Sunday, May 20, 2007

Economics and Social Policy – XXXVI

Welcome to the May 20, 2007 edition of Economics and Social Policy. A full house this week, with lots of good submissions. Thanks to all who participated.

Charles H. Green presents Trusted Advisor Associates > Trust Matters posted at Trust Matters, saying, "Look where the ideas of Ayn Rand, Milton Friedman and laissez-faire capitalism have brought American business."

Well, I’m not sure that the ideas of Ayn Rand ever had much impact on businessmen… Most of Milton Friedman’s ideas have never been implemented, and you can’t exactly describe the American economy as laissez-faire, but other than that….

The basic confusion in the article is mixing up the theory of capitalism with how businessmen operate. Most businessmen are not capitalists, at least not in any sort of principled sense. Given a chance to collude with their competition, persuade the government to keep out competitors, or game the system to generate unfair advantage, and they will do it. Harvard Business School is not the “West Point of Capitalism”. It’s the West Point of managerialism.

That’s a big difference.

One of the more interesting points Mr. Green makes is about credit / debt. Credit is good; debt is bad. Increasing credit available to the poor increases their indebtedness. If your debt is generated by consumer spending, that’s trouble.

Income and wealth distribution data analysis is complicated and highly controversial. Generally speaking, the less capitalist, and more syndicalist or managed the economy becomes, the higher the levels of inequality and wealth distribution will be.

In any event, the Trust Matters blog always has interesting and thought provoking pieces, and trust remains one of the major pieces holding society together.

David Gross presents "Off the Books: the Underground Economy of the Urban Poor" posted at The Picket Line.

A long post, but well worth your time. The underground economy isn’t going away, and is only likely to grow as taxes and regulation of the “free” economy increase. The underground economy is ridiculously inefficient, and prone to many problems, but meets a need. Increases in the underground economy do not bode well for the rest of the economy.

jens presents My house has increased in value over $700/day for the past nine months posted at MyDotMoney.Com.

Sometimes, it’s better to be lucky than smart. Personally, I’d settle for either. Congrats, Jens!

Josh presents National Gas Blackout March 15 2007 posted at The Mad Money Analyst, saying, "National Gas Blackout Day March 15 2007"

So if I divert my purchase from Monday to Tuesday, I’m combating high gas prices? What if I purchase early, on Sunday? Does that help? Since most of the service stations are franchisees independent of the refiners / producers, does putting the local guy running a Sheetz through the wringer (assuming that this does) help? Seems to me, he’s likely making monthly orders based on past sales, and probably isn’t tracking sales by day of the week for order purposes.

Perhaps we would do better to do things like insist that Congress allow drilling in the AWNR, build some additional refineries, increase investment in nuclear power, etc.

Besides, I thought that high gas prices would discourage us from driving, thus saving the planet from the global warming catastrophe. Oh, sorry, the planet is only saved if we pay the increases as taxes….

Brandon Peele presents Marketing: The Authenticity Fallacy posted at GT.

If Marketing has to depend on quantum mechanics, we’re all in trouble.

R.Pettinger presents Reasons for Unemployment amongst Ethnic Minorities posted at Economics Essays.

If you see an ethnic group with a 22% unemployment rate, chances are very, very, good that there’s a thriving underground economy in that sector. (see the post from David Gross above).

But that’s still a very bad thing.

Steven Silvers presents Rankles over U.S. News best colleges list hint at bigger issue with media rankings. posted at Scatterbox at

Rankings – the first goal of the “Best of” magazine issue is to … sell magazines. Any resemblance to reality is purely coincidental. There’s more than a smidge of self-promotion in most of these surveys as well.

Let’s take the case of Harvard. A university that only accepts the best, brightest, and those whose inheritance may allow them to contribute millions as alumni one day.

The lure of Harvard probably isn’t the quality of the education for most of the undergraduates. It’s the potential contacts. The door opening that a Harvard degree confers. It’s a triumph of marketing. Perhaps Mr. Peele’s quantum mechanics post is on point after all.

R Waldhoff presents Terrorism Betting Markets posted at Britannica Blog.

A brief review of the kerfluffle over DARPA’s futures market in terrorism. The structured informal market setting allows for a very large amount of input, all weighted by confidence and past credibility (“wealth”). If you are not gathering highly decentralized information from those with local knowledge, you’re not likely to run a successful counter terrorism operation.

On counter terrorism, the government has to be good 100% of the time. Terrorists only have to be lucky once.

fletchlives presents Sometimes You Should Roll The Dice posted at fletchlivesforecasts.

Fletch is looking for feedback & discussion on his stock / economic analysis blog.

That concludes this edition. Submit your blog article to the next edition of Economics and Social Policy using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

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