Deinonychus antirrhopus

Bad Economic Reasoning

I have blogged a bit about the idea of the state basically taxing punitive damages from court decsions (here). The problem with punitive damages is that they can create a perverse effect and lead to more lawsuits and hence result in non-productive use of resources.

Dwight Meredith, a lawyer, as weighed in on this and offers some bad reasoning.

I have no major objection to having a portion of punitive damages go to the state. The purpose of punitive damages is to punish a wrong-doer and to deter future wrongful conduct. Punitive damages do not exist to compensate the plaintiff and, as a result, allowing all of such damages to flow to the plaintiff (and plaintiff’s counsel) does result in a windfall.

I would object to the state taking 100% of punitive damages awards as it would eliminate all incentive for the plaintiff to bring actions that deter wrongful behavior. Just as a government whistleblower gets a windfall of 10% of the amounts saved by exposing fraud, the plaintiff should have an incentive to deter wrongful conduct. Deterring wrongful behavior is a social good.

The first paragraph is right. Punitive damages are to punish wrong doers (usually firms) so that they do not engage in wrong doing. The problem is with the second part. Not allowing any punitive damages to go to the person(s) suing will not remove all incentives. Suppose there is a court case where an individual suffered losses of $100,000 and also was suing for punitive damages. That is the person suing would get $100,000 + punitive damages. Now if we removed the punitive damages the award from the lawsuit (assuming the person bringing the lawsuit won) would not be zero. There would still be an incentive to sue (i.e., to be made "whole" again).

The comparison to the whistleblower reward of 10% is faulty. The whistleblower will get nothing if not for the 10% reward. Hence the granting of a reward based any settlements due to the whistleblowing does make sense and provide an incentive to blow the whistle.

Further, here is where there is a potential problem with the state taking a portion of punitive damages,

Third, the standard of proof is higher for an award of punitive damages than for an award of compensatory damages. Compensatory damages must be proved by a preponderance of the evidence. For the non-lawyers in the audience, that means “more likely than not.” Evidence to support an award of punitive damages requires “clear and convincing evidence,” a standard that is somewhere in between a preponderance of the evidence and the “beyond reasonable doubt” standard of criminal cases.

The state could try to lower the standard of proof. After all, if punitive damages are a "cheap"¹ source of tax revenues then it could be seen that more lawsuits ending with punitive damage awards is better than less.

Even if such an attempt fails, it still wastes resources. First there will be all the resources lost in putting such an easing of restrictions in place. Then there will be the court battles over it. This will take resources, resources that could have been used to do something productive vs. arguing over who gets what "share of the economic pie". This is classic rent seeking, with the government seeking the rents. It is not a good thing, IMO.
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¹Cheap in that the state has to do little in terms of hiring bureaucrats or spending money, it simply collects a check.

More Austrian Criticism

One of the reasons I have a hard time with the Austrian school of economics is that there is a belief by some that public goods simply do not exist. We see the problem right here in this post by Karen De Coster. In that post Ms. De Coster is writing that she doesn't think John Stuart Mill is a libertarian or a classical liberal. Fine, that isn't what I'm bothered by. What bothers me is this statement,

As an economist, Mill was a believer in public goods, and "legitimate" functions for the State.

See the existence of public goods poses a problem for a stateless society. If they exist the market will generally have a hard time providing the efficient amount (i.e., the market will typically under-provide). Another anarcho-capitalist, David Friedman, has put forward what is necessary for anarcho-capitalism (stateless capitalism) to work.

1. There must be no public good problems whose private solution is catastrophically inadequate. The obvious candidate for such a problem is national defense. Unlike some anarchists (and Objectivists), I don't think there is a clear argument that shows one can always get adequate defense without coercing people into paying for it. When I wrote Machinery of Freedom, I thought that was the hardest problem, and was uncertain whether or not an anarcho-capitalist America in the setting of the U.S. c. 1970 could defend itself adequately. Since then the Soviet Union has conveniently collapsed, making national defense a much easier problem.
2. Economies of scale in law enforcement have to be small enough so that the market equilibrium produces enough enforcement agencies so that an enforcement agency cartel designed to reinvent government for its members' profit is unstable. My guess is that this condition is already met.
3. One has to have a set of working anarcho-capitalist institutions that people are used to.

Friedman clearly realizes that the issue of public goods is a potentially fatal one to an anarcho-capitalists society. So the solution is to either find another means of provision (Hoppe) or to pretend it doesn't exist (De Coster).¹

Now while it is possible that there would be some level of private provision public goods it is definitely not clear that the private provision would be adequate.

The textbook example of what constitutes a public good is, as Friedman notes, national defense.¹ That this good satisfies the criteria for being a public good is pretty easy to establish. A public good must meet two conditions, non-excludability and non-rival consumption. The first one means that you cannot keep people from consuming the good. The second one means that if I consume the good there is still the same amount left for everybody else to consume. The last condition is easy to see by contrast. A candy bar is rivalrous in consumption; that is when I eat the candy bar nobody else can. That national defense meets these criteria should be obvious. If there X amount of national defense it applies to everybody inside the territorial boundaries, hence it is non-excludable. Also, that it is non-rivalrous holds because we all get the same level of benefit from whatever amount of national defense is chosen.

Hence the existence of public goods is, IMO, not open to dispute. The only thing left for dispute is how to provide such goods. Now relying on game theory we know that it is possible to have an equilibrium where there is plenty of national defense. The problem is that in a repeated game context there are a huge number of equilibria and we have no idea which one will result from voluntary provision of a public good.

Further, even if we do have several firms providing defensive services would they be national? Think of it this way, there is no additional cost to defending those who did not pay, and the benefit is that fewer people are killed in our country (remember defense is a public good).

Even if we do away with the non-excludability (i.e., if the poor section of town hasn't hired defense contractors too bad for them), does this solve the problem? What if the poor part of town has a strategic advantage? Do you defend it then? What if the invader is large enough that it takes the collusive efforts of 3 or more defense contractors to defeat them? Will they collude? Will each be waiting for the other firm to make the first move and suffer the greatest losses?

Despite Prof. Friedman's comment above about the collapse of the Soviet Union, today we see that national defense is still a major problem for any anarcho-capitalist. Further, the idea of public goods is a problem in general for anarcho-capitalists. Sticking one's head in the sand and pretending the problem does not exist is foolishness.
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¹This is one possible explanation for why the paleo-libertarians have such a problem with the war on terror. A war on terror is something that has to be pro-active not reactive. A pro-active war is something the paleo-libertarians object strenuously too. Additionally they view the idea of purposefully going out and killing terrorists who haven't yet attacked as being a rights violation and hence should not be undertaken.

The Day After Tomorrow

Its official, it is rotten.

Julain Sanchez says that the notion that this is the move the White House does not want you to see, should be "this is the movie the Whites wants you to see." It is apparently a laugh fest and not likely to arouse fears of global climate change. In fact, from the sounds of it just the opposite.

My overall conclusion: Good.

The Wonderful Word of...

...univariate explanations. Kevin notes the following comment by Fred Barnes on liberal media bias.

Does this affect coverage? Is there really liberal bias? The answers are, of course, yes and yes. It couldn't be any other way. Think for a moment if the numbers were reversed and conservatives had outnumbered liberals in the media for the past four decades. Would President Bush be getting kinder coverage? For sure, and I'll bet any liberal would agree with that. Would President Reagan have been treated with less hostility if the national press was conservative-dominated? Yes, again. And I could go on.

Kevin then goes on to opine,

It's such a tiresome trope, and it misses the point of how the media works anyway. The press bashes whoever's in power, Democrat or Republican, and they cover drama, whether it's in Baghdad or Burbank. For better or worse, that's the main bias of the news industry, not ideology.

But this begs the question: does there have to be just one form of bias? I don't think the answer has to be yes. In fact, I think the answer is probably no. In fact, there probably is liberal media bias in that while it is true that the media tends to go after whomever is in power, they also have their own views and beliefs.

Lets stop and consider for a minute that this criticism is true of science. Scientists have their own personal views and beliefs on whatever they are researching. Robert Matthews has documented such instances where personal beliefs and views have encroached on the scientific process. Science is considered to be something that is extremely objective. So what about journalism covering politics? Is it going to even come close to the level of "objectivity" that we find in scientific research? I doubt it.

Now, I do think that the problem has declined in recent years. The start of Fox News has made the news media far less biased in the sense that there is now a countervailing effect from Fox News.

Kevin then goes on to wonder what kind of solutions does Barnes want to see implemented.

At any rate, I wonder what critics like Barnes think the media ought to do. Should news executives give tests or ask cub reporters who they voted for in the last election? And how does he feel about conservative domination of the officer corps in the military or the executive ranks of corporate America? Should we institute some litmus tests there too in order to give liberals a fairer shake?

What a wonderful example of the strawman argument. Barnes has not said that a litmus test is necessary or indicated that he wants something done about this problem (at least he doesn't outline what he thinks should be done in that aticle). Kevin concocts this argument out of whole cloth so that he can make his opponent appear foolish. I could easily do the same thing here. I could easily say that this column proves that Kevin is happy with liberal media bias. Of course, that would be just as dishonest as what Kevin did.

Speaking of Austrian Economics

Here is something by Hans-Herman Hoppe on health care. It isn't all that great, but lets take a look anyways.

It's true that the U.S. health care system is a mess, but this demonstrates not market but government failure. To cure the problem requires not different or more government regulations and bureaucracies, as self-serving politicians want us to believe, but the elimination of all existing government controls.

It's time to get serious about health care reform. Tax credits, vouchers, and privatization will go a long way toward decentralizing the system and removmg unnecessary burdens from business.

What is kind of strange is to first call for an end of all government control and then to turn around and state that tax credits and vouchers can go a long way towards solving the problem. It is so strange I am going to make sure I read it correctly the first time. Yeah I did read it correctly.

The problem is that tax credits and vouchers are a form of government control, they are simply a subtle form of control. Direct control is where the government comes out and sets the price, the quantity allowed, how something is to be made. A tax credit is basically and incentive device to induce people to do things they otherwise would not do. What makes it even more strange for Mr. Hoppe to come out in favor of vouchers and tax credits is that latter in the article he writes,

Eliminate all subsidies to the sick or unhealthy. Subsidies create more of whatever is being subsidized. Subsidies for the ill and diseased breed illness and disease, and promote carelessness, indigence, and dependency. If we eliminate them, we would strengthen the will to live healthy lives and to work for a living. In the first instance, that means abolishing Medicare and Medicaid.

But vouchers and tax credits are a type of subsidy. Tax credits and vouchers are a type of payment to individuals so they can consume a specific commodity (vouchers), or they are designed to reduce the tax burden to induce people to consume a specific commodity. Soooo...which is it? Eliminate them or institute them?

Now there is some truth to what Mr. Hoppe wrote above. I have made a similar point here. However, there are things that people have no control over. You have no control over a diseases like Alzheimers, Parkinson's diesease, and others are often beyond the control of the individual. Further, the above quote fails to consider the institutional dimension of the problem that hospitals treat people with diseases/health care needs irrespective of the ability to pay. Unless Mr. Hoppe is advocating wheeling those patients out into the street who cannot pay and letting them die horribly there, the above conculsions are a bit hasty. Further, Mr. Hoppe ignores the human/humane dimension that individuals collectively (i.e., society, the public, what ever name you prefer) might decide that such a policy of letting the uninsured die horribly is not something that it wants.

Because a person's health, or lack of it, lies increasingly within his own control, many, if not most health risks, are actually uninsurable. "Insurance" against risks whose likelihood an individual can systematically influence falls within that person's own responsibility.

I'm not sure what to make of this passage. It suggests to me that Mr. Hoppe is unfamiliar with how insurance works. The problem where the outcome of the uncertain event is partly in the control of the person who is insured is not a new problem. This problem is basically the principal-agent problem and the two basic types of problem are moral hazard (hidden action) and adverse selection (hidden information). There are ways to deal with both types of problems with private insurance. If we proceed to the next paragraph, I think it becomes fairly obvious that Mr. Hoppe's grasp of insurance/the principal-agent problem is weak:

All insurance, moreover, involves the pooling of individual risks. It implies that insurers pay more to some and less to others. But no one knows in advance, and with certainty, who the "winners" and "losers" will be. "Winners" and "losers" are distributed randomly, and the resulting income redistribution is unsystematic.

Not true at all. First, the idea of pooling people is false. The pooling outcome can only happen when you have government forcing such and outcome. All pooling outcomes can be "broken" by a seperating outocme. The seperating outcome is where you seperate the customers into different risk groupings. For example, we know that somebody who smokes is definitely a higher risk for lung cancer than somebody who does not. The seperating outcome mentioned earlier is explained by Mr. Hoppe here,

If "winners" or "losers" could be systematically predicted, "losers" would not want to pool their risk with "winners," but with other "losers," because this would lower their insurance costs.

We don't need certainty though. All we need for this to occur is for their to be know differentials in risk. And the next quote suggests that Mr. Hoppe has not thought this through clearly or is over-simplifying too much,

I would not want to pool my personal accident risks with those of professional football players, for instance, but exclusively with those of people in circumstances similar to my own, at lower costs.

By excluding football players from the group Mr. Hoppe would want to self-select with, he is implicitly giving support to the notion of a seperating outcome (equilibrium). Note that there is no certainty here in Mr. Hoppe's example. Some of the football palyer's Mr. Hoppe will be excluding will not get sick. Or to put it differently, Mr. Hoppe could get need greater health care resources than some of the football players he wants to avoid.

Another eye popper for me was this paragraph,

Eliminate all government restrictions on the production and sale of pharmaceutical products and medical devices. This means no more Food and Drug Administration, which presently hinders innovation and increases costs.

Eliminate all government restricitions? Including patents, copyrights, and other forms of intellectual property protection? Some how I doubt it. But...shouldn't that indeed be the case in an anarcho-capitalist world?

Despite the problems with some of the reasoning here, I think there are some good ideas. We don't want to subsidize health care like we currently are. Getting rid of Medicare would probably be a good idea. The problem is that it is highly unlikely it will ever come about as politicians are all to willing to use any such proposal (no matter how sound the alternative is) as a scare topic in political ads.

Wow...Somebody is Upset...

I have to say this post is...simply breathtaking. It is indicative of somebody who is well...out of touch with reality.

First off, I like the idea that by using the domain name steveverdon.com I am somehow an anonymous blogger. Sorry Karen dear, that is my name. I know it might seem kind of cool to think you have a cabal of anonymous bloggers who are going after your and Lewie, but in reality many people you gripe about are precisely who they say they are. For example, Robert Prather is not using a psuedonym (hint: his previous URL was robertprather.com IIRC). Of course I suppose we can also wonder if this really is the real Karen De Coster. For all we know the real Karen De Coster has no idea that somebody has stolen her identity, and is in actuallity a housewife in Sheboygan.

This part was funny,

I guess Steve doesn't have a problem attributing thoughts to me that I did not express. But quite honestly, LRC is the center of libertarianism in the Internet, and it's a site that I write for.

Funny isn't how Ms. De Coster is supposedly a libertarian, but wants to stake out the centralized authority for libertarian. Centralization is bad...except when it works in Ms. De Coster's favor I guess.

This was also enlightening,

And actually, he does care about Lew Rockwell, as he voluntarily joined the Rockwell Attack Club (see more about that here, including links to the "paleohaters").

After complaining that I attributed thoughts to her that she did not have, Ms. De Coster turns right around and does precisely that with me. No, really Karen sweetheart...I don't care about Lew Rockwell. I made a few posts about you because your posting style makes you look unhinged and referenced Mr. Rockwell but since then haven't posted on him nor given him any further thought (well until now).

But here's the funny part: if these guys "don't care" about Rockwell, why are they constantly focusing on him, berating his every antiwar/anti-state word, and attacking him in gangbang fashion?

Constantly? I have over 1,200 posts on my site (admittedly not all of them are mine) and one could probably count the one's pertainting to Lew Rockwell on one hand. If that is Ms. De Coster's definition of constantly I think she should consider upping the medication.

Steve might want to remember that it was him and his blogrolling clique that attacked us, and me, and not the other way around. So I guess we know who cares about whom. Oops -- small facts hurt Steve.

What? I can't post on a stupid an insipid comment I read on another blog. The First Amendment suddenly stopped applying to those who don't worship at the Church of Rockwell?

He is entirely dishonest here, and blatantly so. When he posted my paragraph, he nixed my links, and conveniently so. Here is my original post that he cut-and-pasted from:

Again we see Ms. De Coster being misleading. She utterly fails to address the fact that she was the one that "attributed thoughts to Robert Prather that he does not hold". Gee wasn't that one of the things she was complaining about earlier? Oh, sorry it was actually, ""attributed thoughts to Karen De Coster that she does not hold." The difference is quite compelling, no?

Does Steve give a reason for this 2nd-grade, ninny-like attack on Hans Hoppe? I don't see one. So I am "gushing" over Hoppe because I said "Alas, we have Hans-Hermann Hoppe, one of the greatest living Austrians-theorists today; perhaps the greatest?" Bertrand Russell and George Santayana (and many, many others) make me "gush," as well, due to their massive output and incredible minds, in spite of my drastic difference in political philosophy and core ideology. So what's the point about "gushing?"

Regarding people like Bertrand Russell there is a huge swath of people who would agree that he made amazing contributions to the world. Hans-Herman Hoppe on the other hand does not. Oh I'm sure he's made some contributions, but will people someday be saying, John Locke, Karl Gauss, Bertrand Russell, Hans-Herman Hoppe,....? I somehow doubt it.

The point about gushing is that you gush all over anybody connected to Lew Rockwell and his website(s). You simply praise them as if they do no wrong. I think that is a sign of a sloppy thinker, a cult follower, or a fanboy/fangirl. It isn't the mark of somebody who is interested in analzying the soundness of the ideas, theories, and views that those who are gushed over put forward.

Perhaps this intellectual output is why I see Hoppe as a great and prolific theorist. I cannot think of a living libertarian that has this kind of output, except maybe Walter Block. Here, Steve has arrived at the point of self-mutilation. It's here that you realize he's being entirely puerile, disingenuous, and engaging in personal attacks merely for the sake of attacking those that he disagrees with ideologically.

Bwa ha ha ha. Oh man that is funny. The poor deluded Ms. De Coster. She doesn't seem to have a clue that I probably share quite a bit in common with somebody like Hans-Herman Hoppe ideologically. My comments were referring to her gushing over him. I don't have a problem with Hans-Herman Hoppe at all, but was poking fun at an intellectual sycophant. For example, I agree with some of the things Hans-Herman Hoppe wrote here. I think that in other parts he is missing the boat. So this idea that I am attacking Hans-Herman Hoppe because I disagree with him is laughable. It is laughable because Karen De Coster didn't realise that she was my target.

To conclude, these guys are like the Flamers, those that spend their days sending hate mails to those they disagree with, and act shocked when they get a bite in the ankle back. Once again, as I've blogged before, here's the typical email from a Crazed Flamer, to a writer:

Yeah, I maybe a flamer (actually I'm not as I haven't spent my days attacking Ms. De Coster, Lew Rockwell, Hans-Herman Hoppe or anybody else affiliated with the von Mises Institute), but at least I'm not a lamer.

Lamer is a Warrior who appears in different guises to different people, and is therefore difficult to describe in full detail. Nonetheless, he is readily identifiable because of his mediocre wit, utter lack of insight and vacuous comment . You begin to sense Lamer's presence when you are able to anticipate the content of his messages even before reading them.

Yep that's you Karen. That is you to a T. I knew exactly what was going to be in your screed of a post before clicking on one of the 4 trackbacks I got.

Oh...and the panties in a knot thing, dear try some better research next time; I use that quite a bit and apply to men as well as women. There is no "gender issue" there.

Kerry's Stupid Energy Policy

Reading the press release from the Kerry Campaign about Kerry's energy policy, I can't but help think, "What a dope."

The basic thrust of Kerry's energy policy is this,

"We’re here today to say that a stronger America at home and in the world is an America that is free and independent of Mideast oil," Kerry said. "Today, record energy costs are keeping families from taking vacations and costing businesses across the country."

Here's the deal. You are not going to be "free" of Mideast oil until you find a viable alternative, and there isn't one. It is just that simple.

The idea presented below,

His plan will provide $10 billion in new incentives for the American automobile industry to lead the world in building Advanced Technology Vehicles and make them affordable through a $4,000 tax credit for consumers who buy them.

is a net loss. If these technologies were currently viable and people currently wanted them, there would not have to be these kinds of subsidies. Or to put it another way, instead of paying for higher oil prices people will be paying higher taxes. On top of this the subsidies and tax incentives/increases will introduce distortions into the market.

The reason this policy would be net loss is that even with the higher oil prices these kinds of alternatives are not viable without subsidies (or if they are why are we subsidizing them?). So to get the kind of effect necessary to offset the loss from higher oil prices will likely mean subsidies in excess of the cost of higher oil prices.

So the bottom line is thie policy wont,

• Free us from Mideast Oil,
• Provide a net benefit.¹

Now it would likely make the U.S. less dependent on Mideast oil, but that would not remove entirely the negative effects on consumers/individuals of higher oil prices. Further we would not see the benefits in terms of national security/foreign policy that Kerry outlines here,

“We don’t have to be trapped by the fear that some terrorist or foreign government will hold our economy hostage by seizing control of the oil we depend on,” Kerry said. “With America’s can-do spirit and a President who leads, we can be freer, we can be stronger and we can live in an energy independent America.”

This is just false, and is indicative of somebody who is either ignorant of basic economics, or is aware of basic economics and is a dishonest political pimp.
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¹The possible exception is if the negative external effects of oil usage is large enough to justify such subsidies. However, this is not the point that Kerry is using to sell his plan.

First Quarter GDP

The estimate for the first quarter GDP for 2004 has been revised upwards to 4.4%. Also, GDP for the fourth quarter of 2003 was revised to 4.1%.

Cox & Forkum on Michael Moore's Fiction

Cox & Forkum are absolutely right that Michael Moore's films are not documentaries. A documentary is like my son's movie the Science of Shark Attacks. The movie goes over various shark attacks and discuss some of the various scientific hypotheses and facts.

Moore himself admits that his movies aren't documentaries, but are more like filmed editorials,

"Yeah, it's like an op-ed piece in the newspaper. These are my opinions. I'm very up front about them. I don't try and disguise them. I don't try to present them as objective news. They're not. They're very subjective."

There is also this from Evan Coyne Maloney,

When I interviewed Michael Moore about his upcoming film Fahrenheit 9/11, I asked him whether it would be an attack ad against President Bush in the form of a movie. He didn't deny the premise of my question, saying only, "Oh, so you know what I'm going to film before I film it." Of course, given Moore's previous statements, it doesn't take a psychic to predict how he would portray President Bush.

Oh Spare Me...

In ranting, as usual, about the extreme Right, Nathan Newman writes the following,

Which of course highlights why the rightwing is kind of silly to itself spend too much time talking breathlessly about fringe groups, when it tolerates Klan allies and abortion doctors in its midst. I wonder how many exposes WND has done on those?

Here is my problem with this. According to this Political Quiz, I'm a right leaning libertarian (Left/Right (Economics) score of 4.88, Libertarian/Authoritarian score of -3.18). In some sense you can say I'm part of the "Right Wing" of the country. Yet, I have absolutely no respect for the Klan. I want them to go away. I don't want them to ever hold any offices or have any power. Yet Nathan writes crap like the above.

So, I hereby declare the Nathan Newman is a monsterous human being who is happy millions of people died in Stalinist U.S.S.R. and the People's Republic of China under Mao. After all he probably shares some of the same political views as Mao and Stalin, so therefore he is one of their fellow travellers.

[Note to the completely stupid: The last paragraph above is sarcastic. Nathan and I are more than likely on the same side of the Authoritarian/Libertarian scale. We differ on the eonomic scale. The point is that lumping the "Right" all together into one bucket is the sign of somebody who isn't a very clear thinker.]

Update: In comments Glenn writes,

Steve, I don't know if you know this or not but the Political Compass tool is a recruitment gateway for Libertarians; no matter how you answer the questions the results are supposed to make you think, "Hey, I'm part libertarian? Maybe I should read more up on these folks!"

While the test might be a gateway/recruitment tool for libertarians, I strongly disagree with the notion that you can score Authoritarian on the test. I just did. I answered the questions trying to get an authoritarian score and ended up with

• Left/Right (Economics): -6.75
• Authoritarian/Libertarian: 7.44

So I disagree that no matter how you answer you always look libertarian. The reason why many people probably test out as having some libertarian leanings is that because in societies such as the U.S. holding the Authoritarian views usually means holding what are veiwed as socially abominable views such as that one race is superior to another, homosexuals should have a very limited set of rights, and sex is nasty and dirty. In other words, in many ways the general U.S. population probably has some libertarian leanings. To get to the Authoritarian realm you have to basically be a social reprobate.

Bwa Ha Ha...

...its just a laugh a minute here. Now we learn that Kerry doesn't know his history.

Hey, maybe his training wheels fell off (shamelessly stolen from Steve Antler)?

Ha Ha Ha, Part 2

Via Nathan Newman.

Adjusted for inflation, average hourly wages for non-farm workers, excluding managers and executives, rose 25 cents, to $15.35, between 2001 and 2003. That equates to an annual increase of less than 2 percent, or below the rate of inflation.--source (i.e., not Nathan)

You'd have to work hard to get dumber than that.

Update: Well according to Mindles H. Dreck this problem is more common that I realized.

Update II: Posted by Bill in the comments,

Not to give this stupidity more attention than it deserves, but on top of everything else the data are being cherry-picked. Hourly earnings data do not include fringe benefits. Since 2001 total compensation (not adjusted for inflation) has risen by 12.9% among production workers at firms with 100 or more employees and by 9.4% at firms with fewer than 100 employees.

Funny how Nathan harps on things like benefits, but when it comes to wages he convienently forgets them. Anybody for a nice health cup of intellectual honesty?

Ha Ha: Great Picture

I found this over at Hubris. Its pretty funny.

Who Is the Idiot?

Kevin notes that a study on prescription drugs shows that the cost for said drugs has risen a whopping 27% in from 2000 to 2003. Kevin quotes this part of the article,

....[But] the reports should have looked at the entire health care spectrum rather than just drug prices, [drug industry flack Jeff] Trewhitt added. For the last three years, inflation in the health care industry has averaged about 4.6 percent a year, while the rate of prescription drug inflation has been about 4.4 percent. "So we're in line with overall medical inflation," Trewhitt said.

Kevin then responds with,

Idiot. Medical inflation is higher than overall inflation because of new technologies and different treatment patterns, not because of price increases for existing treatments. Why should the price of Lipitor, which was developed years ago, increase 27% in three years?

This demonstrates a lack of understanding of what things like the CPI, the GDP Deflator, and so forth measure. They measure simple price changes. They do not measure changes in price due to technological advances, changes in treatment and what not. From the Bureau of Labor Statistics website,

The Consumer Price Index (CPI) is a measure of the average change over time in the prices of consumer items—goods and services that people buy for day-to-day living. The CPI is a complex construct that combines economic theory with sampling and other statistical techniques and uses data from several surveys to produce a timely and precise measure of average price change for the consumption sector of the American economy. Production of the CPI requires the skills of many professionals, including economists, statisticians, computer scientists, data collectors, and others. The CPI’s surveys rely on the voluntary cooperation of many people and establishments throughout the country who, without compulsion or compensation, supply data to the government’s data collection staff.

The CPI is calculated using a modified Laspeyres formula the provides and upper bound on the cost of living index (COLI, the COLI is actually unobservable). In any event, there is nothing that restricts the changes just in price due to just technological advances. The idea is to measure price changes in general, not specific reasons for a price change.

Further, there is no reason to expect the price of an existing drug to remain constant over time. This is a stupid conclusion. If the demand for the drug is changing then the price will be changing.¹ If Lipitor is currently the 'state of the art treatement' for cholesterol and we recall that Americans are reportedly porking up, we have every reason to believe the price of Lipitor should be rising.

The level of economic ignorance is simply staggering here.²
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¹Prescription drugs are essentially monopoly goods in that intellectual property law gives the holder of the intellectual property the sole right to produce the item for a set period of time. Given that these goods are monopoly goods, the demand curve is all that matters as a monopoly firm has no supply function.
²Two reason why I respond so much to Kevin Drum is that

1. He gets a huge amount of traffic.
2. He often gets the economics horribly wrong.

Hence it is my feeble attempt to counter his misinformation.

Evolutionary Game Theory

One of the new areas of research in economics and in game theory is in evolutionary games. Evolutionary games are different than your standard game.

Typically in game theory the players are assumed tho be (hyper)rational, so the idea of using game theory in biology and applying it to fish, dung beetles, and even things like mold seems a bit strange. However, it isn't when you think about it.

Strategy: In classical game theory, players have strategy sets from which they choose particular strategies. In biology, species have startegy sets (genotypic variants), of which individuals inherit one or another variant (perhaps mutated), which they then play in their strategic interactions. This extends nicely to the treatment of culture in human society. We say that society has the strategy set (the set of alternative cultural forms) and individuals inherit or choose among them.

Equilibrium: In place of the Nash equilibrium, Maynard Smith and Price used the evolutionary stable strategy (ESS) concept. A strategy is evolutionary stabel if a whole population using that strategy cannot be invaded by a small group with a mutant genotype. Similarly, a cultural form is evolutionary stable if, upon being adopted by all members of a society (firm, family, etc.), no small group of individuals using an alternative cultural form can invade. We thus move from explaining the actions of individuals to modeling the difusion of forms of behavior (strategies) in society.

Player Interactions: In place of the one-shot and repeated games of classical game theory, Maynard Smith introduced the notion of the repeated, random paring of agents who play strategies based on their genome but not on the previous history of play.¹

This is one way to try and see if altruism could develop as a strategy. For exmaple, int the prisoner's dilemma game one common strategy that people implement is tit-for-tat. This is where the player using this strategy plays whatever his opponent played in the previous turn. If the opponent played 'Don't Confess', then the player plays 'Don't Confess this turn. If the opponent played 'Confess' then the player plays 'Confess'. This type of strategy punishes the opponent for deviating, but is also forgiving. It is a very popular strategy.

However, it is not evolutionary stable. If everybody is playing tit-for-tat the equilibirum outcome is to always play ('Don't Confess','Don't Confess'). Now if a small group of players with the strategy of always play Don't Confess invades they will succeed just fine as those playing the tit-for-tat strategy wont have any reason to retaliate.

In biology the mutant, if successful, can often displace the initial organism. The same can happen in evolutionary games as well. However, this gets into dynamical systems, replicators, and so forth. The math is pretty heavy (so I'll just skip it).

The thing to keep in mind is that evolutionary games can lead to results we might not have gotten with standard game theory and neoclassical economics. For example, the standard assumption in economics is that every individual is rational in that they seek to maximize their own utility to the exclusion of all others. There is no way to explain the care parents give to children save by an ad hoc assumption that the utility of the children affects the utility of the parent. Evulutionary game theory gives a solid grounding for such an assumption.

This doesn't mean that standard neoclassical economics is worthless, but it adds some new tools to the economists tool kit.
_____
¹Gintis, H., Game Theory Evolving, pages 148-149.

Kaus on Kerry

Mickey Kaus has a humorous interpretation of why Kerry might not accept the nomination until after the convention. Basically, the idea is that the more exposure Kerry gets, the more people realize he's a dullard, so making the convention into a non-event will minimize his exposure to the public. Also:

But there's more to the complex plan than just keeping Kerry off the air. By delaying acceptance of the nomination, Kerry can encourage speculation that he might just turn it down! Why, he may not be the nominee at all! This will result in wild journalistic scenarios about possible "Torricelli options," distracting public attention from Kerry's spirit-sapping persona much as chaff dropped from an airplane causes anti-aircraft missiles to veer off-target.

Shorter Atrios

Here is a shortened version of Atrios' response to Andrew Sullivan's query about Atrios criticizing the Left.

I can't point to a single example.

Just like the inability to admit he was wrong about GDP growth back in October, he can't point to anything that criticizes the Left. He manages to weasel out of this by claiming that the term Left is poorly defined and anything he points too will be judged insufficient. Right.

I know this is going to shock many...

...but Atrios is dishonest. Here is the short version.

• Last October Atrios wrote that he didn't expect growth to remain high for long (one quarter) and that by April 1st he'd write a long mea culpa if growth did remain strong.
• April 1st has come and gone.
• Nothing at Atrios' site. No mea culpa, nothing.
• Ricky West e-mails Atrios.
• Atrios says he'll do something over the weekend.
• We still have zip.

Is it that hard for a Liberal extremist like Atrios to admit the following:

1. That he was wrong.
2. That growth has been strong, and looks like it will remain strong for the rest of the year.
3. That this growth may in part be due to the tax cuts?

I guess the answer is, "Yes!" Oh well, as far as I know nobody has ever accused Atrios of being honest.

Signs of Spring

The swallows return to Capistrano. The tulips bloom. And KSHB's meteorologist Gary Lezak has a nutty during the first big thunderstorm of the year. Wall-to-wall coverage for about an hour and a half, and you could hear a tinge of excitement every time the Doppler radar showed anything remotely resembling a wall cloud or high winds. Lightning! Baseball sized hail! Tornados, tornados everywhere!

The information was useful, but complete minute-by-minute coverage was excessive.

Another rant -- someone got spooked and set off the tornado sirens a couple of times last night. The first time, the sky was cloudy in a bland, non-threatening way, and the winds were mild with no rain. A look at the aforementioned Doppler radar showed nothing within several miles of my house.

It really pisses me off. Tornado sirens can save lives, but only if they're used properly. It's one system that you really don't want to "cry wolf".

Ha Ha Ha

Perhaps Kevin should leave intelligence issues to the professionals.

Innumeracy

Sean Aday, what an innumerate. Sean has noted that the percentage change from one period to the next in Real Disposable Income has been trending downwards. There is only one problem here. Since the percentage change is still positive that means Real Disposable Income in actually increasing. Here is the math (skip to the update if algebra either scares you or bores you, I provide a numerical example that is a bit easier to grasp):

Let x_t be a discrete time series. Now the percentage change from one period to the next is defined as,

(x_t+1/x_t) - 1.

Now we know that the above is positive, i.e,

(x_t+1/x_t) - 1 > 0 Þ (x_t+1/x_t) > 1 Þ x_t+1 > x_t.

The final line says that x_t is an increasing sequence. The only way for the sequence to be decreasing is for x_t or x_t+1 (but not both) to be negative. However, if this were the case then the change from period t to t+1 would be negative, which is contrary to the fact that the change is positive.

Now what is truly shocking is that this guy is a professor. Okay, a professor of media and public affairs, but still. Gahhh...not only is he a professor, but at the same institution where I went to Graduate School! How embarassing.

Update: I've sent Prof. Aday an note about his error. My prediction he does nothing an hopes nobody notices his own mathematical ignorance.

Also, here is a numberical example highlighting the problem. Suppose in December 2003 your disposable income is $100. Now according to the chart in January the increase was 5%. This means you have $105 in January of disposable income. Now in February the rate of increase was 2.5%. That means you have $107.63. Then the rate of increase is only a meager 1% in March. This means you now have $108.79. What is clear is that disposable income has gone up in each of the three months. Not as much as everybody would like, but that isn't what Prof. Aday was talking about.

Update II: This article is much better. The article points to the same research by John Zaller and Larry Bartels and notes that growth in Real Disposable Income, while positive, is low compared to recent years.

So, as professors John Zaller and Larry Bartels point out, although GDP growth in 2000 was extremely strong, growth in real disposable income was less than average, ranking eighth out of the 14 postwar elections.

Of course, this article was written about a year ago. It would be interesting to see what Zaller and Bartels would say now.

Also, here is a paper by Bartels and Zaller. I haven't read it yet, but it looks interesting.

Update III: And yet more. Looking at this post it looks like somebody is building off of Zaller and Bartels and using it for the 2004 election. I have read the whole thing, but it too looks interesting.

Should all of these predictions all come to pass, President Bush will be re-elected with 285 electoral votes, with the as-yet unnamed Democrat receiving 250 electoral votes.

Update IV: Good news, there has been a correction posted by Prof. Aday. And of course, I should also note if it weren't for Prof. Aday's post I wouldn't have found out about Bartels and Zaller's research into elections.

Whoops, forgot this part. Hat tip to Oberon.

Rush: Back on the Oxycontin?

Or just plain stupid. Hard to say after reading stuff like this.

RUSH: And who really knows about it? All I know is I've never been a chimpanzee, I don't believe this garbage I ever was, because we were chimpanzee, why are the chimpanzees still here? If we were baboons, you know, if we evolved from that, what happened to them? Why didn't they evolve, how come they got stuck still being idiot gorillas and stuff and we got to be humans? Ah you can't go out there. To me it's nature. You cannot look at an MRI of the human body and you just cannot look at it and say "Nan, what a great accident." You cannot look at the beauty of this world and how it all works together, you cannot look at the very different species of animals and the way they act. I mean they don't think -- they go on instinct, and a house cat today behaves the same way it did 10,000 years ago, when we first started domesticating them. They'd still do circles before they get in the litter box, they still hump their backs before they let you pick them up. And they're not thinking about it, they're just doing it. But you can't look at this and say man, what a great coincidence.

Hard to say. He could be higher than a kite, or he could just be this stupid when it comes to evolution.

The idea isn't that we evolved from chimpanzees, but that we have a common ancestor with the chimpanzee. There was a mutation, and the result was two species one that eventually became us. It isn't that suddenly *poof* a chimpanzee turned into a Homo sapiens sapiens. This is a favorite tactic of creationists, which apparently Limbaugh is, to distort what evolutionary theory actually says to something completely ridiculous.

What evolutionary theory does predict (crudely put) is that there is a random mutation and that natural events provide an advantage to those animals with that mutation. Since those animals with the mutation do well, they are able to survive and those that do not have the mutation do not.

The objection that Rush raises is similar to the following.

I've never seen a dog evolve into a bear, therefore evolution is false.

It is akin to saying,

• I've never been to Jupiter, therefore it doesn't exist.
• I've never seen an electron, therefore it doesn't exist.
• I've never actually seen Rush Limbaugh in person, therefore he doesn't exist.

If you find these kinds of claims perposterous, then you are pretty much left concluding the same for Rush's views.

Oh...and before we put the final nail in the coffin, has anybody been in space and seen for a fact that the Earth is round? No. Well, be careful sailing in the future. Wouldn't you want to fall off the edge.

A Little Perspective

When it comes to rebuilding Iraq's infrastructure a little perspective might come in handy. According to ElectronicIraq.net the annual spending for Iraq's water and sewage systems went from $110 million per year to aroudn $8 million. Now before you Liberals start cursing Bush for being a completely blinkered jackass, let me tell you the years for those numbers: 1990 to 1996. In other words, much of the problems with today's water and sewage treatment facilities in Iraq is due to long term neglect. Or for you Liberals, there is not a damned thing Bush could have done to prevent such a decay.

By 1995, access to potable water in urban areas had fallen from 95 percent in 1990 to 92 percent, and in rural areas from 75 percent to 44 percent. By 1997, water treatment plants were working at only 40 percent of their nominal capacities. The existing sewage treatment plants were not fully operational and untreated raw sewage was being disposed of into rivers - the direct source of drinking water for many - with consequent increases in the incidence of water-borne diseases.

Please note the time frames being discussed here. The bottom line is that things were getting bad years before Bush was President, let alone considering war with Iraq.

Now this doesn't mean that the war didn't impact the existing systems, because it did. However, there was already a considerable amount of degredation of the existing systems, and trying to fix all of this is going to take time.

Is the Media Biased on Iraq?

Kevin Drum says no. He points to wars such as Korea, Vietnam, the Spanish-American War, the Civil War and concludes that generally the press is critical and WWI and WWII are probably the exception not the rule.

I don't know because I haven't seen examples of media coverage of the Civil War, the Spanish-American War, or Korea. I know there was lots of negative press over Vietnam, and to some extent the first Gulf War.

Kevin argues that the reason why the media is report alot of negative information is that there is lots of negative information. I'm not sure that works too well. Lets remember that the media are businesses and like all businesses their goal is to maximize profits. The media's profits come from ads, and as such circulation/ratings are important. More circulation/ratings the more you can charge for your ad space.

So what sells? Does a story about a new a 400 kv line that brings in electricity for up to 350,000 homes sell or does the story on the deathz of seven people died in Baghdad sell? My guess is the latter will be more likely to show up in the big media. Why? Because it will help sell papers, magazines, and/or pump up ratings.

Now we don't need a "they hate America" hypothesis here (although this hypothesis could be true). So I'm not sure Kevin is (totally) right here in that it is that there is lots of bad news. The good news is for the most part boring as hell to the average Joe.

Oil Is Oil

Check out this entry by Arnold Kling. Arnold looks at a recent proposal for a "strategic plan for secure and sustained energy." As is often the case with oil people's brain seems to fall out. Oil is oil (for the most part, Saudi oil is cheaper to refine). The idea of shifting from one country or another ignores basic economics. Suppose the U.S. decides it will no longer purchase from the Saudis say, and shift to some other country. Will this do anything to the price? Not after perhaps a short term market response. We'd buy oil from country X, and the people normally buying from Country X would shift to buying from the Saudis.

Also, everybody seems to get all excited about "alternative energy sources". We must subsidize them heavily because it is good for the economy. Well okay, not really. What is good for the economy is to use the cheapest source of energy. Not mess up the market signals by subsidizing something that currently cannot compete in the market.

Also, there is a good discussion at Arnold's site so check it out.

Generalissimo Franco is Still...Dead,

and in other news oil prices have shockingly moved down. Despite all the hopes and prayers on the part of the doom and gloomers, oil prices have moved lower.

NEW YORK (Reuters) - Stocks rose at the open on Monday after oil prices retreated from a 21-year high hit last week, alleviating worries that rising energy prices would derail the recovering world economy.

First off, it wasn't a 21 year high in that there was no adjustment for inflation. Second, I want to know why some people understand the economy moves in cycles, expansion then contraction, but can't seem apply this to things like oil prices? To these people the idea of oil prices being cyclical just isn't part of reality for them. Oil prices must...must continue to rise till thermonuclear war.

Update: Well oil prices went back up now. This article says the reason prices are going higher today are,

• Pipeline probmes in the NW U.S.,
• Repairs to an oil field in Kuwait,
• Trouble with a Gulf of Mexico drilling platform. Fears of attacks on Middle East oil producing facilities.

Also, there seems to be concerns about OPECs ability to produce more oil.

There's considerable debate among analysts about whether many members have the capacity to boost production swiftly and produce more on a sustainable basis.

Other long term influences are the increasing demand from China and India.

Does Anybody Really Believe This?

That Michael Moore was awarded the Palm D'or at Cannes this year based solely on his movie and had nothing to do with politics?

Swinton also defended the decision, saying: "I do think it's possible to see that this film is not about Bush, America, or Iraq, but about the system, in a very precise way. It's about the dialectic between film-makers, the media, and the audience."

Is this is the kind of crap when you know you can't tell the story straight. I'll have to remember this though and see if I can use it if I have to ever testify. "Well you see, forecasting is sort of a dialectic between the forecaster and his PC...."

Kerry Bumper Sticker Contest

Since John Kerry might not be accepting the nomination until after the Democrat convention, Bill Quick is holding a contest for bumper sticker designs. Some highlights:

John Kerry: He wanted the nomination before he didn't want the nomination

VOTE DEAN CLARK DEAN EDWARDS DEAN KERRY EDWARDS KERRY DEMOCRAT KERRY DEMOCRAT KERRY MONDALE DEMOCRAT MCCAIN KERRY KEEP AN EYE OUT AND WE'LL GET BACK TO YOU, OKAY?

John Kerry--waiting for permission from Europe.

BrINg 200 MillIOn DoLlaRs iN UmArkEd BiLLs oR I wOn't AccEPt tHe NomInatiOn - AnOnYmous

Perhahps Kevin should...

...simply stay in bed all year. First there is Kevin's reaction to Noam Scheiber's public musing about torture. Mr. Scheiber writes the following on his website,

That said, it does complicate the practical and moral calculus considerably if the only way we could have caught Saddam was through these means--or at least some milder variant of them. Again, I'm not saying it would have been justified--or even forgiveable--even in that case. But the question does seem highly relevant to the analysis of the situation--if for no other reason than it forces people think through precisely what their opposition to torture is. Yet, strangely, very little of the coverage of the scandal--as far as I can tell--has attempted to answer it.

(Note: Kevin omits the last sentence. I'm not sure it if changes the context of those sentences, but seems a trifle different in implication from what Kevin copied.) Kevein's response was this,

Now, I don't blame Noam Scheiber for a second for writing this. Public musings of this nature are exactly what blogs are for. But dammit — can it really be that in the year 2004 my fellow countrymen are seriously debating whether or not torture is OK as long as it extracts useful information? Have we really sunk to that level of barbarism?

I don't blame him...but I really do. That Noam guy is a real barbarian. What a dick.

Lets ignore that what Mr. Scheiber is actually writing about is why people aren't discussing their opposition to torture. Actually, I don't think it is so simple as: Torture is anywhere and everywhere bad. For example, suppose you have one of the guys who knows where a biological weapon is about to be used. Should you just Mirandize him and that's that? Once he calls for his lawyer you just wait for the tragedy to occur? Yet suddenly Kevin is a black-and-white guy. Things are either right, or wrong. Funny isn't it how this is one of the things people harp on Bush about.

Then Kevin goes off on Glenn Reynolds.

Instapundit. He's been posting like a madman, as though he's decided to take on the task of bucking up the flagging morale of his fellow war supporters singlehandedly. 35 posts yesterday and 17 so far today! And this is one happy world he lives in: things in Iraq are going splendidly, all the problems you hear about are mere inventions of the liberal media, Nick Berg is still topping Google searches, the press is paying way too much attention to all that Abu Ghraib stuff, and the insurgency in Fallujah is well under control.

There were two articles linked by Glenn that I read. One pointed out a new strategy on the Marine's part in Fallujah of helping to rebuild Mosques. The other was on what a disaster the Fallujah operations were from a public relations standpoint. Not exactly a happy dappy world that Kevin is painting.

Kevin, go pop a couple of pills and get some sleep. Your normally limited cognitive abilities have become too impaired by lack of sleep.

After Years of Recession?!?!?!

Yep, that is the opening of this article. What is wrong with that? Well how about the recession lasted only 9 months.

Could a little inflation be a good thing?

After years of recession, the economy is growing, causing prices to rise. But instead of viewing price increases with alarm, the monetary gurus at the Federal Reserve are singing a new tune -- that a touch of inflation isn't so bad.

The National Bureau of Economic Research, dated the start of the recession as March 2001, and the end as November 2001.

What media bias? Well, okay this could be chalked up as just plain old vanilla ignorance.

Fact Checking Spinsanity

Well okay, not really fact checking them, but pointing out a glaring omission. In their current article, the guys at Spinsanity take Media Matters for America (headed up by a self-admitted liar) to task, fail to mention that there is currently some issue about back dating the start date of the last recession.

This Washington Post article points out that there is some evidence that suggests moving the start date into November or December of 2000 which would definitely put the start of the recession during the Clinton Administration. This isn't something new either. It has been around since December of 2003.

Even before the revisions, the GDP data showed that the economy hit a brick wall in the summer of 2000, after the stock market bubble burst.

Here is an article from Forbes on this as well. This idea is well known and should be in the Spinsanity article...why isn't it? Maybe a slight Leftward bias at Spinsanity?

Kerry's House of Ketchup is Up

Sean has the 12th edition up over at the American Mind. One I found rather funny is the Onion story...uh picture...whatever about "Who Is John Kerry?"

Paul Ehrlich -- The Reverse Cassandra?

My new post at Debunkers is up. I guess it is that time of the decade when the Moonbat better known as Paul Ehrlich comes out with a new book predicting the end of the world again. You know like how it ended back in the 1980's, the 1990's and...what...the world didn't end. Oh. Oh well, maybe this time we'll all die.

Some Good News Out of Iraq

It isn't being reported in the major media outlets because it is for the most part boring stuff. But this article points to some recent positive developments.

The U.S. Army Corps of Engineers reported April 21 that a newly restored transmission line from Al Haditha to Baghdad allows the additional generation of 350 megawatts of electrical power from the Al Haditha Dam to the capital city. The dam — on the Euphrates River about 125 miles west-northwest of Baghdad — was transmitting electricity at levels far below its generating capacity due to damaged transmission lines. The Corps of Engineers said the original 400 kilovolt transmission lines had been damaged due to looting following liberation, although foreign reports indicated coalition forces attacked the dam in April 2003.

The $56.7 million project, financed with money obtained largely from the sale of Iraqi oil, represents the single highest addition to the renewed electrical system since the liberation of Iraq last year, according to the Corps of Engineers.

Here in Southern California, that much electricity would be enough to power around 350,000 households.

Here is another article about the improvements to Iraq's electrical grid.

The corps has replaced more than 700 electrical towers throughout Iraq, Roberts said. The goal is to restore 6,000 megawatts to the national grid by June 1. About 4,500 megawatts are currently on the national grid.

If they achieve that goal there would be enough power for over 10 million households. Obviously some of that power would go towards commerical uses such as the oil pumping and so forth, but it does represent some improvements in one area of Iraq.

When he arrived at the U.S.-military-run compound in central Baghdad called the "Green Zone," Roberts dealt with daily blackouts. Before he left Iraq, power outages happened about once a week.

This article while noting that the pace of improvements to Iraq's infrastructure are behind the initial time table are still making some progress.

• repairing major airports,
• refurbish 1,000 schools,
• electricity generation should hit 6,000 megawatts by June,
• southern Iraq actually has a surplus of electricity,
• the Sweetwater Canal, which brings drinkable water to Basra, has been dredged, and pumps have been replaced,
• half the phone lines knocked out during the war have been reconnected.

Again, while things are taking longer than initially expected to get done, they are still getting done.

"Middle America"

Kevin Drum has a post on the successes and failures of conservativism, but what caught my eye was this part of the post,

"Middle America" likes tax cuts — even though they don't pay much in income taxes and no one ever suggests cutting payroll taxes — because they're convinced their taxes are shipped directly to inner city welfare queens and they want it stopped.

My question is what is "Middle America"? Where exactly does it fall in the income distribution (or is it geographical as in literally the middle of the country)? Here is this distribution of tax payers in 2001,

If we count "Middle America" as those Americans who are in the top 50% of income earners and below the to 10% then the amount of taxes that they pay is indeed pretty large. They pay a little over 31% of the taxes. I don't know but 1/3rd strikes me as a decent sized proportion. The average adjusted gross income is $52,180 and the minimum income necessary to get into this catagory is $28,528 while the maximum is $92,754. That strikes me as pretty "Middle America" in terms of income.

If this is the case, then Kevin's claim is quite simply wrong.

Update on Kansas Schools

THis is a followup to my post about the activist judge ordering all Kansas public schools closed by June 30. Yesterday, the KS Supreme Court put it on hold.

The Kansas Supreme Court on Wednesday blocked a lower court order that would have closed the state's public schools this fall if legislators failed to fix the state's school financing system.

The Supreme Court's one-paragraph order stayed "all further proceedings" in a school finance lawsuit against the state until the high court rules on the lawsuit.

Nathan Newman's Perverse Incentives

Nathan Newman applauds the new proposal by Arnold Schwarzenegger to have 75% of punitive damages from civil court cases go to the government. The problem is that with large punitive damages there is a perverse incentive to sue more frequently and to go after the "deep pockets" irrespective of whether or not they bear any liability or not. This kind of an effect is called a perverse incentive because there is now an incentive to do something that is perverse in the sense that it doesn't benefit anybody.

For example, suppose a person goes to an amusement park and does something incredibly dumb and gets injured. Then because the amusement park is owned by a large corporation the idiot sues for a large sum of money in punitive as well as non-punitive damages. If he wins, Nathan's argument is that the rest of us are made better off because now the amusement park will...will...what? Bar idiots from entering? Unlikely? Close the ride in question? I fail to see how that benefits non-idiots. Raise prices to try and recover at least part of the damages? Yes, in this specific example punitive damages are a wonderful thing [/sarcasm].

While the effect that Nathan notes is indeed good, i.e., punishing malfeasant corporations, there is the down side in that large punitive damage awards can create incentives to sue when such actions are not warranted. As is typical with Nathan he simply looks at only the good outcomes, ignores the bad outcomes, and provides zip in terms of any sort of empirical evidence. Ideally we'd like to get just the good effects and not the perverse effects. How to do this? How about burning the money from punitive damages? If nobody can get that money they have no incentive to sue in the hopes of striking it rich via a lawsuit. Further, we still get the good effects in that the malfeasant corporation is punished.

What is the problem with giving the money to the government? Punitive damages become a profit/revenue center for government. Now the government will have an incentive to increase the not only the number of lawsuits seeking punitive damages, but increasing the size of the punitive damages. Here is Nathan outlining the very problem himself,

And guess what, if punitive damages go to the government, you might actually see state agencies and attorneys generals bring more lawsuits, since they would suddenly become revenue sectors of the government.

I am all for lots of plaintiff lawyers suing on behalf of victims and giving them lots of incentives to do so, but using punitive damages is the wrong way.

Bottom line: lawsuits good, more lawsuits even better. Nevermind that there is very little that is actually productive in terms of lawsuits. Lawsuits produce virtually nothing. Can you drive a lawsuit? Can you eat a lawsuit? Will a lawsuit perform your triple bipass operation? No, no, and no. Now lawsuits can have a beneficial effect in that they can address wrongs, and enforce contracts and so on. Lawsuits and courts are a necessary part of a health and functioning market economy. However, the idea that more lawsuits is always better is just plain...idiotic.

Education Graduate Schools

Daniel Drezner has a post that points to some research noting that education graduate schools are rather weak academically. My first response was, "Gee, really? Who'd a thunk it?!?!"

I like this part of the post:

Linda Darling-Hammond, an education professor at Stanford University who has led the charge for tighter regulation and higher standards for teaching, blasted the paper as showing "very poor scholarship."

Course outlines are inadequate to assess what is actually taught, she said, calling the standards Mr. Steiner used to evaluate each of the four types of courses either personal or politically motivated.

"We need systematic studies," she complained, "rather than diatribes that come at the problems ideologically."

David F. Labaree, an education professor at Stanford and author of the forthcoming book The Trouble With Ed Schools, agreed that course outlines are not a good guide to what is actually taught. They are "more an ideological portrait of a course than actual substance," he said.--emphasis added by Prof. Drezner

Well, if course outlines aren't a good indicator of what is going to be covered, how can students know before hand if a course will offer what they need? Sounds like the instructors at education schools need to take a course on writing accurate course outlines. Also, this sounds like a nice attempt to make the problem unmeasurable. If course outlines are no good, then what should be used? How about the text book? Oh, no I guess that wouldn't work either as the same argument would work. Oh...how about asking the students! Yeah, we all know how wonderful polls work.

When I was in graduate school, the course outlines were almost always a good predictors. In my second semester of macro theory we covered precisely those articles listed in the course outline. We didn't cover in class the additional articles, but the idea was the student would read those articles as homework/outside of class.

It is this kind of stupid thing that makes the education graduate programs look so bad. The course outline says one thing, then the professor decides to teach things not on the syllabus. What a load of Barvo Sierra. No wonder education schools are considered a joke.

Robert Prather's Second Blog Annivesary

Robert has been blogging for two years now. And like many of us, Robert has become a hit junkie, a sitemeteroholic, and..dare I say it...yes a link whore (trust me, I know all the signs of a link whore...being one myself). And Robert would like to get to 500,000 unique visitors before his anniversary. So help feed Robert's addiction and think of it as his anniversary gift. Go to his site, and if you have a blog toss him a link.

Follow the Logic

A caller on Rush Limbaugh was decrying the fact that gay couples in MA are getting married starting today. His reasoning (paraphrased) was "This is propoganda fodder for terrorists since radical Islam considers homosexuality a capital offense." Hence, the US shouldn't allow gay marriage. Surprisingly guest-host Roger Hedgecock didn't call him on the irrationality of that statement.

We allow women to work outside the home, drive cars, etc., all of which are forbidden under the strict Islam espoused by the terrorists. So we shouldn't allow that because it might be propoganda for terrorists?

Come on, they hate America because of what we are, not what we do. Our freedoms are a threat to their power, period.

John Kerry and 10 Million Jobs

John Kerry has been claiming that he will add 10 million jobs to the economy in the first four years he is in office. This claim is based on a memo to the Kerry campaign from Harvard economists Lawrence Katz. But what is the basis for this claim of 10 million new jobs? Nothing. This article at FoxNews points out that there is zero economic theory behind the numbers. Here is the key part of the memo,

The average U.S. unemployment rate for 1999-2000 was 4.1 percent. If we restore sound economic policies as Senator Kerry has proposed that we do, then we could re-ignite the innovative and job-creating potential of the U.S. economy and experience such labor market conditions again. Bureau of Labor Statistics projections of labor force growth combined with the historical relationship between employment growth in the household and establishment (payroll) surveys imply that a decline in the unemployment rate to 4.1 percent in January 2009 would result in the creation of over 10 million net new jobs (as measured by the establishment survey) over four years (from January 2005 to January 2009).

Notice what this is saying: if we get back to 4.1% then there will be 10 million new jobs. If we get back to 4.1% is not linked to any policies. The "analysis" is purely statistical in nature in that it assumes that achievement of the goal then calculates the number of jobs achieving that goal will add. There is no analysis as to whether or not Kerry's economic policies will achieve the goal of 4.1% unemployment.

If we look at the historical employment data since 1948 we see that the periods where unemployment is less than 4.1% are indeed rare. There have been five periods where the unemployment rate has been below 4.1% (or close to it). In terms of the number of months with an unemployment rate below 4.1%, we find that only 17% of the 676 months since 1948 have unemployment rates that low. If we look at only the last 25 years we see an even more stark picture. The average unemployment rate is 6.2% and there is only one period with an unemployment rate below 4.1% and that was during the dotcom bubble...hardly something we should consider good policy. The bottom line is that unemployment levels such as 4.1% are the exception not the rule, and that they are generally unsustainable.

If we look at the Annual Report of the Council of Economic Advisors from 1999 we see that even they did not anticipate driving unemployment that low.

Although the NAIRU is an indicator of the risk of inflation, estimates of the NAIRU have a wide band of uncertainty and should be used carefully in formulating policy. The NAIRU implicit in the Administration’s forecast has drifted down in recent years and is now within a range centered on 5.3 percent.--emphasis added (page 24)

What level of unemployment was the Clinton Administration forecasting in 1999? How does 5.3 grab you? Don't believe me, well here is table 2-5 from the report. What about the 2000 report you ask. Well what about it? They still realize that the low unemployment rates are not sustainable. The forecasts never go below 4.6% and bounce up to 5% in 2004 and up to 5.2% in 2005.

Sure there could be 10 million jobs added over the four years of 2005 to 2008, but there is little reason to think this is going to happen. But who knows, oil prices could plummet, gasoline prices could likewise decline, and the economy could take off in 2004. Of course, these events would have absolutely nothing to do with John Kerry. Kerry's claim that his policies will ad 10 million jobs in four years doesn't even pass the giggle test.

Bush's Poll Numbers

Bush's poll numbers are looking really weak right now, but does this mean that he'll lose in November? Well, not if the Fair model for presidential elections is right. This model has been surprisingly accurate in predicting presidential elections since 1960 and with Ray Fair's numbers, Bush will win with 58.74% of the vote. According to the Fair model, if the inflation rate jumps to 10% (never going to happen) and the real per capita growth in GDP is -0.5% for the first 3 quarters of 2004, then Kerry has a 50/50 chance.

Of course this depends on whether or not you still believe in Clinton's mantra of: Its the economy stupid. I don't think Kerry has forgotten the mantra which is why he is working overtime to portary the economy as being bad, weak, and so forth. The problem is that the economy isn't all that bad. Sure unemployment is higher than it was at the end of Clinton's term, but that level of unemployment was exceptionally low. Will there be enough discontent over a 5.6% rate of unemployment for things to go Kerry's way? I doubt it, back in 1992 the unemployment level was 2% points higher and Clinton had the benefit of Perot syphoning off support from Bush. In 1996 the unemployment rate was about where it is now. Also, growth in personal consumption expenditures in 1996 are very similar to what they are now.

And lastly there have been two months of decent jobs growth in the establishment survey. While it may not be super hot job growth if it continues it will make Kerry's job all that much harder. Unless people figure that a change is needed for foreign policy and that this trumps the economy as an election issue, Kerry has a very, very tough election in front of him.

Thanks to Don Luskin and Steve Antler for the link to the Fair election model.

Weekend Fluff -- Troy

Pretty good movie, methinks. Lots and lots of action, and despite the R rating, it wasn't as gory as I expected.

It was also a nice change, in that it wasn't a standard good vs. evil summer action movie. Except for Agamemnon (who was one-dimensionally despicable), the major characters on both sides were pretty sympathetic:

Menelaus -- wife ran off at the first opportunity.
Achilles -- glory hound, but loyal to his friends and family.
Odysseus -- Smart honorable man stuck in a bad situation because he can't afford to have Aggie as an enemy.
Helen -- Stuck in a loveless marriage and trying to find a way out.

Priam -- old king who loves his country and his family
Paris -- young fool willing to risk everything for love.
Hector -- reluctant warrior who would rather stay at home raising his son and learning how to pronounce his wife's name.

I do have to admit that it was a bit of a stretch to see Orlando Bloom playing an extremely earnest character who was in love with someone else's wife, and was highly skilled with a bow.

It also looked like Brad Pitt, Orlando Bloom, and Eric Banna might have spent a little time at the gym.

Lots of Hits

We've been getting lots of hits here the past two days (3,500+ so far). The vast majority have been looking for information on Nick Berg. I guess it was luck that has this site placed so high on the search engines, but the media are idiots for not going with this story vs. Abu Ghraib, at least if you are looking at ratings.

CNN.com is still running with Abu Ghraib. Samething at the Washington Post website. And same with the New York Times. No wonder people are coming to my site and others...bloggers appear to be the only people still talking about it. The media people are idiots by and large.

Update: Here are various news outlets and the main items on their front page:

• Los Angelest Times: Abu Ghraib
  
• Rueters: Abu Ghraib and the PPI
  
• ABC News: Rumsfeld with a smaller story on Berg
  
• CBS News: Nick Berg and Abu Musab al-Zarqawi
  
• Fox News: Nick Berg and Abu Musab al-Zarqawi

Looks like some of them are catching on.

Update II: CNN.com switched to Berg as well.

Legalizing Drugs

The other day on the Larry Elder Show (which I listen too on my way home) Larry and a caller got onto the topic of legalizing drugs. The caller wanted to know what Larry would think if drugs were legalized and heroin epidemic erupted. Larry tried to point out that this idea is patently silly by pointing out that that caller isn't about to run out and shoot up heroin if it becomes legal why should others do so.

The idea can be seen much more easily I think with a picture. The demand for heroin is highly inelastic. That is, price doesn't have that much effect on demand. The demand curve would look something like graph over on the left. The demand in that picture is much more inelastic in that even with a large decrease in price the increase in quantity is small. So the idea that there could be an epidemic is pretty unlikely. This argument is extremely weak.

The caller then went on to the argument that he didn't want to get hit by a drug user who is intoxicated and behind the wheel of a car. Well, nobody is arguing to make driving under the influence legal, so this is a strawman argument. Further, alcohol use is far more prevelent than drug use and there is no calls for banning booze. In fact, most people immediately start pointing out prohibition, but don't realize we have prohibition right now. Drug use is currently prohibited. Also, getting into an accident with a intoxicated drug user is far less likely to lead to fatalities than getting shot in the head. One of the costs of drug prohibition is that it is on the blackmarket and is a revenue source for street gangs. Since it is a blackmarket, one cannot go to the legal system for contract disputes, and other disputes. Instead disputes will be settled by the gangs and usually invovle violence that can and does spill over into the local neighborhood.

The decriminalization of drugs would remove a revenue source from street gangs, which in turn would reduce crime and save money in terms of law enforcment. The cost of increased usage for drugs like heroin would be minimal due to the inelastic nature of these drugs.

Update: I went to the online economic working paper archive to see what kind of research has been done on such drugs as heroin and usage. Shocking there is only one paper. Here is the abstract (I bought the paper and read the whole thing),

The purpose of this paper is to estimate the effects of heroin prices, cocaine prices and marijuana decriminalization on the demand for these three drugs, respectively. There are few prior empirical studies in this area because data have been difficult to acquire. This paper makes use of newly available data on drug prices and is the first to link these data to a sample of 49,802 individuals from the National Household Survey of Drug Abuse. The new drug price data comes from the Drug Enforcement Agency. The results provide empirical evidence that drug use is more price responsive than has been previously thought. The results show that the participation price elasticity for heroin is about -.90 to -.80 and that the participation price elasticity for cocaine is about - .55 to -.36. Marijuana decriminalization was also found to increase the probability of marijuana participation by about 4 to 6 percent. The price elasticity for heroin is estimated at about -1.80 to -1.60 and for cocaine at about -1.10 to -.72. It is estimated that legalization would lead to about a 100 percent increase in the quantity of heroin consumed and about a 50 percent increase in the quantity of cocaine consumed.

The short version of the abstract is: I'm wrong.

The longer answer is that with the price participation elasticities they are reporting a 60% decrease in the price of heroin due to legalization means a 54% increase in participation. Given that price elasticities are about twice the price participation elasticites for opium and marijuana, this means a 60% decrease would mean around a 100% increase in consumption. These are some pretty big increases to be offset by lowering crime.

The one thing that is slightly weird with this study is that heroin seems to have higher elasticities than cocaine which strikes me as being counter-intuitive.

New Global Warming Post

Over at Debunkers.org I have a new post on global warming. Specifically I look at the load of Bravo Sierra Gore was shovelling in his Moveon.org speech.

Producer Price Index

The Producer Price Index (PPI) rose by 0.7 percent in April. This increase is the largest in the last 13 months (maybe longer). I am pretty sure this will count in as a checkmark in the Fed's list of reasons for raising interest rates sooner rather than later.

More on Nick Berg

Morton Kondrake had the right reaction.

"Look at those monsters standing there five of them and they cut the guy's head off, they sawed his head off, shouting God is great. Now that is what we are dealing with, that is the kind of people who will run the world if we do not win this war on terrorism. And it is being fought in Iraq and we have got to win and that is it. Full stop. There is just no losing this thing or else the world will be run by monsters."

My theory right now. with the little information we have? Nick Berg knew something (Photos? What?), was in hiding, and was lured out to be executed by people on our side who are going to cynically exploit this beheading.

So the BFEE went for a "twofer" - kill the whistleblower before he can blow it and use the film to gain points for the BFEE.... two for one.

Update -- name correction

Judicial Activism?

Judge Orders Kansas Schools Closed by June 30.

A Kansas district judge on Tuesday ordered public schools to close, beginning June 30, until the state's flawed school finance law can be overhauled.

Shawnee County District Judge Terry Bullock, who had declared the school finance law unconstitutional on Dec. 2, ordered the expenditure of school dollars to be halted at the end of next month.

His order, unprecedented in Kansas, applies not only to state education spending but also to additional property tax levies authorized by local school boards and local sales tax money collected for education in Johnson and Saline counties.

On December 2, 2003, this Court entered a Preliminary Interim Order holding that the Kansas school funding scheme, as it then existed, was unconstitutional in violation of Article 6 of the Kansas Constitution and the Equal Protection Clauses of both the Kansas and United States Constitutions. At the request of Defendant State Board of Education, the Court withheld final judgment and gave the legislative and executive branches an opportunity to craft remedial legislation. Specifically, the Court provided the State a grace period encompassing the entire 2004 legislative session in which to repair the constitutional violations in the funding scheme. Unfortunately, during that just-concluded legislative session, the legislative and executive branches failed to utilize the time provided by the Court and none of the adjudicated constitutional defects in the school funding scheme were addressed and none corrected. The Legislature has now adjourned and left the capital. Only formal sine die adjournment remains. Accordingly, with considerable regret and after much deliberation, the Court can find no reason to further delay and is now prepared to announce its remedy ruling in this matter.

The gist of the ruling is that the current funding scheme for public schools is both inadequate and unequitable.

1. Inadequate. A commission empaneled by the State Board of Education concluded that the schools are approximately $1 billion underfunded.

2. Unequitable. Evidence presented to the court showed a per child spending disparity ranging from $5,655.95 to $16,968.49.

Number 1 bothers me a little, because it seems to me that the judge is ordering the legislature to raise taxes. Theoretically, they could cut spending elsewhere, but come on, how likely is that?

Number 2 really pisses me off. The spending disparity arrises because some of the wealthier school districts choose to raise property taxes to provide additional funding for the local schools. The ruling includes a list of requirements for a new funding scheme to pass constitutional muster, including the following:

...the Legislature must also ensure that each and every child is treated equally. Accordingly, any per pupil differences in funding must be justified by actual differing costs necessary to provide a suitable and equal education for that child.

{snip}

This new funding plan must not contain:
a. Wealth-based, local funding options which cause per pupil funding disparities;

e. Special local or other funding authority benefitting only some children;

g. Unequalized “local” funding options, which by their nature are more available to wealthy districts both politically and in the revenues generated;

h. Any revenue source which requires local approval, thus creating inequities between places and children.

I live in one of the best school districts in the state, probably in the top 10 percent in the country. I don't have any children myself, but I do own property, and the value of that property is influenced by the high quality school system. According to this judge's ruling, my school district can't increase its funding even if they want to. The fact that children in my school district get an excellent education somehow is detrimental to other students in the state.

Don't get me wrong, I despise the State Legislature as much as the next person, but this judge's ruling is overreaching. It also seems that the judge is a little miffed at the legislature's attitude:

To paraphrase Aesop: The mountain labored and brought forth nothing at all. In fact, rather than attack the problem, the Legislature chose instead to attack the Court. From the outset, legislative leaders openly declared their defiance of the Court and refused to meaningfully address the many constitutional violations within the present funding scheme, all of which were created by the Legislature itself. To this very day, those legislative leaders continue to disregard this Court’s factual findings, premised largely on the State’s own records and other uncontroverted evidence. They likewise continue to ignore the fact that