Economic Axioms and an apology for assuming something was obvious

View 802 Monday, December 09, 2013

“Transparency and the rule of law will be the touchstones of this presidency.”

President Barack Obama, January 31, 2009

 

Christians to Beirut. Alawites to the grave.

Syrian Freedom Fighters

 

What we have now is all we will ever have.

Conservationist motto

 

If you like your health plan, you can keep your health plan. Period.

Barrack Obama, famously.

 

Cogito ergo sum.

Descartes

Cogito cogito ergo cogito sum. Cogito,

Ambrose Bierce

My apologies for my rather obscure humor with my “quote of the day.”

Chicken chess

Jerry,

Nice quote of the day! Heh. I sincerely hope Putin said that. Hilarious!

""Negotiating with President Obama is like playing chess with a pigeon. The pigeon knocks over all the pieces, shits on the board and then struts around like it won the game…""

I think I first heard it years ago, and I really hope Putin’s English coaches just threw it at him as an American or English ‘idiom’ last week and he threw it into the mix. An oldie but a goodie! Heh. I seem to recall it as a chicken (chickens can be trained to play checkers if I recall correctly) here’s a good one from a month or so back:

http://inagist.com/all/386938157671153664/

Anyhow, the sentiment is not lost on me, whether or not Putin said it or not. I Respect Putin, I Laugh at Obama.

I thought it pretty obvious that the Russian chief of state would never have publicly said anything that crass about the President of the Unite States. As my correspondent points out, the story has been told for decades, and attributed to just about everyone in modern times. I believe it was once attributed to Hitler about Neville Chamberlain. It has certainly been said about other American Presidents.

I have received mail informing me that there is no reliable source for Putin ever to have said that, and I am sure it is true. I would be astonished if there were. My apologies for a misplaced sense of humor.

Time Warner has lately had the habit of shutting down my Internet connection about 11 PM PST every night when I sit down to do the mail, so there hasn’t been a mailbag for a while. I’ll get to that. Also there are a number of items to discuss including the current DOJ punishment of Apple with what amounts to a Special Prosecutor whom Apple must pay at $1000/hour and more. http://online.wsj.com/news/articles/SB10001424052702303997604579242320326157900

This is a continuation of the odd DOJ law suit about Apple’s conspiracy to fix book prices by allowing publishers to set their own price for eBooks, as opposed to the Amazon model of having the prices fixed by Amazon. The result of this vile conspiracy is that Amazon has about 85% of the eBook market, and Apple is just beginning to crawl out of the hole it dug itself. One might think that Apple has adequately punished itself. As to anti-trust measures, one wonders. The anti-trust case against Microsoft had nothing to do with real monopolies: Microsoft didn’t believe in having a huge Washington lobby to dispense largesse to government employees and Congressional staffers, and the biggest Washington presence of Microsoft was its sales staff. After the anti-trust action against Microsoft that all changed and now Microsoft throws the big parties and does the other other stuff one expects from the Washington office of a bit corporation.

Now Apple is being shaken down. It’s one way to spread the wealth around.

I have had several smart lawyers try to explain to me how the world was harmed because Apple allowed publishers to set their own prices for the products they sold through the Apple store – the “Agency Model” – as opposed to Amazon’s “:reseller” model in which they paid the wholesale distributor price for a book then sold it at whatever Amazon thought best – usually less than Amazon paid for it for big loss leaders. Of course book stores have long been giving enormous discounts on best sellers in the hopes of getting customers into the stores where they will buy other books at full price and perhaps buy some coffee as well.

I have never understood why I needed the federal government to protect me either as a consumer or as an author. Amazon continued to pay the publisher the full distributor price – generally half the cover price – and author royalties are a percentage of the cover price, so there was never an issue there. And yes, the issue is far more complicated, and involves whether or not Apple conspired to fix book prices which is said to damage the entire market and be bad for everyone; and all this will shortly be before the Court of Appeals. Meanwhile every Apple executive including the design and innovation departments are being summoned before a federally appointed master who has the power to waste their time and collect $1,000/hour as he does it. This is not likely to give us the next big thing. Apple’s competitors are rejoicing: not only have has the government placed a primary hamper on Apple innovation, but Apple is being forced to pay for the inquisition.

That’s nice work if you can get it.

For more on this case, see http://appleinsider.com/articles/13/12/06/wsj-blasts-apple-e-books-antitrust-judge-in-scathing-editorial

I am fortunate enough to have several physician readers of this column, and I would appreciate comment on last week’s Wall Street Journal editorial

Don’t Get Your Operation on a Thursday

Legislation can’t fix hospital overcrowding. Better scheduling of surgeries can.

By Eugene Litvak http://online.wsj.com/news/articles/SB10001424052702303914304579194530055759414

New York, five other states and the District of Columbia are considering legislation that would mandate minimum hospital-nurse staffing levels. The Massachusetts Nurses Association is planning an initiative for the November 2014 state ballot asking voters to approve a law setting minimum staffing levels for all hospitals, a change they say would alleviate the dangerous strain on overworked nurses and result in improved patient care. The nursing associations in the six states (including Texas, Iowa, Mass., N.J. and Minn.) fervently support such legislation. In turn, hospitals vehemently oppose staffing mandates.

Who is right and who is wrong? Although each side is right in some sense, there is a way to address the legitimate problems faced by nurses without a rigid formula like minimum staffing. It will help nurses and their patients while simultaneously saving hospitals money.

The problem apparently is that there are busy days and slow days in hospitals, and on the busy days the demand for nursing and orderly services in higher than the supply, while on other days there isn’t all that much for them to do. I’ve noticed the same thing in visits to Kaiser: some days the waiting rooms are full, other days the nurses have time to chat with both patients and each other. It really isn’t possible to have a bunch of standby nurses instantly available when demand is high, but not having to be around and on the payroll when things are slow.

Litvak’s solution is better scheduling models, something most OR (Operations Research) guys like me are familiar with. The first thing is to model the input queues. There are good statistics on demands for emergency room services, and a number of good models for staff sizes given predictable fluctuations in demand, and then accounting for an additional random demand input. I’d be astonished if most hospital administrators were not familiar with them. And according to Litvak

the peaks have nothing to do with emergency rooms. The real cause is scheduled, i.e. planned, patient admissions. When many admissions are scheduled for the same day, they create artificial peaks in the demand for beds and thus more work for nurses. Without the peaks in demand that hospitals themselves bring about with their scheduling practices, the hospitals could afford a much better nurse-staffing ratios without controversial legislative measures.

There is a hurdle, though. To better regulate the flow of patients, hospitals will have to change the way they accommodate the surgeons who have operating privileges at their institutions. Surgeons bring revenue into a hospital and in the past have largely operated at their convenience. The challenge is for hospitals to work with surgeons to stagger their scheduled admissions and procedures.

Surgeons are a limited resource and have their own scheduling requirements, and they are not slaves or good candidates for enslavement.

I’d appreciate comments.

I once did a lot of formal study of economic theory, but I gave up: most economic models can be fudged to explain everything, but they don’t seem to be very good at predicting; which is one reason the Five Year Plans that were going to produce wealth in socialist countries didn’t work so well.

I have distilled basic economics into a few axioms about economics and government. One is primary.

I say this is an axiom, which is to say it is self-evidently true:

If you want more of something, subsidize it. If you want less of it, tax it or fine people for doing it.

A corollary is that if you can’t tax it, regulation will usually produce the same result.

The consequences of this should be obvious. If you want more unemployment, subsidize it. Pay people to be unemployed for a living and you will get applicants; raise the subsidy for being unemployed and you will get more of them.

But of course this is no more than reopening the discussion of the Deserving and the Undeserving Poor, and it has long seemed evident to me (not an axiom but a postulate) that the best way to deal with that dilemma is to leave a very great deal of the safety net to non-governmental institutions – to Tocqueville’s Associations. In his time these were mostly religious because religions promise high rewards for charity (And the King shall answer and say unto them, Verily I say unto you, Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me.)

Of course we discourage religious activities and under the corollary we get less religious based activity for supporting the poor, so that government gets involved in deciding who shall receive entitlements and who shall not, and that involves politics and unionization. At one time there was even an attempt to form a union of welfare recipients, but I haven’t hear much about it since one city mayor invited them to go on strike and withhold their services.

Another principle I consider axiomatic is that raising minimum wages either has little effect or causes unemployment, and raising them enough will produce mass unemployment. This has always seemed self=evident to me, but my friend Ron Unz, who is a pretty smart cookie, has a different view.

Raise the Minimum Wage to $12 an Hour

Ron Unz, a software developer and publisher of The Unz Review, is the chairman of the Higher Wages Alliance, which is sponsoring a California ballot initiative next year to raise the state minimum wage to $12 per hour.

Tens of millions of low-wage workers in the United States are trapped in lives of poverty. Many suggestions have been put forth to improve their difficult situation, ranging from new social welfare programs to enhanced adult education to greater unionization. But I think the easiest solution is also the simplest: just raise their wages.
The current federal minimum wage is $7.25 per hour and hiking it to $12 would solve many of our economic problems at a single stroke.

http://www.nytimes.com/roomfordebate/2013/12/04/making-low-wages-liveable/raise-the-minimum-wage-to-12-an-hour

I have tried to follow Ron’s arguments here, but I can’t. I don’t see where the money will come from. The Marxist labor theory of value is that value is added by labor, and the capitalist pays below the value of the labor and keeps the surplus value for himself. Of course he then invests that profit in other enterprises, but that could be accomplished by a better system in which the workers themselves then own the enterprises in which the surplus values are invested.

Ron Unz argues that if Wal-Mart raised prices by less than 2% it could afford the $12 minimum wage without further price adjustments, and this would produce a massive economic stimulus – the higher pay would all be spent, not saved or invested, making more business for Wall-Mart – and the economy would boom. Wall-Mart won’t do that because this would signal competitors to pay less money in wages and use what they save to cut prices below Wall-Mart’s; but a minimum wage law would fix that. Now to compete with Wall-Mart you can’t do it by paying less than it pays, and once again everyone benefits.

I don’t know, but it seems to me that raising minimum wages either has no effect – people are already getting that – or it raises the cost of doing whatever it is that the worker does, and if that isn’t worth the minimum wage the job will disappear.

But I will vigorously dispute one point Ron makes: raising the minimum wage isn’t going to save billions in entitlements.

He says

Ordinary taxpayers would be the other great beneficiaries, saving many tens of billions of dollars each year in payments for Food Stamps, the Earned Income Tax Credit, housing subsidies, and other social welfare programs. Businesses should pay their own employees rather than quietly shifting the burden to government programs and the American taxpayer. Conservatives and free-market supporters should endorse this simple idea.

This assumes that having raised minimum wages the entitlement programs would be cut. I don’t believe that is politically possible.

I don’t disagree that Scrooge ought to have paid Cratchit a higher wage and ought to have bought a goose for the Cratchit family. I am less sure that Parliament should have required him to do it.

It’s lunch time. More later.

I have not given abandoned the discussion about evolution theories, and the notion of inheritance of acquired characteristics needs discussion, but to me it is self evident that the original Darwinian hypothesis of blind chance and survival of the fittest simply can’t be demonstrated as plausible. My friend Fred has something to say on the subject: http://fredoneverything.net/LastDarwin.shtml And like Fred, I don’t know.  I don’t claim to know.  Just as I don’t know about Global Warming. But I am pretty sure that those who do claim that they KNOW are wrong.

 

Freedom is not free. Free men are not equal. Equal men are not free.