Lion of the Blogosphere

Archive for the ‘Economics’ Category

Our nation’s declining capabilities

According to this Wikipeda article, in just six years, between 1863 and 1869, a 1,912-mile railroad line was built to connect the east-coast rail network to California. And they had to deal with stuff that we don’t have to deal with today, like massive buffalo herds and hostile Indian tribes.

Not that I’m saying that California needs a high-speed rail line (they probably don’t), but if they wanted to build one, then it’s pretty pathetic that it took 11 years to study a 450-mile-long line, less than one-quarter of what was built in the 1860s, and then scrap the project.

We used to be a nation that got stuff done, but today we can’t do anything despite having huge technological advantages compared to the 1860s.

Written by Lion of the Blogosphere

February 14, 2019 at EDT am

Posted in Economics

College, part 8, cost disease

So what’s driving college cost disease?

I think these points are pretty conventional, but not so conventional that journalists in the mainstream media and politicians widely believe in them.

1. The widespread and increasing availability of student loans means that people can afford to pay more, and colleges act like greedy corporations in that they charge as much as the market will bear. Even though student loans eventually have to be paid back, they feel like free money to 18-year-olds. And let’s not be too critical of 18-year-olds; do you remember what it was like to be 18? It’s up to more responsible and wiser adults to steer 18-year-olds in the right direction.

2. There has been a massive marketing effort to inflate the desirability of college. The message that is being given to high school graduates is that they will be economic losers without a college degree (which is not entirely false), and that college is this super-awesome-amazing experience that no one should miss (partially true to the extent that some college graduates, mostly those from upper-class families, do indeed look back to their college days like that).

I’m not sure who, exactly, is behind the marketing.

This point, however, doesn’t fully explain why people aren’t more price sensitive. People need food to live, so it’s even more important than college, but there’s price competition with food; there exists food that is very cheap.

3. Competition causes higher prices. Libertarian types hate it when I say that competition causes higher prices. But in many cases, it does.

The people who attend college are not paying with their own hard-earned money. They are almost entirely paying with other people’s money. Their parents. Financial aid. Student loans which feel like free money to 18-year-olds.

A low price could indicate an inferior school with less prestige than higher-priced schools. Furthermore, if students are paying with someone else’s money, will they pick the cheap bare-bones experience, or the experience with expensive gyms and student entertainment, better dorms, and expensively landscaped grounds?

Written by Lion of the Blogosphere

February 4, 2019 at EDT pm

Posted in Economics, Education

MMORPGs and socialism

MMORPGs that charge a monthly subscription fee (like Final Fantasy XIV, aka FFXIV) need to give their customers a reason why they should stay subscribed. Unlike the real world, people can opt out of the fantasy world if they don’t like it. (Well, people can opt out of the real world by killing themselves, but it’s less common than people just quitting a videogame.)

Consequently, MMORPGs don’t want a setup like the real world where a few people are billionaires and everyone else has no chance in hell of ever catching up to them. I’ve observed that the following methods are used in FFXIV:

1. You advance by playing the game. The more you play, the more you advance. It’s not like the real world where you can go to work every day, put in your 8 hours, and not be any closer to Jeff Bezos than you were before.

2. Profitable activities are limited. For example, you can only run Dungeon Roulette once per day to get the reward; you can only find one “map” per day from gathering (maps give you valuable rewards); there is a maximum number of “tomestones” you can get per week (and the tomestones are exchanged for the best armor and weapons). These limitations prevent people from getting ahead by grinding the most profitable activity for 18 hours per day, which would make for a boring game. They don’t want to game to be like working on an assembly line where you do the same activity over and over again, and nothing but that.

3. Every few months there’s a new update that slowly resets everything by introducing higher-level gear. You won’t stay the most powerfully-geared person in the game by doing nothing. There’s always an opportunity for newer players, or more casual players who don’t play as often, to catch up.

I think this can tell us something about the real world, about the sort of ideal society that most people would want to live in. And it’s not the type of society promoted by Ayn Rand.

On the other hand, I think we need to be realistic about how the real world really works. I think that many liberals see college as akin to a leveling up mechanism used in MMORPGs. Anyone can go to college, put in their time, and come out at a higher level! But does that make sense when it leaves people in debt? And especially screws over people who accumulate debt but never get their magic degree? Or people who get suckered into getting useless degrees from bogus for-profit schools?

* * *

It should be noted that MMORPGs have become a niche genre of videogames. The vast majority of gamers are playing competitive games like League of Legends, Fortnite, or shooters like Call of Duty and Overwatch. These games are more like the real world. I was stuck in Bronze when playing Overwatch with no chance of ever even breaking into Silver, no matter how much I played.

Written by Lion of the Blogosphere

January 30, 2019 at EDT am

Posted in Economics, Nerdy stuff

College, part 3

While the rest of the world is convinced that college helps people make more money, strangely I have to convince certain blog commenters, because there’s a belief among some in the HBD-sphere that IQ is everything, and therefore someone with a high IQ would make just as much money without a college degree.

There’s also an idea, which is more mainstream, that it doesn’t matter what school you go to, any school is the same. That’s also absurdly false, I don’t know how anyone can believe it. I know from personal experience that if you want to get hired as a lawyer, you had better have the most elite degree possible, because if your degree is outside of the Top 14, you’ll never get hired by a big firm and it’s a lot harder to even get hired by small firms. It’s unlikely you’ll have Michael Cohen’s luck to get hired by Donald Trump, and if anything Michael Cohen disproves that IQ matters above all else, because that guy doesn’t seem all that bright to me.

There is indeed a correlation between high IQ and having a higher income, but my own research into this matter is that people with higher IQ are able to obtain better educational credentials, and then the better educational credentials (if they are lucky and have other necessary things going for them) enable people to get into a higher-paying career track. Without the degree, no one will want to hire you into any good career tracks.

People like to say that employers only care about your experience at prior jobs and not your education, but the problem is that without education you can only get hired for crappy jobs like retail or working at call centers, which only gives you experience to work at other crappy jobs.

Even if you are lucky enough to get hired (for example some people with hot in-demand computer skills have been known to get good jobs without a college degree), you’ll eventually hit a glass ceiling for people without college degrees.

None of this is to say that there is anything intrinsic in years of formal education that makes people better employers or better at making money, but because our society is set up so that only formal learning with a degree is valued, and self-learning is not valued, that’s the way it is. And it’s why I called education a positional good in my recent Lionomics post. The benefit of a degree is that it gives you a positional advantage over people without a degree, and a prestigious degree gives you a positional advantage over people with a degree from a directional state school.

Written by Lion of the Blogosphere

January 11, 2019 at EDT am

College, part 2

I guess I don’t have to convince any of my readers that college doesn’t make you smarter. I’d be willing to say that education after the age of 17 has absolutely ZERO impact on intelligence.

On the other hand, I do have to convince some people that the rest of the world doesn’t think that way. What the rest of the world thinks is a very complicated mix of contradictory nonsense, but once again I have to remind you that people don’t believe what they believe because they’ve thought about it logically. A lot of people really do believe that college makes people smarter.

Education and training can, in some cases, impart useful knowledge and skills. I think college does this a little bit, for certain majors. Engineering majors have to know a lot more about advanced math than they did before they entered college. I have never worked as a real engineer (I don’t consider a title I may have had as “software engineer” to mean that I was a real engineer), but I would think that at least some of that knowledge is a necessary foundation for doing their job. And a degree in computer science would at least ensure that graduate has some basic computer programming skills, along with a bunch of advanced math that’s not relevant for 95% of people working as software “engineers.”

I don’t think I need to work too hard to convince readers of the paragraph above, there’s definitely a theme in the comments that engineering or STEM are the only “real” majors.

On the other hand, commenters routinely vastly exaggerate the number of people majoring in SJW majors like “gender studies.” The vast majority of college students are majoring in something that probably sounded career related to the student. “Business” is the most popular of all college degrees, demonstrating that most people go to college for the practical benefits they imagine from having a degree in “business.” The second most popular degree is in “health professions and related programs,” which sounds like a pretty practical degree for someone who’s not smart enough to get into some elite field. Although I suspect that a lot of those degrees are bogus degrees which confer no useful job skills, such as “healthcare management.” And definitely, the vast majority of people with “business” degrees learn nothing of any practical use. But a degree in nursing teaches real-world job skills and is a great choice for a prole who wants to make decent money (for a prole).

You hear over and over again how important it is to have a college degree in order to earn more money, and that’s despite the fact that it’s crap to just say “college degree” because there’s such a vast earning difference between a degree in engineering degree and one in “fashion design.” And also a vast difference between a degree from Harvard, and a degree in the same subject from a directional state school. If you did a proper study where you actually looked at degree quality (both in terms of prestige and the usefulness of the particular major), you’d find a pretty solid correlation between degrees and earnings potential.

However, except for the uncommon degrees where people are trained to do actual job tasks are that are in demand by employers, the overwhelming majority of degrees are pretty useless as far as creating an actual skill-based reason for why the degree holder should earn any more money on account of having the degree. This is a combination of the students not being smart enough to get anything out if it (I bet that the typical holder of a degree in “business” can’t even understand the financial statements in a company’s annual report), learning topics of no commercial use like Russian History or 19th Century English literature, and a vast oversupply of specialized degrees compared to jobs.

For the most part, people earn more money with a degree because our economy values the degree regardless of whether or not the degree holder has any useful skills compared to someone of equivalent intelligence without a degree.

Written by Lion of the Blogosphere

January 10, 2019 at EDT pm

Posted in Economics, Education

College, part 1

To start this series, let’s slay the dragon that keeps popping up in the comments of conservative and HBD-oriented blogs. These blog commenters have the false belief that corporations believe in everything Arthur Jensen ever wrote about IQ, but they cannot use IQ tests to hire people because of Griggs v. Duke Power Co., so instead they use college degrees to hire.

Totally false!

To start with, Griggs v. Duke Power Co. held that it was illegal for Duke Power Co. to require a high school diploma because they said it caused disparate impact because a higher percentage of blacks didn’t have a high school diploma. So there’s no safe harbor in that case that allows companies to use degrees or diplomas as hiring requirements.

As of 2015, in the United States, 36.2% of non-Hispanic whites 25 or older had college degrees, compared to only 22.5% of blacks. So theoretically, companies could be sued for illegal racial discrimination for making a college degree a requirement for getting hired, just as Duke Power Co. got sued and lost because they made a high school diploma a requirement for getting hired.

Furthermore, I assure you that no one in corporate America believes in Arthur Jensen, and if you on the rare occasion run across someone who even knows who he is, 95% likely what they think they know about him is that he was a racist.

Nope, what is happening here is that nearly everyone (at least nearly everyone among the elites) believes that college is really really really really important. That includes people running corporations, lawyers who work at the DOJ and the EEOC, journalists, and politicians. They all believe it!

Written by Lion of the Blogosphere

January 9, 2019 at EDT pm

Posted in Economics, Education

Lionomics refresher

A review is in order.

1. The developed world has a post-scarcity economy, which means that most goods can be produced in great abundance with minimal human labor needed, so that they could theoretically be available to all very cheaply or even freely.

Common signs of a post-scarcity economy:

  • Poor people are fatter than rich people.
  • Clutter becomes a big problem for people, because stuff is so cheap to acquire.

The most common question raised would be something like this: “Well, if we have a post-scarcity economy, why is everything so expensive, and why am I struggling to make ends meet?”

People have a tendency to spend all of the money they have, so when some goods go down in price, equilibrium requires other goods to go up in price. The goods that go up in price fall into two categories:

a. Positional goods. They are goods and services that people value of because their limited supply, and because they convey a high relative standing within society. Examples are a house in a good neighborhood, a prestige university degree. Even a job, traditionally a way to make money, in a post-scarcity economy is a sort of positional good.

If everyone becomes richer, then the price of positional goods go up proportionately. Tax cuts or economic growth will never make positional goods more affordable.

b. Goods afflicted by cost disease. Applies to healthcare, education, civil engineering and construction. This is a mysterious area of economics, but industries with cost disease probably have the same issues as positional goods. You can’t make them more affordable with tax cuts or economic growth, because they just inflate. Structural changes imposed top-down by government are required.

2. Value transference. Traditional economics assumes that people get paid for creating value. But in the real world of the present, if someone makes a lot of money, it’s most likely that they are not personally creating value themselves, but rather they are in a position to transfer value created by other people to themselves. For example, the CEO makes a huge amount of money based on value created by other people, even though many CEOs actually make stupid decisions that driver their companies into bankruptcy.

Most industries today are winner-take-all, in which all the value created by the industry tends to get transferred to a small number of individuals. But such individuals could disappear, and the industry would just keep chugging along the same as before unharmed by their absence.

One of the reasons why libertarians oppose taxing rich people is because they say we are “punishing” them for creating value, and the taxes might discourage their value-creating activities. But if they are really just transferring value, then who cares if they are punished for doing something that’s actually of negative value to society, and who cares if they are discouraged from doing more of that activity?

Written by Lion of the Blogosphere

January 8, 2019 at EDT pm

Posted in Economics

Paul Krugman is right today

I tend to hate Krugman because he’s such an asshole in his opinion columns, but he convinced me in his column today. We need higher tax rates on the top 1% and especially on the top 0.1%.

We shouldn’t just automatically believe in Republican tax theory because we are on team Republican. That’s for illogical people. We should look to real empirical evidence (as opposed to theories that worked in an Ayn Rand NOVEL).

Will any rich people who voted Democratic (which I believe is the majority of the rich) change their party allegiance if Democrats like Alexandria Ocasio Cortez champion higher taxes for the richest Americans? I doubt it, because they hate Trumpism so much.

* * *

Ann Coulter agrees with me!

Written by Lion of the Blogosphere

January 6, 2019 at EDT am

Posted in Economics

Low oil prices bad for America

I agree. High oil prices create good-paying blue-collar jobs in the labor-intensive oil-drilling sector. Low oil prices could snowball into a recession.

Although it’s ironic that the NY Times is sticking up for these types of workers. Back when Obama was President, the NY Times had loads of articles saying how bad these jobs were, and that the workers would be better off without them. This demonstrates how the NY Times will do a complete about-face on any issue if they think it makes Trump look bad.

Written by Lion of the Blogosphere

November 29, 2018 at EDT am

Posted in Economics

Minimum wage increase benefits low-wage workers

Summary is that a year ago, some conservative economists released a study claiming that the minimum-wage increase in Seattle harmed all low-wage workers.

A year later, the same economists backed off their original claim and admit that the minimum-wage increased helped low-wage workers. “On net, the minimum wage increase from $9.47 to as much as $13 per hour raised earnings by an average of $8-$12 per week.”

I have long been on the record for disagreeing with the libertarian position on minimum wage.

To summarize my position:

1. Employees are paid not by the value they create but by how little they are willing to work for. Competition among workers for scarce jobs causes the going rate for low-skill work (which is the most fungible type of work) to decrease below the value they create for employers.

2. Increasing the minimum wage gives low-skill workers greater bargaining power to earn a salary closer to the value they create.

3. Higher labor costs are just passed on to consumers, but it doesn’t cause that big of an increase in prices because minimum-wage labor is only a small component of expenses for most companies.

4. A higher minimum wage could even increase employment by stimulating the economy by putting more money into the hands of workers. That didn’t happen in Seattle, but that’s because the minimum wage increase was so localized. For example, if the minimum-wage worker uses the additional income to buy an iPhone, that doesn’t directly stimulate the Seattle economy. But a nationwide minimum-wage increase could boost the national economy.

Written by Lion of the Blogosphere

October 22, 2018 at EDT pm

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