Tuesday, February 19, 2008


Obama on NAFTA, as analyzed by Keith at Marginal Revolution: "Apparently Obama is to economics what Mike Huckabee is to evolutionary biology."

Anyway, free trade benefits those who produce efficiently and harms those who don't. Mexican unskilled labor is more efficient because it's cheaper. American corporations that employ Mexican labor are more efficient because they have lower labor costs. Obama is worried about inefficient producers within the US, the kind that are displaced by Mexican labor. The people who, despite coming of age in the most advanced economy in the history of civilization, are unable to contribute anything more to society than the picking of fruit and the assembly of unreliable automobiles.

Listen, China's financing our deficits. In the short run, we can keep up with rising debt by inflating our way out. Sooner or later though, the Chinese are going to get smart and start investing in Euros (or heck, their own booming economy!) instead. Once that happens, we're going to have to pay our bills. With what does Obama plan on paying? Unreliable SUVs and expensive fruit? Moral of the story be: if we want to hold our own in a global economy (a given considering that we owe money to half the globe), we'd better find something that we can do better than the Mexicans can. If, despite our advantages in deployed capital, credit, educational system, tradition, and rule of law, we can't manage that, no amount of protectionism is going to help.

If Obama really wants to promote positive change, maybe he could start by asking himself why the competition between US and Mexican labor is even close. Seek productivity gains, not rents.

Score one for the Austrians

Remember when I invoked the Austrians and their belief that Keyensian attempts at spending our way out of recessions are too slow and actually end up being useless in the short-term and harmful in the long-term? Well, here's some data supporting that claim. Executive summary: in more than a dozen attempts, stimulus packages have either never, or almost never pulled the US economy out of recession.

So, what am I going to do with my stimulus check? I'm not sure. Any idea if there's a prediction market out there where I might go long on lottery tickets and short on economics textbooks?

So, do they have pictures of Senators in the break room?

Okay, so it's kinda funny that a British Minister (as in cabinet secretary, not religious post) got detained by the Department of Homeland[1] Security on his way back from a meeting on addressing terrorism. Apparently it wasn't the first time, but I'm sure that, if it helps Britain, Mr. Malik never refuses American hospitality[2].

The real question: we don't detain Senators, do we? I mean, it's granted that there's a no-fly list where you're guaranteed to get harassed, but is there a white list too? A list of people that it would be politically disadvantageous to mess with? Presumably, a pissed off Senator or even Congressperson might be able to ask some uncomfortable questions about DHS's romp through the search-and-seizure provisions of our Constitution.

Even if we assume that Congress is too impotent to warrant exemption, certainly there's a system in place to ensure that high-ranking DHS personnel themselves aren't exposed to the entirety of their creation, no? Or do they just take the train?

[1] Yeah, "homeland" sounds funny, but "fatherland" and "motherland" were already taken by the Germans and the Russians, respectively.
[2] apologies to Gandhi...

Tuesday, February 12, 2008

Didn't Gump already do this?

A bunch of RIT kids run cross country. 2 miles per shift, 1 shift every 3 hours, 8 shifts a day, 12 days. Considering the setup, the kids were on an absolute tear: about 6.5 minutes/mile. Sounds like an adventure

Monday, February 4, 2008

Consequences and Consequentialism

So I've been posting up quite the libertarian storm lately, which for those who have known me a long time seems somewhat out of character. Well, the opposition to wars against Iraqis, Terror and Drugs aren't new, but what's with the attacks on social projects? Aren't I the dude who was always carrying water for social security and public education?

Well, yeah. Unfortunately, the primaries have reminded me that, just like the driver of a sports car finds his actions limited by the laws of physics, social planners are limited by the laws of economics. I'll probably get into those laws shortly, with the usual motivation of exploring my understanding through writing, but for now I'd rather work on clarifying some points for my extensive readership. There are what, three of you now!?!

Anyway, in case it wasn't clear, I want everyone to have access to health care. I'm less inclined to use "every American" than "everyone," but I also recognize that the developing world will take a while to develop, and no amount of effort will bring it up to our standards overnight. I'll probably address this issue separately in the near future, but some glaring issues come to light. First, what do we mean by "healthcare?" Second, we spend an astonishingly large amount on healthcare now, so how might throwing more money at the problem possibly help? Third, while single-payer seems attractive for any number of reasons, what makes health care so special that market competition won't give us the benefits it gives us everywhere else? Fourth, if kids are really expensive, maybe we need to make sure that the people having them can pay for them. My opposition to the plans offered by the Dem candidates are consequentialist: can our economy afford to spend even more on health care without seriously looking at the supply side of the equation?

Public education is a similar situation. If we assume that income inequality is a rough approximation of productivity inequality, better outcomes for all depend on better productive capacity. Productive capacity is limited by social programs that provide incentives for forgoing productive work, but it's also limited by lack of education. In simple terms, my policy preference on this matter is identical to health care: I want for the poorest among us to be able to secure for their children better education than they can presently afford. There are balance of payments issues here of course, but more important is the matter of efficiency in the deployment of cash. I'm running out of ways to run from the conclusion that we're not getting very good education for our dollar. Significantly, outcomes seem largely affected by the character of the students that a child studies with, an effect that puts middle and upper class students at a huge advantage. This is a tough nut to crack since it won't respond directly to a simple commitment to spend more. We have to answer some hard questions about where the responsibility of the state begins and the responsibility of parents, families and peer groups ends. Once again, possibly a topic for another post, a tough commitment for me to make given that I've been spamming on econ for a week now already.

I think what I'm trying to say here is that I'm not trying to be heartless, but I'm trying to avoid bad outcomes from good intentions. Raising the minimum wage sounds great until you price a swath of workers out of the market and leave a bunch of them unemployed. Protectionism sounds great until you've sheltered antiquated industries from world developments for so long that the structural adjustments necessary to once again be competitive have gone from hard to impossible (I'm talking to you, rust belt). Tight accounting practices sound like a great way to prevent the next Enron until you realize that the cost of doing business has gone up enough that you're really just preventing the next Google from listing in the NASDAQ or NYSE instead of somewhere in Asia.

The consequence of consequentialist thinking is that intentions don't count. The War on Poverty hasn't cured poverty. The War on Drugs hasn't removed drugs from the streets. The War on Terror hasn't made the country less terrified. It's not that I'm opposed to having our cake and eating it too, it's that a lot of times it's just not an option.

Austrians, Keynesians and Stimuli, Oh My

So, Congress is ruminating on recession, studying a stimulus, etc. What's up with that?

Today we consider two mythical points in space: the aggregate supply capacity of an economy and the aggregate demand. Consumers in an economy demand that producers supply goods and services, and money is the mechanism of that demand. With murmers of the 'R' word in the streets, we fear that the two mythical points have been torn asunder.

The problem, say the Keynesians, is not that the consumers don't want all that the market can supply, rathe the problem is that they lack the money necessary to demand it. The solution is to provide the money. How to do that? Well, we can lower interest rates, but they're already at 3%. With inflation somewhere between 2% and 3%, we're damned close to what I'm pretty sure they call a liquidity trap, or a situation where a bank loses money by lending. So the Fed's done most of the what the Fed can do.

When monetary policy isn't getting it done, the Keynesians turn to the fiscal. The idea is to have the government run a deficit in lean times in order to inject money into the economy, boosting aggregate demand up to meet the supply point like it should. In practice, this means increases in spending for Democrats and tax cuts for Republicans. There are different market distortions involved with each, but the idea is the same. Milton Friedman (talking about Keynesians, he wasn't one) emphasized the unimportance of the delivery mechanism by advocating that the money be dropped from a helicopter. As a side note, Keynesians would also suggest that the government run a surplus during fatter years in order to pay back the deficits incurred during the lean ones, but I bet you can guess how often that happens.

Not so fast, cry the Austrians (the part of the Austrians will be played in this election cycle by one Ron Paul). Aggregate demand was falsely blamed, they say, it was the supply all along. If demand is trailing supply, that's just because producers have foolishly gotten caught up in bubble/boom thinking and invested too much in things that aren't nearly so valuable as presumed. Real estate, for example. Last time it was tech stocks, who knows what it'll be next time. When you're faced with a hangover, the sensible lesson is to avoid the next binge.

With that in mind, injecting money is the worst idea EVER. The Fed drops interest rates, the federal government sends everybody a check for a few hundred bucks and suddenly there's a lot of money in the economy looking for someplace to go. It could go into sensible investments, providing long-term value benefiting everyone in the economy. Or it could be rashly deployed, blowing a bubble in some other industry and leading to another period of irrational exuberance, followed by another "correction" once people realize that the new emperor is no more clothed than the others. The Austrians, we can safely say, will bet on irrational exuberance over sober investments every single time the money gets cheap.

A stimulus package therefore is a suckers game. The market crashed when everyone realized that selling dogfood online wasn't the revolution it was cracked up to be. Bush, Congress and the Fed threw money at the problem, literally. Consumers took the money, avoided the stock market (won't be fooled again) and blew a big real estate bubble (okay, they will be fooled again). What happens when the real estate bubble pops? The powers that are loosen the purse strings...

So... are we smoothing the business cycle by injecting money where it's needed, or are we chasing our own tail, causing the next boom/bust cycle by responding heavily and tardily to the last? You're the judge, and Super Tuesday's tomorrow. It's a pretty lame joke that starts "so 6 Keynesians and an Austrian walk into a primary, " right?

For the record, this isn't an endorsement of Ron Paul. More of an exploration of how far away from the status quo his positions really are...

Sunday, February 3, 2008

1..5.times do puts "I win" end

Who among us could see this without immediately wanting to save the kid some time by writing a one-liner? Well, certainly not me.

The iTaser

So, get your orders in for the all-new leopard-printed, mp3-playing, fashion-forward taser. Mace is SO last season. I haven't verified it, but the article says that 43 states allow civilians to carry these things, so I suppose we'll see more and more folks accessorizing in the near future. Hat tip Bruce Schneier.

On Recessions and Dynasties

Folks have taken to debating whether or not the US economy is in a recession. If so, when did it start? How long will it last? Etc. For some reason, I can't stop associating this debate with the talking heads who deliberate over the Patriots dynasty. Are the Patriots a dynasty? At what point did they become one? When will their reign end? Are they the best dynasty EVER?

Now, while sports dynasties are ill-defined, there is at least a technical definition for recession: two consecutive quarters of negative economic growth. Unfortunately, those engaged in this debate are probably using a looser definition than that (read: their own custom-made definition). Worse, even if we did stick to the tighter definition, the clowns would probably be fighting over who's growth numbers to use.

Saturday, February 2, 2008

Those crazy Italians

"Nine-party coalitions are fragile, and Italy's 61st postwar cabinet was no exception."

On the road again

Running with a friend, I'll probably work out some sort of time goal as the training proceeds. I think I probably also just wanted another chance to feel like I this: