Grey Swan

There is a major underlying theme with the rapidly growing state and federal debt — unions. Over the past 30 years unions have won lucrative defined benefits contracts that placed affordable benefits in the present (e.g. 1978), but pushed off unafordable benefits to the future. Police officers could work for 20 years, and then retire with nearly full salary for those next 45 years. Similar schemes have been put in place for MANY other institutions that the tax payer funds (including, the big three auto makers). Of course, to believe that a policemen creates enough value in 20 years at a salary of ~$100K/year, to then live off of ~$90K/year for the next 45 years is ludicrous. Add to this the growing health benefits that many workers have and you have a recipe for disaster.

Unfortunately, the impact of transfering wealth from tax payers to overpaid union employees damages future growth as well as present consumption. Consider that NYC will have to cut its present police force so it can pay for its retired police force. Thus, crime rates will go up, and it will be tougher for businesses to do businesses, not just because of high taxes, but because of a more dangerous environment. The same concept is true with service cuts in the MTA and other vital industries.

The solution of course, is to ban public sector unions and to ban defined benefits. It is one thing if a private sector’s union forces them to go out of business. A better company will grow. However, the public sector can’t go out of business, so it’s costs can only grow. In the last 6 years entitlement spending in the country has increased about as fast as tax receipts, and this is in a period of dramatic growth. Now that most of this growth has proven illusionary, so should these benefits. My 401K went down by 30%, and so should the benefits of retired union workers. Just because union workers feel like they are very valuable, does not mean they are — this is proven by the fact that they must form a union to receive their excessive wages.

We need to ban public sector unions so that they stop strangling the tax payer. The government has little incentive to fight the unions because they use other people’s money to pay them. Union employees need to get paid less, and work harder. And those retired policemen need to get back to work like everyone else in this country.

There has been a lot of debate about global warming this past year as temperatures have failed to rise. Of course climate is a complex topic and there are many factors that contribute to how warm or coool a particular year will be. Everything from sunspots to ocean currents have an important impact on global temperatures. In the long term, however, scientists claim that we humans are placing strong positive pressure on temperature through emissions of green house gases. This may be, but as far as I remember there are actually two types of ‘manmade’ emissions that effect climate. They are:

1) Greenhouses gases – Contribute to higher temperatures and can last in the air for hundreds of years

2) Particulate emissions – Emissions that reflect sunlight and reduce temperature. Generally emitted by dirty fuel sources such as coal.

Given that there are these two key manmande emissions the important factors on there impact are.

The key insight I have gleamed from a lifetime of reading the news is that particles last in the atmosphere for only up to ~30 years, while greenhouse gases will remain much longer (depends on how fast they are scrubbed by forests, etc). If we were to assume that both gases were output at the same rate and had the same impact on temperatures, than for the first 30 years manmade gases would have no impact on temperatures, but thereafter greenhouses gases would have a great impact than reflective particles, and temperatures would rise.

But all things are not equal. Two key insights appear to be

1) In general, more advanced economies have cleaner emissions that output a higher ratio of greenhouse gases to particulate matter (though lower amounts of both, per unit energy).

2) Given a constant proportion of greenhouse gases to particulate emissions, the net impact of emissions will be to have a negative impact on temperatures in the short run, and a positive impact on the long run.

Insight 1 implies that the higher the proportion of emissions from the developing nations the relatively higher amount of reflective particles in the air to greenhouses gases. Insight 2 Implies that the faster the rate that emissions increase the cooler the earth gets. The slower the rate, the warmer the earth gets.

The key implication is that, given the rapid rise of China and its massive and dirty emissions, global warming from human emissions should slow dramatically. It also implies that the more rapidly we switch to clean energy sources, the higher temperatures will be in the short and medium term.

I love America. I like western culture. I don’t ever want to be oppressed by people from another country. A long time ago I would have thought these thoughts and then moved on to playing a game or read a book. But unfortunately, now I am worried enough to shut down the Xbox360 and blog. Why? The future of the US, perhaps western civilization is in doubt. Each day our countries relative strength wanes while China (our biggest long term threat) grows. Within 10 years its economy will be larger than ours. In 50, with a per capita gdp in line with ours, its will be three times our size. Most people hear this and proceed to think at least the US won’t be bullying other countries anymore. I hear this and cry. I realize, unlike others who are too constrained by ideology to see what is blatantly clear, that other countries won’t be like us. They won’t be the glbes policemen trying to keep everyone safe from theirselves. No, They will try to conquer the world.

Before you call me crazy, let me remind you of what EVERY other country with power has done:

Islam
Russia – Communism, attempted to conquer the world by force and ideology. Succeeded in creating and empire known as the ‘Soviet Union’
Germany – Perhaps the cruelest country ever. Tried to create an empire known as the Third Reich
Japan – Empire of the Rising Sun
Britain – “The Sun Never Sets…”
France – Napolean, etc.
Spain – Conquistadors
Hapsburg Empire – …
Ottoman Empire
Moors
Mongels
Rome
Egypt
Etc.

The point is that every nation that has ever gained an upper hand has sallied forth to conquer except for one, us, the US. If we wanted to, we probably could have created an empire. But we didn’t. And now our strength is our weakness. We have forgotten what it is like to NOT be the strongest and are not sufficiently worried about our future. Fortunately 3 simple policy changes can dramatically alter the long-term outlook of our Nation. Unlike Britain, we do not need to fall into obscurity. We have one of the largest landmasses in the world, and perhaps the largest habitable land. We have the 3rd largest population. We have the highest Per Capita of any large country. So what can we do?

1 – Change our immigration policies. Immigrants may increase our population, but if we continue to let in 3rd world people we will become a 3rd world country. We should limit immigration to only the best and brightest from around the world. Australia has this policy, and so should we. Moreover, we need to limit the quantity of people wishing to become Americans. If Europeans are not the majority of people, the country will no longer be a European country.

2 – Make Americans American again. The rise of the hyphenated American means that people are identifying less and less as Americans, and more by their country of origin. It is fine if people are from different ethnic groups as long as they adopt American culture. There should be no black culture, no white culture, no Asian culture — there should be an American culture. We do not need to eliminate peoples heritage, but everyone in America should have a western mindset and ultimately be loyal to our country. To do this will take a great cultural shift away from multiculturalism.

3 – Increase the Total Fertility Rate. One of the great strengths of our nation is not just that there are already 300MM people here, and that many of them are well educated, but that our country is so big. America has one of the lowest population densities of any developed country. We have plenty of room for more people – If our population density were as high as China’s (which is lower than much of Europe) we too would have 1.3B people. That may be to crowded, but in truth population brings power. A TFR of ~2.5 would ensure slow and steady growth with a reasonable youthful population.To accomplish an increase fertility rate we would simply need to give a PERCENTAGE tax break for each child a couple has. This would encourage both the rich and poor to produce children, and would reduce dysgenic effects of a straight up subsidy.

We can do it.

I recently canvassed several interns who are working on preventative health measures in D.C. and asked if there was any new ideas being tossed about. They said “No”. This got me thinking – with all the talk about preventing future illness, why are so few ideas tossed about in public? In order to get this ball rolling, I have two such ideas.

 1) Free Sunblock at public beaches, pools, etc. If sunblock is indeed effective at blocking cancer, offering sunblock free might be a good idea. It would displace a large amount of private purchase, but it might also encourage people who forget or are otherwise uninterested to put some on. It could be held in despensers by snack stands where people could not freely refill there bottle, but could freely put it on. If the quantity of money saved from prevented cancer is in the ballpark of the cost of the program (minus the cost savings of people who would otherwise use sunblock), it would be a success.

2) Free earplugs at concerts, clubs, etc. Many studies demonstrate that young adults today have worse hearing than an average fifty year old had only a few decades ago. The accepted reason for this is excessively loud music. In particular, concerts and clubs are both very loud, and very practical venues for free earplug distribution. The idea is that bad hearing can be costly for a number of reasons – increased accidents (not hearing a car coming, etc), hearing aids later in life, etc. While earplugs are currently ‘uncool’ to wear to most outings, providing them free would increase the quantity of people wearing them, which would decrease their ‘uncoolness’. Consequently, a large number of people might protect their hearing, and the message of auditory protection would be heard. Most importantly, earplugs are very cheap to make and could be distributed at a low cost – making this idea much more viable than free sunblock.

 I hope to start a dialog about potential preventative health measures. Surely a detailed cost benefit study of these ideeas is needed, but having ideas to study is an important step.

N.B. I am not suggesting an all encompassing nanny state, but rather that when the public bears the costs but not the benefits of an individuals risky behavior (failing to apply suntan lotion and subsequently contract cancer), there should be room for policy improvement.

The Bush administration stresses the importance of abstinence only education. Ignoring religious issues with premarital sex, does this policy have a chance of preventing the spread of sexually transmitted diseases? Any economist would say – NO!

Consider you have a child who wants to ride a bike. You can tell him he should not ride a bike because it is dangerous, or you can warn him to wear a helmet in the hope that this will one day save his life. Well, unless you are a parent who can physically stop him from riding a bike, and you can only do this for so long, your best bet is to suggest the helmet. Why? Because deciding whether or not to ride a bike is a fairly large decision. An economist might coin the word dutility (Decision Utility – Pronounced like Utility but with a D), and say that deciding whether or not to go for a ride takes about 20 of these ‘dutils’ (Like the economic construct utility). The idea is that larger decisions require more dutils making them less responsive to any particular source of input *. As much as you lecture about the dangers of bike riding, it would probably be fairly difficult to overcome this 20 dutil decision with a simple diatribe. Deciding whether or not to wear a helmet is a much less costly. It’s not time-consuming to don one, it’s not particularly annoying to wear one, and most importantly, it does not interfere with the larger decision of whether or not to go for a ride. Let’s guess this takes about half a dutil. For such a low cost, the added safety seems pretty worthwhile. Much like a stream, it is easier to gently alter its course than cause it to run uphill.

Now let’s consider sex. Deciding whether or not to have sex for the first time is a much larger decision than whether or not to ride a bike. Let’s say that for the average American this decision is worth 500 dutils. Perhaps this number is much higher. Whether or not a person decides to have sex before marriage requires consideration of many factors, including sex drive, love, lust, peer pressure, potentially sexually transmitted diseases, religion, etc. So many factors are in play that any one of them is unlikely to have a significant impact. Thus sex education, while perhaps having a 5 dutil influence, is unlikely to change the behavior of a person. On the other hand, deciding whether or not to use protection is a much smaller decision- akin to wearing a bike helmet. Asking someone to use protection is not asking them to do a u-turn, just to bear a very so slight right. Maybe this happens to be a 3 dutil decision for the average person. Whatever the unquantifiable dutility, evidence shows that sex education is far more effective than abstinence only education.

* This need not be true. A person who is on edge about a decision can be easily swayed. We can start to think about marginal dutility as being more important that total dutility.