Why don’t Americans like internationalism?

Last night Chris Matthews, the commentator famous for getting a tingle in his leg when Obama speaks, hosted a panel discussion reviewing Obama’s first year in office. The panel cover the spectrum of opinion one would expect on NBC, ranging from overall approval to adoration. I did sense that the obsequiously worshipful category was a bit weak, perhaps due to the bitter realities the past year served up.

One point stumped the panel. All agreed that American are unusually welcoming to foreigners visiting the US. One much-traveled panelist claimed that Americans were clearly the most welcoming in the world. The conundrum, then, it why Americans have not been notably impressed with Obama’s efforts to curry favor with the international community. I’m here to help explain the mystery.

What does it takes to be a full-fledged American? If you apply to become a citizen of Japan, an inspection team comes to your house and checks your refrigerator. True Japanese eat Japanese food, which definitely includes miso and noodles, and definitely does not include Pop Tarts or Wheaties. Americans do not much care about such artifacts of culture. What it comes down to is that what Americans look for and expect of those in their tribe is a love of freedom, and not much more.

Visitors to the US have a prima facia love of freedom simple by the fact that they are traveling here. People who travel are not at home being cared for, they have some gumption to do something. That is enough of a display of independence to gain points.

Obama had a father from Kenyan and was raised mostly in Indonesia. Americans did not hold that against him in the election. Origins have little to do with Americanism. Obama’s attractiveness as a candidate had much to with his drive to succeed and his wonderful rhetoric about making the country successful. Remember hope and change? People assumed that the direction of change was towards making the country more prosperous, more free, and better at defeating terrorism — simple things. Obama’s actual idea was to change America to make it more like other countries.

Obama’s message on internationalism has been that we ought to take our place in the world as an equal with all the other countries. Obama speaks out aginst Iran getting nuclear weapons, and he urges fellow nations to act jointly to do something about it. If they don’t act, well, we did our best to exercise leadership, but that’s the way it is.

Freedom protesters in Iran are viewed favorably by Obama, in due time and with the due caution that they should not expect any help from America.

Obama’s overseas speeches always apologize and always provide a message of cooperation without pressing any issue beyond what the rest of the world, the rest of the world being mainly Europe, approves.

What liberals, notably Mathews and his panel, cannot comprehend is the enduring American love of freedom. Liberals believe that a certain concern with freedom is important, so long as it is restricted to a small list of social issues and there is no concern with economic freedom. However, liberals draw the line at willfully imposing or irresponsibly encouraging freedom in other nations. Any encouragement is viewed as irresponsible.

Liberals interpret the American interest in freedom as an interest in world domination. Not at all. What Americans expect are that our freedoms be protected and that America be an unapologetic spokesman for freedom on the world stage. What binds Americans is not country of birth or a large set of cultural traditions. It is unapologetic advocacy of freedom, and the enterprise to act on the belief. The concept eludes Mr. Matthews panel.

Climategate shows a Need for Full disclosure by Scientists

Climategate is the popular name given to the revelation of e-mail and software from the Climate Research Unit (CRU) at East Anglia in Britain. http://www.climate-gate.org… It’s not known whether the material posted on the web was obtained by a hacker or by a whistleblower inside the organization. The bottom line on the scandal is that scientists sponsored by governments should be required to make their work public so it can be checked by other scientists.

Peer review is the process by which scientists check the work of other scientists. The process is imperfect, but it helps ensure the accuracy of published scientific papers. The Climategate revelations showed that CRU scientists did not want their work checked by climatologists skeptical of their theory that CO2 is causing a climate crisis. The revelations include a great deal of trash-talking about dissenting climatologists at other organizations, promises to subvert the peer review process by which scientific articles are qualified for publication, and a long narrative of attempts to reconstruct software used to compute published temperature data. CRU scientists had failed to keep records of how they had come up with the results they had published, so not could no one else verify their results, they could not do it themselves.

There is a remedy for the problems. Governments should impose a condition on climate research grants and aid related to climate research that source data collected or analyzed under the grant, and all software developed under the government support shall be posted on the Internet within one month of publication or announcement of the results by any means.

The revealed documents includes a README file of a scientist, “Harry,” trying to reproduce the climate data published by CRU, documenting enormous difficulty doing so. The file is posted at http://www.anenglishmanscastle.com…. CRU’s mission is to obtain temperature data from various sources around the world, validate and correct the data, and convert it into a gridded format useful for scientific and practical purposes. The validation and correction steps are important because the raw data includes clerical errors, instrument errors, and errors due to the heat effects of new construction near the individual collection stations. Gridding converts the temperature data from the randomly located collection stations to regular increments of latitude and longitude using interpolation techniques. CRU performs all of the processing functions.

Small errors are important because the total amount of global warming examined is on the order of only a degree per century. Moreover, scientists look for natural experiments in which local conditions may have local climate effects. For example, rapid growth of a city many increase local pollutants or local CO2 levels, and scientists like to examine the possible local effects on temperature.

Britain has a Freedom of Information Act (FIA) similar to that in the United States. FIA requests can be filed to obtain certain documents and other data developed at government expense. In Britain, someone filed a request for the data used to support claims of CO2 global warming. CRU had great difficulty complying, Climategate revealed, because the software and data files were such a mess that they could not reconstruct the results they had published. he tale of woe begins with a guy copying 11,000 files and trying, unsuccessfully, to make something of them. He discovers, for example, that there are alternate files with the same name and no identification of which file is the one that should be used, or why.

NASA has similar responsibilities for climate data in the United States, and a similar FIA request was filed for supporting climate data. After nearly three years, NASA has still not complied with the request, and a lawsuit is now threatened to attempt to force compliance. http://www.thenewamerican.com…

I suspect that most of the problems of compliance at CRU and NASA are due to professional incompetence, not a conspiracy to cover up errors they know to have been made. What has been revealed at CRU clearly shows incompetence. There is nothing novel about poorly written software. A product of human nature and schedule pressures is the method of hacking at software until it appears to work, then calling it done. In the commercial world, demands from users limit incompetence through calls for bug fixes, and ultimately user abandonment of one vendor in favor of another. Those mechanisms do not apply to climate data.

In the case of climate research, the tendency will be to hack at the software until it meets the expectations of developers, in this case the global warming believers at CRU. They could be innocently making a dozen small errors that tend to inflate temperatures in recent times, and no one would question the results, because their expectations are met.

The remedy lies in immediate public disclosure. If the software must be posted regularly, which it will have to be because new results are released regularly, then peer pressure will greatly encourage sound software engineering practices like the use of software configuration control systems. Moreover, the details of the methodologies employed for processing and analysis will be subject to peer review.

CRU deals mainly with data rather than climate models, however disclosure applies to climate modeling software as well. The basic physics of carbon dioxide only accounts for about a third of the global warming that it is claimed to cause, and that’s not enough to cause a climate crisis. The models contain multiplying factors that are not verified by experimental measurement. All of the mechanisms should be subject to peer review and public scrutiny. A few institutions have made their climate model code public, but only a very few.

Aside from the concerns for good science and good professional practice, the public has a right to access what it paid for, for no reason beyond the fact that they paid for it. There are exemptions allowed in FIA legislation. The exemptions are for national security, independent proprietary data, and information sealed in lawsuits. None of the exemption apply to climate research. The requests to CRU and NASA were not denied under exemptions, they just not fulfilled. Requiring disclosure before publication or within a month after publication will guarantee that the public gets what it has a right to.

Climate research strongly affects public policy, so while good professional practices are important in all areas, disclosure of the details of climate research is especially important.

On Obama's Healthcare Reform

Obama established four purposes for the Healthcare reform bill back in August. This article will analyze each of them, their validity, and their utility.

The first purpose of the healthcare reform bill is to establish a public option. This has since been removed, but it is important to remember why. The public option would necessarily grant anyone that wanted it free healthcare from the government dole. The aim was to focus this on those that would not be able to buy healthcare insurance otherwise, but there was no way to do this without either prohibitively regulating it or creating so-called death panels to examine each case individually. The public option quickly failed both in popularity and practicality.

The second purpose was to cut wasteful government spending on healthcare and substantially cut subsidies on health insurance companies. This as a concept is a great thing, but in practicality, it is mixed in merit. For example, it forces drug companies to give a rebate to people with both medicare and medicaid (causing everyone else’s healthcare cost to go up). But there is some benefit. The medicare reform will cut down on fraud. It will also cut so-called over-billings and some bureaucratic inefficiencies, which improves this portion.

The third purpose is essentially a repeat of the second, a mere piece of rhetoric that exists because otherwise the description of the second purpose would be too long to flow conveniently.

The fourth purpose is the real reform, a regulatory mess sure to cripple the private health insurance industry. One of those chains will keep a company from “discriminating”, or charging a higher price to individuals that are more likely to induce costs. This equalizer will raise the healthcare costs of every American who does not have a pre-existing disposition. People will be penalized for living healthily.

Those were the original goals of healthcare reform, back in August. Since then, a new part has been added in the place of the public option: a mandate requiring all americans to purchase health insurance. Failure to buy health insurance means a quarter of a million dollars in fines and in some cases, jailtime. Economically, such a mandate will cause the demand curve for health insurance to become inelastic, meaning that the price can shoot through the roof without companies fearing market retribution. Health insurance costs would increase, and one’s choice to opt out of insurance would be lost. One could no longer be medically independent, and one would face dependence on either a private collective or a public collective to determine whether one should live or die.

On balance, the current bill is still a wreck. I have not even analyzed the trillion dollar spending, and already the headlights and horn of the freight train of Healthcare reform grow nearer, ready to crush us.

[1] http://energycommerce.house.gov/Press_111/health_care/hr3962_PAYINGFORREFORM.pdf

[2] http://www.democrats.org/a/2009/08/why_we_need_hea.php

The 9/11 Truther Laws of Nature

9/11 Truthers do not tire. They diligently maintain their own laws of nature independent of those known to scientists and engineers. Rather than try to make a conspiracy theory that agrees with the established laws of nature, Truthers maintain natural laws that fit their theories. Much of Truther lore is built around claimed properties of steel and thermite that contradict established knowledge.

Thermite is a mixture of aluminum powder with a metal oxide, typically iron oxide. It burns very hot and the iron in the iron oxide is freed as molten iron, so it is useful for welding iron and steel. It’s possible to use thermite to cut a steel beam, but it is not known to have ever been used in a controlled demolition. Because it is difficult to ignite reliably and burns relatively slowly, it’s not suitable to the precise timing requirements of a controlled demolition. Also, the liquid metal flows downhill, so at best it would be extremely difficult to cut any but a horizontal member.

Truthers claim the World Trade Center buildings were brought down by explosives. They say that explains explosive sounds, puffs of smoke or dust from floors below the WTC 1 & 2 collapse, and the supposed extra energy needed to pulverize concrete. They claim the explosive used was thermite, because the beams in the wreckage were cut cleanly, there were pools of molten metal in the wreckage that lasted for weeks after the collapse, and various components of thermite were discovered in the dust from the collapse.

A fundamental problem with that theory is that thermite is not an explosive. Truthers show a video of a small amount of thermite being set off. It takes a noticeable fraction of a second to burn which they proclaim to be an explosion. Explosives actually operate in milliseconds and always produce a shock wave, the sound of the explosion. Truther thermite, as with all thermite, does not explode and does not produce a shock wave.

Steel used in construction is tempered to increase its strength. Tempering involves heating the steel and than rapidly cooling it by, for example, quenching it in oil. This increases the strenght of the steel by up to a factor of ten, but it also makes it brittle. adding trace elements and controlling the quench rate allows materials specialists to adjust the properties of the steel.

A problem with tempered steel is that relatively low heat can take out the temper and thus make the steel lose its extra strength. Safety standards adopted long before 9/11 require that the steel be insulated so that it will not reach 1000 F in two hours of heating by a fire. Overseas, the standard is 700 F. Two hours is figured to be enough time for the fire department to arrive and put out the fire, or for the building’s sprinkler system to do the job.

Steel was traditionally insulated by embedding it in concrete, but in modern buildings an insulating material is used to coat the steel. In the Twin Towers attacks, the airplane impacts removed much of the applied insulation, allowing the steel to heat quickly.

Truthers invariably claim that steel only loses its strength when it melts. If that were true, then the long-established safety standards would be ridiculous. Because steel doesn’t melt until 2500 F, there would be no reason to try to keep the steel below 1000 F. Truthers could attempt to overthrow existing knowledge by experimentally demonstrating that steel does not lose strength short of melting, but they make no attempt to do so, nor do they cite any supporting evidence for their new theory.

Tempered steel is brittle, so when it is overstressed, say by a collapsing building, it snaps in sharp breaks. Truthers are enamored of the idea of “twisted wreckage” so they cannot understand how sharp breaks could occur except by cutting with thermite. Since thermite melts the steel, it actually wouldn’t make a very sharp break, especially not on a vertical member where the liquid metal flows downhill.

The brittle nature of tempered steel is also consistent with the structures collapsing quickly. Truthers have an image of steel being ductile and springy, so the metal would bend rather slowly and absorb energy in the process. Brittle materials don’t do that. Glass is brittle, so windows break quickly, not slowly.

Finally, Truthers point to pools of liquid metal that lasted up to three weeks after the building collapse. They claim this proves that thermite was involved, because only thermite can melt steel. Let’s suppose for a moment that metal was steel and that thermite melted it. So how did it stay melted for three weeks? When thermite is used for welding, the liquid iron solidifies quickly. The hotter the material relative to its surroundings, the faster it cools. This true for hot soup or hot steel.

The only way to keep something hot is to keep adding heat. Truther thermite, however, it claimed to have the property of melting steel in such a way that it stays melted, a violation of the Second Law of Thermodynamics. Whatever the molten metal was, it had to be kept liquid by heat generated from the combustible materials in the rubble. The likely explanation is a natural furnace effect.

How about thermite components in the dust and debris? Thermite is aluminum with some metal oxide. Sometimes Truthers point to iron oxide as proof of thermite, other times it is manganese or any of a shelf of compounds that might be in thermite. The buildings contained tons of iron, but also tons of aluminum and other metals. It would be odd if there were not a wide assortment of materials in the dust and debris. Much of it is indeed unexplained in terms of its exact origins and means of generation in the disaster. No one other than Truthers particularly cares about such details.

Truthers especially point to claimed larger quantities of unburned thermite in the dust. That’s inconsistent with the separate claim that a way was found to reliably ignite thermite and to get it to explode. Try to imagine, say, an explosion caused by dynamite in which there were large quantities of unexploded dynamite left in the debris. That’s not going to happen.

How do Truthers deal with all the conventional knowledge about thermite, steel, and the rest? One way would be to attack the basis of the knowledge. They could try to show or argue that steel does not lose its strength at anything below the melting point, that thermite can produce and explosive shock wave, and so forth. That’s the route used by legitimate scientific dissent. Einstein proposed experiments that ultimately confirmed his theory over classical physics. Those opposed to CO2 global warming theory point to specific deficiencies in the theory, like the earth not warming for the past decade despite increasing CO2. That’s how the game of scientific dissent is properly played.

Truthers don’t attempt to square theory with observation. They say that since no building had ever collapsed like the World Trade Center buildings, conspiracy must be the answer. The fact that their theory doesn’t agree with established laws of nature doesn’t matter, because they _know_ it must have been a conspiracy. Explanations using the established laws of nature must be false, because those explanations do not lead to the conclusion that they _know_ to be correct.

Aside from being Dark Ages mentality, such thinking means that the new investigation that Truthers demand would be pointless. Investigations attempt to explain events in terms of an established base of knowledge. Explanations that involve magical elements contrary to laws of nature are not explanations at all. They already have magical explanations, so it would be pointless to seek new magic.

 

Left-wing Think Tank Acknowledges Failures of TARP, But Advocates Wrong Ammendments

The Center for Economic and Policy Research, a “progressive” (liberal) economic advocacy group’s director, Dean Baker, criticizes TARP, but for the wrong reasons[1]. Instead of criticizing the practice of malinvesting taxpayer money in failing companies, the testimony focuses on advocating restrictions on the few aspects of the banking industry not controlled by government. However, such restrictions would only cripple the financial market further.

The CEPR suggests a rule that would force banks to allow people to live in foreclosed homes as “renters”. Presumably, the way this would work is that the homeowners would have their houses foreclosed but they would have a right to continue living in the same house, and so the banks would not be able to auction off the real estate. Besides the fact that this would drive up home values due to a decreased supply of cheap foreclosed housing, such a regulation would limit a bank’s ability to pursue profit, and banks would experience more losses. And bank losses began the financial crisis.

Another suggested regulation on the financial industry was a cap on executive pay. Because such a cap would only apply to our country and because executives can afford to move, it is likely that this would cause the best of the executives to seek working in foreign markets. Because this regulation, as currently proposed, would only affect the financial sector, the best executives would leave the financial sector in search for higher pay elsewhere. The CEPR does not understand that there is a competitive market for effective executives, in the interest of company profit.

The CEPR also mistakenly asserts that bank executives decide their own pay. This is absurd. If the bank is a corporation, then a board of trustees decides executive pay. If the bank is owned by the executive, then executive pay is determined entirely by the profit of the bank. Else, the executive is an employee whose way is determined by his/her employer. The wages of an executive are not a drain on the company, but a necessary investment. to ensure the efficiency of a company.

The CEPR also mistakenly asserts that regulations are not interference with the market. Any regultion is an interference with the market if it has any effect at all.

The CEPR is correct in asserting that banks are not forced or pressured into making loans it would otherwise make, because such loans would constitute a loss. However, when we cross apply this premise to some of the policies they advocate, such as expansionary monetary policy, the contradiciton is certain. Expansionary monetary policy necessarily encourages banks to give out loans because the Federal Reserve interest rate decreases and more loans become profitable. The bubble is then formed which the CEPR next criticises as the cause of the recession. If this bubble was most certainly the cause of recession, and it was, and this bubble was caused by expansionary monetary policy, and it was, shouldn’t the CEPR change their advocacies?

The CEPR will not change their advocacies because they are dedicated neokeynesians who believe that individuals are incapable of effectively and efficiently controlling their own actions in the pursuit of their own welfare. This is absurd, for the only thing that keeps individuals from doing this is the hand of government.

This article refers to http://www.cepr.net/index.php/publications/testimony/the-failures-of-tarp/.

Let Cap and Trade Die

Tyler Prochazka

Former Vice President Al Gore tells us that the world is on the brink of disaster. Global warming, he says, will destroy the planet. According to him, there is no room for debate. The government must save us. Despite these claims of catastrophe, be cautious of global warming hysteria and calls to take “drastic action.”

In the 1970s, scientists seemed to overwhelmingly agree that a devastating ice age was imminent. It would last for “10,000 years” they said. Famine and nuclear wars would result from this global cool down. Obviously, this didn’t exactly pan out. [1]

Since that time, it has been global warming that will doom us all.

Fool me once, shame on you.

According to the U.N. World Meteorological Organization, there has been no global temperature increase in over a decade. [1]

Moreover, a group of over 30 thousand scientists signed a petition that said greenhouse gasses have no negative effect on the environment. It went on to say that extra carbon dioxide actually helps the environment. [2]

To solve this non-crisis of global warming Congress is proposing a cap-and-trade system where the government sets a limit on the amount of pollutants a business can emit.

The current cap-and-trade bill being considered would cause severe damage to the economy. The Heritage foundation found that millions of jobs would be permanently lost and incomes would contract sharply. [3] It would likely amount to the largest tax increase in American history, costing the average American about $1,000 more a year directly. [4] It would hit people in poverty the most who would have to devote more of their income to energy instead of food and shelter.

Even with the destructive distortions to the economy, cap-and-trade would not have any noticeable effect on carbon dioxide levels. EPA administrator Lisa Jackson even admits this saying, “U.S. action alone will not impact world CO2 levels.” [5]

The real solution, if global warming is a problem, is to allow for the economy to grow so that people can innovate and create adaptations to natural disasters. Some scientists that believe in global warming say that adapting to the new environment will be far cheaper and far more effective than something like cap-and-trade. [6] Stifling the economy only undercuts the effort to innovate and create these adaptations, which would save us from any potential global warming crisis.

Furthermore, the encroachments on freedom perpetrated by this bill should not be even on the table. It seems as if every supposed crisis is just another way for politicians to defy the constitution and defy individual liberty. It should not be up to a bureaucrat how much energy I use.

Global warming likely won’t destroy the world, but the hysteria surrounding it just might.

SOURCES:

1. http://www.washingtonpost.com/wp-dyn/content/article/2009/02/13/AR2009021302514.html?sub=new
2. http://www.lewrockwell.com/paul/paul537.html
3. http://www.heritage.org/Research/EnergyandEnvironment/cda0904.cfm
4. http://online.wsj.com/article/SB123655590609066021.html
5. http://blog.heritage.org/2009/07/08/epa-admits-cap-and-trade-won%E2%80%99t-work/
6. http://articles.latimes.com/2008/mar/26/science/sci-adapt26

Obama is doing fine as his policies fail

President Obama is staying up around the fifty percent approval mark as two-thirds of the people feel the country is headed in the wrong direction. Big spending liberals were sent packing in Virginia and New Jersey, but voters attributed none of it as fall out from the President. Remaking health care in the leftist image was until recently a forgone conclusion in the House, but the bill barely squeaked through this past week.

The Left concludes from this that the public actually loves government-orchestrated health care, new energy taxes, a foreign policy structured around apologies, and, above all, unbridled spending. The proof, they say, is that Obama is still popular, and surely his popularity would have suffered if voters did not want the proposed Big Government. Only lies by Republicans and Fox News, they claim, have temporarily interfered with voters what they really want.

The problem with that explanation is that the voters are getting the truth about the programs, and they are not much liking it. That brings us back to the conundrum: why is Obama remaining so popular in the face of rapidly growing dissatisfaction with his policies?

Obama remains popular because many middle-ground voters have not associated him with the implementation of the policies of his administration. The committed Left and the committed right have no trouble associating Obama with Obama policies, but few in either of those camps have changed their opinions about Obama since he was elected. The middle ground perceives health care as a product of Congress, not the President. The President wants only wonderful things: lower health costs, universal coverage, preserving what you now have, and no increase in deficits. He is firm on all those things, having asserted them in 112 speeches on the subject.

He does not talk about $500 billion in Medicare cuts and other details that might offend. It’s the job of Congress to make magic happen after he casts the spell. The same strategy applies to cap-and-trade, the Stimulus Bill, restructuring the financial system, figuring out where to put GITMO inmates, and so forth. The upside of not providing leadership is avoiding the responsibility that goes with it.

Congress was run by Democrats for the last two years of the Bush administration, yet Democrats have had success holding Bush responsible for everything. A poll showed that 57% of the people who voted for Obama believed that Republicans controlled Congress. Now with a Democrat as president, the Democratic-controlled Congress is held at fault rather than the President. That’s an amazing feat of politics.

It flows from Obama’s style and enormous skill as a politician. His campaign was based upon “hope and change,” without the specifics. The specifics get politicians in trouble. That strategy worked to get the Stimulus Bill passed. Insofar as there was agreement on the bill, in was on the generic premise that “government must act.” It was not sold on the premise that ten months later only 14% of the money would have been pumped into the economy.

Can Obama continue with generic messages that express goals rather than policies? It is possible. Imagine a scenario in which Republicans do well in the elections next year. Obama is already doing well blaming Republicans for his policy failures, despite Republicans having little power in Congress. Obama can step that up by posing the situation as his generic goodness being blocked by horrible detail-obsessed Republicans.

That might not happen. Another scenario is that voters gradually feel the lack of leadership from the President, and start holding him accountable for failed policies. It hasn’t happened so far, but perhaps it is just a matter of time.

We may be seeing a basic flaw in democracy. The best candidates may be the ones who are best at running for office, and perfection as a candidate comes at the expense of the ability to govern once elected.

Insurance Industry Profits are an Insignificant Part of Total Health Costs

Advocates of increased government involvement in health care frequently cite the profits of private health care providers as a major part of the costs of health care. The numbers, however, show that health insurance and managed care industry profits are 0.36% of the national bill for health care. If the compensation of industry executives is added as part of the alleged problem, then the industry accounts for 0.37% of total costs. The notion that industry profits are responsible for rising health care costs is a fraud.

An example of the criticism is that of Representative Anthony Weiner (D-NY) on the Rachel Maddow show, who said, speaking of proposed legislation that would heavily tax the health insurance industry:

“Well, the one behavioral change we are clearly not going to see is the insurance companies aren’t going to suddenly start saying, ‘You know what, we are going to stop making 30 percent profits and cut it down to 10 percent or 5 percent because of this bill.’ “

So are the insurance company profits really 30%, as claimed?

Fortune magazine rated the health insurance industry as the 35th most profitable of 53 industries surveyed for 2008:

Health Care: Insurance and Managed Care 2.2%

In 2006, in better economic times, according to CNN, health insurance company profits were 7.1%. In the Yahoo Finance ranking of industries (they divide industry into more categories than Fortune) by profitability, “Health Care Plans” rank 84th, with a profitability of 3.3%.

Total insurance company profits were $12.87 billion in 2007 and $8.40 billion in 2008. Total health care spending in the United States was $2.2 trillion in 2007. Insurance company profits were therefore 0.59% of total health care costs in 2007. Since total costs have been rising at about 6%, the insurance company profits would be about 0.36% of total health care costs in 2008.

Ten companies account for the health insurance company profits. The highest paid executive received about $11 million, and the others much less, going down to a few million. In each company the top guy gets by far the largest compensation. The pattern I’ve seen is that the top person at any large company gets about half of the total pay. To be generous, I will suppose that the average top pay is $8 million, and that it is only a third of the total executive pay. So that would make the total for the industry 10 x $8 million x 3 = $240 million. The industry profits were $12.87 billion and $8.4 billion, so $0.24 billion would be added using Con’s definition of profit. that would make the contributions to total health care costs rise from 0.59% and 0.36% to 0.596% and 0.37%, respectively. Even if one were to indulge fantasies that executive compensation were much higher than I had supposed, it would not approach being a major part of health care costs.

Critics counting the numbers from public records for top execs claim that compensation was about $115 million in 2007 and less in 2008. That’s much less than the $240 million I’ve estimated. My estimate includes a factor for second-tier execs.

It’s worth noting that executives earn their pay by reducing costs. In Medicare, some put fraud as 20% of the programs costs. That would be 20% of $440 billion, $88 billion. Private insurance companies police fraud, so their losses to fraud are much less.

The hard numbers do not support critics arguments, so they avoid the numbers by spinning percentages. Percentage increases in profits do not mean the profits were significant. If your business made $10 last year and $100 this year, that’s a 900% increase, but it doesn’t imply you are ready to retire on the Riviera. Insurance companies have made billions, but as we have seen, the billions are not a significant part of the trillions involved in health care.

The health insurance industry profits rose “from $2.41 billion in 2001 to $12.87 billion in 2007.” Thus, I included the highest profit year, when the profits were 0.57% of total spending. Critics uniformly ignore the decline in profits since 2007. The profits in health insurance vary between about 2% and 8%.

To make a more dramatic story, critics ignore the 2008 data. It’s likely 2009 will be even worse, so of course that will have to be ignored as well. What the large percentage changes mean is that the industry is volatile. Anything that can go up rapidly is subject to coming down just as rapidly. Profit margins of 2% to 8% are well below the 9% average for the market as whole, so the picture is not particularly attractive.

Critics also try to spin the profit percentages by claiming that reserve funds keep by insurance companies should not be included in basis for calculating profits. That’s nonsense because the main way that insurance companies make money is by investing the funds held in trust. That’s true of life insurance and virtually all forms of insurance. An insurance company may actually pay out in benefits more than it receives in premiums. A large part of profit comes from investing the reserves, and an insurance company that does a better investment job earns more profit. That’s what they do for a living.

Besides, using a definition of profit that is not shared by anyone in the financial community is a scam in the first place.

Note that changing the definition of profit changes the percentages with respect to the company, but not to the total cost of health care. Even if it is deemed a million percent company profit, it is still $8.4 billion of the $2.2 trillion in health care costs. That’s 0.36%, an insignificant part of the total cost.

On the Utility of Economic Liberty

Economic liberty means the ability of the individual to choose the use of his property, whether this means production, consumption, modification, or exchange. The motivation for this use is to improve one’s welfare, physical, mental, or emotional, either in the present or in the future. The result of this liberty is a society in which property is manipulated in a way that most benefits each user.

Movivation is not necessarily outcome, but this motivation can be demonstrated significant in this manner. In the process of making decisions, the individual can, and often does, obtain information necessary to reach a desired result. This itself reduces the tendency for random error in the market; however, even more truths confirm the market’s efficiency in maintaining utility, as will be shown below.

An exchange occurs because multiple individuals find it in their best interest to trade property. Again, the motivation for making an exchange does not necessarily mean that both parties will benefit; however, in the interest of benefitting, both parties of the exchange will release information significant ot guarantee confidence to ensure that the other party will agree to the exchange.

Production occurs in a market because individuals wish to implement their person and property in a manner that will allow a return (through exchange of the produced goods and services). This return is necessarily greater when the goods exchanged meet the most urgent and significant wants of the consumer; therefore, the individual will seek to produce goods and services that the potential purchasers will desire most.

As with exchange, the intents of satisfying the population with production are not necessarily the results; however, the burden of absense of individual demand is significant enough to reallocate goods and services other percieved demands of the consumer. Production is always tending towards meeting the demands of the consumer.

The result of this individualist liberty is naturally a greater utility for society, a general welfare out of chaos. Violence, or coercion, on the other hand, necessarily forces a change in the above criteria and necessarily lower the utility and welfare of society. This economic violence must cease to the highest degree possible if true prosperity is to be witnessed.

Predicting the Effects of Expansionary Monetary Policy on an Economy in Recession

The Obama Administration has enacted both of Keyne’s creeds: Expansionary Monetary Policy and Deficit Spending. This article will focus on the former.

Expansionary monetary policy is enacted to lower interest rates in times of deflation. This encourages investment, and ideally improves the economy and brings it out of recession. However, this Keynesian analysis is limited. After the economy recovers due to a particularly large session of EMP, hyperinflation occurs. Hyperinflaiton is inflation to the point where interest rates rise as if deflation were occuring. This is due to the fact that interest rates must necessarily be above that of the inflation rate, or banks face immediate deficits.

This increased interest rate necessarily passes the inflationary burden onto businesses. This pushes them into deficits of their own, and many businesses have to lay off workers in order to restore their profits. This is the harmful effect of hyperinflation, which can occur if enough EMP is enacted at once.

Though hyperinflation is destined to occur to this recession, there are other harmful effects of EMP that happen every time expansionary monetary policy is implemented. Any time interest rates are artificially lowered, more loans are taken out and less money is saved. This often leads to a “boom”, like the one of 2002 to 2006. However, when the market over invests poorly as a result of this policy, the result is always the same: the economy lurches into recession. Savings have been consumed and most people have spent and invested themselves into large loans. The recession then ensues.

What then, occurs when, as we are now, we implement EMP during a recession? Such an event causes a double-dip recession. The economy spends itself even more up to a point, and then the economy collapses in debt again. This has happened more than once since it happened in the Great Depression.

Expansionary monetary policy is necessarily a harmful policy to implement on society in mass quantities at any time. The proper solution is to let the market painfully recover from its government-stimulated overinvestment. Haste makes waste.