g m g D e s i g n . c o m

What do you get when you cross someone who is impulsive, thrill-seeking, deceitful, and completely without a sense of right and wrong? A psychopath, of course.

And despite the high rate of recidivism of psychopaths, perhaps they should be cut some slack. After all, they can’t help their neurological make-up. In a sense, it’s really not their fault, or at least that’s the argument that lawyers will be making.

A psychopath is someone who has no capacity to empathize. Note that the term psychopath does not suggest that someone is crazy. In the movies, “psychos” are invariably portrayed as killers. That reputation does have a basis in reality, but it is certainly not always the case. In “Snakes and Suits” (a book co-authored by Dr. Hare, the inventor of the psychopathy checklist), the authors describe psychopaths who attain high positions in corporate America, taking credit for the work of others and spreading enough confusion and misinformation to keep their opponents in check and their bosses happy with their “work.”

Psychopathic individuals already have a good chance at getting out of trouble. They can lie remorselessly and convincingly, persuading even the skeptical recipient that he or she is wrong and the psychopath is correct. Psychopaths are expert human predators — societal parasites who will use our weaknesses against us, sometimes for no obvious reason.

Throughout history people with psychopathic tendencies have gleaned power for themselves at the expense of many. I certainly can’t prove that Hitler, Stalin, and Saddam were psychopaths (per the checklist), but it seems highly probable that they were.

Psychopaths in America aren’t quite as powerful as the aforementioned psychopathic candidates, if only because our system is more effective at incarcerating them. A disproportionate share of the prison population scores high on the psycopathy checklist. Rather than attaining power, they go to prison.

Some people with psychopathic tendencies, such as James Arthur Ray*, attain wealth from his gullible followers before being exposed. But, as is typical of psychopaths, not everyone is convinced that they’ve been duped, even after the predator is exposed. On one of James Ray’s “vision quests,” three people died and multiple people were injured due in no small part to negligence on Ray’s part. Unsurprisingly, Ray fled the state (Arizona) following the incident and, to my knowledge, never took responsibility for his actions. I suspect he will face no serious repercussions for his criminal negligence, in large part because he will likely have no trouble persuading a jury of his “innocence.”

Having read about the chilling, disturbing, cold world of psychopaths, it’s tempting to believe that psychopathy itself should be criminalized. Maybe that’s a bit draconian. But in regards to this talk of cutting psychopaths some slack, I say that it’s a dreadful idea. A psychopath would de-fraud you of your wealth or kill your family and not feel bad about it for an instant. Feeling sorry for these predators is a travesty for the line of victims left in their wake.

* Note – at no point have I claimed that James A Ray is a psychopath. I cannot prove that and will not make such a claim. I merely point out that, based on media reports, he has psychopathic tendencies.

Unfortunately, hyperbole is getting the best of people (mostly conservatives/libertarians) who believe that Guaranteed Retirement Accounts (GRAs) are a form of asset seizure by the central government. GRAs—which may or may not ever come into fruition—are a bad idea in my view, but they do not represent an asset seizure (FactCheck.org has a decent write-up). I make this point because this is the type of frenetic hyperbole that makes conservatives/libertarians look like idiots (bad, since I tend to associate myself with conservative and libertarian ideals).

Having said that, I really don’t like GRAs. The “guaranteed” idea is misleading, the rate of return is awful, and greater reliance on the central government of the United States is disturbing to me. Generally, I believe the federal government should have fewer and more defined areas of focus rather than greater breadth of involvement in our daily lives.

GRAs would have a low rate of return (3%), which of course is zero percent after considering inflation. They would be subject to government whim, and I can see this sort of retirement savings program becoming highly politicized. My understanding is the government could invest that money as it saw fit, returning 3% and (I presume) keeping any profit above 3% for itself or for re-distribution to others.

If you’re an investor and you want a low (but stable) return, then invest in index funds covering cash equivalents, bonds, etc. Interestingly, you could essentially achieve the “GRA dream” by simply investing in a federal government bond fund in your existing retirement plan. Regardless, even a relatively stable (but low return) portfolio would still likely out-pace inflation (3%), meaning the GRA plan is still a bad bet.

Alternately, if you want to actually have money when you retire (and esp if you’re relatively young, like me), invest in a broad mix of stocks and bonds (via index funds or ETFs) and wait for the interest/dividends/cap gains to compound over time.

Reading and listening to the coverage and commentary on healthcare, it’s hard not to become cynical. On the Right, you have repetitive talking heads with no interest in adding depth to the debate, instead arguing bellicosely against what they see as government-run healthcare (a credible threat, I concede), but providing no additional insight beyond that. On the Left, we’re met with the supposed “reality” that the “market has failed”—as though the market is free and unregulated to start with—and that the government must step in and save healthcare as we know it, providing liability coverage (insurance) to millions of Americans.

Yet the truth is in between, and the visions of both the Left and the Right are at best useless and at worst dangerous. There are real consequences to failing to understand economic problems and issuing false solutions to those problems. Using the fiat hand of government to distort markets has led to many severe consequences, and a few catastrophic consequences as well.

Something must be done about healthcare. That much is certain. Idealistic libertarians—and I’m including libertarian-leaning conservatives* in that group—are wrong to discount the need for action—for “change,” if you will—in healthcare. We do need change, and simply blocking that change isn’t enough for conservatives as a political force nor for the country.

Liberals*, for their part, are correct that we need “change,” but they fail to understand the necessary change, instead opting for change that “feels better” and is politically easier to explicate rather than sustainable and fiscally responsible change. They look at the deplorable number of non-insured without ever asking the obvious question:  why is medical treatment so very expensive that even routine procedures are unaffordable without insurance? The issue of cost control is met with an outmoded response: use the coercive power of government to control costs via legislation; furthermore, compete directly with the greedy, heartless private sector via a “public option.” Neither pseudo-solution will lower costs in the aggregate, instead shifting the cost burden and likely increasing aggregate costs.

My own libertarian instincts notwithstanding, I feel like the only practical and politically feasible solution is to mandate that every American have some minimal level of healthcare. Call it catastrophic health insurance, if you will. It would be like a high deductible health plan (HDHP), but primarily intended for ER visits and other major events. Of course, Americans could get beefier or additional insurance as well, though tax incentives toward “premium” (or Cadillac) plans would be removed, as would tax favoritism toward employer-sponsored health insurance. That coupling would be weakened over time. To truly distribute risk—which is the intent of insurance in the first place—non-discriminatory laws would be enacted such that insurance applicants are not rejected for existing medical conditions. More people would have health insurance even as insurance itself was taking a less active role in medical treatment.

In fact, the problem with healthcare is insurance itself. That is not to say that high healthcare costs are primarily due to insurance companies per se, though they do share part of the blame. Government shares a significant portion of the blame, and of course the public and media share the remaining. I’ll leave room for blame toward other sources as well, but that’s beyond the scope of this blog entry.

Healthcare is the only insured activity where typical, quotidian expenses are expected to be paid—at least in part—by insurance. Imagine going to Home Depot, purchasing some new lamps, and then whipping out your home insurance card at the cash register. Or imagine asking the mechanic who just rotated your tires if he will file your auto insurance claim or if you’re expected to do it. What would happen? In either case, the person at the cash register or in the body shop would probably look at you as though you were completely bonkers. And yet, a visit to the doctor necessitates the use of insurance and the negative ramifications that go along with it.

Referring to the examples above, what would happen if oil changes and tire rotations necessitated the use of insurance? Further, suppose due to custom or fiat legislation that auto insurance was required to cover such expenses; what then would happen? I suspect that oil changes and tire rotations would rise in price, perhaps over many years, until they were hundreds of dollars. In fact, you would likely blindly hand your insurance card to the attendant, never knowing before or after what the actual price of the tune-up (except your own co-pay). That is exactly what we do at the doctor’s office; and try polling hospitals in advance of surgery how much the operation will cost—you will likely be met with disbelief and non-committal estimates.

It doesn’t have to cost $2,000 to visit the ER. Routine or even advanced surgery doesn’t need to cost thousands or even hundreds of thousands of dollars. Staying one night in the hospital doesn’t need to cost as much as the accumulated mortgage payments for the entire year. While tort reform would lower some of these costs by lowering risk premiums, it would still not be sufficient to lower aggregate costs of medical care (though it would be a good start). More must be done, the objective being to increase price transparency and competitiveness. Ironically, that involves less insurance involvement, not more. The lofty goal of “insuring millions more Americans” is only a recipe for enslavement to insurance companies or to government itself for medical coverage, and even then it’s dangerously unsustainable.

There are solutions to our sick healthcare system, but time is running out. Solutions must be agreed upon by a majority in both parties, lest it be unwound later on. The solution isn’t a simplistic bullet point but instead a visionary, multi-faceted change; it must be phased in over time, not rammed through over a Christmas holiday. That’s the change I can believe in. Will the political class listen?

* Note that I’m using the modern definitions of conservative and liberal from the American vantage point.

Implications:

This scandal has real implications. Mr. Inhofe notes that international and U.S. efforts to regulate carbon were already on the ropes. The growing fear of Democrats and environmentalists is that the CRU uproar will prove a tipping point, and mark a permanent end to those ambitions.

The scientific, or possibly pseudo-scientific, basis for the quasi-religious zealotry of the climate change movement has been called into question. Hence, the political will to propose dumb ideas like a cap and trade regime will probably not happen. I’m looking forward to the free market, not bureaucrats, deciding on innovative engine designs and cool new alternative fuels. Having said that, I’m not certain that that will be one of the implications.

Per the NY Times:

Two years ago, Congress ordered the nation’s gasoline refiners to do something that is turning out to be mathematically impossible.

To please the farm lobby and to help wean the nation off oil, Congress mandated that refiners blend a rising volume of ethanol and other biofuels into gasoline. They are supposed to use at least 15 billion gallons of biofuels by 2012, up from less than seven billion gallons in 2007.

But nobody at the time counted on fuel demand falling in the United States, which is what has happened during the recession. And that decline could well continue, as cars become more efficient under other recent government mandates.

At the maximum allowable blend, in which gasoline at the pump contains 10 percent ethanol, updated projections suggest that the country is unlikely to be able to use all the ethanol that Congress has ordered up. So something has to give.

Security expert Bruce Schneier has a great editorial on zero-tolerance rules. So what are zero-tolerance policies?

These so-called zero-tolerance policies are actually zero-discretion policies. They’re policies that must be followed, no situational discretion allowed. We encounter them whenever we go through airport security: no liquids, gels or aerosols.

Why are they annoying?

These policies enrage us because they are blind to circumstance. Editorial after editorial denounced the suspensions of elementary school children for offenses that anyone with any common sense would agree were accidental and harmless. The Internet is filled with essays demonstrating how the TSA’s rules are nonsensical and sometimes don’t even improve security. I’ve written some of them. What we want is for those involved in the situations to have discretion.

And finally, Schneier’s recommended solution to them! (emphasis added at the end)

The solution is to combine the two, rules and discretion, with procedures to make sure they’re not abused. Provide rules, but don’t make them so rigid that there’s no room for interpretation. Give the people in the situation — the teachers, the airport security agents, the policemen, the judges — discretion to apply the rules to the situation. But — and this is the important part — allow people to appeal the results if they feel they were treated unfairly. And regularly audit the results to ensure there is no discrimination or favoritism. It’s the combination of the four that work: rules plus discretion plus appeal plus audit.

According to some well-known economists, the higher income disparity in this country is not a bad thing. They talk about how in certain emerging markets—China and India—economic growth and the income disparity that has resulted has not been bad for inhabitants of those countries, even for those toward the bottom of the socio-economic ladder.

In this country, they explain the bulk of the wage gap as follows:

The main action came in the earnings of college graduates and those with postgraduate education. They both increased at a rapid pace, with the earnings of persons with MBA’s, law degrees, and other advanced education growing the most rapidly. All these trends produced a widening of earnings inequality by education level, particularly between those with college education and persons with lesser education. I should also note that while an upward trend in the earnings gap by education is found for both men and women, and for African Americans and whites, the earnings of college educated women and African Americans increased more rapidly than did those of white males. As a result, inequality by sex and race, particularly among college educated persons, narrowed by a lot.

[…]

The widening earnings gap is mainly due to a growth in the demand for educated and other skilled persons.

Bottom line is that artificial means at shrinking the wage gap could have unintended consequences (politicians are renowned for their ability to not foresee the consequences of their legislation). Legislation that coercively shrinks the wage gap (stronger unions, higher min wage, punishing “progressive” taxes) could eventually result in market-distorting, state-sponsored ramifications that a) discourage investment in economically productive areas of the market and b) discourage individuals from pursuing higher education. The long-term ramifications of such legislation by our political luminaries would not be immediately obvious, but over time would decrease our competitiveness and productivity and, therefore, our standard of living.

If we all have lower standard of living, do we really benefit from a narrower wage gap?

The irony is that government could declare a sharply lower standard of living as a “market failure” and become more involved in the economy… oh wait, that’s already happened, has it not?

EDIT:

Their concluding para is worth reading:

So instead of lamenting the increased earnings gap by education, attention should focus on how to raise the fraction of American youth who complete high school, and then go on for a college education. These pose tough challenges since the solutions are not cheap or easy. But it would be a disaster if the focus were on the earnings inequality itself. For that would lead to attempts to raise taxes and other penalties on higher earnings due to greater skills, which could greatly reduce the productivity of the world’s leading economy by discouraging investments in human capital.

In a move to prove how economically inept they are, the Times has editorialized their favoritism toward the much-discussed “public option.”

The last para espouses that, eventually, the “public option” be available for everybody.

I’ve written before about why I think the public option is a bad idea (and no, not because some conservative loud-mouth on “talk radio” told me what my opinion should be). The underlying reason is that our medical system as a whole isn’t very good, and additional activism by government will make it worse – in fact, cementing the current system in place for many more years to come.

We need reform, but the “reform” currently being proposed will further lead us astray if it includes the public option. I have a vested interest in cost control (that doesn’t decrease quality). Hence, my bias in this debate is in favor of real and substantial reform (again, something I’ve written about in the past).

The bottom line is this. Although government can make promises, such as liability acceptance for millions of people (via the provision of insurance), that does not mean that the government can guarantee outcomes. The government can promise that people will get insurance (and, by extension, medical care), but that doesn’t make it so. Government can’t guarantee that its own market interventions won’t augment the already-high level of market inefficiencies, leading to higher aggregate costs associated with medical care and treatment. Even if government covered everyone in this country, that does not mean that a) medical coverage would truly be affordable – imagine if income tax rates went up to 60% for most Americans, or that b) quality would be higher or as high as what we have now (imagine waiting months for time-sensitive surgery, or years for “optional” surgery).

Government can’t guarantee outcomes even though government can accept liability with the stroke of a pen. The role of government at various levels has rendered the medical insurance (“healthcare”) market less efficient, with aggregate costs much higher (and far less transparent) than they otherwise would be.

Greater inefficiency and higher aggregate costs (with likely lower quality of service) is a future worth avoiding.

Every time I see a headline like this one I am reminded of the verbal manipulation used by the media. We hear a lot about healthcare reform. Prior to the medical insurance debate, we heard a lot about the economic stimulus package.

Do you see the Orwellian thought manipulation here? It’s not outlandish government spending, it’s a stimulus package. I.e., the government is giving us something for free—like magic!—and it goes without saying that it will have a stimulating effect to the economy, all without any rational justification for this conclusion.

The even thornier subject of “healthcare reform” is fraught with similar manipulation. First, it’s apparently “reform” to introduce yet more government in an already heavily regulated system. Second, apparently, healthcare is synonymous with medical insurance.

Oh, and did I mention that those who rationally oppose the current Big Government effort to overhaul healthcare are extremists?

The Freakonomics blog revisits the pending and likely-to-pass “cash for clunkers” legislation. Levitt is less concerned about the legislation, suggesting it will have a smaller impact than originally thought (good). Unfortunately, there’s usually a way to game government give-aways, and Levitt proposes the following (emphasis added):

If any vehicles are going to qualify under this program, I suspect it will be because enterprising people who already plan to buy new cars will go out and buy old junkers on the used-car market and then trade them in under the program. But those transactions won’t represent incremental new car sales; it will just be a way for people who were already going to buy a car to rip off the government.

So, the government, in their infinite wisdom, will encourage economically unproductive activity among enterprising people who want to earn a buck on our dime.

Having said that, if this does stimulate the auto companies, is that really helpful? Should consumer demand be based on the government’s chosen sector of the economy, rather than from the aggregate choice of consumers?

Ron Gettelfinger, whose union has single-handedly destroyed the US auto sector, makes an impassioned plea for … money? I don’t know, really.

Well, the closing para was pretty good:

If industry stakeholders will continue to work together, we can set the stage for a renewal of U.S. manufacturing, including a revived domestic auto industry.

I suppose the farm lobby will next lobby for a return to the agrarian society, putting us all to work in the fields.

Really, what the car companies should have pushed (in my opinion) is this: a transformation to a knowledge-based company. Manufacturing would take place in developing/emerging markets, primarily, while many high-pay jobs remain in the US as designers and other professions. Economically, that makes a helluva lot more sense for a variety of reasons.

Lastly, I wonder how many people (domestically) are employed in the car industry. Millions, looking at the entire supply chain, I suspect. The idea that it’s better to have more people rather than fewer produce identical output is absurd. I realize no one is explicitly making that argument (if they knew to make the argument, they’d understand the absurdity), but that certainly seems to be the implication.

In other words, real standard of living rises when productivity rises. Fewer people producing the same or greater output is for the aggregate good of the economy. “Saving jobs” is often the complete antithesis of that, meaning that efforts to “save jobs” can actually cause a reduction in the real standard of living.

Not that Gettelfinger, or our political leaders, care about such things, of course.

Per the NY Times:

[The “Buy American” clause] is sparking conflict with American allies and, rather than supporting employment at home, the “Buy American” effort could ultimately cost American jobs.

Foreign and domestic companies that employ hundreds of workers in this country cannot bid for government projects because they cannot guarantee the American provenance of all the steel, iron and manufactured goods in their supply chain, as the provision requires. Others are scrambling to figure out whether American-made alternatives exist to replace their foreign inputs.

This is a very good idea:

[A program meant to beef up military enrollment by guaranteeing US citizenship for military service]  was authorized without fanfare late last year by Defense Secretary Robert Gates to attract temporary immigrants who speak strategically important languages such as Arabic, Farsi and Korean. The bait: The soldiers could immediately apply for U.S. citizenship, skipping the sometimes decadelong process of securing a green card first.

So many Koreans have applied, however, that the Army doesn’t need them all.

While some people scream that our country is being “diluted” (whatever that hell that’s supposed to mean), I argue that this is a very good idea. No nation in the world that exists (or has ever existed) integrates disparate groups and cultures better than the United States. Arabs in this country are freer and wealthier than Arabs in the middle east. Asians in America are better off than Asians in their ancestral homelands. Ditto for Latin Americans.

No one beats America at integrating multifarious people groups and cultures.

Citizenship following military service is just another win-win outcome that serves our strategic interests & theirs.

It’s uncertain that the “cash for clunkers” program will move forward, but if it does, it might look like this (emphasis added):

Say you owned a 2001 Dodge Ram four-wheel-drive pickup with a 5.9-liter engine. That truck has an EPA combined fuel economy of just 13 miles per gallon. Under the House proposal, you could scrap that vehicle and get up to $4,500 toward a truck weighing more than 6,000 pounds that got at least 15 miles per gallon. One that might qualify — depending on how weight is defined and measured — is a 2009 Dodge Ram 1500 four-wheel-drive pickup with a 5.7-liter V-8 and a combined 15 mpg.

So, a multi-billion dollar program will subsidize Big Auto and, of course, Big Labor. It will trade gas guzzlers for gas guzzlers on tax payer expense.

Pretty stupid, even by our political leadership’s very low standards.

An NY Times editorial by Ramesh Ponnuru argues against so-called “universal healthcare.”

After getting over the initial shock of an editorial against universal healthcare in the editorial section of the NY Times, I read the commentary.

First para:

AMERICA’S dysfunctional health care financing system needs to be reformed. But the goal should not be universal coverage. Reform should simply aim to make health insurancemore affordable and portable.

The crux of what he’s proposing is here:

An alternative approach would be to make it easier for people to buy insurance that isn’t tied to their employment. The existing tax break for employer-provided insurance could bereplaced with a tax credit that applies to insurance purchased either inside or outside the workplace. At the same time, state mandates that require insurers to cover certain conditions, which make it expensive to offer individual policies, could be removed.

Ponnuru makes some of the best points I’ve seen against universal healthcare, so be sure you RTA.