fil-ter

The taxpayer bill for Monday’s presidential plane flight over Manhattan was $328,835.

Just as General Motors has in effect subsidized Big Oil by continuing to build gas-guzzlers in recent years, so has the USPS continued to subsidize Big Mail by shaping its operations to encourage what it now calls, revealingly, “standard mail”—that is, advertising junk mail. Most American citizens are blissfully unaware of the degree to which USPS subsidizes U.S. businesses by means of the fees it collects from ordinary postal customers. For example, if you wish to mail someone a large envelope weighing three ounces, you’ll pay $1.17 in postage. A business can bulk-mail a three-ounce catalog of the same size for as little as $0.14.

… [The USPS] has a vast, fixed-cost infrastructure that includes a massive footprint of 38,000 buildings. Its bloated payroll of 800,000 employees—third only to the Department of Defense and Wal-Mart—makes up a whopping 80 percent of its operating expenses (UPS and FedEx spend between 37 and 51 percent). The USPS has tried to pare down its payroll, but the power of the unions has made that very difficult. From senior management down to unionized letter carriers, USPS employees are grossly overpaid compared to any government or private enterprise of its kind, foreign or domestic. This is largely why no matter how much labor-saving technology the USPS buys to service “standard” mail, it seems to have little impact on its labor costs.

(via kottke)

If you want a recipe for how to shut down an economy, just read what the early Ming emperors did. They nationalized foreign trade. They forbade population movements within the country, so villagers weren’t allowed to migrate to towns. They forbade merchants from trading on their own account without specific permission to do specific things. You had to actually register your inventories with the imperial bureaucrats every month, that kind of thing. And they did the usual idiotic thing of building walls, invading Vietnam.

Ridley wrote one of my favorite books, the Red Queen.

The president of the U.S. would like to see greater economic efficiency in the U.S. as a whole. Individual congressmen, however, will push for pork-barrel legislation that benefits their district even if the cost to the overall economy is hundreds of times greater than the benefit (their constituents will pay 1/435th of the cost and receive 100 percent of the benefit). This leads to a perennial conflict between the president and Congress.

Unions or cartels of businesses slow an economy’s response to change because they require the assent of many members in order to effect a change. This makes wages and prices much stickier than in a classical free-market economy. Unions will negotiate agreements that favor senior workers at the expense of junior members and young people just entering the workforce.

Olson would not be surprised by the current auto industry bailout: “Special-interest groups also slow growth by reducing the rate at which resources are reallocated from one activity or industry to another in response to new technologies or conditions. One obvious way in which they do so is lobbying for bail-outs of failing firms, thereby delaying or preventing the shift of resources to areas where they would have a greater productivity.”

Special interest groups create complexity, by getting special rules established for their benefit, and thrive on complexity. If a tax or tariff code were only three pages long, an average citizen would be able to spot the sweetheart deals. If a code runs to 1000 pages, however, nobody will ever understand all of it.

Special interest groups may create government regulation. Prior to the Ford Administration’s mid-1970s push to deregulate railroads, trucking, and airlines, for example, the U.S. government was very effective at ensuring profits and excluding new entrants to the market.

Long, depressing, but worth a read. A conclustion

What practical advice can an individual citizen draw from this book? On the surface, it would seem to be a useful investment guide. Short New York and California; go long on Alaska and Hawaii. Invest in countries that have recently gone through a revolution or are recovering from an invasion (Cuba? Iraq?). One problem with the latter strategy is that instability itself makes it tough for an investor to make money. Only in hindsight do we know that World War II was the last war to rage through France and Germany during the 20th Century or that Red China’s conversion to running dog capitalism would last for decades.

How about as a guide for voting? Olson suggests that a rational voter should remain as ignorant as possible about politics and policies. Even if special interests manage to siphon off 80 percent of the voter’s income, the voter is better off devoting his or her energy to earning more rather than attempting to change the system (likely to require full-time effort, reducing income to $0, and be futile because the voter has no money compared to the special interests). If we ever had the opportunity to vote for something that would restrict the influence of lobbyists and special interests, we should do it, but Olson would predict that such an opportunity will never arise.

One thing an individual can do is choose where to live and in which industry to work. The logical conclusion from reading this book is to prefer a new state to an old state, a newly stable state to a long-stable state, and a new industry to an old one. The worst thing that a young person could do, for example, would be to move to Michigan to work for G.M.’s automobile division. The second best thing would be to move to Alaska or an up-and-coming foreign country and work to extract some new kind of energy. The very smartest choice would be to move to Washington, D.C. and work as a lobbyist for a decaying industry that is bleeding the U.S. economy and taxpayer…

Some good information on why the American train system is so pathetic.

The American passenger rail—once a model around the globe—is now something of an oddball novelty, a political boondoggle to some, a colossal transit failure to others … In 1960, U.S. rail travelers logged 17.1 billion passenger miles (the movement of one passenger one mile), the standard measure of a system’s reach; by 2000, that number had fallen to 5.5 billion, just one percent of the total travel between U.S. cities that year. (Of course, over this same period, airlines’ passenger miles increased 16 times; even intercity buses’ service nearly doubled.) Most of this decrease was seen in the 1960s, as highways and air travel took precedent both in travel plans and in government subsidies. Since its ill-fated formation as a quasi-public, for-profit corporation in 1971, Amtrak has seen only meager growth and loses billions of dollars annually.

The reasons for Amtrak’s bad reputation are totally damning—its service is neither practical nor reliable. Impractical because most of the time, it’s cheaper and faster to drive or fly. Unreliable because more often than not, the trains are really, really late. There are stories of 12-hour delays on routes that would take six hours to drive; of breakdowns in the desert; of five-hour unexplained standstills in upstate New York. Then there’s the mother of all Amtrak horror stories: a California Zephyr that stopped dead on its tracks for two full days, victim of both an “act of God” (as corporate legalese wisely defines a landslide on the tracks) and gross staffing negligence.

… The company, too poor to own nearly any of the rails that it runs on, operates on borrowed infrastructure, using tracks owned by private freight companies who are legally bound to let Amtrak roll on their rails, but little else. Meaning that when a freight train needs to get by, Amtrak waits. Thus the delays, which begin to pile up.

I didn’t understand how messed up the structure of Amtrak really was. It seems like they have the worst of both worlds:

… [Amtrack] is entirely owned by the U.S. government, funded at the government’s discretion, and has its leadership appointed by the president and subject to Senate approval, it still has a mandate to achieve profitability and financial independence. In essence, it is a private company wholly owned and operated by government bureaucracy.