Monday, November 24, 2008

The Forgotten Charity

Amity Shlaes recalls the last great act of banker, industrialist, and art collector Andrew Mellon in The Forgotten Man:
By giving largely, generously, completely, and entirely, he would demonstrate that the private man could be as good a servant to the public as the government official was...Mellon's gift would show the value of leaving art--or capital--to accumulate and compound in the shadows, untaxed. The National Gallery would be an object lesson that the high taxers could not forget.
One of the finest collections of Western art in the world, and the main building which houses it, was originally the gift of a "robber baron" who gave so selfishly that it doesn't even bear his name. And so, alongside the monuments to presidents and memorials to wars, among the lawmakers and tourists, in the shadow of the Capitol building, rests a silent dedication to low taxes.

Friday, November 21, 2008

The Siren's Song of Manufacturing

Today on Morning Joe Pat Buchanan mourned the decline of the manufacturing sector, whose members now (supposedly) work at Wal-Mart. Forget that over the past thirty years median individual income rose about 40%. Even if they were becoming nurses and lawyers (and they are), Buchanan still prefers manufacturing cars, toys, and electronics in America, by American firms.

Manufacturing is no more important than farming, customer support, or mining. The key is never one sector. The key to American prosperity (among other things) is trade. Freer trade opens the plethora of human ingenuity to more people at steadily decreasing amounts of effort. Alaskans get bananas year round. Nevadans get free tech support. Indianans get toys under the tree. Just because we can't point to a single area where everyone works doesn't mean they can't find good jobs, obtain consumer goods, or live a fuller life. Freer trade means all these things are more common, not less.

Tuesday, November 18, 2008

Burn, Baby, Burn

With the world financial system still in turmoil (and Japan joining the recession ranks), governments hear the public cry for action. It's a knee-jerk call with little forethought. People mistaken the current economy as a burning building: clearly, something has to be done. This analogy makes a series of errors, assuming the government could fix the problem, knows how to fix the problem, and wants to fix the problem in a way that actually works (instead of just claiming it works).

If you insist on the analogy, we should wonder if the fire's too hot to suffocate. We should wonder if the buckets contain water or kerosene. We should wonder if the firefighters wish to get burned putting it out or stay away and roast marshmallows. But most of all, we should wonder if if the building should just burn down.

The financial sector is really large. Arguably too large. At the very least, many firms made some big errors. Saving the company that's a proven failure is not a recipe for long term growth. Ditto for Detroit, who focused on SUVs while gas prices climbed. The same goes for virtually any struggling industry, especially its old and unimaginative players. They made a mistake, honest or not, and now they're dead weight.

Forest fires occur naturally. As forests age, dry undergrowth covers the ground and old trees block out all light. Nothing new grows. It takes only a bolt of lightning to ignite the old structure and wipe it away in a cruel immolation. This is the only way new life can flourish and the forest can ultimately survive.

Let the ancients burn.

Saturday, November 15, 2008

Slipperly Logic

After noting the fall of oil prices, a friend of mine suggests oil companies could have "gotten away" with higher prices longer. When prices rise, it's a conspiracy in the greedy pursuit of profits. When they fall, it's still a greedy pursuit of profits?

Supposedly, prices fall because colluding firms want to assuage calls for regulation and taxes. Anyone even remotely familiar with commercials, advertising low prices, knows how sloppy that argument is. There's no evidence of sustained collusion, because there's no way to enforce such deals. Prices rose due to sudden demand and are falling because this competitive industry is finally catching up.

This is not a new story. From Amity Shlaes' The Forgotten Man. In 1934,
[Harold Ickes] had discovered that at numerous points oil was being extracted clandestinely and illegally, outside his NIRA [National Industrial Recovery Act] production quotas, and sold at prices that undercut the policy to force prices upward. He was outraged and opened a campaign against the oil bootleggers, describing them as possessed of a "sly animal cunning." (p 203)
No wonder oil CEOs are paid so much. It's not fun being the villain no matter what you do.

Wednesday, November 12, 2008

Google > CDC

The U.S. Centers for Disease Control and Prevention (CDC) publishes flu data, but with a lag to allow for the data to arrive. Google decided to track the searches for flu, and gets numbers similar to the CDC, but only without the lag. Thus if you want to know the current flu situation, you are better off with Google than the CDC.

No, You Can't

Lawmakers from all fifty states are being bombarded with requests for tickets to Obama's inauguration. When the norm is several hundred tickets each, some report several thousand requests. Questions arise as to how to divvy them up. Lottery systems seems most likely. A market does not.

Legislation looms to make scalping these tickets illegal. It seems like we should ensure that everyone should have an equal chance to get them, that we should combat those who would order a dozen, only to sell them for personal profit. But an a world of different preferences, a forced lottery system is more unjust than scalping tickets. The person who's mildly interested has the same chance as the die-hard fan. Without a market, there's no way to correct the randomization if the former wins. (Frankly, I'm surprised they aren't going by first come, first serve basis. That would solve a lot of problems. But part of the issue is the offices don't know how many tickets they are getting.)

Auctioning the tickets is not perfect, either. The curious but wealthy are preferred over the enthusiastic but poor. Without a prohibitively costly interview system, it's not possible to make it perfect. But denying trade makes it strictly worse.

Saturday, November 08, 2008

Tyranny of the Electoral System

Missouri's still counting and recounting but the absurdity of our electoral system is still clear. Ignoring the Show Me State, here are the results:

Candidate% of Popular Vote% of Electoral Votes

The spread between Obama and McCain jumps from 6.5 points to almost six times that amount (38.6). A large part of this discrepancy is because the plurality of the state gets all the state's votes. But it brings to bear another strange aspect of the electoral college: Pennsylvania has 25 times as many people as Wyoming, but only 7 times the electoral votes. Iowa has a fourth of the people Illinois has but only a third of the votes. In other words, the system disproportionately favors low populations states. (This was a major issue in 2000, when Gore received the popular vote but lost the election.)

People argue rural areas have to get extra voice. Otherwise the candidates would never pay attention to them and spend all their time in major cities. So what? Majorities always have a greater say than minority opinions. But no one says that gays, immigrants, and Jews should get extra votes. The only difference is these minorities (mostly farmers) are concentrated geographically. I'm sympathetic to the idea of giving the outside opinion extra muscle in order to curb the tyranny of the majority. But it's not clear why that minority has to have their own state before they get such an ability. Because we lack consistency, part of the minority becomes party of the majority and the bullying continues.

Tuesday, November 04, 2008

We Stand Together, Like It or Not

My mother used to tell me "if you don't vote, you can't complain." When I was younger, I remember nodding in agreement. Now, as an avid nonvoter, I failure to understand her arguments. You could say I've "learned" less over the years if you consider such reasoning knowledge. But it's not.

The fallacy assumes defection is a practical option. If three people vote to go see a movie, and one of them offers no opinion, that person still chooses to see what the others decide. We all recognize if silent Carl goes to High School Musical 3 with his friends, he is in little position to complain about which movie to see. If he didn't want to see it, why did he go? The same could be said of those voters who went along with the decision. If they wanted to see Saw V, we would wonder why they followed the majority.

But our process isn't like seeing a movie. It's more like being trapped in a plane and people voting on the destination. If the choices are between Alaska and the Yukon, and the majority votes for Alaska, we can understand why the Yukoners complain. But we can also understand why those that like the tropics, and don't bother choosing between two bad choices, complain. We would only be surprised if the Alaskaners protested the result once we arrived.

It turns out those with the least credibility to complain are those that voted for the winner, which is usually most of the voters.

First Time Voting

Like Alex Tabarrok, I voted for the first time today. It took about 45 minutes, and my voting precinct is close enough that I jogged there after I woke up. I realize my vote counts for nothing but now when people talk about voting I know what they are talking about.