Woodstock : A Disturbing Truth

Well that remains to be proven, but it does point to something that I have been contemplating for a while. In the 60s and 70s, the then young baby-boomers provided this country with an idyllic explosion potentially leading to utopian future. The 60s and the 70s brought us an artistic renaissance, Woodstock, the hippie movement, flower power, Peace and Love, massive public involvement against the Vietnam War, and seminal books such as a Stranger in a Strange Land. The future looked bright and promising.

Forty years later, the baby-boom generation has emerged as the population segment in charge of this country. Instead of bringing a utopian society of love and peace we have become an ethically challenged society with a dysfunctional political system, out-of-control deficit spending, Bread and Circuses, continued war, loss of personal freedoms for national security, and "Greed is Good". So what happened to the baby boomers and their ideals?

Not unexpectedly, this thought has occurred to others. So I was amazed when I heard on the Hannity show of the documentary Generation Zero, were he interviewed David N. Bossie (the producer) and Steve K. Bannon (the Director). Regretfully, the Hannity interview, from my point of view, was garbage since Hannity only wanted to spew his anti-liberal agenda rather than present to the audience an understanding of why the baby-boomer generation went "bad".

Of course, it should be pointed out that this documentary was unveiled at the recently convened Tea Party/CPAC convention, which implies that it is unabashedly "right wing". Nevertheless, it raises the legitimate question, why and how did the baby-boomer generation loose the ideals of the 60s and the 70s and go "bad".

Generation Zero – Movie Review. According to the Generation Zero website:

"The current economic crisis is not a failure of capitalism, but a failure of culture. Generation Zero explores the cultural roots of the global financial meltdown - beginning with the narcissism of the 1960's, spreading like a virus through the self-indulgent 90's, and exploding across the world in the present economic cataclysm.

Generation Zero goes beneath the shallow media headlines and talking head sound bites to get to the source of today's economic nightmare. With a cutting edge style and haunting imagery, this must see documentary will change everything you thought you knew about Wall Street and Washington.

Featuring experts, authors, and pundits from across the political spectrum, Generation Zero exposes the little told story of how the mindset of the baby boomers sowed the seeds of economic disaster that will be reaped by coming generations."

Interestingly and also unexplored, why haven't any of the Vietnam War combat veterans risen to be elected president? We have a long history of electing presidents who were war heroes, such as Grant and Eisenhower. Instead we have elected Clinton, Bush, and Obama. The "natural" order of political progression seems to have skipped-a-beat?

I have not seen the full documentary, only the clips. The important point is the question of why the baby-boomer generation has apparently gone "bad". It is a critically important concern that must be explored. It is time for some serious self-examination.

Hopefully I will have an opportunity to view Generation Zero. I also hope to see Michael Moore's documentary "Capitalism: A Love Story". Between these two documentaries, I hope one can begin to understand how and why the baby-boomers became lost.

UPDATE: hetyd4580 provided a link a Generation Jones video. Very interesting and very applicable. The "good" news with the creation of Generation Jones, Obama is no longer a baby boomer! On the sad side, the generational leadership "torch" (with the election of Obama) is being passed from the baby boomers to Generation Jones. Please read hetyd4580 comments.

A Deserved Shout-Out to the Technology Liberation Front

I have expressed dismay over many of the recent posts at the Technology Liberation Front. So I was pleasantly surprised when I read Cord Blomquist's: “Special 301 Watchlist” Threatens Open-Source Software. In light of my prior criticisms, it is important for me to publicly acknowledge positive events when they occur.

Cord writes:

"That inclusion is being pushed for by the International Intellectual Property Alliance, an umbrella group which includes the MPAA and RIAA. This is, of course, a brazen move by US corporations to force these developing nations to use their expense proprietary software instead of the cheaper open-source alternatives available.

This is exactly the kind of things libertarians should abhore—government being co-opted by corporations so that policies can be made in order to defend their interests, instead of our rights."

The “Special 301 Watchlist” was also covered in Against Monopoly: "IIPA thinks open source equals piracy" and in the TechDirt article: "IIPA's Section 301 Filing Shows It's Really Not At All Interested In Reducing Copyright Infringement"

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Deficit Spending - Fiscal Insanity

The Washington Post reports that: "Obama has proposed a record $1.56 trillion deficit for fiscal 2010 ..." The Post then goes on to quote Obama as saying: ""It's easy to get up in front of the cameras and rant against exploding deficits. What's hard is actually getting deficits under control. But that's what we must do," Obama said." How can anyone (with a straight face) publicly propose a monumental deficit while simultaneously promising to get it "under control"??? If Obama were truly committed, propose a balanced budget now. This is insane.

Furthermore, the post quotes Obama as saying: ""Sometimes, particularly in tough times like these, you have to make hard choices about where to spend and where to save. That's what being responsible means. That's a bedrock value of our country. And that ought to be a value that our government lives up to as well," he said." The concern with this type of oratory fluff and empty rhetoric is that for whatever reason, it leaves open the door that we will never have a balanced budget since there will always be "tough times" (Reagan, Bush II, and now Obama have used this excuse) demanding Federal support to make the politicians look good.

Rising College Costs: A Federal Role?

The editor of the New York Times ask a legitimate question: Rising College Costs: A Federal Role? Like medical care, college costs have been rising. What bothers me is the apparent inability of some pundits to recongnize that subsidizing an activity, even one as laudable as a college degree for everyone, is - in the end - self defeating. Worse, the US is teetering on bankruptcy so where is this college aide supposed to come from?

As an example of a pundit not recognizing limits, Jane V. Wellman fancifully writes: "The states are broke, and they can’t continue to pay for the lion’s share of funding for higher education. So increasing federal need-based aid should be a top fiscal priority, and the Obama budget proposal is a good thing." So how is the Federal government going to provide financial assistance if it is broke too. Furthermore, even if the Federal government was able to provide financial assistance, where is this money going to come from? Taxes of course!

A fellow contributor to this debate, Patrick M. Callan partially noted the futility of subsidizing education: "These grants do not cause higher tuition, but runaway tuition undermines their effectiveness in supporting access for low income students." To me, Mr. Callan remarks is cutting hairs, similar to the argument concerning whether a cup is half full or half empty. Fundamentally, the simple large scale availability of "easy" money allows colleges to "test" higher tuition rates.

Another contributor, Arthur M. Hauptman, noted that: "If anything, more Pell Grants will lead to lower completion rates because more people are likely to give college a try but not all will finish."

A responder Buh-Bye, Ben Bernanke to the debate weighed in with an important observation, that the student loans are guaranteed by the government, therefore there is little risk to either the school or the financial institution in making inappropriate loans. As previously mentioned the availability of cheap money permits tuition to be raised.

MFF offers this observation: "The most fascinating thing is this: why is that neighboring Canada, where college is not free, is still capable of offering affordable university educations--and ditto for England, where college is also not free."

Elizabeth offers an interesting take, that I agree with: "No mention of outrageous sports budgets of colleges? Why not? Why not support intramural sports and scrap all of the rest? People will adjust. Is there really any reason to pay head coach multiple million dollar annual salaries/ packages etc.? Why are state supported colleges doing this? Is our country so off kilter that it is thought justifiable to use college educational funds in order to develop talent for our pro teams?" Seems to me that pro-teams should pay the schools for their draft picks and that the money should go towards student education.

Obviously my quotes have been picked to make the case that subsidizing college attendance results in ever higher tuition costs because fiscal constraints are removed. We also need to recognize that the money for subsidizing tuition assistance must come from somewhere. That somewhere is taxes. There are real limits, we need to recognize them and adjust our programs accordingly. To conclude, thisteensy, wrote: "Student loans are the worst thing that ever happened to higher education."

Reaganomics... the gift that keeps on giving.

The witty title comes from a post in the New York Times by Steven in California. The post by Steven is a comment on the New York Times article: Huge Deficits May Alter U.S. Politics and Global Power. It seems to me that our political leaders continue to disingenuously promise deficit reduction while proposing ever greater deficit spending.

The New York Times in an editorial even writes: "Mr. Obama is right that the recovery is too fragile to make deep cuts in government spending." The problem of course is that virtually every presidential administration in recent history has used that "fragility" excuse to avoid making the "hard" decisions they were elected to make. Someday the bill will come due.

As a relevant example of good sounding empty rhetoric, the Times quotes Lawrence H. Summers, Mr. Obama’s chief economic adviser, as saying before he took his current job: "How long can the world’s biggest borrower remain the world’s biggest power?”

Speaking of the Consumer

The Technology Liberation Front posted an article: "heading to FTC’s next “Exploring Privacy” workshop at Berkeley Law School". According the the FTC, "The Federal Trade Commission will host a series of day-long public roundtable discussions to explore the privacy challenges posed by the vast array of 21st century technology and business practices that collect and use consumer data." What is interesting are the background posts of Berin Szoka and Adam Thierer. Both profess that: "consumers are empowered with real privacy controls so they can make the privacy choices that are right for them, rather than a one-size-fits-all choice imposed by someone else." Therefore, regulation is unnecessary.

What's wrong with this? Despite the boisterous public claim that the consumer is somehow "empowered" there is virtually no mention of the consumer as having any rights whatsoever. Essentially, their thesis boils down to companies have a right to violate your privacy anyway manner that they wish. If you have an issue with that it is your responsibility to protect yourself. I would hardly call that empowerment.

I previously discussed this issue in Misplaced Regulatory Blame II. In that post, I wrote: "Similar to Mr. Gomes article both these articles fail to acknowledge that the right of privacy belongs to the "recipient" not the instigator. Since the free-market (especially Forbes) promotes the concept of self-responsibility; these articles - instead of lambasting regulation - should have demanded that companies act responsibility to protect privacy. ... What is ludicrous is that instead of demanding responsible corporate behavior, Mr. Baldwin advocates that people buy products to defend their privacy!!!! The obvious between the lines interpretation is that corporations have an unrighteous entitlement to invade your privacy. If you want to protect it, you need to pay-up or suffer the consequences. Sounds a bit like extortion."

It's unfortunate that both Berin and Adam, despite their rose colored assertions that the consumer is living in a technological utopia of unlimited choice and empowerment, seem to imply (through their silence) that the consumer has no rights. The consumer has rights, David Boaz on Libertarian concepts wrote "Individual Rights. Because individuals are moral agents, they have a right to be secure in their life, liberty, and property. These rights are not granted by government or by society; they are inherent in the nature of human beings. It is intuitively right that individuals enjoy the security of such rights; the burden of explanation should lie with those who would take rights away."

The obvious fact that this issue is surfacing as a regulatory concern with the FTC is anecdotal proof that the consumer feels that they are being unreasonably abused and are now pleading for regulatory intervention. Instead of protesting possible regulatory intervention, Berin and Adam, assuming that they actually believe in consumer rights, should be calling for the private sector to clean-up their act. After all, if you don't want regulation, a bit of self-control and responsible action helps.

Misusing Numbers

A favorite hobby of many special interest groups is "lying" through the use of statistics. This recently cropped with regards to the veracity of the scientific "proof" underlying global warming. In a similar vain, the Technology Liberation Front hosted an article by Steven Titch "Is This What Market Failure Looks Like?" regurgitating a mind numbing stream of numbers (such as number of text messages sent) that purportedly document that the free market is healthy. Mr. Titch, then concludes that: "Metrics such as these are the best weapon against attempts at regulation, especially from an administration keen to find a “market failure” rationale wherever it looks. High-tech consumer electronics remains a bright spot in what has been a down economy. It is best left on its own to thrive."

What is wrong with Mr. Titch's post is that numbers in isolation and without context mean nothing. Raw numbers by themselves do not prove nor do they disprove the success of the free market. Furthermore, these numbers do not prove nor do they disprove the beneficial/disadvantageous effects of regulation. All the raw numbers document is activity.

As Mr. Titch published his post, there were stories behind the raw data. Currently the cable companies and the content providers are fighting over subscription fees. The New York Times reported that: In a Clash Over Cable, Consumers Lose. The Washington Post reports that "Netflix to delay delivery of Warner's latest DVDs". The clear implication of these articles is that the companies are not really competing within the idyllic concept of the free market. Frankly these agreements, besides limiting consumer choice, raise serious questions concerning collusion and the utilization of monopolistic business practices. Hardly free market ideals.

What continues to disappoint is that we have a website that purports to be an advocate for technological freedom but seemingly overlooks corporate business practices that frustrate technological freedom. I previously discussed this issue here:"Nanny State Hypocrisy?" If the Technology Liberation Front is serious about improving technological freedom use real scientifically valid research to document the functioning of the free market (good and bad). Don't simply just throw-out a bunch of meaningless gibberish to see what sticks.

Fiscal Responsiblity? Your Kidding

Today, Rep. Mike Pence, R-Indiana appeared on CNBC. In short, he mindlessly regurgitated the unoriginal mantra of of tax relief with fiscal responsibility. Nice goal, but how do you achieve it?

Representative Pence does not say how. The obvious implication is that if we reduce the "onerous" tax burden then we will need to cut government spending. Will he cut the military? Will he cut social security? Will he cut infrastructure spending? Will the aged be kicked out of nursing homes? Will he eliminate school lunch programs? My mind gleefully spun-on.

Given this upwelling of questions in my mind, what really triggered me to write is that our esteemed journalists failed to follow-up with the obvious question: "Well Representative Pence what said sounds great, now how do you propose to provide tax relief and balance the budget?"

So when will our "journalists" return to real reporting and dig deep into story? We have had too many politicians promise unrealistic goals without the scrutiny that they explain how it will be accomplished.

Legalizing Theft - The New Capitalism III

Seems to be a rash of content related to "Capitalism: A Love Story" by Michael Moore. Steve Forbes, in the October 19, 2009, edition of Forbes had his own take, "Capitalism: A True Love Story". Steve's "Fact and Comment" is an excellent read. Positive points that he has made, which I have been harping on is that Capitalism is built on several fundamental principles. One is trust. Another is that both parties to a transaction walk away with a net benefit. While these are points that I can agree with, Steve continues to perpetuate the myth that the collapse of our financial system was caused by government regulation. Government regulation may have had a contributory relationship, but Steve overlooks the fact that it was the free-will of corporate leaders that created the bogus financial instruments and who also had the laws changed to allow them to work their "magic" with less regulatory oversight.

I have yet to hear of any regulation that "forces" someone to take a multimillion dollar bonus for issuing what has turned out to be almost worthless paper. A least Steve recognizes that "... a sizable portion of the assets created in recent years turned out to be "make believe," the result of an unsustainable, ephemeral bubble in housing and the churning out of increasingly exotic financial instruments. ... that created stuff ends up undermining the global financial system and battering the lives of hundreds of millions of other people. ... Even those individuals not normally hostile to free markets now hold suspicions that capitalism is fundamentally based on greed and is immoral ... "

Tom Toles, in the Washington Post published this cartoon, which is an excellent summary. (Click on the image to get a better picture.)

Legalizing Theft - The New Capitalism II

A confluence of events may have just occurred. Recently, by accident, I saw Michael Moore being interviewed by CNBC on his new movie "Capitalism: A Love Story". In that interview Michael noted that we have lost our moral compass when it comes to making money. Today, I ran across a New York Times article and video: "Profits for Buyout Firms as Company Debt Soared". This article concerns the buying and selling of the Simmons Bedding Company. With each buying and selling action, the private venture firms would increase the debt of Simmons and pay themselves. In that article, the Times is reporting that Simmons will be soon filing for bankruptcy protection. The Times notes that the employees and bondholders will lose but the private venture firm will be making a profit when this is all over.

What the Times is reporting is unfortunately not new, private equity firms have been buying companies and stripping them of there assets for many years. What is telling in this situation is that this article appeared just after the release of "Caplitalism: A Love Story". Now I don't know if the congruence of these two events is a coincidence or not, but they both further highlight that we have a corrupt form of Capitalism. How corrupt Capitalism has become was illustrated just over a year ago with the housing bubble and the use of Collateralized Debt Obligations that proved virtually worthless. We need to restore a moral balance to Capitalism. Furthermore, our corporate and elected leaders need to make decisions with the public interest in mind.

In summary, Rick A. in the reader comments section of the Times article remarked that:

"So in their supposed mission of making companies more efficient, and supposedly, more profitable, PE has actually succeeded in making companies grossly inefficient, and has destroyed lives, families and communities in the process, all while profiting from their shell games and paper-pushing. Then they avoid paying their fair share of taxes using lawyers, accountants and more shell games. All while our country sinks like a rock.

This is capitalism at its worst, and plainly indicates that business needs more regulation to do what's morally right, since the PE people have proven themselves to be morally bankrupt while they bankrupt the rest of us.

Ain't that America?"

Legalizing Theft - The New Capitalism

When I came home for lunch I turned on CNBC's Power Lunch as was surprised to see them interview Michael Moore who just released a new movie: "Capitalism: A Love Story". I was pleasantly surprised by his statements that we have lost our moral compass and that capitalism today is perceived as a means of "legalized theft".

I don't think that Mike fully understands capitalism and several of this comments are off base. Nevertheless I am pleased that he was given this airtime to present his viewpoint. My belief is that we are into corporatism. Our elected leaders today, seem to be nothing more than shills for the corporate interests that they represent. The result, our laws are of, by, and for the corporations. I hope that you will an opportunity to read my other post under Economics. There are some good Dilbert strips!


PS: This is my first attempt at embedding a video. Need to figure out how to eliminate the unused white space.

Why Japan’s Cellphones Haven’t Gone Global

The New York Times has an article "Why Japan’s Cellphones Haven’t Gone Global". The Times writes: "At first glance, Japanese cellphones are a gadget lover’s dream: ready for Internet and e-mail, they double as credit cards, boarding passes and even body-fat calculators. But it is hard to find anyone in Chicago or London using a Japanese phone like a Panasonic, a Sharp or an NEC. Despite years of dabbling in overseas markets, Japan’s handset makers have little presence beyond the country’s shores."

My focus, however, is not with the article but the perceptive reader comments on the article. We are consistently admonished by those advocating free markets and less regulation that we will have a utopian economy if companies are free to compete unhindered. But as I have read articles concerning technological innovation in various newspapers and blogs, I have been made aware that the US is behind the technological curve. Clearly a disheartening concept. So what gives? The unfettered free market seems to have disappointed us concerning technology innovation and has had a significant meltdown (more bluntly ->failure) in the financial arena. Instead of incessant assertions of being superior we need to look into the mirror and ask ourselves how we can do better.

R writes, as a reader response to the article:

I borrow my dad's old cell phone when I'm home -- it's a 1 year old model, with music downloading capabilities, a sweet 5+ megapixel camera capable of taking photos and long movies, and of course, internet and email accessible. It also functions as a debit card -- I can pay for drinks at the vending machine with it, use it as a train pass, and buy things with it in stores. How much did this cost? Because the model had been out for a year, the physical phone itself cost all of 1 yen, or less than a penny.

And it's not just cell phones. Whenever I go back to Tokyo to visit my family, I'm amazed at how far behind the western world is. Our washer is over 10 years old, and it measures the amount of clothes you put in, and calculates how much laundry detergent should be used. It has over 20 options for different types of clothing/material, and still works like a charm. Our bathtub is automatic -- type in the temperature you want it to be on our central computer, the water starts coming out and the temperature is maintained until you turn it off. Oh, and it stops automatically at the right level, and beeps when it's done. My camera, a basic Sony cybershot, came out in the US over a year after I got it in Japan, and my brother's camera was never released in the US. I could go on and on -- but the point is, we're an average middle class family, with average middle class appliances. There are now amazing green advances being made: from houses that (somehow) can recycle and reuse a portion of their electricity, are solar-powered, etc. I could never dream however, of having things like this in the US.

Japan has amazing innovations, but I don't expect to see them over here anytime soon.

Dilbert On a Roll

Scott Adams, the creator of the Dilbert cartoon strip has been exceptionally good. As the old saying goes a picture is worth a thousand words. (Click on the image to get a better view.) Enjoy!

The Dilbert cartoon above gets into a topic that I have not talked about much. Marketing has become a new "drug". In our consumerist society, it appears that marketers do not understand that customers may become desensitized to the marketing message. Like the story of the boy who cried wolf, after repeating a message over and over again, the message ends up getting ignored. Like drug addicts, once the message (rush) gets ignored due to desensitization, the dogmatic solution of the marketers is to further accost the consumer with ever more marketing.

On the lack of ethics today, the cartoons below speaks volumes concerning the lack of ethics by our corporate and elected leaders.


Finally, good old corporate double speak.

Good Performance or Bad Performance - Excessive Compensation

The New York Times article: "After Huge Losses, a Move to Reclaim Executives’ Pay" It is amazing that corporate executive get paid big bucks irrelevant of the issue of how well their company actually performed. These executives are essentially running private fiefdoms for their own benefit. In theory they are supposed to work for the shareholders, but that is a joke. Below are some reader comments on the article posted on Times webpage.

Elsie wrote: "To heck with "shortly before problems emerged." These guys--all corporate CEOs--are the new robber barons. They steal from the government, they steal from the shareholders, they steal from their employees. They steal from their customers. And because we value capitalism and a free market nothing can stop them. We need a new Teddy Roosevelt to drag these leeches off our necks. I think better than nothing would be to just bring back all the regulations that were put in place after the last depression--Glass-Steagal, et al."

Maryann wrote: "CEO salary contracts are a joke. They are not based on performance as they would be for a lower level worker, but based on the flawed assumption that, without these astronomical salaries, these "highly competent (that's a joke) executives would flee to other companies. ... That's what we've been hearing for years whenever the subject of lofty executive compensation in an unprofitable company came up."

Sampson wrote: "Go get 'em. I am all for a clawback. Doesnt the IRS get a clawback if we've made a mistake in our tax filing and been audited? These guys have made "mistakes" (no, the correct word is "cheated"). They have cheated their shareholders, the public, the entire nation and now the entire world. The least they can do is payback. The best case is to punish them for POOR performance. They took money saying they delivered good work and they deserved it. They didnt deliver and they dont deserve. Clawback."

Foreclosure Loophole

CNBC has a good video related to our economic meltdown: Foreclosure Loophole. The theme of the video is that the mortgages have been securitized, tweaked, shuffled, and reshuffled to the point the banks holding the securitied can no longer "prove" that they even own a particular loan.

The significance of this video, from the perspective of our economic system, is that there are limits to the dogmatic assertion that markets need flexibility to promote economic growth. Having some flexibility in marketing mortgages can be beneficial. But here the securitization marketers sliced and diced the mortgages (for the purpose of generating transactions fees) to the point that a "concrete" asset morphed into an abstract security that required computer modeling to establish its value. Unfortunately, history has now demonstrated that the computer models were flawed. Beyond the flawed computer model, these securities were recharacterized to the point that the paper trail became shredded. Due to the lack of an adequate paper trail, the security holders now find themselves unable to prove that they even own the underlying mortgages that make up their securities!

Furthermore, one needs to question why these securities were even being created. It seems that they were being created as a means of selling the same asset (mortgage) over, over, and over again to generate commissions. Generating transaction fees does NOT generate wealth for the economy and is equivalent to churning, which is an abusive business tactic.

To make matters worse, the risk managers charged with insuring these security instruments (AIG as an example) failed to undertake due diligence in writing the insurance. So, as these security instruments failed, the insurance wasn't there to cover the losses.

The meltdown of our financial system is a clear market failure resulting from the willful purposeful actions of some individuals without any regard to the potential damage to society that could result from their actions. Our financial system is supposedly built on trust. If the financial system does not want regulation, don't abuse the trust that society expects of you.

Yes innovation is good. But it is atrocious when innovation is misused to convert something that is concrete (such as a home mortgage) into an abstract unfathomable security. To resurect an old phrase this is "Voodoo Economics".

Update 2/27/2009: As luck would have it, I ran across the following in the March 2009 issue of Newsmax. Newsmax writes: "Beware of financial innovation. Why? Because most of it is designed to enrich the innovtors, not the investors. Just think of the multiple layers of fees, to the salespeople, servicers, banks, underwriters, and brokers selling mortgage-backed debt obligations. These new products (credit default swaps are another example) enriched their marketers during 2005-2007, only to impoverish the clients who held them in 2008."

The Sacred Cow of Home Mortgage Deductions

The New York Times has an article by Edward L. Glaeser titled: Killing (or Maiming) a Sacred Cow: Home Mortgage Deductions. This is an excellent read. The point of this article is that the home mortgage deduction is a government subsidy where the effect is that: "Subsidizing interest payments encourages people to leverage themselves to the hilt to bet on housing markets." On a broader scale, all subsidy programs (whether it be for college, oil exploration, or green vehicles) encourages unecomic investments and creates inflation. In the end subsidies do more harm than good.

Plus One - Obama

I am highly skeptical of Obama, but if you make a positive point you deserve a positive point. The New York Times wrote: " President Obama branded Wall Street bankers “shameful” on Thursday for giving themselves nearly $20 billion in bonuses as the economy was deteriorating and the government was spending billions to bail out some of the nation’s most prominent financial institutions."

The Washington Post wrote: "President Obama yesterday scolded Wall Street bankers who received millions of dollars in bonuses last year, calling the payouts "shameful" and chiding the executives for a lack of personal responsibility at a precarious time for the nation's economy."

Capitalism is not solely about pillaging the economy for your own personal benefit (Gordon Gekko famous line "greed is good"). It is about time that those who lead our nation vocally speak out that capitalism involves personal responsibility and social conscience.

Capitalism Lost Luster III

In Capitalism's Lost Luster II, I wrote how our falling "house of cards" that is our financial system is flushing out those who have apparently been a little less than honest. I concluded: "Sadly, I suspect that we will continue to see even more stories as time progresses." The New York Times has conveniently provided an update: "Troubled Times Bring Mini-Madoffs to Light".

In that article Leslie Wayne writes: "But the number of other people who have been caught running Ponzi schemes in recent weeks is adding up quickly, so much so that they have earned themselves a nickname: mini-Madoffs." I hope that you will have an opportunity to read the article.

More distressing news is reported on "TimesOnline" The article "Irish property tycoon commits suicide" discusses the suicide of property tycoon Patrick Rocca. Ian King wrote "There is speculation in Irish business and media circles today that Mr Rocca, who holidayed in Marbella and who bought a Sikorsky helicopter in November before upgrading to a Jet Ranger, may have lost a substantial sum in Anglo-Irish Bank — which was nationalised by the Irish Government late last week."

Capitalism, as a valid economic system, cannot exist if our corporate and polictical leaders lack moral ethics. The concept of self-responsibility implies that one will have self-control so as not to damage our social structure. John Thain is the current poster child of abuse. The Washington Post writes that Thain authorized bonuses that: "... were paid as Merrill was about to report a $15 billion fourth-quarter loss, and while Bank of America was seeking more federal funds to help it absorb the mounting losses at the New York-based investment bank. " Too bad our corporate and political leaders seem to be lagging.

Scientific Proof - The Free Market is Inefficient

The Free Market is considered an efficient economic system where supply and demand are regulated by price. The Wikipedia article quotes Friedrick Hayak: "a more efficient allocation of societal resources than any design could achieve."

Well I am now in possession of written documented irrefutable proof by a scientific journal that the common perception that the Free Market system is economically efficient is a fraud. Of course the preceding statement, as is the title, is a tease to get you to read this. Read on.

In its February 2009 issue, the Scientific American had an article, "Detours by Design", or "how closing streets and removing traffic lights speed up urban travel" by Linda Baker. (Alternate Source since the Scientific American has not posted the full text. Hopefully they may post this article at a later date.)

So how does one make the connection that closing streets proves that the Free Market is inefficient? To paraphrase Ms. Baker: "Researchers explain that drivers seeking the shortest route to a given destination eventually reach what is known as the Nash equilibrium, in which no single driver can do any better by changing their driving strategy unilaterally." The central concern is that the Nash equilibrium is less efficient than the equilibrium reached when drivers act unselfishly.

Ms. Baker goes on to write: "The solution hinges on Braess's paradox, Gastner says, "Because selfish drivers optimize a wrong function, they can be led to a better solution if you remove some of the network links," he explains. Why? In part because it makes it more difficult for individual drivers to choose the best (and most selfish) route.""

This article demonstrates that: Unregulated selfish behavior is less efficient than regulated Free Market behavior in benefiting society. Of course, I don't wish to advocate unlimited regulation. There is also the issue of "freedom to choose" since regulation would deprive you of your freedom to choose. My point continues to be that unfettered selfish actions end up being self-destructive to both the individual and society. If one does not want regulation, then one needs to act responsibly. My call is, actually not for more regulation but, for real social responsibility by those who are our corporate and elected leaders.

Most free market advocates claim that an unregulated economy is efficient because the sum total of each participant's selfish actions make for an efficient market. While the concept that the sum total of selfish actions make for an efficient market has much appeal, there is an abundance of anecdotal evidence that demonstrates that the free market really is not that efficient. For example, most of us have gone to a hardware store to fix something simple, like a piece of plumbing, only to find that that piece is no longer being made or the design has changed. In fact when you look down the product aisle they all look virtually the same, but due to subtle variations are not interchangeable. Consequently you end up visiting the store more than once, paying more for a whole new fixture that you really did not need and perhaps even paying additional money for someone to install it. Paying for a whole new fixture, when a small part will do, is an economic inefficiency that has a negative societal economic cost.

Then there is the meltdown of our financial system, clearly an example of how unfettered selfish behavior has resulted in significant adverse economic stress to both individuals and society.

While one can quibble with the hardware store example, this analysis can be easily applied to issues such as network neutrality, privatization of the spectrum, proprietary products, and the implementation of Digital Rights Management (DRM). At last - I have "proof" that reasonable regulation will benefit both the individual and society!!!!!

A Bit of History Trivia

Well, I was thinking of continuing my posts on our economic crisis as John Thain, has splattered across the news. But then I would be needlessly repeating myself about our failed corporate leadership. So onto more enjoyable fun news.

Back in 1984, Apple ran it's now famous add for the Macintosh computer at the Super Bowl. In celebration of its 25th anniversary, CNBS has a short video on the history of that ad and a discussion of how the ad came to be here. It almost didn't run. Another version here "The 25th Anniversary Of Apple's "1984"" Still an excellent ad.

Actually, I find that ad very prophetic. Orwell's "1984" society did emerge in 1984.