Uncertain it certainly was not

Below is a graphic clipped from the front page of the Times at 9:37ET on Wednesday Jan 28.

The subheadline concludes “…in light of an uncertain forecast.”

The forecast was not uncertain. It was so certain that 5 governors declared states of emergency. It was so certain that thousands of flights were preemptively canceled. It was so certain that subways and bus routes were halted. Bllions of dollars of economic activity were compromised in the name of safety and millions or billions of dollars were spent on safety preparedness.

Think about what this means in light of other sexy topics de jour. The best forecasting resulted in a “miss” and billions of dollars wasted. The best.

-JD Cross

uncertain forecast

Three easy pieces: welfare, minimum wage, and the Prez

When people talk about raising the minimum wage, I am always confused about the arguments that they put forth in support of the wage increase. Why? Because none of the arguments are very good and none of the arguments consider counterarguments. Here is a succinct encapsulation of many possible counterarguments to raising the minimum wage, put forth by Don Boudreaux:

“…many non-economists say that they believe that most, or at least very many, low-skilled workers are consistently paid less than the market values that they produce for their employers.  Yet not only is this stated belief difficult to square with high rates of bankruptcy of restaurants and other small businesses that employ lots of low-skilled workers, it is also difficult to square with the overwhelming inaction of the people who profess this belief to enter the market to take advantage of this allegedly large pool of consistently underpaid workers.”

Yes, to those of you who say “raise the minimum wage”, an alternative is simple and requires no legislation: start a business that can capitalize on all this untapped and unpaid productivity that you see out there.

That is, rather than forcing beliefs about the world on others (beliefs which are almost certainly incorrect, or at the very best incomplete), simply do yourself what you would have other do. Hey, isn’t that like, uh, the Golden Rule, or some variant thereupon?

…second piece, same as the first, and again, by Don Boudreaux, the master of eloquence and economics (below, “you” is a reference to the Prez):

The premise of your plea is mistaken: raises aren’t given by votes, by you, or by Congress: they’re given only by employers.  And employers must fund these higher payments out of the revenues they earn by competing successfully in markets.  Employers, therefore, can afford to raise their workers’ pay only if their workers become more productive – an outcome that is not achieved by a legislature waving its wand over workers’ paychecks.

You are, however, correct in one sense.  Because the policy you propose would price many workers out of jobs, that policy would indeed change these workers’ incomes: it would drop them to $0.  So I say this: If you truly believe you could be unemployed full-time and support a family on $0 a year, go try it.  If not, vote to give millions of the hardest-working people in America opportunities to work that they are now denied.  Abolish the minimum wage.

Note that this is not, primarily, an economic argument about the minimum wage. (It is about that, but not primarily.) What Don’s writing about is primarily: what is the proper mechanism by which to set wages. He’s arguing that wages are best set not by legislation but by employers. (When you then ask “why?”, then it becomes an economic argument.) If you think this is a triviality (namely, how wages should be set, by employers or by legislation), then let me posit this question: Is legislation the proper way to “determine” the laws of physics? (I use determine in quotes because the answer to the question is no, and as such determining the laws of physics through legislation is impossible.)

Finally, we have the equally eloquent George Will on the welfare state. Here, I shall quote Will’s own quote of Daniel Patrick Moynihan, which appears as the thrilling conclusion of the article (note that I include a link to Moynihan’s wikipedia page so that the curious reader can see what flavor of politics Moynihan practiced. Spoiler: he wasn’t Republican):

“the issue of welfare is not what it costs those who provide it but what it costs those who receive it.”

These three articles are called “easy pieces” by me for a reason.

-JD Cross

Complex systems: Ebola, the current state of affairs

The WaPo has a great article on the current state of Ebola and international aid efforts in Liberia.

Here’s the short version: For unknown and very complicated reasons, Ebola cases are a fraction of what they were a few months ago; and this positive change in the number of affected people is coming at just the time when most aid efforts are culminating in completed treatment and quarantine facilities.

Here’s my take on the situation:

* Ebola outbreak in Africa

* People around the world panic for no justifiable reason

* Aid pours into the country/region for lots of reasons, few of which have anything to do with rationally responding to the disease

* Infection rates dramatically decline for reasons that nobody understands (see the WaPo article)

* Aid efforts reach their effectiveness peak too late to be of any meaningful use

Or, to put it differently: complex systems are complex.

Pop quiz: can you think of any other topics that are regularly in the news that are similarly complex and will likely result in similarly irrational, expensive, and misguided responses from Man?

-JD Cross

A great day for freedom!

Eric Holder has just announced that state and local police departments are now barred from certain kinds of civil asset forfeiture. This is a GREAT day for freedom and justice.

Why is civil asset forfeiture so bad? Let the WaPo tell you:

Civil asset forfeiture is one of the most powerful — and unusual — law enforcement tools. Police do not need to prove a crime to use it, because it is a civil action against an object, such as currency or a car, rather than a person.

As a consequence, protections common in criminal law do not apply. In fact, owners who want to recover their cash or property generally must show it is theirs and demonstrate it is not tied to crime.

Theirs is an understatement. Because of the reasons they describe, civil asset forfeiture isn’t just powerful and unusual, it is extraordinarily unjust and wholly irrational. It is anti-justice.

-JD Cross

Three Easy Pieces, and a whole lot of stupidity and confusion

Today we are presented with three pieces in the WaPo Opinion pages that each in their own manner highlight the tremendous stupidity and confusion that either IS government or IS the analysis of government.

Taken in order of what I consider to be the least to most complex, we have…

First is Charles Lane discussing the modern day consequences of the Democratically dominated 60s; namely the Great Society. What Charles gets completely incorrect is that, at the time, nobody believed there would be long term negative consequences to giving a lot of stuff away to a lot of people. He says:

Transformative and beneficial though they were, and still are, the Great Society programs minted 50 years ago have mutated into sources of new and in­trac­table problems, the most important of which is their unanticipated, enormous cost

And yet, only a few paragraphs later, he gives us this:

Even in those optimistic early years, though, skeptics worried about unrealistic goals and unintended consequences. In 1970, Daniel Patrick Moynihan wrote that the true “test of a program . . . is not input but output. It is interesting, and at times important, to know how much money is spent on schools in a particular neighborhood or city. But the crucial question is how much do the children learn.”

To claim that nobody anticipated the costs…completely disingenuous.

Lane’s piece, however, is a trifle compared to an observation George Will makes in his piece, about Keystone.

While Will’s entire piece is worth reading, here is what I believe to be the most accessible gem of stupidity, levied by Will against BO:

Obama revealed his economic sophistication years ago when he said that ATMs and airport ticket kiosks cost jobs. He does not understand that, outside of government, which is all that he knows or respects, all jobs are “temporary.”

John Tamny, editor of RealClearMarkets and an editor of Forbes, notes that Borders had 10,700 employees and 399 bookstores until it had none of either, thanks in part to Amazon, whose 150,000 employees have probably participated in enough creative destruction to know that permanence is a chimera. Blockbuster — remember that? Remember late fees? — had 60,000 employees and more than 9,000 stores until rivals such as Netflix appeared.

Yes. And, I would further note that BO walks both sides of the line on this because there are many occasions – a specific one of which was when BO exhorted the virtues of DOE’s lending program and Solyndra – when BO claims the jobs are permanent. Apparently, for BO, the jobs are permanent when he supports the program and temporary when he’s against it. Utter hogwash.

Finally, the most confused of all, is EJ Dionne. In this piece, he’s trying to make a point about how rich people don’t pay more than poor people in taxes, particularly local taxes. What EJ – and everybody who make this argument, of which there are many people who do – fails to understand is the difference between the percentage of whatever that is taxed and the revenue generated by (or, equally, the money confiscated because of) the tax.

Here is an example of EJ’s confusion:

On its face, the property tax would seem progressive, because big houses are taxed more. But the study finds that on average, “poor homeowners and renters pay more of their incomes in property taxes than do any other income group — and the wealthiest taxpayers pay the least.”

In fact, no, property taxes don’t ever seem progressive* because THEY’RE NOT! Property taxes, at least, every one that I’ve encountered, levy exactly the same percentage tax against property values. More expensive properties pay a large real dollar value in tax because the property is worth more, not because the tax percentage changes. Furthermore, OF COURSE poor homeowners pay more of their incomes in property taxes than do any other income group; they have less money, in general, so (almost) any tax is necessarily going to be a larger percentage of their income.

Here it is folks, math 101…

Property tax is 10%

Person A earns $100,000 per year and owns a $200,000 home.

Person B earns $50,000 per year and owns a $120,000 home.

Person A will pay $20,000 in property taxes which will represent 20% of their income.

Person B will pay $12,000 in property taxes which will represent 24% of their income.

The tax is the same, as a percentage, for both people. Person A pays more total dollars than Person B, yet Person B pays a larger percentage of their total income than person A.

He makes the same mistake when talking about supposedly regressive taxes like sales taxes:

When you think about it, such figures should not come as a surprise. Most state and local governments rely on regressive taxes — particularly sales and excise levies. Poor and middle-class people pay more simply because they have to spend the bulk of their incomes just to cover their costs.

The percentage is the SAME!** And poor and middle-class people typically DO NOT pay more in total dollars. These groups typically only pay more when one considers what they pay as a percentage of their total income.

Another example

Person A makes $100,000 and spends $10,000 per year on groceries.

Person B makes $50,000 and spends $8,000 per year on groceries.

Because people eat about the same amount, though person A is likely to buy more expensive items simply because they can (or because they’re not aware that they’re doing so…because they can afford not to be).

Suppose there is a tax on groceries (which there often isn’t, but the example works perfectly well if you change the tax to something else, like say a sales tax on electronics, which there often is if there is a sales tax at all) of 10%.

Person A is paying $1,000 per year in sales tax on groceries.

Person B is paying $800 per year in sales tax on groceries.

Person A is paying 1% of total income in this grocery sales tax.

Person B is paying 1.6% of total income in this grocery sales tax.

The tax is at the same percentage rate. Person A is paying more in total dollars; yet Person B is paying more in total dollars as a percentage of total income.

EJ thinks he’s figured out something profound when he says:

The institute found that in 2015 the poorest fifth of Americans will pay, on average, 10.9 percent of their incomes in state and local taxes and the middle fifth will pay 9.4 percent. But the top 1 percent will pay states and localities only 5.4 percent of their incomes in taxes.

But…IT’S JUST (very simple) MATH! It’s completely obvious! It shouldn’t be in an opinion piece in a major national newspaper!

-JD Cross

* – Progressive and regressive are words which, as applied to taxes, mean something very specific and widely agreed upon (because it’s just a definition). They mean something about how the percentage of the tax levied changes as the taxable base changes. These words are all about percentages, not absolute dollars. A progressive tax is a tax where the percentage of the taxable base increase as the taxable base increases; a regressive tax is a tax where the percentage of the tax decreases as the taxable base decreases.

** – So EJ is completely and utterly incorrect in his utterance. See *, above.

Awesomeness: new antibiotics

While this* is still preliminary, my money is – as always – riding on the “we won’t ever run out of stuff we really need” square.

* – Here, “this” refers to harvesting new kinds of antibiotics that have no side effects in mice and operate in a manner that makes them unlikely to develop the kinds of antibiotic resistances seen in today’s commonly used antibiotics.

-JD Cross

Unbundling Unhappiness

A reasonable, if not good, comparison of the nearly inevitable unbundling of the cable industry with the current state of affairs in the airline industry vis-a-vis a la carte menu options and consumer satisfaction.

I have always thought that the unbundling of fares in the airlines industry is a fantastic thing. It makes the real costs of traveling much more apparent and makes it possible for the consumer to spend money on only what they want. But most people seem to think it’s a bad thing; or, at least, they like to complain about it. I have never understood this.

Here is, in part, why I haven’t understood the complaints against a la carte airline pricing:

If you are short of money and will tolerate bare-bones flying experience — crummy seat, nothing to eat, locking your travel schedule far in advance — you are better off than ever before.

Nickel and dimed or not, the fact is that in the modern world we travel faster and better than the kings of yesterday.

-JD Cross


Get every new post delivered to your Inbox.

Join 157 other followers

%d bloggers like this: