More evidence they didn’t get the message

From Yahoo News: Pelosi expected to remain House Democrats’ leader

Her allies predicted she would win overwhelmingly, particularly given the 129-68 vote to defeat an effort by Pelosi’s critics to postpone the leadership election until next month.

Though, an analytic mind might point out that 68 votes seemingly against Pelosi is higher than it would have been a year ago and trending in the right direction.

They might also point out that this could mean that they want to take the leadership vote quicker to get her out of the spotlight sooner.

Revealed Preferences

Since he seems like such a big fan, it’d be nice if Soros chose to live in China and leave us free of his desire to impose his will on us and consolidate political power into overreaching politicians.

Robert Frank on EconTalk

This week’s EconTalk podcast has Robert Frank of Cornell University discussing income inequality with host Russ Roberts of George Mason University.

This seems to be a fundamental basis of Frank’s mental model (about 4:40 in):

So the best situation from an economist’s perspective is the one that leads to the largest surplus. For the non-economists in the audience, surplus is just the cumulative sum over all people of the difference between the benefits they get and the costs they bear, evaluated in their own terms. So, if we can make the economic pie bigger, the attraction of doing that, is that it’s always going to be possible for everybody to have a bigger slice than before. I don’t think that requires any difficult value judgment at all.

I added the emphasis.

I agree that surplus is the difference between benefits and costs, evaluated on our own terms. That’s the root of why our standard of living is much better than our ancestors.  We trade our surpluses in mutually beneficial manners with each other to make our lives even better.

But, I disagree with Frank’s last sentence.

As individuals, making value judgments on our own terms isn’t difficult.  We make them naturally every day.  I often to choose to pay $2 for a cup of coffee even when I can get it free elsewhere.  That might sound absurd.  But, I finish the $2 coffee because it tastes good, while  I throw out a half cup of the free coffee because it doesn’t.

What bothers me about Frank’s last sentence is that I don’t believe he’s talking about individuals making their own value judgments any longer.  I believe he’s talking about economists and politicians making value judgments for individuals based on their assessment of what creates the greater good or the largest pie.  Unlike Frank, who seems to think this is easy, I don’t think it is possible for a third party to appropriately assess how others judge value.   That’s an awful lot like the thinking that leads to destructive central planning. 

I would like to ask Frank if he was given the power to enact his policies to maximize economic surplus, how would he know if he happened  to be wrong?  If he were wrong, how would that be corrected?

Blinder’s Name Fits

I’m left wondering why the Wall Street Journal publishes Alan Blinder.

Blinder comes across as arrogant and smug, which I don’t think is befitting of op-ed space in WSJ.  Here’s an example:

For months, we have witnessed the spectacle of people arguing that Keynes was wrong. Somehow, additional government spending actually reduces employment—even when the economy has huge amounts of spare capacity and unused labor desperate for work; even when the central bank will prevent interest rates from rising to “crowd out” private spending. Really?

One current catchphrase is “job-killing spending.” Hmmm. How, exactly, does more spending kill jobs when there is idle capacity and no threat of rising interest rates? Stumped? So am I.

The anti-Keynesian revival has been disheartening enough. But now the economic equivalent of the Flat Earth Society is turning its fury on Ben Bernanke and the Federal Reserve.

If you have a case, state it.  No need for the ‘Really?’ and Hmmmm… That’s more befitting for a blog post, not a serious newspaper.

And, the worst part, hes’ wrong.  I eagerly await the economists to debunk his column.  Here’s the first debunking that I’ve seen from Charles Rowley.

Facebook Status Update Health Care Debate

While writing the previous piece on Whoppers, I was reminded of a Facebook debate that ensued on one my friend’s status updates this weekend.

I was reminded of how unnecessary it would be to have such debates if health care wasn’t thrust into the political arena.

While the free market does amazing things and almost always manages to provide us with just about everything we need and want for all different sets of preferences and income levels, there are some things we don’t want to trust to free markets, like education and health care, that are “too important to rely on profit to do right”.

The debate started with a friend posting a status update grumbling about some of the trade-offs he feels forced into making because of the Obamacare legislation while making a reference to the Boston tea party.  All the usual suspects chimed in.

A supporter of health care tried to convince my friend that Obamacare really won’t hurt him much and may actually help him and that his reference to the Boston tea party was inaccurate because the Boston tea party resulted from ‘taxation without representation’ while Obamacare was voted ‘fair and square’ by ‘elected reps’.

Another explained her skepticism of the government plan, but was scared because she has a pre-existing condition and can’t find affordable coverage after a job change.

I played the part of the free market, limited government guy.

Whatever you think of the merits the health care debate, the only reason we have this debate is because we’ve pushed health care into the political arena.  That means that some folks get to force their preferences onto others.  And that is the source of all the debate.

We don’t argue about Whoppers because we haven’t pushed it into the political arena.

Teddy Kennedy didn’t sponsor legislation ensuring that if you come into a store for Whoppers, but couldn’t pay, the store would have to provide it to you for free.

During World War II, politicians didn’t set caps on salaries and then exempt Whoppers from those caps.

Likewise, Congress never passed a bill to give favorable tax treatment to employer-sponsored Whoppers or legislation that forces younger folks to subsidize Whoppers for retired folks.

Would there be problems with health care if it were not in the political arena?  I’m certain of it.  But, I’m confident we’d find private solutions for those problems that wouldn’t make things worse for everyone with unintended consequences.

Unfortunately, all it takes is one horror story of private solutions not working before we want to push it into the political arena to prevent that from happening again.

Yet oddly, horror stories from the political solutions don’t seem to make us skeptical of the political solution.

Why We Have Whoppers

I have a taste for Whoppers, the round, malt ball candy.

A co-worker has a spread of candy that he’s giving away from his children’s Halloween pursuits.  On my way by his desk, I picked up a pack of Whoppers.  The following conversation ensued (or close to it).

“Yuck, Whoppers.  Take all of them.  I don’t even know why they make Whoppers.  Seems like a waste.”

“I like them,” I responded.

“You do?  Really?  I can’t see why.”

“I like the flavor.  I’ve always liked the taste of malt and chocolate,” I said.

“Really?  They taste like chocolate covered chalk to me,” he replied.

“Well, it seems not everyone agrees with you.”

He asks, “Why’s that?”

“Because Whoppers have been around for awhile.  I don’t think they’d continue to make them if someone didn’t like them and buy them.” (Of course, I could be wrong about that. It could be that nobody likes Whoppers, but people buy them for others thinking others like them, but don’t really.  But, he didn’t bring that up.)

“True.”

“That’s the great thing about products in the free market.  Not everyone has to like a product to have it made.  Not even the majority of people need to like it.  Just enough people to make a profit,” I said.

“Ah, that’s true.”

“If Whoppers were in the political market, and we had to make a categorical decision by voting to keep making Whoppers or not, then Whoppers might be in trouble.  Thankfully, we don’t have to make that decision. You can imagine, if we did, all the Whopper lovers arguing, protesting and pleading with the non-Whopper lovers to vote to keep making Whoppers.  Essentially, we’d get exactly what we get with just about everything else that we thrust into the political market – conflict.”

“Very true.  Please take all of the Whoppers.”

“Thank you.”

“No.  Thank you.”  He was thanking for taking most of his Whoppers, not for the conversation.  But, even without trading money here, we engaged in mutually beneficial transaction.

End conversation.  I walked away with a few days supply of Whoppers.

Think of all the other products that you use that are produced in the free market and might not exist if you had to get a majority of people to vote for it.   It would be difficult for any genre of music to survive.  Magazines. Hobbies. Fruits. Vegetables. Snack bars.  Shampoo. Movies. TV shows. Coffee. Cell phones.

If any of these required a majority vote, it’s likely the products that suit your specific preferences would not be available.  It’s easy to see that what would be available, in most cases, would blah versions that might not include the features you value.

Instead of the minty, whitening, cavity fighting toothpaste, in a stand up squeeze pouch and no-mess cap, we might just have flavorless, non-whitening, toothpaste with the traditional, messy lids.  Not a major setback by any means, but definitely a minor one for those of us who valued the other kind.

But I can well imagine the fights for votes.  Urban, young professionals would push their whitening agenda.  Others might support a main platform of no-mess lid, softly support whitening and multiple flavors, but think that the cavity-protection chemicals could damage our brains.   Still others really want the no-mess lids, but not the travel size and they think mint flavoring is the evil work of an ancient order that has controlled our lives behind the scenes for centuries.  Others note studies that show that mint flavoring results in more consistent brushing, fewer cavities, better teeth and fewer dental bills.

Though, if toothpaste had always been in the political arena, all the different versions of toothpaste would not have evolved because we wouldn’t have the market experimentation and trial-and-error, we may never have known that these options were possible and we simply wouldn’t know what we were missing.  Free market supporters would try to explain to us that we don’t know what we’re missing, but we wouldn’t get it.

Thank you free market for making Whoppers.

You can say that again

In this post at EconLog, Arnold Kling wonders how someone can accuse a tax cut aimed at bringing in more government revenue as “ideologically charged.”  Kling asserts that such a tax reform is about as centrist of an economic policy one can propose.  He then writes:

But the center is not what it used to be.

That’s the truth.

The Truth Hurts Sometimes

George Mason University econ professor Charles Rowley makes an interesting observation in this blog post:

The United States at this time has no functioning President. Unfortunately, a major error of electoral judgment in 2008 resulted in  the elevation to this office of a person totally unsuited by reason of intellect, experience, work-rate, and concern for his People,  for the issues that confront his administration.   There is no point in beating about the bush.  The weakness of the Presidency and his cabinet,  imposes a serious obstacle to pursuing the fiscal crisis that confronts the nation.

Youch!

“What Country Do You Think This Is?”

In a scene that sticks in my memory from the movie Ferris Bueller’s Day Off, Ferris pulls a car up to a parking garage attendant and asks the parking attendant, “Do you speak English?”

The parking lot attendant gives a look of astonishment and responds, “What country do you this is?”

For some reason, that scene popped in my mind when I read this about a school that made a student remove the American flag from his bicycle because some people were complaining about it.

I do recommend watching both videos.  The school officials have come around and plan to talk to the folks complaining about it.  Props to the reporter for asking some good questions that reporters should ask (and often don’t) like, how displaying the American flag can cause racial tensions (in second video).

Is this a pay increase or a pay cut?

According to this Washington Post article, President Obama’s budget proposes a 1.4% pay increase for government civilian and military personnel next year.  The article says this is less than the 2% civilian and 3.4% military pay increases this year.

Democrats are notorious for referring to spending increases as decreases.  For example, if the budget of the Department of Energy has been growing at 5% a year and is then reduced to 4%, in the past Democrats would call this a 1% spending cut, even though they are still increasing spending by 4% from the previous year.

Why aren’t they consistent when describing salary changes?  Using their lingo, a 1.4% pay increase is  a 0.6% cut for civilians and 2.0% cut for the military.

I’ve always thought that referring to a year-over-year increase as a cut was absurd and meant to be deceptive for those who don’t pay too close attention.  The fact that they are not consistent by referring to these pay increases as cuts confirms that.