Archive for May, 2015

Economics, and Criticism of David Ricardo’s Theories

May 20, 2015

This first appeared in a conversation on Facebook. My correspondent is a professor of economics who is also the author of a textbook on that subject. He favors Free Trade, and cites the theories of David Ricardo. The following is my reply:

I consider the following criticisms of Ricardo’s ideas, which seem germane to me. Note that I came up with my own criticism independently, based on my analysis of current conditions in the US.
“As Joan Robinson subsequently pointed out in reality following an opening of free trade with England, Portugal endured centuries of economic underdevelopment: “the imposition of free trade on Portugal killed off a promising textile industry and left her with a slow-growing export market for wine, while for England, exports of cotton cloth led to accumulation, mechanisation and the whole spiralling growth of the industrial revolution”. Robinson argued that Ricardo’s example required that economies were in static equilibrium positions with full employment and that there could not be a trade deficit or a trade surplus. These conditions, she wrote, were not relevant to the real world. She also argued that Ricardo’s theory did not take into account that some countries may be at different levels of development and that this raised the prospect of ‘unequal exchange’ which might hamper a country’s development, as we saw in the case of Portugal.[16]”
“The development economist Ha-Joon Chang challenges the argument that free trade benefits every country:
Ricardo’s theory is absolutely right—within its narrow confines. His theory correctly says that, accepting their current levels of technology as given, it is better for countries to specialize in things that they are relatively better at. One cannot argue with that. His theory fails when a country wants to acquire more advanced technologies—that is, when it wants to develop its economy. It takes time and experience to absorb new technologies, so technologically backward producers need a period of protection from international competition during this period of learning. Such protection is costly, because the country is giving up the chance to import better and cheaper products. However, it is a price that has to be paid if it wants to develop advanced industries. Ricardo’s theory is, thus seen, for those who accept the status quo but not for those who want to change it.[20]”
Ha-Joon Chang’s comment implies stasis in economics, which may an analytical ideal but is rarely if ever seen in the real world. Natural conditions change, market needs change, labor influences change, rates of exchange change, political influence changes, international relationships change. Some of the changes cannot be predicted, nor can they be prevented.
Instead of free trade, I advocate a mix of free trade, but with critical national industries protected. Note the part about international relationships; simply put, handing our manufacturing sector over to foreigners who might be friendly today, less so tomorrow, is dangerous. It’s not manpower that wins wars now, it’s technology and equipment. Note how readily the IS militants, even though outnumbered, manage to kick the butts of Iraqi government forces. Technology takes time; manufacturing complex systems, then training people to use them effectively, can take years. Handing a capability over to benefit a few in the short run is madness in the long run. Stability is not guaranteed.
I also suggest that part of a mature economy must be turned inward instead of outward. To this end I believe making socialism part of the national mix, in which the government becomes the employer of last resort in a downturn. I advocate Quantitative Easing not to protect banks but to strengthen the nation by investing in infrastructure. Note that China is using her temporary advantage in balance of trade to do just that.
Bottom line: I think that overall Ricardo was wrong, and that overreliance on his theories now is economically damaging and dangerous from a security standpoint.

Society, and the Judicial System

May 17, 2015

I’ve been commenting about the decision to execute Tsarnaev for his part in the Boston Bombing case. I’ve read other comments about Charles Manson and similar ones that have to do with a different aspect of our system: correction, or punishment?
My first post was about society’s responsibility to remove a danger to society. This time I’ll look at a different aspect: punishment, or correction?
‘Punishment’; what’s the purpose? Think about it for a moment.
We punish children. Why? Consider that too.
Is it done to correct a person’s behavior, or is it a kind of societal revenge? Manson and Tsarnaev harmed our society, so we must have vengeance? Neither will be, probably cannot be, ‘corrected’. They’re a danger to the rest of us.
The main problem with correction is that we don’t have a way to ensure that it happens. Prison doesn’t do it. Far too many come out worse than they went in. Death won’t do it, because the person executed is permanently removed, not ‘corrected’. Society is safer, but that’s it.
Those who favor the death penalty believe that it provides both revenge and conditioned avoidance, in that it will frighten others from doing what got the convicted one executed.
I don’t see that working. Are there fewer crimes in Texas? That’s the state with the most executions, yet murders and crimes of violence still happen there.
How about long years in prison? A judge was convicted recently of selling people, including children, to a private prison company to be locked up. He got 28 years behind bars. If he survives, he’ll be an old man when he gets out. Will this encourage others not to become corrupted? Will he be ‘corrected’? To what end? Can he become a productive member of society when he gets out?
This same question applies to anyone who is incarcerated.
The number of people in prison or awaiting execution in the US tells me something different: our society has failed, is failing.
Too many of our people are exploited, hopeless. They see no better future ahead, just work, be exploited by the neo-nobility until they finally die. And their children will fare no better. They rebel.
To me, the cause of our societal problem is uncontrolled capitalism and corruption. There’s more to it than that, but it’s where the rot starts. Religion plays a part too, as does a kind of faux patriotism. Taken all together, it’s an unholy mix.
It’s a failure. We can do better. And we should. We must, or it will only get worse.
While you’re muttering ‘communist!’ at me, think about sports.
Football and basketball are good examples.
“If you ain’t cheatin’, you ain’t tryin’.” Ever heard that?
The New Orleans Saints put a bounty on opposing players. Cheating. The coach got a year’s suspension, now he’s back. Tom Brady is facing suspension for cheating, but it won’t be a heavy one. Why? Both men are draws, moneymakers. And professional sports is about money, not sportsmanship. Basketball? Even notice why it takes so long to finish the final few seconds of a close game? Deliberate fouls, deliberate breaking the rules. Cheating. Two or three free throws, no problem. Fifteen yards penalty for deliberate cheating, holding a defenseman or a wide receiver, no problem. If you ain’t cheatin’ you ain’t tryin’.
And oh, the uproar when ‘fans’ hear that their team is moving to another city! More false patriotism, in a sense.
My team right or wrong is pretty similar to my country right or wrong. We never seem to ask why we shouldn’t make both right instead of blindly supporting their wrongs.
Back to ‘justice’. How do we ‘correct’ early offenders? The judge scolds them, gives them ‘probation’. Over and over again. It’s expensive to lock someone up, you see. And they have no money to pay fines. As for the economic conditions that caused them to act out, nothing is said about that. Nothing will be done in Baltimore or Ferguson, either. Rioters will be scolded, most will be released, maybe a few policemen will get fired, nothing changes.
And unless we force it to happen, nothing will change.
Oh, and that youthful offender? Probation, probation, a short lock-up in a juvenile prison (maybe), until he grows up…then lock him up forever.
Or execute him.
After all, he got due process. Right?

Christianity, and Fakes

May 14, 2015

Christianity is more than simply declaring “I am a Christian.” The religion is based on source documents, most of which are readily available for everyone to read.
Any argument there?
Those source documents prescribe a system of behavior and a code of morals. Those things are not ‘optional’. You really can’t cherry-pick among them. You can’t stand up and declare that someone is a traitor and he should be killed (that has happened several times, sometimes by preachers, yesterday by someone who claimed John McCain was a traitor and should be killed.
If you can’t accept “Thou shall not kill”, you’re neither Christian nor Jew (Jews rely on the Torah, which includes Exodus, one of two places the Ten Commandments are found).
But Christianity is based largely on the New Testament. “Turn the other cheek”; ever heard that one? If your idea of Christianity involves carrying a pistol, you’re a disciple of the NRA, not of Christ. Guns enable people to kill with the squeeze of a trigger, which is incompatible with that first Commandment.
There are other parts of the code that pinch, too. Accumulation of personal wealth, for example. Feeding the hungry; you no longer need rely on loaves and fishes, grocery stores and restaurants work pretty well. As do contributing to charities, food banks, and soup kitchens for the homeless.
If you can look at a homeless man and not love your brother as yourself, you’re not a Christian.
Get the idea?
I’ve never met a real Christian. Mother Teresa came pretty close. But she’s gone now. We may never see her like again.
Public claims and posting articles such as the one in the beginning only underscore the reality: if you speak but don’t act, you’re living a lie.
I don’t depend on exhortations from preachers in expensive suits who drive expensive cars to tell me how to act. Whether atheist or religious, that ‘golden rule’ is still a pretty good guide to behavior. I suspect that I, an atheist, come closer to living that rule than most of the self-identified ‘Christians’.

Private Education, and Why Our System Is Failing

May 12, 2015

A recent discussion with two online friends caused me to reflect on education.
I’m a product of a small public high school (in Leesville, Louisiana) and a small university (University of Texas-El Paso). Most Americans share a similar background. The system worked for us, back then, but it doesn’t work nearly so well now.
And none of the proposed fixes have made a bit of difference.
Students are stressed; teachers are stressed; some, lacking any other solution, cheat. Even school boards cheat (EPISD, for one, the district I once worked for; the cheating happened several years after I retired, and it was done at the district-administration level; teachers had no input into what happened).
My friends, who have a libertarian philosophy, feel that the solution to our education mess is the free-market approach. I don’t agree. Such a system has several major flaws.
The first one is simple: there’s no law against opening your own school. Go ahead, invest the money, hire the teachers, apply for certification, and invite people to bring their children. Collect a fee for services and just like that, you’re off and running.
Until you go broke. And you are very likely to do so during your first year.
There are such schools, and many have been around for a century. Excellent schools; the nation’s wealthiest citizens send their children to such.
And that’s the problem; such schools are only for the wealthy. They cost roughly what a university education costs. Ordinary Americans can’t afford them.
The private/charter schools, instead of offering their product in a free-market system where competition would result in excellence, neatly bypass competition by collecting not from customers but from government. In so doing, they siphon off needed money from public schools.
So why can’t public schools compete?
Actually, they do. Note that I graduated from a public school, as did my sons and grandsons.
But public schools must do things private schools don’t.
They provide transportation to those that need it. Simple solution to busing, instead of huge schools that draw students from wide areas, keep schools small and locate them where students can walk to school or be brought by parents. The larger schools are thought to be more efficient, but when you add in costs of transportation, plus the reduced education outcomes, I question whether large schools really are more efficient.
The other thing that differentiates public schools from private schools is government control. Schools are no longer about education; they’re about social engineering, about inclusion, about lawsuits. Some of these are positive, and it may be that all of these trends are positive in the long run; but they’re expensive. And that’s the failure of the American school system in a nutshell.
Testing only proves what many already knew: we’re not producing the level of education among graduates that we once did.
Schools are about funding; the rule is, live within the budget. It’s the ‘business’ approach.
But kids don’t fit into the column of figures. Some require more services, whether adaptive services such as ramps for physically handicapped, to smaller classes (more teachers; expensive) or resource-intensive classes for the educationally handicapped.
If there’s an advantage to the private-industry school, that is where it’s to be found. As a private company, such schools can avoid much of the governmental/judicial mandates that, however well intentioned, don’t come with funding.
In a rational system, trained professionals would assess the funding needs and come up with a budget. This would be presented to the school board or other authority, much as departments of the government do . Instead, it’s much more the top-down approach: here’s the money and this is what you must do, and you’re forbidden to make changes by dropping programs or dropping expensive students because you don’t have enough money.
There’s another hidden corollary to this: unproductive and misbehaving students.
The budget is based on a cost-per-student basis, and if student enrollment increases the budget is increased. But if students are habitually truant, schools lose money. This means that if students violate rules, they aren’t expelled; they’re sent to an alternative school, set up to deal with such. If students cannot or will not benefit from attendance at a public school, they’re still kept there, because doing so brings in money.
Private schools don’t operate that way. Those schools I mentioned in the beginning, the ones that wealthy people send their kids to? They had a different solution. If you misbehave, for example bring a weapon to school, you’re expelled. If you refuse to do the work, you’re dismissed. If you are so disruptive that other students can’t learn, you’re expelled. Parents quickly become involved, because having paid considerable amounts of money to those private schools, they don’t want their children expelled.
One final comment about those private, for-profit charter schools: if they don’t produce, they go bankrupt. Good economics, bad sociology. What happens to the students who were enrolled? If you’re a factory making widgets, you can send the ones that don’t pass inspection back and have them fixed. Kids aren’t widgets; they have a narrow time-frame where education either takes place or it doesn’t. Subsequent efforts at adult remedial education  can help, but it can’t fix what went wrong during those formative years.
I don’t know that there’s a solution. We elect officials, and as soon as they take office they become magically expert in everything. The urge to stick a finger in and stir things up is overwhelming. So they do.
And the system gets stirred up, but somehow it’s not better. Short of a total redesign, I don’t see improvement taking place.

Economics: Crashes, Recoveries, and Recent History

May 8, 2015

I keep seeing the denials. Whenever good economic news comes out of Washington, some claim it’s propaganda, that it’s all lies by Obama.
As if a president has time to collect the data, to analyze economic trends.
Yesterday I got involved in a discussion with a man who doesn’t believe statistics such as what was reported today, that America enjoyed fairly-healthy job growth last quarter.
But I also see signs on doors, Help Wanted. Look around, you’ll see those too. Go on, look for yourself. Are those signs lies?
Stores close, Others open. It’s part of the cycle. Long term trends are different.
Unless you PERSONALLY have access to all the data, you’re believing someone else’s report. And all those reports, including mine, are based on second-hand information. They’re no more than opinion, in other words. My opinion? I base it on evidence, not solely on government reports.
Those reports some are so quick to doubt are read by a bunch of nervous traders. The stock market…looked at that lately? It reflects the nation’s economic health very closely, and there’s a lot of our economic history to be read there. Companies that are publicly traded must file quarterly reports. They must report changes in their work force, up or down, whether their earnings will meet expectations, things like that.
Don’t like the government reports? Just watch the stock market. Traders know. They have to, or they lose their ass.
Now go back and look at long term market trends. Look at what happened during the last years of the Bush II presidency and what has happened since.
The market almost crashed. Banks almost went bankrupt, the entire financial house of cards almost fell. Bush and his supporters bailed out those same big banks and insurance companies with gigantic gifts of public money.
This is history. It’s not opinion. It happened. The economy sank into the Great Bush Recession. OK, that’s my name for it; I want to remind people of what happened and who was in charge at the time.
You can find the reports, and some of you will even remember when these events took place, now that I’ve reminded you.
No bailouts under Obama. Instead, rising employment. More consumer confidence. The stock market rise has reflected that. The nervous traders settled down and paid more for stocks, because they expected the values of traded companies to go up. That has continued since Obama became president.
Evidence, not opinion.
I call it the Great Obama Recovery, because I want people to remember who was in charge of this part of our economy history too.
Loved Bush II, hate Obama? OK. Personally, I’ve got issues with both of them. But I try not to let that blind me to facts. I look at the evidence.
Government reports, and also what the stock market is doing. That market reflects our economic history, for those who are willing to look at long-term results.

On Campaigns and Society

May 7, 2015

As of this writing (May 7th, 2015), there are at least six ‘declared Republican candidates’ for president. Six more are hinting strongly that they’ll run while they accumulate the milllions it will take to campaign for the party’s nomination. To do that, they’re attempting to find something, anything, that will separate them from the rest in the clown car. Funny suits, big noses, huge shoes won’t do it; this time, it’s not how they look but what they say.
Believe it or not, those buffoons represent a slice of the modern TeaPublican Party. Because they appeal to the few, they believe they can parlay that into an appeal to the many.

But they will end up driving each other farther to the right, to the portion of the electorate where the lunatic fringe lives. Where people think that if only people prayed more, that would solve all the world’s problems. Apparently they haven’t noticed how often Muslims pray.
They end up where the NRA lives, never noticing that the NRA propaganda hasn’t done anything to rein in government; instead, the guns kill thousands of ordinary citizens, many of them children. Not one ‘dictator’ trying to take over the country has been held back. You’d think someone would notice, but the propaganda is never ending. The tree of liberty has not been watered by the blood of patriots and tyrants, it’s grown stunted by being overwatered by the blood of children and citizens.
The no-tax fools are realizing that as government shrinks, as there’s less money in the system, somehow the potholes don’t get fixed. Bridges are collapsing. Some wonder why. Eventually, others will too. Whether they’ll wonder in time for the election I don’t know.
But the party of low spending has no qualms about using public money for political purposes. After all, they’ve spent millions trying to deny affordable health care for ordinary citizens. Fifty plus votes, last I heard. They’ve spent more on repeated investigations into Hillary Clinton. So far, nothing has been found. How much have the manufactured ‘crises’ cost the government?
More money will be spent on defense, too. Not to pay soldiers, not even to care for the injured and shocked, but for hugely-expensive weapons systems. That will, somehow, be spent in districts that elect powerful politicians. Ahh, pork…more public money used to help elect a critter.
So what are the issues? Other than that virtually all of them have been told by God that he should run. God’s being indecisive, I suppose.
Wouldn’t you love to see Ted Cruz debate Mike Huckabee on the role of religion in government?
Freedom, or what Republicans call freedom, is an issue.
Railroads are ‘free’ to haul dangerous cargoes. Periodically they blow up, but at least they blow up free.
Factories too are free of regulations. Guess what? They blow up too. But hey, regulation cuts into profits. And corporations need to be free to make as much as possible.
That TeaPublican fringe curses the EPA because it limits ‘freedom’. Even so, corporation are still free to pollute, to strip the top off mountains, to dump coal ash in streams, to leak oil from pipelines into rivers and streams, to create a mess that the federal government can’t control and won’t have the money to clean up.
And after the clowns drive the car as far to the right as possible, the eventual winner will try to crab back to the center. Dragging all that campaign baggage with him.
I don’t see much chance that a Republican can be elected. Even if one is, haven’t we seen how ineffective they’ve proven themselves to be at governing? At least so far, there’s a slight amount of control.
But the corruption is getting worse. The preachers and priests are gathering, waiting to have more say in American society. The manufacturers of military goods are smiling, waiting for more money for ever-more expensive systems they can sell to the Defense Department.
Have you noticed how similar we’ve become to the Middle Eastern nations we’ve been fighting?
We’ve separated into ‘tribes’ based on religious fundamentalism. On color. On ethnicity. On gender and sexual orientation. Corruption, always present, has become endemic. Schools are failing, education is a way for banks to exploit the young, the social safety net is tattered, little by little we’ve been reduced to a third-world nation. Maybe that’s what people are looking for.
Personally, I don’t want to live in Americanistan.
How about you?