Looking for those willing to work for less than they are worth.

Women only earn 77% of what men do.

Blacks only earn about 75% of what whites do.

Hispanics only earn 70% of what white do.

So I will take the world by storm.  I will hire all the Hispanic women that are willing to work for 54% of what white men will work ( 77% times 70%) and I will have a huge competitive advantage.

I have hired, managed and promoted (and occasionally fired) women before. It worked out well.

I trust women.  I trust black employees.  I trust Hispanic employees. But if they will do the same work for half the rate of white men, I have the chance to really kick butt and create a competitive advantage by dumping the white males (especially the old ones like me).

Here is my question:  Once I hire them and we are leaving the competition in the dust, do you think they will continue to work for a major discount just because they like me?  Maybe not (You might refer to the current wages in the NFL, NBA and Major League Baseball.)

So for all those  women that are willing to work for 77% of what men earn, please let me know. You might make me rich.  For any Black Americans out there that are willing to work for 25% less than whites please send me an email because I will hire you in a New York minute.  And of course any Hispanic women that are willing to work for 46% less for the same work that I pay a white man, I am your biggest fan (although I may doubt your sanity). I am always looking to create a competitive advantage.

I am color blind, could care less about your religion, your sexual orientation or if you are a man or a woman.  All you have to show me is that you are smart, hardworking, will show up every day and I will give you a try.

The problem with no competition!

I have written about startups here at Lucky and Good and the ones that I have written about are the successful ones. 

How about a story about a startup that failed? [as of January 14, 2014]

This company was the idea of Evan Baehr and Will Davis (former Capitol Hill staffers and Harvard Business School graduates). Their idea was to create a service that would stop you from receiving junk mail [hardcopy junk mail in your physical mail box, not computer junk mail] and in the process you would receive all your desired mail [that is bills, letters, correspondence, etc.] in digital format, on-line or over you smartphone for only $4.99 a month.

These two got funding from Silicon Valley and Peter Thiel (Facebook and PayPal backer) and launched a test in the Austin, Texas market. According to all the reports I have seen these entrepreneurs were only limited by their ability to expand to meet demand. Users were all over them wanting to use the service. 

They named the service  “Outbox” and all they needed to expand the concept big time was the cooperation of the USPS.

The idea was pitched to the USPS with the following up-side for the USPS. The Post Office would receive the full benefits of stamped envelops without having to deliver those envelopes (one of the biggest cost to the USPS). That is to say that the USPS would never have to deliver a letter from New York to L.A. if it was known that Outbox was going to deliver it on-line. This would save the USPS a large chuck of money and they would still pick up the full profit from each stamp item that Outbox delivers.

Well, the USPS did not like the idea and told Evan and Will so at a meeting in DC. where Postmaster General Donahoe told the entrepreneurs: “You mentioned making mail service better for our customers; but the American citizens aren’t our customers—about 400 junk mailers are our customers. Your service hurts our ability to serve those customers” and “Your market model will never work anyway. Digital is a fad. It will only work in Europe.”

Interesting don't you think? Of course you must remember that the USPS is not part of the Free Market and so does not have to compete with anyone else. Of course the USPS is losing money every day but it does not have to worry about innovation and improvement to stay in business because it has the government's deep pockets backing it.

What do we learn from this? You are not the USPS's customer...unless you are one of the nations 400 “junk mailers” and the USPS does not have to worry about competition. 

Thanks to Mark J. Perry at AEI for pointing this out....

Jerry

Trade-offs

A bit of economic theory today; well, I do seem to do a lot of economic ranting so this is not unusual and you should be used to it by now.

A rule in economics is that there are "trade-offs". Most of us can always get more of something but only at the cost of not getting something else. We can, as reasonable folks, disagree about many things (I want a Ford Super Duty Pickup and you want a Toyota Prius, I have my reasons and you have your reasons). We all can make smart, informed decisions on any issue as long as we understand that there are trade-offs and we understand the impact of these trade-offs.

Lets consider one trade-off involved in the minimum wage. A government imposed minimum wage will make employers less likely to hire people because it will cost the employers more of their profit. The trade-off here is that although some people will be earning $0.0 per hour [because they don't have a job] other workers will be made better off by X amount per hour. The trade-off for the employer is that because of the higher wage he is forced to pay, thus cutting into his profits, he will have a larger pool of workers to chose from and so will have more efficient and productive workers which should increase the production of the goods he is providing for sale and thus increasing his profit.

This is not a new idea. Philip Wicksteed discussed it in his 1910 book The Common Sense of Political Economy where he talks about how it is in the interest of the powerful Trade Unions to give people with jobs a higher wage at the expense of those looking for jobs.

To have any type of intelligent debate about minimum wage, or economic issues, requires that the people debating the issue have an understanding of the trade-offs.

Jerry

The Rigid Class Structure in the US

Oh yes, the rigid class structure in the U.S. that is based on income. Dr. Mark Rank followed a number of Americans [ages 25 to 60] over a 44 year period to determine how rigid the class structure is. Here is what they found. 

"It turns out that 12% of the population will find themselves in the top 1% of the income distribution for at least one year. What’s more, 39% of Americans will spend a year in the top 5% of the income distribution, 56% will find themselves in the top 10%, and a whopping 73% will spend a year in the top 20% of the income distribution."

"Yet while many Americans will experience some level of affluence during their lives, a much smaller percentage of them will do so for an extended period of time. Although 12% of the population will experience a year in which they find themselves in the top 1% of the income distribution, a mere 0.6% will do so in 10 consecutive years."

"It is clear that the image of a static 1 and 99 percent is largely incorrect. The majority of Americans will experience at least one year of affluence at some point during their working careers. "

So it appears that the United States is a land of opportunity and that this is a land where a large majority of people will experience both wealth or poverty at some point in their life.

As Thomas Sowell has been trying to tell us for years now "Alarmists are not talking about real flesh and blood people. They are talking about abstract categories like the top or bottom 10 percent or 20 percent of families or households. So long as all incomes are not identical, there will always be top and bottom 10 percents or 20 percents or any other percents. But these abstract categories do not contain the same people over time."

Jerry

The model for the European Union versus the Europe of 1500

I am really enjoying Paul Kennedy's 1987 book The Rise and Fall of the Great Powers.  It focuses on the shift in powers in Europe starting in 1500.

Libertarians will be confirmed and central planners dismayed by a fundamental premise of the book: Centralized power over the long run stunts economic progress and wealth.  The author does not state it quite so succinctly but here is the longer version in his own words:

"The story of 'the rise and fall of the Great Powers' which is presented in these chapters may be briefly summarized here. The first chapter sets the scene for that follows by examining the world around 1500 and by analyzing the strengths and weaknesses of each of the 'power centers' of that time-Ming China; the Ottoman Empire and its Muslin offshoot in India, the Mogul Empire; Muscovy; Tokugawa Japan; and the cluster of states in west-central Europe. At the beginning of the sixteenth century it was by no means apparent that the last-named region was destined to rise above all the rest. But however imposing and organized some of those oriental empires appeared by comparison with Europe, they all suffered from the consequences of having a centralized authority which insisted upon a uniformity of belief and practice, not only in official state religion but also in such area as commercial activities and weapons development. The lack of any such supreme authority in Europe and the warlike rivalries among its various kingdoms and city-states stimulated a constant search for military improvement, which interacted fruitfully with the newer technological and commercial advances that were also being thrown up in this competitive, entrepreneurial environment. Possessing fewer obstacles to change, European societies entered into a constantly upward spiral of economic growth and enhanced military effectiveness which, over time, was to carry them ahead of all other regions of the globe."  

Ironically, the rules and regulations of the European Union are generally about creating uniformity, broad legal standardization and more and more centralization of power in Brussels.  What will historians be writing about its long term economic impacts in another 600 years?

The Rationality of Science

This quote about the rationality of "science" in Mark Buchanan's wonderful book Ubiquity: Why Catastrophes Happen is a terrific discussion about the rationality of science.

 "Science is of course, about inventing and testing ideas, and coming to beliefs through conversation with nature; it is decidedly not about being told 'how it is' by some authority. 'Science,' as Richard Feynman once expressed it, 'is belief in the ignorance of experts' - and, one might add, in the possibility of becoming slightly less ignorant through careful investigation. But while this is true, there nevertheless a great naivete in any view that would see the scientist as some kind of autmaton driven by the Holy Trinity of Rationality, Objectivity, and Open-Mindedness. Scientists are human beings, and since all science takes place in the setting of a community of researchers, scientists can influence other scientists."

So as we investigate the seriousness of Global Climate Change and start to consider what we might do about it, please consider that scientists have been wrong in the past and will be wrong in the future.  

And when we only fund and publish those with the mainstream thinking, that does not constitute real science according to Buchanan's definition of science.

Abolishing private property rights

Ever hear of Armen A. Alchian? One of the best econ thinkers on Price Theory and his 100 birthday was yesterday. Wish he were still around to impart more wisdom to us.

Dr. Alchian said: "The worst outcome by far occurs when property rights really are abolished." 

This is a well proven theory known as the “Tragedy of the Commons”. A political economist at Oxford University, William Forster Lloyd, explained this theory in 1832. Looking around England he found that common, not privately owned, pastures were devastated and of little economic value while privately held land was not. Lloyd's answer was that each user of the common was guided by self-interest. When the carrying capacity of the commons was fully reached the owner of a herd would ask "Should I add another animal to my herd?" and because the person owned the animal and not the pasture, adding an animal would be a gain for him while the loss would be “communized” among all the various herd owners using the pasture. In this privatized gain would exceed the herdsman's share of the commonized loss.

Now property rights not only have to do with the private ownership of pastures, property rights has to do with the private ownership of the product of your hands and mind.

Now if you consider the ACA (Affordable Care Act) you will see that the Tragedy of the Commons may be applied. The commons in this case is medical service. A limited number of care providers [doctors, nurses, etc.] and an expanding number of people demanding care that may or may not be necessary but is free. I may have a cold or an upset stomach and so go to the doctor, so the demand will exceed the carrying capacity of the health system.

Jerry