Tag Archives: Mark Perry

Don’t Cry for the Former Taxi Monopoly

23 Friday Mar 2018

Posted by in competition, monopoly, Technology, Uncategorized

≈ Leave a comment

Tags

, , , , , , , , , ,

It would be odd to argue that innovation is not unequivocally positive, that its costs will exceed its benefits. Certainly there are downsides: human capital invested in the methods and technologies supplanted by an innovation is devalued, jobs may be lost, retraining becomes necessary, and even consumers must get used to new ways of doing things, which is not costless. But most of these costs are temporary. And when an innovation eliminates an incumbent’s monopoly, the former monopolist’s profit ends up back in the pockets of consumers.

People do seem to focus excessively on the downside of innovation without carefully tallying the benefits. For example, this article focuses on the loss of New York City taxi pickups since ride sharing services like Uber and Lyft began to have an impact in 2014. Mark Perry reproduces a chart from that article, which is featured above. The number of monthly taxi rides in NYC has fallen by about one-third since then, from an average of 13+ million to about 9 million in 2017. In fact, Perry reports that the market for taxi medallions has tanked since then as well, with plunging medallion prices and many medallions sold out of bankruptcy and foreclosure. But don’t be too quick to shed tears for a monopoly lost.

The same chart shows the massive upside to ride sharing, as discussed here by Warren Meyer. The size of the total market has nearly doubled, from about 13 million per month to roughly 24 million (adding the two lines together). And it was a quick transition! That’s what happens when real competition is introduced to a market: prices fall and quantity increases, with an attendant increase in the welfare of consumers. That increase always exceeds the loss suffered by the former monopolist or cartel (as the case may be), which was earning excessive profits at the expense of consumers before the innovation had a market impact. And many former taxi drivers have made the switch to ride sharing providers, and they seem to prefer it for the flexibility and autonomy it offers. Yes, the best innovations benefit workers as well as consumers.

Competition can bloom when government opens markets to competitors or when an innovation creates new alternatives for consumers. In the case of ride sharing, both were necessary. For many years, NYC restricted the supply of taxi medallions, which kept taxi fares artificially high. The formal approval of ride sharing services in the city was not uncontested. But once it was approved, consumers took advantage of superior dispatching and payment technologies enabled by their smart phones, as well as security features and rating systems, not to mention lower fares. Again, these developments have contributed massively to consumer well-being, which is ultimately the point of all economic activity. Traditional taxis have to try to keep up. The ride sharing industry has inflicted the kind of creative destruction for which consumers are quite grateful.

Dynamism and Punishment

20 Wednesday Apr 2016

Posted by in Income Distribution, Taxes

≈ Leave a comment

Tags

, , , , , , , , , ,

 

econ

The “squeeze” on the U.S. middle class is a fiction. If you don’t believe it, take a look at the “gif” above. It first appeared in The Financial Times (FT) with a misleading description about how “…technological change and globalization drive a wedge between the winners and losers in a splintering US society.” It’s obvious that the middle class, as statically defined by the FT, is shrinking only because it is moving up to higher real income levels (i.e., adjusted for inflation). Mark Perry uses this and other supporting charts in noting that “…so many middle-income households have become better off“. Some of these gains are related to an aging population, but the gains are not remotely consistent with FT’s dramatization. One point of emphasis that the chart should make obvious, but doesn’t quite, is that groups appearing to remain within a particular income range over time are never comprised of the same individuals. There is always movement up and down across all of these groups from year-to-year.

There is a stagnation story here, but it’s more limited than suggested by FT’s narrative. It is twofold: first, the financial crisis in 2007-2009 put a temporary stop to the upward income migration, and its resumption during the Obama presidency has been less robust; second, the very lowest-income segment, $0 – $10,000 of annual income, has expanded in each time interval shown since 1991, from just above 1% of adults to roughly 2.5%. A primary reason for the tepid growth of the U.S. economy since the recession’s trough in 2009, and the weaker migration, has been weak physical investment in the productive economy from its recession lows. That form of spending usually takes a lead role in economic recoveries. A number of observers have attributed the poor performance this time around to “regime uncertainty“, or the risk that regulatory and tax regimes could take an even more destructive toll in the future, essentially devouring returns to capital. As for the increases in the lowest-income sliver of the chart, Scott Sumner says:

“It could be due to expansion of the welfare state, the break-up of the traditional family, or perhaps growth in the underground economy. Nonetheless, it is cause for concern. But it has nothing to do with the mythical decline in the ‘middle class.’“

A related fiction is that the U.S. tax system is unfair to the middle class, and that higher income groups do not pay their “fair share”. This is put to rest in an “Issue Brief” from the Peter G. Peterson Foundation (PPF), using data from the Tax Policy Center and the Congressional Budget Office. The analysis shows that while high-income taxpayers benefit from tax breaks, those breaks offset high marginal tax rates and do not diminish the fact that the tax system is highly progressive:

“The Tax Policy Center estimates that 69 percent of taxes collected in 2015 will come from those in the top quintile, or those earning an income above $138,265 annually. Within this group, the top one percent of income earners — those earning more than $709,166 in income per year — will contribute over a quarter of all federal revenues collected.“

Apparently, the PPF analysis does not account for the impact of transfer payments on progressivity, which make average effective tax rates negative at low income levels. However, PPF does acknowledge that the tax system is unnecessarily complex and creates a web of distortions and poor incentives that limit economic growth. It’s a wonder that the dynamic of upward migration in real income was possible at all.

 

Unequal Pay For Unequal Work

25 Thursday Feb 2016

Posted by in Labor Markets

≈ Leave a comment

Tags

, , , , , , , , , , , , , , , , , ,

equal-pay-cartoon

Debates on social issues are often plagued by facile comparisons that distort the underlying facts. The alleged gender pay gap involves such comparisons. The Obama Administration proposed new rules last month intended to address a difference in median earnings between men and women, demanding data reports on various demographics from firms with 100+ employees. Mark Perry points out that the pay gap in the Obama White House is about the same as the national difference. Can there be any reasonable explanation for these disparities?

One key to understanding the debate is that the difference in aggregate pay between men and women (17% in 2014, according to the Bureau of Labor Statistics) is not a divergence in pay for equal work! However, that is the gist of the fraudulent narrative so often heard from the White House and elsewhere. The truth: 17% is the difference in the medians of two large distributions of working adults, one for men, one for women, covering all occupational categories. The discrepancy, which has declined sharply over the past 35 years, is explained today by fewer hours worked among women and “differences in educational attainment, work experience, and occupational choice.” These differences are well known, but gender-gap warriors conveniently overlook the following facts, as established by the Department of Labor:

  • There is more part-time work among women;
  • Women lose more experience to childbirth, child care and elder care;
  • Women demand more job flexibility and non-wage benefits (and that costs);
  • Women are disproportionately under-represented in dangerous occupations;
  • Women are disproportionately under-represented in STEM fields (Science, Technology, Engineering, Math);

Interestingly, the last point may have more to do with a broader range of talents possessed by females who are skilled at math, relative to men, which leads to a greater variety of career options. An implication: non-STEM occupational choices by women are often voluntary and not the result of discrimination. And those choices are often driven by considerations other than cash remuneration.

As to the risk of physical danger, in 2010, men were almost 12 times as likely as women to suffer fatal injuries on the job. There is no question that high-risk occupations have higher wages. Apparently, women choose not to pursue opportunities in these occupations. An earlier study found that single parents, male and female, were the most risk averse in their choice of occupation, and that married women with children are more risk averse than married men with children. Of course, it is possible that some employers have requirements in terms of physical strength that favor men. Either way, the job-risk gap almost certainly contributes to the measured-wage gender gap, but it has little to do with gender discrimination per se.

Earnings are sensitive to factors such as full-time / part-time status, continuous job tenure, and the likelihood of extended leaves of absence. This is supported by a research finding cited in The Economist, that partners in lesbian relationships tend to out-earn married straight females. The division of responsibilities in the home is surely part of the story: lesbian couples tend to split chores more equally than straight couples. Millennial couples (ages 25-34) are also more likely to split household chores equally; the gender pay gap for millennials is much narrower than for older age cohorts, and it is nonexistent for childless millennials. Millennial women have more than closed the education gap as well.

When gender differences in hours, tenure, absences, education, and job hazards are considered, as well as the full menu of compensating non-wage benefits available, the wage gap is essentially nonexistent. Yet President Obama’s proposed data mandate would carry high compliance costs and likely cost jobs as well. The purpose of the regulation is to make it easier for various groups to sue employers on the basis of wage discrimination. But observation of such a gap, wherever it might exist, is not prime facie evidence of discrimination; it is more than likely to be the result of private, voluntary agreement.

Is it possible that certain attitudes or behavioral characteristics of women generalize to poorer outcomes, relative to men, in negotiations? Tyler Cowan reports on research that suggests as much, based on “laboratory” experiments in which participants played repeated games involving actual rewards. In one experiment, the rewards depended on the acceptance of an offer to share a pot, and both men and women made lower offers to female partners than to males. However, when the partner was a woman, females were markedly stingier in their offers than males. Those women are tough! But seldom are real-world “deals” so one-dimensional, and controlling for all considerations of value is often impossible. In any case, trades rarely take place when the parties don’t find them to be mutually beneficial.

Fortunately, in labor markets, when differentials in skills and experience matter, discrimination is practiced only under a self-inflicted penalty on the discriminator. In the case of wage-based gender discrimination, the employer will tend to overpay for equivalently-skilled male help. Discrimination of this sort impairs a firm’s ability to attract the best employees and harms its competitive position. Nevertheless, the extent to which the market’s self-regulation confers benefits on individual participants depends upon their vigilance: buyer beware (caveat emptor) and seller beware (caveat venditor) are keys to real economic freedom. Most importantly, in all things, beware government edicts. Markets are the best regulator.

Sidebar: I was referred to an article on FiveThirtyEight by my friend John Crawford. The main subject matter of the article is off-topic and its conclusions are incorrect (I might post on it soon), but many of the charts are interesting; the third chart is really fascinating! It shows that women, by age 30, tend to belong to households that are higher in the income distribution than men who come from the same point in the distribution of household-income in childhood. This is true at every point in the childhood household-income distribution! Are there advantage(s) for women that can account for this? A few guesses: a lower rate of incarceration of women by age 30; women have higher marriage rates by age 30; women “marry up” more than men, both in terms of the ages and incomes of their spouses; women who don’t marry live with their parents more than men do (?). There could be other explanations, and the relationship may not hold at later ages. Still, it’s noteworthy that such a reverse “gender gap” exists in the data.

I close with a quote from Harvard’s Claudia Golden, from “A Grand Gender Convergence: Its Last Chapter” (HT: Marginal Revolution):

“The gap is much lower than it had once been and the decline has been largely due to an increase in the productive human capital of women relative to men. Education at all levels increased for women relative to men and the fields that women pursue in college and beyond shifted to the more remunerative and career-oriented ones. Job experience of women also expanded with increased labor force participation. The portion of the difference in earnings by gender that was once due to differences in productive characteristics has largely been eliminated. 

What, then, is the cause of the remaining pay gap? Quite simply the gap exists because hours of work in many occupations are worth more when given at particular moments and when the hours are more continuous. That is, in many occupations earnings have a nonlinear relationship with respect to hours. A flexible schedule comes at a high price, particularly in the corporate, finance and legal worlds.“

Major Mistake: The Minimum Opportunity Wage

06 Saturday Jun 2015

Posted by in Price Controls

≈ 1 Comment

Tags

, , , , , , , , , , , , , , , , , , , , ,

government-problem

City leaders in St. Louis and Kansas City are the latest to fantasize that market manipulation can serve as a pathway to “economic justice”. They want to raise the local minimum wage to $15 by 2020, following similar actions in Los Angeles, Oakland  and Seattle. They will harm the lowest-skilled workers in these cities, not to mention local businesses, their own local economies and their own city budgets. Like many populists on the national level with a challenged understanding of market forces (such as Robert Reich), these politicians won’t recognize the evidence when it comes in. If they do, they won’t find it politically expedient to own up to it. A more cynical view is that the hike’s gradual phase-in may be a deliberate attempt to conceal its negative consequences.

There are many reasons to oppose a higher minimum wage, or any minimum wage for that matter. Prices (including wages) are rich with information about demand conditions and scarcity. They provide signals for owners and users of resources that guide them toward the best decisions. Price controls, such as a wage floor like the minimum wage, short-circuit those signals and are notorious for their disastrous unintended (but very predictable) consequences. Steve Chapman at Reason Magazine discusses the mechanics of such distortions here.

Supporters of a higher minimum wage usually fail to recognize the relationship between wages and worker productivity. That connection is why the imposition of a wage floor leads to a surplus of low-skilled labor. Those with the least skills and experience are the most likely to lose their jobs, work fewer hours or not be hired. In another Reason article, Brian Doherty explains that this is a thorny problem for charities providing transitional employment to workers with low-skills or employability. He also notes the following:

“All sorts of jobs have elements of learning or training, especially at the entry level. Merely having a job at all can have value down the line worth enormously more than the wage you are currently earning in terms of a proven track record of reliable employability or moving up within a particular organization.“

The negative employment effects of a higher wage floor are greater if the employer cannot easily pass higher costs along to customers. That’s why firms in highly competitive markets (and their workers) are more vulnerable. This detriment is all the worse when a higher wage floor is imposed within a single jurisdiction, such as the city of St. Louis. Bordering municipalities stand to benefit from the distorted wage levels in the city, but the net effect will be worse than a wash for the region, as adjustments to the new, artificial conditions are not costless. Again, it is likely that the least capable workers and least resourceful firms will be harmed the most.

The negative effects of a higher wage floor are also greater when substitutes for low-skilled labor are available. Here is a video on the robot solution for fast food order-taking. In fact, today there are robots capable of preparing meals, mopping floors, and performing a variety of other menial tasks. Alternatively, more experienced workers may be asked to perform more menial tasks or work longer hours. Either way, the employer takes a hit. Ultimately, the best alternative for some firms will be to close.

The impact of the higher minimum on the wage rates of more skilled workers is likely to be muted. A correspondent of mine mentioned the consequences of wage compression. From the link:

“In some cases, compression (or inequity) increases the risk of a fight or flee phenomonon [sic]–disgruntlement culminating in union organizing campaigns or, in the case of flee, higher turnover as the result of employees quitting. … all too often, companies are forced to address the problem by adjusting their entire compensation systems–usually upward and across-the-board. .. While wage adjustments may sound good for those who do not have to worry about profits and losses, the real impact for a company typically means it must either increase productivity or lay people off.“

For those who doubt the impact of the minimum wage hike on employment decisions, consider this calculation by Mark Perry:

“The pending 67% minimum wage hike in LA (from $9 to $15 per hour by 2020), which is the same as a $6 per hour tax (or $12,480 annual tax per full-time employee and more like $13,500 per year with increased employer payroll taxes…)….“

Don Boudreaux offers another interesting perspective, asking whether a change in the way the minimum wage is enforced might influence opinion:

“... if these policies were enforced by police officers monitoring workers and fining those workers who agreed to work at hourly wages below the legislated minimum – would you still support minimum wages?“

Proponents of a higher minimum wage often cite a study from 1994 by David Card and Alan Krueger purporting to show that a higher minimum wage in New Jersey actually increased employment in the fast food industry. Tim Worstall at Forbes discussed a severe shortcoming of the Card/Krueger study (HT: Don Boudreaux): Card and Krueger failed to include more labor-intensive independent operators in their analysis, instead focusing exclusively on employment at fast-food chain franchises. The latter were likely to benefit from the failure of independent competitors.

Another common argument put forward by supporters of higher minimum wages is that economic theory predicts positive employment effects if employers have monopsony power in hiring labor, or power to influence the market wage. This is a stretch: it describes labor market conditions in very few localities. Of course, any employer in an unregulated market is free to offer noncompetitive wages, but they will suffer the consequences of taking less skilled and less experienced hires, higher labor turnover and ultimately a competitive disadvantage. Such forces lead rational employers to offer competitive wages for the skills levels they require.

Minimum wages are also defended as an anti-poverty program, but this is a weak argument. A recent post at Coyote Blog explains “Why Minimum Wage Increases are a Terrible Anti-Poverty Program“. Among other points:

“Most minimum wage earners are not poor. The vast majority of minimum wage jobs are held as second jobs or held by second earners in a household or by the kids of affluent households. …

Most people in poverty don’t make the minimum wage. In fact, the typically [sic] hourly income of the poor appears to be around $14 an hour. The problem is not the hourly rate, the problem is the availability of work. The poor are poor because they don’t get enough job hours. …

Many young workers or poor workers with a spotty work record need to build a reliable work history to get better work in the future…. Further, many folks without much experience in the job market are missing critical skills — by these I am not talking about sophisticated things like CNC machine tool programming. I am referring to prosaic skills you likely take for granted (check your privilege!) such as showing up reliably each day for work, overcoming the typical frictions of working with diverse teammates, and working to achieve management-set goals via a defined process.”

Some of the same issues are highlighted by the Show-Me Institute, a Missouri think tank, in “Minimum Wage Increases Not Effective at Fighting Poverty“.

A higher minimum wage is one of those proposals that “sound good” to the progressive mind, but are counter-productive in the extreme. The cities of St. Louis and Kansas City would do well to avoid market manipulation that is likely to backfire.

In Praise of Ticket Scalpers

04 Wednesday Mar 2015

Posted by in Secondary Markets

≈ Leave a comment

Tags

, , , , , , , ,

fare-thee-well-2015

I have been a fan of The Grateful Dead since I was a teenager and have seen the band perform somewhere around 35 times prior to Jerry Garcia’s death in 1995 … I actually lost count. This summer, the four surviving original band members, along with some prominent guest musicians, will perform three reunion shows over the July 4th weekend at Chicago’s Soldier Field. They have said that this will be their last performance together.

Demand for tickets was so high that it surprised the band and the promoter. In January, an initial mail order tallied about 65,000 orders for more than 350,000 tickets, far more than the mail-order allotment and the stadium capacity for three days. On-line requests went mostly unfilled as the system was swamped when tickets went on-sale. Chicago Bears season ticket holders had the right of first refusal on a large number of tickets, which is unfortunate given the probable extent of the intersection between Bears fans and the set of Deadheads. And so there is a problem of scarcity and excess demand, a common occurrence for big concerts and sporting events.

Naturally, a secondary market has arisen to allocate the limited supply of tickets available from brokers and other willing sellers. However, as noted at the links above, asking prices on outlets like StubHub, often well above $1,000 per ticket, have shocked observers. Few transactions will actually take place at those prices. Repricing will occur until enough willing buyers are found. Nevertheless, many “Deadheads” are outraged. There are complaints on Facebook from self-righteous Deadheads, boasting of their honor as music fans and condemning the “greed” of resellers. Needless to say, some of the resellers are, in fact, lucky Deadheads who, having landed tickets, now find the prospect of a pecuniary gain from a resale just too good to pass up!

I am very much in favor of a free secondary market and so-called “ticket scalping.” First and foremost, these transactions are voluntary. There is no coercion involved, just a willing buyer and seller who reach a mutually beneficial deal. A buyer will agree to pay a certain price only if that price is less than the subjective value they assign to the ticket. Of course, a potential secondary buyer would rather have been lucky in what amounted to a lottery for tickets. But if not, they are not shut out altogether. A little patience on the secondary market might bring prices well within reach.

Second, the allocative mechanism in play on the secondary market is little appreciated, but it contributes to social gains. Tickets will be allocated to those who value them most highly. In fact, individuals who value their own time most highly might avoid the time and aggravation of participating in the mail order or joining the on-line sales queue. Instead, these individuals know they can fall back on the secondary market to obtain seats, thereby conserving a valuable resource: their time. Some will contend that all tickets should be made available and allocated via some other, non-price mechanism, such as a lottery or a queue, whereby willingness to pay cash is rendered moot. Unfortunately, such mechanisms have severe drawbacks in the presence of excess demand: they tend to waste time for both the lucky and unlucky participants, they may allocate tickets to buyers who value them less highly, they infringe on personal liberty by preventing individuals from taking part in mutually beneficial exchanges, and they waste scarce law enforcement resources.

Another advantage of the allocative mechanism embodied in the secondary market is its ability to create value in the presence of risk. Performers and promoters are loath to price tickets optimally, partly because there is risk in doing so: damage to goodwill with their fan base and the risk that they will over-price tickets and possibly fail to fill the house. Secondary sellers will gladly accept pricing risk, and the frenzy surrounding an active secondary market can serve as a promotional device for performers. Moreover, by allowing tickets to be allocated to buyers who value them most highly, the venue and the community benefit by bringing in the most appreciative crowd, adding to the success and vibrancy of the local entertainment market. A prohibition on scalping closes off a convenient channel through which some of the most valuable customers can obtain seats to events. Here’s what one ticket market scholar states:

“… a curtailment of scalping markets would not only prevent allocation according to maximization of utility, it would also have the dynamic effect of reducing in the long term the supply of cultural events! This is very rarely mentioned, but following the adoption of an anti-scalping law in Quebec, industry experts have indicated that cultural centers like the Bell Centre in Montreal have reduced events and potential audiences by some 6% to 11%.”

Finally, the fact that prices are high on the secondary market implies great scarcity. The Grateful Dead may have aggravated the situation by stating unequivocally that these would be their last shows. They could have remained silent or vague on that point. But scarcity can be addressed in other ways by performers and promoters: they can agree to price the tickets more highly; they can arrange to perform more shows and appear at more venues; and they can create imperfect substitutes for the actual concert experience, such as providing live-feeds of the show to other venues, including live streaming.

In this case, the band has taken steps to alleviate the shortage. First, they have reconfigured the plan for the floor of the stadium to allow a larger crowd in a “GA Pit” (presumably standing room), and they are opening up the set and directing sound to accommodate seating behind the band. Second, they are discussing the possibility of providing high-quality, live feeds to other venues. This should help to take some of the pressure off prices in the secondary market.

My wish is that the band would also announce additional performances, either in Chicago or a few other cities. My mail order went out on the first day with an early postmark and it is still unanswered. My hopes remain high, but if I don’t get into the show, I’m sure to attend a viewing party!

Statists Make a Mess of Markets

20 Tuesday Jan 2015

Posted by in Markets, Regulation

≈ Leave a comment

Tags

, , , , , , , , , ,

132678_600

Government is not well suited to regulate markets in many respects. In the first place, regulation is never absent from free markets: consumers, competitors, technology and all factors of production such as labor ultimately represent a network of forces that regulate market outcomes. The power of market self-regulation, and the often destructive results of government regulation, are discussed by Howard Baejter in “There is No Such Thing as an Unregulated Market“. Beyond the efficiency with which markets direct resources, Baejter notes that markets regulate the quality and pricing of goods and services. Mark Perry reviews Baejter’s post approvingly and adds some thoughts of his own:

“… the ruthless consumer-regulators also waste no time praising, endorsing and recommending the products, restaurants, movies, services, sellers, contractors and businesses they like, both by supporting them with plenty of their regulatory certificates of approval (dollars), and by giving them positive, sometimes even glowing reviews on Amazon, Yelp, Rotten Tomatoes, eBay, Angie’s List, Uber, etc….”

Baejter’s concluding section covers some ways in which government regulation short-circuits healthy market regulation. Regulatory actions not only impose significant compliance costs, but they often have the effect of suspending market price signals and hampering voluntary adjustments to change that would otherwise lead to improved welfare. Furthermore, regulated firms are often successful in “capturing” regulators, enabling the most powerful players in an industry to manipulate and obtain regulatory treatment that blunts competition. As Baetjer says:

“… government regulation often “crowds out” regulation by market forces and consumer-regulators, and markets therefore operate less efficiently because the interests of the producers take priority over the interests of consumers…”

The Mises Daily ran a post in early January by Patrick Barron in which he elaborates on the truism that peaceful, voluntary exchange necessarily improves well-being relative to third-party interference. Such interference may take the form of forced exchanges, rules, mandates, price controls, or distortions from taxation. A recent post on Sacred Cow Chips, “The State and the Invisible Future Lost“,  emphasized the sacrifice of human well-being brought on by over-regulation. From that post:

“Our society routinely destroys economic opportunities as a matter of policy. This includes immediate discouragement of economic activity via tax disincentives and regulatory obstacles as well as lost capital investment and innovation. And it includes actions that grant protected status for monopolists, a steady by-product of the regulatory state.“

There Oughta NOT Be a Law

11 Thursday Dec 2014

Posted by in Uncategorized

≈ 1 Comment

Tags

, , , , , , , , , , , , , , , , , ,

image

We have too many laws and too many busy-bodies wishing to force others into conformity with their own moral and  behavioral strictures. It is more excessive in some jurisdictions than others, but the unnecessary criminalization of harmless behavior is a spreading canker. The death of Eric Garner  in New York City exemplifies the horrible consequences, an aspect which sets it apart from the death of Michael Brown in Ferguson, Missouri. Last week, Mark Perry posted links and summaries of three essays on Garner’s death “and what it teaches us about over-criminalization, government force, police brutality, the regulatory superstate, and the violence of the state.”

Both the Brown and Garner cases involved tobacco products, a primary target of busy-bodies worldwide. Garner was choked to death by police who restrained him for violating a law against selling individual cigarettes (“loosies”). Brown, then a suspect in a strong-arm convenience store theft of Swisher cigarillos, was shot by an officer claiming that Brown charged him in the street after a physical altercation moments earlier. Both incidents are said to have involved excessive force by police toward African Americans, but grand juries refused to indict the officers in both cases. Whether excessive force was used against Brown or Garner, or whether racism was involved, a major contrast is that the Garner case involved the enforcement of a law that seems ridiculously petty.

The three links provided by Perry are from:

    • J.D. Tuccille, who argues that over-regulation of behavior not only leads to conflict but also encourages corruption in law enforcement.
    • Randy Soave, who discusses the incentive structure faced by police and the extent of over-regulation, “from cigarettes to sodas of a certain size, unlicensed lemonade stands, raw milk, alcohol (for teens), marijuana, food trucks, taxicab alternatives, and even fishing supplies (in schools)“.
    • Jonah Goldberg, who elaborates on a simple truism: if you pass a new law, it must be enforced. Enforcement means force, and force is what government is all about. Therefore, if you insist on more detailed control over others, you can expect some violence.

Michael Munger makes the same point, condemning both the left and the right for their failure to understand the simple but far-reaching flaw in our polity:

“The left is outraged that the state is not doing exactly what the left expects from an idealized, unicorn state. In fact, the state is actually made up of actual human-style people, and people are flawed. The left wants to rely on abstract systems, and then be perpetually astonished when things go really wrong. It’s not bad people that are the problem. The THING, the thing itself is the abuse, folks…. The right is just denying that there is a problem, the system is working, the jury has spoken, etc.”

In “Worse Than Racism,” Eric Raymond discusses Garner’s death in the context of Alexis de Tocqueville’s  “soft despotism,” our penchant for promulgating rules for others “all justified in soothing ways to achieve worthy objectives. Such as discouraging people from smoking by heavily taxing cigarettes. Eric Garner died in a New York minute because ‘soft despotism’ turned hard enough to kill him in cold blood.”

Raymond presses hard:

“Every one of the soft despots who passed that law should be arraigned for the murder of Eric Garner. They directed the power of the state to frivolous ends, forgetting – or worse, probably not caring – that the enforcement of those ‘small complicated rules’ depends on the gun, the truncheon, and the chokehold. 

But we are all accessories before the fact. Because we elected them. We ceded them the power to pass oh, so many well-intentioned laws, criminalizing so much behavior that one prominent legal analyst has concluded the average American commits three inadvertent felonies a day.”

Finally, here’s an interesting connection: research  advocating high taxation of cigarettes  was published in 2008 by none other than Jonathan Gruber. Yes, the architect of Obamacare who often gloated on camera at academic conferences about the clever lack of transparency in the health care law and the stupidity of the American voter. He was also busy providing a rationale for the morality meddlers to more heavily tax and regulate “unacceptable” behavior. It is fitting and ironic that such an infamous elitist as Gruber has a connection to the soft despotism that led to the death of Eric Garner.

Negative Net Taxes For Most Is Not A Good Sign

18 Tuesday Nov 2014

Posted by in Uncategorized

≈ Leave a comment

Tags

, , , , , , , , ,

IRS Spider

Carpe Diem (Mark Perry) reports on a new CBO study showing that nearly all net federal taxes (taxes net of transfer payments received) are paid by households in the highest income quintile. The fourth quintile pays a small, positive amount of net taxes, but the lowest 60% of  households pay negative net taxes, with average tax rates on market income plus transfers ranging from -13.7% for the middle income quintile to -35% for the lowest quintile. From Perry:

“The second-highest income quintile basically just barely covers its transfer payments, so it’s really the top 20% of “net payer” households that are financing transfer payments to the entire bottom 60% AND financing the non-financed operations of the entire federal government.”

A heavy concentration of taxes at one end of the income distribution is not a healthy development for a democracy when it comes to fiscal responsibility.

In a second post, Perry uses the same study to show that adjusting market income for net taxes reduces income inequality by almost 50%. Advocates for greater income equality always focus on market income alone because it tends to show a more dramatic gap between rich and poor. This distortion understates the extent to which policies already in place reduce income inequality and amplifies the unabating contention that more must be done. In addition, standard measures of income inequality tend to distort trends, as SCC has noted in the past.

At the same time, OECD data reveal that the U.S. has the most progressive tax system in the industrialized world. The author of the OECD post cited the data in testifying before the Senate Budget Committee:

“This prompted one Senator to point out that if the richest 10% of taxpayers earn the most of any OECD country, shouldn’t it make sense that they bear the largest tax burden of any country?”

The Senator’s premise was false, as there are countries with higher or similar income shares earned by the top decile, but the tax burden on that decile in the U.S. is the highest. In addition, the U.S. has the highest corporate tax rate in the industrialized world, a point on which SCC has posted before.

The ongoing debate over inequality is counterproductive. Calls for higher taxes will certainly do nothing to encourage economic growth and job creation. Quite the opposite. And inequality, in principle, is not in any way synonymous with decreasing standards of living. However, I certainly agree that inequality can be harmful when it is induced by rent-seeking activity and cronyism, which become a way of life with growth in the public sector.

Unintended Consequences: Living (Without a) Wage

02 Thursday Oct 2014

Posted by in Uncategorized

≈ 1 Comment

Tags

, , , , , , ,

chickensalon

Nick Gillespie makes a good case for what should be obvious to any thinking person: to help the poor, direct transfers are a better alternative than raising the minimum wage. Most people would probably agree, regardless of their views of the appropriate role of government in society, that governments are better-suited to writing checks than to complex market interventions, and labor markets are no exception. State or federal wage floors,  minimum wages, or “living wages” — whatever politically expedient name happens to be in vogue, they are the same thing — diminish employment opportunities for the least skilled members of the labor force. These workers have the most to gain from employment experience. Hence, their losses extend beyond a mere loss of current income into lost opportunities to build human capital and future income.

Mark Perry puts a fine point on the folly of raising the wage floor: “Instead of $10.10 per hour, think of the proposed minimum wage as a $5,700 annual tax per full-time unskilled worker.”

Transfers can be targeted at the poor more effectively than a living wage. First, it is relatively easy to qualify households falling below poverty-level. Second, a significant share of low-wage earners are not members of low-income households. Third, as noted above, employers can respond to wage mandates by reducing employment, but also by cutting the hours of their low-skilled employees. Both actions tend to nullify an otherwise positive impact of a higher wage floor on income.

There are few who question the need for a safety net for those truly in need, but policy should be designed to limit the need for public support. Wage floors do not promote either of those goals. However, I’d also caution that some of the transfer programs mentioned by Gillespie (food stamps and housing subsidies) are, in fact, market interventions that have unintended consequences of their own, including price distortions. Cash transfers avoid these kinds of difficulties if they are crafted to minimize negative incentives on work effort and job search activity.

Is Travel Attire So Controversial?

11 Thursday Sep 2014

Posted by in Uncategorized

≈ Leave a comment

Tags

, , , , , , ,

attire-yokozuna

I love this little uproar over appropriate attire for air travel. I’m guilty of wearing jeans, or shorts when I travel to warmish climes, but hey, I wear nice shirts! Mark Perry quotes Larry David on the subject, complete with a video from “Curb Your Enthusiasm.” Perry and Glen Reynolds both link to an article in Slate, “In defense of looking nice for your flight or train ride.” This quote is nice:

“Alas, the general lack of respect for travel, itself, as a worthwhile human experience, seems to be the root of this lazy dressing phenomenon. Many of us act as if we’re trying to create a private, instantaneous bridge through folded space-time between our bedrooms and our hotel rooms by flying in our pajamas or busing behind oversized sunglasses; the bad news is, barring a sudden forward leap in technology, wormhole creation is impossible.”

Reynolds agrees that you’ll be treated better if you don’t look like a slob; he likes to wear a sport coat for air travel because of the extra pockets. He also quotes Jon Hamm on the movie ‘Endless Summer‘ from a Facebook post: “These two surfer dudes travel the world to find the best waves, but whenever they got on a plane, they put on coats and ties.”