Five Minute Therapy

Thanks to Rich Berger, commenter on this Marginal Revolution blog post, for this video of Bob Newhart on MadTV offering wise advice:

As I watched the video, I wondered why isn’t it that simple?

Got a problem?  Stop it.

Nobody wants to say “no”

Something Michele Bachmann said in this Wall Street Journal interview has stuck in mind since I read it.  When asked about what caused the housing crisis, she said:

Nobody wanted to say, ‘No.’

She’s right.  Nobody wanted to say “no” to folks who had not yet demonstrated the financial or personal responsibility to own and care for a home.

One way to help such folks become homeowners would be to encourage and teach the behavior that generally leads to successful home ownership.  That would include things like:

• Develop marketable skills, show up to work, establish a relatively stable earnings and employment history and save.
• Live within your means so you can save to make a down payment.
• Factor in and budget all costs including mortgage, taxes, insurance, repairs, upkeep and updating and make sure those can fit within your income and savings without much trouble.
• Gain a better understanding of the demands of ownership responsibilities — like mowing the lawn and maintaining plumbing.
• Agree to a mortgage — amount and terms — that is not likely to put you into financial difficulty.

But, instead of encouraging these time proven methods for leading up to successful home ownership, we chose to view these qualifiers as barriers and dismantled them.  I still remember my real estate agent’s horror when I told him that I was only putting down less than 20% on my first home.  He grew up in a different world where that was unheard of.

The reason Bachmann’s words have stuck with me is because I see the reluctance to say “no” in so many areas of our lives and it usually doesn’t end well.

We hear about indulgent parents who can’t say “no” to their kids.  Then we often hear about how these kids turn into adult brats and struggle when someone in the real world does tell them “no”.

Health care reform, similar to government intervention in housing, is really about avoiding saying or hearing “no” (even when it is the person most affected that says it).  Though, eventually it means either going broke or transferring the power to say “no” from individuals to politically-motivated committees.

Apparently, quite a few of the people who have tried out for American Idol have not had anyone in their lives with enough guts to tell them that “no” they do not have singing talent.

We don’t want to tell some students that “no” they have not demonstrated satisfactory mastery of academic requirements to advance a grade level, or earn a diploma or be admitted to college.  We don’t want to tell bad teachers, “no” they cannot keep their jobs.  We also don’t want to tell their parents that “no”, your child cannot attend school because his or her behavior is not acceptable.

Sometimes we have a difficult time telling elected officials who do not uphold their oaths of office and who lack basic decorum that “no” they cannot represent us any longer.

Being told “no” can be rough, but it is not the end of the world.  I’ve been told “no” plenty.   I do not like it.  But, it is an effective feedback and I learned to deal with it.

Did being rejected by some potential employers stop me from looking for a job?  No.  But it did make me evaluate how to better demonstrate my abilities.

Was I angry when a college prof told me “no” he would not accept my (rather poor) excuse for not completing some important homework on time?  Sure.  But, then I applied myself and did well in the class.

Rather than changing the rules so we can avoid saying or hearing “no”, perhaps the more sustainable approach is to help folks deal with it when they are told “no”.

The heart of an innovative and resilient society are folks who can handle hearing “no” and often figure out alternative ways to achieve their goals.  Simon Cowell was told “no,” he was not a good singer.  But, he has done very well in the entertainment industry (telling many others “no” and telling a few “yes”).

Where folks bend over backward to avoid saying “no” you’ll find defeatism and dependence — folks who come to expect others to bail them out when things get rough.

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A gem from Blinder’s nonsense

In the Wall Street Journal Opinion section this morning, Paul-Krugman-wannabe Alan Blinder wrote about The GOP Myth of “Job-Killing” Spending.

Most of it was confused nonsense.

But, there was one thing that he wrote that I agree with:

Dumb public spending deserves to be rejected—but not because it kills jobs.

I also agree with the inverse of this statement. Public spending should not be accepted based on the idea that it creates jobs.

While I’m always skeptical that public spending will create the benefits desired, I would much rather attempt to justify expenditures based on the immediate impact.  We’re building this bridge to reduce time wasting traffic congestion, for example.

Justifying expenditures because it creates jobs is not any better when evaluating public spending than it is when evaluating private spending.  When you spend money, is creating jobs a key factor in your decision?  No.  You justify your spending based on the direct benefits you receive.

Red Herring Sunday

This video of Jon Stewart on FOX News Sunday with Chris Wallace is a great example of a defense mechanism folks use to keep themselves from having productive political discussions.

About 4:44 in Stewart explains to Wallace:

Here’s the difference between you and I.  I’m a comedian first.  My comedy is informed by an ideological background…but the thing you will never understand, and the thing that in some respects conservative activists will never understand is that Hollywood, yeah, they’re liberal, but that’s not their primary motivating force.  I’m not an activist.

This ploy serves a useful purpose.  It keeps him from having to defend his actual ideological views.

He changes the subject by saying, “I’m a comedian first” and then the conversation goes on a red herring romp about who’s more biased.

I’ve encountered a number of folks who use a similar technique.  They say things to push your political hot buttons and when you attempt to respond, they back off from a real discussion by accusing you of being too passionate or taking it too seriously.

From my Discussion Tips page, I’ve found this to be an effective way to deal with such nonsense:

Do you mind if I ask you to explain why you think that?

If they say that they’d rather not, then respond:

Then I’d appreciate it if you not bring up the subject unless you are willing to discuss it.  I’d love to learn more about your thinking and share with you mine.  But, I’d rather you not just jab me for the fun of it.  I try not to do that to you because I doubt you’d appreciate it and I try to be respectful.

Here’s how I might adapt it for Stewart.

To be honest Jon, it doesn’t matter to me how you think you are different from me or what you think your primary motivation is.  Those are red herrings.

The fact is that you do make public political statements.  I’m much more interested in learning more about the ideological background that informs your comedy and why you hold those views.

Wise words from Conan O’Brien?

Thanks to commenter dave for this video of Conan O’Brien’s Dartmouth Commencement speech.

The first 10 – 15 minutes is mostly jokes.  Though he makes great points about fairness and the value of a college degree in there.

The last 10 minutes or so has some good life perspective.  Try different things.  Deal with failure.  Be flexible and adaptable.

Whether you fear it or not, disappointment will come.  The beauty is that through disappointment you can gain clarity and with clarity comes conviction and true originality.

Whatever you think your dream is now, it will probably change.  And that’s okay.

Does the Laffer Curve exist?

Commenting on this post, Speedmaster writes:

The Laffer curve is very real. You can argue shape differences, and where we might be on it. But I don’t think a sane person can deny it exists.

Speedmaster writes more the subject here.  It’s worth a read.  And here’s more from a February post with Arthur Laffer himself explaining the curve.  From that post Laffer explains what causes the bend in the curve:

Changing tax rates changed behavior, and changed behavior affected tax revenues. Reagan understood that lowering tax rates led to static revenue losses. But he also understood that lowering tax rates also increased taxable income, whether by increasing output or by causing less use of tax shelters and less tax cheating.

I’m always entertained by folks who downplay the Laffer Curve and claim that changing tax rates won’t change behavior “that much” (or enough to make tax rate changes counterproductive).

I find this to be a good example of revealed preferences.  Sometimes how we say we will behave and how we actually behave are different.

This difference isn’t caused by dishonesty.   It’s caused by not having a full appreciation of all the factors that will influence our behavior and decisions in the moment.

An example from mass transit might help illustrate.  I once read about a market research study for area considering building light rail for mass transit.  They asked residents if they would be willing to ride the train. 

Of course, they answered. It sounded like a great idea.  Trains are cool.  They can save time and money, right?

After they built the train, many fewer people actually used the train than the market research predicted.  Why, they asked?

It turns out they hadn’t considered all the factors when they answered the market research.  Sure, trains are cool and all, but my car gives me maximum flexibility in my schedule.  If I miss the 5:20 train, for example, I’m stuck until the 6:20 train, when I could have made it home faster if I just drove.

They also say things like they neglected to consider how much time it would take to get to and from the stations.  After they arrived at their destination, they still had to walk a ways or take a bus to get them where they were going and it was just a hassle.

In the end, they just didn’t realize how good they had it with their individual cars.  It turns out there were good reasons why roads and vehicles put most trolley cars and passenger trains out-of-business about 90 years ago.  It’s just that we forgot those reasons.

Same with tax rates.  It’s easy to say that raising marginal tax rates by 5% won’t change our behavior, for example, because we just can’t imagine that it will.  It seems insignificant.

But, when we’re actually faced with it, we do change our behavior in some marginal situations that we didn’t think about when we considered it from a distance.

But, when rates go up, we end up looking a little harder for those deductions and credits to help get back some of that tax money.  We put a little more money into our 401k or maybe buy a rental property.

We turn down that job offer that has a little higher pay and more responsibility because we do the math and realize that the after-tax bump in pay just isn’t high enough to compensate for the added headache.

Lemonade, Lemonade, Lemonade, Whew!

It looks like some kids inMaryland operating a lemonade stand for charity didn’t pay their local rent seekers.

Jennifer Hughes, the director of permitting for the county… says they’ve warned all kinds of other vendors they couldn’t operate near the US Open because of concerns about traffic and safety.

Which really means:

…because of concerns about traffic and safety they haven’t paid their protection money to government bureaucrats.

I’m surprised the parents weren’t fined for violating minimum wage and child labor laws also.

Incentives matter

I recommend reading Alan Reynolds’ piece in Wall Street Journal Opinion today, Why 70% Tax Rates Won’t Work.

The table below from the article says it all.

With some wide range of experiences on where the tax rates have been set, there really wasn’t much difference in the tax revenues generated as a percent of GDP.  The high-end outlier was, counter-intuitive for most, on the lower end of the tax rate experience.

Alan Reynolds sums it up:

Still, pundits cling to the myth that lower tax rates mean lower revenues. “You do probably get a modest boost to GDP from tax cuts,” concedes the Atlantic’s Megan McCardle. “But you also get falling tax revenue. It can’t be said too often—and there you are, I’ve said it again.”

Yet the chart nearby clearly shows that reductions in U.S. marginal tax rates did not cause “falling tax revenue.” It is not necessary to argue that tax rate reduction paid for itself by increasing economic growth. Lowering top marginal tax rates in stages from 91% to 28% paid for itself regardless of what happened to GDP.

Do pundits ignore this evidence?  Do they think there’s something wrong with it?

“I fell victim to the charm”

There’s several things I like about this video of Gene Simmons on Fox.

It’s Gene Simmons.  He’s wearing sunglasses.  He articulates his positions well.  He seems to have a more realistic understanding of government, political and economic incentives than most. He’s also pretty fast on his feet.

But the thing I appreciate the most is that he admits that he changed his mind about something and clearly explains why.  That’s rare.

Something to consider when you vote

From Alan Metzler’s piece, A Welfare State or a Start-Up Nation? in the Wall Street Journal Opinion today:

Who you vote for in the next election will largely be determined by how you answer the following question: Should we encourage more productive use of resources or more social welfare?

Transfers, grants and redistribution did little to raise living standards in Asia, Latin America and Africa. Capitalist development and open economies lifted vastly more people out of poverty in a decade than welfare state policies had achieved in 50 years. Japan in the 1950s began to force its producers to compete in world markets. That forced its firms to use resources more productively. Korea, Taiwan, Hong Kong, Singapore and eventually China and India followed the Japanese growth model. Chile was an early successful convert; now we have Brazil and parts of Africa.

The lesson applies here in the U.S as well. The welfare of the citizens—poor, middle-class and wealthy—is best improved by using resources more productively. Of course, increased productivity isn’t an instant cure for what ails us; there is no instant cure.

And:

Mr. Obama and his followers claim they want a solution that is “fair.” Why is it fair to distribute more welfare to today’s voters at the expense of their children and grandchildren who will pay for this less productive use of resources? This is the same “fair” approach that Europeans chose decades ago, and which led to chronic low growth and high unemployment.

It isn’t fair to tax future generations just because they can’t vote.

Some folks I know believe man-made climate change is a problem and often justify their concern by claiming that we owe it to future generations to take care of the planet.

Fair enough.

It’s not clear to me, however, why these folks seem to have such heightened environmental concerns for future generations, yet so little regard for the financial baggage we are leaving them.  Deficit spending is nothing more than passing the bill onto future generations for our government’s lack of ability to prioritize today.

Metzler’s previous passage reminded me of that observation.