The Allegator

"I do not deny the allegation, I deny the allegator." – Jesse Jackson

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Last Place Aversion

The poor often vote against their own interests. The conventional wisdom on this has been that they one day aspire to be rich, and they are empathizing with their future selves’ wish to have low taxes more than their present situation.

A new study by the national bureau of economic research shows evidence of a much more plausible explanation. Participants were given various sums of money, and an income distribution chart that showed where they stood in relation to the field of other participants. They were then given the choice between giving their money to those below them in the income distribution, or to those above them. Which did they choose?

It varied, but for those who were right above the bottom, they tended to give the money to people above them on the chart. Had they given the moeny to the person below them, then they would have ceded their position and fallen to the bottom themselves.

This theory of last place aversion will make sense to you if you’ve worked a low income job in the years when minimum wage increases have been mandated. Let’s say minimum wage was five dollars an hour. You toiled away at the company for a year and got a fifty cent raise. Now along comes a dollar increase in the minimum wage. After a year of training and experience, you find yourself making the same wage as those who are newly hired. Sure, the company could just raise everyone by a dollar, but that’s a huge expense, and if you’ve been there, you know it doesn’t tend to happen, and that there is plenty of grumbling in the ranks, even when they got a bit of a raise themselves.

Why can’t we just be happy for those who got a wage boost? Why must we look to everyone else to determine our own self worth? If you give one of your pets a bigger treat than the other, you will see that we don’t have a monopoly on the concept of fairness. It’s a survival skill. It drives us to stay ahead of the pack, even if it means keeping the rest of the pack down.

Those who complain one day that the rich are too rich, may the next day complain that the person below them got a bigger raise than them. Handouts to specific groups who are seen as lower on the social totem pole can cause enough resentment to more than cancel out their benefits. Fairness is not a universal construct. Where you stand depends on where you sit.

"When I give food to the poor they call me a saint. 
When I ask why the poor have no food they call me a communist." Camara, Helder

Why Has Going to College Gotten so Expensive?

If you went to college before the turn of the millennium and you are now trying to convince your kids to go to college, it may be worth more careful deliberation. There was a time when college was the path to a wealthy future. Back then it was one of the only ways to get a decent education.

With the advent of the internet, knowledge in many fields is at your fingertips. Unless you want to be a doctor or something similarly carefully regulated, chances are you can learn most of what you need online and at your own pace, and nearly free.

Contrast that with the current college system. Colleges are putting professors on furlough and reducing the amount of education they produce each semester. Meanwhile tuition is going up far faster than the rate of inflation. College loans have increased over 500% since 1999.

Why? What is it in the system that is justifying tuition going up while quality of education is dropping? In this case I believe it is actually a self-defeating government subsidy. Credit is tight right now. If you want a loan for most things, you have to first prove that you don’t need it. This credit crunch has hit every sector but education, in which government loans are still easily available and low interest. Combine this with the lack of work, and people are going back to school and living off loans. The natural result of this is that colleges raise tuition, since the students can afford it.

Looking back a decade, government-sponsored enterprises gave out adjustable rate mortgages to the poor, and once they had them on the hook, raised the rates. What they didn’t take into account is what would happen when they took it too far and people just defaulted and walked away. This time around, they are ensuring that it doesn’t happen again. Federal student loans follow you till you die. Bankruptcy doesn’t help. What will happen when all of this debt comes due? Will people spend the rest of their lives trying to get above water? Will the government forgive the debt on the backs of the taxpayer? Will the next credit bubble use your children as collateral? When will they stop trying to hide the debt and start working to correct it?

What still doesn’t make sense is the furloughs. If tuition is up, and full time attendance is up, and professor salaries aren’t skyrocketing, then why the furloughs? It’s because we are becoming a nation of administrators. Less than a third of your tuition goes into educating you, and the percentage of funds going to college  administrative costs is going up at a truly unreasonable rate. I’m not even saying anyone is getting fat here, just that as a society, we are spending far more on administrating producers than we are on actually producing anything.

What we need now is some transparency. Unfortunately, creating the Office of  Administrative Overview Regulation or some such won’t help. What we need is simple disclosure. Let the resulting outrage do the rest.

For Everyone Else, There’s WikiLeaks

I haven’t spoken much about WikiLeaks, but I’m glad that such organizations exist to shine some sunlight on the back-room dealing of those in power. It’s a sad day when the truth is a crime.

Our secrets are a weakness, not our power. Who can be blackmailed, if they have no secrets? Who embezzles money in the light of day? If torture is humane and effective, then why don’t we do it publicly? What investor invests in a market they know is overvalued?

If the state of our Union is strong, don’t tell us it is strong, show us it is strong. Open the books. Knowing that the data they see is the truth will brink confidence in our Dollar and our nation, not chase it away. Besides, if you don’t open the books, Assange will do it for you.

I also think it’s key, when the media and politicians talk about the damage done by a Wikileak, that we assess for ourselves whether that damage is at the feet of Wikileaks or those who perpetrated what they have exposed.

Wikipedia keeps a current list of all of the major stories they’ve broken here.

California Affiliate Tax

The helping hand of the law - affiliate tax edition

California’s latest budget deal continues their now-familiar trend of chasing small business out of the state. In a desperate and unconstitutional power grab, they are saying that any business that is even affiliated with anyone in California has to pay sales tax on everything sent to customers in the state. This affiliate tax is toxic to the digital economy.

I’m most often complaining about Congress overstepping their bounds in controlling the states, but this is a rare case (Like Arizona’s recent immigration laws) where the opposite is true. Interstate commerce is squarely under the jurisdiction of Congress. Let’s say that a product is manufactured in Texas, sent to Colorado to an Amazon distributor, and then shipped to a customer in California; what’s to stop Texas from saying they can charge sales tax on the item because they made it? Or Colorado to charge it because they are where the sale was shipped from, or every state in between because it passed on through? The Federal government is there primarily for two purposes, foreign policy, and making sure states don’t enact anti-competitive laws that interfere with the commerce between the states, thus, states were only allowed to regulate transactions from those companies which they have jurisdiction over because of a physical presence in the state.

California is now claiming that I, along with ten thousand others are ‘sister companies’ of Amazon, because we are paid to advertise for them. I’m nobody’s ‘sister company’. I have no Obligations to Amazon, they don’t tell me what to do, we don’t have any claim over each other’s assets, I just post a link to Amazon on my page, and Amazon reimburses me for doing so when paying customers arrive there through my sites. I’m no more connected with Amazon than television networks who advertise for them, UPS who carries their products, or Visa, who handles their transactions.

Living in an extremely liberal town, I hear a lot of people cheering this affiliate tax as somehow sticking it to the evil corporations and finally making them pay their fair share, but that isn’t what is going to happen out of this. Amazon has already announced that they will end their business dealings with everyone in California, which means not only are ten thousand more Californians now very suddenly out of work, but California won’t see a cent of it, since the companies won’t actually be taxed after cutting ties, and California will be out the revenue from those people and quite possibly paying to add them to its welfare rolls. Also, it isn’t legally Amazon’s responsibility to pay sales tax on your purchases, it’s yours, so if you aren’t paying taxes on your online purchases, then point the finger at yourself first.

I wish I’d seen that this ship was sinking before I bought a home here. If it were any easier to leave, I would.

Keynesian Fail

Keynesian Fail Demotivational Poster

This was our Nobel for Economics winner of 2008. More proof that our economic situation wan’t an accident, wasn’t the result of insufficient regulation, but was engineered by those very regulators.

“To fight the recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley or Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.” -Paul Krugman, 2002

(via FalkenBlog)