Tag: risk

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free trade & free markets moral hazard

Is It Still Capitalism?

capitalism, mixed economy, socialism, corporation, bank

Is it still capitalism if the capital is guaranteed?

“The U.S. government will guarantee all customer funds in Silicon Valley Bank (SVB) after a series of bad decisions and a run on deposits led to the bank’s collapse,” explains Elizabeth Nolan Brown in Reason. 

Technically, the bank isn’t being bailed out. Its customers are. And that’s a lot more popular than bailing out banks directly. There are more bank customers who vote than bankers who vote — though there is probably more political donations from banks directly seeking banking policy “correctives” than bank customers doing the same. That’s almost apodictically true.

The most bizarre element? While the FDIC, the federal agency that insures depositors of this and similar banks, is designed to guarantee depositors’ capital up to a certain limited amount ($250,000, more or less), the regulatory triumvirate of Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell, and FDIC Chair Martin Gruenberg declare that “all depositors of this institution will be made whole.” 

All.

Even the super-rich.

The key concept, here, is moral hazard — “The decision creates bad incentives for financial institutions and their customers” is how Ms. Brown puts it. We’ve been through all of this before. Is there really any question? The answers are in.

So, to the opening, Is it still capitalism if the capital is guaranteed? — if even Prince Harry’s fortune will be guaranteed — the answer is No.

Sorta. 

It’s a special kind of capitalism. State-dominated capitalism; Neo-mercantilism; f***-ism. Use whichever term.

As we contemplate a profit-and-loss system without loss, and how the losses will be made up within the financial system, just remember that the federal government playing the role of Savior is not itself costless, and . . . its debt keeps growing. And the Ultimate Result of all this still looms.

Immoral hazard.

This is Common Sense. I’m Paul Jacob.

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Illustration created with PicFinder.ai

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Fourth Amendment rights

Marks of Tyranny

chalk, tire, Constitution

It pays to contest petty (as well as major) civil and criminal charges that your local and state governments lay against you. Sometimes you get off.

People have used some pretty “out there” arguments in their own defense. Example? Risk homeostasis in a speeding case. That was a stretch.

But this Michigan case, though it may seem odd, is as American as Apple pie.

Alison Taylor sued the city of Saginaw over her parking violation citations. Her argument? The Fourth Amendment.

You see, the municipality’s parking officer had used chalk to mark her (and others’) tires. If on a second round the officer sees a car with the mark at the right spot, showing that it had not moved in the allowed period — write up a ticket!

Ms. Taylor had accumulated 14.

So she and her lawyer argued that “using the chalk to mark her tires constituted an unreasonable search without a warrant.”

The U.S. Sixth Circuit Court of Appeals agreed. This traditional method of enforcing parking rules was recognized as an infringement of the right of the people “to be secure in their persons, houses, papers, and effects.”

Trivial? The consequences may not be, as my source for this case, Greg Rasa of Autoblog, points out.

Dubious? Imagine a non-legal way to fight the chalk-mark method — non-officers chalking car tires with multiple marks indistinguishable from the officers’. Cities would object, of course, but their best case against such a practice would be the car owners’ case: defacement of private property. 

Yes, if the saboteurs’ marks are defacement, so are the city’s.

Justifying the appellate court’s ruling.

Chalk one up for constitutionally guaranteed rights?

This is Common Sense. It’s Friday! I’m Paul Jacob.

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media and media people responsibility

Science Isn’t Morality

tanning bed, science

“Scientist” — what an abused term! When a journalist needs an authority to write about some nutty, wildly improbable affront to common sense, a “scientist” will do.

Case in point, turn to Newsweek:

“Tanning salons are more likely to be located in U.S. neighborhoods with higher numbers of same-sex male couples,” writes Kashmira Gander, “according to scientists who fear the industry could be targeting the demographic.”

Well, since gay men — for a variety of reasons surely no one will dispute, and which we need not trouble ourselves with — are more likely to use such services than straight men, one might expect marketers to “target” a likely clientele.

But why the “fear”?

Well, don’t panic, but “[t]anning beds are dangerous. They double your risk of skin cancer. Over time, they also cause wrinkles, skin aging, uneven skin texture and dark spots, so even from a cosmetic standpoint, no one should be using them.”

Well, that latter is not a scientific finding. It is up to consumers to decide what acceptable levels of risk they will take to make themselves appealing for the opposite sex, or — in this case — the same sex.

If scientists made fewer moral and political pronouncements, sticking to statements that they can defend with facts and findings, not only would Newsweek and other magazines be easier to bear (I cannot guarantee more subscribers and newsstand sales, alas), but science itself might gain a bit more credibility.

As it is, it is teetering.

Or so some “studies have shown.”

As for me, I’m not gay, but I am married . . . and a former redhead. Tanning salons don’t profitably pitch their services to me.

Not because of science, but . . .

Common Sense. Which this is. I’m Paul Jacob.

tanning bed, science

Original image by Alexis O’Toole

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Accountability free trade & free markets general freedom national politics & policies property rights responsibility

Juicer Choosers

juicer, juice, silicon valley, innovation, risk, luxury, free markets, government waste, freedom

We all have our complaints about this company or that, this product or that.* And it is popular to rag on “consumerism” and the emptiness of “capitalism.” But put it into perspective: me “wasting money” on, say, an expensive juicer is nowhere near as offensive — that is, worth a rant, an excoriation, a philippic — than the government wasting money on . . . anything else.

Or, for that matter, on juicers.

At this point, you may be wondering, “what’s with this juicer business?”

Well, it is all about the hullabaloo regarding, er, a juicer business!

Juicero, to be precise.

The well-funded-at-startup Silicon Valley biz makes the expensive Juicero Press. And news. Newsweek and Washington Post were just two major media outlets to lay into the company. They characterized Juicero and its product as a symbol of all that’s wrong with Silicon Valley.

Wow. What weight for one niche-market company to bear.

While journalists in print and online fret over how Silicon Valley offers up empty gewgaws and gadgets for the “temporarily rich” — a few decades ago members of this class were excoriated as Yuppies — over at Star Slate Codex Scott Alexander reminds us that Silicon Valley does all sorts of things.

One juicer cannot stand for everything else.

Besides, when “Capitol Hill screws up, tens of thousands of innocent Iraqis get killed,” Alexander writes. When “Silicon Valley screws up, people who want a pointless Wi-Fi enabled juicer get a pointless Wi-Fi enabled juicer.”**

Forcing many people to pay for dubious-at-best products, or enticing a few people to pay for harmless luxuries? You see why I prefer the latter.

This is Common Sense. I’m Paul Jacob.

 

* You should listen to me curse my computers! Or, on second thought, no. You shouldn’t.

** “Which by all accounts,” Alexander concludes, “makes pretty good juice.” Even if squeezing the company’s frozen packets yourself works just as well.

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Categories
general freedom ideological culture meme moral hazard national politics & policies Popular responsibility too much government

9 Dangers of “Democratic Socialism”

dangers, socialism, socialist, 9, democratic socialism, meme, illustration, Jim Gill

First… some definitions:

Socialism advocates the public ownership and control of business and industry in service of a more equal distribution of wealth.

“Democratic Socialist” Bernie Sanders places emphasis on redistribution and downplays the public ownership and control part of the system.

However… Bernie seems never to have met a government monopoly he didn’t love, or a private enterprise he didn’t distrust or despise. It’s the state for Bernie, and Bernie for the state.

What are the 9 dangers?


It normalizes envy.


It rationalizes theft.


It idealizes state power.


It penalizes accomplishment.


It rewards indolence.


It preaches obedience to the state.


It encourages dependence on the state by treating citizens as children.


It dismisses the protection of individual rights with a vague appeal to the “collective good” or “public good.”


It has repeatedly led to economic collapse, oppression, poverty and starvation.

So how have Scandinavian democratic socialists managed to avoid these dangers?

Quote from the current Prime Minister of Denmark:

“I know that some people in the US associate the Nordic model with some sort of socialism. Therefore I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy.”
—Speech, Harvard Institute of Politics

 

From “Scandinavian Unexceptionalism” (from the Institute of Economic Affairs):

Today the Nordic economies are again growing, following a return to broadly free-market policies that served them well before policies changed during the 1960s and 1970s.

The countries are changing in the face of serious long-term problems that have developed over the last 30 years.

Finland, Sweden and Denmark have…introduced far-reaching market reforms. These changes include greater openness to trade, clear reductions in the tax burden, private provision of welfare services, the introduction of personal retirement accounts and, in Denmark, even a shift towards a liberal labour market.

—Scandinavian Unexceptionalism (highly recommended!)

And the moral hazards?

The development of Scandinavian welfare states has led to a deterioration in social capital.

Nordic societies have for hundreds of years benefited from a strong Lutheran work ethic, a strong sense of individual responsibility and high levels of trust and civic participation.

In the early stages of their transition to “democratic socialism”, safety nets did exist, but few used them. Over time, an increasing share of the population became dependent on government transfers. The welfare states moved from offering services to the broad public to transferring benefits to those who did not work.

The situation that exists in Nordic societies today is one in which ethics relating to work and responsibility are not strongly encouraged by the economic systems. Individuals with low skills and education have limited gains from working. This is particularly true of parents of large families, which gain extra support if on welfare.

It is true that welfare systems have reduced poverty. However, especially in the second generation, they have also created a form of social poverty of the same type that is apparent in the countries from which many of the admirers of the Scandinavian systems come. Detailed research clearly shows that welfare systems have formed a culture of dependency which is passed on from parents to children.

All of these problems are widely acknowledged by policy makers in the Nordic states. They are generally ignored by American enthusiasts for “democratic socialism.”

MUCH MORE HERE on the moral and economic capital that preceded the welfare state, and its gradual disintegration over time… 

Do you believe that socialism is a good idea that has simply been corrupted by ruthless dictators? Consider the story of the Great Cultural Revolution. . .  a mass movement of Chinese youth dedicated to eradicating capitalism and advancing socialism. Its bloody history tells us quite a lot about the logic of this flawed political philosophy. . . “Socialism’s Idealistic Youth”

 Useful References

Scandinavian Unexceptionalism (Institute of Economic Affairs)
This paper is especially valuable because it was written by someone who actually favors a large welfare state. His willingness to concede the problems inherent in such a state are refreshingly honest… and useful for anyone interested in the issues.

What Can the United States Learn from the Nordic Model? (CATO Institute)

Myth: The Scandinavian countries are proof socialism works (Being Classically Liberal)

The Myth of the Scandinavian Model

Economic Freedom of the World: 2013 Annual Report

International government spending (Wikipedia)

Index of Economic Freedom (Heritage Foundation)

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Categories
government transparency national politics & policies

Absolute Safety Never Assured

There’s this old joke. “How do you know when a politician is lying? He’s moving his lips.”

Regarding President Obama’s recent speech about the ongoing oil spill disaster, Byron York of the Washington Examiner noted “one particularly striking moment . . .

midway through his talk, Obama acknowledged that he had approved new offshore drilling a few weeks before the Deepwater Horizon rig explosion on April 20. But Obama said he had done so only “under the assurance that it would be absolutely safe.”

York then quoted industry experts swearing on a stack of scientific reports that, regarding oil drilling, there is no such thing as “absolutely safe.” So, the intrepid reporter wanted to know, who told Obama that new deep sea oil drilling would be safe?

Long story short: He got a lot of administrative runaround from the Administration.

But who in their right mind believes anything is “absolutely safe”? Water isn’t. Chewing gum isn’t. As Thomas Sowell has explained in books like Applied Economics, we never choose between the risky and the absolutely safe. There’s risk all around. And trade-offs.

Assuming that Obama is not a nitwit (a pretty safe assumption), when he spoke the “absolutely safe” line, he simply wasn’t being honest.

Why? Because he looks bad. But this could have been an opportunity for America (and its president) to confront reality.

Of course, for a sitting politician, that’s the furthest thing from safe.

This is Common Sense. I’m Paul Jacob.