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September 2004

John Kerry plays Who wants to be the President?

Kerry Spot points to this excerpt from Fox New's "Special Report" of 9/27:
The president is bracing for attacks from Senator Kerry and will be ready. And one aide said the president might raise the matter of Senator Kerry's shifting positions by asking as they did on a famous quiz show, 'Is that your final answer?'
Here's how John Kerry will play Who wants to be the President?: Q: Do you think removal of Saddam Hussein by US has made us safer? Options: 1) Safer 2) Less safe 3) Maybe 4) All of the above (depending upon the day of the week)

I bet John Kerry will use up all the three lifelines: a) Poll the audience (his favorite), 2) 50/50, 3) Phone-a-Friend (Bill Clinton?) before answering "4) All of the above".

John Kerry's flip-flopping and his excuses are illustrated perfectly by this post at powerline.

Update: Checkout ScrappleFace's take on 2nd Presidential debate.

This is not a real Health Insurance

Arnold Kling has a great column, titled You Call This Health Insurance?, at TCS. He argues that a real health insurance scheme will allow sharing (or pooling) the risk of rare medical events (such as heart attack, major illness, etc. in people under age of 45) among the insured. And occurance of such a rare medical event will trigger a large one-time payment to cover (a major share) the entire expected lifetime costs to take care of that disease. The almost sure medical events, such as heart attacks among those over age of 55, should be covered through one's savings. The current system is simply a "split the check" or "pass the buck" system in which few people benefit at the expense of others. There is an in-built incentive to over-use the system as expenses for even everyday medical illnesses are reimbursed. That's reason why the current schemes benefit the providers as they see an increased demand for their services and products.

See also his blog for an excellent analysis and discussion on the same topic.

Kerry twists Bush's words: The headline AP never had

From an Associated Press dispatch, Bush Twists Kerry's Words on Iraq:
President Bush (news - web sites) opened several new scathing lines of attack against Democrat John Kerry (news - web sites), charges that twisted his rival's words on Iraq (news - web sites) and made Kerry seem supportive of deposed dictator Saddam Hussein (news - web sites).
AP admits that Kerry has done the same thing in the past:
It was not unlike the spin that Kerry and his forces sometimes place on Bush's words.
Almost at the end, AP describes Kerry's spin on Bush's words:
That's not to say Kerry hasn't been playing fast and loose with Bush's words.

Just Friday, the Kerry campaign sent an e-mail to supporters entitled "He said what?" citing Bush's remark that he had seen "a poll that said the right track/wrong track in Iraq was better than here in America."

The e-mail from campaign manager Mary Beth Cahill accused the president of having "no plan to get us out of Iraq" and thinking "the future of Iraq is brighter than the future of America."

Bush has a plan for Iraq — Kerry just disagrees that it is working. And the president wasn't comparing Iraq's future to that of the United States, only accurately reflecting one recent survey in Iraq and the latest trends in America that asked participants for their assessment of the direction their countries are going.

Okay, then where's the screaming headline: Kerry twists Bush's words

Update: Associated Press has changed the headline to: Bush, Kerry Twisting Each Other's Words

And PowerLine has a more detailed analysis.

Consumers have an upper hand in free markets in spite of the imperfect information

Alex discusses how consumers can choose products with imperfect information.

I think he misses the point that in a market sellers (or producers) have a lot invested than consumers. Producers might be able to sell a few bad products because consumers don't have all the information they need. However, once consumers realize and the word spreads around, sales will drop and it will be the producer who will be stuck with capital investment and inventory. This risk taken by the producers is the main reason why consumers can 'trust' the producers to some extent. It is also the reason why advertising might be useful. Spending on advertising also represents a vote of confidence by the producer in the product it is advertising. If consumers don't find the purchased product consistent with the advertisement and their needs, the rest of the product inventory won't sell. The producer might be stuck with huge investment in inventory, brand building and capital investment. It is this risk that gives incentives to the consumers to try out products in spite of the imperfect information. Other things being equal (such as previous experience with the product) consumers can filter products based on the investment in the capital, inventory and advertising. In fact, filtering can happen automatically. For example, if a distributor (or wholesaler, or retailer) thinks that the consumers are likely to buy the product they will stock the product. Thus products reach consumers backed by investment by various players in the market.

This goes beyond simply helping consumers make a proper choice after the products are produced. This mechanism ensures that producers (and distributors etc.) undertake only those products that they think are likely to be purchased by the consumers. After all, what is the use of ensuring good choice among already produced products if the producers don't have any incentive to produce "good" products in the first place.

Does that mean that producers will not make mistakes or that they will not think short term? Sometimes yes, producers might not think about long term consequences of their actions. They might be tempted to increase margins on individual pieces of products by reducing the quality (hence costs) or by selling at higher rates. But such behavior cannot go on for long because of the opportunity it will create for the competitors.

So why do we as a consumers feel cheated by producers (or service providers)? Producers try a number of things to protect their vested interests from competition. One such powerful thing is govt. protection. That's why we see lobbying for increased legislation to 'protect' from the vagaries of the market place. It can take form of the licensing requirements, quality standards, anti-trust laws, higher taxes, subsidies, tariffs and duties and so on. It is also important to realize that if producers feel threatened by the competition then so are their employees. Wage earners are a huge lucrative political constituency. Thus, many of the producers might get a free ride on the laws designed to protect jobs (say from cheap imports). It is this protection that enables producers to protect their investment (in capital and inventory) without satisfying the demands of the customers in the best possible way. If markets were truly free then we should have see producers much more worried about consumers and their demands than they are today.

Thus, really free markets contain an in built mechanism to help consumers make better choices in spite of the imperfect information. It is the competition limiting legislation that impedes this mechanism and causes consumers to feel powerless in a marketplace.

Anti-discrimination laws

On one hand there are many anti-discrimination laws in US to prevent employers from discriminating employees on the basis of sex, religion, caste, nationality and so. On the other hand, US Govt. is shamefully trying to preserve affirmative action. Employers (and many others) have to make special arrangements, such as providing special parking space near the entrance, for disabled people because of the Americans with the Disability Act.

Employers can "discriminate" when hiring if performance of the job so requires. On this basis, the famous Hooters restaurant can hire only girls as waitresses.

Heck, you even have to prove that industriousness matters, otherwise you can be prosecuted for discriminating against the lazy.

paradoxes in Efficient Markets Hypothesis

Via Catallarchy, Stefan Karlsson points to some fundamental paradoxes in the Efficient Markets Hypothesis.
The advocates of EMH are like people who say that there can never be any bills or coins to be found on the street because if there had been any money on the street someone would have picked it up. Yet if someone has picked up the money then these people would have been contradicted since the people who have picked up the money would have done what the other people said was impossible. Thus, the assumptions underlying the conclusion that there can be no money on the street or no profit opportunities in financial markets are in itself in direct contradiction with the conclusions they are supposed to prove!

How to ensure good public policy

The Catallarchy says, the reason why 'bad' policy gets enacted by politicans has to do a lot with structure of liberal democracy. The solution,
the only solution I can see is creating a structure of government in which Exit plays a much greater role and people who create and advocate public policy pay for nearly the entire costs of ‘bad’ public policy and reap nearly the entire benefits of ‘good’ public policy.

In other words, change public policy from a public good into a nearly private good. When this doesn’t happen, programs like Social Security and Medicare are created and instead of taking responsibility for cleaning up the mess, politicians simply pass the buck to the next guy.

How about giving our representatives a stake in our welfare? If our representatives are given a deferred compensation based on some measure of National Income then they will have to pay (by reducing their pay) for 'bad' public policies and they will reap benefits of 'good' public policies.

Why deferred compensation? Because, whether public policy is 'good' or 'bad' will be known after many years have passed. Using National Income (or any other broad based measure of national well-being) means representatives cannot increase their income without being fair to all of us. Redistributing wealth from rich to poor, for example, will result in lower National Income than what would have been possible in absense of such re-distributive taxes.

I had alluded to this theme earlier, suggesting that the above kind of scheme can even take care of financing electoral expenses.

Will American voters fire George Bush and hire John Kerry?

OpinionJournal - Best of the Web Today has a great post explaining why American votes won't fire George Bush over past minor wrongdoings and hire an unqualified John Kerry:
But dwelling on minor allegations of wrongdoing in the far-off past seems unlikely to bring down an incumbent president. Suppose you're an employer and you hear that one of your employees, who's been working for you for about four years, once had a drinking problem and in fact pleaded guilty nearly 30 years ago to a misdemeanor charge of driving under the influence. You actually heard about all this when you initially hired him, and it did give you second thoughts, but in the end you decided to give him a chance. In the four years he's been working for you, you've seen no sign that he's fallen off the wagon. Is there any cause here to fire him? Even if the revelation about his past were new, wouldn't it have to be pretty severe to constitute grounds for termination?

Now say someone comes to you looking for a job. Right off the bat, you notice something strange about his résumé: It goes on for page after page about a job he held for four months, more than 35 years ago, but makes only the barest mention of anything he's done since. You have him in for an interview, and he can't give you a straight answer to any question about what he plans to do in the job if you hire him. Instead (to borrow a description from Joe Conason), he sounds like a bar-stool bore, with a bad habit of repeating the same lame boasts about that long-ago four-month stint again and again.

Still, you decide to check out his references. (John Edwards: "If you have any question about what John Kerry is made of, just spend three minutes with the men who served with him.") Some sing his praises quite extravagantly, but a greater number describe him harshly as a man of dubious character, and some accuse him of lying on his résumé. He acknowledges a few embellishments but refuses to provide you with documents that would shed light on the other accusations.

Would you hire this man? And would you fire an employee of four years' standing in order to create an opening for him?