Post Office: A Step in the Right Direction

Following up on my post from December 2012, the Post Office is in fact cutting back, by eliminating Saturday delivery. It's a small step, but a step in the right direction.

Silver Linings Playbook Mini-Review

On Friday my wife and I saw Silver Linings Playbook, the Oscar-nominated film starring Jennifer Lawrence and Bradley Cooper. It's a good movie, well-constructed, well-acted, not quite a romantic comedy but not so heavy as to be a full-on drama. Typical Hollywood ending.

But what I thought was interesting was that the climax of the movie involves the furtherance of a criminal enterprise. That's spelled out pretty explicitly, but no one in the film seems to notice or care. The father, played by Robert de Niro, has lost his pension and started a bookmaking "business", which is, of course, illegal. To hide his profits he wants to start a restaurant, through which he can funnel his illegal earnings.

His son Pat, played by Cooper, can help his father win a bet (itself, ahem, illegal) in order to obtain the capital needed to open the restaurant. Spoiler alert: they do win, and Cooper gets the girl and his father gets his restaurant. Which, we couldn't help but notice, is the front for his bookmaking operation.

The reason this is so very odd is that the story revolves around Pat's difficulties with the law. He has just come out of a court-ordered stay at a mental institution after beating his wife's lover nearly to death. Needless to say, Pat figures out a way to control himself and stay on the right side of the law. Except... does he? He ends up being an accessory to a crime, or at least enabling his father to commit one.

I suppose we aren't supposed to worry about such things, but it struck me as strange. The family could easily have had some other, less illegal, form of financial hardship. In any case, the circumstances detract only a bit from an enjoyable, if hardly profound, movie.

Post Office: Shrink It!

The US Postal Service recently announced a $15.9 billion loss for fiscal year 2012. Meanwhile, FedEx had an operating income of just over $3 billion and net income of about $2 billion, and UPS is on track to be slightly more profitable.

I'm constantly seeing ads on TV and elsewhere for shipping services via USPS. But clearly they're losing in the marketplace for shipping. And that's fine, in a way. We don't really need the USPS to make money. But it would be nice if it lost less, and there's a really simple way to do this: cut it down to size.

Do we need a government-run postal service that ships packages of all shapes and sizes to every zip code in the country? We already have privately-run companies that do this just fine and do it profitably. I get that for social cohesion it's useful to have a postal service for letters (although that's less and less obvious given the fact that even email, which has been killing postal mail for years now, seems antiquated in these days of Facebook and Twitter).

The USPS needs to do what any company deep in the red does: cut back to its core competency. This is going to be very hard to do, though, because it can be endlessly subsidized by the taxpayers. It won't have to go through bankruptcy reorganization. It's not even a "public-private partnership", a la FNMA.

This would be a perfect time to shrink the USPS, though: its raison d'etre is going away, it's losing money, and we as a nation are going broke. But I don't imagine for a second that it'll happen, for all the usual reasons: too few people care too little about shrinking it, and the few who really don't care a lot. Repeat this a few hundred times and you have a trillion dollars in annual deficit.

Price-Gouging

In the wake of Hurricane Sandy, the New York Posts reports that New York attorney general is going after Craigslist listings for "price gougers" who are offering, e.g. $20/gallon gasoline.

Robert Nozick once said that "the socialist society would have to prevent capitalist acts between consenting adults." Well, here you go. I'm trying to understand the A.G.'s theory here: if someone needs, say, 5 gallons of gasoline, they usually have a range of quick, relatively equally-priced options, i.e. gas stations. It only takes a few minutes, and the range of prices for the equivalent grade of gas is only a few percent.

During the shortage conditions that obtains following Sandy, those options were curtailed. You could go to a gas station, but would wait in line for hours to buy gas at the normal, low price. Or you could go to a "price gouger", offering to sell you gas with no wait at a considerable mark-up. This gives the consumer a choice.

If the "gouger" did not exist, only the first option would be available. Of course, the approximate equivalent could be accomplished: the person who needed gas but didn't want to wait in line could hire someone to wait in the gas line. That, presumably, would not be gouging. But waiting in line and then trying to sell the product is. The "gouger", we see, is really a small-time entrepreneur.

There are many economic stories in which there are two sides, and one could easily understand the opposite position. (For example, economic nationalists who want certain barriers to trade may be willing to accept the costs of those barriers - higher prices, lower productivity - in exchange for protecting domestic jobs. One may see that there is a tradeoff, even if one has strong opinions about which side of the trade is the more desirable.) But this is a case in which the existence of the "gouger" is a pure good.

The Stock Market Effect

This is necessarily a very approximate, first-order view of things, but consider the following facts:

1. The day of the election, InTrade estimated that President Obama had a 70% chance of winning re-election.
2. The day after the election, the Dow Jones fell about 300 points.

Suppose that all other election-day news had an effect worth a drop of N points on the DJIA. Then the Obama effect was worth a drop of 300-N points. That result had a 70% chance of occurring (assuming efficient markets and sufficient arbitrage). That implies that had Mitt Romney won, the DJIA would have risen by approximately 7/3 × (300-N) = 700-(7/3)N points.

It's probably not fair to assume N=0, in which case the Romney effect would have been +700 points. But even if N=150, a Romney election would have worth +350 points. Instead, it dropped 150 points (due to Obama, plus another 150 due to other news). That's a 500-point swing, or about 4%.

Post-Election Wrap-Up

Well, Tuesday was unpleasant. We were standing athwart history, and history rolled over us like a freight train. We really can't deny that.

At the moment, at least, this is not a center-right country: it's center-left. Some would have us believe that this is due to demographics, and thus has an unstoppable momentum behind it. But I don't think that has to be the case.

In the near future, some predictions:

1. There won't be any conciliation between the parties, unless the GOP chooses to roll over. Obama won narrowly, but he's going to view this as a mandate and push his agenda as aggressively as ever.
2. We will see even more abuses of executive power over the next two, and possibly four, years. (My biggest fear is that this won't end with Obama's second term, but may become a permanent fixture of American politics. If I'm right about that, then we'd better hope we never elect an ambitious power-monger President.)
3. Taxes are going up for most people. The most obvious top-line effects will be on "the rich", but if business taxes are raised, that affects everyone. If gas is taxed more heavily, that affects everyone. And so on.
4. Health care coverage will get worse as more companies opt not to provide it to their employees. We're going to start the long march towards universal care. I predicted this two years ago and so far have seen no reason to doubt it.
5. Iran will get a nuclear weapon.

Lightweight Veep Debate Roundup

Ryan: centered, factual, wonkish. Kept his cool. Looked like the smartest kid in the class. Slight downside: looked like the smartest kid in the class.

Biden: disrespectful, crazy, rude. Drunk uncle at Thanksgiving who can't quite keep his millions and billions straight.

Biden's pre-debate email was very Biden-esque. It began: "I told Barack I have one mission tonight: tell the truth and stand up for what we believe in." Perfect.

The polls will probably not reflect much movement from this, but I can't see that it helped the Democrats much. Think any swing voters watched that debate and thought: "Gee, that Biden guy is the one I want one heartbeat away from the nuclear launch codes." I don't.

Intrade has Obama/Biden down 3.5% today thus far. But still well over 50%.