The Fundamental Theorem of Politics
Theorem: When asked about why electoral promises weren’t fulfilled, a politician will accuse the opposition of obstructionism.
Proof: Most ideal policies that voters favor will have disastrous effects if implemented (in fact, more is true: most implemented policies are disastrous. But we don’t need so strong a claim for the purposes of this proof). However, politicians want to be elected so they have to cater to these figments of the imagination. The trick is to stall and distract once in power. Accusing the opposition of uncooperative behavior has two advantages. It taps into the natural hatred and distaste that one’s supporters already have towards the other side and for the opposition it allows them to rile their troops by saying “See, we were able to stop them!”. QED.
My contra-rian take on contra-ceptives
Economic theory should predict that employers have an incentive to force contraceptives on their employees. That’s because it reduces the risk that workers will be unavailable for maternity or paternity reasons. “Forcing” being illegal, bosses might instead partly compensate employees with contraceptives in place of cash. Unfortunately it’s not legal to resell those “free” pills or “free” condoms etc…, so the employees are stuck with them whether they want them or not.
An extreme example might illustrate the situation. Suppose that you run a business in a very competitive environment, say a WNBA team. You just won a spot in the play-offs and your leading scorer tells you that she’s pregnant. Well that’s a bummer from the point of view of the team. So one could very well imagine that players at such high level be encouraged to always be on the pill or some other contraceptive method. In fact, one could argue that NBA players would also benefit in performance were they to be on the “male” pill.
So in fact, were it not for the fact that I don’t like bans, I would be in favor of a law forbidding employers to compensate employees with anything other than cash. Wages would be higher and then responsible individuals would go about purchasing what they prefer. That would guarantee that everybody’s right were protected and if for some reason some people had a hard time or ran into some bad luck then we could provide a generous safety net, again mainly consisting of extra cash.
Helping the unfortunate this way would be a lot less problematic. It’s pretty clear for instance that going the other way: namely passing a law that forces employers to pay their employees in contraceptives rather than cash, is quite a welcomed “reform” for the producers of pills. Some might even refer to it as a “boondoggle”. Also the science is not completely settled and people might actually object to taking pills on a daily basis. Focusing on cash helps to get away from the culture war. Unfortunately both Republicans and Democrats love to impose their views on the general population and one of their main tools is to mess with the way workers get compensated.
Inflation is overstated in the long run going backward and yet understated in the short run going forward
How can I possibly hold two such apparently contradictory views simultaneously? Simply put I don’t believe in inflation as it is commonly understood. Of course nobody really ever defines the word ‘inflation’ before starting to talk about it, but the intuitive idea is that stuff gets more expensive than it used to be.
If that’s the definition, then I believe “stuff” is getting cheaper all the time. That’s because our economy is really good at producing substitutes. New stuff is cheaper by definition. Take your favorite all-purpose electronic tablet. Just ten years ago it did not exist and its price was therefore infinite. One might object that straightforward Econ theory predicts the price of a good to rise as it becomes more and more scarce. But in fact we never run out: at the first inkling of a price increase we find a substitute and toss the old for the new. There are of course notable exceptions, such as healthcare and education, but those are services and there too the innovations and “new ways” of doing things could be underestimated.
What this discussion points to, however, is that prices are moving in every which way direction. Some are going up, some down, and what really matters is their relative trends. Trying to aggregate such immensely vast array of inter-relationships into a single percentage number is patently absurd. Not only that: our tastes and desires change over time, so it’s only correct that the distribution of prices continually change.
But what about the activities of the central bank? Can’t they create hyperinflation by printing money like crazy? Can’t they create hyperdeflation by crazily not printing enough money? Possibly. The central bank is just a bank, it mainly gives money to other banks that then juggle it among themselves, so what? Actually whatever new money trickles out probably only contributes to disrupt the monetary signals that have already emerged and in any case such leakage would be highly concentrated in space. The analogy is with the BP oil spill of a few years ago. There’s no doubt that it polluted a lot of water, but the ocean is a truly vast entity and the overall impact was diluted. The modern US economy is likewise enormous, especially with it’s ability to create “new” ways to extend credit, new leverage strategies, etc…It’s questionable whether the central bank is actually having an impact at all.
Still pollution is pollution, even if localized, it can still be pretty bad and at the margin make things overall worse. Because of its impossible task most of the central bank activity can be equated with pollution. In the short run going forward this amount of smoke and disruption can matter and can be understated.
Letter to the Collegian
I couldn’t help but respond to this piece in our daily collegian:
Here is my response:
Dear Editor,
Milton Friedman used to say that economic change precedes political
change. The opening up of world trade has done more to change China than
any political reform might have accomplished. Unfortunately our foreign
policy is replete with embargoes that punish innocent people on the ground
and do nothing but reinforce local tyrants. Trade is a force for peace,
maybe our only hope. In the words of another great liberal thinker,
Frederic Bastiat, “When goods don’t cross borders, soldiers will”.
Therefore, I must say that Mr. Frye has it exactly backward in his piece
“Public universities…” of 02-24-2012. Delivering educational services,
especially higher education, to foreign nationals is part of the peace
effort. It’s the reason why these foreigners would want to sell their work
and their goods to us, so they can earn dollars that they can then spend
to come and get educated in our great university system. As long as these
channels of exchange stay open we can expect to keep war at bay, so it is
exactly to the countries we have most problems with that we should extend
an open invitation to come spend their dollars over here.
Once the benefits of open trade are understood, the distinctions that Mr.
Frye makes about public versus private universities become irrelevant. In
fact “public” universities only get a minor percentage of their funding
from tax-payer money, and private universities also might very well
receive federal grants etc….If Mr. Frye wants to make a general case
against tax-payer money going to subsidize education, that’s fine but
unfortunately he picked the wrong example. If it’s a good thing that
people from all over the world strive to come here to get their
education, then it’s a good thing full-stop, independently of a person
country of origin and independently of the institution providing said
services.
Amazing Freedom
I’m free to travel and relocate in the 50 states of America. In fact, all of Europe, Australia, parts of Asia and Africa, as well as the North and South American continents, are accessible to me if I want. I’m free to speak my mind, write about it, debate, on the internet, public forums, blogs. I can publish my research. I can have as many kids as I plan to have. I can decide not to vote. I can go to whatever church or temple I find interesting. I can draw interest on my savings. I can sell stuff. I can buy pretty much anything from anywhere. I can use cash. I can own property. I can join any club, association, cooperative, party, online group, I desire. I can befriend anybody. I’m free, to an amazing degree. More than all my ancestors have ever been; more than most people living on earth right now.
And I’m not alone. Millions of people enjoy the same staggering degree of personal freedom. Still, billions more don’t. The level of “freedom inequality” in the world is the real scandal, you know, worth of permanently Occupying the Border.
Don’t Just Do Something, Stand There.
If Ron Paul becomes president, we are going to witness the biggest volte-face ever witnessed in electoral policy, bigger even than Obama’s. He will not be able to cut any “departments”, bring home any troops, reform any Federal reserve banks, or restore the soundness of any dollars. The course of political events is bigger than any one puny politician, the ratchet effect of govt, the centralizing forces of ignorance, the inertia of regulation, the encrusted interests of cronies, the global pressures, in short the Leviathan, will not even notice.
Actually, it’s more likely that an Obama second turn with a GOP Congress could lead to protracted neglect of some of Big Govt’s goals. Our only hope is that salutary gridlock and partisan bickering will continue to paralyze and quell the “reformers” many impetuses. With some luck we could even witness some presidential vetoes. Now that would be something worth celebrating.
Class Warren-fare
Taxes are a politician’s favorite lever to tinker with. In fact, many a pompous pronouncement, idealistic bombastic dream, gets translated in practice into either a tax cut or a tax hike. My suspicion is that very little can be affected at the real micro level by twisting and cranking the tax knobs from the comfortable central offices of Congress. So I don’t have a horse in the partisan back-and-forth. However, I felt compelled to comment the recent quote by Elizabeth Warren on the subject of “taxing the rich”.
It’s actually better to listen to the full quote, because it gives context to the passage that was extracted and Warren’s tone is relevant (it also contains a surprise). To summarize, the president is supposedly proposing tax hikes on the super rich. This plan immediately raised silly screams on the right about “class warfare”. Such rhetoric, in turn, inflamed the left and, whether Warren intended it to be a response to the class-warfare meme or not, the second part of her YouTube clip was extracted as the greatest argument ever in support of raising taxes on the rich. What she’s saying, essentially, is that nobody acts and becomes successful in a vacuum. Presumably she’s addressing herself to the image of a super-individualist rugged self-made man who doesn’t want to pay taxes. But in fact she explicitly refers to “someone who built a factory”, the stereotypical “job-creator”. The problem with this line of reasoning is that the idea that society is a complex web of cooperation, exchange and support, goes way back at least to Adam Smith. In fact, free-trade logic implies that one cannot restrict this complex web within the confines of a nation: in reality, everyone, even a person on the other side of the globe, even an avowed enemy, is an accomplice in a person success. So should taxes be collected and remitted to the Chinese people who helped us make America great? It’s not clear.
I’m here leaving aside other aspects that are unsatisfying with the quote, such as the fact that the rich already pay most of the taxes that are being collected, and thus (as a consequence?) have disproportionate influence on the way the money collected gets redistributed. The real scandal is not that job-creators in the society explore gains from trade and engage in positive-sum games with the rest of us, leading to win-win enterprises that create wealth for society as whole. The real scandal is how cronies are able to divert government’s largesse in both money and regulatory privilege towards their narrow self-interest.
The irony here is that the first part of Warren’s speech addresses exactly this issue and her money-quote that should be immediately immortalized into a bumper-sticker is: “Just don’t do those things!”. Instead the focus was shone on the second part where she works up a scolding tone and goes after positive-sum creators. Demonstrating once again that partisan bickering is a device to divert the conversation away from what really matter.
