47 thoughts on “Roundup From Madison”

1. f) His native tongue is DoubleSpeak. Where you’re allowed to redefine critical words practically in the middle of a sentence. Bonus points for a complete reversal of the meanings as construed in Standard Business English.

2. The average variation in productivity between individuals is actually not that great, it is far, far less that variation in incomes would suggest. I am kind of into not having wealth accumulate in individuals disproportionately to there productive output – like government, unions, the financial sector, lawyers, big business monopolies, etc. Significant inequality (income disproportionate to productive output), is due to obtainment and abuse of monopoly positions. Because the government is the only elected monopoly and it is the government’s primary job to prevent other monopolies and maintain open competition, significant inequality is therefore due to abuse of government power – due to a failure of government.

   Basically we have serious inequality because the government has their fingers in too many pies. One particularly nasty thing the government does is make the cost of bureaucracy excessive such that there are huge beneficial economies of scale from having greater personal wealth – favoring the super rich over the middle class. Red tape disproportionately disadvantages the middle class, and is destroying it. Bureaucracy is a highly regressive tax on the middle class.

   And so the reason that we currently have such inequality is because the government is actually redistributing wealth in favor of that inequality via non free markets. With this understanding, spreading the wealth around is best accomplished by ceasing to redistribute it. So I go with option “a”. But somehow I doubt that is what Obama had in mind.

3. The average variation in productivity between individuals is actually not that great, it is far, far less that variation in incomes would suggest.

   I think you are confusing productivity with level of effort. Steve Jobs (as an extreme example) probably doesn’t work as hard as the guy here hires to landscape his estate, but his work generates billions of dollars in iPods, iPads, etc., while his landscaper’s work generates a few thousand dollars with of azaleas.

4. The average variation in productivity between individuals is actually not that great

   Even if you ignore Rob’s solid argument, there’s vast differences in productivity when you get to intellectual pursuits. Computer programmers can be a factor of ten faster than other coders. The fields of science and technology development have differences so profound, it doesn’t make sense to give it a number. A good scientist or electrical engineer can do things that the average person simply can’t contribute to. Nonzero productivity versus zero productivity.

   No matter how many azaleas the gardener of Rob’s example trims, he’ll never make a new customer electronics device.

5. “The average variation in productivity between individuals is actually not that great, it is far, far less that variation in incomes would suggest.”

   I think you are confusing productivity with level of effort.

   I do not think so, how well would Apple fair without Steve Jobs? The difference is probably somewhat representative of his productivity and warranted income. Some of the super wealthy (like Steve Jobs), have through their productivity justified their fortunes – many of the super wealthy, and not so wealthy, have not.

   The financial management sector, for example, now claims something like 35% of the world’s profits, the historical average given for the efficient management of capital was around a 10-15% margin. I would be very surprised if the financial sector has become twice as competent and productive (in relative not absolute terms) in the management of capital in the last decade or two. Are financial managers really worth a third of the world’s profits? This points to the obtainment and exploitation of a monopoly to me – inefficiency in financial management labor markets that is seriously costing everyone else. Many of those profits could be far better spent growing businesses than financial manager parasites.

   Other sectors are demonstrating similar monopoly level inefficiencies: government, public sector unions, health care, entitlements, etc. Higher living standards comes from higher productivity, time to clean out the monopolies/parasites, and cut bureaucracy that preferentially punishes the middle class.

6. To give an example of this difference, I knew a top notch perl programmer who developed an online billing system for a start up. Because they were a service provider of sorts for would-be service providers who didn’t have their own infrastructure (dotcom logic) and the billing system automatically allotted access to these services, the billing system was the company.

   The company had about 200 employees and all but a few of them were window dressing (they were trolling for more VC so they were looking the part). This one guy, who was a contractor, happened to be their entire billing department aside from customer care.

   So who was more productive? The guy who built and ran the core of this business or 200 pretty people whose sole duty is to look busy? I’ll give you a hint, they could have fired 200 of these 201 people and they’d still have a business (just as long as they kept the one right person). But as it turned out when that one person left, their business fell apart (though Chapter 7 bankruptcy was their noble destiny anyway).

7. The financial management sector, for example, now claims something like 35% of the world’s profits

   Pete, do you have a citation for that? Does this number come before or after the financial crash? Financial services always do well in a huge bubble. The question is whether they do well in the long term.

8. I do not think so, how well would Apple fair without Steve Jobs?

   Pete, we already know. During the age of John Scully as CEO (and some other mayfly CEOs). Apple failed hard. When Jobs came back, they were a PC business with a weak product and no future. Market cap went from somewhere around $4 billion in 1997, to over $330 billion today. While market cap is often based on delusion optimism, it’s still obvious that this company grew by a factor of 80 in stock market valuation solely due to Steve Jobs.

9. One particularly nasty thing the government does is make the cost of bureaucracy excessive such that there are huge beneficial economies of scale from having greater personal wealth – favoring the super rich over the middle class. Red tape disproportionately disadvantages the middle class, and is destroying it. Bureaucracy is a highly regressive tax on the middle class.

   The above statement is even truer if you apply it to “big corporations” vs. “small businesses”.

10. Being a poor guy I should be all for this class warfare stuff, but logic prevents me. If someone is getting more than there fair share it can’t be just because they’re evil profiteers. I strongly suspect there is a large element of crony capitalism that cooks the rules in favor of some and not others. Actually, it’s more than suspicion, the marriage of unions and democrats is a perfect example.

    However, if someone is getting more than their fair share that indicates an inefficiency that a free market can exploit. In other words, a competing firm with bosses that do take their fair share should be able to out compete those that don’t. The unfair boss is going to have a harder time finding employees where the fair boss would have an easier time and would have products and services that could out compete the unfair boss.

    This is the same foolish argument about the discrepancy of male/female pay. It’s hardly ever an apple to apples comparison. If woman truly got paid less for doing the exact same work, then hiring men would be foolish.

    I get disgusted with O’Reilly mainly because he thinks fair is giving the benefit of the doubt to those where there is no longer any doubt.

11. The average variation in productivity between individuals is actually not that great, it is far, far less that variation in incomes would suggest.

    You’re nuts. In fact, I would say the variation in productivity between individuals greatly exceeds their typical variation in income.

    Every place I’ve worked that isn’t a brand-new start up or garage band, you find a few really valuable people who carry the whole operation on their back, a larger chunk who are moderately useful — do the equivalent of bring the really useful people coffee and take out the trash — and then the rest are drones and parasites, people who actually interfere with getting stuff done, or are of no use at all. Generally, the variation in pay is nowhere near the variation in utility.

12. Pete sez:

    “One particularly nasty thing the government does is make the cost of bureaucracy excessive such that there are huge beneficial economies of scale from having greater personal wealth – favoring the super rich over the middle class.”

    Another thing governments routinely do to widen the gap between middle class workers and the wealthy is to load up on superfluous, highly paid administrators, then grant all pay raises as across-the-board percentages of employees’ current salaries.

13. “I do not think so, how well would Apple fair without Steve Jobs?”

    Pete, we already know. During the age of John Scully as CEO (and some other mayfly CEOs). Apple failed hard.

    Yes, Jobs is something of the exception, not the rule with regard to having the productivity to justify his fortune, although even there I might suggest that Apple was perhaps not competing against non consumption. If that productivity had not happened at Apple it may well have happened to at least some extent at other companies.

14. Obama lied in spades about not raising anyone’s taxes. His health reform bill alone raises taxes for nearly every wage earner.

    An excise tax will be imposed on manufacturers and importers of medical devices (beginning in 2018), a 40% tax on health insurance plans valued at more than $10,200 a year for an individual (2013), an increase in the medicare portion of the payroll tax for many earners and employers (2013), and an increased tax on capital gains, dividends, rents and royalties (2013). For anyone who itemizes on their tax return, the threshold for deducting medical expense will rise to 10% of adjusted gross income in 2013, from the current 7.5%. There are other new taxes and costs imposed on businesses and the states, and we know who will ultimately pay the bills for those.

15. To add to what danae said, I imagine that among his “tax cuts” Obama is counting the extension of the Bush tax cuts in December. Of course, what he doesn’t say is that if he hadn’t signed off on that, there would have been a massive tax increase at most income levels, and he only signed off on it because it was the only way to get other pieces of crap legislation pushed through before the new congress came in.

16. “The financial management sector, for example, now claims something like 35% of the world’s profits”

    Pete, do you have a citation for that? Does this number come before or after the financial crash? Financial services always do well in a huge bubble. The question is whether they do well in the long term.

    My father told me those particular numbers, he probably got them from the Economist or a money manager friend in London, sorry for lacking a direct citation, I have been looking for one. In a quick search I did find this:

    Over the last several decades, the financial sector has grown relentlessly. It has doubled in size over the last 14 years. During the period 1973 to 1985 the financial sector never earned more than 16% of domestic profits. This decade, it has averaged 41% of all the profits earned by businesses in the U.S. In 1947 the financial sector represented only 2.5% of our gross domestic product. In 2006 it had risen to 8%. In other words, of every 12.5 dollars earned in the United States, one goes to the financial sector, much of which, let us recall, produces nothing.

    From perhaps a questionable source:
    http://www.huffingtonpost.com/robert-creamer/the-dominance-of-the-fina_b_317310.html

    Definitely the financial sector has done well during this last bubble, but that would also infer this bubble has gone on for a rather long time. I would quite like to see the latest numbers, I suspect the financial service sector still takes a disproportionately large proportion of GDP. I need to do some research.

17. “The average variation in productivity between individuals is actually not that great, it is far, far less that variation in incomes would suggest.”

    You’re nuts. In fact, I would say the variation in productivity between individuals greatly exceeds their typical variation in income.

    That is very dependent on the industry, for jobs based on physical labor, for example, it is rare for the fastest person to be more than 2-3 times as productive as the slowest person. For jobs with more of an intellectual bias, the differences can on average be much greater. However, a company that produces the same product that is 10% cheaper than the competition can still only justify a 10% increase in wages – not a huge income disparity. Monopolies, though, create unethical competitive advantage enabling extreme income disparities.

    I would quite like a list of productivity verse income for all significant public and private sectors – it would reveal economic inefficiency and who needs demonopolising. Unfortunately, actual productivity is notoriously difficult to measure.

18. I’ve been doing engineering development for 28 yrs. All functioning organizations are carried by then best 1 or 2%. When I started this 1% needed a posse of assistant engineers, draftsmen, PCB layout people, buyers etc… to make things go. Today automation has largely replaced the posse so the really productive engineer only needs maybe one helper.

    My personal business Netburner.com sells solutions to engineers. I get to directly watch engineers buy our products and use them to produce new products. Some of the best individual consultants do 10 or 12 new product designs for 5 or 6 different companies in a year.

    I also see more typical organizations produce 1 product every 18 months with 10x the number of people.

    I think the income inequality in the world has too sources…
    There is a parasitic financial class with the too big to fail banks being poster children, there is also a small group of incredibly productive people that intellectually outproduce the other 98% of the population of the world by orders of magnitude.

    People like:
    Craig Venter, Elon Musk, Steve Jobs, Thomas Edison, Henry ford, etc….

    have individual consltant

19. Sorry about that last dangling sentence fragment did some editing and that part was out of view below the edit box.

20. That is very dependent on the industry, for jobs based on physical labor, for example, it is rare for the fastest person to be more than 2-3 times as productive as the slowest person.

    Counterexamples: backhoe operator versus man with shovel, a person building an automobile from scratch versus an assembly line worker at a major auto manufacturer. Technology augmented physical labor tends to be much more productive and pay more.

    However, a company that produces the same product that is 10% cheaper than the competition can still only justify a 10% increase in wages

    That just doesn’t make sense without more information about what’s going on. We don’t know how labor changes, the company with the cheaper product might use less or more labor. We don’t how much of the cost of the product is due to labor. A small fraction indicates that the business could increase wages considerably, but much heavier capital requirements might push things the other way. And we don’t know how much pricing power the company has. It might end up selling the product for 10% cheaper due to extensive competition.

21. “I think the income inequality in the world has too sources…
    have individual consltant”

    Um, grammar and spelling? (Cue snare drum rim shot.)

    Seriously, now people, there is a strong parallel between military organization and commercial organization. The people who fought in the military brought some of the organizational principles into the corporation. In turn, the Whiz Kids and later Donald Rumsfeld took corporate organization and applied it to war fighting.

    This idea of the natural aristocracy of the 1-2 percent of people who actually create anything and the rest of us are drones — wasn’t that the medieval state of affairs of lords with a small cadre of knights ruling over the serfs? Wasn’t this state of affairs brought about by the power of the arms carried by an armored knight on horseback against infantry?

    Didn’t the power turn against the knights back to infantry, first at Agincourt but more generally with the pike and later with the musket and bayonet?

    Isn’t the highly hierarchical structure of the military the organizational structure needed to run a mass conscript army, where any single soldier, any one cog in that machine plays an almost insignificant role, but the directed and combined effort constitutes its power? Hasn’t that structure been transfered to the modern corporation, where yes, you have your drones and people going through the motions, but the economy of scale counteracts the efficiencies of the mass organization?

    If we are returning to the state of affairs where the 1-2 percent of the natural aristocracy no longer needs the retinue, or perhaps needs it only as a logistics train, or yet perhaps regards the remaining 98-99 percent as making no contribution that is critical to the creative mission, does this mean we are returning to the social conditions of the medieval period? Does this mean that the natural aristocracy will reap the financial rewards whereas the masses will only serve as consumers and as recipients of government checks? Or worse yet, will the 1-2 percent be separated from the mass of the 98-99 percent who will live in poverty — the situation in much of Latin America and other places?

    If we return to this highly stratified social structure, will we lose near universal education and literacy from where the 1-2 percent, say Bill Gates and Steve Jobs being the most famous examples? Perhaps we don’t need, say, the universities or certainly not the public universities because Bill Gates dropped out of Harvard, didn’t he?

    But didn’t he at least get exposed to a university education, and didn’t he come from an upper middle class background, which had the resources and the culture to indulge his theft of computer time from a PDP-10 time sharing service as a “teen hacker” that lead to, well, you know the rest of the story.

    And isn’t the culture of the TOPS-10 operating system pervasive throughout the PC OS’s (in the Command Windows, you can still enter the command “dir”)? And wasn’t Digital Equipment Corporation a spinoff of SAGE, which itself was an artifact of the Cold War, which in turn was a continuation of WW-II, which itself was an embodiment of total mobilization, where every last person had at least some roll to play in the war effort?

    Just asking . . .

22. “However, a company that produces the same product that is 10% cheaper than the competition can still only justify a 10% increase in wages”

    That just doesn’t make sense without more information about what’s going on. We don’t know how labor changes, the company with the cheaper product might use less or more labor. We don’t how much of the cost of the product is due to labor. A small fraction indicates that the business could increase wages considerably, but much heavier capital requirements might push things the other way. And we don’t know how much pricing power the company has. It might end up selling the product for 10% cheaper due to extensive competition.

    Using Apple as an example, sure they may dominate in the market place but that actually only infers a slight competitive advantage over the competition, and the capacity to perhaps pay a slightly higher wage, as you say depending on other details. Point being there is nothing here that warrants a large income disparity between it and other companies.

    The dramatic growth of such companies from a couple of people in a garage to a multi billion dollar company is more of a productivity transfer from competitors than a productivity gain. The productivity gain proportion (added value) is what Jobs is entitled to.

23. I’ve been doing engineering development for 28 yrs. All functioning organizations are carried by then best 1 or 2%. When I started this 1% needed a posse of assistant engineers, draftsmen, PCB layout people, buyers etc… to make things go. Today automation has largely replaced the posse so the really productive engineer only needs maybe one helper.

    Yes and those support people once needed have now moved on to other jobs, where they are presumably somewhat productive. In my experience the 1-2% may have the talent to generate the competitive advantage, and hence the company survival is highly dependent upon them, however in absolute terms the productivity they add is only the last ~10%, so to speak.

    I do not buy that 98% of the productivity comes from 2% of the people, sure it happens in very extreme cases but I suspect the average is far from that. I would really like to see actual numbers on this, unfortunately actual productivity is very hard to measure.

24. There are really only three ways to create wealth:

    1)Harvest natural resources.
    2)Make things (this includes things like farming )
    3)Create intellectual property.

    Items 1 and 2 are becoming more global and automated.
    Except for farming, we have also largely stopped doing these here in America.

    Item 3 is HUGELY dependent on the talent of the people doing the work. The productivity of the top 2% here is orders of magnitude higher than the even the top 10%.

    One way to reduce the income disparity in the U.S. is to increase the percentage of the real wealth generation economy in items #1,#2.

    My view may be skewed, but my lively hood is selling products to the people engaged in new product development. IE #3 and the creativity to be a good product developer is largely an innate talent and is almost impossible to train.

25. a company that produces the same product that is 10% cheaper than the competition can still only justify a 10% increase in wages

    Good grief, Pete, what strange math. Look, if an engineer at Apple figures out how to make an iPod 10% cheaper, what’s that worth? To Apple itself, and to the millions of people who buy iPods? Certainly millions of dollars, perhaps tens of millions. By rights it should all belong to the engineer — his idea, his paycheck. But if he sees a hundredth of a percent of that money, as maybe a nice $10,000 bonus in his Christmas paycheck, I’d be surprised.

    In what strange collectivists world should every employee of a company, from the CEO down to the janitor, share equally in the fruits of any employee’s contribution?

    unfortunately actual productivity is very hard to measure.

    Nonsense. Just set up a free market in labor — without, that is, the huge number of strings and wealth-redistribution schemes imposed on it by modern machines like unions or government — and watch what people get paid. Since paying people for their work is entirely a voluntary activity, and “productivity” by definition means “what your work is worth to others” then what people are paid in a free labor market tells you to four decimal places their relative productivity.

    You’re certainly right that’s it hard to “measure” theoretically, i.e. deduce from first principles of what people Ought To Be Paid. That’s what gets the Marxists tied up in knots. But it’s a snap to measure empirically.

26. Pete, I really don’t think things are sinking in. If one person works 50 hours a week and another person works 10 hours a week doing the same sort of work at the same rate, should they be paid the same? Suppose you have two salespeople, one sells $300k per month and the other only $60k per month, should they be paid the same?

    We keep pointing out that there are huge productivity differences between workers, and you keep ignoring those arguments.

    The dramatic growth of such companies from a couple of people in a garage to a multi billion dollar company is more of a productivity transfer from competitors than a productivity gain. The productivity gain proportion (added value) is what Jobs is entitled to.

    Nonsense. At the time Apple was founded there wasn’t a PC industry. There wasn’t a smartphone industry. There wasn’t an MP3 player industry. There were no markets much less competitors to “transfer” from.

    Remember you claimed:

    The average variation in productivity between individuals is actually not that great, it is far, far less that variation in incomes would suggest.

    We’ve shown in many different ways that yes, variation in productivity is indeed that great. Be it the CEO versus his gardener or the guy that does the billing so 200 other people can look busy, there really are vast differences in productivity.

27. However, a company that produces the same product that is 10% cheaper than the competition can still only justify a 10% increase in wages

    This is static thinking in a dynamic world. To continue Karl’s point you have a number of variable which are not all linear.

    Money is a signal that should equate to productivity. When it doesn’t that means competition is being thwarted. Nobody in any sector of the economy can earn more than they produce or are worth when you have competition which brings everything in line. The political parasite is all about anti-competition.

    Focus on free competition and political positions become extremely easy to define.

28. There are really only three ways to create wealth

    Actually there is only one way. Free trade. Each trader has given up something of value for something of greater value. Wealth has just been increased.

    Harvest, make or create… These are all cases of trading with oneself. Your time and energy are valuable assets that can be traded for things you find to be of greater value.

29. Adding to your point, ken, “harvest, make or create” leaves out the much-hated but invaluable middleman: the trader, or facilitator of trade. The banker, the translator, the merchant ship captain, the leader of a camel carvan, the soldier in the fort on the trade route, and so forth. These all facilitate or perhaps one might say catalyze the creation of wealth, and we shouild not neglect their contribution.

30. “a company that produces the same product that is 10% cheaper than the competition can still only justify a 10% increase in wages”

    Good grief, Pete, what strange math.

    Sorry, I thought it a given that this was the wage bill for the company and that how that wage bill got split up was a completely different question (hopefully based on productivity).

31. Pete, I really don’t think things are sinking in. If one person works 50 hours a week and another person works 10 hours a week doing the same sort of work at the same rate, should they be paid the same? Suppose you have two salespeople, one sells $300k per month and the other only $60k per month, should they be paid the same?

    We keep pointing out that there are huge productivity differences between workers, and you keep ignoring those arguments.

    A couple of data points does not a general theory prove. Personally I have rarely seen productivity differences between people greater than about 10:1, with 2-3:1 being far more common. Those people who do exceed that 10:1 productivity ratio are usually doing it with a lot of help.

    I can not see that the 50 verse 10 hour working comment has anything to do with anything. Sure a person who is unemployed likely has a very low productivity, but I had sort of thought that would be considered a somewhat separate issue.

    With you $60k verse $300k sales person argument, just how common is such disparity? If we considered say a car sales yard, I would expect the average disparity between car sales people at a given place to generally be significantly less than this. Margins also vary dramatically between industries, for some the margin for sales people is very small (Amazon, Kmart, etc., come to mind), for others it can be very high. The cosmetics industry, for example, generally has something like a 30x multiplier between product cost and selling cost, though there the product being sold is more the marketing hype, not the physical product as such. Point being, how much a sales person sells is not necessarily a good indicator of productivity.

32. “unfortunately actual productivity is very hard to measure.”

    Nonsense. Just set up a free market in labor — without, that is, the huge number of strings and wealth-redistribution schemes imposed on it by modern machines like unions or government — and watch what people get paid.

    That is exactly what I am advocating, however I am suspicious that wealth redistribution is far more subtle and significant than most people realize, making it next to impossible to evaluate productivity based on market valued income alone. Yes in a free and ideal labor market income is a direct measure of productivity, but for this to be used as a measure of productivity the given market must actually be free, how does one know it is free? What I was suggesting was some external method of assessing productivity, as this could then be used to determined the freedom of labor markets, and hence reveal the parasites.

    In hindsight, Einstein was productive to a degree that far exceeded his remuneration – that was obviously not a free market. But one of the things that perfect free markets require is perfect information.

    Many thought that the greatly increased productivity derived from the coming of the computer age was backing the high economic growth of the past few decades. It turned out that the coming of the computer age brought far less productivity than people thought – it was just a bubble. If income was a fair measure of productivity, there would be no bubbles. Productivity is notoriously difficult to measure, even economists tend to say that productivity is notoriously difficult to measure.

33. At the time Apple was founded there wasn’t a PC industry. There wasn’t a smartphone industry. There wasn’t an MP3 player industry. There were no markets much less competitors to “transfer” from.

    In a free market, where income is a direct indicator of productivity. Steve Jobs’s income should be equal to the productivity he adds to Apple products. Ideally, every Apple employee should be remunerated with a sum equal to the productivity they add.

    While there are many important distinguishing features, the vast majority of what goes into an iPhone also goes into other cell phones. These common technologies is what I was referring to with regard productivity transfer (for want of a better term). If some other phone had come along instead of the iPhone, those common productive elements would have gone into it instead. Productivity improvement, which warrants the big bucks, is about added value, not common value.

    Companies that increase global productivity I think should get the big bucks, with the bucks distributed to employees in accordance with productive input. It is those that get the big bucks without adding productivity that bother me. And they are many and I suspect they make up a large proportion of the world’s income disparities (the unproductive kind of income disparities).

34. Yes, middlemen make things happen and are too much maligned.

    [a free market in labor] is exactly what I am advocating

    This suggests there’s some talking past each other going on.

    …not having wealth accumulate in individuals disproportionately to there productive output

    As long as disproportionate is not defined by some demagogue I can go along with that. Things are never perfect. But I’m awful suspicious when people like middlemen and creators are maligned. Generally people get the pay they DEMAND. If they don’t demand they deserve less. Life isn’t fair and you can’t legislate it to be. I don’t think hollywood or sports figures are worth millions but that what they can demand.

    Pete, you can’t hold to the belief that ALL PRODUCE EQUAL (sounds marxist) when that is obviously not the case. MANY PRODUCE EQUAL I can accept, but not ALL. Even among the many there is often quite a disparity. One to ten in programmer productivity is well documented. I used to produce more than the total of any three other programmers on my team for years according to records even when they weren’t always the same programmers over time. It was a $70k to $100k job (multiuser client server with over a million lines of code) for which I got paid $40k with no health insurance or other benefits. I left that company for a better opportunity and hired back a year later. That’s what I got for being fat and ugly. Another one of those sad realities when you work for others rather than for yourself. Changing the truth to fit a desired reality is a mental disorder.

35. Productivity improvement, which warrants the big bucks, is about added value, not common value.

    You can’t look at two different things and say the people buying one over the other are nuts. They might be nuts, but they decide the value of a thing (when they freely purchase rather than having a government decide what they can or can not purchase.)

36. BTW, I did get the $70k for the one year I was away from that $40k per year company. Oh well, life and all.

37. I was also supposed to get 5% of the multi-million dollar company my twenty something friend created. Instead I got a 2000 Avalon and a sad story which I’m not going to go into.

    My twenty something friend that owned the company made bad decisions I had to live with. Is he worth millions? Yes he is. Do I deserve the sad story. Yeah, if I’d been smarter I could have changed the results.

    Coulda, shoulda, woulda.

38. “Productivity improvement, which warrants the big bucks, is about added value, not common value.”

    You can’t look at two different things and say the people buying one over the other are nuts. They might be nuts, but they decide the value of a thing (when they freely purchase rather than having a government decide what they can or can not purchase.)

    Indeed, the market decides. Investors will only accept remuneration above normal if that higher remuneration is justified by higher productivity. However bubbles greatly confuse productivity, as do government sanctioned monopolies.

39. That is exactly what I am advocating, however I am suspicious that wealth redistribution is far more subtle and significant than most people realize, making it next to impossible to evaluate productivity based on market valued income alone.

    Pete, WHAT IS THE REASON FOR YOUR SUSPICION? You are basically saying that everyone should be should be paid around the same level of compensation, even though some people build $300 billion dollar companies and some people trim azaleas.

    If you don’t have a reason, then why should I care? Your beliefs become a quirk, much like someone who always washes their hands twice or doesn’t step on cracks in the sidewalk.

40. Pete:

    If you say:

    “Productivity is notoriously difficult to measure, even economists tend to say that productivity is notoriously difficult to measure.”

    Then how could you say:

    “The average variation in productivity between individuals is actually not that great, it is far, far less that variation in incomes would suggest.”

41. It seems that the Wisconsin unions have agreed to the cost increases for the benefits (or, at least, they say they will) so long as their ability to collectively bargain remains untouched.

    Let’s stipulate for the moment that this is the case and they will do that – they will agree to the amounts Walker says they have to contribute to their pension and healthcare provided they retain the ability to collectively bargain. If so, then the debate has been sharpened: now it’s over whether or not public unions should have the ability to collectively bargain.

    Let me play Devil’s Advocate because while I’ve seen lots of discussion as to how that COULD be abused, the question is: So what? That’s true in a lot of cases.

    For example, police can abuse their power by picking on a citizen who blew the whistle on a fellow officer.

    The Patriot Act can be abused to allow the Feds to spy on US citizens.

    In the public union debate, from what I gather, the problem is that it’s POSSIBLE that a union could help a politician get elected and then expect that politician to favor the union over the taxpayer.

    As is usual in these debates what we really need is hard data. There HAVE been cases of police officers abusing their power – and getting away with it. But as a society we haven’t chosen to curb their power that much. We CLEARLY, as a society, make choices all the time between cost/benefit – an unrelated example is that we are willing to accept the yearly death toll on the highways for the ability to use our cars. That’s how life is – there are no perfect solutions.

    How often have public unions bought and paid for elected politicians and from that, gotten what they wanted?

    Are there states that have substantial public union collective bargaining where it has *not* been abused? Which happens more often?

    Does it happen often enough to make the debate warranted:
    to take the ability to collectively bargain away from the public unions? What’s the data?

    One source I’ve read is the Cato Institute which claims:

    “Defined benefit pension plans are available to about four-fifths of state and local workers but just one-fifth of private workers. And public sector plans are typically about twice as generous as remaining private plans.”

    Ok if this is true, how is it that it came out this way? Was it because of bought and paid for politicians? Or are there other factors?

    Is it enough, to justify removing collective bargaining, that it CAN be abused?

    In my search for hard data I’ve found differing numbers regarding what states have what system. Best I can find is from the Cato Institute:

    “About 26 states have collective bargaining for essentially all state and local workers. A further 12 or so states have collective bargaining for a portion of their state and local workers, and the remaining 12 states do not have public sector collective bargaining. At the same time, 22 states have “right-to-work” laws, which free workers from being forced to join a union or pay union dues.”

    And Walker is not calling for total eradication of the affected Union’s collective bargaining. From the AP:

    “Walker’s plan would allow unions representing most public employees to negotiate only for wage increases, not benefits or working conditions. Any wage increase above the consumer price index would have to be approved in a referendum. Unions would face a vote of membership every year to stay formed, and workers could opt out of paying dues.”

    If the CONCEPT of public union collective bargaining (CB) is bad from a principled point of view, why is it ok to allow wage CB but not benefit CB? Is it ONLY because the benefits are where the money is? If so, is that really a principled argument?

    Is Walker using the budget crisis to bust the union? Looks that way. Is that a bad thing? Maybe not if there’s no causal connection between collective bargaining and the budget crisis.

    Once again – I’m playing Devil’s Advocate here. Bear that in mind if you feel the urge to get snarky.

42. It’s nice to see someone get back on topic.

    How often have public unions bought and paid for elected politicians and from that, gotten what they wanted?

    In California, just about each and every time. If you want to understand California’s biggest (though not only) problem, that’s it. Especially teachers and prison guards.

43. As is usual in these debates what we really need is hard data.

    I don’t think so. You’re comparing apples to oranges. In the case of giving certain men who wear uniforms and badges (cops) the power to do violent things to citizens, things that are ordinarily crimes, we (the public) balance a benefit to the public (public safety) against a cost, again to the public, of abuse of power.

    What is the benefit to the public of collective bargaining rights for public employees? Zero. The benefit accrues entirely to the individuals — e.g. cop and firefighter retirees — and the cost is borne by the public. Privatizing benefits and socializing costs: always a recipe for disaster.

    We don’t need any data that show it has actually happened before we act, any more than we need to experience being inside the house when it burns down to buy a smoke detector.

44. Pete, WHAT IS THE REASON FOR YOUR SUSPICION? You are basically saying that everyone should be should be paid around the same level of compensation, even though some people build $300 billion dollar companies and some people trim azaleas.

    Personally I would like to see innovative CEOs and what not who greatly add to the productivity of the worlds remunerated far more than they currently are. My suspicion is that there are a great many subtle monopolies going on, due to excessive government intervention, that lead to a lot of remuneration that is disconnected from productivity. I am suspicious of this to such an extent that I suspect that having a more open and free labor market would actually reduce average income disparities. The financial sector reaping the profits while the tax payers pay the losses being but one example. Government bailouts in general being a prime example.

    But until there is hard data, all I have is suspicions. But how can one separate out productivity and government distortion of the market place?

45. “We don’t need any data that show it has actually happened before we act, any more than we need to experience being inside the house when it burns down to buy a smoke detector.”

    Wrong. In the case of the house burning down you have the experience..of other houses burning down (or maybe one of your own). It actually happened – you *have* the data. Smoke detectors sell because people have the hard data that people HAVE died when the house caught fire while they were asleep. When cheap smoke alarms were invented they sold because people had the data.

    No one would buy smoke detectors if edifices didn’t burn down and/or if people hadn’t died in their sleep because they didn’t have a smoke alarm (for example).

    But if you don’t like that example then there’s the Patriot Act example. More to the point – you are arguing on the periphery: both of those examples were only placed there – not as central cores to the question at hand – but only as examples of the populace accepting risks of abuse for the greater good.

    “What is the benefit to the public of collective bargaining rights for public employees? Zero. The benefit accrues entirely to the individuals — e.g. cop and firefighter retirees — and the cost is borne by the public.”

    This is a very good question – glad you introduced it into the debate. DA in action:

    What is the benefit to the public of private union CB? The public gets to pay higher prices for the articles. The private union members certainly benefit. Does the public get a better product? I don’t know. I sort of doubt it.

    You may say that the public at least has the right to choose to NOT buy that article, or buy from a non-unionized shop and so there’s a difference. And that’s true. But that is no real benefit (or negative) to the public. Is there a benefit to the public conferred by private unions that is not by public unions? I only bring up private unions because you specifically said “public”.

    “Privatizing benefits and socializing costs: always a recipe for disaster.”

    Terms like “always” peg my skeptic-meter. But I’m willing to be convinced. But the actual convincing needs to be done.

    Just to be clear on your meaning: you use the phrase “recipe for disaster”. That phrase doesn’t attempt to say that disaster ALWAYS happens, or even “usually happens”. Only that it sets up the possibility of a disaster. Is that how you meant it?

    If you meant it sets up the possibility for disaster and that’s all, then one has to know: Has it ever NOT resulted in disaster? If so, what fraction of the times it was fine vs a disaster? It it happens once out of a thousand times, then is it really a problem?

    If you meant “always a disaster” then you are doing the thing which I started this thread to actually clear away – making a blanket statement without a rationale and without data without proof. Prove it. You just saying it doesn’t make it so. It is not self-evident. At least not to me.

    I’m hoping we can prove it, actually.

    If it’s ALWAYS a recipe for disaster then do you see a problem with Walker allowing CB on wages? Are you bothered that he is happy to exclude the police and firefighters? You seem to be bothered by that since you used them as examples. Is that a mistake on his part?

    And THAT is the whole point of my playing Devil’s Advocate on this. LOTS of people are saying “Well it’s bad and it sets up conflicts of interest”. And I can certainly see how it might. But what are the risks? How often does it happen?

    Is that the only problem (conflicts of interest)? Are there other reasons why public CB it’s not a good idea?

46. This is much more like what I’m looking for:

    ” In 1943, a New York Supreme Court judge held:

    To tolerate or recognize any combination of civil service employees of the government as a labor organization or union is not only incompatible with the spirit of democracy, but inconsistent with every principle upon which our government is founded. Nothing is more dangerous to public welfare than to admit that hired servants of the State can dictate to the government the hours, the wages and conditions under which they will carry on essential services vital to the welfare, safety, and security of the citizen. To admit as true that government employees have power to halt or check the functions of government unless their demands are satisfied, is to transfer to them all legislative, executive and judicial power. Nothing would be more ridiculous.”

    Rand’s posting “Collective Bargaining In The Public Sector” points to articles that provide what I’m after. Over to there….

47. the problem is that it’s POSSIBLE that a union could help a politician get elected and then expect that politician to favor the union over the taxpayer.

    No it’s more than that, the problem is it’s a clear conflict of interest, regardless of the outcome. Unions help elect the people they bargain with. This is not some kind of gray area. It’s about as black and white as you can get.

Comments are closed.