I've been looking at the IRS's statistical tables. The most recent is for 2007: http://www.irs.gov/pub/irs-soi/07in01ar.xls. A few interesting statistics:
Of 142M total returns, only 90 million of them are taxable. I'm not sure all the reasons why a return might be "non taxable" but of the just under 48M nonpaying filers, $615 Billion of reported income are not taxed. Most of this seems to be coming from the 36M people who had less than $20K of income. In 2007, a family of 4 got a total $13,600 in exemptions, after the standard deduction of $10,700.
9 million people had $382B of long term net capital gains. 23 million people had $150B of dividends. This $532B is taxed at 15% after the Bush tax cuts of 2003 and all but about $50B is to people with incomes over $100K. Just taxing this as ordinary income would net the government about $100B.
1 million people had AGI of over $500K, a total of $1.842 trillion dollars. Nearly all of them had dividends, and $105B of the $150B went to people in this class. About half of them had long term capital gains, and $260B of the $382B went to these people. So if we were to raise the tax bracket for people making $500K or more by 4%, including dividends and long term gains, the government would net from this $67B.
29 May 2011
24 May 2011
Razors
A philosophical razor is a logical device that's effective at shaving away implausible explanations. This is sometimes generalized to include any useful philosophical adage. I intend to keep updating this list as I discover new ones.
Occam's razor: The simplest explanation is the most likely one. It doesn't necessarily mean the simplest explanation is right, but we can save a lot of time not worrying about unnecessarily complex stuff.
Hanlon's razor: "never attribute to malice that which can be attributed to stupidity." Sometimes this is expressed as "Do not invoke conspiracy as explanation when ignorance and incompetence will suffice, as conspiracy implies intelligence"
Popper's falsifiability principle: It's not scientific unless it can be subjected to an experiment which might prove it false. (this is actually due to Newton)
The golden rule: Don't do unto others that which you would not have them do unto you.
Rawls' veil of ignorance: When deciding the morality of something, imagine that society was completely refashioned, and you do not know who you will be.
Murphy's Law: If it can go wrong, it will go wrong. Sometimes this is expressed as: if there's a right way to do something and a wrong way, the wrong way will happen.
It is difficult to get a man to understand something when his salary depends upon him not understanding it. -Sinclair Lewis
The Peter Principle: In a hierarchy, every employee tends to rise to his level of incompetence.
Sturgeon's Law: 90% of everything is crap. (I think Sturgeon was being very generous....99.9% at least...)
Gresham's Law (and): Bad money drives out the good. This is valid for any competitive system: If cheating is allowed, pretty soon everybody has to do it in order to be competitive.
Planck's Principle: Science rarely proceeds by changing the minds of those who already have a position; rather, the conservatives die and younger people familiar with the new idea take over the field. Sometimes expressed as "Science advances one funeral at a time"
Godwin's Law: If any conversation goes on long enough, someone will bring up the Nazis. Who ever does that is losing.
Parkinson's Law: Work expands to fill the time and cost available
Parkinson's Law of Triviality: During any meeting, most of the time is spent discussing trivial but easily understood issues, not what matters
Occam's razor: The simplest explanation is the most likely one. It doesn't necessarily mean the simplest explanation is right, but we can save a lot of time not worrying about unnecessarily complex stuff.
Hanlon's razor: "never attribute to malice that which can be attributed to stupidity." Sometimes this is expressed as "Do not invoke conspiracy as explanation when ignorance and incompetence will suffice, as conspiracy implies intelligence"
Popper's falsifiability principle: It's not scientific unless it can be subjected to an experiment which might prove it false. (this is actually due to Newton)
The golden rule: Don't do unto others that which you would not have them do unto you.
Rawls' veil of ignorance: When deciding the morality of something, imagine that society was completely refashioned, and you do not know who you will be.
Murphy's Law: If it can go wrong, it will go wrong. Sometimes this is expressed as: if there's a right way to do something and a wrong way, the wrong way will happen.
It is difficult to get a man to understand something when his salary depends upon him not understanding it. -Sinclair Lewis
The Peter Principle: In a hierarchy, every employee tends to rise to his level of incompetence.
Sturgeon's Law: 90% of everything is crap. (I think Sturgeon was being very generous....99.9% at least...)
Gresham's Law (and): Bad money drives out the good. This is valid for any competitive system: If cheating is allowed, pretty soon everybody has to do it in order to be competitive.
Planck's Principle: Science rarely proceeds by changing the minds of those who already have a position; rather, the conservatives die and younger people familiar with the new idea take over the field. Sometimes expressed as "Science advances one funeral at a time"
Godwin's Law: If any conversation goes on long enough, someone will bring up the Nazis. Who ever does that is losing.
Parkinson's Law: Work expands to fill the time and cost available
Parkinson's Law of Triviality: During any meeting, most of the time is spent discussing trivial but easily understood issues, not what matters
To an uninformed person, an informed person seems insane.
I've been looking for a source for this without success
02 May 2011
Extended vs Nuclear Families
Prior to World War I, practically everybody in the United States lived in an extended family. After World War II, almost everybody lived in a nuclear family. This change has had an enormous effect on social structures.
In an extended family, there are several families living together, or at least close by, fathers, mothers, unmarried adults, children, grandparents. This is a very powerful thing: For example, if someone needs a babysitter, or a permanent substitute parent for some reason, there's probably another family living in the same house or at least within a few blocks. If someone can't get a job, gets sick, becomes too old to be productive, or feels compelled to do something non-remunerative, there are other family members to take up the slack. If someone is inclined to act in self destructive way--spend way more than their means for example--there is probably a wise and respected family member there to talk them down (I believe that fewer than 10% of people are competent to run family finances--for evidence, the average credit card debt is over $14,000). This comes with a lot of baggage though: family members don't always get along, and often unwanted pressures are exerted. Still, the system worked, from the dawn of humanity (or before it--the apes have extended families too), until the 20th century.
The nuclear family is the smallest family unit that can work. Mom, dad, and a few kids, strike out on their own. They have no support system outside of the immediate family, and as long as everybody is healthy and fulfills their assigned roles, it can work. It's a central theme of the westward movement that started with the homestead act and reached its peak with the GI bill--and millions of people have benefited. But it doesn't always work, and because the support of the extended family is missing, when it doesn't it can have very serious consequences. Lots of things can cause failures: illness or injury, money problems, divorce or abandonment. They're often related--money is a large factor in a great many divorces, and illness is a big cause of money problems. When the family breaks down, the ones that are hurt the most are the helpless: children, the elderly or the incapacitated. The adults are often hurt plenty too.
Supporting this trend is the "social safety net"--unemployment insurance, social security and company pensions, employer health care and medicare, and more. Without all of the safety net, 95% of families are just a few months from destitution. Losing a job, someone getting sick, an investment mistake, and many other things, can destroy lives. With them, many families end badly anyway, but a lot more can survive the loss of a job, illness, accident, divorce, or any of the other pitfalls that are part of life. Most families have one or more these problems at some point in their lives. When the economy is troubled, more people have problems.
The bottom line is this: if you're in favor of anything less than a full, taxpayer funded social safety net, you're implicitly in favor of forcing everybody back into an extended family. This doesn't have to mean a biological family--a group of employees or a "commune" may serve the same purpose. But without the safety net, nuclear families become very difficult for most people in the face of problems.
In an extended family, there are several families living together, or at least close by, fathers, mothers, unmarried adults, children, grandparents. This is a very powerful thing: For example, if someone needs a babysitter, or a permanent substitute parent for some reason, there's probably another family living in the same house or at least within a few blocks. If someone can't get a job, gets sick, becomes too old to be productive, or feels compelled to do something non-remunerative, there are other family members to take up the slack. If someone is inclined to act in self destructive way--spend way more than their means for example--there is probably a wise and respected family member there to talk them down (I believe that fewer than 10% of people are competent to run family finances--for evidence, the average credit card debt is over $14,000). This comes with a lot of baggage though: family members don't always get along, and often unwanted pressures are exerted. Still, the system worked, from the dawn of humanity (or before it--the apes have extended families too), until the 20th century.
The nuclear family is the smallest family unit that can work. Mom, dad, and a few kids, strike out on their own. They have no support system outside of the immediate family, and as long as everybody is healthy and fulfills their assigned roles, it can work. It's a central theme of the westward movement that started with the homestead act and reached its peak with the GI bill--and millions of people have benefited. But it doesn't always work, and because the support of the extended family is missing, when it doesn't it can have very serious consequences. Lots of things can cause failures: illness or injury, money problems, divorce or abandonment. They're often related--money is a large factor in a great many divorces, and illness is a big cause of money problems. When the family breaks down, the ones that are hurt the most are the helpless: children, the elderly or the incapacitated. The adults are often hurt plenty too.
Supporting this trend is the "social safety net"--unemployment insurance, social security and company pensions, employer health care and medicare, and more. Without all of the safety net, 95% of families are just a few months from destitution. Losing a job, someone getting sick, an investment mistake, and many other things, can destroy lives. With them, many families end badly anyway, but a lot more can survive the loss of a job, illness, accident, divorce, or any of the other pitfalls that are part of life. Most families have one or more these problems at some point in their lives. When the economy is troubled, more people have problems.
The bottom line is this: if you're in favor of anything less than a full, taxpayer funded social safety net, you're implicitly in favor of forcing everybody back into an extended family. This doesn't have to mean a biological family--a group of employees or a "commune" may serve the same purpose. But without the safety net, nuclear families become very difficult for most people in the face of problems.
01 May 2011
Beltane and the Cross Quarter Days
On the earth, our weather, our calendars, agriculture and many other things are driven by our relationship with the sun, and traditional peoples thought about this relationship a lot. They needed to. For example, it's important to know when to begin planting in the spring: plant too soon and a frost may kill the young growth. Plant too late and the summer heat may dry them out. This is especially critical in pre-irrigation agricultures. So they studied the seasons carefully and began splitting the year into fractions.
The year is traditionally divided up into four seasons of roughly 92 days, normally deliniated by their starting points: the solstices and the equinoxes. These are the days that the sun appears to reach the endpoints and midpoints in it's travel north and south over the course of the year. Modern astronomers have figured out exactly when these points occur. Since the match between the sun and the Gregorian Calendar is imperfect, some of the dates below may be off by a day or two in some years.
In addition, most cultures have divided the seasons into halves, around a mid-season day. These days are called Cross Quarter days. Since these days mostly coincide with various planting and harvest cycles, many traditional religions all over the world celebrate them, and many of them have some reflection in modern festivals in nearly all cultures around the world, although often transmuted beyond recognizability.
Here's a list of these days, including some of the many names they've gone by
Note that I've used earth centered terminology--the sun travels north and south. In fact what happens is the earth is tilted approximately 23 degrees relative to it's orbital axis around the sun. In practical terms this means that the sun appears to travel north and south: it's in the north when the earth is in the part of it's orbit with the north pole is tipped toward the sun, and it's in the south at the other part of its orbit.
On the Equinoxes, (from the Latin for Equal Night) rotational axis of the earth is exactly perpendicular to the line to the sun. At these points, the day and night are approximately equal in length, hence the name. (The actual length of the day is based on how far north or south of the equator you are. In the spring, the actual equal day is a little early, and in the autumn it's a little late.)
I originally wrote this article in the late 90s, with a major rewrite in 2005.
The year is traditionally divided up into four seasons of roughly 92 days, normally deliniated by their starting points: the solstices and the equinoxes. These are the days that the sun appears to reach the endpoints and midpoints in it's travel north and south over the course of the year. Modern astronomers have figured out exactly when these points occur. Since the match between the sun and the Gregorian Calendar is imperfect, some of the dates below may be off by a day or two in some years.
In addition, most cultures have divided the seasons into halves, around a mid-season day. These days are called Cross Quarter days. Since these days mostly coincide with various planting and harvest cycles, many traditional religions all over the world celebrate them, and many of them have some reflection in modern festivals in nearly all cultures around the world, although often transmuted beyond recognizability.
Here's a list of these days, including some of the many names they've gone by
| Midwinter's day, Imbolc, Candlemas, Groundhog's day. | Feb 2 | The centerpoint of the winter is generally the coldest time of the year, although the days have begun to get noticeably longer (in the north. Opposite in the south) |
| Spring Equinox. | Mar 21 | The sun is at the midpoint of it's trip to the north. Practically every culture has some celebration related to this event: In the Northern Hemisphere, it's time to start planting. Passover/Easter (named for the Babylonian fertility goddess Ishtar) are derived from this. (it's the first sabbath after the first full moon after the equinox) |
| May Day, Beltane, Midspring day | May 1 | The first planting is complete and the first plants are starting to come up. This is a time of fertility festivals. More recently it's become popular for pro-worker events. |
| Summer Solstice | Jun 21 | The start of summer. |
| Midsummer's Day, Lunasa | Aug 1 | The plants are up, the growing is at it's peak. |
| Autumn Equniox | Sep 21 | The harvests begin. |
| Midautumn day, Samhain, Hallows Day | Nov 1 | The harvests are complete or nearly so, and things are beginning to die back for winter. Hence the death imagery of Halloween (Hallows Eve). Once it's over, Harvest celebrations, Thanksgiving celebrations, etc., begin. |
| Winter Solstice, Saturnalia, Yule | Dec 21 | Most cultures have a winter celebration of some sort. They often are designed to remind people of the rebirth to come, despite the long winter grind ahead. E.g. Christmas celebrates the birth of the Messiah, Chanuka celebrates the survival of the temple and the miracle of the oil, etc. |
Note that I've used earth centered terminology--the sun travels north and south. In fact what happens is the earth is tilted approximately 23 degrees relative to it's orbital axis around the sun. In practical terms this means that the sun appears to travel north and south: it's in the north when the earth is in the part of it's orbit with the north pole is tipped toward the sun, and it's in the south at the other part of its orbit.
On the Equinoxes, (from the Latin for Equal Night) rotational axis of the earth is exactly perpendicular to the line to the sun. At these points, the day and night are approximately equal in length, hence the name. (The actual length of the day is based on how far north or south of the equator you are. In the spring, the actual equal day is a little early, and in the autumn it's a little late.)
I originally wrote this article in the late 90s, with a major rewrite in 2005.
25 April 2011
Medical expenses and inflation
As everybody knows by now, medical expenses have been skyrocketing and are now a large part of government spending, both at federal and state levels. The republicans want to reduce them by reducing government payments. This doesn't work, and it results in ever more people not being able to get medical care. This kills at least 45,000 people a year (and here). So then, what are the causes of the rise in medical expenses?
One of the big areas could fairly be described as gouging. This happens for several reasons, some reasonable, some lame, some opportunistic. By law, Emergency Rooms are not allowed to refuse to care for anybody, including those who can't pay. Moreover, ER care is the most expensive--patients are sicker, equipment, doctors and nurses can't be scheduled (so they have to keep a surplus on hand). Since every medical provider has this huge hole in their budget, they have to shift the cost to elsewhere. Charge higher prices everywhere else. One of the places this happens is spectacularly lame. Every provider has a deal with the insurers they work with often. Generally part of this is an across-the-board price cut, often as much as 40%. Knowing they're going to do this, they raise the prices of the individual services to compensate. Folks who haven't negotiated this deal don't get the cut. This includes insurers that don't do enough business with that particular provider (e.g. they're from a different part of the country) and uninsured customers. If you know to ask for it, they'll typically give you an "Uninsured discount" if you pay promptly or in advance, but this is more often only 25%. But if you don't ask or can't pay promptly, you pay the full price. Of course since there's this radical decoupling between actual costs and list prices, there's lots of opportunity to gouge further.
By increasing the number of people who have insurance and can thus get scheduled care for non-emergency issues, the new health care law should substantially reduce ER costs, and it should allow more people to participate in the "negotiated" price breaks. But notice that the insurance companies managed to convince congress to put this off until 2014 and are now trying to kill it.
Drugs are another big cost. For example, drug companies are able to gouge for new drugs that are still under patent, but not for generics, where the free market applies. A major bit of cynicism is the continual development of new drugs that are really the same as older drugs only different enough to be able to patent. For example, new statin drugs like Lipitor and Crestor are only trivially more effective than older statins like Lovastatin and Simvastatin, but they're able to charge 10 times as much. Doctors and medicare are aware of this but enough still prescribe the more expensive options that it's a profitable scam.. The drug companies have another big cost that is totally unnecessary but is a huge part of their costs: TV advertising. They spend a LOT more on this than they do on R&D. The return from this is small, but significant. If one company stops doing it, they'll lose market share, so they can't. The only way to stop this would be for the government to stop it all. I'm fine with drug companies advertising in medical journals and other doctor-specific promotions. But it should be banned in mass media, like TV, newspapers and general interest magazines.
Another big cost is profit taking and wasteful overhead on the part of insurance companies. A certain amount of waste is unavoidable, but we need to keep tabs on this. One recent study puts this at 20-30% of total costs. Meanwhile, Medicare and the VA are able to keep this under 6% This extra 14-24% goes on top of all other costs, including all of that gouging.
One huge cost that I haven't seen discussed much is offshoring. When Walmart (for example) buys from a Chinese manufacturer rather than a US, the price goes down. When they pay workers less, the price goes down. The standard measures of inflation, such as CPI, consist of a "basket" of products, some of which are reducing in costs this way, and some of which are not. If half the things in the basket are going down in price, and half are going up, then the inflation we measure is somewhere between. Medical care is one of the things that can't be offshored much. Even if medical care were remaining as a constant share of GDP, this would make it seem like it was inflating faster than nearly everything else. But people get sick whether their wages are high or low (in fact, low income people tend to be a little sicker). Inflation-corrected wages for more than half of the population have been close to flat for over 30 years, so those people--the majority--are less and less able to pay. Their wages are being held down, in effect, by offshoring. My solution here: we need to recognize this effect and raise wages for the bottom 80% or so. We can do this with small changes to the tax code--not really redistribution, but the effects are similar. This will be good for everybody and really not hurt those at the top.
One of the big areas could fairly be described as gouging. This happens for several reasons, some reasonable, some lame, some opportunistic. By law, Emergency Rooms are not allowed to refuse to care for anybody, including those who can't pay. Moreover, ER care is the most expensive--patients are sicker, equipment, doctors and nurses can't be scheduled (so they have to keep a surplus on hand). Since every medical provider has this huge hole in their budget, they have to shift the cost to elsewhere. Charge higher prices everywhere else. One of the places this happens is spectacularly lame. Every provider has a deal with the insurers they work with often. Generally part of this is an across-the-board price cut, often as much as 40%. Knowing they're going to do this, they raise the prices of the individual services to compensate. Folks who haven't negotiated this deal don't get the cut. This includes insurers that don't do enough business with that particular provider (e.g. they're from a different part of the country) and uninsured customers. If you know to ask for it, they'll typically give you an "Uninsured discount" if you pay promptly or in advance, but this is more often only 25%. But if you don't ask or can't pay promptly, you pay the full price. Of course since there's this radical decoupling between actual costs and list prices, there's lots of opportunity to gouge further.
By increasing the number of people who have insurance and can thus get scheduled care for non-emergency issues, the new health care law should substantially reduce ER costs, and it should allow more people to participate in the "negotiated" price breaks. But notice that the insurance companies managed to convince congress to put this off until 2014 and are now trying to kill it.
Drugs are another big cost. For example, drug companies are able to gouge for new drugs that are still under patent, but not for generics, where the free market applies. A major bit of cynicism is the continual development of new drugs that are really the same as older drugs only different enough to be able to patent. For example, new statin drugs like Lipitor and Crestor are only trivially more effective than older statins like Lovastatin and Simvastatin, but they're able to charge 10 times as much. Doctors and medicare are aware of this but enough still prescribe the more expensive options that it's a profitable scam.. The drug companies have another big cost that is totally unnecessary but is a huge part of their costs: TV advertising. They spend a LOT more on this than they do on R&D. The return from this is small, but significant. If one company stops doing it, they'll lose market share, so they can't. The only way to stop this would be for the government to stop it all. I'm fine with drug companies advertising in medical journals and other doctor-specific promotions. But it should be banned in mass media, like TV, newspapers and general interest magazines.
Another big cost is profit taking and wasteful overhead on the part of insurance companies. A certain amount of waste is unavoidable, but we need to keep tabs on this. One recent study puts this at 20-30% of total costs. Meanwhile, Medicare and the VA are able to keep this under 6% This extra 14-24% goes on top of all other costs, including all of that gouging.
One huge cost that I haven't seen discussed much is offshoring. When Walmart (for example) buys from a Chinese manufacturer rather than a US, the price goes down. When they pay workers less, the price goes down. The standard measures of inflation, such as CPI, consist of a "basket" of products, some of which are reducing in costs this way, and some of which are not. If half the things in the basket are going down in price, and half are going up, then the inflation we measure is somewhere between. Medical care is one of the things that can't be offshored much. Even if medical care were remaining as a constant share of GDP, this would make it seem like it was inflating faster than nearly everything else. But people get sick whether their wages are high or low (in fact, low income people tend to be a little sicker). Inflation-corrected wages for more than half of the population have been close to flat for over 30 years, so those people--the majority--are less and less able to pay. Their wages are being held down, in effect, by offshoring. My solution here: we need to recognize this effect and raise wages for the bottom 80% or so. We can do this with small changes to the tax code--not really redistribution, but the effects are similar. This will be good for everybody and really not hurt those at the top.
14 April 2011
Entropy
Entropy is a measure of the inefficiency of thermodynamic actions. You cannot convert all the energy of a thermodynamic process. It's lost somewhere--heat, friction, noise, radiation, useless motion, etc. That loss goes under the general term "entropy". Not only is there entropy in every process, but it's impossible to even measure it directly. You can only infer that it's there by measuring what you do get back. The laws of thermodynamics, roughly speaking are:
1: Heat can only move from a warm body to a cold one, not the other way.
2: Every thermodynamic process has positive entropy.
Or as my friend Pete Darnell puts it:
You can't get ahead
You can't break even, and
You can't quit the game.
I suspect it's not original to Pete but that's where I first heard it.
One of the consequences of this is that perpetual motion machines are impossible. If you think you're seeing one, it's because there's something you're missing. It might be a hidden source of input energy, or it might be that the process is so efficient that it takes longer than your patience to use up the energy it has stored, like a top that can spin for an hour.
I first learned about entropy when at about age 12, I read Isaac Asimov's story "The Last Question", which is about the end of the universe. Entropy is sometimes called "Heat Death" because the losses from things like engines are often manifest as waste heat, but it's really more accurately called "Chaos Death". It's possible to recover a lot of the heat from various processes and use it for something else--this is sometimes called co-generation. For example, a blast furnace used in making steel might also power a turbine with its considerable waste heat. But it's impossible to get it all. Presuming that the matter and energy in the universe are finite (that's not completely certain), it will eventually all be lost to entropy. It may take a trillion years, but it will happen.
When I was in my early 20s, I had a very powerful realization, that chaos, including entropy, is a major part of everything that goes on. This is a good thing, because among things, it gives us a lot of freedom and flexibility, and frankly, fun. Very little in the world is black and white, not even black and white. Without chaos, we'd be committed to a predetermined path through life.
<I think this is unfinished but that'll do for now>
1: Heat can only move from a warm body to a cold one, not the other way.
2: Every thermodynamic process has positive entropy.
Or as my friend Pete Darnell puts it:
You can't get ahead
You can't break even, and
You can't quit the game.
I suspect it's not original to Pete but that's where I first heard it.
One of the consequences of this is that perpetual motion machines are impossible. If you think you're seeing one, it's because there's something you're missing. It might be a hidden source of input energy, or it might be that the process is so efficient that it takes longer than your patience to use up the energy it has stored, like a top that can spin for an hour.
I first learned about entropy when at about age 12, I read Isaac Asimov's story "The Last Question", which is about the end of the universe. Entropy is sometimes called "Heat Death" because the losses from things like engines are often manifest as waste heat, but it's really more accurately called "Chaos Death". It's possible to recover a lot of the heat from various processes and use it for something else--this is sometimes called co-generation. For example, a blast furnace used in making steel might also power a turbine with its considerable waste heat. But it's impossible to get it all. Presuming that the matter and energy in the universe are finite (that's not completely certain), it will eventually all be lost to entropy. It may take a trillion years, but it will happen.
When I was in my early 20s, I had a very powerful realization, that chaos, including entropy, is a major part of everything that goes on. This is a good thing, because among things, it gives us a lot of freedom and flexibility, and frankly, fun. Very little in the world is black and white, not even black and white. Without chaos, we'd be committed to a predetermined path through life.
<I think this is unfinished but that'll do for now>
Starving the Beast
A central theme of conservative fiscal policy is the idea of "starving the beast", which is the idea that if you cut the government's budget, you will force them to cut wasteful spending. This is nonsense. In fact, undirected budget cutting increases wasteful spending. There are a couple of simple reasons for this.
Let's say we have an organization with 4 equal sized divisions. Divisions A and B have low wasteful spending. Divisions C and D have higher wasteful spending. The managers of A and C are skillful organizational politicians, and the managers of B and D are weaker politicians. So what happens when a 10% budget cut comes down from on high? There are three paths that might be taken. If the executive does the "right" thing, A and B would keep all of their budgets, and C and D get cut 20%. If politics decides, A and C keep all of their budgets and B and C get cut 20%. If the executive does the "fair" thing, each division gets cut 10%. The reality of most organizations is a mixture.
The beast starvers want us to believe that the "right" scenario, the optimal one, is what happens. But it almost never does. In all the other scenarios, the more wasteful divisions suffer less than their fair share and the more efficient ones suffer more than their fair share. Consequently, wasteful spending becomes a larger share of the organizations total budget. Every time this happens, the problem gets worse. Far from starving the beast, the well run divisions are being punished for the sins of the beast.
In any large organization, effective politicians rise. Often, this rise is based less on their ability to actually provide the service the organization is there to provide, and more on how well liked they are by the people above them making the decisions, or how effective they are in political knife fights. It is the goal of politicians to preserve or grow their personal empires. That may mean many different things: budget, head count, freedom of direction, etc.. To the extent that the actual effectiveness at providing their service is a factor in this, this is a good thing. But that's rarely the biggest factor, and as organizations grow, the more pure politicians there are and the more incentives there are to feed the executives self-serving information. Since the goal of the politician is first and foremost to grow their organization, this creates an inverse relationship between organization size and efficiency.
Government is necessarily big. But unlike big companies, government has lots of people watching the works, and the ultimate purpose of government is to provide a service, not make a profit. Consequently, you get anomalies like Medicare having 6% overhead and private medical insurance having 30%. Medicare has plenty of problems--fraud being a big one--but the point is that government can work better than the market. Big organizations, whether public or private, need to have this sort of open review. Privacy is an invitation to corruption. When there's a really free market, with dozens of companies competing, the better decision makers will tend to win and problems like inefficiency and fraud will quickly be exposed. But when there's too little competition, the problems can hide and a bad decision maker with a lot of power can win. Paradoxically, only when the government imposes very strong limits on the power of businesses can the free market truly thrive.
The beast starvers want us to believe that by cutting off the government's budget, they can reduce government. But in fact all they're doing is making it less efficient. Government serves too many vital roles--infrastructure, the social safety net, law enforcement and the judiciary, safety regulation, the military and so forth. While there are certainly some people who would like to see these things eliminated, they are very few.
What's the solution? We need to maximize the free market where we can, and socialize, with full disclosure, where we can't. We need to cut wasteful spending where we can find it, but be careful to not cut useful spending while we're at it.
addenda: 21 Feb 2012
"In any bureaucracy, the people devoted to the benefit of the bureaucracy itself always get in control and those dedicated to the goals the bureaucracy is supposed to accomplish have less and less influence, and sometimes are eliminated entirely." -Jerry Pournelle
Let's say we have an organization with 4 equal sized divisions. Divisions A and B have low wasteful spending. Divisions C and D have higher wasteful spending. The managers of A and C are skillful organizational politicians, and the managers of B and D are weaker politicians. So what happens when a 10% budget cut comes down from on high? There are three paths that might be taken. If the executive does the "right" thing, A and B would keep all of their budgets, and C and D get cut 20%. If politics decides, A and C keep all of their budgets and B and C get cut 20%. If the executive does the "fair" thing, each division gets cut 10%. The reality of most organizations is a mixture.
The beast starvers want us to believe that the "right" scenario, the optimal one, is what happens. But it almost never does. In all the other scenarios, the more wasteful divisions suffer less than their fair share and the more efficient ones suffer more than their fair share. Consequently, wasteful spending becomes a larger share of the organizations total budget. Every time this happens, the problem gets worse. Far from starving the beast, the well run divisions are being punished for the sins of the beast.
In any large organization, effective politicians rise. Often, this rise is based less on their ability to actually provide the service the organization is there to provide, and more on how well liked they are by the people above them making the decisions, or how effective they are in political knife fights. It is the goal of politicians to preserve or grow their personal empires. That may mean many different things: budget, head count, freedom of direction, etc.. To the extent that the actual effectiveness at providing their service is a factor in this, this is a good thing. But that's rarely the biggest factor, and as organizations grow, the more pure politicians there are and the more incentives there are to feed the executives self-serving information. Since the goal of the politician is first and foremost to grow their organization, this creates an inverse relationship between organization size and efficiency.
Government is necessarily big. But unlike big companies, government has lots of people watching the works, and the ultimate purpose of government is to provide a service, not make a profit. Consequently, you get anomalies like Medicare having 6% overhead and private medical insurance having 30%. Medicare has plenty of problems--fraud being a big one--but the point is that government can work better than the market. Big organizations, whether public or private, need to have this sort of open review. Privacy is an invitation to corruption. When there's a really free market, with dozens of companies competing, the better decision makers will tend to win and problems like inefficiency and fraud will quickly be exposed. But when there's too little competition, the problems can hide and a bad decision maker with a lot of power can win. Paradoxically, only when the government imposes very strong limits on the power of businesses can the free market truly thrive.
The beast starvers want us to believe that by cutting off the government's budget, they can reduce government. But in fact all they're doing is making it less efficient. Government serves too many vital roles--infrastructure, the social safety net, law enforcement and the judiciary, safety regulation, the military and so forth. While there are certainly some people who would like to see these things eliminated, they are very few.
What's the solution? We need to maximize the free market where we can, and socialize, with full disclosure, where we can't. We need to cut wasteful spending where we can find it, but be careful to not cut useful spending while we're at it.
addenda: 21 Feb 2012
"In any bureaucracy, the people devoted to the benefit of the bureaucracy itself always get in control and those dedicated to the goals the bureaucracy is supposed to accomplish have less and less influence, and sometimes are eliminated entirely." -Jerry Pournelle
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