Most people know that the U.S. Department of Justice has sued Apple and five publishing companies for “price fixing.”  One of those companies is Macmillan, the parent company of Tor, which is my publisher.  The DOJ suit focuses on the use of the “agency model” as a way to keep e-book prices higher than the prices that Amazon was charging consumers for e-books. Obviously, the entire lawsuit bothers me, but one of the principal reasons why it why it bothers me is that the Department of Justice lawsuit is, in effect, a lawsuit in support of price fixing and predatory pricing by Amazon. I’ve seen comment after comment about how Apple and the publishers were ripping off readers.

And I’ll admit that, in the short run, allowing Amazon to continue to sell e-books at a price below their cost, which is what Amazon was doing, would have resulted in temporarily lower prices for e-books.  There’s absolutely no question about that.

But… doesn’t anyone think about the longer term?  At the time that Macmillan insisted on the “agency model,” Amazon was selling 91% of all e-books.  That’s a far, far, greater market share than Standard Oil had a century ago when the federal government insisted on breaking the Rockefeller Standard Oil trust as a monopoly.  In addition, Amazon was subsiding its losses on e-books not just from its book-selling business, but from its other more profitable online businesses.  None of the independent booksellers nor Barnes and Noble, nor Borders, nor Books-a-Million had such a source of cash. Amazon’s practices, which the DOJ lawsuit effectively supports, were the very definition of both monopoly and predatory pricing… and DOJ did nothing to stop Amazon.

Does anyone in his or her right mind really believe that once Amazon consolidated a true monopoly that Amazon would continue to lose millions of dollars on e-books?  No, two things would have happened.  First, Amazon would have pressed the publishers to lower prices for e-books… and once Amazon had control of the market most of them would have been hard-pressed to resist.  The publishers’ costs, like it or not, wouldn’t have gone down, and that would have pushed many more authors out of publication.  That would limit just how much prices could be reduced, and prices would have crept back up, but with Amazon having a larger share, and in the end, readers wouldn’t end up paying much less for e-books, and there would have been no competition at all… and fewer authors.

As for the DOJ claim of collusion, as far as I can see, Macmillan colluded with no one.  In fact, Macmillan insisted on the agency model alone for weeks.  I know, because Amazon retaliated by refusing to sell ANY Macmillan books for those weeks, not just e-books, but all titles, and I and all the other Macmillan authors took hits, as did Macmillan.  Now… the other publishers did finally join the push for the agency model, but they joined Macmillan. And I think it’s rather interesting that most of the other publishers immediately settled with DOJ.  To me, that suggests that, if there was any collusion, they were doing the colluding. So in the end, DOJ is prosecuting the one publisher, it seems to me, that was NOT colluding.  Now… I could be wrong, and if this goes to trial, we’ll see what actually happened.

What I do find interesting is that, now, something like two years later, Borders has gone bankrupt and vanished, but Amazon only sells a little over 60% of all e-books, rather than more than 90%… and DOJ is targeting the companies and the model that resulted in increased competition and more e-book outlets.

Could it just be that the administration is pandering to the “I want it cheap now” mentality in an election year?  I also find this deplorable in that publishing is a very low margin business, and the administration is taking on a struggling industry when DOJ has done very little in terms of dealing with extensive and real corruption in the investment banking and financial sector… which had a far more devastating impact on the economy and the consumer.

Politics and more hypocrisy, anyone?

Last week various news outlets ran a story on the “most religious” states.  I wasn’t exactly surprised by the rankings, but then I noticed that the two “most religious” states [Mississippi and Utah] are the two with the lowest per pupil spending on public primary and secondary education and that there appears to be a huge correlation between low spending on public education and a high degree of “religiosity” and a fairly strong correlation between more spending on education and less professed faith among the population.

In addition, states with populations that profess higher degrees of faith, in general, have state legislatures that tend to pass legislation imposing “faith-oriented” restrictions on school curricula.

While at least several science fiction authors, such as Rob Sawyer in Calculating God, have written books about cultures and civilizations based on faith that welcome education and knowledge, and strive to expand knowledge, it appears that, all too often here on earth, faith continues to be the opponent of greater knowledge and education, as witness Senator Santorum’s allegations that college education destroys faith, although that is but one example among many.

But does education destroy faith… or does it erode simplistic faiths and beliefs?  And who set up the structures of those simplistic beliefs?  Despite faith in such items as the stone tablets of the Ten Commandments or the golden plates of the “original” book of Mormon, there’s no real proof of their existence or of even of their original meaning, if they did in fact exist.  No… all faiths have been revealed by human beings, interpreted by human beings, and proselytized by human beings.  No deity has ever written across the sky – “I am God. Here are my tenets.”

So why do so many people cling to beliefs that have little root in proved reality or that have real world tenets that been proven to be false and/or unworkable?  Why can they not believe in a higher power that does not require simplistic faith? And most critically, why do they try to restrict the development of greater knowledge and the education of children in that knowledge?

Perhaps I’m missing something, but if there is a Deity, why on earth would that Deity want human beings to believe in what is not true?  Or to exalt ignorance above knowledge?

“Magic Thinking” is the idea that belief can change the physical world.  Now, I’d be the first to admit that someone’s beliefs can motivate them to accomplish great things, but in the end it is the accomplishments that can change the world, not the beliefs.  Belief is the first step, and at least in my experience, often the easiest.

Yet today, all over the United States, we’ve had a resurgence of “magic thinking” totally divorced from reality.

How can a culture that promotes Viagra, movies and television with intense sexual content, that supplies its young people with private transportation and funds, and that now has the largest gap between the age of physical maturity and financial and social maturity honestly believe that abstinence is going to be practiced for ten years or more by a significant fraction of the young population?  It isn’t; and the facts show it, but legislators across the country continue to push abstinence as the solution and to reject any form of realistic sex education.

Here in Utah, as well as in other states, legislators are busy passing laws that are clearly unconstitutional, laws that their own legal counsels have advised them against.  The latest here is a proposal to “reclaim” all federal lands and declare them state lands.  And at a time when state finances are is short supply, they’ve even declared themselves willing to spend $3 million on a futile lawsuit – while “boasting” the worst-funded primary and secondary education system in the state.  They’re going to send a message to Washington – and to anyone who doesn’t believe as they do – and they believe such messages will change things, even as they reject the messages of others who don’t share their beliefs.

We even see magic thinking in sports, with the recent episodes of Tim Tebow and the Denver Broncos [although Tebow is now a New York Jet], the feeling that belief will overcome a less than stellar passing capability – and for a time, given the impact of belief on performance, it did, but belief has a tendency to fall short over time when confronted with superior abilities and equal determination.

When manifested in international relations, magic thinking can be deadly.  Too many American politicians have shown this over the past fifty years by actions supporting their belief that all that’s needed in the Middle East and elsewhere is “democratic government.”  But they tend to ignore the practical fact that democracy doesn’t work well in cultures that have enshrined bribery and corruption as social necessities, or that continue to regard women as property, or the possibility that people in other cultures, even with more representative and honest governments, may still oppose U.S. policies and aims both politically and militarily.

In the end, there’s a simple fact that all too many “magic thinkers” don’t understand:  The strength of one’s beliefs does not make something so. All the denying in the world isn’t going to stop global warming.  All the religion in the world isn’t going to overturn the fact of evolution, and all the belief in abstinence isn’t going to stop hot-blooded young people from having sex.  Nor is all the belief in the supremacy of American “ideals” unsupported by a massive commitment of physical power going to ensure that American policies and beliefs spread and triumph, although it’s likely to get thousands more American soldiers killed.

Recent news reports have noted that as gasoline prices have risen, the President’s popularity has declined commensurately. From a practical point of view this makes no sense, because the President has absolutely no control over energy prices.  He can’t even reduce or increase taxes on gasoline unless the Congress passes legislation, and he certainly can’t set gasoline prices.

In economic terms, crude oil and gasoline are what are known as fungible commodities, that is, there’s no price distinction between light crude from the United States, Saudi Arabia, or elsewhere.  The only price differential in the marketplace is the transport cost from the point of production, and since Middle East oil has a lower cost of production, in most cases, transportation costs don’t affect the price of crude, only the price of refined gasoline. What that means, among other things, is that “Drill, Baby, drill!” isn’t going to make a measurable difference in gasoline prices. In fact, as U.S. production of oil has increased over the last few years, it’s made no appreciable impact on gasoline prices because world-wide demand has increased and will continue to increase as countries such as India and China build and use more cars and trucks.

The only time in the last 60 years when a President attempted to control gasoline prices was during the Nixon administration when Nixon imposed price controls [through legislation he requested and Congress passed].  The result was a disaster.  Because oil companies could not pass on the costs of higher-priced crude oil, they stopped buying and producing it because to do so meant losing money on every barrel of higher-priced oil.  The result was gasoline lines blocks long all over the nation and fuel shortages.

On the other hand, North America is literally awash in natural gas at present.  Interestingly enough, even though natural gas prices are close to all-time lows, which means that most homes heated by natural gas have seen real heating costs decline, this doesn’t seem to translate into greater political approval for the President or anyone else.

What continues to be overlooked in the debate over Romneycare/Obamacare [The Affordable Health Care Act] is the issue of “transferred costs.”  Because hospitals are essentially required to provide health care for those who need it, the costs involved in providing such care to those unable to pay have to be “transferred” to someone else – or the hospitals would go broke. Because doctors can refuse to provide services to those who cannot pay, the uninsured overuse hospital health care, especially at hospital emergency rooms, and that drives up health care costs. Because they cannot pay, the hospitals transfer costs to other paying patients, or their insurance companies, or governments. There are two classes of uninsured – those who could afford insurance and choose not to pay for it and those who either cannot get it or cannot afford it.  The thought behind the Affordable Health Care Act was to provide insurance to those who could not afford it and require those who could to purchase insurance or pay penalties, thus addressing the cost issue and theoretically redistributing health care away from overuse of expensive hospital facilities.  Regardless of whether one agrees with the Act or not, the driving force was the accelerating cost of health care and the economics behind it – and, so far as I can see, none of the opponents of the Act have come up with a viable and workable way of addressing those economics.  They don’t want to require universal insurance; they don’t want a single payer system; they oppose any cost-cutting measures that will make a real difference; and they don’t want to deny health care to anyone. Under those parameters, health care costs in the U.S. will continue to rise, even though they’re the highest of any developed nation… and our health is below average.  The issue is economics, and no one wants to confront that reality.

Whether it’s gasoline or health care prices…it’s so much easier to cast stones… especially at politicians, and especially when they deserve blame for other things.  But right now, on too many economic issues, people are blaming politicians, and politicians are trying to blame anyone else… and none of them want to look at the economics.

The “Money Report” section of the April issue of The Atlantic Monthly contains a fascinating comparison between what Americans spent as a society in 1967 and what we spent in 2007.  The facts are sometimes in agreement with popular perception… and sometimes rather wildly at variance with them.

The area where spending has gone up the most is, unsurprisingly, that of health care, and few would dispute that.  In constant dollars, adjusted for inflation, health care costs have gone from 8.1% of spending to 18.0% – more than doubling.  Likewise, the percentage we spend on business services, things like advertising, accounting, legal services, insurance other than for health care, real estate fees, and consulting, has also more than doubled (this is also where those billions in financiers’ bonuses fit in, as well as the  additional costs of such services as tax preparation, various attorney’s fees, and all the money management fees).  Recreation and entertainment spending have also increased by 80%, so whether we want to admit it or not, we’re either pampering ourselves more than we did forty years ago or the entertainment and recreation moguls are charging more for the same things.

In some areas, such as education, housing, and transportation, there’s been little change in the proportion of income we spend.  With the high increase in the cost of higher education, that suggests that spending on primary and secondary education, in real dollar terms, has dropped, and from what I’ve seen in state and local education budgets that’s definitely been the case.

On the other hand, the percentage of our spending going to food and drink has dropped by 40%, even though proportion spent at restaurants has increased by 75%. And the percentage we spend on clothing has dropped by more than 35%, no surprise to me, given the way most people look in public.

But, most surprising to me were the numbers spent on government/taxes.  In 1967, over 18% of income went to government through fees and taxes.  By 2007, that had dropped to 13.2% – a decrease of over 25%.  So… in real dollar terms, government is costing us less of our income today than it did forty years ago.  Somehow… this message hasn’t gotten across to anyone.

Admittedly, most people just look at the dollars, and in nominal dollars, the figures show that government budgets increase every year, but over time, those budgets haven’t increased as much as inflation.  Of course, neither have the earnings of the middle class, but even their earnings have only declined, in real dollars, very slightly – not the 25% real decrease we’ve seen in government spending. Is it any wonder we’re facing a crumbling infrastructure in areas such as highways and bridges, especially when a larger fraction of declining real federal revenues has been devoted to fighting overseas wars?

Of course, I doubt that these numbers, or anything resembling them, will ever show up in the political arena. But I thought some of you ought to know.