I felt inspired to write a reaction to Krugman's piece in the New York Times Sunday Magazine about how economists "got it wrong" in predicting this current economic downturn. Krugman blames economists for thinking that financial markets always behave rationally and he calls for a return to a traditional Keynesian viewpoint, namely, that massive government spending can get us back to steady economic growth.
However, in the midst of his blah blah blah about the ideological divides in macroeconomics, he does reveal one thing about the economic perspective: THEY ARE STILL GETTING IT WRONG.
Both sides of the debate, whether neo-classical or neo-Keynsian, are so focused on growth that none of the economists are paying any attention to what we are producing. Economists only care that we are producing more stuff. It could be anything. Really. We don't care. As long as it makes GDP higher.
It could be green energy.
It could be digging a ditch and filling it in again.
It could be land mines (see below)*
It could be new financial derivatives that use life insurance policies (nothing like gambling on when grandpa is going to kick the bucket to advance the growth of GDP).
Whatever.
But that's just it.
Economists should care.
Huh?
Personal consumption now drives nearly 70% of our GDP. Economists don't want to tell consumers what to consumer because they believe that consumers have sovereignty over their own decisions and those decision will be rational (that is the whole point of this market thingy). But if highly educated financiers are prone to irrational behavior leading to epic swings in the market, why would everyone else be so cool, calm, and collected about consumerism.
We are not. We are easily influenced. We can be driven to purchase things we don't really need or maybe even want--yeah that's right, I am saying that sometimes people buy things that they don't really want (listen up economists--buyers remorse is real, just ask anyone).
So my real question is, what good is GDP growth if we just end up getting a whole bunch of stuff we don't want?
Or worse. A whole bunch of stuff that will make us worse off in the future. GDP can measure our size, but what we produce and consume tells a lot about our soul as a country. And as we have already seen, size does not protect us from failure; however, meeting our true needs as a society will certainly make us more stable. And advertisers in our free market, and the flocks of consumers that follow do not necessarily know what they need.
Economists are not paying attention to our needs. They assume they will be met as soon as GDP starts going up. And that is why they are still getting it wrong.
*We're number one in the world at producing weapons with $38 billion dollars in sales contracts just this past year. Yup, it's a real growth industry in an economic downturn--don't you think. And we are creaming the competition: #2 Italy at just over $3 billion in sales #3 Russion with the same. We have ten times that suckas! Wahoo! See (NYT article).
Sunday, September 6, 2009
Thursday, September 3, 2009
Dalton Trumbo on PBS
Last night, I saw a PBS documentary about Dalton Trumbo, a blacklisted screenplay writer. One particular quote from his book, Johnny Got his Gun, struck me:
"If you make a war if there are guns to be aimed if there are bullets to be fired if there are men to be killed they will not be us. They will not be us the guys who grow wheat and turn it into food the guys who make clothes and paper and houses and tiles the guys who build dams and power plants and string the long moaning high tension wires the guys who crack crude oil down into a dozen different parts who make light globes and sewing machines and shovels and automobiles and airplanes and tanks and guns oh no it will not be us who die. It will be you.
"It will be you-you who urge us on to battle you who incite us against ourselves you who would have one cobbler kill another cobbler you who would have one man who works kill another man who works you who would have one human being who wants only to live kill another human being who wants only to live. Remember this. Remember this well you people who plan for war. Remember this you patriots you fierce ones you spawners of hate you inventors of slogans. Remember this as you have never remembered anything else in your lives.
"We are men of peace we are men who work and we want no quarrel. But if you destroy our peace if you take away our work if you try to range us one against the other we will know what to do. If you tell us to make the world safe for democracy we will take you seriously and by god and by Christ we will make it so. We will use the guns you force upon us we will use them to defend our very lives and the menace to our lives does not lie on the other side of a nomansland that was set apart without our consent it lies within our own boundaries here and now we have seen it and we know it.
"Put the guns into our hands and we will use them. Give us the slogans and we will turn them into realities. Sing the battle hymns and we will take them up where you left off. Not one not ten not ten thousand not a million not ten millions not a hundred millions but a billion two billions of us all the people of the world we will have the slogans and we will have the hymns and we will have the guns and we will use them and we will live. Make no mistake of it we will live. We will be alive and we will walk and talk and eat and sing and laugh and feel and love and bear our children in tranquility in security in decency in peace. You plan the wars you masters of men plan the wars and point the way and we will point the gun."
That was written in 1939, and you just don't see anything like this anymore. It's a shame.
That was written in 1939, and you just don't see anything like this anymore. It's a shame.
Wednesday, August 12, 2009
The problem with numbers. . .
It's a classic story really.
Due to crazy rumors of government run death panels, man goes to passionately protest the new health care legislation.
Man gets into fight with local union members in favor of universal health care.
Man hurts his leg.
Because of some recent economic hardship, man has no health insurance so he must take up a collection with his fellow protesters.
The people who are so unwilling to save 50 million people from high health care costs are more than willing to save one.
We love our irony (see AP story).
When we talk about one person not getting access to health care, it is easy to get behind the movement. When we talk about 50 million, it is much easier to be selfish--in fact we often look for ANY reason to be selfish. Any at all. Even reasons that are untrue. Why should 50 million people get something? What about me?
It is the problem with numbers. Obama needs to focus this debate on the individual level. Forget about broad goals. Put a face to this legislation. Forget the techno-jargon. There are people that truly need help and that point is getting lost in death panels and socialism.
We need a poster child for health care reform. Call it cheap ploy, but it will help people understand what is at stake. Because what is at stake has nothing to do with whether a government bureaucrat is going to euthanize my grandmother.
Due to crazy rumors of government run death panels, man goes to passionately protest the new health care legislation.
Man gets into fight with local union members in favor of universal health care.
Man hurts his leg.
Because of some recent economic hardship, man has no health insurance so he must take up a collection with his fellow protesters.
The people who are so unwilling to save 50 million people from high health care costs are more than willing to save one.
We love our irony (see AP story).
When we talk about one person not getting access to health care, it is easy to get behind the movement. When we talk about 50 million, it is much easier to be selfish--in fact we often look for ANY reason to be selfish. Any at all. Even reasons that are untrue. Why should 50 million people get something? What about me?
It is the problem with numbers. Obama needs to focus this debate on the individual level. Forget about broad goals. Put a face to this legislation. Forget the techno-jargon. There are people that truly need help and that point is getting lost in death panels and socialism.
We need a poster child for health care reform. Call it cheap ploy, but it will help people understand what is at stake. Because what is at stake has nothing to do with whether a government bureaucrat is going to euthanize my grandmother.
Tuesday, August 11, 2009
Limits of Equality
“A society that wishes to be both ignorant and free, in a state of civilization, wants what never was, and never will be.”
—Thomas Jefferson
I am dedicated to the concept of equality in modern society. I have my own vision of what the manifestations of that equality should look like, but most of us would probably agree on the basic principles.
There is, however, something sinister lurking about in American society: the equality of opinion.
Sure, everyone's vote should be counted equally. Sure, everyone should be paid the same for the same work. However, if someone is poorly informed, that opinion should be discounted. Even better, that person should elect to pipe down and retain some dignity.
It's too bad that something as stupid as "keep your government hands off my Medicare" does not stand out these days. It's even worse to think a person like that would not have enough self-respect to keep his mouth shut. Sadly, even the most obtuse detritus is given full merit in a society ruled by gut reactions and gladiatorial debate.
So much for free speech in America.
Sunday, August 9, 2009
Death ANDTaxes. . .
Life's little inevitabilities. . . now BOTH are brought to you be your friendly neighborhood government--yippee!
And now to the question of costs. Unfortunately, you are correct that having a public option is very expensive and Medicare costs appear to be on a endless upward trajectory as many of those boomers live well into their eighties and nineties. Being the biggest buyer of health care provides the government with a lot of clout over prices, but ultimately the government still has to come up with the cash. As government becomes a larger part of the market it must force suppliers to be more efficient through regulations and, at the same time, it must make sure that private insurance companies do not pawn off it's sick patrons.
As a buyer, government can regulate, but enforcement can be difficult. As a seller, the government controls the means of production and the costs directly. Maybe Marx's was right, socialized medicine is inevitable. But it's more than inevitable, it is already here. In fact, it's how we provide medical services to all of our serving men and women in the military.
If socialized medicine is bad, why do we insist on giving it to our men and women in uniform?
For one thing, ex-military people tend to have a lot of medical issue so no one is willing to do it at a reasonable price. Therefore, the government must provide the good. Is this some sort of vast socialist conspiracy? No. Not really. The government provides health care to soldiers because it is the right thing to do. And while the market does do a lot of things well, providing health care to our fellow service men and women is not one of them. The government can do the same for the rest of its citizens and at a cheaper cost than being just a big buyer.
The time will come when health care will be a lot like education. Everyone gets the health care equivalent of a high school diploma, but you can still buy a private school experience if you would like. That is, if you don't like waiting in line (By the way, I am in total agreement about your view of lines) .
Will we all die at the hands of the government in this system? Yes. But we will all die eventually. Besides, who would you rather have as an advocate during you last days: a corporate executive or your first grade teacher?
Socialism is for medicine. Capitalism is for Wall Street. Let's get it right people.
And now to the question of costs. Unfortunately, you are correct that having a public option is very expensive and Medicare costs appear to be on a endless upward trajectory as many of those boomers live well into their eighties and nineties. Being the biggest buyer of health care provides the government with a lot of clout over prices, but ultimately the government still has to come up with the cash. As government becomes a larger part of the market it must force suppliers to be more efficient through regulations and, at the same time, it must make sure that private insurance companies do not pawn off it's sick patrons.
As a buyer, government can regulate, but enforcement can be difficult. As a seller, the government controls the means of production and the costs directly. Maybe Marx's was right, socialized medicine is inevitable. But it's more than inevitable, it is already here. In fact, it's how we provide medical services to all of our serving men and women in the military.
If socialized medicine is bad, why do we insist on giving it to our men and women in uniform?
For one thing, ex-military people tend to have a lot of medical issue so no one is willing to do it at a reasonable price. Therefore, the government must provide the good. Is this some sort of vast socialist conspiracy? No. Not really. The government provides health care to soldiers because it is the right thing to do. And while the market does do a lot of things well, providing health care to our fellow service men and women is not one of them. The government can do the same for the rest of its citizens and at a cheaper cost than being just a big buyer.
The time will come when health care will be a lot like education. Everyone gets the health care equivalent of a high school diploma, but you can still buy a private school experience if you would like. That is, if you don't like waiting in line (By the way, I am in total agreement about your view of lines) .
Will we all die at the hands of the government in this system? Yes. But we will all die eventually. Besides, who would you rather have as an advocate during you last days: a corporate executive or your first grade teacher?
Socialism is for medicine. Capitalism is for Wall Street. Let's get it right people.
Too much health?
Yes, it is probably much better for us to tackle some of the individual problems of health care individually before attempting to unfurl master plans. It'll be much more interesting to ready, anyway.
First, I would like to point out that all of the challenges a universal health care system would face are very much present in our current system. Limited resources (beds, doctors, etc.) is a problem in the current system and are often rationed by paper pushers at your local HMO office. One can circumvent the process by paying for better insurance that gives more freedom, but the prices still go up if you choose to visit a relatively scarce expert like a specialist. And Steve Jobs recently reminded us that those with a private jet have a much better chance of finding a short line for that much needed organ transplant.
So let's make one thing clear: abuses and shortcomings of universal health care are really no different than those found in the current system. We're just making money less influential. It's an imperfect system for the masses rather than an ideal system for the few. But in a political system that is supposed to favor the majority, a new health care system should be a foregone conclusion.
But what to do?
Let's start by embracing the concept of government oversight. In the current market system, we hold our medical suppliers accountable through the legal system. If a doctor kills me through neglect (denial of services) or incompetence (faulty product) then my family can sue. Bad doctors are slowly removed from the system through the compilation of malpractice suits. Insurance companies, though much harder to get at, are also subject to these reviews. Government oversight is alive and well, only it takes place after the damage is done. In contrast, a universal health care system could allow for the speedy removal of inattentive or ineffective doctors. Even better, medical decisisons would not be based on the financial choices of the greedy few.
The key thing to realize in all of this is that health care is not the standard widget used in Economics. Health care is a means, not an end. When I purchase a new car, I know what I am getting, what the expectations are, and I can return the car if the promised results don't come to fruition. Health care, on the other hand, is intended to provide health, something it may or may not achieve. In either case, I can hardly "return" the care given to me if it fails to make me feel better. Doctors can't promise that a chronic condition will be cured or mitigated by the prescribed treatment. There are no knowns in the equation, and the all-powerful rational choice is denied to the consumer. Tell me, are there means for the economists to explain transactions in which so little is known by either party about the product exchanged?
Lines are the stuff nightmares are made of, but what's the harm? I don't think that medical services would be distributed on a first-come-first-serve basis, actually. Those seeking medical treatment would be evaluated at the first tier of the system. My itchy buttock would be deemed less crucial than your faulty heart valve, and I'd be in line after you. Presumably, you could visit your doctor 2 days after I did and still make it in line for treatment ahead of me. While my itchy buttock is frustrating, I daresay that I believe you should be ahead of me in line. But that supposes I value my community in a way that many Americans clearly do not.
So lines are precisely the way you address the issue, and to everyone's benefit. Yes, I have to wait for you to get heart surgery, but I also know that I'll be at the front of the line when my illness is life threatening. It's a concept so simple, so steeped in a basic fairness, that children would have implemented it long ago.
Such a system requires substantial resources, something I'm rather concerned about. How are we to fund such an enterprise, Anonymous Economist? Can we continue to assert international dominance and build such a comprehensive health care system at home? Must we keep our beating hearts wed to the market system if we are to survive?
First, I would like to point out that all of the challenges a universal health care system would face are very much present in our current system. Limited resources (beds, doctors, etc.) is a problem in the current system and are often rationed by paper pushers at your local HMO office. One can circumvent the process by paying for better insurance that gives more freedom, but the prices still go up if you choose to visit a relatively scarce expert like a specialist. And Steve Jobs recently reminded us that those with a private jet have a much better chance of finding a short line for that much needed organ transplant.
So let's make one thing clear: abuses and shortcomings of universal health care are really no different than those found in the current system. We're just making money less influential. It's an imperfect system for the masses rather than an ideal system for the few. But in a political system that is supposed to favor the majority, a new health care system should be a foregone conclusion.
But what to do?
Let's start by embracing the concept of government oversight. In the current market system, we hold our medical suppliers accountable through the legal system. If a doctor kills me through neglect (denial of services) or incompetence (faulty product) then my family can sue. Bad doctors are slowly removed from the system through the compilation of malpractice suits. Insurance companies, though much harder to get at, are also subject to these reviews. Government oversight is alive and well, only it takes place after the damage is done. In contrast, a universal health care system could allow for the speedy removal of inattentive or ineffective doctors. Even better, medical decisisons would not be based on the financial choices of the greedy few.
The key thing to realize in all of this is that health care is not the standard widget used in Economics. Health care is a means, not an end. When I purchase a new car, I know what I am getting, what the expectations are, and I can return the car if the promised results don't come to fruition. Health care, on the other hand, is intended to provide health, something it may or may not achieve. In either case, I can hardly "return" the care given to me if it fails to make me feel better. Doctors can't promise that a chronic condition will be cured or mitigated by the prescribed treatment. There are no knowns in the equation, and the all-powerful rational choice is denied to the consumer. Tell me, are there means for the economists to explain transactions in which so little is known by either party about the product exchanged?
Lines are the stuff nightmares are made of, but what's the harm? I don't think that medical services would be distributed on a first-come-first-serve basis, actually. Those seeking medical treatment would be evaluated at the first tier of the system. My itchy buttock would be deemed less crucial than your faulty heart valve, and I'd be in line after you. Presumably, you could visit your doctor 2 days after I did and still make it in line for treatment ahead of me. While my itchy buttock is frustrating, I daresay that I believe you should be ahead of me in line. But that supposes I value my community in a way that many Americans clearly do not.
So lines are precisely the way you address the issue, and to everyone's benefit. Yes, I have to wait for you to get heart surgery, but I also know that I'll be at the front of the line when my illness is life threatening. It's a concept so simple, so steeped in a basic fairness, that children would have implemented it long ago.
Such a system requires substantial resources, something I'm rather concerned about. How are we to fund such an enterprise, Anonymous Economist? Can we continue to assert international dominance and build such a comprehensive health care system at home? Must we keep our beating hearts wed to the market system if we are to survive?
Tuesday, July 28, 2009
How much is too much health care?
That is the central question of any redesign of the health care system. We only have so many doctors and hospital beds to go around so at some point we need to determine when care should be denied. Dealing with this issue is paramount and unavoidable (it is also ironic given the push for universal health care).
So how do we do it? Well suppose health care were completely free to the user but paid for by every member of society through taxes. Price or your luck with an employer would no longer be the rationing mechanism of health care (yippee!). Instead, health care would be rationed on a first come first serve basis, through the use of--you guessed it--lines. The biggest fear, of course, is the eventual overuse of the health care system to such an extent that many at Fox News and others would perish because of the long wait (thus fulfilling their own health care prophecy--on snap! Should have listened to Hannity when we had the chance).
Also, even if it is completely free to the user and assuming, for the moment, that it is completely free of corruption there still would be plenty of unequal access to health care based on an individual's proximity to shorter lines and proximity to health care of higher quality (sorry, Iowans, the Mayo clinic is a much longer drive for you).
Also, we know that overuse is a potential problem because Medicare recipients often misuse health care by going to the emergency room too often for medical assistance that could be administered more cheaply. When individuals are disconnected to the actual cost of services they are bound to overuse it. But that begs the question, how much, is too much health care?
When we use the market to ration the good, it all depends on the price people are willing and able to pay. Without price, it will depend on how long you are willing and able to wait.
Now, this could be just as effective--as long as you are not waiting for that defibrillator.
One final thought though, you could always have a bureaucrat or technocrat tell us how much health care is appropriate (brief pause while millions of Fox viewers gasp in horror). However, in many ways a bureaucrat might make better decisions than an insurance executive. After all, sick people can still bestow political power, but they are a total drain on health insurance company profits. Maybe that bureaucrat will have your best interest in mind (or your best interest in the sense that he or she needs to keep you just healthy enough to stuff the ballot box).
There is always rationing through random assignment. Heads I win, tails you get that colonoscopy you have always wanted.
So before you go diving in head first with your socialistic leanings, tell me truly, how are you going to prevent people from getting too much health care?
So how do we do it? Well suppose health care were completely free to the user but paid for by every member of society through taxes. Price or your luck with an employer would no longer be the rationing mechanism of health care (yippee!). Instead, health care would be rationed on a first come first serve basis, through the use of--you guessed it--lines. The biggest fear, of course, is the eventual overuse of the health care system to such an extent that many at Fox News and others would perish because of the long wait (thus fulfilling their own health care prophecy--on snap! Should have listened to Hannity when we had the chance).
Also, even if it is completely free to the user and assuming, for the moment, that it is completely free of corruption there still would be plenty of unequal access to health care based on an individual's proximity to shorter lines and proximity to health care of higher quality (sorry, Iowans, the Mayo clinic is a much longer drive for you).
Also, we know that overuse is a potential problem because Medicare recipients often misuse health care by going to the emergency room too often for medical assistance that could be administered more cheaply. When individuals are disconnected to the actual cost of services they are bound to overuse it. But that begs the question, how much, is too much health care?
When we use the market to ration the good, it all depends on the price people are willing and able to pay. Without price, it will depend on how long you are willing and able to wait.
Now, this could be just as effective--as long as you are not waiting for that defibrillator.
One final thought though, you could always have a bureaucrat or technocrat tell us how much health care is appropriate (brief pause while millions of Fox viewers gasp in horror). However, in many ways a bureaucrat might make better decisions than an insurance executive. After all, sick people can still bestow political power, but they are a total drain on health insurance company profits. Maybe that bureaucrat will have your best interest in mind (or your best interest in the sense that he or she needs to keep you just healthy enough to stuff the ballot box).
There is always rationing through random assignment. Heads I win, tails you get that colonoscopy you have always wanted.
So before you go diving in head first with your socialistic leanings, tell me truly, how are you going to prevent people from getting too much health care?
Sunday, July 19, 2009
Why is it that "one-size fits all" never really fits at all?
In this week's Newsweek, Sen. Ted Kennedy makes a passionate appeal for universal health care coverage in the United States. His mantra has always been that health care should be a right and not a privilege.
Admirable, yes.
However, in Sen. Kennedy's mind (or at least for this commentary in Newsweek), universal means that everyone has the same medical coverage that he had through his plane crash and now his current battle with brain cancer. Unfortunately, health care, like any other good or service, is a finite and constrained by money, time, people, and physical space (well. . .um. . . duh). Can we really expect everyone to get the same level of care as a prominent Senator or even a sitting President? Is this really what Sen. Kennedy means by "universal"?
Well. . .probably not.
So without further adieu here is my current question, what level of"universal" is ideal for our society? (That's right Jeffy, I am calling you out--where have you been man? Hopefully, walking the halls of Congress this minute lobbying for this issue or just having a nice relaxing summer, whatever;-).
Instead of debating what is actually in front of Congress right now (which is some 1,000 page document written in incomprehensible lawyer-eze). Let us play the role of the benevolent social planner and design a hypothetical structure to distribute health care (that sounds fun, right?). Others following this blog can play along at home as well.
To do this, we should think about what are the top three things we would like out of our health care system. Widespread coverage, strong incentives for innovation, high quality of care, effective utilization and treatment, low costs, etc. To achieve these goals we must think about what we would be willing to give up. For instance, less high quality care facilities for the sake of widespread coverage and usage or something along those line.
So tell me what you think, and then I will respond with my grand scheme to save our health care system (man, it is too bad that those bozos on the hill are not reading this blog--maybe we should twitter our final results or something).
Happy Social Planning! Hope to see a post soon.
Admirable, yes.
However, in Sen. Kennedy's mind (or at least for this commentary in Newsweek), universal means that everyone has the same medical coverage that he had through his plane crash and now his current battle with brain cancer. Unfortunately, health care, like any other good or service, is a finite and constrained by money, time, people, and physical space (well. . .um. . . duh). Can we really expect everyone to get the same level of care as a prominent Senator or even a sitting President? Is this really what Sen. Kennedy means by "universal"?
Well. . .probably not.
So without further adieu here is my current question, what level of"universal" is ideal for our society? (That's right Jeffy, I am calling you out--where have you been man? Hopefully, walking the halls of Congress this minute lobbying for this issue or just having a nice relaxing summer, whatever;-).
Instead of debating what is actually in front of Congress right now (which is some 1,000 page document written in incomprehensible lawyer-eze). Let us play the role of the benevolent social planner and design a hypothetical structure to distribute health care (that sounds fun, right?). Others following this blog can play along at home as well.
To do this, we should think about what are the top three things we would like out of our health care system. Widespread coverage, strong incentives for innovation, high quality of care, effective utilization and treatment, low costs, etc. To achieve these goals we must think about what we would be willing to give up. For instance, less high quality care facilities for the sake of widespread coverage and usage or something along those line.
So tell me what you think, and then I will respond with my grand scheme to save our health care system (man, it is too bad that those bozos on the hill are not reading this blog--maybe we should twitter our final results or something).
Happy Social Planning! Hope to see a post soon.
Tuesday, July 7, 2009
And the cat came back. . .
We thought she was a goner. But then she resigned as governor for her big book tour/I need to pay off all of the legal bills because I have been politically massacred trip across the U.S. of A.
Yup. Palin makes politics interesting (interesting as in, you never really quite know what is going to come out of her mouth at any given time interesting). And that is the real reason she will be around in 2012. Either as a pundit or a candidate, she will be making references to soccer-joes and six-pack-mamas, errr, I mean. . .well, you get the picture. The fact remains that people are just drawn to her--just like the way people root for an underdog. Or the way people watch American Idol, but only for the really really bad singers. I mean come on, who wants to watch Romney and the Newt duke it out over fiscal policy and health care.
The latest editorial from Douthat, claims that Palin's defeat represents the destruction of the ideal that anyone--truly anyone--can become President of the United States. A class war raised by the elites to keep the common man (or woman) down.
Hey Douthat: I doubt that! (Ha!)
I think she was just a pawn in the Republicans sceem to keep the Presidency and she was so strongly embraced by the right because she was rejected by liberals and pundits alike. That ideal was never there to begin with on the Republicans side--it was all an illusion (the true trick of the elites to keep the common man and woman down). Just like that plummer guy. Liberals rejected his journalistic know-how and his in-depth political analysis because he had no qualifications or talent. And Republicans embraced him--to keep up the illusion. Not because his analysis was really that good or that they really cared what he actually said but rather because liberals hated him. Similarily they embrace Palin, not because she is qualified or they believe she could make a good Vice President, but because of liberals' distain for her.
The enemy of my enemy is my friend. Who cares what she stands for. Republicans will allow a common man or woman to be President, only if they advance the will of the elite. And if you can convince people you are for the common man or woman in the process--all the better.
No real question here. Just a random political rant.
Ok, putting my soapbox away now.
Yup. Palin makes politics interesting (interesting as in, you never really quite know what is going to come out of her mouth at any given time interesting). And that is the real reason she will be around in 2012. Either as a pundit or a candidate, she will be making references to soccer-joes and six-pack-mamas, errr, I mean. . .well, you get the picture. The fact remains that people are just drawn to her--just like the way people root for an underdog. Or the way people watch American Idol, but only for the really really bad singers. I mean come on, who wants to watch Romney and the Newt duke it out over fiscal policy and health care.
The latest editorial from Douthat, claims that Palin's defeat represents the destruction of the ideal that anyone--truly anyone--can become President of the United States. A class war raised by the elites to keep the common man (or woman) down.
Hey Douthat: I doubt that! (Ha!)
I think she was just a pawn in the Republicans sceem to keep the Presidency and she was so strongly embraced by the right because she was rejected by liberals and pundits alike. That ideal was never there to begin with on the Republicans side--it was all an illusion (the true trick of the elites to keep the common man and woman down). Just like that plummer guy. Liberals rejected his journalistic know-how and his in-depth political analysis because he had no qualifications or talent. And Republicans embraced him--to keep up the illusion. Not because his analysis was really that good or that they really cared what he actually said but rather because liberals hated him. Similarily they embrace Palin, not because she is qualified or they believe she could make a good Vice President, but because of liberals' distain for her.
The enemy of my enemy is my friend. Who cares what she stands for. Republicans will allow a common man or woman to be President, only if they advance the will of the elite. And if you can convince people you are for the common man or woman in the process--all the better.
No real question here. Just a random political rant.
Ok, putting my soapbox away now.
Tuesday, May 26, 2009
Mid-Century Madness
The Story of Stuff is a great online piece. I think I will use it in my class, it will be a great contrast to the traditional circular flow model which is standard in every intro textbook.
It is rather odd, though, that the piece hearkens back to the "good ol' days" of the 1950s. I guess it was a simpler time really, when lead was in our gasoline and paint, asbestos was the flame retardant of choice, mercury was a fun thing to play with in chemistry class, and Valium kept the nuclear family happy. O how times have changed. Apparently women were happier then too (check out this editorial in the NY Times and tell me what you think).
All in all, I think it raises some important questions about our economic behavior and draws the conclusion that--gasp!--maybe our consumption decisions are not as rational as they could be.
So what is preventing people for being rational?
Lack of information?
Maybe. But even with some sort of simple rating system (4-star for labor relations or some label indicating "greener" production habits) it is hard to say if people would respond. Organic local produce is good, but price is still king. I say information is not enough, the price of goods must reflect its true cost in terms of all of its externalities.
How do we measure the true production costs of a good?
Ok, this one is pretty tough. How much is clean air worth to us? Clean water? What about improved labor standards? What wage level is an adequate wage level (ask Krugman or Kristof about this one)? Should the government set the price directly (yuck) or influence industry with market games like a cap-and-trade program for emissions?
Even if we adjust prices to match the true costs, do advertisers really have such a powerful pull on the consumers' behavior--enough to make them behave irrationally?
Some might say keeping up with fashion gives one a false sense of happiness. But who's to judge, really? Can we really judge everyone's purchases with one stardard? Just because dippy hippies buy thrift store clothes doesn't mean everyone should buy them. Afterall (as you are well aware), wearing thrift clothes can be a sign of status too (just in a different way). Different strokes for different folks, right? Or is one group being douped while the other has seen the light of true consumption happiness?
What about you, Jeffy? Are you happy with your recent purchases? Take a moment and think of the top 5 material goods that make you happy. Then list the 5 most expensive things you have ever purchased. Do they match up?
Here is my list (in no particular order):
Happy
1)Beach Vacations
2)Eating out
3)My computer
4)Grill
5)Tennis Racket
Expenses
1)Car
2)Computer
3)Glasses
4)New Bed
5)New Carpet
It is rather odd, though, that the piece hearkens back to the "good ol' days" of the 1950s. I guess it was a simpler time really, when lead was in our gasoline and paint, asbestos was the flame retardant of choice, mercury was a fun thing to play with in chemistry class, and Valium kept the nuclear family happy. O how times have changed. Apparently women were happier then too (check out this editorial in the NY Times and tell me what you think).
All in all, I think it raises some important questions about our economic behavior and draws the conclusion that--gasp!--maybe our consumption decisions are not as rational as they could be.
So what is preventing people for being rational?
Lack of information?
Maybe. But even with some sort of simple rating system (4-star for labor relations or some label indicating "greener" production habits) it is hard to say if people would respond. Organic local produce is good, but price is still king. I say information is not enough, the price of goods must reflect its true cost in terms of all of its externalities.
How do we measure the true production costs of a good?
Ok, this one is pretty tough. How much is clean air worth to us? Clean water? What about improved labor standards? What wage level is an adequate wage level (ask Krugman or Kristof about this one)? Should the government set the price directly (yuck) or influence industry with market games like a cap-and-trade program for emissions?
Even if we adjust prices to match the true costs, do advertisers really have such a powerful pull on the consumers' behavior--enough to make them behave irrationally?
Some might say keeping up with fashion gives one a false sense of happiness. But who's to judge, really? Can we really judge everyone's purchases with one stardard? Just because dippy hippies buy thrift store clothes doesn't mean everyone should buy them. Afterall (as you are well aware), wearing thrift clothes can be a sign of status too (just in a different way). Different strokes for different folks, right? Or is one group being douped while the other has seen the light of true consumption happiness?
What about you, Jeffy? Are you happy with your recent purchases? Take a moment and think of the top 5 material goods that make you happy. Then list the 5 most expensive things you have ever purchased. Do they match up?
Here is my list (in no particular order):
Happy
1)Beach Vacations
2)Eating out
3)My computer
4)Grill
5)Tennis Racket
Expenses
1)Car
2)Computer
3)Glasses
4)New Bed
5)New Carpet
Saturday, May 23, 2009
Wednesday, May 13, 2009
Less is More
That seems rational, no?
There certainly are trends out there that run counter to the bigger is better and more is always preferable to less philosophy (another example is this not-so-big house architectural movement). In light of all this, I think the key question is will we change our behavior in time before we bury ourselves in widgets and do-hickies?
The economist in me screams "yes". In my little theoretical world we are all just happiness maximizers and we are also capable of looking into the future. We SHOULD be able to avoid the grim future predicted by Disney & Pixar's Wall-e (boy, that movie was a tough one to sell through merchandizing). But then again, we live in a world were someone can make lots of money as an expert on clutter--just look at this Peter Walsh guy on Oprah.
What will provide the best incentive for more efficient consumption? Will it take something drastic and catastrophic to change our behavior or will we be forward looking enough to change on our own and avoid disaster? And can we really ever be efficient consumers if we are always bombarded with advertisments?
Well, I think we are capable of change and avoiding catastrophe (see Malthus). After all, having less stuff is cheaper and certainly very freeing. The whole green movement is certainly taking shape rather quickly (I have never seen so many compact florescent lights at Lowes). However, a little nudge from big brother doesn't hurt. Let's keep that tax incentive for hybrid cars, shall we?
There certainly are trends out there that run counter to the bigger is better and more is always preferable to less philosophy (another example is this not-so-big house architectural movement). In light of all this, I think the key question is will we change our behavior in time before we bury ourselves in widgets and do-hickies?
The economist in me screams "yes". In my little theoretical world we are all just happiness maximizers and we are also capable of looking into the future. We SHOULD be able to avoid the grim future predicted by Disney & Pixar's Wall-e (boy, that movie was a tough one to sell through merchandizing). But then again, we live in a world were someone can make lots of money as an expert on clutter--just look at this Peter Walsh guy on Oprah.
What will provide the best incentive for more efficient consumption? Will it take something drastic and catastrophic to change our behavior or will we be forward looking enough to change on our own and avoid disaster? And can we really ever be efficient consumers if we are always bombarded with advertisments?
Well, I think we are capable of change and avoiding catastrophe (see Malthus). After all, having less stuff is cheaper and certainly very freeing. The whole green movement is certainly taking shape rather quickly (I have never seen so many compact florescent lights at Lowes). However, a little nudge from big brother doesn't hurt. Let's keep that tax incentive for hybrid cars, shall we?
Wednesday, May 6, 2009
How much RAM should my hairbrush have?
Okay, so I never made it back to comment on greed. However, you anticipated where I was going and made your case. Horrifically, I don't think the quality of that conversation suffered from my absence!
I think you make some excellent points on material acquisition. No government is going to lead the way on this one, and I strongly encourage you and our readers to take a look at the voluntary simplicity movement. Sometimes called "mindful living" or "deliberate living," there is already an increasing number of people looking to scale back on what they bring into their lives. Take a few minutes to Google "voluntary simplicity" or check out Voluntary Simplicity by Duane Elgin. Many in movement see this book as the bible. While some people take this concept to its extreme, there is definitely something to be gained by embracing these concepts in our own lives.
The one thing I have to wonder about is whether our modern wants are satiable. From reading I've done over the years, my understanding is that our consumerism has evolved over time. Initially, we bought in order to have life necessities like food, clothing and shelter. At this point, demand for these items would never vanish, and luxury items were rare and expensive. Demand was steady and production was costly. By the time you hit the early 20th century and mass production took root, the ability to satisfy demand emerged as an economic problem. Automobile manufacturers, in particular, recognized that there would soon be a car in every garage, and demand would drop precipitously. In response, they created the era of consumer identity. "Yes, you have a car, but given your latest promotion at work, shouldn't you really upgrade to the Cadillac?" (Feel free to weigh in, AnonEcon. My summary may be inaccurate or overly simplistic. I yield to your expertise.)
This mindset has dominated our economy for most of our lives. Our drive to consume became less physical (I'm cold, hungry, and sick) and became more social (I want to be loved, admired, and respected). But now, I sense another fundamental shift is taking place in our approach to consumption. Slowly, we're forgetting about our physical and social motivations for consumption. We now simply consume to...well...consume.
Ultimately, wants can only be saturated if they are driven by some external purpose with a finite goal. I can have enough to eat. I can feel sufficiently admired within my community. However, when the drive is simply to buy the latest item because it is available, the demand is generated by the creation of the product. The demand is the product. And while there may be a limit to the number of cellphones that I want to own, there is no limit to how many cellphones I will buy sequentially as part of my responsibility to upgrade. Further, since I have no external measure by which to evaluate these upgrades, I must pursue all of them. All enhancements are equal if the goal is simply to enhance.
All that said, I do believe it is possible to reform our consumption. In many ways, this will have to be a personal revolution, one in which the individual shrugs off the mantle of "consumer" and defines a life purpose outside of the market. Consumption will serve our larger goals, not replace them.
Given that this will not be easy, and needs to take place on an individual level, how shall we approach this, AnonEcon? How can we effectively break free from the habit of unnecessary consumption? Will the economy suffer from responsible living, as we are told? Can we afford not to change?
I think you make some excellent points on material acquisition. No government is going to lead the way on this one, and I strongly encourage you and our readers to take a look at the voluntary simplicity movement. Sometimes called "mindful living" or "deliberate living," there is already an increasing number of people looking to scale back on what they bring into their lives. Take a few minutes to Google "voluntary simplicity" or check out Voluntary Simplicity by Duane Elgin. Many in movement see this book as the bible. While some people take this concept to its extreme, there is definitely something to be gained by embracing these concepts in our own lives.
The one thing I have to wonder about is whether our modern wants are satiable. From reading I've done over the years, my understanding is that our consumerism has evolved over time. Initially, we bought in order to have life necessities like food, clothing and shelter. At this point, demand for these items would never vanish, and luxury items were rare and expensive. Demand was steady and production was costly. By the time you hit the early 20th century and mass production took root, the ability to satisfy demand emerged as an economic problem. Automobile manufacturers, in particular, recognized that there would soon be a car in every garage, and demand would drop precipitously. In response, they created the era of consumer identity. "Yes, you have a car, but given your latest promotion at work, shouldn't you really upgrade to the Cadillac?" (Feel free to weigh in, AnonEcon. My summary may be inaccurate or overly simplistic. I yield to your expertise.)
This mindset has dominated our economy for most of our lives. Our drive to consume became less physical (I'm cold, hungry, and sick) and became more social (I want to be loved, admired, and respected). But now, I sense another fundamental shift is taking place in our approach to consumption. Slowly, we're forgetting about our physical and social motivations for consumption. We now simply consume to...well...consume.
Ultimately, wants can only be saturated if they are driven by some external purpose with a finite goal. I can have enough to eat. I can feel sufficiently admired within my community. However, when the drive is simply to buy the latest item because it is available, the demand is generated by the creation of the product. The demand is the product. And while there may be a limit to the number of cellphones that I want to own, there is no limit to how many cellphones I will buy sequentially as part of my responsibility to upgrade. Further, since I have no external measure by which to evaluate these upgrades, I must pursue all of them. All enhancements are equal if the goal is simply to enhance.All that said, I do believe it is possible to reform our consumption. In many ways, this will have to be a personal revolution, one in which the individual shrugs off the mantle of "consumer" and defines a life purpose outside of the market. Consumption will serve our larger goals, not replace them.
Given that this will not be easy, and needs to take place on an individual level, how shall we approach this, AnonEcon? How can we effectively break free from the habit of unnecessary consumption? Will the economy suffer from responsible living, as we are told? Can we afford not to change?
Monday, May 4, 2009
Because we are liv--ing in a material world,
But do we really need all of this stuff?
Growing up, I remember my parents complaining a lot about being overwhelmed with stuff. And now that I have earned the title "Papa," my battle with stuff is just beginning. It is amazing how much plastic we have in the house, even when we take bags and bags out. Sell stuff on Craig's list, donate to charity, or just plain trash it--it is an endless cycle of consumerism and waste. Yipee!
In my consumerist daze, I have come to the following realization: I aspire to have less stuff than my parents (sorry American economy). Now this post is not about living like a Buddhist monk or something, rather it is call to rethink our approach to economic growth. Following 9/11 Bush told us all to go shopping to save our economy. Local signs around town say "shop local, spend now, save the economy." But creating an economy that is totally dependent on consumers insatiable wants will eventually hit a wall. Why? Because, even though economist refuse to admit it, some of consumers "wants" are eventually satiable. Yup. There are only so many of these cell phone/PDA/iphone/mp3/back massagers that people will want. Producers must find ways to manufacture more wants in order to keep up the production.
Now that the economy is in recession, maybe some people will realize that it is possible to be truly happy with less stuff. It sounds unAmerican I know, but the quest for happiness and the quest for stuff are only partially correlated. For a developed country like the US, maybe its time to measure the quality of an economy by something other than just counting stuff. Because I certainly would be happy with less (I would also be happy to get from one side of my house to another without stepping on something plastic with wheels).
Can we redefine the American dream? Something like this needs a movement and not a government program. Let me know Jeffy.
Growing up, I remember my parents complaining a lot about being overwhelmed with stuff. And now that I have earned the title "Papa," my battle with stuff is just beginning. It is amazing how much plastic we have in the house, even when we take bags and bags out. Sell stuff on Craig's list, donate to charity, or just plain trash it--it is an endless cycle of consumerism and waste. Yipee!
In my consumerist daze, I have come to the following realization: I aspire to have less stuff than my parents (sorry American economy). Now this post is not about living like a Buddhist monk or something, rather it is call to rethink our approach to economic growth. Following 9/11 Bush told us all to go shopping to save our economy. Local signs around town say "shop local, spend now, save the economy." But creating an economy that is totally dependent on consumers insatiable wants will eventually hit a wall. Why? Because, even though economist refuse to admit it, some of consumers "wants" are eventually satiable. Yup. There are only so many of these cell phone/PDA/iphone/mp3/back massagers that people will want. Producers must find ways to manufacture more wants in order to keep up the production.
Now that the economy is in recession, maybe some people will realize that it is possible to be truly happy with less stuff. It sounds unAmerican I know, but the quest for happiness and the quest for stuff are only partially correlated. For a developed country like the US, maybe its time to measure the quality of an economy by something other than just counting stuff. Because I certainly would be happy with less (I would also be happy to get from one side of my house to another without stepping on something plastic with wheels).
Can we redefine the American dream? Something like this needs a movement and not a government program. Let me know Jeffy.
Sunday, April 19, 2009
You can take the boy out of the country. . .
But can you really blame him for his actions even if he is not in his natural state?
Um. . .well. . .yes.
Since I never did take the Philosophy 101 course at Black Squirrel U, I will admit that my answer is probably naive, so tell me Jeffy, why is this so important? Suppose this crazy material world around us is not our true natural state, then are we any less responsible for our actions? In contrast, suppose this really is our natural state, after all, it is a world (at least in part) made by human hands. Does that imply we are fully responsible for the consequences of our unbridled greed? Or even worse, that this type of instability is an inevitable part of human nature.
I think the question I am getting at is can we be good without big brother watching? Do we need some formal bureaucratic structure that enforces an altruistic agenda within the market (if that is even possible). Is more government regulation necessary to keep that greed in check?
I know the liberal in you is saying yes of course we need to federal government to watch out for the little guy, but I want to focus on the motives for exchange within a market and not ensuring human and political rights (We will assume that Obama is capable of advancing those rights although we will soon see once this whole torture issue plays out).
Man, I need to get some tea to think this through--damn it--why is the price of tea so high?
Stupid tea parties. Where were these "patriots" when we were spending billions of dollars in Iraq for no good reason? Is the thought of spending money on health care, education, and infrastructure really that appalling? Man, I need to get off this soap box and get a coffee.
Um. . .well. . .yes.
Since I never did take the Philosophy 101 course at Black Squirrel U, I will admit that my answer is probably naive, so tell me Jeffy, why is this so important? Suppose this crazy material world around us is not our true natural state, then are we any less responsible for our actions? In contrast, suppose this really is our natural state, after all, it is a world (at least in part) made by human hands. Does that imply we are fully responsible for the consequences of our unbridled greed? Or even worse, that this type of instability is an inevitable part of human nature.
I think the question I am getting at is can we be good without big brother watching? Do we need some formal bureaucratic structure that enforces an altruistic agenda within the market (if that is even possible). Is more government regulation necessary to keep that greed in check?
I know the liberal in you is saying yes of course we need to federal government to watch out for the little guy, but I want to focus on the motives for exchange within a market and not ensuring human and political rights (We will assume that Obama is capable of advancing those rights although we will soon see once this whole torture issue plays out).
Man, I need to get some tea to think this through--damn it--why is the price of tea so high?
Stupid tea parties. Where were these "patriots" when we were spending billions of dollars in Iraq for no good reason? Is the thought of spending money on health care, education, and infrastructure really that appalling? Man, I need to get off this soap box and get a coffee.
Saturday, April 18, 2009
All natural with no preservatives
Well, this may not make for a good post, but I think we need to take a step back from where you're starting with this question of greed.
Namely, we need to determine if human beings are in a natural state in the industrialized society of the 21st century. Would you accept that all of the technology that envelopes us and significantly alters our existence is but an extension of our natural abilities and makes this a natural state of existence? On the other hand, has mankind wandered from the Sub-Saharan Africa to a completely contrived system in which evolution has, to at least some degree, been deprived on the necessary feedback to progress?
Your thoughts on this, I think, lead to different interpretations of greed in our society, especially in our moral interpretation of it. I'll be happy to share both views, but we'll need some money on the table before I spin the wheel, AnonEcon.
Namely, we need to determine if human beings are in a natural state in the industrialized society of the 21st century. Would you accept that all of the technology that envelopes us and significantly alters our existence is but an extension of our natural abilities and makes this a natural state of existence? On the other hand, has mankind wandered from the Sub-Saharan Africa to a completely contrived system in which evolution has, to at least some degree, been deprived on the necessary feedback to progress?
Your thoughts on this, I think, lead to different interpretations of greed in our society, especially in our moral interpretation of it. I'll be happy to share both views, but we'll need some money on the table before I spin the wheel, AnonEcon.
Sunday, April 12, 2009
The Middle Road
In Frank Rich's piece, coincidentally entitled "Awake and Sing" on this Easter morning , he appears to be making the rather obvious point that the world is irreparably different in a post-TARP era. I have certainly felt more like an actor at the improv and less like an experienced instructor when I teach my class about the role of the Federal Reserve in our free-market economy. Rich argues that the new trend among Obama and others is to inspire a new generation of college graduates to seek a career that fulfills a "higher calling" and not just "higher" in the sense of a salary.
While this thought is very warm and fuzzy and while it is true that the rules have changed now in the market, greed will still remain a very primal and powerful incentive that drives people's decisions. Instead of trying to convince people to avoid greed altogether, we need to inspire a balance between self-interest and the altruistic motive. A middle road if you will. On the middle road, greed is still rewarded to the extent that it inspires innovation and efficiency but excessive greed is effectively discouraged.
How? Well, it all depends on the inevitability of excessive greed. Which leads me to a series of unanswerable questions just for you Jeffy: Do you think greed is built into our human DNA? Do you think we also have an altruistic motive built in? If not, do we have to rely on public pressure and government institutions to ensure we don't kill ourselves with greed?
I believe both motives are inherent in our genetic make-up which is why I have some faith in market mechanisms. However, Wall Street was a culture out of balance and unstable, a culture where markets cannot thrive. We need a middle road to achieve growth, prosperity, and stability--at least that will be the main point of my next best-selling book ;-).
While this thought is very warm and fuzzy and while it is true that the rules have changed now in the market, greed will still remain a very primal and powerful incentive that drives people's decisions. Instead of trying to convince people to avoid greed altogether, we need to inspire a balance between self-interest and the altruistic motive. A middle road if you will. On the middle road, greed is still rewarded to the extent that it inspires innovation and efficiency but excessive greed is effectively discouraged.
How? Well, it all depends on the inevitability of excessive greed. Which leads me to a series of unanswerable questions just for you Jeffy: Do you think greed is built into our human DNA? Do you think we also have an altruistic motive built in? If not, do we have to rely on public pressure and government institutions to ensure we don't kill ourselves with greed?
I believe both motives are inherent in our genetic make-up which is why I have some faith in market mechanisms. However, Wall Street was a culture out of balance and unstable, a culture where markets cannot thrive. We need a middle road to achieve growth, prosperity, and stability--at least that will be the main point of my next best-selling book ;-).
Wednesday, April 8, 2009
So, this morning I found out that Kal Penn, an actor who has been a regular on House, M.D. for awhile, will be transitioning to the White House. According to sources of unsubstantiated credibility, Penn will serve in the Office of Public Liaison & Intergovernmental Affairs to help reach out to Asian Americans. Looking at his education, he appears to have an undergraduate degree in sociology and film, and he's dabbled in some online graduate classes at Stanford.
Let's be fair about things. If this were a Republican administration, my left-leaning brethren would be appalled at such blatant cronyism. How does someone with such a pitifully irrelevant resume suddenly find himself with a position in the highest government office in the country? Was there really no other qualified candidate? I have an ENTIRE GRADUATE DEGREE. My phone never rang. Let's bring in the army of PhDs graduating this year and last in relevant fields who would like to apply for a job in the White House. NONE of them could beat out a random actor?
Putting unqualified people into public office because it's fun to show off for your friends is not change in which I can believe.
Let's be fair about things. If this were a Republican administration, my left-leaning brethren would be appalled at such blatant cronyism. How does someone with such a pitifully irrelevant resume suddenly find himself with a position in the highest government office in the country? Was there really no other qualified candidate? I have an ENTIRE GRADUATE DEGREE. My phone never rang. Let's bring in the army of PhDs graduating this year and last in relevant fields who would like to apply for a job in the White House. NONE of them could beat out a random actor?
Putting unqualified people into public office because it's fun to show off for your friends is not change in which I can believe.
Wednesday, March 25, 2009
All animals are equal. . .but some
have been exposed to Orwellian thinking a little too early in their life ;-).
Clearly, the enviable outcome from a market system is a society full of winners and losers. And when I say losers, I mean it in a very harsh sense. The market is cold and uncaring in its allocation decisions, there is no doubt about that. Further, beyond the ability to win and win big, the fear of losing everything is also a powerful incentive to motivate individuals to be productive within the market (or to lobby the government for bailout funds).
Although I do not have an answer to your bigger question about how to both encourage and control greed, this tension between how much the government should control and how much should be left to the market control is very real for policymakers. Of course, we all now know that the government was not willing to take a gamble on AIG failing. The potential number of losers created from that failure was far too great for most politicians.
But now that the deed is done, we seem to be experiencing quite a fallout over these bonuses. Many Americans want these fat cats to pay back these big bonuses as retribution--to make sure they are the losers. But that fact is, these people will never be the losers. They have too much talent (at making money in the market) and too many connections in society to let that happen--ever--even if you take away those bonuses.
The losers in the scenario are not those on the top, they will survive this crisis just find. Instead, the government needs to focus on the individuals at the bottom. They lose without even playing the game (or knowing the rules). We must ensure a basic standard of living for all individuals including health care, food and shelter, and rewarding employment opportunities. These must be paid for with a progressive tax system. Because although we cannot control greed completely with government regulation at least we can protect ourselves from the fall out. Because the market will not protect the losers, even if they did not even know they were playing in the game.
Clearly, the enviable outcome from a market system is a society full of winners and losers. And when I say losers, I mean it in a very harsh sense. The market is cold and uncaring in its allocation decisions, there is no doubt about that. Further, beyond the ability to win and win big, the fear of losing everything is also a powerful incentive to motivate individuals to be productive within the market (or to lobby the government for bailout funds).
Although I do not have an answer to your bigger question about how to both encourage and control greed, this tension between how much the government should control and how much should be left to the market control is very real for policymakers. Of course, we all now know that the government was not willing to take a gamble on AIG failing. The potential number of losers created from that failure was far too great for most politicians.
But now that the deed is done, we seem to be experiencing quite a fallout over these bonuses. Many Americans want these fat cats to pay back these big bonuses as retribution--to make sure they are the losers. But that fact is, these people will never be the losers. They have too much talent (at making money in the market) and too many connections in society to let that happen--ever--even if you take away those bonuses.
The losers in the scenario are not those on the top, they will survive this crisis just find. Instead, the government needs to focus on the individuals at the bottom. They lose without even playing the game (or knowing the rules). We must ensure a basic standard of living for all individuals including health care, food and shelter, and rewarding employment opportunities. These must be paid for with a progressive tax system. Because although we cannot control greed completely with government regulation at least we can protect ourselves from the fall out. Because the market will not protect the losers, even if they did not even know they were playing in the game.
Wednesday, March 18, 2009
In Greed We Trust...
"Greed" is definitely the buzzword of the day. Whether you're talking retention bonuses, sub-prime mortgages, or Ponzi schemes, greed is what we've got going on.
The irony, as you point out, is that while we've been completely swallowed by the fallout of a system that is governed by greed, the prevailing wisdom seems to be that unleashing just a little more avarice will put us back on track. If drenching your house in gasoline makes it prone to fires, surely the proper remedy is more gas.
Market worship is one of the greatest scams of modern times. When times are bad enough to make it on the local news, we all become a little more aware of the dangers of unbridled capitalism. However, what we fail to realize is that fundamentally, nothing has changed. What we're witnessing is just a shift in the ratios inherent to the status quo. When prosperous people outnumber the poor 10:1, then times are good. When it's the reverse, times are bad. But if you're that 1 that is poor in both situations, is there any difference? How can we morally justify our willingness to qualify prosperity in disregard of the casualties?
Capitalism is the cult of concentration. The goal is to get as much disparity as possible in order to maximize the leverage. The trick, when economics meets politics, is to keep just enough people prospering so that they remain wonderfully indifferent to the suffering of others. At best, however, it's disingenuous for our society to pretend as though capitalism has only started hurting people because of some bad bankers. We're just uncomfortable because fewer of us are still perpetrators.
As you guessed, your last paragraph is most interesting to me. I don't quite understand how you're limiting the greed in your system, though. Truly, I think the only way to do that, and something I'd support, is to eliminate disparity. Greed is only a problem when people believe they can hold onto the piles of money they take from others. If you were not allowed to have more than your share and the rule is enforced, the incentive to stomp on others is removed.
So, what were you planning to do, Mr. Economist?
PS -- I think we can both agree that Obama is not a socialist, no matter how much I might hope for it.
The irony, as you point out, is that while we've been completely swallowed by the fallout of a system that is governed by greed, the prevailing wisdom seems to be that unleashing just a little more avarice will put us back on track. If drenching your house in gasoline makes it prone to fires, surely the proper remedy is more gas.
Market worship is one of the greatest scams of modern times. When times are bad enough to make it on the local news, we all become a little more aware of the dangers of unbridled capitalism. However, what we fail to realize is that fundamentally, nothing has changed. What we're witnessing is just a shift in the ratios inherent to the status quo. When prosperous people outnumber the poor 10:1, then times are good. When it's the reverse, times are bad. But if you're that 1 that is poor in both situations, is there any difference? How can we morally justify our willingness to qualify prosperity in disregard of the casualties?Capitalism is the cult of concentration. The goal is to get as much disparity as possible in order to maximize the leverage. The trick, when economics meets politics, is to keep just enough people prospering so that they remain wonderfully indifferent to the suffering of others. At best, however, it's disingenuous for our society to pretend as though capitalism has only started hurting people because of some bad bankers. We're just uncomfortable because fewer of us are still perpetrators.
As you guessed, your last paragraph is most interesting to me. I don't quite understand how you're limiting the greed in your system, though. Truly, I think the only way to do that, and something I'd support, is to eliminate disparity. Greed is only a problem when people believe they can hold onto the piles of money they take from others. If you were not allowed to have more than your share and the rule is enforced, the incentive to stomp on others is removed.
So, what were you planning to do, Mr. Economist?
PS -- I think we can both agree that Obama is not a socialist, no matter how much I might hope for it.
Friday, March 13, 2009
All we need is greed?
Dum da da da da. . .
Well, Jeffy this just in. . .
Uncovered by Politico.com: proof positive that the sitting American President is clearly not a socialist (see "White House: Greed Will Help"). So Obama, Summers, and company seem to be hinting that it is a great time to start buying stock. After all, prior performance is not always a good predictor of future growth--wink, wink.
But can the invisible hand really save us? When you look at Jon Stewart's seething indictment of Jim Cramer and all that CNBC stands for, it is hard to imagine that the same set of incentives that got us into this mess could be our saving grace. Clearly, the invisible hand apparently has no inner moral compass in determining winners and losers (even though, ironically, the invisible hand is a reference to God made by Adam Smith to help float the idea of a society arranged by markets, but I am sure you are tired of me telling you that).
So how do we ensure that greed will be used for good and not for evil? It just doesn't seem possible, after all, it is one of the seven deadly sins you know. But greed is a powerful incentive capable of inspiring new ideas and innovation. Often times more powerful than laws, bureaucrats, and warm-fuzzy ideologies. In addition, greed, like absolute power, is too dangerous to go unchecked. However, any limitation alters its power as an incentive.
So how to proceed?
Well, I think (oh, baby, you are going to love this Jeffy) maybe greed should be like a civil right. The right to pursue happiness for the sake of greed if you will. And just like civil rights, your right to greed should end at the end of my nose. In the context of a market, when people are pursuing their own self-interests, the only time we will get an optimal outcome is if no one individual can overpower anyone else. Greed is in check. The only problem is that, driven by greed, the ultimate goal for individuals in the market is to overpower it (i.e. control the price). Therefore, if we stick with this market system, instability will always be with us. Considering the fruits of capitalism (efficiency, innovation, basically lots of really cool material goods for cheap), is this worth it?
Ball is in your court Jeff-o.
Well, Jeffy this just in. . .
Uncovered by Politico.com: proof positive that the sitting American President is clearly not a socialist (see "White House: Greed Will Help"). So Obama, Summers, and company seem to be hinting that it is a great time to start buying stock. After all, prior performance is not always a good predictor of future growth--wink, wink.
But can the invisible hand really save us? When you look at Jon Stewart's seething indictment of Jim Cramer and all that CNBC stands for, it is hard to imagine that the same set of incentives that got us into this mess could be our saving grace. Clearly, the invisible hand apparently has no inner moral compass in determining winners and losers (even though, ironically, the invisible hand is a reference to God made by Adam Smith to help float the idea of a society arranged by markets, but I am sure you are tired of me telling you that).
So how do we ensure that greed will be used for good and not for evil? It just doesn't seem possible, after all, it is one of the seven deadly sins you know. But greed is a powerful incentive capable of inspiring new ideas and innovation. Often times more powerful than laws, bureaucrats, and warm-fuzzy ideologies. In addition, greed, like absolute power, is too dangerous to go unchecked. However, any limitation alters its power as an incentive.
So how to proceed?
Well, I think (oh, baby, you are going to love this Jeffy) maybe greed should be like a civil right. The right to pursue happiness for the sake of greed if you will. And just like civil rights, your right to greed should end at the end of my nose. In the context of a market, when people are pursuing their own self-interests, the only time we will get an optimal outcome is if no one individual can overpower anyone else. Greed is in check. The only problem is that, driven by greed, the ultimate goal for individuals in the market is to overpower it (i.e. control the price). Therefore, if we stick with this market system, instability will always be with us. Considering the fruits of capitalism (efficiency, innovation, basically lots of really cool material goods for cheap), is this worth it?
Ball is in your court Jeff-o.
Thursday, March 5, 2009
A good way to invest in times of trouble. . .
Check out this website on socially responsible investing. With this strategy, even if you lose all your money in the stock market, at least you supported socially responsible businesses.
It gets my vote for a "Cuttin' the Mustard" award (TM).
Ok, I will stop blogging now.
It gets my vote for a "Cuttin' the Mustard" award (TM).
Ok, I will stop blogging now.
The Radical Centrist
Obama is clearly not a socialist. But there is a populist backlash rising in America and his pro-market, centrist, non-divisive approach has run into this growing outrage. It is political suicide not to respond or, at the very least, appear to be supportive of this growing wave of anger and outrage (i.e. just look at those Republicans, they seem to be doing just great;).
Unfortunately, I think he is burning the candle at both ends so to speak. On the one hand, he is aggressively laying out plans to subsidize green technology, pour more money into schools, revamp the health care system, and come to the aid of individual homeowners faced with foreclosure. But on the other hand, he is probably going to ask Congress for more money for the likes of AIG and GM. In addition, he is desperately trying to avoid nationalizing banks (although at this point some level of nationalization is inevitable and to some extent has already happened).
Ultimately, he is trying to do everything in a hope that something will stick (just look over the content of that stimulus bill). The lingering question with all of this is how long can Obama walk this tight rope between quelling populist outrage while still bolstering Wall Street? So far, Obama seems to be the right radical centrist for the job, but popular opinion can change quickly--especially if the economy continues to spiral downward. Pressure may build for him to make a choice, which makes me very grateful that I am just a lowly teacher of the dismal science.
Unfortunately, I think he is burning the candle at both ends so to speak. On the one hand, he is aggressively laying out plans to subsidize green technology, pour more money into schools, revamp the health care system, and come to the aid of individual homeowners faced with foreclosure. But on the other hand, he is probably going to ask Congress for more money for the likes of AIG and GM. In addition, he is desperately trying to avoid nationalizing banks (although at this point some level of nationalization is inevitable and to some extent has already happened).
Ultimately, he is trying to do everything in a hope that something will stick (just look over the content of that stimulus bill). The lingering question with all of this is how long can Obama walk this tight rope between quelling populist outrage while still bolstering Wall Street? So far, Obama seems to be the right radical centrist for the job, but popular opinion can change quickly--especially if the economy continues to spiral downward. Pressure may build for him to make a choice, which makes me very grateful that I am just a lowly teacher of the dismal science.
Sunday, March 1, 2009
Super Obama, indeed!
Did you happen to catch the weekly address? This is of particular interest to our discussion:
Perhaps you disagree, but this language seems uncharacteristic for a sitting president. Not only is he reminding us of his campaign promises voluntarily, but this virtual declaration of economic war seems reminiscent of Teddy Roosevelt.
What do you make of it? What can come from it? Can a sitting president undermine the status quo that now legitimizes his power? If so, doesn't this make Obama's rise to power far more radical than previously considered?
Perhaps you disagree, but this language seems uncharacteristic for a sitting president. Not only is he reminding us of his campaign promises voluntarily, but this virtual declaration of economic war seems reminiscent of Teddy Roosevelt.
What do you make of it? What can come from it? Can a sitting president undermine the status quo that now legitimizes his power? If so, doesn't this make Obama's rise to power far more radical than previously considered?
Saturday, February 28, 2009
2 big 2 fail?
Disparaging the invisible hand? Au contraire, Jeffy--do you mind if I call you Jeffy?-- I think in some ways you are endorsing the invisible hand of the market as the only way to handle those pesky corporations. Forget about bailouts, let the invisible hand do some creative destruction. Out with the bad, bloated, inefficient firms who made bad decisions, took too big of risks, and were ultimately irresponsible and replace them with lean, mean, smart, new entities ready to make better decisions, take advantage of the market, and profit among the carnage (just look how these two guys from New Jersey are doing it).
However many firms (especially in the automotive and financial industry) have avoided (for now) the cold slap of that infamous hand by convincing the government to give them a handout. And how did these firms manage to squeeze hundreds of billions of dollars from both Obama and Bush. Four simple words: Too big to fail. Let me paraphrase what CEOs of major banks are thinking while they are testifying before Congress, "Hey Congressman Joe Shmoe, if we fail, we will take everyone down with us. This won't be creative destruction, it will be total destruction. Go ahead and slap on some silly stipulation about salary caps or whatever else you have to do to appear that you have some control over the situation. But give us the money or we will blow this society to smithereens because our failure will send such shock waves of instability this economy will never recover."
The government is not giving out handouts by its own free will. It is being held for ransom. But paying the ransom is only delaying the inevitability of creative destruction which is the only real incentive firms will respond to. If these firms are indeed too big to fail, then they cannot exist in a market where failure is inevitable. It is not time for a handout, it is time to take these entities out of the control of the market and into the hands of the government because as you say the corporation "falls beyond the immediate jurisdiction of the voter" and why would we want something so big that its failure could destabilize the entire society to be out of the jurisdiction of the voter? If the market is not allowed to reign these firms in, then someone has to do it (sounds like a job for Super Obama!).
However many firms (especially in the automotive and financial industry) have avoided (for now) the cold slap of that infamous hand by convincing the government to give them a handout. And how did these firms manage to squeeze hundreds of billions of dollars from both Obama and Bush. Four simple words: Too big to fail. Let me paraphrase what CEOs of major banks are thinking while they are testifying before Congress, "Hey Congressman Joe Shmoe, if we fail, we will take everyone down with us. This won't be creative destruction, it will be total destruction. Go ahead and slap on some silly stipulation about salary caps or whatever else you have to do to appear that you have some control over the situation. But give us the money or we will blow this society to smithereens because our failure will send such shock waves of instability this economy will never recover."
The government is not giving out handouts by its own free will. It is being held for ransom. But paying the ransom is only delaying the inevitability of creative destruction which is the only real incentive firms will respond to. If these firms are indeed too big to fail, then they cannot exist in a market where failure is inevitable. It is not time for a handout, it is time to take these entities out of the control of the market and into the hands of the government because as you say the corporation "falls beyond the immediate jurisdiction of the voter" and why would we want something so big that its failure could destabilize the entire society to be out of the jurisdiction of the voter? If the market is not allowed to reign these firms in, then someone has to do it (sounds like a job for Super Obama!).
Thursday, February 26, 2009
Who is getting the money?
This is an excellent start, anonymous economist! Way to take the plunge into a plethora of economic, political and moral issues all at once.
First, I have to make the point that the official poverty line is a rather meaningless concept when it comes to evaluating need for assistance. The idea is out of context and provides a quantitative definition to a qualitative problem. My trusty friend Wikipedia tells me that the poverty line for a family of four in 2007 was $21,027 in the United States. For our purposes, we'll compare this family of four with another family of the same size making $42,054.
Great, now we're out of context and thinking purely quantitatively like any good government bureaucrat. On paper, our $40k family is twice as wealthy as our poverty family. Thus, we'd expect them to feed themselves and leave the food pantries for those less fortunate. Now, let's add some context. Our $42k family has lil' Johnny who was born with a rare form of cancer. Medical bills to keep Johnny alive eat up substantial portions of the combined income, and both parents work and have to pay for a babysitter to watch Johnny and his sister during their long hours. Worse yet, the family has almost maxed out the lifetime benefits for Johnny's medical insurance, meaning none of his treatments will be covered after next year. By contrast, our hypothetical poverty family could have one working adult and no health issues. Who should visit the pantries? What if our poverty family earns an extra dollar this year? Can we really define things this way?
As for the posed question, anonymous economist, I have to say I'd make a distinction between states and the individuals on one hand and corporations on the other. First, we can hold states accountable for the money we provide to them. Ultimately, they are elected officials under the authority of the ballot. Second, assistance and security for the individual is the core value in the creation and perpetuation of democratic rule. Finally, the corporation is an abstract concept that carries no meaningful legal status (regardless of what delusions the US Supreme Court hands down) and falls beyond the immediate jurisdiction of the voter. In that sense, it seems to me that assistance to commercial entities is a dangerous process of removing capital from political influence.
Surely, an economist can't allow me to disparage the invisible hand so openly?
First, I have to make the point that the official poverty line is a rather meaningless concept when it comes to evaluating need for assistance. The idea is out of context and provides a quantitative definition to a qualitative problem. My trusty friend Wikipedia tells me that the poverty line for a family of four in 2007 was $21,027 in the United States. For our purposes, we'll compare this family of four with another family of the same size making $42,054.
Great, now we're out of context and thinking purely quantitatively like any good government bureaucrat. On paper, our $40k family is twice as wealthy as our poverty family. Thus, we'd expect them to feed themselves and leave the food pantries for those less fortunate. Now, let's add some context. Our $42k family has lil' Johnny who was born with a rare form of cancer. Medical bills to keep Johnny alive eat up substantial portions of the combined income, and both parents work and have to pay for a babysitter to watch Johnny and his sister during their long hours. Worse yet, the family has almost maxed out the lifetime benefits for Johnny's medical insurance, meaning none of his treatments will be covered after next year. By contrast, our hypothetical poverty family could have one working adult and no health issues. Who should visit the pantries? What if our poverty family earns an extra dollar this year? Can we really define things this way?
As for the posed question, anonymous economist, I have to say I'd make a distinction between states and the individuals on one hand and corporations on the other. First, we can hold states accountable for the money we provide to them. Ultimately, they are elected officials under the authority of the ballot. Second, assistance and security for the individual is the core value in the creation and perpetuation of democratic rule. Finally, the corporation is an abstract concept that carries no meaningful legal status (regardless of what delusions the US Supreme Court hands down) and falls beyond the immediate jurisdiction of the voter. In that sense, it seems to me that assistance to commercial entities is a dangerous process of removing capital from political influence.
Surely, an economist can't allow me to disparage the invisible hand so openly?
Saturday, February 21, 2009
It's Alive!
Come on in Jeffersonian the water is just fine!
And to start us off I thought I would pose the first question:
When it comes to doling out government aid or any aid for that matter should we be more generous to individuals and less generous to large organizations/corporations? Or should we be more generous to the likes of GM, the state of California, and the Bank of America for the sake of stability but stingy with individuals to mitigate the free rider problem?
I pose this question after reading this recent NY Times article on the increase use of foodbanks across the country. It received well over 200 comments and some where very critical of individuals using the foodbank who were not below the official poverty line in terms of income. Are these same people also opposed to the big bailout happening right now in our financial sector? But then again, in the age of the bailout, where should the buck stop exactly?
Ponder away. . .
And to start us off I thought I would pose the first question:
When it comes to doling out government aid or any aid for that matter should we be more generous to individuals and less generous to large organizations/corporations? Or should we be more generous to the likes of GM, the state of California, and the Bank of America for the sake of stability but stingy with individuals to mitigate the free rider problem?
I pose this question after reading this recent NY Times article on the increase use of foodbanks across the country. It received well over 200 comments and some where very critical of individuals using the foodbank who were not below the official poverty line in terms of income. Are these same people also opposed to the big bailout happening right now in our financial sector? But then again, in the age of the bailout, where should the buck stop exactly?
Ponder away. . .
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