The CEO, the Homeless and Paul Krugman

on Monday, February 28, 2011

A CEO, a homeless man and Paul Krugman are sitting in a kitchen together. The CEO is baking cookies, but Krugman keeps turning off the oven and kicking the CEO in the shins every time he returns from the grocery store. 

He takes takes most of the cookies, dividing them between himself and the homeless man, and says "that greedy asshole wants to keep those cookies and is wasting limited resources, making us fat, poisoning us with natural gas fumes and is sure to burn down the house any second now. Let's go sit on the couch and watch Dr. Phil while we wait for that greedy jackass to make more cookies. I'm going to punch him in the penis if they aren't done before the next commercial break."

Women Underrepresented in Prison


According to 2008 Department of Justice data, there were almost 13 times more men in U.S. prisons than women, and data from the Death Penalty Information Center show that there were about 65 men on death row for every woman in 2007. In other words, the data clearly show that men are way overrepresented in overall prison populations and among death row inmates.

This is essentially what Larry Summers said which led to his resignation as president of Harvard University:

"It does appear that on many, many different human attributes-height, weight, propensity for criminality, overall IQ, mathematical ability, scientific ability - there is relatively clear evidence that whatever the difference in means - which can be debated - there is a difference in the standard deviation, and variability of a male and a female population."

Things your children may never know about

on Sunday, February 27, 2011

Excerpted from Wired Magazine:

Having to manually unlock a car door.

Remembering someone’s phone number.

Getting lost.

Having physical prints of photographs come back to you.

Using a road atlas to get from A to B.

Inserting a VHS tape into a VCR to watch a movie or to record something.

Playing music on an audio tape using a personal stereo.

Scanning the radio dial and hearing static between stations.

Watching TV when the networks say you should.

The scream of a modem connecting.

The buzz of a dot-matrix printer

Blowing the dust out of a NES cartridge in the hopes that it’ll load this time.

Phone books and Yellow Pages.

Filling out an order form by hand, putting it in an envelope and posting it.

Not knowing exactly what all of your friends are doing and thinking at every moment.

Carrying on a correspondence with real letters, especially the handwritten kind.


Waiting several minutes (or even hours!) to download something.

Answering machines.

Pay phones.

Fax machines.

Vacuum cleaners with bags in them.

Not knowing who was calling you on the phone.

Actually going down to a Blockbuster store to rent a movie.

Relying on the 5-minute sport segment on the nightly news for baseball highlights.
Neat handwriting.

Swimming pools with diving boards.

Writing a check.

Looking out the window during a long drive.


A physical dictionary — either for spelling or definitions.

Manual car windows.

The Island of Cheese


Once upon a time, in an imaginary land far away, there lived a group of people on an island. These people lived happily and traded their very tasty cheese with neighboring islands for other things they needed, like spices and wine.

One day a neighboring island decided to attack. The biggest cheese makers defended the island successfully, and were welcomed home as heros. Everyone loved them. Unfortunately the large cheese makers soon realized that they were very large and powerful. No one on their island, or neighboring islands, were more powerful than they. They created armor and helmets and weaponry, and they resolved to begin going door to door, demanding “protection money" to pay for their swords and shields. They asked that each home give them 20% of all the cheese they made each week, and suggested that if they refused, something bad might happen to them or the island. After all, large men need to eat, and they need an arsenal of spears to defend the poor helpless islanders.

And so it went. Each week the large men collected 20% of every islander’s cheese and traded it for weapons, wine, spices and exotic foods. They lived a lavish life, but were content in knowing that it was they, the sole defenders of the people, who deserved a life of luxury and wealth. The people, whom they protected as if helpless children, that must pay to support it.

From time to time an islander would refuse to pay, and from time to time the large men would drag the poor man out into the village square, where he would be locked in a cage for several days and be made to eat rotting bread and water. Most islanders felt supportive and happily gave up 20% of their cheese, knowing that it was the big men who protected them and made a life of freedom possible for them. And after all, the large men settled disputes, policed the island, and built a road from one side to the other (to transport weapons and luxury goods more easily.)

One day the large men became bored with the weekly cheese collections, and hired a few of the islanders to do it for them. They paid the men with the cheese they collected from the rest of the island, but it wasn’t enough. Soon they demanded 30% of all the cheese in order to pay the collectors.

The collectors were paid well but had an idea. They decided to get together and threaten to quit their jobs as collection agents if the big men didn’t pay them more cheese. After all, they had families of their own. They also wanted to retire at a younger age, and continue to be paid during retirement. And they demanded wine and spices and many of the luxury goods that the big men enjoyed. The big men, feeling generous, simply instructed them to collect 40% of all the cheese, and with the extra money, were able to pay the collection agents handsomely.

After a couple of years, the collectors now became accustomed to their lavish lives and were beginning to want for more. They demanded more luxury items and full pay during retirement, which would begin at age fifty. The big men had had enough. They began slowly replacing the collectors with other islanders, who happily accepted less, and were happy to have a good job working for the big men with spears. This was very upsetting for the original collectors, who saw that their luxury lifestyles would be destroyed if this continued. They met with each large man in private, inviting them into their homes, and convinced them to pass a law. The law would be that no one would be permitted to work for the big men unless they were accepted into the group of original collectors, which would now be called the collector’s “united circle.”

From then on, many of the islanders applied to be part of the union of collectors, but it was a sad situation. New collectors were only allowed to join as old collectors retired, and the new positions were always given to friends and family, and never to the sick, or handicapped, or to any of the islanders who did not have blue eyes, like the original collectors.

Life continued in this way. Every few years the collectors demanded more cheese and threatened to stop working if they were not paid even more cheese. Soon one of the big men, Whawker of Scottland, became angry with the previous agreement. He did not like what the united circle of collection-men had become. He wanted to remove the law banning the big men from hiring normal islanders. He saw that the united men were abusing their positions, and he saw that he could hire many of the islanders who needed jobs, but all of their money was going to the collectors. He was not pleased, and began to speak openly with other big men and with the islanders themselves, apologizing for his previous decision to hire only united men, and traveled around the island, trying to show the people that it was a mistake to allow them to live this way.

The united collectors also traveled, and asked for support. They declared that if the people did not support them, they were supporting the big men, who had previously abused them with their big muscles and spears, and who were always taking their cheese and living in the huge huts on the hill, and playing with their weapons and spices and greedily keeping it all for themselves.

Some of the people were convinced. They hated having their cheese taken from them each week, and they traveled to the hill and stood outside the big men’s huts in the cold for weeks. They demanded that the collectors be allowed to keep the old law, forbidding normal islanders from working for the big men. They demanded that the big men recognize the rights of the common worker, and saw this as an opportunity to fight the big fight, and make a real change. Many of them had heard about a neighboring desert island where the people had also become very angry with their big men and taken to that island’s streets in a rage. “Good for them,” many thought as they stood in the cold on the hill of the big men, “I will stand here for as long as it takes... as long as it takes to show those horrible abusive big men that they can’t push us around like this anymore.”

Acceptance to Med School is Easy if You're the Right Color

on Saturday, February 26, 2011

HT: Mark Perry
The chart shows the acceptance rates for whites, Asians and blacks to U.S. medical schools from 2005-2007, based on different combinations of undergraduate grade point averages (GPA) and scores on the Medical College Admission Test (MCAT), using data from the Association of American Medical Colleges.

In all cases above, being black significantly increases the chances of being accepted to medical school compared to being Asian or white, when all three groups of applicants have the same GPA and test scores. In some cases, e.g. having a GPA between 2.80-2.99 and an MCAT score between 27-29, being black increases the chances of being accepted by a factor of 6.35 vs. being Asian and a factor of 4.17 vs. being white. (Note: There were not enough Hispanic applicants to include their acceptance rates in the table.)

Seven root causes for The Health Care Crisis

on Friday, February 25, 2011

Health care is both a luxury and a necessity. Most of us feel that there should be health care for those that cannot afford it, but do not realize that government manipulation is a large part of our failure to make reasonable health care available to the poor.

There are many factors that contribute to the expensive system we have today, most of which are not part of the general public awareness. Here are seven reasons I'm currently aware of:

1. The government mandates what insurance companies must cover. If you want to buy cheap health insurance without all the bells and whistles, you can't. This raises prices when the government, for example, forces all insurance companies to provide Viagra. Without that law the poor could buy cheaper insurance if they select a plan that doesn't cover the drug. (Drug makers lobby to enact laws that force insurance companies to provide coverage for their drugs.)

2. Laws prohibit insurance companies from competing across state lines, which raises prices. (Insurance companies lobby for this law because it keeps profits high)

3. Medical insurance isn't tax deductible unless you're a business.

4. Lawsuits force doctors to purchase very expensive insurance; that cost is passed along to us. (This also reduces quality, because doctors must never admit fault, and are pressured to hide errors from patients and their employer.)

5. Costs are hidden from consumers and the bill is sent to the insurance company. This allows hospitals to overcharge, which forces insurance prices up. (If you had food insurance can you imagine what would happen if restaurants could simply give you a price-free menu and send the bill to your insurance co?)

6. There are legal obstacles that stop or slow employers from providing Whole Foods style insurance, which is a combination of a health savings account and high deductible insurance. It is cheaper and keeps costs low, but government is in the way.

7. The American Medical Assoc. restricts the number of graduating MDs each year, which increases prices by keeping doctors in short supply. (The AMA restricts the supply of doctors in the same way that OPEC or De Beers keeps oil or diamonds off the market.)

Physicians' salaries in the U.S. vs. various European countries and Canada, showing that MDs in the U.S. make about $200,000, which is between 2 and 5 times as much as doctors make in other countries.

Physician Salaries
One reason we might have rising medical costs, and the world's highest physician salaries is that we turn away 57.3% of the applicants to medical schools. What we have is a form of a medical cartel, which significantly restricts the supply of physicians, and thereby gives its members monopoly power to charge above-market prices.

In 1963, there were only 135 law schools in the U.S.; now there are 200.

There are 130 medical schools in the U.S., which is 22% fewer than the number of medical schools 100 years ago (166 medical schools), even though the U.S. population has increased by 300%. The number of medical students in the U.S. has remained constant at 67,000 for at least the period between 1994 and 2005 and perhaps much longer.

The Council on Medical Education and Hospitals of the AMA approves both medical schools and hospitals. By restricting the number of approved medical schools and the number of applicants to those schools, the AMA limits the supply of physicians. In the same way that OPEC was able to quadruple the price of oil in the 1970s by restricting output, the AMA has increased their fees by restricting the supply of physicians.

CEO Pay and Corporate Raiders

on Thursday, February 24, 2011

My opinion, based on examining many hundreds of corporate balance sheets, is that many CEOs are overpaid.  They are overpaid for the same reasons that politicians are overpaid and corrupt. The owners of government (citizens of the country) have no direct control, just as shareholders (owners) have no direct control of board members and CEOs.

Many companies are doing well and paying boards/CEOs a small amount, and others are doing well but paying many times more for their executives, in similar companies in similar businesses. Additionally, Japanese and European executives are paid much less than American executives.

In England, shareholders vote on executive pay. In the US, many investors (most?) don't know how much the CEO is paid in the companies they partially own. (Most probably don't know that Obama makes about $400k per year either.) This disconnect allows many CEOs to raise their compensation and enact various anti-takeover rules (golden parachutes, poison pills, etc) that make it difficult to fire them.

In the 80's, takeovers were profitable because corporate raiders identified executives that were "overpaid" in their opinion, purchased the company, hired new executives at a lower amount, and enjoyed the difference as their compensation for the takeover. Today, with multiple anti-takeover rules, corporate raiding is no longer as easy and profitable as it was before, even though many executives are still "overpaid" in the eyes of a would be raider.

Here is a decent article, quoting Buffet. If you ignore the obvious leftist bias, he has some good points, and here is a wiki entry regarding the various "poison pills" that executives use to maintain their overpaid status (without these measures, raiders would identify high pay and attempt to turn a profit by purchasing the firm.)

The Relaxation Response


Elicitation of the relaxation response is actually quite easy. There are two essential steps:

1. Repetition of a word, sound, phrase, prayer, or muscular activity.
2. Passive disregard of everyday thoughts that inevitably come to mind and the return to your repetition.

The following is the generic technique taught at the Benson-Henry Institute:

1. Pick a focus word, short phrase, or prayer that is firmly rooted in your belief system, such as "one," "peace," "The Lord is my shepherd," "Hail Mary full of grace," or "shalom."
2. Sit quietly in a comfortable position.
3. Close your eyes.
4. Relax your muscles, progressing from your feet to your calves, thighs, abdomen, shoulders, head, and neck.
5. Breathe slowly and naturally, and as you do, say your focus word, sound, phrase, or prayer silently to yourself as you exhale.
6. Assume a passive attitude. Don't worry about how well you're doing. When other thoughts come to mind, simply say to yourself, "Oh well," and gently return to your repetition.
7. Continue for ten to 20 minutes.
8. Do not stand immediately. Continue sitting quietly for a minute or so, allowing other thoughts to return. Then open your eyes and sit for another minute before rising.
9. Practice the technique once or twice daily. Good times to do so are before breakfast and before dinner.

Regular elicitation of the relaxation response has been scientifically proven to be an effective treatment for a wide range of stress-related disorders. In fact, to the extent that any disease is caused or made worse by stress, the relaxation response can help.

Why Do Public Schools Suck?

on Wednesday, February 23, 2011

Public run businesses have the unique ability to enjoy higher incomes by failing. It's a never ending cycle of running a business poorly, blaming the failures on lack of funds, and receiving more funds. Case in point, the US public school system.  From Cato:

"Since 1970, inflation adjusted public school spending has more than doubled. Over the same period, achievement of students at the end of high school has stagnated, according to the Department of Education’s own long term National Assessment of Educational Progress. Meanwhile, the high school graduation rate has declined by 4 or 5%, according to Nobel laureate economist James Heckman.

So the only thing higher public school spending has accomplished is to raise taxes by about $300 billion annually, without improving outcomes.

The president’s decision to pump $100 billion into existing public school systems is likely slowing the U.S. economic recovery."

Bank Loans Hedge Against Inflation Risk

on Tuesday, February 22, 2011

The currency we use today is asset-backed, but it's not obvious to us. Most dollars come into existence when a bank makes a loan for a home, car, or business, all of which are assets and back the currency. A bank creates money with every loan, but the money isn't really "debt-based." That's a confusing term.

Creating currency is very simple. If I bake an apple pie and go to a bank, I would first give them the pie and they would give me eight IOUs for one piece of apple pie. Now they own the pie and I own the paper IOUs. But what if I want to hold the pie and have the paper at the same time? The bank would offer to loan the pie back to me at interest, say one piece of pie per year. I would take the pie back to my house and pay them one piece of pie in interest and another piece in "principle" each year until the pie is paid off.

The same thing happens with a house, but ownership changes hands with contracts, and buying a house is more confusing than building a house because there is a third party involved, but the process is the same. The bank takes ownership of the house and gives the old owner IOUs (US dollars) from the Federal Reserve Bank in exchange. They then charge interest to the person living in the house (a house the bank now owns), and the person living in the house pays the IOUs back to the bank slowly over time.

Every dollar is "backed" by the original asset. It can be apple pie or a house, it doesn't matter. We can create a currency with any asset, and government decree does not make the currency valuable. Almost every dollar out there is instantly exchangeable for real assets. You can pay off your home or car loan at any time using US dollars, which is the same as walking into a bank and demanding gold for the dollars. Cars, homes, and gold are all assets. Even if the government prints 100 trillion more US dollars, you can still go to the bank and take ownership of your home or car that backs the dollars you hold.The only way to remove the asset backing of the currency is to have banks stop accepting them in payment for the loans on their books.

Many people currently feel that the gold standard is a good thing, not because it forces paper money to hold real value, but because it restricts government's ability to spend rampantly with the help of the printing press.  Until recently, I have generally regarded this to be a sound argument, but today I am not sure it is correct. US currency can be exchanged for an asset at a fixed exchange rate as well. The exchange rate is on the mortgage paperwork. What is the difference between being able to always exchange the currency for gold or always being able to exchange it for a home? What is the fundamental difference between walking into a bank with $100,000 and walking out with 100 ounces of gold... or walking in with $100k and walking out with the deed to a home worth 100 ounces of gold?

Another common idea regarding paper fiat is the idea that the currency (the physical paper) has zero ability to store real value, and that gold-backed paper, or exchanging gold itself does hold real value; and that the fiat currency is entirely dependent on government enforcement to continue.

The problem with this idea is that paper money would occur without government backing or force and US dollars do hold real value; each dollar is a debt from a bank, and debt agreements are assets and have real value, just like a bond. Fiat dollars are debt agreements and hold real value in the same way. If the bank spends fake IOUs they go down in value but they are still exchangeable for the original asset. If they dumped 100,000 bank notes on each person's lawn, you could still exchange them for ownership of your house. That loan agreement can't be inflated away.

Even with a gold standard the bank can spend "fake" IOUs and hope no one notices. An IOU for gold is not fundamentally different than an IOU for a house. They are both assets with real value and the bank note is still a debt agreement in either case. The asset the bank takes in exchange for the bank note does not matter, and it doesn't stop a bank from printing fake IOUs if it is forced to exchange IOUs for gold. It is already forced to exchange those IOUs for other assets (homes, cars). The gold is a red herring.

An additional somewhat incorrect idea regarding fiat money is that the printing press always has the ability to destroy wealth held by people holding the currency.  This is not always the case, and depends on two factors: the amount of cash held by an individual and the amount of outstanding bank debt that person holds. For example, if I live in a house worth $100k and I hold 100,000 US dollars in my mattress, my cash holdings are worth "one house." I can pay off the loan and hold the deed to the house tomorrow. My net worth would be one house.

If the currency base is doubled overnight, I can still go to the bank, pay off the loan with the (now devalued) cash, and hold the deed to the house. The doubling of the monetary base would not affect me at all, my net worth is still "one house," and the house's value relative to other assets has not changed. If I held $100k and no bank loan, or if I held $200k in cash and held a $100k bank loan, only then would the doubling of the money supply affect me. Bank loans can be used as hedges against inflation.  If a person has matching debt to cover his cash holdings, his inflation risk is close to zero.

Long term storage of wealth can also be accomplished by owning stable assets that are not currency, but the primary problem with only one currency legal in the US is that it's hard to conduct business transactions with an unstable and inflationary currency that has a higher than normal risk of failure and no competing currencies. I can't pay for a taco in Euros. If I could, we'd have a much more stable economy in the US. 

The real way to stop inflation to stop allowing one bank to have a monopoly on currency production. If the bank can never fail unless the nation fails, that's a recipe for disaster. If a bank can die if it is caught printing fake IOUs or if people can easily use another bank's notes instead, that competition and fear of failure would keep banks in line, stop inflation, and create stable and reliable banks who don't cheat, hold assets to back every bank note, and maintain a very stable value over time. Additionally, government would have no ability to print money. They would have to pay for things with real money; taxes paid in various currencies from each independent bank. The real danger isn't a lack of assets or gold that backs the fiat and keeps government from spending, it is that government controls the business of currency production and explicity bans anyone else from entering that business.

Fuel Efficiency Doesn't Lower Energy Use


It seems intuitive: Increasing the fuel efficiency of automobiles - or anything else that runs on gas - should lower the demand for oil. It was with precisely that expectation that Congress enacted the Corporate Average Fuel Economy (CAFE) standards in 1975, following the Arab oil embargo. After more than three decades of CAFE standards, heightened environmental awareness, and steady improvements in fuel efficiency and engine technology, America's demand for oil is greater than ever. In 1975, highway fuel consumption amounted to 109 billion gallons, according to the Federal Highway Administration. By 2006 it had climbed to 175 billion.

"It seems obvious that rising efficiency in cars, furnaces, and lawn mowers should, in the aggregate, significantly curb demand for energy," write Peter Huber and Mark Mills in "The Bottomless Well," their perceptive 2005 book on the supply, demand, and pricing of energy. "Sad to say, however . . . efficiency doesn't lower demand, it raises it."

HT: Mark Perry
Why? Because improvements in fuel economy effectively make fuel less expensive, and when costs fall, demand tends to rise. As driving has grown cheaper in recent decades, people have done more of it - choosing to drive to work instead of taking the bus, for example, or buying a second car, or moving to a house with a longer commute, or sending the kids to college with cars of their own. Between 1983 and 2001, data from the Energy Information Administration show, the number of annual vehicle-miles driven by the average American household rose from 16,800 vehicle-miles to more than 23,000.

"Efficiency may curtail demand in the short term, for the specific task at hand," Huber and Mills acknowledge. "But its long-term impact is just the opposite. When steam-powered plants, jet turbines, car engines, light bulbs, electric motors, air conditioners, and computers were much less efficient than today, they also consumed much less energy. The more efficient they grew, the more of them we built, and the more we used them - and the more energy they consumed overall." ~Jeff Jacoby, in the Boston Globe, The Fuel-Efficiency Paradox

on Monday, February 21, 2011

George Washington did not have wooden teeth. According to a study of Washington's four known dentures by a forensic anthropologist, the dentures were made of gold, hippopotamus ivory, lead, and human and animal teeth (including horse and donkey teeth).

Dance Tutorial


Breast Cancer Revisited


A few people have asked me to explain this to them again after reading my other note on the accuracy of medical tests.

Here is a nice summary: If your mammogram is positive, how likely is it that you actually have breast cancer? They’ve done surveys asking this question, and most laypeople and many doctors guess 90%. Actually it’s only 10%.

Mammograms are 90% accurate in spotting those who have cancer (this is called the sensitivity of the test). They are 93% accurate in spotting those who don’t have cancer (this is called the specificity of the test). 0.8% of women getting routine mammograms have cancer (this is the prevalence of the disease). This means that of every 1000 women getting mammograms, 8 of them have cancer. Of those 8 women with cancer, 7 of them will have true positive results, and one will have a false negative result and be falsely reassured that she does not have cancer; 992 of the 1000 women do not have cancer. Of those, 70 will have false positive results and 922 will have true negative results. So in all, there will be 77 positive test results, and only 7 of those will actually have cancer – roughly 10%.

It gets worse. How many lives are saved by mammography? If 1000 women are screened for 10 years starting at age 50, one life will be saved. 2-10 women will be over diagnosed and treated needlessly. Ten to fifteen women will be told that they have breast cancer earlier than they would otherwise have been told, but this will not affect their prognosis. 100-500 women will have at least one false alarm, and about half of them will undergo a biopsy they didn’t really need.

Top Holders of US Treasury Securities

on Sunday, February 20, 2011

Why all the fuss about China? Hint: It's because China is competing with US tire and toy makers who are lobbying government to place tariffs on Chinese imports, and are so far successful in promulgating propaganda that makes it sound scary that China's government is investing heavily in the United States, just like Japan and the UK.

Socialism and the bottom 10%


Life can be cruel. It is our job (in defining gov't) not to talk about how life should be, but think about how we can make life best for all members of society, especially the poor.

Capitalism, which uses our own greed and selfishness to keep cruelty in check, is currently the best known system for raising the standard of living for the poor. Free market countries have longer lifespans, less disease, and less poverty for the poorest citizens.

Capitalism includes secrets and cartels, but is not unique in that capacity. Socialism includes corruption and lying more often, because power is held by an elite class. Free markets check these lies more easily because power is distributed to all citizens who are free to start a corrupt business or an honest one. The honest businesses will do better than the dishonest and we all end up with less corruption.

Socialism, in every case it has been tried, has reduced the quality of life for the bottom 90% of the population. The government has stopped the free market from functioning in every country where we currently see rampant food shortages, starvation, disease, short life spans, huge amounts of corruption, and low access to health care.

Nationalizing "too big to fail" industries makes us all worse off at the expense of those business owners.

We can imagine that we will find noble men and women to be the leaders of a socialized country, but it never happens. No group of leaders has ever come to power and avoided terrorizing their people, and that terror is always especially cruel for the poorest people.

It's hard for us to imagine that allowing a lot of cruel business men to run around trying to trick us out of our money is the best solution, but experience shows that somehow, a free system improves the lives of the poor better than a benevolent system which attempts to directly aid the bottom of the society.

We think that the rich get richer, and that is the way of a free market, but that is not necessarily the case; free markets bring new wealth into the world and help everyone become wealthier. Socialistic policies move the world in the opposite direction, resulting in less wealth for everyone, and insure that lawmakers and their friends become wealthier.

When you or I cannot start a business easily, and we are forced to work low paying jobs for someone who already owns a business, that keeps the rich richer, and us poorer.

With less regulations the poor can more easily start a burger stand and take some money from McDonald's -- but with regulations (health codes, zoning laws) McDonald's gets all the business and the poor guy who can make really good burgers goes back to working for McDonald's.

Further, if the government decides to provide free burgers for everyone regardless of the quality of the burger, no one would ever be able to enjoy his quality burgers -- now there are two barriers: first, it is too expensive to start a regulated burger place, and second, he won't get any more business than shitty burger joints.

The lesson here is that when we hear nice things from politicians, promising rainbows and fairies with glitter on top, we should think first about who will benefit most from the law.

In the case of socialized health care the answer is fairly obvious -- health insurance companies and big pharma will benefit most. They are the current owners of the biggest burger joints, and we are the consumer who will never taste that poor man's super-burger. (or Dr. House's sweet diagnostic skills)

The law will serve to insure that the elite stay rich and the poor stay poor. We should all be supporting the poor expert burger guy, and not the elites who already own McDonald's.

Which Insurance Companies Deny the Most Claims?


How does anyone imagine that the government can “keep insurance companies honest” and to make sure everyone gets coverage, when medicare is currently leaving sick and dying old people out in the cold almost three times more often than the best private insurance companies?

If you take a look at the report card, you'll see that the denial number include people asking for co-pay and deductible amounts, so the adjusted Medicare denial rate will be higher.

From the American Medical Association's 2008 National Health Insurer Report Card.

The Source of Money

on Saturday, February 19, 2011

Imagine we travel back in time to a primitive cave-dwelling tribe. They have no money and trade pigs for cows, a knife for some honey, etc. The tribe is doing well but is having trouble trading. Sometimes a farmer wants to buy something smaller than one whole pig, and home builders (a new development; cave space is running out!) want to sell their products but it’s hard to save up 1,000 pigs to buy a home!

So we decide that we will introduce money to this economy. How would we do it? We can’t simply “print” a bunch of coins or dollar bills – how would we distribute them to the people?

We can’t give equal shares to everyone in the group – some people have no pigs and no honey, while others have large farms with many animals. How do we decide who gets how much money?

We could have the chief buy pigs and honey and cows from the tribespeople in exchange for the newly minted dollars; a pig farmer might sell a pig to the chief for a dollar. This would set the value of each dollar at one pig.

But this system would eventually end up with the chief’s cave containing all the products that the tribe had produced. No one would be able to use the homes, pigs, cows and knives. So how do we get money into the hands of tribespeople without taking all the valuable items and storing them in a cave?

There are a few ways to do it, but we’ll use the method still used today. When a pig farmer grows a pig, he goes to the chief and asks for a loan of one dollar. The chief says “show me the pig,” and issues a loan to the farmer at interest.

Now we have dollars in circulation along with all the goods produced. So as we can see from this example:

Pig = Dollar

Dollars are money, so where does money come from? It comes from pigs and all the items produced by the people. At its most basic level, money is simply a representation of valuable things.

Money cannot come into being without the goods, because money represents the goods themselves. The chief only issues loans to someone who has produced a pig.

This is how the Federal Reserve works. It issues loans to people who have already created something of value, or issues money to people who are trustworthy and in the process of creating something valuable.

In a similar way, a respected tribesperson could ask the chief for a loan to build a house. The house and the money come into being at the same time – the money comes into the system only to represent the house that is being created.

In a simple cave-person system it would be relatively easy to track how much money goes into the system – the leader would only loan money to people who had already created something valuable, or was certain to create it soon. His purpose in issuing loans would be to mirror the amount of goods created with the amount of money loaned out.

Today the Fed does the same thing on a grand scale. It attempts to look at how much valuable stuff is being produced by the United States, and issue loans (through banks) to mirror the goods produced.

From this basic understanding of the source of money, we can see what would happen if the chief began spending the money he coined; there would be no goods produced to mirror the new money coming into the system.

Let’s imagine that he loans a dollar to the first pig farmer because he has created one pig. Now the farmer has the dollar and the pig. The chief then makes another coin and purchases the original pig. The chief ends up with one pig, and the farmer ends with two coins. Each pig now effectively represents two coins instead of one. This is inflation, or "inflationary spending."

Similarly, when the Fed overestimates the number of “pigs” that have been produced, it allows banks to issue too many loans and the value or price for each pig goes up.

When one thinks about money, it need not be some mysterious idea. Money is not something imagined, but a very real representation of value – value that someone produced.

If you lived in the cave-tribe, each dollar you spend would be there because someone worked to create something of value for the society. The more valuable things the tribe manages to create – the more money they will have in society. And remember, each dollar introduced represents real value. It represents a house, pig, or knife that someone created.

All of the complex things we hear about money can be reduced to this simple idea. Wealth is destroyed when we consume something. If we eat a pig, a dollar is destroyed. Wealth is created when we produce something of value – something that someone else wants and is willing to pay for. When we grow a pig, we create money.

If I take a raw forest, cut down some trees, and build a house from scratch, I have created money. Very real money; I can now go to the bank (chief), ask for an estimate of my home’s value in dollars (pigs) and receive a loan.

It’s unfortunate that so many of use do not understand the raw source of money. Many seem to be lost in a world where money is seemingly randomly distributed; we don’t understand why some are so rich and some are so poor, and there is a disconnect which causes hardship and confusion about how one becomes rich.

We suspect that wealth is created by luck, or by buying real estate, or investing in the stock market, or playing the lottery. There is often some voice in the shadows of one's mind urging him to work hard and save, but the television says money is imaginary, or that one need only open their heart chakra and accept wealth, or that money is created when the government spends (the chief spending money).

From our simply example, it’s easy to see that money doesn’t simply flow to farmers who have open hearts, and it is not created when the chief spends it. Wealth is created (and profits earned) when people make something that other people want – something that improves the lives of the people around them.

Why Does European Health Care Work?

on Friday, February 18, 2011

A 2006 article by Henry G. Grabowski and Y. Richard Wang in the peer-reviewed journal Health Affairs makes plain, the lion’s share of new chemical entities (NCEs)—that is, genuinely new drugs—are invented in the United States. Between 1993 and 2003, the authors found, 437 NCEs were introduced around the world. America was responsible for 152 of them—far more than any other country—with Japan coming in second with 88 and Germany a distant third with 42 (see chart above).

Why is this important? One reason for America’s drug dominance (though far from the only one) is America’s unsocialized medicine. Here, with the exception of a few programs like Medicaid and the VA system, the government doesn’t regulate the price of drugs, so when a company invents something big—the latest miracle cancer drug, say—it strikes it rich, making its executives hunger for more. Take away the profit motive, as government-run medicine often does by forcing drug companies to sell at discounted prices, and innovation will dry up.

So socialist Europe, by using American drugs is profiting from good old-fashioned American free enterprise. the lesson is to be skeptical of reports speaking glowingly of socialized health-care systems, because those systems wouldn’t work nearly as well as they do without unsocialized American medicine.

Breast Cancer

on Thursday, February 17, 2011

The British Medical Journal recently published a study that examined the data of nearly 2 million breast cancer screenings and found that of 2,000 women screened regularly for ten years, one will benefit and avoid dying from breast cancer, but ten healthy women will have needlessly undergone mastectomies, radiation and sometimes chemotherapy, and another 200 will have endured a false alarm and follow-up tests and biopsies.  Breast cancer screening looks like good example of the false positive paradox, where an accurate test can lead to mostly incorrect results. (A 99% accurate cancer test will give 99.02% wrong answers if 1 in 10,000 women have cancer)

Based on this study, we can determine that if a woman is diagnosed with breast cancer, the probability that she actually has cancer is between 0.5% and 9%. After the initial diagnosis indicating cancer, requiring further testing, the woman is likely to have cancer 1 in 200 times. If upon further testing it is determined that she actually does have cancer and treatment is needed (breast removal, radiation, chemotherapy), only 10% of women will actually have needed the treatment -- 90% of them have harmless lesions.

Unfortunately, doctors and information brochures do not accurately describe risks involved in receiving regular screenings, encouraging all women to have regular screenings. This is medically unethical, and allows insurance companies to raise insurance rates for women who are diagnosed with cancer, even though 90% of them never actually had cancer.

Pamphlets inform women that screening either leads to less invasive surgery or simpler treatment, although it actually results in more surgery, more mastectomies, and more use of radiotherapy because of overdiagnosis. Pain caused by the procedure is sometimes mentioned, although it is probably the least serious harm, as it is temporary. Additionally, none of the information indicates that the tests are wrong over 90% of the time.

"A survey of American and European women found that 68% believed screening reduced their risk of contracting breast cancer, 62% that screening at least halved mortality, and 75% that 10 years of screening saved 10 of 1000 participants (an overestimate of 20 times). Another study showed that only 8% were aware that participation can harm healthy women and that 15% believed their lifetime risk of contracting the disease was more than 50% (an overestimate of five times).

Breast Cancer Rates
The vast majority of women around the world have never heard what the medical evidence supports. In fact, it’s so opposite to what we continually hear, that it can even sound incredible.

Yet, this is just one cancer screening test.

Think of the far greater interests advocating other preventive health interventions, such as surrounding obesity, heart disease, cancer, health indices and “healthy” eating. This study serves as a valuable example and reminder that, all too often, health information is more marketing and disease mongering than we may realize."

A pamphlet with information based on objective interpretation of the available studies has been created. It is quite informative and I'd recommend reading it.

Bicycle Sharing Fails Again

on Wednesday, February 16, 2011

According to the New York Times, the latest French utopia (Vélib’, Paris’s bicycle rental system) has met a prosaic reality: Many of the specially designed bikes, which cost $3,500 each, are showing up on black markets in Eastern Europe and northern Africa. Many others are being spirited away for urban joy rides, then ditched by roadsides, their wheels bent and tires stripped.

With 80 percent of the initial 20,600 bicycles stolen or damaged, the program’s organizers have had to hire several hundred people just to fix them. And along with the dent in the city-subsidized budget has been a blow to the Parisian psyche, as not everyone shares the spirit of joint public property promoted by Paris’s Socialist mayor, Bertrand Delanoë.

At least 8,000 bikes have been stolen and 8,000 damaged so badly that they had to be replaced — nearly 80 percent of the initial stock. JCDecaux must repair some 1,500 bicycles a day. The company maintains 10 repair shops and a workshop on a boat that moves up and down the Seine.

It is commonplace now to see the bikes at docking stations in Paris with flat tires, punctured wheels or missing baskets. Some Vélib’s have been found hanging from lampposts, dumped in the Seine, used on the streets of Bucharest or resting in shipping containers on their way to North Africa. Some are simply appropriated and repainted. 

The Story of Stuff and the Myth of Corporate Power

on Tuesday, February 15, 2011

In The Story of Stuff, the narrator claims that because corporations are larger than many nations in terms of sales and GDP, they are able to use that power to steal from the third world and trick us into consuming more than "our fair share."

Corporations may have huge amounts of money passing through their hands, but they cannot coin money or use force to get what they want. Their power is limited; if they begin selling products people don't want, the company loses "power" and income, and eventually fades from existence. When government does the same thing they do not lose any power, and no one has permission to offer a better product (or to buy a better product) in many circumstances, like first class mail, road building, driver licensing, etc. 

This argument in The Story of Stuff is similar to claiming that because a doctor makes $800,000 per year he has twice the power and influence of the president of the United States, who makes $400,000 per year. The president is tremendously more influential/powerful, just like governments are more powerful than corporations. Additionally, small groups of organized people have more power to influence the government's actions. This is counter-intuitive but makes sense upon closer examination. A small group with a cause that makes polititians look good is a more attractive way for them to spend tax dollars.

For example, $150 million will make a huge difference in the lives of a small group of corn farmers (and will only cost citizens of the USA 50 cents each) but would be meaningless for Exxon mobile; their total revenue exceeded $475 billion last year. Further, large corporations are owned by millions of people. Increasing corporate taxes simply takes money from the owners, who are primarily (either directly or via mutual funds) regular people who have purchased stock in Starbux and Wal-Mart. 

If you take a closer look at the references for The Story of Stuff, you'll find some gross errors, including the claims that 50% of government spending is for military, and that we have lost 80% of our original forests. The primary message is that we are destroying the earth and the third world when we buy cheap products, and that the products are cheap because the externalities of production (pollution and destruction of the workers and environment) are not included in the price. The realities of the situation are more complex, but we are inclined to believe it is as simple as the film implies because of our natural tendency to think of wealth as a zero sum game (where one man wins only at the expense of another) and abhor waste. The film prays on our ignorance of basic economics and general failure to understand the source of wealth on earth.

MYTH: Buying Local is Good for the Community

on Monday, February 14, 2011

Imagine a world with two neighboring towns, Fairfield and Ottumwa. Fairfield makes very high quality chairs, Ottumwa makes very good cheese. What would happen if the chair maker in Ottumwa asked everyone to "buy local," and get their chairs from him instead of from Fairfield?

His arguments would be familiar:

1. For every $100 you spend in my chair shop, $68 is returned to the community through taxes, payroll, and my own spending.
2. If you don't buy local chairs, we won't have a local chair shop anymore.
3. If everyone purchased local chairs we would keep all of our money in the community, which will make us all better off.

All of this is nonsense, and it's not difficult to see why if we reduce the situation further. Imagine everyone took his advice and stopped trading cheese for chairs. Fairfield's citizens would no longer have high quality cheese, and Ottumwa would no longer have high quality chairs. Both towns are worse off.

Imagine further that Ottumwa continues to successfully encourage local shopping and succeeds in supporting all of its local businesses. They have a guy who makes dull knives, they have another guy making okay vegetables, and myriad other citizens make everything the town needs. Now let's compare them to Fairfield, which trades chairs for everything it needs. It trades with Iowa city to get sharp knives, and with Mt. Pleasant to get high quality meat. It gets everything it needs from other cities who also have an exemplary skill, be it knife making or chicken farming.

Ottumwa, whose citizens all buy locally produced products, enjoys only one high quality product -- cheese. Fairfield, on the other hand, who's citizens only produce chairs, enjoy high quality everything. When we begin talking about words most don't understand, it is easy to imagine that keeping money close to home is a good idea. If we remove the confusion of money from the situation and imagine we are simply trading goods with other towns, it is easy to see that when towns trade, everyone enjoys higher quality products at no cost to themselves. We have great chairs, you have great cheese, let's share!

If trade is removed, each citizen in each town is worse off. The only benefactor of the buy local ideas are the crappy cheese maker in Fairfield or the uncomfy-chair maker in Ottumwa; they become rich when locals feel guilty about trading with their neighbors.

There is no benefit to "keeping money in the community." The statement is absurd, akin to saying "keep chairs in the community," which would be pointless. Trading chairs to other towns doesn't hurt Fairfield residents. It isn't as if there are a limited amount of chairs, and we must pass them around amongst ourselves in order to have a healthy economy. To the contrary, the more chairs that leave the community via trade, the better off all of us will be.

Additionally, the term "local" is subjective in nature. How far does one need to go before a product is not "local" anymore? Is the guy on the edge of town still local? What if he lives halfway to Ottumwa? Is your next door neighbor more "local" than the guy one block away?

Let's go further with our simplistic example and imagine that our neighboring town, Batavia, has no skills and no products. Its workers are uneducated and there are no industries there. Everyone is living in huts and foraging for food. Fairfield's chairs are the best in the area and that people in Chicago are traveling to purchase chairs from us. We need to produce more. What is the answer? We set up a chair factory in Batavia. Unfortunately everyone there wants to work in the chair factory, but none have skills, all need to be trained from scratch (high quality chair making is complicated, delicate work) and all of them virtually beg for a job instead of their continued foraging and dumpster diving.

The factory in Batavia helps the citizens there, and it helps the people in Chicago, who want better chairs, and it helps Fairfield, which is able to enjoy more and more high quality products when it trades away its chairs. Eventually, the low pay rates in Batavia will rise as workers there become skilled, save money, and move to thinking about making something of value instead of wasting their lives looking for food and shelter.

Buying products made in Batavia supports the Batavians, the Fairfield residents, and all residents of the entire surrounding area who wish to own Fairfield's chairs. Without the Batavian factory, Batavians would forage for food, Fairfield would have less money, and the people of the surrounding area would have lower quality chairs.

Obviously this is a simplified example. Batavians being forced to work in horrible conditions, the pollution involved in transport, and other problems are not discussed in order to present an understanding of trade in its pure form.

A Physicist Explains Climate Cycles

on Sunday, February 13, 2011

Jasper Kirkby gives a great lecture on our current understanding of climate cycles and explains very clearly how cycles of the sun, earth's orbit, wabble, and relative position in the galaxy affect temperature on Earth. The most fascinating topic for me was the revelation that our entire solar system orbits the milky way faster than the spiral arms, and that the earth enjoys a warm period as we pass through each spiral arm.

Hazing Creates Cognitive Dissonance

on Saturday, February 12, 2011

Female participants, who were joining a discussion group about the psychology of sex, were either accepted into the group (control condition), had to go through a mild initiation, which involved reading aloud sex-related words, or had to go through a severe initiation by reading aloud explicit sex words (Aronson 1959). Those who went through the hazing rated both the discussion and the group members much higher than both the control and mild initiation groups. Read more

College Level Homework Assignment?

on Friday, February 11, 2011

Behold, the sad state of college "learning" today, where teachers with room temperature IQs educate by creating meaningless assignments with little or no educational value.  Students are asked to compare and contrast "strength" with the meaning of "dynamic mobility" (not to be confused with regular mobility), and we are to describe how "flexibility" is similar and/or different from "how the vibrations of the sensations are similar and different."

Additionally, during class students watch videos like this and write two pages on how they felt about the music in the background. Students pay $22,198 per year for classes like this (non-resident).

The second reading is on the five sensations of movement: flexibility, agility, mobility, stability, strength (FAMSS). Write how the five sensations are similar and/or are different with the following characteristics. For this part of the assignment, if it is easier for you to show the similarities and differences in table format rather than in writing format, be do so!

o energy direction
o physical feeling
o how the sensations are nurtured
o how the sensations are maintained
o how the vibrations of the sensations are similar and different
o how each sensation feels
o the meaning of dynamic flexibility, dynamic agility, dynamic mobility, dynamic stability, dynamic strength
o how the physical signs of losing each sensation are similar and/or are different
o how the signs of losing each sensation are similar and/or are different

(University of Iowa Department of Health and Sport Studies 28:029:001 First Year Seminar: The Nia Technique)

Dissolving Gold, Nazis, and Strong Acid.

on Thursday, February 10, 2011

Aqua regia or aqua regis (Latin for royal water or king's water) is a highly corrosive, fuming yellow or red solution, also called nitro-hydrochloric acid. The mixture is formed by freshly mixing concentrated nitric acid and concentrated hydrochloric acid, usually in a volumetric ratio of 1:3 respectively. It was so named because it can dissolve the so-called "royal metals," or noble metals, gold and platinum. When Germany invaded Denmark in World War II, the Hungarian chemist George de Hevesy dissolved the gold Nobel Prizes of Max von Laue and James Franck into aqua regia to prevent the Nazis from stealing them. He placed the resulting solution on a shelf in his laboratory at the Niels Bohr Institute. It was subsequently ignored by the Nazis who thought the jar—one of perhaps hundreds on the shelving—contained common chemicals. After the war, de Hevesy returned to find the solution undisturbed and precipitated the gold out of the acid. The gold was returned to the Royal Swedish Academy of Sciences and the Nobel Foundation who recast the medals and again presented them to Laue and Franck.

The Fear of Artificial Foods

on Wednesday, February 9, 2011

Two hundred years ago we were afraid of nature; we wouldn't swim in the ocean fearing monsters or disease, we saw nature as something wild and dangerous -- something to be tamed. Today, insulated from the dangers of cold and with ridiculously easy access to food, we are generally only aware of nature's beauty.

We've forgotten that a carrot contains literally 10,000 times more poisons and carcinogens than pesticide residues... if an apple were manufactured from scratch it would never be approved because of it's poison laced seeds. The illusion of safety in nature is confusing -- the most poisonous substance known to man is a natural poison (Botulinum toxin). Why are we so afraid of carefully created artificial products? The building blocks of everything made in a lab are natural products; the only difference between "natural" and artificial is the amount of processing involved.

Detroit School Board President Can't Write

on Tuesday, February 8, 2011

From the Detroit News we learn that "The president of the Detroit school board, Otis Mathis, acknowledges he has difficulty composing a coherent English sentence. Here's a sample from an e-mail he sent to friends and supporters on Sunday night, uncorrected for errors of spelling, grammar, punctuation and usage. It begins:

"If you saw Sunday's Free Press that shown Robert Bobb the emergency financial manager for Detroit Public Schools, move Mark Twain to Boynton which have three times the number seats then students and was one of the reason's he gave for closing school to many empty seats."

Here's another mass e-mail from Mathis, from Aug. 11, 2009:

"Do DPS control the Foundation or outside group? If an outside group control the foundation, then what is DPS Board row with selection of is director? Our we mixing DPS and None DPS row's, and who is the watch dog?"

The reason 50% of all porn involves anal sex

on Thursday, February 3, 2011

We evolved from animals that had one hole for everything, and even today sometimes humans are born with a "persistent cloaca." Birds, fish, and reptiles currently still have only one hole, and most of them just sort of push their holes together for mating. Some males ( some species of swans and ducks) have a penis, but most do not.  From Wikipedia