Mises Economics Blog
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In The Pipeline
A Poll for Republicans?
I like to read Hulk's Diary. I know, I know, I shouldn't be reading other peoples' diaries. But if you haven't seen it before, you should. READ NOW OR HULK SMASH!
Ahem. Arrr. That's better.
Hulk linked to Kevin's poll asking questions of people who vote Republican. I'm registered as a Libertarian (though I cringe a little every time I mention that; they can be worse than either major party sometimes) but historically I've voted for Republicans more often than I've voted for Democrats. So I'll answer his questions, even though he wasn't asking me.
Democrats want to establish a socialist utopia today. Republicans want to do it a few years later. They're both going in the wrong direction but the Republicans are a little slower. That's the primary reason, on balance, why I've voted for them more often.
The most direct improvement has been the tax cuts. But it's been a very mixed bag; Bush also gave us steel tariffs and farm subsidies and provoked protectionist reactions from our trading partners.
No way. They don't court my vote at all. And it costs them elections. Tom Cox, who is running for Oregon State Representative in district 29, spoiled the Oregon gubernatorial election a few years ago, tipping it to the Democrats.
I answered "no", so I'll skip this. But I think it's wrong to declare fighting terror an invalid answer merely on the odds of personally dying. By that reasoning it's also invalid for any male (meaning you, Kevin) to vote based on abortion; see the next question…
Taxes. By lowering them. My sister just bought a house and my parents aren't where they'd like to be on retirement savings. Having less of our money stolen every year is very, very helpful.
I don't know.
Just outside (sigh) of Oregon House District 29.
None of the Above
I'm not by nature a cynical person. But in politics, it's hard not to be. I have trouble believing that, given the usual quality of political candidates, people vote for anyone. I think most people vote against. "The whole pack is rotten," they think, "but I'll vote for the one that's least bad."
And the candidates are very, very bad.
Kerry lied to Congress about being in Cambodia, which wouldn't matter but for him making his military record the centerpiece of his campaign. Bush is spending money like it's going out of style, instead of addressing future government obligations. (Oops, that last one was a swipe at both parties.)
Recently, Bush annoyed me by approving federal disaster aid in response to Hurricane Charley. It's outrageous that people living in North Dakota should be forced to subsidize the residents of Florida. It only encourages people to live in more expensive areas. It's exactly like reliable government flood relief encouraging people to live on floodplains. This is what insurance is for. If you object that insurance is too expensive, maybe that's a hint that you should live somewhere else, where the real costs of living (i.e., including periodic rebuilding) are lower.
But my outrage is wasted, because Kerry would have done exactly the same thing.
I'm certain I won't be casting my vote "for" any Presidential candidate. (No, I'm definitely not voting for Badnarik.) Maybe there will be some interesting local candidates. Or maybe not — I've been gerrymandered out of Tom Cox's district.
Sigh. Two more months?
I bought a digital camera a few weeks ago in a meager attempt to catch up to modern gadgetry. I bought a Gateway DC-M42. Because it was cheap, not because I know anything about digital cameras.
I used it to take pictures at the Oregon Air Show, which I posted about a few days ago.
I also used it to take pictures at my team's quarterly event last Tuesday. See the pictures and read the story here. If you're looking for zany, it will not disappoint! :)
A Wonderful Immigration Story
Price Gouging: It's Not About Economics
In the aftermath of Hurricane Charley comes the inevitable clash over "price gouging". Florida's Attorney General Charlie Crist complained:
I found a brief description of the Florida price gouging statute on the Attorney General's site:
Laws against price gouging are politically, not economically, motivated.
The economic case in favor of price gouging is simple, compelling, and noncontroversial among economists. Indeed, after the hurricane many economists have written about the subject. Some consider it a teaching moment.
It isn't. Not at the economic level. I'll demonstrate this by briefly giving the economic case for price gouging, and then explain why the argument is unlikely to win anyone over.
"Price gouging" increases the availability of goods and services following a disaster. The ability to charge higher prices makes additional sources of supplies affordable. For example, food and construction workers from nearby unaffected areas will stream into the disaster zone because they command a higher price there than in their original areas. This effect is called arbitrage, and is distinct from (and in addition to) charitable donations.
…more supplies is a good outcome, right?
Hurricanes can be predicted well enough that the affected area is likely to be known in advance. This makes it possible to stockpile some kinds of goods. Stockpiling has the benefit of making important goods immediately available in quantity at the site of the disaster. For an area to stockpile some good represents a significant increase over its typical demand; this strains the supply chain and increases costs. Thus, stockpiling is only economically feasible if those increased costs will be met by increased revenues from selling the stockpile after the disaster. If firms cannot raise their prices after the disaster (i.e. "price gouge"), they will not stockpile before it.
…more supplies is a good outcome, right?
People will work longer hours if they're compensated with higher wages. Some people may charitably donate their extra time, but the rest require more money to overcome the disutility of labor. If the wage was right, people would be eager to work 10-, 12-, 14-hour or longer days. If laws prevent the payment of these higher wages, those extra potential hours worked are lost. It takes longer to repair the damage, with people inconvenienced in the meantime.
…faster repairs is a good outcome, right?
"Price gouging" results in a better allocation of goods and services, because the alternative is shortages. Laws against price gouging are a form of price control, a price ceiling, and any price ceiling below the market-clearing rate creates a shortage. In an unhampered market, goods are available to whoever is willing and able to pay. In a shortage, allocation is haphazard, with goods going to people who show up first, or wait in line, or have influential friends, or they may be rationed, or many other possibilities.
The unhampered market lets people communicate the urgency of their need with dollars. The most important (i.e. valuable) uses for those goods will offer the highest prices for them, bidding them away from less important uses. If potable water is scarce and therefore more expensive, water for drinking will outbid water for decorative fountains. If prices were unchanged, there would be a shortage, and while this case is intentionally so clear-cut that almost any government allocation scheme would work, most cases are not so obvious: How much water for bathing versus irrigation? The market can answer that question — do you believe the government can?
…you want goods to go toward their most urgent uses, right?
Okay, that wasn't as brief as I hoped, but it gives us more than enough to work with.
Nearly all economists believe the above arguments. They're in textbooks. If you tell an economist they're wrong, they'll look at you as if you've just told them water flows uphill or that the earth is flat.
Most laypeople think ill of price gouging, as evidenced by the popularity of politicians who rail against it. Simple ignorance of economics may explain a great part of this, but what's particularly interesting is the large class of people who are confronted by the economic arguments yet remain unpersuaded by them. My point is this: they don't believe the economic arguments are wrong, they believe they're irrelevant. And that's why no amount of economic instruction will win them over.
After a disaster, there is severe hardship. Homes have been destroyed, daily routines disrupted, and loss of life. There has been widespread and expensive property loss, and due to "price gouging" they'll have to pay even more to get their lives back to normal. In plain language, it doesn't feel right that things that are so important to so many people are so expensive. When something doesn't feel right, people look for a reason — and they identify the proximate cause, the merchants and laborers who have raised their prices. "They're profiting from my hardship! How dare they!"
The physical reality of disaster recovery is that things have been destroyed and it takes time and resources to recover. It is physically impossible to satisfy everyone's wants immediately after a disaster. That option isn't on the table. There aren't enough resources to go around. The market impact is that the things that are "so important to so many people" are expensive precisely because they're so important to so many people.
I used a phrase earlier when describing market allocation: "goods are available to whoever is willing and able to pay." This is what upsets people. Ability to pay has no relationship with need. The rich are able to outbid the poor. A poor person must spend a huge part of their income or savings (or go into debt) in order to compete with the rich. Or, they must wait until prices come back down.
This seems ethically wrong to most people because they link need with desert. This is standard altruism. Need is the source of desert. A person's need creates an ethical obligation to help them.
But whether a person is rich or poor doesn't affect their needs. People are usually considered equal, so that if a fixed amount of resources could repair one rich person's home or the homes of two poor people, it is the poor people who should get the resources. For allocating based on dollars instead of people, the market fails, by this understanding of ethics.
In addition to favoring the rich, "price gouging" is observed to increase the hardship of already-suffering people — first their homes are destroyed, then their bank accounts, too! This is reflexively viewed as people being taken advantage of by profiteering merchants. The Florida Attorney General described it as "trying to take advantage of neighbors" above. Again there is an issue of desert involved. The merchants are viewed as receiving a windfall profit they have not earned. For adding insult to injury and giving wealth to the undeserving, the market fails, by this understanding of ethics.
It is of little benefit to respond that market allocation of goods is better than government allocation, or that prices are merely a reflection of utility, or that higher prices bring about an increased supply. These things are true, but not persuasive.
The anti-capitalist mentality is rooted in altruist ethics, not in a lack of understanding of economics. Capitalism and altruism are fundamentally incompatible. Most people, faced with the choice, pick altruism. They will not be persuaded by economic arguments, because economics is derivative of politics and ethics, not the other way around.
From Carrier Pigeons to Not Carrying Pigeons
From the I-hate-the-post-office office:
The following is a true story. The participants are not actors. The names have not been changed to protect the innocent. My sister, Myra, had an unpleasant experience with the USPS:
I wish to share a little story with you all. Not because I want to freak anyone out or get anyone in trouble but I think people needs to be aware of what can happen when postal workers become lazy or simply don't want to do their job.
On August 11th 2004, around 1pm, a shipment of birds left Irvine, CA and headed to me. Because these are live birds they were shipped via the USPS Express Mail service. Normally the trip from CA to my home in Iowa takes less than 24 hours; in fact the shipper was told that the birds would arrive at my door by noon on the 12th.
Knowing my post office as I do, I anticipated the birds to arrive around 3pm. That time came and went and there were no birds. The postal carrier came and went and still no birds. At this point I used the tracking info e-mailed to me to locate the package. The last entry was on the 11th and stated only:
The 12th came and went with out any further information. Normally an express shipment will arrive in 24 hours but there are instances when it will take an extra day. This isn't unusual and I knew the birds would be fine if they were delivered at noon on the 13th. Food (seeds) and water (in lettuce) was packed in the box with the birds as always.
The 13th came and I waited. Noon came and no birds to be found. I attempt to track the package online once again only to see:
The postal carrier came by shortly after 2pm, still no birds. Now I'm really getting worried about the safety of these little creatures. They can handle being in a box for 2 days, but 3 is really pushing your luck.
With tracking number in hand I ventured down to the post office nearest to me and asked them to track it. They said it had left Des Moines and should arrive at the main post office by 4pm. I left my name, number and tracking information with the post office so they could contact me as soon as it arrived.
I resume waiting. At 4:45pm I decide to call the main post office and ask about the box. I'm told they'll look for it and call me back shortly. Thirty minutes later the post office does return my call and they can't find the box. They don't know where it was. That was about as helpful as they were willing to get. The most they were willing to do would be to have someone call me when the box did arrive.
Around 6pm I contacted a friend who works for the post office and she graciously agrees to call in to find the shipment of birds. I don't know what I would have done without her help. She found the birds and they were still in Des Moines! Apparently the day shift saw the box marked "live birds" and decided they didn't want to deal with it so they left it for the night shift. Well they didn't really want to deal with it either apparently. Never mind the fact that they were alive and they were shipped express.
My friend was able to get them on the next truck and at 10:30pm on the 13th they finally arrived in my main post office. Because it was long after the post office had closed to the public my friend went to the docks personally to retrieve the birds and brought them to my home.
Thankfully all 3 birds were alive. They were a bit dehydrated and stressed but at least they were alive.
I honestly don't know what would have happened to the birds had my friend not called in to get the birds moving again. They may have been sitting in Des Moines for another full day or longer before someone decided to move the box from the docks to the truck and let them continue on their way.
<click> <click> <clickclickclick> Yeah, I know, I know…
Oregon Air Show 2004
Time for a little photoblogging. I went to the Oregon Air Show on Saturday and took a few pictures worth sharing.
For me, "attending" the air show is automatic. I live within easy walking distance of the airport. I've had jets buzzing my house for days, practicing. :)
The Blue Angels were performing, as well as trying to sell lots of merchandise. There was a postcard for sale that I didn't need to buy, because I got this photograph that looked almost like it:
(Here's a higher quality image)
Although it's a little fuzzy, this is my favorite image:
I can post more, if there's interest.
Do the al-Sadr Chant!
Muqtada al-Sadr has been stuck in the Imam Ali Shrine for a while now. (I'm still waiting patiently for the outraged, howling denunciations of him for carrying out military attacks from a holy site — the holiest site in the Shia religion — but I think I'll be waiting a while…) Saturday he gave a speech:
Wow! That's efficient falsehood, right there. (al-Sadr and Michael Moore should be pen pals.) First of all, what's this we business? I don't remember anything about the Mehdi Army bravely fighting the Republican Guard. And this talk about the Iraqi interim government being worse than Saddam is just bizarre. But I think I can understand it! The interim government issued a warrant for his arrest, and Saddam didn't. Ergo, they're worse than Saddam for him, personally. Of course, I don't know why he expects anyone to care about that.
But this is the best part:
…… wait for it ……
<buzz> We have a winner! Congratulations, Muqtada, for carrying on the fine tradition of racist scapegoating that the rest of the world has come to expect from mideast intellectuals, politicians, religious figures, and in fact pretty much everybody. I'm not sure how his mind connects Israel to the seige he's under, but it really doesn't matter, because my eyes are already rolling.
I'll take mideast complaints seriously as soon as they have a little more substance to them than "Israel bad! Hulk smash!"
Belmont Club has been doing a fabulous job covering this. It's long past time I blogrolled it. And he has these excellent words to say about the use of holy sites for military purposes (from the first of those links):
Textbook appeasement. Give him what he wants and he'll be good. Fortunately, the commenters take him to task. (And that's on a hard-left blog; I shudder to think of the reception it would've gotten elsewhere…)
It's taken two weeks, but Michael Moore has finally responded to the Bloomington Pantagraph's complaint that he doctored images of their newspaper in Fahrenheit 9/11:
"Unfortunately off by a couple weeks"? As if it were an accident? What a Shocking! Outrageous! excuse.
I give credit to the Pantagraph for handling this so gracefully. They didn't threaten or file a lawsuit, they just wrote a letter asking for an apology and $1 in damages. But Moore won't apologize even when he's undisputably caught in a lie. He's an all-around good human being, fabulous role model, and have I mentioned trustworthy?
Campaign Finance Law vs. Free Speech
Somewhere there is a teacup, and wrongheaded laws are stirring up a little tempest therein. (Isn't that the worst thing you've ever read?)
There's a bitter fight brewing (gah! quit the imagery!) over the Swift Vets anti-Kerry ad about whether or not it runs afoul of campaign finance law:
(Link found in a tangentially-related Instapundit article.)
I have no opinion on the merit of the claim of illegality. It isn't this instance that interests me — it's the broader principle.
I remind everyone that political speech is precisely what should be most protected by the freedom of speech. Every person has the right to promulgate their political views, alone or in voluntary association with others. (Of course no one may compel the assistance of others; a right to speak is not an entitlement to be provided with a microphone and audience.)
The fact that the government has made it illegal to use certain kinds of funding for political advertisements is an obvious and obscene violation of the freedom of speech. You are no longer free to coordinate resources with others in particular ways when your goal is to influence public opinion. The government is preventing political speech when it is most influential precisely because that's when it's most influential. These laws are, without question, a species of censorship.
They are immoral, unconstitutional, and should be discarded.
I am dumb.
Note to self: If you're planning to get drunk and play scrabble — as ridiculous as that sounds — ensure one of you actually owns the game. So, ya know, you're not a total dork. It's part of that nebulous thing called "planning" you've heard of, once or twice, and get paid for doing. Yeah, that one, that's it.
P.S. I can play piano not so bad when drunk.
P.P.S. Yes, I am!!!
Involving Your Stakeholders
As a rule I've avoided writing much about Intel. But in this case I'll make an exception:
(Read the linked article for a few examples of things that haven't been going well at Intel lately.)
For the past few years employees have been hearing about a need for "operational excellence." There's always been a fair amount of snickering at that phrase, because no one (except perhaps senior management) is too sure what it means. My colleagues and I hear the message as "do your job, only, ya know, better. Somehow."
Real helpful advice, that is.
"Oh! Now I see! I was operating, but not excellently. So all I have to do to improve my performance is to… be excellent!" Bill and Ted would be proud.
I have two anecdotes to share. I can't be too specific about them, but I believe the contrast between them is illustrative of what operational excellence ought to be about, and the sort of concrete advice management should be giving us.
I'm involved in planning some processor debug technologies that have a several-year lead time. The amount of work is significant, and is currently being done by a cross-organizational team of three: one from design, one from presilicon validation, and one from postsilicon validation.
The other case is a group working on tools used by manufacturing and for some debug purposes. The group had reduced the importance of one aspect of the tool without the knowledge of their customers, to whom it was very important. This mismatch was ultimately discovered and was an unpleasant surprise to everyone involved.
What's the contrast? The level of involvement of the stakeholders.
In the first case, postsilicon validation is the primary customer, and is actively involved in architecting the tool. This matters; limitations that presilicon thought were no big deal have been overturned by postsilicon as an unacceptable burden. It had to be done at this stage — it couldn't have been changed later without great difficulty.
The second case is an example of poor communication with stakeholders. If plans had been clearly communicated at the beginning, the customers could have said "that's insufficient" right away, and that group's plans could have been changed at that time. Hopefully, with minimal impact on other groups. As it is, the plans of several groups may be affected until the newly-reemphasized aspect of the tool is delivered. The longer until a problem is discovered, the more costly it is to fix.
Lesson: talk to your stakeholders. Keep them informed of your plans, and especially to changes in your plans. Ask them how proposed changes will affect them. Even better, involve them directly in your planning. It is the individual responsibility of each group to check on the other to ensure requirements are clearly understood and being met. If the other group doesn't talk to you, shame on them — but if you don't reach out to them either, shame on you. It is not acceptable to assume "the other guy" will "do the right thing" without oversight. Trust but verify. If it's important to you, act like it.
Eulogy for a Dream
There are days when the wind is stiff
They remind you of mortality
I did not reach so far!
No matter your station in life, there is hardship
Mideast Ideological Change
Since 9/11, it has been my belief that the present War is primarily ideological. It is not a coincidence that the terrorists who attacked us were religious fanatics and denounced Americans as heathens and the United States as the Great Satan. It is instructive that they were most at home in the brutally repressed lands of the Taliban.
There were, broadly speaking, two answers to the question "Why do they hate us?" One answer was "because we have done them wrong" — the other answer was "because we are an affront to their ideas."
As a result, one group of people believes that if we'd only stop doing bad things to them, they'd stop hating us and leave us alone. The other group believes that they will always hate us, unless we convert to their ideology, or they learn tolerance.
I am firmly in the latter group. I believe that even if we withdrew our influence from the Mideast and shamefully let the jews be pushed into the sea, attacks against America would continue. In fact, I think they would increase. Appeasement doesn't work — ask Neville Chamberlain. Or the Philippines. Appeasement would make us appear weak and exploitable, not reasonable. Of course, those who believe differently about why they hate us will believe differently about the efficacy of meeting their demands.
(I wonder, rhetorically, where are all the Latin American or Vietnamese terrorists? It does seem to be connected to ideology and not to grievance, doesn't it?)
Because I believe this is an ideological war, I believe reforming the ideology of our enemies is a critical element of success. Americans have long tolerated others — it is our enemies who are intolerant of us, and therefore their ideas that must change.
I'm heartened by this article because it challenges Arabs to reject their scapegoating and conspiracy theories over who perpetrated the 9/11 attacks. Scapegoating and conspiracy theories are used to deflect blame, and the "inability to accept responsibility for individual or collective failure" is one of the Seven Signs of Non-Competitive States.
As the culture warms to taking responsibility and facing the truth, the United States will be less of a scapegoat. The Great Satan will be diminished as a threat. And they won't hate us quite so much anymore.
GDP Isn't Gross (it's Highly Netted)
Dr. George Reisman has published an article in the AJES arguing that the concept of Gross Domestic Product is, in fact, highly netted — due to an error that's nearly universally committed by economists.
Standard thought is that the value of a final product includes the value of all the intermediate products that were consumed in its production, and that therefore counting the value of those intermediate products would be double-counting.
Reisman argues persuasively, and in terms easily accessible to the layperson, that the value of a final product does not include the value of intermediate products. He shows the mathematical error that leads to so much confusion between the concepts of gross and net, and briefly indicates the implications for macroeconomic theory.
You can download Reisman's article from the Mises blog.
Please note that if you've downloaded it already, you may have downloaded an incorrect version. The original file had several lines missing (completely whited out) on each of three pages. The file behind the link was silently corrected sometime in the last few days.
You can also download Reisman's book Capitalism, which contains some earlier thought along these same lines in Chapter 15.
<long, slow whistle>
I feel like I'm reading the Democratic Underground discussion forums. Bu$hitler is the President-select of AmeriKKKa! Bush lied, people died! The war was illegal! It's all about oooooil!
Anchors aweigh, me hearties. Let's review the truth, as briefly as possible.
In the "torture memos", Rumsfeld denied requests to use methods stronger than "mild, noninjurious physical contact". What happened at Abu Ghraib was not approved, and no official has ever tried to "justify such barbarism" — quite the contrary, it was strongly condemned. I stress the great distance between "mild, noninjurious physical contact" and actual torture.
The "assertion that Saddam was in cahoots with Osama" is an interesting meme. It's gotten traction because people are being deliberately unclear when discussing it. There are several issues: (1) Were Saddam and/or Osama trying to enlist the other's help? (2) Were they actively working together? (3) Was Saddam involved in supporting the 9/11 attacks? (4) Is Saddam relevant to the broader war against Islamic Fundamentalism even if he wasn't involved in 9/11? Let's consider them separately:
Related to #3, do not send me the now-famous quote from Condoleezza Rice used in Fahrenheit 9/11, "Oh, indeed there is a tie between Iraq and what happened on 9/11." If you don't know what she said immediately afterward, which Moore cut from the film, you should read about it (it's #43).
Goodness, I've only gotten through four sentences! This is the difficulty of debate — it takes so much longer to refute a claim than to make one. Let's pick up the pace and dive into what matters:
Ron Reagan is calling Bush and his administration liars. Explicitly. So don't accuse me of setting up a straw man.
The "Bush Lied!" meme has been receiving a considerable pounding lately. The unanimously-approved Senate Intelligence Committee Report is the source of most of it. The infamous sixteen words hold up. There's an excellent review of the Report at Winds of Change, including some discussion of links between Saddam and al Qaeda relevant to #2.
Bush didn't lie about WMDs. He trusted the intelligence, and the intelligence turned out to be wrong. According to the Report, there was no pressure to "cook" the intelligence. Our intelligence service reached the same conclusion as other intelligence services around the world. Britain and Russia and France believed Saddam had WMDs. The leaders of Jordan and Egypt told General Franks that Saddam had them, and would use them. The Clinton administration believed Saddam had them. (There are some eye-opening quotes from Al Gore in that link. Gore believed violations of the 1991 resolutions against Iraq were sufficient cause for military action. His recent statements don't even sound like the same person.) Many Democrats have sounded downright hawkish about the matter.
Everyone — Republicans, Democrats, and foreign leaders — were making congruent statements based on the consensus of the intelligence community, both domestic and foreign. The intelligence was wrong — not completely wrong — but even if it were, there is no justification for calling Bush a liar with respect to WMDs.
A lie is the deliberate communication of a known untruth with the intent to deceive. Bush believed it was true and wasn't trying to deceive. So it wasn't a lie — period. We can lay that meme to rest.
(Incidentally, there is an Iraqi WMD blog that tracks WMD stories.)
Relatedly, it may be claimed that WMDs were merely the public justification for overthrowing Saddam, that they were a relatively minor factor and that the "real" reasons were kept secret. I agree with that position. What I disagree with is the insinuation that the private motivations are at all sinister.
I view the liberation of Iraq as a first step in a mideast cultural reformation, a necessary step toward victory in the ideological war against Islamic Fundamentalism. Iraq was the best place to begin for a variety of practical reasons, among which are the country's relative secularism, lack of allies, weakened military infrastructure, ongoing military operations against them, and of course the brutal tyrant at the helm which was our moral justification for intervention.
The WMD issue provided diplomatic cover for our allies, but all the diplomats always knew that it was never the primary reason. The only people who haven't figured it out seem to be… Democrats.