Adaptation

Something that has never impressed me about the global warming crowd is their under appreciation of the human’s ability to adapt — especially to relatively slow changing things like climate.

This shows a lack of depth in thinking about history and even modern day events.  For example, Detroit shrunk quickly as people left it in search of better opportunity.

I saw another example recently on a trip to New Orleans.  Where I live, advertising for local dry basement companies is typical.

The New Orleans equivalent seems to be elevation companies.  These companies will raise your home to keep it dry during floods.

Community Education

In a recent discussion about college, I mentioned that many college courses and degree programs would have been (or could be) adult education courses taught at the local community center for $20.

My counterpart bristled with superiority.  What college courses have you taken that could be adult education classes?

Quite a few, actually.

One summer during my pursuit of an engineering degree, I took a basic accounting course offered through adult education to see what that was like.  It was taught by a guy who kept the books for some car dealerships.  It cost about $40.

When I went back for my MBA I had to take basic accounting course.  I expected it to be much more in depth and sophisticated than the adult education class I took.  After all, it costs $1,200 and was taught by a tenured professor.

I was wrong.  It was the same course.

My counterpart’s challenge got me thinking.  What other college courses did I take that could be (or are) also offered in some form or fashion through community education?

Quite a few, it turns out.

These are off the top of my head:

Undergrad courses that I took that could be offered as community education include: technical writing, childhood development, U.S. history, economics, weightlifting, psychology, computer programming, circuits, electronics and logic.

In my graduate business education:  Basic accounting, finance, stock market investing, real estate investing, organizational development and entrepreneurship.

What courses did you take that could be taught in community education?

What’s a libertarian?

In this post at Cafe Hayek, Don Boudreaux points us to a 1 and a half minute long video of himself describing why he is a Libertarian.

He cites two reasons:

1) The way he was raised — don’t be envious, make no excuses, be responsible for yourself.

2) His exposure to economics — Supply and demand curves showed him how the government imposition of price ceilings on oil caused him to have to wait in long lines at gas stations in the 70s.

If these two things led naturally to libertarianism, like Boudreaux indicates in the video, I would expect there to be many more libertarians out there.  I would especially expect there to be more libertarian economists.

A self-described “left-of-center” commenter made the observation that he could agree with almost everything Don said in the video, but not be libertarian.

I tend to agree with this commenter.  Maybe Don is trying to get the point across that libertarians aren’t extremist hermits.  That most anyone right of “left of center” have a great deal in common with libertarians.  Perhaps, even if they were to take a blind political challenge that many would fall out as libertarians — and they don’t now because of branding (libertarianism isn’t cool) or misunderstanding (libertarianism doesn’t mean an ‘on your own society’).

But, I do think that Don leaves out a key element of what causes one to appreciate liberty.  I think there are many good reasons for liberty.  It seems morally right.  It also generally results in better outcomes than other things.

But, the key difference I see in libertarians and others is when they feel the use of force is warranted.

Libertarians (though they come in many flavors) tend to think the use of force is warranted only to prevent someone from infringing on the liberty of others.

Your wealth does not creat my poverty, part two

In the most recent EcontTalk podcast, host Russ Roberts interviews Steve Kaplan of the University of Chicago about income inequality.

I recommend it.

Early in the podcast, Roberts quips:

Recessions are bad for the rich. If you care about inequality per se, recessions are great.

Why I may ‘throw away my vote’

We’ve all heard why it’s a bad idea to vote for a third party candidate.  The smart guys on the radio tell me that it’s…

…like throwing away your vote because you vote for someone who doesn’t have a chance to win and take away a vote from the party that you agree with more, thereby increasing the chances of putting the other party in power.

But, I believe it was in Peter Robinson’s book It’s My Party: A Republican’s Messy Love Affair with the GOP, where I found a good counterpoint to this argument.

It’s been awhile since I read it, but if I recall correctly, Robinson pointed out that Perot’s fiscal responsibility message in the 1992 Presidential election earned him 19% of the vote.

That got the attention of the other two parties.  They adopted the fiscal responsibility platform to attract those votes.  Republicans adopted some of Perot’s platform as their own in 1994 to retake control of Congress and even Bill Clinton adopted a more conservative fiscal stance to get re-elected in 1996.

It worked.  Most of the 19% of the people who voted for Perot in 1992 threw back in with one of the major parties in the next Presidential election.

I think Robinson even suggested that’s why we have two dominant political parties in the U.S.  When a third-party or fringe party makes headway and attracts votes, the other two parties respond and try to adopt that stance in some form or fashion.

This makes sense.  This is normal feedbacks at work.  If a new soda pop took enough business away from Coke and Pepsi, Coke and Pepsi would respond with a similar product or buy that new soda company outright.

This is also a good explanation as to why political parties (and businesses) evolve over time.  Democrat Kennedy cut taxes?  Republican Nixon imposed wage and price controls?

So, despite what the guys on the radio say, all those people who threw their votes away on a third-party candidate really made a difference.  It just took a little longer to make that difference.

They sent a message to Democrats and Republicans that fiscal responsibility was important enough to get their votes.  The feedback loop worked because both parties responded.

Let’s say I agree with 20% of the policies of one major party candidate and 65% of the policies of the other.

If there’s a third party candidate that I’m in 85% agreement with, but he has zero chance of winning, the guys on the radio would tell me to vote for the 65% candidate in order to improve my chances of not winding up with the 20% candidate in power.

But, I think I’m done with that.

Voting for the the 85% candidate is my best chance of moving both parties closer to what I want. Over time, if we all do this, perhaps we start moving all the candidate positions closer to our goals.

Instead of choosing between 20% and 65% shoe-ins and the 85% odd-duck (the percentages representing how much I agree with them on), I might get to choose between 48% and 74% candidates, which are both better options for me than the 20% and 65% guys or gals.

Maybe the political calculation of the guys on the radio is why we seem to have politicians that are out of touch with the American people.

Instead of voting for what we really want and moving those agreement percentages closer to what we want, we vote for the lesser of two evils but end up moving those agreement percentages away from our ideal over successive elections.

Think about it.  If you’re going to vote for the lesser of two evils anyway, what incentive does your less evil candidate (or future less evil candidates) have to give serious consideration to what he disagrees with you about?

Maybe in one election you begrudgingly vote for the 70% candidate over the 45% candidate.  The next politician thinks you’ll vote for him if he only gives you 65% of what you want — as long as it’s higher than the other candidate.  He moved down to 65% because he can pick up a few votes in another group, without risking losing your vote.  After all, you wouldn’t want to take the chance of his opponent being in power, would you?

At the same time, the next candidate for the other major party moves from 45% agreement to 40% agreement.

Until someone can give me a convincing argument otherwise, I say vote for the candidate you agree with most whether that candidate has a chance or not. It might be painful, but enough people do it, it will send a clearer message of what’s important to you.

Innovation Update: Coca Cola Freestyle

Last March, I wrote about Coca-Cola’s new Freestyle soda fountain.  It’s designed to deliver 106 flavors to restaurant patrons.

While I haven’t tried it yet, a family member has.  She reported one drawback: the residual taste of flavors from previous pours.

I like the Freestyle concept.  More choice is good.  I like to mix cranberry and diet soda or a little diet soda and tea.  Hopefully Coke can find a way to flush the system of the previous flavors to get less blending between pours.

Will donations create jobs?

I picked up the brochure on Starbucks new job creation donation project.

The brochure explains that donations will be used to give grants to community development organizations that loan money to community oriented businesses.  For a $5 donation, a community development organization can lend $35 to a business.  And you get a bracelet that says “Indivisible”.

Hmmmm…

The project sounds great.

It took me a little bit to figure out the logical flaw.

But, it occurred to me that this is a version of the Broken Window Fallacy.

It took me a little bit to recognize it since there is no destruction (breaking of windows) here.  But the Broken Window Fallacy isn’t about breaking windows.  The fallacy lies in not considering what would have happened anyway.

What would have happened if I spent the $5 on something else, like more coffee beans? How many jobs would have been created from that?

Probably about the same, or more, as what’s created from the $5 donation.

Starbucks’ efforts isn’t really about creating jobs.  Starbucks’ efforts are about creating seen jobs so it can tell you stories about them to make you feel like you are doing something good.  Their efforts ignore that you are doing just as good by spending or otherwise investing that $5, but the problem is that good is unseen and harder to tell a story about.

So, technically, yes, donations will create jobs.  It’s just not clear if they create any more jobs than if the money been used for something else.

Thomas Sowell on Payday Loans

In his latest column, Thomas Sowell covers payday lending and some of the muddled thinking around it.  Sowell addresses a statement made in a news article:

According to the reporter: “In California lenders charge up to $45 in fees on a maximum $300 loan. This amounts to an interest rate of 460 percent, trapping some borrowers into a never-ending cycle of debt.”

Let’s take this one step at a time. Whatever the merits or demerits of the rest of the argument, $45 is not going to trap anyone in a never-ending cycle of debt, even if they are making only the bare minimum wage. Personal irresponsibility in managing money can trap anyone, but that is regardless of whether or not they take out payday loans.

Now to the 460 percent rate of interest. You don’t need higher math to figure out that $45 is 15 percent of $300. How did we get to 460 percent? Very simple: By distorting the actual conditions of most payday loans.

As the name might suggest, payday loans are short-term loans to tide people over until they get their next check, whether a salary check, a welfare check or whatever. Payday loans are relatively small sums of money borrowed for very short periods of time, often by low-income people who want some cash right now, for whatever reason.

Is it worth paying the $45 to get the $300 right now, rather than wait a couple of weeks for your check to arrive?

No third party can know that. But taking decisions out of the hands of those most directly affected is one of the central patterns of the political left that make them dangerous to the very people they think they are helping. This is not idealism. It is arrogance — and too often, it is ignorant arrogance, as in this case.

The 460 percent figure comes from imagining that the borrower is not just going to borrow the money for a couple of weeks, but is going to keep on borrowing every couple of weeks all year long.

Using this kind of reasoning — or lack of reasoning — you could quote the price of salmon as $15,000 a ton or say a hotel room rents for $36,000 a year, when no consumer buys a ton of salmon and few people stay in a hotel room all year.

Say what you will about payday loans, but the last paragraph really brings it into perspective.  I’ve stayed in many $70,000 – $90,000 per year hotel rooms.

I haven’t taken a payday loan myself and don’t plan to.

Most of the people who criticize payday lending haven’t either, which makes them awfully presumptuous to want to make decisions on behalf of people who do use payday lending.

Maybe they should find some customers of payday lending and ask them a few questions.  When was the last time you took out a payday loan?  How often do you do it?  Why do you do it?  What would you do if you didn’t have a place to get a payday loan?

We are the…1%?

I heard a couple points that Top 1% protesters should consider.

1.  Of the roughly 100 billion humans that have existed on Earth through time, a billion would be in the top 1% of income and standard of living and all of them are alive today and most are in this country, and several are protesting against the U.S.’s top 1%.

2.  If you simply expand population to include everyone alive now, the 1% includes about 70 million folks.  Further, if your income is greater than $35,000 per year, welcome to the world’s Top 1%.

I’m not sure if these are accurate.  But, the key point is that by standards of our ancestors and many others on Earth now, we have it pretty well.

Protesters claim that the rich have plenty and should use their money to do good things.

A commenter on Cafe Hayek (let’s call him Oswald) pointed out that if rich people spend their money on personal baubles instead of finding a cure for cancer or building hospitals, then they’re not doing good.

The two points above about the top 1% made me wonder if some folks might judge Oswald similarly.

To a person living in mud hut, in a country without grocery stores, indoor plumbing, or paved roads, Oswald’s choice to spend his plentiful resources — like his time — commenting on blog posts might appear suspect.

After all, shouldn’t Oswald spend his time finding cures for cancer and raising funds to build hospitals?

People like feel obliged to weigh in on how billionaires should use their wealth. Personally, I wish they would continue doing what they did to create the wealth in the first place, unless it involves stealing or rent-seeking.

By investing in business, taking risks and following their hunches they create the things that allow us to live far better than our ancestors and others elsewhere.  They also create jobs for the rest of us and investment opportunities for our 401ks.

I don’t begrudge any billionaire for wanting to give to charity.  But, I’d like to hear some of them say they considered reinvesting, for our sake.