Jacques Ellul, was a French philosopher and Christian anarchist (which makes him interesting unto itself). Not an anarchist in the violent anti-government sense, but rather apathetic towards any government.
He published a book in 1965 called "Propaganda". I haven't read this cover to cover, but I thought there were a few excerpts worth mentioning already. As news reports start to come in about fears about the resurgence of fascism in Germany and Austria, and the surge towards Statism and socialism in various countries, I thought it was worth knowing more about propaganda.
First, in the foreword, written by Konrad Kellen
"A related point, central in Ellul's thesis, is that modern propaganda cannot work without 'education'; he thus reverses the widespread notion that education is the best prophylactic against propaganda. On the contrary, he says, education, or what usually goes by that word in the modern world, is the absolute prerequisite for propaganda."
You can read the first few pages for free here. He goes on to suggest that the educated, and especially the intellectual, are most susceptible to propaganda. Once you realize that people with little education tend to just follow what their parents and community tell them, you realize that only the educated are truly open to new ideas, many of which are poorly supported.
On who falls for propaganda and why, Ellul writes (p.147-8):
"Above all he is a victim of emptiness-he is a man devoid of meaning. He is very busy, but he is emotionally empty, open to all entreaties and in search of only one thing-something to fill his inner void. To fill this void he goes tot he movies-only a very temporary remedy. He seeks some deeper and more fulfilling attraction. He is available, and ready to listen to propaganda. He is the lonely man...
He feels the most violent need to be re-integrated into a community, to have a setting, to experience ideological and affective communication. That loneliness inside the crowd is perhaps the most terrible ordeal of modern man; that loneliness in which he can share nothing, talk to nobody, and expect nothing from anybody, leads to severe personality disturbances. For it, propaganda, encompassing Human Relations, is an incomparable remedy. It corresponds to the need to share, to be a member of a community to lose oneself in a group, to embrace a collective ideology that will end loneliness. Propaganda is the true remedy for loneliness."
Is it any wonder why so many seem emotionally attached to Obama? They are psychologically driven by the story. To reject him for many is to reject meaning in their lives. How pathetic.
Tuesday, March 17, 2009
Sunday, March 15, 2009
Let's Privatize our Universities
A few years ago the Texas legislature decided to allow state Universities to set their own tuition rates. The idea was to introduce market based tuition rates to induce students to make better choices on the college they attend and the major they pursue. Previously, tuition applied to all majors equally and tuition increases had to be approved by the legislature.
However, tuition rates have been rising at a rate unpopular with many citizens. Some groups are now demanding a tuition rate cut.
This puts state universities in a tough position. The state has not increased funding commensurate with costs, and without the ability to raise revenue through tuition costs, they feel that they are not going to maintain the quality education desired. Texas A&M University, in its Vision 2020 plan, explicitly states their desire to raise revenue to enhance the stature of the university along with lip service towards better use of existing resources.
The question most legislators are looking at is whether we should allow state universities to gather more revenue, or should we try to offer a more affordable college education. The question I want to ask is – Should the state be in the university business to begin with?
The fundamental problem that prevents universities from providing a high quality education at a low cost, is the lack of the profit incentive. From top to bottom, state university officials lack the incentives to pursue an efficient allocation of resources. Their incentives are more likely aligned with expanding their budget and increasing the prestige of their individual departments.
There is also an inherent unfairness in government funding of universities in Texas. Generally speaking, Texas heavily subsidizes students who are going to be wealthy and come from homes with above average incomes. Taxes from low-income individuals are going to subsidize the education and income potential of other people’s children. The best and brightest, which are already likely to make substantial incomes, are more likely to graduate, and pursue degrees with the most associated costs as well, such as engineering.
Since our society is probably not ready to do away with all school subsidies, I'm willing to propose that Texas switch to a system of scholarships for high performing and disadvantaged students. Each university would be required through competition to attract the students and their scholarship money to their respective schools.
Going further, to assure that the universities will be forced to economize their resources, I suggest that we begin to privatize public universities across the state. Furthermore, I nominate my own alma mater, Texas A&M, to be the first. It's time to get the state out of education.
However, tuition rates have been rising at a rate unpopular with many citizens. Some groups are now demanding a tuition rate cut.
This puts state universities in a tough position. The state has not increased funding commensurate with costs, and without the ability to raise revenue through tuition costs, they feel that they are not going to maintain the quality education desired. Texas A&M University, in its Vision 2020 plan, explicitly states their desire to raise revenue to enhance the stature of the university along with lip service towards better use of existing resources.
The question most legislators are looking at is whether we should allow state universities to gather more revenue, or should we try to offer a more affordable college education. The question I want to ask is – Should the state be in the university business to begin with?
The fundamental problem that prevents universities from providing a high quality education at a low cost, is the lack of the profit incentive. From top to bottom, state university officials lack the incentives to pursue an efficient allocation of resources. Their incentives are more likely aligned with expanding their budget and increasing the prestige of their individual departments.
There is also an inherent unfairness in government funding of universities in Texas. Generally speaking, Texas heavily subsidizes students who are going to be wealthy and come from homes with above average incomes. Taxes from low-income individuals are going to subsidize the education and income potential of other people’s children. The best and brightest, which are already likely to make substantial incomes, are more likely to graduate, and pursue degrees with the most associated costs as well, such as engineering.
Since our society is probably not ready to do away with all school subsidies, I'm willing to propose that Texas switch to a system of scholarships for high performing and disadvantaged students. Each university would be required through competition to attract the students and their scholarship money to their respective schools.
Going further, to assure that the universities will be forced to economize their resources, I suggest that we begin to privatize public universities across the state. Furthermore, I nominate my own alma mater, Texas A&M, to be the first. It's time to get the state out of education.
Friday, March 13, 2009
China Is Getting Wary of Lending to the U.S.
This Bloomberg article is a bit of disconcerting news.
China’s Premier Wen ‘Worried’ on Safety of Treasuries
“We have lent a huge amount of money to the United States,” Wen said at a press briefing in Beijing today after the annual meeting of the legislature. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”
U.S. President Barack Obama is relying on China to sustain buying of Treasuries as his administration sells record amounts of debt to fund a $787 billion economic-stimulus package. Chinese investors have lost money on the securities so far this year, after increasing their holdings 46 percent to $696 billion in 2008, according to Treasury Department data.
“China’s purchases of American debt have been one of the few bolts keeping the wheels on the global economy,” said Phil Deans, a professor of international affairs at Temple University in Tokyo. “If China stops buying where does Obama’s borrowing to fund his stimulus come from?”
…
“China is worried that the U.S. may solve its problems by printing money, which will stoke inflation,” said Zhao Qingming, a Beijing-based analyst at China Construction Bank Corp., the country’s second-biggest lender. “If the U.S. can make sure this won’t happen, then China will continue to invest.”
China’s Premier Wen ‘Worried’ on Safety of Treasuries
“We have lent a huge amount of money to the United States,” Wen said at a press briefing in Beijing today after the annual meeting of the legislature. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”
U.S. President Barack Obama is relying on China to sustain buying of Treasuries as his administration sells record amounts of debt to fund a $787 billion economic-stimulus package. Chinese investors have lost money on the securities so far this year, after increasing their holdings 46 percent to $696 billion in 2008, according to Treasury Department data.
“China’s purchases of American debt have been one of the few bolts keeping the wheels on the global economy,” said Phil Deans, a professor of international affairs at Temple University in Tokyo. “If China stops buying where does Obama’s borrowing to fund his stimulus come from?”
…
“China is worried that the U.S. may solve its problems by printing money, which will stoke inflation,” said Zhao Qingming, a Beijing-based analyst at China Construction Bank Corp., the country’s second-biggest lender. “If the U.S. can make sure this won’t happen, then China will continue to invest.”
Tuesday, March 10, 2009
Comparing Atrocities
Off the top of your head, which atrocity was worse:
Spanish Inquisition - perpetrated by a mainly Catholic country
Rape of Nanking - perpetrated by a mainly Taoist country
I suspect that you've heard much more about the Spanish Inquisition in school, but the "Rape" makes you think that maybe it was pretty bad too.
The Spanish Inquisition lasted from 1478 to 1834. Total Deaths: 3000-5000. Maximum average per year = 14.
Rape of Nanking lasted 2 months from late 1937 to early 1938. Total Deaths: 200,000 to 300,000. Other atrocities include the fact that "80,000 women were raped, including infants and the elderly". The savagery surpasses the worst torture in modern horror films where "The women were often then killed immediately after the rape, often through mutilation, including breasts being cut off; or stabbing by bamboo (usually very long sticks), bayonet, butcher's knife and other objects into the vagina."
Glad to see that our history education in America prioritizes atrocities by scale, and not by vendetta against a particular religion.
Spanish Inquisition - perpetrated by a mainly Catholic country
Rape of Nanking - perpetrated by a mainly Taoist country
I suspect that you've heard much more about the Spanish Inquisition in school, but the "Rape" makes you think that maybe it was pretty bad too.
The Spanish Inquisition lasted from 1478 to 1834. Total Deaths: 3000-5000. Maximum average per year = 14.
Rape of Nanking lasted 2 months from late 1937 to early 1938. Total Deaths: 200,000 to 300,000. Other atrocities include the fact that "80,000 women were raped, including infants and the elderly". The savagery surpasses the worst torture in modern horror films where "The women were often then killed immediately after the rape, often through mutilation, including breasts being cut off; or stabbing by bamboo (usually very long sticks), bayonet, butcher's knife and other objects into the vagina."
Glad to see that our history education in America prioritizes atrocities by scale, and not by vendetta against a particular religion.
More on Mark-to-Market
First, a couple links.
My friend John Tamny has an article today at RealClearMarkets in defense of mark-to-market. He seems to be saying that it isn't mark-to-market that failed, but government intervention in the mortgage market that has made those assets impossible to price.
Bob Murphy linked to this blogpost that seems to agree with my position, but gets deeper into the details. Bob calls it the "definitive" post on the issue. He exaggerates, but it's still worth reading.
Second, is the fact that suspending or rescending MTM has virtually no chance of happening. Barack Obama and the Democrats could not support a bill that went against their narrative of "Government Good/Wall Street Bad". Suspending MTM would be an admission that government oversight had failed and that regulation itself was a major culprit in the banking crisis.
My friend John Tamny has an article today at RealClearMarkets in defense of mark-to-market. He seems to be saying that it isn't mark-to-market that failed, but government intervention in the mortgage market that has made those assets impossible to price.
Bob Murphy linked to this blogpost that seems to agree with my position, but gets deeper into the details. Bob calls it the "definitive" post on the issue. He exaggerates, but it's still worth reading.
Second, is the fact that suspending or rescending MTM has virtually no chance of happening. Barack Obama and the Democrats could not support a bill that went against their narrative of "Government Good/Wall Street Bad". Suspending MTM would be an admission that government oversight had failed and that regulation itself was a major culprit in the banking crisis.
Sunday, March 8, 2009
Yes to Suspending Mark-to-Market
Steve Forbes has been beating a drum over the last month, repeating his call to suspend mark-to-market accounting rules. I think that I have finally been fully convinced that this is a good idea. Not permanent suspension, but perhaps a two year holiday from these requirements.
As an employee of one of these bailout blackholes, I have seen the damage to my firm from these kinds of rules. If it were not for them, I suspect that we would never have needed a single dime of government money. Companies with positive cashflow should not be going insolvent because the market value of assets that have not defaulted and they do not intend to sell have lost value.
Why is mark-to-market good?
It forces companies to report what the actual value of their securities are, and not just what they paid for them (like under book value accounting). As an analogy: Say Bob is applying for a new $2 million construction loan to build an apartment complex. He is using his existing complex, which he bought 3 years ago for $2 million as collateral. The problem is, that his old complex has been condemned by the city for health code violations. His collateral would only sell for $1 million on the open market as of today.
Corporations sometimes do the same thing. They buy assets at price X, those assets plummet to price Y, yet they report the value and solvency of the company based on a depreciation model or book value based on price X.
Why is mark-to-market bad?
When fears of corporate defaults are more random, it is fine. If it is feared that Company A will default, then companies B – Z write down any assets they held in company A. Fortunately, those losses are spread across a large number of companies. There is damage, but it isn’t that bad. Mind you, this can occur under the fear of defaults, and not actual default.
When fears of corporate defaults are widespread, it can cause a cascading effect of failures. If it is feared that companies A-I default, then J-Z have to write down those assets. Because of the large write downs by companies J-Z, fears of wider defaults grow. A vicious cycle develops, what we’ve dubbed “contagion”. A critical mass of write downs can lead to total meltdown like we’ve seen.
Using another analogy:
Imagine that you bought a house for $500,000. You had $100,000 down, so you borrowed $400,000. Imagine too that everyone in your city has done the same thing. Due to current market conditions the value of your homes fall by $200,000. Everyone in town now owes around $400,000, but has homes that are only worth $300,000.
As it is right now, the vast majority will just ride it out. They will keep paying their mortgages and prices will eventually rise over the coming years and you will all be back in the black some day. My parents did this during the Oil Bust here in Houston during the 80s.
Now, let’s assume that all home loans required mark-to-market accounting. That is, if your home lost value, you were required to post more collateral to cover the loans. Everyone in town now had to come up with $100,000 of assets to add as collateral. Anyone who failed to do so within 3 months would have their homes repossessed.
What do you think would happen to this town? As repossessions soared, prices would fall further, requiring even more assets to be posted. The town would be destroyed. Virtually no one would be able to keep their home.
In short, I think Mark-to-Market is good 95% of the time, but it creates a systemic risk during a financial slowdown. I agree with Steve Forbes, and I think there should be a 2-year suspension for most firms.
As an employee of one of these bailout blackholes, I have seen the damage to my firm from these kinds of rules. If it were not for them, I suspect that we would never have needed a single dime of government money. Companies with positive cashflow should not be going insolvent because the market value of assets that have not defaulted and they do not intend to sell have lost value.
Why is mark-to-market good?
It forces companies to report what the actual value of their securities are, and not just what they paid for them (like under book value accounting). As an analogy: Say Bob is applying for a new $2 million construction loan to build an apartment complex. He is using his existing complex, which he bought 3 years ago for $2 million as collateral. The problem is, that his old complex has been condemned by the city for health code violations. His collateral would only sell for $1 million on the open market as of today.
Corporations sometimes do the same thing. They buy assets at price X, those assets plummet to price Y, yet they report the value and solvency of the company based on a depreciation model or book value based on price X.
Why is mark-to-market bad?
When fears of corporate defaults are more random, it is fine. If it is feared that Company A will default, then companies B – Z write down any assets they held in company A. Fortunately, those losses are spread across a large number of companies. There is damage, but it isn’t that bad. Mind you, this can occur under the fear of defaults, and not actual default.
When fears of corporate defaults are widespread, it can cause a cascading effect of failures. If it is feared that companies A-I default, then J-Z have to write down those assets. Because of the large write downs by companies J-Z, fears of wider defaults grow. A vicious cycle develops, what we’ve dubbed “contagion”. A critical mass of write downs can lead to total meltdown like we’ve seen.
Using another analogy:
Imagine that you bought a house for $500,000. You had $100,000 down, so you borrowed $400,000. Imagine too that everyone in your city has done the same thing. Due to current market conditions the value of your homes fall by $200,000. Everyone in town now owes around $400,000, but has homes that are only worth $300,000.
As it is right now, the vast majority will just ride it out. They will keep paying their mortgages and prices will eventually rise over the coming years and you will all be back in the black some day. My parents did this during the Oil Bust here in Houston during the 80s.
Now, let’s assume that all home loans required mark-to-market accounting. That is, if your home lost value, you were required to post more collateral to cover the loans. Everyone in town now had to come up with $100,000 of assets to add as collateral. Anyone who failed to do so within 3 months would have their homes repossessed.
What do you think would happen to this town? As repossessions soared, prices would fall further, requiring even more assets to be posted. The town would be destroyed. Virtually no one would be able to keep their home.
In short, I think Mark-to-Market is good 95% of the time, but it creates a systemic risk during a financial slowdown. I agree with Steve Forbes, and I think there should be a 2-year suspension for most firms.
Friday, March 6, 2009
U.S. Govt Crowding Out International Borrowing
A while back I brought up the idea that the U.S. government was borrowing so much money that some other governments might begin to have trouble borrowing for their own purposes. The world has a finite amount of cheap capital, and with the amount of money that our government and several others are trying to borrowing to prop up financial firms and wager on Keynesian stimulus that the supply of those funds might dry up.
After a conversation with Robert Wenzel of the blog EconomicPolicyJournal, I feel more confident that this may occur. I have also predicted inflation, which I also expect to see overseas first.
Then, I ran across this interesting chart (HT: Objectif Liberte)
After a conversation with Robert Wenzel of the blog EconomicPolicyJournal, I feel more confident that this may occur. I have also predicted inflation, which I also expect to see overseas first.
Then, I ran across this interesting chart (HT: Objectif Liberte)
Original image source here, and data here.
What we see here is that the required rate of interest for these EU countries compared to Germany has been skyrocketing. In late 2007, there is little difference between the worst countries and Germany (with the lowest cost of capital). What this implies is that either these countries are all becoming worse credit risks compared to Germany or that the pool of resources available to them is dwindling.
Thursday, March 5, 2009
A Pretext for Oppression
I've tried to express to some friends my concern of how bad Barack Obama's administration could be. I have been shocked over these last months to see the personality cult that has grown around him. I have been saddened over the massive movements he has made towards European style socialism. I have been distressed by comments he, Rahm Emmanuel, and other Democrats have made that reveal their lust for power as they drive my beloved country towards another failed experiment with statism. The question of "Where will this end?" fuels the saddest parts of my imagination.
I fight my darkest fears by trying to convince myself that this will all blow over in a few years. They will overreach and economic liberty will rise like a Phoenix from the ashes of our future years of economic malaise. I quell my worst fears because I can not see any reason that we are moving towards anything, but slightly bigger government and higher taxes.
Then, I see comments like this from Robert Reich, former U.S. Secretary of Labor under Bill Clinton:
I fight my darkest fears by trying to convince myself that this will all blow over in a few years. They will overreach and economic liberty will rise like a Phoenix from the ashes of our future years of economic malaise. I quell my worst fears because I can not see any reason that we are moving towards anything, but slightly bigger government and higher taxes.
Then, I see comments like this from Robert Reich, former U.S. Secretary of Labor under Bill Clinton:
Make no mistake: Angry right-wing populism lurks just below the surface of the terrible American economy, ready to be launched not only at Obama but also at liberals, intellectuals, gays, blacks, Jews, the mainstream media, coastal elites, crypto socialists, and any other potential target of paranoid opportunity.If someone this powerful and this influential is building the case that the opposition is filled with Nazis, where does this end?
Tuesday, March 3, 2009
Even Krugman is Criticizing the White House
Paul Krugman may be the person most responsible for the stimulus fiasco by using his soap box at the New York Times. He has wooed his sychophants in the broader media and the Democratic party and convinced them to hurl the country towards a new soft socialism. But now, even he is beginning to question the choices and competancy of Tim Geithner as well as the Fed.
First here,
First here,
And then some righteous anger about AIG's 4th bailout here:Every plan we’ve heard from Treasury amounts to the same thing — an attempt to socialize the losses while privatizing the gains. We’re going to buy up all the bad assets at premium prices; no, we’re going to offer the banks guarantees against losses; no, we’re going to let private investors buy the stuff, but offer them de facto guarantees against losses in the form of non-recourse loans.
...
And the insistence on offering the same plan over and over again, with only cosmetic changes, is itself deeply disturbing. Does Treasury not realize that all these proposals amount to the same thing? Or does it realize that, but hope that the rest of us won’t notice? That is, are they stupid, or do they think we’re stupid?
AIG is in trouble because it wrote many credit default swaps, in effect guaranteeing others against losses it lacked the resources to cover. We, the taxpayers, are now covering those losses, for fear that not doing so would cause a financial catastrophe. But this means that US taxpayers have now assumed the downside risks for all of AIG’s counterparties.My advice to Obama: Fire Geithner, the markets would soar!
In effect, then, we’ve already nationalized a large part of the financial industry’s potential losses.
So at the very least, we have a right to know who the counterparties are: who are we subsidizing, here? And beyond that, shouldn’t there be some quid pro quo? Shouldn’t the US government get something in return for taking on so much of the risk?
Monday, March 2, 2009
Will the Recession Cause a Surge in Crime?
I gathered the historical murder rate from here, which may not be perfectly reliable, but it corroborates with FBI data here, but the FBI data doesn't go back quite as far as I would have liked.
Just eye-balling the data, it doesn't seem to correlate really strongly. The recession in the early 90's seems to match, but there doesn't seem to be a strong lagging correlation between a high unemployment rate followed by a rising murder rate.
Also, the R-squared on concurrent correlation is 28%. Using a one-year lag (how well does unemployment this year predict the murder rate next year), the correlation fell to 16%. It seems that a higher murder rate in the next year is only very weakly predicted by the data.
Notes
1. The unemployment rate is in percentages and was gather from http://www.bls.gov/. An average of the calender year unemployment rate was used.
2. The murder rate is murders/100,000 individuals.
Thursday, February 26, 2009
Toddler Economics
For years the Parent/Child relationship has been used as a metaphor for the role of government both pro and con. There is a an implicit assumption that the family is a microcosm of socialism. Even the very free market F.A. Hayek believed that we act altruistically or socialistically at the family level. This inspired me to think about my children and how I maintain order at home. I am beginning to see the virtue of running my household more like a free market.
I joined Economist Bryan Caplan’s virtual book club a few weeks ago as he analyzes Murray Rothbard’s “For a New Liberty”. I have also been influenced by my friend Brian Phillips who is an Objectivist a la Ayn Rand.
Both Rothbard and Rand believe that the path to a moral society is to establish clear property rights. I’m not certain about it being moral, but if it helps me achieve my ends, then I’ll use it.
Here are my applications to toddler economics, of which I have two:
The living areas of the house are clearly a case of “Tragedy of the Commons”. That is, no one really “owns” the space so we all abuse the space, especially my boys. Therefore, the common areas must become the property of Mom and Dad. We allow the use of these areas by our boys if they follow our rules.
To encourage them not to abuse the “common areas” we have established a rule of use for the living areas and different rules for their rooms (being their property). Possession and proximity are the rules of temporary ownership for property brought into the living areas. That is, if child A leaves a toy on the couch and is now playing in the kitchen, said toy can become the temporary property of child O on possession. Permanent ownership is still conferred on the child of original ownership. In their rooms, all toys (property) are under their complete and permanent ownership. That is, if child A leaves a toy on his own bed, child O cannot take even temporary possession without explicit permission or compensation from child A. Thus, an incentive is used to maintain toys outside of the living areas.
Another minor rule for individual rooms is the right to exclusion. Child O may prevent child A from entering his room. Child O has the right to exclude child A from taking temporary possession of any property owned by child O within child O’s room.
On the subject of noise. We are all owners of our own bodies, and thus also our ears. If Child A shouts/screams this is a violation of property rights. He has caused me pain without compensation or permission. Therefore, shouting is only allowed outside and within their rooms with the door closed. At night, shouting violates the rights of the other child who is trying to go to sleep. This again is a violation of property rights.
And finally, to running and throwing objects in the house. The objects within the living areas of the house are the possessions of Mom and Dad (mostly Mom). To subject our property to risk of destruction without permission or compensation is a violation of our property rights. Because there is an objective probability that our property may be broken, throwing balls and running in the house are forbidden.
Any other thoughts? It’s actually pretty cool how this is working out.
I joined Economist Bryan Caplan’s virtual book club a few weeks ago as he analyzes Murray Rothbard’s “For a New Liberty”. I have also been influenced by my friend Brian Phillips who is an Objectivist a la Ayn Rand.
Both Rothbard and Rand believe that the path to a moral society is to establish clear property rights. I’m not certain about it being moral, but if it helps me achieve my ends, then I’ll use it.
Here are my applications to toddler economics, of which I have two:
The living areas of the house are clearly a case of “Tragedy of the Commons”. That is, no one really “owns” the space so we all abuse the space, especially my boys. Therefore, the common areas must become the property of Mom and Dad. We allow the use of these areas by our boys if they follow our rules.
To encourage them not to abuse the “common areas” we have established a rule of use for the living areas and different rules for their rooms (being their property). Possession and proximity are the rules of temporary ownership for property brought into the living areas. That is, if child A leaves a toy on the couch and is now playing in the kitchen, said toy can become the temporary property of child O on possession. Permanent ownership is still conferred on the child of original ownership. In their rooms, all toys (property) are under their complete and permanent ownership. That is, if child A leaves a toy on his own bed, child O cannot take even temporary possession without explicit permission or compensation from child A. Thus, an incentive is used to maintain toys outside of the living areas.
Another minor rule for individual rooms is the right to exclusion. Child O may prevent child A from entering his room. Child O has the right to exclude child A from taking temporary possession of any property owned by child O within child O’s room.
On the subject of noise. We are all owners of our own bodies, and thus also our ears. If Child A shouts/screams this is a violation of property rights. He has caused me pain without compensation or permission. Therefore, shouting is only allowed outside and within their rooms with the door closed. At night, shouting violates the rights of the other child who is trying to go to sleep. This again is a violation of property rights.
And finally, to running and throwing objects in the house. The objects within the living areas of the house are the possessions of Mom and Dad (mostly Mom). To subject our property to risk of destruction without permission or compensation is a violation of our property rights. Because there is an objective probability that our property may be broken, throwing balls and running in the house are forbidden.
Any other thoughts? It’s actually pretty cool how this is working out.
Wednesday, February 25, 2009
Be Careful Not to Exaggerate
I am a believer in supply-side economics, but sometimes conservatives exaggerate its effects. There’s a little bit of this exaggeration in the criticisms I've read of the new Obama tax plan. Don’t get me wrong, it’s a bad idea and will only lead to less economic growth, but we are not going to plunge into a second recession from it alone.
From what I have read there are three major anti-growth tax changes that Obama wants to implement. First, is a hike in the marginal income tax rate for evil rich people. Not only do higher marginal provide a disincentive to work, but it also leads to less capital accumulation. The rate change, at least proposed, will move the highest marginal rate from 35% to 39.6%. If this were shooting up above 70% like under the Carter administration this would be a major concern. But, as is, it is only a slight negative effect.
Secondly, is the hike in the Capital Gains tax. This is the most moronic of all the tax hikes, as history has shown that cutting them down to 15% actually raised government revenue. This will have a more significant negative effect on capital flow into and out of the United States. However, changes in investment do not lead to immediate changes in the economy. This will be a long-term drag on the economy overall. However, the effects will be more immediate in the stock market.
Lastly, is forcing hedge funds to pay the corporate income tax rate instead of just the capital gains tax rate. Effectively what this says is that if you are an individual who invests one’s own money, you can pay the lower capital gains tax (15% soon to be 20%), but if you and your friends go into together you are now a corporation that needs to pay the higher corporate rate of 35%.
These changes are bad and they will lead to less economic growth, but the results will slowly build over time. If we were more sensitive to the tax competition they have in Europe the effects would be much bigger, but I don't think we are as sensitive to globalization as some would imagine.
Think of supply-side tax cuts this way: It’s like dieting. Cutting out the chips and sodas will lead to weight loss, but don’t expect to wake up the next morning looking like Brad Pitt.
Or the converse: It’s like me in college. I start off 5’11” and 130 lbs. As a carefree freshman, I laugh off suggestions about weight gain as I consume massive quantities of sodas, chips, and rolls of Pillsbury cookie dough. By the end of my sophomore year I’m pushing 175. Tax hikes always catch up to you, but only drastic changes show up quickly.
From what I have read there are three major anti-growth tax changes that Obama wants to implement. First, is a hike in the marginal income tax rate for evil rich people. Not only do higher marginal provide a disincentive to work, but it also leads to less capital accumulation. The rate change, at least proposed, will move the highest marginal rate from 35% to 39.6%. If this were shooting up above 70% like under the Carter administration this would be a major concern. But, as is, it is only a slight negative effect.
Secondly, is the hike in the Capital Gains tax. This is the most moronic of all the tax hikes, as history has shown that cutting them down to 15% actually raised government revenue. This will have a more significant negative effect on capital flow into and out of the United States. However, changes in investment do not lead to immediate changes in the economy. This will be a long-term drag on the economy overall. However, the effects will be more immediate in the stock market.
Lastly, is forcing hedge funds to pay the corporate income tax rate instead of just the capital gains tax rate. Effectively what this says is that if you are an individual who invests one’s own money, you can pay the lower capital gains tax (15% soon to be 20%), but if you and your friends go into together you are now a corporation that needs to pay the higher corporate rate of 35%.
These changes are bad and they will lead to less economic growth, but the results will slowly build over time. If we were more sensitive to the tax competition they have in Europe the effects would be much bigger, but I don't think we are as sensitive to globalization as some would imagine.
Think of supply-side tax cuts this way: It’s like dieting. Cutting out the chips and sodas will lead to weight loss, but don’t expect to wake up the next morning looking like Brad Pitt.
Or the converse: It’s like me in college. I start off 5’11” and 130 lbs. As a carefree freshman, I laugh off suggestions about weight gain as I consume massive quantities of sodas, chips, and rolls of Pillsbury cookie dough. By the end of my sophomore year I’m pushing 175. Tax hikes always catch up to you, but only drastic changes show up quickly.
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