31 January 2008

Edwards Drops Out

With any luck, we've heard the last of John Edwards, who just dropped out of the race for the Democratic nomination. I've never liked him much, but I'm still surprised he managed to be a distant third behind a woman with a grating voice and a black man with no experience. We really have come a long way, because Edwards, a white guy, has barely any more experience than Obama (the black man, in case you didn't guess), and much less than the woman (you did guess, Clinton, right?)

Hopefully Edwards' plea for economic protectionism and regulation will die with his candidacy. He wants to take the U.S. back to the 1970s, when your only choice of cars (unless you were wealthy) was one over-priced badly-made American car or another, because of strict quotas on Japanese imports. When flying was a delightful experience, but only the well-off could afford to do it. When telecom regulation meant phone customers still rented their phones from Ma Bell.

I also dislike Edwards because he thinks the president's primary responsibility is for domestic policy. Read the second article of the U.S. Constitution carefully, and compare the presidency's domestic policy responsibilities (few, and all in concordance with Congress), and its foreign policy responsibilities. I'm not sure Edwards has read it. After less than 2 years in the Senate, he felt qualified to be the leader of the free world, and began his campaign for the presidency. Over the succeeding 4 years he spent so much time campaigning that he probably didn't gain any real experience even from being in the Senate. Is he ready to deal with North Korea, Iran, China and Russia?

If you doubt foreign policy is a president's real task, look at George W. Bush. He had one big issue in his first campaign, cutting taxes. He knew nothing about foreign policy and didn't want to focus on it (e.g., his cutting off of talks with N. Korea), but his presidency will be defined by the war in Iraq. Or look at Jimmy Carter: he wanted to save the environment, but got bogged down by the Iran hostage crisis. He also brokered the still-strong peace agreement between Israel and Egypt, but that just reinforces the point--a president will be defined by foreign affairs.

That's my criticism of Obama, as well. The difference is, I like Obama. I lived in Illinois when he won his Senate seat, and I remember thinking, "this is the kind of person the Democratic Party needs to reach church-going Americans again." I thought he might make a great presidential candidate in about 10 years--not 3! Depending on who the Republican nominee is, I could consider voting for Obama, but mostly to be on the right side of history, so to speak. I don't mean I would do it for affirmative action, but that I think Romney is no more qualified, and is in many ways more repugnant, so if I have to choose between two unqualified persons, any other criteria is good enough grounds to choose. But since I usually vote Libertarian, my only reason for departure from voting for a certain loser yet again would be to make the statement that it's ok to elect a non-white to the oval office.

I like Hillary far less than Obama, but am more supportive of her for President. Despite her failed national health-care fiasco--actually, because of it--she clearly learned a lot about being president in her 8 years as first lady, and in the Senate she has served on the Armed Services Committee and the Senate Foreign Relations Committee. She's smart enough to have learned a lot that a president needs to know. I would also vote for her over Romney, for much the same reasons I would vote for Obama.

But I still favor McCain, because I don't care about a president's stand on taxes, abortion, or campaign finance reform (McCain is the author of the First Amendment gutting McCain-Feingold law, for which I will never forgive him). A president's job is to deal with other countries, and I don't see any other candidate remotely as qualified for that task as John McCain.

I Hate the Media

I teach American Government. Every single term. I teach it live in front of living, breathing, (occasionally sleeping) students, and I teach it online. I teach it for two different colleges at the same time. I will teach 8 sections of American Government this calendar year alone. I know American Government.

The media knows shit.

I should be more specific: the blow-dried, primping, smug, self-satisfied, breathless, and cynical prima donnas on Tv don't even know shit. The ones on the radio, even on NPR, don't know shit, either.

There are a few people out there who know something, most prominently David Gergen. David Gergen worked in the Nixon and Ford White Houses, maybe not what you really want on your resume, but he sure as hell learned a lot.

I'm always pissed at the media during campaign season. It's not just that the focus almost wholly on the horserace instead of the issues, it's that they can't even do that well. How often do they fact check what candidates say? A handful of serious reporters do, but it takes time, and the primps on the network and cable news might miss the opportunity for a soundbite if they had to spend time looking up facts.

OK, their general idiocy is the ultimate cause of my disdain, but here's the proximate cause that pissed me off right now. Yesterday on NPR they were talking about McCain's win in Tuesday's primary, and all they could talk about was momentum, and who had won which states.

But here's a news flash: the parties don't count up the number of states won in order to determine their nominees, they count up the number of delegates won, and delegates are based on population, so Florida, for example, has more delegates than Iowa. But that's the easy part (and they even managed to miss that). Because each state sets their own election rules, some state parties give all their delegates to the winner of the primary (winner-take-all), and some divide them up depending on what proportion of the vote a candidate receives. My wife can vouch for the fact that I was yelling at the radio, begging them to tell me how Florida distributed the delegates, and how many delegates each candidate had received. But no, the didn't, and I have my doubts they were even aware of this issue.

OK, yes, I teach American Government, but I didn't know the answer. What I know is that with 50 different states, and frequent changes in state policies, keeping track of what each state is doing on each issue is more than a 1-person full-time job. But at least I know that's the situation, and know it's important. For the record, it appears that Florida usually does allocate delegates by congressional district (win the district, win its delegates), but in response to the Republican National Committee stripping it of half its delegates (again, punishment for moving the primary ahead), it switched to winner-take-all, and CNN.com keeps a running record of delegates won.

They also stated baldly that Hillary Clinton "didn't win any delegates" in Florida, despite winning, because the Democratic National Committee has stripped Florida of its delegates as punishment for moving its primary ahead. Maybe, but I'm always hesitant to predict the future. Imagine Clinton and Obama head to the convention with Obama just slightly ahead. You don't think Hillary and Bill will stage an all-out scorched earth battle to get those delegates, and the ones she won in Michigan, seated?

That's ok, though. All you really need to report politics is a degree in journalism and good hair, right? Right?

25 January 2008

Give me my stimulus check, dammit!

Over coffee at Big Boy this morning, my wife and I mocked the economic stimulus package. We're going to do what most American are going to do, pay down a credit card. That means we're not going to do any extra spending, so we're not going to help the economy.

And that's the way it always is with these tax rebates, temporary tax cuts, or temporary reductions in tax collection. They have nearly zero economic effect. And yet at the Republican debate last night, each of the candidates praised the rebate while saying "it didn't go far enough." Yeah, double it. Please. Then I can get that credit card completely paid off. But it still won't boost the economy.

As Milton Friedman figured out, people don't change their spending behavior very much in response to temporary tax cuts or rebates. Even if we all did go out and spend our checks, it's a one time thing. No business is going to invest in new equipment or hire new people as a result. Nor is the business tax credit going to help, because it's also a temporary thing. Businesses will welcome it, just as much as I'll be happy to get my check, but it won't stimulate the economy.

Congress is working on a $150 billion tax rebate. The U.S. has a $13 trillion economy. The stimulus package is only 1% of the economy. Some stimulus. And the checks won't arrive for about 3 months! By that time we could have had a brief recession and already be moving out of it!

And since government is not going to offset the decreased tax expenditures with reduced spending, the deficit (hence borrowing) will increase, putting a little more pressure on interest rates, which will offset any possible stimulus by making business borrowing more costly.

This is just classic Keynseian fiscal policy, and it just doesn't work, for three reaasons. (1) The government is not putting money into the economy, it's just trading taxing for borrowing. (3) People won't increase their spending and businesses won't increase investment as a consequence. (3) Even if it could work, the long delay until the checks are cut means the effects will not be felt in a timely manner.

Monetary policy has proved much more effective in combating recessions, and the Fed has made a drastic rate cut to 4%. That reduces businesses cost of borrowing money, making it cheaper for them to invest. That's likely to have us pulling out of a recession before I ever endorse my check.

19 January 2008

Ecologists,Engineers and Economists, oh my!

This is the second of two posts on economic nincompoopery. 

The commenter on  Ed Brayton's blog didn't like being called a nincompoop (although I'll say once again, I was referring to only one line in an otherwise intelligent comment).  He responded, in part:
Ecologists and engineers don't take economists seriously.

That point deserves discussion because, as a friend of mine always says, "it's so wrong in so many ways I don't know where to start."

So let's begin with the fact that this is a blanket claim about all ecologists and engineers.  Does this person really expect us to believe that there are no ecologists and engineers who take economists seriously?  I want to see documentation on this.  Has he done a study?  Is there actual data to support this?  Somehow I doubt it.

Then there's the "so what" factor.  This is just an appeal to (questionable) authority.  Are ecologists and engineers necessarily well-educated in economics?  That is, do they have the expertise to make an informed opinion on whether to take economics seriously or not?  Or is s/he just assuming that all ecologists and all engineers are more knowledgeable about all things than all economists are?  Nobody is qualified to talk knowledgeably about fields in which they have no training.

Finally, there's the delicious irony that engineers and ecologists (whatever individual ones may think about economists) work in fields where economics is crucially relevant.  We'll start with the easy one, engineers.  First we need to define what economics actualy is.  Here's a nice succinct one:

1 The study of choice and decision-making in a world with limited resources.

The important implications of making choices about how we use limited (scarce) resources is that we have to choose between competing uses of them.  We want, ideally, to choose the option that gives us the greatest benefit for the least use of resources.  Therefore, economics is the study of cost/benefit analysis, as much as anything else.

How does that apply to engineering?  Let's say I'm designing a bridge.  If resources were not limited I could just build a massive bomb-proof, earthquake proof, even meteor-proof edifice.  But in a world of scarce resources, that would be a waste--the extra resources (not just material ones, but also time and labor) that went into could be better employed elsewhere.  Engineers are masters of cost/benefit studies--they want to use minimum materials to achieve their design goals.  If you find an engineer who says cost/benefit analysis doesn't matter, you can figure that he also means the cost you pay and the benefit you receive doesn't matter, so don't hire him!

OK, that was easy.  But what about ecologists?  Not quite so obvious, but economics still apply.  A colleague of mine in my college's Biology department studied imported red fire ants for his Ph.D. work.  He asked me to read a paper he was trying to get published (he was successful), and I noticed that he was looking at the ants' nutrition loading in relation to the distance they had to travel to access those nutrients.  He explicitly discussed it in cost/benefit terms, and if I remember correctly he even referenced an economist in explaining that part of his research.

He's not precisely an ecologist (his specialty, as you might guess, is entomology), but he was looking at the relationship between ants and their environment, which is ecology.  And very simply, animals that thrive and reproduce successfully are the ones that master (even if its instinctive) their cost/benefit ratio in interaction with their environment.  

Consider a simple model, where we assume an animal with only two behavioral options, eat or screw.  Let's further assume--just because I like the example--that it's spring in Yellowstone National Park and the animal is a bison bull.  If you've ever been there in spring, you might notice that the bison aren't especially aggressive then, all they're focused on doing is eating.  The relevant facts are (1) that they've just gone through a harsh winter with little food availability and they now have only a few months to bulk up, and (2) the cows aren't receptive for mating until fall.  Now imagine some bison bull looking around and thinking, "Hey! Nobody else is going after those females!  Now's my opportunity!"  So he spends all spring and summer chasing cows instead of eating.  He fails to reproduce then (because the cows aren't receptive), and when fall comes he's too weak to compete for them.  And of course he goes into winter without adequate fat and dies before next spring.  Now if you don't think that's a cost/benefit issue for bison because they're not making reasoned choices, you're a bit slow.  Natural selection will favor those who make the best choice of resource use, and their offspring will come to populate the ecology, rather than those who make poor resource choices.  That is, evolution will favor instinctive behaviors that have the same results as wise cost/benefit decisions.

So, ecologists don't take economists seriously?  I'm willing to predict that the good ones do.

Are there non-natural economic opportunities?

This is the first of two posts responding to stupid arguments on another blog.

On Ed Brayton's blog a commenter argued
This is what happens where there is no more natural room for an economy to grow: companies have to start extorting "growth" from areas that were never considered before.
 The rest of the comment was intelligent enough, but I called this comment "nincompoopery."  I'm right and s/he's wrong.  Most people who know anything about economics would say that finding growth opportunities in areas never considered before is entrepreneurialism.  In fact the growth of economies--always and forever, from the ancient past to the far future--depends on people finding economic opportunities that weren't previously considered.  If they were previously considered, they wouldn't be opportunities for growth!

For example: the richest woman in China, Zhang Yin, made her fortune by recycling scrap paper from the U.S.   She imported the waste paper cheaply, because container ships regularly head from the U.S. to Asia empty, meaning you can get a really good price on cargo going west.  She then used that waste paper to make cardboard boxes and packaging material for goods being shipped right back to the U.S.  How rich can a Chinese woman be?  Try $3.4 billion worth of richness--more than twice what Oprey Winfrey is worth.

Here's the funny part; countless people around the world, including a non-businessman like myself, knew each of the pieces to this puzzle.  
1. There's a surplus of waste paper in the United States--there's not enough demand in the national market to purchase it all.
2.  Waste paper can be used to make packaging for shipping goods (heck, I've done that myself just by wadding up old newspapers).
3. Lots of things are shipped to the U.S. from Asia, creating demand for packaging material.
4. The surplus of container capacity heading from the U.S. to Asia means cheap shipping.

And yet this was an area "never considered before," because even those of us who knew all the pieces didn't realize we should put them together to solve the puzzle.  Consequenlty it was wide open for Zhang Yin to step into and make a fortune.  Was this an "unnatural" economic opportunity?  Or just a case of someone else being more clever than I was?

09 January 2008

Stupid Newsies

I just read an opinion piece from an Indiana high school teacher in which he claims,
because of my own ignorance about national politics, I feel eminently qualified to offer some opinions."
Geez, no wonder my college students come out of high school knowing jack shit.

But the guy also said,
I know as much about national politics as I do global economics. Both subjects have their own gaggle of experts, and they don’t seem to know much, either.
Now this is pure stupidity, too, but I know where it's coming from. The fact is, there are experts in global economics, and they do know what they're talking about--this guy just doesn't know who they are. The same is true of experts in national politics. So who is he really referring to? I think it's the talking heads who dominate the political chat shows, most of whom are like high school students, not knowing Jack Shit.

For example, here's the repeated theme from the New Hampshire Primary--"Clinton, coming off a disappointing third-place finish in Iowa, rebounded to first place...", or "Hillary Clinton won the New Hampshire Democratic primary, overcoming a third-place finish in Iowa"

OK, for the newsie who's brain has been overheated by too much time in front of a blow dryer, let's clarify this.

  1. John Edwards had 30%, Hillary Clinton had 29%. That's called a statistical dead-heat, or a virtual tie for second. A tie for second place ain't that devestating folks.
  2. According to CNN, Obama won 16 delegates in Iowa, Edwards won 14, and Clinton won 15! It might seem counterintuitive that Clinton could get more delegates than Edwards, with less of the vote, but here's how it can work: Assume a state with 5 equal size precincts: Candidate A wins 3 precincts with 51% of the vote in each, while candidate B wins 2 precincts with 90% of the vote each. If you just total up all the votes from the state, B appears to have won, but because the delegates are selected from precincts, B has actually lost. In the end, it's not what percentage of the vote any candidate gets, but how many delegates, and on that scorecard, Obama, Clinton, and Edwards finished in a virtual tie for first.
  3. There's no reason to think that New Hampshire voters take their cues from Iowa voters. To listen to the media tell it, everyone except Obama might as well have given up after Iowa. Like this already obsolete jewell from teh L.A. Times, "The results were a serious setback for Democrat Hillary Rodham Clinton." Hell, why bother with the whole primary schedule? Let's just let that 10 or 20% of Iowans dedicated enough to participate in the caucus choose the parties' nominees.

So just because the talking heads chatter about national politics, and just because someone is introduced as the network's political analyst, that doesn't mean they're actually an expert--they just play one on TV.

07 January 2008

A Real For-Sure Race This Time?

In recent election years, so many candidates have dropped out early after poor showings in either Iowa or New Hampshire, that shortly thereafter the nominees were effectively chosen and the remaining primaries were just pro forma events. That, of course, is the reason states have been leapfrogging their primaries. And, of course, no nominee has actually been chosen at the convention since (I think) McGovern in 1972.

But this year, with so many states having primaries both early and on the same day (Feb. 5, when 22 states decide), and with the candidates not having been able to campaign much in many of those, there's a possibility that candidates will split their wins across the states that no-one walks out with a convincing lead for the nomination. There's even a remote chance that no-one will get a majority of delegates, and so the candidate will actually be chosen at the convention.

I wouldn't bet much money on that, but it's far more likely this year than in any year since I've been casting votes (that is, since '84). If so, it would be the only good outcome of this ridiculously early primary season. There's a real danger that we'll know both party's nominees by mid-February, and will have to listen to them campaign for nearly 10 months, in which case everyone in the country will be thoroughly sick of the new president before he/she is even inaugurated. One lesson presidents learn is that they can't give major speeches on TV too often, or the public tunes them out, and a campaign requires them to appear on TV, demanding the public's attention, non-stop. Uncertainty up until late August about which two people we'll be choosing between in November would be ideal, and helpful to the future president.

But, in general, the "tsunami Tuesday" is a terrible thing. Coming so soon after Iowa and New Hampshire, where most candidates have been spending most of their time, and encompassing states from Alabama to Oregon, there is no way the candidates can campaign effectively in more than a few of these states. This is why a national primary, which some people advocate, would be a terrible idea--it would just result in candidates having to stage national campaigns at a time when they don't have the funds to do so, and would make it impossible for them to actually meet people.

I've become convinced by the advocates of rotating regional primaries. A regional primary would allow candidates to focus their money and efforts on a limited area, say 5 or 6 states, rather than trying to cover the whole country. Underfunded candidates would be less likely to be completely shut out of the process so early, and the public would still have some chance to meet the candidates. Unfortunately, most analysts seem to think we're not at crisis point yet--maybe we'll only hit the crisis point in 2012--so we're not likely to fix the problem before the next presidential campaign heats up.

There is, of course, a logical stopping point for how early the states can hold their primaries--the day after the previous midterm election. Given that we came close this time to having the first primaries nearly a full year before the general election, that outrageous outcome no longer seems as unlikely as it should be.