Random Thoughts: Private vs Public Ownership

As my friends know, I tend to run quite a lot. A few days ago, after the snowstorm, I was running through my neighborhood. The roads were already cleaned, and the sidewalks were clean too. Well.... with a few small exceptions. All sidewalks in front of private homes were cleaned, but whenever I had to pass by a small park, green acres or city lot, it was snowy and slushy and had to jump on the road or step in deep snow.

This is a basic economic principle: private owners take better care of property than public owners (the city, the state or the feds). Private ownership is the key to higher living standards, not government control. Ever thought why ALL wildfires are starting on public lands? And I said it's an economic principle, not a political one, because this is not just about the government. It's simply about private ownership vs. the rest. Another example: while there is an endless supply of goldfish, the whales are often considered an endangered species. Why? Because goldfish are privately raised and sold, while whales are a common resource. It's private owners that are vested into preserving a resource.

Healthcare spending with other people's money

Prof Mark Perry found a very good explanation to the rising healthcare costs

According to Dr. David Gratzer of the Manhattan Institute, in 1960 about half of health-care expenditures were directly controlled by consumers. Today, it is about 15%. Over the same period in which consumers have relinquished control, per-capita health-care spending has quintupled and costs have skyrocketed.

He then suggests the following example:

Now imagine how your spending on food, travel, clothing, automobiles, cell phone plans, housing, etc. would change if you only paid 15% of the total cost out-of-pocket.
1. You'd eat a lot better, and so would your dog, e.g. you'd both eat a lot more steak.
2. You'd always travel first-class.
3. You'd get a Jaguar instead of a Ford Focus, or you'd get 2 Ford Focuses instead of one.
4. You'd get 2,000 minute per month plan, instead of a 500 minute plan.
What would happen to the prices of food, cars, etc.? Up, Up, Up.

And another interesting quote from PJ O'Rourke: If you think health care is expensive now, wait until you see how much it costs when it is free.

The Myth of Scandinavian Wealth

In a New York Times article titled We're Rich, You're Not. End of Story, Bruce Bawer (a Times contributor currently working in Norway) debunks the fairy tale of Nordic states abundance:

In Oslo, library collections are woefully outdated, and public swimming pools are in desperate need of maintenance. News reports describe serious shortages of police officers and school supplies. When my mother-in-law went to an emergency room recently, the hospital was out of cough medicine. Drug addicts crowd downtown Oslo streets..... After I moved here six years ago, I quickly noticed that Norwegians live more frugally than Americans do. They hang on to old appliances and furniture that we would throw out. And they drive around in wrecks. In 2003, when my partner and I took his teenage brother to New York - his first trip outside of Europe - he stared boggle-eyed at the cars in the Newark Airport parking lot, as mesmerized as Robin Williams in a New York grocery store in "Moscow on the Hudson."..... Even the humblest of meals - a large pizza delivered from Oslo's most popular pizza joint - will run from $34 to $48, including delivery fee and a 25 percent value added tax. Not that groceries are cheap, either. Every weekend, armies of Norwegians drive to Sweden to stock up at supermarkets that are a bargain only by Norwegian standards. And this isn't a great solution, either, since gasoline (in this oil-exporting nation) costs more than $6 a gallon.

Mr. Bawer mentions a study which ranked the 50 US states and 15 EU members based on GDP and purchasing power. Here are some of the results:

The only European country whose economic output per person was greater than the United States average was the tiny tax haven of Luxembourg, which ranked third, just behind Delaware and slightly ahead of Connecticut. The next European country on the list was Ireland, down at 41st place out of 66; Sweden was 14th from the bottom (after Alabama), followed by Oklahoma, and then Britain, France, Finland, Germany and Italy. Alternatively, the study found, if the E.U. was treated as a single American state, it would rank fifth from the bottom, topping only Arkansas, Montana, West Virginia and Mississippi.

There is an explanation for these rankings:

Economic growth in the last 25 years has been 3 percent per annum in the U.S., compared to 2.2 percent in the E.U. That means that the American economy has almost doubled, whereas the E.U. economy has grown by slightly more than half. The purchasing power in the U.S. is $36,100 per capita, and in the E.U. $26,000 - and the gap is constantly widening.

And there is another report from the international accounting company KPMG, which took into account actual disposable income (after taxes) and adjusted cost of living.

Scandinavians were the poorest people in Western Europe. Danes had the lowest adjusted income, Norwegians the second lowest, Swedes the third.

More on how the Government Encouraged the Mortgage Crisis

There are two articles in today's press about the roots of the mortgage crisis.

Thomas Sewell summarizes these causes in an interview:
The government has brought on the housing problem, partly by these very low interest rates, which encouraged many people to go way out on a limb. They’ve brought it on by highly restrictive building policies, which have caused housing prices to skyrocket artificially. And they’ve brought it on by the Community Reinvestment Act, which presumes that politicians are better able to tell investors where to put their money than the investors themselves are. When you put all that together, you get something like what you have.

In the NY Post, Stan Leibowitz goes further into investigating that last element - The Community Reinvestment Act, which mandates lenders to not discriminate borrowers based on the income level. It encourages loans to subprime lenders, alleging discrimination against them. He points out that there was one lender which was praised by community activists as a "paragon of nondiscriminatory lending". Its name? Countrywide.