How I Live Like A Rockefeller

This morning I woke up to the gentle nudging of my alarm clock.  I got out of bed, got into my gym clothes, and went and did a session in my living room with my personal trainer.  Afterward, we had a cool down session and then got into the shower, with the water pleasantly heated just the way I like it by another servant.  Afterwards, I made some breakfast (I do love to cook), and instructed one servant to make sure the dishes were clean and another to feed the cat and a third to clean her litter box while I was at the office.  On my way to and from the office, I was able to listen to some of my favorite artists playing my favorite songs.  When I got home, I instructed yet another servant to do my laundry while I sit here and write this blog with my cat on my lap.  Later tonight, I think I’ll catch some Spring Training baseball action in Florida from my personal luxury box.

And all this on a middle class salary.

Greg G On Bernie Sanders

Frequent commenter (and friend of the blog) Greg G had an excellent response the other day in response to a comment on a Carpe Diem blog post.  I encourage you to read the original comment, but here I post below Greg’s response (with his kind permission):

Ryan,

Since you asked for input, I would like to say that was the best written explanation of the Sanders phenomenon that I have seen. Also, it was a refreshing change of pace from the echo chamber this comments section can sometimes be. I am seen by some here as a dangerous leftist.

As you might expect on a libertarian economics blog, most people here are going to tell you you’ve got the economics wrong. Even me.

I think it’s telling and alarming that Sanders leads with minimum wage as an issue. I owned and operated a small retail store for 33 years. I sold part of it and liquidated part of it 8 years ago when I retired. My former employees are so nostalgic for their old jobs they still insist on getting together about three times a year. I always paid well above minimum wage but a doubling of it would have quickly put me out of business.

When I hired entry level sales clerks the majority of the applicants who scheduled an interview never showed up. Most of those who did were hopeless as potentially useful employees. We always found good people but we usually had to look hard.

Those applicants who couldn’t have added any value for me often found jobs somewhere else. If they were able to earn 65% of what it takes for them to live on then that’s a lot better than them earning zero percent which is the real alternative.

I support a taxpayer funded social safety net. I do not think making it illegal for businesses to hire people at low wages will do anything but make things worse for the people you think it will help.

Bernie is good at diagnosing some of the economic problems the country. That doesn’t mean he’s got good ideas on how to fix them. I saw him get a very sympathetic interview from Bill Mahar. Mahar asked him why Vermont had such a spectacular failure at implementing Obamacare. Bernie flatly refused to discuss it, saying it wasn’t relevant. It is relevant. He ought to be able to understand what’s going on on an issue he cares so much about in his own tiny state.

I’m also skeptical that more “free” college at taxpayer’s expense will lower costs for anyone other than the lucky ones (often high income) who will have their tuitions paid.

[Emphasis mine]

Anything Peaceful

The title of this post comes from a book by one of the great free minds, Leonard Read.  “Anything Peaceful” has become a motto for me.  It guides my theology, my politics, my life philosophy.  I have a t-shirt with it.  Perhaps, someday, I will make a family crest with that motto.

“Anything peaceful” is a major reason why I advocate for free markets.  Consenting individuals should be allowed to live as they choose so long as it is peaceful.  People should buy and sell as they please, so long as it is peaceful.  Those who harm others, whose actions are not peaceful, should be duly punished.  But, so long as the action is peaceful, there is no reason to stop it.

I also extend this motto, this philosophy, of “anything peaceful” immigration.  Peaceful people should be allowed to come and go as they so please.  Peaceful people should be allowed to interact with whomever they please, again so long as it’s peaceful.

There are fantastic (and I mean that literally, that they are removed from reality) theories about why free people must prevent free immigration: these immigrants are barbarians at the gate, coming to rape and murder our people, who will overthrow our government and establish their own failed states on our broken and battered bodies.  The only thing keeping these barbarians at bay is an invisible line on the ground.  I reject these theories on both empirical and logical grounds, but they also represent a fundamental misunderstanding on the nature of open borders.

There is nothing fundamentally different between domestic migration and international migration.  Alluding to my earlier point, peaceful people can come and go as they please.  So long as one’s purpose is peaceful, he should not be detained.  But non-peaceful people should be detained.  If a murderer flees Massachusetts and enters New Hampshire, New Hampshire has every right (indeed a duty) to stop and detain that murderer.  However, if a merchant leaves Massachusetts to sell his wares in New Hampshire, that man should not be detained by New Hampshire.

The same is true with international migration.  If a murderer leaves Mexico and tries to enter the United States, the US has a right (indeed a duty) to detain that murderer.  However, if a merchant (or laborer) leaves Mexico to sell his wares, the United States should not detain that man.

If someone moves to a new place and commits a crime, a murder or rape or theft, she should be detained.  He has committed a crime.  But simply moving from one place to another and crossing some invisible line is no crime.  To conflate the two as equally bad is to either cheapen violent crime or exaggerate the violence of a peaceful action.  And this is the crux of the issue of closed borders: it is violence against a non-violent action.

Anything peaceful.

Guns or Butter

Over at EconLog, Bryan Caplan has an interesting post on the opportunity costs of immigration restrictions.  Given that today is St. Patrick’s Day, a holiday made possible (as mentioned by another EconLog blogger Emily Skarbek) by immigration, I thought I’d expand the conversation into another area of opportunity cost.

Immigration control is very expensive: border patrols, a regulatory state to enforce hiring practices, deportation trials, jails, etc etc.  Enforcement is not cost-less.  And immigrants are, for the most part, peaceful people who just want to improve their lives.  For every tax dollar spent prosecuting peaceful people, for preventing the freedom of association, that is one less dollar in the hands of an individual.  For every worker involved in the regulatory state restricting freedom of contact, that is one less worker making something productive or desirable.  For every brain spent devising new ways to prevent (or circumvent) immigration, it is one less brain inventing something to improve our lives.

In short, I argue that immigration reform makes us poorer, just as most government interventions in the market do.  These are resources that go toward preventing peaceful people from interacting with each other that could have gone to more productive use elsewhere.  It’s essentially the Broken Window Fallacy, but applied to culture.  The seen effects are the “protection” of native culture from foreigners.  The unseen is the lost goods and services those people would have brought and those generated by those currently absorbed in the regulatory state.

The Problem With Trade Deficits Is Not What You Think

One of the main talking points by just about every presidential candidate this year is how “bad” the trade deficit is with other countries, how it’s a sign that they are “beating us” and “laughing at us.”  These sort of statements are the economic equivalent of anti-vaccine comments; extraordinarily few economists believe trade deficits are a problem, from Paul Krugman to Don Boudreaux  and just about everyone in between.

But there’s another reason looking at just bilateral trade deficits are misleading: the world is not limited to just two trading partners.

Let’s look at a baseball comparison:

In baseball, there are often 3 (or more) team trades. Players are swapped among multiple trades. Let’s look at a hypothetical example here:

Team A trades their superstar to Team B. Team B sends a moderate player Team C. Team C then sends prospects to Team A to complete the deal.

Looking at this trade, one could make the argument that, bilaterally, each team loses. Team A sent their superstar to Team B and got nothing in return. Team B sent a moderate player to Team C and got nothing in return. Team C sent prospects to Team A and got nothing in return.

But looking at it bilaterally misses the complex essence of the trade. In reality, everyone won the trade: Team A got prospects to build upon. Team B got a superstar who could get them over the hump into the playoffs. Team C got a solid player to come off the bench and help them on a streach run (btw, here is a real example of this:http://www.cbssports.com/…/white-sox-land-todd-frazier…).

In reality, all trade is like this. I give money to my grocer. I got that money by selling my labor to my company. They got that money by selling products to clients who got their money by selling to their consumers, etc etc. One could make the argument that, bilaterally, every single actor is losing, but the reality is every single person is winning!

Looking at just a single direction of trade is too myopic.

Redistribution Going In the Wrong Direction

On his blog, Paul Krugman discussed how “the conventional case for trade liberalization relies on the assertion that the government could redistribute income to ensure that everyone wins.”  Aside from the historical and intellectual issues with this statement, Krugman makes another rather anti-Progressive point (albeit he does so unintentionally): that wealth should be redistributed from the poor to the wealthy.

“Whoa whoa whoa, back that train up!” you might be saying.  “How on Earth is Krugman making that argument?  He is a noted proponent of redistribution from the wealthy to the poor!”

You’d be right to say that; he is such a proponent.  But this is where his argument becomes contradictory.

If, indeed, the role of the government is to redistribute from the winners of trade to the loser of trade, then that necessarily means that gains must be transferred from the poor to the wealthy.

Who benefits from trade liberalization?  It is, overwhelmingly, the poor.  This is a point even Paul Krugman understands. For example, if a factory opens in Africa, the local population benefits hugely. There are few (if any) losers in that area (except, perhaps, a local monopoly). In the US, the poor benefit from the now lower-priced goods. So, in both areas, the poor are helped. Where the “losers” might be are the now-displaced factory workers and owners, who were relatively better off than those who have been helped by trade. If redistribution from the winners to losers is necessary, then it must come at the expense of the relatively poor.  Tariffs and other taxes or sanctions against imports are, inherently, regressive.  This means that the poor are now paying higher taxes (which they can ill-afford) to protect the relatively wealthier displaced workers (of course, this is not even including the severe poverty that the residents where the new factory is located face).

If, indeed, the case for free trade rests upon the necessity to redistribute (which, again, it doesn’t) then the best thing that could happen is for as free trade as possible given its already-inequality-reducing abilities.  Actions taken to make it more “fair” only harm those most vulnerable.

International Women’s Day

Today is International Women’s Day, so I thought I’d share some good news for everyone to celebrate:

1) According to the BJS, rape & sexual assault rates against women in the US fell to 1.1 per 1,000 in 2014, the lowest level since they began collecting stats in 1994.

2) Violence against domestic female partners fell to 2.4 per 1,000 in 2014, also the lowest level since the BJS began collecting stats.

3) According to the UNDP, women globally are receiving more rights and becoming more equal with men (as measured by the Gender Inequality Index).

4) The UNDP also reports the ratio of women-to-men who have at lease secondary education is also at an all-time high.

5) In the US, the gender gap is virtually non-existent when accounting for all variables, according to the BLS.

Of course, none of this is to say that there isn’t still a lot of work to be done globally, but these are 5 major accomplishments and everyone should be proud. Take joy in one’s accomplishments, but remember there is still a mountain to finish

(source for all data: www.humanprogress.org)

Some Musings on Wealth

Going back to a post from the other day, I have seen a number of people make the argument that Rockefeller was indeed wealthier than average Americans, despite the fact the average American has such a higher standard of living, because he had servants.  This is true.  He did have servants that he could direct.  But so do we.  I can have the Boston Symphony Orchestra play Vivaldi for me at a moment’s notice.  I can have professional baseballers entertain me on my own schedule.  I can get hot food made for me and delivered.  And so can all of you.  Each of us commands thousands of servants, and in turn each of us serve.  That is the glory of markets.

But let’s take this argument at its literal face value, that wealth comes not from a standard of living but the amount of people under your direct control rather than one’s standard of living.  Even that argument is prima facie silly.  Let’s take a look at some contemporaries of us to see what I mean: Raul Castro has more people at his immediate command than the average American, but would anyone honestly claim he lives better than Americans?  What about Robert Mugabe?  Kim Jong Un?  Russian oligarchs?  Sure, they all live better than their citizens, but certainly not better than many Americans.

But let’s go one step more and explore the “status is wealth” claim.  If that were true, the flows of immigration would move opposite from the way they do.  Currently, people migrate from areas of relative poverty to relative wealth.  In doing this, they lose social status.  Moving to wealthy areas means a relative loss of purchasing power (it’s more expensive to live in the US than live in Africa), and means one could afford less “status” items (like servants) in their move.  By moving from a relatively poor area to a relatively rich one, one loses relative status.

If status was the end goal, rather than standard of living, we would see people moving from relatively wealthy areas to relatively poor.  It’s easy to be wealthy in a 3rd World Country.  Most Americans are in the global 1%, and even the poorest among us are in the Top 20%.  If they were to relocate to a 3rd World Nation (or heck, even a 2nd World Nation like Mexico), they could easily command social status and have servants.  Yet they don’t.  I argue this is evidence of people valuing comfort over status.  We do see people jockeying for status within an income class or trying to move up, but I am unaware of any migration, mass or otherwise, where people willingly lower their standard of living to gain a higher social status.

Wealth is a difficult thing to discuss as it is very nebulous.  It’s more than just money.  But we need to guard against such silly things as claiming someone who didn’t have half of what the average person has now was wealthier simply because they paid higher costs for lesser quality and lesser quantity.