End The Debt Ceiling

Jason Furman and Rohit Kumar have an excellent idea over at the WSJ: End the debt ceiling.  Too bad it will never happen.  This is one area where conservatives will have to bear their share of the blame.

Why is it a good idea?  What have been the positive outcomes from the debt ceiling debates?  The sequester.  That is not much to show for all of the effort expended and the negative atmosphere it creates.

Why are conservatives to blame.  Because they think that either they might eventually win one of these dramatic showdowns or that it is a way to rally the base.  It won’t happen until they control the media.  For those of you reading this before your morning coffee or other means of caffeine intake that means it won’t happen.

Trump And Russia

Kevin Williamson at NRO has an alternative for Putin that is closer to  but not exactly what we think:

Some Russia-watchers believe that the goal of the 2016 Russian campaign shenanigans was not to elect Trump but to damage Clinton before her election. That would make a certain kind of sense: Putin does not want a President Trump or a President Clinton — he wants an American president so hamstrung by political rancor, personal weakness, and petty venality that American leadership around the world is compromised.

We think it is more simple than what Kevin reports.  Putin, like most everyone, thought Herself would win and he was laying down a marker to keep Herself off his case.  He had the goods on her and so she better behave.  It just happened that Putin was wrong, like almost everybody else, about who would win.

 

A Trip To The Dentist

The WSJ editorial on apprentices reminded us of last week’s trip to the dentist.  We support all manner of on-the-job training (OJT).  Formal education is an important part of building human capital but OJT is likely more important.  That’s why we were struck by this part of the editorial:

An especially odd objection is that apprenticeship training is a mistake because skills become out of date over time, especially later in one’s work life. But that’s a risk throughout the economy, and all the more reason to get young people skills to enter the job market now and build up savings for the future.

We agree with the first sentence that it is an odd objection but don’t see the second sentence as the answer to why.  Our current trip to the dentist compared to the one some years ago will explain why.

Some years ago our dentist had acquired technology that used a camera and what seemed to be CAD/CAM software (yup) to make a crown in-house.  It took lots of the dentist’s time but it was pretty cool to get the crown in one sitting.  Last week we went and got two crowns at once and the assistant did some of the CAD/CAM work.

Sidebar: We looked at the data on price changes in dental costs and were surprised by the continuing increases.  We wonder about the measurement of quality issues.  Some years ago we would have had four visits to the dentist to get two crowns and would have spent several weeks wearing those awful temporary crowns.  Although the crowns may not have increased in quality the service has.  End Sidebar.

The dentist or the CAD/CAM provider has trained the assistant to do some of the work.  The technology associated with work changes.  OJT is all of your life.  Accounting, dentistry, and welding will all change.  Some might even go away but if you continue to accumulate human capital you will find opportunities.  As the WSJ says in another editorial:

Lowering the cost of goods and services through automation allows capital—financial and human—to attack even harder problems. Wake me up when we run out of problems.

All manner of folks are solving problems.  Our dentist was able to save us three trips and a few weeks of discomfort.  Now the dental assistant is part of that.  Don’t neglect formal education because these things will eventually become part of it but we need to push OJT even more.

Local Virtue Signals

Sigh!  One of the local mayors is virtue signaling as reported in the La Crosse Tribune recently:

La Crosse Mayor Tim Kabat supports La Crosse state legislators urging Gov. Scott Walker to commit Wisconsin to a state-based plan for combating climate change.

“It is essential that local and state legislators present a united front in the face of the president’s withdrawal from the Paris agreement,” Kabat said. “I commend these legislators for their dedication to the environment and join them in their commitment to combating climate change. In La Crosse, we have made substantial progress in reducing carbon dioxide emissions and will continue working toward our goals, regardless of the president’s actions.”

One of these things, the Paris agreement, has nothing to do with the other, local carbon emissions.  Should we be reducing carbon emissions in La Crosse?  Well we ought to reduce costs.  We certainly hope that the city is not increasing costs to battle carbon dioxide.  Why it would be essential for local and state legislators to present a united front is anybody’s guess.  If there happened to be a united front it would be nice to have debate about what it should be.  Our guess and hope is that he will have opposition for his next term.

 

Ending Slavery

Richard Brookhiser has a history lesson for The Donald on avoiding the Civil War in the current (5/29/17) NRODT.  One part, ending slavery by buying them, fits into our expertise from almost 40 years ago.  We believe there was a financial opportunity to avoid the Civil Was that politics failed to find.  Here we only consider the financial cost but the human cost of the Civil War, like slavery, is huge.

Sidebar One: We wrote this paper for a grad class in economic history almost 40 years ago.  We don’t have the references or the exact details anymore so we are painting with a broad brush.  End Sidebar One.

It seems simple because the Civil War was extraordinarily expensive that the government could buy out the slaves and avoid the Civil War and everybody would be at least as well off.  For example, here is an estimate of the actual cost that comes in at over $6 billion.  So when Richard quotes estimates from $600 to $900 million it is easy to wonder why there was a war.

Sidebar Two: There is strong evidence of an efficient market in slaves.  Given the pertinent characteristics like age and gender, the value of a slave can be reasonably estimated based on prices of actual sales.  According to the census there were almost 4 million slaves in the US in 1860 so Richard is estimating an average cost of $150 to $225.  Of course, individual prices would depend on pertinent characteristics.  A 20 year-old male will be worth more than a 60 year-old female.  End Sidebar Two

The problem with this analysis is that it is after the fact or ex-post.  Nobody expected that the Civil War would be as long or costly as it was and both sides thought they would win.  The analysis needs to be ex-ante.  What did folks think the Civil War would cost before it started?  They, see Sidebar, expected it to last a few months and cost a small number of millions.  The financial solution, and this was discussed, was to free the slaves at birth and death (B&D).  The  B&D solution reduces the costs in two ways.  First, babies are cheap because they are not productive for several years.  Second, it reduces the present value of the expenditures because the amounts are paid later.  It also provides a plausible way out for both sides because it doesn’t end slavery immediately.  For the same reason, it will have negative reactions too.

The bottom line is that it would have worked.  The present value of B&D expenditures was less than the expected cost of the Civil War.  It was not easily avoidable but it was avoidable.    James Buchanan might have been worse that our Immediate Past President.

What Is A Business?

Kevin Williamson at NRO discusses The Donald’s performance in filling personnel openings in the federal government and find it wanting.  We agree with that but then he goes on to say:

Businesses, nonprofit corporations, and religious congregations are all worthwhile forms of social organization, but they are not interchangeable. There is something poetic about the fact that our contemporary populist conservatives, avowed foes of progressives and progressivism, are in thrall to one of the most ancient and enduring of all progressive errors: the belief that the government (and society) can be run the way a business is run, as though a nation were only “one big factory,” as the socialists used to put it. One of the problems with running the government like a business is that the government is not a business.

He also throws in a comment about Hoover finding out how different government is from business.  We think that Kevin has confused theories of business management with business.  As Wikipedia notes in the first paragraph on Fredrick Taylor, scientific management was in vogue during the progressive era:

Frederick Winslow Taylor (March 20, 1856 – March 21, 1915) was an American mechanical engineer who sought to improve industrial efficiency.[2] He was one of the first management consultants.[3] Taylor was one of the intellectual leaders of the Efficiency Movement and his ideas, broadly conceived, were highly influential in the Progressive Era (1890s-1920s).

Scientific management’s influence waxed in the Progressive Era but has waned since.  Yet lots of folks think of business as scientific management.

Sidebar One: We recently saw the worst Dr. Who episode, Oxygen, in history.  It is quite an accomplishment because the show started in 1963 although there were some years without the series.  We should have checked the credits to see if Jeremy Corbyn was listed as one of the writers.  Folks, especially TV and movie writers, misunderstand business and capitalism.  End Sidebar One.

What is it that makes a business a business and what makes it different from other social organizations?  Secondly, why do folks want the government to be run more like a business?  Obviously, a business is the only one on Kevin’s list with a purpose, in fact, the primary purpose, to make a profit.  Yet businesses make profits in very different ways.  Take our two local successful supermarket chains.  One has service, service, service.  If a pregnant woman wants an chimichanga then you know where to go.  The other has efficiency.  Prices are low and, if it comes frozen or in a can or a bottle then they have it.  Businesses focus on making a profit but they have a culture that helps them focus on how they do it.  Now businesses are not 100 percent successful at creating such a culture but they have periodic reporting that helps evaluate the entity.

Sidebar Two: Yes there are problems with a focus on short-term accounting reports.  Such emphasis can lead to unethical behavior.  We have not yet had time to perfect accounting in our retirement but we still think that periodic reporting helps decision making.  End Sidebar Two.

We see the difference between a business and most government units is that the business is closer in having all employees pulling together towards a common goal than the government units.  Our accounting department in the 1990s was highly successful because all the faculty members agreed on a purpose of focusing our placement efforts on public accounting firms that were not what is now the Big Four.  It set us up well for the 150 hour environment in the next decade too.

A less successful model is the change in focus from teaching to learning at the university.  Not all instructors have adopted the learning model but a substantial percentage have and the percentage is increasing.  Moving from teaching to learning is fraught with challenges but it reflects a business mentality.  We shall see if it really works.

We think that when folks call for the government to be run more like a business that they recognize the different in focus and want government to focus on what it is supposed to do.  There are at least two problems.  First, government is trying to do many things.  As just one example, the FDA tries to protect people from unsafe drugs and support the creation of useful drugs.  The trade-offs are unclear.  Second, leadership is more of a challenge in government because of the political process.  There is real disagreement about what the government should do.

Kevin needs to realize that business has left scientific management behind but the progressives have not.  The government should try to be more like a business but the first order of business is to determine the organization’s mission.  Conservatives and progressives disagree on the government’s mission.  That disagreement puts government employees in a difficult position.  We think moving toward a business model is a good idea but we need to recognize what the value of the business model is.  It starts with understanding the purpose of the organization.

It Still Was A Binary Choice

Well, we are not sure if that is correct grammar but it makes our point.  Jonah Goldberg is still conflating the hard core supporters of The Donald with the large number of us that made the binary choice.  Jonah says in his newsletter:

The best example of this is how I hear everyday that whatever Trump may be doing wrong, it’s still “better than Hillary.” Of course, that’s got a lot of truth to it when it comes to things such as judicial appointments and the fact that we don’t have to put up with the Clintons’ “there’s no eating in the library” officiousness. But now that Trump is president, it’s utterly irrelevant, save to those who need to reassure themselves daily.  [Emphasis added]

For those of us who chose The Donald because he is not Herself it is completely relevant.  We get real judges.  We get presidential actions that sometimes improve the economy or the country.  We get a reduction in illegal immigration.  We get terrible ideas on trade.  The Donald is far from perfect but he is better than the alternative.  The Donald shares much with the immediate past president (IPP) including incompetence in office.  He is, however, an upgrade on the IPP.  We are with Jonah on the basic point that The Donald, like the IPP, is a better campaigner than president.  It is not surprising that they both fall back on those skills.  What Jonah needs to accept (and move on) is that many/most of us recognized it when we voted for him.  We need to make The Donald the best president he can be.  We support him when appropriate and take him to task often.  We recognize that he is not going to be great but we expect him to continue to be an upgrade on both Herself and the IPP.  The was the choice we foresaw for November and it is why we chose The Donald in the general.