Constructive Interference

Magic of Zero

2011-08-21T11:14:00.001-04:00

Part of the source of the magic of zero comes from the odd disparity of society's opinion of borrowers and lenders. Consider someone who has a good steady job with a substantial income and prospects for the future, the bank is willing to lend to him at some interest. This person accumulates debt and then some event causes his income to fall sharply so that he can no longer service the debt. A sensible view would be that both the borrower and the lender took a risk here and both should loose out. In this view zero is far less magical. However, society at large tends to view the borrower as fully responsible and the lender as a sort of victim. This is wrongheaded for two reasons. For one the borrower can pay for his necessary expenses out of the value of his labor, the lender can not. (If he could he would be doing that rather than taking the risks of lending) For another the lender's business model depends upon support from the government. One really has no chance of making a living by lending money at interest unless one has the contract enforcement authority of a government behind him.

Citizens/Heroes

2011-08-21T09:04:00.006-04:00

The following Editorial in the NYT by William Deresiewicz is well worth a read, especially the last paragraph. (h/t to Kos).

“America needs heroes,” it is sometimes said, a phrase that’s often uttered in a wistful tone, almost cooingly, as if we were talking about a lonely child. But do we really “need heroes”? We need leaders, who marshal us to the muddle. We need role models, who show us how to deal with it. But what we really need are citizens, who refuse to infantilize themselves with talk of heroes and put their shoulders to the public wheel instead. The political scientist Jonathan Weiler sees the cult of the uniform as a kind of citizenship-by-proxy. Soldiers and cops and firefighters, he argues, embody a notion of public service to which the rest of us are now no more than spectators. What we really need, in other words, is a swift kick in the pants.

This is a sentiment I agree with completely. Our national anthem describes this country as "the land of the free, the home of the brave" and yet for the past ten years certainly we have seen an overwhelming tendency to treat any sort of scary scenario, including purely imaginary scenarios as direct threats that must be eliminated. To no extent are we, or at least a large faction of the population, willing to face the existence of some potential danger while we determine what, if any, danger actually exists. So we invade Iraq to save ourselves from nuclear bombs fired by Saddam's ICBMs, none of which existed. I sometimes disparage this as conservative courage, namely the willingness to be brave once the government first guarantees that there is no chance whatsoever that I might get hurt. The truly sad thing about this attitude is that all experience from history shows that the way to intimidate one's enemies is to treat things that frighten them as if they do not bother you. In short, show courage. A willingness to kill does not intimidate your enemies, showing no fear of death does. To be secure each individual citizen needs to willingly and bravely take on some of the risk, not try and pass off all risk to a small handful.

Another Look at Incorporation

2011-08-20T21:24:00.009-04:00

Recent thought I had about the nature of incorporation and the appropriate role of redistributive taxation. This is kind of a new way of looking at things.

I've argued elsewhere that incorporation is a kind of insurance policy for investors (see here and here). Basically, for many types of businesses there exists a very tiny probability of enormously large loss. In short there is a vanishingly small possibility of a loss that would exceed the net worth of all investors. Investors tend to consider feel that vanishingly small is still too large a chance if the loss is all of one's net worth. Hence, those types of activities would never be undertaken under ordinary liability laws. Consider something like a chemical processing plant or a power plant, especially at the time when corporations where coming into existence, that is in the 18th and 19th centuries.

The limited liability corporation then comes into existence as an insurance policy for investors. The investor can put some amount of his total wealth into the business and only that portion of his wealth actually invested is at risk. That amount of wealth is, essentially, his deductible and the rest of his assets are not at risk, no matter how large the loss incurred by the business. Without this insurance, a great many very valuable businesses and industries would never have come into existence.

Note, however, that this insurance is not a private sector policy. The private sector does provide some sorts of insurance against investment loss, but the amount of protection that any private insurance could provide is limited. For this degree of insurance the government has to arrange for the limitation of liability via laws, the courts and law enforcement. In the insurance provided by incorporation, the general populace of the United States takes on some of the risk that private businesses entail. To take an example with relevance to recent news events, the residents of the Gulf coast region take on some of the risk in having BP Oil drill for oil offshore. Those people pay more for insurance to secure the value of their property because they cannot be certain that they will be compensated for all losses that they might incur due to the operation of BP Oil. Other people, in other parts of the country, take on different risks to protect investors in other businesses, but the principle is the same. The investors are protected from risk by some portion of the general population that assumes that risk.

Now, it is true that the general population derives some benefit from incorporation. The goods and services generated by the incorporated businesses, plus the value of employment in businesses that would otherwise not exist is significant. It is not purely a transfer of wealth from the general population to the investors. However, the value of benefit to the two parties is not always comparable. It is frequently, and increasingly, the case that the value to the investors vastly exceeds the benefit to the general population. This is where the role of government and redistributive taxation comes in, but in my opinion, it is better seen as simply the market at work.

The existence of a limited liability corporation is a creation of government. No system for protecting the assets of one part of society against loss in anything resembling a corporation exists in the absence of a government to specifically create it. The government, in our system, acts then as a broker between the investors and the general population. The government guarantees to the investor that others will take up the risk that the investors are unwilling to. The government will use its power of law enforcement and the operation of its courts to see that the investor will not be required to pay more than his investment as compensation for any losses that the investments create. The government provides the guarantee to the investor and arranges that people will take up the risk as is needed.

The role of taxation in this view then is just the operation of the market. The government charges the investors a premium for this insurance, charging them the market value of having the risk assumed by others. The investors are, of course, still free to assume the risk themselves (or to take on some other enterprise), but if they wish to have the insurance of incorporation, the government will charge them the premium. The redistribution of this taxation is then just paying the people who will take on the risk for doing so. Services are provided and payments are made, with the government acting, as I said, as a broker.

The progressive/liberal arguments on this subject often portray the redistributive taxation as coming from a special insight as to what is fair and just and thus subject to the argument that liberals are claiming to know better how to handle your affairs than you do. What I'm suggesting here is that the basis of redistributive taxation and spending is not a matter of liberals knowing better what is fair and just, rather it is a simple matter of requiring compensation from people when you provide them a service and providing compensation to people who provide you one. In other words, paying your way.

Another side note on the progressive view on these matters. It seems to me that much of the conservative policy comes down to conservatives trying to save money by not paying for things such as the value provided by incorporation. The liberal position is that the overwhelming evidence of history (and the overwhelming support of theology and ethics, although I would argue that liberals would do well to make this a secondary argument not a primary one.) is that the cheapest way to acquire the things we need is to simply negotiate a trade. Any other system for acquiring goods and services will be more expensive, all things considered. So if we want the less affluent of Americans to take on the risk of other businesses via incorporation then the least expensive option is to charge the corporations money for it and to provide those Americans something in return. This is especially true given the things they want in return. What they want are things like education, health care and transportation, things which for all of the past five thousand years of human history have increased the value of labor and capital, and thus have increased general prosperity. This in turn will tend to increase the prosperity of the rest of us, included those who ultimately are "paying" for these services to the less affluent.

Progressive Message

2011-08-18T21:51:00.001-04:00

I think there are a bunch of problems with the progressive message and how it is delivered. Progressive policies are fine (no doubt could be better, but as they are they're quite good), but the message is poor. When questioned in private people will support the policies indicated above, but are less willing to defend these choices when arguing in public. The reason for this, is in part, because good arguments have not been spread around.

For example on taxing the rich. Large majorities favor it in the polls, but when confronted with opposition in a public debate the charge is made that raising taxes on the rich is no more than theft. The counter argument, I believe, is that this is nonsense. The rich benefit mightily from several government programs such as incorporation and copyright. The income of most of these wealthy folks' labor is inflated hugely by the government via these institutions. Raising taxes on these people is merely raising our prices, prices that are far too low already.

Much has been made by progressive of the absurdity of the conservative talking point that the government needs to reign in spending like any household or small business. The progressive arguments that I've seen is to claim that the government is not like a household and then get into very wonky discussions about how the government is different. But one of the big differences is that no household would be so foolish as a federal government run by conservatives to spend the past ten years trying to operate on the principal that it must not charge its customers money for the services the business provides. And if one were so foolish, the first thing to do when financial trouble came would be to raise the prices.

Broken Windows

2011-08-17T20:05:00.006-04:00

Yesterday, Matt Yglesias posted this about the broken window fallacy. Now the broken window fallacy is based upon the following parable attributed to by by Frédéric Bastiat:

Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—"It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"

Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.

Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.

But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.

The conclusion that the money spent on repairing the window would otherwise have gone to some other purpose is often given as an argument again Keynsian economics. Now, Matt gives a fine reply in terms of modern views on money and so forth, go read him, but it strikes me that the parable itself is a fallacy.

The claim that the money spent on repairing the window must come as a deduction from money spent elsewhere is certainly not, in general true. Unless everyone in the town is providing absolutely the maximum amount of labor that he can, that no time is spent on leisure activities beyond what is absolutely necessary to maintain optimal productivity, then people have the option of increasing their income by increasing the amount of labor they do. Let us assume that the baker can give up some of his ordinary leisure time today (no wonder he is cross with the child) and produce some extra confectioneries that he knows he can sell to the shoemaker. He uses this money to pay the glazier, who repairs the window to its original state, and then, as it happens, go to the shoemaker and uses the income from repairing the window to purchase a new pair of shoes he would otherwise have done without.

Now where do we stand. Well that still depends upon a number of factors, but let us assume that each of these purchases, the confections, the window and the shoes each cost one franc. In terms of cash money then a single franc was passed from the shoemaker to the baker to the glazier and then back to the shoemaker, leaving the status of cash money unchanged. Now it is true that each merchant is out the cost of the materials used to produce his product. But if each merchant is operating at a profit than the cost of the materials must be less than the one franc price at which the items were sold. It is certainly possible that, depending upon the profit margin for these three, that the total cost of the materials is less than the one franc price of replacing the window and that the net loss is less than that one franc cost and that all three now have more money to spend than would be the case had the window not been broken. The extra value comes from the extra labor done, which would otherwise not have been done.

It should also be considered that most likely the glazier values the shoes more than he does the pane of glass (his loss of materials) and the shoemaker values the confections more than he does the leather (his loss). The baker presumably is just out the value of his flour and eggs, but then his child broke the window. (Of course in that case he might get a bit better labor from the child, who most likely helps out in the shop, with less effort on the baker's part, at least for a few days, due to guilt). Also the pattern of people doing a bit more labor to make up for additional costs could be extended further, thus reducing the overall loss from this event. Perhaps the baker does a bit of further extra work for the supplier to the shoemaker in order to earn money to replace his (the baker's) store of flour and eggs. And then perhaps the shoemaker does the same with the supplier to the glazier to replace his store of leather and the glazier does the same to replace his store of glass. Now the loss is only to the materials used by the suppliers, and that again, if people operate at a profit will reduce the overall loss. Furthermore this braid could be extended still further to reduce the loss to whatever small value we like.

Now, the above, in detail, is not a likely series of events. But it clearly demonstrates that there exist options, centered around the provision of additional productive labor, whereby the broken window leads to an increase in the overall wealth of the society. The glazier gets new shoes and the baker still has money for purchasing a book, although perhaps a somewhat cheaper one. The claim that the broken window makes no difference, while it provides some benefit to the glazier, it must be an equal loss to someone else, is simply not the way people actually function.

Consider a more modern example. While traveling on the highway you see a stranded motorist with a flat tire. The person stranded is in no shape to change the tire (for whatever reason) so you change the tire. You have just done productive labor that would otherwise not have been done. You did it only because the tire went flat. Had the tire not gone flat you would not have done that, or any comparable, extra labor. It this example let us also assume that the stranded motorist will not take the aid for free but insists on paying you $20. Ok, now you've done $20 worth of productive labor that happened only because the tire in question went flat. You are ahead by $20, but the motorist is behind by $20, so no change at all, in line with the parable above. But the motorist, who is now out $20 might well decide to also find some additional labor to do, labor worth $20. But this is labor above and beyond which he would have done had the tire not gone flat. Perhaps he takes an extra shift at work, or he tutors on the side of a local school and takes on one extra student. Perhaps he mows an extra lawn, or takes on another babysitting job. I think I've made my point. Are we really to believe that nothing like this ever happens. I doubt it. Furthermore, once the flat tire has induced the motorist to take on additional labor, what is to constrain him from working only enough to replace the $20. If he is going to give up free time to work, he might as well do more than replace his loss and earn $30 or $40 or more.

It seems most likely to me that the broken window fallacy is itself the error.

Pathologies of Conservative Economics

2011-07-30T17:49:00.006-04:00

I've been thinking that one of the things that I find most objectionable about the conservative view on economics is that the proposed policies can only produce results that are diametrically opposed to the stated objectives of those policies. They claim to wish to shrink the role of government in the economy, but the policies advocated can only serve to make government more essential at all points in the economy. Now for many on the right this is intended. They have no more interest in shrinking the governments role in the economy than they are interested in shrinking the deficit. They want rich people to not have to pay for any part of government. Others seem to believe that conservative policies are related to shrinking government, so I've identified, I think, two areas where the policies cannot have the intended effect. These are the pathologies I refer to in the title.

1) Low taxes reduce the amount that a business needs to pay for government supplied services such as incorporation, using the radio spectrum, dumping waste in the environment, copyright protection and others. If these services are supplied at rates below what the market would demand for them (that is the price that would be charged by a private company supplying the services if the government did not and a private company could) then businesses using these services are at an advantage in the market. The profit expected from a given amount of effort and a given supply of capital will be larger for businesses that rely on government services compared to those who do not. Business that do not use government services must pay for the full value of all the inputs they need to run the business out of the revenue they can earn. Businesses relying on government services need only pay for those goods and services not supplied by the government and a part of those supplied by the government. The difference between what the government charges in taxes and the market value of what the government supplies adds to the businesses profits. Thus in a low tax regime investment dollars will go toward businesses that rely upon government services, because the profit margin (or at least the apparent profit margin) will be greater. Eventually these businesses will use those investment dollars for ever more marginal uses until the general return on investment in the industry, however much it uses government services, is equal to other industries not dependent upon the government. However, that dollar level of investment in such a business will be much higher than it would be if the government were not supplying inputs at a reduced rate. So we can expect that in a general low tax environment investment dollars, and thus the asset values of industries should be dominated by those that heavily rely upon government services.

What we see in the US today is, I believe, an economy dominated by the financial sector which depends upon the security provided by such elements as the FBI white collar crime unit, the content industries which rely upon copyright protection, various businesses dependent upon dumping waste products into the general environment, businesses that need to be incorporated, and the like. In short we have an economy that is heavily dominated by businesses that rely upon government services precisely because of having adopted conservative policies supposedly intended to stop government expansion in the economy. If we wanted to shrink the government we should make the government expensive, not free.

2) The operators of a publicly owned company have a fiduciary responsibility to the shareholders to maximize the value of the company. If there is some option available to increase the value of the company to the shareholders and the CEO and other offices fail to take advantage of that opportunity they are failing in their responsibility and acting unethically. So if the government is to provide services at a rate below the market value (by this I mean the amount that would be charged by a private company if the services were provided by such an entity) then the operators are obliged to take advantage of this sub-market price to increase the value of the firm they operate.

To put this in specific terms, consider that there are many projects the firm can undertake that will bring in just a bit more revenue than it would cost to undertake. These the firm are most likely engaging in so as to maximize the firm's income and thus value to shareholders. There are other projects that would bring in less revenue than it would cost to carry out, these the firm does not undertake. But if the government is charging sub-market for some of the inputs the firm needs, that will make otherwise unprofitable projects, profitable, at least as far as the firm's books are concerned. As the price charged by the government falls, then the firm will increase the extent to which it engages in projects which are made profitable only due to the effective subsidy of the government providing services at below market rates. As the prices government charges fall a firm could certainly find itself so heavily invested in projects that depend upon this government subsidy that its overall profitability is dependent upon this government subsidy. I think it likely that, again as a result of conservative policies, a large fraction of American business remain a going concern only as a consequence of this government subsidy via below market pricing.

That is not to say that they could not become truly profitable again, should the government return to a more sensible pricing scheme. But at this point, it is likely that American firms are highly dependent upon the government.

Conservative Economics

2011-07-26T18:29:00.002-04:00

The central mystery of conservative economics is that it is based on two fundamental truths

Without various services of government such as incorporation, copyright, licensing the radio spectrum and others, American business would not be able to compete and be profitable.
Government does nothing of any value for business, it only takes and hinders.

One might think these are contradictory, but this is just the central mystery.

Note: Actually, the above is tongue-in-cheek. A careful examination of conservative economic thinking reveals that they are not contradictory per se. Rather when providing the above services, they are essential. When charging money for them, they were never really needed.

Patent Madness

2011-07-03T18:45:00.006-04:00

Matt Yglesias has had a few posts up (most recently here) about technology patents and their role in (both good and bad) in the economy.

So a bunch of patents have recently been sold by one company for a cool $4.5 billion. This is but a small part of the total value of patents. This doesn't even touch on the money put into suits and planning on how to use patents to stifle innovation and competition. The things are valuable.

My snarky observation is that whatever business or organization came up with the idea of patents and was able to enforce them, it should be making a mint off the things and paying a huge dividend to its shareholders. Off course, its the government that has created this valuable instrument and we shareholder are gripped with the bizarre belief that our prosperity is dependent upon giving these things away for free. Sigh.

Content Aggregators

2011-07-03T18:23:00.003-04:00

This is an interesting article in the Atlantic from last week about the rise and success of Netflix. Netflix has been an enormously successful business operating on a model of aggregating content (TV shows, movies, stuff like that) and making it available for a fee to folks who want to view it. It turns out they've been a lot more profitable doing that than experts expected, indeed a good bit more successful than the produces of the content. According to the article this comes as a bit of a surprise to experts, expecting instead that the content produces would be mostly making money off of the content they produce.

Now the article points up a number of reasons why this expectation would turn up wrong and describes circumstances in which aggregators can be expected to be very profitable. It seems to me thought that the points I've been raising could play a role as well. Success as an aggregator of content depends upon a number of things, one of which is copyright. To be able to make money off of selling (or renting) content you need to be able to make sure that no one else can sell (or rent) that same content at a lower price. Given that the marginal price for providing content is about zero, the price competition would quickly doom any hope for a large revenue stream.

So this copyright protection service is really important, and copyright is provided only by the government. Given our recent passion for providing these government services for free (or as close to that as we can manage politically), business that rely upon them will be at a competitive advantage. The major inputs for a content aggregator include copyright, so given that it is provided at a rate far below market the aggregator can expect a higher return on investment than a business that must pay market rate for all the inputs to its business. A business like content producers for example.

There really are huge distortions to the economy if we are going to have the government provide these extremely valuable services and not charge money for them.

Rentiers and Government

2011-06-19T15:49:00.004-04:00

A few weeks ago Paul Krugman noted that our policies today seem to be directed solely for the benefit of the Rentier class, those who make money from rents and/or lending of money. Since then this observation has been the source of a number of comments, including further discussion on Krugman's blog and others as well. See for example here, here, or here. I think this observation that we have now long since given an inordinate share of political power to the rentier class and that there is a widespread, and deeply misguided, view that these are the people one's who should lead society. Perversely, the view that these people should be leading in matters of economics is tied to two ideas, both of which are at odds with reality. Namely that a) these rentiers, being extremely wealthy, are the most productive people and b) that supporting their interests is consistent with the concept of small government.

I am mostly interested in discussing point b) here, but let me just say a few words with regard to a). The things we need as a society, the reasons we have for being concerned with economics, can be fairly simply stated. Food needs to be grown, tools need to be manufactured, clothing produced and raw materials extracted, and those things need to be distributed about the population from source to consumer. In short useful goods and services need to be produced and then supplied to consumers. As long as that is going on a society will be prosperous. The mechanism we have as humans to facilitate these essential activities is to have currency flow in the opposite directions. But be clear, if the goods and services were to continue flowing without any currency moving at all (how that would be managed I cannot imagine, but the point remains) the society would continue to be as prosperous as ever. Were the opposite to occur, currency continue to flow but no goods and service be generated or supplied, the society would soon decay to starvation and ruin. The one flow is essential, the other facilitates the essential flow, but is not itself essential. Indeed, societies existed for tens of thousands of years before anyone came up with the idea of currency. Now in today's world currency, and the flow of currency, is necessary and the rentier and financial class provide a vital service in assisting the flow of currency which in turn keeps up the flow of goods and services, so we can no longer do without it. But it is not a class that is productive. It assists the productivity of those who are productive. Basing policy on the productivity of the rentier class, especially while denigrating the productivity of the productive classes, is seriously unwise.

But point b), as I said, was my main interest, as its significance seems to be missed by most others. Specifically, it seems to me that the rentier class and the financiers are the people in this world most dependent upon government. This is a class that cannot exist without the assistance of government, yet we perversely insist on minimizing the degree to which government might interfere with their affairs. They have no affairs but by the grace of government. And yet the role of government, the degree to which this class needs government, seems to be universally ignored.

If I go back to a discussion by Adam Smith on the role of various interests in the economy I can find this quote, where he is discussing those who's income comes from the rent of land:

[renters] are the only one of the three orders whose revenue costs them neither labour nor care, but comes to them, as it were, of its own accord, and independent of any plan or project of their own.

But the revenue does not, of course, simply come to the renter of its own. Someone must be doing something, otherwise the person, or persons supplying the revenue would not bother. And of course, for the renter, and likewise for the financier, the revenue comes to him because the government will enforce the agreement for him. The government supplies a part of the renters (or financiers) business as does the billing department for your electric power company. If the billing department was not there doing its work, the power company's revenue would soon cease.

No small part of our current situation is caused by the odd insistence on the supposed champions of small government insisting that government must supply these services to these business and it should do so for free. One of the best ways to shrink the percieved intrusion of government would be to have these services made more expensive (that would be raising taxes) rather than making them free.

I Am Not Alone

2011-05-14T20:37:00.001-04:00

I’ve only just started trying to learn and become familiar with modern economics, and have come to some seemingly unorthodox conclusions. I have long been wondering if there was any school of economics that even considered my outlook on things. Specifically, I consider the government to be just a part of the economy and that it should be providing services increase the revenue that people can earn from their labor and capital, capturing a portion of that value added via taxes and spending the money on things of value to the owners of the government (the citizens). I’m not sure if anyone quite agrees with that, but there is someone who says a lot of things that aren’t being said and that I agree with. See the video here (h/t to Atrios). This guy makes sense to me.

An Insurance Company with an Army

2011-05-14T20:30:00.001-04:00

This post by Paul Krugman from a while back highlights the terrible issue we progressives have with framing issues and arguing. He describes the US government as essentially an insurance company with an army, with the insurance company being the provider of Social Security, Medicare and Medicaid. His point is that to understand government spending and how government spending will change over the next few decades, everything but these three (and defense) amount to a trivial portion of spending. Any change in spending will be driven by these four parts of the budget.

Now his point, regarding spending, is true enough, and I love Paul Krugman, he is a great voice of reason in these unreasoning times, but this, generally speaking, a terrible, terrible framing of what government does. It is further distressing because, it seems to me, that this description is characteristic of the so called “Obama style of negotiation”, concede to your opponent his major claims and negotiate from there. At time I defend Obama from criticisms, not because his technique is working, but because this really seems to be the “progressive style of negotiations.”

How, you ask, is the characterization Krugman uses (I understand that he did not originate it, but he’s the first to use it to my knowledge) a concession to conservatives. Well, the conservative anti-government argument is that the whole, dreaded expansion of government started with the New Deal, is taking over our lives and the economy and is just a bunch of social spending to help people who, in there opinion, ought to be taking care of themselves, the way people not depending upon these programs do. They agree that the government is a social insurance company with an army and we will all be better off if we get rid of all but the army.

But, as I said, this is a horrible description of what the government is and does. First off, its major insurance program is a massive system of insurance to protect investors against loss, via incorporation. If one invests in a firm that is incorporated the maximum loss that you will face is the value of your investment. Effectively, that is a deductable and the rest of the population (or some portion thereof) will take on the remainder of the loss if it is greater than the total value of the business. Very effective. Very valuable.

The government is also an essential supplier to the telecommunication and broadcasting industries. They both need to have a guarantee that if they are transmitting on a give frequency they will face no interference. The only entity that can supply that guarantee is the government, so it is also the sole supplier. Both of these industries (and as a consequence much of the advertising industry) depends upon this service.

The government defines and creates a regime of intellectual property via copyright legislation, which is also extremely valuable. This right to intellectual property is not some natural right that has always, in any sense, existed. Rather it can be dated to the creation of the British government in the Statute of Queen Anne in 1709. It is also, clearly, not an ancient right. Likewise, the government protects trademarks and patents.

It negotiates treaties with other nations, secures the high seas and property held in other nations. The security services of the government are extensive and extremely valuable. The white collar crime unit of the FBI alone provides the financial service industry with protections far more valuable than ADT, Pinkerton Detective Agency and Brinks Armored Car combined.

These services are also an expansion on the original size of government, but they are expansions that largely provide value to those who are, or are becoming, wealthy. I think it very ill advised for progressives to leave these portions of the government out when discussing what it does. The government is most certainly not primarily involved in providing social services, those may be its expenses, but not its activity. Primarily it is involved in providing essential services to business and industry.

My view is that the United States is organized as a kind of shareholder corporation where every citizen has a share, every share is a voting share and shares are not tradable nor transferable. The major activity of government is as outlined above for which it collects revenue due to the value of what it provides. The major expenses then are dividends paid to the shareholders. This is the expense that government has, but not what it does.

Fair and Unfair

2011-04-24T20:42:00.001-04:00

There has been a good discussion over at The Reality Based Community inspired by the recent editorial by Arthur Brooks. Michael O’Hare gives his response to Arthur Brooks, comments follow. I participated a bit, adding comments that could be expected considering the things I write here. The general discussion was valuable so all told I wanted to capture it here.

In particular the subject of price discrimination, charging different prices to different customers because you can successfully charge some people more than others, came up. This is not discrimination based on race, please note, but rather on how much money you have. If asked people will almost invariable say that it is unfair. However, it is also ubiquitous in our economy, engaged in everyone. From senior discounts, to grocery store coupons, to haggling over the price of a car, to the existence of discount stores, there are innumerable ways in which businesses are able to charge more from wealthier customers (at leas nominally more) than they charge from poorer customers. Indeed it would hardly be possible to run a business without charging more from those willing to pay more (what would you do, refuse the extra money they are willing to pay?) and not accept smaller sums from those able to meet but only slightly exceed the marginal cost of production (do you turn away a profitable sale because it is not as profitable as some other sale?). Indeed we have a host of mechanisms to hide this price discrimination. Profit margins are higher on higher end cars because while the cost of the additional features goes up, the price charged goes up more. Generic products that are identical to brand name products. Electronics which are identical inside but with an interface that doesn’t provide access to the additional features. People don’t generally feel comfortable with price discrimination, but it is all around us.

The relevance to the discussion referenced above is that price discrimination is, in part, behind the progressive tax structure. It is simply worth more to the wealthy to have their wealth secured by the US Government. It is perfectly fair and sensible in a market economy to engage in price discrimination and that applies to taxes as well.

There’s Money and then there’s Money

2011-03-19T21:07:00.002-04:00

There is an unfortunate habit in today’s world to value brevity and being concise a little too much. This leads to a great deal of writing and speaking which can be misleading and confusing for the non-initiate. For example, the term money is used in a number of different ways. This, I think, is bedeviling the efforts of liberals to explain economic proposals. I have read blog posts lamenting that we have wasted so much money, a trillion dollars or more, in Iraq, and this is a blow to the prosperity of the nation. I have also seen blog posts from the same sources, perhaps from the same authors, advocating that in the current economic climate the treasury should just print and distribute money as the money doesn’t matter. (Hence helicopter Ben Bernanke who recommended, at times past, that dropping money from helicopters would be a sound policy). These two claims, however, would seem to the casual observer to be contradictory. How to solve this paradox?

The problem is that in the two cases we are discussing two different issues with the term money. The word money is used to refer to currency, dollars, yen, euros and the like. A person with more money has more currency, or at least has access to more currency. We also use money to refer to the value of goods, services, capital and land, the resources that a person, people or nation have at their disposal. This value is by no means equal to the quantity of currency available, indeed it is almost always a great deal larger.

So the issue with the waste in Iraq, is that a resources were expended in Iraq with no comparable return to the nation. The prosperity of a nation comes from when the resources of the nation, including the products produced from raw materials and transformed into finished products by the labor of the nation, are exchanged with those of other nations. Large quantities of the resources of our nation were sent to Iraq, never to return, without be traded for any goods of value. The quantity of resources expended is measured in dollars, but it is not the currency lost that is a detriment to the nation but the resources themselves. Were it just that a trillion dollars were printed and then burned, there would be no loss (beyond the value of the paper and ink used in their printing), but what was lost was a trillion dollars of the productive output of the nation. That is a loss.

The proposal to just print and drop money into the economy is, on the other hand, simply an issue of currency, not materials. Our economy is suffering, with some 9% of the population not working, because there is not enough currency in circulation. Too great a quantity of currency is held in reserve by those who have little demand to purchase things. The basic exchange of useful services, where more than two or three people are involved, require currency. Too little is available for those who would use it to produce and trade useful things. The treasury can produce more currency easily and release it into the economy, which will stimulate production and trade (see this story). This does not involve and loss of productive output.

Unions and Copyright

2011-02-21T20:12:00.002-05:00

Reposting this after loosing it.

What with the events in Wisconsin and a recent post by Matt Yglesias on copyright, I’ve been wondering about the absurdities of our current political discourse.

Consider that some people wish to organize themselves, independent of any government help, into a union so they can negotiate for higher wages and earn a greater revenue from their labor. The response from a large section of our population is that they should be prevented from doing so, with the full force of the government exerted to stop them from so organizing, because the market doesn't support those higher wages, they should not be able to use the coercion of their organization to capture these wages unfairly. (In the perhaps vain hope of avoiding flames, let me say that this is NOT my position).

On the other hand if some people earn their living from writing songs, plays and books an activity which the market alone has never priced very high, then in light of the above, many of the very same people, of course, believe that the government should organize on its own organize a system of copyright to guarantee that these people earn as much money as possible from their labor, without requiring that the beneficiaries do anything on their own. In fact it would apparently be very wrong for us to so much as charge these people money for providing this protection to them.

Very strange. I believe that one of these positions, at least, must be wrong.

Wisconsin

2011-02-18T17:38:00.001-05:00

Speaking of Wisconsin, I do give all my support to the folks fighting the unconscionable effort to split up the union. If you couldn’t guess from the previous post, I’m for both unions and copyright protections. I just have a bit more support for the unions ‘cause they organize themselves rather than rely upon the government to do it for them. But, having said that, I’m also really, really pissed at all the folks out protesting. I don’t know for sure, so I might be maligning people unfairly, in which case I apologize, but I strongly suspect that a whole bunch of those folks were no where near a voting booth last November. So now that protests and activism are hardly worth a bucket of spit, now we’re all active. Why won’t progressives get out and act when it would actually do some good? I don’t know.

It’s like during the health care debate when every progressive wanted Obama to be more like our hero Johnson. In 1968 supporting Johnson wasn’t so cool, but now yes. Or Al Gore could be beloved in any year after 2000, but 2000 not so much.

Sigh.

More on Money

2010-12-19T13:16:00.002-05:00

The following is a quote from a comment on Matt’s blog and my response with regard to money, but also to this Nation’s odd attitudes toward borrowing, lending and the role of Government.

But nobody thinks money changers are the captains of industry who drive innovation, promote wealth and create jobs by allocating dollars, euros and pounds to their most efficient uses. If anyone said money changers deserve a special tax privilege for the profits they earn, because it's in everyone's best interest to promote as much of their uniquely valuable skill set as possible, the whole world would laugh in their face.

I'm not sure this is true. I'm sure it should be true, but I doubt it is.

Consider the current, so very popular, insistence that we can't provide help for those many people who are struggling with debt, we have to make sure that they pay their loans in full. They can't be rewarded for borrowing foolishly, especially for consumer debt. But if they borrowed foolishly, the lending institution lent to a an exactly equal foolish extent. Furthermore, the borrower has been working some actual job, producing some actual useful output that adds to the value of the economy. The lender's whole means of making a living is not to do something productive himself, but to live off the productive labor of some other person. Yet the near universal feeling is that the lender should be protected, and indeed have the full force of the government to support his getting every dime of income he hoped for in making the loan and the borrower (the actual producer of valuable stuff) is on his own.

So, consider the case where the original agreement amounted to the productive worker paying 10% of his income to cover a debt and he has since lost his original job and is making half his former income. To keep the lender earning the same money he had counted on, the borrower must now pay 20% of his income. It seems that the majority of people believe that it would be wrong to change this agreement so the borrower pays say 15% of his income to cover the debt and the lender then makes three quarters of what he originally hoped for. That is the two parties split the foolishness of their borrowing and lending. It seems to me that this is substantially the same as what you state no one would believe.

Note here too that the fact that the worker producing useful output is, quite likely, to require little or no assistance from the government to earn his income. He, or she, may have some minor need of the government in his or her business model. The bank, however, really needs to be able to have the government back it up with extensive legal assistance if it is going to earn its money. The government’s support is an integral part of its business model. So even with this, our small government conservatives favor the bank.

The Nature of Money

2010-12-19T13:07:00.001-05:00

Matthew Yglesias has another excellent post up today on what we mean by money. He references this post by Paul Krugman and this comment on Krugman’s post by Kevin Drum. All of them make good points that clarify the issues facing us today, issues which are complicated by the poor understanding people have as to what money is, what it does and its role in the economy. Read all of them, they are informative.

Much of the public, and thus much of our public discourse, is confused over the nature and purpose of money. A large portion of the population seems to view the quantity of money that we have on hand to be critical to a nation’s wealth and that we need to focus on conserving our money. This is ironic as no less a figure than Adam Smith argued forcefully in The Wealth of Nations, that this view of money is completely wrong. According to Smith (who I would say is quite right) is that the wealth of a nation is in the total quantity of useful products and services that it creates out of its resources of land, capital and labor. Money is just a tool to facilitate the transfer of useful products from one party to another. If more money in circulation would improve the economy (and all indications are that it would) then we should print more money and get it in circulation.

Debt and our Children

2010-11-27T09:47:00.000-05:00

One regular topic these days in our political discourse is the lament that we are leaving a great burden of debt to our children, and this, of course, is truly lamentable and should not be done. Currently and most recently this concern has been expressed most passionately by the Republican party and its supporters due to the perceived rise in national public debt under Democrats. This complaint, coming from Republicans, is absurd for a number of reasons that have been discussed elsewhere, but there is another reason that I haven’t seen why the complaint is indefensible coming from Republicans. Indefensible because their policies are vastly worse for our children in regard to the debt under which they are being placed.

Consider first how we used money and what its function is in the economy. The basic, fundamental act in an economy is that one person does something useful for another, the second person does something useful in return. While doing something nice, or helpful for someone else is certainly a virtue, no one does, nor really can, work extensively to provide for another person in return for nothing. We people, to survive, need to trade. With simple barter, in prehistoric times, this is simple. Fred gives Barney a newly made spear, Barney gives Fred some of the meat from his hunt. This can work because it involves only two people. As societies become more prosperous and people become more specialized in the useful work they do, the trades need to involve more and more people so that simple barter becomes impracticable. Money is the elegant solution to this problem. So today instead of you providing some service that is of value to your employer and she provides some goods or services to you, your employer provides you with money that you can then use to complete the trades you need with other people. The money serves as an indicator of the useful labor you’ve done so that you can now trade it for someone else’s useful labor and the basic exchange, useful labor for useful labor, is retained.

But now consider the Republican policies of low taxes on the extremely wealthy, especially those who rely heavily on government services to earn their income. So, for example, Bill Gates (replace with Steven Jobs if you are a Mac user) did a great deal of useful (at least work that a lot of people found useful. This is the last nod I’m giving to Mac/PC debate) work in the 80s and 90s creating an operating system for computers. In return for this service he earned a great deal of money and is therefore able to command a great deal of other people’s labor, good and services in return for the great value he added via Microsoft. All is well and good so far. However, no matter how it pains Republicans to hear this, he did not do it on his own with no assistance from government. He needed the government to guarantee his intellectual property rights, he needed government to provide a special legal status with regard to liability to raise the capital he needed, in short he needed a great deal of assistance from government.

This in turn is fine, but then it is also fine to have government capture a portion of the revenue it helped to create and spend it in a manner to the benefit of the general populace. If instead we follow the low tax policies of the Republican party we are insuring that Bill Gates (and others in the same situation) will then be able to leave behind vast fortunes to their children, fortunes comprised largely of value produced by the government. This in turn means that these children and their children in turn will be able to benefit from the useful labor of the descendants of the less fortunate without doing anything of value for them in return.

Let me reiterate that last paragraph. It is true that during the 80s and 90s Bill Gates became wealthy by providing a useful product to many people. In return for the value he provided then much of the goods and services produced by the nation were provided to him, making his life very comfortable and secure. Due to Republican tax policies his children will continue to enjoy the results of your children’s labor without themselves needing to do anything in return. The only value we can expect to get from the Gates family was added in the 80s and 90s and yet for generations to come we, and our descendants, will need to provide for them getting nothing in return. This is truly leaving our children indebted for the future.

Now if it were the case that the people such as Bill Gates earned their fortunes entirely on their own, then perhaps there would be nothing to do about it. But as I point out above that is not the case. Rather they depend heavily upon Government support therefore the Government should be charging them money for the service. That would be the most important step to riding our children of future debt.

Parable of the Travelling Merchant

2010-11-14T15:59:00.001-05:00

This tale is set in colonial America. A small isolated village is a reasonable place, the price of a days labor is $1, a nice simple figure and the range of things done in the economy is small and straightforward.

The Merchant Thomas Smith is travelling, as is his wont, from town to town and village to village in Colonial America, hauling his cart laden with wares that he has purchased at previous stops and hopes to sell at future stops. On this day he is off on a road he hasn’t travelled before and comes upon the very poor, unfortunate town of Arkham. As Thomas entered the town he could see that although the town was well situated near water and other necessary resources, the state of the buildings and the roads and the people indicated a quite depressed condition for their economy. Little was in repair and less was being done by anyone. It seemed to be a poor choice for the destination of a merchant hoping to increase his prosperity, but Thomas was always a hopeful sort and decided he would first see if he could learn more about the town and its history.

After a brief time he learned that the cause of the impoverished state of the village. By some strange chance the town was completely devoid of money. No type of currency could be found, neither coin nor paper of any kind. The exact cause of this strange state of affairs need not concern us now (this is after all a parable). So in this town while all types of simple barter could be done, any more complex transaction was impracticable. The blacksmith needed coal for his forge but the coaler did not need any tools, he needed his roof patched. The main who could repair his roof, however, needed no coal, he needed land cleared, and so on. So the village remained in very unkempt state with may of its houses in disrepair, fencing broken down, animals untended, land going to waste, roads in need of attention and generally in a very poor state. Thus the town seemed a poor place for Thomas to spend his time. Given the general poverty of the area, he could find no tradable goods to purchase, and of course given the absence of money, no one in the town could purchase his goods.

And yet, there was much opportunity for prosperity, and trade, in Arkham. The townsfolk were capable of producing many things of value. The land could be cleared and the animals could be tended. Beyond that there was evidence that people could make many things of value for trade. One woman of the town had, in the past, made beautiful ceramic ware (but her kiln was now cold and she had no clay), the blacksmith had skill and could make wonderful tools (but he was out of coal)yet another townsman did fine woodworking (but he had no wood and his tools needed attention from the blacksmith). A long list of similar stories could be told of the townspeople of Arkham.

Given the possibility of prosperous trade from Arkham to the rest of the region, Thomas pondered what he could do. He had his cart, laden with various goods for trade, goods which he had purchased for a total of $50, but which he could expect to sell for a total of $100. In addition he had but $2 in cash on him, as at this stage in his travels he had most of his capital in his tradable goods. Now, as stated, he could hardly benefit anyone with his tradable goods, but he thought he might do something useful with his cash. There was nothing of value here for him to buy, but it occurred to him that another use might be made of his two dollars.

He took one of his dollars and gave it away to one of the villagers. He purchased nothing, just gave it away. The glad recipient of this bounty immediately set off with his new riches and paid the one dollar to the fellow most skilled at repairing roofs, to repair his leaking roof, the greatest hindrance to his prosperity. The fellow who got the dollar to repair the roof set in to do the job, but first went to the blacksmith who he paid a dollar to fix his plow. The blacksmith, before setting to work on the plow, first paid the collier for a dollars worth of coal and the collier went and paid another villager a dollar to fell trees and create some lumber. Before the day was out that one dollar, given away, had done some six or seven dollars worth of work throughout the town. Seeing the wonderful effect of this one dollars rapid pace through the town, Thomas sent his other dollar off on much the same trek.

After two or three days of this the town was already much improved. Walls had been whitewashed, roofs had been repaired, land cleared, fences mended and host of other tasks had been completed. The prosperity of the town was rising fast as the two dollars in currency were passed quickly from person to person compensating each person in turn for useful labor done. Each person in turn could provide some valuable service to a fellow townsperson, knowing that he or she could expect to get someone else to do something useful in return.

Before the week ended the basic needs of the town had been addressed and people began to produce goods above and beyond anyone’s immediate needs. The one woman’s kiln was again being used to produce ceramic ware, the woodworker produced some of his fine utensils and the blacksmith was producing extra tools of fine quality.

At first Thomas was just pleased to see the good being done by his two dollars, which was, after all, a small part of all his capital. By means of this small donation he was able to do a great deal of good. This alone pleased him much. But as he saw the changes coming on about the town, especially the latest, the production of finished goods that could be traded, he soon realized that he could recover his two dollars, and not only that, he could join in on the rising prosperity his generosity had started.

One of the two dollars, on its latest circulation around the village came into the hands of one young wife who had no longer any purchases to make among the residents of Arkham. This would be all well and good in ordinary circumstances, but here it cut in half the work being done about the town. Seeing this Thomas went to see if this woman would be interested in any of the wares in his merchant’s cart. As it happened she was. Several items of use about the house were exactly the sort of thing she wished to have and so he was able to capture his dollar back by trading items he had purchased for fifty cents, but had fully expected to trade for a dollar. This time, however, rather than give the dollar away, he went to the woman will the kiln and ceramic goods and purchased, with the dollar he had back, goods that he knew he could sell, in another town not two days travel to the west, for two dollars for sure. As the woman with the ceramics had other tasks she needed about the town, the dollar was again on its travels, making possible an increase by several dollars in the prosperity of town each day.

With this trade, Thomas saw that his cart now had goods which sold on his usual route would bring him $101, one dollar more than the cart was worth when he arrived. He had reduced the value of the cart to get the dollar from the woman who wanted his goods, but had raised it by two with the purchase of the ceramic wares from the second woman. Over the next few days he was able, on several occasions, to capture one or another of the dollars (or the same one each time, who could tell) by trading off his goods, and then increase the value of his cart by buying up the tradable goods the villagers were now able to produce.

So although a scant two weeks had passed from the time Thomas arrived in Arkham it had been transformed by his donation of two dollars from poverty to prosperity, and his cart, which upon arrival had goods worth $100, now had a set of goods worth $110. So, in spite of his having donated $2 to the town, he was $8 richer than when he arrived.

Corporate Income Tax

2010-11-12T20:31:00.002-05:00

On October 28 Kevin Drum put up a post up titled Kill the Corporate Income Tax which seemed to me to be quite wrong. His main point was that it would reduce the incidence of lobbying because most lobbying is directed at corporate tax issues. This makes no sense to me, it would rather simply push lobbying toward ending regulations an or other mechanisms by which the Federal Government can direct favorable treatment toward corporations.

Beyond that, it seems to me that the corporate income tax is an eminently sensible tax which should certainly be preserved. To bring the issue into clearer focus a commenter posted links to two articles describing why the corporate income tax should be abolished. One of these articles comes from Beardsley Ruml the Chairman of the Federal Reserve Bank of New York and was printed in 1946. The other comes from William Vickery in 1996, a list of 15 fallacies in economics.

So my task now is the supremely arrogant one of explaining why I think they are wrong.

Chairman Ruml lists three reasons why the corporate income tax is a bad idea, the first of which is

1. The money which is taken from the corporation in taxes must come in one of three ways. It must come from the people, in the higher prices they pay for the things they buy; from the corporation's own employees in wages that are lower than they otherwise would be; or from the corporation's stockholders, in lower rate of return on their investment. No matter from which sources it comes, or in what proportion, this tax is harmful to production, to purchasing power, and to investment.

He further explains the problem as follows

Let us examine these three bad effects of the tax on corporation profits more closely. The first effect we observed was that the corporation income tax results in either higher prices, lower wages, reduced return on investment, or all three in combination. When the corporation income tax was first imposed it may have been believed by some that an impersonal levy could be placed on the profits of a soulless corporation, a levy which would be neither a sales tax, a tax on wages, or a double tax on the stockholder. Obviously, this is impossible in any real sense. A corporation is nothing but a method of doing business which is embodied in words inscribed on a piece of paper. The tax must be paid by one or more of the people who are parties at interest in the business, either as customer, as employee, or as stockholder.

My problem starts with the sentence “A corporation is nothing but a method of doing business which is embodied in words inscribed on a piece of paper.” It is true that a business may be organized as a corporation or it can forgo incorporation and run as a private business. But the state ob being incorporated must either add value to the business or it will leave the value unchanged or decreased. If it is the latter than any corporate income tax can only cause business to do without incorporation. However, the assumption here is that this leaves the value of the business unchanged so this imposes no cost on anyone. if, on the other hand, the state of incorporation increases the value of the business that the tax may be paid out of that increase in the value of the business.

Let us assume, for example, that a given business is operating unincorporated and generates a profit of $1 million. It then incorporates adds value to the business raising its profit to $2 million per year. Assume also that it must pay the full 35% corporate income tax which reduces its incorporated profit to $1.3 million. This is still $300,000 more that it had prior to incorporation. This kind of tax “burden” most people would be willing to endure. As far as the Chairman's options as to who has to pay for this tax, the business described above could increase the amount of dividends paid to investors by $50,000, increase wages paid to employees by $50,000 and reduce prices paid by consumers by $50,000 and still be $150,000 richer. Now, of course, it is possible to claim that all the value added by the status of incorporation should be given to the business and the failure to give this value away is forcing one of the three to “pay” the tax. But this seems to be equivalent to claiming that any time the government could provide a subsidy to some business and does not, the government is forcing the business to “pay”. This is hardly consistent with standard economics, particularly as argued by conservatives.

Consider too that the value added by incorporation does not come for free. For a number of businesses there exist some low probability events that would be extremely costly, perhaps ruinous, for investors under ordinary liability laws. Consider something like a chemical plant which could catch fire and destroy most of a town. If the owners of such a business are fully liable. then the cost of the damage done could certainly be greater than the total assets of the owners, in which case such an accident would ruin them. Under those conditions getting people to invest in such a business is very difficult and the amount of capital that can be raised to run it is limited. And where the capital invested is limited the returns on that investment are limited. Incorporation was invented to produce a state of limited liability to protect the investors against such a disaster. It functions essentially as an insurance polity against investment loss. The amount that an individual invests then is the deductable, all other costs in the event of disaster are paid for by someone else. Incorporation does not, however, eliminate the risk. The possibility of disaster remains, it just is not the investors who will pay (at least they will pay no more than the amount they invested, even if the damage done exceeds that amount to any extent whatsoever.) So if the investors are not taking the risk who does? That would be, in the example I cited, the people living near the plant whose property may be destroyed by such an accident.

If this seems abstract, consider the concrete case of an offshore oil exploration platform in the Gulf Cost. Since being incorporated the value of British Petroleum has been vastly enhanced by the fact that its investors are protected against investment loss in the event of a catastrophic accident. Being incorporated the business is able to raise far more capital than it otherwise would be able to do, and with that additional capital it can earn far more revenue. But that enhancement of the value of BP did not come from nowhere. It was made possible because the residents living around the Gulf Cost have been taking on some of the risk related to the oil exploration and extraction which is the source of BP’s revenue. Indeed, not only have they taken on some of the risk, they have recently had to pay a price in lost business, lost property, adverse health effects and the like due to the spill that took place earlier this year. In order for businesses to gain the revenue they do as a result of incorporation then other people, most of whom are not owners of the business, are taking on some of the risk, risk that involves very real costs to these people. If some of the revenue gained through this process is spent on things of value to those people on whom this risk is thrust, that is in no way a burden on the business gaining the benefit.

In short the nature of the corporate income tax is a matter of simple trade. People take on risk to enhance the revenue of a business which pays them some (but by no means all) of the additional revenue and both parties are better off. It is the opponents of the tax who are advocating a policy at odds with trade. They are calling for the government to spread risk from a business to people in the larger community solely to benefit the business and the modern conservative form of this policy is to adamantly opposed to those who take the risk gaining any benefit thereby. The transfer of the risk should be a one way street from the general population to the privileged owner of the business.

Now it is true, as argued by Ruml and Vickery, that with the corporate income tax in place the incorporated business will be able to either pay higher wages to its workers, charge lower prices or pay a higher return to investors (or some combination of the three) when compared to what that business would do in the absence of the tax. What is ignored in their argument is that it is equally true that if the tax is collected and the money spent on education, transportation, health care and the like, the sorts of things upon which the people who absorb the risks discussed above would have the have the money spent, will also result in higher wages spent paid to employees involved in these activities, higher returns paid to investors and an increase the value of the labor and capital employed by people touched by the improvements to education, transportation and the like. I am not aware of any good reason to think that the largest gains in wages, investment or prices would occur if we provide this service of sharing risk and give it away for free, nor do either of these men offer any such reason.

To summarize, the corporate income tax, in my view, is a simple matter of commerce between a general population and the practitioners of certain businesses. It is a service the population provides through the government which increases the revenue earned by the business. In return, and in complete adherence to the basic principals of market economics, the business pays the government for the service and the government spends the money on things which are needed to continue providing the service and on things which are of value to the owners of the business, which in the case of a government are the citizens of that government. This sort of trade is perfectly good and indeed is the basis of a country’s prosperity. Providing such services, or any services, for free, however, is potentially ruinous.

Government As A Business

2010-06-20T13:22:00.001-04:00

It seems to me that the fundamental interaction to business is that I need other people to do stuff for me so what can I do in return for them. This interaction does not need to be cutthroat capitalism, it is better for all if it is not. Nearly all such trades are going to be positive sum, both parties are better off, so it can be perfectly friendly. There need be nothing brutal about business. And yet what do we see around us.

The thing with seeing government as a business, is what does it do for which it can charge money. It seems to me that government provides a host of really valuable services for which it ought to be charging money. Copyright protection is, according to the content industry, really valuable. Incorporation is a form of insurance against investment loss and is, as such, really valuable. The broadcast and telecommunications industries depend upon the federal government licensing the radio spectrum. I could go on. The problem I see is that we are charging way to little for these services. It is not that we need to tax the rich per se, it should not be punishment for being rich. Rather we should be charging for the services we provide. And that amounts to running it like a business. If government were charging for these services, rather than giving them away, it would seriously curtail the degree of corporate entitlement, the excess money into lobbying and other such stresses on our society.

What to do with the money? I would suggest, given the things that the government does, that we would want to spend it on having a well educated, generally healthy, stable, secure and prosperous population and an infrastructure of transportation, communication and power distributions.

Who owns this business? I’d say the citizens of the US own it jointly. Essentially it is itself a corporation in which each citizen has a share, all shares are voting shares and the shares are not trade-able nor transferable. You can’t accumulate them. So we the people ought to be charging more for the services we provide (at least those services which are used to generate revenue) and spending it on the things I mention. In this view most of the things you would refer to as public goods, can also be seen as the things needed to run the business. My point is definitely not to disparage the concept of the public good but to suggest that thinking of the government as a business need not decrease the value of those things.

Basically, if viewed sensibly I believe that consistent and coherent view of the government as business can only lead to liberal policies.

Human Rights and the Right Wing

2010-02-14T13:12:00.000-05:00

Glenn Greenwald has, as usual, a great post on the ten American Baptists who were arrested in Haiti on charges of child trafficking. I have to disagree with one thing he writes, because he does not go far enough:

Why would National Review -- which endorses far worse abuses when perpetrated on Muslims convicted of nothing -- take up the cause of an accused child smuggler and possible child trafficker, and suddenly find such grave concern over detainee conditions? Or, to use their warped vernacular, which equates unproven accusations with guilt, why would National Review be advocating for the rights of child kidnappers and child traffickers? Because, as a Christian, Allen is deemed by National Review to deserve basic human rights, unlike the Muslim detainees whose (far worse) abuse they have long supported

The distinction made by the National Review is much more start, I believe, than what Glenn indicates in the last sentence. To the right wing Allen, as a Christian, belongs to a privileged and special class of people who should not be accused of any crime unless extraordinary evidence is presented against them. In other words this goes beyond ordinary human rights. A conservative Christian should be deemed, in the opinion of the National Review, to be innocent, unless perhaps charged of some act against another conservative Christian. Other people, such as Muslims, are never of any account. If a conservative Christian is the least bit uncomfortable, then then the most monstrous of acts is fully acceptable if it will, to the tiniest degree, relieve anxiety in a conservative Christian. The slightest concern on the part of a conservative Christian should be held of the greatest possible importance, while the very lives of other people are of no account whatsoever. That is the distinction made by the National Review.

Government, part I

2010-02-13T19:30:00.001-05:00

In the course of our public discourse on government and the economy, I have been increasingly struck by what seems to be the universally accepted view on the relationship between these two. I’m struck by this accepted relationship because it seems to me to be completely wrong.

Whenever I read of anyone writing about the economy, it always comes across that the author views the economy as this perhaps ideal market (if he is a conservative) or otherwise a market troubled by failures of one sort or another (if he is a liberal) and that government is this outside agency that in various ways reaches down to the otherwise isolated market and “interferes” with it. The conservative sees this interference as always damaging to the welfare of the world, and the liberal see it as necessary to fix failures in the market.

I think both are nonsense. The government is no more some outside agency that reaches in to interfere with the economy than the sun is some kind of outside agency that reaches in to interfere with the environment. The sun is part of the environment , the government is part of the market.

Consider as an example: The goods we produce and the labor we provide are more valuable when there are people available to transport those goods to distant places where they can be traded more broadly and can command other goods not found nearby. Those of us who produce the goods here pay to those who transport them a portion of the resultant increase in value. This is trade, this is commerce and it is the basic operation of a market.

In much the same way, our goods and labor are more valuable in a region of general peace and security than they would be where security is absent. Like the porters in the previous paragraph, the government provides that security, and therefore for exactly the same reasons as any other actor in the market, it charges upon the beneficiaries of the service a portion of that increase in value. This charge, particularly for security (which is certainly the primary, but not the only service provided by government) goes by the name of taxes, and can certainly be imposed in a manner that is either just or unjust, fair or unfair, but is, in principal, no different from any other charge imposed by any other actor.

The government then, in my view, is just another actor in the economy, in the market, providing services, charging for those services and spending the revenue on being able to continue those services and/or providing benefits to the nation as a whole (its owner’s and operator’s). One might note that I list the government as providing services only, not goods and/or services as other actors do. It is the case that government provides only services, not goods, however, that is a superficial difference. Other actors are in the same situation and the role of goods is substantially the same as services in the market.

Government does have some unique characteristics, but they are few. The most significant and substantive way in which government is a unique actor will have a powerful impact on how the government should be organized, but does not have any significance for government’s role in the economy. Government is granted the unique power to declare certain acts to be criminal and to therefore impose enormous additional costs (fines, imprisonment, death) upon those who engage in them. People recognize that this is necessary is we are to have a peaceful and secure society. No other entity is allowed to do this. Related to this unique power is the requirement that government be a monopoly. If each citizen is free to choose his own government, and therefore the laws he must obey and the punishments for transgression, then we have no government at all. That is the perfect definition of anarchy.

Beyond this characteristic, government has some unique powers, but all can still be characterized as providing services and charging money for them. The services it provides may be wise or foolish, and the charges it imposes might be fair or unfair, but the idea that government is “interfering” in the market is generally nonsense.

Conservative Law Enforcement

2010-02-05T21:36:00.001-05:00

Matthew Yglesias is noticing and commenting on the conservative view of law enforcement being revealed by the Underpants Bomber case. He notes

The underlying issue here, as I’ve been saying, is that conservatives think that any constraint on the state security apparatus is too much. They believe, contrary to all of the evidence, that the rule-bound criminal justice system can’t or doesn’t function and that things would be better if we scrapped all the rules.

Matt's observation is true as far as it goes, but this admiration of state police power, as Atrios notes, is narrowly confined. Specifically:

Conservative hatred of a civilized system of justice is based on their "othering" of criminals. The instant they feel the jack-booted thugs of the state of[sic] treated them or someone like them unfairly the squealing is deafening.

Indeed, the mere possibility that one of them could be the subject of prosecution is evidence of overreaching by the state. Or consider the case of James O'Keefe (or Scooter Libbey for that matter) and the conservative response. One can see outrage at the fact that one of there's could be arrested. I don't think there is any mystery to this response at all. This is exactly in keeping with the conservative dream of a Servile Society as I've discussed here and here.

What I mean by the Servile Society can be summarized by looking at the conservative dream world for taxation and spending. On taxes they would have us eliminate all taxes on interest, dividends and capital gains and draw all government revenue from a flat tax on income. Spending would be limited to military and police protection, which amounts to just the protection of property. So there would be no government expeditures on the middle class wage earners. In this world then a person who owned extensive property could cover all his yearly expenses from interest, dividends and capital gains and thus pay no taxes. This in spite of the fact that the ability to have these expenditures is completely dependent upon the security of the property that is being provided by the government. In short such a person would enjoy all the service that government provides, service essential to his prosperity, at no cost to the recipient. A perfect hand-out. The costs of providing this service then would be born entirely by those who labor for wages, and in turn they would receive no direct benefit to themselves from the government who's although they supply the governments revenue. A privileged class of property owners and a servile class of wage earners. This is the conservative ideal.

First I would note that not only is this a thouroughly unjust and unfair system, but it is also the system used throughout the world for most of history and has been universally really awful.

With regard to the points made by Matt and Atrios, the attitude toward law enforcement is perfectly in keeping with their belief in a Servile society. Law enforcement needs to be as brutal and unforgiving toward the servile class as is needed to keep the privileged class from being afraid. Servile insurrection is quite scary to the privileged and they need to be keep perfectly at ease. It is part of the privilege. But of course the purpose of law enforcement is to maintain the security of the privileged class, so it is a gross failure if it ever threatens them. This is a view that is utterly incompatible with equality and liberty.

As a final point observation there are a couple of points that should be noted by progressives. The distinction between serevile and privileged is not purely one of wealth. Yes generally the wealthy would be more likely to be in the privileged class, but there is no strict dividing line. The breakdown is more like an aristocracy, in which poorer titled nobles might well be looking down upon commoners who vastly surpass them in wealth.

Nor is it, in fact, entirely one of race. Now race has obviously played a huge role in the imposition of a servile society historically and will continue to do so if the conservative tide continues to grow. I do not pretend that race is not an issue. What I'm suggesting is that for most of the chapions of this system the master/servant relationship. comes first, whoever is going to be the servents. As long as they get to be masters, they are not on the whole overly concerned with how the servents are defined. Or to put it another way, most don't actually have much problem with Condelezza Rice being included in the privileged class. The larger point here is that this servile society is more of a threat to most white folks than is often admitted. This organization of society is very bad for everybody, except, perhaps, the privileged.

Raising Taxes

2010-02-05T20:39:00.002-05:00

The general consensus among economists, left and right, is that raising taxes in an economic downturn is always a bad idea. From Paul Krugman to Milton Friedman, all agree that raising taxes, on anyone, would hurt the recovery. Krugman ranks it as being just as bad as cutting spending. Now I perfectly well understand this with regard to business in a ideally competitive environment. In an ideally competitive environment any increase in costs, taxes or otherwise, can only be made up by producing less stuff. That would entail, in general, laying people off and thus reducing aggregate demand. The taxes collected would be spent on something, but the result would be unlikely to be better than what was being purchased prior to the tax increase, and is quite likely to be worse. That, as I understand it, is the view consistent with standard economic theory.

However, I am puzzled about what happens in a certain non-ideal environment, particularly because I believe that that non-ideal environment applies the the US economy. Let us suppose that John Smith is the proprietor of a gas station under franchise to XYZ Oil, Inc. (fill in the name with your favorite, or most despised, oil company as you please) Among his costs are a franchise fee paid to XYZ Oil. If this fee is at the highest rate the market will support, then everything above applies and any increase in his costs, taxes or otherwise, are likely to force John to contract the amount of work he does, possibly cause him to leave the business. In any case aggregate demand would go down.

I want to consider a situation where the John’s costs are different from the ideal of competition and I’d like to put some numbers on the problem to make it more concrete. So let us suppose that the market price for the franchise fee is $50,000 and that after all other expenses are paid, John can expect to be taking home $60,000 for himself, assuming that he puts in about 60 hours of work each week. Let us further stipulate that this arrangement would be quite satisfactory for John, considering the range of opportunities for work available to him. This then is the state of affairs in an ideally competitive market. Consider then what the situation would be if XYZ Oil, for some reason, were charging him much less than the market value for the franchise fee. The reason is not important, but for some reason it is charging him $25,000 a year, half what the market would support. But given that he can expect to take home now $25,000 more than the market would typically support, I would expect him to work fewer hours. With the reduced franchise fee working 60 hours in a week would bring in $85,000. In this case he could perhaps work only 50 hours in the week and still have $75,000 to spend, more that he would have in the ideal market. Surely, he would rather have the 10 hours in leisure time and use it to spend the extra $15,000 rather than do the full 60 hours of work.

So what happens then if XYZ Oil discovers that its fee is too low. Let us suppose that it raises the fee up to be somewhat closer to the market (it chooses not to correct the error in one sudden jump) and raises the fee from the very low $25,000 up to $35,000. Now if John continues his 50 hours a week his disposable income will be reduced to $65,000 per year. He might keep that level and have 10 hours free time per week now to spend the $5,000 per year, but he is also very likely to choose to work a few more hours each week and increase the amount of stuff done by the station (increasing also the number of people employed and the number of hours these employees work as well as the incidentals purchased by the station) by 5 hours per week. Now he is producing more, working 55 hours per week (still fewer than the market would demand) and earning $70,000 a year. He isn’t as well off as before the price rise, he is working more, but he still has more free time (5 hours per week) and more money to spend ($10,000 per year) than the market would support. The point here is that in this non-ideal situation, raising his costs will not decrease his output and productivity but rather increase it. Contrary to the standard economic theory of an ideal market raising his costs will raise the aggregate demand. Similar arguments could be assembled to show that should XYZ Oil, for some really bazaar reason choose to lower the franchise fee from $25,000 to $15,000 the effect could only serve to encourage him to take even more time off, produce less and reduce overall demand. Note too that this argument has been developed in terms of franchise fees for a gas station and has nothing specifically to do with government and taxes. I maintain that the arguments apply as well to any costs that a business incurs.

Now the reason I discuss this in a post on raising taxes is that I maintain that exactly this kind of deviation from market value applies to the US government and the prices it charges for services such as general security, copyright protection, the guaranteed sole use of radio spectrum, incorporation, etc. If, as I maintain, our prices are too low, we charge far less than what the market will support, then raising prices will not reduce aggregate demand but rather increase it. Raising taxes on those who use these services to generate their income will not discourage production and hiring but rather encourage it.

Consider, for example, the issue of the relative poor state of broadband service in the US compared to other countries in the world. The reasons for this state of affairs is debated, but I propose that at least one cause is that given the low prices we charge for our services the operators of the companies providing these services have little reason to do the extra work needed to provide the better services. Yes they would make more money by providing better services, but the managers would have to do more work and given the pay scales they would rather take the leisure time. Particularly during the past 8 years when a pay raise (via lowered prices charged by the government for services it provided) was guaranteed whether service improved or not. If we would like to see improvements in these services we need only raise our prices. Furthermore this would only be a boost to the economy.

Three Options

2010-01-26T20:15:00.001-05:00

On several occasions now (see here, here and here) I’ve gone on about how the government relates to the economy and what services of what value they are. To summarize, the following things, among others, are services provided by the U.S. government, for example, and are valuable:

Security of financial assets
Copyright protection
Guarantee sole use of the Radio spectrum
Incorporation

These are a few among many that I could list. Now it seems to me that there are three ways, broadly speaking, that we, as citizens of the United States, and deal with the fact that our government provides these services.

I. Trade Them

This is the liberal option, and the one I prefer. We can trade these services for things that are valuable to we the citizens. Those that can use, and who need, these services to generate revenue could return a portion of said revenue to those who supply the services (the government) which then would spend the revenue on A) the kinds of things needed to continue supplying these services and B) stuff we the citizens could use. We could have more extensive, and less expensive, mass transit, fully funded social security, education, health care and the like. I also argue that there is a great deal of overlap between A and B above. To supply the highest quality of the services listed above, as the U.S. does, requires having a well educated, secure, stable, generally healthy and prosperous population. These things are both needed by the government to supply the services and of general value to the population, so the two categories are not totally distinct.

Now if we do trade the services, we do not need to squeeze our customers to death. We can certainly set the prices such that both we, and our customers do well by the deal. That is the liberal proposal. For all the whining and complaining of our conservative friends, even the highest tax proposals leave those who rely upon these services making quite a good living.

II Eliminate Them

This is essentially the Jeffersonian, and it would be a coherent libertarian, position. While this is not the position I would advocate, it is one that can be respected. This would be the position of a truly “small government”. Instead of the government providing these services we citizens would either do without them or they would be provided by the private sector. With no incorporation, no licensing of the radio spectrum and the rest, this would indeed have the government “out of the marketplace”. This is also a position that no significant political faction is calling for.

Now a variation on this policy would be to provide these services, but only to a limited extent. This could be only be accomplished, however, by making them very expensive. If the cost of incorporation or sole use of radio waves were very high, these services would be used rarely, and some private sector solution would be used instead. Now there is no guarantee that the value obtained from these services as provided by the government can be supplied by the private sector. If it takes a government to supply such things, and I think experience indicates that it does, then the loss would be a deep cost to we citizens.

III Provide them for Free

This is currently the policy of the Republican party and the modern conservative movement and it is completely without justification. Currently, the government provides these services and is therefore deeply involved in the economy. But we charge nothing for them, rather provide them for free to a privileged class of select individuals. Thus we in no way reduce the extent or intrusion of government we are simply removing the only things that protect us from the dangers of a large intrusive government, namely oversight, review, accountability and transparency.

There are businesses in which all the costs of all the inputs must be paid for out of the revenue that can be derived from the business. Under these circumstances the business must be run in a manner that maximizes its efficiency if any substantial profit is to be made. However, if the inputs of the business include copyright protection or a guaranteed sole use of radio spectrum, and as in our current arrangement these are provided at nearly no cost, then large profits are guaranteed even if work is done or the business is run poorly. This also results in a disproportionate share of the nation’s capital gets drawn into such businesses, as they are more profitable than businesses that must cover all their costs without government assistance. So this option can only result in growth of government control and influence in the economy.

One Way Ticket

2010-01-12T22:19:00.001-05:00

Much of what was reported about the underpants bomber was wrong. The errors do not alter the story much, but many of the serious ‘red flags’ that should have been caught were, in fact, errors of reporting. One of these was the “fact” that he had purchased a one-way ticket. As TPM has clearly shown, this is just not the case.

I bring this up, because I think this error highlights the sorry state of journalism today. You see, one of the odd truths about airline travel is that, for some reason I don’t understand, and in spite of common sense, one-way tickets are more expensive than round trip tickets, at least for international flights. As I say, it is common sense that a one-way ticket would cost about half of a round-trip ticket and so one might expect that a suicidal terrorist would save the organization some money and get the one-way ticket. Except that supposition is wrong.

Don’t believe me? Go to travelocity, or some other flight reservation system and give it a try. Here are a few examples I tried, All are the cheapest ticket I could find for the given flight and all depart on Feb 26, 2010, the round trip tickets return on April 30, 2010. The choices I made here were essentially random.

Flight	Round Trip	One Way
BWI to FCO	$875	$1435
Boston to Madrid	$590	$917
Miami to Cairo	$1135	$2420

I first came across this in the mid ‘80s and again in the ‘90s. It has been pretty consistent. I have no idea why, or how the airlines can get this to work, but it is pretty consistent.

So the striking thing is that among all of our top notch journalists no one is apparently aware of this, nor could any discover it in the course of reporting on this story. After all, I got the table above in about 15 minutes on travelocity.

Civil Matremony

2010-01-12T21:48:00.002-05:00

I basically agree with Mark Kleiman here on the question of gay marriage and Obama's stance on the same. Mark's short summary of Obama's position is

since gay marriage is bitterly controversial among various religious groups, and the state doesn’t need to take a position with respect to that controversy, it shouldn’t.

Which works well enough as a summary, although I would say that there are a few more wrinkles to the issue. And, as the commenters noted (go check the link) there are important issues of language, which are not easy to resolve.
Basically, there are, potentially, two aspects to "marriage". One is the legal status, defined by the state, the other is the religious sacrament of Holy Matrimony. The state should have virtually nothing to say about the later. If a group of poeple choose to form a social network in which they will perform ceremonies for one another only under certain conditions, that should be their business, the state should not intervene. The legal status, however, the status defined by the state, should be inclusive, people should be able to enjoy that status without discrimination. I believe Obama's position does no more than recognize that this is the case.
Now that does still leave one problem, which is somewhat thorny. Having read the comments to Mark's piece I see reasons for both sides. Namely, which of these two conditions gets the term "marriage". I'm inclined to leave "marriage" with the religious ceremony and have civil union work for the legal status. But, as I said, read the comments to see the opposite view.
I think ultimately this conflict is resolvable and either choice will work.

How to Respond

2010-01-11T22:04:00.002-05:00

Fareed Zakaria has an excellent article in the Washington Post. He summarized very well my outlook on how we ought to respond to terrorist attacks, as opposed to the way we have responded.
As he says, the consensus view in Washington seems to be that we'd rather overreact to an attack, such as the one on Christmas day, than underreact. But, as he says, this is quite wrong

The purpose of terrorism is to provoke an overreaction. Its real aim is not to kill the hundreds of people directly targeted but to sow fear in the rest of the population. Terrorism is an unusual military tactic in that it depends on the response of the onlookers. If we are not terrorized, then the attack didn't work. Alas, this one worked very well.

This is an important observation. The ability of al Qaeda, or any such group, to succeed at their objectives is almost entirely up to us. If we respond calmly and methodically, they fail.
Now this is not to say that we should ignore terrorist attacks. That would be absurd. It is, however, possible to respond, even to violent events, with calm determination, rather than panic. Consider our national response if the cause of an airline crash, with even massive loss of life, is due to mechanical failure.

When an airliner suffers an accident, major or minor, the National Transportation Safety Board

convenes a group of nonpartisan experts who methodically examine what went wrong and then issue recommendations to improve the situation.Currently we are in the perverse situation where a significant minority of the population seem to believe that if the crash is due instead to an organization which is trying to instill terror in the general population, that we need to accommodate them. Instead of going along with al Qaeda in their efforts to terrorize us, it would be preferable if we followed up on a terrorist attack in much the same way as we do for a non-terrorist attack.
A final note by Fareed is, I think, really valuable.

As for the calls to treat the would-be bomber as an enemy combatant, torture him and toss him into Guantanamo, God knows he deserves it. But keep in mind that the crucial intelligence we received was from the boy's father. If that father had believed that the United States was a rogue superpower that would torture and abuse his child without any sense of decency, would he have turned him in? To keep this country safe, we need many more fathers, uncles, friends and colleagues to have enough trust in America that they, too, would turn in the terrorist next door.

Cheering the Team

2010-01-09T21:51:00.001-05:00

I caught this article by Jeffery Young at The Hill (h/t Matt Yglesias) discussing the health care bill with Andy Stern of the SEIU. Now the comments on the health bill are worth in themselves. But one thing in the article particularly caught my attention, not with regard to the health care bill particularly, but rather with regard to how progressives approach politics and the rather limited success we’ve had in advancing policies we want. At one point Young writes

Stern expressed strong frustration with the Senate and with those centrists -- without calling any out by name -- and hinted that labor unions and their members, who contributed with money and effort to winning Democratic majorities in the House and Senate, would be less motivated next time around.
“Democrats were given a gift that they have squandered,” Stern said. “If this is the way the Senate is going to do business when they have 60 votes, they’re pretty much guaranteeing a self-fulfilling prophecy that they won’t have 60 votes.”

a view similar to what I’ve seen a lot from various liberal bloggers radio hosts and the like. Given the Democrats failure to deliver all that we hoped we won’t be there to give them our support in the future.

This seems to me, however, to be a strange attitude toward the political process. It is almost as we are supporting not a political party but a musical group or a sports franchise, and if they disappoint us the fans won’t show up at the part. But the Democratic party is not really like a sports franchise that will have to live the misfortune of lower attendance if we, the fans, aren’t happy with how they perform. The political parties are the instruments we have for achieving our policy objectives. If we stay away from the polls then it is true that the Democratic party will feel some disappointment (although I doubt that it is actually as much as a lot of progressives believe) but it is also the case that other people when then be setting the nations policies. Experience indicates that that will mean that really terribly bad polices will be established rather than merely disappointing policies.

I’ve discussed elsewhere what seems to be the progressives strategy and that it has been a striking failure. As a movement we stayed away from the polls in ‘68 to get Nixon, and stayed away in ‘80 to get Reagan and stayed away in ‘00 to get Bush. The policies that have come out of staying away have been quite a disaster from a progressive viewpoint. Yet we persist in this strategy, and I see echoes of it in the comments of Andy Stern and others

On the flip side of this discussion, however, is this article by Seth Maxon from In These Times. Apparently, Michigan Socialists are having some electoral success and political influence by working with the local Democratic party rather than opposing them. To summarize

The secret to their success, says Green, is thinking strategically.

“As a small organization, how can we make a difference? We leverage our forces. We put our efforts towards a progressive Democrat challenging a Republican, or a progressive Democrat challenging a centrist Democrat [in a primary]. “

“We don’t pick symbolic victories,” Green says, “We pick things we can win.”

After deciding whom to support, Detroit DSA carefully chooses tactics that will have the greatest impact, all of which are based on the leftist tradition of on-the-ground, grassroots action.

This seems eminently sensible to me. The route to political success is to move the political process in the direction you want, not to call upon political purity of all those you associate with.

This also touches on another issue one often hears about in left wing political commentary, namely the formation of a third party. We’ve all heard before the kind of claim that the Democrats are all corrupt and sell outs to Industry, or whatever, so we need to form a new political party. This too seems quite misguided. Forming a political party is enormously expensive in terms of time and effort, as well as money, and the influence of a third party is very limited. A much better path is the one followed by the Michigan Socialists above, form a coalition or section within the Democratic party. Have members of the Democratic party move the Democratic party to the left. People tend to think of the parties as being fixed entities, and indeed it is generally the case that they change slowly, but they do change. The Democratic party of a hundred years ago could hardly have been the one to elect the first Black President, and the Republican party of the same time was not the holdout of the nations Confederate apologists. The Democratic party can be made more progressive than it is and it already has a great deal of the infrastructure needed to get people elected and to shape policy. Use that existing infrastructure rather than try to build a new one.

Another way to consider what is needed is not to think of the Democratic party as a whole. Rather consider that there are a number of people in Congress who are doing the work we want, Bernie Sanders, Russ Feingold, Chuck Schumer, etc. Given that these folks are trying to advance the kind of policies we want, and trying to stop those policies we don’t want, we should consider how to best help them do this. Obviously, electing a whole slew of really progressive Democrats (or whatever's) would be best, but clearly seeing a bunch of conservative Republicans elected would not be helpful. More Democrats would help (60 is a much better number than 59, but we really need 62 or 63). The more progressive better still, but any but the most conservative Democrats would be a boost, and even some of those might not be bad if it brought us over 60.

Government and Industrial Policy

2010-01-07T21:31:00.001-05:00

Atrios comments on our attitudes here in the US with regards to anything called "industrial policy". As he says

One of my longstanding pet peeves is that everyone in the US pretends we don't have an "industrial policy" because that implies naughty state intervention in certain sectors. But of course we have lots of naughty state intervention in certain sectors, we just don't do it even notionally for any good reason. We prop up the single family homebuilding industry and the automobile industry (even before the bailouts). We prop up certain agricultural sectors. We favor big business over small. Now we're massively propping up one skimmer industry - the financial industry - and are about to prop up another skimmer industry - health insurance.

So, yes, by design or accident we have industry policy. We should recognize that and then decide what we should be doing instead of pretending we don't have any.

James K. Galbraith comments on our attitudes toward industrial policy as well in The Preditor State. In chapter 12 he advances the need for planning. Our aversion to anything called industrial policy is harmful to us and foolish.

I agree with this, but I believe that there is a more fundamental problem. It seems to me that everyone discussing economics and political theory treat government as some sort of external entity which 'interferes" with markets and the economy. I believe that our universal insistence on this complete separation between government and the economy to be absurd.

The government produces a host of useful services. Basic security of the sort universally accepted by conservatives and liberals alike is certainly valuable. Ones labor and property are more valuable because one can reliably accumulate property and the produce of ones labor and trade them for other things of value. But in addition to that basic service the government also provides a number of other services that I've discussed elsewhere. A partial list:

Incorporation
Copyright protection
License the air waves
Trade deals with other nations
Securing sea lanes for trade
Securing patents and trademarks

These services are certainly produced and provided by the government and and also certainly extremely valuable. The government is not some outside agency, but a vital part of the economy. We need to have some thought out industrial and economic policy because the government is a part of the economy. Our most recent policy of providing these services, but giving them away with no obligation on the part of the recipeint is certainly one choice we could make. A very foolish choice, but a choice nonetheless. However, if this, or anything else, should be our policy, it should be so because we, as a country, have made a decision to have this policy, not out of a knee-jerk opposition to the phrase "industrial policy".

A further note. Currently, and for many years, government has provided the services listed above. In spite of many years of claiming to be in favor of smaller and limited government, conservatives have never proposed reducing or eliminating these services. We are in no way shrinking government by providing these services and then giving them away. This policy only serves to 1) make government larger and 2) remove what protections we have from the dangers of an over large government. It is an utterly foolish policy.

The policy I would recommend is to provide these services and charge a reasonable amount for them. Mind you, I do not want to take all the money from those who use these services. Indeed, I want to make sure that those who use the services make a buch of money doing so. I just want the people to collect a fair portion of the money generated by these services and spend it on things of value to us.

Terrorist Attack?

2010-01-04T22:05:00.002-05:00

Josh Marshall reports on some fake anthrax deliveries in Alabama and California. Now given that as Republicans and conservatives have insisted, George W. Bush kept us all safe from terrorist attacks (except for 9/11), that implies that the real anthrax attacks of 2001 weren’t terrorist attacks. But if the real attacks during the Bush administration weren’t terrorism, are the fake attacks during the Obama administration terrorism. That is the question.

Market Solutions

2010-01-04T21:58:00.002-05:00

So after the underpants bomber we have had a whole bunch of new security procedures imposed at airports. A lot of this appears to be “Security Theater”, that is the appearance of doing something, without actually doing anything useful. One can also find various reflections on what can be done, from the sensible to the absurd. (After all, even ignoring the civil rights issues and implications for foreign policy, by any measure strip searching all Muslims would involve an awful lot of security people busy strip searching a lot of Muslims who are no threat at all. Those security personnel could be put to much better use doing something else.)

But it occurred to me today that in spite of the conservative love for market solutions to everything, the obvious market solution for those concerned about another such attach is never proposed. Why can’t we have a maximum security airline. Let’s say to get a ticket you need two letters of recommendation from someone the FBI can check on. Then to get on board everyone is X-rayed. There would be more hassle for such passengers and tickets would be more expensive. But for all those who want everyone who is Muslim (or not Republican anyway) to be stripped searched, could have the security they want. The rest of us could then fly as we do now (or perhaps with a little less inconvenience.)

And yet no one on the conservative side is even suggesting this. Strange.

Lost Decade

2010-01-03T17:11:00.002-05:00

Much comment is being generated by this article by Neil Irwin, in which he documents how the past decade has been a “lost decade” for the American economy. For the past 70 years the lowest net job creation rate for a decade was 20%. For this decade it has been 0%. Truly abysmal. But, as I’ve been going on, it seems hardly surprising. We, as a nation, decided to follow the wisdom of conservatives and dedicated our national wealth towards maintaining the status of the idle rich. There is no sound reason in economics, philosophy, ethics or religion to be so dedicated to sacrificing the welfare of the general population to provide handouts to the idle rich, yet that is beyond doubt what the past decade has been about.

The solution to the problem is really quite simple. The value of many of the services provided by government is quite large. Enormous, in fact. We need to either set the price we charge high, and spend the money collected on things of general value, or we need to set the price very high and discourage the use of these services.

We cannot afford to continue as we have been, but what we cannot afford to do, is give away our most valuable services to the wealthiest among us. The services of which I speak are, of course,

Incorporation
Copyright protection
Security
Guaranteed sole use of the radio spectrum
Patents and trademarks
etc.

Our prices are too low, we need to raise them. In fact the history of the past several decades is clear. We lowered our prices in the ‘80s and the budget went all out of balance, we raised our prices again in the ‘90s and the budget went back into balance, then we lowered them again in the 00’s and out of balance again.

Also note that raising our prices in the ‘90s did not destroy the economy, rather the nation enjoyed an economic boom, which furthermore left behind a great many extremely valuable new forms of commerce. We’ve done the experiment, the results are clear, we need to raise our prices.

Circular Reasoning

2010-01-03T16:28:00.002-05:00

Steve Singiser at Daily Kos posts the following

A question that every journalist should be prepared to ask Peter Hoekstra, Peter King, and the rest of the GOP terror bloviators: how is it possible for the outgoing president (Bill Clinton) to have been responsible for one early-term terror incident, but for the incoming president (Barack Obama) to have been responsible for the other early-term terror incident?

But clearly he misses the fundamental principal of Conservative politics, namely circular reasoning. You see, it is a given that Conservatives do a better job on national security, so the 9/11 attack must have been the fault of Bill Clinton (just as the first attack on the World Trade Center in 1993 was Bill Clinton’s fault, not George H. W. Bush’s fault) and the attempted attack by Richard Reed, must also either have been handled perfectly well, or been Bill Clinton’s fault. But the underpants bomber this Christmas was a massive security failure, and Obama’s fault. Then when you see that Democrats are doing a bad job against terrorists (we’ve blamed them for all attempts whoever is in charge when the attack takes place) and Republicans never fail to protect against these attacks you are supposed to conclude that Republicans are better at national security thus justifying the original assumption and completing the circle. You need to understand the conclusion you are shooting for and then analyze the data so as to support the conclusion. This idea of deriving your conclusion from the data is just so liberal. There is no way conservatism could survive if we’re going to use that kind of linear reasoning.

Monty Python and Al Qaeda

2010-01-01T10:36:00.001-05:00

Republicans are in full swing politicizing the Christmas underpants bomber. They have just discovered, apparently, that treating a case like this in exactly the same manner as did George W. Bush with the shoe bomber is a grave failure of leadership. Who knew? The Democratic party and others are setting the record straight a bit (here and here), which is good.

One thing about the Republican insistence that these people are the gravest danger this nation has ever faced, the utter pants wetting histrionics of conservatives with regard to these folks. Consider what this attempt really indicates about Al Qaeda. In 2001 they came up with the idea of having Richard Reed try and take down a plane by hiding explosives in his shoes and then setting them on fire as the plane landed. That did not work. So the brilliant minds of Al Qaeda went to work, those evil geniuses which pose such a monumental threat to the worlds only hyper power put all their brainpower into coming up with another plan. After nine years they came up with an alternate plan. This time they would put a guy on a plane with his underwear packed with explosives and he would set this on fire as the plane landed. Apparently, the recognized that a man setting his shoes on fire was suspicious, but then they thought that man setting his underwear on fire was less so. Hmmm.

I’m sorry, but this really is more like Monty Python and the Holy Grail and Sir Bedevere’s plan with the wooden rabbit. Then when that doesn’t work try a wooden badger. In a three way competition with the Knights of the Round table and the Judean People’s Front, I’m not convinced that Al Qaeda comes out as the most competent.

Look, I’m not trivializing the thread of terrorism, rather I’m putting it in proportion. It is conservatives and Republicans who are magnifying it out of all reason. Anyone committing an act of murder needs to be caught and prosecuted. The people trying to kill Americans in acts of terrorism no less than any others. That is serious and should be treated with seriousness by our officials. But the idea that these people are in any position to destroy the United States is comical and cowardly. That needs to stop.

Democracy as Anti-corruption

2009-12-30T20:19:00.001-05:00

Matt Yglesias posted the other day on the problem China has in curbing corruption and he relates that to the lack of Democratic institutions. He attributes the relatively low level of corruption in the Western Democracies to our democratic institutions. In his words

Simply put, the main way that corruption gets exposed is through a combination of a free press and active, opportunistic opposition parties eager to make hay out of corruption scandals.

A succinct way of stating something true. Critical review and transparency are really the only effective way to uncover errors, whether due to accident or corruption.
One of the conservative arguments for expanded government police powers has been that if the prosecutors and police had an easier time arresting, questioning and trying people they could do a better job catching criminals. And actually that is true. They would be able to do a better job catching criminals. Unfortunately, they would also be able to keep their jobs and positions of authority while doing a really bad job of catching criminals by using the expanded powers to silence the folks who might be inclined to point out that they weren't doing their jobs. In fact, with much expanded powers the police and prosecutors would be in a good position to work with criminals, and yet keep their positions, because they could silence those who would object. This would make them even more powerful and wealthy. It would be lousy for us and beneficial for them. Any you know what. For all of the past five thousand years of human history, that is exactly the kind of thing people in authority did when granted extensive police powers. And that is why many people think it is a bad idea to expand the police powers of government to the extent that Conservatives wish.

President's Response to Terror Attempt

2009-12-28T23:18:00.001-05:00

Excellent post at Kos about the President's response to an effort to blow up a plane. However, this is about Bush's response, or lack thereof, to Richard Reed's attempt to explode a shoe bomb in 2001.
The long and the short of it is that like Obama, Bush did not make any major announcement, did not become immediately involved in the case. Like Obama he monitored the events, but essentially left law enforcement and the courts handle it. The two men responded in much the same way.
Now to be clear, I think Obama's response to this terrorist attempt was correct, and I have no problem with Bush's. Both are handling it (or handled it) in a similar manner and both responses are, I believe, correct. The point here is to the radical difference in the reaction to this approach coming from conservatives. Though Bush and Obama reacted in the same way, somehow to conservatives Bush was admirable and Obama is being a failure. And before anyone claims equal measure of hypocrisy by both Democrats and Republicans, no elected Democrats or officials of the Democratic party offered criticisms of Bush for his handling of this manner. None called him to task for doing to little or failing to be concerned.

Courage and Strength

2009-12-27T17:41:00.000-05:00

Marc Ambinder astutely summarizes the Obama approach to the attempt to blow up the plane in Detroit. An approach that I endorse, by the way. Hat tip, also to Steve Benen, who has some good commentary on it as well.

One does not intimidate enemies by treating every possible danger as if it is life threatening. Rather, one intimidates ones enemies by treating things that terrify them, as if they do not bother you. Cheney’s 1% doctrine wherein we treat even a 1% change of an opponent having a nuclear weapon as if it is an absolute certainty, is the very definition of cowardice.

Are we really to believe that the main who treats a house cat as if it were as dangerous as a lion is to be feared, rather than the man who handles a lion as easily as one would a house cat.

Incorporation

2009-12-27T16:37:00.002-05:00

Mark Kleiman has a good post up on a new book by Eric Lotke. The title is 2044 and is, it appears (I haven’t read it yet) inspired by George Orwell’s 1984. In the more recent book, the story is not of the overwhelming power of government, but rather of the government/corporation complex.

This concern of the growing power and influence of corporate culture is a concern of mine too. It seems to me that we are making a serious error in our treatment of the institution of incorporation. It is looked upon as some sort of natural state, in which the power and influence that can be held by an incorporated entity is theirs by right. However, that is not the case. Incorporation is a status created by governments. To treat it then as a right results in an entity with all the potential for abuse that government may have, but with none of the checks and balances that may obtain with a government.

I also include here a comment I left attached to that post.

Part of the problem here is the seemingly universal tendency to treat incorporation as some sort of natural state of doing business, rather than an institution created by government. Incorporation is a government created institution in which some of the risk of running your business is shared by the community at large. It is an extremely valuable service provided by the government, it is not some natural state of affairs, that is yours by right. Given that it is valuable, it is only right and proper, and is in no way and infringement upon the freedom of the incorporated entity, that the value be traded for something of equal value. The most straightforward way to curb the abuse of incorporation is to require something of comparable value in return, rather than giving it away, with no obligation on the part of the recipient. The libertarian (at least the simplistic ones as identified by Brian) erroneously believe that limiting the use of this property or requiring payment is an infringement upon the liberties of the recipient. Nothing could be further from the truth. Such restrictions are no more than the restrictions that are an normal part of any ordinary trade. One can take the benefit, and pay the price, or pass up on the benefit and save the price. Having the government create this enormously valuable property, on the other hand, and then giving it away with no obligation of the part of the recipient is the infringement upon the liberty of all those not so richly favored.

Conservatives and Lady Hope

2009-12-16T19:01:00.001-05:00

I just had to comment on this post from Matt Yglesias, regarding Al Gore citing Dr. Wieslay Maslowski to the effect that “there is a 75 per cent change that the entire north polar ice cap, during the summer months, could be completely ice-free within five to seven years.” It turns out to have significance not only for the Lady Hope reference in my title (which I’ll explain in a bit) but also as an example of the kind of nonsense that Bob Somerby has been railing against for years.

It seems various conservatives were in full faux outrage mode over Gore’s saying this because conservatives found a report that Dr. Maslowski had made predictions that were marginally less serious. Proof the conservatives claimed that Al Gore was making it all up and climate change was a fraud. Then, what would come as no surprise to Bob Somerby, it has come to light that in other works, Dr. Maslowksi had, in fact, made exactly the prediction that Gore cited. Once again Al Gore has been called dishonest by his opponents over a comment that was completely accurate, in every detail. Check out Bob’s site for far more detailed and extensive review of the way Al Gore has been misrepresented.

But the other issue that this post brought to mind was a difference in the approach to assessing comments made by others. To some people, deciding whether or not to believe some authority involves first deciding that the other person is virtuous, and if so then belief follows. For others, the question of the authorities virtue is secondary at best, the primary concern is whether or not the authorities claim matches evidence, reason and experience. If so, then the claims are to be believed, if not then disbelieved. Therefore, I may well believe in the claims of an individual of questionable character, if the evidence supports him, against another who is generally more virtuous, if the evidence is against him. Now, the general honesty of a person is not immaterial. I’m more willing to accept the testimony of someone whose character I admire than from someone whose character I do not, but evidence and reason should always have the final say.

This brings us to the Lady Hope story. This is a tale that is brought up from time to time by Creationists in arguments against biologists. Basically the claim is that on his deathbed Charles Darwin was visited by one Lady Hope who converted him to Christianity (and supposedly a fairly literalist version of Christianity) and Darwin renounced evolution. Now the story is certainly not accurate and has been refuted many times. But striking to those of us of a scientific mindset is the question “Why would it matter?”. No person of reason thinks that evolution is a correct description of the history of life on Earth because Darwin, a brilliant scientist, proposed it. Rather it is recognized that Darwin, by careful observation of nature and by sound reasoning, developed a simple, elegant and accurate description of life’s history that is amply supported by the evidence. Because he was able to do this we conclude he was brilliant. The evidence and reason come first, conclusions about Darwin’s character follow. Had Darwin, in fact, renounced evolution, it would have no impact on my conclusions about evolution. The same reasons and evidence would still lead to the same conclusion on my part. I would have less respect for Darwin had he done so, but there could be no change in my conclusions about his theory. To join in abandoning the theory would require evidence that it was false, not a change in heart by Darwin.

In a similar vein I respect and admire Newton because his description of the laws of motion and universal gravitation are such a powerful, effective and well-supported description of nature as we observe it. Were someone to present incontrovertible evidence that Newton had abandoned gravity, and the Copernican model, for Ptolemy's geocentric model, I would think that Newton became crazy perhaps, but could not be affected in my recognition of the accuracy of his theories. In fact, I need not speculate on some imagined abandonment of gravity. Newton, the same author of the Principia, and discoverer of laws governing motion and gravity was also a devoted alchemist. I have no problem admiring his work in physics which is richly supported by evidence, while regarding his work in alchemy, which is supported by none, as a waste of his time. Again, a scientific description is valuable because it matches our careful observations of nature, this comes first. The character of the person making the claims may then be judged, in part, by the accuracy and value of those claims, but this judgment of character is secondary.

This brings me then to Al Gore. The right wing seems to be heavily invested in a kind of Lady Hope story here. If we prove that Al Gore, a leading spokesman for the science of climate change, is lacking in virtue, then it calls into question the claims he is making. But that is nonsense. The claims of climate change are well supported by numerous independent lines of evidence. The overwhelming evidence indicates that increasing concentration of CO2, and other greenhouse gasses, is causing rising average global temperatures and this is causing various changes to global climate. Whether Al Gore is a perfect example of human virtue, a monster of historical proportions, or (as I suspect) something in between, has, and should have, absolutely no significance on this question.

Adam Smith and Regulation

2009-12-13T22:56:00.001-05:00

I’ve been reading The Wealth of Nations recently, I was rather interested in understanding what Adam Smith actually had to say, given the extent to which his views on economics are championed by conservatives. The most striking conclusion I have taken from his writing is that if his views were better known by conservatives and by liberals he would be reviled by the former and a champion of the later. For large numbers of people the passion with which the hold opinions of various philosophers, Smith prominent amongst them, is equaled only by their ignorance of the actual opinions of those philosophers. The absurdity of our discourse today is driven in no small part by this dichotomy.

For example, it is widely held among conservatives that the idea of market economics is totally at odds with any government regulations. Smith, it is clear, does not agree. He expressly recommends that government regulate the maximum interest that may be charged.

The legal rate, it is to be observed, though it ought to be somewhat above, ought not be much above the lowest market rate. If the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten percent, the greater part of the money which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give this high interest.

Adam Smith, The Wealth of Nations, Book II, Chapter 4

Adam Smith, at least, was no uniform opponent to regulation.

I note also, that this recommendation for government regulation is specifically to have the government enforce more sound management of money on the part of the citizens. That is, what is recommended here is a form of paternalism. Limits on the rate of interest are imposed on citizens to enforce parsimony with no other service provided in exchange.

The kinds of regulation recommended by modern liberal policy, on the other hand, can be defended, I believe, on grounds of exchange. That is to say that the regulation is imposed solely on the basis of the regulated accept the regulations in return for some other service provided by the state. For example, the restrictions on risk taken by large financial institutions are imposed on those institutions that have been incorporated under the laws of the United States. That condition of being incorporated provides an insurance policy for the managers and shareholders of those institutions on the loses that they may incur should the institution fail. This limitation of liability is an extremely valuable service.

To whatever extent regulations imposed by government to advance some general moral well-being are allowed, and Smith certainly considered them acceptable, it is even more acceptable when they are part of a mutual exchange.

Progressive Obama

2009-12-13T21:33:00.005-05:00

There is quite a bit of buzz around the blogesphere lately with regard to whether or not Obama is really a progressive, really wants progressive policies to be realized and the like. There is Matt Taibi's article in Rolling Stone. Then there are Digby's comments. Matt Yglesias has a response, and Steve Bennen chimes in. There are also comments from a reader at TPM. And follow the links you can get more comments on the comments and so forth.

I haven't much to add to the discussion above on how accurate Matt Taibi's view is or how good Obama's progressive credentials are. But I do have two thoughts to add.

One is that this discussion, it seems to me, confuses two distinct points. If the question is whether or not Obama is truly a progressive and how righteous a progressive he is, I do not know. Should Obama be admired as a great progressive? I have no idea. Is Obama to blame for the difficulty in achieving progressive aims? Hard to tell. Those questions are very difficult to resolve and really are largely a matter of opinion. However, they are also, I believe, not all that important. If, on the other hand, we are interested in the best way to advance Progressive policies then Obama was certainly the best choice in the general election, and I hardly believe a poor choice for the Democratic party. If we are concerned about advancing Progressive policies then supporting Obama is our best choice. I would suggest also that Matt Yglesias's views on how we need to reshape Congress is the next place for progressives to act. At this point, whether or not Obama is as progressive as he promised (and he might well not be), the sticking point is Congress. The fact that we have been counting on Joe Lieberman as a Democrat is a far greater problem than Obama's lack of progressiveness.

The second point that comes to mind with these criticisms of Obama is that Progressives seem intent on continuing the strategy that has a) been pursued steadily for a half-century and b) been a total disaster. The progressive community backed away from supporting Johnson in 1968. They were then disillusioned by his involvement with and commitment to the Viet Nam war. Likewise they were only lukewarm about Humphry due to his connection to that war. They were determined to show the Democratic party that it needed to be true to its progressive ideals. Nixon won the election. The Democratic party responded with McGovern who was crushed. The Democrats did come back with Carter, who in tern failed to live up to our progressive ideals and who met with a liberal challenge from Kennedy. Liberals were unwilling to support a Democratic party that abandoned its progressive ideals. Reagan won the election. Another set of true Democratic progressives and another set of stunning defeats. Then the Democratic party got Clinton elected. Clinton of the DLC and triangulation also did not quite live up to our progressive ideals and so support for Gore was again lukewarm as many liberals were unhappy supporting a candidate that did not truly embrace liberalism. We got George W. Bush. Now, once again, the Democrats have elected a president who may not embrace our ideal. Do we abandon support of him and get, what, Sarah Palin for the love of God.

How clear does it have to be made that we would be better off supporting the candidates we have and use our position to push for yet more liberal candidates in the future. We are not going to transform the nation in a single year, or in a single President's term. We need to push for the liberal policies we can get from the political process we have and then push for more liberal policies in the future.

Another note, when people criticize Obama as a failure for progressives, is our love and support for various liberal and Democratic politicians of the past, now when such support is of no value. There has been an abundance of posts and comments lately, progressives calling for Obama to be more like Johnson. Johnson is well respected and admired now, though in 1968 when such admiration would have been some value to the advancement of Progressive causes, it was scarce to be found. Far more progressives today admire Jimmy Carter as the nation's greatest ex-President than could be induced to vote for him in 1980 when progressive causes might have been advanced by such respect. And, of course, Al Gore is now much admired by progressives who, including large numbers who stayed home, or who voted for Ralph Nader in 2000. Could we not try, just this once, supporting our guy when such support will be of value.

Taking Land

2009-12-13T17:31:00.001-05:00

High Court Weighs Florida Beach Case : NPR

I caught this report on NPR last week. A number of homeowners down in Florida are claiming that the State has "taken" their land, at least as far as the constitution is concerned, by building a sandbar which added a strip of land between their property boarder and the water's edge. The added strip of land is public, so the property owner's property no longer abuts the water. So no actual property has been lost, rather the value of the property is arguably reduced by the presence of this public strip between the owner and water's edge. Furthermore, the issue was settled by the Florida courts according to Florida State law, against the homeowners. The issue came to the Supreme Court on the unique claim that the Florida Court's decision amounted to an unconstitutional taking of land by the judiciary.

I certainly think the plaintiffs are in the wrong here. No land was taken, that seems like the end of the story. The Government is not required to limiting itself to policies that never reduce the value of anyone's property. Yet, from the reports on NPR and elsewhere, I see no other basis for claiming this as a taking of property. Read the account above on the issues raised and consider an alternative. What if the state had followed a policy that created a strip of land a few feet wide but with a few feet of water between the property owner's property and this new strip of land. All concerns about disturbing the owner's peace would remain, but the owner's property abuts water. How wide would such a strip of land have to be, are the owner's guaranteed that a body of water of some size be located at the edge of their property? The issue, it seems to me is a sort of rights creep. In purchasing the property, the owner's were provided certain stated rights under the purchase contract and state law. Given those rights they assumed that other conditions could be expected to hold, although said conditions were not promised under any guarantee. They now argue that the state must respect not only the guarantees made, but also these additional expected conditions. Supporting this will only lead to yet more extravagant expectations, which in turn will have to be respected, and so on.

But more than that, I see here a failure of imagination on the part of progressives. I have heard other reports of property owners claiming government taking that were hardly much better than this. And we can see, from the report, that the current court is considering this claim with some seriousness. But if this does constitute "taking" property, then the implications are huge. Government cannot take property from a citizen without just compensation, but a private citizen may not do so either. So if the state cannot manage its own property if such management will in any way decrease the value of property owned by a citizen, how can citizen A change his property in any way that will decrease the value of property owned by citizen B? One would think that a decision in favor of the plaintiffs on this case would have serious implications for mountaintop removal, for example.

Even if we are to believe that this is taking only if done by the state (that is to say that if the property under the water were owned by a private citizen who acted exactly as the state did, there would be no claim) consider the implications for global climate change, sea level rising and loss of property. The governments granting permission to the power industry to dump CO2 into the atmosphere would clearly amount to "taking" property from land owners.

These issues, and others I could raise, apply not only to this case, but to a number of others. Yet, I see little evidence that progressives are trying to use these kinds of decisions to advance progressive causes. Our efforts seem limited to ineffectual arguments against the decisions.

There is a large point here too. Very often, it seems to me, conservative arguments do not make any sense, even on their own terms. Yes property rights are important, and the government exists, in no small part, to protect them. But if this kind of action constitutes taking of property, it seems to that such a decision would all but destroy property rights, not affirm them.

Stimulus and Smith

2009-12-12T21:33:00.000-05:00

So I'm in the midst of reading Adam Smith's "The Wealth of Nations". I've got a fair number of other obligations these days, so I'm going through it bit by bit, it is taking awhile. I'm well into book four though, so I'm making progress. Listening to the recent debate over Obama's stimulus package has been striking, given what is actually to be found in this work. The overwhelming impression I get from the Republican arguments and the words of Smith is that the Republican position is firmly rooted in the ideas that Adam Smith is arguing against.

One of the main points that Smith makes is that the while we do generally consider an individual to be wealthy based on the amount of gold or other money that he has, this is actually only an approximate measure and it is wholly inappropriate for a nation. Smith was arguing against the Mercantilist view that the a nation should increase its wealth by accumulating more gold. Smith argued instead that to try to accumulate gold and silver beyond what was needed for coin for jewelry and for flatware and plate was pointless. Gold and silver beyond the needs listed above would invariable be taken abroad and used to purchase goods there that were either not produced in England or were of better quality or cheaper in some other country. Rather the wealth of a nation was measured by how often the gold and silver changed hands. His reasoning was that people exchanged gold and silver in return for some productive labor or service, to rent land or to acquire stock and that a nation was wealthy to the extent that these activities were common and poor if they were rare.

The upshot is that while Smith did not advocate anything like a stimulus bill (Smith predated Keynes by a century and a half), such a measure seems more consistent with Smith's views than opposed to them. If, as Smith maintains, the wealth of a nation comes in the frequent circulation of currency then taking action to keep money in circulation, a stimulus, would be in keeping with this philosophy.

Cooper Union Again

2009-12-05T21:42:00.002-05:00

The current state of our political discussion, what with Birthers and Teabaggers along with the current Republican Party, which is in the minority, is determined to obstruct all legislation unless it is authored by the Republican Party puts me in mind of the Cooper Union Address by Abraham Lincoln. In particular this part towards the end:

The question recurs, what will satisfy them? Simply this: We must not only let them alone, but we must somehow, convince them that we do let them alone. This, we know by experience, is no easy task. We have been so trying to convince them from the very beginning of our organization, but with no success. In all our platforms and speeches we have constantly protested our purpose to let them alone; but this has had no tendency to convince them. Alike unavailing to convince them, is the fact that they have never detected a man of us in any attempt to disturb them.

These natural, and apparently adequate means all failing, what will convince them? This, and this only: cease to call slavery wrong, and join them in calling it right. And this must be done thoroughly - done in acts as well as in words. Silence will not be tolerated - we must place ourselves avowedly with them. Senator Douglas' new sedition law must be enacted and enforced, suppressing all declarations that slavery is wrong, whether made in politics, in presses, in pulpits, or in private. We must arrest and return their fugitive slaves with greedy pleasure. We must pull down our Free State constitutions. The whole atmosphere must be disinfected from all taint of opposition to slavery, before they will cease to believe that all their troubles proceed from us.

Prior to the quoted part Lincoln has described the general state of the debate between the sections and is answering the question, what can Republicans (of his day) do to reach an agreement with the opposition. The Republican Party wanted to reach a peaceful agreement with the Southern opposition. But as the above quote indicates there could be no compromise because the only position tolerable to the Southern Slaveholders was complete surrender to their position.

I would say that today's Republican party has now taken up the same kind of stance that their opposition had in his day.

Irrational Behavior

2009-12-05T21:18:00.001-05:00

Matt Yglesias has a post here referencing a few other folks on how well, or poorly, the things that consititute rational, sound economic behavior for the fairly well-off do not apply well to those in poverty. That is to say that careful savings and efforts to gradually improve one's station, which work well for people in a fairly stable background may well not work at all for those in deep poverty.

This illustrates what is, I think, a more general error in thinking. There are a number of times when we identify some large group of people in some situation engaged in behavior which is then regarded as irrational. But does it really make sense to assume that a very large number of people are all acting irrationally? It would instead make more sense to suppose that we have misidentified the situation that these people are in.

I touched on this in an earlier post on the fund manager John Meriwether. Rather than assume that everyone investing with this man is irrational, it makes more sense to assume that they are acting as if they are a) in a financially secure position themselves and b) the money is not the result of their hard work, but rather it is essentially found money, a gift or handout. If that is the situation (which I think there are abundant reasons to believe that it is) then their behavior is rational.

Generally speaking, the kinds of behavior that are rational in, for example, a stable environment, in a highly unstable environment. When conditions are highly unstable, then long term planning and savings may well be of lower marginal value than the kind of prudential behaviors that work well in more stable environments.

What should we really expect?

2009-10-24T17:56:00.001-04:00

Kevin Drum is amazed to learn that John Meriwether, founder of Long Term Capital Management, a hedge fund that failed spectacularly in 1998, and founder of another hedge fund which failed last year, is starting a third fund. And it looks like people will invest in it. Are people crazy, wonders Kevin? See the whole post for more details on the losses incured, and profits earned by Meriwether in these extremely profitable failures. What could induce anyone to invest in a fund which is so likely to fail? How could so many people be so careless with their hard earned money?

I, on the other hand, find this not surprising at all. This appears to be a case of large number of very wealthy people behaving in an insane fashion. If you witness a large number of people behaving in a maner that seems irrational given their circumstances, perhaps they are behaving rationally, you've just got their circumstances wrong.

How can people put so much of their hard earned money into such a risky venture, indeed a venture likely to fail? Perhaps, they are not actually putting in their money, nor is it hard earned.

As I've commented elsewhere (see here, here and here) the federal governmnet of the United States creates a number of extremely valuable services that the people of the United States are bound and determined to give away, at least to extremely wealthy people, for free, or as near to free as our political system will allow. The Federal Government by licensing the airwaves (and guaranteeing that those using the airwaves will not have their signals meet interference), creating the mechanism for incorporation (by which the risk of running a business is shared by the community, vastly increasing the value of the business), protecting copyrights and definding physical and financial assest provides, as I say, a large number of very valuable services. The value that these services add to other aspects of the economy is our money. That is it is value added by us via the legislation passed by our Congress. Nonetheless, for the past several decades we have been busily increasing the value of these services and decreasing what we charge for them, where the starting point wasn't a very high charge to begin with. The result is that folks fortunate enough to be running a business that uses these services are pretty much guaranteed a very high income even if you do little work. Furthermore, we have made clear that this is not going to change much for some time to come.

The upshot is that we, the people, are generating lots of money and then giving our money away to these people, with no strings attached, no obligation in return, no obligation of any kind. In response, they behave exactly as one could expect. They treat this not as their hard earned gains from past work, but rather as a windfall. As people tend to do, the money often gets gambled or put to some bizzare, irrational use. People are not as careful and protective of a windfall, or other people's money, as they are of their own. Also, keep in mind that we are making sure that this gravey train will not be ended in the future. As a result these people do not need to worry that their future income and wealth depends upon the success of any current investment. They have every expectation of their future income being as high or higher than their current. We will make sure of that. And they risk this money in exactly the manner that one would expect.

There is another way to look at this issue. We the people of the United States create these valuable services. Yet we have so little concern for that wealth that we give it away with no obligation on the part of the recipeint, no demand that they pay us, or do us any service in return. If we don't care about the proper use of these money, why would we expect the folks we give it to, to care?

Adam Smith and Taxation

2009-10-21T21:31:00.002-04:00

Excellent diary over at Daily Kos by bay of arizona. The subject is Adam Smith and progressive taxation which Smith favored. Smith has a lot more to say in support of progressive ideas than he does in support of conservative ideas, at least the way those ideologies are shaped today. I would urge progressives to read "The Wealth of Nations". Attempting to incorporate Smith's ideas into a progressive ideology would be a huge benefit to progressives and to the world.

Conservative Patriotism

2009-10-04T18:43:00.002-04:00

Steve Brenen at The Washington Monthly comments on the unseemly glee expressed by various conservative commentators over Chicago not getting the 2016 Olympics. He notes favorable Rachel Maddow's comment that the right wing explicitly cheering an American loss may well leave an impression far longer than the loss itself. I would note, however, that this is only the latest in a string of such anti-America sentiment from the right, and it highlights what I think is the character of right wing so-called patriotism. From Jerry Fallwell commenting on the 9-11 attacks to John Hagee's comments on Hurricane Katrina, the right wing has always been willing to criticize and blame America. The right have never had a problem with those who criticize America. Rather the act they find intolerable is not criticism of America, it is criticism of Conservatism. America does not matter to them, conservatism and conservatives do. So if the America fails to win an Olympic competition, and that failure fuels conservatism, that to conservatives it is indeed reason to cheer.

Why "Liberal" is a term of abuse.

2009-10-02T10:01:00.002-04:00

Mark Kleiman Mark Kleiman has a post recounting comments he recieved after a recent lecture he gave. In his words

Then Tuesday night I gave my crime-control pitch at the California Endowment. It was fairly warmly received. But two of the people who came up afterwards to tell me how much they’d liked the talk said something like, “I’m glad they decided not to have some liberal talk about crime.” When I told them that I was an unreconstructed liberal and card-carrying Obamaniac, they were deeply puzzled.

He wonders at this encounter, but I am not nearly so surprised. It is a growing contention of mine that while conservative policies are indeed quite dreadful, horrid really, close on their heels for being dreadful is liberal rhetoric and argument. Liberal policies are, on the whole, quite good, but the arguments we wield, at least those that permeate the public conscientiousness are quite bad. Actually, to be more exact, the leading liberal arguments are often quite mediocre or poor, while much better, liberal arguments are left unstated.

Take crime control and the criminal justice system, for example. I hear often, from liberals, that there is a need to protect the basic rights of the accused, but this is almost invariably presented as a protection for the accused and only for the accused. This is therefore presented as a gift to someone who is accused, that will benefit my neighbors and colleagues only if they are ever accused of a crime, an event that they don't believe will happen. These rights for the accused then come across as a moral obligation my we liberals believe is a moral obligation imposed on my neighbor for the sake of people accused of crimes, the vast majority of whom have, in fact, committed crimes. My neighbor may, therefore be a bit puzzled as to why we have to grant this privilege to these people.

The most persuasive reasons why we need to do this are, oddly, rarely stated, at least in our public arguments. For one thing, the power of the state to prosecute citizens is enormous, and history shows that if that power is not checked then it gets abused. If we grant our magistrates unlimited and unchecked power to prosecute they could then do a much more effective job going after criminals. But they could also, with far less effort to themselves, do a just barely adequate job of going after criminals and use their powers to go after people pointing out their corruption. This later choice is much easier and much more profitable and therefore the one invariable taken. If instead we require that they meet standards of evidence, that they be required to present overwhelming evidence of guilt of an accused defender, they can only accuse someone on the basis of "probable cause" and the other rights of the accused are respected, then our magistrates will need to just go after actual criminals. That is why we want to have these rights respected. If we require the state to respect these rights, then those who do get accused will generally be those who are actually guilty and we will be more secure in the process.

We are also made more secure ourselves, if the state respects the rights of the accused, because it fosters greater faith and confidence in the state and greater willingness to cooperate with police in investigations. By going through the whole process of trial, including the rights of the accused, we make it publicly clear that the state is going after those who are guilty. The rest of us are more likely to be cooperative with such investigations if we have confidence that the state is pursuing people guilty of recognized crimes and not some personal vendetta.

So, in short, the reasons for respecting the rights of the accused include powerful arguments that doing so protects the security of those who do not commit crimes. Indeed, those arguments are sufficient, in themselves, to persuade most everyone that respecting these rights is the correct thing to do. The moral concerns of the fate of the accused, who may indeed be guilty of a monstrous crime, can, and should be, a secondary concern. However, in recent times "liberal" arguments have raised this secondary concern to first place, and left the more significant arguments behind. This, more than anything else, I believe, is the source of "liberal" as a term of abuse.

As I indicated in the first paragraph, I also am coming to believe, that this general tendency for liberals to put weak arguments first and to abandon our strongest arguments is far more wide spread than just the issue of the rights of the accused. More on that in future posts.

Critical Thinking and Its Alternatives

2009-09-26T11:14:00.002-04:00

A good article by Lane Wallace in the Atlantic (ht to Mark Kleiman) on certain aspects of human reasoning that have great relevance to today's political debates. People are not, as all agree, perfectly rational. One irrational thing we do is to cling to beliefs even after evidence clearly indicates these beliefs are factually wrong. And I'm not talking about grand spiritual questions here, but things that are clearly subject to resolution based on evidence. Ms. Wallace, for example, discusses the question of who got to the North Pole first, Cook or Peary. There are people still passionately attached to one conclusion or the other, on this question and many other similar questions, long after the evidence supporting their conclusion has been shown to be inconclusive or in error, and other evidence has indicated some other conclusion is correct.

While most of us, most of the time, will base our conclusions on the evidence, and will alter our beliefs based on what evidence there is and how reliable the evidence is (the reliability of the evidence being based on some independent standard), this is not always what we do. In some cases we will work in the opposite direction, basing our beliefs on some gut level reaction and then judging the evidence as being reliable or not based on whether it supports our conclusion. Mark Kleiman has distinguished these as "data based reasoning" in the first instance and "motivated reasoning" in the second. But by this second method we can never escape our conclusion no matter how wrong it is. This then is the irrationality trap that keeps people believing in things long since shown to be false.

The success of some of our intellectual activities over the past several centuries, science perhaps most notably, is due to recognizing this tendency and to keep the process focused on reasoning from evidence to conclusions. A central aspect of the critical thinking process is that conclusions are always tentative. That is, we believe these things are probably true, but keep in mind that that could be wrong. As long as one does so you do not become so attached to that conclusion that you switch to "motivated reasoning".

People vary in how likely they are to select "data driven reasoning" over "motivated reasoning", but the preference for the later can also be encouraged by better education and better explanation of the critical thinking process. There is also a theological argument for preferring the "data driven approach" that those who are more religiously inclined might be advised to present and perfect.

For any given person engaged in reasoning about the world and trying to understand the world about him, we can assume that said person does not posses the wisdom and omniscience of God. Therefore said person will, in drawing conclusions and listening to his gut often come to erroneous conclusions. It is an arrogant affront to assume that any person is incapable of error. But if the person is possibly wrong in his conclusions then by definition his conclusions are tentative. That is the very meaning of the term. Later evidence or experience might show that the conclusions are in error. A person should, if he does not assume that he is equal to God, treat his own opinions and conclusions as tentative.

Note, however, that the above paragraph is open to a possible misunderstanding, which also gums up our arguments. While I say that all conclusions are tentative, they are not all equally so. All conclusions that have been drawn to date might be overturned by some later evidence, might not all are equally likely to. That the Earth is a spheroid in orbit about the Sun is a tentative conclusion is true, but so well supported by the evidence that it would be absurd to act in any way as if it might be proven wrong. The conclusion that the Moon is the result of an impact with the Earth during the formation of the solar system is also tentative, but somewhat more so. It is not absurd to imagine that future evidence might replace that conclusion with some other, or some modified version of the impact theory. The conclusion that there was life on Mars in the distant past is also tentative, but much more uncertain than the other two. It is based on the evidence for liquid water on that planet and the inconclusive evidence from a meteorite discovered on the Earth.

To be able to have rational discourse on any subject, we need to engage in "data driven reasoning". This requires us to make use of the principals of critical thinking which recognizes that our conclusions are tentative, but we must be able to recognize that they aren't all equally so.

Supply-Side Weirdness

2009-08-22T21:52:00.001-04:00

Matthew Yglesias comments here on what Matt rightly describes as "Supply-Side Weirdness From Greg Mankiw". Matt's comments are a good read, but I also found the highlighted part, and Mankiw's and Matt's reaction to it, curious.

In the three decades after World War II, when the incomes of the rich grew more slowly than those of the middle class, the top marginal rate ranged from 70 to 91 percent. Mr. Piketty, one of the economists who analyzed the I.R.S. data, argues that these high rates did not affect merely post-tax income. They also helped hold down the pretax incomes of the wealthy, he says, by giving them less incentive to make many millions of dollars.

So the marginal tax rate in the three decades after World War II was high and the pretax incomes of the wealthy were lower. That I understand, but the lack of incentive doesn't make sense to me. Let's say the owner of some enterprise in a low tax environment employs 1000 workers, each of which add $1000 worth of value by their labor in the course of a year. The owner is making then $1 million, which is sufficient for this particular business owner. Let us assume also, that like most people, this individual is not working the absolute greatest degree he is capable. He is effectively taking some of the value he could add to the business in leisure time. Perhaps he is at the firm 40 hours a week, but is doing only about 30 hours of actual work. He could employ more people, and thus make more money, but he is, as I say, taking some of the money he could be earning in lower stress or leisure time. I imagine that this circumstance is not that unusual.

Now let us assume that the tax environmnet changes so that his costs go up and each worker is only adding $500 per year and the owner's profit decreases to $500,000 per year. Still a tidy income, most folks can live comfortably on that, but he would like to enjoy the higher income as well. I'm no economist, but it seems to me that one obvious solution would be to expand the amount of work he is doing by employing more people. If he could increase the number of employees to say 1500, and take on the extra work the management of these extra employees would require, then his income increases from $500,00 to $750,000. Not the $1 Million he was making, but somewhat closer. The cost to the owner is the extra hours of work or the extra stress during the 40 hours that he his at the firm.

Now it is true that in this scenario he is not incentavised to make the million dollars he has making in the lower tax regiem, but he is incentavised to do more work and produce more stuff. That incentive would seem to me to be more productive toward general economic prosperity than the regime where it was easy to make millions.

Markets and Government

2009-08-21T19:52:00.004-04:00

Another voice expressing some ideas I agree with regarding the appropriate role of government in market economics. As the author makes clear, government is an essential component to having a market economy. Given the necessary role government plays in the market it is not unreasonable that government intervenes in the market. In fact the discussion of government intervention in the market is curiously one-sided. Conservatives who express objections to government intervention display a clear pattern to those objections. Government actions which clearly intervene in the market, such as enforcement of contracts, copyright protections and the rest, and which provide a material benefit to the the conservative, raise no objection from the conservative. The only objections expressed are those interventions which require the conservative to do something in recompense for the services which provide a benefit. This is not any sort of noble principal.

Empathy

2009-05-26T19:53:00.004-04:00

The latest conservative buzz word is empathy. In particular the horror they feel at the prospect that a federal Judge might have the quality of empathy. The reason, according to such conservative leaders as Orrin Hatch, is

...the likelihood of a partisan debate over the president's first nominee for the high court already is clear, with a leading Senate Republican warning that Obama has spoken of finding a nominee with "empathy.''
"Usually those are code words for an activist judge... who is going to be partisan on the bench,'' said Sen. Orrin Hatch (R-Utah), on This Week. "We all know he's going to pick a more liberal justice.... A pro-abortion justice - I don't think anybody has any illusions about that.''

The implication here is that, to a conservative, and empathetic judge is going to be one sided in favor of liberal causes. Other conservative commentators have taken an even dimmer view of empathy in a judge. See, for example, this article from CAP. It would seem that to conservatives an empathetic judge must be completely unfair.

At first thought, however, this should seem like a pretty odd attitude towards empathy in a judge. The meaning of the word empathy would hardly support this conservative belief. Take, for example, this definition from dictionary.com. Empathy is "the intellectual identification with or vicarious experiencing of the feelings, thoughts, or attitudes of another." So, in conservative world, if a judge is able to identify with the attitudes of others in general, he or she will be able to understand the position of both litigants then she is unfairly biased, but if she can only appreciate the attitudes of a litigant like herself she will be fair. That doesn't make sense. In the real world things work the other way around.

I do not believe, however, that this is a dishonest put on by conservatives. This is really the conservative view of things. To a conservative the proper way to organize society is around privilege (see here and here). A judge ought to be favorably disposed toward the conservative and biased against the opponent of any conservative. To have judges that will consider the conservative's position on par with his opponent is indeed, to a conservative, unfair.

Give Them Money

2009-04-10T18:29:00.002-04:00

I came across this article from the Boston Globe about Milton Friedman the other day and it struck me as quite in line with my own thinking (h/t to James Wimberley for leading me to it). Milton Friedman, an icon of conservative economic thinking, proposed a "negative income tax", best described in the article.

His proposal, which he called the negative income tax, was to replace the multiplicity of existing welfare programs with a single cash transfer — say, $6,000 — to every citizen. A family of four with no market income would thus receive an annual payment from the I.R.S. of $24,000. For each dollar the family then earned, this payment would be reduced by some fraction — perhaps 50 percent. A family of four earning $12,000 a year, for example, would receive a net supplement of $18,000 (the initial $24,000 less the $6,000 tax on its earnings).

Given the state of conservative thinking on economics, both liberals and conservatives are likely to be amazed. How could this champion of capitalism and markets propose a "give away" such as this?

It is my opinion that this conundrum can be understood by realizing that it is modern conservatism that has abandoned capitalism and markets, not Milton Friedman. Consider the idea that the governments relation to the economy is not as some intrusive external thing that "interferes" with the real market, but rather is simply part of the economy. The government provides services, such as security, copyright protection, incorporation, secure air waves, etc. each of which have value. The government then collects money from those who use the services. This company of the US Government is owned and operated by shareholders who are the citizens. Each citizen owns one share, each share is a voting share and the shares are not transferable. In this view of things, all of which is consistent with market principals, Milton Friedman's scheme is no more than having the company pay out a dividend to its shareholders. Hardly an anti-capitalist idea.

The one distinction between a simple dividend and Friedman's idea though is that his plan is targeted only at the poor. However, recognize that most middle income and wealthy folks derive other dividend benefits from being citizens, from student loans for the middle class to very low prices for the Government services to the wealthy, so they do receive a dividend. Friedman's plan simply is a means of paying the dividend to the poorer citizens as well.

Tax Increases

2009-03-09T13:26:00.003-04:00

Just posting a comment I made to a post by Matt Yglesias here. Matt's post was a response to the conservative meme that the tax increase on folks making over $250k is unfair because these folks are so hardworking and necessary for society. My comment is in response to a bunch of other comments there where folks were comparing the difficulty of work done by lawyers and financiers on the one hand and roofers and movers on the other.

I agree that it is pointless to argue who actually works “harder”. Both because it is not really possible to assess who works “harder” and because it is hardly the government’s job to figure out who is worthy and unworthy and reward the former and punish the later. But given that, the anti-Obama argument takes the bigger hit. Conservatives are arguing that the folks making more than $250k are too worthy to be taxed. If we can’t really assess that, how do they make the argument?

But the free market argument against Obama’s policies is also problematic. First, in my opinion, because the government already seriously distorts the price of things by providing extensive services to the wealthy at absurdly low prices. How valuable is copyright protection to Disney, Microsoft television networks and the like? Do we really charge full market value for that service? I doubt it. How about the value of sharing risk with the community via incorporation or having guaranteed sole use of a frequency of the radio spectrum for broadcasting? I would argue that these are only a small portion of the services provided by the federal government for which we charge very low rates. How much then of the high income of the finance and legal folks here complaining of Obama’s tax policies in turn depends upon the government providing these services at the extremely low rates it does?

But the higher rates on the salaries of folks making over $250k can, I think, be defended even more directly. If the mover roofer had to rely solely on cash for his pay and transactions, he would still be able to do his job and earn the salary he does. But how many of the folks in law or finance depend upon the trustworthiness of many other people to handle large sums of money. A trustworthiness that can no doubt be accounted for to a great extent by peoples natural sense of morals, but which ultimately relies heavily too on the existence of the FBI, the Justice Department and the Federal Penal System, to keep everyone focused on right and wrong? Indeed, if given the choice how many of you in finance would forgo paying the taxes you do now, plus those proposed by Obama, at the mere cost of giving up any such federal protection to your assets? If no one would actually take that deal, then you are not being overcharged.

Incorporation is Social Insurance

2009-03-05T22:02:00.003-05:00

Strictly speaking the title is not true. A well accepted definition of social insurance can be found here at Wikipedia, and incorporation would not quite meet the definition. However, I will argue that the incorporation is essentially a type of insurance supplied by the government, and therefore should be considered the same sort of thing as social insurance. The reason for making the connection is the right wing's supposed horror at the existence of social insurance while at the same time adoring incorporation.

When a business is incorporated only the assets of the business are subject to being seized to pay off creditors or to satisfy other debt and payments. But the debts and payments still exist, they are effectively paid off by some other members of society. Generally they are not paid off by the government itself, rather by various members of society who get caught by the falling company. The various assets of the owners of the company are not subject to paying off the debts, with the exception of the money invested in the corporation. Essentially, if you are an owner or part-owner of a corporation, due the intervention of the government you are insured against the failure of the company, with your investment being the deductible.

While not strictly "social insurance" according to the Wikipedia definition, it is, in substance, a government run insurance program.

My point is to note that this then is really the first major government insurance program created by the U.S. government, far predating Social Security, unemployment insurance, or any of the other bugbears of conservative angst. The implication of this observation is that the main dispute between conservatives and liberals is not whether the government should provide social insurance, but rather whether it should be supplied only to a select group of privileged individuals. The liberal position is that government is well suited to provide insurance like incorporation, as well as the others, that are valuable to people throughout the entire income scale. The conservative position is that it should be reserved only for a special, privileged portion of society. I am not a conservative.

Rush Rules

2009-03-02T20:17:00.003-05:00

This is amazing. (For the original see here). It would appear that Michael Steele has already caved-in on his criticism of Rush Limbaugh on Saturday. No one, it would seem, dares to criticize the great Rush Limbaugh, who now clearly is the voice of and intellectual (as it were) center of the Republican party. What is truly increadible about this is that Rush has never commanded, or spoken for, more than a large fraction of the Republican party. He might well have been, over the years, the effective leader of the largest faction within the Republican party, but I doubt that it has ever been that a majority of Republicans identify with him as the effective leader of the Party. Additionally, of course, to be effective the Republican party needs to capture the support of a fair number of non-Republicans. In spite of this the party is now effectively welded at the hip to Rush Limbaugh. No part of the part, nor its leadership, dare cross his will. I think that the Republicans will once again, in 2010, go with a crazed right winger. We shall see.

Financial Crisis Timeline

2009-03-02T20:00:00.001-05:00

A timeline of the financial crisis can be found here. Very useful source. I found this on the blog Later On, a very good source. There is also a link to an RSS feed for getting updates as the crisis unfolds. No need to miss a minute of the agonizing holocaust.

More on Ruffini

2009-02-27T18:46:00.002-05:00

I had some thoughts on a few other points in Mr. Ruffini's post. Mr. Ruffini claims that

Put another way, Republicans thrive as the party of normal Americans -- the people in the middle culturally and economically. This is true of our leadership as well -- we have a history of nominating figures who came first from outside politics. Our base is the common-sense voter in the middle who bought a house she could afford and didn't lavishly overspend in good times and who is now subsidizing the person who didn't.

But this is profoundly wrong. The Republican party would very much like to think of itself as the party of ordinary Americans, but their problem stems from the fact that their outreach to ordinary Americans has for so long been without substance. It has been no more than packaging. When it comes to questions of subsidies the Republican party is ready to throw any ordinary American overboard, no matter how common-sense the voter might be, should she have any degree of difficulty or problem. Yet, when it comes to the executives of major corporations whose business model is completely dependent upon sharing risk via incorporation, or who need copyrights protected, or trade deals with foreign nations or need to have guaranteed sole use of part of the radio spectrum, the Republican party is insistent that those services be provided at as low a charge as possible, preferably for free. This, to anyone of sense, is a subsidy. That they can do, again, however much it puts the burden of supporting these services upon our common-sense voter.

Mr. Ruffini goes on to say:

This sense of frugality, orderliness, and personal responsibility is something everything aspires to in difficult times. This is why Obama's pitch is fundamentally off-key if framed correctly. People's first instincts in a recession are not to overspend, but to tighten their belts.

But this again shows how the Republican party is out of step with the times and why they are no longer in a leadership position. Yes, indeed, it is the first instinct of most people to tighten their belts and this is what people do. That is what makes recessions bad. The nation will be much better off if people took this as a time to start spending. The belt tightening is what causes the pain. What is needed is a leader, a president say, or a political party, that can lead the country better than to follow our first instincts and worst judgment.

Mr. Ruffini goes on to say

Obama's address last night assumed that no one is responsible for anything, except maybe corporate CEOs. The banks as institutions are not ultimately responsible. People who took out risky mortgages are not responsible. The Administration is not responsible for sharing in the pain by postponing longer-term projects like health care. And even if they are, everything in a recession is subsumed to the need to throw money at the problem in an attempt to stabilize the system. The risk for Obama in embracing the bailout mentality is that it catches up to you: this is not how ordinary people act in their daily lives without major consequences down the road.

but this is simply not true. Obama did not say that no one is to blame, rather he spread blame around quite liberally. Rather the distinction is Mr. Ruffini's conservative habit of insisting that those in charge (the corporate CEO) cannot be to blame. Given this attitude (which is ruinous to both responsibility and to a free society) Mr. Ruffini is offended that the CEO is blamed at all and responds as if all the blame were placed on this one individual. That simply was not done.

Republican Gimmicks

2009-02-27T18:39:00.002-05:00

In this post Matt Yglesias notes another piece of evidence in the absurdity of the current Republican party. Matt is commenting on this post by Patrick Ruffini who is noting the oddity (and lack of seriousness) in the current Republican Party's current obsession with Joe the Plumber. I agree with Mr. Ruffinin in general, although most of his specific comments are far off the mark, but he doesn't seem to get the problem with the current Republican predicament, nor why they cannot escape Joe the Plumber.

The problem Ruffini is facing in trying to pull the Republican party away from gimmicks is that the Republicans are at this point in a bind. Their ideology is tied two unshakable beliefs 1) the government does nothing of value, does nothing to support business, it just ‘interferes’ in the market 2) government functions like copyright protection, licensing the radio waves, and incorporation are absolutely necessary for business to exist. We on the left are pretty sure one of those must be false, and generally believe that the second is true, therefore it makes sense to charge business money to get these services. The Republican party is still wedded to policies which depend upon both being true. The American people are catching on to the absurdity of the conservative position on this. Given that their position is absurd, they have no choice but gimmicks.

On top of that, as Matt notes, Newt’s 80/20 issues are useless for the Republicans. They are 80/20 precisely because they are peripheral and not central to people’s interests. Yes, they are popular, but the 80 percent who favor them are also not really concerned about them.

Obama's Budget Plans

2009-02-22T08:55:00.005-05:00

We can see Obama's budget plans in this article in the Washington Post. His plan is indeed ambitious, but I for one certainly think it sounds very good. Borrowing the WaPo summary of the plan

To get there, Obama proposes to cut spending and raise taxes. The savings would come primarily from "winding down the war" in Iraq, a senior administration official said. The budget assumes continued spending on "overseas military contingency operations" throughout Obama's presidency, the official said, but that number is lower than the nearly $190 billion budgeted for Iraq and Afghanistan last year.

Obama also seeks to increase tax collections, mainly by making good on his promise to eliminate some of the temporary tax cuts enacted in 2001 and 2003. While the budget would keep the breaks that benefit middle-income families, it would eliminate them for wealthy taxpayers, defined as families earning more than $250,000 a year. Those tax breaks would be permitted to expire on schedule in 2011. That means the top tax rate would rise from 35 percent to 39.6 percent, the tax on capital gains would jump to 20 percent from 15 percent for wealthy filers and the tax on estates worth more than $3.5 million would be maintained at the current rate of 45 percent.

Obama also proposes "a fairly aggressive effort on tax enforcement" that would target corporate loopholes, the official said. And Obama's budget seeks to tax the earnings of hedge fund managers as normal income rather than at the lower 15 percent capital gains rate.

All of these are appropriate and helpful steps to take. From my position on the role of government in society and the economy (see here, here and here for example) it is my opinion that the taxes we charge to middle and lower income citizens are way too high and the rates we charge to wealthier citizens, those whose income and wealth are most dependent upon the services provided by the government are way too low. Increasing taxes at the high end and lowering them at the low end of the income range will only serve to boost the economy. There are plenty of folks at the lower end of the income scale who are interested in expanding their economic activity, people who wish to be wealthy but who are not, but have limited access to fresh capital needed to do so.

Look, as a general rule, folks will do more work, and create more new wealth as their expenses rise in comparison to their income. As that difference narrows, people will, whatever their income, do more work and take less leisure. Likewise, as the gap grows (in favor of higher income and lower costs) they will trade further increase in income for leisure time. This is as true of the corporate CEO or fund manager as it is of the hourly wage earner and everyone in between. For people at the lower end of the income range the options when expenses are high compared to income are to take another job or to work more hours or the like. For the manager of a business the options are to also work more hours, but that entails using the resources of the business to create and sell more product. This, in turn, involves hiring more people, paying more wages and stimulating the economy.

So we can see why our economic policies of the past eight years are so foolish. As I have argued in the links above, part of the cost of running a large business in this country are services provided by the Federal Government. Services like copyright protection, incorporation, licensing the electromagnetic spectrum (radio and TV), etc. The Bush era plan to stimulate the economy then has been to consistently cut the costs the businesses have. But this can only serve to increase the gap between income and costs and thus decrease the manager's interest in working to create new and more product. Now in any plan that involves cutting taxes, some additional money will be spent and some stimulus to the economy will be observed. However, the effect will be weak, as it has been for the past eight years. The other effect that I am discussing here, the reduced willingness of the business manager to produce, will also be observed, and it has.

This chart (h/t to Mark Kleiman and Quincy Adams) illustrates what I am discussing. The upper chart shows industrial production, capacity and utilization over time since 1965. The striking thing about the chart is the high level and rapid increase in these value during the Clinton years and the subsequent slowdown and then drop off during the Bush years. With tax rates higher during the Clinton years, people running large businesses needed to produce more and create better products if they were going to enjoy an increase in personal income and wealth. Under the Bush administration, with a nearly guaranteed increase in personal income for the people owning and running the businesses (an increase in their income because the government would certainly reduce their costs, even if they worked and produced less) we see they took more leisure time, produced less and production and utilization slowed down.

Another example of the result of the Bush policies is the quality of our broadband services in this county, discussed by Matt Yglesias, here for example. For a telecom company to improve the boradband services it provides would require a fair amount of efffort to be supplied by the owners and operators of the business. In a capitalist, market based system, the people running a telecom company are motivated to put forth the effort needed to improve broadband service (or any other service for that matter) by a desire to increase their own income and wealth. For the past eight years we have, however, been guaranteeing that they will see an increase in their wealth and income even if the don't do this work, and shock of shocks they have been, by and large, taking the increase income without doing the incrrease effort. The policies of the past eight years have been for the general citizens to do with poorer service and lower value to the products in order to guarantee that the owners of these firms can enjoy great wealth without having to work. This is a foolish policy.

A return to higher taxes for these folks will not raise prices, it will increase the amount of production. To do that will require an increase in employment. All to the good for we citizens who have the responsibility to set the prices that government charges industry for government services. We can also see the effect of these policies in the income and wealth of citizens across the income spectrum in these charts provided by Nate Silver. As indicated, the wealth and income of everybody was higher during the Clinton years, and more equally distributed. This is the expected effect of Obama's plans on taxes and Federal spending. All to the good, again, for the vast majority of citizens.

Fairness Doctrine

2009-02-14T17:16:00.001-05:00

Kevin Drum chimes in here on the discussion of the Fairness Doctrine, the FCC rule, abolished in the 1980's, that, in summary, required radio stations to provide rebuttal time if the station was to broadcast controversial commentary. I pretty much disagree with him here.

Now the doctrine died in the 1980's as part of the Regan revolution. There has been no serious effort to revive it in liberal political circles, much less in the Congress. Liberals would not mind seeing it come back, but generally regard it as a dead issue, and don't much care. I could well be counted among its more ardent supporters and I don't much care. Nonetheless, since the start of this year, conservatives have been from time to time hyperventilating over the prospect that Democrats will reinstate it. There has been no serious effort to do so, Obama doesn't support it, none of the leadership is calling for it and the strongest voices on the supper lefty blogs are not calling for it. See, for example, here and here (the only reference to the doctrine I found on Kos). And the right is going crazy over the possibility, they are quite fired up about the possibility.

Then Bill Clinton added his voice and expressed his opinion that the doctrine should be restored. Now while Bill Clinton is a Democrat and as an ex-President he is quite a significant Democrat, that ex- in his title limits his legislative influence. Still Kevin Drum feels that this is too strong a commentary from a high profile Democrat and Clinton should really shut up about it.

Kevin is nuts. Look, on the merits the right wingers are wrong. The existence of a broadcast network requires the federal government to provide the security that if a given station is transmitting on a frequency, nobody else is. Someone must insure that there is no interference between broadcasters and the only entity positioned to do that is the feds. If we the people, through our government, wish to put the restriction that having this protection means that you must also support the fairness doctrine is perfectly reasonable. Also, the point of the fairness doctrine is that if someone were to defame me before a large audience, common decency says that I should have the opportunity to defend myself before that same audience. So on both these points the fairness doctrine is a perfectly reasonable rule. Now, just as I argue above that if we the people wish to have a fairness doctrine attached to broadcast radio, if we don't want it we are free to do without. That is the decision that was made in the '80's and Democrats are content to live with the decision.

To have the right wing going on about the unfairness to them if they don't get the secure use of frequency provided by the federal government at least 100% of the time, at no charge, their business model cannot survive, only serves to make them look whiny and weak. Similarly Kevin's fear of giving Rush Limbaugh something to complain about is completely wrong headed. If we give Rush nothing to complain about but our breathing, be sure that he will be in a towering outrage over that.

I think there is nothing better for the liberal cause on this issue than to have high profile democrats put forth publicly our arguments in favor of the doctrine, while democrats in positions to affect legislation let the issue lie and conservatives burst veins over the merest possibility that they would have to abide by such a rule. Let us have the debate.

Stimulus Passed

2009-02-14T16:32:00.002-05:00

Well the stimulus did pass the Senate and Obama will sign it into law on Monday. Good job Democrats.

Experience

2009-02-13T21:44:00.002-05:00

For the past year or so the value of experience has been a major talking point and serious issue. It was raised by both Clinton and McCain as an issue against Obama. It also seems right now to be part of the concern over how to handle the banking mess. While the popular view may well be to get rid of the damn fools who ran these banks into the ground, folks in positions of leadership seem to be, among other things, worried about losing the expertise held by upper management.

I think, and have been thinking since it was first raised during the campaign, that the concern over experience has been misplaced. Certainly some level of experience is required for any position of leadership and there is a fair amount that one needs to know to be able to be President or run a bank. But it is hardly the case that increasing experience is always a benefit, or that higher levels of experience will always lead to a better outcome. Indeed experience levels somewhat below the highest will often be linked to a fresh or novel outlook that can be quite helpful, whereas the greater experience results in a stilted or ossified outlook that hinders success.

Consider that one could hardly expect the role of commander of a large army to be less in need of experience than head of a bank or even President. But consider also what were America's two largest wars, WWII and the Civil war and who rose to be the commanders in each case. Also, we actually have three cases because in the Civil War, both the Confederacy and the Union needed to put together a General staff. In all three cases most of the leading Generals were not among the most experienced officers at the start of the war. In fact, in most cases the men who would ultimately prove to be our nation's military leaders where not part of the General staff at the commencement of hostilities, or had been promoted to the rank of Brigadier General only a few months before the War started. Consider

WWII

Eisenhower was promoted to brigadier general on October 3, 1941, only a few months before Perl Harbor. Nearly the entire General staff was more 'experienced' than he was, but by all accounts he was far more capable than any others for handling the Supreme Command. Now in WWII there were several highly experienced officers who were more experienced than was Eisenhower (Marshall, of course, and McArthur as well, among others).

Bradley - In February 1941, he was promoted to brigadier general (bypassing the rank of colonel) and sent to command Fort Benning (the first from his class to become a general officer). Again, Bradley only reached the lowest rank of the general staff on the eve of the attack on Perl Harbor

Patton - Colonel Patton was promoted to brigadier general on the second day of October in October of 1940. Even Patton was not high up among Generals at the outbreak of the war. Note too among these WWII Generals that their rank at the end of the war was the inverse of their level of experience at the start. Patton actually had the seniority over Bradley who was senior to Eisenhower.

Civil War - Union

Grant - In June of 1861 he returned to military life after being a civilian and was made a Colonel of Illinois militia before working his way up to the highest possible rank in the US Army. Clearly many who had more experience than he did were far less suited to command.

Sherman - May 14, 1861 after a period as a civilian he is commissioned as a Colonel in the United States Army. Again his lack of experience was more than made up for with ability.

Sheridan - Pill Sheridan was in the army at the outbreak of the war, holding the rank of lieutenant. In May of 1861 he was promoted to captain.

Civil War - Confederate

Lee - Robert E. Lee would be the closest thing to an exception to my point here. However, I'm not claiming that experience is bad, rather that it is not some perfect guide to excellence in performance. Lee held rank of the of Colonel at outbreak of war but was immediately offered position on the General Staff by both sides. He was made one of Virginia's first five full Generals when Virginia joined the Confederacy. While Lee was the most experienced of the people on this list, he was still a relatively inexperienced General officer at the start of the war and his skill demonstrated throughout the war far exceeded his initial 'experience' level.

Jackson - At the start of the War T J Jackson was made a Colonel in the Virginia militia based on his passed military experience. He again was not part of the General staff at the start of the war, but was clearly far more capable on officer that mere measure of experience would indicate.

Forrest - Nathan Bedford Forrest enlisted as a private soldier but was quickly raised to rank of Colonel. Still he did not reach General staff until the war was under way. Whatever else one might think of N. B. Forrest as a military commander he was brilliant, but not, at the start of the war, particularly experienced.

In short, in times of crises it might be just as well to remove the highest levels of 'experience' and replace them with folks at a lower level in the organization. I think that was some of Obama's appeal and that we will need to see that done with Bank organization as well.

A Win

2009-02-11T22:18:00.001-05:00

It would seem that Obama is soon to have a chance to sign the stimulus bill, and none too soon I should say. I am not sure if this is the best bill that could be produced, or if this is exactly what the country needs, but it is pretty good. I heard some of the Republican House leadership complaining about the final product and going on about the need for small business tax cuts instead. Are there really that many people who don't understand that a tax cut is of no value to a small business, if the business has no customers with money to buy its products or services? Sigh.

But what I really wanted to comment on was this at TPM. A reader there has noted that the bill that is currently being agreed to would appear to be nearly exactly what Obama originally asked for. This is an impressive comment, as the TPM reader notes, for a new President. But it also illustrates something that we on the left will have to get used to (and for what its worth I applaud) namely that with Obama we will see little gloating over enemies who are completely vanquished, but we will see many victories. I believe that with this style we will see more victories, although we shall see less suffering from our opponents. In all a better way to go.

While I'm on the general subject, I'll also comment on a theme I've seen discussed at various places on the left blogs (sorry I have no link for this). There is a sort of debate as to whether Obama has demonstrated some brilliant rope-a-dope or jujitsu (insert metaphor of your choice) on his opponents. The whole laying back at the beginning while the Republicans seemed to have their way was all part of the plan. Look, I admire the guy, but I doubt this is interpretation is the case. Rather his skill is different from some super genius chess player, rather he is skilled at adapting to the current situation and will change strategy or tactics appropriately in response. Such a skill can seem like brilliant planning, and is, in fact, more valuable. Really, I think it is safe to say that his initial plan did not work as he intended, the Republicans proved more determined to oppose at all costs than he expected. When that became clear, he adapted. My opinion at any rate.

Call Now

2009-02-03T07:11:00.002-05:00

The right wing is mobilizing well to try and stop the stimulus bill. Now is the time for progressives to call their Senators, of either party, to get this thing through. Not everyone is thrilled with this bill, but for all the and wringing from the left it is a fairly decent stimulus package. The criticisms from the right are rediculous, absurd even. We need to get our message out.

Follow the link to Fact-esq and then call your Senator. Hell, call your representative just on the chance that he or she has influence with the Senator. Call your governor, call everyone.

Here are some links to sites for finding phone numbers and email addresses of Congresspeople.

Congress.org
Contacting the Congress

Call NOW!

Dr. Who

2009-02-02T20:40:00.001-05:00

I found this article from Media Matters, referencing an article in the LA Times, to be an amusing example of the current state of the media and the add nature of "liberal" bias. Apparently the LA Times finds that some people think it a bit pompous of Jill Biden to refer to herself as Doctor based on her having a PhD in education. The Times seems to feel that Doctor should be reserved for those of the medical profession.

Now, full disclosure, I have a PhD in physics so I have a bias on this subject. But the history of the title is kind of significant here. The title Doctor dates back centuries and has, until very recently, been exclusively a title of general academic accomplishment. The main character in the story of Faust, Doctor Faustus, for example is based upon a doctor of divinity. The renowned Samuel Johnson, often known as Dr. Johnson, never studied medicine. This pattern is repeated for centuries. Indeed, not too many centuries ago, at a time when scholarly doctors were common, medicine was not a field in which one could get a doctorate. In the brand new republic of America, however, folks had initially a very low opinion of titles of all sorts (Article I section 9 of the constitution forbids Titles of Nobility, for example) led to a much reduced use of the title Doctor in the new nation. Later in the nineteenth century the medical profession finally started getting its act together and established itself as a truly professional order and happily embraced the title of Doctor. At that time the nation's earlier animosity to titles had abated so the the medical profession met little resistance from the general public or from those from academic society. That coupled with the fact that most people came to know medical doctors as a regular part of life, but were much less familiar with academic doctors. So now the irony is that academic doctors, in spite of the much longer history for the title come across as the interlopers. Such are the oddities of history.

So it is perfectly reasonable for Dr. Biden to refer to herself as such. Actual usage of the title today is, however, far less common than it once was. It is a generational thing. In my first place of employment there was nothing odd about the fact that the older gentleman who headed our department was Dr. Pontius. On the other hand, younger PhDs do not use the title on a daily basis. But that is part of a general trend in society. No one today, on a daily basis, calls me Dr. Robinson, but then before I got the PhD no one called me Mr. Robinson either. Having said all this, it is also true that in more formal, professional settings the title is used. So at formal, project reviews, I stop being Mike and become Dr. Robinson.

As a final note, as others have pointed out, the pompousness of using the title never seemed to apply to either Dr. Rice or Dr. Kissenger. I wonder why?

Whose Money

2009-02-02T18:51:00.002-05:00

One of the favorite lines from conservatives is that government should let people keep more of their money. Who could argue with that? However, as I've argued elsewhere, there are government services which are used by many folks as a vital part of their income. Whose money is that.

For example, consider the current Governor of California, Mr. Schwartzenegger. Now we have about three thousand years of history for which we know quite a bit about daily life. Maybe more, but at least three thousand. During about twenty-nine hundred of those years acting, performing, composing songs, writing books and poetry were not professions that led to great wealth. Some folks managed to become prominant and attain a comfortable life, but great wealth no. Then over the past hundred years, give or take, government has become involved with defining and securing copyright to the artistic works of such folks and over the same hundred years or so a good number of these performers have become quite wealthy. Wealthy by regional or national standards. People such as Mr. Schwartzenegger. Now, I think that this is not a coincidence. The wealth that passes through these people's hands is still due in substantial measure to their labor, but a great deal of it, in fact by far the larger part, must be due to the agency of Federal copyright protection.

As such it is hardly the case that taxes involve taking Mr. Schwartzenegger's money. The heaviest tax burden proposed by anyone on the mainstream left does not get close to touching Mr. Schwartzenegger's money. The tax burden proposed by the left involves only taking a portion of the money generated by us via copyright.

Further Comments on the Size of Government

2009-02-01T14:53:00.002-05:00

Constructive Interference: Size of Government

I'd like to expand a bit on, and clarify, my earlier comments on measuring the size of government by how much its spending contributes to the GDP.

My first point is that governments provide services, security being the foremost, which have value in the market. In today's world, for good or ill, governments also provide a host of other services for which there is some demand in the market. Amongst those are

Copyright protection
Incorporation
Licensing the electromagnetic spectrum
Negotiating trade deals
Negotiating a stable international regime
Health insurance for at least some part of the population
Old age destitution insurance (Social Security in the US)
Social Safety net
Education support

and quite a few others. In any meaningful sense the size of government, or at least its significance to the economy, is a measure of how valuable these services are all told, not simply the fraction of all money spent by the government. If the value, to the economy, of all these services is large compared to the value of all goods and services provided by the rest of the economy, then government constitutes a large fraction of the economy. While I agree that it is difficult to find a metric for assessing the value of these services, there are clear problems with percentage of the GDP.

The first problem is that clearly the copyright protection provided by the government to Disney and Microsoft, as those two companies will let you know, is very large. But if the government charges money for this service and spends it on activities that either serve the interests of its constituents or helps it continue to provide those services, we see government's share of the GDP increase. If, however, the government provides this service for free, with no obligations in return from the recipients, then governments share of the GDP is lower. But is hardly the case that government is being less intrusive in the economy in the later case than in the former. For one thing, in the later case, given that the price for this service is lower, we can expect that it will be used more extensively, making governments involvement in the economy, not smaller.

The options we have, therefore are to either have government create these services or not. If it does create these services, giving them away for free will reduce governments share of the GDP, but there is little real value in that. Government is just as intrusive and just as important a part of the economy. Charging money for these services instead, will discourage there use to an excessive extent, making governments share of the GDP larger, but its influence and importance in the economy smaller.

In conclusion, as I say above, government creates services, that are of some value to the economy. Services which, contrary to a frequent conservative talking point, do indeed help to create wealth and jobs. While giving these services away for free does reduce governments share of the GDP, it does not make government and government authority less intrusive. Two approaches are needed to minimize the intrusiveness of government. One is to have government charge for services at a moderate, but not too steep, discount. The other is to have a government which is subject to frequent, thorough and extensive, critical review, oversight and accountability.

Useless Statistics

2009-02-01T14:38:00.000-05:00

In my previous post I argued that the fraction of GDP due to government spending is a pretty useless statistic. It does not provide a useful measure for how big or intrusive government is. I'd like to take this opportunity to point out another statistic that has been both amazingly popular and completely meaningless. This would be the conservatives use of the fraction of all income taxes paid by some particularly wealthy fraction of the population.

For a couple of decades now I have heard conservatives trot this statistic out to indicate that the class of people being discussed is over taxed. The top 1% of all taxpayers pay 45% of all taxes (actual number were made up by me now, but he gist is accurate) indicates that those taxpayers are over taxed. There are at least two things wrong with this statistic.

The fraction of all taxes payed by an individual or group pretty nearly tracks the fraction of all income earned by that group. If you are paying a large fraction of all taxes that is because you are earning a large fraction of all income. Earning a large fraction of all income is not a hardship.
The statistic is comparing the fraction of all revenue taken in by the government. No rational person would asses whether a given expense was too great or too small based on the fraction of all revenue earned by the recipient. This is equivalent to comparing the value of a Honda and a Toyota based on which car comprised the greater fraction of the respective corporation's revenue. No one would care. One might well, and in business will generally, compare the amount of revenue the buyer can get from the purchase to the cost of the purchase. But the fraction of all revenue gained by the provider is irrelevant.

More attention needs to be payed to the underlying assumptions of arguments presented publicly, and much more attention needs to be payed to rebutting those assumptions where false.

Size of Government

2009-01-31T18:37:00.001-05:00

An interesting discussion by Matt Yglesias and Kevin Drum on how big we on the left believe government should get. Kevin is arguing that the Government should not grow to be more than about 50% of GDP, where it is about 40% now. Matt thinks that trying to set an arbitrary limit doesn't make much sense, as the economy grows and changes the extent to which government expenditures will rise and fall may be very different from what is appropriate in today's economy. It is far more important, in Matt's opinion, for the government to be looking for more sensible ways to earn and spend revenue. By sensible ways to earn revenue he is talking about placing costs on things like the use of roads, or dumping carbon into the atmosphere, where there is a social good in reducing the activity.

I'm very much on Matt's side in this discussion. In fact, I'm rather of the opinion that the discussion of the fraction of GDP accounted for by government is a very misleading statistic. It seems to me that government, by its nature, provides a number of services that are very valuable. And by valuable, I mean in an economic sense. If these services were not provided by the government people would pay money, or what is the same thing, exchange their labor for these services. Among these services are certainly basic security. But in today's world would also include copyright protection, licensing the airwaves, risk avoidance via incorporation, and a number of other such services. Let's assume the government is going to provide $100M worth of such services, copyright protection for example, to some group of citizens. If the government provides this service to these citizens for free, with no requirement of anything in return, then the government's share of the GDP is unchanged. The government is only becoming bigger then if it provides this service, charges some money in exchange for the service and then spends the money on some activity of public interest.

It seems to me, however, that this later case, trading the service for something of public interest rather than giving it away, is prefereable to just giving it away.

The problem is that giving the value of the services provided by the government, government is, and always will be, something like 90% of GDP and there is nothing that can be done about it. Get rid of government services and the government expenditures will go down, but so will the economy and the result will be a poor country were 90% of the GDP is due to government activity. For what it is worth, I prefer a rich country where government is this large share of GDP to a poor country where government is a large share of GDP.

This is not to say that the intrusion of government cannot be greater or lesser. This argument is only to say that fraction of GDP is a useless statistic for guaging how intrusive government is.

Lord Limbaugh

2009-01-28T22:43:00.002-05:00

This story is quite telling (see also comments by Steve Benan and Think Progress), I should say. Apparently, even minor criticism by any Republican of Lord High Gasbag is an intolerable sin. So what happened was that GOP Congressman Phil Gingrey of Georgia expressed a mildly critical opinion of Rush Limbaugh. Indeed, calling Rep. Gingrey's opinion critical is a bit of a stretch. To quote the representative, here is what he said:

I think that our leadership, Mitch McConnell and John Boehner, are taking the right approach. I mean, it’s easy if you’re Sean Hannity or Rush Limbaugh or even sometimes Newt Gingrich to stand back and throw bricks. You don’t have to try to do what’s best for your people and your party. You know you’re just on these talk shows and you’re living well and plus you stir up a bit of controversy and gin the base and that sort of that thing. But when it comes to true leadership, not that these people couldn’t be or wouldn’t be good leaders, they’re not in that position of John Boehner or Mitch McConnell.

(See here for full article from which the quote was obtained). Well it would seem that these measured words were far too much for a large segment of Rush fans and they precipitated a large volume of angry calls, emails and letters to the Georgian representative. Within a day he offered a complete retraction and indeed appeared on-air to appologize for this criticism and retract his comments. These comments are pretty banal and yet they are too much for the Republican base to tolerate. This is the power that Rush now has on the Republican party. This is the face of the modern Republican party.

This is a good opportunity to mention the thing that I find most galling about Rush and about modern conservatism. Rush Limbaugh has made himself quite a wealthy man by making use the opportunities afforded by broadcast radio. Now broadcast radio is a medium that is completely dependent upon services provided by the federal government. Without the FCC guaranteeing that a give opporator will have sole use of a band of frequencies, it would not be possible to have a broadcast network. Interference would be rampant and would make the medium useless for anything more than the most local communication. Nothing like our modern networks could exist. Were Rush left to try and make his money by renting out a theater and doing his schtick to a ticket buying audience, he would not be quite so wealthy. Indeed, one of the things that most terrifies the right wing today is the phantom menace of the Democrats restoring the fairness doctrine. In spite of the paucity of evidence indicating that Democrats have any intention of doing such a thing (see here for info on the issue), Rush is frequently going on about how his business will be completely destroyed if the Federal government should reduce his guaranteed sole use of his portion of the frequency spectrum from the current 100% all the way down to 95% of the time. His dependancy on this federal service is, by his own admission, this great.

This, in itself, is fine except that Rush then spends three hours a day complaining, effectively, that he doesn't get this for free. In fact his basic complaint is that if only we did not provide any services for poor people then we could provide the FCC protections to him for free. This then is the essence of Rush Limbaugh and the modern Republican party and modern conservatism, the principaled demand for free services for themselves while simultaneously demanding that no such free services be provided to others.

Government and the Economy

2009-01-28T21:33:00.001-05:00

Matt Yglesias points discusses here one example of one of the oddest things about our current political discourse. Matt's specifically discusses how in contemporary discussion of the economy, monetary policy is somehow treated as if it isn't a "government role" in the economy. Given that the Federal Reserve is a government agency and the Federal Reserve determines monetary policy, monetary policy is most certainly a government policy.

I think this is related to another odd thing about our discourse, namely the tendency to treat the government as some sort of alien entity which should normally be outside the economy, but which sometimes interferes with the economy. This is nonsense. When people form a government as a means to gain security (Hobbs anyone) the government is providing a service of some substantial value and is therefore part of the economy. It can provide that service and charge a small part of the market value of that service or it could charge the full market value of that service, but it is an actor in the economy. It does not, in any meaningful sense, "interfere" with the economy, it just sets pricies.

It has been the general experience through history and around the world for the government to expand the services it provides. Today in addition to the basic security that governments are created to provide, governments typically also provide the benefits of risk sharing via incorporation, copyright protection, guaranteed sole use of part of the electromagnetic spectrum, and a host of other services as well. Note that none of the services in that list are among the things objectted to by conservatives. This is true no matter to what extent these services involve government intrusion into your life (consider for example the various inconveneinces that copyright enforcement makes upon our lives. Can I legally transfer my music CDs to my MP3 player?). The only intrusion that conservatives object to with regard to these services is when government expects some compensation in return for providing them. The central message of conservative philosophy is that these services should be provided, at least to the already wealthy and well connected, free of charge and with absolutely no strings attached.

Market Pricing

2009-01-27T21:03:00.002-05:00

Matt is right here, as is, of course, Mark Kleiman (follow the links), it would be a very good idea for the government to charge market rates for things like runway slots. Currently, the rates that airports using a runway make the use of small private jets more affordable than would the market. Read Matt's and Mark's summary of the issue.

However, I would say that there are a great many things of this same sort that should be subject to more market pricing. I'm thinking of services provided by the federal government such as copyright protection, sharing risk through incorporation, protection of physical and financial assets here and abroad. That kind of thing.

Standard Deduction

2009-01-19T19:39:00.003-05:00

I mentioned earlier that I liked the blog "Adam Smith's Lost Legacy" and I do. For example, I came across the following post wherein Gavin Kennedy argues for one of my preferred changes to the tax code. Gavin is writing about the UK tax system specifically, but the same principal applies to the US standard deduction. I believe that tax cuts should be considered, even in this time of recession, but the appropriate form of those cuts is an increase in the standard deduction. Get golks at the lower end of the income distribution off the income tax rolls. Such tax cuts would be a stimulant to the economy. When tax cuts are discussed it seems to me that the only form of cuts considered are changes in the tax rates. But a rise in the standard deduction should be a part of any progressive policy proposal.

Adam Smith redux

2009-01-19T16:21:00.005-05:00

Gavin Kennedy at Adam Smith's Lost Legacy, a site I was unfamiliar with but which, based on my short perusal so far, is a site well worth reading, has a comment on my earlier post about Adam Smith. Gavin's comments are correct, I agree with what he has to say, although I believe that my main point still holds.

Basically, the passage I quoted went on at some length to the effect that the merchant and manufacturer are much better situated in knowledge and experience than are either the laborer or the country farmer to manipulate government policy to his or her advantage. Gavin's point was that while that was perhaps quite true in Smith's day, it is much less so today. All three of Smith's orders of men are today quite savvy at manipulating government policy to their advantage.

I did not mean to suggest that the merchant's and manufacturers still have that advantage as a general rule. My intended points were two fold. One point was that Smith's claim that the interests of the merchant and manufacturer are more often than not at odds with the interests of society as a whole and the general welfare of the nation. Adopting the policies and proposals of this order of men and women without very careful scrutiny is as foolish a move today as it was in Smith's time. Yet we have spent much of the past eight years doing exactly this foolish thing. Secondly, I wanted to advance Smith's other point that the proposals of the merchant and manufacturing class should be met with long study, close scrutiny and a healthy dose of skepticism. I would agree with Gavin's commentary to the extent of saying that the important practice is to address all proposals from any part of society with a healthy dose of critical review.

Obama and Investigations

2009-01-18T12:43:00.002-05:00

Much of the left blogisphere is abuzz with questions on how the Obama administration will be dealing with the criminal activities of the Bush administration and whether, or not, there will be investigations. The latest from Matt Yglesias, for example, is here. The general consensus, based on Obama's comments, seems to be that he is tyring to avoid any such investigations to keep from upsetting the political climate. I am not so sure.

Keep in mind that he is frequently discussing his admiration for, and desire to emulate, Lincoln. When Lincoln came into office he was not remotely voicing the fire breathers determination to take action against the Southern Radicals, nor evan after secession to attack them directly. However, it is equally clear that when pressed, he was hardly one to let attacks on the Constitution go by unopposed.

I expect Obama to take a similar course. He will come into Washington, as he is, not promissing to cleanse the Captial of wrong doing, or to take a vengefull tact against past wrongdoing. However, there is plenty of indication that investigations will be coming. Investigations lead, I'm quite glad to say, by Congress. I fully expect Obama to pursue the results of those investigations as vigorously as Lincoln pursued rebellion. He doesn't intend to take on the attack, but will pursue those who do. Contrary to the insistance of the right wing, this is by far and away the better course for the US Government.

I cannot say for sure that this is what will transpire. Perhaps Obama will turn out to be too soft on past abuses. But it is certainly not clear, or even likely, at this point, that that will be so.

Adam Smith

2009-01-10T11:51:00.005-05:00

I found the final paragraph of the first book to be quite striking. It is my contention that much of today's discourse is seriously distorted by the near universal acceptance of some points which are, in fact, completely false. One of these is the idea that modern Conservative/Republican philosophy is strongly tied to the principals of free market capitalism as espoused by the like of Adam Smith. So the following quote, the last paragraph, as I say, of the first book in the Wealth of Nations is quite illuminating. He has just repeated his long running claim that there are three orders within society, those who make their income from the rent of land, those who do so by wages from labor and those who do so off the profit of stock. He discussed that the interests of the first two orders are tightly aligned with the interests of the Nation as a whole and with society in general. In other words, the prosperity of those two classes rises most with the general improvement in the prosperity of the nation as a whole. Of the third class, I quote:

His [the person who lives off of wages from labor] employers constitute the third order, that of those who live by profit. It is the stock which is used for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operations of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension, of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin. The interest of this third order, therefore, has not the same connexion with the general interest of the society as that of the other two. Merchants and master manufacturers are, in this order, the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration. As during their whole lives they are engaged in plans an projects, they have frequently more acuteness of understanding than the greater part of the country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business, than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion), is much more to be depended upon with regard to the former of those two object, than with regard to the latter. Their superiority over the country gentleman is, not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction, that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufacture, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order, ought always be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have upon many occasions, both deceived and oppressed it.

I would say that the summary of the past eight years of American policy has been to adopt the Conservative/Republican policy of a slavish and servile devotion to all proposals of exactly that order of men whose proposal Mr. Smith says rather "...ought always be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention." Mr. Smith's advice on this score has most certainly not been taken.

Defining the Debate

2008-09-07T11:40:00.002-04:00

Further thoughts on my last post.

One of the big problems we progressives have had for quite a long time now is that we let the opposition get away with defining the boundaries of each debate. Take the current experience debate, and its current boundaries. With the Palin pick, Democrats said that the 'experience' issue was off the table. This has led the Republicans to argue that Palin is actually as experienced or more so than Obama and the debate is off. The terms of the debate, however, are years in public office, time and range of executive responsibilities and so on. What I pointed out in my previous post is that these issues are not the best ground for us to fight on, rather we should argue that Obama has the experience and has gone through an intense vetting process, which Palin has not. That point seems oddly missing from the debate. And the reason it is missing, it seems to me, is only because the Republicans have not brought it up. But of course they're not going to bring it up. We need to make it part of our rebuttal.

Now I agree that on a pure debate of national issue experience Obama will win. But we will do better to argue on easy ground rather than on more difficult ground. To understand what I'm gettig at follow me for a moment on a bit of a degression. We'll get back to the election soon enough.

If, on a clear day, you look up into the daylight sky you will see a uniform field of blue (we'll look away from the Sun for now). If, on a clear night, however, you look up, you will see bright points of light here and there, against a black background, stars and the night sky right. But if you think about this for a minute, this might seem odd. After all, when you are looking up in daylight the stars are still there. In the daylight sky there should be bright points of light, pluss the blue background here and there and just the blue backgrouhd in between, so the stars should be visible day and night, right? But that's the thing, it is very hard to distinguish a small difference between large values. In the day, the blue background is very much brighter than the stars. The small difference between star + blue sky and blue sky alone is generally impossible for the human eye to tell. The equally small difference between the star and no background, however, is easily distinguished. The general problem of small differences between large values is an issue in the design of much scientific equiptment.

Ok, now back to the election. For most of your neighbors the foreign policy experience of any of the candidates is a lot more than what your neighbor has. Thus the difference among the candidates becomes a small difference between large values and we could spend hours trying to persuade one undecided voter that Obama really comes out on top. On the other hand, to argue that Obama and Biden have been thouroughly vetted by the American people over their careers and the campaigning they've done, versus the complete lack of vetting of Sarah Palin is a difference that is easy to see.

Obama's Experience

2008-09-07T10:56:00.002-04:00

Check out this diary listing Obama's experience. We need to have these facts on hand to counter the false charges that he lacks experience. Particularly the patently false charges that he has authored no bills (see Ethics Reform) or has no foreign policy experience (Member of the Foreign Relations Committee).

There is another thing, however, related to Obama's 'experience' as opposed to another candidate on the current tickets, something that is being missed. Obama's level of 'experience' was, yes, a question mark when he announced his campaign back in Springfield. And certainly, while I agree with the diary that Obama's level of 'experience' comfortably exceeds that of Palin's, that debate doesn't seem to me to be a good one to get into. Rather, while Obama is no 'old hand', he is a new face in politics, he has done the leg work for the past year to be a candidate for President. He has organized, run and lead a national campaign, he has had news conferences, interviews with Journalists both national and local, both hostile and friendly, he has given talks, and speeches to audiences of all sizes, he has pressed the flesh and addressed issues in States throughout the Union. In short he has gone through a grueling interview process and come out looking quite good.

Indeed, three of the candidates on the two national tickets have gone through such a national interview process, in one form or another, to get to the point where the nation needs to choose between the tickets. One candidate stands out for having never undergone any such national inspection. That is the problem with the Republican ticket so far. That is why the choice of Sarah Palin for VP calls into question John McCain's fitness for office, his judgement. The American People deserve to have leaders who have given evidence to the American People that these leaders are fit for these offices. Leaders who have been inspected, and checked-out by the
American People before they take on their responsibilities.

So, please be aware of the many accomplishments of Barack Obama, and be prepared to point them out in debate, but also point out that he has done the hard work of campaigning, has put himself up for inspection by the American People and has passed.

Walter Reed Middle School?

2008-09-05T19:47:00.002-04:00

As reported by TPM it would appear that the McCain campaign got the Walter Reed Medical Center with the Walter Reed Middle School, at least for McCain's back drop for his acceptance speech. The story so far is that for the acceptance speech backdrop the McCain team wanted a view of the Walter Reed Medical Center as a kind of reference to wounded troops from Iraq. However, they went about getting the image they got a picture instead of a Middle School in California which also carries the name Walter Reed.

Now this may seem like a really foolish and avoidable error, and it is. However, I think that it is exactly the kind of thing one might expect from the McCain team. To avoid this kind of error, you really need to have someone find the material, and someone else check the work with a critical eye. I've written on a number of occasions on critical review as a basic and essential tool for reaching correct conclusions. It seems to me that the current conservative crowd is ideologically opposed to critical review. Much of what we've seen over the past seven years has been shaped by the refusal of the Bush/Cheney administation to subject their gut reactions to any kind of critical review. From the treatment of all outside questions regarding the Iraq war, to the Cheney stovepiping of intelligence, to Bush's isolation from questioning during the '04 campaign, and may other examples, this administration has refused to consider review of its decisions. It looks to me like the McCain team takes the same approach and therefore one can only expect many more of these kinds of avoidable mistakes.

Pledge

2008-09-01T22:00:00.002-04:00

Ok, so a bunch of folks have commented on Ms. Palin's missing the extent to which the founding father's supported the Pledge of Allegiance, see here,

11. Are you offended by the phrase “Under God” in the Pledge of Allegiance? Why or why not?

SP: Not on your life. If it was good enough for the founding fathers, its good enough for me and I’ll fight in defense of our Pledge of Allegiance.

courtesy of Think Progress here. Given that the Pledge wasn't written until 1892 and the words "under God" weren't added until 1954 her answer is a bit ahistorical. However, what I want to know is this, would she consider the answer "If it was good enough for the founders to do without the phrase "under God" or even without a Pledge of Allegiance to the flag, is it good enough for today's Americans to do without them as well, should they choose to do so." Just asking.

FEMA and Gustav

2008-08-31T09:36:00.003-04:00

This article is good news. It would appear that FEMA is a great deal better prepared for this storm than they were for Katrina. Gustav may well be an even stronger storm than was Katrina, so all the preparations will likely be tested. But it would appear, for example, that the evacuation is already going quite well. It will be impossible, I imagine to get absolutely everyone out, but it would seem that all those who want to evacuate to safer groud will be able to do so.

Another article pointing out that Emergency teams around the nation are on alert to help out.

Another article from the Wall Street Journal is somewhat less rosey about the revamped FEMA, but still somewhat encouraging. The next week or so will show us what has been fixed and what still needs to be done.

Our thoughts go out to the people of the region and we hope that the worst of the problems have all been solved. May there be no loss of life and the people there be safe and secure.

Speeches

2008-08-31T09:22:00.002-04:00

The post I'm writing was triggered by this post from Mark Kleiman. It is a good post, fondly remembering Lyndon Johnson on the 100th anniversary of his birth, which was last Wednesday. Read the post, it is a good reminder that the failure of Vietnam is not LBJ's only legacy and he should be remembered for a whole lot more. On balance history should remember him better than it does, at least to date.

But one thing in the post struck me with regard to one of the Republican talking points about Barak Obama (at least among the class of Republicans who comment on blogs and such). Specifically that Obama gives good speeches, but there is nothing else there. But Mark's post indicates why this criticism of "just giving speeches" does not get much traction. An essential skill a politician needs is to be able to persuade people to do stuff by talking to them, you know, speech. So to quote from Mark's post

But Caro, who started his project of writing LBJ's biography with such a pronounced anti-Johnson bias that he made the segregationist Coke Stevenson the hero of the first volume merely because Johnson had defeated him, does LBJ justice now. He recounts the story of Johnson's "We Shall Overcome" speech to a joint session of Congress, the speech that drove the Voting Rights Act to passage.
Martin Luther King was watching the speech at the home of a family in Selma with some of his aides, none of whom had ever, during all the hard years, seen Dr. King cry. But Lyndon Johnson said, "We shall overcome" - and they saw him cry then.

Making speeches is hardly a trivially important part of the job, and Obama is very good at the task. Also, for those who critique him as one who makes speeches, how many also remember as vital parts of their legacies the speeches of Clinton, or Reagan or Kennedy, or Lincoln, or ... the list goes on.

Now while speech making is a vital part of the job, at which Obama is supremely well qualified, it is not the only part of the job. Among the skills needed are the a steady hand, cool judgement, knowledge of relevant affairs and the ability to pick good people to serve under you. I think on those areas Obama also is, more every day, standing out as the superior candidate.

Gustav

2008-08-31T09:07:00.002-04:00

Well the Gulf coast is facing another massive Hurricane. It does look like the region and the country is better prepared than it was three years ago. Here is wishing safety and security for all in the area.

Looking Up Other Things

2008-08-24T19:12:00.002-04:00

I was following links on McCain's use (overuse, underuse?) of his POW status and came upon this link at MSNBC's First Read. In it Kelly O'Donnell is laying out the McCain campaign's planned response to the Biden pick for VP, the "Houses" flap, and other recent events. I was struck by the following with regard to the "houses" flap. Speaking of the McCain campaign advisors

They say Americans think most people in presidential politics are wealthy and will point out that Obama "made himself a multi-millionaire after he entered public life."

So they plan to "...point out that Obama "made himself a multi-millionaire after he entered public life." So they are going to try and persuade Americans to support the guy who doesn't know how many houses he owns because he married into money, over the guy who "...made himself a multi-millionaire..." by writing books. I'm not up on my Horatio Alger, and I am a liberal, but I thought the later option (making yourself a multi-millionaire) was the one to admire.

Karma on Biden

2008-08-23T14:48:00.001-04:00

This is a good diary arguing in support the choice of Biden for VP. Karma for All points out that Barak Obama has already made clear that his criteria for his VP choice included someone who would disagree with him and challenge him. As I've argued elsewhere, this is a central characteristic of success, looking for evidence and arguments that challenge your existing conclusions. In short McCain, and the press, will frame this as a negative on Obama. The counter argument is that Biden will provide critical review, an essential element to a success.

Biden

2008-08-23T11:13:00.004-04:00

Ok, so the VP choice is Biden. Fine by me. There will be plenty of discussion as to the significance of this choice pros and cons, but I personally doubt that the VP choice is going to be very significant. Biden will not alienate any large segment of the voting population as far as I can tell. I know that Kos doesn't think much of Biden for VP for example, a position confirmed by Jerome Armstrong at MyDD. (Although check both Kos and MyDD for other more favorable opinions as well.) But I see no sign that anyone is so hostile to Biden that the electoral consequences will be large in either direction. Also, note that while some folks will dislike the Biden pick, others will be happy. Some votes may be lost, others will be gained. Total affect will be small. I think that the common wisdom that the VP pick has little affect on election day is certainly correct.

Another point regards the framing of this discussed by Jerome Armstrong at MyDD. The NYT is already framing this as indicating weakness for Obama, he needs Biden to give him support on foreign policy.

I think, however, that points up a common error we on the left have been making for some time now. It is always possible to frame an action in a negative light. Yes by picking a Biden it will reinforce the frame that Obama needs help with foreign policy. By picking a non-Biden it will reinforce the frame that Obama is an arrogant newcomer who thinks he is above everybody else. You can frame any choice as negative. The trick is for Obama supporters to provide the best defense of Obama's that we can. Biden is a useful old hand in Washington, Biden is a good campaigner, Biden will challenge Obama's views on foreign policy providing useful critical review, and so on.

There is a joke out there, I've seen a few times, saying that if the Democrats were to nominate Jesus Christ for president, the Republicans would say "Never held an elected office, the guy has never held a job, never met a payroll and does nothing but stir up trouble." This is odd enough, but the real problem is that the Democratic response would be "That is so true, what were we thinking. Couldn't he at least have worked at Burger King for a while. Our guy is no good." That's where the problem lies. We need to defend our choices. I will leave it as an exercise to the reader to come up with solid Democratic defenses of Jesus Christ.

This Is Just Stupid

2008-08-18T20:57:00.002-04:00

Ok, I've never been a big fan of Newt Gingrich, for any number of reasons, but this is really just stupid. Newt is arguing, in apparent seriousness, that

Well, I got a very funny e-mail from a retired military officer in Tampa who pointed out that most tire inflation is done at service stations and you pay for it. And it’s actually a higher profit margin than selling gasoline. So Sen. Obama was urging you to go out and enrich Big Oil by inflating your tires instead of buying gas.

Let me make this simple so that even those with the intellectual capacity of a Newt can understand.

1 Big Oil is not enriched by profit margin, it is enriched by profits. Under any normal set of circumstances you will buy very little air from Big Oil (or anyone else) by keeping your tires inflated. So even with a huge profit margin, Bit Oil is going to get four, maybe five, dollars from you in a year. If it is much more than that, you need to patch or replace your tires.

2 By inflating your tires you use less gas. This, though it may have a smaller profit margin for Big Oil, is a much bigger source of revenue. You likely spend two to three thousand dollars a year on gas. (Note that the smaller figure for gas, $2000 is much bigger than the larger figure for air, $5).

3 If your savings from inflating your tires is even 0.1% of your fuel consumption (and experts suggest it might be more like 2%), you will buy $20 dollars less in gas.

4 Note that for an additional $5 of enriching Big Oil, you spend $20 less on Big Oil for a net loss to Big Oil of $15. Big Oil loosing $15 does not enrich Big Oil.

5 Note to Newt. That $15 figure was obtained by assuming a rediculously low fuel savings for the consumer. If you were to actually read and comprehend this it would be clear that the expected savings for the consumer (and loss to Big Oil) would more likely be about $400. Loosing $400 per consumer is not going to enrich Big Oil

6. This is actually an important point. We on the left do not actually care that much about whether or not Big Oil (or anyone else gets enriched). We are currently rather ticked at Big Oil because

it profitability depends so much on public assistance (the military and State Department in the Mid East, dumping CO2 into the atmosphere, oil spills off shore, etc.)
is so huge in spite of its dependence on public assistance
its whining about how much more public assistance it needs

so we aren't too sympathetic to its concerns.

But if Big Oil came up with a huge new, high profit margin technology, that would double everyone's gas mileage, we on the left would be thrilled even if Big Oil became super hugely wealthy.

Let me put it this way. Big Oil becoming wealthy, we don't much care one way or the other. Big Oil becoming wealthy by dumping crap into the environment free of charge bothers us. Can you see the difference.

Mass Transit

2008-08-08T09:05:00.002-04:00

Just to have a link to someone else talking about the rise in the use of rail transport, check out this post by Kevin Drum. Ridership is up, fuel consumption is down. This is good.

As someone who has switched to public transport here in Baltimore for the past few months, after years as a car commuter, I'm a bit familiar with both modes of transport. I'd like to make clear one point that should be obvious, but nonetheless often seems to get glossed over. If you do drive, and need to drive, or just want to continue driving and have no interest in using rail transport, or other public transport, that doesn't mean that rail transport has no value to you. Most everyone I've ever know, who drives, would prefer to drive with fewer other drivers on the road, rather than with more. Traffic congestion is pretty universally felt to be a pain. Likewise, most everyone who drives would prefer lower gas prices to higher. Even if you want to stay in your car, more people on the train means fewer people congesting your traffic and lower demand, and thus in general lower prices, for gas. Building more commuter rail, will benefit drivers. In our political discourse there is this very mistaken meme that we can either spend money on roads and help drivers, or else spend money on rail and help only rail passengers. While this idea is useful (wrong but useful) for some conservative positions, it seems to be universally accepted.

So, if you are a driver, and want to keep driving on uncongested roads with realatively cheep gas, we should build more commuter rail.

Josh Gets It

2008-08-06T08:54:00.002-04:00

Check out this Josh Marshall post at TPM about Bob Shaffer, the Republican running for Senate in Colorado.

A bit of background, Bob Shaffer has made himself famous over the past several years supporting the sweat shop and sexual slavery operations in the Mariana Islands, back when Abramoff was a favorite within the Republican party. Shaffer is currently running for the Senate seat in Colorado and has recently been in the news over a web site his son set up at college, in which the son promotes the positive side of slavery. As Josh points out, one of the things that distinguished Shaffer in the Mariana Islands episode was Shaffer's support of the slavers. Josh is sensing a connection.

I believe that Josh's basic conclusion is essentially correct. I've written myself before (see here, here and here) that the basic character of the Conservative view of the world is to have a society composed of a Privileged class (Comprised of well-to-do, well-connected conservatives natch) and a Servile class supporting them (Comprised of the rest of us). That would match up closely with what Josh is seeing from Bob Shaffer and his son.

To understand modern conservatism, and the current state of national politics, we really need to get a grasp on this idea. There are probably 20-30% of the population that does want what I refer to in the posts above as a Servile Society. Those are the current crop of Bush dead enders and the majority of McCain's support. The rest of the country does respect a free and basically egalitarian society, but opinions within that 70% of egalitarians range from quite progressive to traditionally conservative. (I'm using the phrase 'traditionally conservative' to mean conservative opinions that are consistent with a free and egalitarian society, as opposed to the supporters of a Servile Society). The past decade or so has seen the conservative wing of the egalitarians lining up with the Servile Society (largely due to the skill with which the Servile Society supporters have masked there actual views), but they are open to being won back at this point. This election, I believe, is focused on winning back a governing majority dedicated to the principals of a free and egalitarian society. It also appears that we are well set to win back just such a majority.

Energy News

2008-01-26T09:36:00.000-05:00

For some cutting edge developments in energy production that might be more environmentally friendly check this out. An initial discovery at Lawrence Berkeley Laboratory has been able to produce electricity directly from a small temperature differential. What that means in less technical terms is that electrical power can be produced directly from waste heat where there is even a small temperature difference. The thing is, there is a lot of waste heat being produced all the time. From coal burning power plants to your car, the energy to move, to power your phone or lights or whatever comes from getting something very hot and then cooling it down. The temperature change from very hot to cool gets converted to electricity, or mechanical energy. But even the cool part of your cars engine or of a power plant is pretty damn hot. Currently, it is not efficient to try and extract useful energy from the remaining temperature difference so the heat is just lost. Radiated out into space ultimately. If the technology described in the article pans out (and I must say at this point that is a fairly large, but not huge, if. The results are very early, many problems will arise between now and any future application. We have no idea if they can all be solved) then we could produce energy from a great deal of the waste heat we are currently producing which would reduce the amount of coal or gas we would need to burn. Basically, we would be getting more out of the gas and coal we are currently burning so we could have the same amount of useful electricity, and drive the same amount, using less of the fossil fuels.

Environmental News

2008-01-12T21:01:00.000-05:00

I've written before that to address global climate change the critical thing to do is to close the carbon cycle. I was pleased to come across this article over on Daily Kos which addresses new developments that directly relate to what I'm talking about.

I'm particularly interested in the second part of the post, the discussion of Algae fuel. I had come across some information on the general idea some time ago and wondered if some sort of large scale operation using solar power and salt water might be possible. Apparently it is, and is already up to pilot scale project in Arizona.

Basically the idea is that algae photosynthesize, so they take CO2 out of the atmosphere and using sunlight convert it into more algae. The algae can be selected, or via artificial selection can be developed, to be particularly efficient at capturing CO2 and making fats and oils. Then the algae can readily be turned into biodiesel. This is particularly nice because this can all be done here in the US, thus diminishing our dependence on foreign sources and because diesel is somewhat easier on the environment than gasoline in a number of ways. Capturing the exhaust gas from power plants is one possibility, but the article referenced here is just taking the CO2 from the atmosphere.

Needless to say this can have a powerful effect on global warming issues. In particular, from my point of view, with this technology, closing the carbon cycle is a definite possibility. Finally, the process as described here has no extra environmental stresses. Some input energy is needed, as all power generation processes must, but that input energy can be solar so no additional carbon emissions are needed. Salt water can be used so the plants to generate these fuels need not add to the demands for potable water. In short it has the promise of being a very clean system.

Arnold Schwarzenegger

2008-01-11T21:02:00.000-05:00

I believe we are living in absurd times. Certainly the past seven years have been, in my opinion, almost surreal. I think a clear indication of the absurdities of our times is represented by Arnold Schwarzenegger being the governor of California. Many others probably agree with this conclusion, but I suspect for different reasons than mine. The usual reasons some folks think of Schwarzenegger as absurd have to do with his being an actor, and a kind of wooden actor in fairly shallow action adventure movies, movies which were largely about things getting blown up. But that doesn't strike me as significant. Not really. The man, however wooden he might seem on screen, did a fine job at what he did. The man is intelligent enough and however shallow his parts might have been, people were paying him a lot of money to do them. To have done other than take the jobs would have been stupid. No the movie career does him no damage in my book.

The absurdity comes in two parts. On the one hand he ran for governor, and won, based in large part on how taxes were killing him, and folks such as himself could hardly survive the burden of these many taxes. Now the thing that strikes me is that Mr. Schwarzenegger is an actor, an actor in movies. He has made quite a fortune by acting in movies. But, I don't know if you have noticed, there is quite a lot of concern on the part of those who make movies about controlling who can copy, sell and trade the movie once made. These folks go on quite a lot about how much money they loose when you or I copy movies outside of copyright restrictions. There are warnings from the FBI (That's the Federal Bureau of Investigations) on every DVD concerning civil and criminal penalties for copying the disk illegally. So it seems pretty clear to me that someone like Mr. Schwarzenegger is able to make the kind of money he does by making movies in no small part because the Federal government is there to enforce these laws and insure that he, and the studious, do make all the money off of the films that they hope to make. Mr. Schwarzenegger himself does not do the work needed to insure these restrictions on copying his movies are met. Most of that work is done by the FBI, the justice department, the courts and the federal penal system. Oh, that's right the State Department helps out a lot with regard to international use of his films. So basically the Federal government does a lot of work that creates like $100 million dollars for Mr. Schwarzenegger and he is complaining that he only gets to spend like $80-85 million of those dollars that other people worked to provide for him. I don't dispute the value of his labor, but that can only be a part of the money he makes. Much of it comes from copyright.

That's not even the most absurd thing. I'm just getting to that. I mean if someone is raising millions of dollars for me, why not try to squeeze a few more millions out. Ok, I would probably have too much self respect for that, but still hard nosed businessman tries to get everything he can, that's life. What is amazing is that giving this absurd whining that the $85 million we give to him is not enough and is "killing" him, we get all sympathetic and vote him into office. That is absurd.

Actually, that is only part of the absurdity and probably the smaller part. The larger part of the absurdity is that the opposition party is not really pointing out this disparity. The opposition party is still kind of going along with the idea that all this money generated by FBI warning and federal copyright laws and the like is all really Arnold's money and we are taking his money to run the government, but doing so is for a good cause. No, much of the wealth is being created by these federal programs and only part of the wealth created by the federal government is being spent by the feds. Most of it is being given to Mr. Schwarzenegger.

This too is absurd.

US says it has right to kidnap British citizens - Times Online

2007-12-02T09:56:00.002-05:00

Link to US says it has right to kidnap British citizens - Times Online

This is beautiful. The United States is now claiming that it has a right to "kidnap" citizens of Great Britain if we suspect them of any crime at all. One amazing part of this is that in the early 19th century Great Britain was ceasing American citizens which was one of the primary pretexts for the United States to declare war on Great Britain starting the War of 1812. How times change yet remain the same.

Why Adverse to War?

2007-11-17T09:09:00.002-05:00

Atrios brings up a good point via a childhood experience, which illustrates a thought I've had. We on the left, for the most part, are quite adverse to war for all the oft discussed reasons, not wanting to kill people or destroy things, all that stuff. But is also the case, that the wingnuts oddly don't seem to understand, that when words are being exchanged, even very harsh words, you can take them back, if later you decide you went to far in what you said. Bullets, however, don't give you that option (with the possible exception of friends of Dick Cheney).

If you get into a quarrel with a neighbor, you might call him all sorts of terrible things, and yet still be able to make up with him if later you discover that he was not so much the source of your injury as you had originally thought. That option is most likely not available, however, if in the course of your quarrel, you shoot him.

Criticism from both sides

2007-11-16T21:56:00.002-05:00

Link to Horses Mouth November 16, 2007 4:49 PM

I concur that the argument "we're making both sides angry, therefore we are doing a good job" from our news media is particularly specious. If that is their philosophy one really has to wonder what they think their job is that they are doing well. As a quick analogy I'm thinking that if at trial, both the defense and prosecution think the judge is doing a lousy job, it might just be that he is, in fact, doing a lousy job. It should hardly be taken as evidence that he is doing a good job.