blog

…about the road to bland serfdom?

2010-03-10T19:42:42Z

If you don’t live or work in New York City, there’s probably good chance you’ve heard that this city has some of the best food in the world. No matter what your taste may draw you towards, New York City’s got it. Seriously, it’s amazing. Well, if NY Assemblyman Felix Ortiz has his way, the city of food fantasies will be transformed in the land of bland by the force of the tax collector and their men with guns.

Behold, NY Bill Number A10129, The salt ban.

NO OWNER OR OPERATOR OF A RESTAURANT IN THIS STATE SHALL USE SALT IN ANY FORM IN THE PREPARATION OF ANY FOOD FOR CONSUMPTION BY CUSTOMERS OF SUCH RESTAURANT, INCLUDING FOOD PREPARED TO BE CONSUMED ON THE PREMISES OF SUCH RESTAURANT OR OFF OF SUCH PREMISES.

Yep. You read that right. A full-blown prohibition on the use of salt in food preparation. Get ready for salty speakeasies, New York. And what happens if you ignore our overlords in your kitchen?

WHENEVER THE COURT SHALL DETERMINE THAT A VIOLATION OF THIS SECTION HAS OCCURRED, THE COURT MAY IMPOSE A CIVIL PENALTY OF NOT MORE THAN ONE THOUSAND DOLLARS FOR EACH VIOLATION. EACH USE OF SALT IN 24 VIOLATION OF THIS SECTION SHALL CONSTITUTE A SEPARATE VIOLATION.

$1000 Fine for each use of salt in food! And if you don’t pay those fines, make no mistake, men with guns will come for you, hence my cutting the chase about the real force behind such a law above. Government is the gun.

Welcome to the insane, fascistic world of politically-provided healthcare, where all private decisions are a matter of public import. New York’s set of subsidies and regulations means that this state already has a form of so-called “Obamacare”. The result of this level of intervention is that, if your activity impacts your health, it hits the taxpayer’s wallet and that, conveniently enough, justifies the abusive, criminal gang in Alabany, NY (not hyperbole) to dictate the conduct and contents of the world’s best restaurants.

And it’s not just restaurants being hit by New York’s food fascism. Even school bake sales have been assaulted by the arbitrary discretion of our overreaching overlords, with bans of home-made goods. Can you even believe that? In that particular case, its even more stark who the beneficiary of the regulatory overreaching really is: the corporate school partners whose “approved” foods, such as cinnamon pop tarts, are both more expensive and less healthy than mom’s home-made banana bread. As is often the case, it’s quite likely that there is a back-room “bootlegger" behind this Albany “baptist’s" assault on salt.

This state needs an enema

New York has long been the vanguard for the most draconian offensives to liberty in the name of “progressive” ends in America. It is a State whose planners have ripped through neighborhoods with utter disregard for the communities and property rights of its citizenry abusing eminent domain along with every other tool of the state to their limits. This disregard for individual liberty is the stock and trade of a host of bankrupt “progressive” states including California, Illinois and New Jersey whose policies are exemplars for how collectivism and central planning inevitably leads to dictate and tyranny, aka The Road to Serfdom.

Have these people learned nothing of prohibition? It’s as if they’re welcoming a new black market in tasty food. Who will be the first victim to be killed in the black market cannoli trade? Of course, it’s unlikely that our overlords will abide by their own prescriptions for the rest of our health, as Mayor Bloomberg’s demonstrable hypocrisy on diet exposes for us all to see.

One wonders what white powder these anachronistic thugs will ban next. Carbohydrates can contribute to obesity. Maybe they should ban flour.

I have a feeling this is just a bland taste of the road to serfdom that government healthcare enables…

…but what the hell do I know?

…about food fascism?

2010-03-02T21:28:08Z

There really is no area of life too small to avoid interference from the tyrant busybodies in government. Not even the provision of free donuts by a local B&B Do It Center. CNBC Reports on the latest episode in ludicrous food fascism:

For more than a dozen years, the B&B Do It Center in Camarillo, CA, has been offering free doughnuts and coffee to customers. Not anymore.

An anonymous "customer" (maybe a rival store?) called the health department. Now, in what some in this town consider a complete overreach of government, the county has told the store the freebies have to go. They violate food-handling regulations.

No more "pink box of love" as one customer describes the doughnuts. No more hot cup o' Joe.

According to the Ventura County Star, co-owner Randy Collins wasn't aware he was violating the rules. "We've been doing this since we bought the place 15 years ago, and the previous owner was doing it, too," he tells the newspaper.

The health department says that if Collins wants to give away doughnuts and coffee, he'll need to install "stainless steel sinks with hot and cold water and have a prep kitchen to handle the food." A prep kitchen. For a box of doughnuts? "Where the public has access to food, permitting is required," says Ventura County health official Elizabeth Huff.

Wow. What a perfect example of the ludicrous, expensive, invasive lengths these “regulators” will go, largely at the bidding of politically connected cronies, in the name of pretending to “protect” us from ourselves.

At what point will the need to bow before our overlords and pay our licensing dues go too far? Will it be a license to breath? Considering that every breath is full of allegedly global warming inducing CO2, one could imagine there are government regulators anxious to license and tax every living person for the privilege to exhale...

…but what the hell do I know?

…about explaining Fear the Boom and Bust?

2010-03-01T17:54:42Z

A thoughtful and clearly well studied user that goes by “VA Classical Liberal” over at the Daily Kos has produced an utterly splendid expansion and explanation of “Fear the Boom and Bust” that should be required reading for anyone interested in the video and the ideas contained therein. After a first read through, I cannot take issue with anything written there both in its attempts to dispassionately explain the ideas and the editorial content of the piece.

If there is one area where I would like to see some additional attention in this article, it is to point out the contrast between Hayek’s theory, which is focused on WHY the boom and turns to bust (the upper turning point), and Keynes approach, which assumes away the turning point as a function of the “animal spirits” and instead focuses on the depression itself.

Aside from that niggling criticism, it is truly excellent work. Bravo. And thank you, sir, for putting so much useful effort into a powerful companion for our video.

I love that this masterpiece is posted on a website that would surprise most fans of Hayek and free markets. There is nothing better in the world of ideas than to have your own prior biases challenged. It should be a goal for all of us…

…but what the hell do I know?

…about comment redux?

2010-02-26T04:44:14Z

Thought I’d repost this little blurb from a comment I left on the EconStories.tv facebook page regarding the problem with government stimulus.

Todays’ mass of unemployed construction workers face a real challenge in finding what to do next. But government has LESS information and WORSE incentives to attempt and meet that challenge. It’s more likely that they will simply inflate a new bubble trying.

I think I’m right about that...

…but what the hell do I know?

…about anti-trust as history’s biggest scam?

2010-02-26T01:40:52Z

It looks like the EU is at it again, employing the anti-trust excuse for seeking to extract billions in bribes from innovators at the behest of corporate cronies and greedy, bankrupt politicians. This time, the EU is preparing their shake-down operation on Google and, surprise surprise, at the behest of Google’s inept competition. Techcrunch reports:

The European Union has opened an antitrust investigation into Google to look into claims made by three European-based Internet companies. Not surprisingly, this key part of the investigation is said to be about search, which is dominated by Google is most of the EU markets. The Telegraph and WSJ have more details.

It’s important to note that this probe is just a preliminary one, and nothing may come of it. But at least three companies have filed complaints against Google — and notably, one of them is owned by Microsoft. And another one is a member of a group that is partially funded by Microsoft.

You can probably tell that I’m skeptical of the merits of anti-trust. I used to truly believe that “trust busting” was one of the legitimate roles of government in the face of enormous corporate power. Then I started actually reading economic history and discovered that government anti-trust was, is and probably always will be a tool used by politically connected competitors who couldn’t compete in the marketplace.

Anti-trust is a scam.

Moreover, anti-trust is a scam with very little evidence that the government’s supposed goal of improving market competition has ever been achieved. Consider the fact that anti-trust cases have routinely been brought up against the company offering the LOWEST PRICE to consumers, from Standard Oil to ALCOA to Microsoft. These cases were brought not by consumers but by ineffective competitors. Anti-trust has proven time and again to be anti-consumer and pro-corporate insider.

If you want to find the source of the longest-standing monopolies with the most protection from price competition, look toward the industries with the most government involvement and intervention: Healthcare and Education. Telecommunications comes up a close third thanks to the outsized role of the FCC.

Nowhere, though, is anti-trust action more preposterous, pointless and pricy than in the computing industry. A quick review of the outcomes on the IBM and Microsoft cases by the the US Department of Justice, both of which were unmitigated disasters of pointless expense in time and money for all involved, should leave even Teddy Roosevelt shamed.

The use of government’s regulatory monopoly power by politically powerful corporate interests is known as “regulatory capture” and its the inevitable outcome of putting tremendous power over market conditions and outcomes in the hands of a single entity without any competition, which is the government itself.

I’ll end today’s rant with an anti-trust joke I heard somewhere:

Three white-collar convicts are chatting over their daily prison meal.

“What are you guys in for?” asks convict one.

“I set my prices too low and was convicted of predatory pricing” says convict two.

“Funny, my prices were higher then my competition and they hit me with monopoly pricing” says convict three.

“ha. My prices were exactly the same as my competitors and they threw the book at me for collusion” says convict one in response.

I guess that’s not very funny, but it sure does capture the irrational, unfortunate history of trust-busting...

…but what the hell do I know?

…about medical advances and the market process?

2010-02-23T16:10:48Z

Megan McArdle has some very insightful commentary on a recent NY Times article about cancer research.

That's how cancer treatment has mostly advanced--not with a spectacular cure that can be funded by better targeted NIH money, or identified by comparative effectiveness research. It grinds out small improvements one at a time, experimenting with combinations of drugs and radiation and surgery, dosages, and timing. A lot of the improvement in mortality rates comes from better detection--but that means a lot of money wasted on tests, and biopsies for false positives.

Will the drug be "worth it"? What's the price of giving someone six months instead of one to say good bye to their family, or shrinking their tumors so that they don't die in pain? Technocrats can't answer those questions. We have to.

This is an incredibly important insight and very Hayekian. Politicians love to talk about “innovation” and point to basic research and dramatic advances built purely on new ideas. They believe they can impact this process by pouring in more money as if that in and of itself will make magic happen. This is the “manhattan project” romance. It’s a strawman tactic and a fallacy.

The manhattan project is not how the overwhelming majority of progress happens.

Real world progress in science, technology and all business comes from incremental trial and error. Trial and error is the heart of the market process. It’s evolution, not revolution. Useful innovation is not some formula that a small band of experts can concoct if only we could give them time, tenure and funding and leave them alone. As Nassim Taleb puts it in his book The Black Swan, the real work in this world gets done by the practitioners (Fat Tony’s/Traders), not the theorists (Geeks/Quants).

Ideas are great, but the REAL innovation comes in EXECUTION of ideas in ways that have a PRACTICAL impact.

Technological Progress: Revolution Through Evolution

Let me rephrase this innovation problem in terms of an industry I understand better than cancer research: computer technology.

Consider the “Big Idea” that is graphical user interfaces for computers. This idea of mouse-driven control over a computer with a display that presents its information with graphics has been around since the early 1960s. Neither Apple nor Microsoft nor Xerox “invented” the concept.

In fact, these kinds of big ideas are generally “public goods”. Once they’re put out there, everyone can make use of them and try to advance them. But ideas in many ways aren’t what matters. They’re sexy. Being the “inventor” is a moniker that carries a ton of weight in our culture. But, as Steve Jobs brilliantly put it, “great artists ship”.

Bringing an idea to market and making it usable and affordable is what matters. That’s the job of incrementalists and practitioners with local knowledge and specialties that can’t be centralized in the hands of experts and theorists. What works on paper may not work in the real world or be what people actually want.

So Xerox does some brilliant lab experiments and develops a functional graphic user interface. But they don’t execute it for a mass audience and make it affordable, so it stays in the lab until Steve Jobs and Apple take that idea (and some Xerox engineers), improve it and commercialize it with the Macintosh.

The next iteration and innovation comes from Gates who sees the opportunity to expand the use of the GUI through an innovation not in technology but in the business model: broad software licensing to multiple hardware makers. That innovation is the one that proves the most transformative in spreading graphical computing to the globally and building a common platform for a host of related innovations in hardware.

Speaking of hardware, you need look no further for demonstration of progress through incremental practice than the steady march of Intel’s “x86” processor architecture, the basic language of PC processors since their dawn with the IBM PC. There have been numerous core design alternatives that have come and gone that were on paper superior to the X86. The longest lasting has been the Power PC processor used in servers and Apple computers until 2005. Even Intel attempted to re-imagine the core processor design with the Itanium. These were all big ideas. But where the rubber met the road, X86 and the enormous power of incremental innovation won. A great idea must also be practical and affordable.

It’s never clear before hand what will work in the market. That’s what the market process discovers through profits and losses. Betamax had better picture quality than VHS and was superior on paper. People preferred cheaper prices and longer tapes so VHS won in the market.

None of this is to say that large paradigm shifts can’t happen. Medicine has had many from hand washing to penicillin to robotic surgery. The move to web-based computing and touch-based interaction is a paradigm shift. But these sifts only become viable when their practical use makes them viable for the market.

One last example. The iPad. Many people are poo-pooing it as little more than a “giant iPod Touch”. Indeed, that is true. It’s a giant iPod Touch. It’s a small, incremental change. But that change may well prove to be just as important as the many incremental changes that made the iPod a transformative product (smaller, faster transfer rates, larger capacity). I have a feeling that the little tweak of making the iPod Touch larger will have major impacts on the applications that run on the device. Evolution becomes revolution.

Real Artists Ship: The proof is in the market

People’s expectation of a wild revolution and “never seen before” change from Apple and others is part of some cultural/human quirk. Big change is exciting (and scary). We want to be blown away. Compressing away all that incrementalism into big sweeping changes makes for great stories, the kind of stories that are often told in our history books. But this is a very short term impulse and false picture of reality and history, a narrative fallacy. It’s a bug in our psychology… a bug that politicians love to exploit.

If you’re a politician, the only part of this innovation process you’re likely to talk about is the lab inventions and these false “big bangs”. This is pandering to our love of big reveals and the inventor icon and most people’s ignorance of the process that delivers the goods. Benjamin Franklin. Thomas Edison. Henry Ford. Steve Jobs. By focusing on these types of big individuals, the political class tries to paint the innovation process as one that can be managed by a group of top-down elites… like themselves.

These creators are great icons. But they aren’t the process. They alone did not produce the amazing world we have today. Our social and technological order has evolved and emerged through the trial and error of millions of people using their specific local knowledge and practice to solve problems one step at a time. That process needs a mechanism for letting the bad ideas die and the successes move forward. That crucial element is antithetical to the political process, which seems to exist for the purpose of the exact opposite, subsidizing failure and propping up mistakes.

Life-changing innovation and progress doesn’t simply emerge from a federally-funded clean room. Real innovation requires the market process to prove its value...

…but what the hell do I know?

…about that new senator?

2010-02-23T04:45:10Z

I don’t know much about Scott Brown. I don’t trust politicians in general. But at least we now can see that in practice he’s a keynesian with his vote for the so-called “jobs bill” stimulus (HT via drudge). That doesn’t sound like a very “conservative” senator to me...

…but what the hell do I know?

…about Ron Paul at CPAC?

2010-02-21T05:17:08Z

Here’s a great writeup from Andrew Sullivan about Ron Paul’s impressive showing at CPAC.

He is not a cynical mannequin like Romney, nor a clinically disturbed fraud like Palin; nor an alleged moderate like Pawlenty now declaring that in government, "God is in charge!" He is real. He is sincere.

Which is why the pundits keep dismissing him. I don’t.

Ron’s message is beautiful and powerful and peaceful and tolerant. That last point is important. We’re in very interesting times. The kind of interesting times the Chinese allegedly have proverbs about. Dr. Paul’s call for people of passion and principle to have tolerance for those who disagree and engage respectfully and peacefully is an important message. Populism is a potentially dangerous force. Even the great Thomas Jefferson made the mistake of supporting populist revolution in France only to see it descend into murderous chaos and ultimately the return to dictatorship. I hope that more voices repeat this message of peace. Liberty is about peace if not always tranquility.

I don’t know if Ron Paul could win a presidential election, and honestly it doesn’t matter. His message has done more to awaken more people to important and powerful ideas, including myself, than most presidents ever do...

…but what the hell do I know?

…about the similarities between Bush and Obama?

2010-02-19T01:27:52Z

Here’s a nice summary of 5 key points of unfortunate similarity, (HT via Don at cafehayek.com) posted at the cheerfully named “bankruptingamerica.org”:

5. They love to spend. Bush passed a $3 trillion budget for 2009. Obama posted a $3.5 trillion budget in 2010. Bush doubled the debt to almost $6 trillion and Obama’s plans would leave us with an IOU of an additional $8.5 trillion by 2020.

4. They shop at the same stores. Contrary to popular belief, defense and homeland security spending only made up about 40 percent of Bush’s new spending. He increased spending across most non-defense categories – like education, Medicare, Medicaid, income security and regional development – by four to six times the rate of inflation. In Obama’s first half year in office, as he demanded a departure from the “investment deficit” years under Bush, these budgets rose another 70 percent or 40 times the rate of inflation.

3. They dabble with stimulants. In 2001 and 2008, Bush spent billions on rebates to stimulate consumer spending. In 2009, Obama upped the ante with his $862 billion stimulus package.

2. They give sweetheart deals to failing corporations. Obama carried out Bush’s unpopular $700 billion bailout for failing corporations. Together, the presidents have bailed out over 600 businesses since Spring 2008.

1. They enjoy regulating in their free time. Once again contrary to popular belief, President Bush was the biggest regulator since Richard Nixon. Under his leadership in 2007, the number of pages of regulation added to the Federal Register reached an all-time high of 78,090 – a 21 percent increase from Bush’s first year. And spending on regulatory activities rose to $42 billion in 2009 – a 62 percent increase. Since taking office, Obama has proposed a large and sweeping increase in regulation that many worry could lead to another financial crisis in the future.

There are indeed two parties. But they are not the “Republicans” and the “Democracts”. Not really. They are, in fact, the one in power and the one out of power. Their actions seem to depend on that status alone, which is, to grab for more power when they’ve got it, and seek to limit the other’s power when they don’t. Otherwise, they’re basically identical...

…but what the hell do I know?

…about borrowing from a weary China?

2010-02-16T21:09:12Z

The AP has a story about falling international demand for our Federal government’s record debt.

The Treasury Department reported that foreign holdings of U.S. Treasury securities fell by $53 billion in December, surpassing the previous record of a $44.5 billion drop in April 2009.

The big drop in China's holdings meant that it lost the top spot in terms of foreign ownership of U.S. Treasuries, dropping to second place behind Japan.

So the first thing that jumps out at this for me isn’t the fact that China is losing its taste for our government’s debt. That’s inevitable as our leaders continue their keynesian hair-of-the-debt-dog stimulus approach to our economy with trillion dollar deficits being projected out a decade. I’m happy that China is getting tired of lending to our wasteful, warmongering government. For better or worse, this appears to be the last check on our government’s profligacy.

What’s interesting, culturally, is that Japan is such a large US debt holder and yet few people seem to be scared by that fact in the same way that people fear China. Why is that? Is it because Japan isn’t “communist” and is therefore a less scary creditor? Is it just that American’s have gotten used to Japanese brands? I guess people were freaked out about our trade deficit with Japan, its economic rise and it’s subsequent American buying spree back in the 80’s before their cheap-credit driven stock/real estate boom turned to bust and their keynesian stimulus debt bomb left them with a lost decade of stagnation. Funny (and sad) how Japan’s economic history appears to repeat itself here just as America’s Japanophobia is repeating itself as Chinaphobia.

Trading for Debt

The AP story, in an unusually explanatory moment, makes a connection between our trade balance with China and their immense purchase of our government’s debt.

China's holdings are a result of the huge trade deficits the United States runs with China. The Chinese take the dollars Americans pay for Chinese products and invest them in Treasury securities and other dollar-denominated assets.

Politicians love to harp on the “balance of trade” as this great problem to be solved. They love to talk about boosting exports to help (specific) domestic workers. When they do so, they are falling prey to the long defunct economics of 16th century mercantilists. This quote above provides a great example as to why the balance of trade isn’t a problem in the way these politicians make it out to be… and why it may indeed be a source of problems for very different reasons.

Running a trade deficit isn’t an inherent problem because, as you can see above, those exported dollars flow right back into the country in the form of capital investment. This is Adam Smith at work. We pay for exports with US dollars and the people selling us their goods abroad must (presumably) spend those dollars in US, or selling them to other people who will. And if they chose to simply burn them instead, we’d be all the better for it. It’s much easier to produce green paper than actual products that people actually want to buy. In reality, they spend our exported money on us in one way or another.

But it appears there may be a dark side to the trade deficit in practice. The reason it may be a problem, or more specifically can finance problematic activity, is when foreign dollar holders turn around and buy government debt with them instead of making productive investments that will improve society’s standard of living through innovation and entrepreneurship. I’m not sure why it is that China and Japan and their governments have poured so many of their dollar holdings into our government’s wasteful coffers instead of other investments in the private sector. But they did and still do.

Lend to our people, not our government, please!

The massive inflows of government debt purchases are a problem. Why? Because governments don’t spend with an eye on future profits. Investors lend to a business that’s looking for capital because they believe the business will make a profit on that investment and thus be able to repay them plus interest. If this was the course of our foreign capital inflows, there’d be no problem to discuss.

But governments don’t “invest” in any meaningful sense because their decisions are guided by politics, not profits and customers. Look no further than the public transit sector worldwide. Europe is littered with money-losing high-speed rail and the US government is now fully in love with the idea. None of this is self-sustaining investment. All of them require subsidies from taxpayers and non-users. This is an impoverishing system that makes these societies poorer, not richer. It makes their economies more burdened with debt and taxes and thus makes them LESS likely to be able to repay their foreign debts.

Governments don’t hide the fact their spending isn’t profitable or sustainable. Indeed, that’s their stated objective. AMTRACK, USPS and, more poignantly for our crisis, Fannie and Freddie, are all unsustainable wealth-destruction machines that serve to make the US economy less able to thrive and grow. Perhaps they do so in the name of serving the poor and underserved at the expense of profit and sustainability. So far, the record isn’t very good on that goal. Regardless, if any of this was profitable, there wouldn’t be a supposed “need” for government to do it. Private firms would step in (and most likely could today if allowed).

Sustainable investments are ones which prove to be profitable on their own. Profit is a signal, a sign, of good entrepreneurial choices and economic health while loss a sign of trouble and mistakes. It’s not always a perfect signal in the short run obviously (see 2005 subprime lending profits), but it’s the only reliable signal we’ve got. Governments actively ignore these signals. They intentionally shovel MORE resources at failure, thus creating the kind of grotesque institutions with bizarre incentives we see today.

Remember, when foreigners lend their their surplus dollars at interest to our spendthrift government, it is we the taxpayer that must pay that interest, all $260 billion of it in 2009. That interest is a pure drag on our economy. And if our government’s spending isn’t profitable or productivity-enhancing, it actively conspires against us in our efforts to make those payments. The results are higher taxes and a lower standard of living.

To come back to the start of this article, it may be the case that our Chinese creditors are recognizing how unproductive it is to lend to the US government. The result may be that our government will need to entice them with higher interest rates, thus raising the future tax burden on every American taxpayer. I’m not sure why these foreign dollar holders choose to dump so much of their dollars into US treasury bills instead of the American private sector economy, but I do believe that it’s a mistake. It may be a mistake they are finally starting to reconsider...

…but what the hell do I know?