What do breast cancer tests and airport screens for terrorists have in common? Answer: Both involve huge uncertainties. Nothing in life is for sure. Nothing in life comes for free. There really are no free lunches in life. This is as true of testing as of any other area in life. Whenever, and wherever, we run tests there are always two errors that float around. The first, which is called a Type I error, occurs when the test fails to detect a problem. For example, one might have an inspector looking for a gas leak in a house. If the machine fails to detect a leak, when one really does exist, then one has a Type I error. For the homeowner in question, this can be very inconvenient if not plain downright distressing. On the other hand, the world is full of natural gas, so if the machine is set at a level that is too sensitive it will detect natural gases in the air of a house that does not have an actual gas leak. The result for that homeowner might be a wholly unnecessary and very expensive repair job. This kind of error is called a Type II error. It results in “false positives.” All scientific testing involves a balance between these two errors. Continue reading
My mother always told me that you get what you pay for. I was reminded of it this past week when among all the bad news about the market and the uproar about the bailout bill, we were also dealing with tainted milk products from China. We want cheap. We demand cheap. We have websites that offer to search the neighborhood for the cheapest product. We seem to have completely forgotten my mother’s advice that you get what you pay for. If you want a product that is safe, then you need to be willing to pay a little extra for it. Not only will the ingredients be more expensive such as non-lead based paint, but one also has to pay for inspectors to ensure that the product is produced to the required standard. If we want cheap, we can get it. But don’t ask for cheap and quality and safe for your health. That combination doesn’t work.
The papers this morning are full of Members of Congress and several journalists patting themselves on the back for their support of free markets, the supposed grounds on which they rejected Monday’s bill. Sadly, their comments simply reflect their ignorance of history, their Bible, and basic economics. Continue reading
So here we are the day after the great rejection and t he market is attempting to recover. As I write, about noon EST, the Dow is up about 200 points — still 600 points to go to even get back to where we started yesterday before the great rejection. Two of my favorite commentators last night, Ben Stein and Paul Krugman, were in agreement that the bill was imperfect, very imperfect, and that the Treasury Secretary was asking for powers that required usurpation of the Constitution. That said, they both agreed that Congress was playing with fire and that the entire economy could be brought down in ruins. Continue reading