Of/By/For the people

This is disturbing:

U.S. District Judge R. Barclay Surrick on Friday night rejected the suit by attorney Philip J. Berg, who alleged that Obama was not a U.S. citizen and therefore ineligible for the presidency. Berg claimed that Obama is either a citizen of his father's native Kenya or became a citizen of Indonesia after he moved there as a boy.

Obama was born in Hawaii to an American mother and a Kenyan father. His parents divorced and his mother married an Indonesian man.

Internet-fueled conspiracy theories question whether Obama is a "natural-born citizen" as required by the Constitution for a presidential candidate and whether he lost his citizenship while living abroad.

Surrick ruled that Berg lacked standing to bring the case, saying any harm from an allegedly ineligible candidate was "too vague and its effects too attenuated to confer standing on any and all voters."

First, let me say that the claims that he was not born in the US are completely ridiculous.  He’s produced a birth certificate.  Factcheck.org has validated it.  Those who brought this case don’t buy it.  Puh-lease!  Enough, already.

But, the part that’s scary to me is the reason that this case was dismissed.  So pretend for a minute that the allegations were true.  Pretend he wasn’t born in Hawaii, but that he was born in Kenya (as alleged).  The judge is saying that normal citizens could not bring this lawsuit even if they could prove what they claim.  The judge is saying that normal citizens do not have sufficient standing to police the eligibility of candidates for president.  This strikes me as a dangerous precedent to set.  If the people don’t have sufficient standing, then who does?

Additionally, the judge is ruling that the harm caused by this is too vague.  In other words, if true, there’s really no harm done.  On this point, I agree.  I can’t possibly see how Obama having been born in Kenya or McCain having been born in Panama (as is alleged in a separate case) could possibly disqualify them for the presidency.   So I agree.  I don’t see the harm.  But I don’t think it’s the job of a district court judge to change the constitution because he doesn’t see what harm could be caused by not meeting something it requires.  The constitution says that to qualify for president, a person must be a “natural born citizen”.  Some people understand this to mean that you have to have been born in the U.S.   The judge can rule on whether or not “natural born citizen” means that.  But to suggest that the effects of this constitutional requirement are too vague is irrelevant.  The process for changing the constitution is defined w/in the constitution.  It is not conferred to a single judge just because he doesn’t see what the effects are.

It’s one thing for the judiciary to create law from the bench.  Many believe that they are doing this. But for the judiciary to start rewriting the constitution from the bench thoroughly undermines the constitution.  What rule of law are we under now?

In Sync

My friend shared this with me. It's amazing on two levels.

1. That there's so much that is not just in common, but *exactly* the same
2. That anyone would do all the work to put this together.

Anyway, I loved it:

On Poverty

I read an article that really has me thinking:

http://www.leadingsmart.com/leadingsmart/2008/10/its-not-up-to-w.html

There were two reactions to this. Both of which are on the comments on poverty:

1. Financial resources are *not* the reason that poverty persists. Usurped power through bad government is. We in the west have donated nearly $1 trillion to Africa. And over that time, the per capita income has increased $0. That's right. Nothing. Not one plug nickel. Where has that money gone? The leaders in the government, and their political allies
   
   This election is, to me, extremely discouraging. There are only two practical choices. And both of them would like to centralize more power in the government. There is nothing unique about the US that would keep it from the same sort of poverty we see in other countries with too powerful governments. Both of these candidates wish more power for the government. Say what you want about the evils of the United States. I agree with much of that. But you must also recognize that our prosperity has meant an awful lot for the rest of the world. Impoverishing the US has greater impact than just to the citizens of the US.
   
   And both candidates are fine with that. Who to vote for? IMHO, neither.”
   
   
2. On the concept of "Be the change you want to see." The change I want to see is poor countries participating in the global economy to enrich themselves.
   
   So what does that mean? Find someone who's poor and trade with them. Don't give. That bandaid won't cure the cancer. It will temporarily help, but when they've consumed whatever you gave them, they will be right back to where they were. By trading you insist that they provide something of value back to you for the thing of value you give them. And *THAT* is the key. Once a poor person can provide value, they won't be poor for long, even if you stop trading with them.
   
   So what does that mean for me? It means that I need to have something of value to offer the poor person as well. It means that I need to work on the things that I do best in order to create that value that I would like to trade. It means I have to keep working. And keep trading when I find value.

Part of the assumption that I make here is that people are innately poor. If a person does nothing, they will die of starvation. We are required to work if we are to thrive. The Bible describes this here. Once you recognize that you are innately poor, the question of where does poverty come from is no longer valid. Poverty is the default state. The real question is: Where does wealth come from? And the answer is pretty straight forward: it comes from providing value to others.

This has some pretty important implications.

1. Since we’re all innately poor, the answer to the question of battling poverty must start with ourselves. If you want to battle poverty, first battle your own poverty. For me, this means that in the battle against poverty, my biggest responsibility is to go to work. No, it’s not inspirational. Nor does it grab many headlines. But it is the single most important contribution that I can make to the fight against poverty.
   
   
2. The second most important contribution that I can make in the fight against poverty is to teach my children that they are also innately poor. And that their single most important contribution that they can make in the fight against poverty is to ensure that they are not poor themselves.
   
   
3. Trade. That is, find someone who is providing value and come to an agreement to exchange with them. If you do your job well, and this other person does his/her job well, then by trading you only have to be good at your own job. And your trading partner only has to be good at his/her job. Yet you can both get the benefits doing two things well. This makes both of you richer. Repeat.

After these, my ability to fight poverty is drastically reduced. But there are still some things that I can do:

4. Fight for trade. Demand that no one stand in the way of two parties trying to enrich themselves through trade. When you see individuals or governments enacting barriers to trade, get in their and let them know that they are sustaining poverty. This is true whether the trade barrier is:
• a protester actively disrupting trade
• a government import/export tariff
• a restriction on immigration or emigration
• a government subsidy to preferred goods/services in order to dissuade purchase of non-preferred goods/service

This impacts voting. And part of the reason that I’m really discouraged by the current administration and either of the two potential administrations is that they seem to have no problem enacting barriers to trade

5. Give. Last on the list. It’s on the list because there are some people who need a kickstart. Kinda like the engine in your car. It needs a jolt of electricity from the battery to start. But once it’s going, it produces its own electricity from the alternator. In fact the alternator produces sufficient surplus to ensure that the battery is recharged. But this is last on the list because it’s least effective. It requires two things:
• the recipient of the gift must see it as a kickstart, not an entitlement.
• the recipient of the gift must not be encumbered by a government that misappropriates the gift

I have hope for giving as a tool to eliminate poverty. But too often the basic requirements are not met. In one case, the kickstart doesn’t get the engine running. In the other case, the intended recipient doesn’t get it. But when the requirements are met, giving is a powerful tool. Because an effective kickstart can cause a person to start generating sufficient surplus to provide a kickstart to someone else. At that point, there are two available kickstarts: the one that I gave and the new one.

Market Failures

Was there a market failure in today's crisis? I don't know. Some say yes. Some whom I really respect say yes. Some whom I don't respect also say yes. I don't know. I'm skeptical but I also realize that I'm ignorant.

But let's say that private financial markets did contribute to this. And the contribution was completely independent of government intervention.

Ok. So what? Markets produce failure all the time. A company that opens up it's doors with a poor business plan is going to fail. It should fail. That failure is not the fault of the government, nor is it the fault of lack of regulation. It's the fault of the company having a bad business plan. What happens in the market is that the company with the bad business plan is quickly discovered and put out of business. Such a company could not serve it's customers nearly as well as the alternatives that the customers had. Such non-serving companies should fail. And the market discovers these things very quickly.

So this makes me wonder if the failure in the financial markets is just another normal, run-of-the-mill failure. If it is, then that failure should be allowed to proceed so that the bad (non-serving) ideas that were created go away.

What then is the purpose of the bailout package? It recapitalizes financial institutions that were in trouble. In other words, it bails out the bad ideas and lets them live a bit longer. Is this good? It's hard to think that it is. It's more likely that bad ideas that aren't allowed to die will create more destruction in the future.

So, I find it ironic that it is our politicians who are claiming these two things at the same time:

1. The financial market failed.
2. Let's bail out the financial market.
   

Either the financial market has bad ideas that should be allowed to die or it has good ideas that should be bailed out. These two statements seem inconsistent.

But I realize that they seem inconsistent to me because I'm focused on the ideas behind the financial markets. Are they good or bad? But these statements might not be focused on that question. Instead, they seem to be saying that the problems we're seeing today would not have happened if the government were running things. So, let's not trust the market, rebuild the failed banks and then have them run by the government. And we'll be good.

Of course for this to work, it requires that we ignore the fact that the government is not immune to failure. And we must also ignore the reality that government failures are *MUCH* harder to undo than market failures. Bad laws, even ones that everyone agrees are bad laws, live on. We have to ignore those inconvenient facts. We seem to be blissfully willing to do that.

Priorities

Bjorn Lomborg tries to get them straight.

John Stossell

This is worth the watch. There 6 episodes. Watch them all. But be prepared to be depressed.

Forgive and Forget

I just got done watching one of my favorite movies: Eternal Sunshine of the Spotless Mind. The movie is about Joel and Clementine's relationship. If you haven't seen the movie, stop here. Really don't read on. The movie is too good and... thar be spoilers below, matey.

No, really. Stop here and go watch the movie. This blog post isn't going anywhere. But you can't undo the spoilers. So watch it and come back.

Anyway...Like all relationships Joel and Clementine's relationship starts out fresh and new and exhilarating and rewarding and fulfilling. But also like all relationships, those feelings fade until Joel & Clementine are left with the burden of realizing that nobody's perfect. And then they break up. Badly.

So they each decide to get their memories of each other erased. Literally. There's a company called Lacuna who will map out all of the memories and then erase them. The movie takes us through what Joel experiences as these memories are being erased. We move from the most recent memories backwards. So we start seeing all of the bad memories. The ones that are easy to let be erased. But eventually, we start getting to the good memories. And that's when Joel starts wishing that he could keep some of them. The rest of the memory erasure is this sad journey of trying to keep some of the memories, but failing. At some point, Joel realizes that it's pointless. The memories are just going to be gone. We travel all the way back to where Joel & Clementine met. With Joel knowing that this is the end. After this he won't remember her at all.

Sometimes, all that I can remember are the things about my wife that drive me absolutely nuts. I think our relationship is different than Joel & Clementine's in that we've learned how to forgive each other for not being perfect. But it's the forget part that drives me crazy. I don't know how to forget.

I think there's a lesson in this movie: try hard to remember why you chose to be with this person. Unlike Joel, I still have the opportunity to remember those great moments. Those moments that drew me to her and her to me. Like on the jetty at Galveston. Or the first time she leaned over and said, "Kiss me". Or Jefferson and pretending to be deaf. And on and on and on and on....

But what comes so easily to mind, without any effort at all, is, for example, the disdainful tone in her voice when she got home and the kitchen wasn't clean. Or disagreements about parenting. Or whatever. All of which, in comparison to the good memories, are just stupid and insignificant blips. But these stupid little things get in the way. They block out the precious moments. I have to, periodically take the time and effort to remember the good ones or I fear they'll slowly fade away.

I was mad at her before the movie. And if I think about it, I can remember why. But after watching Joel, I'd much rather think about Galveston.

By the Book

Recently, This American Life did a show called “Another Frightening Hour About the Economy”. It was good. I listened to it pretty much as soon as the podcast was released. But on the way to work today, I decided to listen to it again. I’ve discovered that the 2^nd listening is different. It’s different because I’m not just trying to keep up with what they’re talking about. I know where they’re going and (at a high level) I understand what it is that they’re saying. That understanding has freed me up to think about other things presented in the show a bit more critically. And I’m struck by how dumb we can be.

Commercial Paper

The first part of the show talks about the commercial paper market. Yeah, I had no idea what that was before that show, either. But it turns out that it’s essentially a short-term credit card for businesses (both small & large). On a daily basis, businesses earn money. Some days they have a lot of extra money and some days they have a short-fall. It all depends on the timing of when customers pay bills. However, bills to the business tend to come in at a fairly steady rate. So businesses need a way to pay out money every day, even on the days that they’re short. To do that, they use commercial paper. When they’re short, they take a short loan that they pay back on the days that they’ve got surplus. A huge number of businesses operate off this market. If lenders to the market freeze up, a huge number of businesses can’t operate. If they can’t operate, that means that they stop taking in money. And they stop paying employees, vendors, service providers, etc. Commercial paper is a pretty big deal.

But I’m really flabbergasted that so many businesses are in this position. As an individual this is roughly akin to using my credit card to pay for things when I’m short of cash. Which many people do. However, it is pretty universally derided as a dangerous way to live. A *MUCH* better way to manage shortfalls is to build up an emergency fund. Instead of drawing on credit (which you might not be able to pay back) when you’re short, you draw from your emergency fund. Then when you’ve got surplus, you pay back the emergency fund. This is personal finance 101. Why is this not also business finance 101? The Bible describes the situation: “the borrower becomes the lender’s slave” (Proverbs 22:7). When lenders stop lending, they do not care if those who are enslaved to them can’t survive. The lesson from this is that you have a choice about being a slave: don’t be one. Build up two types of savings:

1. Day to day operational savings. This should hold enough money to pay out all the bills that you have in a single day.
2. Emergency savings: This should hold enough money so that you can survive for 3 months w/out income.

My guess: this behavior would significantly reduce the impact of financial crises like the one we’re currently seeing.

Money Market Funds

But what caused commercial paper to freeze up in the first place? The reserve fund broke the buck. Part of the way that businesses save money is by investing excess profits into money market mutual funds. One of those funds is the reserve fund. These are hyper-safe funds. The worst they’re ever supposed to do is pay you back your investment. Sometimes they even pay you back some interest. The people who invest in these funds put money there that they can’t afford to lose. The reserve fund suddenly had to pay back less than $1 for every dollar that investors had deposited. In other words, investors that were being safe with money they couldn’t afford to lose, lost money. Why? Because the reserve fund had invested heavily in commercial paper from Lehman. When Lehman went bankrupt, the reserve fund lost money. Those losses had to be shared by reserve fund investors. Then several other funds started breaking the buck. Suddenly there was a run on mutual money market funds. Investors who couldn’t afford to lose money in those funds were losing money and taking what they had left out. Drying up the money available to for loans on the commercial paper market.

But, again, I’m flabbergasted. How much position did the reserve fund hold in Lehman? Why weren’t they better diversified? Again, this is personal finance 101. And it’s a biblical principle of money management: “Give portions to seven, yes to eight, for you do not know what disaster may come” Ecclesiastes 11:2. If the reserve fund were better diversified, would it have been better able to withstand Lehman’s bankruptcy? Additionally, didn’t the credit market rates to Lehman jump sky high indicating a high degree of risk in investing w/them? Why did reserve fund (and other money market funds) lend to Lehman? Wasn’t that irresponsible use of extremely low risk money? Two lessons:

1. Diversify
2. Do not invest low risk money into high risk investments

Huh?

Of course, there is a problem that arises from the above observations and result lessons. Why did we get these results? Economists sometimes describe markets as discovery processes. People who enter markets are running an experiment. The market sorts out which ones will work and which ones won’t. Over time, bad ideas disappear, and what remains are the good ideas. On a personal level, it’s pretty darn clear that the above lessons are good ideas. Why didn’t they emerge at the business level? Why didn’t the market discard what actually happened and leave behind only these good ideas?

I suspect the answer has something to do with moral hazard. Historical government bailouts may have given investors and businesses confidence that any mistakes they make will be backstopped by future government bailouts. So investors and businesses may have taken on more risk than they would if no bailouts existed. I also suspect that government bailouts interfere with the market discovery process by allowing bad ideas to live on. By bailing out those companies and individuals who are in trouble, the government does not allow the consequences of bad ideas to be borne by those who made them. “The simpleton goes blindly on and suffers the consequences.” Proverbs 22:3. I note also, that our government (in the late 90’s) started applying pressure to lenders to increase loans to those with low incomes. The market had already discovered that it’s a bad idea to lend money to people who don’t have much means to pay it back. But the government applied pressure to ignore that lesson in the legislative changes to the Community Reinvestment Act made in the late 90’s. These changes put pressure on lenders to increase loans to low income earners.

So what’s your point?

Well, this is a blog. A point is required? I guess if I must, the point is that we can’t exclude government action as the cause of this problem. True, no one thing that the government did caused it, but the totality of what the government did is a significant contributor. Sure, This American life mentioned how the government failed to regulate. But that's government inaction. When there were distinct and specific actions that the government took that provided a major contribution to this problem. I think that point was missed by This American Life. It was not missed by Russ Roberts (and here), nor Arnold Kling (and here).

Getting Better All The Time

I guess I'm on a TED kick again. And maybe Steven Pinker in particular. Here's an interesting talk on the decline of violence over time



There are a couple of things that I think about after seeing this video. First, it puts data to my instinct that life is getting better. Watching movies like Gladiator, 300, or Braveheart really bring home the idea that life in times prior was outrageously more violent than life today. And then programs like Frontier House or 1900 House that show us how all those time saving devices that we thought did nothing, actually do save a *ton* of time. And then there's the good economic news about how we're doing and it appears that life in general is getting better. Yes, there are negative blips, but the trend is up. Hooray!

But as a Christian, this creates a problem. Because we would expect that worldliness would cause things to get worse. As we push the need for God further and further from our lives, this should cause our lives to be less and less settled. My pastor has even stated as such. Prior to releasing his book Serious Times, he delivered a message to us as a sort of preview. And I distinctly remember him saying that things are getting worse and we should expect this trend to continue. I remember that there were supporting quotes from the Bible, but I don't remember what they are. (Maybe I should read his book?)

Anyway, what I wonder is whether or not we are misinterpreting what it means to be close to God. I've mentioned before that I think God works through emergent phenomena. Markets are one example of human driven emergence - the order that results is a product of human action, but not of human design. But at the heart of markets are some very important concepts that very much are Biblical. For example:

• consider others
• play fair
• don't ignore yourself
• protect and defend freedom

I wonder if it is our increasing desire to see those Biblical concepts elevated that contributes to further expansion of free markets. And further expansion of free markets is easily the most effective tool we've ever seen at fighting poverty - something that God explicitly cares about very deeply. I wonder if this means that we are actually getting closer to God in our behavior, even as we seem to get further from him in our explicit expressions of our beliefs. It seems like more people claim to be atheists. But despite this fact, are we all (including the atheists) actually behaving to further God's causes by doing the things above that God thinks are important?

Can behavior be an indicator of what you truly believe? Even more so than what you express? Even if your behavior contradicts your expression? The Bible seems to support this concept when it talks about professed believers who don't act like they are believers. It calls them hypocrites. But what about the other way? What if you act like a believer but express non-belief? In that case, do actions also trump words? I don't know, but if so then this means an awful lot in terms of evangelism.

Re: Luxurious Lifestyles

Cyfred comments:

Many of your conclusions are incorrect. Your claim that farm subsidies benefit small farmers is absurd. There isn't one person on any side of this issue who has done a resonable [sic] amount of researech [sic] on the topic who would agree with you.

First, off, thanks for the comment.

Secondly, I think we should make a distinction between small local farmers and agribusiness - large, highly capitalized, but still domestic farmers. Certainly subsidies help agribusiness more than they help small local farmers. The problem is that if you get rid of subsidies all of that business that currently goes to agribusiness will most certainly not go to small local farmers. The cost of domestically growing wheat, or rice, or sugar or whatever is subsidied will go up. And the sales that domestic farmers used to get will now go to foreign producers who produce much more cheaply (even including the transportation costs) than do US farmers.

But make no mistake, small local farmers are helped by subsidies. In 1999 they were paid on average $4141.

Now, combine the subsidies with import quotas on certain farmed products, and the market is strongly distorted in favor of domestic farmers over foreign farmers. Get rid of the subsidies and import quotas and small local farmers will disappear in favor of cheap foreign farmers. Keep subsidies and you force all domestic consumers to pay more for food than they ought to. This doesn't hurt the rich. This hurts the poor who pay a substantially larger percentage of their income to food. It's foolish.

Your personal knee-jerk gut feelings don't really count and are potentially harmful.

Are you suggesting that I censor myself in lieu of the harm that I might cause by speaking? Really? I am generally of the opinion that the best response to bad (even harmful) speech is more speech. So keep the comments coming. But I will ignore any suggestion that I not speak, even if you think that speech is harmful.

Parenting Skills

In the below video, Steven Pinker talks about his book The Blank Slate. It's an interesting video in that it talks about the nature vs. nurture principle. It comes up decidedly in favor of nature. He eventually starts talking about what implications this has for parenting. It's near the end of the video, but if you're going to watch it, I recommend not skipping anything. The whole talk is pretty good:



What he suggests is that any parenting skills we develop have very little influence on what happens to our children as they grow up. He tells a very compelling story using studies of twins. I'm inclined to believe his story. If it's true, it means that the parenting skills that I have worked hard to develop has little to do with how my children will turn out. Their character, responsibility, moral fiber, etc do not come from the environment that I provide.

In one sense, this is really freeing. It means that I don't have to stress to much. In another sense, this is rather depressing because I waste a lot of time trying to develop skills in parenting that will have little impact on them. But it also suggests something else. If I do spend all this time on parenting skills that have no benefit to the kids, there must be some other reason to develop these skills. It strikes me as an odd possibility that I develop those skills because they make me feel better about myself. Maybe development of my parenting skills gives me a rationale for the behavior of my children. If they behave well, good job me. If they don't, bad job me. In other words, parenting skills aren't about my kids; they're about me. When the random selection of genes that God has selected for them turns out good, I get to take some of the credit away from God. But when it turns out bad, I suspect I'd be more inclined to blame God for my childrens' dispositions. (I don't really know because I have great kids!)

Nevertheless, while I find the idea that nature plays an enormous role in how people turn out, I can't eliminate environment from the mix. Sure, two twins who are separated at birth and come back together later on might end up remarkably similar. But they had to have sufficient environments to allow them to survive so that they could come back together. If environment played no role at all, you could imagine a set of twins one delivered to a "mostly normal" family, and the other to an excessively violent and criminal family. If the 2nd twin was murdered by that family, then that twin would never grow up to reunite and compare to the 1st twin.

My point with this rather ghastly and extreme thought experiment is that environment must play *some* role. I wonder how much. If a lot, then my parenting skills aren't just an ego trip. They pay some benefit to my children. If hardly any, then I'm even more of an egomaniac than I thought I was.

To Your Room

In a comment on my post about tantrums, Niffer asks:

What do you do when your kids throw a fit in public and you can't send them to their room?

First, when we've done a good job with the tantrums at home, the probability of tantrums in public seems to be reduced... but not eliminated. There are two things that we've tried. One works well for toddler aged children, but requires a lot of planning and assistance from a friend. The other is easier to implement, but you have to do it with older kids.

Todders
What we've done a couple of times is to establish the reality of having the kids go to their rooms when they're in public. We had problems with our kids in the grocery store. My wife couldn't get through the store without being really hassled by the kids. So, she made an agreement with a next door neighbor. They would each help each other out. So before going to get some groceries, she called our neighbor and asked if she'd be available for the next 90 minutes or so. She said yes. So my wife took the kids to the store. At which point, predictably, they started misbehaving. To which, she calmly said, "My ears and eyes are being hassled by your behaviour. Would you prefer to be well behaved children with me, or spend some time in your room?"

She tells me that they looked at her funny for a second and went right back to doing what they were doing. At which point, my wife called our neighbor. The neighbor drove to the store, scooped up all our kids, and took them to their rooms. Where they stayed until mom got done with the grocery shopping. She took an extra long time just to drive the point home. The neighbor permitted exit of the room only for potty breaks. The next time they went to the store, and started misbehaving, my wife asked the *exact* same question. That was a much nicer trip.

We've only had to do this a couple of times. One of the times, I had to come and pick up the kids. But they again spent the rest of the time in their rooms until mom got home.

Older Kids
The other thing that we do, mostly with our older kids, is that we give them a delayed consequence. That is when they're misbehaving, we say something like, "You know, that behavior isn't working for me. You want to change it or let me think up a consequence?" If they don't change the behavior, we say something like, "Ok. Got it. You'd prefer a consequence. I don't have one right now, but I'll think of something. Try not to worry about what I come up with." Then later on when we can implement the consequence, we say, "Hey remember that consequence? I came up with something." And then lay it on them.

We try to make delayed consequences a bit more creative. Here are some things we've said:

• Son, you remember when you were hassling me in the store? Yeah, me too. That gave me a real headache. And I think I'm going to need to not hear your favorite TV program for a week so that my head can recover.
• I spent all of my extra energy being hassled by you in the store. Now, I don't have any left to scrub the floors like I had planned. Would you rather scrub the floor or pay 3 weeks allowance to have someone come in and do it?
  
• Yes, tonight is normally desert night, but I got so hassled by my experience at the store, that I forgot to get it! (Sweets are a serious motivator for my kids.)
• You know, I'd love to take you to the (fill in the blank, swimming pool, playground, etc) but you remember the store? I used up all of my energy dealing with you and I don't have any left.

Our kids use up our energy a lot. So, we've got to the point, where if they're hassling us and we can't implement an immediate consequence, we dramatically say, "Oh, my energy. It's getting drained! OOOH... it's going..." This is usually a key word that lets them know something later on is coming. Or another favorite one liner is, "Try not to worry about how I'm going to react to that later." I think our kids have translated that into "Uh oh, I better start worrying a lot." Which is our goal.

Re: Gas Shortage

Anonymous makes the following comment on my post on Gas Shortage:

Aren't price caps in place to protect commodities which have inelastic demand? You need gas to get to work. You'll buy gas at $7 per gallon if necessary.

Suppose merchants A, B and C set the price of gas to $7.00, when supply is severely constrained. When the supply returns to normal, merchant D will make enough money at $7.00 per gallon, that there is no motivation to lower it to $5.00 to gain the extra demand.

What am I missing?

You're missing several things:

1. Demand for gas *relatively* inelastic. It is not completely inelastic. My company recently encouraged people to work from home. That's an elasticity that allows for conservation of fuel. People also increase ridership in carpools and public transportation in order to decrease their demand for gas. Some people have started riding to work on scooters which get 100 mpg. Given sufficient time, people can be incredibly creative in their ability to conserve a scarce resource. High prices give them the signal to start thinking about the problem, and thus increase the elasticity of their demand.
   
   
2. Retail gas is extremely competitive. Competition will bring down high profit margins once the supply returns. Retailers who are charging a high profit margin will find themselves with a prisoner's dilemma: do I keep the price high and earn extra profits, or do I wait to lower them. If I wait, my competition may lower their prices first and I'll lose more than I'd lose if I lower my prices. So I'll lower my prices as soon as I can, so as to not lose customers.
   
   
3. Price caps actually have done a very poor job of protecting commodities with inelastic demand. When gas is gone, how much does it cost to get a gallon of gas? The answer is that no one has enough money to get it. It's gone. The price is infinite. Price caps intended prevent the price from going to $7/gal or $10/gal, actually raise the price to $infinity/gal. Price caps are an abject failure at what they're intended to do. They are intended to keep the price low, but they don't.
   
   
4. When there's a shortage, price caps don't allow for a smooth transition from high supply to shortage. You simply run out. People don't get a chance to figure out how they're going to work around the shortage. The supply just disappears one day. Whereas when the prices rise, people can stop other (less important) consumption in order to give themselves a little time to figure out how to conserve on the commodity that's in short supply. Price increases allows people to link things that have relatively inelastic demand with something that has higher elastic demand. This gives people time to think and devise a plan.
   
   What price caps do is create the illusion that there's no supply disruption until supply runs out. And then (rather suddenly) the price jumps up from $4/gal to infinity. And everyone's stuck trying to get a commodity that's gone with very little time to figure out an alternative.
   

Gas Shortage

Over the past few days there has been a shortage of gasoline where I live. And I find myself wishing that I could give one lesson in economics to everyone around me. That lesson would be: let the prices rise. It seems that very few people agree with me on this point.

I recently saw this article:

N.C. Attorney General Roy Cooper issued three additional subpoenas today to the owners of three gas stations, including two in Yadkinville.

Two weeks ago, Hurricane Ike pounded the south Texas coast and disrupted gas deliveries from many oil refineries there. Because of the storm, retailers are getting much smaller deliveries than they expected, said Carol Gifford of the AAA Carolinas office in Charlotte.

"Consumers deserve to be treated fairly when they fill up," Cooper said in a statement. "If we uncover evidence that Hurricane Ike was used illegally to run up prices and gouge customers, we'll take legal action."

The attorney general's office sent a letter to Mohamed Nasrallah, the president of LR&S Inc. of Winston-Salem, which owns the Four Sisters Center and the Yadkinville Food Mart, both in Yadkinville. The letter demands that Nasrallah produce documents about fuel deliveries and prices at the stations.

Last week, the attorney general's office sent subpoenas to the owners of 23 stations who were reported to have sold gas for more than $5.35.

Letting the price rise sends a signal to people who are irrationally panicking. It tells them to conserve since they don't really need the gas. And they get the signal because the price is so high. Leaving fuel behind for those who desperately need it. But if you don't let the prices rise, the irrational will not get the signal. And those who really do need it won't be able to get it for any price since it will run out.

Of course all of this is a consequence of anti-price gouging laws. Those laws which were intended to keep the price of gas from rising to $5.35/gal actually raise the price to infinity.

Now, of course, there is the fear that gas stations will get rich off the rest of our misery. I understand that fear. But two comments:

1. The station owner also owns the gas. Until you come to an agreed upon price, you don't have any right to it. Further you have no right to force a price on them. Doing so violates their property rights.
   
2. People who sell a commodity product can not, in the long run, keep the price high. So while the station owners may make a bundle in the short run, that profit will encourage others to show up with better prices. And (miracle of miracles) increase the supply. When you force the price lower, no one has any incentive to bring in new supply. So, no one does.

Prices send two signals, one to the consumer that tells them about the relative scarcity of a good. When it's expensive, conserve. When it's cheap, consume. And it sends a signal to suppliers, when prices are up, add supply. When prices are down, don't add supply.

Price is the point at which supply and demand meet. If you don't allow it to float, one or the other (or both) will be disrupted.

Tantrums

Niffer's child is starting to learn the fine art of the tantrum. I tried posting this as a comment on her blog, but (as is normal) it got too long. Someday, I'm going to learn how not to be so wordy. But until then, here's another blog post.

Parenting w/Love & Logic has much to say about how to handle tantrums. Here are some examples of how we've put L&L techniques into play.

When any of our children have tantrums, I walk up to him, touch him on the shoulders, and then say in as sincere a voice as I can, "Honey, would you rather work this out in your room or be sweet with me?" And I mean it. I'm not trying to punish him. I really want to know if it'd be better for him to have the tantrum. And if so, he has to have it in his room. But if he wants to stay around me, he has to be sweet.

Now, if he ignores me, as any self-respecting 2 year old almost certainly will. I follow-up with, "Oh. I guess you really need to have this tantrum. Ok. I'll take you to your room." I then pick him up, and put him in his room. As I'm leaving I say, "Feel free to come back when you're sweet." Now if I've already taught him "basic german shepherd" (see below), then I say, "Please stay." And he usually stays. But sometimes I haven't gotten around to teaching that, or maybe he needs a few practice sessions. And he follows me out the door. So, I say, "Oh, are you going to be sweet already? Hmm... doesn't sound like it. Please go back in your room and come down when you're sweet."

And then I turn into a broken record. Every time he comes back out, I say the same thing. "Please go back in your room and feel free to come down when you're sweet." I do this until he emerges and he's not crying.

The older ones (4-6) don't tend to have as many tantrums. But they still have them from time to time. when they do, I treat it a little differently. I might say something like, "Son, that tantrum is not up to your standards. Usually you do much better than that. Why don't you go practice in the *upstairs* bathroom. Watch yourself in the mirror until you're sure you've got it right. Feel free to come back after you're done."

What is absolutely key to this is to make sure they know that they are free to have their tantrum, if that's what they need. But they have to have it somewhere other than in my eyesight. I'm fine letting them be with me, but they have to be sweet. I am explicitly *NOT* trying to tell them to stop having a tantrum. They get to choose what's best for them: to have the tantrum or be with me.

I've learned over the last 11 years that you really have to mean it when you offer them the choice. You can't be angry or obviously sarcastic. If you are, it makes it worse. If you can empathize with them, then they start to learn the value and importance of choosing wisely. Also, the choice has to be one that you're ok with whatever option they chose. Other wise it's not really a choice. They can't learn to choose wisely if they're not actually choosing.

Not being sarcastic or angry can be really, *REALLY* hard. I still fail at that. The good news about this, though, is that in getting angry or sarcastic, I've almost certainly not fixed the problem I was hoping to fix. And I'll get another chance (probably soon) to try again.

Basic German Shepherd
The goal of Basic German Shepherd is to teach your young child some simple commands: sit, come, go, no, stay. The theory is this: at about 10 months old, your child is smarter than your dog. So beyond 10 months, they should be able to learn all of the things that you can teach your dog. Each of these can be fun to teach if you make it into a game and you play it when everyone is happy! Here's the "Stay & Come" game. We started teaching it to our children as soon as they became mobile.

We would take our child and sit him on the bottom stair of the stair well. Then we'd move about 2 feet away, but still facing him. All 4 of them got up immediately and started crawling or walking to us. And we'd say, with a big smile on our face, "Please stay. Can you stay?" They wouldn't get it so we'd sit them back down, and say "Please stay." Eventually they'd figure out that we were asking them to stay. We are smiling the whole time. We'd let them sit there for just a few seconds, and then with big grin or laugh, we'd say, "OK, please come!" And they'd get up and rush over to us as fast as they could. And we'd laugh and say, "Awesome! Good job!", etc. Then we'd do it again, but this time the "stay" part is a little bit longer, and we're a little bit farther away. Every time they stay until we say, "Please come" we cheer them on. Everytime, they come before we say it, we put them back.

We play the game for about 30 minutes. By the end of the 30 minutes, our goal was to be almost in a different room, but still in eyesight. The next time we play, we start off a little bit closer than where we ended last time. By the end of the second time, we want to be in a completely different room and out of eyesight.

Our kids really loved this game. A couple of them had a few tears before they figured out it was a game. But the cheering and encouragement really made it fun. And every time when we put them down on the stair... every single time, we'd say "Please stay". These words then get burned into their brain as keywords. So that when you're not playing the game, and you're asking them to stay in their room or not run across the street to you, they understand what you're telling them. And, what still strikes me as miraculous, they actually stay.

Every so often, a child will not stay when asked. All that means is that we need to play the game again. We call it a practice session. And, what also seems miraculous to me, they still like the game even after they know that I'm going to use "please stay" outside of the game.

This has worked great for us.

Double Standards

I love this quote in the Wall Street Journal (HT: EconLog):

"No one in a democracy, unelected, should have $800 billion to spend as he sees fit," said Mr. Frank.

Notice the caveat "unelected"? Just like the "do not call" list, the politicians seem to think: good for thee but not for me.

Wealth Transfer

A friend shared this with me. The author's main point is very good. He's talking about how to be better stewards of the resources given to the church. This act is the very definition of economizing. Economizing is trying to figure out how best to use scarce resources. It's determining how to get the most bang for the buck. Maybe that means spending less, but getting the same level of utility. Or it could be spending the same, but getting increased utility. Necessity is the mother of invention. The result of being in need is that smart people now have an incentive to think up new ways of accomplishing more with less. Some times those inventions are rehashes of something already invented. Sometimes they're completely novel ideas. Sometimes it involves replacing jobs done by people with automation. Which (eventually) leads to creating new jobs for those people to do.

Now, take all of this activity (what economists call economic activity) and multiply it across the entire population. We call the thing that emerges "the economy". We call it that because it is the sum total of all decisions to economize on scarce resources.

So can you control this thing? Can you engineer it so that people will behave the way you want them to? Can we simply tweak things here or there and increase wealth creation? Good question. Maybe, but probably not. People with free minds, even if they live under a dictatorship, will figure out ways to satisfy the things that they have an incentive to satisfy. Given that, we should be *extremely* cautious about what results we think the government can create. If there's a strong enough incentive to do something, legislation will not prevent it. All that will happen is money will be wasted trying to enforce the unenforceable. If there's a strong enough incentive to avoid doing something, no amount of legislation will make it happen. But, most importantly, if you create legislation that creates a new incentive, you may end up with some surprising results.

An example: anti-gouging legislation. During a crisis, these laws exist to prevent the price of goods from rising. Their purpose seems to be to keep the cost of goods down so that the poor will continue to have access to those goods. But during a crisis the demand for goods goes up and/or the supply of goods goes down. Creating a law that prevents the price from rising does not change the incentive that people have to buy those goods. If the price doesn't go up and signal to the consumer that the demand is higher than the supply, the mass of consumers will not have any information telling them to cut back. The perverse result is that the goods run out because no one is getting the signal to stop consuming. As a result, the poor don't even get to purchase the good at a higher price. The supply is gone. Anti-gouging legislation which intends to keep prices down doesn't do it. It raises prices to infinity.

Which brings me to some of the things that I find frustrating in the above listed article. For example:

We are witnessing what some are calling the greatest transfer of wealth in human history. The McKinsey Global Institute has shown how assets are moving primarily from Europe and America to the oil countries of the Middle East and the manufacturing giants of Asia.

At the end of 2007, these oil producing countries owned about 4.6 trillion dollars of assets. That’s about 1.6 times the whole economy of the UK. The six Arab countries of the Gulf Cooperation Council are receiving 1.5 billion dollars a day. Those are pretty staggering numbers

This paints the picture that we're getting poorer while the Middle East and Asia are getting richer. This is not true. When people engage in voluntary trade, one side does not get poorer while the other side gets richer. Both get richer. Each side brings something to the trading table. When they trade, they are saying by their actions that they value what the other side has more than what they have. If they didn't, they wouldn't trade. So yes we're sending $1.5 billion per day to the Gulf Cooperation Council. But in return, we're getting $1.5 billion in oil. The transfer of dollars to the middle east is offset by a transfer of oil to us. And we value the oil more than the dollars, so we're richer. They value the dollars more than the oil, so they're richer. Neither side gets poorer from this exchange. Both sides see the positive possibilities of the thing they're getting.

And what would you expect to happen when the price of oil goes up? Well, suddenly the value that we're getting for our dollar is less. So what do we do? We buy less. But we do this by engaging in economic activity. Some people start taking the bus. Some people carpool. Some sell their gas guzzling SUV and buy a cheap 4-cylinder. Some, unfortunately, decide to not do any of that and decrease their donations to church.

So, yes this guy's church has less disposable income because the price of fuel is increasing. And it's a wholly appropriate exercise to figure out how to get by with less. That exercise leads to good. But we're not poorer. Moreover, serious problems will result from telling people that we're poorer because we're trading with those foreigners. Bryan Caplan documents two types of biases that result: anti-foreign bias and anti-market bias. This biases lead people to want legislation to control the amount of trading that we do, especially international trading.

Two things:

1. Limiting our trading actually does make us poorer. Being forced to keep something that I value less than the thing I'd rather buy makes me poorer than if I could buy it.
   
   
2. We should be very very careful when we legislate. Perverse results are not far away.
   

So while I applaud what this guy wants to do within his church. I wish he could call for it without simultaneously encouraging people to desire legislation to solve this problem. Legislation that will almost certainly not create what it's supposed to create, and will most likely make us poorer.

Update: F.A. Hayek once said, "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." Megan McArdle gives some good examples of this principle. And it makes my point that we should be *very* careful about what we think we can legislate.