Russ Roberts hits another home run: Keynes vs Hayek part two

Automated “Shirk”?

Shirk: to evade (work, duty, responsibility, etc.).

“Shirk” in economics has the same definition that appears above. However, one component of shirk studied in the field of economics is shirk appearing in differing organizations of the firm. Collectivist firms suffer multi-stage shirk. Late stage collectivist models suffer from rampant shirk.

What if “shirk” becomes automated within a collectivist model? Automated shirk: data processing systems that automatically set the conditions for shirk. A completely automated and impartial shirk condition producer.

What if shirk goes beyond being embedded within the collectivist organization’s workers. Shirk goes beyond the collectivist organizational structure. What if shirk becomes embedded in the automated systems of the organization? What if data processing technological advances allow for ever increasing “automated shirk”?

Lets take an example. You visit your friendly local public school system. Records are not correct. You want the record to be corrected. What is the first thing you hear? “Well on the system it says……”.  "You see, after two weeks the system....".

Does the problem then languish with you having to produce a mountain of paper work, tons of personal trips, numerous phone calls, speak to eleven different people, and maybe on a good day with the wind behind you solve the problem. That your cost is elevated as you must spend time/resources to overcome automated shirk.

In the example above the “system” creates the condition for shirk which sets off cascading conditions of shirk. Why did the system shirk? It didn’t. It is most likely the data system was merely produced with such central planning parameters its inflexibility creates the condition for shirk.

Hence we have an automated data processing system with design parameters set forth by the members/power purveyors of the collectivist firm. The "system" is designed rigid just like the rigid collectivist firm it serves. The data processing system becomes an integral part of the collective based firm. When a correction is needed the data system's design doesn't easily allow for change. Therefore each error creates a condition for "shirk". The collectivist based firm's members then display shirk regarding correcting the error as the data system has created the conditions for shirk. Blame the system and fail to solve the problem.

Given the condition presented by the rigidity of the automated data system, each member of the collectivist firm then has the opportunity to shirk their responsibility to correct the error as shirk conditions have been created/are present. One member merely shirks to another shirker. That is, as you climb the ladder of the eleven people, member one merely shirks to member two and so on. That is, shirk cascades. All the while you suffer the effects of shirk as the error remains. Automated shirk!

The Components of a Bubble?

“You can’t run the government like you run a business”- Our Dinner Table Blog

From the Our Dinner Table Blog:

"I often hear folks proclaim that you can’t run the government like you run a business.


Next time I hear that I intend to ask, what should you run the government like? Is there a good analogy?

What special circumstances does government face that makes it unattractive to run it like a business? What aspects of running a business is not befitting of the government?"

A most excellent question.


However, is the more basic question/problem what F.A. Hayek described as the arbitrary decision to deliver public goods through a government controlled public sector? Hayek argued that the government levies tax and gathers tax revenue for the choice of public goods taxpayers desire. The arbitrary disconnect occurs after the funds are collected. Why create a public sector to deliver the public goods? Outside of defense and public safety, why have government deliver the public goods? Why?

Hayek’s argument was that public goods would be more efficiently delivered by the private sector with government merely acting as the tax gathering mechanism and ordering the delivery of the public goods that taxpayers desire.

Hence every opportunity exists for government to choose what delivery mechanism it desires. Enter the politico. One must never forget that governments don't think, decide, discuss. Only politicos as the power purveyors of government think, decide, discuss. If the politico creates a public sector to deliver public goods then the politico can expand his/her power. Hence the delivery mechanism is an arbitrary decision finding its basis in decisions by politicos. Therefore we end with a system of politicos through the mechanism of government delivering public goods.

Possibly the answer to the question "What special circumstances does government face that makes it unattractive to run it like a business?" lies in that the delivery of public good is not a business but rather power politics.

“You can’t run the government like you run a business”- Our Dinner Table Blog.
http://ourdinnertable.wordpress.com/2011/04/25/you-cant-run-the-government-like-you-run-a-business/

Mr. Smith Receives $10,000! A Two Minute Course in Public Choice Theory.

Grocery School - Don Boudreaux, George Mason University, department of economics‏

One should consider heading over to the blog Cafe Hayek and read the post Grocery School.

"Suppose that we were supplied with groceries in same way that we are supplied with K-12 education."

http://cafehayek.com/2011/04/grocery-school.html

Government promises?

In the coming debate regarding major reductions in federal spending certain politicos will frame “spending” as “government promises”. That a reduction in spending is somehow a reduction in a promise.



There were never any “government promises“. You see, governments don’t think nor make decisions. Any promises were exactly made by politicos, with other peoples’ money, through the mechanism of government.



The reduction in spending, meaning a reduction in politico promises, creates a basic problem for politicos: they have spent the better part of eight decades spending other peoples' money to build dependent political constituency. They have constructed, maintained, and perpetuated spending as a political constituency building exercise and could care less about the actual outcome of the particular spending. Spending focus by politicos is primarily on the dependency factor to built and maintain constituency. They also grant rent seekers (special interests) benefits (taxpayer money) as a further extension of political constituency building.


The result is: reducing/eliminating other people (politicos) ability to spend other peoples' money (taxpayer) on other people (recipient class) is in fact a threat to politicos’ constructed, maintained, and perpetual political constituency building exercise. Hence reducing spending is a threat to their supporting political constituency (votes, political donations, campaign volunteers, etc.).


Therefore, perpetuating spending is paramount to the politico. Framing the argument that spending equals government promises is an attempt to portray reduced spending as broken promises. The Orwellian phrase “government promises” is merely new speak for “politico promises” as governments don’t think or decide, only politicos think and decide.

Protesting their own demand for pollution?

After watching the above video one will note a fully stocked, climate controlled convention center complete with chairs, tables, podium, microphone, etc.. The convention center is filled with people wearing cloths, shoes, ear rings, glasses, assorted makeup, etc.. These participants are carrying ipods, cell phones, smart phones, back packs, etc..

Meanwhile we have a parade with costumes including plastic helmets, pre-printed signage, matching underwear, etc..

The conventioneers and parade participants traveled to and from the convention and parade in trains, planes and automobiles which include steel, plastic, rubber, etc..

Feel free to add to the list here -> ___________ .

“In fact, the people responsible for pollution are consumers, not producers. They create, as it were, a demand for pollution“. - Milton Friedman

Hence we have a group protesting their own demand for pollution. Even if you took into account their minimalist approach, they would still be protesting their own demand for pollution. Where is George Orwell when you need him!

“One source of atmospheric pollution is the carbon dioxide that we all exhale. We could stop that very simply. But the cost would clearly exceed the gain.” - Milton Freidman

The 1920–1921 Depression and Coolidge - Harding vs. The Great Depression and FDR economics

Please take a moment and play the above video regarding Standard and Poors down grade of U.S. debt. There is a wealth of information in this eleven and one half minute video. U.S. debt is real and something needs corrected post haste and straight away.

Uncharted economic waters



One must remember we are in uncharted economic waters. One must further remember that much empirical study of past depressions/recessions, and there has been many deep recessions aka depressions in the U.S. economy, are based on the study of U.S. recessions/depressions when household and government debt was small and/or non existent. That is, we are in uncharted economic waters within an environment of hyper-debt. Hence past empirical studies have a component in common of studying many recessions/depressions in which low debt was the norm.



However, take a special look at 10:08 until the end of the video. Especially 10:08 until 10:48. What is eluded to is that Great Depression economics of the FDR administration did not work in this current economic environment of uncharted waters.. Larry Kudlow may well be contrasting the FDR economics with the 1920–1921 depression and Coolidge - Harding economics.



Note: if you have never heard of the 1920–1921 depression and Coolidge - Harding economics you are not alone. Its glossed over in history books. However, well known in the field of economics.



Friedman and Schwartz



One might trace back QE1 and QE 2 to Milton Friedman and Anna Schwartz. That the Fed’s tight, tighter, tightest money policy deepened and prolonged the Great Depression. Hence the money supply clearly needs expanded when cataclysmic financial shocks occur. Hence Bernanke is following Friedman-Schwartz.



Coolidge - Harding or FDR



On the other side of economics, aside from monetary policy, we have fiscal policy. If you deploy Schwartz-Friedman do you deploy Coolidge - Harding or FDR? The strategy chosen was FDR economics.



The FDR strategy has failed for a second time. Friedman and Schwartz appears to be working. However Friedman and Schwartz is temporary and meant to find a soft economic landing zone. Coolidge - Harding?

Public school education system dismal output: a counterintuitive proposition.

When researching the dismal output results of the public school education system in the United States one finds that over the past 40 years a 200% real dollar increase in spending on public school education (K - 12) has occurred. Yet the quality of output has remained constant or slightly declining.

Applying economics to the dismal results, given the massive increase in funding inputs, yields the conclusion that one is merely finding, viewing, experiencing the classic attributes produced by a late stage collectivist model delivered through monopoly. Hence the economic conclusion is that the increase in inputs have not increased quality of output due to the general output attributes of late stage collectivism.


However, here is a counterintuitive proposition: what if the 200% real dollar increase was never intended to be output related?

Skip by the concept of a collectivist model delivered through monopoly suffering declining output in its later stages and move to the more insidious concept of direct enrichment of the collectivist players. Set aside the output issue for a moment and concentrate on the input. Has the 200% real dollar increase (input) caused a maximization of the wage/benefit of the members of the collectivist model? Yes. Was the enrichment a blanket enrichment to all players in the collectivist model or was the enrichment skewed within the model toward the central planning power purveyors within the collective (administration/bureaucracy hierarchy)? Yes.

If the 200% real dollar increase is the more insidious concept of direct enrichment of the collectivist players, why and how would it happen? The "why" is related to politicos using taxpayer dollars to build a dependent political constituency. That is, politicos found that by increasing funding to public school education they built a political constituency that they could depend upon to vote for, campaign volunteer, and make political campaign contributions to the particular politico or group of politicos.

Directly related, the now dependent political constituency (dependent on the flow of taxpayer dollars) obtained leverage with the particular politicos or group of politicos to further accelerate the flow of tax payer dollars. The "how" is that the flow of taxpayer dollars, increasing at an increasing rate, was never intended for output it was intended for political constituency building. Hence the recipient of taxpayer dollars enriched themselves as the dependent political constituency of the politico. That is, the politico or group of politicos sending ever increasing taxpayer dollars to strengthen and solidify their dependent political constituency were in fact sending the money for the enrichment of their particular constituency and had no intention to send the money as an output related item.


If the counterintuitive proposition is correct then politicos have funded a dependent political constituency at no direct cost to them by merely funneling taxpayer dollars to a recipient class. The recipient class aka the dependent political constituency then enriched themselves with the flow of tax payer dollars. The flow of taxpayer dollars never reached, arrived at, nor are associated with educational output.

Rent Seekers Seek Rent Seekers

Rent seekers aka special interests seek a claim against tax payer monies. The rent seeker might want the monies in the form of direct assistance, tax payer funded subsidies, or want special conditions such as government regulation to protect their position within the market place which then taxes the consumer-tax payer in higher prices. Rent seekers have been known to want a combination of the afore mentioned.

The sly rent seeker lobbies for their claim and many, many times are successful. That is, politicos spending other peoples' money (tax payer money) are not shy in bestowing other people's money upon the rent seeker. However, other sly rent seeks exist as well. The exogenous rent seeker is lobbying for their particular claim. Hence rent seeker X receives their claim. Rent seeker Y receives their claim. Yet rent seeker X and rent seeker Y, in the final analysis, pay for each others claim. That is, if rent seekers X and Y represent firms, non-profits, or citizen groups, their particular claim must be paid by other firms, non-profits, citizen groups of which a subset is rent seekers.

Therefore the sly rent seeker in the form of the lobbiest believes success has been achieved when their claim is validated. They explain to the firm, non-profit or citizen group that they represent that success had been achieved. However the "success" is framed in a closed system argument. That is, it would be success IF no other rent seekers existed. Some one must pay for all the rent seeking activity including rent seekers themselves.

Government is the great fiction through which everybody endeavors to live at the expense of everybody else. - Frédéric Bastiat

It is High Tea Time at Schumer’s Extreme Tea and Flea Room

“Ya better say yer prayers ya flea-bitten varmint! I'm a-gonna blow ya to smithereenies!”
- Yosemite Sam

‘Schumer, who has been criticizing Republicans all day, said in a floor speech Friday
that conservatives were the flea controlling the dog, which he said in this
case is a federal government that could shut down at midnight.



“What we have here is a flea, wagging a tail, wagging a dog,” said Schumer, chairman of
the Senate Democratic Policy Committee.

“The flea are the minority of House Republicans who are hard right, the tail is the House
Republican caucus, and the dog is the government,” Schumer explained. “That
flea is influencing what the dog does ... and it is sad.”

Schumer for more than a week has been arguing that Tea Party conservatives will be to blame
if there is a shutdown.

“When either party goes to the extreme they don’t do the right thing,” said Schumer.
“My experience is they lose politically, but much more importantly they do what
is wrong for the country substantively." ‘(1)

‘Sen. Chuck Schumer can't spin his way out of this gaffe.

The media-hungry liberal leader yesterday accidentally revealed the inner workings of the Democratic Party's "extreme" p.r. machine -- hurting budget negotiations as both parties brace for an April 8 government shutdown.’ (2)

Summary

Apparently when a flea drinks enough tea the yield is an extreme tea flea.

Notes:

(1)    http://thehill.com/blogs/floor-action/senate/154963-schumer-likens-house-conservatives-to-a-flea


(2)    http://www.nypost.com/p/news/national/knucklehead_chuck_CZpf1dHEUAC2e1r008Qy3J

Elitists

In political discourse you will see a reference to “elitists”. Generally the term elitists is used to designate the few somehow, someway enlighten individuals of the political, intellectual, or academic
classes who’s particular vision of society is somehow, some way more enlightened than the vision of others.

Some award the political term of “elitist” to Karl Rove. (1) However, Rove by no means was the first to refer to the label elitist. Milton Friedman referred to an “elite class” when discussing the emergence of the modern welfare state in his classic 1979 book Free to Choose. (2) Whereas
others argue the elitist label is merely anti-intellectual.  That is, people use the term in the positive
or negative. (3)

Is there a better definition, less political /more empirical, more thoroughly researched definition of “elitist”? Yes there is such an animal. Its most likely related to Thomas Sowell’s definition of
“special knowledge” as it appears in Sowell’s books A Conflict of Visions and Intellectuals and Society.

The term “special knowledge” as used by Sowell appears related to F.A. Hayek’s discussion of central planning and the inability of any one individual to have enough information to organize economic activity and associated outcomes.

F.A. Hayek’s discussion of decentralized knowledge trumping centralized knowledge is nicely summed up by Harold Demsetz as follows:

“…the historically important central puzzle of economics was to explain how independently acting people in an unplanned decentralized, private ownership economic system allocate their resources and, in particular, to explain how it is that the uses they seem to make of resources seem to be
well coordinated”.(4)

What is “special knowledge”?

An expert might be categorized as someone who is perceived to have acquired the most knowledge in one particular field of study such as geology or mathematics. Moreover, other participants within a particular field of study consider a particular person as an expert in the field of study. “Special knowledge” is when one leaves his/her particular field of expertise and acquires a self-designated position as an intellectual.

The self-designated and self-appointed intellectual designation is an attempt to transfer particular expert knowledge from an unrelated field to another field and instantaneously acquire “special knowledge” in a completely unrelated or mildly related field of study.

Special knowledge, the self-appointed intellectual, and political-economy?

Most notably, as pointed out by Rove, Friedman, and Sowell, the self-appointed intellectual , the elite as it were, want to comment and shape opinion specifically in the field of political-economy. For example, Paul Krugman trying to transfer his expertise in trade economics to political-economy commentary on society as a whole. Bill Gates trying to transfer his expertise in the field of computers to political-economy commentary on society as a whole. Barack Obama trying to transfer his expertise as a community organizer to political-economy commentary on society as a whole.

The once expert in a particular field, now a self-appointed intellectual in an unrelated field, has somehow, someway acquired “special knowledge” in the unrelated field. That is, the expert knowledge in a particular field becomes “special knowledge” in an unrelated field. Hence
“special knowledge” is merely notional propositions of the way things ought to be of a particular self-appointed intellectual with the premise being that an expert in one field is surely an expert in an additional field, that being most notably the political-economy.

Elites as the self-appointed intellectual?

Hence the definition of “elitist” as merely anti-intellectual misses the mark. It’s not that an elitist is anti-intellectual; it’s that an elitist is a self-appointed intellectual making political-economy
commentary on society as a whole through use of special knowledge which is in fact no knowledge. That is to say, we have a group of people, self-appointed people that have no expert knowledge in the field of political-economy, making notional statements which are in fact statements of “the way things ought to be”. That is, an elitist is a non-expert, making notional comments and putting forth
the notional propositions as fact, when the actual case is the notional propositions are merely their particular non-expert view of the way things ought to be and hence painting the world in one’s own self-image or self-vision.

(1)http://www.associatedcontent.com/article/1031684/elites_elitists_and_rove_politics.html?cat=9

(2) Free to Choose, 1979, Milton Friedman, chapter four,
page 98

(3) http://www.newsandsentinel.com/page/mboard.detail/fNav/71/What-does-the-term--elitist--rea---.html

(4) From Economic Man to Economic System, Harold Demsetz.

ObamaCare Slush Fund for Media Outlets? No Way! Way!

"Two mainstream news organizations are receiving hundreds of thousands of taxpayer dollars from Obamacare’s Early Retiree Reinsurance Program (ERRP) — a $5 billion grant program that’s doling out cash to companies, states and labor unions in what the Obama administration considers an effort to pay for health insurance for early retirees. The Washington Post Company raked in $573,217 in taxpayer subsidies and CBS Corporation secured $722,388 worth of Americans’ money."

Read more:  http://dailycaller.com/2011/04/06/washington-post-and-cbs-receiving-money-from-obamacare-slush-fund/#ixzz1IpYiu2Cr

“Expectations” a major variable in economics is merely a myth?

On Sunday 04/03/2011 edition of the “This Week” program crazy old uncle Paul Krugman, Noble prize wiener-whiner at larger, decided to rewrite economic theory in 20 seconds or less. You see, one of the major variables in economics, which is expectations, is merely a myth.

Which then begs the question: is expectations a myth or is the more likely case that crazy old uncle Paul is the myth?

It becomes a mighty sad case when a Noble prize winner in economics constantly, clearly, and repetitiously shows why he should have never won the prize in the first place.

The American Lung Association: A Billboard Jumble.

The following is from the Wall Street Journal “Political Diary” 03/31/2011:

Childish Behavior -- Kim Strassel

You know a lobby group has sunk to new lows when it resorts to using children to further a political agenda. So cast your eyes downward for a view of the American Lung Association.






The ALA recently posted billboard ads across the district of House Energy and Commerce Committee Chairman Fred Upton. The ads, in Michigan's 6th congressional district, show a young girl with a respirator mask over her face accompanied by the words: "Rep. Fred Upton, protect our kids' health. Don't weaken the Clean Air Act." At least one of the four billboards is near Mr. Upton's district office.


This attack on Mr. Upton, a Republican, stems from his efforts to bar the Environmental Protection Agency from going around Congress's back and unilaterally regulating greenhouse gases. If you are wondering what greenhouse gases have to do with kids' health, the answer is nothing. Groups like the ALA, allied with green outfits such as the Natural Resources Defense Council, peddle the myth that higher carbon dioxide concentrations will somehow result in more health conditions, though there is no real evidence in support of that view.


In its billboards, and in a letter to Mr. Upton, the group said its concern was that efforts to block the EPA from regulating greenhouse gases would "undermine and weaken" the broader Clean Air Act, resulting in more pollution and conditions such as asthma. But as the ALA clearly knows, Republicans want to limit the EPA's ability to regulate carbon dioxide, not any of its other powers. If anything, stopping the EPA from devoting enormous resources to the issue of greenhouse gases will free the agency to focus more of its efforts on its core mission of cutting back on real pollution.


The American Lung Association has found common cause with liberal groups who are in support of greenhouse gas restrictions. It has bought into global warming fears and supports an energy-restricted economy. And it isn't above using kids to make its point.


Those Darn Donations

Hence the American Lung Association has elected to use their contributors gifts to erect billboards that make unsupported statements. In other words, erect billboards with notional statements put forth as fact via donor contributions.

Yes, as has been well published and well documented, donations to non-profits don’t always go to the ideal the particular donors intended.

You donated for additional research? Sorry, billboards are on tap today. You donated for additional staffing to further research? Sorry, it’s a billboard thing. Donated money for additional state-of-the-art facilities. Sorry, you are trumped by the need for billboards.

Paradox

Upon further review, if the American Lung Association wants categorical risk management regarding air pollution of any sort, they surely want categorical risk management of all forms of pollution. Yes? Of course!

Wrong. You see, billboards are considered “pollution” as well. Really? Uh huh.

If one is going to make a non factual political statement, with the use of other peoples’ money, it fits the overall pattern to be as hypocritical as possible in the delivery of the message.


Billboard Pollution?

“Tomorrow is Earth Day, an apt moment to ponder the ways digital billboards and other forms of outdoor advertising create light pollution and squander energy. And while we’re on the subject, we might think about how our physical and mental health may suffer from these effects.” (1)

“It is time for Mendocino County to take stock of the ever-increasing number and size of ugly billboards that are destroying the wonderful views here in Mendocino County.” (2)

"Critics charge that the new signs, like the 500,000-plus old-style billboards dotting U.S. highways coast to coast, not only blight the landscape but represent private exploitation of roadways that the public paid for....The big new digital signs are kicking off a heated argument about safety...South Carolina Department of Transportation ordered removal of 45 trees because they were inside the 300-foot highway 'view window' the billboard lobby had urged the state to mandate...Indeed, at least 28 states have laws that can force cutting trees owned by the public on public land if they obscure drivers' clear view of billboards...How 'ungreen,' one wonders, can government policy get?" (3)

‘Scenic Pittsburgh is a new chapter of Scenic America, a nonprofit that grew from former First Lady Lady Bird Johnson's campaign to beautify America. Scenic America's website takes on billboards as "sky trash," "litter on a stick" and "the junk mail of the American highway." ‘ (4)


The Politico Messenger and the Message Media

The “American Lung Association”, in the abstract, is an entity that doesn’t think, discuss, or initiate action. The only thinking and decision making is made by the bureaucracy of the non-profit institution known as the American Lung Association.

The thinking and decision making comes from the hierarchy of the bureaucracy of the American Lung Association. Each individual within the hierarchy of the bureaucracy of the American Lung Association can surely exercise free speech. If the powers-that-be feel they need to become political then they should voice their concerns and get their message out as free speaking individuals. Each individual within the ALA should express their opinion.

However, when a non-profit takes other peoples’ money (donations) and makes a political-economy statement, a statement that in fact does not reflect all donors’ particular political-economy statements (each individual donor‘s statement) , then it merely becomes the political-economy of the bureaucracy of the non-profit. The message, the political-economy of the bureaucracy, is then re-associated with the abstract being known as the American Lung Association. That is, implicit to the message, the sub-group attempts to set forth the message as absolutely inclusive of the millions of donors, when in fact it’s a message of a particular sub-group.

What about the particular political-economy message media choice? Let us suppose for a moment that a bureaucracy is bold enough to spend donors’ money on their own particular brand of political-economy. Lets further assume the political-economy statement is X. Moreover, X is portrayed as negative. Lets state that Y is a sub-component of X. That is, if X is negative, one of X’s attributes is Y which is also negative.

The bureaucracy, being the rational message sender of its own political-economy message by use of donors‘ funds, chooses Y negative sub component of X to deliver X negative message. That is, is it rational to choose one pollution (billboards) to advertise your political-economy of air pollution? -Or- Is the zeal to send the message of a particular sub-group, by use of other people’s money (donors), so zealous that one sends the message by paradoxical means? Is the need to send the message so zealous that the sub-group never thinks through the paradox?

Notes:

(1) http://banbillboardblight.org/?p=4489

(2) http://agriculturedefensecoalition.org/?q=billboard-pollution

(3) http://www.planetizen.com/node/24603

(4) http://www.post-gazette.com/pg/10318/1102988-53.stm

April Fool's Day: the left handed Hamburger?

Below is a link to the to the top one hundred April Fool's Day hoaxes of all time:

http://www.museumofhoaxes.com/hoax/aprilfool/P0/