Wednesday, September 30, 2009

Meyerson in Washington Post Op-Ed: Free Market Types Got it Wrong

Harold Meyerson in today's Washington Post said this:

The problem with contemporary economics, at least with the purer strain of free-market economics ... is not simply that it failed to predict the near-collapse of the world financial system last year. The problem is that it believed such a collapse could not happen.
So free market economics failed to predict, and failed to even consider the possibility of near collapse of the financial system? Actually, it's the exact opposite. There is a school of free market economics called Austrian economics, which is perhaps the "purest" strain of free market economics, that describes exactly the type of boom/bust phenomenon that our economy experienced. He could have done a simple google search for "who predicted financial crisis", and he could have found all kinds of articles and video links from "free market types" like Peter Schiff and Ron Paul. He may even want to go back and look at the rationale for awarding Friedrich von Hayek, another "free market type" the Nobel Prize in 1974. From NobelPrize.org:
"von Hayek showed how monetary expansion, accompanied by lending which exceeded the rate of voluntary saving, could lead to a misallocation of resources, particularly affecting the structure of capital. This type of business cycle theory with links to monetary expansion has fundamental features in common with the postwar monetary discussion."
I don't care so much that Meyerson agrees or disagrees with this theory, or free market economics in general. And it's true that many free market oriented economists failed to predict the financial crisis, and it's also true that the Austrian explanation of the business cycle has its critics, even among some free market economists . But nevertheless, he is clearly wrong when he says that free market economics failed to predict or even consider the financial crisis.

Meyerson even blames the practice of "mortgage securitization" on the free market. Of course, securitization of mortgage debt was something explicitly created by the government in 1970 and the government is still by far the most influential player in that market.

Maybe Meyerson needs a research assistant, or access to the Internet.

[Update]

Veronica de Rugy also has a great post on the Meyerson op-ed over at NRO. She asks "How can someone write a column on an issue he knows so little about?" One of Meyerson's arguments is that free market economists believe "that all risk could be quantified by mathematical models and that these quantifications could help us correctly price just about everything." Once again, it's the exact opposite. She points out that free market economists, specifically from the Austrian school, reject the use of mathematics in trying to model something as complex as the economy. She closes by saying:

Mr. Meyerson should read the Austrian Economists blog. Great economists such as Pete Boettke, Frederic Sautet, and Steven Horwitz make the case for freedom daily, with no math. He should also read their books and articles; all published in respected academics journals, without much math at all. And by the way, all of these economists have claimed for years that we were heading for disaster.

Monday, September 28, 2009

Making economics more intuitive

Are basic economic principles counterintuitive? Bryan Caplan over at Econlog.com says no, and that economics is just "poorly explained". To illustrate, he provides the following demonstration:

I'm going to present a few allegedly counter-intuitive economic propositions, then explain them at a 6th-grade level.

1. Counterintuitive claim: Free trade makes countries richer, even if the other countries have big advantages like cheaper labor or more advanced technology.

Intuitive version: We'd be better off if other countries gave us stuff for free. Isn't "really cheap" the next-best thing?

2. Counterintuitive claim: Strict labor market regulation is bad for workers.

Intuitive version: Employers don't like hiring people if it's hard to get rid of them. Suppose you had to marry anyone you asked out on a date!

3. Counterintuitive claim: Egalitarian socialism creates poverty... even starvation.

Intuitive version: If everyone gets the same share whether or not they work, you're asking people to work for free. People don't like working for free, especially when the work isn't very fun. (This is my response to Sumner's Great Leap Forward Challenge: "But how do we explain to school children that millions had to starve because of a policy that encouraged people to share?")

4. Counterintuitive claim: Prices are determined by supply and demand.

Intuitive version: If a good was free, consumers would want a lot, but producers wouldn't feel like making much. If the good costs trillions of dollars, producers would want to make a lot, but consumers wouldn't want to buy any. In between there's got to be a price where consumers want to buy as much as producers want to make.

Bread and Circuses Dept.

Obama to make in-person pitch for 2016 Olympics
WASHINGTON (AP)—President Barack Obama will travel to Denmark to support Chicago’s bid for the 2016 Summer Olympics, projecting the highest-ever White House profile in lobbying for the international event.

Saturday, September 26, 2009

Aim High

Man sues BofA for "1,784 billion, trillion dollars"

NEW YORK (Reuters) – Dalton Chiscolm is unhappy about Bank of America's customer service -- really, really unhappy.

Chiscolm in August sued the largest U.S. bank and its board, demanding that "1,784 billion, trillion dollars" be deposited into his account the next day....

The sum also dwarfs the world's 2008 gross domestic product of $60 trillion, as estimated by the World Bank.

Thursday, September 24, 2009

More health care back and forth

A friend wrote to me: "In a free market system there is too much room for deception, as long as profit drives these companies than people will get screwed. People shouldn't have to scramble for their lives when they get sick."

My response:
In a free market system, there is actually very little room for "deception". First of all, if an insurance company violated a contract, the customer should sue. That's what our common law system is designed to take care of. Second, if the insurance company is really deceiving their customers, eventually, those customers will catch on and they will leave to go to a competitor who is providing better value, better service and has made an effort to protect its reputation by doing right by its customers. The company that is deceiving their customers will be put out of business unless they change their ways. That is market discipline. It's incredibly powerful, but has been inhibited in health care because of the government created, cartel-like system we have now.

On the other hand, when the government screws people, there is no accountability. People cannot leave and go elsewhere. People cannot opt out. The government doesn't have to make a profit, and it doesn't have to worry about attracting customers. There is no market discipline. They can just put competitors out of business by charging an artificially low price, by regulating their competitors to death, or by forcing people into their system. They can screw people over and over again without any consequences.

So it's actually the exact opposite. The more we get away from a free market system, the more people will get screwed. The more we have a truly free market system, the more insurance companies and health care providers will have to be responsive to the customer.

Tuesday, September 22, 2009

Someone finally asks...

...if the President wants competition, why not allow the purchase of health insurance across state lines?


Hats off to Wolf Blitzer for asking the question.

I guess that question didn't make the cut for David Gregory's interview with the President on Sunday, but this one did!
Gregory: Hate to break it to you, but doesn't look so good for your White Sox here. So I want to know who is your pick to win the World Series?

Monday, September 21, 2009

Breitbart hints that next story will be about corruption at the NEA

After skillfully exposing Acorn and the mainstream media with the launch of biggovernment.com, Andrew Breitbart writes this morning:

At the very least, filmmaker James O'Keefe and actress Hannah Giles deserve a Pulitzer Prize for their expose of deep corruption and unspeakable immorality at the ACORN housing division. But more important, I won't rest until they receive a grant to continue their partisan artistry from the National Endowment for the Arts.

That's this week's mission.

Can't wait to see what's next...

[Update]
From www.bighollywood.com:

The government involvement here is what is truly stunning. Not only did the government sponsor a conference call specifically dedicated to recruiting artists to the Obama re-election and political strategy campaign – and not only did they co-sponsor the call with Obama partisan organizations — they list lobbying organizations on their website for United We Serve (Serve.gov). As Dana Loesch of BigGovernment.com reported, ACORN is included in the “non-partisan” organizations listed by Serve.gov, among the other participants like the AARP grassroots advocacy organization (which asks you to “Be a part of a team of grassroots advocates that encourage elected officials to address the issue of health care reform…”).

All of this – particularly the government-sponsored conference call itself – is in blatant violation of the Anti-Lobbying Act (19 U.S. Code §1913), which explicitly provides: “No part of the money appropriated by any enactment of Congress shall, in the absence of express authorization by Congress, be used directly or indirectly to pay for any personal service, advertisement, telegram, telephone, letter, printed or written matter, or other device, intended or designed to influence in any manner a Member of Congress, a jurisdiction, or an official of any government, to favor, adopt, or oppose by vote or otherwise, any legislation, law, ratification, policy, or appropriation, whether before or after the introduction of any bill, measure or resolution proposing such legislation, law, ratification, policy or appropriation …”

Violation of this law, in turn, violates 31 U.S. Code §1352, which bans use of “funds appropriated by any Act [from being] expended by the recipient of a Federal contract, grant, loan, or cooperative agreement to pay any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with any Federal action …”

Sunday, September 20, 2009

What a marvelous idea!

Let's take an insane killer on a field trip to the county fair! Well, that's exactly what officials in Spokane, Washington did. No way you'll guess what happened next:

Killer escapes on trip to county fair
SPOKANE, Wash. - Authorities have put out a statewide alert for a mentally ill killer who escaped during a hospital field trip to a county fair, leading to fears that he'll become more unstable and potentially dangerous the longer he is on the loose with no medication.

Sgt. Dave Reagan of the Spokane County sheriff's office says Phillip Arnold Paul remained at large Friday and officials believe he's headed to Sunnyside, the town
where his parents live. Reagan said anyone spotting him should call 911 and not try to confront him.
Paul was committed after he was acquitted by reason of insanity in the 1987 slaying of an elderly woman in Sunnyside. He soaked the woman's body in gasoline to throw off search dogs and buried the remains in her flower garden. He reportedly said voices in his head told him she was a witch.
He was caught trying to escape four years later, and later knocked a deputy unconscious in the booking area following his detention.


Read the whole thing. Or don't. Regardless, until further notice you may want to put that trip to Spokane on hold.

Friday, September 18, 2009

Nadler Calls Acorn Bill Unconstitutional

Rep. Jerrold Nadler (D-NY) is claiming that any bill to defund Acorn is unconstitutional because it violates the Constitution’s prohibition against Bills of Attainder.

I am not a Constitutional scholar, but I believe the prohibition against Bills of Attainder is designed to maintain separation of powers between the legislative branch and the judicial branch by preventing Congress from declaring a person or organization guilty and punishing them accordingly.

Just a couple of thoughts:

First of all, this is a spending issue, and according to the Constitution, the Congress is in charge of all spending.

Second, I don't see how taking away a subsidy is a "punishment", at least in the legal sense. Congress is not declaring Acorn guilty, and is not claiming to have any power to put anyone in prison; they are just choosing not to fund Acorn with taxpayer dollars. As far as this Congressional action goes, Acorn is free to continue to operate as long as it can raise funds from other sources.

And where was the talk about Bills of Attainders when Congress was talking about taxing AIG bonuses up to 95%, or when Congress threatens to tax "excessive" profits from the oil companies?

And Now ABC Gets On Board

Over at The Corner, the National Review staff points to this report from ABC news entitled U.S. Taxpayers Fund Empty 'Airports to Nowhere'.

CNN investigates $31 million "stimulus" project

This story may not be nearly as compelling as the James O'Keefe/Hannah Giles Acorn videos, but it may be a sign of things to come. CNN's Drew Griffin investigates why $31 million of stimulus money was allocated to two border crossing facilities that each handle an average of 22 vehicles per day. Griffin asks:
Did politics, rather than security, guide the DHS? Especially when a border town like Laredo, Texas, which sees 66,000 crossings a day, was getting not one dime of the $400 million in DHS border stimulus funds. Montana, in total, was to receive $77 million.

When questioned by CNN, the DHS initially defended the decision, but later changed its tune and suspended the plans until further review.

In business, there is a concept called Activity Based Accounting, where costs are assigned to a product or service based on the activities they require. In this case, the cost is the $31 million, and the activity is vehicles served. With twenty-two cars served per day per facility, times two facilities, these border patrol facilities will service about 16,000 vehicles per year. Assuming the facilities are good for 20 years, that means that the facilities can expect to serve approximately 320,000 vehicles over the course of their useful lives. Therefore, the cost of each vehicle served would be approximately $100/per vehicle. And, this does not include labor costs and other operating expenditures, which might easily add another $25-$50 in cost per vehicle served.

With a $700 billion stimulus bill, there are probably thousands of stories like this one. As Jon Stewart shouted to the mainstream media in his hilarious Acorn report, "Let's get to work people!"

Thursday, September 17, 2009

Time Magazine Asks "Is Glenn Beck Bad for America?"

But maybe the more appropriate question is, "is Glenn Beck bad for President Obama"? (Or better yet, "is President Obama bad for America"?)

The article is not completely terrible. Below are some excerpts where they manage to give him some credit.

This flexible narrative often contains genuinely uncomfortable truths. Some days "they" are the unconfirmed policy "czars" whom Beck fears Obama is using to subvert constitutional government — and he has some radical-sounding sound bites to back it up. Some days "they" are the network of leftist community organizers known as ACORN — and his indictment of the group is looking stronger every day.

and
He is having an impact. Along with St. Louis, Mo., blogger Jim Hoft, whose site is called Gateway Pundit, Beck pushed one of Obama's so-called czars, Van Jones, to resign during Labor Day weekend. ... On Sept. 14 the Senate overwhelmingly voted to cut off all federal funds to ACORN, and the U.S. Census Bureau severed its ties to the organization. This followed Beck's masterly promotion of a series of videos made by two guerrilla filmmakers who posed as a pimp and prostitute while visiting ACORN offices around the country.


Joe Scarborough accused Beck this morning of "selling anger". Well, if he means anger over the fact that Beck, a former disc jockey and self described rodeo clown, has to be the one to break one explosive story after another that the rest of the media ignores, then maybe Scarborough is right.

Jay Nordlinger sums it up

Jay Nordlinger, senior editor at National Review:

I thought Barack Obama would be a poor and troublesome president. Did I think he would yuk it up with Hugo Chávez, smirk with Daniel Ortega about the Bay of Pigs, turn his wrath on a Central American country trying to follow its constitution, denounce President Bush abroad, bow to the king of Saudi Arabia, endorse a radical Middle Eastern view of how Israel came into being, knock Western countries that try to protect Muslim girls from unwanted shrouding, invite the Iranian regime to our Fourth of July parties, stay essentially mute in the face of counterrevolution in Iran, squeeze and panic Israel, cold-shoulder the Cuban democrats in order to warm to the Cuban dictatorship, scrap missile defense in Eastern Europe, and refuse to meet with the Dalai Lama — in addition to his attempts to have government eat great portions of American society? No, I did not. You?

P.S. When President Ford, at the encouragement of Secretary Kissinger, refused to meet with Solzhenitsyn, conservatives thought this was a pretty rotten move and posture. I hope these same conservatives, and their heirs, see what President Obama’s snubbing of the Dalai Lama means today.

P.P.S. When President Obama does something — even a small something — like turn off the "news ticker" outside the American interests section in Havana, he tries to make nice with oppressors. Sometimes in life you have to choose: whether to make nice with the oppressors or with the oppressed. It’s hard to do both.

P.P.P.S. Will Obama’s moves pay off? Will Russia join arms with us against nuclearizing mullahs, or will the Cuban dictatorship reduce its tortures in the prison cells? I’m not sure the ends are really the point, with the Obama crowd at large. I think the main point may be not to upset regimes in power: and therefore show that America can "get along" with the world, unlike under that crude, narrow, swaggering, simplistic rancher from Texas.

Get along or go along.


Nordlinger is a great and faithful rememberer of those who suffer under authoritarian regimes, and writes frequently about political prisoners in places like Cuba and China. I wish someone like him had the President's ear.

And as to his primary point -- Obama's performance in office as compared even to conservatives' low expectations -- I can't help but agree. Obama's work experience (and lack thereof), voting record, and past associations showed that he was a committed liberal and not the centrist he and his supporters claimed him to be. It was clear too that in his thinking Obama would be prone to all of the left-liberal bad habits, including the tendency to see the federal government as the solution to all problems; the impulse to regard international conflict as ultimately the fault of the U.S.; and naivete about the desires of hostile nations. But I held out hope that he had enough political sense to do a little Clintonian triangulation now and then, and to get the easy calls right. Jay's litany suggests that my hope was ill-founded.

Again, it's a good thing the Obama is filled with super-geniuses, or else I'd be worried.

"U.S. Scrapping Bush's European Missile Defense Plan"

The AP reports:

WASHINGTON – The Obama administration is shelving an Eastern European missile defense plan that has been a major irritant in relations with Russia, a U.S. ally said Thursday. The Pentagon confirmed a "major adjustment" of the system designed to guard against Iranian missiles.

Jan Fischer, the prime minister of the Czech Republic, told reporters that President Barack Obama phoned him overnight to say the U.S. "is pulling out of plans to build a missile defense radar on Czech territory." The missile defense system, planned under the Bush administration, was being built in the Czech Republic and Poland.


I'm so glad we are now being governed by super-geniuses. What could go wrong?

Peter Schiff to Run For Senate in CT

When asked whether voters should be concerned about his lack of experience, Senatorial candidate Peter Schiff responds: "No, not at all, the fact that I have no experience ruining the country is my greatest attribute!" (That is not a typo. He said ruining, not running.)

Thursday, September 10, 2009

John Stossel Moving to Fox

After 28 years at ABC News, John Stossel is moving to Fox. This is mostly great news, since Fox will allow him to do 1 hour of programming each week, while at ABC, he produced only one or two of his hour long documentaries a year.

Unfortunately, now there is no one that I can think of at the three major networks who will provide an opposing point of view. Last week, I heard Mark Levin rant , "You'll never see a program on ABC or NBC about the wonders of the free market", and I said to myself, "That's not true, what about Stossel!" Well, now he is right.

With the incredible success of the Glenn Beck Show, the popularity of the on-line show Freedom Watch with Judge Andrew Napolitano, and now the addition of John Stossel, it is clear that Fox News Channel has been making an effort to provide programming that emphasizes a more libertarian point of view, while downplaying the Weekly Standard, "two cheers for capitalism", big government brand of conservatism that has dominated their "all star" panels. Why are they doing this? Ratings. There is clearly an audience out there for this type of programming.

The more important question is, is there a similar shift going on in the conservative movement?

[Update]

From Instapundit:
"A couple of readers wonder why I think the move is “too bad.” It’s because with Stossel at ABC, some viewers might be exposed to non-conventional (at ABC) views. I very much doubt that ABC will replace Stossel with someone of similar libertarian inclination, though I’d love to be proven wrong. Fox viewers, on the other hand, will appreciate the quality of his work, but it’s not likely to be the same kind of wake-up call it is to the Barbara Walters crowd . . ." .

Contradictions in Obama's Speech

I saw three major contradictions in President Obama's speech:

First, Obama states, "Nothing in our plan requires you to change what you have." This statement is followed by a laundry list of mandates that insurance companies will be required to comply with if they wish to stay in business. If your insurance company wants to keep its current customers premiums low by not accepting customers with pre-existing conditions, too bad, it will be against the law. Want to buy a plan that does not cover routine checkups, but instead provides only basic catastrophic coverage? Again, too bad, that will be illegal as well. So how exactly does the current plan "in no way require you to not change what you have?" It doesn't. Michael Tanner makes the same point in his the NY Post column from this morning.

Second, the President repeatedly claims that under his plan, insurance will become more affordable. But what about all of these mandates? How will that make coverage more affordable? It seems to me that these mandates will have exactly the opposite effect. For example, what kind of homeowners insurance would be cheaper? The kind where you have to purchase it before the hurricane arrives, or the kind where you can wait until after your house blows away before you have to start paying premiums?

And finally, David Henderson over at Econlog highlights a contradiction about the cost of the plan and how the plan will be financed. First, Obama says "I have insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects." Sounds good. But then later in the speech, he says "Finally, let me discuss an issue that is a great concern to me, to members of this chamber, and to the public - and that is how we pay for this plan." Which is it?

[Update]

On the "how are we going to pay this" contradiction, I now realize that Obama was saying that the public option insurance plan will be self sufficient, but that the entire plan, which includes subsidies for people to buy insurance and other programs, will need to be paid for. So my original post was misleading, but I'm not sure the story gets any better. The public insurance plan will allegedly be self sufficient, but only after the government gives away hundreds of billions that will then be used to buy insurance from the government.

Tuesday, September 8, 2009

Is It Really Possible to "Opt-Out" of the Public Option?

I often hear the argument from supporters of the so-called "public option" that anyone who does not want to participate can simply "opt-out" and keep their current insurance. There are many problems with this argument.

1) Just like it is impossible to "opt-out" of the public school system, it is impossible to "opt-out" of the public option for health care. Yes, you may choose not to use the public insurance plan, but you cannot opt-out of paying for it.

2) The plan as proposed by the House provides for specific mandates that the private sector insurance companies must comply with in order to be considered a "approved plan". Again, you will have the option to not use the public insurance plan, but your options will be limited to those plans that the government approves. (We actually have this now, but on a state by state basis.)

3) Because the public plan will be subsidized by the government while private plans will be subject to onerous and costly regulations and mandates, this "reform" will crowd out private sector competitors, and leave most of the public, especially lower and middle income families, with no option other than the public option.

Health care reform means tax code reform, tort reform, and allowing for the purchase of health insurance across state lines. Do those things and the market will solve the problem of skyrocketing costs by itself without costing taxpayers a dime.

Obama Advocates Personal Responsibility

"And that's what I want to focus on today: the responsibility each of you has for your education. I want to start with the responsibility you have to yourself." - Barack Obama in speech to schoolchildren

It would be awesome if he said that in his speech tomorrow night but replaced the word education with the words health care.

Friday, September 4, 2009

Friendly Facebook Debates on Health Care

I try not to be too outspoken about my political beliefs on Facebook, but I am not shy about politely responding to a friend who is. Below are two discussions I've had in recent days:

Facebook Friend: "No one should die because they cannot afford health care, and no one should go broke because they become sick. If you agree, please post this as your status for the rest of the day."

Me: "Interesting. I guess someone who does not purchase health insurance before they get sick is at risk of going broke, just like someone who fails to buy homeowners insurance before their house burns down is at risk of going broke, and someone who doesn't buy disability insurance is at risk of going broke if they get disabled and can no longer earn an income, and someone who doesn't buy any life insurance might cause his family to go broke if he dies prematurely.

I'm not sure there is any way around this. Fortunately, we live in a compassionate society and we don't have people dying on the streets because they don't have any money to pay for health care."

Other person: "You know what I like? Paying into a system here in England. It's not perfect, but it's nice to know I don't have to worry about huge bills should I fall and break my leg or get some horrible food poisoning. I hope they work something out in the US soon."

Me: "I don't worry either. I have a contract that I pay for with a private (but overly regulated) insurance company, and I am fairly confident that they will live up to their end of the bargain. They have an incentive to do so, both because they are contractually required to, and they have a reputation that they must protect if they want to keep and attract new customers. I also believe my life insurance, my disability insurance, my homeowners insurance, and my auto insurance will also pay off if and when I need it.

I wish the insurance didn't cost so much, but that's what happens when the insurance companies are mandated to provide me with all kinds of coverage that I don't really need. It also does not help that there are 133,000 pages of health care regulation in the U.S. Federal Register. There are other important reasons health care costs are so out of control, but those also have nothing to do with the free market, because unfortunately we haven't had one in health care for a long time."


And then there is this one. Perhaps not so friendly, but it was all in good fun.

Facebook Friend: "I am hoping that the health care plan Obama's pitching includes a provision whereby anyone protesting against "government health care" loses whatever Medicare or Medicaid coverage they might have."

Me: "Maybe we could have a rule where anyone in favor of government run health care is not allowed to benefit from any medical breakthroughs or other innovations that come from the private sector."