Man of the Year!

Ben Bernanke has been received praise and awards like Monopoly money. Time Magazine's Person of the Year, Foreign Policy's Intellectual of the Year, etc. Even though there are some lunatic fanatics among us who are pointing to a double-digit unemployment rate, and a continuing slide in non-Governmental--productive--components of GDP as evidence that the "recession" is not over and that a "depression" may still be possible, it is clear to the mainstream media and to many economic thinkers that Ben Bernanke, chairman of the Federal Reserve Bank, staved off the next Great Depression. This was done, supposedly, through his strategic implementation of the corporatist TARP bailouts and through his wise lowering of interest rates. The first question I ask is how do we know this? There really is no evidence that, had Bernanke done nothing, things would not have been better today.
But lets forget about today. Lets consider tomorrow. How will each of his actions eventually impact us? While I do not claim to know specifics, I know that there is no free lunch. "Inflation is always and everywhere a monetary phenomenon." Bernanke believes that the economic recovery we have seen so far remains fragile. Due to this fear he has decided to keep interest rates at essentially zero and keep the printing presses running. There will be inflation at some point in the future. While Chairman Bernanke claims that the Fed has the tools to raise interest rates and control inflation without affecting economic activity when needs be, I am extremely skeptical of this promise of the ultimate free lunch. It is clear that if our bills had another country's name on it, a currency collapse would be a definite possibility. Nobody knows if a currency collapse is realistic, and I have seen data that shows that it is unlikely, but it is not impossible. It would be an ultimate Black Swan, a high-impact, improbable event.

What about the bank bailouts? He may have saved the banking system, but is a system that almost drives us into a Global Depression, as the experts willing to congratulate Bernanke assume, worth saving? Capitalism is about profit and loss. Without the threat of loss, we have fascism of the worst variety. Investment bankers know they are playing with other people's money. These are the same incentives that helped cause the mess. This cannot work and are illustrative of an unsound system. These incentives, more likely than not will lead to further financial "crises."

Maybe I am wrong; maybe Chairman Bernanke with the help of President Obama will be able to engineer an economic recovery without damaging inflation. Maybe they will pull away the punch bowl away just in time as the party gets going. Or maybe, like all central planners dealing with imperfect knowledge and incorrect incentives, they will fail miserably in their "goals" of effectively engineering a $14 economy. Whether I am right or whether they are the point remains: it is too early to congratulate Ben Bernanke on his work until the final result of his work is seen. Many of the now-villified investment bankers were congratulated and rewarded with million dollar bonuses. The point was that they were accumulating all types of hidden long term risks. Bernanke is receiving the same treatment: short term accolades while he is potentially taking on massive amounts of long-term risks. It was a mistake for investment bankers to be compensated in this short-term manner and it is a mistake to praise Bernanke before the costs of his actions are seen. What if his policies create massive inflation or even stagflation in the long-run? Will he even be blamed, or will Obama, or Milton Friedman, or Congress, or the Republicans, or even Keynes? We now know what Paul Krugman knew--and advocated for--in 2001: that the Federal Reserve's response to the Tech Boom and Bust helped cause the Recession of 2008. Imagine if Greenspan and Bernanke, the engineers of that monetary stimulus, were congratulated in 2001 for their work in avoiding a prolonged recession! We are doing the same thing now! The Federal Reserve can cause recessions by keeping interest rates too low and creating malinvestment. They are doing it now. The chickens will come home to roost. And just as 2008 was a larger recession than 2001, the Depression of 2012 may very well be larger than 2008...assuming we do not face a currency crisis before then.

The financial system is more fragile and more prone to negative black swans than it has ever been before.

Hubris I

With the help of President Obama, a deal was cut in Copenhagen. The proposal aims to guarantee that the average Earth temperature does not increase by 2 degrees over the next century. Paint me as an anti-scientific libertarian if you choose, but I remain agnostic on the existence of anthropogenic global warming. I believe that the issue of weather and climate remains a field that is insufficiently understood--actually, virtually impossible to understand and predict. It is not dissimilar to attempts to predict economic forecasts with certainty or explain economic outcomes and historical occurrences with crystal clear ex-post-facto stories; there are simply too many variables to capture in the models. Even though a decrease in supply, when all else remains constant, leads to an increase in price, all else never remains constant. The same is true for understanding and predicting changes in the climate. Though not a physicist or a climatologist, I understand that emissions of CO2, methane, and water vapor can have a greenhouse effect and, all else remaining constant, lead to an increase in air and surface temperature. The problem is that all else does not remain constant. There are literally trillions of other climatic phenomena occurring that have an impact on global climate. Does this mean that we know nothing about these climatic phenomena? No, but it does mean that before we institute, in one form or another, an extreme global carbon tax, we should understand that the climate scientists who speak with certainty are dealing with a subject that is incomprehensibly complex.
I am not denying that anthropogenic global warming is possible; I am merely saying that it is essentially impossible, at least with modern scientific methods, to determine whether anthropogenic warming is occurring today, and anybody who gives me a specific number that they are sure the Earth will warm over the next x-amount of years is demonstrating hubris in the extreme. If we want to cut greenhouse gas emissions as a precautionary measure for the possibility that AGW is real and devastating as we are told to believe, then lets have this debate. This is not how this subject is portrayed, nor was this the tenor of the Copenhagen Climate Summit. Skepticism in science is a good thing, and before we surrender to a world government that has the power to monitor energy consumption on an individual level, I think we should have an honest debate.

Climate Change

World "leaders" are meeting in Copenhagen to discuss the future of the world. The goal of these climate summits is to sign an agreement that will bind every nation to cutting carbon dioxide emissions. There are so many aspects to this issue and it is portrayed incredibly simplistically. The argument for cutting emissions is incredibly flawed. The Obama Administration's goal for emission cuts is 83% below 2005 levels by 2050. This is equal to America's CO2 emissions of 1910! However, there were 92 million people in 1910; by 2050 there will be around 420 million Americans. This means that per capita emissions will be at 1875 levels! This is virtually impossible. What costs would this drastic cut impose? How could we get to this level in 40 years?

• Devoting almost all of America's resources to uneconomical alternative energy sources? As of now, we do not have the technology to meet our goal, and I doubt that a centrally controlled federal plan would allow for sufficient innovation of alternative energy sources. How expensive would this cut be? It would literally kill the American economy. No doubt about it. I think it is impossible to reach Obama's lofty goal through the development and implementation of alternative energy sources alone--at least without devastating economic consequences.
  
• Eugenics? Some groups already propose and advocate forced abortions because newborns will have a large, future carbon footprint. The problem with making the emission cuts is that they would hurt economically per capita. If the population were a 5th of today's population, we would have little problem getting to a 5th of carbon dioxide emissions. But this solution is evil! It is the same Malthusian tendencies that got Malthus worried about population growth on food supply and Paul Ehrlich worried about the same and about natural resources. It is proven time and time again that these worries are unfounded; the human species is remarkably adaptive, and will continue to adapt to a changing world. This is not an immediate danger but I would continue to watch out for this. What will be the next suggestion once the centrally planned alternative energy schemes are ineffective? This is a dangerous tendency that seems to be resurrected from time to time.
• Nationalize or "Internationalize" carbon dioxide emitting energy sources. What if the U.S. nationalized the nations' fossil fuels supply? Or the U.N. doing the same for the world's supply? It could be effective. All the fuel would be used by the government in the form of a police state that would make sure that nobody was going over their incredibly stringent quota. It is a scary thought experiment. Fear of a global government is not irrational.

There are other centralized solutions that do not involve emission cuts--like those proposed in Super Freakonomics, but these will not be considered because environmentalism's primary goal is to end capitalism and material prosperity. It is in all of their rhetoric: take a listen. I do not endorse these solutions, but the fervent criticism of these solutions by environmentalists reveals their true anti-capitalist agenda.
By the way, this all assumes that global warming is a problem to begin with.

Whatever comes out of Copenhagen will do anything to stop global warming because China and India will not sign on. THIS WON'T HAPPEN!! Nothing good can come out of these Copenhagen conferences.

Purpose of Trade

For some reason, international trade is incredibly misunderstood, even by many academics and policy "experts." At the recent G-20 conference in Pittsburgh, "leaders" from 20 economically influential nations discussed ways to plan and run the global economy. One topic that was dicussed was global trade "imbalances." The big focus was on China's net exports and the United States' trade "deficit." Policy experts at the conference noted how U.S. net exports have increased during this recession, and claimed that this was good. For some reason, many people think "exports good, imports bad." This could not be further from the truth; in fact, it is the opposite of reality. Imports, the goods we will consume are benefits and exports, what we send away, are costs. Costs are only necessary to pay for beneficial imports. The fact that we get get more goods from other countries than we send away does not imply that we are in debt, nor does it imply that there is a problem.
Here is an example: I am Mr. Sony from Japan. I sold Joe the Plumber--an American--a Play Station 3 for $300. This would increase America's current account deficit by $300. However, nobody is in debt, at all. Nothing is different than if Mr. Sony was from Oregon and Joe was from Kansas. Why do we not calculate inter-state trade deficits and surpluses? Because it is a silly metric. Borders are a red-herring and trade is trade no matter what borders it crosses.
A common caveat people put into this concept is the one of Chinese currency manipulation. First of all, Chinese currency inflation is bad economic policy, but not because it hurts Americans. It hurts the Chinese people. By inflating the Chinese currency to increase net exports, the Chinese government is lowering the Chinese people's purchasing power and subsidizing American's purchasing power. Americans should be thrilled, we are getting more goods with fewer costs, exports. The Chinese people are forced into making much more than they are able to purchase. This goes back to one of Adam Smith's most basic point about economics. "Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer." This is so intuitive, so why do people make the mistake of valuing exports over imports? In each household we seek to maximize wealth by importing more than we export. It is the same concept between states and between countries.

The most lucid mind that I have found on trade is Don Boudreaux over at Cafe Hayek. Cafe Hayek is a great economics blog,(my personal favorite) and I suggest that everyone check it out, though continue to read My Two Sense!!!

Obama a true PATRIOT?

During America's obnoxiously long Presidential election season, we were led to believe that Barack Obama was the anti-war candidate. A man who had no real legislative record, Obama took down Hillary Clinton in the Democratic Primary by focusing on her vote for the war. Against John McCain, an unabashed war-hawk, Barack Obama made clear his differences with the Bush-McCain militaristic policies. I really thought that Obama would make a positive impact in this realm and really help improve the world's view on America by cutting back on our military spending, scaling back our empire, and ending the war in Iraq. I was worried about his rhetoric on Afghanistan, but some improvement would be better than none.

However, like Obama the free-trader, Obama the non-interventionist is a myth. Instead of scaling back the wars in the Middle-East, Obama is scaling up the war effort. He is sending thousands of more troops to each country and has no plan for getting out. He talked the talk to get elected, but he is not walking the walk. Pandering much?

What about Obama on the Patriot Act and torture? He signed a meaningless document that will close Guantanamo Bay, but this does not mean the end of torture. What about prosecuting the criminals from the previous administration? He is refusing prosecute because he plans on using the same or similar techniques. I have no doubts about this. Obama is a war-hawk like Bush. Not religiously motivated, instead, Obama personifies hubris. He has said that he plans on reauthorizing the PATRIOT Act. How can civil liberty supporters support this man.

"The Obama administration gets a D overall for civil liberties, including a D- for electronic surveillance and a D for the way that state and local fusion centers run by the U.S. Department of Homeland Security collect data on U.S. residents, said Chip Pitts, president of the board for the Bill of Rights Defense Committee."

Totalitarianism is in the air. We now are getting regulation of the internet. The Obama administration has continued the NSA's internet monitoring program. This really is the most totalitarian administration we have ever had. Where is the left's outrage? Is it okay to violate civil liberties if you talk about their importance? We should be legitimately scared of this man and this administrtation because, unlike Bush, Obama is not a complete moron. He knows exactly what he is doing.

In 10 years, will I still be a teenager?

“The American public…just like your teenage kids, aren’t acting in a way that they should act,” Dr. Chu said. “The American public has to really understand in their core how important this issue is.”

This quote summarizes the world view of this administration to a t. We have the president speaking to all of the country's school aged children telling them to work hard. The initial plan was to distribute a lesson plan that would ask "what can you do to help the President?" It is sick. Inherent in the meaning behind Obama's speech is that parents are doing a good enough job. Parents are not getting through with the right messages for their kids, so our President, a man who has done nothing more than get the majority to support his message of hope and change, needs to step in. Good thing Dear Leader is here.

Apparently, the American people do not understand the significance of "climate change," and/or are not taking sufficient steps to control our carbon consumption. We need climate czars do tell us how much energy we can use, what we can buy, what cars we can drive. When will we grow up and stop using our air-conditioning and paint our roofs white? Why am I on my computer now? The battery charges through coal!! Coal is Chu's "worst nightmare." Of course coal has allowed billions of people to escape the state of extreme poverty that human beings have lived in throughout history. Bad coal!!! Bad oil!!! Good thing our science czar knows what temperature the world climate should be, how to acheive this goal, and understands all aspects of global temperature perfectly. Obviously, we are ignorant teenagers in the face of this brilliant, brilliant man.

We spend too much on health care, also. Like teenagers, our health care allowance must be limited. We cannot be trusted with our health care dollars because we just spend too much. (Jokes aside, we are not in charge of our health care dollars now, and I think this is a problem. The consumer of health care should be the customer of health care). Hopefully, when ObamaCare passes we will never have to be worried about choosing our own health care purchases again.

I am such an ignorant teenager. I did not even know where the tires on my minivan were from. I just bought them because they were cheap and of high quality. How ignorant am I? I should have known that I should support the American tire industry and help support the union leaders of the United Steelworkers Union. Left to my own, I would have continued to spend as little money for the highest quality goods. Obama will help make us richer by supporting American industries, jobs, and unions while we spend more on inferior goods. This makes complete sense, right. We will get rich by spending more on fewer, inferior goods.

Mom and Dad, you guys were ok, but President Obama and Secretary Chu really showed me the right way to behave. Maybe, one day, you guys will no longer act like teenagers either.

Smoot-Hawley 2009?

My thoughts on the new tariff:

Government policies always have unintended consequences; however, the consequences resulting from Obama’s new protectionist measure will be severe and predictable. I assume that in an effort to “jump-start” the American economy, President Barack Obama has decided to impose a 35% tariff on Chinese tires. Most economists, from almost all economic ideologies, agree that free trade helps maximize economic production and economic well-being. However, Obama’s new tariff will not just contribute to further economic turmoil, it will cause death and destruction. I know, I know, this sounds extreme. But it is a logical certainty that if this tariff is imposed, President Obama will have blood on his hands. I would argue that President Obama is committing the same mistakes that President Hoover committed.

By definition, a tariff imposed on an imported good is a tax on consumers of that good. Presumably, American consumers buy tires made in China because they are cheaper and/or of higher quality. By taxing tires, consumers will be forced to pay for more for tires meaning that they will be marginally less wealthy. This is true by definition. Less disposable income will lead to lower demand and diminished purchasing power in the economy. Even working within the traditional Keynesian framework this would have disastrous effects. Also, imposing this tariff could lead to a trade war that could affect the trade of many other goods. A decline in world trade is already hurting the economy, and further restrictions could be devastating. One only needs to look at Hoover’s Smoot-Hawley tariff to see the disastrous effects that protectionism can wreck on an economy that is already in recession. It is generally well accepted that Smoot Hawley accelerated the American economy’s slide into depression; this new tariff could lead to further tariffs that would have a worse effect because today’s world economy depends so much more on global trade than ever before.

There is no and can be no economic rationale behind this tariff. It is a payoff to industries and unions that supported Obama. It is an attempt to help a few industries at the expense of the American and the world economy. While the Obama campaign promised that his administration would not be swayed by special interests. This was a broken promise, as his administration has participated in the same type of special interest pandering as President Bush. There has been no change in Washington.

I am willing to claim that Obama will have blood on his hands if this tariff takes effect. By making tires more expensive, some consumers will inevitably put off their purchasing of new tires to a later date when they can afford it. It is logically certain, that, in turn, some marginal group of people will get into an accident due to overly worn tires. This may be a small group, but it will exist. However, the specific incidents will be impossible to identify, so Obama will be not be blamed. This is the law of unintended consequences. Most government policy attempts ignore this law.

I have mixed feelings about China’s retaliatory tariff. I hold the view that the freer the trade, the better. So in this sense, I should be totally and completely against China’s tariff, and this was my initial reaction. However, I think the issue is far more complex. Adam Smith, one of the initial thinkers who understood the benefits of the free market and free trade, also understood the retaliatory tariff as a means to freer trade and more open markets. If China’s retaliatory tariff convinces American policy makers to remove our economic sanctions on foreign goods, then I would consider the tariff to be a good thing. However, there is always the danger of allowing a series of retaliatory tariffs to lead into an international trade war with devastating consequences. We really are on the brink of an economic collapse. Bad economic policy can force the U.S. and the world economy into a severe and prolonged economic depression.

Keeping the government out of medicare.

There is a really silly phrase going around now among opponents of ObamaCare to incite fear of the--in my opinion-disastrous health care proposal: "keep the government out of medicare." By its nature the saying is paradoxical and illogical; Medicare is a government program; therefore, it is impossible to keep the government out. But this quote does bring up an interesting idea and one that people should fear. When government provides a service, it is the job of the politicians to decide how much or how little of a service to provide. Whether you are okay with this or not--I'm not--it is undeniably rationing. The problem is that when government is faced with the inevitable rising costs inherent in a ponzi-scheme like medicare, government has three options: raise taxes on the relatively young and poor to give to the relatively older and wealthier, increase the size of the debt, or limit services provided. All three of these options are unappealing, but what is really terrifying is the fact that millions of elderly Americans rely on the government--and hence, on other taxpayers--to support them. I argue that through Medicare we overspend on health care for the elderly, but it is terrifying that politicians in Washington are in charge of deciding the right amount of benefits elderly Americans should receive. What is even more terrifying is that this type of system might be expanded to include every American. I don't want Barney Frank and Chris Dodd in all of their brilliance to be in charge of how much health care and what type of health care will be provided to people in my age, socioeconomic, or politically-affiliated category.

Ted Kennedy

Well, Ted Kennedy recently lost his battle with brain cancer. I want to take a moment to discuss Ted Kennedy's legacy. To me, his legacy will be one of expanding the role of the federal government and in the process diminishing the freedom of all Americans. He did do some important and greatly beneficial things as Senator. He was instrumental in deregulating the airline and trucking industry. Born in the 1990's, it is hard for me to imagine what a nightmare dealing with an extremely over-regulated airline industry would have been. With this deregulation, Kennedy helped improve the lives of millions. But the Liberal Lion of the Senate will be remembered for his big government programs and his advocacy. These programs have been ineffective at best or destructive and costly at worst.
As far as his replacement goes, I find it blatant hypocrisy on the late Senator's part to request legislation that would allow the governor to pick a replacement senator considering that the law was changed from this arrangement due to Kennedy's desire when Kerry was running for President and Romney was governor. Hopefully the law is not changed, so America is not stuck with another liberal lion in the Senate.

Bernanke?

Federal Reserve Chairman, Ben Bernanke, has been often criticized for his role as Fed Chairman in the current crisis and in the handling of the "Recovery Plan." Others credit him for helping America avoid a severe depression. I am tremendously skeptical of the Federal Reserve's role in the "recovery." Actually, I think that the recession/depression will be longer due to the Federal Reserve and the stimulus plan. Unemployment today--with the stimulus plan--is higher than the predicted unemployment rate made before the stimulus package for a stimulus-less scenario. This same prediction was used to justify the plan and to create a sense of urgency. This should tell us a few things: economic forecasting is hard if not impossible; we should be aware of incentives at play when an administration comes out with an economic forecast--in other words, politicians are concerned with passing their agenda not with the truth. This is not only true for Obama, but for Bush and most other politicians, as well.
But I digress. Obama plans to nominate Bernanke as Fed chairman. Bernanke has changed the role of the Federal Reserve Bank from a secretive central banking agency that controls and inflates the American currency to a central planning agency that controls and hyperinflates the American currency AND bails out mismanaged corporations. Even if Bernanke is responsible for the stabilization of the stock market, why should this be celebrated? If we all gave our money to corporations we would expect corporations to be wealthier and in better conditions. But the stock market does not measure the health of the economy; it is one market that shows the anticipated profitability of corporations. It is wrong to conflate the two.
The Federal Reserve must be audited and destroyed. The Federal Reserve is destroying the value of our currency, and it allows politicians to partake in huge deficit spending. Inflation is essentially a secret tax, and the existence of the Federal Reserve Bank allows politicians to make promises for new spending while never focusing on the tax side of the issue. This permits deficit spending and politicians almost never have to face their constituents with a potential tax increase.
I am not even a sound money advocate. I actually think that Fiat currency could arise in a world with free banking. I believe and advocate for a free banking system, or, maybe more pragmatically? as Milton Friedman suggested before his death , a fixed money supply growth system where the money supply increases by a certain amount each year. If there is one thing that this current recession/depression should teach us, it is that the Federal Reserve bank cannot be trusted with fine tuning our economy through the control of the money supply.

Young Americans for Liberty

I recently joined Case Western's chapter of Young Americans for Liberty. I would encourage anybody who might be interested to join. Ask around at your college campus for more information. It is an important time in American history and getting involved on your college campus can have a tremendous impact. If you go to Case Western Reserve University and you are interested in joining just talk to me. It is a libertarian/limited government advocacy group.

Health Insurance vs. Health Care

This is a great explanation on the differences between the two. Professor Roberts explains the difference in a way that is concise, easy to understand, and intellectually stimulating. What do you think?

Does aggregate spending address a lack of regulations?

I have always considered recessions to be a time when resources are reallocated to more efficient uses. The causes are often difficult to identify. I think it is probably true that Federal Reserve policy has much to do with this recession. I also think past bailouts and the existence of the FDIC had created a severe moral hazard problem. Although I do not think that regulation would have been helpful or beneficial, I think it is certainly possible that America's relatively free and open economy allowed for the spread of financial instruments that turned out to be full of hidden risks. Read Nassim Nicholas Taleb's The Black Swan.
The market is and had been self-regulating against these types of financial devices but governmental and other types of intervention have slowed down this problem. There is no free lunch.
However, for argument's sake, let's assume that lax regulations were responsible for the recession. Why would an increase in aggregate spending be an appropriate solution? It does nothing to address the underlying problems of this scenario. It seems that fiscal stimulus merely attempts to address the symptoms of the disease: a drop in consumer spending. But, in reality, this drop in consumer spending isn't some mysterious vacuous change with no other causes. Fiscal stimulus is (unsuccessfully) attempting to cure the disease by ignoring it. It is a political strategy.
I am not saying that a more regulated economy would be a healthier economy, I am just pointing out logical fallacies working within the paradigm of the left.

Cash for clunkers

Presumably, there are two rationales for this type of economic stimulus. First there is an economic rationale and secondly there is an environmental rationale. Both rationales are nonsense and just an attempt to cover up the real reasons to implement this program. Let's explore:

• The economic rationale is severely flawed. The theory relies on traditional Keynesian thought. Increasing aggregate spending will help increase employment. The problem is that you can't improve the economic conditions by destroying useful resources. Why not apply this economic principle to everything else? Let's burn down our houses and destroy everything we own, so we can rebuild everything. This is Bastiat's broken window fallacy. Resources are wasted to destroy the used cars. Resources are used to build the new cars. This is taking resources away from other uses that would be more productive. The claim is that since resources are underemployed in this economy, resources are not being taken from other sources. However, by employing these resources in an inefficient manner, cash for clunkers slows down the reallocation of resources to their most efficient use, thus prolonging the recession. This reallocation of resources is inevitable and vital to a healthy economy. Another problem with increasing aggregate spending is that it attempts to ignore the reality that Americans have had a negative savings rate for years. This is unsustainable. Economists like Paul Krugman acknowledge this reality, but then claim that we do not have to deal with it. Increasing savings is necessary even if it causes some pain in the short run. It cannot be avoided. How does one reach the long run without going through the short run first?
• Real environmentalists are not in favor of cash for clunkers. The problem is that cash for clunkers only focuses on fuel efficiency while ignoring the total amount of resources used. It takes tremendous amounts of fossil fuels to build cars and to destroy cars. Also improvements in miles per gallon become marginally less meaningful as miles per gallons increases. Consider: Going from 10 mpg to 20 mpg is more meaningful than going from 20 mpg to 100 mpg. How? Well, a 10 mpg car uses .1 gallons per mile or 10 gallons per hundred miles. A 20 mpg car uses .05 gallons per mile or 5 gallons per hundred miles. This is an improvement of 5 gallons per hundred miles. Using the same mathematics, a 100 mpg car uses 1 gallon per hundred miles. So going from 20 mpg to 100 mpg saves only 4 gallons per hundred miles. When you take into account the fuel used to build and destroy the original car, it is probably a net negative to switch from a 25 mpg car to a 50 mpg Prius. These old cars still have utility and should be recycled if conserving resources is an important goal. The reason that it is expensive to implement this program is precisely why it is bad for the environment: tremendous amounts of resources and fossil fuels are used. Also if more fuel efficient cars are being used, drivers may be able to afford to drive more offsetting any possible gains in fuel efficiency.

• Here is what one environmentalist had to say.

Preventative Care?

Does preventative care work? A PLoS study attempted to determine the effects of smoking and obesity on health care expenditures and on life expectancy. The statistical study led to the conclusion that obesity decreased life expectancy, but contrary to popular belief actually increased lifetime health expenditures.

"In this study we have shown that, although obese people induce high medical costs during their lives, their lifetime health-care costs are lower than those of healthy-living people but higher than those of smokers. Obesity increases the risk of diseases such as diabetes and coronary heart disease, thereby increasing health-care utilization but decreasing life expectancy. Successful prevention of obesity, in turn, increases life expectancy. Unfortunately, these life-years gained are not lived in full health and come at a price: people suffer from other diseases, which increases health-care costs. Obesity prevention, just like smoking prevention, will not stem the tide of increasing health-care expenditures. The underlying mechanism is that there is a substitution of inexpensive, lethal diseases toward less lethal, and therefore more costly, diseases [9]. As smoking is in particular related to lethal (and relatively inexpensive) diseases, the ratio of cost savings from a reduced incidence of risk factor–related diseases to the medical costs in life-years gained is more favorable for obesity prevention than for smoking prevention."

Like all statistical studies, the results may be flawed, but this is really besides the point. What if some forms of preventative care actually increase health care consumption? They may be good for public health, but they might be costly. What is the ultimate goal of a public health system. Is it to control costs or to increase public health? It is possible to imagine that these goals can be mutually exclusive in certain instances. How will cost effectiveness be determined? Is cost-effectiveness defined as what is "best" for society or what is "cheapest" for society.

We get into issues of nanny-state activity on the part of government as well. Let's say that prevention of smoking will reduce health care costs. Is it anybody else's business if I smoke (assuming I don't effect their health)? A government run system gives an excuse for further intrusion into the lives of the people in the name of reducing costs. I feel that part of what makes America great is the freedom to make our own choices. Skydiving is unsafe, but we allow it becuase people should have the freedom to choose how to behave. If I am paying for everyone else's health care I want to pay as little as possible. When done through the government, one can imagine restrictions on certain types of behavior in an attempt to reduce people's "burden" on the health care system and on "society." From an individualist's perspective, this is troubling.

Two things are needed:

• Stake in the game: If I am going to participate in unhealthy or possibly expensive activities, I need to anticipate dealing with the consequences of my decision. Assume treating the health problems associated with smoking is expensive, one must be responsible for dealing with these expenses.
• Freedom to choose: What makes life truly fulfilling is the ability to make choices and deal with the consequences of these choices. Restrictions on certain types of behavior in the name of public health or public costs are troubling. Different people have different value systems and make different choices. This is up to them, and I feel that it is somewhat paternalistic for the federal government to disallow certain behaviors. We must resist the urge to try to minimize people's burden on the system. I expect we'd be unhappy with the results.

I am open to preventative medicine, especially if it is cost effective and would help public health. But I wonder, if it really is cost-effective why is it not being done today? Is it because people do not have enough skin in the game or is the profit-motive for insurance companies broken?

More Than A Tax Number

I am often dismayed by tax-first reasoning. It seems that many of the arguments that people make for a particular piece of legislation or reform rely on net tax burden. For example, a common argument for legalizing immigrants is that they will help increase tax revenue to pay for things like the stimulus biil or Obama-care or the Iraq War. This is pretty silly. Increased tax revenue does not mean better economic conditions. The reasons to support amnesty for illegal immigrants are two-fold. The economic case for free-movement of labor is as rock solid as the case for free trade. In fact, trade is not free without the ability for labor to move unrestricted. The second, and most important reason, is that it is the right thing to do. Why should anyone person have the right to tell anybody else where they can or cannot live? Immigrants' lives depend on it, and no one has the right to tell any other person that they cannot move to improve their standard of living merely due to the location of their birth.

The same is true for legalizing marijuana. Yes the War on Drugs has been a miserable failure and a complete waste of money, but weed should be legalized because its health effects are negligible and because legal adults should be able to make their own decisions without Big Brother's restrictions, not because weed could be taxed and increase federal tax revenue. This is a tertiary benefit. When you hear discussion of a piece of reform listen for this. I always ask myself, "is it good or bad?," not "how does it affect net tax revenue?"

What about inequality?

If you remember all the way back to 2007, the talk of the town was about inequality. There were many complaints, most flawed. There was the view that supply-side tax policy was to blame for ever-growing economic policy. Bush's across the board tax-cuts, disproportionately benefited the rich. This allowed the rich to benefit at the expense of the poor. There are other arguments; some are better than others. I will contend that meaningful inequality has actually decreased, but more importantly I will contend that inequality is unimportant. If a Haitian immigrant comes to the U.S. and makes $7 an hour working at a low-skill job and a CEO makes billions employing immigrants and low-skilled natives has unemployment increased or decreased? Both the Haitian immigrant and the CEO are in a better economic condition, yet statistical inequality has risen dramatically. As long as everyone is equal under the rules of the game, equity of results is not very important.

Lets assume that inequality had increased up until 2007, why are we not hearing about inequality these days. We are actually seeing a shrinking amount of "inequality," yet nobody is better off. Would we rather have a more "equal" society where everyone is worse off, or a more "unequal" society where those who work are better off?

Will illegal immigrants be covered?

I am opposed to Obama-care, but not for all the same reasons as your typical right-wing nut. I am opposed to Obama-care because I think that it will neither lower costs or improve quality of care. I am also extremely skeptical of government and oppose this massive centralization of power by the Federal government. I will discuss my opposition and skepticism of this bill in later posts. For this post, I want to focus on the coverage of illegal immigrants. I have a solution; legalize every single one of these immigrants. I am disturbed by the anti-immigrant rhetoric coming from the right. Once again what is needed is immigration reform. There are issues that government should be dealing with: immigration reform, tort reform, removing restrictions on foreign nurses and doctors, loosening licensing requirements, education, and free trade, etc. These are the issues when the economy is good and when it is bad. I saw a letter to Newsday from a registered nurse who was saying that it would be terrible to bring in foreign nurses and that we need more American workers. Don't want those high skilled, productive workers ruining our economy by lowering the price of health care. Then the government would have no excuse to accumulate this massive amount of power. There can be no real conservative(limited government) movement if this bill passes because people will be dependent on government. Seniors will not vote against medicare and a dependent population will not vote against Obama-care once it is in place. This fear of foreign workers on both the distribution and consumption sides of health care is terribly unhelpful.

Why blog?

Friends and family know that I attempt to stay well-informed on the current political and economics happenings in the world, but I am dismayed by the lack of intellectual honesty and skepticism coming from the main stream media. Issues are conflated and important questions are never asked. My opinions are radical and my suggestions pragmatic. My goal is to start an intellectual community, through my blog, where people are unafraid to ask important questions even if they are politically incorrect. I will also comment on anything else that interests me. This is a critical time in world and American history, and I believe that I have some interesting thoughts to share. Comments are extremely welcome. Enjoy.