Wednesday, November 14, 2012

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.

Tuesday, November 13, 2012

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%.

Saturday, November 10, 2012

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.

Friday, October 12, 2012

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%.

Wednesday, October 10, 2012

The Law: No Place For Genetics

Just read an interesting article on "defense of marriage" laws, originally written four years but recently updated. Here's the gist:

The biggest problem is that laws like the California initiative will make the courts decide who is male and who is female — and all available decision criteria create unavoidable miscarriages of justice that will, or should, dismay initiative proponents.
That is, it's impossible, says Rick Moen, the author of the article, to give a biological definition of "man" or "woman", and therefore, impossible to define marriage as between a man and a woman. It's a cute idea, and I get why it would come from a site called LinuxMafia because it no doubt appeals to engineers who like precise definitions, but doesn't really work for a variety of reasons.

First of all, legal definitions are not the same as biological ones. I don't see why it's necessarily the case that, as Moen asserts, someone who has been a woman all her life, but is at some point tested and found to have XY chromosomes, must immediately have her marriage annulled and be permitted to marry a woman. The law is not, in fact, biology, and it has some give in it. It seems eminently reasonable that in a case like this, this person would (or could) still be legally considered a man. That may sound absurd, but it certainly doesn't to transsexuals, who may have some external anatomy changed but retain the same chromosomes.

Second, and even more problematic for Moen's argument, if this sort of test were that problematic, we'd already be drowning in "kudzu" (the article's basic metaphor is that marriage laws have unintended side effects like the introduction of kudzu to the American South has had). There are already all sorts of laws, regulations, rulings, etc. that differentiate between sexes and races. Questionable sexual identity is pretty rare. Questionable racial identity is extremely common, because it's almost impossible to test. And yet we have federal regulations mandating, e.g., that a certain percentage of contracts be awarded to businesses run by minorities. How can this possibly work, given that there is no feasible test that could be given that would verify the minority status of a given person?

So while marriage laws may and do have other pros and cons, we don't really need to worry ourselves about Moen's points. There's no kudzu about to overwhelm our legal system.

Thursday, October 4, 2012

Debate Thoughts

A good night for Romney, as everyone seems to agree. The post-debate CNN poll was 67%-25% pro-Romney, a margin of victory rarely seen. Surely that 25% is only the hardest of hard-core Obama supporters, which means the independents must have sided with Romney in truly overwhelming numbers.

Still, a few tricks were left on the table. I wish Romney had held Obama's feet to the fire more on his record. For example, all those times Obama talked about how Romney would horribly cut the budget and throw grandma out on the street, all Romney had to say was: "For the sake of argument let's say we went back to the spending levels of 2000. Did Clinton throw grandma out on the street? No. But we had a balanced budget and spending was far below its current level. Obama's spending far more, and are you any better for it?" But he continually argued that he wouldn't cut X, wouldn't cut Y. It's OK, Mitt! Cut some stuff!

Also, Romney threw out some talking points without really explaining them. That's something that McCain did four years ago, and it's infuriating. In response to Obama's absurd claim that domestic oil and gas production is up due to his administration, Romney scored a telling blow by explaining that production is up on private lands, but not public lands, but then he just said Romney would (in contrast) "build that pipeline". I know he's talking about the Keystone Pipeline, of course, but it would have made sense to spend 20 seconds explaining this, because many people out there don't know about it.

I'll take it, though. Good performance out there. Next up is the VP debate on October 11, and that should be a joy to watch, kind of like watching your favorite NFL team face your worst football rivals... from high school.

Sunday, September 16, 2012

Book Review: The Good Earth

When reading The Good Earth it's important to keep in mind two things: it was written by an American, Pearl Buck; and it was written in 1931, years before the Communists took over the country. At the time the novel was written, China was largely unknown to Americans, but that would soon change with the Japanese invasion of China in 1937 and China's alliance with the U.S. in World War II. The Good Earth helped bring Chinese peasant life to Americans at a time when there was little other exposure.

Buck, though not Chinese, had lived much of her life in China. Born in the U.S. to missionaries working in China, she was raised in China from the age of three months until she returned to the U.S. to attend college in 1911. She moved back to China in 1914 after graduating, married an American missionary, and lived until 1933 in a small town in rural China.

The novel itself (the first of a trilogy, but it easily stands on its own) covers the life of Wang Lung, a hard-working peasant. As the story opens, Wang is about to marry the woman his father has found for him, a former kitchen slave from the wealthy House of Hwang named O-Lan. The selection of the wife is purely practical: "We must have a woman who will tend the house and bear children as she works in the fields, and will a pretty woman do these things? She will be forever thinking about clothes to go with her face!" (Wang is not too happy about this, but he goes along with it.) Wang and his father are very poor, so much so that when Wang adds some tea to the hot water he brings his father in the morning, he gets rebuked for his wastefulness.

The marriage, however, works well: Wang Lung and O-Lan work hard; she is an export home economist, saving money in countless small ways; she bears him several children; and after a few years the family has managed to save some money. Wang uses this money to buy land: land that the House of Hwang is selling to cover expenses. The Hwangs have more expenses than income and are clearly on the decline, and Wang is determined to take advantage of this to the degree that he can. At first, it isn't much, but he is at least able to expand his farm.

Eventually a terrible famine comes, and Wang and his family are forced to move to the city to survive. The city is a corrupting influence on his sons (who learn to beg and engage in petty theft), and Wang is impatient to return to his farm, but money is tight and they remain in the city for months. Wang, notably, finds honest work running a rickshaw and resists the city's invidious allure. Until one day, when warlords invade and the rich folk run away, the city's poor take refuge in — and ransack — their houses. Wang and O-Lan join the mob, and O-Lan finds and steals a bag of jewels that had been secreted in the house. Finally free of money troubles, Wang uses the jewels to buy railroad passage back to the farm.

It is an ironic twist: Wang, previously incorruptible, succumbs briefly in order to save his family from their own corruption. This is a major turning point for Wang. He is a wise and careful investor, putting the stolen money to work buying yet more land, and he quickly is making enough money, and has enough land, that he must hire help on the farm. His little empire continues to grow, and Wang becomes wealthy, at least for a peasant.

But he is still viewed disdainfully as a farmer, and this rankles. One summer when the river has flooded and there is no work to do, Wang starts to patronize a certain tea shop in town. This tea shop is also a brothel, and Wang falls for a young whore there named Lotus Flower. This is Wang's first positive act contrary to the morality he was raised to respect, and it is the top of the arc of Wang's life: it is essentially all downhill from here. Prior to this summer, Wang was satisfied, despite minor irritants, with his life as a farmer. But after he meets Lotus Flower, he lives in a constant state of dissatisfaction. His patience leaves him. He cannot abide sharing Lotus Flower with any others. In the end he buys her and brings her to his house as a second wife.

O-Lan suffers this insult silently, as is her wont, but she is clearly hurt by it. To add injury to insult, it also comes to pass that she has cancer and will not live much longer. A few years later she dies, leaving behind three sons and two daughters, and Wang Lung with Lotus Flower. Wang's sons have, by this point, become old enough to marry, and they start families of their own. They do not have any interest in farming, however, despite Wang's insistence that the earth, the land, is the most important thing, the central unalterable factor in their lives. Famine may come and go, the land may be flooded, disease may stalk the land, but the land will always be there. Wang's sons, though, do not see this: they are educated, and prefer a softer life. If Wang were not so wealthy, they would have no choice: it would be work the land or starve. But he is able to hire workers, so his sons do as they please.

As Wang's extended family grows and his own abilities to work on the farm wane, he buys the town property of the House of Hwang. This completes the replacement of the wealthy Hwang family by Wang's family: he is now the most important man in the town, with vast land holdings and wealth, but the seeds of decline have long since germinated and are sprouting seedlings. His expenses have grown along with his income, and possibly exceed them. His sons are as profligate as Hwang's were, and do not care any more about his land. At the end of Wang's life, he implores his sons to keep the land, no matter what else they may do. And they promise to do so, but "over the old man's head they looked at each other and smiled." We know what will happen.

The arc of wealth is a central theme to the plot: Wang begins poor but hard-working. He tries to economize wherever possible, and his wife helps out. He invests wisely and his wealth grows. But at some point he becomes consumed by his wealth. He is no longer wise with money; he sees it as the solution to all his problems. Ultimately this makes it difficult for him to keep his wealth, and infects his sons with his carefree attitude. We know they will not emulate their father's work ethic.

The treatment of women is also an important theme: throughout the book they are referred to as mere "slaves". When O-Lan bears Wang three sons, he is thrilled and considers himself blessed. But the fourth child is a girl, and he is immediately anxious that fate has turned and he will thereafter be cursed. (There is some practical reasoning behind this, to be sure, since a daughter would need to be married off at some point, costing the family a dowry. Still, the economic facts don't seem to justify the vast differences in social status between the sexes.)

Ironically, though, women play a large role in the plot. O-Lan is a critical factor in Wang's success: her home economics expertise gives him an advantage when they are first starting out. She even refuses a midwife when bearing children, preferring to do everything, including cleaning up, on her own. (It is even possible to imagine such a thing today?) And of course her knowledge of rich people's homes and willingness to steal provides him with the seed capital he uses to convert a modest farm into an wealthy one. O-Lan stands in sharp contrast to Lotus Flower, a beauty with no practical skills or interest in working.

When reading the stories of the women in the novel, it's hard to forget that the author is a woman herself. Surely she identified with the local Chinese women she came into contact with daily, and she must have empathized with their oppressed status.

Post-WWII criticism of The Good Earth has often pointed out that Buck's not being Chinese would have prevented her from truly understanding Chinese culture, and that it is therefore better to read actual Chinese literature. But I am not so sure. Buck was immersed in Chinese culture for forty years. She wrote for an American audience, and therefore used metaphors and terms that would be familiar to them. Translations of Chinese literature have their own limitations: they are written for Chinese audiences (and thus may be more difficult for Americans to understand) and are usually read through the intermediary of a translator.

Regardless of its limitations as a description of Chinese culture, The Good Earth is a very good, possibly great, novel. The archaic writing style, which could easily have become stilted or silly, is used delicately and well: it brings the reader into a foreign place without shouting about it. The plot is simple and linear, but nonetheless elucidates important themes. The characters do not talk about philosophies of life, but their philosophies are clarified by their actions. It's an interesting question, one I am unqualified to answer, whether The Good Earth illuminates modern China. But whether it does or not, the novel is well worth reading today for its observations on the unchanging aspects of all humanity.