2013 is coming to an end and it is Christmas eve as I write this. I find myself pondering Christmases and New Years past and thinking about the many to come. While I did not remark on this yet in the blog, I passed the 1 year anniversary of this blog's existence a month or two ago. I started the blog as a way to discuss things that were on my mind and were not really appropriate for other forms of social media for reasons of length and complexity. 140 character limits and places to post pictures of pets and babies seemed to me to be uniquely poor places for political, philosophical and economic discussions. So now I have an anonymous way to put my opinions about things out into the void and see if they resonate with anybody (if you are curious, the gun control and the why teachers matters posts are the most popular by page views). And for those of you who have read anything I have written on this blog, thank you.
Christmas, as I get older, increasingly is a time for me to reflect on the holidays of my youth. It is hard for the current holiday season to compare to my memories of Christmases past. You always view such memories with rose tinted glasses to begin with and it is hard for holidays in an apartment to have the same luster as holidays in your childhood home. It is also hard to have the true spirit of giving when you have spent a year unemployed. And while yes, being unemployed has allowed me to indulge my creative urges by writing for this blog, it doesn't help the bank account. And a small bank account can only buy so many presents and still pay the bills. Still, despite all the time I have on my hands, I have been unable for reasons outside of my control to go home for Christmas. I can't help but feel my holidays are diminished as a result.
New Years is a time for people to celebrate the passing of the year and make resolutions for the coming year. However, long ago I resolved to not make any resolutions; and I have kept this promise, more or less, every year since then. This doesn't stop me from having goals, just that these goals are not New Years related. As such, I will not burden this space with my petty wants and desires. Besides, New Years is as much about partying with friends and family as it is about resolving to do things differently in the future. So instead I will simply say this, I hope you all have the chance this holiday season to go out and have fun with friends and family. Friends and family are what make life worth living. When people say money can't buy happiness, to me at least this is what they mean. I wish you all find happiness in the new year.
Merry Christmas, Happy Holidays and Happy New Year!
Tuesday, December 24, 2013
Thursday, December 12, 2013
The Minimum Wage Debate
First, let me state this strait out: I am not in favor of the minimum wage, just as I am not in favor of the government interfering with the rights of any two people to form contracts freely with each other. The few areas where I am in favor of government intervention in the economy at all, is in providing safety nets for the population. My reasons for being in favor of some safety nets are not economic, but prudential. Societies where the poor and disenfranchised are looked after and not allowed to starve tend to be safer and more stable societies. More over a just and moral society should not be allowing large swathes of its populations to starve.
Secondly, the minimum wage debate, like all highly political debates, is one that is fraught with cherry picked and heavily massaged statistics as well as outright falsehoods. Both sides of the debate have ample numbers to throw around, and neither side is particularly interested in listening to the other. The reality is then, that the criterion that decides peoples' views on this subject is their political view of the proper role of government in society, and not the prudential one of what the actual effects of minimum wage laws.
Thirdly, even acknowledging all this, the minimum wage remains an area that journalists, economists and even philosophers like to debate. The political left likes to point to statistics that show little immediate change in employment after minimum wages are increased, while the political right likes to point to statistics that show states with higher minimum wages tend to have higher youth and minority unemployment rates and that increases in the minimum wage do not yield improvements in the poverty rate. Why is there no consensus? Again, politics.
So, with that said, I recently became aware of a decent article, recommended by Harvard economics professor Greg Mankiw here: http://gregmankiw.blogspot.com/2013/12/minimum-wage-redux.html , by Steven Landsburg, himself an economics professor at University of Rochester, here: http://www.thebigquestions.com/2013/12/02/minimum-insight/ and in more depth here: http://www.thebigquestions.com/2013/02/18/thoughts-on-the-minimum-wage/ . And while I don't necessarily agree with all of his arguments, I think they are both thought provoking and should help inform readers on the economic and political debate over this particular public policy problem.
Secondly, the minimum wage debate, like all highly political debates, is one that is fraught with cherry picked and heavily massaged statistics as well as outright falsehoods. Both sides of the debate have ample numbers to throw around, and neither side is particularly interested in listening to the other. The reality is then, that the criterion that decides peoples' views on this subject is their political view of the proper role of government in society, and not the prudential one of what the actual effects of minimum wage laws.
Thirdly, even acknowledging all this, the minimum wage remains an area that journalists, economists and even philosophers like to debate. The political left likes to point to statistics that show little immediate change in employment after minimum wages are increased, while the political right likes to point to statistics that show states with higher minimum wages tend to have higher youth and minority unemployment rates and that increases in the minimum wage do not yield improvements in the poverty rate. Why is there no consensus? Again, politics.
So, with that said, I recently became aware of a decent article, recommended by Harvard economics professor Greg Mankiw here: http://gregmankiw.blogspot.com/2013/12/minimum-wage-redux.html , by Steven Landsburg, himself an economics professor at University of Rochester, here: http://www.thebigquestions.com/2013/12/02/minimum-insight/ and in more depth here: http://www.thebigquestions.com/2013/02/18/thoughts-on-the-minimum-wage/ . And while I don't necessarily agree with all of his arguments, I think they are both thought provoking and should help inform readers on the economic and political debate over this particular public policy problem.
Saturday, November 30, 2013
Improving Business Climate?
Recently, in The Wall Street Journal, a group of business people were asked what could be done to improve the business climate in the United States. Most of the comments involved corporate good citizenship initiatives and reinvesting in local production. The problem here is that this seems to miss the point of business, to maximize profits, and how you improve the general welfare of society through the economy. Whether or not these commentators have a point is open to debate. Here is the article: http://online.wsj.com/news/articles/SB10001424052702304017204579224072622277830?mod=hp_jrmodule
First thing to establish is that the point of a business is to make money and that in itself can be a benefit to society. In its most abstract, a business is a legal fiction, a false legal entity, in which a group of people get together to collectively produce a good or service. Back in the days of yore, most business arrangements were partnerships. People came together to collectively produce something for profit. Unfortunately, when businesses failed, the individuals were personally liable for the debts of the partnership. That meant when a business folded, often the members of that business were left destitute by the debts of the business. Go back far enough in time and that would end with debtors' prison for the founders and homelessness for their dependents. This created a large disincentive for individuals to take on a lot of debt, which also acted as a large impediment to business growth. This is why modern corporate legal codes create a variety of means for principals (people founding a business) to limit their liability through legal arrangements. This allows people the freedom to start businesses without the fear of utter ruination if they fail. The theory being that business growth, job creation and profits are in themselves a social good that society is willing to bear some risk to foster. Or, in other words, having a thriving business community that is growing and creating jobs generally works for the good of society and that justifies the added risk to lenders in not allowing them to raid the assets of the businesses' founders should the businesses fail.
Secondly, business founders who make a lot of money often use their largess to fund socially responsible endeavors. And even when they don't, the money and jobs their businesses create furthers the growth of the global economy, creating more wealth for society. One needs look no further than Bill Gates' creation of The Gates Foundation, or Warren Buffet pledging to donate the bulk of his fortune to charity, to see this in action. http://www.forbes.com/sites/alexmorrell/2013/07/08/buffett-donates-2-6-billion-in-berkshire-hathaway-shares-to-gates-foundation-other-charities/ . But even when the titans of industry are not as generous as Bill Gates or Warren Buffet, it is not like their fortunes turn to dust or are wasted. Society's wealth is held in banks, and through banks it is loaned to local businesses and the local community to further create more wealth. And if it is not put in banks, it is invested directly into the stocks and bonds of other businesses which funds those businesses' expansion which also creates more wealth. Money is never stationary, unless it is buried in the back yard and not spent, and the more it moves, the better off we are as a society.
So, with this understanding, why is it that so many business owners are concerned with corporate good citizenship and investing in the local community? Presumably, if these actions were profit maximizing in the first place, modern businesses would already be doing them to become more profitable and we would all be better off as a result. The reason is that, as the economy creates wealth, it does not do so equitably. What I mean here is that the economy creates winners and losers; some make huge amounts of money, and others do not. And while profit maximization improves aggregate well being, it does not do so for all individuals. These individuals who do not profit tend to resent the profits of others and feel cheated by the global economy.
In the USA there has been growing resentment of big business. As a result of outsourcing, and accelerated by the recent recession, many people have seen their livelihoods disappear and their nest eggs shrink. It is hard for the individual who is downsized when their jobs are outsourced to see the bigger picture. More over, it is harder still for that person to make a living and continue to contribute to the economy with no job. So while aggregate wealth is improved, local economies suffer. It is in these economies that the commenters in the above Wall Street Journal Article are urging businesses invest. The hope is that in investing in underutilized communities, it will create enough wealth and new jobs to make up for the lost profits caused by not outsourcing the jobs to cheaper international markets. Only time will tell if this burgeoning insourcing movement actually creates wealth. But it is clear that the commentators in the above article think this will be the case.
First thing to establish is that the point of a business is to make money and that in itself can be a benefit to society. In its most abstract, a business is a legal fiction, a false legal entity, in which a group of people get together to collectively produce a good or service. Back in the days of yore, most business arrangements were partnerships. People came together to collectively produce something for profit. Unfortunately, when businesses failed, the individuals were personally liable for the debts of the partnership. That meant when a business folded, often the members of that business were left destitute by the debts of the business. Go back far enough in time and that would end with debtors' prison for the founders and homelessness for their dependents. This created a large disincentive for individuals to take on a lot of debt, which also acted as a large impediment to business growth. This is why modern corporate legal codes create a variety of means for principals (people founding a business) to limit their liability through legal arrangements. This allows people the freedom to start businesses without the fear of utter ruination if they fail. The theory being that business growth, job creation and profits are in themselves a social good that society is willing to bear some risk to foster. Or, in other words, having a thriving business community that is growing and creating jobs generally works for the good of society and that justifies the added risk to lenders in not allowing them to raid the assets of the businesses' founders should the businesses fail.
Secondly, business founders who make a lot of money often use their largess to fund socially responsible endeavors. And even when they don't, the money and jobs their businesses create furthers the growth of the global economy, creating more wealth for society. One needs look no further than Bill Gates' creation of The Gates Foundation, or Warren Buffet pledging to donate the bulk of his fortune to charity, to see this in action. http://www.forbes.com/sites/alexmorrell/2013/07/08/buffett-donates-2-6-billion-in-berkshire-hathaway-shares-to-gates-foundation-other-charities/ . But even when the titans of industry are not as generous as Bill Gates or Warren Buffet, it is not like their fortunes turn to dust or are wasted. Society's wealth is held in banks, and through banks it is loaned to local businesses and the local community to further create more wealth. And if it is not put in banks, it is invested directly into the stocks and bonds of other businesses which funds those businesses' expansion which also creates more wealth. Money is never stationary, unless it is buried in the back yard and not spent, and the more it moves, the better off we are as a society.
So, with this understanding, why is it that so many business owners are concerned with corporate good citizenship and investing in the local community? Presumably, if these actions were profit maximizing in the first place, modern businesses would already be doing them to become more profitable and we would all be better off as a result. The reason is that, as the economy creates wealth, it does not do so equitably. What I mean here is that the economy creates winners and losers; some make huge amounts of money, and others do not. And while profit maximization improves aggregate well being, it does not do so for all individuals. These individuals who do not profit tend to resent the profits of others and feel cheated by the global economy.
In the USA there has been growing resentment of big business. As a result of outsourcing, and accelerated by the recent recession, many people have seen their livelihoods disappear and their nest eggs shrink. It is hard for the individual who is downsized when their jobs are outsourced to see the bigger picture. More over, it is harder still for that person to make a living and continue to contribute to the economy with no job. So while aggregate wealth is improved, local economies suffer. It is in these economies that the commenters in the above Wall Street Journal Article are urging businesses invest. The hope is that in investing in underutilized communities, it will create enough wealth and new jobs to make up for the lost profits caused by not outsourcing the jobs to cheaper international markets. Only time will tell if this burgeoning insourcing movement actually creates wealth. But it is clear that the commentators in the above article think this will be the case.
Monday, November 11, 2013
The Death of Small Business Investment
There once was a time, long, long ago when small business was the driver of the US economy and where big business did not dominate our economic policies and concerns. While it is true that small businesses still employ a huge proportion of the working people in the USA, it is also true that this proportion has been shrinking and that small business has been suffering in the post recession economy while big businesses have been hording cash and recording record profits. http://www.forbes.com/sites/scottshane/2012/04/21/small-businesss-share-of-employment-is-shrinking/
This has become an area of concern both for economists and politicians alike as stagnant job growth has plagued our economy and economic policies of late. Currently, worries about the Fed tapering their monetary easing programs has a greater effect on the stock markets than good fundamentals reported by the companies themselves. This is a sign that our current tepid growth is capital driven instead of driven by company fundamentals. http://www.usatoday.com/story/money/markets/2013/06/19/stocks-wednesday/2437101/
One of the major things that separates big business and small businesses is access to capital. A large business with an established balance sheet and a long track record of profits is a much more credit worthy entity than a small start up with few employees that is in the process of developing marketable products and services. This is true, by the way, even if the large business is not public and does not have access to public stock and bond issuances to fund expansion. Its track record allows it to borrow money at a much lower cost from investment banks at rates that the small business would envy. In a post recession world where banks are increasingly reluctant to lend to business at all, this advantage is only compounding. Where a large business today can use a large chunk of restricted stock (essentially a large stake in the firm itself) and other company assets to secure a business loan, a small business owner usually has to mortgage both his business and his house to secure similar funding. And even then they borrow at much higher interest rates than the big business. A lot of this is driven by the perceived relative risk in investing in both companies.
But...
Complicating this factor has been the slow erosion of a post Great Depressions set of laws called Glass Steagall. Glass Steagall was a set of regulations that separated investment banking from consumer banking. The idea behind this was that, if the government is going to give you access to the Fed borrowing window, and access to deposit insurance, that it wanted you investing that money in the local economy to promote small business and home ownership. With the erosion of these laws, banks were free to invest in complex securities and derivatives instead of their communities. This sort of investment is what helped inflate the economic bubble that popped in 2008/2009. While arguments go both ways for whether repeal actually caused the Great Recession, not enough analysis has been done into how the repeal has affected small business borrowing and liquidity. What we do know is that small businesses have had a harder and harder time competing with big business in the years since repeal, and the extra competition from the securities markets now available to banks could not have helped. What I mean is that instead of competing with other small businesses and real estate for loans, now small businesses compete with investments in the securities markets as well.
At some point, we as a nation are going to have to revisit this change in regulatory scheme. Because the end result has been that while our banks and large businesses are investing in international capital markets, using international operations to avoid domestic tax liability and outsourcing jobs around the world, small business is suffering. Small business, the former driver of our economy, does not have the capital it needs to expand an flourish. And when small business can't expand, it can't hire, and thus our unemployment rate stays stubbornly high, tax revenues stay low, and our economy flounders.
This has become an area of concern both for economists and politicians alike as stagnant job growth has plagued our economy and economic policies of late. Currently, worries about the Fed tapering their monetary easing programs has a greater effect on the stock markets than good fundamentals reported by the companies themselves. This is a sign that our current tepid growth is capital driven instead of driven by company fundamentals. http://www.usatoday.com/story/money/markets/2013/06/19/stocks-wednesday/2437101/
One of the major things that separates big business and small businesses is access to capital. A large business with an established balance sheet and a long track record of profits is a much more credit worthy entity than a small start up with few employees that is in the process of developing marketable products and services. This is true, by the way, even if the large business is not public and does not have access to public stock and bond issuances to fund expansion. Its track record allows it to borrow money at a much lower cost from investment banks at rates that the small business would envy. In a post recession world where banks are increasingly reluctant to lend to business at all, this advantage is only compounding. Where a large business today can use a large chunk of restricted stock (essentially a large stake in the firm itself) and other company assets to secure a business loan, a small business owner usually has to mortgage both his business and his house to secure similar funding. And even then they borrow at much higher interest rates than the big business. A lot of this is driven by the perceived relative risk in investing in both companies.
But...
Complicating this factor has been the slow erosion of a post Great Depressions set of laws called Glass Steagall. Glass Steagall was a set of regulations that separated investment banking from consumer banking. The idea behind this was that, if the government is going to give you access to the Fed borrowing window, and access to deposit insurance, that it wanted you investing that money in the local economy to promote small business and home ownership. With the erosion of these laws, banks were free to invest in complex securities and derivatives instead of their communities. This sort of investment is what helped inflate the economic bubble that popped in 2008/2009. While arguments go both ways for whether repeal actually caused the Great Recession, not enough analysis has been done into how the repeal has affected small business borrowing and liquidity. What we do know is that small businesses have had a harder and harder time competing with big business in the years since repeal, and the extra competition from the securities markets now available to banks could not have helped. What I mean is that instead of competing with other small businesses and real estate for loans, now small businesses compete with investments in the securities markets as well.
At some point, we as a nation are going to have to revisit this change in regulatory scheme. Because the end result has been that while our banks and large businesses are investing in international capital markets, using international operations to avoid domestic tax liability and outsourcing jobs around the world, small business is suffering. Small business, the former driver of our economy, does not have the capital it needs to expand an flourish. And when small business can't expand, it can't hire, and thus our unemployment rate stays stubbornly high, tax revenues stay low, and our economy flounders.
Wednesday, October 16, 2013
Our Not So Free Market Economy
In America we throw a lot of economic terms around when describing how our economy works. One of the most used, and I believe one of the most overused, terms is "Free Market". The term is used most often in news reports that try to draw a distinction between the US economy and that of other countries. It is also used in politics as a way to refer to the perception of American exceptionalism and our status as being the largest single country economy in the world. Think news reports that set American free markets against European socialism or Chinese communism where everyone on the news looks serious and nods their heads like they have any idea what they are talking about. Unfortunately, as the laws and regulations in our country have increased over the years, this distinction is becoming more and more muddied when you look at how we actually run our economy and the way the rest of the world runs theirs.
First thing that needs to be addressed is what is meant by the term "Free Market". A free market is one that is run without governmental interference. It is one that is literally free to do what it wants without external restraint. The power of the free market is that prices are set by the market. This means that the aggregate of all people's purchasing and selling decisions dovetails to an equilibrium between consumers' demand for a product and sellers' demand to make as money as they can. This is distinct from a regulated or controlled market where the government interferes with regulations to create a new equilibrium that it believes is more advantageous to its interests.
The advantages of free markets are that the use the power of people's consumer decisions to keep prices low and supplies of goods and services plentiful. Their negatives are that goods and services are not regulated and business practices that create them may not be the most socially responsible means available. Price is the prime mover here so it is the first and primary concern of both the consumer and the producer. Compare this to a regulated market where government intervenes to regulate safety, social responsibility and other relevant areas. The negative repercussions of this intervention in the market are higher prices and a less than plentiful supply of goods and services.
Given these above definitions, it should be pretty clear that our economy is not in fact a "Free Market" but is instead a regulated or controlled market. But how, you ask (assuming you have a Fox News mentality), may we distinguish ourselves from those Socialists in Europe or Communists in China? The answer is that we probably can't. First, because we regulate markets just as much as Europeans do, with the possible exception of the healthcare market. And secondly, because while China does in fact have a Communist Party, it has been deregulating its economy and loosening its control of markets for years to more fully integrate with Western economies. The end result of this has been unprecedented growth and economic expansion in China while we in the West have seen tepid growth and shrinking economic opportunities.
If you need further proof, try to come up with some market in the USA that is untouched by government intervention, regulation or taxing and spending incentives. I'm reasonably certain you will be unable to find one. The difference then between ourselves and the rest of the world is, at best, the degree to which we interfere with the natural functioning of market economies.
First thing that needs to be addressed is what is meant by the term "Free Market". A free market is one that is run without governmental interference. It is one that is literally free to do what it wants without external restraint. The power of the free market is that prices are set by the market. This means that the aggregate of all people's purchasing and selling decisions dovetails to an equilibrium between consumers' demand for a product and sellers' demand to make as money as they can. This is distinct from a regulated or controlled market where the government interferes with regulations to create a new equilibrium that it believes is more advantageous to its interests.
The advantages of free markets are that the use the power of people's consumer decisions to keep prices low and supplies of goods and services plentiful. Their negatives are that goods and services are not regulated and business practices that create them may not be the most socially responsible means available. Price is the prime mover here so it is the first and primary concern of both the consumer and the producer. Compare this to a regulated market where government intervenes to regulate safety, social responsibility and other relevant areas. The negative repercussions of this intervention in the market are higher prices and a less than plentiful supply of goods and services.
Given these above definitions, it should be pretty clear that our economy is not in fact a "Free Market" but is instead a regulated or controlled market. But how, you ask (assuming you have a Fox News mentality), may we distinguish ourselves from those Socialists in Europe or Communists in China? The answer is that we probably can't. First, because we regulate markets just as much as Europeans do, with the possible exception of the healthcare market. And secondly, because while China does in fact have a Communist Party, it has been deregulating its economy and loosening its control of markets for years to more fully integrate with Western economies. The end result of this has been unprecedented growth and economic expansion in China while we in the West have seen tepid growth and shrinking economic opportunities.
If you need further proof, try to come up with some market in the USA that is untouched by government intervention, regulation or taxing and spending incentives. I'm reasonably certain you will be unable to find one. The difference then between ourselves and the rest of the world is, at best, the degree to which we interfere with the natural functioning of market economies.
Tuesday, September 24, 2013
"Life is pain, Highness. Anyone who says differently is selling something."
The above quote is from the iconic movie, "The Princess Bride" which came out in 1987. It's a fabulous movie and if you haven't seen it (I'm not sure how you avoided it up to now, but just in case) you really should. It's a classic. The reason I am quoting this here is that it is a surprisingly penetrating insight into the human condition for a movie that is otherwise a fairly lighthearted comedy. In one pithy statement the hero Wesley shows how hollow the movie's main message about true love conquering all and the hero getting the girl truly is. The implication here is that, even after Wesley has achieved his goals, gotten Buttercup and retired from being the Dread Pirate Roberts, life will not be lived happily ever after. And because it is Wesley saying it early in the movie, it shows he knows this from the very beginning.
As anyone alive knows, life is not easy. You spend the first 5 years of your life desperately trying to learn how to be a big boy or girl, to make your parents proud, only to then be shipped off to school for the next twelve years of your life, whether you want to be there or not. Those twelve years, or more, are often fraught with misery as bullies, school work and the dramas of everyday life weigh you down and crush your spirit. Then, when you graduate, it is either off to work in the real world, or to get even more schooling. All of this effort is merely to prepare you for your next big adventure, which is life in the working world. Life there is no picnic either as more work, the pressures of adult life and family obligations make finding time to do the things that you enjoy a rarity. The reality of life is that you will toil away, day in and day out on things you will likely not enjoy. Then what? Old age and physical decrepitude force you to retire, live off what little you have put away and whatever government handouts are available to you until you die. So when you are young enough to do the things you enjoy, you will instead spend your life laboring on things you don't; and when you are finally old enough to stop, you are likely no longer physically capable of doing those things anyway. Life is pain, Highness.
So, knowing this, it always comes a surprise to me that otherwise rational, moral, law abiding people I know choose to reproduce. Not only does having children add to the burdens of your life, but it also creates a new life upon which the burdens of life can now be placed. Having a child is giving a new life the gift of 65 or more years of hard labor. It appears facially immoral, cruel and heartless. Worse, unlike other human interactions and moral actions, it is not a deal that you make with society or even with another rational, intelligent adult. The child literally has no choice in the matter. It doesn't exist when the decision to create it occurs. It has no say in whether it wants to exist or not (as far as we know. Depending on your religious beliefs, your views on this could differ). The only times we, as a society, view the imposition of hard labor as morally justified is as a punishment for immoral deeds. Here however, there is no immoral deed (again, assuming you don't believe in Karma or some other theory of rebirth based on the quality of your actions in a previous life). It is merely the seemingly arbitrary choice of the parents to have unprotected sex which results in a baby. A baby who gets to learn, over the course of its life, the truth of Wesley's words: "Life is pain".
Thus, it surprises me not at all that, as the world industrializes and men and women are given access to prophylactics and abortion, that the total fertility rate drops, often below the replacement rate. As much as parents tout the gift of life, when given the option, fewer and fewer people choose to give that gift. The reason for this? "Life is pain, Highness. Anyone who says differently is selling something."
As anyone alive knows, life is not easy. You spend the first 5 years of your life desperately trying to learn how to be a big boy or girl, to make your parents proud, only to then be shipped off to school for the next twelve years of your life, whether you want to be there or not. Those twelve years, or more, are often fraught with misery as bullies, school work and the dramas of everyday life weigh you down and crush your spirit. Then, when you graduate, it is either off to work in the real world, or to get even more schooling. All of this effort is merely to prepare you for your next big adventure, which is life in the working world. Life there is no picnic either as more work, the pressures of adult life and family obligations make finding time to do the things that you enjoy a rarity. The reality of life is that you will toil away, day in and day out on things you will likely not enjoy. Then what? Old age and physical decrepitude force you to retire, live off what little you have put away and whatever government handouts are available to you until you die. So when you are young enough to do the things you enjoy, you will instead spend your life laboring on things you don't; and when you are finally old enough to stop, you are likely no longer physically capable of doing those things anyway. Life is pain, Highness.
So, knowing this, it always comes a surprise to me that otherwise rational, moral, law abiding people I know choose to reproduce. Not only does having children add to the burdens of your life, but it also creates a new life upon which the burdens of life can now be placed. Having a child is giving a new life the gift of 65 or more years of hard labor. It appears facially immoral, cruel and heartless. Worse, unlike other human interactions and moral actions, it is not a deal that you make with society or even with another rational, intelligent adult. The child literally has no choice in the matter. It doesn't exist when the decision to create it occurs. It has no say in whether it wants to exist or not (as far as we know. Depending on your religious beliefs, your views on this could differ). The only times we, as a society, view the imposition of hard labor as morally justified is as a punishment for immoral deeds. Here however, there is no immoral deed (again, assuming you don't believe in Karma or some other theory of rebirth based on the quality of your actions in a previous life). It is merely the seemingly arbitrary choice of the parents to have unprotected sex which results in a baby. A baby who gets to learn, over the course of its life, the truth of Wesley's words: "Life is pain".
Thus, it surprises me not at all that, as the world industrializes and men and women are given access to prophylactics and abortion, that the total fertility rate drops, often below the replacement rate. As much as parents tout the gift of life, when given the option, fewer and fewer people choose to give that gift. The reason for this? "Life is pain, Highness. Anyone who says differently is selling something."
Thursday, September 5, 2013
The Problem With Syrian Intervention
The hot issue du jour in international politics is Syrian intervention. If you haven't been paying attention to international politics for the past few years, there is a civil war going on in Syria. This civil war is an off shoot of the Arab Spring movement in the middle east. In countries like Syria and Egypt the populations have been rising up in protest of the ruling hegemony and trying to bring about political change. In countries like Egypt this has been successful, at least as far as regime change is concerned. In Syria, the movement has so far failed to bring about a change in power. Instead the protests have given way to an armed insurgency fighting running battles with government forces. This brings us to this week's G20 meeting and the debate raging about whether the international community should intervene in Syria.
The debate over Syrian intervention came to a head in the G20 due to evidence that chemical weapons were used on the rebel forces and civilians. A few years ago, when the Syrian situation first became a civil war, President Obama made a series of speeches in which he referred to the use of chemical weapons as a "Red Line". What he meant was that the use of these weapons to quell the insurgency would mean dire consequences for the Syrian government. Now that they have been used the President's hand has been forced and he must make good his threat or appear weak internationally. Unfortunately, there is no international consensus over who actually used the weapons. It is known that the Syrian government posses these weapons and has stock piles around the country, but it is also known that the rebels control a large section of the country and may well have secured these weapons for their own uses. It does not take much imagination to see how the rebel cause would be aided by international intervention and the Syrian government's would not be, so there is some debate over who actually released the Sarin gas.
Further complicating the debate is Syrian ties with Russia, a UN Security Council member and Veto holder, and Iran. Russia has long had military and economic ties with Syria and Russia has long had a military base on Syrian soil. Iran and Syria also have military and economic ties. Iran is also currently building up a supply of fissile material that the West thinks is for the purpose of making nuclear weapons, which is a problem because the Iranian government is hostile to Israel, a strong US ally. The end result of this is that Russia and many others are arguing against intervention, while the US and its allies are arguing for intervention.
So, with that scene set, I think it is important for us to discuss why it is the West feels it needs to intervene at all. For starters, the Syrian insurgency has been going on for years and has been largely ignored by the international community. Sure there has been some hand wringing about war crimes and civilian death tolls, but no one has cared enough to actually do anything about it until now. It seems mighty hypocritical to start caring now after 100,000 people or so have died and the country has fallen into ruin. The time for intervention was when the protests first turned violent and civilian lives were first put in danger. The reality here is that, if there were no broader concerns with Iranian nuclear weapons and Obama drawing lines in the sand, we would still be ignoring the situation.
Second, the world has a pretty miserable track record on intervening in foreign conflicts trying to keep peace and solving situations diplomatically. Even military intervention has a high rate of failure over the long run. We have good examples in both Iraq and Afghanistan of how a successful military campaign turns into a quagmire when it comes to nation building (i.e. we were very good at blowing up and conquering these countries, but not very good at building stable democracies afterwards). But the track record goes back further than that. Korea, Vietnam, South America... Even World War One can be argued as an example of how international intervention can lead to some pretty dire consequences (in this case World War Two). So why is it that this time we think Syria will be any different?
Third, we are all just starting to emerge from a global banking and real estate meltdown and most governments are running pretty untenable deficits as a result. These deficits and persistent unemployment mean that the world can little afford to spend billions dropping bombs on a foreign country that has little to no strategic or economic impact on the international community. A much better use of our money would be in providing refugees safe havens with humanitarian aide in neighboring countries. Essentially, cordoning off Syria and letting the government and the insurgency fight it out while allowing civilians to immigrate to other countries to live their lies in relative safety.
Lastly, even if we do bomb Syrian government targets and destroy its chemical weapons stock piles, it's not like that is going to end the fighting. The insurgency and the Syrian government will continue to fight it out until one or the other has been vanquished. Without the threat of putting boots on the ground as peace keepers, the fighting will just continue. And, as we have seen in previous interventions, putting boots on the ground just means we are putting our own people in harms way in a country we don't really care about. Intervention is pretty much a no win situation.
I think, in the end, that we would be a lot better off if we focused more on helping the refugees than bombing the Syrian government. In the long run, I think we would all be better off if we spent less money on foreign conflicts and more money on the home front. We have plenty of problems at home that could use billions of dollars that doesn't involve dropping bombs on people. But Obama was stupid, drew a line in the sand on both Syria and Iran, and now we are forced into yet another foreign conflict because we can't afford to look weak internationally.
The debate over Syrian intervention came to a head in the G20 due to evidence that chemical weapons were used on the rebel forces and civilians. A few years ago, when the Syrian situation first became a civil war, President Obama made a series of speeches in which he referred to the use of chemical weapons as a "Red Line". What he meant was that the use of these weapons to quell the insurgency would mean dire consequences for the Syrian government. Now that they have been used the President's hand has been forced and he must make good his threat or appear weak internationally. Unfortunately, there is no international consensus over who actually used the weapons. It is known that the Syrian government posses these weapons and has stock piles around the country, but it is also known that the rebels control a large section of the country and may well have secured these weapons for their own uses. It does not take much imagination to see how the rebel cause would be aided by international intervention and the Syrian government's would not be, so there is some debate over who actually released the Sarin gas.
Further complicating the debate is Syrian ties with Russia, a UN Security Council member and Veto holder, and Iran. Russia has long had military and economic ties with Syria and Russia has long had a military base on Syrian soil. Iran and Syria also have military and economic ties. Iran is also currently building up a supply of fissile material that the West thinks is for the purpose of making nuclear weapons, which is a problem because the Iranian government is hostile to Israel, a strong US ally. The end result of this is that Russia and many others are arguing against intervention, while the US and its allies are arguing for intervention.
So, with that scene set, I think it is important for us to discuss why it is the West feels it needs to intervene at all. For starters, the Syrian insurgency has been going on for years and has been largely ignored by the international community. Sure there has been some hand wringing about war crimes and civilian death tolls, but no one has cared enough to actually do anything about it until now. It seems mighty hypocritical to start caring now after 100,000 people or so have died and the country has fallen into ruin. The time for intervention was when the protests first turned violent and civilian lives were first put in danger. The reality here is that, if there were no broader concerns with Iranian nuclear weapons and Obama drawing lines in the sand, we would still be ignoring the situation.
Second, the world has a pretty miserable track record on intervening in foreign conflicts trying to keep peace and solving situations diplomatically. Even military intervention has a high rate of failure over the long run. We have good examples in both Iraq and Afghanistan of how a successful military campaign turns into a quagmire when it comes to nation building (i.e. we were very good at blowing up and conquering these countries, but not very good at building stable democracies afterwards). But the track record goes back further than that. Korea, Vietnam, South America... Even World War One can be argued as an example of how international intervention can lead to some pretty dire consequences (in this case World War Two). So why is it that this time we think Syria will be any different?
Third, we are all just starting to emerge from a global banking and real estate meltdown and most governments are running pretty untenable deficits as a result. These deficits and persistent unemployment mean that the world can little afford to spend billions dropping bombs on a foreign country that has little to no strategic or economic impact on the international community. A much better use of our money would be in providing refugees safe havens with humanitarian aide in neighboring countries. Essentially, cordoning off Syria and letting the government and the insurgency fight it out while allowing civilians to immigrate to other countries to live their lies in relative safety.
Lastly, even if we do bomb Syrian government targets and destroy its chemical weapons stock piles, it's not like that is going to end the fighting. The insurgency and the Syrian government will continue to fight it out until one or the other has been vanquished. Without the threat of putting boots on the ground as peace keepers, the fighting will just continue. And, as we have seen in previous interventions, putting boots on the ground just means we are putting our own people in harms way in a country we don't really care about. Intervention is pretty much a no win situation.
I think, in the end, that we would be a lot better off if we focused more on helping the refugees than bombing the Syrian government. In the long run, I think we would all be better off if we spent less money on foreign conflicts and more money on the home front. We have plenty of problems at home that could use billions of dollars that doesn't involve dropping bombs on people. But Obama was stupid, drew a line in the sand on both Syria and Iran, and now we are forced into yet another foreign conflict because we can't afford to look weak internationally.
Friday, August 16, 2013
The Problem With Focus Groups
In business, especially businesses that market things to the general public, it is common practice to hire a panel of random people to review products before they are released to the public as a whole. The purpose of this is to get feed back from would be consumers so that the company can refine their product to make it better and increase future sales before it is released. These panels are typically referred to as focus groups. In theory this is a very good idea. Having the public have a say in what you are selling them, letting them tell you what they want, should make products better and consumers happier. Unfortunately, this doesn't always work out.
A perfect example of this can be seen in the auto industry. Car companies are increasingly worried about the greying of their consumer base. The average car buyer age for most major automotive brands keeps increasing. In order to combat this greying, many of these auto companies are creating youth focused brands or youth focused cars. These companies have been talking to younger adults and trying to create vehicles that meet their needs. Apparently, what their research shows is that young people want cars that can haul their stuff, have lots of tech features, and not be too expensive. The end result are divisions such as Toyota's Scion and cars like the Kia Soul.
Unfortunately, these attempts have completely failed. As cataloged recently by The Wall Street Journal here: http://online.wsj.com/article/SB10001424127887323971204578628233538218960.html , the actual consumers of these vehicles have been seniors and baby boomers. 42% of all sales of these "youth" cars are going to baby boomers while a mere 12% are being sold to their target audience. While sales, regardless of who to, are always a good thing for the company selling them, it is hard to ignore the fact that this is essentially a complete failure in marketing. So the question then follows, why did the focus groups so completely fail?
The first, and most obvious, problem is that the younger generations have been hit hardest by the economic down turn of the last 5 years, with minority youths being the most effected (as measured by unemployment rates). When you are unemployed or under-employed, you tend to not be in the market for new cars. Until the job market actually heats up (and don't be fooled by unemployment rate declines caused by people leaving the workforce, or by people being forced by necessity to take poorly paid part time work, I mean real improvement in full time employment as measured by the labor participation rate) you will not see the percentages of young new car buyers increase.
The second is that companies are remarkably bad at breaking down consumers into functional focus groups. When looking at the car buying public, it is important to note that not everyone wants to buy the same car for the same reasons. A family looking for a people mover is going to be looking for a very different car than a weekend warrior looking for a track day car. Yet we see, especially in youth brands and youth vehicles, a mix of features aimed at appealing to both buyers in the same car. While this may appeal to a company looking for as broad a market for their products as possible, they risk alienating both buyers by making them pay for features that they do not want. The family looking for a people mover likely does not care about sporty rims, customizability or loud exhaust notes. Similarly, the weekend racer will care very little about trunk space, comfortable seating for large numbers of people or how many cup holders the vehicle has.
If car makers want to better tailor a car to the people who might actually buy it, they need to tailor the focus group in a similar manner. Get a bunch of sports car guys together to focus group sports cars, get a bunch of parents together to discuss family transportation, get a bunch of off roading enthusiasts to discuss the next 4x4. Also, understand that you can't pigeon hole people by age. Not all twenty somethings want the same thing in a car. Just because they are young doesn't mean they want the same thing.
Also, this doesn't apply to just the automotive market. Television programming is another area where they try to market one size fit all consumers and have been rewarded with dwindling market share for years. If you keep repackaging the same crap, people are going to stop watching. In an era where almost every popular old show is available online for public consumption, repackaging the same stuff over and over again doesn't work. Why watch another Friends or Seinfeld rip off when you can watch the original? You need to look over the market, find people who watch different types of shows, and cater to their needs. The TV viewer who likes Simpsons, American Dad, Family Guy and Archer will likely not be the same person who obsessively watches The Real Housewives. So trying to make a show that pleases both demographics will likely fail spectacularly.
It is an old adage, but knowing your customers really does help in selling them products. And while focus groups are a wonderful tool for helping to tailor products to consumers, you need to tailor the focus group to actually fit the product you are selling. Because if you do not, the end result will be youth divisions that sell primarily to retirees and TV shows that have no audience.
A perfect example of this can be seen in the auto industry. Car companies are increasingly worried about the greying of their consumer base. The average car buyer age for most major automotive brands keeps increasing. In order to combat this greying, many of these auto companies are creating youth focused brands or youth focused cars. These companies have been talking to younger adults and trying to create vehicles that meet their needs. Apparently, what their research shows is that young people want cars that can haul their stuff, have lots of tech features, and not be too expensive. The end result are divisions such as Toyota's Scion and cars like the Kia Soul.
Unfortunately, these attempts have completely failed. As cataloged recently by The Wall Street Journal here: http://online.wsj.com/article/SB10001424127887323971204578628233538218960.html , the actual consumers of these vehicles have been seniors and baby boomers. 42% of all sales of these "youth" cars are going to baby boomers while a mere 12% are being sold to their target audience. While sales, regardless of who to, are always a good thing for the company selling them, it is hard to ignore the fact that this is essentially a complete failure in marketing. So the question then follows, why did the focus groups so completely fail?
The first, and most obvious, problem is that the younger generations have been hit hardest by the economic down turn of the last 5 years, with minority youths being the most effected (as measured by unemployment rates). When you are unemployed or under-employed, you tend to not be in the market for new cars. Until the job market actually heats up (and don't be fooled by unemployment rate declines caused by people leaving the workforce, or by people being forced by necessity to take poorly paid part time work, I mean real improvement in full time employment as measured by the labor participation rate) you will not see the percentages of young new car buyers increase.
The second is that companies are remarkably bad at breaking down consumers into functional focus groups. When looking at the car buying public, it is important to note that not everyone wants to buy the same car for the same reasons. A family looking for a people mover is going to be looking for a very different car than a weekend warrior looking for a track day car. Yet we see, especially in youth brands and youth vehicles, a mix of features aimed at appealing to both buyers in the same car. While this may appeal to a company looking for as broad a market for their products as possible, they risk alienating both buyers by making them pay for features that they do not want. The family looking for a people mover likely does not care about sporty rims, customizability or loud exhaust notes. Similarly, the weekend racer will care very little about trunk space, comfortable seating for large numbers of people or how many cup holders the vehicle has.
If car makers want to better tailor a car to the people who might actually buy it, they need to tailor the focus group in a similar manner. Get a bunch of sports car guys together to focus group sports cars, get a bunch of parents together to discuss family transportation, get a bunch of off roading enthusiasts to discuss the next 4x4. Also, understand that you can't pigeon hole people by age. Not all twenty somethings want the same thing in a car. Just because they are young doesn't mean they want the same thing.
Also, this doesn't apply to just the automotive market. Television programming is another area where they try to market one size fit all consumers and have been rewarded with dwindling market share for years. If you keep repackaging the same crap, people are going to stop watching. In an era where almost every popular old show is available online for public consumption, repackaging the same stuff over and over again doesn't work. Why watch another Friends or Seinfeld rip off when you can watch the original? You need to look over the market, find people who watch different types of shows, and cater to their needs. The TV viewer who likes Simpsons, American Dad, Family Guy and Archer will likely not be the same person who obsessively watches The Real Housewives. So trying to make a show that pleases both demographics will likely fail spectacularly.
It is an old adage, but knowing your customers really does help in selling them products. And while focus groups are a wonderful tool for helping to tailor products to consumers, you need to tailor the focus group to actually fit the product you are selling. Because if you do not, the end result will be youth divisions that sell primarily to retirees and TV shows that have no audience.
Tuesday, July 30, 2013
Government: Symbiosis to Parasitic
Throughout recorded history, when human kind has come together to form a society, it has also created a government to govern these interactions. The reason for this is obvious. When people get together, crime, disease, and scarcity will plague human interactions and make large gatherings problematic. Governments exist, first and foremost, to protect the populace from malignant external incursions, protect the populace from the deprivations of its own citizens and to create the infrastructure that is required for large quantities of people to live together as healthily as possible. Society benefits from this governing because when humans work together, they accomplish great things. Everyone's lives benefit from human efforts working in concert for the common good.
Need proof? Think of all the wonders of the world. None of them would have been possible without a large governing body overseeing the huge masses of humanity required to create these masterpieces. In order to organize humanity, you need a group of people whose roll it is to oversee them. Someone needs to plan. This general thesis is the argument most people have against a purely libertarian or anarchic state. It is hard to see all the benefits of an organized modern society and not claim that humanity has benefited from the oversight of government.
But now let's look back at those great masterpieces, the wonders of the world. While they were the end result of a great mobilization of humanity made possible by government, they were not created without significant losses of life and other opportunity costs. Take the Great Pyramid of Giza. It was created using slave labor by the Pharaoh. It is not hard to think that Egyptian society of the time would have benefited more if all that effort was put into projects that benefited all of society. So despite that it is now a major tourist attraction and bringing in a huge amount of money to Egypt (well, between civil wars and unrest it does. Once Egypt figures out its government, it will no doubt become a major tourism draw once again) it is hard to argue that the Egyptian populace of the time benefited from its creation. You can say similar things about the Great Wall of China. While it was created with a noble thought in mind, namely keeping the Mongols and other western barbarians out of China (at a time in history when incursions involved murder, rape, theft and arson), it also cost countless human lives to make and failed in its primary purpose. After all, China was eventually conquered by the Mongols and forced to pay tribute to the mongol empire for centuries.
So at what point does a government move from a net positive to a society, to a net negative? This is a complex question and largely depends on what you view the ultimate purpose of government is. I tend to believe that a government that governs least governs best, but I realize there is a large contingent of humanity that wants government to take a more totalitarian roll and run all aspects of human life for the benefit of society. The problem here is that government, while great at organizing people to work for the common good, has historically been very bad at identifying what is in the common good, and terrible at selecting rulers who are actually interested in the common good instead of personal enrichment. Again, think of the Pyramid of Giza and the Great Wall of China.
I write all of the above as a prelude to my next observation. I believe that the US government in particular, though it is certainly not alone (I am looking at you Europe) have transitioned from net positive to net negatives for the societies they govern. Now don't get me wrong, I am not advocating the overthrow of any government. But I would like to see it reformed to better help the populace as a whole.
But lets not get ahead of ourselves. Why do I think government has become a net drag on society? The answers lie in our current economic malaise. We are currently dealing with the 4th or 5th year of a recession that started when the sub-prime real estate market collapsed. This caused property values to decline rapidly. Banks at the time were heavily invested in real estate securities, so this huge decline in value pummeled the stock market and the value of most banks' portfolio of assets. For some financial companies (Lehman Brothers in particular), this drop in value triggered margin calls on their loan agreements which they couldn't pay because their assets were suddenly illiquid and losing value rapidly. The fed then stepped in, bailed out the banks, preventing large scale failures and bank runs. This was government working properly to avoid a disaster.
The problem is that the above disaster was the fault of government in the first place. You see, financial panics caused by real estate collapses are nothing new. The panic in the 1890s, the great depression, and the savings and loan fiascoes all had at least partial roots in real estate crashes. The problem was that after years of economic success, the government relaxed lending standards under the guise of making home ownership more affordable to the less credit worthy, they gutted depression era protections from economic speculation (Glass Steagall), and they allowed easy money policies that further inflated the real estate asset bubble. The result was when property values began to falter due to lack of demand and mortgage rates ticking upwards (from option arms rates resetting), defaults skyrocketed and property values fell. Had better lending standards been in place, had banks not been allowed to speculate on real estate securities (Glass Steagall), and had the government had a less permissive monetary policy, this likely could have been avoided.
When you couple our current economic woes, with what we have been learning about the modern police state we live in. I am referring here to the NSA PRISM program (read more here: http://en.wikipedia.org/wiki/PRISM_%28surveillance_program%29 ) and our multiple costly wars in foreign countries with questionable strategic significance, it is easy to see how our government has become more parasitic than symbiotic (i.e. it is hurting us more than it is helping). To this I would also add the Affordable Care Act, the Dodd Frank Act and Sarbanes Oxley, but these assertions are likely more contentious to some readers and are better dealt with on an individual basis in separate posts. And while the government has been spending time on these projects, our local infrastructure crumbles, our local governments' tax revenues dwindle (further cutting funds to infrastructure) and our local civil institutions whither. In fact the only area of America to not suffer from the depression was the Federal Government and the greater DC metropolitan area. The government continues to raise taxes while providing worse and worse service to its citizens and the only people benefitting are in the government itself.
When an entity lives off another (in this case society) and benefits at the expense of the host, it is a parasite. And without drastic reform to our federal government, future prosperity will be difficult to achieve. It is time we wean ourselves off the teat of big government and start cutting budgets for programs that do more harm than good.
Need proof? Think of all the wonders of the world. None of them would have been possible without a large governing body overseeing the huge masses of humanity required to create these masterpieces. In order to organize humanity, you need a group of people whose roll it is to oversee them. Someone needs to plan. This general thesis is the argument most people have against a purely libertarian or anarchic state. It is hard to see all the benefits of an organized modern society and not claim that humanity has benefited from the oversight of government.
But now let's look back at those great masterpieces, the wonders of the world. While they were the end result of a great mobilization of humanity made possible by government, they were not created without significant losses of life and other opportunity costs. Take the Great Pyramid of Giza. It was created using slave labor by the Pharaoh. It is not hard to think that Egyptian society of the time would have benefited more if all that effort was put into projects that benefited all of society. So despite that it is now a major tourist attraction and bringing in a huge amount of money to Egypt (well, between civil wars and unrest it does. Once Egypt figures out its government, it will no doubt become a major tourism draw once again) it is hard to argue that the Egyptian populace of the time benefited from its creation. You can say similar things about the Great Wall of China. While it was created with a noble thought in mind, namely keeping the Mongols and other western barbarians out of China (at a time in history when incursions involved murder, rape, theft and arson), it also cost countless human lives to make and failed in its primary purpose. After all, China was eventually conquered by the Mongols and forced to pay tribute to the mongol empire for centuries.
So at what point does a government move from a net positive to a society, to a net negative? This is a complex question and largely depends on what you view the ultimate purpose of government is. I tend to believe that a government that governs least governs best, but I realize there is a large contingent of humanity that wants government to take a more totalitarian roll and run all aspects of human life for the benefit of society. The problem here is that government, while great at organizing people to work for the common good, has historically been very bad at identifying what is in the common good, and terrible at selecting rulers who are actually interested in the common good instead of personal enrichment. Again, think of the Pyramid of Giza and the Great Wall of China.
I write all of the above as a prelude to my next observation. I believe that the US government in particular, though it is certainly not alone (I am looking at you Europe) have transitioned from net positive to net negatives for the societies they govern. Now don't get me wrong, I am not advocating the overthrow of any government. But I would like to see it reformed to better help the populace as a whole.
But lets not get ahead of ourselves. Why do I think government has become a net drag on society? The answers lie in our current economic malaise. We are currently dealing with the 4th or 5th year of a recession that started when the sub-prime real estate market collapsed. This caused property values to decline rapidly. Banks at the time were heavily invested in real estate securities, so this huge decline in value pummeled the stock market and the value of most banks' portfolio of assets. For some financial companies (Lehman Brothers in particular), this drop in value triggered margin calls on their loan agreements which they couldn't pay because their assets were suddenly illiquid and losing value rapidly. The fed then stepped in, bailed out the banks, preventing large scale failures and bank runs. This was government working properly to avoid a disaster.
The problem is that the above disaster was the fault of government in the first place. You see, financial panics caused by real estate collapses are nothing new. The panic in the 1890s, the great depression, and the savings and loan fiascoes all had at least partial roots in real estate crashes. The problem was that after years of economic success, the government relaxed lending standards under the guise of making home ownership more affordable to the less credit worthy, they gutted depression era protections from economic speculation (Glass Steagall), and they allowed easy money policies that further inflated the real estate asset bubble. The result was when property values began to falter due to lack of demand and mortgage rates ticking upwards (from option arms rates resetting), defaults skyrocketed and property values fell. Had better lending standards been in place, had banks not been allowed to speculate on real estate securities (Glass Steagall), and had the government had a less permissive monetary policy, this likely could have been avoided.
When you couple our current economic woes, with what we have been learning about the modern police state we live in. I am referring here to the NSA PRISM program (read more here: http://en.wikipedia.org/wiki/PRISM_%28surveillance_program%29 ) and our multiple costly wars in foreign countries with questionable strategic significance, it is easy to see how our government has become more parasitic than symbiotic (i.e. it is hurting us more than it is helping). To this I would also add the Affordable Care Act, the Dodd Frank Act and Sarbanes Oxley, but these assertions are likely more contentious to some readers and are better dealt with on an individual basis in separate posts. And while the government has been spending time on these projects, our local infrastructure crumbles, our local governments' tax revenues dwindle (further cutting funds to infrastructure) and our local civil institutions whither. In fact the only area of America to not suffer from the depression was the Federal Government and the greater DC metropolitan area. The government continues to raise taxes while providing worse and worse service to its citizens and the only people benefitting are in the government itself.
When an entity lives off another (in this case society) and benefits at the expense of the host, it is a parasite. And without drastic reform to our federal government, future prosperity will be difficult to achieve. It is time we wean ourselves off the teat of big government and start cutting budgets for programs that do more harm than good.
Thursday, July 11, 2013
Don't Let the Unemployment Rate Fool You...
Today I want to talk about the unemployment rate and how it is used to pull the wool over your eyes in regards to the effects of the current recession.
As I have discussed in previous posts, the current recession started around 6 years ago when the housing bubble burst, nearly causing a catastrophic meltdown of the financial system. The end result was that US government stepped in and very selectively doled out aid to Wall Street and to specific non-investment, non-bank institutions to help keep our financial house of cards from completely collapsing. Europe, following in our footsteps in both falling into recession and working to cure it, did much the same thing, but on a national level, offering up huge loans for austerity (i.e. cutting the budget to meet certain deficit targets).
Since then, the nation and the world, has been watching unemployment rates with the frenzied fascination of someone waiting for a bomb to be defused. Unfortunately, the unemployment rate is a very misleading measure of the health of the labor economy. The reason? How it's calculated. Most people believe that the official unemployment rate is calculated based on the number of working aged adults not currently employed, but they are wrong. That is actually the labor participation rate (Note: labor participation rate is the rate of employment among working aged adults expressed in percent. But since there are only two option, employed or not, it also reports its opposite, the number not employed). The unemployment rate is based on a survey of 60,000 US families and involves more complex math and fudging. It determines the number of people currently employed in those families, those currently actively seeking work based on a set of narrow criteria, and those that are not in the labor force (who are not counted for purposes of the unemployment rate). It then extrapolates this out to the entire country and then weights the answers (hence my use of the word fudging). But don't take my word for it, read the description of it from the Bureau of Labor Statistics itself. http://www.bls.gov/cps/cps_htgm.htm
So this brings us back to my initial point, how is this used to pull the wool over our eyes. The answer is in the two statistics themselves. While unemployment rates peeked in 2009 and have been steadily decreasing, the labor participation rate is still more or less on the decline. http://data.bls.gov/timeseries/LNS14000000 (unemployment rate) http://data.bls.gov/timeseries/LNS11300000 (labor participation rate). In fact, labor participation rates have been on a fairly continuous decline since the tech bubble burst around the year 2001 (which you can see by adjusting the dates shown in the above link). Why are the two different? Because unemployment only includes those people who fit the narrow definition of actively seeking work. As you stay unemployed, you move from the actively seeking work category into the "discouraged worker" category and cease to be counted. So why do we focus so much on the unemployment rate and not on labor participation? Supposedly we do this because it focuses on those actively seeking work and thus is a more fair measure of the economic activity of the nation. But I think the reality is that the government and the media focus on this rate because it is much more likely to improve over time (as workers get moved into the non-counted discouraged worker category). After all, if you focus on labor participation, then it looks like the real estate bubble was just a plateau in the continued failure of the American economy. Politicians seeking re-election don't like that because it makes them look incompetent and news papers don't like it because doom and gloom doesn't sell papers, get viewers or help them with advertising revenue. So they together hype the rosier picture.
The reality though is something else. We have record low levels of labor participation in this country not seen since before the 80's boom and women entering the work place. And if the last time we saw participation this low was back then, it means that now, with most women of working age working, we are in much more dire financial straits than we were then. I.E. most of those women in the past were not employed and not seeking a job by choice, not because of the terrible economy (and the stagflation of the 70's was a terrible economy). Now we have more people looking, not finding and being moved into the "discouraged worker" camp slowly bringing unemployment rates down. Doesn't sound as nice as when the government or the papers trumpet the unemployment rates' decline does it?
So don't let the unemployment rate fool you, we are still in dire financial straits. Until we see steady improvement in the labor participation rate, it meas most of the unemployment declines came from people "leaving the work force".
As I have discussed in previous posts, the current recession started around 6 years ago when the housing bubble burst, nearly causing a catastrophic meltdown of the financial system. The end result was that US government stepped in and very selectively doled out aid to Wall Street and to specific non-investment, non-bank institutions to help keep our financial house of cards from completely collapsing. Europe, following in our footsteps in both falling into recession and working to cure it, did much the same thing, but on a national level, offering up huge loans for austerity (i.e. cutting the budget to meet certain deficit targets).
Since then, the nation and the world, has been watching unemployment rates with the frenzied fascination of someone waiting for a bomb to be defused. Unfortunately, the unemployment rate is a very misleading measure of the health of the labor economy. The reason? How it's calculated. Most people believe that the official unemployment rate is calculated based on the number of working aged adults not currently employed, but they are wrong. That is actually the labor participation rate (Note: labor participation rate is the rate of employment among working aged adults expressed in percent. But since there are only two option, employed or not, it also reports its opposite, the number not employed). The unemployment rate is based on a survey of 60,000 US families and involves more complex math and fudging. It determines the number of people currently employed in those families, those currently actively seeking work based on a set of narrow criteria, and those that are not in the labor force (who are not counted for purposes of the unemployment rate). It then extrapolates this out to the entire country and then weights the answers (hence my use of the word fudging). But don't take my word for it, read the description of it from the Bureau of Labor Statistics itself. http://www.bls.gov/cps/cps_htgm.htm
So this brings us back to my initial point, how is this used to pull the wool over our eyes. The answer is in the two statistics themselves. While unemployment rates peeked in 2009 and have been steadily decreasing, the labor participation rate is still more or less on the decline. http://data.bls.gov/timeseries/LNS14000000 (unemployment rate) http://data.bls.gov/timeseries/LNS11300000 (labor participation rate). In fact, labor participation rates have been on a fairly continuous decline since the tech bubble burst around the year 2001 (which you can see by adjusting the dates shown in the above link). Why are the two different? Because unemployment only includes those people who fit the narrow definition of actively seeking work. As you stay unemployed, you move from the actively seeking work category into the "discouraged worker" category and cease to be counted. So why do we focus so much on the unemployment rate and not on labor participation? Supposedly we do this because it focuses on those actively seeking work and thus is a more fair measure of the economic activity of the nation. But I think the reality is that the government and the media focus on this rate because it is much more likely to improve over time (as workers get moved into the non-counted discouraged worker category). After all, if you focus on labor participation, then it looks like the real estate bubble was just a plateau in the continued failure of the American economy. Politicians seeking re-election don't like that because it makes them look incompetent and news papers don't like it because doom and gloom doesn't sell papers, get viewers or help them with advertising revenue. So they together hype the rosier picture.
The reality though is something else. We have record low levels of labor participation in this country not seen since before the 80's boom and women entering the work place. And if the last time we saw participation this low was back then, it means that now, with most women of working age working, we are in much more dire financial straits than we were then. I.E. most of those women in the past were not employed and not seeking a job by choice, not because of the terrible economy (and the stagflation of the 70's was a terrible economy). Now we have more people looking, not finding and being moved into the "discouraged worker" camp slowly bringing unemployment rates down. Doesn't sound as nice as when the government or the papers trumpet the unemployment rates' decline does it?
So don't let the unemployment rate fool you, we are still in dire financial straits. Until we see steady improvement in the labor participation rate, it meas most of the unemployment declines came from people "leaving the work force".
Friday, June 21, 2013
The Value of Privacy
In recent weeks we have been re-alerted to a most scandalizing fact, namely that the NSA and other US intelligence agencies have been spying on all internet and cell phone communications on an unprecedented level. I say re-alerted because we were first made aware of this in May of 2006 when USA Today reported on the NSA building a huge database for compiling phone records. There is a long discussion of the aftermath of these revelations here: http://en.wikipedia.org/wiki/NSA_warrantless_surveillance_controversy . But the reality is that this is nothing new. Our government, despite getting its hand slapped previously for warrant-less searches of wireless communications, has expanded the program to include all internet communications as well. Given the strictures of the 4th amendment, many are arguing that this is a clear violation of our constitutional rights. I will not argue with them, at least not on theory. However, it is worth pointing out that the Obama administration and the intelligence community have included such legal safeguards as they think are needed to pass constitutional scrutiny. Likely that argument will not be settled until it is in front of the US Supreme Court. But ignoring the pure legal arguments, it is hard to square our nation's stated values of liberty, freedom of speech and right to privacy with the actions of our government.
On the other side of the coin, I understand where the government is coming from. Since September 11th 2001, we as a nation have been made more alert to the dangers posed by terrorists, both foreign and domestic. The US public has been clamoring for the intelligence community to improve our safety in this new and dangerous world. In intelligence work, data is key, and when most of the world's internet communications come through US hubs, gathering that data was easy and convenient. The belief that if we just had more information that we could prevent the next attack drove the community to use questionable means to increase the amount of data they could analyze. It's easy to sympathize with them, especially with civilian lives on the line.
The problem with this theory is that, in many previous cases of terrorism, we already had the tools we needed to prevent disaster. What we lacked was the competence to interpret that data correctly and prevent the attacks. Take Sept. 11th, the Bush administration had received intelligence about Al Qaeda, Osama Bin Laden and their readiness to attack the USA. Had these warnings been heeded, we may well have avoided the disaster that occurred. http://www.nytimes.com/2012/09/11/opinion/the-bush-white-house-was-deaf-to-9-11-warnings.html . More recently, the intelligence community ignored Russian warnings about the Tsarnaev brothers and how they may be radicalizing. These are the brothers who then perpetuated the Boston Marathon bombings. http://www.politico.com/blogs/under-the-radar/2013/06/fbi-knew-earlier-of-boston-bombing-suspect-166313.html . Two of the largest attacks in recent memory on US soil were both preceded with specific intelligence warnings to the government of the risk of a terrorist attack; intelligence that was ignored. More damningly, this was intelligence gathered through traditional means. If we lacked the competence to interpret this data properly, it is easily imagined that we lack the competence to mine the NSA program properly as well.
So where does this leave us? We have a multi-billion dollar spying program that is manned by the same incompetent people who failed to heed traditional warnings of previous attacks. A spying program that tramples on the world's privacy rights and freedoms which likely will not help us prevent the next attack (if the Boston Marathon bombings are predictive). I can't help but think that our government would have been a lot better off hiring more analysts to mine traditional intelligence than spending billions of dollars on a computer data warehouse. But that is the modern state of our technocratic government. It thinks it is a lot smarter, and a lot more competent, than it actually is. It is now up to the courts to interpret its constitutionality, and the voters to let their representatives know their displeasure.
On the other side of the coin, I understand where the government is coming from. Since September 11th 2001, we as a nation have been made more alert to the dangers posed by terrorists, both foreign and domestic. The US public has been clamoring for the intelligence community to improve our safety in this new and dangerous world. In intelligence work, data is key, and when most of the world's internet communications come through US hubs, gathering that data was easy and convenient. The belief that if we just had more information that we could prevent the next attack drove the community to use questionable means to increase the amount of data they could analyze. It's easy to sympathize with them, especially with civilian lives on the line.
The problem with this theory is that, in many previous cases of terrorism, we already had the tools we needed to prevent disaster. What we lacked was the competence to interpret that data correctly and prevent the attacks. Take Sept. 11th, the Bush administration had received intelligence about Al Qaeda, Osama Bin Laden and their readiness to attack the USA. Had these warnings been heeded, we may well have avoided the disaster that occurred. http://www.nytimes.com/2012/09/11/opinion/the-bush-white-house-was-deaf-to-9-11-warnings.html . More recently, the intelligence community ignored Russian warnings about the Tsarnaev brothers and how they may be radicalizing. These are the brothers who then perpetuated the Boston Marathon bombings. http://www.politico.com/blogs/under-the-radar/2013/06/fbi-knew-earlier-of-boston-bombing-suspect-166313.html . Two of the largest attacks in recent memory on US soil were both preceded with specific intelligence warnings to the government of the risk of a terrorist attack; intelligence that was ignored. More damningly, this was intelligence gathered through traditional means. If we lacked the competence to interpret this data properly, it is easily imagined that we lack the competence to mine the NSA program properly as well.
So where does this leave us? We have a multi-billion dollar spying program that is manned by the same incompetent people who failed to heed traditional warnings of previous attacks. A spying program that tramples on the world's privacy rights and freedoms which likely will not help us prevent the next attack (if the Boston Marathon bombings are predictive). I can't help but think that our government would have been a lot better off hiring more analysts to mine traditional intelligence than spending billions of dollars on a computer data warehouse. But that is the modern state of our technocratic government. It thinks it is a lot smarter, and a lot more competent, than it actually is. It is now up to the courts to interpret its constitutionality, and the voters to let their representatives know their displeasure.
Wednesday, June 5, 2013
Why I am not a Scientist, Psychiatrist or Doctor
Sorry about the hiatus, I had a vacation and then some job related things to take care of. Real life intrudes sometimes...
So, without further adieu, here is why I am not a scientist....
When I was graduating from high school, I got it into my head that I should be an MD/PHD psychiatrist. This came from a variety of misconceptions that I had at the time, primarily that learning psychology would give me some sort of insight into the human mind and how people think about things. I also thought it would be a good way to spend my life talking to people and helping them work through the emotional traumas and troubles of their lives. My vision of psychiatry was of a Freudian doctor sitting in a big comfy leather chair in a wood paneled office talking to someone who was lying on a couch discussing their inner turmoils. Unfortunately, modern psychiatry has little to do with traditional therapy techniques. Instead it mostly involves popping people full of pills until they either stop complaining or actually believe you have cured their mental problems.
Now, you can probably tell from the end of the above paragraph that I do not hold modern psychiatry in much esteem. While this is true, I do wish to point out that there are quite a few people whose psychological conditions really are due to neurotransmitter imbalances that can be successfully treated with psychotropic drugs. Unfortunately, these people make up an incredibly small proportion of those seeking help from psychiatrists. Most people are simply depressed due to the modern world and their lives not living up to their ambitions, hopes and dreams and their inability to accept the life they have. Most of these people would likely be better served by not experimenting with drugs but instead working through their problems and analyzing the root causes of their psychological trauma. Unfortunately, years of therapy with a doctor is not cost efficient from an insurance perspective, so instead the grand tradition of psychiatry has been reduced to a happy pill dispensary. A way point between a troubled mind and the pharmacist.
But I digress, I entered college honestly thinking that I would go pre-med and major in psych. In my first year I took intro to psych, chemistry and a class called brain and behavior. Much to my horror, I found the focus of both psych courses to be neurology. Instead of learning about brain development, I was memorizing the taxonomy of a neuron and learning who was the first person to shove electric probes in a mouse's head and have it actually do something other than killing the mouse. It was an incredible let down to say the least. Moreover, in chemistry I found myself confused in lectures and bored in labs. The end result was that I was either obsessively reviewing notes and reading assignments, or sitting in a lab waiting for a solution to properly mix. In labs I would bide my time squirting liquids onto the hot plate to see them sizzle and pop. This included flammable liquids, mostly because they had the most satisfying reactions. The end result of all of this was that my grades were suffering and I had completely burnt out on my chosen collegiate course of study by the middle of the second semester of my first year.
After some personal issues, and some other unrelated problems, I ended up switching majors into a completely unrelated area of academia. Fortunately, I was much more engaged there and my grades improved markedly. In hind sight, my blunder from the very get go was a profound lack of knowledge about myself. I do not have the attention span to watch a chemical reaction slowly occur over a three hour lab. I do not have the patience to sit down and properly balance a chemical equation or memorize all the parts of the body and their Latin names. My mind requires more active thought and discussion. The discussion, and the desire to help people was what made me want to be a psychiatrist. It was the science required to get there that convinced me this was a bad idea. This is why I am not a scientist, psychiatrist or doctor. But it is why I respect the people with the mental discipline and fortitude to put up with all the years of tedium required to follow one of these three professions.
So, without further adieu, here is why I am not a scientist....
When I was graduating from high school, I got it into my head that I should be an MD/PHD psychiatrist. This came from a variety of misconceptions that I had at the time, primarily that learning psychology would give me some sort of insight into the human mind and how people think about things. I also thought it would be a good way to spend my life talking to people and helping them work through the emotional traumas and troubles of their lives. My vision of psychiatry was of a Freudian doctor sitting in a big comfy leather chair in a wood paneled office talking to someone who was lying on a couch discussing their inner turmoils. Unfortunately, modern psychiatry has little to do with traditional therapy techniques. Instead it mostly involves popping people full of pills until they either stop complaining or actually believe you have cured their mental problems.
Now, you can probably tell from the end of the above paragraph that I do not hold modern psychiatry in much esteem. While this is true, I do wish to point out that there are quite a few people whose psychological conditions really are due to neurotransmitter imbalances that can be successfully treated with psychotropic drugs. Unfortunately, these people make up an incredibly small proportion of those seeking help from psychiatrists. Most people are simply depressed due to the modern world and their lives not living up to their ambitions, hopes and dreams and their inability to accept the life they have. Most of these people would likely be better served by not experimenting with drugs but instead working through their problems and analyzing the root causes of their psychological trauma. Unfortunately, years of therapy with a doctor is not cost efficient from an insurance perspective, so instead the grand tradition of psychiatry has been reduced to a happy pill dispensary. A way point between a troubled mind and the pharmacist.
But I digress, I entered college honestly thinking that I would go pre-med and major in psych. In my first year I took intro to psych, chemistry and a class called brain and behavior. Much to my horror, I found the focus of both psych courses to be neurology. Instead of learning about brain development, I was memorizing the taxonomy of a neuron and learning who was the first person to shove electric probes in a mouse's head and have it actually do something other than killing the mouse. It was an incredible let down to say the least. Moreover, in chemistry I found myself confused in lectures and bored in labs. The end result was that I was either obsessively reviewing notes and reading assignments, or sitting in a lab waiting for a solution to properly mix. In labs I would bide my time squirting liquids onto the hot plate to see them sizzle and pop. This included flammable liquids, mostly because they had the most satisfying reactions. The end result of all of this was that my grades were suffering and I had completely burnt out on my chosen collegiate course of study by the middle of the second semester of my first year.
After some personal issues, and some other unrelated problems, I ended up switching majors into a completely unrelated area of academia. Fortunately, I was much more engaged there and my grades improved markedly. In hind sight, my blunder from the very get go was a profound lack of knowledge about myself. I do not have the attention span to watch a chemical reaction slowly occur over a three hour lab. I do not have the patience to sit down and properly balance a chemical equation or memorize all the parts of the body and their Latin names. My mind requires more active thought and discussion. The discussion, and the desire to help people was what made me want to be a psychiatrist. It was the science required to get there that convinced me this was a bad idea. This is why I am not a scientist, psychiatrist or doctor. But it is why I respect the people with the mental discipline and fortitude to put up with all the years of tedium required to follow one of these three professions.
Friday, May 3, 2013
Why Teachers are Important
Recently I have become aware of a new trend, college classes on video. The idea behind this is that a small local school can save money by firing their professors and simply buying video courses taught by professors. The students still get lectures and the school saves on the cost of hiring a live person. Win win right?
The problem here is that it assumes that the sole reason people go to school is to hear lectures. In fact, people pay to go to college to learn. These two concepts get confused because, in college, most courses are taught via lecture. Thus it seems to be an easy substitute to replace professors with video. The truth is that lectures are only part of why students go to college and pay such a high premium to do so. While it is true that 100 level courses are largely lecture, text book reading and memorization based. As a student progresses into higher level courses, class sizes get smaller and training becomes much more interactive. Classic techniques such as the Socratic method, thought experiments, lab work, and many others serve to teach students to think on their feet, apply the knowledge they have learned and learn how to interact with people. To reduce education to simple video lectures and memorization for tests misses half the reason students go to college. Learning is more than simple memorization, and to reduce it to such is a disservice to students.
A good example of this appears in the work of Charles Dickens. Much to my embarrassment I can't remember which book. But it's an indictment of the pure memorization education system. Essentially a teacher asks a student what a horse is. The student replies from wrote memorization "a four footed ruminating mammal." Then the teacher points outside to a horse pulling a cart and asks the child what it is. The child doesn't know despite the fact he was just asked to define it. The reason being that despite memorizing the correct answer the kid had no practical experience with a horse, nor even knew what one looked like. In this simple anecdote Dickens showed all the short comings of relying solely on memorization to teach students. Were the lecture the student was watching a taped lecture, he would not have had that interaction with the professor. He would have continued in his ignorance despite having the correct answer to the question. In short, the child would have continued on in his ignorance.
Also, from a practical matter, college costs a ton of money. State schools now charge in excess of $20,000 a year just for a student to take classes. Private college can cost $60,000 a year. More over, the value of a college education has never been more questioned. With record unemployment after the financial melt down of 2007 and 2008, experience has become more marketable than a degree. College kids now frequently graduate hugely in debt and end up not being able to find professional level jobs. So they are forced to live at home with their parents, work low level jobs part time and barely get by. For a school to reduce the education to merely watching movies seems to further cheapen the value of the education received. It becomes much harder for a working class family to justify the cost when there is no payoff in either education or in the job market. Instead of 4 or more years invested in a future, it is four or more years and tens, if not hundreds, of thousands of dollars wasted.
For a degree to have any meaning, the student must both have learned a lot of knowledge, and know how to apply it practically in the modern world. Reducing school to filmed lectures and memorization marginalizes the latter half of this equation. Were I still a student, I would think twice before going into debt to essentially watch a series of videos and have my grade determined solely by a few online computer graded tests. You don't pay for the lecture, you pay to interact with experienced college professors who are in the upper echelons of their fields. Schools should think twice before removing professors from their educational equation, because they may just find that they will no longer have customers.
The problem here is that it assumes that the sole reason people go to school is to hear lectures. In fact, people pay to go to college to learn. These two concepts get confused because, in college, most courses are taught via lecture. Thus it seems to be an easy substitute to replace professors with video. The truth is that lectures are only part of why students go to college and pay such a high premium to do so. While it is true that 100 level courses are largely lecture, text book reading and memorization based. As a student progresses into higher level courses, class sizes get smaller and training becomes much more interactive. Classic techniques such as the Socratic method, thought experiments, lab work, and many others serve to teach students to think on their feet, apply the knowledge they have learned and learn how to interact with people. To reduce education to simple video lectures and memorization for tests misses half the reason students go to college. Learning is more than simple memorization, and to reduce it to such is a disservice to students.
A good example of this appears in the work of Charles Dickens. Much to my embarrassment I can't remember which book. But it's an indictment of the pure memorization education system. Essentially a teacher asks a student what a horse is. The student replies from wrote memorization "a four footed ruminating mammal." Then the teacher points outside to a horse pulling a cart and asks the child what it is. The child doesn't know despite the fact he was just asked to define it. The reason being that despite memorizing the correct answer the kid had no practical experience with a horse, nor even knew what one looked like. In this simple anecdote Dickens showed all the short comings of relying solely on memorization to teach students. Were the lecture the student was watching a taped lecture, he would not have had that interaction with the professor. He would have continued in his ignorance despite having the correct answer to the question. In short, the child would have continued on in his ignorance.
Also, from a practical matter, college costs a ton of money. State schools now charge in excess of $20,000 a year just for a student to take classes. Private college can cost $60,000 a year. More over, the value of a college education has never been more questioned. With record unemployment after the financial melt down of 2007 and 2008, experience has become more marketable than a degree. College kids now frequently graduate hugely in debt and end up not being able to find professional level jobs. So they are forced to live at home with their parents, work low level jobs part time and barely get by. For a school to reduce the education to merely watching movies seems to further cheapen the value of the education received. It becomes much harder for a working class family to justify the cost when there is no payoff in either education or in the job market. Instead of 4 or more years invested in a future, it is four or more years and tens, if not hundreds, of thousands of dollars wasted.
For a degree to have any meaning, the student must both have learned a lot of knowledge, and know how to apply it practically in the modern world. Reducing school to filmed lectures and memorization marginalizes the latter half of this equation. Were I still a student, I would think twice before going into debt to essentially watch a series of videos and have my grade determined solely by a few online computer graded tests. You don't pay for the lecture, you pay to interact with experienced college professors who are in the upper echelons of their fields. Schools should think twice before removing professors from their educational equation, because they may just find that they will no longer have customers.
Tuesday, April 16, 2013
Deifying the 50's is Incredibly Stupid
One of the most persistent obfuscations in American politics is the continued misrepresentation of the historical phenomenon that lead to the economic and social booms of the 1950's and 60's. Republicans look back on that era and laud the stable family structure, wholesome family values and relative success of the economy. Democrats look back at the social activism, the high tax rates and powerful government and rhapsodize. Both parties refer to this era for their current political purposes and appeal to our success as a nation back then as some sort of proof of concept. The problem is that both views mischaracterize the era. This makes their analogies at best unpersuasive, at worst, down right misleading.
So let us harken back to the America of the 50's. It was a time of great prosperity, at least for white America. For blacks and immigrants from other countries, it was still a very unfriendly place. The civil rights movement was in full swing though. Martin Luther King, Jr. was advocating for minority and black rights and white America was finally taking notice and allowing the underclasses the freedom to join in the prosperity of white America. But such social progress was fitful and was often times underscored by violence. Also, America was indeed prospering economically, but the reason for this has as much to do with the end of World War II than it did any virtue of the politics of the era. After all, at the end of World War II, Europe was a bombed out mess, Japan had been nuked, and the cold war between the two largest economies that were not destroyed by the war (the USA and the USSR) was just heating up. This meant that, in the western world, only the USA was left as a provider and manufacturer of goods for a rapidly rebuilding and healing Europe. Once the 60's were over and Europe and Japan were beginning to reach parity with the USA in manufacturing and business, the economy tanked. There were a variety of reasons, the 1973 oil crisis, the failure of the Bretton Woods method of monetary management; but overlooked among these reasons usually is the fact that the USA suddenly had competition from the rest of the world in manufacturing. This competition put strong downward pressure on wages. Manufacturers started to fail all over the USA, unable to compete with the new competition from abroad. It was not till the Reagan era and the Thatcher era that the old system was junked, that taxes were lowered, that capital markets were opened up, that the economy really turned around.
So now let us deal with the Republican's vision of the 50's. As I said above, they laud the 50's for its stable families, prosperity and family values. But as I point out above, this safety and stability only existed if you were white (and since most Republicans are white, it gives them a skewed perspective on events). Also worth noting was the divorce system of that era was a fault based system. You had to have a real demonstrable reason to divorce someone, not liking the person anymore just wouldn't cut the mustard. While courts would rarely force two people to stay together if they no longer wanted to, they did not make it easy for them either. The end result is that, under the veneer of the happy family and lower divorce rate, was a seedier reality. Realities like couples staying together because they couldn't afford a lawyer to gin up a proper at fault reason for them to divorce, or spousal abuse and spousal rapes going unreported because a paternalistic society tended to ignore the complaints made by women. The family may have looked happy from the outside, but the reality was often much grimmer. Regardless, holding the 50's up as some paragon of family values misses the point entirely. The society of the time was just very good at hiding its problems.
The Democrats' view of this era is equally specious. They laud the powerful unions, the high tax rates on the rich and the prosperity of the nation at that time. Presumably, they use it as a model for their current tax and spend agenda. What they ignore is that it was only because of the unique properties of that era that expensive labor, high taxes and unionization didn't bankrupt the nation. As I said above, after WWII, the USA was the only first world nation (other than the USSR) that still had a manufacturing base and healthy economy. The result was that we provided the goods that allowed Europe and Japan to rebuild. Once they had rebuilt, and our industries had to compete on the open market, many of them failed. When they failed, the confiscatory tax rates on the wealthy overly burdened the economy and slowed our recovery. The reality was then, and still is now, that high taxes, organized labor and statist policies bankrupt the nation and make our products uncompetitive on the world market. They only were able to flourish because we had no competition. A reality that no longer exists.
So, in short, let us stop harkening back to the 50's as some sort of model for modern America. Except as a cautionary tale, it has absolutely no relevance on current political and economic problems. Also, do not let yourself be convinced by references to the 50's and the ensuing arguments from analogy to it. Arguments by analogy are formal logic fallacies and the reality of the 50's renders the comparison unpersuasive (even if you accept arguments by analogy as persuasive).
So let us harken back to the America of the 50's. It was a time of great prosperity, at least for white America. For blacks and immigrants from other countries, it was still a very unfriendly place. The civil rights movement was in full swing though. Martin Luther King, Jr. was advocating for minority and black rights and white America was finally taking notice and allowing the underclasses the freedom to join in the prosperity of white America. But such social progress was fitful and was often times underscored by violence. Also, America was indeed prospering economically, but the reason for this has as much to do with the end of World War II than it did any virtue of the politics of the era. After all, at the end of World War II, Europe was a bombed out mess, Japan had been nuked, and the cold war between the two largest economies that were not destroyed by the war (the USA and the USSR) was just heating up. This meant that, in the western world, only the USA was left as a provider and manufacturer of goods for a rapidly rebuilding and healing Europe. Once the 60's were over and Europe and Japan were beginning to reach parity with the USA in manufacturing and business, the economy tanked. There were a variety of reasons, the 1973 oil crisis, the failure of the Bretton Woods method of monetary management; but overlooked among these reasons usually is the fact that the USA suddenly had competition from the rest of the world in manufacturing. This competition put strong downward pressure on wages. Manufacturers started to fail all over the USA, unable to compete with the new competition from abroad. It was not till the Reagan era and the Thatcher era that the old system was junked, that taxes were lowered, that capital markets were opened up, that the economy really turned around.
So now let us deal with the Republican's vision of the 50's. As I said above, they laud the 50's for its stable families, prosperity and family values. But as I point out above, this safety and stability only existed if you were white (and since most Republicans are white, it gives them a skewed perspective on events). Also worth noting was the divorce system of that era was a fault based system. You had to have a real demonstrable reason to divorce someone, not liking the person anymore just wouldn't cut the mustard. While courts would rarely force two people to stay together if they no longer wanted to, they did not make it easy for them either. The end result is that, under the veneer of the happy family and lower divorce rate, was a seedier reality. Realities like couples staying together because they couldn't afford a lawyer to gin up a proper at fault reason for them to divorce, or spousal abuse and spousal rapes going unreported because a paternalistic society tended to ignore the complaints made by women. The family may have looked happy from the outside, but the reality was often much grimmer. Regardless, holding the 50's up as some paragon of family values misses the point entirely. The society of the time was just very good at hiding its problems.
The Democrats' view of this era is equally specious. They laud the powerful unions, the high tax rates on the rich and the prosperity of the nation at that time. Presumably, they use it as a model for their current tax and spend agenda. What they ignore is that it was only because of the unique properties of that era that expensive labor, high taxes and unionization didn't bankrupt the nation. As I said above, after WWII, the USA was the only first world nation (other than the USSR) that still had a manufacturing base and healthy economy. The result was that we provided the goods that allowed Europe and Japan to rebuild. Once they had rebuilt, and our industries had to compete on the open market, many of them failed. When they failed, the confiscatory tax rates on the wealthy overly burdened the economy and slowed our recovery. The reality was then, and still is now, that high taxes, organized labor and statist policies bankrupt the nation and make our products uncompetitive on the world market. They only were able to flourish because we had no competition. A reality that no longer exists.
So, in short, let us stop harkening back to the 50's as some sort of model for modern America. Except as a cautionary tale, it has absolutely no relevance on current political and economic problems. Also, do not let yourself be convinced by references to the 50's and the ensuing arguments from analogy to it. Arguments by analogy are formal logic fallacies and the reality of the 50's renders the comparison unpersuasive (even if you accept arguments by analogy as persuasive).
Tuesday, April 9, 2013
Thatcher, and the Beauty of Smaller Government
This week a legend in British Politics passed away. Margaret Thatcher died on April 8th from a stroke after a long decline in health that limited her public appearances in the last years of her life. Perhaps second only to Winston Churchill in modern British Politics, Mrs. Thatcher's influence and impact is unquestionable. She took office in 1979, during a time of great political unrest in Britain. Unions had taken over, the top tax rate was a confiscatory 83%, inflation had reached double digits, public expenditures were 42% of British GDP and the British government accounted for 30% of the work force. The previous two Labour governments lead By Messrs. Heath and Wilson had tipped political power so far towards the unions that the popular consensus of the time was that Britain was ungovernable.
To right the proverbial sinking ship, Mrs. Thatcher took on the unions, lowered taxes (from the above mentioned 83% to 40%), privatized loss leading government run industries and tightly controlled the monetary supply to battle inflation. Her actions likely saved Britain from bankruptcy, and certainly turned the economy around. Under her care, Britain moved from being the 6th largest world economy to 4th largest; and this during a time when most economies were expanding (in most cases, because they followed a similar small government approach).
While this is interesting from a historical perspective, it serves as a good example and a good reminder to current world governments that the path to economic expansion is well known. We may live in different times than Mrs. Thatcher governed, but there are certain undeniable parallels. First, governments have expanded markedly, so has government debt, and the entire banking system has become a ward of the various states. Unions' pay packages, benefits and pensions have grown beyond what most Americans earn in the free market. More over, those pensions are beginning to bankrupt state governments (at least here in America). Instead of raising taxes, we have resorted to deficit spending and printing money to finance the excesses of our governments. This has lead us to a period of persistent unemployment, the lowest labor participation rate since 1979 (the year Mrs. Thatcher took office) and high levels of underemployment. Meanwhile current governments are flailing around unable, or unwilling, to do what is needed to right the ship.
The modern era could well use a Margaret Thatcher. We need a charismatic leader to step in, be the adult in the room, and give our economies and politics the medicine they need. We need someone to take on the public employee unions that are bankrupting us and draining money away from infrastructure projects that would better grow our economy in the long run. We need someone to take on the tax and spend cultures that have invaded the modern first world. Someone to come in and let the citizens keep more of their paychecks to stimulate the economy with. We need someone to instill tighter fiscal policies on our various central banks so that we stop debasing our currencies and penalizing savers. We need someone to privatize the banking system again, cutting off access to the central banks' borrowing windows to investment firms (reinacting Glass-Steagall here in the US would be a good way to do this, ditto ending too big to fail). In short, we could use a dose of Thatcherism in the modern era.
Here is a clip of the Iron Lady lambasting Labour for harping on a wage gap while ignoring the increase in welfare of the poorest members of Britain.
http://youtu.be/okHGCz6xxiw
Here is a bonus quote from the Iron Lady on the profligacy of Socialist governments: "Socialist governments traditionally do make a financial mess. They always run out of other people's money."
To right the proverbial sinking ship, Mrs. Thatcher took on the unions, lowered taxes (from the above mentioned 83% to 40%), privatized loss leading government run industries and tightly controlled the monetary supply to battle inflation. Her actions likely saved Britain from bankruptcy, and certainly turned the economy around. Under her care, Britain moved from being the 6th largest world economy to 4th largest; and this during a time when most economies were expanding (in most cases, because they followed a similar small government approach).
While this is interesting from a historical perspective, it serves as a good example and a good reminder to current world governments that the path to economic expansion is well known. We may live in different times than Mrs. Thatcher governed, but there are certain undeniable parallels. First, governments have expanded markedly, so has government debt, and the entire banking system has become a ward of the various states. Unions' pay packages, benefits and pensions have grown beyond what most Americans earn in the free market. More over, those pensions are beginning to bankrupt state governments (at least here in America). Instead of raising taxes, we have resorted to deficit spending and printing money to finance the excesses of our governments. This has lead us to a period of persistent unemployment, the lowest labor participation rate since 1979 (the year Mrs. Thatcher took office) and high levels of underemployment. Meanwhile current governments are flailing around unable, or unwilling, to do what is needed to right the ship.
The modern era could well use a Margaret Thatcher. We need a charismatic leader to step in, be the adult in the room, and give our economies and politics the medicine they need. We need someone to take on the public employee unions that are bankrupting us and draining money away from infrastructure projects that would better grow our economy in the long run. We need someone to take on the tax and spend cultures that have invaded the modern first world. Someone to come in and let the citizens keep more of their paychecks to stimulate the economy with. We need someone to instill tighter fiscal policies on our various central banks so that we stop debasing our currencies and penalizing savers. We need someone to privatize the banking system again, cutting off access to the central banks' borrowing windows to investment firms (reinacting Glass-Steagall here in the US would be a good way to do this, ditto ending too big to fail). In short, we could use a dose of Thatcherism in the modern era.
Here is a clip of the Iron Lady lambasting Labour for harping on a wage gap while ignoring the increase in welfare of the poorest members of Britain.
http://youtu.be/okHGCz6xxiw
Here is a bonus quote from the Iron Lady on the profligacy of Socialist governments: "Socialist governments traditionally do make a financial mess. They always run out of other people's money."
Wednesday, March 27, 2013
Modern Feudalism
One of the advantages of modern society is the apparent freedom that we all enjoy. We can move freely between states (or provinces, depending on where you live) and relatively freely between countries. We can even move to another country, buy property and permanently immigrate there (following the laws of both countries governing such movements). We can work in whatever profession we prefer and spend our money as we see fit. In many ways we live in a very fortunate time.
In political theory arenas, our current system is called capitalism. The belief that the free flow of capital and labor lead to the best possible allocation of resources. In order to achieve this free flow of labor and capital we allow for private ownership of property. It is, however, important to remember that this was not always the case. The idea of private ownership of property and capital is a relatively new one. Capitalism, our modern system, grew out of the feudal system.
In the dark ages, all land was owned by the liege lord, who ruled through what was believed to be a divine right. The king was the chosen of god, and owned all property. He then divided up his lands among his subordinates, his lords, to rule the various parts of his kingdoms. These lords had vassals, and the vassals ran local towns. The common folk were viewed as being tied to the land they were born in, and worked for their own sustenance and the sustenance of their liege lords. Free flow of labor was not allowed, and the liege lord had absolute power over his particular fiefdom. The people provided labor and goods to the lord, the lord then provided for military and police protections to the citizens.
As society developed, professions did as well. Farming communities began specializing their labor to better use their time. Millers, coopers, black smiths and many other professions developed and improved society. As the professions developed and formed guilds, and these guilds started controlling larger and larger amounts of money. They became a second class that existed between the lords and the farmers. A middle class of professionals who lived in cities and worked for money. As this portion of the economy grew, the traditional lords, who were dependent on the money of the middle class and the population of the lower class to maintain its military and police powers, found themselves subordinate to the middle class. This lead to all sorts of class struggles. The end result was the old feudal system gave way to representative democracy, where the rulers who controlled the military and police powers of the state, were controlled by elected officials beholden to the general public.
The one constant between feudal times and current ones is the means by which the state, or liege lords, collected their due of the fruits of the labors of the general population. This is through taxes. In feudal times, farmers gave part of their crops to the lord and, in war times, they were expected to show up and be armed as part of the levies that defended the kingdom. Once the middle class developed, they paid their lord in the form of a percentage of profits, and rent on the land they were using for their businesses (all lands being owned by their liege lord). In the modern era, we pay our governments a portion of our salaries, property taxes and a variety of other taxes that have been dreamed up over the intervening years. Also, in times of war, people may still be "drafted" into the military to help defend their country and its interests.
So, now that we have gotten the history lesson out of the way, you may be wondering what the point of this article is. My point is to show how little has actually changed in the ensuing years. During the feudal era, the populace was kept in line and tied to the land by the liege lord. In the modern era, we are no longer tied to a particular state, but we are still controlled by whatever state we choose to live in. We may now have a say in government by being allowed to vote on who represents us. But given the cost and complexity of the modern political process, these contests are fought between professional candidates backed by entrenched political parties. We get two, maybe three, choices for any office, all of whom are controlled by their respective political parties. The parties are themselves heavily invested in the system that gives them power, that lets them exert control on the general populace. So while we can steer government to some degree, our actual power to change the system is quite small. More over, our current government still has the ability to call us into serve the military through the general draft. The draft is, after all, not so different from calling in the feudal levies. Worse, the modern government of a first world nation has unprecedented powers in running the lives of its populace. Feudal lords did not run schools or control the curriculum of what was taught to their subjects. The only indoctrination was done by the church, and then only on the sabbath. They couldn't monitor their subjects with a networked system of cameras in feudal times either. The tools by which government exerts control over us now were unheard of and unimagined during the feudal era. The one key difference, and it is a large difference, is that these powers are held in check by our ability to vote public officials out of office. This helps to avoid the worst abuses that such a system could be used for. A power not enjoyed by those who lived in the feudal era. It still does not change the fact that our modern, enlightened. governments exert much greater control over all aspects of our lives than the feudal one did on its subjects.
This is why I call this article modern feudalism. In the modern era we are still viewed by our governments as a mere source of revenue. We are subject to an unprecedented amount of taxes. Our hopes and dreams are only important to our liege lords on election day. Our powers too weak and disparate to enact true change and remove entrenched interests from the reins of power. We may have inalienable rights, but we have many less freedoms now than we did back then. The one key difference is that we have rights now. There are political ramifications for intruding on them. So the worst abuses of the populace of the feudal era (and the sexual liberties that the authorities took with their subjects) are no longer problems. Instead we live in a whole new world of government monitoring and government control of our actions. So the liberties that the government does take, it does so on a much larger scale. This is modern feudalism.
In political theory arenas, our current system is called capitalism. The belief that the free flow of capital and labor lead to the best possible allocation of resources. In order to achieve this free flow of labor and capital we allow for private ownership of property. It is, however, important to remember that this was not always the case. The idea of private ownership of property and capital is a relatively new one. Capitalism, our modern system, grew out of the feudal system.
In the dark ages, all land was owned by the liege lord, who ruled through what was believed to be a divine right. The king was the chosen of god, and owned all property. He then divided up his lands among his subordinates, his lords, to rule the various parts of his kingdoms. These lords had vassals, and the vassals ran local towns. The common folk were viewed as being tied to the land they were born in, and worked for their own sustenance and the sustenance of their liege lords. Free flow of labor was not allowed, and the liege lord had absolute power over his particular fiefdom. The people provided labor and goods to the lord, the lord then provided for military and police protections to the citizens.
As society developed, professions did as well. Farming communities began specializing their labor to better use their time. Millers, coopers, black smiths and many other professions developed and improved society. As the professions developed and formed guilds, and these guilds started controlling larger and larger amounts of money. They became a second class that existed between the lords and the farmers. A middle class of professionals who lived in cities and worked for money. As this portion of the economy grew, the traditional lords, who were dependent on the money of the middle class and the population of the lower class to maintain its military and police powers, found themselves subordinate to the middle class. This lead to all sorts of class struggles. The end result was the old feudal system gave way to representative democracy, where the rulers who controlled the military and police powers of the state, were controlled by elected officials beholden to the general public.
The one constant between feudal times and current ones is the means by which the state, or liege lords, collected their due of the fruits of the labors of the general population. This is through taxes. In feudal times, farmers gave part of their crops to the lord and, in war times, they were expected to show up and be armed as part of the levies that defended the kingdom. Once the middle class developed, they paid their lord in the form of a percentage of profits, and rent on the land they were using for their businesses (all lands being owned by their liege lord). In the modern era, we pay our governments a portion of our salaries, property taxes and a variety of other taxes that have been dreamed up over the intervening years. Also, in times of war, people may still be "drafted" into the military to help defend their country and its interests.
So, now that we have gotten the history lesson out of the way, you may be wondering what the point of this article is. My point is to show how little has actually changed in the ensuing years. During the feudal era, the populace was kept in line and tied to the land by the liege lord. In the modern era, we are no longer tied to a particular state, but we are still controlled by whatever state we choose to live in. We may now have a say in government by being allowed to vote on who represents us. But given the cost and complexity of the modern political process, these contests are fought between professional candidates backed by entrenched political parties. We get two, maybe three, choices for any office, all of whom are controlled by their respective political parties. The parties are themselves heavily invested in the system that gives them power, that lets them exert control on the general populace. So while we can steer government to some degree, our actual power to change the system is quite small. More over, our current government still has the ability to call us into serve the military through the general draft. The draft is, after all, not so different from calling in the feudal levies. Worse, the modern government of a first world nation has unprecedented powers in running the lives of its populace. Feudal lords did not run schools or control the curriculum of what was taught to their subjects. The only indoctrination was done by the church, and then only on the sabbath. They couldn't monitor their subjects with a networked system of cameras in feudal times either. The tools by which government exerts control over us now were unheard of and unimagined during the feudal era. The one key difference, and it is a large difference, is that these powers are held in check by our ability to vote public officials out of office. This helps to avoid the worst abuses that such a system could be used for. A power not enjoyed by those who lived in the feudal era. It still does not change the fact that our modern, enlightened. governments exert much greater control over all aspects of our lives than the feudal one did on its subjects.
This is why I call this article modern feudalism. In the modern era we are still viewed by our governments as a mere source of revenue. We are subject to an unprecedented amount of taxes. Our hopes and dreams are only important to our liege lords on election day. Our powers too weak and disparate to enact true change and remove entrenched interests from the reins of power. We may have inalienable rights, but we have many less freedoms now than we did back then. The one key difference is that we have rights now. There are political ramifications for intruding on them. So the worst abuses of the populace of the feudal era (and the sexual liberties that the authorities took with their subjects) are no longer problems. Instead we live in a whole new world of government monitoring and government control of our actions. So the liberties that the government does take, it does so on a much larger scale. This is modern feudalism.
Friday, March 8, 2013
The Problem With Data
In the modern world, where much of all human interaction is stored and recorded in some way on computers, data about every aspect of our lives is available for public consumption in ways that, even a generation ago, we never thought was possible. This creates problems, first for society, and second, for the individual. For society, because there is no consensus on what is the proper use for this data (morally and ethically speaking), and no consensus over what, if any, laws we should enact to govern the use of this data. For the individual, because he or she does not always know, or is aware of, what data is being shared about themselves publicly and what that data is being used for. The end result has been that many people are surprised to learn what advertisers, or even employers, are able to find out about them through data mining.
For a practical discussion of this, let's look at Facebook. Facebook, for those who have spent the last decade in an arctic wilderness devoid of internet accessibility, is a social web site where people create pages about themselves and their lives and share them with their friends. At first this started as just a social networking site. As the company behind it grew, it started adding advertising, games, marketing, and other features to capitalize on its user base. Today Facebook data mines all the posts and pictures people put on it to bombard them with targeted advertising. It is so good that based on benign information you share, it can tell very intimate things about you. For example this article: http://www.forbes.com/sites/kashmirhill/2012/02/16/how-target-figured-out-a-teen-girl-was-pregnant-before-her-father-did/.
More alarmingly, employers and health insurance providers have begun buying your purchasing habits from credit card companies and major retailers in order to monitor whether or not you are living a healthy lifestyle. They believe this is a necessary step in keeping medical costs down and keeping people healthy and productive. It also gives them the ability to target wellness programs to benefit both themselves and, presumably, the employees. The counter argument is that this breaks the boundary between one's personal and professional lives and is a violation of an employee's privacy. See this article: http://www.marketwatch.com/story/is-your-company-watching-your-weight-2013-02-25.
But the reality is, based on available information, employers are able to learn a lot more about you than previous generations. There are also some fairly significant legal issues that go along with adopting such policies, and both employers and employees should be wary of trodding on the rights of people protected by various laws (think Americans with Disabilities Act, hostile work place and discrimination suits).
The end result is that we already have to worry about embarrassing Facebook posts or pictures keeping people from getting jobs, employers targeting employees for health counseling based on purchasing habits, or even employers making adverse employment decision about people based on data mining. The future could get even less private with employers monitoring all aspects of employees' lives to help them be more productive employees. If you hate a boss who micromanages your work, how will you feel when he or she micromanages your personal life, purchasing decisions and even dietary choices? The result of unregulated data usage could very well lead to just such a result. How long before employers can monitor your every move through your cell phone? It already logs your position with GPS and tower triangulation, and your activity based on accelerometers and G-meters.
The end result is that, as technology matures and innovations are made, we as a country (or as a world really) need to create clear legal frameworks for the use of this new world of freely available data. If a society decides that the division between public and private, professional and social, are divisions that should be nurtured, it will need to create a regulatory structure that fosters such results. Otherwise, the future of data mining could well lead to a pseudo Orwellian future where big brother and big employers monitor your every move. Until such framework exists, it's a good idea to be as careful as you can be about what data you are sharing.
For a practical discussion of this, let's look at Facebook. Facebook, for those who have spent the last decade in an arctic wilderness devoid of internet accessibility, is a social web site where people create pages about themselves and their lives and share them with their friends. At first this started as just a social networking site. As the company behind it grew, it started adding advertising, games, marketing, and other features to capitalize on its user base. Today Facebook data mines all the posts and pictures people put on it to bombard them with targeted advertising. It is so good that based on benign information you share, it can tell very intimate things about you. For example this article: http://www.forbes.com/sites/kashmirhill/2012/02/16/how-target-figured-out-a-teen-girl-was-pregnant-before-her-father-did/.
More alarmingly, employers and health insurance providers have begun buying your purchasing habits from credit card companies and major retailers in order to monitor whether or not you are living a healthy lifestyle. They believe this is a necessary step in keeping medical costs down and keeping people healthy and productive. It also gives them the ability to target wellness programs to benefit both themselves and, presumably, the employees. The counter argument is that this breaks the boundary between one's personal and professional lives and is a violation of an employee's privacy. See this article: http://www.marketwatch.com/story/is-your-company-watching-your-weight-2013-02-25.
But the reality is, based on available information, employers are able to learn a lot more about you than previous generations. There are also some fairly significant legal issues that go along with adopting such policies, and both employers and employees should be wary of trodding on the rights of people protected by various laws (think Americans with Disabilities Act, hostile work place and discrimination suits).
The end result is that we already have to worry about embarrassing Facebook posts or pictures keeping people from getting jobs, employers targeting employees for health counseling based on purchasing habits, or even employers making adverse employment decision about people based on data mining. The future could get even less private with employers monitoring all aspects of employees' lives to help them be more productive employees. If you hate a boss who micromanages your work, how will you feel when he or she micromanages your personal life, purchasing decisions and even dietary choices? The result of unregulated data usage could very well lead to just such a result. How long before employers can monitor your every move through your cell phone? It already logs your position with GPS and tower triangulation, and your activity based on accelerometers and G-meters.
The end result is that, as technology matures and innovations are made, we as a country (or as a world really) need to create clear legal frameworks for the use of this new world of freely available data. If a society decides that the division between public and private, professional and social, are divisions that should be nurtured, it will need to create a regulatory structure that fosters such results. Otherwise, the future of data mining could well lead to a pseudo Orwellian future where big brother and big employers monitor your every move. Until such framework exists, it's a good idea to be as careful as you can be about what data you are sharing.
Tuesday, February 19, 2013
Sweet Sequester
Currently one of the biggest news items nationally in the USA is that of the upcoming US federal budget cuts commonly referred to as sequester. Sequestration is a product of the 2011 budget deal. Part of that bill was a requirement that a bipartisan committee come up with a plan to cut the budget. If it failed, this would trigger a series of automatic budget cuts called sequestration. The result is about a 5% cut to domestic spending and a 7% cut to our military, or about an $85 billion cut from the annual budget, or about 2.3% of total government spending.
The democrats are railing against these budget cuts because they feel it will cut essential services and harm our economy. War hawk republicans are railing against the cuts because they think it will degrade our military readiness. The resulting shrieks are being replayed in both left leaning and right leaning news outlets. The irony of this is that government (many of those same politicians in fact) voted for this outcome in the first place when they approved the new debt limit deal in 2011. At that time everyone agreed that our debt was out of hand and the 60% increase in our national debt was a disgrace ($10 trillion when Bush left office to $16 trillion today). But now that they have to take the medicine they prescribed they are whining like spoiled children. It's even funnier still because both parties sabotaged the bipartisan budget negotiations by demanding things the other side would never accept.
So the question that remains is, how bad is this for our economy? On the one hand, a government budget cut tends to go directly to GDP, just as any spending cut does (either public or private). On the other hand, we have a $15 trillion GDP, so $85 billion is 0.006% (rounded up) of our GDP. Compare that to the $160 billion dollar Obama tax increase for the 2013 fiscal year, a tax increase Obama has sworn will not affect the economy at all. After all, these budget cuts are almost half the amount of new tax revenue. So if this tax increase (which typically decreases GDP the amount of the increase) won't affect the economy according to our dear leader, why such hew and cry about the smaller sequestration cut? Either he is lying about the tax increase, lying about the budget cuts, or he doesn't understand basic economics.
The real reason for this is obvious, and obviously partisan. Democrats love government spending and high taxes. They hate small government, low budgets and generally allowing anyone who is not living in abject poverty keeping the money they earn. Conversely, while republicans love smaller government (supposedly, I would be remiss in not pointing out that the Bush administration increased the budget and budget deficits as well) they are not generally fans of shrinking our military (or allowing the rest of the world govern themselves without being beholden to our military might).
So which side should we listen to? Neither. It's well known that budget cuts and tax hikes harm economic expansion. It is ludicrous and ludicrously partisan for either side to say otherwise. The silver lining on this whole turd sandwich (mixed metaphor, which should make it easier to understand for beltway insiders) is that neither the tax increase nor the budget cuts are actually large enough to make much difference. What we should be rooting for is stasis. Let both parties paralyze our government, let sequestration go through. It is the first real budget discipline I have seen out of government in my lifetime, which means that it likely will not survive. My hope is that once sequestration goes through and both parties pout like the spoiled children they are, we will see a more serious discussion about budget and tax reform. I doubt this will happen, but I can hope.
The democrats are railing against these budget cuts because they feel it will cut essential services and harm our economy. War hawk republicans are railing against the cuts because they think it will degrade our military readiness. The resulting shrieks are being replayed in both left leaning and right leaning news outlets. The irony of this is that government (many of those same politicians in fact) voted for this outcome in the first place when they approved the new debt limit deal in 2011. At that time everyone agreed that our debt was out of hand and the 60% increase in our national debt was a disgrace ($10 trillion when Bush left office to $16 trillion today). But now that they have to take the medicine they prescribed they are whining like spoiled children. It's even funnier still because both parties sabotaged the bipartisan budget negotiations by demanding things the other side would never accept.
So the question that remains is, how bad is this for our economy? On the one hand, a government budget cut tends to go directly to GDP, just as any spending cut does (either public or private). On the other hand, we have a $15 trillion GDP, so $85 billion is 0.006% (rounded up) of our GDP. Compare that to the $160 billion dollar Obama tax increase for the 2013 fiscal year, a tax increase Obama has sworn will not affect the economy at all. After all, these budget cuts are almost half the amount of new tax revenue. So if this tax increase (which typically decreases GDP the amount of the increase) won't affect the economy according to our dear leader, why such hew and cry about the smaller sequestration cut? Either he is lying about the tax increase, lying about the budget cuts, or he doesn't understand basic economics.
The real reason for this is obvious, and obviously partisan. Democrats love government spending and high taxes. They hate small government, low budgets and generally allowing anyone who is not living in abject poverty keeping the money they earn. Conversely, while republicans love smaller government (supposedly, I would be remiss in not pointing out that the Bush administration increased the budget and budget deficits as well) they are not generally fans of shrinking our military (or allowing the rest of the world govern themselves without being beholden to our military might).
So which side should we listen to? Neither. It's well known that budget cuts and tax hikes harm economic expansion. It is ludicrous and ludicrously partisan for either side to say otherwise. The silver lining on this whole turd sandwich (mixed metaphor, which should make it easier to understand for beltway insiders) is that neither the tax increase nor the budget cuts are actually large enough to make much difference. What we should be rooting for is stasis. Let both parties paralyze our government, let sequestration go through. It is the first real budget discipline I have seen out of government in my lifetime, which means that it likely will not survive. My hope is that once sequestration goes through and both parties pout like the spoiled children they are, we will see a more serious discussion about budget and tax reform. I doubt this will happen, but I can hope.
Wednesday, February 6, 2013
The Beast Whose Appetite is Never Sated
Now that we as a nation are done with our fight over taxes (the expiration of the Bush tax cuts) with Republicans having capitulated to the Democrats' demands for more revenue, we can lie back, relax, and let the economy recover without further destabilizing government intrusions... HA! HA! HA! HA! HA! HA! HA! HA!... Didn't know this was a humor blog did you?
No, we are now dealing with the imminent federal budget cuts called sequestration. And shock and awe, the Democrats, lead by our dear leader Obama, are saying that any deal to avert the budget cuts must include... Drum roll please... MORE REVENUE! Who would have thunk it? Turns out that the increase in taxes from Obama Care, the increased taxes in the budget deal, and the increased taxes from letting previous payroll tax cuts expire is not enough new revenue for the Democrats. Nope, they want even more tax revenue. And in typical jack ass, I mean donkey (the symbol of the Democratic party; see, it IS a humor blog), behavior, they are leaving the details up to the Republicans. After all, why get your fingerprints on the evidence of yet more theft from the US tax payers? Fortunately, the Republicans have responded to this appropriately by telling the Democrats to come up with their own deal and that new revenues are off the table (a more appropriate response than what I would have told them).
Lets hope that the Republicans have learned their lesson from the Bush tax cut expiration. Lets hope that this time they will stay united as a party and use the sequestration as the bludgeoning tool it was designed to be to force Democrats to come to the table and actually deal with our budget woes. I won't be holding my breath for this. In all likelihood, neither party will get the other to agree to anything, and sequestration budget cuts will occur as planned. At this point, we should be happy if any fiscal discipline occurs at all.
And this leads me to my greater point, the source of the title of this article, namely that it should now be clear to everyone that no amount of new revenue will ever satisfy the appetites of the left. Or, as Margarette Thatcher once famously said: "Socialist governments traditionally do make a financial mess. They always run out of other peoples' money." To this I would add, that they are always hungry for more. The left has all sorts of grand plans for US tax payers' earnings, but letting us keep them are not among them.
This is why I think it is important for the Republican party to embrace the sequestration budget cuts and use it as a bludgeoning tool against the ravenous left. The left has shown themselves incapable of even a minute amount of budgetary discipline, thus it must be imposed upon them. Because if it is not, this country will become just another bloated first world country with high unemployment, high deficits and be on the verge of economic collapse when international bond markets stop buying our debt.
This will not be an easy task. I fully expect the democrats to pull the old "Think of the children!" histrionics. Be prepared for countless remonstrations about how sequestration will starve the hungry, throw women and children on the streets, and generally do all sorts of horrible things. It will be up to the Republicans to come together as a party and make the case that without sequestration or other budget cuts, our country will be in even worse shape (i.e. we are courting Grecian style economic collapse). Who knows how that debate will come out.
No, we are now dealing with the imminent federal budget cuts called sequestration. And shock and awe, the Democrats, lead by our dear leader Obama, are saying that any deal to avert the budget cuts must include... Drum roll please... MORE REVENUE! Who would have thunk it? Turns out that the increase in taxes from Obama Care, the increased taxes in the budget deal, and the increased taxes from letting previous payroll tax cuts expire is not enough new revenue for the Democrats. Nope, they want even more tax revenue. And in typical jack ass, I mean donkey (the symbol of the Democratic party; see, it IS a humor blog), behavior, they are leaving the details up to the Republicans. After all, why get your fingerprints on the evidence of yet more theft from the US tax payers? Fortunately, the Republicans have responded to this appropriately by telling the Democrats to come up with their own deal and that new revenues are off the table (a more appropriate response than what I would have told them).
Lets hope that the Republicans have learned their lesson from the Bush tax cut expiration. Lets hope that this time they will stay united as a party and use the sequestration as the bludgeoning tool it was designed to be to force Democrats to come to the table and actually deal with our budget woes. I won't be holding my breath for this. In all likelihood, neither party will get the other to agree to anything, and sequestration budget cuts will occur as planned. At this point, we should be happy if any fiscal discipline occurs at all.
And this leads me to my greater point, the source of the title of this article, namely that it should now be clear to everyone that no amount of new revenue will ever satisfy the appetites of the left. Or, as Margarette Thatcher once famously said: "Socialist governments traditionally do make a financial mess. They always run out of other peoples' money." To this I would add, that they are always hungry for more. The left has all sorts of grand plans for US tax payers' earnings, but letting us keep them are not among them.
This is why I think it is important for the Republican party to embrace the sequestration budget cuts and use it as a bludgeoning tool against the ravenous left. The left has shown themselves incapable of even a minute amount of budgetary discipline, thus it must be imposed upon them. Because if it is not, this country will become just another bloated first world country with high unemployment, high deficits and be on the verge of economic collapse when international bond markets stop buying our debt.
This will not be an easy task. I fully expect the democrats to pull the old "Think of the children!" histrionics. Be prepared for countless remonstrations about how sequestration will starve the hungry, throw women and children on the streets, and generally do all sorts of horrible things. It will be up to the Republicans to come together as a party and make the case that without sequestration or other budget cuts, our country will be in even worse shape (i.e. we are courting Grecian style economic collapse). Who knows how that debate will come out.
Friday, January 25, 2013
Currency War
For the past few years the US and other nations have accused China of currency manipulation. What they are talking about is China buying US government debt (aka buying dollars) to prop up the value of the dollar and keep their currencies deflated. How does this work? When governments' buy US debt they do it in dollars. Since only the US government may print dollars, these governments must buy dollars with their own currency. This decreases the supply of dollars in global circulation and increases the amount of their currency in circulation. When demand increases and supply decreases, costs go up. In this case it is the cost of buying that currency, i.e. the exchange rate. Conversely, the value of the country's own currency (the currency used to buy dollars) decreases.
Why is this a problem? When a country devalues its own currency it makes its products relatively less expensive in foreign markets because it now costs fewer dollars to reach the purchase price in the foreign currency. This makes the foreign goods more attractive to the consumers in those countries. It instantly makes these foreign goods and services more competitive. Unfortunately, this also means that the citizens purchasing power of US made goods decreases, since their earnings are in the now devalued currency. So a currency manipulator lowers the purchasing power of its own citizens, but promotes local business and employment over foreign ones. Devaluing currency leads to inflation as foreign goods' values go up and local industries see they can raise prices without losing competitiveness with their foreign rivals. This is why economists refer to inflation as a hidden tax. Governments' intentionally lowering the purchasing power of their own citizens to promote local business and job growth is very similar to taxing citizens and giving that money to local businesses. The only difference is that in the case of currency manipulation you get the added benefit of hurting foreign competitors.
Sounds like a great way to promote local industry then doesn't it? That is why countries like China find it so attractive. Unfortunately, there is one drawback, it is exceedingly obvious when a country starts playing with its monetary supply to manipulate its exchange rates. The end result is that other countries will take retaliatory measures. This leads to a currency value war. Before international markets for currencies it was more common to accomplish these tasks by taxing foreign goods, so called tariffs. However, since the Great Depression tariffs are deeply unpopular among economists because of their role in worsening the Great Depression. The damage that was sparked by the Smoot Hawley Tariff Act of 1930, which caused our trading partners to pass retaliatory tariffs, crippled international trade. This is also why "free trade" deals have become so popular. We know the damage a trade war can do.
The problem is, with the global economy stagnating, it is becoming exceedingly popular for countries to manipulate their currencies to gain an advantage over their trading partners. This is leading to retaliatory measures. Example: China manipulates its currency, we print a ton of money swamping world markets with dollars. Second Example: Japan, a country with a relatively stable and strong currency has seen the value of their money increase, incentivising international investors to buy their currency, creating a self reinforcing spiral where the value of the currency keeps going up. This then causes deflation in Japan and leads to its economic stagnation (not the only reason for Japan's two decades of economic stagnation). Japan has now pledged to devalue their currency in response to regain their competitive edge.
Some Opinion pieces have recently asked if a global currency war is on the horizon. I would argue we have been in the midst of one since the beginning of the great recession of 2007 and 2008. This is likely also a factor in why the global economy is stagnating. Like Smoot Hawley in 1930, modern currency manipulation is harming international trade and competitiveness. It is too easy for a government to print money to pay its bills instead of cutting its budgets and harming its entitlements in economic downturns. That it acts as an invisible tax on its citizens doesn't bother politicians because the average citizen doesn't realize it. Because they don't have to pay their governments anything, they don't know they have any reason to complain. Meanwhile the damage to the international economy continues unabated.
Why is this a problem? When a country devalues its own currency it makes its products relatively less expensive in foreign markets because it now costs fewer dollars to reach the purchase price in the foreign currency. This makes the foreign goods more attractive to the consumers in those countries. It instantly makes these foreign goods and services more competitive. Unfortunately, this also means that the citizens purchasing power of US made goods decreases, since their earnings are in the now devalued currency. So a currency manipulator lowers the purchasing power of its own citizens, but promotes local business and employment over foreign ones. Devaluing currency leads to inflation as foreign goods' values go up and local industries see they can raise prices without losing competitiveness with their foreign rivals. This is why economists refer to inflation as a hidden tax. Governments' intentionally lowering the purchasing power of their own citizens to promote local business and job growth is very similar to taxing citizens and giving that money to local businesses. The only difference is that in the case of currency manipulation you get the added benefit of hurting foreign competitors.
Sounds like a great way to promote local industry then doesn't it? That is why countries like China find it so attractive. Unfortunately, there is one drawback, it is exceedingly obvious when a country starts playing with its monetary supply to manipulate its exchange rates. The end result is that other countries will take retaliatory measures. This leads to a currency value war. Before international markets for currencies it was more common to accomplish these tasks by taxing foreign goods, so called tariffs. However, since the Great Depression tariffs are deeply unpopular among economists because of their role in worsening the Great Depression. The damage that was sparked by the Smoot Hawley Tariff Act of 1930, which caused our trading partners to pass retaliatory tariffs, crippled international trade. This is also why "free trade" deals have become so popular. We know the damage a trade war can do.
The problem is, with the global economy stagnating, it is becoming exceedingly popular for countries to manipulate their currencies to gain an advantage over their trading partners. This is leading to retaliatory measures. Example: China manipulates its currency, we print a ton of money swamping world markets with dollars. Second Example: Japan, a country with a relatively stable and strong currency has seen the value of their money increase, incentivising international investors to buy their currency, creating a self reinforcing spiral where the value of the currency keeps going up. This then causes deflation in Japan and leads to its economic stagnation (not the only reason for Japan's two decades of economic stagnation). Japan has now pledged to devalue their currency in response to regain their competitive edge.
Some Opinion pieces have recently asked if a global currency war is on the horizon. I would argue we have been in the midst of one since the beginning of the great recession of 2007 and 2008. This is likely also a factor in why the global economy is stagnating. Like Smoot Hawley in 1930, modern currency manipulation is harming international trade and competitiveness. It is too easy for a government to print money to pay its bills instead of cutting its budgets and harming its entitlements in economic downturns. That it acts as an invisible tax on its citizens doesn't bother politicians because the average citizen doesn't realize it. Because they don't have to pay their governments anything, they don't know they have any reason to complain. Meanwhile the damage to the international economy continues unabated.
Wednesday, January 16, 2013
More Gun Control Nonsense
So
today we hear from the President announcing the results of his colloquium on
gun control. He invokes the Newtown shooting and many others as justification
for the curtailment of civil liberties involving guns. He essentially said,
"THINK OF THE CHILDREN!" and proposed a series of gun control
measures. It was pure appeal to emotion and not an appeal to reason. It is the
sort of crap that the media and gun control liberals eat up, but infuriates
opposition such as the NRA and its members. And while preventing another mass
shooting tragedy is a laudable goal, I am not convinced that any of the
president's proposals accomplish this. As I said earlier when I critiqued the
Feinstein plan, blanket bans are not effective. The reason sounds pithy, but
isn't. Namely, that criminals don't follow the laws and don't buy guns legally.
Schools, movie theaters, malls and the like are targeted by psychopaths because
they are typically "gun free" zones full of easy targets. Unless you
do something to better protect these soft targets, you will see more mass
shootings.
So
what are the president's proposals you ask? They are as follows (note, since he
just announced this, not all the details are known at this point):
So let’s
start from the top. Background checks. This proposal is not that bad
honestly. If the goal is to get guns out of the hands of psychopaths, then
doing some rudimentary background checks to make sure the person trying to
buy a gun is not, in fact, a psychopath makes sense. My fear here is
implementation. What will the government be monitoring, who will be black
listed from buying guns? There is potential here for great abuse depending on
how narrowly the government defines the category of people who can and cannot
buy guns legally.
Next,
the ban on certain weapons. I have dealt with this before in the Feinstein
bill. Banning guns based on their appearance is silly. It is one thing if
these weapons were somehow more effective than standard hunting rifles, but
they aren't. All guns are made for one purpose, shooting bullets. While they
remain capable of doing this, they are deadly. But then, that's the purpose
of a gun. If they fired NERF foam darts, they would be ineffective at their
primary goals of hunting, home and personal protection. This is made even
more laughable by the following ban on armor piecing rounds, bullets that are
ACTUALLY more dangerous.
Ten
round limit on magazines. This also seems stupid to me. What exactly is the
criterion that makes 11 bullets too deadly but 10 OK? The answer? There is
none. The purpose is to make it hard for people to shoot a ton of rounds
before having to stop and reload. Unfortunately, as recent tragedies have
shown, people going on rampages carry multiple magazines, multiple weapons
and sometimes (in the case of the CO shooter) bombs as well as guns (though
his bombs were used to booby trap his apartment and not in his mass killing
spree). So all this ban accomplishes is (assuming the offending clip sizes
magically disappear if/when the ban is implemented) making psychopaths carry
multiple clips or multiple weapons (things they already do anyway).
Amor
piercing bullet ban. This makes some sense. While victims of mass shootings
typically are not wearing bullet proof vests when they are attacked, the
police who respond to the shootings usually are. And while I have no
illusions that this will stop the next tragedy from unfolding (because, as I
said, victims don’t wear bullet proof clothing) it might help protect law
enforcement. Moreover, it is a much harder argument to make that you need
full metal jacket armor piercing rounds to hunt with. Possibly for home
defense, if you assume someone invading your home will have the foresight to
wear a vest… But still, highly unlikely that there is a legitimate reason to
pack armor piercing rounds. As I said earlier, this provision is most
interesting to me because it belies the idea that certain guns are more
deadly than others.
Gun
trafficking laws. According to the press conference led by Mr. Biden and Mr.
Obama, this is aimed at stiffening the penalties on people who buy guns
legitimately in order to sell them to criminals. This, when coupled with the
federal mandate to track weapons recovered in criminal investigations, seems
like solid attempt at keeping guns out of the hands of criminals. The problem
here is that we have no details on how this will be accomplished. There is
great potential here for infractions to civil liberties and constitutional
rights. I will reserve judgment on this until I know more details.
Lastly,
the incentives to hire more officers, money for the CDC to conduct studies on
how to curb gun violence and programs to sponsor national responsible gun
ownership. These programs could well be useful, or they could be a big pile
of pork barrel spending with no purpose. It really depends on the details of
how the President and Vice President plan on implementing these programs. So
I will reserve judgment here as well.
(Note,
I am ignoring the aspect of asking congress to confirm a head to the ATF.
Confirmation processes are complex and I know nothing about the person
nominated. So I will leave it alone)
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