I’ve been busy for a while. So long as a matter of fact I almost forgot how to log back in to post to the site. The site is still set up so that you need to log in to post comment but please don’t let that deter you – just sign up or write me and I’ll set you up with an account.

I hope to post about once a week and hopefully on a wider range of topics than previously (but we’ll see). A brief one in the neglected realm of politics follows … :-)

I hope the few people that comment here are not put off but I needed to change the comment policy to require user registration. I was getting upwards of 20 spam comments a day and it got difficult to read through them all to see if there were any legitimate posts. Please go ahead and register. Anyone that doesn’t want to go through all that trouble then just write me and I will add them manually.

What did I tell you? GM management fails in a competitive market and we taxpayers will pick up the tab – or so the Washington post reports. The industry and the government are avoiding calling it a bailout but in fact it will cost the tax payer many many times more than the Chrysler bailout. The post reports:

Taken together, however, the components of their wish list would cost tens of billions — far more than Chrysler ever dared to seek.

Both Ford and GM are attempting to circumvent notice when asking the corporate welfare minded Republican party for a series of tax breaks and grants. Read the post’s report … and weep. A bailout by any other name is still a bailout.

Every once in a while, when I’m feeling a bit rambunctious, I visit the left wing site Alternet.org and post a few comments on some of the articles on the site. Today I found an article that I agreed with right up until the last few paragraphs – and that frightened me. It doesn’t frighten me for any reason that might include a changing of my views on issues; that happens frequently enough, and when it does, it certainly never frightens me.

The article is on the enormous national debt and the effects it may have on our future. It made perfect sense – right up until the end of the article, where it started lamenting all of the social programs that might get cut as a result of the debt.

What I’m actually afraid of, now that the left and the Democrats are beginning to take up the call for fiscal accountability, is that much of America will simply “consider the source” and write it off as more left-wing prating, like so much of what comes from that corner.

… and to go along with theme of socialists being disconnected with empirical reality, Mike Adams says tongue-in-cheek

Our college campuses have become the last safe haven of Marxists, largely because its adherents have never had to survive in the real world, much less in a communist dictatorship. Indeed, there are more communists teaching in the State of North Carolina than there are in the former Soviet Union.

Mike Adams – Professor at the University of North Carolina Wilmington

I am not an economist and therefore welcome correction if anyone percieves a misunderstanding in what follows.

As I said in my last post, I am not dedicated to the idea of a completely laissez faire (or hands off) governmental approach to the economy. There are three reasons. First is the threat of monopolies and like entities – by removing competition they remove appropriate incentives. The second is related to the first; it’s that the government can play a positive roll in legislating aspects of the playing field that encourage competition (for example, “truth in labeling” laws). Finally, and perhaps most importantly, the government has a roll in the regulation of “external costs.”

Economist Thomas Sowell says

Economic decisions made through the market place are not always better than decisions that governments can make. Much depends on whether those market transactions accurately reflect both the costs and the benefits which result. Under some conditions, they do not.

He goes on with examples of two different transactions to compare and contrast the “costs” involved.

When someone buys a table or tractor, the question as to whether it is worth what it cost is answered by the actions of the purchaser who made the decision to buy it. However, when an electric utility company buys coal to burn to generate electricity, a significant part of the cost of the electricity-generating process is paid by people who breathe the smoke that results from the burning of the coal … medical costs paid by these people are not taken into account in the marketplace because these people do not participate in the transactions between the coal producer and the utility company.

“External costs” then are those that are borne by those outside the parties to the transaction. Since incentives do not exist within the transaction to account for these costs, it is often necessary for government to do so. Often government can do so indirectly. That is, rather than directly regulate external costs, often governments can cause those costs to become internal to the transaction.

What happens then when the principle of “external costs” and the affects of incentives (or their lack) are applied to government run industries and endeavors? A government has even less direct incentive to manage external costs than a private corporation or individual. In a society where the public has some recourse against a negligent company there is at least some disincentive to help keep down these costs. In the case of a government these mechanisms weakened further and, in the case of our system, rely almost exclusively on the election cycle and the memory of the populace.

This is perhaps what has lead to the recent environmental catastrophe China in the city of Harbin, Heilongjiang province (thanks for the location correction Wendel). Britan’s Guardian has a recent article on a mass pollution of a main water supply for the region. The article doesn’t provide enough details to understand exactly what the circumstances are in this case but it no doubt has a bearing on a discussion of “external costs.” An incentive to reduce the possibility of such catastrophe needs to be internalized or regulated in some way. In this case either the government is responsible for the spill, or a private company resulting from China’s recent experimentation with the free market is. While it is more than likely the former in the still communist country, that only makes the situation worse. As explained, governments, especially those not answerable to a knowledgeable and informed people, are even less likely to consider such costs in their transactions.

About a year ago I began wondering when GM would go out of business. The clearly inept management that put all of its eggs in “cheap gas forever” basket, along with repeated concessions to the auto workers unions, and finally the fact that one of the company’s most (if not only) profitable divisions is its financing arm, has lead to the VERY predictable situation they find themselves in now; that of laying off about 30,000 employees as they teeter on the verge of bankruptcy. The question is, how long will it take for the Republican’s to open our wallets for more corporate welfare in the form of another bail out?

GM should go bankrupt. The free market provides strong incentive to produce products that the pubic wants at a price they will pay while competing with others trying to do the same thing. That incentive comes in the form of the potential for extinction. It should be obvious that the best thing for the automobile industry, as well as the public, is to allow this incentive to remain as strong as possible. Any bailout, no matter how small, would serve only to erode it.

A week or so ago Italian TV aired a documentary on the US use of a banned (arguably) chemical weapon during the asault on Fallujah with effects similar to that of napalm. It’s called White Phosphorus. The documentary has caused a stir in Italy that is still reverberating across Europe and iliciting responses from the military (see the bottom page on that previous link and compare to the BBC coverage here) in the US. It seems either I missed it, or the US press has yet to pick up the story.

It looks like I’m going to need to throw out my foil helmets. According to studies done at MIT’s Media Laboratory, they apparently don’t work – or maybe they just want you to THINK they don’t work.

Thanks to Daniel Drezner for the link.

I was on the verge of removing nykola.com from my list of links because she hadn’t posted in over a month when my RSS subscription to her site woke up. It’s good to see you back Ambra!

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