Oh yeah? Well I cut spending by 25%! :P

Chris Edwards at the Cato Institute has a blog post called "I cut spending 10%". Here's how he does it:

The savings listed here are rough and rounded 2010 outlay amounts from the president’s budget.

1. Community Development Subsidies. The Department of Housing and Urban Development should not be funding local activities such as street repairs and parking lots. Save $10 billion.

2. Homeowner Subsidies. Federal subsidies for home ownership helped to cause the financial meltdown and recession by putting people into homes they could not afford. Save $10 billion

3. Energy Subsidies. Federal energy subsidies have a long record of waste and boondoggle. Private markets will invest in energy technologies when there is a reasonable chance for a return. Save $20 billion.

4. Higher Education Subsidies. Federal student aid contributes to college tuition inflation, and it can be replaced by private borrowing, family savings, and private charity. Save $20 billion.

5. Overpaid Federal Workers. Federal workers earn an average $120,000 a year in wages and benefits—twice what the average American earns. Federal wages should be cut 10 percent. Save $20 billion.

6. Farm Subsidies. More than 70 percent of aid goes to the largest 10 percent of farm businesses. With an average income 28 percent higher than the U.S. average, farm households don’t need federal welfare. Save $30 billion.

7. Public Housing and Rental Subsidies. Federal housing policies have damaged cities and created concentrations of poverty. They are based on a myth that markets can’t provide low-income housing. Save $35 billion.

8. K-12 Education Subsidies. Rising federal funding of the public schools has not improved test scores. It has only created large bureaucracies and stifled local control and innovation. Save $60 billion.

9. Transportation Subsidies. State governments and the private sector can more efficiently fund highways, airports, rail, urban transit, and air traffic control without federal subsidies and regulations. Save $85 billion.

10. Food Subsidies (Food Stamps and School Lunch). Low-income families often suffer from poor food choices and obesity, not a shortage of calories. Food aid for the needy should be left to private charities. Save $90 billion.

Not bad, Chris, but I'll do you one better. I will cut 25% of the budget. I will do this by eliminating the entire Department of Defense and all spending for the Global War on Terror.

But wait! you say. We need an army, a navy, an air force, etc. to guard our liberty! Oh no, sir. Private individuals can easily provide security, by pooling their money to hire companies like Blackwater to carry out anti-terrorism missions around the globe. And security at home can be provided by private security companies and by the militias mentioned in the 2nd Amendment. There is absolutely no need for a government-funded military. Cut this waste out of the budget.

Now, of course, I'm kidding, and everyone immediately and instinctively knows why: defense is a public good, something that will not be provided by private individuals in efficient quantities. That is why it cannot be privatized (though I must say, that doesn't stop Blackwater and its GOP backers from trying!).

But if you look at Chris Edwards' list of proposed cuts, you will find that much of it comes from other public goods, specifically infrastructure, research, and education. These are things that will not be provided in sufficient quantity by the private sector, as both economic theory and centuries of history clearly demonstrate. Edwards only manages to look like he's cutting waste because large numbers of his Republican readers have been fooled into thinking that infrastructure and education are not public goods (on the issue of roads, Edwards recognizes the problem and attempts to weasel out of it by claiming that states will provide roads more efficiently, something that is obviously untrue for interstate roads, and which in any case is just shifting most of the highway tax burden from federal to state taxes).

Even things like food stamps and housing subsidies contain elements of public good-ness. Without this life support, many people would be thrown into absolute poverty. The result? Riots and crime, which hurt everyone. Libertarians don't like to admit this, but food stamps and housing subsidies are the price we pay for the right to bear arms, since absolute-poor people with guns are wont to go on rampages.

The point here is that refusing to recognize the existence of public goods (or, technically, nonrival goods in general) does not equal fiscal austerity. Conservatives have managed to get away with this hackery too long, and it is time to start calling them on this. Econ 101 must triumph over whatever class the Cato people are taking - Econ 0, let's call it.

(PS - It's worth mentioning that I do agree with some of these cuts. #2 I definitely agree with; biasing people away from renting is bad. #5 has some merit, but the specifics are what's important. #6 is absolutely right. So it's not the case that 100% of Edwards' ideas come from ignoring the existence of public goods...just 80 or 90% of them.)

You have been replaced by a machine

Here's an interesting blog post, which brings up the ominous possibility that our current huge level of unemployment is not "cyclical" (i.e., due to the financial crisis and big recession), but rather "structural" (i.e. due to jobs vanishing permanently). The basic idea is this: over the past 10 years, computers have become good enough to make whole classes of jobs (e.g. travel agents) obsolete. However, it's hard to fire a ton of people when times are good, so companies waited until there was a big recession to get rid of people whose jobs had been rendered obsolete by new technology. Now, those laid-off people can't get new jobs unless they learn an entirely new skill set. But that takes time and money, and many of those people are old already, and meanwhile technology is changing so fast that by the time they learn something new, that new thing might be made obsolete pretty quickly as well.

This is a strong argument for implementing a national-level government policy to help people retrain for new industries.

As a side note, at the bottom of the post is a link to a really excellent paper by my advisor, Miles Kimball, which shows that improvements in technology - which "neoclassical"/"RBC" economists claim are the cause of booms - are actually a cause of recessions. Booyah!!

Building Ordinance Coverage

This endorsement provides coverage if the enforcement of any building, zoning or land use law results in added cost that are not covered as a direct loss.

The endorsement is separated into three distinct parts: section A, B and C, which typically allows the policyholder to purchase one or all of these valuable coverages.

SECTION A applies to loss to the undamaged portion of the building. This endorsement covers the loss of value of the undamaged portion of a building caused by enforcement of ordinance or laws.

If a government agency requires the demolition of your entire building because the damage exceeds a certain percentage as detailed in their ordinances, this coverage would apply.

Without this endorsement, you would have no coverage for the part of the building that was not damaged because that part of the building had not suffered “direct damage.”

SECTION B of this endorsement covers the cost of demolition of the undamaged portion of the building. Without this coverage, you could be on the hook for tens of thousands of dollars in demolition and disposal costs.

SECTION C provides payment for the increased cost of construction if the code enforcement requires improvements to construction that were not in the original building. This coverage will pay these increased costs whether constructions is at the same location or another location, with some restrictions.

The building ordinance endorsement requires that you purchase coverage equal to 80 percent of the property’s replacement cost value. This is an optional coverage. For more detail please call your friendly Fey Insurance Services representative.

A futurist post: Noahstradamus predicts The Singularity (and lack thereof)

io9 has a good primer on the notion of the "technological singularity," a futurist favorite:

The term singularity describes the moment when a civilization changes so much that its rules and technologies are incomprehensible to previous generations. Think of it as a point-of-no-return in history.

Most thinkers believe the singularity will be jump-started by extremely rapid technological and scientific changes. These changes will be so fast, and so profound, that every aspect of our society will be transformed, from our bodies and families to our governments and economies...

Science fiction writer Vernor Vinge popularized the idea of the singularity in his 1993 essay "Technological Singularity." There he described the singularity this way:

It is a point where our old models must be discarded and a new reality rules. As we move closer to this point, it will loom vaster and vaster over human affairs till the notion becomes a commonplace. Yet when it finally happens it may still be a great surprise and a greater unknown.

Specifically, Vinge pinned the Singularity to the emergence of artificial intelligence. "We are on the edge of change comparable to the rise of human life on Earth," he wrote. "The precise cause of this change is the imminent creation by technology of entities with greater than human intelligence."...

As we mentioned earlier, artificial intelligence is the technology that most people believe will usher in the singularity...AI will allow us to develop new technologies so much faster than we could before that our civilization will transform rapidly...

Another singularity technology is the self-replicating molecular machine, also called autonomous nanobots...Basically the idea is that if we can build machines that manipulate matter at the atomic level, we can control our world in the most granular way imaginable...

And finally, a lot of singulatarian thought is devoted to the idea that synthetic biology, genetic engineering, and other life sciences will eventually give us control of the human genome...Many futurists, from Kurzweil and Steward Brand, to scientists like Aubrey De Gray, have suggested that extreme human longevity (in the hundreds of years) is a crucial part of the singularity.

A lot of people are skeptical of The Singularity. Exponential change, they argue, always eventually levels off. We drive cars that are not exponentially better than the cars people drove a century ago. Our airplanes have stopped getting faster too. Similarly, they argue, the IT revolution will hit its natural limits, and our progress will slow down until we hit the next brief period of rapid technological change.

I have a lot of sympathy for this skeptical view. But all the same, it does seem like many of the technologies we are now developing (or looking for ways to develop) will cause qualitative changes in human life unrivaled even by the introduction of agriculture.

So which Singularity technologies do I envision living up to their potential? Well, let's run through the short list:

1. Artificial Intelligence - Yes, but not the Vingean kind, and not as soon as people think. We have already succeeded in creating machines that can do many mental tasks much better than we can (play chess, etc.). Eventually machines will be able to create scientific theories and draft business plans. But humans' notion of "intelligence" encompasses more than simply the ability to do difficult mental tasks - it requires independence of action. And this is what there is no guarantee AIs will have. Even if we make machines that can create machines smarter than themselves, why will they be motivated to do so? For a true AI-driven Singularity to happen, AI's must be Autonomous Intelligences.

2. Molecular Assembly - Yes, but not for much longer than many believe. We can make molecule-sized machines that can put other molecule-sized machines together; we are working on ways to give these tiny assemblers the go-ahead to start assembling. But there's a much bigger problem here - the ability to tell large numbers of tiny assemblers what to do all at once. Building, say, a piece of wood from the ground up seems feasible - just make a wood molecule, then make another, then another - but hardly an economic use of nanoassemblers, given that wood already nanoassembles itself. Building a complex machine with nanoassemblers will require a lot of very complex but cheap-to-implement molecular-level quality control, which means solving a lot of difficult IT problems. As for "grey goo," it already exists, and is called "bacteria."

3. Personality Upload - No. Not now, not soon, and possibly not ever. Because here's the rub - suppose someone invents a computer into which you can upload your personality. Suppose that the uploaded you feels exactly the same as the real physical you feels. How could you be certain that it feels the same without uploading yourself? Two ways: A) split yourself into two divergent individuals, or B) kill your physical self. My bet is that almost no one will be willing to do either of those. On top of that, there seem to be so much potential for horrific glitches that the technology will take a ridiculously long time to develop, even if it can be done.

4. Extreme Longevity - Yes. I'm not sure when we discover this, but when we do, it will rapidly change the nature of human life and society. Unless the technology becomes cheap very quickly, it will divide human society into fast-dying haves and seemingly near-immortal have-nots, with all the resulting social disruption.

5. Control of the Human Genome - Yes. This one, in my opinion, has by far the most serious, profound, and far-reaching consequences for our race, because the genome is the race. Forget about making ourselves smarter and stronger; the real posthuman moment will come when we start tinkering with human desires. Imagine if we could make people who love working hard all the time, or people who love having ten kids, or people who never get angry, or people who always take orders, or people who are just happy all the time no matter what. THAT, my friends, will be one bizarre world.

So, to conclude: No, I don't think that a Technological Singularity will soon accelerate technological change to infinite speeds. No, I do not think that we will soon see godlike self-improving AIs or sentient swarms of nanobots eating everything in sight, or people living like virtual gods inside of computer programs. But when we find ways to change what it means to be human, the human race as a basically singular entity will be over, and we will abruptly be left with a number of successor species. That day is coming sooner than we'd probably like.

Noahstradamus makes a prophecy for 2025

I've written a lot on this blog about how, if a rising China challenges the global political order than has prevailed since WW2, it would entail serious costs for the entire planet. Now I'd like to make this warning a little more concrete, by predicting exactly when such a challenge is most likely to occur.

Specifically, I predict that if it comes, it will come in or around the year 2025.

Why? Well, after the midpoint of the next decade, China will have some serious issues to deal with.

The first of these issues is energy. China, like most countries, uses two main sources of energy: coal for producing electricity, and oil for transportation. Both of these will be in short supply after the mid-2020s. The International Energy Agency predicts that global oil production will hit a plateau in 2020 and start to fall in 2030; various studies put the peak of China's domestic coal production between 2020 and 2030 as well, and coal is difficult and expensive to import. Scarcer energy will seriously erode China's unbeatable competitive advantage in manufacturing (much of which was built on extremely profligate use of energy), and nuclear and renewable energy will even come close to making up the difference.

Now, you may be thinking: won't the increasing scarcity of energy make China more likely to mount a serious challenge to the global order (as Japan did in 1941 when its oil supply was cut off)? Well, yes, but China is not stupid, and will see (actually, has probably already seen) the supply crunch coming. If China wakes up and finds that its coal and oil supplies are dropping fast, it won't be able to do anything, because taking control of a large amount of foreign energy supplies requires using a lot of coal and oil. Wars take lots of fuel, and building a big enough military to supplant the U.S. in its system of global alliances takes a lot of fuel too. China's best move is therefore to take control of as much global fossil fuel supply as it can while it still has enough energy to spare; as many have noted, this is what it is already doing. If China waits til after 2030 or so to make its move, it will be too late.

China's second challenge is its population structure. The country is aging rapidly; the U.S. Census Bureau predicts that the population will begin to decline in absolute terms starting in 2026, and the dependency ratio (the ratio of non-working people to working people) is expected to rise sharply around the same time. Nations that age this fast run into all kinds of natural limits to growth, as children are obliged to spend most of their money supporting their parents and grandparents; in addition, a lack of surplus sons makes it fairly difficult to maintain a big army. Even easing or lifting the one-child rule will not be sufficient to boost China's fertility, so this rapid aging is essentially a foregone conclusion.

China's third challenge is another natural resource: water. China's most important farming region, the North China Plain, is experiencing rapid groundwater depletion, and global warming is playing havoc with the country's rivers and rain patterns. By 2030, these problems will force China to import a lot of food, and will throw a bunch of farmers off their land, causing social disruption.

Finally, China's biggest challenge is simply the dizzying speed of its own economic growth. According to the Solow growth model, the simplest and most widely used model in macroeconomics, countries that invest heavily in physical capital see diminishing returns to scale as their economy becomes saturated with this capital; their growth then slows, no matter how high their savings and investment rates. The experience of countries like Japan, Korea, and various countries in Europe suggests that this slowing happens when a country reaches about half of the per-capita GDP of the richest nations (i.e. the U.S.). If China keeps growing at its current rapid rate, it should reach half of U.S. per capita GDP (in PPP terms) by 2030. The slowing of China's growth will create internal political tensions, as people who had come to expect a permanent gravy train demand a bigger slice of a slower-growing pie. It will also leave less of an economic surplus for China to spend on things like war with other great powers.

So in the late 2020s, China will experience rising energy costs, rising food and water costs, a rapidly aging population, the shrinking of its workforce, and diminishing returns to investment. All of that will not make it impossible for China to challenge the U.S. and its allies for global dominance, but it will make it a much dicier proposition.

But of course, as things stand, China is still not powerful enough to displace the U.S. as global Top Dog. Our military technology is still significantly superior, our economy is still significantly larger, and we and our allies still control a very big chunk of global energy supplies. China's leaders are cautious; if they try to mount a major challenge to U.S. power, they will wait until the last minute to do so. Which brings me to my prediction of 2025.

What would such a "challenge" look like? To be honest, I don't know. In the past, it was usually a war, but nuclear weapons make that seem unlikely in this day and age. China might attack a U.S. ally, I suppose - conquer Taiwan, or seize the territory it still claims in India - but even that seems pretty darn risky to me. Some sort of geopolitical assertion of authority, backed up by the implicit threat of military force, seems more likely. They might simply move to somehow take de facto control of a big chunk of global energy supplies, but not being well-versed in these things, I'm not sure how they'd do it. Or they might stake a unilateral claim to the South China Sea, declaring that the U.S. rule of free ocean transport is over and done.

Or they might do nothing. It may be that in an age of dwindling populations and energy supplies, controlling the geopolitical order is just not worth it for any country, even one with China's oligarchic governmental structure and nationalistic sentiment. I hope that this is the case, and in fact I think it not unlikely that China will decide simply to live within the existing order after all.

But I wouldn't bet the farm on that happy outcome. And neither should the United States and our allies; we should be expanding and strengthening our alliances, maintaining our technological edge, and adopting sensible far-sighted economic policies. If the challenge does come, then the more ready for it we are, the less destructive and dangerous it will be.

Reagan's true legacy

If any publication was the official pamphlet of the Reagan Revolution back in the 1980s and before, that publication would have to be The National Review. So it's pretty epic that The National Review recently printed a four-page article lambasting the Reagan economic approach and smashing the conventional wisdom that it was good for our country. Williamson writes:

There are two schools of thought about the Reagan tax cuts. The conventional conservative view: They spurred investment, entrepreneurship, and real economic growth, helping to resuscitate the post-Carter economy, and, by doing so, they paid for themselves. The conventional liberal view: They were an ill-considered product of starve-the-beast ideology and produced crippling deficits, inaugurating a new era of fiscal irresponsibility only briefly transcended during the golden years of the Clinton presidency.

Here’s a different take: They never happened.

Properly understood, there were no Reagan tax cuts. In 1980 federal spending was $590 billion and in 1989 it was $1.14 trillion...Looked at from the proper perspective, we haven’t really had any tax cuts to speak of — we’ve had tax deferrals.

This is the concept of "Ricardian Equivalence" (actually invented in its modern form not by David Ricardo, but by Robert Barro). The idea is that cutting taxes without cutting spending makes it necessary to raise taxes (or default on your debt or produce inflation) in the future; and since people, being rational, realize this, they act as if the tax cuts never happened.

Now, I don't believe the theory of Ricardian Equivalence is quite correct. But conservatives do! They use it as the main reason why stimulus spending won't boost the economy. But if stimulus doesn't work, the Reagan tax cuts didn't work either.

Williamson goes on to say that the political success of Reagan's tax cuts caused the Republicans to lose any sense of fiscal responsibility...that the seeds of 2001 were sown in 1981:

Bush and the concurrent Republican majorities in both houses of Congress didn’t manage to cut spending, either. Part of that was circumstances — 9/11, Afghanistan, Iraq, the subprime meltdown — but part of it was the fact that a poorly applied supply-side analysis has infantilized Republicans when it comes to the budget. They love to cut taxes but cannot bring themselves to cut spending: It’s eat dessert first and leave the spinach on the table.

A good point. But in my opinion, the collapse of Republican fiscal responsibility is merely the latest instance of a problem that democracies always face sooner or later: everyone wants government services but no one wants to foot the bill, so they make the kids foot the bill. Williamson concurs:

There is some evidence that [fiscal irresponsibility] is both bad politics and bad policy...the deficit is now truly terrifying, and, fortunately for Republicans, it is owned by Barack Obama and Nancy Pelosi.

So, in order to keep the deficit-fueled electoral gravy train running, the Grand Old Party o' Deficits keeps blaring the lie that tax cuts pay for themselves:

Despite all those pro-growth tax cuts, our deficits continue to grow faster than our economy...even during periods of strong economic growth, there has been nothing to indicate that our economy is going to grow so fast that it will surmount our deficits and debt without serious spending restraint. This should be a shrieking klaxon of alarm for conservatives still falling for happy talk about pro-growth tax cuts and strategic Laffer Curve optimizing.

Some people are more sensible about that Laffer Curve talk. Laffer, for instance. Arthur Laffer, whose famous (and possibly apocryphal) back-of-the-napkin diagram launched supply-side tax policy, readily concedes that the growth effects of tax cuts are oversold in the political debate. “Does every tax cut pay for itself? No."...

[The idea that tax cuts pay for themselves is] a just-so story, a bedtime fairy tale Republicans tell themselves to shake off fear of the deficit bogeyman. It’s whistling past the fiscal graveyard.

The exaggeration of supply-side effects — the belief that tax-rate cuts pay for themselves or more than pay for themselves over some measurable period — is more an article of faith than an economic fact. But it’s a widespread faith: George W. Bush argued that tax cuts would serve to increase tax revenues. So did John McCain. Rush Limbaugh talks this way. Even Steve Forbes has stepped into this rhetorical stinker from time to time. Reagan knew better — his Treasury Department predicted significant revenue losses from his tax-rate cuts — but his epigones preach a different gospel.

In summary:

Nobody votes for Scrooge. Tax cuts give Republicans an opportunity to distribute economic benefits through the tax code the way Democrats distribute them through appropriations, and the exaggeration of the supply-side effect gives them an opportunity to pretend like those benefits are cost-free...

So, what should conservatives do [to become responsible and still win elections]? One, abjure magical thinking about tax cuts. Two, develop a rhetoric in which “spending” and “taxes” are synonyms, so a federal budget with $1 trillion in new spending means $1 trillion in new taxes — levies on Americans today or on our children tomorrow, with interest.

If conservatives did this, that would be great. But why should they? The path of infinite deficit spending is somewhat easier and far more rewarding than the kind of return to responsibility that Williamson urges. sure, it'll end up crashing the country, but the country is rich enough that the real crash won't come until after the current generation of Republican politicians is retired or dead.

In any case, what does this say about Reagan's legacy? History shows that in a democracy, balanced budgets need bipartisan consensus; you just can't stick one party with the job of being fiscally responsible and expect it to do that job. Before Reagan we had a bipartisan consensus in favor of fiscal responsibility; each party agreed not to become "Santa Claus" if the other one wouldn't. Reagan broke that pact. He changed the GOP's political strategy to a Santa Claus strategy, and it's proven impossible for the GOP to change back. And so Reagan condemned America to spiraling deficits and eventual sovereign default.

Thanks a lot, Gipper!

Safeguard Your Home from Burglary

In 2007, the last year with full statistics, there were an estimated 2.2 million burglaries, according to the Federal Bureau of Investigation. Burglaries represent more than 22 percent of property crimes committed in 2007, and of these burglaries, 61 percent involved forcible entry. Burglary offenses represented $4.3 billion in losses, an average of nearly $2,000 per burglary, and nearly 68 percent of burglaries were residential.



Surprising to many is that nearly 64 percent of burglaries occurred during the daytime. Below are some suggestions that should help you from becoming a statistic:



- Keep exterior views of your home unobstructed and trim landscaping back to expose windows and doors. This requires a burglar to work in full view and poses a serious risk of detection.



-Maintain adequate exterior lighting at access points to your home.



-Put your ladder away. Do not provide easy access for the burglar to gain entrance.



-Do not keep valuables, such as bicycles and tools, in the open.



-Keep your garage door closed and locked. An open garage door allows a crook to see valuables stored in your garage.



-Make sure your house number is prominently displayed and illuminated to help emergency responders find your home quickly.



-Do not leave notes on your door that might indicate your home is unoccupied.