Occupy Brain Cells

Legislating in the streets

It is a complex world in which we live. We’re sure we know what we want, our grand vision. Social activists protest, lobby, and press. The President wields his pen and his phone. Legislators legislate. Bureaucrats regulate. The politically correct cudgel us into their approved mindsets. Humiliation is used as a weapon to ensure lock-step thinking. Yes, we are a happy people, all happy together, thinking our approved, happy thoughts.

But sometimes this man-made nirvana falls short. Here are a few examples.

The Cecil Effect

You may recall Walter Palmer, the dentist who shot Cecil the lion. The outcry was enormous, Palmer thoroughly villainized, and trophy hunting put into the shame locker. All as it should be, you might observe.

Except that it’s not.

On February 23, the Los Angeles Daily News published a piece entitled “Why the Cecil effect is bad news.” Apparently trophy hunting has dropped sharply in Africa. The Bubye Valley Conservancy, a huge wildlife reserve in Zimbabwe, is reporting a sharp overpopulation of lions.

According to the article, “Bubye Valley Conservancy has more than 500 lions, and they may have to cull 200 in order to reach a level that is sustainable.” (To those not in the know, a cull is a selective slaughter).

The other animals in the conservancy are suffering as a result. Hungry lions are “eating up way too many antelope, giraffe, cheetah, leopards and wild dogs.”

It is also reported that villagers who had relied on the hunters’ trade are sinking deeper into poverty.

This is a perfect example of an unintended consequence. Activists and lobbyists and shamers were quick to jump on Dr. Palmer in particular and trophy hunting in general with no thought of the predictable outcome.

That’s a good start… here’s another one closer to home.

Legalized Marijuana and Heroin Deaths

There has been a sea change in how marijuana is viewed in our nation.  According to Governing Magazine, “Twenty-three states and the District of Columbia currently have laws legalizing marijuana in some form.”

One of those states is Massachusetts, where medical marijuana has been legalized and personal use decriminalized. This is the right thing to do from a classic libertarian point of view. But perhaps not without consequences.

While the pot smokers are happy, there has been a disturbing, and very deadly, increase in deaths from opioid overdoses. (This includes heroin and painkillers).

For Massachusetts, according to Masslive, “the number of confirmed cases of unintentional opioid overdose deaths for 2014 was 1,089 – a 63 percent increase from the 668 deaths in 2012, and a 20 percent increase over the 911 cases in 2013.”

It’s not just a local issue. The Boston Globe tells us that “nationally, 125 people a day die from overdosing on heroin and painkillers.” That’s over 45,000 deaths per year, about the same as automobile deaths and gun homicides combined. Where is this plague coming from?

The Washington Post has a clue. In a January 11^th article, they tell us “Mexican traffickers are sending a flood of cheap heroin and methamphetamine across the U.S. border, the latest drug seizure statistics show, in a new sign that America’s marijuana decriminalization trend is upending the North American narcotics trade.”

We shouldn’t have been surprised by the outcome of legalizing weed. It was perfectly predictable, and could have been accompanied by mitigating actions with only a little foresight. (For instance, the Swiss drug policy model, which offers free, safe opioid substitutes to addicts).

Alright, time for just one more.

Shootings double in Chicago

The Chicago Tribune reported just a few weeks ago that the homicide rate in Chicago has doubled compared to a year ago.

In Chicago, “The city has recorded at least 95 homicides since the first of the year, compared to 47 last year, according to data kept by the Tribune. The city has also more than doubled the amount of people shot - about 420 this year compared to 193 last year.”

What is happening?

One theory is this – police are pulling back. They have reportedly seized far fewer illegal guns so far this year as compared to last. “Evidence of a pullback starts with an 80 percent decrease in the number of street stops that the officers have made since the first of the year.”

Again, it is not entirely a surprise that if we vilify our police, they may feel less anxious to put their lives and careers on the line for us.

We have now seen several instances of social or public policy which seem to have backfired. What is the common theme here? One is the preeminence of emotion over logic. Public policy should be carefully based on reason and fact, not on feelings and sentiments. We are far too often tempted by emotion – but should always pause and calculate.

Better public policy is possible. Perhaps, one day, when the computers are in charge…

How to retire a millionaire

Say that you were starting out your working career all over again and the challenge is how to retire, 50 years later, a millionaire? Let’s neglect for a moment that in 50 years from now (2061), inflation will have rendered "millionairehood" quotidian. Instead, imagine this is 1961 and you are surveying the last half of the 20^th century for your best chance to retire in 2011 as a millionaire. Which would you choose?

1. Play the lottery, $2 per day, 5 days a week ($10 per week)?
2. Invest that same $10 weekly in a Standard and Poors 500 stock index fund?
3. Marry a cop or schoolteacher?

Although there is an argument to be made for door number 3 (Forbes, "The Millionaire Cop Next Door"), let’s focus on choices 1 and 2. In order to analyze these choices, we will need a little math. (Yes, your high school algebra teacher was right – you will find this stuff useful).

Playing the Lottery

Playing the lottery is a popular choice because it is relatively painless. Spending a couple of bucks a day has little opportunity cost, i.e., you are not depriving yourself of coffee or hot dogs or paying the rent or other such daily necessities. But what are the odds of winning a million bucks? Let’s take the Massachusetts Cash Winfall lottery as an example. This game of chance costs $2 and asks you to pick 6 numbers of 46. In order to win the jackpot, you must select the proper winning numbers, each with the following odds:

1^st digit 1 out of 46 (2.1%)

2^nd digit 1 out of 45 (2.2%)

3^rd digit 1 out of 44 (2.2%)

4^th digit 1 out of 43 (2.3%)

5^th digit 1 out of 42 (2.4%)

6^th digit 1 out of 41 (2.4%)

Those odds don’t look too tough. With over 2% chance of selecting the correct number for each choice, you should be a big winner if you just play the game 50 times, right? Unfortunately, that’s not how probability works.

To calculate these odds, you must multiply the probabilities (1/46 x 1/45 x 1/44 x 1/43 x 1/42 x 1/41), which yields a vanishingly thin 1 out of 6,744,109,680. If you were required to select the numbers in the exact sequence in which they were drawn, this would be your odds of winning. Fortunately, the lottery does not require that you match the order of the numbers drawn, so the above odds can be reduced by taking into the account the number of different ways (orders) in which the winning number could be drawn.

The first winning number could be drawn as any of the 6 digits, the second as any of the remaining 5, the third as any of 4, etc. So the total number of ways that the winning numbers could be drawn is 6 x 5 x 4 x 3 x 2 x 1 = 720. We can now divide 6,744,109,680 by 720 to determine your actual odds of winning – 1 out of 9,366,819. To put this into perspective you would need to buy one ticket per week for 180,000 years before approaching certainty of winning. Did you really think it would be easy? How many million-dollar lottery winners do you know?

How about the popular Powerball game? It requires that you select only 5 numbers (and then that pesky 6^th Power Ball). This game is rigged to make your odds much worse. The first five numbers are drawn from a pool of 59:

1^st digit 1 out of 59 (1.7%)

2^nd digit 1 out of 58 (1.7%)

3^rd digit 1 out of 57 (1.8%)

4^th digit 1 out of 56 (1.8%)

5^th digit 1 out of 55 (1.8%)

Multiplying these probabilities and then dividing by the number of ways the numbers could be drawn yields a friendly 1 out of 5,006,386. But that must then be multiplied by the probability of selecting the final Power Ball number, 1 out of 39, yielding the overall odds of winning as 1 out of 195,249,054. Feeling lucky?

Bottom line, you could spend an entire lifetime squandering $10 on lottery tickets each week and your odds of hitting the big one are still much less than being hit (multiple times) by lightning.

Playing the stock market

Everyone knows that the stock market is risky. But it is orders of magnitude less risky than playing the lottery. Since 1950, the Standard and Poors 500 stock index has returned an average of 10.8% on your investment. (Yes, that includes the recent financial meltdown).

What would happen if, as an eager young worker, you resolved to put $10 each week into an S&P 500 index fund? Further assume that your account grew tax-free (e.g., an IRA or 401K), and that all earnings and dividends were reinvested. At the end of a 50 year working career, you would have accumulated a million bucks if your average stock market returns were in the neighborhood of 10.5% (see nearby chart).

Now the stock market has no guarantees and it is certainly possible to lose capital, especially in the short run. I would no more recommend that you put all of your money in the stock market as I would urge you to bet it all on the lottery. But $10 per week is a cheap gamble on the market with far greater odds of gaining you a million bucks than hitting the lottery. Here’s my advice – play the lottery for fun, play the market for retirement, and keep some money safe – at least a 6-month emergency fund. That gives you the best odds overall of retiring a millionaire.

Of course, you could always marry a school teacher.