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What are the consequences of consecutive moderate-IQ presidents?

It is shocking to see how much the country lost when it transitioned to the post-Clinton era. For reference, I would place Clinton at an IQ of 135-140, Bush at 115-120,and Obama at 120-130, for what that's worth. A president needs to be smart enough (and not too smart) to know that he doesn't have all the answers and to distinguish among all the BS provided by his advisors. A president needs to be an intelligent moderating force, not a creative genius.

Looking back, Clinton seems to have done relatively little damage, likely because his goals were primarily personal, and not in establishing some over-arching legacy. In contrast, Bush would have liked nothing better than to have established a theocratic dictatorship, and Obama seems to want to install a comic-book socialism.

Regards, Don


An imported Austrian Economic problem

In as much as an outside reference wouldn't seem to be too disruptive, follow this link :

The World's Hardest Austrian Economic Problem


Who profits from the War on Drugs?

Jeffrey Tucker:

...It seems that most all pseudoephedrine is manufactured in China and India, and very cheaply, much more cheaply than it can be made in the United States or Europe. What that means is that these companies don't have lobbyists in Washington who can make an effective case for their product.

Contrast this was phenylephrine, the world's largest manufacturer of which is located in Germany. The company is called Boehringer-Ingelheim, according to MSNBC. It developed the drug in 1949 for use in eyedrops. In the last two years, virtually every manufacturer of cold medicine has changed its formula to include the Boehringer drug. Some continue to make the old formula available but only with special access.

Is it possible that the move against wonderful pseudoephedrine and in favor of useless phenylephrine was really a form of protectionism in disguise? That it was really about rewarding a well-connected company at the expense of companies without connections?

If that sounds cynical, take a look at this. It seems that our friends at Boehringer Ingelheim are rather interested in American politics, with 73% of its donations going to Republican candidates for federal office. You can see here that Boehringer even has a PAC located in Ridgefield, Connecticut. Someone with more time than I have ought to check to see how the people it supported for Congress voted on the act that resulted in a massive shift toward their product, and has nearly kept its competitive product off the market.

To which King at the SCSU Scholar's blog responds:

Now that isn't a whole lot of money. But Tucker argues that lobbying by BI went up dramatically at about the same time the pseudoephedrine ban -- also known as the Combat Methamphetamine Epidemic Act of 2005 -- was placed as a rider in the Patriot Act reauthorization. Coincidence?


What George Bush Did On His Summer Vacation

Pointer 

 


Price Inflation/Deflation Puzzle and ANSWERS

Answers added at bottom.

Imagine a candy like M&Ms which comes in a single size package.

Last year a package contained 100 candies and was priced at a dollar.

This year a package contains 110 candies and is priced at $1.05.

Does this represent price inflation and a reduction in the objective exchange value of the dollar OR

does it represent price deflation and an increase in the objective exchange value of the dollar?

 

For any quantity of candies in the package between 90 and 110 and independently, a price between $0.90 and $1.10, what is a general rule for price inflation/deflation and a decrease/increase in the objective exchange value of the dollar?

 

Repeat the above, substituting cough drops for candy.

 

ANSWERS --

For a package of candies that is roughly a single serving it is only its price that matters, not its precise content quantity. You are subjectively consuming a package of candy, not 90 or 110 individual candies, so price inflation/deflation is tied to the total package price.

Cough drops are a different matter, as they are consumed one at a time, and a smaller quantity in the package will require the purchase of a new package sooner. Here, the price per cough drop is the determining factor.

 

 

 

 

 


Where Richard Epstein Hands Dr. Relman His Head

Point of Law

The Relman review, however, makes so many instructive errors that a different course seems preferable...

Relman is a doctor by training who fancies himself an expert in "social medicine," who has, as best I can tell, no formal training in any of the collateral disciplines that bear on the comprehensive analysis of health care...

In my view, there is nothing whatsoever in Relman's traditional medical background that offers him any comparative advantage in dealing with the full range of property rights, regulatory, marketing, patent, and tort issues that are examined in Overdose, which should be evident to anyone who has worked his or her way through Relman’s review...

Clearly if we are to have pharmaceutical companies, then we must allow them to have some profits in order to attract and retain capital. Relman is not subtle enough to distinguish between a risk-adjusted competitive rate of return and monopoly profits, or to recognize that the former advances social welfare and the latter retards it...

The system of government control that Relman proposes is ruinous to the ends of patient welfare and social prosperity that he supports...

His fundamentally unsound world view does create a huge professional and philosophical chasm between us. Worse still, it infects every portion of his New Republic review....

But Relman is thoroughly confused about how corporations work. The management owes duties of loyalty and care to the shareholders; after all shareholders have put their money in with the firm, and it would hardly do to allow the management to misappropriate the funds so that the shareholders go home empty-handed. But the customers of the firm are not investors, and they can walk away and buy somewhere else if they do not like what they get. The key challenge to any firm is to figure out how to secure their repeated loyalty and that can only be done by offering them goods and services that they value at more than they pay, which the corporation can produce at a cost lower than the prices they can command....

Nor does he see any reason to do so because he takes the view that I will abandon my principles at the drop of the hat by arguing "for stronger government support of the industry's monopoly rights and for government protection against price competition from abroad. He wants handouts from the public without public oversight." Here, Relman has lost his intellectual compass....

Relman's statement about "government protection from price competition from abroad" also reflects either economic ignorance or conscious deceit....

For Relman, who knows nothing about the fine print of this initiative, to call this program "free trade" is a bad joke....

But then again perhaps Relman is in favor of those provisions that hold that doctors, as a condition for being able to work in the voluntary market, have to devote as much of their time to government service for the poor as the state asks, for fees that it determines....

In Relman's world regulation is a free good. In the world we live in, it is not....

But don’t count on Relman to make the right adjustments. He first notes the standard figure of $800 million, developed by DiMasi's team several years ago doubled today, only to comment: "Yet both these figures include the so-called time—cost of the money spent, a theoretical and much-disputed quantity that contributed about half of the $800 million figure." So now we have it: the "so-called" cost of capital is not a cost of production because, at least to one untutored physician, a dollar spent today is precisely offset by a dollar earned eleven years from now.

Relman's brief foray into pharmaceutical pricing reflects his total ignorance of the subject....

Relman notes that prices remain high at retail pharmacies, but misses the point when he treats that segment of the market as representative of the whole, when in fact they are not....

It is in this world wholly incomplete to make his observation that "the listed wholesale price of a prescription drug almost never goes down, no matter how much its sales increase." Listed prices are not where the action is. What you have to know is the number of side deals and rebates and special programs that constitute the full market, about whose structure Relman does not have a clue....

Relman of course touches none of these issues. He notes that cancer therapies can run $50,000 per annum, but does not examine either the cost or benefit side for these drugs, or how deregulation might lower prices. He notes that the industry runs high profits, but scoffs at the notion of risk-related return, even in the face of the industry's mediocre performance in the stock market. To him the "the industry" (and never the firm) just "dictates" prices....

Maybe Relman doesn't think that pharmaceutical companies should behave like ordinary firms. But he surely gives us no inkling here of what pricing regimes follow from his own enlightened view of the industry....

Relman is equally uninformed when it comes to advertising, which in his inimitable authoritarian style he would like to limit or ban....

Next Relman does not appear to believe that advertisements lower average costs because of his excessive reliance on list price as evidence of market prices. But of course they do, for why else would a firm advertise if it could not recoup those costs and then some?...

Relman is oblivious to the need for trade-offs at the margin—here and everywhere else....

Relman is equally fearless when he takes on the patent issues....

On this point, Relman and Angell are the defenders of the single worst idea of regulatory policy to come along in a long time....

Relman and Angell's repeated defense of their position remains a mystery. Ruinous and foolish, from a social point of view, are apt words to describe so misguided a social policy....

Even though Relman makes an utter hash of the economic issues, one might think that he would do a bit better in talking about the health and safety issues, which are more up his alley. But again he misfires on all cylinders....

There is no question that the history of protectionism in the United States and elsewhere is replete with cases where disappointed competitors raise deliberate health scares to keep out superior products with lower price tags. But this is not one of them. Relman, however, dismisses the matter with a wave of the hand, calling the entire concern "spurious," without ever bothering to say why. He does not explain why the huge return from selling bogus goods gives no incentive for unscrupulous people to break into a porous system. He does not explain why long supply lines through foreign territory increase the opportunities to distribute counterfeit drugs into the market. He has no explanation as to why private companies spend small fortunes to label and track goods in an effort to thwart counterfeiting. He gives no explanation as to why every FDA official who has looked at this issue, in both Democratic and Republican administrations, will not give their blessing to parallel importation or why Congress, after its usual bluster, always backs down on the issue....

In response it could, and should, be said that health care raises real problems with information, but so do lots of other goods, including complex financial services and retirement plans, computer programs and the like. There are differences in all these goods, but one mistake that Relman makes is to think that only former editors of the New England Journal of Medicine understand just how difficult it is for ordinary people to understand medical services. But again, that problem is not unique to health care, but arises in other markets as well, like real estate and life insurance. And so in some instances people hire brokers, and in others they hire doctors. It is one thing not to know much about drugs, but it is far more dangerous not to know that you do not know anything about drugs....

Relman is dismissive of any critique of FDA policy, in large measure because of the touching faith that he places in clinical trials....

The point here is not some nasty pharmaceutical propaganda. Indeed the most vocal attackers against clinical trials, without exception, are not pharmaceutical companies (who fear the liability implications of allowing people to use their drugs), but the ordinary patient who knows how to make the simple expected utility calculations that elude Relman and, more importantly, the FDA. ...

Whether correct as a matter of constitutional law or not, the impulse for the attacks on the FDA come from the people who want to take the drugs. And Arnold Relman knows so much about medicine that he is prepared to turn them away at the gate. ...

But the deluge of angry letters to the FDA when it refused to follow the positive recommendations on the promising new vaccine for advanced prostate cancer, Provenge, for example, was mounted by patients who saw in it the only refuge from advanced prostate cancer. Yet at no point does Relman address any of the mountain of evidence against him. Nor does he turn his scientific eye to each new FDA protocol that requires additional trials on smaller populations,...

Indeed, one important use of good clinical trials is to throw out of court the various law suits in tort litigation, but you would not know this from Relman's screed, because he does not mention a single word about tort litigation, even though he well understands the risk that medical malpractice litigation poses to medical progress. ...

There is a common theme to all the points contained in Relman's ill-tempered broadside. Relman's belief about the operation of pharmaceutical markets was the attitude that my grandmother took to flea markets. If the other guy wants to sell at a given price, don’t buy, because he is there to rip you off. Today, Relman's view is that if the company makes a profit, then we have to be suspicious about its motive and its performance.He utterly fails to grasp that most markets in ordinary goods—pharmaceuticals included—survive because they generate win/win transactions, just as Smith and Friedman said...

Then again, anyone who thinks that Milton Friedman was talking through his hat when he spoke about the efficiency of markets will take a jaundiced view of private profits and public health, thinking that they will mix no better than oil and water. I can't comment on his medical skills, but as a professor of social medicine, even at Harvard, it would help if Dr. Relman took, for the first time, Economics 101.


ALHGC Alien Lunar Hijack Global Cooling

What would be the effect on the Earth's temperature if the moon is hijacked to another galaxy?


21st Century Socialism

The New Model

"It might look great for a while, but we know these are formulas that don't work," said Hernando de Soto, a Peruvian economist who has written extensively about how to legitimize informal economies.

In co-ops and state companies, Chávez's policies have generated legions of devoted followers like Iris Pinto, 31, who said her life had been dull, mostly cleaning homes. Now she's at the shoe factory.

"He's a wonderful president, really socialist," she said. "President Hugo Chávez Frías gave us this opportunity, and it's been completely successful."

While a 45 year old Iris may not be bored when her primary diet turns to shoes, black, it is likely true that her economic ignorance only places her in the middle of the pack for the US Congress.


The Wild Wheel

The Wild Wheel

A great story about a moonlighting employee of Thomas Alva Edison.

The $18 paperback

The pdf file

 


The Case of the Minimum Wage Gas Station Attendant, a Problem in Economic Analysis

Vladimir is a legal immigrant working his second job on the lonely night shift at BORDER CITSTOP GAS, a station with three self-service pumps and one full-sevice pump. The station is located in Indiana, 200 yards from the Illinois border, and all of its effective competition comes from several nearby stations in Illinois.

Vladimir's shift is twelve hours long, from 8 PM to 8 AM, six days a week. He is paid the Indiana legal minimum wage, assumed to be $6 per hour for this problem, pre-tax, and no considerations of overtime are to be invoked. For simplicity, assume that the $6 per hour rate is also the total employment cost of Vladimir to the station owner.

The rounded pump prices are $3 a gallon for self-service regular, and $3.24 per gallon for full-service regular. For simplicity, premium grades of gasoline are to be ignored in this problem.

On the first of August, the Indiana legal minimum wage will increase by one third to $8 per hour.

What are the most likely expected consequences of this increase?

 

POST COMMENT ANALYSIS :

The key point is that the wages paid to Vladimir are not dependent on sales quantities or revenues, i.e. are not marginal or variable costs, and thus are not involved in the setting of profit-maximizing (or loss-minimizing) prices. Only if there were a non-slack, non-recoverable opportunity cost to the owner for Vladimir's time would there be an effect on prices. For example, if Vladimir spends the time not used  for servicing either self or full service customers knitting station momentos for owner sale, then their revenues forgone would be a marginal cost that could change the prices. More likely, Vladimir catches up on his sleep between customers.

So the simplest answer is that the prices will not  change and the station will be shut down overnight, as the extra (relative) fixed cost of $24 a day may destroy any profitability of remaining open, with Vladimir getting laid off. Note that some of the business lost during the night may reappear during the day.

This problem has a unusual characteristic in that the profit maximizing price for full-service alone increases when self service come into the picture. If the full service price is raised enough to reduce the quantity sold by one gallon, the full revenue loss only occurs if none of the demand is shifted into  self service.

 

 

 

 

 

 


1-800-54GIANT

Listening to a Red Sox radio commercial, does any country besides the US have independent mobile vans that come to your parked car in response to a call and replace a cracked windshield for almost any car?

 


If You Only Had a Brain

Tax Official All Wet

Tiny Brain No Problem for French Tax Official

Something that many people secretly believed has been confirmed: You don't actually need a brain to work in a tax office. A French civil servant has been found to have a huge cavity filled with fluid in his head -- yet lives a completely normal life.

 


Printer Privacy Invasion


The Declaration of Independence, Performed