Tue, 31 Jan 2006

Fail fast

I wish that the music industry would fail fast, if it's going to fail at all. I don't see any reason why its business model should be propped up by special protection. I refer, of course, to the DMCA (Digital Millenium Copyright Act), which imposes special penalties on people whose sole crime may be attempting to make fair use of a copyrighted work. They're also being propped up in both Canada and the USA by a special tax on blank media, including writable CDs. And of course there is the ultimate prop: the elimination of copyright expiration. Most people alive today have not seen a US copyright expire.

The public benefit to allowing a failing company to fail is that if there is truly a market for a similar protect or a similar business model, then the best thing that could happen is for the company to fail fast, so that its replacement can gain clear access to the market. Propping up a failing company interferes with the process of creative destruction.

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Thu, 26 Jan 2006

Regulation without law

There are many kinds of regulation. A regulator on a steam engine requires no legislator to make it work. Free markets have mechanisms which make certain types of results very unlikely. Legislated regulation ends up being co-opted by the people with the highest-paid lobbyists — and you already know who they are even if you're in no way cynical.

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Tue, 24 Jan 2006

Companies are leaving money lying on the table

Any time you have to deal with a company, you'll find dysfunctional performance. This isn't the company's fault particularly; they have to hire people because no other species is as capable. I think that everyone has had the experience of seeing people show through the corporate veil. People are, frankly, unreliable at best. This causes corporations to perform poorly.

What would happen if a corporation took into account the whole person they were hiring? What if they considered each person as a whole person, with good points and bad points? What if they tried to make the person, not a better worker, but a better person? First, they would end up with happier workers. Frankly, you can pay happier workers less, so the company would save money there. They would also end up with people who were better, more capable workers. If a person's flaws get in the way of the job task, and the company can heal those flaws, then the person's labor would be more valuable to the company. The company would end up paying less for more.

I have never heard of a company that tries to care for its workers in this manner. A company is considered enlightened if it buys health insurance for its workers. But what if the company helped its workers towards enlightenment?It seems to me like companies are leaving money lying on the table. Rather than search and search to find a person whose flaws impinge the least on the job function, mightn't a company do better to fix the flaws in the workers they have? If they can help their workers to become better workers, better people, and better spouses, they'll create huge efficiencies in their business process.

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Fri, 13 Jan 2006

Freedom is about stupidity

"Why the hell would you want to do something that stupid?"

People may ask you that question. If you live in a free society, you don't owe them an answer. It is your right to do anything that doesn't violate an obligation you've imposed on yourself, or doesn't create an obligation on the part of someone else. E.g. if you want to run around in traffic, that's fine, as long as you don't expect people to not hit you, and as long as your estate can clean your blood off their car.

Freedom must include the ability to do stupid things. Of course, by saying that, I am imposing a value judgement on your actions. I am labelling them stupid from my point of view. Whether they are really stupid or not is a complicated philosophical question dealing with the nature of "really" and "reality". Without diving into that morass, we can say that whatever I say may or may not be true for you. By definition, in a free society, my feelings about the wisdom of your actions imposes no obligation on you.

Thus, any law which attempts to stop people from doing stupid things is by definition a reduction in freedom. We should protect the freedom of people to do stupid things, because things other people feel are stupid (like freedom of the press, or of speech, or of religion, or of assembly, or of petition) are likely things you value.

If we don't have the freedom to do stupid things, we have no freedom at all.

Posted [19:17] [Filed in: ] [permalink] [Google for the title] [digg this]

Maryland Idiots

The legislators in Maryland are idiots. They are playing with things they don't understand. They enacted a law which requires companies with more than 10,000 Maryland employees to spend 8% of payroll on health care or else pay the difference into the state's health care coffers. That would seem like a victory of "the common man" over evil big business, wouldn't it? Surely that's how the Maryland legislators want their constitutents to remember it next time they're up for election.

But is that what's really happening? The theory here is that companies with more than 10,000 Maryland employees is making excessive profits for its owners. They've paid a smaller amount of money for a larger amount of earnings, and those earnings came unfairly from the state's provision of free health care for badly-paid workers. From the state's point of view, they're just getting their own money back.

The Maryland legislators are misleading the public, though. First, whenever any company earns excessive profits, the price of getting those profits goes up in the form of a higher stock price. So, really, the only way to earn "excessive profits" is to wisely examine the stock market, and wisely buy stocks which the market has underpriced. Your wisdom will be rewarded by either 1) higher earnings if you hold onto the stock, or 2) a higher stock price when you sell. So, any excessive profits are earned through skill and luck.

The fact that companies with more than 10,000 Maryland employees happens to employ poorly paid workers (at least in the legislator's eyes -- otherwise why would they qualify for public health care) is simply a fact of the market. Either companies with more than 10,000 Maryland employees purposely hires workers who cannot earn a higher wage (in which case they should be applauded, not penalized), or else it is simply a characteristic of the market for labor that the people companies with more than 10,000 Maryland employees needs for its jobs qualify for public health care.

So, what about those excessive profits and low-paid workers who cannot afford the health care that companies with more than 10,000 Maryland employees subsidizes for its workers? Why shouldn't the state equalise these two by forcing companies with more than 10,000 Maryland employees to pay more for health care?

First, the profits are not excessive relative to the profits available from other stocks. If there are persistently higher profits, then they are a function of a retail trade which aims its business largely at poor people. If anything acts to reduce those profits, then the stock price will fall, and companies with more than 10,000 Maryland employees will find itself unable to get the capital it needs at a price it can afford.

Second, if the excessive profits are illusory as I claim, then the only other source of money to pay these new health care fees are the customers -- that is, the same poor people that the legislators are hoping to benefit. They will get away with this, because the benefit is immediate, clear, and concentrated, whereas the harm is delayed, diffuse, and unseen.

This is regressive legislation. It's worse than a zero-sum game. It's a negative-sum game, because when all is counted, society is worse-off for this law.

Posted [16:08] [Filed in: ] [permalink] [Google for the title] [digg this]

Helping the poor

There is no fixed answer to the problem of helping poor people, because poverty sometimes is, and sometimes isn't, solvable by the individual suffering from it. If you give someone with healthy legs a crutch, they'll suffer from it. If you fail to give someone with sick legs a crutch, they'll suffer from it.

Help has to consist of either a helping hand or a kick in the butt.

Is it even possible for a government program to do the needful?

Or are we better off making individuals as wealthy as possible so they can do the needful?

Is there any religious person anywhere who really thinks that God will fail to direct individuals who can help, to help? If not, then why do so many religous people (mostly on the left, but some on the right as well) act as if that's true?

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Tue, 10 Jan 2006


Listening to the Alito confirmation today, many of the questions were about abortion. Abortion used to be left up to states. It was legal in some states and not in others. Women with little resources were unable to travel to states where abortion was legal. They had to get really cheap, really risky abortions, and some of them died.

In spite of the slander of pro-lifers, nobody is in favor of abortion. Abortion is horrible. Ask anybody who had one. The trouble with trying to prohibit abortions in the law is that abortion is fundamentally an act between two consenting adults; or even just one if a woman self-aborts. Pro-lifers will claim that there are two people involved but women interested in an abortion deny that.

It's extremely expensive (and as an economist, when I say "expensive", I don't mean just money; I mean all costs incurred whether money or people's time, or any physical resource expended which hasn't been paid for by the money, or any moral cost incurred, or anything that didn't happen instead) for a third party to interfere with the actions of two willing participants. Look at pornography, prostitution, drug dealing, gun running, or anything done on the black market.

The constitutional justification for interfering with state laws concerning abortion is pretty thin. It is, to my mind, a justification for doing what people want to do anyway. People became tired of paying the cost of interfering with abortions, so abortions are now legal everywhere in the US. I understand people's frustration, but that battle should have been fought at the state's rights level.

Posted [12:56] [Filed in: ] [permalink] [Google for the title] [digg this]