A Tale of Two Cities

In this Jackson Hole, we have Alan Greenspan, proclaiming his belief that “The U.S. economy and the global economy are now better able to withstand shocks because of government deregulation and more flexibility in such areas as labor markets.”

Meanwhile, in Washington DC, we have Ohio Democrat Representive Sherrod Brown proclaiming on behalf of the party “In the last two and a half years, since George Bush became president, our nation has hemorrhaged 2.5 million manufacturing jobs…. Ten percent of our manufacturing jobs have disappeared. … Good jobs in steel and auto and textiles.” Days later, President Bush finally has acknowledged that just maybe, this loss of manufacturing jobs in our economy is a problem. Particularly for a man who would like to be re-elected.

Now then, in what ways have deregulation improved our lives? Deregulating airlines has resulted in the hub-and-spoke system, substantially lower airfares, and a parade of airline bankruptcies putting both skilled and unskilled workers out of jobs. Deregulating the power grid has resulted in energy traders gouging the American consumer for their “well earned” mark-up, an unreliable power transmission system, and Enron. Deregulating meat packing may have kept meat prices down, but it has definately made life tough for the small rancher, and compromised the safety of our foodstuffs. Deregulation of financial institutions has, um, meant we can do all our banking and brokerage business with one company. Deregulating telecommunications may have facilitated the rise of the internet, but it also may have also facilitated the rise of WorldCom. Deregulating telecommunications, cable, electricity, and a host of other things was supposed to bring prices down for consumers; instead of putting money in consumers’ pockets, it lined the pockets of a few potentially crooked executives.

And can we talk about this flexible American worker for a few minutes? The American workforce is currently the most productive in the world. The American worker makes this possible not just by the judicious use of technology (you aren’t reading this at work, are you?), but mainly by putting in longer hours than anyone else in the world. An average* American worker put in 1825 hours in 2002, generating over $60,000 of value to his employer. That breaks down to $32 per hour. The hourly is higher in several other countries, but as one economist on the project put it, “If you work 15 hours a day, of course there are hours when you are not as productive as if you only work six hours a day.” Efforts to “reform” overtime pay regulations will not improve matters. In addition to working more hours, American workers are dealing with more dangerous workplaces than in much of the developed world. We encounter abusive customers, co-workers with weapons, clueless supervisors, tactless coworkers, repealed OSHA regulations, and bosses who try to cover up workplace injuries wherever possible. Wages are going down, good jobs are harder to find, and job security is a fairy tale. It would appear that “flexible” means “able to suck up any and all hours and hardships just to stay employed.”

As “productive” and “flexible” as the American worker supposedly is, it is amazing that jobs are still vanishing overseas. And not just those quality, high wage, high benefit manufacturing jobs Representative Brown is referring to. High tech, decent paying jobs are being sucked away from the American economy. Tech support is being outsourced to former British colonies such as India, taking advantage of English speakers who will accept wages that are low by American standards. All the while, customers with now-tenuous employment are being told that this exportation of American jobs saves them money.

Happy Labor Day. Particularly if you are one of the lucky people with employment, and one of the even luckier people getting the day off with pay.

*Unfortunately, the people covering this study fail to mention whether by “average” they intend the mean, median, or mode. We therefore must assume they are using whichever figure makes the data look better.

But what is step 2?

Do you suppose it would be possible for people to think more than five minutes into the future?

Up in Sultan, Washington (a little bit North of Seattle), a radical animal rights group called ALF set free over 10,000 farm raised minks. This is not the first time they have done such things. ALF, the Animal Liberation Front, is a sister group to ELF, the Earth Liberation Front, the very same group that decided to liberate those SUVs last week. They are widely considered to be “eco-terrorists,” and are included on the FBI’s list of domestic terrorist organizations.

In a move reminiscent of the WKRP General Manager saying “With God as my witness, I thought turkeys could fly,” ALF seems to have believed that if they set free all these semi-carnivorous semi-wild animals, they would romp, frolic, multiply, and live happily ever after in the splendor of the Great Northwest. Things aren’t working out that way. About half never made it out of the farm, milling about the cages in confusion. Some 200 were hit by cars, killed by dogs, or died of dehydration. The overwhelming majority were back in their cages within 24 hours. The thousand or so that got away, however, are causing a little problem.

Now then, what do you suppose would happen if you set loose a thousand little predators in the woods? Why, they’d get hungry. And what if they were raised in a non-hunting environment? They’d have to find something easy to kill. Like maybe some nice, domesticated poultry. Yes, in addition to being prime country for fur farming, Snohomish County is no slouch when it comes to the raising of chickens, ducks, and geese.

The ensuing carnage is apparently impressive. Some birds “looked like they were attacked by vampires.” A group of African Geese were apparently formidable enough to chase off a force of minks estimated at between 30 and 100 individuals. The minks also attacked a dog, and ate 50 pounds of bird seed. In one case, the minks slaughtered half the birds on a farm.

In spite of this, some animal rights activists consider the entire incident a success! They say whatever happens to these creatures, it’s better than being raised, fed regularly, and killed for their pelts. They say this proves that farm raised minks can survive in the wild. Yeah sure, I guess if they have pre-captured food it works out fine.

Fuzzy Reality

In Iraq, we have over 280 dead American soldiers. At the current rate, we could be talking about the grizzly spectacle of a “300 Casualties Special” on whichever news show has the guts to be so tacky by the end of September. This figure does not include British casualties, the people killed in the UN blast, journalists, humanitarian aid workers, or Iraqi civilians. Things have gotten to the point that the United States has admitted that just maybe the time has come for the United Nations to get involved. We might even let France get involved.

We have $1.7 Billion (with a B) and counting in assorted Iraq related contracts to Halliburton. You remember Halliburton, right? That little oil services company Vice President Dick Cheney used to be the CEO of? Bechtel, a little engineering company Caspar Weinberger and George Shultz have been associated with, stands to earn another cool Billion in Iraq.

Speaking of money and Iraq, depending which source you like, it might cost $1 Billion a day to continue occupation of — oops, I mean rebuilding — Iraq. Or it might take $1 Billion a week, a figure that at least is close to Pentagon estimates of $4 Billion a month. Alternatively, the whole job might take another $11-15 Billion. People actually in Iraq seem to think this estimate is downright modest, suggesting it will take “tens of billions” to properly do the job. It seems like it might be more efficient to pick numbers out of a hat. The idea of making Iraq pay these expenses with oil proceeds is sounding more ludicrous by the day.

Both the Bush Administration and the Blair Administration in Britain are having to answer tough questions about how they got us into this mess. Both men may yet be punished in the voting booth.

On the National front, we have a potpourri of interesting economic news. The United States buget deficit has reached such proportions that even the IMF is concerned, saying that the people in charge are too optimistic and don’t have a plan. Granted, the IMF is a big fan of “fiscal austerity,” high taxes, and devalued currencies, but the actual criticisms are valid and undenyable. Some armchair economists insist that we have to make a choice between deficit spending and job creation, yet somehow we managed to create lots of jobs and eliminate the budget deficit in the 90s. As if that isn’t bad enough, it turns out that most of the current actual growth in the American economy can be attributed to defense spending — and it isn’t resulting in job creation. Hmm, at least defense spending in the Cold War put people to work. Are we now selling $600 toilet seats to Iraq? Oh, but wait, one theory posits that the reason new jobs aren’t happening has nothing to do with manufacturing jobs moving to foreign nations (try saying that with a straight face while looking at this), but is rather because us darned Americans are so efficient.

If it weren’t for the lives and money at stake, it would be enough to make you give up trying to understand it.

Makin’ Copies

Today, I happened to see an interview with the CEO of Macrovision. Macrovision is a company that makes the anti-piracy technology you find in DVDs, DVD players, Cable Boxes, Videotapes, and the like. They are the reason you can no longer tape something on Pay Per View to watch later. The CEO cited estimates that the home video industry loses almost $1 Billion each year. He also said that 25% of people responding to their poll said they had tried to copy pre-recorded videos in the last year.

It’s a little harder to copy videotapes and DVDs than it is to copy CDs. A CD can be copied with the tape recorder already in your stereo in as much time as it takes to play the disk, or converted to MP3 tracks on your computer with software you probably already have in even less time. Furthermore, if you own the CD, it is perfectly legal for you to do so. It falls under “fair use.” This has not stopped the music industry from attempting to make such copying impossible. Such attempts have note been well received, and in some cases not very sucessful. The courts have upheld the idea that it is perfectly justified to make a backup of a CD, or a tape for in your car, etc.. Lending this backup temporarily to a friend is a grey area that is unlikely to get you into trouble. Making such tapes for everyone in the neighborhood, or allowing the MP3s you made freely available for download is not, and the RIAA is trying desperately to clamp down on the latter. The movie industry would prefer that the issue of online movie sharing not start. They have the undenyable advantage that, frankly, video data is big. It takes a long time and a big pipe to send a movie over the internet.

All of my discussion thus far has concerned a population called the “casual pirate.” They make copies of things they do not legitimately own for themselves (and maybe some close friends) for personal enjoyment. Maybe because they can’t afford the real thing, or don’t think it’s worth the money; maybe because they can’t find the real thing available legitimately; maybe to complete a collection; in some rare cases, maybe for the challenge of breaking copy protection. All but the last group are effectively thwarted by the most simple of copy protection: make it moderately difficult or complicated, and they move on. Macrovision’s data seems to suggest that half these casual pirates would otherwise rent the videos in question, and almost a third would buy some of them.

Far more dangerous to the software, music, and movie industries is the professional pirate. He makes hundreds or thousands of illegal counterfeit copies and sells them perhaps below retail for a very large profit. This is a very big industry, and it should not shock you that organized crime might be involved. These pirates are not detered by a little bit of copy-protection.

Since circumstances force the movie, music, and software industries to rely on law enforcement personel for the lion’s share of stopping professional pirates, they have no choice but to content themselves with the only small by comparison problem of the casual pirate. This is where Digital Rights Management (DRM) comes into play. The schemes vary wildly in their design and implementation. The bottom line is that the copyright holder wants users to pay for product.

On the surface this is disarmingly fair. Unfortunately, the public has come to expect quality for its entertainment dollar. We are tired of paying $17.98 for an album that turns out to have 2 or 3 good songs and 10 lousy ones. We are tired of spending a lot of money at the movie theatre, when with a little patience we can buy the DVD, watch it on our own sofa, drink our choice of beverage, eat our choice of snack, stop the show to use the bathroom, and we don’t even need to hire a babysitter. We are tired of overhyped films with tired plots, even when the cinematography and special effects are lovely. Fortunately, the movie studios in particular have discovered that there are limits to what audiences will tolerate. They have furthermore discovered that timely, well priced DVDs have kept casual piracy to a minimum.

Want to stop piracy? Really? Give the consumer something quality at a reasonable price.

Attack of the Zero Thinking Policy

Some years ago, I was at a playground when I found an empty glass liquor bottle. Rather than allow it to get broken and maybe hurt some little kid, I picked it up and put it in the trash can. If I had done that as a student at a public school playground I would have faced suspension for “posessing” the liquor bottle.

Today is the height of “back to school” season. Millions of kids begin classes today, joining those who began last week, and getting a head start on those who do not begin until after Labor Day. Today, police officers in a variety of municipalities will take advantage of the newly reinstated school zones to boost the city coffers under the pretext of student safety, never mind the dwindling population of true “walker” students. This afternoon, millions of kids will bring home student/parent handbooks, replete with buzzwordcompliant mission statements, dress codes, school lunch policies, school library hours, computer lab use policies, important phone numbers the Principal hopes you will never dial, and of course rules.

Some of these rules will be common sense: don’t hurt fellow students; don’t run in the hallways; don’t take stuff that isn’t yours; don’t damage school property; don’t cheat; if you are in the halls during classes, you’d better have a hall pass or be prepared to explain yourself. Some of them — and these will vary wildly by school — will make sense if you think about them for a few minutes: keep covers on your textbooks so they stay in good condition; no parents dropping in at lunchtime because it’s a big distraction; no apparel advertising or glorifying the use of drugs, alcohol, or cigarettes because it’s not legal for students to be using such substances. Some of them at any given time may be kneejerk reactions to something that has happened in the past: all book bags must be clear; no thong underwear; a list of items considered “gang” apparel and therefore prohibited.

Some or all of these rules may be enforced under a “Zero Tolerance Policy.” This means that if the rule is broken, school officials have no choice but to levy the district presribed punishment. It is most common to apply such a policy to contraband and violence — sometimes including the threat or planning of real or fictional violence. Such policies are popular with schools because they give the illusion of safety and security. It allows schools to hide behind policy by giving staff a set of immutable guidlines that can be applied uniformly by absolutely anybody. It gives parents and the community the false impression that problems will be dealt with in a swift and uniform manner, that certain behaviors do not occur simply because they will not be tolerated. In reality such policies often mask problems, teach distrust of authority, are used as an excuse to get certain students out of the system, result in the cover-up of activities by certain other students, and actively demand that teachers and administrators not think or use common sense.

By all accounts, our school system is in crisis, producing students who do not know things, cannot apply what knowledge they have, cannot solve problems. The very idea that we are now demanding that their teachers suspend rational thought to enforce rules is mind-boggling. If we have adults in our public school system that cannot be trusted to apply rules in a fair manner, the solution is to get rid of them. Tenure or not.

The list of “contraband” makes this kind of policy more strange. Sure, we can all agree that kids shouldn’t bring weapons to school. But these days “weapon” can include a disposable plastic knife, a water pistol, and the chain on a girls purse. And high school students should be on notice not to help anyone move, not even a family member, because should an honest to goodness kitchen knife remain in the vehicle, expulsion in all likelihood will ensue. We can surely all agree that we don’t want little kids hauling around a bunch of medications — surely they should be administered by the school nurse. (Ha ha, the joke is on us. The “nursing shortage” combined with tight school budgets mean the school nurse is going the way of the dodo. If you are lucky, the school secretary knows first aid.) Unfortunately this underestimates the intelligence of young people with chronic conditions. An asthmatic who is having an attack needs his inhaler now, not after a breathless wheezing run to the office. Someone having an acute allergic reaction, or insulin shock, or an epileptic attack should not have to wait on lifesaving medication over a senseless rule. For that matter, common sense treatment of certain over-the-counter medications might be good for school numbers in the high school setting. Don’t you suppose most high school students should be intelligent and mature enough to follow the line of reasoning: “Gee, I have a headache. If I take an ibuprofen pill, I will feel better and be better able to pay attention in class. That might help me learn something.”

The biggest damage such policies do is in the matter of trust. Contrary to the rhetoric of such policies being used in a fair, uniform, unbiased fashion, the same games of favoritism and discrimination are now given respectable clothing. Do you honestly think the high school star football or basketball player has the rules applied in the same fashion as the school outcast? Honestly? I suggest you ask Patrick Dennehy’s teammates if that is true. Furthermore, the student who thinks he is doing a good thing by pointing out some serious issue often finds that he unleashes a frenzy of suspensions and expulsions. Gee, maybe grown-ups aren’t to be trusted after all.

Judges are starting to speak out against the zero-thinking policies they encounter in the law: mandatory sentencing; three strikes laws; federal cramdowns on state laws. Such rules don’t work in the real world, and truth be told they don’t work in the classroom either. It’s time for educators and parents to unite against this prohibition of thinking in our schools.

I am the Mommy. I am the V-chip

Excuse me, what exactly are some of these people thinking? I have just read that CSI is the least family friendly show on prime time television. What on earth makes any rational adult think that a show whose title is “Crime Scene Investigation” would be fun for the whole family? Do these same parents lament that they just can’t get close enough to actual crime scenes with their children?

The “10 worst” list was essentially 10 shows I would not dream of letting a small child watch. It includes “Fear Factor” and “NYPD Blue.” If I am not mistaken, most of these shows are on at the last available prime-time slot, 10 PM Eastern and Pacific. That means that just maybe the younger kids should be asleep already, or at least getting ready for bed. Their parents probably wonder why they have trouble paying attention in school too.

Equally surprising to me is that some obvious candidates are not on this list. What about “Law and Order: Special Victims Unit”? That is a show so hard edged that I no longer watch it, even though I really like most of the characters. Let me know if they ever start “Law and Order: Munch and Tutuola Ride Around in a Squad Car All Day Talking About Stuff.” For that matter, what little I have seen of the new “Dragnet” series marks it as “not family viewing.”

These people are the reason Cartoon Network has to preface a show with a disclaimer to the effect that it is intended for mature audiences, despite the fact that it is in a block of shows titled “Adult Swim” and in shown at midnight. What? Am I saying that just because it is animated doesn’t mean it’s child friendly? Darn right, that’s what I’m saying.

What point is there in having a TV rating system if we cannot agree that anything that has been rated “TV14” or “TV MA” is simply not appropriate family viewing? Isn’t that what these designations are for? For goodness sake, the people who made the show are begging Mom and Dad to not park little kids in front of these shows.

Here’s a radical idea: how about the parents of the world exercise a little bit of common sense.

The Problem with Wendy

Biographical Data:

Wendy Lee Gramm was born in Hawaii in 1945 and is of mixed ancestry, including Hawaiian and Korean heritage. She is considered by some to be an “Asian American Wonder Woman.”

Her BA is from Wellesley College (1966). Her PhD. in Economics was awarded by Northwestern University (1971). She met her husband, former Senator Phil Gramm, while being interviewed for a position at Texas A & M University, where he behaved in a questionable fashion.* She became his second wife a year later, in 1970. They have 2 sons, Marshall and Jeff.

Activities:

She taught at Texas A &;M for 8 years, and is currently on the Board of Regents, in addition to serving on several committees. Her stellar academic credentials include being a Distinguished Senior Fellow and Director of the Regulatory Studies Program of the Mercatus Center at George Mason University in  Virginia.

During the Reagan Administration, she headed the FTC’s Division of Consumer Protection Economics Bureau, and was an advisor in the Office of Management and Budget (1985-1988). As a reward for fervent deregulation, Reagan made her the chairperson of the Commodities Futures Trading Commission (1988-1993). She joined the Texas Public Policy Foundation in 2000.

She has been on the Board of Directors of several companies, including Enron, Iowa Beef Processors (IBP), Invesco Funds, Longitude, the Chicago Mercantile Exchange, State Farm Insurance Companies and Independent Women’s Forum.

Her position at Enron came under scrutiny from the very beginning. Not only did she join the board 5 weeks after leaving the Commodities Futures Trading Commission, but this was soon after she had pushed through a “regulatory exemption” to Enron’s benefit. Furthermore, she made a great deal of money from her relationship with Enron, despite also claiming over a half million dollars in paper losses from accounts tied to the value of Enron Stock — the Gramms have avoided common stock since 1988, to avoid perceived conflicts of interest. Deepening the controversy is over $100,000 in contributions Enron made to Senator Gramm’s re-election campaigns. As the story of Enron continued to unfold, the Senator chose to retire, and not run for a 4th term. Since the Senator was a high profile proponent of reduced government oversight of energy trading and was against conflict of interest rules regarding accountants providing consulting services, it is reasonable to assume he at least considered the potential media frenzy over the roles he and his wife played at Enron. As an Enron director, she is named in lawsuits against the now bankrupt  company. Despite the high profile of the Enron disaster, Wendy Gramm is also on the board of the equally controversial IBP, a huge meat processing concern. It is the world’s largest butcher, the nations largest slaughterer of both beef (26%) and pork (12%). It also has a history of union busting, attempting to control wholesale cattle prices, using illegal labor, flouting workplace and food safety guidelines, and making deals with the mafia. IBP — now known as Tyson Fresh Meats since acquisition by Tyson Foods — is not surprisingly against more regulation and inspection. Their most recent 10K filed with the SEC lists 5 pages of legal proceedings, yet only 3 pages of “Selected Financial Data.” These myriad legal concerns are broken broadly into “Wage and Hour/Labor Matters,” “Environmental Matters,” “Securities Matters” (only 3 paragraphs), “IBP Stockholder and Merger Agreement Related Litigation,” and “General Matters.”

Miscellaneous:

In January 2002, she was named the Clean Air Trust’s “Clean Air Villain of the Month” in recognition of her activities at the Mercatus Center. Specifically, “Gramm’s Mercatus Center was responsible for no fewer than five of the eight EPA rules singled out by OMB for “high priority” treatment — including standards for arsenic in drinking water. Altogether, OMB noted, Mercatus had called for a re-assessment of no fewer than 44 federal regulations — including national public health standards for smog and soot, as well as standards for tailpipe pollution from cars and sport utility vehicles, low-sulfur gasoline, big diesel trucks and diesel fuel….”

She has also received the Financial Executive of the Year award from the Financial Management Association.

If you should happen to meet Wendy Gramm and have a few minutes of her time, ask a couple of questions for me: “Did deregulation of energy trading make the Great Northeast Blackout better or worse?” and “Why is it that you can eat raw beef in a third world nation like Ethiopia, but you have to cook it tasteless for it to be safe in America, one of the most advanced nations on Earth?”

*Saying “As a single member of the faculty, I’d be very interested in having you come to Texas A&M” to a job applicant these days is much more likely to get you sued than married. Maybe things were different in 1970.

Oh, so this is how a jobless recovery works!

I had a revelation this morning, as I read about the United States being the only industrialized nation with no legally protected vacation time. Here is where reality smacked me in the face:

“And just last month, before members of the House of Representatives took off on their month-plus vacations, they decided to pile more overtime on working Americans by approving* the White House’s scrapping of 60 years of labor law with a wholesale rewrite of wage and hour regulations, turning anyone who holds a ‘position of responsibility’ into a salaried employee who can be required to work unlimited overtime for no extra pay.”

“Vacations are being downsized by the same forces that brought us soaring work weeks: labor cutbacks, a sense of false urgency created by tech tools, fear and guilt. Managers use the climate of job insecurity to stall, cancel and abbreviate paid leave, while piling on guilt.”

So here you are, the factors that allow some economists to say everything is alright, when anybody who does not live in a box knows there is something very wrong. Combine pointy haired bosses focused on arbitrary short term deadlines, add supervisors focused on making budget figures look good to please executives who are focused on making earnings targets, and liberally sprinkle with congressional rhetoric claiming to help the Working Man while actually helping his employer.

Your boss starts the chain of failure by making you work longer hours, and trying wherever possible to avoid paying you extra for these hours. Congress plans to assist him in that goal by increasing the number of people who can be considered salaried, and allowing “Comp Time.” Don’t be fooled by the lofty talk of how this will help you make doctor’s appointments and teacher conferences. The ability to actually take this time is governed by the same Lumberghian boss who told you at 4:30 on Friday afternoon that he needed you to come in Saturday and maybe Sunday too. Frankly, comp time is a system I saw abused before it was even legal. At least that employer gave the deserved time off within a few weeks; the law in question allows as much as a 13 month delay. In the end, your boss is allowed to work you harder, pay you the same, and promise that at some date in the hazy future you can have some time off. Assuming you remember to claim it, assuming your boss lets you have it, and assuming you still work there. Why exactly should your company hire another worker — who requires training and benefits — when the company can force existing employees work longer hours?

Of course this same boss can’t really afford to let you have a week off — let alone the 4 weeks the President gets, or even the 3 weeks the Chinese get — for a vacation. There’s work to be done, and temporary employees are expensive. He’s already perpetually understaffed because he’d rather make you work more hours than hire anybody. Indeed, he seems unable to quantify the fact that you will be more productive if you are rested, not overworked. Furthermore, as much of a taskmaster as he is, he’s afraid you may use that time off to seek a better job.

In the end, it all comes down to this: a “jobless recovery” depends on labor practices that border on abusive, and a labor force too afraid of potential consequences to call foul.

*I have been unable to find independent confirmation that this bill has passed the House. If it has, it will still require passing the Senate, compromise on any differing passages, and of course signature by the President. Think this is a raw deal? Start writing your Senator.

Hey! Who turned the lights out?

By now you surely know there’s a big power outage back east. In fact, it’s the biggest power outage ever, effecting 2 countries, half a dozen states, a bunch of big cities, and millions of people. New York’s airports still appear to be closed at this writing, which will cause travel logistics problems through the weekend and according to one analyst cost each airline $10-15 million. Despite the fact that the lion’s share of the  financial markets are located in New York City, most opened for business today, some on generator power. Detroit is expected to be without power through the weekend, a fact which surprises no-one familiar with the their local infrastructure.

In the late afternoon and evening hours as the situation unfolded and people tried desperately to get from their dark offices to their dark homes, many theories developed about the cause of the massive outage: it was a fire in a Manhattan substation (which turned out to be steam and smoke from the rapid shut-down process); it was a problem at Niagra-Mohawk (they denied it); it was a lightning strike according to the Canadian Prime Minister; one commentator joked it could be UFOs; the latest theory is a problem in Ohio. Nobody knows for certain what happened, but the People In Charge assure us it is not terrorism. How can they claim that without knowing the cause? No crank calls from Osama Bin Laden?

President Bush, despite not bothering to make a public statement until 4 hours after the crisis began, is using this opportunity to call for an energy bill. Do not be shocked if it involves oil drilling in the ANWR. Don’t say nobody warned you that such a bill would make it much easier to ram through eminent domain and the construction of power plants despite the fact that all the experts said last night capacity was not the problem. Do not be surprised if it involves tax breaks for big oil services companies like Halliburton and big energy trading companies like Dynegy.

Oh right, the energy traders. The people who single handedly brought you the California Energy Crisis. In an echo of Enron I point out this paragraph, emphasis mine:

“The early confusion about the cause of the grid collapse reflects the bedeviling complexity woven into the North American electricity network. Strain on the system has increased with the boom in cross-border power energy trading, and the emergence of competitive energy markets where power is being traded across long distances.”

Yes, that’s right.This whole thing may be caused by our old friends, the energy traders. Energy trading is bad, alright? It drives costs up, it drives reliability down. The only thing that can be said in its favor is that it means people can afford to have a “Not In My Back Yard” attitude towards power generation.

If we really want to prevent this from happening in the future, we must make sure the grid has redundant, reliable, and modernized systems in place, just like when you played Sim City back in the day. We must encourage solar and wind energy, since these systems can be used in town without disturbing (or polluting) the neighbors. We must furthermore encourage the use of low power devices, such as compact fluorescent lights, LCD computer monitors and televisions, low power computer processors, and other energy efficient devices.

Drilling oil wells in the Arctic and subsidizing Dick Cheney’s cronies is not going to solve this problem.

Insurance Makes Things Cost More

When I was a kid, my parents had a friend who ran a car leasing/rental business for the local Ford dealership. This was back in the days when insurance companies were first demanding “used parts” for auto body damage repair. One fine day, a new yellow Thunderbird owned by the agency was in a wreck. A few days later, a new green Thunderbird also owned by the agency was stolen. The used parts which showed up at the body shop to repair the yellow Thunderbird were, of course, green. Nobody will ever be able to prove the second car was stolen and parted out to repair the first car, but neither can anyone prove otherwise. You will certainly never convince this man that it was sheer coincidence. He shrugged and laughed that to save a few dollars, the insurance company had bought him an entire new car.

Insurance companies makes things cost more, and not just with foolish financial decisions. Their very existence costs money. They have offices to rent, light, heat, and furnish. They have employees who deserve to be paid. They have regulations to follow and paperwork to file with the state. They have executives who must be paid enough that they don’t begin to think they should get jobs in banking or securities. They have actuarial tables to compile and interpret. Some of them are for profit, siphoning yet more money out of the system. Although some of the insurance company’s revenues are derived from investments, ultimately all this is paid for by the policy holder.

Insurance also drives up costs for virtually every business. Businesses need insurance too: property insurance; liability insurance; benefits such as health insurance for employees; workman’s compensation insurance; unemployment insurance; insurance for business vehicles. Depending on the industry, there may be over a dozen insurance bills to pay. All these expenses must be accounted for when determining how much to charge for products and services in order to make a profit.

Health insurance in particular drives costs up. It actively short circuits any semblance of the market economy in health care. Not only does the patient not pay the doctor, the patient usually doesn’t even pay the people who do. Most of the time, the patient’s employer pays the insurance company that pays the doctor. On the other side of the transaction, health insurance drives up the cost of doing business for doctors. Now, he needs to pay an employee or service that does nothing but submit insurance claims and process insurance checks. Furthermore, his staff has to spend time figuring out what portion of the final bill should be charged to the patient and what should be sent off to the biller. All of this is before time the doctor himself has to spend figuring out what the insurance company is willing to pay for, and any time he may spend on the phone with the insurance company trying to sort things out. FInally, there is little disincentive for the patient to use unnecessary services. There is a fine art to setting co-payments and deductibles low enough that people will seek help for genuine illness and high enough to discourage frivolous doctor visits, services, tests, and treatments that the patient insists upon despite lack of need.

Insurance has become a necessary fact of life in our modern society. Being without insurance can cost more than having insurance. People who do not carry insurance that they need cost everyone else money by not being part of the risk pool. Uninsured motorists cost money when they are in traffic accidents; if they can’t afford insurance they certainly can’t afford to pay for a wreck. People who do not carry homeowners or renters insurance lose everything should disaster strike. Companies without adequate liability insurance go out of business if they are sued, putting employees out of work and jeopardizing intellectual property. People without health insurance tend to wait until small illnesses become serious before seeking care, both losing productivity and turning a hefty bill into a gargantuan one — and more often than we care to think about, costing taxpayer dollars.

Going without insurance is obviously not a solution. However, something has to be done to bring insurance rates down. Insurance reform needs to be a priority in all 50 states. This is not something that can be fixed by slapping some artificial damage caps on jury awards. Indeed, most of the ways that insurance drives costs
up have nothing to do with the courts, let alone tort reform. The first step in insurance reform is not telling big business exactly how much money they can lose in a courtroom, but rather making sure that more insurance dollars are used to cover legitimate claims. Limit the profit motive: Re-mutualize.