Friedrich Hayek's Birthday

Cafe Hayek notes that yesterday was Friedrich Hayek's birthday. He would have been a 109..

I guess there's little point in wishing him a happy birthday. But I do want to honor him by taking note of the date. his Road to Serfdom, while not entirely convincing, influenced me greatly, and The Constitution of Liberty is a great work. Hayek's the one who taught me that the world is a dynamic place, and that's good.

The single most influential idea of his that has stuck with me is that all institutions are the product of human action, but not human design. That is, institutions evolve piecemeal, and can't properly be said to have been designed by anyone. That dovetails nicely with Edmunde Burke's conservatism, although Hayek explicitly disdained a conservatism that simply tried to stop change and development, and ultimately resulted in me occasionally calling myself a Burkean liberal--which may or may not make any sense at all.

Thank you Dr. Hayek.

An Economist Supports the Gas-Tax Holiday

George Mason economist Bryan Caplan supports the temporary suspension of the gas-tax. Imagine my surprise. But here are his reasons;

1. "the tax holiday is a relatively cheap symbolic gesture that makes truly bad policies less likely." I.e., no price controls, windfall profits taxes, rationing, etc.

2. "even a 'giveaway' to the oil industry sets a positive course for the future. During the last crisis, the industry was a scapegoat for scarcity." That is, a gas-tax holiday is better than whipping up an anti-business frenzy.

So, notably, he doesn't support the gas-tax on its own terms, just as a clever political move that prevents even more stupid actions.

But I disagree with him, for two reasons. First, Hillary Clinton is proposing to use the windfall profts tax to ensure that businesses pay the tax, not consumers. So the windfall profits tax idea is on the table. Second, she is trying to make the oil industry the scapegoat, and point the finger at them.

I think the gas-tax suspension, while not a huge issue in its own right, will actually make more anti-free market actions more, rather than less likely, because it misdirects people from the real issue of scarcity, and encourages them to think that big bad business is the whole problem, and that there are easy political solutions.

When the gas-tax holiday fails to increase supplies and bring down prices to under $3 gallon, people will just demand the next stage of government intervention. With due respect to Caplan, he's a fine economist, but not a great political scientist.

Hillary's Snake-Oil Economics

Whether or not Clinton would have gotten much of the economist vote anyway is debatable, but she's certainly thrown it away now.

"I'm not going to put my lot in with economists."

Of course economists are a pretty small demographic, and you can always pick up votes in the U.S. by being anti-intellectual (cough, George Bush, cough).

But it's not the pandering that bothers me. It's the pretense that economists would make people's lives worse, and that ignoring economic advice is the best way to help people. Because it's material well-being that she's talking about, and that's what economics is about--understanding how we can enhance humanity's material well-being. To wholly ignore economists when that is the question is no different than to ignore physicians when the subject is one's physical health, and to "put your lot in" with witchdoctors, herbalists, and faith-healers.

It's snake-oil economics, and it makes me angry because she will continue to blithely assume she cares more about people than economists do, while she actually harms them more than any reputable economist ever would.

She should take the time to look at Adam Smith, who showed us that free markets are for the benefit of consumers, not businessmen, or Alfred Marshall, who clearly saw that studying economics was the path to improving people's lives. As Todd Buchholz quotes Marshall in New Ideas from Dead Economists:

From metaphysics I went to Ethics, and thought that the justification of the existing condition of society was not easy. A friend, who had read a great deal of what are now called the Moral Sciences, constantly said, "Ah! If you understood Political Economy you would not say that. So I read Mill's Political Economy and got much excited about it. [Then] I visited the poorest quarters of several cities and walked through one street after another, looking at the faces of the poorest people. Next, I resolved to make as thorough a study as I could of Political Economy."

I began studying political science because I thought that was the science of human well-being. Later I realized it is actually the science of human conflict, and important and interesting in it's own right, but only when it is securely intertwined with economics--when it is political economy--can it honestly be about the well-being of humanity.

If only Hillary, or any of our presidential candidates, understood that.

Tragedy of the Commons Symposium Fully Funded

Way back on March 21 I wrote that I was submitting a $10,000 proposal to fund a 40th Anniversary retrospective on Garret Hardin's "Tragedy of the Commons." Today I finally--a month and a half later--received word that I would get the funding. Phew, I had almost given up hope.

So on November 21, 2008, the Adrian College Policy Institute will host the Symposium. Among the panelists will be commons expert Elinor Ostrom, of Indiana University's Workshop in Political Theory and Policy Analysis, Mathematician J. Marty Anderies of Arizona State University's School of Human Evolution and Social Change, Oberlin College Political Scientist Harlan Wilson, and Grand Valley State University biologist (and friend of the late Garrett Hardin) Carl Bajema.

Information about the Symposium is available at the Policy Institute website.

Solvable Problems--Plug-in Cars and Electricity Demands

The Wall Street Journal has an article about the effect of plug-in cars on electric utilities. As the use of plug-in electric cars grows, it could cause excess demand during already high usage times if people plug the cars in during the day. This could cause utilities to have to buy more power at high peak-time pricing, or even build more power plants--an expensive proposition fraught with political problems. If they plug them in at night, when demand is low, they'll simply sell more power and make more money.

The solution is economically simple, although politically difficult; just allow the utilities to use congestion pricing. Just as they have to pay more for energy they buy during peak times, they should be allowed to charge more during peak times. If electric use cost more during the day than at night, people would be more likely to plug their cars in at night. For those who want to keep utilities regulated, rather than allowing a full free-market, those different prices could still be regulated, so utilities don't "rip off" people during the day.

One upside on this--most people won't be plugging in their cars during the peak morning demand, as they'll want to have them "re-fueled" in time to drive to work in the morning.

The bigger problem is whether people plug them in as soon as they come home from work, during the next biggest utility demand period. It would be better for people to plug them in just before they go to bed, but then how many are likely to forget and in the morning find their car isn't juiced up? (Blogger raises his hand.) And that detail is why most people will want to plug in as soon as they come home, so a solution oriented toward that specific time period, say 5-8 p.m., is probably what's most needed.

Toledo's Stepford Trash Bins

One of the great questions of the 20th century was, "Was there something special about Germany?" That is, could Naziism and the genocide have happened anywhere else? I don't know about that extreme case, but potential fascists (of the kinder, gentler, Italian-type variety, I suppose) are found everywhere. Case in point: Toledo, OH.

Toledo's trying out a new automated trash pickup program, with special trash bins that are mechanically picked up by the truck (rather than a human having to jump out and pick them up). Evidently, some people are painting their addresses on the bins, but the bins don't actually belong to either the people using them or to the city, but are the property of the trash company. And since this is a pilot program, if the city doesn't follow through, they'll have to pay the trash company for the defaced bins, so they're asking people not to paint on them.

OK, all well and good. A standard public information campaign, which is entirely legitimate. But then this:

One of the pluses of this program is the look of uniformity these identical containers brings to the city. Spray-painted addresses closely [resemble] graffit and [detract] from that uniform appearance.

Oh, god forbid our trash bins don't all look the same! We should all be nervous anytime public officials want to enforce aesthetic uniformity. Next thing you know, someone might find it amusing to paint a smily face on their trash bin, or some other such symbol of anarchic rebellion.

Maybe we can just cover up the defaced bins by putting black shirts on them.

Obama Appointed CEO of General Motors

OK, not really, but he seems to be convinced he's a better businessman than anyone in Detroit, as he criticizes them for the "mistake" of building SUVs instead of more fuel-efficient compact cars."

"I think it was a mistake for them not to plan earlier, and now we're seeing a huge growth in fuel-efficient cars that is benefiting the Japanese automakers and Detroit is getting pounded some more."

OK, except for two things:

1. The Big Three (GM, Ford, Chrysler) haven't been able to hold onto market share in compact cars. Toyota, Honda and Nissan have consistently built cars that are less expensive and better quality. Although the Big Three's quality has dramatically improved, they haven't been able to price their cars competitively without losing money on each unit sold.
2. Every year for the past three decades, truck models (SUVs, pickups, minivans) have outsold car models in the U.S.

So you're an auto exec, you know high gas prices will be coming--sometime--but right now you can sell far more trucks than cars, and make a profit on each truck, while you lose money on most cars. What do you do?

Obviously Obama didn't say this to Detroit 10 years ago--he's so smart that he can see what's wrong now that it's actually happening.

Granted, a number of people have been saying for years that the Big Three need to get more competitive in fuel-efficient cars. But they're not the ones who have had to try to keep the company in business. Staying in business today takes priority over being in business 10 years from now, because the first is a prerequisite for the second.

And does anyone really think the Detroit automakers haven't looked ahead and known this was coming? Does anyone think they really needed Barack Obama to point it out to them? After all, they have a little more at stake than their critics do, so they just might have spent a little time thinking about it. Yes, once again they're behind their Japanese competition, but they have been investing in alternative fuel vehicles, hybrids, etc.

In a nutshell, they were in a tough spot. They could successfully compete in a market that they probably knew was somewhat limited in its duration, but could not (yet) succesfully compete in the market that will probably dominate in the future. They've made plenty of mistakes along the way, as any industry analyst can point out, but their options were never as simple as Obama seems to think.

Odd, isn't it, how people who've spent their whole life in politics, who've never had to meet the bottom line, who've never had to worry about containing costs, increasing efficiency, keeping up with a changing market, always feel qualified to tell us how things should be run?

F for Failing to Show Up

In my American Government class I gave two students an F and another a D because they skipped class too many times. They don't think it's fair.

My definition of fair is: the same rules apply to everyone, they're not enforced arbitrarily or capriciously, and they don't create unrealistic demands. My attendance requirements fit that definition.

One student claimed he didn't realize I took the attendance requirement that seriously. My perspective, although I didn't say so to him, is that learning that it was may be the most important lesson of the term for him. Next time he sees a written rule, he should be less inclined to think it doesn't apply to him.

Here's a confession: I failed a class as an undergrad because I missed too many classes. I had a good excuse, I had mono, but I never let the professor know that. So it was my fault, and I (grudgingly) took responsibility for it. In this case I'm dealing with a student who doesn't want to accept responsibility for his actions, but needs to do so, just as I did. In fact I would have benefited from a hard kick in the ass earlier than that, like so many adolescents.

There's a strange paradox here: students don't want an attendance requirement, because they think they're adults and should be treated as adults, but failing to attend classes is evidence that they aren't yet mature enough to be treated as adults. I've learned the best way to become adult-like is to have people making adult-like demands of you--otherwise you have no incentive to do so.

Each of these three students dramatically underestimated how many times they missed class (7, 10, and 10, out of 28 class meetings, and each thought they missed about half that). But, out of the 45 students I had this term, those are 3 of only 4 or 5 for whom I have trouble attaching a face to the name.

I've received emails from them for 3 days straight, and it's really dragging me down. I hate dealing with this kind of business, and I have to keep reminding me that (a) it's a very small proportion of my students, and (b) it's our entitlement culture that leads them to think they deserve at least a C, despite not fulfilling class requirements, and it's that culture I'm battling, more than it is the students.

We All Hate Bush

President Bush's disapproval rating fell to a new low--71%. It's not really surprising. People think there's a recession (there's not, barely), and the war that nearly everyone thinks he lied to get us into still isn't going spectacularly well. Plus, we're 7 1/2 years into his presidency, and we never like our president much at this point.

Personally, I'm still bitter about his steel tariffs. One of the few things I'd hope a Republican would get right, and he bungled that, too.

Profits or Market Share?

The oddest thing about living in Michigan is the way the big three automakers grip everyone's attention. It's a rare day that both of Detroit's newspapers don't have a front-page, above -the-fold article about the auto industry (and around here, the phrase "the auto industry" means only GM, Ford, and Chrysler).

But oddest of all is the way the journalists who write about them focus so obsessively on market share. For two years now there's been a sort of death-watch as Toyota comes ever close to selling more vehicles throughout the world than GM. But apparently it's not just the journalists--it appears that the auto industry execs themselves have been more concerned about market share than actually making money on each unit sold. They seem to have convinced themselves that if they just sell more vehicles, they'll end up in the black--a strange idea, particularly at GM, which takes a loss on almost every vehicle it sells.

But an article today (sorry, I can't find it in the online edition, so no link, at least for now) suggests that Chrysler's new owners are focused on being smaller, rather than bigger, and looking for non-traditional ways of being more profitable. Such as building minivans for VW in Canada, and trucks for Nissan in Mexico, and having Nissan build a small car for Chrysler. Apparently this is happening because Chrysler's new owners, Cerberus, isn't familiar with the auto industry.

And a little child shall lead them, it seems.

It's amazing that after two decades of full-bore competition from "foreign" cars, auto execs still don't get the basics of how to run a business.