The Most Basic of Economic Principles

If you can solve this brain teaser from a 1932 issue of Modern Mechanics, you may just be a step ahead of your average congressman when it comes to fixing the economy.

Too Big to Fail?

The latest group to ask for bailout is the automobile industry. Most of their argument for bailout hinges on the thought that if they fail, they will take the economy with them. They are framing the problem backwards. The real problem is that they are too big to succeed. Any time you try to have your company do everything, you risk not being very good or efficient at any of it. What the companies really need is to be more modular. If cars were built like computers, you could choose your own build out of the most appropriate components, knowing that all of them were built by people who specialize, and that replacement parts would be standardized enough to be cheaply available. TechCrunch has a good article about the concept .

What we need is to be lighter on our feet. The days of massive self sufficient manufactueres with big pension plans should be a thing of the past. We need small specialized manufacturers. When they see a need in the market they should specialize in creating the best product at the best price to fill the need. When the need is gone, there shouldn’t be any crying about lost jobs; just restructure, retool, retrain, transfer if neccesary, and get back to work. Benefit packages should be made more easily transferrable. If another nation is seriously subsidizing an industry in order to gain market share, I think we would be better served by putting more international economic pressure on that country, which is stronger the more global the industry is. We should encourage  distributed international industry in order to make it unprofitable to cheat. The alternative is a cold war race to socialism.

Traffic cameras

It must have seemed like a good idea at the time – using ticket revenue to help pay for government. It would seem to fall right in with the views of this site; Tax the problem to pay for the solution, right? The problem arises when you mix the government’s inability to shrink with the conflict of interest of needing to feed itself by creating the very problem it was designed to fix.

I know someone who was recently ticketed by one of those traffic cameras they put at intersections. They snap a picture of your license plate, your face, and take a video (displayed big screen in court) of your violation. They never sleep or decide to let you go with a warning. There is a huge amount of data online about these cameras, and after some research I came to the conclusion that this particular camera was making around a thousand dollars an hour. Obviously a lot of cities saw dollar signs and started installing the cameras all over, and seeing immediate revenue boosts. The cameras are so effective in fact, that people have actually quit breaking the traffic laws they police. According to dallasnews. Dallas has seen a 50% drop in camera revenue due to lack of crime. Great, we can reduce our traffic patrol now that the cameras have reduced violations, right? Unfortunately, once government creates a job and gains a source of revenue, it is reluctant to let go. It doesn’t want to lay off employees, it just wants its revenue back. The city is starting to turn off the cameras on a rotating basis. Since the infallibility of the cameras is such a key to their success, I expect this will put people back in a gambling mood and increase violations again. I suspect the city knows this. The cameras are run by a company called Redflex. Redflex receives 80% of the ticket price for the first 95 tickets each month, after that they split the revenue with the city. Where does that money go? It is an Australian company.

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