Of course, I will not share my thoughts at Thanksgiving … but here goes (start at 1:14 if you don’t like stories. One reason I love folk music is the stories):
Please do NOT interpret this to suggest that I think this is an open and shut issue, or that there are not legitimate questions over security, particularly the possibility that people become radicalized when they are here – but my supposition is that in the long run the expectation is that both “we” and “they” will be much better off with a more embracing policy.
“Inequality is a big policy issue because we have data on it” – David Henderson passes on that observation from one of his colleagues. My view is that this is largely correct. Until and whenever we are able to get information on the direct and indirect costs of rules, regulations, restrictions, special favors, etc. in the economy, we are never going to make progress toward improving economic conditions for all people, and in particular the poor, in ways that actually work and are meaningful.
Here is a thought: think hard about all of the things which make economic life for disaffected populations difficult. Accept all of the populist premises about ’em too – from systemic discrimination, to implicit biases and more. Now, think hard about how much of an economic toll those sorts of things are very reasonably expected to impose on people (this does not justify those awful things at all by the way). Now, think hard about what occupational licensing, zoning regulations, government schooling, restrictions on what small businesses can and cannot do, etc. do to those same disaffected populations. While I am not here presenting any empirical “proof” of anything – I would suggest that there is an order of magnitude, at minimum, more serious impact of these government regulations on the well-being of disaffected populations than all of the systemic biases put together. And certainly, focusing on things like measured inequality (which is nearly impossible to measure and of course still says little about overall well-being) not just doesn’t help the disaffected (seriously, what is the empirical evidence on what policies in inequality have helped the worst off around the world over time?) but totally takes our eyes away from the giant mastedons in the room about what is making it harder for the poor and disaffected to get a leg-up in this world.
Can someone do the following calculation or at least ask the question? How much political capital and actual resources have been dedicated over the last 20 years in promoting ethanol, wind, solar, electric cars, green jobs, etc.? How much political and propagandic energy has been expended in discussing signing on to major climate agreements?
What if we had taken all of this energy and resources and directed them into the passage of even a modest carbon tax starting in 1995? What if we had taken all of these resources and poured them into replacing all of our coal plants with natural gas? Where would be we in terms of emissions today and in terms of our legitimacy in the eyes of the global warming community? Where would my university be if instead of spending millions on LEED buildings and tens of thousands on “green” trash cans and recycling and eco-benches, it has installed water and electricity metering across campus?
As a labor economist, I am very much excited any time we see a policy change that enables us to do some research into hitherto unanswered questions. The rolling-out of the new overtime pay rule would seem to be one such option. One reason the administration is pushing for the rule is akin to the reason for the French maximum hours rule – the hope that employers will “spread the employment wealth” around. That seems a strange request when unemployment is near historical lows and may in fact be at its “natural” rate.
But I digress.
This rule is going to give us a chance to see how productive firms think low-paid salaried workers really are, at the margin. If, as expected, many of these workers will be converted to hourly rates, the idea was that firms would not want to pay 1.5x salary to these workers for the valuable work they are doing over 40 hours right now. Do we really think that the 41st, 42nd, etc. hour of work done by low-salary yet salaried workers is producing all that much value, at the margin, for firms? We now have a chance to test it. First we can see how much firms are going to cut back on salaried work. Second, we can see whether firms end up replacing the now costly 1.5x wage time with another worker who earns 1x wages to do that “marginal” work. My priors of course, from personal experience, are that those marginal hours are not productive at all in the marginal sense, even though from an organizational capital sense they may be very valuable on average.
Thus, this new OT rule is going to blunt the development of organizational capital and it will certainly put employers’ money where their mouths are. If the work being done at the margin by these newly “helped” workers is in fact worth something, we should see a surge of new hiring by firms. Lest you be surprised by my thoughts on this, my H-not is that the effect will not just be small, but likely zero. Look around you at your firms for people earning less than $50,000 but who are on salary. How valuable is much of the work overall on average? Compare that to what you think the value of the marginal hour of work is? I have first hand experience – I do not think anywhere near by marginal hours are adding value to my employer – after all, I am writing this over lunch in my office here on campus … it’s a pretty worthless post.
So, in regard to the new OT rule (and there is lots else to be said about it) I am making three predictions:
Firms will NOT expand employment to replace the work done by former salaried workers
Existing salaried workers who will be moved to hourly are NOT going to like it – and if they read the text of the rule carefully they will recognize that they really can’t be made better off by it.
Given 2, and what I think I understand about psychology … these worse off workers are going to blame … their … greedy … employers … for this! You just watch. I am sure my own university which has lots of workers falling into this affected category, is going to have workers get very angry at the University for “doing this to them.” How all of that frustration is not aimed at politicians I will never understand. One can only shudder to imagine what policies these newly frustrated workers will be advocating from these very same policymakers to make up for the very large (perceived) injustices committed on them by their employers.
These may seem trite to you, but I find them more than illustrative.
In one of the classrooms I teach in, there is an analog clock up in the corner of the room. Both I and the students find it useful in managing our time and attention in class. I remark, very obnoxiously at times, to the class that every year when daylight savings time comes in November, the clock is off by an hour and will remain that way until the next Spring. For years I have urged students, almost entirely jokingly, to complain about it and demand to the college that our clock accurately reflect the time at all times. For 8 years this has never happened.
I walked into class today and noticed, beyond expectation, that the clock had in fact been fixed. Now, students probably don’t want to complain to the “authorities” that a simple clock is not timed correctly (or maybe I am wrong about that), and it certainly makes no rational sense (in an egoistic framework) for any student to change the clock. Why? It is a pain in the butt to change the clock, and the gains largely accrue, unremunerated, to everyone else in the class.
One of my students climbed up either before class today or after last class and changed the clock. He privately provided a public good.
Most of the office hours I hold are by appointment for 10 minute slots. But once per week I hold open walk-in hours with no sign-ups and no specified time lengths. Despite me doing this, almost no student who ever visits office hours on those open days happens to stay beyond 10 minutes or so. This is especially startling since the gains to staying would seem to clearly outweigh the costs to them of leaving. Yet for some reason our students tend to internalize this positive externality and provide the service of leaving on time, thereby ensuring that their classmates have ample time to come ask questions.
For discussion: are these exceptions that prove the rule, or are these generalizable behaviors? If they are generalizable, then what kind of a theory explains why these sorts of private productions of public goods are common but the perception is that “bigger and more important” goods will not be provided?
After giving Holloway his comeuppance, they moved on to Nicholas Christakis, master of Silliman College. What was Christakis’s crime? His wife, an early childhood educator, had responded to a campus-wide email about offensive Halloween costumes by opining that it was inappropriate for the college to tell students how to dress. According to The Washington Post:
“Whose business is it to control the forms of costumes of young people? It’s not mine, I know that,” wrote Erika Christakis, an early childhood educator and the wife of Nicholas Christakis, the Silliman College master. Both later took to social media to defend the e-mail, incensing students by tying it to debates about free speech and trigger warnings. At a Wednesday night forum hosted by the Afro-American Cultural Center, Erika Christakis sought to leave the meeting during a discussion of her e-mail, further provoking student anger. …
Students grew distressed, with one shouting at Nicholas Christakis to be quiet and questioning why he took the position at the university. “You are a poor steward of this community,” the student said. “You should not sleep at night.”
I guess the question is whether colleges like Yale are preferentially choosing students with this authoritarian mindset, or whether they are training them to be authoritarian. In either case, they seem to be reaping what they sowed.
This story reminds me of two past observations I have made about universities. The first is that their diversity programs, despite Universities being intellectual institutions, focus on absolutely everything (from skin pigmentation to reproductive plumbing) except diversity of ideas. Perhaps this is because the only way to achieve “safe space” as defined by these students is either to create an intellectual mono-culture (the opposite of diversity) or to suppress speech and idea sharing so much that no intellectual discourse happens at all. Definitely your classic “reap what you sow” situation.
The second observation is that I once thought that a key goal of “diversity” was to eliminate the in-group/ out-group dynamic that has been so destructive through all of history. But I am increasingly convinced that the true objective of diversity programs as practiced on university campuses is to simply shift the “out-group” tag from one set of people to another. More horrible things are said on campus about whites, males, Asians, wealthy people, straights, frats, etc than I ever heard in my entire lifetime from anyone about, say, African Americans.
Just look at how most Ivy League schools treat Asians. The discrimination that occurs against Asian students is amazing, with Asians having to produce SAT scores hundreds of points higher than any other group to have an equal chance of admission. This is why, despite all my support over the years for my alma mater, I quit doing college interviews for Princeton — I got tired of being a part of hosing all the hard-working Asian kids I was interviewing.
Alex Tabarrok points us to news that the Swiss are voting on whether to require (commercial) banks to hold 100% reserves. Now, the vote here is with regard to 100% reserves on deposits, here are a few thoughts/questions one may want to ask as we consider this:
Do you think that curtailing the ability of commercial banks to create private money via the deposit mechanism would forestall the creation of private money overall? Even within the commercial banking sector, ask the following: what share of their total liabilities are now funded through short-term immediately redeemable instruments? In an era of zero-low interest rates, I am sure banks like this idea less than in an era of higher rates.
(or 1a) Wouldn’t it follow that since we can’t quash the demand for folks to hold immediately redeemable short term credit instruments, we’d end up seeing a lot more “private money” creation in the “shadow” banking sector? Wouldn’t we prefer a world, if we are enjoying the idea of regulation, where we can see the deposits and leverage?
Were the most recent crises created because commercial banks were engaged in “excessive” money creation? And even if it were, think of the tools at the disposal of “policymakers” regarding this. Why is the question not asked, “what forces can possibly prevent banks from creating “too much” private money?” After all, if there were serious redemption threats on commercial banks by both their customers and their competitor banks, how could it ever get to the point where everyone was creating too much money without some underlying institutional support for such a regime?
While I am nonetheless sympathetic to the call for 100% reserves (maybe for other reasons), I don’t see how that conclusion follows from the cited problems. Wouldn’t a complete elimination of the central bank be a similarly logical conclusion? Note that I am not calling for such an outcome, but as a logical matter I cannot see how one particular conclusion follows absent a pile of empirical evidence on how successful central banks have been in curtailing “excess” money creation vis-a-vis alternative institutional arrangements.
I can never tell if I am having my leg pulled, but a student sincerely tells me that he wandered to the shower in his freshmen dorm this week to be greeted by this:
Now, I have seen all kinds of stuff in my life on college campuses, but this has to be a first. For starters, I had no idea that the plumbing could have an issue with “the plumbing.” Is that even possibly true? In any case, think of the simple economics here – what would the College have to do in order to curtail this behavior? Telling students, “increases in house prices next year will ensue,” is probably not going to do it. Most students move to upper class dorms where this perhaps is not an issue and also consider moving off-campus. The only way to have a meaningful impact on behavior is to figure out a way to increase the cost of each particular episode. I am not here going to propose ways to do that.
I’d suggest that even if the college figured out a way to raise the cost (and monitor … how?) of these actions, the potential for unintended consequences is high. Remember that most freshmen share rooms with two other people – there is very little privacy to be had there. Think about where and what might otherwise occur if this lone source of dorm privacy is now off-limits to students? Again, this is a family-friendly blog, so we’ll leave it to your imagination.
I’ve seen everything now. Like the many Rangers fans I know said when they won the Cup in 1994, “Now I Can Die in Peace.”