Why Climatetologists Shouldn't be Economists (or Political Scientists)

This image was taken from one of the previous issues of The Economist. Basically the graph compares California and other "blue states" (as defined as supporting John Kerry in the previous election), compared to the "red states" as defined by those that voted for George Bush. Now, the Economist, as well as the source for this graph (http://sciencepolicy.colorado.edu/prometheus/archives/climate_change/001093understanding_us_cli.html, believe that this is some sort of indicator for something political. Of course, this graph leads alot to be desired. For example, using votes for the President as an indicator of the political leanings of the state is probably a sloppy way of determining the two. But it's quick and easily identifiable.

This doesn't even concern the title of the graph itself. For example, states that are "red" are more likely to be in the South or Midwest. These are also states that have hot summers. About 90% of all air conditioning is run on electric. So there is absolutely no adjustment for climate. The same can be said for just using per capita kWh usage without adjusting for industrial usage. Red States are much more likely to have energy intensive industries there than Blue States. For example, I happen to know that there are alot more Alcoa plants in the Southeast than in the Northeast. So obviously, per person kWh usage is going to be higher in states that have these electric-intensive industries than those without. But this graph doesn't make any adjustment for that. A much more telling graph would have been to compare RESIDENTIAL per capita kWh usage compared across red and blue states. But this doesn't happen.

The problem is that these sources believe that this is some sort of indicator of future politics. Case in point is this article by the same source, telling titled: Why Al Gore Will be the Next President of the United States

Ignoring for the moment that the former Vice President hasn't even announced that he's even exploring a Presidential candidate, the author of this post seems to make his position based on a couple of ideas:

1. 2008 will be different than 2004. Elites have decided that global climate change is an issue worth politicizing, that is to say, worth making an issue in politics. Therefore, carbon dioxide emissions will be an issue in the 2008 election.
2. But it seems reasonable to think that the smaller the cost (or perceived cost) of policies on carbon dioxide, the more likely that such policies will be accepted. Similarly, the higher the costs, the greater the likelihood of opposition.

I'm not going to disagree with him on point number two. That makes sense. Number one, I'm going to disagree with. Just because the "elites" have deemed this to be an issue, that doesn't mean that it will be a "make or break" issue. Most polls have shown that global warming/environmental issues rank rather low on voters lists of concerns. Here's some data on voter's priorities. Notice how the environment (unless it gets lumped in with the "energy" category) doesn't show up.

But the bigger issue (and where the author is completely misled) is that he thinks that states with higher CO2 emissions are MORE likely to switch sides. The problem is that this is the opposite. A candidate that would favor higher CO2 restrictions would more likely lose voters than gain them.

Let's take a look at an example. Use a generic high CO2 state, say Pennsylvania. Now, this state has a baseline economic performance concerning production, costs, etc. This baseline, for whatever reason, includes producing more CO2 than other states. Now, say you have a choice in two situations. One keeps the status quo for CO2 and the other creates some kind of cost to production of CO2. If you institute CO2 costs, then states with higher CO2 production will have a higher impact on their economic performance. Thus, either these costs will be passed onto voters (ie higher electricity costs, higher prices for goods) and/or the company will shutter facilities in Pennsylvania and move them to a state with lower costs. Either way, voters in Pennsylvania will see CO2 charges as a NEGATIVE. Thus, if they are rational (a tenuous assumption at best), they will chose the candidate that will impose less of an impact on their economic well-being. Unless you think that voters would want someone to basically force lower CO2 consumption on them. In which case, states with higher CO2 production would support an Al Gore over a Republican. That's what the author believes.

Of course, if that's the case, then all the low CO2 states would support Republicans since they already have low CO2 consumption and thus would care less about global warming issues. But the author wants to have his cake and eat it too. He thinks that low CO2 states will continue their support for CO2 restrictions even though it won't affect them while states with higher CO2 production will want to have these restrictions put in place, in spite of their disproportionate consequences. It's one or the other, but not both.

In the end, the author makes two huge mistakes. The first is that he believes that global warming will be the make or break issue in 2008, when in fact there is considerable evidence to the contrary. The second is that he thinks that he confuses correlation with causation. Basically, he's writing that since states with lower CO2 emissions vote Democratic, that if your state has lower CO2 emissions, you will vote for Al Gore. However, there's no causation between the two.

Then again, I learned that in my statistics class back in 2002. Perhaps they didn't teach that when this professor took his statistics class.

Quote of the Year (so far)

"Really, we're happy to be rich now," said Majid al-Mansouri, who heads the environment agency serving Abu Dhabi.

That is from this journalistic abortion; article by the Associated Press about the United Arab Emirates and their topping of the world index of global footprints, by the World Wildlife Federation (Sorry, whenever I see WWF, I think wrestling).

Al-Mansouri's comment pretty much sums up what the developing world thinks of global environmentalism. It's one thing for all of these environmentalists to want everyone to live under one giant green umbrella. But what it comes down to is that the environmentalists are saying to developed countries "We don't want you to reach our standard of living unless you do it on our terms." Of course, what the environmentalists don't mention is that developing countries CANNOT reach higher levels of development right now because the technology isn't there for clean growth. The other thing that isn't mentioned is that no matter what the Greens demand, suggest, or imply, citizens of LDCs would rather make the trade-off of environmentalism for growth. Thus, you get comments like those above where people would rather be enjoying their lives in splendor rather than an environmentally friendly subsidence existence.

Unfortunately, the Greens in the West still think that Kyoto is still going to work despite the unworkable paradox of:

* The Developing world refusing to have brakes put on their growth.
* The US refusing to implement any kind of agreement that "did not include binding targets and timetables for developing as well as industrialized nations or "would result in serious harm to the economy of the United States"." according to the Byrd-Hagel (Note the bi-partisanship!) saying that the US Senate would not ratify Kyoto as currently written.



The obvious solution to this would be some sort of Pareto improvement by giving the developed countries a shit-ton of money in exchange for environmental controls on their growth. The problem with this is that the US would probably be opposed to the one-two punch of having to put big costs on their economy while transferring gobs of money to developed countries to buy them off. The second, probably more problematic issue, is the lack of any kind of enforcement mechanism. There is basically no way for one nation, or even a group of nations to enforce the rules of the treaty. That is without... (and this will be my final point).

SUPER-NATIONAL AUTHORITAH!

Basically, what it comes down to is that the environmental lobby is much more closer to a Green Communism than most environmentalists would like for people to believe. The reason is that when push comes to shove, most people don't place alot of stock on the distant consequences of their future actions. (Note: The empirical evidence would belie the belief of the Stern Report that there is a zero discount rate on future costs of environmental degradation). In short, while most people would say that they would do stuff "for the children/grandchildren" their actions suggest otherwise. Thus, in order to get any kind of environmentalism done, you need to force people to do it. Thus, environmentalism is very statist in their goals. For any kind of global initiative, you would need a global enforcer, thus the idea of a super-national organization. Which is why there isn't going to be any kind of global environmental policy until there is global government. And God-willing, that isn't going to happen for a long, long time. (It's in Revelations people!)

But the hypocrisy of the environmental movement amuses me just that much.

(Oh, and even Yahoo is apparently not immune to media liberalism. Just check out the URL on the link to the AP story... if they think that's an ecological nightmare, then nobody show them Russia. They might spontaneously combust.)

I'D LIKE TO THANK...

Yes, I know I haven't posted in forever, but I think I'm turning over a new leaf with all of the political shenanigans going on in the past 24 hours. With that, despite the fact that we now have a Speaker Pelosi and Chairman Kennedy, here's some things I'm thankful for with the passing of the election...

• The good people of South Carolina, Tennessee, Colorado, Wisconsin, Virginia, South Dakota and Idaho for reaffirming traditional values and banning same sex marriage. Now I know you libertarians out there (*cough*Dan*cough*) think that this is not the purview of the government, that they should stay out of the private lives of consentual adults, etc. However, I am not a libertarian. I'm a federalist first and a conservative second. State level bans are certainly fine by me. The Protection of Marriage Act or whatever they passed a couple years ago in Congress is not ok. Of course, the problem is going to come up when a "non-traditional" couple gets married in another state and expects recognition in their home state. What happens then? Trouble. Which is why the only thing that would work is an amendment. I'd be interesting to see how that would go over in those awesome New England states, but you just need 75% of the states to pass it. I'm just surprised someone didn't do the whole by-pass congress thing and go straight to state conventions for this. I think it'd have a chance that way. But otherwise, there's going to be a homosexual Nevada on the horizon. That I'm sure of.
• I'd also like to thank the good people of Michigan for standing up to the status quo and rejecting affirmative action. Along those lines, I'd also like Ford and GM for guaranteeing that the first new car I'm going to buy is going to be an import. I've known that Ford has gone all "socially responsible" over the last couple of years, but this takes the cake. Bankruptcy can't come soon enough for Bill Ford's plaything.
• Thanks to Missouri for showing where I'm NOT going to move anytime in the near future. Throwing out Talent along with passing both a minimum wage bill and putting stem-cell research in your freaking consitution. Good job guys.
• I'd also like to thank President Bush for turning national opinion so against Republicans that they had to lose and then face the reality that they had become so bloated with power that they needed to reform. Unfortunately, Senators Talent and Santorum got thrown out with the bathwater, but if the exchange is for Sens. Chaffee and Burns to be tossed out, then so much the better.
• On that note, I would also like to thank the congressional leadership for being so inept that they couldn't clean house when they should have and now some true fiscal conservatives have a shot at some meaningful congressional positions, such as...
• Thank you, Rep. Pence for biding your time and not running for a house leadership position until you knew the shit was going to hit the fan. There's no way that Boehner or any of the current leadership is going to hold their positions and you're going to be no different. Sure, I don't like your position on immigration or farm policy, but that's because you represent a farming district. I'll let that slide. But if you can bring the Republicans back to being for limited and responsible government, then I'll gladly overlook these shortcomings.
• Thanks to the Democrats, who are more than willing to sacrifice their principles to get office. The hypocracy that's going to happen over the next two years is going to be delicious. The Democrats are probably going to wish two years from now that they had waited another two years and really let frustration at complacent governance by the Republicans boil over. Then it could have been ugly.
• Finally, I'd like to thank Gov. Sanford for not backing down and saying that this election gives him a mandate to really go after public school incompetence and introduce REAL choice into the system. The problem with the educational system in South Carolina is not going to change by throwing more money at the problem. That'll just make people more entrenched and reform that much harder.

Well, the Media is Just Too Easy a Target to Pass Up

I was standing in line at Chic-Fil-A when I saw this headline on the front page of "The State"

Family struggles with baby’s death

Aunt says nearby relatives had been trying to help couple raise child

Then there was this first paragraph:

After giving up her first three children, 25-year-old Kellie King wanted to raise her fourth child, Jeffrey, with the help of her family.

She won’t get that chance.

So have a guess at what the article is about. Make a prediction in the comments.


Then read the rest of it.

That's probably one of the more deceitful openings I've ever read. "The State" sets up Kellie King as a victim. Which is probably as far from the truth as possible.

(Note: I'll refrain from any kind of trailer-trash comments, however accurate they may be in this case. Nor will I make any kind of manditory sterilization comment either, no matter how apropos it might be as well.)

Google vs. the US vs. China

Apparently when you face a congressional committee set up to get their pound of flesh, you're not going to look good.

Google and Yahoo! Take a Beating

"Yeah, so what?" you ask. Here's the irony of it all...

The Republican chairman of the committee, New Jersey's Chris Smith, then announced his intention to introduce a bill this week which would "formalise the goals of a new State Department task force to help American technology companies protect freedom of expression in countries that censor online content".

The bill, Smith explained, would include "export controls on certain types of hardware and software and prohibit putting email servers and other assets in countries that lack US-style due process laws."

So after haranging these corporate leaders about their social responsiblity, Congress is going to put more restrictions on these companies. Talk about the pot calling the kettle black.

But the quote of the story has to come from the Honorable Tom Lantos who said "Your abhorrent activities in China are a disgrace. I simply do not understand how your corporate leadership sleeps at night."

I'm going to guess they sleep on top of a pile of money with many beautiful ladies.

New Link on the Sidebar

Let's try this again...

I've added a new link on the sidebar, from Jane Galt (aka Asymmetric Information). From what I've seen of her front page, she seems like my small (but not stupid) government libertarian (ie she hasn't drunk from the Libertarian Party kool-aid). So I've added her to the trough and that should be all good. I really like what she's written about the deficits, and much more eloquently and sarcastically than I could have. So read, be educated.

And in other news, I finally finished THe Price of Loyalty: George W. Bush, the White House, and the Education of Paul O'Neill. I was rather impressed with the book, especially with how the book started, but that doesn't mean that it wasn't a great book, and the premise of the book is great as well. And considering what Bruce Bartlett is going through with his criticism of Pres. Bush as well, perhaps a review would be relevant as well. Perhaps, I'm going to have to start reading more of Bartlett as well.

A Defense of Wal-Mart

This is going to be a response to what someone wrote online. Here's the original post:

http://louishopen.livejournal.com/39450.html

I'm going to do more of a point-by-point refutation of what he says, but considering that alot of his claims are what the general anti Wal-Mart proponents think, this will probably be a good start to addressing most of the concerns that people have against Wal-Mart. Again, excuse the length, and comments are welcome. Just keep them civil and logical.

Part 0: The Introduction

Now I shop at Wal-Mart just as much as the next person (in fact probably more), but I have never been at ease with it. It is my considered opinion that though the Wal-Mart buisness model may be overwhelmingly successful, it benefits neither the consumer nor the employee as a direct or indirect result of their buisness practices.

If it does not benefit the consumer, then why does he shop there? Wal-Mart, while having quite alot of market share, is not a monopoly. So if he felt so bothered by Wal-Mart, he can just as easily go to some place else to get items. As we can see, the author, and alot of other people, derive alot of benefits from shopping at Wal-Mart. As for the employees, they must have some benefit from working there, otherwise Wal-Mart wouldn't have so many people lining up to work for them. (Personal example: When I was living in Clemson, the third Wal-Mart within 20 miles opened up in Liberty. The company had to keep their job office open for 5 days just to deal with all of the people who WANTED to get a job.) If Wal-Mart was such a bad place to work, then why would so many people want to work there? But that'll be addressed further on.

As for his two "rules" of modern economics, they're true in a sense, but they're not true as themselves. The first rule he states is not true in and of itself. It's purchasing power that rules. You can have alot of money, but if it costs $100,000 for a loaf of bread, then money doesn't matter. However, that's semantics. The RIGHT amount of money rules in alot of cases, but not all. As for the second rule, this is what can be called the time discounting of future events. Basically, time acts like inflation, making the future seem really far away and, thus, not important. Otherwise, things like the deficit, Social Security, and "global warming" would be solved with just as much urgency as 9/11 or "the oil crisis". In either case, the reason why long-term stuff is put off is because it's long-term. Basically, it's relying on predicting the future, which not alot of people can do correctly. So to think of what the long-term consequences of the public debt are, you'd have to know the long-term state of the world and the United States. Which is why nobody really cares about the budget deficit.

Like I said, I shop at Wal-Mart just as much as the next consumer. I like their all-in-one mentality, and their low prices. I don't really care about their customer service because I like to find things on my own, and I have yet to meet a customer service rep who won't take my returns.

Now, this is interesting because he just stated that consumers don't get any benefit from Wal-Mart. But he just said that he likes alot of things about Wal-Mart, so he must get some benefit from it. It's the same thing that I hear from alot of people. They say that Wal-Mart is bad and then they say they shop there. I know, we'll get to the monopoly argument in a little bit.

Part 1: Price Gouging

1) Price gouging: This practice is rather common in the buisness world, and does in fact stimulate compitition as you suggest. Wal-Mart, however, uses this practice to drive out buisness with the direct intention of cornering the local market on a long-term basis.

The first problem is the incorrect usage of price gouging. Price gouging "refers to a seller asking a price for a good or service that is much higher than what is seen as the 'fair' price. It is usually used in a pejorative sense to imply the price is unethical."¹ Which is incorrect because Wal-Mart's prices are lower than the prices of other companies, as the argument goes. The correct term in this case would be "preditory pricing"²

This practice is successful because, as I said earlier, money rules and people usually opt in favor of short term consequences (I.E. cheaper grocries and consumer goods, vs. not being able to buy said goods from anywhere else after the compitition is driven out).

The problem with this is that under anti-trust law, preditory pricing is illegal³ Thus if Wal-Mart was engaging in preditory pricing, then they would be stopped by the courts. It's not like there are a number of competetors that wouldn't use the courts to force Wal-Mart to raise their prices or prevent Wal-Mart from gaining market share. However, proving Wal-Mart engages in preditory pricing (or proving that Wal-Mart takes a loss on it's products is disproven by two key factors

1. Wal-Mart makes a profit
2. Wal-Mart's business model is what keeps it's prices lower, not a corporate decision to capture the market.

Now, the case may be that Wal-Mart takes a loss to keep out competitors, but as I will argue shortly, Wal-Mart would not engage on a store-wide loss to keep out competitors.

You mentioned earlier that this is normal, and that it shouldn't be a problem because if prices said buisnesses could just come back if Wal-Mart started charging a premium over market. This sounds feasible according to Adam Smith's theory, but in reality the cost of a buisness moving back in to the local market would be far too high compared to the price premuim[sic] that Wal-Mart charges after they are gone.

Now this arguement mixes two economic ideas: that there is no way that a competitor can enter a market because the entry costs would be too high and that a monopolistic Wal-Mart would still charge lower prices than what would be required to be able to enter the market.

The first argument is perhaps true. A start-up business without a corporate structure or history would have a tough time matching Wal-Mart after Wal-Mart has "driven out it's competition". Thus, Wal-Mart will continue to operate in perpetuity unchallenged. However, this is not how reality works. Wal-Mart has only one competitor in the "all-in-one" superstore, and that would be Target. Should a market be large enough for both companies, then you will usually see both stores in the area. The usual arguement is that the market is small in which Wal-Mart enters, thus Target is not able to enter. However, that does not mean that Wal-Mart does not have competitors for each of their products. While a Wal-Mart has "everything" under one roof, it competes with specialty stores, ranging from "big box" retailers in electronics (Best Buy, Circuit City) and toys (Toys 'R Us) to medium size grocery stores (Kroger, Safeway, Stop and Shop) to even mom and pop stores in specialty areas (farms, greenhouses, tax firms, hairdressers). Although, Wal-Mart contains all of the items mentioned, that does not mean that it has a monopoly in that good. As has been mentioned before, Wal-Mart just contains all of these goods under one roof. While Wal-Mart may (and does) separate themselves from their competitors in each product by price, there are plenty of other ways in which their competition can "strike back". They can differentiate themselves on service, variety, return policy, brand loyalty or even location. While most economists focus on price, a person's decision to buy a product is not SOLELY a function of price. Whether a person buys a product also depends on the utility a person gets from that item.⁴

Now to the second argument, which is rather a bit of contradiction. That Wal-Mart's prices will be low enough that noone will enter the market. The problem is "why is that a problem"? If the competitor cannot lower their prices to match Wal-Mart's, then the prices are going to be as low as the market can handle. However, you can argue that Wal-Mart would raise their prices just to the point where a competitor can't enter. Which again, only works if Wal-Mart is a monopoly. And in every market, Wal-Mart is not a monopoly. Otherwise, again either the government or a potential competitor would file an anti-trust lawsuit against them. There is no situation, as far as I can tell, of Wal-Mart being successfully convicted of being a monopoly.

Furthermore, Wal-Mart as an international corporation can withstand to take a continued profit-loss in serveral markets without significant impact to their earnings, thus even if another buisness did try to re-enter the market, Wal-Mart could just as easily resort to the same tactic until the threat subsided.

Again, this argument mixes up market as in a region with market as in the buyers of a class of products. There is the possiblity that within a small enough market with little competitors, Wal-Mart could take a loss on their products to prevent competitors from entering. However, consumers still benefit, because prices are going to be as low as they can be with or without competition. The argument that Wal-Mart can keep out a competitor in a single market for a particular group of items (say sporting goods) still does not hold water for the same reasons as stated above. There are other factors than just price. Wal-Mart's business model sacrifices variety for price. Thus, if you want Nike golf clubs, a competitor can offer them, but Wal-Mart will not. The same for specialized apparel or anything else that a specialty sporting goods store (such as Hibbett Sports) routinely offers. So in any case, the idea that Wal-Mart engages in intentional losses on it's goods to keep out competition does not hold.

Part 2: Employment

2) Job market cornering: While this might not affect you or me, it does have a big impact on local wage-earners. To say that someone is not forced into such a job is true only in the loosest of senses. As the rules of mechanics and economics dictate, all actions are performed at some cost. While it is true to say that employees of Wal-Mart aren't sweat-shop workers, to say that they could simply get a job elswhere[sic] is not feasible. Most people who work at Wal-Mart work there because they can't work anywhere else, because Wal-Mart is the biggest job supplier in the community.

How many communities have ONE employer, and that employer is Wal-Mart. There are towns where there are just a few large industries (mining towns, paper mill towns like Covington, VA and Johnsonburg, PA), but that does not mean that those are the only jobs available. In fact, large industries will alot of times bring in ancillary companies to serve the industry. A factory is going to employ people who are going to need other services. The same with Wal-Mart. Other businesses will appear with the opening of a Wal-Mart BECAUSE Wal-Mart is there.

Just as most factory workers work there because it is not cost-efficient (dare I say cost-possible?) to simply pick up and move somewhere else in order to have access to other job oppertunities, so it is true of Wal-Mart workers.

Here, this is a disequal comparison. A factory worker is most likely unionized and most likely have a specific skill. Thus, the factory worker cannot move someplace because their skills are not easily transferrable. Or because there are no other jobs available. With Wal-Mart, this the opposite. Wal-Mart workers usually work in a non-specialized environment. Thus, whatever skills they learn (like responsibility, cash handling, customer service) can be much more easily applied than those of someone who spends ten years at a steel mill.

Like I said, people work at Wal-Mart because they cannot afford the oppertunity to work elsewhere, regardless of wether elswhere would be better. Think it over, who works at Wal-Mart? Those with other job oppertunities, or old ladies and high school drop-outs?

The question that would remain is "Where would Wal-Mart workers work if there was no Wal-Mart?" In some cases, they may not work at all (to be addressed below). In the case where there are replacement jobs available, these workers will work THE SAME EXACT JOB. Just with another employer. A high school dropout is not going to get a managerial job no matter if Wal-Mart exists or not. Someone with no specific skill set is going to have to work a generic job, whether it's a janitor at a school or janitor at Wal-Mart.

Now while it is true that a horrible job is better than no job, it is no excuse for a lack of ethics on the part of the employer. In the US we have massive government oversight of our industries because if we didn't, or if we combined both government and trade, we would be another China.

This is one comparison that is patently false. The author suggests that WITHOUT workers rights, the United States would be just like China. However, what most people who fixate on the Chinese market forget to realize is that China is still Communist.The leaders are still unelected. The economy is still controlled in many ways the United States economy is not. Wages are still set, there are no elected officials, and little ability for workers to change jobs due to government control of the nation's resources. There are no unions in China. China is no worker's paradise, even with government owned companies and oversight into every aspect of Chinese life. China is no laissez-faire capitalist market.

Such oversight, might I add, came into being as a result of the atrocious practices of the Laize-Faire[sic] Capatalists, and one of the most glaring problems with an unregulated Free Market society.

This is true, but the market in which Wal-Mart employs their workers is not the same as the 1890's era in which many of these abuses occured. Wal-Mart still has to obey (at least on paper) the myriad of labor laws that the US has enacted over the past 100 years.

Said problem with the Free Market society is that it seeks to be self regulating, and proponents claim that it is kept in check by the round-robin of copetitive[sic] pricing and consumer demand (one drives the prices down, the other up).

Consumer demand, by itself, does not raise prices. Demand does nothing but determine, along with supply which price a good is sold at. While competitive pricing (compared to other forms of the market) does lead to lower prices, consumer demand does not lead to higher prices. Increased demand does.⁵

This is arguably true until the entity who controls the wages also controls the price premium of goods. Like the mine owners in the 1800's who paid their workers in pennies a week and then took it back at the local stores

Again, this all depends on whether Wal-Mart is the only game in town. In a vast majority of cases, Wal-Mart creates other opportunites where Wal-Mart's employees can earn their money. In addition to this, the sitaution that the author describes misses one key fact that makes his example uncomparable to Wal-Mart. Mine owners paid their workers in company script, which was ONLY good at company stores. Wal-Mart employees are paid in dollars, which are universially accepted within the United States.

...Wal-Mart establishes it's self[sic] with cheaper prices, but when it has a corner on the market, it can raise the price premium to the point where it recoups it's loss and yet makes re-emerging compitition not cost effective.

Again, see the discussion on whether Wal-Mart corners a market. Even so, this does not mean that workers are worse off unless prices are higher than when Wal-Mart corners the market. This would assume either a monopoly or oligopoly case.⁶ Only in these cases would Wal-Mart have enough power to dictate what the prices are to it's workers.

Part 3: National Economic Considerations

3) The burden on the economy: Not only do these low wages (supposedly, according to wal-mart, a direct result of those low prices) kill economic oppertunity and force wage-earners to rely soley[sic] on what they earn from Wal-Mart, they also place a great burden on society.

While low prices and low wages go hand in hand in every industry, whether blue or white collar, this does not mean that one causes the other.⁷ One can imagine a situation that has already been described where Wal-Mart raises their prices. Does higher prices mean higher wages? Perhaps but we don't know. Conversely, if Wal-Mart was to increase the wage of its workers (or be forced to), does that mean that the prices of all their products will go up? Not necessarily. There are many other considerations that go into the price in which Wal-Mart sells their goods, with wage just being one of them. Secondly, most employees rely solely on the wages from their primary employer. Most full-time workers only take home one paycheck, while 6.5% of workers work two jobs.⁸I do not know if Wal-Mart employees are more likely to have to take on second jobs to make ends meet.

Right now in the senate, several bills are being debated that would force employers like Wal-Mart to spend at least the equivalent of 9% of their payroll costs on medical insurance for their employees. Why is this such a hot topic? Because employees with low wages and low benifits have to rely on government plans for medical insurance, dental insurance, pediatrics, and all those expenses that people in higher tax brackets have supplied by their employers or can afford for themselves. Althogh you might see a benifit in cheaper goods, you also bear the burden of those cheaper prices by having your taxes spent on providing those necessary services that such employers do not afford their employees.

Except this is not the case at all. The federal government does not provide insurance for benefits for people with jobs.⁹So the greater burden is served by Wal-Mart's employees, not by the government, unless these employees make less than the poverty line, in which case they do qualify for Medicaid.^10<The other issue is whether Wal-Mart gives their employees health insurance. While there has been no definitive answer on this (mainly because Wal-Mart is a private company), there's a couple of factors in play, such as many of their employees already being covered, either by the government (the elderly), by private insurance of their parents or spouses.¹¹ Even so, the fact that the government is specifically attacking Wal-Mart does not mean that the government already pays for the medical needs of their employees. What is left out of the above quotation is that Wal-Mart faces a tax if they do not spend the required amount on health insurance. Which is basically extortion by the government. This does not mean that Wal-Mart treats their employees poorly or not. McDonald's or other fast food establishments do not offer benefits with their jobs, but the government is not attacking them. Wal-Mart at least makes benefits possible through them.

Part 4: Ethics

4) Just plain ethics: This is a two-fold problem. Firstly, I know you say that ethics don't play a part in a a buisness plan but you referenced Wal-Mart's generosity as a strike in their favor, so let me comment on that. Like Mexicanprophet said, such generosity is rewarded with an equally generous tax write off.

Just because the government gives a tax break from a charitable act does not make it any less unethical. The tax laws apply to all corporations and individuals. If Bill Gates gives a couple million to charity, does that make his contributions less ethical because he gets a big tax deduction for them. If the problem is with whether someone gets a tax write-off, then perhaps the problem lies with the government tax policies, not with the ethics of the corporation.

You responded by saying that they did not have to give as much money as they did, and that it is unfair to assume that their board of directors is a bunch of heartless wankers. To further elucidate his point (may I, Kris?); never underestimate the power of cash, it is seond only to the power of an immactulate PR scheme. As you may know, a great amount of revenue is generated by commercialized media. Why is this? because there is a direct correlation between how much exposure people have to a product, and their decision to purchase that product vs. a competing one. Entire industries are based on this principle, as are presidential campaigns and so much else. Don't belive me? Look into studies done measuring campaign spending/ popularity. The results might surprise you.

This contrasts greatly with the rest of the argument, which is that everything about Wal-Mart revolves around their pricing. I have argued that it's not just their pricing that contributes to their success, but other factors such as their convenience, their marketing which includes things like PR events. But why does Wal-Mart get singled out as doing charatable acts for purely selfish reasons while pretty much every company would do the same thing in their shoes. You can argue that any company that donates something to the community as just doing it for the PR. Or you can argue that companies are "trying to give something back to the community", when in reality, it's both. But to say that Wal-Mart is purely being self-interested in doing community work ignores other considerations.

So how is this related to Wal-Mart? Generous donations to charities and hurricane victims not only give them large tax write-offs, it is also just as much a PR practice as a TV ad. In fact, didn't they run a TV ad lauding themselves on their support of relief efforts? Companies spend millions of dollars to adverties during popular radio and TV programs, a company suffering from a horrible PR rap spending that amount of cash on relief efforts makes even more sense. In short, the Wal-Mart board of directors may actually have cared about the Katrina victims, and may not in fact be a heartless bunch of wankers, but there sure isn't any evidence pointing the other direction.

What is the other direction? That they give to charity even when they don't have to worry about PR reasons? Which brings us to the catch-22, if Wal-Mart didn't report their charatable giving, then we wouldn't know that they did it. Then people would complain that Wal-Mart isn't charatable.¹²

Lastly (if I haven't spelled it out already), there is no excuse for a company such as Wal-Mart to deny their workers health care coverage

This has already been established that their workers are not denied coverage if they want it. Many times, they are covered elsewhere and don't want to pay for Wal-Mart's coverage.¹³ But that doesn't mean that they are denied or should have double coverage. That is just wasteful all around.

...or to fully support third-world sweat shops as they do (they are perfectly capable of demanding that their suppliers raise their standard of working conditions without a significant increase in the price of their products). Aside from the fact that they can afford not to use these underhanded sort of tactics, there is simply no excuse for a company that so clearly treats human rights as ancillary to their profit margins.

To conclude, we bring up sweatshop labor. Yes, they are capable of doing that, but they consider the costs and benefits of what they do. And in the end, they choose not to because while the author and others do not like Wal-Mart, that does not affect the marginal person who chooses to go to Wal-Mart. Wal-Mart has never been widely villified for their use of third-world labor, at least to the level Nike was during the 1990s.¹⁴ While you say that their adhearance to their profit margins is anciallary to human rights, the question comes down to what the company's focus is. To be a human rights organization or to sell products to their customers. The best figure of that is to watch their profit margins. If they're satisifying their customer's needs, then they will make money. If not, then they won't make money. If you want every corporation to be the corporate verson of Bono, that's fine. But for most people, Wal-Mart isn't a social statement. It's a store.

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Footnotes
¹ Source: the wikipedia page on price gouging (http://en.wikipedia.org/wiki/Price_gouging)
² For more information on preditory pricing, see the wikipedia page on the topic here: http://en.wikipedia.org/wiki/Predatory_pricing
³ ibid
⁴ Utility is an economic term for the satisfaction that a person gets out of an item. It's unquantifiable, but it is comparable (ie. you can have more or less utility from something, but you can't define how much more or less). See wikipedia for more (http://en.wikipedia.org/wiki/Utility)
⁵ More on demand, including graphs of the dynamics of supply and demand, can be found at this wikipedia page: http://en.wikipedia.org/wiki/Demand
⁶ Monopoly is the case where there is only one seller in a market. (http://en.wikipedia.org/wiki/Monopoly) A oligopoly is a case where there are few enough sellers where price can be set in coordination rather than in a competitive fashion (http://en.wikipedia.org/wiki/Oligopoly)
⁷ Lawyers for one. A lawyer who charges a lower price for their services is going to have lower income (direct correlation). Another example is an American factory worker vs a Mexican. You're more likely to play a lower price for the Mexican-made item than the American-made one.
⁸ Source: http://www.jobbankusa.com/News/Jobs/jobs91405a.html
⁹ Unless you're elderly. In which case, you could be making $100,000 a year and still get Medicare benefits.
¹⁰ For example, people without dependents do not qualify for Medicaid.
¹¹ Source: Here
¹² This doesn't preclude people from Forbes reporting how much Wal-Mart provides for charity, but if Wal-Mart didn't disclose how much they gave, then Forbes wouldn't be able to report this information, at least easily. (See The Forbes article here)
¹³ Health insurance is just that, insurance. You need to pay for coverage. It is not something that is given as a right or a fringe benefit. Even at other companies, workers have to pay for their coverage. Sometimes workers choose to not take that option, especially if they have better options.
¹⁴ Third-world labor is just another bullet in the gun of people who dislike Wal-Mart. There are few people who say "Wal-Mart is great EXCEPT for where they get their products." Thus it makes it hard for the corporate headquarters to determine that it's something that they should do.

Economics at its Finest

If this isn't economics, then I don't know what is:


A GAME THEORETIC APPROACH TO THE TOILET SEAT PROBLEM

Seriously, if people complain too much about the lack of "serious" theory work, then nobody is going to care about economics. As it is right now, there's TOO much focus on math and theory and not nearly enough done with applying economics to the world around us. If you want to be a data cruncher for the rest of your life fine, but there's more to economics than theory and STATA.

And They Want Statehood?

Well, the DC council already acts like a shady legislature, but this takes the cake:

Dewey Wins!: Council revotes and passes lease

But the question is whether MLB is going to accept all the codecils that the DC Council has added on. Here's a list:

• To pay start up costs for a new youth baseball academy;
  
• To give 10,000 free tickets a year to low-income D.C. residents;
  
• To make community appearances each year;
  
• To locate the business office for the Nats in D.C.;
  
• To look for D.C. workers;
  
• To hold MLB owners meeting in District by 2008;
  
• To turn over land for development profits;
  
• To give the District two-thirds of the parking revenue on non-game days;
  
• To forgo the rent penalty if the stadium is not built on time'
  
• To issue a letter of credit to assure D.C. secures low-interest rates.
  

The Nats shouldn't even be getting parking revenues on non-game days, but they're getting a third of it? But it'll be interesting to see if all these proposals go through. Right now, the major hang-up is at capping the costs to the city at $600 million or so. Which is insane and means that building cost will probably be exactly equal to what that limit is. I can guarantee it.

Slowly but Surely, the Media Catches On

The Seattle Post-Intelligencer has a story written about how college loan payments are eating further into graduates' current income. Obviously, the government isn't going to do anything about this, they're making way too much money off it and federal student loans are forever, you have to repay them, even if you're disabled and living off Social Security. Even if you go bankrupt, the government still gets paid back. Of course, that could never happen in the private sector, but the government is different, right?

So, looking into the crystal ball of sorts, what can we see? The first thing is that student-debt will continue to rise as the "myth" of the necessity of a college education continues with this generation. It will only be this generation's kids that will finally see that their parents got screwed over by higher education that they'll start to think over what their career plans should be.

However, in the meantime, students and employers alike will be duped into thinking that a piece of paper somehow makes a potential candidate a better worker, when in fact that link will be dubious at best. My experience has been that experience is much more important for entry into the workplace. 5 years of internships would've been much more beneficial to me than 5 years of higher education, and much cheaper for my parents and myself.

Which means, since demand for education is more or less perfectly elastic, colleges will continue to raise their price because of their monopoly status as purveyors of those sheets of paper. Furthermore, since most colleges are non-profit, their economic "goal" is to maximize revenues. So while there is absolutely no reason for it, colleges will continue to raise their prices until people realize that there are better alternatives. When that point occurs, I don't know.

I really should think about what I would tell the future generation about college education. What I really know right now is that college is a 4-year day care that costs between $10,000 and $45,000 a year to operate. That's especially true depending on what field you go into. Does a fine arts major actually learn something useful for their career? Hell, I didn't learn anything that's marketable in my four years an economics major. It makes it easy to explain to my girlfriend that she shouldn't carry debt on her credit card despite the urban legend that carrying debt makes your credit score higher. I didn't even learn that in school. So I learned pretty much jack squat in school and I left my year of graduate school with $18,000 in debt.

Eventually, as this generation continues to become more politically influencial, politicians will realize that people are both not saving for retirement and barely able to scrape by. This means that at the same time that Social Security will be needed, there won't be any money with which to fund it. How's that for a Catch-22?