Philip Greenspun’s Weblog

Imagine a Monty Python movie where some angry Frenchmen were looking for a way to taunt Americans and said “Americans are too dumb to figure out how to watch television.”  We don’t need to wait for Monty Python to reunite because we have Barack Obama and the U.S. Senate saying the same thing (nytimes story).

I have symphathy for folks too dumb to watch over-the-air HDTV because I’m one of them.  Back in 2003, I bought an accessory ATSC tuner (“conversion box”) as a conversation piece.  It cost about $300 back then and no government coupons were available to help pay for them.  I went through the checkout line at BestBuy with a friend born in the 1970s.  She said “What are you going to do with that?”  I replied that I intended to watch the new HDTV broadcasts.  “You don’t have cable,” she responded.  “How are you going to get the signal?”  I explained that the Feds had just required local TV stations to start broadcasting in HDTV.  “Where will the information come from?”  From the ether, I explained.  Electromagnetic waves in the ether.  Like the ones that go to the car radio.  “TV comes from the wall.  Or from satellite,” she responded.  “TV stations don’t transmit like radio stations.” Don’t you remember rabbit ears?  Blank stare.

Once home, I discovered that some of the stations were too weak to receive with an indoor antenna, though I lived smack in the middle of an urban area in a wood-framed house.  Changing channels was not instant, as with analog TV, but took several seconds to jump from station to station, thus putting an end to any pleasure from channel surfing.  Each station was broken up into multiple substations.  Channel 2 could be received as “2-1, 2-2, 2-10” and sometimes more variations.  Channel 2-2 would show something totally different from 2-1.  How would you know what was on 2-2 or 2-10?  There was no published TV guide that I could find that said (no longer true today; tvguide.com lists this info (though you could also argue that anyone with Internet access doesn’t need TV because all of the important TV content is available as streaming video)).  Without a program listing, the only way to figure out what was on was by channel surfing, which, as noted previously, took forever because the tuner needed to do a lot of computation before latching onto a digital stream.  Sometimes a subchannel would show video from one source while playing audio from an unrelated show.

I gave up on TV and went back to the PC.

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While the U.S. is losing thousands of jobs every day, it might seem odd that Congress is making it tougher for companies to hire people in the U.S.  This New York Times story covers the fact that it will now be possible for someone to sue a company 20 or 30 years after they were hired, on the grounds that the person who hired them (who may be dead by the this time, and thus unavailable to testify) paid them less money than a person of another sex or a difference race.  If you’re an employer, how do you budget for this liability?  How do you account for it in your pension fund, given that once 20 years of pay are adjusted the pension fund will need to be beefed up to pay out a higher pension based on the revised salary.  It sounds at first as though we’re rearranging the deck chairs on the Titanic.  In a nation where everyone is unemployed we’re going to argue about how much people should have been paid back in 1979 when they had jobs.  (Only from the perspective of 2009 does 1979 look like it might have been a good year for the economy!)

The effect on young people would appear to be especially pernicious.  The people who have the best chance of arguing that they were discriminated against are in their 50s and 60s (Lilly Ledbetter, the plaintiff for whom the bill is named, was hired by Goodyear in 1979 and retired in 1998).  As the U.S. economy shrinks, the pool of available money to pay wages shrinks.  If more of the money is given to oldsters and their attorneys, less money will be available to 22-year-olds starting their careers.

An economist would tell you that pay discrimination laws aren’t necessary in a free market.  A company that was underpaying women, for example, would find that its skilled women had quit to work for a competitor.  If women in all sectors of the economy were underpaid, a company could make tremendous profits with little risk simply by hiring an all-female workforce and entering markets where most firms had a mixed or all-male workforce.

Perhaps Congress is smarter than it would be appear at first glance.  Employers who aren’t subject to the market can do whatever they want and many of the most egregious cases of pay discrimination have been at monopolies such as the old telephone company and at government agencies.  Looking at where the jobs are right now and where we are going, the U.S. is no longer a market economy.  By the time we’re done with layoffs and stimulus, at least 40 percent of the economy will be government (federal, state, local).  16 percent of the economy is health care (overlaps with the preceding 40 percent), which does not behave according to the free market, and something like 7 percent is Wall Street, recently nationalized in all but name (and upside).  A school district can pay its workers whatever it wants to and however it wants to; parents have no choice but to continue to pay property taxes and send their children to the local school.  A hospital can pay doctors more or nurses less and still get its Medicare and Medicaid funds.  A Wall Street firm can hand out bonuses to the (mostly male?) managers who drove it into insolvency because there are always more TARP funds available.

A 22-year-old who is lucky enough to find a job in the land of his or her birth will most likely find it in the non-market portion of the U.S. economy.  If present trends continue, a child born today who remains in the U.S. is virtually certain to work for the government, in government-sponsored health care, or at a government-guaranteed financial firm.  Thus the new bill may not be as simple as the “old folks and plaintiff’s lawyers continue to grab everything that isn’t nailed down”.

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Prompted by the death of my Amazon Kindle, I uncovered a very interesting book at the local public library: Devil in the Mountain: A Search for the Origin of the Andes.

The author, a geologist, chronicles his ten years of arduous field work on the Bolivian Altiplano trying to figure out “How come these mountains are so high?” and “How come these mountains sprang up so relatively recently?” (towards the end of the book it turns out that the answer has to do with the cooling that the Earth has experienced since the age of the dinosaurs)

This would have been a terrible book for the Kindle anyway, as the drawings are excellent and essential to understanding the material.

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An increasing chorus of politicians and journalists are asking “Should the government simply nationalize the bankrupt banks?”  Right now we pour in taxpayer money and it goes right back out of the bank in the form of bonuses, acquisitions, losses on bad assets, etc.  The banks on average remain insolvent.  A nationalized bank would have the advantage of instant investor confidence.  Any obligation of the nationalized bank would be as safe as a Treasury Bill.

By guaranteeing hundreds of billions of dollars in potential losses for Citigroup and Bank of America, the U.S. taxpayer is already on the hook for the downside, i.e., we’ve already nationalized any potential losses.  With a full nationalization, the taxpayers might potentially reap some of the upside, if the U.S. economy ever does recover.  Could the government afford to run these banks?  Certainly not with the efficiency that we ran the Iraq occupation (see Imperial Life in the Emerald City to get a sense of the scale of the waste).  Let’s try to figure out the scale of the problem.

The total Federal civilian employment is about 2.4 million full-time employees who are paid approximately $180 billion per year (source), roughly $75,000 per employee.  Merrill Lynch had approximately 60,000 employees sharing $15 billion in salary, roughly $250,000 per employee per year.  Collectively these folks ran their company into insolvency.  Can the Federal government get skilled people for less than $250,000 per year?  Our Supreme Court justices seem to work very hard and very competently and earn $208,000 per year.  The Treasury Department and Federal Reserve Bank are able to attract some of the nation’s best financial talent at salaries less than 1% of what Wall Street pays its top executives.  The U.S. military has “finance officers” who manage programs costing hundreds of millions of dollars and can be responsible for millions of dollars in $100 bills.  These folks aren’t paid any more than officers who perform other tasks, yet they seem to do a competent job.  At least at the federal level, employees seem to be able to work with large numbers without being paid tens of millions of dollars themselves.

Citigroup has 300,000 employees.  Bank of America had 200,000 prior to the Merrill acquisition.  In round numbers, let’s assume that the to-be-nationalized banks together have a total payroll of 1 million people.  The worst-case scenario would be that the banks can’t generate any revenue to pay salaries.  If bank employees were placed on the standard Federal salary schedule, the cost of paying 1 million people for one year would be $75 billion, a small fraction of the money devoted to TARP so far and a tiny fraction of the total bailout money proposed.  Would workers accept lower salaries?  These are troubled times and the lure of a steady federal paycheck is strong.  Furthermore, where else could they go?  What banks are hiring right now or in the foreseeable future?

Right now the taxpayers are on the hook not only for the losses generated by the big banks, but also to keep paying boom-era salaries that were only possible because of phony accounting that assigned ridiculously high values to subprime assets and resultant fake profits.  Nationalizing the banks and putting bank employees on the same salary schedule as the U.S. Treasury Department appears to be more affordable.

Of course, then we get back to the risk of whether the government could be even more incompetent at running these institutions than their former management…

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Starting about 15 years ago, various American universities began putting lecture videos on the Internet.  This was supposed to democratize education and make the great ideas available to all.  The impact of this revolution hardly registered.  Canning lectures on video began in the 1960s and changing the transport medium from closed-circuit TV to satellite to VHS tape to DVD to streaming IP packets doesn’t change the educational value of a university lecture, which has been found to be minimal by nearly all pedagogy researchers.  Learning at a university comes from solving problems while getting assistance from other students and teachers.

I always wondered why the various university lecture Web sites didn’t have at least a discussion forum attached to each class.  That way interested Web learners could find each other.  Finally there is a guy trying to create a reasonable online learning experience, using university materials as a base and standard online community tools as the medium.  More:  a New York Times story about the effort and uopeople.org.

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Merrill Lynch executives wrote themselves $4 billion in bonus checks for their work in 2008, on top of already lavish salaries.  All of this money is coming from the U.S. taxpayer through the TARP program, as previously discussed here.  Looting $4 billion might not sound like that big a deal next to the $700 billion being thrown down the TARP drain, but how does $4 billion compare to other federal expenditures?  Let’s look at some of the stuff the Feds typically do with $4 billion…

• fund all National Science Foundation research for nearly one year (total 2008 research spend was $4.8 billion)
• fund the National Park Service for almost two years (2008 budget $2.4B)
• fund the National Transportation Safety Board (NTSB) and its accident investigations on land, air, and sea for approximately 50 years (2008 budget was $79 million)
• fund the Drug Enforcement Administration for more than two years (2008 budget $1.8B)
• fund the FBI for about 8 months (2008 budget $6.5B)

Now that Wall Street generates only losses, can the U.S. taxpayer afford to take over responsibility for paying Wall Street executives their boom-era salaries and bonuses?

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My friend Paul sent me this book review of The Decline and Fall of the British Aristocracy. The review author compares the decline of the British rich of the 19th Century with our current decline.  One thing that he fails to note is that today’s imperiled aristocrats have $700 billion (so far) in TARP money coming to them (more or less directly into their pockets, at least in the case of Merrill Lynch’s executives).

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The Financial Times has reported on where $4 billion of the TARP money went…. to pay bonuses to the executives who bankrupted Merrill Lynch (story).  They deposited $10 billion in TARP money in October and wrote themselves $4 billion in bonus checks a couple of days before Bank of America took over the insolvent firm.  We can no longer say that the $350 billion first round of TARP money sank without a trace.  Now Bank of America needs another $20 billion in TARP money to make up for this and some other losses from Merrill that it didn’t expect.

One interesting aspect of the story is how weak is the correlation between pay and performance.  Merrill paid its people 6 percent less in 2008 than it did in 2007, when the firm’s numbers still looked pretty good.  If total incompetence and driving a company into bankruptcy yields 94 percent of the pay of doing a great job, what incentive is there to try to turn a profit for shareholders?

More:  Guy works at Merrill for three months, gets paid $25 million, quits and buys a $37 million apartment in Manhattan.

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This week’s New Yorker has an interesting article on how various countries developed their national health care systems.  A few morsels…

“Yes, American health care is an appallingly patched-together ship, with rotting timbers, water leaking in, mercenaries on board, and fifteen per cent of the passengers thrown over the rails just to keep it afloat. But hundreds of millions of people depend on it.”

“There is no dry-docking health care for a few months, or even for an afternoon, while we rebuild it. Grand plans admit no possibility of mistakes or failures, or the chance to learn from them. If we get things wrong, people will die. This doesn’t mean that ambitious reform is beyond us. But we have to start with what we have.”

We’ll have to see what our friend Steve says about the author’s praise of the VA system (long known to be the most efficient user of IT in the health care world, though that’s rather like being a dwarf among midgets).

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Some new research results on red wine and health from the January 26, 2009 New Yorker:  Mouse Au Vin

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