Minor Thoughts from me to you

Diane Cardwell and Matt Higgins report for the New York Times on artificial surf parks. I started out feeling bemused by the entire idea. But the article is interesting and the technology and challenges are fascinating.

The quest to surf on artificial waves has long been challenged by the difficulties of mastering the fluid dynamics, engineering and mechanics necessary to mimic the ocean. And the energy required was often too expensive.

...

Mr. Townend was also an investor in the Ron Jon Surfpark, in Orlando, which was scheduled to open in 2008. It promised to produce saltwater waves eight to 10 feet high and to transform artificial waves from water park attractions into stand-alone operations.

The wave test run at Ron Jon Surfpark was “unreal,” Mr. Townend recalled. “But it tore the bottom up.” Investors lost millions in the failed experiment.

​So what's changed?

The newer surfing pools have been made possible by advances in computing, allowing for better simulations of how the water will behave and for more sophisticated controls. Slight changes in timing, pressure or angle of the water can determine whether a wave will form a curling barrel — the holy grail for skilled surfers — or a soft hump that’s easier to ride.

​The focus of the article is the new NLand Surf Park, in the Texas desert. (I just love the visual of ambitious investors trying to bring the most quintessential beach activity to one of the harshest and least beach like areas in America.) What is NLand?

a much-delayed attraction under development by Doug Coors, a scion of the beer-making family ... a giant artificial body of water within 160 acres of cactus-studded former ranch land here in Hill Country.

And how does NLand produce its waves?

The waves at NLand, like those at Mr. Slater’s site in California, which uses its own closely guarded technology, are produced using a hydrofoil. The large blade moves through the water, pushing it into formations as it hits the contoured bottom of the pool.

“Essentially a chairlift motor with a snowplow on it,” Mr. Coors said, the mechanism travels beneath a central pier, creating waves that flow off both sides until it reaches the end, where it resets and runs back the other way. The water comes from a rain catchment and filtration system, and the approach is less energy intensive than older wave-making practices that involved pumping.

Still it takes a lot of energy to make a wave — roughly equivalent to running 10 cars. Mr. Coors is considering installing solar panels to help generate the electricity.

​What are the advantages to surfing in Texas instead of in California?

“It takes a long time to become a surfer,” said Fernando Aguerre, president of the International Surfing Association, the global governing body for the sport. “If you’re in the ocean for an hour, and you get six, seven waves, you’re very lucky. Learning to surf is like learning to play the guitar when you can only strum once every 30 seconds.”

Some who have surfed NLand say it feels just like natural waves but with more frequent and longer rides — up to 35 seconds — that give novices more time to properly position themselves and advanced practitioners the opportunity for more maneuvers.

The entire article is interesting and includes some video of the NLand Surf Park. Sure, real beaches are the best, but I'd like to have some other options for waves when I'm stuck in Wisconsin, far from the beach.

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​Matt Ridley wrote about a new book, Innovation and Its Enemies.

“When a new invention is first propounded,” said William Petty in 1679, “in the beginning every man objects and the poor inventor runs the gauntloop of all petulant wits.” As Calestous Juma, of Harvard Kennedy School, recounts in a fascinating new book called Innovation and Its Enemies, even coffee and margarine were fiercely rejected at first.

He shared some of the stories from the book.

In the 16th and 17th century, coffee was repeatedly outlawed by religious and political leaders in Cairo, Istanbul and parts of Europe as it spread north from Ethiopia and Yemen. Their objection was ostensibly to its “intoxicating” qualities or on some spurious religious ground, but the real motivation was usually to ban coffee-houses’ alarming tendency to encourage the free exchange of ideas. King Charles II sought to close down all coffee houses explicitly because he did not like people sitting “half the day” in them “insinuating into the ears of people a prejudice against” rulers. He’d have hated Starbucks.

Margarine, invented in France in 1869, was subjected to a decades-long smear campaign (blame Professor Juma for the pun, not me) from the American dairy industry. “There never was . . . a more deliberate and outrageous swindle than this bogus butter business,” thundered the New York dairy commission. Even Mark Twain denounced margarine, showing that celebs have been anti-progress before.

Laws were passed in many states to cripple the margarine industry with bans, taxes, labelling laws and licensing provisions. By the early 1940s, two thirds of states had banned yellow margarine altogether on spurious health grounds. This is reminiscent of today’s reaction to the invention of vaping: banned in some countries, such as Brazil and the United Arab Emirates, discouraged in most others.

The Horse Association of America once fought a furious rearguard action against tractors. The American musicians’ union managed to ban all recorded music on the radio for a while. Like the initially successful opposition to railways from the canal owners in Britain a century before, incumbent industries will do their utmost to stop new challengers.

People react to many new innovations with an attitude of "ban it until it's proven safe". This is an easy reaction, but a wrong headed one. We're all made poorer by knee jerk fear. We look people at our ancestors and wonder how they could have possibly been afraid of margarine or coffee. What will our descendants think of our fear of GMO foods or plastics?

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This is a very interesting service, from a local Madison company.

“A healthy diet is good for everyone. But as people get older, cooking nutritious food can become difficult and sometimes physically impossible. A pot of soup can be too heavy to lift. And there’s all that time standing on your feet. It’s one of the reasons that people move into assisted living facilities.

But a company called Chefs for Seniors has an alternative: They send professional cooks into seniors’ homes. In a couple of hours they can whip up meals for the week.”

“According to some estimates, there are hundreds of thousands, maybe even a million seniors living in their own homes who are malnourished. In long-term care facilities, up to 50 percent may suffer from malnutrition. This leads to increased risk for illness, frailty and falls.”

“Part of the business plan is keeping the service affordable. In addition to the cost of the food, the client pays $30 an hour for the chef’s time. That’s usually a couple of hours a week of cooking and cleaning up the kitchen. There’s also a $15 charge for grocery shopping. So clients pay on average $45 to $75 a week.

And while there are lots of personal chefs out there and services that deliver meals for seniors there are few services specifically for older adults that prepare food in their homes.”

This isn't what most people would think of as healthcare, but I'd call it healthcare innovation. Living a healthy life—and eating right— is a big part of staying out of clinics and hospitals. If people spend money on this service, they could very well be saving thousands of dollars in other healthcare expenses.

This strikes me as the kind of service that insurance companies won't want to provide but that patients would be willing to pay for, if they have control over their own healthcare dollars.

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I think almost everyone agrees that all levels of government underinvest in infrastructure and maintenance. Here's an argument for turning infrastructure over to a competitive private sector.

No, what makes Disney invest in infrastructure is not happy thoughts. Johnston is in fact clear about this:

The Walt Disney Co. invests in infrastructure because it makes the company money.

The problem with America is that our public infrastructure has been turned over to a fickle political process that is not governed by a rational calculation of cost and benefit, market test and experimentation but by a pursuit of power, glory and advantage that only rarely coincides with the public interest.

America should be more like Disneyland and to do that we need to develop institutions that allow more infrastructure to built by the private sector. Most ambitiously we need more cities as hotels, more proprietary cities.

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Participation in a democracy is not the most important thing to preserve liberty and promote well being. I don't see much value in showing up at school board meetings or town hall meetings or just showing up to vote. It rarely changes anything. Exit is what matters: the ability to say "If you're not going to make me happy then I'll go somewhere else where I'll be happier".

I bring this up because I was recently listening to Russ Roberts' EconTalk interview of Martha Nussbaum. Dr. Nussbaum was arguing that it's enough to participate, that it's enough to have an accountable government that listens to everyone's input.

Why do I say, 'government represents the people'? Look, you do not need to show that you win to show that government is in some meaningful sense, yours. Of course, if you have a vote, some people will win and some will lose. But having the chance to weigh in on those policies is what I'm talking about. In the era when women couldn't vote, well they might often get what they wanted by wheedling their husbands and getting the husbands to give them what they want. But there's a crucial difference--namely, that they are being dominated. The government is not accountable to them. And in the era where women have the vote, it's different. Women don't always win. No, of course not. But no individual wins all the time. That's what democracy is about. But on the other hand, you are in that process. And it is in that sense, yours. Even the Constitution, which I think does, by the way, command the agreement and assent of a pretty large proportion of Americans at some level of generality, you know, there's an Amendment process. So, you can always work at organized work to amend the Constitution if you don't like it, and see how it goes. You can't expect to win, but you can participate in that process.

I understand Dr. Nussbaum's argument about how government "represents the people". I understand the argument but I don't think that it gives government a moral right to control as much of society as our government controls. I think she places a far higher value on the mere process of participation than I do. Her view would seem to say that it doesn't matter if you often lose. The important thing is that you participated, that you had an opportunity to talk, and an opportunity to cast a ballot.

I think the important thing is whether you were able to do what you wanted to do. Were you able to get the education that you wanted? Were you able to get the medical care that you wanted, in a way that you liked? Were you able to use your property in the way that you wanted? Were you able to exercise your skills? Were you able to not only make a choice but to follow through on that choice?

I think the crucial factor is not one of participation but one of exit. I think the crucial factor is that you can not only express disapproval with a policy but that you can go elsewhere, to find a policy that you do approve of. In the private sector, I have this choice. When I don't like the look and feel of WalMart stores, I can exit WalMart and shop at Target instead. When I don't want the hassle of driving 25 minutes to Home Depot to pick up a bolt I need, I can choose to drive 5 minutes to the local Ace Hardware to pick up the bolt I need. When I don't like the fact that Google makes my personal information available to advertisers, I can choose to search the web through DuckDuckGo, a search engine focused on privacy, instead of through Google. If I don't like the way that Mazda designs the control panel in their cars, I can choose to buy a car from Hyundai instead.

In each of these situations, I had the freedom to participate and to give these companies my feedback. More importantly, when they ignored my feedback I could ignore them and choose to fulfill my needs and wants elsewhere. In the minutes and hours of my daily life, I constantly exercise the freedom to exit something I don't like and to move to something I do like. That matters to me far more than mere "participation".

Participation, whether in education or in anything else, is not enough. You must have the choice to leave, when you don't like the way that you're treated.

Tyler Cowen, writing for the New York Times.

When restaurants don't charge for reservations, they tend to hold back tables for regular customers, celebrities, very attractive people and the politically and socially well connected. You might be dying to go to that restaurant for a special birthday or anniversary, but you'll simply be unable to get in. Money is ultimately a more egalitarian force than privilege, as everyone’s greenbacks are worth the same.

This applies to far more than just restaurant reservations, of course. All scarce goods must be rationed. That rationing can be done by connections or cash. I'd prefer that it'd be done by cash, putting everyone on an even field of play. (Those without cash can earn it, raise it, or be given it. Connections are much harder to come by.)

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From Alex Tabarrok, at Marginal Revolution:

Australia farmers pay for water at market prices. Water rights are traded and government water suppliers have either been privatized or put on a more stand-alone basis so that subsidies are minimized or at least made transparent.

Australia has one of the largest private school sectors in the developed world with some 40% of students in privately-run schools.

Australia has a balanced-budget principle (balanced over the business cycle) which has been effective although perhaps more important has been a widely held aversion to deficits combined with an understanding of sustainability and intergenerational fairness (factors which also played a role in the decision to create private, pre-funded pensions).

If things go badly in the USA, I may have to head for Australia. (The scenery's nice too.)

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From Patrick O'Connor, at the Wall Street Journal:

During Jeb Hensarling's first congressional bid, a man at a campaign stop in Athens, Texas, asked the Republican if he was "pro-business."

"No," the candidate replied, drawing curious stares from local business leaders who had gathered to hear him speak, a former Hensarling aide recalled. "I'm not pro-business. I'm pro-free enterprise."

Now, more than a decade later, that distinction has Wall Street on edge. The new chairman of the House financial services committee wants to limit taxpayers' exposure to banking, insurance and mortgage lending by unwinding government control of institutions and programs the private sector depends on, from mortgage giants Fannie Mae and Freddie Mac to flood insurance.

Banks and other large financial institutions are particularly concerned because Mr. Hensarling plans to push legislation that could require them to hold significantly more capital and establish new barriers between their federally insured deposits and other activities, including trading and investment banking.

A Republican who wants to make banks play by the same rules as the rest of a us? A Republican who wants to lets bad businesses fail? A Republican who believes it's a profit and loss system not just a profit system? Okay, I can buy that. But how'd he get to be chair of the House financial services committee? That seems too good to be true.

I'll have to keep an eye on Congressman Hensarling.

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Reason argues, very persuasively I think, that commercial drones could be immensely useful and innovative. The argument against hasty changes to law is even, dare I say it, a conservative one.

Six hours into his epic filibuster last week, Sen. Rand Paul had to settle for Mike & Ike’s from the Senate candy drawer to quell his hunger. But is there any question he would have much rather had some delicious carnitas delivered by quadrocopter?

...

Restrictions on private drones may indeed be necessary some day, as the impending explosion of drone activity will no doubt disrupt our current social patterns. But before deciding on these restrictions, shouldn’t legislators and regulators wait until we have flying around more than a tiny fraction of the thousands of domestic drones the FAA estimates will be active this decade?

If officials don’t wait, they are bound to set the wrong rules since they will have no real data and only their imaginations to go on. It’s quite possible that existing privacy and liability laws will adequately handle most future conflicts. It’s also likely social norms will evolve and adapt to a world replete with robots.

By legislating hastily out of fear we would be forgoing the learning that comes from trial and error, trading progress for illusory security. And there is no clearer sign of human progress than tacos from the sky.

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I love this. From Don Boudreaux.

… is from page 162 of Tom Bethell’s 1998 volume, The Noblest Triumph (original emphasis):

The great blessing of private property, then, is that people can benefit from their own industry and insulate themselves from the negative effects of others’ actions. It is like a set of invisible mirrors that surround individuals, households or firms, reflecting back on them the consequences of their acts. The industrious will reap the benefits of their industry, the frugal the consequences of their frugality; the improvident and the profligate likewise. They receive their due, which is to say they experience justice as a matter of routine. Private property institutionalizes justice.

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The Foundation for Economic Education has an informative article out, regarding what's necessary for a "free market" to function. After I read it, I realized that it explains what I couldn't, regarding how and why markets and competition work.

In a free market, “Scrooge-like behavior” is certainly permissible as long as it doesn’t initiate violence or fraud. But where do the high quality, low price, and innovation we associate with the free market come from? Well, as most economists will tell you, much of it comes from the fear of competition. If you cut corners and charge consistently high prices, even though you may be within your rights to do so, many free-market advocates would rightly point out that free entry and hungry entrepreneurs will tend to keep you in line. That’s important, but it’s not the whole story; not by a long shot.

Honesty and fair play, trust and reciprocity, are principles that FEE has always upheld as crucial parts of the “foundation of economics.” They go far beyond the indispensable but bare minimum of private ownership of property, free trade, and individual self-seeking—or what one might call “free-market minimalism.”

... A chapter called “Murder, Reciprocity, and Trust” in Paul Seabright’s excellent book The Company of Strangers, proposes that we divide society into “calculators” and “reciprocators.” A pure calculator is the economic-man caricature who is ready to act opportunistically (with guile) at any moment. A reciprocator is someone who is going to repay what is done to her, good or bad, no matter what. If someone cheats a reciprocator, she’ll go to the ends of the earth to make him pay; if someone does her a favor, she’s going to return it, even at great inconvenience to herself. A reciprocator keeps her promises.

Seabright argues that even pure calculators would have to pretend to be reciprocators at least sometimes lest everyone, including other pure calculators, shun her. It’s people with a norm of reciprocity, an internalized rule to give tit-for-tat even when you don’t have to, who are critical to the free market.

Note also, however, that if B reciprocates and repays A, A must have first trusted that B would indeed repay her. Trust means here that A is willing to make herself vulnerable to B’s opportunistically not keeping his promise. Trust is the flip side of reciprocity.

But if A is too trusting, calculators will take advantage of her, which gives A an incentive to be a calculator at least part of the time. That’s why Seabright argues that in the real world people have an incentive to find the right balance between opportunism and trust/reciprocity.

... The free market is a great engine of discovery and development because the people in it have the opportunity and the willingness to take chances. Bringing many strangers together who have diverse knowledge, skills, and tastes—which we find markets doing around the world—presents the opportunity. Being willing to trust people we don’t know—new employers, suppliers, coworkers, customers, neighbors, and friends—enables us to take advantage of those opportunities.

Of course, sometimes trusting someone who turns out to be untrustworthy hurts us. But even those unpleasant experiences teach us something: we learn the circumstances under which people are trustworthy or not. That’s valuable knowledge we would never have learned if we were unwilling to trust in the first place.

If we are unwilling to trust when the opportunity arises, if we are mere economizing calculators, we shouldn’t expect the free market nor any other system to develop the complex division of knowledge and labor necessary to achieve real prosperity. The greatness of the free market, however, is that, more than any other system that we know, it enables us to learn and to grow, even as it allows us to flourish.

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Specialization in cancer care could lead to better outcomes at the same price. Instead of having every hospital perform every procedure, it might be better to have hospitals specialize in different procedures.

“If all patients needing surgery for colon cancer were referred to hospitals that have consistently achieved mortality rates in the bottom half of all hospitals performing this operation, then the average mortality rate could fall from a rate of 3.8 percent to 2.4 percent,” Ho said. “And if all patients who require surgical resection for pancreatic cancer were referred to hospitals performing 11 or more of these operations per year, mortality rates could fall by half, from a rate of 6 percent to 3 percent.”

“We were concerned that the centralization of cancer care that would result from referring patients to a smaller set of higher-volume hospitals could give these hospitals additional market power to raise prices,” Ho said. “We also wondered whether higher-volume hospitals might have a different cost structure that would raise or lower costs per patient. We found no statistical evidence that hospitals that performed more of these cancer operations were able to charge higher prices to patients for these services. We found that costs per patient were indeed higher for hospitals performing more pancreatic cancer surgery. However, these higher costs were not passed on to patients as higher prices for patient care.”

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Kevin Hassett Aparna Mathur, writing in the Wall Street Journal.

Today we hear that the gains from economic growth accrue to the highest-income earners while the standard of living of the poor and middle America stagnates and the gap between the richest and the poorest grows ever wider. That portrait of the country is wrong.

In the first place, studies that measure income inequality largely focus on pretax incomes while ignoring the transfer payments and spending from unemployment insurance, food stamps, Medicaid and other safety-net programs. Politicians who rest their demands for more redistribution on studies of income inequality but leave out the existing safety net are putting their thumb on the scale.

... From 2000 to 2010, consumption has climbed 14% for individuals in the bottom fifth of households, 6% for individuals in the middle fifth, and 14.3% for individuals in the top fifth when we account for changes in U.S. population and the size of households. This despite the dire economy at the end of the decade.

The data suggest the following picture. Over time, Americans have constructed a vast safety net that has adequately served the poor and helped them—as well as the middle class—to maintain significant consumption growth despite the apparent stagnation of cash incomes. The notion that a society that has accomplished such a feat is rigged or fundamentally unjust is ludicrous.

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Competition is coming to the healthcare system. It's coming very slowly, but it is coming.

In Priceless, I hazarded a guess that employers could cut the cost of hospital care in half by engaging in medical tourism. It’s a variation on what is sometimes called “value-based purchasing” or “reference pricing.” In its pure form, the employer picks a low-cost, high quality facility and covers all costs there. If the employee chooses another hospital, the employee must pay the full extra cost of the more expensive choice. In Priceless, I argued that to take full advantage of the opportunities available, the patients must be willing to travel.

Several large companies are already trying the idea out. As Jim Landers explains:

Wal-Mart Stores Inc., the nation’s largest employer, will jump into medical tourism next year by offering insured employees no-cost heart and spine surgeries at Scott & White Memorial [in Temple, Texas] and seven other hospitals across the country…By using a hospital in the new narrow network, patients could save as much as $5,000 or more…

The hospitals in Wal-Mart’s network — including the Cleveland Clinic and Geisinger Medical Center in Danville, Pa. — have gained national reputations for both quality and value. Physicians and surgeons work under financial incentives rewarding improved patient outcomes.

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Here's a new entry in Tyler Cowen's always interesting "markets in everything" series. This is a fantastic idea.

Here is a new service:

Over 250,000 weddings are called off every year. We purchase cancelled weddings and resell them to new couples.

Sellers recover deposits and upfront costs hassle-free. Venues and providers enjoy uninterrupted business as usual. Buyers find beautiful, pre-planned weddings at a fraction of the price.

Register with us and help us build a new market for weddings.

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Dan Pallotta argues, in the Wall Street Journal, for treating charity more like a business and letting charitable organizations spend more, to do more.

Business can't solve all of the world's problems. Capitalism can—but only if it is permitted in the nonprofit sector. If we free the nonprofit sector to hire the best talent in the world, take fundraising risks, use marketing to build demand and invest capital for new revenue-generating efforts, we could bring private ingenuity to bear on those problems and would not need to look to government to fill the gaps.

I'm game for it.

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Ross Levatter offers a vision of what truly free market healthcare might look like. It's radically different from what we have now, but it's the system I, personally, want to have.

... Many healthcare items–from CTs to cholecystectomies–are clearly priced, and people compare prices and shop for quality as well. You can look up surgeons and radiologists on the Internet, for example, and see what prior customers thought of the quality of their services. Other people choose to use a qualified middleman to recommend a local physician of high quality and reasonable price. Such middlemen advertise their services and list many reasons to use them, including the opportunity to take advantage of volume discounts and to have someone knowledgeable to guide you through the various medical options. Yet others make their own decisions, using the Internet and new software programs, just as they use software to help them make the right tax-paying decisions.

Mayo and Kaiser, among others, take strong advantage of their brand name, which signifies quality, but the competition from many other physicians makes it difficult for them to charge too much additional for “value-added.”

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Small government and free-market capitalism are about to get put to the test in Honduras, where the government has agreed to let an investment group build an experimental city with no taxes on income, capital gains or sales.

The laws in the city will be separate from those in the rest of Honduras. Strong said that the default law that will be enforced in the city will actually be based on Texas state law, which has relatively few regulations.

“It will be Texas law with more freedom of contract. Texas scores well on state economic freedom rankings,” he explained.

This will be an interesting experiment to watch. Hong Kong 2.0?

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If you had asked an 11-year-old Jeff Bezos to let his imagination run wild and think of the stuff that he would most dream to have as an adult, he might have said:

The world's biggest bookstore! Maybe even a bookstore that can beam any book directly to your hand in an instant (and movies and music, too!).

A giant sky computer that can imitate human intelligence. 

A spaceship.

...And maybe even a robot army. 

Of course any adult would have smiled slightly condescendingly, patted him on the head and helpfully explained that these things aren't possible. 

This is so great. I love what Jeff Bezos has done for the world.

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Division of labor, specialization, and mass production. The result: complex heart surgeries for $1,800 and the head doctor wants to bring the price down to just $800. Now that's healthcare reform.

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