Morons shocked at lack of free lunch . . .

. . . but already queued up for promised free lunch tomorrow.

guild follies

I'm in a guild.

Well, not really in a guild, but represented by one. The non-management employees of the company I work for are covered under the terms of the company's contract with the Greater Frobozzia Tachyonic Ansible Guild*, even if they are not members and even if they pay no dues.

The benefits package is attractive - retirement pay, 100% of family health insurance premiums paid by the employer, including vision and dental, sabbaticals, generous severance packages, and much more.

The main dude of our branch of the guild just walked by and dropped a "guild contract survey" on my desk. It asks for feedback on benefits that are important to me, what additional benefits I'd like to have, etc. There doesn't seem to be a space for listing benefits I'd like to see eliminated.

Wha' huh? Eliminated? What manner of treason is this? Am I nuts? Am I some kind of masochist? Have my libertarian tendencies blinded me to my own best interest?

Not likely.

It's very simple: suppose my value to my company is, to pick a round figure, $100,000/year. Then I won't be hired if the cost to employ me is more than that figure. The total cost C to employ me is roughly S + B + E + I, where:

S = my salary
B = the dollar cost of my benefits (insurance premiums, actuarial value of pension payments, etc.)
E = employer's portion of FICA
I = intangibles (expected loss if I initiate a lawsuit, cost of severance if I don't leave voluntarily, probabilistic cost of me going nuts and shooting the place up, etc.)

There's also some marginal cost associated with one additional record to be tracked by HR, payroll, etc.

For simplicity, we'll just say C = S + B. Then from the employer's point of view it doesn't matter if my $100k cost breaks down as $90k salary and $10k benefits, or $65k salary and $35k benefits; the only number they care about is C. So when the guild pushes for additional benefits, what I see is downward pressure on my salary. The company won't pay me more than I'm worth to them - at least not past the very short term - so any increase to B has to be balanced by a decrease in S.

As someone who makes very little use of our benefits package, I'd much prefer having benefits cut to the bone and the difference applied to a fatter salary. Since money is fungible, that would seem to be the method which gives the greatest freedom to the greatest number of people. Some could use that additional income to purchase the services previously provided by the benefits package, perhaps with the company negotiating group rates for insurance and the like, and others could blow their increase on booze and floozies. Or invest it, whatever.

Unions are anti-choice.

*Not its real name

Why we are doomed

In a recent Usenet discussion (yes, it's still around; no, I don't participate) dealing in part with the recent "stimulus" package, some moron said this:

I too have some concern about the spending, but I cannot imagine how jobs could be created without it.

I just. Can't. Imagine.

Dude.

There Ain't No Such Thing as a Free Lawn
(An Economic Fallacy in Four Acts)

Day 1

"'S'up, Mr. O?"

"Heh heh. Heh heh heh heh."

"You're in a good mood."

"Bad drought this year. Worst drought since WWII."

"And this amuses you?"

"No, son, what amuses me is my brilliant solution to it. Going to have the greenest lawn on the block."

"..."

"Heh heh heh heh."

"Does it have something to do with this hose running out of your window here?"

"That's right, my friend. Indeed it does. The well's nearly dry, been running sluggish. Got this hose here hooked up to an adapter on the utility sink downstairs. Going to crank that sucker on full blast."

"Please tell me the other end isn't running into your well."

"Don't be absurd, son. I've got the other end hooked up to that sprinkler out there. Going to use this to supplement what's coming out of the well. Green things right up."

"But all the water flowing into your house comes from the well. Plus, that hose is all leaky and decrepit; you're losing a good deal of water before it even gets out of your house. Not to mention your underground sprinkler system is already set up to deliver water where it does the most good - that sputtery, dribbly sprinkler you're running the hose to barely reaches past your front porch."

"..."

Day 2

"'S'up, Mr. O?"

"Heh heh. Heh heh heh heh heh."

"Got the kinks worked out of your system?"

"That's right. It's science. Science never fails."

"Something to do with these wires running into the ground next to your well?"

"Oh, you mean the wires running to the 10 kilowatt heating element I attached to the well this morning? Those wires?"

"..."

"It's basic physics, son. Volume varies directly with temperature, as every physicist agrees. More volume means more water. More water means more green in the grass, everyone's a winner."

"...but it's not more water - it's the same amount of water, just taking up more space. You've got the same number of H₂O molecules running through your hose; all you've done is reduce the greening power of the water per unit volume. Not to mention the energy you're wasting running that heater."

"..."

Day 3

"'S'up, Mr. O?"

"Heh heh. Heh heh heh heh heh heh."

"I can already see the rolling fields of verdant green."

"You mock what you don't understand, boy. This time it's foolproof."

"Something to do with this anvil-shaped contraption in your driveway?"

"Son, you're off your nut. That there Acme Quantum Water Cadger looks nothing like an anvil."

"Acme Quantum..."

"Water Cadger. Arrived this morning. It borrows water against future supplies, allowing me to green up my lawn on a water deficit."

"...against future supplies..."

"Sure. Science, remember? There's some sort of hyperhydric chamber in there..."

"...hyperhydric chamber..."

"...that - that's right, hyperhydric chamber - that collapses the waveform for..."

"Come on!"

"...the waveform for...well, anyway, it borrows water. And at a very low interest rate!"

"So this feeds into your well?"

"Well, no, it needs a source to borrow from, of course."

"Of course."

"So it draws from the well and feeds out..."

"To that same old dribbly sprinkler..."

"...to that, well, yes, but it can draw more water than what actually is coming from the well."

"But you're still diverting resources from a more efficient water delivery system to a less efficient one, and paying interest for the privilege - all you're doing is translating your drought forward in time and worsening its effects when the bill finally comes due."

"..."

Day 4

"'S'up, Mr. O? Any rain yet?"

"..."

"..."

"Man, fuck you."

<Fin>

Suck it up, hippies

The most lucid comment I've seen regarding the recent ululations of certain cuckolded early adopters:

They bought it because they felt it was worth $600. If they didn't feel it was worth $600, they shouldn't have bought it. I don't see where the anger should come in here. Clearly, Apple sold an iPhone to everyone who felt it was worth $600, and now they're going to sell one to everyone who thinks it's worth $400.

I might change "shouldn't have" to "wouldn't have", but otherwise this is exactly right. It's so right it makes me mellow.

I can't find it now, but there was this one photo of some hippy strutting out of the Apple store on release day, prize in hand, cocked back on one leg, pumping his fist in the air, mouth all rounded in an iGasmic "Hoo-hoo-hoo!", a huge line of hippies cheering him on. Dude looked like he was ready to toss Steve Jobs' salad for the privilege of dropping six hundred bucks on - admittedly - an extraordinarily cool gadget. Now he's going to cry because some folks are getting it a little cheaper?

It wouldn't matter if Apple now had bikini models strewing 8GB models wrapped in hundred dollar bills out the backs of trains. Clearly you value your toy - and, for some perhaps, the concomitant cachet among the ponytail set - at more than $600, or you wouldn't have laid those bills down. Some envy, I guess, is natural when someone gets a better deal than you did, but it's not like you didn't know the price was going to drop.

Don't hate the player, hate the game.

Top Ten Economic Fallacies - #8

Today's entry will take a slightly different tack - instead of discussing a common misconception that's thoughtlessly repeated by myriad rubes, we'll address an argument by a specific guy. Novelist and red-meat libertarian L. Neil Smith almost certainly was aware of the flaw in his argument when he made it and was using hyperbole for rhetorical effect, but since it fits nicely in with our theme of seen vs. unseen we'll today take on:

"Government makes stuff cost eight times as much as it should!"

Smith's argument is OK as far as it goes. Briefly, he claims that our wealth is:
--halved by taxation
--halved again by businesses passing on their taxes to us
--halved again by the costs of complying with unnecessary and/or overbearing regulations.

...resulting in an effective 87.5% reduction. He doesn't cite sources - it's not that kind of article - but I don't see any reason to quibble over the numbers. There may be some double-counting between halvings 1 & 2, but I don't think they're unreasonable figures to stipulate to. So why won't razing DC and salting the rubble octuple our buying power? Well, the unseen consequences lurking here aren't hidden very well.

--Firstly, while the private sector is indisputably more efficient at producing private and semi-private (i.e., either excludable or rivalrous, but not both) goods than the public sector is, even a pure laissez-faire system does not produce them for free. And of course, the majority - possibly the great majority - of goods and services provided by government would still be in demand in some kind of anarcho-capitalist state. So while we wouldn't be taxed to pay for things like schools, libraries, police services, courts, roads, etc., I'd expect the demand for these services to remain roughly constant, taking a big chunk out of that 87.5% savings. There would naturally be cost savings in the more efficent, competetive private market, as well as certain dubious government "services" which would not be replaced in the marketplace (tax collection being one obvious example), but we're already feeling quite a bit less flush.

--And of course, not all regulation is misguided or useless. Building and restaurant codes, workplace safety rules, automobile safety inspections, and so forth would certainly persist in the absence of government, since people place quite a bit of value on knowing their homes are built well, their food is safely prepared, etc. Again, there would savings, both in the greater economic efficiency of the market over central planning, as well as in the lack of necessity of coercive enforcement of the rules. With no government, we would expect such enforcement to be replaced by a non-coercive alternative. But buying that Veyron for a mere $162,500 is pretty much right out.

--The question of the military is more complicated, as national defense is pretty much a pure public good (in the economic sense, not to be confused with "something that is good for the public"). We would indeed save the cost of the military by eliminating government, but it's likely some amount of wealth would still be expended on some kind of ad hoc, volunteer militia to try to respond to threats to the country. And a nation without government would have a significantly higher likelihood of being invaded by force of arms, at least in the world as it exists today, putting the cost savings at considerable risk.

I think Smith could have made a reasonable case that government destroys somewhere between one-third and one-half of all wealth. My off-the-top-of-my-head guess is that it's somewhat less than that - maybe between 10 and 20% - but I think the case for more could be made. Not quite as nice a campaign slogan, though.

Economic Fallacies - an Interlude

It has been pointed out by an uncahmmenter that the fallacy rebuttals I've posted so far are insufficiently rigorous. This is by design. I don't ask that readers take my assertions about the relative benefits of various economic policies as gospel; my goal is to demonstrate that the policy prescriptions offered in the fallacies in fact have unintended consequences which actually work in opposition to their intention.

Whether the cost of actions called for in the fallacious arguments I address is in fact greater than their reward is a question more easily understood with some knowledge of economic theory. Anyone seeking to rebut or confirm my assertions is invited to grab a course in Macroeconomics. Don't cost nothin'.

Top Ten Economic Fallacies, #9

We need tariffs to protect our steel/textile/widget jobs!

Well, in fact, here too tariffs on goods of type X do protect jobs in the X industry in the country imposing the tariff. Eliminating tariff X will definitely cost some people in that industry their jobs. How heartless, how cruel, to starve the children of the hard-working X-nicians! Well, not really. Those jobs that are lost are easily seen, but what is unseen is this:

--If tariffs are eliminated, foreign sellers will be able to take more profit for their goods at the same price point (or at any discount up to the amount of the eliminated tariff) and/or sell more of good X by lowering their price to better compete with their domestic rivals. Higher profits for businesses in those countries among our trading partners may not directly benefit consumers in the de-tariffizing country, but it will have an indirect benefit which we will discuss in a future fallacy-debunking.

--But what *will* greatly benefit the de-tariffized consumers is the lower prices and strengthened competition in the X market they will enjoy when the cost of the tariff is no longer passed along by the sellers. Eliminating, e.g., tariffs on steel decreases the price of everything from cars to construction to bridges to battleships. It lessens the price of trucks and rail used to transport goods, which goods themselves become cheaper as a result. This cascading effect will increase demand for multifarious goods throughout the economy, and thereby create jobs well in excess of the jobs lost in the steel industry.

Just as with Jeeves and Smythe, it's easy to weep for O'Shaugnessy who may have to replace a high-paying job smelting ingots with a slightly lower-paying job hauling yoo-hoo, but maintaining the tariff puts Fourazendeh and Ingasdottir out jobs they'd otherwise have had. I suppose it's possible to argue over who is more deserving, but that has nothing to do with the issue of what is the best economic policy - from the perspective of what makes the entire country better off on average, three jobs are clearly better than one.

Top 10 economic fallacies, #10

I've vowed to keep this unblahg politics-free, but I've also wanted to to do a list of economic fallacies for quite some time. The problem, of course, is that since many, if not most, political positions are based on such fallacies, debunking them appears to imply opposition to such positions.

I think I can cover myself by stating up front that my argument against a particular fallacy should not be taken to imply opposition to the standard position based on it, but rather to holding that position for the reason stated in the fallacy. I hope to thereby avoid tainting the unblahg with "Strife of interests masquerading as a contest of principles".

My arguments will generally owe a debt to Bastiat, who reminds us to consider the unseen, as well as the seen.

In any case, the first fallacy I want to discuss is:

#10 - Immigrants are stealing our jobs!

Well, actually, they are. Some may quibble over "steal", but that would put us in that nasty realm of politics. So if it's true, how is this a fallacy, then? Because of what is unseen.

It's true that when St. John Smythe comes over from the U.K. and takes a job buttling for some nouveau riche cracker, he may well put an American gentleman out of a job. Sucks to be you, Jeeves. But what is unseen is this:

-- The money saved on Smythe's salary over that of Jeeves does not disappear into the cracker's mattress. He's going to spend that cash to buy himself a second yacht or a third mistress. This in turn will generate a market for more yacht-makers and slut-outfitters - which professions will then be in a position to engage the newly-free Jeeves. Of course one cracker won't make that much difference, but summing the effect over all the crackers in Texas will.

-- More importantly, Smythe, and all of his amigos, will themselves need goods and services: food, housing, clothes, cell phones, travel, entertainment, Aibos, and eventually, in their turn, yachts and mistresses. This demand will, again summed over the entire country, generate plenty 'nough employment opportunities in the long run to soak up all of the Jeeveses not absorbed by the maritime-floozy complex, with jobs left over to distribute to a few previously unemployed Alfreds and Cadburys.

So you can point to Jeeves and say "This guy will lose his job and suffer" and I'll say "You're right - but why is his suffering more important than that of Alfred and Cadbury, who gained jobs as a result? Jeeves may make slightly less designing skankwear, but the overall pie is larger. Any policy decision will hurt some and benefit others; the question is how to maximize the upside."

I think there are two possible objections to this analysis, neither of which I find convincing:

1) Something like "But Jeeves had a right to his job! It's not just about economics, there's justice to be considered, too!" I find the idea that Slim's right to hire whichever person he wants is trumped by Jeeves' alleged right to a job . . . let's say "arguable". In any case, arguments about what is just would once again put us in the realm of the political. My point is that economically we're on average better off, although of course some will be hurt in the short run.

2) "But some immigrants will just come over to suck up welfare and resources!" Maybe so, but that's really outside the scope of this argument. The fallacy I'm addressing here is that we're worse off when immigrants "take our jobs", not when they don't take any job. I won't address whether freer immigration is a good or bad thing, but I will point out that there are two ways to combat this objection: we can either keep immigrants out, or reduce the level of benefits provided. Only one of these will eliminate the economic growth I argue we enjoy by allowing our jobs to be "stolen".