Posted by Marc Hodak on June 15, 2007 under Invisible trade-offs | 
Literal question. And I mean you personally.
The answer begins with a theory that not all of us have to die–ever. Please follow.
The Immortality Crossover. Right now, life expectancy is increasing by about two months per year. That means that a decade from now, if you’ve survive till then, your life expectancy may be nearly two years longer than someone who right now is ten years older than you. That increased life expectancy will be due to enhanced treatments developed between now and then. And the pace of advancement is accelerating. At some point, life expectancy will be increased by over one year for each year that goes by. Whoever is around at that crossover point will have a good shot at living indefinitely.
Are we there yet? That crossover point could, conceivably, be within the grasp of a generation that has already been born. The first immortals may be walking (or perhaps crawling) among us.
Can we keep our foot off the brakes? The pace of advancement for medical treatments will depend on exactly two things–the amount of resources devoted to such development, and the efficiency with which such resources are utilized. With regards to the first, total expenditures are rising. Everyone wants to live longer and healthier. With regards to the second, that spending is being funneled through both the private and public sectors. Both areas are contributing to advancement, but the public sector spending is more politicized and less efficient. The profit-driven, private sector is much faster and more focused on getting returns from their investment. Impact matters to them. It’s a fair bet that the more that the market is involved in allocating our health care spending, the more efficiently that (rising) spending will be used to develop new treatments. So, who would want to risk the pace of development by either slowing down the amount we spend on health care or the degree to which the market allocates that spending?
Hillary: The socialists and progressives among us have a view of how the world should work. In their world, Bill Gates could have just as well been a successful bureacrat in the Office of Computer Technology Development in the U.S. Department of Commerce. He could have helped government direct investment in software development. Our best software developers could have just as well worked for the National Institutes of Computing instead of Lotus or Adobe or Oracle. Our computers might even be better if they were required to pass muster with a government FCA instead of being allowed to be sold by any college student with Internet access. And if they could have sucked enough tax dollars out of the private economy, the government could have subsidized equal access to computer technology every step of the way.
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Posted by Marc Hodak on June 1, 2007 under Invisible trade-offs |
That quote came from a 21-year old student who flew back from Europe with the TB guy, meaning she may have been exposed to infection. Yes, it was selfish of him. But I’m somehow bothered that we apparently have students, journalists, and probably many readers who believe that “selfish” is a worthwhile distinction in this matter.
My personal suspicion of this strange label began as a child hearing my mom complaining about my “selfishness” when it appeared to me that her real complaint was about me not satisfying her wishes in lieu of mine. Like every child, I wanted to make my mom happy, but I was still bothered by the logic of her complaint. I suppose that most kids internalize the negative connotation of “selfishness” as guilt when they make trade-offs in their favor versus other people. For some reason, I couldn’t do that. I grew up considering other’s interests and feelings in a fairly normal way, but I also came to view “selfish” as a fundamentally dishonest accusation, an indictment of the accuser more than the accused.
Don’t get me wrong–I would be quite upset about someone deciding to put me at risk by bringing an infectious disease into my passenger compartment. In this case, it was a personal injury lawyer who must have weighed the liability risk of what he did. But I wouldn’t whine about his behavior being selfish. My complaint would be that it was coercive–he didn’t give me the choice. He brought me into the trade-off of staying in Europe and probably dying versus getting to the U.S. and probably living, while exposing me to a minimal risk. His selfishness in making that trade-off would be no less than my selfishness in denying my consent (or complaining about being exposed.)
One could just as well view this situation in the obverse and say that it exposes a lack of heroism. The infected man was not heroic by staying put in Europe to die. The complaining student was not heroic in suggesting that this mans life was worth the small risk to her. In other words, selfishness is here, as everywhere, on both sides of the equation. So what? Either side could have adopted a heroic stance. Heroism is praiseworthy, but optional.
Posted by Marc Hodak on May 29, 2007 under Invisible trade-offs |
I’m putting together a presentation to a group of board members who requested that I start with some basics about the role of directors. So, I’m starting with the most basic question of all: why do companies exist? This is not a philosophy seminar, and we don’t have time for Coasian details, so I have to get right to the point:
– Shareholders create companies with their investment in exchange for a residual claim to the company’s profits
– Shareholders hire managers with the expectation that they will manage the company to legally maximize those profits
– The board’s job is to oversee management to insure that the shareholder’s interests are put first.
Managers, of course, have a zillion trade-offs to make–supplies, labor, new investment, etc.–in their quest to maximize shareholders’ profits. Even for insiders, overseeing the quality of these trade-offs is a very difficult task, but directors should understand in whose favor those trade-offs must ultimately be made.
For most outsiders, including critics, those trade-offs are invisible. But they still criticize. Business critics at least nominally hold the shareholders’ interests at heart when offering advice about new technology or grand strategy, which are sexy when they pay off, but often don’t. Kodak’s critics, for example, as well as their workers and communities, thought the company’s transformation from a chemical to a digital company was long overdue. Kodak’s shareholder’s blanched. They were content to milk the chemical company of whatever cash flow was left from chemical film rather than take that cash and plow it into something their managers had no clear competence in pursuing. Everybody loves a daredevil, as long as it’s not their baby on the ledge. Thus, “harvesting” is a highly underutilized strategy.
Social critics don’t even pretend to have the shareholder’s best interests at heart. And they hate “harvesting.” They would have us consider owners to be just one of many “stakeholders” for whose benefit the firm should be run. These people see the company not as the product of investment and risk-taking, but simply as a given, something to be milked for their own “good” ends based on some nebulous “social contract.” They advocate for “rights” of communities, workers, etc., competing with the rights of shareholders, supported by cash that would otherwise go to the shareholders. And where they have been most successful, they later complain about the decline of their communities and a lack of jobs.
My job is easier. I just have to help directors do their job.
Posted by Marc Hodak on May 25, 2007 under Invisible trade-offs |
Adam Clayton Powell IV, assemblyman from East Harlem, has been accused of being the laziest legislator in Albany. As reported in the New York Sun:
Of the thousands of bills introduced this year, Mr. Powell can take credit for not a single one. If Mr. Powell doesn’t introduce a bill in the next month, he will have made it through three consecutive session years without acting as the prime sponsor of any piece of legislation.
I’m not sure how Powell slipped through. I guess being the son of a legendary politician gives you a big edge in the election game. But somehow, we now have a libertarian’s fantasy–a legislator who doesn’t believe in making new laws.
Most institutions create more rules than than they destroy. Their rules keep piling up. In the private market, a company will either have leaders regularly cleaning out the rules, like when Jack Welch took GE’s huge procedure manual and simply threw it in the trash, or the firm eventually collapses under the weight of its rules, left in the dust of its more nimble competitors.
The government, of course, can’t go out of business. So, if you believe that it’s possible to have too many laws, then one can’t view the current trend as a good one. In fact, your only prayer is someone like Adam Clayton Powell IV.
So, how does he get away with it? This is someone who mysteriously gets elected on something other than a promise to do something. This is a politician who apparently doesn’t stand up to be heard. Here is someone who apparently has little interest in telling other people what to do. This man, if mere mortal he be, somehow resists the lobbyists and activists, media crusaders and other assorted, professional busybodies who place incredible pressure on every one of our representatives, promising them funds and publicity and god-knows-what, so they can get state power behind some pet initiative that would clearly fail to get the voluntary support of their fellow citizens or pass any kind of market test.
Adam Clayton Powell IV, as long as your streak lasts, you are my hero.
Posted by Marc Hodak on May 23, 2007 under Invisible trade-offs |
In this article:
The House, eager to do something about record high gasoline prices in advance of the Memorial Day weekend, voted narrowly Wednesday to approve stiff penalties for those found guilty of gasoline price gouging.
The bill directs the Federal Trade Commission and Justice Department to go after oil companies, traders or retail operators if they take “unfair advantage” or charge “unconscionably excessive” prices for gasoline and other fuels.
Rep. Bart Stupak, D-Mich., its chief sponsor, in urging his colleagues to support the bill said the issue was whether “to side with Big Oil (or) … side with consumers who are being ripped off at the gas pump.”
The bill calls for criminal penalties of up to $150 million for corporations and up to $2 million and a jail sentence of up to 10 years for individuals found to be engaged in price gouging.
…the bill’s supporters argued that states can’t combat energy price gouging, leaving motorists at the whim of arbitrary oil company pricing.
So, the remedy to “arbitrary pricing,” approved by two-thirds of our Congress, is arbitrary prosecution. Even Rep. Stupak (I’m resisting the obvious play on his name) has no idea what “unfair advantage” or “unconscionably excessive” mean. I will let the lawyers tell me if there is such a thing as unconstitutionally vague laws, and if this would qualify.
What concerns me is that most of the people who voted for this bill are really not that stupid (damn, there I go). Congress has commissioned numerous studies on price gouging over the years, under Democratic and Republican administrations, and they all come back with the same verdict. It’s the voters who go in for the conspiracy theory behind such laws. The clearest evidence of the irrationality of that position is the utter lack of explanation about what leads to occasional gas price decreases. (It’s a one-way conspiracy? Big Oil was less greedy last month?) The point of this law is that the answer to why prices sometimes go down is clearly not current price gouging laws.
So what would be the predictable consequences of such a law? Well, rational business persons, when faced with possible $2 million fines and 10 year jail penalties for raising prices will:
(a) avoid situations where they might need to raise prices on a volatile commodity by always keeping them high,
(b) stop selling altogether in times of emergency, when the actual or opportunity cost of the commodity exceeds the “normal” price.
What businesses won’t do is try to make a decent return on a volatile commodity by allowing the price to come down when supplies are easy and not raise them when supplies are tight. And businesses certainly won’t take a chance on finding a market-clearing price for gas in the very times of emergency when gas, in fact, becomes most valuable to the public. So, then everyone will have theoretical access to gas at the “conscionable” price, but people who would have gladly paid more than the $1.50 or $2 (equivalent to $6-$8 per gallon) it might have cost them to drive five miles they desperately wanted to travel will instead stay put for fear of running out of their “reasonably priced” gas.
Posted by Marc Hodak on under Invisible trade-offs |
I found this comment on The Borgas Blog. It echos the sentiments of many people who have been citizens since birth:
I’m an immigrant who took the citizenship oath last December. I’ve been through the system. From my experience, the immigration system works if you decide to follow the rules. Before I immigrated, I never overstayed my student or tourist visas. When I decided to immigrate, I paid the fees, had a physical, was re-immunized against all those childhood diseases (including the oral polio medication), had a criminal record check in my country of birth, an interview in the US Embassy, and paid the required fee. I also had to prove that I had sufficient funds to support myself for a period of 5 years, and promise that I would not be a burden on the US people by agreeing not to apply for welfare (yes, this is true!) After fulfilling the residency period, I applied for citizenship, paid the fee, was finger printed (for the 4th time), had an FBI background check, passed the English language test (required even though my first language is English), passed the US history test, and interviewed for suitability by the INS/BCIS. I gladly did this. I followed he rules and everything worked well during the entire process. In my experience, if you follow the rules, the immigration system works well.
This commenter went on to express his rather extreme antipathy for letting off those who chose not to go the legit route.
On the one hand, it’s hard to argue with the rule of law and its adherents, and immigration law, which seems so messed up to so many people, has clearly evolved to account for many little things that the less informed continue to rant about, like checks for background, ability to provide for oneself, etc.
The key phrase for me, though, was “when I decided to immigrate…” I’m not sure that reflects the typical path, suggesting that this comment may reflect little more than the fact that the winners of the lottery are fine with the lottery. I also won the lottery by being born (abroad) to a U.S. serviceman. Both of my parents are immigrants, but they came over in a window of time when European refugees and Holocaust survivors weren’t subject to as stringent visa caps.
On the other hand, I went to business school with someone who married and had kids in the U.S., but was suddenly barred from returning from a visit with family abroad until she gave up her job at Price Waterhouse and promised never to work again in the U.S. (yes, this is true!).
Back to the commenter above:
Our Congress’s capitulation to illegal residents over the views of US citizens devalues US citizenship. Most legal immigrants I know share these views. Now that I am a registered voter, I’ll be making my views known.
Translation: The hell with her. Now that I’m in, I don’t mind if we slam the door shut. Or, if I can get a piece of it, let’s charge an arm and a leg for entrance. Who are these people tyring to take my jerb?
Ah, it’s so easy to be the lucky one!
Posted by Marc Hodak on May 18, 2007 under Invisible trade-offs |
Russell Roberts does an excellent job dissecting a common argument for government regulation by breaking it down in terms its components. Specifically, he goes after the imbedded assumptions of this statement:
…perhaps you are uncomfortable with the idea of government intervening to assist the financially stupid. But I think there are many cases of the financially, legally or scientifically stupid asking the government to restrict their choices.
Russ breaks it down like this: When advocating government intervention on such grounds, one is implicitly assuming that the government has the good intent, capability, and incentives to actually do what it has nominally set out to do.
The first error is that “the government” is a thinking entity capable of intent. Russell dissents by calling the government a “sausage factory of legislation.” Even this, I think, dramatically understates the fragmentation of government “intent.” Don’t forget the executive branch. Whatever remains of the original good intent after the ‘sausage factory‘ process has turned it into a law, it is quickly discarded by the bureaucracy needed to implement it. At that point, intent has been boiled down to rules that every single person must follow. Anyone who has had to jump through the hoops set up by the bureaucracy to comply with its requirements knows that this is not a system where good intent is institutionalized.
As for government capabilities, consider for a moment the knowledge possessed by the most enlightened, empathetic bureaucrat versus that of the average person actually involved in a transaction. What are the odds that the bureaucrat will really understand the particular issues and tradeoffs you face better than you or whatever advisor you might bring into the transaction? Sure, the odds are there. It’s possible that a government agent might know what is good for you better than you do, but it would be a gross understatement to suggest she might not. Especially when you consider that the government’s agent is not an expert at anything other than following specific rules that cannot, by design, account for the particular concerns you, as an individual, might bring to a particular transaction. As Russ pointed out, lending rules may prevent loans that shouldn’t happen, but they certainly also prevent loans that would be mutually beneficial to borrower and lender. What is the proportion of each type? That would be an interesting question, but it is never even asked by legislators, which brings us to incentives.
By far, the most problematic area in regulation and enforcement is incentives. Every single agent of government is as much a slave to their personal incentives as we are to ours. Laws are made by people seeking votes. Thus, they are shaped by institutions with political clout, including those being regulated. The resulting rules are enforced by people just like you and me. Many of these bureaucrats are honest and diligent, but many are not. The problem is that, unlike a business subject to market discipline, there is no mechanism to keep a check on those in government who have the power to make your life as difficult as possible in order to make their lives as easy as possible. And, for all the theorizing about the potential economic benefits of certain regulations, there is no market test for government, other than the coarse, often undetectable reactions of market agents leaving the regulatory regime.
There is one more thing about the statement that Russ left unchallenged: the magic word “asking.” Who are the people “asking” to be regulated? A commenter to Russell’s post put it very well by suggesting that people who want to be regulated could simply be given the ability to opt in, or the rest of us given the ability to opt out. For instance, I think I can deal pretty well with nearly perfect freedom in my financial transactions, subject to the normal protections of anti-fraud laws. I have an MBA in finance. I may not always know what I’m doing financially speaking, but does Congress know better? Does the bureaucrat with the power? But my choices are limited and my costs are higher because of financial regulations “protecting” me. For me, as well as most people, the costs associated with that loss of freedom, with the inability to truly “ask” for the government’s protection, is very high. How high? I’d like to know. But the legislators imposing those costs don’t even ask what they are, let alone provide them in good faith in weighing the costs and benefits of the mandates.
Posted by Marc Hodak on April 23, 2007 under Invisible trade-offs |
The passing of Boris Yeltsin is being greeted with generally favorable obits, and some residual criticism for his toleration for corruption, initiation of the Chechnyan conflict, and other questionable calls during his time at the helm, to say nothing of his sometimes embarrassing personal behavior. Such criticisms suggest an unstated belief that his perceived shortcomings could have been avoided without other, possibly worse, consequences. For example, maybe he could have accomplished what he did without the corruption that plagued his tenure. But it’s also possible that corruption might have been the grease that enabled him to begin turning the rusty wheel of capitalism by quickly divesting the state of its control over the economy. Many things he might have done to significantly prevent corruption might have also stalled the whole effort. I’m not saying this would have necessarily been the case, or that it wouldn’t possibly have been a better tack anyway. I’m just saying that nobody knows how much better events overall could have turned out with a different package of policies.
How did overall events turn out? Better than most anyone could have expected at the height of the cold war. Well into the 1980s, most people could hardly see an endgame to Soviet communism without a hot, possibly uncontained conflict. The peaceful, almost banal disintegration of the Evil Empire is, I think, among the most underrated achievements in human history.
What Gorbachev wrought by simply stepping back when the Wall began to crumble, Yeltsin consolidated by boldly going forward when the communists were ready to be swept away. I know I would have greatly benefitted from being stinking drunk when standing atop a tank to face down the last, deperate masters of the Red Army. But that’s what Yeltsin did in one of his soberest moments.
All these little critiques of the parts of the package we don’t like are a symptom of a utopianism not unlike the one Yeltsin killed off. The downsides of his decisions are visible–a corrupt relationship with a mafia-like oligarchy, a war in Chechnya, centralized power under Putin, stumbling onto a stage and swatting at an obstruction before recognizing it was a microphone. But what would we have gotten with a sober, uncompromising master of realpolitik who could stand up to the Oligarchs? We could have gotten Putin, ten years earlier.
Posted by Marc Hodak on April 11, 2007 under Invisible trade-offs |
The assailant was District Attorney Mike Nifong. The victim was the lady with the blindfold and scales.
The accused Duke lacrosse players have finally been exonerated. For those of us who have been following this case, the dropping of these charges is long overdue. The players and their families have gone through hell, paid their lawyers over $2.5 million for the privilege, and lost a year of their young lives in the netherworld of an out of control prosecutor. Their coach lost his amazing job. Their teammates lost a great shot at the NCAA championships–the pinnacle of what most lacrosse players work their lives to achieve. The best coverage of this whole, sorry affair has been provided by KC Johnson. He will undoubtebly put it all together in a much-deserved bestseller.
My own interest in this affair stemmed from my son’s decision to apply for and accept Duke’s invitation to their Class of ’11. When I asked him about the lacrosse affair, he responded in his typical, mercenary fashion that he should probably send Nifong a thank you note for making it that much easier for him to get in to a great school. I suppose this was a year of reduced quantity of applications for Duke, and since the students would eventually be found innocent, it was a fair bet that the school’s reputation should more or less recover.
I would qualify these statements by mentioning the behavior of some of Duke’s administration, including President Jim “Throw ’em under the bus” Brodhead, and the politicized faction of their faculty that used their student’s plight to press their own agenda. In either of those regards, however, I don’t think my son would have fared better at any other elite university, except that Duke’s loony left may have been sufficiently spanked by the deservedly bad publicity to lay low for, perhaps, the next four or so years. I doubt it, though.
Of course, the long-term negative effects of this prosecution will be borne by future rape victims who will have a harder time having their voices heard. Among the outrageous enablers of this false prosecution were supposedly feminist advocates who played the victim’s siren song long after everyone else got tired of the screeching.
Posted by Marc Hodak on April 8, 2007 under Invisible trade-offs |
I always thought it interesting that kids derive a lot of fun from biting off pieces of a chocolate bunny. I wondered what vegetarians thought about that.
Many people get squeamish about the death of animals, especially baby animals. All babies are cute in a way that’s somehow recognized across species. So, when the Discovery Channel showed a gaggle of furry goslings being gathered up by a hungry arctic fox, one felt a sense of relief when the geese parents came back to chase the predator away, making it drop everything. But when the fox sneaked around and grabbed a helpless gosling, and the geese parents looked distraught, one shared their distress. One felt their pain, until the fox reached its little kits with the bird. After the furry little kits shared their meal and were rolling and playing, one was grateful that their mom was able to provide for them.
That’s the way it is. We root for the subject animal. We boo the seals ominously swimming around the icy shores waiting for penguins to jump in. We’re told that the death of a penguin seeking food in the sea also means death to her baby penguin waiting for that food on shore. So, seals are vicious, blood-thirsty ocean creatures. That is, until the show is about seals. Then they’re cute, playful creatures trying not to be eaten by those vicious sharks. And when a polar bear attacks a walrus colony, one’s heart immediately goes out to the pudgy, old walruses. And when the walruses successfully evade predation and the polar bear eventually collapses from hunger, we see that the cost of avoided bloodshed was the death of a noble creature.
Fact is, nature is a bloody, violent place with every creature’s life hanging in the balance, in mortal competition with both their rivals and their prey. “Nature, red in tooth and claw,” as Tennyson put it, has always been difficult for ‘nature lovers’ to accept. But it demonstrates the inevitability of trade-offs in every part of the world. It means that when we see a cute little tiger cub waiting for it’s mom and think, “I hope Simba gets what his little tummy needs!” one has to accept the criticism of being against antelopes and gazelles. Predation is an unhappy fact of life for many. But what would the world look like without it?
