I remember a time when opponents of Halloween said it’s an evil day that promotes sorcery and witchcraft. While these are still vocal accusations, I never thought I’d see the opponents saying Halloween isn’t evil enough.
Alex Tabarrok at Marginal Revolution posted this article today about a Washington School in Puyallup banning Halloween because the school has “been contacted by followers of the Wiccan religion, and they indicated they have been offended after seeing elementary school depictions of witches with long noses, warts, cauldrons and such," We’re upsetting Wiccans, thus we must stop. God forbid anyone is uncomfortable about anything.
The Washington Post article goes on to say that this is a growing trend—“It is part of a contentious nationwide trend, as public school administrators, in the name of test-centered learning and multicultural sensitivity, attempt to abbreviate and homogenize classroom celebrations of Halloween, Christmas and Easter. [emphasis mine]”
Now this is scary. We have become so politically correct, so “accepting,” we’re literally white-washing the world into dull conformity. People tell me that globalization “destroys” cultures. That’s not true; globalization stimulates cultural evolution by encouraging collaboration and trade. People exchange ideas and rework their lives. Governments destroy culture because they are under political pressure and have the guns to force people not to offend the “right” group. Conformity is the signature of the state, not the market; histories of China, the Soviet Union and Cuba confirm that.
The school’s first official reason was that these holiday activities take away from schooling. Well, yes and no. Kids running around in costumes may not be sitting at desks learning math, but they are learning something about the American culture (and as Americans, I think that’s pretty worthy). More importantly, any teacher worth their salt could integrate Halloween celebrations with history lessons about origins and witch trials and how too much state power can get out of control rather easily. But because so many schools are run by the government, the average American doesn’t get that option and they don’t get to try different variations on the topic. We are told the one “best” way to do something so we must follow. And we don’t get to dress up.
Sunday, October 31, 2004
Thursday, October 28, 2004
No, They Can't Take My Job Away From Me
Economics professors are some of the best people to ascertain how to go about economic expanse. Not only have they spent their lives studying the subject, they have little incentive to lie. It’s not like their job will ever be in danger of being outsourced (at least with current technology) and they don’t have to worry about the politics of pleasing those that feel that’s something they do have to worry about (justified or not). Academics have the knowledge and incentive to determine economic policy in all sorts of areas. In many ways, that’s exactly what their job is (they just don’t tell anyone already in power about it).
But no one is an angel, not even me.
As someone who aspires to be a professor of economics some day, tenure is incredibly seductive. The idea that I could have a job I love and I can’t get fired (barring extenuating circumstances) fills me with joy. As an economist, however, it sickens me.
Talk about a crazy incentive structure! Do well for a few years (if even that) and we won’t ever fire you. You don’t even have to show up to class, as long as you do the absolute minimum required. Then go on sabbatical.
Granted, each school has their own expectations from their professors and there are costs to not meeting them (if there are any professors reading this, I’d love to hear how your institution handles tenure), but it’s still silly.
One of the unfortunate consequences is course evaluations. In my experience, good professors also have evaluations religiously. Bad ones rarely have them (and those that do probably don’t pay much attention to them). Yet it’s this latter category that really needs to take the time to use them and the former that could spend their time with something else. Ironically, the institutions that are built around self-discovery and improvement and learning have a system that incites their employees to avoid exactly those things.
It doesn’t stop there. The economy of any type of professor changes with the economy in general. If biology professors are in short supply because drug companies are hiring en masse, schools have to hire someone who isn’t as good. After a few years, that person is expected to get tenure. Now fast forward a decade. The economy is different and drug companies aren’t hiring as much. More people want to be a professor but because the bad ones can’t get fired, there’s no room for the good ones. Firms are literally stuck with employees they don’t want. No economist would call this a good thing.
So what’s the deal with tenure? If it’s so bad, why not get rid of it? There are advantages to it: academic freedom, for one. Professors can teach strange courses and challenge the status quo without fear. This can be a good thing. It can also be bad. Beloit has offered courses in comic books and basket weaving. I don’t know if any or all of these courses are “bad” but I can’t believe that all of them are “worth it.” I can’t believe the opportunity cost is that low.
Not surprisingly, tenure is fraught with the libertarian’s kryptonite: politics. Professors up for tenure enter a world where capability is put aside in favor of other reasons. Beloit had a particularly messy situation in the political science department a few years back. I was in Turkey at the time so all the details were handed down the following semester. But the basics were conflicts over whom the students wanted to have tenure and promises for tenure by the college to another person. In the end, the college won and the students have resented the outcome ever since. From what I understand, those promises were politically based; the students were more concerned with job performance. (If there’s any Beloit student reading this, please weigh in with any details you can remember; I sure you’ve heard about the incident.)
There’s been some progress in the education market. Some states require post-tenure reviews of faculty and others establish campuses without tenure options. Professors are increasingly being hired on a contract basis, allowing for removal if warranted. Still, tenure remains the standard and as long as it is, (some) professors will stand like Supreme Court justices: watching on their secure perches with all-too-proud eyes.
But no one is an angel, not even me.
As someone who aspires to be a professor of economics some day, tenure is incredibly seductive. The idea that I could have a job I love and I can’t get fired (barring extenuating circumstances) fills me with joy. As an economist, however, it sickens me.
Talk about a crazy incentive structure! Do well for a few years (if even that) and we won’t ever fire you. You don’t even have to show up to class, as long as you do the absolute minimum required. Then go on sabbatical.
Granted, each school has their own expectations from their professors and there are costs to not meeting them (if there are any professors reading this, I’d love to hear how your institution handles tenure), but it’s still silly.
One of the unfortunate consequences is course evaluations. In my experience, good professors also have evaluations religiously. Bad ones rarely have them (and those that do probably don’t pay much attention to them). Yet it’s this latter category that really needs to take the time to use them and the former that could spend their time with something else. Ironically, the institutions that are built around self-discovery and improvement and learning have a system that incites their employees to avoid exactly those things.
It doesn’t stop there. The economy of any type of professor changes with the economy in general. If biology professors are in short supply because drug companies are hiring en masse, schools have to hire someone who isn’t as good. After a few years, that person is expected to get tenure. Now fast forward a decade. The economy is different and drug companies aren’t hiring as much. More people want to be a professor but because the bad ones can’t get fired, there’s no room for the good ones. Firms are literally stuck with employees they don’t want. No economist would call this a good thing.
So what’s the deal with tenure? If it’s so bad, why not get rid of it? There are advantages to it: academic freedom, for one. Professors can teach strange courses and challenge the status quo without fear. This can be a good thing. It can also be bad. Beloit has offered courses in comic books and basket weaving. I don’t know if any or all of these courses are “bad” but I can’t believe that all of them are “worth it.” I can’t believe the opportunity cost is that low.
Not surprisingly, tenure is fraught with the libertarian’s kryptonite: politics. Professors up for tenure enter a world where capability is put aside in favor of other reasons. Beloit had a particularly messy situation in the political science department a few years back. I was in Turkey at the time so all the details were handed down the following semester. But the basics were conflicts over whom the students wanted to have tenure and promises for tenure by the college to another person. In the end, the college won and the students have resented the outcome ever since. From what I understand, those promises were politically based; the students were more concerned with job performance. (If there’s any Beloit student reading this, please weigh in with any details you can remember; I sure you’ve heard about the incident.)
There’s been some progress in the education market. Some states require post-tenure reviews of faculty and others establish campuses without tenure options. Professors are increasingly being hired on a contract basis, allowing for removal if warranted. Still, tenure remains the standard and as long as it is, (some) professors will stand like Supreme Court justices: watching on their secure perches with all-too-proud eyes.
President of Turkmenistan to Construct Ice Chateau in the Desert
And our government officials spend our money on things like growing corn that nobody else is willing to pay for. Pity they aren't as imaginative as the Turkmeni President, who seems to think constructing an ice palace in the desert a good idea.
Take a moment and think, however, about the remakable technical structure underlying the process of such a construction - one, I'd say, that has precious little to thank government for for its existence; without this capacity , the caprice of officialdom would have to find other outlets for its expression.
Take a moment and think, however, about the remakable technical structure underlying the process of such a construction - one, I'd say, that has precious little to thank government for for its existence; without this capacity , the caprice of officialdom would have to find other outlets for its expression.
Sunday, October 24, 2004
Books that Changed My Life
If you're looking for something to read, be inspired or educated by, or just want to understand some of the thought behind my brand of libertarianism, here're a few of the most significant books that I've ever read.
Economics for Real People: An Introduction to the Austrian School (Gene Callahan)
Just great, a very basic introduction to the Austrian school that nobody should go without reading. Entertaining as well as informative.
Culture of Fear (Barry Glassner)
While suffering from the same flaw it points out in the rest of American culture, the author rightly points out the misuse of fear in politics and social life.
The Future and its Enemies (Virginia Postrel)
One of David's favorites, I love the premise. The authoress draws a distinction between those that seek to control development (economic, cultural, and otherwise) and those that permit it and make it happen, those the author calls Dynamists. Dynamists drive the economy as well as all manner of change, and the future, like it or not, is in their hands - and that's OK!
Democracy: The God that Failed (Hans-Hermann Hoppe)
This book woke me up to the possibility of the absolute dispensibility of government.
The Evolution of Cooperation (Robert Axelrod)
Axelrod does a good job of demonstrating how cooperation can spontaneously arise from the interaction of self-interested agents. His later books are worth checking out after reading this one.
The Selfish Gene (Richard Dawkins)
Dawkins explains the nature of life, and why we shouldn't expect any help from our genetic heritage in the establishment of an altruistic social order.
The Philosophy of Aristotle (ASIN = 0451627830)
A stunning masterpiece, covering everything from logic and metaphysics to politics and ethics. Aristotle's philosophy continues to provide a practical foundation for the conduct of inquiry. Get it.
Suicide (Emile Durkheim)
Durkheim's exploration into the social phenomenon of suicide introduces some powerful concepts of social integration and control. Essentially functionalist, his paradigm can be used to explain and analyze many phenomena.
Law/Society (John Sutton)
This book made me very keenly aware of the lengths to which a special interest group will go to further their own security, power, wealth, etc. In this case, we're talking about the American Bar Association, but the AMA and other professional groups can be plugged into the analysis with equal applicability.
The McDonaldization of Society (George Ritzer)
A great introduction to the sociology of Max Weber with very specific applications in modern society and everyday life. Detailing the seemingly inexorable progression of rationality (i.e. attempts to control things) in institutions, this book will acclimate you with some of the most important trends to be aware of.
I hope this list finds you readers well, and that some of these selections enrich your lives as they have my own.
Economics for Real People: An Introduction to the Austrian School (Gene Callahan)
Just great, a very basic introduction to the Austrian school that nobody should go without reading. Entertaining as well as informative.
Culture of Fear (Barry Glassner)
While suffering from the same flaw it points out in the rest of American culture, the author rightly points out the misuse of fear in politics and social life.
The Future and its Enemies (Virginia Postrel)
One of David's favorites, I love the premise. The authoress draws a distinction between those that seek to control development (economic, cultural, and otherwise) and those that permit it and make it happen, those the author calls Dynamists. Dynamists drive the economy as well as all manner of change, and the future, like it or not, is in their hands - and that's OK!
Democracy: The God that Failed (Hans-Hermann Hoppe)
This book woke me up to the possibility of the absolute dispensibility of government.
The Evolution of Cooperation (Robert Axelrod)
Axelrod does a good job of demonstrating how cooperation can spontaneously arise from the interaction of self-interested agents. His later books are worth checking out after reading this one.
The Selfish Gene (Richard Dawkins)
Dawkins explains the nature of life, and why we shouldn't expect any help from our genetic heritage in the establishment of an altruistic social order.
The Philosophy of Aristotle (ASIN = 0451627830)
A stunning masterpiece, covering everything from logic and metaphysics to politics and ethics. Aristotle's philosophy continues to provide a practical foundation for the conduct of inquiry. Get it.
Suicide (Emile Durkheim)
Durkheim's exploration into the social phenomenon of suicide introduces some powerful concepts of social integration and control. Essentially functionalist, his paradigm can be used to explain and analyze many phenomena.
Law/Society (John Sutton)
This book made me very keenly aware of the lengths to which a special interest group will go to further their own security, power, wealth, etc. In this case, we're talking about the American Bar Association, but the AMA and other professional groups can be plugged into the analysis with equal applicability.
The McDonaldization of Society (George Ritzer)
A great introduction to the sociology of Max Weber with very specific applications in modern society and everyday life. Detailing the seemingly inexorable progression of rationality (i.e. attempts to control things) in institutions, this book will acclimate you with some of the most important trends to be aware of.
I hope this list finds you readers well, and that some of these selections enrich your lives as they have my own.
Remembering the Man
On this day, thirteen years ago, Gene Roddenberry left us. Gene taught us that the future is something to look forward to and our capacity for greatness hath no boundaries. He reminded us that the human condition is godly in its might, its punishment and its humanity. As the public takes those first steps into the final frontier, he is dearly missed but his lessons will always live on in our words and in our deeds and our belief in the future. We will go boldly on. Thank you Gene.
“Change is the essential process of all existence.”
-Spock to Bele
TOS / “Let That Be Your Last Battlefield”
“Change is the essential process of all existence.”
-Spock to Bele
TOS / “Let That Be Your Last Battlefield”
The Fruit of Our Logic
If you don’t like economics, never go grocery shopping with me. I just got back from taking a friend to Woodman’s grocery store (who lack a website, unfortunately). Woodman’s is a massive store in Beloit and part of a chain of ten. Centered mostly in Wisconsin, the chain focuses on providing large volume very cheaply.
And it does this astonishingly well. Every time I go to Woodman’s, I marvel at the huge aisles of meat, cheeses, cereal and ice cream (yes, there is an aisle dedicated to ice cream and it’s a big aisle). There are fruits there I barely recognize let alone pronounce. They have several different types of tomatoes, fresh ginger, those things like bananas but aren’t quite bananas and on and on and on. And that’s just the fruit and vegetables aisle. There’s even a display for Krispy Kreme Doughnuts, even though the closest Krispy Kreme is over twenty miles away.
Beloit, by the way, is the typical liberal arts college town; it’s small and in the middle of no where. It’s along no major trade routes; it’s only life lines are I-90 and the sparsely used Rock River. There are no major airports, seaports or train stations in the immediate vicinity. There’s Chicago, but it’s a good two hours away. The point is, Beloit is no center of civilization.
Yet we have access to all this variety. Imported foods (I found some Italian concoction made from three different oranges grown in volcanic soil), exotic fruits, ice cream, ice cream and more ice cream are at our fingertips. Even more fascinating, this is hardly the exception.
This is the norm.
When I hear stories about Soviet Russia—how hard it was to get just a single banana, how long people had to stand in line for bread, how little variety people had in their diets—and then go to Woodman’s, I can’t help but try to spark my companions’ enthusiasm for globalization. It creates incentives for people to invent better transportation infrastructure. It exposes the wonders of free trade. It opens the door for solutions for malnourishment. It rewards entrepreneurs that discover a way to offer people variety at low prices. If you ever believed in socialism, go to the grocery store; it’s a microcosm of everything good about capitalism.
And it does this astonishingly well. Every time I go to Woodman’s, I marvel at the huge aisles of meat, cheeses, cereal and ice cream (yes, there is an aisle dedicated to ice cream and it’s a big aisle). There are fruits there I barely recognize let alone pronounce. They have several different types of tomatoes, fresh ginger, those things like bananas but aren’t quite bananas and on and on and on. And that’s just the fruit and vegetables aisle. There’s even a display for Krispy Kreme Doughnuts, even though the closest Krispy Kreme is over twenty miles away.
Beloit, by the way, is the typical liberal arts college town; it’s small and in the middle of no where. It’s along no major trade routes; it’s only life lines are I-90 and the sparsely used Rock River. There are no major airports, seaports or train stations in the immediate vicinity. There’s Chicago, but it’s a good two hours away. The point is, Beloit is no center of civilization.
Yet we have access to all this variety. Imported foods (I found some Italian concoction made from three different oranges grown in volcanic soil), exotic fruits, ice cream, ice cream and more ice cream are at our fingertips. Even more fascinating, this is hardly the exception.
This is the norm.
When I hear stories about Soviet Russia—how hard it was to get just a single banana, how long people had to stand in line for bread, how little variety people had in their diets—and then go to Woodman’s, I can’t help but try to spark my companions’ enthusiasm for globalization. It creates incentives for people to invent better transportation infrastructure. It exposes the wonders of free trade. It opens the door for solutions for malnourishment. It rewards entrepreneurs that discover a way to offer people variety at low prices. If you ever believed in socialism, go to the grocery store; it’s a microcosm of everything good about capitalism.
Phenomenal Productive Capacity...
Remarkable, the miracles of modern industry - from the Baby Ruth candy bar to the Boeing 777, any number of wonders unimaginable as little as two hundred years before are produced in great quantity. And yet, even the best businesses often do very poorly, considering what they're capable of.
The problem I'm getting at is one of actualization - that is to say, actually getting the company to perform up to its potential. Take the business I work for, for example (a new job - the reason I've been posting less frequently as of late):
We stock a variety of housewares, bedding, and bathroom supplies; that which we can't fit on the sales floor goes into a stock room, or into "topstock", accessable only via ladder. So let's say that we have only 5 units of product A on the floor, and the rest (15) in the stock room. When we run out, we need to discover the shortage, input the UPC into the computer system to find out if we have any more, then actually locate the products (a daunting task, since the ladders don't really fit in the stockroom, and climbing becomes the most expedient, if not the safest means of locomotion).
There's plenty of room for process improvement here; all the products are in the computer system, so products running on-shelf or in stock should be automatically brought to the attention of management for restocking. Further, having the information of where in the building (topstock, backstock, etc.) the reserve units are would save hours of time every day spent wandering around, climbing shelves, etc.
And this is no small mom & pop shop; this year, more than 50 new locations are being opened in the midwest alone. The point of all this is just to demonstrate in one small area of business the opportunities for competition to erode the market position of existing businesses. The margin could be much tighter. Yes, they have lots of advantages, key amongst them being economies of scale and inherited structure and organization, but that shouldn't dishearten an entrepreneur too greatly. Just remember that the opportunities are there if you look hard enough, and if they're not, there's a good reason for it (like getting the cheapest possible products, all else unchanged).
The problem I'm getting at is one of actualization - that is to say, actually getting the company to perform up to its potential. Take the business I work for, for example (a new job - the reason I've been posting less frequently as of late):
We stock a variety of housewares, bedding, and bathroom supplies; that which we can't fit on the sales floor goes into a stock room, or into "topstock", accessable only via ladder. So let's say that we have only 5 units of product A on the floor, and the rest (15) in the stock room. When we run out, we need to discover the shortage, input the UPC into the computer system to find out if we have any more, then actually locate the products (a daunting task, since the ladders don't really fit in the stockroom, and climbing becomes the most expedient, if not the safest means of locomotion).
There's plenty of room for process improvement here; all the products are in the computer system, so products running on-shelf or in stock should be automatically brought to the attention of management for restocking. Further, having the information of where in the building (topstock, backstock, etc.) the reserve units are would save hours of time every day spent wandering around, climbing shelves, etc.
And this is no small mom & pop shop; this year, more than 50 new locations are being opened in the midwest alone. The point of all this is just to demonstrate in one small area of business the opportunities for competition to erode the market position of existing businesses. The margin could be much tighter. Yes, they have lots of advantages, key amongst them being economies of scale and inherited structure and organization, but that shouldn't dishearten an entrepreneur too greatly. Just remember that the opportunities are there if you look hard enough, and if they're not, there's a good reason for it (like getting the cheapest possible products, all else unchanged).
A Thousand Words
Given my recent post on flu vaccines this cartoon by Chuck Asay I found on Exploit the Worker deserves posting.
There you go Michelle. A short post that you will actually read but also has enough to comment about. You have no excuses.
There you go Michelle. A short post that you will actually read but also has enough to comment about. You have no excuses.
Saturday, October 23, 2004
An Unlikely Democrat
I'm going to make the argument that if you're a real libertarian, you're going to vote for Kerry. Consider that the Libertarian candidate has no chance of winning; you can't do any good by voting for him. On the other hand, a vote for Kerry will bring about a larger, more socialized nation with a more heavily progressive tax structure, increasing control over private industry and life, so on and so forth.
So why, you ask, is that a good thing? Why would I advocate helping Kerry win the presidency? Simple: His policies won't work, if they're really carried out long-term. Not that Bush is much better (he is - barely), but Kerry is bound, if he's able, to send the country straight into the furnaces of the firey down under (and we're not talking about the land of vegemite and boomerangs, here).
The end result of his twiddling and tinkering can be nothing other than the realization that government intervention produces the sort of problems that Americans abhor. From this point, perhaps real progress can be made.
Before you comment, just remember that this is very tongue-in-cheek. Now fire away, gentlefolk.
So why, you ask, is that a good thing? Why would I advocate helping Kerry win the presidency? Simple: His policies won't work, if they're really carried out long-term. Not that Bush is much better (he is - barely), but Kerry is bound, if he's able, to send the country straight into the furnaces of the firey down under (and we're not talking about the land of vegemite and boomerangs, here).
The end result of his twiddling and tinkering can be nothing other than the realization that government intervention produces the sort of problems that Americans abhor. From this point, perhaps real progress can be made.
Before you comment, just remember that this is very tongue-in-cheek. Now fire away, gentlefolk.
Tuesday, October 19, 2004
Mom and Dad, Stop Fighting!
Let’s not play pretend boys and girls, both Republicans and Democrats have it wrong (in different—and in similar—ways). We’re told by pundits, politicians and sometimes parents that one side is good and other is bad. This kind of black and white view of the world is one of the deadliest poisons in our society. Like politics itself, it encourages name-calling instead of respect, yelling instead of listening and bickering instead of discourse.
Of all the shows on television, few capture this mentality better than CNN’s Crossfire. They should know. Jon Stewart told them Friday. Here’s the transcript.
I love Jon Stewart. I don’t always agree with him, but I love him anyway. Mostly because he’s willing to tell the mainstream media that they could do a much better job than they are now and their current trend it hurting the country. During his Crossfire interview, he told Paul Begala and Tucker Carlson their show is “theater.” It’s a debate show in the same way as pro wrestling is an athletic competition. He’s completely right.
The media is the most relevant example of a market failure—people could be getting so much more for their time. Instead of shallow entertainment, we could have knowledge creation. Instead of Jerry Springer, we could more have Bill Maher. In economics, this is particularly important as virtually every “economist” on television is replaced by what Paul Krugman so kindly calls “policy entrepreneurs,” or sell-outs: economists who now work for political parties. They spit out the (often protectionist and/or isolationist) party platforms and dress it up as sound economic policy. Bad media is bad economics but good politics.
There are exceptions, of course. News networks don’t hold a monopoly over information. We have our HBO and our Daily Show. The Internet is stuffed with blogs (I particularly like this one). But this makes just a small dent in the American psyche.
The core problem is information. People simply don’t know what they are missing. How can you, a consumer, really say if what you are getting as news is “worthy” if you don’t know what was cut? Do people even know that bi-partisanship and rational debates are actually possible?
I don’t really have an answer to this market failure. A law, of course, won’t work. The last thing we want to do is have politicians decide what should and should not be covered. Subsidize bloggers so they can advertise? I like that as a blogger, but not as an economist; we’ve just get a flood of partisan blogs. Break up the media giants into smaller companies? I’ve often thought about that but I doubt there would be much change.
The only real way to ensure our media smartens up is if the politicians do, too—that’s where the most discourse is needed (and where it’s most scare). If political parties start saying that they are tired of the endless bickering and actually want to start making real progress, the media would have to follow suit. Most of their guest speakers are from the parties.
So this is a shout out to all those party leaders out there. George, John, John, Dick, Donald, Condoleezza, Bill, Zell (especially Zell)—I know you guys read LL&L religiously and I know we haven’t had the best opinion of you over the short time the blog’s been active. But both sides have important stories to tell, and more important ones to listen to. You guys have your flaws and your strengths. I’m not asking for a marriage, just a talk. A real one. Come on you two, for the country?
Of all the shows on television, few capture this mentality better than CNN’s Crossfire. They should know. Jon Stewart told them Friday. Here’s the transcript.
I love Jon Stewart. I don’t always agree with him, but I love him anyway. Mostly because he’s willing to tell the mainstream media that they could do a much better job than they are now and their current trend it hurting the country. During his Crossfire interview, he told Paul Begala and Tucker Carlson their show is “theater.” It’s a debate show in the same way as pro wrestling is an athletic competition. He’s completely right.
The media is the most relevant example of a market failure—people could be getting so much more for their time. Instead of shallow entertainment, we could have knowledge creation. Instead of Jerry Springer, we could more have Bill Maher. In economics, this is particularly important as virtually every “economist” on television is replaced by what Paul Krugman so kindly calls “policy entrepreneurs,” or sell-outs: economists who now work for political parties. They spit out the (often protectionist and/or isolationist) party platforms and dress it up as sound economic policy. Bad media is bad economics but good politics.
There are exceptions, of course. News networks don’t hold a monopoly over information. We have our HBO and our Daily Show. The Internet is stuffed with blogs (I particularly like this one). But this makes just a small dent in the American psyche.
The core problem is information. People simply don’t know what they are missing. How can you, a consumer, really say if what you are getting as news is “worthy” if you don’t know what was cut? Do people even know that bi-partisanship and rational debates are actually possible?
I don’t really have an answer to this market failure. A law, of course, won’t work. The last thing we want to do is have politicians decide what should and should not be covered. Subsidize bloggers so they can advertise? I like that as a blogger, but not as an economist; we’ve just get a flood of partisan blogs. Break up the media giants into smaller companies? I’ve often thought about that but I doubt there would be much change.
The only real way to ensure our media smartens up is if the politicians do, too—that’s where the most discourse is needed (and where it’s most scare). If political parties start saying that they are tired of the endless bickering and actually want to start making real progress, the media would have to follow suit. Most of their guest speakers are from the parties.
So this is a shout out to all those party leaders out there. George, John, John, Dick, Donald, Condoleezza, Bill, Zell (especially Zell)—I know you guys read LL&L religiously and I know we haven’t had the best opinion of you over the short time the blog’s been active. But both sides have important stories to tell, and more important ones to listen to. You guys have your flaws and your strengths. I’m not asking for a marriage, just a talk. A real one. Come on you two, for the country?
Monday, October 18, 2004
Big Brother is Watching You...Buy Porn
Utah’s a funny place.
Actually, I feel that way about most places in the world, but recent news makes me want to put Utah in a special category: one that involves scary, too. I’m hoping my Utah friends (I think there’s one of you) will be able to help me sort through this web of crap.
Seems authorities in northern Utah want to start tracking the porn they find at crimminal sites in hopes of finding a link between types of porn and types of crime. If they can, then they can use it to help solve crimes—sort of like racial discrimination for the horny.
According to Lt. Matt Bilodeau, spokesman for the Cache County Sheriff's Department, "Like gangs, people who use pornography have associated traits, and we'll define them so we can link them to crimes and pornography."
Obviously Lt. Bilodeau never took any statistics. If you try hard enough, you can link anything with anything, even things completely unrelated, like porn and crime. I can’t even begin to fathom what their computer will spit out after they get enough data to run an analysis and how they’ll justify it. Serial murderers have an “unusual” amount of orgy porn in their homes (they like activities involving many different people). Purse thieves pick up a lot of gay porn (why else do they like stealing purses and not something manly, like a car?). Bank robbers tend to purchase “Girls Gone Wild” (probably because they feel like they’ve been cheated, not that I’m speaking from experience). I could go on for hours.
Of course, this is about where it stops becoming funny and start being scary. The entire point of the investigation isn’t to figure out what felons like to whack off to, but to try to capture criminals. Thus, Utah authorities will mess up causation (a common fallacy): people who buy certain types of porn are likely to commit certain crimes. Rent a saucy movie? That explains the cop at your door. Buy a dirty magazine? That’s why you have a police record. Purchase “The Slutty Professor” over Amazon? That’s grounds for a search warrant. Linking personal preferences with vicious crimes heralds an insidious policy of state control over our daily lives.
Laws that restrict freedom in the name of public safety always sounds innocent and reasonable (or completely unreasonable in this case) at first, but it is one of the few slippery slopes that actually exist. If porn “causes” crime, it’s not a big leap to ban porn, then to link other unpopular inclinations to crime and ban or control them, too. Personal freedom is sacrificed for security (a common theme) and the more these kinds of laws get passed, the more likely worse ones are on the way. People who commit crimes also date certain people, shop at certain stores, eat certain foods, have certain thoughts…
Utah’s a scary place.
Actually, I feel that way about most places in the world, but recent news makes me want to put Utah in a special category: one that involves scary, too. I’m hoping my Utah friends (I think there’s one of you) will be able to help me sort through this web of crap.
Seems authorities in northern Utah want to start tracking the porn they find at crimminal sites in hopes of finding a link between types of porn and types of crime. If they can, then they can use it to help solve crimes—sort of like racial discrimination for the horny.
According to Lt. Matt Bilodeau, spokesman for the Cache County Sheriff's Department, "Like gangs, people who use pornography have associated traits, and we'll define them so we can link them to crimes and pornography."
Obviously Lt. Bilodeau never took any statistics. If you try hard enough, you can link anything with anything, even things completely unrelated, like porn and crime. I can’t even begin to fathom what their computer will spit out after they get enough data to run an analysis and how they’ll justify it. Serial murderers have an “unusual” amount of orgy porn in their homes (they like activities involving many different people). Purse thieves pick up a lot of gay porn (why else do they like stealing purses and not something manly, like a car?). Bank robbers tend to purchase “Girls Gone Wild” (probably because they feel like they’ve been cheated, not that I’m speaking from experience). I could go on for hours.
Of course, this is about where it stops becoming funny and start being scary. The entire point of the investigation isn’t to figure out what felons like to whack off to, but to try to capture criminals. Thus, Utah authorities will mess up causation (a common fallacy): people who buy certain types of porn are likely to commit certain crimes. Rent a saucy movie? That explains the cop at your door. Buy a dirty magazine? That’s why you have a police record. Purchase “The Slutty Professor” over Amazon? That’s grounds for a search warrant. Linking personal preferences with vicious crimes heralds an insidious policy of state control over our daily lives.
Laws that restrict freedom in the name of public safety always sounds innocent and reasonable (or completely unreasonable in this case) at first, but it is one of the few slippery slopes that actually exist. If porn “causes” crime, it’s not a big leap to ban porn, then to link other unpopular inclinations to crime and ban or control them, too. Personal freedom is sacrificed for security (a common theme) and the more these kinds of laws get passed, the more likely worse ones are on the way. People who commit crimes also date certain people, shop at certain stores, eat certain foods, have certain thoughts…
Utah’s a scary place.
Sunday, October 17, 2004
One Flu Over the Cuckoo's Nest
Tim’s post last week about the sudden price increase in the flu vaccination (from $70 to $900) has received a great deal of attention (about 17 comments, last I checked), mostly people challenging his (and my) protection of a company that’s “gouging” the public.
Russell Roberts at Café Hayek posted this lengthy article about the flu vaccine shortage (explanation why the company in question rose it’s price). I think we can learn a lot from it.
Many the comments point (rightly) that the supply of vaccinations are time sensitive; it takes time to produce them and the window for the market is very small. Mike particlular emphasizes this point, saying “If there were sufficient time between now and November for an entrepreneur to hop in, build a vast supply of vaccine, and market it, then David and Tim, you're right. But somehow I doubt such speed is possible, or else we wouldn't even be afraid of such a shortage.”
Flu vaccine manufactures know this so they tend to overproduce the vaccine (because they never know how much they’ll need). Over past few years, they’ve litterally been throwing out millions of vaccines eash season because they didn’t sell them. And it’s not like they can keep them for a later year. The virus mutates just slightly each season, requiring the companies to start from scratch over and over again. (Thus calling the whole idea of “stocking piling vaccines” into quesiton.)
These vaccines aren’t cheap, either. It takes time and skill to make them. The industry standard it to inject a fertilized chicken egg with the flu so the embroyo makes the vaccine. A single eggs yields just four or five doses. This has to be done by hand.
The market’s also very small (and more prone to sudden changes); with a size of less than 1/50th of the drug industry ($6 billion versus $340 billion), there’s not a lot of room for lots of drug makers who would keep the price low.
In fact, the price would be very low because the vaccine is so elastic. Vaccines are identical across companies so very minor changes in price greatly affect revenue. In short, profits from these companies are very slim. This price is even lower because of government purchases, who bought 55% of all vaccinations last year.
This is from the National Center for Policy Analysis:
According to siliconvalley.com, the market share for 2004 is now 60%.
For the record, in 2000, the Department of Health and Human Services spent $449 million for the Center for Disease Control and Prevention for immunizations. In 2003, that number was $556 million.
So on one side, vaccine companies face a really tough market: their good is really elastic, their production is really expensive, their market share fluctuates greatly and it’s not too big to begin with. On the other side, government purchases are depressing the prices more and more every year by exposing the high elasticity of the good. As their market share climbs, governments represent a monopsony (the demand version of a monopoly) closer and closer, dangling their market share to force a company to drop their price or loose the increasingly important government contract. This is why there were over two dozen vaccine companies thirty years ago and only one now.
But with just one left, it has the opportunity to offer a price more incline to represent the costs of doing it’s business, including a wide profit margin for all the risk they shoulder.
Some readers suggest that vaccines should be an exception to this sudden jump in price. They save lives, after all, and lives have infinite value. I’ll agree that each person has infinite potential to make the world a better place, but I deny that every person should be saved no matter what the cost. Very few people ever come close to realizing this potential and some of saved go on to be pretty awful people. Saying that everyone needs to be vaccinated no matter what isn’t a good argument.
They also deny others life because they commit a classic fallacy in economics: the broken window fallacy. Considering how expensive the vaccines are to produce, it’s pretty clear that there’s lots of room for improvement; improvement that will only be discovered if the incentives are good enough to discover it. In classic Bastiat style, these people who criticize the “gouging” company see the person that’s suffering now; they don’t see the countless others that live because of the creation of a more effective or cheaper vaccine.
Russell Roberts at Café Hayek posted this lengthy article about the flu vaccine shortage (explanation why the company in question rose it’s price). I think we can learn a lot from it.
Many the comments point (rightly) that the supply of vaccinations are time sensitive; it takes time to produce them and the window for the market is very small. Mike particlular emphasizes this point, saying “If there were sufficient time between now and November for an entrepreneur to hop in, build a vast supply of vaccine, and market it, then David and Tim, you're right. But somehow I doubt such speed is possible, or else we wouldn't even be afraid of such a shortage.”
Flu vaccine manufactures know this so they tend to overproduce the vaccine (because they never know how much they’ll need). Over past few years, they’ve litterally been throwing out millions of vaccines eash season because they didn’t sell them. And it’s not like they can keep them for a later year. The virus mutates just slightly each season, requiring the companies to start from scratch over and over again. (Thus calling the whole idea of “stocking piling vaccines” into quesiton.)
These vaccines aren’t cheap, either. It takes time and skill to make them. The industry standard it to inject a fertilized chicken egg with the flu so the embroyo makes the vaccine. A single eggs yields just four or five doses. This has to be done by hand.
The market’s also very small (and more prone to sudden changes); with a size of less than 1/50th of the drug industry ($6 billion versus $340 billion), there’s not a lot of room for lots of drug makers who would keep the price low.
In fact, the price would be very low because the vaccine is so elastic. Vaccines are identical across companies so very minor changes in price greatly affect revenue. In short, profits from these companies are very slim. This price is even lower because of government purchases, who bought 55% of all vaccinations last year.
This is from the National Center for Policy Analysis:
The root of this government role goes back to August 1993, when Congress passed Clinton's Vaccines for Children program. The plan, promoted by the Children's Defense Fund, was to use federal power to ensure universal immunization. So the government agreed to purchase a third of the national vaccine supply (the President and Mrs. Clinton had pushed for 100 percent) at a forced discount of half price, then distribute it to doctors to deliver to the poor and the un- and under-insured.
According to siliconvalley.com, the market share for 2004 is now 60%.
For the record, in 2000, the Department of Health and Human Services spent $449 million for the Center for Disease Control and Prevention for immunizations. In 2003, that number was $556 million.
So on one side, vaccine companies face a really tough market: their good is really elastic, their production is really expensive, their market share fluctuates greatly and it’s not too big to begin with. On the other side, government purchases are depressing the prices more and more every year by exposing the high elasticity of the good. As their market share climbs, governments represent a monopsony (the demand version of a monopoly) closer and closer, dangling their market share to force a company to drop their price or loose the increasingly important government contract. This is why there were over two dozen vaccine companies thirty years ago and only one now.
But with just one left, it has the opportunity to offer a price more incline to represent the costs of doing it’s business, including a wide profit margin for all the risk they shoulder.
Some readers suggest that vaccines should be an exception to this sudden jump in price. They save lives, after all, and lives have infinite value. I’ll agree that each person has infinite potential to make the world a better place, but I deny that every person should be saved no matter what the cost. Very few people ever come close to realizing this potential and some of saved go on to be pretty awful people. Saying that everyone needs to be vaccinated no matter what isn’t a good argument.
They also deny others life because they commit a classic fallacy in economics: the broken window fallacy. Considering how expensive the vaccines are to produce, it’s pretty clear that there’s lots of room for improvement; improvement that will only be discovered if the incentives are good enough to discover it. In classic Bastiat style, these people who criticize the “gouging” company see the person that’s suffering now; they don’t see the countless others that live because of the creation of a more effective or cheaper vaccine.
Saturday, October 16, 2004
The Dumbing of the American People
Let's consider a notion: people are rational beings, that exhibit parsimony in their behavior; they will learn from their past experiences and apply this knowledge to future situations. Given these propositions, we must conclude that a parsimonious drive will tend to eliminate unnecessary considerations in many different situations.
Take, for example, driving your car. We've learned that when we hit the brake, the car will decelerate, and the gas will accelerate it. We normally don't consider if they will function at all, we take it for granted that they will. This might cause an accident if the brakes spontaneously fail and we're not prepared or able to take necessary measures.
Expanding this logic from this sort of hypothetical to a broader category of phenomena, we can understand this sort of modification between cause and effect. This sort of thing is natural, but may become pernicious if it lulls us into a false sense of security, or leads to a more categorical modification of behavior. I believe this is the explanation behind the irresponsibility bemoaned in contemporary society.
People spill hot drinks on themselves and reap rewards in the courts of justice for their carelessness. Others use tobacco and do the same, and the process doesn't come close to stopping there, for the typical consumer in America has to pay precious little heed to the warning Caveat Emptor, thanks to the grand benevolence of our government nannies and caretakers.
People aren't stupid, and if it's demonstrated that they don't need to be responsible for their actions, they'll be increasingly irresponsible. It's a self-fulfilling prophecy in that that which was expected was generated by the response to the expectation. By short-circuiting the connection between an activity (say, putting a searing-hot beverage between your legs while driving) and a consequence (sterility, or at least a bit of pain) with the promise of compensation, we only encourage this sort of stupidity, and so long as we permit it as a society, we have no right to complain of it.
It may be intolerant to demand that a person bear the consequences of their own actions; indeed, under these circumstances, a great many may stand or fall under their own power. Moral censure can be like that. Nontheless, I find such a situation infinitely preferable to one in which the mean slowly regresses to the intellectual level of algae.
Ask yourselves, would it really be so terrible a world to live in?
Take, for example, driving your car. We've learned that when we hit the brake, the car will decelerate, and the gas will accelerate it. We normally don't consider if they will function at all, we take it for granted that they will. This might cause an accident if the brakes spontaneously fail and we're not prepared or able to take necessary measures.
Expanding this logic from this sort of hypothetical to a broader category of phenomena, we can understand this sort of modification between cause and effect. This sort of thing is natural, but may become pernicious if it lulls us into a false sense of security, or leads to a more categorical modification of behavior. I believe this is the explanation behind the irresponsibility bemoaned in contemporary society.
People spill hot drinks on themselves and reap rewards in the courts of justice for their carelessness. Others use tobacco and do the same, and the process doesn't come close to stopping there, for the typical consumer in America has to pay precious little heed to the warning Caveat Emptor, thanks to the grand benevolence of our government nannies and caretakers.
People aren't stupid, and if it's demonstrated that they don't need to be responsible for their actions, they'll be increasingly irresponsible. It's a self-fulfilling prophecy in that that which was expected was generated by the response to the expectation. By short-circuiting the connection between an activity (say, putting a searing-hot beverage between your legs while driving) and a consequence (sterility, or at least a bit of pain) with the promise of compensation, we only encourage this sort of stupidity, and so long as we permit it as a society, we have no right to complain of it.
It may be intolerant to demand that a person bear the consequences of their own actions; indeed, under these circumstances, a great many may stand or fall under their own power. Moral censure can be like that. Nontheless, I find such a situation infinitely preferable to one in which the mean slowly regresses to the intellectual level of algae.
Ask yourselves, would it really be so terrible a world to live in?
Friday, October 15, 2004
Dress Codes
Russel Chmieleski of Pennsylvania is in some seriously deep trouble. It turns out that he wasn't permitted to attend his high-school graduation ceremony, and rather than wearing a cap and gown, he chose to show up in somewhat less formal attire: his birthday suit.
The streaking Chmieleski was apprehended and charged with a number of crimes, which were bargained down to a guilty plea for indecent exposure - a first degree charge, since there were observers under 16 years old present. Chmieleski is now facing up to 2 years jail time for his indiscretion.
Is this truly an example of proportionality between the crime and the punishment? I think not. Not only is this sort of response overly prudish (especially since it was not exposure in a prurient context), but dangerous - prison crowding is a serious issue, and imprisoning fools compounds this unnecessarily. Further, more serious crimes often receive lighter punishments than the potential one facing Russel.
Let's hope that cooler heads prevail in this case, and that retributive justice takes a back seat to genuine community interests.
The streaking Chmieleski was apprehended and charged with a number of crimes, which were bargained down to a guilty plea for indecent exposure - a first degree charge, since there were observers under 16 years old present. Chmieleski is now facing up to 2 years jail time for his indiscretion.
Is this truly an example of proportionality between the crime and the punishment? I think not. Not only is this sort of response overly prudish (especially since it was not exposure in a prurient context), but dangerous - prison crowding is a serious issue, and imprisoning fools compounds this unnecessarily. Further, more serious crimes often receive lighter punishments than the potential one facing Russel.
Let's hope that cooler heads prevail in this case, and that retributive justice takes a back seat to genuine community interests.
Thursday, October 14, 2004
Teachers and Athletes
How often do you hear a commentator bemoaning the state of a nation that will stand to pay so much to its athletes and entertainers, while paying a mere fraction of this to the educators that we trust to teach our children? How sorry is this situation when the future of that state, in the form of said youth, is so valued?
Codswallop. This criticism betrays an absolute ignorance of the most elementary principles of economics. Teachers are paid less because they are less dear, though that hardly means that they are less important. Take the classic comparison between water and diamonds - the former, necessary for life, might often be forsaken in favor of the diamonds, mere baubles. Yet in the desert with a mere canteenful of water left and none in sight, that water may become the dearest thing you own, far more important than gaudy trinkets.
The crucial difference here is availability. Since water is common, like those who would be teachers, it is valued little. Since diamonds, like athletes, are comparatively rare, they are expensive. Eliminate 30% of teachers in the country and there would be little more than a temporary disturbance as substitutes and other entrepreneurs shifted careers. Eliminate 30% of the NBA and your problems might be more significant - fewer people can achieve the levels of physical performance desired. It's just not an apples-to-apples comparison.
So no more of such rubbish, thank you very much.
Codswallop. This criticism betrays an absolute ignorance of the most elementary principles of economics. Teachers are paid less because they are less dear, though that hardly means that they are less important. Take the classic comparison between water and diamonds - the former, necessary for life, might often be forsaken in favor of the diamonds, mere baubles. Yet in the desert with a mere canteenful of water left and none in sight, that water may become the dearest thing you own, far more important than gaudy trinkets.
The crucial difference here is availability. Since water is common, like those who would be teachers, it is valued little. Since diamonds, like athletes, are comparatively rare, they are expensive. Eliminate 30% of teachers in the country and there would be little more than a temporary disturbance as substitutes and other entrepreneurs shifted careers. Eliminate 30% of the NBA and your problems might be more significant - fewer people can achieve the levels of physical performance desired. It's just not an apples-to-apples comparison.
So no more of such rubbish, thank you very much.
Wednesday, October 13, 2004
Medical Madness
Given the present shortage of the flu vaccine, it was only a matter of time before this happened. An enterprising company in Ft. Lauderdale Florida, Meds-Stat, has raised the price per vial of vaccine from around 70 dollars to around 900. Yeah, that's a big jump, but the reaction is what kills me.
Kansas is filing a lawsuit, claiming that they want the medicine sold at the fair-market value, not this "unconscionable" inflated value meant to gouge the consumers.
This just isn't pretty. Apparently, supply and demand is too abstract for the Kansas Attorney General to grasp. It seems he's under the impression that Meds-Stat, the owner of a quantity of vaccine, doesn't actually own them at all. Otherwise, the market price could only be what they ask for it, and what consumers are willing to accept. If people are willing to pay the inflated price, it's a fair one. If not, too bad. THeft is theft, and the "right" to someone else's property, vaccine or otherwise, is theft.
This is very much the same thing talked about in the price gouging situation in Florida. By attempting to institute a price ceiling, all that's going to happen is that consumer relief will be longer in coming.
Let the companies charge what they will for their products; if you don't like it, don't buy it. Don't try to steal what isn't yours, and above all, don't try to get the government to do the stealing for you.
Kansas is filing a lawsuit, claiming that they want the medicine sold at the fair-market value, not this "unconscionable" inflated value meant to gouge the consumers.
This just isn't pretty. Apparently, supply and demand is too abstract for the Kansas Attorney General to grasp. It seems he's under the impression that Meds-Stat, the owner of a quantity of vaccine, doesn't actually own them at all. Otherwise, the market price could only be what they ask for it, and what consumers are willing to accept. If people are willing to pay the inflated price, it's a fair one. If not, too bad. THeft is theft, and the "right" to someone else's property, vaccine or otherwise, is theft.
This is very much the same thing talked about in the price gouging situation in Florida. By attempting to institute a price ceiling, all that's going to happen is that consumer relief will be longer in coming.
Let the companies charge what they will for their products; if you don't like it, don't buy it. Don't try to steal what isn't yours, and above all, don't try to get the government to do the stealing for you.
Monday, October 11, 2004
The Baleful Libertarian Visage
I've never had someone tell me that I'm scary, but I think I've just come close. A friend said that libertarians tend to scare her, and that oh yes, by the way, you (I, that is) seem like a libertarian. The scary part, it seems, is the fact that "libertarians seek to establish an order based on greed, want, and selfishness."
For the moment let that stand unsassailed, accepting that it is true. Does that admission inexorably lead to an unhappy conclusion? In the eyes of my interlocutor, it does, or if it isn't precisely poor, neither is it perfectly ideal. Yet is it not possible that the object of my desire is good?
In other words, can I choose to selfishly pursue selfless ends because I want to. Selfishness might lead to me helping myself at the expense of others, but it might also lead me to sacrifice for others. Isn't it true that thousands of people every year risk or lay down their lives in order to help others? Civilian contractors in Iraq face grave risks, just like human rights workers in the Sudan, firefighters marching into a burning building, or police and military officers fighting to protect others.
We can't ignore the other factors in play here - rarely is it that such behavior is totally without benefit to the actor, but it hardly seems to tarnish it. A just society very well may find itself grounded in selfishness, full of people tirelessly sacrificing for others, providing to them things that they wish to have at their own expense, assuming their own risks. They may do so because they profit, and so too may they do this because they like it.
As someone who calls himself a libertarian, I think things are just fine that way.
For the moment let that stand unsassailed, accepting that it is true. Does that admission inexorably lead to an unhappy conclusion? In the eyes of my interlocutor, it does, or if it isn't precisely poor, neither is it perfectly ideal. Yet is it not possible that the object of my desire is good?
In other words, can I choose to selfishly pursue selfless ends because I want to. Selfishness might lead to me helping myself at the expense of others, but it might also lead me to sacrifice for others. Isn't it true that thousands of people every year risk or lay down their lives in order to help others? Civilian contractors in Iraq face grave risks, just like human rights workers in the Sudan, firefighters marching into a burning building, or police and military officers fighting to protect others.
We can't ignore the other factors in play here - rarely is it that such behavior is totally without benefit to the actor, but it hardly seems to tarnish it. A just society very well may find itself grounded in selfishness, full of people tirelessly sacrificing for others, providing to them things that they wish to have at their own expense, assuming their own risks. They may do so because they profit, and so too may they do this because they like it.
As someone who calls himself a libertarian, I think things are just fine that way.
FBI Seizes Indmedia.com's Servers
The long arm of the law knows no boundaries. Take a deep breath and read on: The FBI, in order to protect what may or may not have been the identities of Swiss secret police at a protest in France, confiscated hard-drives from Rackspace UK, the London branch of an American firm hosting Indymedia.com.
A statement from Rackspace.com, says London IT lawyer Dai Davis, "fails to clarify the legal basis of the raid."
Groan. It seems altogether likely that the truth will remain concealed in the interests of national security. How fortunate we are that wiser souls than we are there to protect us from only they know what.
A statement from Rackspace.com, says London IT lawyer Dai Davis, "fails to clarify the legal basis of the raid."
Groan. It seems altogether likely that the truth will remain concealed in the interests of national security. How fortunate we are that wiser souls than we are there to protect us from only they know what.
Panic! Things Aren't Perfect!
Once again the Wall Street Journal makes me sad.
In a front page article today, Timothy Aeppel, Jon E. Hilsenrath and Ellen Byron declare that “Despite Piles of Cash, Businesses Get Stingy About Spending,” as the title says. Their main source of evidence? A graph covering less then the past ten years. From 1996 to 2000, company investment exceeded cash from operations, peaking at a difference of about $400 billion in 2000. A year later, the difference is virtually zero. The article claims failure: something isn’t adding up. Why aren’t companies doing what they did in the 90s?
When will reporters (and the general public for that matter) learn that economic growth isn’t something that happens formulaicly. Economics isn’t physics—it’s filled with variables that are near impossible to even estimate accurately not to mention ones we never would think of considering. The dotcom boom of the 90s was a one-of-a-kind event. We were lucky. You just can’t make that happen with some tax cuts and interest rate fiddling. Investing about what you make is the norm, not cause for concern or a sympton of some grand uncertainly that’s eeking out of every corner of our society. This isn’t complicated stuff here.
In a front page article today, Timothy Aeppel, Jon E. Hilsenrath and Ellen Byron declare that “Despite Piles of Cash, Businesses Get Stingy About Spending,” as the title says. Their main source of evidence? A graph covering less then the past ten years. From 1996 to 2000, company investment exceeded cash from operations, peaking at a difference of about $400 billion in 2000. A year later, the difference is virtually zero. The article claims failure: something isn’t adding up. Why aren’t companies doing what they did in the 90s?
When will reporters (and the general public for that matter) learn that economic growth isn’t something that happens formulaicly. Economics isn’t physics—it’s filled with variables that are near impossible to even estimate accurately not to mention ones we never would think of considering. The dotcom boom of the 90s was a one-of-a-kind event. We were lucky. You just can’t make that happen with some tax cuts and interest rate fiddling. Investing about what you make is the norm, not cause for concern or a sympton of some grand uncertainly that’s eeking out of every corner of our society. This isn’t complicated stuff here.
Ferrets + Dark Room + The Matrix = Science
And some people out there believe that people aren't creative enough to invent alternatives to oil as a fuel source.
If you'd believe it, it's actually a good article; it just sounds way worse than it is.
If you'd believe it, it's actually a good article; it just sounds way worse than it is.
A Little Bit of Faith for the Government (BUT JUST A LITTLE BIT)
A few days ago, Dr. Boudreaux posted this article about lessons he teaches and will teach his son. You gotta love Don for his honesty but I have to ask if his professorship of libertarianism for nearly twenty years has somewhat clouded his opinion of the state (and if you’re one of three of our regular readers, you’ll know that means a lot coming from me).
For example Don says, “…winning elections requires a measure of deceitfulness and Machiavellian immorality that no decent person comes close to possessing.” There is no doubt in my mind that there are the a great many wretched people in government—especially people who pursue office—and these people have a higher propensity to win elections but to say that winning one requires a selling of your soul goes too far. Politicking isn’t inherently bad—it just vulnerable to it. Furthermore, people in government, for the most part, are good people and really want to make the world better. They just don’t know that, for the most part, they are doing just the opposite. Not trusting them is one thing (I agree with Steven Brill: “skepticism is a virtue”), calling them names is another. The best way to make the world better is to treat the pro-governments with a mixture of respect and suspicion; not shake your fist at them whenever they walk by.
Don continues with his attitude of the army: “If he is ever asked to die for a government that claims a monopoly over his allegiance, he should politely refuse.” At least he’s learning to be polite and I agree for the most part: if government ever asks me to fight for them, I’d decline. But there are exceptions and these exceptions need attention. National defense, after all, is a public good and therefore subject to the free rider problem. Now in most cases this isn’t a problem because military interference in other countries isn’t something we should be doing anyway. But if there’s an enemy at the border and invasion is eminent and every hand and heart is needed to ward off the attack (as in society itself is in danger), then there’s a case for the draft.
Granted, this is a sticky issue. If there was a libertarian army that was razed in, say, Canada and marched into the US, determined to release its people of the overbearing government of Washington, I’d probably let them pass. But if the socialists raised an army in Canada (far more likely), I’d hope that everyone in our country would raise the flag of war. Now, I don’t like war and I avoid physical confrontation whenever I can but to say that you should always refuse the request to fight for your country sets a precedent that is more likely to do more harm than good. National defense is, after all, one of the few things libertarians think the government should do. Why not, in this extreme case, encourage people to enable them to do it the best they can?
For example Don says, “…winning elections requires a measure of deceitfulness and Machiavellian immorality that no decent person comes close to possessing.” There is no doubt in my mind that there are the a great many wretched people in government—especially people who pursue office—and these people have a higher propensity to win elections but to say that winning one requires a selling of your soul goes too far. Politicking isn’t inherently bad—it just vulnerable to it. Furthermore, people in government, for the most part, are good people and really want to make the world better. They just don’t know that, for the most part, they are doing just the opposite. Not trusting them is one thing (I agree with Steven Brill: “skepticism is a virtue”), calling them names is another. The best way to make the world better is to treat the pro-governments with a mixture of respect and suspicion; not shake your fist at them whenever they walk by.
Don continues with his attitude of the army: “If he is ever asked to die for a government that claims a monopoly over his allegiance, he should politely refuse.” At least he’s learning to be polite and I agree for the most part: if government ever asks me to fight for them, I’d decline. But there are exceptions and these exceptions need attention. National defense, after all, is a public good and therefore subject to the free rider problem. Now in most cases this isn’t a problem because military interference in other countries isn’t something we should be doing anyway. But if there’s an enemy at the border and invasion is eminent and every hand and heart is needed to ward off the attack (as in society itself is in danger), then there’s a case for the draft.
Granted, this is a sticky issue. If there was a libertarian army that was razed in, say, Canada and marched into the US, determined to release its people of the overbearing government of Washington, I’d probably let them pass. But if the socialists raised an army in Canada (far more likely), I’d hope that everyone in our country would raise the flag of war. Now, I don’t like war and I avoid physical confrontation whenever I can but to say that you should always refuse the request to fight for your country sets a precedent that is more likely to do more harm than good. National defense is, after all, one of the few things libertarians think the government should do. Why not, in this extreme case, encourage people to enable them to do it the best they can?
Conservative Liberalism, Liberal Conservatism
I spent this past weekend at Beloit College, and having had the opportunity, engaged in a spirited discussion with an avowed liberal from Madison, Wisconsin. The striking contrast in our views seemed to be characterized by our different approaches to how order comes to be.
My perspective is, predictably, that cooperation is likely to emerge out of the recognition of mutually aligned interests. Hers depended on the imposition of order by a government for stability and cohesion. She believes that the state is necessary for society, and I view it as an accidental by-product. Yet somehow, I'm the one most often called the conservative, though I'm comfortable with change and she's wary.
The discussion often returned to the state of a ruler-less system, which we characterized as chaotic. For many people, this word connotes grave danger and uncertainty, so when faced with this natural objection I brought up the point that stable order emerges from chaotic interaction in many complex systems, ranging from human hearts and brains to the motion of a swinging pendulum. This isn't exactly the idea of chaos she had in mind, but the point was well taken.
But beyond the substance of our discussion, the recognition that we came to of our underlying unity of purpose remains the most significant: we both want what's best for people. I believe that a free market is the best way to arrive at that point, and she government. Mises, amongst others, regarded minarchy as the ideal balance between the extremes, so perhaps there is a middle path to walk.
In this I profess ignorance - I'm a political agnostic, so to speak. I won't say that all systems will inevitably order themselves in the maximally useful way, nor will I was that all government is evil. It is simply my belief that spontaneous order tends to be better than the alternative, and that government presents a tremendous danger to order by virtue of its monopoly on violence.
Never stop looking for that path, never stop thinking, and never stop hoping. Remember that those with whom you disagree often value the very same things as you, and that they're not monsters simply because of ideological differences.
My perspective is, predictably, that cooperation is likely to emerge out of the recognition of mutually aligned interests. Hers depended on the imposition of order by a government for stability and cohesion. She believes that the state is necessary for society, and I view it as an accidental by-product. Yet somehow, I'm the one most often called the conservative, though I'm comfortable with change and she's wary.
The discussion often returned to the state of a ruler-less system, which we characterized as chaotic. For many people, this word connotes grave danger and uncertainty, so when faced with this natural objection I brought up the point that stable order emerges from chaotic interaction in many complex systems, ranging from human hearts and brains to the motion of a swinging pendulum. This isn't exactly the idea of chaos she had in mind, but the point was well taken.
But beyond the substance of our discussion, the recognition that we came to of our underlying unity of purpose remains the most significant: we both want what's best for people. I believe that a free market is the best way to arrive at that point, and she government. Mises, amongst others, regarded minarchy as the ideal balance between the extremes, so perhaps there is a middle path to walk.
In this I profess ignorance - I'm a political agnostic, so to speak. I won't say that all systems will inevitably order themselves in the maximally useful way, nor will I was that all government is evil. It is simply my belief that spontaneous order tends to be better than the alternative, and that government presents a tremendous danger to order by virtue of its monopoly on violence.
Never stop looking for that path, never stop thinking, and never stop hoping. Remember that those with whom you disagree often value the very same things as you, and that they're not monsters simply because of ideological differences.
Sunday, October 10, 2004
The Sinking Hand of the State
As the new century spreads its wings, ushering a great new era of space travel, individuals are powering the growing surge of ingenuity to new heights. This article from The Straits Times seriously discusses the development of spaceports, privatized orbital travel, lunar bases and traveling from New York to Paris in less than an hour.
It talks seriously about state intervention.
The US Congress just approved new regulations for the infant industry. Like all regulations on new ideas, these seem reasonable at a glance, but are not only unneeded, they embody future intervention. They are safety requirements.
According to the law, companies have to provide passengers with possible health risks. Oh thank God that the state was there to make sure I didn't spend $200K (the cost Virgin Galatic is charging for a ride to space) too quickly. I'm so happy some one forced them to tell me the safety risks because I'm too stupid to think about my personal safety. I didn't know that flying 100km above the earth into an airless vacuum could possibly be any different from going to the grocery store to get a jug of milk.
Contrary to what you may have been led to believe, adults don't need anyone telling them to be aware of safety procedures for a space flight no more than they need someone telling them to look both ways before they cross the street. And yes, I agree that this is a rather minor law because the companies will disclose this information anyway (because we are NOT a bunch of kids). But I guarentee you it won't be minor for long and we all know Congress rarely ever removes laws. In about fifty years or so, we will all have to sit through the same safety speech that airlines (by law) have to give us, except it will be along the lines of this: "Escape pods are located at the front and rear of the spacecraft. Look around you for the nearest airlock. In some cases, it may be located behind you. If you are sitting in an airlock aisle, please assist other passagers to your location. If you do not feel you can handle this, please talk to a stewardess and we will find you a new seat..."
And like I said, this is only the beginning. Congressmen and women will point to the safety procedures and declare how well their law worked. Then they will use it to make more laws. The article reports, "The US Federal Aviation Administration has a Commerical Space Transportation Office geared up [whatever that means] to license private spacecraft." This licensing, by the way, is better known to economists as a barrier to entry. But they will laud it as a safety issue--again, unneeded--and make more laws.
I call this process the sinking hand of the state. At first the hand of the state is far away and seems distant and unintrusive. Sometimes even helpful. Maybe it blocks out some the sun so you can see better (and you don't feel as though you should pay for sun glasses or hold up your hand to your eyes. So you don't care that it's sliding down closer to you. You tolerate it's growing presence. And before you know it, you're wondering if you could strangle youself with the cord from the free headset because you're so sick of hearing the same damn safety lecture over and over again.
It talks seriously about state intervention.
The US Congress just approved new regulations for the infant industry. Like all regulations on new ideas, these seem reasonable at a glance, but are not only unneeded, they embody future intervention. They are safety requirements.
According to the law, companies have to provide passengers with possible health risks. Oh thank God that the state was there to make sure I didn't spend $200K (the cost Virgin Galatic is charging for a ride to space) too quickly. I'm so happy some one forced them to tell me the safety risks because I'm too stupid to think about my personal safety. I didn't know that flying 100km above the earth into an airless vacuum could possibly be any different from going to the grocery store to get a jug of milk.
Contrary to what you may have been led to believe, adults don't need anyone telling them to be aware of safety procedures for a space flight no more than they need someone telling them to look both ways before they cross the street. And yes, I agree that this is a rather minor law because the companies will disclose this information anyway (because we are NOT a bunch of kids). But I guarentee you it won't be minor for long and we all know Congress rarely ever removes laws. In about fifty years or so, we will all have to sit through the same safety speech that airlines (by law) have to give us, except it will be along the lines of this: "Escape pods are located at the front and rear of the spacecraft. Look around you for the nearest airlock. In some cases, it may be located behind you. If you are sitting in an airlock aisle, please assist other passagers to your location. If you do not feel you can handle this, please talk to a stewardess and we will find you a new seat..."
And like I said, this is only the beginning. Congressmen and women will point to the safety procedures and declare how well their law worked. Then they will use it to make more laws. The article reports, "The US Federal Aviation Administration has a Commerical Space Transportation Office geared up [whatever that means] to license private spacecraft." This licensing, by the way, is better known to economists as a barrier to entry. But they will laud it as a safety issue--again, unneeded--and make more laws.
I call this process the sinking hand of the state. At first the hand of the state is far away and seems distant and unintrusive. Sometimes even helpful. Maybe it blocks out some the sun so you can see better (and you don't feel as though you should pay for sun glasses or hold up your hand to your eyes. So you don't care that it's sliding down closer to you. You tolerate it's growing presence. And before you know it, you're wondering if you could strangle youself with the cord from the free headset because you're so sick of hearing the same damn safety lecture over and over again.
Purple Markets
I have this great idea for an introductary economics lecture. Thousands of years ago the color purple was incredibly expensive to make, being exclusively available through the mucus of mollusks—it took 8,000 of these shellfish to make just one gram of pure dye. The dye was so valuable, Rome, Persia and Eygpt all used it as the color of the empire. In Phoenicia, only the rulers were allowed to wear it. Everywhere else, only the very rich could afford it.
Now look around you. Do you see the color purple on anything you own? Probably; it’s a good color. Go to the store—do you see purple anywhere? Sure do. I have purple post-it notes on my desk; when I’m done with them, I throw them away. At justtoiletpaper.com, you can get toilet paper in any color—red, black, maroon, orange, green and oh yes, purple.
Friday’s Wall Street Journal had an article about the changing face of design. People are inspired by shows such as Trading Spaces and While You Were Out and are working with companies to create their own space and style (including toliet paper). Once, nearly everyone in the world was a farmer. Now the average citizen has a greater and greater chance to make a living in design. Markets make things cheaper, cleaner, faster, stronger and smarter. They increase variety, invent new possiblities, blend cultures and change the very state of how people live, work and play. What was once a color exclusively for the elite few is now one we can wipe their asses with.
Now look around you. Do you see the color purple on anything you own? Probably; it’s a good color. Go to the store—do you see purple anywhere? Sure do. I have purple post-it notes on my desk; when I’m done with them, I throw them away. At justtoiletpaper.com, you can get toilet paper in any color—red, black, maroon, orange, green and oh yes, purple.
Friday’s Wall Street Journal had an article about the changing face of design. People are inspired by shows such as Trading Spaces and While You Were Out and are working with companies to create their own space and style (including toliet paper). Once, nearly everyone in the world was a farmer. Now the average citizen has a greater and greater chance to make a living in design. Markets make things cheaper, cleaner, faster, stronger and smarter. They increase variety, invent new possiblities, blend cultures and change the very state of how people live, work and play. What was once a color exclusively for the elite few is now one we can wipe their asses with.
Friday, October 08, 2004
"Your Racist Friend"
Freedom is a funny thing. In the economics class I’m TAing, there was a brief interlude about the role of property rights and exclusion, particularly pertaining to renting space. Some people in the class admitted that a law requiring people to equally consider everyone who applies regardless of race, religion and so forth is a good thing. Sometimes, it’s good to restrict people’s freedom. I didn’t say anything because there is limited time more pertainent things to discuss for an intro course.
Besides, that’s what blogs are for.
There’s a lot of agruments in favor of anti-discrimination laws. One of the most easily seen is the fairness and righteousness it implies. These laws seem to be legalizing morality and taking steps away from the anti-semetic, Hilterisic mentality that (Western) popular opinion fears (as we should fear it). With the backing of the State, it is being declared that Thou Shall Be Good. Who could argue with that?
I can. The goal, afterall, is to encourage a world of tolerance and acceptance. Telling people that their views are wrong and that’s all there is to it isn’t creating that world. It only reinforces their narrow-minded beliefs (So and so controls the government…here’s the proof.) If we want to create a better world, people have to change their minds and they aren’t going to do that if they think they are being forced to it. It makes people feel warm and fuzzy inside, but it doesn’t bring us closer together.
These laws have deeper problems. A rabbi may want to create an all-Jewish apartment building to foster a sense of community or to make studing easier or for people who want to rediscover their heritage. Someone else may want to create a building filled with young people, to create a living area that’s easier to meet people of the same age group. Another may want to do the same thing with cultural background. These are all perfectly reasonable but under the law, not allowed.
As a renter, you’re in a nasty position to rent to someone even if you have legitimate reasons not to. If a black tentant wanted to live in your building but you know from his previous landlord he’s loud, disruptive and often gets behind on his rent, you’d want someone else. Suppose that someone else is white. While you passed on the first application for legitimate reasons, that’s not the appearance and even if you’re found not guility in a court of law (hard to do because you are effectively trying to prove your innocence), the court of public opinon may make a different decision, especially after Rev. Jackson comes to town. You get punished even though you did nothing wrong, and we aren’t even including court costs and time spent.
What we are talking about here is what people can do with their own space. They have a right to do with it as they please (as long as they don’t interfere with other people’s rights and no, the “right” not be discriminated against is not a right). If another wants to join the space (or club, or company), the owners have the right to set whatever criteria they want—it’s their space. That’s what private property is all about. Denying people that freedom is denying them private property and no, it’s not for some greater good. On average, it won’t make us more tolerate, just more angry.
NOTE: Title is title of the sixth They Might be Giants song of the Flood album (released 1990).
Besides, that’s what blogs are for.
There’s a lot of agruments in favor of anti-discrimination laws. One of the most easily seen is the fairness and righteousness it implies. These laws seem to be legalizing morality and taking steps away from the anti-semetic, Hilterisic mentality that (Western) popular opinion fears (as we should fear it). With the backing of the State, it is being declared that Thou Shall Be Good. Who could argue with that?
I can. The goal, afterall, is to encourage a world of tolerance and acceptance. Telling people that their views are wrong and that’s all there is to it isn’t creating that world. It only reinforces their narrow-minded beliefs (So and so controls the government…here’s the proof.) If we want to create a better world, people have to change their minds and they aren’t going to do that if they think they are being forced to it. It makes people feel warm and fuzzy inside, but it doesn’t bring us closer together.
These laws have deeper problems. A rabbi may want to create an all-Jewish apartment building to foster a sense of community or to make studing easier or for people who want to rediscover their heritage. Someone else may want to create a building filled with young people, to create a living area that’s easier to meet people of the same age group. Another may want to do the same thing with cultural background. These are all perfectly reasonable but under the law, not allowed.
As a renter, you’re in a nasty position to rent to someone even if you have legitimate reasons not to. If a black tentant wanted to live in your building but you know from his previous landlord he’s loud, disruptive and often gets behind on his rent, you’d want someone else. Suppose that someone else is white. While you passed on the first application for legitimate reasons, that’s not the appearance and even if you’re found not guility in a court of law (hard to do because you are effectively trying to prove your innocence), the court of public opinon may make a different decision, especially after Rev. Jackson comes to town. You get punished even though you did nothing wrong, and we aren’t even including court costs and time spent.
What we are talking about here is what people can do with their own space. They have a right to do with it as they please (as long as they don’t interfere with other people’s rights and no, the “right” not be discriminated against is not a right). If another wants to join the space (or club, or company), the owners have the right to set whatever criteria they want—it’s their space. That’s what private property is all about. Denying people that freedom is denying them private property and no, it’s not for some greater good. On average, it won’t make us more tolerate, just more angry.
NOTE: Title is title of the sixth They Might be Giants song of the Flood album (released 1990).
Tuesday, October 05, 2004
A Prize No More
We libertarians love to complain. Government’s in the way over here, not enough free market over there; it’s mostly just a bundle of direct attacks and vauge answers. Mike told me the other day that he’d like to see real solutions put forth and if he was here, he’d do something about it.
(Silence.)
But he’s not here and I am. Just as well, because this is about something that’s near and dear to my heart: the Ansari X Prize.
As I mentioned in a previous post, the Ansari X Prize is a $10 million prize to the first private team that can send a manned ship into space, return him and repeat the process two weeks later.
Or should I say, was a prize.
Yesterday, SpaceShipOne completed the daunting task, winning the prize, and already we are reaping the benefits. Virgin Atlantic Airlines founder Richard Branson announced the creation of Virgin Galactic Airways which will offer suborbital flights at $200,000 a seat. The company already ordered five SpaceShipOnes to be built. Next year, the makers of 7-Up will offer one of these six-figure seats as part of a contest.
This is only the beginning. The Ansari X Prize will sponsor annual space races, pushing the technological envelope even farther. And a new contest has surfaced: $50 million for the first team to make a ship capable of going even farther into space (100 miles instead of 62) and dock with an orbital station. NASA will also be offering its own prizes.
This is an answer. Right here. Technology is humanity’s greatest friend. It raises standards, saves lives, connects people and makes dreams reality. At the cornerstone of creating a better world is creating a world that favors novelty, innovation and invention. There is no reason why we cannot stretch our arms a bit wider—prizes for the cure of cancer, for new energy sources, for improved anti-terrorism technologies. The list goes on forever.
(I’m updating a paper I wrote a few months ago about this precise subject. Hopefully, in a few weeks, I’ll publish it here on the blog. I’ll appreciate any input our readers could offer.)
(Silence.)
But he’s not here and I am. Just as well, because this is about something that’s near and dear to my heart: the Ansari X Prize.
As I mentioned in a previous post, the Ansari X Prize is a $10 million prize to the first private team that can send a manned ship into space, return him and repeat the process two weeks later.
Or should I say, was a prize.
Yesterday, SpaceShipOne completed the daunting task, winning the prize, and already we are reaping the benefits. Virgin Atlantic Airlines founder Richard Branson announced the creation of Virgin Galactic Airways which will offer suborbital flights at $200,000 a seat. The company already ordered five SpaceShipOnes to be built. Next year, the makers of 7-Up will offer one of these six-figure seats as part of a contest.
This is only the beginning. The Ansari X Prize will sponsor annual space races, pushing the technological envelope even farther. And a new contest has surfaced: $50 million for the first team to make a ship capable of going even farther into space (100 miles instead of 62) and dock with an orbital station. NASA will also be offering its own prizes.
This is an answer. Right here. Technology is humanity’s greatest friend. It raises standards, saves lives, connects people and makes dreams reality. At the cornerstone of creating a better world is creating a world that favors novelty, innovation and invention. There is no reason why we cannot stretch our arms a bit wider—prizes for the cure of cancer, for new energy sources, for improved anti-terrorism technologies. The list goes on forever.
(I’m updating a paper I wrote a few months ago about this precise subject. Hopefully, in a few weeks, I’ll publish it here on the blog. I’ll appreciate any input our readers could offer.)
VP Debate Tonight
Tonight's the night for the Cheney-Edwards debate; all I know is that I fell asleep watching the presidential debate, so this can't possibly fail to meet my expectations. Cheney's a cyborg and Edwards is a trial lawyer, so it's like some sort of Lovecraftian battle between half-humans.
And I shouldn't feel the need to say it, but please don't take offense at that - It's a joke, and I'm sure their genes would test somewhere in the range of human normality.
And I shouldn't feel the need to say it, but please don't take offense at that - It's a joke, and I'm sure their genes would test somewhere in the range of human normality.
Come Get Bankrupt with Me
You’d think the Wall Street Journal would know better.
Today’s Journal ran a front page article about the decline of major US airlines and how competition are forcing them to adapt. It’s another great article about the wonders of the free market. Like Merck, companies including Delta and US Airways are in danger of going completely under because they made stupid decisions (thus bringing Capitalism’s victory total up to between 6,853,409,823,748 and 6,853,409,823,752—I don’t know exactly how many airlines are serious danger; I know it’s at least four and probably not more than eight).
These stupid decisions include not concerning themselves with keep costs down, refusing to take on good ideas when they see them, relying on the horribly inefficent “hub” system and so on. Back in 1978, the idea was deregulation would lead to lower prices and better service. Instead, the Journal insists, the average consumer was “gouged” while the airlines practiced these stupid things. (As mentioned hundreds of times in other blogs during the summer, the idea that a private firm can “gouge” anyone is a myth.)
Susan Carey and Scott McCartney, the authors of the article, attributed the Internet, oil prices and 9/11 to the airlines’ downfall. They call strategies that the major carriers used to protect themselves from the upstarts of the 1980s as a “bag of tricks.” This includes frequent flier programs, something the article notes that was cheifly responsible for defeating the up and comers like People Express Airlines. (The very idea that there are new competitors on the field just a few years after deregulation speaks volumes for the economy.)
True, the circumstances Carey and McCartney noted probably did help the new upstarts; I have no doubt in that. But to presume that they are the reason why the big companies are getting blasted while in the same article note that these companies haven’t been paying attention to competition is a contradiction in terms. Frequent-flier programs are good; that’s why they worked. But they are no longer good enough; that’s why US Airways is filing for bankruptcy.
Clearly one of these two journalists know some economists. You’d think one would have taught the other some, collaborating on the article they were collaborating on.
Today’s Journal ran a front page article about the decline of major US airlines and how competition are forcing them to adapt. It’s another great article about the wonders of the free market. Like Merck, companies including Delta and US Airways are in danger of going completely under because they made stupid decisions (thus bringing Capitalism’s victory total up to between 6,853,409,823,748 and 6,853,409,823,752—I don’t know exactly how many airlines are serious danger; I know it’s at least four and probably not more than eight).
These stupid decisions include not concerning themselves with keep costs down, refusing to take on good ideas when they see them, relying on the horribly inefficent “hub” system and so on. Back in 1978, the idea was deregulation would lead to lower prices and better service. Instead, the Journal insists, the average consumer was “gouged” while the airlines practiced these stupid things. (As mentioned hundreds of times in other blogs during the summer, the idea that a private firm can “gouge” anyone is a myth.)
Susan Carey and Scott McCartney, the authors of the article, attributed the Internet, oil prices and 9/11 to the airlines’ downfall. They call strategies that the major carriers used to protect themselves from the upstarts of the 1980s as a “bag of tricks.” This includes frequent flier programs, something the article notes that was cheifly responsible for defeating the up and comers like People Express Airlines. (The very idea that there are new competitors on the field just a few years after deregulation speaks volumes for the economy.)
True, the circumstances Carey and McCartney noted probably did help the new upstarts; I have no doubt in that. But to presume that they are the reason why the big companies are getting blasted while in the same article note that these companies haven’t been paying attention to competition is a contradiction in terms. Frequent-flier programs are good; that’s why they worked. But they are no longer good enough; that’s why US Airways is filing for bankruptcy.
Clearly one of these two journalists know some economists. You’d think one would have taught the other some, collaborating on the article they were collaborating on.
Monday, October 04, 2004
Capitalism: 6,853,409,823,744; Socialism: 0
As Election Day draws nearer, one of those hot button issues
we keep hearing about are the evils or drug companies: they
"gouge" prices, step on the backs of the poor and infirm and
lack a single shread of humanity. Steadfastly refusing
Africa much needed AIDs medication while stabbing Grandma
and Grandpa in the back, they are the embodiement of evil,
right?
Wrong. Don't be fooled by the rhetoric: because the
drug companies have to care about the bottom line, we, as a
society are better off. Proft is an incentive for innovation
and the threat of losing it is an incentive for safety. My
favorite instance of the invisible hand smacking around some
irresponsible drug company broke last week: Merck pulled Vioxx.
Vioxx, a drug used to lessen the pain from arthritis, turns
out to double the risk of heart attack if taken too long.
While the company denied this was the case for years, after
an independent panel reached this conclusion, the company
pulled the product. Shortly thereafter, they lost $28
billion as their stock plummented.
Some people may point to this as proof of the need for
government to have a greater role in health care but that
level of faith in the state is sadly misplaced. Let's
suppose, for argument's sake, that the government, not
private companies, were responsible for new drugs. Thus we
would avoid the heartless refusal to acknowledge the drug
may have problems. Governments look out for the people.
At least in theory. I find it highly unlikely that a
government organization could create a drug as sophisicated
as Vioxx--they lack the incentive. Even if they did, they
would have to learn that the drug has flaws (considering how
subtle it is, that's unlikely also). THEN, they would have
to admit they were wrong. If the Bush Administration has
taught us anything, it's that accountability is a foreign
word in Washington.
Governments lack incentive to be good at their job. Sure,
there's re-election (which doesn't apply to some figures)
but considering how much governments do, it's easy to bury
one big thing under a pile of good-sounding stuff. This is
why the Administration doesn't have to fire anyone over the
intelligence failures; they just have to say "oops." What
are you going to do about it? Sell stock?
Firms, on the other hand, have to do well. They have to
balance public safety and medical progress as best they can.
Too much in one direction is not only bad for the company,
it's bad from society. The reward of profits is what makes
capitalism work. Give it to all those who do well, take it
away from all the failures. It may seem heartless, but it's
the best way; it's exactly what socialism lacked. Proper
motivation is how progress is made. Merck's value fell so
much, some investors say it's poised for a takeover,
something the higher-ups were vehemently trying to aviod
(and still are trying to avoid). Every employee at Merck,
especially these higher-ups, is now at risk of losing their
job.
That's what I call incentive.
we keep hearing about are the evils or drug companies: they
"gouge" prices, step on the backs of the poor and infirm and
lack a single shread of humanity. Steadfastly refusing
Africa much needed AIDs medication while stabbing Grandma
and Grandpa in the back, they are the embodiement of evil,
right?
Wrong. Don't be fooled by the rhetoric: because the
drug companies have to care about the bottom line, we, as a
society are better off. Proft is an incentive for innovation
and the threat of losing it is an incentive for safety. My
favorite instance of the invisible hand smacking around some
irresponsible drug company broke last week: Merck pulled Vioxx.
Vioxx, a drug used to lessen the pain from arthritis, turns
out to double the risk of heart attack if taken too long.
While the company denied this was the case for years, after
an independent panel reached this conclusion, the company
pulled the product. Shortly thereafter, they lost $28
billion as their stock plummented.
Some people may point to this as proof of the need for
government to have a greater role in health care but that
level of faith in the state is sadly misplaced. Let's
suppose, for argument's sake, that the government, not
private companies, were responsible for new drugs. Thus we
would avoid the heartless refusal to acknowledge the drug
may have problems. Governments look out for the people.
At least in theory. I find it highly unlikely that a
government organization could create a drug as sophisicated
as Vioxx--they lack the incentive. Even if they did, they
would have to learn that the drug has flaws (considering how
subtle it is, that's unlikely also). THEN, they would have
to admit they were wrong. If the Bush Administration has
taught us anything, it's that accountability is a foreign
word in Washington.
Governments lack incentive to be good at their job. Sure,
there's re-election (which doesn't apply to some figures)
but considering how much governments do, it's easy to bury
one big thing under a pile of good-sounding stuff. This is
why the Administration doesn't have to fire anyone over the
intelligence failures; they just have to say "oops." What
are you going to do about it? Sell stock?
Firms, on the other hand, have to do well. They have to
balance public safety and medical progress as best they can.
Too much in one direction is not only bad for the company,
it's bad from society. The reward of profits is what makes
capitalism work. Give it to all those who do well, take it
away from all the failures. It may seem heartless, but it's
the best way; it's exactly what socialism lacked. Proper
motivation is how progress is made. Merck's value fell so
much, some investors say it's poised for a takeover,
something the higher-ups were vehemently trying to aviod
(and still are trying to avoid). Every employee at Merck,
especially these higher-ups, is now at risk of losing their
job.
That's what I call incentive.
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