2012 Election is in the books, Obamney wins/loses!

So that happened. And a status quo, lame duck session begins. I forecast whip-lashing, headline risk as we endure the race to do nothing significant about the fiscal cliff. Let's prognosticate, shall we...

Winners, Losers, and Trends:

Immigration reform and liberalization seems likely to be a winner. It is clear the Republicans lost critical votes on net from the hard-line positioning the party took from the primaries on regarding immigration. This may make a lot of the bad winners in this election worth it all. And who'da thunk it from the victory of the president responsible for a record number of deportations.

Data crunching a la Sabermetrics is a winner. The Obama team took it to new heights, and Nate Silver showed just how powerful a nerd and some numbers can be.

Generally, social freedom was a winner as marijuana legalization at the state as well as the municipal level continued its success and marriage equality lept forward.

Economic freedom probably took a hit on net; although, that remains to be seen and unseen . . . so we'll never quite know. The chances for good tax reform including simplification ebbed some I believe.

The politics of envy and distrust were winners.

One-size-fits-all social policies defeated one-size-fits-all social mores.

Central planning by good intentions won out over fiscal planning by good intentions.

Count also bailouts and TBTF as continued winners. While Romney/Ryan didn't have a sterling record on this front, they promised better in rhetoric. That at least gave a small rational expectation to believe they would be better.

Defense contractors were probably losers while every other conceivable beneficiary of government largess was victorious on net.

Speaking of "defense", war was probably given a change of venue. Iran is a less likely destination for our restless drones but they still may get to vacation in the sunny Middle East in Syria.

There is a good chance I add to or edit this list.

United versus Southwest

My wife is about to take a short trip up to Denver. She is flying up on Southwest Airlines and back home on United Air Lines. Because she is taking our five-month old, she needs to arrange with the airline that she has an infant lap child.

She called Southwest first. She immediately spoke with a person, was never put on hold, and quickly relayed the information. The agent of Southwest said it was taken care of and thanked her. Easy as that.

She then called United. She was greeted by a recording: (I paraphrase) "Thank you for calling United Air Lines. We are currently experiencing extreme telephone congestion due to the recent events from Hurricane Sandy. We are unable at this time to take any additional calls or to place you on hold. Good bye." And with that they hung up.

The story reminded me of this post from Bryan Caplan re: John Cochrane's recent essay, "After the ACA: Freeing the Market for Health Care"

This passage has the direct point (emphasis added):

The fact that so much cost reduction comes from new entrants, not reform at the old companies, is testament to the painfulness of this process, and the ability of incumbents to protect the status quo. The big 3 still take 40 hours to build a car relative to Toyota's 30. And two of them went bankrupt, while Toyota sits on a cash reserve. American and United are still struggling to match Southwest's efficiencies, after 30 years. The parts of Kodak invested in film simply couldn't let the company exploit its technical knowledge in optics and electronics. Chicago's teacher unions are fighting charter schools tooth and nail. And a quick look at a modern hospital, and its suppliers, suggests just how wrenching the same transformations will be.

How far we have yet to come

It is shameful and amazing that as far as we have come as a society, we not only still have legislation on the books like this, but we have politicians who gain favor by promoting it. It would be bad enough if anti-price gouging law was legacy law left over from a bygone age. It is far worse that this harmful nonsense is actively supported.

Look here (from a "leftist" economist), here (the maximum temperature analogy), here (directly refuting the other side), here (a roundup with videos), here (Cowen reminds us that the current owners of resources, shopkeepers, are also the competition), and here (interference with economic triage) for some wisdom on the topic.

To those who support anti-price gouging: The price increase you find distasteful is a symptom of the distasteful (big understatement) events that have transpired. Don't blame the price messenger. He is one of your greatest allies.

Mantis versus Moth

I was walking in the backyard and noticed a fluttering sound coming from the flower garden in the back corner. Upon inspection, I found an amazing sight right out of wild kingdom. A 4-inch-long preying mantis had captured a very large moth in its front legs. It was proceeding to basically eat the moth's face. Despite the moth's intense struggle, it could not free itself. The mantis was basically strong enough to hold down the moth's attempt to fly away. Below are some pictures and a link to a video I shot.

Let's get up a football league

Legend has it that one day in 1895 while sitting in Bud Risinger’s barbershop on Main Street in Norman, Oklahoma John A. Harts spoke some famous words: “Let’s get up a football team”. From there the Sooners were born.

The NCAA has approved what seem to be significantly more powerful sanctions on those who break the cartel’s rules. Be sure to read the article at SI. This comes as a response to the fact that the rewards from “cheating” are greater today by an order of magnitude than they were in decades past. NCAA czar president Mark Emmert recognizes as much:

We have sought all along to remove the 'risk-reward' analysis that has tempted people - often because of the financial pressures to win at all costs - to break the rules in the hopes that either they won't be caught or that the consequences won't be very harsh if they do get caught. The new system the board adopted today is the result of a lot of hard work and membership input devoted to protecting the collegiate model.

Unfortunately for the cartel, this is a losing battle in a soon to be lost war. Besides the growing sentiment against the NCAA’s practices, this change reflects the stakes growing in the sports world. The attractiveness of an alternative model wholly removed from the grip of the NCAA is higher than it has ever been. King Cnut Emmert will not halt this rising tide.

Value of life

Economists get into trouble they don’t deserve for a lot of bad reasons. One area where this is highly prevalent is when discussing the value of life. Those who don’t understand economics well misunderstand what an economist is really saying about the value of life. Importantly, economists are generally interested in the value of a statistical life. This is important to understand. Let’s consider some hypothetical situations to tease out these distinctions.

First, let’s arbitrarily assume the value of a statistical life (VSL) is $10 million. This isn’t the value of each life uniformly. Rather this is an average approximation of the value of a general human life for purposes of analysis at the margin. That last part about marginal analysis is key. We’ll come back to it shortly.

Consider a baby somewhere in America. This baby may grow up to be the next Steve Jobs or a terrible criminal, but probably something in between. In the former case his economic contribution to society will be vastly greater than $10 million, and in the latter his contribution will be considerably smaller if not negative. But we don’t know ahead of time what a person will turn out to contribute economically, and further this definition of a life’s value is not what an economist is getting at. To see that consider this false bargain:

The baby and a new building worth $10 million are located directly beneath the path of an approaching meteor. The implication of the economic value of life is not we are generally indifferent between moving the baby or the building out of the way. This should be obvious on its face as it is a lot more difficult (read expensive) to move a building than it is a baby. But what if next to the baby was an $100,000 armored car containing $9.9 million worth of gold? Are we indifferent now?

To ask the same question a different way consider this: An evil person somewhere in America has this baby in his clutches. He threatens that unless he is paid $10 million of societies resources (not paper money), he will inject the baby with a lethal dose of cyanide. We are certain never to catch this evil person or recover any of the resources given in exchange for the baby, but we will certainly get the baby back completely fine if the ransom is paid. Is the proper economic thinking here that we are indifferent between paying the ransom and letting the baby perish? You’re gut tells you no, and your gut is correct. The economic thinking on the VSL has nothing at all to tell us about these decisions. The key is marginal analysis.

The VSL is a tool for marginal thinking; that is, thinking about the costs and benefits of an incremental change. VSL tells us that the value of avoiding an increase of 1% in the chances of getting a baby into the path of a meteor or clutches of an evil person is some figure that when divided by .01 equals a number like $10 million. But the circumstances of actually being in the dilemma dictate entirely different thinking. Value is ultimately a subjective concept. The value of the next cup of water you will drink is vastly different if you are lost in the desert or chatting about last night’s football game at the water cooler. To attempt to extrapolate either of those values out to be the value of the Earth’s water supply would be complete foolishness. Similarly, to equate a decision made to avoid an incremental increase in risk multiplied by the weighted quantity all possible risks and the value of avoiding total risk (risk of certain death in an immediate moment) is foolishness as well.

Like the great Mr. T said, “I pity da fool who [confuses thinking at the margin with thinking in the aggregate]”.

Secretary of Business

Copying the success of the Department of Homeland Civil Rights Abuses Security, Obama has eluded to a Secretary of Business in his next administration heading up a consolidated group of business-related agencies. A one-stop shop for corporate welfare.

Efficiency in this area would not mean better SBA loans and smarter import-export subsidies—assuming there is a role for government to play in these endeavors. It would mean simply more of these activities with the associated growth in spending and malinvestment.

Generally, organizations don’t consolidate to bring efficiencies to the end customer or enhanced production. They do so to make it easier on the reported-to entity. Instead of nine offices reporting up the chain separately, the nine report to one office who then reports further up. The opportunity for cost savings is very limited by combining these functions. As functional areas are combined with “redundancies” eliminated, the risk of losing specialized knowledge grows, and the chance of good practices dwindles.