Posts tagged ‘post office’

USPS Problems Not All Their Fault

As much fun as it is to mock the US Postal Service, their inability to restructure their costs is not all their fault. Every time they try to close a facility, they get met by opposition from about everywhere.  Here is an example where Berkely, CA is doing all it can to prevent the USPS from selling a post office building.

The Postal Service over the summer began moving ahead with a plan to sell its 1914 Beaux-Arts post office in the heart of Berkeley near the old city hall and a park named after Martin Luther King Jr. The move drew howls from residents worried that the building would turn into condominiums or office space, even drawing dissidents to camp out for days by the columned building entrance.

Now, opponents are gaining traction with an unorthodox zoning restriction: that the mustard-colored building must remain open to the public

The Berkeley Planning Commission last month approved a measure that would restrict the use of the post office and adjacent government buildings to government agencies or public uses like a theater. Residential use and many other private functions would be banned by the action, which requires City Council approval.

This is simply bizarre.  What, do residents have so many fond memories of their time spent in the line at the post office that they want these golden memories preserved?    The assumptions made by local opponents are just bizarre -- they seem OK if the building is used for offices of the Social Security Administration but not if it is used for private offices.  Why would anyone possibly care.   From my experience, private urban office buildings tend to be cleaner and better maintained than government offices.

Apparently Obamacare is Better Because it Gouges Everyone

A number of people pointed out that the posted Obamacare rates in California are about twice what individuals are paying today at low-cost sites.  This was in response to a deceptive California press release that claimed they were much lower, but got this result only by comparing apples to oranges.

Rick Ungar has two responses, that seem to be the emerging talking points on the left:

  1. He found some bad Internet reviews of the low-cost source that Conservatives and libertarians used as a better point of comparison for Obamacare rates
  2. Some of the people had to pay up to 50% more than the published rates due to pre-existing conditions.

Avik Roy has a number of responses to Ungar (and Ezra Klein, who raises the same points as Ungar).  I would raise three points:

  1. Neither he nor Klein address the issue of the fundamental deceptiveness of the California press release.  I don't think anyone can defend comparing individual rates to business group rates as anything but apples to oranges.  If the Obamacare story is so great, why was the deceptiveness necessary?
  2. Everyone gets bad reviews on the Internet.  If one transaction out of a thousand goes bad, that one will write a negative review online and few of the satisfied will bother.  If sex were a product on Amazon.com, it would likely have some 1-star reviews.  That being said, it is amazing to me that government control is seen as the solution to customer service issues.  I could be wrong, but I would stack up the reviews of the worst health insurance company in America against the DMV and Post Office any day of the week.
  3. The published rates online are for the healthiest class of people.  I have never once had someone sell me health insurance and not make this clear.  Calling them teaser rates is a misnomer, particularly since, as Avik Roy notes, about 75% of the people who apply get these rates.  One in four have to pay 50% more today, so we are going to make 4 in 4 pay 100% more under Obamacare, and that is better?!?

To that last point, I will quote something I said years and years ago, long before Obamacare was passed:

The looming federal government takeover of health care as proposed by most of the major presidential candidates will be far worse than anything we have seen yet from government programs.  Take this example:  In the 1960's, the federal government embarked on massive housing projects for the poor.  In the end, most of these projects became squalid failures.

With the government housing fiasco, only the poor had to live in these awful facilities.  The rest of us had to pay for them, but could continue to live in our own private homes.

Government health care will be different.  Under most of the plans being proposed, we all are going to be forced to participate.  Using the previous analogy, we all are going to have to give up our current homes and go live in government housing, or least the health care equivalent of these projects.

Postscript:  Citizen Kane has over 100 1-star reviews.  Some are about the packaging or this particular version but many are about the movie.   The novel Gone with the Wind has dozens.

Postscript #2:  A sample Yelp review of a local USPS office

This place is the pits.

There are no supplies in any of the racks unless you want to send something Express Mail. All of the Priority Mail stuff is constantly gone and they don't have any more. Not that there's anyone to stock the racks even if they did.

People used to leave reviews complaining that there were "only two" workers. Those days are long gone--there is now ONE counter person at all times. That means if you get behind someone that has questions, or can't understand a customs form, or wants to argue about mail being held, you are just stuck.

Why not use the automated machine, you ask? Because its printer has been broken for two weeks and you can't actually print the postage that you might buy. Not that there's a sign telling you this--you have to spend a few minutes going through the process only to be told at the end that the transaction can't be completed because the printer isn't working.

I know they are making cuts because they are out of money, but it's a vicious cycle they'll never get out of because they've now effectively made it impossible to patronize the postal service.

Stay far, far away.

I would not be at all surprised if California banned online reviews of health care exchanges.  One department of the CA state government threatened to revoke all my contracts unless I took down a blog post simply linking to negative Yelp reviews of one of the department's facilities.

First Rule of Budget Politics

Proponents of higher taxes and larger government often criticize small government folks in Congress for being "obstructionist" and "not willing to compromise."

But here is the problem:  Coyote's first rule of budget politics is to never trade current tax increases or "temporary" spending increases for future spending cuts, because the future spending cuts never happen.  Ever.  Not once.  In fact, I would not agree to trading current tax increases for current spending cuts, because taxes will stay forever but spending cuts will just be over-ridden in a few months.

Here is a recent example:

Last summer, Republicans in Congress agreed to increase the federal debt limit in exchange for the Democrats’ pledge to cap future spending at agreed-upon levels. The compromise was embodied in the Budget Control Act; discretionary spending was to increase by no more than $7 billion in the current fiscal year. I wrote yesterday about the fact that the Democrats intended to violate the Budget Control Act by increasing deficit spending on the Post Office by $34 billion. The measure probably would have glided through the Senate without notice had Jeff Sessions not challenged it. Sessions insisted on a point of order, based on the fact that the spending bill violated the Budget Control Act. It required 60 votes to waive Sessions’ point of order and toss the BCA on the trash heap.

Today the Senate voted 62-37 to do exactly that. This means that the consideration that Republicans obtained in exchange for increasing the debt limit is gone. Moreover, some Republicans–I haven’t yet seen the list–voted with the Democrats today.

One principal lesson can be drawn from this experience. It happens all the time that Congressional leaders will trumpet a budget agreement that allegedly saves the taxpayers trillions of dollars–not now, of course, but in the “out years.” But the out years never come. Tax increases are rarely deferred to the out years; they take place now, when it counts. But spending cuts? Never today, always tomorrow.

Purported agreements about what federal spending will be years from now are utterly meaningless. Congressmen will make a deal, brag about the ostensible savings in the press, and then walk away from it the moment our backs are turned, as the Democrats (and a handful of Republicans) did today.

When folks say, "we just want a compromise" on budget issues, what they are really saying is "we want to roll you.  We are hoping you are stupid enough to trade for future cost reductions that will never happen.  We can get away with this because we have an ally in the press, who always treats promises of future cost reductions as entirely credible and believable and thus paint those who are skeptical of them as radical obstructionists."

Money Does Not Corrupt Politics, State Power Corrupts Politics

Kevin Drum asks whether money corrupts politics, and comes to the conclusion that it does.  I disagree.

Money does not corrupt politics, the expansion of state power corrupts politics.  Every time the state gains a new power to take money from person A and give it to person B, or to throttle company A's business in favor of company B, private individuals start to scheme how they might access that power to their own benefit.

Think back to the much smaller US government of the 19th century.  Don't you long for the day when political corruption mainly meant packing the Post Office with one's kin?  It is absolutely no coincidence that the largest political scandal of that century (the Crédit Mobilier) accompanied the largest expansion of Federal power in that century (the Federally-funded construction of the Transcontinental Railroad).

Political corruption follows the power.  Sure, this power is often bought in dollars, but if we were to entirely ban money from the political process, the corruptions would remain.  And it would shift payment from money to other goods, like quid pro quo's, barter, and access to grass roots labor supplies.  Anyone remember machine politics?

Here is an example from an Administration schooled from an early age in Chicago machine politics

The Heritage Foundation has issued a new report that charges the Obama administration sent presidential earmarks, taxpayer dollars, to Democratic lawmakers to help convince them to vote for controversial proposals such as cap and trade and the health care bill.

“When you examine the recipients of those grants, there were at least 32 vulnerable house Democrats who received significant federal grant money during the run-up or directly after the votes on those pieces of legislation,” says Lachlan Markay, one of the authors of the report.

The amount of earmarks spiked around the time of difficult votes such as cap and trade, then dropped, only to spike again around controversial financial regulations known as Dodd/Frank, and spiked the most just before the vote on the health care bill....

On their websites, lawmakers didn’t advertise their votes, but did tout at length the money they’d gotten for various local projects.

“As a way to counteract the negative voter sentiment that would come from voting for unpopular legislation,” says Markay. “These were attempts to make sure that constituents knew they were bringing money home to their district.”...

Numbers from the non-partisan Congressional Research Service show that the value of administration earmarks under President Obama increased by a 126 percent in his first two years in office and the actual number of administrative earmarks increased by 54 percent.

Those are dramatic increases that are 11 times more than Congress itself increased earmarks, which the White House did not explain today.

By the way, of all the ways that access to political power can be bought, political spending under our current rules is by far the most transparent.   Just as in narcotics or prostitution, a ban wouldn't eliminate it, it would simply drive it further underground and into other forms of currency.

The Only Cost Reduction Ideas Socialized Medicine Has

I have said for quite a while that despite all the hand-waving about  efficiency and electronic records and other BS  (efficiency from owner of the Post Office?) the only two cost reduction tools that state-run health care have are 1) Price Controls and 2) Rationing.  This has become clear yet again in California.  Allocation of scarce resource by bureaucratic fiat has NEVER worked, not only leading to mis-allocations but generally reducing the size of the pie to be allocated in the process.  The only solution is returning health care to a world (that most every other product and service is in) where consumers have the incentive to shop and make price-value tradeoffs for themselves using prices set by the free operations of supply and demand.

David Brooks Big Idea: Learning About Self-Reliant Productive Culture in the DMV

Apparently, the gap between the productive and hard-working and those with less productive habits is growing larger.  David Brooks suggests that the productive be forced into a couple of years of government servitude.  The idea, as I understand it, is for the productive to teach the less fortunate how to be more diligent and productive in the context of a shared experience in an unproductive government make-work program.  Sort of like teaching your teenager good work habits by putting him in DMV internship.

Seriously, I suppose I understand how class-mixing at the point of a gun might expose the wealthy to classes and cultures they have never encountered.  But how is working together in some service brigade with a post office-trained manager on a government paycheck going to teach the welfare-and-food-stamp set anything new about productive work and self-reliance?

Post Office: Mail Delivery or Welfare?

The management of the Post Office is a joke, and it is hardly worth the electrons to write more about it.   But I did find this factoid in Tad DeHaven's commentary on the Post Office's hopeless efforts at cost reduction interesting.

Traditional post offices, which number about 27,000, cannot be closed “for solely operating at a deficit” and the closure process is burdensome.

Wow, that is a bad law (though no worse than 10,000 others like it).  This sounds similar to the military base problem, where every facility that needs closure has a Congressperson desperately trying to keep it open against all economic reality, merely as a jobs/welfare program once its true utility is over.   Apparently, the Post Office has an overcapacity problem that rivals the US Military's after the Cold War (and really to be honest after WWII)

Full post offices are more costly to operate than other means of serving customers. The average post office transaction cost 23 cents per dollar of revenue in 2009 while the average transaction at a contract postal unit cost just 13 cents. Post offices used to generate almost all postal retail revenue, but 29 percent is now generated online through usps.com and other alternative channels.

In 2009 post offices recorded 117 million fewer transactions than in 2008. Four out of five post offices are operating at a loss. However, the postal network’s overcapacity has drawn little corrective action from Congress. In fact, legislation introduced in the House with 102 cosponsors would apply the burdensome procedures for closing post offices to other postal outlets as well. Congress is actively working against the modernization of the U.S. postal system.

The amazing thing is that they have tons of extra capacity and still provide poor service.  Just compare the process of mailing a package UPS vs. USPS.  I have a UPS account, I can print my own labels, I get billed automatically, I get package tracking, and I can send the package from the drop box downstairs in my building.

It is almost impossible to do this with the USPS.  To mail anything larger than 13 ounces, to buy postage without an expensive meter, to get a greatly inferior sort of tracking -- all require a grim trek to the post office.

My guess is that just like Pemex is not longer really about producing oil, the USPS mission is no longer primarily about delivering mail, its a welfare program.

PS - my USPS delivery guy is great.  Nicest guy in the world.  The mistake for years in criticizing the USPS has always been about criticizing the people.  Not only is that wrong, but it distracts from the problem.  By implying the problem is bad, surly people, it implies the problem is fixable with new people.  But in fact, the problem, as with all government, is information and incentives .... and in this case Congressional meddling in their mission.

Employee Reliability & FICO Scores

Megan McArdle writes:

There was a great deal of back-and-forth in the left half of the blogosphere this weekend over employers who use FICO scores as a way of weeding out job candidates.  In a sort of peculiarly American fashion, our nation seems to have decided that one's credit history is a good proxy for one's worth as a human being, and thus should be used to determine eligibility for everything from employment to excellent rates on car insurance.

I have no trouble believing that the FICO score is often a proxy for what some researchers call conscientiousness; I've certainly had roommates and others around me who had terrible credit because, well, they didn't bother to pay their bills, and regarded rent as something optional that could be turned in if no more exciting commercial opportunities immediately presented themselves.

That said, it's going to be at best a weak proxy.  It's also a proxy for things that, as a society, we may not want employers to consider, like a past history of depression.  And for things that have nothing to do with your job performance, like a car accident that left you with huge medical bills and no job, or a sudden job loss.  Looking at our national savings rate, lots and lots of Americans live very close to the edge of their paychecks; they can't all be terrible employees.

I have never really even considered asking employees for their FICO score, in part because all small business people hate these scores as, even with perfect credit records, our scores tend to be smaller than people with similar income and history due to the constant credit checks made on us by vendors and other partners.

That being said, as someone who has 500 service employees working for me, I understand the insatiable desire for information on employee reliability and conscientiousness.  A large number of our employees we hire who interview well tend to get released within 60 days of their hire.  I can't tell you how many people who seem totally normal and friendly turn out to be raving maniacs in stressful customer contact situations.

The elephant in the room that neither McArdle or folks like Kevin Drum mention is that businesses are starved for reliability information on potential employees.  It used to be the best source was to check job references.  Nowadays, though, very few employers will give a honest job reference, or will provide any information at all.  I know I am guilty of that -- my company does not allow any manager to give out performance data on past employees.  I only needed to be sued once over somehow interfering with someone's living by giving honest information about that employee's reliability to change my behavior.

I understand that this is exactly what the Left is shooting for - an environment where the competent have no advantage over the incompetent.  If employers are resorting to FICO scores, it just demonstrates how all the other reasonable avenues of obtaining information have been closed to them.

The only saving grace in this country is that employment is still mostly at-will, meaning we can fire our hiring mistakes and move on.  Of course the Left wants a European-style system where it is impossible to fire anyone too -- this is the system the post office has, and one can see how well it works out.  If they are victorious on this final front, I will be forced into a game of Russian Roulette, where I can't find out anything about those I hire, I can't fire the incompetent people I do hire, and I am infinitely legally liable for any mistakes any of these employees make.

Huh?

Kevin Drum observes that the Post Office is more efficient and effective than we give it credit because ... it fully accrues for future pension and medical costs.

Over at Jon Cohn's place, Alexander Hart explains why the post office is better run than you think. Go read it. I don't have any big axe to grind in favor of the USPS "” in fact, I'm pretty annoyed at how complicated it is to calculate postage these days on supposedly "odd" size envelopes "” but the fact is that they're actually pretty efficient and pretty cost effective. I'd welcome private competition for first class mail, but just go ahead breathe the words "universal service" and see how many private sector companies are still eager to compete with the post office for 46 cents an ounce.

Wow, I have been so unfair to the post office.  I commented:

Great - the post office is really efficient because ... it fully accrues for benefits plans that are way beyond anything paid in the private sector, and reliably pays these benefits to huge, bloated work forces.  I am confused Kevin.  I read the article you linked.  What the heck did you find in the linked article that had anything to do with "efficient" or "cost effective."  Postal rates have grown at something like twice the rate of inflation.  Even industries you demagogue against, like oil, have raised prices less than the post office.

I don't know much about Alexander Hart, but my suspicion is that this is somehow a broadside in the public-private battle.  If so, then his focus is awfully narrow.  The feds may have accrued for their pension and health benefits, but they sure have not socked away any assets besides government IOU's to pay for them.  At the end of the day, most private company health and retirement plans are actually backed with real, 3rd party assets.  If you want to talk about pension law, private companies are not allowed to invest but a small percent of pension funds in their own stocks and bonds.  Not so the Feds -- the Post Office is running the equivalent of the Enron 401K invested 100% in Enron bonds.

And oh by the way, if we turn our attention to the states or local governments, the situation is entirely reversed.  In fact, many US public entities have ZERO percent funding of health plans and ZERO accrual of future costs, taking retiree benefits entirely out of current cash flow.

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.

Best Argument Against the Death Penalty

I agree with TJIC:

If we can't trust the government to enforce the speed limit or issue liquor licenses fairly, how can we trust it to kill citizens fairly ?

It strikes me as odd that law-and-order conservatives can distrust every single department of the government except the guys who carry guns.  The post office and the police are run by the same organization.

More extensive thoughts on the death penalty here and here.

But What Keeps McDonalds From Charging $100 for a Big Mac?

Jesse Jackson, Jr. is freaking brilliant.   When Larry King challenged him (well, not really, King never challenges anyone, particularly on the left) that people see the public option as health care by the Post Office, Jackson replied:

Look at it this way: There's Federal Express, there's UPS, and there's DHL "¦ The public option is a stamp; it's email. And because of the email system, because of the post office, it keeps DHL from charging $100 for an overnight letter, or UPS from charging $100 for an overnight letter.

This is really a weird view of the world, particularly given the history of how Fedex started.  It's amazing, given this logic, that McDonald's doesn't charge $100 for a Big Mac, given that there is no government competitor in that market.

The reality of course is that the relationship works the other way around - Fedex and UPS keep the Post Office in check.  Many of the Post Office's most recent service offerings were copied from UPS and Fedex.  After decades of trying, the USPS still can't emulate these companies' most basic service offerings, such as offering door-to-door tracking of packages.

By the way, here is a graph of the USPS keeping a lid on the industry's costs (via Carpe Diem):

stamps
It should be noted that the Post Office is still losing money at the current stamp price.

Also from Carpe Diem is this little service parable

The stamp vending machine at the downtown Flint Post Office no longer sells stamps, it sits there empty. Right next to the dark, empty vending machine for stamps sit two fully operational, bright and shiny vending machines, one for soft drinks and one for snacks, presumably owned and operated by a private, for-profit vending machine company (see photo above).

Thought For the Day on Government Management

Via John Stossel:

On that note, economist Justin Ross points out on his blog how, for 44 cents, you could mail a letter via USPS - or buy a kiwi fruit that had to be grown and watered in New Zealand, picked, carefully packaged, and shipped across the world to a store near you.

The Libertarian Foreign Policy Problem

Outside of trade policy and climate treaties, I very seldom discuss foreign policy.  First, because it is not my first interest.  Second, because I am not an expert and do not spend the time to keep myself sufficiently informed on the issues to have useful insights.  Third, because of exactly this problem stated so well my Megan McArdle:

I periodically flirt with isolationism, or if you prefer,
"non-intervention". Like most libertarians, I'm attracted to "high
concept" political philosophy: simple rules that can be stated in a
sentence or less. No arguments about causus belli, blowback, or
ultimately unknowable political ramifications; just a simple "yes or
no" test. Did a foreign army invade the United States? For "Yes", press
one; for "No", press two, and go back to arguing about what should
replace child welfare laws in the coming anarcho-capitalist society.

Besides, all the foreigners hate having us there. Why not leave, and
see if absence makes the heart grow fonder? (I suspect that many
nations which have come, over long decades, to regard regional peace as
some sort of natural law, will get a rather nasty surprise. This might
make our influence look, in retrospect, rather appealing.)

But anyone who thinks at all seriously about libertarianism will,
fairly early on, be faced with a very high hurdle. There are a handful
of wars in which American intervention unambiguously halted gross
abuses of human liberty. World War II is one, though many end up going
around, rather than over . . . arguing that the Nazis were the direct
result of American intervention in World War I; or that it was
justified because Japan attacked us1; or that Russia and Britain would have defeated Hitler anyway2.  The American Civil War, however, is by far the highest leap; and the hardest to dodge.

In theory, every state has the right to secede, and the stated
Federal rationale for the Civil War--preserving the union--was the
vilest tyranny. In practice, chattel slavery was a barbarism even
viler.

And so we killed 20-30% of the Confederate Army, not a few of our
own, and uncounted numbers of civilians. That's not counting the
wounded, who probably outnumbered the dead. All we managed to achieve,
at this horrendous cost, was a corrupt and brutal occupation, followed
by the "freedom" of Jim Crow, sharecropping, and "separate but equal". And it was worth it.
The good guys won. We didn't do everything we wanted to, or even
everything we could have, or should have. Jim Crow was putrid. But it
was nonetheless so much better than slavery that it was worth the
horrendous cost--in my opinion, and that of almost everyone in the
world.

For me, a big part of the problem is one of information -- generally, most of the information one might find useful in deciding if X is a good war to pursue is from the government, an institution that demonstrably cannot be trusted based on past history when it makes this case.  Non-interventionism seems the right way to go, except for the
(relatively few) times it is not.  The problems is, to paraphrase the
famous dictum about advertising money, "half (or more) of our wars are
a waste -- we just don't know in advance which half."  Megan uses the
example of the Civil War, saying that that war was worth it because we
got rid of slavery.  But the war by no means began that way.  It wasn't
really until well into the war that both sides were pretty much in
agreement that the war was about ending or retaining slavery. I would argue that in advance, that war looked like an awful, terrible, horrible proposition.  The initial value proposition was "let's go to war so the Feds can have a bigger empire to run."  Only later did it become, "let's go to war to free a large part of our population."  There was a female professor, I forget her name, who made the point that the Emancipation Proclamation changed the war from a bloody waste of time to a moral positive.  But that came years into the fight.

The other problem I have is that the war is fought by, well, the government, the institution for which I have no trust.  One way of thinking about it is that every time we go to war, we put our lives and treasure and very future as a country in the hands of the Post Office.  Eeek.

Harvard Paradox

Asymmetrical Information comments on Greg Mankiw by observing:

Harvard scores lowest in student satisfaction *and* enjoys the highest yield (%
of students admitted who attend) of any leading American university. How can the
same institution be so desirable and so disliked at the same time?

The data presented for is for the undergraduate school and my experience is with the graduate school of business, but I think some of my experience can still help answer this question.

At the time I attended, I was sure that the Harvard Business School (HBS) was the best place for me to attend.  I still think that is true.  First, it had (and has) a great reputation with both people hiring for jobs and the general public.  The Harvard diploma has power, power that hasn't lessened even 20 years later.  Second, it had a style that worked well for me personally.  I sat in on classes at other business schools, but HBS classes had an interactive, and often combative, style that I loved and thrived in.  Yes there was work, but the workload never was worse than my undergraduate school.  I would not change my decision.

That being said, while I have showered my undergraduate school with cash, Harvard has not gotten one dime from me.  Because as an institution, it sucked.  It had an incredible arrogance to it, often stating publicly that its customer was NOT the students, but was the businesses who hired its graduates and society at large.  And this was the attitude at the business school, which I was often told was the most student-friendly part of Harvard.  My college roommate Brink Lindsey apparently had a similar experience at Harvard Law, as he was part of a group that founded N.O.P.E., which stood for Not One Penny Ever (to Harvard).

At every turn, one ran into petty, stupid stuff that did nothing to contribute to the educational experience but were frustrating as hell.  The faculty was often arrogant and the administrative and housing staff uncaring. 

At the risk of sounding petty, I will share two examples.  These are small things, but are representative of hundreds of similar experiences over two years. 

  • At winter break the first year, we were all given a "gift" of a coffee table book about Harvard.  Then, next spring, we all found a $100 charge on our spring term bill for this "gift"
  • My Harvard dorm room had a broken heater in my second year.  It got so cold that ice formed on the inside of the windows.  After weeks of trying, we finally got a maintenance guy to come out.  He set a thermometer down in the center of the room and stared at it for ten minutes.  Then he picked it up and started to leave.  "Why are you leaving?" I asked.  He replied "Because its 53 degrees in here.  State law does not require us to fix the heating until it falls below 50."  I finally had to go to Walmart and buy several space heaters.  Several weeks later I was ticketed by the campus police for having a fire hazard -- too many space heaters.

I do not think it an exaggeration to say that had Harvard scoured every post office in the country for employees, it could not manage to provide worse customer service day-to-day.

And I think this is the answer to the paradox.  If you can tolerate the faculty arrogance, you can get a great education, but Universities are more than just a school.  For most students, Harvard is also their landlord, their only restaurant choice, their local police force, etc. etc.  And for all these other functions, they are terrible.

The Danger of Government-Owned Commercial Enterprises

I am always flabbergasted by folks who support government ownership of commercial assets based on the idea that the government is somehow more accountable than private enterprise.  This argument is, frankly, insane.  Commercial entities are held accountable by two things:  1) the ability of a customer not to purchase their product or service and 2) the ability of new competitors to enter the market and take away their customers with a better price-product package.

All enterprises naturally try to resist these pressures.  In the long run, there is not much a private company can do to evade these pressures.  Even bald attempts to monopolize the market have always failed (at least without the support of the government for that monopoly, as in certain utilities).

But government enterprises are entirely different.  The government has the legislative and regulatory power** to stifle competitors to themselves and to compel consumers to use only their product or service.  In other words, the government, uniquely, has the power to totally void the two sources of accountability in the market.

And the government uses this power all the time.  They use it to protect favored airports, to protect cigarette makers who pay them loads of settlement money, to protect wi-fi revenue, and of course to protect the good-old US Post Office. Via Reason, comes this story of the government even making life worse for drivers in order to protect their toll revenues:

When E-470 opened in 2002, some people thought it was a strange
coincidence that, about the same time, the speed limit on nearby Tower Road, a
paved, 2-lane, rural highway, dropped from 55 MPH to 40 MPH. Several apparently
unnecessary traffic signals also appeared. This, in spite of the fact that after
the toll road opened, Tower Road would have even less traffic than it did
before.

Well, it was no coincidence.

The lower speed limit and extra traffic signals, which make Tower Road slower
and less convenient to use, are required by a "non-compete" clause in an
agreement between the E-470 Public Highway Authority and nearby Commerce
City.

The goal is to impede traffic on Tower Road so drivers will decide they are
better off using the toll road. This protects the revenue stream from the tolls,
thereby protecting the interests of the toll road's investors.

Once government gets into a particular sphere, they are never ever going to voluntarily let anyone in, no matter how bad their product or service becomes.

** This power is not really constitutional, and has only emerged post-1930's, but that is another topic.

Update:  Just to anticipate the argument, observant readers will note that several of these examples represent "public-private" partnerships that split returns between private investors and the state.  The wi-fi example and the toll road example are of this type.  The fact that these government endeavors include private money does not change the problem one bit.  The problem is the government using its unique legislative authority to intervene in an industry to protect its own rents, which can occur with the government as a 100% investor or as a minority investor.

Great Economic Analysis of Kelo and Takings

I am weeks late finding this article, but Todd Zywicki at Volokh posts what may be the definitive economic analysis of Kelo.  He talks about not only the issue of subjective value that leaves homeowners undercompensated for the taking, but about the deceitful game local governments are playing:

Second, focusing on the holdout problem in the Kelo context is to focus on
the wrong issue. The scenario here is different from when a government wants to
build a school or post office, traditional public use purposes. Schools and post
offices have to go in a particular geographic area (that's why they are being
built), and thus strategic bargaining may be plausible because it is similar to
a bilateral monopoly situation. The small group of landowners in the relevant
area can act strategically and try to extract a high price for its sale.

In Kelo, however, there is no obvious holdout power because Pfizer could put
its building in any city in America. So its not like a neighborhood school,
road, or post office. In Kelo, the holdout power is created artificially
by the city's desire to give Pfizer a sweetheart deal to bring it to town.

So ex ante, there is no viable holdout power in this situation because
there are an infinite number of close substitute sites for the building. The
building is going to be built somewhere, the only question is what city--New
London, Hartford, Bridgeport, Boston, New York, Chicago, etc. The artificial
scarcity that says the building has to be built in New London was created by the
city's other subsidies to attract Pfizer to town (the obscenely low rent,
etc.).

So if one is truly concerned about the holdout power problem, then the
correct solution is to require the city to eliminate the artificial scarcity
that "requires" the building to be built in New London rather than some other
city, the same way that a new school would have to be built in New London. If we
allow both the subsidies and the Taking for the benefit of the private party, we
are allowing the distribution tail of what city the Pfizer headquarters will be
built to wag the efficiency dog of whether the homeowner is holding out versus
having subjective value. Instead, we want to have the parties bargain ex ante
before they finally select the city--i.e., choose the city and the plot of
land at the same time--not bargain ex post after the city is selected.
Forcing an ex ante bargain when there are still many substitutes for the
proposed site would eliminate the holdout problem and allow us to determine the
extent of parties' subjective value, because the negotiations would be conducted
against the backdrop of a competitive market, rather than a bilateral monopoly.
The bilateral monopoly is thrust upon the city in the road or post office
scenario; it is freely-chosen in the Kelo situation.

Instead, the ruling in Kelo enables the worst possible economic
outcome--it permits cities to create artificial scarcity just to get a larger
piece of a stable-sized pie (getting Pfizer to New London rather than Hartford),
while then permitting cities on the back end to take land from private
landowners who may or may not be losing subjective value and being
undercompensated in the process.

And the incentive effect of Kelo is obvious--it now enables corporations to
extract both subsidies and takings as the price for locating in city A rather
than city B.

I have written about my frustrations with local governments subsidizing business relocations here and here.