Charlie Stross: Why I want Bitcoin to die in a fire
BitCoin is one of those things I’ve found vaguely irritating since the beginning. Stross has a strong list of legitimate reasons to be irritated. Relatedly, this post by Jason Kuznicki explains why BitCoin is likely a speculative bubble.
A number of my Republican friends love to bring up the negative effect that Obamacare is having on workers. If you like theoretical arguments, there’s CKE Restaurants CEO Andrew Puzder arguing that Obamacare inevitably brings about a shift of full time workers to part time work. In a poll of 603 smallish business owners, 41% said they had frozen hiring because of Obamacare. For people who prefer to stick with anecdotal evidence, there’s a guy who owns Five Guys restaurants that says burger prices are going up because of Obamacare.
The counterargument relies on basic microeconomics. In a rational market, businesses will hire the number of employees that enables them to maximize their profits. If you are a profit maximizing home builder and you can profitably build and sell 100 homes a year, you’ll hire enough people to build 100 homes, spending as little on labor as you can. If you choose to build only 50 homes because you are afraid of the mandate in Obamacare, some other business will build the remaining 50 homes, and hire the people needed to do so. For an individual businesses, Obamacare will almost certainly have some effect on labor costs. For some, it may raise them, and for others, it may lower them. Economically speaking, though, there’s nothing special about it. Costs may go up due to higher fuel prices, or increased costs of lumber, or go down due to purchasing new equipment that makes home building more efficient. Operating a business is about understanding and managing costs.
As Mr. Puzder argues, one way to reduce costs is to shift full time workers to part time to avoid the requirement to provide employees with health insurance. While Obamacare may present business owners with another incentive to do so, this is hardly a new approach to cutting labor costs. There’s a lot of information in Fast Food Nation (published in 2001) about how fast food restaurants take advantage of a variety of labor regulations to save money, including keeping employees on part time status. What’s important is that the opportunity to switch employees from full time to part time is a luxury afforded to employers by the bad job market.
Obviously workers can quit their jobs any time and pursue better opportunities. The reason companies can cut their employees’ hours is that those opportunities are not available. Likewise, in a robust job market, replacing departing full time workers with part time workers would be much more difficult if the job market were better. Imagine what would happen if Google decided tomorrow to switch all of its engineers to part time positions with no benefits. They’d all have different jobs in no time and Google wouldn’t be able to find anyone to take their place.
Finally there’s the argument that Obamacare, and by that I mean providing health insurance for full time employees, will force companies to raise their prices. This is not how pricing works. Five Guys will charge as much as it can for a burger and fries, minimize its costs, and try to make a profit. Clearly higher costs that result from Obamacare (or anything else) may threaten the profitability of a business, but the idea of the new costs being passed directly on to the customers is just a scare tactic.
The economy has been in a sputtering recovery since it pulled out of the great recession of 2008. The result has been persistently high unemployment numbers and an epidemic of underemployment, along with a large migration of the long-term unemployed to long-term disability. For various reasons, the Federal Reserve, Congress, and even the White House have failed to come up with a coordinated response that has any hope of accelerating the recovery.
Most Republicans don’t even believe it’s possible for the government to address these kinds of economic problems in any effective way, and certainly aren’t open to supporting policies that might prove them wrong. In the end, they find it easier to scapegoat Obamacare rather than taking responsibility for their lack of a jobs policy of any kind.
The reason I bring this up is that being a free-market capitalist should be as much about understanding the free market as it is about yelling at the government to stop interfering with business. Convincing people that Obamacare is killing jobs is a huge obstacle to building a consensus for actually taking on our economic problems head on.
Matthew Yglesias explains how a determined economics blogger that nobody had heard of a few years ago led the charge on promoting the policies that underlie the stimulus policy announced by the Fed today. It’s an amazing story.
Interestingly, however, there is one last bastion of economic activity that proved remarkably resistant to the triumph of the market: firms, companies and, later, corporations. Think about it: market-societies, or capitalism, are synonymous with firms, companies, corporations. And yet, quite paradoxically, firms can be thought of as market-free zones. Within their realm, firms (like societies) allocate scarce resources (between different productive activities and processes). Nevertheless they do so by means of some non-price, more often than not hierarchical, mechanism!
An observation by Yanis Varoufakis that has often struck me as well.
Matthew Yglesias makes the argument that Chipotle is the Apple of fast food. America may not be manufacturing consumer electronics, but it is manufacturing more burritos. It’s an interesting and provocative piece.
For what it’s worth, I love Chipotle. Specifically, the carnitas burrito with rice, black beans, cheese, corn salsa, and hot salsa.
Yesterday, I linked to a Malcolm Gladwell piece that included the following sentences:
The rich have gone from being grateful for what they have to pushing for everything they can get. They have mastered the arts of whining and predation, without regard to logic or shame.
It put me on the lookout for other examples of rich people whining about being victimized, and reminded me immediately of this week’s Economist cover story — provocatively titled “Hunting the rich.” Here’s how it starts:
THE horns have sounded and the hounds are baying. Across the developed world the hunt for more taxes from the wealthy is on.
This is important because the basic demographic to which The Economist appeals is rich people. (Before you argue with me, purchase a dead trees issue and check out the ads.) Clearly this is a message that they are confident will resonate. Fortunately, being The Economist, they are willing to engage with actual facts:
First, the West’s deficits should not be closed by spending cuts alone. Public spending should certainly take the brunt: there is plenty of scope to slim inefficient Leviathan, and studies of past deficit-cutting programmes suggest they work best when cuts predominate. Britain’s four-to-one ratio is about right. But, as that ratio implies, experience also argues that higher taxes should be part of the mix. In America the tax take is historically low after years of rate reductions. There, and elsewhere, tax rises need to bear some of the burden.
Second, there is a political argument for raising this new revenue from the rich. Spending cuts fall disproportionately on the less well-off; and, even before the crunch, median incomes were stagnating. Meanwhile, globalisation has been rewarding winners ever more generously. Voters’ support for ongoing austerity depends on a disproportionate share of any new revenue coming from the wealthy.
This is basically the argument I see most progressives make regarding taxes. Tax revenue has been going down for years and the gap between rich and poor has been increasing for years. Clearly US economic policy has disproportionately benefitted rich people the most, and they can best afford the tax increase. The article then goes on to endorse an Obama-like tax plan. Hunting the rich, indeed.
Malcolm Gladwell on the wealth gap:
It is worth noting, though, that in the social and political commentary of the 1950s and 1960s there is scant evidence of wealthy people complaining about their situation. They paid their taxes and went about their business. Perhaps they saw the logic of the government’s policy: There was a huge debt from World War II to be paid off, and interstates, public universities, and other public infrastructure projects to be built for the children of the baby boom. Or perhaps they were simply bashful. Wealth, after all, is as often the gift of good fortune as it is of design. For whatever reason, the wealthy of that era could have pushed for a world that more closely conformed to their self-interest and they chose not to. Today the wealthy have no such qualms. We have moved from a country of relative economic equality to a place where the gap between rich and poor is exceeded by only Singapore and Hong Kong. The rich have gone from being grateful for what they have to pushing for everything they can get. They have mastered the arts of whining and predation, without regard to logic or shame.
From a piece that defies summarization on how a real estate developer purchased the New Jersey Nets NBA team as part of a plan to acquire and develop a coveted piece of prime real estate in Brooklyn. I strongly encourage you to read the whole thing.
Last month Tim Bray reminded me that I should be reading The Economist. The thing I like best about The Economist as a publication is that its editorial stance is to be uniformly in favor of global economic growth. While I am certainly much more left wing than their usual reader or their editors, I am essentially in agreement with them that the number one priority of economic policy must be continued, long-term economic growth, even if I disagree with them on other priorities or occasionally on the best approach to creating sustainable growth.
In any case, whether or not you agree with The Economist on anything, they are the best advocates out there for center-right, pro-business policy. Even if you disagree with their conclusions, their arguments are worth grappling with.
Their policy prescription for dealing with the current jobs crisis and economic slowdown is straightforward — Western governments should pursue policies that prop up demand encourage job growth now and make binding commitments to address structural deficits later. This should sound familiar, because this has been the Obama administration’s position since President Obama took office. It’s also the position of nearly all economists who are not partisan hacks. And the truth is that if President Obama resigned tomorrow and House Speaker John Boehner took over, it would probably be his policy as well.
Unfortunately, despite the fact that this policy course is stunningly obvious, the odds are that a gut-level impulse toward austerity, a misplaced fear of short-term inflation, and pursuit of partisan advantage are all conspiring to render not just the US government, but governments all over Europe, impotent in the face of this crisis. And as The Economist points out, an economic crisis is also a human crisis:
… the human cost of the economic crisis is paid largely by those who are out of work, for joblessness increases depression, divorce, substance abuse and pretty much everything that can go wrong in a life. Worse, today’s joblessness is a particularly dangerous sort. A disproportionate share of those out of work are young, and youth unemployment leaves more scars, in terms of lower future wages and greater likelihood of future unemployment (see article). Joblessness is also becoming more chronic. In America, famous for its flexible labour market, the average jobless spell now lasts 40 weeks, up from 17 in 2007. In Italy half of those without work have been so for more than a year. Long-term unemployment is harder to cure, as people’s skills atrophy and they become detached from the workforce. Its shadow lingers, reducing future growth rates, damaging public finances and straining social order for years to come.
People are looking to Belgium with envy because their lack of a government prevents them from pursuing pro-cyclical austerity measures that deepen the crisis. I thought that multinational organizations like the OECD and the G-20 were created in order to facilitate coordinated responses to global crises like the one we’re facing right now. Instead we’re seeing little collective action to turn the global economy around, and very little on the policy front from individual countries as well. In the meantime, things continue to slide downhill.
David Heinemeier Hansson takes a look at the numbers behind the Groupon IPO:
At the moment, it’s costing them $1.43 to make $1, and it doesn’t look like it’s getting any cheaper. They’re already projected to make close to three billion dollars in revenues this year. If you can’t figure out how to make money on three billion in revenue, when exactly will the profit magic be found? Ten billion? Fifty billion?
On the other hand, Matthew Yglesias says that Groupon is an example of how to achieve growth through aggressive deficit spending:
Maybe this will work out, or maybe it will be a disaster. But it’s worth noting that absolutely nobody thinks it’s categorically absurd to think that what a firm needs to do to maximize long-term profits is boost spending over revenues.
It’s an interesting way to take a jab at critics of economic stimulus.
Update: Jason Kottke points out that Amazon.com operated at a loss for a long time before becoming the profit-generating machine that they are today.
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Tim Bray’s Piketty roundup
On Piketty on Capital
Tim Bray reviews the book of the year, Thomas Piketty’s Capital in the Twenty-First Century, and more importantly, rounds up the key reactions from around the Web. I’m very interested on the book, and I’m sure it will be on my “to read” list for a long time.