Saturday, November 22, 2008
Well, here's a quote for you:
"That stuff about Portland having traffic jams is a lie. I have been monitoring other countries and it is the same. We have the best possible roads; the problem is the excess of vehicles. People have to leave their car in storage, leave individualism aside. Five people can go in vehicle, instead of the selfishness that it is used by a single person"
Who said it? Answer here.
I will admit that I didn't notice that the Governor was in an exceptional situation while being recorded for the interview given in this video clip.
Where I come from, we usually eat the turkey without the feathers. So, noticing the guy in the background doing a smelly job--not particularly hard, but steamy poultry feathers emit a scent all their own--simply didn't seem out of place.
Not so to the good people who brought this clip to the intertubes. I found this clip on the Guardian's website, filed under "sarahpalin-animalwelfare". And I asked myself, what is it about some, that they are so different from me?
Did it finally occur to this benighted journalist that turkeys come from farms? That they don't magically appear in grocery stores? Do you have a problem with eating turkey? 'Cause, if you've had any truck with turkeys, you know that the kind you find at Farmer Jones' is pretty much only good for the eating.
Of course, the insinuation is, that the Governor is clueless about the "carnage in the background." Which leads me to this interpretation, as provided by "Are We Lumberjacks."
Yeah, baby. Throw that turkey in the chipper! (If you've never watched Fargo, do it, just for the regional accents. And why do turkeys wear socks?)
More at Are We Lumberjacks?
UPDATE: Photographic proof the Governor is normal. (But you gotta read the "comments" to get the real laughs!)
Friday, November 21, 2008
I've written about uncertainty. Uncertainty is a killer in markets. People suspend decisions when outcomes can't be predicted.
Predictability is a different thing, though. Just as sure as it's going to rain and the temperatures are going to drop, the Democrats are going to do some predictable things. They are going to develop a whole new tier of taxation in this country--and particularly in this state--in order to save us from Man Made Global Warming. And, don't forget, we're going to be getting a boost in the federal minimum wage in July, 2009.
It's predictable that as a result of new "carbon" costs--again, these are taxes on productive enterprises, either nationally, or within this state--and our current high minimum wage rates (national rates go up to $7.25 next year, Oregon's rate is currently $7.95, so we won't be "affected") that unemployment will be going up, again.
Governments mandate, markets adjust.
Of course, in Oregon, we fund most of our state expenditures through the imposition of personal income taxes. As employment continues to decline, taxes collected by the state will continue to decline. Which will lead our Democrat friends to increase both personal taxes and corporate taxes. Democrats cannot see that increased corporate taxes will lead to lower investment rates within the state, leading to greater declines in employment. And, as revenues decline, sources of revenue must be discovered to cover the shortfall. According to the Governor, we're looking at new debt through bonding, higher costs to license your vehicles, and a new way to tax you for driving your car, vaunted as a "path to transition away from the gas tax as the central funding source for transportation."
Which, increased costs, will further deter increased investment in Oregon. Which, predictably, results in increase job contraction.
So, what is the mechanism chosen by our Governor to increase jobs in Oregon? He's proposing an expenditure of a billion dollars on what he is trying to promote as infrastructure investment to prop up job losses. And to spend the billion dollars, he needs to raise the billion dollars. Which means another billion dollars taken from the private sphere--that's you and me--and given to the public sphere--that's your state government--for them to spend to help us.
Please, Dear God, relieve us from these fools.
Take another billion from private investment and spend it on government programs. Anybody up for building a new business in Oregon?
The impulse to direct us is strong with Democrats. Seven point three unemployment rate. The bus is out of control. What do the Democrats suggest? Step on the accelerator.
Thursday, November 20, 2008
Governments, as a class, do a horrible job of organizing markets. There is a vast difference in coming up with rules that establish trust and a level playing field, and picking winners and losers through mandates.
What to make and how much to make are questions best left to markets. But the "good" that governments have been able to impose makes regard for those market decisions easy to ignore.
We have seatbelts and airbags and lighter-weight cars to maximize distance over fuel usage. And, in many regards, the cars produced today are better cars than were produced fifty years ago.
But, while auto manufacturers and their advocates suggest that the problems facing them are the government's fault, I would point out one salient factor:
Auto prices doubled in the 1980's.
How could this happen? Government intervention.
In 1981, the Reagan administration convinced Japanese automakers to voluntarily restrict the number of vehicles it sold in this country. Demand for Japanese cars was so great that manufacturers couldn't keep up with the demand. If you wanted to buy a new Honda, you had to be prepared to pay the price of the car, plus meet dealer demands for additional up-charges for dealer prep and other sundry charges. Hondas were selling for prices higher than list. Amazing.
What was the quality of American made cars in the '80's? Pitiful. In the years before "Quality is Job #1", American automakers were putting moving trash onto their lots. Well, to be fair, they worked...but Lemon Laws were passing in state legislatures to protect consumers from shoddy products of American manufacturers. If you wanted a trustworthy vehicle, you had to look at the Japanese.
So, what happens when you limit the availability of a good under demand? It's as if policy makers were bereft of any economic experience or training. As Japanese cars passed the 20-thousand dollar mark, many American consumers found themselves priced out of the auto market. The only alternative was an American made car. And by the end of the '80's, American car prices doubled. According to the Organization for Economic Cooperation and Development The Costs and Benefits of Protection (Paris: Organization for Economic Cooperation and Development, 1985) identical models of Japanese cars were selling for 45 percent more in the United States than in Japan. (So much for claims of unfair pricing based on low marginal costs!)
Between 1980 and 1989, the cost of a new car rose from 18.7 weeks of median household income to 24.7 weeks.
Quotas boosted U.S. automaker employment by 22,000 in 1982. According to "The Effects of U.S. Trade Protection for Autos and Steel" Brookings Paper on Economic Activity, 1987, No. 1, p. 287) American auto manufacturers sharply raised their prices, Americans bought over one million fewer cars each year than they otherwise would have - resulting in 50,000 fewer jobs for American workers.
So, while auto manufacturing jobs rose during the '80's, the fact is that price increases made possible due to voluntary import quotas that unnaturally raised auto prices for American car companies, the shift in price actually created a shortfall in demand--again, that pesky price theory--resulting in an actual shortage in job creation (have you heard of opportunity costs?)
The auto manufacturers complain about government mandates that have forced them into uncompetitive times. But, examination of auto markets reveals that auto manufacturers had ample protection from our federal government.
That they have squandered this opportunity is not surprising. After all, what is a federal government for, if not to pick winners and losers?
UPDATE: "Many are suggesting that $25 billion of public money be immediately injected into the auto business in order to buy time for an even larger bailout to be organized. We would do better to set this money on fire rather than using it to keep these dying firms on life support, setting them up for even more money-losing investments in the future." (Volokh.)
Wednesday, November 19, 2008
"In the 'ethic of autonomy' the moral world is assumed to be made up exclusively of individual human beings, and the purpose of moral regulation is to 'protect the zone of discretionary choice of "individuals" and to promote the exercise of individual will in the pursuit of personal preferences'" (Shweder et al., 1997, p.138).
You may accuse me of being in thrall of 18th century ideals of enlightenment. This is true.
The apogee of the Enlightenment occurred with the establishment of the then new country that rose from the origins of our 13 English colonies. This rise of Liberalism was the product of a great body of intellectual work that sought to establish some fundamental notions of our existence. To truly appreciate the length and distance of this debate, I refer you to the conversations between Hylas and Philonous (Berkeley, 1713). And then contrast the conclusions of Berkeley with the insights of Descartes.
This philosophical debate was driven by a need for a priori knowledge of the fundamental nature of Man. Berkeley argued that man's perception of the world was fed to him through the existence of God. Descartes argued that man's perception first existed, and it was through man's innate ability to perceive and apprehend the world that allowed him to acknowledge God's existence.
These are extremely different starting points. But unlike Berkeley's source, the Cartesian model allows for syntony among various religious starting points. There is no need to worry about conflicts with Church dogma, since the Catechism stresses the individual's responsibility to determine on his own the rightness of his own actions. Descartes, Hume and Locke do nothing to prove or disprove the existence of God, merely equate man's moral actions to his independence in what he perceives as the Truth. (Although Dr. Johnson did attempt to do so in his response to Berkeley!)
This a priori knowledge is a permanent feature of the 18th century definition of Liberalism. Hopefully, this brief introduction to modern enlightenment principles will help you better understand the writings of Jonathan Haidt and Jesse Graham. ("When Morality Opposes Justice: Conservatives Have Moral Intuitions that Liberals may not Recognize", Social Justice Research, 2007, pdf.)
I found this article on Ace's site. And it's well worth the reading. It is important to understand that what passes for ontology of the Left is nothing more than a morass of moral presumptions. And, that as defined, can't exist outside of a distinct moral tautology that reinforces beliefs that can't stand the test of a priori knowledge.
There are few fundamentals held by today's Left. The most powerful one, though, runs distinctly counter to the fundamental beliefs that were incorporated into the establishment of this nation, and fills pages of our history. That one fundamental belief is the distrust of the individual.
It is as if they forget history. The lesson of Galileo Galilei (pdf).
Tuesday, November 18, 2008
When we looked at the product transformation curve for Joe's garden production, we saw a curve that reflected potential outcomes based upon the conditions. Joe was able to predict a certain output from his work in his garden, based upon "normal" conditions. We took a brief look at those normal conditions, knowing as we do that when in comes to growing vegetables there are some conditions that need to be met, in terms of rainfall, sunshine, fecundity of the soil, pest and disease control.
When the conditions of a growing season were sub-normal, we see a reduction of garden output, as output moves down the curve to the left. When Joe is the benefactor of above normal growing conditions, the output from his garden moves up and to the right on the curve.
These are conditions of risk, and Joe knows that under conditions of risk that some of these risks can be ameliorated by his effort. Lower than normal rain-fall? Irrigate. Colder weather? Hot-housing. (My dad used to do this for our tomatoes: drive four stakes around the plant, then wrap plastic around your sets. Tomatoes love the warm.) Bugs? Spray.
Any farmer can tell you that there's no sure thing. Every day presents a risk of failure. And, a risk of reward. If you work hard your chances of success increase. Some catastrophic losses occur. There are times that, when listening to folks talk about the Man/Mother Gaia nexus, that there exists a blithe belief that Man is doing a job on Mother Gaia. Place your bets on agriculture, and you'll soon find out that Mother Gaia is a dispenser of tough love. She can wipe you out in a heartbeat, and never shed a tear. We never laid a glove on her.
So, there's risk.
And then there's uncertainty.
Of the two, I'd rather deal with risk. Let's look at Joe and find out what his predicted behavior will be in the face of uncertainty.
We are blessed in this country with a legislature. Well, two. A national legislature and a state legislature. To be fair, we also have to include local governments as well, since they legislate on a local level, although they do not pass law, but rather, ordinances.
We have a national election, and the party of Change! gains unimpaired control of the levers of legislative authority. Typically, these kinds of party movements haven't meant much to Joe and to producers of carrots in general.
See, what motivates Joe to raise additional product from his effort is an attempt to improve himself, to create a surplus and to create greater wealth. When Joe grabs his lunch-box and heads down to the garden for a day of weeding and hoeing, he does so knowing that the reward for his effort is deferred. He will not receive the fruits of his labour until the garden is harvested, and he takes his surplus to market.
When Joe realized that you had carrots and I had apples, and that I had offered you apples for carrots, Joe decided that he would love to add apples to his menu. While you were unwilling to provide me your excess (surplus) carrots for my excess (surplus) apples, Joe looked at it as an opportunity.
Economists have an awareness of opportunity. They refer to opportunity as having rewards and as having costs. Perhaps you've heard the expression "opportunity cost". Decisions have costs. When you decide to increase your carrot production, the costs can be viewed in two ways: the cost of adding an additional row of carrots (carrot seed, increase toil in creating a new row, increased costs of pest and disease control, increased watering demand) and the cost of "not" planting something else.
Joe planned and planted an additional row of carrots, knowing that there was a potential market for his surplus of carrots: my apples. But, what is the cost of giving up a new row of something else, entirely?
What if he had decided to use the additional row for gardenias? Maybe there is a market for gardenias that Joe is unaware of. Maybe, a single gardenia is worth ten apples, while it takes five carrots to get a single apple.
The apples Joe doesn't get--from choosing carrots instead of gardenias--is his opportunity cost. Even though Joe may not be aware of it, his decision to grow additional carrots instead of gardenias has a cost--in terms of future apples--that Joe doesn't even know about. Even though Joe is unaware of this cost doesn't mean that this cost, the opportunity cost, doesn't exist.
Why are opportunity costs important? Remember when Joe first found out about the possibility of getting apples for carrots? It was Joe's recognition of opportunity costs that first led Joe to consider the possibility of creating a surplus of carrots, in order to provide himself with apples. He didn't need to grow more carrots than he needed to grow to sustain himself. He chooses to grow more carrots in order to benefit himself. He was able to create a life that was richer than mere subsistence by varying his diet, in order to enjoy the taste and healthful aspects of apple consumption. Or, mebbe, he just liked the way they looked. (Apple of his eye kinda thing.)
Whatever, he wanted apples. Saw an opportunity. Acted upon that opportunity. And within the range of growing outcomes, expects to receive apples and achieve the goal of his self, personal, pursuit of happiness.
May he fail? Perhaps. And that is the risk. Could he have done better? Perhaps. And making a decision means that all other potential outcomes have been restricted by the commission of a decision to invest, grow and harvest. Regardless of the choices you make, you may find that a better decision would have brought you greater rewards. These are risks.
So, what about uncertainty?
When we began looking at the concept of dynamic economic forces, we talked about how difficult it is to ride a bicycle around a track. Even in a closed system, like a velodrome, there are a lot of forces at work in the successful completion of a lap. We looked at the role that governments can play in assessing the risks of this bicycle riding. And that there are different forms of government action that can take place to make bicycle racing better.
One of the reasons why I am not a Libertarian is my conviction that we are better of, as individuals, with a clear understanding of the rules that govern certain behaviours and choices.
From the early codes--whether you refer to the Tablets of Moses, or the Code of Hammurabi--there are some pretty basic rules that we all, pretty much, choose to follow.
So, too, are there some pretty basic economic rules which you choose to break at risk. Not that you can't break them. It's just that things tend to get screwed up real fast when you break them.
Want to screw up a bicycle race? Set a height requirement for bicycle seats. Mandate shorter peddles. Require solid tires. Build corrugated tracks.
When we talk about bicycles and racing, it's pretty easy to see that some mandates are dumb. Some are smart. Stop a race if there's an oil spill on the track. Require racers who cross the foul line to leave the track. Mebbe even requiring members of a team to wear the same colours.
Some rules make sense. Some don't.
Unfortunately for us, when it comes to economics, the policy makers in the main lack the training or perception to make rules that make sense. And when legislators make bad rules, we introduce uncertainty into markets.
What happens to Joe if the government decides that it wants to regulate the market for carrots?
When Joe finds out that there are going to be regulations imposed upon the market for carrots, two thoughts will cross through his head: one, this won't affect me, and; two, how will this affect me?
We've introduced uncertainty for Poor Old Joe. His impulse is one of common sense; what is it that government can do, in terms of carrot production, which would cause me harm? Because we are used to things making sense, and carrot production being a rather straight forward pursuit, how is it that any regulation of the carrot market could impose a negative effect upon Joe and his pursuit of carrot production?
Governments work mainly in terms of hysteria. Call it the squeaky wheel. Call it the vox populi. Whatever it is, any problem becomes the most important problem.
(Otherwise, it wouldn't be a problem, would it?)
Take the case of carrots. It has been determined by our Governor that we are looking at a possible shortfall in the production of carrots. Because carrots are important, we need to pass a law that deals with this possible crisis.
We know what caused Joe to increase his carrot production. His own self-interest. And, lacking barriers to production, an increase in the demand of carrots should result in an increase supply of carrots.
How do we know this? Because of what is referred to as the Law of Supply and Demand. When we began our series into Carrots and Bicycles, we found out that just because carrots and apples were supplied to the market, that that fact didn't insure any of the normative goals of policy makers. If carrot suppliers--or apple suppliers--fail to find a market for their goods, they can turn to policy makers to provide them with assistance in pursuit of establishing such a market. This is why Command Economies are so loved by politicians. Politicians are hired to do good. Politicians find out a group of their constituents is having problems. Politicians pass laws to fix problems.
But instead of looking at the participants of the race, their bicycles and their track, Team Blue complains that under the current conditions they are unable to compete. Adjustments to the rules must be made to assure fairness of outcome. Normative values replace objective values. Outcomes become more important than process. Fairness--as defined by a level playing field--is replaced not with the outcomes determined by individual effort, but by equality of result.
In public schools you see a lot of posters that warn our children about the horror of the bully. Woe unto you if you're smarter, faster, or whatever. Because every child has dignity, there should be equality in result. Everyone wins because there are no losers. (Yes, our schools have adopted the credo of the Special Olympics. And no, your child being an Honor Roll student doesn't do anything for me. Keep the bumper sticker at home.)
Under command economies, equality of result has become defined as the result of fairness. And it rears its ugly head through all sorts of crisis driven goals.
Let's take a look at carrot production.
The Governor has determined that there is going to be a lack of carrot production. This is bad. What to do? Well, the Governor has determined that if we could only produce bigger carrots that fewer carrots would have to be produced. If I normally eat two carrots a day, if I were to eat a larger carrot I would only need to eat one.
Unfortunately for the Governor, no variety of carrot exists that produces a gargantuan of the carrot world. So what does the Governor do? He mandates the goal under a program of carrot production that he refers to as his Vision for Carrots. Under this plan, government resources are going to be put into carrot research. The goal is to create a new carrot technology to replace the outdated and unsustainable carrot technology of the past. And, the Governor is going to require that all carrot producers grow at least twenty percent of their carrots in Gargantuan carrots within two years.
This Vision creates uncertainty for carrot producers. Currently, Joe is looking at picking up some apples for come carrots. But what happens to Joe's carrot production if he's required to produce Gargantuan carrots? Well, for one thing, there's no Gargantuan variety available for carrot production. He's heard that some research has been done, but that the cost in time, water, sun, and garden space makes growing Gargantuan carrots economically unfavourable. Even though Gargantuan carrot production is possible, it costs more to produce Gargantuan varieties by size and weight than regular carrots--for the same amount of production by size and weight. So while it may be feasible to produce Gargantuan carrots, the economic return on Gargantuan carrot production is less in terms of possible apples.
How does the Governor respond? How about billions of dollars in subsidies for Gargantuan carrot production? There are federal dollars available for Gargantuan carrot production. There are lottery funds available to the Governor to subsidize the production of Gargantuan carrots. And now Joe may look at Gargantuan carrot production--under federal and state subsidies--as being as attractive, or more attractive, than regular carrot production. Voila! The Governor has fixed carrot production!
Or, has he?
One of the beautiful features of being a politician is the wonderful power to fix things. And he has made things (?) better off for those of us who choose to consume carrots. The supply of carrots has been assured. And he's done it by taxing apple growers their apple production to incentivise Joe in his quest to provide the government mandated provision of Gargantuan carrots in order to achieve the Vision of the Governor's Carrot Plan. Carrot growers wouldn't normally attempt to grow Gargantuan carrots because they're so costly, but since apples will be given to those who plant and grow Gargantuan carrots, Gargantuan carrots will be produced!
By subsidising Gargantuan carrot production, uncertainty has been replaced by certainty. Regardless of the lack of desirability of Gargantuan carrots--whether by price, production costs, texture and taste--Gargantuan carrots will be produced because of the overwhelming return on Gargantuan carrot production.
Without these subsidies, what would Joe do?
When the government mandates a thing, it views its actions as costless. Really.
Just ask a state representative or senator "who pays for this?" Would you be shocked, dear Reader, to find out that most of these folks have no idea of what it is you are referring? They see on one hand that the costs of increasing regulation are paid for by those who consume a good. Or, by the producer of that good.
What they fail to account of is the opportunity cost of such mandates.
In the case of Joe, producing his little garden of carrots was a means to a better life. Now, in the face of mandates on the type of carrots he must produce, he looks at the costs of producing carrots and realizes that his economic potential has been reduced by this mandate. Growing Gargantuan varieties will actually reduce his output of carrots because it costs more to produce a pound of Gargantuan rather than a pound of regular carrots. How should he proceed?
What we have found out after years of government intervention into markets is that fewer of a thing is produced due to the imposition of government mandates. Whether it's fixed rents on housing for low-income renters, or carrots, when the government mandates outcomes, that producers of that commodity tend to reduce rather than enlarge their production of that good or service.
But when governments--or Governors--are dead set on implementing their Vision for goods and services, they are more than willing to take apples from apple producers to give to the producers of unwanted or unaffordable products and services in order to achieve the goals of their Visions. And everybody is better off...except for the producers of apples. And now we must examine the certainty, or uncertainty, of continued production of apples, shan't we?
We have removed the uncertainty of Gargantuan carrot production for Joe. But what has happened to you, as the producer of apples? If the government is going to come in and increase its levy of apples against you--to transfer your apple wealth to Joe--what is the outlook for you in terms of increased apple production? Might you not be better off doing something else? Like, producing carrots?
Politicians usually have never had a "job". School teachers? Yep. Lotsa those. Lawyers. Yeah. Lotsa those. But guys who have actually made or grown a thing? Not many of them. And the outlook doesn't look good. After all, when you look at your local high school, do you know how many of the teachers there are, for instance, qualified to teach calculus? Or, worse, having listened to some of our math teachers attempting to teach geometry or trigonometry, how many are--while technically qualified to teach--incompetent? That this is true is not in dispute. What is sad is, that due to union rules, unqualified teachers cannot be removed. Why would we look to teachers and lawyers to pass laws? Or community organizers?
I think it's because being smart is hard. Learning to feel good about yourself?
I come to this conclusion after listening to an NPR show on the way back from Corvallis for the Oregon State-Cal game. I think the show was called "E Town".
What struck me was how similar this show was to the old time revival shows I've heard. As participants got up to talk about corporate evil and the steps they had taken to overcome the evilness of the corporate villains, environmental "amens" were issued and awards were given for good behaviour. This was reminiscent for me of an early summer bible school I attended, where, after reciting the Ten Commandments, I was awarded my very own, first copy of the New Testament. I had won it from my own effort. It was my first "real" book. It was Holy. It was mine.
I listen to the Left and understand their excitement and zeal as they confront the oppressors of Mankind. The evil corporations. The evil Republicans. The evil Capitalists. The Sexists, Rankists, angry, middle-aged white guys. And every stone placed in the way, every barrier is to be praised and rewarded. Hallelujah!
And, the funny thing is, the more they denigrate and repudiate religion and faith, the more they become like those whom they mock. But I'm not the first guy to notice this, am I?
The Left has no uncertainty. You do. I do. And Joe has. Unless we're bought off.