2012 Election in a nutshell

From Mark Steyn:

Give it a week or so, and, in a grand harmonic convergence of Democrat talking points, Big Bird will be dating Sandra Fluke.

Doesn’t a hate crime require the occurrence of a crime?

From the New York CBS affiliate: “NYPD Probing Hare Crime After Bacon Found at Staten Island Ramadan Site.”

What’s the underlying crime?  Is it illegal in New York to be a dick?

It’s not just a good idea, it’s the Law!

It’s a law most people have never heard of, yet controls their life more than any other.  The law is unbending, unwavering, and merciless.  Why do people put up with it?  It’s human nature.  This horrific law, that runs our lives, is the Law of Unintended Consequences.

Every act, every decision, every choice we make has consequences.  Some of them are planned, some are beneficial, and some are unintended.  The unintended consequences generally result from the reaction of a third party reacting to a decision we make.  Say, for example, people like bacon.  People buy more bacon.  Bacon becomes a fixture in popular culture.  Bacon starts showing up in unusual places, like Burger King milkshakes.  A Burger King milkshake is an unintended consequence of the popularity of bacon.

Other consequences are not so benign as bacon-flavored milkshakes.  Economists are familiar with the Tragedy of the Commons, which I consider a sub-species of the Law of Unintended Consequences.  But of all the people who should be the most familiar with the Law, the ones who seem to be the most intentionally obtuse are bureaucrats.  For some reason, most bureaucrats seem to think that the Balm of Good Intentions will dispel the Law of Unintended Consequences.  Time and again, the real world rears up and confounds the best intentions of the nattering classes.

Today’s prime example comes from UN and their carbon-trading scheme.  Briefly, the UN awards carbon-credits for destruction of GHGs that can be purchased by companies to offset their own emissions.  In theory, emissions go down due to destruction of GHGs.

In practice, not so much.  The New York Times reports that firms in Asia have ramped UP production of GHGs for the purposes of selling the credits they get for destroying them.  And, in a move that should surprise no-one, they chose the most destructive GHG, in order to maximize the credits. (CO2 = 1 credit, HFC-22 = 11,700 credits).

So far, no surprises.  Every economics student know that people react to incentives.  When you incentivise an activity, you get more of the activity.  The Times describes the issue, and then quotes one of the NGO bureaucrats who helped create the scheme:

“I was a climate negotiator, and no one had this in mind,” said David Doniger of the Natural Resources Defense Council. “It turns out you get nearly 100 times more from credits than it costs to do it. It turned the economics of the business on its head.”

The breathtaking ignorance of the drafters of this boggles the mind.  Who would have thought that if you make it more lucrative to create something for the purpose of destroying it, people would start doing that?  Now there’s a scramble to correct the problem, which will, of course, lead to more unintended consequences, and the cycle continues.

The other side of the coin

The drought is going to complicate things, that’s for sure.  How bad it will be, and what effects it will have, is as yet unclear.  However, it does illustrate something I’ve been considering for some time.

I recall a former pastor at my church bemoaning the US economy.  He complained that the US was 5% of world population and consumed 40% of resources (or some such PC crap).  I asked him to consider what percentage of world production was generated by that resource usage, but he would not credit that view.

How does that relate to the drought (I hear you ask)?  Consider this:  from the Financial Times

The drought in the US, which supplies nearly half the world’s exports of corn and much of its soyabeans and wheat, will reverberate well beyond its borders, affecting consumers from Egypt to China.

http://www.ft.com/intl/cms/s/0/9989dc80-d1c5-11e1-badb-00144feabdc0.html#axzz21ADWXAWW

I would submit that 40% of the resources producing 50% of the exported food is not a bad utilization of resources.  And that does not take into account any other contribution by the US, such as the demand created for products produced for export by other countries, IP produced, and the positive effect of US leadership (what little of it there is now).

Just some food (as it were) for thought.

Dems beclown themselves (again)

From http://abcnews.go.com/blogs/politics/2012/07/exclusive-democrats-dump-opposition-research-on-top-vice-presidential-contenders/:

In a non-descript Washington, DC office building within sight of the United States Capitol, a team of more than a dozen Democratic researchers have spent the last few months examining every nook and cranny of the records of several GOP vice presidential contenders.

The researchers work for the super PAC, American Bridge 21st Century, which is unveiling a new website on Friday called VeepMistakes.com. The site features more than 1,300 pages of opposition research and scores of video clips.

Veep Mistakes?  I’d think that list would begin and end with Joe Biden.

How to make a movie

I don’t know diddly about the process of making movies or the work that goes into them.  But if I had to guess the most effective way to make good movies, it would look a lot like the way Joss Whedon made “Much Ado About Nothing.”  Just from reading the stories from the actors, it sounds like a lot of fun, and a real collaborative effort.  Amy Acker’s comments were especially interesting.  Can’t wait to see the movie!

Brilliant!

This analysis from Reason concisely states the reason I think that the Keynesian model is not applicable to the current economic situation.  Here’s the text:

In The Washington Times, businessman Mike Whalen (who’s associated the free-market think tank NCPA) writes up an interesting take on why various federal stimulus program have tanked like the Titanic (while causing few ripples on the way down).

His points are worth thinking about.

According to the Keynesians, the remedy for today’s economic problem is for the federal government, as the single biggest actor, to “prime the pump.” As government money starts to ripple through the economy, consumers and businesses will be encouraged and cautiously respond with limited increases of their own. Vroom! The economic engine steadily revs up in billions of responsive steps until happy days are here again. This pump-priming reaction is termed the “multiplier effect.”

There are many reasons to doubt that the multiplier exists at all and if it does, it certainly isn’t at the levels the Obama administration has claimed. As Reason’s economics columnist Veronique de Rugy has pointed out, the administration claimed that one dollar of government spending would create as much as four dollars in economic activity while other economists were coming in with multipliers of between 0.8 and 1.2, meaning that each dollar of government spending might yield just 80 cents to $1.20 in activity. Even if accurate, that buck-twenty is nothing to write home about, especially given the fact that government spending has to be pulled out of some other part of the economy via current or future taxes or borrowing. Which casts huge doubt on the possibility of any stimulus to work.

But Whalen isn’t simply dumping on Keynesianism, he’s bent on pointing out that even its latter-day adherents are straying far from their master’s theory. And in this, he’s surely correct. As Allen Meltzer has argued, Keynes was against the very sort of large structural deficits that characterize contemporary federal budgets and policy, believing instead that deficits should be “temporary and self-liquidating.” And Keynes believed that any sort of counter-cyclical spending by government should be directed toward increasing private investment, not simply spending current and future tax dollars on public works projects.

Or, to put it another way: If the federal government had a strong track record of responsible spending, it would mean one thing if it went into hock for a short period of time to goose the economy (again, whether this would work is open to question). It means something totally different when a government that spent all of the 21st century piling on debt and new, long-term entitlement programs responds to an economic downturn first by creating yet another gargantuan entitlement (Obamacare) and taking on even more debt in the here-and-now. This cuts in a Milton Friedmanesque, monetarist direction too. If the Federal Reserve had not been keeping money artificially cheap for the past couple of decades and it worked to lower interest rates and increase the availability of money in a given moment, that would mean one thing. Promising to keep rates low for the next couple of years – after years of loose money and statements that all those bubbles weren’t bubbles at all – doesn’t mean the same thing.

Whalen again:

I think John Maynard Keynes would be horrified at the slavish adherence to this simplistic strategy by so many policymakers and economic thinkers, as his theory was much more complex. This thinking might be correct under circumstances other than those in which we find ourselves. If the ratio of our national debt to gross domestic product was low – say 25 percent – and the federal government had run surpluses before the downturn, this college freshman-level Keynesian analysis would have great weight. Put another way, if Uncle Sam were a rock-solid financial entity with low debt to value and he had judiciously used debt for capital improvements that were accretive in value, as the biggest dog on the porch, a stimulus might work.

But with a national debt of more than $14 trillion and unfunded, future “off the books” debt of Social Security and Medicare combined at $104 trillion in present value, according to the Dallas Federal Reserve, Uncle Sam ain’t the man he used to be. This in turn makes American businesses that are sitting on a pile of cash focus on deleveraging. The American consumer is doing the same. In fact, from where I sit, it appears as though everyone except Uncle Sam is working like mad to strengthen his balance sheets. The legitimate fear across the country is that Washington’s refusal to join our common-sense parade will result in higher taxes, more regulations, more inflation and Japanese-style stagflation. In other words, Washington’s attempts at stimulus through spending are having the opposite effect. Businesses and consumers stay hunkered down.

If the federal government announced a real road map to fiscal soundness, the impact would be truly stimulating. If American businesses and consumers saw that Washington was really cutting, not just reducing future increases, there would be tremendous relief and an increase in confidence across the country. Job creators would sing “hallelujah”; they would get off their wallets, start hiring, and then you’d see that Keynesian multiplier kick in.

Except, of course, that it wouldn’t be Keynesian at all. Which I don’t think anyone would care about.

Whalen’s entire article is here.