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Tag Archives: Government

A Practical Alternative to Government Regulations

An Engineering Thinking Solution For Protecting The Public

Let’s challenge the assumption that we need the government to protect us, by regulating commerce at all levels.

Why Regulations Are Not Effective (proof by counterexamples):

a. The Food & Drug Administration is supposed to protect us from tainted foods and harmful drugs. It does neither, by its own admission (“FDA Science and Mission at Risk“).

b. The Security and Exchange Commission is supposed to protect us from financial crooks. It doesn’t (remember Bernie Madoff?).

c. Restaurant inspections are supposed to protect us from food poisoning. They don’t (you’ve seen the newspaper reports of folks getting ill at restaurants, all of which are regularly inspected).

Here’s the basic underlying reason why regulations are ineffective: Although the government is never shy about dipping into the pockets of the taxpayer, there will never be enough money to pay for enough inspectors to inspect businesses often enough to eliminate the problems that the inspectors are supposed to find and stop. Why? Because there is no financial incentive built into this open-ended regulatory system. Regulators are not able to make a profit at regulating, unless they are corrupt and take bribes. Unfortunately, such corruption is not uncommon.

A second reason is that the public says, “Yeah, but we have to at least try to stop the problems or they would get completely out of hand. So even though regulations are not completely effective, we’re still better off having the regulations.” This reasoning, however, will not stand up to analysis.

One, it assumes that other factors, such as loss of business and potential lawsuits, are not significant. To the contrary, these free market incentives are very powerful motives for keeping businesses honest, even in the absence of regulations. In fact, for the great majority of honest and competent businesses, government regulations amount to a useless added burden that drives up costs. And these costs are ultimately paid by you, the consumer.

Second, it assumes that there is no better alternative. To answer this, Engineering Thinking offers the following plan:

The ET Plan For Eliminating Costly Regulations

Replace them with the following single requirement:

Each business shall be required to prominently post an easily readable  certificate at the entry to their place of business (or on their web portal, or on their products, etc.)

-A red certificate if they have no liability insurance

-A green certificate if they have liability insurance (as certified by the applicable government accounting agency, with the insurance carrier and amount of coverage noted on the certificate).

Failure to post a certificate, or posting a false green certificate, will be punishable by a minimum jail term and fine.

That’s it. You buy products or services from a “red certificate” business, you’re largely on your own. Its prices might be lower because they carry no insurance, but your risk will be higher if you have a problem. If so, you will still be able to sue, but you will have had fair notice that the business will likely not have enough assets to cover any damages.

The red certificate also allows small start-up entrepreneurs such as taxi drivers or hair stylists to get a foot in the door with clients who are willing to accept lower prices at increased risk. Presently, licensing and regulations often amount to a corrupt system where established wealthier businesses, through contributions to public officials who pass restrictive licensing/regulation laws, effectively block competition by making it too expensive for potential competitors to start a business. This limits consumer choice and drives up costs.

On the other hand, you may prefer to buy products or services from a “green” business. The prices might be somewhat higher, but you will have financial recourse if something goes wrong. Plus, you will be assured of obtaining safer products or services. Why? Because insurance companies do not like to pay for losses. An insurance company will not provide liability insurance to an unqualified person, so if someone claims to be, for example, a medical doctor, they will need to convince the insurance company that they are qualified to practice medicine. Plus, the insurance companies will provide their own ongoing inspections and monitoring to ensure that their clients maintain safety standards.

The new role of the government? To certify/monitor the financial health of insurance companies, to decertify/prosecute those companies that exhibit unethical behavior regarding claims, and to prosecute businesses who operate without an appropriate certificate. All of the licensing and regulatory nonsense simply drops away, because it is no longer relevant. Insurance companies will now provide the regulatory function in a cost-effective fashion.

The advantages of the above red/green plan are numerous: Lowers the cost to the consumer; eliminates the governmental regulatory bureaucracy and related inept  micromanagement; increases consumer choice; offers entrepreneurs a chance to get a business started; eliminates corrupt artificial barriers to competition; and last but not least, enhances consumer safety.

-Ed Walker

 

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Baloney Alert: PolitiFact Is Light On Logic

The St. Petersburg Times Memorial Day edition had a PolitiFact article with the following headline :

“Bulb warnings are light on facts

There’s no plan to ban incandescents, just make them more efficient”

PolitiFact’s second statement above is so logically absurd it made me laugh out loud when I read it. At ET we believe in straightforward honesty: no lies, no spin, no deception, and no misdirection. This includes having the integrity to accept statements in their clearly-presented context. Unfortunately, PolitiFact often likes to twist and distort the context of statements, in effect gerrymandering them into one of their preferred liberal themes.

In this case, here are the facts: the government has not literally banned incandescent light bulbs, true. But it has passed regulations requiring light bulbs to have efficiencies that are impossible for them to achieve. There is no technology on the horizon that will allow incandescent bulbs to achieve that efficiency. Manufacturers of incandescent light bulbs have reacted accordingly by shutting down production. Therefore — bottom line — the government has indeed, in essence, banned the use of incandescent light bulbs.

PolitiFact’s childish contrary argument earns our maximum 5-baloney rating.

Regarding PolitiFacts’ other comments on the compact fluorescent lighting (CFL) replacement for incandescent bulbs, please see “Unintended Consequences: Nanny Engineering” in the DACI 2nd Qtr 2011 Newsletter, and “Why Government-Directed Energy-Savings ‘Investments’ Are Illogical.”

Notes

The St. Petersburg Times is as good as it is bad. We were planning a piece called “It was the best of Times, it was the worst of Times,” where best refers to their investigative reporting, and worst refers to their editorials and their PolitiFact operation. At this point other priorities have intervened, but we hereby want to provide an honorable mention of their stellar investigative work.

Also, we strive hard to be objective, with our critical commentary targeted at non-ET people or organizations, regardless of political affiliation. Although we believe there are sound reasons that support a small-government-is-better theme, this does not mean that honorable people cannot disagree, or that there are no ET deficiencies in the corporate/business world. If you have a suggestion of a person or firm that would be worthy of an ET review, please let me know.

Update 2011/05/31

Here’s another good summary of the unintended consequences of using CFLs: “The CFL Fraud” by Edmund Contoski.

Update 2011/06/02

For a follow-up discussion on this issue, including some facts on the halogen alternative to the standard light bulb, please check PolitiFact Bias under “Bryan adds.”

-Ed Walker

 

 

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Big or Small Government? Check the Empirical Evidence

One of the key principles of Engineering Thinking is to rely wherever possible on actual evidence. Therefore, given a design challenge, engineers typically start by doing a lot of research; why reinvent the wheel? If good hard data are available that answer the question at hand, then the issue is resolved and the team can move on to other challenges.

This scientific process does not have to be restricted to questions about integrated circuits, robots, nuclear energy, or other hi-tech products; it can be applied to any issue. One of the major issues of our day — and for many decades prior — has been the debate over the pros and cons of big versus limited government. As we’ve pointed out previously (“It’s Just A Systems Thing: An Engineering Thinking Review Of Government As A System“), governmental organizations generally perform poorly compared to free market alternatives.

But what about the empirical evidence? For one example,  please check “Detroit: The Triumph of Progressive Public Policy“, by Jarrett Skorup, 6 July 2009, Mackinac Center for Public Policy.

-Ed Walker

 

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More Big Gorilla Insights: High-Speed Rail

Is High-Speed Rail A Good “Investment”?

In an earlier post (“Hunt The Big Gorillas: Climate Change, Birthers, and Chocolate“), the Engineering Thinking concept of the Big Gorilla was described.  As stated in the prior post, if you are weighing several factors while trying to make a decision, and happen to spot one that is so large that all the other factors become negligible by comparison, you have found a Big Gorilla. Then, by focusing only on the Big Gorilla factor, you can quickly make a good decision.

The Big Gorilla is helpful when evaluating claims by politicians who want to spend our money on “investments” such as high-speed rail. In my state of Florida, our governor recently decided not to accept federal funds for development of a high-speed rail system, part of the Obama administration’s national rail plan.

The reaction of many ranged from dismay to anger. “How can the governor give up federal money?” was one common lament. One could argue that federal money is not free, since it  comes out of the pockets of taxpayers, and the federal government is already so much in debt that it doesn’t make sense to borrow yet more money. The politicians and special interests, however, find clever ways to counter such arguments, saying in essence that the spending will pay for itself and be a net benefit. This is generally the argument that governments always use to extract money from taxpayers: we (the government) know best how to spend your money wisely for the common good.

So here’s where a Big Gorilla can brashly step in and clear away the brambles of confusion: If high speed rail (or any project) is going to pay for itself, then it’s highly likely a private business will already be there, implementing the project.

One of the major benefits of a capitalist system is, if there is a need that justifies an investment, then it will be automatically provided by a private business.

Naturally, private firms would love to have public funding for “community” projects such as high-speed rail (sports stadiums are another good example). Having you — the taxpayer — providing funds and eliminating financial risk is a no-lose deal for the private firm. It is also a prime example of capitalism being corrupted by an inappropriate deal between politicians and private businesses. Invariably, such firms will provide donations and other forms of support to assist in the reelection of  those politicians who helped secure the public financing.

Bottom line: always look for a financial connection between the politicians who promote a project, and those who implement the project. Corruption is its name.

-Ed Walker

 

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ET EXTRA: Do Economists Use Engineering Thinking? Not Nobel Prize-Winner Paul Krugman

From prior Engineering Thinking posts we’ve learned that opinions should not be accepted at face value. Unfortunately, most of us are too busy to fact-check everything we read, so we tend to allow our opinions to be swayed by the writings of well-known columnists for the major newspapers. We are even more swayed if the columnist holds major credentials, such as being the recipient of a Nobel prize.

Consider Nobel prize-winner Paul Krugman, who is also a columnist on economic matters for the New York Times, and a major advocate of the Obama administration’s policy of massive “stimulus” spending. If you were to follow Mr. Krugman’s more recent writings, you might be swayed to think that massive government spending is good and necessary.

One of the traits of those who employ engineering thinking is consistency. Therefore, a trait to be wary of is inconsistency. Mr. Krugman is not consistent. For numerous examples please check “Paul Krugman, the Self-Contradicting Economist” by Arvind Kumar, 23 June 2010 American Thinker.

The bottom line: Based on his record of contradictory statements, Mr. Krugman is not a reliable source, and therefore his writings can be safely ignored.

-Ed Walker

 

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The Economy Is Not A Pizza Pie (Part 1)

To properly analyze an issue, one must start with a foundation of well-established facts. This sounds obvious, but a major pitfall in any analysis is that we tend to begin with unquestioned assumptions. If those assumptions are wrong, then our analysis will also be wrong. Therefore in this post we’ll review some economic basics to be sure that we don’t harbor faulty assumptions.

President Obama promised that he would provide a tax reduction to ninety-five percent of us by increasing taxes on “the wealthy.” This promise means that the president believes in Pizzanomics. That is, he believes if someone gets a big slice of income then the rest of us have to settle for a small slice, and this injustice must be corrected by “spreading the wealth,” i.e. taxing those who have more and giving the proceeds to those who have less. But a little engineering analysis will demonstrate, in plain talk, just how wacky the pizza pie theory is.

We engineers love to see test data; i.e. empirical or historical evidence that supports or refutes a theory. Is it necessary to “spread the wealth” to compensate for unfairness in our economic system? Despite what you may have heard otherwise, there is abundant and substantial evidence that supports the fact that money is not a pizza pie, and wealthy people do not prevent less fortunate folks from getting their fair share.

But let’s ignore all of that economic history for the moment, and instead use a simple mental analysis. Engineers and scientists call such analyses “thought experiments,” where logic is used to determine reasonable expectations. These experiments do not require advanced degrees or high IQs, they only require a methodical mind and the avoidance of emotional blockages. Let’s apply such a thought experiment to Pizzanomics.

If a person has a big slice (a lot of money), the Theory of Pizzanomics (espoused by believers in big government) implies that the slice is lost forever. The greedy wealthy person will eat the slice and that’s that: done, finis, adios amigo, burp; nothing left for you and me.

In reality, however, money is not gobbled up; i.e. rich folks do not hide their money under the mattress. Nor do they have big parties on the weekend at their mansions, where they and their rich friends get together and sip champagne and throw their cash into a big pile and roll around in it, cackling at how superior they are to average folks. No, they don’t use their money for such idle and frivolous pursuits, because then it would be of no use to them. They have to spend their money to get mansions and champagne.

When a wealthy person spends money, it flows from them to carpenters, mechanics, chefs, gardeners, servers, importers, distributors, truck drivers, sales assistants, and on and on. As a kicker, wealthy people also invest, which increases the flow, leading to more jobs for everyone.

The bottom line is this: money is not a pizza pie; money is a river. Because government is inherently highly inefficient (as we have discussed previously), the river flows best when government is not in the middle, splashing around and muddying things up.

Now, it’s true that some wealthy folks may be greedy and direct the money flow illegally. When the rich engage in fraud, price-fixing, or other crimes to feather their nests, the government should step in and prosecute such crooks. Likewise, government officials should be fired, impeached, or prosecuted for funneling taxpayer funds (“earmarks”) to their wealthy patrons to buy votes and favors.

However, assuming no criminal behavior, why don’t rich folks have the right to choose the direction of the money flow? It’s their money, after all, not the government’s. Plus it is only theirs temporarily, until it flows through them to others. In other words, being wealthy does not stop a single dollar from flowing to a less fortunate person. In fact, the more wealthy people there are, the better; the river gets deeper and wider. This is why it is illogical for regular folks to be envious of wealthy folks, and also why it is illogical for wealthy folks to feel guilty about being wealthy.

Envy And Guilt About Honestly Acquired Wealth Are Illogical

(If you care to debate the above, contrary viewpoints are welcome.)

Next post:

The Economy Is Not A Pizza Pie (Part 2)

-Ed Walker

 

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ET EXTRA: The Tragedy Of Congressional Arrogance

Engineering Thinking Extra Is A Short Review Of A Current Hot Topic

It looks like the U.S. Congress is getting ready to pass a massive Health Care bill. Regardless of one’s views on the need for health care reform, it can be stated flatly that the process that has unfolded over the past months is anything but rational.

If Congress had presented their proposal to an engineering review team, the response would be shock, followed by hilarious laughter. The engineering team leader would then have admonished Congress to get their act together, and not return until they had a concise and logical presentation, backed up by appropriate research.

Politics does not have to be corrupt and immoral. Unfortunately, for the majority now controlling Congress, it is. And make no mistake, the actions of Congress are not going to make life better for the little guy. If you’re an average person — a  truck driver, or a lady selling cosmetics in a department store — it may make you feel better to think that government is going to take care of you at the expense of “rich folks,” but the opposite is true. Do your own research, employ engineering thinking (and in particular avoid emotional blockages), and in my view you will come to the same conclusion.

Engineering Thinking awards its maximum Five Jacks award1 to Congress for its irrational and bull-headed obsession for enacting a bill that will make things worse — much worse — rather than better.

-Ed Walker

Note 1: The Jack, or knave, is considered to be of lowly and untrustworthy status.

 

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A Trip To The Government Store

Our federal government has gone to a lot of trouble to build up an image of indispensable value to protect the “little guy.” But this false mystique can be punctured by simply viewing how the government actually operates.

When we purchase products or services from the private sector (cell phones, TVs, autos, lawn maintenance, accounting service, air conditioner repairs, etc.) we have a huge variety of price and quality options. When we go to the government “store,” however, the situation is very different, because its motto is “One Size Fits All.”

Imagine that you needed some underwear and went to the government-run department store. You walk inside and notice that the interior is a dull gray color and dimly lit. Many of the shelves are empty. Since it’s your first visit and you don’t know where the underwear section is, you look for a salesperson. After a few minutes, you realize that there are no salespeople, so you walk up to the checkout area.

You count approximately twenty checkout aisles in this government store, but see only one cashier, and there are about fifteen people in her queue. Some of them are reading magazines or books, some of them are staring into space, some of them give you a look of pity.

You walk up to the cashier. “Where can I find underwear?” you ask. She waves a hand in a general direction. “Look over there,” she says curtly.

You go in that direction and, after some searching, find a table scattered with underwear, socks, and gardening tools. After you pick through the underwear you realize that all of the items are the same size, extra large, with a label that says, “Made by the USSA.” You walk back to the cashier.

“Where can I find some underwear in medium?” you ask. “And perhaps some that aren’t gray in color.”

“Whatever’s there is all we’ve got,” she says, annoyed that you’ve now twice distracted her from her work. You walk away sheepishly, thinking: okay, if that’s all that’s available, then I can alter them. You go back to the table and pick up a pair, looking for a price sticker. Finding none, you sigh. But you need the underwear and they shouldn’t cost too much, so you grab three and go stand at the back of the line.

Forty-five minutes later it’s finally your turn. The cashier glances down and then picks up two of the pairs and drops them into a large container.

“Hey,” you exclaim. “I wanted three pairs.”

“Only one to a customer per month,” she says, as she picks up the remaining package and pencils something into a large notebook. You look vainly for a scanner; apparently things are done manually here.

She pauses, waiting, and then finally says with annoyance, “Let me see your identity card.”

“Excuse me?” you respond. “Identity card?”

She rolls her eyes. “You new to the U.S.S.?” she asks. Without waiting for a reply she continues, “The price of everything here depends on how much you make each year, which is on your I.D. card. If you make more than $200,000 you’re charged the max rate for being too successful. Otherwise you get the standard rate.”

“What’s the standard rate?” you ask.

She glances down at her notebook. “Thirty dollar a pair,” she says.

“Wow!” you exclaim. “That’s expensive. What’s the max rate?”

“One hundred dollars a pair.”

“Wow!” you exclaim again, “that’s really expensive. Uh, what if I make $199,000 a year?”

“Then you’re not too successful and you get the standard rate. But I gotta see your I.D.” She holds out her hand.

“Forget it,” you mutter and walk away, deciding that going bare isn’t a bad idea.

On your way out you notice a door ajar at the far side of the building. A uniformed man is standing beside the entry. “What’s in there?” you inquire, taking a peek. You see a room that appears similar to the one you just left, except it’s larger, brightly lit with cheery colors, and the shelves are stuffed with merchandise. Although there are only four checkout aisles, there’s a cashier posted at each one. Three lanes are idle; only one aisle has a single customer. You witness the customer flash the cashier an I.D. card and then walk off with a large bag, having paid nothing.

The guard stands up straight and puffs out his chest. “This is for government employees only,” he growls. “Can I see some I.D.?”

“Forget it,” you mutter a second time, and leave.

This little vignette may sound extreme, even ridiculous, but remember the example of the old Soviet Union in a recent post? The dingy and inefficient store with limited choices and long lines as described above is, without too much exaggeration, a pretty good description of what life was like for the average Soviet citizen living in a big city (life was much worse in rural areas).

If the U.S. continues on it present path toward ever larger government, the gross reduction in the quality and variety of goods and services will not be restricted to underwear. Everything will be affected, including critical services like health care. Consider the story above a peek into our collectivist future, if we continue to ignore the lessons of history.

Next post:

The Economy Is Not A Pizza Pie

-Ed Walker

 

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The Government’s Policies And Our Economic Crisis (Part 1)

An important engineering principle is empirical validation, or proving that something is correct by test and measurement. Theories are great, but a theory isn’t worth two cents if it doesn’t match the real world.

Let’s see how the principle of empirical validation affects an engineering team’s deliberations, as they investigate the root cause of economic downturns.

Charlie (team leader): The purpose of today’s meeting is to review the results of our research on the causes of economic meltdowns in the United States. Nigel, we’ll start with you.

Nigel: In reviewing over a dozen recessions and depressions in the U.S. economy that occurred during the last hundred years, I found that most of them were normal business cycles that lasted about one year on average. The Great Depression that started in 1929 was an exception, because it persisted for several years.

Charlie: Why was the Great Depression so much longer than the other downturns?

Nigel: By doing a sensitivity analysis of major variables, I found that the length of the downturns was strongly correlated with the degree of governmental involvement in the economy. For example, a severe depression occurred in 1920 during which the government did very little, yet the depression only lasted about eighteen months. By comparison, the government intervened massively during the ten years of the Great Depression.

Charlie: Okay, but we all know that correlation is not proof of causation; maybe the government was coincidentally involved when the economy got worse. Any other thoughts? Marcy?

Marcy: Based on Nigel’s results I searched for a prototypical experiment that would support or refute his hypothesis. Fortunately, such an experiment was conducted over several decades wherein massive governmental control of an economy was performed. The experiment was carried out by the Soviet Union during the years 1922 to 1991.

Charlie: Good; there’s nothing better than empirical evidence. And the results?

Marcy: Economic performance was persistently poor. One could easily conclude that the experiment was a striking failure.

Charlie: Could the failure be explained by some variables other than the government’s involvement?

Marcy: In my view, no. The Soviet citizens were of high intelligence, and despite the single-minded — even brutal —  management of the economy by the government, the results were dismal. In fact, considering the intensity and duration of the experiment, had it been a success the Soviet Union today would likely be the world’s dominant economic superpower.

Sam: Some economists today are saying the opposite of what Nigel and Marcy report. They’re saying that the Great Depression lasted so long because the government didn’t intervene enough; that the government should have spent even more money than it did.

Charlie: Do those economists have any empirical data to support their claims?

Sam: Um, well, they cite the fact that the depression ended following World War Two, during which the government spent a lot more money.

Charlie: A correlation, yes, but not necessarily a cause. How do they explain all of the instances where the government did little, and yet, as Nigel found, the economy quickly recovered? How do they explain the fact that the economy worsened when government spending was massively increased prior to the world war? How do they discount the very convincing experiment performed by the Soviet Union? It seems that their theory does not match the empirical evidence.

Sam: Um, well, I guess I don’t have the answer to that.

Charlie: Okay, if those economists have no empirical data to back up their theory, then we should discount it. It appears then that the best hypothesis for the root cause of extended economic meltdowns is governmental interference. All agreed? Good; meeting adjourned.

Next Post:

A Trip To The Government Store

-Ed Walker

 

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ET EXTRA: Fraud And The Global Warming Debate

Engineering Thinking Extra Is A Short Review Of A Current Hot Topic

It is now becoming apparent that a massive fraud has been underway regarding the debate over global warming. (For a good summary see this article by James Delingpole in the Telegraph.co.uk.)

As a result, Engineering Extra is sad but compelled to assign its highest Five Jacks Shameful Behavior rating to those scientists and engineers who have been involved in such a monumental betrayal of the public trust. If not exposed, this betrayal may have led to unscientifically-sound legislation (“cap and trade”) and EPA regulations, which could cost billions of dollars and hundreds of thousands of jobs.

As pointed out in an earlier post (see Scientific Sins in “Advice From Professionals: Who Do You Trust? (Part 2)“), engineers and scientists are not immune to corruption. Normally, however, such corruption tends to be weeded out over time by the scientific method.

But what about the Global Warming fraud? How did this happen? It happened because the work of these renegade scientists was funded by the government, which is not subject to the scientific method.

By contrast, engineers and scientists who work in the private sector are disciplined by the competitive nature of the marketplace. False data or exaggerated claims will be gleefully exposed by competitors, appropriately causing the fraudulent firm to lose profits and possibly face bankruptcy. In the private sector, therefore, there is a strong and ongoing survival incentive to root out junk science.

But scientific organizations that receive all or most of their funding from the government have no competition, ergo they have no long-term concerns about market competitiveness. To the contrary, some employees of such firms — in order to maintain their jobs and secure promotions — provide their political masters whatever it is that those masters wish to hear, regardless of whether or not it drifts from the truth.

To Minimize Corruption,
Science and Engineering Should Be Performed
By Competitive Enterprises,
Not By The Government

Corollary:

Scientific Advice To The Government Should Be Provided
By Private Firms Through Competitive Bidding,
Not By Government Employees

-Ed Walker

 

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