How We Fool Ourselves With Numbers

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Often, the best outcome seems less satisfying than alternatives.

gas-guzzler

Daniel Kahneman  is a psychologist who won a Nobel in economics for Prospect Theory, more commonly called Behavioral Economics. In his book, Thinking, Fast and Slow, Kahneman describes a cognitive bias that leads people to make the wrong choice on automobiles. But the bias might actually keep gasoline consumption high by fooling people with number.

Say you’re concerned with the amount of gasoline you use. You have a Ford Focus that gets 30 MPG, and a Hummer that gets 12 MPG. You need a huge SUV, but you want to minimize your environmental footprint.

Do you

a) trade in your 30 MPG Focus for a Prius that gets 40 MPG, or

b) trade in your 12 MPG Hummer for an H3 that gets 14 MPG?

(Circle you choice)

Chances are, it feels better to jump up to the 40 MPG Prius. In fact, it looks like a no-brainer. Both the government and environmentalists push us toward 40 MPG choice. But let’s do the math.

First, we have to convert miles per gallon to gallons per mile. The formula is simple: 1/MPG. Then, assume we drive each vehicle 10,000 miles a year. Here’s how the numbers work out:

 

Hummer: 1/12 = 0.0833 GPM * 10,000 = 833.33 Gallons per Year
H3: 1/14 = 0.0714 GPM * 10,000 = 714.28 Gallons per Year
Savings: 119.05 Gallons per Year

Focus: 1/30 = 0.0333 GPM * 10,000 = 333.33 Gallons per Year
Prius: 1/14 = 0.0.25 GPM * 10,000 = 250.00 Gallons per Year
Savings: 83.33 Gallons per Year

If your goal is to reduce gasoline consumption as much as possible, trade in the Hummer for the H3. But it still won’t feel right. Going from a Hummer to a Prius, of course, would be the biggest possible savings of 583 gallons per year, or $1954 at $3.35 per gallon. But people resist drastic changes. You’re more likely to entice a Hummer driver to make the switch to brand new H3.

It might sound counterintuitive, but just because gas prices are high doesn’t mean it’s the right time to trade in that SUV for a high-mpg vehicle, Wiesenfelder says. When fuel costs are high, the demand and price for efficient vehicles goes up. Conversely, demand for gas-guzzling SUVs goes down, and their trade-in values fall.

“It’s a romantic notion to drop your SUV for a Prius, but you’ve got to do the math,” says Wiesenfelder. [source]

Advocates count on people to be lazy and take the obvious choice.  As we’ve seen here, though, the obvious choice isn’t always the best choice. Remember this whenever you hear the government talk about obvious, no-brainer choices. Chances are, it’s a lie.

Ed Martin’s Grit Overwhelms Establishment’s Power

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In a blow to the old guard establishment, the Missouri Republican State Committee elected Ed Martin Jr. as its new party chairman.

Ed Martin Addresses First St. Louis Tea Party 2-27-2009

Roy Blunt and all six Republican members of Congress from Missouri lobbied the new state committee over the past few weeks to block Ed and retain the establishment’s choice, David Cole. Jo Mannies of the St. Louis Beacon wrote:

Cole’s loss appears to be a setback for Missouri’s GOP establishment. U.S. Sen. Roy Blunt and all six Missouri Republicans in the U.S. House had signed a letter backing Cole’s re-election.

Martin’s win was seen as a victory for the Missouri GOP’s more conservative factions, including some tea party groups – notably the St. Louis Tea Party, whose founder Bill Hennessy had endorsed Martin.

The victory demonstrates the power of grit—one of Ed Martin’s most valuable qualities. Ed narrowly lost his bid to unseat former Congressman Russ Carnahan in 2010.  In that race, Ed came closer than any Republican in recent memory to taking Missouri’s old 3rd District away from Democrats. Ed’s gritty campaign solidified his standing with grassroots tea partiers.

Grit is the most important factor in success according to human behavioral scientists. As Jonah Lehrer explains:

After analyzing the data, Duckworth discovered the importance of a psychological trait known as grit. In previous papers, Duckworth has demonstrated that grit can be reliably measured with a short survey that measures consistency of passions (e.g., ‘‘I have been obsessed with a certain idea or project for a short time but later lost interest’’) and consistency of effort (e.g., ‘‘Setbacks don’t discourage me’’) over time using a 5-point scale. Not surprisingly, those with grit are more single-minded about their goals – they tend to get obsessed with certain activities – and also more likely to persist in the face of struggle and failure. Woody Allen famously declared that “Eighty percent of success is showing up”. Grit is what allows you show up again and again.

 Ed put in the 10,000 hours of practice. His dogged campaigns in 2010 and 2012 gave him the courage and earned him the privilege to show up.

After losing his bid to unseat Attorney General Chris Koster last November, a lot people wanted Ed to give up politics. But Ed’s no quitter. Instead, he rallied his considerable charm and tenacity to take on a role that is well suited to Ed Martin’s skill and experience.

Missouri’s Democrats and even some conservatives mockingly said “Ed  finally won an election.” The Democrats should be very worried that a talent as gritty and popular as Ed Martin now chairs the Missouri GOP. Conservative might want to review Abraham Lincoln’s electoral history before mocking the resilience of a man who never gives up.

Congratulations, also, to Trish Vincent, Auditor Tom Schweich’s chief of staff, elected Chairwoman, or co-chair in today’s PC-speak. And a special congratulations and thanks to Frieda Keogh of Missouri Precinct Project and a new member of the Republican State Committee. Frieda’s efforts to advance grassroots causes and candidates is a gift to Missouri and America.

Our Tax Code: The Fustercluck From Which Everything Rancid Crawls

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William F. Buckley proposed a simple tax reform in 1973. The language barrier that separates people like Buckley from that odd species we call Congress prevented his thoughts from finding fertile soil.  And in the 40 years between, the tax code has become only murkier and more dangerous.

4-Reforms

“Our tax laws were,” Buckley wrote in Four Reforms: A Guide for the Seventies, “designed historically to raise revenue for the operations of government.”  He continues:

Along the way the operations of government inflated in purpose and ambition, evolving from modest Jeffersonian instruments for effecting the safety of the state into the gargantuan instruments of the social perfectionists.

He points out that attempts to cure a social ill through tax code always and everywhere exacerbates the ill and sprouts new seedlings of destruction. For example, the ill-fated luxury tax of the 1990s, which intended to punish conspicuous consumers who spent their hard-earned dollars on boats, planes, and furs, ended up destroying several American industries and displacing tens of thousands of not-so-wealthy workers. The rich, meanwhile, could import luxury items from Latin America, Asia, and Europe, often cheaper than their American equivalent even before the luxury tax took effect.

Here’s a little history of how we got here, and a reiteration of Buckley’s modest proposal of 1973.

At the height Roosevelt’s New Deal, only about 3 million Americans paid any income tax at all. But World War II changed all that. To feed the war machine, Congress broadened the tax base to about 42 million Americans, most of whom viewed their new tax burden as a) worthwhile, b) reasonable, and c) temporary. Most Americans had one or more family members fighting in Europe or the Pacific, and paying a portion of their income to fund the war effort was something of an honor. At the time, there was but a single tax rate paid by all Americans, married or single.

When the war ended, some states created “community property” laws which stated that wives were entitled to half the husband’s income. This led to a change in the tax law which allowed men to deduct alimony payments, which led couples to divorce for the tax advantage, which created scandals as more couples lived openly in sin.

So Congress amended the law again to allow married couples to pay separate taxes which tended to drop them a few rungs on the tax ladder, reducing their overall tax rate.  This caused overall government revenue to drop about the time General Marshall’s plan to rebuild Europe needed funding.

In 1951 then created the unmarried head-of-household allowing single working parents to pay taxes at a lower rate, as if they had a spouse who didn’t work. This perturbed the single taxpayers who wrote the Congressmen (they were almost all men then). 

As Buckley points out, at this point it should have become clear to anyone that “to favor somebody is almost necessarily to discriminate against somebody else.”

The single taxpayer complaints led to more reforms in 1969. Now, single taxpayers could not pay more than 20 percent more than a married taxpayer in the same bracket.  (Confused yet?)  Now, dual-income households in which both husband and wife worked were furious that they were paying more taxes than single people in the same tax bracket. Congress responded, but now couples with children complained that they were paying the same amount as childless couples, discouraging family creation and giving the childless unfair economic advantage.

And on we go, until in the latest fiscal cliff tax cut/increase/pork festival, NASCAR owner get special tax advantage to compensate for their inability to turn right.

So the tax code is now heavier than health man can bench press, the IRS cannot explain what you should pay, and businesses spend as much on tax avoidance as they do on research and development.

It’s time to stop the madness.

While some believe the way to drum up broad support for change is to propose radical elimination of the income tax altogether, scientific investigations of political change reveal that people prefer incremental and evolutionary changes to revolutionary changes.  Therefore, I won’t endorse the Fair Tax, even though I like it better than what Buckley proposed.

His proposal?  A simple flat rate of 15% that applies to all income. No exemptions, no deductions, no brackets.

The flat tax should appeal to Warren Buffett and his ilk, because he and his secretary would pay the same damn rate for a change.  The formula, which I’ve blogged about many times, is stupidly simply: what did you make? Multiply by .15. Send it in. 

True, this would be a tax increase for many people. Sorry. We have a $16 trillion+ national debt to pay down.  When some future president phones into Dave Ramsey to yell “We’re Debt Free!” we can look at reducing the rate.

The biggest social problem this proposal creates is the displacement of thousands of tax workers at H&R Block, Intuit, and the IRS.

I think we can deal with that, though.

Congress Just Increased Deficits By $4 Trillion, And All I Got Was 2.9% Tax Increase

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You’ll need a scorecard to keep up with the insanity in Washington this week.

boehner-2

The Senate’s been a lost cause for a while, so let’s not even bother with the upper house. Besides, it’s really hard to focus on good fiscal policy while Hooter’s Girls are passing out Bacardi 151 shots, Buffalo wings, and “Welcome 2013” horns in the cloak room.

Over in the House, things looked interesting for a while. Eric Cantor, as the story leaked, wanted to add amendments to the Senate fiscal cliff bill. But, in the end, Boehner convinced 85 Republicans (who are tired of running unopposed in the primary) to join the Democrats in bi-partisan New Year’s present to President Obama. Apparently, everyone who voted for the tax increase and spending binge got a free Obamaphone and tickets to NASCAR for life.

I’m being unfair, actually, by implying that the 85 Republicans who voted “Aye” were paid off. Clearly, these people are too inept to hold out for personal favors. If the bill had required Republican House members to submit to a Tabasco and Thumb Tack enema facing Mecca five times a day, they’d tell you how proud they were to bend over for America’s middle class families.

I’m not right very often, so when I am, I like to, well, gloat.  Here’s what I wrote on December 21, the day after Boehner’s “Plan B” exploded in his hands:

Therefore, the only way the House can pass a fiscal cliff bill is to win a bunch of Democrat votes.  Since Democrats know this, they can hold out for whatever Obama demands.  Boehner, who doesn’t want to get blamed for failing to reach a deal, will go along and he’ll bring enough Republicans to pass it.

Sometimes it sucks to be right. Since I’m on a roll, I might as well keep playing. Here’s my predictions on the results of this bi-partisan work of statesmanship:

  • Obama and the Democrats will get full credit for saving 98% of taxpayers (which is like 4% of the adult population) from a tax  increase
  • Republicans will get full credit for increasing the deficit by $3.9 trillion (according to the CBO)
  • Republicans will also get to claim the 2.9% payroll tax increase that took effect today (2% Social Security, .9% Obamacare Medicaid tax)
  • Come March, Obama will get a 2-year debt ceiling moratorium, meaning he can spend as fast as Bernanke can buy debt from Treasury
  • And the sequestration will affect only the Department of Defense
  • Which will inspire Japan to capitulate to China

When Democrats become the champions of tax cuts and the GOP the goats of deficits spending, the world must be coming to an end. Maybe the Mayans were only a few months off. (Told you you’d need a scorecard.)

Where’s those Hooter’s girls? I need a drink.

It’s Time To End War On Weed

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When in the course of human events it becomes necessary for conservatives to divorce themselves from superstitions they’ve embraced since the Progressive Movement of the 1920s and join the pantheon of reasonable people, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

I hold these truths to be totally friggin’ obvious, that all drugs are not created equal, that we’ve wasted billions of dollars and millions of lives pursuing a demented “zero tolerance” temperance goal that was Never Going To Happen, that the losses we’ve endured trying stamp out weed have cost American society more than they’ve gained, that among these losses are lives, money, and opportunity. That whenever a policy becomes so destructive of the ends of living free and prospering that even the Dean of American Conservative Intellectualism screams “LEGALIZE IT,” only an idiot would hold propaganda images from Refer Madness as an excuse to support our current marijuana prohibition. That if tomorrow the laws of the federal government and the 48 states still prohibiting possession of a milligram of marijuana were erased and forgotten, the world would go on, America would remain the lone Super Power (with other gaining) and the largest economy in the history of mankind, dogs would continue to chase cats, Angelina Jolie would still be hot, and Rachel Maddow would remain an idiot. To prove this, let Facts about this War On Drugs be submitted to a candid world:

  • It costs about $56 billion a year
  • It squanders tax revenue from the drugs targeted of about $42 billion (if taxed like alcohol and tobacco)
  • It costs governments $98 billion dollars a year in net money—a fine down payment on our umpteen-quadrillion dollar national debt
  • It screws up the lives of about 680,000 Americans per year whose only crime was possession of marijuana with no intent to distribute
  • It fails to reduce the number of people who try weed, as the usage rate in the USA is identical to usage in Holland where it’s legal
  • It rewards organized crime, street gangs, and international drug cartels by creating a black market with inflated prices
  • It takes police away from serious crimes like rape, murder, assault, and terrorism
  • It has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance. (Sorry. That’s such an awesome sentence I had to steal it from TJ.)

Seriously, here’s what Buckley said about conservatives and weed in 2004:

Conservatives pride themselves on resisting change, which is as it should be. But intelligent deference to tradition and stability can evolve into intellectual sloth and moral fanaticism, as when conservatives simply decline to look up from dogma because the effort to raise their heads and reconsider is too great. The laws aren’t exactly indefensible, because practically nothing is, and the thunderers who tell us to stay the course can always find one man or woman who, having taken marijuana, moved on to severe mental disorder. But that argument, to quote myself, is on the order of saying that every rapist began by masturbating. General rules based on individual victims are unwise. And although there is a perfectly respectable case against using marijuana, the penalties imposed on those who reject that case, or who give way to weakness of resolution, are very difficult to defend. If all our laws were paradigmatic, imagine what we would do to anyone caught lighting a cigarette, or drinking a beer. Or — exulting in life in the paradigm — committing adultery. Send them all to Guantanamo? [emphasis added for emphasis]

So, grow up, conservatives, or be ready to lose a lot of tourism money to Colorado and Washington. Pot isn’t a super-addictive poison that gives people super-human strength to kill cops and rape nuns. It’s not H, and it’s not Angel Dust. It’s pot. Unless you’re afraid of people driving too slow and staying out of bar fights, settle down. If pot were legalized, Hostess would still be in business and likely challenging Apple for the highest market cap in history.

If conservatives want to be seen as serious about the real threats to freedom, we better let go of the bogeyman we’ve carried over from the Coolidge administration.

If you do nothing else in 2013, Legalize It.