Red Sox Recap

Sunday was an amazing day as the Boston Red Sox won the World Series on our birthday.  It was a double celebration.  We have four comments.

First, the Sox were dominant.  They were dominant in the regular season by winning 108 games.  They were dominant in the postseason going eleven and three.  Two of the teams they beat in the playoffs had won 100 games.  It was one of the great seasons in MLB history.

Second, young New England fans are spoiled. We went oh for 90 last century with the Sox and Pats.  This century the have combined for nine championships.

Third, as we discussed a few days ago David Price could improve his Hall of Fame chances with a good start.  He did even better with two wins based on excellent starts. If he finishes up his four year contract with the Sox he should be in great shape.

Fourth, talk of dynasty is premature because the Sox are going to have budget problems.  Currently, the Sox have the highest payroll in MLB at $234 million but their best player, Mookie Betts, only gets $10.5 million and they have several other young players that will get big increases soon.  Those salaries will go up by a large amount soon.  What will happen to critical players like Steve Pearce and Nathan Eovaldi?  It is going to be an offseason of tough decisions for the Sox.  We hope they show great wisdom but baseball futures are hard to predict.

We will enjoy this glorious year.  We will try to keep future expectations at a reasonable level.  The former will be easy but the latter will not.

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The Growth Fairy Visits

Economic growth created our current state of economic grace.  Deirdre McCloskey calls it The Great Enrichment.  Jonah Goldberg calls it The Miracle.   Both of them would agree, we think, that it wasn’t planned.  After thousands of years of human life being short and brutish, in the past few centuries there has been a dramatic change in the quality of human life.  The [economic] growth fairy visited, because of the miracle of compound interest (separate from Jonah’s Miracle), and left us with riches and resources that the richest folks from a century (and especially two) could not imagine.

As an example, Jules Verne published Around the World in 80 Days in 1873 (set the year before).  The hero takes over, Wikipedia helpfully converts it into 2017 pound sterling, two billion pounds or about three billion dollars to make the trip.  We will take the Lady de-Gloves to Changsha, China in a little over a day for about a thousand dollars (and another thousand for the round trip) in a few weeks.  It is a nice comparison of how life has change in a century and-a-half.  Ordinary people now can do far more than the rich could do ten or 15 decades ago.

Economic growth is crucial to our future well being.  If the economy grows at one percent the compound growth over your child or grandchild’s 80 year life span is about 120% but at three percent it is about 960%.  It is a big difference.  It is important because the growth fairy has revisited the US economy after being away for a few years.  The WSJ tells us:

The Commerce Department reported that the economy grew at a robust 3.5% in the third quarter, a mild slowdown from 4.2% in the second. Consumer spending led the way with a 4% increase rooted in a tight job market and wage gains that have bolstered economic confidence. The economy has now grown by 3% over the last 12 months.  The U.S. economy hasn’t grown at 3% in a calendar year since 2005…

We, along with the WSJ, John Taylor:

When policy moves closer to those three attributes, as in the 1980s and 1990s for the advanced countries and more recently for emerging market countries, the economy does well, growing in a stable manner. When policy deviates from those three, as U.S. monetary policy did going into the tragic global financial crisis, the economy does poorly.

and many others believe in the growth fairy.  We do not believe that we can eliminate economic cycles.  Rather, we believe that good policy leads to, on average, better results and bad policy leads to bad results.  There are numerous examples of bad policy with Venezuela being close to the worst possible policies.  We think the WSJ is pretty close on its summary of good and bad policy in the US:

Can economic growth from tax reform and deregulation stand up to the headwinds from higher interest rates, tariffs and perhaps a Democratic Congress?

The WSJ position on interest rates isn’t clear.  It seems like they are saying increasing interest rates are a problem but are they suggesting action to reduce them?  We are with John on a rules based monetary policy rather than worrying about and trying to manipulate interest rates.  So do you believe in fairies?  This is one you really don’t want to die.

 

Tony Evers And The Minimum Wage

In Wisconsin we have, for some reason, a tightly contested race for governor between Republican incumbent Scott Walker and Democrat Tony Evers.  It seems, based on the news, like it should be a cakewalk for Scott.  For example, the front page of the local paper reports record low unemployment. A regional employer is offering free rides to their place of business to try and attract employees.  Economic growth continues to hum along.  It is hard to see why there is a contest.

Sidebar One: Try Googling Economic Growth In The Third Quarter.  Several of the articles emphasize that growth slowed from 4.2% to 3.5%.  Of the last 16 quarters only the 4.2% is higher.  End Sidebar One.

It appears from the advertising that fills the airwaves some folks are upset that Scott ran for president two years ago.

One silly part of Tony’s platform is his support for a $15 (yup, that is fifteen dollars an hour) minimum wage.  According to the Wisconsin State Journal as reported in the local newspaper:

Sidebar Two: Close to always we go and find Internet sites for this stuff but this seems well established.  End Sidebar Two.

[Tony], who has touted his support for a $15 [fifteen dollars!] minimum wage in Wisconsin, also said he is open to exceptions to the $15 minimum wage in rural areas and for teenagers.

When we see proponents for raising the minimum wage we always wonder if they are knaves or fools.  Tony has created a third category.  The fools think it is a good idea.  They don’t understand that, amongst other things, workers need to accumulate personal capital to be more valuable to employers.  One crucial way to accumulate such capital is working.

The knaves think that raising the minimum wage will benefit some group they favor.  It might create more government dependency and benefit government workers.  Some union contracts have clauses about the minimum wage and an increase in it might help some union workers.  And there are numerous other possibilities.

Tony, the third possibility, appears to see the minimum wage as a purely political play. He seems to recognize that it is a bad idea and that we can’t punish everyone and so we need exceptions but he continues to tout the idea as part of his platform.  We find that his position is more disappointing that either the knaves or fools.

David Price And The Hall Of Fame

We are just back from a family vacation, waterslides and MagiQuest with the grand-de-Gloves, so we need to catch up with old business.  One of those is David Price’s impressive outing beating Justin Verlander to win the ALCS.  It was nice to see him do well and great to see him handle it well.  David had an abysmal record as a starter in the postseason.  We will cheat slightly by only looking at his ALDS record.  His ALCS record has already been updated for his recent stellar outing and he was a reliever in his only World Series appearance until tonight.  His ALDS record is 1 and 8 with a 5.63 ERA.  The record for postseason losses is 16 by Tom Glavine but Tom won 14 and had a 3.30 ERA so we are not sure if David was the worst postseason pitcher of all time but he is in the running.

His strong performance in clinching the pennant for the Red Sox will get him lots of attention.  Our question is about the Baseball Hall of Fame (BBHOF).  As we see it for pitchers, the BBHOF is all about wins and awards.  Currently David has a regular season record of 143 and 75.  He won the AL Cy Young Award and is a five-time all-star at age 32.  In 2018 he was 16 and 7.  He is way behind Clayton Kershaw who is 30 and has been a seven-time all-star, three Cy Young Awards, four other top fives, and an MVP Award.  Despite Clayton’s inconsistent postseason form he looks to be a first ballot BBHOF guy.  Perhaps even if he doesn’t pitch again.

David is unlikely to be a first ballot guy but if he can continue near his recent form, let’s say 15 and 10 for six more years, would make him 233 and 135.  Currently, the top three active pitchers by wins are Bartolo Colon, age 45, (247-188), CC Sabathia, age 37, (246-153), and Justin Verlander, age 35 who David bested (204-123).  Justin is close to a sure thing as a seven-time all-star with a Cy Young and MVP.  CC is likely while Bartolo is unlikely.  David has a long way to go but he has a chance at the BBHOF.  A few more good outings in the postseason might get a few more votes.  We hope that a great one comes tonight.  Time to turn on the tape.

Stress Test

Yesterday’s Patriot and Red Sox games were a real stress test.  We think we are still alive so we passed.  In one evening the Pats gave up 31 second half points and they able to win with a field goal on the last play of the game.  The Red Sox, in a close to must win game, gave up a run in the ninth and the last out was caught on the warning track.  Phew!  It was almost too much for one night.

For most of our lives the Red Sox and Patriots rarely played meaningful games and on those rare occasions usually managed to lose them, often in memorable ways.  For awhile the Pats had the worst loss in the AFL Championship and the Super Bowl.  Nope, we are not going to link to Bill Buckner.  It is better to have stress on a regular basis if you have championships in the bank.

Politics Of Minimum Wage

The Editorial Board at the WSJ has a real man bites dog story that led us to recognize another side to the minimum wage dispute.  In Revolt Of The Tipped Masses the editors describe the conflict between the Washington DC City Council and the workers they are allegedly trying to help.  Here is the part that turned on the light for us:

Before the measure passed in June, many restaurant workers wore buttons asking patrons to “save our tips” and “vote no on 77.” When Washingtonians passed the measure anyway, the workers pushed for repeal. Though restaurants pay a $3.89 hourly wage to tipped workers, “we choose these jobs because we make far more than the standard minimum wage” from tips, bartender Valerie Graham told the City Council.

As Valarie says, especially in an elite establishment in a big city like DC folks can be making a tidy sum on tips.  A high minimum wage effectively eliminates tips.

Sidebar One: Many of them are not declaring the full amount of tips to the IRS.  It is not relevant to us here but it does increase the incentive to fight City Council.  Partially taxed higher amount is way better than fully taxed lower amount.  End Sidebar One.

Sidebar Two: We are heading for China later this year.  One thing every person emphasizes is that there is no tipping in China.  End Sidebar Two.

What we recognized is that there are two groups of workers adversely affected by minimum wage legislation.  We always emphasize the folks who will lose their jobs and it is a bigger deal to lose your job than to take a pay cut.  The pay cut is a pretty big deal too.  Remember what Valarie said: “We chose these jobs…”  She is a person worth listening to.

Free Trade Agreements

We are for unilateral free trade.  We favor eliminating all US tariffs.  We are OK with helping other countries by reducing their taxes including tariffs but it isn’t really important to us.  Thus any free trade deal is a second best solution for us.

Iain Murray at NRO brings us an interesting issue of all the additional agreements that have cluttered up trade agreements.  Do read the whole thing for a good discussion of the trade-offs.  He says:

Trade deals are better than no trade deals, generally speaking. But bad trade deals can set dangerous precedents. That was why in the 1990s, the staunch free trader Fred Smith, founder of the Competitive Enterprise Institute (where this author works), opposed the North American Free Trade Agreement’s (NAFTA) inclusion of side agreements that had nothing to do with trade. He worried that those provisions, mainly concerning labor and environmental standards, would set a precedent to elevate those goals above tariff reduction—the supposed point of trade deals.

Was he right? The conclusion of NAFTA’s renegotiation, the U.S.-Mexico-Canada Agreement (USMCA), suggests he was.

USMCA has 34 provisions, 13 annexes, and 13 side letters.  Iain is right that the expansion of such agreements is a problem.  Some times the problem is a bit of neocolonialism and other times it is the reverse.  We are against both but especially the latter because we live here.  It could be solved most easily with our suggestion of eliminating all US tariffs because.  The problem is that free trade is only high political priority for a few of us.  Many people oppose free trade.  Some folks support neocolonialism and others the reverse.

Free trade is a high priority for us just like Fred but we tend to support such agreements.  It is clear to us that we are not going to take our preferred step of eliminating all tariffs.  It is equally clear that agreements will need to be complex to garner sufficient support to be agreed to by the administration and supported by the Senate.  Rejecting such agreements because they are not ideal is eliminating the possibility of any agreement.  It is a binary choice to approve or reject USMCA.  We vote to support approval of USMCA despite its flaws.