Friday, January 13, 2012

I Want A Cadillac


The Bain attacks are an interesting phenomenon, the meaning of which remains unclear. Are they simply the consequence  of the unleashing of money upon the electoral process produced by the Citizen's United decision? Do they say something important about the instability of the Republican coalition? Time will tell. As far their fairness and accuracy I am, in contrast to yourself, agnostic. I certainly don't feel that capitalism (an economic system that I endorse heartily) is under attack. It's Romney's character that is under attack, absurdly, by opponents with far less character than he. It seems that one of the requisites for entry into political life is an absolute absence of shame. The other requisite seems to be the absence of a sense of irony.

Sounds like you don't like the President very much. You have a lot of company there. Fitness I suppose is in the eye of the beholder. Given who politicians are at their core, I can accept Romney's breathtaking willingness to say anything to be President. But are you certain of what you'll get if he ascends? Does one know with any degree of confidence where he stands, on anything, except in his own belief in himself? One thing I am certain of is that we'll get a man who doesn't have a clue about the lives of ordinary people. Not that I think I have much either given the fabulously fortunate life that I've lead. But that matters to me, maybe even more than competence. And it matters to most Americans, which is why Romney is hardly a shoe in, despite Obama's current dismal approval rating 

The complaint you lodge against the government's role in picking winners and losers is well placed. But our government has been poking its nose into the nation's economic life since the beginning, with often spectacularly positive results One of the interesting lessons I've learned reading the Time's Disunion blog, was that Lincoln, while trying to put the  country back together, also managed to promulgate a series of long term government-interference-in-the-economy policies that had long-lasting, profound, salutatory effects. The Homestead Act, Railroad Acts etc.  So I certainly believe that there's role to play-it just depends on what and how much and how often. It also helps when you no opposition as Lincoln did

What the government ought not be doing is encouraging, or even allowing rent-seeking, a term that I just learned from David Brooks this week. What we both lament is that both political parties allow and even encourage it. Rent seekers, also known as lobbyists are after all what keep campaign coffers full. Maybe that's what I'll relearn from Cadillac Desert, next on my list after I finish In the Garden of Beasts.

If President Romney
1) Revamps the tax code to eliminate all the special breaks
2) Endorses some form of Simpson Boles to fix the deficit
3) Moves toward some form of the Ryan Widen Health care pan (his own is similar I believe)
4) Continues Obama's innovative efforts at education reform
4)Keeps the Persians from getting the bomb
5) Nudges the Israelis and Palestinians toward a comprehensive peace.

He'll have my support. He'll also amaze me.

To return once more to GM and the concept of risk. The bankruptcy could only unfold once. No mulligans here. One cannot say with certainty that an ordinary bankruptcy would not have severely damaged an already crippled economy. Lots of folks have opined that it in fact would have. And though I have no formal experience with economics, my reading suggests to me that the events that worsened the Great Depression were exactly the kinds of unmodified crumblings that you argue do no harm. That's why Bernanke, a lifelong student of the Depression, took the steps he did, and why he has been so vilified for it

What did happen was that GM recovered, the government investment is being repaid, and I'm going to buy a Cadillac next year:

As for the minimum wage, hasn' that experiment been tried already? One can find an entertaining description of the kind of world that produces in any Dickens novel. America in the 19th century was a vibrant bullish place, with plenty of constant and collateral damage that is no longer allowed. That's why we have basic protections for workers like the minimum wage, 40 hour work week, and child labor prohibition. I  respectfully disagree with your assertion  "that the vast majority of the time they are hurting the groups they purportedly are helping."

Risk avoidance and cost in the medical world are correlated. We will go to great lengths and spend a lot of time and money to avoid rare events.

As ever


1 comment:

  1. Eli,

    I've heard you make this arguement before "Risk avoidance and cost in the medical world are correlated. We will go to great lengths and spend a lot of time and money to avoid rare events."

    This does not apply to the business world or our economy. Risk avoidance and cost (profits/productivity) are negatively correlated. People and companies that take greater risks are rewarded and if they fail they can simply try again and our economy is better for it. Capitalism does not support avoiding rare events. The companies that survive end up producing more profit and utility then the ones that are lost. For Example lets look at 3 large retailers and this latest recession: Borders, Circuit City, Amazon. Two died, one survived, are we worse off? Amazon's 2010 sales, exceed the sum of all three's sales in 2007-2008. While sales is not a perfect indicator for jobs and productivity it's a good estimate. Amazon has adapted and is now a stronger company that provides better services to the economy.

    It is also worth noting that rare events in the economy are not predicatable but are consistent in their occurence. Nassim Taleb is famous for his perspective that the only thing predictable about the market is that extreme events keep happening.