Fast Track Authority

When I receive a political e-mail that urges an action that I strongly disagree with, this always gets my immediate attention. A few weeks ago, I received an e-mail from USAction urging that I oppose Fast Track authority proposed by Obama to help negotiate free trade agreements. In response, I unsubscribed from USAction’s e-mails, citing this as the reason:

I support Fast Tracking authority because, as an economist, I understand that trade barriers inevitably harm domestic consumers more than they help domestic producers. Furthermore, to the extent they do help domestic producers, it is only at the expense of foreign producers who have every right to compete for consumers as anybody else.

The main reason trade restrictions occur is because it helps a few people a lot and hurts many people a little. The few thus have a strong incentive to complain loudly. Furthermore, the legislative branch is ill-suited to making trade policy because many legislators answer to relatively small geographical areas, and thus are more beholden to firms and workers in industries seeking to tilt the playing field in their favor. The president, on the other hand, has more of the national interest in mind and is more likely to weight consumer interests more equally with producer interests.

I have no idea how I got on this list, but I strongly believe you are working against the best interest of the country by opposing fast track authority.

Trickle Down

I’ve been commenting pretty regularly on a Facebook group known as Hossain Academy. The moderator regularly posts economic questions, and one recent one asked if we agreed or disagreed with this statement: “Trickle down theory is promoted by the capitalist to increase their wealth.”

Here was my response:

Most capitalists and economists probably don’t view it that way, but the fact is that if you have economic power, you face incentives to expand that power through all available channels, including influencing politics directly through lobbying and campaign contributions, as well as indirectly through donating to policy think tanks and funding academic research. I would imagine most capitalists view this as just an additional cost of doing business, and since their competition engages in this, they must do so as well to stay competitive.

Economics in turn faces incentives itself from politics because the U.S. government (as well as think tanks and journalism) appoints a high number of economists (far more than political scientists, surprisingly enough). As such, economists face incentives to provide research in demand from one of the two political parties. Note that an economist’s career is far more enhanced by having research cited approvingly by a politician than creating a model that forecasts more accurately. This mostly affects macroeconomics.

This probably doesn’t apply as strongly in other countries, but I imagine that most have central banks and government economic advisors. Regardless, the U.S. has both the largest economy as well as most of the influential economics departments in the world.

I think the supply-side school is Exhibit A of this effect. I imagine many supply-side economists probably really do believe cutting the marginal tax cut rate will spur productivity and growth, but I also believe the theory would never have come into existence unless politics did not have the degree of influence over the field that it does. Politicians will often twist what the school says (e.g., it does not claim tax cuts will always pay for themselves), but supply-side economists rarely publicly correct them.

It is also interesting to note that N. Gregory Mankiw removed material critical of the supply-side school from his market-leading principles textbook when working for Republicans.

I plan to expand on this later, as this draws upon Barbara Bergmann and G. William DomhoffI am not as liberal as either, as I have also been influenced a lot by Milton Friedman. But Friedman himself once said, “Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”

So Friedman clearly recognized the extent to which academia could influence politics, although I’m not sure if he realized that this was a double-edged sword.

Boycotting the NFL

This is an e-mail I sent to the NFL today, canceling my NFL Game Rewind subscription (links added later):

Hello,

Please cancel my subscription to Game Rewind, ending the auto-renew (which always irked me anyways as a very sneaky and manipulative practice).

I have been increasingly concerned with how the NFL has handled numerous issues throughout the year, including Ray Rice and Adrian Peterson. Money appears to be the motivating factor as far as I can tell. Rice’s monetary value to the NFL dictated the light penalty, and the monetary penalty due to the negative PR was the only reason the NFL changed its mind.

For that matter, it has also always bothered me greatly that the NFL allowed Ray Lewis to participate in a Superbowl, and I believe his case would and should have caused even more PR uproar if only there had been video evidence as with the Ray Rice case. There are, of course, numerous other cases of the NFL going easy on players very likely to have committed criminal acts, such as Ben Roethlisberger. I have a three-year-old son, and I hate that the league is filled with characters who are terrible role models and tolerates them all for the sake of making more money. That I am directly paying some of this money has thus disturbed me greatly. (more…)

Hello, world!

Hello, Intarweb. This will be the site of my new blog, the original one being here (and also previously at fling93.com, now overgrown with weeds). I am in the process of importing my old posts (but as they were all encoded in an HTML shorthand in a now-defunct plugin, I am doing this one-by-one).

The Economics Behind ObamaCare’s Individual Mandate

In regards to the big Supreme Court decision on RomneycareObamacare, there’s been much hand-wringing on how this is a tax on doing nothing. This does seem odd, until you realize that a penalty or tax on one group but not on a second group is economically identical to having no penalty or tax on the first group but a tax credit or a subsidy for the second. Either way, it’s a transfer payment from the first group to the second group. Economist N. Gregory Mankiw made this point a few years ago:

…consider two proposals:

  1. A person is required to have health insurance. If a person is in violation, he pays a $1000 fine. The revenue from the fines is rebated lump-sum to all taxpayers.
  2. A person is not required to have health insurance, but those with health insurance receive a $1000  tax credit. The cost of the tax credit is financed with a lump-sum tax on all tax payers.

Notice that there is no economic difference between these two scenarios. The difference is purely semantic.

A subsidy or tax credit for a certain activity, such as buying a house, getting married, having children, and growing certain crops, is economically equivalent to a tax on inactivity. The mortgage deduction can just as easily be labeled a renter’s penalty or tax. So while it irks me that Obama wasn’t more up-front with the mandate actually being a tax, it’s economically identical to a tax credit for those who purchase health insurance (much like Paul Ryan’s plan).

Now generally I oppose most such transfers because they are often thinly-veiled kickbacks resulting from corporate lobbying for artificially high profits (economists call this “rent-seeking“), but while there’s plenty of rent-seeking fingerprints on Obamacare, the health insurance mandate tax is a little bit different. Here’s why.

(more…)

(Re)start Me Up

Hey all y'all,

Well, life is strange. Five years ago, I was a software engineer in the Silicon Valley, taking economics classes to transition to a new career that, at the time, I thought would be public policy. A summer in D.C. and a couple of trips to Burning Man, and well, that plan went up in flames. So I holed up for a while to do some soul-searching, and then the economy went down in flames around me.

After a tour in the desert for Black Rock City's DPW, things started making sense again. After teaching economics for a couple of semesters at San Jose State, things crystalized a little bit more. And then after meeting the woman who would become my wife during Playa Restoration, the world opened up again. We road-tripped across America, did another tour at DPW, got married during SF Decompression, settled in Austin, got married yet again in New Hampshire, and then had a son who has epically shattered cuteness records across the galaxy.

Things were still rocky there for a bit, but then I found a job in educational technology. As I said, life is strange. Heck, this city even has a Formula One race coming up.

Anyhow, now that life has settled down a bit, the writing calls back to me (the unbeknownst-Texan-in-me is also calling out for me to become an Asian redneck, but that's neither here nor there). You probably didn't notice over there on the right that I've started commenting more regularly in the blogosphere again. Well, expect more of that, only a bit longer (but not as long as I did way back when).

So y'all come back now, y'hear?

The Bucket List meme

Things you have done during your lifetime:

(X) Gone on a blind date
( ) Gone on a date with someone who was blind
(X) Gone on a date with someone who was blind and you stole food off their plate
( ) Gone on a date blind because there was a bucket over your head
(X) Had a date so ugly you wish there was a bucket over their head
(X) Been stood up by a bucket
( ) Seen Buckethead in concert
( ) Tried to bring a date to a Buckethead concert
(X) Brought a bucket as your date to a Buckethead concert

(more…)

/ within this post lies / a plea to a criminal / (in haiku format!) / #haiku

Ray Lewis, obstructor of justice

for shame, ray lewis!

sheesh, there just ain’t no justice.

murderer you are!

 

(or accessory)

you kept changing your story,

and broke your promise,

 

yet got off scot free!

your bad karma hurt your team,

and many team-“mates.”

 

(NO, I wouldn’t want

you on the Giants any

more than Plaxico!

 

yeah, LT did drugs,

but that’s a victimless crime,

and murder is not.)

 

please come clean now so

the victims’ families can

at last enjoy peace.

 

there! i spoke my piece.

my thoughts are with McGahee.

lift away his curse!

 

(ravens fans, for shame!

worse than giants fans who gave

barry a free pass.)

The facts were these:

(more…)

Taking turns

brady-fail, by stallio on Flickr

Sometimes, I have to wonder what our society would look like without sports. Last year’s New England Patriots finished the regular season an unprecedented 16-0, and they were heavy favorites in the Superbowl to be the first team to complete a perfect season since the1972 Miami Dolphins (whose perfect season had a shorter schedule back then). But those New York football Giants made mince-meat out of this tantalizing possibility, and so the Patriots are remembered more for what they could have been than what they achieved. Making the Superbowl a close dramatic contest was good for the sport, but the Patriots did not get rewarded with 40% of the championship or even 20% of the championship. No, they got absolutely zero percent. And I’m no whining Patriots fan. I’m actually a long-time Giants fan with a Rodney Hampton jersey (and as much as I liked Tiki Barber, this team only looks itself with a big smash-mouth bowl-them-over running back like Hampton or Jacobs).

Such is the nature of sports, where large stakes and drastic swings provide potent fuel for dramatic comebacks and big plays that sear themselves into our collective consciousness (I have to believe that even non-Giants fans will remember Eli Manning’s pass to David Tyree). Fans and athletes live for this stuff, and all-or-nothing outcomes make perfect sense for an industry whose purpose is to entertain. High stakes make for great drama, and everybody hates to see such dramatic contests end in ties (which is exactlywhy hockey moved to the shootout, why you can expect football fans to whine about that Eagles-Bengals game, and why no sport allows a championship game to end up in a tie — kinda like action movies).

I’m clearly a sports fan myself, but I think our society is not very well served when this win-or-lose attitude is forced upon young kids. When kids are left to their own devices, they usually play games without winners and losers. Games where the object is to merely to take turns doing a variety of fun activities, like tag, hide and seek, and duck duck goose. Heck, when I was a kid, we played a game that we called “throw up and kill.” No, it didn’t involve vomit, it involved throwing a football in the air, and then everybody would try to kill (tackle) whomever caught it. When tackled, they’d throw the ball up, and the game would resume again (and I will insist that “throw up and kill” is a funnier and more descriptive name than “smear the queer,” and every bit as memorable).

Note that the object of these games is not to crown a champion, but just for everybody to have fun (we also played football, but throw up and kill was much more fun and we played it more often). This is the important point. Games don’t have to be contests. I think it’s really the hockey dad and soccer mom types who force the kids into organized sports which most kids probably do not prefer.

With this win-or-lose mindset ingrained as a kid, adults often mistakenly apply this to other areas of life.

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A case where a counterargument had already written itself

Glen Whitman points out a defense of the Electoral College from Don Boudreaux:

A related, but potentially more serious, objection to the Electoral College…is that it can result in a minority of popular voters getting the candidate of their choice over the candidate receiving the greatest number of popular votes. … This objection, too, is weakened when one considers that such outcomes can occur in legislatures based upon geographical representation where there is uneven distribution of the voting population across the electoral districts.

Whitman goes on to explain:

Or in other words, people who have a problem with the Electoral College should have a problem with the Senate as well. In fact, they should have a bigger problem with the Senate, since it diverges much further from proportional representation than does the Electoral College.

Damn. I don't know what to say about that — except I must've seen this coming, because my previous post happens to support both ending the Electoral College and implementing Proportional Representation for Congress. And I do, in fact, prioritize the latter, as it will result in more political representation for libertarians, and future posts should make this evident (and no, I honestly hadn't seen Whitman's nor Boudreaux's post until today).

All I have to say is that this seeming coincidence is just seriously trippy — until you consider what Whitman says here:

You can get the very same effect — i.e., policies being adopted with only minority support — when electoral districts represent equal-sized groups of constituents, as long as the groups have sufficiently different divisions of opinion.

Of course, this is exactly one of the problems I wanted to solve when proposing Proportional Representation. Because, you see, the root problem in both is the distortion of the electorate's wishes by using winner-take-all in single-seat districts. As I pointed out earlier, this system discards the very useful and relevant information about the margin of support (or "divisions of opinion", as he puts it), information that is captured under Proportional Representation.

So I'd say Boudreaux actually strengthens my case.