A Geek With Guns

Chronicling the depravities of the State.

Archive for the ‘Basic Economics’ tag

Solve the Housing Shortage by Making Houses More Expensive

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California is suffering from a decades long housing shortage. This shouldn’t surprise anybody. The regulatory burden in California has been increasing along with the population, which has made new construction more expensive than it otherwise would be. But instead of working to relieve the shortage by allowing homes to be built for less, the California bureaucrats have decided to make building new homes even more expensive:

On Wednesday, the California Energy Commission approved a set of standards that will require most new homes built in the state after 2020 to include solar panels on their roofs.

The standards (PDF) apply only to single-family homes and certain low-rise condos, townhomes, and apartments. Exceptions are made for homes with roofs that would receive excessive shade during the daytime or homes with roofs too small to benefit from a few solar panels.

The last two exemptions are interesting because they have the potential to change how houses are predominantly built in California. I foresee a trend in small roofs and heavy shading.

This legislation is also, rather obviously, aimed at coercing a preference for high-density residential. While that may make sense in an extremely dense urban area like Los Angeles, it doesn’t make sense to implement such a requirement statewide since much of California is actually rural and therefore space isn’t at a premium. However, bureaucrats are seldom aware that the existence they experience in their capital city isn’t the experience of everybody in their state, which is why centralized planning always turns into such a fiasco.

Written by Christopher Burg

May 10th, 2018 at 10:30 am

Consumers Always Lose Trade Wars

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Trade relations between the United States and China had been relatively smooth in recent years. Had is the keyword there. Trump decided to provide some protection to his cronies by implementing a series of tariffs to artificially raise the price of imported goods. He sold these tariffs as job creators. Not surprisingly, China retaliated with its own tariffs. Now Trump is planning to retaliate against China’s retaliation with even more tariffs:

US President Donald Trump has instructed officials to consider a further $100bn (£71.3bn) of tariffs against China, in an escalation of a tense trade stand-off.

These would be in addition to the $50bn worth of US tariffs already proposed on hundreds of Chinese imports.

China’s Ministry of Commerce responded, saying China would “not hesitate to pay any price” to defend its interests.

Tit-for-tat trade moves have unsettled global markets in recent weeks.

Governments and their cronies are the only winners in a trade war. Tariff profits go into government coffers while domestic cronies can increase their prices since goods from their imported competitors are now artificially higher. Meanwhile, consumers are forced to pay artificially higher prices for goods. If, for example, a $100 tariff is put on all imported cell phones, the government pockets an extra $100 and you pay $600 for a cell phone that used to only cost $500.

As this trade war wages, consumers are going to get raked over the coals. The only upside is that in the end this will screw over the United States government as well since it will lose tariff profits when imported goods become so expensive that consumption drops significantly.

Written by Christopher Burg

April 6th, 2018 at 10:30 am

What Do You Do for Money, Honey

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There ain’t no such thing as a free lunch. In this new App Store economy where users are often unwilling to pay even $5.00 for an application, developers have been looking for ways to make ends meet. In-app advertising was one model that was tried but the payoff tended to be subpar. Many game developers shifted to a model based on convincing players to make a bunch of in-app purchases. While that model has been very profitable for game developers, it has been hard to make that model work in non-game applications. Now some developers are experimenting with embedding crypto-currency miners in their software:

The app is Calendar 2, a scheduling app that aims to include more features than the Calendar app that Apple bundles with macOS. In recent days, Calendar 2 developer Qbix endowed it with code that mines the digital coin known as Monero. The xmr-stack miner isn’t supposed to run unless users specifically approve it in a dialog that says the mining will be in exchange for turning on a set of premium features. If users approve the arrangement, the miner will then run. Users can bypass this default action by selecting an option to keep the premium features turned off or to pay a fee to turn on the premium features.

I actually like what Qbix is doing. Users are given options for using advanced features. They can either make a one time payment of $17.99, a monthly payment of $0.99, or allow the application to mine Monero in the background. If the user doens’t like any of those options, the advanced features are disabled but the users are otherwise free to use the application.

Two of the biggest problems I have with the advertising model that powers much of the Internet and some applications are the lack of transparency and the lack of options. Websites and applications that collect user information to provide to advertisers often don’t disclose that they’re collecting information or, even if they do, what kind of information they’re collecting. Moreover, users seldom have the option of paying the developer to disable the data collection. Displaying advertisements also introduces a major malware vector. Numerous advertising networks have been highjacked into serving malware to users. Crypto-currency miners don’t require collecting user information and are harder to turn into malware vectors than advertising networks. The cost is electricity consumption due to high CPU usage, which is why I still appreciate developers who provide an option to pay to disable their crypto-currency miners.

Written by Christopher Burg

March 13th, 2018 at 10:00 am

Censorship Is Good for Business

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A lot of popular websites have begun increasing the amount of user content they censor. This post isn’t going to devolve into a freedom of speech rant. I believe that private companies have every right to decide what they will and will not host on their websites. This post is going to be discussing an interesting economic phenomenon related to censorship.

I think many of the people who have been pushing sites like Facebook, Twitter, Discord, and YouTube to more heavily scrutinize user content honestly believe that if those companies remove content, that content ceases to exist on the Internet. While the content ceases to exist on those websites, it can be uploaded elsewhere, which creates a business opportunity for competitors of those websites.

The users being censored will seek another way to publish their content. These users become a new potential customer base that didn’t previously exist. Entrepreneurial types can profit from this by attracting that customer base with an offer to exercise less scrutiny over user content.

Online censorship doesn’t remove content, it merely shifts revenue. While YouTube may stop hosting a video, one of its competitors may be willing to host it or an entrepreneur may decide to start a website that is geared towards hosting content that has been censored by YouTube. Whoever ends up hosting the censored content stands to make money that YouTube is no longer making.

This phenomenon is nothing new though. Censorship has always been good for business. Whenever a publication has refused to publish something, another publication either stepped in or was created.

Written by Christopher Burg

March 2nd, 2018 at 11:00 am

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I Am Altering the Deal

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I have a theory that the biggest threat a government poses to an economy isn’t any specific set of regulations but constantly changing regulations. One day your business venture is perfectly legal, the next day it’s illegal:

The 2015 Butte wildfire had ripped through nearly 71,000 acres in Amador and Calaveras counties and left millions of dollars in damages behind. More than 900 structures were destroyed in the two counties, according to Cal Fire. Some residents left the community, deciding not to rebuild.

County supervisors embraced legalizing cannabis as a way for the local economy to generate revenue that could help it recover. Enticed by cheap land and friendly laws, the rural county of 45,000 people saw an influx of pot growers.

Not long after, however, anti-pot supervisors, including Mills, were elected to the five-member board. They had promised to ban cultivation in Calaveras County. In January they scored a victory with a 3-2 vote ordering growers to cease operations by June.

With a single vote a bunch of perfectly legal businesses became illegal. While the farmers are talking about suing, they won’t be able to operate their farms during the lawsuit, which could last years, and may not win anyways.

I think this story also explains the obsession most business ventures have with maximizing profits at all costs. Anti-capitalists like to blame capitalism for this obsession but any capitalist would tell you that maximizing long term profits is a better way to maximize overall profits… unless you’re operating in an environment where your business might be declared illegal overnight. I’m of the belief that business ventures are obsessed with short term profits at all costs, at least in part, because they have no idea what the rules regulating their business will be tomorrow. You can’t make any realistic long term goals when you don’t know what the rules will be tomorrow, in a month, or in a year.

This story will likely incentivize cannabis growers in California to maximize short term profits and give little through to long term profits. And when they do, anti-capitalists will blame capitalism instead of the real culprit, government.

Written by Christopher Burg

March 2nd, 2018 at 10:30 am

Finding Alternatives to Advertisements

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People often make the mistake that many webpages are free but there ain’t no such thing as a free lunch. Most websites still use the age old monetization technique of displaying advertisements. However, advertisements quickly evolved from relatively safe static imagines. They started becoming more annoying. Imagines turned into animations. Animations turned into full video that also played sound. These “enhancements” also requires clients to run code. Needless to say, users started getting annoyed and their annoyance lead to the creation of browser plugins that block advertisements.

Online advertising has turned into an arms race. Website visitors use an ad blocker, advertisers create a method to bypass ad blockers, visitors upgrade their ad blockers to bypass the bypass, and so on. This is leading a lot of people to question whether the online advertisement model can remain feasible. Fortunately, some websites that rely on online advertisements have begun experimenting with alternative revenue sources. Salon, for example, recently launched an experiment where visitors blocking advertisements are given the option to run cryptocurrency mining code in their browser:

Salon.com has a new, cryptocurrency-driven strategy for making money when readers block ads. If you want to read Salon without seeing ads, you can do so—as long as you let the website use your spare computing power to mine some coins.

If you visit Salon with an ad blocker enabled, you might see a pop-up that asks you to disable the ad blocker or “Block ads by allowing Salon to use your unused computing power.”

A lot of people are pissed about this but I, possibly for the first time ever, actually agree with what Salon is doing.

Unlike a lot of sites that are experimenting with running cryptocurrency mining code in visitors’ browsers, Salon is being entirely transparent about doing so. If you visit the site with an ad blocker enabled, you are presented with a very clear option to either disable your ad blocker or run cryptocurrency mining code. If you choose the latter, your computer’s fans will likely kick on as your processor ramps up.

I doubt browser based cryptocurrency mining will be a viable alternative to online advertising. Cryptocurrency mining, as the linked article shows, requires a lot of processing power. On a desktop that isn’t much of a concern. On a laptop or other battery powered device, that increased processor usage will drain the battery quickly. With more computing being done on battery powered devices, anything that noticeably reduces battery life will likely anger visitors. But I’m happy that websites are finally exploring alternatives to advertisements. It’s clear that visitors aren’t happy with the current state of the online advertising model. If website operators want to continue being profitable, they need to find a way to raise money that their visitors find acceptable.

Written by Christopher Burg

February 15th, 2018 at 10:30 am

Look at All the Economic Stimulus

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A lot of statists cheered when it was announced that the Super Bowl would be coming to Minneapolis. Not only would Minneapolis have the honor of hosting the larger religious festival of the year but its piousness would be rewarded with untold riches from a million, err, 125,000 visitors hurling cash at the local establishments!

As it turns out, the fantastic economic stimulus that was promised was just that, fantasy:

Restaurants along Nicollet Mall and at the Mall of America saw plenty of traffic, but many eateries located away from those immediate areas reported quiet weeks as regular customers stayed at home to avoid the expected Super Bowl bedlam. Downtown Minneapolis skyway eateries also saw customer counts dwindle as the week went on as more downtown workers stayed away from the office and worked remotely.

Super Bowl week was “the worst week ever for us,” said Brenda Langton, co-owner of Spoonriver, located by the Guthrie Theater and just blocks away from U.S. Bank Stadium, site of Super Bowl LII. Sales were down by 75 percent.
Langton also voiced frustration that the media repeated claims by the Minnesota Super Bowl Host Committee that the Super Bowl would draw 1 million visitors, a number that turned out to not reflect the actual number of out-of-towners coming to the area. The big-number prediction wound up scaring office workers and suburban diners away from crowds that never existed, she said.

“The media needs to stop putting the fear of God into everybody and understand that other cities have weathered [the Super Bowl] just fine and not to terrify everyone,” Langton said. “I just want to have people come back downtown and get over the Super Bowl. It was very good for a few people and that’s what happens.”

PinKU Japanese Street Food, a quick-service Japanese restaurant in Northeast Minneapolis, had some of its slowest days of business ever during Super Bowl weekend, said Co-founder and Head Chef John Sugimura On Super Bowl Sunday, for example, the restaurant made just $303, only 15 to 20 percent of its typical Sunday revenue.

While the entire article lies behind a paywall, it’s not a very effective one. Just disable JavaScript for the domain and the story will display. You can also find the contents of the article in the page’s source code.

This news is only surprising to the economically ignorant. Stadiums and large events don’t create wealth. The most they do is shift wealth around. Money that individuals would have spent on other forms of entertainment are instead spent on attending stadium events. Moreover, large events can run the usual customer base out of town. If I’m an employee working near a stadium and want to grab a quick lunch, I’m going to likely avoid any restaurants in my area during stadium events because I’m worried that they’ll be too busy for me to get served within the block of time I have.

The security large events like the Super Bowl employ can also scare people away. I, for one, have a policy against attending events that require military hardware to defend. Any event that’s thought to be a big enough target to warrant such security is riskier than I want to bother with. I also have a general distain for militarization in general so even if the risk isn’t high enough to warrant the security, I don’t feel like living the life of a poor bastard in an occupied foreign city even for only a few hours.

So stadiums and large events merely shift wealth around. A few establishments will enjoy a significant windfall but they are the exception that proves the rule. Most establishments will notice, at most, a minor increase and oftentimes they’ll suffer a notable decrease in business.

Written by Christopher Burg

February 9th, 2018 at 10:00 am

Value is Subjective

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A lot of libertarians falsely believe that there is such as thing as intrinsic, or natural, value. People who believe gold has intrinsic value will spout off the industrial uses that gold has. But all value is subjective. What may be worth a great deal to one person may be entirely worthless to another. For example, lithium may be very valuable to a company that builds batteries. Lithium may also be valuable to people who sell resources to battery manufacturers. Lithium will likely be seen as worthless to a hunter-gatherer tribe in the Amazon which neither knows about batteries or selling resources to manufacturers.

What may be the best example of the subjectivity of value though are “precious” gems:

RIGHT NOW, IN A VAULT controlled by the Los Angeles County Sheriff’s Department, there sits a 752-pound emerald with no rightful owner. This gem is the size of a mini­fridge. It weighs as much as two sumo wrestlers. Estimates of its worth range from a hundred bucks to $925 million.

$100 to $952 million is quite the range.

“Precious” gems are a good illustrator of the subjectivity of value because their primary use is decorative. While some gems, such as diamonds, have a plethora of industrial uses, others are used far less. But many people find them pretty and the simple fact of being pretty can make something extremely valuable in the eyes of some.

I would certainly value a 752-pound emerald higher than $100 because novelty is worth something to me but I wouldn’t value it anywhere near $1 million, let alone $925 million.

If value is subjective, how can the value of something be determined? Through the market. The amount something can be sold for is its value. The iPhone X, for example, is worth $999.00 for the 64GB model and $1,149.00 256GB model. While I personally don’t view either model to be worth their respective prices, I feel safe in saying that they’re priced appropriately because they’re flying off the shelves.

Written by Christopher Burg

January 3rd, 2018 at 11:00 am

The Cure to Inflation Must Be More Inflation

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What happens when you give dictatorial powers to somebody who is entirely ignorant of economics? Socialism:

CARACAS (Reuters) – Venezuelan President Nicolas Maduro announced a 40 percent increase to the minimum wage as of January, a move that will foment what many economists already consider hyperinflation in the oil-rich but crisis-stricken nation.

Inflation is getting out of hand, what should we do? I know! We’ll increase the minimum wage! That’ll fix it!

Every proponent of a minimum wage is ignorant of the fact that mandating a minimum wage doesn’t actually increase anybody’s purchasing power. When you mandate a minimum wage you guarantee that any work that isn’t worth that minimum wage is eliminated. Teenagers bagging groceries may be worth $2.00 an hour but not $3.00. If the minimum wage is set to $3.00 an hour, those teenagers suddenly find themselves unemployed. The higher the minimum wage is set, the more jobs are eliminated.

In addition to eliminating jobs, minimum wage laws also increase inflation. Some jobs simply can’t be eliminated by a business, which is something many proponents of minimum wage bring up when the above point is brought to their attention. A restaurant can’t operate without cooks (At least not yet. But cost decreases in automation will make such restaurants feasible very soon). If a minimum wage is set to, say, $15.00 an hour but a cook is only worth $10.00, then the restaurant owner has to either close shop or increase their prices. Most restaurant owners will opt for the latter, which means the cost of a meal goes up. Suddenly an $8.00 mean becomes a $10.00 meal and everybody who eats out finds themselves with less purchasing power.

By increasing the minimum wage 40 percent, the Venezuelan government guaranteed the elimination of many jobs and major increases in prices. These two things will only cause the average Venezuelan more misery. But dictators are seldom concerned with the amount of pain the average person has to suffer. Dictators are concerned with enriching themselves.

The Rent Is too Damn High

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Remember Jimmy McMillan, the founder of the Rent Is too Damn High Party?

He wasn’t wrong:

A recent survey by New York councilmember Helen Rosenthal found 12% of stores on one stretch of the Upper West Side is unoccupied and ‘for lease’. The picture is repeated nationally. In October, the US surpassed the previous record for store closings, set after the 2008 financial crisis.

[…]

“It’s not Amazon, it’s rent,” says Jeremiah Moss, author of the website and book Vanishing New York. “Over the decades, small businesses weathered the New York of the 70s with it near-bankruptcy and high crime. Businesses could survive the internet, but they need a reasonable rent to do that.”

Part of the problem is the changing make-up of New York landlords. Many are no longer mom-and-pop operations, but institutional investors and hedge funds that are unwilling to drop rents to match retail conditions. “They are running small businesses out of the city and replacing them with chain stores and temporary luxury businesses,” says Moss.

In addition, he says, banks will devalue a property if it’s occupied by a small business, and increase it for a chain store. “There’s benefit to waiting for chain stores. If you are a hedge fund manager running a portfolio you leave it empty and take a write-off.”

Fucking late stage capitalism!

I wrote that sarcastically but there are people who are saying it seriously. If one only possesses an infantile knowledge of capitalism, it would be easy for them to blame this predicament on capitalism instead of the real culprit, government. The economic system the United States operates under can best be described as government manipulated privately held businesses. While businesses in the United States are nominally private they are heavily manipulated by government. Wealthy businesses are able to hire lobbyists who can influence politicians into massaging the regulatory field. The lobbyists work to create a regulatory field that favors their employers while simultaneously hurting their employer’s competitors. For example, a lobbyist working for Comcast might influence city politicians to raise the cost of the permits required to bury fiberoptic cable. A large Internet Service Provider (ISP) like Comcast can easily soak up those additional permit costs whereas small local ISPs are not able to and thus are forced to go out of business.

This manipulated environment is also a feedback loop. As wealthy organizations are able to push out more and more competitors they are able to become more and more wealthy. As they become more and more wealthy they are able to afford more regulatory manipulation and so on. The inevitable end of this feedback loop is an economy controlled by a handful of wealthy politically-connected players and devoid of small businesses. Banks, as major players in the regulatory manipulation game, recognize this and thus acknowledge that properties occupied or owned by large corporations are far more valuable that properties occupied or owned by individually owned businesses. Property owners going off of the banks’ assessments will let their properties sit empty until a large corporation shows interest in buying or renting it.

Parts of the United States are already reaching the point where individually owned businesses can no longer succeed. Other parts of the United States will eventually reach the same point. The feedback loop will continue until small businesses can only exist in the black market.

Written by Christopher Burg

December 29th, 2017 at 10:30 am