Milton Friedman at his Best

So long as the Democrats rule the political landscape in Congress and in the Executive branch, I’m willing to pull out my magical 8-ball to make a few predictions.

1. Obama won’t do anything for the economy. Don’t worry, we’ll hear how terrible our condition is and how we have such a long process to recovery but Obama’s policies will do very little to encourage anything remotely related to economic recovery. Economic recovery does not come from attempting to spend your way out of the doldrums. Trust me. I have a few thousand examples stacked up neatly in credit card bills that still arrive monthly. The difference is that I can’t walk away from my debt or ignore it or my credit rating suffers. Congress seems to think it has no credit rating.
2. Republicans will make a half-assed, half-hearted attempt to rally under the conservative banner only to mock it by electing more incompetant, mediocre representatives to office who are still bitter about homosexuals obtaining equal rights.
3. We’re going to gain a few civil liberties. We’re going to lose a lot more.
4. Democrats will raise taxes on the wealthy – only to realize the wealthy will only pay the same amount of tax if not less due to their incomprehensible economic policies.
5. Government will grow to new heights even leaving George W. Bush shaking his head at the size of government.
6. The war on drugs will continue to incarcerate a disproportionate number of minorities while ignoring the real costs and effects that it is leaving on our society. As long as Obama ignores the reality and complexity of the situation his presidency will degrade from historic to nothing more than the same.
7. Keynesianism will reveal its ugly head only to run into the same problems in created in the first place. You can’t spend your way out of debt. Balanced budgets don’t cut it when you have nearly 57 trillion dollars of debt piled up over the past 20 years or so.
8. A horribly neutered and irriducibly irrelevant health reform bill will make it through Congress that will be sure to make mediocre health care the standard rather than the occasional case. The only people who will be happy with it will be the insurance lobby and the medical community. A congressman will then tell us that we’re somehow better off now without ever substantiating the claim and ignoring the reality taking place right behind his back. (Think officer Brady from South Park)
9. All branches of government will continue to ignore the GAO.
10. Public schools will still be their mediocre selves.
11. Earmarks will reach a new height in dollars while the stupidity level of what Congressmen are earmarking funds for will remain the same (abyssmally high).
12. The Pentagon will pay some ludicrous sum of money for something ironic and moronic and then plead for more money to ensure they can equip our soldiers. The whole Rumsfeld painting is exempted – this was under Bush’s watch.
13. The Federal Student Loan system will teeter on the edge of failure only to be rescued by the same dolts who created it in the first place: government bureaucrats.
14. A giant corporation will collapse in a smoldering heap of failure after some stupidly arrogant crime is committed by an overpaid, well-parachuted executive. The executive will take a leap to safety on the parachute while stockholders will get bilked out of their equity. There will be plenty of fist shaking and a revision to SOX to ensure that all of those businesses who are doing honest business are punished for the crimes of a very small few.
15. Our tax system will continue to grow more complex leaving IRS employees more confused on just what money they are not entitled to.
16. The federal government will continue to pass off surplus and used military gear to local police departments who will be more than happy to deploy anti-personel armor and weapons for no-knock drug raids only to find a small amount of marijuana residue and a violently dangerous dog who was shot running away from the officers assaulting the home.
17. Police officers will continue to be held to some other standard rather than the law. The “Blue exception” to the law will prevail more often than not.
18. Paul Krugman will continue to write political pieces while completely ignoring the laws and rules of the very academic science he is known for: economics. He will violate at least 3 different economic laws or make at least 3 arguments that violate economic fallacies. To go one step further but not included in this prediction – I’ll guess he’ll violate the such staid axioms of economics like the “Broken window fallacy”, “The law of supply and demand”, and, oh, let’s say a contradiction of “opportunity costs”. The media will be quick to point out that he is a Nobel Laureate without paying attention to the fact that whatever he is commenting on directly violates one of many rules of the science of economics for which he won the Nobel.
19. A new drinking game will evolve from Obama speeches in which the rules dicate you must drink once every time Obama says “hope”; two drinks when he says “change”;  drink whole beer every time he attempts to relate to some historical situation as if today is as hard (or harder) than the past.
20. And one for the technology crew: Some new-fangled Internet service will take 10% of the population by storm. This service can do one stupid thing pretty damned well. Someone or some company will buy this other company only to realize that they have no way to monetize the damned thing and have a giant, gaping whole in their books where something like revenue or profit should be.

Now if you made it this far, you’ll realize that I think I can have most of these crossed off as accomplished in about a month or so. My larger point is that if you expect there to be some great change afoot, you’re probably more wrong than I am.

I ran across a post at one of the companies I like to keep tabs on, Cleversafe. They have an interesting product that allows you to disperse data across a network rather than just simply copying data. This gives the advantage of using far less disk space than you would use by copying data over RAID and several backups. But that isn’t my point.

There was an interesting post in their blog with some informative economic insight that you normally wouldn’t think twice about. In the post, the author notes that back in 1956, a 5MB hard disk drive cost roughly $50,000 or $10,000 per MegaByte.

With the recent announcements of 4TB hard drives on the horizon, the author reflexively does the calculations to arrive at the 1956 cost of the same disk space: $40 billion. That’s right, if you needed 4TB of storage in 1956, you would have… a $40 billion investment. Of course, that is in 1956 dollars. In today’s dollars, inflation adjusted, the grand total a 4TB size of a drive would have cost is:

$302,002,380,304

You are reading that right. If a 4TB hard drive was built in 1956 by IBM, it would have cost you roughly $302 billion in today’s dollars. So what is the lesson? It isn’t that a 4TB hard drive is really worth $302 billion dollars.

There are quite a few different lessons that can be derived from this. For many of us in technology, we tend to take progress for granted. However the technology and PC market is one where we can see how markets really work. Prices are continually driven down by innovation. Think about that – our current computers are yesterday’s “super” computers. Many “super” computers are nothing more than a chain of systems similar to what we have on the desk top now.

The real economic lesson in this story is that while a lot of people complain about the “stagnating wages” of the “middle” and “lower” classes, you can only complain insofar as you are able to ignore progress where prices are constantly driven downwards.

Reason – Nick Gillespie

One of my favorite anecdotes that exemplifies unintended consequences is one call “Bootleggers and Baptists”. Wikipedia has a decent explanation.

If you want to skip the link and get the summary it goes something like this:

It isn’t often that you find bootleggers and baptists on the same side of the fence. Consider moral laws that prevent merchants from selling booze on Sunday. Now a baptist would wish alcohol not be sold at all, and especially on the day God rests. Afterall, would you really want drunks out on the road while all of the fine church-going folk are spending time with their families?

The problem that most people miss is that the bootleggers are more than happy to sell alcohol when the churchgoers are busy praying and singing. They could charge a markup specifically because the law does not permit alcohol sales on Sundays.

If you’re not too slow, you might see the bit of the paradox arising. If someone were to challenge the law because it is absurd on its face, you end up with the bootleggers and the baptists on the same side of the voting booth. Bootleggers would end up with very little money and the baptists would lose out on forcing their moral superiority on anyone who doesn’t agree.

A bootlegger therefore has to do very little if the baptists pursue keeping alcohol sales illegal on Sunday. In fact, they will throw as much support behind the baptists as possible if they were smart.

Whodathunkit.

LA Times runs an article where David Axelrod, an Obama advisor states:

Appearing on NBC’s “Meet the Press,” David Axelrod, a senior advisor to Obama, said, “We have to act. Every economist from left to right agrees that we have to do something big in terms of job creation, but we want to do it in a way that will leave a lasting footprint.”

I bet I can think of at least two economists who disagree with Axelrod’s assumption. And there are a host of other economists who disagree, whether they view the Austrian tradition in a positive/negative light.

The problem here is that our new administration is posturing this as a Global Warming-type “scientific consensus” issue that has already been used and beat into the ground. I’m sure Axelrod will start backpedaling and trying to reign in the comment with something to the effect of “the best economists” or the “brightest economists” to properly qualify the statement. Unfortunately, those definitions would be at the sole discretion of Axelrod and only as qualified as Axelrod is to determine who is the best and brightest.

The problem is that we don’t turn to scientific study to determine what the future is. We infer from the data that we have in an attempt to predict, with some reasonable probability, of future events.  There is a significant difference.  Prediction carries the inherent possibility of chance – the product or outcome of the unexpected is a distinct probability.

With this in mind, an economist’s opinion is only that – the opinion of the scientist. To assume an economist can predict the future with any certainty, which Axelrod appears willing to assume through the “consensus” opinion, is nothing short of malarky. If you believe that an economist knows the future any better than a carnival fortune teller, you are sadly mistaken.

“Fair trade” appears to be a noble assembly of words. We all trade and it should be fair, right? A quote, which I can not adequately attribute to a proper author, was told to me that generally questions the premise of fairness: “Fair? to whom?”(1)

(more…)

clipped from www.breitbart.com Justice Dept Approves XM-Sirius Deal WASHINGTON (AP) – The Justice Department approved Sirius Satellite Radio’s $5 billion buyout of rival XM Satellite Radio on Monday, saying the deal was unlikely to hurt competition or consumers. The Justice Department, in a lengthy news release explaining its decision, said the two companies compete not just with each other but also with other forms of radio and entertainment. “The likely evolution of technology in the future, including the expected introduction in the next several years of mobile broadband Internet devices, made it even more unlikely that the transaction would harm consumers in the longer term,” the Justice Department said. “Accordingly, the division has closed its investigation of the proposed merger.”

In a free land, you do not need the permission of the government in order to conduct private business.

I love the “fabulously” wealthy, rich people who earned their stripes working from the ground up to build business empires. The modern business is truly a study in the success and failure of human groups.  So it is no surprise to see some wealthy people patting themselves on the back for a job “well” done.  And it is no surprise that there are those amongst their very ranks who tend to spank themselves for the wealth they have created and/or amassed over time.

A recent article in the NY Times interviews several business executives considered to be at the “pinnacle” of wealth.  There were those who compared their gains to the efforts of the early American industrialists (Carnegie, et al.) while the authors made no effort to diminish these comparisons. The oddity that struck me is how wealthy industrialists of the modern era appear to be largely mixed in their opinions regarding the re-distribution of their wealth.  Some feel that they should be taxed more. Others feel they should be taxed less. Yet still others think the current system is just fine.

What I found odd is that Warren Buffet seems to take a conflicted stance. As many books and lore about the guy state: he’s a simple guy who likes simple things who lives a simple life – and he never gave his kids any of his money. None of Warren Buffet’s money is going to his kids – instead he’s giving it all away to the Gates Foundation. The confusing part? He feels that (from my impression of the article) we need to distribute the income after it is earned. Redistribution is essentially a forceful method of taking one’s wealth and giving it to others.   In much the same way he wouldn’t give his children any money – they had to earn it independently, why should he give it to someone else? On either hand, you’re giving your money away so what does it matter whether it is your children or others? Neither group (family or government) earned it within the marketplace.

The Baltimore Sun reports: recent fee hikes granted by a royalty review board is knee-capping the bootstrapping Internet radio industry. The recent hoopla over the royalty hikes is causing many casual participants in the marketplace to drop out. So just what are the issues involved?

The Copyright Royalty Board has removed some of the caps on royalty fees. For some broadcasters, the fee increases amount to doubling their dues to the cult of the music industry. In some cases, I can understand and side with the music industry. They are seeking to gain on their investments. But more of my mind and heart fall on the opposite side, with the radiomen.

Music and entertainment are interesting things. In the case of radio, while many stations make money off marketing breaks, or in the case of Internet radio – off of advertising links or banners, etc, radio also does a double service for the music industry. Think about it – the music industry charges you to market their product for them; radio has long been a marketing driver of new music, not the end point on the marketing tool chain.

We have our blessed government who likes to step in and manipulate the marketplace: remove “payolla” marketing dollars from broadcasters hands, regulating radio frequencies to stratospheric price levels for access to airwaves, and other pieces of legislation that is, purposefully or not, keeping people out of radio instead of removing barriers to enter the radio market.

Bands and labels with lesser muscle can not gain traction, even in niche radio, that would put them in spots next to similar and more popular, if not equally talented, artists. Traditional mainstream radio is less apt to take large risks on unknown talent – an area that has been well served by Internet radio. All of the risk falls on broadcasters with little to no risk involved by the music industry. How they think they can cannibalize this marketing channel is beyond me. It makes for stupid business; at the same time, it makes more sense to use ideas such as Creative Commons.

If people ever wonder why I think Steve Albini is a god – here is why.