The Loyal Opposition

The Higher Education Bubble

2011-04-18T05:12:00.000-07:00

I have long held the opinion that college degrees, excepting specific branded-schools and technical professional schools, are vastly overvalued on the East Coast. James has sharpened the contention by labelling to our current university economics a "Bubble". Here is published support: http://www.economist.com/blogs/schumpeter/2011/04/higher_education?fsrc=scn%2Ffb%2Fwl%2Fmt%2Fthelatestbubble

(At the recommendation of a seventeen year old with better understanding of internet usage, I have also posted this on my Facebook page. Let me know how the experience compares)

A Great Contemporary Republican Writer

2011-03-21T16:17:00.000-07:00

P. J. O'Rourke:
"The principal feature of American liberalism is sanctimoniousness. By loudly denouncing all bad things–war and hunger and date rape–liberals testify to their own terrific goodness. More important, they promote themselves to membership in a self-selecting elite of those who care deeply about such things... It's a kind of natural aristocracy, and the wonderful thing about this aristocracy is that you don't have to be brave, smart, strong, or even lucky to join it, you just have to be liberal."

Response to Mark Steyn

2011-02-04T18:56:00.001-08:00

Today at Assembly, Exonians had the opportunity to hear from conservative Mark Steyn. While he critiqued partisanship and said he had problems with both parties, he only mentioned what Obama has done to increase the debt and not what Bush did before him to exacerbate the problem. Steyn was correct in introducing himself as a de-motivational speaker. His speech focused on self-indulgence in society, how education is overrated, the debt, and multiculturalism.

In his critique of multiculturalism, he discussed how Muslim morality police are trying to control women in France. While there are downsides to multiculturalism, he ignored the benefits of multiculturalism choosing instead to say that coexist bumper stickers aren’t applicable to real life due to a few isolated problems with multiculturalism. The movement allows integration of different cultures and effectively reduces prejudice. It seems odd to me that Steyn would argue against appreciating other cultures.

Steyn was right in criticizing self-indulgence and overspending by American citizens and their government. I agree with him that prosperity isn’t ensured forever and that his crowd spent our money. He seemed a bit confused though by Obama’s promise to Joe the Plumber to redistribute wealth. This had nothing to do with taking money from the future and using it for the present. Obama cut taxes for the majority of Americans. It seems disingenuous to me for Steyn to say that Obama’s redistribution of wealth has nothing to do with the Robin Hood model of robbing from the rich and giving to the poor.

His critique of higher education was spurious and based on the idea that people with low level educations achieved a lot after World War II. This model simply doesn’t apply nowadays though given the necessity of at least a high school diploma to find any sort of work in the US. Steyn critiqued world poverty and saving the planet as overly lofty causes, but isn’t reducing the debt an equally lofty cause? Besides, just because a cause is lofty doesn’t make it not worth fighting for.

Steyn was downright apocalyptic in the closing parts of his speech, saying that America is doomed. He predicted total societal collapse because of the debt. This idea is more than a little alarmist. Every generation faces great problems. The Greatest Generation faced World War II, the Baby Boomers were up against Vietnam, and now we face the debt. That doesn’t mean we’re on the brink of societal collapse.

The Perils of Political Correctness

2011-02-01T18:25:00.000-08:00

Previously published in The Exonian

On January 6^th before a Republican Club meeting, Dr. Philip Tisdall made a comment to the Multicultural Affairs intern that the intern found racially offensive. By January 15^th, the remark had been reported to the administration and Dr. Tisdall, the guiding force behind the club, had been banned from campus. The fact that it was an uncalculated remark made about the “nice rhythm” in the intern’s voice, according to Upper Dean Walsh (the sole witness to the event), is important, but is not the crux of the issue. While it was, at worst, a mildly offensive remark, the more important lesson to take away from this situation is that you should try really hard not to offend anybody at all, or you might get kicked off of campus. This is political correctness taken to a new extreme here at the Academy.

While a comparable penalty exists for hazing, which the E-Book defines in part as an action with the “result of embarrassment, disturbance, or humiliation,” the Discipline Process provides the opportunity for a thorough investigation of the incident, and includes advocacy for the student by representatives from the groups that would be affected by the student’s requirement to withdraw, including the student themselves. In the case of Dr. Tisdall’s expulsion from campus, this process was minimal. To say that a single unfortunate—but by no means egregious—comment outweighs his six years of mentorship to students at the Academy is irresponsible and shows little compassion for the many students that have learned and grown because of him, quite apart from diminishing the voice of another minority group on campus that deserves the Academy’s respect: Republicans.

The response to a comment that Sarah Palin made in the days after the Tucson Tragedy, in which she used the term “blood libel” to label the accusations that gun metaphors that she and other Tea Party politicians caused Jared Loughner’s shooting spree, provide another example of the perils of political correctness. I am no Sarah Palin fan, but while using the term may have been a bad decision, it is hardly worse than some articles I have seen that claim that Chicago Bears’ Quarterback Jay Cutler is being “crucified” by fans for his decision to leave this Sunday’s NFC Championship game because of injury. Indeed, Palin’s comment is much more appropriate as she is being accused of causing the death of six innocent people. No, she is not a Jewish woman being accused of murdering Christian kids and draining their blood to make matzah, which is the historical origin of the term “blood libel”, but neither is Jay Cutler actually being nailed to a cross. They are figures of speech and should be taken as such.

Political correctness is the antithesis of much that Exeter claims to stand for. The Harkness method succeeds when it fosters an environment of open, honest communication. When students are unable to speak their mind because of fear of reprisal from their peers, many of the best insights are left unsaid, which ends up hurting everybody. Academia itself relies on the ability of professors and students to expand their intellectual horizons without restrictions on what they can study or publish. Unpopular views are often the ones that turn out to be right in the long run, and should be protected, except in cases of outrageous offense or inappropriateness. Dr. Tisdall’s views, along with the views of many in Republican Club, may be unpopular in this liberal institution, but they, along with Dr. Tisdall himself, deserve a place here at the Academy. Out-of-control political correctness does not.

Advertising

2011-01-22T17:00:00.000-08:00

Dear friends,

It has come to my attention that I can allow advertisements to appear on the sidebar of the blog. I do not expect to make very much money, but I figure if I can, why wouldn't I? However, as I have neither a U. S. mailing address nor a bank to cash the cheques at, I am sending the proceeds to the Animal Control Officer of my father's hometown of Falmouth. He is a family friend and the Town Hall bureaucrat's tend to not give him much credit. I have no qualms with allowing a few advertisements if the profits go to a good man. Here is a picture of his dog:

Sunny-Dog, still somewhat shell-shocked since the budget cut.

[Update: I did not like the advertisements. They are gone now. Godspeed, Sunny.]
[Second Update: Disregard first update.]

Response to Dr. Tisdall's Banning from Campus

2011-01-18T10:05:00.000-08:00

On January 7th, Dr. Philip Tisdall arrived at the Elm Street Mezzanine to find a few early bird students and a new comer, a young adult male of African descent with very formal posture and dress. The man introduced himself as Mr. Islam, a member of faculty recently hired in a multicultural capacity related to Muslim students, himself being Muslim. As they chatted, it struck Dr. Tisdall that Mr. Islam had a unique rhythm to his speech. This being the Academy, with its international student body, and Islam being a recent addition to America’s religions, Dr. Tisdall asked Mr. Islam where he was from. Mr. Islam drew himself up and pronounced he was from Philadelphia. Dr. Tisdall told him that he would not have guessed that from his speech pattern, and they discussed his error. Mr. Islam noted that he had come from a long line of preachers, which made sense to Dr. Tisdall, as African-American churches had always struck him as a unique subset of American culture. By this time everyone had arrived and the meeting had started. Knowing that Mr. Islam was new, Dr. Tisdall made a very clear announcement of the Club’s only rule: Don’t be offended.

By January 15th Dr. Tisdall had been officially banned from campus, courtesy of Dr. Curwen, the Academy’s Dean of Faculty, on the premise that he had told Mr. Islam something to the effect of that he had never heard a black from the Philadelphia projects speak so eloquently before. From the accounts I have been given by Dr. Tisdall and Dean Walsh, the only student present throughout the entire encounter, there appears to have been a gross distortion of what actually happened. Despite these unsettled details, within a week the de facto nucleus of the Republican Club – a man who had voluntarily served for six years as our teacher, mentor, and friend, had quietly slipped off into the dark. As anyone who has sat through a frustrated round of Harkness knows, there comes a time when you must tear off your mask and call people out on their shit. I believe that our administrators have crossed the line. Yes, the school is theirs and they have the right to run it as they see fit. But as long as I am able to evade Room 101 I intend to use whatever powers I have as a student to stand against what I see as wrong.

Club members often say that they have a difficult time commenting on race at the Academy because they feel that their views are externally defined by liberal stereotypes about Republicans. In this way, we live with dualistic conceptions of self: one that is produced and interpreted by ourselves, and another, a “myth” forced upon us by an oppressive society that produces and interprets its own perception.

I believe that a multicultural school must accept that we are different. Culture is everything that does not need to be explained. What is the purpose of subsidizing the $73,000/year tuitions of youth from every quarter if asking them about their different cultural axioms is deplored as taboo? Did I misinterpret the phrase “embrace our differences?” Treating everyone equally is quite different than treating everyone as though they are the same. Culture matters. When the foremost indicator of poverty is the absence of one’s biological father, how can we so swiftly ignore the plight of the inner-city African American family unit? Why is it so terribly inappropriate to question the effectiveness of welfare cheques funded by coercive taxation when such programs have been in effect since LBJ’s 1964 War on Poverty? Why must functional questions be consistently misconstrued as discriminatory? Is there really nothing to be learned from our African Americans, Koreans, and Indians, our Jews, Muslims, and Hindus, our rich and our poor? I do not know Mr. Islam well enough to pass any judgment on him personally, but why, when asked how his community viewed caring for its elders in the midst of a social security discussion, did Dr. Tisdall have to practically go through a thesaurus to find the right synonym for “community?” Why was Mr. Islam’s immediate response, “What do you mean by my community?”

When the sincere interest in other cultures is co-opted by a group of self-important intellectuals absorbed in a self-affirming, “I’ve done my part” circle jerk, what has been won? Tolerance is a one-way deal for liberals – they have all of the rights and none of the responsibilities. It’s tacitly engineered that way. At some point, all this cannot go on, and we will have the academic version of September 2008 — as parents no longer choose to spend $200,000 to send their children to a 4-year prep school in which they will be likely indoctrinated that they should oppose the very American institutions that created the wealth and freedom that fuel our endowment and pay our faculty. The “best of the best” seem to be unaware that after some 2,500 years of both experience with and abstract thought about Western national economies, we know that a free, private sector increases the general wealth of a nation, while a statist redistributive state results in a general impoverishment of the population.

The Republican Club was never really about being Republicans, it was about having a safe haven where we could be honest and know that our intentions, however clumsy our expression, would not be mistaken. Will we ever feel safe there again? Who cares what it is called if the Thought Police are there – will we ever feel free to speak our minds? What then is left? Over the past years, that's years, the Club was always a place we could feel free to say the things that were on our hearts, but punishable by our liberal teachers if said in class. The Club was about trust. If Dr. Tisdall can be "banned" for something he didn't say and isn't true, that Club has ended. The Academy has done irreparable damage to its claim of being an institution of intellectual openness, multiculturalism, and diversity by stifling discussion of diversity and acting punitively toward an intellectual minority.

Of his childhood surroundings, David Lynch recalled, “It was a dream world, those droning airplanes, blue skies, picket fences, green grass, cherry trees – Middle America the way it was supposed to be. But then on this cherry tree would be this pitch oozing out, some of it black, some of it yellow, and there were millions of red ants racing all over the sticky pitch, all over the tree. So you see, there’s this beautiful world and you just look a little bit closer, and it’s all red ants.”

– Jimmy

More Notes from Previous Club Meetings

2011-01-16T15:51:00.000-08:00

[Quite a few of us jot down notes during meetings. Try to post them here is you get the chance, especially since most of us view different things as worthy and miss a lot.]

Note: These are mostly fragments because I just use my phone's notepad.

Sputnik was different, because you could walk out onto your lawn and say, "Fuck, the Russians are up there!"

Soviets and Americans stealing German intellectual property at end of WW2. V2 rocket engineers were divvied up between the two superpowers, and during the Korean War both sides had almost identical fighter planes.

Nazi rocket scientists in Alabama.

If you can steal intellectual property, you can leap a culture centuries forward.

Judeo-Christian Greeks vs. Confucians

Egypt is still pretty much Pharaonic. (Example of middle class which has not tried to gain political power)

Performance = Talent X Effort^2 X Directed Effort^3

Ignorance = Not knowing
Incompetence = Not knowing that you don't know

I am comfortable, and I fear success not failure (Tisdall's psychoanalysis of me)

Stock value = Profit X Social Construct

The difference between good people and bad people is that good people figure out how to solve their problems.

Whenever there is government which brings about an unequal distribution of power between groups and individuals within a state [definition of politics], special interest groups will always focus their energies on capturing its power. The greater the power of government, the more energy special interests will spend trying to capture it.

Don't worry about your car not meeting environmental standards. Because oil is fungible , any less gas your car uses will simply make it cheaper for everyone else by the law of supply/ demand. The truth is that all of the oil is going to be burned up.

Mitigation

The only monopolies ever to exist were biological: Chinese tea, Brazilian rubber, and Dutch nutmeg. They did not last for very long.

Rent Seeking

Happiness is mostly correlated to hope

Happiness is only seen in hindsight

You say that you want my money because you will use it to help them. I don't trust you're intent. I think you just want my money. If you needed it, why didn't you offer to shovel snow off my driveway?

Willingness to perform simple manual labor is a good indicator of need vs want

The greatest inequality brings the greatest growth. See: USA 1890, at paradigm.

Anything you are given that you have not earned corrupts you. But you cannot tax inheritance and trust society to solve the corruption.

The Wire (show)

Blog Title

2011-01-15T10:32:00.000-08:00

Could we please rename the blog 'Phillips Exeter Academy Republican Club"? Not everyone is an anarchist or libertarian on the site, notably the very man who runs it (Jimmy, your stance on women shows you are, at least to some degree, conservative.) It misrepresents us. I also want to bring up the fact that being Republican gives our discussions purpose and makes for good clash with the liberals.

Also, could we change the sub-quote to something a little more professional. How about "America is too great for small dreams" - Reagan or "When the people fear the government, there is tyranny; when the government fears the people, there is liberty." - Jefferson

Some Reading

2011-01-10T17:46:00.000-08:00

An article which has been flying around the asian communities:
http://online.wsj.com/article/SB10001424052748704111504576059713528698754.html

and a lecture given to plebes at West Point:
http://www.theamericanscholar.org/solitude-and-leadership/

plus, from the same lecturer above, why Yale sucks:
http://www.theamericanscholar.org/the-disadvantages-of-an-elite-education/

Utilitarianism in the Long Run

2011-01-07T05:01:00.000-08:00

Yesterday, when Rohan tried to use utilitarianism in an argument, he was promptly shut down by Dr. Tisdall. While I see where Dr. Tisdall was coming from, I think we must acknowledge how utilitarianism is interpreted differently between Republicans and Democrats. Over break, I read Justice, a book by Michael Sandel that outlines several philosophies towards society and government. In his chapter on utilitarianism, he outlines the absolutely different ways utilitarianism can be followed in the short run and the long run.

Since utilitarianism works to achieve the greatest good for the greatest number of people, in the short-term, the idea is very liberal. The idea is that $1,000 brings a lot more happiness to a poor man than it takes away from an extremely rich man, so it should be transferred to the poor man. This idea can be continued all the way until the richest man is worth $50,001 and the poorest man is worth $49,999. Since the poorer man will still receive slightly more happiness from the dollar, it should be transferred to him according to utilitarianism. This process thus leads us on a rapid path towards Communism.

However, as Dr. Tisdall was alluding to, utilitarianism is very libertarian in the long-term. The idea here is that thirty years from now, regulation and the dilution of incentives hamper economic growth. By freeing the economy and taxpayers, we can become more efficient and productive as a society, increasing economic growth. The rule of 72 illustrates this effect. Therefore, thirty years from now we will be able to witness far higher standards of living for most everyone. As this does the greatest good for the greatest number of people in the long-term, this is truly utilitarian. This process thus leads ua on a rapid path towards pure Capitalism.

The topic of utilitarianism is interesting because it shows a fundamental difference between Democrats and Republicans: the short-term vs. long-term. In so many of today’s issues, timing separates the parties. In war, the economy, and society, Republicans are concerned with America’s future. However, in all of these topics, Democrats have been concerned with America in the present. Personally, I favor the long-term, and that plays a large basis in my leaning right. I want an America that is long-lasting and gradual, not one of short bursts. Even if I’m dead, I want my grandchildren to be able to live in a world where the USA rules and democracy roams free.

So Democrats like Rohan are wrong in trying to prove a point with utilitarianism. They really should go right ahead and admit they are prioritizing the short-term. This isn’t about some radical social philosophy. No, it’s about Democrats surrendering tomorrow for progress today.

Response to Tisdall's "Money is Overrated"

2011-01-03T12:38:00.000-08:00

I think, instead, that we should say "purchasing power" is overrated. Things are overrated.

But money, money is different. If you have one million dollars in even a 3 or 4 percent return investment (or, long ago, a bank with a non-zero interest rate), that gives you $30k +, or the equivalent of a single blue-collar/ min. wage worker.

If you get a bit better, let's say 6%, you never have to work. $60,000 a year, for simply letting others use your money? That's like having two personal workers produce for you, without needing any sustenance, only direction.

All of this can quickly go to hell. Fast. But we should not underestimate what money can do. If anything, money is underrated.

How to Work with Republicans

2011-01-01T21:55:00.000-08:00

In the New York Times, from a Harvard Economist no less:

http://www.nytimes.com/2011/01/02/business/02view.html?_r=1&partner=rss&emc=rss

And it's a bit funny that libs actually need to be told this, what, with them being bipartisan and all

Common App Short Answer

2010-12-23T14:37:00.000-08:00

Every Thursday night a motley crew congregates in the Elm Street Mezzanine under the generally forsaken banner of “Exeter Republican Club.” Despite the palpably disapproving responses I always get from faculty and friends who learn I am a co-head, I would not trade these weekly two-hour meetings for a straight-11 GPA. Our club has a wide draw – we have our southern gentleman, our “midwestern prick”, our east-coast communists, and our mentor, Philip Tisdall, the club’s libertarian nucleus. Philip is a pathologist, and his patients die if he misdiagnoses them. These stakes have led him to a Zen-like state of egolessness which depends on conflict; his friends are those who disagree with him. It is this mentality that unites our club and gives us our one rule: Don’t be offended. Most of us grow up believing what our family believes, uncritically adopt this default position, and then work backwards to justify it. But we seek truth, not approval. ~~Also, we think the Democrats and their rancid ideology must be ground to dust at all costs.~~

A Moment of Philosophy

2010-12-22T05:20:00.001-08:00

Who could expect that a column on why iPads make poor Christmas gifts would offer this profound observation on life:
"The scarcest resource in life isn't money, land, fresh water or gold. For singles under 25, the scarcest resource is sex, and for the rest of us it's time. And the biggest waste of time I've ever discovered—after (computer) games —is the Web. Nothing comes close. It's a total black hole. Do I want to carry a device that lets me surf the Web endlessly wherever I am? That's easy. It's amazing how much time I have to read now that I never look at Facebook."

http://online.wsj.com/article/SB10001424052748704259704576033941846942596.html?mod=WSJ_hps_RIGHTTopCarousel_1

Progressive Values

2010-12-17T14:16:00.000-08:00

What Progressives really care about:

Two Californias, VDH on NRO

Changes in Health vs Wealth Over Two Centuries

2010-12-10T16:16:00.000-08:00

This link was sent to me by a doctor I know In Calgary. It is absolutely fantastic. I think we could discuss it for the remainder of the year. It could certainly be the basis of your undergrad degree. It reminds us why we are free-marketing, Judeo-Christian-Greco individualistic, personal liberty loving, scientific revolution Enlightenment embacing, economic growth trumps all other concern, Republicans

Mr. Lima

2010-12-09T10:25:00.000-08:00

Nick Lima, a Dem-Club co-head, told me today that over break he was converted to being a libertarian, and that he now hates government. We should welcome him to our ranks. Also props to Philip, who predicted that "he is too smart to remain a Democrat." Good call.

Cloud Computing: The Third Wave

2010-12-07T05:31:00.000-08:00

We are at the edge of the third wave of Information Technology (IT). Following the advent of the the Personal Computer and the Internet, Cloud Computing is going to be the next great disruption of business enterprise. The term refers to the use of physically-remote computers, accessed through the Internet, for IT functions. it can refer to the most basic "utility" functions such as storage, to software programs, eg virus protection, to processes, like payroll, to full services, like building custom applications. It is more than just outsourcing to save costs. It requires a top-down assessment of business processes, such as logistical channels (think overseas manufacturing), distribution or marketing. These are strategic issues for any company that require input from the entire management team. It changes the IT department to the "Business Innovation" department. It is going to be an essential competitive tool for small to medium-sized businesses.
Consider this story told by Honorio Padron of Hackett Group, a process improvement group. He tells of a small drug company that had to compete with the multi-billion dollar majors. It did this by using cloud resources to develop a smartphone application that allowed doctors to look up the drugs they prescribed online using the company's own informational database. By leveraging cloud resources, the company rolled out the app in weeks, without even having to develop its own IT capability, at 10-20% of the in-house cost. Being closer to the doctors is good for their business.
For your generation, the cloud will represent a natural evolution of forces you have already adopted in your personal lives: anyone can connect to any information with any device. Social media sites combined with personal mobile devices on the job will blur the lines between personal and business. Ultimately, business is about connecting people and this technology is just the means.
It is hard to predict the future winners and losers of this. Large companies with powerful IT departments, may be too slow in adaptability. Will growth in heavy data generators like law firms, oil and gas exploration companies and engineering firms be based more on their ability to master their information using cloud technologies than their technical expertise? Will companies that use cloud expertise to measure their financial health outcompete their rivals who don't? Do companies that use the cloud to run their company's adminstrative infrastructure of finance, sales and marketing, be able to be concentrate on their core competencies? Yes, but like all disruptions, the outcomes won't be obvious until after the fact.
So how does one prepare for this future? You do have to be technology literate. Whether you are the most avant-guarde artiste or a civil engineer, understanding technology is essential. After that, you have to understand your business and how it creates and delivers value. This means you must have critical thinking skills. These are not trivial to come by, because they require a way of seeing yourself and the world around you with honesty. You have to always embrace the dissenter; you best learn through reconciling disagreement. You have to know yourself and the people around you. Social IQ matters. I don't know where you can reliably learn these things. I've started to lose my faith in universities. Companies certainly have the knowledge and honesty, but can't allow time for leisurely exploration of ideas. Perhaps certain post-grad programs come the closest to the ideal. Until we know, the best you can do is read the WSJ everyday and come to the Republican Club.

Austrian Politician has Balls of Steel

2010-12-04T14:05:00.000-08:00

“Mr. Ambassador, enter the Orient Express and go back to Istanbul, your wonderland!”

So Austria has this guy, and Hayek, and Von Mises. They get my vote for best country in Europe.

Can you learn the Humanities over the Internet?

2010-11-30T08:25:00.001-08:00

"You could maybe soften your stance a little on the humanities (perhaps instead of learning about them on the Internet, repeating your thought that you can learn them independently?)" - My college counselor regarding an essay.

I think you can. Actually, I know you can. If you want to read a book, you can find and download it as a free pdf in under 10 minutes. Quite fittingly, this is exactly what I did to get my copy of the Singularity is near.

If you want to discuss it or read analyses, you can easily travel from wikipedia, to sparknotes, to online forums, etc. I often go to amazon.com and read the reviews. Online comments are an ENORMOUS resource of compelling ideas. This is why I think the online WSJ is far greater than the print edition. The comments alone can be better than the original article. Furthermore, you will almost definitely here an articulation of all sides of an argument. I know my knowledge of history has some terrible deficiencies courtesy of our liberal Exeter history department. Reading a wikipedia page tends to give a less biased rundown of what actually happened, and lets you focus on what you personally find interesting.

I have a private blog and on this blog I just copy and paste every phrase or link that I think I may want to recall later. (To do this, just create a blog on blogspot and go to permissions and set it up so you are the only one who can view it). [Evan and Philip, I think we were talking awhile ago about how frustrating it is to forget where you read something because we read so many sources nowadays. Well, here's your solution.]

Anyway, nuff said,

- Jimmy

LBJ Great Society

2010-11-27T09:23:00.000-08:00

- Dr. Tisdall, you said at the start of the LBJ reforms, out of wedlock births of African Americans shot from 10% to 60% almost instantly. Do you have any on hand links for this data? I haven't found much.

- Can you type up a quick rundown of the effects of slavery on black culture? I'm a little fuzzy on the details of industrial slavery, the worst part of the whole ordeal.

- Evan, you mentioned a book that covered a lot of the woes of Great Society programs, what was the name of this?

The government bail out of GM

2010-11-23T12:15:00.000-08:00

As you head home for Thanksgiving, you liberal friends will no doubt be lauding the government rescue of GM. GM started selling its government shares as the start of the company's return to private ownnership. The IPO was a rousing success, with the "re-born" GM valued at $51 Billion dollars at its IPO price of $30-35 per share. So the jobs of 300,000 GM employees have been saved and perhaps another 600,000 secondary jobs saved in an economy that has lost around 8 million jobs in this recession. As the government sells the rest of its shares, it could conceivably end up getting all of its money back. So there, thank God the Democrats were in power to use the beneficent hand of government to prevent all of that human suffering. All at no ultimate cost to the taxpayor.
The problem with this story can be illustrated with this thought experiment. If government wanted to save GM, why didn't it just lend it the money, like it did with the banks or use an equity infusion like it did with AIG? Bankruptcy, Chapter 11 in this case, is a well defined legal procedure which has always placed lenders, specifically bond holders, ahead of all other creditors. The normal legal procedure is to sell the company and give the money to the creditors, with the bondholders first in line. What the Democrats did, however, was force debtors into a debt-for-stock swab. The government, owed $16B, got 50% of shares, bondholders, owed $27B, got 10% of shares, and the union(UAW) got 40% of the shares for its unfunded "legacy" costs. These were the costs that were such an important cause of GM's bankruptcy in the first place.
What we see then is a good example of crony capitalism. The government stripped legal creditors for the benefit of of its supporters, in this case, organized labor.
So in an industry with overcapacity, will it have been worth saving GM? That will really depend on the company's future success. That, in turn, will depend on how well it changes its culture. Are UAW workers going to shed their worst habits, including restrictive work rules and extravagant benefits? Can GM make cars that people will buy, or is it going to make a mostly electric car with a battery range of 30-40 miles costing $42,00 dollars? In addition, there is no real way to measure this misallocation of capital. We spent $80 Billion dollars up front, with another $45 Billion dollars in future tax breaks, to save a company that made a product that wasn't needed and consumers wouldn't buy. How do we measure the missed opportunity of the new company that wasn't formed or the research for the new product not now imagined? How do we measure the erosion of trust of lenders, who now have to wonder if government is going to strip them of their legal rights to favor a political supporter?

The Chinese Century and Biologic Laws

2010-11-22T06:05:00.000-08:00

Economics is History masquerading as Physics.
I have introduced to you my belief that the 20th Century was best conceptualized by the Laws of Physics, driven by Energy (think of WW2 as the "war of oil") and communicated in the math of Calculus. I think that the 21st Century will be best understood through the Laws of Biology, driven by Information, and communicated throught the math of the Algorithm (computers). Two of the laws that I have become aware of, but barely understand, are evolutionary algorithms and cellular automata. The former teaches that information can be created without a directing intelligence, by setting up a system with choice and competition. To see this in action, view this brilliant example of the Blind Watchmaker on YouTube: (http://www.youtube.com/watch?v=mcAq9bmCeR0). Cellular automata teaches us that very complex systems can arise from simple rules. To see an example of this, see Wikipedia's entry on Conway's Game of Life: (http://en.wikipedia.org/wiki/Conway%27s_Game_of_Life).
These ideas are much better constructs for understanding people's behaviour than anything in physics. The reason for this is that the laws of physics teach constancy. For example, Charles' Gas Law teaches that if you keep heating a balloon, the gases will keep expanding until the balloon pops. This is as true now as when Charles first described it in the 1780's. The laws of biology, by comparison, teach change, due to increasing information. The balloon that Charles popped in 1780 didn't reproduce and so to survive and reproduce, balloons would have to find a means to relieve the pressure. There would be many possible adaptations and the best would be sorted out through selection. This means that if you tried to reproduce Charles' experiment in a biologic balloon world, you might get a different result than he did.
It is instructive to apply these ideas to economics, a biologic system based on information. Niall Ferguson has written an article on the rise of China (http://online.wsj.com/article/SB10001424052748704104104575622531909154228.html?KEYWORDS=niall+ferguson). In this article, he states that the 500 years of Western domination were based on six "killer applications":
" Competition: Europe was politically fragmented, and within each monarchy or republic there were multiple competing corporate entities.

• The Scientific Revolution: All the major 17th-century breakthroughs in mathematics, astronomy, physics, chemistry and biology happened in Western Europe.

• The rule of law and representative government: This optimal system of social and political order emerged in the English-speaking world, based on property rights and the representation of property owners in elected legislatures.

• Modern medicine: All the major 19th- and 20th-century advances in health care, including the control of tropical diseases, were made by Western Europeans and North Americans.

• The consumer society: The Industrial Revolution took place where there was both a supply of productivity-enhancing technologies and a demand for more, better and cheaper goods, beginning with cotton garments.

• The work ethic: Westerners were the first people in the world to combine more extensive and intensive labor with higher savings rates, permitting sustained capital accumulation."

This list could serve quite nicely as the "set up" rules of a cellular automata program. The first Ferguson parameter, competition, and parameter 5, consumer society (choice), sets up an evolutionary self-teaching information-adding program. By adopting 4 of the 6 rules, China is getting the predicable result of good economic growth. This has been rapidly accelerated by the fact that they can just copy our science and technology. It is interesting to speculate on the effects of not using two of the rules; representative government and a consumer society. Only a physics-minded economist would try to predict with any confidence.

A Moment in the Singularity: Analog to Digital

2010-11-22T05:10:00.000-08:00

My weekly copy of the US News & World Report came today with this cover: "We are writing to inform you that this will be your last issue of (our) magazine...We will continue to publish the usnews.com website". The editor noted that this 77 year old publication started as a broadsheet newspaper and will continue its "information business" as pixels on the screen. I doubt it will last for long. As a long term subscriber, I had stopped reading it seriously years ago, not because of its format but because it didn't provide me with any unique information. Its "Best...Lists(best colleges, best hospitals etc) were entertaining, but nothing you could act on. Just like many city newspapers discovered when Craig's List took away their Classifieds income, not enough people were willing to pay for their low information content to be economically viable.
In today's WSJ, L. Gordon Crovitz comments on the Beatle's tunes coming to iTunes (http://online.wsj.com/article/SB10001424052748704496104575627282994471928.html?KEYWORDS=crovitz). He gives a short history of technology disruptions of the music industry: sheet music, phonographs, 8 track, cassettes, CD's, MP3. He notes that iTunes provided a model for payment after the analog to digital revolution made theft of music ubiquitous. He offers these key insights:
"For music and many content-based industries, the shift to the Information Age from the Industrial Age is a shift to digital versions from older analog versions. The older forms don't disappear altogether. Instead, traditional products find a more limited role alongside newer versions that take advantage of new technology to deliver different experiences to consumers. Sellers may lose scarcity value for their goods as digital tools make copying easy, but as iTunes has shown, convenience is also a service worth buying".
In the same issue of the WSJ, Vacellarp and Schechner write about the coming disruption by Online TV: http://online.wsj.com/article/SB10001424052748704264804575626902698357466.html?KEYWORDS=vascellaro
I don't know how this fight will turn out, but I'm betting on the disrupters. The only objection of the TV stations, afterall, is that they aren't getting paid for their content. Will the cable companies survive? The analog-to-digital disruption has only just begun. I don't expect my specialty, pathology, to survive in its present form. Why would you pay me $150K /yr to read slides on a microscope, when the slide images can be digitalized and read on a TV screen in India for $40 K/yr? Radiology will suffer the same fate. Every industry will feel its effects in some way.
James once asked me what I subscribed to, and I told him the WSJ, Discover Magazine (science) and The Atlantic (thinkers). Only the WSJ is very good. Discover is OK, but it's more of a "geewhiz" content provider than a "this may be important" information provider. The Atlantic was excellent under Michael Kelly, but now has liberal editors and is sinking under their politicized view of everything. In the end, "information" providers will be paid for aggregated data to specialist groups and information to general readers. The conversion of data to information will only be as good as the editors and writers strengths in critical thinking and communication skills. Right now, the WSJ is the most highly subscribed newspaper in the US, and is very expensive at $365/yr in the print edition. It is worth every penny.
People will always pay for information. The analog-to-digital disruption is an essential theme to follow. One of the Internet's famous quotes, by Stewart Brand, is:
"On the one hand information wants to be expensive, because it's so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other."

A witty commentary on our current politics

2010-11-22T05:08:00.000-08:00

This witty article cleverly captures the contradictions in our current political scene.
http://finance.yahoo.com/banking-budgeting/article/111364/a-war-of-the-worlds-for-the-modern-day