It’s, perhaps, not race

The President and First Lady seem to jump to conclusion that being mistaken for a valet or asked to get something off the shelf had to do with race.

I have news for them. Those types of things happen to me, too.

I’ve been asked to get coffee. I’ve been asked by fellow patrons of stores “Do you work here?” I’ve been mistaken for servers at restaurants. I’ve been asked by others for help.

I’ve noticed such things happen when my clothes reasonably matches with what the employees of the establishment are wearing. When I’ve been asked for help, I always assumed it’s because I looked like a nice, approachable guy who would be more than willing to help.

Maybe the First Lady was asked to take something off the shelf because she is taller than the person who was asking and looks like a nice person that would help someone out.

Perhaps the President was mistaken for a valet because what he was wearing more closely resembled what the valets were wearing than what guests were wearing.

It’s silly when we look at these events and see race as a factor.

It reminds me of a conversation I once had with a friend. We were discussing profiling, I believe, and I had made a similar comment as above that race was probably not even one of the key factors in such cases, maybe not even in the top 5 or 10.

Him: Oh? So, are you telling me if you were walking down a dark alley and ran into two black dudes you wouldn’t be concerned?

Me: Actually, that has happened to me on occasion and sometimes I was concerned and sometimes not.

Him: What do you mean?

Me: First, let me ask you something.

Him: Okay.

Me: Why did you ask me about ‘dudes’? Why didn’t you just say ‘people’? If it was just about race, ‘people’ would have been good. But, even you are admitting that there’s more at play than race.

Him: Huh?

Me: You’re saying that gender has something to do with it, too. Otherwise, you could have just said ‘people’.

Him: Okay.

Me: So, now back to your question. My answer is, it depends.

Him: On what?

Me: What are they wearing? How are they behaving?

Him: What do you mean?

Me: In fact, I have walked down lonely streets and encountered ‘black dudes’ on quite a few occasions and only on a few of those I have had concerns.

When they were dressed professionally or casually and behaving politely, I didn’t have any concerns. When they were dressed like bums and behaving politely, no concerns. Would you?

Him: Oh. I guess I can see that.

Me: I’ve walked down lonely streets before and have encountered people of all races who were dressed like thugs and behaving aggressively, like they were looking for trouble. I had concerns then.

Come to think of I’ve encountered such people who were dressed like thugs, but behaving politely and I was less concerned. So, maybe it wasn’t even the clothes, but the behavior.

So, while ‘what would you do on a lonely street’ is a popular example people like to use because they think it gets at one’s true racial biases, that example typically fails in the asking, but few people recognize that.

Him: I was following. Now you lost me.

Me: Again, you asked me about dudes. Not people. Not ladies. So, in the asking, you admitted — without knowing it (or maybe knowing it and you were just trying to bait me into an answer hoping I wouldn’t notice it) — that gender was a key factor. In fact, probably more of a factor than race. Because if race were the main factor, you wouldn’t have to specify dudes, at all.

I honestly can’t remember if I made any headway. But, he seemed to consider the train of thought.

Don’t encourage the un-encouragable

Alex Tabarrok of Marginal Revolution shares his favorite of Morgan Housel’s Motley Fool article, 122 Things Everyone Should Know About Investing And The Economy.

I especially agree with this one:

For many, a house is a large liability masquerading as a safe asset.

This is important to understand and relates to my previous post.

In the U.S. we (especially politicians) have rose-colored glasses when it comes to home ownership. We think it’s good, always. We think, the more the better, always. We have this same affliction with education.

So, you start to see politicians do things to make it easier to become a home owner, like lowering down payment standards.

Home ownership can be good, but as with all good things, it isn’t good for every situation. And, there is a law of diminishing returns that limits the more is better, always.

Back in 2010, the Wall Street Journal interviewed Canada’s Finance Minister, Jim Flaherty. I wrote about that here. Canada did not have a banking crisis in 2008. Part of the reason why is that they do not see home ownership with rose-colored glasses like we do. This prevents them from doing unwise things like getting people into home ownership when renting is likely the best option for them.

He said:

“They [Canada’s version of Fannie and Freddie] are supposed to have a certain part of the market but they are not supposed to be a dominant player in the market. They do make sure that lower income earners have access to a roof over their heads, but that can mean rental housing.

There’s no stigma to renting there. That kept Canada’s government, mortgage lenders and borrowers from doing things that encouraged risky home ownership.

In the interview, Flaherty points out some of these things

  • Canada’s lenders didn’t securitize (sell off) mortgages, or off load risks of bad mortgages, to others. They lent and held the mortgage, so it was in their best interest to make good loans.
  • Borrowers couldn’t just walk away from a home with a mortgage. “They remained personally liable.” That encourages borrowers to be more prudent about becoming a home owner. If you can’t rid yourself of the debt by simply stopping paying your mortgage and walking way from the house if things go south, then maybe you don’t buy a home or you buy one that better fits your budget.
  • Canada’s tax code also doesn’t treat mortgage interest as a deduction. This policy also tips the scales toward home ownership in the U.S.

Time machine? Sadly, no.

The news reported recently that Fannie Mae and Freddie Mac plan to offer programs to allow young home buyers to buy a home with as little as 3% down to make it easier to buy a home.

Hmm…I thought for sure this was a headline from 1995, but no. It’s from December 2014.

Do they not remember how this ended last time?

Why not start a program that teaches financially responsible behavior young home buyers can use to save up a sizable down payment so they can truly be homeowners and not just renters with a deed.

I know why. That doesn’t sound as good.

That’s what highly improbable events are

Ezra Klein thinks Darren Wilson’s account of the events leading up to Michael Brown’s death is unbelievable.

Klein could benefit from a basic lesson in statistics.

Highly improbable events usually appear unbelievable because they don’t happen often and don’t follow the norms. That’s what makes them highly improbable events.

Trying to make sense of highly improbable event by applying the norms of probable events is a common mistake.

It’s also an unfortunate consequence of a highly connected world that allows us to focus a great deal on highly improbable events. We see the highly improbable events so easily that we are deceived into believing that they are ordinary. We don’t often stop to consider what percentage of similar situations did not end as poorly as this one.

Nassim Taleb writes about this in his book, The Black Swan. He points out that people often delude themselves into believing that they could have predicted what turned out to be a highly improbable event, like a financial crisis, when we look back on it using 20/20 hindsight.

Life would be better if more people understood this

Here’s a great post from Don Boudreaux at Cafe Hayek on the nature of wealth and politics.

In it, he criticizes the all too typical, and wrong, view that wealth is a fixed pie and why the concern that the wealthy use their wealth for political influence is a good marker for someone who seems oblivious to root cause thinking.

Here’s a snippet on the second point:

…Mr. Reich fails to connect the dots by complaining that the rich spend more and more of their wealth in the political arena.  What else to expect when that arena becomes ever more central to Americans’ daily lives and, simultaneously, becomes ever more crowded with redistribution-mongers (such as Mr. Reich) whose squeals to soak the rich grow louder and harsher?

Folks like Mr. Reich think that the solution to their perceived problem of politically powerful wealthy is a more powerful government. But, a more powerful government just raises the stakes for the wealthy to use that power to their advantage.

In other words, without a powerful government, the wealthy could not be politically powerful. The problem is not the wealthy gaining political influence. The problem is that with a powerful government there will always be unsavory characters seeking to gain that power for their own good.

Think about the plot line of every movie that has an object with immense powers. There’s always a fight between multiple groups, good and bad, to get the object so they can use its power to their advantage.

The problem in Reich’s thinking is that he cannot fathom a limited power government. He wants a powerful government, but he just wants to somehow (through even more power for the government) restrict the holders of its powers to people who think like him.

He doesn’t realize that’s a self-fulfilling prophecy. The more power we bestow on the government, the more likely there will be unsavory people seeking to control that power.

“Government employees produce nothing”

Kansas Congressman, Ray Merrick, is catching some flak for saying those words. He also said “They are a net consumer.”

Salon.com typifies the criticism of Merrick’s comments in the subtitle of its piece:

Kansas Republican Ray Merrick shows off his breathtaking ignorance.

Brandon O’Dell, commenting on this Merrick piece in Kansas City’s alternative newspaper, The KC Pitch, gets it. He wrote:

You don’t have [to have] the most basic understanding of economics to even comprehend that what Merrick said is factually accurate. The government does not “produce” anything, unless we all woke up this morning to a communist takeover whereas the government now owns the means of production? What he said is 100% true. The government does not take raw materials and labor and combine them to create goods or services that have a net value greater than the cost of making them. That is “production”. Unless you are in the business of making goods or services that can be sold for a profit, you are not a “producer”. Not a tough concept.

What he DIDN’T say is anything derogatory about government employees. It wasn’t a criticism, it was a statement of a basic economic fact, that government consumes. It doesn’t produce. Some government services are absolutely necessary. That doesn’t change the fact that they are expenses though, and should be managed Ina responsible manner, and yes, even cut when possible. Not something government is good at.

I agree. Merrick’s comments reminded me of posts I wrote in 2011, Government is Overhead and Government is overhead’ follow-up.

Criticism I’ve heard of Merrick’s comments falls mostly into two categories “Merrick is a jerk or idiot” which is then coupled with “but government workers are valuable” or “Merrick is a hypocrite since he’s a government employee.”

I take this as another example of the sad state of discourse in our country. These critics don’t have the capability or desire to try to understand what Merrick said. They will just shame him for saying what they thought he said. He is a politician, so he will roll over and apologize instead of taking the opportunity to educate his critics.

Yes. Some government employees do valuable work. Government workers are paid for by taxes. Where do taxes come from?

Just as in my burritos company example in the Government is Overhead post, the burritos company’s accounting department does valuable work for the burritos company, but they aren’t producers. Take away the burritos operations and what happens to the accountants? They lose their jobs. Their jobs are paid for by the production and selling of burritos.

The source of emergent order

Robert Solow from this EconTalk podcast on Growth and the State of Economics:

We all know that a lot of the innovation occurs as a business process. I keep telling myself we also all know that a lot of innovation comes as a matter of dumb luck. You set out to solve problem A, and you fail totally to solve problem A, but you solve problem B that wasn’t in your head at all.

I’m not sure we ALL know that.

But, I do think that growth, innovation, improvement in the standard of living — whatever you call it — depends on how good we are at recognizing that we solved problem B.

I’ve been a part of many organizations that end up solving problem B, but ignore it because they are fixated on solving problem A.

I think this happens with R&D efforts in government and other bureaucratic organizations. They get so hung up on their preferred solution (e.g. solar power or wind power) that they ignore discoveries that don’t fall into their pre-selected, politically-correct categories.

How well a system allows the solution to problem B to propagate, I believe, is related to that system’s long-term viability.