Casting blame far and wide

When something goes wrong, do we need to blame someone?

Yes, according to an article in the Journal of Political Economy by researchers from Boğaziçi University, Bocconi University, and the University.

The researchers ran experiments that paired subjects. One subject had to make decisions about how money would be split between a risky and safe investment in an uncertain environment. After the uncertainty was resolved and the payout was determined, the second subject decided how much to reward (or punish) the first.

There were four possible outcomes from the first subject's decision:

1. The person chose the risky outcome and the risky outcome made money (also more than the safe outcome),
2. The person chose the risky outcome and the risky outcome lost money,
3. The person chose the safe outcome and the risky outcome made money (and would have paid more than the safe outcome), and
4. The person chose the safe outcome and the risky outcome lost money.

Although the first subject chose the investment, s/he did not have any influence over how the uncertainty would be resolved.

The researchers set things up so that under some circumstances

1. the risky investment was the better bet (even though there was still a small possibility of a loss),
2. neither the risky investment nor the safe investment was a better bet, and
3. the safe investment was the better bet (even though there was still a small possibility that the risky investment would pay more).

In this set up, there was some scope for blame-worthy decisions. For example, choosing the safe investment when the risky investment had a higher expected pay-off or choosing the risky investment when the safe investment had a higher expected pay-off would each be "bad" decisions a priori.

What was interesting, however, was that the second subjects paid the first subjects less (punished the first subjects) even when they made the appropriate decisions a priori but the luck of the draw led to bad outcomes. For instance, subjects were often punished when they chose the risky investment, even though it had a higher expected pay-off, but the realized pay-off was a loss. That is, the second subjects appeared to shift blame for bad outcomes that were beyond anyone's control onto the first subjects.

Need someone to blame? Chances are you'll find someone.

"Somewhere Pavlov is smiling"

A beloved teacher frequently admonished our class when we would reflexively start to pack up our things at the sound of the dismissal warning bell, "somewhere Pavlov is smiling."

She was referring, of course, to Ivan Pavlov, who conditioned dogs to reflexively salivate at the sound of a buzzer.

Somewhere Pavlov is smiling about Republicans' reflexive rejection of President Obama's announcement that he is creating a myRA program to help people begin saving.

The program allows for voluntary, after-tax payroll deductions--as little as $5 per week--that can be used to purchase risk-free Treasury securities with no fees charged to either the worker or his/her employer. Funds in accounts would accumulate tax free. The program mimics, on a small scale, a risk-free retirement savings option that is available to federal civil servants.

Republicans' reactions to this and nearly every other Obama initiative have followed a drearily predictable path--if the President is for it, they're against it.

This latest rejection may be one of the oddest yet, because the President's program, modest though it is, actually advances conservative principles.

Consider that by making saving easier, the program promotes self-sufficiency and ownership.

Also, the savings would be entirely privately-funded--indeed, funded by workers themselves.

In addition, every aspect of the program is voluntary. Employers are free to offer this or not as they wish; eligible employees are free to contribute or not as they wish. The only mandatory component is that employees must move their funds to a regular retirement account once their myRA savings reach $15,000.

And the returns on the savings escape taxation.

Effectively, the only thing that this program does is to eliminate the transactions costs associated with setting up or contributing to retirement accounts. As transaction costs interfere with the beneficial outcomes with free-markets (especially the amounts traded are small), the program facilitates a free-market outcome.

This may be why the Heritage Foundation and other conservative organizations have advocated for exactly these types of savings vehicles.

Right up to the point where the President agreed with them.

Come to think of it, Bugs Bunny might be smiling too.

Lesson learned?

You would think that after nominating a host of too-extreme-for-prime-time candidates that failed to knock off vulnerable, "damaged-goods" Democrats, including Sen. Harry Reid, Sen. Claire McCaskill, and now Va. Gov.-Elect Terry McAuliffe, Republicans would wise up.

You would be wrong. National Review's Maggie Gallagher explains

Would another $3 million have swung 50,000 votes? The Republicans, starting with Bill Bolling, who undercut Cuccinelli as unelectable have egg all over their faces.

This was a winnable election. How did we give this away to Terry McAuliffe? Some serious soul-searching should be taking place among the anti-tea-party faction.

The implied prescription--doubling down on bad Tea Party bets--is music to Democrats' ears.

Job-killing in Raleigh continues

Chalk up another self-inflicted job wound by Gov. McCrory's administration.

The North Carolina Coastal Federation is reporting that the state's Division of Water Resources has just turned down two federal grants totaling $583,000.

Saying they don’t need the money to meet their new mission, state environmental officials recently turned down almost $600,000 in federal grants. The money would have been used to set up a network of sites to begin testing streams in the Piedmont where natural gas production is likely to occur and to establish a long-term planning and monitoring program to protect wetlands.

One grant would have paid state researchers to collect baseline water quality data in the economically depressed central Piedmont region. The other grant would have paid for public employees to plan for and monitor the protection of wetlands.

The grants would have provided valuable outputs, especially given the possibility of natural gas fracking in the central Piedmont and the need to protect sources of water flowing into Jordan Lake. Both grants would have supported the goals of advancing economic development while simultaneously improving the environment.

More prosaically however, both grants would have funded well-paying jobs in a state that needs every job it can get its hands on.

The decisions are also wasteful given that valuable state resources went into the effort to apply for the grants.

But nevermind those considerations. The general economic interest of the state is no match for the narrow special business and political interests of the Governor.

It's little wonder that North Carolina trails the nation in job growth.

U.S. leads in manufacturing...artificial crises

The Washington Post cheers House Republicans' "novel plan" to suspend the artificially-created debt ceiling crisis and re-create it this summer.

House Republicans are advancing a novel plan to suspend enforcement of the federal debt limit through May 18, a move that would lift the threat of a government default and relieve the air of crisis that has surrounded their budget battle with President Obama.

The measure — set for a vote Wednesday in the House — would not resolve the dispute over how to control the national debt. But after the traumatic “fiscal cliff” episode at the end of last year, it would buy policymakers a little breathing room to continue the argument without another economy-rattling deadline just around the corner.

As the Post points out, we needn't worry about a lack of artificial crises. Suspending the debt ceiling fight clears the deck for a possible government shut-down if a new budget isn't set and for mindless across-the-board sequester cuts if an alternative debt reduction deal isn't reached.

Meanwhile, Bloomberg reports that this is no way to run an economy.

If Congress focused more on manufacturing bipartisan solutions than artificial crises, we might all be doing better. Don't manufacture a crisis of your own by holding your breath.

Shhh, don't say 'gay'

Teaching about Oscar Wilde, discussing civil rights, and reprimanding children for anti-gay taunting could all get a lot tougher in Tennessee where a state Senate committee approved a bill that would prohibit elementary and secondary schools from providing "any instruction or material that discusses sexual orientation other than heterosexuality."

If we don't talk about it, it doesn't exist, right?

A follow-on bill will prohibit Will and Grace re-runs and Ted Haggard sermons from being shown on Tennessee televisions before 10 p.m.

Birthers are just the tip of the know-nothing iceberg

There are days where my belief in rationality is really put to the test.

My very sensible brother-in-law, who has adopted Texas as his home state, sent the following along.

Nearly a third of Texans believe humans and dinosaurs roamed the earth at the same time, and more than half disagree with the theory that humans developed from earlier species of animals, according to the University of Texas/Texas Tribune Poll.

...Most of the Texans in the survey — 51 percent — disagree with the statement, "human beings, as we know them today, developed from earlier species of animals." Thirty-five percent agreed with that statement, and 15 percent said they don't know.

Did humans live at the same time as the dinosaurs? Three in ten Texas voters agree with that statement; 41 percent disagree, and 30 percent don't know.

This would be just an interesting cultural note were it not for the influence that Texans have in the national textbook market.

One wonders how many of these folks were in the audience yippin' and yawin' at Tom Tancredo's recent plea for higher voting standards.

NC confirms double-dipping

The Program Evaluation Division (PED) of the NC General Assembly has now investigated the double-dipping in the NC wetland mitigation programs.

The PED describes in detail how credits for the same 46 acres of preserved land were purchased twice by the state--once as wetlands credits for the Department of Transportation and then later as nutrient offset credits for the Department of Environment and Natural Resources (DENR).

The PED determined that of the $911,000 that the DENR spent on the "new" nutrient offset credits, $698,372 paid for credits on land that had already been preserved. The PED also determined that another 18 acres remains available for further double-dipping.

Besides the double-dipping itself, one of the most appalling items in the report was a statement by a DENR Assistant Secretary, who wrote that

Approval of the EBX buffer/nutrient offset bank did not impose additional costs on taxpayers. The ability to use nutrient offset credits from an established stream and wetland restoration site made those credits less expensive.

By such logic are dead parrots and the Brooklyn Bridge sold.

The Assistant Secretary seems not to realize that that expenditure bought absolutely no additional environmental benefits to the taxpayers of North Carolina. The money was completely wasted; it has evaporated; it protects nothing, and it can't be used to protect anything. The state would have been better off if the DENR had taken 698,372 dollar bills, shredded them, and then used resulting fluff to insulate its headquarters or to stuff the Assistant Secretary's empty head.

The only positive from the report was that the DENR has issued a moratorium on most future "double" transactions and has drafted rules to prohibit this in the future.

Money for Nothing

Mark Knopfler had it wrong. EBX didn't have to learn to play the guitar or learn to play them drums. All it had to do was write a proposal, and it got its "money for nothing."

The News Observer has a follow-up story this morning that suggests that there isn't much urgency in the state government to address the double-payments problem.

Officials with the Department of Environment and Natural Resources have characterized the payment as the result of a regulatory loophole that they now want to close. But they also acknowledge that they support double payments in some cases when a restoration project enhances streams and the land alongside them. These projects are built by the state and by private companies.

EBX officials say the company should be entitled to the $911,000 because the state has supported double payments on the other restoration projects...

Chrissy Pearson, Perdue's communications director, said that the governor has been aware of the double-dipping concerns and told her Budget Reform and Accountability Commission to tackle the issue earlier this year.

"She told me quite bluntly that this process doesn't make sense to her and she does want some answers as to whether the groups involved in this type of work are working as efficiently and effectively as possible," Pearson said.

We can speed this along for the governor. The answers are "no" and "no."

Pollution mitigation projects often yield benefits that extend beyond the affected site. Although intended to address one type of pollution, they can sometimes address several. Economists refer to these extra benefits as positive externalities, or spillovers (especially apt for projects to reduce stream pollution). The externalities make the project all the more valuable from a social perspective.

The presence of externalities could explain why the state might prioritize one project over another. It might also explain why the state might be willing to pay more initially.

However, the state's responsibility is to get these benefits at the lowest possible cost. It should drive the best bargain possible initially. And under no circumstances, should it pay a second (or third or fourth) time for work that has already been performed.

Any "regulatory loophole" that allows double payments should be closed. In the meantime, no new double-payments contracts should be written, and existing contracts should be reviewed to see if the state can terminate them.

The audacity of hope

I woke up to the news that President Obama had won the Nobel peace prize. After checking the calendar to make sure that I hadn't slept until April 1, I started trying to think how that could have happened. To quote Dr. Suess, I puzzled and puzzled 'til my puzzler got sore.

Sure Obama has united parts of this country, mostly the Republican parts that are united in opposition to health care, a better climate, and evolution.

And sure he's pursuing more peaceful policies, such as keeping only some of the detainees in Guantanamo and having predator drones fire missiles at wedding rehearsal dinners instead of actual wedding parties.

Heck, one of these days he may even make a decision about what we're going to do in Afghanistan.

But once you get past there, the resume really thins out.

In the end, the answer that I come to is that the Nobel committee has awarded the equivalent of one of those self-esteem trophies that the last place kids' soccer team gets at its Fuddruckers end-of-season banquet. You can almost hear them saying, "Way to be there Barry!"

Rationality takes a hit in NC

Some days it's hard to hold on to that very dear belief in rationality.

Exhibit A is a poll conducted during the last week in North Carolina by Public Policy Polling that asked people, "Do you think Barack Obama was born in the United States?"

26 percent of respondents answered that he wasn't; another 20 percent weren't sure. Among Republicans in our state, 47 percent answered that he wasn't, and an additional 29% weren't sure. Less than a quarter of Republicans answered that our President was born in the U.S.

Democrats did better only in comparison--only 75 percent said that the President was born in the U.S.

There's bad news for Hawaii. Only 88 percent of Republicans provided positive responses to the question, "Do you consider Hawaii to be part of the United States?" For Democrats, the figure was 92 percent.

In response to a post last week about the "birthers" now throwing "temper tantrums," Sam Spagnola commented

The goal is to discredit a whole movement by identifying it with some on the fringe or some other group that can be isolated.

And later...

The whole "birther" linkage is proof enough. They represent a clear minority, yet you want to tar the entire GOP by linking them with the fringe.

The poll indicates that the "fringe" among conservatives and Republicans is the minority that rejects the "birther" argument.

In fairness, the poll has a standard error of plus or minus 3.6 percent. So, it may be that only 28 percent of North Carolina Republicans are so grossly misinformed.

Virginians didn't fare much better in a similar poll; there a third of Republicans got the President's nativity correct.