"Yeah, I'll tell you about the whale. That's a story I'll never forget."
A good lesson of strict liability. Hilarious!
"Yeah, I'll tell you about the whale. That's a story I'll never forget."
A good lesson of strict liability. Hilarious!
Jon Stewart interviews Debbie Wasserman Schultz. (See video below.)
First, I love the use of the phrase, "We need real people." What she means by"we," of course, is people who believe in more centralized control of our economy, which of course means more power in the hands of people like Debbie Wasserman Schultz to control other people's lives.
Further, to explain what she means by "real people," Wasserman Schultz uses the example of mothers needing to become more involved in education. But there are plenty of "real people," both fathers and mothers, thank you, involved in their children's education, many of whom send their kids to private schools, in part to separate their kids from the large number of kids whose parents do not concern themselves with, and who do not actively participate in, their children's education.
Also, what about the "real people" who work in the private sector as employees, employers, entrepreneurs, etc. Don't they better our lives, and arguably far greater than 99.99% of any government program that I know of.
She uses a straw man to criticize Republicans (who, by the way, deserve tons of ridicule and criticism) as obstructionists who do not see any value in government. Given the expansion of government under eight years of Bush, with four of those years having Republican control over both houses of Congress, I wouldn't say Republicans don't believe in centralized decision making and big government. What many of the critics might be contending is that there are limits on what government can, should, and ought to do, not that it cannot do anything right. Honest people can disagree; they don't need their views distorted simply because you disagree with them.
Which brings up Stewart's last question to her (with about 1:40 left to go). He notes that the Republicans handed Democrats a golden opportunity for the latter to prove that government does work and that they failed to take advantage of this opportunity. Could it be maybe, possibly, might be, probably, that critics of centralized planning are correct in that centralizing health care won't work? It's not that but for the bumbling of the Democrats health care can be centralized, but maybe, could be, just might be that the failure to launch the Affordable Care Act portends larger systemic problems with centralizing health care, both now and in the future? Can there possibly be, might be, probably is, a problem with the incentives that preclude much success when government seeks to control other people's lives and the decisions they make or fail to make? And that such a system is too complex to collectivize?
The NSA spying scandal is becoming more of a black eye every day. The most recent revelations that the NSA has been spying on its allies, including German Chancelor Angela Merkel before she even became chancelor, reveals an extreme lack of judgement. And politicians have acted—and will continue to act—just as one would expect: they deny any knowledge and involvement in the scandal.
"With respect to NSA collection of intelligence on leaders of U.S. allies — including France, Spain, Mexico and Germany — let me state unequivocally: I am totally opposed," Feinstein said in a statement Monday. “Unless the United States is engaged in hostilities against a country or there is an emergency need for this type of surveillance, I do not believe the United States should be collecting phone calls or emails of friendly presidents and prime ministers. The president should be required to approve any collection of this sort.
“It is my understanding that President Obama was not aware Chancellor Merkel’s communications were being collected since 2002," Feinstein continued. "That is a big problem."
This reminds me of a famous quote from a very famous movie (clip below).
Reports have emerged recently of the failure of the Affordable Care Act (i.e., Obamacare) to gain a large turnout of people enrolling in health care exchanges during the first two weeks they've been open. It certainly wasn't unexpected, and this anecdotal stat (below) may have some explanatory power. What it implies is simply that people without insurance might have lacked insurance not because it wasn't available, but instead because they are irresponsible. This failure to obtain coverage through the exchange is a puzzle, assuming that people without insurance actually desired it. But it might simply signal irresponsible behavior on the part of many who are currently uninsured, which explains both why they lacked coverage to begin with and why so few are signing up now. "Why sign up now? I'll do it later and worry about the consequences then."
In this excellent piece about marriage and parents having children out of wedlock, researchers asked adolescent women whether or not they agreed with the following statement:
"Having birth control on hand takes too much planning."
The results tell a story of irresponsible behavior highly concentrated among people with less education. (Notice that the results are by the educational attainment of the mother of the adolescent being asked the question). The problem of out-of-wedlock births is only exacerbated by current health care policy.
Such policies are not compassionate if the consequence is that more children than otherwise would have been are born into families living in poverty where responsibility is neither taught nor exhibited, stress is pervasive, and the children are therefore likely to have little chance of success in life. They repeat the same behavior, creating a culture of poverty that exists in large parts of America today. If this is the case, having access to health care insurance coverage doesn't solve the underlying problem. In fact, it likely creates the incentive to act even more recklessly and irresponsibly.
After completing the first few weeks of a basic course in economics, students should be able to spot the clause in the National Collegiate Athletics Accountability Act that will bring about adverse consequences to, and alter the incentives of, college athletes protected by the bill. Note that this bill has near zero chance of being passed. (For a discussion with Rep. Beatty and former Washington Redskin Lavar Arrington, see the video "Reps Call Fould Play on NCAA.")
The specific clause includes the following:
That is, regardless of your attitude, actions, behavior, performance, and abilities that an athlete demonstrates after signing with a college or university, their scholarship cannot be rescinded.
I understand the intent of the act. And I am pleased to see (at least some members of) Congress finally going after one of the world's most corrupt cartels in the history of humankind. But that clause simply decreases the chance that a marginal student-athlete is signed by a university. Schools are willing to take chances on students, but once in college, things change.
It's not much different than the arcane labor laws in Europe, that make it very difficult--if not impossible--to terminate an employee once hired. The result is higher unemployment since firms are reluctant to take chances on people they have any doubt about their subsequent performance.
In addition, once signed, athletes have less of an incentive to perform as expected, including and especially their behavior away from the team, knowing that their scholarship cannot be revoked.
Lastly, if you're going to include soccer and lacrosse as contact/collision sports, then why not basketball? Injuries occur to athletes in all sports, so it's a big puzzling why only a select few are protected.
We tend to forget that market capitalism, though based on competition, is really about social cooperation. When I go to the store for milk, the grocer and I are engaged in a socially cooperative venture. I am made better off by having the milk, and the store is made better off by having my dollars.
The same applies to students in that I am better off having their dollars and they are better off (I think) by having improved knowledge of how the world works and from being taught how and what to learn. I could actually even add the college as an intermediary that benefits from having the students' dollars and the students benefit from the college organizing and facilitating their education and then credentialing them. The college then benefits from my expertise and I benefit from the dollars that pass through from the student to the college to me.
In any market transaction, just like any positive social relationship, we are partners, not adversaries. We sometimes forget about this cooperative endeavor—a positive sum game—and view it as a negative sum game or some sort of adversarial relationship. If I make you better off, by default I must be made worse off. Similarly, we often view an employer as someone out to "screw us," or the employer views its employees as prospective thieves or loafers. Any or all of this can be true, but we too soon forget that we are partners with our customers, our employers, our employees, our suppliers, and so on and so on.
Seen as adversaries, it makes it difficult to effectively respond to unforeseen events, events that are often beyond the control of the person adversely affected.
Suppose I own a lumber mill and we agree that in six months I will provide you 100 board feet of walnut in exchange for $500, payable upon delivery. First, I offered you more value per dollar than anyone else was offering you for that $500, and second, you offered me more dollars for the resource costs I incur in producing the lumber. We are partners.
You had plans to use this lumber to make furniture that you hoped to sell for $5,000. Prior to delivery of the lumber, but after we made our deal, a downturn in the economy causes your customers to cancel their furniture orders. Consequently, you call me to cancel delivery of the lumber, which I had already invested my time and money in cutting down the trees and milling the wood into usable lumber. And because of the downturn, I, too, have no one else to sell it to. I don't want to incur this loss, so what do I do?
This is not an uncommon occurrence and we have formal rules to address how the situation is handled between two or more parties. But what is truly important to remember is that our relationship is a cooperative venture; you are a partner in my success and I am a partner in your success. You as the buyer of my lumber, and me as your supplier, are partners. We are both engaged in creating value for consumers of furniture. And those customers who buy your furniture are also partners just as are my suppliers of saw blades, energy, etc.. We are all engaged in a cooperative venture.
It does neither you nor I nor your customers nor my suppliers any good if one of us fails. Failure of one means we are unable to engage in cooperative ventures with that person or firm in the future. I certainly could hold you accountable for the deal we agreed to, forcing you to take delivery of the lumber, but it might not be in my best interest to walk you down the plank and watch you jump off the ship. It indeed might be if you are simply wasting resources, but that is something I have to figure out. If it's simply an unforeseen event that will someday be corrected, then it might be in my interest to forgive you.
The purpose of formal rules like those within the realm of contract law is to deal with just this type of situation. However, as Stewart Macaulay explained years ago, it is the informal rules that sustain cooperative ventures. I may have a formal claim against you, but it may be in my long-run interest to adhere to informal rules, either excusing you of your obligation to me or working out some alternative arrangement, both of which might require me eating part or all of the loss in order to keep you going. In doing so however, I preserve our cooperative venture that might otherwise be lost. I must weigh both the short-run and long-run costs and benefits from either action, but, barring fraud and/or complete ineptness on your part, my best bet is likely to excuse you.
This topic is brought on by this article from Christopher Elliott published on LinkedIna few months back. Should Priceline excuse this woman from her contractual obligation and refund her money, or should it make her eat the loss? She claims that she had to cancel the trip due to unforeseen circumstances, and that due to these unforeseen circumstances cannot now afford the expense. Priceline's policy is that once you click that "Accept" button, you must pay for whatever hotel or airline or rental car company accepts your offer. It may indeed be in Priceline's best interest to cancel this woman's reservation, which means they may take the loss since it is really an intermediary between this woman and the hotel (though Priceline keeps a big chunk of the proceeds), but it also has to protect itself from people fraudulently (or let's say unnecessarily) canceling their reservation contracts.
Priceline is essentially a means for airlines, hotels, and rental car companies to price discriminate. Effectively doing so requires these companies to segment their markets so that people (loyal customers and others with a more inelastic demand) willing to pay the rack rate don't see the discount rates the hotel is currently willing to offer those with a more elastic demand. Priceline facilitates this by a) not letting you know which airline, hotel, or car company is willing to accept your offer beforehand, and b) once they've identified their willingness to accept a lower price, preventing you from now opting out so you cannot go fishing for lower prices from your favorite hotel(s).
Should Priceline release this woman from her contract and refund her money? It depends. She is certainly not a loyal customer of the hotel, so the long-term relationship argument is irrelevant, at least as far as the hotel goes. And they could do so out of the kindness of their heart, but neither the hotel nor Priceline are in the business of providing charity. (Managers can certainly use their own money to do so, and shareholders may indeed agree to charitable giving, but managers have no right giving away shareholders' money without their consent.) But the biggest reason for doing so is the goodwill it can create for Priceline (and maybe the hotel) and the exposure the company may generate from its customer service. I have gone to two hotels now that we booked through Priceline and promised to discuss them positively on social media if we get an upgrade or are treated favorably. Both responded and served us well.
Bryan Caplan has offered to bet people on the ultimate validity of his beliefs against theirs. As Alex Tabarrok calls it, betting is "a tax on bullshit" and Bryan is calling BSers out. In other words, if you're not willing to place a wager on your beliefs or opinions or expectations, how valid are those beliefs, opinions, and expectations?
Now, Bryan and others can indeed bet (not legally in Virginia, however), but that doesn't mean anyone will collect. Some people place bets on things they believe at time t, but at time t+1, after their beliefs are proved wrong, they regret making the bet and refuse to pay up. Laws in most states (maybe all states, I don't want to search them all out right now) won't allow the winner to collect, so the bet simply goes unpaid.
But as Richard Posner argued about gratuitous promises made by family members, maybe we want them enforced to make them more valid. I mean, how valid is a promise from Uncle Ned that if you hit a homerun he'll take you to dinner if he repeatedly welshes on his promises? "Sure Uncle Ned, like that will ever happen."
The same applies to bets. Enforcing bets means that people will refrain from making them unless they have solid information that validates their beliefs and opinions. "Put your money where your mouth is," if enforced, makes your beliefs and opinions that much more credible because blowhards will have a tax (i.e., losing bet) imposed on them for voicing unsubstantiated opinions and beliefs.
It seems that Aaron Rodgers wanted to appear credible with his opinion about Ryan Braun's innocence, so he "bet" a year's worth of his salary on it. (See the twitter exchange below.) Ryan Braun just of course accepted a suspension from Major League Baseball for the remainder of the season for using PEDs. What's so frustrating to some is that he adamantly proclaimed his innocence and charged others (i.e., the media) of waging an unjust attack on his reputation and abilities.
Rodgers took the bait and baseball subsequently nailed Braun. Now Aaron Rodgers finds himself having to admit his opinion of Braun was in error. But he also must admit that he bet a year's salary on his belief that Braun did not use PEDs, and will now welsh on this bet, just like Uncle Ned welshes on his promises. (Or was it Ted?)
Now, no court will uphold Rodgers' bet as valid, so he can rest easy with regards to his potential financial liability. But, since this is at least the second public bet he's made where he was subsequently proven wrong and then welshed on it (like Uncle Ned), his opinions and beliefs are really no longer credible, if they ever were. He can no longer profess greater intensity of his convictions by betting on them because no one now believes he'll honor those bets. And since he's been proven wrong in such public ways, and in the latter case such a public travesty (read this article about Braun), most will simply discount what he says.
Simon Johnson makes an important qualifying argument regarding any level of bank capital requirements.
Given systemically important financial institutions and imperfect regulations, capital requirements have an important role to play. But we should be setting them with the understanding that banks fail before they run out of capital, capital is difficult to measure, and the errors all come out the same way—in the banks’ favor. In practice, of course, it’s all politics: even if Daniel Tarullo wants higher capital requirements, there’s a limit to what he can get through the Board of Governors, and there’s a limit to what Ben Bernanke thinks he can get while remaining an independent agency. That’s the bottom line to remember—not that our new capital requirements are the outcome of some reasoned discussion about how much capital banks really need to protect the rest of us from their misadventures.
Art Carden has a very good piece on price controls and why they persist despite the social harms they create.
Price controls create shortages, and they also drive a wedge between the price of a good or service and what people are willing to pay or accept. Suppose someone is willing to pay $10 for a gallon of gas after a storm but is only allowed to pay $2 in cash. If he values his time at $8 per hour, he will be willing to pay with $2 in cash and an hour of time spent standing in line. The cruel irony of this is that the entire difference between the legal maximum price and the price people are willing to pay for every gallon that is supplied will evaporate as people stand in line for gas. Everyone is unambiguously worse off relative to where they would be without price controls.
I would only add one more important point that dovetails with his argument. Students often ask about the poor who are adversely affected by the price controls increases since they are not able to afford (much) the scarcer good at the higher price. A poor family may value, say, ice at $10/bag, but is unable to pay, say, $8 per bag.
The solution is not to impede prices, which not only leads to an allocation problem, it destroys the incentive for people living outside the adversely affected area to shift more of the now scarcer resource from where they are to areas where there is an excess demand for it. Instead, if the concern is with enabling the poor to obtain some of the now-scarcer resource, subsidize the poor through a cash grant sufficient enough that they can buy some.
Consider the situation where ice normally sells for $2.50 per bag and a hurricane knocks out power to an area, leading to a shortage of ice. As a consequence, the price of ice increases from $2.50 per bag to $8 per bag. A low income family who valued ice at less than $2.50/bag before the hurricane (they weren't buying any before) now values on a daily basis one bag at $10, a second at $8, a third at $6, a fourth at $4, a fifth at $2, and zero for any more than five bags. At $8/bag, this family will buy two bags, but has to sacrifice a large portion of their normal daily consuption to spend $16 per day on ice. (Maybe they have to cut back on milk, etc.)
One solution--the one normally taken and to which Carden refers--is to impose a price control of $2.50/bag on the sale of ice. In doing so, this family buys four bags of ice for $10, bags that are now scarcer due to the increased demand as a consequence of the power outage, and valued more elsewhere. As long as they are willing to spend more time waiting in line (and poorer people tend to have lower opportunity costs of their time), they are more likely to obtain more of the scarce good.
We want people to conserve ice and find alternatives to consuming bags of ice that are valued more for other uses. There is no way of knowing who values ice at what price and who has the least cost viable alternatives for ice without having people act in market exchange. Offering poor families, say, $10 per day as long as the outage persists allows them to consume some ice, yet provides them incentives to not consume ice that is valued more highly elsewhere, as well as finding viable lower cost alternatives to using ice. Any portion of the $10 not spent on ice can be used for other things they value more than ice.
For wealthier families, consider the time spent waiting in line for ice as long as price controls are in effect. Absent price controls, lines disappear and these households are better off by the value they place on their time spent waiting in line. It is this time we all spend waiting in line that is the true social loss due to price controls. Permitting prices to rise simply transfers money from consumers to producers, but waiting in line is an opportunity cost imposed on everyone that is not recovered by anyone anywhere else.
Suppose my time is worth $25 per hour and I want four bags of ice. Waiting in line for one hour makes me worse off by $3. (I could have worked for that hour, earned $25 and then paid $22 more for the 4 bags of ice.) This loss is compounded when waiting in line exceeds one hour. A mutually beneficial solution is to tax, say, 80% of higher income families $2.50 per day and transfer it to the 20% of lower income families, giving each $10 per day. (Yes, in this idealized example I'm dreaming that there are no frictions in wealth transfer schemes.) Such a scheme offers both poor and wealthier houesholds a mutually beneficial alternative to price controls.
Here is a piece I wrote a few years back after North Carolina's attorney general was prosecuting retailers for raising gas prices following damage to refineries in Texas due to a hurricane. Download Steckbeck on Price Gouging 9_24_08
UPDATE: By the way, there is a natural tendency for such transfers to happen voluntarily. In 1998, the National Gallery of Art in Washington, DC had an exhibit of Van Gogh paintings. In order to ensure even low income people were able to view such works, the museum offered a limited number of tickets each day, first come, first served, beginning at (I believe) 9:00 am. Lines of course began forming well before 9:00 and tickets were depleted immediately upon opening. For area residents who worked, and for tourists who did not know of the procedure, seeing such a great body of work was not likely.
Solution: Homeless people and other people with lower opportunity costs of their time (i.e., college students) waited in line and then sold their tickets for (again, I believe) around $20 a piece. The easily duped were outraged that people were profiting from something they obtained for "free." (So much for undersanding the value of time.)
Wealthier households were able to view the exhibit and people with lower cost value for their time were able to consume things they valued more than viewing Van Gogh.
UPDATE 2: But of course there is still the problem of time wasted waiting in line (i.e., the homeless waiting for tickets). A better alternative would have been for the National Gallery to sell the tickets are market prices and then, if they truly desired to subsidize the poor, handing the money over to them.
This is the problem with ticket scalping. Had the artist or venue simply increased the price of tickets there would be no time spent rent seeking. Instead, by selling concert tickets or tickets to sporting events below market prices, time is wasted trying to obtain some in order to profit from it. Better to just raise prices to those willing to pay and handing the money over to scalpers, again, assuming that what actually happens is the intent of the concert or sports promotion agency.
Research from the American Association of University Women shows that even one year out of college, a typical college-educated woman working full time earned $35,296 a year, compared with $42,918 for a typical college-educated man working full time.
Even after controlling for factors known to affect earnings – such as occupation, college major and hours worked – a 7 percent pay gap persists between one-year-out male and female college graduates.
Notice how she left out years of experience and age, two major factors.
Here is an opposing view (BTW - authored by a female).
To compare male and female pay on a level playing field, we found the median pay for all men in a given job, as well as breakdowns of important compensable factors such as years of experience, location, education level, etc. Then, using PayScale's proprietary MarketMatch™ Algorithm, we determined what the female median pay would be using the exact same blend of compensable factors as our control male group.
What we created was an apples-to-apples comparison of what men and women make, all other factors held equal, according to actual market data. For example, the male software developer median, annual salary is $65,700, which is 4 percent more than the median female value of $63,300.