Questions and Observations

Free Markets, Free People

Republicans: Rationalizing breaking your word

Apparently when you pledge your word and you’re a politician, that pledge (and your word) has a shelf-life:

The decades-old pledge from the Americans for Tax Reform group has been signed by 238 House members and 41 senators in this Congress and has essentially become inescapable for any Republican seeking statewide or national office over recent election cycles, especially in the Republican-controlled lower chamber.

New York Rep. Peter King and Sen. Lindsey Graham said Sunday they would break the pledge and accept tax changes to generate more revenue to curb the trillion-dollar federal deficit.

Their statements followed a similar one Thursday by Georgia Republican Sen. Saxby Chambliss.

“I agree entirely with Saxby Chambliss,” King said on NBC’s “Meet the Press.” “A pledge you signed 20 years ago, 18 years ago, is for that Congress. …  The world has changed, and the economic situation is different.”

That’s what you get for electing moral cowards (aka, “politicians”) to office.

Spending cuts?

Forget about it.  It is your fault they spend more than they have so pay up and shut up.  After all, voters don’t seem to hold them accountable for any of this so why should they worry or take responsiblity?

The great cave-in begins.

The good news?  We won’t have to hear any moralizing by the GOP about “principles” … or at least we won’t have to take it seriously.

~McQ

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Observations: The QandO Podcast for 25 Nov 12

This week, Bruce, Michael, and Dale discuss Israel and Obamacare.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.

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To give is to waste?

My friend George Scoville wrote a Black Friday-appropriate post on a problem with gift-giving, which touches on a broader point that libertarians should heed.

A microeconomics paper that’s bounced around econ-blogs for several years says gift-giving causes a huge deadweight loss: when someone else picks a gift for you, it may not be what you would have bought for yourself when you would have bought it, which normally implies that goods and services are being distributed inefficiently.

If that’s true, then Christmas is a tremendously wasteful institution, within an order of magnitude of the income tax, and we’d be better off giving each other cash gifts.

Humbug!

First, on a technical note, that paper was written in 1993, before Amazon wish lists and social media made it easier to detect people’s interests and needs, so perhaps we’re getting better at matching gifts with recipients.

More importantly, the paper fell short of meaningfully capturing deadweight loss, because it focused entirely on the value of the goods.  Gift economies mostly operate on another kind of supply and demand: the desire for social cohesion, meaning closer relationships with family, friends, and other peers.

This is no trivial matter: relationships with people we can count on make us happier, healthier, and more successful.  Anything that helps to build and cement those bonds is valuable, and while some academics and marketers try to quantify that value (it may be more than you’d think), the normal rule is that relationships of trust should not be fungible with cash.  All societies have some social taboo against trading off the sacred and the mundane, which sometimes leads to absurdly stupid conclusions, but also allows people to build trust without worrying that anything intimate or of an extremely hard-to-price value (what’s the rest of your life worth?) will be easily sold for any of the mundane things that can be bought with cash.

It’s awkward when people give each other cash as gifts even if the amount is equal, and gift exchanges in which only one side puts any thought into it show unequal empathy.  If you put a lot of thought into anticipating someone’s wants, and that person gives you a very generic gift, it’s like being put in the Friend Zone.

The point of gifts is to trip a hardwire in the brains of social mammals: cycles of giving and gratitude that go beyond simple reciprocity.  When you’re trading cash, everyone is acutely aware of the value of what’s been exchanged, and there’s no fudge factor in the brain for “the thought that counts.”

That’s something we disagreeable, rationalistic libertarians should keep in mind, because the gift economy is a powerful force in human relations that resists and resents the intrusion of market forces, even if markets efficiently bring us the gifts.

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Wal-Mart protest a flop

So how did the great Wal-Mart protest go?

According to the Bentonville-based company, roughly 50 people who are actually on Walmart’s payroll joined today’s “walkout” nationwide. The protest organizers say “hundreds” participated. Even if 1,000 took part, that’s still less than 1/10 of 1% of Walmart’s 1.4 million associates.

If you can’t find 50 disgruntled employees in an organization of 1.4 million, well, you’re a refugee from the real world.

But look at that last number.  1.4 million people have jobs because of Wal-Mart.  Then there’s the downstream effect – suppliers, etc.  My guess is you’re looking at an organization responsible or at least partially responsible for 3 to 5 million jobs in this country.

And yet it is under attack.

Now, there were protests at Wal-Mart stores.  But what should be clear is they weren’t protests by Wal-Mart’s vast majority of associates.

The “organization” which organized this flop,  “OUR Wal-Mart”,  is calling it a clear success.  I mean what else would they call it?  The fact that it only drew 50 employees in protest (50 who I assume are now ex-employees) seems to have been waived away for the fact that there were some protests.

Woo – hoo.

So who were the protesters?  You’ll enjoy this:

Seems strange then that, according to organizer OUR Walmart’s website, the group speaks for actual Walmart employees. In the “About Us” sectionof its website, this not-for-profit describes its mission as follows: “We envision a future in which our company treats us, the Associates of Walmart, with respect and dignity. We envision a world where we succeed in our careers, our company succeeds in business, our customers…” (Italics mine.)

OUR Walmart was listed as a subsidiary of the United Food and Commercial Workers Union (UFCWU) in a 2011 Department of Labor filing. While the union disputes that the two organizations are one and the same, one thing is certain: The organizers of today’s protest represent not Walmart employees, but employees of grocery stores that compete with Walmart.

Oh, I’m shocked, shocked I tell you.  Members from a union that represents the workers of stores that compete with Wal-Mart?  Ah, of course – OUR Wal-Mart.

[W]hile the anti-Walmart movement claims to be about helping Walmart employees get better health care, improved working conditions, higher pay–not to mention preventing our children from the temptation of petty thieveryit’s really primarily about stopping the threat of cheap groceries–the same ones that go a long way towards helping cash-strapped Americans put food on the table.

Emphasis mine … and the reason, as mentioned yesterday, is this model works.  It appears, at least superficially, that all but 50 Wal-Mart employees agree.  Given the consumer reaction to the protests (uh, nil, nada, zip – didn’t slow down sales a bit), it’s rather hard to understand how any sane person could call the protests a success.  But then no one said those who put together OUR Wal-Mart are sane, did they?

Not surprisingly, a union’s hand is found in a movement deceitfully claiming something that isn’t true and trying to cause problems for a company that employs a huge number of Americans and is responsible, at least partially, for the jobs of a huge number more.

And, watching these shenanigans, you can’t help but believe that unions are desperate – very desperate.  Here’s a company which is offering the same products as their union stores offer at significant discounts and that’s an obvious threat to their continued employment.  So they think nothing of starting a “movement” that is union backed and likely union financed to undermine that company by enticing workers, who apparently aren’t at all as disgruntled or as upset as this group has claimed, into a job action that’s guaranteed to be against their best interests and that would likely get them fired.

50 heeded the siren song and are likely now trying to figure out how to claim unemployment compensation.

And, they have the UFCWU and their apparent inability to think critically to thank for their folly.

Hey, maybe they can go apply at the union stores.  I’m sure they’re hiring, huh?  I’m equally sure they’re more than eager to hire someone who walked off their last job.

~McQ

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Hey consumers, it’s your fault if Wal-Mart strikes

Jordan Weissmann has a piece in The Atlantic entitled “Who’s Really to Blame for the Wal-Mart Strikes? The American Consumer.”

Balderdash.

While I will admit that the demands of the American consumer being partly responsible for the wage scale paid by Wal-Mart, I frankly see no consumer liability in that responsibility.  Wal-Mart saw a need, constructed a model and has successfully fulfilled that demand.   And last I checked, no one has twisted anyone’s arm or marched them into Wal-Mart and made them take a job.

The American consumer’s role?  It is like us saying “you can have open borders or you can have a welfare state, but you can’t have both”. You can demand the lowest prices or you can demand “mom and pop” be saved and pay their workers more (but then you have to commit to voluntarily doing business and paying higher prices) but you can’t have both.

Weissmann is essentially claiming that the consumer is to blame for impending strikes by demanding lower prices. Lower prices mean lower pay and because Wal-Mart isn’t paying a “living wage”, it’s employees are striking. Again it’s a part of the left’s disingenuous”fairness” argument.

But by now, that low-price, low-wage model has become the industry standard among discount retailers, or at least close to it. The median retail worker earns $14.42 an hour, but at big box chains, the pay is significantly lower (the notable exception being Costco, which commendably pays its employees a living wage). Walmart, for instance, says it pays full time sales associates $11.75 an hour on average. But independent analysis peg the figure much lower, closer to $9. According to IBISWorld, that puts it a bit behind companies like Home Depot and Lowes, but ahead of its nearest competitor, Target, which has managed to put a more fashionable face on the same abysmal pay for its workers.

First a “living wage” is different for different people. If husband and wife are both working, the one working at Wal-Mart may be supplementing the higher wage of the other spouse. Who is to say what the Wal-Mart employee earns isn’t sufficient to live quite well on?  If it is a teenager living at home, what’s a “living wage” to him or her?  What, in fact, the Weissmann’s of the world are claiming is that any wage paid to anyone should be sufficient to “live on” based on whatever arbitrary standard they choose to apply.  My reaction?  None of your business – everyone goes to work and accepts the wages they do for their particular reasons.  If they aren’t satisfied, then they can leave.

That brings us to point two, if you don’t like the pay at Wal-Mart, seek a job at another employer. I doubt that most “big box” companies look at their employees as permanent. Wal-Mart and others are, for many, a stop on the way (for experience) to higher paying jobs. If it’s not, if it is all someone is qualified to do, then that’s their problem, not Wal-Mart’s and not the shopping public’s.  My suggestion is to seek out further training or schooling elsewhere.  But it isn’t the job of the public to subsidize your wages just because you think you’re worth more than you really are.

Wal-Mart doesn’t exist to pay a “living wage”, whatever that is. It exists to serve it’s customers and turn a profit. It is that profit that allows them to provide what is demanded by their customers and to pay their employees. If  wages are too low, workers will likely look to an alternative for employment. Yet, somehow, Wal-Mart remains fairly consistently fully staffed.

Like it or not (and the complainers usually don’t) that’s the model. It works. It provides consumers what they demand.

But that’s not what the fair police want, you see. And that’s where you see this sort of an argument:

There are many reasons why pay in retail is often paltry. Among them, it’s a low-skill industry with high turnover and a lot young workers. But the sector’s utter lack of of union presence certainly plays role. And for that, we can thank both Wal-Mart and Washington. From its earliest days, Wal-Mart has taken fiercely antagonistic stance towards organized labor, keeping its stores union free by using every ounce of leverage Congress has given employers — so much so that, in 2007, Human Rights Watch called the company “‘a case study in what is wrong with U.S. labor laws.”

In essence what Weissmann is arguing is workers should be paid more than their worth in a competitive labor market  (low-skilled young workers with little experience).  It’s a matter of “social justice” – that nebulous term used to justify intrusion into markets because they “care” (with your money, usually).  And their go-to vehicle for achieving this “social justice” and upsetting a business model that favors the consumer is the union.  Other than grow fat and demanding, that’s what unions are there to do.

See Hostess and GM for how that usually ends up.

But to his point, there’s a reason Wal-Mart is “fiercely antagonistic” toward unions. That’s because unions would wreck the model they’ve so painstakingly put together over the years, the one which their customers demand. Customers don’t show up there because they love Wal-Mart.  They show up because they get more for their hard earned money.

Unionize, demand wage and pension increases and all the other concessions that put GM in the poor house and Hostess out of business and you’ll find one thing to be true – Wal-Mart’s customers will go to Target.  Or Kohls or some other “big box” retailer.

But they’re not going to pay higher prices.  They like the model.  It works for them and their situation.  And they will seek out the next best alternative when and if they see prices go up at Wal-Mart.

So, perhaps it is time for those like Weissmann to figure out what Wal-Mart is – it is a store that offers deep discounts on thousands of items that its customers demand.  Oh, and by the way, it also has employees who are paid according to that customer driven model.   The  workers have choices, if they’ve prepared themselves – work at Wal-Mart to gain experience and move on, or go do something else.  For those who haven’t prepared themselves for anything else, it isn’t the customer’s job to subsidize their wages just because they believe they should get more even if they haven’t earned it.

But for those who can’t let this go, I have an idea.  Each and every Wal-Mart store ought to establish at least one check-out line which is for those who want to pay the highest retail price found for the items they’re going to purchase.  Wal-Mart could research that, have the cash register price the items according to that research and at the end the Wal-Mart associate could say to the person, “and you over-paid by $53.00, have a nice day.”

Wal-Mart would then promise to take the difference between their prices and the premium prices and apply it to the pay of all Wal-Mart associates.

How’s that for fair?  And people in that line wouldn’t have to feel like hypocrites when they diss Wal-Mart for it’s presumably low pay while they continue to buy at the store.

Of course, that particular line would likely to look like something out of a Halloween display, all covered in cob-webs and the like.

~McQ

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Egypt’s Morsi grants himself new powers – So much for Arab Spring

It’s a bit of “meet the new boss, same as the old boss” but with an Islamist slant:

Egypt’s president on Thursday issued constitutional amendments that placed him above judicial oversight and ordered the retrial of Hosni Mubarak for the killing of protesters in last year’s uprising.

Mohammed Morsi also decreed immunity for the Islamist-dominated panel drafting a new constitution from any possible court decisions to dissolve it, a threat that had been hanging over the controversial assembly.

Liberal and Christian members withdrew from the assembly during the past week to protest what they say is the hijacking of the process by Morsi’s allies, who they saw are trying to push through a document that will have an Islamist slant marginalizing women and minority Christians and infringing on personal liberties. Several courts have been looking into cases demanding the dissolution of the panel.

The Egyptian leader also decreed that all decisions he has made since taking office in June and until a new constitution is adopted and a new parliament is elected — which is not expected before next spring — are not subject to appeal in court or by any other authority. He also barred any court from dissolving the Islamist-led upper house of parliament, a largely toothless body that has also faced court cases.

In essence he has declared himself (by issuing his own handy “constitutional amendments”) supreme and above the law.

I’m not sure why anyone is particularly surprised.  He promised no one from the Muslim Brotherhood would run for president and then ran for president.  He claimed that they’d do the will of the people and now he’s actively making women and religious minorities into 2nd class citizens.  And his government will have a pronounced Islamic theocratic slant all written into law.

He also supports the terrorists in Gaza.

Yup, that “Arab Spring” thing is just working out about as well as one could hope, huh?

Forward.

~McQ

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Union chooses to try to ruin holiday for travelers at LAX

Of course we’re talking about a government union, the SEIU, which plans today, from 11am to 4pm (PST), to put 1,000 protesters on Century Blvd. near LAX to, one assumes, “persuade” harried and pissed off travelers that the SEIU’s cause is just.

Or something.

So to do that they choose peak time on the busiest travel day of the year to protest a company that decertified them by claiming that safety at the airport has been compromised (because, you know, only union companies have the inside on “safety”), that the company isn’t paying a “living wage” (according to other new reports, the employees of this particular company have gotten wage increases since decertification) and that the employees are being denied health care coverage (the same news reports claim these employees now have a number of health care insurance choices).

Or to put it another way, this is a fairly typical propaganda driven and thuggish union tantrum and they’re planning on screwing over travelers to make whatever point they are trying to make.

Which brings us to a graphic I found interesting.  Now granted, in the case of the graphic we’re talking about private unions.  But it still make a powerful statement about unions overall:

Of course, given the demise of Hostess, I’d guess that last number is just a touch higher.

So, if you were looking at this graphic and considering what the SEIU planned for today given the fact that it is likely to cause some people to miss flights etc., what would your overall impression of unions be?  And how relevant would you consider them in the 21st century?

~McQ

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Economic Statistics for 21 Nov 12

The following US economic statistics were announced today:

Initial claims for unemployment fell 41,000 last week, to 410,000. The 4-week moving average rose to 396,250. Continuing claims fell 30,000 to 3.337 million. The huge swings of the past couple of weeks are clearly related to Hurricane Sandy, so getting any handle on the fundamentals of the labor market are impossible with the current weekly volatility.

The MBA reports that mortgage applications fell –2.2% last week, with purchases up 3.0% and refinancings –3.0%. Despite an overall decline in applications, purchase applications are trending up, which is a positive trend for the health of the housing market.

The Bloomberg Consumer Comfort Index fell –0.8 points to –33.9.

The Reuter’s/University of Michigan’s consumer sentiment index fell more than 2 points to 82.7.

The Conference Board’s index of leading economic indicators rose 0.2% in October.

The Markit Economics PMI Manufacturing Index Flash rose more than a point to 52.4 for the mid-month flash. Anything over 50 generally indicates economic growth.

~
Dale Franks
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