David D. Friedman's Blog, page 21

Thoughts on the Debt Limit Controversy

As best I can tell, there are two different games being played. One is the attempt by each side to make sure that either it gets the credit for solving the problem or the other side gets blamed for not solving it. That game is basically about rhetoric and PR.
The other and more interesting game, now that the administration has dropped its demand for tax increases, is about whether or not to raise the limit by enough to get past the next election. From Obama's standpoint, the answer is, I think, obvious. Having the option of deficit spending is almost always a benefit for those currently in power, since it lets them buy votes without obvious cost. Concern with the size of the national debt may have changed that, at least for a while, but I think more likely not. Hence Obama would like to be able to spend as much money as he wants through the election while satisfying demands for fiscal responsibility via cuts, possibly imaginary, in future expenditures. 
The Republicans, on the other hand, would like to be in a position to force real reductions in spending, both because many of them think reductions are a good thing and, I suspect, because many of them think that reductions in spending by Obama will cost him the votes that the spending would have bought him. One way of doing so is to arrange things so that a second increase in the debt limit will be needed before the election, and make their support for such an increase conditional on serious reductions in expenditure—which are not, so far as I can tell, happening on either of the current plans.
There is one other feature of the situation,  one which may explain Obama's failure to hold out for tax increases even while orating in favor of them. An election is coming up, and Democrats to Obama's left have no realistic alternative.

Debt Limit as Incentive: A Modest Proposal

News stories on the debt limit controversy agree that Boehner's plan, which increases the limit by $900 billion, will require further action before the 2012 election, but that Reid's plan, which increases the limit by $2.4 trillion, will not. Obama would obviously like to push the debt limit issue to some date, any date, after the election. To an economist, that suggests a simple tactic to reduce government expenditure. 
Raise the limit by an amount that will require further action before the election unless Obama manages to substantially reduce federal expenditure, but which can be pushed past the election if he does. It will then be in Obama's self-interest to find ways of cutting federal spending, which is a better guarantee than any legislative promises that Congress can pass today and break tomorrow.
Of course, it is also an incentive to find ways of increasing tax revenue—but until the election, the Republican House is in a position to deal with that problem.

P.S. I note that Reid has gotten at least one thing right. I've been arguing for some time that one way of reducing the debt problem is by selling off government assets, the policy that Greece has been urged to follow. Reid apparently agrees, although his specific proposal is on too small a scale to help much with the current situation.

(Almost) Free Medical Advice

A recent news story about the use of smart phones as heart monitors reminds me of an idea along similar lines that I recently had.
There are a variety of medical conditions, such as Alzheimers or a brain tumor, that cause a gradual decrease in mental performance, gradual enough so that the victim may not notice it. Early warning of such a condition could be very valuable.
Many people, faced with a few minutes of boredom, pull out a cell phone and play a game. It should be straightforward to add to such a game the ability to monitor some simple measure of player performance such as reaction speed that, under most circumstances, is reasonably stable over time. If the measure trends down for longer than, say, a month, a message goes to the phone's owner, suggesting that he see a doctor. Just in case.
It doesn't work for everyone. It doesn't watch for everything that might go wrong. But the cost is negligible and the potential payoff from detecting a tumor or early stage Parkinson's tomorrow instead of next year could be large.

Austrian Fantasy

Browsing the web, I came across the following claim  by Lew Rockwell:
" Need I note, as this article indirectly indicates, that the whole world is reading Rothbard, but that Friedman is almost a nobody outside of mainstream academic economics?"
He provides no support for the claim—the link is to a collection of links on Rockwell's site to works by Rothbard—so I thought I would look for some data. I do not know where one would find figures on what books people read, but the most readily available source for books they buy is Amazon, which ranks books according to sales; rank 1 would be the best selling book on Amazon, rank 100,000 would be the hundred thousandth best book. So I searched Amazon.com for books authored by Murray Rothbard and books authored by Milton Friedman, in each case sorting by sales to find the ones that sold best.
Friedman, Money Mischief: Amazon Bestsellers Rank: #2,132 in Books
Friedman, Capitalism and Freedom: 40th Anniversary edition: Amazon Bestsellers Rank: #2,120 in Books
Friedman, Free to Choose: Amazon Bestsellers Rank: #3,719
Rothbard, A History of Money and Banking in the United States: The Colonial Era to World War II: Amazon Bestsellers Rank: #34,118 in Books
Rothbard, The Case Against the Fed: Amazon Bestsellers Rank: #22,316 in Books
Rothbard, The Mystery of Banking: Amazon Bestsellers Rank: #49,523
Rothbard, America's Great Depression: Amazon Bestsellers Rank: #63,960
Readers are welcome to check the numbers themselves—they will, of course, be a little different each time you check them, since Amazon updates rankings on the basis of current sales—or search for a Rothbard book with sales anywhere close to the top three I found for Friedman. 
I do not usually waste my time defending my father, a job he did more than adequately for himself, but this seemed like a striking example of one prominent Austrian—Lew Rockwell founded the Mises Institute, which publishes several of the Rothbard books I listed—who appears to be living in a fantasy of his own invention.
He is, of course, more than welcome to post a comment here providing the data to support his claim.

For Mac Fans in a Hurry: An Idea

The MacBook Air uses an SSD, a solid state disk, available in 128 GB and 256 GB sizes. The current iMac has space for two drives, one of which can be an SSD, letting you put software you want to run fast, such as the OS, on the SSD, while using the physical hard drive for bulk storage. Other World Computing offers a range of replacement SSD's for the Air which, at least according to them, are considerably faster than Apple's. For someone who has an iMac, would like to add an SSD to it, and is thinking of getting an Air, this raises an interesting possibility.
Get an air with a 128 GB SSD. Get the 240GB SSD from OWC, or an even bigger one if you are feeling extravagant. Replace the Air's SSD with the upgrade. Put the drive you took out of the Air into your iMac. 
Cost (assuming you get the 240) is $479. That's $179 more than if you bought your Air from Apple with the larger hard drive—but you end up with not only a faster Air but a faster iMac. Buying your iMac with an SSD and a standard drive—admittedly, that would be a 256 GB rather than 128, but I'm not sure how important the difference is— costs $600.
I can only see one problem with this approach, assuming you are willing to pay the price to speed up both machines. Apple does not support third party installation of an SSD into an iMac. A little casual browsing suggests that it is possible but not easy, and I am not sure if at this point there are places that will do it for you, and if so what price.
But it is a tempting thought, for anyone who really likes fast machines.

Norway and 9/11: Fighting the Last War

A common criticism of militaries is that they are always preparing to fight the last war instead of the next. The recent attack in Norway suggests that the same problem exists for the "war" on terrorism. The point is made clearer if we compare that attack to its closest equivalent: 9/11.
The attacks have two critical characteristics in common. The first is that the form of the attack was original. The second is that it was strikingly successful, from the standpoint of its objectives—did a lot of damage at a relatively small cost to the attackers. That is not terribly surprising, since an original attack is one that potential defenders do not expect and so fail to take precautions to prevent.
With the benefit of hindsight, it was obviously imprudent, arguably suicidal, for a political party to put a large number of its younger supporters, its future elite, on a not very large island with no guards. That created a situation where a single gunman could murder about eighty victims and badly handicap the future of a major political party. 
If the final point is not obvious, consider the equivalent U.S. case, scaled. The U.S. has more than sixty times the population of Norway. What would be the effect on the future of the Republican or Democratic party if more than 4000 of the most active members of the Young Republicans or Young Democrats were killed?
What was the cost of accomplishing that to the perpetrator? As far as we  know, he did it all himself. The shooting spree required one rifle, one pistol, and a lot of ammunition—total cost probably under a thousand dollars. The previous explosion, part of whose purpose was presumably to set up the opportunity for the subsequent shooting, cost one car, very likely rented, a lot of ammonium nitrate and fuel oil, and some sort of detonator and timer. For a wild guess, total cost of the whole project between one and ten thousand dollars. 
Plus, presumably, life imprisonment, a cost balanced by the opportunity to get wide publicity for his political views.
Which gets us back to where I started. Most of what one can see being done to prevent terrorism, most obviously the exertions of the TSA, is aimed at preventing a repeat of 9/11. It ought to be aimed at the next, and entirely different, 9/11.
Which is a much harder thing to do, since we do not know what it will be.

Playing with Kids: Asymmetrical Games?

In my experience, there are at least two different approaches to parents playing games with kids, related to two different views of what children are: Pets who can talk or small human beings who don't yet know much. The former provides a justification for the adult cheating against himself, deliberately playing badly in order to give the child a chance. The latter implies that children, like other people, are entitled to honest treatment, and pretending to try to win when you are actually trying to lose does not qualify.
The simplest version of the second approach, and the one I am familiar with from my own experience, is the sliding handicap. Our house had a basement with a ping-pong table, and I spent a good deal of time playing ping-pong with my father. The rules were very simple. I started with some number of points, and whichever of us got to 21 points first won. Every time I won, my starting number went down by one, making the next win harder. Every time I lost, my starting number went up by one, making the next win easier. The result was that the typical game was close, decided by how well each of us played—a  more interesting interaction than if we had played without a handicap and my father, who for most of the relevant period was a better player than I was, had deliberately thrown some of the games in order to "make it fun" for me. And the sliding handicap provided a longer run metagame as well, in which my objective was to push the handicap down as far as possible—ideally, in the sufficiently long run, to zero and below.
The  approach can be applied, and no doubt is, to a wide variety of other games, as when the better chess player spots his opponent a piece by removing it at the beginning of the game. 
What about a game that, unlike ping-pong, is asymmetric, and as a result easier for one side than the other to win? Consider, for example, a board game based on the battle of Gettysburg. The two armies in that battle were quite different, as were their objectives. Unless the designer of the game makes a point of tuning the rules to make victory equally easy for either side—which, of course, he might do—one would expect one side to start with an advantage. The same could be the case for a more abstract game, such as one of the variants of Tafl, a family of early European games of which the best recorded example is  Tablut, discovered and recorded by Linnaeus during his travels in 18th century Finland.

In the Tafl games, one side represents a king and his defenders, starting in the central portion of the board. The other represents the attackers, starting around the periphery. The objective of the attackers is to kill the king, the objective of the king is to escape the board. Not surprisingly, in most of the variants, which differ mainly in the size of the board and the number of pieces, one objective is easier to accomplish than the other.
The problem with an asymmetric game is that the handicap doesn't slide. It works fine for two unequal players who are going to stay about equally unequal, but not for the parent/child situation where the child will, with luck, be gradually catching up to the parent. Are there examples of asymmetric games that solve that problem, perhaps by a range of starting scenarios of increasing difficulty for one side, decreasing for the other? The obvious ones are computer games where the player can set the difficulty level against the computer—are there good two player games that work that way?
I cannot resist the temptation to end this post, more random in its subject matter than most of mine, with a quote from the page on Tafl that I earlier linked to:
"Evidence shows that the game of Tablut, described by a traveller called Linnaeus during his trip to Finland in 1732 ..."
Presumably the author of that comment knows more about the history of games than the history of biology.

Does Obama Have a $2.7 Trillion Get Out Of Jail Free Card?

In a recent post, based on a WSJ piece by Thomas Saving, I pointed out some implications of the status of the Social Security Trust Fund. My point in that post was that Obama appeared to be either deliberately lying about the implications of the debt limit for Social Security or striking ignorant of them. 
It now occurs to me that, if one accepts the interpretation Saving offers of the Supreme Court decision in Helvering v. Davis (1937), there is another implication: Obama may have a $2.7 trillion dollar get out of jail free card, a way of spending that much additional money without exceeding the debt limit.
When Social Security revenue is more than expenditure, the excess is loaned to the federal government and used to help pay for its expenditures. The result is a debt of the federal government to the Social Security system, a debt that is included in the total of the national debt. If Social Security revenues fall below expenditure, the treasury is required to pay back the difference, thus redeeming some of the bonds that make up the trust fund. Doing so lowers the national debt, since it includes intergovernmental obligations, so the treasury could borrow the amount it has just paid without exceeding the debt limit.
Under Helvering, at least as Saving interprets it, the receipts from the Social Security tax are not earmarked; they are income of the federal government that can be spent on anything the federal government wants to spend them on. Revenue from Social Security is about $800 billion/year. 
Suppose no agreement is reached on raising the debt limit. Obama instructs the relevant people to spend the income from Social Security on the war in Afghanistan, bailouts, whatever he thinks needs money. He then instructs the Social Security system to cash in as many bonds as are required to meet its obligations to Social Security recipients, say $700 billion. He then instructs the treasury, since the national debt is now $700 billion below the debt limit, to borrow $700 billion. The net effect is that he has increased total expenditure, Social Security included, by $700 billion without exceeding the debt limit. The trust fund is currently at about $2.7 trillion, so he can do it for four more years.
And if an extra $700 billion isn't sufficient for his purposes, it isn't clear to me that he couldn't simply instruct the Social Security administration to ask to cash in some more of the trust fund, instruct the Treasury to agree to do so, and then instruct Social Security to hand over the money to whatever part of the federal government requires it.
There are obvious PR problems with this sort of solution to the present problems, both because it is so obviously gaming the system and because the part of the system it games is Social Security, which is a politically highly visible target. But are there any legal problems?

Two cheers for the Huffington Post

My previous post came very close to accusing President Obama, when he warned of the possibility that the debt limit would prevent the payment of social security checks, of either deliberately lying or being culpably ignorant of the relevant facts—my only hedge being that it was possible I had myself been misinformed. One of the commenters on the post pointed out an article in the Huffington Post making essentially the same point. That such an article would appear there is worth noting, since the Post is an explicitly left wing site that one would expect to support Obama in the current controversy, where he is arguing for raising taxes in order to continue, at least to some degree, the current unusually high level of government expenditure. It's to their credit that, at least in this case, they are willing to publish the truth even when it goes against their political interest.
This reminded me of a less striking example a few years ago, when I discovered that I had a new hobby—defending Tea Party Republican candidates against stories that exaggerated how nutty they were. One of the cases involved  references to "Colorado's Ken Buck, who says he opposes the principle of separation of church and state."
Following that up, I found a video of the speech by Buck that was pretty clearly the source for the claim. The video was on the Huffington Post, and their story, unlike the one I just quoted, gave a reasonably accurate account of what he said—not that he opposed the principle but that he thought it had been applied more broadly than it ought to have been.
I don't read the Huffington Post regularly enough to offer any more detailed opinion, but on the basis of these two cases it looks as though it may be a more honest source of news than one usually expects of an ideologically oriented publication. Which would be a good thing—it makes it at least a little easier to resolve political disagreements if the various sides are all arguing from about the same facts.

WoW in Realspace, a Software Suggestion

If I am in a group in World of Warcraft, I can view a map that shows where all members of the group are. It occurs to me that the same ability would be useful outside the game—and that implementing it would be straightforward. Simply have two (or more) smartphones with gps talking to each other. Your phone tells mine where you are, mine shows me where both of us are, while mine tells yours which shows you. Useful for finding your spouse in a crowded art and wine fair, shopping mall, or equivalent.
Does it already exist?