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Every Business Is a Social Science Experiment

Kevin_Williamson (1)

from Kevin Williams at National Review,Why does this gas station pay so well?

When I mentioned my surprise at what it pays to work at a gas station in Bastrop, I got two reactions, both predictable. One was from a purported conservative who sniffed that this pay scale was absurd for such low-skilled work, and that that was why a gallon of gas at Buc-ee’s cost a dime more than it did across the street. (For the record, this was not true of the Buc-ee’s in Bastrop.) And so I found myself having to accommodate the shock of a so-called conservative who has trouble mentally processing the fact that in a free market, consumers can choose between lots of price points offering different levels of service and amenities. (Given how purchasing decisions are actually made, I think they’re on to a pretty solid strategy here: A single man traveling alone may go to the funky service station across the street to save 80 cents — Hello, Dad! — but a man traveling with a wife and children is going to stop at the place that is famous for having the cleanest bathrooms in the business, even if it costs him an extra buck-and-a-half for a tank of high-test. Or he’s never going to hear the end of it.) There’s a reason that we have first class, business class, steerage, and Spirit Airlines: Some people are willing to pay more for better, and some people hate themselves and don’t care if their flight from Vegas to Houston runs a few hours late or never actually even takes off.

The left-wing response to Buc-eenomics is just as predictable and just as dumb: If Buc-ee’s can afford to pay gas-station attendants $17 an hour, then why can’t we mandate a $15-an-hour federal minimum wage? Put another way: If it’s a good idea for one specific business in one specific market at one specific time, why not everywhere? You get the same thing with Walmart vs. Costco: They’re superficially similar businesses, so how come the mean meanies in Arkansas can’t pay like the nice, nice men from Washington State do? The answer, of course, is that every situation is different, and every business is a social-science experiment, trying out different approaches to solving social problems, which is what entrepreneurs and successful firms actually do. If it weren’t for the self-interest of big, nasty corporations, it wouldn’t be a question of clean bathrooms vs. less clean ones: You’d be out there on the side of the road watering Mrs. Johnson’s beloved bluebonnets.

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The Other Half of the Battle

David French

from David French at National Review, The Sins of the Elite Don’t Excuse the Sins of the People

Even worse, the American cultural elite served up a ruinous sexual revolution, complete with anti-religious hostility that spawned and perpetuated enormous human suffering as families fractured and the fatherless multiplied. It launched wars without fighting in them, sought to help the poor without knowing them, and prospered in part by stacking the deck through a faux “meritocracy” that put a premium on credentialing over knowledge.

In other words, if there was any version of the American establishment that richly deserved toppling, this was it.

But identifying the reason for a political revolution is only half the battle: The revolution itself has to offer something better than the status quo. Egyptian governor Hosni Mubarak was an oppressive autocrat, and his ouster during the Arab Spring fired imaginations around the globe — until it ushered the Muslim Brotherhood to power in his place. Western history is littered with examples of justified revolutions spawning even worse tyranny. Few people weep for Czarist Russia, but no moral human being believes that the genocidal Soviet Union was an improvement. France’s Ancien Régime was riddled with injustice, and the French Revolution initially inspired even some of our own Founding Fathers, yet the Reign of Terror was a nightmare. If one could sum up the distinction between the American and French revolutions in two words, it would be these: virtuous revolutionaries. Thank God we had Washington, rather than Robespierre.

 

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Employment and Capital

A business makes a capital investment for two reasons: one is to expand production to meet rising consumer demand, and another is to increase efficiency or reduce cost.  The first reason is common during a growing economy and such investment can lead to increased employment.

Reducing costs is often ‘code’ for reducing labor. The cost of the equipment is weighed against the cost of labor. The higher the cost of labor and the lower the cost of equipment the greater is the incentive to replace labor with capital.

The cost of labor includes not just the wages and benefits but other friction costs ranging from compliance regulations, legal liability, unions, and administrative costs.

If a $50,000 a year employee can be replaced with a $500,000 capital investment, then this investment delivers a 10% return.  In an investment climate ruled by very low interest rates a 10% return can be alluring.  At the same time that low interest rates reduce the cap rate it also reduces the cost of the capital acquisition.

Such stimulation of capital investment is the stated intention of a low interest rate policy, but the combination of the low interest rates with high labor friction costs and a slow growth economy means that it will have less of an impact on employment and wages.

Anecdotally I still hear that employers are both reluctant to expand and that they have a very difficult time finding motivated quality workers, especially in the trades. Some fear another recession around the corner and others seek to avoid the higher friction costs associated with new hires, sometime referring to the ACA penalties.

Higher employment regulatory friction costs, and slow economic growth are offsetting the potential benefit to employment and wages from lower interest rates.

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Knee Jerk Gun Control- Part II

chickgun

America has a gun problem. We can argue if the guns are a symptom of a crime problem, a cultural problem or a terrorist problem; or if they are a cause.  But we can certainly agree that we would like to reduce violent gun deaths. We can likely agree that we would like to avoid the availability of weapons of any kind to get in the hands of terrorists or the psychotically deranged.

But as a matter of policy it is more productive to properly analyze a problem than to respond emotionally or haphazardly to a tragedy such as Orlando.

Gun critics compare the gun deaths in America to other countries such as in Europe where there is no second amendment and most weapons are unavailable to the public.  But we should understand that such a comparison between a large land mass with 50 states with widely diverse cultures and population to a small homogenous population is of limited use.  There is a diverse range of gun control statutes that vary not only among the states but also differ among communities within the states.  Chicago and Washington, DC have locally restrictive gun laws.

It is far more useful to compare statistics of gun violence among the states.  Police use crime stats to target assets to the location of the problem.  We find that gun violence is concentrated in relatively few areas, mostly large urban areas. When these areas are removed the rate of gun violence for the rest of the country drops considerably, even in areas where the incidence of gun ownership is very high.

Gun rights supporters like to point out that Chicago with strict gun control measures has much higher gun violence that other cities with much less regulation. This is largely irrelevant. What we should ask is if the regulations in Chicago has reduced gun crime from the period before the regulations were instituted. If these regulations have failed to reduce gun violence, then perhaps other solutions in law enforcement should be considered. Blaming the access of guns from neighboring states may explain a few instances but it also points to the futility of only relying on the access to weapons in controlling the problem.

We should also distinguish between the classification of gun crimes. The common gun crime perpetuated by a single criminal is the larger source of deaths, and this can be addressed with restricted access and better background checks, since so many in this category have criminal backgrounds.  There are many laws on the books already to enforce this that are unfortunately poorly enforced.

But the psycho shooters and terrorists pose different threats and requires different solutions.   This may entail profiling in ways that challenge civil libertarians, but such a laws could be tried for a limited period like The Patriot Act, requiring reauthorization by Congress.  This will discourage the abuse of the law by the enforcement agencies.

Stronger straw man laws severely penalizing those who buy for others with known risks can decrease access to dangerous felons, but this can be tricky.  Could you buy a gun for someone as a gift who then shoots someone 5 years later and then be held liable?

Expanded background checks, and licensing gun buyers would also help.

But there are two tactics that will not help.  Relying on the second amendment to avert any restriction is not productive. Nor is the demonization of the second amendment as a 250-year-old relic of the constitution.  Beyond the practical aspects of gun ownership there is something profound about a government that can trust its citizens to be armed.  The government has nothing to fear from its armed citizens, because they rise and fall not from armed insurgency but from the sacredness of the ballot box.

While restricting the sale or availability of certain weapons or high capacity clips may seem productive, the existence of so many of these weapons renders this approach ineffective unless you intend to engage in a massive confiscation of these weapons in all 50 states that are overwhelmingly in the hands of law abiding citizens.  I can not picture agencies that are unable to enforce the existing laws being able to carry out such a task, and I can not imagine the population complying.

Those who call for such confiscation only embolden the opposition who sense that every effort to reduce gun access to anybody is only a step on the slippery slope to confiscation.

Pistols are far more common than assault weapons in gun violence and almost equally deadly. Identifying an assault weapon as such is not as obvious as you may think.  Such weapons are used in a very small per cent of gun deaths; banning then and even confiscating them (if you could) would have minimal effect on gun deaths.

We are emotional creatures and responding emotionally to such tragedies is expected, but it is not the way to enact effective solutions.

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The Opposite of Progress

hillary-clinton-winking

from Hillary’s ‘Progressive’ Demise in The American Spectator by Ross Kaminsky

excerpt:

Mrs. Clinton has yet to propose a truly new idea. Each of her few policy positions are regurgitations of populist pabulum that offer nothing innovative, nothing for Americans to get excited about, no hope to improve the lives of people anywhere on the income spectrum, and no future for our nation. In short, she is a perfect Progressive.

Her comment related particularly to ride-sharing service Uber, which received another thinly veiled threat from Clinton: “I’ll crack down on bosses who exploit employees by mischaracterizing them as contractors…” No, Hillary, it’s fairly simple: I own a car. I want to give someone a ride to make a few extra bucks. I don’t need your “protection” and I’m not — and don’t want to be — an employee.

Soul-crushing big-government policies are, to coin a phrase, failed policies of the past. What’s really new — in the sense that it was abandoned long ago by American politicians of both major parties — is freedom. Freedom-based policies derive from trusting (as Progressives manifestly do not) that Americans are, can be, and prefer to be self-reliant and smart enough to make important and often difficult choices about our own lives and businesses without being nudged, much less shoved, by the Nanny State. More freedom… that would be real progress.

HKO

We are witnessing the decay of the Progressive movement brought about by the decline of unionization, the weight of their own failed polices, and a new economy that renders the government increasingly irrelevant.  In a typical Orwellian political fashion Progressivism has come to mean the opposite of progress.