Month: October 2009

Now that teenage unemployment has reached 25 percent among those still actively seeking work (source), it seems like a good time to look at regulations that might discourage companies from hiring teenagers. Economists have traditionally said that the minimum wage law is the primary weapon wielded by older workers against the young. With a high minimum wage, companies won’t want to hire the inexperienced so the next generation will be hobbled in their attempts to build a sufficiently strong resume to unseat the current generation of workers.

At a party here in Massachusetts, I asked a group of comfortable middle-aged folks how they felt about the minimum wage. All were strongly in favor of a minimum wage law and thought that it benefited entry-level workers. I asked “Wouldn’t a minimum wage, of whatever amount, cause companies to refrain from hiring any worker that wasn’t worth the mandated wage?” Absolutely not, the group agreed. A restaurant would need burger flippers and they would pay whatever the government told them to pay. I observed that it would be pretty tough to live on the current $8 per hour minimum wage here in Massachusetts. Wouldn’t it be better to set it at $50 per hour? If $8 is good, surely $50 would be better. “Maybe that is too high,” one person said. They accepted that a $50 per hour minimum wage would discourage hiring, but believed that an $8 one would not.

What about in their own households? Nearly all of these folks employed cleaners, landscapers, babysitters and nannies. Suppose that the government mandated that they pay their helpers more than they were currently paying. “We’d clean the house ourselves,” one couple said. “I’d let the weeds grow,” said another. “We would stay home and watch TV instead of hiring a sitter and going out,” said a parent. Would a business faced with a minimum wage law behave similarly? “Absolutely not, companies are completely different from consumers,” was the response.

Why was it more common in California for households to employ helpers than here in Massachusetts? Was it because immigrant labor is available at much lower prices than here in Massachusetts? That a gardener at $10 per hour is appealing to a homeowner than a $30 per hour gardener? “No, it is mostly because there are more people available and it is easier to find someone.”

“We need the minimum wage for social stability,” one guest asserted. I asked if they considered Norway, Singapore, Switzerland, and Sweden to be unstable, as those countries had no minimum wage law. Then I asked if they thought it made our society more stable to have 25 percent of the young workforce out on the street instead of working at a job.

Not a single person changed his or her mind as a result of my questioning. Support for the minimum wage remained solid at 100 percent.

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I spent a recent Sunday in Washington, D.C. visiting art museums, my favorite white bitch, and family. The big show in town is everything Spanish that could be stuffed into the National Gallery. More in tune with the times, however, are the oil paintings commissioned by the Federal Government during the Depression exhibited at the National Museum of American Art (link). There is some truly great stuff on the walls there (example), a subset of the more than 7,000 paintings, 750 sculptures, and 700 murals created by 3,700 artists at a total cost to the taxpayer of $1.3 million (about $21 million in 2009 dollars). Let’s hope that comparable work will come out of the Collapse of 2008 and subsequent bailouts (are there interesting art projects buried amidst the trillions of dollars being spent on bailouts and stimulus?).

Walking around Northwest D.C. you wouldn’t know that anyone anywhere in the U.S. was hurting economically. The parks are groomed, the monuments and museums are polished and fully staffed, there are very few retail spaces vacant, and everyone looks optimistic (walking) or frustrated (stuck in the heavy traffic that attends growth in a city incapable of implementing congestion pricing). Stopping to pick up some fruit at a Giant supermarket in Bethesda, I parked next to a brand new Bentley convertible. Stepping onto the metro at Friendship Heights, I walked passed a soon-to-be-completed gleaming new luxury shopping mall, complete with $100 per person chain steakhouse. The retailers’ confidence in opening was consistent with a July 2009 report that “Washington D.C.’s most expensive retail submarkets seem to be among the few in the nation that have seen rent growth over the last year” (source). Government workers are more numerous and better paid than prior to the Collapse, but probably the Bentley belongs to a lobbyist (see this article for how returns on an investment in lobbying can exceed 22,000 percent). As the government embarks on its largest expansion since World War II and grows beyond 28 percent of the GDP, lobbyists have become second only to politicians in their influence on our nation’s economy.

I expected long lines and full flights around a 9 a.m. Monday morning departure from DCA, but the TSA staff outnumbered passengers in the security area and there were only 19 passengers on our 76-seat regional jet. One possible explanation is that the federal government has now become so powerful that there is no need for anyone in Washington to leave the city on business. The government regulator who used to go to Indiana to check out a factory can now sit at his desk because the factory has shut down.

After the cabin door was closed, the captain warned passengers not to get up and use the restroom prior to reaching our cruising altitude of 31,000′ , by which time we’d be in Delaware or New Jersey and freed from the special security regulations that govern flights in and out of National Airport. If someone had gotten food poisoning from the bagel shop in the terminal and ran to the bathroom, the airplane would have to be diverted from landing in Boston. We’d be landing at some other airport for a security check and would then proceed to Boston. Note that this would cost the airline approximately $10,000 in fuel, engine reserves, and disrupted schedule.

Once home in Boston I was able to renew my struggle with the exciting challenges of suburban living. The Waltham Home Depot was virtually empty at 6 pm. Helpful employees converged to assist in my quest for appropriate technology to water grass that is hundreds of feet from the nearest tap. I asked one of the workers, a fully licensed but young plumber, how the store was doing since the Collapse of 2008. He said “I can’t compare to what it was like before the downturn because the crash is one of the reasons that I am here. I work three jobs now and earn less than I did at just one job.”

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My favorite economist (never understand what she says, but love to hear her talk) sent me “Possible Macroeconomic Consequences of Large Future Federal Government Deficit” by a Yale economist under a subject line “fodder for your bleak outlook”. She summarized my recent Weblog postings on the economy as “bleak”, which to me means “pessimistic”. Yet I’m actually very optimistic about U.S. economic prospects in an unfettered market. Here are some reasons for optimism…

• The average American worker is better educated and more capable than the average worker worldwide. There are, of course, many excellent workers in countries such as China and Mexico, but on average a U.S. worker is more useful to a business.
• We have a better-than-average infrastructure of transportation, communications, electric power, and legal system.
• We have a lot of natural resources, including the basics of land and fresh water.

How come we are having trouble growing our economy? Part of the problem is that the products and services that people want to buy aren’t available. Let’s look at a top-of-the-head list. We’ll exclude products that require a huge amount of scientific and engineering innovation, e.g., a house-cleaning robot.

• A basic city car, gas or electric, priced similarly to the Tata Nano (i.e., $2500)–I would buy one tomorrow
• A dock for using a smartphone as one’s home computer (see this 2005 article)
• A compact motorhome, sort of like the old VW camper van (see this article on making recreational vehicles in China)
• A home aquarium hood combining lights, filter, heater, UV sterilizer, and automatic fish feeder (see this posting; I would buy one tomorrow)
• A floor lamp consisting of an upright fluorescent tube covered by a paper shade (see this posting; I would buy one tomorrow)
• A prefabricated one-room house, for someone who wanted to have the industrial loft experience in the suburbs (see this design)
• Mobile phone software that would, based on its knowledge of your location, show you a list of nearby hotels and how much they were charging for rooms at the moment, with the opportunity to reserve a room through the phone (useful for travelers; I used this as an example of the lack of innovation at phone companies back around 1997 when it became technically straightforward (Expedia was up and running by then)–it never occurred to me that we still wouldn’t have this 12 years later)

It is true that the same old products aren’t selling quite as well at their same old prices, but that’s partly because people already have the same old products. It is a lot easier to sell new products for which no competition exists.

So that’s my optimistic posting about the economy. All that we need to do is design and produce a few things that aren’t available already.

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… but we’re still trying to do it in Kabul.

Let’s consider the case of Najibullah Zazi, who speaks English and has lived in Flushing, Queens (New York City) and Denver, Colorado. Subsequent to Mr. Zazi’s first trip to Pakistan for terrorism training, it took the FBI at least two years to figure out that this guy was planning to attack his neighbors here in the U.S.

We’re going into our ninth year of war in Afghanistan, attempting more or less the same task: sorting out the Afghans who want to kill Americans from those who don’t. We don’t speak the language, we don’t know the terrain, and yet we’re trying to do what we were barely able to do in Queens.

[Zazi is a good example of why we might want to consider changing our immigration policy along the lines suggested in my economic recovery plan. He was a legal immigrant to the U.S. at the age of 7. He would have been educated in the New York City public schools, some of the most expensive in the world. Let’s say 10 years times $15,000 or $150,000. He filed for bankruptcy earlier this year, costing U.S. creditors $52,000. His career as a would-be terrorist will probably cost at least $5 million in FBI salaries and legal process. Fear of similar activities by Mr. Zazi’s colleagues should result in security costs and reduced economic activity running into the hundreds of millions of dollars.]

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This year’s Nobel Prize in Physics goes to the guys who developed the CCD sensor that enabled the first tubeless video cameras and consumer-priced digital still cameras. Please add comments with examples of how either cheap video cameras or digital still cameras have changed someone’s life. I will lead off…

A friend of mine is a working mother. Her toddler’s nanny, a Mexican woman in her late 30s, carries a small digital camera with her all day every day. When Mom gets home she can review the photos and see the fun that her kid was having all day. Doing this in the film era would have required a trip to the one-hour lab every evening and a cost of $20 and therefore would never have happened.

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A lot of companies make floor lamps that are designed to produce a vertical strip of light. Here’s an example from Target. The conventional way to do this is to cover the light source with a vertical paper shade. To get the illumination to be reasonably even, you put three 60-watt light bulbs inside. The result is a fairly cheap lamp that burns a lot of electricity, wastes most of the energy into heat that might set the shade on fire, and whose light is not very uniform across the shade.

This makes me wonder why there aren’t more floor and table lamps made with conventional fluorescent tubes. If you want a strip of light, why not start with a line-shaped light source? It is hardly the case that fluorescent fixtures are expensive. A two-bulb 4′ fluorescent fixture can be purchased at Home Depot for less than $20.

The quality of light from a fluorescent bulb can be excellent, with 5000K (daylight) color temperature and high color rendering index (CRI). A photographer’s light table uses just such a fluorescent tube. A fluorescent light might be too bright at full power for many floor lamp uses, but it can be electronically dimmed (vendor).

If Dan Flavin could make sculpture from fluorescent light bulbs in 1963, how come we can’t get something vaguely like it at Walmart 40+ years later?

[Of course I recognize that the modern way to do this would be a strip of LEDs, but right now I think they have poor CRI and can’t be fabricated in a continuous strip.]

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Here’s my personal stimulus story. I added something to U.S. GDP this week. The American-made 9-year-old water heater in my Cambridge condo failed yesterday, covering the basement floor with water. This was discovered about 6 pm last night. As I was not in the area, the neighbors all got together in an attempt to stanch the water gushing out. They closed all of the shut-off valves, but the water kept coming. Greg Walsh, the plumber, had planned to come the next morning, but sent his son to investigate. It turned out that the American-made shut-off valve had failed and, despite being shut off, was not impeding the water flow. Son of a great plumber is at least a pretty good plumber, so he managed to stop the geyser. By noon the apartment was being supplied by a new American-made water heater and equipped with some new shut-off valves. GDP should be at least $1000 larger and government economists will hail this as a green shoot of recovery.

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Upon hearing about Chicago’s failure to secure the 2016 Olympics, a young friend asked if the Olympics would have been profitable. I said that they would have cost billions of taxpayer dollars and that Greece spent over $1 billion on security alone for the post-9/11 Athens contest (even the very successful pre-9/11 Sydney Olympics 2000 punched a $2 billion hole in Australians’ collective pocket (source)). There was no way to recover that in ticket sales, television rights, or temporary boosts to the economy. My friend then asked if the Olympics were guaranteed to lose money, how come any city would bid on them? My response was that bidding for the Olympics highlights the conflict between rulers and subjects, or “politicians” and “taxpayers” as we might refer to these groups in the U.S. The mayor of a U.S. city wants to get the Olympics so that he or she can be in the national and international spotlight for a few months, which might result in being able to obtain a more powerful job. The mayor has the ability to spend taxpayers’ money, and borrow billions more on their behalf through construction bonds, for personal advancement. The taxpayers would have a tough time organizing to stop the commitment to an Olympics.

The taxpayers of Chicago dodged a bullet this time, though no thanks to any of the politicians who supposedly represent their interests. If we assume a modest amount of inflation since the 2000 Olympics, a reasonable dose of Illinois corruption, most of the work being done by mob-controlled unions, and the American systems of dealing with vague security threats, it seems reasonable to assume that the Olympics would have cost at least $5 billion. That would be enough to finance a great engineering college, an online university serving tens of thousands of students, an electric car manufacturer, a bunch of high-tech businesses, a free wireless Internet covering the entire city, and still have a lot left over. Unless taxpayer dollars were truly unlimited, could anyone minding the long-term best interests of citizens choose to spend that money on a two-week spectacle?

Update: http://www.nytimes.com/2005/07/10/opinion/nyregionopinions/10CImatheson.html

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