Government and culture

Matt Yglesias:

My view is that the biggest relevance of Southern Europe to the United States is the current high social prestige enjoyed by the twin ideas that the social responsibility of a corporation is to be profitable and that the primary moral and legal obligation of a corporate manager is to enrich shareholders. These ideas combine to create a toxic moral climate that is undermining the social context in which a successful market economy can flourish.

In a healthy society, a business leader might invest time and resources in rent-seeking but he wouldn’t brag about doing so and certainly he might choose to take the honorable path and not do it. But the current paradigm in the implicit US political philosophy is that he has a moral obligation to divert resources away from R&D and toward lobbying if the ROI on lobbying is higher. It says he has a moral obligation to find ways to trick customers into overpaying if he can find them. It says he has a moral obligation to violate regulations if the Net Present Value of paying the fines when you are caught exceeds the cost of compliance.

In other words, it replicates Banfield’s amoral familism but with shareholders replacing the nuclear family as the local of ethical thinking.

This is all further exacerbated by the ideas of Public Choice Economics which tend to move from (correctly) asserting that government institutions’ performance is often undermined to some extent by the self-interest of government officials to a kind of perverse fatalism which suggests that wholly selfish and inept behavior is all that is possible from public institutions.

I once talked to an investment banker from northern Europe who was surprised at how much money American banks spent on lobbying.  His bank did didn’t even have a lobbying department.  I suppose you can think about that in one of two ways. Banking regulation in his country was probably far less complex than in the US, and so there was less need for lobbyists. Or perhaps the culture was less corrupt than in America—which is itself a less corrupt than average culture, by global standards (at least if you believe survey data, and/or ratings like Transparency international.) So which is it?

My hunch is that it’s both.  More importantly, I think the two interact.  Bad culture producing bad governance, and bad governance produces bad culture.  And by “bad governance” I mean complex regulations, which push firms away from wealth creation and towards rent seeking.  I’ve talking talked to more than one businessman who straight out told me that his business was regulatory arbitrage in the financial sector.  They made money by talking taking advantage of poorly designed regulations. Over time, that surely must have a negative effect on culture. Lobbyists would try to get even more government regulation, to open up more rent-seeking opportunities.

Off topic, also over at Vox.com there is an article on whether you should drive with one foot or two feet.  Over at Econlog I have a new post that mentions my daughter getting a learners permit.  The Vox article suggests that driving with two feet is safer, if you drive an automatic transmission car.  That’s actually the way I’ve always driven, and it feels safer to me.  But I was told that mine was the wrong way, and hence I was planning on teaching my daughter the “right way.” Now I don’t know what to do.  Any thoughts?  Keep in mind that’s it’s extremely unlikely that my daughter would every drive a manual transmission car.  Like 1000 to 1 against, even if she learned to drive the standard way.  (My Italian readers are requested not to reply to this question; I already know what you are going to say.)

PS.  When they ask how much you’ve given to charity, how come they never ask about the auto insurance we are forced to buy?  I’ve contributed maybe $20,000, and (knock on wood) never pulled out a cent (except when a branch fell on my car.)  I’m subsidizing the horrible Boston drivers—why isn’t that charity?

HT:  TravisV


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111 Responses to “Government and culture”

  1. Gravatar of Morgan Warstler Morgan Warstler
    19. July 2015 at 05:29

    The “rate sucker” commercials by Progressive will be redone as attacks on Obamacare.

  2. Gravatar of Morgan Warstler Morgan Warstler
    19. July 2015 at 05:50

    I already did this with my discussion of Fast and Furious. Yglesias frame is WRONG. This is WRONG:

    “My view is that the biggest relevance of Southern Europe to the United States is the current high social prestige enjoyed by the twin ideas that the social responsibility of a corporation is to be profitable and that the primary moral and legal obligation of a corporate manager is to enrich shareholders. These ideas combine to create a toxic moral climate that is undermining the social context in which a successful market economy can flourish.”

    Southern Europe’s problem is FAILURE of culture to let the best and brightest RULE their countries as free market gods. Period. The End.

    Read this article about Greece not privatizing:

    http://www.usnews.com/news/business/articles/2015/07/18/greece-does-about-face-pledges-big-privatization-push

    When you get down into it, the entire issue here is about Greeke elites not wanting to PRIVATIZE EVERYTHING. If they did, massive investment $ floods in.

    That’s the ONLY problem.

    I repeat what s the problem in Southern Europe?

    The elites are desperate to keep the right men from being their gods. They do not want to be a free market.

    This isn’t about corporate responsibility, it is about PUBLIC SECTOR RESPONSIBILITY.

    Govt’s job is to create a sense amongst their employees that they are GRUNTS. They don’t get the women, the money, the status.

    If a Govt fails to instill this sense in their people you get corruption.

    Silver bullet: Greece should pass a law that anyone public employee taking a bribe on camera will be executed int he public square. The guy with the camera should get to pay no taxes.

    You can’t have tax collection problems if the game is structured so tax collector gets shot if he takes a bribe, and the tax criminal gets what he wants: paying no taxes.

    Matty ia a liar.

    He ALSO wants to see status flow to public sector.

    No country can survive with that mindset. The best and brightest either leave or become lazy non-productive public sector thieves.

    In the US I’d put a “windfall tax” on for elected officials that takes 90% of their income after they are worth more than 10M in assets.

    these aren’t tough problems. Just get the game rules right, and the best and brightest go do what matters.

  3. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    19. July 2015 at 06:46

    FDR had two lawyers–Tommy ‘the cork’ Corcoran and Ben Cohen–write much of the New Deal legislation (the SEC Act, for one). Cohen quickly jumped back into private practice and became wealthy advising clients on how to avoid those same regulations.

    Corcoran stayed inside until after FDR died. Harry Truman ordered the FBI to tap Corcoran’s telephone on the principle that Truman knew he was a crook. That tapped phone produced telephone conversations between Corcoran and John Stewart Services’s lawyers manipulating the Grand Jury proceedings in the Amerasia Spy Case. Service was not indicted, just as Corcoran predicted.

    Joseph McCarthy had those transcripts leaked to him by someone in the FBI and put Service in McCarthy’s cross hairs. Service was one of five named by McCarthy in his famous 1951 Wheeling West VA speech.

    So, this is nothing new.

  4. Gravatar of Mark Mark
    19. July 2015 at 06:58

    Two big problems with the Yglesias formulation. The first is pointed out by Warstler above. The second is his explanation of why a firm might spend more on lobbying than on R&D. He’s confusing cause and effect. A business person does not awake in the morning and say “hey, let’s spend money on lobbying!”. The why is actually because of Yglesias and folks like him who favor regulation as a general proposition. In the world they’ve created everyday your company is potentially at risk from regulations and the bureaucracy. You’re not going to be doing R&D at all if your business model is destroyed by government action. It’s not about morality, it’s about survival.

    If you want less money in politics make politics about less.

  5. Gravatar of Mark Mark
    19. July 2015 at 07:11

    Then there is his comment:

    “It says he has a moral obligation to violate regulations if the Net Present Value of paying the fines when you are caught exceeds the cost of compliance.”

    I worked for two large companies in the compliance area over a period of 30 years. At both we did not decide whether to disobey a regulation. Whatever the laws were we were going to comply, even if we thought them silly, counterproductive or overly costly. But again, that’s why we would lobby to change them. I worked with many in other companies and never heard anyone use the calculus Yglesias sets forth. This sounds like something he picked up in a college class.

    Of course I didn’t work in financial services!!

  6. Gravatar of Ray Lopez Ray Lopez
    19. July 2015 at 07:15

    One foot, since it’s the right way. One foot good, two feet bad.

  7. Gravatar of ssumner ssumner
    19. July 2015 at 07:28

    Lots of good comments (excluding Ray of course.)

  8. Gravatar of Bubble Monger Bubble Monger
    19. July 2015 at 07:59

    But who says that the insurance companies don’t have a limit on what they pay out to a driver that files an unlimited amount of claims.

  9. Gravatar of collin collin
    19. July 2015 at 08:06

    I am not sure why political lobbyist has increased so much in the US since 1980? Maybe, the value of lobbying a really big country has incredible consequences on your bottom line. (If a bank can lower than reserve ratio by 1%, that can be billions of profit.) Otherwise, the big change in the US economy is how flat it truly is. So many businesses are national where a lot of business before 1980 was local. Just think how many chain restaurants or banks as compared to 1980. (Multiply that times wholesales and grocery stores, etc.) And these businesses had more influence over state and local governments who were a lot more corrupt 50 or 100 years ago than today. (Today corruption scandals compare nothing to the scandals of the 1970s and there is no way a Huey Long could exist today.)

    Well, there are rays of sunshine…Oregon has passed legislation for over the counter birth control! (Damn Oregon always beats Cali on being the most liberal state!)

  10. Gravatar of collin collin
    19. July 2015 at 08:21

    Outside of economics, the US has so much lobbyist because our nation has too much influence of global politics. And we are seeing that in the Iran nuclear deal as specific lobbyist are turning their efforts to 11 agasint or for it.

    That said why are libertarians NOT cheering this deal more? Arnold Kling, Tyler Cowen (it seems) and Reason opinions are it is a shitty deal but what are going to do about it. If libertarians truly wants less military adventures, shouldn’t they be cheering and supporting the deal more?

  11. Gravatar of Tom Brown Tom Brown
    19. July 2015 at 08:22

    “His bank did even have a lobbying department.”

    Should have been “didn’t?”

  12. Gravatar of Tom Brown Tom Brown
    19. July 2015 at 08:24

    “They made money by talking advantage of poorly designed regulations.”

    Should be “taking?”

  13. Gravatar of Tom Brown Tom Brown
    19. July 2015 at 08:35

    @Mark, “Of course I didn’t work in financial services!!”

    …or mining?

  14. Gravatar of gappy3000 gappy3000
    19. July 2015 at 08:49

    So Yglesias makes a catchy (but superficial) parallel between amoral familism and shareholder capitalism. I can’t resist noticing that Bandfield was a good friend of Milton Friedman! How could they be friends?? What’s good for one is bad for the other! I think Yglesias thesis should be testable. Banfield was recording the number and popularity of associations. A similar index, and trend thereof, should be possible for companies. Ditto, for corporate parternships and lawsuits. This deserves some investigation.

  15. Gravatar of Dustin Dustin
    19. July 2015 at 08:56

    I agree with Morgan’s comment. But this also gives me pause when Scott makes statements like ‘I love Greek culture’; I suspect this is a merely an ad-lib about daily lifestyle in Greece (though maybe from a tourists perspective?) and so not a contradiction.

    Mark,
    I’ve done consulting work in compliance, including FS. While I’ve never seen anything so explicit as NPV calculations, it is the case that costs of non-compliance are accounted for as part of the decision process around investment of firm resources, though it is a bit more fluid and implicit.

    Think of it this way. There is not such thing as ‘compliant’. Instead, operational controls provide only a relative probability of compliance. A firm can continue to invest resources to enhance controls and so reduce the probability of non-compliance, but at some point the costs of doing so become prohibitive while a residual risk of non-compliance remains. It is here where such marginal investment and ROI considerations make sense, and such considerations are rather appropriate and in no way reflect an apathetic, red-in-the-claw, greedy business culture.

    For clarity, costs of non-compliance are not limited to regulatory actions and do include repetitional impacts, etc…

  16. Gravatar of ssumner ssumner
    19. July 2015 at 09:28

    Bubble, Yes, why?

    Collin, I support the Iran deal (although it’s not my area of expertise.)

    Tom, Yikes, that’s what happens when I forget to proofread.

    Dustin, I find it sad that people think culture is primarily about economic relationships. People in Greece were really nice to me even if they had no economic incentive to help me out. I can think of other European countries (and parts of America) where that’s not true.

  17. Gravatar of Morgan Warstler Morgan Warstler
    19. July 2015 at 09:32

    collin,

    Real Libertarians are anti-butter.

    Oh your going to spend that dollar on bureaucracy or welfare? Better to spend it on defense.

    In order to get Libertarians to be antiwar, the SAVINGS has to ALL flow to tax cuts for those who actually pay income taxes

    This is why Dems are not actually anti-war, they are just favor butter over guns.

    If they were really antiwar they offer massive tax cuts to GOP voters if they took cuts to military.

  18. Gravatar of Tom Brown Tom Brown
    19. July 2015 at 09:34

    @Scott, what business wants more competition? They’ll always take measures to avoid it (trusts, lobbying, etc).

    @Morgan, my dad was a public sector employee who helped develop many weapon systems. Look up the history of the Sidewinder missile (AKA “Local Fuze Project 602”) for example. I grew up on that remote desert base and knew those engineers and scientists. I’d describe them as dedicated and innovative. They didn’t always play by the rules, but they did get things done, often in record time. Perhaps it was a unique circumstance, but I suspect that kind of culture exists or existed at some other government labs (read Feynman at Los Alamos for example).

    I can see where there might be some unintended consequences to your tax collector bribery mitigation scheme too. Fabricated evidence perhaps? Should anybody caught trying that get the death penalty as well?

  19. Gravatar of Frank Tobin Frank Tobin
    19. July 2015 at 10:43

    Two feet. That’s how I’ve always driven, taught by a professional truck driver in my driving class, and I’m 100% sure it’s safer. It’s a personal sticking point of mine.

    1) You can cover the brake while still hitting the gas, or just cover both the brake and gas simultaneously, reducing reaction time. I think this obvious, and the strongest argument.

    2) You’re much, much, much less likely to accidentally press the wrong pedal in an emergency than with one foot. It’s harder to get which foot wrong than placement.

    4) If cars were just invented today, and they were only automatic, would you recommend one foot or two? I think you’d do design for two. Why in the world would you do one foot? The *only* reason we have one-footers is legacy.

  20. Gravatar of ssumner ssumner
    19. July 2015 at 10:46

    Tom, They never like competition. But they can’t stop it without help from the government. That’s why they lobby.

    Thanks Frank, That’s why I’ve always used two feed, quicker reaction time.

  21. Gravatar of Dustin Dustin
    19. July 2015 at 10:57

    I agree, Scott. My tailor is Greek – Alexis. I always have to plan extra time for visits to allow for conversation about weekend plans, family, upcoming vacations etc. I once took an article of clothing to get a button replaced, he told me he’d have it ready in 5 minutes if I went next door to get him a cup of coffee. I find that type of informal, people-oriented interaction very endearing and sometimes lacking in the U.S.

  22. Gravatar of Christian List Christian List
    19. July 2015 at 11:34

    It’s two feet of course.

    Since you’ve only mentioned Italians I can still say it: Get a car with manual transmission.
    Automatic transmission is not really driving.

    I think the problem in the US lies deeper. It might be the practical driving lessons. Or in other, harsher words: Any idiot in the US is allowed to drive.

    The last time I was in the US (in this case New Jersey) you had to pass a simple multiple choice test and then you needed exactly 0 driving lessons. After your 0 driving lessons you had to drive a car around the block. Around the block! That was the whole “test”. I don’t know what you are testing with this test but trust me it’s not the ability to drive. And after that “test” you get your driving licence. The advantage of this procedure is of course the costs: It’s pretty cheap to get a driving licence in the US. But there also might be a huge downside: A lot more road fatalities per 100,000 inhabitants per year than in other countries with comparable living standards.

    In most Western European countries for example it’s a lot harder to get your driving licence. In most countries you need to go to a driving school where you have to drive a minimum amount of hours in the city / overland / at the highway / at night and so on before you are even allowed to take the driving test. The driving test itself got a practical part in which you are driving for 45-60 minutes with driving examiner in the back who is giving you tasks and is really testing your driving skills. The failure rate of this practical test is pretty high, around 30% fail at their first try. Failing means that you have to go back to driving school and do some extra training.

    Oh and did I mention that everybody has to learn manual transmission?

    Different regulation might be the reason why the road fatalities per 100,000 inhabitants per year are between 3-5 in Western European countries compared to 12 in the US.

    With 12 the US plays in the same league as Ukraine and the United Arabic Emirates, and comes pretty close to Zimbabwe’s 14. Luckily the US is not as bad as Uzbekistan in this category. The US is actually worse because Uzbekistan got 11. 😉

  23. Gravatar of Kevin Erdmann Kevin Erdmann
    19. July 2015 at 12:20

    It’s all about low barriers to entry. Yglesias occasionally finds a nut when he realizes that is the case – like in metropolitan housing policy. Most of the time, progressive policies are very friendly to large, established firms. Elizabeth Warren’s economics program basically insures work for both (1) large, established firms and (2) Elizabeth Warren.

    Rents are available in finance, alternative fuels, transportation infrastructure, real estate, defense, etc. The reason firms can seek rents in those areas without capturing our ire is because the existence of those rents reflects the demands of the electorate. It’s certainly not “free market fundamentalists” who are pushing for all these things.

    I think Milton Friedman made a rhetorical error on this issue. In the aggregate, it would be very difficult for large firms to do anything but be “socially responsible” by general standards.

    http://idiosyncraticwhisk.blogspot.com/2015/03/the-problem-with-corporate-social.html

  24. Gravatar of Gordon Gordon
    19. July 2015 at 12:26

    While I can see the validity of the reaction time and negation of pedal error arguments for two foot driving, I do wonder about a couple of things. First, there have been times in the past in which I have been behind someone who was likely a two foot driver. The reason why I believed this is that their brake lights were coming on too frequently and under conditions in which a single foot driver would not be touching the brake pedal. I dislike being the person behind such a driver because the brake lights have lost meaning and it creates uncertainty about what actions I need to take when their brake lights come on. Second, there have been studies that have found that safety devices cause an increase in careless behavior that can lead to accidents. I wonder if some two foot drivers who feel they have an edge in reaction time have a tendency to tailgate or engage in other risky driving behavior.

    I would love to see a study of two foot versus one foot drivers that take these possibilities into account. Though in the long run, I expect that automatic braking systems will become common enough to make this debate meaningless.

  25. Gravatar of Frank Tobin Frank Tobin
    19. July 2015 at 12:40

    Just a note regarding manual transmission, I don’t think electric cars have this. The whole idea of shifting may be well on its way out in a decade or two.

  26. Gravatar of TallDave TallDave
    19. July 2015 at 12:41

    Fiduciary duty isn’t a moral plague. Free market works because the gains are eventually captured by consumers, because consumers control the transaction. All producers can do is make offers. Some of those offers will be better than others, but that’s a subjective call. Is Coke better than generic cola? Should I buy the product LeBron James endorses? Those are complicated questions and one man’s deceit is another’s desire.

    It says he has a moral obligation to find ways to trick customers into overpaying if he can find them.

    And consumers try to get producers to accept less. In fact, so does everyone in the supply chain: there’s a famous case study in accounting in which Wal-Mart’s pricing drove its supplier Vlasic out of business.

    It says he has a moral obligation to violate regulations if the Net Present Value of paying the fines when you are caught exceeds the cost of compliance.

    The government controls the rules of the game. If the rules of the game create bad incentives, that is not the fault of the players, that is the fault of the rules.

    Why does lobbying have better ROI than investment? Same reason Congress beats the market every year — the government has been generating exponentiating and increasingly arbitrary, politically-driven, rentseeking-focused regulations.

    When you make the government more powerful, complex, and capricious, you unavoidably increase the returns to lobbying.

  27. Gravatar of Steven Kopits Steven Kopits
    19. July 2015 at 12:50

    Yglesias is right. A business culture is geared around profit maximization.

    This includes charging more for less, and paying less for more. But this imperative affects both customers and vendors, so it’s really a matter of who is on top at any given moment.

    McKinsey has at times referred to the ‘quality’ of earnings, which can mean either the stickiness of customers or the long-term sustainability of the business.

    A company that does repeat trade with its customers develops a sense of tolerances of its customers for quality and price, as well as the competitive landscape and its position therein. Over time, in competitive markets, this tends to create good quality products at affordable prices.

    There can be significant dislocations within individual companies lasting years, and within industries for decades, if government policy allows it(eg, cable). Yglesias is certainly right about that. If you’ve worked for more than two or three companies, you’ll have experienced that first-hand.

    On the whole, however, strong competition leads to good prices and high quality.

  28. Gravatar of Don Geddis Don Geddis
    19. July 2015 at 12:57

    @Steven Kopits: “Yglesias is right. A business culture is geared around profit maximization.

    But that’s not Yglesias’s point. Everybody agrees that business maximizes profits. Yglesias’s claim is that this is a moral failing, and a more ethical culture would require business to do something else (or in addition to) “maximizing profits”.

    If you actually claim “Yglesias is right,” then you need to believe that maximizing profit causes unethical behavior. Do you?

  29. Gravatar of Jim Glass Jim Glass
    19. July 2015 at 13:04

    Yglesias? Is this the same Yglesias whose fiscal analysis was off a mere 30-fold or 50-fold or so when he claimed land taxes “could replace all taxes on labor and investment and still fund an ample welfare state and public sector” — apparently by making the minor mistake of imagining it is possible to tax the full market value of land every year, rather than just the rent produced by the land which gives it is value, which runs about 3% of that, amid a few other oversights.

    And whose legal expertise decried a Supreme Court riven by partisanship thusly: “5-4 decisions have become drastically more common … The justices seem increasingly inclined to write maximalist rulings that can secure minimum winning coalitions, rather than to enter into compromises to secure broader agreement.Oblivious to the fact that the Court had just issued more 9-0 decisions than it had in 73 years. In a lager piece that was wonderfully, babushka doll-like, fractally wrong at every level.

    And whose mastery of political science leads him to dismiss the Constitution of the USA — the longest running constitutional regime in the world (sorry, UK) and by far the most successful — with …

    American democracy is doomed

    America’s constitutional democracy is going to collapse … when George W. Bush was president and I was working at a liberal magazine, there was a very serious discussion in an editorial meeting about the fact that the United States was now exhibiting 11 of the 13 telltale signs of a fascist dictatorship.

    … reaching the conclusion, of course, that a parliamentary system would be much better, because it solves the awful problem of gridlock …

    In a parliamentary system, deadlocks get resolved. A prime minister who lacks the backing of a parliamentary majority is replaced by a new one who has it.

    Indeed! As in Germany in 1933, and its then-bff Italy too — gridlock promptly relieved to produce all 13 of 13! … Italy more recently 12 times in 12 years until it solved its gridlock problems with Berlusconi … and Greece five times in the last five years, with even finer result. Just a small sampling. What a great record! Really, who wants to stay stuck with the ‘”doomed” American constitutional democracy’ of the last 150 years when we could improve to a system that regularly produces the likes of all that?

    This same Yglesias? The master of producing analysis of this quality gets a serious audience here … why?

  30. Gravatar of scineram scineram
    19. July 2015 at 13:06

    The government controls the rules of the game. If the rules of the game create bad incentives, that is not the fault of the players, that is the fault of the rules.

    Very good point! We should be correcting incentives. All financial, safety and enviromental regulation penalties should carry 5 years prison at minimum, in addition to the fines.

  31. Gravatar of E. Harding E. Harding
    19. July 2015 at 14:22

    One foot until 50 years from now, when all cars would likely have adjusted for two.
    http://jaymans.files.wordpress.com/2014/05/all-race-age-adjusted-traffic-death-rates-county-2004-2010.png
    I wonder how government design impacts the low amount of lobbying in the Nordic states. And how much lobbying goes on in Canada.

  32. Gravatar of Nick Rowe Nick Rowe
    19. July 2015 at 14:49

    Two feet: http://www.vox.com/2015/7/1/8877583/two-foot-driving-pedal-error

    Googling around suggests the risk of unintended acceleration (foot on the wrong pedal) is reduced.

  33. Gravatar of Cassander Cassander
    19. July 2015 at 14:50

    There is no better response to this than James Wilson’s classic The Bureaucracy problem. To quote, “There are inherent limits to what can be accomplished by large hierarchical organizations….Some problems cannot be solved and some government functions cannot, in principle, be done well. Notwithstanding, the effort must often be made. The rule of reason should be to try to do as few undoable things as possible”

  34. Gravatar of Jim Glass Jim Glass
    19. July 2015 at 14:57

    Off topic but perhaps worth noting, as prompt admissions of error from PK are seen so seldom…
    ~~~~~

    “Paul Krugman: ‘I may have overestimated the competence of the Greek government'”

    http://cnnpressroom.blogs.cnn.com/2015/07/19/paul-krugman-i-may-have-overestimated-the-competence-of-the-greek-government/

  35. Gravatar of Ray Lopez Ray Lopez
    19. July 2015 at 15:05

    @Frank Tobin – ‘two feet safer’ – so you are assuming that hitting brake and gas simultaneously will slow a car down faster than moving your foot right to left? Perhaps actually, since brakes are pretty powerful these days, but I like one foot.

    @Christian List – ‘automatic transmission is not real driving’ – for driving in the city it is foolish to have a manual transmission: stop and go, stop and go, you’re just exercising your left leg. Speaking as a driver who used to own a five speed standard BMW (awesome car got me chicks), who has driven a manual motorcycle, and currently drives a Honda fully automatic scooter (fun to drive).

    @Scott Sumner – ‘USA business is rent seeking, while North Europeans are not, South European are’ – perhaps true, but remember why: Bell Corporation in the USA. MCI’s McGowan once said he made more money from his lawyers than his R&D scientists.

    Sumner: ‘Greeks all nice to me’ – this one isn’t, but it’s tough love for your own good. And the ones that were nice to you probably just wanted your tourist money. Most Greeks are taciturn and really not nice to strangers (traditional tales of mountain hospitality from old villagers aside). Filipinos are the ones that are nice to you if you’re a stranger (cries of “Hey Joe!” from literally every corner…. I feel like a rock star here).

  36. Gravatar of Andrew_FL Andrew_FL
    19. July 2015 at 15:16

    “the current high social prestige enjoyed by the twin ideas that the social responsibility of a corporation is to be profitable and that the primary moral and legal obligation of a corporate manager is to enrich shareholders”

    What planet has Yglesias been living on?

    In the first place, being profitable is not a “social” responsibility, it’s an ontological imperative. In the second place, this “idea” has “high social prestige?” Really? Has he looked at any-any-major corporations websites, seen any of their public relations? How many have a “corporate social responsibility page? How many of those are focused entirely on the corporations generation of wealth for their shareholders?

    How does Yglesias propose to make shareholders not influence corporations to generate wealth for them? That’s uh, what they’re shareholders?

    But it’s amazing, he really thinks the way to get around corporations profiting from manipulating government rules, is to make the the corporations care less about profits, and not, you know, get rid of the government rules they manipulate in their favor???

  37. Gravatar of Tom Brown Tom Brown
    19. July 2015 at 15:25

    Scott, you write:

    “Tom, They never like competition. But they can’t stop it without help from the government. That’s why they lobby.”

    That’s why I brought up trusts: Am I misinformed, or was a late 19th, early 20th century trust (e.g. sugar) an arrangement between dominant corporations to limit competition? How is that an example of using government to limit competition?

  38. Gravatar of Tom Brown Tom Brown
    19. July 2015 at 16:10

    …although I guess enforcing the concept of private property in the 1st place is a form of “government intervention.”

  39. Gravatar of Andrew_FL Andrew_FL
    19. July 2015 at 16:53

    Bringing your Big Brother Uncle Sam to the playground to beat up the kid who’s bigger than you is the ultimate anti competitive business practice.

  40. Gravatar of Tom Brown Tom Brown
    19. July 2015 at 17:05

    Scott, O/T, have you taken this test?

    I came out 2.8% Left, 33.3% Liberal. I’m very persuadable on the right left issue and a little less so on the communitarian / liberal axis. And yet I realized that the chance I’ll vote Republican is vanishingly small (like I used to sometimes do 15 years ago and earlier). All I have to see is a debate moderator ask the field “Raise your hand if you believe in evolution” again and if none of the candidates raise their hand (as I’d expect to happen), it makes it easy for me: I can’t vote for an anti-science lunatic or someone pretending to be one. Ever.

  41. Gravatar of Dustin Dustin
    19. July 2015 at 17:55

    Andrew_FL
    I’m not sure what the problem is. Matt says that in a healthy society individuals, even in the capacity of their association with a business enterprise, will give some consideration to externalities. Seems to not be asking much, unless I am missing something.

  42. Gravatar of collin collin
    19. July 2015 at 18:01

    Morgan,

    Real Libertarians are anti-butter. And this why I now ignore Ron/Rand Paul and won’t vote for Rand. Ron Paul stated “Black Caucus only votes against war because they don’t want cuts in food stamps.” In reality, there are a lot left center Democrats (especially minorities in California) who would vote for right economics and anti war President.

    My take is big government and especially the security state did not come about from nothing. NSA wasn’t created because the government simply loves tracking citizens but it was created because we have enemies. If we stop making enemies it will make it easier to pull NSA or programs.

    Anyway, remember second term Clinton and early Bush? Big tax cuts because we won’t spending as much money on the military. High military spending hurts our economy and workers compared to Germany or China.

  43. Gravatar of TallDave TallDave
    19. July 2015 at 18:49

    Tom — businesses can only ever be as powerful as government allows them to be. Governments have all the power to coerce and control, corporations can only engage in voluntary transactions with willing partners.

    One might argue United States v. E. C. Knight Company was decided wrongly (and future courts seemed to do so) but it is not possible to argue the decision itself was the fault of the corporations.

  44. Gravatar of TallDave TallDave
    19. July 2015 at 19:05

    Tom — that’s an interesting hill to plant your flag on, given that belief in evolution has virtually no public policy implications other than whether alternatives to evolution should be taught. Democrats are much less interested in science when it comes to GMOs, nuclear power, fracking, astrology, psychics, whether life begins at conception, and the empirical evidence for free markets. But the media is overwhelmingly Democratic, so you hardly ever hear Democrats asked inconvenient questions like whether a 7 pound baby deserves basic human rights.

  45. Gravatar of ssumner ssumner
    19. July 2015 at 19:30

    Christian, Agree that Americans are not good drivers, but I think you misunderstood the question.

    Also the death rates are biased by the fact that Americans do far more high speed driving. But yes, the Germans would clearly blow us away in any fair test.

    Gordon, Good point.

    Kevin, Good point.

    Frank, I agree, or at least I hope so, as I still don’t know how to drive them (although I did once drive one a long time ago)

    Nick, Good. I thought you’d say one, and isn’t that the same article I linked to?

    Tom, Ask the Dems to raise their hand if they agree with the science on innate differences between the way that men and women think. How many hands in the air? Everyone has their own religion; Christianity, feminism, etc.

    Cartels tend to quickly fall apart without government support.

    I don’t vote Republican either, BTW.

  46. Gravatar of Steve Steve
    19. July 2015 at 20:18

    Lots of good comments above.

    I would add one observation: Both parties, but especially the one starting with a “D”, like to implement policies with “free” benefits and hidden costs. The policy imperative is to impose costs on businesses so that businesses function as de facto tax collectors, taking flack for and passing on the cost of government freebies. The quintessential example of this is Gruber’s tax on cadillac insurance plans, but there are many more from airline fees to bank lawsuits to minimum wages.

    With this observation in hand, we can see that much of the activity of the financial and business sectors is simply taking hidden taxes imposed on businesses and redistributing those taxes back to the taxpayer. Consider packaging of government guaranteed mortgages, offshore subsidiaries, REIT spin-offs, NOL acquisitions, and 29-hour workweeks. Then there is the “independent contractor” model utilized not just by Uber, but also in a form by eBay and Amazon, as well as Apple for app development.

  47. Gravatar of Steve Steve
    19. July 2015 at 20:27

    As far as driving, take heart: Massachusetts is the safest state in the union!

    http://www.iihs.org/iihs/topics/t/general-statistics/fatalityfacts/state-by-state-overview

    Surprisingly, Minnesota is #2 (Nordic drivers?)

    Most of the safe states are snowy northeastern states–but Utah makes the top, despite being surrounded by death traps on all sides. I do wonder what characteristic of Mormons makes for safe driving…

  48. Gravatar of Riccardo Riccardo
    19. July 2015 at 22:37

    Re: Driving, one foot. While it’s true that you can train for two and thereby gain a millisecond stopping time, that’s a false economy since its time advantage is dwarfed by all the other things a good driver must do to avoid ever depending on such a tiny gain. Plus, in the real world the second foot only adds another element of complication, unnoticed almost all the time but deadly in that one panic situation when simplicity helps. Proponents of two feet driving are IMHO the same types who champion Esperanto, in love with theory, forgetting how things really work. Oh, and let’s say I’m so wet about this. Ok. But why would you consign your daughter to much more expensive car rentals when she travels to Europe?

  49. Gravatar of Tom Brown Tom Brown
    19. July 2015 at 22:47

    Scott, I really wish the Republicans were competitive for my vote. The Dems and/or lefties clearly have a lot of problems, especially with the false concept that everybody’s culture and beliefs are equally valid, and we mustn’t offend anybody by being culturally insensitive (sometimes I see this referred to as “post-Modernism”). Objective reality largely exists apart from how we think or feel about it. Thinking otherwise justifies giving clearly false claims (like those of flat-Earthers or creationists) a place at the grown-up’s table, which is inexcusable.

    I don’t know anything about the science of gender differences, so I can’t comment on that beyond speculation based on my experiences. Likewise, if a politician doesn’t know anything about a field of science, then he shouldn’t pretend that he does. IMO, to proudly and confidently deny evolution is equivalent to proudly and confidently denying that the Earth is approximately a sphere. I see no reason to tolerate that. It shows a disturbing disregard for evidence and belief revision. Such a person needs help, not power.

  50. Gravatar of Tom Brown Tom Brown
    19. July 2015 at 23:00

    … and my beliefs about a spherical Earth and evolution are open to revision, but it’s going to require a lot of evidence. A good first step would be a peer reviewed paper published in “Nature” or “Science.”

  51. Gravatar of Lorenzo from Oz Lorenzo from Oz
    19. July 2015 at 23:32

    “I once talked to an investment banker from northern Europe who was surprised at how much money American banks spent on lobbying. His bank did didn’t even have a lobbying department.”

    Apples and oranges comparison. US Senators and MHR’s have to be lobbied individually. In proportional representation systems with (very) strong Parties and majority coalitions that rarely exceed 4 Parties, you can “put the fix in” with 5 folk around a nice dinner.

    Given the power of permanent public services in such countries, 2 folk over dinner may be enough.

  52. Gravatar of Lorenzo from Oz Lorenzo from Oz
    19. July 2015 at 23:47

    Given that US legislative coalitions are much higher complexity in majority building than proportional representation polities with relatively small number of (strong) Parties per majority coalition, that rather predictably will lead to more complex regulation which feeds back into lobbying.

    Yet, the US still rates high on economic freedom, so there are clearly some compensating features.
    https://en.wikipedia.org/wiki/Economic_Freedom_of_the_World

  53. Gravatar of Lorenzo from Oz Lorenzo from Oz
    20. July 2015 at 00:02

    And if you want culture and politics: among OECD how downwardly redistributive your social (i.e. welfare) expenditure is correlated 0.59 with economic freedom, 0.6 with % Protestants in population, 0.64 with % no-religion in population and -0.7 with Catholic+Orthodox+Muslim share of population and effectively not at all (0.18) with social expenditure % of GDP.
    http://lorenzo-thinkingoutaloud.blogspot.com.au/2015/07/ethos-and-welfare-state.html

    Yes, the “priests & clerics tell you what to do” religions tend to have upwardly distributive welfare systems (the top quintile gets more than the bottom quintile).

    In Mediterranean OECD countries, the top income quintile receives more social expenditure than the bottom income quintile. With Greece a particularly bad offender (the top quintile get 31% of social expenditure, the bottom quintile 8%).

    Makes “austerity” look rather differently, doesn’t it?

    Basically, the Anglos, the Scandinavians and the Dutch believe in the deserving poor, the Mediterraneans in who has shall receive.

    (Australia has the most downwardly redistributive welfare system in the OECD. While, if you add in private donations and net out tax effects, the US spends more of GDP on social expenditure than any other OECD country except France.)

  54. Gravatar of Philippe Philippe
    20. July 2015 at 00:20

    “corporations can only engage in voluntary transactions with willing partners”

    Obviously false.

  55. Gravatar of dtoh dtoh
    20. July 2015 at 02:54

    1. Businesses (and unions and non-profits) lobby because politicians in the U.S. have set up shop selling political favors to anyone with money or influence.

    2. Anyone who believes U.S. corporations routinely violate laws or regulations for reasons of cost efficacy or any other no very little about business. In fact they are ignoramuses.

    3. IBs make a huge amount (maybe most) of their money arbitraging bad government regulation/laws. This is also the cause of most “bubbles.”

    4. I forget who mentioned per-capita road fatalities, but whoever it was is stupid. You need to look at per mile driven fatalities.

    5. The time it takes to actually move your foot is insignificant relative to the time it take to visually process data and send the signal to your foot.

    6. @Scott, maybe you’re not subsidizing other drivers. Maybe you’re just lucky.

  56. Gravatar of ssumner ssumner
    20. July 2015 at 04:44

    Traveling today, so not much time.

    Lorenzo, I’d like to use your third comment in a post, but am skeptical of your final point. Can you flesh out what “net out tax effects” means?

    And do you have a post on these issues?

  57. Gravatar of John Thacker John Thacker
    20. July 2015 at 05:16

    “I’m subsidizing the horrible Boston drivers””why isn’t that charity?”

    Isn’t the larger subsidy involved with mandatory liability insurance towards owners of expensive cars, protecting them from accidents caused by people poor enough to be judgment-proof (but with enough money to afford insurance)? True, there is a possibility that you’re a much better judge of your own driving skill and chance of a payout than the actuaries at car companies, but rates generally do vary quite a lot with driving record.

  58. Gravatar of JL JL
    20. July 2015 at 05:39

    Scott,

    Within Western Europe, Autobahn Germany actually has much more fatalities than their neighbours Denmark and Holland and this is mostly because of the autobahn and legacy infrastructure. Denmark and Holland implement the latest in road design innovations to reduce accidents.

    As a percentage of road travel, the Netherlands actually ranks near the top with highest % of high speed travel, but Americans make far more mileage and mileage is the single strongest predictor of likelihood to get into an accident.

  59. Gravatar of TallDave TallDave
    20. July 2015 at 06:02

    Tom — Let us know when Democrats stop proudly and confidently denying the science with respect to GMOs, nuclear power, fracking, astrology, psychics, whether life begins at conception, and the empirical evidence for free markets.

  60. Gravatar of TallDave TallDave
    20. July 2015 at 06:10

    Philippe — “corporations can only engage in voluntary transactions with willing partners” Obviously false.

    A corporation cannot compel you to enter a contract. A government can, and does.

    Corporations are creature of statute so more or less by definition can do nothing coercive, indeed nothing but what the government allows. That people deny the obvious and even claim the exact opposite is obvious never ceases to astound.

  61. Gravatar of TallDave TallDave
    20. July 2015 at 06:22

    Why lobbying has such great ROI, in two charts.

  62. Gravatar of Doug M Doug M
    20. July 2015 at 07:51

    “It says he has a moral obligation to find ways to trick customers into overpaying if he can find them.”

    The “moral obilgation” is to increase the value of the company. Frequently, any increase in short-term profits increases the value of the company. But, to “trick” customers into overpaying trades would certainly be an instance where long-term value has been sacrificed.

    Funny, of the behaviors listed, this is the only characterization that bothers me… choosing to pay the fine rather than comply, may be distasteful, but may be good sense; Same for lobbying.

    Driving with two feet. I was taught to drive with the one-footed technique with the explanation, that it wears out the breaks faster to drive 2-footed. With tech advances that might not be the case anymore. But these days I drive a manual. Two feet are in order, one for the clutch. I would teach my child how to use a clutch, even if I expected her to primarily drive automatics.

  63. Gravatar of Kenneth Duda Kenneth Duda
    20. July 2015 at 07:54

    Off topic:

    I love this first paragraph in Kevin Erdmann’s latest. It encapsulates why we need NGDPLT.

    ===========================
    From http://idiosyncraticwhisk.blogspot.com/2015/07/inflation-and-housing-starts-arent.html
    ===========================
    Inflation for June is a bit worrisome. Indicators are moving back into dangerous territory, with shelter inflation moving up and “Core minus Shelter” inflation moving down. I take this as a signal of decreasing monetary accommodation on both counts, through currency management regarding the CmS inflation and through credit constraints in the Shelter inflation (which limits housing construction). Nominal spending is stagnant because of currency management and real consumption is stagnant because of credit constraints in housing construction. The combined signal these give is of a moderate inflation, which looks like reasonable monetary policy if the supply problem isn’t accounted for. So, not only does this signal a monetary policy that is currently too tight, but it is likely to produce a monetary policy reaction that is even tighter.
    ============================

  64. Gravatar of Njnnja Njnnja
    20. July 2015 at 08:39

    About the driving, I always figured that people were mostly “right-footed” like people are mostly right handed. So maybe a right handed person’s left foot can’t react as fast as their right, even taking account travel time.

    Of course, this means that lefties would be better off driving with their left foot. I’m not left-handed so I will refrain from making a recommendation to them. But it’s a small argument in favor of the status quo.

  65. Gravatar of Andrew_FL Andrew_FL
    20. July 2015 at 09:52

    I dunno Dustin, maybe the part where he wants to hold a gun to their head if he decides they aren’t?

  66. Gravatar of Steven Kopits Steven Kopits
    20. July 2015 at 10:03

    Don –

    A moral failing. Hmmm.

    Businesses are not really moral entities. They are neither moral nor immoral. The are structures which can be used for the purposes of their owners and managers. It’s like asking if a pen is moral. Well, it depends on how you use it.

    The primary duty of a manager is, of course, to himself and his family. But assuming that the principal is aligned with the agent, then his primary duty is to his employer. If he fulfills that, then he is arguably acting morally.

    Under some circumstances, he may be acting illegally. He may be acting in contravention of accepted social norms. Are these immoral? They could be.

    But at the end of the day, in an ostensibly private transaction, it is the customer and seller who determine morality. Are Twinkees immoral. God, yes. Does that make the producers of, production or sale of Twinkees immoral? I don’t think so.

    As a result, I really struggle with the notion of morality in business. Legality, that’s clear (and illegality is not necessarily the same as immorality). We can arguably establish social conventions. (You’re bad if you don’t say please and thank you.) We can talk about the role of deception, particularly in non-iterated interactions (ie, anything on Mallorca). That’s not nice, but the market will tend to catch up with you over time.

    But morality? I don’t know. Morality somehow implies that Moses came down from the mount and said, “Thoust shall not sell milk after the sell-by date.” Things that aren’t to my taste, things that are mean, things that are insensitive–I don’t know if they are immoral.

  67. Gravatar of Jason Smith Jason Smith
    20. July 2015 at 10:48

    I’d agree that the real story isn’t all one thing or another. However, the typical impact of lobbying is to make legislation and regulations more complex, not less.

    There is a story there of lobbyists trying to make their own jobs more necessary — by creating complex legislation that you need lobbyists to deal with.

    In the end, I think it is the number of veto points (another Yglesias issue) that increases complexity and lobbying (more people to move in one direction or another with a tiny tweak). Parliamentary systems have one or two veto points; we have several (committee-level, caucus level, house/senate, president and potentially judicial system).

  68. Gravatar of John Thacker John Thacker
    20. July 2015 at 11:37

    Matt’s assertion about relative prestige seems to be wrong. It is in Southern Europe where people assume that both business and government cannot be anything other than corrupt. Oddly, while their government is in general corrupt, their road and transit contracting seems to be much cheaper and more efficient at building infrastructure than the societies which are in general less corrupt. Perhaps the US overspends on the wrong sort of anti-corruption, aimed at process rather than getting things done efficiently.

  69. Gravatar of Adam Adam
    20. July 2015 at 13:14

    If your daughter ever plans to rent a car in Europe, she may need to know how to drive a manual transmission, which might be hard to learn if he’s used to using her left foot for other things.

  70. Gravatar of ThomasH ThomasH
    20. July 2015 at 13:23

    “Over time, that surely must have a negative effect on culture. Lobbyists would try to get even more government regulation, to open up more rent-seeking opportunities.”

    Not “more government regulation” just more OR less government regulation that opened up profitable opportunities.

  71. Gravatar of TravisV TravisV
    20. July 2015 at 16:50

    Obama has his next pick for the Fed

    “President Barack Obama has chosen University of Michigan economist Kathryn Dominguez to fill the final open seat on the Federal Reserve Board of Governors, adding an expert in international economics to the central bank’s leadership team.”

    Read more: http://www.businessinsider.com/r-obama-picks-university-of-michigan-economist-dominguez-for-fed-post-2015-7#ixzz3gU4gMVmo

  72. Gravatar of Ray Lopez Ray Lopez
    20. July 2015 at 16:57

    At last, a scientific explanation of Sumner’s old man inappropriate behavior (from the net, BBC): “The frontal lobes are the last part of the brain to develop as we progress through childhood and adolescence, and the first part of the brain to atrophy as we age. Atrophy of the frontal lobes does not diminish intelligence, but it degrades brain areas responsible for inhibiting irrelevant or inappropriate thoughts. Research suggests that this is why older adults have greater difficulty finding the word they’re looking for – and why there is a greater likelihood of them voicing ideas they would have previously suppressed.”

  73. Gravatar of Mark Mark
    20. July 2015 at 19:20

    Dustin

    I agree with your observation that “operational controls provide only a relative probability of compliance” so that we have to make decisions all the time as to what controls are “adequate”.

    But I think Yglesias was making a different point, one that I’ve encountered in discussions particularly at the university level or with self-styled activists – that we actually look at laws or regulations and flat-out decide we are not going to attempt to comply.

    One of the most instructive things we could do in the business world is to invite some of those people to design the systems and processes needed to comply with the regulatory onslaught they advocate.

  74. Gravatar of Mike Sax Mike Sax
    21. July 2015 at 03:45

    Some economists argue Germany not Greece should leave the euro:

    “But some economists say proponents of a “Grexit” have it all wrong: If one country should leave the eurozone, they argue, it is Germany.”

    “These economists’ basic premise is that Europe’s depressed economies, which include not just Greece, but Spain, Portugal, Ireland and Italy, would benefit tremendously from a cheaper currency. Devaluing the euro would help boost their exports and even spur domestic spending, as moderate price inflation would prompt consumers to lock in deals at current prices. But currently these mostly southern European countries are stuck with a currency value that is boosted by the inclusion of Germany and other wealthier European countries. High investor demand for a currency that includes the German juggernaut keeps the euro’s value relatively high.”

    http://www.huffingtonpost.com/entry/economists-troll-germany-telling-it-to-leave-the-euro-first_55ad8ae2e4b0caf721b3ae92?

  75. Gravatar of Mike Sax Mike Sax
    21. July 2015 at 03:56

    They also argue it would be good for Germany-a win-win.

    “Germany stands to gain from an exit as well, since the new deutsche mark would be worth substantially more than the euro, enabling German consumers to benefit from cheaper consumer goods.”

    “The disruption from a German exit would be minor,” Mody wrote in Bloomberg on Friday. “Because a deutsche mark would buy more goods and services in Europe (and in the rest of the world) than does a euro today, the Germans would become richer in one stroke.”

  76. Gravatar of TallDave TallDave
    21. July 2015 at 05:26

    There is a story there of lobbyists trying to make their own jobs more necessary “” by creating complex legislation that you need lobbyists to deal with.

    Of course they do! But again, this is a problem created by the lobbied, not the lobbyists — we need officials that don’t accept bribes, at any remove. The economic success of a country is necessarily limited by the corruption/incompetence of its gov’t officials; this is just as true in Sweden or the US as it is in Mexico or the Philippines or Iraq or the Sudan.

    There’s a lot of ruin in a nation.

  77. Gravatar of Floccina Floccina
    21. July 2015 at 06:25

    Or perhaps the culture was less corrupt than in America””which is itself a less corrupt than average culture, by global standards (at least if you believe survey data, and/or ratings like Transparency international.)

    I think that for corruption the USA is more on par with Italy than with Germany. The USA does amazingly well for having so much corruption. I am from a heavily Italian area in Providence RI and it seems to me that Italian immigrants did not immediately change all their ways when they got here. See our long time mayor’s story here.

  78. Gravatar of Floccina Floccina
    21. July 2015 at 06:31

    BTW I think circumscribed Government mitigates corruption, I hope anyway. Technology may help.

  79. Gravatar of John Thacker John Thacker
    21. July 2015 at 07:08

    Floccina:

    Different states in the US are differently corrupt. You’re quite right that Providence RI is very corrupt and like Italy. New Jersey, Illinois, and Louisiana also traditionally score as very corrupt. Other states, however, are remarkably clean.

  80. Gravatar of Floccina Floccina
    21. July 2015 at 11:07

    Interestingly CAFE has a strange effect of not allowing auto manufacturers to specialize without violating the rules.

    https://en.wikipedia.org/wiki/Corporate_Average_Fuel_Economy

    A number of manufacturers choose to pay CAFE penalties rather than attempt to comply with the regulations. As of model year 2010, Jaguar (Land Rover), Porsche, Mercedes, Fiat and Volvo failed to meet CAFE requirements. These fines totaled 24 million dollars for the year.[27]

    After the failure of GM and K many car guys asked why GM, F and K did not just pay the fines and stay profitable by specializing in large vehicles which were the most profitable for them. I guess that Matt forgot about that.

  81. Gravatar of Christian List Christian List
    21. July 2015 at 11:48

    “but I think you misunderstood the question”

    I think I got the question. You wanted to know what driving style is safer and/or what to teach your daughter. And I told you it’s two feet. Then I got off the subject, alright. But I did this on purpose to show how important it is to really learn how to be a good driver. Two feet is not enough. You need to teach her all kind important aspects of driving and if you can’t do that she should do at least one professional safety training.

    “the death rates are biased by the fact that Americans do far more high speed driving”

    I really love America. I think its culture is superior in nearly every way. But in this case your theory doesn’t seem to be true. There’s no “high speed driving” in America. Americans don’t know what high speed is. Most of its highways got a speed limit between 65-70 mph. I drove on those strange roads, it felt like a snail race, it really did.

    For a German 65-70 mph is really slow because on the German highway (the infamous Autobahn) there’s an advisory speed of 81 mph called “Richtgeschwindigkeit”. That’s not a limit. That’s the speed you are supposed to drive at the left lane by law.

    It’s also a myth that most deadly accidents happen at highways at high speed. Highways are the safest roads in Germany with the lowest deaths per mile. I bet this applies to America, too. It’s much riskier to drive overland or in the city. There are so much fewer curves and other dangerous spots at highways. And don’t forget that there are no pedestrians and bikers at highways all.

  82. Gravatar of Christian List Christian List
    21. July 2015 at 12:06

    @Mike Sax
    “Some economists argue Germany not Greece should leave the euro”

    I’m saying this for years now.

    @John Thacker
    My impression is that Americans are really honest. Take cheating for example. I’ve seen American high schools in which the teacher left the room during very important tests for nearly the whole test and not a single student even thought cheating. To me this was really amazing.

    Another recent example is FIFA. The French, the Swiss, the Germans, they all knew for decades that FIFA is extremly corrupt. You could read it at any paper. But not one official in these countries went after FIFA in all this years. Only Americans are clean enough to do something about those mobsters. This applies to most organized crime.

  83. Gravatar of Ray Lopez Ray Lopez
    21. July 2015 at 12:30

    @Christian List – achtung! I saw a traffic sign here in rural Philippines, on a small 4m wide road with houses right next to the road (as is common here, they build right to the edge of a road), “Minimum speed: 40 KPH, Maximum speed: 60 KPH”

    I defy you to go 60 KPH = 36 mph on such a tiny road without feeling a deadly tingling sensation down your spine, with the numerous dogs and kids that play in the road. Yet people do it all the time here, and strangely the accident rate is about the same as in the USA, with a much younger population, which is amazing. I stuck to 40 KPH with a finger on the left brake on my Honda scooter. Speed kills, unless you have a well engineered road clear of people.

  84. Gravatar of Scott Sumner Scott Sumner
    21. July 2015 at 12:45

    Traveling, commenting will be slow.

    Steve, Massachusetts has some of the worst drivers in the country. It’s safe because it’s hard to drive fast in Boston.

    Riccardo, My daughter will have to rent automatics even if she uses one foot.

    Kenneth, I agree.

    Njnnja, I’m left handed.

    Jason, I agree.

    Adam, I’ve rented many automatics in Europe, even southern Europe

    Ray, That’s bulls***!

    Mike, Why would a new DM be worth more? Do they think the Bundesbank would stop targeting inflation?

    Christian. In America the dangerous roads are non-divided highways. Didn’t you recommend she learn to drive an automatic? To do that you have to learn to drive with one foot (if you are using an automatic.)

  85. Gravatar of TravisV TravisV
    21. July 2015 at 12:47

    Uh-oh…..

    http://www.vox.com/2015/7/20/9005911/hillary-clintons-capital-gains-quarterly-capitalism

    “Hillary Clinton’s capital gains tax reform, explained”

  86. Gravatar of TravisV TravisV
    21. July 2015 at 12:50

    Benjamin Cole:

    https://thefaintofheart.wordpress.com/2015/07/21/et-tu-singapore-another-central-bank-suffocates-an-economy/

  87. Gravatar of Listerian Listerian
    21. July 2015 at 13:16

    @Scott
    “In America the dangerous roads are non-divided highways.”

    I assume that’s true in Germany, too. But I don’t think it’s called highway/Autobahn in Central Europa then. A real highway in Germany is always divided.

    “Didn’t you recommend she learn to drive an automatic.”
    No. I’m sorry for the misunderstanding.

    @Ray
    “Speed kills, unless you have a well engineered road clear of people.”

    Speed has never killed anyone. Suddenly becoming stationary, is what gets you.

    😉

  88. Gravatar of flow5 flow5
    21. July 2015 at 13:53

    The fact is people will do anything for money. The ABA did some of the dirtiest tricks of any lobby.

  89. Gravatar of Ray Lopez Ray Lopez
    21. July 2015 at 15:19

    OT: Gold standard was like the Taylor Rule and worked good says this mainstream economist. ‘Whither Macro?’ by Perry Mehrling from “New Frontiers in Economics” (2004, forward by Paul A. Samuelson): When I first began serious study of macroeconomics, twenty years ago at the London School of Economics, the field was in serious disarray. … Inside,the New Classical alternative of Robert E. Lucas had already replaced Milton Friedman’s loyal monetarist opposition as the most significant challenger, and the Real Business Cycle initiative of Ed Prescott was in the air. The core of modern usable macroeconomics would have been recognizable to a man like Ralph Hawtrey, whose Currency and Credit (1919) sought to theorize the role of monetary policy for his own times. …Under the gold standard, central bankers could and did choose whether to respond to a gold drain by raising bank rate in order to reverse the drain, or by expanding central bank credit in order to accommodate it. They had, in effect, their own implicit Taylor Rule, albeit without benefit of our modern statistical capability to calculate price indices and to measure aggregate income.”

    Author goes on to extol the benefits of the Taylor Rule. So there you have it: the Gold (exchange) Standard of yesteryear, with banker discretion, was like the Taylor Rule. So why do we need NGDPLT? What’s good enough for grandpa is good enough for me.

  90. Gravatar of Ray Lopez Ray Lopez
    21. July 2015 at 15:37

    @myself – not that I believe in monetarism, but the burden of persuasion is on Sumner to show NGDPLT works better than the Taylor Rule and/or gold standard.

  91. Gravatar of Major.Freedom Major.Freedom
    21. July 2015 at 16:31

    Sumner, why do you keep quoting and paying attention to that one foot out the closet commie Yglesias? He is almost always wrong, more frequent than even you.

    His postings are social poison, ignorant, and if acted upon, destructive to human welfare.

    “My view is that the biggest relevance of Southern Europe to the United States is the current high social prestige enjoyed by the twin ideas that the social responsibility of a corporation is to be profitable and that the primary moral and legal obligation of a corporate manager is to enrich shareholders. These ideas combine to create a toxic moral climate that is undermining the social context in which a successful market economy can flourish.”

    This is absolute drivel, cobbled together by a mish mash of false beliefs, the biggest false belief being that there is somehow an incompatability, a mutual exclusiveness, an antagonism between profit seeking on the one hand, and peace and prosperity on the other.

    Yglesias is ignorant of the benevolent symbiosis between the two.

    In reality, a person who seeks to maximize profits, that is, maximize dollar gains and minimize dollar losses, subject to private property rights, is doing much more than receiving dollars.

    What profit seeking does is minimize waste of resources, and puts maximum pressure on resources being devoted to the most urgent needs.

    A person who finds a way to produce more goods and services, or the same quantity of goods and services, at a lower cost, which can consist of such things as laying off workers, liquidating obsolete machines, or “raiding” unprofitable businesses, that person is freeing up resources and making them available for the production of new goods and services that would not have been possible otherwise, and increasing the production of newer and better goods.

    Has Yglesias ever considered who are the actual physical beneficiaries of all the factories, office buildings, productive lands, stores, shops, farms, everything that we call “capital”? It is the consumers, all of us.

    A person who is “wealthy” and owns millions or billions of dollars worth of capital, is not the main physical beneficiary of that capital. It is the “Joe Six pack.”

    Consumers are BETTER OFF when they are able to buy more goods at a lower price, and that is exactly the outcome of unmitigated profit seeking subject to private property rights!

    Toxic? What is toxic is Yglesias posturing and rabble rousing against free enterprise, social coordination, and peace. He wants collectivism over individualism. He wants from others without giving value in return. He wants to gain, by giving less. He is acting like a true capitalist, the only difference is that he advocates for violations of property rights. He wants individuals to sacrifice themselves for the sake of others, and if they won’t do so willingly, then they shall be made to at least feel guilty, but more than that, they should be made to suffer. All so that Yglesias’ “social context”, which is of course a dog whistle, a code speak for more statism, more collectivism, more socialism, all ultimately at gunpoint if you dare disobey and use your own body and property as you see fit rather than how Yglesias sees fit.

    The man is disgusting. A virus of society. Envy, hate, avarice, those are the emotions that guide that fool’s “thinking.”

  92. Gravatar of Ray Lopez Ray Lopez
    21. July 2015 at 16:44

    OT: Fed cannot hope to control the money supply, follows the market, so says a leading textbook author. From Stigum et al textbook (2007): “Prodded by Congress, the Fed began [in the 70s] to set money-supply targets and sought to hold growth of the monetary aggregates within target bands. At the same time, the Fed did not fully accept monetarist doctrine: from long experience, Fed technicians knew that the Fed could not control money supply with the precision envisioned in textbooks” In 1979-82 the Fed tried a monetarist experiment that targeted non-borrowed reserves (non-borrowed reserves are those that the Fed supplies to the banks via open market operations) but the experiment ended in failure as M1 was unstable. The Fed then switched to a scheme in place today where interest rate targeting is used rather than targeting a money supply variable like M1. Reader request for Sumner: why not have the Fed set the regulatory capital a bank must hold? This might be more effective in inducing monetary expansion or contraction than interest rate, though I believe money is neutral so no effect. Then this from Stigum confirms the Fed follows the market: “The impact that a fund rate targeting regime has on reserves varies with the level of economic activity. When the demand for money is strong, reserves increase at a fast pace because the Fed must supply as many reserves as are necessary to keep the funds rate from rising above the target rate. During periods when the demand for money is slow, the Fed needs to supply relatively fewer reserves to the banking system to keep the funds rate at the target rate.” Who to believe? Stigum or Sumner? Bank on experience, or the blogger that saved the world?

    @MF – OT, do you think CAFE (fuel efficiency) penalties are Pigovian (tax effective in deterring externalities)? When in fact Wikipedia says they are watered down and ineffective? What does Mises say about this? Externalities cannot exist in a free market?

  93. Gravatar of Don Geddis Don Geddis
    21. July 2015 at 21:26

    @Ray Lopez: Even funnier than your misunderstanding of economics, is when you include the text of a quote that you found yourself, but then attempt to “summarize” it — only to create a self-contradictory comment, as your summary doesn’t match what your own quote says. Priceless!

  94. Gravatar of Steve Steve
    21. July 2015 at 22:22

    “Steve, Massachusetts has some of the worst drivers in the country. It’s safe because it’s hard to drive fast in Boston.”

    “Worst driver” depends on which characteristics you care about. The term MA-hole exists for a reason; MA has the most aggressive, competitive, strategic drivers in America, but that doesn’t make them dangerous or “worst” beyond fender-benders.

    I noticed that WA, MN, VT, UT all scored surprisingly well on traffic fatality: I suspect the first three, WA, MN, VT, all benefit from low interstate truck traffic per capita–it’s certainly not the weather. Also, I suspect changeable weather is more dangerous the rainy/snowy weather. UT safety is obvious, low drunk/drugged driving.

    My hunch is those are the big three for danger: trucks, changeable weather, and drink/drugs. MA-hole is only bad for dents.

  95. Gravatar of Mike Sax Mike Sax
    22. July 2015 at 02:54

    I think the idea is the DM would be worth more as it wouldn’t have the Greeks and other periphery countries pulling it down.

  96. Gravatar of Mike Sax Mike Sax
    22. July 2015 at 02:59

    Certainly the Germans would continue to target inflation-that’s what the Bundesbank is known for.

    But without the weakness of the periphery this would enable them to do a better job fighting inflation and the DM would be stronger.

    This is the same reason why many believe Greece would be better off leaving-then they could inflate to their heart’s content. The Germans could deflate.

  97. Gravatar of Joe C Joe C
    22. July 2015 at 08:15

    My dad, when a state policeman, drove with two feet but does not now. I drive with one primarily because its more comfortable for me. If the brake pedal were much further to the left I would probably use two. I really think its a personal preference thing.

    @ Steve – In regards to why Utah is low for a mountain state I would guess its because most Mormons don’t drink – lower DUI related fatalities?

    Running through the data source you listed earlier, just eyeing the data; the pattern I see is less educated states typically have higher fatalities rates.

  98. Gravatar of TallDave TallDave
    22. July 2015 at 09:54

    BTW Instapundit has been promoting a solution for the lobbying problem for years — high level government officials should be required to accept lengthy moratoriums on their earnings after leaving office, for much the same reasons as we outlawed titles of nobility: “…since it is apt to make them proud, disdaining to be employ’d in useful Arts…”

  99. Gravatar of Edward Edward
    22. July 2015 at 11:47

    Interesting new article by Yglesias on Hillary Clinton.
    http://www.vox.com/2015/7/20/9005911/hillary-clintons-capital-gains-quarterly-capitalism
    What do you think, Scott,
    Particulary about the link that says Chamley-Judd doesn’t hold in the “real” world?

  100. Gravatar of Mike Sax Mike Sax
    22. July 2015 at 13:19

    By the way for anyone interested I’ve updated my blog name to something more politically correct than Diary of a Republican Hater

    Turns out Republicans get as offended as much as anyone else. This is probably a better title anyway. I don’t know how many will understand it much less be offended by it.

    http://lastmenandovermen.blogspot.com/

  101. Gravatar of Ray Lopez Ray Lopez
    22. July 2015 at 17:14

    @Edward: Vox: “That said, as is typical with highly theoretical results in macroeconomics, there are massive challenges in saying whether the Chamley-Judd construct applies in a meaningful way to the actual policy choice at hand.” and “Empirical studies also struggle to confirm the idea that tax rates on investment income are an important driver of real investment activity. A recent, statistically sophisticated study of the 2003 dividend tax cut by Danny Yagan, for example, finds that “the tax cut caused zero change in corporate investment.””

    Taxes don’t matter except at extreme levels, same as money printing and money neutrality. These econ macro models that show otherwise are not grounded in reality. Same as monetarism; no stat evidence Fed influences real economy, or even nominal economy. Open your eyes, there’s no evidence for what you guys claim. The macro models are as elegant as engineering free-body diagrams that assume zero friction, but much, much less useful.

    Where is Sumner? His minions are not as exciting as their master. He needs to blog on “Yoghurt and culture”, it would be much more concrete than this entry…

  102. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    23. July 2015 at 05:57

    Mike, this thing you call a blog; by any other name it still reeks of ignorance.

  103. Gravatar of Mike Sax Mike Sax
    23. July 2015 at 06:15

    Patrick you should know having seen what you call a blog

  104. Gravatar of Mike Sax Mike Sax
    23. July 2015 at 06:17

    Just so we’re clear Patrick I didn’t change the name because I value your opinion. No basically to please the advertisers.

  105. Gravatar of Ray Lopez Ray Lopez
    23. July 2015 at 07:06

    @Mike Sax – pay no attention to Patrick R. Sullivan (which is the usual state of affairs when Sullivan speaks). I thought from some of Sullivan’s erudite posts that he was a PhD in economics, and was pleased to be trading posts with him. Then, like a telling passage in the excellent Wolfe novel ‘Bonfire of the Vanities’ involving the protagonist and his housemaid, who he was in awe of because of her British accent and apparent sophistication until she made a racist comment that spoiled her mystique, Sullivan said something stupid, I asked him if he was an economist, and it turns out he’s a layman, with a high school education but not much more. LOL, like the rest of us.

  106. Gravatar of Tom Brown Tom Brown
    23. July 2015 at 09:41

    Scott, have you had any interchanges regarding the advantages of NGDPLT with the GOP frontrunner and shoe-in “anti-establishment” nominee, Donald Trump? Was he receptive to the evidence for monetary offset under ZIRP? Your views on immigration policy? Progressive consumption tax? 😉

  107. Gravatar of flow5 flow5
    23. July 2015 at 10:43

    Dec 2015 is the mother of all flash crashes. The E-dollar System capitulates. The oil market falls out of bed. All belt tightening is for not.

    Money flows summer inflection point in sync (7/22/15). The next acceleration in the downswing will be 9/2/15.

    Every year, the seasonal factor’s map, or scientific proof, is demonstrated by the product of money flows. Yale Professor Irving Fisher was a genius. But make no mistake, Leland Pritchard was smarter than Albert Einstein.

    – Nostradamus

  108. Gravatar of Thiago Ribeiro Thiago Ribeiro
    23. July 2015 at 14:15

    “Morgan, my dad was a public sector employee who helped develop many weapon systems. Look up the history of the Sidewinder missile (AKA “Local Fuze Project 602″³) for example. I grew up on that remote desert base and knew those engineers and scientists. I’d describe them as dedicated and innovative. They didn’t always play by the rules, but they did get things done, often in record time. Perhaps it was a unique circumstance, but I suspect that kind of culture exists or existed at some other government labs (read Feynman at Los Alamos for example).”
    Yeah, but how much money they made for themselves? Unfortunately for libertarians, this is the sole measure of one’s contribution to Society, not to kention one’s innovation and dedication.

  109. Gravatar of Lorenzo from Oz Lorenzo from Oz
    25. July 2015 at 23:14

    Scott: no, I don’t have a post on the lobbying dynamics point, just on the welfare correlations.
    http://lorenzo-thinkingoutaloud.blogspot.com.au/2015/07/ethos-and-welfare-state.html

    According to the OECD document I took the data from:
    “The “Net tax effect” includes direct taxes and social contributions, indirect taxes and net tax breaks for social purpose similar to cash benefits (TBSPs). TBSPs also include favourable tax treatment of “current” private social benefits (e.g. donations to charities or exemptions of private health insurance contributions) and favourable treatment of pension saving that “ultimately” benefits households (e.g., favourable tax treatment of private funds). The value of the TBSPs toward “current” private benefits is not included in this figure, as it is equivalent to financing of private social benefits, and thus has to be excluded to avoid double counting when calculating total net (public and private) social spending. For methodological reasons there is no comprehensive cross-nationally comparable dataset on the value of TBSPs for pensions.
    Because of the complexities with calculating the value of tax reliefs for pension that are given at various stages (e.g. including tax exemptions for contributions to private pensions and tax relief for investment income of capitalised pension funds) there is no fully comparable cross-national data set available on TBSPs for pensions. Hence, available data are not included in the overall calculation of net total social spending.”
    http://www.oecd.org/els/soc/OECD2014-Social-Expenditure-Update-Nov2014-8pages.pdf

    Been at a conference, and then sick, so sorry about the delay in replying.

  110. Gravatar of flow5 flow5
    27. July 2015 at 08:42

    The rest of the world is now catching up:
    ————

    US Recession Imminent – Durable Goods Drop For 5th Month, Core CapEx Collapses

    Submitted by Tyler Durden on 07/27/2015 – 08:40

    “Durable Goods new orders has now fallen 5 months in a row (after revisions) flashing a orangey/red recession warning. After 2 weak months, Durable Goods bounced more than expected in June (+3.4% vs +3.2% exp) – though non-seasonally-adjusted dropped 3.1% MoM. There was an unexpected drop in Capital Goods Shipments non-defense Ex-Air which fell 0.1% (against expectations of a 0.6% rise), but mosty worrying is that Core CapEx collapsed 6.6% YoY – the second biggest decline since Lehman.”

    27 Jul, 11:13 AMReply

    I said:

    4th qtr. recession now imminent (i.e., negative roc’s in M*Vt). Sell all stocks.

    – Nostradamus

    Jun 25, 2015. 07:37 PM | 3 Likes |Report Abuse |Link to

  111. Gravatar of Scott Sumner Scott Sumner
    27. July 2015 at 19:05

    Thanks Lorenzo, That’s a really good post on social spending.

    Hope you are feeling better.

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