When the financial world was turned upside down last fall, there was gnashing of teeth aplenty at what seemed to be the Bush Administration's bailout after bailout of wayward banks.
One side of the aisle complained that the government had no business tampering with free markets and the other complained that why should public money be used to save hubristic and overpaid corporate executives.
As the Bush years faded into the Obama ones, lots of people conveniently forgot upon whose watch this fell. For instance, I interviewed U.S. Rep. Eric Cantor a few weeks ago and he was complaining that "we have to get the government out of the capital markets." I pointed out that George Bush and Treasury Secretary Henry Paulson, both Republicans like Cantor, were the ones that inserted the feds into finance. He was silent for a full 15 seconds protesting that it was seen as a catastrophe. I guess Eric typically gets a free and unchallenged ride from the Virginia media.
Anyway, on to my point. The news today is that 10 big bailout banks -- J.P. Morgan Chase & Co., Goldman Sachs Group, Morgan Stanley, BB&T, U.S. Bancorp, American Express, Capital One, Bank of New York Mellon, Northern Trust and State Street -- all want to start paying back their billions in bailout funds.
Good news, to be sure. It shows that a recovery might actually be in the offing. And it shows that the banks want federal government restrictions brought on by the bailouts, gone.
The news points out another thing. It is fairly common in financial crisis to have a government bail stuff out and it can be only temporary. A couple case points:
- Chrysler was slammed by shoddy cars and bad decisions in the 1970s. It got federal loan guarantees worth $1.5 billion in 1979. New management saved the day and the firm paid everything back by 1983.
- Long Term Capital Management, a big hedge fund, went bust in 1998, threatening plenty of investors. It came as much of the rest of the world, Thailand, Taiwan, Singapore, Japan, Russia, and Mexico were going through or had gone through bad times. The Ne York Fed arranged more than $3.6 billion in loans which were paid back by 2000.
There are other example,s but you get the point. It is actually a tried ands trusted practice for the government to come in with bailouts and sometimes it works. If this sounds like I'm saying something positive about George W. Bush it may well be.
I am not addressing, however, the massive bailouts of American International Group, one of those "too big to fail" firms. What has happened is shameless and I wish grand juries and Congressional probes on the perps. And, there is a legitimate question out if these types of bailouts tend to perpetuate a flawed financial system that got us into trouble in the first place.
But I stand by my point -sometimes bailouts are good things and can work.
Peter Galuszka
43 comments:
this is a simple thing when you get right down to the basics.
Do we support the CONCEPT behind the Govt-operated FDIC?
because.. the private sector could have done the same thing that the Feds are doing - set up a certifying agency that provides insurance from premiums to those banks who meet the benchmarks.
Do we want to kill the FDIC and turn this function over to the private sector?
AH HA - I THOUGHT SO!
time for you folks who think the govt is big, intrusive and incompetent.
Do we toss the FDIC or not?
no cats allowed on your tongues...
yes or no?
"
From 1986 to 1989, the Federal Savings and Loan Insurance Corp closed or assisted 296 institutions hit by unsound real estate and commercial loans. More than 740 institutions were later closed or consolidated by the Resolution Trust Corp, a federal agency created to take over and liquidate their assets, often for pennies on the dollar.
The largest of these was the American Savings and Loan Association of Stockton, California, which had about $30 billion in assets and received a $250 million injection from the Federal Home Loan Bank Board in 1988.
The FDIC estimates that resolution of the S&L crisis cost a total of $153 billion, with taxpayers footing $124 billion of the bill. Other estimates of the cost, including those from lawmakers, have been as high as $300 "
http://www.reuters.com/article/hotStocksNews/idUSN1445176620080914?sp=true
I once worked on a big database project at FDIC. They wee located in a building in Arligton that as far as I could tell had been specifically desiged to have the maximum number of corner offices.
I remember having breakfase in the excellent and cheap (subsidized) cafeteria there one morning. In the booth behind me was a group of young, newly fledged bank examiners.
What were these young men in thier 20's discussing?
When they could retire.
FDIC does a good job, but I'm not sure it couldn't be done better.
RH
naw.. you sidestepped in Ray.
do you want the govt to run FDIC or the private sector?
who do you trust?
There is a big difference between a bailout of 150 billion and 3+ trillion. There is no way that the taxpayer is going to get their money back in a couple of years. In fact, the money the government spent hasn't even been earned yet. It is a debit from taxpayer future earnings those same taxpayers need to bail themselves out of debt.
And it would behoove the bureaucrats to read this article of an emerging attitude in worker philosophy.
Shades of Peter Gibbons.
http://www.sfweekly.com/2009-06-03/news/funemployment/
Doesn't it seem odd to anybody but me that the very institutions that needs a huge and hurried bailout in January are healthy and solvent in early June? Long Term Capital Management got bailed out in 1998. It folded in 2000. While the money was paid back LTCM was not operating with a sustainable economic model and, in reality, was not a going concern when it was bailed out. Is the same true for today's TARP recipients? Are the repayments a sign of:
1. The sudden fiscal health of the comapanies?
2. The desire by the company executives to get their compensation (especially bonuses) out of the hands of the federal government?
3. The possibility that there never really was a 'credit crunch" or "liquidity trap"? Before you scoff, this is exactly what the Fed in Minneapolis has said - the presumed liquidity trap never really existed.
Doesn't it seem odd to anybody but me that interest rates can be at or near zero? Since interest rates are the price paid for capital, deosn't a zero interest rate mean that capital is both free and, therefore, worthless? How can this possibly be true? If so, I'd like to take out a bazillion, bintillion dollar loan. If I can just make 1% on that loan over the next year I'll be the richest person who ever lived. If I can't - I just go bankrupt. Oh dear - isn't that logic what got us into this jam from the start? Who is artifically holding down interest rates (hint LarryG - think FRB not FDIC).
re: " There is a big difference between a bailout of 150 billion and 3+ trillion. "
Agreed.
what are the consequences of walking away from it?
there are no good answers - because it got way out of hand - and in my view because we did not have an FDIC framework for investment banking like we do for commercial bankings.
and why don't we?
well.. because of folks like Phil Graham and Ronald Regan who have repeatedly said that "Government is the Problem".
so do we really think this?
If we do.. then it leads directly to this question that I've asked:
Do we want - A govt-operated FDIC or a private sector-operated FDIC?
I think I have my answer from the silence.
This financial upheaval - has forced all of us to confront the realities of whether or not we need less or more regulation.
and some.. in the words of Colonel Nathan R. Jessep ... "cannot handle the truth".
and the truth to some of us means .. we have to admit that we really do have a hypocritical attitude about Govt - where we take for granted government regulation - otherwise known as protection from unprincipled capitalism
and at the same time.. sing the praises of unregulated commerce - the heart and soul of American Capitalism.
so.. who wants to turn over the FDIC function to AIG and Standard & POORS?
come on.. don't be shy folks.
It is both party's fault. Call them the Incumbent Party.
Take some time to watch the videos from the Independence Caucus about the blight in Washington...
www.icaucus.org
You will be glad you did...
so.. the Independent Caucus believes the FDIC role should be done by who - the Govt or the Private Sector?
I'm just trying to get a single ....non-partisan ... basic answer here about how one feels about the role of the Govt with regard to the FDIC...
I really don't care if you are left, right, "independent" (yeah)...
I don't want to know how you want to characterize yourself...
I want you to answer the basic question because in answering that question we know what you stand for no matter how you want to characterize yourself.
do you believe in / trust the govt more or less than the private sector when it comes to commerce?
If you could "throw out" the Dems and the Republicans.. what philosophy would your ideal candidate have with regard to the FDIC role?
I see no more problem with the government owning the FDIC than I have with the government owning the US Coast Guard. As I understand it, the FDIC insures depositers up to $250,000 per account. If an institution fails (like Indy Mac) then the FDIC pays the depositers first with money collected from as the banks as a payment into a fund. If the fund is not large enough to pay all depositers (never has happened) then the US Government would pay the rest. The FDIC also takes the failed bank into receivership and liquidates the assets in an effort to recover some of the funds.
So, we have a mandatory insurance system, a mandatory paid-in fund and payouts in time of emergency. Sounds like Social Security for banks to me.
Yes, except FDIC could easily go insolvent if more than a few banks fail. Your deposits would be about as well insured as your pension. If you company fails and ERISA takes over your pension payments, you might get 40% of what was promised.
We need to stop kidding ourselves that government can give us a society with no risk at a price we can afford.
As for whether the bailout "works" we won't know until we have paid off the costs.
RH
well we're nibbling at the edges here folks.
I didn't ask for someone to describe what FDIC does
NOPE.
What I asked is this:
Do you believe that it is the PROPER role of government to operate and FDIC-like insurance operation?
More to the point:
Why should the FDIC ..NOT be operated by the Private Sector?
..ESPECIALLY .. if the Government is incompetent, corrupt, ill-suited to decide what is best for the private sector..
you know.. like Ronald Reagan said...
and a bunch of folks right now, today, still continue to say...
don't ya'll stumble all over each other giving the answer....
HINT - This is your basic question about what the govt ought to be doing (or not).
"Why should the FDIC ..NOT be operated by the Private Sector?"
If FDIC was operated by te public sector it would have to be heavily regulated by the government anyway, to make sure they didn't cut corners or find some other way to aggrandize themselves, like the ratings agencies did.
Total Cost = Production Cost + External Cost + Gov't Regulatory Costs.
If you could lower Total costs by shifting production (operation of FDIC) to the private sectore while increasing the cost of government oversight, then it would be prudent to shift.
Question is how much oversight does governmtnet have to give ITSELF while also operating FDIC vs how much it would need if it "farmed out" FDIC operations.
Quiz. What is an example of external costs in this situation?
RH
Hint, to the question about externalities:
"If property rights are commensurate and competition prevails, then any bilateral externality will be equivalently internalized by markets, contracts, and Pigouvian taxes. The Pigouvian tax solution is equivalent to a competitive market in pollution rights where polluters must buy rights from victims. And the core of a competitive contracting economy shrinks to the same market solution -- ergo all three institutions are equivalent.
Note that for the full equivalence to hold however, spillovers must be bilateral. This applies to the cases that Coase investigated. Cattle trample a farmer's fields; a building blocks sunlight to a neighbor's swimming pool; a confectioner disturbs a dentist's patients etc. In each case the source of the externality is matched with a particular victim.
Notwithstanding this limitation, the equivalence version helps to underscore the Pigouvian fallacies that motivated Coase. Pigouvian taxation is revealed as not the only way to internalize an externality. Market and contractual institutions should also be considered, as well as corrective subsidies."
From Environmental Economics.
Pigouvian taxes are the basis for the idea of "user fees", but that isn't the only way to get around to the lowest overall cost, or een the most efficient distributon of costs.
RH
LarryG -
Let me be clear - I don't care whether the FDIC is a public institution or a private enterprise. It just doesn't matter. Either way, it's operation should be mandated by government regulation.
You might as well ask whether yield signs should be triangular or square. Who cares as long as there are yield signs and they are all the same color and shape? You are asking an irrelevent question.
So ... I'll say I want the FDIC as a public agency rather than a private enterprise because I believe it would another "too big to fail" private enterprise. I'd rather have public agencies than "too big to fail" private enterprises. However, even if Fannie Mae and Freddie Mac were public agencies - it wouldn't have mattered. What mattered was Fannie Mae's and Freddie Mac's bad policies of risk taking. Our private enterprise systems pretty much depends on the reallocation of capital through business failure. Private concerns that are deemd "too big to fail" break that system and will ultimately cause our economy great harm.
Please remember that the state of California is a public concern. Has California done the right thing?
public or private FDIC?
so.. apparently Groveton believes that a private FDIC could be "trusted" to do the intended role and not end up like Fannie or Freddie or AIG or Standard and Poors rating very questionable securities as AAA?
I would wager a little bet that if you took a poll of most folks asking them if the FDIC should be turned over to Private Industry that there would be a negative reaction to that idea.
because it gets right down to this - "who do you trust"?
do you trust Standard and Poors to correctly rate Credit Default Swaps?
Would you bet your pension or your savings account on it?
My view is that even the most severe critics of the government would seriously waver from a proposal to privatize FDIC -
.. i.e. - to get the government out of the regulation of banks - commercial and investment.
I would posit that even those on Wall Street itself would shudder at such a prospect.
In fact.. I wonder how many of the sub-prime loans would have ever been made if Fannie and Freddie had not been willing to buy them as "securities".
So.. Groveton thinks it makes no difference as to whether or not FDIC is private or public.
interesting...
let's be even more succinct here.
Should we abolish the FDIC as a Federal Entity and let the private sector figure out how to deal with risk?
no waffling - Groveton and others.
the question at hand is - should the government regulate the "free market"?
yes or no?
" It just doesn't matter. Either way, it's operation should be mandated by government regulation."
I think it ought to be done the least expensive way.
RH
We do not have any free market. either you have private enterprise regulated by government, or government does the job.
RH
re: " I think it ought to be done the least expensive way."
If one's premise to start with that what is less expensive to taxpayers is to not being paying taxes to run and operate FDIC then you'd turn this over to the private sector - right?
But no one here - will answer the simple question...
set aside the "least expensive" question and focus on whether or not this is a legitimate govt role in the first place?
If FDIC is primarily an insurance operation then why do we need the government doing this in the first place?
Here's my take.
I think even the most libertarian of those who frequent these pages - including the one's who often spout off about just how dumb, slow, corrupt, name your own pejorative about the govt - virtually none of these folks would feel comfortable about the FDIC role being done by private industry.
In fact, I would posit that given the events of the last two years that if we did not have a govt-operated FDIC, and that instead the private-sector version would probably have been operated by the likes of AIG or Standard & Poors and as a result, the mess on Wall Street would have spread to Main Street with massive bank failures and a situation much like we had back in the Depression.
So.. I'm basically challenging those who say that govt regulations are a "bad" thing and that our free market system operates best with the govt having a minimal presence, basically to be tolerated rather than valued as necessary.
There ARE folks "out there" who advocate abolishing the FDIC - just GOGGLE the appropriate phrase and you'll find them.
I tried to distill the question about govt involvement in the private sector down to a very simple question involving something that affects most of us - and that is - who should be in control of securing our bank accounts.
Do you want the govt-operated FDIC or a private-sector equivalent?
As far as expense goes - don't we all know that the govt-operated FDIC is going to be more expensive than a private-sector approach?
"If one's premise to start with that what is less expensive to taxpayers is to not being paying taxes to run and operate FDIC then you'd turn this over to the private sector - right?"
Nope.
Total Cost = Production Cost + External costs + Government (Regulatory) Cost.
Just because you turn production over to the private sector does not mean that you necessarily get lower cost. The government regulatory or oversight cost might still be significant.
What you need is a plan like Obama's health care plan. divide FDIC up into districts. Let the government monitor and insure some districts and private enterprise the rest.
Recompete the "bids" frequently and find out which system cost less in total.
RH
"If FDIC is primarily an insurance operation then why do we need the government doing this in the first place?"
FDIC keeps a fleet of bank examiners thea go and investigate the books to see if they are insurance worthy.
This is essentially a regulatory situation, and the insurance is a secondary consideration.
RH
" would probably have been operated by the likes of AIG or Standard & Poors and as a result, the mess on Wall Street would have spread to Main Street with massive bank failures "
That is why you would still need government oversight, if a private insurance company handled this job.
Like most things, the lowest cost is not one or the other, it is the best mix of both.
Same with pollution controls, the lowest cost situation is not zero pollution and it is also not zero regulation.
RH
"As far as expense goes - don't we all know that the govt-operated FDIC is going to be more expensive than a private-sector approach?"
Nope.
As you said an all private approach could have led to huge costs, if it failed to work as planned.
Anyway, it isn;t one or the other. The question is a false dichotomy.
Even though government "runs" FDIC a lot of the work that goes on there is subcontracted out. A private operator would probably also have subs.
RH
Larry, your question is too simple and seems to portend that it's either yes or no, black or white. No, there are (and should be) various rules and regulations in place; like the regs that forbid a bank loan with 5000% interest. Believe there would be some idiot who would 'know' how to 'rig' an investment to where a loan of that size would still give him a profit and then scream like a stuck pig when the scheme went tits up. So I don't really see your question as black and white as you do.
The government can do a few things well, and even there there are problems, specifically I would look at the military. I'd much sooner have the government in charge of it than say, Blackwater. However, the government has many more examples of places where they took over and it's been years of disaster. Amtrack comes to mind. The USPS comes to mind (yes USPS is a good value for the money but without the government giving it money to run, it would collapse). The government is victim of 'mission creep' where an entity keeps expanding what it's doing for some 'good reason'.
To answer your question, I would have no problem if the FDIC went private; I have no problem with it being in the hands of the government. I do NOT like what Obama has done in the short time he has been in office and I don't like the agenda that he is proposing (WAY too much government intervention).
Accurate
" Amtrack comes to mind. "
Amtrak would be just as bad if it were run privately. The economics just are not there.
The only difference would be that private industry would have enough sense to put most of Amtrak out of business. Government does not have that choice, because of politics.
There are probably better examples of something government runs that is out of control. HUD comes to mind. Some would say CIA.
RH
I note that Ray... slips right by the regulatory question. He thinks regulation would be needed even if the FDIC were private so he misunderstood my question.
My question was an UNREGULATED FDIC.
Ditto with Accurate.
I agree Accurate. If the Military is the creme de le creme when it comes to being effective (money aside) and the military is a govt function - like the FDIC is...
as is the FDA, FTC, NPS, many of which ARE run well and effectively ..others maybe not so much...
..then why do we automatically assume that new / prospective functions will be done badly?
It's even been asserted that the bailouts are in some folks minds an FDIC-like approach to the businesses that have been bailed out - the theory being the same.. do we let a financial equivalent of a conflagration just burn itself out or do we intervene?
Mr. Hoover said - "let them burn".
Mr. Obama said - "we cannot".
I don't know if Obama is right or wrong but most historians judge Mr. Hoover as wrong.
re: " Total Cost = Production Cost + External costs + Government (Regulatory) Cost."
bullfeathers Ray.
simplistic equation = no way in heck that you can plug in accurate data.
the equation is correct.
implementation of the equation is virtually impossible.
show me ONE SINGLE circumstance where your equation has actually been used with real data .....
Some scientists Ray.. they spend their entire careers trying to figure out where the missing data is that would correctly balance an equation.
that's why we have theory and practice.
the ONLY way your equation would ever work would be to try it both ways... and we don't do that usually.
Most often what we do is we "privatize" something - not based on your equation - but on the premise that it can be done cheaper - usually - because the pay and benefits are lower.
"My question was an UNREGULATED FDIC."
Can't happen, could never happen.
Even the Mafia is regulated.
We have organizations that are badly regulated, but no organizations that I know of that are truly unregulated.
RH
"..then why do we automatically assume that new / prospective functions will be done badly?"
Political dogma created by people who only want THEIR answer, regardless of the question.
RH
"the ONLY way your equation would ever work would be to try it both ways... and we don't do that usually."
The equation ALWAYS works in the real world. There is simply no way that it cannot work. The question is simply whether we know enough to discern our way to the lowest cost answer, and even if we knew what that answer is, are we willing to live with it?
We might choose to pick a higher cost answer, as some people claim we have done with DDT. In that case the question is whether you have chosen the higher cost answer knowingly, or just politically.
We chose not to have sufficient regulation in the financial industry, and now we are bearing the costs.
RH
"the ONLY way your equation would ever work would be to try it both ways... and we don't do that usually."
But that is EXACTLY the purpose of free enterprise: let people try various ways to get the lowest cost, and most popular answer.
We don't do it that way, usually because we don't WANT the right answer, we want OUR answer, one that supports our dogma. We love our dogma because it insulates us from the dirty and difficult business of thinking.
Frequently, there is no reason why we cannot do it both ways and compare the answers, but that would imply giving up some power (The power to make a decsion based on dogma instead of facts.)
RH
"the equation is correct.
implementation of the equation is virtually impossible."
At least we agree on the first part.
We do not implement the equation. It is correct in and of itself and it is reflected accurately out in the real world. It is self implementing: whatever the facts are out in the real world , add up to the real result.
We just don't necessarily know what that is, let alone how to improve it. But it isn't "Virtually Impossible".
3=1+1+1
4=1+2+1, 2+1+1, or 1+1+2
All we have to do is discern what the values are.
Somewhere out there everyone has a pretty good ide of what they are paying for. It is real money coming out of someone's pocket: if someone dies or becomes ill from pollution it is a real cost.
If someone develops a better process, that is a real savings that someone recognizes. Or, if someone develops a WORSE process, which however, saves on pollution damage and pollution prevention there exists a real answer that says whether the new Total Cost is higher or lower than the old one.
We simply are too lazy to figure it out, as best we can.
We prefer to single out one part of one of those terms and harp on that incessantly: "Excess profits", "short term profits", "the external costs of gasoline" (ignoring the external benefits), "there is no cost for pollution control, it pays for itself in reduced pollution damage."
Yeah, really, by how much? Where is your data?
And that is the problem, not that the costs and benefits are not real and have real dollars attached, but we are too busy arguing over what the result "should be" to go find out what it is.
People like you do not want to know, so they gloss over the problem by saying it is impossible to measure.
I'll agree that in each term there may be items that are subjective, unknown, or known with uncertainty.
That does not mean that we cannot agree on approaches to reducing uncertainties or setting uniform subjective values that are used universally: if you have a subjective value of mobility, it is the same for electric and gas cars.
We have set a value on the benefit of no one losing over $100,000 in personal assets, and the cost is the price of FDIC. Suppose we had other agencies tasked with the job of making sure no one loses more than $100,000 to fraudulent building construction or medical practices or insurance practices.
If we are not willing to fund those regulatory agencies to the same degree as FDIC, then we are saying that one kind of $100,000 loss is more valuable than another kind of $100,000 loss.
The idea that one $100,000 loss is worth more to protect than another one is patently stupid, and yet we make exactly those kinds of decisions every day.
It boils down to recognizing that property rights are equal, and they deserve equal protection, no more, and no less.
Which is what that equation says: you can have more specific regulatory control, which will protect YOUR property, but it might not result in a lower Total Cost.
If that happens, it is because someone is claiming that their $100,000 is worth more than someone else's.
RH
"usually - because the pay and benefits are lower."
A faulty arguent, then. This is exactly what I said, someone is looking at part of one term in the equation.
You lower production costs by lowering pay and benefits. But that also lowers the benefits in the externalities term (jobs created not related to production, for example), and since benefits are a negative cost, such a move would lower the costs of one term and raise another term.
The Total Costs might be higher or lower or the same, but you cannot tell by looking at part of one term only, consequently you cannot make a decision that way.
At least not a good one.
RH
We have practice and theory.
I'm suggesting that we practice the theory.
RH
Ray - you would need a protocol to invoke the theory....
it would require.. essentially what those who are concerned with global warming advocate - known as wall-to-wall analysis of the energy/pollution aspect of a given fuel.
except your equation would require things like figuring out the dollar cost of opportunity lost.. which is virtually impossible to do on a calculated basis...
it's like transit supporters claiming that for every dollar spent on transit that 5 are created (I just threw numbers here)....
I'm not opposed to rudimentary exercises to do a reality-check but what you're advocating just is not practical... and even if it were done -you'd be severely disappointed because you're only looking at the things you thing would benefit you - when others get involved and advocate that other areas be included.. you'd probably lose more than you'd gain.
Ray - you would need a protocol to invoke the theory....
it would require.. essentially what those who are concerned with global warming advocate - known as wall-to-wall analysis of the energy/pollution aspect of a given fuel.
except your equation would require things like figuring out the dollar cost of opportunity lost.. which is virtually impossible to do on a calculated basis...
it's like transit supporters claiming that for every dollar spent on transit that 5 are created (I just threw numbers here)....
I'm not opposed to rudimentary exercises to do a reality-check but what you're advocating just is not practical... and even if it were done -you'd be severely disappointed because you're only looking at the things you thing would benefit you - when others get involved and advocate that other areas be included.. you'd probably lose more than you'd gain.
You would need a protocol to invoke the theory.
Yes, and that protocol is well known and established.
For example:
"More evidence that the VSL is about $6 million
From GoBlueRidge.net (Bear Safety Tips ...):
[Ranger Linda] Barnes [of the Blue Ridge Parkway], “Only about one in every 600,000 black bears will actually fatally attack. Grim as it sounds, being murdered is 90,000 times more likely.”
If you are willing to pay $10 to avoid a black bear then your value of statistical life is $6 million:
$6,000,000 = $10/0.00000167"
From Environmental Economics.
VSL is pretty generally acknowledged to be somewhere around $6 million. If you can settle that, or at least agree on a range, then a lot of th eother things that are considered subjective go away.
To a large degree these things are only considered subjective because we are raised to believe they are. But, in everyday life we can observe and measure risky behavior with known outcomes. Despite the fact that we are raised to believe in the sanctity of life, in our every day actions we routinely put a price on it.
The protocol isn't hard, it is just tedious and meticulous.
For some activities it is pretty easy. We have statistics on red light crashes, we spend X money on stop light cameras and crashes go down and revenue goes up. You spend more money on cameras and crashes go down some more. But eventually you get to where buying more cameras does not have enough result to make it worth while. The government regulation component has risen too high and total costs start to go back up.
But, if you think that the sanctity of life is perfect, that everyone has the right to be absolutely be protected from death or injury in red light collisions, then no amount of money is too much to spend on cameras and other enforcement.
Some people think they have an absolute right to be protected from every possible pollutant and no amount of money is too high a cost to pay to enforce that right.
RH
"you're only looking at the things you thing would benefit you - when others get involved and advocate that other areas be included.. you'd probably lose more than you'd gain."
Not at all. In fact that is the whole point. As long as their data is correct and they can show a strong likliehood that Total Costs go down, then why would I object?
Other areas SHOULD be included. That is the whole point of a total systems analysis. But, we limit the system by considering the limits of its effects. Usually, after two or three levels of transactions, the next level of externalities is too small to affect the overall answer. Or the effort to find out costs more than the likely result. In other words that Total Costs equation also applies to systems anlysis itself.
You look at ALL the inputs and ALL the outputs that are likely to make a difference in the total costs. You stop looking when it costs more to look than the results will warrant.
e know what the ozone levels are in various cities, and we can compare them to the incidence of asthma and other respiratory diseases. From that we can make pretty good guesses as to what is worthwile doing, and where.
All the protocol says is that having done that, you have an obligation to go back and capture the new data. If the increased regulation does not have a measurable effect that is worth the cost, then you need to remove that regulation and go find a better one to enforce.
But, we don't do that. Politically, we say this is a good thing, we institute FDIC, and we live with it forever, whether it is a good idea or not.
How many people have ever collected on their $100,000 dollars of FDIC insurance, and what did it cost to run FDIC to make sure that happened.
Flip side, how many more people would have lost out without FDIC? it is the traffic camera problem all over again. Sure, someone is going to figure out that traffic cameras increase rear end crashes, and that costs something. OK, you have valid data, and it materially affects the results, then it belongs in the analysis. I have no problem with additional data that meets the protocol.
The people with a problem are the ones that think ANY externality, no matter how small and remote, requires massive government intervention. The people with a problem are the ones that think that ANY externality, no matter how big and imminent also deserves a massive response from government.
Instead, the analysis might show that no matter what you spend, you are doomed anyway, in which case there is no point in spending on prevention: you might as well spend it on champagne.
If global warming is going to kill 80% of the population and reducing combustion enough to prevent global warming is also going to kill 80% of the population, then what is the point, other than you get some control over WHO gets eliminated?
That is what this is going to come down to, and it is going to be ugly. Whose life is worth more? Whose property rights have more value?
What the protocol says is that they are all equal.
RH
" If global warming is going to kill 80% of the population and reducing combustion enough to prevent global warming is also going to kill 80% of the population, then what is the point, other than you get some control over WHO gets eliminated?"
one false premise after another...
how about nobody dies and 50% end up with debilitating illnesses instead that degrades their lives .. their ability to be productive.. their ability to contribute time on task...
the world does not work the way you'd like it to.
the world is much more complicate than black and white... even gray.. can and does vary with different variable that are themselves dynamic.
Ray.. you'd spend the rest of your life figuring out why, "in theory" your car should get 38.7 mpg and instead it gets 38.2.
then you'd find out that one of your tires wasn't exactly the same weight or roundness of the others...
experiments ONLY work if you can hold everything but what you are studying - fixed and the world simply does not work that way.
you know the phrase - "your mileage will vary" is so true.
some folks needs set of brakes every other year. some folks don't need a brake job until 80,000 miles... or 3 years..
"one false premise after another..."
The argument is started with an IF. There is no false premise although the numbers are (deliberately) exaggerated to make a point. The same argument will hold true, whatever numbers you choose.
You simply cannot expect to make drastic reductions in combustion without making drastic changes in peoples lives, and drastic reductions is what it is going to take in order to prevent the drastic consequences being supposed in order to drive the combustion reductions.
Long term, the issues will turn out to be different, but given the economic facts today and our dependence on fossil fuels, the short term plans can be expected to kill a lot of people - one way or another.
RH
"Ray.. you'd spend the rest of your life figuring out why, "in theory" your car should get 38.7 mpg and instead it gets 38.2.
then you'd find out that one of your tires wasn't exactly the same weight or roundness of the others... "
Precisely my point.
There IS a reason and a balance for everything, if only we are not too greedy to admit it and too lazy to look for it.
RH
"some folks needs set of brakes every other year. some folks don't need a brake job until 80,000 miles... or 3 years.."
I'm still using the original brakes, after 140,000 miles - and they are still in good shape. I figure that if you have to use the brakes, you are admitting to a serious error in judgement.
RH
You are right. The world does not run the way I wouldlike it to. for example this blog, if I remember correctly made an enthusuastic and optimistic post about the Paris bicycle sharing program.
If the world ran the way I would like it, there would be a follow up post to measurte its success or learnt the reason for its failure. (primarily, lack of property rights.)
I understand it is human nature not to look back when you are wrong. It is scientific nature to do exactly that.
All I say is if you make a claim, propose a way to measure it, and then do so. We don;t argue about how many feet in a yard or how long a yard is. But then we spot the ball by eye and then bring out the chain to measure.
At least we bring out the chain. Environmental alarmists are not even willing to do that.
RH
More evidence that we can measure anything, if we just try.
"A recent unpublished study links changes in state laws on mandatory helmet laws to the supply of transplantable organs, showing that where and when helmet wearing was no longer required, the supply of organs for transplants in the state increased."
RH
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