American Politics

There's an example from Economics that I keep thinking of. Say there is a long stretch of beach, and there are two food stands, one on each side. Where would each of them move to, to maximize profit? Well, if both are on the far end of the beach, one could move closer to the middle, and get a greater percentage of the customers (assuming the customers choose to go for whichever one is closest). While the optimal placement for customers (shortest walking time) would be one at each of the 3/4 points along the beach, equidistant from both the edge and the center, both businesses will move to the very middle, to prevent the competition from moving over any more and taking their customer base. This assumes that no other competition can move in.

This is pretty much what American Politics seems like to me. By November, McCain and Obama will be barely differentiable, but everyone to Obama's left will vote for him, and everyone to McCain's right would vote for him. This is what a two party system does; going back to the beach analogy, if given no other choices, and Hitler were running for the Republicans and Stalin for the Democrats, right at the edges of the beach, then the voting results would be fairly similar.

This is what happened in the 2000, election, at least. Bush was a moderate-conservative and Gore was a moderate-liberal. That was just branding, of course, because both have turned out to be quite different than they were when running.

Response to Jake's comment

Jake Quinton:

Honestly, in all the hubbub about tax cuts, I didn't stop to think once that those wealthy bastards I love to hate (and aspire to be like) pay for such a large portion of our government.

I still would like tax cuts to be seemingly the most beneficial for those lower quintile (love that term) of the population that is most often faced with the choice of having either milk or lights some months.

But that might just be the socialist in me.

I'm going to respond in post-form, because I just know if I start typing out a long response my computer is going to die without auto-saving. So yeah...

My problem with this is:
1.) the lowest quintile pay .65% of the income tax in America, so income tax cuts won't benefit them too much. (time for a digression) The real place where the poor are hurt are in things like gas taxes and excise taxes; these taxes tend to be regressive, because the poor will spend a greater percentage of their income on these. Especially with things like New York's new cigarette tax, which more than doubles the price of cigarettes. This is done with the full knowledge that it will force the poor, who are more likely to smoke, to have to decide between smoking and eating.

2.) It tends to be the top quintile who produces and distributes things like milk and lights. By punishing them, the government indirectly punishes the people who have to pay for their products. If a research scientist, working to produce cheaper light bulbs, works 35 hours a week at a 50% tax rate, but would work 50 hours a week if the tax rate were 20%, meaning that each additional hour he or she works means marginally more money for him or her, then it's more likely that a cheaper light is produced, which would benefit the poor.

It also drives up the cost of doing businss, as hiring someone who wants to make a certain amount of money costs businesses more, which is passed on to the consumers via higher prices.

So cutting taxes for the rich may not directly benefit the poor by giving them more money, but it benefits them by making their money able to buy more.

I think this may be Reganomics though, now that I look at it. Whoops.

I called it

It turns out the guy who has the blog,Five Thirty-Eight, which I mentioned earlier is Nate Silver, who happens to be involved with Baseball Prospectus, which is a big baseball-statistics think tank that I used to subscribe to. And indeed, he studied economics at the University of Chicago.

Baseball, Politics, and Economics. Whodda thought.

This guy must have some econ training

This is a great blog for election buffs and number nerds.

Henry George

In a libertarian world, where do taxes come from? Income taxes violate the most fundamental of rights; the right of a person to his or her own body, and the labor that it produces. They also have the negative effect of disincentivising work; if people get to keep less of what they produce, they'll produce less, especially in a progressive income tax system, which punishes people for producing the most.

Sales taxes have the same problem; they punish people for trading, which is the last thing you want to do in a free market system. So do tarrifs, etc.

What remains is property tax. This is where Henry George comes in - to digress slightly, a problem with libertarian philosophy comes with the ownership of land. The ownership of private property, or anything that is the product of one's labor, can morally be assigned to whoever produced it, or whatever they traded the product of their labor for, etc. Land was produced by no one; natural resources were produced by no one. Therefore, the only way one can claim ownership of them is by showing up before anyone, or by using coersion to claim ownership. Neither is tenable under libertarian philosophy.

So, a legitimate form of government is the collection of rent from a resource that cannot be morally owned. A good primer for this is here.

Windfall Profits

There is no greater indication of a widespread ignorance, if not sheer loathing, of economics is the concept of a "Windfall Profit Tax." Generally levied on oil companies as a way to take anger out on someone, these taxes are perhaps the most irrational taxation of all. 'Windfall Profits' happen when one of two things happen: the supply of a good shoots down, driving prices up and rewarding those with inventory, or the demand shoots up with an inelastic supply curve, meaning price rises inordinantly.

To bring the price of a commodity back down to the market rate, the industry so affected must invest in new forms of production. To do this, the companies will invest in capital and labor, increasing their supply. They use their 'Windfall Profits' to return the good back to its equilibrium price.

Of course, if the government slaps a 'Windfall Profits Tax' on the industry, less of this investment will happen, so the government keeps the price artificially high for a longer period of time. This is what the government wants to do to the oil industry; though to be fair, they receive subsidies from the government, so they kind of asked for it.

One of the industries that is experiencing the most 'Windfall Profit' right now is the farming industry. The government, instead of slapping a tax on them, is rewarding them with the biggest subsidy of all time (I think). Now that's just stupid.

Health Care

The biggest benefit of the free market is that it gives each person the ability to allocate their time and resources in the way that benefits him or her best. In the market, this means that producers have to provide the highest quality goods at the lowest possible price, or people will go somewhere else. This system would of course be best for health care, as well... but in America today, does such a system exist? Not at all. If the cost of health care is rising, and the cost of providing care isn't rising, then this cannot be a free market system.

What is it then? Our system seems to have the downsides of a bureaucratic system with the downsides of a free market system, and few of its benefits. The problem stems from WWII wage controls (see, the government removing choice from the people) - sometime during the war, the government imposed a wage freeze, looking to provide stability in the labor markets, most likely. Of course, this didn't work. Some businesses were still expanding and were willing to pay more for employees - so they offered non-wage benefits that were tantamount to a pay raise. Now we have employer provided health insurance. This is stupid for several reasons: it impedes the freedom of workers to go to the best jobs, out of fear that something will happen in between jobs, making them uninsurable. It's also stupid because insurance came to cover everything - the price signaling that is so important in a free market does not exist when the customer never sees the price tag; why go somewhere that charges $100 for a physical, when you can go somewhere where it costs $300 - it makes no difference to the consumer, because the insurance just covers it. It makes sense to have insurance for emergency situations, you aren't going to shop around for the lowest price if you're having a heart attack.

What are the solutions offered? There's single payer nationalized health care, where we just decide to end the market for health care. Prices go up (though consumers don't see it directly - only through their taxes), quality goes down (and consumers can no longer decide not to patronize the poor quality places, since they would all be the same), and waiting times go up, and people have no incentive to take care of themselves, since no matter what there will be no cost to taking care of them. The benefits: everyone has access to at least some health care. The rising prices under the employer-based system, which hurts the poor most, would be taken care of.

I think the two front Democrats' system is that the government would become an alternate health care provider. The government offers health care at an artificially deflated price, and you can choose between that and the current options for health care. (Under Barack's system, you still have the option to decide not to have insurance, but you must cover your children somehow. Under Hilary's system, everyone's a child and has no choice but to get some sort of insurance). This doesn't solve any of the problems of the increasing price of health care, and has the further disadvantage of screwing up the market for health insurance. The advantage seems to be that there would be fewer uninsured people demanding care, who drive up prices by being unable to pay; health care would be available to a lower class of people (but it doesn't solve the problem of illegal immagrents being uninsurable).

I think both of these alternatives are worse than our current system. What needs to happen is insurance needs to be shifted to covering only emergencies, and it needs to be moved out of the hands of employers. It wouldn't cost workers more: their wages would go up, as the money that was spent on insurance would instead be given out as wages. People then have greater choice in getting insurance, and can buy a program that best fits them, and they are no longer tied to their employers (how lame would it be if you got a car and house leased to you by your employer? Noone would ever change jobs). We would see prices drop - this would make health care accessable to even more people, and it would give everyone more wealth. For those who truely cannot afford the bare minimum of health insurance, charity would be able to cover this (as it is now, the high price of care makes the government the only charity that can possibly afford to cover everyone). I think our system is slowly moving this way, and is likely being impeded my the government, and the health lobby's control over regulation. The best thing the government can do, if it wants to improve the quality of life for people, is to do nothing.

History and Economics

In deciding between the study of History and the study of Economics, I should try to define why I am attracted to each of them. Economics is the application of reason and common sense to reality; it is the science of making good decisions, as one of my econ teachers puts it. One would think that this means that Economics may be limited and straightforward, but it is anything except that, largely because determining what will happen in the future, which can affect decision making, is an art. Especially in Econometrics, thinking about your data and how it relates to other phenomena. There's a misconception that Economics has all to do with money; this couldn't be further from the truth. It's just that people care more about rational decision making when money is at stake.

One of my professors and I wrote a paper about Major League Baseball; the purpose of the paper was to determine if players gave 'hometown discounts,' and whether they accepted less money to remain with their previous team. We didn't find that the first one existed; perhaps players figure they will be traveling enough during the 162 game season that they should maximize their salary and just live near home in the offseason. I have a feeling that people with exceptionally high incomes have less of an incentive to stay near home than those with lower incomes; the cost of traveling home is porportionally lower for someone making a million dollars a year, since they could afford airline tickets, etc, more easily. We did find that players accepted less to stay with their previous team; the psychic cost associated with moving houses, and changing employers, would be about the same regardless of income, it would seem. There was much more to the paper, but that's it in a nutshell.

Does this give us any useful information outside of Major League Baseball? I think it does. When looking for a job, each of us has to weigh the cost of leaving home behind in order to get the best job; quantifying this is useful.