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Workers Get the Same Slice of the Pie as They Always Have

Workers Get the Same Slice of the Pie as They Always Have →

I'm always fascinated by the type of analysis that Scott Winship does here. There can be a huge difference in results, depending on how you look at things. This is one reason that I don't like to trust "common sense" all that much.

A couple of posts ago, I showed that when analyzed properly, hourly pay has risen just as much as productivity since 1947. The keys to getting the analysis right are to

  • Compare mean hourly compensation (not median compensation, and not wages net of fringe benefits or household income) to productivity,
  • Compare the same workers and sectors of the economy when computing compensation and productivity,
  • Look at the nonfarm business sector to exclude the housing sector (where imputed rent to homeowners is counted as income) and the government sector (where indirect taxes are counted as income) so that income sources that do not reflect the value of what workers produce are excluded from productivity,
  • Use net GDP to compute productivity rather than GDP, so that income taking the form of depreciation–which does not go to workers or owners but will simply affect future productivity–is excluded from productivity, and
  • Use the same inflation adjustment for both compensation and GDP.

I should have added to that list that proprietors’ income (income from one’s business) should also be excluded, as it is not at all clear how to allocate that category into income from labor and income from capital. I have updated the earlier post (and chart) to take this into account. When these guidelines are followed, the results indicate that hourly compensation is almost exactly where it should be if we expect it to rise with productivity:

Average Compensation Growth vs Productivity Growth, 1947–2012

This entry was tagged. Analysis Income

Literary Lions Take Themselves Too Seriously Against Amazon

Literary Lions Take Themselves Too Seriously Against Amazon →

Over 300 authors have decided to take a joint stand against Amazon.

[H]undreds of other writers, including some of the world's most distinguished, are joining the coalition. Few if any are published by Hachette. And they have goals far broader than freeing up the Hachette titles. They want the Justice Department to investigate Amazon for illegal monopoly tactics.

They also want to highlight the issue being debated endlessly and furiously on writers' blogs: What are the rights and responsibilities of a company that sells half the books in America and controls the dominant e-book platform?

They have a rather apocalyptic view of Amazon's role in the literary world. Here's agent Andrew Wylie.

"It's very clear to me, and to those I represent, that what Amazon is doing is very detrimental to the publishing industry and the interests of authors," the agent said. "If Amazon is not stopped, we are facing the end of literary culture in America."

And here's Ursula K. Le Guin.

"We're talking about censorship: deliberately making a book hard or impossible to get, 'disappearing' an author," Ms. Le Guin wrote in an email. "Governments use censorship for moral and political ends, justifiable or not. Amazon is using censorship to gain total market control so they can dictate to publishers what they can publish, to authors what they can write, to readers what they can buy. This is more than unjustifiable, it is intolerable."

Full disclosure: I've been an Amazon customer for about 15 years now. I was both stunned and thrilled when they announced the very first eInk Kindle. I've owned almost every eInk Kindle they've made and the Kindle has been my preferred way to read for at least 6 years.

With that background in mind, my response to Ms. Le Guin is something along the lines of "Say, what? How's that again?".

Amazon has created a self-publishing platform that allows anyone (literally anyone, have you seen some of the dreck that's up there?) to publish a book. They give authors a platform to self-publish in both print and digital formats. How that correlates to dictating to authors what they can write and to readers what they can buy is beyond me. (As a reader of discriminating tastes, I sometimes wish that Amazon would exercise more control over what writers write and readers read.)

The Times attempts to provide some evidence of Amazon's dastardly deeds and pernicious effects.

Even Amazon's detractors readily admit that it is one of the most powerful tools for selling books since the Gutenberg press. But how that power is used is increasingly being questioned in a way it was not during the company's rise.

So what are they guilty of?

Take, for instance, the different treatment Amazon has given two new Hachette books on political themes.

"Sons of Wichita" by Daniel Schulman, a writer for Mother Jones magazine, came out in May. Amazon initially discounted the book, a well-received biography of the conservative Koch brothers, by 10 percent, according to a price-tracking service. Now it does not discount it at all. It takes as long as three weeks to ship.

"The Way Forward: Renewing the American Idea" by Representative Paul Ryan has no such constraints, an unusual position these days for a new Hachette book.

Amazon refused to take advance orders for "The Way Forward," as it does with all new Hachette titles. But once the book was on sale, it was consistently discounted by about 25 percent. There is no shipping delay. Not surprisingly, it has a much higher sales ranking on Amazon than "Sons of Wichita."

That's really reaching. First of all, the complaint isn't that Amazon is jacking up the prices on books that they don't like. They're complaining that Amazon isn't discounting Sons of Wichita, as if a discount were a moral right.

This anecdote ignores the fact that the central disagreement between Hachette and Amazon is that Amazon wants a wholesale pricing model for eBooks (like the one they have in print books) that would allow them to discount eBooks. Hachette is fighting that, insisting on an agency model that gives them full control over pricing. And, yet, here the complaint about Amazon's "abuse of power" is that they should be discounting more, not less.

Second. "Not surprisingly, it has a much higher sales ranking on Amazon than Sons of Wichita". I'm pretty sure that the pricing discount isn't the entire reason—or even the main reason—why a book by a national political figure is selling better than a book about comparatively obscure political donors. As much as Harry Reid wishes it weren't so, most of America neither knows nor cares who the Koch brothers are.

Here's what I think is going on. Andrew Wylie represents a large number of very successful literary figures. Like most successful people, these literary lights seem to feel that not only do they know their own craft better than anyone else, but that they know everything better than anyone else. As a result, they're confidently claiming to know how Amazon should run its business. Not only that, they're confident that they know how the entire publishing industry should be run. Not for their own benefit, of course, but for the good of civilization.

Personally, I think it's likely that the authors know far more about the craft of writing than Amazon does. And I think it's likely that Amazon knows far more about the craft of getting books into readers' hands than these writers do. As a longtime voracious reader, I appreciate what Amazon has done for me over the past 15 years. I've continually had access to an ever widening variety of books, especially the obscure ones that I despaired of ever getting access to.

I find Ms. Le Guin's and Mr. Wylie's comments to be more than a little ridiculous. I absolutely respect their right to free speech and their right to advocate for any position that they like. But the more I hear of what they have to say on this topic, the more my respect for them diminishes.

ESR Reviews Irregular Verbs and Other Stories

ESR Reviews Irregular Verbs and Other Stories →

Eric S. Raymond reviewed Matthew Johnson's short-story anthology Irregular Verbs and Other Stories. He used it as an opportunity to talk about the differences between SF, literary fiction, and other genres. It caught my eye because I've been doing my own ruminating on what SF is and what literary fiction is.

I will use Johnson's work to explore some of the boundary conditions of the SF genre—how it differs from literary fiction and from genres such as mystery and fantasy.

Because I'm going to be saying a lot about genres of writing, I want to be clear on what I think a genre is. It's two things: one is a set of expectations a reader has about the kind of experience an instance of the genre will deliver, the other is a set of genre-specific codes and expressive techniques that the genre writer uses in the expectation that readers will receive them as the author intended. Like all codes and languages, the purpose of genres is to make communication easier by allowing both parties to assume a repertoire of common referents. Genre art fails when the production of the writer fails to match the genre referents and constraints as known by the reader.

This analysis generalizes Samuel Delany's observation that SF is not merely, or even mostly, a way of writing; it is a way of reading, too. The same is true of other genres, in different ways.

We will also require the following definition of science fiction (due in its most developed form to Gregory Benford): that branch of fantastic literature which affirms the rational knowability of the universe, and has as its most particular reader experience the sense of conceptual breakthrough—of having understood the universe in a new and larger way. Every constraint in this definition is important; removing or relaxing any of them lands us in other genres.

It made for some interesting reading. I also learned from the discussion in the comments.

How We Got "Please" and "Thank You"

How We Got "Please" and "Thank You" →

Maria Popova, at brain pickings, has this fascinating look at the history of why we say "please" and "thank you".

In English, “thank you” derives from “think,” it originally meant, “I will remember what you did for me” — which is usually not true either — but in other languages (the Portuguese obrigado is a good example) the standard term follows the form of the English “much obliged” — it actually does means “I am in your debt.” The French merci is even more graphic: it derives from “mercy,” as in begging for mercy; by saying it you are symbolically placing yourself in your benefactor”s power — since a debtor is, after all, a criminal. Saying “you’re welcome,” or “it’s nothing” (French de rien, Spanish de nada) — the latter has at least the advantage of often being literally true — is a way of reassuring the one to whom one has passed the salt that you are not actually inscribing a debit in your imaginary moral account book. So is saying “my pleasure” — you are saying, “No, actually, it’s a credit, not a debit — you did me a favor because in asking me to pass the salt, you gave me the opportunity to do something I found rewarding in itself!” …

The “Pro-Gun” Provisions of Manchin-Toomey were Actually a Bonanza of Gun Control

The “Pro-Gun” Provisions of Manchin-Toomey were Actually a Bonanza of Gun Control →

David Kopel, at the Volokh Conspiracy, analyzes the actual language of Senator Toomey's and Senator Manchin's gun control bill.

The Toomey-Manchin Amendment which may be offered as soon as Tuesday to Senator Reid’s gun control bill are billed as a “compromise” which contain a variety of provisions for gun control, and other provisions to enhance gun rights. Some of the latter, however, are not what they seem. They are badly miswritten, and are in fact major advancements for gun control. In particular:

  1. The provision which claims to outlaw national gun registration in fact authorizes a national gun registry.

  2. The provision which is supposed to strengthen existing federal law protecting the interstate transportation of personal firearms in fact cripples that protection.

On April 17, after the bill died, the President had this to say.

They claimed that it would create some sort of “big brother” gun registry, even though the bill did the opposite. This legislation, in fact, outlawed any registry. Plain and simple, right there in the text.

Except that, as Kopel showed, the bill only outlawed some registries, leaving the government free to enact others. It also posed a danger to gun owners who drive through anti-gun states. The way I read the relevant legislative language, the Senate was right to vote against the bill and the President was wrong to accuse them of acting in bad faith.

This entry was tagged. Analysis Guns

The President’s infrastructure investment argument

The President’s infrastructure investment argument →

From Keith Hennessey:

Geographic politics distorts and often dominates government investment in physical infrastructure. Highway funds and airport funds especially are allocated in part based on which Members of Congress have maximum procedural leverage over the spending bill. Even if you could somehow get Congress to stop earmarking infrastructure spending (good luck), and even if you could rely on the Executive Branch not to allow their own political goals to influence how they allocate funds, local geographic politics would come into play at the state level, since much federal infrastructure spending flows through State governments. This is where reality most falls short of a valid theoretical starting point for increasing productivity and long-term growth.

Keith argues that infrastructure spending isn't useless but it does face a lot of problems that prevent it from quickly creating jobs. It's not a great "investment in America".

Consider the Milwaukee Evidence in Debate on Voucher Expansion

Consider the Milwaukee Evidence in Debate on Voucher Expansion →

Wisconsin's School Choice Demonstration Project (SCDP) recently finished a 5-year study of the effectiveness of Milwaukee's voucher program.

After five years, the SCDP team found:

Statistically significant gains for voucher users in reading compared to matched Milwaukee Public School (MPS) pupils (with the important caveat that the introduction of program wide WKCE testing in the final year of the evaluation could be responsible for some of the gains);

  • Statistically similar impacts on math test scores for matched MPS and MPCP users;
  • A modest positive impact on public school tests scores as more private schools participated in the MPCP;
  • Statewide taxpayer savings, though not in Milwaukee;
  • Higher graduation rates for voucher users compared to MPS;
  • Higher rates of four-year college enrollment for voucher users;
  • Evidence that closed schools in both MPS and the MPCP were the lower performers;
  • High levels of parental satisfaction;
  • No impact on housing prices or racial integration;
  • High rates of school switching;
  • Wide variation in achievement levels between schools.

So what are the practical lessons from the SCDP for other communities considering vouchers? Don’t expect the introduction of a voucher program to sizably increase test scores across the board for voucher users, or students in public schools. It’s safe to expect no negative impact on test scores, but any gains will likely be substantively small. So if the primary consideration in a community is raising test scores, a voucher program like Milwaukee’s may not be wise.

However, if you are a community struggling with high school graduation rates, particularly for low-income pupils (like Madison and Green Bay), a Milwaukee style voucher program could be a viable strategy to raise attainment.

I think this evidence justifies expanding the voucher program state wide. I'd love to see that happen.

The Economic Case against Arizona's Immigration Laws

The Economic Case against Arizona's Immigration Laws →

Arizona's immigration laws have hurt its economy. The 2007 Legal Arizona Workers Act (LAWA) attempts to force unauthorized immigrants out of the workplace with employee regulations and employer sanctions. The 2010 Support Our Law Enforcement and Safe Neighborhoods Act (SB 1070) complements LAWA by granting local police new legal tools to enforce Arizona's immigration laws outside of the workplace.

LAWA's mandate of E-Verify, a federal electronic employee verification system, and the "business death penalty," which revokes business licenses for businesses that repeatedly hire unauthorized workers, raise the costs of hiring all employees and create regulatory uncertainty for employers. As a result, employers scale back legal hiring, move out of Arizona, or turn to the informal economy to eliminate a paper trail. SB 1070's enforcement policies outside of the workplace drove many unauthorized immigrants from the state, lowered the state's population, hobbled the labor market, accelerated residential property price declines, and exacerbated the Great Recession in Arizona.

LAWA, E-Verify, and the business death penalty are constitutional and are unlikely to be overturned; however the Supreme Court recently found that some sections of SB 1070 were preempted by federal power. States now considering Arizona-style immigration laws should realize that the laws also cause significant economic harm. States bear much of the cost of unauthorized immigration, but in Arizona's rush to find a state solution, it damaged its own economy.

More Gun Rights Coming, but Slaughter-House Will Remain

I really should start posting my predictions publicly. Not only would it vindicate me when I'm right, it would keep me honest when I'm wrong.

Last week, I predicted that Justices Scalia and Roberts would be very negative towards the idea of resurrecting the "Privileges or Immunities" clause of Section 1 of the 14th Amendment. From reading his past opinions, I know that Justice Scalia isn't a big fan of overturning precedent, especially when said precedents have been around for 140 years. (The Privileges or Immunities Clause was strangeled by the Supreme Court just moments after birth, in the Slaughter-House Cases.) Everything I've read about Chief Justice Roberts says that he's a cautious incrementalist who prefers to make changes to the law in the smallest way that's likely to be effective. I was pretty sure that both Justices would be in favor of expanding gun rights but would be hostile to doing so through the Privileges or Immunities clause.

It turns out, I was right. Here's what happened during oral arguments this morning, in McDonald, et al., v. Chicago, et al..

The first argument to collapse as the hearing unfolded was the plea by the lawyer for gun rights advocates, Alan Gura of Alexandria, Virginia, that the Court should “incorporate” the Second Amendment into the 14th Amendment through the “privileges or immunities” clause. In the first comment from the bench after Gura had barely opened, Chief Justice John G. Roberts, Jr., noted that the Court had essentially scuttled that argument with its ruling in the SlaughterHouse Cases in 1873. And within a few minutes, Justice Antonin Scalia — the author of the Heller opinion and the Court’s most fervent gun enthusiast — was sarcastically dismissing the “privileges or immunities” argument.

“Why,” Scalia asked Gura, “are you asking us to overrule 140 years of prior law….unless you are bucking for a place on some law school faculty.” The Justice said the “privileges or immunities” argument was “the darling of the professorate” but wondered why Gura would “undertake that burden.” And Scalia noted that the “due process” clause — an open-ended provision that he has strongly attacked on other occasions– was available as the vehicle for incorporation, and added: “Even I have acquiesced in that.”

Senate Bill Will Increase Healthcare Premiums

At the request of BlueCross BlueShield, Oliver Wyman did a study of the Senate health care bill. Unsurprisingly, this study estimates that the bill will cost consumers quite a bit more than the CBO estimated.

John Goodman summarized the findings this way:

Premiums for individuals and families purchasing coverage on their own will go up 54%. Premiums for small businesses will go up 20%. Both numbers are over 5 years and both numbers exclude the impact of medical inflation.

I skimmed through the study and it looks pretty interesting. The study points out that reform won't work unless everyone is forced to purchase insurance.

The key implication of our analysis is simple: For these types of insurance reforms to be successful and sustainable, it is imperative to get broad participation. Young and healthy people need to be part of the insurance pool, and people cannot defer buying insurance until they are sick or at high risk. This is true no matter who is paying the premiums--individuals, employers, or the government.

The study then goes on to indicate that the current bill likely will allow people to free-ride, with bad results. They're basing their conclusions on several states' experiments with healthcare reform.

  • New York and Vermont: Average premiums in the individual market today are about 60% higher than the national average

  • New Jersey: Reform caused much higher premiums forcing thousands of individuals to drop coverage. The individual market decreased from 157,000 people in 1993 to 88,000 in 2007

  • Maine: Individual market enrollment in Maine dropped from 90,000 to 41,000 between 1993 and 2007 following the state's reforms.

Even in Massachusetts, there is evidence that individuals are selectively jumping in and out of the market when they need healthcare. Data from health insurers in Massachusetts indicate that the number of peopl ein the individual market with coverage of less than 12 months has doubled post reform. These individuals have a significantly higher claims to premium ration when compared to those who had coverage for more than 12 months but let it lapse or those that are active.

Without strong penalties, similar types of behavior are likely to emerge in the reformed individual market--resulting in significantly higher premiums for the insured.

This is one of the reasons why I believe that the "reform" bills will just make American healthcare worse than it already is.