Tuesday, August 29, 2006

Katrina Rebuilding

Is the government so far failing in rebuilding New Orleans or succeeding in not rebuilding?

The LA Times reports that so far only $44 billion of the $110 billion of aid approved has been spent. That means that the government has not yet spent $66 billion rebuilding in an unsustainable below-sea-level river delta that is likely to flood again when the next tropical storm hits the New Orleans area. It is much more wise to build new in locations that do not need the protection of multi-billion levee systems to survive the next tropical storm. The challenge is how to encourage people to build elsewhere without being seen as not caring about New Orleans. Especially when the accusation "George Bush doesn't care about black people" has already been made.

Doing nothing is often the right thing to do. But for the government, doing nothing can actually be difficult. The media will attribute doing nothing to not caring, which to the press is usually worse than failure to "do something". For example, the administration has succeeded in doing nothing about China's exchange rate, which has required a delicate balance of providing just enough rhetoric to be seen as caring while preventing arch-protectionist Chuck Schumer from imposing massive tariffs and quotas. They also succeed in doing nothing in Lebanon for the first few weeks.

If it takes failure to not spend taxpayer's money than incompetence can be a virtue.

Friday, August 11, 2006

Sleeper Cell

FOX News reports that the airplane bombing plot was infiltrated by an undercover British agent. The cell had "planned to stage a dry-run within two days, with the actual attack expected just days after that". In the television series Sleeper Cell, where the plot has many similarities to the real terrorist plot, the cell was rounded up with much less time on the clock.

HBO's The Wire is another show to watch. The third season should help anyone understand the necessity of the NSA program and how it relates to arrests of terror suspects with hoards of prepaid cell phones.

Thursday, August 10, 2006


Before Iraq, when we were not distracted by all our operations overseas, when all our troops were at home, we were successfully attacked at home by Al Qaeda twice. One attack on the World Trade Center was partially successful and the other was 9/11. Now that we are completely distracted by Iraq, with more people hating us because of our actions in Iraq and elsewhere, the number of times we have been attacked at home is zero. And today that number remains zero, thanks to intercepted terrorist chatter and other surveillance.

What are our troops supposed to do make us safer after we bring them home?

We want to hunt down and kill the terrorists wherever they are.
We can hunt down and kill the terrorists wherever we are.
We will hunt down and kill the terrorists wherever both we and they are.
To help win the war on terror our troops need to be where the terrorists are. Not at home, not where the terrorists were, but where the terrorists want to be. Right now, this is Iraq. Iraq is where the most terrorists are being killed. That is because our troops can be there and the terrorists want to be there. We cannot hunt down and kill them where we are not or where they are not.

Wednesday, August 02, 2006

Minimum Labor Cost

An increase in the minimum wage will always result in lower employment because the demand curve slopes downward. However, a wage increase now will probably not reduce employment as much as expected, most of it will be passed on to consumers. We have recently had an extinction event. We had a bubble where labor costs rose out of control until the bubble burst. The fittest companies that could control costs survived, the rest did not. Most employers now can control costs well, and will just pass on an increase in labor costs to consumers. Those employers that cannot control costs and would have to pass them to investors or reduce employment died in the bust. This is why profits have reached record highs and will continue to be strong for a long time.

The minimum wage is paid disproportionately by the poorest consumers. Poor families will be hurt more as consumers than they will gain as workers. A single mother of two, for example, will benefit once from a wage increase but will pay for it three times. Raising the minimum wage will also make legal workers and employers even more uncompetitive against illegals.

A minimum wage increase is an increase in the cost of living of the poorest Americans.

Capitalism in Cuba

Fidel Castro is ill, and there is no prediction market contract on his expiration.

There has been some hope that his brother Raul may be more market friendly and that capitalism may be coming to Cuba shortly. But why wait? There is one place where we can start building capitalism in Cuba right now—Guantanamo Bay. We could build a free capitalist port city there in the same model as Hong Kong. Some current residents there that would have to be moved, but there is plenty of space in the rest of the world that can be used for prisons.

Update (8/4): TradeSports now has a contract on Fidel resuming power by the end of August. Independent Sources links to some betting sites taking bets on Fidel.