Just a little bit scary

So we now know that the federal government - and the treasury department in particular - has "essentially forced" nine major US banks to accept the government bailout. To accept partial government ownership of their company. From today Wall Street Journal:

While the program is voluntary, Treasury essentially forced nine major U.S. banks to agree to take $125 billion from the federal government. Treasury will buy $25 billion in preferred stock from Bank of America -- including soon-to-be acquired Merrill Lynch -- as well as from J.P. Morgan and Citigroup; $25 billion from Wells Fargo & Co.; $10 billion from Goldman Sachs Group Inc. and Morgan Stanley; $3 billion from Bank of New York Mellon; and about $2 billion from State Street. The remainder will be available to small and medium-size institutions that apply for an investment.

So, we have government requiring that private business sell a portion of their business to the government for the supposed good of the nation.

Are you comfortable with that? I, certainly, am not.

B HO 's tax plan and economist angst

Many economists (including several Nobel Prize winners) have signed a letter opposing Obama's tax plan.

I whole heartedly agree. This is the Link, and the key paragraph.

We are equally concerned with his proposals to increase tax rates on labor income and investment. His dividend and capital gains tax increases would reduce investment and cut into the savings of millions of Americans. His proposals to increase income and payroll tax rates would discourage the formation and expansion of small businesses and reduce employment and take-home pay, as would his mandates on firms to provide expensive health insurance.

Krugman and the Nobel Prize

I'm not going to beat a horse that's already moving, so rather than re-analyze the awarding of the Nobel Prize to Paul Krugman, I'll let economic minds with more institutional knowledge than mine have their say.

http://www.marginalrevolution.com/marginalrevolution/2008/10/what-is-new-tra.html

http://www.marginalrevolution.com/marginalrevolution/2008/10/paul-krugman-wi.html

http://www.marginalrevolution.com/marginalrevolution/2004/07/paul_krugman_gu.html


Well, I might say a few words.

Krugman can easily and truly be said to be the best-known and most popular left-wing economist in the United States, if not the world. Interestingly, though he is in favor of several government interventions that I'm uncomfortable with, Krugman's economic ideals are much, much closer to mine than are those of most politicians from either party.

His Nobel was technically awarded for his work on trade theory (much of which I was actually unaware of), but many economists feel that this award also signals the importance of social and policy relevance to the work of an economist. I agree. There is no point to theory if that theory cannot be used to better society in some fashion.

However, despite the undeniable successes that Krugman has achieved in issues of trade, he has also unquestionably fallen flat on his face regarding basic economic thinking. Please read this article!

Wow - what a ride.

So it's been a while, but times have been crazy. I've been spending more than 2 hours every day just trying to stay up on the current issues in the economy so I can answer the questions from my students and colleagues.

And there's a lot I could say.

But I won't, at least not right now.

Well, perhaps I'll say something.

In economics there is this concept called "regime uncertainty". Basically, the idea is that investors and businessmen will be less willing to take an active role in the economy if they have uncertainty about the future "regime". In the US this translates into "wow, the .gov just passed a $700B spending bill that tremendously expands federal power. I wonder how this will effect the future of business in the United States?"

GROWTH!

The economy grew last quarter. A lot. Especially compared to recent quarters. 3.3% Now, we don't know if it will continue to grow at such a pace - apparently there are concerns about some level of worldwide economic draw-down.

Rainy Day Sale

A rainy day here at PHC. While going to lunch I noticed that the bookstore was having a "rainy day sale" on umbrellas.

My economist sense tingled.

Hmmm....

You see where I'm going with this - a store interested in making money should not decrease the price of an item just as the demand increases (as for umbrellas when the sky leaks). The customers demand or desire for an item is at least partially influenced by perceived need. Your perceived need for an umbrella increases when liquid steam is falling from the sky. So, in general, customers will be more willing to purchase umbrellas and the store should increase prices.

But they didn't. They reduced prices.

Why?

I see two options. First - the PHC college bookstore exists not to make money, but to serve the students so they reduced umbrella prices in the students' day of (wet) need. Second - the bookstore does intend to make money, but umbrellas are a poor seller and the bookstore is taking advantage of the rain to get them to move off the shelves.

I'll have to ask the bookstore staff....

Dollar is up

And my optimism over the last year has made people look at me like I have two heads. Well, the housing market is beginning to turn back around (at least in the DC area) and the dollar is moving back up.

Olympic Pride - Pride of the Nation or Pride of the State?

Just a quick thought tonight.

Nations around the world sponsor training facilities and camps for their Olympic and potential Olympic athletes. True (well, with a few exceptions, such as Togo). However, there are some nations that certainly seem to pour significantly more resources than others into their national athletes. Not only money, but various nations, through the years and currently, have also sequestered large numbers of young people in athletic training camps.

A tremendous expense, of people and of money. And it pays off - to some extent, and for as long as the money flows. For what? National prestige? Now, I'm glad the U.S.A. wins medals. But I'm also glad that the U.S. gov doesn't take hundreds of children with promising genetic structure and house them in training camps for 15 or more years.

But this is really beside the point. Or, at least, beside the point I was originally thinking of.

My initial thought was this. Most nations draw their athletes from trials, at which the top athletes compete to represent their nation. These athletes could have chosen to follow another path, to do something else (or many somethings) with their 4-8 hours a day that they spent practicing, but instead they practiced. They love their sport.

Other nations - East Germany, Soviet Russia, China today, and others - draw their athletes from state-run training camps. These athletes have much less choice of pursuits.

When an athlete from the first group of nations wins a medal does it better represent the sporting spirit and pride of the national population or of the government? What about those athletes from the second group of nations?

Then ask yourself this. Why do nations feel the need to go to such extremes to clinch victory in sporting events? And, if they are willing to go this far for sports, how far will they go in other situations?

Labor and Capital

Tonight I visited a local fast food establishment to grab something on my way home from the college. In most respects this is a very typical establishment, but it normally stands out in one notable way. Rather than giving your drive-through order to a voice-box, you give your order to a live person standing by the menu board. And this is no temporary situation - there is almost always a person stationed outside by the menu.

Today the order-taker was, as usual, stationed outside. Additionally there was a second employee outside, running up and down the lane, taking money/credit cards, giving the payment to the teller inside, and returning change/cards to each vehicle. I'm not sure why the manager chose to do this (pay a second employee to collect payments), but let's take a brief look at the economics in play.

Any producer must make a wise choice between investing in capital (equipment, machines, etc...), labor (manpower), or some combination of the two. Both are usually necessary for the production of goods or services. At the local fast-food establishment, the manager made a choice between upgrading his order-processing equipment and paying additional people. The producer (the manager in this case) will typically make the choice based on a comparison of cost and productivity for each additional unit of labor or capital.

From what I observed today, I can only conclude that the local manager believes that it is better (leading to greater net profit) to hire two additional people beyond what similar establishments usually employ than to upgrade the capital. In this case "capital" may include capability of the person working the registrar (who usually handles orders and taking payment as well). Therefore, because most fast-food establishments choose the capital route, I must conclude that either the capital improvements are for some reason unavailable or that labor is particularly cheap for this particular manager.

"In a hurry, will pay"

One of the persistent dreams for future transportation is a road/vehicle/transportation network in which personal vehicles (cars) talk to each other. The hoped-for result is to create a smoother traffic flow with fewer (or no) traffic jams or accidents.

If cars are talking to each other, then it should be entirely possible for you to program your vehicle to offer to pay/bribe other vehicles (and their occupying passengers) to move our of your way. Emergency vehicles will already, I expect, have this power - - so why not create a system that allows your car to implement the same "get out of my way" program for a price?

But such a system might not be so simple. In many urban areas (especially DC) everyone will program their cars to scream "I AM IMPORTANT! MOVE!!!" And because everyone has programmed their vehicles to be important, no one will move, and no one will benefit.

To solve this impasse we turn to the economist's favorite tool - pricing. For most economists, the creation and function of prices is the equivalent of duct tape, a good knife, all-purpose oil/grease, and adjustable pliers all rolled into one. Prices hold things together, allowing people within a market to trade with each other and function as one unit. Prices remove and separate unwanted or unproductive portions of the economic structure, resulting in concentration of resources on productive uses. Prices speed and smooth interaction between the various elements of an economy, allowing greatly reduced friction (transaction cost) and less wasted energy. Prices continually adjust to best regulate the good or service being traded, adjusting much faster and more precisely than human-controlled mechanisms ever could.

But how do prices help us solve our priority-auto-driving problem? Well, the simplest way would be to have each driver program a price at which (s)he is willing to move out of the way for other drivers. In this case your vehicle would automatically accept a move request, and payment, from the vehicle of a driver who is willing to pay more than the minimum you have set. You could even allow drivers to change their prices on the fly. Say you have an important meeting to rush to. You set your "priority price" at $0.75 and set off. Many people move out of your way, but as traffic gets heavy and you are forced to slow, you look up from your laptop and instruct your car to offer $0.80. That doesn't free you, so you increase your "bid" to a full $1.00. That does the trick, and you are soon zooming on your way.

You, as the driver, may also opt to allow your car to automatically increase your bid to whatever level is necessary (or some maximum you pre-select) to buy speedy passage.

Both of these methods are, however, potentially subject to what economists call the "holdout problem."

Presumably, drivers of vehicles would be able to set not only their "priority price" - the price they will pay to pass others - but also their "move aside price", the price they expect to receive before they will reduce their own speed or change lanes for someone else.

A holdout would potentially occur if, for example, you are trying to hurry your way through heavy traffic and, instead of allowing you to pay them and move out of your way, the vehicle in front of you sees your hurry and simply increases its prices. Dramatically. Before you know it, you might be asked to pay $50 or more before the person in front of you will move out of the lane.

One potential way of solving this problem would be to program your vehicle to hold a brief, almost instantaneous, auction. By communicating with the vehicles in relevant positions around you, your car could determine whether it would be cheaper/faster to negotiate a path around the recalcitrant vehicle in front of you rather than buy him off. Though you may run into areas (especially around DC) where everyone expects a fair amount to cede right-of-way, peoples' self-interest should give them enough incentive to accept your offer before someone else does.

Olympic Thoughts

I wonder if any economist has ever run an analysis of national spending for Olympic games. In particular, watching the opening ceremony for the summer games in Beijing, I was struck by how much of the ceremony was directly focused on the history and glory of China. Now, I know that every host nation does its fair share of strutting, but I wonder if nations with a more command-type central political structure tend to spend more on Olympic opening ceremonies?

Oil Prices

I don't really have anything earth-shaking to say, but I know that oil and gas prices have been large in peoples' minds and pocketbooks.

Oil prices are going down. Despite explosions and further uncertainties of supply. See This, and This. This is a good thing, but I hope it doesn'(though it probably will) take focus and impetus away the various domestic oil production/replacement possibilities. Just to make sure you don't misunderstand, I don't think such schemes are necessary for any nationalistic/environmental/global warming reason, but rather for reasons that there seems to be decent statistical information that links (relatively) cheap energy with greater rates of economic growth around the world. And I like economic growth because nothing else comes close to being as effective at lifting people from poverty and saving lives. Economic growth also gives people more slack in life to pursue political/personal/religious freedoms.

Why are oil prices falling? Probably due to a variety of factors - but all are related to supply and demand. Iraq is restarting exploration, Saudi Arabia is signaling that they may increase supply, the summer driving season is slacking off, world oil/gas consumers have (slightly) decreased consumption,

High oil prices were never the doomsday scenario that many people assumed they were, but I'm comfortable seeing them decrease.

Mulligan

Ok, so I didn't really start posting again like I said I was going to. The dissertation topic is still in process also - well, I have a topic, but haven't presented it yet. But now I'm finished with my set-term job at the Charles Koch Foundation and I'm joining the Patrick Henry College faculty full-time.

And I'm moving (again, just moved in June '08).

And I'm getting married! Yeah!

And Nicole and I are trying to buy a house.

Despite all of this I'm trying to get back into the routine of regularly commenting on economic affairs.

Let's see how this goes.

Overton Window Follow Up

So I've decided that I won't be posting my scholarly writings on Overton Window Theory. Primarily because I plan to do more with them in the future, but also because, well, I just don't have time right now to clean them up and bring them up to speed with my current thinking.

However, just in case anyone finds their way here after reading discussions regarding the Overton Window that have taken place on several Internet discussion boards, I would like to point out that the whole idea behind Overton Window Theory is not for it to be a grand strategic design of the conspiratorial right-wing. Rather, OWT is simply a tool to explain what a think-tank does and to help people understand how a think-tank or public research organization can have an impact on public policy.

In reality, the entire concept of the Overton Window is merely a further example of a fundamental economic trait - one that I have picked-up over the years and one that Joe Overton apparently possessed. That trait is the naming of and fitting complex theories to common truths/mechanics that have been occurring of their own accord, happily un-named. Then along comes an economist, joyously declaring "look, supply and demand" or "hey, let's formalize how think-tanks impact policy."

And that is really what the Overton Window is all about - the formalization of think-tank workings and influence in a way that can be understood by just about anyone, and yet is also of interest to the most highly educated economists and public policy nuts.



Oh, and the impetus behind this post? My recent discovery that my Current Comment for the Mackinac Center for Public Policy (on Overton Window Theory) was the second most read CC of 2006, that there is a Wikipedia page for OWT, and that the concept of OWT was picked up by several blogs holding views very different from MCPP's limited-government, free-market, ideals. Do a search for "Overton Window" and you will see what I've seen - with the exception of my academic stuff.

Here is the ranking of MCPP CCs.

Here is the original MCPP article.

Here is my previous blog posting on the Overton Window.
(similar to the previous, but I like it a little more)

Top Two!!

Some of you may, or may not, know that I have had some affiliation with the Mackinac Center for Public Policy. Just this evening I discovered that my Current Comment for MCPP was the second-most-viewed CC for 2006! My CC, which you can read for yourself HERE, deals with the basics of Overton Window Theory, an idea first put forth by a former vice-president of MCPP, Joe Overton. In short, the Overton Window is a useful way to look at the role and effectiveness of a think-tank in shaping policy through changing public opinion.

Over the next few days I will likely write more on the Overton Window, and may post a couple of papers that I have written dealing with the concept. Additionally, the time I am currently spending with several other like-minded individuals is proving to be very fertile and will likely lead to several other postings in the near future.

Random Thoughts that I'll finish later

So how long will it be before the Chinese economy falls apart at the seams?

San Diego has condemmed its citizens to paying too much for groceries by banning all Wal-Mart supercenters.

Compassionate Warfare

Gaaaagh! I spent 45 minutes writing a post, and it somehow vanished. Stupid internet.

Ok, here's a brief version.

Around DC you hear talk of "compassionate" warfare being the way we need to go in Iraq. Politics and the usual meaning of "compassionate warfare" aside (hint - its proponents aren't in favor of aggressive operations), what would compassionate warfare look like?

Assuming that the goal of warfare - even compassionate warfare - is to win by killing and capturing enough enemies to cause their compatriots to loose heart and cease aggressive actions, all warfare will include killing and holding combatants against their will.

So if the above is true, the only way to make warfare compassionate is to limit the impact/damage to American soldiers, citizens, and yes, even to true non-combatants residing in the nation in which we are conducting military operations.

And, the best way to reduce the collateral damage of warfare is to fight intelligently and aggressively so as to make the conflict as short as possible. Go in, do the job well and truly, and get back out. Less mess, less strain on both nations, and the situation is resolved.

Now, I know that warfare is complicated, and that the Iraqi front of the war on terror is especially complicated, but increasing the length of a conflict - or failing to see a conflict through to a successful finish altogether - is most emphatically NOT compassionate warfare.

Yes, you want to pick your targets with care. But you also want to be aggressive and violent enough to get the matter settled as quickly as possible - for the sake of your own troops, their families, your own home front, and especially for the people of the conflicted land itself.

This is true compassionate warfare.

Vanishing Seafood and Happy Terrorists

Last week I caught a radio news bulletin breathlessly announcing that, by the year 2042, there will be no more seafood. Oh the panic! Oh the horror!

But let's think about like an economist. Demand for a product is partially determined by price. Price is, in part, determined by supply (relative to demand, but we'll assume people continue to like seafood). Assuming the study is correct, and we are eating seafood faster than it is replenished, seafood will become more and more difficult (and expensive) to catch, and therefore more expensive to eat. As seafood prices rise two things will happen; people will eat less of seafood (just like with any other good), and entrepreneurs will have the incentive to figure out ways to raise seafood.

For these two reasons - decreasing demand due to rising costs and increasing "artificially" grown seafood - I don't think we will ever really "run out" of seafood.


Second Point of business:
So I heard (but haven't confirmed) that an AQ terrorist leader in Iraq has issued a statement saying, among other things, that "America has taken a step in the right direction" with the recent elections. Wow, that should tell you something about how America's enemies view the two parties.

Schnelling Points and Day Labor

Economists use the term Schnelling Point when talking about any particular location, in space or in time, which is the "natural" meeting place/time. For example, if we were to meet on a particular date, at a particular place, but hadn't specified a time, when would you arrive? The majority of people respond to this question that they would assume the meeting was at noon - making noon a Schnelling Point.

Another example of Schnelling Points is how Latin-American day workers tend to find a place to gather, often outside a convenience store, and wait for potential employers. These potential employers know to head to this particular spot if looking for short-term workers. In this case the convenience store becomes the Schnelling Point.

So the real question is; can government change the location of a Schnelling Point?

I ask this because recently, in the area around Washington DC here, several of the smaller communities have tried to establish designated day-laborer sites, often with the intention of moving the gathering points for the day-workers from some pre-established, Schnelling Point, location.

We shall see - this could be very interesting.

School safety

First: About the recent rash of school shootings of various terrible sorts.

There has been much hand-wringing along the lines of "what, oh what can we ever do to make the children safe at school?" Predictably there has been noise made about "making sure guns can't get into schools" (almost like the guns had little legs and just up and walked themselves into the schools), "faster response from authorities", and even a couple of remarks about the need for armed guards stationed in every school.

I find myself in agreement with those declaring that schools in these United States need to be safer, but most others probably won't agree with my methods. No, I'm not talking about an automatic deathray school-defense system (though that might do the trick). I'm talking about applying the basic economic theories of incentives, risk, and uncertainty.

When an individual chooses to attack a school he (or she, one of these days) can be assured of two things. One: The attack will be given a great deal of attention in the news media across the nation. Two: The individuals within the school will not be armed, and therefore will unlikely mount an effective response to the attack.

The response to number one is easy - the incentive to choose a school for an attack, for a violent outburst by a desperate/depressed individual, can be substantially reduced if the potential perpetrator no longer believes that everyone in the nation will hear of his deed. The short version? Report the tragedy, but don't constantly repeat and cause the nation to dwell on the shooting.

My response to the second point is the one that is a little more off the "normal" way of thinking.

I think that teachers and other school staff should be allowed to carry guns.

Yes, I think there should be more guns in schools.

More specifically; teachers who hold a valid concealed handgun permit should be allowed to carry their pistol on school grounds. Allowed, not required. This policy would increase the risk of anyone's plans to commit a violent, lethal, assault on school property by introducing the possibility that one or more school employees are armed.

Any citizen (teacher) with a valid concealed weapons permit would have already received a state-mandated level of training and would already own their own firearm - a firearm they would have chosen themselves. The school would be welcome to offer funding for additional training classes that would help armed employees respond to lethal threats in a crowded school environment.

A plan that allows already-licensed teachers the option of carrying their personal pistol on school grounds would add the element of uncertainty and risk as a disincentive to anyone's plans of attacking a school. So why not arm all teachers? Allowing the teachers to choose would reduce costs to the district because the school district would not be required to pay for training or provide the handguns for teachers who don't have them. Many teachers may feel extremely uncomfortable carrying a firearm around their students, under my plan these teachers could easily opt not to carry. Finally, the honest truth is that while I believe all individuals should take the responsibility to learn how to protect themselves and their loved ones, I do not believe that all individuals possess the capability to extend this protection to others around them (such as the students).

Anyway, feel free to knock holes in my plan. Of course, I would like to see schools in the US of A go back to sponsoring rifle and pistol teams, and allowing the students to bring their competition or hunting rifle to school with them. Remind me, how many school shootings were there when students would bring their rifles to school and stack them in the classroom or office for the day?

Again about DC

OK, so does anyone out there actually think that gun buy-backs cut down on the amount of gun violence? Who is going to bring in their firearm for a $25-$50 payment? I'll tell you who: Old widows who never liked their husband having a gun in the first place. (Grown) children who inherited an "evil" gun from their parents and, for reasons of principal, don't want it around the house. Not that I blame these people - everyone should be just as free to not have a firearm as to have one - I just find the idea that buybacks will somehow reduce gun crime in a substantial way absolutely ludicrous.

If anyone reading this ever wants to get rid of a firearm for $50 - let me know. If you want to get a good market price for the weapon, list it on gunbroker.com or auctionarms.com.

And I wonder where the unused portion of the $300,000 DCPD was recently given for a buyback will end up....


alright, I'll put down my fingers.

Crime

You may or may not have heard about the "crime emergency" that has been in effect in DC all summer. I honestly don't know what that really means, other than stirring up the media and imposing a 10pm curfew on kids.

Last week I caught a few minutes of a press conference held by the DC police chief. Interestingly, he was claiming that the curfew has reduced both the number of teens who have been victims of crime and the number of teens who have been arrested during the summer. Let's see here - the curfew keeps the law-abiding kids off the streets and gives the law-breakers (who will still be outside) further incentive to avoid being in positions where they might come into contact with authorities. Interesting.

Even more interesting was that the chief stated that the police department is only part of the law enforcement process. I was thinking to myself, ok, he's going to refer to the need for effective methods of dealing with criminals once they are caught and parental responsibility for kids. ... Of course not. The chief went on to explain how the police and courts only came into play after the rest of society (including government in general, "community", welfare, etc...) failed to prevent those lawbreaking individuals from feeling they needed to break the law!

(blink, blink)

Yeah, the chief of police for Washington DC believes that all of society is part of the law enforcement process because, somehow, it is the responsibility of society when any freedom-despising, other-disregarding, law-breaking, individual makes a CHOICE to hold-up a convenience store or strip a pair of basketball shoes off a kid at gun-point. And we wonder why DC has the reputation it does....

Ok, I have to go do some school work. More on my classes and my students later.

73

Oil Prices (and what doesn't change them).

Hey Ya'll,

Remember how, a little over a week ago, a portion of the Alaskan oil fields were shut down to conduct repairs on the pipeline? At the time pretty much every news outlet (at least that I saw) was predicting doom, gloom, and rising oil prices. Speculation prices did rise - but not by very much and certainly not for very long. In fact, today we get the news (see article here) that oil prices have reached what is an eight-week low due to robust oil stocks and the expectations of declining demand as we reach the end of the summer. The price (and supply) of oil continues, as always, to be driven by demand. Scare tactics based on mistaken economics bother me.

Oh, and in other news... I'm done with my field exams! Two three hour exams on subsequent nights.

Economists and Taxes

This morning, before I left for work, my roommate asked me if the paycheck he recently received for his teaching services was substantially smaller than he expected exclusively due to taxes.

It was.

Ouch!

I stopped for a moment, and we shared a moment of sadness and disgust about the inefficiencies of the various levels of government and the amount of servitude they require from workers in the United States. Both of us also realized that the government has a pretty slick game going on - as long as most Americans are relatively content to pay the current level of taxes, no one will find it worth their while to really work for change. For example, my roommate, while perfectly willing and eager to jump onto someone else's efforts for lower (or no) taxes, finds that even the substantial amount of money he lost to the government is not enough to prompt him into personal, individual, action.

It's all about incentives, costs, and benefits my friends.

Fourth of July

I find it very interesting that on this day - a day to celebrate the birth of so much of what the United States stands for - so many people choose to spend the day with family and friends. Cooking out, boating, playing yard sports, watching fireworks (lighting fireworks); all these activities, to me, speak of values and ideals fundamental to our nation. Freedom, initiative, family, deterrence (you do know that the tradition of fireworks in America started with the celebratory detonation of military ordnance).

Anyway, enough musings - on to my main point. Isn't it amazing that we live in a country where so many counties, townships, and cities can afford to spend tens of thousands (or even hundreds of thousands) of dollars on making nice explosions in the sky? Does anyone think that such an outlay of wealth could happen in a country without a free economy on a local level without negatively impacting the other functions of the local or state government?

ps - the fireworks show went really well last night. The Finale was AWESOME - one of the best I've ever done.

Economics Everywhere

(with apologies to Marginal Revolution for the title)

Yeah, I know it's been a while, but I've been busy. I'll actually be teaching two sections of "economics for the citizen" at Patrick Henry College in the fall.

But that's beside the point.

The reason I'm writing: I'm spending the week of the 4th with my family, in Michigan, doing fireworks. (we are part of a commercial fireworks crew) We're just about to eat breakfast, and my dad walks into the room and starts paying "bounties". On Chipmunks! The bounty is $2.00 a head, paid by my dad, upon the killing (and removal) of every chipmunk. It truly is amazing how the bounty has turned my siblings into vicious chipmunk hunter. Pellet guns, slingshots, bike tires, water buckets - they are rather creative in their destruction.

High Gas Prices and Unintended Consequences.

Ouch! It hurts to fill your tank these days. I start thinking about building a giant slingshot every time I put gas in my car. The only problem left to solve is predicting the landing accurately enough to install a net so I won’t kill myself. My boss sure would be surprised to see me come flying through the air on my way to work!

High gas prices have left all of us searching for answers about just why gasoline is so expensive and who is to blame. We can all easily see gasoline prices climb toward, and past, three dollars. We all see, and hear, the clamorous cries of politicians to investigate the high prices, punish those responsible, and generally “do something” about how much people pay for fuel. Most of us feel the bite in our wallet (though not enough to stop us from driving). What most people don’t see are the unintended results from various government decisions, a major reason why prices are so high.

Sure, prices on the sign at the local station went up because Johnny took his suction pole thingy out there and changed the numbers, but that’s not why fuel costs rose. We had to pay more for a gallon of gas because, at the heart of the matter, the amount of gas available for purchase in the United States didn’t keep pace with the amount of gas that Americans wanted to buy.

Restricted gasoline supplies result in higher prices. There are many reasons why the real and practical supply of gasoline in the United States has been restricted and the price has been rising. One of these is that the real supply of gas was seriously strained following the damage caused by hurricane Katrina, and it takes time to put refineries back at full capacity. Another cause of high prices is that worldwide demand for crude oil and gasoline is at an all-time high, thanks to the growing economies of the Far East and America. But that’s not all. We even have our own federal and state governments to thank for these high gas prices.

Even though every politician you’ve ever heard of, and many you haven’t, would like to make sure everyone sees him or her reducing gas prices, there are laws on the books that actually increase the cost of gasoline. I know it sounds crazy, and I’m sure the senators and congressmen who voted for these laws didn’t intend to raise gas prices, but that’s what happened.

What the politicians wanted to do, what they intended to do, was protect the environment. So laws were passed that carefully required that only a certain mixture of fuel, the one best suited for specific environmental conditions, be used in each region of the United States. Activists, concerned with the potential environmental impact of refineries, joined forces with anyone who was concerned about having a refinery built in their city to demand strict regulatory standards and a multitude of requirements for new refineries to ensure safe and environmentally friendly facilities. Congress listened to their requests. Environmentalists lobbied the legislature and told the public about beautiful, untouched, wildernesses or oceans and the devastation caused by oil exploration and drilling, so congress passed laws to protect these pristine wildernesses.

All of us want to protect the environment. We can all enjoy the beauty and majesty of a fresh mountain valley or the wonder of a mother duck swimming on a pond with her ducklings. Sometimes it’s good just to know that untouched regions still exist. Unfortunately the laws meant to protect the environment have had effects that go beyond their intended targets.

I said earlier that laws passed by the government can easily have unintended consequences. Well, the laws that were passed requiring different mixes of fuel in different areas of the United States, or even in different seasons, have had results that the politicians didn’t mean to happen.

Fuel mixture laws are intended to cut down on smog in heavily populated areas and reduce the amount of carbon monoxide pollution from autos. The areas of the country that currently require specially formulated fuels each have their own requirements that must be at least as strict as the federal regulations. To make matters worse, some of these requirements apply through the whole year and others do not.

The problem with these laws is that in a situation where there aren’t ample supplies of each fuel mixture, when the mix of fuel for one area runs short – say, because a hurricane damaged the refinery making that particular mix, or demand increases during the summer – it is nearly impossible to shift fuel from other areas. Further complicating matters is the yearly switch from summer to winter fuels and back again, which leads to temporary shortages when it comes time to switch fuel mixtures. This is exactly what happened briefly up and down the East Coast earlier this year. The result in the affected area is prices at the pump that rise rapidly.

Clean air is good, but protecting that clean air can have consequences we don’t want. Laws that regulate refineries and refinery construction have made the process very lengthy and very expensive in this country. In fact, building a new refinery has become so difficult in the United States that none have been built here in over thirty years.

Gasoline production around the world has expanded, but this is mostly due to new refineries that have been built in other nations. American demand for gasoline has continued to climb during this thirty years and, though refineries in the United States have expanded production and become more efficient, we have had to run the refineries full tilt while still importing processed gasoline from foreign nations. This becomes a problem as growing economies around the world, including ours, continue to demand more fuel, and are willing to pay for it. If a refinery can get comparable prices from different customers, the refinery would rather sell where they don’t have to pay costs to ship overseas. The result is that we have to pay higher prices to offset transportation costs and get the same fuel.

Like the laws to protect the air by requiring fuel mixtures and the laws to ensure safe refineries, the laws designed to protect the pristine wildernesses seem to have worked. The wildernesses are protected, protected so well that even efforts to reduce America’s sensitivity to worldwide oil demand and supply changes by drilling in very small areas are refused. So the oil sits untouched in Alaska, off our coasts, and in the Gulf of Mexico. Oil that, if extracted, could increase American oil production enough to soften the negative effect that the uncertainties in Iran and Brazil have on our gas prices.

So we see how, with the best of intentions, government can cause higher gas prices when all they really wanted to do was protect the environment. Actually, it’s not just gas prices. An astonishing amount of things done by government have an impact or consequence beyond what they meant to happen, and unintended results are caused whenever government tries to fix anything by using laws. In our complex economy everything is interrelated. When government changes the laws to address one issue, it ends up affecting some other, different, issue. This is what happened with the environment and gas prices. Sometimes it can take years before we start to see the full effect of a new law, but sooner or later its true colors will show.

The government certainly doesn’t mean to drive up the price of oil and gasoline in the United States, but neither are they able to fully see the results of their legislation. These laws were only intended to protect the environment in some way. Yet each of them has, because of consequences the government never intended to happen, helped make it more expensive to fill my tank at the gas station.

Great Article

Though I don't have time to write my own analysis, this article is really good. Sound economics, good explanation of demand/supply for oil. You should read it.

Here's a second article that I found interesting. It certainly has some flaws - particularly in assuming that we could grow enough corn and other agricultural products to produce ethanol in sufficient quantities to replace oil, and it was written by a pol, but it's interesting.

Scary - sort of.

Take a look at this. So now Iran has openly said that the United States could not win a war against them. Interesting. It was also proclaimed that the US is a "decaying power". Now, it could be that this is another example of the rhetoric that has historically been used again the West ("we will bury you", "the great satan", etc.), or it could be that Iran is looking at the way a vocal portion of this country is doing its very best to demolish our ability to wage war and taking comfort.

No, no economic thoughts right now. Sorry. Not really. Maybe later.

Biblical warfare.

During WWI a British Army officer was fighting in Israel around Michmash, the location of Jonathan's victory in 1Samuel with his weapons bearer. The officer recognized the name, looked up the battle in his Bible, copied Johnathan's tactics of going through the hidden pass, and won a victory.

Yet another example of Biblical wisdom or actions continuing to prove applicable in this age.

More thoughts on Japanese Warfare

Allow my to indulge myself once again with the conclusion to my Japanese thoughts. Again, there are two parts.

First - during the roughly one hundred years of civil war, is was most common for warriors and samurai to be paid when they could present the head of an enemy after a battle. This led to some warriors trying to enter the battle late - after the majority of the fighting was completed - to collect a head. To counter this, significant effort was put into methods of determining if a head was removed pre or post-mortem. To me, this is a pretty good example of poorly designed incentives that lead to additional expenditure to remedy the situation.

Second - opportunistically switching sides was considered dishonorable. Extremely so. Samurai were expected to be willing to fight to the death for their employer, but in defeat, once they were threatened with death and had not flinched - thereby proving their worth and honor - they were offered a chance to switch sides. Dealing with incentives again, this of course decreased the expected cost of being "willing to die", and therefore decreased the meaningfulness and value of such an oath.

Great Article!

Just going about my business and found this superb article by Thomas Sowell. He writes on the disturbing irrelevance of the facts - a situation I have noticed for several years now and that really pesters me.

Good Morning!

Believe it or not, I have been up since about 5:30am. It feels great. Got the new laptop, and it has been a pleasure to write on for the last 18 hours.

Just have some random military-economic thoughts about Japan this morning. Did you know that in 1500s Japan, commoners were allowed to own land but not allowed to possess weapons and samurai were allows to own weapons but not land? Very interesting. Puts the power to protect property in the hands of those who do not have the property themselves. Removes all power to rebel/defend from taxes on land or crops - property taxes - from those who would pay such taxes. Not quite a state monopoly on deadly force, but the samurai worked for the state most of time around that time period.

At the beginning of the above, and to end the one-hundred year civil war, all commoners were required to surrender their swords. To reduce the friction this would cause, the blades were melted into a giant religious statue. The idea was that this statue would pick up the responsibility of protection and peace-enforcement. Hmmm. Wonder what you could make with seized guns that would fill the same role? Watch out for this idea in the future - or at least the basic concept or giving up weapons but not losing the protection of property and person.

I have several interesting economic ideas about Japanese warfare, but I'll wait a while before writing those.

Read it.

My friends - this is the importance of going behind the news and gathering your own information about "news events" from varying sources. I of course was aware of the precise definition of "air assault", but most Americans really are not.

So, for a slightly different (from what any media source usually tells you) picture of what went on in Iraq this weekend, read this. Oh, and it really is a good thing when a large military operation results in no casualties. From time immemorial, military leaders have sought to be where their opponent wasn't, while still damaging his ability to make war.

A Minimal Michigan

Wow, my state-of-origin has continued to dig itself deeper and deeper into an economic rat hole. This week the Michigan Legislature voted for a $1.80 increase to the minimum wage in response to the current push to place a constitutional amendment increasing the minimum wage on the November ballot.

Here's a brief article, written three days ago by Mark Steckbeck of Hillsdale College, that talks about the illogic of increasing the minimum wage.

When dealing with minimum wage issues, it is vital to remember two things. First of all, when the price of anything increases less of it will be purchased. In this case we are talking about the price of labor. As employers are forced to pay their minimum wage workers (who, by definition, aren't valuable enough to earn more than the employer is forced to pay them) more, fewer minimum-wage/minimum-productivity workers will be employed. It's as simple as that, and has been born out many times in studies.

Second, Steckbeck does a good job of illustrating just who earns the minimum wage. The reality is that a tiny fraction (2.7%) of workers make the minimum wage in the first place. Of those workers, most of them are young and living with their parents, gaining valuable experience at a first job - experience that will allow them to go on and lead a productively employed life. Those minimum wage workers who are not young, the vast majority of them are either supplementing their hourly-wage with tips (ie, waitstaff, bartenders, etc....) and making decent money, or are simply working to occupy their time and supplement social security income post retirement.

Ok, I'll get off my horse for now. Got to go get more schoolwork done....

Wealth inequality -- -- or not.

We're subject to a constant barrage of statements about "wealth inequality" - about how the rich are "getting richer" and everyone else is just barely scraping by. I'm not going to go into my own spiel here, though I could. Instead you should read this post by one of the professors at George Mason.

More coming!

Finally I'll be getting my head back in this blog. Sorry for the long delay. My goal for the time being is to post something every other day, be it a short essay written for a class, some commentary on the news, or some random economic thoughts. The first short essay is posted below. Enjoy!

Nathan

A Spontaneous Force

An invisible energy field surrounds us. It permeates our lives, influencing nearly everything we do. You can’t taste or feel this energy, but it wields great power to organize man’s efforts and enable the existence of society as we know it.

No, it isn’t The Force.

Instead of being practiced only by a handful of dedicated and highly-trained Jedi, the energy field I am talking about is utilized the world over by people who are – in virtually every case – completely unaware of its existence. Indeed it seems to operate best when unknown; every time a single person or a group of individuals has attempted to either manipulate the energy field or to accomplish similar coordination without its assistance, disaster has resulted.

This energy field is called spontaneous order, and without it our world would be a vastly different place.

Think about a paper clip or a pencil.* Both of these simple items are readily available, and at prices that make them quite expendable, yet could you make one? For that matter, could anyone? Some people might theoretically know how, but no one on this planet is able to single-handedly accomplish the gathering of raw materials, creation of the manufacturing equipment and processes, and production of either of these items – or virtually anything else either for that matter. It is simply far too much for any one individual to know, let alone accomplish.

Yet somehow, without a “minister of paper clips”, tens of thousands of individuals manage to coordinate their actions and combine their knowledge to create these products. The metals are mined and made available, manufacturing plants built, boxes produced, distribution systems of ships and trucks activated, and a quantity of low-cost paper clips very close to that which will be bought finds its way to the shelves of your local office supply store. All of this happens without anyone “in charge”, without any overall plan, and even without many of the people involved having any idea of the “big picture”. This is spontaneous order.

Self-interest drives spontaneous order. This sounds awful and selfish, but in reality self-interest causes all of us to do things that other people value. By doing what we can, and that is of value to others, we help create order. Prices for goods and labor are the primary signal that we can all use to decide what we can do that is most valued. You simply choose the job that pays the best and you have found what you can do that helps others out the very most.

But spontaneous order is more than just self-interest; it is also the instinct to participate in the activity of a group in a way that fits in with what is already being done, gaining value from and adding value to the activity taking place. The second form of spontaneous order is evident in both man and animal. A goose exhibits it while flying in the aerodynamic “V” with other geese. A jazz musician participates in a spontaneous order while playing in a jam-session with other musicians. You exhibit it when you decide to interact with other people by buying and selling a house using the same methods as other home-sellers. Both the self-interest that drives you to do what others value most and the instinct to participate in established ways with others are necessary.

Spontaneous order is vital to modern life as we know it. Even to make such simple goods as paper clips or pencils from start to finish, the amount of knowledge and information required is far too great for any individual, or even any small group, to grasp. How much more so for a watch, a microwave, or a car? Only through a spontaneous, uncontrolled, order that emerges from the self-interested interactions of individuals can we experience life as we do. The good thing? We don’t have to create order, all we have to do is leave it alone. Spontaneous order already exists all around us, surrounding us, permeating our lives and everything we do, and coordinating human action for the betterment of all.

---

* With thanks to Leonard Read and his pacesetting essay I, Pencil.

Two Stories

Here are two brief stories I wrote this week for my "communicting economic ideas" class. Enjoy.

I walked away nearly twenty-five years ago. Walked away from Omelas.

Walked away from the pleasure, the ease. Walked away from the festivity of life in that desperate city. Only by walking away could I save that which makes a man human.

See, staying would have meant accepting my incapability of working for my own well-being. An acceptance that all I enjoyed in life was purchased by the unwilling suffering of a little child. I would have had to live with the knowledge that my life was based not on my actions, but on the bleak existence of someone who had no choice in the matter.

This I could not do.

Life has been hard these twenty-five years. I have discovered what a responsibility it is to rise or fall by my own actions. Though work is hard, my customers pay me a fair wage for my services. I don’t force them to buy anything. No one suffers against his or her will to benefit me, and I labor willingly for my own benefit.

See those two girls feeding the geese? Those are my daughters. Every day I give thanks that they will never know the seductive horror that is Omelas. They enjoy their play and free time all the more because they know work. Yesterday Claire, the oldest, was complaining about doing her chores. Dear thing, she probably thinks I’m crazy when I tell her, as I did yesterday, that working and benefiting from your own labor is one of life’s greatest blessings.

It’s true you know. Profiting from the suffering of another, especially if that person has no choice, reduces a man to a being dependent on the handouts of others, reliant on external sources for survival. Working and adding the results of that effort to your life, though much less enjoyable at the start, strengthens a man’s mind and body, spurs him to invent and create, and gives him a true appreciation for life and what he has.

And that really is the most priceless possession of all – to appreciate life, to enjoy your own and respect that of others around you.

I have never succeeded in freeing the child of Omelas, and life has not been without struggle. But every time I embrace my wife at the end of a day or run through the yard with my two girls, I give thanks that we live in a land where all work benefits the worker. Our futures here in Tsilatipac, our very lives, are our own.

The Second One.

“Grandpa, did you feel oppressed when you were young?”

The gray-haired gentleman seated by the window raised his eyes from his book; “No Peter, why do you ask?”

Sitting on the couch near his grandfather’s chair, Peter said, “Today my government teacher told us America’s prosperity was built on the suffering of workers, especially immigrants, and that capitalism has never succeeded without causing and profiting from the oppression of the lower classes. He also said that capitalism keeps workers in poverty to profit the businessmen who employ them. I know you came over from Germany with your parents when you were a kid, so I wanted to ask you; what happened when you came to America? Did you have to suffer so your dad’s boss could profit?”

“Peter,” replied the old man, “I think your teacher is misguided. My parents came to the United States because they heard it was a country where men could create a better life for themselves and their children through hard work. In the United States was this wondrous thing called ‘capitalism’; men could start out as a deliveryman or laborer – anything really – work hard, and someday own a big business or even be in politics. My father dreamed of owning his own business, he wanted to do something other than what his father and his father’s father had done, so we packed up our lives and moved to the States.

“Life was difficult. The home my father found was small, even smaller than the house we left in Germany. Father couldn’t find work doing what he had before, so after three weeks he took a job unloading ships. The work was hard – he would leave the house every day before the sun rose and return well after dark, hungry, sore and exhausted. He was paid little; often we had only two meals a day. After school I helped earn money for the family by standing on the corner and selling my mother’s bread.”

“Yes, life was hard for many years, but my father remained cheerful, often saying that things would get better. Sometimes he would point out a certain man when we went to mass, a man who was always dressed well and never arrived with mud on his boots. Father told me this man owned the company he worked for, that this fine and distinguished man was his boss’ boss. When I asked why this man kept my father working so hard for such long hours, my father would reply ‘It isn’t him who keeps me working, I choose to work the agreed amount to receive my pay. I work because working benefits me, not because he or any other man requires me to.’ I thought it was unfair that this man was so rich and we were so poor, but my father would answer ‘No son, that man earned what he has. Because of his business skill and hard work I, and many others, have jobs with his shipping company.’”

“Peter, even though we struggled back then, my father taught me that capitalism meant men earned their wealth through their own effort, not by exploiting the suffering of others. Yes, workers might experience hardship on the job, but they worked of their own free will – no one was forced into suffering for the benefit of their employers. Even the poorest of laborers was compensated for his work. And though some were rich and others poor, all alike were able to benefit from their own sweat. As you know, Peter, your great-grandfather didn’t work at the docks the rest of his life. He saved some money, opened his own store, and lived his dream.”

Unleash the economy!

So, about the President's State of the Union address last night. You should check the various news and pundits sites for what people are saying, but I have one comment.

Bush proposed a 22% increase in the budget of the United States Department of Energy. Supposedly this extra money will help develop nuclear, wind, and solar power to lessen our "addiction" (Bush's term) to foreign oil over the next nineteen years. First of all there are all the normal public choice economics type arguments to be made about this; such as I would expect that every actual attempt to follow this plan would be met with opposition by somebody, nineteen years is a long time for Americans to maintain a vision or plan, and the organizations using this money will be primarily focused on USING this money instead of providing results due to the distant time-horizon. I mean, in twenty years, who's going to remember that Bush proposed this initiative last night?

If the President really wants to lessen dependence on foreign oil, I say unleash the market. There is a vast amount of untapped information in existence, buried in the heads of a geologist here, a chemist there, or an engineer over the next mountain. This knowledge would never be fully utilized in a government program, but given the opportunity to make money from what they know...people with valuable information come out of the woodwork and the market gets to sort out whose ideas are really worthwhile.

How would the market be unleashed? Relaxing/removing various drilling and exploration restrictions. Reducing the time and money it takes to get a new petroleum refinery through inspections and regulatory red-tape (it's currently something like ten years and over two BILLION dollars). Make it more difficult for communities or states to block construction and operation of wind generating facilities and nuclear plants. Alternately, make it easier for the prospective owners to strike a deal with the affected landowners, and only with affected landowners. Not only should it be easier to get into or expand in the energy business, it should be brutally easy to get out of energy, ie go out of business without the government trying to prop you up.

If energy independence is truly top of the President's to-do list, I believe the market holds far more promise than does increasing government spending.

Morning thoughts

Good morning! When I woke up this morning the sun was just rising, painting the sky a gentle shade of pink. Now, I've seen winter sunrises before, but it never ceases to surprise me when I look outside and see a clear, blue, sky during the winter. I grew up in Michigan remember. Gray skies ALL THE TIME! Not here though. I love my adopted state.

Check this out. A VA state delegate (like a state representative) accidentally discharges a gun in his office. The bullet is stopped by the kevlar vest hanging on his door. The governor (Democrat) calls for review of the policy allowing guns to be carried IN THE STATE CAPITOL BUILDING. Everyone else seems to think the incident isn't such a big deal. Did I mention I love my adopted state?

So Hamas won a majority of seats in the Palestinian election. Far more than anyone expected. Far more seats than exit polls indicated they would win. Now what? Well, the international consensus seems to be that no one really wants to deal with a terrorist organization as a government. But Hamas appears to be the legitimately elected majority government - and possesses something that is somewhat a rarity in parliamentary-style democracies, an individual, simple, majority of seats. They don't NEED any other party to align with them in order to form a government, but they are making overtures to Fatah, the primary (newly) minority party.

I know what I would do. From what I've read, Hamas seems to have won the victory it did because the PEOPLE (that cornerstone of any democracy) wanted a change from the perceived slow economic and political. Hamas has done a good job dealing with individual charity cases, supporting individuals - this plus their hardline stance vis a vis Israel has given them "street cred". Yet all main donor nations appear poised to cut off all aid to a Palestine governed by a terrorist organization. In essence, though Hamas is the majority party, the rest of the world may force them to form a coalition government. If I were in charge of Hamas, and from the limited amount of time I have put into this, I think I would attempt to form a government that consisted largely of Fatah in terms of foreign relations/policy. At the same time I would put my party, Hamas, in charge of domestic policy (what the people voted for). Don't know if this would work, don't know if other nations would buy it, but I would try it.

Do I think my idea will be tried? Ehh... not really. I mostly expect Hamas to say "get lost, we won and we'll run the government, to anti-paradise with the consequences".

That's enough for now, I really do have school work to be doing!

How is it done?

Quick - someone answer me this. How do you have an intelligent and reasonable (ie, not dissolving into insults, name calling, and shouting) discussion with someone who refuses to accept the same facts as you? Could they possibly be right? What if you are 100% sure your facts are correct... but so are they. How should they go about informing you that it may actually be your dearly held "facts" (assumptions) that are wrong? Is it possible to both try to persuade another and yet be open to persuasion yourself? If one party of a discussion is willing to examine facts with an open mind, and the other party isn't, doesn't that give an advantage to the one who resolves not to examine alternate facts? If one party is willing to compromise, and the other isn't, who wins? Therefore, is not the dominant strategy usually to steadfastly hold to your own "facts" or interpretation thereof, regardless of what arguments are presented? Seeing that each party in a discussion may have an incentive to refuse to look at alternate facts, of course, lands us right back where we started.

And what, oh what, does this mean for American politics?

General News

Wow. The more I hear/read from Judge Sam Alito the more impressed I am with his judicial knowledge, intelligence, and general presence of mind. This dude is smart! The left side of the aisle is still trying to taint him with something, anything, that will outrage the American people, but to this point nothing is sticking. On all the major Democrat "hit issues" Alito appears to have made well-reasoned decisions that have supported various sides of each issue.

I am sure you know this, but on Monday the ninth the Dow Jones Industrial Average broke through 11,000 for the first time since 9/11/01. Though all major news sources reported the milestone as more "phychological" than real, breaking 11,000 - and staying there as the Dow has done - is indicative of an economy that is not only doing well right now, but also an economy that people expect to continue doing well.

It has been in the 50s or even 60s every day this week here in DC. This Michigan boy just doesn't know quite what to make of it. Does make it a little hard to use my dogsled though....

73

Published!! (on a webpage)

Today another article of mine appeared on the Mackinac Center for Public Policy website. This one is a basic explanation of and introduction to Overton Window theory. If anything you have heard about my work this past term interests you, this is a good article to read. You can read it HERE or by clicking on the link in the sidebar.

Palestinians

I don't know how much you know about Middle Eastern history from the end of WWII to present, but a common conception is that Palestinians hate Israel because Israelis threw them out of their homes and land. Forgotten in the depths of "uncomfortable history" are the instances when the leaders of the nations in which Palestinians have resided for the last sixty years refused to allow settlement among their own population, keeping the refugees in camps. Forgive any insolence, but answer me this. If Palestinians hate the Israelis and live in peace and harmony with all other residents of the Middle East, why did THIS occur?

Very interesting. Apparently some Palestinians decided that they 'deserve', are due, land from Egypt. And are willing to take it by force. Doesn't this show that Palestinians are a (effectually) leaderless rabble? How can they be considered a coherent nation that requires their own homeland (as we are so often 'reminded' of)? Doesn't this show that Palestinians do not, in fact, feel warm and fuzzy toward their Arab neighbors? Could their possibly be a reason for this anger and resentment?

Ok, I'm done with that thought.

Naples Economics

There will be more on this later, as right now I will be going to be to get up early for my flight, but it is very interesting to see the very recent spate of economic growth that this area has undergone. 73

The economist lives!

hey friends!
There was a nice post, almost ready to be posted, and the durn laptop froze up. So here's something maybe a little different.
From Thanksgiving to the end of the semester I was extremely busy. Two weeks of writing on my two big papers for my professors, one week of intense studying for final exams. All the work paid off though. My exams went well. Both papers were very well received. A third paper will be published January 4th on the Mackinac Center for Public Policy website. All three of these papers focus on the same topic, a topic that has become an area of great interest to me and that I hope will have potential for the future - political possibilities. More particularly, the papers focus on developing a theory of a window of political possibilities and how that window can be shifted to result in policy applications.

Well, I'm hanging out with Larry Reed, the president of the Mackinac Center, in Naples, Florida - so I'm going to go for now.

Pearl Harbor Day!

Lest we forget either the tremendous sacrifices and triumphs of World War Two or the reality that we are at war even now - no, I'm not talking about Iraq - with an enemy that is more eager to destroy our way of life than the Japanese ever were.


One paper down, major homework getting done, then studying for finals and modifying the paper.

Arrogance of the intellect.

If I ever start using my education and training as a foundation for arrogance, you MUST set me straight. This week I have come to the conclusion that, while not all of the economics professors here at GMU suffer from arrogance, far too many of them do. Included in the afflicted are all three professors that I have classes with this semester. Now, this arrogance takes several forms, but all have the same root - forming judgments and beliefs based on seriously flawed and/or incomplete information. Now don't get me wrong, all three men are brilliant, and I respect all of them, but all three have allowed their intellect to impair their ability, in some areas, to absorb information that doesn't fit with a preconceived idea of how things should be.
One professor emphatically does not believe evolution, and is able to rattle off many logical and factual problems with the theory, but neither does he believe in design by the Creator. Why? Because his back hurts, and other physical aliments observed around him, make him think that humans were not perfectly designed. His intellect cannot accept the notion of a Creator, therefore, no Creator exists. So what does he believe? Hmmm, good question. Not in evolution, and not in God (in any sense).
The next prof. allows his intellect to make snap judgments about political issues. Sometimes he seems to be on target, but more often his assumptions are simply incorrect. Though I think he realizes that he doesn't have all vital information, he feels that he has enough to act and believe as if he had all pertinent information. He doesn't.
The third professor blatantly assumes that the rules he plays by are the only proper, the only rational, rules by which to think and form opinions. If you can argue and win from within his rules he may accept your point, but heaven help you if you try to argue that one of his assumptions about rationality, morals, motives, or another such human aspect, is flawed. His fervent belief in his perfect conception of rationality is, ultimately, irrational.

Three forms of arrogance: "This doesn't fit into my preconceived opinion of how things should be, so it must not be true." "I don't need to know all the relevant information, I know enough to make a judgment." "My approach is the only rational and proper approach to use." All three are dangerous both in academic and personal life, yet all three are oh so easy to slip into - especially for the educated mind.

Why should I believe as I do?

Tonight I had the pleasure of attending a debate between two of my favorite professors here at GMU about the rationality of religion. It was unfortunate that one debated the rationality of religious action and the other the rationality of religious belief, but the debate was fantastic nonetheless. I believe that the debate will be made available as a podcast (digital recording) for dispersal, and when it is I will link to it. Why should you listen to it? Because it provides excellent examples of a fantastic speaker (Dr. Larry Iannacone), the types of anti-religious arguments you hear all the time in academia (Dr. Bryan Caplan), and some good, non-experiential based, arguments for why religion is a rational action (again, Dr. I). Why non-experiential? Well, simply because if you base your entire argument for religion on experienced phenomenon you leave yourself open to counter-arguments such as "well, that's your experience and that's fine for you, but I've never experienced that", or, "are you sure you didn't just see/feel/experience what you really really wanted and expected to - kind of a mind-over-matter sort of thing."

All right, that's enough for now. I have many more thoughts on this though, so if you're interested, ask me.

God bless,

Read this

Wednesday I read a paper that made me laugh, smile, chortle, and think that perhaps it's time that economists stop pretending they can analyze religion without accounting for the supernatural. That leaves me with a significant question however - how can I provide additional depth to the work being done on the Economics of Religion by drawing God and the supernatural into the picture? Here's the paper - it's not long and really isn't as sacrilegious as it seems at first. And here's a good website for some background on what economists have just started doing with religion in the last couple years. Warning about that second website - it is substantially more complex and "economic".

Another one of these kooky 60 degree and sunny November days here in Virginia.... Yesterday I drove nearly all the way to the southern edge of the state while making a run for my part-time job. At least I didn't have to drive all the way to our branch office in Raleigh NC.

Was I born in the right decade?

Once again I have come across one of "my" economic ideas in a paper that was written in the 60s. I guess the challange for me now is to both learn to identify which ideas of mine that haven't been written about yet have merit (instead of just assuming they are so simple as to be worthless) and to explore new applications of these old ideas of "mine".

I have a question for you. Why is democracy the best? Do you have any economic, administrative, or effectivness reasons why democracy is the best form of government? I think that question can be solved rather easily, but more difficult is the question of which of the many voting methods is best.

Third random point. Yesterday, working in the AAV shop, I was marveling at the network of small and medium sized businesses that exist to produce the technical setups for tradeshows, conferences, concerts, etc.... Not only are there the companies that actually bring the equipment, set it up, and run the show (and even then they hire lots of freelance help for specific jobs), but there are also many companies that rent additional equipment, do shipping, even tasks as mundane as building cases in whish to transport and store expensive equipment.

The reset button

Have you ever had an experience that convicted you, illuminated your actions, and pushed you back on some course you had originally set?

When these experiences come from God they are just amazing and make me praise Him all the more. When I discover a particular "reset" on my own, I just kick myself. And when the reset comes from a friend, from realizing that by straying from my previous course I may have hurt someone I care about or caused them turmoil, I grieve for them and feel great remorse regarding my actions.

This afternoon something from one of my friends triggered this third kind of reset, and believe me, seeing how far and fast I can go from where I want to be when I try to take matters into my own hands just makes me all the more glad for God's grace and the constant advice/companionship of the Holy Spirit, and all the more committed to relying totally on the provision of my Father.

My friend - - I am deeply sorry, and thank you for (whether or not you intended to) setting me back on track.

In other news, I had a meeting/interview at the Tax Foundation this afternoon. Talking with several of the staff I discovered that one of their major points in the discussion on what attracts businesses to states is almost exactly the same idea I had and wrote a little about back in June. Now I really wish I had turned that thought piece into a full paper or article for MCPP. Good news though - it appears that I am moving from having "original" ideas that were first written about sixty years ago to simply not getting my ideas on paper fast enough to be the first. Guess I should write about my thoughts and ideas more, huh. :)

Went hiking with several friends yesterday. Fantastic day, so wonderful to be out and among God's forests, hills, and rocks again. The group hiked about 7.5 miles (one of the young ladies and I hiked about 1.3 miles more than the group). Here are a couple of pictures.


















Just a stream I really enjoyed hiking along. The goofy camera said the picture was blurry, but I like the picture the way it is.

Below is most of the group. The standing guy (Mike) and seated gal (Carolyn) both go to my church.
















And here's me, playing with the rocks again.

Behind the politics

More and more evidence continues to surface that we must give decentralized disaster relief more freedom in responding to crises. It seems as though worries over jurisdiction, licenses, and other bureaucratic nonsense hampered various small scale initiatives to provide assistance (article). Could there really be something to the wisdom of free-market economists' saying that a central authority has no hope of efficiently (or even workably) coordinating all relevant information and making the right decisions? Ok, so why do people clamor for stronger government response and protection after disasters? That's right, because then they do not have to take responsibility for their own actions and safety.

Apparently there is also a dispute over whether Amtrak was available to help move people out of the city (article), substantial emergency funds were unaccounted for or mis-spent before the fact (here and here), and my favorite of all religious groups in America - the envirowackos - strike again, causing more death and destruction (article).

More red tape (article). Just makes me upset.

No real profound economic thoughts, just been doing lots of reading lately - mostly about voting methods, rent-seeking, and various other facets of public economics and public choice. Played football (among other things) with friends from church yesterday, very sore all over today. So much fun....

YeeeeeHaaaaaaah!!!!!

I passed my Macro Economics Preliminary Exam!

I feel as though I should write something.

A possible bias may be a work here, but I find it rather sad that those most responsible (if anyone is) for the troubles in New Orleans most try to pass the blame while the one least responsible is the only one who has taken responsibility. I have actually heard people saying (and writing) that no blame rests on anyone except the President, while I strongly feel that, due to the evac plans that were not followed, the delays in requesting federal help (National Guard, etc...), and other various factors, what blame exists is to be found in lower levels of government.

Anything I could say has already been hashed to death, but you may have missed several points that I feel are crucial. First, the death toll stands at 659. Tragically high, yet not nearly the cataclysm that was initially feared. Second, to the best of my knowledge (and limited time), neither city evacuation plans and state response plans were followed completely. Third, everything that happened in New Orleans had been predicted and warned about for decades - expect perhaps the looting - and nothing was done by the "responsive and compassionate" leadership of the city and state. Fourth, it is the responsibility of the state governments to call for federal aid - especially when that aid involves military personnel. National Guard units are under the command of the governor. Neither was requested until after President Bush called and urged the governor to do so. Fifth, the talk about blacks being "targeted" in some way is preposterous. Look at the inner city of most urban areas. Anything that affects that inner city area is going to affect a greater number of "racial minorities" than "racial majorities".

There may be other salient points, and I make no assurances that the above is 100% correct, but it is true to the best of my knowledge given the limited time I've taken to be informed.

Now to some interesting economic thoughts - again, not original, but with my own spin.

First - the response of the free market, even though there are some tacit restrictions on prices, has been terrific. WalMart, Home Depot, cell phone providers, and other major retailers began preparing for the hurricane before it made landfall by stocking stores around the area expected to be hit with food, water, and relevant supplies (mobile cell towers and generators moved into the nearest safe zones in the case of the cell providers). Positive press was probably part of the story, but there was also money to be made. Survival items were given away, but markets existed for vastly increased quantities of "hurricane related but not survival" items.

Second - private relief efforts aside, the government spending/rebuilding/assistance/relief in disaster scenarios significantly decreases the costs of living in areas prone to disasters. My intelligent but non-economist mother saw this as a problem, and any economist worth his/her salt will heartily agree with her. Put in simple "economist speak", government disaster relief distorts the true costs of living in such areas, allowing more people to live in such areas than is best for the society as a whole. Instead of accounting for the true cost of potential ruin, they count on government relief to defray their costs. I have heard several economists who are concerned with the growing trend of increasing relief efforts and setting up special funds for victims of disasters. I agree with them. It is always easier, politically, to increase the amount of relief and be seen as "compassionate" than to decrease the relief and be decried as "heartless", "racist", and whatever else your political enemies will attempt to crucify you with. If we set up special funds for Katrina victims, al la 9/11 funds, where do we draw the line? At least with 9/11 you could draw a line at "victims of foreign attack during time of peace", though even that line is tenuous at best. Looking at things from a public choice perspective, it seems likely that more and more tax money will be spent on disaster relief of various kinds, and the costs of living in a disaster-prone area will continue to decrease.

Third - should we rebuild New Orleans? No, we should not rebuild it. Should it be rebuilt? Perhaps, but only if the costs of rebuilding are born by those who will live/work/have businesses there will we really know. Only then will we know if the benefit the residents expect to receive is greater than the costs of rebuilding.

Fourth - will the average income/wealth of New Orleans increase, stay the same, or decrease as a result of the hurricane? My bet is that average wealth will increase. If it is truly months before people are allowed back in to the entire city, I would expect that a lower proportion of low-income individuals will return to the city than the proportion of high and middle-income individuals.

All right, that's enough for tonight. I still have to read for class tomorrow. Do your homework, be willing to look beyond the major sources for news and information, and you won't need me.

NR

Enough!

In an ideal world, rescue would have come to all individuals trapped in New Orleans almost immediately, law and order would have been maintained, and the survivors would have been spared the trial that so many have born over the past five days. Instead, despite their best efforts (the US Coast Guard alone rescued 22,000 survivors and assisted with a further 9,400 rescues) the available rescue assests were overwhelmed by the magnitude of the disaster, worries about political correctness allowed looting and armed banditry to reach such a point that US military units have been conducting "combat operations" in the city, and the scale of flooding combined with the lawlessness contributed to the length of time required to extract all survivors taking shelter within the city. Yeah, things could have been done better, but I would argue that human factors have made things substantially more difficult than they otherwise would have been.

But wait!! What's this!? It looks as though, prior to the hurricane, all residents were warned that in the event that New Orleans was hit by a hurricane they (residents) would be responsible for their own safety and evacuation. Here's the article. Draw your own conclusions - I respect you enough to let you think for yourself.

Oh, and by now I am sure you've heard about Senator Clinton's request for a 9/11 commission style investigation into Katrina and the disaster response. Does that mean the commission would get to selectively ignore embarrassing revelations? It remains to be seen whether her request has true merit or whether it is a political maneuvering device to distract the administration.

'Nough for now. I was pleased to read that many of the Gulf refineries are beginning to restart operations, that crude oil prices have fallen below pre-Katrina levels, that we got through the Labor Day weekend without serious fuel problems, that various utility crews have made strides of progress in restoring service, and that engineers have been able to plug more of the levees around New Orleans and begin pumping operations.