Milton Friedman: How did Markets Survive?

I've been listening to Russ Roberts pod casts at Econ Talk, which has a pretty extensive archive section. I looked through it, and found one with Milton Friedman. This part of that podcast has had a profound impact on me:

Milton Friedman: But it's always been true that business is not a friend of a free market. I have given a lecture from time to time under the title Suicidal Impulses of the Business Community... It's in the self-interest of the business community to get government on its side. It's in the self-interest of a particular business.[...]

But the real puzzle—puzzle isn't quite the right word—the real problem here is where do you find the support for free markets? If free markets weren't so damn efficient, they could never have survived because they have so many enemies and so few friends. People think of capitalism or free markets as something that obviously is supported by business. People think that if a business party is a party in politics, it will promote free market. But that's wrong. It will be in the self-interest of individual businesses to promote a tariff here and a tariff there, to promote the use of ethanol—

Russ Roberts: Special regulations for its competitor that apply just by chance to its competitors but not to itself—

Milton Friedman: That's right.

Russ Roberts: —or that they already comply with but their competitors don't happen to comply with.

It's insights like these that attracts me to Economics, and keep me coming back for more...


Update: Here's a link to an article Friedman wrote on this subject at the Cato Institute.

Pollution Didn't Begin in 1960...

In the spirit of Dr. Boudreaux, here is a letter I sent to the Washington Post:

In his letter, “Where are conservatives' conservation efforts?” (Sept. 9th), Mr. Kennard makes in interesting connection between Hayek’s warnings about government interventions into complex market systems and human intervention into the complex environmental systems. However, he should have quit when he was ahead.

If Mr. Kennard looked back at history, he might discover that the internal combustion engine automobile was one of the single greatest advancements in pollution reduction in the 20th century (produced by in the marketplace, mind you). Before then, streets were lined with filth and the air filled with methane from horses which people used to get around.

Mr. Kennard then indicts “Conservatives” to come up with his solutions to his perceived, “problem” because they oppose “Liberal” “solutions”. My answer is to see the above.

Sincerely,
Christopher J. York
Student, George Mason University, Economics M.A.

Dictators...they're not so bad

Top political strategist Woody Allen thinks Obama would get much more done as dictator; No, really

Why is Mel Gibson's ugly break up in the news, and this isn't?

US maternity leave rate is zero?

Yet another post from Dr. B: Fringe Thinking

I'm just confused on how Jackson is saying the maternity and paternity leave rate is zero, when my wife is taking 10 weeks and I am taking 2...

Actually, my wife gets 8 paid weeks, and she's taking an additional 2 unpaid. We can do this because we've planned for it and are saving accordingly.

We Kornheiser's don't produce anything...

Dr. Boudreaux shares a letter he sent to Tony Kornheiser that is in the same vein as my post yesterday.  People have a hard time with the abstract, and maybe we feel guilty if there isn't something tangible to point to when you're done with your work. My thought is any value adding work we do that gets compensated for is a good thing, be that manufacturing or producing services.

I call it "value adding work" because there are too many Keynesians out there that want to hire ditch diggers with someone to fill them.

If everything is made in China, are we Chinese?

Caught this on Facebook by way of My Morning Jacket, pretty good song, I'm a fan of Jim James especially. However, the italicized line caught my attention:

The Roots - Dear God 2.0:
They said he's busy hold the line please
Call me crazy, I thought maybe he could mind read
Who does the blind lead?
Show me a sign please
If everything is made in China, are we Chinese?

Aside from the line being a non sequitur to the rest of the verse, the premise is also way off.  Of course we're not Chinese because we buy Chinese stuff, the point he's making with a seemingly throw away line is that America doesn't produce anything.  Instead of going into a long, complicated rant about trade (quick version - it's good for everyone!), I'm simply going to point out that it is ironic that his problem is that we don't produce anything, all while he's making music.  It's intangible, yes, but he makes a living off of it, I'm not sure how well a living, but one none the less. I wonder if anyone in China will buy this record, or if the CD's their music is recorded on is made in China...

I'll apply a common example used when discussing trade to explain further.  If I like movies, and I go out to them all the time, am I Hollywood...inian, even though I'm from Virginia?  Or vice-versa, if Smokers in Hollywood smoke tobacco from Virginia, does that make them Virginian?  Of course not.

Not a perfect game...

This is a little over due, probably because I found my position wasn't as controversial as I had thought:

Russ Roberts at Cafe Hayek has a post about Detroit Tigers pitcher, Armando Galarraga, start on June 2nd where he pitched good enough to earn a perfect game. Unfortunately for him, he didn't because of, as umpire Jim Joyce has admitted, a blown call.  That, in and of itself, is why he didn't, and I'm glad to see that Bud Selig didn't cave to pressure to 'make it right'.

The way I've always heard it, a perfect game is facing the minimum - 27 up, 27 down.  No runs, no hits, no walks, no errors.  Not one batter reached base safely.  That didn't happen in that game and that's why it wasn't a perfect game.

I think the natural tendency to want to 'make this right' is because the belief is that Galarraga deserved a perfect game. He pitched a heck of a game, before and after the bad call by Joyce, but that doesn't guarantee anything, not even a win (see the rest of Dr. Roberts' post for the story of Harvey Haddix). In fact, it doesn't make sense that pitchers are credited with Wins and Losses anyway, since you can pitch terribly and give up 8 runs and still win, and pitch great and get a loss or even a no decision.

The good thing that came out of this was seeing Galarraga handle himself. He is a classy, stand-up guy, and should be a role model for good sportsmanship now and in the future.

Bastiat & The Oil Spill

Russ Roberts has a post about the oil spill, asks as question that is similar to my earlier post about Bastiat.

Did they even read it?

The movie 'Preadators' opens this July, it's the 4th (?) installment of the franchise. This is the movie poster for it:

 
 
 
 
 
 
 
 
 
 
 
 

Image - moviefone.com (click to enlarge)
 

The tagline caught my attention, it says:

"They are the most dangerous killers on the planet.

But this is not our planet."

I'm no english major, but this doesn't appear correct. Shouldn't it be:

"They are the most dangerous killers on THEIR/OUR planet.

But this is not THEIR/OUR planet."

or, even better:

"They are the most dangerous killers on EARTH.

But this is not EARTH."

If I'm right, how does something like this get passed and approved? Does it speak to the quality of the movie itself? Only time will tell...

A Rose by any Other Name, Would Smell Like...???

The venue formally known as Nissan Pavillion will now be known as Jiffy Lube Live.  I wonder, did Nissan pull out, or did they get out bid by Jiffy Lube? Or, was the offer by Jiffy Lube a standing offer, and the economy pushed them to accept the offer?  I also find it interesting that just the name alone makes the venue seem cheap, even with out going there.

image from: http://www.nissanusa.com/

image from: http://www.jiffylube.com/

The venue is still the same, it just has different logos advertisements. But why is it that we think Nissan is OK, but Jiffy Lube isn’t? How about the Snagajob.com Pavilion just outside of Ricmond? I don’t think I would even visit the website, Snagajob.com in the first place, let alone go to their Pavilion. OK, maybe if I had front row tickets to Pearl Jam…

But then again, I wonder about other business sponsorships that are taken seriously, like Michelin Stars. These are ratings given by the tire manufacturer, rating restaurants all over the globe. Apparently, if you have just one star, it means you’re a very good restaurant, and you can get up to three, and it’s taken very seriously. But, why or how is a tire company any kind of expert in the culinary world? (Maybe this has something to do with it?)

Companies also try to pass off an inferior product, and use its good name to do so. Toyota did this, I believe, with their Camry line of cars (if not their entire line). About 2 years ago, I was in the market for a car, and test drove the Camry, partly because I knew of Camry, and thought they were very good cars. When I test drove the ‘08 model however, I thought it was a piece of junk. It was underpowered, small, and felt cheap – like it was made of plastic. I ended up buying a Honda Accord instead. It has since turned out that my feelings were justified, with the recent gas pedal issues Toyota has been having. I also love my Accord.

The point is that brand names have value for a company, and companies use that value in different ways. Nissan meant quality, and it transferred to the venue (or vice versa); while Jiffy Lube doesn’t, or hasn’t yet. Michelin has worked very hard to earn the respect it garners from their Michelin Guides (interestingly because of how difficult it is to earn even one star, at least in part). Lastly, it seems Toyota relied too heavily on their good name, and now they’re paying for it.

Broken Healthcare Fallacy...

Didn't blog the last couple of weeks, had a paper and a take home exam due.  Apologies (to the NO people who are reading...)

I randomly listened to Adam Bold's Mutual Fund Show (an investment advice show sponsored by his company, The Mutual Fund Store, of which he is the founder) from last Saturday (5/15/10). In it, he had a caller who was a banker that asked what he thought the impact of the recent passage of the Obama Healthcare Plan would be on the economy. Mr. Bold seemed to think the impact would be positive.


I won’t argue with him about whether he’s right or wrong, it would be tough to tell either way. However, I will take issue with his justification why he thinks this. He said that, implying that even if the HC plan were bad for the economy, it would be OK because of all the jobs they would be creating in the healthcare industry. I’m pretty sure this is a pretty cut and dry case of Frédéric Bastiat’s Broken Window Fallacy.

In it, Bastiat showed that it is incorrect to look at broken windows as good for the economy, because it “creates” jobs for the glaziers (window repairmen). On the whole, yes the glazier is up a job, but the shoemaker that has his window broken is down what he would have bought with that money had the window not been broken. (The name of the piece is That Which is Seen, and That Which is Not Seen )

In this case, the broken healthcare and then the supposed influx to fix it is what is seen. The healthcare we had and the output that would be otherwise used is what is not seen.

Why did they attack us again?

An exclusive interview from WTOP with a former Al Qaeda insider says that Osama Bin Laden had no idea that the US would retaliate the way that they did. Quote:

"What happened after the 11th of September was beyond their imagination, " says Benotman, who adds that al-Qaida thought the U.S. was a "paper tiger."

He continued...

Benotman attributes al-Qaida's overconfident attitude to the United States' response to al-Qaida attacks on its in embassies in Nairobi, Kenya and Dar es Salaam, Tanzania in 1998.

Zawahiri, according to Benotman, expected only a missile attack.

"When they attacked the embassies in East Africa, they estimated the U.S. launched 75 cruise missiles and eight people got killed. So they said this time, maybe they will launch 200 and they laughed about this."

This revelation flies in the face of the common perception that Western globalization or US foreign policy is why we were attacked on 9/11, or that diplomacy will resolve our issue with Islamic extremeism.  In fact, non-engagement escalate attacks far beyond what would otherwise be. I'm not saying that the global economic environment or American intervention doesn't play a role.  But given this, it's not a good argument for not confronting treats as they arise.

The market would do that anyway...if you let it.

US Treasury Secretary Timothy Geithner vowed Thursday to put failing banks that take too much risk "out of existence" in order to avoid bailing out firms deemed "too big to fail" at taxpayers' expense.

"Our view is that we need to make sure that you're limiting how big they can get and how risky that they can get," Geithner told ABC News as the US Congress pursues negotiations on a sweeping financial reform bill.

"But if, in the future, if they mess up and they take themselves to the edge of the cliff again, then we want to make sure we can put them out of existence, dismember them, break them up safely without the American taxpayer having to bail them out again."

(link)

Government tells banks, we will bail you out if you're too risky, what do the banks do? Surprise surprise, they're more risky.  Now the Federal Governement is going to do what the market would do anyway...why?  To control WHICH banks fail!

This is called crony capitalism. Couple this with what's going on with Goldman Sachs right now, and it's clear.

The Volcano

The Icelandic Volcano is putting so much ash into the air that it closed UK airports for 6 days (necessarily?). What will we see first, a report about how this type of pollution is OK, because it's "natural", or a report showing the environmental impact of the eruption?

A little science...

UPDATE: Looks like both at the same time...

Intro

The purpose of this blog is 3 fold...

I am in a master’s economics program here in Northern Virginia. I felt the need to do the obvious, write about the news and ideas that I see or have out there. My professors do it, my classmates do it, everyone does it, I'm behind, and so now so do I.

Second, I'm reading a lot of interesting stuff, and I'm going to use this as a repository for some of them. This mostly for myself, if you don't like it, whatever, don't read. You're not anyone anyway because no one is reading this anyhow.

Third, has to do with the title, Thought Intrusion. I get weird thoughts sometimes. They're strange, sometimes disturbing - well mostly disturbing - but most of all un-invited. I did some light research on it, it's a real thing, according to the internet, but it tells me to just breathe, and it will pass. This has helped, but I also thought it would help to maybe get some of the other thoughts out there, to just get them down on paper...the web? Lord help us...

That reminds me, this about sums what I think I should do instead: http://bit.ly/cfT9TL

That's about it, I hope that this will be more of a shoot from the hip type of place, so if I say something that doesn't make sense at first, I hope that it will develop it over time as I think about things. Having said that, I hope I don't waffle, and I will try my best not to do so.

Thanks, and welcome.