End Of A Specious Argument?

James Freeman on the WSJ’s Best Of The Web tries logic on the folks that want to try to reduce income inequality.  Do read the whole thing.  We think it is unlikely to work but it might help the voters make a better decision in the general election.  He starts with an assertion:

Leftist politicians have been saying for years that a dramatic rise in wealth and income inequality is the central economic problem of our time.

We are not sure that those leftists care about the changes in income inequality.  Our guess, and it is only a guess, is that they think there there are more folks that think they would benefit from eating the rich than there are folks that worry about being eaten.  James hopes that an academic paper by Gerald Auten and David Splinter

Sidebar: Yes splinter is a bridge bid but we are not making this up.  If we did, however, then Splinter would be one of the authors but Gerald would need a new name and Splinter a first.  How does Diamond Splinter and Bergen Raises sound for the two authors?  End Sidebar

will eliminate the premise to the argument.  We don’t think that logic will stop folks from selling envy.  Here is part of what James says about the new paper:

After a draft of the paper was released last year, Paul Solman of the PBS NewsHour of all places wrote:

You thought income inequality was rising dramatically, right? Well, so did I. In fact, maybe you thought so in part because I and journalists like me have been reporting it as fact, for decades. But maybe we’re wrong — all of us.Mr. Solman reported that the Auten-Splinter draft paper enjoys widespread respect in the economics profession—even if not everyone is willing to admit it.  [Emphasis added]

We don’t like the of all places dig in bold.  Our information is the the PBS NewsHour is only slightly left of center unlike the rest of PBS.  But the second bold item is really damming to about the group-think of journalists.  James tells us that the paper is well received even by those on the left.

We don’t see that Auten-Splinter have any impact on us and we doubt it will have leftist politicians James hopes to convince.  It won’t have any impact on us because we care about growth much more than inequality.  To be precise, at the current levels of inequality in the US we don’t care about it at all.  We do want the growth fairy to come and visit.  We think that the government has been far too worried about inequality and related issues and not worried enough about growth.  An example of this is The Donald, whose administration has sometimes helped growth but his trade wars have not.  No administration has emphasized growth enough.  Growth should be a higher priority than it currently is.

The left doesn’t agree.  They want to increase the emphasis on distribution.  We don’t think they will be deterred by logic from James.  They think envy sells and we are concerned that they might be right.  Will a specious argument be enough?

 

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Good Ideas, Bad Ideas, And Bad Claims

The left cannot claim to have all the bad economic ideas.  They have the worst as we see in Venezuela but they do not have exclusive rights to such ideas.  There are lots of ideas out there and some of them are good but to get them noticed folks often make extreme claims.  Thus, good ideas get dismissed because they are not quite as good as the claims suggest.

Our example of a bad idea comes from Cesar Conda at NRO.  He says:

President Trump should propose exactly what President Barack Obama did in 2011: a temporary reduction in the Social Security portion of the payroll tax from 6.2 percent to 4.2 percent.

Cesar Conda is:

a former Bush-Cheney White House domestic-policy adviser and senior aide to three Republican U.S. senators, is founding principal of Navigators Global.

He is writing at NRO.  It is not unreasonable to take him seriously.  We shouldn’t.  Part of his argument is economic growth and we are fans of the growth fairy.  Economic growth is critically important and we believe that governments can influence the growth fairy.  But the way to get the growth fairy on your side is through long-term policies.  Countries with policies that support economic freedom like enforcing the rule of law, having low corruption, low regulation, low taxes, and free trade are highly likely to be visited by the growth fairy.  Going in the opposite direction then the more likely the growth fairy won’t visit.

The best you can hope for with Cesar’s idea is to move growth around.  It was one of many bad ideas from the 44th president.  It is worse now given the deficit and the near insolvency of Social Security.

Sean Maskai Flynn at Market Watch has two really good ideas for improving health care and reducing or limiting the costs.  They are good ideas because they are long-term and make healthcare more of a marketplace than it currently is.  First, we need transparent health care prices:

The first policy—price tags—is a necessary prerequisite for competition and efficiency. Under our current system, it’s nearly impossible for people with health insurance to find out in advance what anything covered by their insurance will end up costing. Patients have no way to comparison shop for procedures covered by insurance, and providers are under little pressure to lower costs.

Absolutely.  And second we need health savings accounts (HSA) that revert to the owner or can be extended into future years.  We don’t agree with Sean that the employer needs to “gift” them and he is surely wrong that it is a gift.   Any such payment is surely part of compensation rather than a gift.  We are not sure of how such a payment would be treated by the IRS.  The tax treatment of HSA need to be part of the solution.  We think the important points are high HSA limits and the opportunity to move amounts among years.

The second policy—deductible security—pairs an insurance policy that has an annual deductible with a health savings account (HSA) that the policy’s sponsor funds each year with an amount equal to the annual deductible.

The details are important but the problem is that the headline says these two changes would reduce health care costs by 75 percent.  Nope.  The text says they will provide $2.4 trillion [yup, trillion] per year in savings.  Since health care spending in 2017 was $3.5 trillion this gets another Nope.  Still, transparent prices and HSA with high limits and methods to move amount into other years or revert to the owners are great ideas.  Temporary tax changes are not.  Realistic claims are another good idea.

 

C.J. Box: The Bitterroots

C.J. Box’s new book, The Bitterroots has just come out.  We highly recommend it as one of his best.  It is one of his best because it gives you an interesting mystery with lots of unexpected twists and turns, interesting characters and scenery, and something to think about.  Because of the intricate plot we have some thoughts on the book without giving away much.  Don’t worry if you haven’t read the previous Cassie books as C.J. fills you in on everything you need to know.  If you want to do them in order here is a list C.J. books by lead characters.  There are three other Cassie books.

There are lots of interesting plot twists as Cassie Dewell, now a private investigator, gets roped into investigating Blake Kleinsasser’s alleged rape of his niece Franny.  Cassie wants to help the good folks and punish the bad folks and it seems obvious that Blake belongs to the latter group.  She will be reminded of the difficulty of sorting those groups out.  When you find out that Blake’s two brothers are named John Wayne and Rand you know that we have some symbolism going on.

Sidebar: What about Blake and Kleinsasser?  Is he the visionary William Blake? What is little (Klein) about the family?  Google Translate had no conversion for “kleinsasser” or “sasser” and our college German didn’t help.  End Sidebar.

John Wayne is far from the rugged individual of his namesake and Rand is the opposite of the rational approach from his namesake.  Dad, Horst II, can’t be happy and C.J. has a really interesting scene as Horst meets his final adversary.  And there are the forest fires that obscured things during the book and seem to still be burning at the end.  Does that mean there is a sequel?

Then there are the three generations of Kleinsasser women, Marion, Cheyenne, and Franny.  The interactions between Cassie and those three are some of C.J.’s best work. Will there be second bout for just the ladies?  We hope so.  Enjoy this one first.

 

The Donald And Trade

Michael Tanner from CATO is on NRO taking The Donald and the Democrats to the woodshed on trade.

There is a good reason for the [Democrat] rhetoric. Several recent studies, from researchers at Harvard, Columbia, the IMF, and two different branches of the Federal Reserve, have all concluded that the tariffs imposed by President Trump on China and others have indeed hurt American consumers and threatened economic growth domestically and internationally.

As Michael’s title says, the Democrats are no better.

But with the exception of extreme long-shot Representative John Delaney, every major Democratic candidate either joins Trump in opposing the TPP or is highly critical of the current negotiation.

You knew that John Delaney was running for the Democrat nomination, right?

Sidebar: Wisconsin is an open primary state.  Suppose that John or another sensible Democrat like Joe Sestak is still in the running for the nomination.  Would MWG take a Democrat ballot and vote for one of them?  What would such a nomination do to the probability of The Donald or the Dems winning?  We have not done this much math since grad school.  End Sidebar.

So 2020, just like 2016 presidential election, shapes up to be a binary choice but there is no choice that supports of free trade.

As always, MWG is with Kevin D. Williamson on trade.  In the NRO Corner, Kevin quotes his acerbic self:

Protectionists often describe reciprocity as if it were a cover charge for admission to American markets, but that gets the issue exactly backward: The question isn’t whether Washington may properly interfere with foreign sellers but whether it ought to interfere with American buyers. The case for allowing Senator Sanders to interpose his political interests between buyers and sellers is non-obvious, on either moral or economic grounds. It takes a special kind of stupid to believe that a voluntary exchange — willing seller, willing buyer — is transmuted into a form of hideous predation simply because some of the parties to the transaction may hold different passports.

We are with Kevin in supporting unilateral free trade.  We wish there was a major candidate that was supporting it in 2020 but there isn’t.  So when you make your decision between The Donald and the Democrat in 2020 free trade will not relevant to your decision unless there is a big surprise.

 

Bobby, Kris, and Janis

We really enjoy Daniel Henniger but recently he went too far.  Dan is at the WSJ discussing Does Hong Kong Matter?   Well, of course it does but it also depends.  Are we going to cause WW III over it?  Unlikely.  Is Dan going to use a really bad analogy about it to distract us from his reasonable point?  Absolutely.  Janis Joplin’s version Kris Kristofferson’s of Me and Bobby McGee is our all-time favorite song.  Dan should listen more closely.

Sidebar: Sometimes it is Bobbi and sometimes it is Bobby.  The Genius site uses Bobby so we are too.  End Sidebar.

Dan quotes Kris correctly but too briefly.  He says:

Someone once sang that “freedom’s just another word,” and maybe today it is. One casualty of the relentless U.S. political slog is that some important ideas—such as justice, racism, equality and respect—get so beaten into the ground, become so hackneyed, that one feels almost embarrassed to use the words.

The problem is there are lots of kinds of freedom.  Economic, political, and personal to make a short list.  Kris was talking about personal freedom.  The whole verse is:

Freedom’s just another word for nothin’ left to lose
And nothin’ ain’t worth nothin’ but it’s free
Feelin’ good was easy, Lord, when Bobby sang the blues
And buddy, that was good enough for me
Good enough for me and my Bobby McGee.

Personal freedom can be a negative as it was when Bobby set the songwriter free.  So the song ends:

Well I’d trade all my tomorrows for a single yesterday
Holdin’ Bobby’s body close to mine

Economic freedom and political freedom are positive goods while personal freedom can be positive or negative.  Dan needs to understand the difference between dating and Hong Kong.  There are different kinds of freedom and Hong Kong does matter.

Faculty Workload

Paul Caron, over at TaxProf Blog has parts of two articles on the dispute over faculty workload.  Joseph Epstein asks, “Who’ll Take A Pay Cut For Free College” over at the WSJ (subscription required).  Among other things, Joe says faculty have a sweet racket.  Coleen Flaherty calls shenanigans on Joe and wants to fact check him.  We’re generally with Colleen but think even Coleen could do better.  Do read all of what Colleen has to say.  Only read Joe if you want a rant.

Joe leads with a picture of Nick Saban, the Alabama football coach, and spends three paragraphs on college athletics.  We are not a fan of Division I sports, but they are irrelevant to the tuition cost.  Students do pay a separate fee but Division I athletics generates essentially all of their own revenue.  You can also ignore the college president but Joe has an important point on administrative creep.  He does get a bit wound up but he is close the the mark when he says:

The next big cut in the cost of higher education would be in superfluous administrative jobs, for the contemporary university is nothing if not vastly overstaffed. All those assistant provosts for diversity, those associate deans presiding over sensitivity programs, those directors for student experience—out, out with them.

He actually only spends two paragraphs on faculty.  Joe starts out imprecisely:

Which brings us to the faculty. Faculty jobs in American universities have risen well in excess of any visible improvement in the quality of university teachers: $200,000-a-year-or-more professorships are now not uncommon.  [Emphasis added]

Joe should have given us a little data on what the bold part means.  Yes, there are some highly paid faculty members in some departments.  Because we are retired we don’t have access to the data we did before.  Here is an AACSB summary of worldwide salaries for 2018/19.  AACSB is an organization of business schools.  It is hard to become part of AACSB so we could describe it as an elite organization.  Business school faculty make substantially more than most other faculty and elite schools pay more too.  There are just under 5,000 accounting (to pick a large discipline that is close to our heart, highly paid, and at the beginning of the alphabet) faculty in the survey and at least 300 are in the $200,000 category.

Sidebar One: We only have a very rough estimate from this data as it is 75 percentile, median, 25 percentile, and mean for four levels of faculty.  We can infer that there are some big salaries because the mean is above the median.  End Sidebar One.

So in one of the highest paid disciplines at the tonier universities, to use Joe’s term, perhaps 10% (that would mean 500 out of 5,000) make $200,000.  Some make much more than $200,000 but there are lots of schools and lots of disciplines where nobody is making $200,000.  We are close to certain that no faculty member at our former school is making $200,000 per year.  There is substantial faculty income inequality within and among universities.

Then Joe gets silly and decides he wants to pay us all on an hourly rate by experience. We might be able to staff the English department but the business school and many other departments would be out of luck.  We are not sure about what Joe plans to do about scholarship and service.  It is a bit of an overstatement to say that the faculty run the university but faculty committees do stuff like hire, fire, and budget.  Colleen notes one study finds professors spend 17 percent of their time in meetings.

Colleen brings up the opposite of the racket: the expansion of what are often called adjunct faculty who are paid by the course at a much lower rate than faculty and are not expected to do service or scholarship.  She says:

Among other things, Epstein’s essay ignores the structural shifts that have occurred since he began teaching — most significantly the transition to majority-non-tenure-track work force. This means that many professors don’t make a salary at all, but are paid on per-course basis. (In this sense, he’s closer to his “strict hourly wage” reality than he thinks. But adjuncts say that the $3,000 they often get to teach a course vastly undervalues the actual work they do to plan it, teach it and be available to students taking it while staying current in their fields. And that shift, in turn — along with public funding cuts — has led to a greater overall workload for tenured and tenure-track professors.)

She makes good points that this is Joe’s idea and that this increases the workload for the remaining faculty.  To be specific, there is more work because there are fewer people carrying a bigger service load.  Colleen leaves out that there is a mezzanine section of instructors who are full-time with a service expectation but (usually) no research expectation and no tenure.

Colleen has data from AAUP (all disciplines for American schools).  Income inequality shows up between private and public and by research intensity.  Here is some data:

At public doctoral institutions last year, the average full professor salary was $141,000. Associates made about $97,000. Assistants made $84,000. Full-time instructors made about $63,000, while lecturers made about $57,000.

Colleen leaves out the income inequality by discipline.  There are not many, if any, English faculty above the averages and no (well, there could be an exception) accounting faculty that are not above the averages.

Colleen give some examples of faculty working really hard.  She is right.  All faculty do teaching, scholarship, and service but the emphasis is on different things at different schools.  At doctoral schools the emphasis is on scholarship.  At comprehensives there is more of a balance among the three.  At smaller schools scholarship is less of an emphasis and service is more of an emphasis.  Faculty work hard but lots of the work is not obvious to everyone.  Faculty committees like assessment of learning, curriculum design, and retention of other faculty are not obvious.  The value of scholarship is hard to evaluate.

Coleen mentions one thing we get as faculty and leaves two out.  She is right we get flexibility but doesn’t go far enough.  We might work seven days a week but we can usually pick up the kids when needed.  Faculty members also have flexibility about what to teach, what scholarship to engage in, and service areas.  The flip side of flexibility is that each faculty member has to figure out what to do.  She leaves out, once we are tenured, we get exceptional security and a good retirement plan.

Sidebar Two: Tenure is a double-edged sword.  Tenure must be granted.  The percentage of probationary faculty earning tenure those schools with big salaries is pretty low.  It is hard to get good data because most folks leave voluntarily before the sword falls.  If you don’t get tenure then you are fired.  End Sidebar Two.

When we were finishing our MBA program some of the teaching assistants had a discussion.  Should we teach or work?  We chose to teach and learned that it is more than teaching but it is different than work because you have so many choice.  We can’t put a number on it but we were willing to trade off lower current income for flexibility, security, and a good retirement plan.  Like any career, it is a racket if you like what you do.

 

 

 

Men, Women: Reality and Fantasy

It has been building for years but the current hot item in TV shows and movies is for women to beat up men.  Sometimes, like in Stargate SG1, Samantha (Sam) gets to beat up an alien man.  It is a bit of silly fun.  We have recently been watching Whiskey Cavalier (WC) and Blood and Treasure (B&T) where this behavior is happening all the time.  The former is the better of the two although currently, the latter is the only one to be renewed.  Or perhaps not.  Why do we like WC better?  The characters are interesting in WC.  Lauren Cohan in WC looks intimidating but her pictures suggest otherwise.  It may take awhile when looking a Lauren’s pictures but eventually you can bring your focus to her biceps.  Her bulges are elsewhere.  B&T has some interesting flashbacks but the main characters are not very interesting.  In one particularly silly B&T sequence Gwen (Katia Winter check her arms too) beats up Bruno and then Bruno escapes from his cell  by beating up two beefy policemen.

It is great fun having pretty women beat up big guys.  Is it the cause of some of our current confusion?  Men, on average, are stronger and faster than women.  We see amazing women all the time but the strongest and fastest men are much stronger and faster than the strongest and fastest women.  Military .com tells us about some amazing women.  The US Army Ranger school has graduated twelve of them to date.  They also tell us that 40 percent of the men pass but they don’t give a pass rate for women although it seems to be two or three out of nineteen.  Elsewhere, there are assertions that there was an Army thumb on the scale for women:

But whereas men consistently were held to the strict standards outlined in the Ranger School’s Standing Operating Procedures handbook sources say, the women were allowed lighter duties and exceptions to policy.

We take no opinion on these assertions of the Army playing favorites other than to say hats off to the women and men that graduated and that any woman is highly unlikely to be the top scorer in Ranger school.

Sidebar: In running there might be some extremely long distances, like 100 miles where the top women can compete with the top men.  In addition, boys and girls can compete equally at very young ages too.  These exceptions are more proof of the general rule.  End Sidebar

Here is some evidence from sports.  Over the weekend the men (PGA) and and women (LPGA) both had a golf tournament on a par 71 golf course.  The men’s course was 7,353 yards and the women’s course was 6,427 yards for a difference of over 900 yards or 50 yard a hole.  There is a reason for separate tours.  Of course, as Madeline Kearns reports at NRO, the transgender movement has led to unsurprising results.  Connecticut allows men who identify as women to compete with women:

Since enacted in 2017, the Connecticut state [high school] conference policy has enabled two young men to win 15 women’s championships, titles that were held by 10 young women the year before. State athletic conferences in 18 other states have similar policies.

We don’t know if the fantasy of TV and movies has confused folks that women athletes can compete with men.  It is not that a female can never beat a male.  We have seen the women at the handball tournaments and many could hold us to three or less but they can’t compete with the men in the open class.  It is just that the best woman has little chance against a pretty good man.

Let’s bring back Whiskey Cavalier.  It is not a great show but it is interesting enough to renew.  But we shouldn’t be confused that women can compete in athletics with men on the high school, college, or professional level.  We shouldn’t let any group convince us that it is a good idea.