Grad students, 1…
…Big box retailers, 0.
Did you catch this story in the New York Times? I rarely read anything in the N.Y./Region section, but this was really interesting.
It is winter. A third of the city is poor. And unworn clothing is being destroyed nightly.
A few doors down on 35th Street, hundreds of garments tagged for sale in Wal-Mart — hoodies and T-shirts and pants — were discovered in trash bags the week before Christmas, apparently dumped by a contractor for Wal-Mart that has space on the block.
Each piece of clothing had holes punched through it by a machine.
They were found by Cynthia Magnus, who attends classes at the Graduate Center of the City University of New York on Fifth Avenue and noticed the piles of discarded clothing as she walked to the subway station in Herald Square. She was aghast at the waste, and dragged some of the bags home to Brooklyn, hoping that someone would be willing to take on the job of patching the clothes and making them wearable.
According to a Wal-Mart spokesperson, this is atypical; they say they usually donate their discarded clothes to charity and don’t seem to know why or how this happened. Not so for H&M, apparently.
During her walks down 35th Street, Ms. Magnus said, it is more common to find destroyed clothing in the H & M trash. On Dec. 7, during an early cold snap, she said, she saw about 20 bags filled with H & M clothing that had been cut up.
“Gloves with the fingers cut off,” Ms. Magnus said, reciting the inventory of ruined items. “Warm socks. Cute patent leather Mary Jane school shoes, maybe for fourth graders, with the instep cut up with a scissor. Men’s jackets, slashed across the body and the arms. The puffy fiber fill was coming out in big white cotton balls.” The jackets were tagged $59, $79 and $129.
And nobody from H&M seems to be talking about it. Reporter Jim Dwyer writes, “various officials did not respond to 10 inquiries made Tuesday by phone and e-mail.” No one has answered the letter that Cynthia Magnus wrote. Are they embarrassed by their flagrant disinterest in helping the poor? By their demonstration that they’d rather destroy these clothes than let some charity case wear them? Being quiet doesn’t make it any less embarrassing; if anything, it makes it more so.
Well, kudos to Ms. Magnus, and Mr. Dwyer, for bringing this to our attention. I never really thought before about what happens to unsold merchandise. I suppose I just assumed it sat on the shelves until it eventually sold, but then again I’ve never really grasped the concept of “new fashions for spring” sort of stuff. I would guess most places donate unsold clothes, but this article definitely makes me want to start asking.
News on the math gap
We interrupt these long essays on religious belief to bring you a tidbit of news about math education!
Back at the beginning of the month, the MIT News Office reported on a recent paper by economics professor Glenn Ellison and econ PhD student Ashley Swanson regarding the gender gap in math performance. Their research showed “not only that girls are a small minority of elite high school math students, but also that the prevalence of high-achieving girls in math varies from school to school.” It’s a very interesting result.
This extreme concentration of talent strongly indicates the crucial role that environmental factors, not just innate ability, play in shaping the accomplishments of students. “It’s significant that the top girls are coming from a very, very small subset of schools with strong math programs,” says Ellison. “That suggests most of the girls who could be doing well, aren’t doing well. The thousands and thousands of other schools in the United States must have a lot of talent, too, but it’s not coming out.”
I’m really happy about this work because so much of the dialogue about gender disparity in STEM fields centers around anecdotes, or on assertions of trends which, while convincing, are still assertions. And I think that’s part of why it’s still such a contentious issue. If we’re ever going to reach a consensus about the extent of the problem and what, if anything, should be done about it, we need to roll up our sleeves and crunch some numbers. (And okay, I’ll admit, I’m also happy about this paper because it makes me feel a little more secure about not having done so well on the AMC back in high school.)
There’s a PDF of the paper online, so give that a read if you’re interested in more details.
Philly libraries closing?
The Philadelphia Inquirer is reporting that the city’s library system plans to shut down on October 2.
The Free Library of Philadelphia has posted notices at its branches and on its web site advising users that all libraries will close at the end of business on Oct. 2 if the state Legislature does not act on the city’s budget request.
The notices also say that all material will now be due Oct. 1 and that nothing can be borrowed after Sept. 30.
Besides closing libraries, the Nutter administration’s so-called Plan C doomsday budget includes eliminating court-system funding, shutting down all recreation centers and laying off up to 3,000 workers, including police and firefighters.
Layoff notices could go out on Friday if the Legislature does not approve the city’s request for a temporary sales-tax hike and a two-year deferral of payments into the pension fund.
I admit I don’t know the whole back story, and this does sound a little bit like an attention-grabbing stunt meant to pressure the legislature. Even if it were a stunt, though (which I doubt), it’s such an extreme one that it still means the situation is very dire. I mean, it’s not necessary to cut funding for libraries and fire departments and police departments and rec centers and courts (?!) in order to get people’s attention. Any one of them would be plenty if that were the only reason. The city government has posted this PDF showing the service changes possible under “Plan C.” It includes more cuts, such as reduced trash collection and the closing of the entire Fairmount Park system.
The whole thing sounds dreadful, but I admit it was the library system closing that really tugged at my heartstrings. When I was growing up, the highlight of my week was biking to the local library with my family to return the picture books that filled our backpacks, and to fill our bags up again with new ones. Libraries contribute so much to public literacy, even just by insinuating the expectation that people be literate, and that they ought to value literacy and information availability. I can’t imagine a major city like Philadelphia going on without them, especially considering their longstanding history of free libraries. It’s always sad when people lose their jobs, but cutting back on a particular service (as many of the budget cuts would do) is different from cutting it out entirely.
It’s Thursday already, and I haven’t been able to dig up any news about progress on this budget. Here’s hoping that things turn around soon.
New York isn’t special
Well, it looks like it’s my turn to rip on the New York Times editorial page. Two days ago the editorial staff put together this piece they call “The Dairy Quandary,” about extra subsidies for dairy farmers. It doesn’t seem like much of a quandary to me; I think they’re really reaching in order to justify conclusions they know can’t be right. They write:
We do not like agricultural subsidies or price supports, and we have opposed dairy subsidy programs. They tend to push farmers in the wrong directions, and they blunt the impact of market forces on farms. But there is a special argument to be made in this case.
What’s the special argument? They heart New York.
Nearly 2.5 million acres in New York state are directly tied to dairy farming. The milk crisis is severe enough to put many farms at risk, raising the potential of abandoned farmland susceptible to development. … This kind of dairy is a relatively benign use of the land, a means of protecting open space, a form of stewardship that is more acceptable than most others. We think it is right to keep the state’s dairy farmers on their farms, even if we are not happy with this way of going about it.
Nice try. There’s nothing different about New York dairy farmers that makes subsidies okay in their case. They’re still getting pushed in the wrong direction, encouraged to keep farming because it’s artificially profitable. Market forces are being blunted just the same. But it’s okay this time, they say, because … open space should be protected? People are using large open fields to produce commodities that are worth less than they cost, but that’s okay because they’re preserving those open fields! Silly me, I thought we had some state and federal organizations that kept an eye on that sort of thing. And, erm, does this really count as preserving open space? Sure, there aren’t any office buildings there, but there are, you know, cows. And the crop fields get sprayed with pesticides. And they’re surrounded by barbed-wire fences. It’s not like New Yorkers get to hike through the dairy farms to appreciate nature. (Also: do they really mean to imply that it’s important to preserve open space in New York, but not in Missouri or Nebraska? I know it might not feel like it from Manhattan, but New York is not that short on open space.)
It gets even stranger when they start parroting arguments from the pro-subsidy handbook:
Feed costs, the recession, a change in consumers’ milk consumption have all played a part in the dairy crisis, which affects organic farms as well as conventional ones. Like most commodity farmers, dairy farmers are essentially locked into the one product they have invested in producing, making it very hard to change quickly.
Right, “like most commodity farmers”—so why suggest that dairy farmers are a special case here? They agree that “[change] will have to come — including a revamping, if not a dismantling, of the maze of dairy price supports.” The bottom line is that that change will feel quick whenever it happens. Subsidies, even short-term ones, just push the timeline out to next quarter, or next year, or a couple years from now. (And when we get there, we’ll need more “short-term” subsidies.) The New York Times editorial board knows the correct policy on farm subsidies, and they should have the courage to advocate for it even when it hits a little closer to home.
Asking for higher taxes
I saw a great op-ed in the New York Times last week by Reed Hastings, the CEO of Netflix. It’s called “Please Raise My Taxes.” He proposes that government regulators should form a new tax bracket, taking 50% of salaries above one million dollars, rather than follow President Obama’s proposal of capping executives’ salaries at $500,000. I think this idea makes a whole lot of sense.
A salary cap sounds good, but it’s not actually helpful. Another NYT article recently pointed out that given the cost of living in Manhattan and the pressures of social expectations, it would actually put some families at the point of “selling their home in a fire sale,” despite how weird that seems. Of course, if all those salaries were capped, social expectations would change, and this isn’t the real problem. However, this salary cap would only apply to companies supported under TARP, and there are plenty out there that aren’t. All these highly-paid executives are extremely capable of finding other jobs when their current ones are suddenly a lot less high-paying. Offering high salaries is the way companies compete for the best CEOs. If you can’t pay at least as much as the other guys, you haven’t got a chance of getting top-notch management. It’s not good for the public’s investment to set these corporations up to fail, but that’s what salary caps are ultimately doing.
The higher tax bracket, on the other hand, gets plenty of benefits, but none of those harms. It allows companies to offer varying salaries to compete with each other. Additionally, this rule applies broadly to anyone making over a million dollars — whether their company is TARP-supported or not, whether they’re a CEO or a movie star or an athlete or a plumber named Joe. After all, it’s easy to make CEOs out to be the bad guys, but that’s not fair. People are generally paid according to how valuable their work is, and surely the head of a major investment bank is at least as valuable as the star of “Confessions of a Shopaholic.” Finally, of course, we have to remember that the government needs to be taking in more revenue somehow. That’s the main reason this nearly-trillion-dollar bailout is so terrifying: we were already $10 trillion in debt. The cap is more like scapegoating, blaming CEOs for being too greedy and decreeing how much they deserve to make. The tax increase actually addresses the underlying problem and increases government revenue. This is exactly where taxes ought to be raised if they have to be, because the marginal utility of money is much lower for the outrageously wealthy.
I think there are lots of good reasons to listen to Hastings’ proposal. But seriously, when someone’s begging the government to raise their taxes… that in itself is a pretty good indicator that there’s a solid case behind it.
New York’s soft drink tax
Last month, New York Governor David Paterson proposed adding an 18% statewide tax to non-diet sodas and sugary juice drinks. Though it does have some supporters, the plan has drawn plenty of criticism from nutritionists as well as small-government proponents. Fox News is even getting their fair and balanced panties in a twist about it. Despite all the criticism, I think it’s a great idea.
I know that nobody likes taxes. At the same time, though, most people like police and fire departments that are operational, public schools that can afford textbooks, and courthouses that can handle enough trials. The government needs to collect some tax revenue. The real question is, where should we take taxes from?
Every time the government taxes something, it changes the incentives for doing that thing. Income taxes make working less valuable, because they lower the wages you receive. Sales taxes discourage making purchases. Property taxes discourage owning property. (All these things are really only visible at the margins. Imagine that you have five dollars in your pocket and you want to buy a sandwich that costs $4.95. After sales tax, you can’t afford it anymore. Now, instead of thinking about how much cash you have on you right now, think of it in terms of a long-term budget, and you’ll get the idea.) If we want people in society doing a certain thing, or we want to make sure they are able to, we should keep taxes low on it. That’s why many places don’t tax groceries; they’re a necessity of life. Inversely, if we want people to stop doing something, we ought to tax it as high as is feasible. That’s why cigarette taxes exist, and why there should be a higher tax on gasoline. Taxes allow consumers to consider the externalities of their behavior. The tax is like adding on the social cost of people’s behavior, spread out over each individual act of consumption.
It’s bad that so many Americans are obese. According to Governor Paterson, nearly one in four New Yorkers fits that description. This puts a burden on New York’s medical resources, both in terms of time and space and in terms of funds available for government healthcare assistance. Therefore, it makes sense for New York to disincentivize obesity. They’re not locking people up in prison for it. Just making it a little less appealing.
If a tax can be used to achieve some social good like this, it means other taxes can remain lower (or can be lowered, depending on the current state of things). It seems to me that it’s a win-win situation. Better health in society, better allocation of taxes. Some people (like our friends at Fox News) think that this is cynical and hypocritical. Steven Milloy writes, “Combating obesity is not grounds for the tax; it is, instead, camouflage for it — and not very good camouflage at that.” This is a serious mischaracterization. What happens is, either New Yorkers drastically reduce their soft drink intake, which is a good thing, or New York makes a bunch of its tax revenue off a negative behavior rather than a positive one like working or buying groceries, which is also a good thing. No one is camouflaging anything.
Now, some of the criticism has been more along the lines of, “This isn’t enough.” It’s true that reducing the amount of soda you drink won’t instantly put you at your ideal weight. There are other types of food that are bad for you. Exercise still matters. However, this sounds to me like arguing that if you have anvils crushing both your feet, it’s not worth it to try to move the one on the right. Doing something in this case is still helpful, even though it isn’t everything.
The full extent of our madness
There was a fantastic op-ed piece in the New York Times on Saturday about the financial crisis. it’s by Michael Lewis and David Einhorn, and it’s called “The End of the Financial World as We Know It.” (It’s seven pages long, so set aside some time for reading. The first four pages are at the link above, and the last three are here.) The tone is set in this early paragraph:
Incredibly, intelligent people the world over remain willing to lend us money and even listen to our advice; they appear not to have realized the full extent of our madness. We have at least a brief chance to cure ourselves. But first we need to ask: of what?
Lewis and Einhorn answer this question both thoroughly and clearly. If you’re really unfamiliar with stock market vocabulary you may occasionally need to look up a word or two. Aside from that, it’s an immensely understandable explanation of the confluence of events leading up to the state we’re in now, in particular the knotted web of incentives that make self-correction next to impossible. Additionally, rather than just describe problems (however artfully that may be done), they go on to describe solutions and explain why those solutions would be more effective than those being attempted in the status quo. It’s not partisan or political at all; it’s mathematical and logical, which ought to appeal to everyone without regard to party affiliation.
I strongly recommend that you make yourself comfortable and settle in to read all seven pages. If you’ve been keeping up with financial news lately, you’ll find it a refreshing piece of writing (and possibly even a bit inspiring). And even if you feel like you’ve fallen too far behind in the news coverage to catch up, now is your golden opportunity.
Like farm subsidies, but for babies
Louisiana state representative John LaBruzzo announced on Tuesday that he is considering a proposal to pay $1000 to poor people willing to undergo tubal ligation or vasectomy so they will not have any children in the future. (I heard about this on CNN, but found a link to the Times-Picayune article via Wonkette.) LaBruzzo says he is concerned that families on welfare have more children than families who aren’t, and thus sap the state’s resources in ever-increasing amounts.
This idea sounds revolting on face to most people. John LaBruzzo is surely not a politician I would trust to formulate reasonable policy, particularly after hearing him say on CNN that he didn’t expect Democrats to support this proposal because people on welfare are the Democratic base. Cute. More importantly, the statistics don’t support LaBruzzo’s fears. While I strongly suspect that LaBruzzo’s intentions are racist and/or classist in nature, and I acknowledge that there is no urgency of an out-of-control welfare budget, I don’t think that that visceral revulsion at the basic idea is really warranted.
The first thing I want to point out is that no one is being forced into this arrangement, unless your definition of “force” is incredibly broad. If a person would rather have $1000 than be able to have children in the future, I see no reason not to allow them to make that trade. Plenty of people seek vasectomies or tubal ligations on their own, so it’s clear they’re not inherently bad operations. No one else would be harmed by the fact of an individual receiving the surgery, so if that individual would prefer the money to their fertility, the trade makes everyone better off. Surely there are people out there who face both unwanted pregnancies and financial problems, and would find themselves killing two birds with one stone in a system of this sort. (I anticipate a claim that this is merely economic coercion, since some people really need the money — but this is a ridiculous argument. Is it coercive for a grocery store to charge you money for food? You need that to survive. Is it coercive for your employer to require you to work according to your contract before you get your paycheck? Clearly not.)
We can also think about the potential children that might have been conceived in the future by someone who signed up for this surgery. If $1000 is worth more to you than your own child, I’m going to hazard a guess that you either would not love and care for that child very much, or that you clearly do not have the financial resources necessary to raise a child in a healthy situation (I mean, with adequate food, clothing, shelter, etc.). In either case, the wisest choice would be to refrain from conceiving a child in the first place, which is what a program of this sort allows for.
I know any hint of eugenics makes everyone queasy, because of how easy it is to invoke a comparison to the Nazi regime. I am not contesting the badness of Hitler here. However — aside from the obvious differences in levels of violence and coercion — it is important to notice that while Nazi eugenics were based on ethnicity, religion, and other qualities having in reality nothing to do with one’s ability to raise a family, the eugenics in a program of this type are almost precisely equivalent to the sort we all employ if and when we look for someone to start our own families with. We ask, will this person be able to love and care for our children, putting their needs ahead of his or her own? Will this person take on the intense level of responsibility involved in raising a child? Will our combined salaries be enough to support a family of the size we want? It’s not exactly “eugenics” to choose to have children with someone you think would make a good parent, as opposed to someone you think would make a bad one — or, if it is, it’s not the hateful sort of eugenics that’s tantamount to genocide.
Claims of eugenics with respect to this program are based on the fact that the payments could only go to poor people. Either the goal is to end poverty by ending poor people, as the Wonkette headline read, or the goal is to diminish the numbers of ethnic minorities who are statistically more likely to be poor. These are legitimate complaints. I’d like to step back and look at the basic idea of paying someone not to have children, though, and ask: is it really necessary to restrict this program to poor people? Everyone’s children impose some burden on the state, since public schools must make room for them, they consume resources and contribute to scarcity, Social Security will (maybe…) make payments to them when they retire, and so on and so forth. Sure, wealthy people are probably less likely to take the government up an an offer like this (since $1000 has less marginal utility to someone with greater financial assets), but for the sake of fairness why not offer it to them as well? Would a plan structured in that way make you feel the same kind of revulsion? I doubt it.
My point is absolutely not that John LaBruzzo is a good guy, or that his particular proposal is a good idea. I simply believe that what I’ve been hearing and reading on this topic is missing a certain level of rational discourse. Of course, in the US we don’t suffer from such severe overpopulation as to make a policy like this worth enacting, and I definitely think we should steer away of programs with central and unavoidable discriminatory effects. If it became practically necessary, though, paying people not to have children would be a legitimate plan, not a reprehensible one.
College endowments
Senator Grassley recently held hearings into how colleges use their endowments. There’s some understandable interest here. Universities frequently control large amounts of money, with a handful of them controlling huge assets. (Harvard, the richest by far, has over $34 billion.) With college costs rising faster than inflation, some in government have thought about ways to force colleges to put this money to work faster to help out with their expenses and reduce tuition. I really think this debate, though, has missed a few points.
First of all, and I think this is the most important point, the money has to be used on education/research eventually. Most of the money in endowments is tied to specific uses. It’s for scholarships, or the salary for a named professorship or something. Even what isn’t specifically targeted is going to end up being used by an educational institution. The real complaint here is just that colleges are saving more than they should — overvaluing education in the future as compared to the present.
I’m inclined to think they are not. Recognize first of all that, to a great extent, any lack of them funding education out of their endowments right now will be replaced with funding from people paying tuition, as long as tuition doesn’t get so high as to dissuade people from going to college. Now, I believe it’s clearly the responsibility of government to provide enough financial aid that everyone can attend college (assuming they put in the effort in high school to make themselves qualified). This is what’s annoying congressmen, since they don’t want to make room in the budget for it, and of course that’s understandable.
The real problem here, though, is that the vast majority of endowment money is held by only a small handful of schools. Maybe Harvard, Princeton, Yale, Stanford, and MIT can make college free for everyone for a little while by spending down their endowments (or at least, not growing them fast enough to keep up with inflation), but that only affects a tiny minority of college students in the US, and those schools already offer enough financial aid that students from poor families pay very little if anything. Most students go places that don’t have much in the way of endowments, and Congress is still going to have to offer enough financial aid to keep those places affordable.
However, these big endowments do constitute a form of national savings for the US. The American savings rate is low (or negative, really) and could use every bit of help it can get, and a half-trillion dollars in savings isn’t something we should be trying to get rid of. Also, more importantly, it helps to lock in the leading status of US universities. The world’s most elite universities are near-universally in the US (the main exceptions being Cambridge and Oxford). This is largely a consequence of economics. The schools with the ability to bring in the top people will always be the best. The US isn’t going to stay the world’s biggest economy forever, and the gap is definitely going to shrink fast. Building up huge endowments in our top universities essentially locks in their top position, guaranteeing that they’ll be able to fight and stay at the top even as the overall position of the United States deteriorates.
The government should try to avoid forcing private actors to spend their money. I’m not a libertarian, and regulation of nonprofits is something I could live with when clearly necessary. Here, though, I don’t think it is. Harvard is still raising lots of money, so clearly their donors don’t have a problem with the way the endowment is being used. At a time when the United States is failing in general to invest in the kind of long-term society-building things that keep a country at the top of its game, private charities that devote resources to planning for the very long term should be helped, not hurt.
Energy independence and stupidity
Real Clear Politics posted this article today by John Stossel in which he argues that energy independence is some sort of populist, protectionist talking point that makes no economic sense. All he succeeds in, however, is showing his own economic idiocy. He correctly uses some very basic principles from high school economics to point out problems with the most simplified 3-second sound bites on the issue. It’s great that someone understands these overly simplified basic principles, but if that’s the only economics you understand, you should stay out of high-profile public debates on economic issues.
Don’t Obama and Pickens realize that we get something useful for that money? It’s not a “transfer”; it’s a win-win transaction, like all voluntary trade. Who cares if the sellers live in a foreign country?
This point is right on face. It’s not in general bad that we buy things from other countries, and the “our money is being sent overseas” argument would apply to all trade. He is, however, ignoring a multitude of points that are more subtle. First of all, oil is not traded in a free, competitive market. It’s controlled largely by a cartel that is not above manipulating the price. This isn’t to say we don’t benefit from the trade — we still voluntarily make the exchange — but it does mean that developing domestic supplies or alternatives lowers the price more than the normal competitive forces would indicate, and therefore has what are essentially positive externalities.
It’s also important to note where the money goes. Stossel points out that most of the oil that physically comes into the US comes from Canada and Mexico, rather than oppressive dictators, but in doing so he’s missing his own point. The oil market is global. Price changes affect everyone. Our demand for oil raises the price that Russia can charge, even if we aren’t buying oil from Russia.
He also, of course, ignores the negative externalities (pollution, massive geopolitical games and expensive wars, increased power to Russia and Venezuela, etc.) that aren’t priced into oil.
The biggest idiocy, though, is the premise of the entire article. He thinks that “energy independence” means not ever importing oil. Maybe someone somewhere has used it to mean this, but definitely not anyone intelligent. Energy independence means that we produce as much energy as we consume. Denmark has done this, and yet they still both import and export oil. Stossel is correct to lampoon a literal no-oil-imports goal, but that’s not the argument anyone else is making.
If we export as much oil as we import, or if we have cheap alternatives available in the case of price spikes, it forces oil prices down and means that oil prices can never be used as a political weapon against us or anyone else. It takes power away from our enemies. (It should be pointed out that since much of our decreased dependence is likely to come from new technology, it will be easily spread and will also reduce the demand for oil from other countries.) That’s because an increase in the price, in addition to being unlikely, helps us as much as it hurts us.
He also makes the unfounded claim that energy independence is an impossible goal. We could replace oil for electricity generation, he says, but cars need oil so we’ll always need oil. Except that a lot of the focus of energy independence efforts has been to change exactly that. Hydrogen or electric cars, for example, do not offer any way to generate energy. They simply offer the flexibility to use other methods — anything that can produce electricity — to power cars. I’m just blown away by the stupidity of his argument.
He finishes by warning against government spending programs for energy research, saying that the government is unable to pick the most promising technologies. I have a lot of sympathy for this goal, but there are a lot of methods, such as gas taxes, that are clearly effective methods by which the government can push energy independence without trying to directly engineer the solution.
There are lots of good options, and they need to be supported. The energy debate is sorely in need of some increased sophistication. Stossel is clearly trying to provide that, but wow did he fail.