Month: July 2015

“Husbands of female breadwinners most at risk for cheating, says study” is a CNN story on an academic study finding that men are more likely to have affairs when their wife earns more than they do while wives are correspondingly less likely to cheat. The financial incentives and intersection with state-by-state family law are deemphasized.

Let’s look at the financial incentives. Consider the pampered husband of a financial industry executive. They’ve been married for 30 years while she works for an investment bank and he paints in a home studio while nannies watch the kids. His wife is now 60 years old and about to retire. Her fertility is exhausted. Her earnings are about to cease and all of the financial value that she contributed to the marriage is now in savings and retirement accounts.

The husband thinks to himself “Perhaps it would be more enjoyable to be having sex with 22-year-old women from Craigslist.” Suppose that he indulges in this new lifestyle with at least four such women (“I think a man can have two, maybe three, affairs while he is married. But three is the absolute maximum. After that, you’re cheating.” — Yves Montand). If this leads to either spouse heading down to the courthouse for a no-fault divorce the typical U.S. state will reward him with 50% of the wife’s accumulated earnings and future pension. Should we need to look further to explain the data?

 

 

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In April 2015 I wrote a post about how higher minimum wages could cause massive unemployment if more employers copied Costco. I noted that “even a casual visitor to [Costco, Target and Walmart] can notice that the work being done per employee per hour is not the same.”

Can you get ahead in academia by studying phenomena that are apparent to consumers? Apparently so! “Why ‘Good Jobs’ Are Good for Retailers” is a 2012 Harvard Business Review article by Zeynep Ton, a business school professor at MIT. She turned this into a The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits in 2014 and now the New York Times is excited about it (article in today’s paper).

Professor Ton says to business people “You can cut your labor cost as a percentage of revenue by hiring higher-quality workers and leaving the low-quality workers to competitors or SSDI.” What the New York Times hears is “Every American can be a high quality worker if paid sufficiently high wages.” Professor Ton quantifies the savings of retailers from not competing with SSDI and TANF: “Sales per employee at Costco are almost double those at Sam’s Club.” As we can be pretty sure that Costco’s per-worker labor costs (wage, health care, taxes, etc.) are not double those of Sam’s Club, this means that Costco spends less on labor than does Sam’s Club. Another way to look at this is “If you don’t have the potential to be twice as productive as a Sam’s Club worker you will not be hired by Costco.”

It is worth looking at the reader comments on the NYT piece. By cutting labor costs as a fraction of sales, Costco and similar companies should be reducing the share of the economic pie enjoyed by labor and enlarging the slide of pie enjoyed by owners of capital (e.g., the Costco shareholders and/or the executives looting from them). But the liberal readers celebrate this move in the direction of less equality because they are dazzled by the headline dollars/hour number paid to the remaining handful of workers.

[Note that the New York Times pays its own journalists less than they could make by having sex with married foreigners and collecting child support. See the discussion of Times reporter Liza Ghorbani in this August 2013 posting.]

Related:

• “The Redistribution Recession” (June 2015 book review)
• “The lottery winner who kept his job at Costco” (March 2013)
• “unemployed = 21st century draft horse?” (August 2010 post about how low-skilled workers can be prohibitively costly to a modern enterprise)

 

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“Intact Families, Continued: The Red-County Advantage” is a July 1, 2015 New York Times article about the tendency of people who are living the 1950s American lifestyle (children living in a home with both parents) to vote Republican.

When interviewing legislators for realworlddivorce.com we never could get a clear answer for their rationale in making quick marriages and divorces, or one-night encounters leading to childbirth, potentially so much more lucrative than going to college and working. Why offer $40,000 per year tax-free for 23 years (Massachusetts) for having a child with a $250,000 (pre-tax) per year earner? Why would collecting child support in about half of U.S. states potentially pay 10-30X more than providing a home to a foster child? Researchers Brinig and Allen (see “These Boots are Made for Walking” and their follow-on papers) found that these incentives encourage the filing of divorce lawsuits. Aside from divorce litigators, judges, and psychologists who are paid witnesses in court, who could have an interest in encouraging that?

This Times article explains that it is in fact rational for one political party to encourage divorces and out-of-wedlock childbirth.

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Thought for this morning: Is Greece the equivalent of GM? Here are some parallels:

• GM promised to pay out more in pensions than what it could earn in profits (2009 post); Greece promised to pay out more in pensions than what it could collect in tax revenue
• GM received about $100 billion in taxpayer dollars while its competitors received nothing; Greece has received about $400 billion mostly from its partners (also competitors in many industries, such as agriculture and tourism) within the EU

I was always shocked that Ford could survive as a company when its major competitor had just been handed $100 billion for free. Now I’m wondering why Greece isn’t doing better than some of its competitors. With $400 billion in free money, shouldn’t Greece have an edge over other countries in the region? Maybe the answer is that the people who provided the $400 billion want it back, but Greece is sovereign and, assuming it is willing to live within its means going forward, can simply say “we’re not giving any of it back.” That would leave Greece as having had a massive injection of free cash, especially on a per-capita basis, that neighboring countries haven’t enjoyed. Greece could even keep the euro in the same way that Ecuador uses U.S. dollars as its official currency without having any special ties to the U.S. Treasury.

Clearly there is something wrong with the above analysis because (1) Ford is still more profitable than GM, and (2) Greece is the subject of a constant stream of doom-and-gloom journalism. But I can’t figure out why this back-of-the-envelope calculation is wrong. In short: assuming that they’re not going to pay it back, shouldn’t Greece be better off than a country that had never borrowed $400 billion?

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“Revenge Killing: Race and the death penalty in a Louisiana parish” is a New Yorker story about a man in Louisiana sentenced to death after either a tragic murder or a tragic accident, depending on which medical expert you believe. As with similar stories from the magazine, the description of the legal process is thorough.

[Note: the New Yorker editors implied with their headline that this was a racially-motivated prosecution and verdict. The text of the article does not support that headline, however. The prosecutor admits to a prejudice against children of divorced and unwed parents:

[Prosecutor] Cox told me that in the past forty years he had never prosecuted a man between the ages of seventeen and twenty-six who grew up in a nuclear family. “Not one,” he said. He believes that the “destruction of the nuclear family and a tremendously high illegitimate birth rate” have brought about an “epidemic of child-killings” in the parish.

But there is no evidence that the prosecutor is prejudiced against anyone on any other basis, including the “race” characteristic of the headline. There were three black members of the jury and all apparently voted “guilty” for this defendant, who happens to be black.]

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I asked a couple of divorce litigators what they thought of the movie Boyhood. The quote “Women are never satisfied. They’re always looking to trade up.” was cited with approval.

They liked the mother’s practice of multiple marriages and divorces, but couldn’t understand how she could have been so badly informed as to be doing it in Texas (virtually no alimony). Had she been married in Connecticut, for example, she could have been collecting alimony off at least one husband at all times.

They thought that it was unrealistic that the mother was not engaged in post-divorce litigation with the father of her children, at least to get court orders for more lucrative child support payments as his income grew.

What do readers think of the film? Personally I thought the least credible part was the carefree musician becoming an actuary without ever once having a math book in his hands. Also, if he was an actuary working in tax-free Texas (BLS says $94,000/year median pay in 2012), why wasn’t he rich enough to keep his classic muscle car?

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The Wall Street Journal has a story about how Down the Rabbit Hole: Curious Adventures and Cautionary Tales of a Former Playboy Bunny is America’s #1 bestselling book. The author is Holly Madison, a 35-year-old who was at one time Hugh Hefner’s girlfriend and lived in the Playboy Mansion (Hefner is 89).

The reader comments are interesting. One reader disputes that there is any “correlation, positive or negative, between beauty and intelligence. Some beautiful women are intelligent and some are not.” This is at variance with “Intelligence and physical attractiveness” (Kanazawa 2011, Intelligence), which found a positive correlation.

Here’s a response to a commenter attacking Madison for being a bimbo:

Actually she is quite an intelligent person. I heard her do an interview with a business news site two years or so ago. I was very impressed with her performance. She’s articulate, can think on her feet (or her back, depending, I guess on the needs of the moment) and is not afraid of any questions. Unlike interviews that the news media does with Hillary Clinton, the interview was not rehearsed, the questions were not presented to her in advance so her staff could prepare canned answers, and the interviewer did not fawn all over her George Stephanopolus-style.

Yes, she used her assets. Why not? Do we really think that the offspring of rich, powerful politicians and mega rich media moguls really shot right to the top of daddy’s empire because of their brains and business ability?

Andrew Cuomo would be parking cars for a living if not for daddy.

What about the general idea of Americans being more interested in the memoir of a rich geezer’s young girlfriend than in The Rise and Fall of Classical Greece (a recent download to my Kindle, though I haven’t read it yet)? Kenneth Tarr noted

In some ways, entertainment today is like the Roman amphitheaters in days of old, when entertainment had to become more extreme to keep the citizens engaged.

Has anyone who reads this blog also read this book? What is there to say about Ms. Madison’s bestseller?

Related:

• child support cashflow from a brief encounter at the Playboy Mansion (see the California chapter of Real World Divorce for the formula)
• comment on NBC News article on Bill Cosby at the Playboy Mansion:

If you are a success out West, get ready for women to pretend to be your soul mate, until you don’t fall for their lies and trickery. Then, since their Plan A failed at you getting them pregnant so they can live off child support for the rest of their lives, Plan B kicks in: the rape and abuse allegations. The goal is to get the same amount of money but by different means. I had five women attempt to scam me after moving out West. Of the five, two were psychopaths — with children from many different fathers! All living off over $10,000 a month in child support.

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On a recent flight I watched (but did not listen to) the live action version of Cinderella. Historians tell us that princes and kings back in the old days were not typically set far apart from ordinary nobility and they tended to affect a “first among equals” manner even when they were. In the movie, however, when the prince and Cinderalla dance everyone else at the ball (presumably all noble) stands in a circle to watch. Children learn from watching this that some people are vastly more important than others, the exact opposite of what their K-12 teachers are supposedly telling them.

So here’s a question for readers: Why is this message popular with children? We know why the chain of being was popular with rulers, but I don’t think anyone is explicitly telling those who make children’s movies to emphasize this concept.

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In February I posted a note about TransAsia 235, the turboprop that crashed in Taiwan. I suggested that, in the event of an engine failure, the pilots didn’t have to do much of anything other than fly the airplane. The official factual report is now available.

The engine failed about one minute after take-off (see page 12). Automated systems then shut off bleed air from the good engine, so as to maximize its available power (bleed air from the compressor is used to run pressurization and de-icing), temporarily relaxed a power limit to the good engine (“uptrim”), and, more important, feathered the prop on the failed engine so as to reduce drag. At this point all the pilots had to do was leave the throttles pushed full forward and fly. The pilot flying (PF), however, pulled back the throttle on the good engine about five seconds after the bad engine failed, ignoring the PM’s (pilot monitoring) suggestion to “wait a second cross check.” (A third pilot, an “observer” (OBS), sat behind the PF/PM in the front seats.) With no power on one side and limited power on the other side the airplane crashed about two minutes later.

Not a great day for John Henry…

[Illustrating the human bias towards action, the press coverage of this latest discovery has failed to mention “doing nothing” as a superior alternative to what the pilots actually did. A non-pilot reader would be left with the impression that the crew should have moved at least some levers but unfortunately moved the wrong one when in reality a far better course of action would have been to touch nothing. (Corollary to the First Principle of Flying Jets: “If a switch has dust on it, don’t touch it.”)]

Related:

• my syllabus for multi-engine training in a crummy piston-powered twin
• part of my email report on flying a Beriev Be-103: “pulling an engine back to zero thrust is an experience you won’t soon forget. The yaw isn’t that dramatic because the engines are inboard. What is dramatic is the sink rate at blue line. We were at 3000′ on a cold day and couldn’t hold altitude. It turned out that we’d [we = TWA captain demo pilot plus newbie (me)] left the cowl flaps [air inlets to cool the engines at high power settings] open and that was enough to rob us of the advertised 3000′ service ceiling. A piston twin is a pretty bad aircraft and an underpowered piston twin is scary bad. The ship has 210 HP per side. It probably should have at least 250 or, better yet, a single 450 HP turbine.”

 

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What percentage of U.S. GDP is simply moral hazard? The U.S. is one of the world’s most heavily insured countries and Americans are not notable for considering the welfare of their insurers.

Let’s consider health insurance, the purchase of which is now required by law. Would people be discouraged from risky behavior if they thought that they’d have to pay medical costs likely to occur as a result? Can any non-emergency trip to a U.S. hospital be considered moral hazard? If an American didn’t have insurance, presumably he or she would fly to Europe, Mexico, Israel, or India to have a procedure rather than pay 5X the world market rate.

Taxpayer-subsidized flood insurance is another obvious example. A lot of Americans have built and rebuilt fancy houses near the beach or rivers because they don’t have to pay the true cost of cleaning up after floods.

I thought about this other day because of a condo that I own in Cambridge. The trustees are the owners of the four units and also manage the building (rather than contracting with a property management firm to do it professionally). The top of the building is a 125-year-old slate roof that I wrote about in 2013. The trustees with units on lower floors voted against redoing the roof (cost of $25,000 to $30,000) on the grounds that it wasn’t leaking into their units, but only into the top floor unit, and also because the insurance company had always been there to write checks for repeated damage (minus a deductible each time). The winter of 2014-2015 resulted in ice dams on the roof, however, which sent water down the side walls into units on lower floors. The insurance company estimated that it will cost $100,000 to repair and they are getting ready to write a $76,000 check (the full cost minus some depreciation for damage to areas that hadn’t been painted for a while). In a world without insurance the roof probably would have been fixed a long time ago. In a world with an insurance company cheerfully paying out, a large percentage of GDP will be repairing damage caused by moral hazard.

What do readers think? Is this now a significant percentage of U.S. GDP. Given that health care is 18 percent of GDP it seems as though it could be.

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