Archive for the ‘economics’ Category

A new protected class: things you've said

Saturday, October 27th, 2012

Some years ago, when this site was much smaller than it was today, it was suggested to me that I might want to be careful about what I wrote here lest it get read by a prospective employer who might find a reason in it to decline me employment. Having my website be nothing more than a online resume would be very boring, though, so I declined - in rather more polite terms than I really felt. Besides which, any employer who would do such a thing would clearly not be a good employer to work for. I'm lucky in that I have a pretty desirable skillset, though - not everyone is so fortunate.

I bring this up now because of this horrifying story that I read this morning. The very suggestion that such a thing might be done will have a massively chilling effect on participation in publicly archived discussions. Blogging is already hard enough knowing that everything I say is really part of my permanent record without imagining that it will be data-mined to discover all sorts of things about me that I didn't want to share in the first place!

We talk a lot about free speech in the western world, and take very seriously any possibility that government might limit that speech. But I think we don't take seriously enough threats to our free speech from public sector. Knowing that we can't get arrested for stuff we say online isn't terribly useful if that same stuff can make us unemployable.

So, I'd like to see some kind of legal framework that would prevent employers from discriminating against prospective hires based on things they've said. Such a framework wouldn't be completely unprecedented - there are already several pieces of information that are technically available to employers which they can't use in employment decisions. I propose that we just expand that to make "stuff you've said" a protected class. Naturally, that would also make it illegal to fire someone over something that they said (though exceptions would probably have to be made for things directly related to their job - it should still be possible to fire someone for violating an NDA, for example).

Companies don't like to have employees who say terrible things on the internet, because it reflects badly on them (and their hiring practices). But it only does so because they have the power to do something about employees who say terrible things on the internet. If they didn't have that power, they can just say "it's not work related - it's nothing to do with us". Essentially, because it's not prohibited it's essentially compulsory. So companies ought to be clamouring for this legislation - it would ensure they could concentrate on their core business and not have to go googling for dirt on their employees. It would also mean that they could choose the best person for the job without having to take into account stuff that fundamentally doesn't matter to them. And it would make it less likely that they would be left short-handed due to an ill-advised comment.

Practical considerations of a consumption tax

Friday, October 26th, 2012

I enjoy listening to NPR's Planet Money podcasts and I have learned a lot about economics from them.

One recent show that was particularly interesting and that has had me thinking is the one about the no brainer economic platform. That has made me reconsider several of my own economic opinions and throw several sacred cows on the barbecue (to mix up some metaphors).

In particular, I had always thought that income taxes were the best kind of taxes, being progressive and cheap to collect. However, as Planet Money points out - taxing something discourages that behavior and we don't want to discourage income and employment! A consumption tax makes much more sense in terms of incentives - discouraging consumption is environmentally friendly and, while it isn't naturally the most progressive form of taxation, can be tweaked to make it reasonably progressive. How to make it practical to collect is a different matter, though. Taxing something is always extremely invasive, as the government will require lots of information and documentation about that thing in order to make sure that you're not cheating on your taxes.

A carbon emission tax seems like one of the best kinds of consumption tax. We're pretty universally agreed that putting carbon dioxide in the atmosphere is an undesirable thing. Most of that net carbon comes from fossil fuels which tend to come from a few big mining operations, so it's natural and easy to tax these operations per tonne of carbon they sell. They will then pass these costs on to their customers and ultimately to the consumer, discouraging the consumption by means of increased fuel costs (of course, there are political problems with raising fuel prices but that's a bit out of the scope of this discussion - after all, Planet Money does point out that their economic platform would be political suicide!)

Fossil fuels aren't the only way carbon gets into the atmosphere, though. Should we also charge dairy farmers for the methane emissions from cows? That has a big effect on climate change too, although the carbon involved came out of the atmosphere much more recently than that from fossil fuels. The fairer we try to be, the more invasive the tax becomes. For example, consider someone who lives completely off the grid, growing trees and felling them for firewood. He's completely self-sufficient in terms of carbon cycles (while burning the trees puts out carbon dioxide, it's completely cancelled by growing them in the first place). So it doesn't seem like he should be paying any carbon tax. So we'd have to offset the emission tax against carbon absorption - in other words pay a credit to individuals and organizations causing a net reduction in the amount of carbon in the atmosphere. Growing trees is one such activity. What about landfill site operators, who sequester enormous amounts of carbon in the ground? That's not generally considered to be a hugely "green" activity, but by this measure it would be.

Of course, as we inevitably move away from fossil fuels, that form of tax becomes increasingly useless. We can tax other forms of "digging up stuff from the ground and using it up" consumption, but I suspect that getting all the tax money we need that way would have some really undesirable consequences (like pricing a lot of useful things like electronics right out of the range of what most people can afford).

What other things are consumed that we could tax? Well, there's a lot of energy falling on the earth in terms of sunlight that we can collect and reuse in various forms (and indeed I expect that's where much of our energy will come from in a few decades). But it's hard to think of that as "consumption" when it's so plentiful and so much of it just goes to waste. Harnessing solar energy is also something we don't really have any interest in discouraging.

There is one resource that we each have a finite amount of and have to be very careful how we use it. That is our time. Could we tax consumption of time? That sounds like a very regressive poll tax on the face of it. But what if we tax only wasted time? I subscribe to the view that time is only wasted if you're spending it doing something that you don't truly enjoy. There's an easy way to tell (from a taxation point of view) if you're doing something that you don't really enjoy - somebody has to pay you to do it. If you do it without being paid, then you're probably doing it because you want to and therefore not wasting your time.

So that brings us right back around to the income tax again. There's even a justification here for making the income tax progressive - if you need to be paid more to do some piece of work, obviously it's more unpleasant and therefore should be taxed at a higher rate (yes, I know that people don't really get paid in proportion to the unpleasantness of their jobs but it could be a useful legal fiction).

There's one aspect to income taxes that I don't really like, which is casual labour. Suppose I wanted to hire the kid next door to trim my hedges - if I had to fill in a big pile of tax paperwork in order to do so I probably wouldn't bother - I'd just do it myself instead. Lots of "under the table" work goes on and many blind eyes are turned to it which is a sad state of affairs - our laws ought to reflect actual practice rather than making huge swathes of our population (technically) outlaws. How do we draw the line between which jobs should be taxed and which shouldn't?

I haven't thought through all the ramifications of this, but I have an idea that perhaps income tax ought be linked to limited liability. We give this great gift to corporations, limiting the liability of investors to only the amount of money they invest - if the corporation does something which costs society more than that, society absorbs the remainder of that cost. The idea is that by doing this we encourage entrepreneurship, which is all very well but it seems like there should be a cost to limiting liability, so perhaps income tax should only be raised when the employer is a limited liability organization. The deal ends up being the same as it currently is for such organizations, but if you don't need to limit your liability, then your employees don't need to pay income tax either - I think it's quite a neat way to delineate. On the small business end of things, there will be a population of companies with limited liability and a population without, they will compete with each other and market forces will determine the size of business at which limiting liability becomes worth it. Perhaps there could be some kind of sliding scale of liability (and therefore taxation) to ease the transition for companies growing across that boundary. I suspect I don't have the economic chops to have a good sense of how well that would work out in the real world though.

Buying up the junk

Wednesday, September 26th, 2012

I recently moved from Seattle to the UK. Part of the process of doing a big move like that is getting rid of stuff that you don't need any more. For some things that's just a question of throwing it away (we had one visit from the haulers, two trips to the tip and several weeks of extra garbage charges). But there's other stuff that, while we didn't need it any more, would have some value to someone else. Getting rid of all that stuff was a consistent feature of all our todo lists, and we still didn't manage to get rid of as much stuff as we wanted. We gave some things away to friends, sold some things on a neighborhood email list and had a (not particularly successful) garage sale.

There really ought to be a better way than this. There must be a enormous amount of value locked up in peoples houses in the form of stuff that they don't use but which still has some value and therefore they don't want want to throw away, but getting rid of it is an annoying, difficult, low priority task, so never gets done.

I think somebody could make a fortune by setting up a company that takes away your unwanted stuff. You'd request a visit from them on their website (or maybe they could just show up on a regular basis) and take away anything that you didn't want. They'd do the work of valuing it, selling it and shipping it, and then send you the proceeds (after taking their cut). If, after the valuation stage, you decided that the item was worth more than that you could reject the offer and they'd bring it back with the next visit (perhaps for a small charge to avoid the service being abused as a free valuation service). Items that might leak liquids or emit odors would probably not be accepted (the small amount of value held in such items would probably not be worth the possible damage to other items).

They'd do all the work of making sure that items were packed sufficiently well for shipping, reusing packing materials as much as possible (and eliminating a large amount of waste). If they delivered items as well (instead of relying on UPS, Fedex or similar) they could take away the packing materials on delivery, helping the environment and saving the customer from another annoying job (my workshop in Seattle often used to get cluttered up with old cardboard boxes, packing peanuts and bubble wrap).

Another nice thing about this business is that it would be really easy to bootstrap - you could start it off in just one city with a couple of people, a van and a simple website and some insurance against breaking things. Deliveries to places too far away for the van to get to (or between two different cities where the company does have vans) could be done with the existing delivery services. After visiting one house for a requested pickup they could visit other nearby houses and ask if they have any items they want to get rid of.

eBay private bids

Tuesday, September 25th, 2012

There are all sorts of programs available for "eBay sniping" - automatically placing your bid in the last moments of the auction in order to minimize the amount of information available to your adversaries (the other bidders) and thereby maximize your chances of winning while minimizing the amonunt you expect to pay.

The trouble with this is that it creates two classes of eBay bidders - those who have paid extra (in money, effort or both) for the sniping software, and those who haven't. This makes the eBay user experience less friendly and more frustrating.

So I think eBay should offer its own (free) sniping software built right into the site - give bidders the opportunity to make a public or a private bid (or both). Only the highest public bid is shown but the highest bid overall (public or private) will actually win.

Why would anyone make a public bid if a private one is available? Wouldn't this turn all eBay auctions into silent (?) auctions? Not necessarily - there are some circumstances when a public bid is actually in the bidder's favour - for example if there are several auctions for equivalent items all ending around the same time, making a public bid on one of them is likely to push other bidders towards the other auctions.

Though that bit of game-theoretic oddness could also be eliminated with a closely feature closely related to private bids, which is the ability to (automatically) withdraw a private bid. This would allow one to bid on several auctions at once, while guaranteeing that you'll only win one of them. More complicated logic would also be possible, like "I want to buy either A or the combination of (B and any of C, D or E)". I'm not sure if this is currently possible with sniping software (I haven't used it). One could also set different bids for different auctions, if some are more desirable than others in some ways.

All these changes favor buyers rather than sellers, so eBay users who are primarily sellers probably wouldn't like them (after all, they help buyers save money!) But sellers already hate eBay - many of their other policies are drastically biased towards buyers. The only reason that sellers keep selling stuff on eBay is that is where the buyers are (and therefore that is where the best prices are, even after factoring out eBay's cut).

One other reason that eBay might want to do this would be that by having private bids go through the site, they get more accurate information about who is prepared to pay how much for what. I don't know if eBay currently does anything with this sort of information, but it surely must have some value to someone.

Spam for buying instead of selling

Wednesday, September 19th, 2012

Most unsolicited commercial email tries to get its readers to buy something, but recently I had some spam that was the other way around - they wanted to give me money! Specifically, they wanted to buy ad space on one of my sites. Now, given that I don't have any costs involved in running the site in question (the hosting and domain name were donated), I don't feel I have the right to put ads on the site. I wouldn't want to anyway - it's a better site for not having ads, and it's not like the amount of money involved is likely to make the slightest bit of difference to the quality of my life. For the same reasons I don't have ads on this site (maybe if I could make enough money from the ads to give up my day job it would be a different story but none of my websites has anywhere near that amount of traffic!)

Even so, it took me a moment to decide whether to reply with a polite "no thank you" or to press the "report as spam" button. In the end I decided on the latter course of action - it's still unsolicited commercial email even if it's buying instead of selling. And one of the last things the internet needs is more advertising. It's kind of interesting though that advertisers (or ad brokers at least) are starting to court webmasters - it always seemed to me that the supply of advertising space on the internet vastly outstripped the demand, but maybe that's changing.

Similarly, my web host recently sent me a coupon for $100 of free Google ads - I have no use for them myself (I don't think anyone interested in what I have to say here is going to find it via an ad) but I hope I'll be able to donate them to someone who does have a use for them.

Import taxes to level the playing field

Thursday, October 6th, 2011

There's a big hurdle for the US manufacturing sector in that many products are much cheaper to produce in China or Taiwan. Part of the reason for this is that those countries have much less strict standards on things like pay, employee working conditions and pollution controls. Another way of looking at it is that US companies are saving money and skirting important social and environmental rules by outsourcing their manufacturing to countries which don't have these rules - with excellent consequences in terms of increased profits and cheaper products, but disastrous consequences in terms of the environment, the welfare of those who make the products, and US manufacturing jobs.

It seems to me that the US government should use its power to tax imports to level the playing field for US manufacturers by removing the incentive to manufacture elsewhere. In other words, the import tax on something should be the difference between what it costs to make something in the US and what it actually cost to make due to laxer regulations. Then, manufacturing for things sold in the US would (over time) move to the optimal locations based on where they were being sold and the where the raw materials were mined or recycled.

Suddenly making all our electronics more expensive by (maybe) a factor of 10 would be enormously disruptive so I suggest ramping up the tax gradually over a period of (say) 10 years or so. That would lessen the blow and give the US manufacturing companies some time to bootstrap. It also gives a great incentive to China to improve working conditions and emissions since doing so essentially wouldn't cost them anything (it would be covered by the corresponding reductions in import taxes).

In the long term, I would expect that the final cost of the manufactured products in question would stay about the same or even become cheaper than what they would be without these taxes. That's because as it becomes more expensive to hire people to do a menial job, it becomes more cost-effective to automate that job. The machine costs more to begin with (you need clever people to build and program it) but once it's up and running the unit cost per produced item is much lower.

There's a lot more to it than that, of course - China still has a big advantage in the expertise it has developed in building things, China sells to other places besides the US, and there are currency, debt, and trade treaty issues which further complicate matters in ways I don't completely understand. Still, I think it's an interesting idea to consider.

Energy saving idea

Thursday, September 8th, 2011

One of the most inefficient things we do with energy is heat up water with it only to let most of that water (and most of the energy) go right down the drain when we take showers (baths are a little better because more of the energy goes into heating the house in the winter, but they do use more water).

So I think that if we were serious about wanting to save energy one thing we could do is try to encourage shorter showers by making people aware of how much energy they use. What I imagine is a little display that shows you how much energy you've used since the start of your shower (if you like you could factor in the cost of the water and sewage as well as the energy used to heat the water). For maximum effectiveness, I think the value displayed by the meter should be in units of local currency, and correspond to the amount you'd spend taking a shower of that length every day for a year - that way it feels like you're spending money really fast (of course, you'd really only be spending it at 1/365th of that rate so it's a bit of a psychological hack/cheat).

I think many people would appreciate such a device for the money it would save them, though I suppose some people might believe that long, guilt-free showers are worth that extra money.

Issues as political proxies

Tuesday, September 6th, 2011

Suppose you own a large successful business which makes money by telling customers things they want to hear - reassuring stories, comforting platitudes and advice and guidance about how to live their lives. Suppose also that, for tax reasons, you are not allowed to use your influence over your customers to push them towards voting for one particular candidate over another, and you're also not allowed to donate any of the company's profits to political parties or candidates.

However, you'd still prefer to have one candidate elected over another because your preferred candidate might lower your taxes or give you more freedom to run your business the way you want to run it, or maybe just because he's a good customer. How could you covertly support that candidate?

One thing you could do is a pick a couple of social issues which aren't fundamentally a big deal to you one way or another but which differentiate your preferred candidate from their opposition and which the opposition is unlikely to change their minds on (perhaps because they are objectively correct in their position). Then you can use your platform to tell your audience that your preferred position on said social issues is vitally important, and deciding the wrong way on them will lead the country to ruin. You don't even need to mention the names of the political candidates or the upcoming election to your audience at all - they can figure out themselves what they need to do.

For this reason I think we need to avoid making "tax deductions for political neutrality" deals - it's too easy for the organizations in question to be covertly politically non-neutral and the tricks they use cause pressure to move candidates away from objectively correct positions in this kind of issue.

How do we get there from here?

Sunday, September 4th, 2011

So we have some ideas about how we want the world to look - the next question is "How do we get there from here?" It seems to be very difficult to get anything changed at least in US politics because there are so many entrenched interests, but here's the best idea I've had about it so far.

We use this fantastic information transfer medium of the internet to get as many people interested, involved and well informed as possible. We get these people to vote in on-line elections (that are at least to begin with unofficial, non-binding and informal but are as secure as possible and only open to registered, authenticated voters). We then try to persuade politicians to take these polls into account (as well as what they suppose the opinions of the rest of the electorate to be) when making their decisions. Participating in this system costs the politician nothing at first (since when they disagree with what the poll says they can say "oh that's just the opinion of a small minority of people, most people have the opposite opinion"), but as more and more people participate in these polls they eventually become impossible to ignore ("it's the will of the people"). When politicians vote against the will of the people, we call them out on it and hopefully get them voted out of office in the next election. Once the system has sufficient momentum, we start to field candidates who run on a platform of voting according to the results of these polls rather than their own opinions. Then eventually we can transition away from having elected politicians at all and just have a system of direct delegated democracy so that the people can vote (directly or by proxy) on every piece of proposed legislation. This is much less susceptible to corruption by corporations, because decisions are not made by wealthy minority.

In the meantime, we have to do something about the media. It's no good having a democracy if people are voting against their own interests and blindly following the instructions of corporate mouthpieces. I think this is more of a US problem than a UK one the BBC is much more impartial than private media can be. Here in the US there are massive numbers of people who get all their information from Fox News and conservative talk radio which are really just fronts for organizations like Koch Industries. This is how we get public support for absurd wars and other policies that are disastrous for almost all of the people who are voting for them. The usual method we use as a society for determining which side of an argument is true is the judicial system, so I'm wondering if we can somehow make news organizations liable for things that are not true that they present as news. Don't make the penalty too big because sometimes mistakes happen but make it large enough so that the likes of Fox can't continue their current scam. And if that puts too much power in the hands of judges, then we'll need some entirely new system of checks and balances to prevent abuse there. I guess to avoid stepping on the first amendment there would have to be some kind of voluntary labeling scheme for news organizations, and we would have to learn to take with rather more salt news from sources which don't stand by what they say by participating in this scheme.

We still need to keep the economy growing as fast as possible. Unlike the conservatives, I don't think the way of doing this is reducing taxes on the rich and reducing services on the poor. I think we need more small businesses, and that there are a lot of impediments preventing people from setting up or taking over small businesses. These impediments need to be identified and removed. More small businesses means more competition for large corporations. In the US, creating a functional public healthcare system would be a great benefit for small businesses (companies in the US are can't attract the best employees without providing health insurance plans, which is much more expensive for small companies than for big ones).

The logic of the minimum wage

Saturday, August 27th, 2011

I've said before that I would prefer to replace the minimum wage with a guaranteed minimum income, but I've since thought of a justification for keeping the minimum wage.

In any economy, there are commodities - things which are easily available and the prices of which are easy to discover such as gold, oil or milk. One very important commodity is the hourly labour of a human who is healthy and competent at following simple instructions but otherwise unskilled. Even without a minimum wage law, there will be a natural price for such labour. It will fluctuate with time and space but will generally stay within a certain range. In some times and places it might actually go higher than the legislated minimum wage (which corresponds to a state of zero unemployment).

Having a legislated minimum wage has the effect of setting a scale factor (or a "gauge", for the physicists) of the economy as a whole - it's sort of like having an electrical circuit that isn't connected to anything and then connecting one part of it to ground. If the minimum wage is set too high then it will cause an inflationary pressure which will dissipate once everyone has a job again. If it's set too low then it will have a negligible effect anyway, since there would be very few people who would be unable to get a job for more than minimum wage. According to this theory, the minimum wage has nothing to do with making sure the poorest members of society are paid a respectable wage (which makes sense since a minimum wage is actually a regressive policy) - it's just an economic control factor.

Now, as an economic control factor, a minimum wage has a number of problems. One is that it takes a while for the inflation to eliminate unemployment after the market rate for labour goes down, so there's always some residual unemployment. Another is that people are not all equal - the labour of some people is just naturally below the basic labour rate (because they are unskilled and also either unhealthy or incompetent). While this is unfortunate, essentially forbidding them from working at all (by preventing employers from hiring them at the market rate) seems to add insult to injury (not to mention creating yet another dreaded poverty trap). A third problem is that there are many other ways that governments "ground" economies - in the electrical circuit analogy they're connecting various bits of a circuit to voltage sources that correspond to "what we think this ought to be" rather than what it actually is, which seems like a good way to get short circuits.