Friday, January 31, 2014

demand for a much higher minimum wage stems from selfishness, ignorance, and/or a lack of policy imagination

There *are* a number of reasons why a *somewhat* higher MW could have little or no impact-- and importantly, beyond that, much of an impact that would be observed/measured. But any increase in the minimum wage that hopes to make a difference has to get around the theory/logic: Why would "greedy" firms pay an employee more than he produces?

If one wants to increase the MW to a level that would support someone trying to support a household, it would obviously have employment effects-- perhaps large ones. (We have little evidence on something like this, but what we have is telling-- e.g., the short-lived imposition of the federal MW in Puerto Rico in the 1930s; what we can infer from the govt's unwillingness to extend the current MW to our territories.)

And then back to the second paragraph of my post, there is NO debate that the MW is poorly-targeted AND clearly inferior to other policy alternatives (given even modest unemployment effects). So, why do politicians, partisan hacks and laypeople focus on it so much: selfish (economic and/or political) interests, ignorance and wishful thinking, lack of policy imagination. Are there other explanations?

Wednesday, January 29, 2014

what could we do about income inequality?

There are all of the problems with measuring income inequality.

And let's note that most of those who profess concern also support a president who talks about it while his statistical record on the topic is woeful. Love that.

Beyond these things, there's the question of what we can do about it.

I think my ideas on school reform would be quite helpful over the long-term. But at least among those who profess concern about income inequality (II), they disagree and have nothing significant to propose instead. They're fans of the status quo.

Family structure/stability is a big player-- directly and indirectly-- but how we get the toothpaste back in that tube, esp. with public policy? The government stoked whatever cultural influences we had-- with policies that subsidized these problems. It's difficult to imagine welfare reform that would address this. Even so, how do you reverse the damage? The only thing I can imagine is spiritual revival.

Increasing the MW is always a popular prescription-- and would help a bit, by definition, with II among the employed. But for an II stat that includes the unemployed, the impact is at best mixed and nominal-- and might well be negative.

More tax and spend on the poor? Are we using pre-tax or post-tax / pre-transfer or post-transfer calculations of II this time? (Oh, you forgot to think about that? Don't worry, it's quite common to commit that sin of omission!) Even assuming "post", it's a mixed bag for *measured* II.

Caps on CEO compensation could help on the top end. But the last time we did that, it led circuitously to our current health care/insurance debacle. Well done, good intentions!

Friday, January 24, 2014

Kristen Sauder, RIP

Kurt's wife Kristen passed yesterday after a 13-month battle with cancer. Visitation is Friday and Saturday morning before the 11 AM funeral.

She was a good friend and a great minister of the Gospel. She was a beloved wife and mother. She ...will be greatly missed by Kurt, their kids, their extended family-- and the Kingdom.

I'll miss her infectious smile and enthusiasm, her wisdom on effective ministry, her knowledge of the Bible, her passion for making disciple-makers, her warm/sweet/gentle spirit, and so on.


Here are messages from Kurt before the visitation-- here and here-- and Kristen's final blog post.


Two songs come quickly to mind these days. First, an oldie but a goodie: Michael W. Smith's "Kentucky Rose".

I always think about this song when God calls his faithful home "too soon". It always makes me tear up. But these days, I'll have to avoid listening to it (too much), unless I want to keep crying/sobbing like a baby.Praying for Kurt and his family as they grieve and celebrate their Kentucky Rose...Second, I sent Tenth Avenue North's "Worn" to Kurt and Kristen awhile back, for those inevitable "dark nights of the soul". (Interestingly, they'll sing this song in Freedom Hall on Friday night at WinterJam.)

I love the line, "I'm worn, so Heaven come and flood my eyes." Indeed. We need that eternal perspective always, but especially in the difficult times.

Kristen was "worn", at least physically. Now she's healed and whole. Kurt and his kids have been and will likely be "worn" off and on in the coming days. But we know that our faithful God will send them an extra measure of His presence.

Praying for Kurt and his family as they struggle to "breathe" the next few days and in the coming weeks/months.


*Happened* to read about William Whiting Borden on Thursday night in Wiersbe's 50 People Every Christian Should Know (a really nice little mini-bio, semi-devotional book, by the way). Had never heard of Borden before...

Borden died at 26. He was a millionaire's kid
who did some great things at Yale in terms of ministry and was preparing for the mission field (to Muslims in NW China), but got sick and died while training in Egypt.

Wiersbe had two great lines that reminded me of Kristen:

Why should such a gifted life be cut short? One of Borden's friends, Sherwood Day, said: "I have absolutely no feeling of a life cut short. A life abandoned to Christ cannot be cut short."

"It is not the length of a person's life that matters, but the strength of one's influence for God."

So, too, with Kristen.

Wednesday, January 22, 2014

knowledge, motives and creativity-- on the minimum wage and the working poor

Here are some ways to separate people by motive, knowledge, and/or creativity on the issue of the minimum wage (MW):

a.) offer to reduce or eliminate the 15.3% FICA taxes on EVERY dollar of income earned by the working poor (no exemptions / no deductions like the "income tax" gets);

b.) offer wage subsidies for low-paid heads of household instead;

c.) offer to raise the EITC instead;

and d.) offer to raise the MW for those who aren't teenagers.

All of these do a better job of helping the targeted group-- while lessening or eliminating the costs/damage of a higher MW.

If they don't go for these policy suggestions-- or come up with really good reasons to avoid these policies-- then you can know that a.) their motives are something other (e.g, to help unions or to harm business); b.) their knowledge is lacking (although you've just helped them there, so...); or c.) their policy creativity is woeful (see also: ability to assimilate knowledge).

The latter two remind me of Brian Regan on the kid who keeps using the same solar system for his science project: "The big yellow one is the Sun. The big yellow one is the sun!" Check out this video, starting at 1:26.

Monday, January 20, 2014

Social Security ROI by race

Here's an Urban Institute study on Social Security by race. (For those not familiar with the various think tanks, Urban "leans left".)

Hey, sorry, white people: you get a *really* low rate-of-return from SS.
And really sorry, "people of color": you get an even lower ROI.

These ROI are lower than I'm used to seeing-- and the authors don't seem to weigh in the "employer's share" of SS taxes either. Ouch!

Notice also that this ignores difference in income, within racial differences. We know that the working poor get an even-rawer deal from SS-- and can least afford to have the thousands of FICA dollars yanked out of their paychecks annually.

Something to think about-- the next time you hear Democratic politicians demagoguing on Social Security and the next time you realize that most politicians routinely ignore the immense burden of FICA taxes.


Thursday, January 16, 2014

the ethics of ethics-based veganism

I know there are degrees of vegan-ism and that vegans come to their beliefs/practices through a variety of ethical and practical/health angles. To the extent that one is a vegan-- and that their veganism is based on ethical arguments-- what are the implications?

I infer that (ethical) vegans would oppose hunting. Would there be exceptions-- e.g., if one species was killing another, threatening humans, over-crowding that caused starvation?

I figure that (ethical) vegans wo
uld oppose abortion, in all cases except perhaps the life of the mother. I surmise that they'd be non-interventionist in foreign policy.

More broadly, wouldn't they be libertarian (if they make little effort to think about public policy) or Libertarian (if they make the effort required to put together a coherent political philosophy? In a word, not all libertarians would be vegans (based on their beliefs about man and animals), but all vegans should be libertarian?

Finally, to what extent would they (want to) impose veganism (or variants) on others-- as a "justice" issue, believing that one party is harming another party (esp. a vulnerable) party?

Does anyone here have knowledge on this-- or other inferences?

Tuesday, January 14, 2014

the War on the Poor

With respect to the poor, those on the Left focus moreso on outcomes than process-- and then churn and grasp for remedies.
Part of the focus on outcomes is a taste and preference-- and I can't quibble with that. People have different beliefs about equity, including the weight/importance of those beliefs. Although interesting and important, I'm not going to argue with them about that-- anymore than I'm going to get excited about putting pepperoni or sausage on their pizza.

In part, the approach of those on the Left stems from a reasonable inference: if the outcomes aren't fair, then the process cannot be fair. A big part of this is based on ignorance about the deeply flawed statistics used to describe such outcomes-- e.g.,
the poverty rate, income inequality, and wealth inequality. Reasonable but shallow and improper inferences are drawn-- and off they go. (Others on the Left and Right know that the stats are deeply flawed, but use them anyway-- to achieve their partisan or ideological goals.)

To the extent that those on the Left focus on the process of the economy, they often (and often implicitly) believe that it must be deeply flawed-- e.g., because workers have little bargaining power in labor markets. These reasons are often unstated and almost always untested. When stated, the beliefs are often incoherent (e.g., screeds against "greed" or "discrimination"-- without having or using a coherent definition). On occasion, the concerned party will make a good point, but the subsequent problems are not nearly sufficient to explain the deep outcome flaws they've asserted. (Next time you hear this from someone, ask him for a list.)

The funny thing? I agree with the Left's assessment of injustice against the poor and middle class. But I know that various government interventions-- at the behest of interest groups and wrong-headed but good intentions-- are the cause of the bulk of the problems they face.
And it's not just a belief; one can easily list an array of devastating policies from birth to death: the subsidized kick in the pants to family structure and stability; the crony-capitalistic bow to the status quo in K-12 education with its tremendous monopoly power over those with fewer resources; a War on Drugs which tempts the young and unskilled to sell drugs and then tosses them in jail; subsidies not to work and a long list of labor market regulations that particularly restrict those with fewer skills; if they do work, a payroll tax which takes about 15 cents of every dollar earned by the working poor and middle class; and a Social Security system that provides a negative rate-of-return for the poor and disadvantaged minorities. Only someone committed to Statism would not want to talk about these inconvenient and indefensible truths-- and work passionately to do something about them.
This is not to say that government has no role in the economy. This is not to say that everything the govt does is bad, ethically or practically (for the poor or otherwise). But it is to recognize that the government does many things which directly and indirectly harm and hammer the poor.
As we "celebrate" the government's 50-year War on Poverty and we lament its failure to make far greater strides, we should also open our eyes and condemn the government's War on the Poor. Can those on the Left put aside their ignorance and idolatry toward government? Can those on the Right fight courageously for the rights of others, particularly the vulnerable?

Friday, January 10, 2014

the "failure" of the War on Poverty

This year marks the 50th anniversary of the beginning of the War on Poverty-- at least in terms of legislation. (Appropriations expanded a bit under LBJ and especially under Nixon.)

One of the first observations to make is that progress against (measured) poverty stopped once the War on Poverty began. (Insert "government is inept" jokes here.) With economic growth, poverty was decreasing rapidly post-WWII. A rising tide was, not surprisingly, lifting most boats. Since the War began, the poverty rate has merely fluctuated between 11-15% over the last 50 years.) Once the War began, progress stopped. But why?

If we use lame statistics, univariate analysis, and false-cause fallacy-- common errors, especially for those on the Left-- the War on Poverty stands (easily) condemned. Poverty falls; the War begins; poverty quits falling; the War is a failure; QED. (Not surprisingly, the Left does not do their usual analysis in this realm.)

If we move to more sophisticated analysis, the answers are more complex, interesting, and realistic.

Why did measured poverty quit falling when the War began? There are three primary reasons:

1.) Paying people to be in a state (and removing the payments if they move away from that state) will generally encourage them to remain in that state. The more you pay them-- and the longer you make the payments available-- the greater the problem. (See also: other welfare programs like "unemployment insurance".) So, on the basis of this point, the War on Poverty will increase poverty. This is the favored argument of those on the Right-- and is clearly true to some extent, but how much? (Daniel Mitchell relies too much on the poverty rate in his opening, but otherwise has a nice post on this, including a discussion of the high marginal tax rates imposed on the poor.)

2.) It could be that government started the War at the moment when most of the curable poverty had been handled by the market. Perhaps the market grabbed the low-hanging fruit-- and the government happened to get involved just when the high fruits were still on the tree. In a most unfortunate coincidence (at least for statists and those who can only manage lame analysis), it looks like government was getting in the way of progress, when it was mostly treading water. This is not a particularly flattering view of government policy (especially at the federal level), but it takes some of the blame/heat off of their seeming ineptness.

3.) The measurement of poverty is profoundly flawed. Against its poverty lines (adjusted for family size and inflation), the government compares measured, annual, cash income for each household. The poverty lines are a proxy/standard set by the government-- adjusted by inflation (a proxy for the economy's increase in prices). All in all, one can certainly quibble, but at least by government standards, these lines were calculated with a reasonable methodology in the 1960s and have been reasonably well-adjusted since then.

The bigger issues are with the government's measurement of income. First, the government is only picking up reported "income" by each "household". Unreported income is likely-- when one is engaged in illegal activity or getting paid under the table to avoid taxes or welfare benefit reduction. If people are shacking up, they might live like a household with a bigger income, but be measured as if they're in two separate households with smaller incomes.

Second, the government is only measuring *cash* income. So, cash benefits paid by the government are counted (e.g., Social Security), but non-cash / in-kind benefits are ignored. We could give every poor household $50,000 in food stamps and they would still be counted as poor by the government. In this, the poverty rate is much more of a measure of dependence on government than a measure of those living in poverty. Or putting it more bluntly: unless they're refusing assistance, no one lives in material poverty in the U.S. (as measured by the government's poverty standards).

Third, the government ignores wealth and focuses exclusively on annual income. One might have considerable wealth, but modest income and be measured as poor. This explains the impressive data about the poor in terms of home ownership and other consumer goods.

Similarly and finally, the government's measure of income is only a snapshot-- the statics of one year rather than  the dynamics of many years. Thus, it says *nothing* about the larger question of how "poor people" are doing five and ten years into the future. As an example, I had a number of colleagues in grad school who were "poor". Likewise, the country's highest poverty rates are found in college towns.

Is there poverty? Sure. Using static analysis, has government increased the living standards of many poor people? Sure. Using dynamic analysis, has government increased poverty by subsidizing it? Sure. The first two questions are obvious and not all that interesting. The third question is complex and difficult to measure. But any layman concerned about poverty should know the basic point-- that the statistics used to measure poverty are lousy.

How to adapt policies to better help the poor? Again, a complex and difficult question-- for another day. How to stop crony capitalism and government policies that harm the poor? Ahhh, I know a good book or two on that topic-- if you care...

Monday, January 6, 2014

Krugman without his econ hat and inconsistent on worker bargaining power

From John Goodman this AM, a number of great observations on Krugman and economics in general-- and on labor markets and health care in particular.

1.) Goodman: "Pick up any introductory textbook in economics and see if you can find the word 'bargaining' or the word 'fear.' I bet you can’t. That’s just by way of warning you that Krugman’s depiction is not the way real economists would describe any of this."

Krugman has a Nobel Prize in econ, but when he talks like this, he's moved (well) outside econ-- let alone, the particular/narrow expertise for which he was (deservedly) awarded the Prize. Knowingly or out of ignorance, people who cite Krugman in this mode are playing a Fallacy of Authority card.

2.) "Krugman says that in a weak economy workers have weak bargaining power" and "employers are in a position to work them harder, pay them less, or both".

a.) There is some work on this-- which comports with the common sense here. But Goodman cites work from Arthur Brooks which indicates that the concerns here are smaller than one might anticipate.

b.) Goodman calls Krugman on the carpet for advocating much greater reduction in bargaining power for doctors-- under "single payer" HC! "Why is it good for doctors to live in fear, but not [other] workers? And if the single payer bargaining is good for medicine, why wouldn’t it work just as well for college professors — given that higher education seem to have all the same problems that the health care system has."

c.) As Keynes taught us, prices and wages are "sticky downward". Some of this is natural. (Of this, some is cultural. E.g., in South Korea, workers are much more willing to allow wages to fall, so that others will not lose their jobs.)  Much of it is artificial-- e.g., through minimum compensation laws, unemployment insurance, artificial strengthening of unions, etc. Whatever the size of the impact of a higher MW, it works against the need to reduce wages to clear the labor surplus-- increasing unemployment further and reducing worker bargaining power (to the extent that one buys Krugman's argument).