life hereafter

random musings from a wannabe economist

As anyone who has ever flown in, once seen, or thought about an airplane, I feel as though it is my patriotic duty to add my inflation adjusted $0.02 into the mix.

In-case you have been hiding under a rock for the past week, Spirit Airlines announced that they will charge up to $45 for passengers bringing carry-on bags onto it’s jets this summer. The announcement has been met with much controversy and has even sparked a new Bill in congress entitled the BAG Act (whose cutesy title makes me gag a little so I won’t repeat it here.)

The great Senator from New York (no, the other one… yes, Schumer… near-sighted protector of consumers everywhere… ok, no? yeah, the CARD Act was short-sighted wasn’t it… ok, that’s a whole other debate, let’s move on…) has received commitment from five domestic airlines that they will not follow suit and also charge for carry-on bags. Unfortunately, the Senator may be on the wrong side of this issue. Closer inspection shows that the argument isn’t so simple.

This is a problem that airlines brought on themselves. Ever since they began charging for checked bags individual consumers decided to outsmart them and bring ever larger bags into the cabin itself. A cabin which was never designed to hold the quantity of cargo it now contains. This causes multiple headaches, it slows down the check-in process, slows down security, slows down boarding and slows down disembarkment. It now takes a solid half hour to board an A-390 as little old women struggle to lift 45-lb suitcases above their heads and into the over-head bins.

Spirit decided to apply a tried-and-true (and effective) economic principle using a (dis)incentive to force people to make a conscious choice about what they are doing. Do I REALLY need my bag with me in the cabin, slowing everyone down, or can it go below?

Of course no one wants to pay any added fees for anything, but perhaps we should all take a good look at what Spirit was trying to accomplish. Maybe folks bringing 40-lb bags into the cabin should pay the fee for the added convenience (for themselves) and inconvenience (for everyone else.)  Then we can all return to sanity and vacationers can check their over-sized and overstuffed bags. While we are at it, airlines should also enforce the rule that your first carry-on goes under your seat. No more putting your coat and purse in the overhead so that your little feets can stretch comfortably. (I’m looking at you.)

Wow, the government is really fast at pulling money right out of your bank account when you owe them. I guess times are tough…

Speaking of taxes, I just finished completing the paper forms for my seventh and final state. Whew. If I was deciding where to live based solely on Tax forms I’m pretty sure that North Carolina would be at the bottom of my list. Delaware would be at the top. In Delaware all you basically do its copy over all of the lines from your federal return and tell them if there are any differences with your income or deductions with respect to their state. It’s two pages and your tax is computed on a simple ratio basis. Done in 7 minutes.

North Carolina on the other hand. Four pages long. The first page after you finish with the pleasantries of filling out your name, SSN and which horrible political party you want your money to go to, they have you jumping all over creation. I believe question 12 told me to go to page 3 and complete questions 37 through 52 and bring the result back here. Once on page 3 and you get to question 38 it tells you to go to the instructions and complete worksheet A on page 12. Once there one of the questions on the worksheet asks you to complete the Deduction Exemptions worksheet on the Federal 1040 instructions. So, here I am with two computers with four PDF documents open trying to complete these worksheets on pen and paper, only to get to the end of the worksheet and have it tell me that none of this matters and they are going to use the results on page 1 anyway. Oh and not to mention that Acrobat Reader crashed on me half way through and I tried to complete the forms again from memory and came out to a different result… I hate you NC Department of Revenue.

It was like one of those choose your own adventure books where you keep dying. Anyway, at least that is over.

I sure do hope that California doesn’t send me an IOU for the $2 they owe me… And yes, I will be cashing that check. It’s a principles thing.

Dear President Omaba;

I know you and the Congress are currently struggling with small ways we can reduce the national debt that won’t greatly impact everyone. As I was reviewing my mail this evening I saw a letter from the US Department of Commerce with the words 2010 Census on the envelope. Thinking that this was in-fact the census I opened the envelope to find it contained a letter stating that I would be receiving a letter containing the actual census in one week.

What is this? The Works Progress Administration (WPA) at work here? Did we need to bail out the Postal Service by mailing millions of letters saying “LOOK OUT, a letter is coming!” How many millions did that cost the tax payer?

I realize these are already sunk costs, however I’d like to make an early recommendation for the 2020 Census. Let’s stick to just sending out one letter with the form inside.

Sincerely,
Everyone

P.S. We are also in the 21st century. Perhaps next time we can try conducting the actual census virtually for those of us with Social Security Numbers and drivers licenses?

This is a tremendous example of well-meaning government creating inefficients and waste. Take a look at the article from across the pond:

Twelve million low-energy light bulbs were posted to households over Christmas by an energy company as part of its legal obligation to cut carbon emissions, despite government advice that many would never be used.

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A survey in July by the Energy Saving Trust found that the average home had six unused ones lying in drawers and cupboards.

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In 2008 the Government ordered the big energy companies to invest in measures for improving energy efficiency and cutting fuel poverty.

Companies can choose how to meet their obligations.

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Companies were allowed to register immediate carbon savings from every bulb issued on the assumption that all recipients instantly installed them in some of their most intensively used light sockets. In reality, many people either stored the bulbs or threw them away, often because they were the wrong fitting or wattage.

The companies can also meet their obligations by paying for homes to be insulated. This guarantees energy savings but is much more expensive.

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Companies can pass on all the costs of the scheme to their customers. Over three years it is expected to add more than £100 to the average household’s energy bills.

This is a wonderful example of a well intentioned goal, reducing carbon emissions, turning into an inefficient, inexcusable and costly piece of waste. Companies, much like indivduals, respond to positive and negative incentives. When governments create a market distortion (e.g., provide an incentive) two things will happen 1) the distortion will lead to disequilibrium and very likely unintended consequences; and 2) the companies will follow the path of least resistance, which also happens to be the path of least cost. In this situation, resulting in 12m light bulbs sent to everyone in the country creating countless waste, not to mention the environmental impact of the shipping and packaging materials used. Oh, and the fact that the customers will eventually have to pay for these bulbs, you see nothing is really free.

These politicians were moronic to think that the companies would, out of the goodness of their hearts, pay for an expensive home insulation program and eat the full cost.

Original Article: http://www.timesonline.co.uk/tol/news/environment/article6973577.ece

Fantastic article, as always, by Bruce:

A terrorist attack cannot possibly destroy a country’s way of life; it’s only our reaction to that attack that can do that kind of damage. The more we undermine our own laws, the more we convert our buildings into fortresses, the more we reduce the freedoms and liberties at the foundation of our societies, the more we’re doing the terrorists’ job for them.

Is aviation security mostly for show? CNN.com

Dear Al-Queda,

Congratulations! Look’s like once again you have struck a victory even in the face of what looks like defeat. Don’t get me wrong, your plans were not foiled in any way. The security measures in place absolutely failed to notice anything suspicious. The only thing that went wrong was your man screwed up. So, good job on accomplishing that first victory. Now, your second victory wasn’t even something you had to do in order to irreparably harm the lives of millions. The Dutch government has decided that it will shove millimeter wave scanning on all individuals traveling to the United States. Won’t be long before we have the same scanners installed on domestic flights.

You can thank the reactionary fear-mongering governments of the world for doing what you never could, which is erode the freedoms and personal liberties of the democratic and civilized world.

So once again, congratulations on your two victories. I’m sure your leadership is so proud.

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Now America, ask yourself: Could we have caught this person using full body scanners? Most likely. Could we have also caught him by profiling individuals from Muslim nations with shady backgrounds and banking transactions? Statistics point to yes. Could the attack have been prevented by following a non-interventionist foreign policy? almost assuredly.

This is surely going to be unpopular. I am in no-way justifying the attempted attack, but think about how our actions around the world drive individuals and organizations to extreme (and seemingly unprovoked) re-actions. There are two options to address this concern; the first is that you hunt down every suspected organization and individual who might pose even the slightest threat to the United States. This option is surely expensive, looks bad to the rest of the world, is very bloody, is only going to further the nanny-state and will ultimately be impossible. The other option is to stop doing the things around the world which drive people mad enough to blow themselves up and kill innocent people. (Like say, overthrowing governments only to have a more oppressive one take it’s place.)  Whichever option is ultimately chosen by the powers that be, just be prepared for the costs, monetary and otherwise.

Continue to give up liberty for a little security, just don’t come crying when you have neither.

Time for me to take a moment to talk about my favorite topic, the  way we measure our unemployment rate and misinformed reactions. Take this headline from earlier today:

Rally loses steam on Wall Street after early surge fueled by jobs report.

This “rally” was a 148 point rise in the DOW moments after the market opened. And for what? The apparent decline in the unemployment rate from 10.2% to 10% and the smallest amount of job losses (~11k) since the recession began in December 2007.

Take a moment to deconstruct the above statement. The media jumps all over these numbers and makes the following fallacies in their interpretations:

1. The unemployment rate went down. Good.
2. The amount of job losses this month was better than last month. Good.

At first glance this all sounds good. However, here is what the thought process should be:

1. The unemployment rate went down. Why? Was it because more Americans found work? Or, was it because some Americans have been unemployed for more than six months and are no longer considered in the standard measure for unemployment calculations?
2. The amount of job losses this month was better than last month. However, there were still job losses. Taking this little tid-bit and thinking about the unemployment rate, we can see that it is more likely that Americans are either underemployed or are no longer considered “in the labor pool.”

Is it too much to ask for this type of reporting?

Heading over to the Bureau of Labor Statistics website we can see that the raw data for the U-4¹ unemployment measure shows no decrease in unemployment.

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¹ The U-4 measure is the total number of “unemployed” persons plus “discouraged” workers. Discouraged workers are those who have not found work and are no longer considered a part of the labor pool.