Monday, August 5, 2019

Re: Your post about cashiers

Hey guys! A while back you wrote a post that talked about cashiers: http://economics.enlightenradio.org/2016/09/

In your post, you mentioned cashier careers. I work at Zippia and we have a cashier career map that might be a great addition to the post as a way of helping your readers understand what it's like to work as a cashier:
https://www.zippia.com/cashier-jobs/#career-paths

I thought it might be worth linking to in your post. For instance, you could say: "Cashier career paths are quite lucrative, and cashiers entering the field can expect to move onto senior positions in less than 10 years in most cases."

Take care,
Kristy

--
Kristy Crane
Public Relations
Zippia.com

Zippia is a resource site for job seekers who want to empower their career aspirations with knowledgeable data. We've been featured in USA Today, Forbes, Fortune, CNBC and the NY Times, among other leading publications.

Saturday, August 3, 2019

Dan Little: Pervasive organizational and regulatory failures [feedly]

The always fascinating, and illuminating, sociologist, Dan Little

Pervasive organizational and regulatory failures
http://understandingsociety.blogspot.com/2019/08/pervasive-organizational-and-regulatory.html

It is intriguing to observe how pervasive organizational and regulatory failures are in our collective lives. Once you are sensitized to these factors, you see them everywhere. A good example is in the business section of today's print version of the New York Times, August 1, 2019. There are at least five stories in this section that reflect the consequences of organizational and regulatory failure.

The first and most obvious story is one that has received frequent mention in Understanding Society, the Boeing 737 Max disaster. In a story titled "FAA oversight of Boeing scrutinized", the reporters give information about a Senate hearing on FAA oversight earlier this week.  Members of the Senate Appropriations Committee questioned the process of certification of new aircraft currently in use by the FAA.
Citing the Times story, Ms. Collins raised concerns over "instances in which FAA managers appeared to be more concerned with Boeing's production timeline, rather than the safety recommendations of its own engineers."
Senator Jack Reed referred to the need for a culture change to rebalance the relationship between regulator and industry. Agency officials continued to defend the certification process, which delegates 96% of the work of certification to the manufacturer.

This story highlights two common sources of organizational and regulatory failure. There is first the fact of "production pressure" coming from the owner of a risky process, involving timing, supply of product, and profitability. This pressure leads the owner to push the organization hard in an effort to achieve goals -- often leading to safety and design failures. The second factor identified here is the structural imbalance that exists between powerful companies running complex and costly processes, and the safety agencies tasked to oversee and regulate their behavior. The regulatory agency, in this case the FAA, is under-resourced and lacks the expert staff needed to carry out in depth a serious process of technical oversight.  The article does not identify the third factor which has been noted in prior posts on the Boeing disaster, the influence which Boeing has on legislators, government officials, and the executive branch.

 A second relevant story (on the same page as the Boeing story) refers to charges filed in Germany against the former CEO of Audi who has been charged concerning his role in the vehicle emissions scandal. This is part of the long-standing deliberate effort by Volkswagen to deceive regulators about the emissions characteristics of their diesel engine and exhaust systems. The charges against the Audi executive involved ordering the development of software designed to cheat diesel emissions testing for their vehicles. This ongoing story is primarily a story about corporate dysfunction, in which corporate leaders were involved in unethical and dishonest activities on behalf of the company. Regulatory failure is not a prominent part of this story, because the efforts at deception were so carefully calculated that it is difficult to see how normal standards of regulatory testing could have defeated them. Here the pressing problem is to understand how professional, experienced executives could have been led to undertake such actions, and how the corporation was vulnerable to this kind of improper behavior at multiple levels within the corporation. Presumably there were staff at multiple levels within these automobile companies who were aware of improper behavior. The story quotes a mid-level staff person who writes in an email that "we won't make it without a few dirty tricks." So the difficult question for these corporations is how their internal systems were inadequate to take note of dangerously improper behavior. The costs to Volkswagen and Audi in liability judgments and government penalties are truly vast, and surely outweigh the possible gains of the deception. These costs in the United States alone exceed $22 billion. 

A similar story, this time from the tech industry, concerns a settlement of civil claims against Cisco Systems to settle claims "that it sold video surveillance technology that it knew had a significant security flaw to federal, state and local government agencies." Here again we find a case of corporate dishonesty concerning some of its central products, leading to a public finding of malfeasance. The hard question is, what systems are in place for companies like Cisco that ensure ethical and honest presentation of the characteristics and potential defects of the products that they sell? The imperatives of working always to maximize profits and reduce costs lead to many kinds of dysfunctions within organizations, but this is a well understood hazard. So profit-based companies need to have active and effective programs in place that encourage and enforce honest and safe practices by managers, executives, and frontline workers. Plainly those programs broke down at Cisco, Volkswagen, and Audi. (One of the very useful features of Tom Beauchamp's book Case Studies in Business, Society, and Ethics is the light Beauchamp sheds through case studies on the genesis of unethical and dishonest behavior within a corporate setting.)

Now we go on to Christopher Flavelle's story about home-building in flood zones. From a social point of view, it makes no sense to continue to build homes, hotels, and resorts in flood zones. The increasing destruction of violent storms and extreme weather events has been evident at least since the devastation of Hurricane Katrina. Flavelle writes:
There is overwhelming scientific consensus that rising temperatures will increase the frequency and severity of coastal flooding caused by hurricanes, storm surges, heavy rain and tidal floods. At the same time there is the long-term threat of rising seas pushing the high-tide line inexorably inland.
However, Flavelle reports research by Climate Central that shows that the rate of home-building in flood zones since 2010 exceeds the rate of home-building in non-flood zones in eight states. So what are the institutional and behavioral factors that produce this amazingly perverse outcome? The article refers to incentives of local municipalities in generating property-tax revenues and of potential homeowners subject to urban sprawl and desires for second-home properties on the water. Here is a tragically short-sighted development official in Galveston who finds that "the city has been able to deal with the encroaching water, through the installation of pumps and other infrastructure upgrades": "You can build around it, at least for the circumstances today. It's really not affected the vitality of things here on the island at all." The factor that is not emphasized in this article is the role played by the National Flood Insurance Program in the problem of coastal (and riverine) development. If flood insurance rates were calculated in terms of the true riskiness of the proposed residence, hotel, or resort, then it would no longer be economically attractive to do the development. But, as the article makes clear, local officials do not like that answer because it interferes with "development" and property tax growth. ProPublica has an excellent 2013 story on the perverse incentives created by the National Flood Insurance Program, and its inequitable impact on wealthier home-owners and developers (link). Here is an article by Christine Klein and Sandra Zellmer in the SMU Law Review on the dysfunctions of Federal flood policy (link):
Taken together, the stories reveal important lessons, including the inadequacy of engineered flood control structures such as levees and dams, the perverse incentives created by the national flood insurance program, and the need to reform federal leadership over flood hazard control, particularly as delegated to the Army Corps of Engineers.
Here is a final story from the business section of the New York Times illustrating organizational and regulatory dysfunctions -- this time from the interface between the health industry and big tech. The story here is an effort that is being made by DeepMind researchers to use artificial intelligence techniques to provide early diagnosis of otherwise mysterious medical conditions like "acute kidney injury" (AKI). The approach proceeds by analyzing large numbers of patient medical records and attempting to identify precursor conditions that would predict the occurrence of AKI. The primary analytical tool mentioned in the article is the set of algorithms associated with neural networks. In this instance the organizational / regulatory dysfunction is latent rather than explicit and has to do with patient privacy. DeepMind is a business unit within the Google empire of businesses, Alphabet. DeepMind researchers gained access to large volumes of patient data from the UK National Health Service. There is now regulatory concern in the UK and the US concerning the privacy of patients whose data may wind up in the DeepMind analysis and ultimately in Google's direct control. "Some critics question whether corporate labs like DeepMind are the right organization to handle the development of technology with such broad implications for the public." Here the issue is a complicated one. It is of course a good thing to be able to diagnose disorders like AKI in time to be able to correct them. But the misuse and careless custody of user data by numerous big tech companies, including especially Facebook, suggests that sensitive personal data like medical files need to be carefully secured by effective legislation and regulation. And so far the regulatory system appears to be inadequate for the protection of individual privacy in a world of massive databases and largescale computing capabilities. The recent FTC $5 billion settlement imposed on Facebook, large as it is, may not suffice to change the business practices of Facebook (link).

(I didn't find anything in the sports section today that illustrates organizational and regulatory dysfunction, but of course these kinds of failures occur in professional and college sports as well. Think of doping scandals in baseball, cycling, and track and field, sexual abuse scandals in gymnastics and swimming, and efforts by top college football programs to evade NCAA regulations on practice time and academic performance.)  

 -- via my feedly newsfeed

A Smart Approach to China-U.S. Relations [feedly]

A Smart Approach to China-U.S. Relations
https://www.bradford-delong.com/2019/08/a-smart-approach-to-china-us-relations.html

Consider a country that is the global superpower.

Its military is best-of-breed. Its reach extends from Japan to the West Indies to the Indian Ocean, and beyond. Its industries of the most productive in the world. It Is predominate in world trade. It dominates global finance.

But, when this global superpower looks to the west, across the sea, it sees a rising power—a confident nation with a larger population, hungry for wealth, hungry for preeminence, seeing itself as possessing a manifest destiny to supersede the old superpower. And, unless something goes horribly wrong with the rising power to the west, its rise is indeed all but inevitable.

Thus the proper goal for the current superpower is to ensure a soft landing—ensure that the world will still be a comfortable place for it, once its preeminence as the global superpower is over.

There are, of course, sources of conflict: the rising superpower wants more access to markets and to intellectual property than the current superpower wishes to provide. And what the current superpower does not willingly provide, the rising superpower will seek to take. The rising superpower wants a weight in international councils corresponding to what its fundamental power will be a generation hence, nd is not satisfied with a weight corresponding to its fundamental power today.

These are all valid sources of conflict. They need to be managed. Interests need to be advanced, and defended. But they do not outweigh the joint interests in peace and prosperity.

So what should the superpower currently dominant do? How should it use its current preeminence?

And am I talking about the United States and China today, about Britain and the United States a century and a half ago, or about Holland and Britain 350 years ago?

In the case of Holland and Britain, a spate of cold trade and hot naval wars in the 1600s led to the infusion into the English language of a remarkably large number of derogatory phrases based on "Dutch": Dutch bargain, Dutch book, Dutch comfort, Dutch concert, Dutch courage, Dutch defence, Dutch leave, Dutch metal, Dutch nightingale, Dutch reckoning, Dutch treat, Dutch uncle, "if I do it not, I'm a Dutchman"—and, possibly, Dutch auction and Dutch oven. It led also to perhaps the most memorable line in British naval bureaucrat Samuel Pepys's diary, as the navy he had built and supplied faced superior numbers of Dutch at Harwich, Portsmouth, Plymouth, and Dartmouth: "By God! I think the Devil shits Dutchmen!"

But in the long run fundamentals told, and Britain rose to global hyperpower. Possibly decisive for the Dutch-British transition was the wind shift of 24 October 1688 to an east Protestant wind. That allowed the Dutch fleet to leave harbor. The following Dutch military intervention in support of the aristocratic-Whig coup against the Stuart dynasty that brought hereditary Dutch Stadthouder William III of Orange to the British throne.

Thereafter the common interests of both powers in limited government, mercantile prosperity, and anti-Catholicism created a durable alliance with the Dutch as junior partner around, in the words of the viral tweet of the 1700s, "no popery or wooden shoes!" Under Britain's aegis the Dutch remained independent rather than becoming involuntarily Francofied. It was a—largely—comfortable world for the Dutch, and for Holland.

In the case of Britain and the United States, after 1815 the British government followed a durable policy that was rather odd for 19th Century Britain, whose SOP was usually: "we burn your fleet, and perhaps your capital, first, and negotiate later".

Britain acceded to the Monroe Doctrine in 1823; accepted a line of demarcation in the Oregon Territory that left the British-settler majority region that is now the state of Washington in American hands; did not intervene on the side of free trade in 1862; accepted American mediation on the Venezuelan border; supported American annexation of the Philippines; relinquished rights and interests in what became the Panama Canal zone; and acquiesced to the American position on where the boundary between Alaska and the Yuko actually was.

Britain, instead, gave scholarships to American wannabe aristocrats who wanted to study at Oxford and Cambridge; gleefully married off its own aristocrats with titles to American heiresses—Winston Churchill's parents became engaged three days after meeting at a sailing regatta on the Isle of Wight—and stressed common lineage, cultural, and economic ties; and, as the young Harold Macmillan unwisely, because too publicly, put it when he was seconded to Eisenhower's staff in North Africa in late 1942, became "the Greeks to the American Romans".

The result was that the United States became Britain's wired aces in the hole in teh game of seven-card stud that was twentieth-century geopolitics.

The fundamentals tolled against Britain. One island cannot, they said, in the long run "Half a continent will, said economic historian J.H. Clapham speaking of the United States, in the end raise more coal and melt more steel than one small densely-populated island".

Yet perhaps Britain's supersession by America was not inevitable. In 1860 the United States had a full-citizen population of 25 million, and Britain and its dominions had a full-citizen population of 32 million. By 1940 the full-citizen numbers were 117 and 76 million. But the pro-rated descendents of the full citizens as of 1860 were 50 and 65 million, advantage Britain and the Dominions.

As the Financial Times's Martin Wolf points out, his ancestors were some of the very few who made the much cheaper migration from the Ashkenazi Pale of Settlement to London than to New York.

Up to 1924 New York welcomed all comers from Europe and the Middle East, while London and the Dominions were only welcoming to northern European Protestants.

A Britain more interested in turning Jews, Poles, Italians, Romanians, and even Turks who do not happen to be named Alexander Boris de Pfeffel Johnson—who bears Turkish Minister of the Interior Ali Kemal's Y and five other chromosomes, and hence is, by all the rules of conservative patriarchy, a Turk—at turning them into Britons or Australians or Canadians would have been much stronger throughout the twentieth century.

Perhaps it would not be in its current highly undignified position.

Compared to Holland and Britain when they were global hyperpowers pursuing soft landings, how are we doing?

The answer has to be: since January 2017, not well at all.

There is a lot of wisdom in George Kennan's 1947 "Sources of Soviet Conduct". Three points stand out:

  1. Do not panic, but recognize what the long game is, and play it.

  2. Contain, but not unilaterally: assemble broad alliances to confront, resist, and sanction as a group.

  3. Become your best self, because ultimately, as long as the struggle between systems can be kept peaceful, liberty and prosperity will be decisive.

    • Are we forming alliances—cough, TPP— to contain?
    • Or are we making the random incoherent demands for things like immediate bilateral balance that can only be understood as the actions of a chaos monkey?
    • Are we not panicking?
    • Are we soberly playing the long game?

 -- via my feedly newsfeed

Congress has never let the federal minimum wage erode for this long

https://epi.org/170071#.XUXIJvK0g3U.gmail

June 16th marks the longest period in history without an increase in the federal minimum wage. The last time Congress passed an increase was in May 2007, when it legislated that the minimum wage be raised to $7.25 per hour on July 24, 2009. Since the minimum wage was first established in 1938, Congress has never let it go unchanged for so long.

When the minimum wage remains unchanged for any length of time, inflation erodes its buying power. As shown in the graphic, when the minimum wage was last raised to $7.25 in July 2009, it had a purchasing power equivalent to $8.70 in today's dollars. Over the last 10 years, as the minimum wage has remained at $7.25, its purchasing power has declined by 17 percent. For a full-time, year-round minimum wage worker, this represents a loss of over $3,000 in annual earnings. Moreover, since its historical peak in February 1968, the federal minimum wage has lost 31 percent in purchasing power—meaning that full-time, year-round minimum wage workers today have annual earnings worth $6,800 less than what their counterparts earned five decades ago.

A simple way to fix this problem once and for all would be to adopt automatic annual minimum wage adjustment (or "indexing"), as 18 states and the District of Columbia have done. The Raise the Wage Act of 2019 would raise the federal minimum wage to $15 by 2024—boosting wages for nearly 40 million U.S. workers—and establish automatic annual adjustment of the federal minimum wage. Automatic annual adjustment would ensure that the paychecks of the country's lowest-paid workers are never again left to erode.

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Thursday, August 1, 2019

The Inequality of Nations [feedly]

are globalization and inequality eroding the viability of democracy?

The Inequality of Nations
https://www.project-syndicate.org/commentary/market-power-encroaching-on-politics-by-michael-spence-2019-08

Markets are mechanisms of social choice, in which dollars effectively equal votes; those with more purchasing power thus have more influence over market outcomes. Governments are also social choice mechanisms, but voting power is – or is supposed to be – distributed equally, regardless of wealth.

MILAN – The eighteenth-century British economist Adam Smith has long been revered as the founder of modern economics, a thinker who, in his great works The Wealth of Nationsand The Theory of Moral Sentiments, discerned critical aspects of how market economies function. But the insights that earned Smith his exalted reputation are not nearly as unassailable as they once seemed.

.

Perhaps the best known of Smith's insights is that, in the context of well-functioning and well-regulated markets, individuals acting according to their own self-interest produce a good overall result. "Good," in this context, means what economists today call "Pareto-optimal" – a state of resource allocation in which no one can be made better off without making someone else worse off.1

Smith's proposition is problematic, because it relies on the untenable assumption that there are no significant market failures; no externalities (effects like, say, pollution that are not reflected in market prices); no major informational gaps or asymmetries; and no actors with enough power to tilt outcomes in their favor. Moreover, it utterly disregards distributional outcomes (which Pareto efficiency does not cover).

Another of Smith's key insights is that an increasing division of labor can enhance productivity and income growth, with each worker or company specializing in one isolated area of overall production. This is essentially the logic of globalization: the expansion and integration of markets enables companies and countries to capitalize on comparative advantages and economies of scale, thereby dramatically increasing overall efficiency and productivity.

Again, however, Smith is touting a market economy's capacity to create wealth, without regard for the distribution of that wealth. In fact, increased specialization within larger markets has potentially major distributional effects, with some actors suffering huge losses. And the refrain that the gains are large enough to compensate the losers lacks credibility, because there is no practical way to make that happen.1

Markets are mechanisms of social choice, in which dollars effectively equal votes; those with more purchasing power thus have more influence over market outcomes. Governments are also social choice mechanisms, but voting power is – or is supposed to be – distributed equally, regardless of wealth. Political equality should act as a counterweight to the weighted "voting" power in the market.



To this end, governments must perform at least three key functions. First, they must use regulation to mitigate market failures caused by externalities, information gaps or asymmetries, or monopolies. Second, they must invest in tangible and intangible assets, for which the private return falls short of the social benefit. And, third, they must counter unacceptable distributional outcomes.

But governments around the world are failing to fulfill these responsibilities – not least because, in some representative democracies, purchasing power has encroached on politics. The most striking example is the United States, where electability is strongly correlated with either prior wealth or fundraising ability. This creates a strong incentive for politicians to align their policies with the interests of those with market power.

To be sure, the Internet has gone some way toward countering this trend. Some politicians – including Democratic presidential candidates like Bernie Sanders and Elizabeth Warren – rely on small individual donations to avoid becoming beholden to large donors. But the interests of the economically powerful remain significantly overrepresented in US politics, and this has diminished government's effectiveness in mitigating market outcomes. The resulting failures, including rising inequality, have fueled popular frustration, causing many to reject establishment voices in favor of spoilers like President Donald Trump. The result is deepening political and social dysfunction.1

One might argue that similar social and political trends can also be seen in developed countries – Italy and the United Kingdom, for example – that have fairly stringent restrictions on the role of money in elections. But those rules do not stop powerful insiders from wielding disproportionate influence over political outcomes through their exclusive networks. Joining the "in" group requires connections, contributions, and loyalty. Once it is secured, however, the rewards can be substantial, as some members become political leaders, working in the interests of the rest.

Some believe that, in a representative democracy, certain groups will always end up with disproportionate influence. Others would argue that more direct democracy – with voters deciding on major policies through referenda, as they do in Switzerland – can go some way toward mitigating this dynamic. But while such an approach may be worthy of consideration, in many areas (such as competition policy), effective decision-making demands relevant expertise. And government would still be responsible for implementation.

These challenges have helped to spur interest in a very different model. In a "state capitalist" system like China's, a relatively autocratic government acts as a robust counterweight to the market system.

In theory, such a system enables leaders, unencumbered by the demands of democratic elections, to advance the broad public interest. But with few checks on their activities – including from media, which the government tightly controls – there is no guarantee that they will. This lack of accountability can also lend itself to corruption – yet another mechanism for turning government away from the public interest.

China's governance model is regarded as dangerous by much of the West, where the absence of public accountability is viewed as a fatal flaw. But many developing countries are considering it as an alternative to liberal democracy, which has plenty of flaws of its own.

For the world's existing representative democracies, addressing those flaws must be a top priority, with countries limiting, to the extent possible, the narrowing of the interests the government represents. This will not be easy. But at a time when market outcomes are increasingly failing to pass virtually any test of distributional equity, it is essential. -- via my feedly newsfeed

Important article on wv