Wednesday, June 30, 2010


The website for Cracked Magazine has some good economics--explaining how laws based on good intentions backfire and cause harm. Their six examples are: Smoking bans in bars cause more drunk driving,; sex offender laws make them harder to track; fishing restrictions mean smaller fish; the Endangered Species Act endangers species; boxing gloves mean more head injuries; and the Paperwork Reduction Act does nothing of the sort.

Monday, June 28, 2010

Bad ideas

I liked this line in a Wall Street Journal editorial:
Like many bad ideas, the current Keynesian revival began under George W. Bush.

Monday, June 21, 2010

Good intentions are not enough

From a commencement speech from Justice Scalia's, cited in Commentary's blog:
More important than your obligation to follow your conscience, or at least prior to it, is your obligation to form your conscience correctly. Nobody — remember this — neither Hitler, nor Lenin, nor any despot you could name, ever came forward with a proposal that read, “Now, let’s create a really oppressive and evil society.” Hitler said, “Let’s take the means necessary to restore our national pride and civic order.” And Lenin said, “Let’s take the means necessary to assure a fair distribution of the goods of the world.”

In short, it is your responsibility, men and women of the class of 2010, not just to be zealous in the pursuit of your ideals, but to be sure that your ideals are the right ones. That is perhaps the hardest part of being a good human being: Good intentions are not enough. Being a good person begins with being a wise person. Then, when you follow your conscience, will you be headed in the right direction.
A lot of evil can be done by good people pursuing bad causes. A lot of harm can be done by people with good intentions but who do not understand basic economics, which is why the notion of unintended consequences is central to the subject.

Saturday, June 12, 2010

Perceptions and reality

From an article about a Massachusetts controversy:

“In politics, image and perception overrules reality every time,”

That pretty well summarizes the 2008 presidential campaign.

Falling debt

From the Real Time Economics Blog of The Wall Street Journal:
As of the end of March, the average U.S. household’s total mortgage, credit-card and other debt stood at 122% of annual disposable income, meaning it would take a bit more than 14 months to pay it all off if everyone stopped spending money on anything else. That sounds like a lot, but it’s better than it was before: At its peak in the first quarter of 2008, the debt-to-income ratio stood at 131%. Economists tend to see 100% as a reasonable level, so we’re almost a third of the way there.

In fact, people are making much more progress in shedding their debts by defaulting on mortgages and reneging on credit cards.

Since household debt hit its peak in early 2008, banks have charged off a total of about $210 billion in mortgage and consumer loans, including credit cards. If one assumes that investors suffered at least that much in losses on similar loans that banks packaged and sold as securities (a very conservative assumption), then the total — that is, the amount of debt consumers shed through defaults — comes to much more than $400 billion.

Problem is, that’s more than the concurrent decrease in household debts, which amounts to only $372 billion, according to the Federal Reserve. That means consumers, on average, aren’t paying down their debts at all. Rather, the defaulters account for the whole decline, while the rest have actually been building up more debt straight through the worst financial crisis and recession in decades.