The Angry Economist

Tom Slee has written a book entitled No One Makes You Shop at Wal-Mart. The introduction of the book ends with "why we need to rely on collective action rather than individual choice to take us to where we want to be".

Poor Tom! He fantasizes that once the tools of coercive collective action are created, intellectual such as himself will be in charge of directing the action. And yet, when you point him at collective action gone wrong (e.g. Jim Crow laws, or the War in *, or the War on Drugs), he'll just tell you that the wrong people (e.g. George Bush) are in charge.

No, it's far more likely that when powerful tools are created, powerful people (politically and/or economically powerful -- which you surely must acknowledge doesn't include intellectuals) control them. That's why I oppose the creation and ongoing maintenance of these tools. Not because you can't do good things with them -- you can -- but it's more likely that bad things will be done with them.

The US Sentate is currently considering a bill designed to pay people to be unemployed, and to penalize any private parties that still employs people.

Well, that's not exactly how the bill is written, but that's how any economist will read it. They're planning to extend unemployment benefits, which would otherwise run out. This has the effect of paying people to have the job of being unemployed. When you buy more of something, anybody who has a supply of it will step up to the plate. So rather than take a job, any body just to get income flowing again, the US Senate is encouraging people to stay unemployed.

The other thing they're doing which "helps" the recovery is to raise the unemployment insurance payments that employers have to pay when they employ someone. This is a tax on employment, and makes it more expensive to keep someone employed. Anybody whose employment is on the edge will get kicked over and kicked off.

When you tax something, you get less of it. When you subsidize something, you get more of it. Thus it has always been, and thus always have politicians ignored that face. It's the economist's burden to always have to tell them that their grand plans are doomed to failure.

I just cringe whenever I hear Obama or his minions talking about how they created or saved N jobs. As an economist, I'm trained to look for the other side of the coin. Yin and Yang. The coin cannot not have another side if it is to be a coin. So when the government takes money from taxpayers, or prints up new money, or borrows money from China, to spend on creating jobs, I have to ask: how many jobs did the stimulus destroy?

If being in charge of wars in two different countries, and having your troops stationed in nearly every continent doesn't qualify you for the Nobel Peace Prize, I don't know what does.

Paul "MIT wants its PhD back" Krugman is at it again. When government action causes an economy to go bust, people need to adjust their spending (recalculating). This includes employers and employees. So unemployment goes up. Krugman can't understand why this process doesn't apply equally to boom times.

His claim is comparable to saying that because the distance between two floors is equal (the amount of spending adjustment), that it should take an equal amount of effort (unemployment, as some jobs are destroyed and others created) to climb the stars as go down. By this metaphor he's obviously lost all shred of his former Nobel-inducing glory. All that's needed is to show that gravity exists in economies as well as houses.

Causes of gravity: information (in a boom, everybody knows where the jobs are; in a bust that information is hard to get), confidence (people take more risks with their jobs if they know a replacement is easy to get), egoism (everybody wants to get paid more; nobody wants to get paid less), time (booms happen slowly and busts quickly), and probably a few more that I can't think of, but really, these are sufficient on their own. Four reasons why recalculation results in unemployment on the bust side rather than the boom side.

It must suck to be Krugman.

My friend Nat Friedman proposes on Twitter "If it's really only $19M in health industry lobbying holding us back, why doesn't some rich guy just spend $50M and get this done?". Won't work. Here's why.

The health industry lobbies for its interest. They spend a certain amount only because they don't need to spend any more. They're buying influence with legislators.

Now, introduce some rich guy and have him try to buy up all the influence, so that the health care industry doesn't get its way any more. This is an attempt to "corner the market" -- to own all of it so you can demand the price you want.

The problem with trying to corner any market is that the other participants in the market still desire the product. As you buy up more and more of the product, the other participants still want to buy it, so the price rises higher and higher. You have to be willing to spend as much for the last item as the richest customer for the produce.

In this case, the intent is to extinguish the industry. So the price for the lobbying is not $19M. The price is the entire value of the health industry. No way is $50M going to cover that price.