Showing posts with label capture theory. Show all posts
Showing posts with label capture theory. Show all posts

Tuesday, January 25, 2022

Crony Capitalism (Vacation Rental Edition)

My wife and daughter just returned from a delightful long weekend in Santa Fe, NM. The entire family will return soon to Saint Francis's fine city where, as Hermann Banks reminds usstrangers are kind and beauty is overflowing and the local government is captured by crony capitalists. In fairness to Banks he never has said as much about local government, but I would imagine he wouldn't dispute it. 

Case in point:

A friend of mine has a vacation home there that he purchased a few years ago for both personal use and as an investment. Part of the investment is renting it out as a short-term vacation rental.

About six months ago I booked his place for my family's trip this coming April. In October I received an urgent text message from the rental property service directing me to check my email. Doing so I saw a short message stating that my reservation was no longer available, they were searching for a substitute property, and would be back in touch soon. I somewhat shrugged it off as being a mistake since I knew the actual owner well. But before I had a chance to contact my friend I received another email regretfully informing me that my reservation was cancelled with no substitute.

I reached out to my friend still thinking this was just a clerical error in their system. While a clerical error had occurred, it had a deeper problem behind it. My friend was somewhat upset but a lot calmer about it than I would have been. In fact I was livid for him and ready to go to the barricades. Not because of my vacation plans being disrupted but because of why this was happening and the implications it had for him.

The short version is this: The property management company had failed to make sure that my friend was current in his short-term rental permit with the city of Santa Fe (and yes, this is enough to get me to the barricades--the fact that a city government makes property owners get permission to use their property . . . but wait, there's more). The failure here was pretty significant in that it had expired the prior December 31st. Shame on the management company for sure. 

Should be no problem, though. Just refile as this should be a formality at this point. My friend does so starting a few days before my cancellation email by calling the proper city office. Keep in mind that my friend lives in Tulsa, OK; so all of this is out of direct control for what it's worth. I'm not sure if being able to go down to city hall would have made things better for him. They probably wouldn't have been better for me if I were in his shoes due to the whole ready-to-storm-the-castle attitude I have in these matters. Nevertheless . . . the city official looks it up and says, "Uh-oh, I don't think we'll be able to do this." 

[I swear this is the short version] It seems there exists another, current, valid in-the-eyes-of-the-Duke-of-Santa-Fe short-term rental permit for a property located within 50 feet of my friend's. You see kids, in America Big Hotel has decided that short-term rentals are a threat to their business. They've convinced well-meaning homeowners that people renting out their property could be scary. Soooo, rather than compete they've helped create rules to stop the madness. 

But this no-longer-short story doesn't end with just a Bootleggers and Baptists tale of the hotel lobby working hard to stifle competition along with the help of residents who think they should be able to dictate what happens on other people’s property. We get some government failure and unintended consequences to boot. 

My friend was taken aback at the news he couldn't get a permit because one nearby already existed (a new rule) but was immediately relieved relaying to the official, "Who has a rental? I know all my neighbors, and none of them rent." Upon further inspection, the city official realized that there are two roads with the same name in Santa Fe. The other permit is for a property miles away from my friend's. He could get it after all. Just need to have the local inspector swing by the next day to validate it all. Phew, that was close . . . but wait, there's more . . . as you probably suspect knowing what came next for me. 

The inspector comes out to my friend's house. Presumably begins checking boxes. Sees that there is another property located within 50 feet holding a short-term rental permit by looking it up just like the prior city official did. So he promptly denies the permit and goes about his day. 

This triggers a very fast and unforgiving process in the several rental property agencies my friend uses for his listing. Because I'm sure so as to not fall afoul of city governments everywhere and their crony capitalist controllers, they act swiftly to cancel all of my friend's future rentals. Remember this is October right before a busy Thanksgiving and Christmas season and he depends on repeat business as well as referrals. Along with all of these would-be customers, it is now that I receive a cancellation via email. 

At this point my friend was already on top of getting this reversed--I would not say satisfactorily resolved. He cleared it up with the city and over a LONG weekend was square to lease his property. Then came damage control. Many apologetic messages later with many discounts offered and still a large number of permanent cancellations foregone, he had done all he could to salvage some of his 9+ months of bookings.

It is hard seeing the system work the way it is actually, ultimately intended. It is harder still being a victim of it.




Summer Rental


Saturday, May 8, 2021

The Seductive Allure of Socialism

The more local something is the more essentially socialistic it becomes. I think the best way to describe this is that size/complexity has a positive relationship with the net benefits of the market (free market principles and market incentives, etc.) while size/complexity has a inverse relationship with the net benefits of socialism (yes, there are benefits). Simply put: the bigger or more complex something is, the more you want/need markets and not central planning to do the heavy lifting.

Intelligent people recognize that they know things and understand how to solve problems much better than most other people. They see this in action locally where it works or seems to at least. Thus, their belief is reinforced. This leads them down a bad path to an unreasonable conclusion that they can guide the world.

Keep in mind that what distinguishes a person as being "intelligent" can be local knowledge rather than pure IQ. Therefore, a local shop keeper may be orders of magnitude more intelligent about running her shop than would be a team of McKinsey consultants. 

Art Carden gives a model, salient version of this. For example, consider the family, the firm, and especially small and midsize towns. The local banking relationship in these places illustrates this nicely. 

The key skill of a banker today is not financial acumen. It was once upon a time at least to the degree of assessing credit risk. But large firms, algorithmic models, and risk spreading have largely supplanted that need. It is still important--vitally important for the bank itself--but it is not primarily dependent on the skill of individual banker. I believe financial risk assessment is a quality of secondary importance.

Rather the key skill of a banker today is relationship building. That is what makes a great banker. Hence, bankers are deeply involved in their communities. Again, this is not new, but it is now the primary attribute rather than a secondary one as it was in decades past.

It is strange then that a bank and its bankers, the stereotypical image of a capitalist (think of the board game Monopoly) are in fact the leading proponents of a road to local socialism. 

Here is how it unintentionally works. First, bankers are deeply interested in current customers' wellbeing and credit soundness. They have made loans, and they want them paid back. Second, they want to make future loans. These same customers would be the easy way to accomplish that goal. This gives them an all-too human impulse to favor the known and familiar as opposed to the new and (perceived) extra risky. 

Certainly bankers are interested in growth and new development. It is just that the unseen has a built-in bias against it. 

How is this a slippery road to socialism? I am not proposing that it formally leads to socialism, but it is central planning friendly. Most directly it runs the same risks of all central planning whether at the household, firm, or governmental level: decisions are made that suffer from the knowledge problem and are subject to the local maximum problem

Bankers are deeply imbedded within their communities for good reason: they want the business relationships and they want to stay close to the credit--all the better to monitor the risk. Yet this presents a sort of capture risk similar to formal regulatory capture. The bankers can easily be persuaded to support their customers' desires at the expense of their customers' competition. 


P.S. When I was in college I had a righteous disdain for kids wearing Che Guevara t-shirts, etc. They were "old enough" to know better. As the great P.J. O'Rourke explains, that is no longer true of kids these days, who are now the same ages as those who I rebuked back in the day.

P.P.S. Iain Murray's The Socialist Temptation explores this topic in depth. For a good discussion on it I recommend this recent episode of Jonah Goldberg's The Remnant




See this for more on the source for the above image and related story.

Wednesday, September 23, 2020

Oh, you left out a bunch of stuff.


Imagine various conversations at a board of directors meeting of a major corporation. For example: Trying to save money by paying women less, trying to please customers by not hiring blacks, contemplating intellectual-property theft, discussing a new found way they can literally defraud customers, etc. These would all obviously be wrong and would not be within the scope of fiduciary duty or any reasonable ethical framework. I put cronyism in the same category. Contemplating how to get special favor and rent seeking from the government is unethical.

I've been thinking about this post for some time. It started five years ago reading this article.

Recently there have been several things that have me thinking on this again--making this as fine a time as ever to actually complete this post. 

Michael Munger has been thinking about this for some time. This EconTalk is a great discussion with him laying out the problem. And this more recent appearance on Free Thoughts is great as well. Still another discussion highlighting the nuances and difficulty of this topic is with Rebecca Henderson recently on EconTalk

The question that I think doesn't get asked enough is: At what point does activity like developing and utilizing business relationships, networking, and advocacy cross over to be cronyism? It is difficult to disentangle behavior and results between these two worlds. In fact people participating in the activity during or after the fact would find it quite challenging even if they could put their natural bias to the side--the bias to believe they were acting in good faith and to good ends using good information and sound logic. 

Use of other people's money is a big key, but it isn't necessarily a smoking gun. For example, Facebook uses cash (shareholder funds) to hire lobbyists to advocate for A) onerous regulations for social media companies or B) a continuation of the protections it enjoys under Section 230 of the CDA. The first case (A) is likely a blatant attempt to use the power of government to prevent startup competitors from challenging their market position. The second case (B) is likely a reasonably good protection of their shareholder's and other stakeholder's interests as well as actually a good protection of free speech and enabling force for social media in general

Other people's money can come not just from taxpayers and owners (shareholders in public companies most commonly but not exclusively) but from employees as well. Imagine employees of Facebook being asked to participate in a letter writing campaign to Congress. 

It is not so simple to assume that a company can or should endeavor to right the wrongs of society. Not everyone sees the problem the same way. And not everyone will agree on the means even when they agree on the side to take in the cause. I higher a business to do what they do best--make shoes, install tires, store my money, serve me food, etc. I will do my own charitable giving, thank you very much. This is one of many reasons why Friedman was right

How do we get out of this downward spiral? I don't believe it is easy. In fact it is quite challenging. Education and communication are likely keys. Transparency helps as well. But as long as government is both powerful and trusted, these problems will persist. 

Related: 

Sunday, February 9, 2020

Highly Linkable

It has been too long since I shared things worth reading...

Scott Sumner explains just how rigged it all is in America, and how despite this the American free market still keeps making it better.

The difference between science and Science! begins with some simple yet important facts--take chemistry for example.

How long until smart phone phobia is behind us? Someday it will be fodder for the Pessimists Archive.

Better post this take down of Elizabeth Warren by Tyler Cowen before her candidacy (thankfully) fully flames out.

Saturday, February 16, 2019

Render Unto Caesar

I just filed my tax return, so it seems like a logical time to post on taxes.

The current regime (a Democrat-Republican alliance co-opted by many special interests (law-financial planning-accounting industrial complex, real estate industrial complex, big farm, big charity, and on and on)) has us running in circles.

On the one hand they giveth: corporate tax rate cut and increase in standard deduction--the two true highlights of the 2017 Trump tax reform.

On the other hand they taketh away: tariffs, which are just taxes on U.S. consumers, and threats of escalations in complexity and burden, +70% top rates and wealth taxes to name a couple.

I continue to find actual tax policies (basically everywhere) and most general discussion about tax policy to be a strong indictment of where we are as a society and how (un)critically we think. As an alien visiting your simple planet, I find it quite humorous how unsophisticated and corrupt the whole of taxation is and has always been. It is a Baptists and Bootleggers conspiracy combining the dumb with the evil.

As an example, an awkward tension exists between where implied tax levels are (the amount needed to pay for all the obligations and expenditures currently in place) and the current, explicit tax level actually in place (higher than commonly believed, but not high enough). The Republicans/conservatives cannot admit the Democrat/progressive proposal for very high rates is necessary for the very spending they are a partner in. Likewise the Democrats/progressives cannot admit the Republican/conservative fear of high taxation smothering future wealth is well placed.

There is hope. There are great ideas being well communicated and lurking in the forest. Examples:

Scott Sumner says tax luxury not wealth or income.

John Cochrane takes Krugman, et al. to task for lending support for some recent nonsense and he follows it up with a good discussion on the effective property tax rate.

Tyler Cowen warns that the Warren Wealth Tax won't be as popular (or desirable) as Democrats believe.

Related to all this is the UBI, and if you don't realize the relation, you aren't thinking critically enough. Arnold Kling offers some thoughts, and note the abstract of this recent paper (HT: Tyler Cowen).

Monday, January 25, 2016

The Devil is in the Details

I have been thinking about taxes recently and actually had a couple of potential posts noodling around in my mind and my notes for the past few months. Good thing I waited. No, you didn't miss news of hell freezing over and a sensible tax code being adopted in the U.S. But you did miss me stumbling through what John Cochrane very simply Nadia Comaneci'd.

My notes on the potential posts began with: "I propose a major tax compromise: slightly higher taxes now in exchange for dramatic tax simplification. We take the existing tax code today and replace it wholesale with a consumption tax. We'll have the debate/fight at a later time about how big the tax burden should be, which is really a debate about how big the government should be. For now let's just remove the deadweight loss that comes from the complexity and the cronyism of the tax code."

Here is the full post from The Grumpy One's webpage. Allow me to extract a few key sentences:
Left and right agree that the U.S. tax code is a mess.
The first goal of taxation is to raise needed government revenue with minimum economic damage. That means lower marginal rates—the additional tax people pay for each extra dollar earned—and a broader base of income subject to tax. It also means a massively simpler tax code.  
... A simple code would allow people and businesses to spend more time and resources on productive activities and less on attorneys and accountants, or on lobbyists seeking special deals and subsidies. And a simple code is much more clearly fair. Americans now suspect that people with clever lawyers are avoiding much taxation, which is corrosive to compliance and driving populist outrage across the political spectrum.
... the government should tax consumption, not wages, income or wealth.
Wise politicians often bundle dissimilar goals to attract a majority. But when bundling leads to paralysis, progress comes by separating the issues. Thus, we should agree to first reform the structure of the tax code, leaving the rates blank. We will then separately debate rates, and the consequent overall revenue and progressivity.
Scott Sumner heaped rightful praise on the piece while noting a few considerations. I had similar thoughts. Again from my notes: "The many complications of any tax scheme: defining consumption goods versus investment assets, not penalizing transactions (you want to tax activity as it is more traceable and definable, but you don't want to do so in a way that stifles or distorts gains from trade), not inadvertently taxing capital (capital is ideas; when you tax textbooks, you are effectively taxing capital; when you tax computer sales you are taxing both Minecraft users and the 'next Minecraft' creator), etc."

Some additional thoughts: It is important to understand that ultimately ALL taxes are consumption taxes. The only difference is how efficient they are. When you tax savings, you are taxing future consumption (encouraging current consumption, which is shameful). And this taxation is usually on income that has already been taxed, but that isn't the central reason it is despicable. To savings taxes (including investment and corporate and capital gains, etc.) I say, "You're Despicable!" because that taxation compounds making the tax disincentive for savings worse the longer it is deferred (i.e., saved).

If structured properly, the disruptive effects of taxes on consumption can be minimized. If not, they can be quite dramatic and quite limiting. Of course, the current incumbent is not a high hurdle to surpass on this last point. Consider this very conservative estimate of the gains from simplification:

Let's assume the estimates of man-hours devoted to tax preparation and compliance of 3.2 billion (many estimate it is closer to 6 billion) are way off. Let's assume it is only 1 billion man-hours. Let's further assume away any other costs (capital investment distortions, rent seeking, labor tied up in compliance/avoidance work (lawyers, accountants, internal corporate departments, etc.), enforcement, etc.). Let's finally assume we can only reduce the man-hours by half (500 million). The average U.S. wage is about $25 per hour. Just this conservative estimate yields a wealth gain of about $12.5 billion dollars every year.

PS. Will tax cheating (intentionally under-reporting tax liability) or perhaps more likely tax fraud (filling fraudulent returns to garner other taxpayers' refunds) force us to simplify the tax code? Will they force us to remove Milton Friedman's unfortunate innovation (no refunds, no fraud)? Will they force a rethinking about identity verification at least in regards to the government (even less anonymity)?

Monday, August 18, 2014

Highly Linkable

Then there was only the ocean and the sky and the figure of Howard Roark . . .


A new day is dawning in sports. A tyrannical dragon has suffered the first strike of what I predict will be a lethal combination leading to its eventual slaying. The NCAA has lost the O'Bannon case. Michael McCann's take is, as always, a must read. He carefully lays out the limits of the ruling, but my optimism is not naive. The lawsuits have just begun, and the law from which they challenge is various--meaning more ways the NCAA can be harmed--while the judge will be the same--and she didn't mince words in rejecting the NCAA's logic and arguments. Notice that those calling for (market) reform are not satisfied yet. That is important as it means the NCAA hasn't found refuge in a new normal. Rather the hypocrisy and ignorance is being called out. And the silly arguments, which wouldn't mean salvation for the NCAA even if they were valid, are smothered before leaving the nest.

Kevin Erdmann makes an interesting comparison between school choice and financial regulatory choice with a spotlight on Dodd-Frank. The thrust is that a right to exit is essential to good institutional policies and incentives.

Speaking of exit, Arnold Kling points to others showing yet another way we could exit the FDA.

Scott Sumner wants you to know that the American middle class is fine and that is exactly what he means.

Tuesday, December 17, 2013

The Regulator's Dilemma

Imagine two rooms: one is a group of consumers and one is a group of producers. For now the rooms are completely isolated from one another. As they are labeled, these two groups will interact in trade.

Now imagine a regulator whose job is to, well, to do something. The regulator has imperfect information but is guided by a few beliefs about the job to be done. The first is a belief that the job exists somewhere along the dimension of necessity, which extends from anti-necessary to necessary. At the extreme of necessary the regulatory job is required for a good outcome. Anti-necessary is not the same as unnecessary; rather it means the job of regulation is in fact destructive—that the execution of the regulatory job brings a clear net harm.

The second belief is about where the need exists. Is it the consumers or the producers who need "help"? Let's call this dimension need.

The third belief is that he as the regulator will do a good job of fulfilling the regulatory mission. Let's call this dimension effectiveness. This dimension obviously extends from positive to negative meaning he does a good job or a bad job regulating.

The regulator has limited resources in addition to imperfect information. He must make tradeoffs. The interaction of where his beliefs land on the three-dimensional grid of necessity, need, and effectiveness will determine how he approaches the job of regulator (of course, it may not just be his beliefs that guide that decision, but he is a good proxy for the fact that something guides those beliefs).

For example he can concentrate his efforts on the group of consumers. In this case he surveys the room of consumers with the underlying belief that 'there are people in this room who can't be trusted to make good decisions even if there is no fraud involved. I must protect those idiots from themselves.' Call this option 1.

Alternatively he can concentrate on the producers thinking 'there are people in this room who can't be trusted to act ethically. I must stop those crooks.' Call this option 2.

And of course there is the more likely option that he divides his efforts between both groups. Call this option 3.

Here are my thoughts:

  • We unfortunately tend to view the job of regulation and regulators as highly necessary and highly effective. This means they punch hard and with impunity. The only thing left to decide is where they punch.
  • Option 1 can be a realistic point of view or it can be a disgusting point of view. People do make poor choices—all the time, every day. But the magnitude of those poor choices matters. So does the incentive arrangement—who is in the best position to benefit from a good choice and hurt but learn from a bad choice. At the extreme this point of view relies on a paternalistic philosophy that assumes the best way to make decisions is through a poorly incentivized and poorly informed regulator. Free market processes are highly superior to a regulator if option 1 is our focus for regulation.
  • Option 2 is the best case that can be made for regulation. There will be fraud and with it real blood. But again the role of the regulator can and should be limited here. The regulator can be a blunt and poor instrument for discovering and preventing fraud in all its forms including unintentional harm. Liability law via common law and contract law (both emergent processes) can be equal or better regulators than a pure regulator himself.
  • Option 3 is where most regulation tends to land from the SEC to the FDA. And think about how the more dynamic real world plays out. The rooms aren’t actually isolated from one another nor are the groups mutually exclusive. Everyone is in one big room wearing multiple labels. The imperfectly informed regulator is going to look for the help of the relatively informed producers to help guide his attempts at helping consumers. He is asking people, some of whom are crooks and many of whom have ulterior motives, to structure and enforce option 1. He will also look to define fraud from the point of view of the “victim”. The relatively injured consumers (who will self-select among those who have suffered a harm—happy people don’t complain) will help guide the regulator. He is asking people, some of whom are notoriously making bad decisions but not bearing the full burden of those choices, to structure and enforce option 2. This is a formula for regulation that is anti-necessary, ineffective at all the wrong times, and fulfilling mythical needs.


Thursday, July 11, 2013

A low-hanging fruit rant

Re: The Great Stagnation

I've been thinking about low-hanging fruit from changes in political economy. I mean this as a constructive group of points, ideas, questions  . . . I don't mean to go off on a rant here, but nevertheless . . .

There still seems to be low-hanging fruit when we look at certain aspects of government policy. Tax code simplification and ending the war on drugs are two great examples. Immigration expansion and school competition (where tax dollars follow parental choices) would be two others. I'm not saying these would be or should be politically a snap--obviously they are not--but consider simplifying the tax code:

  • Where are the environmentalists on simplification of the tax code? Why can't we free up these resources (labor is the huge one and as we know our precious time is the one resource environmentalists tend to disregard, but still)? 
  • Why can't we get liberal, conservative, libertarian, Democrat, Republican, et al. to agree on this? It can be as progressive as you like. Let me concede to your desire for an intrusive, expansive, colossal government. Just don't make me use a spoon to dig your ditch.
  • How can we not defeat the vested interest on this issue? If your business plan depends on tax policy (tax lawyers and accountants, MLPs (to a degree), some charities, realtors, et al.), you are not adding value to society. 
  • The bootleggers and Baptists on preventing tax code simplification would be those who want to punish others aligned with those who want to advance their own special, vested interest. I'm not sure which group is the bootlegger.
My point is that these changes would be affect massive improvement to society. The magnitudes are strong. There are still low-hanging fruit if we will just pluck them. 

Sunday, May 5, 2013

Escape from New York

I've returned from a jam-packed trip to NYC that was part business and part pleasure. I always find it hard to leave New York without feeling that leaving is a mistake. It is such an amazing place. Very few places on Earth can boast the same wide-range of risk/return opportunity sets. Here are some thoughts:

  • To my impression, by a wide margin no other American city is as much an international city. This is an underappreciated quality.
  • It is a shame people tend to be too uncreative to appreciate experiences that are not "tourist traps". 
  • The success of the city, largely a reflection and exacerbation of the success of American free enterprise, disguises and minimizes the drag of being in the People's Democratic Republic of Bloomberg [insert any prominent former or future mayor as well]. It is hard to see the forest of unintended consequences when dealing so directly with the trees of real-world problems. Viewed in this lens, it becomes easier to excuse the frequent acquiescence to bureaucratic and technocratic power.
  • If your only impression of life in NYC was from television sitcoms, you would be missing 75% of it. If it were only from movies, I'd say you are still missing 50%, and most of that corresponds to the prior missing 75%. 
  • Goldman Sachs, the business portion of my adventure, is a first-class organization. I am often a critic of the revolving door between government regulators of GS and executive positions at GS along with other regulatory capture issues. Being in the heart of the dragon, one sees clearly how that cozy relationship maintains harmony. Literally, the janitors at GS exude more confidence and professionalism than I've seen among bank presidents. Uniformly both in informal conversations and formal presentations, every representative of GS was quite impressive--not cocky or arrogant, but definitely assured of themselves and their organization and certainly serious. They can and do laugh (when appropriate), but I am certain they physically lack the ability to giggle. 
  • I appreciate Goldman for having me as a guest at what was a very good conference filled with good information and entertainment. I now have more respect for them as a money manager, and it is with more confidence that I consider investments with them for my clients. 
  • Here is a random thought I had during the conference: Does corporate paternalism and generosity breed acceptance for governmental paternalism? This is similar to the forest/trees thought referenced above. People in these companies are very well taken care of with all ancillary needs provided or sourced, they are used to showing ID cards and having limited access within their firm and even on their floor or in their business group, they work in "safe" environments insulated from the "chaotic" world outside, etc. 
  • Depending on your perceptive sensitivity to any given behavior, you can get the feeling that "everyone" in NYC matches that given behavior. For example, everybody jogs. Of course, everyone doesn't. But it is easy to be misled being that there are countless examples of any behavior, activity, etc. to be found. That is one thing >60,000 people per square mile will get you. This goes a long way to explain misconceptions visitors come away with.
  • Being in the beautiful jungle of so many choices, a thought I have had previously occurred to me again. A key to happiness is being easy to please. If you can see the good in things (be optimistic) and if you can refrain from pickiness (see things as highly substitutable), you can greatly expand your happiness. In economic terms, the flatter your indifference curves and the looser your budget constraint, the greater your utility potential. 
  • Nearby our hotel was a Whole Foods grocery. We have a Whole Foods store in Oklahoma City, but the store in NYC, as a microcosm of so much else, is quite different from the store in OKC. The selection was larger in scope and scale, and the services included delivery for a flat $10 fee. No such delivery option is available in OKC. Discussing this with my wife dovetailed with other grocery economics discussions we have had. We've thought before about the intrinsic differences among stores like Whole Foods and Central Market versus Safeway and the local Crest Market versus Sam's Club and Costco. Not to get too far off on tangents, but this thought problem brings up the difficulty of finding a comparable basket of goods for inflation as well as other comparisons. Back to the central idea, what are people getting out of food shopping? The joy of bargain hunting (optimizing $/calorie) versus the joy of elegant shopping (optimizing the experience per se) could be generalized extremes along what seems a reasonable dimension of quality/quantity tradeoffs (optimizing selection and discovery). At what point is the only physical grocery shopping we do that done as an entertainment (elegant shopping) with the remainder done online including preprogrammed? 
  • Enough random thoughts. Here are some pictures from a great trip. Enjoy!























Friday, March 15, 2013

It is good that the NRA sets the tone the gun makers follow

On today's NPR Morning Edition Bloomberg Businessweek assistant managing Editor Paul Barrett was trying to express concern but instead expressing confusion about the role the NRA plays in the debate over gun rights. Here he is again on Bloomberg TV.

He demonizes NRA CEO Wayne LaPierre as conspiratorial without any evidence offered, but that is not the major confusion he expresses. What he doesn't seem to understand is that the NRA is an organization lobbying for gun rights, not gun makers. He wants to fit it into a simple box like tobacco lobbyist towing the line for cigarette makers. But that isn't the correct model. What's more, we don't want it to be. And that is true of both ideological sides of the gun debate.

If the NRA were simply the gun manufacturers' political arm, we would expect to see lots more compromise on the issue of gun rights. Sounds good, right? It is not. When a corporation compromises with the government, it is a tit for tat arrangement. Hence, the Tobacco Master Settlement Agreement (MSA) of 1998 was very, very favorable to incumbent tobacco firms. Assuming one's goal was either tobacco freedom or tobacco prohibition, this agreement did not work very strongly in principle or practice to achieve either goal.

From gun rights supporters' perspective, they want an NRA beholden to their principals not the profitability of current gun makers. An NRA working for the gun makers would probably seek to prevent new entrants in the market a la the MSA as well as limit competition among existing firms--government-sponsored oligopoly. These compromises would be indifferent if not contrary to gun rights, but positive to gun makers.

While the limits on competition would be the compromise that somewhat satiates gun prohibitionist by limiting guns in some capacities, it would not be the ideal arrangement for that group either. 200-300 million guns exist in America today. These are highly durable machines. Limiting future production does little to correct what this group sees as a major problem in America (hear Steve Levitt's thoughts here.) An NRA fighting for a chance to capture public officials to the benefit of gun makers is a more dangerous foe than one staking out a principled stance. The latter will fight to the death, and you just might kill him. The former will fight to lose just enough that you won't win but will lose your own will and momentum to fight any longer.

Be able for thine enemy rather in power than use...