A New School Year Begins

And so tomorrow morning we start. Last year's graduates for the most part are off to college, where we can only hope we properly prepared them as best they would let us. Older graduates return to college or to jobs, where again we hope they learned something of lasting value during their time in high school.

Tomorrow begins my tenth year of teaching, almost exclusively teaching high school seniors. I have my class rolls, filled with mostly unfamiliar names. The room is as ready as it is going to be; Monday's plan is ready; the powerpoint prepared, the handouts copied. After ten years I'm still nervous. Probably more nervous than most of the students who will sit before me tomorrow. You see, they see the light at the end of the tunnel - graduation. They're 17 or 18 and are ready to move on in life, to gain and exercise independence, to end this phase of their lives. From my side, I see the potential, and the future of our country and civilization, and I worry that I will be up to the task. I worry that I will adequately prepare them for college, while at the same time helping to prepare them for life. I know going in that some will like me, some will like my courses, and that some will dislike me and the subjects I teach.

And this nervousness is what convinces me that I am in the job that I was meant to do. The excitement of teaching, of trying to show someone new things, to show new ways of thinking, to expand horizons and opportunities - that's the thrill of teaching. And every year we get a new crop of students, and although some of the material and some of the lessons are the same, the discussions never are, the class personality never is, and the bonds we form with the students never are. It's a new job every year.

By May, I'll be tired and grumpy, whereas tomorrow I'll just be relatively rested and grumpy. But I really love what I do, and I can't wait until 8:45 tomorrow: IB Economics, and away we go.

Please Watch This

A couple of prefatory comments. I like to watch TV, and a lot of what I like to watch is pretty junky stuff. In our house we like to watch "America's Got Talent;" I guess this summer we Americans learned about "Britain's Got Talent," but I never ever thought about there being a "Ukraine's Got Talent." I also read a lot. Using Google Reader and RSS feeds, I probably review about 500 headlines a day, from a wide variety of sources: liberal and conservative, political and apolitical, serious and frivolous.

Tonight on a British magazine link (The Spectator), I found this. The artist uses sand to recount the horrific experiences of the Ukraine during World War II. The words at the end supposedly translate to "You are always with us."



I'm not very talented. I like to think I work hard, I'm a pretty good teacher, and I'm pretty smart, but I have very little creative talent. I'm awed by people (many of you who have been my students!) who have amzing creative artistic talent. To be able to do this with sand, to tell a story in such a moving way, is awesome. Watch this - you won't be sorry. Tell me what you think.

Polls: Conservatives and Liberals

Polls can be dangerous and tricky things. Personally I wish our country, our politics, and our politicians weren’t so poll-driven. The daily and weekly tracking polls, the constant focus on approval ratings, and other examples of poll-overload contribute to the increasing polarization of American politics, in my opinion. But like driving by a car wreck, you can’t keep from looking.

Interesting poll of the week: Gallup reports that conservatives outnumber liberals in every one of the fifty states. And that seems like one of those indicators that the major media does not necessarily reflect the views of the public.

Problems With GDP?

In a New York Times opinion piece, Eric Zencey has written a thought-provoking criticism of gross domestic product as a key measurement of economic activity. If you read this, you’ll see that many of the criticisms are familiar. GDP is inexact, it excludes certain things and activities, it doesn’t take into account certain costs and benefits, it may not accurately reflect economic gains to society, etc., etc., etc. But here’s the deal – we know and almost all economists agree that GDP is a flawed measurement of economic activity. However, the weaknesses and limitations are known, consistent, and predictable. As long as GDP is measured consistently, it is a useful tool for comparisons within a country of economic activity from one time period to another or to a lesser extent comparisons of one country to another.I say to a lesser extent because once we expand beyond a single country, we can’t be as certain that the GDP's were calculated in a similar manner.

Mr. Zencey’s main point seems to be that GDP is not a perfect measurement of a country’s economic well-being. Well duh. That’s why, especially when we talk about economic development, we focus on other measurements such as the Human Development Index, the Poverty Index, measurements of education, health, gender equality, political liberty, and more. Economists know GDP isn’t a perfect indicator of an economy. Again, remember that in basic macroeconomics, we use real GDP, inflation rates, and unemployment rates to get more of a composite view.

I think the big tip-off is that the author isn’t an economist – he’s a professor of historical and political studies.

Hiring Rates and the Recession

Because of this article, I ran across a new statistic called the “hires rate”. It’s compiled by the Bureau of Labor Statistics and is defined as “number of hires during the month divided by the number of employees who worked during or received pay for the pay period that includes the 12th of the month.”


The hires rate is currently at the lowest level ever. So what? It means businesses are afraid. Businesses aren’t hiring. Why not? I suggest two primary reasons: fear of unknown but negative legislation, and already increased costs (taxes) related to hiring. Payroll taxes have risen and are expected to rise more. Unemployment insurance costs borne by businesses are high and go up as businesses hire and then have to lay off employees. So what do businesses do? They avoid the potential costs by not hiring and doing more with fewer employees. Oh well.

And before you blame the greedy employers, weren’t the employers also greedy when the hire rate was at higher levels? Corporations don't just become "greedy" when times are bad. Greed, or self-interest, or the profit motive, is what drives economic activity in good times and bad. You need to be very careful about using the convenient but questionable attack on those “evil” corporations. By the way, didn’t those greedy corporations make the computers you’re using?

Zombies and Math

A Canadian mathematician has researched and modeled what to do in the case of a zombie attack. Here's a link to an article about the study. His conclusion, based upon "modern zombies" is that only one strategy is likely to succeed: “impulsive eradication.” “Only sufficiently frequent attacks, with increasing force, will result in eradication, assuming the available resources can be mustered in time.” The real key is evidently acting quickly. “If the timescale of the outbreak increases, then the result is the doomsday scenario: an outbreak of zombies will result in the collapse of civilization, with every human infected, or dead.” “This is because human births and deaths will provide the undead with a limitless supply of new bodies to infect, resurrect and convert.” Just remember this next time you think math is useless and you’ll never use the things you have to study!

Flip Flops to Die For

You may remember in some of my crazier musings I would occasionally suggest that flip flops marked the end of Western Civilization as we know it. Now my theory related to the casual nature of society and how that led to relaxed standards, less effort, senioritis, and then inevitably, societal collapse.

Turns out before civilization crumbles, the flip flops may kill you!

Lab tests of two reporters' flip-flops, worn for four days, revealed a potentially deadly germ - Staphylococcus aureus - lurking on the rubber.

If it seeps into a cut on your foot - an entirely common summer affliction - the bacteria can enter the bloodstream and, if left untreated, kill you.

Students Disciplined for Facebook/Myspace?

So the Burleson school district has decided not to discipline the student for the contents of her Myspace page (I thought everybody had moved to Facebook, anyway). This is a tricky and complex issue, and I thought the facts were especially bad for the school district. One of the basic things we learn in law school is that good facts make good law and bad facts make bad law. These were bad facts for Burleson.

Tha being said, it's amazing to me how many people seem to be unaware or unconcerned about what they post online (he says as he posts this stuff online). Like it or not, agree or disagree, the web is a public place. You shouldn't rely, as the student did, on the page you post the bad stuff onas being "private"; it's on the web: somebody can and will find it. I have often told students that in the old days, my company automatically used an applicant's credit report as a hiring qualification in the belief it was indicaitve of the applicant's character. If I was in human resources or looking to hire anyone these days, I think I would do a full-fledged internet search on that person, and I would include Facebook, Myspace, and anything else I could think of to get more information about an applicant. Someone's postings quickly give you a clue about how clueless someone is.

The Now Renamed "Health Insurace Reform"

I could basically post multiple things a day about this topic, but it would beat us down and probably interfere with what I want this blog to become. So I'm imposing voluntary self-restraint until such time as news events absolutely compel me to bring it up. On the other hand, it is a hugely important topic and one that will impact our country's economy for a long time to come. So feel free to comment on your own or ask me to comment on specific issues or topics.

My Kindle

I really like my Kindle electronic book, but this article makes a lot of sense. Especially if Apple gets into the game big-time. I hope my Kindle doesn't go obsolete!

My Shiba Inu is Apolitical, Too

Jonah Goldberg, writing today at National Review Online:

The wonderful thing about dogs — and yes, cats too, I suppose — is that they are beyond the reach of ideology. Not only does affection for dogs have no significant correlation to politics, but politics holds no interest whatsoever to dogs.

Talk about health-care reform to Cosmo and he’ll tilt his head, yawn, and walk away just as quickly as he would if you opted to discuss the assassination of Trotsky or the Defenestration of Prague. But if you say the words “tennis ball” or “squirrel,” he will be utterly fascinated.

And that’s what I love about dogs. They just don’t care about such things, and they encourage you not to care either — at least while you’re with them. You can’t say the same thing about children, because they grow up and inherit the society we leave behind. Being a good parent requires caring about politics. Dogs, meanwhile, keep their innocent doggy goodness from kennel to grave, obviating the need to explain to them why tax cuts are awesome.

Nonetheless, I think Krista the Shiba is a supply-sider. If not I may have to make her pay attention to the SmartBoard.

Celebrate! The Recession's Over!

According to a survey of economists (hmm, should I be hurt they didn't ask me?), the Wall Street Journal has declared the recession over. Pardon my skepticism. I realize unemployment is a lagging indicator, but I am still troubled by the unemployment data released this week. The rate went down 0.1%, within the scope of sampling error, but the number of unemployed is increasing. If you remember this is like disinflation - unemployment is still getting worse, but it's less bad than it was. Furthermore, increasing numbers of unemployed coupled with a falling unemployment rate suggests invreasing numbers of "discouraged workers," not exactly a sign of economic health and strength.

We may be at or near the bottom, I'm just not convinced. And I really expect the recovery to be slow to take off, so at best I think we're looking at a very weak economy for many months to come. My IRA hopes I'm wrong.

America's Best Colleges

An interesting list, to be sure. From Forbes magazine.

Shouting in the Dark?

When I started this a couple of weeks ago, I didn't quite realize how much care and feeding an interactive blog would need. I read voraciously, and follow a huge number of news and political websites, so the information that would be fun and interesting to discuss far surpasses my ability to post and comment. As school starts (soon), I still think this will be a fun way to interact and hopefully improve classroom performance by increasing exposure to economic and governmental thinking. I know there are more of you reading than have posted, and I would encourage you to comment and agree, disagree, question, and think "out loud". A lot of times I'm posting things to try to provoke thinking or discussion - in law school, all my classes used the Socratic method, so we learned by being questioned, not by being lectured to. I guess I'd like this to be like that. If you run across something that you would like to see discussed, send me a link and I'll put it up, maybe with or without comment. My opinions are just like everyone else's and not any more valuable, but if there is something you want me to comment on, let me know. I love to learn new things, so if there is something you don't understand, bring it to my attention and I'll try to help figure it out.

I know it's a busy time as summer ends, many of you are packing for college, others are putting off thinking for these last few days of summer, but I really would like some thoughts on whether this is a worthwhile thing for me to be spending my time on. Thanks.

In Defense of Dissent on Health Care Reform

The techniques used by one side are not always appreciated when used against them. I think everyone could do well to take a deep breath and remember your mother told you it wasn't polite to call someone names.

'Un-American' attacks can't derail health care debate

In Defense of Dissent on Health Care Reform | Washington Examiner

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Are We in a Recession?

One of the educational experiences of my life that has had a lasting and profound effect on my life, philosophical development, and intellectual growth is my law school experience at The University of Chicago Law School. Not only did I get to find out what is was like to live as a Yankee, I was exposed to some amazing and powerful intellects, both among my fellow students and among the faculty. One of my law professors my first year was Richard Posner, who is the intellectual godfather of what is known as the law and economics movement, an effort to analyze legal rules and principles through the lens of economics. During my time at UC Law, he was appointed to the 7th Circuit Court of Appeals, where he still serves while continuing to teach and write prodigiously. One of his outlets is a blog he co-authors with Gary Becker, a Nobel Prize-winning economist at UC. A fascinating thing about their blog is that it is a dialog between them over current topics of interest.

Most recently, Judge Posner posted that while he believes the nomenclature is not important, he feels the current economic situation is severe enough to be considered a depression, not merely a recession. In his view, we are not out of the depression/recession until GDP returns to the long-run trend line (the secular trend line from our economics class) and this may take 2 or 3 more years before we get there. Pointing out what I have said previously about our economic theories' inadequacies, Posner writes:

A number of macroeconomists and financial economists, including leading figures in these important branches of economics, had believed until last September that there could never be another depression, that asset bubbles are a myth, that a recession can be more or less effortlessly averted by the Fed's reducing the federal funds rate, that the international banking industry was robust, and that our huge national debt was nothing to worry about, nor our very low personal savings rate. All these beliefs have turned out to be mistaken, along with influential versions of the rational expectations hypothesis, the efficient-markets theory, and real business cycle theory.

That said he does not fault the government for taking actions inasmuch as we are in uncharted lands where our theories don't fit the facts. But in a sobering conclusion, he writes:

The economy remains imperiled. If the Administration's trillion-dollar health care program is enacted in anything like its proposed form, the costs, on top of the rapidly rising public debt that is the consequence both of the impact of the depression on tax revenues and the costs of the anti-depression programs may create an aftershock to the current depression that will do almost as much harm to the nation as the--I insist on the term--depression itself.

In response though, Professor Becker writes:

The latest output and unemployment figures for the United States indicate that the recession in this country is very probably finally over, given the usual definitions of the turning points of recessions. . . . I am more optimistic about the world and US recovery than the consensus, although I do not expect a sharp expansion during the next few months. . . . So legitimate reasons exist for concern about the speed and strength of the recovery of the American economy. However, I worry much more about various regulations, spending, and controls being introduced by the present Congress and by President Obama than by intrinsic difficulties in the American economy.

Confused? I think this illustrates well how very confusing the current economy is and how difficult it is to chart a course of action when no one is certain what's going on. But the Becker-Posner blog shows how it is possible to have a civil and high-level discourse on the subject.

Cuba's Wiped Out

Cuba's communist, command economy is having a slight problem: There's a toilet paper shortage.

How'd you like it if you didn't have toilet paper and the government reassured you that they would be able to import some by the end of the year?

Statistics is Hot!

Many of you who knew me or took my class in the past may not be aware, but last year I was able to bring back the Advanced Placement Statistics class at Bell. Most of you should know I'm a math geek and a college math major. We had 14 students who finished the course last year, 12 took the AP exam, and 11 made 2's or higher on the test, so all in all a good start. I'm not sure of my enrollment this year; I was hoping to get two sections but didn't.

Anyway, much as it pains me to say so, I found an interesting article about statistics in the New York Times, of all places (see, I don't just read conservative sources). Among my favorite quotes:

“I keep saying that the sexy job in the next 10 years will be statisticians,” said Hal Varian, chief economist at Google. “And I’m not kidding.”

"The new breed of statisticians . . . use powerful computers and sophisticated mathematical models to hunt for meaningful patterns and insights in vast troves of data." In the old days, we learned how to compute statistics. I'm intrigued that statistics nowadays is about interpretation and understanding - I think its a huge improvement in the discipline.

And for the material-minded: "The rising stature of statisticians, who can earn $125,000 at top companies in their first year after getting a doctorate . . . ." Not too shabby.

I think one of the things that unites the two somewhat dissimilar classes I teach is that they are both among the more practical and useful courses we require students to take in high school. You need many of the basic mathematical skills taught in the other math courses, but I guarantee you that familiarity with statistical lingo and methods will be useful. If you're still at Bell, think about taking the course. If you're in college, it's a smart elective to take. I'm not saying it's an easy course, but it's one that will pay off for you.

Inflation or Deflation video

Just found this and I can't stop laughing:

Debt and Deficits

Some of you who know me and endured my classes may remember (if you stayed awake) that I liked to show you the National Debt Clock . (This is a different one, but I think it's pretty cool.) And in class I would generally answer concerns about the size of the debt and deficits to our real GDP, in loose terms the income of the country. My favorite analogy was to compare the country's debt load to that of a homeowner, where higher income people had significantly higher debt loads, particularly on home mortgages, and it was okay because their higher incomes allowed them to adequately service the debt -in other words, they could afford the payments on the debt.

I'm becoming concerned that the National Debt is approaching an unaffordable point. We are now borrowing so much money and running such massive deficits that we may be putting the United States in the same position as the credit card abuser who runs up huge debts and has nno way to erver pay the debts off. And while this trend became somewhat troubling during the Bush Presidency, the acceleration of the spending and piling up of debt which has occurred so far in the Obama Presidency is frightening. Take a close look at this chart:

In today's news, a prominent economist is predicting that the United States will have to default on Treasury Bonds - not pay the debts when they are due. After that, who would lend to us ever again? What about the effect on interest rates? The rate you pay is based in significant part on risk premium, whether the lender believes you'll pay them back. Default, and rates go up. Or do we say this is the US government, let's just print the money? I don't want to become the next Zimbabwe.

I don't have a good feeling about this. The answer seems to me that government spending needs to be controlled, and ways of increasing revenue need to be found. And as I've said before, I don't think the revenue increase is going to come from simply raising taxes on the rich.

Disturbed?

Change Nothing? - John Stossel's Take on Health Care Reform

Change Nothing? - John Stossel's Take

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You Have to Laugh

Or cry. Senator Boxer can tell the protests at town hall meetings aren't sincere because the protesters are too well dressed. The video is at Hot Air.

I'll remember to dress like one of my students if I go to a meeting. I guess for sure this means no bow tie.

Economic Blog

One of the blogs I read regularly is written by Keith Hennessey. His economic analysis and arguments are impressive and I recommend him highly if you would like to read more detailed economic analysis, theory, and policy.

Are Cats Smarter Than Dogs?

Recent studies conclude dogs are smarter. At least US tax dollars didn't pay for this study,

Next, we'll do the experiment on high school seniors, if we can wake them up.

Cash for Clunkers?

In class, I follow the traditional appraoch to teaching macroeconomics. We teach a little of the Keynesian aggregate expenditures theory, followed by quite a bit of "fiscal policy". The we do quite a bit of monetary policy. Then, almost as an afterthought, we spend about a single class session on supply side approaches. This is in part a reflection of how the material is ultimately tested by the College Board and partly a reflection of our textbooks.

Personally, I have serious questions about Keynesian fiscal policy, and I have seen and studied much evidence supporting the effectiveness of supply side approaches. But let's see if we can spot one of my major misgivings about Keynesian fiscal policy in the current "Cash for Clunkers" program.

A digression: if I see one of you at Sonic, and I ask you to come dig a hole in my backyard and pay you $100, then tomorrow I ask you to come fill it in and pay you another $100, how is our economy enhanced? Where is the economic growth? All we have done is transfer $200 from me to you, without there being any economic substance or growth.

If the government pays you $4,500 for your car so that you can buy a new car and insists that your old car be destroyed, how is that any different in substance from my hole-digging analogy? What have we done other than transfer money from the government to the car manufacturers indirectly through this program? Yes, the auto manufacturers employ workers and pay them, but by destroying the traded in cars, we eliminate the potential of real economic growth. Maybe GDP will grow in the immediate time-frame, but how much of this represents purchases that would have occurred in the future? We are time-shifting economic activity, not creating growth.

That's my fundamental problem with most fiscal policy solutions. By having the government increase its spending, it is spending money that taxpayers would otherwise spend on their own. The money the government spends is taken away from taxpayers (or printed - see the post below on inflation) and therefore the taxpayers don't get a chance to spend it on what they want or need. An editorial I read recently in the Wall Street Journal suggested that the logical extension of this is the government should give us incentive payments for other things we buy so that we'll buy them now rather than deferring our purchases - makes as much sense as paying you to dig and then fill in holes in my yard.

Health Care and Edmund Burke - I Like This a Lot

In The Corner at National Review Online, Yuval Levin of the Ethics and Public Policy Center wrote:

Edmund Burke offered a reflection on this question in 1790:

What is the use of discussing a man's abstract right to food or to medicine? The question is upon the method of procuring and administering them. In that deliberation I shall always advise to call in the aid of the farmer and the physician, rather than the professor of metaphysics.

It seems to me that’s still basically the right response to the question of health care as a right. All sides in the contemporary debate are trying to find a way to provide health insurance to more people more efficiently and cheaply. They are not divided about any fundamental ethical question. People on the left are not saying we should provide unlimited medical care to all without thinking about the cost because health care is a right: They’re arguing their approach would cost less and work better for more people. People on the right are not saying we should forget about the poor because health care is just a privilege: They’re arguing their approach would cost less and work better for more people. Which of them is right is an important question, but it’s not fundamentally an ethical question, and whether health care is a right or not does not seem particularly relevant to finding the answer to that question.

I think is extremely apt, and that is why I have such a negative reaction to having th question framed as whether someone has a "right" to healthcare. As I've said, I agree totally that reform is needed, so if the poll asked me if I believe Congress should take action with respect to healthcare reform, I would answer in the affirmative. Do I support the plan pushed by Congressional leaders as it currently seems to exist - not at all. Of course I haven't read all of it, but neither have our Congressmen and Senators.

Taxes?

Remember during the Presidential campaign? Remember how then-candidate Obama said 95% of Americans would see a tax decrease?

One of the major disputes between Keynesian and Supply-Side economists is the relative roles of government spending and taxes. Both sides see tax decreases as expansionary, with the arguments over the size and mechanics of how tax decreases work to stimulate an economy. Supply-siders focus on incentives and rely on what is sometimes characterized as "trickle-down" while Keynesians argue that tax decreases increase disposable income, thereby increasing consumer spending (as influenced by the marginal propensity to consume).

I think both economic perspectives would see a tax increase as contractionary, not expansionary. Traditional Keynesians see a government spending increase accompanied by a tax increase as being only slightly expansionary.

In any event, despite claims during the campaign that his planned spending increases would necessitate tax increases which were adamantly objected to and refuted by the candidate, the President has now sent his top economic advisors on a round of Sunday talk shows to float the idea that middle class tax increases may be necessary. Let's see: unemployment is still rising and the recovery, if we have reached bottom, is weak, so let's raise taxes. Campaign on no tax increases, then increase taxes. Does anyone remember George H.W. Bush (Bush 41) and his statement "Read my lips, no new taxes"? After going back on that pledge, he became a one-term President as Bill Clinton pointed out over and over "It's the economy, stupid."

Those who don't remember history are doomed to repeat it. Or is it merely hubris?

Sunday Randomness Round II

I like to watch NASCAR on TV.

My favorite pro sport right now is hockey - I love the Dallas Stars and bought season tickets for this year.

My dog is very cool and cute, and it's fun having an unusual breed: a Shiba Inu.

Health Care - Reopening a Can of Worms

I'm back, and I think I'm ready to stir things up a bit. So let's talk health care (since Congress is wisely slowing the runaway train of reform down a bit).

It's commonplace to hear how the American health care system is unfair and in need of reform. If you listen to the politicians and major media, you come away convinced that our system is so deeply flawed that we need massive changes, and there is a sense that only government can be trusted to fix it.

From a simplistic economic standpoint, I tend to believe strongly in the efficiency of a free market system, with government involvement only to set fair playing rules for competitors in the market and to deal with what are known as externalities or market failures - situations where for one reason or another the market does not work correctly or efficiently. One of those market failure situations that we all inherently understand is a monopoly - where a single seller controls a market. We instinctively sense that the imbalance of market power causes problems - inefficiency, reduced output, higher prices, "supernormal profits", etc. I'm not sure why we don't have the same instinctive distrust of what is known as a monopsony - a market characterized by a single buyer. The economic arguments for inefficiency are simply the mirror image of a monopoly, yet there is a hue and cry for a monopsony in health care: the "single payer option" with the government as the single payer. In addition to the libertarian distrust of government that I have, I have a further economic problem with such an inefficient solution to a problem that I truly believe is overstated.

Why do I say it is overstated? Consider the following article: http://www.ncpa.org/pub/ba649

I strongly recommend that you read and consider the points being made there before you declare our system irretrievably broken. Some of you have questioned my sources at times - I think the sourcing and documentation of this report are impressive. Don't assume all conservative viewpoints are flawed and incorrect. Read and think for yourselves.

What's the problem with our system? In my opinion the flaws are explainable by my free-market economic approach: for a market to work, consumers and producers must be free to communicate with each other through the market and price mechanism. They aren't, because distortions created by wage controls many years ago and continued by tax laws have led to a system dominated by the insurance companies. In other words, the producer (hospitals, pharmaceutical companies, doctors, etc.) do not deal directly with consumers (patients) because the bulk of payment now is made by the insurance companies. So we have separated the payer from the consumer, a situation which almost always distorts market incentives and responses.

Rather that create a single payer system, we should instead focus on the economic source of the problems, the break created by the insurance companies' dominant role. As for people who are unable to afford or receive adequate healthcare, there are other, less intrusive, less expensive ways to see that they share the benefits identified in the article I linked to above. Let's not throw the baby out with the bath water.