Search Results for: moral hazard

Do Seatbelt Laws Kill More People in Total? Maybe Not, but They Do Kill More BYSTANDERS!

I (and the enraged Yehuda Segal) have written elsewhere against seatbelt laws, blindly amplified by various poskim. As it turns out, they likely do not kill more Jews in absolute numbers, but they do still redistribute risk unto innocent pedestrians. This is otherwise known as Moral Hazard.

A fine example of moral hazard, funnily-painfully enough, is this very act of  paskening, complete with Da’as Torah papacy (our rabbis are never wrong), social conformity enforced in the name of pseudo-halacha, vapid intuition, as opposed to Talmudic proof, on the part of modern decisors, כי רבים חללים הפילה — and in Nefashos, to boot, the mind-rotting negation of ואל תאמר קבלו דעתי, שהן רשאין ולא אתה and Chulin 6b מקום הניחו לי אבותי וכולי, and contempt of hard data in halacha (exceptions notwithstanding).

In short, we have ourselves the perverse multiplication of moral hazard by (1) third-party rabbis (2) relying on the interventionist state, father of manifold moral hazards, which, in turn, (3) ignores drivers’ moral hazard…

Here is Wikipedia’s update of the research (abbreviated):

The reduction of predicted benefit from regulations that intend to increase safety is sometimes referred to as the Peltzman effect in recognition of Sam Peltzman, a professor of economics at the University of Chicago Booth School of Business, who published “The Effects of Automobile Safety Regulation” in the Journal of Political Economy in 1975 in which he controversially suggested that “offsets (due to risk compensation) are virtually complete, so that regulation has not decreased highway deaths”. A reanalysis of his original data found numerous errors and his model failed to predict fatality rates before regulation (Robertson 1977).

… But “Peltzman’s theory does not predict the magnitude of risk compensatory behavior.” Substantial further empirical work has found that the effect exists in many contexts but generally offsets less than half of the direct effect. In the U.S., motor vehicle fatalities per population declined by more than half from the beginning of regulation in the 1960s through 2012. Vehicle safety standards accounted for most of the reduction augmented by seat belt use laws, changes in the minimum drinking age, and reductions in teen driving (Robertson 2015).

The Peltzman effect can also result in a redistributing effect where the consequences of risky behavior are increasingly felt by innocent parties (see moral hazard). By way of example, if a risk-tolerant driver responds to driver-safety interventions, such as compulsory seat belts, crumple zones, ABS, etc. by driving faster with less attention, then this can result in increases in injuries and deaths to pedestrians.

Tosafos Bava Kama 27b s.v. H.G. Amai:

ה”ג אמאי פטור איבעי ליה לעיוני, אבל הך לא פריך אמאי חייב בנזקו כשהוזק איבעי ליה לעיוני כדפירשתי לעיל (דף כג. ד”ה ולחייב) דיותר יש לו לשמור שלא יזיק משלא יוזק ולא שייך כאן כל המשנה ובא אחר ושינה בו פטור (לעיל כ. כד:) דגבי אדם לא אמר הכי והא דאמר (לעיל דף כב.) הניח חנוני נרו מבחוץ בעל הגמל פטור ולא אמר איבעי ליה לעיוני וי”ל דדוקא במקום הליכתו אמרינן איבעי ליה לעיוני וקצת קשה הא דאמר רבא לעיל כי אית לך רשות לסגויי הא בהמה נמי איבעי לה לעיוני כדמוכח בהפרה (לקמן דף נב:) דשור פקח ביום פטור וליכא למימר בממלא רה”ר שאינה יכולה לעבור אלא דרך עליה דא”כ לבעוטי נמי אית לה רשותא.

Doesn’t the BP Scandal Prove We Need More Government?!

Nope.

First of all, what happened?

Wikipedia gives us the highlights:

The Deepwater Horizon oil spill (also referred to as the BP oil spill, the BP oil disaster, the Gulf of Mexico oil spill, and the Macondo blowout) is an industrial disaster that began on April 20, 2010, in the Gulf of Mexico on the BP-operated Macondo Prospect.

Killing eleven people, it is considered the largest marine oil spill in the history of the petroleum industry and estimated to be 8% to 31% larger in volume than the previous largest, the Ixtoc I oil spill. The U.S. government estimated the total discharge at 4.9 million barrels. After several failed efforts to contain the flow, the well was declared sealed on September 19, 2010.

Reports in early 2012 indicated that the well site was still leaking.

A massive response ensued to protect beaches, wetlands and estuaries from the spreading oil utilizing skimmer ships, floating booms, controlled burns and 1.84 million US gallons of oil dispersant. Due to the months-long spill, along with adverse effects from the response and cleanup activities, extensive damage to marine and wildlife habitats and fishing and tourism industries was reported.

Oil cleanup crews worked four days a week on 55 miles of Louisiana shoreline throughout 2013. Oil continued to be found as far from the Macondo site as the waters off the Florida Panhandle and Tampa Bay, where scientists said the oil and dispersant mixture is embedded in the sand. In April 2013, it was reported that dolphins and other marine life continued to die in record numbers with infant dolphins dying at six times the normal rate.

Numerous investigations explored the causes of the explosion and record-setting spill. The U.S. government September 2011 report pointed to defective cement on the well, faulting mostly BP, but also rig operator Transocean and contractor Halliburton. Earlier in 2011, a White House commission likewise blamed BP and its partners for a series of cost-cutting decisions and an inadequate safety system but also concluded that the spill resulted from “systemic” root causes and “absent significant reform in both industry practices and government policies, might well recur”.

In November 2012, BP and the United States Department of Justice settled federal criminal charges with BP pleading guilty to 11 counts of manslaughter, two misdemeanors, and a felony count of lying to Congress. BP also agreed to four years of government monitoring of its safety practices and ethics, and the Environmental Protection Agency announced that BP would be temporarily banned from new contracts with the US government. As of February 2013, criminal and civil settlements and payments to a trust fund had cost the company $42.2 billion.

In September 2014, a U.S. District Court judge ruled that BP was primarily responsible for the oil spill because of its gross negligence and reckless conduct. In July 2015, BP agreed to pay $18.7 billion in fines, the largest corporate settlement in U.S. history.

There have been similar leaks and almost-leaks at nuclear plants, and the like. The government prefers using bogeymen to scare us since these can be safely shut down and interchanged as needed. Serious emergencies merely reduce the public trust in the state. Indeed, there are several ongoing threats (such as massive debt and entitlements, the accumulating space debris Commons problem, the anti-population growth people) which are ignored because they serve no positive political purpose.

Private companies have no motivation to disclose them, either. And, again, the government has no interest in forcing them to.

If the government puts an unpopular defendant on trial, the result is foreknown. If the government played a role in enabling the crime, through moral hazard and government-quality regulation, the result is even more obvious. If the judgment is a question of paying fines to the employers of the judges, even more so.

When decisions pertaining to the public weal are socialized via government or private-public collusion, the true factor is only the bureaucratic refrain of “How can I keep my job safe?”

Thomas Sowell: “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.”

So that’s how we do it…

Making business government-like means we will get more of those kinds of deception we have grown to know and resign ourselves to.

Lessons will never be learned, either.

I don’t have the latest Block “Defending” book, but here’s a summary of his comments on the BP spill via Lewrockwell.com:

British Petroleum is a good hard case because everyone knows about the accident in the Gulf of Mexico, the 200 million gallons of oil that was spilled, and that BP has been vilified by the media pundits and politicians because of it. Block begins by calling the people at BP heroes in part because they do the dangerous work so we can comfortably drive across town at 10 cents a mile.

Block asks if BP knew the dangers of deepwater drilling. Of course they did, but government regulations prevent shallow water drilling near the shoreline and provide incentives to drill in deep water far out at sea. Meanwhile, government regulators were not doing their job, goofing off, taking bribes, and they failed to upgrade safety standards to account for the new deepwater drilling.

As BP was vilified for negligence and as the oil continued to seep into the gulf, the U.S. government turned down offers of assistance from foreign companies that specialized in such spills and who had more experience than U.S. firms. Ships from foreign countries also offered their assistance, but like after Hurricane Katrina, the volunteers were turned away. Block argues persuasively why such disasters are very unlikely to happen in a libertarian society and that this tragedy was the result of government intervention.

Greenwashing and the Beauty of Capitalism

As we said we would, here goes on “Greenwashing”…

What is it?

Greenwashing (a compound word modeled on “whitewash”) is a form of spin in which green PR or green marketing is deceptively used to promote the perception that an organization’s products, aims or policies are environmentally friendly.

Contra Ayn Rand, successful businessmen are not consciously philosophical, at all. They have an inexplicable, unteachable practical knack, and usually, have no knowledge, nor interest in what money “is” or what it stands for, or “represents”. The intuitions and language of businessmen are often wrong, you knowing the truth doesn’t mean you will make any (more) money at all, and teaching successful businessmen what’s up to increase profits is a complete failure of ROT (Return On Time).

“Ideals”? As Adam Smith wrote, every business meetup turns to collusion. Rand’s calling businessmen a persecuted “minority” is hilarious, not to mention those Rothbard called “Big Business”.

Business is all about giving the people what they want.

Well, what do they want?

  1. Free.
  2. Perfect.
  3. Now.

It’s the name of a business book, which hardly anyone has read.

They want certain buying experiences (shopping as therapy), to be lied to about how sausages are made, to feel rectitude (in accordance with their current values), to receive honor as “valued customers”, to avoid losing face (by overpaying or later noticing defects in purchases), and so on.

So when business caters to our all-too-human religious frailty, we have the chicken and egg problem. Does increasing supply of smartphones to Yeshiva students increase or hasten Tarbus Ra’ah? Are low culture purveyors actively worsening culture on the margins or merely catching freefalling paper money from gusts of air? The demand is already there, so why not cash in? And there’s still another question: Would the “unseen” alternative entrepreneurs be better in these respects or worse? Again, if the demand (read: Yetzer Hara) is there, a Nisayon can neither help nor hurt.

And if that’s all wrong, where does it end? With actual Lifnei Iver, or earlier?

Media is a business, too, by the way.

Businessmen didn’t make anyone believe in anti-property “environmentalist” woo. They may themselves agree or disagree with it (they don’t understand it, nor care about it much, as it happens!). But they do firmly intend to make money off of the actual consumers, before, after, or during whatever beliefs, crazes, or notions are present, regardless, be it imperialism, Mussar, Rabbi X, tobacco, communism, book X, tulips, crosswords, religion X, whatever. Isms are just altered demand, product differentiation, and the costs of doing business.

If and when (and where!) the backlash against racism/socialism/environmentalism/militarism/protectionism/etc. comes, you can be sure those businesses who reverse the trend will be rewarded, again. Which they know. So they will. Greenwashing is just one illustration.

I’ll use shortened excerpts from Wikipedia on Greenwashing to spur thought (footnotes left out):

Evidence that an organization is greenwashing often comes from pointing out the spending differences: when significantly more money or time has been spent advertising being “green” (that is, operating with consideration for the environment),than is actually spent on environmentally sound practices. Greenwashing efforts can range from changing the name or label of a product to evoke the natural environment on a product that contains harmful chemicals to multimillion-dollar advertising campaigns portraying highly polluting energy companies as eco-friendly… While greenwashing is not new, its use has increased over recent years to meet consumer demand for environmentally friendly goods and services… Many corporate structures use greenwashing as a way to repair public perception of their brand.
Greenwashing is just marketing. Marketing itself can be fraudulent or not. Wikipedia, reflecting our age, obscures the chasm between the two:
Why do they do this? “[A] study found that 77% of people said the environmental reputation of the company affected whether they would buy their products.”
The problem is compounded by lax enforcement by regulatory agencies such as the Federal Trade Commission in the United States, the Competition Bureau in Canada, and the Committee of Advertising Practice and the Broadcast Committee of Advertising Practice in the United Kingdom.
Right! Mathematically speaking, how does “lax enforcement” compound anything?! Doesn’t “compound” mean to multiply? Ah, they mean by moral hazard. So what else is new?
Critics of the practice suggest that the rise of greenwashing, paired with ineffective regulation, contributes to consumer skepticism of all green claims, and diminishes the power of the consumer in driving companies toward greener solutions for manufacturing processes and business operations.
Guess what? Why don’t you create competing consumer report certification (like Hechshers), instead of pushing tyrannical regulation?
Here’s a start:
Companies may pursue environmental certification to avoid greenwashing through independent verification of their green claims. For example, the Carbon Trust Standard launched in 2007 with the stated aim “to end ‘greenwash’ and highlight firms that are genuine about their commitment to the environment”.
I hope it’s private.
In addition, the political term “linguistic detoxification” describes when, through legislation or other government action, the definitions of toxicity for certain substances are changed, or the name of the substance is changed, so that fewer things fall under a particular classification as toxic. The origin of this phrase has been attributed to environmental activist and author Barry Commoner.
This is unrelated!
Now that you bring it up, however:

A small-time criminal breaks the law. A medium criminal bypasses the law. A major criminal perpetrates his crime by means of the law.

By the way, this is how the absolutely 100% pure, distilled, water bottle industry gets to add sugar, etc. to their fresh, sparkling, untouched water welling from wells in an exotic, untouched location.
Some examples:
The term greenwashing was coined by New York environmentalist Jay Westervelt in a 1986 essay regarding the hotel industry’s practice of placing placards in each room promoting reuse of towels ostensibly to “save the environment.” Westervelt noted that, in most cases, little or no effort toward reducing energy waste was being made by these institutions—as evidenced by the lack of cost reduction this practice effected. Westervelt opined that the actual objective of this “green campaign” on the part of many hoteliers was, in fact, increased profit. Westervelt thus labeled this and other outwardly environmentally conscientious acts with a greater, underlying purpose of profit increase as greenwashing.
Genius! Improve your corporate image by guilt-tripping customers into saving you money via degrees of personal physical discomfort!
Environmentalists have argued that the Bush Administration’s Clear Skies Initiative actually weakens air pollution laws.
Surprise, surprise! Let’s go pass another law to fix that law!
Many food products have packaging that evokes an environmentally friendly imagery even though there has been no attempt made at lowering the environmental impact of its production. In 2009, European McDonald’s changed the colour of their logos from yellow and red to yellow and green; a spokesman for the company explained that the change was “to clarify [their] responsibility for the preservation of natural resources.”
Love it!
Environmental accounting can easily be used to pretend that environmental impacts of a company are reduced while actual impacts increase. This has been shown, for example, in a case of corporate carbon accounting: the company celebrated reduced relative emissions while absolute emissions increased. The same company achieved reducing current emissions by “correcting” past emissions as higher (effecting a calculation that presents current emissions as relatively lower).
Whoever said bookkeeping is boring?! For many more fun examples, consult the original Wikipedia article.
And here, courtesy of Wikipedia, is a great practical guide to Greenwashing:
According to the Home and Family Edition, 95% consumer products claiming to be green were discovered to commit at least one of the “Sins of Greenwashing”. The Seven Sins of Greenwashing are as follows:
  1. Sin of the Hidden Trade-off, committed by suggesting a product is “green” based on an unreasonably narrow set of attributes without attention to other important environmental issues.
  2. Sin of No Proof, committed by an environmental claim that cannot be substantiated by easily accessible supporting information or by a reliable third-party certification.
  3. Sin of Vagueness, committed by every claim that is so poorly defined or broad that its real meaning is likely to be misunderstood by the consumer.
  4. Sin of Worshiping False Labels is committed when a claim, communicated either through words or images, gives the impression of a third-party endorsement where no such endorsement exists.
  5. Sin of Irrelevance, committed by making an environmental claim that may be truthful but which is unimportant or unhelpful for consumers seeking environmentally preferable products.
  6. Sin of Lesser of Two Evils, committed by claims that may be true within the product category, but that risk distracting consumers from the greater environmental impact of the category as a whole.
  7. Sin of Fibbing, the least frequent Sin, is committed by making environmental claims that are simply false.
There is so much to say here. Let’s just comment on the second-to-last one. Either the product “category” is being bought anyway or it isn’t!
Enough for now.

America’s Next Depression: Right on Schedule

Janet Yellen: False Prophet of Prosperity

By 

Ron Paul Institute

July 12, 2017

Federal Reserve Chair Janet Yellen recently predicted that, thanks to the regulations implemented after the 2008 market meltdown, America would not experience another economic crisis “in our lifetimes.” Yellen’s statement should send shivers down our spines, as there are few more reliable signals of an impending recession, or worse, than when so-called “experts” proclaim that we are in an era of unending prosperity.

For instance, in the years leading up to the 2008 market meltdown, then-Fed Chair Ben Bernanke repeatedly denied the existence of a housing bubble. In February 2007, Bernanke not only denied that “sluggishness” in the housing market would affect the general economy, but predicted that the economy would expand in 2007 and 2008. Of course, instead of years of economic growth, 2007 and 2008 were marked by a market meltdown whose effects are still being felt.

Yellen’s happy talk ignores a number of signs that the economy is on the verge of another crisis. In recent months, the US has experienced a decline in economic growth and the value of the dollar. The only economic statistic showing a positive trend is the unemployment rate — and that is only because the official unemployment rate does not count those who have given up looking for work. The real unemployment rate is at least 50 percent higher than the manipulated “official” rate.

A recent Treasury Department report’s called for rolling back of bank regulations could further destabilize the economy. This seems counterintuitive, as rolling back regulations usually contributes to economic growth. However, rolling back bank regulations without ending subsidies like deposit insurance that create a moral hazard that incentivizes banks to engage in risky business practices could cause banks to resume the unsound lending practices that were a major contributor to the growth, and collapse, of the housing bubble.

The US economy is already faced with several bubbles that could implode at any time. These include bubbles in student loans and automobiles sales, and even another housing bubble. The most dangerous of these bubbles is the government bubble caused by excessive spending. According to a 2016 study by the Mercatus Center, at least four states could soon join Puerto Rico and Illinois in facing bankruptcy.

Of course, the mother of all government bubbles is the federal spending bubble. Despite claims of both defenders and critics of the president’s budget, neither President Trump nor the Republican Congress have any plans for, or interest in, reducing spending in any area. Even the so-called cuts in Medicare and other entitlement programs that have generated such hysterics are not real cuts, but “reductions in the rate of growth.”

Some fiscal conservatives are praising the administration’s proposal to finance transportation spending via government bonds. However, the people will eventually have to pay for these bonds either directly through income taxes or indirectly through the inflation tax. Government-issued bonds harm the economy by diverting investment capital away from the private sector to the “mixed economy” controlled by politicians, bureaucrats, and crony capitalists.

If Congress continues to increase spending and the Federal Reserve continues to facilitate that spending by monetizing the debt, Americans will face an economic crisis more severe than the Great Depression. The crisis will likely result from a rejection of the dollar as the world’s reserve currency. Those of us who know the truth must redouble our efforts to ensure a peaceful transition away from the Keynesian system of welfare, warfare, and fiat currency to a society of peace, prosperity, and liberty.

From Lewrockwell.com, here.

Better First Aid for Child Molestation

What is the first thing a Jew must do in case of sexual child abuse? Call the cops! Of course.

But as a Jew who believes that the police should not exist in their current, public form, this doesn’t inspire enthusiasm. How are the police doing in all other areas…? The only reason to use their services is that the only choice is between that and nothing. If, and when, competing, private security firms and courts are decriminalized and unhampered, government excesses and shortcomings in this area become unforgivable.

This includes:

So what?

So going to the police will not always be the right move, and, even in the present time, perhaps not in every country on the globe. If you can wrangle something other than sterilization and\or welfare until parole, this might be the answer.