Free Marketer’s Dilemma

Posted on 2008-02-19 by David

I’m a proponent of the value of free markets and their ability to enrich people. The problem is that the free market only works in a closed system, in other words a free market is not favored when intersecting with markets which are being manipulated. The issue of how to compensate for intersecting our supposedly free market with other markets which impose duties and protective tariffs on imported good led me to think of the Prisoner’s dilemma from game theory.

Briefly, the prisoner’s dilemma is a situation where the results of your actions will vary depending on the actions of others over whom you have no control. If one market imposes tariffs and the other does not the market with tariffs benefits at the expense of the other market. If both markets impose tariffs then the playing field is level, but both are worse off than if neither of them impose tariffs.

Thankfully there may be a solution to the problem by studying the prisoners dilemma. Our economic interactions specifically resemble a specific form of the prisoner’s dilemma called The iterated prisoner’s dilemma. Under this specific variation the interactions are repeated so that the participants have a history of interactions. In a competition of computerized players the winning algorithm was one called “tit for tat” (later improved versions have been classed as “tit for tat with forgiveness”). This kind of a strategy encourages others to play nice without simply being a doormat for those who wish to use tariffs.

Does this sound like it would work in international economics?

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Fixing America’s Woes

Posted on 2008-02-18 by David

I’m not a huge fan of Mark Towner but he caught my attention with THE 545 PEOPLE RESPONSIBLE FOR AMERICA’S WOES. My first reaction was “you know what, he’s right.” Further reflection helped me realize that it can never be as simple as voting out those 545 people. For one thing, 75 of those people are not up for reelection in any given cycle (at least 66 Senators and 9 Supreme Court Justices). Second, the justices on the Supreme Court serve for life – as they ought to – so throwing them out is not an option. Third, there is an entire federal court system below the Supreme Court that has a more continuous and immediate effect on the nation than the Supreme Court. I think you would have to count all those other federal judges as well. And fourth, what happens if we simply vote out all those who are up for reelection? We would get lots of new names in the federal government, but no real guarantee of significant change.

That fourth issue is the real sticking point against Mark’s declaration. The solution is hinted at by the work of Newt Gingrich (I’m not a real fan of Newt either) when he talks about the 513,000 elected officials throughout the country. In order to fix the problems we face, what we really need is for the millions of voters to educate themselves on the issues and elect people at all levels of government who will put government back in it’s proper place. The leaders of cities and states should demand that they be free from a federal government which would dictate the minutia of their responsibilities.

Each city and state would be free to find the solutions that best meet the needs of their citizens – which was how our country was designed to function – rather than ceding that responsibility to, or having that responsibility forcibly taken by, an overreaching federal government. We should not expect that every city and every state will look the same or act the same.We cannot expect that every person should be equally at home at any place in this vast country. Instead we should allow our more local governments the freedom to express the culture of their own citizens without fear of offending people who have no interest or connection to their locale.

Maybe we could even learn to practice a little more tolerance by doing this.

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Our Chinese Finger Trap

Posted on 2008-02-16 by David

Socialism is like a Chinese finger trap. Playing with it just a bit look harmless and even fun, but once you start on that road it much easier to get further trapped than it is to free yourself.

Chinese Finger Trap

Image based on stuck for lyfe by Chris Martin.

I read a great example of this in the comments on an article about some proposed seatbelt legislation – specifically the following interchange:

No mandate please | 8:43 a.m. Feb. 14, 2008

If I don’t want to wear a seatbelt, that’s my business. But the sponsors of this bill will cry…”it’s about safety”. Let’s all be honest. Bottom line…it’s not about safety. It’s about revenue. It’s about mining the drivers in Utah for more money over a silly (soon to be) law.

Legislators should stick to real issues. Seatbelt laws are unconstitutional.

Anonymous | 9:06 a.m. Feb. 14, 2008

How many people out there are not willing to wear a seatbelt but more than willing to sue the insurance company for injuries sustained for not wearing a seatbelt.

Anonymous | 9:18 a.m. Feb. 14, 2008

It is your business as long as you don’t expect Utah taxpayers to pick up your medical bills if you are out of work or disabled. Sort of like a smoker. Do it if you want but don’t expect me to pay your bills if you end up with cancer.

Really? | 9:18 a.m. Feb. 14, 2008

Do you really think that not wearing a seat bealt is just your business? Let’s say you don’t have insurance, like many Utahns, who is going to pay your medical bills? You will probably end up on Medicaid and the tax payers will have to pay for you… now let’s say you do have insurance. Do you think there is a possibility that my insurance rates will go up because of your expensive medical bills? Now let’s say you have a wife and kids, and you die due to your neglect, what happens to them? They may go on public assistance as well. They start getting Social Security death benefits. Can you see that more is at stake than “your business”?

YES REALLY | 9:38 a.m. Feb. 14, 2008

Hey Really… Yes I think it is just my business or whoever it is that chooses to not wear a seatbelt. You have a good point on the insurance statement, but that is just one of many things that could make your rates go up or have people get on public assistance. People can start getting Social Security death benefits from anything that might take someones life. I have to agree with the above comment, I do believe its not about safety, it really is about the money. We should have a choice whether or not to wear a seatbelt. Remember this is America.

Sagacious Inquisitor | 9:58 a.m. Feb. 14, 2008

To Really.
Sadly, your comments are based on the Socialistic notion that somehow society is responsible for me. Granted, Socialism is the dangerous system into which we have already slipped too far.

Once we already have a little socialism – such as government paying the costs of health care for those who can’t afford the choices they have made – it gets easy to use that as a lever to argue that the choices they make are no longer theirs to make but are within the reach of government to make those choices for them. The problem is that each time such an argument is made it becomes that much more difficult to be free to make our own choices – responsible for the consequences of our choices, and not responsible for the choices of others.

It is too easy to paint proponents of individual responsibility as uncaring towards those who are less fortunate than they are, but that is an unfair characterization of the position. I am fully in favor of helping someone in need. I absolutely desire that doctors be paid for their time and effort on behalf of people who cannot afford the health care they need.

The difference is that I believe we do a disservice to those who receive such help when the help comes from a nameless, faceless, impersonal government agency rather than coming from caring neighbors or relatives. Not only do they feel no urgency to improve their situations or to repay the kindness they have received in their time of need when aid comes from such an impersonal source, but it is impossible for government to fully tailor that aid to their specific situation which opens up the misfortune of some people to be used as an opportunity for gain by other unscrupulous people. With caring individuals involved in rendering the needed assistance there are greater safeguards against those who would take such advantage and more incentive for those receiving aid to lift themselves as much as possible.

If the vehicle of government could be used to eliminate social ills such as poverty or homelessness we would have found that solution after decades of government intervention. For all the efforts to use government for those noble ends we show little if any progress.

Posted in culture, pictures | Tagged , , , | 6 Comments

More on Consumption

Posted on 2008-02-15 by David

A great comment led me to this video – which everyone should see:

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Rhetoric Overshadows Facts

Posted on 2008-02-15 by David

The well titled post, The World Is Not Going To End This Weekend, illustrates how easily an issue can be skewed simply by blurring the facts. Quoting from a post at the Politico which contains the rhetoric surrounding the debate about extending the Protect America Act Timothy Lee goes on to show the truth:

. . .” a measure to extend the Foreign Intelligence Surveillance Act as the deadline approaches. The measure, which failed 191 to 229, would have extended the bill an additional three weeks”. . .

FISA is not expiring this weekend. FISA was passed in 1978 and isn’t slated to expire ever. What’s going to expire this weekend is the Protect America Act, which gave the president some additional spying powers beyond those he enjoyed under FISA. And in fact, even that is misleading, because all that’s really going to expire is the ability to authorize new surveillance activities. The PAA allowed the government to authorize surveillance programs for a year, which means that any surveillance programs that have already been approved will continue to be authorized until August at the earliest.

What this means is that the only real effect of the PAA’s expiration is that if a new terrorist suspect comes to the government’s attention, and he makes a phone call or sends an email that passes through the United States, then the government would need to fill out the extra paperwork required to get a FISA warrant in order to surveil that call. This paperwork can be filled out after the interception begins, so we’re not talking about the NSA missing any important phone calls, we’re just talking about [a bit more paperwork].

This same kind of fudging happens from activists on both sides of most issues. It’s no wonder that the average voter who only knows what they see in the media has such a hard time seeing any debate completely clearly. Their views are almost always being skewed based on the news they receive.

In the midst of all our government social engineering maybe we could make a law to outlaw such abstraction in our news – but I guess that would be counterproductive every time a politician wants to make an emotional appeal to the country.

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Income vs Consumption

Posted on 2008-02-14 by David

I found it fascinating to read You Are What You Spend to see how different the economic picture is depending on the way we measure economic position.

. . . renewed attention is being given to the gap between the haves and have-nots in America. Most of this debate, however, is focused on the wrong measurement of financial well-being.

It’s true that the share of national income going to the richest 20 percent of households rose . . . while, families in the lowest fifth saw their piece of the pie fall . . .

Income statistics, however, don’t tell the whole story of Americans’ living standards. Looking at a far more direct measure of American families’ economic status — household consumption — indicates that the gap between rich and poor is far less than most assume, and that the abstract, income-based way in which we measure the so-called poverty rate no longer applies to our society.

Comparing the richest 1/5 of society with the poorest 1/5 using different metrics leads to widely different conclusions on the gap between those two groups.

  • Income ratio – 15 : 1
  • Income per person – 8.2 : 1
  • Consumption ratio – 3.8 : 1
  • Consumption per person – 2.1 : 1

Simply adding in the per person statistic cuts the gap in half and moving from an income base to a consumption base (which largely indicates standard of living) makes the gap 1/4 of what it might appear on the surface.

I’d love to see how this has changed over time. We know that the income gap has increased, but I’ll bet that the statistics would show that the consumption gap has decreased between the top and bottom income groups over time. If I’m right, the reason for this is that we have taught the poorest 1/5 to spend what they don’t earn and we have ingrained the expectation that they should be able to do that into our government which has adopted the same policy for itself.

Posted in culture, National | Tagged , | 3 Comments

Face to Face

Posted on 2008-02-13 by David

I was privileged to attend a meeting with our Lieutenant Governor this morning and I enjoyed meeting a few of those who have provided ideas to blog about as well as valuable feedback. It was quite enjoyable.

While we were talking with Lieutenant Governor Herbert (is there any legitimate way to shorten that title?) I came to appreciate even more the crucial need to keep the lines of communication open between government officials and voters. One thing that I really liked the sound of is a program called Be Ready Utah. The whole premise of the program is to be prepared to address emergency situations effectively at the ground level before larger levels of government (county, state, federal) are able to organize and lend a hand. I like that idea – in fact that should be the basic premise behind most of the functions that we expect of the government (think education).

What disappointed me was that I had never heard of this valuable program. I even went to website of the state government and discovered that there are no apparent links to the program (I found it by searching for the title of the program and close wasn’t good enough). Other issues we discussed, such as transportation and education, illustrated how we can suffer from poor communication between government and citizens (think back to the voucher debate).

I think that serious bloggers (meaning those who are blogging about serious topics of public interest) have the potential to enhance those lines of communication at every level of government – especially if we can come together in promoting a robust discussion of the important issues being addressed by our civic leaders.

Posted in State | Tagged , | 2 Comments

Feeling Bloated

Posted on 2008-02-12 by David

As if the Republican party (thanks largely to the current administration) had not long ago lost any credibility to apply the “tax and spend” label to the Democrats, the American Enterprise Institute has now published a report on just how fat our favorite Elephant is. (hat tip Cato @ Liberty)

Allowing for our military expenditures, making the Bush tax cuts permanent, adding prescription drug coverage to Medicare, removing the alternative minimum tax, and this years stimulus package we would still be spending hundreds of billions less this year than we are and we would have a balanced budget through 2017 if Bush had otherwise maintained the discretionary spending levels that Bill Clinton left to him.

Before the Democrats and our current Clinton get too puffed up over this fact we should all be reminded that the budgets left by President Clinton were the result of 6 years of struggle between a Republican Congress and a Democratic President. The excesses of President Bush are the result of 6 years of cooperation between a Congress and a President from the same party. One year of a Democratic Congress and our spendthrift Republican administration does not seem to have brought us noticeably toward the relative fiscal restraint we had achieved by the end of the Clinton presidency.

That struggle between the different ideals of the two parties looks like a good thing in practice, not just in campaigning. It almost makes me hope that we never again have a President and a Congress who essentially agree on most issues.

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Year-round School is a Given

Posted on 2008-02-12 by David

The KSL esitorial board is supportive of a move toward year-round school. They manage to demonstrate a crucial mis-characterization of childhood education:

As Governor Huntsman put it in his recent State of the State address, “It is amazing to me that, in this age of innovation and education, we have students, buildings and teachers sitting idle for three months every year. . .”

This very statement assumes that children do not learn when they are outside the classroom. Anyone who has watched children knows that they are learning machines. There are a wide variety of lessons they are learning during their summer breaks that could not effectively be taught in a classroom setting.

The proponents of year-round school would also ignore the fact that there is a loss of academic effectiveness for every transition back to school from a break. With a traditional school year there is one major break and a large number of small breaks where students must navigate that transition. Year-round school has all the same minor breaks plus two extra major breaks to interrupt the academic progress of the students. All this is in addition to the standard complains about conflicting tracks within families and interruptions to the established patterns in family scheduling.

Many of the troubling aspects of year-round school can be mitigated, and there are some benefits (which are widely publicized), so the idea of year-round school is worth exploring but the decision cannot be safely made while we turn a blind eye to some false assumptions during the debate. These issues must be a part of the discussion if we are to come to a solution of any lasting benefit.

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Really Inevitable

Posted on 2008-02-11 by David

Of all the things that we don’t know about the outcome of this year’s election there is one outcome that would be dependable. If Clinton is elected we will see more news like this. Those who vehemently dislike the Clintons will continue to make comments that most of us consider inappropriate. When they do we can also be sure the Clintons will never let any slight pass unchallenged.

I’m fairly certain that David Shuster meant to elicit a reaction from viewers but did not mean any particular offense towards any of the Clintons. I don’t mean to suggest that his comments were appropriate, but the only apology that might be acceptable to the New York Senator would be an unequivocal endorsement from MSNBC (and even that might not be enough).

The thing we know for certain is that another Clinton term would mean years of investigations and acrimony in Washington guaranteeing that nothing useful gets accomplished. No other candidate would produce such a predictable response from the country.

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