No, empirics cannot tell you whether a minimum wage is a good idea
May 21, 2015, 12:07 pm
Filed under: Uncategorized

Kevin Drum says: By About 2020, We’ll Probably Finally Know Whether a $15 Minimum Wage Is a Good Idea

Actually, we know now. I’ll tell you the answer now. We know that it’s a bad idea now. No conceivable events or data gathered between now and 2020 can, even in principle, make a $15 minimum wage have been a good idea. (In fact, an $X minimum wage is a bad idea for all X.)

The ‘natural experiment’ of a city adopting this particular minimum wage will not tell us whether it’s a bad idea. (It is.) It might, at most, tell us how bad of an idea it is. Is it a marginally-bad idea, that in the event will end up having been dwarfed by, e.g., all the other bad things the government does (as well as by whatever natural disasters, geopolitical events, or for that matter unexpected technological advances might affect the economy)? Or is it a disastrously-bad idea whose bad effects dwarf other things to an extent that the idea’s badness will soon be undeniable by all but the hardcore ideologues?

That’s what we might learn ‘by 2020′. The ‘natural experiment’ only can tell, at most, how much damage the bad law caused – and maybe not even that (because you can never fully disentangle and isolate its effects). So even if, ‘by about 2020′, there are some Good Things to point to, that doesn’t (and can’t!) tell you that this minimum wage ‘was a good idea’. After all, you will not have access to the alternate-universe in which the minimum wage didn’t exist. There is no control group. You are not seeing the reference point. It’s not an actual experiment.

Now, the effect of this min. wage might indeed turn out to be only marginally-bad. Who knows. I get the impression that if it turns out to be marginally-bad, the Kevin Drums of the world will be out there calling that ‘good’. (After all, there’ll be some anecdotal people you can point to who will be making $15 at that time, and will prefer making $15 to making $9, so they will be happy.) But the main point of this post is just to emphasize that not-disastrously-bad (with an effect that a subset of people enjoy) is not the same as good.

A secondary point is just to, well, marvel at how retarded is the typical economic analysis we usually get in pro-minimum-wage arguments:

My own guess is that $15 is too high. I would have supported something in the $10-12 range for a city as large and basically prosperous as Los Angeles. But $15? There’s just too much uncertainty in a number that big

Got that?

$10-12 is fine. $15 is ‘too big’.

Sorry but I know some things about maths and a teeny bit of econ and stuff and I just I well I’m sorry but I don’t get it.

Where/how did Kevin Drum calculate this magical transition-point between $10 and $15? Is there a spreadsheet he can link to? I just do not understand. Nor does he. It’s all completely made-up. $10 being fine and $15 being bad is completely pulled out of his butt. The above passage is as good as him having come out and stated that explicitly.

Which goes back to my point: it’s all bad. The minimum wage is bad. It is a bad idea and a bad law. It’s never a question of ‘whether’ it’s bad, just a question of how bad.

DISCLAIMER. Kevin Drum is a very nice guy.

Bold new initiative: the government could even make lending decisions!
May 21, 2015, 10:28 am
Filed under: Uncategorized

Lion says that people who don’t embrace his idea to ‘socialize financial services’ just lack ‘imagination’. Perhaps. And imagination is a beautiful thing. I like to imagine lots of things. Like I imagine I’m back in high school doing a big rock show in the quad at lunchtime and all the girls are

Wait. Where was I. Oh yes. That Lion post and ‘socializing financial services’. Ok you see, the problem here is that while I may lack imagination, Lion lacks knowledge. Of what he is talking about. I also lack knowledge of many/most things but it is, I dare say, a problem for someone who claims he knows ‘how to’ socialize financial services when he so apparently doesn’t know what he’s talking about.

Don’t believe me? Here’s one of his how-tos:

I think that a government-run bank could even make lending decisions.

Wow! Revolutionary!

Um. Could, and does, Mr. Lion.

Sorry to be the first to break it to you, but Fannie and Freddie are (in effect) government-run banks that make lending decisions! That is all that they do! They make decisions regarding which loans/borrowers are ‘conforming’, then they loan people money to buy houses as long as they meet those (blunt/dumb/easily-gamed) statistical criteria.

How did that work out, Mr. Lion? (Hint: they both declared bankruptcy in 2008 and were formally, as opposed to wink-wink kinda-sorta, taken over by the government. Now they are fully and officially on the government’s balance-sheet.)

Another government-run bank that makes lending decisions is called the FFB. A hint that this is a government-run bank is that FFB stands for ‘Federal Financing Bank’. This is the government-run bank that made that loan to Solyndra – you know, the stellar socialized lending decision to pour $500 million down the drain. Tell me more about how great it is when the federal government makes lending decisions Mr. Lion!

There’s yet another government-run bank you may have heard of, it’s called the Federal Reserve system (or, colloquially, our ‘central bank’ – another hint that the government runs banks). It makes loans to big institutions of its choosing and definition (also, perhaps confusingly, called ‘banks’, but whatever) by crediting them with ‘reserve’ balances (i.e. printing money) for those banks to then go out and do whatever (or, nothing) with. When things get rough, like there’s a The Financial Crisis™, in Smart Peoples’ view this government-run bank is also supposed to be the ‘lender of last resort’ – which, you might guess, also de facto means making a ‘lending decision’.

One of our newest government-run banks is called the Department of Education. What’s that, you didn’t realize that was a bank? But if you think about it they make tens of billions in, well, loans every year to teenagers and twentysomethings. This involves the highly-informed and quantitative-criteria-driven ‘lending decision’ which goes something like ‘oh you say you want to go to a thing that is, technically, a ‘college’ and you’re a person? ok great we shall lend you money just have the college or fake-college tell us how much’. I’m sure we all look forward to seeing how these lending decisions will have worked out in the next decade or two.

I’m sure there’s plenty more. Small-business loans, political-crony loans, loans for public works, loans for ‘green’ bullcrap. It’s not even limited to just loans; for example, the government has, on our national credit, sold super-senior synthetic-CDO tranche protection to health-insurance companies (perhaps without quite knowing it). The government runs, or tries to run, a giant pension system (you may have heard of ‘Social Security’). And, so forth.

At this time, and on an ongoing basis, and for many many many years, the government has been knee-deep in doing literally exactly what Lion boldly declares in May 2015 that the government ‘could even’ do. And I don’t know about you but I am less than impressed with the results. It would be interesting to hear if Lion has a different opinion of those results or whatever, like whether he thinks Fannie/Freddie and the FFB and the DoE and random Congressmen with cronies all do an awesome job of making lending decisions, but the problem is that he seems not to even be quite aware that all this lending even exists.

I don’t see why a credit analyst being by a government bank is suddenly going to become sores [sic; worse] at his job than the same credit analyst working at a private bank.

Um. What ‘credit analyst’, Lion? is one question that comes to mind here.

See how he doesn’t know what he’s talking about?

More ideas and how-tos:

Cashless payments: Why should American Express get 3.5% of every credit card transaction? This is surely something the government could do profitably with only a 0.5% fee. Simultaneously, they should pass a law which …

I guess. I got bored reading this. Somehow I’ve managed to find a way to avoid paying fees on electronic transactions without the government running the show. But, whatever, this one is fine I guess. Just boring

Investment banking: The government can create a website where issues of securities can get hooked up with investors.

Sounds neat and not fraught with risks at all. I wonder if they can hire the same contracting firm (for negligible cost, I’m sure) that made the Obamacare website to set this up.

Consumer credit: Consumer credit is generally a way that rich people rip off poor proles whose future time orientation is too low to realize that borrowing money to pay for an expensive car or vacation is in the long run a really bad deal. The government should put a stop to this.

Yes, it should be illegal to lend money to people who apparently have a need for it. That will solve lots of problems (?)

In any event, once again Lion appears unaware that there are in fact actual state-level usury laws, and that the government does indeed put a cap on interest rates and try to do ‘consumer protection’ cracking down on ‘exploiting’ borrowers and so forth. The new Elizabeth Warren agency (I forget its name) is hot on the case of exciting things like this and so far lots of lives have been changed. (I kid. Lots of government-jobs have been created, I mean.)

Anyway, it seems like his post of how-tos ended there. Odd. I guess in general if Lion is genuinely interested in this whole subject that’s cool and all, but he should probably read up on it or talk to people who know stuff about it or something. I have really only scratched the surface here.

May 20, 2015, 7:27 am
Filed under: Uncategorized

John Quiggin has a weird piece saying that the (purely mathematical) concept of Pareto-optimality is ‘misleading’ because, like, Pareto was a fascist (or something). Oh well read the whole thing I guess (I couldn’t) but this snark seemed worth highlighting:

The supposed constancy of income distribution implies that any attempt at redistribution must be essentially futile. Even [if] the aim is to benefit the poor at the expense of the rich, the effect will simply be to make some people newly rich at the expense of those who are currently rich. Pareto called this process ‘the circulation of elites’.

ZOMG so dumb. That idea sounds fascist frankly.

Hey, meanwhile, in other news, the Clintons (Bill and Hillary Clinton – two people of apparently modest intelligence who, like, got law degrees?) have something like 8 digits of net-worth. You know, for, uh, doing that stuff they do.

May 13, 2015, 2:05 pm
Filed under: Uncategorized

Noah Smith claims that one reason that economists don’t (says he) have physics-envy is that

Economists are treated as experts on practically anything. An economist can talk about why hipsters have moustaches, and get taken seriously. An economist can talk about which restaurants are the best, and get taken seriously (Update: NO, I’m not saying Tyler’s book is bad, I haven’t even read it, so HUSH). An economist can talk about politics, marriage, popular music, sex, race, or sports and get taken as seriously as any expert in those fields. An economist can talk about how much progress physicists are likely to make, and get taken seriously.

All of which is news to me. I hadn’t previously suspected economists to be taken seriously – at least not by anyone I would consider serious – on any of those things.

The fact that “Freakonomics” becomes a bestseller doesn’t strike me as an example of economics being ‘taken seriously’, but rather of pop-econ being sometimes entertaining, which is, well, different. A related phenomenon is that of economists (sometimes) being characters and/or fascinatingly-blowhardish because they are (often) so arrogant and full of themselves (one might even say, prone to saying things like ‘someone in my field is treated as an expert on practically anything’). If Tyler Cowen wrote a book on restaurants I’m sure that’s pretty entertaining too, for similar reasons…having very little to do with economics.

No, the rich don’t ‘want to pay more taxes’
May 6, 2015, 12:00 pm
Filed under: Uncategorized

Lion notes that the rich prefer (D)s (which is true) then suggests it’s a puzzle that (R)s should be so low-tax since that (supposedly) helps the rich.

But this is misguided. The primary taxes that the (D)s clamor to be neverendingly increased (and which (R)s have to fight to prevent being increased) are income taxes. Rich people don’t pay no stinkin’ “income taxes”. So when Mr. Richie Progressive says “I want taxes to be raised” he’s not talking about a tax incidence that will be felt much by him personally. He’s talking about raising tax on other, orders-of-magnitude-poorer people than himself: the middle- and upper-middle classes, mostly.

One might object that Richie Progressive (sometimes) also claims to want the capital-gains tax to be increased. Perhaps this is true, but doesn’t change the point. R. Progressive, Esq. is confident his financial planners will find appropriate tax-shielded vehicles and structures, do the appropriate tax-loss harvesting, and all that. So he knows that in practice a headline “X% increase” in that tax rate won’t actually be felt by him as a X% increase, if at all. So, whatever.

One reason such policies appeal to Richie Progressive is that the alternative he fears – the real fear – is populist-driven wealth garnishment, if not full-on ‘The Purge’-style unrest, expropriation, and lynching. By ostentatiously claiming to ‘want to pay more taxes’ he primarily hopes he is tossing the masses a bone (and the (D)s he helps elect will throw them some bread & circuses) to keep them off his and his family’s back.

And again, in practice the tax policies pushed by (D)s would largely mean raising taxes on other, poorer people than Richie Progressive, so it’s win-win! He gets to keep down would-be nouveau-riche at the same time, by placing obstacles in their path to social advancement. This helps ensconce him and his good-for-nothing kids’ place in perma-richness. What’s not to like?

Here’s a thought experiment: instead of just ‘raising (income) taxes’, let’s see the (D)s propose a tax reform that actually hits actual super-rich people (you know, like the Clintons) where they actually live. Not this silly oh-no-don’t-toss-me-in-that-briar-patch ‘raise the top marginal income tax rate’ nonsense.

For starters, (1) Get absolute rid of all tax advantages for setting up ‘Family Foundations’ and ‘Blind Charitable Trusts’ and all that BS. GET COMPLETE RID OF ALL SUCH STRUCTURES. (2) Giant wealth-tax – like 95% flat garnishment – on all net-worth above, say, $10 million.

Then let’s just see how many Richie Progressives (not to mention Warren Buffets) of the world go around in the media saying they ‘want’ such a policy – and backing the (D) pols who propose it.

C’mon superrich! Put your money where your mouth is! You say you ‘want to pay more taxes’ right? Well this would do it!

The point being, superrich people don’t back (D)s because they somehow – unlike all other humans – are magically selfless creatures who work against their own interest. They back (D)s because (D) policies work in their favor. This is what the (correct) observation that superrich vote (D) is supposed to make you realize, although few do.

UPDATE: This comment downthread by Lion is instructive. First, he calls one of the points above ‘made-up libertarian nonsense’.

That rich want higher taxes to prevent other people from becoming rich is made-up libertarian nonsense.

He then supplies his own made-up nonsense:

They want higher taxes because they believe in the liberal stuff about helping the less fortunate, or maybe they don’t really want higher taxes but they vote Democratic because issues like gay marriage and global warming are a lot more important to them than tax rates.

Hey maybe! But to complain about ‘made-up nonsense’ and then toss out random theories in the next breath is pretty breathtaking.

Finally, he contradicts his paragraph 1 in paragraph 3 by actually conceding the very thing he had called ‘made-up nonsense':

I am sure that a lot of rich people do realize that it’s their location in the pecking order they care about and not the absolute value of their wealth.

Well, right! See, that’s what some of us are saying.

In any event, to expand a little on my ‘made-up nonsense': The idea is not that superrich people have the conscious thought, ‘I Wish To Keep People On The Rungs Directly Below Me From Surpassing Me In The Pecking-Order’, and then calculate that higher marginal tax rates is the best bang-for-the-buck way to do that, and (therefore, on that basis) vote (D). The idea is, rather, that

1) the superrich have multiple, overlapping incentives to (ostentatiously, publicly) ‘want higher taxes': throw masses a bone; avoid The Purge; and, yes, reduce social mobility/volatility (that can only act to displace them, as Lion concedes!). I would also mention two other factors: one, higher taxes (and thus, bigger government) helps the sort of superrich whose wealth depends on connections to government; and two, saying ‘please tax me!’ acts as a form of conspicuous consumption, because it signals to all around you that you’re so rich that you could be taxed and not even feel it.

2) so the ‘please tax me!’ posture is overdetermined: they have every reason in the world to adopt this posture. Nor does this even have to mean the posture isn’t ‘sincere’, as far as it goes. Sure, they mean it. Why wouldn’t they? After all:

3) the posture is cheap. Words are the cheapest thing in the world! Give an interview, say ‘I want higher taxes’. Easy!

4) But don’t get me wrong: it is also literally cheap. The kinds and methods of taxes (D)s push for, and thus which Richie Progressives ‘want’, don’t really hit rich people where they hurt anyway. It would actually be mathematically impossible to construct a marginal income-tax raise that would materially affect, like, Paris Hilton in any way that she would actually feel. All such raises are, however, felt by middle-manager, engineer etc. employee types who make like $130k or something and have the two kids and the mortgage.

So AGAIN I must point out that in practical effect, what the Warren Buffets of the world are literally saying is: “Please, Mr. Government-Man, I, billionaire, would like you to tax that guy making $130k with two kids and a mortgage more than you already do.” The proper response, Lion, is not to marvel ‘wow he really wants high taxes’ but to say ‘Fuck you too’.

5) And again, notice, you don’t (usually) see these superrich ‘wanting’ confiscatory wealth taxes, or asking to undo the parts of the tax code that let them set up bullshit perma-wealth ‘Foundations’ and shield so much of their wealth from tax and ensconce their families as nobility. Nor, of course, do you see serious proposals from the (D)s to do these things. After all, the (D)s do them too.

Welfare Is A ‘Job’
May 5, 2015, 9:33 am
Filed under: Uncategorized

Arnold Kling struggles with the question, what is a job.

A job is a context for performing a particular small set of tasks that can be exchanged for the means to obtain goods and services produced by a far larger set of tasks.

By this definition, the stereotypical welfare-collector ‘has a job’. He/she indeed has a particular small set of tasks to perform:

  • Fill out some paperwork at the local Social Welfare Bureaucratic Place, or forms online, or whatever, to ‘sign up’, or whatever, for the welfare.
  • Vote straight (D)-party candidates in all elections. (The linkage here between performing the task & collecting the goods/services is admittedly stochastic rather than deterministic, but plenty of other jobs are like that too.)
  • Riot/crime/dysfunction/mayhem? (Perhaps only occasionally or fractionally, but at least with some critical-frequency that gives politicians sufficient talking-point fodder to make their demagogic pitches for the welfare, anyway.)

In return for performing these tasks (the latter two – arguably the most important – of which can be summarized as ’empower certain politicians’), the welfare-collector receives the means to obtain goods and services – i.e., money. Or he is given some such services in-kind – health care, for example. Either way, the transaction is there and the linkage fairly strong. (There are exceptions, like when Clinton defaulted on his implicit end of the bargain by ‘ending welfare as we know it’ – just as an employer can go bankrupt and default on employee pay/pensions – but those exceptions, I’d say, prove the rule.)

I mean, empirically, these form-filling, lever-pulling and community-polluting tasks clearly can, usually, ‘be exchanged for the means to obtain goods and services produced by a far larger set of tasks’. This relationship between welfare-collector and the state, then, meets all of Arnold Kling’s criteria for being ‘a job’. We can think one of three things about this observation:

1. Kling’s definition is just bad. I don’t want to say this (not yet). I like and have immense respect for Kling, and would be loathe to dismiss his thought so readily, without giving it more thought myself.

2. Kling’s definition needs some amendments/conditions to exclude this relationship from being termed a ‘job’, since we don’t want to think of it as one. But what exactly? I can think of possible amendments, but they seem to be ad hoc and throw the baby out with the bathwater, by excluding too much. The payer can’t be the government? But surely genuine bona fide government jobs are, whatever else they are, ‘jobs’. The recipient must ‘create value’ in the transaction? How on earth do we measure ‘value’ (other than by what is revealed by what the recipient receives)?

3. Kling’s definition is fine, and so we should just follow it to its conclusion: ‘welfare recipient’ is indeed a job. Hmmm. Maybe!

If we provisionally go with #3, we’re left with a description of the economy in which almost all people have ‘jobs’, it’s just that some of those ‘jobs’ involve being on various forms of welfare, and the fraction of ’employees’ with the welfare ‘job’ fluctuates over time. Well gee now what? Presumably conservative minded folks such as Kling (and myself) would really like to say that it’s bad for people to have the welfare ‘job’, for the ‘welfare work force’ to be large rather than small. But why exactly? We can’t even get there by calling welfare ‘not a job’ anymore.

In fact, here are some other examples of ‘jobs’, per this definition: drug dealer, layabout good-for-nothing trust-fund collector, street beggar, being mentally ill and institutionalized, car thief, prostitute, mortgage fraudster who hasn’t made a mortgage payment in 5+ years but fights foreclosure in court, Kim Kardashian (oh but I already said prostitute), daytime home burglar, ex-President who informally ‘advises’ and greases wheels for (other) rich people trading off his wife’s cabinet position, guy who wheels around a train of stolen shopping-carts skimming aluminimum cans from your recycling bin at 3 a.m., etc. etc. etc.

Those are all ‘jobs’ by Kling’s definition, surely: small number of tasks, receives large number in return – etc. And so almost anyone you can name who draws breath and has a pulse has at least some ‘job’, almost by definition. Which observation gets us nowhere I’m afraid.

To get somewhere, I guess we’d have to start distinguishing among ‘jobs’ by asserting that some ‘jobs’ are actually bad and socially-undesirable, and that what we seek is not to blindly increase the number of ‘jobs’ (or create a Pattern Of Sustainable Whatever in which the number of ‘jobs’ increases, whatever), but rather to shape and alter the types of ‘jobs’ that exist so that (among other things) the number of people with the bad types of ‘jobs’ goes down.

I’m willing to go there and call some jobs bad, of course (although following this path has twisted us into speaking in a way that will be understood by too few to be of any use). But in order to do that we have to start a look-through into how and why the ‘job’ we’re concerned with was created or exists, and critique or praise the process that led to its existence. Merely defining ‘job’ itself, especially in this broad Klingian sense, doesn’t help us do that at all. I’m afraid we may have to start talking about things like rights, externalities, and rule of law.

But that’s an entirely different kind of discussion, altogether.

Chris Rock on the missing black player
April 27, 2015, 10:06 pm
Filed under: Uncategorized

Chris Rock takes up the noble cause of the missing black player:

“Last year, the San Francisco Giants won it all without any black guys on the team.”

Just for the record, their 25-man 2014 World Series roster included the following lilywhite WASPs.

Santiago Casilla

Jean Machi

Yusmeiro Petit

Joaquin Arias

Pablo Sandoval

Ack! It’s like a 1950s Tupperware party in here! Someone break out the Jell-o dessert!

And I have editorially excluded some of the other players who are probably more Latino-ish than “black”: Sergio Romo, Gregor Blanco, Juan Perez, Javier Lopez…to say nothing of Travis Ishikawa…

Why does this stupid-ass meme persist?

Here’s a theory: black people feel self-conscious because black Americans have (evidently) been losing roster spots to black Central- and South-Americans. This (stupid-ass) meme that this is a failure of baseball is more palatable than the reality, which is that it’s a failure of black Americans.

‘Oh, but we just don’t want those roster spots.’ Sure you don’t. Baseball players earn basically the most you can earn in pro sports this side of pro golfers. I still remember when Dave Winfield was the highest-paid contract at $1 million per year; then Kirby Puckett broke the $2mm/year barrier. But now, even some mediocre middle reliever or second baseman with modest home-run potential can get an 8-digit contact. ‘We just don’t like the sport anymore, it’s too uncool.’ Uh huh, keep telling yourself that. Hey, it’s okay that you suck at baseball, don’t feel bad.

Meanwhile, fat guy Pablo Sandoval (a whopping 14 home runs last year): being paid $100 million over 5 years from the Red Sox.

But basketball is ‘cooler’. Ok then, enjoy.


Get every new post delivered to your Inbox.

Join 469 other followers