Tag: Unintended Consequences

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.

9/11 Continues to Cost Us

12 years ago two planes crashed into two towers and killed a lot of people. Another plane crashed into the Pentagon, which was far less damaging since the wing that was struck was under construction and therefore unoccupied. But the carnage didn’t stop there. In an ironic twist the very agency that was supposedly created to protect Americans from another terrorist attack, the Transportation Security Administration (TSA), has made flying so miserable that people now opt to drive shorter distances. Since driving is exponentially more dangerous than flying the country now suffers an additional 500 automobile-related deaths per year:

The inconvenience of extra passenger screening and added costs at airports after 9/11 cause many short-haul passengers to drive to their destination instead, and, since airline travel is far safer than car travel, this has led to an increase of 500 U.S. traffic fatalities per year. Using DHS-mandated value of statistical life at $6.5 million, this equates to a loss of $3.2 billion per year, or $32 billion over the period 2002 to 2011 (Blalock et al. 2007).

To put that number in perspective it has been 12 years since the 9/11 attacks. During that span of time approximately 6,000 people have died in automobile-related accidents that may be alive today if it wasn’t for the draconian policies put into place by the TSA. The 9/11 attacks killed a total of 2,753 people. Since the 9/11 attacks the policies put into place by the federal government have managed to kill over twice as many people as the attacks themselves. That’s not even counting the number of deaths that have occurred because of the wars started using the 9/11 attacks as a justification.

The terrorists won. A handful of people using box cutters and knives were able to bring the mighty United States to its knees.

Central Planners Never Learn

Central planners never learn. When one of their plans go awry they blame the data, implementation of the program, and anything else that allows them to avoid admitting central planning doesn’t work. Centralized plans rely on things never changing, which in an ever-changing world is a pretty stupid thing to rely on. Hell, the fucking continents don’t even remain the same!

The United Nations (UN), the largest central planning organization in the world, want people to supplement their diet with insects instead of current livestock:

A 200-page report, released at a news conference at the U.N. agency’s Rome headquarters, says 2 billion people worldwide already supplement their diets with insects, which are high in protein and minerals, and have environmental benefits.

Insects are “extremely efficient” in converting feed into edible meat, the agency said. On average, they can convert 2 kilograms (4.4 pounds) of feed into 1 kilogram (2.2 pounds) of insect mass. In comparison, cattle require 8 kilograms (17.6 pounds) of feed to produce a kilo of meat.

Most insects are likely to produce fewer environmentally harmful greenhouse gases, and also feed on human and food waste, compost and animal slurry, with the products being used for agricultural feed, the agency said.

Currently, most edible insects are gathered in forests and what insect farming does take place is often family-run and serves niche markets. But the U.N. says mechanization can ratchet up insect farming production. The fish bait industry, for example, has long farmed insects.

How could this possibly go wrong? Let’s pretend that the majority of the regions that currently rely on beef, poultry, and pork for their protein intake decide to rely on insects instead. While the number of cattle, chickens, and pigs raise by farmers would decrease the number of insects being raise would increase. Simply walking around in forests and gathering insects wouldn’t provide enough foodstuff to replace current livestock so insects would have to be farmed. Farming insects is likely to be more difficult than farming current livestock because insects are difficult to contain (and difficult to keep out of your house). The UN report notes that many insects feed off of waste but it fails to note that insects also feed off of crops. Have you ever heard the phrase “A plague of locust?” There’s a reason people use that phrase, it’s because locust have a pension for wiping out crops.

Now let’s pretend that one of the insect farmers experience a failure in the system they’re using to contain their insect herd. What consequences would follow a massive number of fast-breeding crop-consuming creatures breaking out of their cages? In all likelihood all crops in the vicinity would be wiped out. In other words foodstuff would escape, more foodstuff would be destroyed, and the people in our hypothetical society would face the potential of starvation.

Of course central planners tend to believe they can control everything so this scenario has likely been written off as impossible.

New Yorks Newest Gun Control Legislation Apples to Police

Talke about an unintended consequence:

Assemblyman Al Graf (R,C,I-Holbrook) recently expressed his opposition to the poor government process that yielded a hurried vote on incomplete legislation. Graf indicated that the legislation contained numerous flaws, including one that hits extremely close to home.

“My daughter is a New York City police officer, and under this legislation, we’ll be taking bullets out of her gun while the bad guys have no such limitations,” said Graf. “This is what happens when you circumvent the legal, responsible legislative process: you end up with a well-intentioned bill that completely misses its mark and ends up putting the safety of our children and families at risk.”

Heh, since it applies to everybody I guess it isn’t that bad.

Enforcing the Laws on the Books

When it comes to gun control there is already a veritable library of laws on the books. Some advocates of gun rights and gun control often make quips about focusing on enforcing current laws. Both sides are making a statement that current gun control laws are not stringently enforced. In the case of gun rights activists they are implying that crimes involving firearms can be addressed by stringently enforcing current laws and that new laws are unnecessary whereas advocates of gun control are implying that current laws aren’t being enforced and therefore a higher rate of crimes involving firearms exists than should.

The concern I have with the idea of enforcing current laws, a concern that should be shared by both my fellow advocates of gun rights and my philosophical opponents advocating for gun control, is that laws can be interpreted different by different individuals. Consider the Second Amendment Foundation’s (SAF) latest victory in Illinois where a judge ruled that the Supreme Court’s decision in McDonald v. Chicago made the individual state’s prohibition against non-state agents carry firearms illegal. This decision was a boon for advocates of gun rights and a defeat for opponents of gun rights but could have had the opposite outcome.

Remember that the federal appeals court decision actually overturned the decision of a lower court, which held a different interpretation of the Supreme Court decision in McDonald v. Chicago. One court believed that the Supreme Court’s decision, which allowed for “reasonable” gun control laws, allowed an individual state could prohibit non-state agents from carrying firearms while a different court believed the opposite. If the defense appeals the case we may see it land in the Supreme Court where a third interpretation of the McDonald v. Chicago ruling could be decided.

Utilizing the interpretation of current laws has played out in the quest to advance gun rights and I’m not saying we should abandon this strategy. What I am saying is that advocates of gun rights should be careful about advocating for the enforcement of current laws. I believe it would be smarter to recognize the court system for what it is, a convenient tool to advance gun rights, but not imply that current gun control laws are just. If we imply any consent to current gun control laws we could find ourselves at the wrong end of a court ruling. Were this to happen we would be forced with either consent to the law or make hypocrites of ourselves and claim that the law, in this case, shouldn’t be enforced.

The Economics of the Affordable Care Act

With Obama’s reelection and the Democratic Party’s control of the Senate it appears that The Affordable Care Act is here to stay (it would still be with us had Romney won, he’d have just repealed it and replaced it with the same thing but under a different name). Now that the law is starting to go into affect we’re seeing the unintended consequences. Since the legislation raises the costs for many business owners we’re seeing changes in employment methodology. Many companies are laying off employees to avoid the financial burdon of the legislation, other companies are cutting employee hours, and now some franchises are going to implement surcharges to offset the additional expenses of Obamacare:

While some business owners threaten to cut workers’ hours to avoid paying for their health care, a West Palm Beach, Fla., restaurant owner is going even further. John Metz said he will add a 5 percent surcharge to customers’ bills to offset what he said are the increased costs of Obamacare, along with reducing his employees’ hours.

“If I leave the prices the same, but say on the menu that there is a 5 percent surcharge for Obamacare, customers have two choices. They can either pay it and tip 15 or 20 percent, or if they really feel so inclined, they can reduce the amount of tip they give to the server, who is the primary beneficiary of Obamacare,” Metz told The Huffington Post. “Although it may sound terrible that I’m doing this, it’s the only alternative. I’ve got to pass the cost on to the consumer.”

Economically literate individuals expected this to happen. You can’t increase the costs faced by a business and not expect that business to compensate. Unfortunately man people are economically illiterate and are therefore throwing a fit about the layoffs, slashed hours, and additional surcharges. The economically illiterate are advocating businesses that adjust their employment methodology in response to Obamacare be boycotted or sued.

What’s ironic is the economically illiterate got exactly what they wanted, Obamacare. As with anything there were consequences and now advocates of Obamacare are trying to escape those consequences. The only lesson that should be learned here is to be careful what you wish for.

Unintended Consequences of Prohibitions Against Texting While Driving

Individual states across the country are passing laws that prohibit texting while driving. How have these laws fair? Not well, in fact these bans have been followed by an increase in accidents:

It’s perplexing for both police and lawmakers throughout the U.S.: They want to do something about the danger of texting while driving, a major road hazard, but banning the practice seems to make it even more dangerous.

The Insurance Institute for Highway Safety says that 3 of every 4 states that have enacted a ban on texting while driving have seen crashes actually go up rather than down.

It’s hard to pin down exactly why this is the case, but experts believe it is a result of people trying to avoid getting caught in states with stiff penalties. Folks trying to keep their phones out of view will often hold the phone much lower, below the wheel perhaps, in order to keep it out of view. That means the driver’s eyes are looking down and away from the road.

One thing statists and other authoritarians never seem to learn is that making a law against something doesn’t stop people from doing it. Theft, murder, smoking marijuana, and tax fraud are all illegal yet people still steal, murder, smoke weed, and commit tax fraud. What happens when a law is passed that prohibits an action is that people keep performing that action but they try to do it in secret. Thieves move to robbing homes during average working hours when the owners are unlikely to be there, murders come up with complex and sometime absurd plots to avoid being caught, producers and consumers of marijuana have created a very successful black market, and people develop ways to shuffle money around in order to confuse the state’s tax collection goons. In the case of texting while driving people are more apt to hold their cell phone lower, which will entirely remove their eyes from the road and thus increase the chances they’ll get into an accident.

Brazil Central Bankers Go on Strike

The irony can barely be described in words:

The central bank union is demanding an average pay increase of 23 percent to compensate for inflation since June 2008, Belsito said. The union may call a longer strike later this month, he added.

Brazil’s central bank likes to play many of the same games as the United States central bank. The Brazilian central bank enjoys printing money and fractional reserve banking. In fact the Brazilian central bank recently dropped the reserve requirement in the hopes of boosting automobile loans. Needless to say a drop in reserve requirement is actually a grant of permission from the main central bank to the lower banks to counterfeit more.

Now that the employees of Brazil’s central bank are suffering the consequences of their employer’s actions they are demanding a wage increase. Perhaps they can remain on strike indefinitely, cripple the central bank’s operations, and help prevent inflation from increasing.

Unintended Consequences of Farm Subsidies

Every time the state interferes with the market they create unintended consequences. This year’s weather can be summed up as hot and dry, which isn’t ideal for growing crops. Needless to say that bitch Mother Nature has greatly reduced the yields on foodstuff and that is leading to increasing food prices:

The price of many food products could rise later this year as much of the country is hit with the worst drought in a generation. Wholesale corn prices shot up nearly 5 percent yesterday, and soybean prices are also heading higher. Crop losses will be a blow to America’s rural economy and cut farm exports. The US Agriculture Department slashed its estimate of this fall’s corn crop by 12 percent – compared with last month’s forecast. Officials say 38 percent of the corn crop is in poor condition because of the drought. A shortage of corn and soybeans is raising concerns about global food shortages and inflation. That said, it would be easy to overstate the impact on the national economy and American consumers, especially if the weather improves soon. It may take months for some food and meat costs to rise in supermarkets. According to a government estimate, cereals and grains accounts for just 2 percent of the US consumer price index.

Nobody should be surprised by this, less supply combined with steady or increasing demand has a tendency to lead to higher prices. What does this have to do with government interference in free markets? Consider a free market in foodstuff for a moment. As food prices continue to fall producers are likely hold onto the food they’ve produced until prices increase sufficiently. Effectively a surplus is created with the intention of selling it at higher prices at a later time.

This is where state interference in the agriculture market comes into play. Through various agricultural subsidies the state has discouraged farmers from creating a surplus of food, instead they are paying farmers to destroy surpluses [PDF]:

In 1936 the U.S. Supreme Court ruled that the federal government had no authority to administer land-idling acreage controls under New Deal farm legislation, on the Constitutional grounds “that powers not granted are prohibited. None to regulate agricultural production is given, and therefore legislation by Congress for that purpose is forbidden.” (U.S. Supreme Court 1936). Subsequently, the Court’s alleged respect for precedent was not extended to this decision, and many later production control measures have passed Constitutional muster.4 At the time, the result of the Court’s decision was a merger of prior concerns about conservation with measures to remove acreage from commodity production. This was done in the Soil Conservation and Domestic Allotment Act of 1936 principally by defining “soil-depleting” crops (the main basic commodities) and “soil-conserving” crops (grasses and legumes), and paying farmers to substitute the latter for the former.

Instead of having surpluses of food waiting to be sold during times of low yield (which are also times of higher prices) farmers have been paid to destroy surplus crops meaning a low yield will necessarily create an actual shortage. Once again an unintended consequence emerges from from state meddling in economic affairs. While the short term gain to farmers was notable the severity of hazard being placed on the rest of society, namely a possible food shortage, has the potential of being extremely damaging.

Picking Your Battles

The last couple of week shave really demonstrated what media blitzes are capable of. Before Chick-Fil-A’s owner, Dan Cathy, publicly stated his opposition to gay marriage I had never heard of his restaurant. Shortly after his statement the Internet was alive with people praising and denouncing the man and his business. Those opposing gay marriages cheered Cathy’s statement and vowed to frequent his restaurant and those who support gay marriages decried the man and encouraged everybody to boycott the restaurant. What happened? People reacted:

Chick-fil-A restaurants in cities across southern states of the US, where the majority of the chain’s outlets are located, were reported to be bustling with customers who turned out in support of the chain on Wednesday.

How did this happen? Is the United States so bigoted towards homosexuals that far more will set out to support a restaurant owned by a man who is publicly opposed to gay marriages than will boycott it? To answer this question we need to do a bit of analysis.

First and foremost the reaction by the supporters of gay marriage was, to say the least, inflammatory. Mayors of Boston and Chicago both threatened to ban the restaurant from their cities while many other supporters of gay marriage loudly referred to Cathy and his supporters as bigots and homophobes. Screams about boycotting the establishment were made, Facebook boycott events were created, and angry rants were posted across the Internet. Needless to say Cathy’s supporters were receiving a great deal of hatred and decide to counter the hatred with their own plans.

Let’s look at the factions in the gay marriage debate. Only two factions have an actual stake in this debate: homosexuals who want to receive the same treatment in marriage as heterosexuals and deeply religious individuals who believe God his tasked them with bringing his word and morality to the masses. Other factions have various interests in the debate but no real stake, they won’t be personally affected. Of the two factions with a stake in this debate the deeply religious factions is by far the largest. The golden rule when confronting a much larger force is not to engage in a head-on attack. Unfortunately that’s what the proponents of gay marriage did, they engaged their smaller force in a head-on attack against a much larger force. In addition to that their move alienated them from other potential supporters.

The most intelligent move would have been to ignore Cathy’s statement and continue to fight for gay rights. Such a move would have given opponents to gay marriage nothing to rally their troops behind and such a move wouldn’t have alienated potential supporters. Instead demands for a boycott were made and two groups ran to the support of Chick-Fil-A: opponents of gay marriage and proponents of free speech. Bravo guys, you managed to give common cause to two extremely large groups. The motivation of the opponents of gay marriage was obvious, they don’t support legalized gay marriages and see Cathy as a spokesperson. What about the supporters of free speech, what was their motivation? Free speech. When the mayors of Boston and Chicago came out and threatened Chick-Fil-A with a ban from their cities they may as well have said they were punishing the establishment because its owner decided to exercise his freedom of speech. It was a stupid and devastating move.

The stupidity didn’t end there. In a move that one could believe was custom crafted to further create opposition to gay marriage supporters started slinging mud. They started referring to people who ate at Chick-Fil-A or otherwise agreed with Cathy’s statement bigots, homophobes, haters, and disgusting individuals. Insulting people is not how you build popular support for your movement. Many people who were on the fence or uninvolved suddenly had reason to support Chick-Fil-A. Why help a group of people who are calling you names even though you didn’t really have a stake in the game? Others who were on the fence but leaning towards supporting gay marriage also started backing away because few people want to work with individuals who are acting in an unprofessional manner.

To put it bluntly, advocates of gay marriage really fucked up this time. What could have been an absolute nonissue turned into a giant political fiasco. Chick-Fil-A found its stores packed with supporters, which sent a signal to other businesses informing them that opposing gay marriage may be rewarded with additional patronage. Free speech advocates, who had no reason to support Chick-Fil-A, sudden had a reason to support the restaurant. Opponents to gay marriage found themselves with a massive media platform to use to rally support to their cause. Basically every unintended consequence came to fruition.

I now see why constitutional amendments to ban gay marriage have succeeded in every state they’ve been pushed in. Getting prohibitions against gay marriage off of the books requires appealing to public opinion, it requires building support, it requires smart maneuvering. All of those things are jeopardized when a single individual is able to rile up supporters of gay marriage in such a way that they act against their own goal. You have to keep your emotions under control if you want to win public support.