The Liberal Democrats – the (unofficial) Guide

Satire .. not quite dead yet.

In the olden days

The Liberal Party was one of the two great political parties in Victorian times. It used to be known as the Whigs.

Nowadays

The Whigs changed their name to the Liberal Party and then the SDP-Liberal Alliance and now the Liberal Democrats or LibDems..

Their leader is Vince Cable .. no, sorry Nick Clegg .. no … umm ..Tim Fallon … Farron. Tim Farron.

Is that it?

Yes.

Are you sure?

Can you think of anything?

No

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Campaign Financing Capture Index

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@realDonaldTrump raised $7.5 million from people not named #DonaldTrump

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@TBillTheProf unintentionally destroys the case for a #livingwage @Mark_J_Perry @arindube

Living wage advocate William Lester published a briefing for the Washington Centre for Equitable Growth that destroys the case for a living wage. He did not intend this but he documented in detail the exclusion of inexperienced workers from the restaurant industry in San Francisco after a living wage was imposed. He compared San Francisco’s minimum wage of $12 per hour with North Carolina which only pays the federal minimum of $7.25 per hour.

What Lester found was a systematic increase in hiring standards. The living wage in San Francisco of $12 all but ended the hiring of inexperienced workers as shown in the chart below. This is exactly what basic price theory predicts. I put the two pie charts in his paper into a single bar chart so this powerful effect of the living wage on hiring standards is not lost.

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Source: The consequences of higher labor standards in full service restaurants – Equitable Growth.

The most fundamental criticism of living wage and minimum wage increases is they exclude workers who do not meet the new labour productivity level required to make it profitable for employers to hire them.  UK research found the same thing – an increase in hiring standards and tougher shortlisting. Lester welcomes this transition of the restaurant industry in San Francisco into a career for professionals. As he says in his briefing paper:

Concurrent with this wage compression was a rise in professional standards as employers sought to hire and keep already well-trained workers at higher wages and with expanded benefits. Both developments reduced turnover and attracted more professional employees who maintain a high level of customer service.

As with all minimum wage and living wage advocates, he is incurious as to what happens to those low skilled, inexperienced workers and new workforce entrants who no longer meet the hiring standards of San Francisco restaurants because of the large minimum wage increase.

As Lester concedes in his conclusions about what will happen if the San Francisco minimum wage of $12 an hour, the highest in the country, is extended to other cities and states:

Higher professional standards may limit entry-level opportunities within the industry, while lower standards may result in more employer-provided training for new workers.

Employer funded on-the-job training is often a major part of a job package. It is well-known in the labour economics literature since the time of Adam Smith that any job is a package of wages and other attributes including learning opportunities.

Workers sell their services and buy learning opportunities; firms buy labour services and sell jobs with varying learning possibilities (Rosen 1972, 1975, 1976). The rational allocation of time results in most careers starting with large investments in full-time schooling and then mostly investments in on-the-job training (Becker 1975; Ben-Porath 1967, 1970; Weiss 1987).

As the training provided by restaurant employers is useful to other employers, the trainee must fund it through trading off wages for this training. Once trained, the employee can command a higher pay because other employers are willing to pay them more now that they are trained. Again, this is a standard result in the human capital literature.

Where the human capital is more specialised to one firm or job, the employer and the trainee share the cost. A classic example of this is an apprenticeship.

Source: IZA World of Labor – Do firms benefit from apprenticeship investments?

In San Francisco, employers expect recruits to be fully trained and experienced. They provide little in the way of on-the-job training. Their recruits must have been able to afford to fund this in their previous jobs by trading off wages for training as Lester notes in his working paper:

…San Francisco employers were less likely to report lengthy formal training periods for either front-of-house or back-of-house workers. Instead, there is an overall higher level of skill expectation and—as is the case for many professions—workers are expected to acquire and exhibit industry specific knowledge on their own. 

In North Carolina, as Lester notes, the restaurant industry hires younger workers with less formal education and offers them intensive on-the-job training:

The restaurant industry in the Research Triangle region tends to hire younger workers with a lower level of formal education. Specifically, 49.5 percent of workers in there are under age 24 or have less than a high school education, compared to  38.9 percent in San Francisco. Conversely, 40.6 percent of workers in San Francisco have some college or a bachelor’s degree or higher, compared to 29.7 percent in the Research Triangle Region.

North Carolina restaurants sought to hire unskilled workers who were friendly and reliable as Lester notes:

One manager of a neighbourhood bistro in Raleigh explained what he looks for in a new front-of-house worker: “Basically, we require [that a server] can work a four-shift minimum per week and go an entire shift, an entire eight-hour shift without smoking a cigarette and [without] any facial piercings or anything. Beyond that, just come in with a smile on your face.”

The restaurant industry in North Carolina is willing to give people low skilled,  poorly educated and inexperienced a chance to work if they are willing to work. Lester reports this when quoting an upscale bar-and-grill manager on his hiring standards:

We look for at least one year’s experience, but the biggest thing we look for is we look for the person. We don’t look for the skill. I could teach anybody how [to] wait tables [and] pour drinks. I can teach anybody how to cook steaks. What I can’t teach is how to be a good person.

Lester then discusses with some degree of approval the hiring standards in the San Francisco where restaurants are professional careers:

Rather than viewing servers as essentially interchangeable labourers who can be trained quickly and easily if they possess a modicum of personal hygiene and a friendly personality, employers in San Francisco exhibited a clear description of what a “professional server” was.

One mid-scale restaurant employer said of her front-of-house staff: “We have a lot of people who have made it a career and they’re investing in the knowledge of the product and learning their trade or already know their trade because they’ve done it for years.”

Much to the surprise of believers in the inherent inequality of bargaining power between employers and workers, employers invest heavily in low-skilled employees despite the fact this makes them employable elsewhere. Lester again:

“Training is a huge investment for us and it is constant,” [a manager] said. “Training days depend on the position. Bartending training is ten days and servers require eight days. In the kitchen it’s probably about ten days. Every day they write note cards on all their recipes. But they’ll take a final. When they take their final, their test in the kitchen, they have to know every ingredient, every ounce, and every item, for the entire station. That’s why we require them to write note cards.

Even at higher-end restaurants, employers in the region have built a human resource system that accepts a high rate of turnover. “We try to stay ahead of the game so that we’re always hiring, we’re always interviewing, but hopefully it’s not desperation hires,” says another manager. “And we try to have a mix of needs like people who need fulltime, who can work lunches and brunches and all of that, to servers who really want very part time so that you can kind of over staff on busy shifts and then there’s always someone that wants to go home. There’s always a student that would like a Saturday night off.”

Lester paints a picture of a San Francisco restaurant industry that expects workers to fund their own industry specific human capital. In North Carolina, employers provide those training opportunities to minimum wage workers despite this making these up-skilled employees an attractive proposition for rivals to poach. By depriving low skilled workers of this opportunity of both wages and employer-funded training, a living wage would make them worse off.

I am at a loss here. How can the progressive left regard the exclusion of low paid, low skilled workers as a good thing? How do they put food on the table in San Francisco other than through a welfare check? How do they get their first job?

Counting the Austrian economists

Nintil

How many Austrian economists are out there? Here I present a list of them.

In a previous post (spanish), I listed some Austrian work published in listed (JCR) journals.

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Is there R&D spending myopia?

Nintil

Do firms invest in long term R&D?

They do, right? There are examples around. Just recently we saw that Intel will invest 50 millions of dollars in Quantum Computing (Also, this brief note by Intel’s CEO). They don’t expect to have results immediately:

Today Intel Corporation announced a 10-year collaborative relationship with the Delft University of Technology and TNO, the Dutch Organisation for Applied Research, to accelerate advancements in quantum computing. To achieve this goal, Intel will invest US$50 million and will provide significant engineering resources both on-site and at Intel, as well as technical support.

[…]

Despite significant progress, quantum computing will take at least a dozen years to fulfill. That’s why practical and theoretical research is needed now, and why we will work with industry partners.

Then, the interesting question would be what kinds of corporations invest in R&D, and at which timescales they do. It could be…

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Jousting with the Knightian knights: Uncertainty and entrepreneurship

Nintil

On the one side, Sir Entrepreneur of Northkirznerland. On the other, Sir Ardee of the Order of the Knightian Knights, Master of the Uncertain. Which gallant contender will win in this duel? In the past, Sir Entrepreneur has defeated Sir Ardee’s younger brother, Sir Risk of Martingale. It turned out if you studied his past jousting activities you could predict his moves, and thus win. However, doing this with Sir Ardee has proven impossible, and thus he is a fearsome fellow.

Days before the jousting commences, Sir Entrepreneur has been studying some writings by Lord Knight, Ardee’s Master and in one of them we can read:

Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated…. The essential fact is that ‘risk’ means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of…

View original post 4,889 more words

You didn’t invent that! Or deflating entrepreneurship and on historical explanations

Nintil

Consider the following sentences

  1. Without the State/Elon Musk we would have no iPhone/SpaceX
  2. The role of the State/Elon Musk was crucial for the success of the iPhone/SpaceX
  3. The State/Elon Musk played a very important role in the development of the iPhone/SpaceX
  4. The State/Elon Musk were one of the factors  that played a role in the development of the iPhone/SpaceX
  5. The State/Elon Musk played a minor role role  the development of the iPhone/SpaceX
  6. The State/Elon Musk had nothing to do with the development of the iPhone/SpaceX

Full disclosure: I’m an Elon Musk fan and I don’t own nor consider owning in the future any Apple products.

Here we have an ordering of different causal attributions for the State inventing the iPhone and Elon Musk creating SpaceX (yes, NASA played a role). Mazzucato seems to think that for the iPhone case, 1 or 2 are true. I think 3-4 are more likely. For…

View original post 1,589 more words

NSIDC’s Arctic Illusion

Real Science

Mark Serreze is the director of the National Snow and Ice Data Center in Boulder, Colorado. He believes that the Arctic is screaming, and he predicted that the North Pole would be ice-free in 2008.

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Star-News

2016-03-12063146

August 20, 2008 at 8:14 am

NSIDC graphs make it look like screaming Arctic sea ice is declining linearly, with 2016 at a record low.

Figure3_0301-350x270

Arctic Sea Ice News and Analysis

Even though there has been almost no change in sea ice area over the past decade.

Screenshot 2016-03-10 at 10.24.47 AM

timeseries.anom.1979-2008

The Danish Meteorological Institute shows a very different graph, with no change over the past decade, or perhaps a slight increase.

osisaf_nh_iceextent_monthly-02_en

osisaf_nh_iceextent_monthly-02_en.png

The graph below overlays the black NSIDC graph on the red DMI graph. The graphs matched fairly well until four years ago, when the NSIDC line diverged sharply downwards.

2016-03-111459222016-03-12062126

This divergence is enough to allow NSIDC to declare a record low and create the appearance…

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General government expenditure and general government revenue as a % of Australian and New Zealand GDP since 1970

I do not trust the numbers for New Zealand prior to the early 1990s released by the OECD. New Zealand simply did not have a tax structure including a GST in the double digits back then to support estate of that size. Nonetheless, the size of government in New Zealand is systematically larger than in Australia, a richer country which can afford a large government and generous welfare state.

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Source: General government – General government revenue – OECD Data and Data extracted on 12 Feb 2016 08:45 UTC (GMT) from OECD.Stat from OECD Economic Outlook November 2015.

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