The Financial Crisis Explained

John Allison's discussion of the financial crisis is far and away the best that I have ever heard.

See his book talk here.

his book at amazon:

The Financial Crisis and the Free Market Cure

I will be rematching and reading his book, because I really have not heard anything that comes close to this book at describing our economic situation.  Although the second half of the book talk was more free market ideology rather than describing why we are where we are economically

Political Quiz

The Economy 

Our budget can be balanced, with only tax increases, if we

(A) tax the rich.
(B) double all taxes paid by everyone.

If taxes are raised on the rich, then

(A) government revenue will increase.
(B)  the rich will leave, and the government's revenue will be lower.

If taxes are raised on businesses, then

(A) the rich will be made poorer.
(B)  the poor will be made poorer.

Our budget can be balanced

(A) without changing entitlements.
(B) only if we change entitlements.

Unemployment is high because

(A) the rich don't pay their fair share.
(B) businesses are taxed and regulated to the point where they are unable to expand or invest.

Which is more likely to balance a budget?

(A) taxing the rich
(B) cutting spending

Life

Its good to criticize the cost of a political candidate's wife's wardrobe so long as the candidate is a:

(A) Republican
(B) Democrat

If taxes are raised on cigarettes, then

(A.) people will stop smoking.
(B.) more cigarettes will be bought out of state

Feminism has

(A) improved the lives of women.
(B) resulted in unhappy women who aren't getting married or having kids.

Women working is

(A) empowering.
(B) a bad idea.
 

Guns

Mass shooting occur 

(A) where guns are allowed.
(B) gun-free zones.

More people are murdered in states where

(A) gun control laws are loose.
(B) gun control laws are strict.

Gun control laws are

(A) sensible.
(B) nonsensical.

The NRA is ____ of an ideological fringe than gays and lesbians.

(A) more
(B) less

Banning things that we don't like

(A) eliminates them from our society.
(B) move the items into the Black Market, and makes criminals out of average people.


Miscellaneous

Global warming is

(A) caused by man's activities.
(B) explained by seasonal variations and the sun's activities.

The lack of minorities in Obama's second term cabinet is

(A) disappointing, shameful and an important issue to discuss.
(B.) irrelevant to anything.  Only their abilities to do the job should matter.

Technology vs. Employment

Many people think that automation and new technology will replace lots of workers and increase unemployment.

This is the way a bad economist* thinks about it.

While it is true that some jobs will be lost in the short term as technology improves, it is also true that our wealth will increase.

At one time it took all day, every day, for a person to get food, shelter, and clothing.  Because, in part, of technology all of those things are cheaper.  Cheaper goods and services mean that we can acquire more goods, services, and free time.

The role of humans will never be completely replaced by technology.  Someone still has to build it.  Someone still needs to fix it.  And someone still needs to direct it.

Consider this: In which scenario are people wealthier?

A) A dozen people work at a factory making widgets**.  They make 100 per day.
B) A dozen people manage their own factories, which each make 100 per day.

Clearly in case "B" fewer people have boring, repetitive manual labor jobs.  They all have more interesting and higher paying jobs.  And more widgets, and wealth, are produced.  Who get's paid more: someone who creates 10 widgets per day, or someone who creates 100 widgets per day?

Admittedly this example is very much simplified.  But is is unnerving how few people understand economic ideas, that are even more basic than this.

An example:

In 1881, Dakota Territory had never sold a bushel of wheat to anybody outside of
Dakota. Six years later, it sold 62 million bushels. 
 
What happened?

I recently read Garet Garrett’s The American Story, which came out in 1955. It is a well-written history of America, unusual because of its emphasis on the powerful economics that drove the country to great heights. Garrett tells the Dakota story in this book, which is a useful reminder about how economies grow and prosper.

What happened in Dakota was that farmers invested in machinery. The riding plow, the reaper and the combine harvester made the farms far more productive than they had been. Suddenly, the labors of one man could produce 5,000 bushels of wheat. A single miller could turn that wheat into 1,000 pounds of flour.

But that was not all. New railroads connected the farmer to the mill and the mill with markets and ports in the East. The energies released were enormous. Garrett writes:

“So the labor of four men — one a farmer in Dakota, one a miller in Minneapolis and two on the railroad — plus a very low rate for ocean carriage — could put into Europe enough flour to feed 1,000 people for a year.”

Four people to provide food for 1,000.  Instead having 996 more people need to spend their time making food, they became free to invent new things, and explore new places.  The world became wealthier because people did not need to spend their lives finding enough to eat.

This is how progress is made.  While they don't admit it, or even know it, what people who oppose automation are opposing is actually progress and wealth.

I have not yet read The American Story, but the three books that I have read by Garet Garrett have all been superb.   Read it for free here.

In places like Mongolia or Myanmar, for example, you find today’s Dakota Territory. Not that Mongolians are as free as those American pioneers, but there is so much frozen potential to unlock by applying technology and know-how and capital to their situations. It’s these mind-bending changes — and the lure of profiting by them — that attract me to explore the world beyond the developed West.

-The American Story...Abroad

*A bad economist is someone who only looks at the seen and not the unseen.
** "Widgets" is the economic term to mean, "goods or services."  It just means "a thing."  It is easier to say "widgets" rather than pick an example, like cars, or shoes, or customer service calls.

Indiscreet

I'm going to recommend a movie from 1958 with the idea that I doubt that too many people today have watched movies from the fifties.  Indiscreet stars Cary Grant, who did many romantic comedies that are actually watchable, unlike modern romantic comedies.  It also stars Ingrid Bergman who you would have seen in Casablanca.

I am recommending it because:

• Its amusing to watch
• The elements of Game are interesting

After a "jump break" I write about the plot and why it is interesting to those who study game.

Welcome tp the government...

from here

In the District of Columbia, I need to get a simple Basic Business License to rent out a single dwelling. After puzzling over the Department of Consumer and Regulatory Affairs website for a bit, it became clear that step No. 1 was actually to file form FR-500 with the Office of Tax and Revenue, which you can do online. Then it was time to hustle down to the DCRA (which closes at 4:30 p.m.) to file the paperwork. Once there, I learned that filing the FR-500 online wasn’t good enough—I needed a hard copy. Fortunately, the Office and Tax and Revenue was right across the street, so I went there and refiled. Then it was back to the DCRA to stand in line to get a number, wait for the number to be called, do some more paperwork, wait in another line for the cashier, fork over $100 in fees, then get a slip from the cashier to finalize the paperwork.

But then it turned out I needed to go to a third office, the Rental Accommodations Division of the Department of Housing and Community Development. It closes at 3:30 in the afternoon and required a 15-minute walk through a sketchy neighborhood. So the next morning I went down to that Rental Accommodations office to file a paper claiming exemption from D.C.’s rent control law.

The striking thing about all this isn’t so much that it was annoying—which it was—but that it had basically nothing to do with what the main purpose of landlord regulation should be—making sure I’m not luring tenants into some kind of unsafe situation. The part where the unit gets inspected to see if it’s up to code is a separate step. I was instructed to await a scheduling call that ought to take place sometime in the next 10 business days.

etc.

Inside North Korea

An interesting look into North Korea.

Excerpt:

Ordinary North Koreans live in a near-total information bubble, without any true frame of reference.  I can't think of any reaction to that except absolute sympathy.  My understanding is that North Koreans are taught to believe they are lucky to be in North Korea, so why would they ever want to leave?  They're hostages in their own country, without any real consciousness of it.  And the opacity of the country's inner workings--down to the basics of its economy--further serves to reinforce the state's control. 

The best description we could come up with: it's like The Truman Show, at country scale.

The Best Movies

I thought that I would take a shot at listing my idea of the best movies ever.

My list is a bit different than most because I disregarded those movies that I did not like: Gone With the Wind, Citizen Kane, The Godfather, etc.  There seems to be a surplus of western movies on my list, but most movies, with budgets worth considering, have been American.  And westerns are the definitive American genre.

1. High Noon (1952)
2. Butch Cassidy and the Sundance Kid (1969)
3. The African Queen(1951)
4. The Wizard of Oz (1939)
5. Seven Samurai (1954)
6. The Good, The Bad, and The Ugly (1966)
7. Casablanca (1942)
8. Shane (1953)
9. Cowboy Bebop (2001)
10. The Wild Bunch (1969)
11. Raiders of the Lost Ark (1981)

Not to be confused with my favorite movies (also a surplus of westerns):

1. Cowboy Bebop (2001)
2. High Noon (1952)
3. Once Upon A Time in the West (1968)
4. The Sheepman (1958)
5. Little Big Solider (2010)
6. Exiled (2006)
7. Election (2005)
8. Double Indemnity (1944)
9. Blazing Saddles (1974)
10. Rocky Balboa (2006)
11. Indiscreet (1958)

Movie I most want to see that I haven't: Gilda (1946).

My favorite actors:
Glenn Ford (The Sheepman)
Lee Van Cleef (The Good, The Bad, and The Ugly)
Claude Rains (Casablanca)
favorite actress: Barbra Staynwyk (Double Indemnity)
favorite director: Johnnie To (Exiled)

I doubt that that was of interest to anyone but me, but here we are.