Re: My Comment

Anonymous comments on my comment:

If you buy potatoes from South America, South American farmers have jobs. If you buy potatoes from Idaho, Idaho farmers have jobs. If you live in Idaho, then your neighbors have jobs and presumably will spend money in other local businesses... What am I missing?

What Anonymous is missing is that nothing can possibly be produced entirely locally. For a good description of why this is true, checkout Leonard Read's "I, Pencil". There are an unbelievable number of things that must be purchased, and almost always, must be purchased outside of the local environment just to make a simple pencil. When you buy locally, the *vast* majority of the cost of producing locally already goes somewhere else. What remains local is the profit. What people who advocate buying locally forget is that getting a better deal *also* keeps money local. Probably more money than is retained in profit by the local producer. The only real question is who gets the local money. Me or the local producer? If maximizing localization of money is good, then keeping money more local to me must be better then sending it remotely to some other producer - even one who lives down the street.

But let's assume for a moment that the herculean task of all local production could be accomplished. Doing so would almost certainly result in a lower quality product. Why? Because the assumption in producing locally is that we have the best natural resources, capital and labor in the world locally. That assumption is almost certainly false. When that's false, you end up with worse quality for the same price. Sometimes the price goes up while the quality goes down.

Now, of course there are some things for which it's true that you have the best natural resources, capital and labor to produce a product locally. In which case, that's good. Wisconsin does a much better job of producing milk and diary products than Arizona. In that case, it makes sense to buy locally. But it almost never makes sense to buy everything locally. No place can possibly be the best at producing everything.

So, if you could wave some magic wand, and despite the immense difficulty of doing so, you could manufacture something locally - that isn't already produced locally - the resulting quality would be probably be terrible compared to what you can get through participating in a global economy. But, of course, some have tried. Take for example the 100 mile suit.


The first thing that comes to mind is that it looks horrible! Is there any question at all that this is a significant reduction in quality?

But the next thing that comes to mind is that the person who did this, almost certainly cheated. Did the transportation that she used to make this suit get produced w/in 100 miles of where she lives? What about the roads that she drove on. Was the equipment that made those roads produced w/in the 100 mile radius? How about the camera that she used to document it. Is that a local product? Or the communications devices that she used to coordinate her efforts. All made in New York? Or the fuel that she used. Did that come out of New York ground, get transported around in vehicles made in New York and refined in New York? How about the feed for the sheep that produced the wool, or the feed for the cows that produced the leather? What about the food that she ate to fuel herself for this work?

If the answer to any of those questions is no, then it's almost impossible to measure how much the global economy was needed for the production of the suit. How much did the suit cost to make as it is? How much would it have cost if she had to substitute any or all of the above for local production? The difference is how much (unmeasured) profit she got from relying on globalization. So, sure you can call that unbelievably ugly suit a local product if you're willing to cheat. But even then, it took monstrous effort for her to make. I'd bet the amount she lost in wages working on this project would have paid for several top quality, custom tailored suits. But even in producing what she did, she still relied on immeasurable resources from globalization. She would have been better off, by far, just buying a suit made by someone else, even one that was custom tailored.

But here's the most incredible part. As a consumer, I don't really have to know who has the best resources, capital and labor to produce products. That information is carried through the price. Those who have access to the cheapest natural resources will develop the physical and human capital to distribute those resources. They will become the most efficient at it, and drive the cost of production down. So all I need to know is this: which product is the least expensive for my desired level of quality. The pricing system sorts out all of the stuff that I don't have a clue about and allows the most efficient producer to emerge.

Inexpensive quality is the road to wealth. Calling for everyone to produce entirely locally, will drive us towards poverty. We will lose all of the unmeasured profits that globalization provides.

My Comment

One of the comments to Will Wilkinson's article was this one:

Wil, you need to do a little more research into Buy Fresh, Buy Local before you get on your soabox. Eating locally and seasonally keeps more of the food dollar in the local economy. In western Minnesota where I'm from that is very important. Local foods will keep more people on small farms and help decrease our national dependence on petroleum. Modern corn and soybean production puts money in Monsanto, Archer Daniel Midland, and the other conglomerates pockets at the expense of local economies. Local food puts the food dollar into local farmer's and grocer's bank accounts.

I posted a response, that I don't know if the MarketPlace editors will approve. So I'm posting it here as well:

Mike Jorgenson says, "Eating locally and seasonally keeps more of the food dollar in the local economy." This is false. First, it's irrelevant how much money is kept in the local economy. What's more important to wealth creation is taking advantage of those who can produce the most efficiently.

But suppose your goal is to keep more money in the local economy. If so, then don't forget that when I spend less to buy remotely produced food, I keep money in the local economy. Suppose a locally produced food costs $2 and the same remotely produced food costs $1. Buying the remote produced food immediately keeps $1 in the most local economy possible: my own. Now it's highly unlikely that a local producer could come anywhere near matching the economies of scale that a large remote produce can take advantage of. So it's highly likely that the profit margin of the local producer is lower than $1.

So if I buy remote I keep $1 in the local economy. If I buy local, I keep less than $1 in the local economy.

But like I said, keeping money local is irrelevant. What matters is efficiency. If the local producers are more efficient than remote producers, then buy local. If not, then don't. How do you know which is most efficient? The one who can sell their product for the least price is the winner. Buy from that person. That's the best way to make yourself and your neighbors wealthier.

My two cents

Niffer wonders how her daughter will grasp money. Which got me thinking about what we do for our kids.

When it comes to money, I want my kids to learn three things:

1. Money is not infinite.
   
2. Desires are infinite.
   
3. As a result, you will *never* have enough money to buy everything you want, so think before you spend.

To achieve this, we've done three things. My parents did the allowance thing, but the other two are ideas entirely the brainchild of me and my wife.

1. When they start getting a concept that money can buy things, we give them an allowance. For the oldest three, we started at 4 years old, giving them $0.25/year (e.g. the 5 year old gets $1.25, the 7 year old gets $1.75 & the 10 year old gets $2.50). Of the allowance that they get, we force them to give 10% to God and put 10% into savings. They get to spend the remaining 80% however they wish.
   
   There are a couple of things we hope to achieve through this. First, just like we give them pencils and paper to practice writing, we give them money to practice using it. It also alleviates a lot of pressure when we go to the store. A common question that is asked is, "Can we get candy?" (You can also substitute tons of worthless trinkets for "candy".) And the answer is always the same. We smile and give an excited, "Sure!" but then follow-up with, "You have money to pay for it?" Almost always the answer is, "No". To which we say, "Oh that's too bad, because they take money here." One time, my oldest got cute and said, "I've got pretend money." To which my wife responded, "Well, that can buy a pretend candy bar."
   
   The really hard part of giving them an allowance is also giving them the freedom to spend the 80% however they want. My older two frequently come up with grandiose ideas of how they're going to pool their savings so that they can buy something big. Something, which I usually approve of. But instead, they're usually at the store unable to resist buying Pokemon cards - which are really expensive and almost entirely useless. When that happens, it takes every effort I have not to jump in and forbid them from doing it. Mostly I succeed, but sometimes I don't. What I have to remember is that if they don't experience the feeling of "being broke" now, they'll not learn how to avoid it in the future. I'd rather that they wasted small amounts of money on pokemon cards at 10 years old instead of wasting large amounts of money on useless crap at 25. I hope that they learn that it's their previous spending choices that determine their later spending capability. If I step in and make the choice for them, that's a lesson they'll never learn.
   
   
2. The 2nd thing that I do is that I have my kids help me pay the bills. I pay almost all of our bills electronically. So I give the kids some jobs to help me pay the bills. Their job is to
   
   
   1. open the envelopes
      
   2. throw away everything except the actual bill
   3. tell me how much it's for
   4. file the bill into the filing system.
   
   I then take care of sending an electronic payment to whomever it is. This is especially useful when it comes to the credit card bill, which is (invariably) the largest bill. One that we pay off in full every month. My kid will say, "Credit card bill is big again."
   
   "Yep, but take a look at everything that it bought"
   
   "The grocery store is on here a lot. And wow, the gas station charges are really expensive."
   
   "Yes. Those expenses have been going up a lot lately. It means that we have to figure out how to spend less somewhere else."
   
   "Where have you been spending less?"
   
   "Well, I don't golf as much as I'd like. I give your mom backrubs instead of paying someone for them. We switched cell phone providers recently to one that was cheaper. We've also been more frugal on the family vacation. That's why we stayed where we did and why we didn't go to that expensive place that you and your brothers were really hoping for. Basically we do a lot of little things, but where most of it comes from is... well... let's just say that I hope you get a college scholarship, son." My oldest two are the only ones who are capable of helping me pay the bills, and they laugh at the joke that they are probably on 90% sure is an actual joke. It is a joke, but I don't mind letting them wonder a bit.
   
   In any case, I hope that by watching me pay the bills, they see that life is expensive. I also like the fact that they get to see me giving 10% of our money to God and putting at least 10% into savings just like we demand of them. (These are tasks that take place at the same time as paying the bills.)
   
   
3. Finally, from the 7th birthday on, we decided to change how birthday's were handled. So the oldest two no longer get a gift and a party from us. Instead, they get $100 to use as they see fit for their birthday. They can plan a huge party and use what's left over for a gift, or they can buy themselves a huge present. Either way, they get a chance to learn about budgeting. The oldest likes to have friends over. So, he almost always puts a large percentage into the party. He buys the cake, the napkins, the paper plates and plastic ware. He also buys all of the items for the "goodie bags" and prizes for the games. At first he suggested that he invite some friends to a local theme park. "Great idea!" we said, "Which two friends do you want to take?"
   
   "Only two?"
   
   "Well, yeah, that place is expensive. Along with your ticket, you just barely have enough money for that." He had been planning to spend some money buying himself a computer game. Suddenly an inexpensive party at home with *LOTS* of friends began to sound really good to him.
   
   Child #2 did the party last year in similar fashion to his older brother, but I suspect that next year he's going to skip the party altogether and spend all the money on a gift for himself. That'll be hard for us, but we're just going to have to bite our lips and let him do it. Time will tell.

So that's it. That's what we do to try and teach our kids about money. Any other suggestions?

Flipping a coin

I think I may have found one article that does a good job of expressing my ambivalence over the upcoming election. Here's a a paragraph that resonates:

The most exhaustive examination of the McCain and Obama budget proposals I've found comes from the Tax Policy Center, sponsored jointly by the Urban Institute and the Brookings Institution. It's discouraging reading. Though details differ, neither plan would realistically limit spending or eliminate deficits. This is especially true when the Obama and McCain health proposals are considered. Both would cost far more than $1 trillion over a decade, says the Tax Policy Center.

The article is 2 pages. The above quote is on the 2nd page.

Up to this point, I've been leaning towards McCain in the vain hope that the opposition would result in less that the government did. Obama seems to be trying to advertise that he'll unite the government. I don't want that. I want the government to be divided and fighting each other. That way, they tend to not have enough time to focus on fighting me. A united government strikes me as a horrific affront to individual freedom. Now, re-read the last sentence of my quote. It means that the opposition that McCain and Obama have is over small trivial things. They agree, quite strongly, on a whole bunch of ways that they're going to spend other people's money. On a whole bunch of ways in which they're going to interpose the government into individual choices. Aw, crap.

Then I am reminded by Greg Boyd of what's important:

But its precisely at this point that I have to remind myself that I am a citizen of a different empire and am not to get overly invested in civilian affairs. I have to therefore regard Obama’s call to embrace the audacity of this political hope as a temptation... Whatever good Obama, McCain or any other politician may or may not be able to accomplish, the ultimate hope and allegiance of all Kingdom citizens must remain in Jesus Christ and in the mustard seed Kingdom he established.

Me. Busted.

It's easy to hope that if we change our government and get something in place that is less invasive in individual lives, that life will get better for all. And I think that's true. But that's not the world we live in. The only hope we have for elminating the desire of humans to rule over each other is to set Jesus as the leader. We *all* follow. He leads. He is the ultimate omniscient and benevolant dictator. He is the one that *can* solve Hayek's knowledge problem. And He's incorruptible.

Until He comes, every other person who would preside, rule, lord, dictate or otherwise command others can really only accomplish one thing: make things worse.

I might as well flip a coin. Last time I convinced my wife to vote Republican, maybe I should return the favor.

UPDATE: Jimazing pointed me to this very entertaining interaction that Don Miller had with Barack & Michelle Obama.

It's Not Easy Being Green

Will Wilkinson was on MarketPlace and provided the following commentary (HT: Division of Labour)

A tomato raised in a heated greenhouse next door can be more carbon-intensive than one shipped halfway across the globe.

Doesn't it just have to be more earth friendly to not have to waste all that energy shipping food half way around the globe?

Nope.

Wilkinson goes on to say something even more important:

But one thing is clear enough: the farmers in Mexico, China, and Brazil, who produce a lot of the imported food Americans eat, are poorer than the farmers here in Iowa. A lot poorer. The corollary of "eat local" is "don't eat Mexican," so to speak. But the way poor people get less poor is to do business with people who have a lot of money, like us. If the local stuff is mouthwatering, you might as well pony up. But if your salad is made with Mexican lettuce, savor your righteousness.

Yep. That's right. The market makes poor people wealthy. And in the effort to strive for even more non-market fixes to environmental concerns, remember two things:

1. Non-market solutions almost always subvert the thing they're intended to do. E.g. forcing people to buy local on the premise that it's good for the environment is actually worse for the environment, and
   
   
2. Non-market solutions come with a cost: they will like make someone else poorer, and frequently those someones are the people who are already desperately poor.
   

Parentonomics

Don Boudreaux sent a letter to the Boston Globe. I'm quoting it here in it's entirety because it's excellent:

Derrick Jackson wants government to reduce income differences among Americans ("Politely declining to touch the income gap," August 19). Forget that even poor Americans today generally have greater access to goods and services than did middle-income Americans of a generation ago. Instead ask: what kind of philosophy demands that government adopt and act on values that all decent parents teach their children to reject?

Who among us sends our children to school or to the playground with admonitions to begrudge classmates or playmates possessing nicer clothing or fancier toys? Who among us counsels our youngsters to form schoolyard coalitions for forcibly confiscating expensive sneakers and video games from 'rich' kids for "redistribution" to poorer kids? Who among us would not scold our children for such envy, and punish them severely if they participated in such thievery?

Children should avoid envy and learn to thrive by producing rather than by taking. The same is true for adults.

Sincerely,
Donald J. Boudreaux

Revelation

The author of one of my favorite blogs has been revealed. I wrote previously about how I wished I could write like this guy. Apparently, his was a good standard to seek because his book is about to make the NY Times Bestseller list.

Heretics and Idolators

As previously mentioned, I thoroughly enjoyed reading "The Shack" by William Young. This book has a lot of theology in it. Most of which, I have no real opinion on it's accuracy. Basically because the primary message of the book isn't the finer details of theology. The central message is that God wants a relationship with me. He craves it. He has and will do whatever it takes to get me to freely participate in this relationship.

But I did a foolish thing. I started looking for other people's opinions of this book. And I found them. I found a lot of effusive praise for the book, and a lot of criticism of the theology. I am bothered by the criticism. Not because I want them to agree. I have no leg to stand on to say that disagreement is bad.

Instead, I really think that much of the criticism is missing the point. And the criticism reminds me a lot of other criticism that I've seen bandied about within the church. Specifically, if you disagree with my interpretation of the Bible then you're a heretic.

Well then let me get this out of the way: I am almost certainly a heretic. But I'm in pretty good company. I would suggest that anyone who attempts to ever describe God will always advance some heresy.

I may misunderstand the technical definition of heresy. But from how I see it used, it seems like heresy is any inaccurate representation of God. So when someone decries the author of The Shack as preaching heresy when he presents a picture of the trinity, they're making this claim because that author's picture is inaccurate.

So, it would appear that the only way to avoid being a heretic is to always portray an accurate picture/representation/story of God. But none of us can do that. None of us have an accurate picture/representation/story of God. God tells us that all of our attempts to understand Him will come up short. If that's true, than any attempt to describe him at all, will always come up short. We *always* describe God incompletely. As a result, we always describe Him inaccurately.

Now, to be certain, there is a difference between someone who is taking their best shot at describing God and is inaccurate, from someone who is actively attempting to lie about God. But I certainly don't think that any of the authors that I've read,who've had the "heretic" epithet tossed at them fall into the latter category (e.g. William Young, Rob Bell, Donald Miller). So, based on behavior, it appears that being a heretic does not simply mean lying about God. You can be a heretic by attempting to describe Him, but failing to do so accurately.

Again, we always describe God inaccurately. Hence, I'm a heretic.

But that's where the beauty of this book comes in. The central message that it's trying to get across is that God wants a relationship with me. And I don't have to have my heresy fixed before that happens. He knows I'll never fully understand him. Being able to have a perfectly accurate picture of God is not the point. Being in that relationship so that He can point out where I'm not understanding Him is the point. He's not a map. He's a navigator. He wants to travel the road with me, giving me thoughts and tips along the way, avoiding the hazards as they come up.

That is the message I got from this book. Do I think that the Holy Spirit is an Asian woman who's hard to see, or that the Father is an jolly African American woman? Of course not! But they are useful images to help me grasp how God wants a relationship with me. Focusing on the inaccuracies of those particular tools is, in my opinion, entirely missing the point.

Now, of course, this creates a pretty big tension. God is also pretty clear in the Bible that we are not to worship idols. Put another way, we should make sure that the thing we have a relationship with is really Him. So there is value in understanding God as accurately as we possibly can. But as soon as we remember that none of us, not even those who dedicate their lives to the study of Theology, will ever have a complete and clear picture of God, that ought to introduce in our minds a bit of humility about the discussion.

When I hear people throw "heretic" around, it seems really really arrogant to me. As if to say, "I have a better understanding of God than you, and yours is wrong." Maybe that's true, but isn't there a better way to approach it? Wouldn't it be a better alternative to engage the differences and see what can be learned? Instead of immediately assuming that your own understanding is infallible?

Yes, there are people who have dedicated their lives to trying to understand what God looks like. And then there's the rest of us who have to use significant abbreviations from the theologian's understanding. But *ALL* of us (including professional theologians) are immensely far from the true understanding of what God looks like. Somehow, I don't think it really matters to God that we get a complete and accurate picture of Him. It seems to me that He has spent more time and energy trying to be in a relationship with us than in trying to paint a picture of himself.

Given that, can we please try to approach other opinions of what God looks like with humility? Can we please stop labeling as heresy thoughtful attempts to understand. Can we instead engage the thoughts and see if there's anything that can be learned? If, for a given topic, the theologians have already done that and settled it, then can we focus on explaining the outcome in terms that a non-theologian can understand? My assumption is this: if it requires theological training to understand, then it's probably not the primary way that God wants to engage us. If that's true, then maybe we can approach the declarations of heresy with a bit more humility?

Maybe?

Please?

Favre '08

Ok, so I have very few (known) readers of this blog. And I'm about to (again) alienate 33% of them. Sorry, dude.

First things first, I just got back from a trip to Wisconsin for our annual family reunion. It was a blast. But I was really surprised to hear the opinions of my relatives - most of whom are die-hard Packer fans. The general consensus seemed to be that they wanted Favre to stay retired. I really couldn't believe that they thought that Aaron Rodgers was a better risk than Favre, especially considering the year that Favre had last year.

Many of them attributed selfish motives to Favre's actions. And certainly acting on the desire to play again is something that will benefit Favre. I happen to think it will also benefit the Packers. But I see what's been going on differently than most of the people I've talked to. I think Favre has bent over backwards to accomodate the Packers, while not giving in on what he wants. He wants another shot at the Superbowl. I think he thinks the Packers are his best shot at that. I also think the Packer's best shot at the superbowl involves Favre. But if the Packer's don't agree, then he wants to play somewhere that he does have a shot. And unfortunately, the best place for that is in Minnesota - someplace that the Packers do *NOT* want to see him play.

So, in what seems (to me) to be an effort to help the Packers, he delayed filing for reinstatement until today. That delay gave the Packers time to find a trading partner, it also helped the Packers avoid a circus at training camp with Favre showing up. Now that he's finally filed for reinstatement, he's done it at exactly the time that gives the Packers even more time to find a trading partner. In the next two days, the NFL commissioner (Roger Goodell) will reinstate Favre. This will take a day. Then the Packers will give Favre a physical, which will also take a day. Then Favre can show up at camp, but Thursday is not a practice for the Packers, giving the Packers another day. Friday, if nothing happens, Favre will show up at camp, having given the Packers every last possible oppurtunity to trade him or release him.

And at that point, if Favre isn't given a chance to compete for the starting job, there's really no way that Packers GM Ted Thompson can keep his job. It's one thing to not have Favre at camp, but it's entirely different if he's there but not allowed to compete. I don't see how you can say you want the Packers to win, if you're not even willing to give Favre a shot at the starting role.

In my opinion, the Packers need to do as quick as an about face as they possibly can and welcome Favre back immediately. I don't think he should be handed the starting job. I think he should compete for it, but I'm certain that he'd win it. Maybe they're worried that if they did that, they'd lose a little bit of credibility with other players who are in contract negotiatons. But, I don't think they'd lose much (if any) credibility in contract negotiations. No other player on that team has the cachet that Favre has.

I'm sure that I have a blind spot, but I'm just not able to see the ill motives in Favre's actions. On the other hand, I'm equally unable to see the motivation behind what the Packers are doing. Rather it looks more like Ted Thompson's ego demanding that his draft pick (Aaron Rodgers) get a chance to start. If Rodgers plays well, it can make Thompson's career. I don't know that this is what's happening, but I also can't dismiss it.

As for me, I think Favre has done all that he can to accomodate the Packers. I think it's time to report to camp. If that ruins Ted Thompson's career, so be it. Thompson made this bed. He can lie in it.

The Shack

When it comes to crying, in my family, my wife has mastered that particular skill. I am frequently frustrated with the ease at which her emotions spill over into tears. As for me, in the 14 years of our marriage I've not really cried at all. I've gotten "misty" a couple of times while watching some particularly moving films. And then, just recently at church this last Easter, I got really close to crying after I saw our own local rendition of Lifehouse's Everything Skit... actually I probably crossed the line during that service.

In any case, I don't cry that much. So it came as a surprise to me that I was moved to tears by a book. Specifically, this book. In my defense, I'm not the only one who had this reaction.

I very much enjoyed the book. I will need to read it again to fully absorb it.

Yes, this is me.

This could do it...

As many of my friends know, I am a life long fan of the Green Bay Packers. I remember watching them when Lynn Dickey was throwing to Phillip Epps & James Lofton. I remember the year we all put our hope in Eddie Lee Ivory. I'm still (to this day) ticked off that they took Tony Mandarich in the draft while Barry Sanders was still available!

Of course, I don't live in Wisconsin any more. I live closer to the Carolina Panthers, who I have adopted as my 2nd team. Still, I never considered that I would ever give any other team the number one spot other than the Packers. Until now.

Brett Favre wants to come back from retirement. The Packers have not taken a stand on the issue and Brett has officially requested that the Packers release him. I am going just batty contemplating the possibilities of such a release. There are 3 other teams in the NFC North that don't have much of a QB. And Minnesota would LOVE to have him. And I suspect that he'd love to play for his former QB coach (Darrel Bevel - ex-QB for the Wisconsin Badgers) who is now the offensive coordinator of the Vikings.

I'd never really thought that anything could cause me to not be a Packer fan. But I think that this could do it. If Brett wants to play, the Packers should *BEG* him to come play for them. I understand that the Packers are in a tough situation. They want Aaron Rodgers to take over the team. But good grief! How do you push out Brett Favre for Aaron Rodgers, who has potential, but not much else. On the other hand, #4 has 3 MVPs, a SuperBowl and pretty much single handedly put the Green Bay back on the NFL map after more than 2 decades of horrible play. Not to mention that he had a fantastic season last year.

If they trade him, or worse, they release him, I'm not sure I could stand to root against the guy. I'm not sure I could stand the dissonance of rooting for a purple-clad Brett Favre, while hoping that the rest of that awful team fell to the ground sucking their thumbs in the fetal position. Much less having to contemplate rooting for the Packers and for the Viqueens QB.

If, on the other hand, Brett Favre came to the Panthers, as some have suggested as a possibility, it would almost certainly make them my favorite team.

But of course, what I really hope happens is that the Packers' brass stops being so stupid and announce Brett Favre as a Green Bay Packer for the 2008 season.

Luxurious Lifestyles

One of my favorite podcasts is American Public Media's Speaking of Faith. The most recent podcast revisits an interview from last year with Barbara Kingsolver, who chose to move her family to the mountains and live off of food that she grew in her backyard, supplemented by food provided by local farmers. Ms Kingsolver got a great deal of reward from doing this, as she expresses in the podcast. And, it's great. I applaud her choice and rejoice along with her in having done that.

If that was as far as it went, that would be the end of my comments. But she also tries to make the claim that her lifestyle was ethical, and implies that the lifestyle that most of us have with our food is unethical. There is a subtle advocacy for all of us to lead that kind of lifestyle, and I can't agree with that. One of the things that she says in the podcast is that we don't take account of the costs in the lifestyle that we lead. But I think she does a very poor job of taking account of the costs that would be associated with imposing that lifestyle on the rest of the world.

Her lifestyle is one of luxury. It's a byproduct of the fact that we're fantastically wealthy that some of us can choose that lifestyle. In the third world, that lifestyle is called subsistence living, and is generally considered to result in massive amounts of suffering. A few random thoughts from the podcast as I re-listened to it...

Early in the podcast she complains about not knowing where our food comes from, whether it be China or Argentina or elsewhere. Part of what raises her concern is the amount of distance that our food must travel and how much fossil fuels must be consumed in the transport. But I'm not sure that she's measuring correctly. She just assumes that using fossil fuels will release more CO2 into the atmosphere, but when measured, that assumption turns out to be bad:

Most notably, [researchers] found that lamb raised on New Zealand’s clover-choked pastures and shipped 11,000 miles by boat to Britain produced 1,520 pounds of carbon dioxide emissions per ton while British lamb produced 6,280 pounds of carbon dioxide per ton, in part because poorer British pastures force farmers to use feed. In other words, it is four times more energy-efficient for Londoners to buy lamb imported from the other side of the world than to buy it from a producer in their backyard. Similar figures were found for dairy products and fruit.

New Zealand is a *MUCH* more efficient producer of lamb than Great Britain. They have what economist David Ricardo called a comparative advantage in producing that lamb. Their advantage is so big that it makes more sense to ship the lamb than grow it locally. Additionally, commercial processing of foods allows for economies of scale that local growing simply can't match:

Contrary to current wisdom, packaging can reduce total rubbish produced. The average household in the United States generates one third less trash each year than does the average household in Mexico, partly because packaging reduces breakage and food waste. Turning a live chicken into a meal creates food waste. When chickens are processed commercially, the waste goes into marketable products (such as pet food), instead of into a landfill. Commercial processing of 1,000 chickens requires about 17 pounds of packaging, but it also recycles at least 2,000 pounds of by-products.

That 2000 pounds of by-products become waste when a 1000 people harvest a chicken in their homes.

She claims that humans throughout all of history have eaten local organic food, up until the time of WWII. I don't know if that's false, so I'll simply take her word for it. She seems to think that this is a "normal way to eat". I don't understand why that makes it a good way to eat. Until very recently, women were at a lower social status than men. Many argue that this problem persists. When compared against history, male dominance over women is the norm. But I don't think it's good. Steve Landsburg argues that prior to the Industrial Revolution, all of humanity was poor. Which would suggest that poverty is a pretty normal state for us. I don't think that's good, either.

So the question is what makes eating local foods good and eating imported foods bad? The case really can't be made that importing is always worse for the environment. The case is hard to make that normalcy defines good. On the other hand, the amount of wealth that is created as a result of division of labor and specialization has greatly enriched all who take place in that trade. That wealth has directly reduced human suffering. Division of labor and specialization seems to me to produce more good than self sufficiency.

LOL! An excerpt is read from her book and she quotes the bible saying, "The harvest is bountiful and the labors few". She hears this and is amazed at how much food is growing in her garden, but that the labors were not few - she had a ton of work to do. I find it funny because it's a misquote. It should have been "The harvest is bountiful and the laborers few". The original quote means something completely different than how it was applied. But even so, if you were to interpret the quotes from the perspective of division of labor, the correct quote makes much more sense.

The biggest problem with a country getting rich is that the cost of labor goes up. Which means that the farmers are less willing to farm for low wages relative to the wages of everyone around them. They're better off trying to get some of the other jobs that pay more. In a market, there are two general responses to this:

1. Send the work where labor is cheaper - which means we'll get our food from overseas
   
2. Develop technology to replace expensive labor - which means it'll be mass produced
   

What does it mean that we see both #1 & #2? To Ms. Kingsolver, it means we're worse off. But what it looks like to me is that the labor market is too wealthy to produce food locally. There are more profitable things to do. Of course, when the government intervenes, they do things like create farm subsidies, which encourages more local farming, because farmers no longer see the need to chase after the better paying job.

She then goes onto say something that I agree with wholeheartedly: that the subsidies that our government provides to farmers distort the market. Unfortunately, she seems to think that it distorts the market away from local farmers. That is a surprising conclusion since those subsidies and trade barriers were enacted to protect the production by the local farmers, and combat competition from foreign products. In other words, the subsidies and trade barriers serve to cause us to buy more locally than we would without the subsidies and trade barriers.

She'd like to see more people buying locally to expand the market for local produce. But this ignores the economies of scale that mass production creates (as mentioned above). So expanding the local growers market means increasing the price of food. This is a great luxury item for someone who's wealthy enough to afford it. It's a horrible thing to impose on those who are not. (To be fair, I didn't hear her directly advocating imposing these things on people.)

She laments that we lack strong regional traditions in our food that tie us to our surroundings. But I see lots of local foods. For example, around here the barbecue is a matter of local pride. In Texas, it's steak. In Wisconsin, beer & cheese. New York has pizza. Chicago has a different type of pizza. California yet another version. She goes on to say that we're surrounded by cheap fats and carbohydrates and that what lines our bookshelves are diet books. That seems true to me. But even this is evidence that we're so wealthy that eating has not become the biggest problem that we face. To reverse this means becoming poorer. I don't like that tradeoff.

I want to say something about how this lifestyle was very enriching to her personally. I don't want to dismiss that. If it's something that would be enriching to you, go for it. But realize that choosing that lifestyle is a luxury item. It's entirely impractical for a single parent mom living in the inner city to do this kind of thing. That person will likely spend most of their time maximizing the time working at things their talents and gifts enable them to do. Which, in most cases, means outsourcing the production of food.

She's now going on about how our consumption has contributed to global climate change, and that Hurricane Katrina is evidence that our consumption comes with a price. Immediately, this strikes me as another case of "here's a bad weather event, see it's proof that global warming is causing problems". But that doesn't match with the data.

She claims that we're over consuming the world's limited resources and then bemoans the idea that if you can afford it, it's ok to use it. But that idea is exactly correct. The pricing system tells us about the relative scarcity of things. If the thing you are buying is cheap, then by the simple supply and demand, it's not very scarce. Moreover, as the thing gets more and more scarce, the price will go up to reflect the scarcity, and fewer people will buy it. Take a look at the number of people taking public transportation now that gas is more than $4/gal. Take a look at your local car dealers: they're all advertising high mileage cars. We're consuming less gas because the price of as has gone up. That dynamic is true for all goods and services. So when a good or service becomes more scarce, the pricing system signals us to consume less of it, and we do. If that's true, then we are not over consuming.

At the end of the segment she asks, "Do you think you can keep doing this without paying some kind of a price?" And that is, of course, a valid question. But I would respond with, "Do you think you can engineer change without also paying some kind of a price? What would you recommend we do if the price of change is higher than the price of not changing? How can you measure those prices without first understanding economics?"

UPDATE: Mike Munger has a very well written article that explains how the division of labor works and benefits us, by describing the market for pins. IMHO, the most salient part of that article is this:

I could make my own pins. Working hard, with some wire and some cutters and a file to sharpen them, I might make 100 or more pins a day. But my time is too valuable to spend that way. Likewise, we could make pins in my home state, North Carolina. But the amount of capital required to be competitive with world prices of 10,000 pins for $1 would be... well, it would be a lot. Too expensive, given all the other profitable investments available for capital in North Carolina. The same is the true for the U.S. as a whole: we could make our own pins, but it's cheaper to buy them, and exploit our own comparative advantage in activities where division of labor works for us, rather than against us.

I'll spare you from the really bad joke that starts and ends that article. But the point is this: division of labor in the food market has provided cheap and plentiful food. This is a good thing. It means that we can expend our creative energy and time on things other than food production. Blithely calling for the unwinding of that division of labor is a road to poverty and food crisis.

Questioning Myself

The Antiplanner has a great post in which he discusses the value of dissenting opinions:

As the Economist points out in its review of the book, “Because Americans are so mobile, even a mild preference for living with like-minded neighbours leads over time to severe segregation. . . . When a group is ideologically homogeneous, its members tend to grow more extreme.” This is why we are becoming more polarized...

...we each need to make more efforts to communicate with others who are different from us. The Antiplanner has always appreciated the fact that DanS, D4P, MSetty, and other loyal opponents so frequently comment on this blog so that everyone can be exposed to other views. I frankly admit that I have often learned from their comments.

This attitude is impressive and something that I wish to emulate. But not having a lot of commenters, it's hard to get very many dissenting points of view. So I decided to start visiting blogs of people who stand in opposition to some of my favorite blogs. And I'm entirely discouraged.

Megan McArdle is one of the most reasonable, and intelligent bloggers around. I don't always agree with her, but even in disagreement, I find myself concluding that her views are reasonable, even if I don't hold them. Lately she's been critiqued by Kathy G. The critique is that McArdle isn't really a feminist, despite McArdle's claims that she is. She agrees with most of the problems that the feminists say exist. She disagrees with the solutions proposed. Kathy G wrote a post describing why McArdle is not a feminist.

It was horrible. It was riddled with ad hominem attacks. In it, Kathy G did exactly the things she accused McArdle of doing (making claims without citing any sources). In short, it was a nonsensical rant. Now there are times when rants are useful, and I enjoy reading them. But rants that try to cloak themselves as rational argument are, in short, horrible. They're horrible because they remind me too much of myself at my worst.

But the horror didn't end in the main article. The commenters were even worse. In the post, McArdle wrote a somewhat snarky comment, but IMHO it was rational and went to great lengths to address all of the complaints that Kathy G laid out. In response to this, McArdle was called "full of *hit" and a liar. I'll grant that the McArdle defenders (including McArdle herself) did not behave entirely professionally. That would require no snark. But their snark was a whole lot less distracting than the all out immaturity and insolence on the other side.

This is, of course, a discouraging journey into the world of the opposition. And previous forays into this world have seen similar results. Still I'm hopeful that there exists rational dissent.

McArdle has her own post on the subject of humility. I'm pretty sure that I'm in the graduate school stage that she describes - despite not actually being in graduate school. I really don't have a very deep understanding of economics. I want one, but when it all comes down to it, the best I can say is "Mr A says Mr B is wrong". Still, I'd like to think, that since I'm quite a bit older than the typical grad student, I've had a bit more life experience to lead me to more humility. But my meager attempts at viewing the other side have been thoroughly discouraging.

Are there rational liberal blogs out there?
Are there better ways to seek out rational dissent?
I'm discouraged.

A picture of my words...

Caleb Crain linked to Wordle. I ran my blog through it and came up with this:




Update:I like this one. It looks kinda like a gun, or (possibly) more appropriately a phaser. In any case, I kinda like the idea of my words being a weapon, even though, I don't really think of them that way.



Update #2: I was looking at some of the previous Wordle's in the gallery, and I ran some friend's blogs through the system. I can't ever show my wife my blog, or this wordle. She's not mentioned... at all. Of course, in my defense, I try very hard not to publish any identifying information about either my wife or my kids... or me for that matter. For example, I frequently refer to my children as "oldest", "youngest", "#2", etc. I see that I mentioned my wife's name in only one post. Got to clean that up.

Minding the Gap (follow-up)

"Anonymous" had a comment on my gap posting. I think it's funny, because I'm pretty sure I know who "anonymous" is. There are really only 3 people who read this blog (as far as I know). Anyway, he says:

My biggest concern about the gap is that it allows the rich to fund injustice.

While I think that this is possible, I'm skeptical that this is a prevalant problem. Can you give me some examples of when the wealthy fund injustice?

Anonymous continues...

That said, I don't have a solution. I don't believe in legislating morality

Personally, I don't have a problem when laws are created that prevent people from infringing on the rights of others. That is exactly the purpose of the government, to protect individual rights. Whether the government is the most effective protector of rights is up for debate. But it's certainly a whole bunch better than what it does most of the time, which is to take money from an unfavored group and give it to a favored group.

Maybe that's the example: the wealthy buy politicians. But I don't consider the problem to be with the wealth gap. I consider that to be a problem with the politicians. I don't think the solution to corrupt politicians is to reduce the size of the wealth gap. To me, that's roughly equivalent to saying that sex should be outlawed because some men aren't faithful.

In my opinion, the problem of corrupt politicians is a problem of a small number of people having too much unchecked power. Politicians wield a gun. You have to follow whatever laws they create or the police come get you. It doesn't matter if the laws are valid or not. The process of fighting corrupt laws is incredibly difficult.

I'd very much like to see the government's power greatly curtailed. But I worry that any such reduction would be a short term thing, only to be reasserted later. That seems to be the way our current government is going.

Given that, I'm curious about the idea of removing all government power, e.g. anarcho-capitalism. I don't know whether or not it would work, and what would prevent anyone w/in that framework from turning around and agreeing to form a government. This would, of course, put us (eventually) right back where we are. Still, it's compelling enough to at least be tried as a small scale experiment. I'd be interested in how it turned out.

Anonymous continues...

and I don't believe in redistributing wealth.

I have no problem with voluntary redistribution of wealth. I have a big problem with it when it's forced.

I've said this before, but I see very little difference between the government forcing me (at the point of a gun) to give up my money to be used for the government's purposes, and a thief forcing me (at the point of a gun) to give up my money to be used for the thief's purposes.

Battle of the Bills

Bill Easterly speaks sense in response to Bill Gates' call for creative capitalism.

The creative capitalism blog is an interesting blog. It's basically a bunch of superstar economists (on both sides of the econo political spectrum) reacting to a speech Bill Gates gave on transforming capitalism to better attack poverty. Apparently they plan on turning this into a book. (HT: Megan McArdle.)

Easterly's comments align well with what I'm hoping to communicate w.r.t. Brian McLaren's views of rich & poor.

The false accusation was that traditional capitalism fails to help the poor. It is certainly true that firms have much more incentive to meet the needs of rich people with money than to meet the needs of poor people without money. What Mr. Gates forgot was that as firms expand their production to meet more of rich people’s needs, they hire more unskilled labor to do so—driving up the incomes of poor people.

Just add this to my list of the ways that the rich, unknowingly help the poor as a result of a gap between the rich and the poor.

Steven Landsburg's comments also resonate:

You can’t end poverty without capitalism. (And indeed, prior to capitalism---more precisely, prior to the Industrial Revolution---the entire world was poor.) ... Bottom line re eradicating poverty: Capitalism is indispensable; health and education measures can help.

Not that I can add anything to something these guys have written, but I would also add that institutions matter, too.

Everything Must Change (Part 1): Minding the gap

My friend posted a review of book that I've been wanting to read. My friend makes this comment:

[Author Brian McLaren] deals with our over consumption of the world’s resources, the growing gap between the rich and poor, our war-prone proclivities, and the failure of the Church (and even other religions) to provide a different “framing story” from which to act upon. Solving this last one is the key to solving the other three.

The book may identify more issues than just these four. And the book may very well give good reasons for why these problems are problems worth solving. But, for the first three, my guess is that it assumes that these problems are agreed upon by the reader. For two of the problems listed, I'm not sure that I think they're problems worth trying to solve. Specifically, I am not worried about:

1. the growing gap between the rich and the poor
2. our overconsumption of the world's resources

I initially started this as a comment directly on his blog. But it quickly got way too long to be a comment. So I'm posting my reply as blog post. In fact, even my reply is too long to be just one blog post. I think I need at least two (maybe three). In this post I'm going to talk about the gap between the rich and the poor. In my next post, I'll share my opinions on overconsumption. But first, minding the gap...

I don't consider the fact that there's a gap between the rich and poor to be a problem worth solving. A "solution" to this problem has a few problems of it's own:

1. It ignores what the real goal of poverty reduction should be.
2. It ignores the benefits that come to the poor as a result of the gap

First, what is the real goal of poverty reduction? Increasing the wealth of the poor. The size of the gap between the rich and the poor is not the source of poverty. Imagine a country in which the poorest person earns $1 million annually, and the richest person earns $100 billion annually. That is a huge gap. The richest person earns 100,000 times as much as the poorest person, or $99.999 billion more per year. But in that country, the poorest person still incredibly wealthy. Now, consider a different country in which the richest person earns $100,000 per year and the poorest person less than $100 per year. The gap is smaller. The richest person earns 1000 times as much as the poorest person, or $99,900 more. The gap between the rich and the poor in the 2nd country is much much smaller. But the poorest person is much worse off in the 2nd country. Reducing the gap does not necessarily make the poor better off.

I think that an assumption in the problem is that the amount of wealth available is a fixed pie, like a pizza. If my slice gets bigger, then someone else's slice must get smaller, and it doesn't matter if my slice is the smallest slice or the largest slice. The goal, if wealth is fixed, is to make sure that everyone gets the same size slice. If there's a gap between the biggest slice and the smallest slice, that's a problem.

But the assumption is wrong. Wealth is not fixed. It can, and does, grow. Here's a thought experiment. Imagine a group of 10 people. And in this group, is a single dollar, and nothing else. The wealth of that group in total is $1. The guy who happens to be lucky enough to be holding the dollar can purchase from others whatever he wants. No one else has any purchasing power. But they have talents. And they can use those talents to create things. Things that sold for the dollar, or bartered for things. But getting the dollar gives them a lot of purchasing power. Much more so than bartering. So they all want the dollar, and use their talents to make things for the dollar.

Eventually someone makes something that the dollar holder will trade for, and does. At this point, what is the wealth of the group? It's risen. It used to be $1. Now it's $2. One guy has a dollar, and another guy has something that's worth $1. Every time anyone makes something worth trading for the dollar, the wealth of the group grows. After 10 trades, that group no longer has to worry about dividing up a $1 pie. The pie has now grown to $10. This is, of course, true in the US, too. Wealth here is not fixed. So when the pie grows, knowing how much the rich have, tells you nothing about how much the poor have. Worrying about the gap ignores the problem: figuring out how to help the poor.

Since I'm no longer worrying about how big the gap is, and only worrying about how the poor are doing. I want to talk about the purpose that the gap serves in making the poor wealthier.

In the early 1800's almost nobody had a flush toilet. Everyone had to figure out a way of dealing with human biological waste. And the mechanisms that were employed were unsanitary, to say the least. Disease was a problem as a result of not being able to easily dispose of waste. Everyone in that world was poorer than everyone in today's world where running water and flush toilets are the norm. But how did we get from there to here? How did we all get richer? The answer is that there was a gap between the rich and the poor.

Initially, running water and flush toilets were exclusive options in only the wealthiest households. And rightly so. Installing the required plumbing system is expensive, especially when the knowledge of how to do it is brand new. Things have to be figured out or the problem that's being solved (dealing with human waste) is replaced with a worse problem (dealing with human waste and leaky plumbing). So, it cost a lot of money to figure those things out. And only the rich could afford to pay for the figuring.

But once it was figured out, it became highly profitable to sell the products of this knowledge. The first guy to have a toilet paid handsomely for it because the guy selling it had to do so much work. But the 2nd installation was a *LOT* more profitable for the seller than the first one., since the seller had already figured some things out. Other people noticed this profit and wanted in on it. So the number of toilet sellers increased. But to win a share of the people who wanted toilets, the toilet sellers had to offer something more. And the easiest way was to cut a bit into their profit margin. A huge profit margin cut by a few percent was still a big profit margin. Multiply by millions of installations and thousands of sellers, and the cost of getting a toilet is now a tiny fraction of what it used to cost. And because toilet sellers and plumbers have been incessantly improving their products over time, what we have now works much better than what they had then. Not only is it dramatically cheaper. It's better. And nearly everyone has at least one. This is just one example of how the poor today are wealthier than than rich of 150 years ago. Compared to 150 years ago, we live in the wealthy world that I mentioned above.

Notice that the toilet, and all of its health benefits, came because it was developed at the exclusive expense of the rich. The rich paid for *all* of the development costs. And the poor paid for none of them. Had there been no rich with sufficient funds to cover the expense, the toilet would never have been developed. No one would do all the figuring out for free. It required that someone be wealthy enough, and have sufficient excess money to fund the development. Had no one been wealthy enough, we'd all today be poorer.

This example is not just true for the toilet. It's true for cars, for televisions, for VCRs, for cell phones, for houses, for aspirin, for computers, and for most of what we take for granted as basic necessities in our modern society. All of those things have made us all a *LOT* wealthier. And *all* of those things exist specifically because there's a gap between the rich and the poor. A gap that allows the rich to fund the R&D of things that competition over time brings to the poor. The gap enriches the poor.

So if you want to help the poor - as I do - try to focus on the poor. Try not to worry about the rich. Wealth is not a pie, such that if one piece is bigger, some other piece must be smaller. Additionally, the gap between the rich and the poor results in a natural, and voluntary wealth redistribution from the rich to the poor. The gap is good news. It's not a problem to try and solve.

In my next post, I'll talk about how to deal with resource constraints. And in a post after that, I hope to talk about how I think that the free market is part of God's plan, not in opposition to it.

Gmail? I'm not scared.

A friend of mine is having spam problems. He commented that he'd consider transferring his email to gmail, but was concerned about the privacy issues associated with gmail. The issue is that gmail uses software to scan your email and provide targeted ads to you. I don't worry about this for many reasons, not the least of which is that I don't currently encrypt my email. As a consequence it's hard to complain about google software scanning my email when it's already scanned by other software to determine where it's going, to determine if it's got a virus, to figure out if I'm reavealing insider information when I use my companies email, etc. None of that stops me from using email. Here's an article that articulates more reasons not to worry about gmail and privacy:

http://www.oreillynet.com/pub/wlg/4707

But when it comes to the advertising part of gmail, I'm actually quite in favor of it. I *want* google to deliver targeted ads to me... as long as the targeting is good enough. One of the lessons that I've learned from Economics is that division of labor, specialization, and trade makes us all wealthier. So I want to know as many people who are already specializing in things that I want so that I don't have to do (poorly) those things that they are specialists at.

Old media advertising (TV, radio, newspaper, billboard) is generally annoying because 99.9% of the time, it wasn't selling something that I wanted. For example, I will never, ever need tampons. Seeing a tampon commercial in the middle of a program that I like is a waste of my time. Time is a rare resource. Spending it on tampon commercials is annoying. But more broadly, most of TV, radio, newspaper, billboard advertising is annoying because I don't want most of what is advertised. I'm not their target audience. Advertisers have no choice but to create ads that hit a huge population in hopes that some small percentage of that population is in the market for their product. A few people are interested. Most people are annoyed.

Now, there's some targeting with TV commercials. You don't see a lot of tampon commercials during football games. Nor do you see a lot of beer commercials on the Lifetime Network. But these are really crude forms of targeting. Most of the time these ads still miss their mark. If you could increase the effectiveness of the targeting, then advertising becomes beneficial more often for more people.

An example: I am currently in the market for a car that gets better gas mileage than the minivan I drive around. So I take a little bit more interest in any ads that are selling cars. But I take a great deal of interest in ads that are selling small, inexpensive, fuel-efficient cars. If I could only look at those ads, I would seek them out to find out what's available. In fact, that's what I do when I search the web for car deals: I'm seeking out information about people who have something to sell. In other words I'm seeking out advertising. And we all do this. We all, at some point or another, seek out advertising. It's not the advertising that's bad. It's the missed target that is annoying to us.

Now imagine that google could infer what I'm in the market for without me having to tell explicitly them. Then they'd deliver ads to me that I already want. That's not just cool technology, it's efficient technology: I get the same information without having to do the work to find it. It finds me.

So receiving ads from gmail really doesn't bother me. In fact, the fact that someone has already written a program to determine my interests and what I might be in the market for, and go find ads to deliver to me, and is doing it for free, is a big benefit to me. I get the information that I want without having to work for it.

Of course, if google's targeting is bad, then I move back onto the annoyed side of the fence. But google has every incentive to target me correctly. If they don't, then I'm simply freeloading on their service - because I won't buy things that I don't want. If they target me correctly, then they can recover the costs of providing me this free service. And everyone's better off.

Disclaimer: This blog is hosted on a google product. I don't work for google. I interviewed with them once. I'm not trying to push their products. Use them, don't use them. I don't care. I have a gmail account (actually two) that I don't use that much.

How to turn a cell phone into an ATM

This TED talk was pretty interesting. But the part I found most fascinating is how, in the streets of uganda, they've figured out how to create banking services with a cell phone. The part in question is at about the 8 minute mark.



Let me summarize. If you live in rural Uganda, you don't have access to a personal phone. But someone in your village might have one, and set up shop as a phone kiosk. This is done by purchasing a cell phone, and then selling access to the local residents who want to use the phone. Now if you have some money and you want to send it to your home village (which has one of these cell phone kiosks) what you do is buy cell phone airtime and call up the kiosk in your home village. You read off the numbers to the cell phone provider. Say you bought 1000 minutes for $5. The cell phone provider keeps all the thousand minutes (equivalent of $5), takes about 20% and gives $4 to the person you wanted to give money to. The kiosk owner then resells the minutes to make up that $4.

This is simply brilliant. But the part that's most fascinating to me is that it's doing exactly what Grameen Bank is trying to do - namely provide banking services to the extremely poor. The difference is that there's no central controlling authority. The people who have the most interest in it's success will be the ones who determine whether or not it works. The cell phone as ATM system is simple and elegant, and capital unintensive, and yet achieves much of what Grameen Bank is trying to do with a much bigger capital investment.

It never ceases to amaze me how much can be accomplished without central planning. And how it is usually accomplished much more efficiently.

Unexpected Beauty

One of the things that I find amazing is how badly we are at predicting the future. Here's an example, in 1970 the total oil inventory of non-opec oil producers was roughly 200 billion barrels. With a consumption rate of roughly 11 billion barrels per year, you would have expected the non-opec oil producers to have run out of oil in 1988 (200 / 11 = 18). But here's the surprising reality of what happened. Since then, those same countries produced 400 billion barrels of oil, and now have a remaining inventory of 209 billion barrels. (Reference)

How is this possible? By adding 409 billion barrels of new inventory to the 200 billion barrels. Take away 400 billion barrels that were consumed and that leaves 209 billion in inventory. But where did those 409 billion additional barrels come from? One answer is the earth. But that oil was already in the earth in 1970. A better answer is that it came from people.

It was people figuring out new ways to discover new oil. Or people figuring out new extraction techniques for getting at oil they couldn't previously get to. It was people exercising their minds that produced the additional inventory. The results match fairly well with what Julian Simon predicted: natural resources act like they're infinite.

Of course, oil is not infinite. There is a finite supply of it in the world. Reconciling this fact with Julian Simon's prediction riles environmentalists and conservationists. How can Julian Simon predict that resources are infinite? The first answer is that he's not actually predicting that they're infinite. He's predicting that we'll never run out. Which is a very different prediction.

Russ Roberts describes it like a room full of pistachio nuts. Imagine that you're a huge fan of pistachio nuts, and that you suddenly find your self the beneficiary of a large room, filled with pistachios. You can have as many as you want, but there's one rule: you have to leave the shells in the room. At first, all is grand. You go in the room, grab some nuts and you always get shells with nuts in them. And it goes on for a while like this. But eventually, you start finding empty shells. Over time, you find more and more empty shells. Eventually, all you ever find is empty shells. Now you know that there are other nuts still in the room, you just can't find them. The amount of effort that you have to expend is so great that it's just not worth it to you. So, you leave the last nuts in the room, and go on to some other less costly substitute. In that room, even though you are addicted to pistachio nuts, you will never run out of them.

But maybe Julian Simon wasn't just predicting that natural resources act like they're infinite. Maybe he was saying they are actually infinite. How could oil be infinite? Only if we can figure out a way to make more. And it turns out that entrepreneurs are doing just that (HT: Growthology). Not only are they making more oil, but the oil that they're making is carbon neutral: it extracts more carbon from the environment to produce, than it releases as oil. In 1970, who could have predicted this? Who could have predicted that we'd consume twice as much as our supply, and have increased our supply by 5%? Who could have predicted that we'd be this close to synthesizing crude oil?

I find this all incredible and beautiful and utterly amazing. Should this actually work out, we should be careful of getting too proud of ourselves. No single person can take credit for anything other than a small contribution. Perhaps Greg Pal has a bigger claim than anyone else, but it's still insignificant compared to all that he depends on. Mr Pal is dependent on countless other people. Take any of them away and this can't be accomplished. Certainly he's on a team of people that are doing this. Some of them are doing other parts of the science. Some of them are maintaining the books. Some of them are maintaining the facilities. But he also relies on a stable food supply, and reliable transportation, and a housing sector that ensures he can get sufficient rest. He relies on computers to do his calculations, and electricity to power those computers. Heck, he relies on a market that signals the fact that this kind of work would be valuable. There are a myriad of things that he relies on, that if taken away would prevent this from coming to fruition. In deed, no single person can even take credit for the creation of a pencil, much less this.

No one designed this system. No one orchestrated it. This result emerged from individuals following their own incentives, without anyone directing any of it. When Adam Smith looked at this kind of thing, he saw what he called "the invisible hand". When I look at it, I see the hand of God. I think God built us this way. That despite all of our best efforts to try control creativity by putting a person at the top of an org chart, the most effective way is to involve all of us a little bit in something bigger than the sum of the parts. I think God's plan for creation is emergent. And our plan is not. "For my thoughts are not your thoughts, neither are your ways my ways". And when I see emergent phenomena like markets or evolution, I find myself amazed at how beautiful it is.

"Poor countries are poor because..."

"...they lack secure property rights, free markets, the rule of law, and free trade" Or so says an excellent letter in the Wall Street Journal.

The problem for countries like Haiti is not a lack of investment in agriculture but the existence of a predatory public sector facilitated by international institutions like the World Bank and IMF peddling the latest fad. Poor countries are poor because they lack secure property rights, free markets, the rule of law, and free trade. Sorting that out, rather than developing a new Five Year Plan for agriculture, is what will lift their people out of poverty.

Andrew P. Morriss
H. Ross & Helen Workman Professor of Law and Business
University of Illinois

Hat Tip: Cafe Hayak.

The State of AGW Skepticism

I read a few blogs that are skeptical of anthropogenic global warming (AGW = manmade global warming). One of my favorites is Climate Skeptic. But I generally believed that the skeptics were in significant minority. I concluded this because, despite what seems like quite sound criticism, very little of it gets reported in the MSM.

However, the commentary on this article lets me start to think that skepticism is being more widely consumed than what is reported by the MSM. My reason for this is three-fold:

1. Slashdot (where this commentary is hosted) allows a subset it's users to rank the responses - called moderation. Not all users get the ability to moderate, but generally speaking the moderation system seems reflect the general opinion of the average slashdotter. Anyone that diverges from that average opinion, gets repudiated by others who override the moderation. The viewer of slashdot can set a threshold to view comments that have reached a sufficiently high moderation point. This means that the cruft (of which there is a lot) is easily filtered out. In short, I think slashdot does a decent job of tapping into the wisdom of crowds.
   
2. The average slashdotter seems to consume scientific data more than the average person. Any mistakes made in the commentary are quickly refuted, leaving only those who have useful commentary left to survive the moderation filter.
3. I had anticipated that the commentary on this issue would be highly in support of the AGW position. But the commentary that's survived the moderation seems divided amongst critics and supporters. This suggests to me that the average slashdotter is consuming the AGW criticism and finding it convincing.

Of course, I have no way of knowing whether or not the average slashdotter is closer to reality than than anyone else. I also have not tested whether the average slashdotter's opinion is closer to the average scientific opinion of AGW or if it's closer to the average layperson's opinion. These are (I think) empirical questions.

Still without that testing, I suspect that the average slashdotter is closer to average scientist's opinion than the average layperson's opinion. And this gives me hope that the average scientist is consuming the AGW criticism and the average scientific opinion may be swaying as a result.

The Wrong Question

My wife and I recently went on (and thoroughly enjoyed) our first cruise. The picture is of me standing in front of the boat. I found myself totally fascinated by how *big* the thing was. The day our cruise departed, we could see the boat from our hotel room. If you had turned it on it's side, it would have been taller than most of the tallest buildings that were in the area. And our boat (at 855 ft) is not even close to the biggest cruise ship. Not only do these things have all the accoutrements of a resort hotel, but the thing is mobile! Most of the pictures that I took, much to the surprise of my wife, were to capture the awe that I had of that situation.

One accoutrement that we really enjoyed was the attentiveness of the service staff. For long time cruisers, this is not surprising. But for my first time, the fact that our cabin steward remembered my name after my having told it to him only once, and that our wait staff were genuinely friendly was a level of service that my wife and my frugality do not usually encounter. We really liked the different animals that we'd seen on our bed that were constructed from towels.

At some point, my wife and I started to consider the tip that we should be giving to the service staff. The cruise director made some comment that was created for the purpose of encouraging bigger tips. She said that a large proportion of their earnings came from the tips, so tip generously. So we did a little math, and concluded that these people were making significantly less than minimum wage for the amount of work that they did. When we talked to them, we discovered that 14-15 hour days are normal for them. Our assistant waiter, Erix, had been on the boat for 6 months (a standard length of time). During which time, his most recent child was born, whom he had not yet met. He expressed quite a bit of excitement for the current cruise to end because he was going home to meet his child.

For my wife, this was an unforgivable horror. How could the cruise line not allow him to go home to be with his wife during the birth of their child? For me, considering the pittance of wage that they made, it seemed extreme and I was washed over with a pang of guilt. So much work was being done for us, and we were paying almost nothing for it. I confirmed with my wife that she was feeling the same thing. This feeling was strong enough that it made me seriously consider whether or not I would go on another cruise in the future.

Fortunately, I remembered economics, and I realized that we had assumed an answer to a question, but that it was the wrong question. So I asked our head waitress, Chonmila, why she did this job. Why would she submit herself to long work hours, the long stays away from home, etc. Her answer was what I expected but was a complete surprise to my wife: "Because the money is so good." Chonmila went on to say that she's lucky to have the job. The line of people waiting to get the job is really long.

We had fallen prey to viewing the world of the service staff through the lens of living in the wealthiest country in the world. We assumed that pay that was less than the U.S. minimum wage would be grossly insufficient to make ends meet. But we'd ignored two important things in coming to our initial conclusion:

1. The cost of living in the country where the person resided
2. The alternative wages available to each server on the boat

And the 2nd point is the most important. Whatever you think of the U.S. minimum wage for Americans, it's might be a huge salary in some other country. Additionally, if the only other alternative for me is making much less money, then even the minimum wage seems like a great deal.

Now to be certain, there are probably people on the boat who are likely making less money that the people we got to talk to. Perhaps they're making much less than the alternatives available at home, but they're holding out hope for a promotion in order to make much more than their alternatives. Or perhaps they're from a wealthy country, but they take the job that pays them much less because they enjoy taking a day off on a nice sunswept beach. I have no idea why all of them are there. But I'm certain that none of them are their by force. All of them are there because they believe that this is the option that best maximizes the things they want at this point in their lives, be it money, leisure, etc.

So stopping cruising is the wrong thing to do. If all of the customers felt guilty enough to stop cruising, every single person on the boat would have to go get a job that was less than this option for them. We would, in fact, be appeasing our moral sensibilities at the expense of their jobs. We'd be limiting their freedom in order to feel better about ourselves.

There's no rational reason to feel guilty about cruising. I'll gladly do it again... as soon as I save up enough money to afford it.

Update: Hankerin'

In a previous post, I said:

I think God still thinks that all of our governments are unnecessary.

I later thought the statement may have been too strong. But after re-discovering Greg Boyd, it turns out that I'm not alone in my thoughts about government. And it may, in fact, be biblical:

So far I've tried to establish that, according to the Bible, earthly governments are premised on mistrust of the rule of God (I Sam. 8). It was not part of God's original plan for humans, but rather exists as a way of God accommodating himself to human sin. I've also tried to establish that, from God's perspective, all governments are "less than nothing" (Isa 40:15-17). Since our trust is exclusively in this God, the "ruler of the nations," we should adopt this same perspective. To live under the reign of God is to live solely under the reign of God and to therefore regard earthly government as insignificant.

What I now want to argue is that all human governments are not only premised on mistrust: they are actually ruled by Satan. In Luke 4:5-7 Satan offered Jesus all the authority of the governments of the world, for he claimed to own all this authority and claimed that he could give it to whoever he wanted. What's amazing is that Jesus does not dispute his claim. He granted that Satan owned this authority and thus could give it to whoever he wanted. But he refused to put himself under Satan's rule to acquire governmental authority.

What he's describing is something called "Christian Anarchy". I had no idea such a thing existed. But, after my first skim of it, it sounds pretty good to me. (I'm not ready to totally jump on board yet. I may end up disagreeing with it as I learn more about it.)

American Poverty

I am a Crown Financial small group leader at my church. That means that I periodically lead a class where people learn God's plan for the use of money. I say that I lead the class, rather than teach it, because I'm involved mainly because I need to keep the ideas fresh in my mind. In other words, I'm re-learning these ideas every time I participate in the class. I just happen to have done it before so it's beneficial to have me lead the class.

In any case, one section in the class is on giving. And it talks about two general topics: giving to the church, and giving to the poor. And invariably I am in a minority in the class when I report that I simply can't get myself worked up about poverty in the U.S. My claim is that the poor here live like kings when compared to where real poverty exists. Here are some facts about poverty in the U.S:

The following are facts about persons defined as "poor" by the Census Bureau, taken from various gov­ernment reports:

• Forty-three percent of all poor households actu­ally own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.
  
  
• Eighty percent of poor households have air conditioning. By contrast, in 1970, only 36 percent of the entire U.S. population enjoyed air conditioning.
  
  
• Only 6 percent of poor households are over­crowded. More than two-thirds have more than two rooms per person.
  
  
• The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)
  
  
• Nearly three-quarters of poor households own a car; 31 percent own two or more cars.
  
  
• Ninety-seven percent of poor households have a color television; over half own two or more color televisions.
  
  
• Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.
  
  
• Eighty-nine percent own microwave ovens, more than half have a stereo, and more than a third have an automatic dishwasher.

As a group, America's poor are far from being chronically undernourished. The average consump­tion of protein, vitamins, and minerals is virtually the same for poor and middle-class children and, in most cases, is well above recommended norms.

Now, of course, that doesn't mean that poverty doesn't exist in the US. The above are averages. And there certainly are poeple here who fall below those averages. But compare that with developing nations. And what do you find that's different? Poverty in places like Africa and China is killing people. Here, almost no one dies of starvation. Instead the focus is on increasing access of "the poor" to middle class goods and services.

So what's the difference? Here, we've actually done something about poverty. And what have we done? We have a government that protects liberty better than anywhere else in the world. That liberty allows for innovation which drags the entire country out of poverty. Yes the rich get richer. But by every measurable account, so do the poor. The things we've done here should be the model for attacking poverty throughout the world.

But I find it increasingly difficult to find an organization who's willing to actually teach the world to fish! Now, I give to those programs even though I think they're not helping in the long run, because people's lives are at stake. I'm happy to argue about the most effective way to fix it in the long run as long as we're keeping people from dieing in the short run. But almost no one is talking about how to fix the main thing that keeps poor countries poor: bad government. For example, consider Africa, as reported by this African:



The amount that the developed nations give to Africa creates an incentive for the African governments to dedicate *MOST* of their time collecting more handouts instead of using the generosity to produce an economy that works without handouts.

I'm anxious to read Shane Claiborne's book but before I even crack it, I'm skeptical that it's really going to do much to increase focus on long-run solutions to poverty. Which is where the real gains are. I don't mean to say that we should diminish any short run solutions. I just wish that there was *some* support for long-run solutions.