May13th2008

Comencement Advice Worth Giving

Published by HispanicPundit in Academia, DayToDay, Economics and General. 2 Comments

P.J. O’Rourke, author of Eat The Rich, gives commencement advice worth giving:

1. Go out and make a bunch of money!

Here we are living in the world’s most prosperous country, surrounded by all the comforts, conveniences and security that money can provide. Yet no American political, intellectual or cultural leader ever says to young people, “Go out and make a bunch of money.” Instead, they tell you that money can’t buy happiness. Maybe, but money can rent it.

There’s nothing the matter with honest moneymaking. Wealth is not a pizza, where if I have too many slices you have to eat the Domino’s box. In a free society, with the rule of law and property rights, no one loses when someone else gets rich.

2. Don’t be an idealist!

Don’t chain yourself to a redwood tree. Instead, be a corporate lawyer and make $500,000 a year. No matter how much you cheat the IRS, you’ll still end up paying $100,000 in property, sales and excise taxes. That’s $100,000 to schools, sewers, roads, firefighters and police. You’ll be doing good for society. Does chaining yourself to a redwood tree do society $100,000 worth of good?

Idealists are also bullies. The idealist says, “I care more about the redwood trees than you do. I care so much I can’t eat. I can’t sleep. It broke up my marriage. And because I care more than you do, I’m a better person. And because I’m the better person, I have the right to boss you around.”

Get a pair of bolt cutters and liberate that tree.

Who does more for the redwoods and society anyway — the guy chained to a tree or the guy who founds the “Green Travel Redwood Tree-Hug Tour Company” and makes a million by turning redwoods into a tourist destination, a valuable resource that people will pay just to go look at?

So make your contribution by getting rich. Don’t be an idealist.

3. Get politically uninvolved!

All politics stink. Even democracy stinks. Imagine if our clothes were selected by the majority of shoppers, which would be teenage girls. I’d be standing here with my bellybutton exposed. Imagine deciding the dinner menu by family secret ballot. I’ve got three kids and three dogs in my family. We’d be eating Froot Loops and rotten meat.

But let me make a distinction between politics and politicians. Some people are under the misapprehension that all politicians stink. Impeach George W. Bush, and everything will be fine. Nab Ted Kennedy on a DUI, and the nation’s problems will be solved.

But the problem isn’t politicians — it’s politics. Politics won’t allow for the truth. And we can’t blame the politicians for that. Imagine what even a little truth would sound like on today’s campaign trail:

“No, I can’t fix public education. The problem isn’t the teachers unions or a lack of funding for salaries, vouchers or more computer equipment The problem is your kids!”

4. Forget about fairness!

We all get confused about the contradictory messages that life and politics send.

Life sends the message, “I’d better not be poor. I’d better get rich. I’d better make more money than other people.” Meanwhile, politics sends us the message, “Some people make more money than others. Some are rich while others are poor. We’d better close that ‘income disparity gap.’ It’s not fair!”

Well, I am here to advocate for unfairness. I’ve got a 10-year-old at home. She’s always saying, “That’s not fair.” When she says this, I say, “Honey, you’re cute. That’s not fair. Your family is pretty well off. That’s not fair. You were born in America. That’s not fair. Darling, you had better pray to God that things don’t start getting fair for you.” What we need is more income, even if it means a bigger income disparity gap.

Continue reading ‘Comencement Advice Worth Giving’

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May12th2008

Why The Gas Tax Matters

Published by HispanicPundit in General and ModernPolitics. 1 Comment

Greg Mankiw explains why the issue of the gas tax proposed by McCain and Billary matters:

This issue is like the canary in the coal mine: No one really cares about the canary, but its condition tells us about deeper problems that lie below.

Many economic issues (e.g., health care, corporate taxation, the trade deficit) are vastly complicated, with experts holding a variety of opinions. When candidates disagree, it simply means that each is siding with a different set of experts, and it is hard for laymen to figure out which set of experts is right. By contrast, the gas tax holiday is not nearly as complicated, and the experts speak with one voice.

Why, then, are candidates proposing the holiday? I can think of three hypotheses:

Ignorance: They don’t know that the consensus of experts is opposed.

Hubris: They know the experts are opposed, but they think they know better.

Mendacity with a dash of condescension: They know the experts are opposed, and they secretly agree, but they think they can win some votes by pulling the wool over the eyes of an ill-informed electorate.

So which of these three hypotheses is right? I don’t know, but whichever it is, it says a lot about the character of the candidates.

With this test in mind, Obama comes out ahead.

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May9th2008

The Canadian Healthcare System In Practice

Published by HispanicPundit in Economics and HealthCare. 5 Comments

Canada’s Globe writes:

More than 100 Canadian women with high-risk pregnancies have been sent to United States hospitals over the past year – in what a doctors’ group attributes to the lack of a national birthing plan.

The problem has peaked, with British Columbia and Ontario each sending a record number of women to U.S. neonatal intensive care units (NICUs). Specifically, 80 B.C. women have been sent to U.S. hospitals since April 1, 2007; in Ontario, 28 have been sent since January of 2007, according to figures from the respective health ministries.

André Lalonde, executive vice-president of the Society of Obstetricians and Gynaecologists of Canada, said the problem is due to bed closings that took place almost a decade ago, the absence of a national birthing initiative and too few staff.

“Neonatologists are very stretched right now,” Dr. Lalonde said in a telephone interview from Ottawa. “We’re so stretched, it’s kind of dangerous.”

…and this is the healthcare system some of our politicians want to move closer towards?

The full article can be found here. Link via Perry, who has more here.

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May8th2008

The Problem With Unions

Published by HispanicPundit in Economics, Education, Unions and Vouchers. 3 Comments

No, I’m not talking about the unions bringing down what used to be the biggest company in the United States, GM, but about how unions harm our public education system:

A $13.2 million, five-year grant from the National Math and Science Initiative, designed to add new Advanced Placement teachers, courses and exams for thousands of Washington high school students, has been scrubbed.

The reasons?

The state’s rule against merit pay for teachers, and top-down inflexibility, said discouraged Southwest Washington program leaders who broke the news Friday.

Victims include Evergreen and Union high schools in east Vancouver. They were among seven statewide that stood to win an average of $114,000 for AP teacher training and courses for the 2008-09 school year.

Despite weeks of talks, no way was found around teachers union collective bargaining rules to meet the rigid guidelines of the grant organization.

I’ve described the economics of this in detail before here, “Because of unions, our public education system pays science teachers the same as english teachers, and given that science majors are in great demand in the private sector, this has a downward push on able science teachers.” In other words, you can blame our abysmal math and science public education directly on the teachers unions. Joanne Jacobs has more.

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May7th2008

Warren Buffett On The Financial Markets

Published by HispanicPundit in Economics and ModernPolitics. 0 Comments

The oracle of Omaha, in a recent Fortune Magazine article, comments:

Do you think the U.S. financial markets are losing their competitive edge? And what’s the right balance between confidence-inspiring standards and …

… between regulation and the Wild West? Well, I don’t think we’re losing our edge. I mean, there are costs to Sarbanes-Oxley, some of which are wasted. But they’re not huge relative to the $20 trillion in total market value. I think we’ve got fabulous capital markets in this country, and they get screwed up often enough to make them even more fabulous. I mean, you don’t want a capital market that functions perfectly if you’re in my business. People continue to do foolish things no matter what the regulation is, and they always will. There are significant limits to what regulation can accomplish. As a dramatic illustration, take two of the biggest accounting disasters in the past ten years: Freddie Mac and Fannie Mae. We’re talking billions and billions of dollars of misstatements at both places.

Now, these are two incredibly important institutions. I mean, they accounted for over 40% of the mortgage flow a few years back. Right now I think they’re up to 70%. They’re quasi-governmental in nature. So the government set up an organization called OFHEO. I’m not sure what all the letters stand for. [Note to Warren: They stand for Office of Federal Housing Enterprise Oversight.] But if you go to OFHEO’s website, you’ll find that its purpose was to just watch over these two companies. OFHEO had 200 employees. Their job was simply to look at two companies and say, “Are these guys behaving like they’re supposed to?” And of course what happened were two of the greatest accounting misstatements in history while these 200 people had their jobs. It’s incredible. I mean, two for two!

It’s very, very, very hard to regulate people. If I were appointed a new regulator - if you gave me 100 of the smartest people you can imagine to work for me, and every day I got the positions from the biggest institutions, all their derivative positions, all their stock positions and currency positions, I wouldn’t be able to tell you how they were doing. It’s very, very hard to regulate when you get into very complex instruments where you’ve got hundreds of counterparties. The counterparty behavior and risk was a big part of why the Treasury and the Fed felt that they had to move in over a weekend at Bear Stearns. And I think they were right to do it, incidentally. Nobody knew what would be unleashed when you had thousands of counterparties with, I read someplace, contracts with a $14 trillion notional value. Those people would have tried to unwind all those contracts if there had been a bankruptcy. What that would have done to the markets, what that would have done to other counterparties in turn - it gets very, very complicated. So regulating is an important part of the system. The efficacy of it is really tough.

…

Your OFHEO example implies you’re not too optimistic about regulation.

Finance has gotten so complex, with so much interdependency. I argued with Alan Greenspan some about this at [Washington Post chairman] Don Graham’s dinner. He would say that you’ve spread risk throughout the world by all these instruments, and now you didn’t have it all concentrated in your banks. But what you’ve done is you’ve interconnected the solvency of institutions to a degree that probably nobody anticipated. And it’s very hard to evaluate. If Bear Stearns had not had a derivatives book, my guess is the Fed wouldn’t have had to do what it did.

The interview can be found here.

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May6th2008

Quote Of The Day

Published by HispanicPundit in Environment. 8 Comments

“Politicians want lower gas and oil prices but don’t want more production to increase supply. They want oil “independence” but they’ve declared off limits most of the big sources of domestic oil that could replace foreign imports. They want Americans to use less oil to reduce greenhouse gases but they protest higher oil prices that reduce demand. They want more oil company investment but they want to confiscate the profits from that investment. And these folks want to be President?”– “Windfall Profits for Dummies“, WSJ

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May2nd2008

In Praise Of Obama’s Economics

Published by HispanicPundit in Economics and ModernPolitics. 8 Comments

The New York Times reports:

Senator Hillary Rodham Clinton lined up with Senator John McCain, the presumptive Republican nominee for president, in endorsing a plan to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for the summer travel season. But Senator Barack Obama, Mrs. Clinton’s Democratic rival, spoke out firmly against the proposal, saying it would save consumers little and do nothing to curtail oil consumption and imports.

The price of gasoline is set by supply and demand, meaning that if you remove taxes, the price will (atleast in the short term) still rise to the same level - with Iran, Saudi Arabia, and other big oil producers benefiting from the lost tax revenue. For more on the economics of this, see here. Greg Mankiw has more. Paul Krugman has more.

Update: Megan Mcardle has more and more. Kling has a simpler explanation.

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May1st2008

The Cost Of University Subsidies

Published by HispanicPundit in Education, General and University. 0 Comments

Thomas Sowell explains:

Those who want the government to provide subsidies to help meet the high cost of college seem not to consider whether government subsidies might have contributed to the high cost of college in the first place.

In any kind of economic transaction, it seldom makes sense to charge prices so high that very few people can afford to pay them. But, with the government ready to step in and help whenever tuition is “unaffordable,” why not charge more than the traffic will bear and bring in Uncle Sam to make up the difference?

The president of a small college once told me that, if he charged tuition that was affordable, even an institution the size of his would lose millions of dollars of government money every year.

In a normal market situation, each competing enterprise has an incentive to lower prices if that would attract business away from competitors and increase its profits.

Unfortunately, the academic world is not a normal market situation.

Some of the ways of cutting costs that a business might use are not available to a college or university because of restrictions by the accrediting agencies and the American Association of University Professors.

…

The criteria used by most accrediting agencies are based on inputs — essentially spending — rather than results for students.

Competition among academic institutions therefore seldom takes the form of lowering their costs of operation, in order to lower tuition. The incentives are all the other way.

Competition often takes the form of offering more upscale amenities — posh lounges, bowling alleys, wi-fi, finer dorms.

None of this means better education. But, so long as the customers keep buying it — with government help — the colleges will keep selling it.

The full article can be found here.

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Apr30th2008

The Argument Against Regulations

Published by HispanicPundit in Economics, Hispanics (Minority Issues), Myths, Personal and Poverty. 0 Comments

Bacon-wrapped hot dogs are common in downtown Los Angeles and especially in Mexican border cities. Tijuana, for example, has a vendor at almost every corner. Well now, apparently, Los Angeles is trying to ban the cart sale of these very delicious bacon-wrapped hot dogs.

As a huge fan of bacon-wrapped hot dogs (I’ve eaten more than ten in one TJ night before), I couldn’t pass up the opportunity to use this recent regulation as an argument against regulations in general (though not all regulations). It is a perfect illustration of the standard argument against regulations: reduces consumers choices, benefits the well-off and established sellers, and harms competition. All, of course, in the name of saving the consumer from himself…government paternalism at its finest.

However, those of us that eat bacon-wrapped hot dogs in much less regulated settings (Mexico, for example) know who these regulations really benefit (not the consumer!).

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Apr29th2008

Quote Of The Day

Published by HispanicPundit in Economics, FreeTrade, General, Hispanics (Minority Issues) and LatinAmerica. 2 Comments

“Free trade with Colombia can’t have anything to do with loss of US jobs: Colombia’s exports already enter the US duty-free. Rather, the Free Trade Agreement would reduce remaining Colombian barriers to imports from the US….It is hard to escape the conclusion that the only reason Congressmen are opposing the Colombian free trade agreement is to pander to ill-informed American public opinon. ” –Jeff Frankel, professor of economics at Harvard University

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Apr28th2008

Why The Age Divide Between Hillary And Obama Supporters?

Published by HispanicPundit in General and ModernPolitics. 1 Comment

David Friedman, son of Milton Friedman, gives us his opinion:

I have a different theory, one that also helps explain the mirror image problem—the reason so many people dislike Hilary. To me, at least, she comes across as bossy, cautious, conservative, someone who knows what is good for other people and will firmly make them do it, whether or not they want to. The feel, the gestalt, fits my description above of the old. So it isn’t surprising if she appeals to many older people.

Obama appeals to young people. Part of the reason may be the impression that he is willing to take risks, to bet on luck and human goodness—the sort of political risks that might heal some of the rifts in modern American society and, in the process, establish a long term Democratic majority. The sort of risks that, if something goes seriously wrong, might snatch electoral defeat from the jaws of victory in what should be a Democratic year.

The full post can be found here.

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Apr25th2008

Quote Of The Day

Published by HispanicPundit in Economics, ModernPolitics and Myths. 6 Comments

“What they are saying is that in zip codes where lots of folks were turned down in 1996, you see lenders approving many more loans, and at lower risk spreads in 2001 through 2005, fueling the home price bubble. The lower risk spreads tells me that this was not predatory lending, but the opposite…It sounds like what they are talking [about] is that lenders charged exorbitant interest rates to hapless borrowers. In fact, lenders were guilty of charging borrowers too little for loans, as well as approving too many unqualified borrowers. If you think that alert regulators would have cracked down on lenders for providing too many home ownership opportunities to Americans, especially minorities, then you believe in a different political environment than what I remember.” — Arnold Kling, explaining a recent study by two University Of Chicago economists on the housing bubble

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Apr24th2008

Quote Of The Day

Published by HispanicPundit in General and ModernPolitics. 0 Comments

“John McCain is now aggressively exploiting loopholes in . . . wait for it . . . McCain-Feingold. Presumably this is all right because as we know, McCain is not like those other nasty politicians who take money as part of a corrupt quid-pro-quo. McCain is taking money in order to fight the good fight, which makes it okay to raise the funds By Any Means Necessary. I was against McCain-Feingold, so I normally don’t get particularly interested in violations thereof. But as far as I’m concerned, politicians who voted for McCain-Feingold are the only people who should be bound by its silly and counterproductive rules. And Messrs. McCain and Feingold should be straightjacketed with them.” –Megan McArdle

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Apr23rd2008

Quote Of The Day

Published by HispanicPundit in Economics, Education and University. 0 Comments

“I’ve been asking myself that about student loans for quite some time. It’s still not clear to me how much, if at all, they benefit the students they are supposed to help. It seems at least equally plausible that they’re simply feeding the tuition inflation which makes it impossible for a normal kid to work his way through college–that is, that all the benefits of the student loans are not being appropriated by the students, but by the faculty and administration, and the non-borrowing students, who get to enjoy the shiny new facilities that tuition inflation helps pay for.” — Megan McArdle

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Apr22nd2008

Quote Of The Day

Published by HispanicPundit in Education and Hispanics (Minority Issues). 1 Comment

“After adjusting for multiple sources of bias and differences in sample construction, we establish that (1) the U.S. high school graduation rate peaked at around 80 percent in the late 1960s and then declined by 4-5 percentage points; (2) the actual high school graduation rate is substantially lower than the 88 percent estimate of the status completion rate issued by the NCIS [National Center for Educational Statistics]; (3) about 65 percent of blacks and Hispanics leave school with a high school diploma, and minority graduation rates are still substantially below the rates for non-Hispanic whites. In fact, we find no evidence of convergence in minority-majority graduation rates over the past 35 years….A significant portion of the convergence reported in the official statistics is due to black males obtaining GED credentials in prison.” — James J. Heckman and Paul A. LaFontaine, via Greg Mankiw

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Apr21st2008

Quote Of The Day

Published by HispanicPundit in (modern day) Liberalism, Academia, Economics, Education, General, University and Wal-Mart. 1 Comment

“I have never quite encountered an intrinsically less fair institution than the university, at least in liberal terms of egalitarianism and respect for the underclass. A full professor may damn Wal-Mart, but Wal-Mart would never get away with the two-tier system that the university in built upon: the PhD part-timer has no job security, sometimes no benefits, no privileges, and earns usually about 25% of the compensation that is paid to the full professor to teach the identical class. When one factors in the use of graduate assistants not merely to TA courses, but to teach them in their entirety, then you can appreciate the level of exploitation that the university is built on. And add to the notion that tuition has climbed higher than the annual rate of inflation, and the picture is complete of an institution that is entirely immune from public scrutiny.” –Victor Davis Hanson

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