The Angry Economist

The best thing we can do about terrorism is: nothing. It's not that terrorists don't create harm. It's that terrorism is not about the harm; it's about the fear. We kill, each month, more people in automobiles than were killed by terrorists on 9/11. But that's not the correct comparison to make, because the tactics employed by the terrorists cannot be reproduced. Nobody will sit still for a hijacking ever again. Thus, the real comparison is against the number of airplane passengers killed. We kill, each month, TEN TIMES more people in automobiles than the number of airplane passengers killed by terrorists on 9/11.

The terrorists are hacking our brains. Being a hacker myself, this is intolerable to me. Being a security professional, this is intolerable to me. They are trying to set up a situation where there is a very very very low risk of very bad harm. They do not have the ability to create actual harm. They can only create a harm that is terrifying (and I cheerfully admit that I cannot sleep when I imagine myself on Flight 93, knowing that I have to defeat the terrorists on the airplane or die).

The terrible aspect, when multiplied by the tiny risk, cannot be comprehended by the human brain. Such a small number, when multiplied by a large number, becomes unity. Thus, people overreact, even though the risk of death by being killed by a violent airplane passenger is equal to the risk of dying on the road in the next 9 days. As I write this, between now and Christmas, three weeks away, fully twiceas many people will be killed by automobiles as have everbeen killed by violent airplane passengers.

The solution to this problem is to not be scared. Not all of us arescared. We need those of us who are not scared to struggle against those who are. We need our political leaders to be strong enough to ignore terrorism. There is nothing they can do to stop it, so what they should do is nothing.

Terrorism is an evil hack, nothing more. It's a trick. We need to ignore it.

I could forgive them groping me if they would just acknowledge that nobody will ever succeed in hijacking an airplane, and allow anything which cannot harm the whole airplane itself. Enough with keeping bladed weapons off airplanes, including those hellish nail clippers. You couldn't even commit suicide with one, much less harm anyone else.

I could forgive them worrying about bombs on airplane if they would just acknowledge that the threat to sports stadiums, subway stations, or heck, busy security lines, are just as bad if not worse than airplanes.

I could forgive them worrying about terrorism if the terrorists could actually cause us more harm than we are harming ourselves. We kill 10X as many people EVERY MONTH on the highways as they killed airplane passengers on 9/11.

No, I can't forgive them.

Sigh. From time to time, leftists get up on their high horse, and think that they can come up with a single objection to freedom which completely smashes all arguments. Today's version of that objection may be found on elementropy, where it goes:

another question unanswerable by neoliberal economists: Who is our economy for?

I'm thinking that the author is not open to new light, but let me venture to answer today's unanswerable question: An economy is for people who trade goods and services with other people. Consequently, any interference with trade goes against the best interests of the economy. Government regulation of trade counts as interference.

Now, readers of that blog may think I'm INSANE. That's okay. 240 years ago, nobody thought a country could exist if it didn't choose a religion for its countrymen. A country without an established religion?? INSANE! Of course, we now know better (although there are some fundamentalist religionists who still disagree). In time, we will be able to convince people that freedom of trade is a civil right along with freedom of association, freedom of speech, freedom of the press, and yes, freedom of religion.

Not that I expect this one posting to change anybody's mind. It takes many drops to turn a wheel, singly none, singly none.

There are two kinds of poverty: relative poverty and absolute poverty. One could define the latter as lacking certain qualities of life; for example access to a minimum of 1600 calories per day, shelter to keep you warm and dry, and clean clothing appropriate for your climate and culture. There are many people who are absolutely poor. It's possible to abolish that kind of poverty. It is not possible to abolish relative poverty. Some people will always have much much more than other people; we call these latter "poor", often without distinguishing them from the absolutely poor.

Okay, this kinda of crap makes me angry, just angry. Go read the article. Do you see what's wrong with it? I see no distinction between legal prostitution and illegal prostitution. Now let's look at the difference between legal and illegal drugs. The first you can buy in any store (everybody sells aspirin), in controlled doses with brand names and labels. The police aren't involved, violence isn't involved, it's all up front and everybody knows what they're getting into when they start selling legal drugs.

So by the principles expressed in this article, because illegal drugs are risky, then, too, are legal drugs. Defending legal drugs clearly says nothing about illegal drugs, and yet the article does not distinguish between legal and illegal prostitution. The two situations are very similar in that the illegality is the CAUSE of the problems that make people want it to be illegal! Circular cause and effect! The solution causes the problem. You see this kind of reasoning everywhere. "Oh, oh, poor people don't earn enough money, so we will help them by forcing a minimum wage." and yet that destroys the employment of anyone whose productivity does not justify paying them the minimum wage.

This is NOT to justify any of the horrible activities described in the article. They ARE horrible, and they ARE horrors. But I suggest that all of them are caused by the illegality of prositution, and I encourage anyone worried by the article to examine the operation of legal prostitution.

Unions are against globalization. To listen to them, unions are a force for good for all workers (rather than just the workers who pay the union its dues). But to watch them, you can see that they're in favor of cartelization. They don't mind other people competing against them, as long as those people are hobbled by the same pay rate, protections, and benefits as the union members have. In other words, they're not allowed to use a lower cost of living, or a lower regard for their own safety, or a longer work week as a competitive advantage.

Sigh. Unions! Still selfish, after all these years.

Yo! Stupid conservatives! Y'all keep whinging about how wonderful it is that Arizona is FINALLY doing something about immigration. It sounds like you wish that the Federal Government would do its job and keep those dratted foreigners out.

Well, I have exactly zero words for you:

[nelson@desk ~]$ grep -i immigration ~/Constitution 
[nelson@desk ~]$ 

Well, I have exactly one word for you: emigration.
If the Feds can control immigration even though the Constitution doesn't give them that power, then they can also control emigration. So when the USA turns into the communist USSA and Der Presidente for life decides that you can't leave, where are you going to be THEN??

The Feds don't have the ability to stop people from entering or leaving the United States, and that's a good thing.

Hey you, over there. If you were offended by Mark Williams blog posting about a letter from Colored People to Abraham Lincoln, THEN YOU ARE STUPID. And you lack any sense of historical perspective. Many many people thought at the time that colored people could not take care of themselves. That freedom was too much for them. That they would have to think for themselves, and suffer the consequences of their choices. That colored people couldn't do that, and so for example, if you wanted to free your slaves, you first had to put up a bond against them becoming wards of the state.

So to pretend that "Colored People" were writing to Lincoln to agree with the racist opinion of the time, is just too delicious for words. It's absurd theater at its best.

I just have to shake my head. Again, at global government meetings, you have so-called "anarchists" who are demonstrating for their concept of peace and justice, which seems to include violence. But violence doesn't cause people to say "Hey, my government is engaging in violence. I must want less government". No, they say "Hey, my government isn't going enough to stop the violence. I should give them more power (money and privilege) so that they can keep these protesters in line."

It's like shooting yourself in the foot to promote foot health, to mix a metaphor.

I'm not sure Leonard Pitts is correct about Bobby Jindal rethinking his belief in less government. What if your next-door-neighbor contracted with a wind energy company to erect a wind generator, and it fell on your property? You'd be angry at the company, but you'd hold your neighbor responsible.

Now, the US Government claims ownership of the waters off the coast. It licensed BP to drill off the coast. That went sour, and Louisiana has been hurt. They're holding the US Government responsible.

This has nothing to do with the correct size of your next-door neighbor. Nor does it have anything to do with the correct size of the US Government (which does things not even remotely present in the US Constitution).

Government is the enemy in the case of this oil spill, since it didn't require remotely operated valves on the blowout preventer.

A bunch of people are tweeting and retreeting the question "I didn't look today, did the free market clean up the oil yet?". I have a couple of responses to that. First that there is no such thing as a free market. You're not free to sell something unless someone else is willing to buy it. That points to the conclusion that there are only customer-regulated markets and government-regulated markets. And that poses the question: who's the customer here, and if they're not regulating why not?

If customers can't regulate the behavior of sellers, then it's not even close to being that-thing-which-is-called-a-free-market. So that points to this: when governments regulate, they don't regulate in a vacuum. Their regulation displaces customer regulation. If you look at the oil industry, you'll find that it's regulated up the wazoo and back down again. Customers can't regulate because they're being prevented from doing so by government regulation.

Thus, to my friends who are asking this question, I suggest that since a free market isn't present in the oil industry, it's silly to expect that something which doesn't exist is capable of taking action.

And my second response is to ask what would have happened had this oil spill happened on private property. It's certainly the case that the property owner would have a contract with BP, and the contract would specify remedies. One way or the other, the property owner is going to be compensated for the risk of oil spills.

Who is the property owner here? Why, it's the federal government, which claims to own the seas off our coast. What does their contract with BP say? If it doesn't hold BP's feet to the fire for enough money to clean up the oil, then why did the government allow the drilling?

So the question is not why the free market hasn't cleaned it up yet, but instead why the government screwed up. Private companies fire incompetent executives, and if they don't do that, they go out of business. Who's going to lose their job over the irresponsible handling of the BP drilling? And if they don't, will the government go out of business?

The answer is obviously "no" to the second, and probably "nobody" to the first. And that, my friends, is exactly why you want to limit the things you let your government do.

Rand Paul points out that customer regulation of markets doesn't tolerate racism. Racism in a market is a commons. Anybody can be a racist, up to a point, but if too many people are racists, the market for racism gets destroyed. In order for all the racists to succeed in business, you need to manage this commons. Typically, this is done by government, and specifically, in the case of black racism, by Jim Crow laws.

Just another example of government regulation of markets making everyone worse off. It's a dangerous tool that we're better-off without. Yes, it can sometimes succeed, but most often it fails, and because the future is unknown to us, we can't pick the successes and avoid the failures.

Better to have separation of state and markets. Let customers regulate markets, not politicians.

I am disappointed by conservative's reactions (Fred Thompson, and Anne Coulter, to name two) to the Arizona legislation. They point to a higher crime rate by illegal immigrants, to which I say "When immigration is outlawed, only outlaws will immigrate." If you make it risky to immigrate, only those with nothing to risk will immigrate. Perhaps this will surprise some conservatives, but there are Mexican professionals like doctors, lawyers, engineers, and programmers, who have better things to do than come to the US and standing around waiting to be hired.

Also, I want to see the victim of the crime of illegal immigration. Name the victim, or else I'll claim it's a victimless crime.

Or maybe they want to claim that Mexicans come here just to go on welfare? Sorry, but the facts go against that; instead they work on fake social security cards for which they will never be able to claim the benefits.

Or maybe they want to claim that Mexicans are here to take American's jobs? Well, the day that a spanish-only Mexican can take an english-speaking American's job, is the day that Mexican deserves the job. If an American can't or won't work harder than a Mexican, I have no pity for them. If they're a victim, it's of their own laziness.

The proper version of "ignorance is bliss" is actually "WHEN ignorance is bliss," and it should be followed by "'tis folly to be wise." That's the short version of public choice economics, which points out that your vote counts for very little, and consequently justifies very little investment in making a quality vote. They call that "rational ignorance." Some economists go even further and say that because your vote counts for so little, you can vote emotionally rather than rationally. You can vote for a minimum wage because it makes you feel good, rather than voting against a minimum wage because it actually prices the worst workers (who need the most help) out of the market.

This posting has been translated into Belorussian.

I live on a rural road, with 10 houses per mile where the local cable franchise is only required to wire when there are 20 houses per mile. With practically no growth, it seems foolish to wait for anybody else to wire it up. We have power and telephone, and so plenty of poles. The trouble with poles is that they're tied up in engineering costs, pole rental, make-ready costs, and other bureaucrazy.

The alternative of burying or laying the cable on the ground seems like the only sane choice. Our road is about 50% fields and 50% dense brush/woods. So, burying in the fields, and laying through the woods.

I found some nice COE/CPE for $80 each end. Uses a single strand of singlemode fiber, transmitting on one frequency (color) and receiving on a different one. Gets you 100Mbps Ethernet. Or you can spend $250 for a box which has wifi, four Ethernets on a switch, and two RJ11 VOIP lines, AND a fiber cable tray (which you need anyway because bare fiber is very fragile).

Planning to do a home run, running a strand of fiber for each house all the way down the road. At the state highway there's Time Warner, Verizon, and the tri-county municipal fiber (but they only want to connect you at a POP, and they don't have a POP anywhere nearby). I could probably become an ISP and haul in bandwidth, but I'd prefer not to have to get into that business. Been there, done that.

The problem is: how do I get to the other side of the road? I could cut through the asphalt, but that seems like a lot of work, and wouldn't please the town highway department. Directional boring is expensive (and boring). I could go over on poles, but that gets back to the crazy. I could go over using trees, but there's a reason why telephone companies quickly abandoned trees: falling limbs.

Perhaps the solution is simply to run fiber down both sides of the road?

If you're interested in DIY fiber, join the Communities-United-for-Broadband Facebook group.

Apparently some Democrats object to the idea that Jamestown was run as a socialist enterprise, as Dick Armey pointed out. They say "Oh, no Jamestown was established as a capitalist venture to make a profit." Well, that's true, but internally (which is the only thing that matters) it was run in the same way as any socialist venture. There was no money, no market, everyone got free food and housing, and -- this is key -- there was no incentive to work because only the corporation made profits. Individuals who wanted to work harder than others had no incentive to do so. So naturally, the enterprise foundered, as any socialist venture does.

(Before you object by pointing to Sweden, do please consider that Sweden is nothing like a socialist country. It has high taxation and generous social benefits, but it has a vibrant and free market. Socialist countries don't have free markets. They have government-controlled markets. The idea that socialist countries can have free markets is a recent and ignorant one. Go read up on the history of socialism, and you will see that their first goal was to eliminate the marketplace, preferring instead government allocation of profits.).

Okay, now you can object with Sweden, but at least now you'll know in advance that I think you're wrong. And crazy, but mostly wrong.

There is no such thing as a free market. There are only markets regulated by customers, and markets regulated by politicians. If you want your markets regulated by politicians, you have to believe that they are better at running your own life than you are. I don't understand why you think that. If you think you can explain that to me, my email is nelson@crynwr.com

I first posted this in December of 2006. Nothing has changed since then. NOTHING. So I'm reposting it.

Health care in the USA is completely broken. Health care is a difficult problem, to be sure, but I think it's clear that we're currently solving it very badly. Two problems with health care: One is that people expect everyone to have the same health care as a rich person, even if they're not rich themselves. Another is that health care, not being exposed to the discipline of the market, is very expensive. If everyone gets the same health care as a rich person, then there is no pressure to create more frugal health care.

Health care then being expensive, everyone expects somebody else to be paying for their health care. This creates bizarre solutions. For example, in Canada, health care is paid by the federal government. In order to hold down taxes, access to health care is limited; typically by waiting periods. Or in the USA, most working people have their health care paid by their employer, except for a very small deductible. This makes it difficult for employees with health problems to switch employers. The government has created a ham-handed solution which permits former employees to continue their health insurance by paying the premium out of pocket..

Health care is important, without doubt. So is food (insufficient calories reduces your resistance to ordinary infections), but we generally don't expect everyone to be able to dine on caviar and steak every day. Many different kinds of food are available in many different venues and preparation styles, at reasonable prices. Yes, the poor may need to dine on beans and rice, but except for the most indigent, everyone can get enough calories, protein, and vitamins to stay healthy. Health care could be the same way; with cheap, worthwhile health care being available to everyone at affordable prices. We have chosen a different path; much to our detriment.

I'm using QR code permalinks now. If you're looking at one of my blog entries, and you want to load it onto your smartphone, just read the QR code and follow the link and you'll have the story on your cellphone.

Free markets are the most efficient solutions for all problems in the future. The trouble is that people are looking at the past and can easily see where free markets evolved into failure, and can easily see where political solutions created success. Thus, otherwise intelligent designing people want to give up on freedom and start telling others what to do, usually with a gun.

I don't believe in economic creationism.

When a government spends money, there are only three places that money could have come from:

1. Taxation -- by taking the money away from someone.
2. Borrowing -- by temporarily taking the money away from someone, with a promise of returning it at a higher value.
3. Inflating -- by printing money, which reduces the value of all the other money that people hold.

Of these, the last is the most regressive and pernicious. Not only does it reduce the savings of the middle class, but it also causes people to think they have more money than they really have.

Which one, do you suppose, do politicians choose most often? Right: inflating and borrowing. That's because taxpayers feel the pain of taxation most directly.

I've written about deflation twice before: Deflation and Deflation 2. Third time's the charm?

The common wisdom is that deflation of the currency is bad. When money deflates, it becomes more valuable, even when you do nothing. So the theory is that people won't spend their money, because it will become ever-more valuable.

That theory cannot be true.

Look at the PC market over the last 30 years. In each one of those years, the PC became more reliable, faster, came with more memory and storage. The original MDA display was one color and text only. The CGA had 16 colors and 640x200 bits. The price -- of the computer you really want to have -- has stayed constant, at about $5000.

If the story told about deflation was true, then you would always be better off delaying your purchase of a PC by 6 months. You could be confident that the PC you would buy would be a more valuable PC.

Except ... that people did that very rarely, if ever. The standard advice was always "don't wait to buy a computer, because there will always be a better computer on the horizon."

So, in a situation where people can predict a constant stream of increase in value, people STILL made the trade. Thus, I think it's safe to predict that in a similar situation, where people could predict a constant increase in the value of their money, they would spend their money as needed.

On a cloudy day, the macroeconomist, on being asked where the sun is, will point up, and think he has been helpful.

Well, I listened to Larry talking about how Obama failed to change anything. And I heard about Larry's plan to change this: Citizen Funded Elections. It's astounding how someone so smart can miss the mark by so much. The problem is not that special interests are buying congressmen. The problem is that congressmen have power to sell to them. As long as they have the power, they will be able to demand a price.

So, first things first: If we want to be able to trust Congress again, first we have to take away their power. How do we do that? Well, for one, people could vote Libertarian, but I don't think that's likely. More likely would be to demand that state legislators take back the power that rightfully belongs to them, according to the design of our country.

I've been rude to a friend of mine (Simon Phipps) on Twitter. On the one hand, why should I be rude to a friend of mine? On the other hand, if I don't call him out for quoting stupid things (as if he agrees with them), then how much of a friend do I consider him? If I'm not willing to be harsh with him, then I can't value his friendship much. If I'm not able to be harsh with him, then he doesn't value my friendship much.

In particular, I feel very strongly that the wealthy should be responsible for the poor. "Responsible" means several things. First, it means only lending aid appropriately. "Give a man a fish and you have fed him for a day. Teach a man to fish and you have fed him for a lifetime." It also means charity should only be for the deserving. "Give an ailing man a crutch and you have gotten him back on his feet. Give a healthy man a crutch and you have taken away his ability to walk."

Responsible also means not using the power of wealth against him. This is a tough one. It's very easy to look at someone who is not as wealthy as you, and decide how they need to be helped. Everyone who has more than someone else can fall into this trap. Certainly my country does it all the time, sending food aid to countries that can't use that food, or to countries where their competitive advantage is that food.

And responsible means consistently advocating for free markets (not using the power of wealth) and private property. When my friends harm that cause, I get very upset. I can understand my enemies, and the people that hate me advocating for coercion. But my friends? That cuts me to the quick.

All evil starts with one person threatening to hurt another person. The purpose of government is to threaten to hurt people (that's what makes it different from any other organization). Thus, the only way that government can not be evil is if it only threatens to hurt people who threaten to hurt other people. When government undertakes any other activity, it becomes a source of evil.

A society of libertarians is not an oxymoron. Libertarians aren't loners; in fact we're usually even more socially oriented than socialists. What we are is individualists; meaning that all relations between individuals should be voluntary. Socialists think that it's acceptable for some relations to happen at the point of a gun. Note that someone may hold individualist and socialist ideas; while they may think of themselves as pragmatic, compromising towards a worthy goal; instead they're just confused. You can't compromise on a principle, otherwise you lose it entirely. For example, it's wrong to kill; thus it's wrong for a group to kill; thus it's wrong for a government to kill; thus capital punishment is wrong. At best it's a cheaper method of life imprisonment -- but when you compromise your principles to save money, you are not principled at all.

Folks, I have bad news for you. The Barack Obama Health Care Reform (shepherded through by Nancy Pelosi) will be, as written, an utter and unmitigated disaster. It attempts to do two things which are, in combination, impossible. First, it makes health insurance much more widely available through the mind-boggling deal it made with the insurance companies. To wit: the health insurance companies agree to insure everyone, and the federal government forces everyone to buy health insurance. While that's a huge give-away to health insurance companies of your personal tax dollars, that's not impossible.

No, the impossibility comes when you combine that with: Second, Barack is going to pay for this new plan by reducing costs. There's two problems with this idea. A) if costs could be reduced, insurance companies would have already done it, and pocketed the money. B) when you pay less for something, you get less of it. This is one of the iron laws of economics, which is just as inviolable as the laws of thermodynamics, or the laws of mutual attraction (things fall at 32ft/sec/sec absent wind resistance).

So Obamacare will attempt to 1) increase the amount of medical care needed because you have all these newly insured people, AND 2) decrease the amount of medical care available by paying less for it.

No, really.

Stop laughing.

This is our PRESIDENT, and he deserves the same respect due to any other politician who is ignorant of economics yet tries to regulate markets: zero.

There can be only two results: either we'll have less medical care (think you're having a hard time finding a doctor now??), or we'll pay a lot more for it (think your doctor's visits are expensive now??).

But there is a different way: free market health care. Reduce every possible barrier to health care. First, stop protecting the doctor's union. Let anybody practice medicine, but give the doctor's union a super-trademark on the term "physician", just like the 4-H shamrock and Olympic rings are protected. If you want a graduate of a medical school, you can have one; just go looking for a physician. Second, stop treating us like children, and let anybody buy any medicine they want. Abolish the FDA. Pharmacies will compete to provide the safest and most effective medicines. Abolish the patent system. Drugs are only expensive to develop because of the FDA and don't need patent protection. Testing can be provided by pharmacies. Stop expecting doctors to be medical deities. Greatly reduce the available torts to only those things that doctors have control over, like leaving sponges inside patients after surgery. I'm sure there is more government hampering that I'm just not thinking of right now. Oh, yes, stop the war on (some) drugs. Abolish the ONDCP.

You will, from time to time, see people ask for more regulation of markets. I don't really need to cite any examples, do I? They're all over today's newspapers, claiming that unregulated or deregulated or free markets are responsible for the collapse of various businesses.

There is no such thing as an unregulated market, however. The term "free market" is a bit of misnomer. Participants in a free market are not free to do anything they want. If you fail to make a product that people choose to buy, that is a freedom you will find unavailable in a free market.

Let us be clear: there are markets which are regulated by politicians, and there are markets which are regulated by customers. There are no unregulated markets. There are no free markets. There are only markets in which customers are free to reward or punish businesses, and markets in which customers are prevented from rewarding or punishing businesses.

Which kind of that market do you want? One where you are free to buy or not buy? Or one where you are hampered?

John Kay makes a similar point.

The whole "health care reform" thing totally baffles me. Where do all these idiots (and yes, you ARE idiots) who support health care reform think the money is going to come from for all these improvements? Cost savings?? Sorry, idiots, but if savings were already available, insurance companies would have already gotten them, and kept them for themselves. Is that not completely obvious? It's GONNA cost more, and it's GONNA cover less.

There is a way to get more for less, but it requires that people understand and accept that free markets actually work. And yet there are so many people who are convinced that somehoww health care is some kind of magic market where the laws of economics don't fly, where pigs do fly, and where everyone can get all the health care they want for almost no money.

And a pony.

There is a major flaw in Soros' justification for spending $50m on a new think-tank. He derides "unchecked free markets" when in fact no such thing exists. You either have free markets checked by customer behavior, or you have markets which have been hampered by government action so producers are free to ignore customer behavior. An unchecked free market is an oxymoron.

Tom Slee has written a book entitled No One Makes You Shop at Wal-Mart. The introduction of the book ends with "why we need to rely on collective action rather than individual choice to take us to where we want to be".

Poor Tom! He fantasizes that once the tools of coercive collective action are created, intellectual such as himself will be in charge of directing the action. And yet, when you point him at collective action gone wrong (e.g. Jim Crow laws, or the War in *, or the War on Drugs), he'll just tell you that the wrong people (e.g. George Bush) are in charge.

No, it's far more likely that when powerful tools are created, powerful people (politically and/or economically powerful -- which you surely must acknowledge doesn't include intellectuals) control them. That's why I oppose the creation and ongoing maintenance of these tools. Not because you can't do good things with them -- you can -- but it's more likely that bad things will be done with them.

The US Sentate is currently considering a bill designed to pay people to be unemployed, and to penalize any private parties that still employs people.

Well, that's not exactly how the bill is written, but that's how any economist will read it. They're planning to extend unemployment benefits, which would otherwise run out. This has the effect of paying people to have the job of being unemployed. When you buy more of something, anybody who has a supply of it will step up to the plate. So rather than take a job, any body just to get income flowing again, the US Senate is encouraging people to stay unemployed.

The other thing they're doing which "helps" the recovery is to raise the unemployment insurance payments that employers have to pay when they employ someone. This is a tax on employment, and makes it more expensive to keep someone employed. Anybody whose employment is on the edge will get kicked over and kicked off.

When you tax something, you get less of it. When you subsidize something, you get more of it. Thus it has always been, and thus always have politicians ignored that face. It's the economist's burden to always have to tell them that their grand plans are doomed to failure.

I just cringe whenever I hear Obama or his minions talking about how they created or saved N jobs. As an economist, I'm trained to look for the other side of the coin. Yin and Yang. The coin cannot not have another side if it is to be a coin. So when the government takes money from taxpayers, or prints up new money, or borrows money from China, to spend on creating jobs, I have to ask: how many jobs did the stimulus destroy?

Paul "MIT wants its PhD back" Krugman is at it again. When government action causes an economy to go bust, people need to adjust their spending (recalculating). This includes employers and employees. So unemployment goes up. Krugman can't understand why this process doesn't apply equally to boom times.

His claim is comparable to saying that because the distance between two floors is equal (the amount of spending adjustment), that it should take an equal amount of effort (unemployment, as some jobs are destroyed and others created) to climb the stars as go down. By this metaphor he's obviously lost all shred of his former Nobel-inducing glory. All that's needed is to show that gravity exists in economies as well as houses.

Causes of gravity: information (in a boom, everybody knows where the jobs are; in a bust that information is hard to get), confidence (people take more risks with their jobs if they know a replacement is easy to get), egoism (everybody wants to get paid more; nobody wants to get paid less), time (booms happen slowly and busts quickly), and probably a few more that I can't think of, but really, these are sufficient on their own. Four reasons why recalculation results in unemployment on the bust side rather than the boom side.

It must suck to be Krugman.

Seems like every handful of years, somebody starts yammering about how much money candidates spend to get elected. About how that spending is going up and up and up. And they claim that that's a sure sign of corruption.

Not likely. Look instead at the ratio of federal spending versus spending by presidential candidates over several decades:

See how the ratio varies between 1 and 20.5 and 2.5? That's because candidates spend in proportion to the power they'll have. If you want them to spend less, expect them to do less and spend less of your own money.

UPDATE 2/8/2010: Sam Nelson of clevernamehere.com fame (which would let you guess his email address) noticed that I was plotting the wrong column from the DebtArticle.csv dataset. I've re-generated the plot, and included 2008 spending (which is for a partial year, so in your head, move the rightmost point lower). The graph is a little more noisy, but still serves to make my point.

Data sources: Federal spending and Presidential campaign spending.

If being in charge of wars in two different countries, and having your troops stationed in nearly every continent doesn't qualify you for the Nobel Peace Prize, I don't know what does.

It's not a conspiracy if they don't need to conspire. For an example in the natural world, consider that raindrops fall. The natural laws that apply to them ensure that this happens. No doubt if the molecules in a raindrop could conspire to form themselves into the shape of a glider, and locate an updraft, they could fly forever.

So why don't public school teachers teach good economics to their students? Why don't they teach that minimum wages just hurt the least qualified workers? Why don't they teach that unions mostly serve the employees and leaders of the union? Why don't they teach that unqualified amateurs (homeschoolers) teach better than trained professionals (themselves)? These are all documented facts.

Are public school teachers conspiring to suppress these facts? No, they aren't. No conspiring is necessary. No consultation, no coordination. It is in the interests of each and every teacher to fail to teach these things. No conspiracy exists because no conspiracy is needed.

Contrast this with your favorite conspiracy theory, e.g. the 9/11 truthers. They claim that the U.S. Government faked these attacks in an attempt to cause people to give them more power. Such a conspiracy would require the continued cooperation of at least a hundred people. Not likely that they would continue to cooperate for 8 years.

No, no conspiracy is needed to get people to cede power over their most intimate parts of their lives to governments, e.g. health care.

I fail to understand why any economist (Nobel Prize or not) can say with a straight face that "the public option" is competition for the private insurers. And Krugman says it, again and again.

A marketplace with competitive entrants, is one in which success or failure exists. Think of a competitive footrace (well, one without Usain Bolt!). Someone comes in first, someone in second, someone in third, and the rest are not named presumably to be counted as losers (except of course that any loser in such a race is faster than 99% of the general population). Failure is an option; in fact it's guaranteed for all but the top three medal winners.

In a marketplace with private insurance companies, any of the companies could go out of business at any time. In a free market system (which ours barely approximates) you have profit and loss. You have success (growth in market share, growth in profits), and you have failure (loss of market share, loss of income). Ultimately, if a market participant loses all their income, they go bankrupt.

Does anybody think the public plan for insuring people would ever lose all its income? Go bankrupt?

I thought not.

So I ask you again, how can any economist say that a company which is guaranteed not to fail be competing with companies that can fail? The obvious answer is: they're not competing; they're not even participating in the same market.

And that puts paid to Krugman's assertion that the argument against the public option boils down to the fact that it's a government program (his emphasis). No. I argue against it because it cannot fail. Without the discipline of potential failure, the program will never succeed, either.

My friend Nat Friedman proposes on Twitter "If it's really only $19M in health industry lobbying holding us back, why doesn't some rich guy just spend $50M and get this done?". Won't work. Here's why.

The health industry lobbies for its interest. They spend a certain amount only because they don't need to spend any more. They're buying influence with legislators.

Now, introduce some rich guy and have him try to buy up all the influence, so that the health care industry doesn't get its way any more. This is an attempt to "corner the market" -- to own all of it so you can demand the price you want.

The problem with trying to corner any market is that the other participants in the market still desire the product. As you buy up more and more of the product, the other participants still want to buy it, so the price rises higher and higher. You have to be willing to spend as much for the last item as the richest customer for the produce.

In this case, the intent is to extinguish the industry. So the price for the lobbying is not $19M. The price is the entire value of the health industry. No way is $50M going to cover that price.

Michael Moore says that capitalism is evil. Oh? Why is he selling admission to his movie, then? If he believed his own propaganda, his movie would be free for the downloading off, say, Youtube, or Archive.org.

Michae Moore has gotten rich off of telling other people that they shouldn't be rich like him. A pox on his house!

Wilson is right. Obama IS lying. He says that none of the people opposed to his plan have an option to offer. Well, that's just a steaming pile of bullshit. How about this option: everyone pays for their own health care up to 20% of their pre-tax income? Effectively, then, the rich will pay for all of their own health care and a lot of other people's, the poor will have a single-payer socialist health plan, and the middle-class will largely pay for their own health care but nobody will be bankrupted.

Here's a letter that I sent to North Country Now. If it gets published, it will come out next Tuesday.

One of the sound-offs points out that the US doesn't have universal healthcare (except that it does -- nobody gets turned away from an emergency room), and that we should be leaders. I agree. We should lead the rest of the world away from a system of government-rationed health care to a system of free-market health care.

Before anybody tries to suggest that we already have a free-market health care system, let's compare socialized medicine vs. our current corporate-insurance medicine vs. free-market health care.

socialized: out-of-pocket expenses are minimal, so everybody loves it, but nobody has any reason to economize. Nobody gets bankrupted by catastrophic health care, but on the other hand, some people are denied care at any price (good thing Canadians have the US to fall back on). You pay the full cost because it comes out of your taxes.

corporate-insurance: if you have a good job, you have health care, with a low deductible and small co-payment. If you switch jobs, you lose your health care, and maybe the new job's insurance company will cover your pre-existing condition. If you have no health care, you go to an emergency room. The corporation pays the insurance company which then rations out payments to doctors. Patient is not consulted. Technology is expensive. You pay the full cost because it comes out of your salary.

free-market: cooperation is maximized by multiple competing plans. The doctor's union (the AMA) has no power to restrict entry, so doctors' pay is competitive and bad doctors aren't protected. Technology reduces costs just like everywhere else in the economy. Genetic testing and preventative care keeps the worst illnesses at bay. Doctor's charity (or government, if necessary) covers losers of the genetic lottery. Non-patenting of drugs (and no FDA) reduces costs of drugs to level affordable by all. You pay the full cost because it comes out of your pocket.

Make no mistake about it -- health care is a hard problem to solve. There are no good solutions, only least-bad solutions. It will require all of us, competing and cooperating freely, to devise a solution we can accept. A single government solution imposed on us by the exigencies of politics will likely be controlled by politically powerful groups: drug companies, insurance companies, and doctors. You'd be correct to notice that patients aren't listed among the politically powerful, so when politics controls medicine, patients lose out.

Let's put the patient in control of the purse so they can choose the solution that's best for them. Free markets -- they're not just for breakfast anymore.

I had an interesting conversation at OSCON last week over a couple of beers. Since this conversation was alcohol-involved, I decline to name the person who said the following. I can only assume that he wasn't at his logical best.

"Freedom of speech is just libertarian bullshit. If people have the right to say anything they want, then you can't punish fraud."

I was nonplussed. How do you respond to a statement like that? Of course, you always realize the right thing to say hours or days later. The right thing to say is simply this:

"We trust people to vote for anyone they want; we trust anyone to run for office; we should trust them all to say anything they want."

Progressive taxation is not logical. It assume that not only should we tax the rich at the same rate as the poor and middle class, we should tax them at a HIGHER rate. And yet if they didn't the money, why did they bother to earn it? Taxing them at a higher rate can only give them a lower incentive for the most productive people in our society, who employ the most people.

And what do they do with their money? They INVEST it, usually back into their own business, but into the general economy as well.

Progressive taxation is taxation of capital. If you ask any economist, they will explain that taxing capital is eating your seed corn.

If you want to understand that progressive taxation is unfair, then give four pennies to one boy, and eight pennies to another. Then charge the first boy a penny for some candy, and the other boy three pennies. When he objects, and surely he will, tell him "but you have twice as much money." If he can do simple math and then says "But that's no fair! I should only be paying twice as much." You can then try explaining how under the theory of progressive taxation, it's no hardship for him to pay three times as much.

You want to buy from a monopoly! Trust me on this one, and read on.

In the marketplace as everyone knows it today, monopolies are almost always bad. That's because they have a government-granted franchise which permits them to charge monopoly prices. When a monopoly has a franchise like that, they can restrict output, charge a higher price, and make more money. In a free market, without a franchise, anybody charging monopoly prices will soon have a competitor.

Okay, can you see it coming? A free-market monopoly, without a government franchise (like a license, or a copyright, or a patent), can only keep its monopoly by charging prices low enough to keep out competitors. Another way to say that is: a monopoly seller in a free market will always give you a better price than anybody else who might enter the market, otherwise ... they would.

Thus, you want to buy from a monopoly, but only if it's a free-market monopoly. And unfortunately, we've regulated them out of business. The only monopolies you'll see are charging monopoly prices, which they get away with because the government has given the monopoly in the first place.

A monopoly is a good thing, but only under conditions outside of our experience.

So, I got hired by Cloudmade as a Regional Community Ambassador for the Northeast USA. It was our job to set up mapping parties in the cities in our regions, go attend the party, and help build a community of ambassadors. Didn't work. Was plain to me that we weren't meeting our goals through this method. I thought we had made a plan to do something different, but that didn't happen. Instead, management laid off nearly the whole team.

Anyway, I'm still not ready to go back to consulting, so I've got a few feelers out for jobs and am looking for more. Can do any sort of programming work, but am best in Python / Perl / PHP / C / x86 assembly.

The government needs to get out of the marrying business. Marriage should be a religious arrangement. Continuous lengthy cohabitation should, absent a contract to the contrary, be a default contract laying out certain rights as would a common-law marriage. Apart from that, the government should have nothing to say.

The controversy over gay marriage should be a lesson to everyone who wants the government to do more in society. Every disagreement comes a reason for political unrest.

The more government interference in civil society, the less civilized and the less peaceful the society.

It is NOT MORAL to use violence (or threats of violence) to change the behavior of peaceful people. This is true no matter what they are doing: whether they are talking to each other, writing to each other, meeting with each other, worshipping with each other, or, yes, trading with each other.

Even if you COULD successfully direct the behavior of other people who have their own plans, IT IS NOT MORAL TO DO SO.

I was wandering around NYC in the late afternoon today, taking a break from work. Wandered my way down a rathole, into the nether regions of the roads behind Belleview Hospital. Only way out without retracting my steps was to go through the hospital. On the way out, I noticed the old facade of the hospital, with some beautiful stonework. Of course I took a photo, being careful not to include any faces in the photo.

Immediately a security guard came over and told me "No photos! You'll have to delete any photos you've taken!". I refused, of course. The Supreme Court has ruled that you have a right to take a photo from public property. Bellevue Hospital, being owned by the city, is of course public property. He called for his supervisor, an older and presumably wiser gentleman.

The supervisor gently explained to me (obviously an ignoramus hick from out of town but I repeat myself) that the hospital board has a policy prohibiting photos. I didn't bother explaining to him that the hospital doesn't rule on the Constitution, nor can it take away a basic civil right. I explained that I respected people's right to privacy and didn't include any faces in the photo. He explained that if I did it again, he could confiscate my camera, but that I could keep my photo. No point in explaining the law to him; I just shook his hand, said thanks, and left.

So, no, he still thinks he can threaten peaceful people, but since he respected my civil rights (since I knew them), no harm done.

The moral of the story is: know your civil rights, or you WILL lose them.

Gary Reback is one of those attorneys who understands his subject very well. Unfortunately, since he isn't an economist, and shows no evidence of having studied, it doesn't MATTER how well he understands antitrust. You can always tell someone who is ignorant of the operation of markets when they say "self-policing" in reference to how companies behave when not regulated by legislation.

First, understand that free markets are not without regulation. The participants in the market regulate the behavior of other participants, by their choice of who to cooperate with and who to spurn. But secondly, corporations never Never NEVER NEVER self-police. Never. Ever. Not on a good day, not on a bad day. That's not how free markets work. Somebody who understands how they work would NEVER use that phrase. Corporations regulate the behavior of other corporations. They're all greedy sons-of-bitches, and they wouldn't hesitate to cut their mother's throat, OR their own prices in order to gain market share.

Consequently, the only way for a company to persistently[1] dominate their market is with assistance of the government. You know. The same government that Gary Reback wants to have the power to regulate markets.

Yeah. That's why this article is entitled "Dimbulb". That would be Gary.

[1] I would note that Pedipaws is currently dominating the market for pet claw grinders. That's okay, they created the market, they should be allowed to own it, for a while. The only way to dominate a market is by creating a new product that nobody else has, by getting a government monopoly (e.g. a patent), or by constantly offering a better deal than anyone else. That's how Standard Oil got and kept its monopoly -- by constantly improving its process and driving the price of a barrel of oil into the ground.

Yeeks! Patri Friedman disses folk activism, which I sadly find myself trapped in here.

Sing it, choir!

Haha! xkcd notes that some problems are simply hard to solve. That attempting to impose a solution is not necessarily an improvement. That sometimes it makes the situation much, much worse."