Category: Economics

Well, hello (again)

A few stories to catch up from my unplanned absence.

First, Don Boudreaux offered a fascinating comparison of Sen. Barack Obama’s fund-raising and economic populism.

… Last quarter Sen. Obama raised, as the Times puts it, “a whopping $31 million.”

These funds, of course, are all voluntarily contributed. The fact that I, personally, do not care for much of what Sen. Obama espouses is irrelevant: lots of people like what he says. They like it enough to contribute to his campaign. The result, designed by no one, is a huge campaign chest for Sen. Obama. He will be well-financed to pursue his ambition. (In my opinion, this ambition is an especially greedy and venal one, but that’s just my opinion.)

In May, however, the very same Sen. Obama called for Senate hearings into allegedly excessive pay for CEOs of corporations.

The rest of Mr. Boudreaux’s analysis is perfect. When someone earns achieves superior results through voluntary exchange, any action to alter those results by a third party is wrong. “Too much” success notwithstanding.

As I think I’ve mentioned before, I will not be voting for Sen. Obama if he wins the Democratic nomination precisely because he is an economic populist. I did not vote Democratic in the last election to institute economic populism. Severe displeasure at the current administration and climate should not be seen as an overwhelming desire to be economically stupid.

Next, I still think public money for this is questionable, at best, but I like the approach this writer uses to explain proposed funding for circumcision as an HIV prevention.

One of the suggested health campaigns reviewed by the Global Health Program is provision of adult male circumcision to decrease individual likelihood of sexually acquiring HIV infection. Some recently published studies performed in Africa suggest circumcision may offer an impressive 60 percent margin of protection against HIV infection, which is well below consistent condom use and complete sexual abstinence, but far better than any other currently available interventions for men. Ambassador Mark Dybul, who runs the PEPFAR program, told the Council that he would provide funds for circumcision programs if the governments of the 15 countries PEPFAR works with requested such support. But strong concerns have been raised regarding the quantity and skill level of medical personnel required to perform this bloody surgical procedure. Though the procedure itself is inexpensive, adult circumcision risks exposing both healthcare workers and patients to blood-borne infections, including HIV. Diverting scarce health talent to large circumcision campaigns could impede other public health and clinical efforts.

In that context, my only concern is the public financing. The writer mentioned all the key aspects of circumcision as an HIV prevention technique. It should be up to the adult male, it’s effectiveness is significantly outpaced by non-invasive methods, and there are considerable risks to be addressed before applying it to African countries facing a severe epidemic. Radical solutions should be tied to real-world facts, considerations, and consequences.

Speaking of radical solutions needing to be tied to real-world facts, I haven’t seen Sicko yet. I don’t make it a priority to pay for propaganda. Anyway, I’m fairly certain what my opinion will be when I get around to it. I imagine it’ll be something like Kurt Loder’s opinion. (Someone else deserves credit here, but I can’t remember where I saw this link.) The entire piece is worth reading, but I like this best:

Moore’s most ardent enthusiasm is reserved for the French health care system, which he portrays as the crowning glory of a Gallic lifestyle far superior to our own. The French! They work only 35 hours a week, by law. They get at least five weeks’ vacation every year. Their health care is free, and they can take an unlimited number of sick days. It is here that Moore shoots himself in the foot. He introduces us to a young man who’s reached the end of three months of paid sick leave and is asked by his doctor if he’s finally ready to return to work. No, not yet, he says. So the doctor gives him another three months of paid leave — and the young man immediately decamps for the South of France, where we see him lounging on the sunny Riviera, chatting up babes and generally enjoying what would be for most people a very expensive vacation. Moore apparently expects us to witness this dumbfounding spectacle and ask why we can’t have such a great health care system, too. I think a more common response would be, how can any country afford such economic insanity?

I guess we’re supposed to fall back on the argument that it’s somehow free. No need to trouble ourselves with economic laws or evidence that demonstrates those laws or even the nuances of any argument that millions of Americans don’t have health insurance. The facts, although interesting, are irrelevant. Right?

I will see Sicko at some point, if only to understand what stupid people are believing. I don’t really want to give Moore any money, but I’m thinking back to how people paid for a different movie and saw Fahrenheit 9/11 instead. It’s tempting as a “gotcha”, but I wouldn’t do it. Unlike Moore, I consider honesty an asset. Whatever small price he’ll get from my (matinée) viewing is surely worth remaining above his level.

Catching Up: Random Links

I’ve been pre-occupied the last few days, so I haven’t caught up on my blogging duties the way I should. Refunds will be processed upon request. To discourage you from seeking that refund, here are a few stories stuck in my queue:

Courtesy of a Robert Novak column from last week:

Addressing a Republican fundraising dinner at the Washington Convention Center on Wednesday night, President Bush declared: “If the Democrats want to test us, that’s why they give the president the veto. I’m looking forward to vetoing excessive spending, and I’m looking forward to having the United States Congress support my veto.” That was more than blather for a political pep rally. Bush plans to veto the homeland security appropriations bill nearing final passage, followed by vetoes of eight more money bills sent him by the Democratic-controlled Congress.

Better late than never would be how I’d like to analyze that. Unfortunately, we’re mostly discussing a 14% increase versus a 7% increase and a 30% increase versus a 22% increase. This isn’t fiscal conservatism. Consolation from the lesser of two evils, anyone?

Next, government understanding of economics always achieves its predictable unintended consequences:

Beef prices are up. So are the costs of milk, cereal, eggs, chicken and pork.

And corn is getting the blame. President Bush’s call for the nation to cure its addiction to oil stoked a growing demand for ethanol, which is mostly made from corn. Greater demand for corn has inflated prices from a historically stable $2 per bushel to about $4.

Economic laws are inviolable, not suggestions open to the good intentions of government policy-makers.

Continuing on a similar theme, that politicians believe reality is subject to the whims of the United States government and can simply be legislated into existence, this:

“America deserves more-fuel-efficient cars,” said Sen. Maria Cantwell of Washington. But she added that “the only way consumers are going to get more out of a tank of gas is if the president and his party help deliver votes in a narrowly divided Congress.”
…

“America’s strength lies in our ability to invent new and better ways of doing things,” she said. “The challenge we face now is transforming America’s energy policy — one that is well over 50 years old and too reliant of fossil fuels — to one that will make America a global leader again in energy technology and get us off our overdependence on foreign oil.”

Congress (and the president) can legislate creativity and innovation. And it comes with a centrally planned national energy policy. That should work out well. Just look at corn and ethanol.

Health care economics are not different.

Sebastian Mallaby is correct in explaining that Republicans have embraced economic stupidity surrounding globalization, as evidenced by its stance on immigration. Although the root cause appears to be more xenophobia than economic ignorance, the point is taken. However, Mr. Mallaby quickly loses any credibility when he switches to health care and Rudy Giuliani’s proposal to fix the system. His intro:

Giuliani is also spouting nonsense about health care — a challenge that the nation must address if it is to assuage middle-class anxiety about a turbulent globalized economy. As employers have stopped offering coverage, Americans have discovered that it’s almost impossible to buy decent insurance because the market for individual purchasers is plagued by a vicious cycle. At the start of this cycle, insurance premiums reflect the cost of covering the average person, so healthier-than-average people realize they are getting a bad deal and choose not to buy coverage. That leaves a sicklier group in the market, which forces premiums up, which drives more relatively healthy people to exit, which drives premiums up still more, and so on.

I’d like to see some statistics verifying that claim. I’m a healthy individual insurance purchaser, and I’ve found my premiums to be reasonable enough. That doesn’t mean I think my insurance shouldn’t and couldn’t be cheaper. I do. But I realize that the disincentive to switch to a robust insurance market devoid of a sole reliance on groups organized around individual employers is based on our flawed tax code, not Mr. Mallaby’s absurd theory:

This market failure is a basic fact of health-care economics. But Giuliani is oblivious to it. In an interview with the Wall Street Journal last week, he indicated that he wants to triple the number of people in the dysfunctional individual insurance market without taking the one step that might fix it, which is to force every American, healthy or not, to buy coverage. Depending on whether he understands how dumb this is, Hizzoner is either a coward or a lightweight.

There’s so much to challenge. Most obvious, he trips himself in the beginning. If “health care” economics (economics is a science, remember) states that society will see a race to the bottom where only sick people will have an incentive to minimize their risk through insurance, then how exactly is this adherence to economics a market “failure”? It sounds to me as if the market is behaving exactly as expected. Yes, we have to rely on Mr. Mallaby’s misunderstanding of economics, but in his worldview, market failure cannot happen according to “health care economics” unless insurance companies ignore profit incentives and offer health insurance at a loss. I don’t believe that’s happening, but maybe Mr. Mallaby has evidence to the contrary.

That could be our endpoint, as it’s enough to dismiss his argument. That wouldn’t be any fun. There’s so much more wrapped into one paragraph. Not getting the results we want? Blame the market without looking at all inputs in that market. Ideology over facts!

I don’t know enough about Guiliani’s plan to critique it fairly, but using what I have here, how would expanding the pool of candidates for individual health insurance, which would spread risk further across the client pool for the individual insurance companies, exacerbate the problem? If it would work with employers, what would be different?

The answer is obvious if you look not at intention (affordable health care) and look instead at intended action. Here Mr. Mallaby offers only force. He has no interest in incentives, only playing the role of central planner. His justification is obvious later in the essay:

Instead, the Democratic candidates are focusing on helping the economy’s losers without restricting trade, which is exactly what they should be doing.

Why does he show no concern for why there are economic “losers”? I assume he believes that our benevolent government can’t possibly create losers. That’s capitalism’s fault. Because capitalism is only “I win, you lose”. It’s a fascinating narrative, even though it’s 100% incorrect.

From the rest of that paragraph:

John Edwards, the contender who sounded most protectionist in 2004, seems to have turned over a new leaf. He has admitted that trade benefits poor countries and has declared that arguments over labor standards should not be an excuse to obstruct liberalization. Meanwhile, Edwards has proposed a thoughtful health-care reform that would require everyone to buy insurance. He supports market-minded social programs such as an expanded earned-income tax credit and housing vouchers.

Market-minded social programs is as informative as it is bone-headed. (Mr. Edwards shouldn’t get credit for proposing stupidity.) Mr. Mallaby wants a socialist solution with a few free market curtains to pretty up the proposal. It won’t work in the way he predicts. Incentives matter. You don’t fix a disincentive by encouraging the offending entity to create new misguided incentives.

Wouldn’t a meat-eater taste better than a vegan?

The subject of yesterday’s example on the derogatory use of “ginger”, Jeremy Clarkson, popped up on my radar today with an anti-vegan essay. (He’s apparently basing his attack on a foundation offered by EarthSave.)

The facts it produces, however, are intriguing. Methane, which pours from a cow’s bottom on an industrial scale every few minutes, is 21 times more powerful as a greenhouse gas than carbon dioxide. And as a result, farmed animals are doing more damage to the climate than all the world’s transport and power stations put together.

What’s more, demand for beef means more and more of the world’s forests are being chopped down, and more and more pressure is being put on our water supplies.

Plainly, then, EarthSave is encouraging us to go into the countryside at the first possible opportunity and lay waste to anything with more than one stomach. Maybe it wants me to shoot my donkeys. Happily what it’s actually saying is that you can keep your car and your walk-in fridge, but you’ve got to stop eating meat.

In fact you’ve got to stop eating all forms of animal products. No more milk. No more cheese. And if it can be proven that bees fart, then no more honey either. You’ve got to become a vegan.

It’s worthwhile and intellectually honest for both sides to debate the impact of factory farming on land and its consequences. It may be devastating or it may be managable, but this method of food production produces a negative. That is simply not open for debate.

After much gnashing of teeth on how dull and uninteresting a world of only plant foods would be for him, he offers this “tough” question:

There are wider implications, too. Let us imagine that the world decided today to abandon its appetite for sausage rolls, joints of beef and meat-infused Mars bars. What effect would this have on the countryside?

Where now you find fields full of grazing cows and truffling pigs, there would be what exactly?

Going vegan alone will not solve global warming¹. And going vegan without a rational transition period to accommodate the existing animal population and redevelopment of factory farm land into other productive uses would be a mistake. So, while I harbor no fantasies that the world will soon see a mass switch to veganism, I also understand that benefiting from such a miracle wouldn’t be an overnight reality. Not all vegans are “free-range communists and fair trade hippies,” to use Mr. Clarkson’s term.

He then informs us that a much less radical solution may be possible:

So plainly the best thing we can do if we want to save the world, preserve the English countryside and keep on eating meat, is to work out a way that animals can be made to produce less methane.
…

… We all know that the activity of our bowels is governed by our diet. We know, for instance, that if we have an afternoon meeting with a bunch of top sommeliers in a small windowless room it’s best not to lunch on brussel sprouts and baked beans.

There are more negatives from animal agriculture than just methane, but Mr. Clarkson is actually thinking a little. There may be more than one solution. I have no problem admitting as much because my preferred solution is obviously open to subjective challenge. Working the argument down to a core issue helps.

If only his facts were completely correct:

So if we know – and we do – that diet can be used to regulate the amount of methane coming out of the body, then surely it is not beyond the wit of man to change the diet of farmyard animals.

At the moment, largely, cows eat grass and silage, and as we’ve seen, this is melting the ice caps and killing us all. So they need a new foodstuff: something that is rich in iron, calcium and natural goodness.

He then suggests feeding vegetarians to cows to get those nutrients. I laughed, because it’s a joke. But do you remember his pleasant story about “fields full of grazing cows and truffling pigs”? It’s nice to imagine, especially if we throw in a few rolling hills and a pretty violet sunset. With or without my embellishment, it’s also not generally true. Cows raised in industrial settings generally get less grass and more silage. Their bodies are not designed for the large quantities of grains we feed them to fatten them up and make it easier to raise more cattle in less space. Surely this factors into the debate.

How much will new drugs to reduce methane production help? Even if we can decrease the methane, what would result from actually creating Mr. Clarkson’s idyllic world of cattle grazing in open fields? What happens to the economics of grain and other foods as a result of using land to grow food to raise animals?

Link via Fark, where you can find the usual commentary that not eating animals places you lower on the food chain because animals are ours to do with as we see fit, and besides, humans need protein and that only comes from animals. Oh, and not eating meat means you’re a “sackless nancy” who is also a hypocrite because, come on, we all know that vegans kill many varieties of living beings, like bugs and algae and bacteria. Probably on purpose.

¹ For the sake of this entry, assume global warming is a serious problem that man can halt and reverse.

Dirty 10-Letter “C” Word

Here the most petulant little article you’ll read today.

Until recently, Bill Gates has been viewed as the villain of the tech world, while his archrival, Steve Jobs, enjoys an almost saintly reputation.
…

But these perceptions are wrong. In fact, the reality is reversed. It’s Gates who’s making a dent in the universe, and Jobs who’s taking on the role of single-minded capitalist, seemingly oblivious to the broader needs of society.

The evidence? Bill Gates gives away his money with his named attached and is actively involved in some of those charities. He’s even spoken out against cutting the inheritance tax! OMG, if Bill Gates sees the wisdom of it, why shouldn’t we all? He’s such a saint? Seriously, is that the implication I’m supposed to infer? I hope not because it’s ignorant.

And the case against Mr. Jobs? He either doesn’t give donations larger than $5 million, or he doesn’t do so with his name attached. And because most billionaires give away their money with their name attached, a statement the author makes in a tone that clearly indicates that billionaires donating their money are self-congratulatory publicity leeches. Except Bill Gates, because he talks about “solving global health problems”. Otherwise the author’s alleged point falls apart.

That leaves only one perceived sin by Mr. Jobs.

…, he uses social issues to support his own selfish business goals. …

Jobs can’t even get behind causes that would seem to carry deep personal meaning, let alone lasting social importance. Like Lance Armstrong, he is a cancer survivor. But unlike Armstrong, Jobs has so far done little publicly to raise money or awareness for the disease.

Get that? He doesn’t (openly) raise money for cancer research. Because, once you have cancer, you have an obligation to speak out against it to whomever will listen. And you’d better do so, or else you’ll get tagged thusly:

On the evidence, he’s nothing more than a greedy capitalist who’s amassed an obscene fortune. It’s shameful. In almost every way, Gates is much more deserving of Jobs’ rock star exaltation.

In the same way, I admire Bono over Mick Jagger, and John Lennon over Elvis, because they spoke up about things bigger than their own celebrity.

It’s time for Jobs to do the same.

Mr. Jobs is supposed to be upset because he’s not admired by the author. And he should definitely be embarrassed about his fortune and being a “greedy” capitalist, because that’s capital-B Bad. But the Bono comparison is useful. Where Bono’s activism is quite public, it’s also stunningly short-sighted and wrong¹. Time will tell that perhaps Bill Gates is throwing much of his money into worthless efforts that do nothing to solve global health problems.

With great wealth does not come great obligation. Despite the clear indication that most people with wealth donate money (and noteriety) to charity, which Mr. Jobs may be doing, individuals should be free to do with their money as they see fit. That includes not doing.

Should we now talk about all of the Apple and Pixar employees and shareholders who’ve made significant sums of money over the years thanks to the ideas and innovations facilitated by Mr. Jobs? How much money have those employees and shareholders donated to charity? How many Apple products have individuals used to create compelling marketing material for charity marketing campaigns?

Jobs is already contributing.

¹ Debt relief is not a policy for long-term economic success.

I’d like to buy the world a Coke water.

Here’s a “scary scenario”, courtesy of the Sudanese ambassador to Washington during his press conference in response to economic sanctions in response to the ongoing atrocity in Darfur.

… John Ukec Lueth Ukec, the Sudanese ambassador to Washington — held a news conference at the National Press Club yesterday to respond to President Bush’s new sanctions against his regime. In his hour-long presentation, he described a situation in his land that bore no relation to reality.

During the bulk of the press conference, the ambassador denied any deaths in Sudan, while contradicting himself that it was only collateral damage, comparable to U.S. actions in Iraq. Clearly, he’s reaching for anything. Continuing:

What’s more, the good and peaceful leaders of Sudan were prepared to retaliate massively: They would cut off shipments of the emulsifier gum arabic, thereby depriving the world of cola.

“I want you to know that the gum arabic which runs all the soft drinks all over the world, including the United States, mainly 80 percent is imported from my country,” the ambassador said after raising a bottle of Coca-Cola.

A reporter asked if Sudan was threatening to “stop the export of gum arabic and bring down the Western world.”

“I can stop that gum arabic and all of us will have lost this,” [the ambassador] warned anew, beckoning to the Coke bottle. “But I don’t want to go that way.”

I know nothing of soft drink ingredients, other than they consist mostly of sugar. I don’t understand the chemistry of why gum arabic is essential, or how it works. It doesn’t really matter. Should Sudan retaliate by prohibiting the export of gum arabic, I have a strong suspicion that Coca-Cola and Pepsi will figure out an alternative approach to making their soft drinks. Inevitably, his threat will fail to achieve his desired results.

That doesn’t mean he won’t achieve results. He will, but the citizens of Sudan who rely on gum arabic exports will be harmed. Their income and trade will shrink, exacerbating an already questionable situation. Dictators have a funny way of not caring about that. The U.S. will probably get the international blame for that, even though it will be clear where it should fall.

A Democrat Who Understands Economics

For once, I’m happy that I voted for a politician rather than against the other guy.

Virginia Governor Timothy Kaine, parting with some fellow Democrats, said he’s “passionate” about strengthening global-trade ties and that those advocating protectionism have a “loser’s mentality.”

“The only way you’ll succeed is by being an aggressive competitor rather than trying to hoard your dwindling assets,” Kaine, 49, said in an interview yesterday in Washington with Bloomberg News editors and reporters.

On the whole, I still voted mostly against the other guy. But good for Gov. Kaine for getting it right on trade. If only our national politicians could figure out something so obvious.

Via Cato @ Liberty

National health care is not a charity.

Via Kevin, M.D. comes a fascinating look at reactions from Canadian journalists to Michael Moore’s new documentary film, Sicko.

Michael Moore is handing out fake bandages to promote his new film Sicko, an exposé of the failings of the U.S. health care system.

But he may feel like applying a couple to himself after the mauling he received yesterday from several Canadian journalists – present company included – following the film’s first viewing at the Cannes Film Festival.
…

We Canucks were taking issue with the large liberties Sicko takes with the facts, with its lavish praise for Canada’s government-funded medicare system compared with America’s for-profit alternative.

While justifiably demonstrating the evils of an American system where dollars are the major determinant of the quality of medicare care a person receives, and where restoring a severed finger could cost an American $60,000 compared to nothing at all for a Canadian, Sicko makes it seem as if Canada’s socialized medicine is flawless and that Canadians are satisfied with the status quo.

The Canadian journalist can’t be that naive. The Canadian certainly pays to have a severed finger removed. It makes no difference if he pays the hospital, his insurance company, or the government taxing authority. The amount he pays may be different, but that’s a matter of economic risk redistribution, not the allegedly-but-not-really free health care that nationalized systems provide. That’s before we discuss the economic rationing necessary for Canada to provide such a service “for free”.

I’ve never heard of an American not having his finger reattached due to lack of funds. I’m open to hearing about such stories, if they exist. Regardless, this issue is far more complex than some people don’t like paying “a lot” for health care.

Economics Lessons: Yard Sale Edition

My homeowners association is hosting a community yard sale today, and we’re participating. It’s not going to be the most profitable yard sale possible. We’re learning Frédéric Bastiat’s broken window fallacy in the most literal way possible, which blows because I already understand this and don’t need the experience.

One item (previously) for sale was a bookshelf. It had a pleasant $30 price tag on it, ready to go to a good home. That was until the moment the wind gusted and carried it into one of the side windows of my neighbor’s car. To fix the broken window and the dent will cost us approximately $500.

The economically illiterate will suggest that this is good, because now the glass installer will make a sale he would not have received. Good for him, but I am most certainly not better off, and am unhappy to be participating in this unnecessary charade. I’m still unemployed without a contract. Money is going out without coming in to replace expenditures. The money now going to pay for this window is money that might be needed for items I might need more than new glass for my neighbor’s car. Like food.

It won’t come to that, of course, so Whole Foods has nothing to worry about. But what about the new company I might invest in but now must live without that last $500? What if I might’ve used that $500 to buy sport suspension on a new MINI (when I land a new contract)? Would MINI USA like to have that $500 instead of the local glass installer?

So, yeah, money is circulating in the economy. That’s wonderful. But there’s more than what is seen. I might start doing this.

Breaking (Not) News: Politicians are dishonest and hate freedom.

Add Montgomery County, Maryland to the list of governments that doesn’t trust its residents and business owners. Yesterday, it passed a ban on trans fats in “food service establishments”. The story offers the standard fare discussion, which misses how anti-liberty such government intrusion is. For example:

The move comes as health officials across the country decry a rise in bad eating habits, growing waistlines and an increase in heart disease and other ailments. The anti-trans fat bill puts Montgomery in the vanguard of a growing national movement to make it easier to obtain healthy foods in restaurants and grocery stores.

I disagree that easier is the correct word to use in that paragraph. Such anti-trans fat bills seek to make it obligatory to obtain healthy foods. Why bypass that? To make this sound more reasonable? Don’t bother; nothing can make this reasonable.

That doesn’t mean I like trans fats. I avoid them. But I’m not egotistical enough to believe that what I choose for myself is the best, or at least desirable, choice for everyone. We’re all unique human beings with different, subjective preferences and an individual risk aversion not readily apparent to government busybodies. Personal choice is better than institutionalized denial of choice.

Where governments go wrong with that is most apparent in this:

Council member Duchy Trachtenberg (D-At Large), the bill’s chief sponsor, said she thinks the food industry will be able to adjust. Some Montgomery establishments, such as the Silver Diner and Marriott Corp., stopped using trans fats voluntarily.

I wonder what evidence Councilwoman Trachtenberg used to come to her conclusion that the food industry will be able to adjust. Wishing isn’t evidence.

“The goal is to protect the public health,” she said. “People want to know what they are eating.”

And there’s the deceit. Mandatory menu labeling would achieve her stated goal, for customers to know what they’re eating. They’d have the information to make an informed choice. But that’s not the bill Councilwoman Trachtenberg sponsored. What she’s done speaks louder than what she said.

Will Councilwoman Trachtenberg achieve her stated goal?

Gene Wilkes, owner of Tastee Diners in Bethesda and Silver Spring, said the ban will force him to eliminate certain items, such as lemon meringue pie and chocolate cream pie, which he buys from a supplier. His popular biscuits, made in bulk at the diners from a General Mills mix that contains trans fats, will be a no-no. He said he’ll begin making them from scratch, most likely.

I guess if people in Montgomery County want to know what’s in their lemon meringue pie or chocolate cream pie, they’ll know because they’ll have to make it themselves. Mission accomplished. Right?