Category Archives: economics

Say no to the dress

A popular reality TV show follows the struggles of young brides-to-be shopping for a wedding dress at a famous store, Kleinfeld’s. They’ve come to believe that this charming adornment will make their dream-wedding really perfect. There is some sort of idea that the perfect wedding is necessary (or desirable) to get you started on a perfect life. This is stated in various ways throughout the show with phrases like: “you deserve to be the princess,” or “you deserve your special day.”

Each woman brings a retinue to help her pick the gown, and to help advise her about what dress has the most pop, or looks best on her, or makes her look the most special. Often it’s someone in this retinue that will pay for the dress too, a father, uncle, or a close family member. The store caters to the retinue at lest at the beginning to get a commitment to the price, generally $5,000 to $10,000, but sometimes to “no limit on the price.” It then provides a dazzling variety of dresses and an old hand or two to guide the young lady to the right one. At first, the retinue chimes in, but eventually the retinue is detached, and the bride is made to embrace that it’s her special day, alone. Then, when the perfect dress is finally chosen (often at the high-end of the budget), the bride is asked: “are you ready to say yes to the dress?” She does, with tears, and everyone claps, especially the retinue. Often, there is a final shot of the beautiful bride at the beautiful wedding. It’s touching, but perhaps unnecessary. So here’s an alternate  thought: just say “no”. No to the expensive dress; no to the expensive cake (sorry, cake boss) and no to the fancy, big diamond. instead, throw a big fun wedding on the cheap, perhaps at a park in a rented gown; friends will get you through life, the big dress and big cake will not.

An expensive wedding didn’t keep John Kennedy faithful, nor did it help cement Elizabeth Taylors 7 husbands (two to Richard Burton). Just the opposite: a recent study on marriage stability showed that the higher priced the wedding, the more likely it is to end in divorce.

Marriage stability goes down as the wedding costs go up.

Marriage stability goes down as the wedding costs go up. If you dress costs $5,000, your wedding is unlikely to come in at less than $10k. From Francis and Mialon, “A diamond is forever and other Fairy Tales,” 2014. The average cost of a US wedding: $30,000.

The point of the wedding is to have a long, happy marriage, not a one day party, and expensive weddings appear to be counter-productive to stability. Things are worse for those who enter poor, backing up the observation that money stresses are among the main causes of marriage failure. This is not to say that you should not have a wedding party, but that spending should be watched especially if the couple isn’t that extraordinarily rich. The average, employed US 20-something earns about $26,000/year before taxes. That’s not bad money until you realize that the average US wedding costs over $30,000 not including dress, ring and honeymoon. There is a far lower chance of divorce for the couple with the $5-$10k wedding, and even lower if the couple can keep expenses in the 0-$5k range.

Give her a diamond ring, but the ideal cost is between $100 and $2000 (unless you're super rich)

Give her a ring, but the ideal cost is between $200 and $2000 unless you’re super rich.

Statistics suggest that spending on the diamond doesn’t help either, unless it’s a very expensive stone — and that, perhaps, is because the very expensive stone is only bought by the very rich groom. Still, even for the 1% who can afford it, the dress or stone should be considered a sunk cost, not an investment. You’ll never be able to resell that dress at all, and though you can resell a diamond it is virtually impossible to get even half your money back. This isn’t to say that you should not give a ring — without a ring the bride will feel cheated, but most grooms will be better served giving one in the $100-$2000 range.

It seems that having lots of people at the wedding is perhaps the single best thing you can do for marriage stability. On the other hand, this graph might show that the sort of person who has 200 good friends is the sort of person to remain happily married.

Having lots of people at the wedding is perhaps the single best thing you can do for marriage stability. On the other hand, this graph might show that the sort of person who has 200 good friends is the sort of person to remain happily married. ibid.

While your wedding should be cheap, or at least affordable, it should not be small. It turns out that having lots of friends and family in attendance correlates strongly with having a long, stable marriage. I’m not sure if this is entirely cause and effect: perhaps those with lots of friends and family are giving and stable than those without. Still, it strikes me that friendships are good for every couple, and very worth maintaining. These are people who will be there for advice, or just be there when things get rocky. Give them a good party, and don’t drive them away by sending a message that a large gift is expected. If you get married on the cheap, it’s likely your guests will feel more comfortable showing up in business clothes with simple affordable gifts. Most bridesmaids are happier if they don’t have to buy a big expensive dress.

Honeymoons help malaise stability too.

Honeymoons help marriage stability too. ibid.

Robert E. Buxbaum, July 12, 2015. My 3 children are all entering marriageable age — and PhD age (I wrote a post comparing a wedding to a PhD.) The above are my thoughts before being hornswoggled into buying $5,000 worth of taffeta. They are also suggestive of the sort of work to get a PhD. Another good spending investment, I think, is to go on a honeymoon. I didn’t, and though we didn’t get divorced, in retrospect it seems like a good idea. I plan to finally go on a honeymoon for our 25th anniversary. Let’s toast (with Geritol) to finding the right mate. Good luck.

The mystery of American productivity

Americans are among the richest and best paid people in the world. On a yearly basis, Americans produce and earn about 20% more than Britons and about 30% more than Japanese. On an hourly basis, counter to what you might expect, American workers produce about 30% more than Britons or Canadians, and about 50% more than the vaunted Japanese.

Per hour worker productivity, from the Economist.  We do OK for backward hicks.

Per hour worker productivity, from the Economist. We do OK for backward hicks.

French and German workers produce about as much as we do, per hour, but tend to work fewer hours. Still, the differences are not quite what you might expect. French workers take many more hours off than we do and are still so much more productive than the British that it appears they could take an extra month off and still beat them in yearly output. Japanese workers meanwhile produce only as much as the French, per year, but take far more hours to do it. One thought is that it’s all the vacation time that makes French so productive and it’s perhaps the lack of vacations that causes the Japanese to be relatively unproductive.

Not that vacation time alone explains our high productivity, nor that of the Germans or Italians relative to the Canadians and Britons. One part of an answer, I suspect, is that we put fewer roadblocks to workers becoming business owners, and to running things their own way. Another thought is that US and Germany have a low minimum wage, comparatively, and Italy has no minimum wage at all; Germany had no minimum wage in 2013, the time of the productivity comparison. In countries like this, there is a larger profit to be had by clever individuals who work hard, think, and start their own businesses. With minimal requirement on how much to pay, the business owner can bring to bear a mix of low-wage, minimally productive workers with labor-saving innovation, allowing them to become rich while decreasing unemployment. It also allows them to serve otherwise under-served parts of the market and profit from it. And profit is a powerful motivator. As Friedrich Nietzsche said, “a why beats a how.” 

The nine European countries with no minimum wage are among the richest on the continent, and among those with the lowest unemployment: Iceland, Lichtenstein, Norway, Sweden, Finland, Denmark, Austria, Italy, and Switzerland. By contrast, England, Canada, and Japan have relative high minimum wages and relatively high unemployment. There are also some poor countries with no minimum wage (Egypt, Zimbabwe, Rwanda…) but these countries suffer from other issues, like rampant crime. I’ve argued that the high “Living Wage” in Detroit is a major cause of Detroit’s high unemployment and bankruptcy. If low minimum wage is a major source of American worker productivity and wealth, it would be a real mistake to raise it.

Worker productivity is the best single predictor of long-term national success. As such, the long-term prediction for Britain, Canada, and Japan is not good. Unless something changes in these countries, we may expect to see them off to a long, dark tea-time of declining significance. Perhaps, it is a fear of this that was behind the resounding defeat of the Labour party in British elections last week. The Labour government oversaw England’s last big drop in productivity.

R.E. Buxbaum, May 28, 2015. It’s also possible (unlikely) that US universities are really good, or at least not as bad as thought. We don’t seem to quite beat the enthusiasm out of our students, though we do drug them quite a lot. Here’s a Forbes article on minimum wage.

Detroit emerges from bankruptcy. Not quite.

missing homes Detroit

While Detroit’s central core comes back, surrounding, homes burn at 220+/month, leave Detroit streets looking like the teeth of an aging hillbilly.

Detroit went bankrupt last year, the largest US city to do so since New York in 1970. As with New York’s bankruptcy, Detroit’s was used to cancel old debts and rewrite ill-thought contracts. Detroit also got to jail some crooked politicians including mayor Kilpatrick, described as “a walking crime wave.” But the city and county have no easy path out of bankruptcy as both city and county are likely insolvent. That is, they spend more than they take in despite massive out-state funding, and high taxes, 10% above the state level. To make matters worse, they are losing population at the rate of 1% or so per year. It’s hard to fund a city built for 2 million on the tax revenue of 1/3 as many, especially when they are mostly unemployed. Unless a lot changes soon, another bankruptcy is almost inevitable — likely this time at the county level.

We got in this state, largely as a result of a 50 year war between the black, solidly Democrat, somewhat anarchist, political establishment of Detroit, and the white, stayed, mostly Republican out state. The white population fled following the riots of the 60s and the richer black population soon followed. The remainder stayed, trapped in slowly decaying neighborhoods as the city went broke. White flight allowed the black community to develop its own, Motown culture, but except for the music industry, it has not benefitted from this culture.

Detroit's murder rate, 45/100,000, is the highest in the US. It's coming down but not that fast.

Detroit’s murder rate is the highest in the US. It’s come down 10% in the last 2 years, but has far to go.

Detroiters have poor health, poor savings rates, high murder rates, and a fire rate of about .22% per month, 2.6% per year. The city lacks basic city services like reliable fire fighting and street plowing. Police at one point erected signs that said, “enter at your own risk.” There is a lack of small businesses and the services they would provide too: laundromats, grocery stores, and taxis (though no lack of bars and marijuana maintenance clinics). Employment in the auto-industry is down. And it’s not being replaced by home-grown small business – perhaps hampered by the low savings rate. A surprisingly large fraction of the Detroit homes are in foreclosure, see map, and with it a high abandonment rate and a high fire rate. As pheasant and dear return, non-core Detroit is beginning to look like farm country.

Detroit foreclosures near me. Blue is occupied homes, red is unoccupied, yellow unknown, and green is destroyed homes or vacant, foreclosed land.

Detroit foreclosures near me. Homes in dark blue are occupied foreclosed, red is unoccupied, and green plots are destroyed homes or vacant, foreclosed land.

It’s not clear what political leaders should do. The city council would like to return to their pre-bankruptcy ways where they could borrow as much as they felt they needed and spend on whatever they saw fit — often on fast friends, fast cars, gambling, and vacation homes outside of the city. But the out-state population has been reluctant to give them the credit card. Is this racist or is it prudent — probably both, but this can not continue. The city and county pension funds were ransacked for ill-advised investments and consulting fees to cronies and their power-lawyers. Either the money is replaced from out-state or there will be some unhappy retirees in the not-too-distant future. My guess is that the state will have to pick up the tab for this mismanagement, but that they won’t want to hand over management control afterwards.

Rand Paul, a potential GOP presidential candidate, has proposed rebuilding business and property values by a method that the city will almost certainly reject. His solution: cut services to low-population density areas and cut taxes on business and earned income. While this would likely bring in new people and new businesses, the people would likely be white, and the businesses white-owned/ white-serving. Black-Detroiters have too little savings, organization and income to directly benefit from this plan. Detroit’s Democrat politicians will claim, not without merit, that this is welfare for rich whites: a way for them to become yet-richer while doing nothing for the poor blacks of the burning neighborhoods. They are likely to demand control as the elected officials of the town: regulating business and raising the minimum wage to create “equality.” I suspect this is a bad idea.

Detroit hunger games

Detroit suffers from two populations and a divide.

To some extent we’re already seeing the return of white-owned, white-serving businesses. Classic buildings in the core of the city have been purchased by white developers – notably Dan Gilbert of Quicken Loans leading to gentrification and an influx of single, white hipsters. The newcomers are viewed as half-saviors, half-carpetbaggers. They dwell in a whiter city core with hipster bars and expensive restaurants. Does a poor city with massive debt, crime, and unemployment benefit from a core filled with high-priced, gourmet coffee and fern bars?

The author, Robert Buxbaum, enjoys a day at an artificial beach in central Detroit.

The author, Robert Buxbaum, enjoys a beer at an artificial beach-cafe in central Detroit with some, few black folks, none poor. Is this good for Detroit?

The new hipsters put a squeeze on city services too — one that’s hard to deal with fairly. Detroit can not afford to plow all the streets after a snow. Should the new high-tax white folks get plowed streets, or should they suffer equally with everyone else? Detroit education is abysmal, but the high tax-bracket folks want better. Should they get it, or suffer equally? They want extra street lights and police protection. Should they get it, or suffer equally? Is this the way up?  A solution I’d proposed some while ago was to divide the core city from the now-rural outskirts so that each could be managed more sanely. It’s not a grand a solution like Rand’s plan, but less likely to be rejected. One way or another, we seem destined to have a Detroit with a rich core and abandoned neighborhoods. I suspect it might as well be managed that way.

Robert E. Buxbaum, February 10, 2015. I don’t have solutions, but write about the city’s problems, and the partial solutions I’ve heard as a way to clarify my thinking — and perhaps yours too.

Is college worth no cost?

While a college degree gives most graduates a salary benefit over high school graduates, a study by the Bureau of Labor statistics indicates that the benefits disappear if you graduate in the bottom 25% of your class. Worse yet, if you don’t graduate at all you can end up losing salary money, especially if you go into low-paying fields like child development or physical sciences.

Salary benefits of a college degree are largely absent if you graduate in the bottom 25% of your class.

The average college graduate earns significantly more than a high school grad, but not if you attend a pricy school, or graduate in the bottom 1/4 of your class, or have the wrong major.

Most people realize there is a great earnings difference depending on your field of study with graduates in engineering and medicine doing fairly well financially and even top graduates in child development or athletic sciences barely able to justify the college and opportunity costs (worse if they go to an expensive college), but what isn’t always realized is that not all those who enter these fields graduate. For them there is a steep loss when the four (or more) years of lost income are considered.

risk premium in wages

If you don’t graduate or get only an AA or 2 year degree the increase in wages is minimal, and you lose time working and whatever your costs of education. The loss is particularly high if you study social science fields at an expensive college, and don’t graduate, or if you graduate in the bottom of your class.

A report from the New York Federal Reserve finds that the highest pay major is petroleum engineering, mid-career salary $176,300/yr, and the bottom is child development, mid-career salary $36,400/yr (click to check on your major). I’m not sure most students or advisors are aware of the steep salary difference, or that college can have a salary down-side if one picks the wrong major, or does not complete the degree. In terms of earnings, you might be better off avoiding even a free college degree in these areas unless you’re fairly sure you’ll complete the degree, or you really want to work in these fields.

Top earning majors Fed Reserve and Majors that pay you back.

Top earning majors: Majors that pay.

Of course college can provide more than money: knowledge, for instance, and learning: the ability to reason better. But these benefits are likely lost if you don’t work at it, or don’t go in a field you love. They can also come to those who study hard in self-taught reading. In either case, it is the work habits that will make you grow as a person, and leave you more employable. Tough colleges add a lot by exposure to new people and new ways of thinking about great books, and by forced experience in writing essays — but these benefits too are work-dependent and college dependent. If you work hard understanding a great book it will show. If you didn’t work at it, or only exposed yourself to easier fare, that too will show.

As students don’t like criticism, and as good criticism is hard to give — and harder to give well, many less-demanding colleges ,give little or no critical feedback, especially for disadvantaged students. This disadvantages them even more as criticism is an important part of learning. If all you get is a positive experience, a nice campus, and a dramatic graduation, this is not learning. Nor is it necessarily worth 4-5 years of your life.

As a comic take on the high time-cost of a liberal arts education, “Father” Guido Sarduchi, of Saturday Night LIve, describes his “5 minute college experience.” To a surprising extent, it provides everything you’ll remember of 4 year college experience in 5 minutes, including math, history, political science, and language (Spanish).For those who are not sure they will complete a liberal arts education, Father Sarduchi’s 5 minutes may be a better investment than a free 4 years in community college.

Robert. E. Buxbaum. January 21-22, 2015. My sense is that the better part of education is what you get when you don’t get what you want.

Of Scrooge and rising wheat production

The Christmas Carol tells a tale that, for all the magic and fantasy, presents as true an economic picture of a man and his times as any in real-life history. Scrooge is a miserable character at the beginning of the tale, he lives alone in a dark house, without a wife or children, disliked by those around him. Scrooge has an office with a single employee (Bob Cratchit) in a tank-like office heated by a single lump of coal. He doesn’t associate much with friends or family, and one senses that he has few customers. He is poor by any life measure, and is likely poor relative to other bankers. At the end, through giving, he finds he enjoys life, is liked more, and (one has the sense) he may even get more business, and more money.

Scrooge (as best I can read him) believes in Malthus’s economic error of zero-sum wealth: That there is a limited amount of food, clothing, jobs, etc. and therefore Scrooge uses only the minimum, employs only the minimum, and spends only the minimum. Having more people would only mean more mouths to feed. As Scrooge says, “I can’t afford to make idle people merry. I help to support the establishments I have mentioned [the workhouses]. They cost enough, and … If they [the poor] would rather die,” said Scrooge, “they had better do it, and decrease the surplus population.”

Scrooge, the poor rich man.

Scrooge, the poor rich man with a tiny carbon footprint.

The teaching of the spirits is the opposite, and neither that of the Democrats or Republicans. Neither that a big government is needed to redistribute the wealth, nor that the free market will do everything. But, as I read it, the spirits bring a spiritual message of personal charity and happiness. That one enriches ones-self when one give of and by ones-self — just from the desire to be good and do good. The spirit of Christmas Present assures Scrooge that no famine will result from the excess population, but tells him of his 1800 brothers and shows him the unending cornucopia of food in the marketplace: spanish onions, oranges, fat chestnuts, grapes, and squab. Christmas future then shows him his funeral, and Tim’s: the dismal end of all men, rich and not:  “Will you decide what men shall live, what men shall die? It may be, that in the sight of Heaven, you are more worthless and less fit to live.” And Scrooge reforms, learns: gives a smile and a laugh, and employs a young runner to get Cratchit a fat goose. He visits his nephew Fred, a cheerful businessman for dinner, and laughs while watching Tom Topper court Fred’s plump sister-in-law.

The spirits do not redistribute Scrooge’s wealth for him, and certainly don’t present a formula for how much to give whom. Instead they present a picture of the value of joy and societal fellowship (as I read it). The spirits help Scrooge out of his mental rut so he’s sees worthy endeavors everywhere. Both hoarding and redistribution are Malthusian-Scroogian messages, as I read them. Both are based on the idea that there is only so much that the world can provide.

World wheet production

World wheat production tripled from 1960 to 2012 (faostat.fao.org), but acreage remained constant. More and more wheat from the same number of acres.

The history of food production suggests the spirits are right. The population is now three times what it was in Dickens’s day and mass starvation is not here. Instead we live among an “apoplectic opulence” of food. In a sense these are the product of new fertilizers, new tractors, and GMOs (Genetically modified organisms), but I would say it’s more the influence of better people. Plus, perhaps some extra CO2 in the air. Britons now complain about being too fat — and blame free markets for making them so. Over the last 50 years, wheat production has tripled, while the world population doubled, and the production of delicacies, like meat has expanded even faster. Unexpectedly, one sees that the opulence does not come from bringing new fields on-line — a process that would have to stop — but instead from increased production by the same tilled acres.

The opulence is not uniformly distributed, I should note. Countries that believe in Malthus and resort to hoarding or redistribution have been rewarded to see their grim prophesies fulfilled, as was Scrooge. Under Stalin, The Soviet Union redistributed grain from the unworthy farmer to the worth factory worker. The result was famine and Stalin felt vindicated by it. Even after Stalin, production never really grew under Soviet oversight, but remained at 75 Mtons/year from 1960 until the soviet collapse in 1990. Tellingly, nearly half of Soviet production was from the 3% of land under private cultivation. An unintended benefit: it appears the lack of Soviet grain was a major motivation for détente.  England had famine problems too when they enacted Malthusian “corn acts” and when they prevented worker migration Irish ownership during the potato famine. They saw starvation again under Attlee’s managed redistribution. In the US, it’s possible that behaviors like FDR scattering the bonus army may have helped prolong the depression. My sense is that the modern-day Scrooges are those against immigration “the foreigners will take our jobs,” and those who oppose paying folks on time, or nuclear and coal for fear that we will warm the planet. Their vision of America-yet-to-be matches Scrooge’s: a one-man work-force in a tank office heated by a single piece of coal.

Now I must admit that I have no simple formula for the correct charity standard. How does a nation provide enough, but not so much that it removes motivation– and the joy of success. Perhaps all I can say is that there is a best path between hoarding and false generosity. Those pushing the extremes are not helping, but creating a Dickensian world of sadness and gloom. Rejoice with me then, and with the reformed Scrooge. God bless us all, each and every one.

Robert Buxbaum, January 7, 2015. Some ideas here from Jerry Bowyer in last year’s Forbes.

von NotHaus, the terrorist who uttered money.

Bernard von NotHaus was sentenced two days ago, December 3, 2014 in Federal court, North Carolina on charges of terrorism for the crime of making token coinage. This crime is called uttering money in English common law, but it is not generally considered terrorism, or generally prosecuted at all in modern times. The sentencing was covered by only one newspaper, The New York Sun. The New York Times and others, I guess, found it wasn’t news fit to print. But I find it newsworthy enough to blog about.

The current price of silver (as I write) is $16.60 per ounce. Had Bernard von NotHaus limited himself to selling ordinary, one ounce, silver medallions for $20 each, he could have made money on each, and perhaps been awarded a medal for his artistry. Instead, von NotHaus stands convicted as a terrorist against the US economy. The problem: his $20 medallions include the symbol “$20” and the word “dollar” on the coins. The government’s claim is that people might come to use his silver medallions to buy $20 worth of products, and this, it was argued, could bring down the government. Also incendiary was the phrase “Trust in God.” The federal prosecutor argued this was too close to our government’s, “In God we Trust.”

A liberty dollar. The crime is terrorism by uttering money -- saying that this coin should be used as $20 currency.

A liberty $20 piece The crime is terrorism, undermining the US by suggesting people use this coin as currency.

Von NotHaus was arrested on June 6, 2009, and had his coins and metal confiscated. He was convicted of terrorism March, 2011. Among the evidence are gold coins with the image of Ron Paul and certificates with von NotHaus’s image marked as 1 Dollar negotiable currency. Making these items isn’t quite counterfeiting, as the coins and certificates don’t look like US currency, but the US government decided it’s worse: economic terrorism. Anne Tompkins, the federal prosecutor successfully argued that von NotHaus is suggesting that the currency of the US is somehow deficient, and perhaps that the president and his crowd are doing something wrong in their efforts to drive inflation by printing excess currency. Ms. Tompkins successfully argued that such “attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism” and that they “represent a clear and present danger to the economic stability of this country.” I’d say that’s over-reacting.

The Liberty Dollar. It's not counterfeiting, but the crime of terrorism by uttering money. Printing certificates with the intent of having them used as currency.

The Liberty Dollar. It’s not counterfeiting, but terrorism. 20 of these can be exchanged for a silver coin. US currency is non-negotiable; you have no right to change

The mechanism whereby these items are supposed to undermine the economic stability is the reverse of Gresham’s law. Gresham’s law is that the worse currency will stay in circulation and the better will be driven out. Applied here, Gresham would predict that people will hoard these liberty dollars and will spend only the paper. That’s what happens with ordinary art, or gold bars. But our government’s terrorism argument assumes Gresham’s theories are wrong, and that people will hoard Obama’s paper while spending von NotHaus’s coins. On that chance, Mr. von NotHaus stands convicted of terrorism. Mr. von NotHaus’s defense is that he never claimed his medallions should be used as currency. The judge rejected this defense. For all I know, Ms Tompkins could now pursue Von NotHaus for sedition: suggesting there is something wrong with the way we pursue minters.

The Ron Paul $1000, weapon of mass destruction.

The Ron Paul, $1000 weapon of national destruction.

At sentencing yesterday, Judge Voorhees ignored rules that should have condemned von NotHause to life in prison. Instead, he ruled for 6 month’s house arrest and 3 years probation saying he didn’t believe von NotHaus was motivated by evil intent, but rather by philosophical speech (something partially protected by the first amendment). I’m always glad for lenient sentencing, especially when the argument involves freedom of speech. I’m also glad for philosophy, but that does not mean I’m happy about the outcome. To me, von NotHaus deserves a medal; he is the Rosa Parks of hard currency. And I think that’s fit to print.

Part of the reason this conviction bugs me is that I got a free education courtesy of Peter Cooper, the citizen industrialist of the 19th century who founded the greenback party. He published (uttered) $3 bread notes to advertise his cause. Robert Buxbaum is a good US citizen, who uses only non-negotiable, fiat currency; none of this negotiable stuff for me. December 5, 2014.

Political tensegrity: the west is best

We are regularly lectured about the lack of kindness and humility of the western countries. Eastern and communist leaders in Russia, Iran, Saudi Arabia point to Western pollution, consumerism, unemployment as prof you need a strong leader and central control to do good by regulation, thought policing, and wealth redistribution.

Let me point out that the good these leaders provide is extracted from the populace, and the advantage of central control is rarely as clear to the populous as to the leadership. When leaders redistribute wealth or place limits on the internet, movies or books, the leaders are generally exempted, and the populous are not made more moral or generous either. One does not say a prisoner or slave-worker is more generous of moral than one on the outside despite the prisoner working for free. The leaders feel certain they are protecting their people from thought and greed, but it isn’t clear outside of the leadership that these dangers are as great as the danger of despotism or rule by whim.

Authors and thoughts are blocked in the East by the whim of a supreme leader who also determines who is an infidel or enemy, or friend, and which businesses should flourish, and who should be rich (his buddies). By contrast, two fundamentals of western society — things that lead to purported immorality, are citizen rights and the rule of law: that citizens can possess things and do things for their own reasons, or no reason at all, and that citizens may stand as equals before a bar of law, to be judged by spelled-out laws or freed, with equal believability and claim.

In Russia or Iran, the Commissar and Imam have special rights: they can take possessions from others at whim, shut down businesses at whim; imprison at whim  — all based on their own interpretation of God’s will, the Koran, or “the good of the state.” Only they can sense the true good, or the true God well enough to make these decisions and laws. And when they violate those laws they are protected from the consequences; the masses can be prosecuted to the full extent of the law, and then some, not even requiring a trial in many places (Gaza, for example) if the leader feels speed is needed. The rule of law with equal treatment is a fundamental of western civilization (republicanism). It is commanded by Moses in the Bible at least seven times: Numbers 15:15, Numbers 15:16, Numbers 15:29, Exodus 12:49, Numbers 9:14, and Leviticus 24:22, “One law and one ordinance you should have, for the home-born, and the foreigner who dwells among you.”

The equal treatment under the law: for rich and poor, king and commoner, citizen and foreigner is a revolutionary idea of the west; that justice is blind. Another idea is personal possessions and freedoms. There is no concept of equality under business law unless there is a business that you can own, and personal possessions and rights. These are not in place in eastern theocracies: they tend to treat the preachers (imams) better than non preachers because they are presumed smarter and better; similarly men are treated better than women, who have few rights, and the state religion is treated better than infidels. In communist countries and dictatorships the dictator can get away with anything. Admittedly, in capitalistic states the rich and powerful find loopholes while the poor find prison, but not always (our Detroit’s ex-mayor is in prison) and it’s not the law. A feature of Eastern theocracies and dictatorships is that they lack a free press, and thus no forum for public exposure of legal mischief.

Einstein on freedom producing good. I'd say freedom is also a good in itself

Einstein on freedom producing good. I’d say freedom is also a good in itself.

The strongest arguments for socialist dictatorship and theocracy is that this is needed to protect the weak. Clement Attlee (labor socialist British Prime Minister, 1945 -56) explained his government’s take over of almost all British business: “There was a time when employers were free to work little children for sixteen hours a day… when employers were free to employ sweated women workers on finishing trousers at a penny halfpenny a pair. There was a time when people were free to neglect sanitation so that thousands died of preventable diseases. For years every attempt to remedy these crying evils was blocked by the same plea of freedom for the individual. It was in fact freedom for the rich and slavery for the poor. Make no mistake, it has only been through the power of the State, given to it by Parliament, that the general public has been protected against the greed of ruthless profit-makers and property owners.”  (Quotes from Spartacus.edu). it’s a brilliant speech, and it taps into the government’s role in the common defense, but it’s not at all clear that a chinless bureaucrat will be a better boss than the capitalist who built the firm. Nor is it clear that you help people by preventing them from work at a salary you decide is too low

England suffered a malaise from public ownership and the distribution of profit by those close the liberal party. Under Attlee there was lack of food and coal while the rest of Europe, and particularly Germany prospered, and passed England in productivity. Germany had no minimum wage, and  still doesn’t have one. In eastern countries, ingenuity is deadened by the knowledge that whatever a genius or worker achieves is taken by the state and redistributed. A cute joke exchange: Churchill and Attlee are supposed to have found themselves in adjoining stalls of the men’s room of Parliament. Churchill is supposed to have moved as far as possible from Attlee. “Feeling standoffish, Winston” Attlee is supposed to have said. “No. Frightened. “Whenever you see something large you try to nationalize it.” Perhaps more telling is this Margret Thatcher’s comment, and exchange. Making everyone’s outcome equal does more to penalize those with real pride in their ideas and work than it does to help the truly needy.

While there is a need for government in regards to safety, roads, and standards, and to maintain that equality of law. It seems to me the state should aid the poor only to the extent that it does not turn them into dependents. There is thus a natural tension between private good and public service similar to the tensegrity that holds cells together. Capitalists can only make money by providing desired goods and services at worthwhile rate, and paying enough to keep workers; they should be allowed to keep some of that, while some must be taken from them to get great things done. I’ve related the tensegrity of society to the balance between order and disorder in a chemical system.

Robert E. Buxbaum August 27, 2014. This essay owes special thanks to a Princeton chum, Val Martinez. Though my training is in engineering, I’ve written hobby pieces on art, governance, history, and society. Check out the links at right.

High minimum wages hurt the poor; try a negative tax

It is generally thought (correctly I suspect) that welfare is a poor way to help the poor as it robs them of the dignity of work. Something like welfare is needed to keep the poor from starving, and the ideal alternative to welfare seems to be a minimal job — that is one that is easy enough for a minimally skilled worker to do it, and high-paying enough so that this worker is able to support a family of 4. Such jobs are hard to produce, and hard to sell to those currently getting welfare — that is those getting paid the same amount for no work at all. I’d like to propose something better, a negative tax along with the removal of our minimum wage.

I suspect that our current system of minimum wage hurts the desperate poor and middle class at least as much as it helps the working poor. One problem with it is that it flattens the wage structure, hurting the ego and incentive of those who work harder or with higher skills. The minimum wage encourages lax work, and reduces the incentive of workers to improve. A higher talented or more experienced worker should make more than an unskilled beginner, but with the current minimum wages they hardly do. Our high minimum wage also hurts the desperate poor by cutting the lower rungs off of the employment ladder. Poor, unskilled, young folks are not hired because it will take a while before they’re productive enough to justify the minimum wage. And anyway, why should the minimum wage number assume that every worker lives independently (or should) and that every job deserves to support a family of four. Most unskilled workers are neither independent nor are they supporting a family of four. Most unskilled workers are not independent, nor are they the sole support of a family.

I suspect that people push for high minimum wages as a way to help without giving themselves. The cost is borne by the company, and companies are seen as evil, faceless oppressors. They prefer not to notice that the a high minimum wage creates high unemployment in central cities and other low skill areas, like Detroit before bankruptcy, and Puerto Rico today. In Detroit before bankruptcy, the living wage was set so high that companies could not compete and went bankrupt or fled. The ones that stayed hired so selectively that the unskilled were basically unemployable. Even the city couldn’t pay its wages and bills.

A high minimum wage increases the need for welfare, as some workers will be unemployable — because of disability, because of lack of skill, or from an ingrained desire to not work. The punishments a community can mete out are limited, and sooner or later some communities stop working and stop learning as they see no advantage.

The difficulties of taking care of the genuinely needy and disabled while the lazy and unskilled has gotten even some communist to reconsider wealth as a motivator. The Chinese have come to realize that workers work better at all levels if there is a financial reward to experience and skill at all levels. But that still leaves the question of who should pay to help those in need and how.  Currently the welfare system only helps the disabled and the “looking” unemployed, but I suspect they should do more replacing some of the burden that our minimum wage laws places on the employers of unskilled labor. But I suspect the payment formula should be such that the worker ends up richer for every additional hour of work. That is, each dollar earned by a welfare recipient should result in less than one dollar reduction in welfare payment. Welfare would thus be set up as a negative tax that would continue to all levels of salary and need so that there is no sudden jump when the worker suddenly starts having to pay taxes. The current and proposed tax / welfare structure is shown below:

Currently someone's welfare check decreases by $1 for each dollar earned. I propose a system of negative tax (less than 100%) so each dollar earned puts a good fraction in his/her pocket.

Currently (black) someone’s welfare check decreases by $1 for each dollar earned, then he enters a stage of no tax — one keeps all he earns, and then a graduated tax. I propose a system of negative tax (red) so each dollar earned adds real income.

The system I propose (red line) would treat identically someone who is  incapacitated as someone who decided not to work, or to work at a job that paid $0/hr (e.g. working for a church). In the current system treats them differently, but there seems to be so much law and case-work and phony doctor reports involved in getting around it all that it hardly seems worth it. I’d use money as the sole motivator (all theoretical, and it may not work, but hang with me for now).

In the proposed system, a person who does not work would get some minimal income based on family need (there is still some need for case workers). If they are employed the employer would not have to pay minimum wage (or there would be a low minimum wage — $3/hr) but the employer would have to report the income and deduct, for every dollar earned some fraction in tax — 40¢ say. The net result would be that the amount of government subsidy received by the worker (disabled or not) would decrease by, for 40¢ for every dollar earned. At some salary the worker would discover that he/she was paying net tax and no longer receiving anything from the state. With this system, there is always an incentive to work more hours or develop more skills. If the minimum wage were removed too, there would be no penalty to hiring a completely unskilled worker.

At this point you may ask where the extra money will come from. In the long run, I hope the benefit comes from the reduced welfare rolls, but in the short-term, let me suggest tariffs. Tariffs can raise income and promote on-shore production. Up until 1900 or so, they were the main source of revenue for the USA. As an experiment, to see if this system works, it could be applied to enterprise zones, e.g. in Detroit.

R. E. Buxbaum, June 27, 2014. I worked out the math for this while daydreaming in an economics lecture. It strikes me as bizarre, by the way, that one can contract labor for barter, pay a pizza for two hours labor, but you can’t contract labor for less than the minimum cash-rate $7.45/hr. You can go to jail by paying less than this in cash, but not in food. In Canada they have something even more bizarre: equal wages for equal skills — a cook and a manager must earn the same, independent of how well the cook cooks or how needed the work is. No wonder violent crime is higher in Canada.

My solution to the world’s problems: better people

Most of the problems of the world are caused by people. Look at war, it’s caused by people; look at pollution, people; look at overeating, or welfare, or gun violence. You name it, the problem is people. My simple solution, then: better people. Immigration is a simple solution for a county that can do it selectively (take in the best, leave the rest); it’s worked for the US and it doesn’t have to beggar the third world. Education is another way to help, but we’re not quite sure what sort of education makes people better. “An uneducated man may steel from a boxcar, an educated one may steal the whole railroad.” Theodore Roosevelt is supposed to have quipped.

Those who claim they are uncommonly moral and good at teaching it have barely any proof that they are. American schools produce financially successful people, but not particularly moral ones; Europe’s approach is different, but there’s no indication they’ve done better at moral education. We look to the 18th century, or the Greeks, but they were no more moral than us, as best I can tell. The Taliban, the communists, or similar fundamentalists claim moral superiority over the west, but from my perspective, they look even worse. 

I notice that people learn morality from one another — that is each person acts like his neighbor. I also note that people tend to act better when they are involved, and feel part of whatever country, city or group they are in. Targeted immigration might bring in better people–honest, hard working, non-violent — and these people might help improve and motivate the locals. And even if we don’t improve by interaction, perhaps lazy Americans will ride on the backs of the hard-working immigrants. But it strikes me that the disconnect between world problems of high unemployment, world hunger, and lots of open, US jobs is a moral problem that could be solved by targeted love. Allowing some increased mobility from country to country and job to job (plus better preaching?). If you can move you are more-likely to find a job or place where you feel fulfilled, and you are likely to do better and more there. Even the countries and jobs that are left might benefit by being rid of their malcontents. And we don’t have to take everyone.

From "Hispanic-hope."

From “Hispanic-hope.”, an interesting combination of Bible-study and immigration morality.

Living in America is desirable for most people from most countries. Far more people want to live here than we can accept. As a result, we are in a position to target the bright, honest, hard-working Peoples from virtually any country. These folks are helpful to industry and to the US tax base as these immigrants tend to work out — or get deported. In the short-term they might displace Americans or depress salaries, but even that is not certain. There is no fixed slate of US jobs nor a fixed amount of work need. Yesterday’s job taker is tomorrow’s job creator. Our country is built on immigrants, and has not suffered from it. We should not take those who hate the US, or those who hate freedom, or have no skills, criminals and the sick. Nor should we give citizenship immediately. But that still leaves plenty who we’d want, and who want to be here. Th. Roosevelt said, “you can not take in too many of the right people, and even one of the wrong type is too many.” I suspect this is true.

I suspect we’d have 90+% odds picking good people from a crowd. The Immigration system does a good job now, and the great colleges have done better for years. The past is usually a great indicator. If someone is well, and has worked for years, or has been here in school; if they’ve managed to stay productive and out of trouble, he/she is a good candidate. A first step would be a work permit, and in a few years they can apply for permanent residence or citizenship. Many of the most successful people in America are either immigrants or descendents of immigrants. The founders of Google and Facebook; the builders and the shakers. These people have the ‘get-up and go.’ You can tell because they’ve gotten up and gone.

Dr. Robert Buxbaum, June 16, 2014. I’m a child of an immigrant, went to public school, got a PhD at Princeton, have built my own company, and have (so far) avoided arrest, imprisonment or serious scandal. With the help of my Canadian-immigrant wife, I’ve produced three Buxbaum clones, my biggest contribution to improving the US and the world.

The future of steamships: steam

Most large ships and virtually all locomotives currently run on diesel power. But the diesel  engine does not drive the wheels or propeller directly; the transmission would be too big and complex. Instead, the diesel engine is used to generate electric power, and the electric power drives the ship or train via an electric motor, generally with a battery bank to provide a buffer. Current diesel generators operate at 75-300 rpm and about 40-50% efficiency (not bad), but diesel fuel is expensive. It strikes me, therefore that the next step is to switch to a cheaper fuel like coal or compressed natural gas, and convert these fuels to electricity by a partial or full steam cycle as used in land-based electric power plants

Ship-board diesel engine, 100 MW for a large container ship

Diesel engine, 100 MW for a large container ship

Steam powers all nuclear ships, and conventionally boiled steam provided the power for thousands of Liberty ships and hundreds of aircraft carriers during World War 2. Advanced steam turbine cycles are somewhat more efficient, pushing 60% efficiency for high pressure, condensed-turbine cycles that consume vaporized fuel in a gas turbine and recover the waste heat with a steam boiler exhausting to vacuum. The higher efficiency of these gas/steam turbine engines means that, even for ships that burn ship-diesel fuel (so-called bunker oil) or natural gas, there can be a cost advantage to having a degree of steam power. There are a dozen or so steam-powered ships operating on the great lakes currently. These are mostly 700-800 feet long, and operate with 1950s era steam turbines, burning bunker oil or asphalt. US Steel runs the “Arthur M Anderson”, Carson J Callaway” , “John G Munson” and “Philip R Clarke”, all built-in 1951/2. The “Upper Lakes Group” runs the “Canadian Leader”, “Canadian Provider”, “Quebecois”, and “Montrealais.” And then there is the coal-fired “Badger”. Built in 1952, the Badger is powered by two, “Skinner UniFlow” double-acting, piston engines operating at 450 psi. The Badger is cost-effective, with the low-cost of the fuel making up for the low efficiency of the 50’s technology. With larger ships, more modern boilers and turbines, and with higher pressure boilers and turbines, the economics of steam power would be far better, even for ships with modern pollution abatement.

Nuclear steam boilers can be very compact

Nuclear steam boilers can be very compact

Steam powered ships can burn fuels that diesel engines can’t: coal, asphalts, or even dry wood because fuel combustion can be external to the high pressure region. Steam engines can cost more than diesel engines do, but lower fuel cost can make up for that, and the cost differences get smaller as the outputs get larger. Currently, coal costs 1/10 as much as bunker oil on a per-energy basis, and natural gas costs about 1/5 as much as bunker oil. One can burn coal cleanly and safely if the coal is dried before being loaded on the ship. Before burning, the coal would be powdered and gassified to town-gas (CO + H2O) before being burnt. The drying process removes much of the toxic impact of the coal by removing much of the mercury and toxic oxides. Gasification before combustion further reduces these problems, and reduces the tendency to form adhesions on boiler pipes — a bane of old-fashioned steam power. Natural gas requires no pretreatment, but costs twice as much as coal and requires a gas-turbine, boiler system for efficient energy use.

Todays ships and locomotives are far bigger than in the 1950s. The current standard is an engine output about 50 MW, or 170 MM Btu/hr of motive energy. Assuming a 50% efficient engine, the fuel use for a 50 MW ship or locomotive is 340 MM Btu/hr; locomotives only use this much when going up hill with a heavy load. Illinois coal costs, currently, about $60/ton, or $2.31/MM Btu. A 50 MW engine would consume about 13 tons of dry coal per hour costing $785/hr. By comparison, bunker oil costs about $3 /gallon, or $21/MM Btu. This is nearly ten times more than coal, or $ 7,140/hr for the same 50 MW output. Over 30 years of operation, the difference in fuel cost adds up to 1.5 billion dollars — about the cost of a modern container ship.

Robert E. Buxbaum, May 16, 2014. I possess a long-term interest in economics, thermodynamics, history, and the technology of the 1800s. See my steam-pump, and this page dedicated to Peter Cooper: Engineer, citizen of New York. Wood power isn’t all that bad, by the way, but as with coal, you must dry the wood, or (ideally) convert it to charcoal. You can improve the power and efficiency of diesel and automobile engines and reduce the pollution by adding hydrogen. Normal cars do not use steam because there is more start-stop, and because it takes too long to fire up the engine before one can drive. For cars, and drone airplanes, I suggest hydrogen/ fuel cells.