Some Chicago Boyz know each other from student days at the University of Chicago. Others are Chicago boys in spirit. The blog name is also intended as a good-humored gesture of admiration for distinguished Chicago School economists and fellow travelers.
TM Lutas The invaluable XKCD strikes again with an examination of money.
I think their bias might be showing a bit though, they have an order of magnitude error on GOP campaign finance spending in 2010. They added 3 zeroes onto the GOP actual expenditure. I *wish* the GOP had that much money to throw around.
The Greeks do not need Germany to come bail them out. Russia was in something of a similar situation in the mid-1800s and resolved their financial and strategic difficulties by selling Alaska to the United States. At the time Russia feared that they had to sell Alaska or lose it to British Colombian expansion.
There are over 6,000 islands in Greece of which only 227 are inhabited. These 5500+ are all assets that could be used to satisfy Greece’s debts either by concession, Hong Kong style, or outright sale as Russia’s Alaska holdings were sold. At the very least this is an option that should be talked about. Strategically, a sale could be offered to France, Italy, or the UK (I do not believe the US would be interested) that would create interesting possibilities of introducing a buffer state between the remaining Greek Aegean territory and Turkey. The islands themselves may or may not be worth much but their economic zones, fisheries, and resource possibilities are intriguing.
The idea ultimately may turn out to be insufficient by itself to save Greece. But you really don’t know until you present the idea and so far nobody seems to be pursuing it. I find it odd that a proven method for raising money that does not require default or endanger the EU is not even on the table for consideration.
There seems to be a lot of oppositional thinking about labor and capital. I’m not sure that this is conducive to clear thinking and wonder if putting them on a continuum would lead to more productive solutions to everybody’s problem, how to make money.
In the cycle of producing stuff and serving customers, the later you get paid, the more the risk you won’t get paid at all. To take hindmost position, the capitalist takes the greatest risk and consequently reaps the greatest reward. Flipping over the coin, the sooner you get paid, the less you get paid because your payment is a surer thing and thus you don’t get as much in risk compensation. So the common stockholder gets the biggest rewards and is paid last, preferred stockholders get paid earlier, but their payments tend to be less, ditto bondholders.
Labor is, by definition, made up of people who are paid in advance of sales and regardless of whether there is a profit made of the fruits of their labor. The laborer gets paid first, even more so than the bondholder or the preferred stockholder. But just like the bondholder and the preferred stockholder, getting to the head of the payment line has a price.
Now if you’ve got no reserves, I can see the need to be paid right away. But after age 30 when you’ve got some money put away and could afford to not be paid immediately, would deferring compensation either in part or in whole make sense? In terms of the enterprise you would be reducing the capital requirements to produce and reducing the risk that the capitalist has to take. Payroll would drastically shrink and payout would be in shares as sales came in. Capitalists would have a shrunken role in the enterprise because they would only have to fund the land and the tools. In terms of worker attitude, you would be strongly aligning worker interests with increasing sales in order for their back end compensation to come through. To some extent, these workers would cease to be labor.
Labor would become a phase you went through as a kid, if your family couldn’t stake you to a more normal working arrangement, or right after a bankruptcy, because you’d exhausted your reserves and couldn’t afford to wait for your pay anymore. It might also be something you would do if you lost faith in your company’s future but hadn’t found another position at a different company yet. It could also be used as a weapon, punishing management by demanding to be paid on the front end or the back end and driving up costs by shifting quickly from one to the other.
Would firms accept a lower capital cost and a better incentivized work force in exchange for the risks? I suspect that some would be amenable to it but we’ve gotten so stuck in the rut that labor is paid first and hit with the penalty of not taking part in the risks of the firms that it just hasn’t been considered an option.
Do you believe in communism? In its most technical sense, communism is the idea that bureaucrats can reasonably control production and distribution to provide adequate supply and avoid shortages. At this point, most people say no, they don’t believe, and for good reason. The quest to find a sustainable government system of production that didn’t break down has consumed decades, untold lost production, and created a river of blood as the need for scapegoats of this system’s failure consumed millions of lives.
Do you believe that there is an exception for drug production communism? The US Government thinks there is. In the 1970s it established the current production quota system, a system that is currently in the middle of breaking down as shortages pile up. It is unabashedly communistic with the Attorney General in charge of both overall production numbers of Schedule I and II drugs and List 1 chemicals as well as assigning individual company quotas on a yearly basis.
As virtually anyone with a brain could predict, the system lasted for a while and is now breaking down amidst a growing number of shortages. About 1 in 5 medical practitioners knows of circumstances where these increased shortages have adversely affected patient outcomes. It is unlikely we are going to ever get an accurate body count of this drug communism. Nobody is going to want to open themselves up for liability if they are a private practitioner and no bureaucrat is going to want to turn over this rock because of its political implications.
Fortunately, over the next two years, these regulations are going to finally come under review. So as a practical matter we’re going to have an answer to my title question, do you believe?
Well, do you?
What are the common interests of workers? Do present worker associations, unions, further those goals? This is the heart of any real examination of labor but I can’t recall reading anybody seriously addressing the question.
Workers, in general, have an interest in labor being in short supply relative to jobs in order to drive up the cost of labor. They have an interest in having effective, portable lifetime education available to them at affordable or even free rates. They have an interest in being able to get decent medical care. They have an interest in not being shackled to an abusive employer for any reason. They have an interest in being able to retire from work before their bodies or minds give out and have a dignified retirement that cannot be taken away by anyone.
How do today’s unions stack up in terms of satisfying workers’ interests? I don’t think that they stack up well at all. Unions do create labor supply shortages but it’s on a firm-by-firm basis, forcing employers to exclude non-union dues paying members from employment. If you are not a member, you’re not a real worker in their eyes. Unions provide health insurance through employers but the way that they do it shackles employees to their employer. Union educational programs are not generally portable or accredited or open at all to any sort of healthy competition. And with the coming crackup in Medicare and Social Security, a whole generation of workers is going to feel the betrayal in their pensions.
A worker association that offered accredited education standards and classes meeting those standards would be far superior to present. An association that worked hard to create labor shortages for everybody would raise wages while improving the whole economy. An association that backed associational healthcare would remove the shackles from a lot of workers. And an association that supported a Chile style retirement system would be able to sustainably keep faith with our elders as far as the eye could see.