Free markets

Nov 202007
 

What if freedom and prosperity don’t go together? Here is a paragraph from The China Mode, by Rowan Callick, at The American

In the May/June edition of the american, Kevin Hassett, director of economic policy studies at the American Enterprise Institute, explained that evidence is emerging that developing “countries that are economically and politically free are underperforming the countries that are economically but not politically free.” China, of course, is in the lead of the economically free but politically unfree nations. Hassett wrote, “The unfree governments now understand that they have to provide a good economy to keep citizens happy, and they understand that free-market economies work best…. Being unfree may be an economic advantage. Dictatorships are not hamstrung by the preference of voters for, say, a pervasive welfare state. So the future may look something like the 20th century in reverse. The unfree nations will grow so quickly that they will overwhelm free nations with their economic might.”

But maybe it shouldn’t be so surprising. European-Americans conquered the Native peoples in North America, not because they had greater freedom than the Native peoples, but because they were more willing to submit to authority, to discipline themselves to keep their noses to the grindstone, and to march lock-step into near-certain death in time of war. It was greater organization and lesser individualism, not greater freedom, that enabled that conquest of North America. Yes, it’s true that among the nations of wannabe conquerers, the ones that prevailed were the ones that had greater economic and political freedom. But it wasn’t greater freedom than that of the people they conquered.

Nov 172007
 

My favorite IT pundit is Bob Lewis, who has an Advice Line blog at Infoworld. I’ve been reading him for years, since long before there were such things as blogs. (I liked Bob Metcalfe, too, as an IT pundit, back when he was punditing. But now that he’s gone, it’s just Bob Lewis.)

Before he got into IT, Bob got a PhD doing behavioral research on electric eels, which means he got off to a good start. He has amazing insights into the way businesses can and should work, especially but not only on the IT side. Anyone who believes in the conservative values of free markets and limited government will find a wealth of information to help one understand why we do not want the usual leftwing solutions of centralized planning and welfare-police statism.

Unfortunately, Bob has not allowed his business insights to inform his politics. He leans way too far to the left in politics, and often acts like a frustrated political pundit who looks for any excuse to talk politics rather than business. He draws connections between business and politics, sure enough, but is usually oblivious to the real import of what he is saying. Some people find his politics annoying. But that’s no reason not to read his columns and use them as a valuable resource for libertarian-leaning conservative politics.

Here is an example, from his latest, titled “The magic formula for IT budgeting.”

I know practitioners who claim it allows them to estimate projects with high levels of precision.

My personal opinion: The best way to estimate projects is to break them into small chunks with go/no-go gates in between. That allows you to avoid estimating how long it will take to build a system before you’ve decided what has to go into it.

That’s a great argument for not letting the government design a massive health care system for our country, which if it was to work would require knowledge that no government bureaucracy could ever hope to attain.

An alternative, which I increasingly like as I grow older and less energetic, is to assign one programmer/analyst to a business change effort. The P/A sits with the end-users, learns their job, helps them think about the next logical and easy-to-implement process improvement, and makes whatever system changes are necessary to make it possible. Then they do the next one.

It’s business improvement through the removal of small annoyances. It can be surprisingly effective, and makes resource planning easy. What it doesn’t let you do easily is predict when you’ll reach the point of diminishing returns on the improvement effort so you can redeploy your P/A to the next one.

Exactly. Whether it’s transportation planning or health care reform, nothing can beat the use of the market to let people design solutions to remove small annoyances. Of course, that doesn’t feed political egos, so government has no natural motive to nurture, protect, and foster these market forces. Instead, it tries to force private parties into government-like one-size-fits-all mandates (e.g. mandated benefits) where they will naturally fail, which will give government an excuse and political support to step in, take over, and make the situation even worse. But we shouldn’t be buffaloed when they say, “Well, what is YOUR solution?” There is no one solution — probably no solution at all. There is just the ability to improve our health care system greatly through small, market-oriented reforms. That doesn’t mean there is no place or need for government welfare — just that we do not want it for a solution.

Bob also publishes a column called “Keep The Joint Running” at issurvivor.com Highly recommended. Bob dislikes conservative politics, but that doesn’t matter. His column is one of the best conservative resources out there now that Milton Friedman is gone.

Oct 042007
 

First time I heard about the yellow pages test was in this post over at SCSU scholars. (And btw, the existence of that SCSU web site is making me prouder that I got a degree from that University, even though it had nothing to do with the departments that these guys come from. I even found myself looking for an excuse to mention SCSU the other day — as the place where I got my first computer job when I was in grad school.)

The yellow pages test reminds me of Coldwater, Michigan.

Black Hawk’s route through Coldwater, Michigan

This photo was taken on my last bike ride to Coldwater, two years ago. I really shouldn’t have let two years elapse, because it’s a favorite riding destination. There is a shop on main street where I can get a decent sandwich while keeping an eye on my bike, and there are lots of good Black Hawk era history places in and around the town. Main street (shown here) was part of Black Hawk’s route back in the 1820s before it became the Chicago Road.

One thing I haven’t understood, though, is why the city fathers decided to go into the ISP business. Why did they want to provide residential wireless service as a city utility?

You’d think they’d have wanted to put their energy into making Coldwater a good place for private ISPs to provide wireless, cable, whatever. Private ISPs would have property, employees, and revenue that could then be TAXED and provide revenue for the city! Given the way Michigan governments like taxes, you’d think this would have been all the incentive they would have needed. But no, they had to go and cut into their own tax base by providing internet as a public utility.

Maybe it’s something in the (cold)water that made them act that way. I will continue to enjoy the sandwiches, but maybe I will bring my own water next times I ride there.

Oct 032007
 

It was disorienting when I happened across this article a few weeks ago by Justin Fox in Time mag.  (I wouldn’t want Time in our house; it was something I saw while making a cup of coffee in the lunchroom at work.)

Talking about the sub-prime loan crisis, he says:

Does this mean we need more regulation? Maybe, maybe not. It does indicate, though, that the mortgage business might be due for a return to its roots.

The disorienting part was that he seems to care what kind of regulation might be needed.  Usually you have lefties crying for more regulation, and righties wanting less.   It’s frustrating, because what usually matters is the kind of regulation.

Do people want regulation that creates new bureaucracy with the power to play favorites?   Do they want regulation that uses market forces to the maximum extent possible?  We hardly ever get into those discussions.

That’s not exactly what Fox wants to talk about, but he does seem to keep his head about him.   And I think he makes a plausible point about the need to “shift mortgage risk back into the banking industry.” Maybe I’m prejudiced, because I think that too often the God of Almighty Liquidity creates situations where people-to-people interactions vanish, which is what happens when banks freely sell off loans to other companies that have had no relationship with the borrower.

Sep 142007
 

Remember those people who kept criticizing Bush for his unilateralism, for going it alone when the rest of the world was going Kyoto, for going to war alone without making sure everyone loved us, first?   You can google “Bush unilateralism” to get your fill of examples.

Now we have a case where Bush didn’t go it alone, where he tried to cooperate with other countries:  (WSJ, Sep 13, “Mexican Roadblock”)  Clinton was the unilateralist on this one.

Under the 1993 Nafta accord, Mexican trucking companies should have been delivering their loads to U.S. destinations for more than a decade by now. But since the Clinton Administration banned Mexican trucks in 1995, they have had to offload their cargo at the border and transfer it to Teamster trucks, raising costs for U.S. consumers.

In 2001 a Nafta arbitration panel ruled the U.S. ban on Mexican trucks violated the treaty and granted Mexico the right to retaliate. The Bush Administration crafted the pilot program to open the market and at the same time address safety concerns. The program would allow limited cross-border trucking in both directions, with inspections required. The Teamsters sued, but even the Ninth Circuit Court of Appeals denied their request for a stay. So the Teamsters turned to Congress, which is now obliging under the whip of North Dakota protectionist Byron Dorgan.

Now it’s the Bush-haters in Congress who want the U.S. to go unilateralist.

And next time the question is asked, “Why do they hate us?” we know where to look for an answer.

Jun 092007
 

I’m a huge fan of private property and free markets, but this is nuts. Unfortunately it’s a kind of nuttiness we see all too often from certain Republican types. It handicaps them. If they don’t understand the limits on what private property and free markets can do for us, they will not be adequately prepared to defend these institutions from the onslaught by the left.

It’s from an article by Steven Landsburg in the June 9 WSJ, titled “A Brief History of Economic Time.

It’s one of those articles that talks about how wonderful life is, given all the modern conveniences we have. It talks about our well-being in purely material terms. I suppose you could say it’s outdoing Karl Marx and doing it on a very superficial level.

Here’s the lead paragraph:

Modern humans first emerged about 100,000 years ago. For the next 99,800 years or so, nothing happened. Well, not quite nothing. There were wars, political intrigue, the invention of agriculture — but none of that stuff had much effect on the quality of people’s lives. Almost everyone lived on the modern equivalent of $400 to $600 a year, just above the subsistence level. True, there were always tiny aristocracies who lived far better, but numerically they were quite insignificant.

Yup, it treats the quality of human life in purely material terms, and says not a word about social relationships. One nice thing about this particular article, though, is that it reductio ab absurdums itself, saving commentators like me the trouble of explaining the nonsense this kind of thinking will lead to if not balanced by other considerations:

The moral is that increases in measured income — even the phenomenal increases of the past two centuries — grossly understate the real improvements in our economic condition. The average middle-class American might have a smaller measured income than the European monarchs of the Middle Ages, but I suspect that Tudor King Henry VIII would have traded half his kingdom for modern plumbing, a lifetime supply of antibiotics and access to the Internet.

Anyone who has read a history book or watched the turf wars at the office knows how important power is to people. Henry Kissinger said power is the ultimate aphrodisiac. George Washington understood that people think of their well-being in comparison to what their neighbors have. Does anyone really think Henry VIII would give up one bit of power? Look at how hard the left resists tax cuts, even though high taxes destroy our economic engine. What matters to the left is their slice of the economic pie in relation to the whole, not how large the whole is. It’s the same with everyone.

Henry VIII might give up a wife in exchange for a new one, or for one who would secure his continued power on the throne through his heirs. Think of all the trouble his power-grabbing caused for himself. He wouldn’t have traded a bit of it for modern conveniences, or even for the conveniences he could have had if he had not been so ambitious.

Feb 132007
 

A WSJ article about the utility industry, one of a set of article in the Monday February 12 issue:
The Bottom Line

In the power business, the more electricity you sell, the more money you make.

Now state officials and electric utilities — backed by environmental groups — have begun to change that equation. Faced with growing demand for electricity and the environmental consequences of generating it, states and utilities are considering new regulatory regimes that remove the incentive for selling more power — and give utilities a financial stake in saving energy.

The ultimate goal is to eliminate the need for new power plants.

And just how would this be done? Count on the governing class to do anything, just anything, to avoid the use of market pricing mechanisms.

States are considering two major regulatory remedies. The first is “decoupling,” in which utilities receive a predetermined profit each year — thereby separating their earnings from the volume of electricity they deliver.

Here’s how it works. A utility and state regulators hammer out how much profit the company will be allowed to earn. At the end of the year, if the utility’s actual profit is lower than that amount, the company charges customers to make up the difference. If the actual profit is higher, customers get a rebate.

I like that phrase, “utility and state regulators hammer out.” In other words, they get together for some corrupt dealing and influence peddling. Well, that sort of corruption is the fuel that powers the modern state.

But under current rules in most states, utilities can’t earn a return on their efficiency spending — they can only recover the cost. A proposal being considered in California, Texas and several other states would change that.

Under such a system, “the people running the energy-efficiency departments in these utilities will become on a par with those running the transmission and distribution departments,” predicts Mr. Gallagher. “There will be more of a corporate focus on energy efficiency.”

In other words, there will be more emphasis on utilities figuring out how to make regulators happy than on energy production, or profit, or even energy efficiency.

Nov 212006
 

O.J. Simpson says he was legally muzzled. But the really good news about the cancellation of his book and TV special is that this isn’t true.

It wasn’t the legal system or any other government action that did it. It wasn’t congressional hearings in which smarmy politicians threaten to pass laws. (Who could have stomached another such spectacle as when they inserted themselves into the baseball steroid scandal?)

It was social pressure — the threat of boycotts, Bill O’Reilly’s loud objections, the denunciations from newspaper editors, and the affiliates who refused to carry it. (In short it’s the behavior we should have gotten from the media back when the Clintons were stonewalling the legal system.)

I’ve long held that boycotts and the threat of boycotts are an underutilized tool for social change. In the past, whenever I’ve brought up the possibility, It’s usually libertarians, of all people, who’ve objected the loudest.

But governments can’t and shouldn’t do everything. We as a society need to govern ourselves, and this is incident shows how it can be done.

It’s interesting that it happened on the same day as this article about “controlled chaos” European Cities Do Away with Traffic Signs

“The many rules strip us of the most important thing: the ability to be considerate. We’re losing our capacity for socially responsible behavior,” says Dutch traffic guru Hans Monderman, one of the project’s co-founders. “The greater the number of prescriptions, the more people’s sense of personal responsibility dwindles.”

What we had in the O.J. cancellation was an increase in our capacity for socially responsible behavior.

Nov 172006
 

Network World reports on huge increases in the amount of spam over the past several weeks: What’s with all this spam?

Researchers and IT managers are confirming security vendors’ claims that spam levels have spiked in the past month – some say by as much as 80 % — and show no signs of decreasing.

“There are enormous amounts of spam; it’s shot up like crazy since the beginning of October,” says John Levine…

This spam problem is an example of why socialism doesn’t work. Continue reading »