Archive for May 2012

Love/Hate Relationship with Facebook

My column this week at is on my business's experience with Facebook and what it might mean for Facebook's valuation.  An excerpt:

And woe be to he who actually develops for the platform, because he may soon find out that it all became wasted effort at the next over-caffeinated random user interface change.  I just did a tiny, minor bit of coding (less than a few hours) that takes my page administrators’ status updates and posts them as a news feed on our main web site.  I could do more interesting things, but I have absolutely no confidence that whatever hooks I take advantage of into the Facebook system will still be supported tomorrow.

Now, one could easily argue that this is all fixable.  And it is.  Some simple steps might include:

  • Create an internal advocacy group for enterprise users.
  • Stabilize the user interface.  Communicate a long-term plan and revision history to enterprise users.
  • As in other publishing engines, allow multiple levels of editorial rights for pages (today there is just one choice: administrator)
  • Allow more control of page layouts, perhaps in conjunction with a paid model, up to and including ability to eliminate ads and the patented Facebook clutter.

Over time, however, I have lost confidence that Facebook culturally is up to the task.  No, that’s not quite right.  I have lost confidence that Facebook evenwants to take on the task.  In Facebook, pages were meant for fans who wanted to create homages to their favorite band.  My gut feels is that the Facebook culture can’t get past the notion that corporations are “icky” and have hijacked the pages for crass commercial purposes.  Perhaps I am overly pessimistic, but all the Facebook changes I have observed over the last two years have actually taken the platform backwards as far as my business needs are concerned.


Love My New Computer Case

By an accident of both finances and previously hitting the technology sweet spot at just the right time, I have not built a computer in several years.  In anticipation of doing some upgrades on my home PC, I started by buying a new case.  Wow!  This is absolutely the best case I have ever had.  I am not sure this is so much the particular case I picked but the evolution of case design in the past few years.  Either way, its awesome.

Just the small step of turning hard drives 90 degrees so their wiring does not conflict with the graphic cards (and they are much easier to slide in and out without removing the expansion cards) makes a huge difference.   This is great, since I am constantly swapping drives in and out (for example I am trying to teach myself Linux/Ubuntu so I have added a dedicated drive and dual boot to the system for that purpose).  In addition, this case, as does many new cases, has a wiring management system the puts all the wiring in a back compartment accessible by a separate panel.  Look how neat everything is:

There is also a hole in the floor of the case, covered by the back door, that allows access to the back of the CPU.  This allows changing the CPU fan without taking out the motherboard, which I took advantage of after I somehow damaged the old CPU fan cleaning it in the case swap.  As you can see it has tons of space, including plenty of room for one of the mile-long graphics cards they are selling nowadays.  Other nice features are a hard drive hot dock and big huge quiet fans with a three-position fan speed control.  The only downside is that there are no front cutouts for 3-1/2 inch drives, but I don't have any so that was not a problem.

This case is expensive - $160 after rebate, but it's the first case I can say that this may be the last case I buy.  It's a Corsair Obsidian Series 650D and I highly recommend it.

Another Enormous Subsidy of a Pitiful Few Train Riders

From the AZ Republic

Valley Metro is set to break ground today on the first light-rail expansion, a 3.1-mile stretch into downtown Mesa that city leaders hope will bring a sorely needed economic boost.

The $200 million extension is expected to attract thousands more East Valley riders daily and potentially nurture new development along the line.

If we assume "thousands" means two thousand, then this means the metro area is spending $100,000 per new daily rider for this expansion, not including the additional operating subsidies that will be required to run the trains.  Given that none of these people will likely be able to give up their car, since the route goes so few places, why should they get a $100,000 subsidy?

How about we charge them what it costs?  The payment on a 30-year 5% bond is around $13,000,000 a year.  So if there are 2,000 additional round trip riders boarding or debarking at these new stations each day, that is 1.46 million trips.  So the tickets should be $8.90 per trip plus the cost of actually running the train.  We'll round it to $10, though the cost is probably higher.  If people really think this train is so great, they should be more than willing to pay the $10 a trip it costs for the expansion.

No, they are not?  What this means is that people think this is a really go idea as long as someone else pays.

PS-  If these seem unreasonably high, or simply an artifact of looking at this expansion on a stand-alone basis, think again.  For the original system, the capital cost was $75,000 per round trip rider and the public subsidy in 2010 was $32.73 per trip.  In other words, on the main system, riders would have to pay $32.73 a trip more to be actually covering the cost of the service they are receiving.  So if anything, these incremental numbers for the expansion are probably optimistic.

PPS - I am sure transit authorities would argue that the public did support paying for other people's transit by approving the sales tax increase for this purpose a few years ago.  But the train piece was packaged in with a bunch of highway improvements in the same proposition that people really did want.  It would never have passed on its own.  Transit official may disagree, but the proof is in their actions - they have never allowed the public to vote on the transit piece alone.

Wow, I Wonder Why Job Creation Isn't Occurring in California?

I wonder if its because companies have to beg for government permission, and then pay a hefty bribe, to get permission to hire more employees:

The city council in Menlo Park, Calif., is set to approve a deal that will let Facebook employ thousands more people at its headquarters there.

Mayor Kirsten Keith says officials are expected to green light the environmental impact report and the development agreement at a meeting Tuesday night. City staff has recommended the city approve the deal.

That means Facebook employees, currently numbering about 2,200 in Menlo Park, will soon be able to stretch out. If the deal is approved, Facebook will be able to employ about 6,600 workers in Menlo Park, up from its current limit of 3,600. That was the constraint on Sun Microsystems, which previously occupied the campus.

Facebook will pay Menlo Park an average of $850,000 a year over 10 years to compensate for the additional load on the city. It will also make a one-time payment of more than $1 million for capital improvements and set up community services such as high school internship and job training programs. Facebook is also creating a $500,000 local community fund that will dole out grants and charitable contributions to communities surrounding Facebook's campus.

Facebook is making the payments because Menlo Park can’t collect sales taxes from Facebook.

The last is a dodge - this is a protection racket, pure and simple.  Presumably Facebook pays property taxes on its corporate offices, as do its employees who live nearby.  Also, these new employees will all spend money in the local economy that will generate sales taxes.  Facebook presumably pays for water, sewer, trash and other utilities, and their employees are paying gas taxes as they drive that pay for the roads.  Facebook pays California income taxes, as do their employees.  What are these mystery costs that are not getting covered?  The community services bit is a hint that this is a stick-up, with Menlo Park demanding its cut of the recent IPO.

The truth is that cities and counties in California see business expansion plans the same way that Tony Soprano looks at the Museum of Science and Trucking -- as a way to maximize their skim.  I operate a campground in Ventura County that DOES pay sales taxes the County so far will not let me increase my live-in staff without making a big payment.  Even the remodeling of our store required 7 separate checks written to Ventura County agencies.

Update:  Minutes after I posted this, I see this at Reason about Ventura County's efforts to use zoning laws to shut down businesses.  Another Ventura story -- we tried to put a small trailer, really just a booth, in a large asphalt parking lot so my employee there could get out of the sun.  Putting a portable shed on a parking lot apparently required permits - lots of them.  At one point we were asked to get a soil sample, meaning they were asking us to cut through the paving and sample the dirt underneath.  Eventually we just gave up.

Yet Another Cost of the Drug War

Stupid bank structuring laws that allow the government to seize your property without due process if they don't like the size or pattern of your cash deposits.  All in the name of going after drug dealers.

I run a cash business.  It is not at all unusual that we might have $9000-ish a week deposits through the summer months at certain large locations.  If some bored Fed were to decide tomorrow that these looked suspicious, they could seize all my bank accounts, effectively bankrupting my business, and then force me to try to get my money back in the courts (where the burden of proof is on me, not the government).  All the while with a set of incentives such that the Feds get to keep any of my money for their own departmental use if they thwart my efforts to get it back.  And all without any need to go to a judge to sign anything or even offer a shred of proof that I am engaged in an illegal activity.  Making deposits just under $10,000 is effectively a crime in and of itself, and the only thing that protects me from abuse is my hope for the goodwill of the Feds that they won't abuse their power.

This is the kind of Faustian bargain we have made for ourselves in the war on drugs, and it needs to end.

Nest Thermostat

I installed one of these beauties over the weekend.  It was easy to install, and has a beautiful user interface that blows every other programmable thermostat away.  And I can change it via a web interface, which is handy if I forgot to change it before I left town.

It remains to be seen if it actually saves money.   It is a very satisfying piece of gear, though.   It has that Apple kind of industrial design, which is unsurprising since it was designed by ex-Apple folks.  It is currently in its learning mode where it learns where we like to set it at different times and days of the week.   Maybe these guys can turn their attention to lawn sprinkler controls next, as that is another industrial design / user interface nightmare.

Protecting Public Employees From Accountability

Mark Tapscott writes:

Legislators in the California Assembly have approved on a 68-0 vote a bill that would exempt multiple categories of state and local government employees from having their names disclosed in public property records, according to Steven Greenhut....

Greenhut, who is vice president of the Franklin Center for Government Public Integrity points out that such a measure has implications far beyond public safety concerns: "Public officials and their family members will be able to hide their identities, which will undermine the reliability of property transactions. Dirty officials will pull off real estate scams without scrutiny," he said.

As it turns out, Arizona has a prohibition from publishing the home addresses of government officials over the Internet.  Which Sheriff Joe Arpaio (who else) has used to try to thwart investigations of his real estate dealings

In 2004, during an election cycle, reporter John Dougherty found that Arpaio had over a million dollars of investments in commercial real estate parcels.  Dougherty asked the question, how does a lifetime public official making $78,000 a year have so much real estate?  Arpaio could have replied that his family was independently wealthy or that he had parlayed his real estate investment from rags to riches.  Instead, Arpaio used an obscure law aimed at protecting the home addresses of government officials to remove access to any public records of his commercial real estate transactions at the same time he removed his home address from these data bases.  Instead of explaining where the money came from, he used his power to cover his tracks.

If passed, this means that California officials can take bribes with impunity, as long as they take these bribes in the form of real estate.

Yeah, Let's Turn the Internet Over to These Guys

I am increasingly convinced that the UN is really some kind of performance art rather than a serious attempt at global governance.  Why else would they select Robert Mugabe as ambassador of tourism?  Via Radley Balko

Department of Circular Definitions

Apparently, it is official US policy now that any adult male killed in done and other attacks be labelled a "militant".  Was the drone strike yesterday that killed 12 men really necessary, Mr. President?  Of course, they were all militants.

By the way, kudos to Greenwald to holding his "side" accountable, without even a token "but of course the other side is worse" dilution.  Both Conservatives and Liberals can learn from it.

Corporate State and the Olympics


The most carefully policed Brand Exclusion Zone will be around the Olympic Park, and extend up to 1km beyond its perimeter, for up to 35 days. Within this area, officially called anAdvertising and Street Trade Restrictions venue restriction zone, no advertising for brands designated as competing with those of the official Olympic sponsors will be allowed. (Originally, as detailed here, only official sponsors were allowed to advertise, but leftover sites are now available). This will be supported by preventing spectators from wearing clothing prominently displaying competing brands, or from entering the exclusion zone with unofficial snack and beverage choices. Within the Zone, the world's biggest McDonald's will be the only branded food outlet, and Visa will be the only payment card accepted.

This brand apartheid is designed to prevent "ambush marketing", the gaining exposure of an brand through unofficial means. One of the best known examples of this was in the World Cup in 2010, where a bevy of 36 Dutch beauties in orange dresses provided by Bavaria beer gained considerable media attention, to the chagrin of the official World Cup beer, Budweiser. At London 2012, branding 'police' will be on hand to ensure that nothing like this happens, with potential criminal prosecutions against those responsible. Organising committee LOCOG will also take steps to ensure that no unofficial business tries to associate itself with the Olympics by using phrases like 'London 2012', even on such innocuous things such as a cafe menu offering an 'Olympic breakfast'....And it's not just London. All the venues for the 2012 Olympics will be on brand lockdown. In Coventry, even the roadsigns will be changed so that there is no reference to the Ricoh Arena, which is hosting matches in the football tournament. Even logos on hand dryers in the toilets are being covered up. The Sports Direct Arena in Newcastle will have to revert back to St. James Park for the duration of the Olympics.


Enshrining Peer Review as Part of the Scientific Method

I have written a lot about problems with over-emphasis on peer review and problems in scientific publishing.  This is from a press release by the CRU quoting the highly flawed Muir-Russel review / whitewash of the Climategate emails.

We note that much of the challenge to CRU’s work has not always followed the conventional scientific method of checking and seeking to falsify conclusions or offering alternative hypotheses for peer review and publication. We believe this is necessary if science is to move on, and we hope that all those involved on all sides of the climate science debate will adopt this approach.

Because methodological challenges to scientists work that don't appear in Climate Journals controlled by the scientists in question are not part of the scientific method.

By the way, the statement that "The raw tree-ring data used in our published work are available; anyone is free to use them in any way they wish" is absolutely hilarious for anyone who has followed this saga over the years.  To the extent they are available "freely," it is only because Steve McIntyre and other challengers of CRU's work engaged in a decade long legal campaign to get this publicly-funded data (necessary to verify and/or replicate the CRU's published work) released.  Here is the McIntyre post to which CRU was responding, though they bend over backwards not to actually mention him.


Bottom Story of the Day

Sorry for the lack of serious blogging, but I am not in the mood.  Local 81-year-old woman accused of hoarding and eating cats by Maricopa County Sheriff's Department.  Sheriff Joe and this woman are perfect for each other.

YouTube Mysteries

Via my daughter.  It's a suckers game to try to analyze what is popular on YouTube, but the view count for this video is just staggering.  It apparently also has about a thousand imitators.  If I am going to watch a cover video, why wouldn't I rather one with LA cheerleaders?  But I have to credit Harvard as a trendsetter.  Who knew there could be a whole new genre of videos about lip syncing pop tunes in a moving passenger van?

If It's May, It Must Be Time For Another Valedictorian Fight

Yes, yet another group of school kids and their parents are battling it out over whose little darling should be valedictorian.   I like the approach taken by my son's high school.  All the seniors, on dates scattered through the year, must make a 10-15 speech to the school.  On anything.  This year there were speeches on topics ranging from the Holocaust to the banking crisis to "why I love my dog" to "why the rumors of my crying at that formal dance Freshman year when my date abandoned me are greatly exaggerated."

The speeches are a fun event.  The speaker's friends leave an offering of food and balloons on the stage.  When they are done, much of the school comes up on stage and congratulates them.  It is great experience, and (within the context of public speaking, which is stressful for many) the school works to lower the pressure on the kids -- in fact, there are no grades for the speeches that hit any transcript.

The only grading is simple -- whoever is judged to have given the best speech, both in subject matter and in presentation, gives the speech at graduation.

Of course, this could only work at a private school, where the school and teachers can actually exercise judgement without having to defend their decision in court.

PS-  My son's speech included, among other topics, one of the four subjects listed above.  If you really must know which, see the 23-minute mark here.

College Grade Inflation

Apparently the news of the week is that the letter grade "A" is now the most common.  Mark Perry has more on college grade inflation.

I am actually a fan of the grading system at Harvard Business School when I was there.   15% of the students in each course get the top grade (category I) -- no more, no less.  10% get the bottom grade (category III) -- again by rule, no more and no less.  All the rest are in the middle.  It effectively acknowledges that for most folks, the point is to demonstrate you have satisfactorily learned the course material, while still allowing folks to distinguish themselves on both ends.  Budding young executives who complain that it is unfair to automatically "fail" the bottom 10% of each course are reminded that this is exactly how many Fortune 500 companies run their HR systems, seeking to constantly weed out the bottom 10%.

Update:  The argument usually is that students need high grades to compete with other kids from grade-inflated schools in the marketplace.  I just don't think this is true.  Colleges themselves deal with this all the time in admissions.  When they get a high school transcript, attached to that transcript is a fact sheet about the high school that gives its distribution of grades.  That way the recipient can discount the GPA as appropriate.  Every company doing hiring should demand the same of colleges.

Here is a personal anecdote.  My son Nic's school grades hard.  Something like 2 kids over the last 2 decades have graduated with a 4.0.  One could argue my son's grades could have been higher at another school, but knowledgeable consumers of high school GPA's know how our school works and we have never felt he somehow was at a loss due to the school's grading policies (but Oh God can type A parents fret about this incessantly among themselves).   [edit:  took out brag about my son.  Nothing more boring than other people bragging on their kids.]

Very Frustrating

It is bad enough that great series like Game of Thrones and Downton Abbey whiz by in just 10 episodes or so, making us wait another year for more.  But Sherlock has to be the ultimate tease, giving us just three (admittedly epic) episodes each season.  I mean, every three episodes there is a season-ending cliffhanger.

Agent of the State

Somehow the picture of my son posing with one of Joe Arpaio's new recruits got messed up in an earlier post.  I know you all were desperate to see it, so here is the repaired image.

It's Time to End the ACA (No, a Different One)

No, not the Affordable Care Act, though we need to get rid of that, too.  In this case I am talking about the Arizona Commerce Authority.  This is one of those ubiquitous local / state "development" efforts that mainly consists of handing out corporate welfare to a few well-connected companies who threaten to leave or build their new plant somewhere else.

Dru Stevenson at the Privatization blog has been nice enough to invite me to blog from time to time over at his place, despite the fact that we do not always agree.  But we are in total agreement on this effort:

Even from a conservative, free-market perspective, government subsidies for businesses distort markets, foster monopolies, undermine competition, and reduce efficiency.  The same complaints that business advocates make about the welfare system apply to government programs to help businesses - the vicious cycle of dependence, the lack of incentive to work hard or face difficult choices, the inevitable favoritism (some businesses get taxpayer subsidies, others miss out, and those that do have an unfair advantage over competitors who might otherwise win in a free marketplace).  It has a chilling effect on market-driven innovation, improvements in efficiency, or "creative destruction." The subsidies can cause inflation as the local market prices correct for the infusion of unearned money. The inherent risks in entrepreneurship get externalized onto taxpayers rather than internalized by those who hope to reap the profits if they get lucky.  The conflict-of-interest problem is not just that the businessmen will engage in whitewashed embezzlement, diverting funds to their own businesses or friend's businesses (or to their suppliers, in hopes of getting discounted inputs).

The problem is also that other firms - firms that might be more efficient, providing better goods and services at lower cost - face higher entry barriers when the existing holders of market share are bolstered by government handouts.  In other words, I see little difference in the morality of handouts for poor individuals/families and handouts for businesses.  There is a spiritual virtue in helping the poor, of course, but also a virtue in helping those who are hard-working and who have made sacrifices to become successful.  The problem for me is the unintended consequences of government subsidies for entities that are supposed to compete and succeed in a free market.

I encourage you to check it all out.

The reason this made his privatization blog is that Arizona has actually privatized this function to an independent business group.  Though an advocate of privatization in many realms, this makes me queasy for a couple of reasons:

  • I can't get excited about privatizing an activity that should not be occurring, or is, as Stevenson so ably explains, actually detrimental
  • I am comfortable privatizing operational things -- landscaping, running buildings, cleaning bathrooms, etc -- but privatizing the handing out of political patronage is an odd one for me and I don't really know how to think about it.  On the one hand, this is essentially what the PPACA (Obamacare, the other ACA) is doing with difficult decisions like determining which procedures should be on the must-cover list for insurers by putting them in the hands of independent groups.  But I have criticized those provisions of the PPACA for lack of accountability, and I believe the same arguments apply here

The only quibble I have with the criticism of the Arizona group is that, like many criticisms of privatization, it does not actually make a comparison to government-run efforts.  Sometimes even mistake-riddled private efforts can be better than disasterous public management.  For example this criticism:

According to Arizona PIRG's report, only two of the 13 incentive programs even track how many jobs or other benefits they generate -- and none disclose that information publicly. For all its business-savvy rhetoric, the ACA can't demonstrate performance if it doesn't track results. Only one program publicly discloses what companies promise to deliver for their subsidies. Worse still, only 4 of the 13 programs even disclose which companies received subsidies or how much. And when companies that receive subsidies fail to deliver on promised economic development benefits, the ACA can reclaim taxpayer subsidies for only one program, and there is no way for the public to see if this ever happens.

None of this is good, but note that for most similar state-run development programs, the number of programs that track their results is usually less than 2 in 13, the number is usually none.  And the fact that there is some sort of clawback provision on funds is better than exists in most state relocation and other subsidy programs.  In fact, most third-party reviews of state-run corporate relocation and plant location subsidy awards show that they universally fall well short of their pr0mised benefits, though this analysis is really hard to do because there is so little transparency in state activities of this sort.

My quibble, then, is that I am not sure the bad results here are a function of privatization or just the activity itself, as state-run efforts seem to do no better.

Update:  I have written before about government corporate subsidies and attempts at venture capital investment in the context of the "big shot" effect.  Many times I have come to suspect the biggest beneficiary of these programs is to the administrators themselves, who have no money of their own and wouldn't ever be trusted to manage a private portfolio but get to act as "big shots" with other peoples' money.  They get the psychic benefit of being little junior Donald Trumps.  This seems especially evident to me with Glendale, AZ, but seems to be an element of all these schemes.

Judicial Review

There is an argument going around, mainly on the Left, that the Supreme Court cannot overturn the PPACA (aka Obamacare) because it is just too major and significant.  It's sort of OK to overturn minor legislation at the margins, but if Congress does something really big, it deserved the Court's respect and acquiescence.

But it strikes me that the larger and more comprehensive a piece of legislation is, the more likely it is to run afoul of Constitutional restrictions.  And this is the case no matter what theory one holds about the Constitution.

I am not a Constitutional scholar nor a lawyer, but I would describe two schools of thought on the Constitution.  The first is that the Constitution gives the Federal government certain enumerated, defined powers beyond which it may not stray.  The second is that the Constitution gives citizens a number of enumerated, defined rights (e.g.  First Amendment freedom of speech) such that the Federal government can do most anything it wants as long as it does not trample on these defined rights.   (I would argue that the first interpretation was the clear meaning of its authors, and the second interpretation is probably the majority view today of average Americans today).

But under either interpretation, larger, more sweeping legislation is more rather than less likely to cross a boundary that circumscribes Federal power.  Whether such a boundary has been crossed by this legislation is another matter, but the argument that large legislation per se should be exempt from the possibility of being overturned on Constitutional grounds does not hold water.

Profile on the Corporate-Regulatory State

This article from the Chicago Tribune on fire retardants has everything, from regulations that benefit a small industry group to tort lawyers effectively forcing the propagation of a bad standard to playing the race card and the "for the children" card in policy debates.   Here is a bit of history I did not know:

These chemicals are ubiquitous not because federal rules demand it. In fact, scientists at the U.S. Consumer Product Safety Commission have determined that the flame retardants in household furniture aren't effective, and some pose unnecessary health risks.

The chemicals are widely used because of an obscure rule adopted by California regulators in 1975. Back then, a state chemist devised an easy-to-replicate burn test that didn't require manufacturers to set furniture on fire, an expensive proposition.

The test calls for exposing raw foam to a candle-like flame for 12 seconds. The cheapest way to pass the test is to add flame retardants to the foam inside cushions.

But couches aren't made of foam alone. In a real fire, the upholstery fabric, typically not treated with flame retardants, burns first, and the flames grow big enough that they overwhelm even fire-retardant foam, scientists at two federal agencies have found.

Nevertheless, in the decades since that rule went into effect, lawyers have regularly argued that their burn-victim clients would have been spared if only their sofas had been made with California foam. Faced with the specter of these lawsuits — and the logistical challenge of producing separate products just for California — many manufacturers began using flame retardant foam across their product lines.

The "if only the manufacturer had used technology X, little Sarah would not be dead" argument should be very familiar to readers of Walter Olson's blog.  Part II of the story argues that the Tobacco industry helped reinforce this story to shift the blame for fires started by cigarettes to the furniture (can't any of this be, you know, the person's fault who dropped burning items onto flammable items?)

It also, by the way, has plenty of elements of environmental panic in it.  For example:

"When we're eating organic, we're avoiding very small amounts of pesticides," said Arlene Blum, a California chemist who has fought to limit flame retardants in household products. "Then we sit on our couch that can contain a pound of chemicals that's from the same family as banned pesticides like DDT."

I am open to believing that flame retardant chemicals pose some harm to humans, though one must posit some way for them to get out of the foam and into people for it to be harmful (just existing nearby is not enough).  Further, being from the "same family" as another chemical is meaningless, particularly as compared to DDT which was banned for suspected thinning of bird eggs and not for demonstrated harm to humans.

I finally read through all four parts  of the story, and its interesting to compare the approaches to science.  The authors make a really good case that the science of flame retardants effectiveness is deeply flawed and that lobbying pressure and actions in tort cases have led to their expanded use rather than any particular benefit.

But the authors' scientific standards change wildly when it comes to their own side's science (I write it this way because the authors clearly have  a horse in the race here, they want these chemicals banned). I kept waiting for their bombshell study that these chemicals posed a danger, but we never get it.  All we get is the typical journalistic scare quotes about trace quantities of these chemicals being found in house dust and in certain animals.

OK, but with improving detection technology, we are constantly finding traces of chemicals at tiny levels we did not know were there before.   How much risk do they pose?  We never find out.  It would be nice to know.  I'm convinced I would rather not have this crap in my couch, but there has to be a better standard for legislation than this.  Ironically, the whole point of their story is to highlight regulation pushed by small groups based on bad science, and their response is to ... mobilize a group to push different legislation based on bad science.    There is a heck of a lot of "OK for me but not for thee" here.

Here is what is really going to happen:  After years of being stampeded by tort lawyers into putting these chemicals into furniture as a defense against "you should have..." lawsuits based on bad science, these same furniture makers are now going to be sued by people claiming the chemicals make them sick based on bad science.   And yet another industry will find itself in a sued-if-you-do-sued-if-you-don't trap.

The one group never interviewed in all four parts were furniture makers.  It would have been fascinating to get an honest interview out of them.  I am sure they would say something like "legislatures just need to tell us what they freaking want, chemicals in or out, and then shield us in the courtroom when we follow the law."

Update:  The updates to the story are classic.  After describing how the race card was abused in what should have been a straight up fight over chemical effectiveness and safety, the authors then pen a story called "Higher Levels of Flame Retardants in Minority Children."  It's OK, I guess, to play the race card in a scientific debate if it is for your own side.

Penn Jillette Rants On Drug Criminalization

People who genuinely care about African-Americans in this country should be supporting

  • Decriminalization of drugs
  • School choice
Everything else is a rounding error, or a way for prominent black leaders to get TV time.  Those are the two things that would have an impact.

A Modest Proposal

I spend my business life taking over operations from bloated public agencies, so I suppose I should not be surprised at this picture (via Carpe Diem)

The PPACA has a provision that private insurance companies cannot spend less than 80% of premium on care (vs. administration) or money has to be rebated.  I am not a big fan of this provision, believing a free market is a better mechanism for enforcing price and cost discipline than some arbitrary metric like this.

But, since Congress and this Administration thinks this is such a good idea, here is my modest proposal:  Public universities may not spend less than 80% of tuition directly on teaching of students, or else they must rebate excess tuition back to their students.


Headline of the Day

 Joe Arpaio Thinks Tennessean Who Said Satan Told Him to Kill "Birthers" Might Be After Him (source)

Wow, two loonies duke it out.  Except unfortunately, while Tennessee actually convicted their guy, we Arizonans elected ours to a high office.  To be fair to Arpaio, Eugene Cox did list him as second to die (behind Alan Keyes), though its unclear if anyone other than Arpaio's press agent really considers this a credible threat.  This is not the first time our fair city has spent hundreds of thousands of dollars defending Arpaio from various mythical threats.

Asset Forfeiture

One of the worst outcomes of the war on drugs has been civil forfeiture laws, which basically allow police to take your property and keep the proceeds, forcing the burden of proof onto you to prove that the property is not a result of or facilitator to criminal activity.  It is beyond me how such laws continue to be considered Constitutional, but the unfortunately the same justices that tend to protect property rights are the same one that seem to have an even stronger law and order streak.

Anyway, its good to be reminded just how awful these laws are, and Hit and Run has several recent examples here.

Update: Walter Olson has several more.

A Stupid Suggestion

A guest blogger on Megan McArdle's blog writes:

Here's my first such idea:

Abolish Mortgage-Backed Securities (and Offspring)

CDOs and credit default swaps don't kill financial systems, mortgages kill financial systems. There has been altogether too much opproprium directed at CDOs, credit default swaps and other structuring techniques that spread financial contagion, and not enough directed at the underlying collateral. The record seems to be, however, that Dick Pratt was correct when he called the mortgage "the neutron bomb of financial products."

This makes no sense.  I don't have time for a comprehensive argument, so here are a few bullet points:

  • His argument rests on the fact that mortgages have inherently hard-to-quantify risks.  I don't believe that, given how long the financial system worked just fine writing mortgages, but if this is really the case, shouldn't he be proposing to ban mortgages, not just mortgage-backed securities?
  • Holding the higher-quality tranches of an MBS simply cannot, by any mechanism I can fathom, be more risky than holding a lot of individual mortgages.  In fact, for a given bank, it should spread the risk geographically and to a larger number of mortgages.
  • The first actual problem with MBS's is that the default risks were under-estimated by those packaging the securities.  Basically, the top AAA tranches were too large (or too wide, I think the term is).  This is correctable, and likely already has been corrected (In fact it had more to do with the actions of the government-enforced credit rating oligopoly than with actions of bankers).
  • The second actual problem with MBS's is that the default risks were under-estimated by government regulators world-wide when in Basil II and the equivalent US law changes c. 1991, MBS's were given very preferential capital requirement treatment.  Basically, MBS were treated, for capital requirements, as if they were nearly as risk-free as US treasuries, providing incentives for banks to over-weight in them.
  • The largest problem was the reduction in credit requirements for mortgages.  Increasing LTV from 80% to 97% or 100% or even 100%+ hugely increased the risk of default, and no one really took that into account in MBS packaging or bank capital requirements.  Bank capital requirements for mortgages and MBS were set as if they were European style recourse loans with 80% LTV.  But the same regulations and requirements applied to MBS built on US-style non-recourse loans with 97% LTV, which is crazy.

Here is a better plan:

  1. Narrow the AAA tranches of MBS
  2. Fix bank capital requirements vis a vis mortgages and MBS
  3. Stop encouraging high loan to values on mortgages