Text

Democracy, Despite the Capitalists

Tl;dr—the important connection between Brendan Eich & Citizens United.

One of the few conservatives who can stand to follow me on Twitter, @atgrote, wrote up his reflections on Eich’s ouster. I’m not going to touch on every point of disagreement we have, here. But it is in my mind as I write.

The National Organization for Marriage (NOM) is the major force behind efforts to deny legal marriage to same-sex couples. They started with Prop 8 in California, which has since been ruled unconstitutional, and then reproduced their efforts across the country.

NOM has also been a significant actor in the realm of undermining and contesting political donation disclosure laws. They even hired the attorney behind Citizens United to advance the cause of anonymous political donations. They challenged disclosure requirements in Washington, Minnesota, New York, and Maine. Brendan Eich, and others similarly situated, are undoubtedly the people whose interests NOM was acting to protect by challenging disclosure requirements.

My point is that the marriage rights battle has developed an equally significant companion—the battle over whether individuals have a right to anonymously influence our democracy/political process with their wealth.

Eich donated to Prop 8. We know this because disclosure laws required that the donation be public information. (Incidentally, here is one of probably many people who are sympathetic with NOM and think this disclosure is somehow bad.) Eich’s $1,000 donation was a relatively modest token in a campaign that burned $80 million on influence/propaganda.

But Eich, like everyone in California, had at least two ways to demonstrate his support for Prop 8 that wouldn’t require public disclosure: donate less than $100, or simply cast a vote for it. He chose to donate above the threshold amount, because he wanted to contribute more than a de minimis amount to his favored cause.

And this is where the issue connects back with Citizens United and SCOTUS’s latest gift to people who want to trade wealth for influence, McCutcheon. If money is speech as a matter of law, it is more important than ever that the public retain its right to know who is holding the megaphones. If the wealthy can launder their identities through political influence organizations, their type of anonymous speech-via-wealth will have far more power than any kind of anonymous speech available to people using mere words. 

The disclosure laws are an important check on people who have enough disposable wealth that they might not think twice about lending material financial support to political causes that would dwarf the contribution any ordinary person could make. They should have to think twice about whether they want to be personally connected to something that is (or could be) politically unpopular.

Without that check, democracy is fully subverted to anonymous wealth.

For Mr. Eich, he made his choice. And contrary to “allahpundit“‘s claim that “[t]he Prop 8 donor list now functions essentially as a blacklist,” Eich was Mozilla’s Chief Technology Officer for nearly 10 years, approximately half of them after he donated to Prop 8. There’s no evidence his donation affected his career in the slightest until he was elevated to Chief Executive.

Eich’s resignation is undoubtedly going to be used in the argument against disclosure. But on the whole, the effects of disclosure in this case were proportionate and justly meted out. CEO is a unique role, and is rightly held to a unique standard. Eich was not held to that standard until he was promoted.

Everything functioned correctly.

Text

Economics and the Ethics of DISRUPTION

So this article has been popping up in my timeline, usually with accompanying positive remarks that it explains Uber’s dynamic pricing as well as it ever has been explained. Which I’ll grant.

But the author, and the people retweeting the link, seem to gloss over that regardless of whether Uber’s Dynamic Pricing is good economics, that doesn’t tell us if it is capital-G Good. To be sure, there are people out there who mistake Good Economics for The Good, but they are pitiful, callow people. Let’s aspire to be better than them.

In short, Uber’s Dynamic Pricing allows drivers/the system/Uber—depending on how or if you want to assign agency to the mechanism that sets the price—to charge more for undesirable trips. Good economics, sure! With our heavy capitalist indoctrination, it just makes good darned sense.

But is this Good? I mean, let’s assume, briefly, that the best purpose of society isn’t to operate in strict accordance with supply and demand models, but to achieve some other goal, like maximize happiness, or human opportunity. Is charging more for undesirable trips what we want all the time?

It puts a higher burden on people who need to take more undesirable trips than average. Like people who need to travel at strange times, maybe because they work overnight, or in and around unpleasant parts of town. Poor people.

A system of regulations to reduce discrimination based on price, location, or timing necessarily isn’t going to be the pinnacle of Good Economics. That’s not the point. It forces everyone to share in the costs associated with serving people who have certain needs, because it is in our collective interest that those needs be met. And if one or two organizations gets to/chooses to disregard those regulations, they will obviously be able to outcompete the ones playing by the rules (because they can cherry pick, and leave the fares that can’t pay their price to the law-abiding services).

Let’s not forget that Good Economics isn’t the point of society.

Photo
foyobli:

The number of followers I lost on Twitter today for creating a feminist happy hour group is an excellent reminder of why one needs to exist in the first place.
Plus, now I get to drink wine and talk about Miley Cyrus and race politics with a group of smart, funny women I don’t know, so WHO’S WINNING NOW? 

foyobli:

The number of followers I lost on Twitter today for creating a feminist happy hour group is an excellent reminder of why one needs to exist in the first place.

Plus, now I get to drink wine and talk about Miley Cyrus and race politics with a group of smart, funny women I don’t know, so WHO’S WINNING NOW? 

Text

Foodcare benefits on Earth II

Earth II, 1950: In response to a tight labor market, employers began arranging for discounts for purchases of flour, sugar, and other pantry staples as a benefit for employees to attract workers. Labor unions supported the practice and bargained for expanded programs and better discount rates. A movement to make the program available to all citizens on a voluntary basis was considered but not pursued.

Earth II, 1970: Participation in the programs continued to grow rapidly. The networks of foodcare providers participating in the discount programs expanded. The programs grew to include discounts at restaurants and everything sold by entire grocery chains. Pretty much any food sold could be had at a discount… if you had a foodcare plan.

Earth II, 1990: The undiscounted cost of food was in the middle of skyrocketing. People not on a foodcare plan often went without (with detrimental effects to their health), succumbed to their need for food and went bankrupt, or arranged their lives to get on a plan by taking jobs that offered membership, or by marrying someone who had one.

At the same time, the labor market forces that gave employers the incentive to make the plans available had dissipated. Some employers required employees to pay (increasing amounts) for their plans, others restricted or simply didn’t offer them.

Earth II, today: Food is now completely unaffordable to anyone not participating in a plan, and even the plans offered by employers are often not generous enough to overcome the food price inflation of the previous decades for certain basic ingredients.

Liberals, seeing more and more people undernourished and/or bankrupted by the system that had developed, passed legislation intended to sever the connection between foodcare and employment. The plan to allow foodcare for all had to be watered down to satisfy conservatives and the industry that had grown around foodcare plans.

People no longer were required to work certain jobs for certain employers to obtain food. Conservatives objected that everyone had a personal responsibility to obtain food, and should continue to be required to obtain it under the existing employer-controlled system.

Text

Bad Ethics, Bad Economics

Faith in markets to inevitably produce desirable outcomes permeates our culture. For many, market systems have taken on the role of an ethical system. Free markets are good, the philosophy goes, because they produce good (the best) outcomes.

There are plenty of flaws with this; I want to point out just two. Even on its own terms, faith in unregulated markets as an ethical system is misplaced.

This is because (a) economic theory holds (to the extent it operates at all as an ethical system), as an axiom, that the normative optimum is achieved only in the Long Run, and (b) in the meantime there is no mechanism of proportionality: nothing ensures bad/wrong practices are punished in proportion to their undesirability.

For the first part, economic theory distinguishes between the short run and the long run. Even assuming that unregulated markets “get it right,” that is only true in the long run. The long run is not a defined period of time; it’s just however long it takes for circumstances to change, competition to arise, etc. And once you get to the receding horizon that is the long run—let’s say for the sake of argument that you can ever get there—then whatever you have is “right” in free market dogma, by axiom. It is easy to achieve the normative good when you define whatever you wind up with as The Good. In the long run, free market dogmatists only beg the question.

The second flaw is equally important. Assuming free markets are a suitable moral/normative arbiter, even if just for distribution of scarce resources, they should punish bad/wrong conduct in proportion to its undesirability. But there is no well-defined mechanism for punishment in the short run.

Small errors in judgment can be disproportionately punished, or massive, concerted intentional misconduct disproportionately underpunished. Consequently, suboptimal outcomes persist in the short run—and it is always the short run. Because even if we have reached the long run for some miscarriage of economic justice—and the normative good has been axiomatically achieved—we’re in the middle of the short run for countless others that have arisen in the meantime because the short run disincentives are inadequate.

Unregulated “free” markets therefore don’t guarantee to achieve the good in the short run—i.e., the present where we all live—and only do so in the long run by defining the good to be whatever was achieved.

Markets are not a substitute for ethics, and they do not optimize The Good, except in a sense that doesn’t withstand any critical scrutiny. Any suggestion that free markets serve to maximize virtue is a facile dogma that should never go unchallenged.

Text

My unpopular, boring opinion

Want to get this out in a chunk rather than a stream of tweets.

The “tropical vacation” angle for hounding April Todd-Malmlov out of her position as MNSure Director is garbage.

On its own, an ill-timed vacation is probably not an infraction that warrants dismissal. Especially if, as reports tell it, it was a working vacation. The media-fueled outrage is premised on a lot of facts irrelevant to job performance, while devoid of many relevant facts.

And even accepting that her job performance did not meet acceptable standards, the timing of her separation is entirely political and media-driven. Mid crisis, it was unacceptable for her to take a working vacation, but acceptable to change leadership entirely? It doesn’t compute.

Maybe she was terrible this whole time! She is still only jobless *now* for a bad reason. Maybe that’s not a rallying cry anyone cares about, but do we really want a media that feels empowered to conduct housecleaning operations through innuendo and salacious but irrelevant information?

And now the impartial enablers who led the public with loaded and suggestive coverage will claim no responsibility for the almost certainly defamatory feeding frenzy that takes place in their revenue-generating comment threads.

The legislature handed the MNSure director a stinkburger, and now political factions are eager to point out who got smelly. The local media have played the role of willing tool.

Text

The Great Pension Heist

When discussing defined-benefit versus defined-contribution retirement plans, the argument from management is generally that defined-contribution plans are cheaper, and therefore better. For business.

But be clear, this is not a case where you can pay 70¢ for something you had been buying for $1.00 and still get a a dollar’s worth. The savings does not come from nowhere. It comes from employees.

The easiest way to see this is to do some language substitutions. Substitute “employer-risk” when you see or hear “defined-benefit” and “employee-risk” for “defined-contribution.” That is the fundamental difference between the two types of retirement plans. Changing from one to the other is an exercise in shifting risk.

With a defined-benefit plan, the employer bears the risk that participants will outlive their actuarial life expectancy and will be on the hook for unanticipated expenses. Changing from a defined-benefit to a defined-contribution plan simply shifts that risk to individual employees.

Who is in a better position to bear that sort of risk? An employer with a pool of employees, some of whom may die sooner than expected, and others later, or every individual employee, gambling that they can sock away enough to match exactly how long they will live?

By shifting that actuarial risk to employees, employers can save money! But unless the increased risk is accompanied by a corresponding increase in compensation, it’s a stealth pay cut. And not just any pay cut, but one that affects the employee when they are most vulnerable: at the end of their lives, generally unemployable and with no way to make up any shortfall besides to rely on charity, or the state.

Calls to end defined-benefit retirement plans, without corresponding pay increases, are a way to shift the risk of living too long onto individuals, the parties least capable of managing that risk. By doing so you both reduce their compensation, and make their lives less secure.

It is cynical and antisocial.

Text

The Value of Law School

Incredibly, I am five years removed from my law school experience. In fact, I made the decision to go to law school almost a full decade ago. A lot has changed since then.

What hasn’t changed is that going to law school is virtually the only way to enter the legal profession. (Some states allow apprenticeships. (PDF))

I am not a Law School Scam Blogger. I don’t argue that nobody should ever go to law school, even now. I don’t claim to know that it is universally a Bad Idea. If you want to enter the profession, there aren’t many alternatives (maybe consider paralegal or stenographer which are less sensationalized professions that are up to their elbows in law—though the truth is, technology is displacing them as well).

When I reflect on the value of my legal education, I have a ponderous sunk cost and a lot of intangible, hard to value benefits. It gave me the right to take the bar, and ultimately be licensed to practice. It gave me countless opportunities for experience that are primarily valuable for the purpose of getting the first job out of law school. It also gave me knowledge. It’s easy to lose track of how much.

Law school is primarily a sorting mechanism for the legal profession. So definitely go if you want to get sorted. It is designed (with your diligence) to release you into the professional market with knowledge and experience adequate to get you your first job in the profession. But those things have a short half life. If a dearth of jobs keeps you from meaningful employment in the first 6, 9, 12, 18 months, the value of law school knowledge and experience drops precipitously.

Some law school knowledge is valuable in more than economic terms. Some of it is valuable in the liberal arts sense of making me a better person and citizen.

You do get that kind of knowledge at law school, but I believe you can get that more inexpensively by other means. Law school extracts a tuition premium for keeping the gates to the profession. If your goal isn’t to enter the profession, but to achieve some other goal, why pay the premium?

If you want to be involved in the administration of law, or want to improve society, or help people in need, or become a more well-rounded person, three years of law school may not be the best way to accomplish those things. Which isn’t to say it prevents you from doing any of them. But the price it extracts can pose a significant obstacle.

Obviously this calculus can shift. The economics probably will not always be this perilous. Unfortunately, the stakes are much higher when gambling on education than on a business.

Text

Economic Immorality

We all have something in common: we were brought into this world by someone(s) who were already here. Maybe deliberately, maybe not. But none of us asked to be born.

In this way, creating life is sort of a cruel joke the living play on the unsuspecting newcomers. We are all brought to be at a time and place and in circumstances we didn’t choose.

The ethic of “personal responsibility” in this context is a farce that serves to perpetuate inequality. Instead of all newborns being given a pro rata share of human achievement, some get much much much more (and access to more still), and some get much much much less (and access to none). Now go be “personally responsible.” hahahaha Come on.

It is immoral for we—the living—not to consider that WE are the ones who create the conditions into which new people are born. We are responsible for the systems, the economic burdens, the social stratification, and the inequality of opportunity that exist for every new person.

We are just really good at absolving ourselves of that responsibility.

Capitalism is amoral. But that doesn’t mean our implementation of it can’t be immoral.

Text

Governor Dayton’s Sales Tax Reform and Apocalyptic Business Rhetoric

I saw varieties of this argument floating around Twitter (and elsewhere) yesterday:

Governor Dayton’s tax plan purports to raise $2 billion in revenue via sales taxes; Minnesota middle-class taxpayers will indirectly be the source of this new revenue as businesses raise prices.

The idea being that the $2 billion has to come from somewhere, and sales tax (like all business taxes?) ultimately comes out of consumers’ wallets.

This is a pernicious falsehood, however.

Governor Dayton’s budget proposes raising revenue via a broadening of the transactions subject to state sales tax. The governor projects the state will collect just over $2 billion by taxing services, including, particularly, services performed by one business for another like “legal, accounting, specialized design and business support services.”

Assume as a given that the estimate is accurate, and that the proposed 5.5% tax on those services will raise $2 billion. Given that assumption, there is NO support for the argument that the $2 billion will come from Minnesota consumers’ pockets.

The 2011 Minnesota Tax Incendence Study states that a tax (in its example, a property tax) “may lead [a] firm to raise its prices, lower its pay to employees, or the business owner may experience reduced profits.” Only one of those three alternatives falls 100% on Minnesota consumers: lower pay.

While it may seem at first glance that a business opting to raise its prices in the face of increased costs would be a direct hit on Minnesotans’ wallets, it is not that simple. First, not all businesses can shift taxes onto consumers. The Tax Incidence Study recognizes this, noting that for its purposes: “producers of ‘local market products’ are assumed to pass tax differentials on to consumers but producers of ‘national market products’ cannot.” Second, businesses with (inter)national reach like Best Buy, 3M, and Target, sell to consumers outside of Minnesota. To the extent they would face increased costs under the new regime (and are able to shift some or all of them to consumers, and aren’t able to avoid them by doing the work internally or having it done elsewhere), those costs would be passed on to a class of consumers much larger than those residing in Minnesota.

The Tax Incidence Study determined for various business taxes what percentages were borne by capital, labor, and consumers, and what percentage is exported. Of all the taxes investigated, NONE fell 100% on consumers. It found that 56% of “General Sales and Use Tax” fell on consumers as a price increase, 0% fell on labor in the form of reduced wages, and 37% was exported from Minnesota altogether. At least one person argued to me that the newly reformed sales tax would be approtioned identically. It isn’t necessarily so, but assume it to be true for the sake of argument.

That means of the $2 Billion proposed, only 1.12B will be paid by Minnesota consumers indirectly in the form of higher prices, and there will be no effect on jobs.

But there is reason to believe the allocation will not be the same as the existing sales tax. Businesses that seek to avoid higher prices for business services may elect to in-source the work. Instead of using an accounting service, they may hire a part-time accountant. That may in fact have a slight multiplier effect on employment, while resulting in little to no increased costs (after all they hired the accountant to avoid the tax). Or, the tax may be borne in part by the Accountant’s firm, which lowered prices to (partially?) offset the tax, meaning there are two businesses that might share in absorbing some of the cost rather than passing it on to some end-consumer somewhere.

The effect, I would argue, is that the tax will be dissipated throughout the economy more thoroughly than the present sales tax. It is at least probable that the distribution of the existing sales tax is not an accurate gauge of how the reformed sales tax will be distributed. And in NO EVENT is there reason to believe that all $2 billion will come from Minnesota consumers, much less that it will come from the state’s middle class. At MOST the consumer-paid number will be 1.12 billion, and it is likely to be substantially lower.

Accordingly, the hyperbolic rhetoric that Minnesota consumers or taxpayers, as a class, will bear the entire tax increase in the end, is false. And claims that Minnesota’s job market will be substantially negatively affected are also highly dubious (in the Tax Incidence Study, the largest shift of business tax burden to labor was 12%).