Mises Economics Blog
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In The Pipeline
Jane Galt endorses Bush
Megan McArdle (a.k.a. Jane Galt) has endorsed Bush for President. She was much more torn over the decision than I was. Her post contrasts the candidates on many different issues and is a very worthwhile read.
Cap'n's Voting, part two...
I vote. I don't buy the arguments that it merely sanctions a corrupt system. The United States is still relatively free. Plus, I get a psychological thrill at the opportunity to lay the smackdown on people trying to coerce me.
Oregon uses vote-by-mail, so I get to fill out my ballot at my leisure and mail it in. Thus, I'm spreading out my voting thoughts over several posts. In my first installment I examined the Oregon statewide ballot measures. In this post I'll discuss the state and federal candidates. In the last post I'll discuss county and city candidates and ballot measures.
I'm currently registered as a Libertarian but I'm planning to change my registration to an independent. When the LP is wrong, they're really wrong, and I can't stand it. I don't want to be affiliated with them anymore.
Fishing for Compliments
Megan McArdle is fishing for compliments during her guest-blogging at Instapundit:
Sorry, babe — and if you've seen one of her television appearances, you know she is a babe — I'm not biting. But if you're ever in Oregon, I could supply it on demand. Measuring our cross-elasticity is something I would do with interest. Carefully exploring your supply curves would reduce our asymmetric information.
I could go on, but it gets much worse. No one wants to read that.
A Few Quick Notes
I wish I had time to blog each of these properly, but I don't. I'd rather link to them briefly than leave them totally unmentioned.
George Reisman posted a new and excellent article, Reducing Poverty by Reducing Government. He argues very forcefully (and of course I would say persuasively) against the minimum wage and also prounion and licensing legislation. The article also covers many other minor points. There's a whole bunch of commentary on it also, of widely mixed value. Originally I had wanted to fisk some of it, but I don't have time.
Kofi Annan thinks it's "inconceivable" that oil-for-food corruption lead to bribery in the Security Council. He keeps using that word. I do not think it means what he thinks it means.
I'm shocked, shocked to learn that the oil-for-food investigation is continuing to meet resistance. It's not like there was widespread corruption or anything, right? Surely nothing that would implicate the head of the program, or Kofi Annan's son, or France or Russia or China?
Unhappily, my e-mail isn't working well at the moment. It appears to be some kind of problem on the server. I haven't been receiving e-mail most of the day. Hopefully things will be back to normal soon.
Finally, a Health Savings Account!
The New York Times reports Health Savings Accounts are slow to gain acceptance:
For 2005, Intel will be offering a plan with an HSA, and I can't wait to sign up. Last year I dreaded the enrollment season and out of apathy didn't change anything. This year the choice is obvious. Why?
Health insurance with broad coverage and a low or no deductible isn't really "insurance" — it's actually third-party prepayment for medical services. There's no mystery why health care costs are rising so quickly. Within such a system, there is no incentive for the individual to pay attention to cost. They're spending someone else's money, so why should they care? As a member of the demographic group least likely to need medical care (a single young healthy male), I've been subsidizing everyone else.
No more! Intel is offering the Lumenos HSA plan (calling it the Lumenos High Deductible Health Plan (HDHP)) and allowing me to escape this theft, with a glad tip of the hat to George W. Bush. This plan lets me contribute pretax dollars into an account that I own — and unlike the older Lumenos HRA plan (Intel calls it the Lumenos Consumer-Driven Health Plan (CDHP)), there is no balance limit.
One of the comparison tools available to help people compare their health insurance options included figures for how much the various plans cost my employer in addition to how much it cost me. The HDHP is far and away the cheapest option for Intel. (I'm not going to post the numbers, just in case that would get me in trouble.) It's going to be cheapest for me, too, given how much health care I use.
This is a win-win. I get real insurance — that is, catastrophic coverage — and my HSA gets the tax break that the employer would normally get for the insurance costs. Oh, and I won't need no stinkin' referral to see a specialist. Preventative care measures are automatically covered by the plan and won't cost anything from my HSA. (This is actually a minor disappointment from my desire for pure catastrophic coverage.)
HSAs are good. I like ownership. I like being able to invest my HSA funds to accumulate enough money to pay for anti-aging therapies, and if that doesn't work out, for the — no, my — money to be inheritable.
Design Guessing Contest
The decision to develop and release the 3GHz Intel® Pentium® 4 Processor (happy, Legal?) in 2003 was (in)famously made via some scribbles on a napkin.
In that fine tradition — and at peril of developing pointy hair — I present the following challenge.
During my recent "vacation" to help my sister move, these complete blueprints for a construction project were developed. What was built?
Click the image for a much larger view. (Incidentally, doesn't the widespread use of the phrase "click to enlarge" disturb anyone but me? Ya'll know that originated on porn sites, and the obvious double meaning, right?)
Write me if you'd like to take a guess about the blueprints. The winner gets… nothing. No, wait, fame — you get fame, because I have literally bazillions of readers. And they think you're sexy. Really. Would I lie?
Sarah T. is the winner! She guessed it's a screen porch, which is as close as anyone was going to come. It's actually an aviary. My sister has a lot of birds, and the climate in Arizona is agreeable for them to spend most days outdoors. The aviary is essentially a wall (half solid, half screen) wrapped around the backyard porch. It has two layers of screen to keep her birds safe from wild birds. (There's apparently a problem with hawks in the area.)
There you go, Sarah — fame! Though I guess you were already famous, because as one of my co-workers you've already had your picture posted on this site.
Don't click on that link, don't look at that picture! No, no don't do it, it's too sexy!
The Productivity of Stock Trading
Last week I was chatting with a co-worker about economics, and specifically about how the indirect nature of many economic processes makes them difficult to understand. This leaves laypeople vulnerable to simple but thoroughly wrong anticapitalist arguments.
One such area is the stock market. Its economic value is vastly underappreciated and popularly reviled. It is common to resent people who profit from stock trades because they didn't have to perform "real work" for it. Passive income from investments is also widely disliked, at least by people who don't have any.
What does the stock market have to do with economic progress? How does stock trading contribute to growth? Can it be rescued from the attacks of of the anticapitalists?
When I approach something like this I usually start by going to George Reisman's book Capitalism. Beginning on page 464 is an explanation that covers the following benefits of financial markets and institutions in general:
On the stock market in particular, Reisman notes:
To this, I would add a defense of the individuals involved in the capital markets. They do not deserve to be reviled as people who just trade but don't produce anything. Stock trading is productive work as much as is a manufacturing job. Indeed, the fact that traders tend to have a higher income than manufacturers suggests that their work is more economically valuable than the manufacturers. What is the nature of the productive work of stock trading?
Successful investment over the long run is the result of having a more correct prediction of future economic conditions than other market participants; that is, the ability to forsee the direction of (some part of) the economy.
The essence of this task is to allocate investments among the various possibilities — an enormous and difficult job. Which companies in which industries will be most successful? How does their current valuation compare to my own estimate of their worth? Should I trade in their stocks or bonds, or both, and how much?
The most successful investors also see when investment opportunities in the capital markets are not very appealing compared to investment in new businesses. A new business is a risky venture but may have an expected return greater than the opportunities in the capital markets. To say that "the whole market is overvalued" is to say that the most profitable investment opportunities lay outside the current market.
The successful investor need not be skilled in evaluating the potential of new business ventures himself; he may invest his money with a venture capital group which specializes in this activity. It is the investor's recognition that new businesses will yield better than existing ones that is important here, not the specific details of what new businesses would be created.
An issuance of new stock clearly raises capital for a business. Counterintuitively, so does trading in already-issued shares! This results from the fact that trading activity will tend to concentrate assets in the hands of the most skilled investors, who will be in a better position than the lay investor to know when new businesses should be created.
The overall economic effect of trading in the capital markets is to concentrate assets in the hands of those most capable of directing them toward the most profitable ventures, resulting in greater economic growth.
The bottom line is that stock trading is a wealth-creating activity. The mechanism of this creation is extremely indirect and not at all obvious — the trader does not create anything "with his own hands" — but his direction of capital does increase the rate of economic growth, and is praiseworthy.
For those interested in a broader examination of this subject, Jeffrey T. recommends Fritz Machlup's The Stock Market, Credit and Capital Formation. The link is a free .pdf of the entire book, courtesy of the Ludwig von Mises Institute. I'll be reading it… shouldn't you? :)
"Vacation" in Arizona
I'm in Arizona this week helping my sister move. Blogging is likely to be heavier than normal because I'm not working and therefore will have some spare time. :)
I have a number of things to write about that have been accumulating for a while. I hope to get through them this week.
But let's start with travel news. On the flight down, I was reading the airline's magazine and saw an advertisement for an in-flight entertainment system you could rent. (Not available on my flight, of course.) It could show movies, along with some other things. The selection of movies was pretty disappointing. How disappointing? In the "Classics" category they listed three movies — one of which was Dude, Where's my Car?
Oregon Ballot Measures
Does anybody care what everybody's favorite inland pirate thinks of this year's Oregon ballot measures?
No? Too bad.
This sounds fine. I doubt it will precipitate assassinations by those eager to game the political system.
This also sounds fine. I was surprised to learn that taxes and fees on mobile homes could only be used for roads. I don't see a lot of mobile homes on the road these days.
How did Oregon's constitution become such a mess? I don't see why stuff like this should be a constitutional issue. Yes, it's a great way to tie the legislature's hands, but maybe we've gone a bit overboard? Could we add a tier between the constitution and regular legislation, or something?
Marijuana should be legal. It's less dangerous than alcohol. In Oregon it has been legal to use marijuana for medical purposes, but not to purchase it. This would set up highly regulated dispensaries where it could be purchased.
I don't think there should be any restrictions at all on the production, use, or trade of marijuana. But I'm in the minority, as usual. Despite my discomfort with highly regulated businesses, the text of this measure earns bonus points for invoking the 9th and 10th Amendments of the U.S. Constitution. It also mentions the "wholly intrastate" nature of Oregon's program, neatly avoiding all Federal drug laws because they, like most encroachments of Federal power, rest on the Commerce Clause.
It doesn't go far enough, and it's not entirely in the right direction, but on balance it's good and I'm voting for it.
Interestingly, the Libertarian Party of Oregon filed an argument in opposition of this measure, on registration/privacy grounds. I think this argument is weak; as long as marijuana is primarily illegal a registration and monitoring system is going to be part of a medical exception. (It's reasonable within the existing system, just like the Medicare prescription drug benefit.) We'll just add this to the ever-growing list of things I disagree with the LP about. (Sigh, even the fringe party doesn't represent me…)
No! More environmentalist nonsense. I reject all forms of intrinsic value, including the alleged intrinsic value of forests. The great value of forests to man is derived from harvesting their wood to build things — and that's exactly what we should do. I wouldn't be much bothered if environmentalists would purchase the land themselves and refuse to log it, but they get on my nerves when they want to control everyone else's land. (And yes, the state and federal governments don't have any business owning forests; they should sell them off.)
I oppose this measure. There's a lot wrong with it.
I'm skeptical it would achieve its stated goal of lowering insurance costs. I'm unconvinced that the current insurance costs are "too high" (whatever that means!) in the first place. I think it's dangerous to presume the $500,000 limit is correct. I'm skeptical that fixed limits are appropriate at all.
Let's grant the assumptions, arguendo, that insurance costs are too high and that this is due to large jury awards. It doesn't follow that jury awards should be capped. Maybe doctors are screwing up very badly. Maybe the juries are too sympathetic. Shouldn't we be exploring doctor education or limits on bleeding-heart jurors as alternatives? The arguments published in favor of this measure don't give me any reason to prefer it over the two alternatives I just listed.
I don't claim to know The Solution to "high" insurance costs. But I do claim that this measure stinks of quick-fix hackery and is very poorly argued. That's enough reason to vote against it.
I oppose this measure.
Hell yes. Wow, this is a great measure. It combats theft by zoning and environmentalist nonsense at the same time! Most of the opposition complains about the cost — which to me, is simply another argument in favor. If the state had to pay for taking all the property it takes, maybe it wouldn't take so much!
One phrase in the opposition arguments kept being repeated — that the "government can decide one thing for your neighbor's property and something entirely different for yours." So what? It may sound scary, but it was never explained, and I for one don't understand what business the government has in deciding what happens on either your or your neighbor's property in the first place.
This one's easy. Government should not be in the insurance business. Voting in favor.
I am evil. I am also patient. And patient evil is the best kind.
My team at work is one of several across different organizations that have approximately the same charter, working on different projects. One of these sister teams was only recently formed, and my team did the training, so we've maintained very strong ties.
That team has an intern. Her name is Kim. They tease her a lot. It's all in good fun — she's tremendously talented and I've heard, and have, nothing but praise for her. We tease lovingly. And this time it was my turn.
And I'm evil, remember? I don't do anything halfway.
One of the things she gets a lot of teasing over is how many "dates" she has. Going to movies or lunches or gatherings of any sort. They're not "real" dates but that doesn't matter for teasing purposes.
I took her to see Something's Afoot at a community theatre in September. A few days later, I discovered lipstick in my car. This was a bit of a shock to me — as a single man I don't find feminine articles lying about very often — but after a little thought I knew it must have been hers.
"Wow," I thought, "that's a lot of rope. I can do almost anything with this." Of course I'm also honest to a fault, so I felt responsible to return it to her. But there's nothing wrong with being evil in the performance of a good deed. This was a teasing opportunity I could not pass up.
There are two other things you need to know. Kim used to play piano, and briefly thought about taking up practicing again (which I mentioned very obliquely a while ago.) She also just purchased a new laptop computer. The relevance of these things will become clear. I love ambiguous statements with multiple interpretations, so I couldn't resist weaving all this together.
I resolved to return Kim's lipstick to its rightful owner. And what better way to do it than to interrupt her team meeting and lay on the dating innuendo as thickly as I am able?
I started by giving her a greeting card encouraging her not to give up on the piano idea, because that was going to be one of my themes and I needed to keep it fresh in her mind. I planned to interrupt her team meeting the very next day. Unfortunately, I learned that some of her teammates — who would particularly enjoy the public teasing — were not going to be present that day. It was a difficult decision to postpone, because it meant waiting several weeks until I knew all the right people would be present at the same time.
Today I finally implemented my plan. I knocked on the door during their team meeting, went in, and said:
Silence. Nobody knows what to make of this.
Sudden laughter. Kim is much more embarrassed than I expected, and turns away.
And then I leave. Kim is too embarrassed to say anything. The tools half of the room is still laughing, the debug half of the room doesn't know what just happened. (Kim is in tools — everyone in tools gets the joke, but the others don't know this fine tradition.)
A job well done. I walk away with a huge evil smirk on my face. It was worth the extra weeks of waiting.
I want to shout out a big "thank you" to everyone who helped me do this; you know who you are. But what would really be praiseworthy is if you somehow keep Kim from retaliating. (That's reverse psychology for "bring it on.")
Lest you think I'm mean, you should know I sent an e-mail apology in advance, though late enough that I knew she wouldn't read it until afterward. It just said that I was sorry and evil, with no details.
Foreign Policy Debate
I know what you're thinking. "If the good Cap'n was at the foreign policy debate, how would he have answered the questions?" What, you weren't thinking that? Well, I bet you are, now — so this is your lucky day!
All my quotes come from this debate transcript.
No. I scope this war very broadly and believe the path to victory is to pursue a Reformation in the middle east. A strain of intolerant Islamic fundamentalism has metastasized and is not willing to coexist with any different philosophy. It is bred by religious fanaticism, political repression, and cultural failure.
Reformation will take decades, and the liberalization of many nations is necessary. Afghanistan was the right place to start because it attacked us. Iraq was the right place to go next for a host of practical reasons, including its relative secularity, modernity, geography, military weakness, and lack of allies. Iran has been on the verge of democratic revolution for years but its nuclear ambitions make direct action there extremely delicate. As Iraq changes and becomes prosperous it will be a catalyst within the region for others to change as well, and the foundations of that success (liberty, capitalism, accountability, etc.) will spread and cause Islamic fundamentalism to lose its appeal.
Kerry views 9/11 as an isolated incident, or at best connected to only a few other attacks, and limits his response to al-Qaeda. Bush takes a broader view but his public statements have not gone as far as I would like. He wants to destroy terrorists and promote liberty abroad, which is great, but I do not believe he views the war quite as broadly as I do.
The wording of the question is unfortunate. I do not believe the U.S. is susceptible to another 9/11-type attack for the simple reason that citizens will prevent it, as they did on Flight 93. I do believe that attacks will be attempted in the future no matter who the President is, but that they will be smaller in scale because al-Qaeda's organizational capability has been severely hurt due to the fighting in Afghanistan.
I believe the election of Senator Kerry would result in more attacks over the long term, because he would not pursue change in the mideast that would lead to permanent victory. Kerry wants to block, Bush wants to punch.
I am sympathetic to the argument that disbanding the Iraqi military and police was a mistake, because it made it more difficult to reconstitute those bodies today. But I am no expert on such matters.
I do not find fault with Bush's decision to go through the United Nations during the build-up. Britain's help was politically impossible without having gone to the U.N., and the time spent waiting for them to act did not ultimately delay the war. The critical path was our own logistics.
It was unfortunate that Bush relied almost exclusively on the threat of WMDs in trying to convince the U.N. to act. He believed it was true (and therefore was wrong, but not a liar) and if it were true it would have been sufficient cause for the war on its own. But in my understanding of this war WMDs were not a necessary cause for action. In the 9/11 attack itself, it must be remembered, no WMDs were used.
As Bush said, "we've got the capability of doing both." We properly went after OBL first, but the Afghanistan effort did not require our entire military force. Tanks, for instance, were not useful in Afghanistan but were very useful in Iraq. As Bush stated, the Taliban is out of power and three-quarters of the known al-Qaeda leadership has been captured or killed, so the organization has been crippled and what remains is essentially mopping up.
I have to step out of my role for a second here and mention a bizarre statement from Kerry: "And we got weapons of mass destruction crossing the border every single day, and they're blowing people up." Huh? What's he talking about?
I have no comment about the question or either candidate's response.
What Bush said. When the Iraqis are capable of tending to their own security, we can bring troops home. Loved his paragraph about "a free Iraq" (see the transcript.)
I have no comment about the question or either candidate's response.
I have no comment other than to say that Bush's response was very weak.
I don't believe Bush has been dishonest about his foreign policy. He has been diplomatic, not making some arguments that wouldn't be received well by other countries, but genuinely believed the WMD threat.
Kerry mentioned the State of the Union speech, which was a definite mistake because it was Joe Wilson who lied and British intelligence has steadfastly backed their uranium claim. I do not comprehend Kerry's argument that we didn't "exhaust the remedies of the United Nations". What would "exhaustion" be — another decade of Hussein brazenly flaunting Security Council resolutions? The U.N. made it clear that they were not going to act, and in the aftermath of the war it has become obvious why — oil-for-food corruption:
The United Nations is a corrupt, racist, toothless, ineffective, debating society of terror coddlers. It has negative credibility. I would join the "get the U.S. out of the U.N., and the U.N. out of the U.S.!" club except that without our veto, it would quickly act to destroy the state of Israel.
Kerry said, "I think a critical component of success in Iraq is being able to convince the Iraqis and the Arab world that the United States doesn't have long-term designs on it. As I understand it, we're building some 14 military bases there now, and some people say they've got a rather permanent concept to them."
Oh, but we do! The United States is still involved in a military occupation of Western Europe, sixty years later. Plus consider Japan and South Korea. Iraq will (should) be like that. The U.S. is a benign occupier, and we need permanent bases in the region to carry out the remainder of the war.
Less likely, and Bush gave Libya as an excellent example.
The use of force is justified only in self-defense, and in some circumstances that includes preemptive action.
Kerry's "global test" remark is horrible. I can only interpret it to mean getting the support of the United Nations. This was impossible with Iraq because veto powers were being bribed through the oil-for-food scam. It's also horrible because consistent application would mean government by consensus — the United States' consistent use of its veto power to protect Israel does not pass the "global test".
I do not understand Kerry's respect for the United Nations. It isn't the fuzzy, friendly, well-meaning organization its charter intended. It's a cesspool of depravity, the clearest case against world government that could ever be made.
Bush brought up the International Criminal Court, but his reasons for not joining it are pathetic. The real reason not to join it is because we can't — the U.S. government doesn't have the authority to join it; it's unconstitutional.
Bush said yes, and I believe that's the right strategy for now.
Kerry screwed this one up, saying "I think the United States should have offered the opportunity to provide the nuclear fuel, test them, see whether or not they were actually looking for it for peaceful purposes." Provide the nuclear fuel!?!? I know what he meant to say — by giving them the fuel we'd have pretext for monitoring how it's used in detail — but Kerry sounded very bad.
Kerry's bigger mistake was saying, "for two years, this administration didn't talk at all to North Korea." Bush had already argued that the 6-party talks were better than bilateral negotiations. The reason we didn't talk to North Korea for two years was in order to convince China to come to the table. China wanted us to take care of the North Korean problem for them, and it took two years for them to realize that we were serious about expecting their help.
China has powerful leverage because it controls an oil pipeline into North Korea and has cut off supplies in the past to apply pressure. Also, it's possible North Korea was even more reluctant than China to participate in multiway talks. The point is, we got them, they're valuable, and Kerry would throw them away. This is a clear error in his foreign policy and is the straw that broke this camel's back — I will not vote for Kerry.
Bush's best moment of the night was when he said "the minute we have bilateral talks, the six-party talks will unwind. That's exactly what Kim Jong Il wants."
Both candidates expressed their desire to work with the African Union and not intervene directly. Neither mentioned the predictable failure of the United Nations to do anything (as distinct from talking about it and wagging their fingers menacingly).
I believe that state military force should only be used abroad when it serves national security interests. What is the national security interest in Darfur? Darfur is absolutely a humanitarian catastrophe, but we're not responsible for it, and we're not morally obligated to clean it up (contra Kerry's statement). This is a good opportunity for a humanitarian mercenary army funded by private donations.
Kerry's remark likening stop-loss programs to a "backdoor draft" is shameful. Read the comments on this article.
Kerry's response was excellent until he started talking about "bunker-busting" nuclear weapons. The battle against nuclear proliferation is abroad, not at home. The United States can and should have lots of nuclear options.
Bush's response included a mention of busting the A.Q. Khan network, which is the most important antiproliferation victory I am aware of.
Yes he did. Putin is much worse than he first appeared to be.
That's all, folks. If you'd like to comment on this, don't hesitate to contact me.
Tom Cox and the New Budget Coalition
(This is a letter to the editor, submitted to the Hillsboro Argus.)
Are you tired of politicians trying to scare voters into approving tax increases? They tried it with Measure 30, warning of severe cuts to education if it didn't pass. Voters rejected the measure in February, triggering a 5% budget cut.
Education is only 60% of the budget. Bigger cuts in other areas would have allowed smaller cuts in education. If education is so important to so many politicians, why didn't they move to protect it and acknowledge that cuts could have been smaller? Because they wanted the tax increase, and the alternative of "your money or your children's education" is the most powerful way to get it.
The New Budget Coalition's first agenda item is to set priorities, funding education and public safety first, so they will no longer be used as political cudgels. The NBC has many other great ideas, too, and has gained bipartisan support from some incumbents as well as over twenty candidates. One of the NBC's founders, Tom Cox, is running for State Representative of District 29 (Hillsboro, Cornelius, and Forest Grove).
I urge you to support the candidates that support the New Budget Coalition. Together we can make the legislature stop playing politics and start paying attention to priorities.
A New Hobby
My excuse for not blogging much lately is that I've been spending a lot more time on music. I finally purchased a USB-MIDI interface and downloaded some music software so I could connect my PC to my digital piano.
This leaves little time for blogging. Which is a shame, because I've read a lot of interesting stuff this week that ordinarily I'd link to and comment on. Oh well.
However, this weekend I'm planning to write my own answers to the questions asked of the candidates in the first Presidential debate. I've only watched a few minutes of the debate (I'll watch the rest this weekend) but I already noticed a few things I wanted to comment on.
Competing for my time will be my desire to try a bit of musical composition based on a melody I heard with some co-workers a long time ago. It became something of an inside joke, and it's my job to carry jokes too far.
Tonight I found a bunch of Metallica MIDIs, so I'll have to split my practice time between Rachmaninoff and Metallica.
Sunday night I'm going to the symphony. They'll be performing Rachmaninoff's 3rd Piano Concerto.