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How to Increase GDP and Cut the Costs of the USPS at the Same Time

Allow the Post Office to deliver all bills to random addresses and require the recipients to pay the bills received rather than their own, which have been delivered to someone else for payment.

What is the Biggest Fallacy in Economics?

Consider 'biggest' to mean a combination of widespread belief and extent of error.

Nomination :

That two goods exchanged have been agreed by the exchanging parties to have equal economic values.

Corollary: If one of the goods is money, then the economic value of the other can be represented by its money price in the exchange.

Any other nominations?

Lew Rockwell on Production

The Mystery of Production

by Llewellyn H. Rockwell, Jr.

How can you go wrong with someone who has three double-L's in their name?

Some excerpts follow, but read the whole thing.

"...Every government that seeks to provide goods and services faces the problem of economic calculation. Without markets and prices, rooted in private property and exchange, there is no way to place a value on resources up and down the structure of production. Government can order people to make this and install that, but it cannot solve the problem of how to resolve competitive uses of resources. That is only possible in an exchange economy...."

"...The market economy is the only means to solve the essential economic problem of the creation and allocation of goods and services essential to life and a flourishing civilization. We are not dealing here with technical considerations of management and following instructions. We are dealing with a problem that is exclusively economic: sorting out the competitive uses of time and resources. This is a point so all-encompassing that it is ironically easy to forget...."

"...This is the free-market capital structure at work in a complex economy. It is truly a miracle of coordination—extending through all sectors and across a huge range of time horizons—with no central management, and needing none. It balances human needs with the availability of all the world’s resources, unleashes the amazing power of human creativity, and works to meet the material needs of every member of society at the least possible cost...."

"...Let us never underestimate the social benefits that flow from this seemingly technical mechanism. The market economy has created unfathomable prosperity and, decade by decade, century by century, miraculous feats of innovation, production, distribution, and social coordination. To the free market we owe all material prosperity, all leisure time, our health and longevity, our huge and growing population, nearly everything we call life itself. The market economy alone has rescued the human race from degrading poverty, rampant sickness, and early death...." Read more »

Jeff Chapman\'s Absurd Belief

Fron Jeff Chapman at the Economic Policy Institute :

If you work, then you shouldn't be poor

"...A minimum wage increase from $5.15 to $7.25 would return the value of full-time work to just above its 1997 level and renew the nation's commitment to working families."

A Conservation Law for Externalities

From the Adam Smith Institute :

Economics of Recycling Read more »

Is Free Market Money Impossible?

I think that the answer is yes, but all it takes is a valid counter-example to change my mind.

More precisely, the contrasting question is :

Can the supply of money be increased in a pure free market economy?

First of all, the definition here of a pure free market economy is one in which all actions consist of voluntary exchanges, expected to be mutually beneficial.

The problem is that the creation of money is always a unilaterally beneficial exchange of one state for another. As soon as new money is created, it belongs to the creator, and makes all other holders of money worse off. Mises would call this an autistic exchange, where the impact of an action on anyone but the actor is of no concern.

As an example, if, under a gold money standard, I believe that I can dig up enough gold in my back yard to justify the time and effort expended, then I am likely to proceed with the excavation. If I find any gold at all and add it to my gold money balance, then the supply of gold money has been increased and all other holders of gold money have been made worse off to the extent that the increase in my gold money balance induces me to bid up the prices of any goods that I may wish to purchase. It is not relevant whether or not in retrospect the found gold was worth the trouble, as any amount found has increased the supply.

This seems to me to be the primary reason that gold has greatly increased in supply over history even though no benefit to society results from an increase in the supply of money. The benefit acrues to the producers, and no mutual benefit need exist. Read more »

Homeland Security, Circa 2025

When Homeland Security is able to perform warrantless, continuous mindtaps on the entire population simultaneously, this is what they would have picked up from me 5 minutes ago. --

"SOS is loaded with soap!"

Targeting Inflation

New Fed Chairman Bernanke is on record as wanting to execute monetary policy so as to aim at some unspecified, positive rate of price inflation, although he promises not to unilaterally institute such a policy.

While we can be reasonably sure that he will not aim at a price inflation rate of 6%, it is not easy to understand the significance of much smaller rates.

The simplest way to understand price inflation rates is to roughly calculate the loss in the purchasing power of the dollar between the birth and the death of someone who survives to an age of 72 years. Read more »

Investing With a Klunky Time Machine

You have the use of a time machine of limited functionality to aid in your investment.

In particular, you can only use it once to make a single round trip to Wall Street of the last market day of 1926. You will arrive at 6AM local time and return to 2006 after 12 hours.

When you arrive, you will find an irrevocable trust consisting of an envelope with your name on it and containing $10,000 in cash. The trust will be broken and distributed to you on the last day of 2006.

The only possible action that you can take in 1926 is to use all or part of the $10,000 to buy a predecessor to an S&P500 index fund. No other options are possible.

What percentage of the $10,000 will you use to buy the index fund? Read more »

Strange Quote of the Week

In the April 2006 Annual Auto Issue of Consumer Reports, page 13, under What's New 2006/2007, Lexus LS460 :

"...The climate control monitors both the air and body temperature of its occupants..."

This must be the 'Medical Examiner' option.

ACH Debit Authorization

Has anyone else encountered a payee, a landlord in this case, that effectively charges them a surcharge ($20) if they refuse to authorize an ACH direct debit to their bank account? Of course it is not called a surcharge, but a discount for reducing processing costs. At the same time, they refuse to allow the discount for a fully electronic payment initiated by the renter.

Time vs Temperature

I have a single BR, centrally-heated apartment in New England. In the winter, the sun drives a single natural solar-heating cycle per day. Why does the temperature in the bathroom exhibit two full time-temperature cycles per day, independent of any usage of hot or cold water in the bathroom? Does the answer to this question have any bearing on global warming? Is this question indicative of how desperate we seem to be for new posts?

What is Your Rate of Time Preference?

To determine your rate of time preference, perform the following thought experiment :

Assume that there is no Fed monetary supply inflation or deflation and that the supply and variety of future consumer goods in one year's time will not have appreciably changed from today. Also assume that there is no reason to expect the demand for money to increase or decrease over the next year.

There are two envelopes on the table. Read more »

Toyota\'s 2004 RAV4 Shortage : Solved

In a prior post, I took note of my Toyota dealer's desparate expressed need for pre-owned 2004 RAV4s. Fortunately, this has now been ameliorated, as below.

Originally, my 2004 RAV4 sticker indicated the following :

MSRP : $20,800.00
Options : $464.00
Delivery, etc. : $540.00

Total : $21,804.00

After trading it in against a 2006 RAV4 lease for an $18,000 allowance plus $812 in unused warranty credit, the 2004 has re-emerged on the dealer website as follows : Read more »