A Helpful Analogy

What is minimum wage?

Question: What is the minimum wage and how does it affect the economy?

I think that everyone should be able to answer this question accurately and concisely.

Minimum wage is one of our most impactful economic policies. It applies to every economic activity that we engage in. It applies to every person who participates or who wishes to participate in the economy.

But the effects don't end there.

Minimum wage is not merely a social program or a form of assistance, rather it is a cultural norm enforced by law.

Minimum speed limit analogy

To illustrate the arbitrariness of minimum wage, and examine its unexpected cultural impact, it is helpful to use an analogy.

Instead of talking about economic activity, lets pretend we are talking about transportation.

Everyone uses different forms of transportation. Some people drive cars, others ride on buses, some people walk or bike, others take private jets, and a few people even orbit the earth in space craft.

The biggest predictor of how fast you are traveling is what form of transportation you use.

• Walking: 3 mph
• Running: 6 mph
• Sprinting: 12 mph
• Biking: 15 mph
• City driving: 30mph
• Freeway driving: 65mph
• Commercial Airline: 500mph
• Private Jet: 600mph
• Space shuttle orbit: 18,000mph
• Apollo 10 record: 24,000mph

Each activity serves a different purpose and each activity covers a different amount of distance in a different amount of time.

Now let's pretend, for a moment, that you want to improve people's access to efficient transportation.

You decide to create a minimum speed limit of 7.25mph on all city streets, roads, and walkways.

Most modern transportation activities will be unaffected. Cars rarely drive that slow, and cyclists and even skateboarders should be able to keep up without trouble.

Reasonably fit individuals can achieve that pace just by running.

For disabled people who can't walk, their powered wheelchairs can be designed such that they can comply to the new universal minimum speed limit.

The benefits would be numerous. People would get to their destinations faster, no one would be stuck being immobile or unable to travel because they were too slow to get to their destination quickly enough.

This minimum speed limit would help solve velocity inequality, where a small percentage of the world's population have a disproportinate amount of humanity's kinetic energy.

Eventually, we would bring this minimum speed law to less fortunate countries in Asia or Africa, where many people travel less than 10 miles a day. Some people even travel less than 1 mile in an entire day. Surely these people would be delighted to recieve a minimum velocity guarantee of 7.25mph.

A few people would complain about the drawbacks of not being able to go on leisurely walks, but those people are probably just pawns of elon musk, who wants to save all forms of high velocity travel for himself.

Surprisingly apt

The best way I can characterize this analogy is surprisingly apt. It is numerically insightful, because both economic and transportation activities involve exponential scales.

Athletes make millions while sustenance farmers only earn the food they eat. Spaceships travel at least 5 miles every second, while people walking take nearly 2 hours to cover the same distance.

This analogy also mirrors the differences we see across different countries. More people drive in the first world, and thus our average traveling speed is much higher.

The U.S. minimum wage may be low when you compare it to other 1st world countries like Australia, but in reality, half the people on earth live on $10 a day. A full billion people live on $1 a day or less. We can't arbitrarily enforce a "living wage" on these people.

It also highlights that differences in productivity that we realize are often due to different tools and techniques.

When you drive a car, it is easy to go 20mph. But only the fastest humans on earth can sprint over 20mph.

When you work in a factory, achieving a productivity level $20/hr should be easy. But if you try to cobble shoes by hand, it would be hard to keep up.

Just because we have modern technologies such as factories, doesn't mean that everyone has access to them, nor will everyone want to use them. Under our current system, a few people reap most of the benefit of factories, while other people are basically unaffected.

Finally, this analogy highlights the most important point I want to make. Minimum wage is not an effective solution to poverty nor is it an effective solution to wealth inequality.

Forcing people to run at 7mph doesn't fix anything. It won't give them good jobs if they don't have them already. It won't redirect resources away from space travel and private jets back down to earth. It won't create a blissful utopia with abundance and equality.

Perhaps there would be positive effects of a minimum speed limit. Perhaps more people would get in shape.  Perhaps it would improve congestion on the streets and city walkways.

But it would look ridiculously silly to have all those people running around for no apparent reason.

Final thoughts

Liberals have spent years fighting against unhealthy cultural norms, such as racism, sexism and more. They have fought uphill battles trying to ensure that people who are different have opportunities available to them.  It is unfortunate that these same progressive thinkers have become champions of a policy that partitions people based on their productivity level and enforces an arbitrary standard of productivity.

This simple wage limit, has helped create a culture where we universally both fear and hate economic activities that involve a low level of productivity.

In order to have value, in our culture, in the eyes of our society, there are currently 2 paths. One is to acrue social status or cultural influence, essentially fame. The other means of achieving societal value is by making a significant economic impact, essentially acruing wealth. Interestingly enough, the former can lead to the latter and the latter can lead to the former.

Individuals who fail to find a positive role within our society are generally looked down on. They are usually both misunderstood and feared and shunned. We create enormous pressure on ourselves and others to be high achievers, to find a worthwhile career where we have a positive sociatal impact and earn a decent amount of money.

But what do we really need?

There is a zen proverb that goes something like this: "Before enlightenment, chop wood, carry water. After enlightenment, chop wood, carry water"

I'll let you do with that quote what you will.

Minimum Wage Alternative: Wage subsidies

An Unexpected Utopia

Imagine a world where people give and take things freely, not demanding anything in return.  Imagine that you can walk outside, go anywhere, and recieve any type of good or service available, without owning or paying a cent.  Imagine that every person, rich or poor, could have anything they could possibly imagine.

This may sound like an unrealistic or far off ideal, but what if I told you it was not?  What if I told you that this kind of world took almost no effort to create, that in fact, we live in such a world already, all we have to do is realize it?!!

So what's the secret?

The secret is that information is naturally free to copy.

When it comes to physical goods, this type of free exchange is merely an idealistic fantasy.  But for information, the utopia is already here!  Information has never been more readily available, easier to create or easier to recieve.

I want to talk about copyright law.  I want to talk about patent law.  But in doing so, I don't want us to get hung up on these tiny details.  A world of free and bountiful information is already here.  Let's not forget what we have by focusing on what we don't have.

In the midst of such a utopian vision, intellectual property can look fairly petty.  We are so close to a beautiful and perfect world, why are these backwards thinking people insisting on holding on to an old, broken system?

But it's not so simple.  Information utopia may not be that far off, but a physical economy utopia is a long way from reality.  Worst case, it may never be practical.

In the absence of a universal utopia, the reluctance to embrace an information utopia is understandable.  Exchanging information may be practically free already, but creating it is not.  Individuals and companies use vast amounts of resources to conduct research or create media.  Expecting them to embrace a different vision for how information fundamentally works should not be done lightly.

But it needs to be done.

In the future, controlling the distribution of information will only become more and more costly, while the exchange of information becomes even cheaper and easier.

If this cost were only a monetary price tag, it might be justifiable.  It would certainly be expensive, but it might be justifiable.  But the cost is not merely monetary.  We pay the costs of intellectual property enforcement in many forms.  This includes personal freedoms.  It also dilutes and compromises the role of government, by committing us to policies that are unsustainable and counterproductive in the long run.

Let's look at the pirate bay.  Piracy is a clever and catchy term to describe copyright infringement.  In reality, the comparison to actual piracy is bit of a stretch.  But the pirate bay decided to embrace this term instead of rejecting it.

In doing so, they were effectively communicating a commitment to a course of action, that was independent of what the law said.  They became models of the principle of civil disobedience.

It is clear that the pirate bay website facilitated the infringement of US copyright laws.  Millions of people used that site across the world to help them download copyrighted media, including inside the US.

What is not so clear is whether the pirate bay itself broke any swedish laws.  I'll refer you to two resources if you want to know the details of this case.  The pirate bay article on wikipedia has a section titled legal_issues.  There was also an interesting documentary that was created that tells much of the history of the site and more importantly what happened to its founders.  Search for "tpb afk".

What is clear from those sources is that the enforment practices used to attack the site and its founders were highly questionable and at times unethical.  The case appears to have been pursued with significant pressure from the United States justice department.

You may not agree with the actions of tpb or its founders.  Fair enough.  But the point of this example is to highlight the challenges of copyright enforcement.  Tpb website was up and running before, during and after the trial.  The trial had no effect on the prevelance of copyright infringement.

The problem here is that copyright requires global enforcement.  And this enforcement is not possible without massive and intrussive surveillance, and other infringements into personal rights.  Are we ready to commit ourselves to a course of action that compromises our freedoms and helps perpetuate the surveillance state and government overreach?

Not all cultures and countries have the same attitudes and laws about intellectual property as our country.  Enforcing IP rules requires imposing our viewpoint on the rest of the world.  What if they are right and we are wrong?

What's my prescription?

I would actually like to recommend that people try to respect the wishes of authors of creative works regarding distribution and reproduction.  Being civil is important when you are trying to effect change.  In the words of one of my favorite philosophers: "Render unto ceaser, that which is ceaser's".  I don't think we need to buck against the commercial side of copyright law when it comes to entertainment media.

Having said that, I definitely feel that copyright enforcement is immoral, and impractical.  Thankfully, copyright law is hardly enforced beyond a domestic, commercial level.  Doing so would require unethical and irresponsible actions.  The exceptions to this enforcement pattern have demonstrated that.  The story of Aaron Swartz is a tragic example where malicious prosecution practices were used against someone who publicly put himself in the crosshairs by exercising civil disobedience on this matter.  He released a database of copyrighted scientific articles.  Aaron chose to end his life after rejecting a plea bargain, that, it could be argued, compromised due process by pressuring people to plea irregardless of guilt.

Aaron Swartz is a tragedy of the failings of public policy.  No one else made him kill himself, but that doesn't mean that the actions the justice department or the copyright holders are excusable.

A lot more can be said on this matter, but that is for another day.

Three P's of starting a business

Let me start out by saying that running a business isn't for everyone.  I think that most people should work for someone else and can be perfectly happy doing that.  However, I also feel strongly that everyone should understand and consider the option of working for themselves.  Our rules should make it easy to work for yourself and that our culture should make it acceptable.

Even if you'd rather work for someone else, having the freedom to run your own business is important so that you have leverage when seeking employment.  If you are desperate, without good options, then you are stuck accepting whatever terms some employer dictates.  As you can see in my other posts, I feel strongly that the best way to alievate this predicament is personal empowerment, and being able to run your own business is one way to do this.

Personal Accountability

When you run your own business you are responsible for everything.  When you work for someone else, it is easy to forget or ignore everything that your employer takes care of for you.  Running a business is a lot more than the day to day work involved.  It's a long term commitment to your customers.  You have to be prepared to not only do the work, but to take accountability for the work that you do.  Your customers need to know what you offer and that you are consistent and reliable in delivering that offering.  If your mindset is "I want to try doing that", or "That sounds interesting", then you probably aren't ready yet to make significant commitments to customers.

A lot of people think of entrepreneurialism as a form of innovation, but in reality trying to innovate is unreliable.  Most successful businesses usually strive to serve people first, and then in the process of doing that they will innovate.  There is definitely an observation bias here, because the most visible successful enterprises are highly innovative, like apple, microsoft, or facebook.  These are the rare cases, and these kind of ventures tend to be much more risky than something like mowing lawns or walking pets.

Profitable

Your business has to be profitable.  If it's not profitable it's just a hobby.  It may be fun, rewarding, and even educational, but if it's not profitable it's not going to empower you economically.

Profitability is sometimes counterintuitive.  The unfortunate truth is that it is difficult to be sufficiently profitable creating and delivering necessities, especially for an unexperienced person working on a smaller scale.  Growing food or vegetables is a great way to save a little money, but trying to earn a significant amount of money doing it is challenging because raw food is so cheap.  Most commercial farmers cultivate acres of land and use expensive equipment and have large yields.

The same applies to other necessities like sewing clothes or making shoes.  Unless you can create something people are willing to pay a premium for, like organic food or trendy clothes, you will have a hard time making money.  In order to attract new customers, you must not only match the value and price of existing offerings, you actually need to do better.  Even if you offer a comparable product for a better price, a lot of people simply won't care enough to change their habits.  Even if they think what your doing is cool and they try your product, there's no guarantee they'll become long term customers.

Services are perhaps the easiest type of business when you are starting out small.  Large companies don't have all the advantages, small companies can offer better customer service and other advantages.  Paul graham, a famous tech entrepreneur, has an excellent article about this: Do things that don't scale.

Passion

The third P, and probably the least important, is passion.  Mike Rowe, the dirty jobs guy, has said something interesting, basically that you shouldn't follow your passion, but you should bring it with you.  Your business needs to be something you can be passionate about if you want to turn it into a long term success.  It doesn't need to be your dream job, but it should be something you care about and find engaging and worthwhile.