2010-05-26

You MUST Sell Us Your Product, Or Else!

See this article for reference.

I am no fan of the FTC, but this is beyond the pale. In testimony to Congress, FTC Chairman Jon Leibowitz that deals between brand and generic manufacturers cause "enormous" consumer harm.

For those of you outside the industry, here's how it works.

A brand drug manufacturer has a HUGE drug, making billions of dollars of revenue per year. Everyone loves this drug, it solves an important and widespread health problem in our lives. Near the end of the drug's patent life, the generic manufacturers start purchasing the active ingredients and get ready to send out huge shipments of a generic version of the drug.

Ordinarily, once the patent expires, pharmacists start substituting the cheaper generic drug so that consumers don't have to pay as much for the same pill. But in some cases, the brand company says to the generic company, "Hey buddy... Why don't I pay you a couple of billion dollars to just hold off on production for a little while? You get money, I get money, everyone's happy." So that's what happens.

Somehow, the FTC believes that this is not a fair and legitimate business practice. In the FTC's telling of the story, as soon as a generic company can produce a drug, they are OBLIGATED to sell it! Otherwise consumers lose big!!! Nevermind that consumers love the brand drug. Nevermind that it solves our health problem. Nevermind that neither the brand companies nor the generic companies are unhappy with the way things are.

No, instead generic manufacturers must be forced to forego legitimate business deals so that they can start cranking out cheapies for Jon Leibowitz.

I don't know what to call this, other than Whore Culture. Everyone believes that everyone else exists solely to pleasure themselves.

2010-05-21

Follow Up: What Me Worry?

I find it somewhat interesting that this week's Export Development Canada Weekly Commentary was written by former EDC chief economist Stephen Poloz. Poloz was reportedly a potential candidate for president of the Bank of Canada just a couple of years ago. He has since moved to SVP of EDC's Financial Products Group. Since then, Peter Hall has taken Poloz' place.

What is interesting is that, as I indicated last week, Hall's take on the issue in general was so objectionable. I felt so strongly about this (and I still do) that I was compelled to reason that the economics profession doesn't even know what it's referring to anymore these days.

And yet, Poloz, who I have had the pleasure of having heard give speeches and press conferences, and to have met meet a couple of times (although he would not remember me), summarizes the entire economic recession perfectly:
For about six years running, U.S. consumers spent their entire income and as much money as they could borrow. This was facilitated by very willing bankers. The result was a global spending boom that lasted long enough to become seen as a trend, and a financial bubble that fed speculation in almost every financial market on Earth. American consumers will not correct these excesses very quickly – it will take years, and now everyone is paying the price in the post-bubble world.
Virtually no one other than the good people at The Ludwig von Mises Institute have told the story so simply and accurately. For the record, Stephen Poloz is an incredibly witty man, and one of the most knowledgeable economists I've ever met, and this week's commentary is a great demonstration of his acumen.

I'm posting this on my blog first in the interest of fairness: if EDC says something stupid one week, they might very well redeem themselves of that stupidity the following week. (Although, as an instrument of corporate welfare, they have a long way to go before they are completely redeemed.) Second of all, I think it's important to show evidence that there are smart people out there, too. Third, it really is a good synopsis of the recession.

2010-05-18

Prices vs. Inflation

If the word inflation ever had a coherent economic definition at any time in history, which is doubtful, that defintion has been completely obscured. Now, the word is utterly meaningless. I don't want to bore you with economic jargon, nor do I wish to pontificate. In this case, a simple case study of the pharmaceuticals market will suffice.

PharmaTimes reports:
US prices rises for brand-name prescription drugs rose 9.7% in the 12 months ending March 2010, against general inflation which was nearly flat (0.3%), says a leading advocacy group.

It does not take a rocket scientist to understand what the AARP is getting at here. They view the prices for branded pharmaceuticals as having increased "too much," because the rate of price increases in that market significantly out-paced one of the official inflation metrics.

But if 0.3% is the rate of general inflation, then it stands to reason that this 9.7% increase in the prices of branded pharmaceutical products was off-set by a corresponding decrease in some other segment of the economy. Indeed, just a couple of paragraphs later in the article, we learn (emphasis added):
Price increases for specialty drugs were almost as high, at 9.2% over the period, while the prices of generics fell 9.7%, the group adds.
Clearly prices within industries and across industries all rise and fall at varying rates. General inflation is simply an estimate of the weighted-average change in all prices within an economy. No economist with a head on his/her shoulders would ever claim that a 0.3% rate of general inflation "will" or "should" correspond to a 0.3% increase in absolutely, positively every segment of the economy, according to the breakdowns conducted by all advocacy groups at large.

The "issue" of inflation has always been political as opposed to economic. "Advocacy groups" such as the AARP understand that if any one price increase exceeds the rate of general inflation, they can make the businesses who took the price increase look scary, mean, and bad. They want you to forget that metrics like the Consumer Price Index seek to estimate, and not define, general inflation.

It is important to remember that the natural state of the economy is such that prices are rising and falling constantly. You can see this easily by tracking the price of common stocks on the New York Stock Exchange over the course of one hour (nevermind one day, one week, one month, etc.). Prices are neither static nor do all prices rise and fall by the same rate in unison.

I would say that it is stupid and childish to believe that all prices move the same way at all times, but no one really believes that. These things are just political issues drummed-up by advocacy groups to scare us and to demonize those of us who produce medicine, oil, Chinese imports, or whatever the evil business du jour is.

Don't be fooled.

2010-05-14

Long on Motl

Physicist Lubos Motl, who maintains a fantastic science and politics blog that I am sure you have already come across by now, makes some great points about where debt comes from. Specifically, he blames ordinary people, and frankly, he's right.
It's very clear that it is the "ordinary people" who have ultimately spent most of the money. They were getting higher pensions or more expensive "free" health care than what the nation has produced. It is also the ordinary - and not only ordinary - people who will have to pay the debt. The decisions to make the spending was made by the politicians but the politicians were just doing whatever was needed to preserve their support by the public: in democracy, the politicians must be understood as doing what the people actually want, at least in the long run.
I must say that it is very refreshing to see someone accept responsibility for widespread public debt. It is not just "the fat cats on capitol hill," it is you and I who saddle ourselves with unsustainable socialist programs.

BONUS CONTENT:

NoodleFood's Diana Hsieh points to a rather disturbing YouTube video, seen below:



Politically, there is a lot going on here. I'm going to do my best to sum up in bullet points (a more thorough treatment of this issue is a good idea for a likely forthcoming blog post.
  • Last month, Maclean's Magazine covered a rising pro-Hitler sentiment popping up throughout the world. I was skeptical of the article, because it seemed to depict all far-right conservatives as neo-Nazis. This kind of depiction is, of course, a common leftist bromide. I'm no right-winger, but it's easy to see the fault in that line of criticism. My skepticism led me to conclude that there was no rise in pro-Hitler sentiment. As the young woman in the above video demonstrates, I was clearly wrong. It's not just skinheads anymore, it is also some in the extremist Muslim community. (Clarification: Here I am talking about the "extremist Muslim community" as opposed to the "extremist Muslim community." Note the difference. Not all Muslims are extremists, just as not all members of any other group are extremists.)
  • It is atypical of self-proclaimed Objectivists to delve into the Muslim extremism issue at all. I consider myself an Objectivist, and I've always felt like dwelling on Islamic extremism is a very poor way of making a point about racism, collectivism, and despotism. These evils are universal. They do not have greater prevalence in the so-called "Muslim world." When we dwell on these things, we are basically endorsing the Bush world-view, which states that "terrorism" is something easy to define with a clear line of demarcation, and it must be fought. "Terrorism" is nonsense. If you kill someone you are a murderer; if you kill lots of people, you are a mass-murderer. The motive is irrelevant. Murder is murder. "Terrorism" is a term intended to politicize certain kinds of murder in order for governments to obliterate our human rights. It is disturbing to see the Bush Doctrine infiltrating the Objectivist community. But then again, there isn't supposed to be an Objectivist community in the first place, as collectivism and Objectivism are antithetical.
So there is a lot going on here. Clearly, endorsement of genocide is the most despicable sentiment a person can express. It is pure hatred. The woman in this video is crazy. At the same time, I also object to the ongoing attempts of conservatives (and now libertarians?!) to set Muslim extremism apart from the rampant hatred, racism, and dictatorial collectivism found in virtually all political ideologies these days.

Society is in desperate need of a philosophical "reset." We are all losing our way. We need to drop our assumptions and start from square one again. The warning signs are now everywhere.

2010-05-13

What, Me Worry?

Export Development Canada's Peter Hall, in his latest Weekly Commentary, regurgitates the predominant world view. While he makes a number of fuzzy points, he sums it up quite well in his trademark "bottom line:" (Emphasis added.)
The bottom line? Ongoing bailouts are a key sign that we are not yet through the economic downturn. Paying for the bailouts will signal recovery, and remind us of this downturn for a long time to come.
You have to feel a little sorry for these guys. They're trapped. To suggest that monopoly money is not a viable solution to a global recession will get you ostracized right out of the profession. As Hall puts it, "we all became Keynesians again." So in a sense, he's trapped; even if he had a free market head on his shoulders, the economics profession is such that speaking the pure and simple truth gets you labelled an extremist.

This is dangerous. I truly believe that, deep down, everyone knows that free markets are the only way to fly. But these people in the economics profession have been sucked into a technical muck so deep that they no longer understand what their own equations are supposed to mean anymore. They can't demonstrate free market superiority using equations, so they can't make a "credible" argument against Keynesianism.

This is what the socialists wanted all along. Socialists will always try to dazzle you with unintelligible linguistic non-sequitur debates. After a while they just become exhausting. You have to give up on the debate because you inevitably lose sight of how each subsequent polylogistic non sequitur relates to your original point. Socialists have been engaged in this kind of "debate" since the days of Marx. It's a game to them - they don't really believe it, because there's nothing to believe. The game is only to prove the folly of the free market. They never wanted to replace liberal philosophy with anything viable, they just wanted to exhaust the competition and take control of everything.

Now even free marketeers like Peter Hall can't even keep up. He sadly tries to follow along with the mishmash of senselessness that is Keynesian socialism. Here's an example:
The truth is now clearer: overnight, small surpluses and single-digit deficits became whopping, double-digit monoliths in the US, Japan and the UK, and both France and Germany strayed well away from the 3% Maastricht deficit target for the Eurozone.
Note the alarming phrase "single-digit deficits." A single-digit deficit is a budget shortfall of between 0 and 9 dollars. But that's not what Hall means. Hall means "single-digit-as-a-percentage-of-something." Every socialist economic statistic is expressed as a percentage of something. For example, sales taxes are considered regressive because they are regressive as a percentage of disposable income. Single-digit deficits probably mean single-digit annual deficit growth. In other words, our problems were always getting worse every year, but only by a compounding factor of 9%. What does that even mean? It is socialist nonsense. Compounding budget deficits are a serious problem! We know that now because we just watched Greece's monetary system virtually collapse into the sludge of "stimulus bailout packages."

But as the above quote points out, this very real, simple, tangible point is muddled by Keynesian terminology. We now no longer have the linguistic tools to criticize the underlying problem, which is deficit spending. Instead, we have to accept some "safe" level of deficit spending. In Hall's case, I suppose that "safe" level is anything less than 10% annually, i.e. "single-digit deficits."

Hall's proposed solutions also tow the party line:
IMF projections have debt as a share of GDP escalating in most G-7 nations beyond the critical 90% level by 2013, with the US nudging above 100% and Japan at an unthinkable 240%. Talk of ratings downgrades is circulating, adding to the growing unease. Worry is warranted, but only to a point. In contrast with emerging markets in the same straits, these economies have much greater ability to raise taxes, far deeper domestic capital markets, and significantly lower levels of political risk, among other factors that greatly increase their capacity to manage higher debt levels.
Even as the industrialized world's ability to produce anything collapses in our faces, our best economists are prescribing higher taxes, an expansion of government welfare services, and higher levels of debt!

We need to start asking ourselves some fundamental questions. Why are some of us convinced that a larger, more expensive government is the solution to an economic crisis? What is behind this line of thinking? So many of us feel this way that they can't simply be dismissed as power-hungry people who want to control our lives. So what is this idea based on?

How can printing money and expanding the government be taken seriously as a viable measure toward stabilizing our economies? Seriously? Is this where we're headed?

2010-05-10

Racism


Racism is the lowest, most crudely primitive form of collectivism. It is the notion of ascribing moral, social or political significance to a man’s genetic lineage—the notion that a man’s intellectual and characterological traits are produced and transmitted by his internal body chemistry. Which means, in practice, that a man is to be judged, not by his own character and actions, but by the characters and actions of a collective of ancestors.

I really think this is the most comprehensive damnation of racism ever written. The reason for this is that it covers not just "being judgemental against another race," but also because it covers a more modern aspect of racism, which I will attempt to explain.

One of the remarkable things about Ayn Rand was that so many of her predictions have come true. Rand viewed issues from what she saw as their philosoophical roots. She wrote the above statement during the American Civil Rights Movement of the 1960s, but she was practically alone in offering words of warning even as she praised the concept of equal rights.

See, racism is more than just being prejudiced against other cultures. True racism strikes at the heart of how we conceive of other human beings. It is racism to believe that a white woman in Germany will never truly be able to understand the essential life experiences of a black man in Liberia. While it is true that these two individuals have had vastly different life experiences, it is pure, ugly racism for either person to believe that the other is incapable of understand the other.

Likewise, it is racism to believe that one is "more at home" among "one's kind" than among people of a different race or cultural background. True, there are certain aspects of one's personality that are best understood by people who share that in common. However, it is a terrible crime against oneself to value one's cultural background more than one's individual character traits. For example, sharing a meal with friends will always be more important than the type of food you choose to put at the table. More tragic still is the belief that your friends will never appreciate dinner if you serve them your favorite "soul food."

Finally, I would like to go on the record as saying that it is my belief that people have intellectualized racism to the point that they can no longer see it in themselves. Our society talks so much about examples of racism committed by others that we have completely erased our own ability to see ourselves committing more subtle forms of racism. In this day and age, we need to get away from perceiving racism as klan-rallies and name-calling. We need to recognize the kind of racism Rand predicted, which involves seeing ourselves as members of a genetic club, and believing only those who belong to the club can understand the important parts of us.

Human beings are not so stupid, and polylogism is nonsense. We all share the human experience.

2010-05-07

A Heroic Being


My philosophy, in essence, is the concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute.

-- Atlas Shrugged

Another optimistic quote today. Because she could be snarky, Rand often turned people off. It takes a little more patience to understand how much faith in human beings she had. She believed we could all be heroes in our own life stories.

Also, I think some people are intimidated by Rand's ideas because she put such a large emphasis on "productive achievement as [one's] noblest activity." Some people feel that if they haven't achieved anything, then Rand's ideas are "judging them." Some people feel that not everyone is destined to make history. To a certain extent, they're right, but remember that we all get to set our own values. Your achievement is what you decide is worth striving for. For some, that might be writing a great book or becoming a great athlete or being rich. For others, it might be living a different kind of ideal life.

The best part is, you get to say what you value, and what a great achievement is to you! Living your life for the accomplishment of your own achievements, according to your own idea of a "perfect life," is what Rand's philosophy is all about. That's why it's such an uplifting message.

Performance and Achievement

A friend of mine sent me the following email:
Talking about sport activity/working out, Ryan’s example should be taken out of our sample!!!

His capabilities are beyond my comprehension :) I am happy that everyone is back on “sporty” track! Hopefully weather will cooperate :)
This was pretty glowing praise, considering that I'm a 30-year-old amateur who only works out to stay healthy and because I think it's fun. But it got me thinking a bit about what human beings are physically capable of.

I believe that everyone has the same capabilities. The only physical barriers any of us have are mental barriers in disguise. If you can overcome your mind, you can overcome your body. Years of competitive running beat that concept into my head repeatedly. I’ve seen people literally run to the point where they are unconscious. I’ve seen people run at the head of the pack on broken bones. I’ve seen people win races while bleeding. When you see that kind of stuff on a regular basis, you start to realize that a person is only ever competing with the voices inside their heads. If you can learn to ignore the voices, you can achieve things you never imagined.

So, to my friend and to the world, don't let a little dedication and hard work elude your comprehension. Look inside yourself and discover your own capabilities. You might surprise yourself by what you can do!

2010-05-04

Socialism Creates Dependency on the System

Interesting item in today's Ottawa Citizen:
The Lalibert├ęs were still out of luck though: Ottawa lacks a private pediatric clinic.... Their only hope was to seek assistance from the ministry’s Trillium program[.]
I suppose some deranged critic could suggest that it was a shortfall of private care that made this child a burden on the socialist system, but of course everyone knows that the public system is designed to crowd out the private system.
 
Private medical practice has been against the law in Canada for years. [Note: In Canada there is a distinction between private medical practice and a private medical clinic that operates within the public system.] That this child must beg for basic medical services from a government that professes to promise all its residents "universal" care is one of the many farces associated with socialist medicine.

Morality and Joy

"The purpose of morality is to teach you, not to suffer and die, but to enjoy yourself and live."
-- Ayn Rand

This is one of those Rand quotes that really highlights the level of joy and optimism in her philosophy. People have a tendency to believe that being moral and doing the right thing is a painstaking process of loading the mind up with heavy thoughts and then depriving oneself of something enjoyable.

In Rand's view, this was not morality. Rather, morality is a byproduct of rational clarity. If you know what really gives you joy in life, then you should simply embrace it and make it something that you pursue with abandon. There is never any need to hide from the things that give a person joy, or to pretend that one don't want them or need them.

The first step in Rand's world is to completely embrace whatever brings you happiness and accept it as a natural, happy thing. The second step is to focus on the long term: What will bring you the most happiness for the longest time, for the rest of your life? Your answer to that question is also the answer to the question "What should I do with my life?"

2010-05-03

More Anecdotal Evidence of Inflation

As The Wall Street Journal reports, some companies have begun to increase salaries and dole out raises, based on higher expectations for 2010.
Last year, many CEOs fretted that lean staffing during the recession would burn out employees and spark turnover once the job market improved, but they put very little money behind retention efforts. Instead, they cut or froze pay and made managers rely on no-cost rewards like thank-you notes. By January, employers had started to restore pay cuts and lift pay freezes.

Now, some firms are going a step further by accelerating the distribution of raises and awarding special bonuses to certain employees, say consultants and executives.
The article spends most of its time reasoning that these pay increases are a response to retention concerns and reflect rosier expectations. I pause to wonder aloud whether one can simultaneously address employee retention fears and engage in high expectations. Fear that one's employees will leave is not exactly a rosy expectation.

Wages, as we all know, are the Keynesian benchmark of stimulus efficacy. Now that wages are starting (or may have started) to increase, Paul Krugman can pat himself on the back. Meanwhile, unemployment continues to trudge through the trenches at 9.7%, nationally, and Robert Murphy at the Ludwig von Mises institute has noted some disturbing inflationary trends in bank reserves.

UPDATE:
The WSJ also reports that consumer spending rose twice as fast as incomes in the USA this March. So we continue to be deleriously drunk on stimulus money and refuse to invest our savings in a brighter future. The Keynesians are winning, but beware the crash.

Cellular Phones Versus Hot Soup

Six months into Ontario's ban on cellular phone use while driving, it is time to ask ourselves a simple follow-up question: Do we feel safer on the road?

Realistically, no, of course not. Knowing that it is illegal to drive while talking on a cellular phone has done nothing to improve my sluggish and frequently hazardous morning commute. At best, when I now see individuals driving while talking on the phone, I can take pointless comfort in howling at the road that said person is breaking the new law. Beyond that, my experience on the road has not changed.

More importantly, did we really expect that this law would make us feel safer? Really?

Comically, it is now more legal to drive while carrying an open container brimming with scalding hot chicken broth than it is to drive while using a cellular telephone. As I mention this, you the reader are most likely having one of two reactions.

"That's because no one drives while carrying hot chicken broth, so it isn't a problem! When people start driving with hot soup, then they'll make a law against that, too!"

This reaction represents that held by the probable majority in Ontario. The general idea is that as soon as something bothers us, we will outlaw it. Similar laws applying to snow tires, trans fat consumption, recycling, and plastic bags are either currently on the books or up for parliamentary debate. I will concede the possibility that any of the above legislative maneuvers are representative of "the right thing to do in life" as an individual making individual choices. But to outlaw them? Why are Ontarians so intent on outlawing whatever it is that they personally do not like? Is this really the solution? Have our lives become better as a result of any of this?

"You know what? You're right. We're taking this too far."

I hope there are a few Ontarians out there who have reacted this way. Banning cell phones from automobiles has not improved our lives. Driving poorly and causing accidents was already against the law, and we have full recourse to punish those people civilly and in some cases criminally. A cell phone ban does not contribute new legal recourse to the existing environment for motorists. It merely further erodes our civil liberties by expanding the existing Nanny State.

Perhaps some day we will learn to be less hasty with our lawmaking activities and focus on solving problems ourselves. Take myself for example: I am writing a blog to attempt win you over to my way of thinking; what I am not doing is arguing that the opposing side become outlaws.

Think about it.

2010-05-01

Morals and Rational Choice



Man has been called a rational being, but rationality is a matter of choice - and the alternative his nature offers him is: rational being or suicidal animal. Man has to be man - by choice; he has to hold his life as a value - by choice; he has to learn to sustain it - by choice; he has to discover the values it requires and practice his virtues - by choice.


In Rand's view, the alternative to a life based on logic and reason was the refusal to ever analyze one's decisions. Rand saw logic as part of what it means to be a human being. Rand saw logic as the means by which we all stay alive. If we don't reason that food will keep us alive, for example, then we will not eat.

But eating is an easy choice to make. There are more difficult decisions that require more thorough logical analysis: What should I study in school? Should I look for a new job? Are my friends taking advantage of me? Should I spend money now or save it for the future? Should I exercise today or slack off? Etc., etc....

That's not to say John Q. Public is a bad person if he makes a wrong choice. Rather, it simply means that John Q. Public should acknowledge the wrong choices he made and work to ensure he makes the right decision next time.