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Monthly Archives: December 2011

The Tragedy of the Commons.

I don’t remember when it was that I came across the specific term, when I read about it.  But I resonated with it immediately.

In short, it’s the idea that a shared resource made available to the whole of the community will languish and suffer abuse in a manner that would not exist if that same resource were owned and used by a single individual.

The classic example is that of a pasture.  Multiple shepherds begin by grazing their sheep in the common pasture.  When the shepherds grow their herds, they begin to understand that the pasture will, in time, become over grazed.  However, because the pasture is communal there is no incentive to preserve the pasture; if Farmer Johnson doesn’t increase the aggregate herd size by one, surely his neighbors will.  In time, the incentive is perverse, the shepherd accelerates the growing of his herd to make sure that “he gets his.”

The tragedy of the commons.

Of course, there are two solutions to this problem:

  1. Privatize the pasture.  Assign an owner of it all or simply divide the pasture into plots.
  2. Form a government and regulate it.

I don’t wanna get into the 1’s and 2’s right now.  Rather, I’m interested in why the Tragedy occurs to begin with.  For example, if we begin the story with a single shepherd and a pasture that he alone owns, he will expand his herd to the size at which the pasture is able to sustain it.  At that point he either begins to cull the herd or expand the pasture.  Now, we can assume that this shepherd has a family, some old enough to be responsible for work and productivity.

Why doesn’t each member of the family act in the manner described above?  Why don’t individual family members engage in the destructive activities of the Tragedy?

Because they have stronger social bonds that hold them together.  A family has the ability to shape expectations, to punish members who fail to live up to those expectations.  A family can control behavior.

No one minds sharing. Hell, we TEACH our kids to share.  However, the unspoken, perhaps even unthought of corollary, is that the sharing is done among a group of people whose actions we can influence.

We are willing to share with those people who would react in the same manner should our circumstances be reversed.  That is, I am willing to share my good fortune with friends and family should they be equally willing to share in reverse.

Note, this does not mean they “owe” the sharer.  Only that, found in similar circumstances, they be willing to share back.  And should they fail, the “social” penalties would be significant.  Up to and including exclusion.

We find that socialism or communism works in the family or small groups of communities.  But when expanded to the point that social penalties lose bite, those constructs breakdown.  They breakdown to the point that people begin to act in rational ways to existing incentives.

As part of legislation, Congress made it illegal for banks to charge a certain percentage to merchants when a debit card was swiped.  As a result, the merchant was able to retain more of the purchase price, but the bank lost a segment of its revenue; profits were threatened.

Because banks don’t enjoy profit margins significantly above the average, they have to work to retain whatever margin they DO have.  This means that the lost revenue from debit card swipes paid via the merchant would have to be made up elsewhere.

Banks began to end free checking.  They even began to add $5.00 fees for using a debit card for purchases.  The banks changed the way and manner in which they billed individuals based on indiscriminate legislation.

Now consider Verizon.  The telecommunications giant introduced a $2.00 fee for electronic billing to certain customers.  There was o regulation that forced this move, no change in laws.  Verizon simply felt that they need to move revenue in a specific segment.

Customers were enraged.  And Verizon changed course and ended the charge:

Verizon Wireless bowed to a torrent of criticism on Friday and reversed a day-old plan to impose a $2 bill-paying fee that would have applied to only some customers.

The consumer vitriol, which cascaded across Twitter and onto blogs and petitions all around the Web, struck a chord with a company that was clearly not expecting it.

“The company made the decision in response to customer feedback about the plan, which was designed to improve the efficiency of those transactions,” Verizon Wireless said in a statement referring to the reversal.

Companies risk capital in an effort to produce a product or service that the consumer wants.  In return for this risk, investors desire a return on capital.  If they fail to obtain this return, they move their capital somewhere else.  Therefore, it is incumbent for a company to look to improve revenues in any way they can.  And if those methods fail in the market place, shrewd companies will adapt.  Inefficient companies will fail.

And all of this is achieved through the free market.  Not one of government control.

What does it mean to carry a concealed weapon in North Carolina?  It means that you are about 20x more likely to obey the law: via Coyote Blog

A front-page story in today’s New York Times tries to stir up alarm about liberalized carry permit laws, which let people carry concealed handguns if they meet a short list of objective criteria. To illustrate the hazards of that policy, the Times cites crimes committed by permit holders in North Carolina. How many crimes? Excluding traffic offenses, the Times counts 2,400 over five years, of which 200 were felonies. More relevant (since critics of nondiscretionary permit laws worry that they contribute to gun violence), “More than 200 permit holders were also convicted of gun- or weapon-related felonies or misdemeanors, including roughly 60 who committed weapon-related assaults.” That’s a dozen gun assaults a year. How many permit holders are there in North Carolina? According to the story, “more than 240,000.” So 0.2 percent of them are convicted of a non-traffic-related offense each year, about 0.017 percent are convicted of a felony, and only 0.005 percent are convicted of a gun assault. The Times concedes that the number of permit holders convicted of crimes “represents a small percentage of those with permits.” More like “tiny.” By comparison, about 0.35 percent of all Americans are convicted of a felony each year–more than 20 times the rate among North Carolina permit holders.

I didn’t know this.  However, it kinda makes sense.  See, in order to get a conceal carry permit, you have to have a clean record.  Considering that most criminals begin young, this would seem to only include law abiding people.  Do folks suddenly have occasion to make a poor decision?  Certainly.  But not typically.

I don’t like guns.  I think they’re dangerous.  But they’re less dangerous than swimming pools and I have no problem with people having them.  I even let my kids play with swimming pools.

I also think that it’s okay to regulate guns.  No one needs a fully automatic assault rifle.  And you’d be hard pressed to convince me that we need armor piercing ammunition to take down Bambi.  We already agree that criminals shouldn’t have guns.  So it isn’t a case of “should we regulate” it’s more of a case on “where do we draw the line.”

The more I see that gun owners are safer and law abiding, the more I’m willing to push that line out a little further.

There’s been a lot of back and forth between pro-nanny state folks and pro-market folks concerning the impacts of either policy on job growth.  On one hand there is the argument that the uncertainty of regulations causes a pause in investment.  The case being that businesses are unable to predict the return of their investment due to unknown costs in the environment.

I have suggested in the past that this is akin to playing blackjack.  Consider the game as we know it.  A dealt 21 is a winner at 150% of the wager.  Dealer has to hit up to 16 and wins on a tie.

Further consider a table of players.  Upon being told that the rules might change mid “shoe”, that the changes to the rules are not yet finalized and that once you commit to playing, you can’t back out, do you think the players would play more, play less or play the same?

I suggest that the players would “hold onto their capital” until they knew the rules, and then, based on the new value proposition, would play at a level that reflects the advantage to the house; less play if the rules benefit the house, more play if those rules benefit the player.

Why we would expect business to react differently isn’t rational.  And, as it turns out, is exactly what we are seeing:  Hat Tip Carpe Diem

Because we don’t know what our health-care expenses will be in two or three years, we are unable to determine with any certainty how much our investments will have to return for us to be profitable. All of that counsels in favor of holding off on new investments and saving our funds. We want to grow. But we are unable to do so knowing that large and undetermined liabilities will absorb funds we otherwise would invest for expansion.

It is simply not reasonable to suspect that people or organizations will invest at the same level when the risks are unknown.

Every year the Associated Press interviews top economists and asks them for their thoughts on the coming year.  This year we have good news:

The three dozen private, corporate and academic economists expect the economy to grow 2.4 percent next year. In 2011, it likely grew less than 2 percent.

The year is ending on an upswing. The economy has generated at least 100,000 new jobs for five months in a row — the longest such streak since 2006.

The number of people applying for unemployment benefits has dropped to the lowest level since April 2008. The trend suggests that layoffs have all but stopped and hiring could pick up.

While a 2.4% growth rate isn’t as large as we would like to see, it does represent a better than 20% increase over last year’s numbers.  As long as we continue to grow, every little bit helps.  However, the employment picture doesn’t seem to look ay brighter for next year that for this year:

Unemployment will barely fall from the current 8.6 percent rate, though, by the time President Barack Obama runs for re-election in November, the economists say.

Not only has this economic crisis been deep but it’s been wide.  We’re gonna be looking at elevated unemployment for years to come.

Disclaimer:

This is a topic that earns conservatives a bad name.  Or rather, this is a topic that liberals are easily able to use in order to give conservatives a bad name.  This is an unfortunate reality, for IN reality, it is the conservative that gives more to charity than the liberal:

The fact is that self-described “conservatives” in America are more likely to give—and give more money—than self-described “liberals.” In the year 2000, households headed by a conservative gave, on average, 30 percent more dollars to charity than households headed by a liberal. And this discrepancy in monetary donations is not simply an artifact of income differences. On the contrary, liberal families in these data earned an average of 6 percent more per year than conservative families.

So, with that said, let me make it clear that what I describe as policy in no way or manner represents my individual and specific view of the actual person, their plight, human spirit and personal tragedy.

Okay, now, onward.

I caught a Reuters article recently.  Specifically detailing the impact of the recession on our children; our homeless children:

In a report issued earlier this month, the National Center on Family Homelessness, based in Needham, Massachusetts, said 1.6 million children were living on the streets of the United States last year or in shelters, motels and doubled-up with other families.

That marked a 38 percent jump in child homelessness since 2007 and Ellen Bassuk, the center’s president, attributes the increase to fallout from the U.S. recession and a surge in the number of extremely poor households headed by women.

To be sure, we have work to do.  The problems surrounding kids who don’t have hoes is bad.  And getting worse.  I don’t think there’s a soul alive who who disagree that something, anything, has to be done.  But it’s important to acknowledge that the thing, the “anything, is going to come in two forms:

  1. Direct assistance to the displaced families right now.
  2. Actions that will prevent the homeless condition from occurring in the first place.

While noble, I am less interested in the first, as a matter of policy, than I am in the second.  Consider this:

As her mother sat in a homeless shelter in downtown Miami, talking about her economic struggles and loss of faith in the U.S. political system, 3-year-old Aeisha Touray blurted out what sounded like a new slogan for the Occupy Wall Street protest movement.

“How dare you!” the girl said abruptly as she nudged a toy car across a conference room table at the Chapman Partnership shelter in Miami’s tough and predominantly black Overtown neighborhood.

There was no telling what Aeisha was thinking as her 32-year-old mother, Nairkahe Touray, spoke of how she burned through her savings and wound up living in a car with five of her eight children earlier this year.

Think of that.  This woman is trying to care for a family of 9 on her own.  Ms. Touray is 32 years old and has 8 children.  In comparison, I had yet to be married at 32.  And now, as a professional married to another professional I have two children.  Without making any judgements as to decisions or life circumstances, as a 32 year old professional, I’m certain that I would have struggled caring for 8 kids.  Even making it to work would be difficult if not impossible.

Again, my interest in the conditions of the poor and homeless in America are more focused on preventing single 32 year-old women from having 8 children.  To put this in perspective, if you were to take ALL families in 2011, the percent of them that have 7 or more members is 2.6%.  When you look at only female householder, the percentage of families with 6 members is 2.8%.  In a perverse fact of life, the problem gets worse as women find themselves raising the family alone.

Certainly I can’t know the journey that Ms. Touray has taken to get to where she is.  Her life could be one of immeasurable bad luck and unbelievable twists of fate that have led her to where she is.  However, I suggest that another theme exists.  One that we can change.

That is, there is a significant portion of our population that makes misinformed and bad decisions that ted to put them in cohort groupings that lead to poor outcomes.  Is it perfectly allowable that a single woman would want to make it on her own and raise a family of 8 children?  Sure, without a doubt.  However, if a trusted friend or sister were to seek your advice on her decision to embark on this path, what might your counsel look like?  Would you caution her?  Might you recommend that she obtain an education?  Perhaps secure income?

Something.

What would you counsel your own daughter to do?

And if THAT answer is different than, “I’d do nothing.  However, I would continue to lavish untold amounts of mine and my neighbor’s money in order to support her.”, then I ask you:

Why aren’t we making YOUR answer policy?  Why aren’t we telling our Ms. Tourays of the world that it’s generally not accepted wisdom to create a condition where you are single with 8 kids?  In fact, why is it so “insulting and disparaging” even to merely suggest such advice?

For any trivial number N greater than 2 travel coffee mugs, there will ALWAYS be N-2 dirty non-dish washer safe mugs available on the counter.  Further, there will be N-(N-2) dirty dish washer safe mugs in the dish washer.

There is no counter example to this law.

Ever.

Corollary One:

Buying more Travel Mugs does not increase either:

  • The number of clean mugs
  • The chance any mug will be clean

It only increases the number of dirty Travel Mugs at any time.