When we are born, we do not know what challenges we will encounter in the world. Often we learn from experience. Many of us have been injured through careless mistakes, during our youth and later on. As a society we try to prevent harmful events but some problems we have not been able to eliminate, while others would cost more to warn against than we expect to gain by allowing those mistakes to occur.
Determining which of these two categories an unexpected event falls into is not always easy. One of the purposes of society is to reduce this ambiguity and give people information on how to avoid problems they have become aware of. If a problem has not been solved, we can adapt our actions and agree on how to proceed.
This means when an unexpected event occurs that seems like it would lead to harmful results, there is value to society in exploring whether it can be prevented.
This curiosity towards the world when it does not conform to our expectations is natural at a young age. It results in the ability to rationalize our mistakes as being to the benefit of ourselves and, possibly, even to all of society. Even when no solution to a problem is found, the story of how that conclusion was reached allows others to make an informed judgement on whether to attempt to solve the same problem.
Emergent Complexity
One problem which is particularly relevant to the goals of society is described here: "A Story of Love, Good and Evil" - blogspot.com (http://jobcreationplan.blogspot.com/2012/04/story-of-love-good-and-evil.html). The way in which this problem causes the world to work in an unexpected way is explained here: 'The need for "reality interpretation" in evaluating support for changes to competitive or ethical standards' - blogspot.com (http://jobcreationplan.blogspot.com/2012/05/need-for-reality-interpretation-in.html). The desire to avoid exposing people to knowledge of this problem, or minimize its unwanted effects is responsible for much of the complexity of human culture.
However, this issue only exists because of a selfish desire to maintain control of one's future—what is known in psychology as an internal locus of control. Due to the inherent unreliability of statements of intention, complexity is deliberately allowed to exist to reduce conflict in the event of a mistake in judgement of value. According to the above description of the positive value of exploring the reason for mistakes, the described conflict between the concept of love and benefit to society only has a harmful effect when a miscommunication results in that complexity being interpreted in a way that was not intended and from which there would seem to be no way to recover.
This may sound vague but I can base my understanding mostly only off of my own experiences. I was supposed to have died three years ago but I did not, in order to determine if a mistake had occurred and if it was possible to prevent such mistakes from being made in the future.
This leads to the topic of memory. Certain types of information are easier to understand and store in memory, because they relate to pre-existing concepts which 'resonate' to increase the intensity with which a thought is held in our minds while also allowing easier access to a thought which has been recorded in our memory. Abstract or vague thoughts that seem to have no relation to things we commonly observe in reality are harder to remember. This suggests that if there are misunderstandings that seem like they involve memory, being less complex and vague might be a way to prevent mistakes from being made but this is not something that could be confirmed in a short amount of time.
In short, deciding whether a problem exists can be a time-consuming process. In order to identify harmful effects, many previous actions and different strategies are examined. As far as I can determine, complexity in the form of intentions and capabilities does not lead to anything being harder to remember, which suggests if a problem exists it is a result of the aspects of society which make it difficult to know whether being honest will lead to positive results.
This is too vague. I cannot really proceed without mentioning the concepts of several strategies. The first is that if there is conflict between your goals and the goals of others, you choose to fulfill your goals. The second is to give deference to the goals of others. Either of these may appear to be the other due to confusion about benefit to society and the goals of people who are distant from a certain setting, and in fact it often benefits both society and the individual to avoid revealing which strategy is being used. A third strategy is to contradict the idea that either of the previous two is being used by redefining the situation so that no conflict exists.
For a variety of reasons, people who are using different strategies are socially incompatible with each other. This concept is useful because it provides an alternative explanation for why mistakes that seem to involve memory occur. While exploring the reason for a failure can lead to benefit for society, it often does not lead to clear benefit for the individual especially when that effort delays progress in other aspects of life. It is therefore possible that such a course of action could be interpreted as following the second strategy of deference to the goals of others, which would imply incompatibility with someone who places priority on their own goals. In situations where memory is a reasonable explanation for a mistake, this alternative hypothesis is difficult to confirm or deny and can lead to significant changes in the actions that someone in this situation takes.
There is much that could be said about this topic—for example, the fact that Adolf Hitler only got married after Germany had already been defeated in the second world war—but suffice to say that these uncertainties about memory and whether it is possible to solve the underlying conflict between love and benefit to society have harmful effects due to the embracing of the appearance of using the first strategy of fulfilling one's own goals.
However, there is a third explanation for why mistakes occur, in addition to memory and incompatible attitudes toward conflict. It is possible in these cases that there was a simple misjudgement in value, or the perception of a misjudgement in value, that would cause inequality in a social relationship. A solution that reduces the incidence of these mistakes in society would then involve more accurate standards of judging value, as well as a way to confirm whether this is, in fact, a reasonable explanation for why these mistakes happen and whether society would benefit from a change to prevent these mistakes.
Due to the need to eliminate memory as an explanation for mistakes, a method which reveals perceived value without introducing conflict between individual goals and benefit to society is not easy to find or execute. Accepting the importance of the problem of inaccurate evaluations of authority, also known as poor signal evaluation, suggests the benefit to society from subverting even the idea of what types of actions indicate that you are using the first strategy towards conflict of placing priority on your own goals. One such method is to focus your efforts on a goal that is widely agreed to be socially beneficial until a decisive point is reached, either the completion of that goal or the failure of your efforts in a way that provides other people with useful information on its feasibility.
Due to the nature of the origin of inaccurate judgements, many people who choose this problem to focus their efforts on never reach a decisive point and are forced to conclude that their efforts have been wasted or, at best, unproductive. This can result in various cultural attitudes designed to prevent people from attempting to accomplish something at which so many other people have failed. Wealth, riches, and power are all unhelpful in solving this problem, because all they do is make people more reliant on an authority which is inherently unable to provide all the answers people ask for.
In cases where cultural attitudes are not able to prevent people from attempting to solve this problem, it is even possible that someone will deliberately allow their mind to deteriorate in order to reach the decisive point where they can say that further efforts have no chance of success. All of this is the result of trying to avoid the use of a strategy toward conflict incompatible with that of others and questions about the reliability of memory, since concerns about forgetting the existence of this problem and its consequences are related to the fear of forgetting equally complex concepts of values and intentions.
The resulting self-manipulation consists of nothing more than convincing yourself that the world is simpler than it really is, and that no success can be expected from a certain course of action that has not been fully explored. In order to maintain the validity of this conclusion, it is necessary to reject the idea of holding multiple simultaneous goals which leads to the habitual measurement of one's capabilities outside of the systems of measurement developed by society. By doing so, it follows that effort spent on this unsolved problem would prevent completion of personal goals. The logical conclusion is that anyone who encounters this problem becomes fully dedicated to solving it, allowing a determination that they are using the second strategy of placing deference on the goals of others and leading to the conclusion that, due to failure to maintain behavior consistent with the first strategy regarding conflict, a decisive point has been reached on exploring the feasibility of solving this problem and the origin of mistakes.
This is the explanation for the conservative ideology and how people who accept these ideas are able to progress with their personal goals, while also showing why the conservative movement is vulnerable to manipulation by authority. The result is an imperfect society which chooses to ignore the underlying issue rather than correct it.
It should be clear by now that the rich, and even the entire United States with the world's most powerful and expensive military, have limitations and uncompleted goals. It has been argued that the first Gulf War demonstrated the power of technology in increasing the effectiveness of conventional warfare, but the invasion of Iraq and subsequent occupation by the United States showed that a low-tech enemy with minimal funding can be successful against even the most modern military equipment.
The world does not need the United States to be its global police force. The best way for developed nations to help the underdeveloped countries of the world is not through military support of one or another political faction, or even by giving them aid. It is by giving them jobs, which we can do by adopting a new standard of achievement in the form of work conservation.
Dedicated site: http://jobcreationplan.blogspot.com/
Show your support: http://the99vote.com/idea/US95
Wednesday, May 30, 2012
Friday, May 25, 2012
Why foreigners are respected in China
Such an unimaginative title. Cannot begin everything with "Why...".
The evidence:
The reason that Chinese people exhibit a much worse case of the so-called bystander effect is because parents depend on their children to support them in their old age and because of television (?). If parents only expect their children to follow the rules of society and make lots of money—or marry someone who does—then helping injured or threatened strangers is not socially rewarded nor does it help one's parents.
This means that in cases where helping someone actually leads to a legal penalty or fine, the older population has no reason to put pressure on the government to change the law to make helping people less dangerous.
Population controls in China are mainly for urban dwellers, leading to significant differences in family sizes which are magnified for larger generational spreads. China needs more government support for the elderly, more and higher quality jobs, or both. This might require less obsession with brands and possibly changed attitudes toward housing, but support for the elderly may need to come first. It might not need to come from the central government if communities see clear benefit from policies which lessen the dependence of parents on the financial success of their children or child, but anything that isn't nationwide would be more vulnerable to exploit even if geographic mobility is lower in China due to the Hukou system.
The evidence:
- Female College Graduate Beaten and Killed in Busy Street over Dispute
- Brazilian Beaten Up For Stopping Thieves As Chinese Stand By
- British Man Beat Up For Sexually Assaulting Chinese Girl (telegraph.co.uk, beijingcream.com)
- Chinese Bank Robber Spends 4 Minutes Smashing Hole In Reinforced Glass
- Top 10 Problems in 2011 China, CASS Survey of Chinese Public
The reason that Chinese people exhibit a much worse case of the so-called bystander effect is because parents depend on their children to support them in their old age and because of television (?). If parents only expect their children to follow the rules of society and make lots of money—or marry someone who does—then helping injured or threatened strangers is not socially rewarded nor does it help one's parents.
This means that in cases where helping someone actually leads to a legal penalty or fine, the older population has no reason to put pressure on the government to change the law to make helping people less dangerous.
Population controls in China are mainly for urban dwellers, leading to significant differences in family sizes which are magnified for larger generational spreads. China needs more government support for the elderly, more and higher quality jobs, or both. This might require less obsession with brands and possibly changed attitudes toward housing, but support for the elderly may need to come first. It might not need to come from the central government if communities see clear benefit from policies which lessen the dependence of parents on the financial success of their children or child, but anything that isn't nationwide would be more vulnerable to exploit even if geographic mobility is lower in China due to the Hukou system.
Tuesday, May 22, 2012
The Occupy movement is wrong about the rich
Is it ethical to sell to someone who made a lot of money in an unethical way? If you have difficulty answering this question, you are guilty of two mistakes. The first is the assumption that society will allow unethical ways of making money to exist, instead of outlawing those activities as soon as they are shown to be harmful. The second is the assumption that the buyer in a transaction benefits more than the seller, and that the only way to reverse this arrangement is to be dishonest.
This is a result of the culture in which people are brought up. People in the lower half of the income distribution—of any country—tend to associate with others of similar economic status, and have more sensitivity to scarcity and wanting something but not being able to afford it. This causes them to assume that the best way to help other people is to offer a less expensive product, and that the best way to increase sales is by decreasing prices.
People in the upper half of the income distribution have fewer unsatisfied needs and are more likely to assume that products will naturally be sold for significantly more than their production cost, because they buy at the upper end of the quality scale or enjoy a sense of status from their purchases which can only come from product scarcity. They are more likely to charge and accept higher prices in the normal course of business.
The first group may feel that avoiding competition based on price is implicitly dishonest, while the second group is likely to accuse the first of ignoring price tags and purchasing things they obviously don't need at their level of income. Either group might feel that the economy would be better off if everyone adopted one or the other spending philosophy, but the truth is that neither of these strategies is stable by itself.
If everyone tried to compete on prices, some people would still end up wealthier which would create demand for higher quality products. If everyone tried to compete on quality, some people would inevitably become poor from spending their money on necessities which would give someone an opportunity to gain market share by selling at a lower price. It is unrealistic to think that people will lower the prices they sell at if it causes them to lose money or to pick the more expensive of two comparable products just because they have money to spare.
This applies to corporations as well. Some people think that corporations should be nice and pay significantly higher than market wages instead of giving their profits to shareholders who are already rich, but if more corporations did this it would just mean that their employees would accept higher prices for things they bought, meaning that those profits would just end up in the pockets of the shareholders of whatever corporations chose not to do this. The choice of the owners of a corporation to redistribute profits back to employees, or to retain employees whose jobs are unnecessary, is just like the one in the classic game theory problem of "The Prisoner's Dilemma" [http://www.smbc-comics.com/index.php?id=1899], but instead of playing against a single opponent who you must trust not to defect you would be playing against millions of opponents all of whom have the opportunity to defect for a large profit.
The third option which would help employees of a corporation without giving the shareholders of other corporations a chance to defect is work conservation [http://jobcreationplan.blogspot.com/2012/05/work-conservation-is-solution-to-global.html], but that is not actually the main focus of this text.
The reason for the above explanation of why giving things away for free or nearly free does not always help the economy [http://www.smbc-comics.com/index.php?id=2413] is to lead to the point that there are many people who could be richer than they are, who are just not interested in doing so. They might think that raising prices is wrong or unaware that it can be an effective strategy, or they might like the customers they currently work with. Maybe they don't have anything they feel they need to buy. There are many flaws in using the amount of wealth someone has as a standard to estimate the amount they could have if they wanted to be rich.
But people still support the idea that becoming rich is an honest and admirable goal, not only because it is less risky and less costly to society, but also because it allows you to influence the perceptions others have about how you see yourself as being viewed by giving a commonly accepted standard of achievement with no upper bound on the limits of measurement. The key point is that you may want to make yourself appear to be more than you really are or less than you are, because this ambiguity can serve both as a test for the accuracy of thinking of others and as an excuse for your behavior when someone fails that 'test'. Being able to manipulate your perceived self-worth to match that of someone else is a valuable social skill, and expressing greater or lesser acceptance of the accuracy of income to measure ability is one way to accomplish this.
However, deviations from the common standard are based on the idea of alternative, more accurate ways of demonstrating personal ability and discernment of benefit to society. These standards can sometimes come in almost unrecognizable forms if society is perceived to be inherently evil which may cause people to feel they must embrace the use of the same strategy in order to survive, but they are always intended to lead ultimately to a positive result for both the individual and society. In cases where no agreement can be reached about what standard would best help society and the individual, such as with the issue of whether to raise prices or to lower them or for many political topics, conflict itself can be seen as positive by encouraging people to find a better solution which resolves that conflict.
This leads to the final point. Money as a standard of achievement can be replaced, not by an idea which can be easily expressed as a single number, but by the more complex and more accurate standard of whether you are able to prevent benefit to society from conflicting with your own goals. Some people may feel the desire to become rich and compete within the social and economic circles of the wealthy, but this concept of success should only be one among many and should not lead to harmful economic effects for the rest of society. Work conservation [http://jobcreationplan.blogspot.com/2012/05/work-conservation-is-solution-to-global.html] is essential not only to eliminate unemployment which results from the desire to become rich or show off status by earning and working as much as possible, but also to directly refute the idea that everyone wants to become rich as their personal idea of success.
There is nothing wrong with being rich, or part of the top 1% of income. Unemployment and the rise in inequality are everyone's fault and it is therefore everyone's responsibility to support the solution to these problems.
People might buy an iPhone or another of Apple's products while knowing the high profit margins, or even because of its price. If it forces them to make other sacrifices in their budget you might say they are making themselves appear to be "more than they are" if they flaunt their new item. Yet if appearing "more than you are" is seen as a negative thing because it implies a low true value, possession of an iPhone is actually making yourself seem "less than you are" if you are aware that trendiness has no intrinsic value and are just trying to deter people who are prejudiced against iPhone users.
Now take the knowledge of Apple's profits and combine it with an analysis of how much of your money comes from the rich vs how much goes to the rich [http://jobcreationplan.blogspot.com/2012/05/alternative-to-socialism.html]. If you sell to poor people, you can conclude that buying an iPhone contributes to unemployment and so possession of one is evidence either that you don't care about unemployment or you don't understand the economic consequences of your actions. This identifiable direct consequence to society has the effect of resolving the uncertainty such that an iPhone would unambiguously make you appear "less than you are" if you think that unemployment is an important problem, unless you really are rich enough that you don't have anything else to spend money on.
But maybe you think that having an iPhone is more important than unemployment. You would then be able to attract the interest of other people who feel the same way.
Now consider what it means if you don't have an iPhone. Maybe it's because you don't want your money to go to corporate profits! This makes you look like a nice person, when maybe you're just too poor to afford one; not having an iPhone can therefore make you appear "more than you are", the same result that owning an iPhone led to. Meanwhile, since it would still help employment to buy an iPhone if you're rich, you can also pretend you're a nice person—even if you're not—if you're rich by buying an iPhone which could make you seem "more than you are". And conversely, someone who cares so much what other people think of them probably has low self-esteem, so people might think you appear to be "less than you are", and actually emotionally vulnerable and approachable (despite being rich).
This is a result of the culture in which people are brought up. People in the lower half of the income distribution—of any country—tend to associate with others of similar economic status, and have more sensitivity to scarcity and wanting something but not being able to afford it. This causes them to assume that the best way to help other people is to offer a less expensive product, and that the best way to increase sales is by decreasing prices.
People in the upper half of the income distribution have fewer unsatisfied needs and are more likely to assume that products will naturally be sold for significantly more than their production cost, because they buy at the upper end of the quality scale or enjoy a sense of status from their purchases which can only come from product scarcity. They are more likely to charge and accept higher prices in the normal course of business.
The first group may feel that avoiding competition based on price is implicitly dishonest, while the second group is likely to accuse the first of ignoring price tags and purchasing things they obviously don't need at their level of income. Either group might feel that the economy would be better off if everyone adopted one or the other spending philosophy, but the truth is that neither of these strategies is stable by itself.
If everyone tried to compete on prices, some people would still end up wealthier which would create demand for higher quality products. If everyone tried to compete on quality, some people would inevitably become poor from spending their money on necessities which would give someone an opportunity to gain market share by selling at a lower price. It is unrealistic to think that people will lower the prices they sell at if it causes them to lose money or to pick the more expensive of two comparable products just because they have money to spare.
This applies to corporations as well. Some people think that corporations should be nice and pay significantly higher than market wages instead of giving their profits to shareholders who are already rich, but if more corporations did this it would just mean that their employees would accept higher prices for things they bought, meaning that those profits would just end up in the pockets of the shareholders of whatever corporations chose not to do this. The choice of the owners of a corporation to redistribute profits back to employees, or to retain employees whose jobs are unnecessary, is just like the one in the classic game theory problem of "The Prisoner's Dilemma" [http://www.smbc-comics.com/index.php?id=1899], but instead of playing against a single opponent who you must trust not to defect you would be playing against millions of opponents all of whom have the opportunity to defect for a large profit.
The third option which would help employees of a corporation without giving the shareholders of other corporations a chance to defect is work conservation [http://jobcreationplan.blogspot.com/2012/05/work-conservation-is-solution-to-global.html], but that is not actually the main focus of this text.
The reason for the above explanation of why giving things away for free or nearly free does not always help the economy [http://www.smbc-comics.com/index.php?id=2413] is to lead to the point that there are many people who could be richer than they are, who are just not interested in doing so. They might think that raising prices is wrong or unaware that it can be an effective strategy, or they might like the customers they currently work with. Maybe they don't have anything they feel they need to buy. There are many flaws in using the amount of wealth someone has as a standard to estimate the amount they could have if they wanted to be rich.
But people still support the idea that becoming rich is an honest and admirable goal, not only because it is less risky and less costly to society, but also because it allows you to influence the perceptions others have about how you see yourself as being viewed by giving a commonly accepted standard of achievement with no upper bound on the limits of measurement. The key point is that you may want to make yourself appear to be more than you really are or less than you are, because this ambiguity can serve both as a test for the accuracy of thinking of others and as an excuse for your behavior when someone fails that 'test'. Being able to manipulate your perceived self-worth to match that of someone else is a valuable social skill, and expressing greater or lesser acceptance of the accuracy of income to measure ability is one way to accomplish this.
However, deviations from the common standard are based on the idea of alternative, more accurate ways of demonstrating personal ability and discernment of benefit to society. These standards can sometimes come in almost unrecognizable forms if society is perceived to be inherently evil which may cause people to feel they must embrace the use of the same strategy in order to survive, but they are always intended to lead ultimately to a positive result for both the individual and society. In cases where no agreement can be reached about what standard would best help society and the individual, such as with the issue of whether to raise prices or to lower them or for many political topics, conflict itself can be seen as positive by encouraging people to find a better solution which resolves that conflict.
This leads to the final point. Money as a standard of achievement can be replaced, not by an idea which can be easily expressed as a single number, but by the more complex and more accurate standard of whether you are able to prevent benefit to society from conflicting with your own goals. Some people may feel the desire to become rich and compete within the social and economic circles of the wealthy, but this concept of success should only be one among many and should not lead to harmful economic effects for the rest of society. Work conservation [http://jobcreationplan.blogspot.com/2012/05/work-conservation-is-solution-to-global.html] is essential not only to eliminate unemployment which results from the desire to become rich or show off status by earning and working as much as possible, but also to directly refute the idea that everyone wants to become rich as their personal idea of success.
There is nothing wrong with being rich, or part of the top 1% of income. Unemployment and the rise in inequality are everyone's fault and it is therefore everyone's responsibility to support the solution to these problems.
Fruits
I think it helps to add a practical example. Take the iPhone, which costs $650~850, half or more of that being gross profit. People might assume that since Apple is a nice company, they keep prices low to make their products more affordable to consumers and pay their workers a substantial amount of the production costs. But Apple's profit margins are much higher than its competitors because it doesn't need to keep prices low, and just sells for maximum profit. Much of that profit is sitting in tax havens outside the US. Apple currently has over $100 billion in cash and other relatively liquid financial assets.People might buy an iPhone or another of Apple's products while knowing the high profit margins, or even because of its price. If it forces them to make other sacrifices in their budget you might say they are making themselves appear to be "more than they are" if they flaunt their new item. Yet if appearing "more than you are" is seen as a negative thing because it implies a low true value, possession of an iPhone is actually making yourself seem "less than you are" if you are aware that trendiness has no intrinsic value and are just trying to deter people who are prejudiced against iPhone users.
Now take the knowledge of Apple's profits and combine it with an analysis of how much of your money comes from the rich vs how much goes to the rich [http://jobcreationplan.blogspot.com/2012/05/alternative-to-socialism.html]. If you sell to poor people, you can conclude that buying an iPhone contributes to unemployment and so possession of one is evidence either that you don't care about unemployment or you don't understand the economic consequences of your actions. This identifiable direct consequence to society has the effect of resolving the uncertainty such that an iPhone would unambiguously make you appear "less than you are" if you think that unemployment is an important problem, unless you really are rich enough that you don't have anything else to spend money on.
But maybe you think that having an iPhone is more important than unemployment. You would then be able to attract the interest of other people who feel the same way.
Now consider what it means if you don't have an iPhone. Maybe it's because you don't want your money to go to corporate profits! This makes you look like a nice person, when maybe you're just too poor to afford one; not having an iPhone can therefore make you appear "more than you are", the same result that owning an iPhone led to. Meanwhile, since it would still help employment to buy an iPhone if you're rich, you can also pretend you're a nice person—even if you're not—if you're rich by buying an iPhone which could make you seem "more than you are". And conversely, someone who cares so much what other people think of them probably has low self-esteem, so people might think you appear to be "less than you are", and actually emotionally vulnerable and approachable (despite being rich).
Monday, May 21, 2012
The need for "reality interpretation" in evaluating support for changes to competitive or ethical standards
Do you think it's a good thing that people can be manipulated by advertisements into buying things they don't need, or by the words of a politician into supporting a war that isn't necessary?
A fundamental tension has existed for most of human history between improvements to the framework of society that allow people to make accurate decisions in pursuit of their goals and the awareness of the limits of this framework. Periodically, major events happen that cause people to realize that the system in which they live does not eliminate mistakes, but this knowledge is not properly conveyed between generations and so history tends to repeat itself.
During the periods leading up to significant change, reliance on the system means that a majority of people are often wrong on things of varying degrees of importance or complexity. In these cases a simple democratic polling is not enough to determine reality. Some portion of the population will have enough experience to be confident in their relative ability and intelligent enough to understand the situation, but difficulty in proving this means that it is often more rewarding to focus on one's own goals instead of those of society, especially when either category includes goals that are time-sensitive.
With this general outline of the problem, it has been impossible for people to agree whether efforts to improve the accuracy of social standards are a moral requirement, or whether things like dishonesty are justified in the pursuit of legitimate goals.
The significant consequence is a distortion in feedback regarding proposed changes to social standards, such as the 'rightness' of patriotism and nationalism leading up to the first World War—and more recently the nearly unanimous decision of the United States Congress to invade Afghanistan—or the idea that hard work is the best way to help the economy during periods of high unemployment. Dissenting arguments are stifled by the wave of popular sentiment, while people who expect a bad outcome avoid speaking because they also tend to be aware of the nuances of the situation and unlikely to react to a current problem without an understanding of how to resolve the underlying historical trend towards inaccurate judgements.
In other words, people allow bad things to happen because of the possibility that society will learn from the experience and, perhaps, find a permanent solution.
However, this does not only affect ethical standards which involve physical harm to an individual. Our goals are often emotional or social, and measures of competitive success that allow these goals to be accomplished are subject to the same historical trend of systematic bias towards inaccuracy as time goes by, with inaction by those who could spend effort to prevent this drift having the same role. The difference is that the variety of competitive standards is much larger, so the concentration of the population which could prevent a decrease in accuracy can vary widely between different communities and over time.
For both competitive standards and purely ethical ones, a lack of awareness of the widespread extent of the problem of ensuring long-term accuracy can lead to an assumption that there is, in fact, no moral justification for ignoring any particular problem and that inaction by those who should have the ability to resolve an issue is due to selfish or even malicious intent. As a result, the number of social issues in a society tends to grow when an increasing degree of accuracy in the framework of society causes people to assume its general reliability, because the motive of ignoring current problems in hope of a permanent solution cannot be distinguished from actual selfish intent unless such a permanent solution is found.
Competitive standards, however, have an additional aspect: people are more clearly separated into winners and losers, instead of clear gain for all involved from cooperation. Altering the rules of scoring will cause gain for one person but loss for another. If economic success is seen as a competitive standard, and not an ethical matter of physical survival, this would explain much of the apathy that people have toward any change in the 'rules' by which economic success is achieved.
But any game is only accurate if everyone is trying to win. Just like Calvinball, real life is a game where we can change the rules and even the purpose of playing. And if this measure of success is to have any accuracy as a measure of ability the people who decide to play should be helping society, instead of right now where it's easy for some people to earn more than they could ever spend in a useful way.
Work conservation, where people are given the option to work less at a higher average compensation rate, would encourage more people to participate in the 'game' of financial success by causing the flow of money from purchases by the rich to be redirected to the working poor instead of circulating back to the rich through the purchase of brands. In doing so, it would also address the ethical problems of high unemployment and inequality and the social problems those cause. The fact that popular support for this policy option has been muted should not deter its adoption, when an analysis of the practical effects of the concept shows that it would have the intended result of fixing unemployment despite its changes to the game of economic success played by individuals as well as by the entire nation.
A fundamental tension has existed for most of human history between improvements to the framework of society that allow people to make accurate decisions in pursuit of their goals and the awareness of the limits of this framework. Periodically, major events happen that cause people to realize that the system in which they live does not eliminate mistakes, but this knowledge is not properly conveyed between generations and so history tends to repeat itself.
During the periods leading up to significant change, reliance on the system means that a majority of people are often wrong on things of varying degrees of importance or complexity. In these cases a simple democratic polling is not enough to determine reality. Some portion of the population will have enough experience to be confident in their relative ability and intelligent enough to understand the situation, but difficulty in proving this means that it is often more rewarding to focus on one's own goals instead of those of society, especially when either category includes goals that are time-sensitive.
With this general outline of the problem, it has been impossible for people to agree whether efforts to improve the accuracy of social standards are a moral requirement, or whether things like dishonesty are justified in the pursuit of legitimate goals.
The significant consequence is a distortion in feedback regarding proposed changes to social standards, such as the 'rightness' of patriotism and nationalism leading up to the first World War—and more recently the nearly unanimous decision of the United States Congress to invade Afghanistan—or the idea that hard work is the best way to help the economy during periods of high unemployment. Dissenting arguments are stifled by the wave of popular sentiment, while people who expect a bad outcome avoid speaking because they also tend to be aware of the nuances of the situation and unlikely to react to a current problem without an understanding of how to resolve the underlying historical trend towards inaccurate judgements.
In other words, people allow bad things to happen because of the possibility that society will learn from the experience and, perhaps, find a permanent solution.
However, this does not only affect ethical standards which involve physical harm to an individual. Our goals are often emotional or social, and measures of competitive success that allow these goals to be accomplished are subject to the same historical trend of systematic bias towards inaccuracy as time goes by, with inaction by those who could spend effort to prevent this drift having the same role. The difference is that the variety of competitive standards is much larger, so the concentration of the population which could prevent a decrease in accuracy can vary widely between different communities and over time.
For both competitive standards and purely ethical ones, a lack of awareness of the widespread extent of the problem of ensuring long-term accuracy can lead to an assumption that there is, in fact, no moral justification for ignoring any particular problem and that inaction by those who should have the ability to resolve an issue is due to selfish or even malicious intent. As a result, the number of social issues in a society tends to grow when an increasing degree of accuracy in the framework of society causes people to assume its general reliability, because the motive of ignoring current problems in hope of a permanent solution cannot be distinguished from actual selfish intent unless such a permanent solution is found.
Competitive standards, however, have an additional aspect: people are more clearly separated into winners and losers, instead of clear gain for all involved from cooperation. Altering the rules of scoring will cause gain for one person but loss for another. If economic success is seen as a competitive standard, and not an ethical matter of physical survival, this would explain much of the apathy that people have toward any change in the 'rules' by which economic success is achieved.
But any game is only accurate if everyone is trying to win. Just like Calvinball, real life is a game where we can change the rules and even the purpose of playing. And if this measure of success is to have any accuracy as a measure of ability the people who decide to play should be helping society, instead of right now where it's easy for some people to earn more than they could ever spend in a useful way.
Work conservation, where people are given the option to work less at a higher average compensation rate, would encourage more people to participate in the 'game' of financial success by causing the flow of money from purchases by the rich to be redirected to the working poor instead of circulating back to the rich through the purchase of brands. In doing so, it would also address the ethical problems of high unemployment and inequality and the social problems those cause. The fact that popular support for this policy option has been muted should not deter its adoption, when an analysis of the practical effects of the concept shows that it would have the intended result of fixing unemployment despite its changes to the game of economic success played by individuals as well as by the entire nation.
Thursday, May 17, 2012
Feedback
"I think you are conflating a whole lot of issues. And although I believe your heart is in the right place, there is too much emphasis on poll numbers for one route, compared with ZERO polling data for your alternative. Until you come up with comparable polls, you have no leg to stand on in terms of the viability of your plan. It's not that I object to your goals, but I feel that the are, at best, partial solutions, completely unsupported by data in terms of popularity, and have no chance of gaining traction: in other words, unrealistic."
"The unemployed are just lazy!"
If unemployment is such a problem, why don't people volunteer to work for less than workers in China? The answer is that the basic necessities of living, such as housing, are more expensive here in the United States. Even room-sharing arrangements cost more, at $200~500 per month, than the entire monthly income of many workers in China.
Every town has housing vacancies, and some communities even deliberately limit the construction of new buildings that would cause the number of empty housing units or amount of unused office space to rise. This artificial scarcity of housing exists because for many people, real estate is an investment and more construction would drive down prices. Empty units that do exist can remain unfilled for the simple reason that it is more profitable to wait for someone who can pay the market price than to rent a housing unit for whatever a prospective resident can afford.
The loss of utility that results from the willingness of people to pay higher prices for goods from a monopoly, in this case the monopoly of housing units existing at a certain location, is well known in economics. To put it shortly, the willingness of people to accept high prices in housing, or any other good that is sold for significantly more than its production cost, causes sellers to avoid selling to people who need that resource but are unable to pay as much. Lack of price discrimination is why the US cannot compete directly with China on manufactured goods.
What is it about the unemployed that has led to them being out of work while other people are still living comfortably? In many cases, the reason is nothing more than a lack of experience compared to other job candidates. In technical terms this means that high unemployment is not structural and more public spending on education will not help. For those not convinced by the protests led by college graduates about inequality and lack of jobs or the $1 trillion in student debt in the US, some excellent sources of data are a survey of small businesses by the NFIB which showed concern about low demand at a historical high during the recession with almost no businesses reporting the cost or quality of labor to be a problem [http://macromarketmusings.blogspot.com/2012/04/is-there-really-aggregate-demand.html] as well as the Census Bureau and BLS which collect information about unemployment in various occupations [http://krugman.blogs.nytimes.com/2012/05/09/occupational-hazards/]. Every major occupational category has seen a significant rise in unemployment, meaning that there are people with the proper credentials and actively looking for work who are unable to find any.
Corporate profits are doing fine as reported by the US Department of the Treasury, having risen by 57% to nearly $1.6 trillion per year since the first quarter of 2009 [http://www.slideshare.net/USTreasuryDept/recent-us-economic-growth-in-charts]. The only problem the economy has is a lack of work, which forces people to live off of things like food stamps and unemployment benefits funded by working taxpayers or future generations. For example, leaving taxes low now and raising them later would mean it becomes more difficult to compete against existing holders of wealth.
While polls show that a majority of people think that higher taxes and more government spending would lead to growth, the policy of growth at all costs does not have equivalent support. People are even willing to support a presidential candidate who they think avoids speaking honestly if it will lead to a reduction of government spending and waste. If we are to restore equality and opportunity to the United States, we need a different approach than socialism and taxes. We can start by examining why people feel that working harder, instead of smarter, has the greatest benefit to themselves and to the rest of society including the unemployed.
The evidence:
1. “There is still this heavy cultural message that men should be out there earning money and supporting themselves,” quoted from an article that mentions the higher pay of males and their greater willingness to stay in the labor force. [http://www.nytimes.com/2011/12/29/business/young-women-go-back-to-school-instead-of-work.html]
2. 93% of males report working at least 35 hours and 51% more than 44 hours in a typical week, compared to 78% of females reporting they work at least 35 hours and 26% more than 44 hours in a typical week. [http://www.gallup.com/poll/122510/Self-Employed-Workers-Clock-Hours-Week.aspx]
3. If given the choice 71% of males would prefer to have a job outside the home instead of staying home and taking care of a house and family, compared to 48% of females. [http://www.cbsnews.com/htdocs/pdf/SunMo_poll_0209.pdf]
Labor participation rates for both genders have been approaching each other for decades and male participation in the work force is at a record low due to the lack of jobs. However, there has been little or no public support for measures to reduce the average amount of time spent working so that more people can find employment. A rare exception is work sharing, also known as short time compensation, which allows employees to draw unemployment benefits for a reduction in work hours, but the program is built around the assumption of full time work and is not intended to create jobs or encourage new hiring.
One explanation for why males have such a desire to earn money comes, appropriately, from an analysis of messaging data for the online dating site OkCupid. The study found not only that people frequently exaggerate their income, for example that there were "consistently 4× the number of people making $100K a year than there should be", but also that there was a high degree of correlation at most ages between the listed income of a male user of the site and the number of messages he received per week. [http://blog.okcupid.com/index.php/the-biggest-lies-in-online-dating/]
Another explanation is that males see financial success as an admirable achievement that benefits society, or simply have nothing else to do. Economist Robin Hanson once suggested that people spend too much effort on unproductive activities in an attempt to impress others [http://www.overcomingbias.com/2007/01/against_admirab.html], and many people do not realize that work can fall into this category as well.
There are two considerations that should influence the decision to work full time, for someone of either gender. The first is how much value there is in higher qualities of goods, which full time work may allow someone to purchase. The second is the effect on other members of society, and what actions by an individual will lead to the best outcomes for other people.
The effect that income and wealth have on social dynamics, by influencing the opinions of other people, distorts the prices that higher qualities of goods are offered for. These financial measures might be seen as attractive because of the stability they imply, such as access to better health care, living in communities with lower crime and more opportunities, and no need to make sacrifices to obtain basic necessities. They might also be seen as indicators of ability that suggest benefit for other people unrelated to physical comfort, such as intellectual rapport.
The consequence is that for someone who does not see significant benefit from these factors, higher quality and more expensive goods are likely to be overpriced compared to their intrinsic utility while lower quality goods may provide more value at the market price.
This tendency is accentuated by low production costs for goods due to technological innovation, which means that frequently, more expensive goods are justified in cost only by their "brand". One might be lead to assume, for example, that a food is more delicious because it has attractive packaging.
The value of brands is not zero. They can represent a consistent level of quality, but more subtly can also influence the perceptions and goals of other people in a way that benefits society. In the absense of a common understanding in society of how to resolve social ills, an interest in brands can serve as a way for someone to direct their actions to help society.
This leads to what is effectively a number of parallel monopolies, because the value of a brand can sometimes be higher when it is more rare or when opinion on its value is controversial. Another OkCupid study, in fact, found exactly this result. People who provoked a strong negative reaction from some users and a strong positive reaction from other users received much more messages than people who were more uniformly rated. [http://blog.okcupid.com/index.php/the-mathematics-of-beauty/]
This combination of brand identity and the promise of higher quality are what reduce competition and allow high profits for a brand, and directly suggest the possible benefit from working less for someone who has goals that require time. Competing products may provide just as much utility at a much cheaper price even if they don't have the same social value.
However, people might also assume that spending more money leads to greater employment, or that buying products specifically made in the United States instead of overseas is the best way to support the economy. There is a simple standard to establish whether this is true. Determine "percent of money I earn that comes from people richer than me", and compare it to "percent of money I spend that goes to people richer than me". If the first is higher, then you are helping to raise employment. If the second is higher, you are making unemployment and income inequality worse.
This standard is what makes it so a poor person who sells to other poor people should not feel the need to save or work more until they can buy an iPhone from Apple, since 50% or more of the marginal revenues can go to profits and one estimate is that labor cost for assembly is only $8 [http://www.asymco.com/2012/02/22/the-iphone-manufacturing-cost-structure/]. However, someone who sells only to rich people or who is very wealthy would be raising overall employment by purchasing an iPhone.
The logic of "buying American" is more complicated. Suppose you have several choices. You can buy a shirt made overseas that costs $5, of which $4 goes to various workers in the manufacturing and transportation industries who are all poorer than you. Or you can buy a brand-name shirt made overseas that costs $25, of which $10 goes to various workers including people with about the same income as you who live in the United States and designed and marketed the shirt. Or you can buy a brand-name shirt which is advertised as having been made in the United States and costs $30, of which $15 goes to various workers in the US.
In this case it cost $5 more for a US worker to make the shirt instead of someone overseas, because of cost of things like housing and health care in the US. Now suppose that you could buy the $25 shirt and just give the US worker $5; or you could buy the non-brand $5 shirt and give the US worker $25 so they can pay for rent or food. The difference in the first case is that an overseas worker earns $1 for making a shirt and the US worker gets $5 for doing nothing instead of $6 for making a shirt. The difference in the second case is that a minimum-wage American worker gets $25 for doing nothing and other workers, including the overseas worker get a total of $4, with $1 of profit for the business, instead of $15 going to various workers including the one who made the shirt while the other $15 goes to profit.
It might be possible that the owner of the business is also poorer than you, or roughly equal in economic status. But in most cases corporate profits go to people who are already rich. The top 10% in the United States had 75% of net worth and 83% of net financial assets in 2009 [http://www.epi.org/page/-/BriefingPaper292.pdf]. So profit can generally be assumed to go to someone richer than you unless you are also very rich. Evaluating these situations for economic effect, if you buy the $5 shirt then 20% of your spending goes to people richer than you; if you buy the $25 shirt then 60% of your spending goes to people richer than you; and if you buy the $30 shirt that was made in the US then 50% of your spending goes to people richer than you.
Buying the American-made shirt is therefore better for society than the made-overseas, brand-name shirt, but still less useful for the global economy than buying the $5 shirt. The US worker, on the other hand, would probably prefer you buy the $5 shirt and give them the $25 difference.
Since it isn't possible to do this, the next best thing would be to avoid working instead of earning an extra $25, so that the US worker can use their college degree to work for your employer and earn that $25 instead of you.
However, it's also possible that there is a shirt that is not only made in the United States, but also by a company that pays its workers well similar to the high rates offered by Henry Ford in his factory. Maybe $29 goes to labor costs and only $1 to profit. But a "Made in America" tag won't tell you this, so confirming this information will always be difficult and unreliable. The best decision for someone who doesn't care about brands but does care about the economy would be to work less and buy the $5 shirt.
The perhaps unexpected implication of this moral standard is that if the business you work for has a high profit margin, you should discourage poor people from purchasing the products your company sells because it would transfer money from the poor to the rich, the opposite of the desired direction. You would normally want to try to sell to the rich for the simple reason that they have more money, but if you wanted to make it more ethical to sell to the poor there are two ways: by reducing profit margins through a rise in wages, and by encouraging employees to work less so that they are more likely to have a lower income than your company's customers. If the business can hire more workers with a lower average work week, those employees are less likely to buy brands and are more likely to buy products with a low profit margin, where more of the revenues go toward wages in a competitive labor market.
The first difficulty in doing this is that overtime pay encourages longer work weeks, not shorter, so the compensation system would benefit from a change [http://jobcreationplan.blogspot.com/2012/05/work-conservation-is-solution-to-global.html]. The second difficulty is health insurance costs and how employer health benefits are not treated as a normal wage cost, but this could also be fixed [http://jobcreationplan.blogspot.com/2012/05/controlling-health-care-costs-in-united.html].
Eventually, if enough people stop buying brands and work less, profits go down and so does inequality, which reduces the deadweight loss from imperfect price discrimination by monopolies. This includes things like housing and also for brands themselves. Instead of selling the iPhone at a 50% profit margin and using tax havens to pay a 9.8% tax rate on profits of $34 billion, Apple might choose to lower prices to retain market share and continue to take advantage of network effects that it would lose if it decided to target only the rich.
Every town has housing vacancies, and some communities even deliberately limit the construction of new buildings that would cause the number of empty housing units or amount of unused office space to rise. This artificial scarcity of housing exists because for many people, real estate is an investment and more construction would drive down prices. Empty units that do exist can remain unfilled for the simple reason that it is more profitable to wait for someone who can pay the market price than to rent a housing unit for whatever a prospective resident can afford.
The loss of utility that results from the willingness of people to pay higher prices for goods from a monopoly, in this case the monopoly of housing units existing at a certain location, is well known in economics. To put it shortly, the willingness of people to accept high prices in housing, or any other good that is sold for significantly more than its production cost, causes sellers to avoid selling to people who need that resource but are unable to pay as much. Lack of price discrimination is why the US cannot compete directly with China on manufactured goods.
What is it about the unemployed that has led to them being out of work while other people are still living comfortably? In many cases, the reason is nothing more than a lack of experience compared to other job candidates. In technical terms this means that high unemployment is not structural and more public spending on education will not help. For those not convinced by the protests led by college graduates about inequality and lack of jobs or the $1 trillion in student debt in the US, some excellent sources of data are a survey of small businesses by the NFIB which showed concern about low demand at a historical high during the recession with almost no businesses reporting the cost or quality of labor to be a problem [http://macromarketmusings.blogspot.com/2012/04/is-there-really-aggregate-demand.html] as well as the Census Bureau and BLS which collect information about unemployment in various occupations [http://krugman.blogs.nytimes.com/2012/05/09/occupational-hazards/]. Every major occupational category has seen a significant rise in unemployment, meaning that there are people with the proper credentials and actively looking for work who are unable to find any.
Corporate profits are doing fine as reported by the US Department of the Treasury, having risen by 57% to nearly $1.6 trillion per year since the first quarter of 2009 [http://www.slideshare.net/USTreasuryDept/recent-us-economic-growth-in-charts]. The only problem the economy has is a lack of work, which forces people to live off of things like food stamps and unemployment benefits funded by working taxpayers or future generations. For example, leaving taxes low now and raising them later would mean it becomes more difficult to compete against existing holders of wealth.
While polls show that a majority of people think that higher taxes and more government spending would lead to growth, the policy of growth at all costs does not have equivalent support. People are even willing to support a presidential candidate who they think avoids speaking honestly if it will lead to a reduction of government spending and waste. If we are to restore equality and opportunity to the United States, we need a different approach than socialism and taxes. We can start by examining why people feel that working harder, instead of smarter, has the greatest benefit to themselves and to the rest of society including the unemployed.
The evidence:
1. “There is still this heavy cultural message that men should be out there earning money and supporting themselves,” quoted from an article that mentions the higher pay of males and their greater willingness to stay in the labor force. [http://www.nytimes.com/2011/12/29/business/young-women-go-back-to-school-instead-of-work.html]
2. 93% of males report working at least 35 hours and 51% more than 44 hours in a typical week, compared to 78% of females reporting they work at least 35 hours and 26% more than 44 hours in a typical week. [http://www.gallup.com/poll/122510/Self-Employed-Workers-Clock-Hours-Week.aspx]
3. If given the choice 71% of males would prefer to have a job outside the home instead of staying home and taking care of a house and family, compared to 48% of females. [http://www.cbsnews.com/htdocs/pdf/SunMo_poll_0209.pdf]
Labor participation rates for both genders have been approaching each other for decades and male participation in the work force is at a record low due to the lack of jobs. However, there has been little or no public support for measures to reduce the average amount of time spent working so that more people can find employment. A rare exception is work sharing, also known as short time compensation, which allows employees to draw unemployment benefits for a reduction in work hours, but the program is built around the assumption of full time work and is not intended to create jobs or encourage new hiring.
One explanation for why males have such a desire to earn money comes, appropriately, from an analysis of messaging data for the online dating site OkCupid. The study found not only that people frequently exaggerate their income, for example that there were "consistently 4× the number of people making $100K a year than there should be", but also that there was a high degree of correlation at most ages between the listed income of a male user of the site and the number of messages he received per week. [http://blog.okcupid.com/index.php/the-biggest-lies-in-online-dating/]
Another explanation is that males see financial success as an admirable achievement that benefits society, or simply have nothing else to do. Economist Robin Hanson once suggested that people spend too much effort on unproductive activities in an attempt to impress others [http://www.overcomingbias.com/2007/01/against_admirab.html], and many people do not realize that work can fall into this category as well.
There are two considerations that should influence the decision to work full time, for someone of either gender. The first is how much value there is in higher qualities of goods, which full time work may allow someone to purchase. The second is the effect on other members of society, and what actions by an individual will lead to the best outcomes for other people.
The effect that income and wealth have on social dynamics, by influencing the opinions of other people, distorts the prices that higher qualities of goods are offered for. These financial measures might be seen as attractive because of the stability they imply, such as access to better health care, living in communities with lower crime and more opportunities, and no need to make sacrifices to obtain basic necessities. They might also be seen as indicators of ability that suggest benefit for other people unrelated to physical comfort, such as intellectual rapport.
The consequence is that for someone who does not see significant benefit from these factors, higher quality and more expensive goods are likely to be overpriced compared to their intrinsic utility while lower quality goods may provide more value at the market price.
This tendency is accentuated by low production costs for goods due to technological innovation, which means that frequently, more expensive goods are justified in cost only by their "brand". One might be lead to assume, for example, that a food is more delicious because it has attractive packaging.
The value of brands is not zero. They can represent a consistent level of quality, but more subtly can also influence the perceptions and goals of other people in a way that benefits society. In the absense of a common understanding in society of how to resolve social ills, an interest in brands can serve as a way for someone to direct their actions to help society.
This leads to what is effectively a number of parallel monopolies, because the value of a brand can sometimes be higher when it is more rare or when opinion on its value is controversial. Another OkCupid study, in fact, found exactly this result. People who provoked a strong negative reaction from some users and a strong positive reaction from other users received much more messages than people who were more uniformly rated. [http://blog.okcupid.com/index.php/the-mathematics-of-beauty/]
This combination of brand identity and the promise of higher quality are what reduce competition and allow high profits for a brand, and directly suggest the possible benefit from working less for someone who has goals that require time. Competing products may provide just as much utility at a much cheaper price even if they don't have the same social value.
However, people might also assume that spending more money leads to greater employment, or that buying products specifically made in the United States instead of overseas is the best way to support the economy. There is a simple standard to establish whether this is true. Determine "percent of money I earn that comes from people richer than me", and compare it to "percent of money I spend that goes to people richer than me". If the first is higher, then you are helping to raise employment. If the second is higher, you are making unemployment and income inequality worse.
This standard is what makes it so a poor person who sells to other poor people should not feel the need to save or work more until they can buy an iPhone from Apple, since 50% or more of the marginal revenues can go to profits and one estimate is that labor cost for assembly is only $8 [http://www.asymco.com/2012/02/22/the-iphone-manufacturing-cost-structure/]. However, someone who sells only to rich people or who is very wealthy would be raising overall employment by purchasing an iPhone.
The logic of "buying American" is more complicated. Suppose you have several choices. You can buy a shirt made overseas that costs $5, of which $4 goes to various workers in the manufacturing and transportation industries who are all poorer than you. Or you can buy a brand-name shirt made overseas that costs $25, of which $10 goes to various workers including people with about the same income as you who live in the United States and designed and marketed the shirt. Or you can buy a brand-name shirt which is advertised as having been made in the United States and costs $30, of which $15 goes to various workers in the US.
In this case it cost $5 more for a US worker to make the shirt instead of someone overseas, because of cost of things like housing and health care in the US. Now suppose that you could buy the $25 shirt and just give the US worker $5; or you could buy the non-brand $5 shirt and give the US worker $25 so they can pay for rent or food. The difference in the first case is that an overseas worker earns $1 for making a shirt and the US worker gets $5 for doing nothing instead of $6 for making a shirt. The difference in the second case is that a minimum-wage American worker gets $25 for doing nothing and other workers, including the overseas worker get a total of $4, with $1 of profit for the business, instead of $15 going to various workers including the one who made the shirt while the other $15 goes to profit.
It might be possible that the owner of the business is also poorer than you, or roughly equal in economic status. But in most cases corporate profits go to people who are already rich. The top 10% in the United States had 75% of net worth and 83% of net financial assets in 2009 [http://www.epi.org/page/-/BriefingPaper292.pdf]. So profit can generally be assumed to go to someone richer than you unless you are also very rich. Evaluating these situations for economic effect, if you buy the $5 shirt then 20% of your spending goes to people richer than you; if you buy the $25 shirt then 60% of your spending goes to people richer than you; and if you buy the $30 shirt that was made in the US then 50% of your spending goes to people richer than you.
Buying the American-made shirt is therefore better for society than the made-overseas, brand-name shirt, but still less useful for the global economy than buying the $5 shirt. The US worker, on the other hand, would probably prefer you buy the $5 shirt and give them the $25 difference.
Since it isn't possible to do this, the next best thing would be to avoid working instead of earning an extra $25, so that the US worker can use their college degree to work for your employer and earn that $25 instead of you.
However, it's also possible that there is a shirt that is not only made in the United States, but also by a company that pays its workers well similar to the high rates offered by Henry Ford in his factory. Maybe $29 goes to labor costs and only $1 to profit. But a "Made in America" tag won't tell you this, so confirming this information will always be difficult and unreliable. The best decision for someone who doesn't care about brands but does care about the economy would be to work less and buy the $5 shirt.
The perhaps unexpected implication of this moral standard is that if the business you work for has a high profit margin, you should discourage poor people from purchasing the products your company sells because it would transfer money from the poor to the rich, the opposite of the desired direction. You would normally want to try to sell to the rich for the simple reason that they have more money, but if you wanted to make it more ethical to sell to the poor there are two ways: by reducing profit margins through a rise in wages, and by encouraging employees to work less so that they are more likely to have a lower income than your company's customers. If the business can hire more workers with a lower average work week, those employees are less likely to buy brands and are more likely to buy products with a low profit margin, where more of the revenues go toward wages in a competitive labor market.
The first difficulty in doing this is that overtime pay encourages longer work weeks, not shorter, so the compensation system would benefit from a change [http://jobcreationplan.blogspot.com/2012/05/work-conservation-is-solution-to-global.html]. The second difficulty is health insurance costs and how employer health benefits are not treated as a normal wage cost, but this could also be fixed [http://jobcreationplan.blogspot.com/2012/05/controlling-health-care-costs-in-united.html].
Eventually, if enough people stop buying brands and work less, profits go down and so does inequality, which reduces the deadweight loss from imperfect price discrimination by monopolies. This includes things like housing and also for brands themselves. Instead of selling the iPhone at a 50% profit margin and using tax havens to pay a 9.8% tax rate on profits of $34 billion, Apple might choose to lower prices to retain market share and continue to take advantage of network effects that it would lose if it decided to target only the rich.
Monday, May 7, 2012
Addendum: Controlling Health Care Costs in the United States
Apologies everyone for another spammy email. This is a followup to a previous email, "Work conservation is the solution to the global recession".
Random song..! You may have seen it before.
http://www.youtube.com/watch?v=Vo0Cazxj_yc
___
Most people would agree that receiving more health care will increase the amount of time you live, while receiving less care will decrease your lifespan. Cases where this is not true include when the medical procedures performed carry some amount of risk such as radiation exposure or the possibility of complications, when the cost of a procedure leads to inefficient allocation of limited financial resources, or when the expectation of medical treatment causes acceptance of risks such as smoking or drinking similar to how antilock braking systems can lead to riskier driving.
What is missing from the national conversation on health care is the idea that people might be willing to accept a slightly lower quality of health care in exchange for a significant reduction in cost. Anecdotal evidence suggests that this is due to a fear of death, or the empathetic perception of that fear in other people as a consequence of reduced health care[1]. If we accept the idea of different qualities of medical treatment, society's structure must give people the option of choosing higher qualities instead of being forced to accept less expensive health care.
This means reducing unemployment, which can be accomplished by adopting the idea of work conservation[2]. Affordable health care is less likely to happen with current levels of unemployment because the inefficiency that results in high health care costs also provides people with jobs. Although the medical profession has always been well-represented in the upper class of the United States, the increase in health care costs has not significantly changed the proportion of doctors in the top 1% of income while the representation of the financial sector has nearly doubled[3].
The cost of health insurance from the perspective of an insurance company's perspective is the result of health consumers feeling that they must get enough value from their insurance policy while disregarding costs. According to physicians, unneeded care occurs because standard procedures require it (to the financial benefit of the institutions they work for), because patients request it, or to guard against litigation through the use of defensive medicine[4~9].
However, the amount of care delivered is completely separate from the prices charged for that care. People generally trust doctors[10][11], but both doctors and patients are frequently ignorant of the cost of treatment options[12][13]. Since most people think it's important for their health care plan to cover any needed treatment and to be able to choose any doctor or hospital they like [10], insurance companies have limited ability to influence the prices facilities charge. This is much of why prices for medical services in the United States are so much higher than other countries and can vary widely even within the US[14][15], although price caps for medical services or government reimbursement are common in other countries. An MRI costs around $160 in Japan[16] and $281 in France, but costs $1,080 on average in the United States, varying from a low of $503 at the 25th percentile to a high of $2,758 at the 95th percentile.
Other sources also show wide variations in prices within the United States. One study that looked at 19,368 cases of routine appendicitis found that hospital bills ranged from $1,529 to $183,000 with a median of $33,611[17]. In another case, a hospital was charging $517 for a chest x-ray or $310 for those who know to ask for a discount, compared to $73 at a nearby private radiology office for the same quality[18]. A third example is a comparison of the costs of a CT scan for an uninsured patient at several facilities, ranging from $5459 before any discounts to $1616 after discounts[19].
Consumer-driven health care, where patients pay more of the costs of routine treatment and health insurance is only for exceptional medical problems, is thought to be a way to increase price competitiveness and has had some success[6]. However, families tend to cut back on both 'frivolous' care and 'useful' care when it's entirely up to patients to make decisions on specialized medical topics[20].
The solution is to give a 'cost rating' to medical providers based on their past record of treating patients with a particular diagnosis compared to the national average, and allow people to purchase a level of insurance coverage based on the cost rating of facilities in their local area. Unlike bundled payment, medical facilities would only be paid for care actually provided based on a certain diagnosis-related group or category of preventive care, and similar to indemnity insurance the patient would need to pay for costs that exceeded the level of coverage for the particular diagnosis.
Patients would still need to trust doctors to recommend the best treatment, but would have a distinct advantage in that they would have previously made a decision before any medical problem even appeared as to what quality of treatment they are able to afford. Physicians could feel ethically and professionally justified in suggesting a less expensive course of treatment and would not be accused of 'trying to save insurance companies money' when discouraging expensive tests for a patient whose level of insurance coverage was lower than the prices typically charged at that medical facility. While less health care can increase the risk of undetected medical problems, it would save the patient from additional costs and lower the cost rating of the medical facility, attracting future patients who are sensitive to the cost of their health care or insurance.
Not all families in the United States feel a financial burden from the cost of health insurance so physicians could still make decisions that would increase the cost of treatment. In this sense it might not decrease prices for hospitals used by the rich, but even for someone for whom an expensive hospital is the only option, they could still purchase a low level of coverage and use it to bring up the topic of costs with a physician without seeming insulting or feeling 'poor' because they would come prepared with knowledge of the hospital's high costs compared to the national average.
For this to work, several things have to happen at the national level. Using existing codes for classifying medical conditions, the appropriate federal agency must determine the statistical distribution of costs for treatment under the 'episode-based payment' model based on diagnosis by a physician. Since costs rise significantly for older patients[21], age would be included in the analysis. This would be used to determine a profile with which to measure the costs of treatment at a medical facility and also to determine the coverage limits at a certain level of insurance for someone of a specific age, for each diagnosis or type of preventive care. A lower level of coverage would not decrease all limits equally in proportion, but would be based on the national distribution of costs for that payment category.
Any insurance policy which used cost rating would then be based on partial community rating and guaranteed issue, and would offer the same coverage limits as any other insurance policy of the same cost rating. Consumer decisions would be based primarily off the desired coverage limit judging from the cost ratings of nearby medical providers, with insurance companies distinguishing themselves through 'extras' like case management and low administrative costs. Unlike standard health plans, even catastrophic medical conditions would have a coverage limit based on the typical cost of such events. While there would not be much a patient could do to control costs in a catastrophic situation, the prices charged by a medical facility would be directly reflected in its cost rating which would give an incentive to provide needed care at a low cost.
Coverage limits for 'episode-based payment' might conflict with PPACA's ban on annual coverage caps and this would have to be changed. For preventive care, an annual limit might work better than a per-visit coverage limit which would just encourage multiple visits. For preventive care which normally needs to be done every, say, five years someone might be able to get coverage for every year but coinsurance would discourage this. Elective treatment without recommendation from a physician for a specific diagnosis would not be covered, as with normal health plans that sometimes require pre-authorization for a procedure. However, those costs would still be included in a facility's cost rating, by influencing the computed costs of diagnosis-related groups that use that specific treatment or as a separate, elective component to cost rating that would decrease its utility as a way to judge what level of insurance coverage to purchase.
Other changes to the health care system would involve all insurance plans, not just ones that use cost rating. It has been widely argued that the individual mandate to purchase insurance or be fined is necessary to prevent adverse selection due to guaranteed issue[22], but there is another way to encourage people to purchase health insurance even when healthy. When someone purchases insurance or switches providers, the new insurance provider is immediately responsible only for medical conditions which the policy holder had no way of knowing about or anticipating at the time they purchased insurance. Pre-existing medical problems or previously anticipated costs, including preventive treatment, must be partially funded by the previous insurance provider or by the individual during a one-year transition period, during which the responsibility of the new insurance provider gradually increases to 100%. Modifying the level of coverage would have the same effect.
The second way of encouraging purchase of health insurance is subsidies through tax deductions. This would involve altering the qualified medical deduction for US income taxes so that health insurance premiums are applied last and always fully deducted from income. Employer-sponsored insurance would still have the advantage of avoiding payroll and other taxes, while other tax-advantaged options like health savings accounts can be used for a wider variety of expenses and invested so would continue to have a place.
Employer-sponsored health insurance can also be treated conceptually more like a portion of wages when affordable health care is available outside of employment for those with pre-existing conditions. Employees would have the option of diverting pre-tax contributions from an employer toward a third-party insurance provider or even cashing out on benefits by choosing to have no health insurance, with the employer-side costs such as payroll and unemployment taxes being deducted from the premium amount so that the employer has no additional costs from giving workers this option.
This is especially important for the issue of providing health insurance to part-time workers, especially if the work conservation option of working less at a higher wage rate becomes popular. Having a flexible, pre-tax contribution to health care costs for employees without the restrictions (such as giving equal benefits to all employees) of existing tax-advantaged plans would make it much easier to think of health insurance costs as just a flat addition to hourly wage rates or salary, with the employee having the choice of how much of compensation should go to tax-advantaged payment of insurance premiums and how much should go to a paycheck or another destination such as a health savings account.
This might mean that older workers would have to divert more of their income to health insurance premiums for employer-sponsored insurance or another insurance provider, but the cost of covering older workers might be why they currently make up most of the long-term unemployed during the current recession so this would just make it easier for older workers to find work and pay for health premiums for their family with pre-tax earnings.
Mini-argument: people are afraid of death because they feel there is something important they haven't been able to do, or because they're uncertain they made the right choices in life with regard to adapting to the perceived conflict between society and the concept of love[23], specifically whether better outcomes can be achieved by encouraging people through example to accept or reject the necessity for conflict on important issues or at a personal level. People often realize the need for "a broad awareness of the varying reliability of primary signals" due to the wasted effort that results when the instantaneous or temporal accuracy of a standard of achievement is not what was expected, but lack confirmation of the reason for the problem or how to fix it[24]. When the strategy of acceptance of conflict is adopted with no regard for one's life, it often results in actions designed to cause people to question their assumptions. This might be the reason Anders Behring Breivik made an anti-Muslim video but engaged in actions commonly associated with those of the Muslim faith. Contrast 'Death to America' day in Iran[25], a nation from the same part of the political spectrum as the Republican party of the United States. Compare propaganda disseminated by the resistance groups of Iraq[26], which came from a culture with progressive political tendencies somewhat similar to the Democratic party of the US.
[1] End-Of-Life Savings: The ‘Fool’s Gold’ Of Reform? July 28th, 2010.
http://web.archive.org/web/20110305024748/http://healthaffairs.org/blog/2010/07/28/end-of-life-savings-the-fools-gold-of-reform/
[2] http://jobcreationplan.blogspot.com/
[3] Who are the 1% and What Do They Do for a Living? Oct 14, 2011.
http://www.nextnewdeal.net/rortybomb/who-are-1-and-what-do-they-do-living
[4] Study Finds Many Primary Care Physicians Think They Provide Too Much Care. 10/27/2011.
http://www.aafp.org/online/en/home/publications/news/news-now/practice-professional-issues/20111027toomuchcare.html
[5] Many Physicians Feel They’re Delivering Too Much Care. September 26, 2011.
http://blogs.wsj.com/health/2011/09/26/many-physicians-feel-theyre-delivering-too-much-care/
[6] Consumer Directed Health Care. December 2006.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=985572
[7] Defensive medicine worsens patient care and raises costs. May 2010.
http://www.kevinmd.com/blog/2010/05/defensive-medicine-worsens-patient-care-raises-costs.html
[8] Unnecessary testing needs more than tort reform to cure. July 2010.
http://www.kevinmd.com/blog/2010/07/unnecessary-testing-tort-reform-cure.html
[9] Why doctors can’t screen patients for every disease. May 2011.
http://www.kevinmd.com/blog/2011/05/doctors-screen-patients-disease.html
[10] Majority in U.S. Favors Healthcare Reform This Year. July 14, 2009.
http://www.gallup.com/poll/121664/Majority-Favors-Healthcare-Reform-This-Year.aspx
[11] On Healthcare, Americans Trust Physicians Over Politicians. June 17, 2009.
http://www.gallup.com/poll/120890/Healthcare-Americans-Trust-Physicians-Politicians.aspx
[12] Ordering tests may take food out of the mouths of our patients. April 2011.
http://www.kevinmd.com/blog/2011/04/ordering-tests-food-mouths-patients.html
[13] Finding out the cost of lab tests is a real challenge for patients. February 2011.
http://www.kevinmd.com/blog/2011/02/finding-cost-lab-tests-real-challenge-patients.html
[14] Why an MRI costs $1,080 in America and $280 in France. 03/03/2012.
http://www.washingtonpost.com/blogs/ezra-klein/post/why-an-mri-costs-1080-in-america-and-280-in-france/2011/08/25/gIQAVHztoR_blog.html
[15] 2011 Comparative Price Report - Medical and Hospital Fees by Country.
http://www.ifhp.com/documents/2011iFHPPriceReportGraphs_version3.pdf
[16] In Japan, MRIs Cost Less. November 18, 2009.
http://www.npr.org/templates/story/story.php?storyId=120545569
[17] Study Shows Shocking Disparities in Hospital Bills for Appendicitis Treatment #costsofcare.
http://mydoctorsf.com/study-shows-shocking-disparities-in-hospital-bills-for-appendicitis-treatment-costsofcare.html#more-432
[18] The case of the $517 chest x-ray. May 1, 2012.
http://costsofcare.blogspot.com/2012/05/case-of-517-chest-x-ray.html
[19] Savvy patient finds hidden discounts just by asking. April 22, 2012.
http://costsofcare.blogspot.com/2012/04/savvy-patient-finds-hidden-discounts.html
[20] The Moral Hazard Myth. August 29, 2005.
http://www.gladwell.com/2005/2005_08_29_a_hazard.html
[21] Forecasting the Cost of U.S. Healthcare. September 3, 2009.
http://www.american.com/archive/2009/september/forecasting-the-cost-of-u-s-healthcare
[22] Americans Prefer Having Cake, Eating It. March 27, 2012.
http://prospect.org/article/americans-prefer-having-cake-eating-it
[23] http://jobcreationplan.blogspot.com/2012/04/story-of-love-good-and-evil.html
[24] http://en.wikipedia.org/wiki/Lust,_Caution
[25] Iranians delight in 'Death to America' day. Nov 4, 2007.
http://www.youtube.com/watch?v=WRjG36WGvWM
[26] Iraqi Insurgent Media: The War of Images and Ideas. June 2007.
http://realaudio.rferl.org/online/OLPDFfiles/insurgent.pdf
Random song..! You may have seen it before.
http://www.youtube.com/watch?v=Vo0Cazxj_yc
___
Most people would agree that receiving more health care will increase the amount of time you live, while receiving less care will decrease your lifespan. Cases where this is not true include when the medical procedures performed carry some amount of risk such as radiation exposure or the possibility of complications, when the cost of a procedure leads to inefficient allocation of limited financial resources, or when the expectation of medical treatment causes acceptance of risks such as smoking or drinking similar to how antilock braking systems can lead to riskier driving.
What is missing from the national conversation on health care is the idea that people might be willing to accept a slightly lower quality of health care in exchange for a significant reduction in cost. Anecdotal evidence suggests that this is due to a fear of death, or the empathetic perception of that fear in other people as a consequence of reduced health care[1]. If we accept the idea of different qualities of medical treatment, society's structure must give people the option of choosing higher qualities instead of being forced to accept less expensive health care.
This means reducing unemployment, which can be accomplished by adopting the idea of work conservation[2]. Affordable health care is less likely to happen with current levels of unemployment because the inefficiency that results in high health care costs also provides people with jobs. Although the medical profession has always been well-represented in the upper class of the United States, the increase in health care costs has not significantly changed the proportion of doctors in the top 1% of income while the representation of the financial sector has nearly doubled[3].
The cost of health insurance from the perspective of an insurance company's perspective is the result of health consumers feeling that they must get enough value from their insurance policy while disregarding costs. According to physicians, unneeded care occurs because standard procedures require it (to the financial benefit of the institutions they work for), because patients request it, or to guard against litigation through the use of defensive medicine[4~9].
However, the amount of care delivered is completely separate from the prices charged for that care. People generally trust doctors[10][11], but both doctors and patients are frequently ignorant of the cost of treatment options[12][13]. Since most people think it's important for their health care plan to cover any needed treatment and to be able to choose any doctor or hospital they like [10], insurance companies have limited ability to influence the prices facilities charge. This is much of why prices for medical services in the United States are so much higher than other countries and can vary widely even within the US[14][15], although price caps for medical services or government reimbursement are common in other countries. An MRI costs around $160 in Japan[16] and $281 in France, but costs $1,080 on average in the United States, varying from a low of $503 at the 25th percentile to a high of $2,758 at the 95th percentile.
Other sources also show wide variations in prices within the United States. One study that looked at 19,368 cases of routine appendicitis found that hospital bills ranged from $1,529 to $183,000 with a median of $33,611[17]. In another case, a hospital was charging $517 for a chest x-ray or $310 for those who know to ask for a discount, compared to $73 at a nearby private radiology office for the same quality[18]. A third example is a comparison of the costs of a CT scan for an uninsured patient at several facilities, ranging from $5459 before any discounts to $1616 after discounts[19].
Consumer-driven health care, where patients pay more of the costs of routine treatment and health insurance is only for exceptional medical problems, is thought to be a way to increase price competitiveness and has had some success[6]. However, families tend to cut back on both 'frivolous' care and 'useful' care when it's entirely up to patients to make decisions on specialized medical topics[20].
The solution is to give a 'cost rating' to medical providers based on their past record of treating patients with a particular diagnosis compared to the national average, and allow people to purchase a level of insurance coverage based on the cost rating of facilities in their local area. Unlike bundled payment, medical facilities would only be paid for care actually provided based on a certain diagnosis-related group or category of preventive care, and similar to indemnity insurance the patient would need to pay for costs that exceeded the level of coverage for the particular diagnosis.
Patients would still need to trust doctors to recommend the best treatment, but would have a distinct advantage in that they would have previously made a decision before any medical problem even appeared as to what quality of treatment they are able to afford. Physicians could feel ethically and professionally justified in suggesting a less expensive course of treatment and would not be accused of 'trying to save insurance companies money' when discouraging expensive tests for a patient whose level of insurance coverage was lower than the prices typically charged at that medical facility. While less health care can increase the risk of undetected medical problems, it would save the patient from additional costs and lower the cost rating of the medical facility, attracting future patients who are sensitive to the cost of their health care or insurance.
Not all families in the United States feel a financial burden from the cost of health insurance so physicians could still make decisions that would increase the cost of treatment. In this sense it might not decrease prices for hospitals used by the rich, but even for someone for whom an expensive hospital is the only option, they could still purchase a low level of coverage and use it to bring up the topic of costs with a physician without seeming insulting or feeling 'poor' because they would come prepared with knowledge of the hospital's high costs compared to the national average.
For this to work, several things have to happen at the national level. Using existing codes for classifying medical conditions, the appropriate federal agency must determine the statistical distribution of costs for treatment under the 'episode-based payment' model based on diagnosis by a physician. Since costs rise significantly for older patients[21], age would be included in the analysis. This would be used to determine a profile with which to measure the costs of treatment at a medical facility and also to determine the coverage limits at a certain level of insurance for someone of a specific age, for each diagnosis or type of preventive care. A lower level of coverage would not decrease all limits equally in proportion, but would be based on the national distribution of costs for that payment category.
Any insurance policy which used cost rating would then be based on partial community rating and guaranteed issue, and would offer the same coverage limits as any other insurance policy of the same cost rating. Consumer decisions would be based primarily off the desired coverage limit judging from the cost ratings of nearby medical providers, with insurance companies distinguishing themselves through 'extras' like case management and low administrative costs. Unlike standard health plans, even catastrophic medical conditions would have a coverage limit based on the typical cost of such events. While there would not be much a patient could do to control costs in a catastrophic situation, the prices charged by a medical facility would be directly reflected in its cost rating which would give an incentive to provide needed care at a low cost.
Coverage limits for 'episode-based payment' might conflict with PPACA's ban on annual coverage caps and this would have to be changed. For preventive care, an annual limit might work better than a per-visit coverage limit which would just encourage multiple visits. For preventive care which normally needs to be done every, say, five years someone might be able to get coverage for every year but coinsurance would discourage this. Elective treatment without recommendation from a physician for a specific diagnosis would not be covered, as with normal health plans that sometimes require pre-authorization for a procedure. However, those costs would still be included in a facility's cost rating, by influencing the computed costs of diagnosis-related groups that use that specific treatment or as a separate, elective component to cost rating that would decrease its utility as a way to judge what level of insurance coverage to purchase.
Other changes to the health care system would involve all insurance plans, not just ones that use cost rating. It has been widely argued that the individual mandate to purchase insurance or be fined is necessary to prevent adverse selection due to guaranteed issue[22], but there is another way to encourage people to purchase health insurance even when healthy. When someone purchases insurance or switches providers, the new insurance provider is immediately responsible only for medical conditions which the policy holder had no way of knowing about or anticipating at the time they purchased insurance. Pre-existing medical problems or previously anticipated costs, including preventive treatment, must be partially funded by the previous insurance provider or by the individual during a one-year transition period, during which the responsibility of the new insurance provider gradually increases to 100%. Modifying the level of coverage would have the same effect.
The second way of encouraging purchase of health insurance is subsidies through tax deductions. This would involve altering the qualified medical deduction for US income taxes so that health insurance premiums are applied last and always fully deducted from income. Employer-sponsored insurance would still have the advantage of avoiding payroll and other taxes, while other tax-advantaged options like health savings accounts can be used for a wider variety of expenses and invested so would continue to have a place.
Employer-sponsored health insurance can also be treated conceptually more like a portion of wages when affordable health care is available outside of employment for those with pre-existing conditions. Employees would have the option of diverting pre-tax contributions from an employer toward a third-party insurance provider or even cashing out on benefits by choosing to have no health insurance, with the employer-side costs such as payroll and unemployment taxes being deducted from the premium amount so that the employer has no additional costs from giving workers this option.
This is especially important for the issue of providing health insurance to part-time workers, especially if the work conservation option of working less at a higher wage rate becomes popular. Having a flexible, pre-tax contribution to health care costs for employees without the restrictions (such as giving equal benefits to all employees) of existing tax-advantaged plans would make it much easier to think of health insurance costs as just a flat addition to hourly wage rates or salary, with the employee having the choice of how much of compensation should go to tax-advantaged payment of insurance premiums and how much should go to a paycheck or another destination such as a health savings account.
This might mean that older workers would have to divert more of their income to health insurance premiums for employer-sponsored insurance or another insurance provider, but the cost of covering older workers might be why they currently make up most of the long-term unemployed during the current recession so this would just make it easier for older workers to find work and pay for health premiums for their family with pre-tax earnings.
Mini-argument: people are afraid of death because they feel there is something important they haven't been able to do, or because they're uncertain they made the right choices in life with regard to adapting to the perceived conflict between society and the concept of love[23], specifically whether better outcomes can be achieved by encouraging people through example to accept or reject the necessity for conflict on important issues or at a personal level. People often realize the need for "a broad awareness of the varying reliability of primary signals" due to the wasted effort that results when the instantaneous or temporal accuracy of a standard of achievement is not what was expected, but lack confirmation of the reason for the problem or how to fix it[24]. When the strategy of acceptance of conflict is adopted with no regard for one's life, it often results in actions designed to cause people to question their assumptions. This might be the reason Anders Behring Breivik made an anti-Muslim video but engaged in actions commonly associated with those of the Muslim faith. Contrast 'Death to America' day in Iran[25], a nation from the same part of the political spectrum as the Republican party of the United States. Compare propaganda disseminated by the resistance groups of Iraq[26], which came from a culture with progressive political tendencies somewhat similar to the Democratic party of the US.
[1] End-Of-Life Savings: The ‘Fool’s Gold’ Of Reform? July 28th, 2010.
http://web.archive.org/web/20110305024748/http://healthaffairs.org/blog/2010/07/28/end-of-life-savings-the-fools-gold-of-reform/
[2] http://jobcreationplan.blogspot.com/
[3] Who are the 1% and What Do They Do for a Living? Oct 14, 2011.
http://www.nextnewdeal.net/rortybomb/who-are-1-and-what-do-they-do-living
[4] Study Finds Many Primary Care Physicians Think They Provide Too Much Care. 10/27/2011.
http://www.aafp.org/online/en/home/publications/news/news-now/practice-professional-issues/20111027toomuchcare.html
[5] Many Physicians Feel They’re Delivering Too Much Care. September 26, 2011.
http://blogs.wsj.com/health/2011/09/26/many-physicians-feel-theyre-delivering-too-much-care/
[6] Consumer Directed Health Care. December 2006.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=985572
[7] Defensive medicine worsens patient care and raises costs. May 2010.
http://www.kevinmd.com/blog/2010/05/defensive-medicine-worsens-patient-care-raises-costs.html
[8] Unnecessary testing needs more than tort reform to cure. July 2010.
http://www.kevinmd.com/blog/2010/07/unnecessary-testing-tort-reform-cure.html
[9] Why doctors can’t screen patients for every disease. May 2011.
http://www.kevinmd.com/blog/2011/05/doctors-screen-patients-disease.html
[10] Majority in U.S. Favors Healthcare Reform This Year. July 14, 2009.
http://www.gallup.com/poll/121664/Majority-Favors-Healthcare-Reform-This-Year.aspx
[11] On Healthcare, Americans Trust Physicians Over Politicians. June 17, 2009.
http://www.gallup.com/poll/120890/Healthcare-Americans-Trust-Physicians-Politicians.aspx
[12] Ordering tests may take food out of the mouths of our patients. April 2011.
http://www.kevinmd.com/blog/2011/04/ordering-tests-food-mouths-patients.html
[13] Finding out the cost of lab tests is a real challenge for patients. February 2011.
http://www.kevinmd.com/blog/2011/02/finding-cost-lab-tests-real-challenge-patients.html
[14] Why an MRI costs $1,080 in America and $280 in France. 03/03/2012.
http://www.washingtonpost.com/blogs/ezra-klein/post/why-an-mri-costs-1080-in-america-and-280-in-france/2011/08/25/gIQAVHztoR_blog.html
[15] 2011 Comparative Price Report - Medical and Hospital Fees by Country.
http://www.ifhp.com/documents/2011iFHPPriceReportGraphs_version3.pdf
[16] In Japan, MRIs Cost Less. November 18, 2009.
http://www.npr.org/templates/story/story.php?storyId=120545569
[17] Study Shows Shocking Disparities in Hospital Bills for Appendicitis Treatment #costsofcare.
http://mydoctorsf.com/study-shows-shocking-disparities-in-hospital-bills-for-appendicitis-treatment-costsofcare.html#more-432
[18] The case of the $517 chest x-ray. May 1, 2012.
http://costsofcare.blogspot.com/2012/05/case-of-517-chest-x-ray.html
[19] Savvy patient finds hidden discounts just by asking. April 22, 2012.
http://costsofcare.blogspot.com/2012/04/savvy-patient-finds-hidden-discounts.html
[20] The Moral Hazard Myth. August 29, 2005.
http://www.gladwell.com/2005/2005_08_29_a_hazard.html
[21] Forecasting the Cost of U.S. Healthcare. September 3, 2009.
http://www.american.com/archive/2009/september/forecasting-the-cost-of-u-s-healthcare
[22] Americans Prefer Having Cake, Eating It. March 27, 2012.
http://prospect.org/article/americans-prefer-having-cake-eating-it
[23] http://jobcreationplan.blogspot.com/2012/04/story-of-love-good-and-evil.html
[24] http://en.wikipedia.org/wiki/Lust,_Caution
[25] Iranians delight in 'Death to America' day. Nov 4, 2007.
http://www.youtube.com/watch?v=WRjG36WGvWM
[26] Iraqi Insurgent Media: The War of Images and Ideas. June 2007.
http://realaudio.rferl.org/online/OLPDFfiles/insurgent.pdf
Tuesday, May 1, 2012
Work conservation is the solution to the global recession
Many people are confused about the underlying reasons for the recent economic crisis, which has lead to high unemployment and slow growth in many parts of the world. Some try to blame it on the incompetence or selfishness of some part of society, but the true reasons have not been identified by any government.
[A rise in income inequality, productivity and financial complexity preceded the Great Depression of the 1930s similarly to the current situation, and in both cases the transfer of value toward the wealthy as a result of a drop in asset prices was the immediate cause of a decrease in total demand for goods]
[The political deadlock in the US is the result as neither major political party has a plan to create the jobs that people need.]
___
Many people are confused about the underlying reasons for the recent economic crisis, which has lead to high unemployment and slow growth in many parts of the world. Some try to blame it on the incompetence or selfishness of some part of society, but the true reason is nothing more than that there are not enough people who are willing to reduce the amount of time they work.
In the United States, people are not likely to accept this explanation without understanding what is wrong with the conventional explanations for the recession. Unemployment is not high because of a lack of education. This can be seen by the large number of college graduates who have to work in unskilled jobs despite student debt which has exceeded $1 trillion in the US. The federal budget deficit is not because the wealthy pay less in taxes than the middle class. According to a report by the Congressional Budget Office[1], 30% of the income of the top 1% goes to federal taxes after including corporate income tax, compared to a national average of 20% of income.
Other people find it reasonable that with the amount of money the federal government spends, there should be no economic problems. In polls by the New York Times and CBS, 67% of the population think the government should do more to help the middle class but only 2% think they pay less than their fair share of federal income taxes. A majority of the population is opposed to government spending to create jobs, and 64% would choose cutting government spending over raising taxes on corporations despite that only 4% think that corporations use savings from tax cuts to hire more workers.
Despite this perception of government inefficiency, no one should expect government agencies to cooperate in reducing their spending because any government employees who are laid off would have difficulty finding work in the current job market. Unemployment must go down before government spending does. Some parts of society suggest increasing subsidies and direct wealth transfers toward the poor and taxing the rich regardless of government inefficiency, but this is not likely to happen. Socialism is viewed positively by 49% of the 18-29 age group but only 13% of the 65+ age group in the US[2].
The final alternative to working less is for communities to become more isolated and less open to world trade. Instead of buying the cheapest product that was manufactured overseas, people could be encouraged to buy from local producers either by choice or through raising trade barriers to make locally made products more competitive on price. Economists generally agree that this would lower the gross domestic product for a country and for the world, but on the other hand it would raise employment precisely because of the inefficiency that would result. The primary argument against doing this is that the same standard of living could be obtained by encouraging people to work less so that work, and jobs, are more evenly distributed in the population.
This leads to the question of why the average work week has not fallen as productivity has increased. The overtime pay system introduced in the United States in 1937 was not designed to cause people to work less than full time, only to be used in combination with a minimum wage to discourage businesses from placing unreasonable demands on their workers. When the minimum wage does not provide for living expenses workers may feel forced to accept overtime work, but even at higher wage rates overtime encourages people to work as much as possible.
The progressive tax system is just as ineffective in reducing in the average work week. Even with marginal tax rates in the top bracket of over 90%, it was understood that tax revenues from working more helped the United States against its enemies in World War II and the Cold War. Since income is calculated on a yearly basis, the tax rate also appears to be 'locally flat' for anyone considering taking a day off work during the week, meaning that there is no clear justification for doing so unless the non-work activity is particularly urgent.
For these reasons, giving an incentive to work less than full time is the quickest and most effective way for society to address the economic problems resulting from the recession in the United States and the rest of the world.
The following is taken from the full proposal.
A third major way to determine employee compensation, in addition to a monthly salary or hourly wages:
The first 20 hours are paid at 1.2 times the normal hourly rate for full-time work.
Work beyond 20 hours in a single week is paid at 0.8 times the normal hourly rate.
Businesses could also choose to use a more complex version, if they had seasonal demand or were based off of projects instead of a constant supply of work. Employees that took time off when they were not needed would accumulate a pool of credits that would increase compensation during the days or weeks that they worked until those credits ran out, allowing a business to more efficiently manage its workforce throughout the year.
Doing this in the United States requires legislative changes to prevent discrimination against employees who take the option to work less as long as they fulfill their responsibilities and to remove overtime pay for workers using this concept. The best protection against exploitation of labor comes from ensuring workers have a wide variety of options available to them if their employer tries to force them into an unwanted work arrangement.
However, the structural unemployment that will result in various regions should also be mentioned. Businesses which sell high-end or luxury products will see lower demand, and if it isn't profitable for them to lower their prices due to continuing demand from the very rich then they will naturally reduce the size of their workforces, leading to unemployment of people in those industries and ripple effects in the local economy. The protests taking place in the United States and other countries may serve as evidence that this structural unemployment in some industries will be justified by the larger number of jobs created in other industries and regions.
But none of this will happen without your help. In a study on ethics, 73% of participants said they would flip a switch to divert a train away from a track where it would kill five people onto another track where it would kill one person, possibly because that person could still reasonably save themselves from the incoming train. However, only 10% of participants said they would cause certain death to one person to save five people on a track from a train, and only 27% said they would do it to save 19 people[3].
If as a society we decide to support working less as the solution to the global recession, it is completely certain that some people in the short term will be put out of work by the changes in spending patterns that will result. Politicians, and even the economists they depend on for advice, will remain paralyzed in a debate on the proper amount of socialism unless there is sufficient public support for people to be able to work less without discrimination by their employer. Public approval of Congress remains very low and they are widely seen to represent the interests of the rich, but the truth is that until now no one has offered a solution to the economic recession that the entire nation can support.
It isn't important who wrote this. The desire to 'take credit' for an idea or advance in knowledge distorts people's actions and reduces the incentive to support changes that help all of society. It was once difficult to find or store information, or meet basic needs without relying on building up one's reputation in a mainly agricultural society, but the Internet has lowered the cost of information to the point that a conflict between ownership of information and benefit to society is no longer justified and this concept would make it easier for anyone to find a job to support themselves without the need for bias for or against a particular idea based on wanting to appear 'creative' or gathering reputation. If the global recession can be fixed through work conservation, this course of action should be taken without hesitation.
Beat It by Michael Jackson, Chinese version:
http://www.youtube.com/watch?v=b0fqdKYbMPU
Knights of Cydonia by Muse:
http://www.youtube.com/watch?v=e5tCl72ART0&t=2m51s
..random songs! (inclusion optional)
http://www.youtube.com/watch?v=rtfb8MqXoU0
http://www.youtube.com/watch?v=2nnEi1hHSCo
http://www.youtube.com/watch?v=_ju1U_7c-kM
http://www.youtube.com/watch?v=_mVW8tgGY_w
[1] Trends in the Distribution of Household Income Between 1979 and 2007. October 2011. Figure 18.
http://www.cbo.gov/sites/default/files/cbofiles/attachments/10-25-HouseholdIncome.pdf
[2] Little Change in Public's Response to 'Capitalism,' 'Socialism'. December 28, 2011.
http://www.people-press.org/2011/12/28/little-change-in-publics-response-to-capitalism-socialism/
[3] Principled moral sentiment and the flexibility of moral judgment and decision making. March 2008. Table 1.
http://home.uchicago.edu/~bartels/papers/Bartels2008.pdf
___
Technical explanation, structural unemployment: A community of any size will see reduced unemployment from work conservation, because while the community can collectively reduce its prices and raise taxes to prevent outflow of money to land or capital owners, luxury products are provided only by a limited number of sellers who are typically outside of the community leading to a reduction over time of the amount of money flowing within the community and the slowing of purchases at a certain price level. If the community is the size of the United States people may have to relocate to take advantage of jobs that will be created which is the reason for structural unemployment in some regions. The jobs that were lost will tend to have paid more than average, while the ones created will pay less than average, but the portion of revenues going to wages instead of capital owners will increase while efficiency should also increase from the incentives given to employees, meaning that median and average wages should rise. Tax rates can be adjusted as necessary to meet revenue targets, with less government spending needed if unemployment is low.
[A rise in income inequality, productivity and financial complexity preceded the Great Depression of the 1930s similarly to the current situation, and in both cases the transfer of value toward the wealthy as a result of a drop in asset prices was the immediate cause of a decrease in total demand for goods]
[The political deadlock in the US is the result as neither major political party has a plan to create the jobs that people need.]
___
Many people are confused about the underlying reasons for the recent economic crisis, which has lead to high unemployment and slow growth in many parts of the world. Some try to blame it on the incompetence or selfishness of some part of society, but the true reason is nothing more than that there are not enough people who are willing to reduce the amount of time they work.
In the United States, people are not likely to accept this explanation without understanding what is wrong with the conventional explanations for the recession. Unemployment is not high because of a lack of education. This can be seen by the large number of college graduates who have to work in unskilled jobs despite student debt which has exceeded $1 trillion in the US. The federal budget deficit is not because the wealthy pay less in taxes than the middle class. According to a report by the Congressional Budget Office[1], 30% of the income of the top 1% goes to federal taxes after including corporate income tax, compared to a national average of 20% of income.
Other people find it reasonable that with the amount of money the federal government spends, there should be no economic problems. In polls by the New York Times and CBS, 67% of the population think the government should do more to help the middle class but only 2% think they pay less than their fair share of federal income taxes. A majority of the population is opposed to government spending to create jobs, and 64% would choose cutting government spending over raising taxes on corporations despite that only 4% think that corporations use savings from tax cuts to hire more workers.
Despite this perception of government inefficiency, no one should expect government agencies to cooperate in reducing their spending because any government employees who are laid off would have difficulty finding work in the current job market. Unemployment must go down before government spending does. Some parts of society suggest increasing subsidies and direct wealth transfers toward the poor and taxing the rich regardless of government inefficiency, but this is not likely to happen. Socialism is viewed positively by 49% of the 18-29 age group but only 13% of the 65+ age group in the US[2].
The final alternative to working less is for communities to become more isolated and less open to world trade. Instead of buying the cheapest product that was manufactured overseas, people could be encouraged to buy from local producers either by choice or through raising trade barriers to make locally made products more competitive on price. Economists generally agree that this would lower the gross domestic product for a country and for the world, but on the other hand it would raise employment precisely because of the inefficiency that would result. The primary argument against doing this is that the same standard of living could be obtained by encouraging people to work less so that work, and jobs, are more evenly distributed in the population.
This leads to the question of why the average work week has not fallen as productivity has increased. The overtime pay system introduced in the United States in 1937 was not designed to cause people to work less than full time, only to be used in combination with a minimum wage to discourage businesses from placing unreasonable demands on their workers. When the minimum wage does not provide for living expenses workers may feel forced to accept overtime work, but even at higher wage rates overtime encourages people to work as much as possible.
The progressive tax system is just as ineffective in reducing in the average work week. Even with marginal tax rates in the top bracket of over 90%, it was understood that tax revenues from working more helped the United States against its enemies in World War II and the Cold War. Since income is calculated on a yearly basis, the tax rate also appears to be 'locally flat' for anyone considering taking a day off work during the week, meaning that there is no clear justification for doing so unless the non-work activity is particularly urgent.
For these reasons, giving an incentive to work less than full time is the quickest and most effective way for society to address the economic problems resulting from the recession in the United States and the rest of the world.
The following is taken from the full proposal.
A third major way to determine employee compensation, in addition to a monthly salary or hourly wages:
The first 20 hours are paid at 1.2 times the normal hourly rate for full-time work.
Work beyond 20 hours in a single week is paid at 0.8 times the normal hourly rate.
Businesses could also choose to use a more complex version, if they had seasonal demand or were based off of projects instead of a constant supply of work. Employees that took time off when they were not needed would accumulate a pool of credits that would increase compensation during the days or weeks that they worked until those credits ran out, allowing a business to more efficiently manage its workforce throughout the year.
Doing this in the United States requires legislative changes to prevent discrimination against employees who take the option to work less as long as they fulfill their responsibilities and to remove overtime pay for workers using this concept. The best protection against exploitation of labor comes from ensuring workers have a wide variety of options available to them if their employer tries to force them into an unwanted work arrangement.
However, the structural unemployment that will result in various regions should also be mentioned. Businesses which sell high-end or luxury products will see lower demand, and if it isn't profitable for them to lower their prices due to continuing demand from the very rich then they will naturally reduce the size of their workforces, leading to unemployment of people in those industries and ripple effects in the local economy. The protests taking place in the United States and other countries may serve as evidence that this structural unemployment in some industries will be justified by the larger number of jobs created in other industries and regions.
But none of this will happen without your help. In a study on ethics, 73% of participants said they would flip a switch to divert a train away from a track where it would kill five people onto another track where it would kill one person, possibly because that person could still reasonably save themselves from the incoming train. However, only 10% of participants said they would cause certain death to one person to save five people on a track from a train, and only 27% said they would do it to save 19 people[3].
If as a society we decide to support working less as the solution to the global recession, it is completely certain that some people in the short term will be put out of work by the changes in spending patterns that will result. Politicians, and even the economists they depend on for advice, will remain paralyzed in a debate on the proper amount of socialism unless there is sufficient public support for people to be able to work less without discrimination by their employer. Public approval of Congress remains very low and they are widely seen to represent the interests of the rich, but the truth is that until now no one has offered a solution to the economic recession that the entire nation can support.
It isn't important who wrote this. The desire to 'take credit' for an idea or advance in knowledge distorts people's actions and reduces the incentive to support changes that help all of society. It was once difficult to find or store information, or meet basic needs without relying on building up one's reputation in a mainly agricultural society, but the Internet has lowered the cost of information to the point that a conflict between ownership of information and benefit to society is no longer justified and this concept would make it easier for anyone to find a job to support themselves without the need for bias for or against a particular idea based on wanting to appear 'creative' or gathering reputation. If the global recession can be fixed through work conservation, this course of action should be taken without hesitation.
Beat It by Michael Jackson, Chinese version:
http://www.youtube.com/watch?v=b0fqdKYbMPU
Knights of Cydonia by Muse:
http://www.youtube.com/watch?v=e5tCl72ART0&t=2m51s
..random songs! (inclusion optional)
http://www.youtube.com/watch?v=rtfb8MqXoU0
http://www.youtube.com/watch?v=2nnEi1hHSCo
http://www.youtube.com/watch?v=_ju1U_7c-kM
http://www.youtube.com/watch?v=_mVW8tgGY_w
[1] Trends in the Distribution of Household Income Between 1979 and 2007. October 2011. Figure 18.
http://www.cbo.gov/sites/default/files/cbofiles/attachments/10-25-HouseholdIncome.pdf
[2] Little Change in Public's Response to 'Capitalism,' 'Socialism'. December 28, 2011.
http://www.people-press.org/2011/12/28/little-change-in-publics-response-to-capitalism-socialism/
[3] Principled moral sentiment and the flexibility of moral judgment and decision making. March 2008. Table 1.
http://home.uchicago.edu/~bartels/papers/Bartels2008.pdf
___
Technical explanation, structural unemployment: A community of any size will see reduced unemployment from work conservation, because while the community can collectively reduce its prices and raise taxes to prevent outflow of money to land or capital owners, luxury products are provided only by a limited number of sellers who are typically outside of the community leading to a reduction over time of the amount of money flowing within the community and the slowing of purchases at a certain price level. If the community is the size of the United States people may have to relocate to take advantage of jobs that will be created which is the reason for structural unemployment in some regions. The jobs that were lost will tend to have paid more than average, while the ones created will pay less than average, but the portion of revenues going to wages instead of capital owners will increase while efficiency should also increase from the incentives given to employees, meaning that median and average wages should rise. Tax rates can be adjusted as necessary to meet revenue targets, with less government spending needed if unemployment is low.
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