Public Park Management

As many of you know, my company privately operates public parks and recreation areas.  With costs 50-70% lower than government management, one would think that private operation would be on the table as an option when government recreation budgets face shortfalls**.  However, this is seldom true.  The reason is that you will almost never, ever, ever hear discussion of efficiency improvements in any discussion of public park budgets.  100% of any such discussion will be "how do we find new revenue streams", even when those revenue streams are one or even two orders of magnitude smaller than potential efficiency gains.  When costs have to be cut, they are cut solely by closures and service reductions.

Which is why I smiled when I read this article about Connecticut State Parks sent by a reader:

The effects of state budget cuts will soon be felt at Connecticut’s 109 state parks, including cutbacks in lifeguard staffing and park maintenance and the closure of three state campgrounds.

The $1.8 million in reductions to park operations will take effect after the July Fourth holiday weekend, and Robert Klee, commissioner of the Department of Energy and Environmental Protection, said he expects additional cost-cutting steps next spring. DEEP faces an overall $10 million reduction in funding from the state’s general fund.

“By carefully analyzing how and when the public uses our state park system, we will achieve the savings we need while keeping much of what we offer at our 109 parks open and available to the public,’ Klee said.

But park advocates argue these reductions point to the necessity of identifying additional revenue streams to help fund the parks.

“This just underscores the need for these sustainability funds,” said state Sen. Ted Kennedy Jr., the Democratic co-chairman of the legislature’s Environment Committee. Kennedy and other lawmakers have proposed concepts over the years such as expanded park concessions, a tax on disposable plastic bags, higher park rental fees and sponsorships.

The only cost reductions discussed in the article are reductions in service days and hours.    If one were in private industry, one would approach this by identifying all the activities performed by the organization, such as bathroom cleaning and landscaping, and then look at benchmarks to see if others do it less expensively and then try to figure out how they do it less expensively and determine if those methods could be copied.  None of this ever occurs in the public sphere.  The several times I have suggested it in senior meetings, for example in California, the whole room goes quiet and looks at me like I am insane.

 

** In reality, every single government agency running parks has a shortfall, even when their budget is balanced.  Why?  Because virtually no agency, including the big ones like the National Park Service or California State Parks, fully cover all of their capital maintenance costs.  All these agencies have growing deferred maintenance accounts, even when they claim that budgets are nominally balanced.

Well, WTF Was He Supposed to Do?

Update:  Well, apparently my lack of knowledge about the practice of law was particularly evident in the post below, as several readers let me know.   From this source

Since 1978, attorneys in California criminal trials have been forbidden to exercise peremptory challenges based on a lawyer’s belief that certain individuals are biased because they are a member of a specific racial, ethnic or religious group. (People v. Wheeler (1978) 22 Cal.3d 258, 276, citing, Ca. Const., art. 1, § 16 [right to representative trial by jury drawn from cross-section of community], overruled in part by Johnson v. California (2005) 545 U.S. 162, 168-173 [125 S.Ct. 2410, 162 L.Ed.2d 129].) In 1986, the U. S. Supreme Court followed California’s lead and held that jury challenges based on group bias violate the Equal Protection Clause of the Fourteenth Amendment. (Batson v. Kentucky (1986) 476 U.S. 79, 89 [106 S.Ct. 1712, 90 L.Ed.2d 69].) This has commonly become known as the "Wheeler/Batson" rule.

I don't want to be that guy whose point is disproved but who sticks by it anyway, but I stick by my point.  It's not clear by the timing that Kaine's actions were even illegal at the time, and the narrative below shows Kaine as responding to behavior of the opposing attorney.  If he did not at the time have access to Wheeler/Batson challenges, then his actions seem a reasonable response.  Again, it would be interesting to hear from attorneys actually involved in trials, but are there many attorneys who don't think the racial makeup of a jury makes a difference, even if they have to be more subtle in managing it?

/Update

The Washington Examiner seems to think they have somehow caught Tim Kaine red-handed:

As an attorney in the 1980s, Tim Kaine once had three white jurors struck from hearing a case in which his client, an African-American, alleged she was discriminated against by the defendant, who was white, the Daily Beast reported Monday.

Kaine explained later that the move was aimed at securing more black people on the jury, thus increasing his client's odds of winning her housing discrimination suit.

The white defendant's attorney employed peremptory strikes on the day of the trial to have three black people removed from the pool of potential jurors, the Daily Beast report explained. Kaine responded in kind: He used peremptory strikes of his own to have three white jurors removed, and succeeded in getting one African-American onto the jury.

Kaine explained later in an article for the University of Richmond Law Review in 1989 that he believed having more black people on the jury would swing things in his client's favor, implicitly admitting the tactic was race-based.

I am not an attorney, but doesn't this happen pretty much every single day in every single court?  This strikes me as about as surprising as a baseball manager substituting in a left-handed hitter to face a right-handed pitcher.  I would think that given any sort of reasonable legal ethics, if Mr. Kaine thought this action would help his client, then he was virtually obligated to do it.

If one wants to lament that black and white jurors come to different sorts of verdicts for black plaintiffs and defendants, then I suppose one could rant about that but it's hardly Tim Kaine's fault.  He has to deal with reality as it is.  If you really wanted a racial gotcha story, imagine  the facts reversed to something like "white defense lawyer refused to strike other whites from jury despite the fact it might have helped his black client."

Postscript:  And yes, I know the Lefty SJW's would have gone apesh*t if a Republican candidate as an attorney had struck black jurors from a trial to help his white client, but that does not make the critique any more correct.

This One Simple Trick -- Used by Colin Kaepernick -- Will Make It Harder To Fire You

Years ago, in Ventura County California (where I am thankfully no longer doing business), a loyal employee approached our manager and told her of a meeting that had been held the night before for our employees at a local attorney's office.  The attorney was holding the meeting mainly because he was trying to drum up business, brainstorming with my employees how they might sue the company for a variety of fanciful wage and hour violations.  Fortunately, we tend to be squeaky clean on labor compliance, and the only vulnerable spot they found was on California break law, where shifting court decisions gave them an opening to extract a bit of money from the company over how we were managing lunch breaks.

Anyway, in the course of the meeting, the attorney apparently advised our employees that if they ever thought they were about to get fired, they should quickly accuse someone in the company of harassment or discrimination or some other form of law-breaking.  By doing so, they made themselves suddenly much more difficult to fire, and left the company open to charges of retaliation if the company did indeed fire them.   In later years, we saw at least two employees at this location file discrimination or harassment claims literally hours before they were to be terminated for cause.   Since then, I have seen this behavior enough, all over the country, to believe that this is a strategy that is frequently taught to employees.

This terrible advice is obviously frustrating not only because it makes the firing process harder, but also because these charges all still have to be investigated seriously, a time-consuming process that has to involve me personally by our rules.   On at least two occasions that I can remember, we delayed a firing for cause by several weeks to complete investigations into what turned out to be bogus charges, only to have the employee do something really stupid in a customer reaction during these extra weeks that had substantial costs for the company.

Anyway, I was thinking about this in the case of Colin Kaepernick, the NFL quarterback currently employed by the 49ers but expected by many to be released (ie fired) in the coming weeks.  Last weekend he stirred up controversy when he refused to stand for the national anthem to protest treatment of blacks in America.   Personally, I barely noticed, as I am not a big fan of enforced loyalty oaths and patriotic rituals, finding these to historically be markers of unfree societies.  For these sorts of rituals to have any meaning at all, they have to be voluntary, which means that Kaepernick has every right to not participate, and everyone else has every right to criticize him for doing so, and I have the right to ignore it all as tedious virtue-signalling.

I mostly yawn and change the channel over all this, but it did make me wonder -- Kaepernick has to know that he is potentially on the chopping block.   Many folks believe that his performance last year was not good enough to earn a job on the 49ers this year.  It has been discussed on national TV for weeks, and probably for months in the local San Francisco market.  If he were to be cut, it would likely be in the next 7 days or so by the schedule the NFL sets for finalizing rosters.   So I wonder if part of Kaepernick's action the other day was to make it harder to fire him.   He and his supporters can now portray his firing as retaliation for his support of Black Lives Matters, something that would be an uncomfortable perception for any high profile organization in America but particularly in San Francisco.

Bad Timing Award

Guess where I am supposed to fly on Saturday?

Update: This will totally paint me as a geek, but does this remind anyone of the Romulan plasma torpedos in the Star Trek episode "Balance of Terror"?

Making Lace

I first saw this over the summer in Bruges.  If I had to name one place in Europe where I expected to be bored, but was in fact fascinated, it was the lace museum in Bruges.  They had a lot of examples of super-fine lace, as well as a history and examples of how it is made.  The best part was that upstairs, they had women actually doing hand lace projects that you could go watch.  I did not get a video of it but here are a few examples from the web that give the basic idea.  Here is hand-making of lace:

and here

and here is an insane machine for making it automatically

The super-fine hand-made lace in the museum in Bruges was unlike anything I have ever seen. An order of magnitude finer than even the best lace you have likely seen.

Reopening A State Park

Over  a year ago, due to budget constraints, Alabama State Parks was forced to shut down Roland Cooper SP, near Camden, Alabama.  The park was beloved by the local community and an important economic asset to the town of Camden.  As a result, a lot of local folks put pressure on the state to find some other solution than just closure.  To its credit, the Alabama State Parks Department was willing to consider private options that most state agencies refuse to countenance.  The end result is that my company will be reopening the park -- still a public asset but operated privately -- in time for Labor Day.  The full announcement is here.

We are still working on the permanent web page, but if you are in the area our Facebook page is here.

Interesting Solar Tech

I have no idea how much this stuff costs, so I am not advocating it as currently making financial sense.  But I have long argued that we will know solar is the energy source of the future when they start rolling out solar cells in large sheets like carpet out of Dalton, Georgia.

This is A First: Our Local Paper Actually Questions Movie Tax Incentives

I find that the local newspaper in most towns is generally a strong supporter of most every business relocation subsidy or tax incentive that comes along -- whether it be for Apple or an NHL team or a movie production, the local paper benefits from having more newsworthy activity in town.

But the AZ Republic actually ran an article this weekend questioning movie tax incentives, perhaps the only government subsidy dumber than buying sports stadiums for billionaires

States, including Arizona, that don't offer movie and television tax breaks usually are smart not to do so, a researcher contends.

Nearly all states have lured Hollywood productions at one time or another with special tax incentives, but a University of Southern California professor says such spending fails to deliver the long-term economic benefits promised by industry lobbyists and lawmakers.

“The subsidies are a bad investment," said Michael Thom, an assistant professor in USC's Price School of Public Policy, in a prepared  statement. "States pour millions of tax dollars into a program that offers little return."

Arizona doesn't currently offer tax incentives for the industry but spent $23.7 million on subsidies between 2005, when the program started, and 2010, when incentives ended amid a state budget crisis.

Thom, who has led two recent studies on the topic, looked at job growth, wage increases, entertainment-industry output and other factors for each state.  "On average, the only benefits were short-term wage gains, mostly to people who already work in the industry," he said. "Job growth was almost non-existent. Market share and industry output didn’t budge.”

Sounds Exactly Like Climate Alarm

Good excuse as any to relink this funny video on homeopathy

I Still Don't Understand Why Racism is Defined Assymetrically

What if I wrote this:

"For me as a white man, it's really nice to just go out with other white men sometimes," ... "I have to do so much less translation. When you're white around black people, you have to explain every little thing, even with people who are perfectly nice and well-meaning."

My presumption would be that this would be treated as evil and racist.  But what was actually written was this, which by its reception by Kevin Drum and others is apparently perfectly OK

"For me as a black woman, it's really nice to just go out with other black women sometimes," said Sabrina Stevens, an activist and progressive strategist. "I have to do so much less translation. When you're black around white people, you have to explain every little thing, even with people who are perfectly nice and well-meaning."

The answer I generally get for treating racism asymmetrically (e.g. almost anything a white person says about blacks is racist, but nothing a black person says about whites is racist) is that it's all about privilege and power imbalances.  But the author, at least in this passage, is not talking about privilege and power imbalances.  She is merely talking about differences in outlook and perspective, which are presumably symmetric.  She is more relaxed around similar people, which is likely true of many of us.

Drum, fortunately, seems to get the point about safe spaces, that there is a huge difference between people privately creating spaces populated only by folks of their own selection (ie freedom of assembly) and public institutions (such as universities) enforcing segregated groups and spaces, particularly spaces meant to avoid contact with ideas at an institution dedicated to spreading ideas.  The first strikes me as fine, the second as generally unacceptable.    Of course women have spent the last 30 years of trying to purge private spaces where men choose to hang out solely with other men, so they shouldn't be surprised if they get a teensy bit of push back when they try to create such spaces for themselves.

The United States Is Doing Better Than Europe on Poverty: An Economics Rorschach Test

Kevin Drum, in commenting on a Binyamin Appelbaum article in the NY Times, writes that the Presidential candidates should be talking more about poverty in part because the US is way behind Europe.  Specifically, Appelbaum quotes a Harvard Sociology (!) Professor as the source for the poverty claim:

“We don’t have a full-voiced condemnation of the level or extent of poverty in America today,” said Matthew Desmond, a Harvard professor of sociology. “We aren’t having in our presidential debate right now a
serious conversation about the fact that we are the richest democracy in the world, with the most poverty. It should be at the very top of the agenda.”

Drum argues that Desmond is right, because of this chart from the OECD:

blog_oecd_poverty

One of the dirty secrets about poverty measurement is that the actual measurement seldom has anything to do with absolute well-being.  And this is the case with the OECD numbers.  The OECD's poverty measurement is based on the country's median income, and is the percentage of people who are below a certain percentage (generally 50%) of the country's own median income.  As such, this is more rightly thought of as a graph of income inequality rather than absolute poverty.

Here is an example.   Image country A with a median income of $50,000 and an income of the 20th percentile at $20,000.  Now imagine country B where the median income is $30,000 and the 20th percentile income is $15,000.  In this example, the poorest 20th percentile in country A are better off on an absolute basis, but the OECD (and most other poverty numbers) will show country B doing better because the poor are closer to the (much lower) median income.  In an extreme example, if everyone in a country were equally impoverished, the OECD would show that country as doing the best on poverty -- Yes, you read that right.  By this metric, the OECD would show a country where every person made just $10,000 a year as having 0% poverty.

Obviously, what one would really like to do is compare across nations the absolute well-being of the lowest 10th or 20th percentile.  On a purchasing power parity basis, which country's poor has, after transfers and taxes, more money?  Unfortunately, you likely have never ever seen this.  Yes, the data comparison is hard, but it is possible, so one has to wonder if there is some ulterior political motive for never showing this quite obvious analysis.

I tried to do this analysis myself for years (I describe some false starts here) but was unsuccessful until I actually identified a data source that would work, ironically from two folks on the Left (Kevin Drum and John Cassidy) who were using data from the LIS Cross-National Data Center to make comparisons of income inequality.  It turned out the data they were using could do what I wanted.

So now we get to the chart I call the poverty Rorschach test.  It is a comparison of the absolute income, by income percentile and including transfers and taxes, of the US vs. Denmark (the country by Drum's chart that should be the "best" on poverty)

click to enlarge

(The date is old, alas, because this kind of cross-country data is only gathered every so often)

This chart shows, on a purchasing power parity basis, that for every single income percentile, all the way to the bottom, an equivalent person in the US has more income than that a similarly situated person in Denmark.  In short, the poor in the US are wealthier than the poor in Denmark.  The only reason Denmark does better than the US in the way the OECD and others measure poverty is that the middle class in the US are a LOT wealthier than the middle class in Denmark.

I call it the Rorschach test because one either sees the US doing a good job, because everyone is better off, or the Danish doing a better job, because everyone is more even.  Proponents of the latter view tend to believe that the size of the economic pie is an exogenous variable, unrelated to the method one chooses to slice it.

I picked the Danish because they were the obvious comparison from Drum's chart, but here is the US vs. all the European countries for which there was data in the survey.  The US is better than all but 3 at the 10th percentile and better than all but one country at the 20th percentile.  And better -- by a huge margin-- for the middle class than any of the countries in Europe.

income_all

Update:  One more note on Drum's chart.  As I said above, the exact definition of the OECD numbers is percentage of people with income less than 50% of the country's own median income.  The US has a median household income, per the OECD, 41% higher than Denmark's.   So the US has 9% more people under a number that is 41% higher.   That is hardly a fair or meaningful comparison.

For reasons that are beyond my understanding, I am banned at Mother Jones so I cannot post the comments directly to his article.  If someone wanted to cut and paste this under his or her own name, I wouldn't complain.

 

Leveraging Up The World in Good Times -- The Madness of Modern Central Banking

From the WSJ:

The European Central Bank’s corporate-bond-buying program has stirred so much action in credit markets that some investment banks and companies are creating new debt especially for the central bank to buy.

In two instances, the ECB has bought bonds directly from European companies through so-called private placements, in which debt is sold to a tight circle of buyers without the formality of a wider auction.

It is a startling example of how banks and companies are quickly adapting to the extremes of monetary policy in what is an already unconventional age. In the past decade, wide-scale purchases of government bonds—a bid to lower the cost of borrowing in the economy and persuade investors to take more risk—have become commonplace. Central banks more recently have moved to negative interest rates, flipping on their head the ancient customs of money lending. Now, they are all but inviting private actors to concoct specific things for them to buy so they can continue pumping money into the financial system.

The ECB doesn’t directly instruct companies to create specific bonds. But it makes plain that it is an eager purchaser, and it lays out the specifics of its wish list. And the ECB isn’t alone: The Bank of Japan said late last year it would buy exchange-traded funds comprising shares of companies that spend a growing amount on “physical and human capital,” essentially steering fund managers to make such ETFs available to buy.

Note that none of the criteria for the debt purchases is anything like, "the company has sensible plans for investing the money."  It is merely buying debt for debt's sake.  In the US, private companies are using most of their debt issues to buy back stock, a nearly pointless exercise that channels money from central banks to propping up equity valuations.  I wouldn't be surprised if European companies do the same.

Folks, it may not feel like it, but we are at the top of the economic cycle.   We have negative interest rates and central banks buying up every available debt issues in relatively good times, when these were formerly considered tools for the deepest point in a recession.  I am not a big believer in government stimulus, but these folks are.  What are they counting on in the bad times, when nothing will be left in the tank?

But now, we see central banks going one step further, encouraging private companies to lever up at the top of the business cycle.   Historically, this has been a formula for disaster.  The oil industry has been a preview of this.  Take ExxonMobil (XOM).  XOM, given its size, has never been very good at developing certain sorts of plays (e.g. the shale boom).  What it has done historically is use its size and balance sheet to swoop in during inevitable periods of low oil prices and producer losses to buy up developed fields at good prices.  But this time around, XOM has only had limited ability to do this, because it spent the boom years levering up its balance sheet and buying back stock.  Other large oil companies are in even more dire straights, facing real cash flow crises because, again, they levered up to repurchase stock when they should have been cleaning up their balance sheet.

Phoenix Light Rail Update: Half Billion Dollars More Spent, Transit Ridership Continues to Fall

Valley Metro, the agency that operates light rail and most bus service in the Phoenix area, has published its 2016 annual ridership numbers, and they are awful (the agency is on a july-june fiscal year).  Over the past year, they have opened two extensions of the current light rail line, spending $o.5 Billion to extend the line 6.2 miles.  So what did we get for this?  Falling transit use.

Valley_Metro_Fiscal_Year_Ri

To begin with, we must again look past Valley Metro's downright bizarre chartsmanship, where differences in bar length bear absolutely no relationship to the values graphed (just try to figure out the bar lengths for the last three years of light rail data).

We see that light rail ridership is up 9%.  This appears low, given that the line and total investment were increased by about 33%, but the new extensions were not available for the whole year.  My guess correcting for opening dates is that on a full year basis this represents about a 20% increase.  For May, June, and July light rail ridership has been running 19%, 26%, and 20% above the same month last year (before either extension was opened).  This is well below the increase in line length (31%) and line total investment (36%)

I have always argued that the first 20 miles of the light rail line cut through the densest part of the city, including the downtown area (such that it is), the two highest visitation sports stadiums, and ASU  -- and as such any future expansions were going to have a much harder time justifying themselves (ie, as in this case, a 31% expansion in length would yield something less than 31% increase in ridership).  Light rail supporters have argued in return that I had things exactly backwards, that network effects would mean that ridership increased faster than route length.  My sense is that this argument will pretty clearly tip in my direction by the time we have 2017 data.

By the way, with total investment up to over $2 billion and average weekday round trip ridership at about 23,500 in fiscal 2016, then the total capital cost (not including annual operating subsidies) of the line sits at about $85,000 per round-trip rider.   Whenever Valley Metro supporters defend the line against my attacks, they will often quote various riders saying how much they love it.  Of course they do!  They damn well should love it -- we taxpayers spent $85,000 for each one of them to open the line AND subsidize every single one of their rides.

But if you really want to see the cost of these subsidies, look at the bus and total transit ridership in the chart above.   Total transit ridership in the area has fallen to the lowest point since before the light rail line was first opened, despite the fact the city it serves is still growing.  This is because bus ridership has fallen off the map.   Just last year, for every 1 rider gained to the light rail line expansions, 3.6 were lost on busses.   To see how far bus ridership has fallen, you have to go back further than the chart above shows.  Here is an older Valley Metro chart I annotated for a previous article:

click to enlarge

You can see from this that bus ridership in Phoenix fell to a level we have not seen since 2003!  This is despite the fact that the Phoenix MSA has added about a million people since that time.

As it does in every city, light rail costs are starving the rest of the transit system.   By shifting transit dollars into a mode that requires 10x  more money to move a single passenger, the numbers of passengers served has to fall.  You can see from the chart that Phoenix transit ridership was rising steadily from 1997 to 2009.  But once light rail was completed, transit ridership absolutely stopped growing, despite population increases and large increases to total transit budgets.  Without light rail, we might very well have seen transit ridership as high as 90 million today, if past ridership growth trends held.

 

Being A Victim Apparently Has More Status Now Than Being A Gold Medal Winner -- Ryan Lochte Channels "Jackie"

There appears to be no rational way to explain Ryan Lochte's bizarre need to make up a story about being the victim of an armed robbery.  The media seems to be pushing the notion that he made up the story to cover up his own vandalism at a gas station, but that makes zero sense.  He had already defused the vandalism incident with a payment of cash to the station owner.  The rational response would be to just shut up about the whole thing and let it be forgotten.

But instead, he purposely made a big deal about the incident, switching around the facts until he was a victim of an armed assault by men posing as police officers, up to and including harrowing details of a cocked gun being jammed into his forehead.  The incident, likely ignored otherwise, suddenly became a BIG DEAL and subsequent investigation (including multiple video sources) showed Lochte to be a bald-faced liar.

The only way I can explain Lochte's motivation is to equate it with the lies by "Jackie" at the University of Virginia, whose claims of being gang-raped as published in the Rolling Stone turned out to be total fabrications.  Like Lochte, she dressed up the story with horrifying details, such as being thrown down and raped on a floor covered in broken glass.  The only real difference I can see, in fact, between Lochte and Jackie  is that the media still protects Jackie (via anonymity) from well-deserved humiliation for her lies while it is piling on Lochte.

I can sort of understand Jackie's motivation -- she was by all accounts a frustrated, perhaps disturbed, certainly lonely young woman who was likely looking for some way to dramatically change her life.  But Lochte?  Ryan Lochte has won multiple Olympic medals, historically in the sports world a marker of the highest possible status.  But in today's world, Lochte viewed victimhood as even higher status.

Update:  This is probably the fairest account of the whole incident.

Canada May Fine Me $42,000

Via Steven Green at Instapundit, comes this story of a comedian getting fined $42,000 by Canada for telling a joke:

Canadian comedian Mike Ward was fined a whopping $42,000 by Quebec’s Human Rights Tribunal for jokes he made about a disabled boy.

The child, Jérémy Gabriel, who suffers from Treacher Collins Syndrome, is a bit of a national celebrity in Canada after he sung for the pope in 2006 essentially because everyone thought he did not have long to live. Ward’s joke was a rant about how the child was supposed to die, that he “stole a wish” and is unkillable.

Hmm, I believe I have made this same joke about Keith Richards at least a hundred times in the context of messing up my dead pools.  I better not travel to Canada.

Uncertainty Intervals and the Olympics

If I had to pick one topic or way of thinking that engineers and scientists have developed but other folks are often entirely unfamiliar with, I might pick the related ideas of error, uncertainty, and significance.  A good science or engineering education will spend a lot of time on assessing the error bars for any measurement, understanding how those errors propagate through a calculation, and determining which digits of an answer are significant and which ones are, as the British might say, just wanking.

It is quite usual to see examples of the media getting notions of error and significance wrong.  But yesterday I saw a story where someone actually dusted these tools off and explained why the Olympics don't time events to the millionths of a second, despite clocks that are supposedly that accurate:

Modern timing systems are capable of measuring down to the millionth of a second—so why doesn’t FINA, the world swimming governing body, increase its timing precision by adding thousandths-of-seconds?

As it turns out, FINA used to. In 1972, Sweden’s Gunnar Larsson beat American Tim McKee in the 400m individual medley by 0.002 seconds. That finish led the governing body to eliminate timing by a significant digit. But why?

In a 50 meter Olympic pool, at the current men’s world record 50m pace, a thousandth-of-a-second constitutes 2.39 millimeters of travel. FINA pool dimension regulations allow a tolerance of 3 centimeters in each lane, more than ten times that amount. Could you time swimmers to a thousandth-of-a-second? Sure, but you couldn’t guarantee the winning swimmer didn’t have a thousandth-of-a-second-shorter course to swim. (Attempting to construct a concrete pool to any tighter a tolerance is nearly impossible; the effective length of a pool can change depending on the ambient temperature, the water temperature, and even whether or not there are people in the pool itself.)

By this, even timing to the hundredth of a second is not significant.  And all this is even before talk of currents in the Olympic pool distorting times.

Demand Curve? What Demand Curve?

Today's little slice of economic ignorance comes from tech site Engadget, a frequent contributor of such morsels.  Apparently California is considering new penalties on auto makers for not selling enough electric cars, penalties which by their structure will be fed right into the pocket of Tesla, already a gaping maw of government subsidy consumption:

Assemblywoman Autumn Burke tells the Associate Press that she's introducing a bill requiring that car manufacturers sell at least 15 percent zero-emissions free vehicles within a decade. Companies operating in the state already have to hit yearly emissions targets and get credits for sales, but this would require that they embrace electric or hydrogen fuel cell cars in a big way -- not just one or two novelty models. And if they don't sell enough eco-friendly cars, they'd have to either pay a fine to the state or pay rivals that meet the targets. Yes, they might inadvertently help the competition.

If the bill becomes law, it could light a fire under car makers that have so far been slow to adopt emissions-free tech. Only 3 percent of all California car sales are either electric or plug-in hybrids.

The underlying assumption, both by Ms. Burke as well as the article's author, seems to be that lack of electric car sales is entirely a supply-side problem -- low sales are because auto makers don't make enough of them.  While I have no doubt that there would be incrementally more sales if auto makers had a larger variety of models with different combinations of features, all of this seems to ignore the demand side.  Automakers, who are constantly locked in a death struggle over tiny increments of market share, and who already pay penalties for not selling as many electric cars as politicians would wish them to, have every incentive to sell as many as they can.  The issue strikes me as one of demand rather than supply - given current technology limits and costs, and despite large financial incentives from the government in the form of tax subsidies, most buyers have eschewed electric vehicles to date.  Neither Ms. Burke nor the author even pretend that this law will change this demand situation.

Which is why critics rightly argue that this is just another way to funnel other people's money into Elon Musk's pocket, without his actually having to sell any more cars.  Tesla already depends on payments from other auto makers for electric vehicle indulgences for much of its revenue, and this can only go up under this kind of law.

Wow, With This Level of Understanding of How Government Works, It's Hard To Believe We Struggle to Have Meaningful Public Discourse

I don't have any particular comment on the Supreme Court decision in Voisine v. United States, but I have to highlight the headline that was just shared with me on Facebook:

Another Big Win: SCOTUS Just Banned Domestic Abusers From Owning Firearms

Um, pretty sure that is not what happened.

First, convicted domestic abusers generally are already banned from owning firearms.

Second, I am fairly certain that SCOTUS did not ban anything (not surprising since they don't have a Constitutional power to ban anything).  There was some legal uncertainty in the definitions of certain terms in a law (passed by Congress and signed by the President) that restricted gun ownership based on certain crimes.  This dispute over the meaning of these terms bounced back and forth in the courts until the Supreme Court took the case and provided the final word on how the terms should be interpreted by the judicial system.

This decision strikes me as a pretty routine sort of legal result fixing a niche issue in the interpretation of terms of the law.  How niche?  Well apparently Voisine was convicted (multiple times) of "“intentionally, knowingly, or recklessly” hurting his girlfriend.  The facts of the case made it pretty clear that he was beating on her on purpose, but he argued that due to the "or" in the wording of the crime he was convicted of, as far as the law is concerned he might have only been convicted of recklessness which shouldn't be covered under the gun ownership ban.  Really, this silliness should never have reached the Supreme Court, and did (in my interpretation) only because second amendment questions were involved, questions stripped off by SCOTUS.  Freed on any Second Amendment implications, SCOTUS rightly slapped his argument down as stupid and said he was subject to the ban.  Seems sensible to me, and this sort of thing happens literally constantly in the courts -- the only oddball thing in my mind was how this incredibly arcane niche issue made it to the SCOTUS.

Instead, the article is breathless about describing this incredibly niche case as closing a "gaping loophole."  It is written as if it is some seminal event that overturns a horror just one-notch short of concentration camps  -- "This is a win for feminism, equality in the home, and in finally making movements on reigning in this country’s insane, libertarian approach to gun-owning."    And then of course the article bounces around in social media, making everyone who encounters it just a little bit dumber.

Markets in Not Quite Everything: IP Address Shortage

I migrated my server and in the process lost a block of 10 dedicated IP addresses I had.  So I tried to sign up for the 10 addresses again, and got this:

Due to the global shortage of IPv4 addresses, we are now required to request justification for dedicated IP address requests. Each dedicated server comes with 4 dedicated IP addresses, in addition to the primary shared IP address. Additional IP addresses must be requested in blocks of 4 IPs ($16.00/month for each block of 4). Please be aware, at this time, the only acceptable justification for a dedicated IP address we can accept is for use with an SSL certificate. You will need to provide at a copy of the certificate(s) which will be installed, however, we do not need to install the certificate for you.

Obviously IPv6 is meant to relieve this but it is still a minority of Internet traffic.

Phone Scam

Perhaps this has been going on for a while but it is the first I have had it happen to me.  Over the last two days I have had robocalls from two numbers - 626-265-4560 and 413-356-4173.  The robot says in a menacing way that this is the final call I am going to get and that the IRS is about to file a lawsuit against me.  I knew better than to believe this and did not call back, but several websites report that if you call these numbers, you get an operator who demands personal information without giving out any explanation.  Beware.  This is obvious phishing and should be avoided.

Update:  Add 213-447-4831 and 802-673-0582 to the list.

Example of the Impact of Minimum Wages on Consumer Prices

I thought folks might be interested in a letter I just wrote to the US Forest Service.  I have left some of it out, but these are the guts of it.  As many of your know, we manage parks and campgrounds under concession contract for public entities.  As such, we typically must get changes to customer fees approved in advance by the agency.  This is a version of a letter we just wrote to a number of US Forest Service offices in California explaining the substantial increases to camping rates that must occur over the coming years to accommodate the new California minimum wage laws.

2017 Fee Proposal & Impact of California Minimum Wage Increases on Camping Rates

The purpose of this letter is to make you aware of the substantial effect that the recent increase in California minimum wages will have on use fees. I will get into details below, but in short the newly-legislated 50% increase in the state minimum wage is likely to increase our costs by about 22%, even ahead of inflation in other categories of expenses. Just to stay at parity and to avoid cuts in service, we (and other California concessionaires) are going to need substantial increases in fees over the next five years. Frankly, this does not make me very happy – our company will have to struggle with public resentment of the new fees without making an extra dollar in profit – but it is the reality we must face together. The only other alternative would be large cuts in service (e.g. bathroom cleaning frequency) which frankly I am not going to accept.

Background on the Minimum Wage Increase

California minimum wages have already risen over the last three years by 25% from $8 to $10 an hour. The new California law, which will apply to most concessionaires, demands the following timetable for minimum hourly wages (smaller companies with fewer employees than we have will have one extra year to comply):

2016: $10.00

2017: $10.50

2018: $11.00

2019: $12.00

2020: $13.00

2021: $14.00

2022: $15.00

Note that given the terms of other portions of labor law, these same sorts of percentage increases must trickle up to all managers and salaried employees in California as well.

Background on Concessionaire Cost Structures

Not surprisingly, as a labor-intensive service business, a substantial portion of concessionaire costs are directly tied to wage rates. The minimum wage increase will increase at least three categories of our costs:

  • Wages
  • Payroll taxes (which are calculated as a percentage of wages, so will go up by the same percentages as wages go up)
  • Workers compensation insurance premiums (which like payroll taxes are calculated as a percentage of wages and go up by the same percentage wages go up)

Looking at our financials for our California permits (we have three large permits in the Inyo NF and one in the Cleveland NF) these three categories make up 44% of our total costs.

Preliminary Estimated Fee Impacts

Let’s look, then, and how much our costs may rise between now and 2022.

For the labor and labor-related charges discussed above, we know that costs will rise 50% between now and 2022. A 50% price increase on 44% of our costs raises our total cost structure by 22% (0.5 * 0.44).

But all of our other costs will also continue to rise during this period by at least the national rate of inflation. It is very possible that these costs will increase faster in the future due to this minimum wage increase – for example, our waste disposal costs will almost certainly go up as the labor costs of waste disposal companies rise. For a starting point, we will assume 3% general inflation in 2016 and 2017 and 4% in the years after that. This would yield a 24% increase in the other 56% of our costs for an impact on our total costs of 13.4% (0.24*0.56). Combining these two effects, we can expect a total cost increase to operate campgrounds in California by 2022 of 35.4%.

Note that though we bid based on trying to earn a profit margin around 9%, our actual profit margin in the USFS campgrounds we operate in California has been between 3% and 7% of revenues (5% in 2013, 7% in 2014, 3% in 2015). There is simply no room in that margin to absorb a 35.4% cost increase. We are going to have to therefore seek fee increases over the next 6 years in the 35% range, or between $6 and $8 on the $18-$23 camping rates that currently obtain. This is about a dollar or year, or two dollars every other year.

Competitor Analysis

We understand that the USFS wants to justify fee increases based on market conditions. One problem we will have is that even though we don’t open until April or May at seasonal locations, we need to get fee approval the previous September or October. We fully expect private operators will have to pursue fee increases of a similar magnitude; however, they may not announce their new higher rates in time for our very early fee-setting process. This makes local competitive analysis misleading.

Fortunately, in California we have another large public campground provider, California State Parks (CSP), that has many of the same public service and land management goals as has the US Forest Service. They therefore make a very good comparison. While rates vary by park, CSP is typically charging $35 a night for a no-hook-up campsite in parks that are very comparable in their natural settings to USFS campgrounds.

We currently charge no more than $23 for a no-hook-up site in the USFS in California (both in the Inyo and Cleveland NF). Even with a $6 fee increase, we would still be offering no-hookup campsites at 17% lower cost than does the State of California today (and presumably even lower in 6 years given that CSP is likely to continue to increase its camping fees).

[Rest of the letter on exact fee recommendations and other contract issues omitted]

China Doesn't Kill American Jobs, Politicians Do

I am simply exhausted with the notion that seems to have taken over both political parties that trade with China is somehow the source of US economic woes.

Remember that voluntary trade can't happen unless both parties are benefiting from each trade.  Remember the masses of academic evidence that the (largely hard to see) benefits of trade in terms of lower costs and more choice tend to be greater than the (easier to see) job losses in a few trade-affected industries.  But even if none of that is compelling to you, consider that our trade deficit with China is just 2% of GDP.  It's almost a rounding error.

If politicians want to know why lower-skilled laborers struggle to find employment, they need to look past imports from China and Mexican immigration and look at their own policies that are making it more and more expensive for businesses to hire people in this country.   I have written about this many times before, but some of the most prominent include:

  • minimum wage laws, rising to $15 an hour in many parts of the country, and increasingly draconian overtime rules, both of which substantially raise the cost of hiring someone.
  • minimum benefit laws, including expensive health care requirements in Obamacare and a myriad of other state-level requirements such as mandatory paid sick leave or family leave
  • payroll taxes that act as sales taxes on labor  -- we understand that cigarette taxes are supposed to reduce cigarette purchases but don't understand that payroll taxes reduce purchases of labor?
  • employment regulations, such as chair laws and break laws in California, that make employing people more expensive and risky
  • employer liability laws, that make employers financially responsible for any knuckleheaded thing their employees do, even when these actions violate company policy (e.g. making racist or sexist statements)**
  • laws that make hiring far more risk, including those that limit the ability to do due diligence on potential employees (e.g. ban the box) and those that limit the ability of employers to fire poor performing employees.

And this is just employment law -- we could go on all day with regulations that make life difficult for lower income workers, such as the numerous laws that restrict the housing stock and drive up housing prices and rents for these same folks who are struggling to find a job.

Let's say you live in California.  Who has killed more jobs in your state -- China or the California legislature?  The answer is no contest.   The California legislature wins the job destruction race in a landslide.   While California's high-tech community enjoys a symbiotic relationship with China that has created immense wealth, the California legislature works overtime to make sure low-skilled workers in the state don't benefit.

 

**Postscript:  Of all the factors here, I won't say that this is the largest but I think it is the most underrated and least discussed.  But think about it.  If you are going to be personally financially libel for ignorant, insensitive, or uncouth remarks made by your employees, even when you have explicitly banned such behavior in company rules and don't personally tolerate it, how likely are you going to be to hire a high school dropout without a good work history to interact with customers?

Stupid Regulatory Games

The US Government has various rules on insurance companies that include a notification requirement if they are not going to renew a policy.  However, apparently this requirement is for a date earlier than most insurance companies have made their annual underwriting decisions (in my case often because I have not gotten them all the information they need).  So every year, like clockwork, I get notices on all my business insurance policies that they are not going to renew, and then like clockwork they (mostly) all renew.  Insurance companies comply by sending, it appears, everyone a non-renewal notice.  That way, they can't get in trouble for not informing you in time on the off-chance it actually does not renew.  So in practice, the regulatory requirement is both expensive and worthless.

Actually, it is worse than worthless, as the two times I was non-renewed for a policy it was impossible to differentiate their actual warnings that I might have an underwriting problem from these pro forma ones.  By forcing insurance companies to cry "wolf" constantly, I missed the real dangers.

Venezuela's Directive 10-289

I have written before that the best way to read Ayn Rand's Atlas Shrugged is not as a character-based novel, but as an extended exposition taking socialism to its logical conclusion.  That ultimate conclusion in the novel is directive 10-289, whose first two points are these:

Point One. All workers, wage earners and employees of any kind whatsoever shall henceforth be attached to their jobs and shall not leave nor be dismissed nor change employment, under penalty of a term in jail. The penalty shall be determined by the Unification Board, such Board to be appointed by the Bureau of Economic Planning and National Resources. All persons reaching the age of twenty-one shall report to the Unification Board, which shall assign them to where, in its opinion, their services will best serve the interests of the nation.

Point Two. All industrial, commercial, manufacturing and business establishments of any nature whatsoever shall henceforth remain in operation, and the owners of such establishments shall not quit nor leave nor retire, nor close, sell or transfer their business, under penalty of the nationalization of their establishment and of any and all of their property.

When I first read this at age 18, I thought this was a bit over the top.  But I have seen similar things in my lifetime, even in the US.  I remember years ago a law in Oregon where companies could not go out of business without the state's permission.

More recently, Atlas Shrugged has started to become redundant -- we don't need it to see the logical conclusion of socialism, we can just watch Venezuela.  Here is a brief dispatch from that country via Glen Reynold's, showing that Venezuela has gone full 10-289

This is not a joke nor even an exaggeration. I just found out that my sister in law’s other brother-in-law was arrested in Venezuela at the airport while trying to leave the country. His crime, he was an employee for a company that went out of business. Waiting for more? There isn’t any. Maduro has decreed that any business that goes out of business has committed economic treason and its employees are subject to arrest. They had already arrested numerous owners and managers but this is the first time they went after rank and file worker bees.

Feel the Bern, suckers.

Another Problem With the National Minimum Wage

Beyond the basic lunacy of attempting to help the poor by mandating that they sell their labor for more than most businesses are willing to pay, I am reminded of another problem with proposals for a higher national minimum wage.

This problem is related to one that is seldom discussed in the context of most economic statistics, and that is the differences in the cost of living in different parts of the country.   The Tax Foundation looks at the cost of living by state, showing the value of $100 ($100 is worth more in states with lower prices and cost of living, since one's money will go further).  Magenta states are lower cost of living, yellow states are higher.

$100 Map-state-01

I have written before that not taking this into account messes up our view of things like poverty and income by state.  Well-being of folks in high cost states like California and New York are often exaggerated, as is poverty in states like those in the deep south.

But another issue is that this large variation in cost of living changes the effective value of a minimum wage.  Based on these numbers, a $15 minimum wage in Washington DC becomes, effectively, a $20.43 minimum wage in Mississippi.  Employment effects are likely to be much worse in these lower costs states.  Since the higher cost states all vote Democrat in Presidential elections, and the lower cost states all vote Republican, one wonders if this is a bug or a feature of Democrat-proposed $15 minimum wage plans.