Friday, June 29, 2007

Dennis Kucinich Is An Idiot

“If Sudan had oil, we’d be occupying it right now.” - Dennis Kucinich at last night's debate

Ah, ahem, Sudan does have oil. Lots of it in fact. That is why the Chinese have basically occupied it.

And besides, if it was oil we were after, we'd have invaded Canada. It's close, there are only 30 or so million of them. They don't really have a military. There's no language barrier. They don't have a strong national identity. We could round them all up with free hockey tickets and free beer. Intelligence gathering would be easy. We could infiltrate insurgent cells by talking about the weather, saying "sorry" (so-ree) and "eh" alot.

Thursday, June 28, 2007

Is Your Senator In the Pocket of Small Dairy?

Will Bill O'Reilly ignorantly rage against "Big Dairy"?

Actually, there is a conspiracy story here. Big Government has conspired with Small Dairy (heartstring tuggingly refered to as "family farms") to enact legislation that allows cartelization (known euphemistically as a "milk marketing board") of milk producers who artificially restrict the growth of milk production capacity. Let's review: Restrict supply + Demand Rises Naturally = Prices Go Up. Milk, oil, labor, appendectomies, you name it, they are all subject to this, cause it's like ya' know, a real law.

I still think we should have "Law of Supply and Demand Day" in the schools.

Simply Amazing

How the hell did Yanqui Imperialist George W. Bush get all these folks organized and on the streets so effectively? And to think that some actually say the man is incompetent!

I Wannabe!!!

Shock Post of the Day: Canadian Gov't Inept!

A classic sure to go down in the Government Effectiveness Hall of Fame. But I am sure that the same folks do a damn good job of running the healthcare system!

Wait Times Are the Antithesis of "Healthcare"

In the post where I rebut pinko commie economist Robert Frank, he relates an anecdote about healthcare in France. Of course, Frank extrapolates his anecdote into a broad conclusion. Well, another economist relates an anecdote about French healthcare. Although the anecdote is quite indicative, this economist, unlike Frank, is intellectually honest enough to warn you that anecdotes are not a good basis for making broad conslusions.

One point that I would like to make about this post is that it points up something that any good doctor will tell you, that sometimes immediacy is the essence of care. Certain conditions require immediate attention and thus delayed care is no care at all. Thus a system whereby care is rationed via wait times, such as in Canada and Britain, is profoundly inconsistent with proper care. Such a system is deeply irresponsible.

Wednesday, June 27, 2007

Warren Buffett Provides Dangerous Fodder for Distortion

No doubt much will be made of this by the class warriors and the anti-capitalists. Of course what most media outlets won't mention is that Buffett's salary (somewhere around $100,000) is taxed at the highest rate of 35%. The other portion of his "pay" (somewhere around $46 million) is probably entirely investment income - some capital gains but mostly dividends that he receives by virtue of several decades worth of sinking money into investments - which is taxed at 15%. Naturally there are probably some odd items in there that bump his rate up to 17.7% as he states. If his $46 million "pay" were guaranteed, like his receptionist's is, he'd be ponying up 35% to Uncle Sam. But Warren spent his entire life making investments, forgoing guaranteed pay for pay that may or may not be there if his investments didn't pan out. Turns out they did pan out and through the miracle of compounding over decades he now has gargantuan business interests that spit out investment income to him.

The simplistic analysis is to look narrowly at the rate he pays versus his receptionist and ask, "is it fair?" But that is the wrong question. The right question is "at what rate of taxation of capital income do you discourage the next Warren Buffett?" The capital gains tax rate was 25% when the Sage of Omaha began to build up his capital by investing. Would he have embarked on the path that he did if the rate was, say, 50%? Would all the jobs that his business interests created along the way have been created if a young Warren Buffett determined that taxation on investment gains was too high a hurdle for even his brilliance? Same for all the taxes those businesses paid over the years, and ditto for the ridiculous sum of money that he has now left to charity. Would all that have happened if in 1956 the tax code scared him off into a career in, say, accounting? Would we, as a society, trade all those jobs, all that tax revenue, and all those charitable gifts to equalize Mr. Buffett's tax rate with that of his receptionist in the name of fairness? Maybe we would be just that foolish, but it would've been a grave mistake. In formulating tax policy, we need to consider the next Warren Buffett(s). Are we going to imbed proper incentives into the tax code to encourage a career just now getting started that will in time contribute in jobs, taxes (over the long term) and charitable resources what Warren Buffett has contributed up to now? Are we going to let a narrow, class warrior view of tax fairness slam the door on all that? We might if we are not careful.

UPDATE: Here is Prof. Mankiw's take.

UPPDATE: Don Luskin has more, and is, um, less kind.

UPPPDATE: IBD thinks Warren is just making stuff up.

Big Business Loves Hillary. Capitalism Is Not So Sure...

Of course, my reaction was "Are you kidding?" However there is some truth to this and Jimmy P. shows what is really at work here. "Big business" is not "Business", and Big Business is not the source of the dynamism in our capitalist system. Let's call up the words of Nobel laureate Edmund Phelps yet again:
"Why, capitalism so reviled in Western Continental Europe? appears that the recent street protesters associate business with established wealth; in their minds, giving greater latitude to businesses would increase the privileges of old wealth. By an "entrepreneur" they appear to mean a rich owner of a bank or factory, while for Schumpeter and Knight it meant a newcomer, a parvenu who is an outsider. A tremendous confusion is created by associating "capitalism" with entrenched wealth and power."

So let's translate this real simple like..."Big Business Does Not Equal Capitalism"...and cite some examples:
Bill Ford = Big Business; Bill Hewlett = Capitalism
Bill Gates Circa 2007 = Big Business; Bill Gates Circa 1978 = Capitalism
Your Average Supermarket = Big Business; Wegman's (or Stew Leonard's) = Capitalism
Budweiser = Big Business; Dogfish Head 60 Minute IPA = Capitalism
Banking Hours = Big Business; Internet banking & branches open 'til 7pm = Capitalism
HMOs = Big Business; A Vitrectomy = Capitalism
Public Education = Big Business; Sylvan Learning Centers = Capitalism
Airlines = Big Business; Webex = Capitalism
Newsweek = Big Business; Pajamas Media = Capitalism

Big Business does not make the American economy great. Capitalism makes America's economy great. I think it is fair to say that Capitalism is, shall we say, not yet overly smitten with Hillary.

Healthcare Clearinghouse, Part 2

Arnold Kling is pretty pessimistic about how the policy landscape will unfold in coming years. Based on his predictions, speculative as they may be, libertarians, or the libertarianish, ought to be depressed over the raft of bad ideas that will be foisted on us as law. Punitive taxes on high earners are a problem but we can avoid those pretty easy (see here). Quixotic effrots to 'address climate change' will be annoying and perhaps expensive, but will be far removed from daily life. Healthcare however is another story. Wrecking our current system, imperfect as it is, in favor of some form of collectivist or statist approach would be a serious encroachment into our lives as well as a devastating blow to our personal liberty. Isn't the care and treatment of our own bodies the essence of personal freedom? (At least that's what the pro-choice movement keeps telling us.) Isn't that too important to have some bureaucrat have any say in the matter of whether we get a vitrectomy or lumbar fusion? (If you are a woman, it is clearly not appropriate for a man to tell you what to do with your body. How would the 'progressive movement' feel about government bureaucrat, who could be female, denying me a vasectomy because it was 'elective surgery'? Get your laws off my body, Senator Edwards, I say!)

So what is to be done to avoid the inevitable government bumbling affecting our health? We simply have to get over whatever fear we have and embrace competition as the fundamental basis of healthcare reform for the majority of us. (I have stated that for the chronicly sick and uninsurable, there is an appropriate government role that can be easy and affordable, but we can't let providing for a small minority of people ruin the dynamism and innovativeness of our healthcare system for the rest of us. So I'm adding some new material to the Healthcare Clearinghouse:

- Senator Tom Coburn M.D. on Competition

- Fred Thompson On Healthcare Systems We Shouldn't Copy

- Grace Marie Turner On How We Get There

- Numerous Economists Against Drug Reimportation and Price Controls

- Oh, Oh, It's Magic: The Economist

- Competition Is the Best Rx: Chicago Tribune

- The Healthcare Fix Is Actually Pretty Simple



- The Choice on Healthcare

- Wait Times Are the Antithesis of Care

Don't miss the first installment of the clearinghouse!

Energy Debate Hijacked By Ignorance

Complete ignorance about energy and energy markets abounds in the US and thus poisons the debate over energy policy. In fact, based on these survey results, what most Americans think they know about energy is completely wrong. So, what to do? Some snazzy PowerPoint to the rescue.

I'm channelling Obama: "Somewhere along the way, factual understanding got the so called leaders of the religious environmentalist movement."

Tuesday, June 26, 2007

Head Rolls Over Global Alpha Fund With No Alpha

Well, a head has rolled at Goldman Sachs over the poor performance of its flagship Global Alpha hedge fund. Eric Schwartz, co-head of asset management, is being removed to the safe house. That someone's head would roll was predictable, although I predicted that Global Alpha's arrogant jerk co-managers would receive the lopping. They still might. What is interesting here is that the last tidbits about Global Alpha's performance that leaked out were for the first four months of this year. That Schwartz got the heave-ho now leads me to believe that things haven't gotten better and may have gotten, worse over the last two months. Total speculation on my part, but it makes sense. Anyway, we'll see. I hope we can go at least a few months without another multi-billion dollar hedge fund implosion story hitting the front pages.

Diesel in the MSM

It's not quite page 1, but the WSJ covers the emerging growth of diesel powertrains for passenger cars here in the US (and with video!). Oo la la, I like that Beemer 535d! This puppy could have some competition for Donny Baseball's diesel dollars!

Social Value of Wall Street

Prof. Mankiw's blog is providing fertile ground this AM. I am amused at the career advice seeker gnashing his/her teeth over the perceived low-social value of investment managers. Prof. Mankiw gives a fine argument in favor of the social value of investment managers, elucidating the basic contribution of properly functioning capital markets, as a Smithian invisble hand, in promoting efficiency and optimal allocation of resources.

On the off chance that said career advice seeker makes his/her way to this blog, let me add Edmund Phelps's nod to those who make the wheels of the capital markets turn:

"The textbook capitalism of Schumpeter and Hayek means opening up the economy to new industries, opening industries to start-up companies, and opening existing companies to new owners and new managers. It is inseparable from an adequate degree of competition." (Read more here.)

Those new owners and new managers that Phelps speaks of are precisely the private equity firms, hedge funds, and corporate investors, like Buffett's Berkshire Hathaway, that are being raked over the coals in the halls of Congress these days. We are in a golden age of robust capital markets activity, and the unemployment rate is historically low. The two are not unrelated. That's pretty decent social value if you ask me.

Who Needs Recovery When We Can Have the Impression of Recovery?

Amity Schlaes new book about FDR and the Great Depression is getting alot of play in the economics blogosphere. Greg Mankiw helpfully points to John Updike's defense of FDR and subtly calls it "telling," which is a hyper-gentlemanly scholar's way of saying it's nuts. Updike's defense is based on the banal, popular view of business as heartless. I doubt the label was even deserved in the 1920s, as it isn't today, but let's grant him that. Rather than have a robust business environment where these heartless corporations could employ people, Updike sees virtue in the "impression of recovery". This reminds me of the oral history I learned from the likes of my dad and my uncles who lived through the New Deal. As a naive student I wondered at the brilliance of the New Deal until they burst my bubble telling me about what it was really like to work on WPA projects, where men were essentially paid to dig holes in the woods or move things around with no productive purpose in mind. However, the ultimate flaw in Updike's argument is the strange notion that a transaction involving government is a human, meaningful one whereas a transaction with a corporation is a heartless, empty one. Of course in reality, corporations are not monoliths but collections of people who, mostly, act like people when dealing with other people; and, government can be as monstrous, impersonal and heartless as any corporation. Maybe the 1920s were different, but today, I'd rather deal with almost any company that currently provides me goods and services over virtually any government entity, as I suspect most of us would. If we got half of the solicitousness and attention from the governemnt that we get from, say, our auto insurer, Updike could have a seat at the table, but as is he ought to be laughed out of the room.

UPDATE: Scott Johnson is not impressed either.

Boeing Vs. Airbus, The Book!

I've admitted that I've fallen down on the job from time to time but I can't believe I missed this book for going on 6 months now. Anyway it is in the mail.

Just to note, my first post on Boeing vs. Airbus was on May 10, 2006, so the title seems, well, suspicious...!!

Monday, June 25, 2007

World's Poor Need Hernando De Soto

Pejman Yousefzadeh is saying something very close to what I've been saying. Here, here and here for instance.

Thursday, June 21, 2007

Merrill Lynch Talked Down From The Ledge

Merrill Lynch smartly decided to hold on to the securities that it seized as collateral for loans from two busted Bear Stearns hedge funds. No sense in dumping these CDOs on the market, but I think what was really at work here is that the industry at large helpfully suggested to Merrill that the current political environment is not an auspicious time to showcase more negative fallout from the subprime lending crisis. The Sausage Factory is currently debating the "Blackstone Tax" in addition to substantially higher and punitive tax increases on private equity and hedge fund compensation, protectionist measures against global trade, higher taxes on energy producers, a 4.3% surtax on high income earners to provide AMT relief, and countless other anti-business, anti-growth policies. Now is hardly the time to draw negative attention to these derivatives markets and investment vehicles. The political risk to economic growth and the investment climate is too great. Whether or not these CDOs are toxic or not, best to take one for the team and lay low. Don't give farm country populist goofballs like Grassley and Baucus any more ammunition to crusade against what they don't understand.

UPDATE: There is alot to this story. One interesting twist is that Bear Stearns's rival banks were probably happy to let Bear twist alone in the wind as comeuppance for its crappy move over the LTCM affair years ago.

Impatient Youth

Has our media-saturated, 24 hour news cycle, video game, short attention span culture had an impact on the young? This would seem to support an answer in the afformative. Five months on the job and these whipper-snappers think they know something and want to be let loose. The article has good advice for these young grasshoppers. I would add another bit of advice...for the first 2-3 years of your career assume that you know squat, because you do.

Rudy Economic Team Is a Tax Policy A Team

Naturally, it is revealing to see who is advising politicians and I have looked at Mitt Romney's economic team for any clues as to what his economic policy might look like. Prof. Mankiw has looked at who is advising who on the Democratic side (here and here). Yesterday Rudy officially unveiled his economic policy board and it is solid. Malpass and Boskin represent a top-class one-two punch of academic economist and market economist. Needless to say, Steve Forbes is a highly regarded, policy-focused businessman. He also happens to be a longstanding, tireless advocate of a flat tax. Given this assemblage, one could easily come to the preliminary conclusion that the signature focus of Rudy's economic policy will be tax policy/reform. Will we see something radical or creative coming from Rudy's economic team on the tax front? The prospect is exciting. Just as exciting as, say, the healthcare proposals that could be coming out of the Romney team.

Wednesday, June 20, 2007

Free Market Cure

Wow. Here is a great website that is a clearinghouse for the case for free market healthcare. I have to admit, it is a little bit better than my healthcare clearinghouse.

(HT: Club for Growth Blog)

One More Way To Save the Planet

Prohibit unions from striking.

Workers at a Danish power company are striking, forcing the company to switch to oil from coal and biomass to keep power supplied to the market. The result will be more expensive power and GREATER CO2 EMISSIONS! Those irresponsible, soulless, predacious unions. The polar ice caps are melting and yet they want more retirement benefits!

Boeing Steals Home Again

I've fallen down on the job regarding the greatest business rivalry on earth, but Montana Liberty Project picks up the slack.

More Irony Courtesy of the Sausage Factory (with bonus Baucus Follies feature)

Just yesterday the WSJ Op-Eders treated us to the illogic of anti-trust enforcement (see here) and today they note the pathetic irony of the current direction on tax policy:

"There's another irony here: Advocates of higher taxes on the rich argue that Congress has a duty to inform Blackstone's prospective shareholders about the potential tax hike before the IPO. That's because if taxes are raised on these partnerships, the value of their shares will fall -- and no one wants small investors to take a hit. But the same logic should also apply to the 15% tax rate on dividends and capital gains that Senator Baucus and his fellow Democrats want to increase to 39.6% and 20% by letting the Bush tax cuts expire; that would also whack small investors by slashing stock values."

N.B. Here is a brief history of Max Baucus's follies - here, here, here, here, and here.

Tuesday, June 19, 2007

Bloomberg's Tricky Dick Mask Removed

Prof. Reynolds has Mayor Mike Boomberg nailed dead to rights and he doesn't even live here. Alas New Yorkers like the Bloomberg brand of nannyism - ban what the elite think is bad, demand choice for what the elite think is good. Like I said, the new tourist slogan should be...

"Come to New York City, where you can have unlimited, anonymous, unprotected, gay sex in any of our numerous health clubs, but where you can't have a potato fried in oil."

Onion Rings, Your Income, Health Insurance...She's "Ordering for the Table"

What an apt metaphor! She's ordered for the table, 'cause she knows what's best for us. I'm with Bill though, I'd like to have the choice to get the o-rings if I so choose.

Riding With Farsi Speakers on Trains

I had an odd conversation with an fifty-something-ish woman on the train home last night. She is an Iranian immigrant and so, to make conversation, I asked her if she heard that there was an earthquake in Iran yesterday centered close to Qom. She asked me the magnitude and if anybody was hurt. I told her it was a 5.6 and that it didn't appear that there were large casualties. "Damn," she said, "we need a 10 to hit Qom and kill everybody. They have ruined my country." I asked her if she would ever go back if there was a regime change in Iran. "No, I am an American now. I love America. I live in Seattle. Have you ever been to Seattle?" And then, for ten minutes, she proceeded to give me a better sales pitch for Seattle than the mayor or any tourist board could muster.

I was so refreshed by the candor and glibness of her manner. She talked to me, a stranger, for the whole train ride and our conversation could be summed up thusly: "I spit on those Islamist bastards. I want them dead. Have you ever been to the Fishmarket? It's fantastic!"

Thursday, June 14, 2007

Shocker: Insurance Companies Actually Insuring

In Fisking a Collectivist Approach to Healthcare I rebutted the absurdity that insurance companies "avoid people who actually may require healthcare." I said, "Insurance companies want to insure...[and] have no incentive to avoid you if they can price your risk properly." Turns out, I was right.

Here is an illuminating article about how a few insurance companies are finding success in selling cheap policies to the young and healthy. The business that companies like WellPoint are generating explodes the myth that the private insurance market can't adjust their business models. An additional myth that this story explodes is that the 'uninsured' are hopeless destitutes who need help. A large percentage of the uninsured are young healthy people who don't see the need for insurance, especially premium, high-priced coverage. They'd rather have the money for doing what young people do (when I was 27, I passed on health insurance to have more disposable income in which to seek out the future Mrs. Baseball). But give these folks a stripped down product (let's face it, a 28 year old has an extremely low probability of needing a hip replacement, so why should he/she pay for expensive insurance that covers hip replacements?) at low cost, and they buy insurance. Unbelievable. Market demand met by market supply.

Still, there are the same type of people who view this as skimming the insurance pool, much as they view school vouchers as skimming the educational pool. That argument is just plain dumb. Healthy young people are still contributing to the insurance pool that pays for sick people, it is just that they are paying for sick people in the future. As I have said before, people who are sick today are a very small and special category and should be the beneficiaries of government assistance. We can afford this easily without having to distort the private market, which we've done. Insisting that the young and healthy today fund the care of the old and sick today, we remove the incentives to get and stay healthy and we drive needed people out of the insurance pool altogether with expensive insurance that they don't want. This Bloomberg article chronicles a welcome development, one that policymakers ought to find ways to encourage and expand in the least intrusive and distortionary way.

This post is going up on the Healthcare Clearinghouse.

Socialized Medicine

A documentary on socialized medicine.

Tax Progressivity

A MUST READ post over at Prof. Mankiw's, full stop.

Wednesday, June 13, 2007

Skip the Shake Shack

Grungy West 26th Street between Broadway and Sixth Avenue has gone from wasteland to culinary destination in the blink of an eye. First to appear in this unlikely spot was Black Pearl, claiming to serve up the best lobster roll in the city. Seems that folks agree. I sure do. Their fish n' chips is great too if you don't have the $20 to pony up for the roll.

Next up is Hill Country, a gigantic temple to, obviously, Texas-style barbecue. Sorry, you'll have to get your pulled pork sandwich elsewhere. As evidence of both the power and appeal of the great tradition of Texas barbecue and the web-empowered citizen journalist, the place is barely even open yet (they're still doing construction) but there is already a photo essay up. Allegedly New York has always had the best of every type of cuisine under the sun. Bullstein. NY has lacked real 'cue for so long it's criminal. No longer. My only nit to pick is that they take the homage to the Texas tradition a bridge too far with the beer selection. Now, I know full well that to be authentically Texan, you have to wash down your 'cue with crappy beer. But this is New York, would it be too much to ask to add one or two decent, flavorful beers to that sad collection of macro swill?

So, all you bankers and traders at CSFB, send those armies of khaki-clad interns on over to West 26th to haul you back a little taste of Maine and Texas.

Blue Blood Brother

Eminent Domain Abuse Rebuked

A victory for personal liberty in NJ. Read all about it.

Odd personal connection: Donny Baseball was boyhood friends with the son of NJ Supreme Court Chief Justice James Zazzali.

Eschew the Pigou!

Good to see that Greg Mankiw sees limits to Pigovian approaches to negative externalities such as the speculative damage that we face due to anthropogenic climate change.

I think the limits to Pigou are much greater. It is impossible to see how a simple, elegant Pigovian approach can win the policy day given the state of our modern politics. Assuredly, we would get all of the worst aspects of Pigovian taxation and few of the benefits once the Great Sausage Factory was unleashed on this task. More caution on Pigou here and HERE! and here.

And on sin taxes in general (as opposed to sin taxes specific to driving an SUV) there is this, where I cough up two of my brightest gems in the history of this blog (if I do say so myself):

"maybe liberty means the freedom to be a fat, artery-clogged slob...if one so chooses" and

"I am sure that there are similar 'offsetting' effects of the negative externalities of drinking sugary drinks. Maybe the existence and popularity of sugary drinks causes busybody elitists to tip their hand as to what they really think of us all and how they would govern us, causing us to be ever vigilant and protective of our liberty. That is worth having a few extra fat kids in my book. "

Holman Jenkins On The Baucus Shakedown

Holman Jenkins gives wider audience to Max Baucus's (along with co-bandito Chuck Grassley) Wall Street shakedown machine that I highlited previously. The best reason to read Holman is that he always cuts through the farsical political thicket to ask the one, seminal question on any issue. In this case it is:

"But what about the economic issue? Any tax is a disincentive, so let's just say the tax code imposes less of a disincentive than it might to what private equity does: buying, overhauling and reselling companies. Is there a public-interest reason suddenly now to use a tax-policy bludgeon to reduce the attractiveness of this business?"

Of course another good reason to read Holman is that his plucky writing style gives us fantastic formulations like "unlimbered a delicious flow of campaign dollars."

Tuesday, June 12, 2007

States Renamed for Countries with Similar GDP

This is very cool.

So, Vlad Putin's Russia has an economy about as big as New Jersey's. Are we really going to let this punk push us around?

UPDATE: Upon further review it looks like the person who drew up this map has an eye for subtle humor. Stumbling, bumbling Michigan is named after stumbling, bumbling Argentina. Notoriously corrupt Louisiana is named after notoriously corrupt Indonesia. Famed mafia territory New Jersey is named after emerging mafia state Russia. Milquetoast California is named after milqetoast France. Can anybody suggest any more delicious ironies in this map?

Just Spend Baby!

Now that the Democrats are in charge of the Great Sausage Factory and within striking distance of the White House again, the phoniness of their deficit-hawkishness of the last several years is starting to reveal itself. Bloomberg covers this development as if it was some sort of intellectual battle, a modern day ontological joust akin to Anselm and Gaunilo. In reality though, the protagonists of this debate have never had any genuine concern over the deficit. They have no desire greater than expanding the role of government. Their teeth gnashing over the deficit during the past few years has had one purpose and that is to justify higher taxes and provide grounds for opposing tax cuts. Now that the balance of power is shifting their way, they can safely discard their deficit concern and a guy like Bernie Schwartz provides the grounds for it in the name of "investing" and "infrastructure". Schwartz's message is clear, forget about the deficit and just spend baby!

Without any help from his now cashiered Republican majority in Congress, the Bush fiscal policy has managed to bring the deficit down below average post-war levels. We've seen this movie before, a tax-cutting President establishes prosperity and gets the fiscal house in as good a shape as can be expected, only to clear the decks for a legendary spending binge that will go down in the record books. That's were we are folks. Bush has teed up Hillary's version of LBJ's Great Society program, and key backers like Bernie Schwartz are cheerleading.

Fall Back Plan If His Rap Music Career Fizzles

Wow. His divorce settlement with Britney must have been pretty darned good to be able to buy his own bank!

Monday, June 11, 2007

World Bank to Poor: Don't Use Your Natural Resources

As if more proof were needed that the World Bank is not an economic development organization, but a global bureaucracy in the service of all manner of secular, statist religions, they are dedicating $250 million to keep poor countries from cutting down trees. Now, the merits of preventing deforestation in the name of the environment are up for debate, but I am pretty darned sure that there is almost zero evidence that limiting the use of natural resources alleviates poverty. Just more solid economics from the crew at World Bank!

Friday, June 08, 2007

More Away Games on Home Turf

Said it before, I'll say it again...this is sad.

Funny That

Like I said way back when, someone someday is going to do a study on why or how Bush can give such powerful, eloquent speeches but will still go down in history as a lousy communicator.

Thursday, June 07, 2007

Jim Chanos on

Great interview with famed short-seller Jim Chanos talking about a variety of things, specifically private equity, here.

Citigroup: "On Average, Things Are Normal"

Citigroup has head in the freezer, feet in the oven. Hilarious.

Josef Stalin for Sugeon General!

Great timing. Just as I thought to establish my Healthcare Clearinghouse posts, Prof. Mankiw promptly provides fodder to add to it by linking to David Leonhardt's dishonest and stunningly blind column where he advocates universal healthcare coverage.

The article opens reasonably enough, talking about broad variations in the instance of certain medical procedures across geographies. Indeed there are such variations and, in theory, there shouldn't be - medical knowledge ought to disperse throughout the profession fairly quickly and diagnoses and treatment ought to be fairly uniform. The reality is quite different. To begin with, some doctors stay scrupulously current with the medical state-of-the-art. Others do not. Some doctors are philosophically inclined to recommend surgery, others to council against it. Differences in the demographic characteristics of local population can also result in wide variations in surgical incidence. A young population is more likely to have higher proportion of certain surgeries than a retirement community as young people can handle the trauma of surgeries better than older people. Young people also opt for elective surgery more often, as they have more years ahead of them in which to reap the benefits. In addition, certain cities get a reputation for leadership in certain fields, sometimes simply becase a renowned surgeon chooses to live there, or a local wealthy donor establishes a center of excellence in a field (example here). My point is that there are complex reasons for these variations. To interpret these numbers as evidence of wasteful consumption of healthcare is preposterous. Furthermore, Leonhardt's example of Idaho Falls is a thin reed. Idaho Falls has roughly 53,000 residents (Bonneville County close to 100,000), implying that there may not be more than 5 or 6 neurosurgeons there who can do lumbar fusion procedures. One especialy renowned surgeon residing there can skew the numbers drastically.

This is not to say that wasteful medical spending does not occur. It does. Alot. There is a vast and well-established economic literature on overconsumption and the economics profession has identified a reliable culprit of overconsumption, the presence of a third party payer - precisely what Leonhardt advocates. It is evidence of messianism that Leonhardt omits any discussion of the well-known effects of a third-party payer on oversonsumption, even more so that he tries to pin the source of the problem on local communities.

Now that Leonhardt has set up his reader with a dishonest premise, he can get into the nitty-gritty, his third party payer policy nirvana - universal healthcare coverage. His preferred approach is, well, stunning:
"Along these lines, the three leading Democratic candidates have quietly come up with nearly identical ideas. Deep inside their health care plans, Mrs. Clinton, Mr. Edwards and Mr. Obama have each called for the creation of a national institute to figure out which kinds of medical care actually work. This institute would sort through the scientific research on, say, spinal fusion and help people understand when it may make sense and when it’s likely to be just another big medical expense that doesn’t solve anything."

Got that, it's an "institute." Not a government bureaucracy, but an institute (although given the vast size and complexity of the medical world, can anybody reasonably claim that this institute would not become another large bureaucracy). This institute would determine what treatments are approriate and not appropriate for you and me, and it would dictate prices to that other large government bureaucracy, Medicare, and the private market (we know, quite clearly, what centralized price-setting results in - shortages at worst and misallocation of resources at best). What is stunning about this is how closely it resembles the fascination that economists of FDR's day had with Soviet central planning:
"The group was dazzled by the Soviets' economic planning. Stuart Chase, a founder of Consumers' Research (which would become Consumer Reports), reported that "sixteen men salt down the whole economic life of 146 million people for a year in advance as calmly as a Gloucester man salts down his fish...and...the actual performance for the year 1928 will not be so very far from the prophecies.... One suspects that even Henry Ford would quail before the order."
Finally, this institute is redundant. It exists today, except that it is not one institute but many institutes and institutions that do exactly what Leonhardt feels needs to be done. The difference is that they compete to deliver the most reliable output. One would have to be ignorant or blind to the last 50 years of economic thought and actual history to think that centralizing the authorization process for medical procedures would result in optimal healthcare outcomes. It clearly wouldn't and Leonhardt doesn't make claims that it would, it's all about expunging costs from the system. The word for this is rationing. What Leonhardt wants is a large bureaucracy engaged in rationing on a massive scale, indifferent to the particular circumstances of your and my health.
Leonhardt ends with this: "The simple truth is that medical spending can’t continue to rise at its current rate. Somehow, we need to make choices."
What he means, of course, is that he and a small band of elitists needs to make choices. Choices for you and me.

Wednesday, June 06, 2007

NBfPB's Healthcare Clearinghouse

Healthcare is the critical domestic policy issue of our time. It is critical as a practical matter because those of us who will be entering our high-healthcare-consuming years in a decade or so have to live with the consequences of the policy choices we make today. Healthcare is also critical as an idealogical matter. Healthcare is roughly 16% of GDP and rising, and the near uniform view of one of our two political parties is that healthcare should be competely provisioned by the government. Think of it. What likely will be 20% of our economy could be transformed into a collectivized, centrally planned system. Will we allow one-fifth of our economy, historically the wonder of the world, to operate along socialist, statist principles? The case for free markets and more capitalism in our approach to healthcare has never been more urgent in my view. I have tried, in my own small way, to make that case on this blog. The effort has been scattershot though, so going forward I am going to aggregate all manner of commentary into heathcare clearinghouse posts, starting with my own commentary on the subject. So here goes.

Why Healthcare is Not a Right

A Rough Vision of What Health Insurance Should Look Like

Is Tennis Elbow a More Critical Need Than Diabetes or Healthy Babies?

Fisking a Collectivist Approach to Healthcare.

First Hand Account of the Worst Healthcare State

An Example of Why We Can't Impede Human Ingenuity's Contribution to Healthcare

Some Policy Manifestos Worth Your Time - One and Two and Three (The Big One!)

A Novel Idea - Don't Screw "The Healthy"

What Socialized Medicine Looks Like

Josef Stalin for Surgeon General!

Insurance Companies WANT to Insure

Addressing Some Misguided Punditry . And More.

Too Much To Hope For Given Our Silly Politics

I guess it was too much to hope for that one of the Republican candidates would have said, in response to Wolf Blitzer's questioning if the "oil companies" are making too much money, "No Wolf, they are not making enough money in my view. If we let them drill more here at home and let them build refineries without decades-long legal battles, then hopefully they'll have more profits and make more investments in our energy future."

Alas the best we got was Ron Paul not begrudging them their profits made honestly in the free market.

Tuesday, June 05, 2007

Big News For Clean Diesel?

A victory for clean diesel over hybrid technology????

More on diesel here and here.

Rubinonmics-Style Pessimism Getting Lamer and Lamer

In one of the lamer recent attempts to convince us all that the economy stinks, Rubinomics foot soldier Gene Sperling says that there is alot more that should get you depressed about the economy than just the housing bust (which, btw, Ben Bernanke says isn't affecting the broader economy). What are those things?

1) Corporate spending on goods and equipment. Here is the doom and gloom, hide the children: "This important indicator of the health of the U.S. economy fell into negative territory in the fourth quarter of 2006. Economists now predict real investment growth by companies of only 2 percent to 4 percent for 2007 -- a yawner at best." So, a relatively small part of the economy did bad a few months ago and is predicted to do OK, but not great, this year. Simply devastating. Bizzyblog says it best: "In sum: 14% of the economy is doing just fine, and 86% of the economy is seriously rocking."

2) Companies are buying back stock. Apparently it is a bad sign that companies are returning surplus cash to investors rather than tying it up in inventory. Sperling seems to think that if businesses were really bullish they'd be stocking up on goods. There is something to that logic, but it is too thin a reed to make broader determinations. To begin with, the inventory adjustment that took place at the end of 2006 is now reversing - inventory buildups quickened in Q1 over Q4's pace and manufacturing production is accelerating. Secondly, inventories are a short term focus for businesses, not the stuff of strategic thinking. Buying back stock, however, is bullish. It means that corporate managements have a more optimistic view of thier prospects than the market does. Of course, Sperling circumvents that logic with a conspiracy theory, that corporate managers are just engaging is massive market manipulation.

3) US companies are expanding overseas. We have dealt with this one before. Faced with an incredibly tight labor pool here at home and rising wages, US companies tend to turn their sights abroad where they can continue to expand without the constraints of the current US labor market. At 4.5% unemployment it is natural that corporate capex would be flowing disporportionately abroad. Why this has to spell doom for the US economy I do not know. Much of this capex will go to produce goods that will eventually come back into the US, keeping distribution assets humming, accountants accounting, retail clerks clerking, etc and so forth. US corporations are merely side-stepping an impediment to growth, not reaching for the brakes on their US operations. Of course, Sperling knows this as he makes this oblique reference to it..."It also raises larger social and political issues over whether there is a growing disconnect between the profit and share performance of American businesses and capital investment and job growth in the U.S."

So what is the "social and political issue"? Apparently Sperling doesn't like that US companies can invest abroad and hire foreigners, when he thinks they should be doing so only in the US. This is an ever so thinly veiled version of the protectionism and trade isolationism that these phony 'citizens of the world' truly believe in.

Here is previous fun with lame Rubinomics-style pessimism.

Ontarians Life, Liberty and Property Are Safe

Ontario's legislators are closing down shop three weeks early. I predict goods things for Ontarians. I just wish our own Sausage Factory down here would do the same.

Must Read Op-Ed on Healthcare Economics

There is a must read opinion piece today in the WSJ by a Dr. Robert Swerlick, a professor at Emory's School of Medicine. Dr. Swerlick highlights a major flaw in our healthcare system that goes largely unnoticed, but it is a big one. The flaw has nothing to do with the usual talking points of 'affordability' or 'quality' per se. Rather, it has to do with appropriateness and availability of specific disciplines of care. Dr. Swerlick illustrates this right off the bat by showing how easy it is to get a veterinarian compared to an endocrinologist. Current policy has subverted the price system, thus distorting the information content that prices convey. Do we need more cardiologists, less podiatrists, or what? True prices would tell us where medical talent and training is most needed, but we don't allow true prices to form in large parts of our healthcare system today. That is why we have a surfeit of sports medicine practicioners and a dearth of more critical care experts like obstetricians and, as the author points out, endocrinologists. Is tennis elbow really a more critical need for our medical system to focus on than diabetes or neo-natal health? The result is we are not getting the right amount of young medical talent focusing on the health problems that are most pressing to society. Furthermore, we are creating needless shortages of doctors in critical fields. Shortages mean higher prices. No matter how desperately the government or the insurance industry try to contain costs, the supply and demand imbalance is insurmountable, prices will rise. Anything other than correcting the imbalance can only be a temporary and ineffective solution.

True prices that reflect supply and demand and convey valuable, accurate market information need to be allowed to flourish in our healthcare system if we are to get appropriate and affordable care over the long term.

Friday, June 01, 2007

German Brain Drain

Instapundit??? Pshaw. I crap bigger than him! OK, that's not true, but I did beat him by 9 months on this story. Here's Johnny Come Lately's contribution.

Cold Showering the Fred Thompson Boomlet

At this stage in the game of the 2008 presidential campaign, candidates are mapping out positions, and voters (those very few already paying attention) are assessing who stands for what. At some point, as we get into the nitty gritty of the campaign, the issues will be well known, the debate over them will begin in earnest, but the notions of qualifications, experience, and what they call 'gravitas' will take center stage. And, when you cut through the noise - the media gotchas, the accusations of flip-flopping, the hobgobblins of YouTube moments - when you get beyond pictures of cross-dressing or Mormonism or use of corporate jets or hedge fund jobs, what you find is that Mitt Romney and Rudy Giuliani have more in the way of qualifications, experience and "gravitas" in their left pinky fingers than Hillary, Obama or Edwards have combined. Some may not care but will vote on principle, wanting a rabid pro-lifer or a committed class warrior in office regardless of qualifications. Still, many many voters are going to ask themselves quite simply, "who is more qualified, who is the truly serious individual?" In that regard, Republicans have the clear advantage, but that is about their only advantage. They would be ill-advised to give up that advantage. Now, Fred Thompson may be awe-inspiring and wonderfully fearsome and may ooze gravitas, but he is light on experience. Quite light. Nominating him risks ceding that advantage. I'm not saying that Fred is a futile option, just that his candidacy entails more risks for conservatives than they either understand right now or are willing to admit. Tread lightly with the Fred-mania.