Tracing consequences both seen and unseen.
Justin M. StoddardSteve Jobs: A Man of Good Works — Part I
Posted at 10:30 am on November 6, 2011, by Justin M. Stoddard

First, allow me to clarify a few points about the video below before I start into the meat of the matter.

The video is obviously edited — for what purpose, I do not know. It could have been to cut down its length or to stitch together a narrative that puts the person being interviewed in the worst possible light. Though, admittedly, given his statements, I don’t know how that’s possible.

I understand that people who are put on the spot with a camera in front of their face are going to stammer and search for words. After seeing thousands of these kinds of videos, I’m convinced that people generally do not do well when confronted with on-the-spot interviews.

  • The sentiments expressed seem to be endemic to the Occupy Wall Street movement.
  • The easiest way for me to address this is to take it point by point with a wrap-up at the end.
  • This is going to be a long post.

Man on the street: “The top one percent don’t produce anything.”

There are some awkward questions that need to be asked in response to this assertion.

Besides the obvious catchy “one percent of the people own 43 percent of the wealth” trope, why not move that arbitrary line to the top five percent? If the top one percent own 43 percent of the wealth, wouldn’t it follow that the top five percent own even more of the wealth? How about the top ten percent? The top 25 percent?

The arbitrary line is chosen because it fits nicely into the idea of the proletariat struggling against the bourgeois. What is being insinuated here is the top one percent own the means of production while the 99% are the factors of production.

How is the “1 percent” being defined here? One percent of the population of the United States or of the population of the world?

The question matters a great deal, for a couple of reasons:

One percent of the population of the United States is a little more than 3 million people (approximately the population of Mississippi). Just playing the numbers game, it strains all credulity to accept the assertion that the more than 3 million people being referenced here don’t produce anything.

One percent of the world’s population is about 70 million people (approximately the population of California, New York, and Ohio combined). Of course, this takes credulity to the breaking point.

The question hardly needed to be asked. The only population statistic being used here is the population of the United States. The OWS crowd skirts over the fact that if they were to count the entire population of world, the majority of them would end up in the top 1 percent of people who control wealth. That’s simply an argument they dare not broach. I’ve addressed this briefly here, but I’ll expound on it just a bit.

Even adjusting for purchasing power parity, if you make $34,000 or more per year, you are in the top 1 percent of world income earners. Income disparity between someone who makes $34,000 and someone who makes $500,000 per year in the United States seems pretty significant, but not nearly as significant as the income disparity between someone who makes $34,000 per year in the United States and someone who makes $7,000 dollars per year in India, or $1,000 per year in Africa.

The standard argument against this line of reasoning goes like this:

“Living off of $1,000 a year in sub-Saharan Africa is a lot easier than living off of $1,000 a year in the United States. In order for the comparison to actually have any meaning we need to adjust income for the cost of living in these various countries. In some places it is possible to live off of a dollar a day, and in some places you can’t live off of a hundred dollars a day.”

Lest I be accused of making up my own argument to refute, that’s a response I got on a recent Reddit thread addressing what I said above.

At first blush, this makes quite a bit of sense. Commodities do seem to be more expensive in the United States than they are in the Sub-Sahara (unless you are living in a country with hyper-inflation). Earning $1,000 per year will certianly not give you the purchasing power to buy or rent a house or an apartment. You may or may not be able to afford transportation. Food and clothing would also be difficult to acquire.

But, one is tempted to ask; would you rather live in the United States with an income of $1,000 per year or in Sub-Saharan Africa with an income of $1,000 per year?

Here are the two main problems I see:

First: The United States (and other First World countries) have many orders of magnitude more consumer goods and commodities to choose from than all of the Sub-Sahara put together. In the United States, $1,000 goes much further because there is so much more you can do with it. You must also consider basic welfare entitlements to every poor citizen in the United States to be used for food, shelter and clothing, along with other factors of income like child support payments and not being required to pay taxes.

It further discounts the ability to barter for goods, rely on charity, and utilize the cast-offs of the rich and middle class. Our country is awash with high-class “junk.” It is very easy to acquire clothes, furniture, gadgets (TVs, microwaves, phones, radios, etc.) just by asking for it. It’s unbelievable how much stuff the well-off just leave on the curb for others to pick up. Whole virtual communities like Freecycle and Craigslist thrive around the concept of either exchanging these types of goods or just giving them away. If you are savvy enough, it is possible to get hundreds of dollars worth of name brand products for free through the practice of extreme couponing. There are literally hundreds of blogs dedicated to the concept of extreme frugality, meaning there are people in this country who choose to live well below the poverty line by recycling, reusing, budgeting, couponing, growing their own food, bartering, etc. From all accounts, they have healthy and happy lives.

Second: If you take all other factors into consideration, even for those at the very bottom of the socio-economic scale, life is comparatively much better here. On average, people in the United States live 20–35 years longer than those in the Sub-Sahara. In America, there is an infant mortality rate of eight out of every 1,000. In Mali, the rate is 191 out of 1,000.

While millions have perished in Africa because of famine, I have not been able to find any account of a single person starving to death in America because of an inability to acquire food. There are rare cases in which people are starved through abuse or neglect, but the issue of general access to food was not a factor. On the contrary, we are constantly reminded that we have an epidemic of obesity in our country. Looking at population statistics, this is a problem that affects the poor almost exclusively.

Millions more have been butchered in war, slavery, and genocide in Africa during these past 20 years. With the exception of 9/11, war, slavery, and genocide have killed exactly nobody in America — unless you count the “War on Drugs.” (I’m excluding here our military adventures overseas — which both liberals and conservatives love — and focusing on civilian deaths within our borders.

More than 1 million people die from AIDS/HIV in the Sub-Sahara each year. Nearly 2 million more contract the disease yearly. The region accounts for about 14 percent of the world’s population and 67 percent of all people living with HIV and 72 percent of all AIDS deaths in 2009.

Contrast that to the United States, where there are approximately 1 million people infected with HIV. About 56,000 new people become infected each year, while roughly 18,000 per year die from AIDS.

Even the poorest of poor in America have the means and ability to protect themselves from sexually transmitted diseases that ravish other populations.

This represents just a cursory look over publicly available data, of course, but many inferences can be drawn. Living off $1,000 per year in the United States is actually a lot easier than living off of $1,000 per year in the Sub-Sahara.

In the United States, $1,000 per year still makes you pretty well off compared to a huge majority of the world’s population. Instead of the OWS asking why this is the case (different economic and political policies have different economic and political outcomes), they are insisting that it’s not the case, in the face of all empirical evidence. It’s a complete break with reality.

All of this begs a basic question. We know that there are millions of people living in Africa on $1,000 per year or less, but are there people living on $1,000 per year in America?

Maybe. According to the 2008 United States Census, the number of individuals living on $2,500 or less is 12,945. If you count households instead of individuals, that number drops to about 3,000.

Looking at demographics, we find that many of those either live on Indian reservations or in closed off religious communities. The vast majority live in very rural areas, with the exception of some communities in Texas and California.

This brings up another awkward question. Can we differentiate between the worthy and the unworthy poor? Is it safe to say that those living on an Indian reservation are most likely the victims of centuries of oppression, paternalism, and other factors beyond their control, and deserve our sympathies, while those whose religious doctrines call for unsustainable familial and community growth (though still collecting welfare entitlements) don’t?

Back to the original point. Taking this all into consideration, the speaker (along with 70 million of his fellow human beings) is more than likely in the top 1 percent of income earners in the world. Does he produce nothing? Do the other 70 million people produce nothing?

If he had a shred of intellectual honesty, he would advocate taxing anyone who makes $34,000 per year or more at a very high rate so that money can be redistributed to the absolute poor in Africa, India, China, Afghanistan, etc. If you’re going to advocate forced redistribution, what’s the more moral course of action? Paying off student loan debt and making secondary education free for those who are extraordinarily rich in comparison to world standards, therefore giving them further opportunities to collect more wealth, or giving that money to someone who will quite literally starve to death without it?

Interviewer: “Steve Jobs didn’t produce anything?”

Man on the street: “Steve Jobs took in the wealth that others produced. No, he didn’t.”

Even though you can tell he’s searching for the concept, what he’s attempting to recall is the Labor Theory of Value, which suggests that the value of goods derives from their labor inputs. Some take it a step further and suggest that goods should therefore be priced according to those labor inputs rather than in response to the demand for those products.

This murderous idea has been refuted too many times to count and isn’t taken seriously by mainstream economists. As with the devastating yet simple argument against Pascal’s Wager, this is a case of rudimentary logic pitted against religious thinking.

If a laborer labors all day making mud pies instead of pumpkin pies, he may well have put in a great deal of work, but still produces absolutely nothing of value. Not understanding why someone would do that, I come along with a novel idea. Why not hire that labor (which is obviously motivated to work) and have him make pumpkin pies instead? Which is more valuable, the labor or the idea that moved the labor in a profitable direction?

Given time, one of my workers gets a workable idea that it will actually make it more time- and cost-efficient to divide the labor and go into business for himself making ready-made pie crusts to sell back to me. In turn, he hires 10 more people.

Another person figures out that growing local pumpkins for production is not sustainable or efficient, so he saves his capital and starts an import business to buy pumpkins to sell back to me. In turn, he hires 10 more people. Of course, that import company creates demand from pumpkin farmers halfway across the country, signaling to them that they need to hire more people. But what about packaging? How will I wrap all those pies? Where will I get the metal for pie tins? How do I even make a pie tin? What if I want to branch off into cherry pies or apple pies? What if I want to sell coffee with those pies?

The Labor Theory of Value is an epic failure of imagination. At any given moment, there are two types of birds on the face of the earth, those that are airborne and those that are not. Do you know what the number of birds in each group will be, say, 10 seconds from now? The answer may well be impossible to ever figure out, but there is an answer as concrete and real as the computer screen you’re looking at. It will take a great deal of dispersed observation, knowledge, and computer power to ever figure out the answer to that question, but it takes an even greater amount of imagination to think of a use for the question in the first place.

On the labor side of the equation, how many people per day, independent of each other, not even knowing of each other’s existence, were involved in making Steve Jobs’s ideas a reality?

Can you imagine it? Can you even begin to try to imagine it? When you do, dig deeper. When you do that, dig deeper still. You will find yourself trying to comprehend a voluntary network of a number beyond your comprehension all working independently but in concert with each other in order to make that idea a reality. The vast majority have no earthly idea that they are working toward a common goal.

If you’ve read the essay “I, Pencil,” you can start to grasp the amazing complexity of what goes into creating one simple product. Once you’ve started to grasp that concept, you realize that an iPhone or a Macbook is nearly infinitely more complex than a pencil.

When you think you have a grasp on all of that, add into the mix all the competition that Steve Jobs inspired in the economy. Microsoft, Google, Android, Unix, Linux, smart phones, laptops, programming, software and hardware development, battery efficiency — the list goes on and on.

Multiply everything above by factors unimaginable when you add in each new facet of competition.

How many people were involved in making Steve Jobs’s ideas a reality? Like I said, there is a concrete answer to this question. I don’t doubt that computers will some day be able to figure it out. I’m not confident that it will ever happen in my lifetime. However, if you are able to imagine the several billion neurons in your brain exchanging countless bits of information each second, culminating in what we call human consciousness, then you are getting close to the complexity involved in the network of voluntary exchange Steve Jobs helped put into motion.

Now think of the consumer side of the equation. For the purpose of this example, let’s limit ourselves to the latest model iPhone. For about $199, plus a two year contract with a cellular phone company, you can walk out the door with an iPhone 4S.

Putting aside for a moment all the apps you can use, these are the features that come built in, off the shelf:

  • Two cameras, front and back. Rear camera is capable of HD, low light photography, f2/4 lens with face detection, and photo editing software.
  • 1080p HD motion stabilized video camera, accompanied by an editing suite and the ability to share videos instantly with anyone on the Internet.
  • Facetime video teleconferencing over a WiFi connection using either the front or rear camera.
  • Unlimited texting to other iPhone, iPad, or iPod users, with the ability to exchange videos or photos.
  • A digital assistant that is able to help efficiently organize your daily life. It syncs with any other device you use on iCloud.
  • A phone. Pretty standard, but it lets you talk to any other human being on the face of the earth who also has a phone. It’s ridiculously portable, so you can use it anywhere there is cell phone coverage, which is pretty much 90 percent of the United States.
  • Email. Check your Gmail, Yahoo, AOL, Hotmail, or any other industry-standard IMAP and POP mail systems. Access multiple accounts at once. Write and send email without ever touching your keyboard by using its voice recognition software, Siri.
  • Internet. You have a virtual world of information at your fingertips, accessible to you any time and anywhere.
  • An iPod allows you to access your complete music library, with instant access to many thousands of songs.
  • The video player allows you to rent or buy movies from iTunes, and either stream them or download them to your device.
  • The photo organizer will store all your photos and organize them by location, date, or face. Take a photo and it will automatically share with all other devices hooked up to iCloud. Share photos by text, Twitter, Flickr, or Facebook. Print wirelessly through AirPrint.
  • App Store with access to over 500,000 paid and free apps.
  • iTunes to buy music, movies, TV shows, and ringtones. Download whole college courses and thousands of podcasts.
  • Maps+Compass, with an automatically updated GPS displayed on up-to-date maps. Search for a location. Zoom in and out, view live traffic information, and receive point-by-point travel directions.
  • Game Center allows you to play games against others over the web.
  • Calendar.
  • Contacts allows you to organize everything you want to know about a person — address, all phone numbers, email addresses, birthdays, notes, websites, and anniversaries. Make a change on one device and it is updated on all others through iCloud.
  • Find My iPhone assists you in finding a lost or stolen iPhone by viewing its location on a map. Remotely wipe all info, remotely send a message to your phone to tell others it’s yours, and lock remotely.
  • Newsstand to read magazines, newspapers, etc.
  • An up-to-the-minute stock ticker.
  • Extended weather forecasts for multiple cities and locations.
  • A notebook.
  • Access to YouTube.
  • Voice Memos.
  • Calculator (scientific).

Another exercise in imagination, if you will: Consider every bit of technology listed above (we will ignore the wonderful advances in lithium battery, sensor, and storage technology for the purposes of this exercise) and the infrastructure needed for it to work. Now take it back in time just 20 years, to 1991. Keep in mind, all of this wonderful technology is crammed into 4.5 by 3.11 by 0.37 inches, with a total weight of 4.9 ounces.

How much would something with comparable functionality cost back then?

The logical answer would be that the technology did not exist 20 years ago, so it would be priceless. But this is a thought exercise, so we can at least break down some of the components and price them individually.

In 1991, the most common portable analog phone (cell phone technology was still in its nascent stages) was a Motorola MicroTac 9800X. It was lauded for its compact size, and for being the first flip phone on the market. It was an inch thick and nine inches long (when opened), and weighed close to a pound. The only thing it did was make phone calls. The quality of the calls were reportedly pretty bad. You couldn’t use the phone while traveling outside your metropolitan area, and it was pricey to make any phone call.

It sold for anywhere between $4,153 and $5,822 in current dollars (adjusted for inflation).

The first digital camera was released in 1991. It was a Kodak Digital Camera System, and had a resolution of 1.3 megapixels. It also came with a 200 MB hard drive that could store about 160 uncompressed images. The hard drive and batteries had to be tethered to the camera by a cable.

Cost in current dollars, adjusted for inflation: $33,317.

This is where I stopped. At just two laughingly inefficient components (according to today’s standards; back then, they were miracles of technology) in comparison to what comes standard on any iPhone available for $199, I was already hovering around an overall price of $40,000.

Extrapolate all of that out, including all the infrastructure required to make it work, and you can easily conclude that literally all the money in the world in 1991 could not buy you an iPhone.

Today, I can walk into a store conveniently located near me and get a device that makes it nearly impossible for me to get lost, lets me communicate with people I’ve known my whole life who are scattered all over the globe, allows me to take wonderful pictures and record moments of my life, provides access to all the information available on the Internet, streams any number of movies or TV shows directly to me, tells me an extended forcast, lets me video chat with my daughters and phone anyone I wish, along with any number of other things — all for the paltry sum of $199 and the price of a two-year contract.

A product that Bill Gates, Steve Jobs, the Queen of England, and any royal prince would be unable to purchase 20 years ago is now as ubiquitous as the air we breathe. That’s what Steve Jobs produced. And, as a bonus, the wealth created by his idea provided the means to countless other people around the world to purchase what he produced.

Interviewer: “The system you’re interested in is one in which somehow that voluntary web of association is no longer allowed.”

Man on the street: “Correct.”

This pretty much speaks for itself. In this guy’s preferred system that disallows voluntary economic association, in order to get from point A to point B, a whole lot of murder, mayhem, theft, and rape will have to occur first with an end result of abject poverty for hundreds of millions of people.

Interviewer: “So, instead of those voluntary associations, what would you put in its place? Who would make all those decisions?”

Man on the street: “All decisions would be made democratically.”

There’s quite a bit of political philosophy that can be addressed here, but the next question pretty much sums it up for me.

Interviewer: “Like, for instance, when Athens democratically decided to kill Socrates?”

Man on the street:

This is a brilliant rejoinder. Popular democracy is nothing more than mob action. If everything is up for a vote and decidable by the “will of the people,” then there can be no individual rights, ever. The individual will always lose.

The argument I often hear in support of popular democracy goes a little something like this: Wouldn’t you vote against Hitler to keep him out of power? Well, the very fact that someone like Hitler can run for an election tells me that the system is completely invalid. If the election is deemed valid and workable because he weren’t voted in, it would be just as valid and workable if he were voted in.

That’s the long answer. The short answer is, “No, but I’d gladly shoot him in the face.”

Even the OWS crowd seems to understand that popular democracy is basically the rule of the mob, because they have set up rules in their assemblies dictating that 100 percent consensus must be reached before anything passes. But that just makes the mob smaller.

Man on the street: “I don’t believe there’s any need for individuals like Steve Jobs in this system to flourish based on their particular talents or particular genius.”

An argument from belief is a religious argument.

Also, framing an argument based on what you think that other people “need” is highly paternalistic. At worst, if carried out to its logical conclusion, this line of thought is murderous, if not genocidal.

What is not acknowledged or understood here is the notion that a person’s talents and particular genius are priceless. A person’s talent and particular genius is nearly the whole sum of a person. Disallow a person to use his talents or genius in voluntary association with others, and you’ve essentially murdered his spirit. You’ve destroyed the greatest resource on the face of the earth, and it can never be replaced. Ever.

Man on the street: “I don’t believe it’s possible to continue this kind of system. It’s a retrograde system. It’s a system that no longer works. It creates war. It creates mass unemployment. It creates poverty.”

I’ve already eviscerated this notion above. It obviously does work. It obviously does not create mass unemployment or poverty. It obviously does not create war.

In three minutes time, this person said he would do the following if he were in power:

  • Disallow voluntary association.
  • Steal money (and everything money represents) that doesn’t belong to him.
  • Impose mob rule.
  • Hobble those with talent.
  • Impose poverty on the masses.

None of this can be done without a whole lot of guns and a whole lot of cold-blooded murder. And in his mind, Steve Jobs creates war, poverty, and unemployment?

I’ll just put these few examples here.

  • Deaths in the Soviet Union from communism: 20 million
  • Deaths in Communist China from communism: 65 million
  • Deaths in Cambodia from communism: 2 million
  • Deaths in North Korea from communism: 2 million
  • Deaths in Africa from communism: 1.7 million
  • Deaths in Afghanistan from communism: 1.5 million (and climbing)
  • Deaths in Eastern Europe from communism: 1 million
  • Deaths in Vietnam from communism: 1 million
  • Deaths in Latin America from communism: 150,000
  • Deaths caused by Nazi Germany and the Empire of Japan:  60 million

Combined with all other genocides, wars, famine and repression caused by national governments, the death toll for the 20th century is approximately 160 million.

If you took half of the population of the United States (every other man, woman, and child) and shot them in the head, you would have the number of people murdered by governments, the majority of whom were killed by their own governments.

  • Communism, socialism, Nazism, imperialism, theocracy, statism: 160 million dead.
  • Steve Jobs: Zero dead.

Of those 160 million murdered, how many may have turned out to be like Norman Borlaug, the man credited with saving up to 1 billion people worldwide from starvation? For those of you counting, that’s one seventh of the world’s current population. Can one honestly confront that number and still insist that talent and genius are not important? That free association should be done away with? That mob rule should prevail?

Man on the street: “You know, to hell with Steve Jobs.”

As Billy Beck brilliantly said when he linked to this video on Facebook, “Have you ever seen a man cut his own throat with philosophy?”

Well, dear reader, you just have.

[Cross-posted at Shrubbloggers.]


Filed under: Corporatism, Economic Theory, Efficiency, Gains From Trade, Labor, Market Efficiency, Philosophy, Property Rights, Regulation, Rhetoric, Taxes, Trade, Unintended Consequences
Comments: 1 Comment
 

Justin M. StoddardMore Bailouts for the Rich
Posted at 7:45 pm on October 20, 2011, by Justin M. Stoddard

The rich on Wall Street are demanding more bailouts:

The Demands Working Group of Occupy Wall Street unanimously endorsed and is circulating for discussion the following demand, which will be submitted to the General Assembly of OWS:

Jobs for ALL – A Massive Public Works and Public Service Program

We demand a massive public works and public service program with direct government employment at prevailing (union) wages, paid for by taxing the rich and corporations, by immediately ending all of America’s wars, and by ending all aid to authoritarian regimes to create 25 million new jobs to:

-Expand education: cut class sizes and provide free university for all;
-Expand healthcare and provide free healthcare for all (single payer system);
-Build housing, guarantee decent housing for all;
-Expand mass transit, provided for free;
-Rebuild the infrastructure—bridges, flood control, roads;
-Research and implement clean energy alternatives; and
-Clean up the environment.

Wait, you didn’t think I was talking about corporate bailouts, did you?

No, I’m talking about the rich people who make up the Working Group of Occupy Wall Street.

There is a very inconvenient and awkward question that is not being answered by the OWS crowd, as it pertains to wealth. Even making the assumption that the majority of those protesting are lower-middle class (a very liberal assumption, by anecdotal evidence), that would still mean that they are richer than 80 to 90 percent of the world’s population.

In fact, the poorest 5 percent of the United States is still richer than 68 percent of the world’s population. When compared to the poorest in India, China, or Afghanistan, the inequality is breathtakingly staggering. That college kid who is 60 grand in debt may as well be Bill Gates to a girl born in parts of rural China or Afghanistan.

Whenever this is brought up, you will inevitably hear this as a riposte:

“The problem is that attitude can be very easily used as an excuse for dismissing the complaints of literally anyone who is not the most oppressed, marginalised, and miserable people in the world.”

In other words, you cannot ignore what is bad here because things are worse elsewhere.

Well, that statement may well have merit, were it argued in another context. In this context, it is meaningless. Here’s why.

The above “demands” have everything to do with trying to bring the classes to a parity rather than fixing the economy. We are constantly barraged with the 99 percent vs. the 1 percent rhetoric. This, in itself is a lie. At worst, the people protesting on Wall Street are the 32 percent. More likely, they are the 20 percent and up.

If there were one shred of intellectual honesty in this movement, the above demands would be much, much different. They would be calling for taxing everyone in America at a much higher rate and redistributing that money to the poor in China and India. As the holders of 20 percent of the world’s wealth, they surely can afford it. After all, there are millions upon millions of people living in soul-crushing, abject poverty at this very moment. A vast number of them can never hope to make more than $1 per day, if that.

Instead, we get demands for free education and free housing for all (well, for all the rich people living in the United States, anyway — everyone else can go get stuffed). This is nothing more than the rich seeking taxpayer money for bailouts through the use of force.

Sound familiar?

I’m not being flippant, here. When it comes to entitlements, tariffs, trade barriers, immigration or where I purchase my goods, I’ve not yet heard a convincing argument for why I should regard a middle-class or working poor American in any higher regard than the absolute poor of other countries.

When I’m told that I should buy American in order to save American jobs, I wonder why a South Korean’s job is of any less importance. When I’m told that I must pay my fair share to help the deserving and undeserving (relatively) poor of this country, I wonder why the absolute poor from other countries shouldn’t get that money first.

But this is what it’s come to, now.

Rich college-age kids asking for taxpayer funded bailouts in order to relieve them of a debt (paid by the taxpayers) that they voluntarily took on with full knowledge that they would have to pay it back. Not only that, the vast majority of them have the means to pay off said debt through hard word and dedication.

Now, tell me again why I should care that a rich kid got a liberal arts degree that didn’t pan out, when tens of millions are living in absolute poverty around the world. Tell me again why rich kids with liberal arts degrees aren’t sacrificing their income, well-being, and happiness to redistribute their wealth to those more in need.

It’s time that we stopped focusing on this murderous idea of “inequality” when we should be thinking instead of relative standards of living over time.

Maybe then we can focus on what’s wrong with our economy rather than just fight about which rich group of people get which bailouts.

[Cross-posted at Shrubbloggers.]


Filed under: Economic Theory, Government Spending, Labor, Politics, Taxes, Trade
Comments: 3 Comments
 

David M. BrownWhat if there were deficit thinking, thinking deficit, on a desert island?
Posted at 1:43 am on August 9, 2011, by David M. Brown

Let’s attempt the program of “economic stimulus” on a desert island. Five persons have survived the shipwreck. Joe is good at gathering berries and reeds, and dressing wounds; Al is good at fishing, hunting and basket-weaving; Bob is good at making huts and gourd-bowls; and Sam, who wants to spend all his time sharpening sticks, and who regards any other kind of employment as beneath him, cannot produce a tool of any usefulness.

Let more and more of the resources that would have been exchanged in life-fostering and productivity-fostering trade between Joe, Al and Bob be confiscated by a fifth person, the king (who happens to have the only gun, a Kalashnikov that he grabbed from the ship before it crashed; elsewise no one would listen to him). And let this confiscated wealth (after a suitably large finder’s fee for the king has been deducted) be given to Sam to subsidize his slow and pointless blunt-stick production, since it would allegedly be unacceptable for Sam to have to accept alms in accordance with the sympathies and judgments of his fellows. And let the king perpetually demand more and more “revenue” to distribute and perpetually bray that criticism of his taxing and spending policies by “economic terrorists” is undermining confidence in the island’s economy.

What are the effects of this confiscatory and redistributive process on the prospects for the islanders’ survival? Discuss.

[Cross-posted to Davidmbrowndotcom.]


Filed under: Culture, Economic Theory, Efficiency, Finance, Food Policy, Gains From Trade, Government Spending, Health Care, Labor, Law Enforcement, Local Government, Market Efficiency, Nanny State, Philosophy, Politics, Property Rights, Taxes, Trade, Unintended Consequences
Comments: None
 

Christine HarbinThe Show-Me State Needs More Snooki*
Posted at 6:32 pm on November 9, 2010, by Christine Harbin

A Saint Louis production company is planning to focus on reality television series, and it is looking into tapping the Missouri film tax credit program to do it. According to an article in the St. Louis Business Journal:

Coolfire Media, the St. Louis production and design studio behind Budweiser, Maybelline and Verizon Wireless ads, has spun off a separate company to develop ideas for reality TV shows and scripted comedies.

The minds behind Coolfire Originals say they will specialize in offering Midwest storylines, characters and actors as a niche — and a cheaper alternative — in a world of coast-centric programs. […]

Coolfire Originals hopes to tap into some of the $3.5 million in Missouri tax credits still available this year for the TV and film industry and the $4.5 million in state tax credits available next year, Breitbach said.

First, there is a fiscal problem. The state government in Missouri is facing historically low revenues, and has to make cuts to services that are arguably more important than reality television — such as education and public safety.

Second, there is a fundamental problem: This program diffuses the cost of reality television production onto the taxpaying population, and concentrates the benefits on reality television producers. Missourians will pay a marginally higher amount of taxes as a direct consequence of this policy.

I have many questions. Will Brett Michaels ever find love, and will he find it in Missouri? How much money in state incentives will it take for the “Rock of Love” bus to park in the Central West End of Saint Louis?

Additionally, what is the economic multiplier on reality television production? I know that contestants on dating shows like “The Bachelor” and the “The Bachelorette” purchase a considerable number of restaurant meals, so I suspect that it may be high. Similarly, if Kate brought her gaggle of Gosselins to Missouri, she’d probably buy a lot of diapers and children’s clothes in state.

Coupled with a lower marginal tax rate on income relative to other states, will this policy incite reality television stars to move to Missouri? Perhaps Snooki would consider moving to Missouri because the top marginal state income tax rate in New Jersey is 8.97 percent, whereas it is only 6.0 percent in Missouri.

Could a producer receive tax credits for making a reality television show about an activity that is also financed by state tax credits? Perhaps “Extreme Home Makeover: NorthSide Saint Louis” could feature a large private development that uses tax credits for historic preservation, low-income housing development, and/or brownfield remediation.

For the purpose of this post, I tried to brainstorm a list of titles of Missouri-specific reality shows that the state could subsidize with its film tax credit program. I encourage our blog readers to leave additional ideas for titles the comments section of this post.

  • Who Wants to Marry a Missourian?
  • Mississippi Shore
  • The Hill**
  • Pimp My Tax-Exempt Yacht
  • The Real World: Chillicothe, Mo.
  • The Real Housewives of Osage County
  • Grundy County’s Got Talent
  • Top Chef: Kansas City Barbecue
  • Iron County Chef
  • Are You Smarter than a Saint Louis Public School Fifth Grader?
  • East Saint Louis High School Musical
  • I’m in the Missouri Bootheel, Get me Out of Here!
  • Poplar Bluff’s Next Top Model
  • Survivor: Lake of the Ozarks Party Cove***
  • Branson Idol

* Title reference here.

** A reality show that follows the personal lives of several Italian-American young adults living in the Hill neighborhood of Saint Louis.

*** David Stokes tells me that a reality show about the Lake of the Ozarks’ Party Cove would make the stars of Jersey Shore look like participants in the Algonquin Round Table, and I concur.

[Cross-posted at Amateur Philosophy.]


Filed under: Culture, Government Spending, Politics, Taxes
Comments: None
 

Sarah BrodskySubsidies for Grocery Stores
Posted at 7:41 am on April 25, 2010, by Sarah Brodsky

I love Schnucks, but I can’t agree with this:

Robert Buchanan, assistant professor of finance at St. Louis University, gives the Schnucks credit for trying something bold and innovative — and for not jacking up the prices at the downtown store.

As for the businesses who are struggling as a result, that’s a fact of competitive life, he said.

“Retail is very much a Darwinian struggle, and the best operators are going to win,” Buchanan said.

The competition for lunch customers in downtown St. Louis isn’t simply a matter of the best food establishment winning out. Schnucks received state and federal “incentives” and tax increment financing from the city–subsidies that allow it to keep prices low and put smaller eateries out of business.

The story of the Schnucks Culinaria in St. Louis illustrates how government efforts to subsidize grocery stores can effect neighborhoods. Small stores and diners are hurt. The people who gain the most are the office workers who get access to cheap, convenient salads and sandwiches. But it’s not like those salaried employees wouldn’t have been able to eat any other way. They could have packed lunches from home just as cheaply if they had cared to take the trouble.

We should keep in mind the unintended consequences of grocery store subsidies the next time activists like Michelle Obama call for eradicating food deserts. To politicians, any place without a fancy deli that suburbanites would find attractive is a food desert–and all the small cafeterias that are already there had better get out of the way.


Filed under: Food Policy, Taxes, Unintended Consequences
Comments: None
 

Christine HarbinInefficaciousness: Hot New Trend?
Posted at 10:48 pm on March 30, 2010, by Christine Harbin

[NOTE: Since the original publication of this blog entry, the classification “libertarian paternalism” has been corrected to “liberal paternalism.”]

I recently had a conversation with my good friend Justin who lamented that he had received his third parking ticket this year from the city of Madison, Wisconsin for violating the alternate side parking rule. “Alternate side parking is a racket designed to part the citizens of Madison with their hard-earned cash,” he told me.

I think that Justin is onto something, and this raises an additional concern that I have about aggressive ticketing and selective taxes: liberal paternalistic policies frequently fail to accomplish their official purpose.

The parking tickets haven’t changed Justin’s behavior; he continues to park on the side of the road that is arbitrarily wrong. The city’s alternative-side parking rules are so confusing and difficult to appeal, even smart people like Justin get trapped. Of course, that’s OK with the city; they’ll receive a steady revenue stream from parking tickets.

Selective taxes on fatty food and soda are another example of liberal paternalism that doesn’t accomplish their official purpose, which is to trim waistlines in aggregate. In this example, there is not a scientific consensus on whether they will accomplish that which they allegedly intend. In a recent piece on the Huffington Post, Dr. Pamela Peeke explains how many studies that prove the contrary are being ignored.

Last September, the New England Journal of Medicine published a policy report by a group of distinguished experts that called for taxing sodas and other sugary drinks to fight obesity. The news media gave a lot of attention to the report. But last month, the press did not give much attention to a group of letters from prominent doctors published in NEJM noting that the report failed to cite any scientific evidence showing a tax would reduce the cumulative weight of Americans.

Furthermore, slapping selective taxes on soda will be inefficacious at reducing obesity because an individual’s risk of obesity is not a direct function of the amount of sugary beverages that she consumes. Dr. Peeke argues that it is the result of many factors instead — some relating to genetics, others to lifestyle choices.

Government actually has an incentive for these taxes to be inefficacious, because then it can continue to generate revenue from them. I consider this to be further evidence that the primary purpose of new taxes to raise more tax revenue to support the government’s spending habit. Just like the indoor tanning tax, selective taxes on sodas and fatty food would be a revenue generator first and a behavior deterrent second. These taxes would easily generate a considerable amount of income for state and local governments. In a previous post on Show Me Daily, I used a revenue calculator for soft drink taxes from the Rudd Center for Food Policy and Obesity at Yale University to determine that Missouri could generate $285 million in 2010 if it taxed sugar-sweetened beverages at $0.01 per ounce, or over $460 million if this tax were expanded to include diet-beverages.

[Cross-posted at Amateur Philosophy]


Filed under: Health Care, Nanny State, Taxes
Comments: 7 Comments
 

Christine HarbinThe Indoor Tanning Tax: Behavior Deterrent or Revenue Generator?
Posted at 10:40 am on March 27, 2010, by Christine Harbin

The 10% tax on indoor tanning services is the government’s latest effort to save us from ourselves. From an article on CNNmoney:

An indoor tanning tax will therefore “serve as a signal from the federal government to young people that indoor tanning is dangerous and should be avoided,” said Dr. William James, president of the [American Academy of Dermatology].

This tax represents an unfortunate and disturbing trend in public policy: it’s disguised as a means to “nudge” people into improved behavior, but its primary purpose is to provide an additional revenue stream. This 10% tax on indoor tanning will generate a considerable amount of money: $2.7 billion over ten years. How could a politician resist? State and local governments are facing large deficits, and they are understandably trying to account for their expenses. Government wants individuals to stop their bad habits, but not completely, because then it will generate no revenue from them. If all Americans switched to spray tanners and vitamin D pills as a consequence of this tax, then Congress would have something else to exploit tax.

Moreover, these selective sales taxes assume that the government/”choice architect” actually knows what the “right” choice is for other individuals. Whether something is healthy is subjective; it depends on who you ask and when. Some herald indoor tanning as healthy because it is a source for vitamin D; others say that it is unhealthy because it increases an individual’s risk of melanoma. Also, government is notoriously swayed by the interests of lobbying groups instead of the interests of their constituents — corn syrup is not very nutritious, but it certainly secures a significant amount of assistance from the U.S. government.

I don’t know who to believe — the rent-seeking lobbyist trying to save his industry from an imminent leftward shift of the demand curve, or the U.S. senators who just want my tax money to fund their pet projects to please their constituents to secure their re-election. I’ve made the decision that the risks associated with indoor tanning outweigh the benefits for me personally, and I know that other individuals may come to a different conclusion in their cost-benefit analysis. As a libertarian, I disagree that it should be the role of government to tell individuals how to behave.


Filed under: Health Care, Nanny State, Taxes
Comments: 9 Comments
 

Paul JacobWe Told You So
Posted at 10:03 pm on March 23, 2010, by Paul Jacob

Say it with me: We told you so.

Over the years, I’ve tried to help citizens regain control over their prodigal representatives. Sometimes I got called a radical for these activities. An extremist. But I think of myself as a moderate, as someone promoting moderation.

In government spending, for example.

Among the most moderate of these many statewide initiatives have been what are sometimes called the Taxpayer Bill of Rights, or TABOR, initiatives. These proposals are designed to limit spending increases to a formula of population growth-plus-inflation.

Sometimes we succeeded. Too often we failed.

The consequence of our failures, of each defeat at the hands and promotional budgets of groups that called us, of all people, extremists?

Now, state after state has become what Reason magazine dubs “Failed States.” They did what politicians demanded, spent at rates far greater than moderation would allow. And now that we’ve hit hard times, and state revenues have drastically fallen, how the politicians whine! Indeed, they demand bailouts.

Say it with me, you who’ve voted for TABOR in the past: “We told you so. Lacking our measures, the states have become part of the out-of-control federal deficits and ballooning debt.”

And remember, you who opposed our moderate measures to limit state spending: You are the radicals. You are the ones who helped set our country on its current, self-destructive course.

This is Common Sense. I’m Paul Jacob.

[Originally posted at ThisIsCommonSense.com]


Filed under: Government Spending, Taxes
Comments: None
 

Henry Hazlitt"[T]he whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."
Henry Hazlitt, Economics in One Lesson
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