Thursday, March 31, 2011

Energy and Begging the Topic

A maddening aspect of American politics is the constant substitution of nonsense for debate or discussion. Partisanship is partly responsible; no one with an investment in their public position is going to have their opinions change--at least in public. There is another problem as well: Begging the question. Begging the question is a perfectly good phrase tattered by abuse. It does not mean "raising a point for discussion", it means "assuming what is to be proved," or "circular reasoning".

An example: "Affirmative Action can never be fair or just; you cannot remedy one injustice by committing another."

While a staple of American political discussion, its use in the energy debate has taken on mystical overtones. It is so large as to engulf the entire topic, so large a new phrase may be necessary to describe it. It assumes everything.

Here is a summary of Obama's points in his energy address this week:
-Reducing oil imports by one third within a decade.
-Discovering and producing cleaner, renewable sources of energy.
-Making vehicles more efficient.
-Increasing domestic oil production.
-More nuclear energy - keeping in safety in mind.

This is not a plan, it is a wish list. While Obama can make these goals difficult, like increasing oil or nuclear production, he cannot actually do any of these things himself. Essentially this "plan" assumes a lot of other people are going to solve your question.

1. Reducing oil imports of course depends on the success of the other points. 2. There are sources of energy (solar, wind). The problem is the battery. 3. Vehicle efficiency might be improved by stop-start technology but there is little else yet.4. Increasing production will be hard with two decades of suppressed production, the Gulf ban and the EPA. 5. Nuclear energy is a good source but a reactor has not been built in 23 years. That is purposeful.

Two nations, Japan and Israel, have no domestic energy sources and are totally dependant upon imports, some from sworn enemies. These two highly successful, technical cultures have been trying to make themselves energy independent for generations and have failed so far. That Obama can stand up and present these assumptions as a plan is simply fanciful; that anyone could take him seriously is stupid.

Wednesday, March 30, 2011

Obama's Libyan Performance

“We don’t have markets any more, we have theater."

This quote from investor James Rickards may have more application than he realized. The Pittsburgh Pirates no longer play baseball, they play a baseball game in a carnival. News shows deliver information and opinion as part of a multimedia extravaganza--watch Jim Cramer's show for a few minutes if you can. One of the women on FOX News is so beautiful that a man she was interviewing became distracted by her and could not speak. (She could easily wear a headdress and gown.) And those politicians reliably hold up to the form over substance creed, brilliantly answering those questions that were not asked.

"We have led...", "At my direction...", Our "interests and values...", "We have been joined...", (paraphrase) "It took more than a year for us to act in Bosnia, in Libya it took us only 31 days."

For those of you who missed Obama's speech on the American attack on Libya Monday night, the speed-reading quotes above give a good outline of the script. (It misses the rather stirring finish.) The performance shows Obama as the leader, the initiator, in charge, faster than Clinton, with everything except "the sneer of cold command" in the Libyan desert. Perhaps he was a power behind the scenes but it is more likely the Europeans are laughing up their collective sleeves. We have here, from all appearance, America's first diffident president, slow to anger, slow to act, ready to blend into the background at any threat of uncertainty. For two years the congress led; he is now a tall ship with huge sails of pronouncements but no rudder and a log book of imagined history.

Nor was the key question asked or answered: What are the circumstances that allow the United States to invade a country with impunity? Our "interests and values" were alluded to, our "values" being added to Gates' earlier statement that we had no nation interest in Libya. But the diffident are a hands off people; there is no reason for us to expect much. The appearance of involvement and action should be quite enough for the likes of us.

Nothing to ponder, legerdemain, and a stirring finish; what more could the audience demand of an entertainer.

Tuesday, March 29, 2011

Teaching the Baby to Swim by Throwing Him in the Pool

American energy comes from oil (40%), coal (23%), natural gas (23%), nuclear (8%), renewable--really hydroelectric with a percent or two of solar and wind-- (7%).

The Americans have just promised 2 billion dollars (as a loan, no equity) to Petrobras, the Brazilian national oil exploration company, to drill deep--really deep--off the coast of Brazil. There are 5 to 8 billion barrels of oil 4.48 miles down, in 7000 feet of water, 50 miles off the coast of Rio. Drilling at this depth has never been done before and likely will require new technology. This financial support is difficult to explain on two levels: One, there appears to be a general disapproval of the use of fossil fuels in this country (although they make up 85% of our energy) and, two, the government has banned American deep water drilling in the Gulf of Mexico so only foreigners do it.

As mysterious as the United States' decisions are, one thing is certain: There are no accidents in planning, only in execution. They want the Brazilians to drill for oil and do not want us to. Why? They have not given us the slightest clue. But it is no accident. Regulatory agencies are waging a virtual war against domestic energy exploration as America's reliance on foreign production grows in relative and absolute terms. In 2009 American oil production increased in absolute terms for the first time in 20 years. 20 years! That is no accident.

There hasn't been a new nuclear reactor built in this country for 23 years and it would take twenty years to build one. Nor is that an accident. The efficiency of nuclear power and our expertise at it will not be a factor here. They have not allowed us to build and the recent disaster in Japan will only solidify their position.

Somehow and for some reason the powers that be want us to shift to less efficient and more expensive fuels regardless of the negative impact. The fact that those fuels do not actually exist on any practical scale does not seem to matter.

There may be a new phenomenon afoot here. Many religions require a leap of faith in initial belief. Once the initial premise is accepted--that difficult step--then everything else is easy. These people seem to have a leap of faith in their vision of the endpoint. It is as if a religion believed in heaven and worked backwards. They finesse the difficult process part of the thesis, the creation of alternative energy sources. Each of the believers have a credo--global warming, CO2 production, unequal distribution of energy use, unfriendly oil producers, unreliable oil producers, etc., etc, etc. Some have saints. All want to use solar power, geothermal power, biofuels and wind power now despite the fact there are no ways to do that now. The process to that holy place does not exist.

Sometimes being a visionary is not enough.

Monday, March 28, 2011

Libya

There are many questions raised by the American attack on Libya. What is the necessary endpoint? How will the decision to attack be made? Is Congressional approval required? But these questions are far beneath the real question. The essential question of the Libyan Attack Mystery is this: What circumstances justify an attack by the United States on another sovereign state?

The classical answer is, of course, war. But we have not declared war. Nor will we. War is always the result of some national need, some unarmed conflict that one or both sides decide cannot be solved peacefully and is threatening enough to kill and die for. But the Americans have said that Libya poses no threat to the United States and they have no national interest at stake. What then? What makes us blow them up?

Nor are we alone. Many European states are in on the kill. Indeed, the esteemed United Nations had a vote to attack Libya and that vote passed--with a few notable abstentions. It may seem that we are a part of a movement; in unity there is justification. The more collaborators, the more the justification. But the question remains: Who can we simply attack? And, while we are at it, what does the U.N. have to do with it?

The Americans historically have been the guardians of the West, the first line against those messianic political beliefs that feel compelled by historical inevitability to roll over us. Islam is different; it has some militant messiahs but those aims are not held unanimously among its believers; it may be a problem for the West but it has not declared itself yet. But our motives in Libya are not self defense and they have--or at least had--the imprimatur of the Arab League. In short, the attack on Libya does not seem to be political or military; our blowing up of Libya seems to be humanitarian.

Set aside for a moment the irony inherent in blowing up people for humanitarian reasons. What humanitarian reasons qualify as a good motive for blowing people up and are there mitigating circumstances? There were terrible things done in Rwanda, done in Bosnia, done by the Heroes of Beslan, but none of these terrible things moved the U.S. to action. Where does a nation--any nation--get the right to impose its conscience on any other established group?

Libya has opened a nasty can of worms. It seems to be a bizarre act linked vaguely to the fact that one side in a conflict was getting clobbered. If the U.S. is going to try to even out the conflicts of the world they will be busy. But it hovers there, watched by the Americans with bewilderment, turned away from by its chief executive in apparent embarrassment, unexplained and undiscussed. But what it really is is precedent. It really is a foot in the intellectual door so that aggressive leaders can do it again if it pleases them.

Strange that an act, likely precipitated by embarrassment over failure to perform an act of mercy in Rwanda, will no doubt be used to justify countless future acts the Americans should not do.

Wednesday, March 23, 2011

Japan, Nihilarians and The Biggest Bastiat Broken Window in History

One of the weaknesses in the modern cultural infrastructure is the notion that action is inherently valuable. Perhaps it is an unfortunate hangover from the choice-obsessed existential period but it permeates everything, chilling common sense and often building mountains out of molehills. So crazy Gaddafi gets a military response from the entire Western World, water pistols are outlawed in kindergartens, building codes have more prohibitions than the Torah. Now editorials are proclaiming the advantages of the destruction of Japan: It will allow for building and growth.

Could any statement be more unreasonable? Should the Japanese provide the GDP coup de grace and finish off what is still standing? On a broader level, is this the subtle reason countries go to war, to be defeated and destroyed so the can beat their enemy by their subsequent great postwar growth? Should each country have a Bureau of Growth that selectively destroys areas of high productivity in the country so it can eventually be reclaimed? One wonders if the muted charitable response to the unfortunate Japanese does not spring from this weird belief that they are an able people and, in rebuilding, will be better off.

Symbolic work is Sisyphus; economic work is productive, creative, and meaningful to more than the individual. Economic work is of benefit to all. Symbolic work might keep you off the street, might distract you from your ailments, make you a better person. But symbolic work will not benefit the economic community. Building a house, tearing it down, rebuilding the house, tearing it down for generation upon generation is meaningless, worthless and distracting. Trying to make it valuable is insane.

There are illnesses where the afflicted repeat physical acts that have meaning to only them, pulling out invisible drawers, hanging invisible pictures. A wonderful scene in the movie Blow Up had the lead character, in his final surrender to fantasy, join a tennis game played without a ball. It's doubtful that this nihiliarian movement is pathological, it's probably just easier than hard analysis and difficult choices.

It's easier than honest thought.

Monday, March 21, 2011

Government investment 2

If the U.S. government wants to do "investments", they should clarify the nature of investments first.

There are a couple of types of investments, generally debt and equity. With an investment in debt, the investor is giving money for a certain return, the debt backed by something like real estate, or company assets or intellectual property. If the debtor doesn't pay his debts, the bondholder takes what was pledged. In equity the investor invests in the company and its future; that investment is backed by the company's property but the debt holders have first claim and, in a failure, there is usually little left. Next, the investor invests his own money, or someone the investor assigns or pays invests the money for him.

There are several components to this type of transaction that are obvious. First, an investment is voluntary; it is always done with the approval of the person whose money is being invested. Second, investment involves risk; the investor may lose his money. Indeed, the risk determines what kind of investment the investor is willing to make. Risk is an inherent part of investment; it is what the investor is paid for. But the risk is not simply the loss of money; the other side of the risk coin is pain. In an investment, the investor investigates the investment, takes money from another aspect of his life and deprives himself of its use--perhaps forever, and risks his money, his comfort and a bit of himself in his decision. (An interesting aspect of the 2008 meltdown was the appearance of "investments" that appeared "riskless', a sure sign of something wrong.)

Now, how can the government do this?--aside from the practical questions of whether they can do it well--whether their motives are good and their assessment even adequate. They can give money to people or things; that's easy. But investments demand a relationship with the investor and the entity he invests in; that relationship hinges on the possibility of risk and pain. So the government takes Other Peoples' Money and gives it to someone else and calls it an investment. But an investment requires one's own money. And regardless of how the bureaucrat may want the target of the money to succeed, it will never be his "investment".

So the government might give money to a wind farm. A transfer of money takes place; but that doesn't make it an "investment" any more than Charlie Sheen's professional girlfriends are receiving investment money from him. The wind farm is getting a "subsidy", a gift for a purpose--albeit a possible good purpose--but it is not an investment. And what if you own a competing wind farm? Is the appropriation of your money to subsidize your competitor in any way right?

Any politician who calls this an investment is either foolish or insincere.

Friday, March 18, 2011

Government Investments. A Modest Proposal

"Government investments." The concept thrills the heart. The sensible, objective and insightful state leadership filters, examines and guides concepts, products and services to some endpoint for the betterment of all.

We know our leaders capable of this; they have survived the personality and appearance wars. We know they are impervious to petty influence--aside from the occasional Fanny Fox and the periodic ethanol debacle. The 7% graft "off the top" of every government program as estimated by the GAO is merely the cost of doing business, great business.

There are certainly precedents. The Axis in the Second World War ran completely controlled economies as did the free world in response but while one succeeded, one lost, so it may not be a great proof. The Pacific Basin nations have strong partnerships with business and, often, seem successful, albeit, in the words of Dylan, "with a little too much force". Our own efforts will bring social awareness and sensitivity to the project so we certainly will succeed.

A modest proposal: There is an obvious problem stalking this great land whose evil tentacles have stretched so far as the sacred Oval Office. To mobilize against such a curse, to place the power and high-mindedness of the government against such a plague, would inspire citizens and prove the value of such government intervention. The evil is, of course, bullying in schools and the vector is large ears. Here a social problem converges with self esteem, education and health care--a perfect storm in a perfect showplace. It would be simple for the government to set up a bureau to evaluate ears, create a norm with standard deviations and unleash the healing power of the American medical system to reconstruct all reasonable candidates' ears to meet the norm and to end school bullying. Labs would be started, statisticians would be employed, new departments in schools created, physicians would be guided away from unnecessary tonsillectomies and erroneous orthopedic surgery accompanied by thousands of support personnel. Jobs would be created; children saved. This first step will prove once and for all of the value of intimate government interaction in our poor lives, emphasizing children rather than toilet size, education rather than ethanol, personal worth rather than stop-start engines.

We will not shirk! We can not fail!

Thursday, March 17, 2011

In the Land of the Blind....

There is a notion about that all of America's problems are more than self-inflicted, they are purposeful. The question is the motive.

Michael Moore, proving the democratic principle that any man may speak, stated that Wisconsin was not going broke--despite its increasingly negative balance sheet--because there was wealth in the state that could be confiscated. Confiscated, like some foundationless third world soundtruck democracy. E.J. Dionne wrote in the Washington Post that the "We're broke" phrase that has been used recently is simply false. Interest rates are low so we can borrow and there are a number of "tools" that can be used like "taxes, layoffs, spending cuts, debt shifting". But who is willing to bell the cat with these tools? Romer has already said there is a direct correlation between raising taxes and decline in both GDP and employment. ( http://steeleydock.blogspot.com/2011/03/obamas-rock-and-hard-place.html) And who gets laid off? And whose projects are cut with the spending cuts? With the deficit in the trillions, the current Congress, both parties, can't seem to cut much. And of course there is the promise of the mysterious government "investment." We'll be able to see "government investment" in action soon in Japan, rapidly becoming the world's largest imaginable application of the "broken window theory."

According to Dionne, the motive for this "We're broke" talk is to decrease taxes for the rich. This seems pretty thin, especially with so much at stake. One would expect much more evil than tax breaks for friends if the economy is going to be crippled by nefarious manipulation. But maybe it is true. Maybe these people are easy to compromise, even over big topics. Maybe even as crooks they have a small vision.

The other side of the aisle sees the left's behavior over the last years more simply: It's treason. The idea is to overload the system with debt until it collapses so they can rebuild it to their liking. While this sounds totally insane it has had some traction because of the left's persisting association with old people with homicidal revolutionary pasts, like Ayers, who continue to float about the periphery like Polansky at a film event, staining everyone in sight.

Recently Glenn Beck set aside part of his show to attack the conservative darling James O'Keefe and his NPR "sting" operation because he thought it was dishonest. In the national debate with these other people, he sounds like Lincoln.

Wednesday, March 16, 2011

The Smiling Ape

We are not thinking beings who feel, nor are we feeling beings who think. We are a complex mesh of thinking moderated by emotion-driven values--or so says David Brooks in his new book.

This notion seems a part of a growing consensus among physiologist and thinkers as to how the human brain works, a consensus that inherently raises suspicion because there is nothing science hates more than momentum. None the less it is gratifying to see and hear concepts in neuroscience that confute last century's vision of humans as blind, reactionary beings in thrall to subconscious conflicts that each individual must untwist and resolve before they can become functional. (Happiness is a further away land.)

Thus far integration with others, especially from infancy, seems to be key. And this continues with growth, the emotional reward of integration flowering in the rational decision-making of adolescence and adulthood. It offers great reward--and challenges. The virtual office--distant, separated and filtered--is unrewarding and must be solved. A caring, involved teacher might overcome a distant or absent parent -- or the damage may be already, irretrevably done. The remarkably personable politician can succeed and advance without any management ability at all. The soldier can fight and sacrifice with his comrades completely absorbed in his unit without regard to its objective.

So families thrive, the hand that rocks the cradle rules the world, at Thermopylae the Persians never had a chance, the Japanese have their nation leveled and there is no looting, the White Rabbit goes twenty-four hours under Nazi torture before giving up his friends.

Certainly there are downsides. Unengaged children grow up as shards in a cultural web, angry mobs show up at some vague target, the less rational have little to modulate. But at least there may be a positive interaction between the rational and emotional. At least that honing of the human mind over the last 500,000 years may have created a sharper point that has driven, and been driven, through history without the burdens of self destructive conflicts and doubt and with values that can make us proud.

At least we may have a chance.

Friday, March 11, 2011

Punking the Hypocrites

Years ago there was a popular American television show called Candid Camera. The idea of the show was to create artificial situations where the reactions of unsuspecting people would be filmed. Some were puerile: A dollar bill on the ground with a tiny thread attached so that every time the person bent to pick it up the bill would be pulled out of reach, voices from hidden sources that the show's employees refused to acknowledge to the confusion of the "mark". Some were uglier; a cast member would shoplift in front of the "mark" and, when reported by the honest target, other cast members would aggressively defend "the thief". Once a beautiful woman stepped out of an office building naked and all the passers by desperately tried to cover the seemingly deranged girl. A currently popular show called "Punked" does a similar thing with celebrities.

Watching people being taken advantage of, struggling to do the right thing (or not--but victims still), is never pleasant. It may come from our regard for their privacy and our sense of fair play. Another factor might be our willingness to put ourselves in the victim's position; we see the victim as a proxy for us. We respect him as ourselves. This may explain our tolerance for the current gonzo journalistic approaches to public figures; like grifters, we do not respect our victims so anything goes. Minnesota's governor is put on the phone with someone he believes is a donor and supporter; he turns out to be an agent for his opponents. The NPR head walks into a lunch with several men he thinks are sympathetic to the Muslim Brotherhood and says some terrible things about the voters; the lunch mates are conservative operatives. In a similar vein, people actually interview prostitutes about their famous clients.

Public affairs have become entertainment. The audience is more than salacious, it is contemptuous.

Thursday, March 10, 2011

Fun With Retirement Numbers






This looks a little ominous but is quite interesting. It is a chart made by Crestmont Research, an investment analysis group that writes about, among other investment topics, growth and price/earnings ratios. (The price of a stock divided by the company's earnings per share) They looked at the long cherished American notion of retiring with a fixed amount of money invested in the U.S. stock market and gradually withdrawing 5% a year for thirty years. They placed this notion on a matrix of the behavior of stocks over all the thirty year periods since 1900. What resulted is seriously alarming: The success of such a retirement withdrawal policy varies directly with the P/E ratio when the program is initiated. If the P/E ratio is below 10.4, the withdrawal of 5% ---in this example below the original starting nest egg was one million dollars---would have been successful in 100% of 30 year periods since 1900 and actually would have ended up with a net retained nest egg of almost 7 million dollars. But if the P/E ratio was from 10.4 to 12.0, only 94% of such plans would be successful. If the P/E was greater than 18.7, the success rate of taking five percent out a year was 41%. For all periods the average P/E was 14.4 and the success rate of withdrawal was 75%.

So this seems to be a dangerous plan.

Now here is a chart of the P/E history of the S&P500:


Feel any better?

Tuesday, March 8, 2011

Lady Gaga

Lady Gaga's roadshow, titled "The Monster Ball", has the drama, spectacle, exaggeration, and intensity of opera with the thematic content of a talk show. The show opens, after the mandatory delay for expectation, with the dancers, as Gaga fans on their way to the concert, struggling with a stalled car in an obvious urban area. (The car engine turns into a piano later.) Street signs point to "hospital", "emergency room", "pharmacy" but also, less concretely, to "drugs" and "death". Gaga appears as a shadow on the curtain, on a fire escape to the side of the stage. There she is, an urban working class heroine. The audience, resentment-free despite the inexplicable wait, goes wild.

The music is bouncy and catchy; some of the songs are terrific. But Gaga has recognized the danger in concerts: If it's just the music, the DVD is better. So she has emphasized form over substance and developed a real performance. The costumes are extravagant--less being more. The dances are furious, laden with horniness and sensuality. And there is blood. Lots of it, especially on her, for impact. Impact. Sometimes she's a sacrifice. Sometimes she's the priestess. Sometime towards the end a giant statue of Christ catches fire.

Of course there is danger in pushing the envelope; sometimes you reach a place where there is nowhere else to go. But if any performer can make a success out of excess, it will be Gaga. She has been travelling since November 2009 and has renovated the show once. The show is exotic, powerful, explosive, confrontational, exhausting, obscene, repulsive, sensual, contrived and, generally, extremely well done. And well aimed. The audience is a cross-section of the peripheral: The extravagantly homosexual, worshipful young girls, partiers and admiring business women. There is a constant drumbeat--not of the rockers who get no satisfaction--but of the uncertain, the lost, the unformed being told over and over that they are of value, that they are a bit different --not because of some heartless accident--but because they were "born this way" and "this way" is good and will be enjoyable and productive.

It is a genius that this woman, coldly carving a niche in the entertainment world, goes on a fatiguing 18 month tour whose theme is her audience.

Sunday, March 6, 2011

Obama's Rock and Hard Place

Christina Romer:
This is a short bio: http: //blogs.wsj.com/economics/2008/11/24/who-is-christina-romer/This article discusses the relationship between tax cuts and government spending; (it is not what you think): http://http//elsa.berkeley.edu/~cromer/draft708.pdf.

And here are three small conclusions of her research:
1. Each 1.0 percent rise in the federal tax burden leads to a 1.8 percent reduction in economic growth.
2. Each 1.0 percent rise in the federal tax burden leads to a 1.14 percent decline in national employment. In the employment model more than 40 percent of the growth in new jobs is explained by the federal tax burden and changes in oil prices.
3. Christina D. Romer and David H. Romer in “ the Macroeconomic Effects of Tax Changes": They considered the announcements of tax changes, rather than the proportion of GDP taken in taxes. They find that an announced tax change equivalent to one percent of GDP causes a three percent reduction in GDP over the next two and half years, which would indicate that we are approximately at the Laffer maximum where changes in the tax structure, up or down, do not influence revenue gained by the government, only changes the relative status between the general economy and the state economy to the state's advantage although the net result for both is negative.

This study implies that taxation has a direct effect on the productivity of a nation, that taxation reduces national wealth, and that the recipients of the tax largess are net losers as are the taxed. This research is from one of Obama's (former) advisers and, if taken seriously by the Washington powers that be, gives an insight into Obama's problem. They believe that government spending causes growth, causes employment and production. (Ignore the broken window theory for the present). With that mindset they face the unemployment problem--a problem most believe is the Achilles' heel of any politician running for reelection--with only a few options. If they do not trust the private sector to rebuild the economy their only option is to spend. If they believe Romer, they know raising taxes to offset the spending will contract the economy but still think that spending will expand it.

So what are their options? Deficit spending.

Thursday, March 3, 2011

The Oscars and a Union of Elites

The Academy Awards, seen as a social test or study, can be fun.

First, the interface. Hathaway seemed to be a winning, energetic girl who tried valiantly to fill her job. Her efforts were all the more noble beside her partner, James Franco, who, despite apparently being a well regarded guy, seemed to have intimations of doom and emotionally withdrew.

The award recipients were not so interesting in themselves, although True Grit was a finely made film. The behavior of the recipients was interesting. It has become quite the fashion to thank one's family when an award is given. This has become as routine as thanking one's producer or director or agent. This concern flies in the face of the entertainment industry's reputation and one can only hope it is genuine.

The other preoccupation--that was not universal but certainly frequent and prominent--was the occasional interjection that certain workers on the movie sets were union workers. This pretense always received a positive response from the audience as the multimillionaires showed their solidarity with their only wealthy colleagues.

One must have a peculiar notion of unions and unionism to participate in such a thing. Unions emerged to create a labor monopoly to oppose the industrial capital monopoly. Their conflicts were life-and-death confrontations for both. Incomes were not the only thing at stake; health, working conditions and the very fabric of families were on the line for both sides of the argument. As time went by, the purpose of unionism changed. The government stepped in to monitor safety and working conditions, health programs evolved and became routine, the success of capitalism raised all the boats. Unions, in search for relevance, tried to make labor a participant in the capital side of industry without the risk. This required an amalgam with government to change commercial rules--the government would buy only from union companies, the government would underwrite companies whose labor contracts were inherently self-defeating--so that with globalization, the jobs began to seek cheaper labor elsewhere, first in more capital friendly states then in cheaper countries.

What is left now is two groups of unions. One is incestuously linked with the very people they negotiate with--public employee unions and unions working for government subsidized and declining industries. Their "confrontations" are closer to collusion. These unions like teachers or hospital workers, often target people who are particularly vulnerable and who cannot influence the outcome. Neither of these organizations will keep their impossible promises and will try to prolong their death throes by becoming ideological and adopting the eidos of old French Socialism. The other union group is a boutique group that follows traditional extortion techniques in their negotiations to take more money out of their industry, like the Hollywood industry and the sports industry.

Boutique unions? A-Rod and Angelina are union members; none of us could have a beer in any of their clubs. Samuel Gompers couldn't. Unionism has changed; it is no longer the organization of the common man than the American Bar Association is.

Or maybe the American common man has changed.

Tuesday, March 1, 2011

Serious Government

One reason that the government contribution to GDP can not be examined is because of the remarkable warmth the "G" creates in the cold GDP = C+I+G+X equation. Government, as opposed to the rapacious and self-centered private sector, has good motives, an evenhanded outlook that treats all citizens equally and does things for the betterment of all that may not be economically advantageous.

How could we evaluate the economic value of what government does? What is the economic value of the building of a school? Or a road? There certainly seem to be some social value to all but there is also some social value to a church social; should they be underwritten? It seems reasonable that an educated populous is more economically valuable that an uneducated one, it seems that roads would encourage easier and faster economic activity than cow paths but how exactly are those advantages quantified? Should the government build hospitals, which seem to have social value? How about libraries? Libraries have a lot of social value; should we build them? If so, how many? Is it possible to build too many libraries? How should we analyze the right number of libraries? And how to we evaluate a successful road or school?


But even if we accept as true that the government "has good motives, an evenhanded outlook that treats all citizens equally and does things for the betterment of all that may not be economically advantageous" that does not excuse the government from honest and clear self assessment. Modern surgeons have a regular monthly or bimonthly self assessment called M&M, Mortality and Morbidity. It is a conference attended by the hospital surgeons where the recent surgical errors, misjudgments and bad results are discussed. The discussion, often among friends, is brutal. Cases are dissected like cadavers, thinking processes are probed, behavior and decision-making are laid bare. There is never any animosity; the truth and improvement guided by the truth are the only objectives.

The General Accounting Office spoke before a congressional committee a few years ago and said that they estimated 7% of federal programs were lost to graft before they were implemented. Nobody blinked. Very few businesses in the private world could afford that kind of loss because they are serious. The physicians in M&M conference hear every word of the discussion because they are serious. What makes people serious is risk, the risk of loss or failure or death--risk the involved people are responsible for. Improvements in government will certainly come from visionaries and philosophers, but up until now, such visionaries have been few and most of them have been murderous.

Making governmental personal responsible for planning their projects, defending them, and analyzing their social and financial success or failure would be a refreshing start in developing governmental programs that create value. That's what everybody else does.