Archive for September 2009

News Flash: People Being Tortured Sometimes Confess to Anything to Stop the Torture

It is pretty amazing to me that 500 years after the Spanish Inquisition it is somehow a revelation that people who are being tortured will say about anything to make the torture (or the threats thereof) stop:

On Friday the government declassified an opinion in which U.S. District Judge Colleen Kollar-Kotelly ordered the release of a Kuwaiti held at Guantanamo since 2002, saying he was imprisoned based on coerced confessions that even his interrogators did not believe. Fouad Al Rabiah, a 50-year-old aviation engineer and father of four, was captured as he tried to leave Afghanistan in December 2001. He said he came to Afghanistan that October to help refugees, an explanation the judge found credible....

Later four Guantanamo inmates made several implausible accusations against Al Rabiah"”claiming, among other things, that the engineer, who had worked at Kuwait Airlines for 20 years, suddenly became a leader of the fight against U.S. forces in Tora Bora. Kollar-Kotelly noted that the charges were either inconsistent or demonstrably false. The Pentagon eventually stopped relying on these wild claims to justify Al Rabiah's detention, but by then interrogators had used the charges, along with sleep deprivation and threats of rendition to countries where he would be tortured or killed, to extract confessions from him. In the end, the interrogators concluded that Al Rabiah was making up a story to please them. "Incredibly," Kollar-Kotelly wrote, "these are the confessions that the government has asked the Court to accept as truthful in this case."

I have argued for years that indefinite detention of anyone, citizen or not, is an affront to the principles on which this country was founded.  Just to make my position entirely clear, I am willing to risk letting 40 dangerous people go free (assuming we can't actually prosecute them) to avoid having one person detained wrongly.  If you think this is naive or wrong, then you need to ask yourself what you think about our entire legal system, which is predicated on a similar presumption, that we would prefer some guilty or dangerous people go free rather than tilt the system such that innocent people rot in jail.

Other posts from this topic here and here

Here Is A Great Issue for "Progressives." Somehow I Doubt They Will Run With It

From Daniel Griswold in the Washington Times:

President Obama and the other Group of 20 leaders delivered their obligatory warning against protectionism at last week's summit in Pittsburgh. But at home the U.S. president continues to conduct his own trade war, not only against imports from China and other developing countries, but against the most vulnerable of American consumers.

America's highest remaining trade barriers are aimed at products mostly grown and made by poor people abroad and disproportionately consumed by poor people at home. While industrial goods and luxury products typically enter under low or zero tariffs, the U.S. government imposes duties of 30 percent or more on food and lower-end clothing and shoes - staple goods that loom large in the budgets of poor families....

The tariff the president imposed on Chinese tires earlier this month was heavily biased against low-income American families. The affected tires typically cost $50 to $60 each, as compared with the unaffected tires that sell for $200 each. The result of the tariff will be an increase in lower-end tire prices of 20 percent to 30 percent. Low-income families struggling to keep their cars on the road will be forced to postpone replacing old and worn tires, putting their families at greater risk....

A few liberal Democrats still care, too. Edward Gresser of the Democratic Leadership Council has done more than anyone to expose the unfair, anti-poor bias of the U.S. tariff code.

In his 2007 book "Freedom From Want: American Liberalism and the Global Economy," he calculated that a single mother earning $15,000 a year as a maid in a hotel will forfeit about a week's worth of her annual pay to the U.S. tariff system, while the hotel's $100,000-a-year manager will give up only two or three hours of pay.

OMG, This Is Different

The Observer Effect and Using Google for Social Science

I thought this was an interesting quick and dirty social study using Google. (via Knowledge Problem)

For any individual study you can validly say that you think the estimate is too low, or indeed, too high, and give reasons for that. For instance, you might say that your sample was mainly young people who tend to be healthier than the general public, or maybe that the diagnostic tools are known to miss some true cases.

But when we look at reporting as a whole, it almost always says the condition is likely to be much more common than the estimate.

For example, have a look at the results of this Google search:

"the true number may be higher" 20,300 hits

"the true number may be lower" 3 hits

I often tell folks that the key to understanding behavior is to understand incentives. The media as institutions have incentives to sensationalize and scare (it sells papers) and as individual reporters have incentives to magnify the importance of whatever story he or she is working on.

But what I found really interesting was how the Observer effect comes into play here.  Wikipedia has this brief definition of the observer effect:

In physics, the term observer effect refers to changes that the act of observation will make on the phenomenon being observed. This is often the result of instruments that, by necessity, alter the state of what they measure in some manner.

Click on the Google hit numbers above.  I get 42,700 and 5,360 respectively, the increase presumably due in part to this article and links to it.  Its impossible to report on patterns in Google searches without the very fact of such reporting affecting what is being measured.

But's Its My Hard Work Paying Your Unemployment

I found this story, from a Marketplace segment via Carpe Diem, especially irritating.  Our company has to pay for a lot of unemployment fraud, so seeing such fraud in action really annoys the hell out of me.

Quick background:  Employers pay unemployment taxes generally as a percentage of wages.  These taxes are based on a direct relationship with past claims from ex-employees.  The more of my ex-employees who make claims, the more premiums I pay.

Since I only have jobs for 6 months a year (it is a seasonable business), employees have the opportunity to file for unemployment the other 6 months.   BUT, the rule is generally that you have to be looking for work.

Unfortunately, I have numerous employees who work for me over the summer and take the winter off, but tell the unemployment office they are looking for work so they can collect unemployment anyway.  I have had employees call me from Mexico telling me about the great winter vacation they are having on the exact same day I see their names on the roles of those collecting unemployment (and thereby supposedly "looking for work").

In California, where such behavior is rampant (and where the state unemployment agency has established penalties for employers who even think about asking the state to investigate one of his ex-employees for fraud) I pay over 7% of wages in unemployment taxes, vs. less than 1% in states without such fraudulent behavior.

So, with this background, I am thrilled this guy is showing the initiative to find work but am frustrated he is still fraudulently taking my money:

Michael: I'm getting $272 a week [in unemployment benefits]. Which is just, bare bones. It's so bad that at one time I was going to the food bank. And, you know when you're really hungry and when you're facing eviction, you've got to do something.

Marketplace: So he started looking for work on the side. He found it pretty quickly.

Michael: So right now I have Craigslist open. And what I've done is I've opened three different tabs: I've opened free stuff, all gigs and all jobs.

Marketplace: He's found all sorts of work this way: software testing, landscaping, bouncing and lots of focus groups. All have paid cash. He says some weeks he's earned three times as much as his benefits check. Like everyone on unemployment, he's meant to report any earnings to his unemployment insurance office. Then they adjust his benefits down. So how does Michael answer the question, have you earned any money this week?

Michael: I opt to say, you know, no. I opt to say no, I have not. Because this is my own hard work, this is my own ingenuity, this is my own genius, and I am still looking for work every day.

You are absolutely right Michael, yours the same argument all productive folks make in the face of government expropriation.  In fact, I couldn't have said it better - "this is my own hard work, this is my own ingenuity, this is my own genius."  Brilliant.  But recognize that the unemployment money you are taking fraudulently was paid for with my hard work, my ingenuity, and my own genius.

ADM's Mistake (Mostly Corrected)

Alex Tabarrok discusses the new movie about Mark Whitacre and price fixing at Archer Daniels Midland.  ADM apparently was caught holding meetings with competitors to fix prices of certain chemical commodities, specifically Lysine.

Here was ADM's mistake, and it is one they have clearly learned from:  in the modern American corporate state, there is no reason to engage in illegal private price fixing or cartel arrangements when corporations can achieve similar ends legally and openly through the government.  If ADM was concerned about difficult competition depressing pricing, they could have emulated any of these examples:

  • Run to Congress to beg for strong tariff's on foreign sources of their commodity product (as do the sugar and ethanol industries)
  • Run to Congress and have them institute minimum pricing or buy up excess supply (as do many agricultural producers)
  • Run to Congress to seek supply restrictions (as does the taxi business)
  • Run to Congress and have them restrict new competition and sources of supply through licensure (as do a variety of industries, from real estate to funeral homes to medicine)
  • Run to Congress to have them pass onerous legislation that makes it difficult for new capacity to be added in the business (as does the waste disposal industry)
  • Run to Congress to seek subsidies for their product in the name of some public good - it doesn't even have to be true (as does, well, ADM with ethanol)
  • Run to Congress to seek regulations that favor your particular production and product technologies while hamstringing your competition (as does GE with light bulbs)
  • Run to Congress and have them enforce an industry price-fixing arrangement -- its legal when Congress does it (as do the Milk producers)
  • Run to the FTC to bring anti-trust actions against your competition (as did Netscape and Sun against Microsoft)  This is an interesting article on this, which says in part, "Most [antitrust] cases are not brought by public representatives, whether elected or self-appointed, but by private companies, often rivals of the defendant who are being driven out of business. Businessmen believe that competition is good if they win but bad if the other guy wins."

Of course, all of this takes a little care.  The competitive relief must be couched in something like "consumer protection" or "saving jobs" or "going green" or "fairness," but there are plenty of good examples of consumers getting the shaft in the name of consumer protection that it shouldn't be too hard to come up with something.  Developing a high profile in an early Presidential primary state like Iowa doesn't hurt either.

As I said in the title, ADM has certainly figured this out, if their approach to the ethanol business is any guide.  In ethanol, they have resorted to any number of these tactics simultaneously.

Expectations

I must say that I do find it interesting that a few heated verbal exchanges and one guy carrying a gun peacefully somewhere near where the President was speaking is considered a looming threat from the right to civil society while lefties physically clashing with police and destroying property (again near the President) is treated as ho-hum, more leftish rioting.  The same bored reaction tends to result from union violence as well.  Is it bias, or have we just had years to get used to violence on the left?  With memories of Seattle, all subsequent violence I guess seems tame and not worthy of comment.

Local Governments Mining for Dollars

As a small business owner, a huge portion of my time is spent feeding governments with all the paperwork they demand.  But this year has been twice as bad.  Every local authority we operate in has started mining for dollars.  What this has meant is a whole slew of property "reassessments" that have no basis in reality (e.g. values put on non-existent assets) that I have to spend a lot of my time fighting.  The general modus opperandi is to declare my company owes money for something fictitious, and then make us prove we don't.  Have you ever tried to prove you don't own an asset that doesn't exist?  Think about it.  How would you go about it, short of inviting the assessor out to your property to search for it.

Maricopa County, the county that includes Phoenix where my headquarters resides, has been the worst.  We buy assets for properties all over the country, and have the bill sent to our headquarters.  Often, if a registration is required, we will put our headquarters address on the government registration to make sure we get the renewal paperwork (long experience is that if anything gets sent out to an address in the field, it is lost).  The concept that an asset might be in location X but the paperwork should be sent to location Y is a really, really hard concept for a lot of state registration authorities to get their head around/

This year, Maricopa County has started sending us personal property tax notices for all kinds of assets that have never even existed in this county.  They were bought in state A, shipped to state B, with the bill sent to us here in Arizona.  But the County is in financial distress.  It probably understands that the asset does not exist in the County.  I am sure it knows that I don't, for example, have 24 cabins sitting on the fourth floor of this building, where they have them located.  But they need money.  If they send out enough fraudulent bills, and then tell taxpayers it is the taxpayer's responsibility to prove the bill is wrong, then they will likely get some money.   Yet again, the government is engaging in abusive practices that not private company could get away with for long.

I was pretty calm today on the phone with the assessor until this came up:

Me: Look, these are cabins I bought from a factory in Maricopa County but which were shipped immediately from the factory to California.

Assessor: I don't see where you filed for permission to move the cabins

Me: Excuse me?

Assessor: Your xxxyyy form [I forget the numbers].  You never filed for permission to relocate

WTF?  I know we have problems with declining tax roles, but do I really have to ask permission to move an asset out of the county or state.  What, did I violate directive 10-289?

So beware small businesses.  Your government is mining for dollars -- do not assume that tax bill is correct.

Both Sad and Hilarious

Rick Trabino writes "How to Publish a Scientific Comment in 1 2 3 Easy Steps."  Not only hilarious, but it will make one despair for the future of science and academia, until one remembers that this kind of stuff has probably been happening since Euclid so somehow we make progress anyway.

Via Steve McIntyre, who has had similar problems of his own.  Particularly the parts where authors of studies published in journals refuse to share their data for replication, despite rules in the journals in which they publish which typically require such availability.

Corporations and Free Speech

Here is my very simplistic take.  You will have to pardon me for referencing the actual text of the Constitution -- I know this is passe in our modern era (jeez, I am probably a tenther too).  The issue looks pretty straight-forward to me, for two reasons

  • Congress shall make no law ... abridging the freedom of speech.  Doesn't say by whom or for what.  There are no modifiers.  Doesn't say "except when individuals organize themselves into a corporation."
  • Congress shall make no law ... abridging ...the right of the people peaceably to assemble.  So Congress can make no law restricting free speech and it can make no law restricting assembly but somehow it can make laws restricting free speech of people who have assembled?

It's a Tax

Forcing people to pay money or pay a fine on their tax return to buy a product they currently don't buy is a tax.  Particularly when that product will likely be over-priced to the young and healthy not buying it today to subsidize the older folks.

Does Anything Exceed the Commerce Clause Nowadays?

A question has been going around on legal blogs -- "Does a Federal Mandate Requiring the Purchase of Health Insurance Exceed Congress' Powers Under the Commerce Clause?"

My answer is:  Nowadays (not in the original intent) is there anything the Feds can do that exceeds current interpretations of the commerce clause?  In Raich, the Supreme Court decided that a product (marijuana) that was grown in state for personal consumption, like tomatoes in your own garden, and was used legally under state law, can still be regulated under the commerce clause.    As Clarence Thomas wrote in dissent:

Diane Monson and Angel Raich use marijuana that has never been bought or sold, that has never crossed state lines, and that has had no demonstrable effect on the national market for marijuana. If Congress can regulate this under the Commerce Clause, then it can regulate virtually anything and the Federal Government is no longer one of limited and enumerated powers

No kidding.

Unfortunately the theory that this personal use in California could somehow affect marijuana pricing in other states (by growing their own, they reduced demand for out of state weed which might affect prices in Arizona -- again similar to an argument that growing your own tomatoes might affect prices in another state) won the day in the Court.   With the Supreme Court accempting this "butterfly effect" argument  (because truly the demand of one person in a national market is like a butterfly flapping its wings in China and affecting a hurricane in the Gulf of Mexico), anything falls under the commerce clause.

23 Different Health Reform Plans, and Not One Mentions Torts

It is amazing to me that there can be numerous health care plans in Congress plus a jillion speeches on the topic by the President and not once does anyone mention "torts."  Now, I am not one to ascribe all cost problems in the medical field to defensive medicine and tort settlements.  Buthey t certainly are a factor.  It is just stunning that a President can stand up and talk numerous times about "unnecessary tests and procedures" and ascribe all of these to some weird profit motive by the doctors - weird because generally, the doctor gets no extra revenue from these tests, so somehow he or she is motivated by the profits of a third party lab.

But I think the rest of us understand that American tort law, which allows juries to make multi-million dollar judgements based on emotions and empathy rather than facts and true liability, has at least a share of the blame.   Not just the settlements, but the steps doctors go through to try to protect themselves from frivolous suits down the road.  Here are two interesting stories along these lines.  The first from Carpe Diem:

Zurich University Hospital has stopped treating North American "medical tourists," fearing million-dollar claims from litigious patients if operations go wrong. Hospitals in canton Valais have also adopted measures to protect themselves against visitors from the United States, Canada and Britain.

"The directive applies only to patients from the US and Canada who come to Zurich for elective, non-essential health treatments," said Zurich University Hospital spokeswoman Petra Seeburger.

"It is not because treatment is not financed; it is because of different legal systems." In a statement the hospital said it was "not prepared to risk astronomical damages or a massive increase in premiums." Seeburger emphasised that the restrictions only affected people not domiciled in Switzerland.

Apologies to Mark Perry for quoting his whole post, but if you are not reading Mark Perry, you should be.  The second example comes from Overlawyered:

Oh, I miss the days when you got a radiology report that said, "fracture right 3rd rib, no pneumothorax". Because of frivolous lawsuits radiologists have learned to be vague, noncommittal and to pass the buck of possible litigation. So now you get a 2 page report that says "linear lucency in right 3rd rib, clinical correlation recommended, underinflated lung fields cannot exclude underlying interstitial disease and or masses. CT recommended for further evaluation, if condition warrants." along with several other paragraphs of lawyer imposed legalmedspeak"¦.

Wow, Who Would Have Predicted This?

The answer is:  Just about everyone who was not in the tank for the Obama Administration predicted this (from my Princeton classmate Henry Payne):

When Congress gave away $3 billion for buyers to trade in their "clunkers" and buy new cars in August, lawmakers thrilled as buyers swamped showrooms to take advantage of the big discounts. "Cash for clunkers has captured the public's attention . . . (it) has the possibility to truly jumpstart our economy, said Rep. Candice Miller (R., Mich.). Other, more sober analysts, warned that the clunkers program was only stealing from future sales.

September sales are in, and sobriety can take a bow.

Edmunds.com reports that "September's light-vehicle sales rate will fall to 8.8 million units . . . the lowest rate in nearly 28 years, tying the worst demand on record. After the cash-for-clunkers program boosted August sales to their first year-over-year increase since October 2007, demand has plunged. In at least the last 33 years, the U.S. seasonally adjusted annual rate has only dropped as low as 8.8 million units once -- in December 1981 -- with records stretching back to January 1976."

The real popularity of the program was always due to the fact that the government was throwing money away and people rushed to pick it up.  Edwards.com estimated the Feds purchased vehicles with average blue book values of just under $1500 for $3500 to $4500.  That means that the government purchased cars that blue booked at just over a billion dollars for three billion.  I you suddenly offered to buy all of your neighbors' cars for three times what they were worth, you'd be popular too.   It was a $2 billion giveaway, and people rushed to pick the cash up like one of those money drops in the outfield of a minor league baseball game.  In doing so, the government made a trivial change in the overall fleet fuel economy, in the process overpaying for Co2 reduction by a factor of 20.

Update: The study linked above shows the government paying over $400 per ton of Co2 reduced in the Clunkers program.  The 20x factor cited was based on an estimated clearing price of a tone of Co2 in a future cap and trade system.  This is hypothetical, as currently a ton of Co2 offsets trades right now in the US at 20 cents.  At this price, the program overpaid by a factor of 2000.  To be fair, this reflects both estimated pricing as well as a discount for the likelihood of a cap and trade bill passing.

This Looks Very Good

We Phoenicians, who live in one of the best solar sites in the world, have been anxiously awaiting a solar electric technology that makes economic sense.    I have a couple thousand square feet of nice, flat room that is just begging to get be off the grid.  Already, solar is economic for individuals in Phoenix, but only if you are willing to soak American taxpayers and your neighbors for 85% of the costs.  It would be nice if it were, you know, actually economic and not just subsidy bait for tens of thousands of dollars.  I have dug into many analyses that claim that solar has a 5-7 year payback, but never seen one that achieved these returns without substantial subsidies and rebates (beware the term "energy payback" which is not the same thing as investment payback (pdf))

For a while I have said that I thought traditional silicon/germanium IC-like wafer processes for making solar cells was just never going to get there, and that some other technology was necessary.   This might be one such example:

JA Solar, one of the big players in the solar industry, is working with Innovalight to commercialize the latter's method for making silicon-ink-based, high-efficiency solar cells, the companies said this week.

... The solar cells are created by pouring an ink solution incorporated with silicon nanoparticles and then decanting the excess liquid to leave behind a crystalline silicon structure.

At the time of the 2007 announcement, Sunnyvale, Calif.-based Innovalight claimed its method not only resulted in solar cells that were cheaper to produce by as much as half, but that the crystalline structure resulting from the process made its cells more efficient at converting electricity.

Those claims now appear to be validated.

On Tuesday, Innovalight announced that an independent study of its method by the U.S. Department of Energy's National Renewable Energy Laboratory and the Fraunhofer Institute for Solar Energy Systems in Germany confirmed that its silicon ink-based cells "demonstrated a record 18 percent conversion of efficiency."

The 18% conversion efficiency is close to a record for thin films, but must be the "record" for production models, since higher conversions have been achieved in the lab.  18% is very good for a production device, particularly if it is cheaper to manufacture than current cells.

Ezra Klein, There Is A Reason You Can't Get An Answer to Your Question

Ezra Klein writes:

For a long time, I took questions about stifling innovation very seriously. So did a lot of liberals. But then I realized that the people making those arguments wanted to do things like means-test Medicare, or increase cost-sharing across the system, and generally reduce costs in this or that way, which would cut innovation in exactly the same way that single-payer would hypothetically cut innovation: by reducing profits.

I also found that I couldn't get an answer to a very simple question: What level of spending on health care was optimal for innovation? Should we double spending? Triple it? Cut it by 10 percent? Simply give a larger portion of it to drug and device manufacturers? I'd be interested in a proposal meant to maximize medical innovation. I've not yet seen one.

The reason he could not get an answer to this very simple question is that it is stupid.  It is a non-sequitur.  It is, as Ayn Rand used to warn, a statist trying to force the argument to conform to his statist assumptions.

Let's take a different example, because medicine is so screwed up by government intervention that it can be confusing.  Let's imagine ourselves in the computer market in 1974.  The market is dominated by IBM mainframes, and innovation at the time was considered to be the penetration of mini computers (not to be confused with PCs, these were really just smaller mainframes) by DEC and HP.

Let's say that for some reason the US government decides it is fed up with the IBM "monopoly" and the high cost of mainframe computing and it wants to take over.  It feels like there is a lot of waste in mainframes as some people are using them for frivolous reasons while other companies who really need them can't afford them.  They might have created review boards to make sure that they thought each dollar spent on computing hardware and software was "worth it."

So, how much spending is needed to maintain innovation?  We know in hindsight that the PC revolution is looming in the next few years.  And in that context, Klein's question is absurd.  The answer is that spending per se, and even profits, in the mainframe computing market were irrelevant to the coming series of innovations.    The necessary preconditions were that entrepreneurs saw that new technology provided potential new value to consumers, and were allowed the freedom to launch these new products in hopes that the value these new products provided would be sufficiently high that consumers would pay enough for them to return their cost of manufacture and development and return them a profit.  Some succeeded, and some failed, but entrepreneurs were allowed to try, despite most "experts" predicting the PC was a silly toy.

Note that computer innovators were not required to trundle into some government computing board to justify the PC and its price, to justify how much, as Klein would say, needed to be spent on PC's.   If in fact they were forced to do so, if Jobs and Wozniak had to fly to Washington to justify the Apple I to the Computing Spending Decisions Board, they would have almost certainly been shot down.  Or told they could sell it but only for $200 and not their initial price of $2000.  We would have never had a PC revolution in a government single payer computing world, no matter how much, as Klein asks, was "spent" by the government.   It is possible that the government might eventually have greenlighted a PC (years later) just as the increasingly bureaucratic IBM did, but can you imagine how frail the PC revolution would would be if only IBM had ever sold PCs, without the slew of competitors that emerged, and if every innovation had to pass the scrutiny of a government review board before it could be launched?   Only a tiny percentage of PC innovation and of what we think of as a PC today, mostly in the basic architecture, ever came from IBM.

The very problem is that when government runs computers or health care, innovation is seen as a cost.  Klein, by asking the question in this way, is betraying exactly what is fundamentally wrong with a single-payer system.  The single-payer tends to think in terms of trying to deliver the current value proposition (ie the 2009 level of health care technology) as cheaply as possible.  The problem is that in 2039, it will still be focused on delivering the 2009 level of health care technology.  For the government -- a new drug, a new procedure, a new test -- these are all incremental costs, to be avoided.  Klein just wants a number he can plug into budget projections to say, "see, innovation is covered."  Its like Wesley Mouch asking John Galt near the end of Atlas Shrugged to tell him what orders to give.

I wrote about it just the other day.  You can see it in everything the Left writes -- increased spending is equated with increased costs which are therefore bad.  They all say that America's health care spending is rising and our per capita spending is higher than other nations and that this rising spending is somehow a problem to be fixed.  But there is a value side of the equation.  What are we getting from the spending?  When you leave out things the health care system can't do anything about (homicides and fatal accidents) Americans have the longest life expectancy in the world.  We are getting something for that extra money.  It is not just "cost" to be contained.  Is a year of life worth an extra $100,000 spending?  Everyone has a different answer, which is why we typically let each individual make these tradeoffs, and why people are uncomfortable having someone in the Post Office make the tradeoff for them.

But, the left will say, we will put really smart people on this board, who are angels of public service, who will make perfect decisions on the price-value tradeoffs of innovation (have you noticed that all their programs seem dependent on this assumption?)  Back to our computer example, these guys, they would argue, would have been smart enough to have given Jobs and Wozniak the green light.  This is a fantasy.  It never happens.  No matter how good the people, every such government entity is driven by its incentives, and this group's incentives will be to cut spending.  Innovations that result in a net total increase in spending are not going to be well-received.

Further, these boards get politicized, always.  Companies will quickly learn they have a better chance, say, of getting a new breast cancer treatment rather than a new prostrate cancer treatment past the board because the current administration is closely tied to women's groups.  Just look at current government R&D spending, this already happens.  AIDS was under-funded given its mortality because Conservative administrations thought it a disease mainly of groups it found distasteful; today, women's cancers get far more funding than men's due to the strong political activism of women's groups and the success of the pink ribbon campaign.  Drug companies will learn that the quickest way to board approval may not be winning over the board, but getting certain interest groups to lobby the board, or maybe lobby Congress to override the board.  Just look at the promise not to politicize ownership of GM -- that lasted about 2 days before Congress was passing legislation reversing internal GM decisions and GM was making plant closures based on political rather than economic concerns.

But even beyond these problems, there are Hayekian ones as well.  In the mid-seventies, there might have been only a few thousand people who were excited enough to buy an early microcomputer and see its potential.  What are the odds that one of those folks would be on the government review board, particularly since few of them were in the mainstream establishment of the computing field (heck, few of them were over 19 years old).  And even if one were on the board, would they have approved a technology with only a few initial adherents?  The fact is innovation often requires adoption of bleeding edge risk-takers who are willing to try a new technology and iron out its kinks before the mainstream catches on.   The iPod was not the first music player -- a few of us struggled for years before the iPod with large and sometimes hard to use early mp3 players  -- but if these early MP3 players had not existed, the iPod would not exist.

Perhaps most importantly, everyone makes different tradeoffs.  It may make perfect sense for some person in Washington that a biopsy is not required for certain kind of positive cancer test results.  This may make perfect price-value sense to the beauracrat, but I know a number of people who would lose months or years of their life to worry -- worry that could be short-circuited with an inexpensive biopsy.   Or consider a new cancer treatment -- is a year of life worth an extra $100,000 spending?  Would I prefer to extend my life through chemo or increase the quality of life of the time I have left by avoiding chemo?   Everyone has a different answer, which is why we typically let each individual make these tradeoffs, and why people are uncomfortable having someone in the Post Office make the decision for them.

One could say that all of this does not answer Klein's question.  That is because his question, built on the wrong premise, is unanswerable.  I suspect he knows this and is, as Brad Warbiany posited in the link above, just setting up a straw man.  All I can do is try to give a feel what what innovation does require, and help folks to understand that it has little if anything to do with Klein's question.

So, if I had to come up with a pithy one sentence answer, here it would be:

Klein:  What level of spending on health care is optimal for innovation?

Me:  The very fact that you intend to control spending centrally, at any level high or low, is what kills innovation.

Postscript: For a totally different reason, I was reading this article on the Russian T-34 tank, probably the best all-around tank for its time ever made when considering its production volume (the Panther was theoretically a better tank but volume production of the scale of the T-34, not to mention mechanical reliability, eluded the Germans).  Apropos of government boards and innovation was this:

The L-11 gun did not live up to expectations, so the Grabin design bureau at Gorky Factory No. 92 designed a superior F-34 76.2 mm gun. No bureaucrat would approve production, but Gorky and KhPZ started producing the gun anyway; official permission only came from Stalin's State Defense Committee after troops in the field sent back praise for the gun's performance.

This Is Still A Stupid Idea

I probably have posted on the electricity generating speed bump more times than it deserves, but Glen Reynolds linked this story and I am seeing it linked uncritically all over.  Here was the email I dashed off to Instapundit:

The speed bump / power device at the Burger King in New Jersey is the silliest technology I have ever seen and I am amazed that so many people praise it or write uncritically that it provides free power.  Energy is never free, it comes from somewhere.  In this case, the energy is actually stolen from the car.  The electricity power produced is equal to or less than the extra power the car has to expend going over the bump.

This electricity might be "free" if it is used where cars are braking anyway, say on a long down ramp in a parking garage, or on a suburban street or school zone where speed bumps already exist.  But the Burger King example, and in fact most of the examples I have seen of this installation, are just vampiric theft, very similar to what the US Government does in many of its programs, creating a large benefit for a single user and hoping that distributing the costs in small chunks across a wide number of people makes these costs invisible.

I wrote more about the technology here.

More Specious Logic

A while back I wrote:

People often use terrible, specious logic when arguing things political.  I have particularly seen this over the last 6 months.  The argument typically goes like this:

  1. I make a critique of a policy in the Obama administration, say on health care
  2. Sometimes as an opening response, or sometimes when [the] other person is unable to specifically counter what I have said, they respond instead, "well, your guys  fill in the blank ." The latter part might be "got us into Iraq" or possibly "are pushing this birther nonsense."
  3. I respond that  fill in the blank was not something I support(ed) and that if  by "my guys" they mean Republicans, that I was not a Republican, that I do not think the Republicans have an internally consistent position, and that I disagree with many programs and policies typically advocated by Republicans.  And besides, how did this have anything to do with the original conversation?
  4. They respond to me now as if I am somehow cheating.  Confusion reigns.

Michael at Q&O has a good example today, from the White House blog reacting to criticisms that there are too many unaccountable czars running around:

But of course, it's really the hypocrisy here that is noteworthy. Just earlier today, Darrell Issa, a Republican from California and one of the leaders in calling for an investigation into the Obama Administration's use of "czars", had to admit to Fox News that he had never raised any objections to the Bush Administration's use of "czars". Many of these members who now decry the practice have called on Presidents in the past to appoint "czars" to coordinate activities within the government to address immediate challenges.

That addresses the charge, how?  Unbelievably, the White House is resorting to the kindergarten playground argument "well, you started it."

By the way, I had asked before if such an argument had a name.  Its clearly a subset of ad hominem arguments, but I suspected that something so common must have be labeled.  It has:

Tu quoque (pronounced /tuːˈkwoʊkwiː/, from Latin for "You, too" or "You, also") is a Latin term that describes a kind of logical fallacy. A tu quoque argument attempts to discredit the opponent's position by asserting his failure to act consistently in accordance with that position; it attempts to show that a criticism or objection applies equally to the person making it. It is considered an ad hominem argument, since it focuses on the party itself, rather than its positions.

At Least Four New Taxes in Baucus Bill

The Baucus Health Care bill follows in the tradition of many other pieces of recent legislation in raising taxes in ways such that Congress can claim that it didn't actually raise taxes.  Here are four such taxes in the Baucus Bill  (note that no one that I know of has read any actual legislative language, so this is based on the press releases by the bill's authors.  Actual bill language can only be worse).

Employer Penalty is a Tax: In a step right out of Goldilocks, the Baucus bill will impose "penalties" on employers with no employee health care plan as well as on employers who have plans that are "too rich."  Never mind the insanity of the government micromanaging how an employer chooses to structure his compensation package to employees.  These "penalties" are structured as percentages of wages -- the one for having no health care plan was 8% of wages in the last bill.  This is a direct tax on employment, making hiring people more expensive (effectively the same magnitude as doubling the Social Security tax).  So how does this effect the average person?  Think of it this way, for the same wage, you job will be more expensive to a company that it was before the bill, making it less likely you will get hired at that wage.

Insurance Mandate as a Tax: The mandate that everyone must have insurance is a tax on the young and the healthy, as I explained previously:

People focus too much on the penalty itself being a new tax.  But the new tax is actually the requirement that individuals buy a product (in this case a health insurance policy) that they feel has no value (or else they would purchase it of their own free will today).  The government stopped pretending long ago that these younger middle class families will get much value from such a policy.  In fact, if they did get value commensurate with the premiums they will be paying, the mandate would not be achieving its purpose.  The whole point is that healthy people pay more into the insurnace system than they get back to support sick people.  If that payment is mandatory, then it is a tax, even if it is called an "insurance mandate" instead.

In fact, this is made all the more clear when politicians also suggest that cheaper high deductible health insurance plans be banned, as they were in Massachusetts.  Again, the whole point is to get young healthy people to overpay for insurance, and allowing them to buy sensible, cheaper, high deductible insurance defeats the whole purpose.

In fact, the bill's supporters have explicitly discussed requirements that insurance companies raise the price of insurance to the young and healthy to help reduce premiums for the old and, er, politically more active.  This is a redistributive tax, hidden within an insurance rate structure that will be heavily regulated by Congress.  Though don't expect Congress to admit this when young folks start to complain, they will say "blame the insurance companies."  Which is the whole beauty of such a hidden tax.

Corporate Taxes as Consumer Taxes: The plan would place new excise taxes on insurance companies, drug companies, and medical device providers.  But these taxes, particularly in the low margin insurance businesses (Yeah, I know if you only listened to Obama, you would never realize they were low margin but they are) just get passed onto consumers in the form of higher prices.  Congress knows this, but pretends it doesn't happen, so it can tell the economically ignorant that it hasn't raised taxes on consumers, and that rising prices are all the fault of the evil insurance companies blah blah, you know the drill.

Price Controls as a Tax: A large part of the Baucus Medicare savings is instituting price controls on doctors and other medical suppliers --  basically cutting their reimbursement rates.  This, by the way, just confirms what we all have known, that Obama and the Democrats don't have some mysterious win-win way to cut medical costs.  The only levers they have are 1. Price Controls and 2. Denying care.

There is absolutely no difference to a doctor between price controls and a tax.  A cut in the reimbursement rate from $50 to $40 is the same as having a 20% tax put on his $50 reimbursement.  Again, price controls in this context are just a way of hiding a tax.

And this might be the most dangerous tax of all, as such price controls always, by the immutable laws of economics accepted by monetarists and Keynsians alike, reduce available supply.  Doctors, for example, are going to be less willing to stay in the medical profession.  The result is inevitably shortages and long waits, something that should surprise absolutely no one as shortages and queuing are endemic in every government health care system in the world, starting with liberal darling Canada, whose citizens get medical treatment quickly only by crossing the border into the US.

Quickbooks -- Steadily Worse Each and Every Year

A quick note to many small businesses out there that use Quickbooks.  I know that most of us are cynical about annual upgrades from people like Microsoft as they seldom add any new functionality one actually needs, so they are seldom worth the price.  But there is an additional reason not to upgrade Quickbooks.  Every single version, since at least 2004 and up to and including 2009 has been worse than the previous year's version.  Somewhere around 2006 we got data file bloat, where the size of the company data file mushroomed 10-fold.  Around 2008 we got a goofy and intrusive place-a-phonecall-to-India authorization process.  In 2009 most of the online banking features were broken.

It is kind of funny to read Quickbooks reviews on Amazon, with each successive generation getting fewer stars.  Every version is dominated by reviews that begin with "worst quickbooks version yet."   Quickbooks 2009 right now is at about 2 stars, and is buoyed that high only by an aggressive campaign by Intuit employees to post 5-star reviews.  I stopped upgrading my business version around 2006 (and wish we had stopped earlier) but one of the non-profits I do the books for upgraded to 2009 and it is a mess.  Unfortunately, if you use the online banking functions or payroll service (we do not) Intuit forces your company to upgrade as there is apparently a 3-year clock built into the software that shuts down and forces an upgrade.

Its time for those market forces to get to work and make someone rich by bringing out an alternative.  Intuit is right for the plucking, if someone has the right product.

Good News, for Once, on Water

Kevin Drum links this:

The city of Palmdale is running out of water, and as a result prices are going up.  Way up:

"My bill went from $12.80 to $185," [Tracey] Summerford, a Neighborhood Watch captain, told the water board.

"My water bill went from $139 to $468," Sanchez said at that meeting. Since then Sanchez received another monthly bill, one for $324. Together that meant she owed the water district $792, plus a prior balance that brought her total to $924. "That's my two car payments," said Sanchez, who moved into her home in November....I feel discouraged. I feel like we should have stayed in Santa Clarita and lived in our apartment."

I wrote in the comments:

This is really good news. For years California has claimed to have water shortages, but municipal water prices never reflected that shortage. Politicians would prefer to use command and control allocation and rationing powers than just let price do its work.

It is really good to see some California communities price water in line with its scarcity. Under-pricing water has always provided an implicit subsidy for building and farming in certain areas. I wish all California water would be priced on the basis of supply/demand clearing rather than political patronage.

By the way, the author later calls Santa Clarita "the city."  That is pretty hilarious to anyone who has been there.  Santa Clarita sure looks like the burbs every time I have been there.

Strange Brew

Combine 40% French design and engineering, 40% political correctness, 10% Hello Kitty and 10% of WTF to get this new electric concept car from Renault with square wheels called the Twizy.  I don't think this is a put on.

f2

Can This Be Real?

I haven't really written about the various ACORN videos James O'Keefe has been collecting.  As someone with 500 employees, I have substantial understanding for folks who get bitten in the butt by nutty front line employees.  But the volume is starting to look a lot more like a culture of corruption that a few crazy employees.  Did this ACORN employee really just explain how she got away with murdering her husband?  I mean, if she tells this story to people who just walked in off the street, she must have told it to everyone at ACORN she works with.  I have hired a few doozies by accident, but I can guarantee you that people only 10% as nutty as this lady would be out our company's door in minutes after telling such a story.

The only thing I really can say is that O'Keefe missed his chance at a fortune, because this stuff is far more outrageous than anything on reality TV.

Bait And Switch Alert -- Increased Expenditures <> Increase Costs

Kevin Drum presents this chart:

Blog_Healthcare_Growth

Look at the top and the bottom of the chart.  The top says "growth of health care costs" while the bottom says "average annual percentage change in total health expenditures."  Drum goes on in his post to use rising expenditures and rising costs interchangeably.  I responded in the comments:

Um, I hate to bring measurement and data integrity into this discussion, but "costs" and "expenditures" are not the same thing.

Total per capita expenditures at Wal-Mart have gone up over the last 20 years by a lot. The cost of items sold at Wal-Mart have not increased by nearly so much. The difference is the volume of purchases.

Let's say 20% of this country was getting no health care. If next year, everything stayed the same but suddenly these 20% could buy the same amount of health care as everyone else, our per capita expenditures would go up by at least 20%. This does not mean the cost goes up. It means we bought more of it. It would be a good thing, not a "cost"

Only from one perpective, that of a single payer, are the words "per capita expenditures" and "costs" the same. In such a scenario, but no other, having people get more health care is an increase in costs, rather than an improvement to the population.

I think this is at the heart of what makes many people worry about single payer health systems -- that increased volume of use is a "cost", so that in turn decreasing supply and volume of use is a reduction in cost. It is this whole way of thinking that equates increased usage with increased costs that makes people suspicious of government run systems, and fear that cost reductions will come through usage restrictions.

We might well expect that in wealthy countries like the US, as the per capita percentage of people's budgets taken up by food and other necessities drops, that health care spending might increase. What better way to spend incremental wealth than on our own health? In anything else - housing, food, travel, whatever -- I would suspect that Mr. Drum would consider increasing per capita spending as a good thing, as a sign of wealth and increasing well-being. Why is health care treated just the opposite?

You Want to Know Why Medical Care Is So Expensive?

You Want to Know Why Medical Care Is So Expensive?  Because the government has passed numerous laws to help medical practitioners enforce their monopoly on numerous medical services.

Today I encountered an egregious example.  1-800-Contacts will not ship my contact lens order.  Seeing that my 1-year prescription was about to run out (but still valid for another week, it expires on the 18th), I ordered a bunch of boxes of my daily lenses to see me through some more months.  The retailer called my eye doctor, who confirmed that the prescription was still valid but that the doctor would only allow me to buy one box because he wanted me to return for an exam soon.  They confirmed this by email:

Thank you for choosing 1-800 CONTACTS. While we were verifying your prescription, your eye care provider informed us that your prescription will be expiring soon. Unfortunately, this means that we are unable to ship your order....

But then we get to the real point

Also, if you would like assistance scheduling a new exam, we can help! We have a network of doctors with convenient locations and hours....

Sincerely,

The Doctor Network Team at 1-800 CONTACTS

So the email is not even from the customer service department.  It is from their doctor network.  Its clear the requirement is all about pumping up the eye doctor business.

I remember a Dilbert cartoon (or maybe it was the Far Side) where one copier repairman was pointing into a copier and telling the other that he should "set this dial for when he wanted to return."  We all have suspected something like this exists in copiers, but for all the dark humor, it really exists in the medical profession.

Why should the government force me to pay the doctor for as many visits as the doctor wants just to be able to purchase contact lenses?  One could argue this is for eye health or some happy BS like that, but we don't require everyone to visit the eye doctor at the doctor's pleasure, just people with bad vision who have daily wear contacts.  There is not, to my knowledge, any correlation between glaucoma and contact lens wearing, so why do I face such a government mandate while someone with 20/20 vision does not?

Further, why can't I self medicate on contact lens selection?  I know people who have been raised to be submissive sheep deferring to the almighty medical degree gasp at such a suggestion, but why not?  Because I have problems with both near and far sightedness, my choice of contact lens strength is a tradeoff anyway.  If I can see well long distance, I can't read anything without reading glasses.  Back off a bit on the far vision, allowing a little blurriness in one eye, and I can read in an emergency without my glasses.  I chose my own lens strength, and my doctor then wrote a prescription for it.  Why can't I just do this on my own, say with a trial kit of lenses from the manufacturer.  (for those who think it might be a size issue, there are only about 3 sizes in this type of lens, and they are far enough apart that once a size is selected, they are likely that size forever).  It's fine if people want to do this under a doctor's supervision, and I would certainly get into the doctor every two or three years, but why must the government mandate I go in more frequently, at the doctor's pleasure, not mine?

This kind of thing exists ad infinitum in the medical profession, with government mandates helping to protect over-educated professionals from lower-cost competition.  Why do I have to go to a dentist's office to get my teeth cleaned?  Why do I need someone with 12 years of medical training to put three stitches in my knee?  Why do I need a fully trained doctor to take me through the basics of a routine physical?  Why does Viagra require a prescription -- I mean, doesn't the doctor just take my word there is a problem, or is there actually a doctor out there who sends in hot nurses to prove whether I have an erectile problem?  OK, I might not begrudge that particular doctor visit.