I am all for reducing drug use, especially among the the young, but the government does not have the tools. Government is force, but persuasion is what is needed. The use of force against the drug suppliers has wreaked havoc on some Latin American countries. Due mostly to the war on drugs, the level of violence in Mexico and Honduras is almost as high as in Syria. See here.
Pharmaceuticals are more costly than they need to be as a result of the war on drugs. Many patients suffer needlessly because MD's are reluctant to prescribe pain killers. See here.
A past coworker of mine shot and killed a man after a bad drug deal. He was a fine young man, but he was addicted to crack. When drugs are illegal, dealers can't report theft, and customers can't report scams. This causes people to take the law into their own hands. When people take the law into their own hands, the law takes them to jail.
Thursday, October 1, 2015
Wednesday, September 30, 2015
On the Necessity of the Welfare State
Scott Sumner has an interesting post on Libertarianism.
Most USAers assume that the welfare state is more needed and more effective than it really is, and that a huge amount of charity (in fact more than we could ever come close to getting) would be needed to replace it. They may be right that charity would never be enough but I think charity would be much closer to being sufficient than people think.
When progressives assume that the those lowest income cannot affords something they often forget to factor in reduced demand lowering the price.
One example is that in a market for housing with restrictions on building (adding housing units) which we have in most counties, and where housing is subsidized, if you remove the subsidy the landlords will take some of the hit probably most of the hit.
Another example is that as far as I can tell, even adjusted for inflation, our USA schools spent 3x as much as in the 1960's and output is not much improved. Now I am sure that the experience for the student is better now but I would bet that you could cut spending hugely and get pretty much the same output. And if parents payed directly you could possibly get better output due to motivation and for some other plausible reasons. See the link in Scott's post on this.
Welfare also seems to not make as much difference compared to what most people would expect. Take Social Security, our biggest welfare program, we only need it for low savers who are to weak to work who have not family or friends to care for them. That is a small percent of the population but to reach that small percent of the population without creating very bad incentives we have to give SS to everyone. A huge cost relative to the problem. BTW I think we should give every USA citizen over 67 $200/week from SS, reducing the program cost by about 1/3rd. BTW I think absent SS most people would start to save as much as possible at about 60 years old and work as long as they could and do OK.
Most USAers assume that the welfare state is more needed and more effective than it really is, and that a huge amount of charity (in fact more than we could ever come close to getting) would be needed to replace it. They may be right that charity would never be enough but I think charity would be much closer to being sufficient than people think.
When progressives assume that the those lowest income cannot affords something they often forget to factor in reduced demand lowering the price.
One example is that in a market for housing with restrictions on building (adding housing units) which we have in most counties, and where housing is subsidized, if you remove the subsidy the landlords will take some of the hit probably most of the hit.
Another example is that as far as I can tell, even adjusted for inflation, our USA schools spent 3x as much as in the 1960's and output is not much improved. Now I am sure that the experience for the student is better now but I would bet that you could cut spending hugely and get pretty much the same output. And if parents payed directly you could possibly get better output due to motivation and for some other plausible reasons. See the link in Scott's post on this.
Welfare also seems to not make as much difference compared to what most people would expect. Take Social Security, our biggest welfare program, we only need it for low savers who are to weak to work who have not family or friends to care for them. That is a small percent of the population but to reach that small percent of the population without creating very bad incentives we have to give SS to everyone. A huge cost relative to the problem. BTW I think we should give every USA citizen over 67 $200/week from SS, reducing the program cost by about 1/3rd. BTW I think absent SS most people would start to save as much as possible at about 60 years old and work as long as they could and do OK.
Also I once saw a show on PBS about a guy who built a road to Miami Beach.
Narrator: One of his greatest ambitions was to persuade the government to start building better roads. He convinced the leaders of the automotive industry to jump-start the process by financing the first paved road across the country -- the Lincoln Highway, from New York to San Francisco. It was such a success that he went on to build another road -- the Dixie Highway... leading, very conveniently, from Indianapolis to the foot of the bridge he was paying for back in Florida.
Thursday, August 27, 2015
Forgetting the History of Central banks
Forgetting that the great depression occurred after the creation of the federal reserve.
Forgetting that Canada avoided the great depression because it had no central bank.
Forgetting that wealth would have been greater had the western world not experienced a great depression..
The EU looked at the world and saw the dominance of the US dollar. They saw research that I have seen shows that the USA is 3% richer than it would be if the dollar was not the dominate currency in the word. They wanted a piece of that. They also thought that a common currency guided by an enlightened central bank.would be better for the Southern countries which had been prone to periods of inflation. Further that a single currency would facilitate trade within the EU. And so the Euro was created.
But big currencies mean big problems and we have Greece, Portugal, Spain and Italy with very high unemployment for 5 years! They are all struggling and falling deeper in debt.
And lest you get the wrong idea even Germany's real growth has been poor. And no one sees an easy way out.
Time to start thinking of smooth way out of the Euro mess.
Forgetting that Canada avoided the great depression because it had no central bank.
From Wikipedia: In 1934, with only ten chartered banks still issuing notes, the Bank of Canada was founded and began issuing notes in denominations of $1, $2, $5, $10, $20, $25, $50, $100, $500 and $1000. In 1944, the chartered banks were prohibited from issuing their own currency, with the Royal Bank of Canada and the Bank of Montreal among the last to issue notes. From that point forward, the Bank of Canada has been the sole issuer of bank notes denominated in Canadian dollars. A liability of more than $12 million remains on the Bank of Canada's books up to the present day, representing the face value of Dominion of Canada, provincial, and chartered bank notes still outstanding.[3]
The EU looked at the world and saw the dominance of the US dollar. They saw research that I have seen shows that the USA is 3% richer than it would be if the dollar was not the dominate currency in the word. They wanted a piece of that. They also thought that a common currency guided by an enlightened central bank.would be better for the Southern countries which had been prone to periods of inflation. Further that a single currency would facilitate trade within the EU. And so the Euro was created.
But big currencies mean big problems and we have Greece, Portugal, Spain and Italy with very high unemployment for 5 years! They are all struggling and falling deeper in debt.
And lest you get the wrong idea even Germany's real growth has been poor. And no one sees an easy way out.
Time to start thinking of smooth way out of the Euro mess.
Great Depression and the Origins of the Welfare state in the USA
Mike Konczal on the origins of the modern welfare state in America:
Informal networks of local support, from churches to ethnic affiliations, were all overrun in the Great Depression. Ethnic benefit societies, building and loan associations, fraternal insurance policies, bank accounts, and credit arrangements all had major failure rates. All of the fraternal insurance societies that had served as anchors of their communities in the 1920s either collapsed or had to pull back on their services due to high demand and dwindling resources. Beyond the fact that insurance wasn’t available, this had major implications for spending, as moneylending as well as benefits for sickness and injuries were reduced.
The Hoover Administration’s initial response to the Great Depression was to supplement private aid without creating the type of permanent public social insurance programs that would arise in the New Deal. Hoover’s goal was to maintain, in the words of the historian Ellis Hawley, a “nonstatist alternative to atomistic individualism, the romantic images of voluntarism as more truly democratic than any government action, and the optimistic assessments of the private sector’s capacity for beneficial governmental action.” As President Hoover said in 1931, much like conservatives do today, any response to the economic crisis must “maintain the spirit of charity and mutual self-help through voluntary giving” in order for him to support it.
Noble as that goal may be, it failed. The more Hoover leaned on private agencies, the more resistance he found. Private firms and industry did not want to play the role that the government assigned them, and even those that did found it difficult, if not impossible, to carry out those responsibilities. The Red Cross, for instance, did not want to move beyond providing disaster relief. Other groups, like the Association of Community Chests and Councils, had no interest in trying to coordinate funds at a national, rather than local, level. Hoover understood that private charity wasn’t getting to rural areas, yet private charities couldn’t be convinced to meet these needs.
[...]
What’s most worth noting is that, in the end, both beneficiaries of fraternal societies and private charities themselves welcomed this transition. During the Great Depression, citizens, especially the range of white ethnic communities in the largest cities, watched as mass unemployment tore down institution after institution. From fraternal societies to banks to charities, the web of private institutions was no match for the Great Depression.
As documented in Lizabeth Cohen’s Making a New Deal, these white ethnic communities turned to the New Deal to provide the baseline of security that their voluntary societies were unable to offer during a deep recession. As a result of the implosion of the voluntary societies they depended upon, working-class families looked to the government and unions for protections against unstable banks and the risks of the Four Horsemen.
Never the less, I think that the big flaw in Government charity is not that it helps the poor creating disincentive to work, but that most of the spending goes to rich and middle class (through SS, medicare, farm and other subsidies and Government schooling) and so Federal Government spending on charity is much higher than it should/could be. My reason to believe that is because I do not think it is possible at this time for Government to subsidize the median life time earner. So you are taxing the same people you spend the money on.
So absent if the Great Depression was avoided how much of Government do you think would be devoted to charity? I think it would be much smaller and just about everyone would be better off.
Take Social Security for one example.
- a person who earns $15,000/year will pay $82,000 in payroll taxes (employer and employee combined) over 44 years of work. When he retires, his annual benefit will be $10,476 or 13% of his lifetime payroll taxes.
- a person who earns $50,000/year will pay $273,000 in payroll taxes over 44 years of work. When she retires, her annual benefit will be $21,672 or 8% of her lifetime payroll taxes.
- a person who earns $115,000/year will pay $627,000 in payroll taxes over 44 years of work. When he retires, his annual benefit will be $32,952/year or 5% of his lifetime payroll taxes.[56]
$1,294 is the average benefit/worker/month. If everyone got what those who earns $15,000/year that would enable cut the program by about 1/3. We could then lower the tax by about 25% allowing workers to spend that money when they want. Most people are poorer when they are young than old and so would get a higher marginal benefit from keeping that 25% than getting 25% more in retirement. The lower earners would not be hurt because many of them would get more than they get now. Almost all USA citizens would be better off.
BTW In Australia the government part of the retiree pension pays out the same amount to all recipients.
Bottom line we should not work to end Government charity but we should work to educate people about why Gov. charity should be for bottom percentiles of life time earners.
Friday, July 24, 2015
Amazing Good News
The following Quote is from here.
I have a friend who is a PHD agronomist from Brazil, he tells me that beef production per acre in Brazil would 6x higher if the average rancher used the practices of the best ranchers. So we have plenty more to go see below.
One other often ignored thing, if you look at the chart here, you will see that some lesser used crops like sweet potatoes yield much more per acre than wheat, corn and rice. I have read that tree crops have even greater yields per acre than potatoes.
Then there is new technology. A 50% increase in wheat yields is at least theoretically possible.
So instead of global famine, food production tripled even as world population doubled. As a result, the amount of daily calories per capita rose from 2,400 in 1960 to nearly 3,000 today.
I have a friend who is a PHD agronomist from Brazil, he tells me that beef production per acre in Brazil would 6x higher if the average rancher used the practices of the best ranchers. So we have plenty more to go see below.
Researchers at Rockefeller University counter that—because the backlog of productivity enhancing technologies—humanity is on the verge of “peak farmland” and that by 2060 farmers will have returned an area 10 times the size of Iowa to nature, and even more if governments stop subsidizing biofuels.Also:
The surge in food prices also occurred because huge amounts are being diverted into biofuels. Bourne notes that the International Food Policy Research Institute calculated that biofuel production drove up food prices by 40 to 70 percent. The calories in the 40 percent of the U.S. corn crop that is used to produce biofuel would be enough to feed everyone in Africa for a year. In addition, reducing the third of food that is discarded, spoiled, or eaten by pests would increase supplies by nearly 50 percent.
One other often ignored thing, if you look at the chart here, you will see that some lesser used crops like sweet potatoes yield much more per acre than wheat, corn and rice. I have read that tree crops have even greater yields per acre than potatoes.
Then there is new technology. A 50% increase in wheat yields is at least theoretically possible.
Tuesday, July 21, 2015
Illness and Bankruptsy
People can easily be bankrupted in the USA due to an illness. Surprisingly to some, people in countries with socialized medicine can also easily be bankrupted due to an illness. Being bankrupt in not necessarily poverty.
Almost no one in the USA lives in poverty today (mostly only the mentally ill homeless still live in poverty and they exist all over the world and are a very though case.) So if the illness is not mental illness, it will not generally drive a person into poverty in any developed country, not even the USA.
If you can go back to working after the illness you can recover from bankruptcy, most will. In the USA if you cannot go back to working you will be able to get on medicaid and SS disability. If medicaid and SS disability did not exist things would different enough that it is hard to imagine how people would get by but I would bet that they would.
The trick with all this is to help the needy while maintaining good incentives to produce. Could we be more charitable, yes but we could also be much more efficient in our charity.
Almost no one in the USA lives in poverty today (mostly only the mentally ill homeless still live in poverty and they exist all over the world and are a very though case.) So if the illness is not mental illness, it will not generally drive a person into poverty in any developed country, not even the USA.
If you can go back to working after the illness you can recover from bankruptcy, most will. In the USA if you cannot go back to working you will be able to get on medicaid and SS disability. If medicaid and SS disability did not exist things would different enough that it is hard to imagine how people would get by but I would bet that they would.
The trick with all this is to help the needy while maintaining good incentives to produce. Could we be more charitable, yes but we could also be much more efficient in our charity.
Monday, July 20, 2015
Some Thoughts on the Minimum Wage
To me, the minimum wage looks like a very clever way for politicians to hide a tax that redistributes some money to some low wage employees.
Who it might hurt:
Only the few businesses hurt will know what hit them and they account for very few votes. From the perspective of politicians, it is a brilliant, though on might say unethical, scheme. They get to look like the good guys and companies that provide work for employees who cannot find better jobs look bad.
Who it might help:
Some facts:
Much depends on how you feel about the trade off between more money for some workers and less jobs and who should pay for any added expense and also how you feel about hidden taxes.
I think many on the side of the $15/hour minimum wage believe that it is immoral pay someone so little and so are not bothered if it would drive a few small usually poorly run businesses into bankruptcy. They also have little sympathy for those who buy from low paying businesses, besides it allows them to hit McDonald's and Walmart and they can easily afford the higher wages and can most of their customers.
Who it might hurt:
- A small number of would be low wage workers who will have no idea that the minimum wage is to blame.
- Some marginal businesses that now pay below the minimum wage who might go bankrupt quicker.
- Consumers who buy from those businesses.
Only the few businesses hurt will know what hit them and they account for very few votes. From the perspective of politicians, it is a brilliant, though on might say unethical, scheme. They get to look like the good guys and companies that provide work for employees who cannot find better jobs look bad.
Who it might help:
- Shy mostly young people working very hard for very low pay who are to shy to ask for a raise. I think that I was once in that group.
- Businesses that pay more than the proposed new minimum that compete businesses that pay the less than new minimum.
- Those employees who are marginal but will keep their jobs.
- Businesses like McDonald's and Walmart who can easily pay the higher wages but do not who compete with business that may not be able to afford the new minim wage.
- Businesses like McDonald's and Walmart that compete for employees with business that already pay more that the new minim wage.
Some facts:
- Many people already work for less that minimum wage. If you believe Steven D. Levitt some of those are low level drug sellers. Some work for companies like the one a few offices over from mine called Vector Marketing. I think in the likes of Vector Marketing most people who end up working for them pay to work. Some work scavenging for metals. A few work for cash.
- Also there always some restaurants teetering on the edge of bankruptcy will a higher minimum wage not push them over the edge a little quicker?
- There are large regional differences in cost of living. Some of these are because of differences in real-estate costs but also due to life style.
Much depends on how you feel about the trade off between more money for some workers and less jobs and who should pay for any added expense and also how you feel about hidden taxes.
I think many on the side of the $15/hour minimum wage believe that it is immoral pay someone so little and so are not bothered if it would drive a few small usually poorly run businesses into bankruptcy. They also have little sympathy for those who buy from low paying businesses, besides it allows them to hit McDonald's and Walmart and they can easily afford the higher wages and can most of their customers.
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