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kottke.org posts about economics

Decrease in Economic Activity Due to COVID-19 Reduced Air Pollution and Saved Lives

posted by Jason Kottke   Mar 11, 2020

COVID-19 Pollution

Stanford professor Marshall Burke, who does research on the social and economic impacts of environmental change, wrote a post about how the decrease in economic activity in China due to COVID-19 quarantine and other countermeasures resulted in a significant drop in air pollution, which Burke estimates will save more lives than deaths caused by COVID-19.

Putting these numbers together [see table below for details] yields some very large reductions in premature mortality. Using the He et al 2016 estimates of the impact of changes in PM on mortality, I calculate that having 2 months of 10ug/m3 reductions in PM2.5 likely has saved the lives of 4,000 kids under 5 and 73,000 adults over 70 in China. Using even more conservative estimates of 10% reduction in mortality per 10ug change, I estimate 1400 under-5 lives saved and 51700 over-70 lives saved. Even under these more conservative assumptions, the lives saved due to the pollution reductions are roughly 20x the number of lives that have been directly lost to the virus.

And his conclusion is not that viral pandemics are a net positive for the world (you will see people naively arguing this, siding a little too closely with a snapping Thanos for my comfort) but that situations like this remind us, as Burke summarized on Twitter: “the way our economies operate absent pandemics has massive hidden health costs”:

But it seems overall incorrect and foolhardy to conclude that pandemics are good for health — and again I emphasize that the effects calculated above are just the health benefits of the air pollution changes, and do not account for the many other short- or long-term negative consequences of social and economic disruption on health or other outcomes. But the calculation is perhaps a useful reminder of the often-hidden health consequences of the status quo, i.e. the substantial costs that our current way of doing things exacts on our health and livelihoods.

Graphic above via NASA.

Why Do Poor People Make Bad Decisions?

posted by Jason Kottke   Mar 04, 2020

From The Correspondent, this is an article by Dutch historian Rutger Bregman about why poor people make low-quality decisions. In a nutshell, it’s because living in poverty overwhelms your brain, decreasing cognitive ability by a significant amount. The piece cites a number of supporting studies, but this one is perhaps the most relevant to separating cause from effect:

Shafir found what he was looking for some 8,000 miles away in the districts of Vilupuram and Tiruvannamalai in rural India. The conditions were perfect. As it happened, the area’s sugarcane farmers collect 60% of their annual income all at once right after the harvest. This means they are flush one part of the year and poor the other.

So how did they do in the experiment?

At the time when they were comparatively poor, they scored substantially worse on the cognitive tests. Not because they had become less intelligent people somehow — they were still the same Indian sugarcane farmers, after all — but purely and simply because their mental bandwidth was compromised.

Another study, of Cherokee families whose income increased dramatically due to casino revenues, shows just how beneficial more money is to poor communities:

Soon after the casino opened, Costello was already noting huge improvements for her subjects. Behavioural problems among children who had been lifted out of poverty went down 40%, putting them in the same range as their peers who had never known hardship. Juvenile crime rates among the Cherokee also declined, along with drug and alcohol use, while their school scores improved markedly. At school, the Cherokee kids were now on a par with the study’s non-tribal participants.

On seeing the data, Costello’s first reaction was disbelief. “The expectation is that social interventions have relatively small effects,” she later said. “This one had quite large effects.”

Costello calculated that the extra $4,000 per annum resulted in an additional year of educational attainment by age 21 and reduced the chance of a criminal record at age 16 by 22%.

This article was adapted from Bregman’s book, Utopia for Realists: How We Can Build the Ideal World, in which he advocates for three main changes to make our global society more equitable: a universal basic income, a 15-hour work-week, and open borders. The UBI issue is what he’s most known for — check out his 2013 article, Why we should give free money to everyone, and his two TED Talks on the topic. BTW, did you know that Nixon almost implemented a UBI in the US in the late 60s?

What Happened to the Company That Raised Minimum Wage to $70k/yr?

posted by Jason Kottke   Feb 28, 2020

Remember a few years ago when the owner of a credit card payment processing company based in Seattle raised the minimum wage of his employees to $70,000/yr while taking a huge pay-cut himself and capitalists the world over, afraid of their beloved & apparently suuuuper delicate system collapsing from such madness, flipped out?1 The BBC recently checked in with Gravity Payments and its owner Dan Price to see how things were going. Pretty damn well, as it turns out:

The headcount has doubled and the value of payments that the company processes has gone from $3.8bn a year to $10.2bn.

But there are other metrics that Price is more proud of.

“Before the $70,000 minimum wage, we were having between zero and two babies born per year amongst the team,” he says.

“And since the announcement — and it’s been only about four-and-a-half years — we’ve had more than 40 babies.”

More than 10% of the company have been able to buy their own home, in one of the US’s most expensive cities for renters. Before the figure was less than 1%.

“There was a little bit of concern amongst pontificators out there that people would squander any gains that they would have. And we’ve really seen the opposite,” Price says.

The amount of money that employees are voluntarily putting into their own pension funds has more than doubled and 70% of employees say they’ve paid off debt.

When Price made the announcement about raising wages, two senior employees quit because they thought the junior employees would become lazy and the company would suffer. Spolier alert: didn’t happen.

Rosita Barlow, director of sales at Gravity, says that since salaries were raised junior colleagues have been pulling more weight.

“When money is not at the forefront of your mind when you’re doing your job, it allows you to be more passionate about what motivates you,” she says.

Senior staff have found their workload reduced. They’re under less pressure and can do things like take all of the holiday leave to which they are entitled.

The thing about the increased number of babies is astounding. Some of that has to be demographic (employees getting older and entering prime family-starting years) but having a baby in the United States is expensive and that has to factor into many people’s decision on whether to have a child, especially if it’s a second kid or if you’re a single parent.

But the most interesting observation is this one by Price equating the freedom of his employees to their capability:

“We saw, every day, the effects of giving somebody freedom,” Price says.

He thinks it is why Gravity is making more money than ever.

Raising salaries didn’t change people’s motivation — he says staff were already motivated to work hard — but it increased what he calls their capability.

Employees that worry less about debt, healthcare, or where their next meal is coming from are happier, more productive employees. Imagine that.

Update: Although what he did in raising the salaries of his company’s employees is commendable, Price himself is perhaps not the corporate role model that BBC article makes him out to be. From a 2016 piece about Price in Esquire:

In a TEDx Talk last fall, Price’s ex-wife, Kristie, claimed he once “got mad at me for ignoring him and grabbed me and shook me… He also threw me to the ground and got on top of me. He started punching me in the stomach and slapped me across the face.” (The video of the talk was never released, but Bloomberg Businessweek quoted it in a story about Price in December.) The suit brought by Lucas Price, his business partner and brother, was unrelated to Kristie’s allegations. Lucas was seeking $26 million because, essentially, Dan had been a dick in their business dealings.

The rest of the piece corroborates that Price is in fact a dick who raised his employees’ salaries partially because it was a good PR move. (via @adrianhon)

Update: Inspired by Gravity Payments, Basecamp raised their minimum starting salary to $70,000/yr in 2019.

  1. Have you noticed that when hardcore capitalists talk about plans to raise corporate taxes or re-institute a more progressive income tax scheme or regulate businesses, they seem deathly afraid that these changes are going to completely derail capitalism in America, as if capitalism were this super weak thing instead of one of the most powerfully unstoppable inventions that humans have ever created? Your great engine of change is indeed mighty! Have some confidence in your beliefs, man!

Welfare vs Subsidies

posted by Jason Kottke   Jan 21, 2020

I was travelling yesterday and so missed observing Martin Luther King Jr. Day on the site, but I ran across this quote from him on Instagram and wanted to highlight it. It’s from a radio speech King gave called To Minister to the Valley and like many of King’s speeches and writing, it concerns economic justice & equality.

Whenever the government provides opportunities in privileges for white people and rich people they call it “subsidized” when they do it for Negro and poor people they call it “welfare.” The fact that is the everybody in this country lives on welfare. Suburbia was built with federally subsidized credit. And highways that take our white brothers out to the suburbs were built with federally subsidized money to the tune of 90 percent. Everybody is on welfare in this country. The problem is that we all to often have socialism for the rich and rugged free enterprise capitalism for the poor. That’s the problem.

The quote and its sentiment reminds me of the White Affirmative Action episode (transcript) of the excellent Seeing White podcast series, in which Deena Hayes-Greene of the Racial Equity Institute asserts affirmative action in America has overwhelmingly favored and benefitted white people.

America’s Unjust Regressive Tax System and How to Fix It

posted by Jason Kottke   Oct 11, 2019

On Monday, I posted a link to David Leonhardt’s NY Times piece, The Rich Really Do Pay Lower Taxes Than You.

For the first time on record, the 400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data. That’s a sharp change from the 1950s and 1960s, when the wealthy paid vastly higher tax rates than the middle class or poor. Since then, taxes that hit the wealthiest the hardest — like the estate tax and corporate tax — have plummeted, while tax avoidance has become more common. President Trump’s 2017 tax cut, which was largely a handout to the rich, plays a role, too. It helped push the tax rate on the 400 wealthiest households below the rates for almost everyone else.

Tax 2019 Regressive

The result is a tax system that is much less progressive than it used to be. And unjust. The economists who compiled this data, Emmanuel Saez and Gabriel Zucman, have written a book called The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay. In this piece called How to Tax Our Way Back to Justice, the pair lay out the problem and how we can fix it to make our tax system more just for the majority of Americans.

The good news is that we can fix tax injustice, right now. There is nothing inherent in modern technology or globalization that destroys our ability to institute a highly progressive tax system. The choice is ours. We can countenance a sprawling industry that helps the affluent dodge taxation, or we can choose to regulate it. We can let multinationals pick the country where they declare their profits, or we can pick for them. We can tolerate financial opacity and the countless possibilities for tax evasion that come with it, or we can choose to measure, record and tax wealth.

If we believe most commentators, tax avoidance is a law of nature. Because politics is messy and democracy imperfect, this argument goes, the tax code is always full of “loopholes” that the rich will exploit. Tax justice has never prevailed, and it will never prevail. […] But they are mistaken.

A Hand-Drawn Visualization of the US Economy from 1861 to 1935

posted by Jason Kottke   Sep 18, 2019

75 Yrs Us Ecoonmy

In 1936, former director of research at the Cleveland Federal Reserve L. Merle Hostetler published 75 Yrs. of American Finance, a hand-drawn chart of the economic health of the US from 1861 to 1935. The chart, which is horizontally oriented, shows a trending business activity index (which measures productivity) along with other financial data, indicates when Congress is in session, lists notable news events, and shows the high and low of the DJIA (starting in 1898). The graphic at the top shows Hostetler’s chart from 1929-1931, aka the beginning of the Great Depression.

The copy of this chart hosted by the St. Louis Fed goes to 1938…it must have been updated at some point. Also, if you go into the “»” menu in the upper-right corner of the in-page document viewer, you can set it to “horizontal scrolling” for easier viewing. (thx, andy)

Update: Philip Bump made a horizontally scrolling B&W version of Hostetler’s chart. This is a lot easier to navigate than St. Louis Fed version.

A Visit to the Most Solitary Place on Earth, the Deep Sea

posted by Jason Kottke   Sep 17, 2019

For their latest video, Kurzgesagt takes a typically informative journey from the surface of the ocean all the way down to the deepest spot on Earth, Challenger Deep.

In the segment about marine snow — decaying matter and feces that falls from the resource-rich sliver of ocean near the surface to provide the thin sustenance for the entire rest of the ocean — I couldn’t help but think about trickle-down economics.

Capital and Ideology

posted by Jason Kottke   Sep 16, 2019

French economist Thomas Piketty has come out with a new book. The 1200-page Capital and Ideology is a followup to Capital in the 21st Century, a surprise bestseller when it was released a few years ago. The book just came out in French (English readers will need to wait until March) so details are still sparse, but The Guardian has a short preview.

Among the proposals in the book are that employees should have 50% of the seats on company boards; that the voting power of even the largest shareholders should be capped at 10%; much higher taxes on property, rising to 90% for the largest estates; a lump sum capital allocation of €120,000 (just over £107,000) to everyone when they reach 25; and an individualised carbon tax calculated by a personalised card that would track each person’s contribution to global heating.

In an interview with the French weekly news magazine L’Obs, Piketty made no apologies for the impact his ideas would have on the stock market. He said: “[Yes], it will also affect the price of real estate that is crazy in Paris, and it will allow new social groups to become owners and shareholders.”

Branko Milanovic, an expert on global inequality, has written an early review.

This part of the book looks empirically at the reasons that left-wing, or social democratic parties have gradually transformed themselves from being the parties of the less-educated and poorer classes to become the parties of the educated and affluent middle and upper-middle classes. To a large extent, traditionally left parties have changed because their original social-democratic agenda was so successful in opening up education and high-income possibilities to the people who in the 1950s and 1960s came from modest backgrounds. These people, the “winners” of social democracy, continued voting for left-wing parties but their interests and worldview were no longer the same as that of their (less-educated) parents. The parties’ internal social structure thus changed — the product of their own political and social success. In Piketty’s terms, they became the parties of the “Brahmin left” (La gauche Brahmane), as opposed to the conservative right-wing parties, which remained the parties of the “merchant right” (La droite marchande).

To simplify, the elite became divided between the educated “Brahmins” and the more commercially-minded “investors,” or capitalists. This development, however, left the people who failed to experience upward educational and income mobility unrepresented, and those people are the ones that feed the current “populist” wave. Quite extraordinarily, Piketty shows the education and income shifts of left-wing parties’ voters using very similar long-term data from all major developed democracies (and India). The fact that the story is so consistent across countries lends an almost uncanny plausibility to his hypothesis.

The Symbiotic & Toxic Relationship Between Houses and Cars in America

posted by Jason Kottke   Aug 29, 2019

Since reading Gregory Shill’s writing about how heavily subsidized cars are in the United States, I’ve been on the lookout for different frameworks for thinking about America’s relationship to cars. I recently ran across a pair of interesting things about cars & housing. First, a refresher on what Shill had to say about how our nation’s laws have made cars all but mandatory:

Let’s begin at the state and local level. A key player in the story of automobile supremacy is single-family-only zoning, a shadow segregation regime that is now justifiably on the defensive for outlawing duplexes and apartments in huge swaths of the country. Through these and other land-use restrictions — laws that separate residential and commercial areas or require needlessly large yards — zoning rules scatter Americans across distances and highway-like roads that are impractical or dangerous to traverse on foot. The resulting densities are also too low to sustain high-frequency public transit.

Aaron Bady shared a few meaty pages from Nathanael Lauster’s The Death and Life of the Single-Family House: Lessons from Vancouver on Building a Livable City about houses being urban parasites and their symbiotic relationship with cars. Here’s an excerpt (italics mine):

Returning to the metaphor provided by the pine beetle and blue stain fungus, one parasite often works with another. In similar form, houses cultivate cars. Integrated through planning, they displace vastly more habitat than either could manage alone. Because houses consume space and tend to surround themselves with other houses, which also consume space, people often cannot walk to where they need to go. Because all that space results in a relatively low population density, it is also not very efficient to run public transit lines to areas with many houses. Low-density areas tend to end up with very few riders for what are often very expensive systems to maintain. In short, public transit loves density. The relationship between urban density and public transit use is exceptionally strong, with some suggestion of a cutoff — perhaps around twelve persons per acre (or about three thousand per square kilometer) — below which ridership drops off and expense per user makes transit impractical. By contrast, cars love the sprawl associated with houses and houses love cars back.

Houses cultivate cars. Cars love the sprawl associated with houses and houses love cars back. Lauster continues with the nature metaphor:

Altogether, house habitat displaces alternatives. The establishment of a Great House Reserve has protected house habitat even as it continues to expand in size. Agricultural and wild lands suffer in an immediate sense, as do the more urban habitats prevented from expanding beyond a constrained Urban Core. The house allies itself with the car at the same time as both contribute to global warming, potentially risking the displacement of everyone and everything. The house habitat excludes the poor. But even for those who can afford to live there, the Great House Reserve is a troublesome place to live. By its nature it leads to disengagement, contributes to inequality, and encourages a sedentary, unhealthy lifestyle.

And so on:

Houses are not just unaffordable for most people; they’re ultimately unaffordable for cities too. The fiscal situation of cities varies from place to place, but overall, houses tend to create a drain on municipal coffers. They are often taxed at lower rates than other properties, reflecting zoning restrictions on what could be built on single-family lots and how they can be used. But houses are more expensive to service on a per-unit basis, both in terms of the basic utilities infrastructure and, as previously noted, in terms of transit and transportation infrastructure. This could mean that my modestly wealthy neighbors and I, living in low-rises and town houses, end up supporting the very wealthy house owner nearby by paying more property tax relative to the amount of urban land and services we receive. The disparity becomes more notable as one crosses municipal boundaries into nearby house-dominated suburbs, where residents frequently enjoy the services (e.g., roads, commerce, employment opportunities) provided by the city without paying into the municipal tax base at all.

Josh Vredevoogd’s No Parking Here is about the poor parking policy in LA and leads with the statement: “Let’s build houses for people, not cars.”

For commercial buildings, it’s common to see a parking space required for every 100-200 sq ft. Meaning that parking is built at an almost 2:1 ratio to actual retail space, marginalizing the place that actually creates value and prioritizing temporary car storage. This inefficiency is carried into rent, groceries, meals, and overall raises the floor for cost of living.

Per City of LA code, a set of storefronts like above are illegal to build, instead they are required to be surrounded with empty pavement at the cost of walkability and comfort.

This forces people into driving. Parking requirements increase the density of cars but reduce the density of people. It also puts pressure on businesses by taking up useful real estate and replacing it with car storage.

Certainly a lot of food for thought here. See also Cars! What’s the Matter with Cars Today? and on a lighter note, What On Earth!, Kal Pindal’s Oscar-nominated short film about Martians visiting Earth and their observations about the dominant form of life here, the automobile.

Urban Nudges

posted by Jason Kottke   Aug 14, 2019

Urban Nudges is a site that documents small efforts by cities and the people who live in them to slightly change the behaviors of their inhabitants in some way. A 2008 book by Richard Thaler and Cass Sunstein defines a nudge as “any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives”. That sounds a bit academic but some examples from the site clarify things. For instance, protected bike lanes encourage bike riding:

The study “Lessons from the Green Lanes: Evaluating Protected Bike Lanes in the U.S.” was conducted in eight protected bike lanes in Austin, Chicago, Portland, San Francisco, and Washington, DC and the major findings were that bike lanes induced new bikers, mostly because they feel safer about the experience.

The researchers interviewed 2,283 cyclists using the bike lanes and found out that nearly ten percent of the users would have taken another mode of transportation if the bike lane hadn’t existed and around one percent of the interviewed said they would not have taken the trip at all.

Dancing zebras in Bolivia cajole motorists into minding crosswalks and other rules of the street:

Zebra Bolivia

Inspired by the Colombian experience, in Bolivia the Department of transportation developed a program where urban educators get dressed as zebras, teaching children and adults urban values through empathy and comedy. The project’s initial concept was to teach pedestrians and drivers the appropriate use of the pedestrian crossing and reduce congestion: urban zebras rejoice when pedestrians wait for green light and grab their head in agony when pedestrians jaywalk. Empathy, humility and comedy made them popular.

A speedometer in Amsterdam raises money for the neighborhood when drivers do the speed limit:

Every driver that passes by the speedometer below the speed limit of 30 km per hour raises EUR0,03 for the neighborhood. “The city’s slogan: Max 30 — Save for the Neighborhood” (Pop Up City). The money raised by this initiative is granted by the city of Amsterdam and is meant to be invested in local community projects.

What kind of nudges could you imagine in your town or city?

Plastic Bag Bans Might Do More Harm Than Good

posted by Jason Kottke   Jun 11, 2019

Yesterday I wrote about a Vancouver store offering plastic bags with embarrassing messages on them to encourage customers to use their own bags for their groceries. Under new laws that took effect on June 1, stores in the city must stop offering paper/plastic bags or charge for them.

NPR’s Planet Money team pulled some research together that suggests that banning plastic bags might do more harm than good (at least in the short term).

Taylor found these bag bans did what they were supposed to: People in the cities with the bans used fewer plastic bags, which led to about 40 million fewer pounds of plastic trash per year. But people who used to reuse their shopping bags for other purposes, like picking up dog poop or lining trash bins, still needed bags. “What I found was that sales of garbage bags actually skyrocketed after plastic grocery bags were banned,” she says. This was particularly the case for small, 4-gallon bags, which saw a 120 percent increase in sales after bans went into effect.

Trash bags are thick and use more plastic than typical shopping bags. “So about 30 percent of the plastic that was eliminated by the ban comes back in the form of thicker garbage bags,” Taylor says. On top of that, cities that banned plastic bags saw a surge in the use of paper bags, which she estimates resulted in about 80 million pounds of extra paper trash per year.

The waste issue is better, but paper bag production increases carbon emissions. And tote bags, particularly those made from cotton, aren’t great either.

The Danish government recently did a study that took into account environmental impacts beyond simply greenhouse gas emissions, including water use, damage to ecosystems and air pollution. These factors make cloth bags even worse. They estimate you would have to use an organic cotton bag 20,000 times more than a plastic grocery bag to make using it better for the environment.

Freezing Executive Salaries to Pay Entry-Level Workers a Better Wage

posted by Jason Kottke   May 16, 2019

John Driscoll is the CEO of a healthcare company called CareCentrix. In an opinion piece in The Guardian, he wrote about the success of a plan his company implemented where they froze the salaries of the top 20 executives and gave significant raises to entry-level workers, from the federal minimum wage of $7.25/hr to $15/hr. Driscoll explains why the company decided to do this:

Assuming nothing went wrong, and assuming that our employees were living with another wage earner or working another part-time job, $7.25 hourly wage might be sufficient.

The reality is that for many of us, things do go wrong, and I had emails from my new teammates to prove it.

One was from a customer service representative — a young mother with a family, who had lost her apartment in a fire and did not have enough money for diapers. Another email soon followed — this employee had missed a few bills and was living out of her car with her child.

This drove me crazy: how did we get to the point where one of our employees had to apologetically ask for financial support so she and her family could put a roof over their heads?

While some of our elected officials congratulated us for creating jobs, I felt that we were failing some of our employees, and the communities we were based in. The more our executive team parsed through the requests for assistance, the more we all became uncomfortable with the mismatch between what we asked of our employees and what we provided to them in turn.

And the real kick in the groin about the plan? It wasn’t even that tough to implement!

I challenged the chief financial officer to see how deeply we would have to freeze wages in order to reach our goal of a base rate of $15 per hour.

The answer was that we did not have to go very deep. Over the last few decades executive salaries have skyrocketed. That translates into accelerated wage growth in the highest tiers of executives throughout American business, and it affects every company.

What that meant for our company was that if we just froze the wages of our most senior team — less than 20 executives - we could radically increase the wages and improve the lives of nearly 500 of our teammates.

The conversation with our executives was straightforward. We were in the midst of a turnaround. We were demanding much from every corner of the company. Small financial sacrifices from those at the top could be life changing for those at the bottom of our wage scale. We needed to do it to build a real sense of Team CareCentrix. They agreed.

And it worked really well. Duh. It drives me bananas that more companies don’t see the benefit of doing this versus implementing compensation policies that serve only to line the pockets of the people in char— oh waaaaait, it actually makes perfect sense why this is happening. The shareholders of these companies should start calling bullshit on that sort of behavior with more regularity though.

See also the founder of Richer Sounds retiring and transferring 60% of his company to its employees, with workers also receiving £1,000 for every year they’ve worked for the company.

The Failure of the Great Tip-Free Restaurant Experiment

posted by Jason Kottke   Apr 18, 2019

Over the past three years, a number of restaurants across the geographic and economic spectrum of America have experimented with eliminating tipping. The practice is outdated, creates a difficult-to-justify wage imbalance between servers and cooks, and can result in mistreatment of staff (racism, sexual harassment) because of the fucked-up power dynamic it creates.

But as Grub Street’s Nikita Richardson writes, the no-tip test has largely failed, with many of those places going back to the old ways. This happened for three main reasons:

1. No tips meant higher prices printed on the menu, and customers stayed away from what they perceived as more expensive meals. That $12 burger became a $14.50 burger and all of a sudden, people knew what they were actually paying for their food. What’s interesting is that in another situation (say, having to pay to check a bag on a flight), people would be upset at not knowing the price up front and having a “hidden charge” added to their bill when they’re drunk and happy at the end of a meal.

2. Servers can make more at tipping restaurants. Places that went tip-free lost a bunch of their staff to places that still had tipping.

Meanwhile, by raising menu prices and thus revenues, the extra money would go toward higher wages for kitchen staff, who could start making $12 to $15 an hour at a time when the state minimum wage was $8.75.

But, it turned out, many front-of-house staffers were more concerned with making money than with maintaining the moral high ground. This February, Meyer admitted that he had lost 30 to 40 percent of his “legacy” staffers since 2015. (One Meyer employee told Grub last year that her wages dropped from $60,000 per year to $50,000 under the new policy.) While he insisted that the employees that replaced them “understand ‘Hospitality Included’ and are thrilled about it,” added employee attrition in an industry where turnover is already 1.5 times that of the private sector average has to hurt.

My regular NYC spot was one of the restaurants that experimented with eliminating tipping, and I can report that the staff was indeed quite skeptical about it and they switched back to the old method very soon. (I believe they kept the raises for the chefs though somehow.)

3. Tips make diners feel powerful. With tipping, you become the boss of your server or bartender and are responsible for a large chunk of their take-home pay.

Generally speaking, Americans hated the practice of tipping when it was first introduced in the late 19th century, perceiving it as a form of bribery for service workers who should simply do their jobs. But as we’ve adjusted to it, tipping has become undeniably intertwined with a sense of power.

Short of walking into the kitchen and telling off the chef, tipping is the easiest way to express satisfaction or dissatisfaction with a dining experience.

As a customer, I loved not tipping. I don’t feel the need to have power over the staff in a restaurant, I want cooks & chefs to get paid as well as servers, and I’ve acclimated to factoring the tip into my dining expenses. But it seems that Americans in the aggregate do care about those things, and so here we are.

And if we’re going to have tipping in restaurants, we should all know how it works.

If you can’t afford to tip 20 percent of the total amount that you spend at a restaurant, you can’t afford to eat at that restaurant.

And if your meal is bad?

You still tip. If something truly egregious happened, you ask to speak privately with a manager. If you do not want to speak privately with a manager, and would rather correct this perceived slight by tipping less or not tipping at all, you do not actually care about your perceived slight; you’re just using it as an excuse to be a dick.

Cheap TVs and Exorbitant Education, Modern America in One Chart

posted by Jason Kottke   Feb 25, 2019

Economist Mark Perry has updated for 2018 his chart of price changes of selected goods over the past two decades.

Price Changes Graph

This graphic has been referred to a “the Chart of the Century” because it explains a lot about the socioeconomic life in the United States in just a quick glance.

During the most recent 21-year period from January 1998 to December 2018, the CPI for All Items increased by exactly 56.0% and the chart displays the relative price increases over that time period for 14 selected consumer goods and services, and for average hourly earnings (wages). Seven of those goods and services have increased more than average inflation, led by hospital services (+211%), college tuition (+183.8%), and college textbooks (+183.6%). Average wages have also increased more than average inflation since January 1998, by 80.2%, indicating an increase in real wages over the last several decades.

The other seven price series have declined since January 1998, led by TVs (-97%), toys (-74%), software (-68%) and cell phone service (-53%). The CPI series for new cars, household furnishings (furniture, appliances, window coverings, lamps, dishes, etc.) and clothing have remained relatively flat for the last 21 years while average prices have increased by 56% and wages increased 80.2%.

As various parties have noted, the goods & services that have gotten more expensive tend to be things that people need, aren’t subject to international competition, and are subject to more government regulation. The goods & services that have gotten cheaper tend to be things that people want, are subject to international competition, and are less regulated.

If healthcare & education costs had dropped as much in the last two decades as the price of TVs, toys, and software has, we’d be all set! As it is…

The Life-Changing Magic of the $15 Minimum Wage

posted by Jason Kottke   Feb 25, 2019

For the NY Times, Matthew Desmond writes about how raising the minimum wage makes a huge difference in people’s lives.

A $15 minimum wage is an antidepressant. It is a sleep aid. A diet. A stress reliever. It is a contraceptive, preventing teenage pregnancy. It prevents premature death. It shields children from neglect. But why? Poverty can be unrelenting, shame-inducing and exhausting. When people live so close to the bone, a small setback can quickly spiral into a major trauma. Being a few days behind on the rent can trigger a hefty late fee, which can lead to an eviction and homelessness. An unpaid traffic ticket can lead to a suspended license, which can cause people to lose their only means of transportation to work. In the same way, modest wage increases have a profound impact on people’s well-being and happiness. Poverty will never be ameliorated on the cheap. But this truth should not prevent us from acknowledging how powerfully workers respond to relatively small income boosts.

Another observation in the article reminded me of a passage from Matthew Walker’s piece in The Guardian asserting that sleep is an amazing and underutilized performance-enhancing drug:

Studies have linked higher minimum wages to decreases in low birth-weight babies, lower rates of teen alcohol consumption and declines in teen births. A 2016 study published in the American Journal of Public Health found that between roughly 2,800 and 5,500 premature deaths that occurred in New York City from 2008 to 2012 could have been prevented if the city’s minimum wage had been $15 an hour during that time, instead of a little over $7 an hour. That number represents up to one in 12 of all people who died prematurely in those five years. The chronic stress that accompanies poverty can be seen at the cellular level. It has been linked to a wide array of adverse conditions, from maternal health problems to tumor growth. Higher wages bring much-needed relief to poor workers. The lead author of the 2016 study, Tsu-Yu Tsao, a research director at the New York City Department of Health and Mental Hygiene, was “very surprised by the magnitude of the findings.” He is unaware of any drug on the market that comes close to having this big of an effect.

Desmond is the author of the award-winning Evicted: Poverty and Profit in the American City.

Americans Greatly Overestimate Racial Economic Equality in Our Country

posted by Jason Kottke   Jan 09, 2019

One of the defining features of the United States is a deep and long-lasting economic inequality between white and black people in terms of wages, income, and especially wealth.

Average wealth for white families is seven times higher than average wealth for black families. Worse still, median white wealth (wealth for the family in the exact middle of the overall distribution-wealthier than half of all families and less-wealthy than half) is twelve times higher than median black wealth. More than one in four black households have zero or negative net worth, compared to less than one in ten white families without wealth, which explains the large differences in the racial wealth gap at the mean and median. These raw differences persist, and are growing, even after taking age, household structure, education level, income, or occupation into account.

Despite the magnitude and persistence of this inequality, Americans (both black and white) vastly underestimate racial gaps in income and wealth.

For instance, one question in the study asked: “For every $100 earned by an average white family, how much do you think was earned by an average black family in 2013?” The average respondent guessed $85.59, meaning they thought black families make $14.41 less than average white families. The real answer, based on the Current Population Survey, was $57.30, a gap of $42.70. Study participants were off by almost 30 points.

The gap between estimate and reality was largest for a question about household wealth. Participants guessed that the difference between white and black households would be about $100 to $85, when in reality it’s $100 to $5. In other words, study participants were off by almost 80 points. Participants were also overly optimistic about differences in wages and health coverage.

The full paper is here. Closing that gap will be challenging, in part because the often racist mythology around it is persistent. In a report called
What We Get Wrong About Closing the Racial Wealth Gap, the authors conclude “that the wealth gap is structural in nature, cannot be solved through the individual actions of blacks, and can only be solved through ‘a major redistributive effort or another major public policy intervention to build black American wealth’”.

“The Invisible Helping Hand”

posted by Jason Kottke   Jan 08, 2019

Feeding America (formerly known as America’s Second Harvest) is a non-profit organization that receives food donations from farmers, manufacturers, and retailers and distributes them to food banks around the nation. As this excerpt from Tim Sullivan and Ray Fisman’s book, The Inner Lives of Markets, tells it, this system was working pretty well but wasn’t as efficient as it could be, resulting in food being wasted and people going hungry.

Food banks might provide feedback on their likes and dislikes, but at its core, the Second Harvest allocation still resembled 1960s-era Chinese central planning (which, free-market economists will note, helped to cause the Great Famine of 1959-61). Second Harvest’s management felt that it was falling short in its efforts to get food banks the donations they most needed. Prendergast gives the example of sending potatoes, unbidden, to a foodbank in Idaho that already had warehouses full. Or delivering milk to a bank that didn’t have the refrigeration capacity to store it and so would end up throwing it away. In fact, Second Harvest would sometimes turn down food donations from giant food companies because they weren’t sure where to send it. Second Harvest was also, at the time, treating different kinds of food as the same — a pound of broccoli was the same as a pound of cereal was the same as a pound of potato chips. When it comes to feeding the poor and hungry, however, not all foodstuffs are of equal value.

So Feeding America asked University of Chicago economist Canice Prendergast to design a market for the donated food, hoping that would make things run more efficiently. After listening to concerns raised by the food banks, particularly from the smaller ones who didn’t want to get out-muscled in the market by the larger banks, they came up with an economy where food banks were given shares to bid on the food they wanted each day.

Crucially, the market was overseen by a “central banker”, so that certain market dynamics didn’t result in a disruption of the ultimate goal of getting the most food to the people that needed it.

Food bank presidents, the market designers discovered, were hoarders of shares. To keep the market from dipping into a deflationary spiral, Prendergast needed to pump extra shares into the market to encourage bidding. There was also the ebb and flow of goods into it to consider. Some days, Kraft might dump half a dozen container — loads of mac and cheese into circulation; other days there’d be none. If everyone used their points to bid on mac and cheese, the prices of, say, potato chips and broccoli would plummet, not because broccoli was suddenly worth less, but because of a temporary surge in the supply of more desirable donations. So extra shares would need to be put into circulation to prop up prices — lest Arnold see last week’s lower price of potato chips and bid too timidly on them, misinterpreting short-run price declines as permanent ones. Similarly, in a dry spell of donations, shares would be withdrawn from the market: Since there was so little to bid on, there would be a run-up in prices unless the number of shares also declined.

As a result of their implementation of an economy, a couple of benefits emerged. First, Feeding America learned which foods were most sought after by banks (i.e. those for which the bidding was highest) and were able to be more aggressive in seeking out donors for them. Second, the amount of total food donations doubled, with about 25% of the increase directly attributable to the market:

As Prendergast reports in an academic paper summarizing the Second Harvest market experiment, the annual supply of food donations increased by 50 million to 100 million pounds as a result. Twelve million pounds can be traced directly to the market itself, in the form of excess donations that flush food banks placed into the market in exchange for shares. That’s 12 million pounds of food that would otherwise have been wasted.

A Short History of the US Economy 1945-2019

posted by Jason Kottke   Jan 03, 2019

Morgan Housel, an economics writer and venture capitalist, recently took a crack at summing up (in just 5000 words) what happened to the U.S. economy since the end of World War II. Even if you disagree with it (or parts of it), the whole thing is worth a read. I think this captures a large part of the main point:

Everything in finance is data within the context of expectations. One of the biggest shifts of the last century happened when the economic winds began blowing in a different, uneven direction, but people’s expectations were still rooted in a post-war culture of equality. Not necessarily equality of income, although there was that. But equality in lifestyle and consumption expectations; the idea that someone earning a 50th percentile income shouldn’t live a life dramatically different than someone in the 80th or 90th percentile. And that someone in the 99th percentile lived a better life, but still a life that someone in the 50th percentile could comprehend. That’s how America worked for most of the 1945-1980 period. It doesn’t matter whether you think that’s morally right or wrong. It just matters that it happened.

Expectations always move slower than facts. And the economic facts of the years between the early 1970s through the early 2000s were that growth continued, but became more uneven, yet people’s expectations of how their lifestyle should compare to their peers did not change.

Along with this:

The biggest difference between the economy of the 1945-1973 period and that of the 1982-2000 period was that the same amount of growth found its way into totally different pockets.

This reminded me of Matthew Stewart’s piece from The Atlantic that I read when it came out but never blogged about: The 9.9 Percent Is the New American Aristocracy.

When it comes to the division of wealth, many Americans believe that the country is split between the 1%, which possesses a significant share of the country’s money, and the 99%, or “the people.” In reality, The Atlantic writer Matthew Stewart argues, 9.9% of the population comprises America’s new aristocracy, which often “takes wealth out of productive activities and invests it in walls.” But this group of people is rich in more than mere money, and its constancy poses an insidious threat to the promise of American democracy.

The related video is a good 3-minute summary of Stewart’s piece.

GDP Per Capita in China and Africa in 1980 and 2016

posted by Jason Kottke   Dec 19, 2018

Africa China GDP

Using data from the IMF and World Bank, this map by Näytä Data shows how quickly the relative fortunes of China and African countries changed over the last few decades. For reference, in 1980, Africa had an estimated population of 480 million and China’s population was 994 million, while in 2016, Africa had 1.23 billion people and China had 1.4 billion people.

The Effects of Pollution on Human Cognition & Performance

posted by Jason Kottke   Nov 28, 2018

While I am not a big fan of shifting to an economic argument for things that are already plenty bad for other better reasons (see diversity in the workplace, immigration policy, healthcare, etc.), this article by Austin Frakt on the economic cost of pollution reports on the results of a number of studies linking pollution to low performance in work and school. This study of baseball umpires was particularly troubling:

Pollution may also affect the quality of work, which is much harder to measure. An intriguing study in the Journal of the Association of Environmental and Resource Economists got at this issue by examining how accurately baseball umpires called balls and strikes under different pollution conditions.

Since 2008, pitch calls have been checked by Major League Baseball with an electronic system. In a typical game, an umpire makes 140 ball/strike calls. When there was a 150 percent increase over average carbon monoxide levels or the same increase in small particulate matter, the study found an average of 1.4 additional incorrect calls. Levels of pollution that high occur in about one in 10 games.

Imagine what the rest of us, especially kids, are getting wrong when we’re in polluted areas (i.e. many American cities). (via @tylercowen)

If the Point of Capitalism is to Escape Capitalism, then What’s the Point of Capitalism?

posted by Jason Kottke   Oct 02, 2018

In a thought-provoking essay, Umair Haque asks the question If the Point of Capitalism is to Escape Capitalism, Then What’s the Point of Capitalism?

Some systems are self-perpetuating. Like a forest. Like a river. Like an ocean. But some systems are self-annihilating. Like a fire. Like a storm. Like an epidemic. They burn themselves out. We tend think of capitalism as the former — but we are wrong. It is the latter — a self-destroying, not a self-sustaining, system. If we’re all really just trying to escape it — then what else could it be? After all, that means there will probably come a day when we do make our escape — and on that day, poof! — capitalism, at least in the sense above, winks out, like a storm, or a fire. So if we see for a moment through the great lens of human history — first there was tribalism, and we escaped it, then feudalism, and we escaped that — today now there’s capitalism, which we’re currently trying to escape, all over again. But while kings and knights might have not been so keen on escaping feudalism, what’s striking about capitalism is that we’re all trying to escape it — even most of the capitalists — because it makes us so miserable, mean, and foolish.

Humans don’t want money — that’s never been the goal — they want freedom from exploitation and the freedom to pursue meaningful lives free from fear and anxiety. Haque then argues that given humanity’s current levels of wealth, technology, and social structures, it is not only possible to provide everyone with those freedoms without the need for capitalism but it’s inevitable.

These three things, technology, finance, and public goods, have finally matured and developed to a degree that freedom from capitalism isn’t just possible. It’s becoming inevitable. What’s really happening as these three forces intersect? Society’s surplus is being reinvested back in precisely the very things we are really after — instead of being skimmed off by predatory elites. Freedom from exploitation, freedom from control, freedom to find, realize, and develop ourselves. We haven’t had the means, mechanisms, or tools, in the long history of humankind, to ever really achieve those on a mass scale yet. But we have them now.

Read the whole thing — it’s not that long and it’ll give you something to think about as you work.

This Nonsense of Earning a Living

posted by Jason Kottke   Jul 10, 2018

From a 1970 issue of New York magazine, Buckminster Fuller on the massive economic lever of technology:

We must do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest. The youth of today are absolutely right in recognizing this nonsense of earning a living. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian-Darwinian theory, he must justify his right to exist. So we have inspectors of inspectors and people making instruments for inspectors to inspect inspectors. The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living.

That was written almost 50 years ago…the capability of technology to generate wealth has increased greatly since then.

Closing the racial wealth gap: debunking 10 common myths

posted by Jason Kottke   Apr 19, 2018

A report called What We Get Wrong About Closing the Racial Wealth Gap was released this month by a group of economists and researchers from Samuel DuBois Cook Center on Social Equity at Duke University and the Insight Center for Community Economic Development. They report that the racial wealth gap in the United States is “large and shows no signs of closing”; this holds true at all levels in the wealth spectrum:

The white household living near the poverty line typically has about $18,000 in wealth, while black households in similar economic straits typically have a median wealth near zero. This means, in turn, that many black families have a negative net worth.

The 99th percentile black family is worth a mere $1,574,000 while the 99th percentile white family is worth over 12 million dollars. This means over 870,000 white families have a net worth above 12 million dollars, while, out of the 20 million black families in America, fewer than 380,000 are even worth a single million dollars. By comparison, over 13 million of the total 85 million white families are millionaires or better.

The authors then address ten common myths about the racial wealth gap, many of which are just straight-up racist — if only blacks just worked harder, saved more, learned more about financial literacy, etc. — particularly the one about black family disorganization:

The increasing rate of single parent households is often invoked to explain growing inequality, and the prevalence of black single motherhood is often seen as a driver of racial wealth inequities. These explanations tend to confuse consequence and cause and are largely driven by claims that if blacks change their behavior, they would see marked increases in wealth accumulation. This is a dangerous narrative that is steeped in racist stereotypes.

Single motherhood is a reflection of inequality, not a cause. White women still have considerably more wealth than black women, regardless whether or not they are raising children. In fact, single white women with kids have the same amount of wealth as single black women without kids. Recent research also reveals that the median single-parent white family has more than twice the wealth of the median black or Latino family with two parents. These data show that economic benefits that are typically associated with marriage will not close the racial wealth gap (Traub et al. 2017). Having the “ideal” family type does not enable black households to substantially reduce the racial gulf in wealth.

And overall, the authors conclude that the wealth gap is structural in nature, cannot be solved through the individual actions of blacks, and can only be solved through “a major redistributive effort or another major public policy intervention to build black American wealth”.

These myths support a point of view that identifies dysfunctional black behaviors as the basic cause of persistent racial inequality, including the black-white wealth disparity, in the United States. We systematically demonstrate here that a narrative that places the onus of the racial wealth gap on black defectiveness is false in all of its permutations.

We challenge the conventional set of claims that are made about the racial wealth gap in the United States. We contend that the cause of the gap must be found in the structural characteristics of the American economy, heavily infused at every point with both an inheritance of racism and the ongoing authority of white supremacy.

Gosh, it’s almost like if one group of people owned another group of people for hundreds of years — like the wealth of the group was literally the bodies, minds, and souls of the members of the other group — and then systematically and economically discriminated against them for another 100+ years, it’s nearly impossible for them to catch up. (via @eveewing)

A Selfish Argument for Making the World a Better Place

posted by Jason Kottke   Mar 19, 2018

This video, a collaboration between Kurzgesagt and economist Max Roser, makes a compelling argument for empowering the maximum amount of people around the world to become happier/wealthier/more free, so that everyone can all work on solutions to problems that affect everyone. The main gist is that while pre-industrial conditions favored zero-sum thinking, the Industrial & Green Revolutions and global telecommunications have created a situation in which non-zero-sum thinking is favored.

I couldn’t help thinking of the Lost Einsteins due to inequality in America.

I encourage you to take a moment to absorb the size of these gaps. Women, African-Americans, Latinos, Southerners, and low- and middle-income children are far less likely to grow up to become patent holders and inventors. Our society appears to be missing out on most potential inventors from these groups. And these groups together make up most of the American population.

The key phrase in the research paper is “lost Einsteins.” It’s a reference to people who could “have had highly impactful innovations” if they had been able to pursue the opportunities they deserved, the authors write. Nobody knows precisely who the lost Einsteins are, of course, but there is little doubt that they exist.

In addition to the ethical and moral arguments for improving the lives of all humans, the non-zero-sumness of today’s world makes a powerful economic argument for doing so as well. How to accomplish this is left as an exercise to the reader…

Ted Chiang on the similarities between “civilization-destroying AIs and Silicon Valley tech companies”

posted by Jason Kottke   Dec 19, 2017

Ted Chiang is most widely known for writing Story of Your Life, an award-winning short story that became the basis for Arrival. In this essay for Buzzfeed, Chiang argues that we should worry less about machines becoming superintelligent and more about the machines we’ve already built that lack remorse & insight and have the capability to destroy the world: “we just call them corporations”.

Speaking to Maureen Dowd for a Vanity Fair article published in April, Musk gave an example of an artificial intelligence that’s given the task of picking strawberries. It seems harmless enough, but as the AI redesigns itself to be more effective, it might decide that the best way to maximize its output would be to destroy civilization and convert the entire surface of the Earth into strawberry fields. Thus, in its pursuit of a seemingly innocuous goal, an AI could bring about the extinction of humanity purely as an unintended side effect.

This scenario sounds absurd to most people, yet there are a surprising number of technologists who think it illustrates a real danger. Why? Perhaps it’s because they’re already accustomed to entities that operate this way: Silicon Valley tech companies.

Consider: Who pursues their goals with monomaniacal focus, oblivious to the possibility of negative consequences? Who adopts a scorched-earth approach to increasing market share? This hypothetical strawberry-picking AI does what every tech startup wishes it could do — grows at an exponential rate and destroys its competitors until it’s achieved an absolute monopoly. The idea of superintelligence is such a poorly defined notion that one could envision it taking almost any form with equal justification: a benevolent genie that solves all the world’s problems, or a mathematician that spends all its time proving theorems so abstract that humans can’t even understand them. But when Silicon Valley tries to imagine superintelligence, what it comes up with is no-holds-barred capitalism.

As you might expect from Chiang, this piece is full of cracking writing. I had to stop myself from just excerpting the whole thing here, ultimately deciding that would go against the spirit of the whole thing. So just this one bit:

The ethos of startup culture could serve as a blueprint for civilization-destroying AIs. “Move fast and break things” was once Facebook’s motto; they later changed it to “Move fast with stable infrastructure,” but they were talking about preserving what they had built, not what anyone else had. This attitude of treating the rest of the world as eggs to be broken for one’s own omelet could be the prime directive for an AI bringing about the apocalypse.

Ok, just one more:

The fears of superintelligent AI are probably genuine on the part of the doomsayers. That doesn’t mean they reflect a real threat; what they reflect is the inability of technologists to conceive of moderation as a virtue. Billionaires like Bill Gates and Elon Musk assume that a superintelligent AI will stop at nothing to achieves its goals because that’s the attitude they adopted. (Of course, they saw nothing wrong with this strategy when they were the ones engaging in it; it’s only the possibility that someone else might be better at it than they were that gives them cause for concern.)

You should really just read the whole thing. It’s not long and Chiang’s point is quietly but powerfully persuasive.

Unlocking the Commons: Or, the Psychoeconomics of Patronage

posted by Tim Carmody   Dec 15, 2017

Nieman Journalism Lab is running its annual predictions for the next year in journalism. I wound up pitching something about audio platforms that is weirdly optimistic about Spotify? but for a hot minute, I tried to talk Jason (and he tried to talk me) into writing something about the new patron economy.

It was too late to pitch it as a prediction, but I couldn’t get it out of my head. So I do what I do, which is to write as much of it down as I can. In the end, I couldn’t think of a better place to run it than right here at Kottke.org.

Here’s the picture as generally agreed upon: ads are still alive and well, but the collapse and consolidation of the ad market means ads alone can’t support media companies any more, whether they’re big like the New York Times or small like Kottke.org.

There’s a puritanical argument that says ads have failed media, they bring out media’s worse impulses, and might be inherently bad. The only way to break with the ad model is to break with it completely, and sell media like a product. Make readers pay for content. If they don’t pay for it, don’t give it to them. Only when media companies are wholly accountable to their subscribers can you fix what’s wrong with media. Big companies need paywalls: little ones need exclusive subscribers.

Kottke.org, obviously, does not work this way. It has ads, although those are a very small part of the site and a shrinking part of the revenue. It has members, but very, very little is directed only to them: right now, subscribers to the newsletters get some behind-the-scenes stuff and a few early previews and experiments. Stuff that only real fans even want. The site, the tweets, the RSS feed, and everything else the site’s produced or ever will produce is available to everyone, whether they’re a member or not.

I call this “unlocking the commons,” and it’s the same approach I’ve taken with my Patreon and newsletter. Fans support the person and the work. But it’s not a transaction, a fee for service. It’s a contribution that benefits everyone. Free-riders aren’t just welcome; free-riding is the point.

This, I think, is key to understanding the psychology of patronage. Normally, if you buy a product — let’s say you’re buying a book. Books aren’t perfect commodities, but they’re still commodities. As a shopper, you’re trying to get as much value for your book as you can for your money. If I can get the book cheaper and faster from retailer A(mazon) than retailer B(arnes & Noble), most of the time, that’s what I’m going to do.

If I’m skeptical of A, and prefer to support B or C(ity bookstore of my choice), I’m not strictly speaking in a purchasing relationship any more, but something closer to a patronage one. I don’t just want my money to buy an object; I want it to support institutions and individuals I like, and I want it to support the common good.

This is one of the weird things about patronage. As a consumer, your first thought is to your own benefit. As a patron, it’s to the good of your beneficiary. Likewise, as an artisan supported by patronage, you tend to think more about what’s best for your patrons and audience than you do yourself.

For instance, when Patreon recently changed its fee structure, I thought about it on two levels. First, it seemed really bad for patrons, slightly less bad for beneficiaries, and clearly helped out Patreon more than either group. As a customer of Patreon — they’re the ones I give my money to — I felt like I was being ripped off. I was being asked for more money without getting more in return. But as a patron, my first thought was, does this help the people I pledge money to each month? And as a beneficiary, I thought, how does this affect the people who pledge money to me?

In both cases, I wanted what was best for that other person. I wanted them to be getting the full value of the transaction. The only time it was about me was when I thought about my relationship with Patreon — which is completely different.

Please note that this is not fuzzy-headed idealism or just sentiment: this is as concrete and comprehensive as it gets. It’s economic thinking that recognizes that goods don’t just exist to be used up, but are objects of labor produced by and for members of a commonwealth. The truth of the transaction is in the whole.

The most economically powerful thing you can do is to buy something for your own enjoyment that also improves the world. This has always been the value proposition of journalism and art. It’s a nonexclusive good that’s best enjoyed nonexclusively.

Anyways. This is a prediction for 2018 and beyond. The most powerful and interesting media model will remain raising money from members who don’t just permit but insist that the product be given away for free. The value comes not just what they’re buying, but who they’re buying it from and who gets to enjoy it.

The bigger those two pools get — the bigger the membership, and the bigger the audience — the better it gets for everyone. This is why we need more tools, so more people can try to do it. PBS as a service.

It’s not quite socialized art. Mutualist art, maybe. Proudhon probably would have thought it was pretty cool. So would the Florentines, arch-capitalists as they were. And it might not work. But so far, it’s the only model I’ve found worth trying.

An interactive map of debt in America

posted by Jason Kottke   Dec 13, 2017

Interactive Debt Map

The Urban Institute has built an interactive map for exploring debt in America.

Credit can be a lifeline during emergencies and a bridge to education and homeownership. But debt-which can stem from credit or unpaid bills-often burdens families and communities and exacerbates wealth inequality. This map shows the geography of debt in America at the national, state, and county levels.

I’d love to hear why the “share with any debt in collections” is so relatively low in the Upper Midwest, Minnesota in particular.

Update: Unsurprisingly, health insurance coverage is a significant factor in American debt…and Minnesota has a low rate of medical debt in collections along with a relatively low rate of uninsured. This 2016 press release from MN Department of Health provides some clues as to why the uninsured rate is so comparatively low. (via @yodaui)

Universal Basic Income explained

posted by Jason Kottke   Dec 07, 2017

In their distinctive style, Kurzgesagt tries to explain the concepts behind and pros & cons of Universal Basic Income in just 10 minutes. In US, UBI would be a massive change to how our economy and society functions, so much so that it’s challenging to predict what the effects would be. Nonlinear systems, yo!

Update: Aw dammit… I totally forgot to connect the part of the video where they talk about the non-monetary value of work — which is a worry of UBI critics — to something that Ludicorp (the small company that built Flickr and sold to Yahoo! in the mid-2000s) had on the company’s about page. It was a passage from Disclosing New Worlds: Entrepreneurship, Democratic Action and the Cultivation of Solidarity by Charles Spinosa, Fernando Flores & Hubert Dreyfus:

Business owners do not normally work for money either. They work for the enjoyment of their competitive skill, in the context of a life where competing skillfully makes sense. The money they earn supports this way of life. The same is true of their businesses. One might think that they view their businesses as nothing more than machines to produce profits, since they do closely monitor their accounts to keep tabs on those profits.

But this way of thinking replaces the point of the machine’s activity with a diagnostic test of how well it is performing. Normally, one senses whether one is performing skillfully. A basketball player does not need to count baskets to know whether the team as a whole is in flow. Saying that the point of business is to produce profit is like saying that the whole point of playing basketball is to make as many baskets as possible. One could make many more baskets by having no opponent.

The game and styles of playing the game are what matter because they produce identities people care about. Likewise, a business develops an identity by providing a product or a service to people. To do that it needs capital, and it needs to make a profit, but no more than it needs to have competent employees or customers or any other thing that enables production to take place. None of this is the goal of the activity.

When behavioral economics meets a $700M Powerball jackpot

posted by Jason Kottke   Aug 24, 2017

Business Insider went out onto the streets of NYC and tried to buy people’s just-purchased Powerball tickets ahead of the $700 million drawing. They did not get many takers, even when offering twice the price they paid (which meant they could just go and buy double the number of tickets and slash their odds of winning). The video says this is an example of regret avoidance.

A theory of investor behavior that attempts to explain why investors refuse to admit to themselves that they’ve made a poor investment decision so they don’t have to face the unpleasant feelings associated with that decision. Regret avoidance causes investors to not correct bad decisions, which can make those decisions worse. Regret avoidance is the result of cognitive dissonance.

As Alex Tabarrok notes, it’s also a demonstration of the endowment effect (Tabarrok: “these people are crazy!”).

In psychology and behavioral economics, the endowment effect…is the hypothesis that people ascribe more value to things merely because they own them. This is typically illustrated in two ways. In a valuation paradigm, people will tend to pay more to retain something they own than to obtain something they do not own — even when there is no cause for attachment, or even if the item was only obtained minutes ago. In an exchange paradigm, people given a good are reluctant to trade it for another good of similar value. For example, participants first given a Swiss chocolate bar were generally unwilling to trade it for a coffee mug, whereas participants first given the coffee mug were generally unwilling to trade it for the chocolate bar.

One way to think about it is if you buy a lottery ticket for $5 and someone offers you $10 and you don’t take it, financially it’s like you’ve paid $10 for the ticket, an easily replaceable item with an average worth of about $2.50 (and more likely worth nothing). But no one should be buying tickets anyway because the lottery sucks.

Apple’s diseconomies of scale and the next iPhone

posted by Jason Kottke   Jul 19, 2017

Apple is the biggest company in the world and they sell one of history’s most successful consumer products. As the total human population of Earth becomes a limiting factor in the iPhone’s continued sales growth (see also Facebook), they are perhaps running into problems designing a desirable product that they need to produce 200 million times over the course of a year.

This is one of those areas where Apple may be the victim of its own success. The iPhone is so popular a product that Apple can’t include any technology or source any part if it can’t be made more than 200 million times a year. If the supplier of a cutting-edge part Apple wants can only provide the company with 50 million per year, it simply can’t be used in the iPhone. Apple sells too many, too fast.

A Daring Fireball reader put it this way:

People commonly think that scale is an unambiguously good thing in production, but the tremendous scale at which Apple operates shows this not to be the case. Annual iPhone production is so large that Apple is likely experiencing diseconomies of scale, a phenomenon one doesn’t often hear about. What significant, break-through technology can a company practically introduce to 300 million new devices in a year?

Diseconomies of scale is a real thing, btw. John Gruber has been arguing that Apple’s way around this is to produce a more expensive iPhone ($1000-1200) with exceptional components and features that the company simply can’t produce at a scale of 200 million/year. Rene Ritchie describes this iPhone++ strategy as “bringing tomorrow’s iPhone to market today”. Gruber compares it to the Honda Prelude, quoting from the Edmunds description of the car:

Honda established itself in America with the Civic and Accord — both good, solid but basic cars. But big profits in the automotive world don’t come from basic cars that sell for commodity prices. Those profits come from cars that get consumers so excited that they’ll pay a premium price just to have one. The Prelude was Honda’s first attempt at an exciting car.

The Prelude was Honda’s technological leading edge. Features that are now expected from Honda, like the double-wishbone suspension under the Accord, fuel injection, and VTEC electronic variable valve timing system showed up first on the Prelude before migrating across the Honda line (though VTEC first showed up on the 1990 Acura NSX).

Keen observations all around and it will be interesting to see if Apple can benefit from this strategy.