The Sacred Philosophy

Even though I wrote about the reasons why I don't vote Tuesday, I'm contemplating the act this Election Day. Virginia has a constitutional amendment to ban gay marriage on the ballot and I'd like to show my support against it (which is reason #2 if you read that post).

About half the electorate disagrees, making familiar arguments. But for the moment, forget that our culture isn't so fragile it will collapse because boys marry. Forget that homosexually actually is natural and it's marriage that isn't. Forget that the Bible commands Christians to "love thy neighbor." Forget that God (if there is one) wouldn't want us to limit an expression of love to anything less than all of us. The essential point is that America is fundamentally a land of free people.

Living in a free society demands that people put up with things they don't like. Your church doesn't have to marry gays but you don't get to make the rules for other churches, no matter how sad that makes you. There is no such thing as "freedom from others' freedom;" this was part of the sacred philosophy of the Founding Fathers. Ultimately, the ban is just wrong; it is unethical, unholy and un-American.

November's Most Random Wikipedia Page Is....

Really two pages: KL-ONE and KL1. Yes, they are different things. But I'm selecting the former is the real winner since its article is longer yet makes less sense. I of course left a snarky comment on talk page about writing the article in English. (Sample sentance: "The system is an attempt to overcome semantic indistinctness in semantic network representations and builds upon the idea of Structured inheritance networks.")

Runner up for this month is Transportation in North Korea because (a) I didn't know North Korea had any transportation beyond dirt roads (note 94% of highway is unpaved) and (b) the whole of the "Pipeline" subheading is "Oil - 136 km." The article was almost number one this month but the topic is actually quite relevant.

The Chronicles of Six

Tyler Cowen continues his epic reading of six word stories. Here are some of my favorites from Wired:

Computer, did we bring batteries? Computer?
- Eileen Gunnr

Gown removed carelessly. Head, less so.
- Joss Whedon

Kirby had never eaten toes befoe.
- Kevin Smith

We went solar; sun went nova.
- Ken MacLeod

TIME MACHINE REACHES FUTURE!!! … nobody there …
- Harry Harrison

Tick tock tick tock tick tick.
- Neal Stephenson

Heaven falls. Details at eleven.
- Robert Jordan

God to Earth: “Cry more, noobs!”
- Marc Laidlaw

Always a fun time.

Only Seven Days Until People Stop Trying to Shame Me Into Voting

I had a conversation with an old friend from high school the other day and naturally, with the elections looming, our conversation turned to politics. This is about when I told him I don't vote.

Why don't I vote? There are three common reasons why people would engage in this democratic ritual: (1) they enjoy partaking in the democratic process; (2) they like expressing their support for a candidate through voting (no doubt because the candidate tells them that is how they like having support be expressed); and (3) they think their vote will make the difference in the election (thus gaining benefits from that outcome).

I gain nothing from (1) or (2) and I know (3) is about as likely as a jellyfish making me dinner. My friend had trouble relating to my position and told me a story that for this election he convinced people in his office to vote his way and brought in absentee ballots for them to fill out.

I have no problem with people voting. There are clear reasons to do so (like to shut up people who want you to vote). I only have a problem when politicians lie, saying people that their vote matters. That's different from being counted--the vast majority of votes are counted. But most don't matter because most don't decide the election. Telling people their vote will matter is like telling people Creationism made life on this planet. It's possible but not really.

In the end I'm tired of this discussion. It's not really a puzzle why some people vote, nor why others don't. It's just a heated debate between those passionate individuals who can't stand that the other side exists. I don't care which you do next Tuesday, just leave me out of it.

Living In an Immaterial World

A myriad of obligations deny me from watching Real Time with Bill Maher when it airs on Friday night. Additional distractions have prevented me from commenting on last Friday's episode and I feel I should post before the next installment.

The episode featured Congressman Barney Frank, Jason Alexander, Stephen Moore. Bill Maher and two others spent part of the show lamenting that the average wage was going down while the DOW grew. I'll give one guess which two were on Maher's side (and Moore got a masters in economics from Mason). Moore brought up good points but it mostly consisted of pointing out Maher was rich, too. What he should've pointed out is that the data didn't matter in the first place.

Wage data can be immaterial in two basic ways and which way depends on how much time the analysis covers: did wages drop base on last year's wages or last decade's? If it's last year's wages, then it is just a tick in the market. The lastest adjustment does not allow for sweeping conclusions about the nature of the economy. (See earlier post here.) Imagine a great but developing relationship and then your date says something stupid. Do you end it based on that? Of course not; you are still getting to know one another and mistakes will be made. The economy is similarly in a constant state of adaptation. There are rigidities and there are errors. The lastest tick means little.

If the data is last decade's it avoids the minor change problem but it eases to a different, more subtle problem. As people enter the bottom of the work force (immigrants, new adults) and people leave from the top (retiries), there's downward pressure on average wages even if everyone's getting richer. The better measure is income mobility over long spans of time. (See Steve Horwitz's myths page; the third item has an excellent discussion of the topic.)

So even if we set aside other problems with real wage data (inflation's over estimated, there's no inclusion of product quality, there's no inclusion of job quality), the data doesn't matter.

Wikipedia: How to Teach It and What It Can Teach You

I love referencing Wikipedia. Whenever I have a random trivia question, it's the first place I check. It may not be accurate all the time, but for what I use it for, it's accurate enough. And I love editing Wikipedia. Economic topics are far too rare (though becoming more common) and it's fun adding new articles and contributing (or cleaning up) old ones.

For the October 27, 2006 issue, the Chronicle of Higher Education noted many scholars in academia don't feel this way. Wikipedia isn't something to be edited or referenced, it's something students should be warned about. There is logic to this reasoning: an expert has as much authority as a schoolboy, a stark contrast from a classroom or journal. At the same time, that can be good because experts aren't always the clearest, most concise people. I've had many knowledgable professors that couldn't pass on that information to the class.

Scholars argue that Wikipedia lacks control but I see that as a good thing. At worst, it is an option to be ignored. Professors who are frightened of undoing damage caused by fallacies of wikiality should remember that problem has always existed. Most economic professors start each semester not only assuming their students know nothing but that they are also certain of blantantly false things.

But at best, Wikipedia is a tool for professors to teach their students and the public at large. My advice to academics (and the world at large) is to...

-Remember the best way to understand something is to try to explain it to others. Encourage students to edit Wikipedia and they will better understand the material.

-Edit Wikipedia yourself; you'll become that much better at lecturing and your students will thank you for it (and it'll make it easier to see how they edit).

-Talk to others. You'll also have to encounter people that disagree with you and will be forced to talk to them on their level. Another good teaching skill (I think economists could benefit a lot from this; we bemoan the fact that the public doesn't listen to us though at the same time we have a hard time talking to the public.)

-Recall how academic papers work: cite sources and peer review. These things are not requirements on Wikipedia but they are strongly encouraged; pointing out wrongs in the talk page and adding sources will improve the quality of articles that is unlikely to be undone.

-Understand that in practice, it is not as chaotic as you might think. The Wiki cultural is certainly more ungoverned compared to ivied halls but even in this free-for-all, academic credentials hold more authority (call it social capital) than no credentials. For the most part, you will be welcomed and you will be respected, so long as you do the same.

The Efficiency of Innocence

When economists talk about efficiency we are usually talking about the costs and benefits for all society. Benefits minus costs are the "social totals" and the most efficient items are those that maximize these totals. Doing this type of analysis can be difficult because one must include all costs and benefits for everyone. It's usually impossible to get an exact figure so an estimation works pretty well. Still, it can be a daunting task.

I've decided that the "innocent until proven guilty" reasoning in US legal courts is efficient so, briefly, I'm going to demonstrate my logic. (If you don't want to go through all the assumptions and logic, skip to the conclusion at the end of the post.) Assume a crime, such as rape or murder, and a trial of an accused, the police's chief suspect. Assume that the police stop investigating the crime when the court finds a guilty party and the police keep investigating otherwise--not completely true but true enough for our analysis. Assume all third parties are treated equal--one family's feelings aren't inherently more valuable than anothers'--and the pain of seeing a family member go to jail is roughly equal to the pain of having a crime against a family member go unsolved. Assume the court is wrong by an even-handed chance (see below).

We have four scenarios to consider based on if the accused is actually innocent or guilty and what the courts find him as:
-declared Innocent if actually Innocent (IiI)
-declared Innocent if actually Guilty (IiG)
-declared Guilty if actually Guilty (GiG)
-declared Guilty if actually Innocent (GiI)

The first two represent the current legal system which favors claiming someone is innocent. The second pair represent an alternative system: "guilty until proven innocent" where guilty is the more likely verdict. Because these will chiefly determine what kind of error is most popular in a given legal system, this divide is how we will make our analysis.

IiI and GiG cancel each other out. In both cases the system did exactly what was most efficient to do. Social totals were maximized. It's the errors that are interesting.

Most of IiG and GiI cancel. The victim's family will suffer and the accused family will celebrate for IiG and the reverse is true for GiI. Similarly, effort needed for the case is on the state for IiG because they have the burden of proof; that effort transfers to the defense in GiI so once again we see a canceling out. The moral pain of sending a good man to prison is roughly balanced by an equal level of pain of letting a killer free. In both cases, the crime can be repeated as the bad guy still roams.

This is where we see the difference. In IiG, the crime is unsolved. Not only are people more alert because that crime could be repeated but police are still investigating the crime. The liklihood of correcting the error is much higher than in GiI where the crime could occur again but people's guards are down and the police aren't on alert. (In fact, in GiI it's more likely the bad guy will get away because everyone will be caught off guard.) Because everything else is a wash, this edge--which is by no means minor--demonstrates "innocent until proven guilty" better serves society.

For those that didn't read the whole post it is better for the law to assume people are innocent because the bad guy getting away is easier to correct than the good guy going to jail. In the former, society knows there's a problem still out there and thus makes it cheaper to correct. In the latter, the problem can occur with greater liklihood (or much longer) without it being stopped. We can see this in immigration policy: society never misses the good people rejected from the US so that drop in social totals would persist for a long time but accepting the bad guys allows us to kick them out when they prove themselves as the bad guys. Alex Tabarrok and Dan Klein make a similar arguement about the FDA: if a bad drug gets passed, society knows it and can remove it before too many people die. If a good drug is rejected, people can be dying for years and no steps taken to correct the problem.

This is ultimately the old distinction between the seen and the unseen. People focus on what they can witness first hand. They tend to ignore the unseen costs because the never were even aware of them. Sending the innocent to jail, rejecting a promising citizen and never benefiting from a great drug are treated as non-losses to society and so they are rarely corrected for even if they are just as damaging as their obvious counterpart.

The Most American of Us

The US was founded and built on the capacity of the individual and the dangers of centralized power. These basic sentiments run counter to the politicians' popular view of the illegal immigrant, claiming they leach off the American people and drag down the economy.

But a Washington Post article notes that the average Mexican immigrant is more like an entrepreneur, working hard, risking much and doing what it takes to get by (even leaving behind family members when they immigrate). They really do pull themselves up by their bootstraps. These tempest-tost stretch their budgets in virtually every dimension allowing them to purchase cars and homes, a testament not only to the wealth created in a free society but their determination to take full opportunity of its advantages.

When I see the average immigrant working as hard as our heroic pioneers and entrepreneurs while native-borns repeat claims of victimhood and accusations of theft, it is clear that this generation's foreign population are our next great citizens. Risking everything so they have a chance to risk everything once more, they are clearly more American than virtually every soul fortunate to be born here.

Dating for Nerds

Economics is an amazing discipline because it has widespread applications in so many other fields (such as politics, science, history, religion, psychology and sociology). One of my favorites is dating. I have done some field research and while I'm no expert at dating I've learned some things over the years (and in one or two of Bryan Caplan's lectures) that I think could prove useful (or at least interesting) to L3 readers.

At its core, dating is a way to correct for asymmetrical information (you know yourself, but not her and vice versa). Many normal dating activities that some people find worthless or immaterial (holding the door open, paying for dinner, buying flowers) are actually vital. They are what economists call signaling.

Signaling is an activity where its value lies in demonstrating a fact even if the activity itself is immaterial. What you learn in an advanced mathematics course will probably never come up again but doing well in it demonstrates you are an intelligent person. Instead of merely declaring you are smart, you can show it and that is much more convincing. (An actor that doesn't not cry but merely says he is sad is a particularly vivid example.) The lesson is that small stuff matters.

Signaling is a complicated thing because you can do it too much and thus send other, unintended, signals. If you are applying for a job and you agree with those around you all the time, you might appear too eager to please even if you are easy to work with. In dating, asking about a woman's job or family is a signal that he's interested in her as a person. Asking a string of unconnected questions about her life shows he's not really interested in her, he just wants her to think that.

There is generally a clear interaction between firm and candidate where one tries to impress the other and then the roles switch and then they switch again. In all cases, it is clear who should be doing most, if not all, of the signaling. Thus the danger of over-signaling is smaller than it would be. But with dating, transitions between who is "dominate" is continuous and rarely clear. This is particularly common in the initial dates an so are the occurrences of over-signaling. Avoiding questions she asks about him so he can ask her more questions makes him appear overeager; he didn't see that at that point she was now sending signals to him that she was interested. He didn't open up, which can also send signals that are not good.

Signaling is a very hard concept to master (I'm still learning myself) unless you are a person that has an intuitive grasp of it. Though signaling is not all of dating (getting to know people directly without signaling is important, too; that's what all that talking is about) it's still more significant than many people think. While it's important to relax, it's equally important to be aware that you could be sending bad signals. Finding that balance between alertness and being yourself is the essential learning process.

Word, Word, Word

I subscribe to dictionary.com's word of the day as a fun way to increase my vocabulary. Sadly my memory is not that great so progress is slow but yesterday I was sent a word I'm sure to remember:

concinnity (kuhn-SIN-uh-tee): Internal harmony or fitness in the adaptation of parts to a whole or to each other

What a wonderful way to describe so much of economic activity! Firms adapting to people, organizations dove-tailing with other organizations. The extended order created endogenously. People talk about how economics is all about competition but they fail to realize it is at least as much as about harmony.

Author's note: The title is based on the quote by Shakespeare: "Words, words, words." I never understood the appeal though my high school English teacher always loved it. I guess that's what happens when your last name is Shakespeare: everything you write becomes art.

Raising Awareness About Raising Awareness

Logging on to Wikipedia, I discovered that today is National Coming Out Day. Like every other National Group Day, NCOD aims to raise awareness of the LGBT community. It's gotten to the point where I'm losing track of what "raising awareness" means and I doubt groups that use it to justify their events have a much better idea.

So I started a Wikipedia article: raising awareness. In the article I suggest some groups become more interested in raising awareness than actually doing something about it simply because the former is easy to do. In undergrad every student organization seemed to be built around this concept and did nothing more. This even extends to our local chapter of the LGBT Alliance which was located on the most liberal campuses in the country. (Those from my old stomping grounds--Beloit College--might point out there were some activities the Alliance did that were not "raising awareness." This might be true, but most of what they did involved parties and papering the campus with fliers about yet another LGBT issue.)

I think the drive to spend so much time raising awareness comes from our democratic system. If we merely "raise awareness," then our representative will change things. We don't have to take action; the how is someone else's problem. Now it's true that getting people to pay attention to something is a critical first step (a lot of economics is in this stage as most people don't know certain laws are tremendous problems). But when we pass the point, the next step is do something about it, even if that doing something is writing to a congressman or proposing a plan of action. The obsession of only pointing out all that is wrong is a tremdenous problem and people need to be made aware of it.

Yes Logo

It's been a while since I posted and recent discussions and thoughts I've had has led me to the desire to defend on of my favorite captialist institutions: advertising.

Advertising's an amazing invention. It creates an incentive for people to provide a quality service without charging people who use it. It's free. Okay, it's not completely free as I have to watch it (though even here there's a strong pressure to make ads more entertaining) but as a poor grad student, I'd rather have an opportunity to take a bathroom break than open my wallet. Even something as simple as the brand itself offers massive bonuses to the consumer.

A random walk on Wikipedia today reminded me that there exists people like Naomi Klein who think branding creates a harmful consumer culture. Her book (No Logo) mostly focuses on the plight of the worker in developing countries and the evils of when firms concentrate into corporations. But let's not forget that because large companies exist, their brand becomes paramount and they gladly sacrifice short-run profit for long-run gain.

Our consumer culture is awash with examples. Google is my favorite (I use several of their products every day--including Blogger--and I have never paid the company one penny) but we see others. NBC now offers some of its primetime shows for free online. (Yes, there's advertising for these episodes but also note there is much less.) Phillip Morris advertises that they give advice on how to quit smoking on their website. Microsoft gives away some of its software. Nike sponsors athletic teams. When a company becomes very large, its brand becomes much more valuable and the firm will take more care to defend it.

This is not a perfect process and some might complain that the corporations' motivations are merely to help itself. They would be right but so what? Does it matter if they are more concerned about make profit than doing good when both are accomplished at the same time? I doubt the hungry care why Kraft Foods donates meals.

Contest of Wills

Protests serve two purposes: to generate change and to make the protestors feel good because they think they are generating change. Often there is the latter without the former.

While heading to my car after class last night, I passed one of the campus quads which was crowded with protestors. There was no event in particular they were protesting, except perhaps the protest of another group. (It's hard to tell who was protesting whom.) On one side was a crowd of about thirty student insisting homosexual marriage should be legal (Virginians will vote on this issue in November). On the other side was an equally large crowd of people arguing marriage should only be between a man and a woman. There was one police officer walking between them, though actively restraining no one.

Each side seemed intent on making sure the other side could see their posters, as if pictures and slogans would change the mind of anyone who is already participating in a protest. They seemed far more interested in their opponents than the trickle of passing students who had no clear allegiance. Neither side talked to each other.

There's politics and there's the real world. This is a clear demonstration that the two rarely have anything to do with one another.

Unintended Consequences

My father recently worked in Afghanistan doing USAID. In Pakistan they drive on the left hand side of the road, like England, but in Afghanistan they drive on the right hand side. The Pakistani cars have the steering wheel on the right side of the car, which the Afghanis import. Due to driving on different sides of the road my dad said that there are accidents and deaths caused by people not being able to see well while driving a car that wasn’t made to be driven on the right side of the road.

October's Most Random Wikipedia Page Is...

Alternate spellings of "the". I didn't want to have another list for October but come on, "alternate spellings of the word 'the'"? The fact that the first item on the list is "teh" as a common typo is really why this page gets the award this month. The article gives details as to why its a common typo and which programs autocorrect the mistake. It even offers instances where this typo--because it's often a mistake--is actually a "correct" spelling.

Every Move You Make

I've been an economist (or student of economics, depending on how you define "economist") for about five years now and one constant are people asking me about the economy based on the latest changes. Don't get me wrong, I like questions. But sometimes these questions are based on the latest news in some minor adjustment of a commonly reported number. The DOW dropped twenty points. Oil prices slipped. The Fed is rasing interest rates. They don't really matter.

The same thing happens on news shows, especially financial ones. Part of this is neccessary because investors want to know about every tick (which you can't know about but they still want it) and part of this is wanting to fill up airtime. But the conversation is always the same and almost daily: is the economy a bear [doing poorly] or a bull [doing well]?. The latest tick of the market is always at the front of the debate as critical evidence.

Let me tell you a little secret. You cannot determine the quality of the economy by merely looking at the latest adjustment. Rarely does a one time gain or loss matter (it only makes a difference if it is very, very large). The market has error, it has trends, it has noise and it has risk. Each change is an attempt to determine what the price should be; each indicator is subject to the messiness of that discovery process.

Let me close with an example. Copper is probably my favorite economic indicator. When the price rises, it signals people want more copper and because copper is used for many things but people rarely store it these people probably want it for production purposes. But copper just jumped because, in part, of the possibility of a strike. Does that mean the economy is doing even better because the price rose? Not at all. Does that mean the economy will enter a recession because of the strike? Again, no. What matters the trend and what's going on beneath the numbers, not every single adjustment in the value. Prices are like people: you should learn why they are as they are if you want to understand what's going on. Stalking won't help.

Straddling the Siren Song

Last night during my Austrian economics class I argued that some of the mathematics in neoclassical economics is useful for a few things, a sentiment some (all perhaps?) of my classmates did not share. Jason Briggeman challenged me to note one insight the Cobb-Douglas production function (one example I offered that could be useful to economics) but the conversation went in another direction and I was too tired to backtrack to his inquiry so I could address it. After class I promised to answer his question in a blog post so here it is.

The C-D production function is a pretty uninteresting claim: GDP depends on how much labor and how much capital a country has. However, if we combine it with the Solow growth model we can use it to prove the existence of convergence (poor countries grow faster than rich countries). In the real world, absolute convergence (all countries converge) is a myth however conditional convergence (countries with similar institutions converge) is quite real.

We do not need C-D or Solow to learn this--we can simply look at the data--but it does help explain why this happens in a clean but still useful way. Similarly, we could use pure math to explain or demonstrate conditional convergence but that would be of little use; words are much more appropriate for that. In my defense of math in economics, I ask that Austrians recognize something they've always asserted: people are heterogenous. One person may instantly grasp the intitution of convergence while another may be assisted in the calculus. To dismiss all of mathematics in economics is to deny a potential tool economists can use to demonstrate how the world works. To embrace it completely is also a mistake for it nullifies the most important questions. Mathematics misses the point in some ways, but is appropriate in others.

Math in economics is a siren song. It is beautiful and pure, but also dangerous if we focus too much on it. Yet if we completely avoid the music we will deny ourselves valuable knowledge and drastically limit where we can go (Odysseus had to travel past the sirens' island in order to continue his journey). Economists must learn to straddle this siren song: to hear it but not to succumb to it. If we can force ourselves to stay grounded, like the hero The Odyssey who tied himself to the mast of his ship, we won't miss what can be learned from mathematics nor will we drown in a barren attempt to worship this dirge.

Processor Neutrality

When I hear phrases like "net neutrality," I think of processors. Few people build their computer; most people buy a ready-made one. Any expert will tell you it's better to build your own because it costs less money, you have more customization for what you want the computer to do and you can combine the best parts in a way Dell or Gateway won't. Still, building a computer costs time and requires technical expertise so most people don't do it.

Net neutrality, or legally requiring Internet service providers to treat all data on their networks the same, is much like making a law demanding all computer manufacturers to build the same computer. Dell computers are good for some things but not others; same with Gateways and E-Machines. Similarly, using one provider may make life easy for some websites but not others while another provider will be good for a different mix. Different goods for different people. One could pick and choose all the best parts, like some do with computers, but such a feat is very costly both in time and money.

Yet if government requires net neutrality, they've removed a strong reason to improve their product. There's less profit in the Internet, so there's less incentive to better it. If firms had to use the same item for just one part of their product people would see why the whole good would deterioate. Why few understand this basic idea for net neutrality is beyond me.

AEI has a good article on net neutrality here.

The Wisdom of Tullock

While on the History of Economic Thought website, I read about my current professor Gordon Tullock. His page on the site linked to an article he wrote, Smith v. Pareto. The abstract, in its entirety, reads:

This paper argues that we do not and cannot actually use Paretian criteria, therefore, I recommend that we stop pretending we do.

Watch Your Language

Leaving for class this morning, I heard Nobel prize winner Joseph Stiglitz on NPR discussing his book, Globalization and Its Discontents. He surprised me because he remarked that globalization could, on average, be bad. Sure, it could be bad for some people (it often is, in fact) but on the aggregate?

As it turns out, Stiglitz was treating legal globalization and real globalization as the same thing. The latter relates to the process of connecting institutions (economics, social, political, etc) across the world over. The former describes how much of that connecting people are allowed to do.

I only realized he was doing this when he explained that the free market could solve most or all of the problems "globalization" creates. For example, legal barriers embodied in "free trade" agreements allow for tariffs on certain crops, harming people in poor countries who want to export their food to the US and other protected countries. Stiglitz correctly noted that a free trade agreement could only be a few pages long; the only reason why the current ones are so massive is because they are stuffed with exceptions and little rules.

By mixing up the legal and the real definitions of globalization, I fear that people will cite this great economist as grounds for diminishing market activity, not expanding it. It reminds me of an incident when a law student claimed firms wouldn't engage in free trade because they wouldn't follow the restrictive rules of a treaty. Just because a law might say the sky is purple, does not make it so.

The Law Is a Tramp

When I see an immoral piece of legislation, one that tells people how to live their lives, and then I hear people get around it with technicality, I smile. Tonight on 60 Minutes there was a segment on online gambling, which is illegal in the US. But companies find ways around that by being located overseas and then advertising the same domain name but with a .net web address instead of a .com. This .net address labels itself as an education site (where people learn to gamble), getting around the law while directing people to the .com address (where people actually gamble). Genius.

For some reason, the reporter had a problem with this and I saw two different answers. One was cracking down on the law, which is clearly worse. The other is to making the gambling illegal, not because that would be the moral thing to do but because then the government could regulate it. Apparently, it needs widespread control.

How did 60 Minutes come to this conclusion? They gave a 16-year-old a credit card and then lamented about how easy it was for him to start gambling. Of course it was easy; that's one of the great things about Internet commerce. It's built to be easy. But the viewers are supposed to conclude that it's the company's job to police someone else's child and someone else's credit card.

In a world where anyone can grab that bit of plastic and use it online with the ease of using a turning on the television, it is clearly the cardholder's responsibility to keep track of their card. If you have a kid in your house, you childproof the stairs, block some TV channels and keep your credit card in your pocket. Just because, on average, you're giving money to casinos does not mean they are your babysitters.

The Rant, the Recount and the Petty Ridicule

Last night, Mike sent me this link containing video of Keith Olbermann's 9/11 commentary. Granted, I thought it was rather long and some parts were a little strange but he makes a critical point: five years later Ground Zero is still empty. No memorial, no construction.

To me this speaks of government bureaucracy, infighting and politics. If Donald Trump was in charge of rebuilding the WTC, we'd be halfway there by now. (Trump World Tower, a 72-story residential building, took only two years to complete.) Sadly Olbermann's focused on the blameful Bush rather than take a stab at government in general but we can only hope for so much. A favorite passage:

Instead they bicker and buck pass. They thwart private efforts and jostle to claim credit for initiatives that go nowhere. They spend the money on irrelevant wars and elaborate self-congratulations, and buying off columnists to write how good a job they're doing instead of doing any job at all.

Shortly after the video hit the internet, NewsBusters, a self-proclaimed "liberal media" watchdog, posted this article which recounts Olbermann's commentary but never seriously refutes it.

Another NewsBusters article accuses Olbermann of using Ground Zero partisanly while complaining others do just that. Perhaps it was mere politics (though in this case the point was to show everyone that nothing has been done rather than use it as a prop for political grandstanding). Also note that when one side of the aisle legitimately accuses the other of doing something wrong, the other side paradoxically attempts to save themselves by throwing the accusation back. They don't refute it--indeed sometimes they agree they did wrong--they just say others do it too as if that makes it alright. But somehow I doubt "well my neighbor tried to kill someone, too" would hold up in front of a judge. It's sad it works so well in the court of public opinion.

How the West Was Bureaucratized

You'd think after a couple hundred years of the American government pushing around Native Americans, telling them how and where to live their lives, it would finally leave them alone. Not so. A couple of days ago, the US Department of the Interior shot down an agreement between Private Fuel Storage (PFS) and the Skull Valley Goshutes reservation.

The agreement was pretty simple: let PFS dump spend fuel rods (nuclear waste) in an 820-acre corner of your 18,540-acre reservation and this coalition of energy companies will pay the reservation for the right to do so. For the record, there's 125 members of this reservation of which only 30 actually lives there. Sounds like a pretty sweet deal.

But in its infinite wisdom, the Interior stepped in and vetoed the deal, citing health risks and transportation problems. It's pretty clear the health concerns are bogus; the site occupies only 0.04% of the entire reservation. And the Goshutes aren't morons, either (see this link). So let's consider the transportation argument. Salt Lake City currently pays to dump some trash at the reservation, requiring 130 trucks a day along the two-lane State Route 196 (it appears the Department of Transporation is unwilling to expand the road). Because a recently declared state park blocks the path of a railway, the plan would require two additional slow moving trucks a week along that busy stretch of land.

This is a cruel joke played on the Goshutes: a government agency denies them their freedom because of the actions (or inaction) of other government agencies. In the wake of the decision, U.S. Rep. Jim Matheson declared "Utahns stand united against the East Coast dumping its nuclear garbage on the West." But only at the cost of accepting the East's most dangerous waste: bureaucracy.

Why oh why can’t we have better bloggers (Brad DeLong Edition)

Brad DeLong, an economist at Berkeley, frequently mocks newspapers for their inept reporting. Recently he posted a map that conformed to his world view on lower wages. The problem is, as Tyler Cowen said, “The map is wrong.” You would think that someone who places such a great emphasis on accurate reporting would admit that he linked to a faulty article, but apparently he doesn’t have time to correct a leftist error

Depressed by Innovation

Reading Terence Kealey's The Economic Laws of Scientific Research, I stumbled onto an interesting passage concerning the popular (Keynesian) view on what caused the Great Depression.

But Roosevelt and the Democrats believed that improvements in productivity had caused the depression by throwing people out of work....If Hoover supported science, they argued, then science had to be a bad thing....Much of the nation shared that believe and, if there was an understanding that science might improve living standards in the long run, there was also a widespread believe that the time had come for a moratorium on research. [Emphasis added]

Apparently Science magazine in 1935 (vol. 81, p. 46) published some popular thoughts concerning technology. Kealey presents this enlightening example: "the physicist and the chemist seem to be travelling so fast as not to heed or care where or how or why they are going. Nor do they heed or care what misapplications are made of their discoveries."

Science is a bad thing? Technology moving too fast? A moratorium? Let's look back to the mid and late 30s and see some of the things these elitist were working on. 1937 saw the first blood bank. 1936 gave us the first tv broadcast with modern definition as well as radar's first working model. Enrico Fermi--and others--first studied nuclear fission leading, in part, to its discovery in 1939.

Don't let anyone tell you science is moving too fast or it should be slowed or scientists should be held back. It's easy to look to the past and defend what we might have missed. It's much harder to protect an unknown today so it may mature into tomorrow's cherished revolution.

Live and Let Thrive

As I drove home from campus, I heard some NPR commentary concerning America's birthrate, which apparently is somewhere on the range of three children per couple. I have no idea if this is true or even if was for America (though the woman spoke as if it was) but that is immaterial for the purposes of this post.

The commentator offered explanations: people want to show their peers they can afford more or they want to prove how fertile they are. These malevolent justifications are insufficient. These desires, to one degree or another, always exist. Why would having children become such a powerful way to express them? Are they bored of buying cars and talking about sex? I have a hard time believing that.

A better reason is that because people are richer, they can afford more children. Parents often invest more of their money in fewer kids. More clothes. More education. More extracircular activities. But a person can only do so many things. Combined with a greater abundance of child care having another kid sounds pretty cheap, especially as the economy grows.

The Lost Wisdom

Last night I watched a sci-fi classic Jurassic Park with some friends. If you've never seen it, stop reading this and go watch it. Overwise, I ask you to remember the story, and thus the message of the movie.

The company InGen develops a way to clone dinosaurs which they do with great enthusiasim. Ian Malcolm (Jeff Goldbloom) plays a mathmatician specializing in chaotic systems (better known as dynamic systems). He argues InGene is getting into nasty territory. Nature cannot be controlled and those that lack humility for natural forces will regret it. Malcolm's prophecies come true, not because the dinosaurs rebel against man but because the computer programmer--Dennis Nedry (Wayne Knight)--shuts down the park so he can steal important research to sell to InGen's competition. Havoc ensues.

The movie implies scientists should have a moral code, asking not just if something is possible but if they should even try to make it happen. (See earlier post on the subject here.) Dinosaurs, being seperated by humanity for 65 million years, should not be cloned because "nature" never intended the two species to intermingle. Over and over, we here the characters say this is "too much" and "too far" and the chaos that follows seems to prove their concerns.

But wasn't really cloning dinosaurs that was dangerous. It was cloning agressive dinosaurs while, at the same time, giving one person the power to shut down all security measures if he wished. If there were only herbivores on the island, it wouldn't be much of a deal that Nedry shut down the park. Hammond built so much in such a way that collapse was inevitable and so everyone else then makes the mistaken conclusion that we shouldn't build at all.

September's Most Random Wikipedia Page Is....

Brfxxccxxmnpcccclllmmnprxvclmnckssqlbb11116. No, that's not me falling asleep on the keyboard. It's the name a Swedish couple gave their child in defiance of a fine levied because they didn't legally name their child by his fifth birthday. It's not because they were lazy parents, just acting libertarians, defying a law that restricted what first names could be.

It's a good thing The Artist Formerly Known As Prince doesn't live in Sweden.

Justice For All

Right now I'm watching Law and Order, one of the great dramatic shows on television. I enjoy taking the journey of the case with the characters. The twists and turns. But then there's that turnabout where the guy everyone knows is guilty gains some kind of advantage usually because the main characters, the protagonists, extended themselves a little bit beyond the law. Perhaps if the cops or lawyers had more discretionary power, our world will be better.

Enter last night's premiere of Justice. Instead of following the state, the viewer sees the action from the defense's point of view. Special emphasis is placed on the advantages the DA's side has in prosecution. The research before the arrest. The first crack at the crime scene, evidence and/or body(ies). The complete dependence the defense has on the prosecution to provide this information. Instead of the defense lawyer concocting a desperate insanity or self-defense plea, we see government lawyers building a story to prosecute an innocent man.

The messages are clear. Law and order are for statists. Justice is for libertarians.

Biting The Hand You Shop At

Politics is the art of the impossible. If people like apples but hate apple trees then politicians claim we can have tree-less apples today (or at least after election day). If people like low prices but not Wal-Mart, then politicians tell us it's an easy matter to fix. There's "something wrong" with the free market and politicians have the magic "make it work" button.

AEI recently published a short essay on Delware Democrat Joe Biden who blasted Wal-Mart for supposeably not caring about the middle class. This is a strange claim for a company who relies on the middle class for a good hunk of its business. It's an even stranger claim coming from a party who's constituents shop at Wal-Mart and who's standards of living rise because of Wal-Mart.

Biden, and Democrats like him, are probably thinking people believe in magic. "It's a simple matter to get everything we want. We'll just declare it." But laws aren't spells and even though Wal-Mart (like any firm) could be nicer, no amount of legalese will instantly make it so. Hopefully, people will recognize hurting Wal-Mart hurts them and we can move past all this. Hopefully, people don't believe in magic.

A Typical New Experiment

On the first anniversary of Katrina, Kudlow and Company dedicated a segment to the role of government in times of crisis. Jared Bernstein of the Economic Policy Institute argued the administration missed a golden opportunity for a "bold new experiment." I'm not sure what he meant by this. Presumably this means more free market activity and less government. Drastically less government, allowing New Orleans to just be rebuilt but reimagined.

Bernstein, however, works for a leftist think tank and has agrued for more spending on "rebuilidng the Gulf Coast" and fewer tax cuts so I doubt he has much faith in the market.

People always tell me the market is great but it can't handle emergencies or disasters. I don't get this. In times of crisis information is incomplete at best. Normal lines of communication fly apart. Scarcity hits new heights. Do we really believe politics, which ignores the pricing mechansim (arguably the best way to convey information) and relies on the good will of bureaucrats to distribute these scarce resources, to be better than the private sector?

Look around you. Virtually every great service or product in our society was forged by free minds in free markets. Virtually every shameful or horrid thing an institution has done was done by politicians of one breed or another. In times of crisis, it simply make more sense to involve the institution that best handles information and scarity. It would certainly be a new experiment to allow freedom in times like those, but the record of markets is so good, so proven, I would hardly call it "bold."

Proportional Remonstration

When I was in college, I took a course in alternative voting systems. Americans may be surprised by this but there are actually several ways to choose candidates, and the method can fundamentally change the result. For example, proporational representation (PR) is a voting system where, for a given district, voters elect multiple candidates. This is in stark contrast with the majoritarian system used in the US and UK: one candidate per district. The latter system tends to encourage a two-party political landscape while the former encourages multiple parties.

A recent publication in AEI discusses some of the reasons behind American success and it cites it's two-party system as one of those reasons. Two parties keep taxes low while many parties encourage higher taxes.

Under a PR system, several parties will compete, while in majoritarian systems, only two parties usually contest elections. If there are several parties, middle-class voters will support programs that tax the rich and benefit them, knowing that they can change their voting habits if a government wishes to tax them more. But if there are only two major parties, middle-class voters will worry that voting for leftist parties will mean more taxes for them, and so they will be inclined to support right-wing parties.

I don't see how this logic holds. In multi-party countries, these parties create coalitions and effectively transform into a handful of contending parties. A majority still have to approve the new government. In practice, three changes in the system come to mind: the minority view is more likely to be considered, platforms are more flexible because parties can mix and match their allies and, my favorite, politicians have to spend a great deal of time forming coalitions, time they can't spend governing.

The author, James Q. Wilson, is confusing voting for parties with voting for policies. If a vote to raise taxes for the rich were held to the people, they would probably cast in favor for it. But if a party wants to do that, there is still the danger that they could raise taxes on everyone. I'll buy that competition tends to create things people want but politicians tend be expections. They are package deals of package deals. Almost anything goes and everyone knows it.

I Want a New Drug

When I start playing a particularly good computer game, I can spend hours upon hours playing with little notice of the time passed (Civilization and World of Warcraft come to mind). These games are few and far between. Only the really good ones are ones I can get lost in but it happens, it my commitment can be debilitating to my normal affairs.

Enter a new study from the UK claiming people can suffer medical addictions to their BlackBerry. Like certain video games, this amazing piece of technology can be all-consuming to the user, especially when employers ask employees use them all the time. There are obvious flaws in suggesting that using technology is addictive in the same way as smoking. There are more subtle flaws in suggesting that employees should be held accountable if it is as bad. But the least noticable consequence legal repercussions could have is discouraging new technology.

People want to pull out their BlackBerries all the time because the devices are so very useful. In fact, people use work as an excuse to use their hand held devices. Claiming the company gets them "hooked" doesn't do the job either. Firms also require everyone to use word processing but we don't see Microsoft Word addictions. Information and communication technology (ICT) addiction only happens when people want to use the device for whatever reason. This requires good devices. The moment we start punishing companies for making their employees use great technology is the moment we just gave someone a reason to invent sub-par devices.

A Scholarly Reminder

The 1421 hypothesis is a fringe historical theory developed by Gavin Menzies, claiming China discovered the Americas seventy years before Europe. Emperor Zhu Di sent a fleet of ships (led by Zheng He) which discovered the Northeast Passage, Antarctica and everything in between. In the 1420s, a lightning strike burned down the newly consturcted Forbidden City which the administrators took as an omen which denounced the voyages. A year later, all new explorations were banned and evidence of them were ordered destroyed.

Menzies' theory is about as popular among historians as Creationism is around biologists. There is no real need to go into the details, but across the board they refer to it as "usless" and "without substance." So the question becomes "why." Menzies' made too many errors for his theory to be honest mistake. He might be trying to make a name for himself or creating more interest in his area of expertise. But I think he's also motivated by a hunger to downplay Europe's role in history.

In The Wealth and Poverty of Nations, David Landes argues the key reason why Europe developed faster than the rest of the world is because its people are free. Sure, other countries might stumble upon a new development but governments never allow people to expand on them. Terence Kealey echoes the same point in The Economic Laws of Scientific Research. While China had gunpowder centuries before Europe, it was Europe's free societies that developed the technology. Both works could easily be called "Eurocentric" (Landes is proud that his is) and be annoying to those who specialize in the history of the rest of the world.

There is good reason for Eurocentricism when discussing economic growth. Europe developed and continued to develop technology and trade as other parts of the world grew into stagnation. Any historical discussion of the underlying causes of economic growth must include the only success story. But this does not jive with the instinct for inclusion and fairness so people choose intellectual mediocrity. New ideas are great to have, but to quote Richard Dawkins, "You don't want to be so open-minded your brain falls out."

Prize Watch

Given my research interests of prizes for technological invention, I've decided to start a list of such prizes in order to keep better track of them. This is an ongoing list and if you discover any technology prizes, please let me know via comments or e-mail.

-The Grand Challenge, a DARPA prize. Robotic vehicles traversing an urban or desert course.
-The Lander Challenges, X-Prize and NASA prizes. Landing on and breaking the Moon's gravity.
-The Auto X PRIZE, an X-Prize contest. Creating a new order of magnitude of fuel efficiency.
-The Genome X PRIZE, an X-Prize challenge. Speeding up the ability to sequence the human genome.
-Centennial Challenges, NASA, et al. prizes. A plethora of space-related prizes intended to ease humanity's jounery into the final frontier.
-The M Prize, a Methuselah Foundation contest. Extending human life starting with mice.
-The NetFlix Prize, improving the accuracy of predictions of who loves which movies.

Notable for the list is the X Prize Cup, an annual exposition where some of these competitions are held.

The Naming Game

You can tell the news has been slow lately when International Astronomical Union's debates reach international headlines. For those that don't know (which I assume is all of you), the IAU is an international collection astronomers who's primary function seems to be naming things. Right now they're debating if they should redefine what a planet is, an act prompted by 2003's discovery of UB313: a body larger than Pluto but farther out. Safe to say by the end of this, we will no longer have nine planets. It may become 12 or 53 or over 200.

To be sure, definitions and names require consistency. We have to be sure we are all calling something the same things so having a single, official agency makes sense. I'm not so sure I agree with the agency's working definition (paraphrasing, "a big round object that orbits a star") because it's too inclusive. The definition holds little value if it suddenly includes every large lump of matter in the system.

I was also amazed how the organization names things. Planets, for example, have a strict regulations: they "must be named after deities of creation, with the exception of plutinos, which are named after underworld deities," according to Wikipedia. Why does a committee name a planet?

Sure it's neat knowing all of our currently named planets are named after Roman gods (especailly for students who have tests on planets and Roman mythology) but that desire for thematic consistency is misplaced. We loose all the neat names for things because they don't fit into a pre-conceived pattern. Why not just let the person(s) who discovered the thing name it? That's how everything else was named. Imagine a world where all oceans are named after a god of the sea or every mountain be named after a lanuage's word for "towering." I can (somewhat) see the need for a body to officially recognize who discovered (and thus gets to name) what, but to say how things are named for the sole purpose of thematic consistency is just intrusive.

"But what if someone names something silly?" you might ask. There's always that possiblity, but if no one wants to call Jupiter "Aunt Edna," then no one will and a better name will emerge. When was the last time you called your car a "horseless carriage?"

Google Search Humor

Go to Google, type in failure, and look at the first link. I don't know how long this will stay up.

What's the Deal With Ann Coulter?

Ann Coulter was on Kudlow and Company tonight. She seems to be on it a lot. She seems to be on a lot of shows a lot. And I'm not sure why.

It's not that I hate Ann Coulter nor am I a fan. I just don't find her very relevant for understanding the important issues of the day. Ann Coulter is like an episode of Seinfeld. A lot of people either love her or can't stand her and few that are likely to change their minds. She's entertaining (to those who like her) but rarely important. She makes a very big deal about small things which becomes bigger and bigger as she talks to the point of absurdity. Often this results in making fun of others which usually isn't a big deal unless you're trying to learn something.

The only differences here are that everyone on Seinfeld knew they weren't that important and the show's a lot funnier.

Telling Tales

In the wake of the 2006 transatlantic aircraft plot (we really need to come up with better names for things) the Wikipedia article offers a nice overview. I found the following paragraph most interesting:

On 9 August, hours before the arrests, the UK Home Secretary John Reid gave a major speech to Demos (a UK think-tank) hinting at a new round of anti-terror legislation and claiming that the country was facing "probably the most sustained period of severe threat since the end of the second world war".[31] The following day he broke the news, the Prime Minister being abroad on holiday.[32]

Wait a second. A major victory against this incredible and constant threat and no one can be bothered to haul a podium to the beach so Tony Blair can make this announcement himself? Why is this clearly important development too mundane for a out oworld leader to dry himself off, put on a suit for two hours and make a simple speech? It's not like he was giving a press conference about embaressing sexual exploits; that I can understand wanting to skip.

Seriously, this kind of stuff is political gold. Why did Blair opt out? The first thought is that he wants to give someone else the limelight, seeing how he's not running for a fourth term. The second thought is scarier: by having the same person who called this time an era of great and sustained danger in need of more laws announce these major arrests so soon afterward, it makes the legislation seem all the more urgent and his calls all the more justified.

In the US, we see the National Guard being mobilized, air marshalls being sent to the UK and the banning of all liquids on US flights, all to prevent something that's already been prevented. I'm no expert about police investigations in England but I doubt requiring passengers to take off their shoes or turn in their gatorade helped London Metropolitan Police foil this plot.

Thinking on the Mundell

Brian posted this link recently which offers a quick and easy interactive tool for playing with the Mundell-Flemming model. Great for when I don't want to get out yet another sheet of paper. (Brian posted another one for Solow.)

He also provided a video he found which nicely demonstrates growth in the world. It's a twenty minute show and really interesting. The topic also speaks to an interest of mine: being a better advocate for liberty. The lecturer didn't talk about liberty much but he did remind us of one of the few things all macroeconomists agree on; growth is good.

The Great Hope For Mankind

A few days ago, Julian Benson of The Star commented on the prospect of Castero dying and Cuba adding more market activity in the island nation. Defending socialism, he said Cuba "has a lower infant mortality rate and a higher literacy rate than even the United States or Canada, let alone her peers in the developing world. Cuba also has one of the highest doctor per-capita ratios in the world. There is no illiteracy or homelessness, something that only a precious few nations can boast. These benefits exist precisely because of the planned economy."

Let us assume that this is all true; socialist governments love changing their numbers for the world stage and naturally these are all things they would love to alter. I still find these claims insufficient to overturn capitalism's ashtonishing track record. For example, a high ratio of doctors does not mean the doctors are (on average) very good or make a large impact in the health of the population. Cuba has national health care, which would increase the demand for doctors to treat minor problems, taking time away from those smart MDs. We can make similar arguments of illiteracy.

The homelessness claim is simply too absurd to try to explain how it could be true. Quoting a (cited) paragraph from Wikipedia's entry: "Paramount issues have been state salaries failing to meet personal needs under the state rationing system chronically plagued with shortages. As the variety and amount of rationed goods available declined, Cubans increasingly turned to the black market to obtain basic food, clothing, household, and heath amenities."

It's worth noting that for much of its history, Cuba relied on subsidies from the Soviet Union and currently recieves gifts from Venezuela. When the Soviet Union fell in the 1980s, Cuba was forced to engage in more market practices; "only" some 78% of its work force is now employed by the government.

For some reason, people hate accepting capitalism as a means of bettering people's lives despite the volumes of evidence. They point to half-assed attempts of creating free markets as evidence of capitalism failure and economic expansion as somehow undesirable. Benson claimed "capitalism has done few favours to the poor of the world," a strange assertion in a time when China's liberalization is directly followed by her people buying record numbers of cars.

In the Year 2000

The Washington Post ran an article “Efforts Begin to Compute the worldwide Eco-Crisis” by Claire Sterling on July 20, 1970. This paragraph got my attention.

There will be 7 billion people by the turn of the century, twice the number now. They are not going to have enough to eat: half the world’s population is starving already, and 4 or 5 of the 7 billion are expected to. They will not have enough habitable living space, even by our own generation’s shrinking standards: the more affluent may live 50,000 to a skyscraper, the poor in cement warrens of “conurbations” spreading across continents from end to end. They will not have enough parks, beaches, woods, open countryside to escape maddening urban pressures, or enough psychiatrists for any but the basket-cases. They might not have the physical room to travel freely, They may not have enough breatheable air or drinkable water.

There are so many things wrong with this I’ll only highlight a few. The easiest is the population, the 7 billion figure was off by a mere billion. The writer claimed that we wouldn’t have “enough habitable living space,” although I don’t know what “enough” means. That’s vague and doesn’t tell us anything. Ditto for “parks, beaches, woods” etc. Enough for someone might not be enough for a different person. I don’t know the actual figures, but I assume there are “enough” psychiatrists to go around and the basket-cases don’t have a monopoly on their services. The air, at least in America, is getting cleaner.

Another eye catching paragraph was:

There are a lot more such fright stories, and others possibly in the making as bad or worse; earthquakes caused by manmade dams, deserts spreading relentlessly across overgrazed land, a new Ice Age induced by human tinkering with the atmosphere, lifeless oceans, terrestrial floods. And all the ravages we are just beginning to notice will have doubled within 30 years, when twice as many human beings will be scrambling for food and water, excreting, piling up garbage, consuming fuels and manufactured goods, emitting noisome vapors and deafening sounds as the crisscross the globe in cars and supersonic jets.

This sounds like it could have been spoken yesterday, although the Ice Age prediction is outdated has since been replaced by a new hysteria. Sterling some how didn’t mention all the people solving problems, coming up with better things, and improving the standard of living.

Writings like this make it hard for me to take any eco - apocalyptics seriously, regardless if they have something intelligent to say. For all our problems, I’ll take life today over life 36 years ago and enjoy the company of the ultimate resource.

The Dater's Curse

Imagine you're at an auction at the auctioneer unveils a locked chest two hundred years old. He says it has never been opened and nobody knows what's inside. How much are you willing to put down for it? The answer depends on what you think is inside. Some might think it's filled with old socks and only pay based on if they think the chest would look good in the guest room. Some might think it's filled with some interesting artifacts from the era--mostly junk but a few treasures--and be willing to pay a bit more. Some might think it's filled with gold. These people tend to win these kind of auctions.

Generally speaking, people are, on average, right about unknown in straightforward scenarios like these. Some people overestimate, some underestimate and the errors tend to cancel each other out. But the person with the highest estimate will bid the most, open the chest and cry over the pile of blankets and love letters. Economists call this the winner's curse: the person who estimate the value of an unknown object the most will tend to pay the most for it and end up regreting it.

The same could be said of dating markets. The guy that's spent a lot of time and attention on a girl at a party "wins" her and she usually isn't worth it. We've all been there; I certainly have. Experienced daters, like frequent participants at auctions, know better: tone down your guesses when you bet on the unknown. You're be a lot happier and win--really win--a lot more.

August's Most Random Wikipedia Page Is....

Hazing at universities in Brazil. A pretty long article for such a narrow topic. For additional information, check out the lengthy list of ideas provided in the more general, hazing article.

Something Smells Rotten

A Wegmans grocery store is one of the greatest institutions in the modern era. A local one--about 15 minutes from my place--houses food from all over the world, an upscale cafeteria (upscale for a grocery store) and consistently good prices. Leaving the parking lot from a recent trip, I witnessed yet another Wegmans addition: a protest.

About half-a-dozen young people stood on the street corner just outside the store waving large signs encouraging a boycott of Wegmans. A banner said, "www.wegmanscruelty.com Watch the Video and Decide for Yourself" The film is a good half-an-hour so I watched the trailer to see if the larger version was worth watching. I doubt it is.

The film and website are entirely dedicated to complaining about the living conditions of the chickens in Wegmans' egg farms. The trailer showed a series of shots of chickens struggling in small cages, flapping in feces and walking over dead cage-mates. An attractive young woman (who I swear is in every animal-rights video I've seen) declared "You know something's really wrong there, that that can happen."

Let's set aside the obvious problem with making such a wide conclusion seemly based on this small sample of information. Let's ignore that Wegmans claims they meet or exceed industry standards, a fact verified by New York State Police. Let's even table the assertion that these conditions are typical in other egg farms and Wegmans is being targeted only because it is large. My question is, why insist everyone boycott the entire store? Their Diet Coke supply has nothing to do with chickens. You could even still buy eggs there (they sell organic eggs where the chickens are free-ranged and not kept in cages).

It makes a larger impact if you deny an entire store because of their eggs, that much is certain. But Wegmans is a popular store (and was incredibly crowded today). It's much more reasonable to ask people to boycott their eggs then get all their groceries elsewhere (with less selection at higher prices). The protesters clearly have not thought through their strategy to get Wegmans to change which suggests they also haven't thought through their accusations.

Humanity 2.0

Imagine a world where people never sleep. Where anyone can use computers with their mind alone. Where every superhuman power from the 1950s comic books are as commonplace as iPods. During a Monday talk at the IHS seminar I just returned from, journalist Joel Garreau explained this is a world looming on the horizon and it's closer than we think.

For dynamists like myself, this was an exhilarating speech. Think of the untold wonder that will become common place in just a decade or two. How the world will change, how people will adapt, what new ideas will explode from such radical change is the process that defines us as humans and I anxiously await the successes and unavoidable failures.

Yet buried in Garreau speech was a lurking sentiment I found uncomfortable. He said his main motivation for telling people about the upcoming breakthroughs is so "they" don't determine how society evolves. "Who's 'they?'" I asked. "Technologists," he replied. Elaborating, he said technologists are those who invent technology with no concern for the advances larger implications. It reminds of me of what Ian Malcolm said in Jurassic Park: "[y]our scientists were so preoccupied with whether or not they could, they didn't stop to think if they should."

The perception that because scientists develop technology they are in charge or should consider unintended consequences of such advancements assumes they are either superhuman or ought to be. When a new technology is released unto the world, the populace determines its use and its value. If people think we are moving too fast, market forces adjust for that. (Internet companies responded with better security measures to answer consumer concerns of identity theft while buying thing online.)

To be concerned that scientists will mold society into something most don't want can only occur under tyranny, not capitalism.

Author's Note: A friend told me that his book, Radical Evolution, does not actually paint scientists in such a suspicious matter. However, I still find it necessary to emphasize that if he does feel this way, he is wrong to.

Efficient Rent Seeking?

There is legislation in Congress that would kill the penny. It costs more than a penny to make one, with rising metal costs (and inflation making it worth less, although the article omits this). Representative Jim Kolbe from Arizona introduced the bill. I thought that someone in Congress actually wanted to do something to stop wasting money besides Ron Paul or Jeff Flake, but then I got to a later paragraph:

Kolbe's home state of Arizona is the largest copper producing state in the nation. Copper is the main material of the nickel which would benefit by becoming the lowest denomination of currency in circulation.

Even though Kolbe is trying to boast his own state’s revenue, I think this is efficient for society as a whole. Which got me to thinking, what are other examples of efficient rent seeking?

IHS Break

My blogging will be even more sparse than usual this week as I'll be attending the IHS seminar, Liberty and Current Issues. Hopefully I'll get a chance to post while I'm at Catholic University.

Meeting Dave Barry

Tonight I met Dave Barry, the humor columnist. He's one of my favorite writers and was doing a book signing in Arlington Virginia for his new kids book. I always enjoyed his writing, and then I read this from Reason. I learned that Barry takes swipes at the government so adroitly because he’s a libertarian. And he seems to have a basic economic knowledge, unlike almost everyone in Washington.

Reason: In your column I detect a certain skepticism at the notion that congressional spending creates jobs.
Barry:: Of all the wonderful things government says, that's always been just about my favorite. As opposed to if you get to keep the money. Because what you'll do is go out and bury it in your yard, anything to prevent that money from creating jobs. They never stop saying it. They say it with a straight face and we in the press will write that down. We will say, "This is expected to create x number of jobs." On the other hand, we never say that the money we removed from another part of the economy will kill some jobs.

After getting Dave to sign a book of his I have, I went to see Jim Bovard, Jesse Walker from Reason, and some old guy debate if we have the government we deserve because we keep electing these fools and put up with their antics. It was an interesting debate, even showing up an hour late because I went to the Dave Barry book signing. I think the conclusion was that we are partly responsible, but not completely. (And when I say we, I mean not me. I’ve never voted.)

Getting the Most for Your Money

While at a store today I overheard someone wishing he had more interests, as they don't cost any money, such as watching soccer. No, said another, you have to pay monthly bills electricty and cable to watch soccer.

I'll agree with electricity, assuming the opportunity cost uses less energy, but if this stranger already has cable then on a monthly basis, using it more makes it cheaper.

On the surface, this seems very strange; cable bills remind constant month-to-month and isn't effected by how much you use it. But on the margin it becomes cheaper the more you use it. If I watch 10 hours of cable a week and then discover a new show which ups my total to 11 hours, I am paying less per hour, less per interest and, most fundamentally, less per "unit" of satisfaction.

It's exactly the same concept of average fixed costs: the more the hypothetical factory is used, the less significant its initial building costs are.

Sadly, the first patron left promptly after this exchange before I could point the economics out to him.

Welcoming Warren

Warren, a friend and fellow student in the economics program at Mason, joins L3 this week. Hopefully he will be posting soon, though if he's anything like me lately he's a lot of talk and no show.

“(Gullible) Ladies and Gentlemen of the Jury”

Trial by jury is one of those things that look really great on paper…and, unfortunately, that’s where most of the greatness stops. With people going to court over stupid things, and lawyers dragging out the trials forever, it’s no wonder why nearly everyone tries to get out of jury duty. We servants of the public (read “state”) have to show up and sit through a long selection process, including instructional videos and a pep talk from the commissioner. This is all done for free since we only get paid after the first day of service. The opportunity cost is enormous! It doesn’t matter whether you’re a graduate student working part-time (like me!) or a CEO. Jury duty is a big blow to one’s pocketbook. On the other hand, the general principle of trial-by-jury, inefficient as it is, shouldn’t be abolished. Many people have said that they’d never want to have their cases decided by just one person. Surely something can be done about the system.

New Jersey Folds

Suppose you are a VP of a company and, unable to settle on a timely budget, the entire corporation shut down for several days, resulting in millions of unrealized gains. Now suppose all VPs pointed fingers at each other and nobody claimed fault. Would it not surprise you if stock holders demanded the lot of you to be fired? I wouldn't be.

After several days of debate and roughly 60 million dollars of lost revenue, the New Jersey government will finally allow Atlantic City casinos to do their business. When politics prevented the congress to pass a budget by July 1, the casino inspectors (who are strangely required by law to be on the floor) were forced to take several days off resulting in the complete shut down of all Garden State gambling.

Perversely, the inspectors, who seem to be nothing more than government-appointed auditors, are paid by the casinos. (I imagine the casinos pay the government who then pays the inspectors, which is why the budget problem still created this mess.) Like millions of other residents, the casinos paid for something the government then denied them, an injustice that could have been avoided if this invasive law were removed.

I'll be surprised if the law's dropped and I'll be even more stunned if all of congress steps down. For those of you who think government's more reliable and accountable than the private sector, take notes.

Earned Freedom?

People's memories are surprising short. On July 5th, I watch Hardball where Jim Gilmore, the RNC Chairman, spoke out against an "automatic path to citizenship." Forget that millions of Americans, including Gilmore, got an automatic path to citizenship by the simple act of being born here. He embraced an even more unreasonable argument.

The day before I engaged in my annual ritual and reread the Declaration of Independence along with its recognition of unalienable rights. The sad truth is for most of the world's people enjoying these rights means becoming an American citizen (or citizen of another freedom-loving country). To suggest this path shouldn't be automatic is inhumane, unpatriotic and antagonistic to the day the country just celebrated.

July's Most Random Wikipedia Page Is....

Forbes Fictional 15, a 2002 list, according to Forbes, of the most well-known and richest fictional characters in pop culture. For some reason, Scrooge McDuck is only number four (and I heard in the 2005 version, he drops to number six). How he's below that lazy Richie Rich, I'll never know.

And could someone explain number one?

Executive Compensation

While it's only a component of overall corporate accountability, Jason brings up the point that CEOs are rewarded if they succeed, and suggests that even in failure, are rewarded with significant severance packages.

First, like any other employee, a business wants to pay the CEO as little as possible, yet still enough to attract the individuals with qualifications the company is looking for.

Second, the severance packages aren't "going-away presents" - they're prenegotiated, as a condition of the CEO's service, or sometimes granted as reward for performance, as Jason mentioned. If a CEO is tanking a company, the last thing that business wants to do is give them bags of money to dig themselves in deeper before booting them. They do it because it's the cost of keeping the CEO desired around in the first place; while the CEO may not be good in the long run, if it seems like a good idea at the time, the company can bet on the CEO with compensation and salary.

Like all bets, and like all employees, they may not pan out as desired; but that doesn't mean the prior contracts can be negated - of course, if a company and CEO agree, they can have punitive measures in place in case of failure, but this is likely to just scare away the best candidates for the job.

The question always comes down to whether the CEO is worth the salary. Isn't it ridiculous to pay a single person Every month several times what a common worker might make in the coarse of a whole career in a low-paying job? It certainly doesn't seem that way to the company - if it thought it would lose money by hiring anyone, even a CEO, it wouldn't do it at all.

The CEO can theoretically destroy the company, or at least do it irreparable damage. Look at what Bush's "business" is doing to the US, as it's Chiefe Executive - wiretapping, bloating spending and debt, committing soldiers to costly, unpopular wars (I still think Iraq was a good thing, even though I don't support the war effort. Saddam gone is a blessing to the whole world, IMHO), attempting to further cement government control of marriage, free speech (flag burning), etc.

While Michael Isner didn't have the option to launch an invasion of Six Flags, or to imprison rowdy park guests and hold trials for them in the back of the Epcot Center, he still could have done tremendous damage, and had great power and responsibility of a company now worth more than 30 billion dollars. That sort of position, such a company clearly judges, is necessary to fill with a person judged worthy of the trust and responsibility. To attract those kinds of people, salaries tend to climb, if the supply of excellent candidates doesn't change.

That's about the bottom line for me - companies look out for their interests, and overpaying employees to the point where they get less from them than they pay is hardly something they're in the mind to do, even if it's the CEO.

Debate-Mart

Economist Jason Furman and author Barbara Ehrenreich are currently engaged in a Wal-Mart discussion at Slate. Read the entries and follow the debate; it's a solid discussion on a hot-topic, though I doubt it will change people's minds. (As those that already have an opinion are most likely to read it and least likely to be changed by it.)

I just want to quickly point out a flaw in Ehrenreich's logic after Furman discussed two very different stores: Best Buy and Stereo Exchange. Best Buy has the good prices but the less knowledgeable (and paid) staff while Stereo Exchange is the opposite. If all of the former were replaced by the latter, we would have more "good" jobs but more unempolyment. Ehrenreich responds: "If Stereo Exchange took over from Best Buy, there'd be a lot more better-paying jobs in the retail electronics business. Why wouldn't the former Best Buy workers take a lot of these new and better jobs? They're not all as clueless as you seem to think."

There's a lot of reasons why this argument is not so but let me illustrate a key idea with a story. I knew someone who used to work at Best Buy. He said one of the most annoying things about the job was when customers would ask him where stuff was. He never knew the answer so he quickly learned a fast way to handle the problem: he simply would pick the corner of the store farthest from him and confidently declare that's where the product is. (Customers, as it turns out, are incredibly gullible in this regard.)

It is not that Best Buy empolyees are all clueless: some just don't care. Some would care if they were paid more, true. But others would only care if they were paid much more and others wouldn't care at all because it's just a summer or part-time job--they have no desire to go through additional training. Both customers and the work force demand retail diversity. Why shouldn't it exist?

The Downsides to Capitalism

I've been thinking about this for a bit, and wanted to try and share what I think is one of the fundamental problems we have in communicating ourselves to non-believers. They think we don't care what happens as a result of the free market. Some seem to think that means that people can be bought and sold, abusded and thrown away. Others might just despise corporate layoffs and the whole bother about the bottom line trumping the people involved.

Businesses fail (sometimes spectacularly, like Enron), businesses can hurt people (firing them when they really need the job), and so on. I don't deny any of that. But I think these failures and personal injuries are not only magnified by government involvement, I think they're rather the products thereof as often as not.

The Austrian theory of the business cycle revolves around the money supply, and as the Fed has been inflating it (or inversely, devaluing the dollar) at a fairly steady rate since founded in 1913, it's been fueling booms and the subsequent market corrections, in which people get hurt. In boom times there aren't many layoffs, but man, when the corrections come around and people realize that there's really no value in a business, jobs go flying.

This, compounded by the warping of time-prefernce spurred by the availability of easy money (via credit) and the constant erosion of savings (via inflation), leads to a great many negatives, which people rightly criticize - but rarely do they pin the blame on the institution that's actually causing the inflation, creating malinvestment, and ultimately, causing loss of jobs, productivity, and so on. They blame the proximate cause, the business that cuts the jobs, and not the government bank-cartel that fueled the problem.

Believing that, am I cruel to say that the real solution, at least in my eyes, would be to liquidate the Fed, instead of implementing stringent business regulations? To me, that's just bandaging a compound fracture; it may help keep out infection, but it's not helping to make the fundamentals any more sound. You can cover up problems, like the USSR did for more than 70 years - but eventually, debts need to be paid.

I firmly believe that this sort of action is helpful and moral; does that make me a monster? I don't think so.

Buffeting Statism

Yesterday I got an unexpected e-mail from Ryan questioning why no one's posted on Warren Buffet's unprecedented donation to the Gates Foundation. He wondered why I didn't point out that successful businessmen contribute more to society than their donations, or that the lesson in this story is if people work hard they can support whatever cause they choose to.

This is all correct, but hardly the story I'd like to tell. I'd rather ask a different question: "Why the Gates Foundation?" or better yet, "Why all to the Gates Foundation?" Not too long ago Ted Turner gave billions to the UN and once in a while the news blares headlines about some milllion who left their fortune to help reduce the budget deficit. Why not give to a political organization which, almost by definition, is larger and thus more capable to handle the world's problems?

The short answer is that Warren Buffet is not so naive. He's one of the world's greatest investors and he didn't make his fortune by believing that bigger is better or trusting bureaucrats to handle his money. The Gates Foundation is actually quite focused, which Buffet rightly sees as an asset. In a letter to the Gates family, he wrote, "You have committed yourselves to a few extraordinarily important but underfunded issues, a policy that I believe offers the highest probability of your achieving goals of great consequence."

Buffet doesn't even completely trust long-life friend Bill Gates that the money will be used effectively (even though the Gates Foundation is one of the most effective in the world). Two of the three conditions the foundation must meet to get the installments of the Buffet gift are (a) remaining a legal charity and (b) minimum annual awards totalling the previous year's donation plus five percent of assets (creating an incentive to keep the overhead slim).

The last of Buffet's requirements speaks to trusting free and proven individuals instead of government agencies: Bill or Melinda Gates must be alive and active in the running of the Foundation. Sounds like a solid investment.

FDA Calls Cocoa Via Bars Adulterated, Misbranded

I'm going to dive into the chocolate business, so this does nothing to cheer me up. To make it short, the FDA is wagging a finger at MasterFoods USA's Cocoa Via "functional" bars. Why?

1) They used folic acid in their product, which isn't expressly permitted.
2) The FDA claims the product isn't heart-healthy as claimed, despite the presence of plant sterol esters shown to lower LDL cholesterol as part of a low fat, low cholesterol diet, which a piece of chocolate certainly can be.

This is utterly insane, and I suggest that anyone that gives a damn about freedom write the FDA to tell it to shut up, and then go buy a pack of Cocoa Via bars to show 'em what-for.

The criticism ill-founded - in our system of law, something need not be permitted expressly to be legal, merely not prohibited to be legal. If there's a legal prohibition to using folic acid, there's another silly problem to deal with altogether. If they don't like this, they can uproot their organization and go regulate France, I'm sure they'd welcome them.

On the second count, this is both bad science, and a hollow attempt to regulate a food product as medicine. Saturated fats may have been damned by plenty of doctors, but I'm not convinced that it's quite fair.

Take a charming study of the effects of dairy consumption (I'll link in comments if anyone is interested) - it showed an alarming correlation between dairy consumption and cancers, tumors, etc. In short, all sorts of wretchedness. The conclusion is that a healthy diet has no place for these things. But where was the study undertaken? In a population where milk products have been almost unutilized over thousands of years. China.

For sakes, ~93% of the whole damn country is lactose-intolerant! Is there even a shade of a chance that there's a bit of a problem here? I think so. If they included some Mongols in their study, or for god's sake, Swedes (~2% intolerant prevalence), would the results have differed? Who knows, but silliness like this just clouds the water.

A more specific criticism of the whole "saturated fat is bad" argument is here: http://www.cookingforengineers.com/article.php?id=40
More than anything, I think it shows the silliness of allowing government to regulate claims rather than a civil court.

And of all the things we don't need, the government telling us what candy we can't have is about the last.

Jennifer Superman

In case you need more evidence that Superman is a statist, I just caught him reading Jennifer Government (second panel). For those of you who don't know, JG takes place in an Orwellian future where corporations control the US government. Admittedly I haven't read it, but I reviewed the Wikipedia entry and play Nationstates, which is based off the book.

I bet Batman would read The Future and Its Enemies. I love Batman.

An Inconvenient Movie

The plan is to see Al Gore's movie this weekend with some friends and in preperation I found a TCS article written a month ago entitled "Questions for Al Gore." Climatologist Roy Spencer hits on a lot of good points, notably reminding us there is not a total consensus that global warming is an unnatural phenomenon. It sounds like this film is a "documentary" in the same way Star Wars: The Phantom Menace was "good." The only people that buy the label are already too invested in it to consider otherwise.

Tempers, Temperatures and Temper Tantrums

Today's Wikipedia's featured article is global warming, an article I've tried to edit in the past and gave up after receiving unkind commentary on my changes, some of it deserved and some not. Skimming the talk pages reveals this is not unusual--nasty words have been exchanged by both sides of the argument. The whole thing is not unlike Jason and Tim's argument this past week. Just read it and you'll see as much heat as light.

When I was in college, I read Bowling Alone by Robert Putnam, which argues people are spending more and more time alone thanks to certain of technology, such as television and the computer. Putnam agrues Internet interaction is a poor substitute for real human interaction. I don't agree, but one thing is for sure is it makes it a lot easier to be nasty. Any online forum (blogs, Wikipedia, discussion boards, etc) is prone to parties simply throwing rants and temper tantrums, barely reading what the other has to say. Part of this is because we are only thinking of our counterpart in the abstract; we just don't know him. Part of this comes from talking to our agreeing friends about such issues, so we are more prone to repeat the less diplomatic agruments we make to each other. Part of it is because we talk in paragraphs, which end up becoming speechs for ourselves. I'm sure there are other reasons.

In being a better advocate for liberty, I think it's worth learning how to tone down our arguments and make shorter, cleaner claims. For example, it's amazing how much more likely people will pay attention to what you write if you show some patience and acknowledge some points the other side made. It's something we all need work at.