Thursday, April 30, 2015

Minimum wage

There are many descriptors for people able to hold contradictory thoughts without flinching. It can be seen as profound sophistication or as muddled thinking. President Obama famously blamed ATM machines for job losses and unemployment. The President is also a fan of raising the minimum wage.

The picture below is of a McDonald's robot order-taker-cashier. This one surely replaces entry-level workers. It's also a sure bet that as employing real humans becomes costlier, more such machines will be installed.

Recall that the much-celebrated Card-Krueger study that found wage hikes are harmless looked at fast-food outlets.

Monday, April 27, 2015


With the centenary of the Armenian genocide, many are mourning but others stick with denial. Of all the people with crimes to face up to, the Germans must be commended for the all the Holocaust memorials they have created.

The most moving one, in my view, is Gleis (track) 17 at Berlin 's Grunewald station. This is the place from which Berlin's Jews were sent to the death camps. The platform has been retired from use and an iron plaque has been placed for each transport to "the east", noting the date, destination and how many were sent away. The last dates were in February, 1945. The war had been lost but the murders went on (Kershaw).

Wednesday, April 22, 2015

Science over hysteria

Here is the summary of Prof Judith Curry's testimony to the Committee of Science, Space and Technology of the U.S House of Representatives on "The President's U.N. Climate Pledge."

Curry, to her great credit, is neither a true believer nor a "denier." She is a scientist and writes about what we know and what we don't know. This moves away from the land of "climate pledges" and a million other trendy postures and policies.

Scientists, as well as non-scientists, should know that human ingenuity has always triumphed over past doomsday forecasts. Scientists should never scuttle scepticism and should be wary of politicians making climate pledges. "Fatal conceit" is what the latter traffic in.

Read Curry' statement.

Tuesday, April 21, 2015

Right and wrong capitalism

Announce you are setting your company's minimum wage at $70,000, probably above the market rate for some of those covered, and people line up to opine.  This NY Times piece reports on some of the views. But this is not a case of a legally mandated minimum wage. So let the employer/owner (of Gravity Payments of Seattle in this case) go forward with his experiment. As far as I can tell, all of the commentators cited have no direct stake in the outcome.

The real stake we all have is in the survival of trial-and-error entrepreneurialism. These are real life experiments involving willing participants. My own impulse is not to buy a stake in Gravity Payments. But I can be wrong in my skepticism. If so, I pay the price as I sit on the sidelines.

With all of the talk of "secular stagnation" (what is it? what are its causes and possible cures?), many people lose sight of the big picture.  We will do well if and only if entrepreneurial trial-and-error capitalism survives. If it does not (the real crowding out we should think about), we will have lost the game.

Here is the wrong capitalism -- all around us. (H/T Newmark's Door).

Here is a book on the entrpreneurialism that I have just started to read.

Saturday, April 18, 2015

Superb history

We hear that young people don't know much about history. Perhaps their teachers should have them  read the works of Stephen Ambrose, whose Undaunted Courage: Meriwether Lewis, Thomas Jefferson and the Opening of the American West is what they used to call a page-turner. But it is also essential and well documented history.

Jefferson was a visionary (a word that usually makes me cringe). The Louisiana purchase was a good idea. So was the thought that there might be a water route to the Pacific via the Missouri and Columbia Rivers -- not found, to the great disappointment of all involved. So also was the choice of Meriwether Lewis to assemble the group of explorers and lead them through unknown territory and back. Jefferson was also wise to have Lewis move into the White House as part of his preparation so that the two men could share all that Jefferson knew of the relevant geography, navigation, natural life, etc. Lewis was instructed to bring back information as well as examples of plant and animal life. There was no thought to finding gold or silver. Ambrose calls all this emblematic of the "American enlightenment."

We see that trade and new trade routes were seen for their fundamental value and importance (unlike many commentators today). We learn that Indians who had never seen white men were ready and eager to trade. Aside from one episode, whites and Indians were able to avoid confrontation and violence. This in spite of their mutual strangeness and no common language.

Yes, Lewis and his men referred to the Indians as "savages".  Lewis and others of the expedition saw that it was natural to own black slaves. They were men of their time. But when major route choice decision time came, "[t]his was the first vote ever held in the Pacific Northwest. It was the first time in American history that a black slave had voted, the first time a woman had voted" (p. 316).

Lewis came to  a bad ending. He was a much better explorer than a politician. Jefferson's great failing was appointing him Governor of the Louisiana territory on his return from the expedition. Lewis and Clark failed to follow up and get their valuable journals published. That was left to others. "... [T]he journals he [Lewis] wrote are among his greatest achievements and constitute a priceless gift to the American people, all thanks, apparently, to lessons learned from Mr. Jefferson during his two years of intimate contact with the president in in his house" (p. 67). Read the book.

Wednesday, April 15, 2015

Big tent

Timothy Snyder's Bloodlands: Europe Between Hitler and Stalin is indispensable. The area was a tough neighborhood even before the two dictators arrived. Borderlands are that way. But modern industrialized killing made everything much worse. George Kaufman makes a similar point. He writes about Flashpoints and updates the story in order to address today's many conflicts in Europe. It's always a "new ballgame" and (Friedman notes) it's not.

Both authors make the point that Hitler and his band murdered millions in the name of race war; Stalin and his followers murdered millions in the name of class war. But Stalin and his heirs (Mao, Ho, Fidel, Che, Hugo, to name a few) still get a better press than the Hitlerites because race war has (rightly) become unfashionable (exclude the jihadists) while class war is still very popular. (What would politicians do without it?)

Writing in the current Independent Review, Andrei Znamenski ("From 'National Socialists' to 'Nazi': History, Politics and the English Language"), notes that Nazis did not refer to themselves as "Nazis." They liked to be called National Socialists. But the label "Nazi" is now preferred by most people in the West so as not to taint the label "socialist". There is supposedly honor in class war so we must be careful who to include in any "socialist" big tent.

Saturday, April 11, 2015

Specialists, not regulators

This morning's WSJ opines (as do many these days) re California water ("California's Farm-Water Scapegoat"). The piece begins this way:
Perhaps the only issue on which Bay Area liberals and conservatives down California’s coastline agree is that farmers use too much water and should be rationed. The fortunate in Silicon Valley and Marin County need a tutorial in Golden State water allocation.

According to the fable of the prodigal farmer spun by environmentalists, farmers are producing too many water-intensive crops and over-pumping groundwater. Big Agriculture is said to have negotiated dirt cheap water rates with the government that are subsidized by city dwellers and suburbanites. As a purportedly even greater injustice, Governor Jerry Brown’s new mandate to cut statewide water usage by 25% exempts farmers.

The reality is that farm water has already been rationed for more than two decades by the ascendant green politics, starting with the 1992 federal Central Valley Project Improvement Act. Federal protections for the delta smelt, salmon, steelhead and sturgeon (2008-2009) further restricted water pumping at the Sacramento-San Joaquin River Delta, so 76% of inflows, mainly from the Sierra Nevada mountains, spill into San Francisco Bay.
The piece goes on to describe some of the adaptations/distortions that result when allocations are mandated.

But there are two problems in the cited passages. First, water (everything) is always rationed -- by price, by fiat, by convention, etc. To complain of "rationing" is very odd, especially for WSJ writers. The same inaccurate rhetoric comes into the health care debates.  It is never rationing-vs-non-rationing. But, rather rationing how.

Second, the editorial sounds like the Ralph Nader theme that "my regulators would be better than your regulators." The authors of the editorial would regulate California water allocations so that farmers get more and wildlife less than in recent years. But no breed of regulator can possibly arrive at a sensible answer because the details of water allocation are too complex to be knowable by any body of well meaning (or not) officials. All investments and all plans involve risk-taking and are best left to the specialists, those who have a stake in the outcome.

Wednesday, April 08, 2015

Rand Paul

Radio guy Larry Elder redefined himself some years ago from Libertarian to Libertarian-Republican, as "Republitarian." Likewise, Rand Paul will look for votes among those who want liberty returned to U.S. political discourse but who also fear the consequences of isolationism abroad. We have come a long way and people like Elder and Paul and many others deserve credit for mainstreaming views that had been missing from political discourse for too long.

I have often mentioned Arnold Kling's useful three-axes model. Republicans look at a civilization-barbarism axis; progressives use oppressor-oppressed; libertarians prefer freedom-coercion. Understanding the views of others is always desirable.

"Mainstream" opinion follows the progressive view -- and loves to evoke "fairness." The complexity of "fair" is ignored -- as are the baleful consequences of the embraced (default) policitical allocations.

This morning's LA Times includes, "Some charities fear L.A. wage could hurt their own efforts for workers." Complicated! Mandated wage hikes were supposed to be funded by fat cats -- and that is that. Oppressors pay and oppressed benefit. Labor demand elasticities do not exist and life is simple. But if you are confined to viewing the world along the progressive axis, then struggle -- as the people in the Times story seem to.

Paul gets all this. There is plenty of high ground for him to claim. Politicized allocations are most "fair" to cronies. Freedom makes upward mobility possible; 50 years of "war on poverty" policies have failed that test -- witness the chorus of complaints about increasing inequality.

Monday, April 06, 2015

Not easy being "green"

Two things struck me as I arrived at USC early this morning. The campus seemed unusually littered. A clean-up crew was hard at work with their power-blowers, gathering all the litter. The other was that I picked up the campus daily which headlined. "Greenfest educates and entertains attendees ... The event ran alongside Springfest and promoted energy awareness."


Related to all this is Radical Secularization? which some people may find clarifying.


Mondays are great because Econtalk appears.  Here are three smart people discussing the works of Adam SmithLearning these ideas, including what it means to be sociable, may be a better use of time than marinating in some undefined "sustainability". 

Saturday, April 04, 2015

"Fixing" the problem.

Policy failures bring on policy "fixes" that usually make things even worse. Various clear elaborations of the problem are in Burton Abrams' The Terrible 10: A Century of Economic Folly. See, especially, his chapter on "Government Failure and the Great Recession."  The various "fixes" that have been served up since then are not promising.  See last Friday's jobs report.

Where to begin? It appears that politicized water allocations in California ship most water to almond growers. But polite company only sees "drought" and the "need" for more water wisdom from Sacramento. I do not think that these people have ever put "price" and "water" into the same sentence. More awfulness will follow.

The latest Economist leads with "Space and the City: The high cost of wasting land."  Bingo. Restrictions push up prices. "Affordability" problems follow.  But somehow the leader's author also thinks that better top-down land use planning is possible.  Good luck.

The follow-up piece in the same issue cites recent research by Enrico Moretti and Chang-Tai Hsieh ("Growth in Cities and Countries").  The authors model the economic costs of U.S. workers separated from the jobs where they would be most productive -- separated by the high costs of living nearby. They find that the annual cost is $1.7 trillion (with a "t").

And then comes another possible "fix". "Alternatively, a possible solution is the development of forms of public transportation that link local labor markets characterized by high productivity and high nominal wages in local labor markets characterized by low nominal wages. One obvious example is the high speed train currently under consideration in California ..." (p. 7).

Among the "root causes" of the Watts riots cited in the McCone Commission analysis of events was joblessness caused by poor transit connections to jobs centers. Ever since, public transit funding has been promoted as a remedy for unemployment. The money was duly spend but inner city unemployment never got better. It's those "fixes" again.

Thursday, April 02, 2015


In his New Yorker review of two recent books about the Holocaust ("The System ... Two new histories show how the Nazi concentration camps worked") Adam Kirsch notes once again that Nazi barbarity continued with ferocity, even as it exacted a high cost in terms of Germany's losing war effort; the victims had been effectively dehumanized in the German mind. "Once a prisoner ceased to be human, he could be brutalized, enslaved, experimented on, or gassed at will, because he was no longer a being with a soul or a self but a biological machine."

But then Kirsch goes off the rails. "The enemies we kill in war, the convicted prisoners we lock up for life, even the distant workers who manufacture our clothes and toys—how could any society function if the full humanity of all these were taken into account."
I like my iPhone and I am happy that supply chains now extend to China and beyond -- and that "distant workers" in poor countries have new and better labor market options than ever. Death and despair are not the rule. China's growth has been good for hundreds of millions of Chinese. There are workplace tragedies and we expect that they are attended to as they come to light.

Non-zero-sum outcomes are not easily accepted by many smart people. We see that all the time.  But analogizing the customers of developing country exporters to Nazi death camp sadists is bizarre.