Remembering the Saccharin Scare

Dr. Elizabeth M. Whelan at TechCentral Station notes that this week marks the 30th anniversary of the FDA's ban on saccharin (better known as Sweet'N Low) on the basis that it causes cancer in lab animals. Dr. Whelan writes that the "administered dose of saccharin has been compared to the equivalent of human consumption of 800 diet sodas a day for a lifetime." In other words, they pump the animal with more of it than any human could consume and watch its biology go haywire.

Today saccharin is freely available-the public outcry against the ban was too great-and it is clear it doesn't cause cancer. Remember this history lesson the next time you see something contains "cancer-causing agents;" it's more likely that the science isn't too sweet.

Not Dying While Waiting in Line: Priceless

I've taken to editing Wikipedia's article on the Canadian health care system. Seeing that Clinton's campaign will most likely sound a call to emulate Canada's system, this seems like a good place to clean up a little.

We shouldn't be too surprised that one of the consequences of our northern neighbor's system are lengthy wait times for even the most routine of procedures. Donald Loritz (who appears to lean in favor of the system) pointed to this information concerning Canadian wait times. Now the data (which Donald describes as "the best recent information on Canadian wait times") are poorly presented and not very flattering. Lengths of time include fuzzy language like "within 30 days," wide ranges such as "34-177 days" and strangely presented numbers including "57-100%" (a reference to the percent of wait times for cardiovascular/cardiac surgeries that did not exceed various benchmark goals). There's not even any aggregate data (the closest they get are vague estimates broken down by province, ranging from one month to twelve).

Here's an inkling of the Canadian wait times for health care.

Cardiovascular/Cardiac Surgery: 3-182 days (Nova Scotia)
Bypass Surgery: 17 days, 27 days, 62 days (Ontario, three were listed)
Bypass Surgery: 24 days (British Columbia)
CT and MRI Scan: 80 days (Alberta)
CT and MRI Scan: 7 days, 105 days (Prince Edward Island; "urgent" and "routine," respectively)
Joint Replacement: 95 days, 127 days, 281 days (Ontario, three were listed)
Sight Restoration: 56 days (British Columbia)
Chemotherapy: 2.1-8.4 weeks (Ontario)

This is why I'm not surprised when I hear people die waiting for care under the Canadian system. Some things are worth paying for.

Consensus on “Carbon Neutrality”

Recently I commented on Gore’s increasing carbon footprint. In the comments I was told:

God, if you're gonna make fun of something, at least know what you're talking about:

Live Earth says it will implement a new 'Green Event Standard' that will become the model for carbon neutral concerts and other live events in the future. This will include:-

All electricity that powers the shows will be from renewable sources, either through utility supplied renewable energy, biodiesel generators, or renewable energy credits

Recently there have been some initial analyses on using “carbon neutral” energy.

More fun than chess

A tale of two markets

The Political Economy of Alternative Energy

Another stab at carbon offsets

After reading these the consensus seems to be that credits and carbon neutrality doesn’t work as it claims to. And anyone who denies this is a fringe skeptic in the pocket of the environmental lobby.

Measuring Temperature

Recently I’ve been reading up on global warming. I came across something that I hadn’t heard before on the measuring of temperatures. After the collapse of the Soviet Union, thousands of measuring stations closed in the former USSR. The closing of these stations in cold areas correspond to the rise in temperature measured in the late nineties. Now whenever I see the claims that 1998 was the hottest year on record, I can’t get excited about it. It should be expected that eliminating thousands of Siberian and other cold weather stations will lead to an increase in measured temperature.

Passionately Neutral

Peter Johnson of USA TODAY wrote a wonderful piece about how news anchors tend to adopt a handful of pet issues and focus on those during their broadcasts. Bob Woodruff on army medical services. Lou Dobbs on immigration. Chris Hansen on child predators. Douglas Kennedy's on the dangers of attention-deficit-disorder drugs prescribed to children. The list goes on and on.

From an economics point of view, this is yet another example of the nature of competition. Each anchor is vying for the attention of an audience so it should not be surprising we see specialization in the media market place. And even though I disagree with what some of these advocates have to say (notably Lou Dobbs), one must appreciate this combination of free speech and free markets.

The only problem is the lie they tell us every day. Each anchor (with surely some exceptions) claims to be a neutral voice. In one moment they are passionately discussing their chosen issue. In the next moment they remind us they speak only the Truth; bias is not in their vocabulary. According to Kennedy, this is perfectly consistent: "You can be objective and still take on an issue that is important to society and to you personally." Let me take this moment and remind the media that they are not gods. Things that are personally important to anyone are things they can't be trusted to be neutral about.

Payola Day

In what everyone's calling a landmark settlement, four major radio broadcasters will be paying the FCC a tune of $12.5 million. The settlement gets the agency off the broadcasters' backs on their practice of payola-accepting payment in exchange for playing certain songs.

I see nothing wrong with this; it's just a form of advertisement. If you think the station's playing too much of the same song, do something else. But some radio listeners and-not surprisingly-small time artists are applauding the move because all these stations also promised air time for independent musicians.

This leads to more variety, they say, and I'm sure it does. But most successful independent musicians serve a niche audience. Their songs aren't as suited to the radio. Maybe there's a good reason why we hear only a small band of artists.

What everyone seems to be tip-toeing around is that now these broadcasters no longer have the payola's source of income, how many more conventional commericals will we have?

The Bootleggers and the Baptists Stop for a Smoke

One of my favorite theories of regulation comes from Bruce Yandle concerning his story of bootleggers and Baptists. The latter offers a good public face for some new regulation, say no selling alcohol on Sundays because it is a vile drink and Sunday is a holy day. The former offers politicians the money to pull off the face, in this case breaking the law and selling alcohol on Sundays for an inflated price.

In the standard story, these are two distinct groups but what's common is when they are the same group with two different faces. Consider smoking.

The Baptist. Phillip Morris wants to make it virtually impossible to advertise cigarettes. Young people watch these ads and might be tempted to smoke!

The Bootlegger. Phillip Morris's Marlboro brand captures a good 40% of the market. By making it nearly impossible for consumers to learn about new brands, PM restricts any competition and maintains, or maybe even grow, its healthy market share.

Note that this bill is supported by Ted Kennedy, not exactly a favorite of tobacco companies.

Score Another Point for Technology

Remember the summer of 2006, when an E. coli outbreak made eating spinach dangerous? It turns out the source was a likely culprit: an organic farm.

Organic farms use natural fertilzers, better known as manure, which are breeding grounds for micro-organisms. Some farms even refuse to irradiate their crops, which would have killed any E. coli that called our food their home. I can't be sure if conventional farming is healthier but I bet my life that "inorganic" crops are. If you want food to be safer technology is your friend, not your enemy.

HT: Mike Mills

The Economy Reorganizes

Airbus plans to slice 10,000 jobs from its payroll. Rudiger Lutien, chairman of the Worker's Council, insists the company's troubles are management in nature, not too many workers on the payroll. The truth is usually somewhere in between in cases like these but I'll bet Airbus made the right decision. If Lutien was right, firing a bunch of management looks a lot better from a public relations standpoint than firing five digits of workers.

Some of you may still be upset that these workers are being let go, as if Airbus is going to shoot them behind a chemical shed. These people won't disappear, only move onto new things. It won't be easy, but they will ultimately add more to the economy. If you don't believe me, would you shout down farmers that moved to the cities in the Industrial Revolution or buggy manufacturers when Ford perfected the assembly line? For your own sake, I hope not.

Hidden Exchange

In one of my classes, we read about how various stateless societies functioned economically without money or prices as we are familiar with. There were various methods of exchanged discussed, but this one I found to be the most interesting.

Herodotus discussed the trade relations between the Carthaginians and African tribes several hundred BCE. It went as follows:

The visiting traders (or perhaps better, would-be traders) appeared at some point in the vicinity of the area occupied by their hoped-for trading “partners,” with the goods they wished to exchange, and signaled their presence. The visitors placed their goods on the ground and went into hiding. In due time those with whom they wished to trade brought their goods, which in turn were placed on the ground, after which they disappeared. The visitors then returned to the place where the goods were displayed and if they were satisfied with the offerings of the “host” group, took them and returned home, leaving their own in exchange. If not satisfied, they left the host’s offering and their own goods untouched and disappeared again, thus indicating rejection of the initial offer. The hosts were then expected to adjust their offerings, or withdraw them and depart. In this technique the visitors would normally not be adjusting the amounts that they offered; they merely accepted or rejected the host’s offerings. Further, the visitors, in refusing the host’s first offering, were courting failure of their expedition and even impairment of continued relations with those who had goods that they needed.

F. A. Hayek called the pricing system a “marvel.” After reading about societies without an explicit pricing system, I agree with him that much more.

The Smallsonian Institute

The Smithsonian Institute's Secretary Lawrence M. Small is being called to be put under investigation for $90,000 of unauthorized expenses. Covering six years, Small's violations are actually quite small in the political scheme of things--"only" $15,000 a year.

I doubt Small will get into too much trouble for this. The Smithsonian is one of the few government agencies that people think are above politics. Yet this instance shows that no bureaucrats are angels. And if that's not enough, it appears that "After some of Small's expenditures were questioned, the [Board of] Regents rewrote some of the rules governing him to make sure there were no violations." They rewrote the rules just for him? No one is above politics.

Panic at the Exchange

A few hours ago, ABC Money posted this article which casts worry over the latest drop in the Dow Jones Industrial Average. This 200 point fall, the story goes, suggests we are in a slow-growth economy and the market is due for a correction.

First, the DJIA isn't nearly as important as people think it is. The number is the average stock price of 30 companies--just thirty--adjusted for stock splits. Granted, these are important companies whose performance has wide ranging implications. But they are not everything.

Second, the world is a messy place. This drop may be a correction for past over-optimism or next week may be the correction for today's panic. The latest tick of the market is not automatically indicative of its overall quality.

Each move of the DJIA isn't news worthy. Even big moves. They aren't nothing, but there are more important items to report. What is news worthy is the economy's next big thing, but because we don't know it we have to admit any measures of the quality of out economy--any economy--is subject to tremendous error.

Billy Bob in Space

In about a month, I'll be travelling to Amsterdam to present my paper, One Giant Leap for Bureaucracy. The piece is about how NASA is more concerned with maintain its authorative position in space travel than allowing private citizens to enter space. NASA's just like any other bureaucracy, more concerned with its public image than bringing humanity into space.

Enter The Astronaut Farmer, a movie about Charlie Farmer (Billy Bob Thorton) building a rocket on his Texas ranch. When he tries to buy rocket fuel for his launch, FBI and a smattering of other government agencies find out and try to shut him down, notably NASA and the FAA. The overarching sentiment on why they don't want him to launch: they don't want to be embarassed.

It was a pretty good movie, though sometimes overdone and scientifically shaky. But the theme is disturbingly accurate.

The War on Tobacco

People who support the criminalization of drug usage often note that drugs and crime are correlated. They claim the causation is that drugs cause crime. People who support the decriminalization of drugs say the general causality is the illegality of drugs cause crime, not the drugs themselves.

California has recently banned tobacco usage in prisons. This allows for testing on whether tobacco causes crime or the illegality of it does.

There's no if, and or butt about it: California's ban on tobacco in prisons has produced a burgeoning black market behind bars, where a pack of smokes can fetch up to $125.

Prison officials who already have their hands full keeping drugs and weapons away from inmates now are spending time tracking down tobacco smugglers, some of them guards and other prison employees. Fights over tobacco have broken out -- at one Northern California prison guards had to use pepper spray to break up a brawl among 30 inmates.....

At California Correctional Center in Lassen County, officials reported more than 60 tobacco offenses among inmate crews at the institution's work camps in December, Associate Warden Matt Mullin said. The same month, cigarettes triggered a brawl between 30 Hispanic and white inmates on a high-security yard. Follow-up interviews with inmates revealed the dispute was over control of tobacco sales....

At Folsom State Prison, a cook quit last year after he was caught walking onto prison grounds with several plastic bags filled with rolling tobacco in his jacket. He told authorities he was earning more smuggling tobacco -- upwards of $1,000 a week -- than he did in his day job....

Chuck Alexander, executive vice president of the California Correctional Peace Officers Association, said lawmakers should either roll back the prohibition or add stronger penalties.

"It didn't do anything but make (tobacco) a lucrative business," he said.

HT: Steven Levitt

The H-Bomb and You

Here’s a pamphlet from 1954 on how to survive a hydrogen bomb attack, and what you can do to help prevent attacks.

Just remember, Civil Defense is Your Job.

Peace, Prosperity and Pants

Free-market economists hear a lot of reasons for why protectionism is a good idea. One of the stranger ones I've come across lately is national security. We need a lot of factories in case we get in a war. That way we can start making war machines right away. It's all about mobilization.

But if it is truly worth making society less wealthy to gain a tactical advantage, why not take it to the next level? Why not start producing an army of tanks now? We could have even more mobilization. We could travel a less and pay Boeing to start churning out stealth bombers instead of planes. American Eagle can sew legions of uniforms. I bet Starbucks could come up with some delicious instant coffee. Even if we don't end up using this stuff before it rusts, it will at least act as a detterent. That's actually a lot better because now people aren't dying in a war. Isn't that worth a new pair of pants?

What's nice about trade is it lets us have both the detterent and the pants, even if we don't have the tanks. Buying Japanese cars makes their auto-industry happy. Giving investors a profitable place to invest their money makes them happy too. What their people will do to them, not us, helps the government from being a war monger. But the effect is the same: peace, prosperity and pants.

A War Against Toasters

Last night, Lou Dobbs was very upset because we are losing the war against drugs. He wrote a commentary last week about how drugs are destroying our society. One has to wonder, then, why the online poll on his website is (currently) running 80% in favor of legalizing marijuana.

It's actually not that hard to see because any "war" against an inanimate object will either be won very easily or become something entirely different (and much harder to succeed). Suppose the US declared a war against toasters. Two things might happen. The first is that the American people will rise up against their bread-grilling overlords and smash them to bits. War fought and won. But the second is much more likely: it will stop being a war against toasters and start being a war between toast-lovers and toast-haters.

Some people like doing drugs. A few of them would be better off if they don't, but others are happier despite its costs. We all, in fact, do things that aren't great for us and we wouldn't want people to micromanage our lives. If you are willing to say that certain drugs are unhealthy and should be banned, you must do the same of smoking, drinking and fast food. There's surviving life and there's living life. Let them eat toast.

How Windfall Profits Blow in New Technology (All By Themselves)

I've been in a lengthy discussion with a blog by William and Mary's American Constitution Society concerning the vices and virtues of a windfall tax for oil companies. Firms could assuage this tax, their post goes, as they shift money to developing sources of alternative fuel.

The author--Darren--notes that oil companies have a tremendous incentive to create the Next Energy Source but paradoxically concludes we should use the government to force them to do just that. I completely agree with Darren on his first point, thus I see little reason for the conclusion. As Julian Simon pointed out, increasing prices attract entrepreneurs and investors to employ or invent substitutes and stretch current technology.

No one knows how long it will take the new technology to surface, let alone become feasible. Our dynamic economy needs to be able to use a vast array of options to satisfy humanity's long and short term goals. One unintended consequence this tax could encourage too much development in an unrealized technology, forgoing an expanse in oil production now. At best Darren's idea does nothing. At worse, it sabotages the present and, in doing so, delays the future.

Gore's Increasing Carbon Footprint

In his quest to against global warming, Al Gore is hosting “Live Earth” concerts on all the continents, “including the first ever rock gig in Antarctica.”

Apparently Gore feels that burning who knows how much fossil fuel and increasing his carbon footprint is a good way to lower emissions. My question is how many people will watch the concert and say “Hey, now I’ll stop burning so much gas since Mr. Environmentalist burned through untold barrels of oil to go to one of the most desolate and undeveloped places on earth. Now I’m convinced that wasting energy is a bad idea.”

Save Lives and Win Fabulous Prizes

Mason's Broadside ran an article this week about Abul Hussam, a Mason chemistry professor who won a $1 million prize for creating a filtration system for South East Asia. The goal of the Grainger Challenge Prize for Sustainability was no small task. The system not only had to reliably filter arsenic, it also had to be easy to maintain, affordable, socially acceptable and environmentally sound.

This is an apt example why technological development is best pursued in a de-centralized way. Instead of creating a single committee, bureaucracy or "task force," the Prize signaled to countless people that this problem exists and is worth solving.

I doubt a government bureaucrat could replicate the job Hussam did. Not only is he a professor of chemistry (perfect for filtration), he's from Bangladesh and is intimately familar with daily life and the resources locals have access to. His system is built around the people and their world, allowing them to make their own filtration system from easily found resources. Useful technology doesn't just come from knowledge discovered in the lab. It also draws upon the vast stock of information some of us had since we were children.

Benefits of Private Property

I’ve been reading a history book called “History of the United States” printed 1880 by John Clark Ridpath. After discussing the disastrous situation at the early Jamestown colony, he noted the following.

Thus far the property of the settlers at Jamestown had been held in common. The colonists had worked together, and in time of harvest deposited their products in public storehouses. Now the right of holding private property was recognized. Governor Gates had the lands divided so that each settler should have three acres of his own; every family might cultivate a garden and plant an orchard, the fruits of which no one but the owner was allowed to gather. The benefits of this system of labor were at once apparent, and the laborers became cheerful and industrious.

To My 2002 Toyota Corolla- Happy Valentine’s Day!

This past week – for the first time ever – I patronized Amtrak, the socialized train system. Amtrak is one of those publicly-operated “firms” that past many people’s radar because they think it’s privately owned and operated. (In fact, someone once argued with me that it had to be a private corporation because it was such a lousy system and the federal government could surely do better!) Riding it was a good experience for me because it not only secured my own views against it but it also let me experience the ride with those who rely on it everyday.

Where I’m from, fewer people take public transit than those on the east coast, who seem to treat it like a form of life support. That’s understandable considering the close proximity of locations, the older cities that can’t accommodate multilane highways and parking lots, and the cultural expectations of the public. Out here in the west coast, where land was once cheap and (still is) plentiful, traffic and parking lots accompanied development. Where I live, this tends to produce two types of people: those who see public transit as a completely worthless enterprise and those who bemoan the fact that an efficient public system is impossible given the current suburban lifestyle.

As I mentioned, riding Amtrak and the Metro while in DC this past week helped me realize that merely unplugging the government funds from public transportation systems and letting them collapse – a position that I’d held for years – was completely unrealistic. These people can’t just switch to cars. Until a workable plan for private mass transportation appears, public trains and subway systems will have strong support, regardless what any of us who avoid urban life try to do about it.

Trading with the Sea

Trading with the Sea

Frederic Bastiat sums up my feelings towards the trade deficit. He tells a story about himself and the protectionist Mauguin:

I was at Bordeaux. I had a cask of wine which was worth 50 francs; I sent it to Liverpool, and the customhouse noted on its records an export of 50 francs.

At Liverpool the wine was sold for 70 francs. My representative converted the 70 francs into coal, which was found to be worth 90 francs on the market at Bordeaux. The customhouse hastened to record an import of 90 francs.

Balance of trade, or the excess of imports over exports: 40 francs.

These 40 francs, I have always believed, putting my trust in my books, I had gained. But M. Mauguin tells me that I have lost them, and that France has lost them in my person.

Bastiat earned 40 francs in profit, but according to the government bookkeepers France was in deficit, which was bad. Bastiat follows with a second story:

I had had some truffles shipped from Périgord which cost me 100 francs; they were destined for two distinguished English cabinet ministers for a very high price, which I proposed to turn into pounds sterling. Alas, I would have done better to eat them myself (I mean the truffles, not the English pounds or the Tories). All would not have been lost, as they were, for the ship that carried them off sank on its departure. The customs officer, who had noted on this occasion an export of 100 francs, never had any re-import to enter in this case.

Hence, M. Mauguin would say, France gained 100 francs; for it was, in fact, by this sum that the export, thanks to the shipwreck, exceeded the import. If the affair had turned out otherwise, if I had received 200 or 300 francs' worth of English pounds, then the balance of trade would have been unfavorable, and France would have been the loser.

And thus in terms of the trade deficit, there are some who would feel it better to trade with the sea than to trade with others and get something in return.

And the Money Keeps Flowing

It very easy to find data about the US trade deficit. For example, today a major headline on Google News blared "US trade deficit surges to record $763 billion." Most people find this to be a bad thing, which I suppose is why this data--historical and otherwise--are so easy to find.

It's much harder to find data on the US capital account, or the difference between foreign investment in the US and American investment abroad. The money being invested elsewhere is called an outflow and the money commoning in is called an inflow. Most economists realize a trade deficit is the mirror image of the capital account; the numbers are essentially the same, which might be why they are hard to find. If you don't agree, I found a nice pair of graphs.



This is a little rougher than I'd like but bare with me. First, note the second graph (found here) covers about twice as much time as the first one, so pay attention only to the 1990s. Second, ignore the grey bars. They are not important for our purposes. Third and most importantly, pay attention to the difference between the inflow and the outflow--remember that's the capital account.

This difference follows a pattern that mimics the trade deficit. In the 1990s, the trade deficit was small, as was the difference between the capital flows. In about 1997, the deficit took off just as inflow rapidly outpaced outflow. 2001 showed a little bump in the trade deficit when the inflow fell a little sharper than the outflow. Take a close look at the end of the second graph. The difference looks to be about $600 billion, matching the trade deficit in the same time period.

Trade is a cozy relationship. When a country does well, wages go up and it imports a lot, increasing the trade deficit. But wealthy country are also great places to invest and that money is sent back in another form: capital inflow. Some sectors are helped and others are hurt, but in the big picture a trade deficit isn't something to be feared.

What Businesses Want

Conventional wisdom hold that corporations love free markets, which is why they don't want to be nationalized. However, some economists note that corporations hate free markets, which is why they lobby the government to get special laws that make their job easier (subsidies, tariffs and so forth). Both have a good point. How do we reconcile this?

The fact of the matter is, corporations love the free market to the extent they love competition. They want a lot of flexibility to sell their product and a lot of flexibility to buy inputs (workers, materials, energy, etc). When selling, they hate competition, thus they want little free market activity. They desire special favors and exclusive contracts. It makes selling easier. When buying, they love the free market. They want the cheapest stuff possible and the ability to change their minds. This is what the free market allows.

So what do they like more? Generally, inputs exceed outputs so companies have more to gain by restricting trade on a particular product than to liberate trade on a different product. But the relationship is far from pure.

Price Controls and the Great Depression

Arnold Kling and Brad DeLong have been debating the merits of the New Deal. One of the aspects that I dislike the most was the price fixing, some of which still remains today in agriculture. In the book How Capitalism Saved America, Thomas DiLorenzo quoted John Flynn on the price fixing behaviors. There were code enforcement police in the New York garment industry who

roamed through the garment district like storm troopers. They could enter a man’s factory, send him out, line up his employees, subject them to minute interrogation, take over his books on the instant. Night work was forbidden. Flying squadrons of these private coat-and-suit police went through the district at night, battering down doors with axe looking for men who were committing the crime of sewing together a pair of pants at night.

A tailor from New Jersey was arrested, convicted, fined, and imprisoned for pressing a suit of clothes for 35 cents when the legally mandated price was 40 cents.

I’m not the sort of neo-Keynesian who believes that sticky prices cause recessions, but when prices are this sticky and with such a brutal enforcement mechanism (especially when going through massive deflation) I would argue that sticky prices, or price controls in this case, did contribute to the depth of the depression. (Not that they caused it, but were another factor.)

Safety In Numbers

The vast majority of humanity is not stupid. We certainly make mistakes and are sometimes careless, but we are not stupid. Certainly not when it comes to our personal safety. If you bought that you are, apparently, wrong.

New York senator Carl Kruger knows better. "We have a major public safety crisis," he said. What is this crisis? Drunk driving? Terrorism? Nothing so obvious. The new culprit of our time is far more user-friendly. It's the iPod, that dreaded device so alluring that people become brainwashed and stumble into on-coming traffic.

Kruger wants to save us from ourselves (or rather our catchy tunes) by proposing a bill making it illegal to use any electronic device while crossing a street. Violators will be punished with a $100 fine. I personally don't care enough about my life recall childhood lessons about looking both ways, but $100? That's 100 frosties!

Over the past five months, Kruger has personally heard of as many as three iPod-related deaths. Maybe that fine should be $110 just to be sure.

February's Most Random Wikipedia Page Is...

List of objects dropped on New Year's Eve. It's about time we had this article!

This month's installment marks the 12th random Wikipedia article I've tracked down--I've officially been doing this for a full year. While I'd like to maintain this tradition, a couple of events make me hesitent. The first is Mike's discovery of this page, a Wikipedia article that does continuously what I do only monthly.

While merging my monthly "column" with the list, I stumbled on a second reason: some of my Wikipedia articles have been deleted, notably the one that started this whole mess: List of sets of unrelated songs with identical titles. (Other items nominated for deletion that day: List of fictional characters that regularly wear shorts, Veil Fetishism, Tuba (mythology), and perhaps the one I disagree with the most, Bureaucrash.)

PS: Runner up this month was Pipe Smoker of the Year, a discontinued award which honors famous pipe smokers. However, my research for the above paragraph led me to this month's winner; I couldn't resist.

The Corporations and the Communists

A couple of weeks ago, Russ Roberts interviewed Bruce Yandle who founded the regulation story of "the bootlegger and the Baptist." This actual alliance is forged from some good intentioned legistation: no selling the vile alcohol on Sundays (the moral high ground that Baptists take). But bootleggers like the law, too. They don't mind breaking the rules so they step up to meet the demand for drink and the law keeps competition out (and prices high). Both groups hate each other, but one has the ethical argument people will support and the other has the money to spread the word. The lawmaker becomes the go-between.

The story of the bootlegger and the Baptist illustrates that regulation has two parts: an ethical center and an economic justification. Knowing this, it is not surpising that in 2005, Wal-Mart called for a hike in the minimum wage. They strangely cited their desire for helping working class families. Strange because they don't need Congress's permission to pay their own employees more.

The bootlegger and the Baptist illustrate Wal-Mart's devious plan. Big businesses know they can afford higher wages while small mom-and-pop stores can't. Thus corporations can pick the pocket of the American people while cloaking themselves in the Baptist's morals. And the Baptists are fooled every time.

NetPrizes

NetFlix is offering one million dollars to the first person that can improve their system (which matches people to movies) by 10%. The company provides the contestants with a bunch of random data and a program that measures the attempt's accuracy. The contest is less than a year old but the leader is already at 6.75% improvement.

Here's the New York Times article which mentions two advantages to prizes: paying for results, not proposal (as grants do) and anyone--not just the usual experts--can try. I can think of two other advantages: allowing people to try whatever out-of-the-box idea they wish and creating a competitive atmosphere that demands constant progress.

Hat Tip to Donald Boudreaux.

iPrices & iPractices

A few days ago, my brother sent me this article critizing the new iPhone. The author--Adam Frucci--complains that Apple lost a golden opportunity to restructure how phones are sold in the US. Instead of selling the phone and letting people determine the carrier (as the practice in Europe), Apple sold the phone the conventional way: at a discount with a two year contract to a particular carrier. (Frucci thinks the iPhone wouldn't have a higher price if it didn't require a contract simply because half of retail price is profit. This is nonesense: the price is determined by what people are willing to pay, not by what the profit is.)

Frucci goes on to call the wireless industry "anticonsumer" and Apple's actions will lead to them "to start thinking they can rip us off even more." Most plans give people free phones, free services, free minutes, people you can talk to for free all the time and free text messaging. If Frucci thinks he's being "ripped off" he should switch to a land line.

Dream Tax

In 2005, Brian Emmett won a contest from Oracle Corp to travel into space--fulfilling a life-long dream--but it would cost him $25,000. This isn't for some hidden company fee or for bribes that allowed him to win, it's the taxes. To collect his winnings, he'd have to fork over to the IRS a quarter of a grand, a sum too much for this software consultant.

Emmett won't be traveling into space--the software consultant isn't willing to go into debt. As this fledgling private sector sets out into the final frontier, Emmett's story is a vivid reminder how government can still slow it down in the most unremarkable of ways.

Reichnomics

On Kudlow tonight, Robert Reich insisted that states should spend their growing surpluses on schools, roads and other infrastructure and not tax cuts. His justification is one needs to do this to keep the economy going well.

I'm not really sure what Reich thinks people do with the money they save because it doesn't go to taxes. Burns it, I suppose. But I do know what they actually do the money. They save it or spend it, creating the next economy or pushing this one to greater heights.

Lawyer Up

Mike--who's in law school now--and I got in a brief debate about the economics of lawyers. I told him that as society increases its number of lawyers, that tends to encourage the existence of more lawyers. He didn't buy it and he had to go before I could explain myself.

From any one person's perspective, one lawyer is often a substitute for another, just like apples, candles, cars and trips to Japan. However, from a macro perspective, each lawyer complements at least one other. If you and I are involved in a dispute and you get a lawyer, that makes me want a lawyer, too. (This sort of feedback happens a lot in divorces.)

The market for lawyers is similar to that of advertising. When Toyota puts more ads out, Ford has a greater incentive to secure more air time. However, since lawyers work with the law--which the state uses to take capital by force--I'd argue companies are even more careful about keeping their legal budgets up (in recessions, ad budgets are the first things to go but I doubt the legal department takes a big hit). So I claim lawyers breed more like rabbits than any other occupation.

The Nature of Property

In the new issue of Econ Journal Watch, Daniel Klein reports on a survey he's completed on why some economists support the minimum wage. Of the 644 economists (those who signed a petition supporting the minimum wage) he sent the survey to, 95 completed it. A handful refused to do the survey, among them was Henry J. Aaron of the Brookings Institute who sent this short letter. (The sentence Aaron is referring to says "In one manner of speaking, liberty is freedom from political or legal restrictions on one’s property or freedom of association.")

Aaron argues that "[p]roperty does not exist apart from political and legal restrictions on its use." This is a very strange definition of property. It says that the only private property that can exist within the realm of the state thus the moment the state legally changes the nature of property, that's all there is that can be said. While this might resonate with some, for me it's analogous to magic; saying these magic (legal) words redefines reality.

It would be more accurate to say that private property is mainly a social construct, not simply a legal one. People acknowledge that I and I alone own X. The law reinforces that sentiment and provides a structure for the few people who defy my property to be punished. In developing countries, people lay claim to things even though their ownership is not recognized by the state. Yet in the daily, practical sense of the word they own the item, be it a business, home or spoon.

Private property is also a philosophical construct in the sense that everyone owns their own body (this gets a little strange with children but let's stick to adults for now). If the state said all people of a certain religion are can be enslaved by others, I'm sure Aaron would recognize this as a violation of private property. A person owns their own body. Building on that philosophy, people also own things they build, assuming it doesn't contradict with existing property. If I own a pile of dirt (or no one owns it) and I turn that dirt into a mud hut, I own the hut even though the "dirt" doesn't exist any more. That claim can be backed by legal wording or not, but most reasonable people would agree I have a valid claim regardless.

There is no doubt that the state influence what is and is not private property but I have a hard time accepting that property is and always whatever the state says it is.

Rolling the Loaded Dice

While taking a break from the sudden list of eighty-three things I've had piling up, I watched a bit of a Star Trek: Enterprise episode, of which the Sci-Fi Channel has been rerunning. In the episode, the Captain decides to give the ship a major weapons overhaul instead of returning to Earth's solar system so they can better defend themselves against a virtually invincible foe.

Later, the Captain regrets a decision to rush this new ship out of space dock, before these weapon enhancements were complete. His chief engineer reminds him that he had to accept that risk because the reason it was rushed out was to complete an important mission. He finishes his little lecture by noting that other pioneers of space (notably the ones of our era) sat on millions of liters of rocket fuel--they took on great risks too. That's what it means to do amazing things.

He was clearly talking about NASA, which I found strange. There is no doubt that the astronauts are brave, but the risks they take are not the seat-of-your-pants, on the fly, kind of risks. Those are best left for true revolutionaries, like when the Enterprise left space dock incomplete. The risks NASA astronauts take are calculated risks. Extremely calculated. NASA astronauts are not some "space cowboys," living by their wits alone, bravely the blackness of space like a rugged invididual. They are arms of a bureaucracy. Risk takers? Yes. Legendary heroes? Not quite.

The Dangers of World Exclusion

Everybody has at least one thing, a critical issue that gets them excited and motivated. It can be of vital importance (human trafficking, free trade, the Iraq War) or trivial (celebrity gossip, video games) but it always lingers in the back of their minds. This sort of specialization can be valuble, just like specializing in a job is, but it can also prove dangerous because the person will gladly ignore all other considerations with barely a thought.

We see this all the time. Some people who don't like immigration will hold the country's feet to the fires of destitution with barely a second thought. Others are willing to risk the wellness of the whole of humanity to save a handful of rodents. There are even those that cite the Bible to justify hating homosexuals while blissfully ignoring the Good Book's doctrine of "love thy neighor as thyself."

These people--and others like them--refuse to even acknowledge the rest of society in pursuit of their personal ideals. The tendency for world exclusion sits in the very heart of the statist's mind for laws by their very nature pursue one goal over all other considerations. It is vile and ignorant and sloppy and is perhaps the one these all these disjointed interests have in common.

Falling Gas Prices

Recently David posted about gas prices. While gas prices have recently risen, they have actually decreased relative to wages. In other words income has risen faster than the price of gas over the past 80 years. The book Myths of Rich and Poor gives a good chart.

Year Minutes needed to work to purchase a gallon of gas
1920 32
1930 22
1940 17
1950 11
1960 8.3
1970 6.4
1980 10
1990 6.5
latest 5.7
(No year was given for the latest date, the book was published in 1999)

Follow the Sandwiches

For the past few days Steven M. Warshawsky from American Thinker engaged in a minimum wage debate with Cafe Hayek's Don Boudreaux and Russ Roberts. Since Mr. Warshawsky seems to have stopped posting on Cafe Hayek (though one has to admire how long he kept commenting to people who disagreed with him), I thought I'd quickly show why the minimum wage has a negative net impact on the economy.

Warshawsky doesn't think anyone can pull this off. In his post about the minimum wage, he said:

However, it is not obvious a priori that total welfare will go down as a result of a federal minimum wage increase from $5.15 to $7.25 per hour.

In other words, one cannot intuitively demonstrate that raising the minimum wage will make society worse off. But actually this is quite easy.

Consider fourteen people at McDonald's working for $5.15 an hour, each making Big Macs (it's a busy McDonald's). In total, it costs McDonald's $72.10 to employ them all. Now suppose the minimum wage rises to $7.25 and management responds by firing four Big Mac makers. In this new restaurant, there are ten people pouring the secret sauce, with total costs of about the same as before: $72.50 (do me a favor and ignore the forty-cent discrepency; it is not needed to understand the point I'm making).

At a glance, Warshawsky is completely correct. Four people get fired but ten people benefit. How can one tell if society is better off from this? It's a wash--money is merely transfered from some people to others. In the big picture, the world is the same.

But now take another look. In the $5.15 world, McDonald's made fourteen Big Macs. In the $7.25 world, it makes only ten. The movement of money is ambigious, but the number of Big Macs is not. Society is strictly poorer.

Now one could claim that people earning more would be more productive--we'd get eleven or twelve sandwichs, not ten. But that's still not as much as fourteen. What if in the $7.25 world, the ten workers made fifteen? Then society has gained, but in this world, a minimum wage hike is not needed; McDonald's would have every reason to raise wages on its own. This is what Henry Ford did on his assembly line when he raised the hourly rate: the increase in worker productively more than made up the extra expense. By definition, firms which raise wages because of the law would not raise them because doing so betters productivity.

This example can be applied to all sorts of scenarios. Maybe the company didn't fire any workers and the money came from the CEOs. That means they couldn't spend those dollars on more investment in the company or a trip to Paris or a donation to cancer research. Maybe the prices rise. That means consumers spend less on many other things: a notebook here, cell phone minutes there. From person to person it is merely a transfer, but net production decreases. Society as a whole is made worse off.

Q.E.D.

Moore Nano

Do you have a cell phone on you? Or an iPod? How about a PDA? Do me a favor and pull it out. Now take a good look at it because what you are holding in your hand is some of the most densely packed computing power the world has ever known. Even a simple pocket calculator--available for just a few dollars--would put to shame the military grade stuff used in the Vietnam War. Probably shame stuff a lot more recent, too.

In 1965 Gordon Moore, following current trends in technology, proposed that computing power would double every two years. This is better known as Moore's Law and unlike most projections, this one actually holds and it holds really well. Take a look:

Note how well--almost perfectly--the data matches with the projections and think for a minute how astounding the claim is: double every two years? If your income doubled every two years and you started out with one dollar, in forty-two years (how long the Law has been around) you'll be making an annual salary of $2,097,152. Doubling adds up at a break neck pace.

The numbers grow so quickly, some people think it can't possibly keep going like this for much longer but it looks like they are going to be proven wrong. Nanotechnology--or manufacturing at the atomic level--might just allow engineers to side step the nasty overheating and defect problems thought to be the Achilles' heel of the doubling pace. The new chips are due for release as early as 2010.

People sometimes put too little faith in the capacities of technology, thinking the best humanity can do is always right around the corner. But when it looks like even Moore's Law is going to hold out well into the next decade, one must consider these pessimists to be underestimating humanity's capacity for innovation rather than having a special insight into the human condition.

Chasing the Dream

Discussing Martin Luther King Jr. I heard an NPR commentator complain about people who "misuse" his words. Her example was the idea that people should be judged "not by the color of their skin but by the content of their character" being cited with arguments against affirmative action.

I'm not sure what Dr. King would think of affirmative action but I doubt he'd like it. The legislation lowers acceptance standards for people of certain races and necessarily crowds out more qualified people because they literally have the wrong color skin. This is not "positive discrimination;" this is racism.

There is no doubt that these policies are well intended, but that hardly matters. They are disastrous not only because they fail to accomplish what they set out to do, they sow animosity between peoples. This should come as no surprise. When the law elevates one group above another, such preferential treatment always breeds hatred. Growing up under Jim Crow (a more extreme example of inequality to be sure), Dr. King would have been acutely aware of this.

This is why he embraced non-violence. This is why he spoke about togetherness and equality. This is why his dream was "one day on the red hills of Georgia the sons of former slaves and the sons of former slave owners will be able to sit down together at a table of brotherhood." Affirmative action does not aid that dream.

Slippery Oil

As the NYSE closes for the week, crude oil prices continue to drop. Take a look at this chart I made at hawaiigasprices.com, covering three years of American average gas prices.

Note that while we experienced steep rises about ninth months ago, four months ago witnessed steep declines. And prices continue to fall (though the holidays made a slight bump). While there has been an overall real increase in price over the past few years, considering the rise of China and the growing economy elsewhere, the increase is rather mild.

It certainly dispells the "evil corporation" myth we heard not more than a year ago when prices were on the rise. Are Shell, Exxon Mobil and BP suddenly altruists because the prices have fallen? No, of course not. But it does back what the CEOs said when Congress hauled them in to testify: most of the profits go back into the company to expand capacity.

This is yet another reminder why people shouldn't make permanent laws in reaction to sudden market changes because those changes are almost always temporary.

Minimum Stage

The new Congress is well on their way to increasing the minimum wage and Mike mentioned briefly that he's had frustrating conversations about the subject with his peers at law school. They tend to focus on the person that will benefit from the rise of wages, a common (and incomplete) argument to defend the rising wages. I argue that his peers don't care about the arts. The logic is actually pretty straight forward (and hopefully I'm not missing any bits).

1) Pay more for people to work and a firm has less money to spend on other things. (For some reason that continues to be beyond me, some people have a hard time understanding this. I wonder how they stay in their budgets.)

2) There are very few artists who are critical to the success of a company; most can be fired--or be turned down for hiring--with relativity little pain.

3) With less money in their pockets, firms will hire fewer artists and, thus, society will have less art.

This basic idea is hard to directly observe because we live in such a vast and complicated economy, hence why the "mere" story is so critical. But the logic holds. People and firms tend to buy art (everything from advertising to paintings to theater) when they have disposal income. The minimum wage diminishes that income. If the populace has a difficult time understanding why the minimum wage hurts the economy as a whole, then perhaps economists will have an easier time explaining it if people see why it hurts this one section.

(A related argument against the minimum wage is the point that the higher the wage, the fewer employees firms are willing to hire but for some reason, people have an even harder time understanding this truth.)

Build A Baby

Suppose a pharmaceutical company created a fantastic new drug that could eliminate the chances that a fetus will suffer from birth defects. The usefulness of this miracle drug, however, commands a high price so only the very wealthy can afford. Despite that barrier, I doubt the average citizen would complain that the drug exists. Indeed, they would be far more likely to demand that the government subsidize the drug.

Contrast this with genetic engineering--for all intents and purposes a better version than this hypothetical drug. It is very possible that in the next ten or twenty years human beings will have the ability to genetically improve their offspring, transforming the average person into an athlete genius. In an episode of Law and Order: Criminal Intent I saw recently, the main characters encountered a suspect that was on his way to perfecting such a process. The characters actually complained that the technology would increase the gap between the rich and the poor thank to additional advantages the child would gain.

For some reason, people are very averse by genetically altering someone to make them better than average. They are fine with altering their biology to make them average and it is expected that parents do everything they can to elevate their children above average, but people can't stand the thought of starting that improvement process before birth. I am not sure why.

This little story exposes a disturbing reality about how people think about their relation to the economy. If science makes a person better than she would be otherwise it not merely a gain for that person and her family. It is a gain for the whole of society. The reason why the genetically improved would be richer is because more people than before would decide that this person betters their life. To conclude genetic engineering only benefits those who can afford it demonstrates a poor understanding of how the economy works.

The Pursuit of Pleasure

On Kudlow and Company today, Larry Kudlow and Art Laffer lamented at a Gallup report that claimed half of all Americans cite "getting rich" as a high priority goal (or the priority goal, I can't remember). "Only half?" they said. "That's horrible." Laffer thought it should be 100%.

Let's set aside the fact that people are diverse and some want to simply retire or raise a family or live a quiet life. Getting rich is expensive and is not a goal for everyone's tastes and lifestyles. Instead I want to point out the hidden success story in that poll.

If lots of people aren't focusing on getting rich, that means they don't see a need to get rich. They can live a happy life much easier than before. We are so wealthy, people can spend their time pursuing things they desire but cannot be bought. That's a sign of our economy's strength, not its weakness.

Not About Science Anymore

Tim Swanson today posted a nice article on the Mises Institute about NASA, noting that the opinion of the agency is over-rated. Some of its more popular invention credentials are urban myth, its PR celebrates what should be routine and, of course, there is always the lingering question of lost opportunity (see my recent post on the subject).

NASA is a strange animal when it comes to political agencies. Yes, it is subject to all the shameless politics and waste any government organization is prone to but it is also a brand. When a company produces something based on NASA technology, they proudly proclaim it, knowing it raises the profile of the product. Eagle Eye sunglasses cites the government origin of their technology on their website. Better yet, in the Temper-Pedic commericals (where that dorky-looking guy jumps up and down next to the wine glass on the mattress to show motion is not transferred) the NASA logo leaps on the screen.

People have a lot of faith in NASA and this makes it easier on the agency to get big budgets and political support. They can fail utterly and not be punished for it, sometimes not even politically. By trumping every event as a success, they maintain a high public opinion and thus only have to produce a trivial amount of expensive and minor accomplishments.

The space shuttle was supposed to be a reuseable space craft that could land like an airplane and, now over thirty years old, the design is still celebrated every time it doesn't crash. That cameras still gather to report the launch and landing of the shuttle demonstrates that the vehicle is a failure and exposes the agency not as a scientific haven but a typical bureaucracy with atypical public relations.

Hat tip to Jeremy Horpedahl for sending me the Mises article.

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

Species with "New World" in their name. Quite fitting for the new year, I think. Happy 2007 everyone.

Every Invention Has Its Costs

While visiting home this Christmas, I mentioned to a family friend my research for my dissertation. It consists of demonstrating that competitive structures like the Ansari X Prize (a $10 million prize to the first privately funded team that could get into space twice in two weeks) is preferred to a centralized structure (such as NASA) for the purposes of discovering new technology.

In this brief discussion, my brother seemed it necessary to point out that contestants used NASA-made technology to accomplish the task. He is correct, but I fail to understand the relevance. He is probably suggesting that the base technology everyone used could have only come from a state agency, in this case NASA. This sort of argument is common in the economics of science and it is foolish, just as it would be foolish to claim that because the free market invented the Apple computer, a state agency never could. The question is not of possiblity--given enough time, money, or people any organization can invent anything that is scientifically possible--but of relative cost.

For some reason, people groan when I talk about costs. I'm told that they are not everything and that's true: otherwise gum would always be preferred over a car because it's always cheaper. The benefits must also be weighed. Yet it is those that claim I think costs are everything that then turn around and claim benefits are everything. NASA created an invention, they might say, and thus we must be better off. I hope you can see why this logic, which refuses to ask what society gave up to achieve this marvelous invention, is flawed.

To insist technology should be created merely because the result might prove useful to the private sector is the same as scouring the streets for hours on end in hopes of finding money left on the sidewalk. There are cheaper ways to improve quality of life.

Santa Scrooge

Last night, Dickens' classic A Christmas Carol was on TV. I watched, mostly because Patrick Stewart played Ebenezer Scrooge, but while watching I was reminded of a common economic mistake.

Scrooge is portrayed as a villian in the story because he has no love for Christmas and only cares about money. Perhaps the greatest victim is Bob Cratchit and his family, who barely scrape out a living trying to keep from starving on Bob's lowely salary. The spirits that visit the businessman late at night convince him that caring only for money will be the moral death of him and he will be forced to wander the world in ghostly chains for all eternity after he dies as punishment. To save himself from this ghastly fate, he must embrace the "Christmas spirit," which he does with full force at the end of the story.

Yet woven beneath this tale of Christmas goodwill is an economic lesson, if you are willing to see it. Charity is a fickle mistress. By their nature, people often donate in certain times of the year, Christmas being one of them, yet the poor and homeless need things all year around. Are the starving more hungry in December than January? Are the diseased more infected while choristers sing than when the streets are silent? Of course not. Charity flies in and out based on the random fancy of others. I have nothing against it--people should do what they wish with their own earnings. But to condemn a man because he is not charitable at a time when everyone else empties their pockets lacks an understanding of everyday needs of the needy. Indeed, if Scrooge was generous only during the holiday (but the same other times) I doubt the Spirits would have seen a need to visit him.

And here is the great lesson in this classic (at least the movie version) because Scrooge understood giving far more than they. Upon his epithany of virtue, he proclaimed he would have the Christmas spirit in him all year around. Not once a year for a day or a week but all the time. Incidently, Bob Cratchit also understood this for on his family's Christmas dinner (before Ebenezer's revelation) he toasted his wretched boss because he is the one that pays his salary (once again) all year around.

And this is a great lesson of the morality of trade. Capitalism and the pursuit of profit gives a reliable reason for people to ensure their fellow strangers survive. Charity, while seemingly more moral, is contingent on the daily fluxuating depth of another person's humanity. A man who eats a feast in one month and starves in all others will probably die. But the same man who dines modestly every day of the year will survive and prosper. Charity has its place but if you want to ensure the continued prospertiy for the most people, Tiny Tim better make sure God blesses capitalism, too.

Brian's Song

I knew I had to write about this the moment I read the title: Enough About You: We've made the media more democratic, but at what cost to our democracy? It's an editorial by Nightly News anchor Brian Williams in this week's Time. The piece is a direct criticism of the emerging culture that spawned this year's Person of the Year: You.

Or rather everyone that's contributed to the plethora of user-created content that's swamping the Internet and influencing everything else. Blogging. Wikipedia. YouTube. It is hard to overestimate their impact in how people are exchanging ideas and spreading information. But Williams thinks it's trouble brewing.

It is now possible--even common--to go about your day in America and consume only what you wish to see and hear...The problem is that there's a lot of information out there that citizens in an informed democracy need to know in our complicated world with U.S. troops on the ground along two major fronts. [Original emphasis]

There is no doubt that, in part, he is right. People can live their lives without being exposed to other ideas. Of course, they could always live their lives that way: it is very easy to not read or watch something you don't like.

What Williams is saying, though, is that he doesn't like what people are specializing in and they should turn to the "unbiased" media for the whole picture. But no one is unbiased; everyone frames or colors a story to their liking and while some are more neutral than others, no one is innocent. When anchors such as Williams insist what they report on is what matters to everyone, they not only lie by assuming an air of god-like neutrality, they arrogantly assume everyone cares about the same thing or views the world in the same way.

Because everyone knows that user-created content is biased, they are more willing to search out the other side to get the full picture. True, there are those that won't and simply consume what they like, but you can't do anything about them. They have always existed and they always will. But today it is harder to be them because it is so much easier to be challenged. Everyone knows everyone else's sources are biased so people are more likely to read up (and it is easier to do so).

And this points to the great flaw in William's article. He argues that we might miss the next great idea because we focus so much on "the same tune we already know by heart." But these great things, by definition, are for everyone and their truth appeals a mass audience. In the previous world of the narrow media, revolutionary concepts more easily fell through the cracks--only a relatively few people had to miss them. But today's wide media catches so much more. The constant spread of information makes it less likely--not more--that we will miss the next big thing. It is not that we might miss the next revolution; Williams is concerned because we might now recognize the absurdity of his selections.

iReputation

This Christmas, I'm finally jumping on the bandwagon and asking for an iPod. A conversation with Becky got me thinking as to why the economy often bears witness to consumer trends. Some might claim that people are stupid and buy whatever ads tell them to buy. Or that they are superficial and competitve, buying a thing because everyone else buys it. These are both only part of the story (if they are a player at all) and often leave the question unanswered.

An often cited explanation is what economists call path dependence. A new product hits the market, a few people but it and like it, products are made and perfected to work with it, encouraging more people to buy the same product. People buy iPods more than their equivlent because of the plethora and quality existing other products (from iTunes to adapters).

Another explanation is related but distinct enough to mention on its own accord (and is also the reason I requested an iPod). Every year, countless cutting edge products enter the market, most of which often fails in unpredictable ways or doesn't live up to expectations. And even if it does what it is supposed to do, it is hard to tell how useful the new, expensive device will be.

Thus, reputation matters. I personally am looking to jump on the bandwagon because testimony after testimony suggests an iPod is a quality product I'll use all the time--you won't know how you lived without it. I know nothing of mp3 players--iPod's competitor. I'll bet that reputation plays a large part in why some products triumph over others which are very technologically very similar. It's not that people are mindless consumers. Indeed this explanation shows most of them are thoughtful and cautious buyers, a tendency that increases as the price does.

Free Trade, Fair Trade and What We Have

Mason's student newspaper--Broadside--had an article concerning fair trade, advocating university students take up the practice. I was actually surprised by the article. Instead of the same emphasis on "market failure," Tsedey Aragie makes note that the WTO isn't about free trade (though I would argue it promotes a trade that is freer than what was standard before its conception). Some fair traders even acknowledge that local and supra-governments (WB/IMF) are a key source of strife.

Normally, I agrue that free trade is fair trade. But what is "fair?" If by "fair" we mean that each side benefits equally, then virtually no trade is fair; that bar is set too high. Instead, I checked dictionary.com; the first definition is "free from bias, dishonesty, or injustice." Note that free trade restrictions violate these things, especially bias and injustice.

Sometimes people make mistakes because people are not perfectly informed. Again, this does not inherently remove fairness. It might be unfortunate, but it is not unfair. Still, people might be conned, an act made unfair because of its dishonesty. In essence, these are contract violations (one of those few things I think the government should do: enforce contracts). Still, I don't see how this is grounds for distinguishing between free and fair. Just because people are being paid less than other people think they should be, does not mean they are victims of dishonesty.

What we have is neither free nor fair trade. Government restrictions on the former create less on the latter. I'd be more impressed with fair trade if its backers lobbied to create more free trade.

The Truth on American Oil Dependence

When I say "the truth", I mean "Pravda", as in the Russian newspaper (now owned, I believe, by the government Gazprom business). While the paper is mostly filled with "Paris Hilton and Britney Spears have lesbian sex" articles, there's occasionally an editorial tossed in for good measure. They usually run along the lines of "America seeks to destroy Russia", or "Poland seeks to destroy Russia", this one is a bit better than the usual.

And so, rather than focusing on Pravda itself, let's get down to the meat and bones of the issue it handles. The article I linked above describes a "...group of leading US business executives and senior military officers..." who delivered a report on oil dependency to the White House and Congress.

The participants include Fedex, UPS, and Dow-Corning executives, military high muckety-mucks, et al. Their conclusion is that:

'“pure market economics will never solve the problem” of US oil dependency.'

Where to begin?

Let's start by saying that a pure market is a pretty far cry from the US economy (though closer than, say, Venezuela).

But what really interests me is the idea that "oil dependency" is a problem, and that it presumes that we're really oil dependent at all.

We use TONS of oil, there's no mistaking that. But oil dependency is the sort of statment that makes me think of drug dependency - we're not just talking about use, we're talking about the inability to stop, even if we like. That, dear readers, is the bull. There is nobody forcing consumers to continue using petroleum - as soon as its price rises, consumers will flee. That's hardly the reaction of a coke-head looking for their fix.

Yes, our energy needs have grown, and will continue to do so for the forseeable future, but that by no means ties us into petroleum. As prices for oil rises, new commodities become economical.

But let's say we ARE addicted, and that we can't get enough of the black stuff. The only problems I can see with this situation is the fact that petroleum products tend to be polluting, contributing as well to a greenhouse effect.

But that, friends, is a debate for another day - and one, I should say, that David regularly addresses.

Climatology and my Return

David's posted some interesting material recently about the fallibility of climatological models predicting great disaster in our near (i.e. w/in 100 years) future.

To add to the noise, I'm pretty confident that a huge variable hasn't been at all accounted for - volcanism.

What's the big deal? I mean, why get hot and bothered about a bit of lava? One word: Krakatoa.

I'm not so much worried about that particular volcano - it's watched like Michael Jackson at a cubscout jamboree - it's more what it showed us. Our everyday Joe American may not have heard of it, but believe me, it's worth knowing about.

In 1883 it heaved off some steam, launching the world into a miniature ice age of sorts (by heaving off about 25 cubic kilometers of said world, incidentally). All of this rock-vomit, according to Wikipedia, lowered global temperatures by about 1.2 degrees celcius, and the climate supposedly didn't return to "normal" for 5 or so years.

But that's not all this magma-muffin's dished out - far from it! Let me preface this with the disclaimer that this is a disputed thesis regarding Krakatoa as the direct cause, but the conclusions are solidly testified to in dendochronological records. That said, the real party started around 535 AD. Things are looking up for Rome, Emperor Justinian and his prize-fighter Bellisarius are out ridding their hood from the Germanic vagrants that settled in, and BOOM.

Yeah, that's an all-caps boom. We're talking major. Proto-Krakatoa let loose with the mother of all explosions, and all hell breaks loose. Global temperatures drop, causing crop failures, darkness during the day, and general misery. Teotihuacan in modern Mexico is abandoned. Barbarian slavs are pouring into the Balkans, nomadic pastorlist tribes in central Asia like the begin rampaging. Falling temperatures make it easier for plague to be transmitted, and there's a decade of incessant disease and suffering. The list goes on. You know, it wasn't the dark ages for nothin', folks!

Let me suggest that this is more than just a little blip in the data - this was a phenomenon that easily spread more than a decade. But what does that have to do with climate models in the long-run?

As David says, climates are sensitive, complex systems. Small disturbances in the present can have tremendous affects on outcomes in the long run, and this is a phenomenon that seems to be able to do more than just a little thing.

Who knows when a major volcano could erupt? Even more important, who has integrated this important tidbit into their climatological models of temperature change?

Less importantly to matters of public importance than the possibility of erupting volcanoes ushering in an era of catastrophy, I'll be heading to Moscow on Monday to get my daughter's passport, and my wife's green card. Just a few weeks then, and with luck I'll be back home!

Theory in the Fast Lane

My lovely wife and I were talking about driving in Russia, and one of the biggest differences that I can't get over is how many traffic-related deaths occur annually. I won't cite numbers, but it's much higher than the US rate, and this fact is amazing only because the US has something like 3-4 times as many cars per capita as Russia.

She gave me a wonderful theory, which I'd love to put more work into someday: that Russians have more accidents because more of them don't actually take the driver's tests to get their license.

You see, in order to get a license, you need to pass a test with around 500 questions. Since most people here aren't inclinded to study that hard for a piece of paper with a stamp on it, many just pay for their license, i.e. bribe someone. The friend-of-a-friend network puts people willing to buy licenses in contact with the right officials, and the result is that there are plenty of people driving legally (i.e. with a license) that ought not be driving at all (i.e. they don't have a clue what they're doing).

This is interesting in face of the European experiment regarding traffic laws - I'd be interested in knowing if we could find correlations between traffic fatalities and number and severity of regulations, etc.

I don't think this is nearly all of the explination - a good bit comes from the fact that they plow the roads so poorly in the winters, for example - but it's probably a larger part than it ought to be.

Might I suggest adopting a more, dare I say, humane licensing schedule, involving perhaps a dozen or two questions at most? People might take the time to study, and in the end, less regulation just might end up being more.

The Lunar Connection

Yesterday morning I heard Howard McCurdy on the radio discussing NASA's endeavors to go to the moon. At first, I was very excited: McCurdy penned a book--Faster, Better, Cheaper--which pointed out the flaws in NASA's attempts to reduce the cost of its over-the-top budget and I've often used in my research. Naturally, I expected him to blast NASA's plans and expose the obvious fact that a base on the moon was going to be very, very, very expensive. I was wrong.

Though he acknowledged the costs would be high, McCurdy defended the bureaucracy and the mission on the basis that sometimes, to advance technology, people need to explore brave new challenges.

There is no doubt that radically new endeavors expand our understanding of the world, and thus our technological base. But the scientific community is not so creatively drained that a multi-billion-dollar mission is needed to inspire others. Nanotechnology, genetic engineering, quantum computers, fusion--these are all areas which are far from reaching their apex and also promise to fundamentally change the way we understand and manipulate the world around us.

There is little doubt that going to the moon (again) will expand science, but we are at a point where more "mere" lab work will do the same. Perhaps McCurdy really meant that space will provide a literal different view--as in one from space. But if that is truly what he wants into to shake up the thought patterns of scientists, I suggest instead a much cheaper option to inquirers the world over: go stand on your head.

A friendly aside...

Lest it seem I'm too rough on my good friend Mr. Putin, I want to make it clear that for me, the simple judgement of him as a tyrant yearning for the old Soviet days doesn't fit any more.

Oh, I think he's got a bit of that up his sleeve, but more to the point, I'm not sure he has as much control over the whole situation that is "Russia" as western countries would like to imagine.

Given the fact that his country experiences hundreds, if not thousands, of paid assassinations a year by government estimates, that crime is growing at a rate outpacing GDP growth, and that politicians, journalists, and public figures across the country end up dead in myriad creative ways, it's conceivable that there's a bit of a hissy-fit of power going on.

The old Soviets don't see the problem with "extinguishing" opposition; mobsters and ex-KGB have collaborated for years; billionaires occasionally try to wrangle some political clout out from behind their bucks.

It's a nasty, hostile mix. Add in the ethnic tensions (between Russians and blacks, Georgians, Chinese, etc.), the nationalist desires of the southern republics (Chechnya, anyone?), and the conflict of interests the military and intelligence-dominated bureaucracy has with their citizen-subjects, and I'm pretty sure you come up a bit shy of a pound cake.

A fruit cake, perhaps - and one well soused with the water of life, if you know what I mean.

So let's not be too hard on Mr. Putin - it seems entirely possible to me that he's doing his damndest to duct-tape and staple together a country together before it blows itself apart. If anyone doubts that Communism can produce these sorts of effects, take a look at the former Yugoslavia.

And given the murderous tendencies of some other elements in Russia, I'm not sure it's a bad thing.

For the record, Russia has nearly 3 times the per capita homicides annually as Zimbabwe and Zambia, neither nation which I'd think of as a safe tourist destination.

Why Anthropologists aren't Economists

I recently read on Dienekes' Anthropology Blog that a "pioneering" study has discovered that 2% of the world's population owns 50% of the household wealth.

Does that surprise anyone? Should it?

And does anyone else care that this is quite a remarkable egalitarian shift from the good old days when a handful of kings owned their realms and subjects due to heavenly mandate?

Back in the USSR

According to a research organization Eurasia Monitor, the largest group of citizens of the nations of Russia, Ukraine, and Belarus are regretful for the downfall of the Soviet Union.

I know this sentiment is especially strong in the older generation, which often feels betrayed and left behind by the democratic reforms in the post-Gorbechov era. The Yeltsin years were particularly terrible for people, and saw the savings of Russians flushed down the toilet as the government printed out so much money that the value of the ruble has still not recovered.

The suffering that the Soviet Union caused was incalculable. The post-Soviet-era pains stem directly from the economic stranglehold the communists held over the Russians for nearly 75 years; like any other correction, it was a painful one. As I mentioned, the pain was exacerbated by the political climate, with the bank of Russia printing money for, I suspect, the dual purpose of eroding national debt and harming the then-president Yeltsin.

With this era officially over, I'd think people would celebrate - even modern history books detail events like the Katyn massacre, Stalin's purges, Lenin's mass starvations, etc. But people, when living dangerously (as in dangerously close to starvation, as many people here were during the worst years after the USSR's fall), think with their pocketbooks and stomachs.

The government botched the transition to a market economy, and understandably people are pretty pissed. But going back isn't the answer.

Let me suggest that part of the answer is for cities like Irkutsk to not spend a million-plus rubles buying expensive artificial Christmas-trees from Ireland. Nor is it to establish a nation-wide vodka monopoly, as Putin has waxed poetic about. And it certainly isn't to allow Georgian immigrants to be beaten and deported because they bring cheap labor and products that the Russian people crave (like watermelons).

My solutions ideally center on hands-off approaches to the economy, while massively decentralizing the government to allow for regional autonomy.

But those are democratic solutions, and the bigger question that must be asked is not whether democratic reforms are needed, but whether the Russian people are willing and able to implement and use them. There seems to me to be such a strong ideology of central authority; in many ways, Putin IS the tsar, and as such, can do well as he likes.

Can ideology truly derail freedom in the world so well? I hope not for much longer.

EULA Fun

Can I possibly be the only person ever to wonder what all that garbage I'm supposed to read in one of those EULA (end-user licencing agreement) actually was about?

Of course, I've read one. But that was many moons ago, and I've long sense stopped caring so much - for the most part. But it brings to mind another question: as a licensing agreement, a form of contract, the scope of the agreement could potentially be as broad as the publisher wishes to make it.

I see no rational reason from preventing EULAs from doing things like preventing the user from engaging in certain types of business, certain types of activity more generally, perhaps even wearing certain types of clothing.

Now I'm aware of some limitations to contracts and exchange - having and failing to disclose prior knowledge of the value of a product, for example (which is, hilariously, the basis for all exchange - disequilibria of valuations). But in principle, there's no problem with this - you agree to it, and you're getting the compensation in the form of the software you use.

The question I'm getting at is tangential (as I'm sure such "abuse" of contract would be unenforced) - I'm wondering what the legal ramifications of ignorance of the terms of a contract are.

If I sign a labor contract, for example, stipulating that I shall receive 7 dollars an hour for labor, when I didn't bother to read and learn the specifics, my being upset later upon so discovering is nobody's fault buy my own.

Since legal language and lengthy, redundant documents are used, in a sense, as a tool to prevent people from reading them (and certainly from understanding them without legal council), there might be an argument that a blatantly deceptive contract is only partially enforcible...

Fat Chances?

Brilliance.

People eat too much of that which harms them, the only logical response is to take away the option altogether, right?

That's the leap that New York City has made concerning the use of trans-fatty acids in restaurants, and it looks like several other cities are following suit.

While I'd like to complain that this is just another silly example of people rudely being presumed by their servants (i.e. elected representatives) incompetent to make their own decisions; that they coopt the decisions that said people make as their best choices given available options; that the unseen costs and benefits are completely ignored; ...

I won't go on at all. I'm going to just ask people to punish their elected bitches by electing new ones to replace them for the vote of no-confidence in their bosses the present ones filed.

Will it happen? Hell no, it's comfy when someone else is taking care of your problems. The psychological stresses we can avoid by just taking the government happy-pill whenever a crisis (manufactured or reasonable though it may be) arises must truly be great, for I know many people that would applaud this decision.

But as I've recently blogged, our legislators have their hands filled with other worthy endeavors such as establishing official state muffins. This can't possibly be the place to look for output resembling sensibility.

I suggest all of our NYC readers (I'll indulge myself with the notion that we actually have one or more - but judging by the hit-meter, it's not likely) go bake a margarine-laden Apple Muffin and send it to city hall.

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

Pretty short this month: Palilogy. Even if you know what it means, I'll think you agree that this small, small, small article is random, was always random and will stay random.

The Thin Blue (Magic) Line

I had a conversation with a friend of mine the other day about the war on drugs. He strongly supported legalizing marijuana but backed the government ban on "harder" drugs such as cocaine and heroin. In fact, the only drug he seems in favor of bringing back into the private sector was weed. I asked him why.

"Because they're dangerous," he said. I reminded him that all drugs are dangerous, including legal ones like tobacco and alcohol. "But these are really dangerous." There is no doubt of this: heroin, for example, is incredibly addictive and dangerous, far more than, say, alcohol. But alcohol and heroin are not inherently different; heroin is just more of the same. So if one is okay and one isn't then there must exist a line that, once passed, makes it social optimal to illegalize. So where's the line?

I have not yet recieved an answer to this question that reflects current laws and I doubt I ever will (though the reader is welcome to try). The best boundry I can come up with is "when the drug starts to have an overall negative impact on the person's life." Heroin is more likely to cross that boundry than alcohol, but it ultimately depends on the person. Since an individual is the foremost expert on themselves (followed by friends and family), and people are all very, very different, a blanket law that treats everyone as the same will punish some unjustly.

Everyone has their own personal boundries, a fact that these laws ignore. To assume individuals are the same is social alchemy; I don't believe in magic.

Move Over Global Warming

In the recent hype of global warming, the sun has taken a backseat to anthropogenic causes of global warming. Yet in the slight warming that the earth has experienced over the past century, solar patterns have played an important role. Researchers from Duke

estimate that the sun contributed as much as 45–50% of the 1900–2000 global warming, and 25–35% of the 1980–2000 global warming.

Despite the fact that politicians have not denounced the sun, wasted billions, and held international conferences to accomplish nothing over solar patterns, the sun seems poised to do its part to alleviate global warming.

Researchers with the Russian Academy of Sciences warned Wednesday that the Earth could be headed for a 60-year cooldown, the news agency Interfax reported.

Scientists based at the academy's Pulkovskaya Observatory in St Petersburg, Russia, said they expected a gradual decrease in global temperatures in 2012-15, followed by a more dramatic, 60-year period of cold to come in 2055-60.

Khabibullo Abdusamatov, chief researcher at the observatory, said the predictions were based on solar cycles, and that after the 60-year glimpse of the Ice Ages warmer weather could be expected.

HT junkscience and Cato-at-Liberty

Don't Forget To Read the Fine Print

It can be hard to demonstrate, for a mainstream audience, why so many laws are absurd. Mike sent me this link that explains the lunacy of consent forms in the best way I've seen yet. I recommend everyone take a gander at it.

An Inconvient Model

Today Jason Briggeman of Productivity Shock ends Hurricane Week--a week-long recognition that no hurricanes made landfall this hurricane season. I applaud Jason's efforts to remind everyone the failings of climatology.

Like the global economy, the world's climate is a high-dimension, non-linear system (which is a fancy way of saying "there's lots of important factors and they are all connected"). These complex systems are nortoriously hard to model because all the variables interact with each other, often in unpredictable ways. Economists learned this the hard way, having spent decades attempting to map the global economy but with only very limited success. But this was not mere academic time wasted: the flawed economics led to flawed policy. Economies went haywire as simple plans were grafted to a non-simple system. Recessions and hyperinflation followed.

Today climatologists are doing the same thing. While they might have more success (software is better and the climate forces are usually more predictable than people), the science is not yet at the point where policy is a safe idea. It pains me that the climatology discipline seems to want to repeat our mistakes. Not only might this roll of the dice not result in a lowering of global temperature, with the world economy more connected than ever before the unintended consequences could be far worse than any economic policy.