Category: Stupidity

Pop goes the market.

I’m not surprised:

President George W. Bush’s January, 2006, declaration that the U.S. is “addicted to oil” marked the beginning of a gold rush for corn growers: The government policies the comment helped spur have been a boon for the producers of corn-based ethanol, the all-American fuel that now displaces about 4% of U.S. gasoline supply. Over the past 18 months, farmers have rushed to plant more corn—and are set to produce a record crop this year—while small-time entrepreneurs and agricultural giants alike have built plants to expand capacity. A handful of initial public offerings have fed investors’ desire to get in on the action.

Government sets incentives outside of the market, so the market responds. In this case, farmers plant more (or switch to planting) corn. That’s no surprise. Nor is this:

Lurking behind ADM’s gloomy news are doubts about the future of corn ethanol. A growing number of analysts, once bullish on the product, are warning that an oversupply may be coming as soon as this year. On Apr. 27, a Lehman Brothers (LEH) report projected that production will outstrip demand in the second half of 2007, measuring the domestic thirst for corn ethanol at 420,000 barrels per day but supply at 445,000 barrels a day, mainly because the U.S. lacks the infrastructure to move the product to market.

“There’s tremendous capacity coming online, but the infrastructure isn’t there to keep up with it,” says Michael Waldron, an oil markets research analyst at Lehman Brothers who co-authored the report. “We need a nationwide system to pipe it, and until that happens, we’ll likely have an excess of product.”

Just a quick pause to speculate on who’s going to pay for that infrastructure. You know it’s coming.

Waldron says the problem isn’t a lack of demand for ethanol, which remains high, especially given that the federal Renewable Fuel Standard mandates at least 4 billion gallons, or about 3% of all U.S. transportation fuels, to come from alternative sources today, and nearly double that amount, or 7.5 billion gallons, by 2012. Lawmakers are expected to give the mandate a significant boost later this year. Rather, the problem is getting ethanol to consumers in various parts of the country. Ethanol requires a separate piping system from gasoline, and since Uncle Sam hasn’t appropriated funds to build such infrastructure, ethanol is now primarily transported by rail. But the rail system extends only to major metropolitan areas—not to mention the dual problems of its high cost and carbon dioxide emissions.

So, let’s see, we get energy dependence, if you count only needing oil for 96% of our gasoline, as well as increased carbon dioxide emissions to transport what the government mandates we buy. (We won’t need foreign oil if we choke to death? Is that the plan?) And we’re supposed to accept that this is because the government hasn’t provided the funds to build such infrastructure? I’m not buying that argument. If the demand were truly “high”, private entities would be building a pipeline without government subsidies. That those entities are waiting for the pipeline suggests some combination of insufficient profit motive from the pipeline’s cost structure and market infantilization.

Either way, it implies that ethanol is not ready for prime time, despite the grandiose wishes of politicians. I’m reminded that the facts, although interesting, are irrelevant¹, especially when politicians consider public policy.

Looking at the consequences of this, though, how much economic hardship will result for those who rushed to grow more corn to produce ethanol that can’t be shipped economically? I have little sympathy for those people because they ignored economic signals for the quick buck, but I’m sure a government bail-out will be “necessary” because “the market” doesn’t work. It’s amazing how consistently government creates problems that “prove” how necessary more government is to our well-being and survival.

¹ Was it Einstein who said this?

“Read the track listing” will have new meaning.

Why do legislators hate the environment?

Independent merchants selling and buying used CDs across the United States say they are alarmed by stepped-up pawn-broker-related laws recently enacted in Florida and Utah and pending in Rhode Island and Wisconsin.

In Florida, the new legislation requires all stores buying second-hand merchandise for resale to apply for a permit and file security in the form of a $10,000 bond with the Department of Agriculture and Consumer Services. In addition, stores would be required to thumb-print customers selling used CDs, and acquire a copy of state-issued identity documents such as a driver’s license. Furthermore, stores could issue only store credit — not cash — in exchange for traded CDs, and would be required to hold discs for 30 days before reselling them.

I think it’s reasonable to assume that some CDs that would’ve ended up in a used record store will now end up in landfills. I can assure you I wouldn’t go through the bother, not to mention the Big Brother statism, involved just to earn a few dollars of store credit. I’d find someone I know who wants the CD, or I’d toss it in the garbage. If the goal is to force incentivize people to discard their unwanted property in a sub-optimal manner, mission accomplished.

This perverse incentive to discard used CDs wouldn’t involve rent-seeking, I’m sure.

Meanwhile, [National Association of Recording Merchandisers] says it will try to help shape the pending legislation. In Florida, retailers selling previously owned videos and videogames managed to carve out a partial exemption from the law so that they do not need a permit and have to wait only 15 days before reselling the merchandise.

The article doesn’t state any more than that, but the mere existence of an exemption indicates what’s inevitably going on behind the scenes. It’s shameful.

Link via Hit & Run.

Are we funding computers, as well?

From a few days ago:

Members of a House committee charged yesterday that a five-year, $1.2 billion program to expand broadband Internet services to rural communities has missed many unserved areas while channeling hundreds of millions of dollars in subsidized loans to companies in places where service already exists.

There’s not much shock there, of course, as success is in the details and government doesn’t handle details well, always forgetting the law of unintended consequences. Instead, it’s more fun to follow the words of members of Congress.

“If you don’t fix this, I guarantee you this committee will,” House Agriculture Committee Chairman Collin C. Peterson (D-Minn.) told James M. Andrew, administrator of the Rural Utilities Service at the U.S. Department of Agriculture. “I don’t know why it should be this hard.”
…

Last week, Rep. Stephanie Herseth Sandlin (D-S.D.) introduced legislation to close loopholes that allow areas that “are neither rural nor suffer a lack of service” to collect the loans and loan guarantees.

Congress shouldn’t have created this mess. It did. And now it’s blaming the USDA while implying that somehow the same people who messed this up can fix the problem now that it exists. It’s an absurd but classic move for a politician, demonstrating that politicians aren’t leaders.

Of course, the true discussion here is whether or not this program should be funded at the federal level. It shouldn’t. Broadband access to The Internets is not a public good. Still, for anyone who believes this is a public good worthy of being on the federal dole, consider:

Congress created the rural broadband program in 2002. To date, according to Andrew, 69 loans for $1.2 billion have been approved to finance infrastructure in 40 states. Only 40 percent of the communities benefiting were unserved at the time of the loan, Andrew said.

Forty percent. That’s good if it’s the success rate for a hitter in baseball. With everything else, it’s miserable. And we’re not even analyzing how successful that forty percent has been compared to what would happen with private efforts, assuming that private industry would deem it necessary. Heckuva job.

Must sixth-graders pack heat?

I guess he isn’t busy forcing optional vaccines on pre-teen girls. (Link via Fark.)

Gov. Rick Perry, mulling ways to stop the kind of murderous rampages that recently left 33 dead on a college campus in Virginia, said Monday there’s one sure-fire solution he likes: allow Texans to take their concealed handguns anywhere.
…

“The last time I checked, putting a sign up that says ‘Don’t bring your weapons in here,’ someone who has ill intent on their mind — they could [sic] care less,” Perry told reporters. “I think it makes sense for Texans to be able to protect themselves from deranged individuals, whether they’re in church or whether on a college campus or wherever.”
…

“Let me cover it right here,” Perry said. “I think a person ought to be able to carry their weapons with them anywhere in this state if they are licensed and they have gone through the training. The idea that you’re going to exempt them from a particular place is non-sense to me.”

Not only does Governor Perry not have a good understanding of bodily autonomy, he has a poor understanding of property rights. For liberty to continue, property rights must exist first. Violate and abandon those, and everything else will eventually fall. If a business or homeowner doesn’t want guns on her property, she has the right to deny access, regardless of the governor’s wild notions. This is so fundamental¹ that I wonder whether Gov. Perry can be considered competent to continue in his role.

Afterthought I: Someone who despises religion could have a field day with Gov. Perry’s comments:

…protect themselves from deranged individuals, whether they’re in church…

Pronoun attribution can be vicious sometimes. I’m just saying.

Afterthought II: I can’t tell if he’s being serious or sarcastic, but Glenn Reynolds notes this news:

If it saves just one life, it’s worth it!

God, I hope he’s kidding.

¹ The obvious parallel to smoking (and trans fat and …) bans must be noted.

I like not sending excess money to the government.

Catching up on tax-related news, from Monday’s Washington Post comes this column by Shankar Vedantam. Consider:

Economists have long known there are two reasons that people cheat on their taxes. One is that they are poor and need the extra cash so badly they are willing to risk getting caught. The other is that they are rich and have lots of “non-matchable” income — mostly investment income not directly reported to the government — which makes it less likely they will be caught.

Taxpayers in the middle class are the least likely to cheat: They are not struggling to make ends meet, and their income is mostly wages, which are directly reported to the Internal Revenue Service. If you measured the likelihood of tax evasion by income level, in other words, the graph would look like a giant U.

For reasons I don’t feel like delving into (the use of under-reported income estimates among them), he’s wrong. See Kip’s prior analysis here and here for evidence. Instead I want to focus on this “solution”:

Other experts are considering more creative ways to improve tax compliance. One idea is to take advantage of people’s desire to get a refund at the end of the year.

“What some people do when they are doing their taxes is they do a first draft and see how much they are getting back,” said Richard Thaler, a University of Chicago economist who studies how people think about money. “If they owe money, then they do a second draft. They keep finding deductions until the refund is positive.”

Thaler said mandatorily increasing withholding levels so more people get refunds could increase compliance because taxpayers would no longer have to go to great lengths to get a refund.

There are (at least) two problems here. First, the government shouldn’t be in the business of promoting people to engage in irrational behaviors offer interest-free loans. (And yes, by promoting, I mean forcing.) Of course it would help the government to implement this policy. But that assumes that the government is supreme over the people, granting reasonable income policies and so forth. That’s backwards.

Second, if people are willing to “keep finding deductions”, what’s to stop them from being greedy and seeking deductions to increase the positive refund? Does human nature recognize a limit to greed¹ and stop once it gets a little if it can get a lot? If most middle-class taxpayers get a refund, it seems there’s a built-in incentive to cheat. Most probably won’t do it, but that doesn’t mean it’s not there. Fix the incentives by fixing the tax code and the incentive to cheat diminishes.

¹ I’d argue it’s stupidity rather than greed if you’re scheming to figure out ways to get your own money back up to sixteen months later than necessary. But the point holds.

Choose: Bankruptcy in Solidarity or Survival in Reality

In today’s Washington Post, Harold Meyerson attempts to suck us into his view of the world. Imagine how he gets to this line:

It was, in short, just a normal day in contemporary American capitalism.

Any number of scenarios could build to that. When you have an aversion to economic liberty because it means some people will “lose,” you arrive via this route:

On March 28, Circuit City announced that it was laying off 3,400 of its salesclerks. Not because they had poor performance records, mind you: Their performance was utterly beside the point. They were shown the door, said the chain, simply because they were the highest-salaried salesclerks that Circuit City employed.

Their positions were not eliminated. Rather, the store announced that it would hire their replacements at the normal starting salary.

One can only imagine the effect of Circuit City’s announcement on the morale of the workers who didn’t get fired. The remaining salesclerks can only conclude: Do a good job, get promoted, and you’re outta here.

I’m in a somewhat useful position to critique this. As of next Friday, I will not have an active client. The funding for the project I’ve been working on disappeared. I’m a bit concerned, but I’ve planned for this possibility. That’s mere responsibility. But as much as capitalism can be blamed for losing my current contract, it will also be responsible when I land my next contract. Change may mean death for some opportunities, but it’s only the natural re-ordering in response to reality. This is inherently good.

In the case of Circuit City¹, what function do salesclerks serve? When I visit an electronics retailer, I either know what I’m looking for or am browsing to discover what’s out that I’ve missed. I rely on the Internets for my pre-education, if you will. I rarely make an impulse buy. (Danielle is saying “no kidding” right now.) The one time in recent memory where I did make an impulse buy, I called my brother from the store and asked him to pull up reviews of the product. I gave my usual “just browsing” response to any salesclerks who accosted me offered to help. I didn’t need anyone other than a cashier, and if a store offers self-checkout, I always do that. From my anecdotal observations, most shoppers behave this way. Expert knowledge is no longer valuable in store the way it used to be.

That doesn’t stop Mr. Meyerson:

Over at Wal-Mart, the employer that increasingly sets the labor standards for millions of our compatriots, wage caps have been set for certain jobs, and many longtime employees are now required to work weekends and nights in the hope that they’ll quit. A memo prepared by a Wal-Mart executive in 2005 for the company’s board noted that, “the cost of an associate with 7 years of tenure is almost 55 percent more than the cost of an associate with 1 year of tenure, yet there is no difference in his or her productivity.”

(That, of course, is because Wal-Mart does nothing to raise its employees’ skills lest it have to raise their wages.) Coincidentally, in the same week that Circuit City axed its clerks, an analysis of Internal Revenue Service data from 2005 that became available showed that the bottom 90 percent of Americans made less money that year than they had in 2004. According to a study by economists Emmanuel Saez of the University of California at Berkeley and Thomas Piketty of the Paris School of Economics, total reported income in the United States increased by 9 percent in 2005 over its level in 2004. All of that increase, however, came from the wealthiest 10 percent of Americans, and the wealthiest 1 percent experienced an increase of 14 percent. Among the remaining 90 percent, income actually decreased by 0.6 percent.

Capitalism, as cruel as it is, generally demands that one provide more value to earn more return. If Mr. Meyerson prefers the world of government, his skewed view is understandable, for the government is far more lax in requiring measurable return for its increased expenditures. But the government has guns to enforce its demands. The private sector must use persuasion.

When Mr. Meyerson quotes the IRS data showing a decrease in income for the “bottom 90 percent”, the only context he provides involves the change in income for the top 10 percent. Big deal. There is more than just income to determine how well a person is doing. Mr. Meyerson offers no analysis of how this affects Poor American other than the outrage we’re supposed to feel because his absolute dollar income decreased. This is the fallacy of a mind unconcerned with the basics of economics.

There’s a bunch of progressive gobbledygook in the rest of his essay, but given his poor economic foundation, Mr. Meyerson offers little beyond the usual chants. Unions! Health care! Equality! Blech, all socialist crap. When American workers who buy into this start treating themselves as mini-capitalists offering a product rather than pawns in a game for business elites, this drivel will die away from all but the tiniest group of “intellectuals”. Until then, we’ll suffer through more harmful policies masquerading as help for the working man.

¹ I shop at Best Buy because I like it better and I’ve only had bad experiences the last few times I’ve given Circuit City a chance. But the buying process is the same.

The Logical Conclusion of Majoritarianism

Normally, I’d present the facts and comment on them. Thanks to YouTube, I don’t have to do that. See for yourself what democracy mob rule really is.

That’s why, in the wisdom of America’s Founders, we are a republic, not a democracy. It’s why nonsense like the National Popular Vote Plan are ill-conceived. The will of the people is instructive, but it should not be exclusive. We have principles enshrined in our Constitution to protect the minority viewpoint from unjust harassment and an outright ban on their liberty.

Original story here, via Fark.

Mob rule is anti-American.

David Broder is right to raise questions about a new, foolish attempt to circumvent the Electoral College process for electing presidents. The heart of the proposed approach:

The National Popular Vote Plan, as it is known, has passed both houses of the Maryland legislature and is headed for signing by Gov. Martin O’Malley.

The scheme, invented by John R. Koza, a Stanford professor, relies on the provision of the Constitution giving legislatures the power to “appoint” their presidential electors. If legislatures in enough states to make up a majority of the electoral college — 270 electoral votes — pledge to commit those votes to the candidate winning the national popular vote, no constitutional amendment is needed. [Former Senator Birch] Bayh and other high-minded individuals, such as former Illinois Republican representative John B. Anderson, a one-time independent presidential candidate, support the plan, arguing that it is a perfect expression of 21st-century democracy, while the electoral college is a relic of 18th-century thought.

There are many issues arguing against going to a national popular vote, whether directly or indirectly as put forth here. I’m not going to address them, but I’ll point you in the smart direction. Read Kip’s analysis of the District Method. (Thread here.) He explains it perfectly.

To the plan under consideration, what state would be so stupid as to give its votes away like this? Aside from Maryland, of course. Is it so hard to believe that Maryland could vote for one candidate while the rest of the nation could vote for another? This may count as some perverted form of solidarity, but it’s not an American principle.

The founders devised the Electoral College to avoid such lunacy. We should not be running towards such lunacy.

Good Intentions and Taxpayer Money

As long as government is doing something, that action is “good”. Or not:

New York City’s Department of Health and Mental Hygiene is planning a campaign to encourage men at high risk of AIDS to get circumcised in light of the World Health Organization’s endorsement of the procedure as an effective way to prevent the disease.

The taxpayers of New York should not pay for cosmetic surgery. Yes, it has some supposed health benefits regarding HIV, but condoms are more effective. In that context, the surgery is unnecessary because any benefits it might achieve can be achieved without surgery and the corresponding risks. (Malpractice insurance, anyone?) If the government pays for anything, condoms are the way to go.

However, this is government, so when it takes action, it must find extra-special creative ways to be stupid.

In the United States, “New York City remains the epicenter of the AIDS epidemic,” Dr. Thomas R. Frieden, the city’s health commissioner, said in an interview. Referring to H.I.V., he said, “In some subpopulations, you have 10 to 20 percent prevalence rates, just as they do in parts of Africa.”

His department has started asking some community groups and gay rights organizations to discuss circumcision with their members, and has asked the Health and Hospitals Corporation, which runs city hospitals and clinics, to perform the procedure at no charge for men without health insurance.

If you have no insurance, you still get to have sex with fewer consequences! Aren’t New York’s taxpayers city officials generous? But ignore that. The three released studies (which all ended early, remember, despite HIV’s 3-6 month latency period before detection) have not shown any link between circumcision and reduced HIV-infection among men having sex with other men. The research simply isn’t there. To theorize any such link is irresponsible and potentially dangerous.

Continue reading “Good Intentions and Taxpayer Money”

Retelling the story of America’s Pastime.

The window for the cable industry to make a deal with Major League Baseball for its Extra Innings package is closing. (It ends Saturday.) As time clicks away, I fear that Bud Selig and Co. have no intention of honoring their public pronouncements. Fine, I’ve come to expect that. But I flipped on Field of Dreams this morning at the most awesomest part. When Terence Mann (James Earl Jones) delivered his monologue, he reminded me why I love baseball. Consider:

Here is the text of that monologue for those who prefer a quicker read.

Ray, people will come Ray. They’ll come to Iowa for reasons they can’t even fathom. They’ll turn up your driveway not knowing for sure why they’re doing it. They’ll arrive at your door as innocent as children, longing for the past. Of course, we won’t mind if you look around, you’ll say. It’s only $20 per person. They’ll pass over the money without even thinking about it: for it is money they have and peace they lack.

And they’ll walk out to the bleachers; sit in shirtsleeves on a perfect afternoon. They’ll find they have reserved seats somewhere along one of the baselines, where they sat when they were children and cheered their heroes. And they’ll watch the game and it’ll be as if they dipped themselves in magic waters. The memories will be so thick they’ll have to brush them away from their faces.

People will come Ray.

The one constant through all the years, Ray, has been baseball. America has rolled by like an army of steamrollers. It has been erased like a blackboard, rebuilt and erased again. But baseball has marked the time. This field, this game: it’s a part of our past, Ray. It reminds of us of all that once was good and it could be again.

Oh… people will come Ray. People will most definitely come.

Thank God Bud Selig didn’t write the screenplay for Field of Dreams. If he had, Terence Mann would’ve said that only baseball fans watching DirecTV driving a Mercedes SUV could pay the $20 per person and sit in the bleachers. He might make an exception and let people watching MLB.tv riding a Segway get in for $10.

The monologue’s closing wouldn’t be nearly as powerful then, I suspect. Oh… people will come, Ray. People will most likely come.