Predictions: a follow up

Author: David R. Kotok, Post Date: June 6, 2018

In our recent commentary “Predictions,” we quoted Daniel Kahneman and the story of the cost overruns and prolonged construction period associated with the Scottish Parliament Building. The project’s troubles didn’t end when the ribbon was cut. Brian Barnier, who is a voracious reader, sent me the article linked below, detailing the urgent repairs necessitated by the Parliament Building’s faulty construction and design: I’m a little older than Brian, but I’m fully simpatico with his appetite for confirmed information.

I share the article with readers as a follow-up to my piece on predictions ( It’s a three-minute read. Here is an excerpt:

“PARLIAMENT chiefs could be hit with their biggest ever repair bill after potentially lethal faults were found on the roof of the £414million building. Emergency site visits were arranged on Friday after contractors refused to carry out maintenance work on the roof, claiming it is dangerous for them and the public. Meanwhile, our astonishing pictures show a loosened 100lb granite block on the side of the Holyrood building being held in place by makeshift wooden wedges just yards above the Royal Mile.”

We have here another chapter in government incompetence and the mess it can create.

Some readers chastised me for slamming Democrats, since all the sponsors and other proponents of the legislative proposal in the US Senate for “work at taxpayers’ expense for anyone who wants it” are Democrats, like Senator Booker, or independents, like Senator Sanders, who caucus with Democrats. Other readers asked why I didn’t focus on artificial intelligence (AI) as a risk that would eliminate many jobs with machine learning.

Supporters offered that there were lots of “buggy whip jobs” that disappeared when automobiles took over the roads and that agricultural jobs were winnowed by tractors and other farm machinery.   History says AI will increase productivity and plant the seeds for an entire generation of jobs that are presently unknown. History also says education and training are the keys to that success.

My point is that government intervention in a market-based clearing system has a bad history. Kahneman has demonstrated that in his book. And most economists and financial folks would agree that government intervention often causes more problems than it fixes. I used energy subsidies as an example.  But there are many examples of subsidy like sugar which is killing people alongside corn syrup.

My friend Chris Whalen points to the causes and effects of banking system failures. His recent piece referenced Ed Kane’s seminal work on “zombie banks” in Europe. Google Ed Kane if you don’t know him and his efforts as a professor of banking and finance.

The key point is that a political economy needs constant surveillance and scrutiny. Government has an inherent bias, and that bias must be tempered by those who are willing step forward to offer well-researched views. In the social media world of today there is a lot of confusion about what constitutes a researched view vs. an unsubstantiated assertion or opinion. To paraphrase a known media social-ist: beware of fake research.

Lest I be misunderstood, the critics who assumed that I am opposed to immigration are dead wrong. We have 6.5 million unfilled job openings in America right now. Many would come to the US and fill those jobs, bringing with them skills we need and do not have. They are discouraged from doing so by the Trump Administration. That policy of discouragement is awful for our country.

Last night I had dinner with a young person who wants to be an American. He drives a car legally, with a license. He works. He saves. He reads. His English is perfect. He is a taxpayer. He is living on the edge since he falls under the DACA program. He does not want to go back to his country of origin. He has a good reason. There is great personal danger there.

My fishing guide in Miami originates from Cuba. He obtained asylum after a multi-year ordeal to get a foot on American soil. He is now a citizen. He has a family. He works. He votes. He served in the American armed forces. Obama failed by eliminating Cuba asylum. Trump fails by not restoring and expanding it. Venezuela?  I’m biased. One of my ancestors walked 1000 miles to escape a czar and take a steerage passage to Ellis Island.

There are millions of such stories. America can thrive and grow with immigrants and more of them.  America can shrink and age without them.

Meanwhile our universities are shutting down courses because of a fall-off in foreign students. Higher education is a great American export. The US is squandering a competitive advantage. And the buyer comes here to make the purchase and pays cash. We don’t have to ship a higher education anywhere. But when we make it more difficult for prospective international students to get here, they go elsewhere to study. Consequently, US universities don’t have the money for this course or that one, so the course gets cancelled. This is now a national phenomenon. Don’t take my word for it; go ask the dean or admissions officer at the college you know well.

Many readers said my earlier piece on jobs wasn’t a rant at all, but a thoughtful discussion. Thank you for the encouragement. Here is a non-rant to add to your day.

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