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Tag Archives: Money

An Essential Rule For Not Being A Fool

Engineers know that measured data points require context to be meaningful. For example, the total miles that a car can travel on a tank of fuel is not economically useful knowledge, unless you also know how many gallons of fuel the tank holds, and the cost of the fuel per gallon. If you know all this, you get a meaningful metric: miles traveled per dollar spent. In addition, there can be supplementary but important considerations such as safety, pollution, styling, and reliability. Therefore, to properly evaluate economic alternatives, all important factors must be converted to a baseline of total benefits per dollar.

GOOD DATA = BENEFITS per $ SPENT

FOOL’S DATA = $ SPENT

Here are some examples of meaningless data that are commonly used to try to fool people:

Dollars spent per pupil. (The important metric is how much a student learns per dollar spent.)

“On Sale” dollars spent for a car, lipstick, sports equipment, or any consumer purchase. (The important question to ask is, “What benefit will I get from spending the dollars?” rather than concluding, “Wow, the on-sale price is much less than the normal price therefore it must be a good deal.”)

Benefits of taxing the rich 1% on behalf of the 99%: (This example is a case where both benefits and dollars spent (extracted from the rich) are difficult to properly define and determine. For example, how do you define “rich”? Is this a person or a corporation? How much money = rich? Is that earned income, or investment income, or total assets, or a combination? And should everyone who is in the 1% group be taxed more? Why not 2% or 1/2% or some other %? Also, since rich people often become poor, and the poor often become rich, how long does one have to be rich before you would say they are truly rich? Or what about someone who invents something that benefits society? What about someone who’s been poor and wins the lottery? How about an athlete who’s paid a lot of money for their physical talent? Even assuming you can arrive at a rational and moral definition for “rich 1%,” the proper question becomes: what benefits are obtained for every dollar extracted from those folks? This is a complex question not easily answered by the simplistic 1% versus 99% “fool’s chatter” that one typically hears.)

Government dollars “invested” in green energy (or education, or bridges, or whatever). (The important metric is the benefit provided per taxpayer dollar spent, where the benefit to all of the taxpayers is honestly defined and measured.)

AN ESSENTIAL RULE FOR NOT BEING A FOOL:

Don’t Make Decisions or Listen to Arguments Based Only On $ Spent

A useful corollary to the above is: don’t make decisions or listen to arguments where benefits and expenditures are not clearly defined, or are distorted by appeals to envy or other emotions.

-Ed Walker

 

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The Economy Is Not A Pizza Pie (Part 2)

In “The Economy Is Not A Pizza Pie (Part 1)” we discussed why being envious of the honestly-acquired wealth of others is not logical. This is an important concept to grasp, because once we cut loose the emotional anchor of envy, we are free to expend our energies on more productive pursuits. Among those pursuits would be the celebration of the success and wealth of others. Why? Because not only do we benefit from the products and services that are born from such success, the related boost to the economy gives us a better chance of finding and keeping a good job.

At the gut level, though, we already know this. Let’s try another thought experiment to prove the point.

Consider a man who has been out of work for some time and is traveling to seek a new job. He comes to a fork in the road, and sees by a sign that he can take the right road to Richville, or the left road to Poorville. He has heard that Richville has quite a few wealthy folks, where Poorville has very few.

Now, if it were true that money was a pizza pie and wealthy folks were mean, why would the job-seeker go to Richville? Why waste the time? Since all of the money in Richville would already have been consumed by those rotten rich people, why not try to find a job with the nice friendly folks in Poorville?

The answer is obvious: the man would take the road to Richvile because he instinctively knows Pizzanomics to be false. He knows that traveling to Richville gives him a much better chance to get a job. He knows that wealthy folks do not eat their money, they spend and invest it, and his chance of getting some of it is much better when he gets closer to the flow.

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

Next post:

We’ve discussed why Pizzanomics doesn’t make economic sense. Next we’ll discuss why Pizzanomics is immoral.

Also, in upcoming posts we’ll summarize the Engineering Thinking principles learned to date, and show how to apply them to various everyday challenges. Because it’s a major pocketbook issue, we’ve been using the government’s effect on the economy for several examples, but the principles can be applied to any problem; in the past we’ve touched on relationships, psychics, scams, etc. If you have a particular topic that you think would benefit from Engineering Thinking, please let me know.

-Ed Walker

 

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ET EXTRA: Five-Baloney Rating Awarded To U.S. Congress

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

5 BaloneyET Extra is proud to announce the presentation of its Baloney Award to the U.S. Congress for its work on health care reform. This award is only given to those who have demonstrated a complete inability to understand and apply any of the key principles of Engineering Thinking.

Congress has achieved a 5-Baloney score, the highest possible rating, for its claim that its health care reform legislation will “provide increased health care to millions while reducing costs.” This claim is rated to be totally unbelievable and devoid of any rational basis, based on (a) the inherent inefficiencies of government (see “We Interrupt This Blog…“), (b) the government’s proven track record of running up enormous debt on every major program implemented over past decades (under both Democrat and Republican administrations). and (c) massive amounts of empirical (historical) data that overwhelmingly demonstrate the folly of government-run health care programs.

 
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Posted by on October 10, 2009 in Baloney Award, ET Extra, Government, Healthcare, Money, Protecting Your Life, Protecting Your Pocketbook

 

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ET EXTRA: The Elephant That Wasn’t There

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

In a prior post on healthcare, the following significant money-saving conclusion was presented:

The Government Should be Used

To The Minimum Extent Possible For Providing Services

Although I pointed out that this was not an ideological conclusion, I nonetheless had some feedback to the effect that the post indicated a bias for U.S. capitalism; i.e. if government is inferior, then the Big Elephant in the post was that our current system of capitalism is superior.

But that’s not what was said. When reviewing an engineering analysis it’s very important not to read into a conclusion more than was stated in the analysis. In this case, although the analysis clearly concluded that the governmental system is inferior to free-market capitalism, the analysis made no mention of the system that is currently in place in the U.S. Our system, although it has many free-market elements (particularly at the small business level ), is actually a corrupt collusion between the government and its big-money corporate donors, and is in need of deep and rigorous reform.

Therefore, the Big Elephant (the U.S. has an effective and efficient free-market system) was never there.

-Ed Walker

 

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Is The President’s Reason For Taxing The Wealthy Moral?

In the last post we examined the following assertion from a factual perspective. In this post we’ll review it within a moral framework. This will provide an example of how differing assumptions can lead to dramatically different conclusions.

Assertion: President Obama’s press secretary, Robert Gibbs, recently said that it was okay to tax wealthy citizens for the health care of others because, “The president believes that the richest 1% of this country has had a pretty good run of it for many, many, many years.”

Assumption: The government should (should not) tax the wealthier portion of the population to provide benefits for the portion that is less wealthy.

Analysis:

  1. Paying taxes is not voluntary; i.e. all citizens are forced to pay taxes.
  2. If one believes that it is acceptable to use force to transfer money from a wealthier group of citizens to a less-wealthy group, then President Obama’s belief is moral.
  3. If one believes that using force as a means of wealth transfer is not acceptable, then the president’s belief is not moral.
  4. The morality of the belief is therefore dependent on the view of the one that holds the governing assumption.

Conclusion: The Assertion is conditionally true or false from a moral perspective, depending on the governing assumption. This is an example of why many arguments tend to go around in circles and be irresolvable, because the parties doing the arguing are starting with different baseline assumptions. Resolution of such arguments is dependent on digging deeper and challenging the assumptions, which engineers call a root cause analysis. In future posts we’ll see how this analysis method can be used to help break endless debates and come to some reasonable conclusions. But first we need to learn how to avoid emotional blockages.

Next Post:

Put On Your Emotional Armor

-Ed Walker

 

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Is The President’s Reason For Taxing The Wealthy Logical?

Assertion: President Obama’s press secretary, Robert Gibbs, recently said that it was okay to tax wealthy citizens for the health care of others because, “The president believes that the richest 1% of this country has had a pretty good run of it for many, many, many years.”

Assumptions: The “richest 1%” of citizens will be determined by their income tax returns, and taxation will start on the year that the president’s tax plan takes effect.

Analysis:

  1. A powerful method of determining whether or not an assertion is factual is called proof by contradiction. For example, consider the assertion that “all swans are white.” To prove the falsity of the statement, all that is required is that you locate a single non-white swan. (Historical note: Europeans believed that all swans were white until the mid-1600s when sailors first visited Western Australia, an area where black swans are not uncommon.)
  2. In our analysis we will present three cases that contradict the assertion that it is acceptable to tax the wealthy because “the richest 1% of this country has had a pretty good run of it for many, many, many years.”

Case 1: Assume you are an entrepreneur who has worked very hard for the past twenty years, trying to perfect an idea you conceived. During that time you and your family have lived very modestly, and have taken great financial risks. Today, you are finally at a point where you can sell your idea and make millions. However, because you will now be one of “the richest 1% of this country” you will be heavily taxed to provide health care for others, even though you have not had “a pretty good run of it for many, many, many years.” Just the opposite; you and your family have had a very tough time of it for twenty years.

Case 2: Assume you are an average guy or gal whose salary has never been anywhere near a million dollars a year, but you like to dream and you sometimes buy one of those jumbo lottery tickets. One fantastic day you actually win a mega-jackpot, and now you are a millionaire. You, too, will now be heavily taxed, although during the past many, many, many years you have had just an average income.

Case 3: Assume you are a hard worker but, due to various misfortunes beyond your control, during the past several years you have had a very tough time making ends meet. To your surprise, you are informed that when your uncle recently passed away he bequeathed you a sizeable fortune, and you are now a multi-millionaire. Yep, same result. You will be heavily taxed even though your life has been anything but “a good run” up until now.

Conclusion: The assertion is factually false. The president’s belief is based on a logical fallacy, namely that “the richest 1%” is a specific group of folks who have made a lot of money over the past many years. To the contrary, the population is comprised of millions of individuals whose incomes can vary widely from year to year, including a great many who may be wealthy today, but in prior years were not.

Next Post:

We’ll review the president’s assertion from a moral perspective.

-Ed Walker

 

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