American Elephants

Confusion and Misconception are Rampant Everywhere by The Elephant's Child

Friedrich Hayek once wrote: “Buying and selling were a procedure for discovering facts, which if the procedure did not exist, would remain unknown or at least would not be used.” The full name of Adam Smith’s classic work was “An Inquiry Into the Nature and Causes of the Wealth of Nations,“as the Coyote Blog noted today:

The fact that AOC and other modern admirers of socialism can fret about poverty is, as they imagine, attributable to capitalism, but not in the way they think. Capitalism did not cause the poverty, it created the situation in which poverty is an issue with but a minority of the population (rather than essentially everyone). Before capitalism, fretting about poverty would just have been fretting about .. the way things are for everyone.

One of the earliest things that someone learns about politics, at least in Democrat families, is that Republican tax cuts only go to the rich. They simply do not understand the workings of the economy. Because “the Rich” pay way more in taxes than the rest of us, they get proportionally bigger tax cuts. What we are seeing out there is the result of everyone’s tax cuts. Someone remarked on the radio this week, in the wake of the  3½% remarkable growth spurt in the economy, that “people have decided to go shopping.”

Well, yes they have. I learned some time back that apparently large numbers of people have chosen to have their income taxes withheld from their wages, and really don’t know how much they paid in taxes — but only how big their refund was. This year, their refunds were somewhat bigger, and they have the money to do some extra shopping. I guess they worry that if they don’t have taxes withheld, they may not have the funds to pay on April 15. The rich don’t have to wait for refunds, so when they receive a tax cut, they have the extra funds to expand, grow their businesses, hire, invent—and make the economy grow. How do we tell? By reading the facts of the buying and selling that is going on.

This explanation does not fit into the world view of Democrats. They don’t buy it. I remember a few years back, a writer at the Wall Street Journal wrote in astonishment that “Elizabeth Warren has only a childlike understanding of economics.” That is why you have so many Democrats who want to get rid of capitalism. Much of the climate activists’ purpose is to use climate as a way to rid the world of capitalism. Mentioning Venezuela as a notable example of the abject failure of Socialism gets you nowhere. They do not, and cannot, accept the starving people of Venezuela as the inevitable result of Socialism. It just does not compute. It is based, of course, on a failure to understand human nature and an ignorance of history.

There has been lots of conversation about the vast crowd of Democrats running for the presidency. All are positive that Trump is so despised, so awful, that only the few gap-toothed deplorables in flyover country would vote for a second term. Joe Biden makes the twenty-first Democrat candidate to announce a run. Some reporters have remarked that name-familiarity should help him, but according to polls, large numbers of Americans have no idea who he is, and do not recognize a picture.

Those of us who have always assumed that we can depend on the wisdom of the American people may want to give some consideration to running for your local School Board. Or at the very least picking up one of Hayek’s books at the Library: The Fatal Conceit: The Errors of Socialism, The Road to Serfdom, or The Constitution of Liberty.

The Mysteries of the Butterfield Paradox by The Elephant's Child

First published in January 2013, but it seems time to do it again. Nancy Pelosi has made it clear that as soon as the Democrats get back in power, they will immediately raise taxes back to where they should be, because she is quite sure that Trump’s despicable tax cuts went only to the very rich. If you cut the taxes of someone very rich by 2%, the amount of  money saved will be larger than the amount of the 2% cut for someone who pays a small amount of taxes because they don’t earn very much.

Democrats simply do not seem to understand simple economic facts, or basic math for that matter, which is why their big ideas never, never work. Franklin Roosevelt did not save us from the Great Depression, and winning the war may have had more to do with the fact that George Marshall was his chief-of-staff throughout the war, and made it a policy never to laugh at FDR’s jokes. Yes, the Marshall who was responsible for the Marshall Plan.

Obama is making a round of speeches to rouse up the Democrats to vote as many times as they can in the mid-terms, to take back the House. He’s quite sure that his economic programs are what has brought on the current boom, and he is furious that the ignorant Donald Trump is simply taking credit for what were his (Obama’s) excellent actions. Here’s how things really work:

Have  you heard of the Butterfield Fallacy?  It is rooted in ideological prejudice, and well known to conservative commentators.  Fox Butterfield was a reporter for the New York Times  “whose crime stories served as the archetype for his eponymous fallacy.”

“It has become a comforting story for five straight years, crime has been falling, led by a drop in murder,” Butterfield wrote in 1997. “So why is the number of inmates in prisons and jails around the nation still going up?’  He repeated the trope in 2003: “The nation’s prison population grew 2.6 percent last year, the largest increase since 1999, according to a study by the Justice Department. The jump came despite a small decline in serious crime in 2002.” And in 2004: “The number of inmates in state and federal prisons rose 2.1 percent last year, even as violent crime and property crime fell, according to a study by the Justice Department released yesterday.”

The Butterfield Fallacy consists of misidentifying as a paradox, that which is a simple cause-and-effect relationship. You put more bad guys behind bars, and crime goes down. The typical New York Times reporter disapproves of sending people to prison because, among other reasons, they think it is racially discriminatory. “In 2004 almost 10 percent of American black men ages 25 to 29 were in prison” and, it diverts tax money from what should be higher priorities.  In 1997, “already California and Florida spend more to incarcerate people than to educate their college age populations.” Here, Reynolds Law comes into play:

The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.

New York Times business reporter Reed Abelson wrote yesterday with bewilderment that insurance premiums are rising sharply as ObamaCare’s insurance regulations begin to take effect:

Health insurance companies across the country are seeking and winning double-digit increases in premiums for some customers, even though one of the biggest objectives of the Obama administration’s health care law was to stem the rapid rise in insurance costs for consumers.

Yuval Levin wrote of Ableson’s surprise that health insurance companies across the country are seeking and winning double-digit increases in premiums for some customers, even though one of the biggest objectives of the Obama administration’s health care law was to stem the rapid rise in insurance costs for consumers. Ableson was bewildered at the Butterfield Fallacy. as Levin wrote under the perfect title “Even Though.” Some people think this might have something to do with ObamaCare’s basically outlawing actual insurance and replacing it with an economically  incoherent substitute. The article also notes with surprise that businesses that now have to have their prices approved by regulators have adopted a  peculiar practice by which they first propose higher prices than they expect to end up with and then work down toward their costs. Levin adds “sources say that supply and demand may be related in ways that influence prices, but this remain unconfirmed.”

When health care bureaucrats reduce the price that will be paid to providers for their services, oddly enough, the cost of insurance will go up.

James Taranto noted another example from the Associated Press:

A bluefin tuna sold for a record $1.76 million at a Tokyo auction Saturday, nearly three times the previous high set last year–even as environmentalists warn that stocks of the majestic, speedy fish are being depleted worldwide amid strong demand for sushi.

The reporter, Malcolm Foster, was too caught up in environmental sentimentalism to notice that this is basic supply and demand at work. When the supply of something is low, prices go up.  Imagine that.

Addendum: John Hinderaker reported at Powerline, that “just this morning the Labor Department announced more great news:”

American wages unexpectedly…


…climbed in August by the most since the recession ended in 2009 and hiring rose by more than forecast, keeping the Federal Reserve on track to lift interest rates this month and making another hike in December more likely.

Average hourly earnings for private workers increased 2.9 percent from a year earlier, a Labor Department report showed Friday, exceeding all estimates in a Bloomberg survey and the median projection for 2.7 percent. Nonfarm payrolls rose 201,000 from the prior month, topping the median forecast for 190,000 jobs.

When the economy is booming, unemployment reaches new lows, companies are having trouble finding qualified employees, they may have to offer a little more money, and offer more to their own employees to keep them from applying elsewhere you naturally get an increase in average hourly earnings. Basic!, But not for Democrats who don’t understand basic economics. Mr. Hinderaker was just back from trying to explain to the Joint economic Committee on the Tax Cuts and Jobs Act on Minnesota’s economy.

How Do You Define Wretched Excess? Behold Nancy Pelosi: by The Elephant's Child

“Today, we gather on this floor in the midst of a holy season. In this season we celebrate the miraculous blessings of God. We reflect on the wondrous joy of children and our responsibility to them. We remember our duty to live justly. And for those of us blessed to serve in this Congress, we must remember our special responsibility to govern fairly, to meet the needs of all of God’s children. In this holy time, the moral obscenity and unrepentant greed of the GOP tax scam stands out even more clearly….

This GOP tax scam is simply theft, monumental, brazen theft from the American middle class and from every person who aspires to reach it. the GOP tax scam is not a vote for an investment in growth or jobs. It is a vote to install a permanent plutocracy in our nation. They’ll be cheering that later. It does violence to the vision of our Founders. It disrespects the sacrifice of our men and women in uniform, who are a large part of our middle class and to whom we owe a future worthy of their sacrifice. And it betrays the future and betrays the aspirations of our children. It demands, it morally demands a no vote from every member of this house of the people.”

Her plea did not work. These might be some of the reasons why:

  • The Unemployment rate for Latinos is the lowest ever in the history of government tracking.
  • The Black Unemployment rate has hit a 17-year low.
  • Third Quarter growth was 3.3 percent (in spite of two hurricanes) and the 4th quarter is projected to hit the magic number of 4 percent.
  • A majority of Americans see our economy as “good” or “excellent.” 41 percent believe 2018 will be even better and 43 percent believe their wages will increase.
  • The unemployment rate has hit a 17 year low at just 4.1 percent, the lowest since 2000.
  • So far in 2017, a full 171,000 manufacturing jobs have been created. The manufacturing unemployment rate is just 2.6 percent, the lowest ever recorded.

P.S. Our men and women in uniform just got a long overdue raise.

If you have trouble understanding, see “Explaining the Trump Derangement Syndrome” just below.


Yoo Hoo, Seattle City Council by The Elephant's Child

From Economist Mark J. Perry at AEI:

Seattle City Council: Do higher prices reduce demand  or not?

Milton Friedman Explains: Soaking the Rich Doesn’t Work. by The Elephant's Child

A good spat over economics always inspires me to reach for Milton Friedman. He explains so clearly, with such good humor.

Who Will Be Hurt Most by ObamaCare? by The Elephant's Child

John Goodman, of the National Center for Policy Analysis, asks an important question in today’s edition of his Health Policy Blog:

Who will be hurt the most by the health reform legislation Congress passed last year?

The answer is the most vulnerable segments of society — the poor, the elderly and the disabled.  Those who are left of center in Congress voted for a law that will significantly decrease access to care for the very people they claim to care most about.

There are two basic ways to reform health care.  One way, the way Congress chose, is top down.  The other is bottom up. The latter is the economic way of thinking which involves incentives.

The top down approach starts with a social goal, and tries to impose it with regulations and rules, mandates and constant tinkering and re-regulation to fix what doesn’t work.  Those who are left of center seem to be natural control freaks, and cannot resist telling people what to do.  Doctors, nurses, hospital administrators, pharmaceutical companies and insurance companies are all being told that they can no longer conduct their businesses and their lives the way they have, over many years, found to work most efficiently and most successfully.  A bunch of bureaucrats in Washington, who have no experience in any of these fields, are going to tell them how it all must be done.  The program depends for its success on keeping people from acting in their own self-interest.

The bottom up way to reform health care depends on incentives, or allowing people to pursue their own self interest.  And of course you don’t know exactly how it is going to turn out. Health saving saccounts are one example of positive incentives.  When it is to your advantage to spend less and use less health care, it is in your self-interest to spend and use efficiently. Employers who adopted health savings accounts and their employees were very satisfied with them.  Governor Mitch Daniels of Indiana initiated health savings accounts for low-income people and found that they too responded to incentives and liked the program.  ObamaCare has omitted health savings accounts.

Another example occurred in the Medicare drug benefit.  Your costs are significantly less when you use a generic rather than a name brand drug, though some new drugs have no generic version. When you reach a total expenditure of $2830, you reach what is called “the donut hole.” a point when you have to pay the full cost of your drugs, until you reach the next level, when all are paid except for a small co-pay. This has been an incentive tor people to request generics, and to use less expensive drugs when they work as effectively. That incentive worked efficiently to keep drug benefit costs far less than they were expected to be.  For those who could not afford to pay the full cost of drugs in the “donut hole” there was help available. The left, unable to grasp the idea of incentives, eliminated the donut hole in ObamaCare. Without incentives costs will rise sharply.

The bureaucrats are convinced that preventive care can keep people from getting sick and costing the health care system much more money.  Free tests to prevent people from becoming ill will be hugely expensive.  Doctors usually don’t order a test unless there is a symptom or a particular worry that indicates a test would be worthwhile.  The incentive here is to have lots of tests.  If everyone in America succeeds in getting all the recommend preventive services (no deductible and no co-pay) primary care doctors would have to spend more than 7 hours every day delivering services to healthy people.

The Left is so convinced of the collectivist vision of universal health care that they ignore incentives entirely.  It is an economic mistake.

In the throes of an economic crisis, governments begin to question environmental claims. by The Elephant's Child

Delegates from 190 countries are meeting in Poznan, Poland to prepare the way for next year’s UN conference in Copenhagen at which the world will seek agreement on a successor to the Kyoto Protocol on climate change. In an essay titled President-elect Barack Obama proposes economic suicide for US” in The Telegraph, Christopher Booker writes that, at the meeting, delegates will see a video of Mr. Obama pledging, in only his second major policy commitment, that America is now about to play the leading role in the fight to “save the planet” from global warming.

Obama begins by saying that “the science is beyond dispute and the facts are clear”.  He claims that “sea levels are rising, coastlines are shrinking, we’ve seen record drought, spreading famine and storms that are growing stronger with each passing hurricane season.”

Apparently Mr. Obama has believed all the wonders of Al Gore’s loony film An Inconvenient Truth without checking the actual facts.  Sea levels are indeed rising, but no faster than they have for the last three centuries.  Even the UN’s IPCC’s computer models only predict a rise of from four to seventeen inches.

The tiny countries of Tuvalu and the Maldives often claim that rising sea levels are inundating their land, but Satellite measurements show that since 1993 sea levels have actually gone down about four inches.  Coastlines are not shrinking, except where land is subsiding as it has been doing for thousands of years on the east coast of England.

Mr. Obama proposes spending $15 billion a year to encourage “clean energy” sources, such as thousands more wind turbines, apparently unaware that the 10,000 turbines the United States has already installed “representing 18 gigawatts of installed capacity” only generate 4.5 GW of power, less than a single coal-fired power plant.

In the Energy Tribune, Peter Glover and Michael J. Economides in an article titled Wind Power Exposed: The Renewable Energy Source is Expensive, Unreliable and Won’t Save Natural Gas.” In the U.K,  where the government is ordered to meet a 20 percent reduction in carbon dioxide emissions by 2020, wind has been the favored substitute since England is the windiest country in Europe.  In the U.K. gas and electricity prices have risen by 29.7 percent. Ofgem, which regulates the U.K.’s electricity and gas markets, has already expressed concern for all the billions of public investment when wind produces a mere 1.2 percent of Britain’s energy needs.

The Times, in London, has a column titled The fool’s gold of carbon trading: A huge new market designed to solve global warming seems doomed to failure” by Jonathan Leake.  In The Local, Germany’s News in English, the headline read “Report claims EU climate plan could cost 100,000 jobs. In Canada, in the National Post, Peter Foster says:

President-elect Obama’s plans represent an enormous threat both to the U.S. and world economies.  Far from creating new jobs, any “green” jobs arising from draconian legislation and/or subsidies will be bought at the cost of more jobs lost in restricted/disfavored sectors.  Green jobs carry a reverse multiplier.

As for the benefits of green government guidance, just look at how much Corporate Average Fuel Economy standards have done to help guide U.S. auto makers towards viability.  Nevertheless, the conventional wisdom is that any bailouts for the Big Three must be accompanied by commitments on their part to create “more fuel efficient” cars rather than simply cars that people want to buy.  Government bureaucrats may even be put on their boards to lend their expertise to the process.  Having poured good money after bad, the government will add to the investment’s guaranteed failure by further muddling corporate direction with political input.

According to a poll of 12,000 citizens in 11 countries, reports, less than half of those surveyed said that they were prepared to make personal lifestyle changes to reduce carbon emissions, down from 58 percent last year.  Only 37 percent said they were willing to spend “extra time” on the effort, an 8 point drop, and only 20 percent said they would spend extra money to reduce climate change. But other questions yielded the information that more than half of respondents felt that their governments should do more by investing in renewable energy sources — as long as it doesn’t cost anything.

These bits and pieces are not offered as a comprehensive survey. The vast majority of the mainstream media are firmly in the Al Gore camp.  But there are alternative voices coming from all over the world pointing out that all is not as it seems.  The countries of the European Union are backing off their climate change commitments.  In the wake of the economic crisis, they are taking a hard look at their climate change priorities, and deciding that the wish-list is just too expensive.   Perhaps, in their considerations, they may be more open to looking at the observed science instead of the questionable predictions of computer climate models.

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