Thursday, July 31, 2014

Institutions and relative incomes

Important insight by Robert Reich--
"The myth is you get paid what you’re worth. Yet for many occupations it’s just the reverse: Pay is inversely related to the real benefits to society. Social work, teaching, nursing, and caring for the elderly or for children are among the lowest-paid of all professions, but the benefits to society are considerable. We desperately need these people." 
   Couldn't say it any better.

Saturday, July 26, 2014

Quest for Land and Fortune

Three hundred thousand books are published in the United States every year. A few hundred, at most, could be called financial or creative successes.  Failure doesn’t afflict only the lesser talents.  John Keats, now regarded as a great poet, who died at 25 with a collection of bad reviews to his name, asked for his gravestone to read: Here lies one whose name was writ in water. He died convinced of his obscurity.
Help me avoid a similar fate: buy a copy of my historical novel, “The Quest for Land and Fortune” at Chapbook   You can’t go wrong at $20, about the cost of two movie tickets.
Search for Alfred Allan Schmid

Tuesday, July 22, 2014

The Hobby Lobby Supreme Court decision

"Benjamin I. Sachs, a law professor at Harvard University, notes that while federal law lets union members prevent the use of their dues for political purposes, shareholders do not have similar rights. “If we’re going to say that collectives have speech rights, then we should treat unions and corporations the same,” Sachs told me. Employees are even more vulnerable. When companies like YUM! Brands, which owns KFC and Taco Bell, campaign against minimum-wage increases, they are effectively using the profits generated by their employees to limit the compensation of those same employees. And of course, some of Hobby Lobby’s 13,000 workers will now need to pay for contraception." NYT 20 July 2014

Monday, July 21, 2014

For Shame America

For Shame America.  More than 57,000 young migrants have been apprehended, coming without parents, mostly from Central America since October.  At great expense, we have thousands of immigration control officers and elaborate fences.  I try to imagine the desperation of parents to send their children north hoping to escape killing and rape by drug gangs.  Do we need extensive interviews to determine if these children are eligible for entry? We are ruining our neighbors.
      The whole thing is our fault.  If we treated our addicts, the demand and profits of the drug trade would dry up. 

Saturday, July 5, 2014

Why We Have No High-speed Rail Lines

America is the only rich country in the world with no high-speed rail lines connecting our major cities.  As any European tourist quickly notes,  fast trains such as the Euro-Star and the French TGV are comfortable and reliable and cheaper than flying.  And, you are not treated like a crimnal while boarding.
       Opponents of rail improvement argue that roads are self-sustaining via tolls and gas taxes.  But, in fact the US Treasury yearly transfers from its General Fund to the Highway Trust Fund huge sums that do not equal all of the Amtrack subsidies for the past 40 years.  Federal highway subsidies were $41 billion in 2013; aviation subsidies were $16 billion, while Amtrak received only $1.6 billion.  (Reported in Harpers, July 2014)  
       Wisconsin's Republican Governor rejected a Federal offer to build a high-speed rail line from Madison to Milwaukee.  General Motors and Exxon and the oil exporting countries must have cheered this stupidity. 

Why Do Many Embrace Inequality?

Papers and books describe the widening inequality in our society.  They provide little understanding of why the 99% put up with it.
          The explanation of Prof. Justin Friesen  et. al. suggest that "When we feel a lack of personal control, we compensate by looking for order or predictability in our environment.  So we desire and perceive governments and gods to be particularly powerful.  Those who suffer inequality often even defend the social system responsible,  rather than accept that life has been unjust." (reported in the NYT June 22, 2014)
       The constant litany in our press and TV emphasizes that capital provides jobs, and we can't threaten it or it will go away.  This slogan translates into no protest against the favorable treatment of capital gains and low effective tax rate for the super rich. 
    It is just as true that labor provides opportunities for capital, but this is seldom noted.  Our political energy is captured by the Tea Party who rails against big government (whatever that means) and ignores inequality with the lame excuse that doing anything about it would mean more government (whatever that means).

Merger Fever--the patient is sick

The Federal Reserve has gone to great lengths to keep interest rates low.  So what have American firms been doing?  Borrowing to build new plants and employ more people?  Wrong! 
They are using retained earnings and borrowing to buy their own stock and other companies.
Prof. Richard Roll of the University of California has formulated "the hubris hypothesis of corporate takeovers."  "Lately Prof. Roll has been studying the role of narcissism--a personality disorder characterized by excessive self-love--in corporate takeovers.  When executives are excessively self-involved, he said, they may ascribe unrealistic attributes to themselves, like great strategic vision or deal-making ability, leading them to extend their domains by seeking acquisitions and wheeling and dealing rapidly." (reported in the NYT Jun 22, 2014)
         And what are the results? Prof. Rene Stutz found that during the Merger and Acquisitions mania of the period 1998-2001 shareholders of public corporations over-all lost huge sums. 
         Economic theorists have gone to great lengths to exclude psychology from economics, but it comes at a cost of reality.  Just because psychology does not fit mathematical models is no reason to exclude it. Theorists deride the above as just telling stories.  But, a good story is worth a lot of equations that miss the point.