Archive for the 'Personal' Category

The Scamming Beggar

I have a long standing rule to NEVER EVER give money to bums. No matter what the circumstances. I even look down on people who do. They rub me as purely emotional acts with not even one second of real thought. I do this for two reasons: one experience, the other logical. Growing up in Compton, I was approached by what we called cluck-heads daily. Crack addicts who would do anything, and I mean anything, for a $1. They would give you the most extravagant reason why that dollar was absolutely necessary. Then, after a moment of weakness, you would see them smoking that dollar – digging themselves further into the crack addiction. After years and years of this, I have developed quite a thick skin from beggars.

The logical reason has to do with the fact that it is very difficult to separate the true needy beggar from the scammer.  When confronted for a donation, with such limited information, there really is no statistically significant way to know if the bum is going to use the donation for something useful, or simply another hit of drugs. Much more beneficial is to save the donation and send it to a charity devoted to helping the truly needy. They have the means of separating the sincere bum ready to change their life, from the one who just wants another hit. With such noisy information, it’s much more logical to withhold your money and choose an efficient charity of your choice.

With that said, I was touched by the news article showing a New York Police officer giving a pair of winter boots to a shoeless bum. I thought, maybe in that situation that is the best thing to do, as the bum currently needs shoes, else his feet will freeze. It’s an immediate, obvious need that should be fulfilled. Sending money to a charity is not going to cut it, as by then the bum could have lost his feet to frost bite. Anyway, I didn’t think much more of it until later when I saw the story on CNN.

While reading the article, still torn between feelings of admiration and disapproval, I came across this interesting section:

There were some who considered the officer a victim, taken in by another scam.

“This guy is only barefoot as a begging strategy,” wrote David Levy. “I’ve been seeing him around midtown for years. I’ve even witnessed someone buy him slippers in a freezing day which he promptly put in his shopping cart.”

“Clever stunt! The (man) is ‘parked’ at the entrance of a shoe shop. He got like 10 pairs that day,” commented Louis Zehmke.

Which cured my short lapse of judgement.

Beverly Hills As The USA

Imagine that you lived in Beverly Hills, among the richest people in the United States. Some of your friends were the kids of executives at Fortune 500 companies. Others were the kids of famous Doctors, Lawyers, and some were the kids of hedge fund managers. While all relatively rich, assume there was quite a range of wealth from really rich, to filthy rich.

Further assume, that one day, a bleeding heart liberal starts feeling bad for the really rich. Her complaints are along the lines of: “The really rich can’t eat out at the $500/plate restaurants, they have to settle for the $100/plate restaurants, or, god forbid, make sandwiches at home”. Her complaints continue: “The really rich can’t afford the Lamborghini’s or Ferrari’s, they have to get by with the – GASP! – BMW’s and Mercedes Benz’s”. Worst yet, “the really rich actually have to live in mansions with no ocean view, or golf courses”. Most heartbreaking of all, “the really rich have to actually prioritize their lifestyle and set a budget. They can’t go to Europe on a moments notice, they can’t eat out everyday”.

Now further assume that said bleeding heart liberal decided to set up an “alleviate suffering” fund that took away from the filthy rich to give to the really rich. Such a fund would help equalize Beverly Hills and “bring people together”. But instead of making this fund voluntary, the bleeding heart liberal wanted to enforce this through the city. She wanted to make it a city tax that merely takes from the filthy rich and gives to the really rich. Her arguments, again, are to “alleviate suffering”.

What would your reaction be if you were suddenly transplanted to that society and debate? Would you support the “Beverly Hills tax”? I am not one of those that believes there are absolutely no circumstances that justify forcibly taking the wages of one to give to another. But such circumstances have to be met with atleast reasonable justification. Yet simply moving money around amongst the worlds richest people does not seem to me like an acceptable justification.

Such is the image that comes to mind whenever I have a discussion with a liberal about increasing redistribution via taxes to help the USA “poor”.  It’s the image my dad and uncles, who immigrated to the United States in their twenties from ranch life in the poorest parts of Mexico, gave me. It is certainly how they viewed me and my cousins growing up – no matter what our circumstances, be it growing up in Compton (as I did), living off of the income of mechanics, gardeners, or window tinters – we were all blessed beyond their wildest dreams. Where they had to eat tortillas off the dirt floor, work in fields in the scorching heat where there were no “sick days” or “vacation time”, even the McDonalds cashier can seem privileged. And this view isn’t far from reality. Even the “poor” in the United States are among the richest in the world (see here and here).

The Institute For Justice Shows Results

One of my favorite organizations is the Institute For Justice. It is an extremely successful organization that fights against the powers of the government in areas where there are little other organizations doing so. For example, there  is the licensing fight – an especially discriminatory and arbitrary arm of the government that gets little attention – where the District of Columbia government threatened hairbraider Pamela Ferrell and her husband Talib-Din Uqdah with fines and jail time for practicing their craft without an unnecessary government license. The license would have been expensive, and worse, unnecessary, as the barbers license had no class for hair braiding – a predominantly African American practice. The Institute for Justice took the case and won! See more here.

[youtube:http://www.youtube.com/watch?v=2tjTheDqQrw&feature=youtu.be]

Then there is the case of the El Paso governments war on taco trucks. Prodded by restaurants afraid of the competition, the El Paso government tried to ban taco trucks in the area. So the Institute for Justice stepped in.

[youtube:http://www.youtube.com/watch?v=q1YlXcORhUs&feature=player_embedded]

It also fought against the state of Arizona in its attempt to regulate eyebrow threading.

[youtube:http://www.youtube.com/watch?v=MpsqEB5q7TA&feature=player_embedded]

Then there is the case of Atlanta’s war against street vendors.

[youtube:http://www.youtube.com/watch?v=1XDLN14yDUg]

But a case that has hit close to home is the Institute for Justice’s recent victory against the city of National City on eminent domain. The Liberator today explains:

The Institute for Justice has obtained a victory in the long running dispute between National City and the Community Youth Athletic Center, which was designated as blighted in order to allow seizure of the gym by the city so that an influential developer can build luxury condos…National City took the route of declaring the area “blighted” by paying a private consultant to produce a report allegedly proving the blight. However, they then refused to provide the details of the report.“. . .the Court also held that when the government retains a private consultant to perform government functions—in this case, documenting the existence of alleged “blight” in National City—documents that the private consultant produces are public records subject to disclosure under the California Public Records Act. The Court also set a clear standard for what government agencies have to do in searching the records of their private consultants in response to a Public Records Act request.”

National City, for readers unfamiliar with the area, is one of San Diego’s low income neighborhood. The Barragan family have run the gym primarily as an alternative outlet for gangmembers who want a way out of the gang. The gym has been successful and the residents of National City hold the gym and the family in high regard (to read a moving article on how a 2006 tragedy to the Barragan family was dealt with by the community, see here).   But this didn’t matter to the greedy politicians who cared more about money than doing whats right. Luckily for the Barragan family and the community of National City, the Institute for Justice stepped in.

[youtube:http://www.youtube.com/watch?v=8pB_TmpSjJI]

The Institute for Justice doesn’t stop there, it also helps fight for school choice, property rights, and other cases involving economic liberty.There are three things that make the Institute for Justice unique: first, it helps those who need help the most. Mostly the poor and recent immigrants. How could a poor immigrant from Africa trying to make a living hair braiding have paid for a lawyer on her own? Or the taco truck owners? Or the Barragan family in the low income neighborhood of National City? Second, it targets laws that primarily harm the poor and minority. Third, it has a strong winning record. Few other organizations could say the same.

Phoenix Area Bloggers?

I’ll be in the Phoenix area tomorrow and Tuesday night through Thursday morning of next week…if any bloggers would like to meet up, send me a personal email.

The Leftist View Of The World

Readers of my blog, especially those who comment frequently, know my good friend Jon. He’s a recent convert to the left and believes in it passionately. A common theme of his world view, and those on the left in general, is the tug of war between the rich and the poor. The powerful and the non-powerful. The politically connected and the those with no political power. Basically the heart of leftist’s worldview revolves around this paradigm.

Every political fight, every economic decision and every current event is filtered through this prism.  Since I consider Jon a smart, honest and sincere person, I have been trying to understand how he could be so enthralled by such a political philosophy. I try to read, watch and listen to everything he asks me to. And a big part of that is Chomsky and his writings. So I go over to Chomsky’s site and this is the latest article of his, on the Winsconsin union political fight:

As working people won basic rights in the 1930s, business leaders warned of “the hazard facing industrialists in the rising political power of the masses,” and called for urgent measures to beat back the threat, according to scholar Alex Carey in “Taking the Risk Out of Democracy.” They understood as well as Mubarak did that unions are a leading force in advancing rights and democracy. In the U.S., unions are the primary counterforce to corporate tyranny.

By now, U.S. private-sector unions have been severely weakened. Public-sector unions have recently come under sharp attack from right-wing opponents who cynically exploit the economic crisis caused primarily by the finance industry and its associates in government.

Popular anger must be diverted from the agents of the financial crisis, who are profiting from it; for example, Goldman Sachs, “on track to pay out $17.5 billion in compensation for last year,” the business press reports, with CEO Lloyd Blankfein receiving a $12.6 million bonus while his base salary more than triples to $2 million.

Instead, propaganda must blame teachers and other public-sector workers with their fat salaries and exorbitant pensions — all a fabrication, on a model that is all too familiar. To Wisconsin’s Gov. Scott Walker, to other Republicans and many Democrats, the slogan is that austerity must be shared — with some notable exceptions.

The propaganda has been fairly effective. Walker can count on at least a large minority to support his brazen effort to destroy the unions. Invoking the deficit as an excuse is pure farce.

In different ways, the fate of democracy is at stake in Madison, Wis., no less than it is in Tahrir Square.

Lost on Chomsky, and which bears no mention in this article or other writings, is an investigation into whether or not the claims of opponents of teachers unions are actually true. This is typical Chomsky. He doesn’t care about declared motives. There has to be other reasons, and those reasons have to fit into a powerful vs nonpower paradigm. Anything else is not even worth investigating.

Ignored by Chomsky then is the long trail of writings and arguments that opponents of teachers unions have been making. Opponents of teachers unions make the claim (among others) that the teachers union stifles reform and entrenches a low quality public education system. One that ultimately harms the poor most, especially minorities.

The proof of this is so one sided that even traditional supporters of unions have a hard time making a compelling case in their defense and instead resort to distortions and misleading claims (see here for an example). But where is Chomsky on this issue? Nowhere. He is so blinded by his worldview, that anything contrary to union power is ipso facto a power grab against the ‘poor and powerless’ in favor of the ‘rich and powerful’.

I bet you can read all of Chomsky’s material, all of his writings, videos and historical accounts and you will not find anything on say, the unions role in entrenching racism (pdf), or vast corruption throughout history, or more currently, the teachers unions negative affect on public education – his is a simple storyline, unions and ‘workers’ are good, rich people are evil.

This is typical of Chomsky and leftist in general. Their simplistic paradigm is so ingrained in them that they often cannot see the forest for the trees, and miss the fact that it is the students and poor minorities in particular, who are the powerless in need of defending, and it is the teachers unions and their political allies that are the powerful.

Famous Economists Time

Years ago, I was given the opportunity to meet Milton Friedman in person. It had always been a dream of mine and a picture with him would have been something I would have cherished forever. There was only one problem: it would have cost me $10,000. Even at that price, I still considered it. When he died, a year or so later, I look back on the lost opportunity and second guess myself. Maybe I should have just paid it!

Some of my (not so very economically inclined) readers might balk at the idea of an economist charging for his time. But that never really bothered me. Some of these people are so famous and so sought after that if they’d give their time away free they wouldn’t have any time left for anything else. And more importantly, I would have less of a chance of ever actually meeting them. Time is money, and everybody has priorities. If you want your place above certain priorities, it should be mutually beneficial.

In fact, I believe in this so much that I have often suggested it to other economists. For example, in a discussion with a knowledgeable opponent, you may reach a point where you don’t know what to say next. Does the data fit your intuition? Are his points stronger than yours? What does the “mainstream” economist believe? But while you may not have the answer, you are certain someone else would. Only problem is: how do you get it from them? Sure, an email sometimes works. But oftentimes it doesn’t. In the past, I’ve suggested to the more famous bloggers that they should have an “hourly rate” posted somewhere on their blog. A means that guarantees access to them. For example, I would easily pay $100 for an hour of back and forth discussions with, say Scott Sumners. Or Tyler Cowen. Or especially Bryan Caplan. Even Paul Krugman, Matthew Yglesias, and Ezra Klein would be on my list (sometimes you want to know what the real, thought out, opposing view is). But alas, they don’t have that option – so most emails go unmet.

Lucky for us though, many famous free-market  economists have already thought about this idea and made it public. Bloomberg reports:

Becker, a University of Chicago professor who won the Nobel Prize in Economics in 1992, will be selling his time on ExpertInsight.com, a website offering one-to-one video chats with leaders, which opened yesterday. He’ll join people such as economics professors Jeffrey Miron of Harvard University and Laurence Kotlikoff of Boston University, “Freakonomics” co- authors Steven Levitt and Stephen Dubner, poker celebrities Patrik Antonius and Tom Dwan, and tennis coach Jeff Salzenstein.

“The idea is to bring this coaching model to everything,” said Brandon Adams, Expert Insight’s 32-year-old founder and chief executive officer.

I think this is a great idea and hope it becomes the norm. This is a great step in the path towards a smarter and more knowledgeable citizenry. I’m excited!

The Left vs Right Economic Model (aka Europe vs United States model)

My good friend Jon asked an important question: why not prefer the European economic model vs the United States economic model? I didn’t want to bog down his comments section with a long response, so I thought I’d post my longer response here.

Basically, there are two paradigms, two “visions” of an economy. The first, is generally considered left (or European): an economy with a large safety net, strong unions, and generally high taxes. The second, and my preferred, is considered right (or USA model): an economy with a large percentage of immigration, weak unions, weak safety net, and generally low taxes. The leftist economy tends to grow slowly. The rightwing economy tends to grow in a boom and bust way, with higher average growth than the leftist economy.So which one is better? Well that depends on personal preferences. The answer will be different for each person, depending on their personality (It would be like asking someone if they should join a union – it depends). If you are ambitious, entrepreneur minded, and generally a high achiever, you would prefer the United States model economy, where it’s easier to strike it rich (and, similarly, you would tend to oppose union membership). If you are someone who, for example, prefers small gains over large risks, and doesn’t have any ambitions to be CEO one day, you just want a steady pay with little growth – then the leftist economy is better for you (and, similarly, you would probably tend to favor union membership).

It’s kinda like asking someone should you invest their money in stocks or bonds? There is no right answer…it depends on the personality. Stocks give you better long term gains, but they are a lot riskier and volatile. Bonds are safer, but you sacrifice long term growth. It depends on the person (and age group – which is why the young around the world tend to prefer the USA, while the older Canada, see here).

Here is the important thing you have to notice about these two economies: they are mutually exclusive (please, click on the link and read the blog, it’s very pertinent to this discussion ). You can’t have a large safety net, for example, and a large immigration class. And you don’t need high taxes if you don’t have a large safety net. And you don’t get high growth with high taxes. etc. It’s all a domino.

So for example, in the United States, you have a dynamic corporate sector with one company rising to prominence in one decade, and going bankrupt in the next decade. Whereas in Europe, it’s usually the same companies, decade after decade (see here and here). Again, the United States model gives you boom and bust, with more growth, while the European model gives you steady growth, with less long term growth.

Or take immigration. Germany, for example, is not very friendly to the immigrant Turks (only recently, beginning to change, see here). And Germany – like the Scandinavian countries – is generally homogeneous (White).

More importantly,  these dynamics feed off of each other. Because safety nets are indeed zero sum – your welfare gain really is my loss – large safety nets foster an ant-immigrant culture (it’s the same reason that during a recession, anti-immigration sentiment increases – the people feel that in a time of scarce jobs, immigrants are “stealing” their job).

Matthew Yglesias, who lived in Europe, writes on the cultural difference between Europe and the United States:

There’s often a kind of conventional idea on the left that the United States is an unusually racist society. And I think there’s also often a kind of image of Europe as a place where more of the progressive agenda has been achieved than in the USA. But I think that you’ll find if you look at Europe through the eyes of the liberal agenda that while the German left has certainly been more successful than the American left at securing universal health care, it’s been much less successful at promoting a tolerant, integrated, multicultural society. And allowing for the errors implicit in making any kind of sweeping generalization, I’d say that’s pretty generally the case across Europe. …

In the US, in other words, racial problems have been more salient for a long time since we’ve been a racially diverse society for a long time. But by the same token, for all the problems we have with us today, we’ve made enormous progress over the years. Racial and ethnic tensions are a common problem in the world, and the United States manages diversity pretty well in comparison with other places (not just in Europe) even if we fall short in some absolute terms. Just look at Barack Obama. I think we’ll be waiting a while yet before someone of non-European ancestry is elected head of government in a European country. Denmark has some great public policy ideas, but it’s also kind of made itself into the gated community of nations in a way I don’t find particularly appealing.

Just look at this youtube video on Black soccer players to see how different race relations are in Europe compared to the United States.

The United States is much more tolerant of immigrants not because we are inherently different than Europeans, but precisely because of our smaller safety nets. Because immigrants that come here are largely excluded from our safety nets, we don’t feel that they come to steal our piece of the pie – instead they are viewed as coming here to enlarge the pie for everyone (unless of course, you are a poor Black person – in that case you do feel threatened from immigration, and rightly so – which helps explain the high anti-immigration sentiment in the poor Black communities) .

That is not to say that the European economic model is bad for everyone. I agree that some people probably are better off under the European model. If you are a White, not very ambitious member of the middle to lower upper class (think liberal arts university professors, or White union members), the European model probably is better for you than the United States model.

But liberals often speak as if all that mattered were White union members (another example of this is in the minimum wage debate), but immigrants and minorities count as well and so do the non union members (White or not) and the very poor and even the very rich. And so the question is: are they better off under the European economic model?  And on that I would say no. In addition to the exceptions mentioned above, the unemployment rate is significantly higher in European than in the United States (and especially higher if you have the bad luck of being a minority in Europe). And strong welfare nets notwithstanding, having a job counts for a lot (Highly recommended article here). It’s a source of self respect, pride and happiness. Furthermore, the unhappiness associated with being unemployed swamps out any happiness gains from the slightly higher job security gains of others.

And don’t say that ‘a couple percentage points of unemployment is worth it’, since even a couple points of unemployment could have a drastic affect on happiness levels. An economist explains: ‘Think about how hard it was to find a job back in January 2009 when our unemployment rate was 7.2%. The plight of the job-seeker wasn’t 30% worse than it was in May, 2008,  when the unemployment rate was 5.5%.  It was probably more like two or three times worse. Now imagine turning 7.2% unemployment into a way of  life.  It’s pretty awful to imagine, isn’t it?  Well, you don’t just  have to imagine it, because in France and Germany, 7.2% is normal.  The horror!”

So to summarize: the European economic model is better for low ambition White union prone citizens. It’s worse for immigrants and minorities of all  stripes. White non-union members. The United States model is better for those at the bottom and top of the economic ladder, and those who prefer risk and growth over stability.

In Defense Of For-Profit Colleges

One of the biggest blind spots of policymakers and pundits is the inability to take target market into account. For example, you can’t just compare the wages of employees at Hilton Hotels vs Motel 6’s and conclude that Hilton Hotels are superior because the employees are paid more. You have to take the companies vastly different target market into account. Motel 6’s target a much poorer and cost sensitive segment of the economy, and so it’s understandable that they pay their employees less. In addition, Motel 6’s also hire from a lower socioeconomic level than does Hilton Hotels, so again you’d expect their pay to be lower (in exchange for lower productivity, ie education, ability to speak English, etc). What seemed like a bad wrap for the poor without taking target market into account, turns out to be an overall net gain when it’s included (who doubts that from the poor’s perspective, Motel 6’s are better than Hilton hotels?).

The same blind spot is apparent in the Wal-Mart vs union run grocery stores debate. Wal-Mart caters to a lower socioeconomic class, by hiring and providing cheaper products to those at the lower end of the income distribution. So it makes sense that their employees are paid less than their union run grocery stores counterparts, who cater to a higher socioeconomic class. Seen in that aspect, Wal-Mart is no different than the Motel 6. And since it’s our ghettos and poor areas that are plagued by unemployment, empty lots and general lack of opportunities, the Wal-Mart model is a superior model for the ghettos and poor areas.

The same blind spot resurfaces when talking about for-profit colleges. When comparing for-profit colleges to non-profits, critics will primarily focus on graduation rates and default rates, taking nothing else into account. But what happens when you take target market into account?

For-profit colleges tend to cater primarily to the marginalized segments of society: working mothers, high school drop outs, older people trying to change careers, and people who are in a rush to graduate. In other words, the riskier segment of society. The very same people that the non-profit education system often ignores.

Seen from this perspective, it’s expected that for-profit schools will be worse than non-profits when it comes to student debt. It’s expected because they cater to riskier students, so they are going to have a larger variance of outcome – whether that is graduation rates, or student loan repayment. But catering to a riskier segment of the population is not something that should be punished, it should be encouraged. Lets remember, for-profits are actually doing what we berate businesses to do – serve those at the bottom, often forgotten by others. They are a lot better at helping students who may have messed up through high school and want to change their lives around.

And this is without even mentioning all of the other benefits that come from for-profit colleges vs traditional colleges. For example, a significantly shorter time to graduation (averaging 3 years, when non-profits are getting closer to 6 years – a huge gain in opportunity cost), more income oriented majors (even the worst of the for-profit colleges will never have such time wasted majors like Chicano Studies, for example) and a clear path towards graduation. All benefits that primarily help the marginalized segments of society.

In the interest of full disclosure, I should mention that I graduated from a for-profit institution. I got my BS in 3 years. Before that I was a high school drop out (in 10th grade) with about a 2.0 GPA. I had only a GED and no community college credits. I was also the child of a poor single mother, living in Compton, Ca. The group of friends I currently run with all have similar stories – all of us grew up poor, are minorities and graduated from the same for-profit college. None of us received any grants (my mom refused to fill out the FAFSA – she always hated anybody knowing how much she made and was convinced I would find out). More importantly, in the for-profit college I went to there were others – not a majority, but certainly a strong minority – in the same situation I grew up in. It’s the privileged kids that were the exception at the for-profit college, not the the poor minorities.

All of us, also, are currently successful engineers. We all make around 6 figures a year or more. All of us with just the bachelors degree from the for-profit college (I have some undergraduate and graduate work at UCSD, but never completed a full degree there). Without a doubt, graduating from that for-profit college was the single best thing I could have done for my life. Without it, my life would have been very different.

Update: Matt Rognlie makes a similar point here.

Two Arguments In Favor Of Immigration