Honest Headline

In today’s paper (I’m too lazy to see if it is online) there is an amazing headline, “Group Takes Aim at Low-Wage Jobs.”  The group is Wisconsin Jobs Now! and it is unclear if they explicitly intend to eliminate those low wage jobs or if it is just an incidental impact of the group.  I can wait to order fast-food via a touchpad.  (For those of you not thinking along, when labor gets more expensive then capital becomes a likely substitute.)

Elsewhere on the continent, John Taylor reports on California’s quasi experiment in increasing the state minimum wage.  To follow up on John’s ending comment, what are people thinking of when they do this?  Perhaps they are just social scientists.

Good News for Freedom

It has been a good September for freedom as votes in Australia, Norway, and Colorado provided various levels of surprising support for freedom.  The Shale Revolution continues to improve the standard and quality of life.  But perhaps the most surprising event is when Mayor Vincent Gray vetoed the “stop Wal-Mart” bill in Washington DC.  To have somebody in Washington DC do something that sensible is shocking.

If you want to have your doom & gloom, you can hope that the veto will be overridden and the citizens of DC will need to shop elsewhere for goods and jobs.  Oh, and there is another government in Washington that is having a bad month.

 

Lease D-Day

Today is the day that the comment period for 

Proposed Accounting Standards Update—Leases (Topic 842): a revision of the 2010 proposed FASB Accounting Standards Update, Leases (Topic 840)

ends.  You can get the whole exposure draft here.  If the FASB adopts it, this would be the most dramatic change in GAAP since perhaps Paton and Littleton.  MWG hopes the FASB goes for it.

 

Coercion

The Wall Street Journal reports on the effects of coercion related to campaign finance legislation.  Campaign finance legislations has its adherents but one of the problems is that is administered by the state.  Certain officials in Ohio were unhappy with Ed Corsi and brought the weight of the state to bear on Mr. Corsi.   According to the article, here is a summary of Mr. Corsi’s activities:

Over the next two years, Mr. Corsi and a few friends would sometimes gather to talk politics. He occasionally sponsored meetings featuring speakers (not political candidates) on public policy issues (not elections), and charged a nominal fee for seating to offset his costs. He and two friends passed out political pamphlets they made at the Geauga County Fair.

Mr. Corsi spent $40 a month to maintain his website, and perhaps a couple hundred dollars a year in other expenses. According to the state of Ohio, however, these activities are illegal under campaign-finance laws because Mr. Corsi did not first register with the state, report to the state on his activities, and subject himself to the regulations governing the operation of a state political action committee.

If the quote above is a reasonable representation of the facts then there is a grave error by the Ohio Election Commission in considering this complaint.  The related website suggests that the Commission made a grave error.  Mr. Corsi’s Geauga Constitutional Council site is a pox on both parties.  As an example:

This [the lesser of two evils] mindset itself is evil and allows evil to continually dominate our society

 

Mr. Corsi is not supporting either major party.  The abuse he has received is unwarranted.  But let’s take it to the next step.  Suppose MWG rents and signs a billboard that says either impeach Jindal or impeach Obama depending upon your disposition.  Given the discussion (see the parentheses in the first quote) there is reason to think this could be illegal.  Perhaps some legal eagle can weigh in.  My question is: should it be illegal?  If you think this is illegal then can we make our Christmas lights look like a donkey or an elephant?

Juxtapostion

The Wall Street Journal has Germany’s Switch to Renewables Causes Electricity Costs to Soar just below Fracking and the Poor.  The former relates that Germans will pay €20 million for €3 million in electricity while the latter shows that the fracking revolution has reduced the price of natural gas from $7.20 to $2.80 benefitting homeowners, industrialists, and workers.  No doubt the WSJ did this on purpose.  There is some doubt that the fracking revolution is responsible for all of the reduction in natural gas prices as the Obama doldrums might share some of the responsibility for natural gas prices.  On the other hand, it is possible that the reduction in price led to switching to natural gas a an energy source and the real impact of the fracking revolution is understated by the data.

Still, the differences are stark.  The comparison shows the impact of coercive methods (government imposed) and non-coercive methods (markets) on the consumer.  The cooperation within markets almost always favors the consumer when compared to the coercion of government solutions.  For the extreme case see Venezuela’s rolling blackouts despite being an OPEC founding member. 

Bad accounting at Forbes

Forbes has estimated that the Astros will be the most profitable team ever despite having the worst record since 2005.  There are two issues: bad accounting and the baseball side of it.

The bad accounting has to do with CSN Houston, the sports cable network that broadcasts the Astros games and is 45% owned by the Astros. 

As the largest stakeholder in CSN Houston, the Astros absorbed the brunt of those losses. FORBES considers regional sports networks separate businesses and does not include their losses or gains in its operating income estimations. 

That’s nice that Forbes has an opinion but GAAP has a different one.  Significant influence (and since the Astro are the biggest shareholder that would be hard to deny) requires the equity method and accruing their share of the earnings.  Forbes said the purchase price was $610 million so the $73 million or so in earnings represents about a 12% return.  Nice but hardly like getting in on the Microsoft IPO.

The other issue is baseball strategy.  Players from the farm system are cheap while free agents are usually expensive and often overpriced.  You may remember when Deadspin released financial statements showing that the Pirates were doing well financially in 2007 and 2008 despite being an awful team.  In 2013 it looks like their strategy worked.  Besides the Pirates, the Rays, Twins, and As are examples of teams build this way.  If you look at beginning of the year payrolls, five of the top ten would be hopeless (over 12 games behind for the wildcard), one has a chance and four would qualify for the playoffs if the season ended today.   The Yankees may yet rise in 2013 but as of today their strategy for 2013 and beyond is not looking good.  MWG is looking into an Astros jersey  because a lack of big contracts makes a team nimble.  They have a chance to be successful.

Educational policy: pricing

Steven Hayward reveals an interesting fact

In Vietnam, still run by the Communist Party, the very selective national university is offering free tuition to anyone who signs up for the university’s curriculum in Marxism.  They’ve had to offer free tuition because no students have been signing up for these courses, as in zero.  I can’t help but be amused that the market-clearing price for courses in radical philosophy is lower in a Communist university than in American universities.

Hayward’s factoid brings up an interesting problem in educational pricing: should we price programs differently and if so how?  Here we are only about government funded schools.  There are at least four ways to go about it.

1. All programs are priced at the same cost
2. Programs are priced based on cost
3. Programs are priced based on value
4. Programs are priced to produced desired enrollments

Alternative one is where most schools are now.  Alternatives two and three should be correlated but three is really the dominate solution as value should be the driver of price rather than cost.  Hayward’s factoid shows that prices in #4 have a limited impact on decisions.

Alternative #4 should be thrown out immediately.  Central planning is bad planning.  Individuals are better suited to make the decisions that relate to them.  There is other information beyond price that will be discussed in the next post.

Prices should be based on value with cost being a second choice.  Otherwise demand will skyrocket for cheap and valuable programs making it difficult to staff them.  A potential problem is that high prices could make it difficult for low income individuals.  Higher prices provide the opportunity to support other students.

There are important secondary difficulties with market based programs.  How often should prices be adjusted and what is the program?  Prices need not be adjusted every year to get an exact market price.  Value of programs rarely changes dramatically so price changes are not that big a deal.  What is the program is more of a challenge.  Because students are free to change their majors, they would have an opportunity to game the system.  English Composition should cost the same for all students.  Program would need to be defined so that prices could be applied.  

In short, a market solution needs prices that approximate the market value of each program.  The approximation of market value might be cost as programs in demand are usually more expensive.  We do not need perfect market prices.  We just need better ones.  Students can make good decisions and in demand programs can offer scholarships to offset higher prices.