An economics lesson for skeptics

A year and a half ago I fell off my weekly podcast schedule and got behind on Skeptics Guide to the Universe. Partially because I got behind on jogging and stopped playing World of Warcraft - two activities I would do while I listened - and partially because I started listening to Econtalk and wanted to get caught up on that podcast. I am now within striking distance of being caught up with both of them and mixing them in together has got me thinking a lot about economics within skepticism, and how often they overlap.

Economics is a strange beast to most skeptics - they think it's about money when its really about making the most with limited resources. Most people see a demand curve stretched over a Cartesian coordinate plane and shut down. However, someone like me who's got econ fever doesn't see numbers and percentages - we see people and their wants and needs and how they shape their actions. The degrees of comfort and hardship are what it's all about - not abstract figures.

But most science nerds miss this field. Take for example a Skeptics Guide episode I listened to the other week. There was a long discussion about how ineffective sunscreen can be because people slathered with it spend more time outside because they think it will protect them. The discussion was very interesting to hear, but the panel was unaware that they were discussing a well-known economic concept - the moral hazard, where people insulated from risk will behave in a riskier manner, and in some cases they will be harmed more than if no safety measure was put in place.

Brandying about the term would make it easier to find other examples, such as seat belts, airbags and other automobile safety devices which encourage fast driving. The concept is common enough to inspire the name of econ-country crooner "Merle Hazard."

Here's another important one - opportunity cost. As skeptics we understand that homeopathy is a placebo medicine - it doesn't directly harm the health of the treated, it's merely water, but it keeps people from seeking real medical advice. To put it another way, the opportunity cost of getting homeopathy is all the real treatment one could be getting at the same time.

Economic concepts really belong in a skeptics toolbox, as risk and reward are important issues in skepticism.
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Guilty as charged

A recent Huffington Post article has shocked - shocked - its readers with the bold accusation that people with my views care just as much about people in other countries as we do about helping Americans.

You caught us, Ian Fletcher. The rabid USA-first business council you work for really pulled out the stops by employing someone so willing to broadcast naked American exceptionalism and protectionism. Your corporate monkey-wrenching has revealed that we don't think the lives of Americans are more important or precious than the impoverished masses in third world countries.
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These are "fun" facts?

Some of them aren't even facts!

I had a good laugh reading the Wikipedia article on coin clipping - trimming the edges off gold and silver coins - when a line about people being executed for coin clipping was attributed to a page of "US Mint fun facts."

If having the life snuffed out of you for debasing the currency isn't enough fun, one of the next items on the link claimed the country profits by stamping more and more coins. This is neither fun nor a fact. The official government website reads:

The whole country makes money when the Mint makes money... Why? The answer is "seigniorage"—the difference between the cost of making a coin and its face value. (For example, it costs only a few cents to make a quarter, yet its face value is 25 cents.) This profit runs the Mint and puts extra funds into the country's Treasury—funds then spent on education, health care, defense, and other services for the nation.

Let's pretend that the country spends all its money on "services for the nation" and not boondoggles, bailouts and bureaucracy. Let's ignore that. If it's so profitable to make coins, why don't they end all taxes and just mint coins?

Clearly - clearly- it's because money is not wealth, it just stands in for it, and the value of bills and coins in the hands of the public is sapped when hard currency is increased faster than the resources and wealth it stands for. This is not rocket science, it's Inflation 101.

And why would the US Mint want to remind the public that seigniorage exists. Sure, a quarter only costs 10 cents to make, but a penny costs 1.6 cents and a nickel costs 7.7 cents. If quarters are profitable, doesn't that make pennies and nickels a liability?

To be fair, for all I know the higher ups at the mint want to stop making pennies and its the ignorant public that forces them to keep stamping them out. Still, how the word "profit" got in there is beyond me.

I'd imagine you'd have to be a pretty bored little kid to cruise the US Mint children's section when you could log onto The Alcohol and Tobacco Tax and Trade Bureau kids-only section. But does the ATTTB have a spunky cartoon rat mascot? No, no they don't.

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Death comes for all businesses

I came across an interesting Washington Post article this morning about a local business doomed by large competitors:

In a quiet alcove, in a circle of 14 chairs and with a 496-page book on their laps, club members discussed events an ocean and several lifetimes away. But they had the present in mind, too: What will become of their monthly meeting spot?

Borders, they know, is struggling to survive. It recently suspended payments to book publishers. Dozens of its stores across the country, including several in the Washington area, have closed. For many in the industry - and for this group of Borders regulars - the question is not whether the chain will go under, but when.

What sets this piece apart from the routine Big-Companies-Are-Shutting-Down-Our-Corner-Store formula is the subject is part of a national chain and not a small business. The hopeless lamenting and deep sighing while waiting for the ax to drop, however, are exactly the same.

This is a routine part of the business world and new technologies - not just economies of scale - will (and need to) kill older business models.
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Spontaneous order creates things we don't like too

Why can't we accept that some powerful forces create both good and bad things?

It's popular to draw lines between free market economics and Darwinian evolution. Both systems depend on a competitive environment that allows helpful traits to survive, whereas critics of these systems claim that higher levels of order and function need to be planned by an intelligent source.

The meeting points of evolution and free markets is spontaneous order, where order emerges through the actions of self-interested participants and creates something that looks like it was designed. Adam Smith's invisible hand is the typical example.

While I see people are willing to accept spontaneous order created the things they like, such as butterflies and iPods, there is a tendency to attribute wicked things to a devilish planner, such as the AIDS virus, racial tension and rival political movements.

Media Bias

Most conservatives express views that the mainstream media has a liberal bias, and I generally agree with them. Where we disagree is that cause of that bias. I typically hear that the bias is a conscious effort to distort events to sway the public into taking a political position. Instead, I see it as a natural result of an industry that has more lefties than righties.

The individual reporters have a left wing worldview, which we can expect to cause the news product they create to lean to the left. It's difficult to create a study that reflects the bias of the reporting, but it's somewhat simple to find out the bias of the news team. We already understand why researchers who believe in astrology can create dubious scientific studies on the matter. The same principal applies to summarizing current events.

But what I typically hear from the right is not a media bias created by unintentional wordings and gatekeeping, but instead a nefarious plot.

That doesn't mean that all news groups attempt to be unbiased - it's a successful marketing niche for MSNBC, Fox News and The Nation magazine. One minor form it takes is with wordings. All news agencies strive to use consistent wording, so what do you do when a partisan issue like illegal immigrant comes up? One answer is to select partisan wording that will please the audience. The left has been chewing on weird phrases like "undocumented workers" - as if documentation was the issue instead of immigration status. "Illegal visitors" caused a firestorm recently, because the story was on illegal aliens who were not workers or planning to live here, and the news agency forbid the term "alien." Fox does the same thing using terms like "illegals," which always struck me as an jagged and ugly expression.

Racist plots

A few months ago I had to stop watching Crips and Bloods: Made in America on Netflix because it wasn't labeled a mockumentary. The film kept drawing lines that weren't there, such as the assassinations of Martin Luther King Jr. and Malcolm X as a government plot.

I thought it's well-understood that the racist organization that conspired to kill Malcolm X was the Nation of Islam. Government plots have been blamed for a host of terrible things that have devastated black communities, such as the crack-cocaine epidemic, the AIDS virus and even conflict with other minorities.

In reality, crack-cocaine was an innovate drug that stretched expensive cocaine so it could be smoked quickly and cheaply. AIDS was created by nature, not a plot by the government against blacks or a lance from God to destroy gays. As for racism between minority groups, this is simply how racism forms - one group develops contempt, blame and distrust for another. It doesn't matter if it's Korean shopkeepers in black neighborhoods being called "blood suckers," that's the neomercantalism of "buy local" and "buy black" at work. No one thinks the Anti-Chinese Mongolian neo-Nazi's were concocted by a white power organization, so why should conflicts between blacks and Hispanics?

That's not to dismiss all claims of institutional racism - episodes like the Jim Crow laws had a very big impact on the world. Those certainly existed, but there is a huge difference between Black History Month being February, the shortest month, and the very real Stolen Generations where Australian Aboriginal children were forced into adoption.

Obsolescence doesn't need to be planned

Obsolescence, where older technologies need to be replaced, is a natural part of creative destruction. It was not a plot to sell wagons wheels for thousands of years and then to replace them with rubber tires, nor were record players created with eight-tracks, cassettes, CDs and mp3s in mind.

Yet if you watch The Story of Stuff - and I'm not suggesting you should - you'll hear that bulky computer monitors were a scheme until flat screen computer monitors arrived. The idea of planned obsolescence - where companies time the release of products and make things break early in order to cheat customers into buying the same items over and over again - is no less of a wild conspiracy theory than the moon landing hoax or the mafia assassinating JFK.

I remember in my fourth grade public school class being handed a propaganda magazine printed on recycled paper about a fictitious handheld video game system that is designed to break after three months to make kids buy more. It was a fairy tale then, and it's a fairy tale now. That's costly to arrange and it would give the products a bad name. Imagine what a PR disaster that would be if it was revealed to the public.

All opposition as astroturfing

I've written about this before, the idea that anyone who disagrees with you is a front for your opponent, but it could use more focus on rival political groups.

First off, astroturfing - fake grassroots movements - happen. For example, there are pro-Walmart groups that have been faked by the company, and the same has happened with anti-Walmart groups funded by their competitors. After the revelation of a few of these groups, I have seen wanton and reckless accusations that everything hostile is astroturf. This begins and ends with the small-government, low tax "Tea Party" movement.

I have seen so many accusations that the Tea Party is a front group by corporations, billionaires and the Republican party that I don't need to link a single one - they are out there in droves. But if they weren't centrally-planned, then what created this movement in 2009?

There are a few theories. One is a campaign to mail tea bags to politicians, another is a blogger who put together a tax protest in Seattle. The origin I find compelling is the Rick Santelli CNBC viral video that drew immediate attention and pitched the idea of a "Chicago Tea Party" in July. The first protests were April 15 of that year - a little early - but I think that's because once Santelli planted the idea, a collection of individuals planned tax day without being lead by anyone.

The important thing is some of the opposition to this group can't grasp the idea that people would so strongly disagree with them that they'd organize a movement. The nerve!

Inside the tea party is no refuge from conspiracy mongering either. Having been to gatherings of both the Tea Party and overlapping 9-12 Project, I've heard accusations of astroturfing abound. Here's an example:

There was a rally for the nationalization of health care in Portland, I heard there would be a counter-protest nearby, which I attended solely for networking. While there I witnessed a full-grown man from "our side" yelling slogans at "their side" and behaving childish.

Weeks later I mentioned him at a 9-12 Project meeting and the people in charge nodded and said he was a plant from the opposition. I asked how they knew, and was told "they do that sort of thing."

My obvious follow-up was, perhaps they do but how do we know this was an example of that, and not just some jerk?

I was again told, because they do that sort of thing.

People, that is not evidence. There's nothing to prevent a loose-cannon right-winger from showing up at a public protest and being obnoxious. It sounds a lot more likely than an actor was employed to disrupt things, and by disrupt I mean got on my nerves and very few others. They didn't think this could just be some idiot - it had to be planned.
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Economic Reality Check #5

Poverty is the natural state of the world. Only civilization can destroy it, and then only under a certain constellation of circumstances.
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Why I think less government will increase charitable givings

Jeremy asked in the comment section of a recent post:

Speaking as someone who works in food-relief, charity is very limited and always will be. Only when people use government to wield grander resources, or when markets find a profitable solution do the problems cease. Do you know of any systemic issues that were solved by the nonprofit sector? I don't.

Why do free-marketeers assume charities will grow in a libertarian world - a world where there's a strong emphasis on the "self."

Jeremy has two questions. My answer to the first is, no, I can't think of issues that were solved, but I can name major victories within issues. That's because solving systematic issues is too lofty a goal. The work of Norman Bourlaug thwarted mass starvation in parts of Mexico, India and Pakistan, but starvation is a pretty big issue for one group to tackle.

You also have to look at charities that get government support - does that rule them out? The Campfire Program in Zimbabwe was started by NGOs, academia and government programs. Does that mean the government aspect was crucial, or does some small government action superficially tag all charities once they get going?

Look at the case of Harlem Prep - a non government school that was successful until it was poisoned by government help. Harlem Prep didn't solve the issue of poor education for inner city kids, but it did solve it in that neighborhood.

What about Dr. Jonas Salk and the March of Dimes on polio? Salk gave his amazing vaccine away, and the March of Dimes did a lot to stamp out polio. Should we take it on faith that without government grants Salk never would have made his discovery?

You don't hear this from my side enough, but non-government aid and support will never create a utopia. The voluntary aid I advise will always miss people and issues. Important things will be overlooked.

But compared to what? Why must my flawed solution be compared to a fictitious perfectly-managed government that solves every problem? How effective has government been? Does anyone really believe LBJ's War on Poverty has helped the problem?

As to the second question, why I think charity will increase if we focus on the self more, the first reality is people will have more money left in their pockets. They will also see themselves as responsible for the things government is no longer doing.

Charities are by no means perfect. The nonprofit world has a corruption problem, but unlike government, no one is forced to give them money. I agree with you that that is one of the advantages of a government solution - its easy to marshall the resources for the program. However, its also a curse. Its very easy to marshall resources for the bad programs.

Charities compete with each other to attract donors, and an America that relied on charities more would see more scrutiny in charitable givings. Bad charities will go out of business, while bad government solutions stay intact.

Government solutions also have nasty side effects. For example, giving more aid to single mothers encourages poor families to break up. I expect this effect would be much smaller in charities as they can exercise their judgment on who to help and change the rules quickly if a problem occurs.

As for the objectivist philosophy of the self discouraging people from helping others, I think don't think we should assume people would radically change their philosophy in this modified world. Our friends on the right already give more to charities than our friends on the left, because the lefties seem to think paying taxes counts as helping the poor.

I think most people feel they have a duty to help others when they can, and as I said before, limiting government programs will empower them to help more than they can now.
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The ignored eye of the blame-storm

The web was strung from one metaphorical end to the other with blame about the shooting of Rep. Gabrielle Giffords D-AZ this weekend. Guilt was heaped on the Tea Party, Sarah Palin and the general animosity of modern politics, even as it quickly became clear that the shooter was seriously mentally ill.

The right shot back, citing the lefts history of calls for violent revolution. The amount of animosity, hate and contempt actually grew as the same people blamed it for the tragedy.

But then I went of Facebook and saw what my left-wing friends were really writing. Drew wrote:

For people waiting for me to weigh in on this: I do not feel the violence in Arizona was politically motivated, and that all the talking heads going on about it are running away with assumptions.

A psychotic young man want to his supermarket with a gun, saw a huge cluster of people, and started shooting. That seems to me all there was to it, despite who was shot.

Mario, a friend to the left of Ralph Nader, posted what turned out to be a quote from left-winger Rachel Maddow:

There is nothing to be gained from speculating on the motives and affiliations of Rep. Giffords' shooter without facts.

They were not alone. It's the loudest, angriest people on the fringes that gather the most attention, and the calm and reasonable people are far too often overlooked. It's easy to blame what you already oppose for the tragedy of the day, but it takes guts to stand up when your side goes to far.
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Did we just win this one?

The media has latched onto an old story this week - that Andrew Wakefield's 1998 study in The Lancet that reported a link between vaccines and autism was deliberate fraud, that Wakefield was funded by lawyers suing vaccine manufacturers and was trying to create a market for an alternative vaccine he held the patent to.

Still, better late than never. This could be the tipping point that undermines the entire anti-science vaccine denial movement. It's not time to break out the party hats, and some of the media is downplaying how damning this is. But we really couldn't expect a better event for this issue. The other side is scrambling to say this study was anything less than the foundation they built their crusade on. With all the enlargement they made in the 00's, victory will be a major shrinking of their numbers but not a vanishing act.
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The one that got away in 2010

I update this blog a minimum of once every three days, and sometimes a news story falls through the cracks that I find myself telling friends about, but never punching into my keyboard. Each year I pick through the missed issues and events and find one that stands out. Last year was the economically-flawed "buy black" campaign.

The 2010 missed story was the South Fulton, TN fire department fiasco, which the left jumped on as a warning about privatization of government services and served as a proxy skirmish for the health care debate.

The popular narrative was that the Cranick family didn't pay its fire insurance bill and when the house went up, the private fire department showed up but refused to put out the flames, even after being offered any amount of money they wanted. They only got involved when it threatened to ignite a paying neighbors house. The image of this burned-out house, the left claim, is what a privatized America would look like.

So this is the part where I sling a few well-placed facts that turns everything upside down.

The real story is the Cranicks live in Obion County in a rural area outside of South Fulton. Residents in this area do not pay taxes to the city, and as such, do not pay for their emergency services and are not entitled to them. If you break your leg in Northern Michigan, Canadian paramedics are not expected to cross the border and help you. This is how government services work.

The city of South Fulton decided to offer fire protection in exchange for a $75 yearly fee for homes near the city. The Cranicks did not join this insurance program, and for them to receive normal fire service without penalty would be harmful to the residents of South Fulton and their neighbors who paid into the program. The problem was jurisdiction, not profits.

So far, the city had done nothing wrong. This was not privatization in any way, shape, form or figure - and that's why a problem occurred. Gene Cranick offered to pay the fire department a day-of fee for putting out the fire, and was refused. This bears no resemblance to how a private company would operate. They would have to offer already-burning rates - let alone potential loss of profits, failure to do so would be PR suicide.

Instead we saw government employees acting like government employees - refusing to help, complete apathy for the public and no apologies. Instead of the tactically-superior move of "no comment," South Fulton City Manager Jeff Vowell said:

I have no problem with the way any of my people handled the situation. They did what they were supposed to do. It's a regrettable situation any time something like this happens.

This incident was a perfect example of how incompetent government solutions can be. It was never a black mark against privatization because there were no privatized services involved, and it's sad to see it being used as a progressive fairy tale about capitalism.
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Will military recruiters be allowed back on campus?

As mentioned before, now that Don't Ask Don't Tell is no longer the law of the land, universities will have to find another excuse to chase away military recruiters.

Peace activist and academic Colman McCarthy has answered that call with a recent op-ed piece:

ROTC and its warrior ethic taint the intellectual purity of a school, if by purity we mean trying to rise above the foul idea that nations can kill and destroy their way to peace.

The piece is more of a swan song than a rallying cry, as McCarthy does not reveal an actual loophole, just an anti-military sentiment. In fact, this piece shows why McCarthy is a liability to the campus anti-military movement, not a valued ally. His penultimate paragraph contained a line he will never live down:

To oppose ROTC, as I have since my college days in the 1960s, when my school enticed too many of my classmates into joining, is not to be anti-soldier. I admire those who join armies, whether America's or the Taliban's: for their discipline, for their loyalty to their buddies and to their principles, for their sacrifices to be away from home.

This kind of loose-cannon extremism is the last thing peaceniks need to hone their image, and distancing themselves from McCarthy should be on the top of their list right now. He is the living embodiment of the "peace at any price" extremist that Ronald Reagan caricatured in his 1964 A Time for Choosing speech:

There is no argument over the choice between peace and war, but there is only one guaranteed way you can have peace and you can have it in the next second – surrender. ...From our side [Nikita Khrushchev] has heard voices pleading for “peace at any price” or “better Red than dead,” or as one commentator put it, he would rather “live on his knees than die on his feet.” And therein lies the road to war, because those voices don’t speak for the rest of us.

You and I know and do not believe that life is so dear and peace so sweet as to be purchased at the price of chains and slavery. If nothing in life is worth dying for, when did this begin – just in the face of this enemy? Or should Moses have told the children of Israel to live in slavery under the pharaohs? Should Christ have refused the cross? Should the patriots at Concord Bridge have thrown down their guns and refused to fire the shot heard ’round the world? The martyrs of history were not fools, and our honored dead who gave their lives to stop the advance of the Nazis didn’t die in vain.

McCarthy revealed in a 2008 interview that his opposition to all wars makes no exception for World War II, and that "Hitler could have been waited out."

If this is the kind of leadership emerging to keep the recruiter ban, then that side has already lost.
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