a good job. So my plan is to link to his recap each week and offer some of my thoughts/observations as well. Here is the link to last Sunday's fifth episode, "Mas" (for recaps of episodes 1 -4, please see the following links, respectfully, here, here, here and here.
Some thoughts on Episode 5:
-I thought there were a number of nice directorial touches throughout the episode: the wooden beam dividing the screen in half at the dinner scene, separating Walt from Skyler and Walt Jr., then Walt and Skylar, and ultimately Walt and the baby from Skylar; the towel separating Skylar's feet from Ted's heated floor (Natasha Vargas-Cooper felt it was one of the many insinuations of hell in the episode; I feel it was more of a symbol of temptation for Skylar for which life she is going to choose; Jessie smashing Walt's windshield (remember, Jesse indirectly caused Walt's windshield to be crushed last season, all while they were passive-aggressively fighting. Now Jesse directly smashed the windshield; foreshadowing a climatic clash between the two?)
-I feel Gus is often wearing yellow; an illustration of his cowardly nature/potential back-stabbing ways?
-NVC felt Gus' tempting of Walt was similar to Satan tempting Christ in the desert. I like this interpretation, though I think Eve and the apple is a more appropriate allusion. Walt is Eve, Gus is the Serpent, the lab is the great desire/temptation, and the United States government is God. That's probably too simple though.
-When David Simon talks "The Wire", he often invokes the idea of Greek tragedy, in that post-modern institutions take the place of the gods and that the human characters have no control over their tragic future. I think "Breaking Bad" is proving to be a wonderful contrast to "The Wire" as it is proving to be the modern Shakespearian tragedy. In it we see character after character slowly but surely succumbing to their own hubris and in the end, self-destruction.
-In my eyes, the primary themes of this episode were temptation and inadequacy.
Ezra Klein on Alleged Goldman Fraud
If you want to better understand the SEC fraud charges against Goldman Sachs, Ezra Klein does a nice job summing it up:
Confused about the SEC's fraud filingagainst Goldman Sachs? You're probably not alone. Let's try this two ways.
First, let's play it straight: Goldman Sachs let hedge-fund manager John Paulson select the subprime-mortgage bonds that he thought likeliest to explode and put them into a package called Abacus 2007-AC1. Paulson, who guessed early that the market was heading for a crash, wanted to bet against these bonds. But he needed someone on the other side of the bet. So Goldman went out and found him some suckers, or, as Goldman called them, "counterparties." Many of them were Europeans.
But here's the rub: Goldman didn't tell the counterparties that Paulson had picked the bonds. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” said Robert Khuzami, the director of the SEC’s division of enforcement.
Another way of think about it comes from the Washington Independent's Annie Lowrey, who analogizes it to a housing sale. Imagine a broker shows you a home. It looks good to you. Looks like the other homes, in fact. But when you buy it, it turns out that the foundation is cracked and the roof leaks and the neighborhood is full of crackhouses.
How can this be? You got the home appraised! And your broker knows all about homes!
Well, it turns out that your broker was working for the seller, who did the appraisal himself. And the seller had bet a bookie that whoever he sold the home to would move out within a year, which and your broker knew that but never told you. In this analogy, as you've already guessed, the broker is Goldman, the seller is Paulson, and the buyer is the counterparties.
Please note that these are charges, not yet determined fact.
More Bootleggers and Baptists. Or Just Bootleggers.
Russ Roberts on US sugar quotas and imports. The comments section is worth reading as well.
One of the books I'm currently reading is Bastiat's Economic Sophisms. Very early on Bastiat makes the (not original) point that production is not an end in and of itself but is a means for consumption. For example, sugar is not produced because it is enjoyable to make or because it "creates jobs" or for any other production-based reason. It is manufactured because there is significant demand to consume it.
Now if consumption is the end, it should be done in the most efficient manner possible so that costs are reduced and prices go down. There are many obstacles to achieving such a process, but some are more avoidable than others. Tariffs and subsidies should be some of the more avoidable obstacles.
Unfortunately our political system makes the abolition of said policies nearly impossible. As long as hypocrites like Michelle Bachmann are the ones making the rules, you can be sure all sorts of coercive government actions will be taken to maintain the status quo.
One of the books I'm currently reading is Bastiat's Economic Sophisms. Very early on Bastiat makes the (not original) point that production is not an end in and of itself but is a means for consumption. For example, sugar is not produced because it is enjoyable to make or because it "creates jobs" or for any other production-based reason. It is manufactured because there is significant demand to consume it.
Now if consumption is the end, it should be done in the most efficient manner possible so that costs are reduced and prices go down. There are many obstacles to achieving such a process, but some are more avoidable than others. Tariffs and subsidies should be some of the more avoidable obstacles.
Unfortunately our political system makes the abolition of said policies nearly impossible. As long as hypocrites like Michelle Bachmann are the ones making the rules, you can be sure all sorts of coercive government actions will be taken to maintain the status quo.
Decriminalization of Drugs Going Mainstream?
I caught the end of Charlie Rose on Bloomberg earlier this evening, and I found the final three minutes very interesting. The topic was the State of Latin America and the panel was the Chair of NYU's Latin America History Department, the Dean of International Studies at Columbia, a policy wonk for a think tank devoted to Latin American studies, and a former high-ranking Costa Rican official (I apologize for not remembering names or details 100% accurately).
As was to be expected, there was disagreement among these men on a litany of topics. Yet when Rose brought up "non-State players", as I believe he so aptly put it, there was universal agreement among the panel that the War on Drugs was an absolute failure, needed to be amended, if not shut down, and that it was the single most devastating policy Washington, D.C. had enacted on Latin America in the past forty years.
Obviously such things won't happen for many years, if they happen at all. But it is encouraging to see such well-respected intellectuals of various ideologies and backgrounds all taking this position.
Race to the Bottom?
From David Henderson of Econlog:
Throughout the discussion about the bill, various proponents said that the law would immediately prevent insurance companies from denying coverage to children based on pre-existing conditions. And it does. What, apparently, it doesn't do is require insurance companies to cover children. At least that's what some insurance companies are reputed to be saying. Having heard this, Obama appointee Kathleen Sebelius wrote a threatening letter to the health insurance companies' trade association.
Interestingly, various Democratic Congressmen expressed outrage at the insurance companies for reading the law carefully and trying to figure out what they are and are not required to do. There's no report that the Congressmen are angry at themselves for their carelessness.
This is an isolated issue, so I don't want to make too much of a big deal over it. But I do think this story illustrates a couple of key points about regulation in general.
My thoughts circle around Hayek's Knowledge Gap. Hayek's critique of central planning stated that it was impossible for a small, selected group of "enlightened" individuals to possess the massive amount of knowledge necessary to effectively and efficiently "plan" an industry (obviously a very poor summary on my part).
I think the intuitive points of this theory are very obvious and quite convincing, from a basic common sense perspective. What is even more interesting though, in my view, is that in today's health care system, which is very much a top-down, centralized regime, we have a tug-of-war between knowledge and power. In other words you have a couple hundred of legislators with the most power but least knowledge, followed by legions of bureaucrats with less power but more knowledge, finally ending with health care professionals, mostly private sector, with the least power but the most knowledge. So, in essence, you have this bizarre power/knowledge paradox where those who understand the system best are more or less the slaves of very naive politicians with very bad incentives.
I think what this will do will create a long-term race to bottom for health. At least that's what the systemic incentives in place tell me what will happen. You will have episodes like the one above ("Yes, we have to cover children with pre-existing conditions, but where does it say we have to cover children at all?) or simply a decrease in quality because the best and brightest will not have the power incentive (autonomy) to match the knowledge they possess and the cost it took to attain that knowledge.
Like with all complex pieces of legislation, the unintended consequences, the Unseen as Bastiat said, are very difficult to foresee and account for.
Throughout the discussion about the bill, various proponents said that the law would immediately prevent insurance companies from denying coverage to children based on pre-existing conditions. And it does. What, apparently, it doesn't do is require insurance companies to cover children. At least that's what some insurance companies are reputed to be saying. Having heard this, Obama appointee Kathleen Sebelius wrote a threatening letter to the health insurance companies' trade association.
Interestingly, various Democratic Congressmen expressed outrage at the insurance companies for reading the law carefully and trying to figure out what they are and are not required to do. There's no report that the Congressmen are angry at themselves for their carelessness.
This is an isolated issue, so I don't want to make too much of a big deal over it. But I do think this story illustrates a couple of key points about regulation in general.
My thoughts circle around Hayek's Knowledge Gap. Hayek's critique of central planning stated that it was impossible for a small, selected group of "enlightened" individuals to possess the massive amount of knowledge necessary to effectively and efficiently "plan" an industry (obviously a very poor summary on my part).
I think the intuitive points of this theory are very obvious and quite convincing, from a basic common sense perspective. What is even more interesting though, in my view, is that in today's health care system, which is very much a top-down, centralized regime, we have a tug-of-war between knowledge and power. In other words you have a couple hundred of legislators with the most power but least knowledge, followed by legions of bureaucrats with less power but more knowledge, finally ending with health care professionals, mostly private sector, with the least power but the most knowledge. So, in essence, you have this bizarre power/knowledge paradox where those who understand the system best are more or less the slaves of very naive politicians with very bad incentives.
I think what this will do will create a long-term race to bottom for health. At least that's what the systemic incentives in place tell me what will happen. You will have episodes like the one above ("Yes, we have to cover children with pre-existing conditions, but where does it say we have to cover children at all?) or simply a decrease in quality because the best and brightest will not have the power incentive (autonomy) to match the knowledge they possess and the cost it took to attain that knowledge.
Like with all complex pieces of legislation, the unintended consequences, the Unseen as Bastiat said, are very difficult to foresee and account for.
Art as Animation
Possibly the most wonderful trailer I have ever seen.
Not being able to understand the titles actually added to the experience, I think; provided more focus on the sheer beauty of the animation and thus the story within my own imagination.
In a world of things like this, hope remains.
Another Potential Book for Our Yet-To-Be-Established Book Club.
Slapped by the Invisible Hand: The Panic of 2007 by Gary B. Gorton.
Steve Landsburg sums up the thesis of the work here.
Steve Landsburg sums up the thesis of the work here.
Bootleggers and Baptists 2.0
This new FCC regulation has Bruce Yandle's Bootleggers and Baptists Theory written all over it.
The story that best exemplifies the Bootleggers and Baptists Theory concerns the Clean Air Act of the 1970s (forgive me if I leave out details as I'm not an expert on this event). The Act was lobbied for by numerous large energy/coal/car companies. One such company was GM. An amendment that passed during this time was a regulation that required all vehicles driven in the United States to be equipped with catalytic converters, a mechanism that limited vehicular emissions. It seemed strange that a company like GM would lobby for such requirement, which would no doubt increase costs.
Nonetheless, the regulation went into effect. What was even stranger though was that Honda, whom had developed an engine that reduced emissions more than a GM engine with the catalytic converter, was still required to install said coverter in all of its vehicles if sold in the US.
No big deal, it would be unfair and unreasonable to preclude some from the regulation. Maybe. But here's the real kicker.
GM owned the patent to the catalytic converter required by law to be installed in all cars.
So what's my point? Regulations, at face value, are simply clever, if not deceptive, pieces of marketing. They appeal to emotions. Health care reform to save the uninsured. Cap and Trade to save the planet. Financial reform to protect the middle class. And maybe there truly are noble intentions behind such legislation (though I have my doubts). Either way, it doesn't matter. Massive, sweeping pieces of legislation like this will attract special interests from every corner of the globe. They want an edge, and the best business edge in history is to ally with Big Government.
This isn't new what I'm talking about, and I don't wish to come across as naive. My only desire is that people would look beyond the face value of laws, bills and regulations and challenge themself (and their representatives) by asking the question "but what happens next?"
The faster people realize that self-interest is not absent from the political process but is in fact far more damaging to the public because it lacks the checks the market provides, the better.
Here's Russ Roberts on the issue (he also illustrates why I stopped going to CNN for my more general news coverage).
The story that best exemplifies the Bootleggers and Baptists Theory concerns the Clean Air Act of the 1970s (forgive me if I leave out details as I'm not an expert on this event). The Act was lobbied for by numerous large energy/coal/car companies. One such company was GM. An amendment that passed during this time was a regulation that required all vehicles driven in the United States to be equipped with catalytic converters, a mechanism that limited vehicular emissions. It seemed strange that a company like GM would lobby for such requirement, which would no doubt increase costs.
Nonetheless, the regulation went into effect. What was even stranger though was that Honda, whom had developed an engine that reduced emissions more than a GM engine with the catalytic converter, was still required to install said coverter in all of its vehicles if sold in the US.
No big deal, it would be unfair and unreasonable to preclude some from the regulation. Maybe. But here's the real kicker.
GM owned the patent to the catalytic converter required by law to be installed in all cars.
So what's my point? Regulations, at face value, are simply clever, if not deceptive, pieces of marketing. They appeal to emotions. Health care reform to save the uninsured. Cap and Trade to save the planet. Financial reform to protect the middle class. And maybe there truly are noble intentions behind such legislation (though I have my doubts). Either way, it doesn't matter. Massive, sweeping pieces of legislation like this will attract special interests from every corner of the globe. They want an edge, and the best business edge in history is to ally with Big Government.
This isn't new what I'm talking about, and I don't wish to come across as naive. My only desire is that people would look beyond the face value of laws, bills and regulations and challenge themself (and their representatives) by asking the question "but what happens next?"
The faster people realize that self-interest is not absent from the political process but is in fact far more damaging to the public because it lacks the checks the market provides, the better.
Here's Russ Roberts on the issue (he also illustrates why I stopped going to CNN for my more general news coverage).
Sobering Fact of the Day
Via the Cato Institute's Ian Vasquez:
Though the deaths are the first in which Mexican drug cartels appear to have so brazenly targeted and killed individuals linked to the U.S. government, illicit drug trade violence has killed some 18,000 people in Mexico since President Calderon came to power in December 2006—more than three times the number of American military personnel deaths in the Iraq and Afghanistan wars combined.
Though the deaths are the first in which Mexican drug cartels appear to have so brazenly targeted and killed individuals linked to the U.S. government, illicit drug trade violence has killed some 18,000 people in Mexico since President Calderon came to power in December 2006—more than three times the number of American military personnel deaths in the Iraq and Afghanistan wars combined.
Care vs Insurance
Here's a comment I recently made on the blog Cafe Hayek in response to this question (made by another commenter):
"So what do Americans propose to do for people who have a pre-existing condition and cannot afford health insurance." [sic]
I don't think you're framing the question correctly. It should read, "So what do Americans propose to do for people who have a pre-existing condition and cannot afford the health care services needed to alleviate the problems caused by said pre-existing condition?"
I don't know the answer. But I think it is very important use the correct language. Care, not insurance.
Consumers with pre-existing conditions are probably not priced out of the market because of their own lack of funds, but much more because there is no market to accomodate them. Why? Because there is no risk! Just like you will never find a fire insurance underwriter who will write a burning building, you will never find a health insurance underwriter who will write a person with a pre-existing condition. That's because doing so would defeat the very nature of the product.
Treating people with costly, long-term medical ailments is a serious predicament for our country. Some private/public plan (HSAs + a shorter-term, slimmed down Medicare/Medicaid style contingency option?) is probably the way to go. But insurance companies are the LAST entity that should be looked out for dealing with this issue.
"So what do Americans propose to do for people who have a pre-existing condition and cannot afford health insurance." [sic]
I don't think you're framing the question correctly. It should read, "So what do Americans propose to do for people who have a pre-existing condition and cannot afford the health care services needed to alleviate the problems caused by said pre-existing condition?"
I don't know the answer. But I think it is very important use the correct language. Care, not insurance.
Consumers with pre-existing conditions are probably not priced out of the market because of their own lack of funds, but much more because there is no market to accomodate them. Why? Because there is no risk! Just like you will never find a fire insurance underwriter who will write a burning building, you will never find a health insurance underwriter who will write a person with a pre-existing condition. That's because doing so would defeat the very nature of the product.
Treating people with costly, long-term medical ailments is a serious predicament for our country. Some private/public plan (HSAs + a shorter-term, slimmed down Medicare/Medicaid style contingency option?) is probably the way to go. But insurance companies are the LAST entity that should be looked out for dealing with this issue.
Debt and Growth: More than Meets the Eye
Timely post from Krugman on the relationship between debt and growth. I particularly liked this seemingly obvious but actually quite interesting take:
What I think I’m seeing, although I haven’t tested this carefully, is that the causal relationship largely runs from growth to debt rather than the other way around. That is, it’s not so much that bad things happen to growth when debt is high, it’s that bad things happen to debt when growth is low.
He references two Carmen Reinhart papers in this post. I don't have the time, energy or, quite frankly, ability to read many academic economic papers, but I've read and listened to numerous interviews with Reinhart and she is defintely one of the go to people when it comes to debt and growth.
What I think I’m seeing, although I haven’t tested this carefully, is that the causal relationship largely runs from growth to debt rather than the other way around. That is, it’s not so much that bad things happen to growth when debt is high, it’s that bad things happen to debt when growth is low.
He references two Carmen Reinhart papers in this post. I don't have the time, energy or, quite frankly, ability to read many academic economic papers, but I've read and listened to numerous interviews with Reinhart and she is defintely one of the go to people when it comes to debt and growth.
Is Capitalism No Longer Capitalism?
James P. Hoffa writes today in the The Detroit News, "Protesters blame "big government" for their woes, but their anger is misdirected. It's the big conglomerates that are fleecing them. The fact is that institutional power has moved away from government to Wall Street and large corporations."
Bryan Caplan recently posted about whether "capitalism" is no longer the right term to describe capitalism. I think it no longer might be. Whether we like it or not, words evolve and take on different meanings over time and across culture. I think this is clearly happening to the word "capitalism". Michael Moore's "Capitalism: A Love Story" is probably the most appropriate example of this. The documentary, from what I understand (never saw it), should be titled "Crony Capitalism: A Love Story" or "Corporatism: A Love Story". People, I think, are more and more thinking of capitalism not as idealistic free-market enterprise valiantly defended by the likes of Smith, Hayek and Friedman, but instead as the anti-liberty cozy relationship found between Big Government and Big Business.
And they should be.
The ironic thing is the more people are upset at Washington, the more they seem to rely on it. This is what concerns me most. Government is dangerous when it is the problem, but it is terrifying when it is viewed as the sole solution.
Bryan Caplan recently posted about whether "capitalism" is no longer the right term to describe capitalism. I think it no longer might be. Whether we like it or not, words evolve and take on different meanings over time and across culture. I think this is clearly happening to the word "capitalism". Michael Moore's "Capitalism: A Love Story" is probably the most appropriate example of this. The documentary, from what I understand (never saw it), should be titled "Crony Capitalism: A Love Story" or "Corporatism: A Love Story". People, I think, are more and more thinking of capitalism not as idealistic free-market enterprise valiantly defended by the likes of Smith, Hayek and Friedman, but instead as the anti-liberty cozy relationship found between Big Government and Big Business.
And they should be.
The ironic thing is the more people are upset at Washington, the more they seem to rely on it. This is what concerns me most. Government is dangerous when it is the problem, but it is terrifying when it is viewed as the sole solution.
What I've Been Reading
Beowulf - I can see where Tolkien got much of his inspiration. Not as entertaining as The Song of Roland; not as enthralling as The Nibelungenlied. The battle with Grendel was a bit underwhelming.
Ethics by Aristotle - I haven't read much Greek Philosophy, just some of the Socratic Dialogues. I'm only about a fifth of the way through, and often times I feel like I am going in circles. But I like his discussion so far with happiness serving as the central tenet. I am interested to see where it leads.
The Corner by David Simon and Ed Burns - I recently finished David Simon's Homicide: Life on the Killing Streets. If you are a fan of The Wire, buy it. Reading like a novel, the work offers a glimpse into the fascinating if not slightly terrifying and mostly depressing life of a Baltimore Homicide Detective. The Corner offers a similar unique insight, but this time from the angle of the dealers and addicts.
Titan by Ron Chernow - A mammoth work that I have been chugging through for a couple of months now at around fifty pages a week. Reading it is exhausting, I can only imagine what researching it must have been like. If you like biographies on industrial giants, not one to miss.
Gang Leader for a Day by Sudhir Venkatesh - Picked this up after reading Superfreakonomics, as this author and Steve Levitt have done academic work together. The premise is a young sociology student (of Indian descent) befriends a local gang leader and becomes an informal member of the projects tribe. Starts off strong, but tails off at the end. Venkatesh tries too hard, in my opinion, to not hurt anyone's feelings.
Othello by Shakespeare - For some reason I just never really got into this one. I didn't find any of the characters particularly interesting, even Iago (who by the way was very much brought back to life by Christoph Waltz's epic performance as Col. Hans Landa in Inglourious Basterds). I'll give it another shot in the future; I'm sure my reaction will be different.
More Stuff on the Euro
Dennis Gartman on the euro situation. As someone long gold, short the euro, I found this comment particularly interesting:
What's really interesting is that gold in euro terms is well above the high that gold in dollar terms made in early December. Gold in euro terms is actually at new highs. So if you've been long gold and short euros, creating a synthetic long gold in euro terms, you're actually feeling pretty good. You're ahead of the game. You're so far ahead on the euro side of the trade that the entire trade is enormously profitable, whereas if you had bought gold in U.S. dollar terms, you're still behind by quite a bit.
So then how do I buy gold in euro terms?
Unbelievable... Yet so Believable
This is one of the people who will be reforming the financial regulatory sector and ultimately shaping the future of the global economy:
Watch CBS News Videos Online
Watch CBS News Videos Online
The Euro and the Mainstream Media
Here is a comprehensive if not overly pessimistic piece on Greece, the euro and the current state of global debt.
I'm a bit disturbed by the lack of mainstream media attention to this issue. I receive virtually all of my news from Yahoo! Finance and Bloomberg.com, but will periodically check CNN.com and other similar sites to get a more bird's-eye view. There has been nothing on these sites about this issue. I find it eerily reminiscent of mid-2008 period when things stared heating up and most journalists were not attempting to get to the bottom of anything but instead screaming, "What the hell is going on!" and "This is what's going on this is whose fault it is!"
I understand the MSM's hesitation to get involved. It is a very complex, complicated issue, is quite technical and probably boring to most people, and doesn't, as of this moment, directly affect Americans, unlike say the fall of Lehman and Bear.
But that doesn't erase the fact this is an extremely serious situation that deserves attention. If you are looking for more info, the blogosphere has been doing an excellent job over the past few months.
Chaos in Europe
My take on the euro situation is that the EU is in a catch-22. If they bailout Greece (which it looks like they most definitely will), what signal does that send to the rest of the Eurozone, and in particular other high risk nations like Ireland, Italy and Spain? Will bailouts become the norm? What signal will that send to outside nations and investors about the credibility of the currency, if not the entire region? There is also potential inflation concerns to be worried about.
Yet, what signal does the EU send if it allows Greece to default? What will that say about the stability of the euro?
"Greece in itself is not a big thing," said Sveder van Wijnbergen, of the Free University of Amsterdam, who says Athens' budget shortfall of euro5 4 billion ($75 billion) is small change by European standards. "I'm worried about what sort of message we give to other governments."
In my view this is a short-term sure thing if I've ever seen one. I'm going to buy some DRR on Tuesday and possibly move some of my gold exposure to this area as well.
Some Stuff on Trade
Here's a Don Boudreaux letter to the editor on trade and job creation (which are really one in the same if you think about it):
Labor-union official Vincent Fyfe wants the state of New York to continue prohibiting supermarkets from selling wine (Letters, Feb. 12). His reason? Supermarket wine sales will put some liquor-store owners out of business and their employees out of work.
Note to Mr. Fyfe: the purpose of the wine trade – like every other trade – is to serve consumers, not to create jobs for producers. If job creation were paramount, then government should not only continue to prohibit supermarkets from selling wine, but should require that bottles of beer, wine, and spirits be hand-delivered to retailers, one at a time, while cradled in the arms of carriers each pulled though the streets in a rickshaw.
Of course, such a requirement would harm consumers, but it would also create lots of jobs.
Sincerely,
Donald J. Boudreaux
While at dinner a few months I heard someone close to me say that the new devices offered by the local Stop & Shop that allowed shoppers to instantly check out their items were not only bad because they were cumbersome (the real motivation for her vitriol I believe), but also because they eliminated the jobs of traditional check out people.
I held my tongue but wanted to ask, "Should EZPass be eliminated as well? It surely destroys the job of the local tollbooth worker."
Given that she is an avid user of EZPass, and one who loves the benefits it provides, I'm not sure what she would have said.
In a similar vein, Russ Roberts' most recent EconTalk podcast is an excellent monologue on trade and borrows heavily on the ideas of Smith, Ricardo and Krugman. Highly recommended.
Labor-union official Vincent Fyfe wants the state of New York to continue prohibiting supermarkets from selling wine (Letters, Feb. 12). His reason? Supermarket wine sales will put some liquor-store owners out of business and their employees out of work.
Note to Mr. Fyfe: the purpose of the wine trade – like every other trade – is to serve consumers, not to create jobs for producers. If job creation were paramount, then government should not only continue to prohibit supermarkets from selling wine, but should require that bottles of beer, wine, and spirits be hand-delivered to retailers, one at a time, while cradled in the arms of carriers each pulled though the streets in a rickshaw.
Of course, such a requirement would harm consumers, but it would also create lots of jobs.
Sincerely,
Donald J. Boudreaux
While at dinner a few months I heard someone close to me say that the new devices offered by the local Stop & Shop that allowed shoppers to instantly check out their items were not only bad because they were cumbersome (the real motivation for her vitriol I believe), but also because they eliminated the jobs of traditional check out people.
I held my tongue but wanted to ask, "Should EZPass be eliminated as well? It surely destroys the job of the local tollbooth worker."
Given that she is an avid user of EZPass, and one who loves the benefits it provides, I'm not sure what she would have said.
In a similar vein, Russ Roberts' most recent EconTalk podcast is an excellent monologue on trade and borrows heavily on the ideas of Smith, Ricardo and Krugman. Highly recommended.
The Economics of eBooks
Interesting article by the The New York Times on the potential increase in pricing of ebooks. The thrust of the article is that in the near future ebooks will increase from a standard $9.99 price to $14.99, a 50% mark up. Consumers, predictably, are not happy:
“I just don’t want to be extorted,” said Joshua Levitsky, a computer technician and Kindle owner in New York. “I want to pay what it’s worth. If it costs them nothing to print the paper book, which I can’t believe, then they should be the same price. But I just don’t see how it can be the same price.”
First of all, Joshua, you are not being extorted. No one is saying you have to buy $14.99 ebooks in the future or you're going to be harmed in some way. This not a mafia-style "protection" racket or an egregious tax situation. If you don't like it, don't buy it.
Secondly, Joshua, and I assume other upset consumers, are using the Labor Theory of Value to determine what they believe the "correct" price of an ebook should be. Of course, as we now know, the value of any product is determined by its marginal utility concerning a particular consumer in conjunction with the combined factors of input cost and the profit motive. For example, if the final Twilight book costs $10 to "make" and the final Harry Potter book cost $10 to make, then they should be retailed at the same price (given the same profit margin preference). But, personally, I would have paid $100 for the final Harry Potter book, whereas you could not have paid me $100 to slog through the final Twilight book (or any of them for that matter). But many readers probably feel the opposite, saying they would have paid anything for the Twilight book but zero for Harry Potter. So saying an ebook should cost $9.99 or $14.99 or any other predetermined, ultimately arbritary price, is nonsense. Prices are amorphous, as I will shortly explain.
Author Douglas Preston makes the same fallacious arguments, but from the other side of the aisle:
“The sense of entitlement of the American consumer is absolutely astonishing,” said Douglas Preston, whose novel “Impact” reached as high as No. 4 on The New York Times’s hardcover fiction best-seller list earlier this month. “It’s the Wal-Mart mentality, which in my view is very unhealthy for our country. It’s this notion of not wanting to pay the real price of something.”
To reiterate, there is no "real price". Let's recall what a price is. It is a signal, a relay of information to parties about how much another party values an asset they hold title to. The receiving parties then decide whether the benefits they will get from the asset will exceed the costs (the price they have to pay to obtain title from the other party). For every individual for every asset, this preference is different and is subject to an innumerable amount of factors.
As I mentioned before, if Joshua doesn't like the price change, he simply does not have to purchase any more books. Yes, he will have to deal with the sunk cost of the ebook hardware, but this was a foreseeable event and an eBook still has value besides purchasing books (free public domain works, web browser, etc...). Or he could fill his spare time with other activities. Or he could go to a library, like Wilma Sanders:
“As far as I’m concerned, Amazon has committed to the $9.99 price,” said Wilma Sanders, a 70-year-old retiree who has homes in Plymouth, Mass., and Marco Island, Fla. She said that if e-book prices rose, she would stop buying. “I’m still a library-goer. There are enough good books out there that I don’t need to pay more than I want to. I already can’t keep up with what I have.”
I'm with Wilma on this. I do think Amazon will eventually fall back on the $9.99 model. What it seems like their doing is trying to translate the old hardcover/paperback price differential to the new medium (eg: when books first come out they will cost $15, then will drop down to $10 after a few months). But why does the model have to be so standard and rigid? Why can't prices float dependant on how popular a book is? My point is this is a very new market that does not need to be cemented as one particular model.
Obviously the role of publishers' and the deals they have with Amazon, Sony, B&N and Apple all play a huge role in this and the article doesn't mention a whole lot about them.
But my basic point is Amazon doesn't owe consumers anything. That's the beauty of a market. It's voluntary exchange. So if you don't like what they have to offer, go somewhere else or do something else. But don't go on Amazon.com and give a new book repeated one star ratings because you think it's overpriced. It's immature and adversely affects others.
(HT: Marginal Revolution)
“I just don’t want to be extorted,” said Joshua Levitsky, a computer technician and Kindle owner in New York. “I want to pay what it’s worth. If it costs them nothing to print the paper book, which I can’t believe, then they should be the same price. But I just don’t see how it can be the same price.”
First of all, Joshua, you are not being extorted. No one is saying you have to buy $14.99 ebooks in the future or you're going to be harmed in some way. This not a mafia-style "protection" racket or an egregious tax situation. If you don't like it, don't buy it.
Secondly, Joshua, and I assume other upset consumers, are using the Labor Theory of Value to determine what they believe the "correct" price of an ebook should be. Of course, as we now know, the value of any product is determined by its marginal utility concerning a particular consumer in conjunction with the combined factors of input cost and the profit motive. For example, if the final Twilight book costs $10 to "make" and the final Harry Potter book cost $10 to make, then they should be retailed at the same price (given the same profit margin preference). But, personally, I would have paid $100 for the final Harry Potter book, whereas you could not have paid me $100 to slog through the final Twilight book (or any of them for that matter). But many readers probably feel the opposite, saying they would have paid anything for the Twilight book but zero for Harry Potter. So saying an ebook should cost $9.99 or $14.99 or any other predetermined, ultimately arbritary price, is nonsense. Prices are amorphous, as I will shortly explain.
Author Douglas Preston makes the same fallacious arguments, but from the other side of the aisle:
“The sense of entitlement of the American consumer is absolutely astonishing,” said Douglas Preston, whose novel “Impact” reached as high as No. 4 on The New York Times’s hardcover fiction best-seller list earlier this month. “It’s the Wal-Mart mentality, which in my view is very unhealthy for our country. It’s this notion of not wanting to pay the real price of something.”
To reiterate, there is no "real price". Let's recall what a price is. It is a signal, a relay of information to parties about how much another party values an asset they hold title to. The receiving parties then decide whether the benefits they will get from the asset will exceed the costs (the price they have to pay to obtain title from the other party). For every individual for every asset, this preference is different and is subject to an innumerable amount of factors.
As I mentioned before, if Joshua doesn't like the price change, he simply does not have to purchase any more books. Yes, he will have to deal with the sunk cost of the ebook hardware, but this was a foreseeable event and an eBook still has value besides purchasing books (free public domain works, web browser, etc...). Or he could fill his spare time with other activities. Or he could go to a library, like Wilma Sanders:
“As far as I’m concerned, Amazon has committed to the $9.99 price,” said Wilma Sanders, a 70-year-old retiree who has homes in Plymouth, Mass., and Marco Island, Fla. She said that if e-book prices rose, she would stop buying. “I’m still a library-goer. There are enough good books out there that I don’t need to pay more than I want to. I already can’t keep up with what I have.”
I'm with Wilma on this. I do think Amazon will eventually fall back on the $9.99 model. What it seems like their doing is trying to translate the old hardcover/paperback price differential to the new medium (eg: when books first come out they will cost $15, then will drop down to $10 after a few months). But why does the model have to be so standard and rigid? Why can't prices float dependant on how popular a book is? My point is this is a very new market that does not need to be cemented as one particular model.
Obviously the role of publishers' and the deals they have with Amazon, Sony, B&N and Apple all play a huge role in this and the article doesn't mention a whole lot about them.
But my basic point is Amazon doesn't owe consumers anything. That's the beauty of a market. It's voluntary exchange. So if you don't like what they have to offer, go somewhere else or do something else. But don't go on Amazon.com and give a new book repeated one star ratings because you think it's overpriced. It's immature and adversely affects others.
(HT: Marginal Revolution)
Sarah Palin is No Barry Goldwater
Katrina vanden Heuvel recently writes:
Palin nonetheless delivered a speech steeped in the late Arizonan's extremist brand of conservatism. In his 1960 manifesto The Conscience of a Conservative, Goldwater wrote, "I have little interest in streamlining government or in making it more efficient, for I mean to reduce its size. I do not undertake to promote welfare, for I propose to extend freedom. My aim is not to pass laws, but to repeal them. It is not to inaugurate new programs, but to cancel old ones that do violence to the Constitution or that have failed their purpose, or that impose on the people an unwarranted financial burden." Palin took an equally extremist anti-Washington/anti-government stance, fulminating against the 2009 Recovery and Reinvestment Act by condemning the "fat strings attached" to federal stimulus dollars and by accusing the Obama administration of baldly using the stimulus as a power grab that "disrespect[s] the Tenth Amendment of our Constitution." (Never mind the denunciation of Miranda Rights that she herself had made minutes earlier.)
I don't follow. Never mind the shameless attempt to try and brand free-market conservatism as equivalent to violent political terrorism, what in what in God's name does Sarah Palin have to do with Barry Goldwater?
One may disagree with Conscience of a Conservative from an ideological standpoint, but I think it is safe to say that all can agree the short work is a highly principled, highly consistent essay. It builds on classical liberal political and economic thought and does so quite coherently. Goldwater's book is a testament to individual liberty as a moral end in and of itself. If you disagree with that, fine. But don't say "Well, Sarah Palin is one of the current faces of conservatism and Barry Goldwater is one of the older faces, so Sarah Palin must be today's Barry Goldwater."
Sarah Palin believes in centrally planned nation-building. She believes the federal government should determine who can and cannot get married. She believes the federal government should dictate what you can and cannot put into your own body. Like most so-called conservatives, Sarah Palin loves to espouse the wonders and beauties of the free market when it suits her purposes. But if she doesn't like the outcome of the market (aka individuals making their own decisions), then she will attempt to use the coercive power of the State to enforce her way and outlaw alternatives in a flash.
Barry Goldwater may not have been a practical politician and he have held views that many found and still find unreasonable. But the man was no hypocrite. Sarah Palin is.
American Idol 2010
And so it begins. My early pick is Casey James (WARNING: DO NOT TYPE INTO GOOGLE WHILE AT WORK), though I'm skeptical he'll find enough of a niche to get as far he might deserve to go.
Also liked Andrew Garcia. This cover of Paula Abdul's "Straight Up" could win a Grammy.
A bunch of really good girls, but can't remember their names at the moment. Some very singers though, overall.
Couldn't help but notice that all the best singers all played acoustic. Definitely no coincidence.
Where Do We Go From Here?
I've been following the global economic situtation pretty closely over the past few weeks and the one thing that seems clear to me is that no one has any idea where we are headed. I think it's easy to just throw out a prediction that everyone will forget in fifteen minutes, but if you really want to see what people believe, check out where they've plopped their money. Last week I shifted 15 - 20% of my holdings from an S&P 500 tracking ETF to VXX, which tracks the VIX (in theory). Pretty much I'm paying 89 basis points for insurance against any future collapse, which I think is entirely possible.
My rationale for this move is for the most part the debt situation in Europe. Carment Reinhardt is not enthused by what is going on there. Arnold Kling reinforces her thoughts, though doesn't go into much substantive detail. The latest news is Greece will be bailed out by the EU, but what will this mean for the Euro? Already record shorting is being done on the currency.
A couple of months ago I bought gold anticipating some sort of situation like this. But the flight from the Euro has not gone to metals, and in particular gold as many anticipated, but instead to the dollar. This needless to say has adversely affected gold, driving it down during a time when all the fundamentals say it should be shooting up! I may looking at UUP to play and hedge off this development (I'm still long gold), but that party may soon be over too. I just don't know.
We live in strange times indeed.
My rationale for this move is for the most part the debt situation in Europe. Carment Reinhardt is not enthused by what is going on there. Arnold Kling reinforces her thoughts, though doesn't go into much substantive detail. The latest news is Greece will be bailed out by the EU, but what will this mean for the Euro? Already record shorting is being done on the currency.
A couple of months ago I bought gold anticipating some sort of situation like this. But the flight from the Euro has not gone to metals, and in particular gold as many anticipated, but instead to the dollar. This needless to say has adversely affected gold, driving it down during a time when all the fundamentals say it should be shooting up! I may looking at UUP to play and hedge off this development (I'm still long gold), but that party may soon be over too. I just don't know.
We live in strange times indeed.
Economist Blogger Drama
Hey Rob, if you ever thought our debates got a little testy, check out what's going on between Mario Rizzo/Steve Horwitz and Brad DeLong.
Stimulus debates really bring it out of people.
Stimulus debates really bring it out of people.
We Need More Competition in Government
Arnold Kling and Scott Sumner both advocate a return to decentralization and federalism-based policies. I particularily like this paragraph from Kling:
I would like to see more experiments and more variety. Instead of having a big national contest over what health care system, why not try single-payer in one part of the country and radical deregulation in another? Switzerland, which is about the size of Maryland, has different health care systems in each of its 20-odd cantons, which are about the size of Maryland counties. Surely it must be possible to try different health care approaches in Texas and Massachusetts.
I do not see what is unreasonable about this. One may say that this would lead to potentially devastating situations in states that took a more decentralized approach, but even if this were true, those peoples could move to a state that offered a more centralized approach if they felt that would benefit them.
Also, Sumner implies that comparing the United States to smaller, far less diverse and complex countries like Denmark and Switzerland is a mistake. I think it is safe to say that it gets exponentially more difficult to centrally plan for a country as it gets larger. Thus, the argument that the US should centrally plan health care because smaller countries do it effectively is a backwards statement. We shouldn't centrally plan precisely because these smaller, less complex nations are competent at it.
UPDATE: Here is Reason's Peter Suderman's take on Kling's post:
I'm obviously wary of socializing medical payment, even at the state or local level. But given the opportunity to see single payer compete against a genuinely deregulated market, I'm pretty sure I'd bite. And I suspect a lot of single payer supporters would too. But that sort of political competition isn't in the cards. Instead we're stuck with a broken, compromised system in which neither side gets what they want: On one hand, the government controls nearly half of all medical spending, but failures get blamed on the free market. On the other hand, those who want to sweep away the current system and socialize medical insurance get stuck with messy legislative compromises larded with handouts for special interests. You could make the Beltway centrist's case that this is a good thing—that political systems shouldn't cater to extremes. But in this instance, we've got a system that's catering to almost no one [emphasis mine -ed.] And in the meantime, we're stifling innovation and experimentation on both ends of the political spectrum.
I would like to see more experiments and more variety. Instead of having a big national contest over what health care system, why not try single-payer in one part of the country and radical deregulation in another? Switzerland, which is about the size of Maryland, has different health care systems in each of its 20-odd cantons, which are about the size of Maryland counties. Surely it must be possible to try different health care approaches in Texas and Massachusetts.
I do not see what is unreasonable about this. One may say that this would lead to potentially devastating situations in states that took a more decentralized approach, but even if this were true, those peoples could move to a state that offered a more centralized approach if they felt that would benefit them.
Also, Sumner implies that comparing the United States to smaller, far less diverse and complex countries like Denmark and Switzerland is a mistake. I think it is safe to say that it gets exponentially more difficult to centrally plan for a country as it gets larger. Thus, the argument that the US should centrally plan health care because smaller countries do it effectively is a backwards statement. We shouldn't centrally plan precisely because these smaller, less complex nations are competent at it.
UPDATE: Here is Reason's Peter Suderman's take on Kling's post:
I'm obviously wary of socializing medical payment, even at the state or local level. But given the opportunity to see single payer compete against a genuinely deregulated market, I'm pretty sure I'd bite. And I suspect a lot of single payer supporters would too. But that sort of political competition isn't in the cards. Instead we're stuck with a broken, compromised system in which neither side gets what they want: On one hand, the government controls nearly half of all medical spending, but failures get blamed on the free market. On the other hand, those who want to sweep away the current system and socialize medical insurance get stuck with messy legislative compromises larded with handouts for special interests. You could make the Beltway centrist's case that this is a good thing—that political systems shouldn't cater to extremes. But in this instance, we've got a system that's catering to almost no one [emphasis mine -ed.] And in the meantime, we're stifling innovation and experimentation on both ends of the political spectrum.
Constitutional or Not?
Steve Chapman writes about whether current health care legislation is constitutional or not. From the article:
“Never in the history of the United States has the federal government ever required someone to engage in an economic activity with a private party,” Georgetown University law professor Randy Barnett has said. If the Supreme Court goes along, he said, “there’s pretty much nothing Congress can’t do.”
George Will offers his thoughts here.
The only argument I've heard so far is the ICC, but I think that is a major stretch.
“Never in the history of the United States has the federal government ever required someone to engage in an economic activity with a private party,” Georgetown University law professor Randy Barnett has said. If the Supreme Court goes along, he said, “there’s pretty much nothing Congress can’t do.”
George Will offers his thoughts here.
The only argument I've heard so far is the ICC, but I think that is a major stretch.
All In and Out?
Russell Roberts:
The real implication of Brown’s victory isn’t that the Republicans can now stop the Democrats. It’s the informational signal it sends to current Senators that they have over-reached. A lot. When a Republican wins an election to replace Ted Kennedy whose signature issue was health care in perhaps the most liberal state in the country, and he wins running against ObamaCare and as a real Republican not some Republican Lite for Massachusetts, it’s a wake-up call of enormous proportions.
It seems fairly obvious to me at this point that Obama and Co. have vastly overplayed their hand. US Senators, Representatives and even the White House are going to react to this in a way that is going to make true-blue liberals furious. But whether good or bad, right or wrong, it seems thats what the doctor has ordered.
The State of the Union is going to be fascinating.
Logic Trumps Politics. As Usual.
Don Boudreaux asks a wonderful question of Nancy Pelosi:
Reacting to Republican Scott Brown’s election to the U.S. Senate seat once held by Massachusetts’s Ted Kennedy, House Speaker Nancy Pelosi said that “Massachusetts has health care… The rest of the country would like to have that too. So we don’t say a state that already has health care should determine whether the rest of the country should” (“Gut-Check for Obama and Dems on Health Care,” Jan. 20).
Questions for Ms. Pelosi. If the citizens of Massachusetts are able, without any further legislation from Congress, to foist on themselves the kind of government-directed health-care that Ms. Pelosi alleges the rest of the country desires, what’s stopping people across America from doing in each of their states what the people of Massachusetts have already done in that state? Why does Congress have to act at all?
Sincerely,
Donald J. Boudreaux
I would love to hear her answer.
Reacting to Republican Scott Brown’s election to the U.S. Senate seat once held by Massachusetts’s Ted Kennedy, House Speaker Nancy Pelosi said that “Massachusetts has health care… The rest of the country would like to have that too. So we don’t say a state that already has health care should determine whether the rest of the country should” (“Gut-Check for Obama and Dems on Health Care,” Jan. 20).
Questions for Ms. Pelosi. If the citizens of Massachusetts are able, without any further legislation from Congress, to foist on themselves the kind of government-directed health-care that Ms. Pelosi alleges the rest of the country desires, what’s stopping people across America from doing in each of their states what the people of Massachusetts have already done in that state? Why does Congress have to act at all?
Sincerely,
Donald J. Boudreaux
I would love to hear her answer.
New Feature: Episodes of Skepticism
I would like to introduce a new feature here at Non Incautus where we take skeptical views of conventional wisdom. Here are some topics I hope to broach in the future:
Are borders obsolete?
Should performance-enhancing drugs be allowed in professional sports?
Are anti-trust laws self-defeating?
I do not hold any definitive opinions on these topics, only feel skeptical about their traditional answers. I think this will make for some interesting conversation.
Are borders obsolete?
Should performance-enhancing drugs be allowed in professional sports?
Are anti-trust laws self-defeating?
I do not hold any definitive opinions on these topics, only feel skeptical about their traditional answers. I think this will make for some interesting conversation.
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