Globally Rational

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We hear politicians talk a lot about “a lady I met who couldn’t afford to pay for xxx” or “a man in Ohio who lost his job”.  I’ll accept that unemployment rates are a little bit higher than last year, but we can find stories like that at any time, even if the economy is booming.  The question I’d like to ask is this: as a society, are we really worse off than we were in 2000?

The Dow Jones is higher today than it was then, even if you adjust for inflation.  The dollar may be a bit weaker, but that’s more of an international issue than a domestic one; also, the “housing crisis” and the “recession” are supposed to affect other countries just as much as they affect the US.  Gas prices are high, but that’s just supply and demand.  As a nation, is the average person doing better or worse?

Gregg Easterbrook, a fellow at the Brookings Institution, argues (in a Wall Street Journal article) that we’re better than ever:

• Housing prices may have dropped, but that’s only because they surged a few years ago.  People always talked about the “housing bubble”, but people ignored it until the bubble decided to burst.  Easterbrook points out that the average house value today is still about 30-40% higher than it was in 2000 (before the price boom).
• The unemployment rate (~5.5%) is pretty low by historical standards.
• Income is still rising faster than inflation.
• The definition of a recession is “two consecutive quarters of negative economic growth”.  We still haven’t even had one such quarter… the economy may not be growing as fast as before, but it’s still growing.

I think a big part of our problem is that people think the economy is worse than it is.  In a recent survey, 79% of Americans were worried that we may go into a depression (not a recession)… I don’t think they realize exactly how extreme a depression is.  The media hype is fueling our tendency to act like we’re in a recession, which fuels the possibility of a real recession.

The reason why we’re worried is because we’ve become accustomed to the “Great Moderation” of the last couple of decades; economists agree that normal economic volatility has decreased substantially in recent years.  Because of this, every slight downturn seems much worse than it actually is.

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We hear a lot of propaganda aimed at convincing the American people that Arabs are evil, the war is justified, and America is the best thing that ever happened to the world. Some people believe it all, and some people (i.e. the people who are probably reading this) believe none of it… but did you ever think that just some of it might be true?

All other things aside, the slogans “Land of the Free” and “Land of Opportunity” really do describe two of America’s very unique traits. We often take these facts for granted, but the amount of freedom and opportunity available to the American population is unmatched in the rest of the world. Here, we can speak out for what we believe in (although recently, we’re been losing that privilege). Here, you can be whatever you want to be if you set your mind to it. After you hear those things a million times, you tend to take them for granted… but this is the only country where it’s true.

In most countries (even in Europe), the average person does not believe they can be anything they want to be. If you’re born under a tin roof in Indonesia, you’ll probably die under a tin roof in Indonesia. If you speak out against the King in the Middle East, you’ll be detained. If you openly practice Buddhism in Tibet, you’ll be suppressed by the Chinese. If you try to leave your poor village in Pakistan to go to college, you’ll starve before anybody gives you a scholarship/loan. And that’s why the US became the world’s foremost economic and scientific power (I mentioned yesterday how we became the world’s foremost military power).

Recently, more countries have started granting more liberties and have attempted to produce more opportunities. In the process, Germany and Japan have risen as intellectual powers, while London’s financial sector is bringing economic prowess to the UK. Although the US is still leading the world, the rest of these countries are taking our strengths - our belief in freedom and our endearment of the old rags-to-riches story - and implementing them into their own policy. They’ll slowly start to chip away at our status as the world’s best country for scientific discovery and economic advancement… but it will make the world a better place.

Interesting note: the indices that measure democracy and freedom of the press both report that the US is no longer a leader in these two issues (we’ve been dropping quickly in the last few years). If we don’t fix this, we’ll destroy everything we stand for and, eventually, we’ll also lose our place as a leader in liberty and opportunity. The way to fix a declining democracy with fading freedoms is to be aware of the problem… if we know what’s going on and we follow these indices, we can prevent ourselves from slipping.

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We all complain about high gas prices… personally, I’m tired of seeing the complaints. Here’s why:

1. Prices aren’t determined by costs; they’re determined by supply and demand. Our demand for fuel is increasing (case in point: India/China) and the supply is decreasing. My only complaint is that the government wasn’t able to foster a gradual increase (rather than a sudden one, which was a major contributing factor to the recession)… the reason for this is because they were doing everything possible to avoid the inevitable increase, so when they ran out of resources, the prices catapulted to their rightful place.
2. Prices still haven’t increased to the point where we significantly reduce consumption. As long as demand doesn’t decrease, the prices will continue to increase… the only thing that can stabilize the prices is if we stop using as much gas. At that point, the supply and demand curves are intersecting and we’re at the perfect price.
3. Until prices get high enough so that we can’t get by anymore, we’ll never devote adequate resources to alternative energy. Last year, the government spent $200 million on solar power research, about $300 million on nuclear energy and on “other fossil fuels”, and about $400 million on coal. By contrast, we spent $102 billion (about 100 times as much) on the Iraq War. Also, we spend $1.6 billion every day on gasoline (almost $600 billion per year)… that means that we spend more money PER DAY on gas than we do PER YEAR on alternative energy.

As long as we’re spending 500 times as much on gas as we do on alternative energies, how do we expect to really fix our problems? Instead of reducing our gas taxes (like Hillary and McCain were suggesting), I think we should add a little bit of a tax and use it to pay for novel research. In the long run, it will save us money… even if we only increase prices by 1% (about 4 cents per gallon right now, which seems pretty inconsequential with the way that prices have been inflating), that’s enough to multiply our alternative energy research by a factor of 5.

But it seems like we’re stupid enough to demand lower gas prices, even though we know that it will hurt us in the long run. I say that we add a 2% tax to all gas purchases, which would amount to 8 cents a gallon, and use it to multiply alternative energy funding by 10.

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There’s a fact that I’ve always taken for granted; recently, I learned that it’s not common knowledge. It was always so obvious to me that I started to wonder why most people don’t know this.

Did you know that the Middle East is generally impressed with Western culture? People often think that the anti-American sentiment we always hear about implies an imminent culture clash in rapidly developing emirates like Dubai. In fact, a lot of the people in the developed part of the Middle East love the concept of our clothes, movies, and even cars (eek!). I can’t think of any logical reason why people in an oil-rich Sultanate would choose to drive a Ford/Shelby Mustang GT instead of the far-superior and equally-priced Nissan Skyline GT-R (or BMW M3 or Audi RS4) but for some reason, “American” is synonymous with “classy” there. Why don’t most Americans know this?

Don’t get confused… they hate our foreign policy and our Americocentrism. But Kuwait’s beachfront also has a popular restaurant called Big Al’s Steakhouse, right between the Applebee’s and the Ruby Tuesday (keep in mind that beachfront property is not cheap… there are much better Arab restaurants down the street, but they’re not nearly as popular). If you have an American passport or an American degree, you are a first-class citizen; my Pakistani passport, on the other hand, isn’t even good enough to get me a full-access visa despite the fact that I have connections there. How can they hate American foreign policy but like our culture?

Well, the answer is simple: most of the world is, unlike us, capable of distinguishing a country’s political policies from their individual people. In my birth country of Pakistan, for instance, most of the people resent the past British rule and India’s firmness with regard to Kashmir. Meanwhile, they have no problem moving to England or making friends with Indians. The reason is because we understand that our friends in India and England are not the ones who make those policies… and that those policies don’t directly affect us anyway.

So why is there growing anti-Muslim sentiment in the US? I have no qualms about hating Al-Qaeda or even Ahmadinejad. But why does the average American maintain a personal feud with the average Palestinian who wants nothing more than the right to go back home? Most Muslims are peaceful and don’t share the radical right-wing views. Most Arabs understand the difference between Bush’s failed policies and the average American’s blissful ignorance… why can’t most Americans understand the difference between Osama bin Laden’s belligerence and the average Arab’s benevolent neutrality?

Enter propaganda. If you can be convinced that all Arabs hate all Americans, it’s much easier to convince you to endorse a campaign against them.

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I’ve always wondered why people stay in a city that they hate.  I’ve met plenty of people in Boston or St. Louis or Columbia (Missouri) who complain about the weather or the costs or the people.  Why not just move to whatever place fits your lifestyle best?

This was a major part of my decision to move to Australia.  After looking at various surveys (like this one), I’ve come to the conclusion that it makes sense to move to one of the cities that offers the best possible quality of life.  If I didn’t want to leave the country, I’d seriously consider relocating to Cleveland, Ohio or Pittsburgh, Pennsylvania; they did well in the survey too.  I know for a fact that my quality of life would be better in California than in Missouri (if for not other reason than the fact that the nice weather will entice me to exercise more often), so why not just pack up and go?

Of course, it’s hard to embrace change sometimes.  How is the job market in western Pennsylvania?  How hard is to go through the process of buying a home in Ohio?  But usually, the questions can be answered easily (see the links in the last two sentences).  When I decided to move to Australia, I found everything I needed from a quick Google search for “relocating to Australia”.  Why doesn’t everybody just go where they want to go?

I think encouraging such a diaspora might even help boost the real estate market.

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I’ve come across a lot of people who oppose the recent suggestion of implementing a sales tax on Internet purchases.  My favorite line of reasoning is the argument (which I heard on a radio interview with a random online retailer) that some of these businesses are already just barely scratching a profit and that a sales tax would severely hurt the company.

This sales tax is nonexistent solely because it has never been implemented.  Eventually, it became a part of online culture and retailers are afraid that its implementation will hurt their profits.  I don’t see why these people should be exempt from a tax that brick-and-mortar retailers, who also have to pay for their facility and their employees, are required to pay.  As much as I love shopping online (partially because of the lack of sales tax), it is ridiculous to say that any business should be exempt from a tax because it would hurt their profits.

Some people make the argument that online retailers also have to deal with the unique hurdle of shipping… but don’t brick-and-mortar businesses deal also have to ship items from their warehouse to their storefronts?  State governments are losing a great deal of income because of these tax-free transactions, and online sales are driving increasing numbers of storefront-based companies out of business.  Since when have profits ever been a decent concern for lawmakers?

Even with the taxes, it will be much cheaper to shop online.  Right now, people often go to a retail store to check out the product (and ask questions) before buying it from a website that has no customer service.  How is it fair to allow the online businesses to take these customers without paying the taxes that the other company would have had to pay?

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This is the first post in the “Nominal Breakthroughs” series, which will talk about news that is farcically touted as groundbreaking.

The fight against political corruption is one of the most important tasks confronting many of today’s developing countries; for instance, many leaders have stolen billions of dollars (which is worth a lot more in Africa/Asia than it is worth here) from their starving population. For this reason, the UN has spent a lot of resources in the past five years to establish the Convention Against Corruption, which establishes a set worldwide anti-corruption regulations. These regulations will allow a country to prevent this theft, criminalize the thieves, and recover lost assets.

Let’s let go of the fact that it took them five years to say that “theft is illegal, thieves are criminals, and stolen money should be recovered.” It’s more interesting to focus on this: they are expecting the leaders of a corrupt government to persecute corrupt leaders. If you were stealing money, would you really want to bring attention to the fact that money is being stolen? I do see potential benefits from such legislation… but why did it take them so much time and energy to pass such a simple regulation with no real means of enforcement? I know that it will be completely ineffective in my home country of Pakistan, but they tried to mask this by publicizing the Zambian government’s recent recovery of a measly $60 million. I wonder how much money they spent trying to make this convention a reality… will they even recover what they spent?

Since I usually get angry comments when I challenge the status quo, I decided to do a Google search for scholarly articles about the subject (which are written by people who know what they’re talking about). Click here to see the response study by the Anti-Corruption Resource Centre.

Where is the incentive for corrupt governments to follow these new regulations?

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A few days ago, Hillary Clinton decided that economists are wrong about the potential effect of a gas tax rebate. Her exact words: “I’m not going to put my lot in with economists … We’ve got to get out of this mindset where somehow elite opinion is always on the side of doing things that really disadvantage the vast majority of Americans”.

So, according to Hillary, the economists screwed up the math because they don’t need the rebate money as much as other people do (I have to mention here that Bill/Hillary earned $109 million in the last 5 years. She blamed them for being ‘elite,’ which automatically makes them out of touch with the strife of the average person; apparently, it doesn’t matter if the rebate will hurt the long-term economy, as long as it gives people a little bit of money today (and gets Hillary some votes). Then she went so far as to say that she thinks we should get out of the mindset that the experts have the best understanding of a situation. Is she saying that, as President, she will ignore the experts’ recommendations (regarding the big picture) and just worry about what is more important now?

I always thought that heavy tax cuts were a Republican premise. In the whole world, we see the best quality of life in the countries with the highest taxes; when the government has the money to provide universal healthcare and a successful school system, the people are happier. So why is Hillary abandoning these traditional principles and jumping on the reduce-gas-prices bandwagon? And does she seriously think that getting rid of this tax will reduce our long-term dependence on oil?

I think any reasonable person knows the answer to both of those questions: she is saying whatever it takes to get some votes.

Side note: Scott Adams also wrote a great post about this today on his blog. Click here to check it out; he proposes that we form a sort of a political party that demands politicians to pay attention to expert analysis.

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About a week ago, I wrote about how humanity seems to be disturbingly close to the mass die-off that Thomas Malthus predicted 200 years ago. In that last week, I’ve come across a huge amount of additional evidence suggesting that this theoretical catastrophe might soon become a reality:

• Food riots have been taking place around the world; the UN Food and Agriculture Organization (FAO) is suggesting that this may lead to social instability.
• The use of corn ethanol as an energy source is causing a rise in the price of corn, which means that many people can no longer afford it.
• People in Haiti have resorted to eating mud.
• A US envoy is visiting North Korea, of all places, to provide food aid.

And that’s just a short list of stories I’ve happened to encounter. I’ll keep following this issue in the future; stay tuned to see what else is going on. The striking thing about this problem is the fact that in Western countries like the US, we’re facing an “obesity epidemic” at the same time as this “starvation epidemic.”

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Yesterday, I wrote about how we’re incentivizing scientists to stop innovating. In that post, I promised to suggest some solutions today. Here are some things we can do to foster increased scientific innovation:

• We should require institutional research boards (IRBs) to include more scientifically knowledgeable personnel, so that decisions can be made by scientists instead of lawyers. Also, IRBs should be required to publish their membership - like several universities are already doing (i.e. Stanford, UT-Austin, etc.) - so that they have an incentive to hire more qualified people. According to one of my commenters yesterday, many top-class universities do have more qualified IRB members; however, this is not true at many large non-top-tier public universities. This will solve problems #1 and 2 (see yesterday’s post).
• As I wrote once before, the Public Library of Science (PLoS) should become the only source for publications. This will eliminate many slowdowns caused by a scientific journal’s in-press time. As long as the peer-review system is kept intact (I also have a plan for this, but it’s outside the scope of this post), there is no drawback. This will solve problems #3, 4, 5, and 8 (see yesterday’s post).
• There should be a specific minimum wage scale for scientists with PhD’s. Right now, it really doesn’t pay to become an academic researcher; most potential researchers end up going into industry, going to pharmacy/dental/optometry/podiatry/medical school, becoming engineers, or doing something other than science. This will solve problem #6.
• NIH and NSF should objectively score/rank all researchers in terms of the quality of their research (it doesn’t have to be a precise score; they can just get titles such as “expert” and “newcomer”). This way, tenure committees can look at these ranks instead of requiring an arbitrary number of publications, thereby solving problem #8.

I think that if we implement these regulations, it will drastically improve scientific productivity and, consequently, our overall society. Any objections?

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