Thursday, April 30, 2015

How Bernie Sanders can change the terms of the debate as presidential candidate

Bernie Sanders is running for president. Even the Washington Post has noticed. The Post article makes a lot of hay about how Bernie doesn't have a chance in hell of winning. That part of the article is just a bit condescending, even if there is some truth to the point. The article also points out that Bernie is never going to be in Hilary's cabinet, or anywhere close to the White House if Hilary is nominated and elected so he has nothing to lose by changing the terms of the debate.

There is no question that Hilary has the money to run. But that doesn't make her a good candidate or a good president relative to Bernie. I will admit that I much prefer Hilary to anyone in the Republican Clown Car. If anyone in that car gets elected, and the Republican majorities remain in Congress, America will swing farther right, and perhaps bend to the will of those who would fashion America as a Christian Nation. That would be very uncomfortable for everyone else who is not Christian.

Where Hilary has offered very little in terms of her platform or agenda, Bernie offers a clear agenda:

• Supports reducing defense spending
• Supports tax increases on high-income earners
• Supports a balanced budget
• Supports a constitutional amendment stating that corporations do not have the same rights as individuals (overturning the Citizens United decision from the U.S. Supreme Court)
• Supports stimulus spending during economic downturns
• Opposes privatization of Social Security
• Supports state regulation of education over federal regulation
• Supports federal action to combat climate change
• Believes states rather than the federal government should regulate firearms
• Supports a single-payer system for health care
• Supports a path to citizenship for illegal/undocumented immigrants
• Pro-choice
• Supports same-sex marriage

Priority issues according to Project Vote Smart:
• A Strong Safety Net
• Getting Our Priorities Right
• National Healthcare
• Justice and Equality For All
• The Environment
• A National Energy Policy
• Worker's Rights
• Progressive Tax Reform

Bernie also makes a moral point: should all the gains in the economy in the last few years accrue to only the top 1% due to government intervention in the markets? There is a lot of talk about how the 1% have been running away with the economy. But few are willing to point to government intervention in the market as the source of the advantage enjoyed by the 1%, as Bernie and Elizabeth Warren have done.

More than a few economists will support Bernie's contentions about a rigged system funneling money up to the top. Paul Krugman, Dean Baker and Joseph Stiglitz to name a few. None of those esteemed economists will be on Hilary's economic team if she is elected. More likely, someone who has been steeped in Wall Street tradition will find a place in the cabinet or a position as an economic advisor. Bernie will have none of that. Bernie will find someone who is not beholden to Wall Street for economic advice, if elected.

The Post article mentioned above makes a strong point that Bernie has nothing to lose. He can afford to push the debate hard to the left and expand the scope of the debate to include how rigged the system really is. He can paint a picture of The Hunger Games in America on national TV and there is nothing that anyone can do about it. The major networks cannot shut him out of the debates, for that would raise a stink like we've never seen. Any attempt to silence Bernie would be like gas on a fire and raise the voter turnout - and we know how the GOP loves low voter turnouts.

I believe that with Bernie running for president, we will see an enormous response from those who are tired of seeing the same neoliberal ideas put to the test only to fail and fail again. Bernie has a clear shot at the presidency if the 20 somethings take notice and get out the vote. The young people know where they're going with the Clown Car. They also know that Hilary, with enormous corporate backing, will not betray that support unless someone else is there to expose her.

Bernie says, "Don't underestimate me." Don't worry, I won't. I support Bernie and his run for president. Won't you?

Wednesday, April 29, 2015

Fiber is good for real estate

Municipal Broadband Networks has a very interesting article on their website, "FTTH Adding Value to Apartments and Condos, Studies Show". The second paragraph will raise a few eyebrows:
"Several studies have established that fiber raises the value of single family homes by $5,000 - $6,000 on a home valued at $300,000. A July 2014 survey, commissioned by Broadband Communities magazine and conducted by RVA LLC indicates that similar results influence MDUs. Clearly, access to FTTH adds measurable value to real estate." 
We have confirmed that fiber to the home can raise home values. We are now learning that fiber to the home adds value to multi-dwelling units (MDU), too. The investment in fiber pays for itself early, too. Fiber to the apartment reduces vacancy rates, reduces advertising costs and increases the rents that an apartment will fetch. Fiber is now a must have utility, just like water, power and gas.

Fiber also means gigabit access to the internet wherever it is deployed. But you wouldn't know it by talking to Centurylink, Comcast, Time-Warner, Verizon or ATT (let's call them the telcos). They will tell us that most people don't want a gig network to their home and worse, they wouldn't know what to do with it if they had it. Oddly, that doesn't explain why more than 450 communities have installed municipal broadband, the majority of them including fiber in their networks. 40 of those networks offer gigabit access to the internet.

For two decades, we have showered the telcos with tax breaks, subsidies and a favorable business environment to encourage them to build a world class network for our citizens. What we got in return was an enormous betrayal of public trust. They took the money and the goodwill and turned it into dividends for their shareholders and bonuses for their executives. They laid off employees. They did just about everything they could to avoid building better networks.

During that time, communities large and small pleaded with the telcos to build better networks, but the telcos snubbed many of them, leaving them with DSL at 3-4mbs or no service at all. Cable and telephone companies alike cherry-picked their communities while enjoying a secured and protected monopoly with their franchise agreements with their respective cities. They talked about the wonders of a free market without really participating in one.

So when communities around the country began to marshal their resources towards building their own networks, the telcos, working with organizations like the American Legislative Exchange Council (ALEC), lobbied the states to pass model legislation to hobble or prohibit municipal broadband altogether. They were successful in more than 20 states so far, and the effort is not going to stop anytime soon. That is how the telcos said "Thank you".

Fiber to the home is the 21st century utility. Fiber to the home will empower people to be a part of a world-wide community, to pick and choose where they want to live and work, to get the education they so desperately need, to get access to medical care in remote locations, to get the services we can't even dream of yet on a gigabit network.

The electrification of the United States started with community cooperatives to connect every house and business to power. So it is with community broadband, to connect a thin strand of fiber to every house and business. Electric power added value to every home and business. Fiber to the premises, every single address, will also add value to the home or business. Fiber is good for real estate.

So when you see the fight over net neutrality or Title II reclassification or the right to choose the provider for internet access to be a local municipality, know that the fight is about the telcos wishing to deny Americans the power and the freedom that high speed internet access provides. There can be no other way to interpret legacy incumbent internet service providers actions and intentions.

If management at the telcos are unhappy because municipal broadband offered gigabit access first, they should remember that we gave them every chance to do it and they did not do what we asked. Now it is time for American citizens to rise up against the legacy incumbent internet service providers and build their own networks. These new networks will be fashioned rightly as public utilities rather than private monopolies and they will remind the telcos that the customer is always right.

Tuesday, April 28, 2015

The apple that will not brown

It seems that someone has used genetic modification to develop, produce and sell an apple that doesn't turn brown when you cut it. It's called the Arctic Apple. When I first heard about it, I was almost sure that the Arctic Apple has found a way to defeat the enzymes that caused browning in the apple. It seems I was right. Here is a response to a reader's question about the genes that are inserted into the Artctic Apple's genome:
The *full* explanation is quite long and technical, and is best explained in the link supplied in response to David's comment (http://www.aphis.usda.gov/brs/aphisdocs/10_16101p.pdf).
To hit on some of the key points, we use a process called RNAi (RNA interference) that essentially inserts additional copies of the genes (from the same apple varieties) that control the production of the enzyme polyphenol oxidase, which drives enzymatic browning. An overly simplified way to explain it is to say that these gene sequences "cancel out" their corresponding genes, which silences them.
The amount of PPO apples produce varies quite a bit from variety to variety, so there are some cultivars that will brown more slowly, or less overall, but only Arctic apples produce so little PPO that they will not experience enzymatic browning. Technically, it might have been possible to breed an apple that had low enough levels of PPO to be comparable with Arctic apples, but it would have taken decades, with uncertain success. And, even then, you would only have one nonbrowning variety, rather than the ability to make existing popular varieties nonbrowning.
I too, know something about enzymes. Every metabolic process in our bodies is mediated by enzymes. Enzymes are the engines that perform digestion, assimilation and replication. Our bodies take advantage of the enzymes in the food. When food is cooked, the enzymes die once the temperature reaches 105 degrees. All animals, except humans that cook food, have an instinctive understanding of this feature of food, real food. After thousands of years of cooking food, humans still need to eat raw food to live. There is no way around it. You can learn more about this topic in a book called, Enzyme Nutrition.

Back to the apple. As noted above, the scientists who modify the apple to create an Arctic Apple are modifying the quantity of enzymes in the fruit to produce more of one enzyme to cancel out another enzyme, the enzyme that makes the fruit turn brown after cutting. We put food in a refrigerator to slow this process down. It's called decay. All food decays, unless it's processed food, like a Twinkie. Twinkies don't decay and they can remain perfectly preserved for decades. No animals, not even mold and bacteria will touch it. Why? It's not food.

So when I see what these scientists are doing with the apple, the Arctic Apple, I see that they're interfering with a metabolic process in the apple. This can impact the nutrition of the apple. The genes that inhibit browning in the apple are taking something away from the apple, for in order to promote the production of one enzyme over the other, you are allocating resources in the apple in ways that nature did not intend. Despite the claims of safety that promoters assert, we don't know for sure how gene expression will change in the apple.

Yes, we can sequence the genes in the new apple to verify how much of the desired enzyme is produced. The problem is that genes are actually very complicated. Apples have 57,000 genes, more than most other plants, more than humans, it seems. How genes gain expression or how they are silenced depends on their location in the genome, their relative locations to each other and even the frequency of a gene in the entire genome.

Here, these scientists seek to increase the production of one gene by introducing more copies of the same gene into the host genome. More copies leads to more expression, at least that is what the scientists hope for when they introduce more copies. How that affects the other genes in the host, may be more or less known. Genes have been around for about a billion years, as far as we know. Apples have been around for probably 34-40 million years, sometime after mammals came along.

I consider genes to be a storehouse of great wisdom and experience. I do not believe that we completely and safely understand the effects of genetically modified crops on our bodies, the environment or the host with modified genes. I don't think that we will gain that understanding anytime soon, not in my lifetime, and most likely, not in the lifetime of my children. Until we've had adequate safety testing of these foods, I will stay away from the Arctic Apple and look for organic varieties to eat. I encourage you and your friends to do the same.

To stay away from them, you will have to use some care and diligence. This GMO is protected by a patent. The gene modification can be performed surreptitiously upon many popular types of apples. The biggest problem is that GMO promoters are not so proud of their products as to put a label on them. They want the royalties from the patents, no doubt. But they are fearful that once the consumer apprehends that the product is genetically modified, they will avoid that product. So they want us to eat their product through deception, as if somehow, that will make everything alright.

Put a label on it so that we can decide for ourselves if we want to eat it. You cannot claim to operate in a free market without transparency and disclosure. To try to do so is a disservice to your customers. To pretend that anyone can comprehend millions of years of evolution to determine for sure if GMOs are safe, is not just a disservice to the consumer, it is dangerous.

Monday, April 27, 2015

Secrecy allows private equity to nickel and dime public pensions to death

While there are many articles discussing the yawning divide between the Wall Street financial industry and everyone else, there are few that really point out how this is happening. One example finally came to light recently: investment management fees.

All states have pension funds for their public employees. The pension funds don't just put their money in a bank to earn 1/2 percent interest for a year. They look for ways to maximize their return on their investments. Considering that hedge fund managers make up a significant fraction of the billionaires in this country, they would seem to be doing a good job, right? So state and local employee pension funds have been looking to Wall Street for ways to ensure that there will still be money in the fund when their employees retire to finance the obligations of the pension.

In These Times reports that pension funds are paying very large sums of money to managers of their money. For example, their article estimates that CalPERS paid $440 million in management fees to private equity firms. Their article further goes on to say that most states are reporting only half of the actual fees paid for management since there are "performance fees" when the investments perform well. They also provide the caveat that private equity firms are reporting returns without any third party verification of same. In other words, these private equity firms could be doing exactly what Bernie Madoff did, without anyone the wiser for it.

While the fees are disconcerting, the bigger problem is the lack of transparency. In These Times also reports that states are, on average, only reporting 50% of the total management fees paid to Wall Street private equity firms. Apparently, terms of these management agreements are trade secrets and cannot be disclosed.

There is a problem with this line of thinking: the agreements are treated as secret law. that line of thinking goes against a very simple principle in American Jurisprudence. Secret laws are prohibited. How can we avoid breaking a law if it is secret? I know I couldn't. But private equity firms would like for everyone else to be penalized for their special, secret law, the terms of their agreements with their pension funds.

If we're talking about two sophisticated investors, two people who have the experience and the means to support such investments, that would be one thing. But what we're talking about is the law of agency. When an employee joins a retirement system, he is entering into an agency agreement. That is, the retirement system is representing the interests of the employee. When the agent enters into an agreement with a private equity firm to manage an investment, he is not the only person bound by the terms of the agreement. The employee is also bound by the same terms.

If the terms of the agreement between the pension fund and the private equity firm are not disclosed to the employee who pays into the retirement fund, can we really say that the employee is bound by the agreement if he does not have access to the terms and conditions? More to the point, can the taxpayer be held liable for such an agreement? Can the employee and the taxpayer then be held liable for the mistakes of the agent?

Personally, I can't see any justification for the secrecy. When a private equity firm enters into an agreement with a public pension plan, it enters into public service, through and by an agency agreement. As an agent of The People, there is no privacy and no secrecy can be allowed within the context of the agreement. The People need to know what is being charged and when so that they can be sure their agents are working in the public interest.

Saturday, April 25, 2015

The TPP has nothing to do with free trade - it's all about protecting monopolies

Anyone who has not been living under a rock knows or has heard something about the Trans Pacific Partnership, aka, the TPP. I have been doing quite a bit of reading on the subject and one common theme emerges, trade barriers are already very low. Conservatives and liberals agree on this point.

So without even having a chance to read the agreement, and believe me, very few people outside of negotiations have any access to it, we know that the vast majority of the agreement is not about free trade. There is very little that can be done to free up trade anymore. TechDirt covers the history of trade agreements in more detail to show, rather conclusively, that this deal is not about free trade.

Economist Dean Baker also confirms that trade deals are already low. In fact, he goes farther by noting that the main purpose of the deal is to impose a more business friendly legal atmosphere so that businesses can be less accountable to the customers they serve and the countries the serve in.

Baker also notes that the trade deal will make rent seekers very, very happy. If you make pharmaceuticals, this is a great deal for you. If you make movies, music or other works protected by copyright, it's cool. If you have ridiculous software patents, this deal is a bonus. Even the Cato Institute, a conservative organization if I ever saw one, agrees that there nothing not to love in the TPP if you're a rent seeker.

I note also that Trade Promotion Authority, aka, "Fast Track Authority" has managed to eke it's way out of committee. TPA allows the Senate to approve the treaty, but only without any chance to amend it and only with an up or down vote. Once ratified by the Senate, the president can sign it. Congress has been wresting with TPA for the TPP for more than a year, and the latest hurdle had something to do with human trafficking, particularly with Malaysia, as the Washington Post reports:
The amendment, offered by Sen. Bob Menendez (D-N.J.), would prevent Congress from "fast tracking" any treaties with countries considered by the State Department to be far out of compliance with international standards on human trafficking. Currently, that list includes Malaysia, which is also a party to the Trans-Pacific Partnership, a massive trade deal with Pacific Rim countries that is in the final stages of negotiation.
I find a certain sense of irony that the issue of human trafficking could potentially throw the entire treaty off the tracks, for awhile anyway. The Post notes that a human trafficking amendment passed the committee 16-10. A bill similar to the amendment to the TPA amendment passed the Senate 99-0, so we know there is bipartisan support for measures to stop human trafficking. In case you're wondering, human trafficking is one of the clearest indications that slavery is still alive and well. Its an industry almost exclusively run by men, but dominated by women and girls. Here it is abundantly clear that rent seeking is not only diverse, it is also quite perverse.

Trade barriers and tariffs are already very low. The only remaining reason for the TPP is to seek competitive advantage over other people. From employees to consumers, the TPP has exploitation built in. The odd thing is, as Dean Baker noted in his article (and many others like it), hardly anyone is talking about using monetary policy to improve trade the right way, by balancing it.

Friday, April 24, 2015

Welcome to the Fiberhood

Since the introduction of Google Fiber, cities across our country have been vying for Google's attention. Once the first city, Kansas City got it, people have been in awe of the speed and the price of Google Fiber. $70 for gigabit access to the internet? Who could believe it when most of us are lucky if we can crack 10Mb/s from just one provider let alone two. For perspective, a gigabit is about 100x faster than 10mbs, which is typical in most places that have internet access in the US.

As good as Google Fiber seems to be, there is still an alternative that should not be missed: community broadband. Why is this? Why not take the commercial alternative to the incumbent carriers? They won't raise my taxes, right? They'll cover everyone, right?

Google appears to be on the right track with their Fiberhoods. The Fiberhood is built by surveying residents to see who will commit to signing up for the service. If enough people sign up, you're in luck and you get connected. If not, you may have to wait until more people get fed up with legacy incumbent service.

Community broadband is different. They are committed to connecting everyone, regardless of the neighborhood or the profit margin that can be derived from the neighborhood. Yes, they're a monopoly, just like Comcast, Time-Warner and Verizon in their respective service areas. But legacy incumbent service providers tend to cherry pick service areas - community broadband does not.

Google Fiber has definitely upped the ante for legacy incumbents, but they are still playing by the market. They look for demand and then they build. Remember the movie, Field of Dreams? The tiny voice in the ear of one character says, "Build it and they will come." This is the motto of community broadband, not that of the commercial internet service providers, including Google.

Where Google and the incumbents use the market to see if the demand is there, community broadband is built with the assumption that everyone should have access. This is the debate in my city. An entire buildout is being held up over a utility fee. What is being held up? A proposal to finance the buildout of fiber to every business and home in every city that is part of the Utopia group of cities. Of 11 cities, 5 have opted out, risking the legal costs of letting their network go dark while still paying off bondholders, if they still can. Why would they let the network go dark instead of using it to raise revenue? Fear of a utility fee.

Opponents like Comcast and Centurylink have seized upon this fee as a tax through their proxy, the Utah Taxpayers Association. By calling a fee a tax, they are playing upon the conservative sentiment about taxes. But they are silent when it comes to the "tax" that incumbent impose on heir customers: slower speeds at a higher cost than community broadband offers. Incumbents are silent upon the fact that their business model and the profits derived, require little or no competition. They assume that their customer base must be "price takers" or their model won't work.

Legacy incumbents claim that community broadband is unfair competition from municipalities. I guess they're afraid that government can outperform private enterprise. If that's their fear, then they're not really competitors. They're private monopolists that could never really survive in a free market.

Thursday, April 23, 2015

There is no such thing as corporate sovereignty

There are two emerging trade deals that you might have heard about by now, The TransPacific Partnership (TPP) and the TransAtlantic Trade and Investment Partnertip (TTIP). Each of them contain a provision for investor state dispute resolution (ISDS). ISDS allow a corporation to sue a country for billions of dollars in perceived lost profits if a corporation is denied those profits due to action by a government. These provisions are also known as "corporate sovereignty" provisions.

The problem is that these dispute resolution systems are designed to be extrajudicial and allow the tribunals to be stacked with corporate sympathizers rather than independent people we can trust. From what I've read so far, they have nearly zero accountability and tend to act in the corporate interest, not the public interest. TechDirt notes that we already have a similar provision in NAFTA, the rightly maligned trade agreement that basically erased jobs while enriching the 1%.

Corporations are not sovereign, no matter how hard you try to make them. Why? Corporations are created by governments, constructs that form nations like the United States. The United States government has sovereignty that is recognized by every nation in the world. There is nothing in the Constitution that allows the US government to confer sovereignty to any corporation. Nothing. Do a search yourself you and you will not find it anywhere in the Constitution.

Not only that, The People never delegated authority to grant sovereignty to corporations. Not in the Constitution, not in any state constitution. We know this because of men, real men, like Lincoln and Teddy Roosevelt. They knew the power of corporations firsthand. They met and saw the lust for absentee ownership of property, the lust for control, the lust for unmitigated power, without any accountability for errors in judgement. It's hard to expect anything else when limited liability is combined with monopoly power in the largest of corporations.

What is sovereignty and why are corporations seeking it? Let's see what Wikipedia has to say about it:
"Sovereignty is understood in jurisprudence as the full right and power of a governing body to govern itself without any interference from outside sources or bodies. In political theory, sovereignty is a substantive term designating supreme authority over some polity.[1] It is a basic principle underlying the dominant Westphalian model of state foundation."
Wait. What? Corporations are seeking that kind of power? Giving corporations sovereign power is like giving an alcoholic keys to moving van and a liquor store and turning off the cameras for a week. Corporations involved in the negotiations to these two treaties are seeking the power of a governing body without the accountability of a governing body.

This is the problem we should be noticing about these trade deals. Corporations are once again seeking power without accountability for their errors.

To give you and idea of how wrong ISDS is, take Germany for example. According to Yes Magazine, the German government and taxpayers have been stung by a corporate lawsuit over lost past and future profits:
"Germany is no stranger to similar dispute settlements. After the country decided to phase out nuclear power following the disaster at the Fukushima Daiichi Nuclear Power Plant in 2011, the Swedish energy firm Vattenfall filed for arbitration to seek €3.5 billion ($4.6 billion) in damages, blaming the country for past and future loss of profits."
Did you notice that the corporation suing is seeking billions? This is the jackpot that proponents of corporate sovereignty seek. It's happened here under NAFTA, too. Well, in Canada. Exxon sued the government of Ottowa over a law that requires Exxon to spend money on local research, and won $17 million. Great if you're a corporation, terrible if you're a taxpayer expecting foreign corporations to obey local laws:
"An international trade tribunal has ordered Ottawa to pay ExxonMobil and another oil company $17.3 million, following a complaint that the companies were required to spend money in Newfoundland and Labrador on research and development."
What a sweet deal. There is nothing like arbitrating through a private tribunal stacked with sympathetic lawyers looking forward to employment in a corporation they helped. Is that "public service"? Is this what our leaders think we really want from them? Complete unadulterated power for corporations? I don't think so.

The president is seeking Fast Track Authority on the TPP. He will probably seek the same for the TTIP if he hasn't done so already. We can thank Bernie Sanders for throwing a stick in the spokes on the TPP deal, for at least a short delay. Sanders and Elizabeth Warren are the only two senators I know of who are speaking out vehemently on the deal. Why Obama is siding with Republicans on these deals is beyond me except that they also contain big bonuses for intellectual property advocates. Apparently, Obama has friends in Hollywood he would like to please.

These trade deals can be stopped. We know this because we were able to stop SOPA and PIPA, two acts designed to damage the internet. But the only way they are going to be stopped if people make themselves heard.

Wednesday, April 22, 2015

Yearly productivity growth + stagnating wages != booming economy

If you listen to the standard conservative line from Congress, what we hear is that keeping wages low will grow the economy. What we've seen over the last 30-40 years (depending on the economist you talk to), wages have stagnated in real terms. The minimum wage has lost purchasing power over the same term while productivity has gone up at a pace that leaves the growth of wages in the dust. If real wages are fairly constant and productivity increases faster than wages, shouldn't our economy be booming?

All of this is well documented. A number of sources have pointed out that if wages kept up with productivity, the minimum wage would be at least $16 per hour. The upper bound for a minimum wage in line with productivity is about $22 an hour.

Technology has been the biggest driver in productivity. Paper has been replaced by databases and electronic documents. Communications by phone and fax have been replaced by email, video conferencing and social media. Manufacturing has seen steady improvements in materials, designs and processes. Traditional energy sources have been augmented by renewable energy and eventually, they will replace oil, gas and coal.

Despite record high indexes in Wall Street, the real unemployment rate remains stubbornly high at 11%. The largest corporations are reporting strong earnings and some have done so since the collapse of the housing bubble. It is widely acknowledged that the largest corporations have parked almost $2 trillion offshore, supposedly waiting for repatriation when tax rates are lower.

So I don't get it. If wages are so low and productivity continues to grow, the economy should be booming right? I think that the reason the economy isn't booming is that America has turned into a country that only supports businesses not consumers. I also think that the current economics in America prove that no matter how much you try to help businesses, the only people who really generate demand are consumers.

70% of the economy is driven by consumer demand. Yet, we've spent the last 30 years digging a hole in the economy with supply side economic policy. In other words, if you make it easier for suppliers to produce goods and services, prices will come down and demand will emerge. A strong dollar policy over the last 30 years has been great for businesses with low cost supply chains around the world. That has kept prices down here, but the same policy has depressed domestic demand.

Strong dollar policies combined with trade deals like NAFTA have worked together to depress demand here while sending it elsewhere. Now our policy elites are promoting treaties like the TPP and the TTIP as if that is really going to help our economy when trade barriers are already very low. Both of those treaties have extensive provisions for intellectual property, but intellectual property rights here at home are already very strong.

Dean Baker has noted that between 1947 and 1969, the minimum wage actually kept pace with productivity:
"... the minimum wage generally was increased in step with productivity over these years. This led to 170 percent increase in the real value of the minimum wage over the years from 1948 to 1968. If this pattern of wage increases for those at the bottom was supposed to stifle growth, the economy didn’t get the message. Growth averaged 4.0 percent annually from 1947 to 1969 and the unemployment rate for the year 1969 averaged less than 4.0 percent."
So we've had more than 20 years of experience with a rising minimum wage with 4.0 percent annual GDP growth and 4% unemployment. Since the 1980s, we've had nothing but bubble after bubble to grow the economy only to fall back again into malaise and unemployment.

If we really want to drive demand, we have three very simple choices:

  • Increase government spending on things like infrastructure, education and health care
  • Increase the minimum wage to match productivity so people can buy what they make
  • Decrease the value of the dollar to the point of balanced trade - that would create 6-7m jobs

All three of these would work very well on their own and together to grow the economy and they would be great for business. But they would be terrible for the current program of excluding 99% of us from enjoying the growth of the economy. Now who would have the greatest amount of input on economic policy? The same people who benefit the most from them. The 1%.

Monday, April 20, 2015

The laws of thermodynamics say happiness is a choice

There's an old joke about the laws of thermodynamics, a set of laws to explain how our physical world behaves. It goes something like this:
Zeroth: You must play the game.
First: You can't win.
Second: You can't break even.
Third: You can't quit the game.
This sums up the human perception of reality fairly well. You're born. You must play the game. You try to make life better by winning. There is no such thing as winning for someone else has to lose if you win. You try to break even, but no matter how hard you work, what you get is never entirely the same amount of energy expended. You can't quit the game, either. When you die, all your marbles are returned to the game.

That joke is the most concise expression I've ever seen about the laws of thermodynamics. But there is something else that thermodynamics does: it reminds us that, scientifically and objectively, no matter how much work we put into something, we will never get 100% back. It doesn't matter if we're talking about nuclear energy, doing homework or running a Fortune 500 company. Our tiny little brains seem tuned to trying to achieve break even, but it never happens.

The worst part is, no matter what we do, entropy ensures that nothing we do is permanent. Everything degrades, wears out, or changes in some way, even if we don't use that thing. No matter how hard we try to preserve the results of our work, the universe will not let it be. We set something down one day and a few days later it's gone. Moved by the spouse, the wind or the flood. It all eventually slips from our grasp.

To put it differently, no amount of money or material wealth can even remotely approximate the effort expended by the brain. The brain is simply never satisfied with the reward received from work. We work, measure our work and yet, we come up short. Even if we have other people working for us, we still think "they" could do better so we push harder, have more meetings, send out more emails and try all manner of encouragement.

When we get home, we have the big screen TV to sink into. We have the sound system for our choice in music. The kitchen to cook in and lose ourselves in a recipe. We can putter around in the basement organizing or building something in the shop. We can check our phone to see what new post appeared on Facebook or Google+ or Redddit or Tumblr. If we're doing well financially, we can check the bank account, the investments, or watch CNBC.

But none of that stuff really matters, at least for me, unless I'm sharing this life with someone else. Having a nice house is better with someone else. I reach break even and more when I share my house with someone else. My wife, my kids, and any relatives or friends who would like to visit. When I'm with other people, all that electronic stuff falls to the wayside. Why?

I think that there are two exceptions to the laws of thermodynamics. The Beatles observed the first exception, "And in the end, the love you take is equal to the love you make". The second exception? The choice to be happy. Once we make a choice to be happy, all other conditions are moot. Once we're happy with what we have, right now, without reservation, equivalence from the work we perform doesn't matter anymore.

Sunday, April 19, 2015

A $70k minimum wage at one company belies the Reagan Revolution

By now, you might have heard the news about Gravity Payments. The CEO, Dan Price, has cut his own salary by $900,000 a year to make it possible for his employees to enjoy a minimum wage of $70,000 a year. At LinkedIn, Dustin McKissen says that this is a brilliant strategic move, garnering national publicity and giving a positive image to Gravity Payments. At Seeking Alpha, Dana Blankenhorn shows us that a $70,000 minimum salary is quite reasonable in a payment processing sector that is on fire for investors. This actually makes sense for a young startup where the CEO owns most of the equity in the company, anyway.

The move also places a spotlight on inequality in a different way. The move shows us that the inequality resulting from the Reagan Revolution is unsustainable. Let's see if we can put this into historical perspective. The Economic Policy Institute notes the following trends in CEO pay:
"From 1978 to 2013, CEO compensation, inflation-adjusted, increased 937 percent, a rise more than double stock market growth and substantially greater than the painfully slow 10.2 percent growth in a typical worker’s compensation over the same period. 
"The CEO-to-worker compensation ratio was 20-to-1 in 1965 and 29.9-to-1 in 1978, grew to 122.6-to-1 in 1995, peaked at 383.4-to-1 in 2000, and was 295.9-to-1 in 2013, far higher than it was in the 1960s, 1970s, 1980s, or 1990s."
In addition to that, economist Dean Baker points out that between 1941 and 1969, the minimum wage kept pace with productivity. He also notes that if wages matched productivity over the last 30 years, the minimum wage would be about $16 per hour, not $7.25 an hour we see now. He also notes that a public policy decision to suppress the minimum wage came into effect in the 1980s, you know, during the Reagan Revolution:
"How was it decided to break the link between productivity growth and the minimum wage? It is not as though we had a major national debate and it was decided that low-wage workers did not deserve to share in the benefits of economic growth. This was a major policy shift that was put in place with little, if any, public debate."
In the 1980s, we saw the seeds of inequality planted as if it was common sense, rational economic policy. What we saw in September, 2008, is that the supply side economics makes no sense. Supply will only meet demand, and if the demand is not there, employers will look for demand somewhere else.

The move by Mr. Price to raise the minimum wage at his company makes several points that may or may not already have been noticed. In order for CEOs to enjoy a 295 to 1 compensation ratio, everyone else has to earn less, far less, in order to support that kind of salary. The bump from $40k to $70k is life-changing and will generate demand, directly and indirectly.

More to the point, the demand generated by raising the wages of workers is far greater than any tax cut that has ever been proposed. Mr. Price understands that his customers and their customers will want to work with a company that treats their employees well. This is a fact that has been difficult for executives at Wal-Mart to understand.

A large group of workers earning $70k a year is going to create a lot more demand than the same group earning $40k a year. It's simple math. No amount of fiddling with the tax code is going to change that fact. It is also worth noting, as Mr. Price did, that people are not commodities like coffee and copper. Commodity values decrease or increase in proportion to demand. They are quite passive since they lack any brains or intelligence. People are not commodities in the sense that if you pay them more money, they get more interested in the work and worry less about the money. They can become more productive, increasing their value.

CEOs are often a great example of a class of people who find ways to work less for more money at the expense of other people, regardless of performance. On the other hand, the average worker will work harder when paid more. He will be more creative because he's not stressed out about money. The employer paying higher wages will create competition for his open positions and will find more talented, loyal employees than otherwise. It's a win-win for everyone.

But you won't hear any of this from any conservative in Congress. That kind of talk doesn't play to their base - the top 0.1%.

Saturday, April 18, 2015

How do we know our voting machines are secure?

Ars Technica has a great article on a voting machine used in Virginia elections that is so insecure it was decertified after an audit revealed just how bad it was. That machine was initially offered for service in 2006. Who knows how many elections were hacked by the machine? We won't know because the machine is so insecure that a skilled person can alter the voting results without leaving any trace - over wifi.

The fact that the machine uses Windows is bad enough, to find that it uses an embedded Windows operating system so old it has not received an update in more than 10 years is ridiculous! How such a machine could ever be approved is a marvel to behold in American politics, but I can offer an alternative, and I'm sure I'm not the only one who has.

Last October, I wrote an article to describe a completely transparent electronic voting system. From the bottom up, the entire system is built upon open source hardware and software. The specs and the code would be available to anyone who wants to see so that we, as a nation, can be sure that the our electronic voting systems will work as intended.

Such a system can easily be checked for accuracy. I'm not just talking about the voting machines. I'm also talking about the servers that tabulate the votes. The entire stack, from machine to server, must be made open source and available for inspection to ensure that there can be no tampering. With hashing algorithms like md5sum, we can check every component of the code before and after the election. We can verify that the wifi network is using strong encryption. We can use strong passwords for the system administrator and database admin accounts for each voting system. We can use Linux instead of Windows.

That incident in Virginia is an embarrassment to the electronic voting industry, but probably not for making such a poor example of a voting machine. No, if there is any embarrassment, it was more likely for being revealed at all.

We can do better. We deserve better. A democracy cannot function unless the will of the people can be accurately determined.

Here are some resources to learn more about voting machines:

http://verifiedvoting.org/
http://blackboxvoting.org/
http://www.openvotingconsortium.org/

Thursday, April 16, 2015

A funny thing happened to me on the way to sleep

I was up very late last night working with my two-year old Emily, trying to find some way to help her find sleep. My wife and I have tried all manner of encouragement and discouragement to get her to sleep but nothing seemed to work. There is simply no such thing as negotiating with a two-year old. There is only the art of distraction.

I've fit a few pieces together. First, she needs a bath and she needs that bath at the same time every day. So I will give her a bath every day, on time at the same time. Kids need and like that sort of routine. I find bathtime very satisfying as she tends to lose herself in the toys in the bath and she likes to get her hair washed. She knows how to have fun and enjoys sharing it with my wife and I. My wife and I have agreed that I am the designated bath giver while she tends to my second born at just 4 months, Natalie.

Baths are nice, but there is something else that must happen. She must get into some relaxing activity after the bath, an activity that is conducive to sleep. The fact that she took an unusual 3 hour nap yesterday did not help matters much and as a result, I found us both up beyond midnight trying to find an answer for her to get to sleep. That is more a problem of rhythm than of mental state.

She had that nap because the night before last, she put up a mighty struggle not to sleep. Again, we tried everything we could think of and it wasn't until later, that I figured out that if we give her a reason to resist, she will resist. So I found a distraction from the resistance - drawing - that works because she loves to draw. Well, it's not really drawing, it's more like putting pen to page to make a mark. But she's fascinated by that and she will immediately forget everything if she can draw. Then I found a way to get her in my arms so that I could carry her. She was tired and needed sleep, but something in her mind said no sleep, probably because that would mean, well, I don't know what that means to her. Once in my arms, I began to walk around and sing to her and sure enough, she was asleep. That was two nights ago.

Last night was different. She had a long nap that day and that had created a tremendous reserve. One thing she really needs is preschool so she can expend her energy playing with other kids, but that's another article. I tried all manner of distraction from the notion of sleep to get her on activities that would be conducive to sleep and nothing worked. Drawing, playing, singing, reading picture books, etc. No luck.

But then an idea occurred to me. I remembered my days working as an IT technician at a retirement home. I remembered how I had to sit in the weekly early afternoon staff meeting. The meeting was filled with nurses and executive staff, almost all of them women. I remembered how the drone of their voices put me to sleep. It was no secret that I tended to fall asleep at the staff meetings, and that I somehow, as if by magic, managed a coherent, wakeful and often humorous response when my turn came to speak. The fact that the meeting was right after lunch didn't help. While my stomach was working, sleep seemed like such a wonderful idea. The drone of female voices going on and on about stuff that had nothing do with me in a quiet meeting only served to tip me over into sleep.

So last night, having gone through as many options as I could think of, I seized on a big book of fairy tales. It was pretty and colorful. But the text was dense and each page took about a minute or two to read. Emily seemed to enjoy the reading as she sat patiently by my side on the couch. I knew that her speedy little brain would work hard to process those words and figure out what they mean. The brain uses ten times more energy than any other organ in the body, so all this very busy processing would help to land my toddler to sleep.

Sure enough, while reading three stories the spoken words became a sort of droning sound as my little girl was unable to keep up. I kid you not, the beating rhythm of voices on my ears will put me to sleep, so I'm sure that is what worked for her. I noticed with the conclusion of each story, how she became more and more relaxed. How she slowly slumped down next to me on the couch. It was truly satisfying to see that just reading these classic fairy tales could help her to fall asleep.

Raising children is not easy (understatement!), and with each passing day, I have newfound respect for my peers who have gone before me, their kids already grown up or well on the way. Reading is one of the most important activities I can do for my kids. It is the one thing I want to be sure they learn how to do, so I am setting the example, early. It is a great relief to learn that reading to my kids can be so conducive to sleep. It is such a surprise to me that the big picture books are not as conducive to sleep as books that require more reading than page flipping, though that does make sense now that I think about it. 

It's early days, so I will post an update sometime in the near future on the topic of sleep for kids. If you have kids, your comments are most welcome.

Wednesday, April 15, 2015

Eliminate the electoral college

Some people have noticed that Democrats got the popular vote in 2012, but somehow, Republicans managed majorities in both houses of Congress. This has been verified by Politifact. At the same time, Barack Obama was re-elected. Republicans are so unhappy about this condition that at least in Michigan, there is a proposal floating around to change the rules so that Republicans have a better chance to nail the trifecta: House, Senate and President.

Through the wonders of computers, various groups have tallied the votes for Congress and the president and they arrive at pretty much the same conclusion: in 2010, Republicans used their new found majorities in the state houses to draw districts that would favor their party. Another way of putting it is that Republicans drew districts that would disenfranchise Democrats in their states by splitting their votes. This can leave us with the somewhat uncomfortable condition of having one party in Congress butting heads with the President in the White House.

There is some talk of reform of the Electoral College. I'm not even sure that reform is even possible since it was designed from the beginning, to prevent the common man from having a say in presidential elections. As Dave Stewart of US News and World Reports describes it:
"The presidential elector system is an anachronistic vestige of aristocratic attitudes, both undemocratic and easily manipulated. Its survival until 2013 reflects the power of inertia and founder worship. We should change it."
Mr. Stewart offers this tidbit to show the attitudes of 1787 when the Electoral College was created:
"According to George Mason of Virginia, popular elections were the equivalent of asking a blind man to choose between colors."
He goes on to note that times have changed. Most men and women are not so isolated. News travels in seconds rather than days. Literacy is nearly universal. There is no reason that the president cannot be elected by popular vote. Eliminating the Electoral College would also eliminate the gamesmanship that goes on with the laws regarding how electors are awarded.

Such a plan would create an effective check on gerrymandering. No matter how the districts are crafted, there would be no way around the popular vote, ensuring that a president willing to veto will provide the check on power in Congress we so badly need now. Imagine what life would be like if we had a Republican President in tow with a Tea Party Congress. Why, they'd make every department of government miserable except for the Department of Defense. What's not to love in the DOD?

I can't see a better way to turn the country around. Congressional districts look more like sprawling amoebas with each census. Requiring a popular vote for president will go a long way to reducing the temptation to gerrymander districts. Without an Electoral College to manipulate, a minority party backed by an even smaller, very wealthy minority, just might have to listen to everyone else when writing laws that determine our collective fate.

If we're lucky, the elimination of the Electoral College might happen sooner than we expected.

Tuesday, April 14, 2015

It's about ideas not us and them

This article is intended to clarify a certain perspective in my blog. It is in response to a comment I received yesterday about how as long as the debate is framed as "my team is better than your team", nothing will change. There is merit to that perspective and today, I would like to explore that with you, dear readers. You can see the comment at the bottom of my blog post from yesterday.

To begin, I don't hate people. I really don't. I recognize that they are human beings and that they are prone to error, just like me. I wouldn't want to be hated because I made a mistake, so I treat everyone as I would want to be treated.

In political discourse, for people I might term as "the adversary", I don't hate them, either. I just don't like what they do. I try to convey the sense that it's not the group that is the problem, it is the ideas they sometimes promote. In yesterday's post, I failed to make that clear. A bad idea is a bad idea, no matter who the proponent happens to be.

For example, in general, I like President Obama. He's done great work with getting Obamacare passed and that law is saving money for the taxpayers. The CBO has consistently revised estimates of health care spending down since the enactment of Obamacare. Millions of people now have access to health insurance where there was none before. And the law has survived many attacks in court, even with a conservative majority on the Supreme Court. We can be sure that the law will be under attack for quite some time until "the adversaries" see that gutting Obamacare will cost them more than they wish to pay.

On the other hand, Obama has been in an apparently mindless pursuit of two very important treaties on trade, each between many countries including the US. The problem with these treaties, the TTIP and the TPP, is that they claim to be "free trade" deals when the trade barriers are already very low. The only possible explanation for all of the support for them is that they are essentially massive power grabs for large, very well established corporations. We can infer this by noting who gets access to the texts and who attends the negotiations. Ordinary people, in general, are not stakeholders at these negotiations since they do not attend these meetings.

Do I hate Obama for his unwitting support of these deals? No. But I certainly let him know my opposition to them on Twitter and wherever the subject comes up. Those two treaties are, from what I have gathered so far, very bad ideas for everyone except for the wealthiest among us.

Yesterday, I wrote in detail about my concerns regarding a desire for unchecked power by a certain faction that is well known as "conservatives". In yesterday's blog, I used that term as shorthand for "people who love Reagan and the Laffer Curve", but that post isn't to say I hate the people who support the ideas espoused by Ronald Reagan and Arthur Laffer. Politicians can be very personable and charming - that's part of how they get the job in Congress. I might even enjoy a conversation with any of them, even if I disagree with their politics. I may disagree with their ideas, but I most certainly don't hate them.

There are some great ideas that are supported by conservatives. In Colorado, they shine like bright stars doing good things. Colorado legalized marijuana and they now have a thriving new sector of the economy that is generating tax revenue. They are reducing the possibility of a pointless prison term for thousands of people who may do no more harm than spend more time eating Mallomars and staring at light bulbs. They are getting mellow.

Conservatives in Colorado did something else in at least 53 different communities. They asserted local control from the state government over local choices in broadband. Some did so in referendums where local control received better than 90% of the vote. Those communities can now plow millions of dollars into a fiber network for their small conservative towns that will provide a great boost for their local economy. Fiber networks offering gigabit access to the internet at reasonable prices for everyone in town are a great idea no matter who proposes it. It's called "Community Broadband" and the majority of community broadband networks are in conservative jurisdictions.

Despite the disdain we hear from conservatives in Congress about how expensive infrastructure is, here in Utah, a Red State, cone zones are everywhere. Hardly a day passes that I don't pass some sort of road work as I go to work or to run some errand. I love to see this because I know that when those guys put the shovels down at the end of the day, they will spend money. Here, in Utah.

There was a time when I was afraid of government. During that time, my occupation was to gather documents from the government with the Freedom of Information Act and Privacy Act. My requests were mostly directed at the Internal Revenue Service and the Franchise Tax Board in California. It was a very interesting experience for that work taught me more about government than any history or social studies classes have ever taught me. I learned how to use the FOIA and the PA in a little workshop and became a big fan of the Sunshine Laws. One thing I learned in that workshop is to be nice to the disclosure officer so that he doesn't round file my request.

During that period of my life, I got to know disclosure officers in two agencies. I began to see that they are people, too. They just want to go to bed at night, knowing that they did the right thing. They're like me. They need air, water, food and space. They need love. They need to know that they're a part of larger group, something we call, "society".

From that point on, I was no longer afraid of government, and therefore, and I'm not even sure if I could say that I hated the government. I simply had a mild distaste for government. But working with the disclosure officers I met during that time really changed my perspective. People in government choose public service for a reason. They seem to believe that working in government is the best thing they can do for themselves and us, the people they work for. This is true for conservatives or liberals, Democrat or Republican. I'm not a cynic, I just don't like bad ideas.

The subtext of everything that I say on this blog in a political sense, is that I am more concerned with a bad idea than bad people. Conservatives are not bad people. There are no bad people. Supremely confused people abound and sometimes, we see them on Meet The Press. But they are not bad people and they don't deserve to be hated.

Any ideas, from any source, conservative, liberal, Republican or Democrat, must have supporting evidence to show that it works. In economics, the record has been clear: Democrat presidents tend to fare much better than Republican presidents. There may be disagreement on whether this is true or not between conservatives and liberals, but there will always be facts. The record has shown pretty clearly, at least to me, that liberal economic policy works.

A good idea is a good idea, no matter what the source. Supply side economics is not in the set known as good ideas. There is simply no empirical support to show that it works. Fortunately, the people who support supply side economics are not bad people. Confused perhaps, but not bad. There is no "us and them", there is only us. Some of us have the facts, and some do not. The question we must answer is how to live together when we disagree?

Can we all admit that there is no "us and them" and work together to solve the problems that face us all without seeking an advantage over someone else? I remain hopeful that we can.

Monday, April 13, 2015

Conservatives claim they are going to kick some liberal ass in 2016

Conservatives are girding their loins for 2016. They claim they are going to prevail. But first a "real conservative" will have to run for president and get nominated. Then that guy has to win the election. You can find it here, on Google+ and a few other places around the internet if you do some searching. Yet, they seem to be missing some pertinent facts that do not support their chances of winning the next presidential election - and still be able to claim a consensus.

In the last mid-term election, voter turnout was at the lowest since WWII. Voter turnout has been on the decline and that trend has been persistent over the last 30 years The trend is exacerbated by successful efforts to reduce voter turnout further still. Voter ID laws are the most recent example, despite the lack of any serious evidence of voter fraud.

Now the Huffington Post reports that some Republicans are proposing changes to the way the Electoral College works in the state of Michigan. They'd like to add a sense of proportion to the way the electoral votes are tallied up instead of winner take all as it was before. The new plan isn't without criticism, but in a state that has been carried by every Democrat running for president since 1992, Republicans would like to improve their odds by giving at least some of their electoral votes to a Republican even if the popular vote says "Democrat". The CentralMaine.com website nails the tactic as follows: "The only rationale for the new method: It would help Republicans."

So if conservatives are so confident that their ideas have any merit, why mess with the Electoral College? Why institute voter ID laws when instances of voter fraud are so hard to find? Why work so hard to draw and get approved contorted districts that splinter the Democrat vote? Oh, wait. They don't want the dummies...I mean, Democrats, to vote.

Want to know why turnout has been decreasing steadily over the last 30 years? The average person has no influence on public policy. How did this happen? The right of nomination has been stolen from the vast majority of Americans by about 132 of the wealthiest people in this country. You know, the "relevant funders". See mayday.us for more info on this topic.

It would seem to me that so-called "conservatives" would prefer that their power remain unchecked. Gerrymandering, voter ID laws, Supreme Court rulings that say "money is speech" are all ways to sideline or mute the voice of the opposing party. How can anyone claim victory over an opponent so hopelessly defanged? As long as voter turnout goes down, Republican prospects go up. Is that what they call "political capital"? Do you know what happens when a large fraction of the population feels disenfranchised? You get protests.

It is generally acknowledge that when the economy does well, the first term president is elected to office again. We saw this with Reagan, yet so few remember that his tax policies didn't do all that much to help the economy, you can thank the Federal Reserve for that. We saw that with Clinton. With Obama, he was the underdog, raising the Titanic from the wreck left by those who still believe in the Laffer Curve, and he still got re-elected.

Remember those guys? You know, the people in the Bush Administration so anxious to bail out the banks? Remember how the banks said they were going to put a gun to their head and pull the trigger unless they got bailed out? Republicans know that on a national level, their economic policies haven't worked so well. They've managed to gerrymander their way to majorities in many statehouses and a majority in both houses of Congress. But the trifecta, House, Senate and the White House, eludes them still. If they could just get all three and hold them still for 8 years, they could finally prove that their economic policies actually work.

But they don't. We see that in Governor Brownback's Kansas and we see that in Christie's New Jersey. Both states are hopelessly lost in this recovery. So if they change the rules for the electoral college, then maybe the Republicans can get down to business and prove their point. Their best shot at 2016 is to show that Clinton is not really the populist she will try to make herself out to be. That all that Wall Street backing she has received will limit her ability to truly help the middle class.

Even if the Republicans win the White House in 2016, they will be unable to make a convincing claim of anything resembling a consensus, much less a victory, if the voter turnout is low. If the voter turnout is low, will they still claim they kicked liberal ass if they win the presidency?

Friday, April 10, 2015

Neoliberals miss something in all that math: the market is not rational

NakedCapitalism has an interesting piece by Ed Walker titled, "Why the Claims Neoliberals Make About Markets Are Wrong". It's an interesting overview of the claims made by neoliberals concerning the ways in which markets work to allocate resources. The article shows that neoliberals (that's "conservative/libertarian" to most of us), are doing a lot of work but unable to show how their math adds up.

The article also makes an interesting point. If markets are so rational, who gets the good stuff? The wealthy. They get the clean air, water and food. Everyone else? Well, they don't unless they organize politically to get what they want.

After reading the article, I realized that many economists seem to think of people like widgets. You know, something that can be approximated by a number, something that has a known and predictable behavior. Something approaching rationality.

But that is an assumption. Markets are not rational. If you don't believe me, try reviewing the hidden, unregulated market of credit default swaps prior to the collapse of the housing bubble. Because the market was hidden, with no true third party accounting of who had the liability or the assets, there was no way to allocate resources in the market. So when it came time to sell the assets, or pay for the liabilities, no one could figure out what to do except sell, sell, sell.

From water privatization to internet access, from the bankruptcy of Orange County to the dot com bubble collapse, we can prove that the market is not rational. It's easy. Americans spend $100 billion a year on illicit drugs. Have you ever seen anyone on drugs make a rational decision? 70% of Americans use prescription drugs, often advertised on TV. Is that rational? There is a huge fast food business in America that doesn't even sell food, they sell something that is an approximation of food. I see people waiting in line to buy it for breakfast before work as I drive to work eating an apple. Is that rational?

I could go on. The point is, there is no way to assume that the market is rational. The market is good for allocating luxuries. We need government to help allocate resources that everyone needs. That's why water, sewer and electricity have been successfully managed for decades as public utilities. That's why commodities are sold and bought in places like the Chicago Mercantile Exchange.

I want to put one more idea out there for you to consider: the market cannot be rational without transparency. If you don't know what's going on in the market, you have no way of knowing what price the market will bear for what you are buying or selling. Therefore, you cannot make a rational allocation of resources.

Most of our markets are not transparent. Take the labor market for example. Employers will not tell you the salary range for a job. "Everyone is different, so we cannot tell you how much you will earn in this position." Employers often prohibit the sharing of salary information to prevent comparisons and jealousy. But that very policy prevents people from making a rational decision about what to ask for in negotiations for salary. It's why women often make less money than men at the workplace. That lack of transparency provides the opportunity for discrimination.

When a market is transparent, all participants can review the data to make an informed decision about how to respond to market conditions. They can make a rational decision about how to allocate resources. Making markets transparent is the only way to ensure a rational market. But it's not a guarantee that the market will be rational.

Without transparency, the market is guaranteed not to be rational. Since most American markets are not transparent, there is little hope of a rational allocation of resources. That's why we need government to act as a third party arbiter of transactions to at least bring some semblance of fairness and accountability to society.

Thursday, April 09, 2015

Ironically, regulation brings freedom

Time Magazine is running an interesting story about the impact of marijuana legalization in the US upon the profits of the drug cartels. Sales of recreational and medical marijuana have hit $2.7 billion in 2014 and projections suggest sales will top $4 billion by 2016. They have also noticed that violence in Mexico has taken a dive, but not all of the that decline can be attributed to legal marijuana sales and that is not what this article is about. But it is somewhat positive news to see that the violence in Mexico is on the decline.

The Time Magazine article presents a certain irony: consumers of marijuana prefer the regulated, tax-paying sources rather than the unregulated black market sources.

Clearly, the consumers want to know what is in the product, they want to know that they're not financing violence and they want to be able to show that they purchased it legally, without fear of going to jail. The takeaway I get from the article is that indeed, a little bit of regulation can lead to freedom in life.

There is another point to this post. Even if the government didn't step in to regulate, the cartels would do the regulating, but with a far heavier hand and response to errors. In the regulated, transparent world of legalized marijuana, you don't die for botching a deal. You do better next time. In the "free market" world of the cartels, every move is scrutinized and every mistake carries a very painful penalty. So, even in the "free market" there is regulation.

This is probably something that free market proponents don't want you to notice. Promoters of free markets like to pretend that the market is rational, pure, unfettered and free to make the best choices for the consumer. What they don't tell you is that having a 3rd party arbiter, a regulator, to observe each transaction, provides a forum for conflict resolution that you won't find with the cartels. Where the cartels use force as the first resort, regulators use diplomacy.

Creating a taxable, transparent market in marijuana has another benefit. Like guns, we know that if guns are banned, the only people getting guns are the criminals. But if we regulate the market, keep records and create forums for conflict resolution, we know who has the guns and the pot. But we don't arrest them just for the purchase, we just keep track of what is going on for the safety of all.

Contrast the American legal marijuana scene with the unregulated market of credit default swaps before the collapse of the housing bubble. Yes, I know this is an unusual segue, but it makes my point. Various entities had bet against each other in the years leading up to the collapse. Some bought credit default swaps, some bought insurance against them. Some were betting against the homeowner, and some were not. Either way, the market was almost completely unregulated with no accountability. No one knew who had what, so when time came to lay the cards down, some of the biggest finance firms in the country folded. Some others sought government protection for a bailout.

This is the point about regulation and the free markets. The regulation of a market can actually make it free, up to a point. If the transactional cost of regulation is too high, the market will not move, and black markets are created. If the transactional costs are low, then more people are willing to participate and that allows capital and products to move. The market adjusts to the regulation and finds a way to make a profit. Everyone is happy.

So when someone comes to you with a proposal for a free market or a "free trade agreement", remind them that the market isn't rational. The drug cartels and finance firms like Goldman Sachs and HSBC know this, too. They just won't admit it.

Wednesday, April 08, 2015

Accountability is the subtext of the inequality debate

The liberal progressive faces an uphill battle in these neoliberal times. They face campaigns in a Congress filled with safe seats. They face an army of paid political mercenaries intent on securing for themselves and their employers an impermeable dominance. They face the scorn of so-called free market agitators with labels like "socialist", "communist" and "moocher".

Yes, the conservative right has been careful to set the scope of debate. They are happy to debate the merits of inequality. They will happily claim that the lust for money only increases the desire of one to innovate and create jobs, despite the evidence to the contrary so plain to see over the last 30 years.

When Elizabeth Warren takes the podium in the Senate and fires off another populist speech, does anyone give a rebuttal to her claims? I think that if someone did, it would be news.

Warren has been beating the drum of inequality since she landed in the Senate after defeating Scott Brown. She has not only shared her views on the problem of inequality of opportunity. She has also been brazen enough to talk about accountability to the point that Wall Street executives have openly discussed withholding campaign funds from Democrats. They seem to think that if they withhold campaign funds from Democrats that peer pressure will prevail upon Warren to simmer down. That didn't happen.

The subtext of this entire debate is accountability. Bankers who robosigned loans and foreclosures before and after the housing bubble collapse did not even see a judge. Insurance companies that denied health insurance due to pre-existing conditions or jacked up rates just to build opposition to Obamacare did not go to jail. Oil men who leave a vast polluted and destroyed landscape after fracking get a check, not a cellmate. Between bankers, insurance and energy, we have a tag team working the country into a froth. Clearly, these are mistakes of a huge proportion. Did we learn from them? Yes, everyone learned from them except the men who perpetrated them. They are not held accountable.

When raising children, we are quick to hold them accountable for their errors. At first, it's just a mistake so we show them the way. But if they continue as before, without following instruction, then we try punishment to curb the errors. Parents can hold children accountable because of their power.

An alcoholic parent cannot be held accountable by his child. The child cannot make a parent responsible when he's passed out on the couch. When she comes home late. When he forgets to attend the baseball game. When she brings McDonalds home for dinner. When he crashes the car. Other people make the parent accountable because they are equal in size and power. They can arrest the errant parent.

Our financial sector, bigger than ever before, is too big to fail, too big to jail. Same goes for the oil, gas and coal industries. Energy, banking and health insurance are all divided by a few really big monopolies. Executives working for those industries pull down tens of millions of dollars a year. Very large corporations can now plow millions into a political campaign, and a million is just chump change when the gross income of a company runs into the billions. This explains why the wealthiest corporations pay very little income tax.

Our public policy at the national and often, the state levels, is dictated by the top 1%. Unlimited campaign contributions find their way to the office holder with no transparency. So when a very large donor makes an error that costs millions of people their jobs, houses or livelihood, it only takes money to make it all go away. We saw this with Wall Street in 2008.

This is the point of progressive taxation. It's not just about inequality of opportunity. It's about inequality of accountability. A CEO making 300x that of his employee cannot be held accountable by the latter. If such a CEO has connections, then he can always avoid accountability. The employee cannot. Progressive taxation helps to level the playing field so that we hold each other accountable for our errors.

A little accountability can go a long way towards better citizens and a better country.

Tuesday, April 07, 2015

Can the fate of a nation be decided by a powerful minority?

Our planet is warming at the fastest rate ever observed. Fracking for oil and gas is destroying the land upon which it is practiced. Too big to fail bankers run away with the money without fear of prosecution. As we pollute the world, health care costs rise, yet an extremely conservative right-wing faction of the US government insists on cutting health care and retirement benefits for programs that are already paid for with payroll taxes. 1 in 5 children live in poverty. 95% of the economic growth created in the last few years has gone to the top 1%.

Yet only the top 1% have any influence on the government. As Elizabeth Warren and Bernie Sanders have both noted, the system is rigged in favor of those who have money. Can any of the most influential people in American government say that they are truly proud of the current situation? Unfortunately, yes.

Yet, when we observe the mainstream press, the megaphone for the wealthy, we are told that everything will be alright. That interest rates are still at historic lows, that energy costs are under control, and that the broth of pesticides sprayed upon our produce is safe to eat, that trade agreements in progress today will eventually help to create jobs when trade barriers are already very low.

Today's post has one main point: the number of people who benefit from a public policy decision is proportionate to the number of people who provide input for that decision. Numerous academic studies have been done to show that in America, the number of people who have input on public policy has declined precipitously since the 1980s. It has been shown that this country is evolving into an oligarchy, like the society in the movie, The Hunger Games.

Lawrence Lessig, a professor at Harvard University has done an amazing job of getting the word out about this trend. He has shown that the "relevant funders" of our elections are the only people who shape public policy. Everyone else is essentially ignored. Money in politics has become the theme in alternative news sources while the mainstream press would rather talk about other things. You know, like the murder in the neighborhood, the robbery at a local bank, or the latest recipe for chicken soup. At least they carry news that is of interest to everyone: the weather.

Perhaps we could learn from the animal kingdom what success looks like. Ants are some of the most successful insects on the planet. The colony depends on input from every member of the colony to survive. Yet, everyone in the colony gets what they need and more. Everyone in the colony cooperates in support of the queen ant. There is actually a single ant colony that extends around the world. When we're gone, they will still be there, doing their thing.

Turning to software, one of the most successful software projects in computer history is the Linux kernel, a project started by Linus Torvalds in 1991. Linux is very similar to Unix, the venerable operating system created by Dennis Richie and Ken Thompson in 1969 and released in 1971 as a general purpose operating system. Web servers, DVD players and supercomputers all run some form of Linux. If you use the internet, chances are, you're accessing a server running Linux. If you have a smart phone, it's probably running Linux. Even if you have an iPhone, it's running BSD, a free operating system that is based on Unix.

Linux is open source software. In open source software, the people decide what goes into the software. The leader is only a guide, nothing more. He does not dictate terms to the people contributing to the software. The software is created from the ground up, not from the top down. This allows more people to have input into the direction of the software, and because the source code is freely available, anyone who knows programming can make changes and run the resulting changes on his own systems. But as soon as he distributes that software, he must make the source code available so that others can use, service it and support it. As a result of this programming philosophy, Linux is the most popular operating system in the world.

The last example I want to offer here is community broadband. As we have seen in the last two decades, the incumbent carriers we know and love, Comcast, Time-Warner, ATT and Verizon, have worked tirelessly to entrench their monopolies and limit competition to the detriment of the communities they claim to serve. They have even worked with the American Legislative Exchange Council (ALEC) to fashion model legislation to protect their interests. 21 states have passed similar legislation designed to hinder or block competing business models for internet access.

In response to this behavior, more than 450 communities across the nation have taken broadband into their own hands. They have built their own networks with their own funding and have provided superior service at higher speeds for less money than the incumbents have provided previously. These communities prevailed despite numerous political and legal campaigns by the incumbents to hinder or block community broadband efforts. In some communities in Colorado, resolutions to assert local control over telecommunications were passed by more than 90%. That model legislation from ALEC? It is designed to prevent community broadband from popping up around the country.

Community broadband is designed to serve everyone in the community, not just some CEO in a corner office in New York.

In all three cases, the work being done is to benefit everyone, not just the leaders. In contrast, what we have seen in the last 30 years is exactly the opposite as a result of the Reagan Revolution.  As the one percent accumulated greater power, they became more concerned with protecting what they have rather than protecting the concerns of the people they must serve in order to keep generating wealth.

In the bailouts of 2008 and 2009, the bankers were bailed out instead of being allowed to fail. Their investors were bailed out instead of being allowed to lose their money. Homeowners on the other hand, were allowed to live with stagnating wages, higher taxes and the loss of their homes and savings. The public policy actions before and after the bubble years clearly show that the current government is not intended to help everyone.

We can change this. No matter what anyone says, ordinary people can exercise that power, but they must organize and work together. TV, radio and advertising are all designed to disrupt our thinking process so that we do not organize and work together. The internet can be a unifying force among us. President Obama was elected largely in part because he understood how to use the internet to raise funds for his campaigns.

I offer to you, two websites devoted to the cause of getting money out of politics, thereby forcing our "leaders" to listen to the rest of us:

mayday.us
The Friends of Democracy

Money in politics is the biggest reform issue of our time. In the previous century, women's suffrage, civil rights and social welfare were issues decided with a far greater participation of the American public. Removing money from politics will allow ideas to be implemented and tested based upon their merits, not upon the narrow thinking of a tiny, wealthy minority. But until we force that tiny minority to share their power by removing the power of their money in politics, true reform of our government will remain out of reach.

Friday, April 03, 2015

A short tour of free books on the internet

When most people think of books, they think of Amazon, Barnes and Noble, and B. Dalton Bookstores. Well, that last one isn't around anymore, but I can remember spending time there in the days of my youth. The point is, people tend to think of buying the books they read and holding them in their hands for reading. I used to be like that. The previous generation though, still prefers to buy a paper book and read it. I am a member of a family of prodigious readers. Literacy is our family legacy. I still like to read books, but now I read them on my computer.

The internet has given birth to something generations previous to mine had not seen before: free content. Not just a little free content. Tons of it. A simple search will yield treasuries of free books to read. The caveat is that these books are free because the marginal cost of reproduction is next to zero. Why? They are computer files, usually PDF files that can be viewed with Adobe Reader on Windows and Mac and Evince on Linux.

This is possible because Adobe had the good sense to make the PDF, the Portable Document Format an ISO standard, free for anyone to use. That means you can write a program that can create PDFs as long as the resulting file conforms to the standard. That is what makes the PDF reader, Evince, and many other programs like it, available for Linux.

In this tax season, it is worth noting that the US government makes all tax forms available as PDFs. You can search for and download a Form 1040 at www.irs.gov and print it yourself. Then you can fill it out by hand. That is just how pervasive PDF technology is.

PDF books are easy to find on the internet. One of the most popular sources is Project Guttenberg. Named after the man who invented the printing press, Project Guttenberg aims to be a worldwide repository of books that are free to download and share (if you're a Jane Austen fan, this is your lucky day). They offer a variety of formats to choose from, but the common feature among their books is that the copyright has expired on them. With 46,000 books to choose from, there is plenty of content to keep the avid reader busy.

Here are a few sources where the books are published under open licenses like the Creative Commons license or the public domain:

O'Reilly Open Books. If you want to learn programming and Linux, this is the place to go for free books.

Open Culture - A collection of 700 free ebooks you can read on any device.

The Library of Congress - Here you will find a treasure trove of books beyond copyright or just offered in the public domain.

Social Science Research Network - if you like reading scientific papers on human behavior, this is the place to go.

Along the way I've found a few very interesting titles, too:

Against Intellectual Monopoly - A fascinating read on the history and myths of intellectual property that promotes the abolition of all intellectual property with a particular emphasis on patents.

The End of Loser Liberalism - A treatise on the myth of the "free market" agenda of the conservative right and how liberals can expand the scope of the debate to bust the myth in political debate.

The Book On the Taboo Against Knowing Who You Are - If you have ever read The Wisdom Of Insecurity by Alan Watts, this is the other book to read.

Free culture is where you find it on the internet because the internet is made for sharing of information. It is designed to route around damage. It is the pathway to a collective consciousness that can serve humanity. Use it wisely.