El Debato

These are my limited observations from tonight’s debate, from the 10 or so minutes I saw before I nodded off for a nap.

Have you ever seen one of those letters composed from words cut from magazines? You know how the words are all different fonts and sizes and choppy? That’s how President Obama sounded to me tonight. I often couldn’t tell if the two words he just said were connected to previous sentence, the next sentence or stand alone.

I liked the first part of Romney’s response to the question about this country losing jobs overseas. He should continue to hammer this message home. The answer isn’t trickle down government, it’s to make the U.S. a more attractive place to invest.

Most economists agree, incentives matter. We — through government — chase those jobs away by making it less attractive to invest in America.

I didn’t care much for the second part of Romney’s response. If China devalues its currency to make its products cheaper, we benefit at the expense of the Chinese citizens. They should be up-in-arms about that. Not us. They will be some day.

The moderator seemed fair.

President Obama seemed surprised and a little disappointed that one of the questioners, Kerry, was not female, and judging from Kerry’s body language, not prone to be wooed Obama’s machismo.

Also, the President didn’t answer Kerry’s question, which was When did the Libyan embassy request extra security and who turned down that request? President Obama started his answer at the time of the attack.

I wasn’t clear on what Romney’s answer was on the assault weapon ban question. But, I don’t really care, either. President Obama said enough repeating the wisdom/ that guns kill people. He also demonstrated his lack of understanding of the second amendment when he said something about people having guns to hunt and (I think he said, I was nodding off) fish.

Yes. The 2nd Amendment protects our right to hunt and fish (who fishes with a gun?)./

No. It does not. It protects our right to protect ourselves from an oppressive government and other things that might encroach on our safety. It is one check-and-balance on power in a document that is full of check-and-balances.

I think the President also said something about eliminating mentally unstable people, or not eliminating them…not sure. It was one of those choppy moments. But, I think even he wished that he could ‘walk that one back.’

After I woke from my nap after the debate and was cleaning the kitchen, I heard some post-debate poll results.

One question was which candidate will help the middle class the most. If I heard right, the results were 54% to 30-something% in favor of President Obama.

Wow. I guess this may show the distrust some folks have for a rich guy and the love they have for a guy saying he’s going to pick that guy’s pocket.

However, I’d caution the 54% that you may want to favor the guy who is talking about making our country more attractive for investment. That will do more to help the middle class than any nutshell game. That makes as much sense as a football coach saying he’s going to win games by putting the best team on the field.

In case that 54% needs a little help with that, that makes a lot of sense.

Personal Preference Bias

I’ve read and heard a fair amount from critics of JC Penney’s disastrous everyday-low-price strategy. But, much of it is too simple.

Critics speak of JC Penney’s customers as if they are all the same. I’ve read things like maybe they liked sales prices or JCP has to attract a new customer base to replace the old one.

While JCP sales were down considerably, they were still doing 75% of the volume they did the previous year. That is a huge decline for a retailer, but the sales didn’t go to zero and that says something. Three-fourths of customers didn’t mind the change.

In my experience with consumers and retailing, it is not uncommon for about 25% of sales volumes to come from promotions and coupon offers such as the sales JCP use to run. A fair part of that percentage are folks in whatever product category that are bargain hunters. Another chunk are from folks who are not typical bargain hunters — they may shop on value — but they may just come across a deal too good to pass up. I was recently perusing Kohl’s and saw a griddle for half the price I’ve seen elsewhere. I’m not a typical bargain hunter, but I popped on it.

There’s no reason JCP can’t satisfy value shoppers and bargain hunters alike. Other retailers have figured out how, sometimes so cleverly that few notice.

Even everyday low-price leader Walmart has “Rolbacks” in the main aisles, which are goods offered below their everyday low price.

Target, not necessarily known as a low-price leader, has a dollar and value section near the front.

Old Navy has clearance racks hidden in the back. Banana Republic has its mall based-locations, carrying higher priced, in-season fashion. But, they too have limited clearance sale space in the back. They also have separate Factory Stores where you don’t get the latest, but you get good stuff at sales prices.

Management at these companies recognize that not everybody is the same and they try to find ways to satisfy varying consumer preferences in creative ways that don’t detract from the experience of others. That’s basic retailing.

In my opinion, that’s the key insight that escaped JCP CEO Ron Johnson — everyone is different.

Johnson was in charge of retailing at Apple. Certainly, many folks rave about the Apple store experience. But most of these ravers have very similar preferences when it comes to electronics — they love Apple!

So, Johnson didn’t have very tall task in delivering a retail experience that satisfied a relatively narrow consumer segment. He made a store for Apple devotees.

Ask yourself this. Does Apple need a store? Not really. Apple products would sell with or without their stores.

Johnson is remaking JCP to satisfy a segment of consumer that is smaller and more narrow — a group that he likely sees himself in — than the group that JCP was satisfying before he arrived, which is not usually a successful strategy.

I call this personal preference bias. Successful managers usually find ways to overcome their own personal preferences and give more weight to the varying preferences of their customers.

It’s an easy mistake to make. Ron Johnson probably thinks he learned from his former boss, Steve Jobs, that designing things to meet your personal preference is good. And, there might be something to that when you are trying to innovate from ground zero.

Garrett Jones on EconTalk

I enjoyed the recent EconTalk podcast with guest Garrett Jones.

Here are some of his observations. On the changing role of government:

Jones: And after a crisis hits, it just changes the kind of government we have. We now have a government whose job it is to repay this enormous amount of debts. Of explicit and implicit liabilities. That is now what our government is for.

The challenge for government:

Jones: I would love to see the United States tackle its long-term entitlement crisis. In some way it makes it clear to people that the Fed government is not on the hook for everybody’s health care forever. These incredibly open-ended commitments really have to be–they are going to get curtailed one way or the other. I’m certainly in the camp of thinking that the U.S. government is not going to default, either explicitly or through inflation. But sooner rather than later would be really nice.

‘Open-ended commitments,’ is a great way to put it. It’s easy as politicians to promise these open-ended commitments because it costs them nothing. It’s easy for voters to vote for these open-ended commitments because they sounds really good.

And, the political behavior that I believe every voter should be tired of:

Jones: I think these one-year fiscal fixes are appalling. And I don’t just mean that because it’s fun to complain about it. But I think it really does hurt the government’s planning–makes that inefficient–and I think it hurts the private sector’s planning. It makes that inefficient. This is both–whether you are a Keynesian or a supply-sider, you should be appalled by this. And it’s only the politicians who need re-election, of both parties, who really don’t want to just take a hit and sign something that lasts for 5, 10, 15 years.

No joke. One of the worst things that could have happened in politics was the Budget Act and Byrd Rule modified in 1990.

As usual with government actions, the intent of these were good, but they have generated disastrous unintended consequences. This one being setting up a government that is in never-ending kicking the can down the road mode.

These rules require that a change in law and tax code that does not have a sunset provision (a time when it automatically expires and goes away with 10 years, for example), must have 60 votes in the Senate. Any law change with a sunset provision only requires a simple majority.

The intent was to make sure that any costly legislation would either need a super majority approval (meaning it’s something a lot of people want done) or an automatic expiration date that will cause a future Congress to re-evaluate the law to see if it’s something they would like to extend.

But, from my understanding, this has had two negative consequences. First, many big changes are made with a sunset provision in order to meet the simple majority requirement. Since it’s difficult for either party to get a super majority control in the Senate they settle for using sunset provisions to a law in order to pass it on a simple majority.

This is a recipe for kicking the can down the road. Since many laws in the past 15-20 years have been passed with a sunset provision, Congress now spends a good deal of time and energy determining whether to extend these things when they come up for expiration. The “Bush Tax Cuts” are a perfect example.

Politicians love these, because they can use these expiring laws as leverage to get their new changes done, which leads to endless and unproductive (for citizens) back-scratching. Want me to vote to extend the Bush Tax Cuts? Okay, vote for my  health care proposal. Or some such.

Second, this sunset provision applies to tax law changes and treats reduction in tax rates as a ‘cost’, even if the reduction helps invigorate the economy generating more government revenue in the future.

The result is we get tax law changes with sunset provisions that guarantee political drama every time they are set to expire. Instead of having Congress debating only incremental changes to an underlying stable tax code, we have debates for incremental changes on top of the ever shifting sands of the expiring provisions and folks who are even more uncertain of what their tax situation will look like a year from now.

 

My limited vp debate observations

I don’t watch much of the debates, which surprises my friends.

I watched about 10 minutes of last night’s debate. Here are some of the things I observed and some thoughts on what I have heard since.

Joe Biden reminded me of Will Farrell’s character in the late summer movie, The Campaign. Fake teeth, hair plugs and cheesy charm and all.

More folks should be bothered with the way politicians on both sides refer to ‘tax plans’. It’s unclear what the point of their ‘tax plans’ are. It seems like one key point is to raise even more tax revenue. I don’t care about raising more tax revenue. I would rather hear politicians talk about how they are going to lower spending and minimize taxes for everyone and do the job of executing the Constitution with the most minimal impact on society as possible. Since we don’t hear much of that, I know the direction of government is still a long way from where I’d like it to be.

Democrats say that it was a draw or gave a slight edge to Biden. I even heard some Democrats praise Biden for his distracting behavior.  If a Republican acted in the same fashion, I doubt the Democrats would be praising it. They would call it a loss.

I don’t often quote the Bible, but a caller to a radio show this morning shared his thought on the debate in the form of Proverbs 29:9 and I thought it was good:

If a wise man has an argument with a fool, the fool only rages and laughs, and there is no quiet.

Biden’s remarks on Iran scared me and would have been enough for me to decide not to vote for that ticket if I was undecided.

I heard Ryan give a few zingers. I thought that bringing the unemployed back into the economic picture and saying that they aren’t feeling the recovery was a good line.

However, I also think Ryan (again in my small sample of about ten minutes) got into eye-glaze territory when he was explaining his Medicare proposal.

Just scoring on body language — which is about what any of these things are good for — I would say Ryan carried himself well against a more seasoned performer.

Ryan looked more ‘vice-presidential’ and like he has some future leadership potential. He didn’t fumble, which is all he needed to do.

As I mentioned earlier, Biden looked like a caricature of a politician portrayed by Ferrell.

 

Pleasure vs. Necessity

Tomato (Tamatar)

(Photo credit: Wikipedia)

This Freakonomics podcast on the Tale of the $15 Tomato reminded me this post of mine about how things must be pretty good because we can afford to grow our own food.

The tale was about how someone bought a hydroponics tomato growing kit that produced about 15 tomatoes. Once they figured the cost of the kit, the electricity for the light to grow the tomatoes and the time they put into to growing the tomatoes, it cost them about $15 per tomato. And these were cherry tomatoes.

We use to grow our own food out of necessity. Now we do it out of novelty.

Why?

Because it is expensive (opportunity costs) and we’re not very good at it (comparative advantage) and others are much better (specialization).

Reminds me of a time as a young guy when I tried my hand at brewing my beer. I did it. Folks liked it. It was kind of neat to see the process. But, when we were drinking it one of my friends asked, “Why brew your own beer? Beer is so cheap.” I agreed and stopped brewing.

Straw man army

Much political debate nowadays is one side putting up a straw man fallacy while the other side tries to dismantle it — all of which takes away from productive discourse.

A straw man fallacy is usually an absurdly inaccurate representation your opponent’s position — so absurd that it’s easy to defeat, or knock down, like a ‘man made of straw’.

We begin using straw men right about the time we start talking.

“Mom! Brother called me a booger!”

“Brother, quit calling your sister a booger.”

“I didn’t. I told her she’s a selfish snot, because she will not share her toys with me.”

“Sis, we’ve discussed this. Share.”

Sis, won’t tell Mom what her brother actually said. She intuitively knows that her selfishness will not gain her much sympathy from Mom. Best leave that part out and turn make it seem her brother made an unprovoked malicious comment.

Using a straw seems to imply one of three things.

1. You know, like Sis, that your opponent’s position is stronger than you’d like it to be, so you carefully avoid the truth and construct the straw man.

2. You expect your target audience to be dumb and not recognize the straw man.

3. You’re dumb.

Most political ads are straw men. “My opponent wants to destroy something or the other! Don’t vote for him.”

These campaigners hope that you’re dumb and that the army of straw men they construct will sway your vote their way.

It must work to some degree. Straw men still exist. Unlike Mom, enough of us don’t call BS and request that the campaigners address the real positions.

Keep your eye out for straw men in this election season.

Now that’s a scientist…

From this article about co-habitating black holes:

“If there really are tons of black holes in there, then my old theory is completely toast,” says astrophysicist Steinn Sigurdsson of Pennsylvania State University. “This is a really nice piece of work.”

…someone who seems delighted with prospect of being wrong.

Someone doing their job

 

I enjoyed McGurn’s opinion piece in the Wall Street Journal today, …Lehrer Got it Right.

Despite all-around criticism that last week’s Presidential debate moderator ‘let things get out of control’, McGurn described Lehrer’s response to the criticism.

“I’ve always said this and finally I had a chance to demonstrate it,” he told Politico. “The moderator should be seen little and heard even less.”

He followed up Monday on radio’s “Imus in the Morning,” saying he wasn’t in the least “apologetic” for how things went. In particular Mr. Lehrer insisted that it wasn’t his job to challenge Mr. Romney on issues favored by the cognoscenti…

“If somebody was going to challenge Romney about the 47%,” Mr. Lehrer said, “it was going to have to be . . . the president and vice versa. They were there to do the challenging.” What a novel idea: Instead of leaving it to the press to decide what issues take priority, let the candidates choose and go at it.

Bingo.

 

 

 

But I like wine and beer

In this election season, it’s good to remember a classic Walter Williams column from 2010, Conflict or Cooperation.

Different Americans have different and often intense preferences for all kinds of goods and services. Some of us have strong preferences for beer and distaste for wine while others have the opposite preference — strong preferences for wine and distaste for beer. Some of us hate three-piece suits and love blue jeans while others love three-piece suits and hate blue jeans. When’s the last time you heard of beer drinkers in conflict with wine drinkers, or three-piece suit lovers in conflict with lovers of blue jeans? It seldom if ever happens because beer and blue jean lovers get what they want. Wine and three-piece suit lovers get what they want and they all can live in peace with one another.

It would be easy to create conflict among these people. Instead of free choice and private decision-making, clothing and beverage decisions could be made in the political arena. In other words, have a democratic majority-rule process to decide what drinks and clothing that would be allowed. Then we would see wine lovers organized against beer lovers, and blue jean lovers organized against three-piece suit lovers. Conflict would emerge solely because the decision was made in the political arena. Why? The prime feature of political decision-making is that it’s a zero-sum game. One person’s gain is of necessity another person’s loss. That is if wine lovers won, beer lovers lose.

It seems with each election cycle we continue to shove things into the political decision-making arena that shouldn’t be there.

One such thing: what children eat for lunch at school.

I’ve been an opponent of the First Lady’s movement to control school lunches since the beginning. Recently,there has been a rash of news stories about students and parents who have become less appreciative of the First Lady’s school lunch efforts as they find their personal choices in conflict with what the government thinks best.

As the election draws closer, I encourage you to keep your eyes peeled for things that are being unnecessarily shoved into the political decision-making arena.

New York city is the innovator in this arena. They’ve placed smoking, salt and now large, sugary-drinks in the political arena. They are being placed there because the government, acting in the best interest of their taxpayers, claim these things drive up health care costs.

As Obamacare takes hold, watch for these trends to go nationwide. The rationale used by these nannies is, “If I’m paying for your health care, then I have a right to tell you not to drink Super Big Gulps.”

Watch out, if you lead what others may consider an unhealthy lifestyle. They may eventually use the above logic to seek to limit the choices you make — all for the greater good, of course — or deny you the generosity of ‘their’ funding.

What I find ironic, is how this super-nanny-ism is never compared to a free market. In a free market, you make choices and deal with the consequences.

Some find that objectionable because it appears to lack compassion. What about those who don’t have the means to handle the consequences?

But, it is rarely considered whether they could have made different choices leading up to consequences and if not having to deal with the consequences caused them to make less responsible choices.

But, once the ‘compassion’ of super-nannyism takes over, it surprises me how quickly the super-nannies lose compassion for those they judge to have not made responsible choices. Now that I’m paying for your health care, I have the right to tell you not to drink Super Big Gulps.

Good intentions vs. Scams

Politicians use ‘jobs programs’ to get elected. Jobs programs sound good. They help people find jobs, after all, right?

Not always.

As with many government programs, the actual outcome doesn’t always mesh with the well intended, campaign sound bite.

We need more investigative journalists like John Stossel who recently sent his interns to these supposed jobs programs. Here’s a link on Dan Mitchell’s blog about their findings. This is what one intern reported and it sums up the problem well:

“First I went to the Manhattan Jobs Center and asked, “Can I get help finding a job?” They told me they don’t do that. ‘We sign people up for food stamps.’ I tried another jobs center. They told me to enroll for unemployment benefits.”

How can this be?

As I write about often on this blog, it’s all about feedbacks and incentives. I imagine that when these jobs centers were originally funded by a legislative stroke of a pen authorizing the expenditure of taxpayer funds, they did intend to help folks find jobs.

But that same authorization gave birth to a bureaucracy which would become staffed by self-interested (not greedy) folks just like you and I. Over time, the good intention of helping folks find jobs gets subtly replaced with the bureaucracy’s intention of preserving itself.  As Stossel states elsewhere in his piece:

The private market for jobs works better than government “job centers.”

So the staffers at jobs centers look for other ways to be useful to the politicians who fund them. Soon, jobs centers become the front offices for other government programs.

Feedback is the reason I prefer private activities over government activities.

It’s not that I think government activities are inherently evil or bad. I even believe that sometimes government activities can produce value and innovation.

The weakness I see in government activities is that the failure feedback loop is indirect and weak, and sometimes the opposite of what it needs to be.

That means that when the activity does not produce the intended benefits, it can persist, even grow. Sometimes the failure of a government program can attract even more political and taxpayer support to try to fix the failure. That usually leads to an even bigger failure.

The failure feedback loop happens to be more direct and stronger in private activities. Monster.com is a private ‘jobs center’ that works well. Companies with job openings pay to post their jobs on Monster.com because they like the pool of candidates it brings.

If something else does a better job, Monster.com will either have to adapt or it will go out of business. The failure feedback loop is direct and strong.