Category Archives: Economics

Business, Economics, Political Commentary

GM Thoughts

5 Comments

From Mitt Romney:

GM’s new proposal, clearly produced under government duress, is worse than virtually any of the alternatives. It would give GM to the UAW and the U.S. government and make taxpayers pick up the bills. Of course, billions more from government would be drawn down right away. But the UAW could also depend on the Obama administration to keep up the subsidy for years and years to come. Government and Union co-ownership: It would be as ineffective as it is un-American.

The right course for GM is an out-of-court restructuring or bankruptcy. Either would keep the company in business and rid it of burdensome costs, work rules and obligations. The government could backstop the post-restructuring debt, helping the company get on its feet. GM must not fail: If its costs are brought in line with its competition, it can ultimately thrive and grow jobs. What is proposed is even worse than bankruptcy—it would make GM the living dead.

I was never a big Romney fan, but he’s looking pretty damned good right now.

Business, Economics, Media Criticism, Political Commentary

One Hundred Days

10 Comments

One hundred screwups. And here’s a pretty serious one:

The feds will ask the banks to increase their tangible equity by converting preferred shares to common stock, including the taxpayers’ preferred shares that were purchased with TARP funds. The WSJ editorial board called this a “backdoor nationalization.” That’s exactly what it is. It’s also a nationalization that increases taxpayer exposure to bank losses without recapitalizing the banks, without providing an exit strategy, and without building in effective safeguards against politically directed lending.

The country’s in the very best of hands.

Business, Economics, Media Criticism, Political Commentary

“Card Check”

2 Comments

In action:

Milner says the men demanded that he erase his recording, and one of them took his camera, while Cerbo claims, in the Post’s words, that he “offered to erase his tape because he hadn’t been invited to the event.” No one disputes that Milner was outnumbered, or that it was he who called 911.

If this is what happens to a man at a public event, what do you expect a woman to do when these guys show up at her house with a card to sign?

I’ll be curious to see whether Benedict Arlen flips on this issue.

Economics, General Science, Political Commentary, Science And Society

Swarm Savvy

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This article about how bees and ants make collective decisions reminds me of my emergent stupidity theory:

So clearly it’s not enough to just put a bunch of dumb things together — how they are put together matters as well. But it at least offers the possibility that if you had a large enough bagful of Michael Moores (admittedly, it would require all of the burlap that the world will produce for the next century or so), you might have a chance of getting something intelligent as a result.

But to get back to my NASA example, I have a theory that the converse is true as well. You can aggregate a bunch of really smart things (like rocket engineers) and come up with something really, really dumb — an entity that would make decisions that no single individual among them would ever make, sans psychotropic drugs. Call it, if you like, the “committee effect.”

I’m not sure how to quantify it, but I suspect that it’s kind of like the rule for determining the resistance of a parallel network of resistors.

[Danger Will Robinson! MATH ahead!!]

If resistors are in series, that is, connected end to end in a long row of them, it’s easy to determine the total resistance — just add them up. So two resistors of ten ohms each become one resistor of twenty ohms when one end of one is connected to one end of the other, and the resistance is measured across the two free ends.

Parallel resistors, in which both ends of the resistors are connected to each other, so that the current flows through them all simultaneously, instead of first one and then the next and so on, has a different rule to compute the net resistance.

It’s: Total Resistance = 1/((1/R1)+(1/R2)+…+(1/Rn))

where the “R”s represent the individual resistances, and there are n resistors. In words, it’s the reciprocal of the sum of the reciprocals of the individual resistances.

For the example given above, it would be one over the sum of one-tenth plus one-tenth, or one over two-tenths, or one over one-fifth, or five ohms. So instead of doubling the resistance, as in the series case, we’ve halved it.

It can be shown (exercise left for the algebra student) that if all of the resistors are of equal value, the formula simplifies to the original resistance divided by the total number of resistors.

[End MATH]

Which is a frightening thought, if the same rule applies to my “emergent stupidity” theory. Assuming for simplicity that everyone in a government bureaucracy has the same I.Q. (it doesn’t change the answer that much if you allow variation, but assuming that they’re equal makes the calculation much simpler, as one can see from the formulas above), that means that the net I.Q. will be that I.Q. divided by the number of agency employees.

If you add the number of lobbyists and interest groups to the mix, you can drive it down another order of magnitude in value, to the point that it has the intelligence of a lobotomized fern (only slightly smarter than Joe Biden).

And my theory would seem to be borne out by the quality of decisions coming from, for example, the U.S. Agriculture Department, or the INS, or the State Department.

All of this, of course, is a long way of saying that I’m not encouraged by the prospects of merging several federal agencies and departments into a much larger (and probably dumber) one called the Department of Homeland Security, and then actually entrusting it with homeland security…

Just for those morons in comments who imagine that I was ever in favor of the DHS. I think the theory goes a long way toward explaining the hundred days, hundred f-ups that we’ve been seeing since the end of January as well.

Business, Economics, Political Commentary

The Workers Take Over The Means Of Production

17 Comments

At Chrysler:

The agreement with the union essentially relieves Chrysler of a portion of the $10 billion it owes to the union’s retiree health fund. In exchange for giving up its claims to some of that $10 billion, the union is getting the significant equity stake in the company.

Gary Chaison, professor of industrial relations at Clark University in Worcester, Mass., said that if the union winds up with a majority stake in its employer, that “puts the UAW in a strange position.”

“If it takes company stock as a part owner in the company, it would be bargaining against itself,” he said. “It can never act as adversarial in that relationship. Also it’s in a position that to make the company more stable, it has to reduce health-care benefits of its own retirees.”

“A strange position.” No kidding.

What I don’t understand is why Fiat would want a 35% stake in a company that is owned by the UAW.

[Update a few minutes later]

It seems to me that shareholders of GM, Chrysler, Bank of America and many other companies that have been screwed over by the government have massive grounds for lawsuits. The tricky part, of course, and particularly with this particular government, is getting permission from it to sue it.

Business, Economics, Political Commentary

Busted

The country’s in the very best of hands:

The cavalier use of brute government force has become routine, but the emerging story of how Hank Paulson and Ben Bernanke forced CEO Ken Lewis to blow up Bank of America is still shocking. It’s a case study in the ways that panicky regulators have so often botched the bailout and made the financial crisis worse.

In the name of containing “systemic risk,” our regulators spread it. In order to keep Mr. Lewis quiet, they all but ordered him to deceive his own shareholders. And in the name of restoring financial confidence, they have so mistreated Bank of America that bank executives everywhere have concluded that neither Treasury nor the Federal Reserve can be trusted.

Boy, that’s not a very flattering picture of Hank Paulson. Looks like Darth Vader without the mask.

Business, Economics, Political Commentary, Science And Society, Technology and Society

There’s Something Missing

25 Comments

So the president made (or is making) a speech before the NAS today in which he proposes to increase spending for “science,” and R&D (I wonder if he understands that these are different things?).

Well, no surprise there. Increasing spending is his first resort to every conceivable problem (except when it comes to defending the nation). But do you not see what I don’t see?

Obama said he plans to double the budget of key science agencies over a decade, including the National Science Foundation, Department of Energy Office of Science and the National Institutes of Standards and Technology.

He also announced the launch of the Advanced Research Projects Agency-Energy. It is a new Department of Energy organization modeled after the Defense Advanced Research Projects Agency, that led in development of the Internet, stealth aircraft and other technological breakthroughs.

Look, Ma, no space agency! No mention of NASA at all. This, combined with the continuing absence of an administrator or White House direction, makes me wonder just where space falls in the priorities of this administration.

But actually, what I find much more disturbing is this:

“I believe it is not in our character, American character, to follow — but to lead. And it is time for us to lead once again. I am here today to set this goal: we will devote more than 3 percent of our gross domestic product to research and development,” Obama said in a speech at the annual meeting of the National Academy of Sciences.

Let’s leave aside the arbitrariness of setting a percentage goal at all (why 3%? Why not 2.5% or 5%?). Let us also ignore the fact that at the rate things are going, there’s not going to be much of a GDP to have a percentage of, and that the $420B number makes some optimistic estimates.

Why set the goal as a percentage of GDP? Why not as a percentage of the federal budget, something over which a president and a government has at least theoretical control? The implication is that he doesn’t just preside over the government and its spending priorities, but that he commands the entire national economy, and can, should and does dictate how others are to spend their own money, which apparently is no longer their own money. It implies a conceit of omniscience on the part of him and his advisors about how much we should be spending on R&D as a function of domestic product, and how we should be spending it, when he has no useful control over what non-governmental entities are spending.

Or does he? Just what does he have in mind?

Oh, and note the latest gratuitous slap at the previous administration, without which, apparently, no Obama speech is complete:

In recent years, he said, “scientific integrity has been undermined and scientific research politicized in an effort to advance predetermined ideological agendas.”

He then drew chuckles, commenting: “I want to be sure that facts are driving scientific decisions, not the other way around,” Obama said.

Yes, there will be no predetermined ideological agendas in an Obama administration.

Right.

Oh, one other thing. I don’t have the time to run the numbers right now, and it obviously depends on how you categorize things, but I’d wouldn’t be surprised if we don’t already spend more than 3% of the GDP on R&D. It’s just not being spent the way The One wants it to be spent.

[Update a few minutes later]

This brings to mind some thoughts that I had last summer on the ability to command and control R&D, with bad Apollo analogies.

[Late afternoon update]

One of Clark Lindsey’s readers makes a good point about the non-mention of NASA:

Perhaps, as the reader suggests, if NASA had not dropped most of its R&D in favor of funding a handful of giant development projects like Ares I, it would get more backing for such activity.

Of course, Ares 1 is R&D, technically speaking. But almost all other, more diverse and certainly more useful R&D has been sacrificed to fund it. But somehow, I actually doubt that this is the reason for the apparent oversight. It think it’s just an oversight.

[Update a few minutes later]

OK, NASA didn’t go entirely unmentioned. He did repeat the flawed Apollo analogy again (it’s one of his favorites), and then said this:

My budget includes $150 billion over ten years to invest in sources of renewable energy as well as energy efficiency; it supports efforts at NASA, recommended as a priority by the National Research Council, to develop new space-based capabilities to help us better understand our changing climate.

That little whirring windy sound you hear is my upright forefinger twirling around and around.

Whoopee.