Thursday, July 24, 2014

Minimum wage: Socialism or Communism?

I've said that I'll try not to be didactic, that I'll describe and not prescribe, that I'll listen first and preach second.  However, when it comes to minimum wage, I am going to ignore my own advice.  Minimum wage is a bad idea.  It needs to be repealed.  Minimum wage is just like communism, only on a smaller scale.

In the US we take it for granted that communism is bad.  It is ineffective and harmful.  This is practically universally accepted.  Given all the marketplace clusterfucks we have experienced, many Americans are starting to lose faith in the effectiveness of capitalism, but most still adamantly reject communism.

Americans are losing faith in capitalism, but still reject communism.

Socialism is very different from communism.  Socialism is about public welfare, shared accountability, and social contracts.  Communism, on the other hand, can be described as enforced equality.  Socialism, ideally, is democratic.  The public enacts and reviews programs and policies designed to serve the public good.  Communism, on the other hand, tends to be run by an oligarchichal, self-contained political movement.  Whereas socialism elicits the contributions of a diverse groups of people, communism appears to be lead by a small set of revered leaders.  I may not be the best person to ask about socialism, but I can at least recognize many ways in which it is different from communism.

Socialists like to claim minimum wage as their own.  They could not be more wrong.  Minimum wage is fundamentally different from things like public transit, need based welfare, social security, public health care, and state funded education.

There are two big differences between minimum wage and actual socialist programs.


Social programs are elective.
Minimum wage is not.


1) Social programs are elective for recipients.  You choose to collect social security, medicaid, or welfare.  You choose to ride state subsidized public transit or receive a state subsidized education.  If it is inconvenient or unnecessary, you don't have to participate.  This gives you both personal choice and can save taxpayer money.

Minimum wage is not elective.  If you are retired and working because you want to be active, you are still forced to take minimum wage.  If you want to work a second job parttime as a hobby, you are still forced to take minimum wage.  In both these cases, the primary benefit of working is doing the work itself.  Getting paid is only a secondary benefit.  You don't need the money, in fact, you would probably sacrifice some of the money you earn for more flexibility and more options.  With minimum wage you are limited in your options.

Voluntarily working for less money doesn't take jobs away from people, on the contrary, giving without asking for much in return helps everyone to have more and be more prosperous.  It's just as beneficial as electing not to recieve other forms of public welfare.

I'm not saying you should forgoe all benefits to try to save taxpayer money.  If you need it, accepting benefits is better than trying to save a few dimes.  The economic premise of welfare is that helping people out can be less expensive than waiting until their problems create costly expenses for everyone.  The moral premise of welfare is that we have a duty to assist one another when we are a position to do so, so long as we respect their own personal accountability and agency.


Social programs are about shared accountability. Minimum wage is not.
2) Social progams are about the state or public taking accountability.  The state pays for education, it subsidizes public transit.  It funds welfare and runs the social security program.  In a lot of these cases, it does make sense for the state to take some accountability.  We can work together to fix problems instead of leaving every man to his own means.  We shouldn't forget that we are using compulsorily collected taxpayer money, but for certain problems, drafting the help of the public is an appropriate solution.  In this context I use the word draft to highlight that it is compulsory.  For all the good that social programs might do, we should never forget that their funding is compulsory.  Social programs should be limited to activities where it is appropriate to elicit compulsory contributions.  But this test doesn't even apply to minimum wage because it is not actually a government expenditure.  The goverment doesn't directly pay a dime of the the related costs.

The government doesn't pay a dime towards minimum wage costs.
 
With minimum wage, the state is not taking accountability.  Instead, it defers accountability, by not paying any money itself, and it creates an extra burden on workers and employers.

Proponents of minimum wage tend to argue that employers have all the economic power, and thus need to be held in check.  I tend to agree with this assesment.  They will sometimes go so far as to clump all employers together into one group of people and label them as powerful and negligent.

But what does minimum wage do to hold employers in check?  There are a lot of laws that hold employers in check.  There are safety requirements and overtime requirements.  There are child labor laws and discrimination laws.  There are scores of industry specific regulations.

These rules are both important and effective.  Labor laws are important for protecting workers and holding employers accountable.  However, all these laws have certain side effects.  The biggest effect is that it takes a lot of work for employers to comply with all these rules and regulations.  Each rule by itself may be easy to comply with, but once you combine them all, it becomes a lengthy checklist.   There is a lot of risk and responsibility involved in being an employer.  Employees may not be aware of all the challenges and rules that are involved in giving them their monthly paycheck.


Labor laws are important for protecting workers and holding employers accountable.  However, there are potential side effects.


Without labor regulations, the distinction between employer and consumer is almost arbitrary.  When you buy something, the company you are buying from is like your employee.  You are hiring them to provide you a service, specifically, deliver a product.  What is it that fundamentally distinguishes an employer from a consumer?

Labor laws play a big role in helping to define the distinction between employer and consumer.  Employers have more obligations to their employees than consumers have to the business they patronize.  Employer and employee have an ongoing contractual relationship that involves expectations and obligations.

Labor laws create barriers to entry for new businesses.  Ironically, this makes companies more valuable, and more powerful.  When it comes to most labor laws, this extra value is earned.  Complying with labor regulations and having a positive relationship with the public and the community is what these companies have to do to earn the extra value they get from these barriers to entry.

However, when it comes to minimum wage, employers need to pay competitive fair rates anyway in order to run a successful business.  You won't be able to run a successfully business long term without paying your employees competitive rates.  We do need social action including social programs to make sure that employers aren't in a position to exploit and abuse desperate helpless workers.  These social programs should start with information, education, and transportation.  People who are informed, educated and mobile are difficult to exploit.

All labor laws and regulations give an advantage to successful compliant business.  In most cases this advantage is earned by compliance to the applicable laws.  When it comes to minimum wage however, employers tend to pass on or avoid the burden of compliance.  They do this by automating more processes, using infrastructure to improve productivity, using more machines, outsourcing labor and hiring fewer workers.

How much you are worth depends on what job you are doing.  I don't like saying that people are worth $5 or $10 an hour.  The value of people is much more than the immediate monetary return of the work that they do.  However, there are certain jobs that people can perform that are only worth $5/hour.  Should we forbid them from accepting these jobs even if they want to?


Minimum wage makes it harder to be an employer, harder to be an employee and harder to be a consumer.

Employer burdens:
  1. Ensure its workers can meet the productivity level demanded by minimum wage.
  2. Ensure the business is successful enough to supply a continuous income stream to all workers.
  3. Do both of the above while paying taxes and complying with all regulations.

Worker burdens:
  1. Ensure they can meet the basic productivity level demanded by minimum wage.
  2. Ensure they are reliable enough to continuously provide the minimum wage value to employers.
  3. Sacrifice other job priorities such as flexibility or opportunity, in order to meet the minimum wage.
Consumers burdens:

   1.  Travel farther.
   2.  Pay more money.
   3.  Have fewer product and service options.


So what is minimum wage if it's not a social program?

There is a clear distinction between regulation, programs, and policy.  Regulation is rules that are enforced to help manage the marketplace.  Programs are expenditures of the government designed to provide some type of service.  Policy is a prescribed pattern of behavior by an institution.  While regulation and programs fall under a broad definition of public policy, policy can also more specifically refer to the patterns of behaviors established by institutions designed to create uniformity and consistency in achieving that institution's intended purpose.

With these definitions established, let's take a look at which apply to minimum wage.

Minimum wage is not funded, sponsored, or administered.
Minimum wage is enforced. 

Technically, all this means is that minimum wage is a form of regulation.  But good regulation should be about compensating for market externalities.  Our actions can indirectly hurt other people.  It makes sense, economically and politically, to communicate that potential for indirect harm through rules designed to punish annoying and unhelpful behaviors.  But minimum wage is not about disincentivizing harmful behavior or managing public resources.  Instead, minimum wage tries to enforce equality.  Minimum wage is essentially a form of central planning.  These differences, in my opinion, mean that minimum wage is communism not socialism.  And the great lesson that we learned from the history of communism is that enforcing equality doesn't work.

Looking at history, I tend to feel that minimum wage was an unfortunate compromise that both sides of the political spectrum could accept, but neither really wanted it.  It became popular because it was an effective compromise, not because it was an effective policy.  Unfortunately, I feel that the state of the marketplace has changed an imperfect compromise into a policy that is directly harmful.

Minimum wage has been accepted because it is an effective compromise.  It is not an effective policy.  Neither side of the political spectrum is getting what it really wants.

I hope to address this in a future article.  I will discuss some of the marketplace conditions that I feel make minimum wage a very harmful policy in our current economy.  This list includes asset inflation, infrastructure vs productivity tradeoffs, wealth inequality, and the increase of free and low cost information and services.  We will talk about why the effects of minimum wage on the job market are hard to measure.  (Hint: people are adept at adapting to changes in the job market).  We will talk about how the effects may still be very harmful, even if they are hard to measure using traditional metrics.  Overall, minimum wage considers only one half of the marketplace picture.  Minimum wage is about providing a reasonable cost of living, but tends to ignore the need to be competitive, especially for individuals who don't own the extra infrastructure required to achieve high productivity.  The unfortuntate part is, that minimum wage could potentially raise cost of living, both directly through labor costs and indirectly by disincentivizing the market from providing services that cater low income individuals.

Minimum wage considers cost of living, but ignores the need to be competitive.

One of the more plausible potential real world effects of the minimum wage policy is that it shifts a sizeable portion of the workforce away from serving the basic needs of the poor and middle class, who have less purchasing power.  Instead, a greater portion of the marketplace focuses either on providing luxuries to the higher classes or they provide services that are easier to mass market but at the same time are less essential on an individual basis.  This can in turn further reduce the purchasing power of the middle class and poor leading to a cyclical, self-reinforcing effect.

Minimum wage [might] reduce the percentage of the workforce that serves the basic needs of the poor and middle class.  These workers instead provide luxuries to rich or trivialities to the mass market.

Mimium wage tends to counteract the few advantages that the poor and middle class have in the marketplace.  These advantages include things like proximity, relatibility, friendship, empathy, cooperation, and personal trust.  Minimum wage can lead people to prioritize price tag above other important marketplace factors.

Minimum wage leads people to prioritize price tag above other concerns.

This will all be discussed in greater depth in a future article.


Monday, July 21, 2014

Who is Noam Chomsky and why should I care?

I first heard the name "Noam Chomsky", I believe, in one of my computer science classes.  We were talking about algorithmically processing language, or just mathematical computery stuff in general.  The word "Grammar" was being thrown around, I believe.  There are a lot of parallels between language, mathematics, and computers.  Chomsky, being a real pioneer in linguistics and cognitive science, came up as an important name in my computer science class.  A short time later, I began hearing his name a lot in an "Intro to linguistics" class.  (check out amazing bio).

So what does a linguist have to do with politics and public policy?  Well, over the years he has effectively made politics and public policy a major concern of his.  The way he talks about politics is not very conventional, but he is far from a crack or conspiracy theorist.  He has a knack for digging out relevant history and presenting it in a way that brings clarity to the intentionally inscrutable world of political action.  I get the impression listening to his lectures that he has a knack for bringing focus to defining issues and that he is well read and experienced enough to base his conclusions on what actually is going in the world.  Normal people like you and I form our opinions from, at best, a simplified version of history, as well as conjectures, principles and theories.  Noam Chomsky knows a little bit more than you or I do when he forms opinions.

Before you think that I am an unquestioning disciple, I have to say that I doubt that Mr. Chomsky would agree with my ideas.  Also, I don't really think I agree with his ideas.  However, his analysis is, imho, indispensible.  This man is intelligent, well read, accomplished, passionate, patient, persistent, independent, and a good teacher.  If the world's problems can be solved with great minds, or if at the very least great minds are capable of any contribution whatsoever toward solving our problems, then it would be an incredible folly to ignore Noam Chomsky.

I would like to refer you to a particular lecture.  This guy's interests are so diverse and his contributions are so impactful that it motivated this clever piece of satire by The Onion.

This lecture is basically a criticism of either the principle or the application of the idea of free markets.  I have read and heard a lot of liberals critique free markets and propose policies that ignore and destroy basic market principles.  Let me tell you that most of what I hear along these lines I am extremely dismissive of.  However, Noam's lecture is a valid critique.  The other thing I really like about this lecture, is that far from trying to claim he has the answers for everything, he spends his effort convincing you that the problems are real.

If you have some time to invest, I would recommend taking the time to really dig into this lecture.  It will make you smarter just hearing his voice.


I may not agree with every idea that he hints at.  (He tends not to say all his ideas outright, but presents the motivating information).  But I feel strongly the things he talks about are inequivocably worth talking about.  His arguments are sound and he's asking the right questions.


Sunday, July 13, 2014

War on Work

Mike Rowe claims there is a war on work:


Simple is Best: Understanding minimum wage

Advanced concepts give a more detailed and accurate picture of the world around us.  Simple concepts don't provide the same level of sophistication, but are no less true.  When tackling the big questions, simple concepts can be just as useful and much less confusing.  They are less likely to lead you astray.


Let's talk about physics for a second.  If you want to analyze what happens to a rock when you throw it in the air, there are many tools you could use to answer this question.  To start with, you could use basic newtonian physics.  I say basic, but many would not consider F = G*m_1*m_2 / d^2, to be simple.  Even after figuring out what the equation means, you still have to use that to analyze how the rock moves over time.  Hopefully you have recently practiced your integral calculus.

Instead of trying to muscle through newtonian physics and calculus, in many situations, we can live with a lesser level of detail.  The mantra: "What goes up, must come down."  is all we need to know in many real world scenarios.

If you're a mathematician or physicist, you may take great pride in pointing out that the saying "What goes up, must come down." is false.  While saying that would make you technically correct, it would also prove you are annoying and oblivious.  This statement was never meant to perfect, it was meant to be insightful.  "To err is human."  Once you understand that these statements are observations of principles, not assertions of absolute truth, it doesn't make sense to say that it is false.  Instead, we might call it a literary metaphor.

For anyone who has actually taken a basic physics class, you can testify first hand that equations tell lies.  In many cases you may work through the problem, and find that the rock does not come down, but instead has a density of 5000 degrees celsius.  Or was it fahrenheit?  You triple checked your work, so obviously the equations are wrong.  Or maybe the world is just that crazy.

Advanced concepts provide more detail, but require more skill to apply correctly.  Recently, I have been reading a book titled Human Action by Ludwig von Mises.  Even though it doesn't use a lot of Mathematics, it still involves a lot of advanced concepts.

I really feel very strongly that minimum wage is a terrible policy.  I feel it hurts most people on a daily basis and that the people it affects the most, it hurts the most.

For quite some time, I have been trying to figure out how to explain why minimum wage is so terrible.  Why do I feel so strongly about this issue?  I have come up with a lot of claims of what minimum wage does, but building a logical chain between the policy and its effects feels like working through a challenging newtonian physics problem.  And yet at the same time, to me it feels like I am literally trying to convince people not to throw a rock into the air in a crowd of people.

I want to be able to help people see what I am seeing and feel what I am feeling.  I am not wrong about the dangers and risks involved, even if I don't have the tools (data, research, science etc) to assert what the actual effects are.

How do we improve our lives?  The answer is work.  Everything takes work.  If we try to demand things without giving something in return, we will not get the results we want.  Minimum wage demands a perfect world.  It demands a living wage for everyone.

Work is the simple answer.  Minimum wage does not encourage work, it provides more obstacles.  When more people are working for our mutual well being we will be better off.  To the extent which it discourages work, minimum wage harms us.  We need to give before we recieve.  We need to understand before we demand.

The living wage principle is wrong,  Living wage demands that circumstances match our expectations, instead of adapting our expectations matching our circumstances.  Poverty is being solved.  People are enjoying increased freedom.  We can describe what the path out of poverty looks like, and it is not $7.25 or $10.50 an hour.

Poverty starts at $1 dollar a day or less.  1 billion people in the world live on $1 dollar a day or less.  These people cannot afford to own shoes in many cases.

The first step out of poverty is being able to own shoes.

About half the world lives on about $10 dollars a day or less.  These people may or may not be in poverty.  They may own a bicycle or a motorbike.  They probably don't own a car.

Where did I get these statistics?  Google this: "median world income"

Also, I watched some insightful videos on youtube by "Hans Rosling".

Minimum wage is not going to help the poorest billion people in the world and it's not going to help anyone in America.  "There is no free lunch".  Controlling other people economically is not the path to greater economic freedom.  It has the direct opposite effect.

Minimum wage tries to force employers to be "good" by paying a fixed amount per hour.  The problem is, being good is not about a fixed amount per hour.  All employers are not the same, which makes this indiscriminate wage requirement unfair and ineffective.  If you are an employer who is poor yourself, paying too much is actually a bad thing.  Employer, employee, and consumer all directly effect each other and need to be able to work things out in the best way that serves everyone's needs.

We need to empower people to be able to claim their actual economic contribution.  If you are only worth $10 a day, it is wrong to pay you more.  Half the world is apparently only worth $10 a day, so don't consider it a bad thing.  Guess what, the people earning $10 a day are not the ones polluting and destroying our planet, it is the people with big airconditioned homes and expensive cars (having a prius does not save you).

Eliminating minimum wage will remove barriers to work and allow participation in the workforce by everyone on equal terms.  It will reduce consumption of natural resources and help preserve our planet.  It will encourage wealth through frugality and generosity, not through consumption, excess, and control.  Please, please, please help change the public understanding about this policy.

The effects are complex, but the reasons are simple: Minimum wage interferes with work.  Minimum wage interferes with freedom.






Saturday, July 12, 2014

10 things wrong with the marketplace

and why I am such a rebel

Okay top ten lists are fetching stupid.  I have no idea if I will actually name 10 things or not in this article.  I just wanted the cliche title. ;)

1.  Streamlined only in one direction.

This might as well be the only reason why the marketplace sucks.  Pretty much every sin in the structure and design of the marketplace can be described as streamlining things in 1 direction.

What do I mean by streamlined in 1 direction?  Well, if you take a close look at things, you'll see that in America, running a business is all about creating an ideal consumer experience.  Customers are coddled.  Shopping is all about creating the perfect consumer fantasy.  Store design is all about atmosphere, access, imagination and also efficiency.  That retail outlet wants you imaging a perfect lifestyle with their product.  Consumers are serviced and seduced.  Stores even accept returns just so you are never stuck with a bad experience.

So in other words, we're doing great on the consumer end of things.  Perhaps a little too well in some cases.

So consumption is streamlined.  It is easy for anyone, provided they have money to spend, to participate in the consumer side of the economy.  Specifically, spending money is streamlined.  However, in the other direction, trying to acquire money, everything is carefully counted and controlled.  There are roadblocks and tests every step of the way.

You may be inclined to think that this is the way that things should naturally be, it should be easy to spend money, and hard to earn it.  However, that is only half the picture.  When money changes hands, it is usually as part of a transaction.  Both parties are giving something up and both parties are getting something in return.  This happens the same whether you are spending money or acquiring money.

We have become so accustomed to this, that it is hard for us to imagine or accept as possible what things would be like if the marketplace obstacles related to spending and earning money were balanced.  In such a world, it would be just as easy to walk into a place with some spare time and earn a few bucks, as it currently is to walk into a place with a few bucks and come out with a new watch.

You may argue that a company needs to evaluate a person before they can trust them to do work for them.  The truth is, everytime you walk into a place of business, that business is placing a good deal of trust in you regardless of whether you are a customer or an employee.  They trust you to not damage property or steal things.  They trust you to behave a certain way and there to participate in the business, either by buying goods or services or providing them.  The way things work today, employees are given more trust than customers, but that is only because we are accustomed to doing things that way.  There is no intrinsic reason it couldn't be reversed.

While I'm not saying we need to perfectly balance the ease of spending money vs earning money, I will say that the way things are now, the balance is grossly skewed in one direction.  This creates serious problems and compromises our economic and social freedom.

2.  Single source of income expectation

You can fill this section in using your own brain.

3. Minimum wage is a silent thief

If you have a brain, fill in this section.  I'll give you some help I guess.  Minimum wage steals from the poor and gives to the rich, by making it so only rich people can afford to employ you, and poor people can't afford to employ you, they can only afford to go to some big department store.  And then you are stuck waiting for congress to try to pass a law so you can get a raise cause you can't get work anywhere else, which is obvious because most people wouldn't take those department store jobs unless it was their last resort.  So the department store is happy, cause they get a steady supply of desperate people at a price lower than people would normally agree to work at that kind of place, because normal people would rather help out their neighbors for a fraction of the pay, than travel 10 miles, burning fossil fuels and killing the planet, only to work at the temple of consumerism where they are treated like a machine, by the customers if not by the company itself.  the end.

10. THE END

Saturday, June 28, 2014

First Post

First Post

"What is the purpose of this blog?" and some housekeeping.


In the beginning . . .  I want to describe what this blog is for, what I hope it will become.  I want to describe my motivations for creating this blog, and why I feel it will be a project that I will continue to invest in.

I sincerely believe that the subject matter of this blog is something I care about.  Public policy affects all of us, but more importantly, the principles and science behind good public policy apply to individuals, organizations, and groups, even if the application is different in each environment.

The blog is titled "Fix Public Policy".  Unfortunately, this is somewhat of a misnomer, or at the very least a deceptive title.  While I would love to see public policy get fixed as a result of this blog, that is not my expectation.  Who am I to change the world?  I won't rule it out, but it's not an expectation.

No instead, "fixing public policy" is really a mental exercise about fixing myself and hopefully others who interact with this blog.  The only real hope we have for fixing the world is fixing the people in it.  For me, I need to use public policy as an channel for this self improvement effort, because I know that I can't help myself.  If I don't take the effort to understand public policy and its relationship to myself, then I am doomed to spend the rest of my life abrasively bumping up against it.

But let's not get discouraged just yet.  It's a very interesting subject matter, and very useful as well.  This is going to be worth our time.

Okay in this first post I also need to do a little housekeeping.  I have comments turned off.  I may change that because this blogging platform really takes care of a lot of the work in setting up and managing comments.   For now, if you have input or things to say the blogs email address is fixpublicpolicy@gmail.com.

I won't respond to your emails, but I will read what you say, and may quote you or mention you on my blog.  If you want me to share your name or other information, you should tell me explicitly in your message that you would like me to do so.  Otherwise, I will omit all personal information when I discuss your feedback.

Okay, I feel it would be a disappointment if the first post I didn't say anything about the subject of the blog.  I don't know a ton about public policy, but I do have strong opinions.  I'm going to go easy on my opinions though.  I'll mention them, but not proselyte.  Personally, I consider myself a libertarian.  If you are a liberal you should leave now.  No, actually stay, please.  I don't care about your political opinions.  I do care about the way you think.  For me, being libertarian is a statement of my personal values.  I am an individualist and like small government.  That's all.  I hear there is a libertarian party.  I'd rather avoid that.  They seem to be losing anyways.  I don't care.  What I do care about is the way we think, the way we solve problems, and finally, how we would synergize working either together or against each other.

Public policy does not have to be a political question.  People of differing political views often have a lot of overlap in their values.  In a perfect world, representatives would recognize diverse values, create goals according to common values, and have a clear picture of the parameters of their job.  Once you agree on goals, parameters, and values, public policy becomes strictly a technical question.  How do we acheive our goals, within the parameters of our office, without compromising our values?

That's what this blog is about: technical issues behind public policy.  I want to get a vivid, up close picture of the creation and application of public policy.  I would love to investigate specific local or individual issues, see what role public policy plays in the real world.  I also want to look at big picture questions.  I want to learn the science and principles of how individuals and groups interact.  I'm not afraid of delving into the philosophy of government, to try to get a deeper understanding why government exists and what it means to us.  If that sounds interesting, then come back for more and keep reading.

And in case you missed it, send questions and comments to fixpublicpolicy@gmail.com.