All waste benefits someone

There was a deceivingly simply quote on the Aid Watch blog last week:

"Every inefficiency is someone’s income."

As I've written before, inefficiency creates jobs - bad jobs that need to go away, but jobs all the same. Whenever wasteful spending is cut, someone will lose their paycheck.

I remember a few years ago a caller to an NPR program talked about money being misspent in New Orleans after Hurricane Katrina was wasteful, but at least it stimulated the economy. The host was clearly not a Henry Hazlitt reader and agreed.

Whenever there is talk about cutting health care costs, it is glossed over that the medical profession will lose revenue. It's also assumed by some that the insurance industry is making all the profits, but that's not the case. Whenever waste is trimmed, someone loses a buck, or worse, their job.

But cutting waste frees up resources and allows new jobs to be created. The political trouble here is that the new jobs will appear all over the place. The jobs will certainly happen, but the nature and location of these new jobs is unpredictable - and the people who will eventually get the jobs don't know that they stand to benefit. Meanwhile the holders of wasteful jobs know who they are and will resist efforts to destroy their profession.

In the political battle, the visible and organized have a huge advantage over the invisible and scattered. The people holding wasteful jobs participate much more in the debate than the clueless people who will benefit when those jobs are destroyed.
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A farewell to sustainable foods

The Freakonomics blog recently posted a farewell address from agricultural economist William A. Masters. Masters is transitioning from Perdue University to Tufts University and had some interesting comments on what a "sustainable food system" should look like:

"People say they want to buy local and artisanal food so as to promote the local economy, or to avoid environmental damage from long-distance transport. But when scholars investigate these claims, they may turn out to be very fragile. What if organic, local, traditional and artisanal products don’t actually deliver a healthier, more secure and sustainable food system?

"This is not a hypothetical question. Right now, the preponderance of evidence is pointing in that direction.

"It seems likely that improved health, security and sustainability will actually come from other kinds of intervention, such as more rigorous control of e. coli or salmonella, limiting fertilizer runoff from conventional agriculture, and building more efficient supply chains from tropical to temperate countries. These more effective measures don’t preclude but also don’t support the pursuit of organic, traditional, local and artisanal qualities that food consumers are demanding."

What also interests me is that he left some room for respecting the wishes of consumers. Even if the health, environment and economic arguments are false, there is still a place for consumers to have their own way. After a fair criticism of the scares food writers are dredging, Masters said:

"Eventually I hope to do some writing for popular rather than academic audiences, to help replace what I see as misleading stories about health and the environment with a more accurate narrative about what’s actually desirable in higher quality foods.

"My working title is Food without Fear, aiming to help readers enjoy various qualities without a misplaced sense of fear or guilt that shopping for conventional carrots at Wal-Mart will harm themselves or others, or a misplaced sense of foolishness about paying five times as much for a more delicious organic carrot on a sunny day at a farmers’ market. Plenty of smart people do both those things, and they should not feel fearful, guilty or foolish about it."

Well put. I look forward to reading when it comes out.
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Money isn't everything

I was reading an old Tyler Cowen post where he argued its wrong to look at increases in measured Gross Domestic Product to measure the success of economic policy, and one should instead look at the standard of living.

It seems obvious to me. People don't produce goods and services for the sake of working - they do so because they want to consume, and other producers are savvy enough to demand payment. GDP just measures how much people are currently producing - but its the enjoyment of that production that really matters.

A lot of my posts are about increasing wealth and efficiency. I don't spend enough time here emphasizing that money is just a way to get some of the things we want - it's not the goal itself.

I think economist Russ Roberts put it best when he wrote recently, "I hate the idea of things being 'good for the economy' rather than good for human beings."

Wealth is just a means to an end. It's human happiness and well being that matters, and there's more of that today than ever before.

Civilization has spent a long time slowly increasing living standards - including health, hygiene, leisure time, nutrition and luxuries, and increases to wealth has simply been the servant of that task - not the overseer. That slow march picked up rapidly in the Twentieth Century and all indicators say it will continue to rush upward.

Roberts said he ends his intro to economics classes with a talk about not always taking the job offer that pays the most. Money often comes as a trade-off for more hours, longer commutes, inflexible schedules and tougher tasks.

Imagine someone working 40 hours a week and making $25,000 a year. That person would probably say yes if offered $5,000 more a year if they worked an additional hour each week. They'd be thrilled if you made that offer a second time, paying them $35,000 a year for 42 hours a week. But if you kept making that offer, they'd eventually say no.

That's not irrational - while 50 hours a year for $5,000 is a good deal the first few times, no one wants to work 16 hours a day, every day, even if it pays $385,000. They would find a spot where they value their time more than the additional money they could be making.

Of course, while money isn't everything, money isn't nothing either. Trade-offs work both ways, and there are times when it's worth sacrificing a great vacation, time with your children or an evening with friends in exchange for money.

There's a lot of bad career advice to only "do what you love," which works great if you manage to land a great paying gig, but terrible if you become a miserable artist who can't afford shoes. Sometimes its worth leaving that job at the bank to become a gardener, and sometimes its worth closing the greenhouse to make some real green. Both extreme positions fall apart, and happiness lies in balancing ones interests with ones financial needs.
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Obama could break C-SPAN ratings record tomorrow

Remember on August 21, 2008 when presidential candidate Obama said he'll broadcast health care negotiations on C-SPAN? He didn't follow through, of course, but the idea of televising important government meetings that are normally conducted in shadows is still appealing.

And what private meeting are more people interested in then the one tomorrow between President Obama and U.S. Army Gen. Stanley McChrystal about a Rolling Stone article quoted McChrystal criticizing the president and his administration.

Obama made a big mistake by promising greater transparency in government - which he has not done. He also had the bad luck to come into office right after the American left put a lot of effort into (correctly) reminding America that protesting and criticizing politicians is patriotic. What better way could he win back his supporters than by a belated gesture of compassion and civility to McChrystal in public?
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Trade as a magical machine

Great video about the benefits of trade, and the fallacy of preferring local production.




Astute readers will recognize it as a retelling of an example I borrowed from Paul Krugman's Pop Internationalism, which he himself took from James C. Ingram's 1983 International Economics textbook.

Link swiped from Kids Prefer Cheese.

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Am I missing something?

There's an article scaring readers about Christian right "fascists" that's been making it's way around the Internet for the last two weeks. Some of my liberal friends have linked to it, but I honestly don't see why any of them take it seriously.

Here's a typical excerpt:

"This movement, veering closer and closer to traditional fascism, seeks to force a recalcitrant world to submit before an imperial America. It champions the eradication of social deviants, beginning with homosexuals, and moving on to immigrants, secular humanists, feminists, Jews, Muslims and those they dismiss as “nominal Christians”—meaning Christians who do not embrace their perverted and heretical interpretation of the Bible. Those who defy the mass movement are condemned as posing a threat to the health and hygiene of the country and the family. All will be purged."

Author Chris Hedges, introduced as "a Pulitzer Prize-winning reporter" and a senior fellow at the lefty Nation Institute, makes a lot of bold proclamations, but he doesn't back it up with evidence. The entire spawling piece reads like something an 8th grade Livejournal user would pound out in the computer lab between biology and geography class. It wanders from topic to topic, making grand claims of visible horrors and offers no compromises. The only thing missing is a broken Caps Lock key.

Hedges uses the word "fascism" as a cudgel, striking out and disfiguring anything that comes along, yet he never demonstrates any understanding of the word beyond a mere insult.

But fascism does have a meaning - it is a nationalistic, totalitarian, corporatist form of socialism.

It's elementary to paint patriotic opponents as vile nationalists - any fool can do that. It's quite another thing to claim that free market economics is corporatist or socialist - it opposes both of them very strongly.

As for totalitarian - I really don't see it. Those enthusiastic tea party protesters that everyone loves to look down upon have one common message, and that is less government. It is their opposition that believes in solving problems with the government - and that means more governmental powers. Neither side is in favor of totalitarianism, but it's the right that seems to understand why.

In addition, why would they seem to undermine our republic and the concept of voting when the party in power is the Democrats? Wouldn't that just seal their opposition into office?

So after reading this drivel, I wonder why so many smart people could enjoy it. It's not that they're stupid - some of them are quite astute. It could be the relevance of expertise - maybe that just don't know what a persuasive argument should look like, or politics isn't something they deeply understand. But I don't find these answers satisfactory.

I think what's going on is bias. People who like the premise - essentially that the Christian right is an evil marauding horde - are willing to forgive scant evidence or wild claims because they "know in their hearts" that Hedges is on the right track.

In addition, it's hard for someone like me who rolls his eyes every two lines to see this article as holding any value.

I hope I would reject a right wing version of this piece, but I can't know for sure. I don't quote Michael Savage, Ann Coulter or Sarah Palin because I don't like their presentations. But I do like Rush Limbaugh, Bill O'Reilly and Glenn Beck. True, I don't always agree with them and they aren't my top influences, but I do think there's a lot to learn from them.

Bias cuts two ways here. I'm rather certain that this article is lousy, and it's clear to me that lefties are giving it too much credit. But what is impossible for me to see is how much my own bias is sapping away any credit it deserves.
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What's wrong with judging?

One of my friends has an online profile that states she is "On a mission to wipe away all negativity and judgment from my life." My gym has a "lunk alarm" that the employees can set off on anyone who "grunts, drops weights or judges." I hear a lot of people talk about how its wrong to judge another person.

But what does any of this actually mean?

It is not possible to give up judging people, and if it was, it would be terribly undesirable. When people talk about judging, they imply a very narrow definition. What they really mean is reaching a firm negative conclusion about someone from little information.

But that isn't always a bad thing. If I was looking to hire a babysitter and I learned one of the candidates was a convicted child molester, I would cross them off the list.

But wait a minute, that's judging someone. What's more, I even discriminated against the person based on my judgment. But would anyone look down on me for doing it?

What if it wasn't so extreme - what if I got to know all the candidates really well and I thought one of them was irresponsible. I had seen the car they drive was filled with food wrappers and beer bottles. One of their references said they forgot to feed the kids on two separate occasions. The candidate didn't pay attention during the interview. If I was to use these facts to dismiss the candidate as irresponsible, I would absolutely be judging them.

So what I want to know is, what's the problem here?

Maybe the convicted child molester was falsely accused. Maybe the slob had a series of creative excuses and misunderstandings. There's always a chance that the judgment is wrong or is based on incomplete information. That's unavoidable, but it's silly to reject all evidence and clues out of some fear of passing judgment. We will always have incomplete information and judgments don't have to be firm - they can always adjust with new information.

On the other side of the coin, people don't seem to have much of a problem with positive judgments. If your opinion of someone goes up after you see them hand a stranger a dropped $5 bill or hear they left a fun activity early to drive someone home, then you are judging them - and on very little information too.

Look back at that opening quote - how could anyone think living life without "judgment" is a smart plan? It's foolish to reject a person because you don't like their socks or eye color, but that is straw man. Judgment is needed because sometimes we don't have the luxury of perpetually delaying a conclusion. Sometimes we need to act fast, and our sense of judgment is the key to making good decisions.

You don't have to walk a mile in someones shoes to judge them. A simple evaluation on the choices and decisions a person has made and the context they were made in is a good start.

And by the way, when someone sneers at me because I say I am proud to judge people, they are in fact passing judgment on me.

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No breaks for bad upbringing

Just as a warning, I'm going to talk about Nazis in this post. I avoid bringing them up because they often paint blog entries as hyperbolic, but that's a risk I'm willing to take today.

I don't agree with giving criminals softer punishments because they were brought up in a bad environment or had few legitimate opportunities for work.

The idea is pretty common. John Doe was brought up poor in a violent city, mired with drugs, gangs and bad schools. He fell into the criminal life, not because he was born bad, but because his environment influenced him to be.

Indeed, I agree that people from those areas are more likely to turn to crime than those from better neighborhoods. If one were to pluck a young John Doe from the ghetto and raise him in suburbia, he would be much more likely to obey the law.

So when John Doe gets caught and goes before a judge, there's a cry for leniency. It's not entirely his fault, after all, so why should he be punished the same as someone who had a good upbringing? Is that justice?

Well lets stop and think what the purpose of prison is. Most people think of it simply as punishment for wrongdoing. That's correct, but incomplete. Incarceration servers three purposes: Punishment, prevention and protection.

With punishment, any victims and their families will feel that the law had made the criminal pay a penalty. It is the vengeance aspect of justice.

As for prevention, the threat of legal consequences acts as a discouragement to future crimes.

Finally with protection, locking someone away from general society keeps the public safe from dangerous criminals.

So while I agree with the sympathetic opposition that a criminal with a poor background is less deserving of the punishment aspect, the prevention and protection matters should not be ignored or undermined.

With the rule of law, the sentence a court carries out should be predictable. If you know that getting caught throwing a brick through a window will always result in 30 days in jail, you will not throw a brick unless you think its worth risking 30 days in jail. When people know they can plead a bad upbringing, it changes the equation they make in their own head, encouraging crime.

Without strict sentencing guidelines, the public has a heightened risk of being savaged by violent criminals. No one will find it comforting that their aunt was strangled by a drug addict because John Doe was the product of his environment and thus received a light sentence, placing him back on the streets that fateful night.

Of course, that sympathy for venomous influences does not extend to Germany in the 1930's and 40's. There is nothing evil in the blood of German people that lead them to engineer the Holocaust and march across Europe. They were under the influence of Adolph Hitler, an Austrian radical and one of the most persuasive public speakers of the century. No goose-stepper thought up Antisemitism; it was fed to them. So was the glory of national socialism. They were caught up in movement larger then themselves, and it heavily influenced their actions.

So should we have shown sympathy during the Nuremberg Trials? Of course not - and that is where my opposition must backpedal. Punishment, prevention and protection were intertwined into the executioner's noose. Even with lesser crimes, the rule of law and predictably of consequences are needed to keep society safe. Punishment is just part of the equation.
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The basics still haven't changed

Occasionally I'll be at a social event and someone will make the following claim:

"Local production will be the norm of the future. All of the cross-country shipping and large-scale productions we're used to are based on cheap gasoline, and will go away when oil prices rise."

Honestly - my social life really does include elaborate localist encounters and rhetoric.

The fallacy here is the assumption that buying local conserves fuel.

The majority of fuel is used in the production of goods, not transportation, and local production is less efficient. Even ignoring that, it's a bogus assumption that a fleet of pickup trucks going 15 miles is always more efficient than a tractor trailer going across the country, as George Mason University's Don Boudreaux recently wrote.

The activists are claiming that only transportation fuel counts, and even those numbers are against them.

The entire notion that mere petroleum prices will throw everything we know about production out the window is cringe-worthy. I'm reminded of something Paul Krugman wrote in Pop Internationalism:

"Pop Internationalism proclaims that everything is different now that the United States is an open economy. Probably the most important single insight that an introductory course can convey about international economics is that it does not change the basics: trade is just another economic activity, subject to the same principles as anything else."

Every few years some demagogue proclaims we have to throw everything we know about economics out the window. Things are different now, they say, and we need to update the textbooks.

But those same textbooks they claim to care so much about never graced their bedside tables. They are throwing out ideas that they never understood.

I anticipate rising fuel costs to be a temporary problem. It may end up lasting for a few decades, but economic history suggests that we'll just end up finding a new energy source, like we did after whale oil peaked in the 1840s.

So what will rising oil prices actually do to local production? Since local production and transportation are both fuel hogs, the price gulf between local and regular goods will continue to widen. Unless the market is interfered with (subsidies, tariffs, localist activism) than there will be less local production in the future, not more.

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Why is "shareholder" an accusation?

I was listening to a radio ad from AARP this morning and there was a call to help elderly investors who lost money. After all, these people are retirees who put their money into companies and were victimized when they went broke.

I hear it all the time - the documentary Enron: The Smartest Guys in the Room sympathetically interviewed an Enron line worker who invested everything* in the company and lost. When a company makes bad investments or acts unethically and damages its own value, the victims are the poor, humble investors. Either they bought stock directly, or a fraction of the stock through mutual funds.

But when a company does make money, close down old factories or shut out a selfish union, the "blame" rests on the CEO, the board of directors and the greedy shareholders.

But investors and shareholders are the same thing.

It's exactly like what Todd Zywicki said in an interview on debt. People think debt is bad and credit is good, even though they are the same thing.

When it's time to pity them, they are investors - regular middle class people from all races who just want to save for retirement. When it's time to hate them, they become shareholders - greedy white fat cats who blow cigar smoke rings and frown.


*Free investing tip: Fools puts all their eggs in one basket. Diversity your portfolio.

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