Eliminate "Gov-co"

Why doesn't McDonald's charge $40 for a cheeseburger? After all it'd more profitable. Why does Wal-Mart or the Dollar General or 5andDimes or Goodwill even exist if name-brand stores can charge as high as "the wealthy" can pay? Most people seem to inherently understand the cause-and-effect of prices and competition in the retail market. But is that only because we see it everyday in our current lives?

Consider an alternative history where during the Great Depression, advocates for the poor pressured the govt to pass a bill that created "Gov-co" retail stores. Gov-co stores are a nation-wide chain that provide cheap, generic food and goods for the poor at massively discounted prices (subsidized by taxes). Adjusted for inflation, they had prices like $1 for a new pair of tennis shoes or a button up shirt or $10 for new car tires or $20 for a new dishwasher because the rest of the cost of the goods is subsidized with taxes. At such discounted prices, no private company can compete and so not only have Gov-co stores became a national chain in virtually every town, but now the only alternative to those Gov-co stores are high-end, brand name stores selling high-end goods that cost top dollar and are only affordable to the middle class and above. At this point, very few really remember what it was like before Gov-co existed. People only recognize that only "the rich" can afford the brand name goods. But that only reinforces the need for a Gov-co to provide affordable goods for the poor.

Unfortunately, people have recognized that while the prices of Gov-co goods have remained stable (only raising with inflation), the quality of the goods has not. In addition, the quality and price of goods in the south is slightly different than the price and quality in the northeast as well as differences between urban, suburban and rural communities. Meanwhile, brand name goods continue to improve and increase in quality, though prices still cannot compete with Gov-co.

People are decrying the further and further separation between what the poor can afford vs what the rich can afford. In fact, they point out that the rich are able to afford goods that make them more productive and able to make more money compared to the poor. Something must be done. Many advocate to increase tax spending on Gov-co products to help increase the quality while keeping the prices low. Others advocate setting mandated regulations - maybe even establishing a federal agency to oversee and inspect manufacturers to ensure sufficient and consistent quality products. Tweaks to the system are constantly introduced, customer feedback mechanisms, product quality control tests are standardized, but nothing appears to really be improving the situation. (Not to strain the analogy, but imagine if IN ADDITION to everything else, if you did choose to shop at Gov-co instead of the brand name stores, you could only shop at your local Gov-co nearest your home.)

In such a situation, if someone advocated simply and completely eliminating Gov-co and allowing the free market to work in the retail space, I think few would dispute that there would be large numbers of people pointing at those high-end stores that cater to the more well-off and decry "What about the poor?" and lament that the poor would go hungry and naked because they couldn't afford to buy from those high-end stores. They'd claim that those private stores would just continue to charge high prices because people have to have food and clothing and stuff, right? The suggestion to completely eliminate Gov-co would be treated as nonsense - of being harsh, unsympathetic, and cruel. Accusations would abound that advocates are only concerned for the rich or are "in the pocket of big business".

But in reality, we know that without a Gov-co, we actually have a vibrant retail market with an enormous segment dedicated specifically to low-income consumers. Stores like mentioned above: Wal-Mart, Dollar General, 5andDimes, Goodwill, etc. all directly aim to serve low-income consumers. Critics of eliminating Gov-co overlook that the poor are a market in and of themselves and that many companies would move into that market to serve them - providing cheaper goods for lower prices and that competition in that market would help improve quality while keeping prices low.

Now this understanding that free market competition DOES encourage businesses to keep prices low and to increase the quality to attract customers is pretty common. We seem to inherently understand this about retail goods because we see it in action everyday. But many seem to have a problem with the idea that the same effects and incentives apply to education as to retail goods - I would argue, because we're only familiar with the current setup where only "the rich" can afford private schools.

Those who suggest simply eliminating public education are dismissed as naive. They are told, often even by other advocates of limited-govt, that without public education, the poor wouldn't be able to afford to send their children to school, only continuing the generational poverty and further widening the gap between the rich and the poor. Perhaps another look at the nature of competition in a free market, only in a different market, may help them see that we cannot simply assume that the current structure of "only the rich can afford private education" would continue if we eliminated public education. In fact, based on looking at other markets like retail, there is significant evidence to conclude that education providers would likely actively focus and pursue low-income customers.

Eliminating public education and allowing free market competition into the market for education couldn't be a whole lot worse than modern public education in many places, and it has the potential to be much, much better.

Math doesn't lie... Right?

If a bucket has 2 apples in it, and you add 2 more apples, how many apples are now in the bucket?

4 right?

2 + 2 = 4

"Math doesn't lie." Right?

That's true, "Math doesn't lie." But math CAN be wrong.

What if I told you the correct answer is 6?

Would you cry foul and declare your original answer to be true? Would you show me mathematical theorems and proofs that demonstrate that 2 + 2 DOES in fact equal 4?

As I said, "Math doesn't lie.", but math CAN be wrong when it tries to represent the real world. Or, let me rephrase - we are wrong when we assume that the world described by the math, identically represents the world in which we live.

In our scenario, that math didn't lie. In fact, the math wasn't wrong. But we were wrong when we assumed that the math accurately represented the world. What the math failed to take into consideration was that John also added 2 apples to your bucket. Thus, there are now 6 apples in your bucket.

"That's not fair! You never mentioned anything about anyone else." 

That's true, but when we create math to model the world, we aren't TOLD all the characters and variables and the exact scale and nature of their effects. We have to derive them ourselves. Sometimes, in simple systems, we can deduce all of them and the math does accurately reflect that system. However, the more complex the system, the more variables, the more interactions, the more complex the math, the more difficult it is to discover all affected and affecting variables, and the easier it is to miss (or misunderstand) something. Thus, when we create mathematical models to represent extremely complex systems, the potential for overlooking variables (or even simply under or over estimating their effects) is not only possible, it's likely.

In the world described by the math, John doesn't exist. Nobody other than you exists. Therefore, if you only added 2 more apples, there will only be 4 apples in the bucket now. It's simple, it's straightforward, but it'd be wrong. Overlooking John as a variable means that, while the math didn't lie; while the math wasn't wrong, it did not reflect reality. And if we had based our actions on the result of that math, we would have potentially made the wrong decision.

Let's say that we adjust our math, represent John, and based on this math, decide we have enough apples to bake an apple pie. However, what happens to our plans if, because of our mathematical oversight of not considering Sally, we only wound up with only 1 apple in our bucket because our math didn't represent that she removed 5 apples for herself? Based on our math, we would have concluded that we had enough apples, and we would have began preparing to bake. However, at some point, we would have come up very short of apples.

Similarly, when we try to model complex systems like climate or the economy, we can easily draw the wrong conclusions and plan the wrong actions based on, not faulty, but incomplete, math.

Even looking at previous data can be misleading if not all variables are considered. If we look at data that shows that home sales went up at the same time that tax rates went up, we could draw the conclusion that higher taxes cause increased home sales. Based on this conclusion, we could plan to raise them even more in hopes of further increasing home sales. However, by overlooking that a new factory opened up a few miles down the road, our conclusion would be wrong, and our actions would be mistaken. In the end, our wrong conclusion and the following actions might have led to not only the reduction in home sales, but also possibly the closing of the factory.

This type of oversight can happen easily. Looking at some specific economic data, one can easily see how people would conclude that getting into WW2 got us out of the Great Depression. However, the data doesn’t tell the whole picture. Similarly, many economists and politicians will bring up a chart or point out some data that indicates that their prescribed action worked in the past and should be implemented now. But without taking a full, contextual view of that event and that time, it’s difficult to understand all the variables that may have affected things.

“So are you saying we can’t trust math? Well we might as well throw it all out the window?”

My point isn't to say we should ignore math. My point is that we need to be cautious about just blindly trusting what math "tells" us. We need to understand that in complex systems, even a small misunderstanding of a single variable, let alone possibly omitting one entirely, can change a negative feedback system into a positive feedback system. We need to be careful about basing actions on mathematical models without trying to look at the entire context of the situation. Otherwise, we may very likely find out we don't have enough apples.

The "Good Side" of Regulations

We have created a system, a bureaucracy, that is self-perpetuating. People whose job is to come up with more and ever more invasive regulations, restrictions, directives and mandates.  I've complained about these rules before. Crafted "in the name of the people" for our own good, and enforced with the full, threatening power of the government.

Some would argue that some regulations are necessary. Well, some may be tolerable, but what if we reached that point a long time ago? What if we have passed the point of acceptable, useful, needed regulations and into the point of pedantic bureaucratic market meddling? Worse, the organism we've created encourages ever more regulations. New bureaucrats with something to prove, departments that must show they're doing something to earn that ever larger budget they're requesting. How will we ever know if we've gone beyond that necessary point? 

But the part that is often overlooked is that whether you agree with the regulation or not, they have a cost. By requiring that businesses improve their product in some way, or that they pay their employees more, or that they use more expensive equipment, or that they use more environmentally friendly processes, you are increasing the cost of producing that product. And since that company isn't going to sell their product for a loss (at least not for very long), then that company is going to increase the price of the product in order to cover the increased cost of producing it. 

So in the end, it is you and I, that pay the increased cost of these regulations! 

Again, you can argue about whether each new regulation is worth the associated cost, but, as this link shows, it seems to me that we have already passed the point of diminishing returns a long time ago.  

http://mises.org/daily/4781

Slippery Slope

Many like myself criticize government regulations and intervention by saying that while the act may seem and sound reasonable now, it will lead to ever more invasive actions. We talk of the slippery slope. We have, for years, suggested that increased regulations were, instead of protecting people, were going to lead to the OPPOSITE of freedom. And all along, we have been dismissed and chastised for "fearmongering" or simply exaggerating.

One of my personal favorites when decrying regulations was to suggest that if it doesn't stop, pretty soon 10 year olds' lemonade stands will be forced to submit to health inspectors and apply for a permit or be forced to shut down. And, predictably, I've been accused of using an absurd fallacy to make my point.

However, the slippery slope exists and while the results are absurd, it's not fallacious to be wary of it.

Along similar lines, people like myself have also argued that a truly free market has not existed for years ... like 150 years at least (if ever). While it's sometimes difficult to see the negative impacts of federal intervention, this is a great example to see how even local govt intervention can distort a market in favor of those with political ties. What's bad is that this kind of government "preferential" intervention goes back forever. Even in the mid-1800's, when the concept of robber barons and of industry's tyrannical oppression of its customers really began, we can look closer and see that most such instances (I would recommend you read the entire book or hopefully that first section, but at least read a page or two starting half way down page 12) were actually cases of govt intervention ending a free market and creating a preferred market for a specific preferential industry, business, or person.

Anyone that even TRIES to argue that the US is a free market is so removed from reality as to be dismissible. Keep these stories in your back pockets the next time someone says that the "free market" failed or that "free market capitalism" is the cause of our problems.

Stop Subsidizing Everything!!

An article from the Cato Institute describes my frustration with "part-time" conservatives:

Government Support for Nuclear Energy Misguided

Peter van Doren have long argued that the case for government intervention in energy markets is flimsy: "Despite promises in the 1950s that nuclear power would soon become 'too cheap to meter,' 50 years of lavish federal subsidies and regulatory preferences have yet to produce an industry that can turn a profit without taxpayer help."Calling the plan "radioactive corporate welfare," Taylor says the plan is highly misguided:President Obama announced this week he would allocate billions of dollars in loan guarantees to build a new nuclear power plant in Georgia, the first new nuclear power plant in the U.S. in thirty years. Cato scholars Jerry Taylor and

A good default proposition regarding the government's role in the economy would state that the government should not loan money to an enterprise if the enterprise in question cannot find one single market actor anywhere in the universe to loan said enterprise a single red cent. It might suggest — I don't know — that the investment is rather … dubious. Alas, like all good propositions regarding the government's role in the economy, this one is being left by the roadside by the Obama administration.

Many conservatives who regularly defend free and open markets praised Obama's decision to subsidize nuclear energy. The editors of National Review wrote, "the president has sent a clear message to the country — and to environmentalists — that nuclear will be part of the country's future energy mix. For that message, he deserves our approbation." Cato scholars have repeatedly warned against supporting such subsidies in energy markets, criticizing so-called "free-market advocates" who lose their way when it comes to energy policy. Taylor and Van Doren write: 

Rather than defend free markets, [conservatives] bang the table about the need for national energy plans and government timetables for energy-plant construction…. How is the conservative case for the above subsidies any different from the liberal case for subsidizing solar or wind energy, or high-mileage automobiles — or, for that matter, the case for government backing of financial institutions and automobile companies? It isn't, and conservatives should not check their skepticism about central planning and the bureaucratic ordering of markets at the door when they walk into the energy-policy funhouse.

Taylor and Van Doren further outline a plan for sound energy policy in the Energy Chapter of the Cato Handbook for Policymakers. For more, read Richard L. Gordon's 2008 Policy Analysis on energy policy and government subsidies that makes the case against government intervention in energy markets.

I recognize that nuclear is good, necessary, and a WAY better energy generator than wind and solar. But encourage it by LOWERING REGULATIONS/RESTRICTIONS!!! Stop thinking the only way that anything will ever develop is if government throws money (Other People's Money) at that market.

When supposedly fiscal/limited government conservatives jump on the subsidizing bandwagon just because that money would be going toward something they like or agree with, it makes me question the validity of their claims of truly being limited government. I know, I know, "But we need energy independence ASAP! It's about our national security. It's about lowering energy costs for those struggling. We can't wait to battle for lower regulations or for the market to mature itself. We must act

now!"

Sound frighteningly like another party I know.

Sweden as Socialistic Example

I've talked with several people recently about the effectiveness of a libertarian-style free market. They seem to believe that different groups of people require different types of government. That some people are designed for communism whereas others for capitalism.

Sweden was recently used as an example by someone who said that their socialism is actually quite successful and that those people are perfectly happy with it.

Here's an actual look at the country of Sweden and the "success" of it's socialistic policies.

http://mises.org/daily/2259

Looking objectively at the statistical history vs just the perception of success, it seems that Sweden and the socialism isn't faring much better than anywhere else.

In addition to the economic ramifications of collectivism, the effects of socialism on the mentality of people is also detrimental.

http://mises.org/daily/2190

It's easy to understand that when people are raised in an environment where most everything is provided for you by someone else, your attitude about work, about expectations, about rights themselves, changes. 

Say what you will, I like the guy

You can joke about him crying, about him being a goofball, about him being overdramatic, about him being more about sensationalism than realism, but I like him.

http://www.glennbeck.com/content/articles/article/198/36618/

Glenn Beck's keynote speech at the Conservative Political Action Conference (CPAC) was impressive. It touched on all the things that fiscal conservatives are demanding and used actual history and stats to reinforce the point. Not much was discussed regarding social conservatism, to which I say all the better considering the economic state of affairs. Best of all, he expressed a skepticism about the Republican party and their limited government intentions that I don't hear enough. Plus ... you gotta love the chalkboard. :)

Oh, and Jon, talk about missing the forest for the trees.

http://www.huffingtonpost.com/2010/02/23/stewart-to-glenn-beck-you_n_472826.html

Conservatives don't want to get rid of public libraries. Please explain the logic behind claiming conservatives who advocate for enumerated powers and the 9th and 10th amendments to limit the federal government, are somehow hypocritical because they use public libraries. Not everything paid for with taxes is evil communism. We just think that falls squarely outside the enumerated powers of the federal government (as does a LOT of what the federal government is doing nowadays). If states and city/counties want to fund their own libraries with taxes, then by all means they can do so and most conservatives would support that.

If you truly believe that there is a group trying to get rid of all public libraries... Well, you're right. They're called libertarians. I agree with them on many, many things. But I tell you what, if you're worried, I think libertarians would be willing to put "Eliminate Public Libraries" LITERALLY at the end of their list of priorities. 

Law of Comparative Advantage

The Law of Comparative Advantage

Long name that basically says that even if you have the ability to do something, it's to your advantage to let someone else do it if you can be more efficient at something else.

http://www.unc.edu/depts/econ/byrns_web/Economicae/Essays/ABS_Comp_Adv.htm

This is nothing new, but it helped me understand why, in a truly free economy, you wouldn't have megalithic corporations that do end-to-end vertical production as well as having a huge breadth of products. In our current setup, government tax schemes have created an environment where it is to the advantage of the corporation to provide everything "in-house". This means that because of taxes that Dell would pay to buy network cards from some manufacturer, it would be cheaper for Dell to manufacture their own network cards for themselves. Soon it becomes nearly impossible for an upstart to get into the market because in order to be able to compete at Dell's prices, you have to start with a massive manufacturing infrastructure to avoid the same tax penalties. 

Even in situations where one person/group is better at everything they do than anyone else, it's still going to be to their benefit to cooperate:

http://mises.org/story/3015

You want increased competition and smaller megalithic corporations? Lower the barriers of entry into the market (i.e. regulations, taxes, permits, etc) and don't incentivize monolithic practices while claiming to despise them. Through a combination of comparative advantage and increased competition, you'll see that companies find it beneficial and more profitable to do one thing, and do it very well. In the end, it's the customers, we consumers that benefit.

Booms and Busts

Excellent economic video contrasting two key economists of the 20th century. While one is the prominent basis of all economic theory and taught in economic classes, the other is hardly known.

http://www.youtube.com/watch?v=d0nERTFo-Sk

This describes the crisis we're in. The housing bubble and Wall Street are all blamed, but Hayek describes how the Fed has played the key role in creating the boom and bust cycles.  We need to learn from history.

Article Response #6

Article:
http://www.idsnews.com/news/story.aspx?id=73117

Response:

I think the thing that gets me is the lack of desire to understand the CAUSE of whatever income gap might exist. There appears to be an assumption that this is the natural order of things in an open, free market and since there is a lack of rules about such things, it continues to propagate. Thus, the conclusion reached from such an assumption is that rules are needed. And this is exactly where Ashley goes, ignoring the cause and jumping straight to 'there ought to be a law', "The point of the story is not to get hung up on the past, rather, it's to look forward to the types of legislation that could prevent another economic collapse..."

Consider the possibility that another regulatory law won't fix the problem and that perhaps the cause of the income gap is primarily corporatism. That some, with connections, are able to gain by influencing laws, rules, regulations, and mandates toward their benefit. Those of us with a philosophy of smaller, limited government view this as a tragic abuse of government to reach beyond its defined limit.  We believe that more often than not, the expansion of government into regulation of areas of personal and economic liberty lead to MORE problems, not less.

So again, consider that possibly, just maybe, the best, the best way to fix the inequity is to eliminate government favors for some at the expense of others. Eliminate subsidies, eliminate bailouts, eliminate tax breaks, credits, incentives, loopholes, and exemptions, eliminate excessive regulations required to enter the market, allow businesses that are poorly managed or that come under difficult times, or that are faced with a changing environment to deal with those problems on their own merits, and yes, allow them to fail if need be. It's better to let the phoenix to die and be reborn than to toss first twigs, then branches, then logs and entire trees to attempt to rekindle the flame. Eventually you'll find that while you've kept it from extinguishing, it's cost you the forest.

The core problem of this type of life support is that the two people that are benefiting are the poor being sustained by the hand of others, or the wealthy being given advantages. So who are being hurt the most by this setup? Those in the middle. Those who work day to day, spend time with their families and simply look to make each day slightly better than the last. Too well off to get handouts, still expected to pay taxes, but not wealthy enough to have excess. No wonder we have such an income gap.

Article Response #5

Article:
http://www.idsnews.com/news/story.aspx?id=72835

Response:

I'm no fan of Bush. I'm basically a libertarian. I have MANY issues with his policies, but at the same time, this article uses cherry picked items to indict Bush while skipping things that . By picking a 2000 DJIA point and then comparing it to now is extremely misleading and omits the fact that the 14K+ record was set during Bush's time. Same with the median income. 1998 was during the height of the boom economy. It's again misleading to compare incomes then with incomes during a recession while leaving out that there were higher incomes in 2006 & 2007. There are many things to complain about with regard to Bush, we need not cherry pick things to do so.

There are a several comments on that article. A couple of those sparked my response. I'm reposting them here for less confusing chronology and better readability using names submitted to the public forum.

By POR Economy:

The Pelosi-Obama-Reid (POR) economy kicked in during the latter part of June 2007, when its Congressional architects — Nancy Pelosi, Barack Obama, and Harry Reid — decided that starving the economy of energy by refusing to allow more offshore drilling in the face of $4 gas prices was a winning political position. Pelosi claimed that because we couldn't totally "drill our way out of this," we shouldn't increase drilling at all. Reid put an exclamation point on Pelosi's stubbornness by insisting that fossil fuels are "making us sick." Well, they only thing sickened by their policies was the US Economy. FDR tried massive public works programs during the Depression. All he did is prolong it for seven years. Japan tried government stimulus for 10 years running in the 1990s. It only resulted in "the lost decade." What Pelosi, Obama, and Reid should do is expand the tax cut element of the stimulus plan to include all incomes, ditch almost all of the alleged "investments," open up oil and gas exploration, and, eventually, watch the royalty money pour in. I know; that's way too much to "hope" for. 

Response to POR Economy:

I personally believe that while the internal energy embargo definitely put a cap on the economy's ability to grow, it was the increase in the minimum wage that lit the fuse of our current issues. In an economy beginning to struggle for real growth, already in a bubble, shifting the entire wage scale (which is what we should really call a minimum wage increase), was the tipping point that halted any growth and began to exacerbate the tearing where it was already stretched thin.

By Jared:

Ashley: Great editorial, but I think its time we stop talking about how bad Bush was as President. But essentially, the 00's basically proved that neoconservative and inherently conservative policies do not work. When you essentially tell regulatory agencies to stop regulating, financial giants are free to break the law and prey upon their customers. When you spend more than all past presidents combined while enacting exceedingly high tax cuts, you drive up the deficit to dangerous levels. When you go to war against one country based on an ideology while the real war is denied resources, terrorism spreads. I honestly think that the world is experiencing a global transition where the focus of power lies between China and the US, rather than just the US. The road may be tough, and lower class Americans may be left behind as China's middle class grows. Bob--you are an exception to the rule. Thrift is not a trendy word these days. Between the cars people own, the clothes they wear, to the college they go to, its more of a competition than what is practical. Being financially secure should be the equivalent of having that big-screen plasma HD TV, however it is not. 

My Response:

What free market ideas were actually tried that didn't work? When did we have limited government? Bush cut taxes in 2001 and the recession bottomed out (even with 9/11). Outside of that and working to increase trade with foreign countries (though even this was more protectionism than it was free trade), I'm hard pressed to really think of anything significant that Bush did that was free market, limited government oriented. No Child Left Behind - Nope, bigger govt spending and regulation. Prescription Drug Benefit - Nope, bigger govt spending and regulation. The Bailouts - Nope, bigger govt spending and regulation. Sarbanes-Oxley - Nope, massive increase in regulation. Even things like his proposed social security reform was nothing more than moving from tax&spend to a forced savings account (he even suggested lifting the FICA tax cap to pay for it). Please show me where government spending was reduced (even minus the wars), government programs were cut (and a "cut" of an 8% increase to a 3% increase doesn't count), or the pages of government regulations were reduced. The whole "compassionate conservatism" was, I feel, a ploy to get conservatives to THINK he was for free markets and limited government while it was basically just slightly slower government growth than what liberal Democrats would have done. The 00's didn't prove free market, limited government policies to not work. We didn't HAVE a free market and limited government. However, if you don't believe that the 00's show that expansive spending and strict control by government do not create prosperity, if we continue along the path we're traveling, the 10's may prove it beyond a reasonable doubt.

Jared:

I wonder how many of you have actually gone to IU in some academic capacity, especially POR? Copying Fox News articles does not mean you know what you are talking about. In fact, it means the opposite. If you can show me objective, peer-reviewed analytical proof that FDR's policies protracted the Great Depression I might actually read the rest of your BS. Ever hear of a Hooverville? For now, put down the glue and put your nose in a book.

My response:

I don't like worshiping at the alter of "peer-reviewed" primarily because I'm aware of the flaws in the peer-review process. However, if you are going to be condescending and refuse to open your mind unless you get what you want, I will try to satisfy you. If you don't like the hundreds of historical descriptions of the cause and effect relationship of FDR's policies and the lengthening of the Great Depression (also read what Milton Friedman says about it), here's a paper that analyzes exactly what you apparently consider to be hallucination induced fantasies: http://www.journals.uchicago.edu/doi/pdf/10.1086/421169 As for a Hooverville, I hope you're not suggesting that Hoover was the sole cause of the Depression. He certainly shares in part of the blame due to his massive spending attempts to "stimulate" the economy (sound familiar?). In fact, Hoover spent so much in an effort to right the ship that FDR actually ran his campaign against him on a platform of fiscal responsibility, though obviously his actions did not match his promises.

Jared:

Your comment that you don't "worship the alter of 'peer-reviewed'" says all I or anyone else needs to know in how you gather and analyze the information you use to form your opinions. Granted, some articles may have poor analytical methodologies, but when you form opinions about complex topics, I suggest you have facts to back them up while also taking into account the inadequacies in your own arguments. I've learned at least in introductory US History classes that Hoover thought that the severe downturn in the economic was simply part of a larger "economic cycle." As a result, he earned the nickname "Do Nothing Hoover." He thought that the market would simply correct itself over time. Although he did rack up the largest peace-time federal deficit in history at the time, it was not enough.

My Response:

You're exactly wrong on two accounts. Firstly, the reason I don't worship at the alter of peer-reviewed is NOT because I think they're all wrong or have "poor analytical methodologies". But many times, errors in peer-reviewed papers DO slip through, despite reviewers. Beyond that, peer-reviewed papers can be completely wrong and still get published simply because of things like the reviewers agreeing with the premise of the paper or the technology or understanding of the time doesn't provide for good criticism. You have to admit, the peer-review process itself has problems: http://tinyurl.com/y9e64s8 or http://tinyurl.com/n5dbdz But my point was that I don't think 'peer-reviewed'='absolutely true' any more than 'found on the internet'='absolutely false' and that it is close-minded for you to demand peer-reviewed material to even consider that you may be misinformed. And regarding how I gather the information on which I base my opinions, I find your assumptions based on "poor analytical methodologies." Secondly, maybe you need to do some reading beyond what you learned in your Intro US History before you get condescending with people. The name "Do-Nothing Hoover" was started by opponents of Hoover! But looking at the facts, nothing could be further from the truth http://tinyurl.com/dbdbq5 He spent large amounts of money and used the government as the mechanism to try to bolster the economy: http://tinyurl.com/ye38el9 or http://tinyurl.com/lr2g56 And in the end, Hoover himself indicated that he had ignored those who recommended "do-nothing" and that it was he who initiated the interventionism: http://tinyurl.com/ydhbp3x Actually, I'm curious how you explain the contradiction in your own last sentence. If his plan was "do nothing", how and why did he rack up such massive deficits?

Article Response #4

Article:
http://www.idsnews.com/news/story.aspx?id=72488

Response:
1) Sanders is a proclaimed socialist. To merely state he's an 'independent' because he isn't a Democrat or Republican is misleading. In fact, the fact that both Bunning and Sanders both wish to hold Bernanke's reappointment should be telling.
2) Why is it just assumed fact that his actions (and those of Geithner and Obama) made things better? Economics is about balance, like supply and demand. When one changes, it exerts a force on the other (and possibly over many other things). Over the course of decades, more of the US, both government and personal finances were based on debt (largely due to the artificially low interest rates of the FED). When enough of that debt manifest itself in bad investments (i.e. subprime mortgages), a chain reaction of revoking credit began. This whole "bubble" was not only allowed, but encouraged by manipulation in the market by the FED. Now that that bubble burst, as the market began to divest itself of these poor investments and bad debt, as we started the difficult climb from badly extended credit to more sound investments, what did Bernanke do? He lowered interest rates, began printing of MASSIVE amounts of money, and intentionally TRIED to make credit, borrowing, and debt to get going again. This is what led to the crisis to begin with!!! Note that since he got approval to print trillions, has lowered interest rates to effectively 0% and Obama has injected billions into the economy, it's not surprising we've seen the short-term improvement we have. However, throwing money at the situation doesn't necessarily fix it. Remember that GDP has, as part of its measure, Government spending. So say the government were to massively raise taxes and spend trillions on welfare and unemployment handouts, GDP may actually increase. Would that realistically represent actual growth in our economy? Of course not. So just because we seemed to have a sliver of growth doesn't mean that we're on our way to recovery. And as for the evaluation of Bernanke, we cannot start with an assumed premise (things would have been worse had he not done what he did) and then go from there. Remember, Obama said that if we did NOT pass the stimulus, unemployment might get up to 8%, but that if we did pass it, it wouldn't rise past 7%. I'm not so confident in their prognostication abilities.

Article Response #1: GDP != State of Economy

Article:
http://www.idsnews.com/news/story.aspx?id=71799

Response:
"The Republican alternatives in Congress, mostly just collections of tax cuts, would not have set unemployment on a drastically different course than it is on now." If the smarts of the Obama admin were so wildly inaccurate in their prediction of the impact (or lack thereof) of the stimulus package to unemployment, how can you (or anyone else) so quickly and easily dismiss tax cuts as being wholly ineffective? --- "Even though the recession may be technically over – the government just reported the economy had grown for the first time in nearly a year" Be careful how you interpret those results. Look at the data itself. GDP is the primary measure they're bragging about, part of which is government spending (source). That has certainly gone up over the last months, but does that really indicate a better economy? Also, consider cash for clunkers occurred during that period. Even though that's basically govt paying for half of your car, it all adds to GDP. It's not a sign of a strong economy, it's just a sign that someone is throwing a lot of money in the pot, that someone being govt. And where is the government getting that money to throw? It's printing it, it's borrowing it, from foreign countries (select 'Ownership of Federal Securities'] and from our posterity. But that isn't sustainable. There are many economists predicting that looking back at 2009-2010 the stimulus will cause the recession to slow, stop, then create a "fake" recovery, followed by another downhill period as the "bump" provided by the stimulus goes away. Now politicians are considering a second stimulus because they believe that if they can keep things afloat long enough, then the private sector will recover on its own by then. How? ... Somehow.

The Effects of Minimum Wage

I keep getting into discussions with liberal friends of mine about increasing the minimum wage. I have problems with minimum wage in general and especially with raising it. Now I'm not positive that getting rid of it altogether would be good, but I do believe that raising it causes small problems to be exposed and compounded, and bigger problems to become "crises" (sorta like we're seeing now). Now I'm not an economist, but despite the fact that I've heard remarkably little about the raise in minimum wage with regard to the current economic strain, I still feel that there's an impact that's going unreported. So I thought it through, past the initial hike and the more money people would initially get. I wanted to post the cause-and-effects with regard to minimum wage as I see them.

Firstly, let's make it clear. When the govt raises minimum wage, what they're doing is basically forcing companies to pay ALL of their employees more. Because when you raise the rate you have to pay your entry level positions, they would be earning the same as the second tier employees. Because these second level positions usually require some additional training or skills, you have to pay them more than the bare minimum. Then to keep wages competitive, corporations have to raise the amount they pay their third tier workers as well. Etc, etc on up the chain.

Remember that as long as we're in a capitalistic society, the goal of companies is to ethically make as much money as possible. Now, as I see it, in order to be able to pay all their employees more money, there are really only a few options they have:

• Absorb the extra costs and take a cut in profits
• Some would say this is acceptable considering how outrageously large the profits are for some of these corporations. Problem is, while these multi-billion dollar profit oil companies could probably absorb the increase, the vast majority of businesses in America are small-medium businesses.
  
• [Admittedly, small businesses (<$125,000 revenue) get some tax cuts to help with the additional costs. However, I'm dubious if the cuts cover the entire cost of paying higher wages, so they still have to come up with more money.]
  
• How would a non-profit deal with this?
• Also ask yourself, how do you think the stock of a publicly traded company would react if the company suddenly announces a cut in profits?
  
• Increase prices
• If you don't take the money from profits, then you have to get more money from somewhere. So many companies will resort to increasing the costs of their goods and services. By increasing costs (and hoping their demand doesn't decline) they will look to increase revenue and hopefully be able to handle the extra expense of paying their workers more without reducing profits.
  
• Now to me, the widespread increase in costs is basically artificial inflation. And inflation was the reason why people were shouting for the increase in minimum wage in the first place! So by increasing the minimum wage, we've indirectly increased the cost of living and artificially accelerated the rate of inflation. So in another 5-10 years, guess what they say is needed again?
  
• [I'm picturing a dog chasing its tail right now.]
  
• Lay off employees
• If you don't take the money from profits and you don't increase prices to increase revenue, then you don't have enough money to spread out across the employees. So something has got to give. The next relief valve is to reduce the number of employees. So it's not surprising to me that we're now hearing about numerous companies laying off batches of workers.
• Move overseas
• Say you don't want to lose profits, price-tolerance says you can't raise prices, and you can't afford to reduce supply by eliminating employees. Now say you're considering updating or expanding production. What incintive is there to open a new factory in the US? Not much other than being closer/easier to manage and perhaps patriotism. Looking that the possible advantages:

• Lower cost of materials
• Lower cost of labor
• Minimal environmental regulations
• Less red tape and paperwork requirements
  
• Lower taxes (a whole other article)

• Add into that the fact that the US has free trade agreements with numerous countries and I'm surprised there are still even factories left in the US!
  

Now I'm not an economist. I have only looked at what seems to me to be logical cause-and-effect. And what we're observing in the economy lately seems to be support me. Please someone tell me where I'm wrong, because both Democrats are talking about raising it to a "living wage" which could be $10 or $11 /hour or more!

Economics Reading

I've been interested in learning more about economics. I'm going to assume that, as with most things, I don't even know how much I don't know. But I do know that I'm currently pretty libertarian in my views. I'm going to begin reading some in that vein (Ayn Rand, Milton Friedman, etc) and see if I agree with their views or not. After that, I may look for some opposing views and see what I think of them. Any suggestions?

RR

Can the media impact gas prices?

I've seen this title before and I'm going to take a different direction in answering this question from most. Most stories which ask if the media can impact gas prices generally have one of two views: 1) Can the media, through persistent and vocal "calls to action", cause those evil, greedy, price gouging oil companies to lower their prices in deference to the poor? or 2) Does the media, through scare-tactics and overemphasis of a non-story, cause gas prices to skyrocket?

My thought is a little different; a little longer in scale. What if the media's criticism of high gas prices have actually created an environment where it is no longer in the oil companies best interest to increase supply?

Follow me on this...

Over the last several years, whenever gas prices go up, there is a constant criticism of oil companies by many in the media. Cries of gouging and beratement of profits and CEO salaries are frequent. Shortly following this, there is a push of substitute energies and alternative fuels. Between this and the constant barrage of global warming warnings, there is an ever growing motivation for people to move off of oil/gas. Currently we are enjoying $3+/gal gas. Many blindly call this a ploy by the oil companies, however, others are pointing out that the price of oil is $10/barrel cheaper this year than last when the prices were slightly cheaper. They then call attention to the fact that much of the influence on our supply of gas is the ability to refine it from oil. As many have noted, the refining capacity (amount of oil we can convert to gas per day) is virtually the same now as it has been for 3 decades since there hasn't been a new refinery built in over 30 years. This does NOT mean that the demand for gas has similarly remained static. Economics 101 says increased demand and static supply results in increased cost.

Now, here's where the media comes in to play. As they've pushed new sources of energy and alternative energies, they are TRYING to create an environment where we lower our usage/need for oil/gas. What if the oil companies believe them? If the oil companies prognosticators look at oil in 50 years and see an End-Of-Life. What motivation is there for them to spend millions/billions of dollars to create additional refining capacity now if the demand for gas will begin to decline in the next few years? Business-wise, it makes more sense for them to wait out this last peak (as they see it) in demand before it begins to decline and alternative fuels begin to take over.

So in the media's constant criticism of high gas prices and push for new fuels, have they themselves been (unintentionally) complicit in the rising of current prices?

Gas prices going back up?

Gas prices have dropped by about a full buck in the last month or two. There's the theory that Bush dropped the price using his oil cartel connections in order to improve the GOP image prior to the November elections. The followup theory being that once the elections are over, prices will reinflate again. Even those that don't attribute the drop in prices to Bush's aspirations believe that they will rise again at the occurrence of a single hurricane or terrorist attack or incident in the Middle East. So I have a suggestion. Gas cards by the gallon.

The gas companies should start selling gas cards by the gallon instead of by the dollar. That way, people who believe that gas prices are going back up and even higher, will be able to buy gallons of gas at the current prices, thus saving themselves $$$ once it goes back up. The advantage to gas companies is that the longer gas prices stay low, the more they make. Obviously the gas cards would have an eventual expiration date as well. That way people can't horde away hundreds of gallons of gas for several years just waiting for it to go back up.

Either way, it gives those with the conspiratorial axe to grind with the price gouging gas companies, an opportunity to save money based on where they believe the prices will go.