Tuesday, January 20, 2009

This would be a better country if...

This would be a better country if the new administrator of our public goods jurisdiction were ushered into office with all the fanfare of a shift change at Target. -- Kerry Howley

Turn Off the Money

The politicians and their economists have it exactly backwards. They focus on money while looking at the benefits of the markets, and they ignore money's role as the regulator of the markets. I think people obsess far too much about dollar bills changing hands.

Imagine this. Imagine paying no heed to the dollar bill moving around the economy. Intentionally remove it from your thoughts. Rewind two years and watch contractors and workmen furiously developing tracts in Florida and big, 3 bedroom houses in California. Forget about who was buying them and how much they were paying, just watch the workers and their sweat. Gaze upon the titanic container ships bringing in Wiis and fancy cellphones from Asia, and the UPS guys delivering these things to millions of households around the country. What were these households providing in return for all of this? Remember you can't say money. If a household has a lawyer and a construction worker, these people are providing legal experience and sweat in return for the things they're getting.

Now what happens if lots of these people are putting in all this effort on false information. The workers are spending their time erecting huge condos in Nevada on the belief that many other people will want to live in them. The college kid spends 4 years studying finance under the assumption that there will be a great demand for her services. What if these people are dead wrong? People don't want to live in Nevada and do not need any more financial services. Then these people's efforts are wasted. If hundreds of thousand of Americans spend their days working but providing no value, because they are mistaken about what people want or need, then the entire country becomes poorer. If these people had been contributing to real wants and needs of consumers, those contributions, that wealth, would enrich everybody. Don't think about money, just think about these riches existing or not existing.

And this is where money really comes in. The best way we know of to make sure that people are working on things that other people want and need is the free market price system. The abuse this framework has taken over the years is what has caused our woes. And in a false understanding of the fundamentals of economics, the politicians have decided that the way to address this crisis is to undermine on a much grander scale the free market price system. Manipulating interest rates, printing money, and arrogating spending decisions from private people to government bureucrats are the surest ways to misallocate the efforts of ordinary people. In the years to come this malinvestment will further impoverish the country and the world.

Monday, November 24, 2008

Primum Non Nocere

The most compelling tenet of the social-democrat system is the injunction to help those in dire need. The libertarian would admit the virtue, but would ask why it is more virtuous to force other people to help than to simply help. But I have a different question.

Why does the social-democrat feel it necessary to suspend the free markets to help those in need, instead of just helping them directly. If people need health care in their time of need, why not just pay for it. Why do we have to turn the whole sector into a dysfunctional thicket of misguided incentives? If every child should be guaranteed education, why don't we just pay for him to go to school, or to become educated some other way.

Maybe it's because as messy as the socialized systems become, they at least settle into some sort of homogeneity. Health care becomes a thing, a commodity. Otherwise the problem of distributing it fairly would become wispy and untenable. But health care should not be a commodity, and education should not be a commodity. They should be set free to blossom and to heal the world, amongst all other human enterprise.

Sunday, November 23, 2008

Countervailing Impulses

As Bruce Schneier, Steven Pinker, and Mark Perry remind us, we're living in the most propsperous and secure cultures in the history of the world. In modern democracies, tens of millions are not starving to death, people generally have lots of freedom of speech, and standards of living are skyrocketing. All kinds of things seem messed up about our system, but if we mess with it too much we could be flirting with catastrophe.

On the other hand, there's a lot of mindless depravation going on. There are over two million prisoners in the US, giving it the highest rate of incarceration in the world. One big reason for this is the War on Drugs. The more things you make illegal, the more criminals you will get. Shouldn't we take a closer look at what's against the law, and why? Seems pretty fundamental.

Governments are messing up bigger and bigger chunks of society. They've been messing up the mortgage market for a while, and they're messing up a whole lot more trying to fix it. Nobody knows how many people die because of the FDA outlawing life-saving drugs, and delaying the ones that make it through. I'm pretty sure health care would be vastly superior if the government stopped protecting the doctors' guild from competition, and stopped distorting the health care market in the myriad ways all modern democracies do. Education is in shambles, because it's public.

The TSA has managed to take all the fun out of flying; countries like Australia and Israel are working on Internet censorship; businesses of all sizes, but especially tiny ones, are getting bullied over frivolous regulation of every detail of their operations.

All of this adds up to a massive impoverishment of mankind. We can't see the impoverishment, because there is no richer, freer society to contrast ourselves with. But this waste of human resourcefulness is real and it's infuriating.

The more control governments take over our life, the poorer the world will become. And by poorer, I mean relative to what could have been. I think it's a good idea to push in the opposite direction.

Saturday, November 22, 2008

How I became a Libertarian

Want to turn someone into a libertarian quick? Get her to open a small business, especially in a place like Israel, or India, or New York. You'll have a small-government fanatic for life, or until she gets big enough to afford a good lobbyist.

I'm an expert in how a government can turn a little company's life into living hell. Israel loves her exporters, and I'm an importer. Before my stuff can even be released by the ports, it has to be labelled in Hebrew, it has to have passed the government standards institute, and I have to pay import tariffs of up to 15%. On my store I have to pay property taxes of about 50% of my rent. I have to charge my customers 15.5% sales tax. I have to put printed price tags on every item in the store, but the central bank is manipulating the currency, so the prices have to keep changing.

The details of these regulations are mostly not legislated by parliament but set down willy-nilly in a mess of ministerial directives, governmental company procedures and bureaucrat whim. Often, even these are too much to hope for. Where does one classify a guitar effect pedalboard under the Harmonized Tariff Schedule? The answer could mean the difference between a 0% tariff (musical instruments and accessories) and a 15% tariff (furniture).

The government monopoly ports take large fees on incoming shipments, and their unionized workers are lavishly paid. But the real trouble comes when they strike and delay our shipments.

For these reasons and many others like them, I was drawn to Libertarianism. But I began to see that if government is so pernicious to small companies, it might not be a good idea to entrust it with education, health and pension plans.

Friday, November 21, 2008

Setting the Tune

incentīvus "setting the tune" (in L.L. "inciting"), from stem of incinere "strike up," from in- "in, into" + canere "sing" (see chant). Sense infl. by association with incendere "to kindle." The adj. use, in ref. to a system of rewards meant to encourage harder work, first attested 1943 in jargon of the U.S. war economy; as a noun, in this sense, from 1948.
Online Etymology Dictionary
Perverted incentives are sprouting all around. Where unemployment rises, politicians are subsidizing it. Where companies waste resources, they are propped up. Where easy credit has caused catastrophe, it is cheapened. There are a few good men out there who warn us to heed the incentives, but many of the pundits seem to ignore them in the stampede to save the economy. I wonder how an economy can be saved by disregarding Economics.

Incentives will probably be a central theme in this blog, but the blog really has more to do with the Latin root of the word: canere, to sing. It's easy for me to admit I don't have all the answers to questions of economics and philosophy, since I have no training in either. This gives me a distinct advantage over the many excellent economic bloggers out there who are burdened with a vastly superior knowledge of the field. I'll try to use this asset to ask really basic questions that others might be embarrassed to.