Produce more stuff
Tada! Where’s my Nobel Prize in economics?
But think about it. You’d be surprised at how much of what we do as a nation and how much nonsense theory is thrown around that directly violates this conclusion.
Our growth rate during our best decades was about 4.5%. An economy growing that fast is vibrant, presidents are re-elected and everyone is high on the future. For the past decade our growth has been just 1.7%. It seems like such a small difference, but it’s huge. So all we have to do is find a way to increase production about 3% more per year than we do now and we would be transformed from the current state to one of the most vibrant economies we’ve ever had?
Can I point out that when economists discuss the growth rate they are measuring “Gross Domestic Product”. That’s product, as in, production. Of course you could listen politicians and pundits talk for hours about economics and never use the word production. More on that in a bit.
Let’s take a look at what a set of government policies centered around “produce more things” would look like. When you see it, you’ll realize how different it is that what we do now. You want your economy to do well. Do this:
- Educate people in the basic skills they need to produce things: reading, ‘riting, ‘rithmatic. Not racism, recycling and reproduction.
- Recognize that government jobs are not jobs programs. They are a means by which citizens purchase what they need and so this should be done as cheaply and efficiently as possible.
- Have people work most of the years of their lives. Having students in post-graduate gender studies classes to age 28 and retiring at age 62 is not a recipe for production.
- Invest money in building new technologies to increase productivity per person. Give investors what they crave most: stable and limited rules, a clear and fair return, protection from unfair practices such as silly lawsuits. Stability and fairness also creates a space that attracts investors and inventors from around the world, fleeing the many places where instability and corruption are common. Fairness and protection are actually rare products we can sell abroad at a huge profit to us.
- Don’t rack up excessive debt, privately or publicly, as you have to give over part of your production to the debt issuer
- Prevent government from rewarding rent-seekers of all kinds. This means no subsidies, bailouts, tax breaks, windfall lawsuits, protectionism, ‘investments’, guaranteed loans, welfare, etc. All these do is have people give more effort to getting some benefit, than they do to actually producing things. If half the lawyers, lobbyists, accountants, welfare cheats, medicare cheats, etc had to get jobs producing things, instead of arguing over their share, then there would be more to go around for everyone. Government subsidies produce bubbles that distort prices and misallocate resources. They are also ‘sticky’ - programs designed to solve a temporary problem always create rent seeking groups, including the bureaucracy itself, that cause the programs to expand and metastasize for decades beyond their original need. Government is a crude tool because it lacks the kind of precise checks and balance that pressure business towards continuous improvement. So often a government ‘cure’ is worse than the disease. Every dollar spent subsidizing a business or practice that doesn’t produce things on its own must be taken from business that actually does make money. Obviously, that reduces production and takes cash from future investment. It keeps people from seeking work producing what others value and would pay for.
Economies based on these sound principles may have a down year if there’s a supply shock or a realization that a lot of resources were misallocated towards something that didn’t pan out, but they bounce right back.
Economies where the government plays favorites by picking winners and losers, distracts the citizens by holding out potential awards, overpays for more bureaucrats, or does anything contrary to the list above, reduces production. I’m not saying high production is the ONLY societal value. But you have to realize that values compete for attention and you can’t have everything. If you decide that redistributive policies are a higher value, then guess what? That competes against production. You’ll be distributing a smaller pie, probably a much smaller one.
News flash. Most of what’s talked about in economics is nonsense. Economics is common sense. If business are encouraged to do well, the economy does well. Economics is NOT the sum of egghead policies. Here’s partial list of “macro economic” terms and policies which frankly are more designed to confuse and scam than anything else.
- Stimulus jobs bills leading to multipliers in consumer demand
- Artificial changes in interest rates
- Bailouts of business ‘too big to fail’
- Quantitative easing of the money supply
- Trade imbalances
- Currency exchange fluctuations
- Curbing speculation
Sorry. These are inconsequential to improving an economy. In the real world (aka outside liberal economist Paul Krugman’s fantasies) you can’t stimulate, price fix or ease your way to economic health; you can’t fix imbalances in trade or currencies by fiat. Efficient economics is not a shell game. All that businesses need is stability and fairness. Do you want your best and brightest to spend half their days lobbying for government policy changes to alter their fortunes? Or would they produce more if they spent their time producing? This is not a hard question. Sound economies doing what I list above wouldn’t even be talking about the effect of these things.
There are at least two reasons Liberals obsess about the above ‘macro economic’ terms. The first is psychological. Liberals believe on some level that success is luck or that there’s some kind of trick or some mastermind behind the economy pulling strings that makes it all go. They believe that, since they are smart, they can invent and use some kind of new trick or tool or or new scientific-like theory to avoid actual hard facts and work. Liberals hate hard facts and work. So if we can just alter some interest rate it’ll push this bond price up, which will alter some exchange rate, which will bolster exports and alter some trade imbalance, causing some union member to be employed making some product thus getting rid of unemployment; as if the economy were some Rube Goldberg machine. These theories are so sexy, slick, clean and intellectual. You need some Ivy Leaguer in Washington to figure it out. And since there’s a good chance that the hard work done by real people is going to produce some success anyway, you have a pretty good chance that the economy will improve, despite your tinkering, and then you can take credit for it all. These theories are soooooo much more appealing that the truth. What politician wants to deliver this message: “Hey, America, you want to be rich? Work extra hours sweeping floors, climb down in that mine and dig for more minerals, work 80 weeks writing more software, gamble on inventions that have a prudent chance (but no guarantee) of panning out, study boring subjects like accounting and prevent politicians from giving away your money as a reward to their friends and supports.”?
The second reason that Liberals love to talk about these complex macroeconomic terms is BECAUSE they are confusing. Most people have some experience with business.. You make something people want, control your costs, charge a markup for organizing and delivering the product and that’s it. It’s hard work but the concept is easy to understand. If done well, there’s high production which is traded for income for workers and investors. But liberal policy is to thwart production if it gets in the way of 100 other liberal goals, such as increasing leisure time, preserving the environment, creating fairness in the marketplace or job space, funnelling money to rent seekers of all kinds in return for campaign support, etc. But if production goes down, your average politician wouldn’t want anyone to realize that they were out there thwarting production! So the propaganda goal is to de-link the ideas that a good economy and production go together. Liberals have created a fantasy model of the economy. In their model, the overall health of the economy is not based on working hard to make more stuff. Instead it’s a combination of confusing terms which only experts (such as them) can understand. Therefore, if things go south, they can not only talk their way out of blame, they can even convince people that the only solution is to do even more of what they want. But at the very least, they can mask the obvious truth which is that they have policies that are anti-production and these hurt the economy.
The bottom line for liberals is that it’s to their advantage to change the the battlefield from great policy, to propaganda. In that arena they excel. Macro economics is so convoluted and confusing, that almost any argument can be made. Let’s say as a liberal that I support policies A, B, C, D and E. Let’s, for sake of argument, assert that none of these policies do anything to help or hurt an economy. They are just useless levers on a rube goldberg machine - the economy goes up and down independently. Watch what can be made out of that. If the average person can’t tell what the levers really do and I control the narrative, I can make any argument I want. Let’s say that Lever A has been pulled 10 times in that past. If the economy by chance, improved times after that lever was pulled, I can point to just those 5 times, ignore the others, and claim that lever should be pulled again. But I can do even better by setting my own time frames. I can look at the year after the times lever A was pulled. If the economy improved 7 of those times, I can argue take credit for those too, I just say that the lever has a delay. If the economy only improved 3 times, I can just ignore it and moved to the next lever. I can go on to levers B-E and see if I can make a better story out of those. Since no one party has full control, I can never implement all 5 policies at once. Therefore I can make up any story I want.
Let’s say that I implement A-D but not E.
- If things go great, I take credit.
- If things go bad, it’s because I was held back from implementing all my policies.
- If things go poorly, I can just blame the other guys.
- If things go well, I can say that A saved the day, despite my opponents being in power. Or I can claim that my policies, which were previously implemented, finally took effect when my opponent was in power and the he rode on my coattails. I can also distract from the whole picture and find a few individuals that didn’t do well and claim them as victims, saying that my opponents policies only worked for some at the expense of others.
For example. today I heard Obama say that “We gave Bush a $5T Surplus and he left us a $1 deficit”. It’s absurd, but since it’s all confusing, it’s sellable. Where did he get the story “We gave Bush a $5T surplus”? Every word of that is a fabrication: “We”, “gave”, “$5T” and “surplus”. Before I break down every word, let me point out that disputing propaganda is an uphill battle if every word spoken is bullcrap. How can I realistically explain every word to most people?
- “We” - This refers to President Clinton and by extension, the democrats. But the president doesn’t control the whole budget, it’s mostly congress. Clinton said at various points in the 1995 budget battle with the newly republican congress under Newt Gingrich that it would take 5, 7 or 10 years to balance the budget and that any attempt to do it faster would endanger the economy. Limbaugh played a montage of Clinton saying balancing the budget in less than 7 years would destroy the economy, etc. Every proposed spending cut or freeze was met with “it’s going to kill old people and children”, “the Gingrich who stole Xmas”, etc. But after the 1998 midterms, Gingrich and the republicans increased their numbers in the House and Clinton compromised and let the republicans pass much of their budget, which led to half of the surplus.
- “Gave” - Only half of the surplus came from politics. The other half came from the internet boom and increased tax revenues. So it was the taxpayers who ‘gave’ the money. BUT it turns out they didn’t really give it. Just before Bush came in the tech bubble burst and by the time Bush got to his first budget, many investors were writing down their previous gains (because they never really existed) and thus got refunds on some of the taxes they gave during the Clinton Years. So net, they never gave it. For all intents and purposes they 6
- 3+9-*projected it, then took it back
- “$5T” - this simply never happened. It was a 10 year projection based on the very best case hope. They had a 2 year period where they had about 2% of the that number (including the internet part that didn’t really exist) and then projected increases on that for a decade and figured they’d make it to $5T.
- “Surplus” - 5 of 8 years Clinton ran huge deficits and for 3 years he ran small surpluses with the net being almost $3T negative. There was no net surplus.
This whole scenario is like a friend bragging, “I made $200K in the stock market”. Then you find out the truth. Her stock picks lost $3K. So how did she get to $200K:
- “She” - Lost $3k but Her husband Newt forced, over her objections to make other picks, that made $7K for a net of +$4.
- “Gave” Then her father told her he’d give her $6K cause he thought he was having a good year. Now she’s at +$10K for the year. But later she finds out she has to give the $6 back because things didn’t work out after all for dad.
- $200K - she figured a 10 year budget and figured if she made $10K this year year, she’d do even better every year (even though in all previous years she’d lost money).
- “Surplus - She neglects to mention her $80K credit card debt from all the spending and losses over the previous years.
I could go on to explain the other half of Obama’s statement. It’s the same mess. But the point is that macro economics is DESIGNED to be confusing. By throwing tons of variables around, half going one way and half the other, you can make any argument you want. It’s not unlike astrology. You make 100 claims in vague enough ways and then later you can cherry pick anything to argue that you were right all along. Eventually, if you get good enough, you could argue that the most destructive and self serving economic policies you support are actually vital.
So let’s get into the details of the 2 main competing economic theories.
- Conservative economics is termed “Supply Side Economics”. Supply is another term for production. But really Supply Side is just a synonym for the free market.
- Liberals espouse Keynesian Economics (aka “Demand Side”) which is the theory that inspired FDR. It's pretty much just socialism (a set of fairness, not production goals), but made to sound like an economic theory.
Supply Side: There's a lot of talk about stimulating consumer demand as a way of getting an economy going. But does demand need to be stimulated? Don't people already want beach front property and private jets? So the real question is not demand, it's supply. How much of what people want can they make? Everything that is consumed, must be made first. You make a lot, you can consume a lot. It's common sense. 'Supply' is just another term for the national income. Nations, like individuals, improve their lot by earning/making more, not wanting more. Supply side focuses on people making a lot of stuff; on efficiency and invention; on building wealth. Then there will be a lot for everyone. Building real wealth is difficult in the best of situations. You start a company, raise money, develop a product, train staff, market the product, build it, ship it, deal with regulations, competitors, unforeseen input shortages, etc. Since this is so risky and hard as it is, the best thing for the government to do is not make it more difficult with lots of taxes, confusing regulations and unstable rules. If you are careful at the end of all this you'll average between your winners and losers, a 12% return on your money. The very, very best, like Buffet, average around 23%.
Demand Side or 'Keynesian' Economics: Anything the government does stimulates demand and the economy. Every dollar spent multiplies itself. There are no bad investments. Whereas a good investor making complex products that benefit consumers can only expect a 12% return, any bureaucrat can get a 70% "multiplier" even if he just makes toilets and then ships them out into the ocean and dumps them in. The theory is that by hiring people, even to do make-work, they’ll collect salaries, go out and spend money, thus giving work to yet other people who also spend money, etc. Thus the multiplier.
Which of the preceding 2 economic theories has been called 'Voodoo Economics' for the past 30 years by the press?
The premier liberal economist is Paul Krugman, Princeton Professor and lead economics writer for the NY Times. He said that if we spend money preparing for a never-to-come alien invasion it would improve the economy because it would get people to work making guns and defenses. Did I mention that he has my Nobel Prize? Of course this is nonsense. Making things that no one needs is not economics. If we have 100 people dig a hole and another 100 fill in the hole (another classic keynesian example), we are left with no useful work. Why not just pay these 200 people to stay home? How is either strategy more productive than having these 200 people produce something useful? In the alien invasion model, these workers are paid, but the people paying them get nothing back. Whereas in a real job, they would produce products or services that they would exchange with customers. So they get paid AND the people paying them get something. The theory is silly. If it worked, why stop at 200 people? Why not just do this with millions of people. Hey, it worked for Mao when he had people making steel in their back yards without the proper equipment. I might mention that it didn’t work out quite so well for the 45 million who starved because they made no saleable steel to trade for food. But hey, who’s counting.
In addition to the fantasy economics model, liberals have created a fantasy history to match - claiming that WWII ‘got us out of the depression’ - Producing weapons (goods we intended to blow up) was a net benefit to the economy. This is all debunked here: http://youtu.be/gG3AKoL0vEs
yet the left continues to argue otherwise: E.J. Dionne: Government is the Solution.
Gee, if only Greece and the rest of Europe had spent their way into oblivion, they’d be rich by now. There’s a bit of a “Let’s try and win our money back from the casino” logic to continuing with government spending. Dionne says that government should invest in transportation, clean energy, refurbished schools and the education. Are these goods currently short on investment? Are goods or people stationary because we need more transportation options or can investment bring down the cost of transportation (light rail being pushed by liberals will cost 10x its alternatives AT LEAST)? Are kids failing to learn because they go to unrefurbished schools? Would further investment in the current education model lead to a better educated citizenry and more future production? I would argue that the current education model does the opposite and is way over funded. Certainly time spent in current economic classes are useless. Are any of the green energy projects Obama invested in panning out or did we pay lots of people to start green companies which produced nothing, paid big bonuses, funnelled money back to democratic campaigns and went bankrupt? Every dollar invested by the government has to be taken from somewhere. But where? It can’t come from the poor, or the unemployed. It can’t come from other government workers because their whole paychecks just source back to taxes. Ultimately, it can only come from successful business enterprises either by taxes or loans. And every dollar spent by the government is a dollar less that the private sector could have spent on other products or investments. There is no net gain. And if the government buys things with low value equations (things which wouldn’t sell on the open market at the same prices government pays), then there is a net loss.
I suggest that liberal economics is designed to confuse and to accumulate power. Notice that the answer to every problem, economic or otherwise, is more government. How convenient. “If the economy is good, the people can afford to pay more taxes and we can finally ‘invest’ in government projects. If the economy is bad, we have to turn over what little we have left to the government right away because only they can stimulate the economy.” Heads I win, tails you lose.
The liberal critique of Supply Side economics is, as usual, embodied in slogans: “Trickle Down Economics” or “Voodoo Economics”. The charge is that Supply side makes the top 1% rich and leaves the rest poor. Both slogans impugn the motives of supply side economists; the claim is that even conservatives know that their policies are only for the rich but they have to justify it by saying that some of that wealth will “magically trickle down to the little people” who will somehow get the scraps left over. It’s all very emotional; a typical method to discredit the motives of their opponents rather than debate the merits of policy. The counter to “Trickle Down Economics” is the conservative slogan “a rising tide lifts all boats”. Obviously, the poorest in our nation consume many times what the poor did 100 years ago and live nearly twice as long, so a robust economy helps everyone, not just the rich.
The broadest statistical measure of the economy is GDP (gross domestic product). It’s a measure of product (aka production) and a giveaway that at one time everyone understood that the economy centered around production. The very thought of measuring that offends the left but they haven’t done well at changing that measure. But they are still trying though, for example here and here. In a nutshell, they want to confuse the situation even more by measuring the economy with non-economic measures. Keynesianism already confuses the inputs, - supplanting GDP will confuse the outputs. Similarly they are trying to discredit the very idea of production (see The Story of Stuff)
The main critique of supply side economics is that just producing more is not the real task. Supply side only produces for the rich. The real task is to produce more for everyone (redistribution). Right away you can see the problem - liberals are already backing off of high production as the real goal. But the language works against them. They are almost forced to claim that their methods increase GDP - a recession is defined as 6 months of decreased GDP. You can’t campaign on decreased GDP because your opponent would just say that you are literally running on a pro-recession platform. So that leaves liberals in a bind. Until they can get rid of the use of GDP, they have to claim they are for production AND for many other conflicting goals, at the same time. These other goals include equality, the environment, patronage, etc. They can try to claim that these goals complement rather than conflict with GDP. But life just rarely works that way. If you have many goals, you have many tradeoffs, not many successes. Unwilling to admit the truth of life’s trade-offs, they make up convoluted theories that they claim can get them everything. “We need Green Jobs to save the economy” is a classic example of a Utopian propaganda line designed to hide the trade-off - in real life we can have EITHER green jobs OR a great economy.
I can list dozens of ways that they will oppose the highest production policies, yet they still claim they will increase GDP as much as conservatives. But ultimately the broad economy is just the sum of its parts. If individual policies reduce production, then the broad measure will reflect that.
It will be pretty obvious in a minute that Highest Production is not everyone’s goal and therefore you can’t be intellectually honest and say that the liberal method happens to produce higher production, even though with each policy move they are against highest production.
In Obama’s walk back of his infamous “the private sector is doing fine” comment, he said that firemen, police and teacher jobs are the backbone of the middle class. It’s an essential mis-read of economics. You hire firemen, police and teachers when you have more fires to put out, more security needs and more students to teach. They are not jobs programs. The very idea of a jobs program misses the point - in both the private and public sector, employers should hire people to get needed work produced, not to give jobs to people. The cheaper you produce something, the fewer workers needed to produce an outcome, the more people are freed up to work on producing other things. The most productive segments of our economy work that way. In 1800, 90% of the population worked just to bring agricultural products to market. Now just 5% work in that supply chain. Should we hire back the other 85% as farmers because “farmers are the backbone of the middle class”? No. The other 85% make ADDITIONAL things we need, like cars and websites, and a million other products. We couldn’t have those things otherwise.
Liberal economists think that make-work is work. It’s not. Make work has no value; you pay more than you get out. In the Soviet Union, everyone had a job. There was no unemployment. They just didn’t produce much. Liberals think that protectionism saves jobs. But protectionism works by forcing above-market prices; again consumers are paying more than they are getting out. These strategies keep people employed at jobs that don’t make things people need at a price they are willing to pay. They have a negative “value equation” (that is, they cost more than they are worth). Believing that they do have value, regardless of cost, is similar to the fallacy of the broken window. Price fixing schemes of all kinds make value equations impossible to calculate and lead to resources being allocated where there is no value.
Production is increased when the most goods are made with the fewest people. Walmart gets this. Governments don’t. Walmart has a complex management hierarchy, but there are controls on multiple ends:
- Customers only give their money if they get value
- Managers and shareholders only profit if costs are kept down AND customers get value
- Competitors are prepared to undercut and outservice to steal business.
- Customers are forced to purchase products even if they have a negative value
- Managers (bureaucrats) often benefit if budgets and costs are high and bloated, regardless of whether customers get value
- Competitors are prohibited by law and force.
Ok, so let’s flesh out some specific policies that my economy might have.
K-12 Education
Let’s go right for the throat and tackle public sector bureaucracies, starting with the teachers union. K-12 Education in this country is in shambles. HS graduation rates and test scores are terrible. Education costs far more than it used to, and the end product is getting worse. Many cities have 50% HS dropout rates. No private sector product would continue with a product with that high a failure rate. The primary problem is the unions.
The very word union is a problem for high production. The two rarely go together. Uniting or bundling any 2 or more things together rarely gets you what you want. Someone did a study of 40,000 patents and found that most improvements come about when something is broken down into smaller parts - this allows more functionality by allowing people to cherry pick what they want and mix and match parts as needed. Unions, whether of parts or people, do the opposite. It’s take-it-or-leave-it for a whole group of things, some of which you want and some you don’t. It’s like when you want to buy 1 basketball channel from your cable company and it only comes in a sports package with 50 soccer channels you’ll never watch. By definition, bundles of any kind are less flexible. Let’s say that in a non-union market I have teachers at a certain seniority level with a range of skill qualities ranging from $30K to $70k of value. In this scenario I can match their skills to their salary and always get value. But what if they are unionized and all employees in the bundle are offered a salary in the middle, $50K. Well in this scenario, I’m overpaying for the $30K worker and the $70 worker walks out. In fact all the workers worth more than $50K find work elsewhere. So basically I can NEVER match pay to value and I’m ALWAYS overpaying. How could it be otherwise? And over time, what incentive does the $30K person have to improve their skills to the $70K or even $50K level? None. Bundling things together never is efficient, which is why all those patents break things apart.
The number of administrators has nearly doubled in 20 years, even as pupil count has fallen. Class sizes have shrunk from 30 students per class to 20. The sales pitch is that this means each kid gets special attention. In practice this means you are buying more teachers but it’s had no effect on scores. Question: would you rather have your kid in a class of 20 if you knew the teacher was in the bottom third of effectiveness in the school? Or would you rather fire the bottom third and put your kid in with a better teacher, now with 30 kids (the same class size as 50 years ago, when education was good). I say you’ve increased productivity in the school AND freed up a lot of ex-teachers to go produce iPhones or some other product. On both fronts, production increases. Unionizing teachers means that you can’t get any value because you are always overpaying and robbing incentive for good work.
Anyone who watched the near riots promulgated by Wisconsin Teachers knows that they have priorities other than providing maximum value for their customers at minimum price (the goal of all effective enterprises).
Bob Chanin, the National Education Association’s former top lawyer:
“This is not to say that the concern of NEA and its affiliates with closing achievement gaps, reducing dropout rates, improving teacher quality and the like are unimportant or inappropriate. To the contrary. These are the goals that guide the work we do. But they need not and must not be achieved at the expense of due process, employee rights and collective bargaining. That simply is too high a price to pay.”
“Which is why, at least in my opinion, NEA and its affiliates are such effective advocates. Despite what some among us would like to believe, it is not because of our creative ideas. It is not because of the merit of our positions. It is not because we care about children. And it is not because we have a vision of a great public school for every child. NEA and its affiliates are effective advocates because we have power.” [Or if you can stomach it, watch the long version]
At least Charin was honest about one thing: life has tradeoffs - you have EITHER collective bargaining OR produce quality. Not both, as is often claimed.
Government jobs are not jobs programs, they are the way citizens buy services. End unionization of all government workers. In the case of education there’s an extra powerful tool that can be employed: switch to vouchers and let competition set pay rates and generate innovation and value.
Can you see how this works? One can look at every policy and critique it. Are the people doing jobs that are most productive?
College Loans
Like all subsidies, subsidized loans create an oversupply - a bubble which appears to have value but whose cost overshadows any rational assessment of value. Colleges, seeing that students can now get government loans, simply jack up the prices of their products. Now they cost more than they are worth and have a negative value equation. Students are working part time jobs (producing little) and taking out loans until they are in their mid 20’s until finally many realize that their degrees confir no special skills and have no value. Plus there’s a high percentage that never even finish their degree. Either way, people spend their 30’s paying off their loans (taking their production and giving it over to colleges which contributed little to their ability to produce). This is the quintessential bubble. Drop college subsidies.
All subsidies, bailouts and other price fixing schemes are the same. By artificially changing the effective price that buyers and sellers face, they rob the market of making accurate value decisions. As a result, the cost controls of the market are bypassed and invalidated, and products with reduced and often negative value are promoted.
- Subsidize insurance in a flood plane, people will build houses that will be washed away
- subsidize ethanol, people will waste 2 gallons of gasoline to produce a gallon of ethanol.
While subsidies promote the purchase of things that have lower value than their true cost, they discourage the purchase of other things that have a higher value. In the case of Student Loans, if the average person simply produced a product for 4 years and got on-the-job training and then took any money they’d have given to colleges and invested it in industries that make products. there would be far more production and wealth created.
How many people know the true history of the college bubble? A common thread running through my suggestions is that Production is ‘real’ while many of these distractions are fantasies. Bubbles are an example of a fantasy. Can we be honest? Outside of the sciences, most people are learning little in college they couldn’t learn on their own. Information is everywhere and beyond a certain age it’s more up to the individual to absorb than it is up to a teacher to teach. There’s a world of wikipedia, books, History Channel, Ted.com and YouTube Videos and Amazon books out there to absorb on any topic imaginable and those sources will be the primary learning vehicle from age 22-80 anyway. Why is the learning done from ages 18-22 worth $100,000? Sitting in a lecture hall listening to a professor is not superior to watching a video of the same material. In fact video can be far superior because it can draw multiple voices and images and be edited to a higher degree of clarity. What percentage of college time is spent engaging in A) a useful subject, B) absorbing material not found for a lot less money elsewhere and C) interacting with a good professor who is providing some kind of interactive experience that is not available online or tainted with his personal ideology? Very little. Some, but outside the sciences, not much. The real ‘value’ people think they are getting from college is not knowledge but a certification they can take into the marketplace. And a huge percentage of that certification value at this point simply comes from the name of the college. In other words your SAT scores and successful application say almost as much about you as your degree. So here’s the hidden history. Employers USED to give aptitude tests all the time. They didn’t need to see a degree. It was discrimination claims and lawsuits surrounding those tests that had industry drop them and opt for looking for a degree. The most cynical way to look at this is that society had an inexpensive way to determine employee value, but by a system of lawsuits, coercion, subsidies, salesmanship and propaganda, we switched to a super expensive system to determine the same thing. And liberals profit immensely from the new system. In a way, it’s a classic example of the type of bundling I frequently describe as a source of inefficiency. Bundling almost always attaches something of low net value to something needed. That’s the scam of it. The big AntiTrust Lawsuit against Microsoft in the 1990’s involved them bundling their crappy browser to the needed operating system. Unions bundle useless teachers to good ones. Cable companies bundle HBO to some package of 20 useless channels. The history of the switch to the college certification system is the most successful example of bundling I can think of. You used to just have pay for a $100 aptitude test. Now you have to pay for a $100 SAT test BUNDLED with a $100,000 degree (virtually all paid to liberal institutions). The lawsuits created a form of protection racket: employers can’t certify applicants, only liberal colleges can. It’s an old school racket, like how you had to buy your garbage removal at inflated prices from the mafia, now you have to buy your certification at inflated prices from the liberals. Frankly, the liberals make the mafia look like pikers. There’s $1 Trillion in unpaid student loans right now. But it’s a bubble, it’s based on lies and it’s about to crash. It’s lowering production tremendously. The students are wasting their time and money and the professors and administrators could likewise, go out and produce other, non subsidized products. More for everyone.
Energy 1
End subsidies for green energy, ethanol, etc. Subsidies distort markets and lower production. Some regulations are necessary, but excessive regulation of oil and all industries simply reduces production. Every hour filling out a government form, is an hour not producing. Every government worker reading that form is not producing.
If you want to promote new ‘green’ technologies, then do what the founding fathers did: provide patent protection. Issuing patents costs taxpayers almost nothing up front and there’s no taxpayer risk of loss. But if a technology works, the developers can recoup their own private investment by having a legal monopoly on the technology (thus allowing suppliers to overcharge a bit, but only for proven successes). It’s a good system. Since the USA has invented almost all existing technologies, the patent system has obviously worked for 200 years. Taxpayers only pay for success and inventors make out if they do succeed.
So why add subsidies and government investments as an alternative to patents? I’m going to leave this as a quiz question. If patents are an incentive to investors and only cost taxpayers if they succeed, why give cash subsidies of taxpayer dollars? If you want to give a bigger incentive you could lengthen the patent time. Why is that not the answer? Why add subsidies in addition to patents? [UPDATE: New Propaganda Trick to discuss]
Energy 2
I love this example because it’s super obvious and therefore hard to bullshit. You can see why liberals love complex macro economic conversations, over easy to understand supply side arguments.
Which will produce more: producing more oil or producing less oil. I know this is tough. That’s right: producing more, produces more.
The Canadians have tons of Shale oil which they intend to drill and sell. We buy oil. They’d like to ship it to us in a new project called the KeyStone Pipeline. The pipeline would be paid for by oil companies at no cost to taxpayers, pass through the US to our main oil refineries in Texas and Louisiana. Building the pipeline creates jobs in construction and later in refining, all generating tax revenue as well.
So should we participate in producing this oil from Canada? The objection is that it will create environmental damage. But there are already dozens of old pipelines crisscrossing the country creating little damage and this newest one can be made even safer. Plus, if we don’t buy the oil, Canada is going to just ship it all the way across the Pacific to China by boat, which is inherently more environmentally damaging because the boats consume oil themselves, and are more accident prone than stationary pipelines. Plus if we don’t buy the oil, it’s not like we are consuming less. It’s just that we are shipping oil across the Atlantic on yet more oil consuming and accident prone boats. Plus, then we have to pay more military dollars to fight arabs who bought weapons with money they got by selling us oil.
But environmentalists don’t like oil. So Obama killed the pipeline. So we make less oil.
My real point in picking this example, as I said, is to illustrate the difficulty liberals would have in explaining their economic plans if economics were understood to simply be the amount of stuff produced less any tradeoffs we are willing to pay for. If all economic arguments were couched in those simple terms they’d lose most of the time. Greater production is not the ONLY value, but saying that there are no tradeoffs and that their policies achieve the Liberal Values plus improve the economy is nonsense. If you want a good economy, build the pipeline. If you want to feel good about yourself and feel like you got back at the oil companies, all the while creating more environmental damage, then block the pipeline and spend money on green energy projects and live with reduced wealth. Liberals prefer the 2nd option, but they don’t want to argue about it honestly.
Lawsuits
The more laws, the more lawsuits. I’m being sued for gender discrimination by a guy who said I only hire girls. Cause you know how hard white guys have it in this economy! More laws and tort rules which enable lottery type awards and legalized blackmail, reduce production. Everyone involved in most of these are wasting their time. Lawyers on both sides, most defendants, the witnesses, the courts and even most plaintiffs would do better and produce more if they were simply engaged in producing other things, rather than arguing over the gossip, grievances, etc. The government is powerful but blunt tool. It can and should provide physical security for property and bodily harm. It can and should enforce contracts, it can and should be a fair referee in cases of gross exploitation. But it cannot correct nor should it adjudicate every whim and complaint. It’s expensive and pointless and societies that foster this, make less and have less.
Drug War
Here’s one for the other side. End the drug war. Take the half of prisoners who are nonviolent drug offenders and have them enter the labor force and produce things, even if they are menial. Take the associated prison workers, cops and other enforcement and court officials and let them get other jobs producing more products. Take all the money we send out of the country to drug lords and just keep it here. Prohibition (another form of price fixing) is not working.
Complex Tax System
We have a long confusing tax policy. So people hire lawyers and accountants to find loopholes, file assorted exemptions, lobby for special treatment, and modify their optimum production strategies to qualify for some chit, etc. Some of our most talented people are shuffling government paper. Simplify the tax code and let those talented people produce other products. Don’t dangle potential rewards in front of people and then have them dance to get them. Let them produce other, more useful things.
Tolls
Tolls are the least efficient form of tax. Couldn’t you collect the same money by taxing gasoline? Do you also have to slow down all the cars and stop the passengers from getting to work? Do you have to build toll booths and pay toll collectors? Couldn’t those people make other products instead?
Unemployment Benefits
Are people offered 99 weeks of unemployment benefits really going to look for work? Or will some stay home and wait and just produce less until the bitter end. Many studies show that’s what happens
Etc.
Honestly, I could do this all day. At every turn, with every economic policy, simply think through whether or not it increases production. Are people working more years and hours of their life? Are they paying for things they really need at a low price that yields value? Are people doing jobs that others value and would voluntarily pay for? If you ask and answer these questions, you know more than most economists. The next time you watch an economic debate on TV, watch how they focus on Stimulus, and Jobs bills and Bailouts. These have nothing to do with production. Borrowing from peter to pay paul won’t increase production, aka GDP.
While economics professors worry about multiplier effects and stimulus and interest rates, the real economy is about production. Is Greece struggling because the international bankers won’t roll over their loans at favorable interest rates or because they don’t have “a central bank to monetize their debt” (print money to pay back their loans with counterfeit money). Fancy words and complex schemes are not the solution. The problem is that Greeks don’t work that many hours per week, retire early, borrow money to pay bureaucrats to do make-work jobs in return for votes and kickbacks and in general don’t produce products that they can use to sustain themselves or better, sell to pay off their debts. And in the real world there is no solution other than to start producing or take it from someone who is working hard and producing. There is no trick out of it. Work, borrow or steal to get more, or do none of these and have less. Borrowing has its limits, so what’s left? Economics is actually simple. It’s just hard to face up to.
