Posts tagged ‘wal-mart’

(Temporary) Respite for Wal-Mart and Exxon

I wonder if the board rooms of Wal-Mart and ExxonMobil are enjoying their probably temporary respite from being first to be set on by the pitchforks.  At least for now, I think the public has decided that there are worse things than companies that reliably provide essential products and services for single-digit margins and without taxpayer bailout money .

It's About Control

Government health care initiatives are not about cheaper or better care.  They are about control, and increased power for government officials.

First, via Carpe Diem:

The state is trying to shut down a New York City doctor's ambitious plan to treat uninsured patients for around $1,000 a year. Dr. John Muney (pictured above) offers his patients everything from mammograms to mole removal at his AMG Medical Group clinics, which operate in all five boroughs. His patients agree to pay $79 a month for a year in return for unlimited office visits with a $10 co-pay.

"I'm trying to help uninsured people here," he said.But his plan landed him in the crosshairs of the state Insurance Department, which ordered him to drop his fixed-rate plan - which it claims is equivalent to an insurance policy. Muney insists it is not insurance because it doesn't cover anything that he can't do in his offices, like complicated surgery. He points out his offices do not operate 24/7 so they can't function like emergency rooms. The state believes his plan runs afoul of the law because it promises to cover unplanned procedures - like treating a sudden ear infection - under a fixed rate. That's something only a licensed insurance company can do.

"I'm not doing an insurance business," he said. "I'm just providing my services at my place during certain hours." "If they leave me alone, I can serve thousands of patients," he said.

Expect similar efforts by Wal-Mart and CVS to run afoul of the government soon, under some pretext.   Massachusetts debated for over a year before allowing just two licenses for this type of clinic.   I have already observed lefty bloggers turning their nose up at this trend, and sense they are scrounging around for some kind of meme or message to consolidate around to oppose this kind of care.  Because having people find private solutions to their problems is the last thing they want to see.  (Seriously - is this the goofiest indictment of the US medical system you have ever seen? How deep are we reaching here?)
Anyway, should you think I am exaggerating, I will leave you with this story I saw on Radley Balko's site:

The five plaintiffs, who now include former House Majority leader Dick Armey, are challenging a policy of the Department of Health and Human Services (DHHS) that denies Social Security benefits to anybody who refuses to enroll in Medicare.

Read that again: As the policy now stands, if you want to pay for your own health care rather than let taxpayers finance it through Medicare, government will not let you receive the Social Security benefits for which you have spent a lifetime paying taxes.
Note that nobody is trying to avoid contributing to Medicare. The plaintiffs merely want to decline the tax-funded benefits for which they already have paid. None of them want the bureaucracy, the governmental intrusions into their privacy, and the rationing of care they believe Medicare entails - so they volunteer to let taxpayers off the hook by providing their own health care coverage.

But DHHS won't let them. Or at least not if they want to receive Social Security benefits. Forfeit Medicare, says DHHS, and you must also forfeit Social Security even if you've paid for it for half a century.

Not The Best of Times Because, Why?

Kevin Drum posts this chart as a one-picture refutation of McCain's statement that we are living in the best of times.

Um, OK.  We all got wealthier.  And the problem is, what?  That someone else got even wealthier than I did?  So what.  Do we really have to keep refuting this zero-sum economics-of-envy argument?

I won't get into the whole zero-sum thing, because the chart itself proves that the world can't be zero-sum, since everyone got richer on average.  But here is a full refutation of zero-sum wealth arguments.  Also, a zero-sum wealth quiz here.

Looking at changes in income brackets is
always misleading. In the US, most folks are migrating up the brackets
as they age and gain experience. So most folks benefit not just from
the increase in their bracket but a migration to the next bracket.

To this last point, the bottom end of the bracket is being flooded
with new immigrants (legal or not) with poor skills and often no
English. They drag down the averages, again understating how well the
typical person is doing.  Lifetime surveys of individuals rather than percentile brackets always demonstrate that individuals gain wealth over time much fast than this type of analysis demonstrates.  And even the new immigrants at the bottom are presumably gaining vs. their previous circumstances, or else why else would they have immigrated in the first place.

Here is an alternate response to whether we are in the best of times.

By the way, here is an interesting article on why using a single inflation rate for the poor and the rich to get real income growth may be incorrect.  There is an argument to be made that the poor have a lower inflation rate than the rich, thanks to Wal-Mart.

The Format Wars May Be Over

It looks like Blu-Ray will soon defeat HD-DVD

Fans of Toshiba's HD DVD format have been kicked while they're down, this time by Wal-Mart's decision to ditch the format,
and sell Blu-ray players and media exclusively. Effective June, the
move is the result of customer feedback, and an attempt to "simplify"
patron's decisions. This news closely follows Best Buy's decision to
also give the format the boot. Speculation has already surfaced that
suggests Toshiba will abandon their own format "in the coming weeks"...

So file all that HD-DVD software next to your Betamax tapes.  I actually preferred the HD-DVD format, but thought from the beginning that Blu-Ray's position in home gaming machines, which immediately gave them a huge installed based before any of us started buying High Def. movie players for our home theaters, might give it a lead that could not be overcome. 

Most consumers have just wanted the format wars to be over so they could pick the right player and software (I partially avoided this problem by buying a combo player).  This is an interesting consumer-friendly role for Wal-Mart that I have never seen discussed, that of standards-setter.

So here is a message to Blu-Ray:  Now that you are on the verge of victory, you need to clean up your own house.  The creeping standards problem you have had, which has caused early players to be unable to play newer disks, has got to end.  In particular, it is irritating not to be able to play a newer disk because the fancy multimedia menu won't work.  When when you learn that we aren't interested in all that crap and just want the movie to start?  Just because the technology says you can do that stuff does not mean that you should.

Update: Reuters with the same news, and a rumor that Toshiba has already shut down production line.

The Problem in Education Is Not Expertise

Via Kevin Drum, Mark S. Tucker and Kevin Toch make the argument, if I understand it right, that school districts and state education organizations simply don't have the expertise or the capacity to handle the changes required to meet the standards that are being applied by efforts like NCLB (they also argue the tests themselves suck, but I am not going to address that issue).  By the way, you know I'm going to get worked up when the title of an article is "The secret to making Bush's school reform law work? More bureaucrats"

...we need a long-term solution, which can only lie in building
the capacity of the states, districts, and schools to reach the kinds
of goals contemplated by the framers of NCLB. This is not a simple
matter, but a vast, man-to-the-Moon kind of challenge. It means finding
people with the data management experience to build and administer the
very complex systems called for by the law. It means recruiting experts
who can help create truly world class curriculum standards so that
teachers will know what they are supposed to teach and students will be
able to reach the standards. It means identifying and training
thousands of educators who have succeeded in improving their schools to
provide on-site assistance at other failing schools, and recruiting
still others who can take those schools over if the current staff
cannot or will not rise to the challenge. It means creating and
expanding networks of talent-laden organizations--universities, think
tanks, for-profit and non-profit school companies--that have the skill,
experience, and management capacity to turn around individual schools
and entire districts. And it means greatly strengthening the
capabilities of the agencies that will coordinate this massive effort:
state departments of education.

Wow!  It's hard to even know where to start, but I guess my first thought is : What the f*ck have public schools been doing in the last 100 years?  Why, after an absolutely enormous spending growth over the last several decades, do districts still not have the ability to create world class curricula?  Why don't teachers know what they are supposed to teach?   Why is the system so talent poor, despite a huge increase in the number of administrators with various advanced education degrees at all levels of the system?  It's as if the highway department announced today that they didn't have the ability to design roads.

The first and last resort of every technocrat is to complain that the system is great, if only the right "smart" people could get put in charge.  These folks are making this same argument yet again.  Our public schools are fine, if we could just get the right experts in charge. 

Bullshit.

The issue is not the lack of expertise.  The issue is one of incentives and senescence in the system itself.  In this context,  NCLB is completely off the mark.   I work with government employees all the time.  There is a very clear difference between the incentives they see and the incentives I see in the market.  For government employees, the biggest incentive is to avoid missing some bureaucratic check box.  They are much more concerned that they not be found later in some audit to have missed a procedure or a required approval authority than with actual performance or productivity.  NOT, I want to emphasize, because they are bad or misguided people, but because that is how their incentive system is set up.  Their actions are entirely rational in the context of their incentive structure, but the results are no less disastrous.

For example, government managers of recreation facilities get almost no credit for improving the customer experience, a metric my company lives and dies for.  I have seen a government park manager do a great job obtaining funds from private sources to add a new facility to their park that pleased guests, only to get criticized for having the slope of an access ramp be 1/4 degree off ADA standards and have a grievance filed by the union that park visitation had gone up, creating more work for the government employees.  I spent an evening having a beer with that manager, and you can bet they are never going to try to actually improve the customer experience again.  As another example, I went in to my government landlord last week and just blasted them for their lack of customer service focus, for the fact that they are blocking me from making improvements customers are begging for.  They yawned, gave me no response,  and handed me a notice that they were missing some of our water testing paperwork and please get it to them ASAP.

NCLB just gives government schools another government wammy to be managed and avoided.  The authors will probably get their wish, and huge bureaucracies will rise up to manage the numbers and reports without anything being done to really improve education.  The authors lament that the California state education department has "only" 1452 employees.  I have every confidence that this "problem" will soon get fixed by California, and the number will balloon up nicely, long before children see any better education.

A while back I wrote a plea to just let GM die.  I said:

A corporation has physical plant (like factories) and workers of
various skill levels who have productive potential.  These physical and
human assets are overlaid with what we generally shortcut as
"management" but which includes not just the actual humans currently
managing the company but the organization approach, the culture, the
management processes, its systems, the traditions, its contracts, its
unions, the intellectual property, etc. etc.  In fact, by calling all
this summed together "management", we falsely create the impression
that it can easily be changed out, by firing the overpaid bums and
getting new smarter guys.  This is not the case - Just ask Ross Perot.
You could fire the top 20 guys at GM and replace them all with the
consensus all-brilliant team and I still am not sure they could fix
it. 

All these management factors, from the managers themselves to
process to history to culture could better be called the corporate
DNA*.  And DNA is very hard to change.  Walmart may be freaking
brilliant at what they do, but demand that they change tomorrow to an
upscale retailer marketing fashion products to teenage girls, and I
don't think they would ever get there.  Its just too much change in the
DNA.  Yeah, you could hire some ex Merry-go-round** executives, but you
still have a culture aimed at big box low prices, a logistics system
and infrastructure aimed at doing same, absolutely no history or
knowledge of fashion, etc. etc.  I would bet you any amount of money I
could get to the GAP faster starting from scratch than starting from
Walmart.  For example, many folks (like me) greatly prefer Target over
Walmart because Target is a slightly nicer, more relaxing place to
shop.  And even this small difference may ultimately confound Walmart.
Even this very incremental need to add some aesthetics to their
experience may overtax their DNA....

Changing your DNA is tough.  It is sometimes possible, with the right
managers and a crisis mentality, to evolve DNA over a period of 20-30
years.  One could argue that GE did this, avoiding becoming an
old-industry dinosaur.  GM has had a 30 year window (dating from the
mid-seventies oil price rise and influx of imported cars) to make a
change, and it has not been enough.  GM's DNA was programmed to make
big, ugly (IMO) cars, and that is what it has continued to do.  If its
leaders were not able or willing to change its DNA over the last 30
years, no one, no matter how brilliant, is going to do it in the next
2-3.

I would say the exact same thing is true of public schools: Their DNA is senescent.  Most are the equivalent of alcoholics who keep falling off the wagon and keep asking for more chances.  At some point, you just have to give up.  At some point, it is easier to just start from scratch.  After 30 years of trying, Sears still can't change itself so there is Wal-Mart.  After 30 years of trying, GM still can't change itself so there is Toyota.  After 30 years of trying, United Airlines still can't change itself so there is Southwest.

The only difference in education is that the government has to date suppressed the emergence of Toyota and Wal-Mart and Southwest because, well, because it can.  I am sure that United Airlines would have liked to ban competition from Southwest, but it does not have the coercive power of government.  Fortunately, in most industries other than education, the public gets a choice of offerings, and companies that customers don't prefer tend to die.

It's time to give school choice a chance, and radically shift the incentives for public schools in a way that the government can't with bureaucracy-based programs like NCLB.  Some public schools will thrive, and many will die in favor of private options, but our kids will be far better off either way.  It's time to stop doubling down on failure.  It's time to stop giving the alcoholic one more chance.

Postscript:  One of the reasons that competition is important is in the very definition of "expertise."  An expert is someone who presumably has been succesful at a certain activity when others have been less so.  We call Herb Kelleher an expert on airlines and customer service because he designed a model that kicked everyone else's butt.  But would you have called him an expert in 1972, before Southwest took off?  Probably not.  He was just one of many voices with diverse, untested opinions of what would make a better airline.  What eventually made him an expert, and the others less so, is he went out and applied his ideas and they were succesful.

So the author's want to send more "expertise" to the schools.  OK, who are the experts?  Nearly every public school is using the same version of the same failed model.  Some succeed more than others, but these differences tend to be incremental rather than radical, like the difference between Sears and Montgomery Ward rather than between Sears and Wal-Mart (or even Amazon.com).  So how can you even know who the experts are within the same failed system, where no one is really allowed to go out and fully test their ideas in practice?  What happens, in reality, is that "experts" in education are the ones that can best enthrall academics and politicians and think tanks with grandiose or politically correct visions.  I would argue that as of this moment there are no experts in education in the US and we have no hope of identifying them until we let entrepreneurs go out and start testing various new models.

The Problem in Education Is Not Expertise

Via Kevin Drum, Mark S. Tucker and Kevin Toch make the argument, if I understand it right, that school districts and state education organizations simply don't have the expertise or the capacity to handle the changes required to meet the standards that are being applied by efforts like NCLB (they also argue the tests themselves suck, but I am not going to address that issue).  By the way, you know I'm going to get worked up when the title of an article is "The secret to making Bush's school reform law work? More bureaucrats"

...we need a long-term solution, which can only lie in building
the capacity of the states, districts, and schools to reach the kinds
of goals contemplated by the framers of NCLB. This is not a simple
matter, but a vast, man-to-the-Moon kind of challenge. It means finding
people with the data management experience to build and administer the
very complex systems called for by the law. It means recruiting experts
who can help create truly world class curriculum standards so that
teachers will know what they are supposed to teach and students will be
able to reach the standards. It means identifying and training
thousands of educators who have succeeded in improving their schools to
provide on-site assistance at other failing schools, and recruiting
still others who can take those schools over if the current staff
cannot or will not rise to the challenge. It means creating and
expanding networks of talent-laden organizations--universities, think
tanks, for-profit and non-profit school companies--that have the skill,
experience, and management capacity to turn around individual schools
and entire districts. And it means greatly strengthening the
capabilities of the agencies that will coordinate this massive effort:
state departments of education.

Wow!  It's hard to even know where to start, but I guess my first thought is : What the f*ck have public schools been doing in the last 100 years?  Why, after an absolutely enormous spending growth over the last several decades, do districts still not have the ability to create world class curricula?  Why don't teachers know what they are supposed to teach?   Why is the system so talent poor, despite a huge increase in the number of administrators with various advanced education degrees at all levels of the system?  It's as if the highway department announced today that they didn't have the ability to design roads.

The first and last resort of every technocrat is to complain that the system is great, if only the right "smart" people could get put in charge.  These folks are making this same argument yet again.  Our public schools are fine, if we could just get the right experts in charge. 

Bullshit.

The issue is not the lack of expertise.  The issue is one of incentives and senescence in the system itself.  In this context,  NCLB is completely off the mark.   I work with government employees all the time.  There is a very clear difference between the incentives they see and the incentives I see in the market.  For government employees, the biggest incentive is to avoid missing some bureaucratic check box.  They are much more concerned that they not be found later in some audit to have missed a procedure or a required approval authority than with actual performance or productivity.  NOT, I want to emphasize, because they are bad or misguided people, but because that is how their incentive system is set up.  Their actions are entirely rational in the context of their incentive structure, but the results are no less disastrous.

For example, government managers of recreation facilities get almost no credit for improving the customer experience, a metric my company lives and dies for.  I have seen a government park manager do a great job obtaining funds from private sources to add a new facility to their park that pleased guests, only to get criticized for having the slope of an access ramp be 1/4 degree off ADA standards and have a grievance filed by the union that park visitation had gone up, creating more work for the government employees.  I spent an evening having a beer with that manager, and you can bet they are never going to try to actually improve the customer experience again.  As another example, I went in to my government landlord last week and just blasted them for their lack of customer service focus, for the fact that they are blocking me from making improvements customers are begging for.  They yawned, gave me no response,  and handed me a notice that they were missing some of our water testing paperwork and please get it to them ASAP.

NCLB just gives government schools another government wammy to be managed and avoided.  The authors will probably get their wish, and huge bureaucracies will rise up to manage the numbers and reports without anything being done to really improve education.  The authors lament that the California state education department has "only" 1452 employees.  I have every confidence that this "problem" will soon get fixed by California, and the number will balloon up nicely, long before children see any better education.

A while back I wrote a plea to just let GM die.  I said:

A corporation has physical plant (like factories) and workers of
various skill levels who have productive potential.  These physical and
human assets are overlaid with what we generally shortcut as
"management" but which includes not just the actual humans currently
managing the company but the organization approach, the culture, the
management processes, its systems, the traditions, its contracts, its
unions, the intellectual property, etc. etc.  In fact, by calling all
this summed together "management", we falsely create the impression
that it can easily be changed out, by firing the overpaid bums and
getting new smarter guys.  This is not the case - Just ask Ross Perot.
You could fire the top 20 guys at GM and replace them all with the
consensus all-brilliant team and I still am not sure they could fix
it. 

All these management factors, from the managers themselves to
process to history to culture could better be called the corporate
DNA*.  And DNA is very hard to change.  Walmart may be freaking
brilliant at what they do, but demand that they change tomorrow to an
upscale retailer marketing fashion products to teenage girls, and I
don't think they would ever get there.  Its just too much change in the
DNA.  Yeah, you could hire some ex Merry-go-round** executives, but you
still have a culture aimed at big box low prices, a logistics system
and infrastructure aimed at doing same, absolutely no history or
knowledge of fashion, etc. etc.  I would bet you any amount of money I
could get to the GAP faster starting from scratch than starting from
Walmart.  For example, many folks (like me) greatly prefer Target over
Walmart because Target is a slightly nicer, more relaxing place to
shop.  And even this small difference may ultimately confound Walmart.
Even this very incremental need to add some aesthetics to their
experience may overtax their DNA....

Changing your DNA is tough.  It is sometimes possible, with the right
managers and a crisis mentality, to evolve DNA over a period of 20-30
years.  One could argue that GE did this, avoiding becoming an
old-industry dinosaur.  GM has had a 30 year window (dating from the
mid-seventies oil price rise and influx of imported cars) to make a
change, and it has not been enough.  GM's DNA was programmed to make
big, ugly (IMO) cars, and that is what it has continued to do.  If its
leaders were not able or willing to change its DNA over the last 30
years, no one, no matter how brilliant, is going to do it in the next
2-3.

I would say the exact same thing is true of public schools: Their DNA is senescent.  Most are the equivalent of alcoholics who keep falling off the wagon and keep asking for more chances.  At some point, you just have to give up.  At some point, it is easier to just start from scratch.  After 30 years of trying, Sears still can't change itself so there is Wal-Mart.  After 30 years of trying, GM still can't change itself so there is Toyota.  After 30 years of trying, United Airlines still can't change itself so there is Southwest.

The only difference in education is that the government has to date suppressed the emergence of Toyota and Wal-Mart and Southwest because, well, because it can.  I am sure that United Airlines would have liked to ban competition from Southwest, but it does not have the coercive power of government.  Fortunately, in most industries other than education, the public gets a choice of offerings, and companies that customers don't prefer tend to die.

It's time to give school choice a chance, and radically shift the incentives for public schools in a way that the government can't with bureaucracy-based programs like NCLB.  Some public schools will thrive, and many will die in favor of private options, but our kids will be far better off either way.  It's time to stop doubling down on failure.  It's time to stop giving the alcoholic one more chance.

Postscript:  One of the reasons that competition is important is in the very definition of "expertise."  An expert is someone who presumably has been succesful at a certain activity when others have been less so.  We call Herb Kelleher an expert on airlines and customer service because he designed a model that kicked everyone else's butt.  But would you have called him an expert in 1972, before Southwest took off?  Probably not.  He was just one of many voices with diverse, untested opinions of what would make a better airline.  What eventually made him an expert, and the others less so, is he went out and applied his ideas and they were succesful.

So the author's want to send more "expertise" to the schools.  OK, who are the experts?  Nearly every public school is using the same version of the same failed model.  Some succeed more than others, but these differences tend to be incremental rather than radical, like the difference between Sears and Montgomery Ward rather than between Sears and Wal-Mart (or even Amazon.com).  So how can you even know who the experts are within the same failed system, where no one is really allowed to go out and fully test their ideas in practice?  What happens, in reality, is that "experts" in education are the ones that can best enthrall academics and politicians and think tanks with grandiose or politically correct visions.  I would argue that as of this moment there are no experts in education in the US and we have no hope of identifying them until we let entrepreneurs go out and start testing various new models.

What if the Wage Isn't Required for Living?

For those who are new to my blog, I run recreation sites like campgrounds, mostly with retired people as labor.  Retired people love these jobs, because they are looking for a nice place to live for the summer in their RV.  Often they are willing to work just for their site and utilities, though as a private entity I must pay them minimum wage as well (when they work for the government, they don't get paid).  We sometimes get into odd situations -- for example, because of a disability payment or Social Security limits, it is not unusual I have employees that ask me if I could not pay them or pay them below minimum wage, and I have to tell them no (minimum wage is absolutely required, even if the worker begs to be paid less).

This relationship works out well.  The retired persons bring conscientious and low-cost management to the campgrounds.  Our employees, who usually are living comfortably off their retirement savings or pension, get a few extra bucks and a nice place to live for the summer.  These folks may work a bit slow, but I can afford that at $6 an hour.

But what happens when a state like Maryland, because it's got its blood up against Wal-Mart, passes a $11.30 "living" wage?  A number of problems result.  First, a camping night generally consumes, on average, about an hour of labor.  At $6 an hour with 22% burden for payroll taxes and workers comp, this totals to $7.32  per night of camping in labor.  At $11.30 an hour, this totals $13.79 per night of camping.  Most of our campsites are tent camping sites and more primitive natural campgrounds (see here) and a typical price for a night of camping is $16.  This is a very low price for camping when compared to large RV parks, and makes our sites particularly popular with lower income people.  The Marlyland minimum wage would add at least $6.50 to this price, or increase prices by 41% in one swoop.  And this is before considering second order cost increases in other purchased goods and utilities due to the minimum wage increase.

The other problem is one I would have thought so obvious that it is amazing to me that no one seems to talk about it -- not everyone earning minimum wage is trying to live on it.  Certainly people new to the work force are one example, as they are often willing to trade lower initial wages for training and experience and a work record and other valuable but non-quantifiable benefits.  In my case, while I am perfectly happy to tolerate lower productivity from older, retired workers at $6 an hour (the average age of my employees is over 70), when wages are forced arbitrarily to over $11, then I have to think about changing my business model, substituting younger workers for older folks.  As any economist would predict, lower productivity workers get pushed out of the market.

For more on this topic, I discussed four case studies in my business dealing with the minimum wage.

Does the Hippocratic Oath Make Doctors Our Slaves?

In the beginning, human rights were things we could enjoy by ourself on a desert island.  Speech, assembly, the ability to make decisions for our own life, to keep the product of our own labors -- these are all rights that don't require other people to make them real.  The only role for government is merely to keep other people from trampling on these rights by the use of force.

And then, in the 20th century, we invented new rights -- the "right" to sustenance, to be clothed, to have shelter, to be educated, to have health care.  These were not the passive rights like freedom of speech.  For example, the right to shelter did not mean that we were free to go and build ourselves a shelter and have it protected from attack or burglary by others.  No, it has come to mean that if we don't have shelter, either through hardship or fecklessness, it should be provided for us. 

I hope you can see the difference.  These new rights require action by someone else.  They require that someone, by force if necessary, be made to provide us these things, or at least be made to forfeit wealth which is used to purchase these things for us.   These new rights are not only different from traditional rights like speech and property, but they are 180 degrees opposite.  The old-style rights established that no other person has a call on our mind, our bodies, or our labor.  The new-style rights establish the opposite, that we do have a call on someone else's mind and labor.  In fact, these news-tyle rights are not rights at all, but dressed up slavery.  Because no matter how you try to pretty them up, the fact is that none of them have any meaning unless force can be used to make someone provide the object in question, whether it be health care or education or housing.

Now when we libertarians begin calling things like this slavery, the average American turns off.  Oh, you libertarian guys, always exaggerating.  But Eugene Volokh brings us a great example that proves otherwise.  Libertarian Dr. Paul Hsieh wrote what I thought was a pretty reasonable letter to the Denver Post:

Health care is not a right, and it is not the proper role of
government to provide health care for all citizens. Instead, this
should be left to the free market. It is precisely the attempts of the
governments of countries like Canada (or states like Tennessee) to
attempt to mandate universal coverage which have led to the rationing
and waiting lists for vital medical services. Similar problems are
already starting to develop in the Massachusetts plan as well. Any plan
of government-mandated "universal coverage" is nothing more than
socialized medicine, and would be a disaster for Colorado.

Paul S. Hsieh, M.D., Sedalia

Denver Post columnist Jim Spencer is scandalized by Dr. Hsieh's position:

The craziest letter to the editor that I've read in some time came
from a physician who claimed that Coloradans have no right to health
care.

Seems the guy not only forgot his Hippocratic oath but also the law.

If you're sick enough or badly injured, they have to treat you at the emergency room regardless of your ability to pay.

The doctor aimed his editorial rant against socialized medicine. But
he wrote it because a state blue-ribbon commission is now cobbling
together a plan for medical treatment and prescription drugs for
Coloradans....

First, it is depressing how deeply these new non-rights are embedded even in the freest country in the world -- so much so that the reporter considers it the craziest notion in the world that free health care might not be a human right.  (I have a thought problem for you -- if free health care is a fundamental human right, and a group of us are stranded on an island with no doctor, how do we exercise our right?)

Second, the fact that something is written into the law does not make it a right.  Rights flow from man's nature (or from God, depending on your beliefs) and NOT from the government.  The fact that the government legislates against free speech does not change my right to free speech, it just marks itself as a bad government.  On the other hand, if the government legislates that we all get free plasma TV's, it does not change the fact that man does not have the inherent right to a plasma TV. 

Third, and I think most interesting, is how Mr. Spencer is using Dr Hsieh's Hippocratic oath as a club.  In effect he is saying "you swore an oath and now you are obligated to provide us all with health care at whatever price, including zero, we wish to pay for it."  Mr Spencer demands the right to health care -- and Mr. Hsieh is going to provide it at any price the government demands because his Hippocratic Oath forbids him to do otherwise.  Very unsubtly, Mr. Spencer is treating Dr. Hsieh as his and society's slave, and he is appalled that the slave has talked back to the masters.

Postscript:
  I could not let this other paragraph in the article go. 

"Insurance companies are not in the
business of providing quality, equitable health care," [health care reform advocate] White explained.
"They're in the business of making money. I said, 'OK, let's fix this
once and for all.' This establishes a single- payer system."

I just love the people that treat "making money" and "quality service" as incompatible.  Because its just so easy to make a crappy product and sustain profits over a number of years.  Here is an exercise:  Name 10 private for-profit businesses that make a quality product or service.  Gee, how about Apple, Sony, Toshiba, GE, Home Depot, UPS, Wal-Mart, etc. etc.  You get the idea.  Now name 10 government run agencies that provide a quality service.  Gee there's the post office, uh no, not really.  DMV?  no.  VA hospital?   no.  Amtrak?  no.  OK, name one.

State-Run Companies and Investment, Part 3

One of the urban legends of the civics world is that is some project really requires investment for the long-term, the government needs to do it since private companies are too short-term profit focused. 

Over a series of posts, I have been showing just how terrible state run companies are at making long-term investments compared to private companies.   I showed the Mexican state oil company eschewing investment in favor of bloated patronage-based payrolls and social spending, and the nationalized Venezuelan companies doing the same thing.  What you see in both cases is that the state run oil companies are particularly bad at making investments to maintain production, investments that can be huge in the oil business.  Leftists have convinced themselves that oil companies make a fortune with little or no work, that oil extraction is kind of like clipping coupons.  But the maintenance of any infrastructure is hugely expensive, and takes a discipline and focus that the state does not have.  Belatedly, some of them are learning that producing oil takes real work and constant re-investment.  It bizarrely reminds me of Carl talking to Vernon in the Breakfast Club:
"You took a teaching position, 'cause you thought it'd be fun, right?
Thought you could have summer vacations off...and then you found out it
was actually work...and that really bummed you out"

But I don't want to imply that this is just a poor-country, banana republic problem.  Defenders of big government in the US will say that government can do all these things just fine, if only you have the right people in charge.  But under-investment in public assets, particularly in refurbishment, is a constant problem in the US as well.  Every Senator likes to get his name on building a new facility, but you don't get your name on a maintenance contract, so lots of things get built by the government but few get maintained.  Disney would never let its parks get as run down as the government
allows its public parks to get.  Wal-Mart (like most retailers) virtually rebuilds its stores every
twenty years, and would never let its infrastructure get as run
down as, say, the average US post office.

So I take as my example the Washington Metro system, one of the highest-profile public infrastructure projects in the country:

The Metro Rail system was built with federal dollars, with the
understanding that local governments would pay for its operation. But
no one was prepared to pay for rail reconstruction, which is
needed every 30 years or so and which costs a substantial fraction of
the original construction cost. Now, some of the system is approaching
30 years of age and is breaking down with increasing frequency.

The article, by Randal O'Toole of Cato, goes on to show another example of this same mindset:

Meanwhile, everyone is trying to ignore the gorilla in the corner,
which is that VTA's board wants to spend $4.7 billion to connect the
San Francisco BART system to San Jose. The agency only has enough money
to build to the edge of San Jose, but even if it had all the money for
construction, its general manager admits "we clearly do not have the money to operate the system." Nevertheless, the board recently voted to spend $185 million "” more than half of VTA's annual operating budget "” on preliminary engineering.

Meanwhile, VTA is still short on operating funds, so it is contemplating "eliminating or consolidating" service on more than a quarter of its remaining bus lines.

Is Jury Nullification Libertarian?

A while back, at our local libertarian discussion group, we spent an evening discussing centralization vs. decentralization of government, and whether one or the other better protects individual liberties. 

Many libertarians argue for decentralization.  The anarchists in the room will argue for the ultimate decentralization, all the way to the individual level, essentially voiding the concept of government altogether.  Others who are more amenable to some government argue for decentralization because it tends to allow for competition, with citizens voting with their feet and wallets for more favorable tax and regulatory regimes.

On the other hand, the US provides historical examples of the benefits of federalism in protecting individual rights.  Certainly the abolition of slavery and later of Jim Crow laws were a positive outcome from the feds, as are the enforcement of Bill of Rights protections on the states.  I would personally love to see a federal system like our own with all legislative power held as locally as possible, but with a federal government whose main purpose domestically was not taxation/regulation/legislation but instead enforcement of a more robust Bill of Rights and nullification of state and local law that violated protected individual freedoms.

Anyway, one topic related to decentralized authority was jury nullification.  Jury nullification is the ability for juries to rule on the law, rather than guilt or innocence.  An example might be "the jury thinks Joe is guilty of smoking pot, but we don't think smoking pot should be illegal, so we are going to let Joe go."  Most state law technically does not allow juries to rule on the law itself, but as a practical matter there is no way juries can be prevented from doing so  (Prosecutors really go non-linear over jury nullification -- I remember Patterico had a long series inveighing against it.)

Anyway, as you might imagine, the libertarians in the room mostly love jury nullification.  Despite being a good anarcho-capitalist, I disagreed. I understood that most of the examples people brought up did indeed demonstrate that jury nullification could be a tool for protecting individual rights.  However, I believe that nullification could equally be a tool of oppression.  For example, in criminal law, take the Enron-Skilling trial.  I am not saying this happened, but one could certainly imagine a properly inflamed jury saying "well, we don't think he is technically guilty beyond a reasonable doubt on the charges based on the evidence here in court, but he's rich and Enron failed and people lost money and we're pissed off, so we will find him guilty.  They would be saying "what he did was not a violation of the law, but it should be, so we are sending him to jail." This is just as much jury nullification as my previous example.

I don't think this kind of anti-individual-rights jury nullificatin happens often in criminal court, but I do think it is happening a lot in civil court.  In fact, I think one way you could summarize what is wrong with torts and litigation in this country is that we are seeing rampant jury nullification in favor of wealth redistribution.  Juries are ignoring the law, the facts of the case, and all reason for one and only one consideration:  "One guy in the room is rich, one guy is not, and I have a chance to take money from the rich guy and give it to the poor guy."  For while it may be hard in America to get 51% of the voters to support substantial increases in wealth distribution, smart lawyers like Peter Angelos and Jon Edwards have figured out that it is not that hard through voi dire to get at least seven or eight such votes in a room of twelve people.

Particularly if you are good at venue-shopping:

In Race, Poverty and American Tort Awards (and here),
Eric Helland and I show that tort awards increase strongly with county
poverty rates especially with minority poverty.  A 1% increase in black
poverty rates, for example, can increase tort awards by 3-10 percent
with a similar increase in Hispanic poverty rates.   Careful forum
shopping can easily raise awards by 50-100%.

Anthony Buzbee, a famed plaintiff's attorney, inadvertently let the
cat out of the bag recently when talking about Starr county in Texas.

"That venue probably adds about seventy-five percent to the value of
the case," he said. "You've got an injured Hispanic client, you've got
a completely Hispanic jury, and you've got an Hispanic judge. All
right. That's how it is."

In other parts of Texas, Buzbee went on, a plaintiff may have the
burden of showing "here's what the company did wrong, all right? But
when you're in Starr County, traditionally, you need to just show that
the guy was working, and he was hurt. And that's the hurdle: Just prove
that he wasn't hurt at Wal-Mart, buying something on his off time, and
traditionally, you win those cases."

The problem with letting juries write law in the jury room is that there are no Constitutional protections at all.  If they want to make the law, at least for that day, read that homeowners are liable for injuries suffered by burglars trying to break into their house, then that is what the law becomes, fair or not.  If they want to make the law read that drug companies shouldn't sell painkillers that have any risk at all, then that is what the law is, and the rest of us 300 million minus twelve people have to live with fewer choices for managing our migraines. 

Economics is a Science. Seriously.

George Reisman at Mises:

When it comes to matters such as the theory of evolution and
stem-cell research, so-called liberals"”i.e., socialists who have stolen
the name that once meant an advocate of individual freedom"”ridicule
religious conservatives for their desire to replace science with the
dictates of an alleged divine power. Yet when it comes to matters of
economic theory and economic policy"”for example, minimum-wage
legislation"”these same liberals themselves invoke the dictates of an
alleged divine power. Their divine power, of course, is not the God of
traditional religion, but rather a historically much more recent deity:
namely, the great god State.

Traditional religionists believe that an omnipotent God came before
all natural law and was not bound or limited by any such law, but
rather created such natural laws as suited him, as he went along. Just
so, today's liberals believe, at least in the realm of economics, that
the State is not bound or limited by any pre-existing natural laws. In
the case in hand, the State, today's liberals believe, is free to
decree wage rates above the level that would exist without its
interference and no ill-effects, such as unemployment, will arise.

Where have I heard that before?  Oh yeah, I remember:

So here is this week's message for the Left:  Economics is a
science.  Willful ignorance or emotional rejection of the well-known
precepts of this science is at least as bad as a fundamentalist
Christian's willful ignorance of evolution science (for which the Left
so often criticizes their opposition).
  In fact, economic
ignorance is much worse, since most people can come to perfectly valid
conclusions about most public policy issues with a flawed knowledge of
the origin of the species but no one can with a flawed understanding of
economics....

In fact, the more I think about it, the more economics and evolution are very similar.  Both are sciences that are trying to describe the operation of very complex, bottom-up, self-organizing systems.  And,
in both cases, there exist many people who refuse to believe such
complex and beautiful systems can really operate without top-down
control
.

By the way, the author partially addresses the Card and Krueger study on New Jersey fast food that purportedly showed that employment goes up as minimum wage goes up.  Unfortunately, the author does not get into the now fairly well-known problem with this study.  For those who don't know, here it is:

Card and Krueger looked at the employment in fast food restaurants in New Jersey both before and after the minimum wage went up.  Here is the key process fact you need to know -- they did not look at every restaurant, just at some branches of national chains (e.g. McDonalds).  They did not include, say, Joe's sub shop.  The restaurants they studied shared a couple of traits in common:

  • They were all far more professionally managed than the average small restaurant
  • They all had higher labor productivity than the average restaurant
  • They all had far more capital equipment (e.g. automation of labor) than the average restaurant

In other words, they studied the restaurants that were able to incur a wage increase with the least impact on their total costs (and eventually prices).  Follow-up studies have shown that there was probably a real reduction in total restaurant employment in New Jersey in the studied period, but the differences in productivity cited above caused the impact to disproportionately hit small ma and pa operations as opposed to large capital intensive nation chains.  In fact, during this period, the national chains experienced a gain in market share vis a vis smaller shops, as the higher minimum wage made it harder for local shops to compete with the national chains.  So, in fact, what Card and Krueger observed was not an economic miracle on the order of seeing the virgin Mary in your pancakes, but a predictable shift of market share from low capital to high capital competitors in response to higher wage rates.

This theme of regulation, including the minimum wage, advantaging larger competitors is an old one.  I discussed it a while back in the context of Wal-Mart's support for a higher minimum wage:

Apparently, though I can't dig up a link right this second, Wal-mart
is putting its support behind a higher minimum wage.  One way to look
at this is a fairly cynical ploy to get the left off its back.  After
all, if Wal-mart's starting salary is $6.50 an hour (for example) it
costs them nothing to ask for a minimum wage of $6.50.

A different, and perhaps more realistic way to look at this Wal-mart
initiative is as a bald move to get government to sit on their
competition.  After all, as its wage rates creep up, as is typical in
more established companies, they are vulnerable to competitors gaining
advantage over them by paying lower wages.  If Wal-mart gets the
government to set the minimum wage closer to the wage rates it pays, it
eliminates the possibility of this competitor strategy. 

Weird Binary World of Sales

This observation is apropos of nothing, but I have noticed something odd about the sales efforts of companies.  They seem to be either too aggressive or downright dormant.

I answer my own phone at work, so every day I hear the parade of people calling me asking for the "person who purchases your printer supplies."  Certain industries, including toner, office supplies, telecom, etc. seem to have irritatingly aggressive sales forces.

And then we have companies like Wham-O.  Yes, the toy guys.  We opened a new snow play area and are selling hundreds of plastic sleds a week.  Unfortunately, we can't find any manufacturer to talk to us about a distribution deal.  So one of my managers spends a part of each week combing every Sams Club and Wal-Mart in Northern Arizona to buy plastic sleds for resale.  I have called Wham-O, a large maker of these sleds, about twenty times.  I have talked to many different people.  I have been referred to several different reps and even the head of the sales department.  And no one will return my call, despite a plea that I want to buy hundreds of sleds a week. 

It is possible that in this Wal-Mart world, volume of this size from one retail outlet is not worth pursuing, but this casualness about making a sale really amazes me.  I would chalk it up to some unique circumstance at Wham-O, but I have had this experience with a number of other companies.  I can't tell you how many times I have left plaintive messages to firms saying "I want to buy a bunch of your product, can someone please call me back to tell me how."

Weird.  Fortunately, we finally had a Canadian company today actually returned our calls and was more than happy to sell us large lots of their product.  Oops, there goes the trade deficit.

First Annual Blogsthetics Award

Yes, I know that the blogosphere needs another award like Washington needs another lobbyist.  But for a while now I have wanted to create an award aimed solely at blog aesthetics.  What I am shooting for is an award that pays no attention to content, that has as much to do with the blog's reasoned arguments as the Miss Hawaiian Tropic Bikini competition has to do with mental agility.  In a world where 1,998,000 out of 2,000,000 blogs are butt-ugly Blogger template jobs with all the charm of a Wal-Mart at 3AM, I would like to reward real creativity. 

What I want to do is take your nominations in the comments of this post. Please post links to the blog websites you think have the nicest visual style.  I will choose six or eight I like the best, and put them up for a vote.  Just to give you an idea, here are a couple I have viewed in the last few hours that I think are attractive in some way.  This blog has a pleasing layout.  And this blog has a gorgeous header image, though the rest of the layout does not do much for me.  Ironically, this blog layout has never done much for me, either, and this site always makes me want to poke my eyeballs out.  But you may disagree.  Again, please ignore content -- the last thing I need here is some left-right flamefest.

As a second competition, because everyone seems to like the flameouts more than the successes (just look at the popularity of the American Idol episodes where they show the total losers) I will also accept nominations for the worst blog look and feel.  Is there a blog out there you think has a "face made for RSS"?  You can nominate it too!

Flash: Labor Market Works Like It Always Does

During the last election, politicians and pundits made a lot of hay trying to argue that the labor market was somehow broken and not functioning like it always has.  First, the argument was that we were having a "jobless recovery."  Then, when employment took off, the argument was that wages were somehow broken and trailing productivity.  Whether this was a secret plot by GWB or by Wal-Mart was never quite made clear.

Well, it turns out that the job market works like it always has.  In a cyclical economic recovery, employment and productivity gains always precede wage gains.  Wages tend to go up late in the cycle, after excess available labor is soaked up:

After four years in which pay failed to keep pace with price
increases, wages for most American workers have begun rising
significantly faster than inflation.

With energy prices
now sharply lower than a few months ago and the improving job market
forcing employers to offer higher raises, the buying power of American
workers is now rising at the fastest rate since the economic boom of
the late 1990s.

The average hourly wage for workers below
management level "” everyone from school bus drivers to stockbrokers "”
rose 2.8 percent from October 2005 to October of this year, after being
adjusted for inflation, according to the Bureau of Labor Statistics. Only a year ago, it was falling by 1.5 percent.

I am not one to really accept the "active bias in media" argument (I believe in a more passive bias based on reporters failing to apply skepticism to stories that fit their view of the world).  However, the bias crowd predicted that reported economic news would suddenly improve after the election and that certainly seems to be the case.

One final note - be careful of folks who are claiming that wages have not kept up with inflation for years.  Make sure they are using "total compensation, including benefits" and not just "wages."  The former number has consistently outpaced inflation.  These numbers diverge because the portion of compensation paid out in non-cash benefits has been growing as a percent of total compensation.

Where's the Debt?

I still get a lot of email and
commentary on my posts explaining why a trade deficit does not
necessarily result in a build up of debt
.  Its a mistake that
protectionists like Lou Dobbs make, either accidentally or on
purpose, to confuse the trade deficit with a debt (Dobbs, in the linked article, claimed that we had $5 Trillion in accumulated trade debt).  In another
attempt to explain this, I want to present a thought experiment.

In our hypothetical, a regular old
American guy named Joe walks into a Wal-Mart to buy new Plasma TV.
Lets assume that Joe is presented with two choices, a Chinese-made TV
and an American-made TV.  The American TV is $2000 and carries a
brand Joe recognizes;  the Chinese TV is $1800 and is a brand Joe
does not recognize.  As far as he can tell, both are featured
similarly.

Joe may choose to take a chance with an
unknown brand to save $200, or he may not.  Let's see what happens
either way.  If Joe picks the Chinese TV over the American TV, the US
trade deficit will likely be worse, by whatever Wal-Mart has to pay
to restock the shelves.  But, while the trade deficit may be worse if
Joe buys Chinese, is there any additional debt created by buying
Chinese rather than American?

Well, Joe doesn't have more or less
personal debt either way.  Whether he is paying with cash or
financing the TV, this decision is unaffected by whether he buys
Chinese or American.  He may happen to buy Chinese and take on debt
to purchase the TV, but the decision to take on debt has nothing to
do with the fact that it is an import.  If he had bought the American
TV, he presumably would have taken on debt for that purchase as well.
In fact, if anything, since the Chinese TV is cheaper, Joe's
personal debt is reduced by buying Chinese over American.

In fact, the only way in which Joe's
personal debt could be said to be increased by Chinese imports is if
the $200 price differential was enough to change his mind from
not-buying a TV to buying one, and he then financed the purchase.
But this is only going to occur in a small percentage of
transactions, and besides, it would be unfair to call something so
empowering "“ ie giving Joe the power to get something he really
wants that he would otherwise been unable to "“ as a negative.
(Update: I do think this is sortof the logic trade opponents
use.  They argue that "rampant consumerism"is causing an increase
in consumer debt which is kindof sortof tied up in some way with this
whole cheap Chinese goods at Wal-Mart thing, so therefore trade
causes debt.  This may sound good rhetorically at an
anti-globalization rally but makes no sense scientifically).

Now let's take Wal-mart.  Assuming they
know how to price items, they will make a gross margin on either the
Chinese or the American TV.  How, then, can having to restock the TV
Joe bought by buying one from an American factory for say $1400
affect Wal-Mart any differently than paying the same (or less) money
to a Chinese company?  The answer is that it has no effect.  Buying
Chinese vs. American has no effect on Wal-Mart's debt.

So let's say Joe bought the Chinese TV,
and the Chinese end up with $1400 (the factory price) in US currency
courtesy of Wal-Mart.  If they don't need anything in the US, they
will trade this currency for yuan to someone in China who does want
to buy something in the US.  Let's assume that these dollars are all
incremental, so none go to buying exports from the US or goods to be
consumed in the US.  Let's assume that it all gets invested as
profits, and further, let's assume that it gets invested 100% in US
debt securities.

Aha!  People want to say to me.  There
is the debt!  Chinese are buying up US bonds.  And so they are.  But
trade did not cause or create the debt.  Just because Chinese trade
dollars are reinvested in debt securities does not mean trade cause
the debt.  In fact, the US government debt would exist with or
without Chinese trade, courtesy of the tax and spend whores of both
parties in the US Congress.  If the Chinese had not bought the debt,
someone else would have, and the debt still would have existed.  In
fact, the US debt would likely have just been a bit larger and a bit
costlier without Chinese buyers to bring down interest rates.

So, to review, an average American
makes an incremental decision to buy Chinese rather than American,
the trade deficit gets worse, but no debt is created.  So I renew my
challenge to Lou Dobbs
, who claims America has $5 trillion in trade
debt by asking a simple question:  Where?

Decoding a Wal-Mart Ban

From the USA Today:

The City Council here voted late Tuesday to
ban certain giant retail stores, dealing a blow to Wal-Mart's potential
to expand in the nation's eighth-largest city.

The measure, approved on a 5-3 vote, prohibits
stores of more than 90,000 square feet that use 10% of space to sell
groceries and other merchandise that is not subject to sales tax. It
takes aim at Wal-Mart (WMT) Supercenter stores, which average 185,000 square feet and sell groceries....

Supporters of the ban argued that Wal-Mart puts
smaller competitors out of business, pays workers poorly, and
contributes to traffic congestion and pollution. Opponents said the
mega-retailer provides jobs and low prices and that a ban would limit
consumer choice.

Certainly such a ban represents a total disdain for consumers and a populist political stunt to cash in on fashionable Wal-mart bashing.  But what is really behind the ban?

A Wal-Mart Super Center differs from a large Wal-Mart mainly in that is sells groceries.  And in fact the legislation does not ban all super-large stores, just ones that sell groceries (Wal-Mart could still build a super-honkin large store in San Diego as long as it didn't sell food).  Well, this should give us a clue.  It tells us that the politicos are not against large stores, just against large new stores that compete with existing grocery stores.

And this puts the lie to supporters statements that their concern is that Wal-Mart "puts smaller competitors out of business."  There aren't any "smaller competitors" in California grocery stores, they are all large chains run by corporations.  And if there are any local fresh produce shops out there, I don't think their customer base is one to run off to Wal-Mart.  This is about protecting grocery retailers from competition.  Why?  Well, there is one other thing we need to know, and that is that California grocers all have extremely powerful and politically connected unions.  This is a story from the LA Times way back in 2003:

Inglewood seemed to offer the perfect home for a new Wal-Mart
Supercenter, with low-income residents hungry for bargains and a mayor
craving the sales-tax revenue that flows from big-box stores.

But nearly two years after deciding to build on a 60-acre lot near
the Hollywood Park racetrack, Wal-Mart is nowhere near pouring
concrete. Instead, the world's biggest company is at war with a
determined opposition, led by organized labor.

"A line has been drawn in the sand," said Donald H. Eiesland,
president of Inglewood Park Cemetery and the head of Partners for
Progress, a local pro-business group. "It's the union against Wal-Mart.
This has nothing to do with Inglewood."

Indeed, similar battles are breaking out across California, and
both sides are digging in hard. Wal-Mart Stores Inc. wants to move into
the grocery business throughout the state by opening 40 Supercenters,
each a 200,000-square-foot behemoth that combines a fully stocked food
market with a discount mega-store "” entirely staffed by non-union
employees. The United Food and Commercial Workers and the Teamsters are
trying to thwart that effort, hoping to save relatively high-paying
union jobs.

The unions have amassed a seven-figure war chest and are calling
in political chits to fight Wal-Mart. The giant retailer is
aggressively countering every move, and some analysts believe that
Wal-Mart's share of grocery sales in the state could eventually reach
20%. The state's first Supercenter is set to open in March in La
Quinta, near Palm Springs....

Yet the Supercenters also threaten the 250,000 members of the UFCW
and Teamsters who work in the supermarket business in California.

For decades, the unions have been a major force in the state
grocery industry and have negotiated generous labor contracts. Wal-Mart
pays its grocery workers an estimated $10 less per hour in wages and
benefits than do the big supermarkets nationwide "” $19 versus $9. As
California grocery chains brace for the competition, their workers face
severe cutbacks in compensation.

"We're going to end up just like the Wal-Mart workers," said Rick
Middleton, a Teamsters official in Carson who eagerly hands out copies
of a paperback called "How Wal-Mart Is Destroying America." "If we
don't as labor officials address this issue now, the future for our
membership is dismal, very dismal."

The push for concessions has already started, prompting the
longest supermarket strike in Southern California's history. About
70,000 grocery workers employed by Albertsons Inc., Kroger Co.'s Ralphs
and Safeway Inc.'s Vons and Pavilions have been walking the picket
lines since Oct. 11, largely to protest proposed reductions in health
benefits. The supermarkets say they need these cuts to hold their own
against Wal-Mart, already the nation's largest grocer.

Rick Icaza, president of one of seven UFCW locals in Southern
California, has taken issue with much of the supermarkets' rhetoric
since the labor dispute began. But he doesn't doubt that Wal-Mart is
the biggest threat ever posed to the grocery chains "” and, in turn, his
own members.

"The No. 1 enemy has still got to be Wal-Mart," he said.

The unions and their community allies have stopped Wal-Mart in
some places and slowed it down in others. They have persuaded officials
in at least a dozen cities and counties to adopt zoning laws to keep
out Supercenters and stores like them.

Hat tip to the Mises blog, which has more here.  In 2004 I wrote how the California grocery unions were using the state pension fund (Calpers) to support their strike.

A Challenge to Lou Dobbs

Sorry posting has been light this week.  A reader was nice enough to point to the latest rant by Lou Dobbs here.  Apparently, he has decided to take the position that free traders are now elitists, while folks like him who want the government to pick and choose winners among American businesses and industries as "populist."  The obvious response of course is that beneficiaries of American protectionist legislation tend to read as the who's who of politically connected elitists.  It is also hilarious to equate free trade, whose benefits are backed by 100 out of 100 economists, with some irrational faith-based belief system.  But I will leave that aside to point to this line:

He and others completely disregard the $5 trillion in trade debt that
the United States has built up through 30 consecutive years of trade
deficits. That trade debt is rising faster than our national debt and
is simply economically unsustainable, no matter what any faith-based
economist would argue. Our political, business and media elites
continue to disregard reality.

Here is my very, very simple challenge for Lou Dobbs to help those of us who obviously don't get it:  Point to where this $5 Trillion of Debt is.   What private individuals or corporations owe it to whom?  That should be simple.  With the national debt, we can just go out and count all those government bonds.  But where is this trade "debt"?

Answer:  IT DOESN'T EXIST.  What he means is that over some time span of several decades, American has a cumulative trade deficit of $5 trillion.  But trade deficit does not mean debt.  I showed this in great detail here.  Calling it a "trade debt" is not a sloppy mistake on Dobbs part but an outright lie, meant to make the point that running deficits every year is unsustainable.  But America has become the wealthiest country in the world running trade deficits for the majority of the last 100 years.   In fact, one can argue that the trade deficit itself only exists as a phantom of the awkward and limited way in which we measure trade

Postscript:
I constantly get people who write me that the fact the Chinese are buying up a lot of US government bonds or corporate bonds with their trade profits is proof of a "trade debt."  No such thing.  The US Government bonds are evidence of a fiscal deficit of the federal government, also called the national debt, and exists not because of trade but because Congress has no fiscal discipline.  Corporate debt is growing to buy back stock, make corporate acquisitions, and to buy new plants and facilities.  The fact the Chinese help to fund these debts does not mean that trade caused this debt.  In fact, foreigners buying US debt securities depresses interest rates and actually keeps the national debt lower.

Here is a thought experiment:  Wal-Mart runs a multi-billion dollar trade deficit every year with China.  Why isn't it building up lot's of debt to the Chinese?

Minimum Wage Hypocrisy

I thought this was amazing, from an article by John Fund on the activist group ACORN.  Most of the article is about allegations of election fraud, but this caught my eye:

Founded by union organizer Wade
Rathke in 1970, Acorn boasts an annual budget of some $40 million and
operates everything from "social justice" radio stations to an
affordable-housing arm. Still run after 36 years by Mr. Rathke as
"chief organizer," it is best known for its campaigns against Wal-Mart,
and for leading initiatives in six states to raise the minimum wage....

Acorn is vulnerable to charges
it doesn't practice what it preaches. Its manual for minimum-wage
campaigns says it intends "to push for as high a wage as possible." But
it doesn't pay those wages. In 2004 Acorn won a $9.50 an hour minimum
wage in Santa Fe, N.M., for example, but pays its organizers $25,000 a
year for a required 54-hour week--$8.90 an hour. This year Acorn had
workers in Missouri sign contracts saying they would be "working up to
80 hours over seven days of work." Mr. Rathke says "We pay as much as
we can. If people can get more elsewhere, we wish them well."

In 1995 Acorn unsuccessfully sued
California to be exempt from the minimum wage, claiming that "the more
that Acorn must pay each individual outreach worker . . . the fewer
outreach workers it will be able to hire." Mr. Rathke acknowledges
higher wages can cost some jobs but that the raises for other workers
are worth it.

I am not sure this hypocrisy even requires further comment.  It is particularly hilarious that he argues that economic arguments against the minimum wage (e.g. that they reduce jobs) apply to a non-profit but not to for-profit companies.

This is also hilarious, for a group that is at the forefront of trying to unionize Wal-Mart:

One of them, Sashanti Bryant of
Detroit, Mich., was a community organizer for Acorn....Ms. Barton
alleges that when she and her co-workers asked about forming a union
they were slapped down: "We were told if you get a union, you won't
have a job." There is some history here: In 2003, the National Labor
Relations Board ordered Acorn to rehire and pay restitution to three
employees it had illegally fired for trying to organize a union.

Broken Window Fallacy, On Steroids

Economics have a concept called the "broken window fallacy" that many of the media to this day do not understand.  Here is an example:  Every hurricane season, the media always writes a "silver lining" story about how recovery from a devastating hurricane spurred the local economy.  One might assume from this reasoning that it is good to go around breaking windows, since one will make a lot of work for glaziers and boost the economy.  The problem is what is not measured.  What would the money that was spent on window replacement have been spent on instead?  It is a safe presumption that had they not had to repair storm damage, they would have spent the money on something more productive  (test:  if this were not true, everyone would be breaking their own windows).  Advocating the broken window fallacy is a bit like saying that stealing money from banks would increase the savings rate, since people would have to deposit even more money to replace that which was stolen.

Anyway, I bring this example up because today I saw the most amazing example of the broken window fallacy I have ever seen, via Kevin Drum and Business Week:

 Business Week's cover story in their current issue tells us that healthcare inefficiency is what's keeping the American economy afloat:

The
very real problems with the health-care system mask a simple fact:
Without it the nation's labor market would be in a deep coma.  Since 2001, 1.7 million new jobs have been added in the health-care sector, which includes related
industries such as pharmaceuticals and health insurance. Meanwhile, the
number of private-sector jobs outside of health care is no higher than
it was five years ago.

.... The U.S. unemployment rate is 4.7%, compared with 8.2% and
8.9%, respectively, in Germany and France. But the health-care systems
of those two countries added very few jobs from 1997 to 2004, according
to new data from the Organization for Economic Cooperation &
Development, while U.S. hospitals and physician offices never stopped
growing. Take away health-care hiring in the U.S., and quicker than you
can say cardiac bypass, the U.S. unemployment rate would be 1 to 2
percentage points higher.

....Both sides can agree that more spending on information
technology could reduce the need for so many health-care workers. It's
a truism in economics that investment boosts productivity, and the U.S.
lags behind other countries in this area. One reason: "Every other
country has the payers paying for IT," says Johns Hopkins' Gerard
Anderson, an expert on the economics of health care. "In the U.S. we're
asking the providers to pay for IT" "” and they're not the ones who
benefit.

Let's go back to slow-motion instant replay.  What was that first line?

Business Week's cover story in their current issue tells us that healthcare inefficiency is what's keeping the American economy afloat

I am not seeing things, am I?  Did he really write that it is the inefficiency of one of the largest and most ubiquitous and perhaps most important industries in the country that is propelling the economy?  Do I really have to state the obvious?  Do you really think that if all those people were not hired to push paper around in health care they would be sitting unemployed today?  What about all the money either consumers or corporations would be saving from more efficiency -- would that really not have been spent on something else?

In a way, I guess this is sort of consistent with Drum's position on Wal-Mart.  If Wal-Mart is detroying the economy (according to him) by bringing increased productivity to retail, I guess this argument that health care inefficiency helps the economy is at least consistent.  Maybe if we could get our state drivers' license agency folks to take over the whole economy, we would have a boom! And the old Soviet Union must have been an economic powerhouse!

This is some of the worst economics I have seen in a while.  Lefties like Drum often rail against conservatives for being anti-scientific in their opposition to teaching evolution or approving the morning-after pill, but for God sakes the most fundamentalist Bible-belt home schooled conservative Christian probably knows more about the science of evolution than journalists understand about the science of economics.

Get Wal-Mart Out of the Public Trough

I have defended Wal-Mart on a number of occasions given its new whipping-boy-of-the-left status.  However, if it wants to get my further support, it is going to have to take it's nose out of the public trough.

It's hard to find reliable numbers on the total value to Wal-Mart of such subsidies. The leading report is Shopping for Subsidies: How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth
by Philip Mattera and Anna Purinton was published by a left-leaning
advocacy group and funded in part by one of the very unions trying to
unionize Wal-Mart's work force, which will suggest to some a need for
caution. Yet, even if one applies a substantial discount to Mattera and
Purinton's results, Wal-Mart is still doing quite well at the public
trough:

  • In a sample of subsidy deals for individual stores, they found
    subsidies ranging from "$1 million to about $12 million, with an
    average of about $2.8 million."
  • In a survey of Wal-Mart regional distribution centers, they found
    that "84 of the 91 centers have received subsidies totaling at least
    $624 million. The deals, most of which involved a variety of subsidies,
    ranged as high as $48 million, with an average of about $7.4 million."

In a very real sense, Wal-Mart thus is in part a creature of big
government. From this perspective, Wal-Mart's recent hiring of
long-time Democratic operative Leslie Datch and significant increase in
contributions to Democratic politicians comes as no surprise. (Of
course, as Timothy Carney has argued,
it may also be that Wal-Mart is now using big government not just to
boost its own growth but as a tool to squash competition.)

Is Wal-Mart becoming the Archer-Daniels-Midland of retail?  In fact, the article does not even mention the egregious practice of getting local governments to use eminent domain to clear them a building location.  A while back I argued that Wal-Mart was using regulation as a club to pound on their competitors:

Apparently, though I can't dig up a link right this second, Wal-mart
is putting its support behind a higher minimum wage.  One way to look
at this is a fairly cynical ploy to get the left off its back.  After
all, if Wal-mart's starting salary is $6.50 an hour (for example) it
costs them nothing to ask for a minimum wage of $6.50.

A different, and perhaps more realistic way to look at this Wal-mart
initiative is as a bald move to get government to sit on their
competition.  After all, as its wage rates creep up, as is typical in
more established companies, they are vulnerable to competitors gaining
advantage over them by paying lower wages.  If Wal-mart gets the
government to set the minimum wage closer to the wage rates it pays, it
eliminates the possibility of this competitor strategy.  Besides, a
higher minimum wage would surely put more low-skilled people out of
work, increasing the pool of people Wal-mart can hire  (and please do
not bring up the NJ convenience store study that supposedly shows that
higher minimum wage increase employment - no one in their right mind
really believes that demand for labor goes up when the costs go up).  I
am not sure what the net effect on Wal-mart's customers would be --
some would have more money, from higher wage, and some would have less,
from fewer hours or due to being laid off.

I have defended Wal-mart in the past,
but I am going to stop if they become the new auto or steel industry
and use the government to protect their market position.  Already they
are losing my sympathy with their whoring for local relocation subsidies and eminent domain land grabs.

If Wal-Mart wants to seek public funding for its business and impose regulation on its competitors, and thereby make itself a semi-governmental entity, then I am no longer going to have any sympathy for them when governments want to single them out for special regulation, no matter how bone-headed the regulation may be.

Another Thought on Wages

The NY Times is working to help the left coalesce its strategy for the upcoming elections, and it is pushing the notion that Wal-Mart represents everything that is wrong with the economy and that the Wal-Mart effect (supposedly holding down wages to augment profits) has caused real wages and middle class earnings to stagnate.

I have been addressing some of this piecemeal
, but it also occurred to me that something is different over the last two decades that radically effects average wages - that is, immigration.  This is not the "immigration drags down other people's wages" argument, something that most economists have debunked.  But since immigrants, legal or not, are new in the labor force, have fewer skills, and don't always have good English skills, their wages are lower.  My guess is that these lower immigrant wages bring down the average, and are one reason for apparent stagnation of wages.

The solution to this would be to do a time-series study - don't look at the average, but look at the same people and see what happened to their wages.  My sense is that most everyone in the pool is experiencing improving wages, but the fact that new people are entering the pool at the bottom of the wage ladder keeps the average wages for the whole pool flat.

Progressives in Their Own Words

From Kevin Drum, it's good when progressives make it clear to everyone what they want:  Control!

[emphasis added]  It's just that, left to their own devices, both humans and corporations
tend to act solely in their own self-interest. That's why we have laws
to control human behavior
, and it's why we need laws and regulations to
control corporate behavior. I prefer a society in which people don't
gun each other down in the streets, and I also prefer a society in
which middle class workers prosper when the economy grows. I support
laws that encourage both.

Woah!  Can't let all those damn individuals do whatever they please of
their own voluntary self-interest.  Don't they know they are supposed
to do what we intellectuals think best for them?  I want to repeat
this line:

That's why we have laws
to control human behavior

Actually, in governments with a strong grounding in individual rights,
we have laws to prevent people from acting using force or fraud on
other individuals.  So yes, we do have laws to stop people from
shooting each other, but these laws are philosophically a long step away from
laws that tell people what wage they can and cannot legally accept.   Preventing someone from using force against another is waaaaaaay different than using government force to prevent one or more individuals from acting voluntarily in their own self-interest.  The whole point of government in a free society is to prevent people
from trying to control each other by force, not, as Drum wants, for the
government to be the very agent of this control and coersion. 

People who root for more government control need to learn their lesson.  Both parties tend to set up mechanisms of control as if their own guys are going to run this machinery forever, only to freak out when the opposition party takes over and uses this machinery of control for its own purposes.  Thus Democrats lament that the machinery they built to control the drug market gets taken over by Republicans to ban the morning after pill, and that the public education system Democrats so love is co-opted by ID curriculum.  As I wrote here:

Again we hear the lament that the game was great until these
conservative yahoos took over.  No, it wasn't.  It was unjust to scheme
to control other people's lives, and just plain stupid to expect that
the machinery of control you created would never fall into your
political enemy's hands.

Drum makes these statements in the context of arguing that moderate Democrats should be irate about Wal-Mart and should be seeking to have the government sit on Wal-Mart in some way:

And one of the things that's changed is that Wal-Mart has gotten a lot
bigger, unions have continued shrinking, working class wages have
stagnated, and corporate power has grown tremendously. It's perfectly
rational for even moderate, pro-business Dems to look at the record of
the past couple of decades and conclude that things have gotten pretty
far out of whack and that Wal-Mart is a good symbol of this imbalance

One problem with this meme beyond the others I have pointed out in the past is that Wal-Mart is generally not supplanting (with one exception) unionized retailers.  In fact, the implication that Wal-Mart is somehow setting back unionization is actually a complete reversal of how Wal-Mart used to be hammered by critics.  Traditionally, Wal-Mart has been blamed for replacing small stores and family businesses which certainly aren't unionized, usually don't have health plans, and often pay lower wage scales than Wal-Mart does.  Now they are trying to reverse history, and claim instead that Wal-Mart has somehow been supplanting high-paid union jobs.  The only place where this could be argued to occur is in the supermarket business, where strong unions have dominated.  But these old-line unionized supermarkets were falling to competition from other supermarkets even before Wal-Mart came along.  And as to all those Chinese imports, well, I would LOVE to see a liberal try to twist themselves into a pretzel to make a progressive argument for why an impoverished person in China counts for less than a middle class person in the US.

The only real change in employee's fortunes is that employees who work for Wal-Mart are now more visible than they were when they worked for thousands of tiny local retailers, but are they really worse off and more powerless, or just a better target for populist rhetoric?  In fact, even if pay and benefits are the same as in a small store (and I think Wal-marts are probably better), Wal-Mart also offers opportunities for advancement and training far, far beyond the ma and pa store.

By the way, you know its election time when you hear this:

The American economy has changed for the worse over the past couple of decades if you're part of the working or middle class

Ahh, it reminds me of those heady days when Clinton was able to portray a modestly growing economy under Bush 1 the "worst economy since the great Depression."   Election rule to remember:  Republicans try to get elected by running down the morality of Americans, Democrats do so by running down their economic success.

Postscript:  I will admit there is one group who sometimes must accept wages that are not the result of pure voluntary agreement with an employer: Illegal immigrants.  Those who read this blog a lot will know I am very pro-immigration, and would like to see full, open immigration and there be no such thing as an "illegal" immigrant, except in narrow cases of convicted criminals, etc.  Illegal immigrants in many ways have the same problem as prostitutes, in that they have only limited legal redress when they are victims of force or fraud in their work.  Making currently illegal immigrants legal would do more to help disenfranchised workers than any slate of goofy government legislation to try to reinvigorate unions.

Update:  My past response to charges of widening income distribution was:  So what?  Also alot more links here.

 

More of Wal-Mart as Satan

I guess Exxon must be happy that after a really long run, they may finally be handing off the title of the left's great Satan to Wal-Mart.  Ezra Klein thinks government intervention to change the practices of Wal-Mart's managers, consumers, and employees is one of "the two or three most important issues facing the country" (hat tip: Instapundit).

Eegad!  My response in his comments:  "My guess is what is really worrying to you is that there is a large
group of people voluntarily and by individual choice making decisions
you don't agree with (e.g. to shop at Wal-Mart or to work at Wal-Mart)
and you are frustrated that no one has yet allowed you to become
economic fuehrer so that you can override by government coersion the
actions of individuals so you can force them to make decisions the way
that you think they should."

I have pointed out the great irony before that those who call themselves "progressive" are actually inherently conservative, hating capitalism for its chaos and unpredictability.  They hate new business models and often make common cause with incumbent competitors to get the government to halt such new competition (e.g. protection of US auto and steel vs. imports).

Update:  Sabastion Mallaby has an editorial in the Washington Post criticizing moderate Democrats for jumping on the anti-Wal-mart bandwagon

Update#2:  I realized that I forgot my usual caveat in my defense of Wal-Mart:  That is, Wal-Mart totally pisses me off in their rent-seeking from local government, benefiting from tax breaks and even eminent domain actions their competitors do not get the benefit of.  Also, I think their stores are aesthetic hell-holes I enter only under duress.  Wal-Mart has problems, I just don't agree they are the ones their critics harp on.  Tim Worstall's article reminded me I forgot this part.

Leaving Poverty in China

Michael strong has a great article in TCS Daily about Chinese citizens pulling themselves out of poverty:

Between 1990 and 2002 more than 174 million people escaped poverty in China,
about 1.2 million per month.

In part he credits America's newest great Satan, Wal-mart:

With an estimated $23 billion in Chinese exports in 2005 (out of a total of $713
billion in manufacturing exports),[2] Wal-Mart might well be single-handedly responsible for
bringing about 38,000 people out of poverty in China each month, about 460,000
per year.

There are estimates that 70 percent of Wal-Mart's products are made in
China.[3] One writer vividly
suggests that "One way to think of Wal-Mart is as a vast pipeline that gives
non-U.S. companies direct access to the American market." [4] Even without considering the $263 billion in
consumer savings that Wal-Mart provides for low-income Americans, or the
millions lifted out of poverty by Wal-Mart in other developing nations, it is
unlikely that there is any single organization on the planet that alleviates
poverty so effectively for so many people.[5] Moreover, insofar as China's rapid manufacturing growth
has been associated with a decline in its status as a global arms dealer,
Wal-Mart has also done more than its share in contributing to global peace.[6]

It is almost certain that abusive practices exist in some of Wal-mart's Chinese suppliers -- in particular, slavery and compelled work must end and be opposed by all of us.  But wages that are "too low" is not one of these abuses.  In fact, wages at these suppliers, that comfortable middle class Americans decry as too low from the safety of their Pottery Barn couch, are actually a victory for Chinese workers.  Strong provides the context that is always missing from attacks on Chinese wages:

If we care about alleviating global poverty we need to take this fact
seriously. Without Wal-Mart, about half a million of these people each year
would be stuck in rural poverty that is, for most of them, far worse than
sweatshop labor.

And he provides some context as well for the futility of charitable aid:

Other than economic growth, there is no way to double the salaries of a 100
million people (and growing). After the 2004 Asian Tsunami, more than one-third
of Americans gave more than $400 million in charitable aid, an extraordinary
outburst of giving by any standard. And yet there are more than 630 million
rural Chinese remaining, many of whom are living on less than a dollar per day.
While each would welcome a charitable dollar if we could get it to them, that
charitable dollar, representing one good day's worth of income, would not do
them nearly as much good as would a job in the city paying twice as much day in,
day out. Charity cannot take place on an adequate scale to solve global
poverty.

I made similar points in my post several years ago on why progressives hate capitalism:

Progressives do not like American factories appearing in third world
countries, paying locals wages progressives feel are too low, and
disrupting agrarian economies with which progressives were more
comfortable.  But these changes are all the sum of actions by
individuals, so it is illustrative to think about what is going on in
these countries at the individual level. 

One morning, a rice farmer in southeast Asia might faces a choice.
He can continue a life of brutal, back-breaking labor from dawn to dusk
for what is essentially subsistence earnings.  He can continue to see a
large number of his children die young from malnutrition and disease.
He can continue a lifestyle so static, so devoid of opportunity for
advancement, that it is nearly identical to the life led by his
ancestors in the same spot a thousand years ago.

Or, he can go to the local Nike factory, work long hours (but
certainly no longer than he worked in the field) for low pay (but
certainly more than he was making subsistence farming) and take a shot
at changing his life.  And you know what, many men (and women) in his
position choose the Nike factory.  And progressives hate this.  They
distrust this choice.  They distrust the change.  And, at its heart,
that is what the opposition to globalization is all about - a deep seated conservatism
that distrusts the decision-making of individuals and fears change,
change that ironically might finally pull people out of untold
generations of utter poverty.

Find the Deep Pockets

In my new novel, one of the elements of humor is added by a fictional law firm that has no sense of right and wrong but a very finely tuned sense for who has deep pockets.  Early readers of the book have accused me of exaggerating reality.  In fact, all the humorous cases in the book are based on real analogs.  Just check out this one via Overlawyered:

Katoria Lee refused a carjacker's command to surrender her car-keys in 2001, so
he shot her in the back. This, a Georgia state court jury decided, was the fault
of Wal-Mart, who owned the parking lot where the shooting occurred. Eric Deown
Riggins, 22, was caught within minutes, and is serving a 15-year sentence in
state prison for the crime.