The Speaker of the House?

 

Wishin’ and hopin’

'Cause wishin' and hopin' and thinkin' and prayin'
Plannin' and dreamin' his kisses will start
That won't get you into his heart.

We should expect more than wishin' and hopin' from the Speaker of the House.

In order to become Speaker, he made a deal with some Republican holdouts that he would roll back defense spending to 2022 levels. The agreement drew the ire of some conservatives, who said any cut to defense spending would be irresponsible.

“You’re gonna tell me inside defense there’s no waste?” McCarthy asked on Sunday. “We shouldn’t just print more money. We should balance our budget.”

https://news.yahoo.com/mccarthy-social-security-medicare-cuts-155850854.html

The ignorance of this amazes me. I wish I could say it surprises me, but so it goes.

Last I looked it was 2023. Cutting defense spending to 2022 levels, if there has been inflation. (News flash! There has been! Didn’t rINOs, republicans In Name Only,  make an issue about that?)  2022 US Dollars, USD, are worth less than 2023 USD. This means that keeping defense spending to 2022 USD levels is effectively a roll back. There might be waste, but any unwasteful spending that was funded in 2022 USD, would still need more funding in 2023 USD.

And the US Dollar is a fiat currency and has been since the 1930s. The US Treasury prints enough money such that all economic transactions can take place, IOW the US money in circulation should be equal to the US economy. If the US economy grows, then somebody better print more money.

You can wish and hope all you want, Kevin, but that doesn’t change things. Inflation is real, and printing money is how the economy works.

Wealth

 

If I Were a Rich Man

The most important men in town would come to fawn on me!
They would ask me to advise them like a Solomon the Wise
"If you please, Reb Tevye..."
"Pardon me, Reb Tevye..."
Posing problems that would cross a rabbi's eyes!
And it won't make one bit of difference if I answer right or wrong
When you're rich, they think you really know!

As the song says, just because you are rich, does NOT mean you really know.

If wealth followed a normal distribution, the wealthiest people would be about twice as rich as the median wealth. This assumes that the mean, average, is equal to the median, the value where 50^th percent are greater and 50^th percent are less. A distribution can still follow at least one of the rules of a normal distribution if the mean is no more than 150% of the median. If the mean exceeds the median by more than that amount, the distribution can not be considered to be normal. But any distribution of an abnormal group can be approximated by the presence of more than one normal subgroup within the larger abnormal group.

For example, in my field of transportation demand forecasting, a trip is characterized by its purpose, for example the commute between home and work, a Home Based Work trip, HBW. If commute trips to work are grouped with commute trips from work, and this combination is sorted by starting trip times, then the median starting time is different than the mean starting time of those trips. However, if the difference between the commute to Work and the commute from Work is maintained, the mean and the median within each subgroup are almost equal as shown below.

It is visually obvious that there are two separate groups by starting time. I.e. the mode of starting time to work is generally about 7:30 AM. The mode of the starting time from work is generally about 5 PM. (if the commute time is on average is about 30 minutes, this also means that the average person is at work from 8 to 5! I guess Dolly Parton was wrong!)  The fact that there are two groups is not surprising. However this same behavior is apparent even when the separation between the two groups is not as obvious, If this same grouping was done for shopping trips from the home,  the duration of shopping does not result in the same separation. The fact that there are two normal subgroups is obscured by the fact that these subgroups were combined. In fact if the same separation is made, shopping trips, when combined are not normal in that the mean is greater than the median, but when they are seperated into the legs, trips, from the home to shopping and the legs, trips, from shopping to the home the normality is evident. There are two normal groups, as shown in the chart on the right, which is masked as in the chart on the left where the starting times of each leg are combined.

It is suggested that any group which is abnormal actually consists of many subgroups, where any one subgroup, such as the rich, may be normal only within its own subgroup. However you should not expect that its wisdom is normal for the larger group, such as the group that also includes the poor.  That rich subgroup might say silly things like, “let them eat cake” or ”the problem with the poor is that they live off their principal, and not their interest.” The rich really are different. But that only means that they are richer, not that they should speak for all of us.

Interest

 

God Bless The Child

Them that's got shall have
Them that's shall not lose
So the Bible said, and it still is news
Mama may have, Papa may have
But God bless the child that's got his own, that's got his own

If the Bible is news, what does it say about interest?

“You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest.” Deuteronomy 23:19

So the Bible says, but this does NOT say that the future is worth the same as the present. It only says that charging in excess of that difference is wrong. Passages like this are often used to justify forbidding the charging of any interest. This includes even the discount rate, which is the difference between the present and the future, also known to economists as the opportunity cost.

 Charging more than the difference between the present and the future, the discount rate, seems also to be forbidden, by the Old Testament of the Bible, to your brothers. Similar language also appears in the Koran. If you then define your brothers as those only in your faith, then those who are not in your faith seem to be able to charge or receive interest.

So what should the discount rate be? If that rate is defined in terms of our life, the interest rate should be higher as we get closer to the end of our life. If we are immortal, then the interest rate should be as close to zero as possible. But this ignores the fact that the future is obviously different than the present, by the discount rate. Let us assume that the discount rate is the related to life expectancy. The period before you can contribute to a group is proposed to be divided by the total period where you could contribute to the group. If your life is 80 years (Psalms 90:10), and the period before you contribute to the group is 13 years (at around 13 years you become a man, are bar mitzvahed), then the Old Testament's discount rate is 13/80, 16.25%. Jesus’s public ministry was 3 years, while His life was 33 years, so His discount rate seems to be 3/33, 9%. If the interest rate is less than the discount rate, then it makes sense to invest in the future. If the interest rate is greater than the discount rate, then it does NOT make sense to invest in the future.

Regulation

 

Math Sucks

If necessity is the mother of invention,
Then I'd like to kill the guy who invented this
The numbers come together in some kind of a third dimension
A regular algebraic bliss.

Math does not suck!!! Economists would benefit by three-dimensional thinking.

Economists classify goods by the two dimensions of rival and exclusive.

Source: https://www.econlib.org/the-correlation-between-excludability-and-rivalry/

By excludable, it is meant that the good has a price or some other means that is used to exclude the good from non-payers. Rival means that if the good is being used then someone else can not use that same good. In this way there are more than just Private Goods (Excludable and Rival) versus Public Goods (Non‑excludable and Non-rival). It also includes Common-Pool Resource Goods (Non-excludable and Rival) and Club Goods (Excludable and Non-rival). Club Goods are also often called Private Monopolies because it also includes Cable TV, electricity, land-line telephones, etc. (i.e. my using Cable TV, or electricity, does not mean that my neighbor cannot also watch the same station on Cable TV, or use electricity.)  Private in this case does NOT mean the government is excluded from the operation. Some private monopolies (e.g. water, sewer) are often operated by public/government agencies).

To these two characteristics, dimensions, I would also like to propose adding a third: Regulation. It may also highlight why there are so many disagreements over Common-Pool Resources and Club Goods/Private Monopolies. In each economic transaction the buyer/consumer may have a different perspective/frame of reference than the seller/producer.

Both buyers and sellers agree that Private Goods should be Regulated. Sellers want to be assured that their goods can not be stolen, and that the medium of exchange used in the transaction can be trusted (e.g. no counterfeiting). Buyers want to be assured that the goods are represented correctly (truth in advertising laws, labeling, FDA, etc.) and are produced in a manner that they find acceptable (labor laws, OSHA, etc.). By contrast, both the buyer and the seller agree that Public Goods are un-Regulated.

The problem is that buyers and sellers do not have the same perspective, frame of reference, for Common-Pool Resources and Club Goods/Private Monopolies.

Sellers should want to be assured that there are sufficient Common Pool Resources for the production of their goods and should want those Common Pool Resources to be regulated. The buyer wants these goods available at the lowest price and may not care that the Common Pool Resources are regulated leading to what economists call the “Tragedy of the Commons.”

The seller wants to be assured that a price can be charged for Club Goods/Private Monopolies which requires regulation, while the buyers may not care that the goods are regulated (e.g. Napster/”free“ music, pirated movies, etc.)

Regulation is not necessary if all of the parties in the transaction can be trusted. By regulating you are saying that at least one of the parties can not be trusted, which is why you are regulating. So in addition to raising the cost by requiring regulation, the very act of regulation may offend some people. But if you trust everyone, but always cut the cards card (trust but verify) then you are regulating. So thus even Ronald Reagan was in favor of regulations, he was just disagreeing about what regulations he wanted.

Holocaust Remembrance

 

I, I Who Have Nothing

I, I who have nothing
I, I who have no one
Adore you and want you so
I'm just a no one with nothing to give you but, oh
I love you

To all of the outcasts, you are NOT no one.

On tomorrow's Holocaust Remembrance Day, let us remember all of the outcasts. The Jews were outcast by Christian and Islamic societies. At some point, the fundamentalists in each faith decided that the collection of interest was forbidden and those who collected it were outcasts. However both societies had to come face the fact that they needed interest. (maybe not as high as the 50% implied by the adage that “a bird in the hand is worth two in the bush”, but still). The Jews did not view interest as wrong. Consequently Jews became the world’s bankers who made loans and charged interest. Why do you think Shylock in Shakespeare’s Merchant of Venice was a Jew? Why do you think Jews came to be over-represented in the banking industry, most famously by the Rothschilds? Because if you outcast those who collect interest, then why is a surprise that outcasts then dominate the sector that deals with interest. You reap what you sow.

The entertainment industry was once considered to be demeaning, so unsurprisingly many of the earliest pioneers in Hollywood and comic books were Jews. (For example, while they may have anglicized their names, Jack Warner was born Jacob Warner and Stan Lee was born Stanley Liberman.) If you outcast a people and outcast a sector, but you value that sector, then why is it surprising that outcast people come to dominate the sector that you value. No one should ever be an outcast. Love is the most important thing that can be given. I may not be a Jew, but on behalf of all of your fellow outcasts, you are appreciated and remembered.

Society

 

When I was Young

When I was young, it was more important
Pain more painful
Laughter much louder
Yeah, when I was young
When I was young.

But now I am old.

I would propose that there are fours stages of man. The first stage is when we are born, At that time we are an individual and have to be trained to enter the second stage, to be civilized (funny word that. It literally means the process of living in a city, i.e. a group). At that point we have learned how to be part of society. The next stage comes when we see ourselves as an individual again and rebel against that society. Hopefully, we will enter the fourth stage and realize that society is just a collection of individuals like us, and we willingly join that society as an individual. In doing so society also needs to see itself as nothing more than a collection of diverse individuals and to respect those individuals.

When you are young, you rebel against society. But when you are old, you realize that you are a group animal, and that society is the group which you must join. If you get to that fourth stage not only you, but society, will benefit.. You are an individual, probably older, and society is nothing more than a collection of individuals. If people, or society, have arrested development, and are stuck in an earlier stage, they are to be pitied, not scorned.

Electoral College

 

Sophisticated Lady

Educated lady with your college degree
Amazes me why you just can't see
Learned everything from your books on the shelf
But no one ever taught you how to think for yourself

But does that Sophisticated Lady have an Electoral College degree?

The winner of the Electoral College has not been the winner of the popular vote in many recent Presidential elections. This has prompted calls for the elimination of the Electoral College. But before calling for the elimination of the Electoral College, isn’t it worth examining why there is an Electoral College in the first place. The Electoral College was instituted because the President was supposed to have broad representation from the People of ALL of the states, and not merely the popular vote winner. Otherwise the popular vote winner might be decided only by those states with the largest populations. The Electoral College was intended to ensure that the President have broad support across all of the states, large and small.

However the framers did not foresee the formation of Political Parties. It was originally proposed that the leading vote getter in the Electoral College would be President and the second leading vote getter would be Vice President. This resulted in the election of 1796 where the President, John Adams, was from one party while his Vice President, Thomas Jefferson, was from a different political party. It also resulted in the Electoral Crisis of 1800 when Thomas Jefferson (the nominee of the Democratic-Republican Party for President)  and Aaron Burr (his party’s proposed Vice President) got the same number of votes (and if you don’t know who Aaron Burr is then watch Lin-Manuel Miranda’s Hamilton. He was “the damn fool that shot him” and the man who “stood for nothing”). This led to the 12^th Amendment which required separate Electoral College votes for President and Vice President. The formation of political parties also changed the way that the Electoral College worked. The winner of the popular vote might no longer have desired broad support of the states. Under a two party system, the winner of the popular vote and the electoral vote should still be the person who received more than 50%. However in the event of more than two parties, the Electoral College votes are mostly awarded to the person who received the plurality of the votes in a state, but that person may not have received a majority of the votes in that state.

Of the 59 presidential elections, the winner of a majority of the popular vote also won a majority of the electoral vote in 37 of those elections. A third party participated in 13 of the 29 elections where no candidate won a popular majority.  In two of those third-party elections, (Woodrow Wilson in 1912 and Ronald Reagan in 1980), the difference between the percentage of the Electoral College and popular votes exceeded 40%, falsely giving the impression of a mandate to the winner. In the 9 elections where there was no major third party (i.e. the victor might not receive a majority of the popular vote), that ranges from a low of 46.09% of the popular vote and 56.50% of the Electoral College vote for Donald Trump in 2016 to a high of 49.72% of the popular vote and 56.42% of the Electoral College vote for John F. Kennedy in 1960.

I do not have the state-by-state votes to see how this would impact the elections, but based on these results, I would propose that Electoral College votes NOT be awarded unless a candidate receives a majority (NOT A SIMPLE PLURALITY) of the state votes in a Presidential election. The Electoral College would still meet, but would not consist of a pre-specified number of votes (so Nate Silver’s famous 538 would be no more). It is suggested that this might ensure that the winner of the popular vote more closely tracks with the winner of the Electoral College vote, even in the presence of third‑party candidates. This is intended that a Presidential winner have not only the most votes, but a broad representation of the state's votes.  This might not change the results of the election of 2016, but it would more closely heed the Spirit of the Law.

I realize that some states (i.e. Maine and Nebraska) award Electoral College votes on the basis of the votes in Congressional districts, but awarding Presidential Electoral College votes on the basis of votes for President in Congressional districts makes the fight over the mapping of those Congressional districts even more contentious. The proposed modification to the Electoral College does not deal with the number of Congressional seats or the mapping of districts. (Although I personally prefer the adoption of the Wyoming rule for the number of Congressional seats,
 https://dbeagan.blogspot.com/2021/05/apportionment-ii.html, and I do not think that a political party which has an interest in the mapping of Congressional districts can be unbiased in developing such a mapping, i.e. I am anti-Gerrymandering. But one battle at a time.)