Category Archives: Economics

Third wave feminism seems pretty misogynistic sometimes….

The latest “feminist” movement is to get the government to pay women to stay at home with their kids and caretake for older adults.  (See, NYT essay.)   The basic argument:

The feminist argument for a U.B.I. [Universal Basic Income] is that it’s a way to reimburse mothers and other caregivers for the heavy lifting they now do free of charge. Roughly one-fifth of Americans have children 18 or under. Many also attend to ill or elderly relatives. They perform these labors out of love or a sense of duty, but still, at some point during the diaper-changing or bedpan cleaning, they have to wonder why their efforts aren’t seen as “work.” They may even ask why they have to pay for the privilege of doing it, by cutting back on their hours or quitting jobs to stay home.

For eff’s sake.  Let’s talk about basic economics and family structure.

You get paid for “work” because someone would rather you do those things at the office than have the money they pay you.  It is not a reflection on your self-worth, contributions to making the world a better place, or anything but the fact that you are performing labour that someone would give up money to have performed. When we pay people to scoop ice cream, mow our lawns, or change the oil, it’s not because we are saying that scooping ice cream is more worthwhile than singing your child to sleep; it’s because we need the oil changed.  This is not a way to advance cosmic justice or give people the warm fuzzies; it’s about (pardon the language) getting shit done that needs to get done, which you cannot or do not want to do yourself.

The important thing in all that is the person who pays the money gets something in return – an ice cream cone, a functioning automobile, or a lawn that does not resemble Einstein’s hair.  You figuring out how to make your household work is not anything that benefits anyone outside the household, which is why no one pays you for it.  If you want to get paid for raising kids or the cleaning the house, raise someone else’s kids or clean someone else’s house, and have that ‘someone else’ give you a check in exchange.  But your kids, your house? It’s called being an adult.

(Incidentally, we already pay people to have kids: child tax credits, maternity care that is included in all health insurance premiums, free public schools for 13 years, subsidised state universities, after-school programmes, youth sports leagues.  We also pay people who are old through Medicare, Medicaid, Elder Services, and heaven only knows what else.  Let’s not pretend that women are doing the lion’s share of the work already that needs to be shifted even more to the taxpayer.)

Now, actual feminists have a good solution to this problem about not getting paid for “women’s work:” it’s called equally sharing their husband’s paychecks, or, in the case of elderly relatives, having a sit-down conversation with their siblings and saying, “Look, it’s going to cost $X in either foregone salary for me, or $Y to pay someone else to do this, to take care of Dad.  Either come up with better ideas or open up your checkbooks, because this one isn’t falling all on me.”  Sad, pathetic excuses for adults look to strangers to make their households function properly.

Readers, am I being harsh, or is this beyond absurd?

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Filed under Economics, Feminism

“The world is awash in cash”

So says Kevin Ahearn, the president of condominium marketing and brokerage firm Otis & Ahearn, in explaining why a condo in the Back Bay was just sold for almost $4,000 per square foot.  (Story.)

Those who like to ogle the pads of the rich and famous (or merely rich) can check out some of the Mandarin Oriental’s condos here.  A sample:

Boston’s luxury housing market is booming (hence, the condos that sell for $8 to $12 million). It’s a fascinating example of the economic “recovery,” i.e. a recovery that has left some “awash in cash” and others… not so much.

Readers, thoughts?

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Filed under Economics

As Mark Twain said, there’s lies, damn lies, and social science

Okay, he didn’t quite say that, and “lies” is harsh.

I came across this article in the Harvard Business Review, citing a study which proves that wearing high-status brands signals to potential interviewers that you are more qualified and should be paid more money. (Story here.)  Put on a Burberry and, voila!, people will think that are qualified and worth extra money.

The set-up itself was good: videos of the same interview, but some of them were edited to add a conspicuous logo to the interviewee’s attire. The problem is that the people analysing the interview are college students.  Not only are they all barely legal to drink, at best (and therefore entirely unrepresentative of what a fifty-year-old interviewer may think), they have never hired someone for a position before.

The research is intriguing, but the proper conclusion may well be that young people with little experience rely heavily on outward indicators of success and status.  It is entirely possible that older, more seasoned interviewers would dislike status signalling (and, anecdotally, I know a few who prefer hungry and ambitious to spoiled and wealthy).

Thoughts, readers?

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Filed under Economics, Nerdiness

Just what we need: the fat police!

In April of 2010, Jonathan Gruber, one of the architects of ObamaCare and an adviser to the Obama Administration, suggested that we tax people based on their weight. (Full essay here.) The theory is that fat people spend more in health care dollars, so we can tax to “modify behavior and raise revenue.”

If people who smoke, drink, don’t work out, or are professional bungee jumpers have higher health care costs than everyone else, then I have no problem with a private insurance company raising their rates.  We do this for auto and homeowner’s insurance all the time: you pay more if you speed, drive drunk, or live in a place that gets hit by hurricanes.  A private insurance company that charges people too much for various “sins” will lose those customers; an insurance company that charges too little will lose money.  The force of the free market will push companies to get the most accurate risk assessment possible, and those companies would be just as happy with people quitting smoking and paying less as they would with smokers paying a penalty to cover their additional costs.

None of this is true about government sin taxes.  Aside from the creepy and coercive nature of the government attempting to regulate our lives through financial penalties, extorted from us with the threat of jail if we do not comply, the government will tend to rely on increased ‘sin’ revenue.  The money from cigarettes or adipose that pays for schools will no longer be there if people quit smoking or slim down. The government also has an incentive to increase this tax to the point just before political backlash: there is no downward pressure from competing governments that are ready to charge an amount that is more tailored to the expenses incurred from such weight.

Economics of sin taxes and insurance premiums aside, this is also problematic because weight is not what causes people to incur excess health care costs: it is fat, lack of physical fitness, high blood pressure, low muscle mass, and a host of other things.  Most likely, the government will simply calculate our BMIs and tax us, rather than attempt the fine-tuned calculation of taxing people whose body composition puts them at a higher risk for health problems.  It also highlights one of the many problems with socialised medicine: once you are forced to pay for some stranger’s health care, you have every right and incentive to stick your  nose in that stranger’s business and dictate how his life ought to be run. It’s an ugly business, served up to us in the name of compassion.

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Filed under Bioethics, Economics, ObamaCare

“Lunch at Costco!”

Back in the day, my dad asked my brother what he wanted for lunch.  “Let’s get lunch at Costco!” was his response, and no, he wasn’t talking about the pizza and hot dog stand.

As The Psychology of Free Samples explains, free samples do not just function to get people to try a new product; they induce a sense of reciprocity in the would-be buyer.  Once someone gets a free sample, he is more likely to buy the product.  Free samples and cheap pizza also make the store fun; people like going to fun stores; and when people like going to fun stores, they buy stuff there and talk it up to their friends.  Jordan’s Furniture could not be reached for comment regarding the presence of trapeze schools, ice cream stands, and the Motion Odyssey Movie Ride.

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Filed under Economics, Nerdiness

Why my blog is boring

There are times when you just realise that your blog is boring. Maybe it’s because it doesn’t have the name of an animal in the title. Maybe it’s because you don’t have pink hair and the lack of panache comes through in your writing.  Or maybe it’s just that you don’t write things like this about the Market Basket meltdown:

But what is this ineffectual leadership going to do? Fucking fire everyone? Yeah, no. Disaster. Not even just in a logistics sense, but from a PR standpoint, it would be a headache to attempt to hire an entirely new work force for every store. Customers are protesting along with the workers, and the fallout from such a move would be drastic. It would take months for a new workforce to get up to speed, if they could even find enough people willing to work there. Do they think robotic minions grow on trees? Not since we told Monsanto to cut the crap with the robotic minion GMOs.

Is replacing the new CEO team not an option? Don’t look at me, I have tattoos, pink hair, live in relative poverty, and I’m writing a freakin’ blog. I’m not exactly in Harvard Business School here. But with these two dipweasels at the helm, it’s not going well for Market Basket. This shitstorm may not be entirely under their control, but they’re sitting there with stupid looks on their faces just letting it happen with no real solutions.

Good one, Clamsplainer.

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Filed under Economics, Nerdiness

I’m a dessert aficionado, not a business analyst

But I still called it on the failure of Crumbs Bakery. Inc.com agrees with me on a few points, but I think that the real issue is low quality, high overhead, and the wrong product (or rather, too much product) for the business model (i.e. walk in, buy cupcake, eat cupcake while standing up).

As I wrote over a year ago, cupcake stores that thrive might lack seating, but their desserts are small enough to eat in a few bites.  They also have delicious cupcakes: fresh, gooey, and loaded with flavour.  Crumbs compensated for those things in size, generic sweetness (as opposed to actual, nuanced taste), and artificial food colouring.  I’m an engineer and a lawyer, not a business analyst, but if Crumbs is going to reopen under new ownership, I would be happy to consult on a better product for the business model.

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Filed under Economics, Food

Uexpectedly! Seattle’s Minimum Wage Hike Hurts Workers

It is a given that an increase in minimum wage will decrease available jobs (via outsourcing, automation, reduction in the workforce and loading up the remaining workers, and reduced hiring by new businesses), it also hurts the current workers.  Consider the situation in Seattle, wherein workers who clean hotels are losing a lot of valuable perks (e.g. free parking, food on the job, a 401(k), and health insurance).  They also have had their overtime hours cut.

Most of the listed perks are given tax-free or tax-deferred, which is hugely advantageous for the employee.  It’s much better to be paid $10 and hour and get free parking and food than it is to be paid $15/hour, but have to pay $5/hour in parking and food: the latter are bought with post-tax dollars.  As an example, let’s assume that a person has a tax rate of approximately 20%.  In the former situation, the employee earns $10, pays $2 in taxes, and receives $5 in benefits, for a total tax bill of $2 and post-parking, post-food pay of $8.  In the latter situation, the person earns $15, pays $3 in taxes, and then pays $5 for parking and food, with a total take-home pay of $7. Multiply that by the usual 2,000 hours per year that a person works, and you can see that this change costs working-class people thousands of dollars a year.  Of course, this doesn’t even account for the effects of the marginal tax rate, but that only makes life worse for our employees. (I doubt that the government is shedding many tears over having more tax revenue.)

Similar logic applies to tax-deferred 401(k) accounts and tax-free benefits like health insurance.  The minimum wage hike forces low-skilled employees to take all of their compensation in the form of taxable income, rather than a mix of taxable income and untaxed or tax-deferred benefits. I know that your eyes are glazing over and you’re thinking that most low-skilled workers don’t care, but that does not change the fact that people will notice if they have less money left at the end of the year than they did the previous year.

 

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Filed under Economics

Perverse Incentives

Medicare officials admit that fraud is pervasive, but refuse to take the hard steps to address it.

To defend Medicare for a moment: it makes no economic sense to spend $10 in order to eliminate $5 worth of fraud. However, that math changes when everyone gets the idea that they can scam the system for small amounts of money with impunity, which is why insurance companies have fraud prevention systems.

A company in a free market will do its best to balance overzealous fraud prevention with preventing large losses due to fraud. A patient does not get any benefit from fraudulent payments nor for fraud prevention; both are essentially overhead. A company that strikes a good balance will either make a larger profit or will be able to pass along some of the cost savings to its customers (or both).

The problem comes in the superficial analysis of the efficiency of a company.  If a company spends, say, $30 per customer to prevent $100 worth of fraud, and then charges $300 per month in premiums instead of $400 in premiums, it will look worse than a company that charges $370 per month for premiums and spends little to nothing on fraud prevention.  In a superficial analysis, the former company spends 10% of premiums on “overhead” that does not “provide medical care,” which is substantially more than the second company spends.  (Perversely, the higher premiums make the company’s percentage of overhead spending look even better: the larger denominator results in a smaller percentage.)

“Hey, Bridget, that would never happen in the real world. The insurance company would get creamed, because no one would spend an extra $70/month for the same product.”

Not in the free market, they wouldn’t, but I’ve just given you a simplified version of Medicare spending and the reason that Medicare famously “spends so little” on overhead.

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Filed under Economics, Medicare/Medicaid

Musings on the VA Scandal

The Veteran’s Administration debacle is such a scandal because it involves breaking a promise to those who risked their lives, health, bodily integrity, and sanity for the country, and it also underscores the many problems that come with government-run businesses. One such problem is that the government cannot act as an umpire when it is also a player in the game: while it can regulate other businesses in the marketplace and bring prosecutions or civil charges as needed, it is fundamentally incapable of policing itself.  Rather than have the government as a neutral third party to ensure that people and companies do not commit rampant fraud, we have a government that is structurally accountable to no one, and victims of its malfeasance lack any redress. While the IRS and Benghazi scandals are dismissed as ginned-up ideological issues, it is hard to do the same for the V.A. when the underlying issues (i.e. total lack of accountability for a government agency or actors) are involved.

Just as the government holds corporations accountable, so do markets. An inefficient corporation that does not provide quality goods or services will find that its customers go elsewhere. While it may struggle to pinpoint the source of the problem (e.g. bad customer service, faulty reporting by employees, or a poor product), it will either find and redress the problem or go out of business.

While I agree with Megan McArdle that the scandal is bigger than any one President, I disagree with her that such an idea exempts Obama from criticism.  In 2008, Obama was more than happy to play the Wonderball game: the one holding the ball when the timer runs out (in 2008, it was on the housing and stock markets) is the loser. If that was his standard in 2008, it should be the standard to which he is held in 2014.

In a larger sense, Obama has done things that promote the evils of the V.A. scandal: on a structural level, he has presided over a massive growth in the federal government, and his signature accomplishment is to bring the V.A. system to all Americans. It’s not that his actions are neutral on this and momentum carried the malfeasance through his term; his entire Presidency has been aimed at making these scandals happen to all of us.  Without government or market oversight, this is our future under ObamaCare – a future that we warned the nation about, but for which we were viciously derided by the current occupant of the White House.

The prescriptions for avoiding such scandals in government agencies are simple: reduce the size of government, eliminate sovereign immunity, outsource as much as possible to the private sector and let competition clear things up, and ensure that at least some reporting is done by the people, not the bureaucrats.

 

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Filed under Economics, Medicare/Medicaid, ObamaCare