Archive for November 2012

Worst Chart Ever?

Kevin Drum posts this chart with a straight face as "proof" that sea level rise is out-pacing forecasts.

I don't really think I need to even point out the problem to most of my readers, but you can see the differences in ending value is because the starting values are different.  Likely the two are drawing from different data sources with a shifted zero value.  The slopes are the same, confirmed by the fact that the 3.2 mm trend per year is well within the IPCC forecast range that was centered, if I remember right, around 3.3 mm per year.  It is also well under Al Gore's forecast, which was for 20 feet by 2100, or about 61 mm per year.

Corporate DNA

Almost exactly seven years ago (amazing how long I have been blogging) I wrote an extended piece about how hard it is to change corporate DNA.  I was writing about GM but also used Wal-Mart as an example.  Part of this piece read:

A corporation has physical plant (like factories) and workers of various skill levels who have productive potential.  These physical and human assets are overlaid with what we generally shortcut as "management" but which includes not just the actual humans currently managing the company but the organization approach, the culture, the management processes, its systems, the traditions, its contracts, its unions, the intellectual property, etc. etc.  In fact, by calling all this summed together "management", we falsely create the impression that it can easily be changed out, by firing the overpaid bums and getting new smarter guys.  This is not the case - Just ask Ross Perot.  You could fire the top 20 guys at GM and replace them all with the consensus all-brilliant team and I still am not sure they could fix it.

All these management factors, from the managers themselves to process to history to culture could better be called the corporate DNA*.  And DNA is very hard to change.  Walmart may be freaking brilliant at what they do, but demand that they change tomorrow to an upscale retailer marketing fashion products to teenage girls, and I don't think they would ever get there.  Its just too much change in the DNA.  Yeah, you could hire some ex Merry-go-round** executives, but you still have a culture aimed at big box low prices, a logistics system and infrastructure aimed at doing same, absolutely no history or knowledge of fashion, etc. etc.  I would bet you any amount of money I could get to the GAP faster starting from scratch than starting from Walmart.  For example, many folks (like me) greatly prefer Target over Walmart because Target is a slightly nicer, more relaxing place to shop.  And even this small difference may ultimately confound Walmart.  Even this very incremental need to add some aesthetics to their experience may overtax their DNA.

Corporate DNA acts as a value multiplier.  The best corporate DNA has a multiplier greater than one, meaning that it increases the value of the people and physical assets in the corporation.  When I was at a company called Emerson Electric (an industrial conglomerate, not the consumer electronics guys) they were famous in the business world for having a corporate DNA that added value to certain types of industrial companies through cost reduction and intelligent investment.  Emerson's management, though, was always aware of the limits of their DNA, and paid careful attention to where their DNA would have a multiplier effect and where it would not.  Every company that has ever grown rapidly has had a DNA that provided a multiplier greater than one... for a while.

But things change.  Sometimes that change is slow, like a creeping climate change, or sometimes it is rapid, like the dinosaur-killing comet.  DNA that was robust no longer matches what the market needs, or some other entity with better DNA comes along and out-competes you.  When this happens, when a corporation becomes senescent, when its DNA is out of date, then its multiplier slips below one.  The corporation is killing the value of its assets.  Smart people are made stupid by a bad organization and systems and culture.  In the case of GM, hordes of brilliant engineers teamed with highly-skilled production workers and modern robotic manufacturing plants are turning out cars no one wants, at prices no one wants to pay.

Changing your DNA is tough.  It is sometimes possible, with the right managers and a crisis mentality, to evolve DNA over a period of 20-30 years.  One could argue that GE did this, avoiding becoming an old-industry dinosaur.  GM has had a 30 year window (dating from the mid-seventies oil price rise and influx of imported cars) to make a change, and it has not been enough.  GM's DNA was programmed to make big, ugly (IMO) cars, and that is what it has continued to do.  If its leaders were not able or willing to change its DNA over the last 30 years, no one, no matter how brilliant, is going to do it in the next 2-3.

Megan McArdle makes some very similar points as I about Wal-Mart and how hard it is to change corporate DNA.  I recommend you read the whole thing.

CFL Bulbs Suck. However, I Like LED's

A number of years ago, there was a push by many Leftish technocrats for the government to mandate a standardized cell phone power cord.  Beyond demonstrating that there is no personal irritation too trivial for some to demand government action, this would have been an awful idea.  Why?  Because when these demands for action came, cell phone power cords were just that, power.  If a standard cord had been mandated, then current designs that use a USB connection for both data and power would have been illegal, at least without the vendor also putting in a connection for the government standard connector as well.  There is always danger to the government setting arbitrary standards, but these dangers are an order of magnitude higher when the technology is still in flux.

So enter light bulbs.  The government has decided to ban incandescent light bulbs and while not mandating them, it has actively encouraged people to purchase expensive CFL bulbs.  The only problem is that CFL bulbs suck.  The light from them has bad color qualities, many take a long time to warm up, they are hard to dim, and they contain toxic substances.  They also have nothing like the multi-year life we are promised.  I have tried CFL bulbs of many, many brands and none have consistently achieved their promised life.

But as much as I hate CFL's, I am coming to love LED-based lights.  LED lights use even less energy than CFL's and last a really long time.  The technology allows for color tweaking better than CFL's, and already the warm white LED's I am buying (color temperatures around 2900K) are better to my eye than CFL's, and there is no fast-flicker problem that gives some people headaches.  Dimable versions are coming out, and prices are dropping but they are still expensive.   About half my house is LED now, and I am told that landscape lighting is quickly going all LED.

The main cost to LED's is that they all have to have a transformer.  LED's run at low voltages, like 5v, so house current has to be stepped down at every bulb.  LED's in theory should run cool and be cheap, but they are expensive and run hot because of the transformers.

Which leads me to wonder whether we may start wiring houses for 12v in parallel to 110v.  When I grew up, nearly everything I plugged into the wall -- lights, motors, appliances -- ran on 110V.  Now, most everything (other than appliances) that I plug in the wall actually needs 5-12v  (computers, cell phones, all my audio equipment except big amps).  I don't know enough about power lines to know if this is feasible.  I am pretty sure the resistance losses for 12V DC would be too high, so it would have to be 12V AC, but a diode bridge and some capacitors is a hell of a lot smaller and cheaper than a full blown transformer.  I know my landscape lighting has long runs of 12V, that seems to work OK.  It is also a hell of a lot safer to work with.

A Defense of Israel

I can't call myself a defender of Israel per se because they have done a number of illiberal things in their country that tick me off.  However, I can say that for all the problems they may have, their response to a neighboring country dropping rockets on its citizens is FAR more restrained than would be the response of, say, the US.  If Mexico were dropping rockets into El Paso, Mexico would be a smoking hole in the ground.   We still maintain a stricter economic embargo on Cuba, which has never done a thing to us, than Israel does on Gaza.

I pay attention to the Amherst College community since my son enrolled there.  I thought this was a pretty powerful article by an Amherst student who has taken a leave of absence to join the IDF.  Given my understanding of how Eastern liberal arts faculty think about Israel and Palestine, one should think of this as a voice in the wilderness.

The Biggest Economic Story of 2013...

Sorry, but it is not the fiscal cliff.   It is the complete shift in the US labor model, at least in the service sector, due to Obamacare.

Here is what I am doing for the rest of the year -- working with every manager in my company so that as of January 1, 2013, none of our employees are working more than 28 hours a week.   I think most readers know the reason -- we have got to get our company under 50 full time employees or else I am facing a bill from Obamacare in 2014 that will be several times larger than my annual profit.  I love my workers.  They make me a success.  But most of my competitors are small businesses that are exempt from the Obamacare hammer.  To compete, I must make sure my company is exempt as well.  This means that our 400+ full time employees will have to be less than 50 in 2013, so that when the Feds look at me at the start of 2014, I am exempt.  We will have more employees working fewer hours, with more training costs, but the Obamacare bill looks like about $800,000 a year for us, at least, and I am pretty sure the cost of more training will be less than that.

This will be unpopular but tolerable to most of my employees.  The vast majority of them are retired and our company is merely an excuse to stay busy, work outdoors, and get a little extra money.

But this is going to be an ENORMOUS change in the rest of the service sector.  I have talked to a lot of owners of restaurants and restaurant chains, and the 40-hour work week is a thing of the past in that business.  One of my employees said that in Hawaii, it was all the hotel employees could talk about.   Many chains are working on mutli-team systems where two teams of people working part-time replace the former group of full-time employees.  2013 is going to see a lot of people (who are not paid very well to begin with) getting their hours and pay cut by 25%.  At the same time that they are required, likely for the first time since many are relatively young, to purchase health insurance.

It will be interesting to see what solutions emerge.  My bet is that it will become standard for people in the service sector to work two different jobs for 20-25 hours each with two different companies.  This will be a pain for them, but allow them to keep their income up.  The hard part may be coordinating shifts between companies.  For example, a company that divides their shifts into mon-tue-wed vs. thu-fri-sat cannot share employees with one who divides their shifts between morning and afternoon.  If given time, I would guess that just as the mon-fri workweek emerged as a standard, companies may adopt standard ways of dividing up the work weeks for part-timers, making it easier for schedules to mesh.

Government Influence Over the Media

From Walter Olson

According to the New York Times, French Socialist president François Hollande demanded and received the dismissal of the editor of Le Figaro, the country’s leading conservative newspaper. If that sounds impossibly high-handed, consider the background, as reported in the Times:

The publisher, Serge Dassault, is a senator from [ousted President Nicolas] Sarkozy’s political party [and thus opposed to Hollande]. But Mr. Dassault also heads a major military contractor, and there was widespread speculation that [Figaro editor Étienne] Mougeotte’s ouster was meant to put the Dassault group in good stead with the new president.

For an American reader, it would be natural to turn the page with a murmur of thanks that such things don’t go on in our country. Don’tbe so sure:

[Since-convicted Illinois Gov. Rod] Blagojevich, Harris and others are also alleged [in the federal indictment] to have withheld state assistance to the Tribune Company in connection with the sale of Wrigley Field. The statement says this was done to induce the firing of Chicago Tribune editorial board members who were critical of Blagojevich.

Read the whole thing.  He has an interesting story about Ted Kennedy passing legislation to force a change in ownership of the Boston paper most consistently critical of him.

Becoming France

Presented without comment (source).

The source is an agency in PA so I don't know if this is a state phenomenon there or if this is US data


Cargo Cult Social Engineering

Once upon a time, government officials decided it would help them keep their jobs if they could claim they had expanded the middle class.  Unfortunately, none of them really understood economics or even the historical factors that led to the emergence of the middle class in the first place.  But they did know two things:  Middle class people tended to own their own homes, and they sent their kids to college.

So in true cargo cult fashion, they decided to increase the middle class by promoting these markers of being middle class.  They threw the Federal government strongly behind promoting home ownership and college education.  A large part of this effort entailed offering easy debt financing for housing and education.  Because the whole point was to add poorer people to the middle class, their was a strong push to strip away traditional underwriting criteria for these loans (e.g. down payments, credit history, actual income to pay debt, etc.)

We know what happened in the housing market.  The government promoted home ownership with easy loans, and made these loans a favorite investment by giving them a preferential treatment in the capital requirements for banks.  And then the bubble burst, with the government taking the blame for the bubble.  Just kidding, the government blamed private lenders for their lax underwriting standards, conviniently forgetting that every President since Reagan had encouraged such laxity (they called it something else, like "giving access to the poor", but it means the same thing).

A similar bubble is just about to burst in the college loan market, and this time it will be much harder for the government to blame private lenders, since the government effectively nationalized the market several years ago and for years has been the source of at least 90% of all college loans.  In the Wall Street Journal today, it was reported that student loans are now the largest component of consumer debt, and growing

Further, a Fed report yesterday said that student loan diliquencies have jumped substantially of late

The scary part was found by Zero Hedge in the footnotes of the report, which admit that this number is understated by as much as half, meaning the true delinquency rate of student debt may be north of 20%.

The Journal article linked above explains why this is:

Nearly all student loans—93% of them last year—are made directly by the government, which asks little or nothing about borrowers' ability to repay, or about what sort of education they intend to pursue.

President Barack Obama championed easy-to-get loans during the campaign, calling higher education "an economic imperative in the 21st century." A spokesman for Education Secretary Arne Duncan said the goal is "to make student loans available to as many people as possible," and requiring minimum credit scores would block many Americans

Any of this sound familiar?  I seldom learn much from anecdotes in new stories since it is too easy to craft a stirring anecdote on either side of just about any issue.  But I was amazed at the story of the woman who was issued $184,500 in student debt to send her son to college when her entire income is a $1600 a month disability check.

When Something Is Free... use way too much of it, never having to do any cost-benefit analysis.

Case in point, some spam I got today at my blog.  All bloggers are likely bombarded with request to "guest post", which in reality is a thinly veiled request to post a long advertorial masquerading as a blog post.  And of course, since the down of Google's ranking methodology, I get a lot of link request spam.  Here is the funniest I have gotten in a while

Inquiry About A Bounty Hunting Resource

I happened upon your collection of Internet links related to bounty hunting here and thought you might be interested in another authoritative online resource to add to those.

Are you the correct person to contact for having resources added as an additional link on this page? If not, could you please direct me to the right individual?

Thanks for your time. I hope to hear from you soon!

LOL.  I responded:

All bounty hunters attempting to do business here are thrown into the Sarlacc

A Quick Reminder to Swedish Workers

Apparently Swedish unions are demanding a looser monetary policy

Forget Chuck Schumer's cat-out-of-the-bag 'get back to work' comments to Bernanke, now it is union-leaders who are advising the world's central bankers. "There is a not a single reason not to lower rates" exclaims Sweden's trade union confederation to the central bank as he begins negotiations with employers on wage deals for next year. His demands (for lower rates) are "far from excessive" and he adds "should not cause inflation" as Swedish organized labor have "never called for levels that ... could not be supported economically."

Inflation and monetary debasement have always been Progressive favorites -- until, of course, they were not.  Consider the plight of the worker in Weimar Germany

By mid-1923 workers were being paid as often as three times a day. Their wives would meet them, take the money and rush to the shops to exchange it for goods. However, by this time, more and more often, shops were empty. Storekeepers could not obtain goods or could not do business fast enough to protect their cash receipts. Farmers refused to bring produce into the city in return for worthless paper. Food riots broke out. Parties of workers marched into the countryside to dig up vegetables and to loot the farms. Businesses started to close down and unemployment suddenly soared. The economy was collapsing.

It was total hell.  If a worker's family member could not find something to buy in the morning with the worker's morning pay packet, the money was worthless by dinner time.  Not to mention the incredible lost productivity of all those man-hours spent running around trying to find goods on shelves (of which we got a small taste post-Sandy, as people spent hundreds of dollars of their own time waiting in queues because the government would not let gas station owners charge them an extra $20 for scarce gasoline).

News You Can Use

Soon to be the subject of a Michael Bay film, I am sure.  Can you point a machine gun at the ground in order to fly.

A Bad Sign

It is probably a bad sign when your EPA administrator is better at hiding her email tracks than the CIA director.

Can the Majority Vote to Have A Minority Send Them Money?

Barack Obama argues that the last election gave him a mandate to raise taxes on the rich.  Put another way, he is arguing that 52% of the people voted to raise taxes on 2%.  Did they?

Well, they certainly did something like this in California.  Let's take a look at two propositions:

  • Prop 30, which propose to raise taxes on on the rich to help close the deficit (there was a token 0.25% sales tax increase for cover, but everyone knew it to be a tax on the rich).
  • Prop 39, which was a broad-based income tax increase which raised taxes on most everyone (or at least on the 50% or so who pay income taxes).

So, let's look at the results:

  • Raise taxes on only the very rich:  PASS
  • Raise taxes on everyone (including me):  FAIL

The California election was a crystal clear mandate:  People want more taxes as long as they are on somebody else.  By targeting the richest few percent, we can get a lot of money but make sure the people taxed don't have any hope of fighting the increase, even if they vote as a block.

So I think Obama clearly has a mandate to raise taxes on not-me.  The question is, do we think we have, or do we want, a government where this is possible?  Where majority votes can do anything they wish to minorities?

I should hope not.  I will remind you of a famous quote, from a different context, but entirely relevant:

First they came for the communists,
and I didn't speak out because I wasn't a communist.

Then they came for the socialists,
and I didn't speak out because I wasn't a socialist.

Then they came for the trade unionists,
and I didn't speak out because I wasn't a trade unionist.

Then they came for me,
and there was no one left to speak for me.*


* there seem to be many variations on this out there, you may have heard other similar versions.

Defending Corporatism, In the Name of Eliminating It

For years I have argued that Obama is leading us to a European-style corporate state rather than socialism per se (though the two have many things in common).  It seems like his defenders on the Left have figured that out, and are getting on board.

The other day, Kevin Drum seems to agree with a Washington Monthly article that defends corporatism in the name of attacking it.  In this case, it was an example from the beer industry:

Prior to the 2008 takeover, Anheuser-Busch generally accepted the regulatory regime that had governed the U.S. alcohol industry since the repeal of Prohibition. It didn’t attack the independent wholesalers in control of its supply chain, and generally treated them well. “Tough but fair” is a phrase used by several wholesale-business sources to describe their dealings with the Busch family dynasty. Everyone was making money; there was no need to rock the boat.

All that changed quickly after Anheuser-Busch lost its independence....Today, with only one remaining real competitor, MillerCoors, the pressure it can put on its wholesalers is extraordinary. A wholesaler who loses its account with either company loses one of its two largest customers, and cannot offer his retail clients the name-brand beers that form the backbone of the market. The Big Two in effect have a captive system by which to bring their goods to market.

.... So distributors are caught in an impossible bind: they either do the brewer’s bidding, including selling their businesses to favored “Anchor Wholesalers,” or they lose Anheuser-Busch InBev as a client. And if the wholesalers try to push back? Anheuser-Busch InBev will get rough.

I don't know if this is just tremendous ignorance or some sort of calculated scheming.  The article decries the growing power of beer manufacturers vis a vis liquor distributors, and wants to call this some sort of slide into corporatism.    Actually just the opposite is true -- what we see is Anheuser-Busch taking on some of the largest beneficiaries of government cronysism:  the liquor wholesalers.

The liquor distribution scheme, and resulting government enforced monopolies, created post-Prohibition have been the worst sort of corporate statism, and what is going on here is that the beer manufacturers are finally fed up with it.  Regional liquor wholesalers are generally some of the most politically powerful forces in local and state politics.  These distribution monopolies have all created multi-millionaire owners who deploy money and political clout to prevent any changes in law that might weaken their government-enforced monopoly position.  Wonder why you still can't mail order from Amazon that bottle of California Merlot -- thank the liquor wholesale lobby.  Without all this government protection of distributors, the soft drink business went through identical changes, relatively quietly, decades ago.

This whole liquor distribution scheme we have today is consistent with FDR's corporatist thinking (he was a great admirer of the economic aspects of Mussolini's fascism, and modeled the National Recovery Act after this Italian system).  But it is also thoroughly anti-consumer, and has both raised prices of alcohol to consumers as well as stifled innovation and competition.  We are living in a glorious age of incredible micro-brew choice, but this almost didn't happen.  The biggest hurdle these early pioneers had to clear was cracking this liquor distribution monopoly.

I find it incredible that a Progressive like Drum sees fit to defend such a system and castigate Anheuser-Busch for challenging it.  It is even more amazing to see him positing that anti-trust is all about protecting millionaire corporate players in one part of the supply chain from billionaire corporate players in another part.  I have said for years that anti-trust has been corrupted from protecting consumers to protecting weaker competitors, even when this protection hurts consumers  (remember, Microsoft was convicted of anti-trust violations for giving away free stuff to consumers).  I just am amazed that the Left has come so far that it has now openly adopted this view of anti-trust.

Update:  Here is another example of the Left describing market attacks on a government-protected corporation "Corporatist."  There are always beneficiaries of deregulation (consumers being the most unsung of these).  It is crazy and disingenuous for the Left to call those who win in a newly deregulated market "cronies."

Twinkies Going Galt

Via Fox News

Hostess Brands — the maker of iconic brands such as Wonder Bread and Twinkies — is shutting down and firing 18,500 workers after one of its unions refused to end a strike even after being warned it would kill the company.

The privately-held company had reached a deal with the Teamsters, but a smaller union representing bakery workers refused to agree to concessions, prompting the mass layoffs and closing down of hundreds of plants, bakeries and delivery routes. That prompted harsh words from both the company and from Teamsters officials.

"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," Chief Executive Gregory Rayburn said in a statement. "Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders."

I suppose Michelle Obama and Michael Bloomberg are celebrating

This is My Take As Well

From Foreign Policy

Every turn in the investigation that led to Petraeus's resignation perfectly illustrates the incredible and dangerous reach of the massive United States surveillance apparatus, which, through hundreds of billions of dollars in post-9/11 programs -- coupled with weakened privacy laws and lack of oversight -- has affected the civil liberties of every American for years. The only difference here is the victim of the surveillance state's reach was not a faceless American, but the head one of the agencies tasked to carry it out.....

It seems the deciding factor in opening the investigation was not the emails' content, but the fact that the FBI agent was friendly with Kelley. (Even more disturbing, the same FBI agent has now been accused of becoming "obsessed" with the Tampa socialite, sent shirtless pictures to her, and has been removed from the case.)...

One would assume, and hope, police have to get probable cause for all emails, just like they would for a physical letter or a phone call. But the law governing email -- the Electronic Communications Privacy Act (ECPA) -- doesn't have such requirements for emails more than 180 days old. Because ECPA was written in 1986, before the World Wide Web even existed, archived emails were an afterthought given the incredibly small storage space on email servers....

While these details may shock the average reader, these privacy-invasive tactics are used regularly by both federal and local law enforcement around the United States. In fact, as the New York Times reported, referring to Petraeus, "Law enforcement officials have said they used only ordinary methods in the case." The only difference here is the target was the director of the CIA and one of the most decorated soldiers in modern military history.

Electronic communication needs better Fourth Amendment protection.

By the way, another scandal here that interests me more than the sex thing is that the head of the CIA has such a terrible grasp on basic fieldcraft

Petraeus and Kelley were communicating not by sending each other emails, but using an old (and apparently ineffective) trick -- "used by terrorists and teenagers alike" -- of saving drafts in the draft folder of Gmail, thinking this was more private than if they sent them to each other. But as the ACLU's Chris Soghoian explained, this was not so

"Magnet spheres may soon be harder to acquire than ammunition in the U.S."

US Government harasses Buckeyballs out of existence.  We have two sets at home and my daughter in particular loves them.

Romney and Republican Messaging Fail

I got a lot of email that Republicans aren't libertarians and to stop complaining that they are not.  OK.  But let's look at their campaign messaging in the context of their own values.

Republicans had a golden opportunity to use the results of a natural experiment over the last four years between red and blue states.  Obama constantly harped on the fact that 3.5 million new jobs had been created on his watch.  Rather than play dueling statistics or end points in this analysis, the Republicans should have taken advantage of existing red/blue data:

Yes.  And the vast majority of these jobs were created in states like Texas which have been successful precisely because they have labor and tax policies which you, Mr. Obama, oppose.  And they have been created in industries like Oil and Gas production that you, Mr. Obama, have done your best to hinder.  All the jobs you claim to have helped to create were actually facilitated by a philosophy of government you oppose, by regulatory policy you would overturn if you could, and in industries you would prefer did not exist.   States like Texas -- with organic growth driven by private capital -- stand in stark contrast to your investments of our taxpayer money in bankrupt companies like Solyndra.   If you had had your way, Mr. Obama, few of these jobs would have been created.  Yes, this country saw some job creation, but it occurred despite your efforts, not because of them.

Instead of this clear kind of message, we get a bunch of wonky stuff about tax deductions vs. tax rate changes.  Heck, even if you told me I had to run my campaign on the single plank of eliminating tax deductions, I could have done a better job.  I saw this part of the debate that Romney supposedly won.  His explanation was lame.  What about this instead:

This country over the past several decades has increasingly become plagued by cronyism.  Whether it be Wall Street bankers or public employees unions or casket sellers in Louisiana, everyone wants to try to convert influence with the government into taxpayer money for themselves.  We have to end this.  And a good place to start is with the tax code.  Every special deduction and tax credit in the tax code is a giveaway to some special interest.  At best it is a misguided attempt, like the money we wasted in Solyndra, of politicians to try to pick winners and losers, to say that one kind of spending is somehow better than another.  At worst, these deductions are a crony giveaway.  Sure, it's  eliminating these deductions will help reduce the deficit.  But even more importantly, eliminating them would be an opening shot in the war to take cronyism and corporatism out of Washington.

Cronyism and Corporate Welfare, in Hawaii

I don't know if its the distance from the Mainland or something about its history, but Hawaii often appears to be among the worst states for regulatory capture by local businesses.  This example was brought to me by a co-worker, who lives in AZ but wants to buy a condo in Hawaii.  They want the condo for their own use, but also hope to rent it out.  This kind of model is more appealing nowadays given the ease (and low cost) with which one can advertise rentals on various Internet sites.

But not so fast, not in Hawaii.  In legislation that reminds be of stuff from the 1990's when businesses tried to fight Internet-driven disintermediation, Hawaii is proposing to force non-Hawaiians to use a local broker to list their rental properties.  Apparently local residents can still list their properties on low-cost Internet sites, but folks on the mainland (also known as "the United States") must use a high-cost locally licensed broker, who typically charge 50% of rental fees as a commission.  These type of commission rates are farcical - they imply that fully half the value of a one-week condominium stay is due to the broker, not the condo itself, its location, etc.  The only way brokers can charge these fees is by maintaining a tight cartel enforced by government licensing laws.

Any reasonable person will look at this law and immediately know it is about crony protection of local real estate brokers.  Of course, that is not what the law says.  It is all about "consumer protection"

The legislature also finds that requiring nonresident owners to employ a licensed professional such as a real estate broker or salesperson or a condominium hotel operator is an important consumer protection measure. Consumers who use real estate companies, real estate brokers, real estate salespersons, or condominium hotel operators for their transient accommodation rental needs can do so with the knowledge that all money generated will flow through a client trust account, the appropriate federal tax form 990s will be generated, and accurate transient accommodations taxes and general excise taxes will be paid. Real estate companies, real estate brokers, real estate salespersons, and condominium hotel operators must comply with specific licensing and bonding requirements, thus offering additional protections for consumers.

So consumer protection is defined as making sure taxes get paid and the government forms get filled out.  Because God knows my entire vacation would be ruined if Federal tax form 990 was not filled out properly.

This is total BS, and Milton Friedman called it years ago when he wrote on licensing:

The justification offered is always the same: to protect the consumer. However, the reason is demonstrated by observing who lobbies at the state legislature for the imposition or strengthening of licensure. The lobbyists are invariably representatives of the occupation in question rather than of the customers. True enough, plumbers presumably know better than anyone else what their customers need to be protected against. However, it is hard to regard altruistic concern for their customers as the primary motive behind their determined efforts to get legal power to decide who may be a plumber.

This is also a great example of voters agreeing to add costs on everyone but themselves.  If the almost inevitable Constitutional concerns with this law forced in-state and out-of-state condo owners to be treated equally, local owners would immediately push back, hard, against the costs this law would impose.  Only  by structuring this law to apply to those annoying out-of-staters could it ever be passed.

I have been considering taking advantage of low prices in Hawaii to buy a condo, but I may rethink that plan given this pending legislation.

Thoughts On Election Spending

It is pretty standard to read lamentations about how high spending was in the most recent election.  However, it strikes me that election spending was irrationally low.  With stakes literally in the trillions (differences in tax policy, crony protection of certain industries and groups, etc.), it is a wonder to me that more money is not spent.

Political spending is rising because we have given the government insane powers over, well, everything.

Crazy Rail Transit Capital Costs

I don't know what it is about rail transit advocates, but for some reason they seem to believe that capital costs of rail construction are somehow irrelevant.  There is no other way to explain this (thanks to a reader for the link):

A new rail station that opens next Wednesday in Ramsey could give the Northstar Commuter line the ridership boost it needs for an eventual extension to St. Cloud, an Anoka County official says.

But even as a ribbon-cutting ceremony Thursday heralded the arrival of the seventh station along the line, others have questioned the cost: about $13 million, or an average of roughly $130,000 for each of the 100 new daily round-trip riders the station is expected to attract. Some also wonder whether the new station will merely siphon riders from the two stations on either side of it.

But apparently the rail authority thinks the skeptics are being too pessimistic.  They expect it to be MUCH better:

Anoka County Commissioner Matt Look, a former Ramsey council member, predicted the new station will exceed the 100 daily round trips that Northstar officials hope it will generate. With a bus line being discontinued because of the station's arrival, and a 230-unit apartment complex going up near the site, Look said the station could increase Northstar's overall ridership by 25 percent. Based on current figures, that would be a rise of about 600 rides per day.

So the station's greatest supporter is optimistically expecting 300 daily round trip riders per day.  That makes the cost of the station per round-trip daily rider "only" $43,000.    Or approximately enough to buy every rider a new Prius and still save about half the costs.

The Wasted Vote Fallacy

Republicans before the election worked to convince Libertarians that a vote for Gary Johnson (or any other third party) was a wasted vote -- that Libertarians needed to be voting against Obama and therefore for Republicans.  Some libertarians have argued that the only way to change the Republican Party is from within.  Libertarians need to join the party and then work to make the party less statist.

I thought this was a crock at the time and think so even more now.  Here is the key thought:  Republicans are not going to change their platform and their candidates and their positions to woo voters they are already getting.  After the election, no one in the Republican leadership was talking about what a mistake it was to run a big government Republican like Romney -- the ex-governor of Massachusetts for God sakes -- who authored the predecessor to Obamacare.  No one was wondering about Gary Johnson as a 2016 candidate.

What the GOP did do is panic at the shellacking they got among Hispanic voters.  The ink was not even dry on the ballots before Republican leadership was considering abandoning their anti-immigrant stance in order to win more Hispanic voters.  I am not sure that will get them Hispanic voters, but whether they are right or not, that is the conversation they were having.  They were asking, "How do we attract voters WE DID NOT GET" -- not, "how do we attract voters we are already getting".

The turn of the century Progressive Party (William Jennings Bryant, free silver, etc) never won a Presidential election but both the Republicans and Democrats co-opted many of their platform positions because they sought to attract voters they were losing to the Progressives.

I don't see how Libertarians can look at a party that has fielded John McCain (author of speech restrictions) and Mitt Romeny (author of the proto-Obamacare) as any sort of long-term home.  Heck, the Republicans more seriously considered Rick Santorum and Donald Trump than Gary Johnson or Ron Paul.  I respect what Mr. Paul has done in bringing libertarian issues to the debate, but as long as he keeps reliably delivering his voters to whatever lame statist candidate the party fields, the GOP is never going to seriously address libertarian concerns.

Now That The Election Is Over, We Can Take On Serious Topics Again

Welcoming Princess Leia to the Disney Princess club

Sandy and Global Warming

The other day I linked my Forbes column that showed that there was no upward trend in global hurricane number and strength, the number of US hurricane strikes, or the number of October hurricanes.  Given these trends, anyone who wants to claim Sandy is proof of global warming is forced to extrapolate from a single data point.

Since I wrote that, Bob Tisdale had an interesting article on Sandy.  The theoretical link between global warming and more and stronger Atlantic hurricanes has not been fully proven, but the theory says that warmer waters will provide energy for more and larger storms (like Sandy).  Thus the theory is that global warming has heated up the waters through which hurricanes pass and that feed these hurricanes' strength.

Bob Tisdale took a look at the historical trends in sea surface temperatures in the area bounded by Sandy's storm track.  These are the temperature trends for the waters that fueled Sandy.  This is what he got:

If he has done the analysis right, this means there is no warming trend over the last 60+ years in the ocean waters that fed Sandy.  This means that the unusually warm seas that fed Sandy's growth were simply a random event, an outlier which appears from this chart to be unrelated to any long-term temperature trend.

Update:  I challenge you to find any article arguing that Sandy was caused by anthropogenic global warming that actually includes a long term trend chart (other than global temperatures) in the article.  The only one I have seen is a hurricane strike chart that is cut off in the 1950's (despite data that goes back over 100 years) because this is the only cherry-picked cut off point that delivers an upward trend.  If you find one, email me the link, I would like to see it.

The Silly Fact-Check Genre

I do not agree with Mitt Romney's implied protectionism in his ads, particularly when he says

Obama took GM and Chrysler into bankruptcy and sold Chrysler to Italians who are going to build Jeeps in China

The problem with Obama's intervention in the GM and Chrysler bankruptcies was cronyism -- the protection of favored insiders to the detriment of the operation of the rule of law -- rather than any accelerated globalization.  The auto industry is a global business, deal with it. We should be thrilled that Chrysler is participating in the Chinese economy, an opportunity they would not have had a generation or two ago.  This kind of populist BS is exactly why I voted Johnson, not Romney, this morning.

Anyway, this statement has been subject to a lot of "fact-checking."  Chrysler head Sergio Marchionne wrote a letter in the Detroit News, and while he did not attempt to deny the part about Italians (though that would have been funny), he did write:

Chrysler Group's production plans for the Jeep brand have become the focus of public debate.

I feel obliged to unambiguously restate our position: Jeep production will not be moved from the United States to China.

OK, thanks for the clarification.  But wait, the letter goes on.  He spends a lot of time explaining how Chrysler is investing a lot in Jeep SUV development and production, and that many jobs are being added making Jeeps.  In fact, Jeep SUV's seem to be the big bright spot in the Chrysler turnaround, which is funny because Obama's logic for handing Chrysler over to Fiat for about a dollar was that Fiat would turn Chrysler around with all of its great small car designs.

Anyway, the really interesting part comes late in the article, where he says in paragraph 9:

Together, we are working to establish a global enterprise and previously announced our intent to return Jeep production to China, the world's largest auto market, in order to satisfy local market demand, which would not otherwise be accessible.

So Chrysler ... is going to build Jeeps in China.

This is why the whole "fact check" genre is so stupid.   We could fact-check this three ways, depending on what political axe we want to grind:

  1. We could say that Romney's ad was exactly correct, that Chrysler's CEO says it is going to build Jeeps in China, just as Romeny said.  Romney's statement is literally true as written, which one would think might be a good criteria for a fact-check.
  2. We could say that Romney's ad was misleading, because the implication was meant to be that Chrysler is shifting North American production to China, and they are not (Politifact took this tack).
  3. We could argue that Romney's entire premise is wrong, because what matters to long-term economic health and wealth creation in this country is that Chrysler is making the optimum production decisions, wherever the factories end up.  And further, that making these decisions the subject of political discourse virtually guarantees they will be made for reasons other than optimizing efficiency.  This is the fact-check I would make but you will not hear in mainstream media fact-checks, because the level of economic ignorance on trade in most of the media is simply astonishingly high.