Dey Tuk Er Jurbs

While I understand economics isn’t everybody’s favorite subject of study it’s also not rocket science either (although if you look at some of the magical formulas concocted by Keynesians you might think it is). There is no reason why people today should still believe the myth that automation leads to unemployment. But people still believe it:

The Associated Press has a three-part series on one of the biggest questions business and society will face in coming years.

Are we prepared for a world where 50 to 75 percent of workers are unemployed?

It seems like a ridiculous question, but it’s something economists and technologists say we seriously need to think about. It’s just math.

If you believe this then do yourself a huge favor and read Hazlitt’s Economics in One Lesson. Chapter seven, title The Curse of Machinery, buries this myth under six well deserved feet of ground.

Back when the industrial revolution was in full swing people often cursed automation as the killer of jobs. Then computers came to the market and they were going to render us all unemployed. Now we’re all supposed to be afraid of the job killing robots. In the end every supposed killer of jobs has failed to render everybody unemployed. Instead the employment market changed. People are still needed to do things that machines cannot. Even if we do reach a point where a vast majority of work is performed by robots it will only mean that goods and services will be so incredibly cheap that people will have to perform very little work to afford them. It will also mean that labor will become more specialized and therefore more expensive so an individual could live a very comfortable existence by only working a handful of hours a week, month, or year.

The robots may render specific jobs obsolete but they won’t render everybody unemployed. That’s just history.

For Being an Anit-Gun Paradise California Sure is a Militarized State

California is a hostile place to live if you’re a gun owner. The state is placed number one on the Brady Campaign’s State Score Card list [PDF], which is based on how many stupid gun control laws each state has on the books. You would think that a state so hostile to gun ownership would be a devoid of militarism. But that’s not the case. In fact California lays claim to the only be the only state that I’m aware of where school districts own armored personnel carriers:

News that San Diego Unified School District has acquired an MRAP, or mine-resistant ambush protected vehicle, is adding a new facet to discussions about the practice of giving surplus military equipment to civilian agencies.

The six-wheel Caiman MRAP has an official value of around $733,000. But the San Diego school district paid only about $5,000 to transport it, according to, a website that partners with NPR member station KPBS.

$5,000 could buy a lot of text books and that price doesn’t cover the yearly upkeep fees and cost to fuel the machine. Why did the district feel it was a good use of its money to buy an armored personnel carrier instead of equipment to better enable education? Probably because schools are more closely reflecting prisons every day and to complete the image districts need a way of rounding up truant students in the same way prisons round up escaped convicts. But San Diego doesn’t have the title of most militarized school district. That title belongs to the Los Angeles Unified School District:

os Angeles Unified school police officials said Tuesday that the department will relinquish some of the military weaponry it acquired through a federal program that furnishes local law enforcement with surplus equipment. The move comes as education and civil rights groups have called on the U.S. Department of Defense to halt the practice for schools.

The Los Angeles School Police Department, which serves the nation’s second-largest school system, will return three grenade launchers but intends to keep 61 rifles and a Mine Resistant Ambush Protected armored vehicle it received through the program.

An armored personnel carrier and surplus military rifles (later in the story it notes that the rifles were converted to semi-automatic)? Talk about rounding up students in style! But the district did return the grenade launchers, I guess it realized that most parties sent to round up convicts don’t usually bring heavy ordinance.

The San Diego district justified its purchase of the armored personnel carrier by saying it is for search and rescue and that the behemoth will be loaded with medical supplies. I guess the district has some policy against calling an ambulance, which is loaded with medical supplies and comes equipped with trained medical personnel. The Los Angeles district didn’t beat around the bush, it went straight for the school shooting scare excuse. Of course the Los Angeles Police Department was the first department in the country to have a Special Weapons and Tactics (SWAT) team and is well known for being extremely militarized already. Why the school district believes it needs its own team when it can call in the LAPD is beyond me, especially when you look at the statistics and see how rare school shootings actually are (which isn’t to say they don’t happen but the risk doesn’t warrant the establishment of a separate SWAT team for the district).

Truthfully these school districts are just following in the footsteps of police departments throughout the country. The federal government is giving away free or near free shit to local government agencies and those agencies are snapping it up like a shopper snapping up shit they weren’t going to buy until it they say that it was marked down for the store’s going out of business sale. In other words the government, by subsidizing the purchase of military equipment, has further distorted the market by making the military equipment look more appealing than shit local agencies could actually use (like, say, deescalation training for police officers).

Everything I Want is a Human Right and Should be Free

Economic ignorance has lead to widespread belief in many silly things. For example, people believe that war is good for the economy because it creates manufacturing jobs. Frédéric Bastiat explained why this belief was bullshit in 1850 with the parable of the broken window. Another silly belief many people seem to have is that there is such a thing as free. This belief has become especially commonplace now that everybody equates anything they want as a human right and therefore should be provided for free.

The latest case of this belief being proliferated is tampons. I’m not kidding. This article, which argues that tampons should be free, has been making the rounds on the Internet and many people have deemed it to be a good idea:

We need to move beyond the stigma of “that time of the month” – women’s feminine hygiene products should be free for all, all the time.

Sanitary products are vital for the health, well-being and full participation of women and girls across the globe. The United Nations and Human Rights Watch, for example, have both linked menstrual hygiene to human rights. Earlier this year, Jyoti Sanghera, chief of the UN Human Rights Office on Economic and Social Issues, called the stigma around menstrual hygiene “a violation of several human rights, most importantly the right to human dignity”.


But this is less an issue of costliness than it is of principle: menstrual care is health care, and should be treated as such.

We’ve come full circle. Since so many people believe that healthcare is a human right and therefore must be provided to all for free anything that can be somehow tied to healthcare should likewise be provided to all for free. But nothing is free. Everything good requires resources. First raw resources must be collected, which in of itself requires energy. Then those raw resources must be refined into something useful for the manufacturing of capital goods, which also requires energy. After that those capital goods must be further refined into something consumers can us, which requires more energy. Energy itself is a resource as is time and basically everything else that touches the manufacturing process.

The bottom line is somebody has to invest the resources necessary to produce a good. When somebody says they believe something should be free what they really mean is that everybody in the world should be forced to set aside a portion of their resources to manufacture that “free” product. To further simplify the matter when somebody says they believe something should be free what they really mean is that everybody else should pay for it.

Now the people who want free shit usually use very utilitarian arguments. This article, for example, points out that approximately half of the population of this planet can utilize tampons. I’m going to one up that. What is an activity that every human being does that can negatively impact sanitation? Shit! Therefore I propose something different. Instead of “free” tampons I propose “free” toilet paper for all! Obviously I’m joking since I’m not economically illiterate and I’m not such an asshole that I want government violence brought against you so I can get something for “free”. But I believe my point has been made.

Economy in a Slump? Just Blow Some Shit Up!

The New York Times, the same publication that gives Paul Krugman space to print is insanity, has a piece under the heading “The Pitfalls of Peace”. As you can imagine from a publication that gives Paul “Boost the Economy By Warring with Aliens” Krugman space, the article is about how war is good for the economy:

The world just hasn’t had that much warfare lately, at least not by historical standards. Some of the recent headlines about Iraq or South Sudan make our world sound like a very bloody place, but today’s casualties pale in light of the tens of millions of people killed in the two world wars in the first half of the 20th century. Even the Vietnam War had many more deaths than any recent war involving an affluent country.

Counterintuitive though it may sound, the greater peacefulness of the world may make the attainment of higher rates of economic growth less urgent and thus less likely. This view does not claim that fighting wars improves economies, as of course the actual conflict brings death and destruction. The claim is also distinct from the Keynesian argument that preparing for war lifts government spending and puts people to work. Rather, the very possibility of war focuses the attention of governments on getting some basic decisions right — whether investing in science or simply liberalizing the economy. Such focus ends up improving a nation’s longer-run prospects.

Emphasis mine. Let us start off with the obvious, if a state is at war it has already failed at the most basic of basics, not getting involved in a war. Wars are only good for two things: destruction and death. And not surprisingly both of those things are bad for the economy. Recreating that which was lost is not economic growth, creating new wealth is. And death is always bad for an economy because is reduces both the number of producers and consumers.

Now let’s get to the second point. According to the author war leads to an investment in science or a, pardon me because this is hard to say with a straight face, liberalizing of the economy. Science is not something that only gets invested in by the state nor only during a time of war. Science is constantly being invested in because science leads to better products. Without being engaged in an all encompassing war we have seen computers go from room sized monstrosities that could only perform a few tasks to devices that fit in our pockets and contain more computing power than their full sized brethren from only a decade back. There is a bitchin’ fully electric car on the market today. The private sector is closer to returning to space than the National Aeronautics and Space Administration (NASA) and it has a plan to mine asteroids for resources (seriously, how cool is that). Of course I don’t want to sell the state entirely short. As it is involved in several minor wars it is investing money into science. It currently possesses the best remotely controlled bombers on the planet! Granted, they’re not really good for anything productive but they exist and that counts for something.

We should also discuss the liberalization of the economy that supposedly occurs during a time of war. World War II, being the last all encompassing war, is a good example. Everything from metal to food to rubber were rationed for civilians so that those resources could be put into the war effort. Perhaps the author has a different definition of liberalize than I do.

Economists often discuss all of the scientific advancements that occur because of war. What they ignore are the scientific advancements made by the private sector regardless of war. The difference between the two methods of scientific investment is that the state focuses on impractical things whereas the private sector focuses on things the average person can fucking use. Give me better computers, cell phones, cars, and e-readers over remotely controlled bombers and aircraft carriers any day.

But, hey, nothing sounds better to the state than war being good for the economy. If there’s one thing the state is good at it’s war. Which is why it only hires economists who say war is good for the economy to its advisory boards.

Increasing Minimum Wage

One of the political battles currently being waged here in Minnesota is an increase of the state mandated minimum wage:

Minnesota’s legislative Democrats have struck a deal to raise the wages of the state’s lowest-paid workers.

Details of the agreement are expected to be released by House and Senate leaders Monday morning, but two sources with knowledge of the deal said Sunday that the minimum wage would rise to $9.50 an hour and future increases would be linked to increases in inflation.

The first question I have to ask about this deal is which inflation metric would minimum wage be pegged to? There are several different measures of inflation. Inflation numbers reported by the state are heavily doctored to make things appear better than they are. If this deal uses any state-approved inflation metrics pegging minimum wage to inflation will be meaningless.

As an individual who subscribes to the Austrian tradition of economics (also known as the only tradition that actually knows what it’s talking about) I will point out that increasing the state mandated minimum wage will also lead to an increase in unemployment. And as an agorist I believe an increase in unemployment will lead to an increase in the minimum wage.

How can I make such lofty claims? Because there exists an “underground” economy. Being unemployed doesn’t mean a person isn’t making money. Most people faced with the prospects of starvation or breaking the law will choose the latter. That means people who are officially unemployed will seek employment in the “underground” economy. The biggest advantage of working in the “underground” economy is that any income received is off of the books. Income acquire off of the books cannot be tracked by the state and therefore cannot be taxed. By working in the “underground” economy individuals need not spend half of the year working for Uncle Sam.

Without having to pay taxes the average person would enjoy an sizable increase in their wage. Increasing the state mandated minimum wage also increases unemployment. Increasing unemployment causes individuals to seek “unofficial” employment. Income from “unofficial” employment is untaxed. Therefore laws that increase state mandated minimum wage can increase the actual minimum wage but not through the mechanism that statists believe.

The United States Government Promoting Poaching

The federal government has amasses a rather sizable amount of ivory. Its intention is to crush the six tons of illegally gathered elephant remains. According to the Fish and Wildlife Service (FWS):

We’re sending a message to ivory traffickers and their customers that the United States will not tolerate this illegal trade. We’re standing with nations that have already destroyed their illegal ivory and showing our commitment to working with partners around the world to stop this trafficking and save elephants.

Leave it to the government to think destroying illegally acquired materials will convince people to stop illegally collecting that material. The supply of ivory is quite limited since its sole source is from a very small portion of the body of a slow growing mammal. Ivory’s status as an illegal material and its relatively scarcity makes it quite valuable indeed. So what happens when six tons of it are crushed into useless dust? It becomes more scarce and therefore more valuable. With the potential for higher profits poachers are willing to take higher risks.

What the FWS is doing sounds good on paper but will only exacerbate the problem. It would be no different than the Drug Enforcement Agency capturing tons of cocaine and burning it. All that would do is cause an increase in the price of cocaine and encourage more production and sales.

Poaching, being an illegal activity, can’t be fought by making the value of poached animal remains more valuable. That further encourages poaching, especially in poorer regions where a subsistence farmer could stand to greatly improve his life by selling a single poached animal carcass. Instead of creating incentives to poach animals we should think of ways to disincentivize poaching. The only way to do that is to devalue the materials. Ivory, for example, could be devalued by finding a viable replacement, such as an indistinguishable synthetic, which could increase the overall supply without requiring the poaching of elephants.

Bitcoin as a Commodity Backed Money

One of the more heated debates going on in Austrian economics circles is whether or not Bitcoin is a currency backed by a commodity. Proponents of Bitcoin claim it is while opponents claim it is not. I fall into the former camp. I also believe that latter camp suffers from a misunderstanding of what Bitcoin is.

Bitcoin, above all else, is a network. The network is maintained by computing power. Disagreements within the Bitcoin network are resolved by going with whatever 50% + 1 of the computing power says. Who gets the Bitcoin when the same Bitcoin is sent to two addresses at the same time (something that could happen if the blockchain gets split)? Whoever 50% + 1 of the Bitcoin network’s computing power says it goes to. Furthermore, new Bitcoin can only be mined through the efforts of a great amount of computing power.

A commodity is nothing more than a raw material that can be bought and sold. Computing power is a commodity as it is a raw material needed to produce many of the goods we enjoy today and it can be bought and sold. One example of a good that is created using computing power is an encrypted communique. In order to encrypt a communique you need pass the plain text through algorithms that tend to be computationally complex. Computing power is also a resource that is bought and sold. When you sign up for an Amazon EC2 instance you’re buying computing power from Amazon. Just as a jeweler buys gold and turns it into jewelry that is later bought, Amazon buys computers from manufacturers that is later rented by people who don’t want to sink that much money into hardware they may only need temporarily.

The computing power put towards maintaining the Bitcoin network could be put to other tasks. Instead of participating in the Bitcoin network somebody could throw their computing power at Folding@Home or SETI@Home. But a lot of people have thrown their limited computing power behind Bitcoin. In fact, the processing power used to maintain the Bitcoin network outperforms the top 500 supercomputers combined. On top of personal hardware, many people are willing to rent your their mining hardware in the form of shares. You can buy into Bitcoin mining pools. The money you use to buy in is generally put towards more mining hardware and you are paid dividends based on the amount of Bitcoin mined.

Bitcoin, through the computing power necessary to maintain the network, is backed by a commodity. The raw materials necessary to maintain the Bitcoin network, including computing power and network bandwidth, could be put towards other uses but cannot be put towards simultaneous uses (even with multi-tasking, a computer can only work on one computation per unit of time per processor or core).

Let Me Explain the Economics of College Tuition

The Atlantic has discovered that many colleges are soaking the poor by charging high tuition while handing out discounts to students from wealthy families:

Sometimes, colleges (and states) really are just competing to outbid each other on star students. But there are also economic incentives at play, particularly for small, endowment-poor institutions. “After all,” Burd writes, “it’s more profitable for schools to provide four scholarships of $5,000 each to induce affluent students who will be able to pay the balance than it is to provide a single $20,000 grant to one low-income student.” The study notes that, according to the Department of Education’s most recent study, 19 percent of undergrads at four-year colleges received merit aid despite scoring under 700 on the SAT. Their only merit, in some cases, might well have been mom and dad’s bank account.

There’s nothing inherently wrong with handing out tuition breaks to the middle class, or even the rich. The problem is that it seems to be happening at the expense of the poor. At 89 percent of the 479 private colleges Burd examined, students from families earning less than $30,000 a year were charged an average “net price” of more than $10,000 annually — “net price” being the full annual cost of attendance minus all institutional and government aid. Less technically, it’s what students can actually expect to pay. At 60 percent of private colleges, that net price was more than $15,000.

Of course the author of the article is unable to understand why colleges are partaking in such chicanery:

Otherwise, it’s hard to think of a justification for their behavior. Could it be that their prices are worth it, that the educations they provide justify the eye-popping cost? It’s hard to say definitively. But I’m hoping to put that possibility to the test in the coming week by matching Burd’s data against graduation and student loan default rates. In the meantime, the preponderance of evidence seems to suggest that many private colleges are either undercutting the intent of the Pell program, if not abusing it outright.

I’m nothing if not helpful so let me explain what is going on here. The phenomenon noted by the author is really another version of the state’s war against the poor. That is to say colleges, like states, want to raise a herd of dairy cattle that will produce a lot of milk. Doing so requires culling cattle that produce less milk and breeding cattle that produce more milk.

As the article notes many of the students being favored didn’t score notably well on Scholastic Assessment Tests (SAT) or demonstrate any real form of academic exceptionalism. The primary criteria for handing out discounts appears to be parental income. Why would a college prefer to attract students from wealthy families over students who demonstrate academic exceptionalism? Because students from wealthy families provide more milk.

When a college accepts students from wealthy families they stand to get far more than just tuition. Have you ever wondered how college buildings get their names? In many cases college buildings are named after large donors. For example, Parkhurst Hall at the Georgia College is named so because:

Next to Foundation is Parkhurst (2003), an imposing structure that replaces the 1949 Parkhurst Hall that chiefly had been occupied by faculty. The first Parkhurst was built with money from the Sylvester Mumford Fund, established by Mumford’s daughter, Goertner Parkhurst (1850-1949). Sylvester Mumford was a New York merchant who settled near Waynesville, Ga., and built a stately, antebellum home. The beautiful Goertner Mumford cast a romantic figure in the 1870s as she rode her favorite white stallion through the sand hills and pines of the Brantley County estate. Mrs. Goertner Mumford Parkhurst later used her considerable fortune to support the cause of women’s education.

Wealthy families tend to donate money to the college their student(s) went to even after their student(s) graduated. In addition to donations, colleges also gain name recognition by having students from prominent families in their communities (often wealthy families) attend. Name recognition can greatly increase enrollment because many people want to go to a famous college (I’m told it also looks good on a résumé). Not only that but children are often encouraged by their parents to attend whatever college one or or both of them attended. That means a college may enjoy multiple generations worth of students from a wealthy family, thus expanding the amount of time they enjoy the previously mentioned benefits.

What do colleges stand to get when they accept a student from a poor family? Tuition. Somebody is probably saying, “Hey Chris, you dumbass, a student from a poor family will make more money after they graduate college!” As it turns out economic mobility in the United States isn’t very mobile. If you are born into a poor family you are more likely than ever to remain poor. That means a college is less likely to see large donations from students of poor families after they graduate. On top of that, students from poor families are more likely to be, at least somewhat, fiscally conservative. That means even if the student becomes wealthy he or she isn’t as likely to waste that wealth by tossing it to a college they already paid. Because of those two things the college has to milk cattle from poor families as much as possible right away.

In summary colleges favor students from wealthy families because they expect to gain more. The mistake being made by many people is believing colleges are something other than businesses. Colleges aren’t magical egalitarian institutions that are able to rise above self-interest. If that were the case senior college administrators wouldn’t make six-figure salaries, they would forgo a great deal of their salary so that money could be used to educate more students. But they do make six-figure salaries and they know that they need a strong herd of cattle to milk in order to continue making six-figure salaries.

Affordable Healthcare

Many people keep demanding the state step in to make healthcare more affordable. As it turns out healthcare becomes more affordable when you cut out the middle man:

A Long Beach hospital charged Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. But because she had health insurance with Blue Shield of California, her share was much less: $2,336.

Then Snyder tripped across one of the little-known secrets of healthcare: If she hadn’t used her insurance, her bill would have been even lower, just $1,054.


Unknown to most consumers, many hospitals and physicians offer steep discounts for cash-paying patients regardless of income. But there’s a catch: Typically you can get the lowest price only if you don’t use your health insurance.

Who would have guessed that cutting out the middle man could reduce prices? Insurance is a headache for everybody but the insurance company. It’s in the best interests of insurance companies to weasel out of paying a claim so they try to find every excuse in the book to avoiding paying a claim. This takes time, while you’re fighting the insurance company the hospital you visited is waiting to get paid. Everybody loses, except the insurance company.

One of the biggest flaws in our current health system, besides the state’s involvement, is the reliance on insurance to pay for everything. Insurance is supposed to be a method of reducing risk, you pay a small amount of money into a pool at fixed time increments and if something horrible should happen you can access the pool to recover your costs. The system work well when risks are low and payouts are few, which is why renters insurance is so cheap. On the other hand when everybody is pulling from the pool constantly the system falls apart and the costs have to be jacked up to make things work, which is why health insurance costs so much now.

Since dealing with insurance companies is such a headache it’s not surprise hospitals want more money when they get involved. If you have to wait months before you get paid then you’re going to want more, it’s basic time preference. Time is money, if you pay in full now you can generally get a better price than paying later or in increments over time. There is also the added risk involved if the insurance company denies the claim. If the claim is denies the hospital has to collect the money from you, and there is a risk in the fact that you may not be willing or able to pay the bill. Therefore hospitals also have to cover their potential losses when dealing with insurance, another increase in the price.