"It [Really] Ain't Rocket Science"

Peter Boettke via Jeffrey Ellis:

I have adopted many of my father’s sayings as I have grown older, and this particular phrase “ain’t rocket science” I tend to use all the time about economics. Yesterday the report came out that housing sales were down, and the stock market fell. I woke up this morning to emails from a very good friend in the investment business with dire predictions from Morgan Stanley and even Goldman Sachs that the US economy is going to tailspin into a deeper recession.

I don’t possess a crystal ball, so I cannot forecast the economic future. But I do know that it is not good to expand the monetary base 140% or to run deficits the size we have, or accumulate public debt as we have.See Laurence Kotlikoff in The Economist. This “ain’t rocket science”! There will be a day of reckoning due to the monetary mischief and fiscal irresponsibility.

I also know that the problems we are facing are not “market problems” — it is not that actors are all of a sudden ‘irrational’, and it is not that markets are inherently ‘unstable’. Everything we are seeing in market behavior is a rational response to the environment created by public policy. This is not a psychological problem we are dealing with, it is a public policy problem. Bad public policy produce bad incentives which in turn produce bad results. Ultimately, this is a problem of bad ideas which result in bad public policies. Again, this ain’t rocket science.

Maybe? It wasn't about China

The Economist suggests that maybe manufacturing job losses in the US aren't about China. Markets are harsh and inherently unstable. They force an unending cycle of improvement or else you die. It might seem bleak - but the flip side of that, is that those who do innovate and meet the needs of customers thrive and profit. With mounting job losses and governments looking for easy targets to blame, China's an easy scapegoat.

Sure, I'm not the least bias source by any means but to put things in perspective (Economist referencing a chart from Paul Kedrosky):

[This is] manufacturing employment as a share of total employment. The downward trend is over 50 years old. It predates the end of Bretton Woods. It predates the union-crushing, deregulating era of the late 1970s and early 1980s. It predates the era of Japanese dominance, the rise of the Asian tigers, and the recent surge in Chinese growth. And what it is driving this trend, overwhelmingly, is technology. Manufacturers have steadily improved manufacturing productivity, routinising and then automating occupations.

A plunging dollar, a "get tough" approach to China, and an embrace of industrial policy won't reverse this trend. Eventually China will face the same dynamic and the same decline in manufacturing employment. Time to accept that reality and figure out how best to prepare workers for the good jobs to come.

The Lottery: "The interests of adults above those of children"

Worth two minutes of your time - a trailer for the documentary "The Lottery", about the selection process for a charter school in Harlem:

An interview with documentary producer Madeline Sackler (Reason.tv):

The Freedom Movement and the Libertarian Electorate

A look at what and who libertarians are. One pointed quote: "Libertarians are treated as if they have quirky beliefs precisely because they are consistent. In a country where a lot of people have inconsistent beliefs, a consistent adherence to priciple sometimes looks pretty unusual."

And a useful reminder: "A lot of the people who say they favor smaller government in the abstract, tend to favor larger government in the particular. You don't get that many true libertarians in big business because [..] big business likes regulation that disadvantages their competitors."

From Reason.tv, h/t Instapundit:

"Giving Back"?

An op-ed in the WSJ asks the provocative question of whether those like Bill Gates and Warren Buffet do more for society as businessmen than as philanthropists. I'd say yes. "Wealthy businessmen often feel obligated to 'give back.' Who says they've taken anything?":

What are the chances, after all, that the two forces behind the Giving Pledge will contribute anywhere near as much to the betterment of society through their charity as they have through their business pursuits? In building Microsoft, Bill Gates changed the way the world creates and shares knowledge. Warren Buffett's investments have birthed and grown innumerable profitable enterprises, making capital markets work more efficiently and enriching many in the process.

[...] While businesses may do more for the public good than they're given credit for, philanthropies may do less. Think about it for a moment: Can you point to a single charitable accomplishment that has been as transformative as, say, the cell phone or the birth-control pill? To the contrary, the literature on philanthropy is riddled with examples of failure, including examples where philanthropic efforts have actually left intended beneficiaries worse off. The Gates Foundation has itself acknowledged that one of its premier initiatives—a 10-year, $2 billion project to reorganize high schools around the country into schools with fewer than 400 students—was a complete bust. Good for them for admitting it. In that, they are unusual. In the failure, they are not.

If you're a locavore, you could well be an idiot

From the NYTimes of all places - Math Lessons for Locavores:

But the local food movement now threatens to devolve into another one of those self-indulgent — and self-defeating — do-gooder dogmas. Arbitrary rules, without any real scientific basis, are repeated as gospel by “locavores,” celebrity chefs and mainstream environmental organizations. Words like “sustainability” and “food-miles” are thrown around without any clear understanding of the larger picture of energy and land use.

[...] The statistics brandished by local-food advocates to support such doctrinaire assertions are always selective, usually misleading and often bogus. [...] Agriculture, on the other hand, accounts for just 2 percent of our nation’s energy usage; that energy is mainly devoted to running farm machinery and manufacturing fertilizer. In return for that quite modest energy investment, we have fed hundreds of millions of people, liberated tens of millions from backbreaking manual labor and spared hundreds of millions of acres for nature preserves, forests and parks that otherwise would have come under the plow.

Why psychopaths kill and libertarians don't

Erm... thank goodness I'm a libertarian? From the folks at Reason.tv:

PSA: What to do when you flight is cancelled

Much of this advice also applies to when you miss your connection: "Reasons You're Doing it Wrong When Your Flight is Cancelled" (hipmunk.com via lifehacker.com). Hint: don't bother waiting in the customer service line.

Reason.TV: New Orleans' School Voucher Program

via Instapundit.com:

Note to Self

From someecards.com, a reminder for those lovely days...

Why Google's Android Will Win

The war between competing Android and iPhone app markets is one to watch. When built properly (even the best markets require some form of regulation and boundaries within which players can innovatea), markets will almost always trump the selection/tastes of an individual - or even a group of individual - and that's why I suspect Android's opensource experiment and their market will trump Apple's with time. From the P2P foundation via swissmiss:

A good example of manual curation vs. crowdsourced curation is the competing app markets on the Apple iPhone and Google Android phone operating systems. Apple fans complain that the Android marketplace has too many low-quality apps for any given task. They complain that it’s hard to find an “official” or “sanctioned” app. On the other hand, Android fans criticise Apple for limiting their choices. They don’t want to be beholden to the whims of a select few. Apple is a monarchy, albeit with a wise and benevolent king. Android is burgeoning democracy, inefficient and messy, but free. Apple is the last, best example of the Industrial Age and its top-down, mass market/mass production paradigm. They deal with the big head of the curve, and eschew the long tail. They manufacture cool. They rely on “consumers”, and they protect those consumers from too many choices by selecting what is worthy, and what is not. Google Android is building itself as a platform for bottom-up innovation. Their marketplace publishes first, filters second, utilizing little more than the rankings of the community.

Of course, the fact that they've announced they will only be taking a 5% cut in their Chrome store which could end up catering to a much larger audience can't hurt (TechCrunch).

And the Blog Reader Answers: The Myth of Authoritarian Growth

Dani Rodrik at Project Syndicate (via aidwatchers):

For every Lee Kuan Yew of Singapore, there are many like Mobutu Sese Seko of the Congo.

Democracies not only out-perform dictatorships when it comes to long-term economic growth, but also outdo them in several other important respects. They provide much greater economic stability, measured by the ups and downs of the business cycle. They are better at adjusting to external economic shocks (such as terms-of-trade declines or sudden stops in capital inflows). They generate more investment in human capital – health and education. And they produce more equitable societies.

[...] At first sight, China seems to be an exception. Since the late 1970’s, following the end of Mao’s disastrous experiments, China has done extremely well, experiencing unparalleled rates of economic growth. Even though it has democratized some of its local decision-making, the Chinese Communist Party maintains a tight grip on national politics and the human-rights picture is marred by frequent abuses.

[...] For the true up-and-coming economic superpowers, we should turn instead to countries like Brazil, India, and South Africa, which have already accomplished their democratic transitions and are unlikely to regress. None of these countries is without problems, of course. Brazil has yet to recover fully its economic dynamism and find a path to rapid growth. India’s democracy can be maddening in its resistance to economic change. And South Africa suffers from a shockingly high level of unemployment.

Yet these challenges are nothing compared to the momentous tasks of institutional transformation that await authoritarian countries. Don’t be surprised if Brazil leaves Turkey in the dust, South Africa eventually surpasses Russia, and India outdoes China.

China's #2, but where's India?

So unless you've been under a rock you probably know that China surpassed Japan as the second largest economy (though on a per capita basis, China remains one of the poorest in the world). To give some context, from the Economist:

While I can't say I'm that surprised about China given how poorly Japan did, looking at the historical share of global GDP, all the accolades given to Indian graduates, I can't help but wonder, what happened to India?

John Cleese on Creativity

A talk on how to be more creative. To sum up - use boundaries of space and time, create an oasis in your life (offline). These are moments where you can think uninterrupted which are separate from your ordinary life. Interruptions are disastrous to the creative process. And sometimes, (maybe often?) starting from scratch results in a better work product than the original. (via HackerNews):

The High Cost of Free Parking

Tyler Cowen, of the popular blog Marginal Revolution, quoting a researcher on the unintended consequences of free parking (NYT):

Minimum parking requirements act like a fertility drug for cars.

Now consider the effect of free highways...

Killing African Entrepreneurship

Todd Johnson via Megan McArdle:

As a struggling businessman creating new start-ups, he could not compete with what NGO's were paying for some of the best and brightest. And even worse, he said, "by the time the NGO's are done with them, there isn't an ounce of entrepreneur left."

An issue as true back when I was in Uganda as it is today.

Decriminalize it all?

The war on drugs is an abject failure. Economics could provide the solution. From AOLNews, on how Portugal has dealt with the problem:

Ten years ago this summer, Portugal became the first country in Europe to decriminalize all illegal drugs -- marijuana, cocaine, methamphetamine and even heroin. Hefty fines and prison sentences still await drug traffickers and dealers, but users caught with less than a 10-day supply of any drug are no longer considered criminals. Instead, they're referred to a panel comprised of a drug-treatment specialist, a lawyer and a civil servant, who usually recommend treatment -- and pay for it, too. If the users decline treatment and go back to abusing drugs, that's their prerogative.

But statistics show they're not doing that. Instead, about 45 percent of the 100,000 heroin addicts Portugal's Health Ministry recorded in 2000 had by 2008 decided to at least try to quit the habit, without the threat of jail time. And the number of new HIV cases among users fell from 2,508 in the year 2000 to 220 cases in 2008, Alun Jones, a spokesman for the U.N. Office on Drugs and Crime, told AOL News. "This was a major success," he said.

Also from an earlier article in Time:

The paper, published by Cato in April, found that in the five years after personal possession was decriminalized, illegal drug use among teens in Portugal declined and rates of new HIV infections caused by sharing of dirty needles dropped, while the number of people seeking treatment for drug addiction more than doubled.

“Judging by every metric, decriminalization in Portugal has been a resounding success,” says Glenn Greenwald, an attorney, author and fluent Portuguese speaker, who conducted the research. “It has enabled the Portuguese government to manage and control the drug problem far better than virtually every other Western country does.”

Compared to the European Union and the U.S., Portugal’s drug use numbers are impressive. Following decriminalization, Portugal had the lowest rate of lifetime marijuana use in people over 15 in the E.U.: 10%. The most comparable figure in America is in people over 12: 39.8%. Proportionally, more Americans have used cocaine than Portuguese have used marijuana.

Prohibition in any form creates incentives for underground markets, increases costs and builds bureaucracies around enforcement, which in turn drives prices even higher resulting in a vicious cycle.

There are no unicorns... (aka the misplaced faith in government)

It is easier to believe in unicorns than hope for the benevolent governance of any politican. On Larry Lessig's public admonishment of the current administration (TruthontheMarket via Instapundit):

One would think a Harvard Law School professor and director of a something-something Center for Ethics would not be so naive. Criticizing the president for promising to change politics and then, once in office, playing the same old politics is like criticizing parents for telling their kids about Santa Claus.

There are no unicorns, Prof. Lessig, as much as you and I both wish there were. Our best hope for changing Washington is not to let hope triumph over experience and believe if we just elected the right person everything would change, but to make the structural changes that will deny the politicians the power they always abuse.

Only a smaller government is one that will do less damage when wielded by politicians, no matter what their stripe or promises to behave. Republicans promised fiscal restraint when they took the House, and we got profligate spending; Obama promised to drain the swamp, and yet the alligators and mosquitoes still infest it. When will we learn?

The solution is less government - not more of it.

Related: Why (some)businesses aren't hiring:

Spontaneous Order, Traffic Lights, and the Peltzman effect

There's a subset of bureaucrats and regulators who want us to believe that the only thing separating us from chaos/imminent disaster is another rule or law. So what happens when you turn off the traffic lights? From John Stossel at creators.com:

In some cases, traffic moves better and more safely when government removes traffic lights, stop signs, even curbs.

It's Friedrich Hayek's "spontaneous" order in action: Instead of sitting at a mechanized light waiting to be told when to go, drivers meet in an intersection and negotiate their way through by making eye contact and gesturing. The secret is that drivers must pay attention to their surroundings — to pedestrians and other cars — rather than just to signs and signals. It demonstrates the "Peltzman Effect" (named after retired University of Chicago economist Sam Peltzman): People tend to behave more recklessly when their sense of safety is increased. By removing signs, lights and barriers, drivers feel less safe, so they drive more carefully. They pay more attention.

In Drachten, Holland, lights and signs were removed from an intersection handling about 30,000 cars a day. Average waiting times dropped from 50 seconds to less than 30 seconds. Accidents dropped from an average of eight per year to just one.

On Kensington High Street in London, after pedestrian railing and other traffic markers were removed, accidents dropped by 44 percent.

"What these signs are doing is treating the driver as if they were an idiot," says traffic architect Ben Hamilton-Baillie. "If you do so, drivers exhibit no intelligence."

Sure enough, here's the experience of a small town in Britain (via Marginal Revolution):



Marginal Revolution goes on to quote a profile about "an unassuming Dutch traffic engineer showed that streets without signs can be safer than roads cluttered with arrows, painted lines, and lights" in the Wilson Quarterly. The article describes a busy intersection where traffic lights are removed:

At the town center, in a crowded four-way intersection called the Laweiplein, Monderman removed not only the traffic lights but virtually every other traffic control. Instead of a space cluttered with poles, lights, “traffic islands,” and restrictive arrows, Monderman installed a radical kind of roundabout (a “squareabout,” in his words, because it really seemed more a town square than a traditional roundabout), marked only by a raised circle of grass in the middle, several fountains, and some very discreet indicators of the direction of traffic, which were required by law.

As I watched the intricate social ballet that occurred as cars and bikes slowed to enter the circle (pedestrians were meant to cross at crosswalks placed a bit before the intersection), Monderman performed a favorite trick. He walked, backward and with eyes closed, into the Laweiplein. The traffic made its way around him. No one honked, he wasn’t struck. Instead of a binary, mechanistic process—stop, go—the movement of traffic and pedestrians in the circle felt human and organic.

A year after the change, the results of this “extreme makeover” were striking: Not only had congestion decreased in the intersection—buses spent less time waiting to get through, for example—but there were half as many accidents, even though total car traffic was up by a third.

Of course, regulations aren't the source of the Peltzman effect where technology designed to make us safer does the opposite - also from Marginal Revolution:

The NHTSA had volunteers drive a test track in cars with automatic lane departure correction, and then interviewed the drivers for their impressions. Although the report does not describe the undoubted look of horror on the examiner’s face while interviewing one female, 20-something subject, it does relay the gist of her comments.

After she praised the ability of the car to self-correct when she drifted from her lane, she noted that she would love to have this feature in her own car. Then, after a night of drinking in the city, she would not have to sleep at a friend’s house before returning to her rural home.

Update (Aug 17): The Antiplanner (Freakonomics)

Update (Aug 23): Solutions for traffic jams (eskimo.com)

Update (Sept 23): To tame traffic, go with the flow: Lights should respond to cars, a study concludes, not the other way around (sciencenews.org)

Union Jobs vs Children's Lives

"When I see that people are using children with seizures as a lever to get more nurses in schools, I think it's wrong." Well, duh. Figures that it's also happening in California. And yet there is probably no clearer example that teachers unions are a greedy and immoral special interest group than this -

More on teachers and their lobbying from Cato. Then there's the supposed $26 billion jobs bill, "which includes $10 billion in grants to districts to keep up to 130,000 education jobs on life support. Where are they coming up with the money? At some point in the future, they're going to pay for part of it by cutting food stamps" (Reason.com). Yep, they're serving teachers unions at the expense for food for poor people. Classy.

Regulators gone amok: "Portland lemonade stand runs into health inspectors, needs $120 license to operate"

While they ultimately reversed their stance after political higher ups intervened, it should serve as reminder that when governments and bureaucrats are given power, they'll use it (OregonLive):

It's hardly unusual to hear small-business owners gripe about licensing requirements or complain that heavy-handed regulations are driving them into the red.

So when Multnomah County shut down an enterprise last week for operating without a license, you might just sigh and say, there they go again.

Except this entrepreneur was a 7-year-old named Julie Murphy. Her business was a lemonade stand at the Last Thursday monthly art fair in Northeast Portland. The government regulation she violated? Failing to get a $120 temporary restaurant license.

There are days when it does feel this way...

Elon Musk (founder of Tesla and SpaceX, at TechCrunch):

Being an entrepreneur is like eating glass and staring into the abyss of death. …So if that sounds appealing…

"Only Prettier": Giggle of the Day

While I'm guessing that there aren't many people who follow this blog who actually like country (sister notwithstanding), I got forwarded this link from a friend of a song that's a cute twist on "can't we all just get along?".

Co-founder of Reddit.com: "Keep calm & carry on"

Success rarely comes easy. Reddit.com's co-founder Alexis Ohanian chronicles some of the personal battles on the path to the sale of his startup. It's worth a read of the whole thing:

My life -- and thus Steve's -- was dramatically changed during those startup months for reasons beyond my control. I've lived a ridiculously fortunate life, so I knew it was only a matter of time before something was going to knock things a bit off course; I just didn't think it'd happen like this.

Thought of the Day/Month

Erm... Sorry, I've been neglecting the blog. It was quite a busy July. The project which is the bane of my existence is nearly completion of its draft. From Fred Wilson, of Union Square Ventures on "N+1 Theory":

I have found that most of the time, there is always more where you think there is nothing left. You may have to look a little harder/deeper but it is there.

That does not mean that there is an infinite supply of everything. Math would say that when you extrapolate N+1 all the way out you get to infinity. But we are talking about life, not math, here.

I find the N+1 theory very inspiring. It is pure optimism sprinkled with tenacity and we need that in our work and our lives.

What separates most competitors isn't a radically different business model but a few incremental differences. Those differences however, can result in several magnitudes of profit. N+1 is a reminder to push a little harder. As one reader, JacobAldridge, pointed out at Hacker News, "'Pure optimism sprinkled with tenacity' - that's a pretty good definition of a start-up, when you think about it." Indeed.