Wednesday, December 31, 2008

What Goes Up Must Come Down

This is apparently a fairly common New Year's tradition:
St. Petersburg, where New Year's Eve revelers have been known to fire guns into the air, is putting out a public service announcement this morning advising them not to do the same Wednesday night.

Last New Year's Eve, there were 16 incidents of stray bullets falling from the sky, and in two cases people were struck and wounded. One of the victims, David Mink, 24, of Clearwater, is featured in the PSA.
This is one of the many things I've learned from my wife, who has been a social worker for a minute now.

Tuesday, December 30, 2008

Emptying the Bottle: December '08 Links List

1) Belated Christmas present: a bat species named after a loved one.

2) Make a bet on your New Year's Resolution for weight loss.

3) "This is, I think, perhaps the worst financial crisis of all time, and is the direct result of the government's housing policies"

4) A watch that wakes you up at the end of a REM cycle.

5) Eye lid advertising. Seriously.

6) Busting a move around the world.

7) Charging Polly for a cracker.

8) Obama's new new deal could be just as bad as the old new deal.

9) Cleanliness is next to godlessness.

10) Create a blog, not a book.

*Check my Bookmarks to see what I find interesting on a daily basis*

Sunday, December 28, 2008

The Economic Stimulus Package, Part III

You can go here and here for my first two arguments against any governmental transfers to "fix the economy." But I've been thinking, maybe a stimulus package isn't all bad. One assumption I have is that for the last 200 years (since the industrial revolution) life have been consistently getting better. So maybe politicians aren't stimulating votes, but are instead creating a "temporal progressive tax" (patent pending). Taxing the rich, future generations, to the benefit of the poor, us. It may not be a free lunch, but it is a borrowed one.

Friday, December 26, 2008

Avoiding Xmas Deadweight Loss

Today marks the beginning of "Reverse Christmas." That is, instead of selflessly buying gifts for loved ones, we selfishly exchange those gifts for what we really wanted. This got me thinking, what exactly is the deadweight loss of gift giving?

One of the complaints about the economists is that they know the price of everything, but the value of nothing. Hopefully I won't sound like too much of a scrooge. The main question is: what is the benefit of giving gifts? Almost surely I am better equipped to buy presents for myself, yet I still enjoy giving and receiving presents. Why? I think it's because there is value in feeling known. We like it when people plan for us and when they know us personally, both which are essential for a quality present. So how can we avoid the mass present returning and not using (10% of money on gift cards is never be redeemed)?

I have two recommendations:
  1. Give guilty pleasures that someone wouldn't buy for themselves.
  2. Give in your expertise. Stick with what you know and specifically with what the receiver doesn't know. Essentially the goal is to give a gift that they couldn't as easily give themselves.

Wednesday, December 24, 2008

$86,609 for Twelve Days of Christmas

That’s this year’s cost, according to the annual “Christmas Price Index” compiled by PNC Wealth Management, which tallies the single partridge in a pear tree to the 12 drummers drumming, purchased repeatedly as the song suggests. The price is up $8,508 or 10.9 percent, from $78,100 last year.

Here is the story and here is an interactive chart.

Monday, December 22, 2008

The Economic Stimulus Package, Part II

I discussed the follies of the first stimulus package earlier this year, but bad ideas die hard. Currently Japan, Germany, Spain, India, the United States and many other nations are planning some kind of fiscal stimulus. What these governments are not recognizing is that to put extra money into the market, you must first take it out, either taxes or debt (future taxes). There is no new wealth created, only an awkward redistribution of resources (here is a video from the Cato Institute that explains it in more detail). There are at least six reasons why governments rarely improve economic panics: information problems, unresponsiveness, bias against innovation, political bias for constituents, rent seeking, and corruption. The graph below shows just how helpful the first stimulus package was:

Disposable income went up, but actual purchases didn't. But wait, wasn't it FDR's progressive government action that pulled America out of the Great Depression? No, says two UCLA economists:
After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

So if government transfers aren't the solution, what is? Let's again look backwards and see what has worked in the past:
When [Margaret Thatcher] came to power in May 1979, the British economy, by every measure, was in worse shape than the U.S. economy is today. Inflation was out of control. Unemployment was high and rising rapidly. Job creation had been at a total standstill for almost a decade and a half...

Yet by sticking to her policies of lightened regulation, reduced trade barriers, privatization of a raft of publicly owned companies, reduced taxation, and the adoption of laws to prevent abuses of union power, Mrs. Thatcher achieved something few if any of today's economists have begun to consider. She achieved a genuine, productivity-led recovery that transformed Britain from perennial basket case into the Europe's most improved and vibrant economy.
There is something the government can do, less.

Saturday, December 20, 2008

Shoes Fly at Bush, Off Shelves

It seem like there's a profit to be made in political statements:

The shoe hurled at President George W. Bush has sent sales soaring at the Turkish maker as orders pour in from Iraq, the U.S. and Iran.

The brown, thick-soled “Model 271” may soon be renamed “The Bush Shoe” or “Bye-Bye Bush,” Ramazan Baydan, who owns the Istanbul-based producer Baydan Ayakkabicilik San. & Tic., said in a telephone interview today.

“We’ve been selling these shoes for years but, thanks to Bush, orders are flying in like crazy,” he said. “We’ve even hired an agency to look at television advertising.”

Iraqi journalist Muntadar al-Zeidi hurled a pair at Bush at a news conference in Baghdad on Dec. 14. Both shoes missed the president after he ducked. The journalist was jailed and is seeking a pardon from Prime Minister Nuri al-Maliki.

Baydan has received orders for 300,000 pairs of the shoes since the attack, more than four times the number his company sold each year since the model was introduced in 1999. The company plans to employ 100 more staff to meet demand, he said.

“Model 271” is exported to markets including Iraq, Iran, Syria and Egypt. Customers in Iraq ordered 120,000 pairs this week and some Iraqis offered to set up distribution companies for the shoe, Baydan said.

Baydan has received a request for 4,000 pairs from a company called Davidson, based in Maryland. He declined to provide further details.
Perhaps General Motors should throw a GMC Sierra at Blagojevich.

Tuesday, December 16, 2008

Saturday, December 13, 2008

The Auto Bailout is a Bad Idea.

The last bailout may have been questionable, this one is just plain wrong. Earlier this week the government's bailout of the automotive industry stalled in the Senate. As best I can figure, this is very good, but the story isn't over yet. The Bush administration is considering sending funds from the financial bailout to American car makers. Not only is this a clear misuse of the money's original purpose (a purpose still questionable), but it is also a bad policy decision.

To put is simply, these companies are not currently profitable in the United States. Compare General Motor's 2007 profits (-$38,730,000,000) to Toyota's (+$17,146,000,000). GM, along with Chrysler and Ford, are asking for taxpayer help because they have made bad business decisions. The biggest of these is promising too much in their 2,215 page (22 pounds) United Autoworkers Union contract. American car companies have almost double the labor costs compared to foreign companies who have plants in the US (graph). These labor differences are not bringing the poor into the middle class. The average auto employee makes $20,000 more than the average American. This problem becomes apparent when you see that GM's overseas (non-union) operations are still profitable. The solution is to allow these three companies to use the bankruptcy system, which was created for just this problem. They will then be free from impossible to keep union promises.

The response from the auto industry is that no one wants to buy cars from a bankrupt company. While I admit it does damage their reputation (which is being hurt right now anyways), it is certainly not death for these companies. In fact there have been several companies that filed for bankruptcy and have returned to profitability (Delta, Heinz, Quaker Oats, Pepsi just to name a few). There is even one guy promising to buy a bankruptcy car.

The auto executives have said "government getting a stake in the auto companies would allow taxpayers to share in future gains if they recover". The problem with this, as economist Don Boudreaux points out, is that the people already have a chance to share in any future gains; it's called the stock market. However millions of Americans and billions of people all over the world have chosen not to. Is it then okay for Congress to force us?

The failure of these businesses will not result in the disappearance of their resources. All the capital (cars waiting to sold, buildings, machines) can all be sold for more productive purposes. Just as important, the skills and talent of auto workers can also be sold to highest bidder in the labor market. Think of it as a bag of marbles. If a bag is breaking and not handling the marbles well, we should allow it to be thrown away. The marbles inside can be still be moved elsewhere. We lose the current organizational tool, but the resources can still be used. It is most likely that these businesses will simply exchange their old bag for a new one (bankruptcy). To bailout the industry is to stitch patches to a crumbling bag.

Also important to note is that these companies are not "too big to fail." First off, Americans buy more foreign cars than American cars (graph). Secondly, the size of these industries only increases the importance that they restructure. Once again, Don says it best: "the bigger the unprofitable firm, the more vital it is that it be allowed to fail." And with gas at it's lowest level in history (measured as a percentage of income), the restructuring into "green" business could actually hurt the industry.

With all the reasons not to support this bailout, why did it get through the House of Representatives. With 61% of the public opposing the bill, it seems the American people know something politicians don't, that this plan will not help. Or perhaps the almost $50 million the auto industry has given to congressmen this year is affecting their votes. I wonder exactly how much a politician costs these days?

I'll leave you with this final question: what if the government had bailed out the struggling piano industry in the 1960's? Answer: Americans in 2008 would have more expensive less quality pianos.

Wednesday, December 10, 2008

Culture in Diagrams

Below is a great video inspired by Indexed. Enjoy.

Monday, December 08, 2008

Ten Quotes Worth Quoting

Inspired by Justin, who has a healthy love of good quotes.

1) "The Bush administration, having entered office as social conservatives, leaves office as conservative socialists" - Brad DeLong

2) "Anybody who's married, and divorce is an option, you're going to get a divorce" - Will Smith

3) "In a modern democracy, not only can a libertarian be elitist; a libertarian has to be elitist. To be a libertarian in a modern democracy is to say that nearly 300 million Americans are wrong, and a handful of nay-sayers are right." - Bryan Caplan

4) "Country music is all about being cheated on, rap music is all about doing the cheating" - this guy

5) "I love these recession gas prices" - brother-in-law Brian Jones

6) "Being non-profit does not mean that you don't have profits as an objective. All it does is restrict what you can do with earned profits, meaning that they can't be dispersed to shareholders. As I was told at a meeting when I jokingly brought up the fact that my university is a non-profit, I was told by an older gentleman at my table 'Oh, we get plenty of profits. We just make sure we spend it all.'" - Phil Miller

7) "Extremism in the defense of liberty is no vice! And let me remind you also that moderation in the pursuit of justice is no virtue" - Barry Goldwater

8) "Democracy is truly the sacred cow of the modern world" - Bryan Caplan

9) "One can't explain an unusual cluster of errors by citing greed, which is always around, just as one can't explain a cluster of airplane crashes by citing gravity. Anyway, the greedy aim at profits, not losses" - Larry White

10) "Dave Ramsey discourages listeners from taking out any kind of debt, but he encourages them to save money for the future. Yet. the main source of savings is through banks, a system built on borrowing." - Edward Bynum (paraphrased)

Saturday, December 06, 2008

Bottlenecked Blog Personality Type

I recently came across a site that can take the text from your blog and determines your Myers-Briggs personality type. I've talked before about how I think I am an ENTP. However, labeled me an INTP. It may have missed that I'm an extrovert, but there seems to be little difference in brain activity when writing between the two:

Thursday, December 04, 2008

Solutions to Traffic

This Sunday my 3 hour trip home from Thanksgiving turned into a 6 1/2 hour crawl. While sitting in standstill traffic on the highway I began to wonder what the problem was. Well clearly more people want to travel over Thanksgiving and Sunday is the most popular day to come back home. But consider this, 20 percent of all turkeys consumed in 2007 were consumed at Thanksgiving, but if you want a turkey during the holidays you can get one quickly and cheaply. Why then do I have to wait in line to drive home? The solution is to allow the market (that is prices) to allocate the scare resources of the road. Here are some practical ways to do so:

1) Raise the gas tax. The United States has one of the lowest gas taxes in the industrialized world. Of all the taxes we pay, the gas tax is one of the most efficient. For one it makes drivers feel the cost of their driving on others (in traffic, pollution, road wear).

2) Use giant screens to keep rubberneckers from wasting our time.

3) Turn our freeways into fareways. Like Six Flags, let people pay extra to cut in line. Have a special toll lane and use that money to subsidize other government projects.

4) The final and best way is to use congestive pricing. This is charging drivers more to drive in times of heavy use. The fareway tag could be used for this too.

5) Wait until everyone has a GPS with traffic conditions. Or as this fantastically named blog suggests, maybe electronic signs can give us the information.

Tuesday, December 02, 2008

I'm Published at, "a good source for [fake] Christian news," allows readers to submit article ideas. Mine was accepted and published this month:

Man tired of being used in sermon illustrations

SOMERSET, Pa. — Dan Felks, a local mechanic, noticed he was getting strange looks and sly comments around town a few months ago.

"People at the grocery store would smile at me and say, ‘I’ve heard about you,’" he says. "Some even talked about things I’d done in my past."

But it wasn’t until he dropped into Pine Grove Christian Fellowship one Sunday that he realized his old college roommate, pastor Pete Lancaster, was using him in sermon illustrations.

"I was going to surprise Pete, because I don’t attend church and I thought he’d get a good laugh out of seeing me," Felks says. "Then I heard him tell a story about an old friend who got drunk, fell into a reservoir and almost died, and I realized, my gosh, that was me."

Felks slipped out quietly and attended services for the next few weeks, hearing several more unflattering illustrations about himself.

"It was a little hurtful," he says. "I don’t talk to my customers about Pete’s colorful past. Why would he talk about me?"

Felks says their lives have gone in different directions since college, with Pete becoming a successful local pastor and Felks abandoning hopes of a career in computers and instead working in a transmission shop.

"I like to party. I like to have a good time. I’m not hiding anything," Felks says. "I’m not ashamed of myself then or now."

But he says being made the bad guy in each of Pete’s stories has strained the loyalty he still feels toward his friend.

"He only recalls the bad stuff," Felks says. "There’s this vibe around town now like, ‘Watch out or you’ll turn out like Dan Felks.’"

Lancaster has never identified Felks by name, but many people know the two were roommates. Some were even present for the events described. Lancaster says he regrets that Felks’ anonymity was breached.

"We had some fun times and some times I’m not so proud of," Lancaster says. Still, he says it’s fair game to talk about the people and events in his past to help people live better now.