Category: Current Affairs

The Online Tipping Outrage

The latest outrage cycle was started by April Glaser in Slate who is outraged that some online delivery companies apply tips to a worker’s base pay:

My first DoorDash order is probably my last because, as journalist Louise Matsakis put it on Twitter, “I don’t believe that a single person intends to give a tip to a multibillion dollar venture-backed startup. They are trying to tip the person who delivered their order.”

You will probably not be surprised, however, that Slate is also outraged at tipping.

Tipping is a repugnant custom. It’s bad for consumers and terrible for workers. It perpetuates racism.

But one way for a firm to get rid of tipping is to guarantee a payment per delivery. Many delivery workers may prefer such a system because tips are often perfunctory and therefore from the point of view of the worker random or they vary based on factors over which the delivery person has little control (e.g. worker race but also the customer’s online experience and whether other workers got the pizza into the oven on time). In other words, the no-tip system reduces the variance of pay. Moreover, it won’t reduce pay on average. Delivery workers will earn what similarly skilled workers earn elsewhere in the economy whether they get to keep “their” tips or not. The outrage over who gets the tip is similar to complaining about who pays the tax, the supplier or the demander.

There are exceptions. In some industries, such as bartending, the quality of the service can vary dramatically by worker and tips help to reward that extra quality when it is difficult to observe by the firm. In these industries, however, both the workers, at least the high quality workers, and the firms want tips. If the firms themselves are removing tips that is a sign that they think that the worker has little control over quality and thus tips serve no purpose other than to more or less randomly reward workers. Since random pay is less valuable than certain pay and firms are less risk averse than workers it makes sense for the firm to take on the risk of tips and instead pay a higher base (again, with the net being in line with what similar workers earn elsewhere).

In short, a job is a package of work characteristics and benefits and it’s better to let firms and workers choose those characteristics and benefits to reach efficient solutions than it is to try to move one characteristic on the incorrect assumption that all other characteristics will then remain the same, to do so is the happy meal fallacy in another guise.

Martin Gurri reports from the front

I have met their kindred before, in other glittering places. They run the institutions that hold center stage in our society, but look on the world as if from a walled mountain fortress, where every loud noise from beyond is interpreted as risk and threat. They disagree about minutia, but mostly move in lockstep, like synchronized swimmers, with word and thought. They are earnest but extraordinarily narrow. In a typical complaint, one speaker blamed the public for hiding in an “information bubble” – yet it occurred to me, as I sat through the conference, that the bubble-dwellers controlled the microphones there.

The same unmodulated whine about present conditions circled around and around, without even the ambition to achieve wit, depth, or originality…

Here is the full post.

*Me the People: How Populism Transforms Democracy*

By Nadia Urbinati, I think of this book as the next step after Martin Gurri.  Here is one bit:

…the massive usage of the internet — which is an affordable and revolutionary means of interaction and information sharing by ordinary citizens — has supercharged the horizontal transformation of the audience and made the public into the only existing political actor outside institutions born from civil society.

But more significantly, populism is so diverse and the word is so often misused, how should we best understand it?  First, by breaking down parties, the new internet populism raises the status of personalized individual leaders, such as Trump and also AOC.  Thus:

…populism in power is actually a new form of mixed government in which one part of the population achieves a preeminent power over the other(s).  As such, populism competes with (and, if possible, modifies) constitutional democracy in putting forth a specific and distinctive representation of the people and the sovereignty of the people.

Populism also has a hard time giving up power, because the rhetoric is purifying, and the pretense is that the current government does in fact represent a more or less unitary “will of the people,” enemies of the people aside of course.  Elections are about revealing a majority opinion that (supposedly) already exists, and thus populism does not fit entirely easy into standard democratic practice.

Here is more:

As such, populism is more than merely a movement of contestation or mobilization, and it should not be confused with social movements in civil society.  Populism is a movement of contestation against the existing political establishment, but one that seeks a majority that would rule with unchecked ambitions and plan to remain power for as long as possible, though without revoking political liberty or eliminating adversaries.  The “benign” aspects of populism in power include its dwarfing of the opposition and minorities by humiliating them and creating an overwhelming propaganda campaign that endlessly reinforces the power of majority opinion.

Populism is not just a style of politics, so you can’t expect a successful and truly left-wing populism, nor will populists end up as a successful vehicle for “right-wing” ideas either.  Beware!

There is too much political science jargon in this book, and many of the paragraphs are too long or too circuitous, and furthermore much of the best content is difficult to summarize.  Nonetheless this book makes more sense to me than the treatments of populism I read in the mainstream press or in “intelligent” magazines, and I found it genuinely insightful throughout.  Recommended, at least if you are up for a particular kind of read.  You can pre-order the book here.

Should Alaska cut state university funding by 41 percent?

That is what they have done, in order to boost the Permanent Fund Dividend payments to the citizenry.  Here is the closing segment from my Bloomberg column:

I see Alaska’s decision as reflecting two broader trends in the U.S. First, a lot of small educational institutions are closing, consolidating or drastically cutting back, most of all in out-of-the-way places. Second, regions are diverging, both economically and culturally. More and more educated people are moving to the major cities.

You may have mixed or negative feelings about these two developments. Taken together, however, they could lead to a bunch of state schools on the chopping block. I suppose it’s fine to complain about this outcome, but far better would be to address the underlying trends.

There are things government could do if it were bold enough. How about a series of state-specific visas to foreigners, designed to encourage them to settle in Alaska and other underpopulated states? Alaska’s population could well rise to more than a million, and then the benefits of a good state university system would be more obvious, including for cultural assimilation. In fact, how about a plan to boost the population of Alaska to two or three million people? What would it take to get there?

That’s my biggest worry in all this: that that the diminution of the University of Alaska amounts to a kind of giving up. Alaska is supposed to be the American frontier, a place for taking chances. It is a sign of defeatism if the state has now decided that its main task should be mailing out dividends to its residents. The animating spirit should be one of science and exploration, as might be enabled by a well-functioning university system.

The University of Alaska in Fairbanks is rated among the world’s top science institutions for studying the Arctic, a region that might well grow considerably in importance, in part due to climate change. A well-developed and well-educated Alaska is a kind of option on future Arctic development and also on geopolitical influence. If new frontiers are opening up, then Alaska — and America — should want to be ready for them.

We really do need dynamism to keep our institutions going.  Allison Schraeger put it well on Twitter: “a preview of our UBI future.”

EU markets in everything?

I had never heard about this before:

The controversial practice of picking corporate sponsors for the European Union‘s rotating presidency is to continue, despite an outcry from MEPs.

EU countries have been raising eyebrows by doing deals with increasingly controversial multinational corporations during their stints overseeing debates at the EU council.

Romania’s presidency in the first half of 2019 was sponsored by Coca-Cola, with the US drinks giant’s logo plastered over banners and signs at meetings. One council summit in Bucharest featured Coca-Cola branded bean bag chairs, and a fridge of free drinks plastered with statistics about the company’s contribution to the economy.

Other sponsors of the council presidency have included car manufacturers, software companies, and other firms with vested interests in influencing EU policy.

But hopes that the incoming Finnish presidency, which took the helm this summer, might end the practice, were dashed after it picked German car manufacturer BMW as a sponsor – despite the firm being hit with a fine over its cars’ diesel emissions earlier this year.

Here is the full story, via Jon Stone.

My Conversation with Neal Stephenson

Here is the transcript and audio, and here is the CWT summary:

If you want to speculate on the development of tech, no one has a better brain to pick than Neal Stephenson. Across more than a dozen books, he’s created vast story worlds driven by futuristic technologies that have both prophesied and even provoked real-world progress in crypto, social networks, and the creation of the web itself. Though Stephenson insists he’s more often wrong than right, his technical sharpness has even led to a half-joking suggestion that he might be Satoshi Nakamoto, the shadowy creator of bitcoin. His latest novel, Fall; or, Dodge in Hell, involves a more literal sort of brain-picking, exploring what might happen when digitized brains can find a second existence in a virtual afterlife.

So what’s the implicit theology of a simulated world? Might we be living in one, and does it even matter? Stephenson joins Tyler to discuss the book and more, including the future of physical surveillance, how clothing will evolve, the kind of freedom you could expect on a Mars colony, whether today’s media fragmentation is trending us towards dystopia, why the Apollo moon landings were communism’s greatest triumph, whether we’re in a permanent secular innovation starvation, Leibniz as a philosopher, Dickens and Heinlein as writers, and what storytelling has to do with giving good driving directions.

Here is one excerpt:

COWEN: If we had a Mars colony, how politically free do you think it would be? Or would it just be like perpetual martial law? Like living on a nuclear submarine?

STEPHENSON: I think it would be a lot like living on a nuclear submarine because you can’t — being in space is almost like being in an intensive care unit in a hospital, in the sense that you’re completely dependent on a whole bunch of machines working in order to keep you alive. A lot of what we associate with freedom, with personal freedom, becomes too dangerous to contemplate in that kind of environment.

COWEN: Is there any Heinlein-esque-like scenario — Moon is a Harsh Mistress, where there’s a rebellion? People break free from the constraints of planet Earth. They chart their own institutions. It becomes like the settlements in the New World were.

STEPHENSON: Well, the settlements in the New World, I don’t think are a very good analogy because there it was possible — if you’re a white person in the New World and you have some basic skills, you can go anywhere you want.

An unheralded part of what happened there is that, when those people got into trouble, a lot of times, they were helped out by the indigenous peoples who were already there and who knew how to do stuff. None of those things are true in a space colony kind of environment. You don’t have indigenous people who know how to get food and how to get shelter. You don’t have that ability to just freely pick up stakes and move about.

And:

COWEN: What will people wear in the future? Say a hundred years from now, will clothing evolve at all?

STEPHENSON: I think clothing is pretty highly evolved, right? If you look at, yeah, at any garment, say, a shirt — I was ironing a shirt today in my hotel room, and it is a frickin’ complicated object. We take it for granted, but you think about the fabric, the way the seams are laid out.

That’s just one example, of course, but you take any — shirts, shoes, any kind of specific item of clothing you want to talk about — once you take it apart and look at all the little decisions and innovations that have gone into it, it’s obvious that people have been optimizing this thing for hundreds or thousands of years.

New materials come along that enable people to do new kinds of things with clothing, but overall, I don’t think that a lot is going to change.

COWEN: Is there anything you would want smart clothing to do for you that, say, a better iPad could not?

STEPHENSON: The thing about clothing is that you change your clothes all the time. So if you become dependent on a particular technology that’s built into your shirt, that’s great as long as you’re wearing that shirt, but then as soon as you change to a different shirt, you don’t have it.

So what are you going to do? Are you going to make sure that every single one of your shirts has that same technology built into it? It seems easier to have it separate from the clothing that you wear, so that you don’t have to think about all those complications.

There is much more at the link, including discussions of some of his best-known novels…

What is the America-China trade war all about?

That is the subject of my latest Bloomberg column, and here are the closing bits:

So that means the trade war is really all about Huawei and Taiwan. If the U.S. persists in trying to eliminate Huawei as a major company, by cutting off its American-supplied inputs and intimidating foreign customers and suppliers for Huawei equipment, it will be difficult for the Chinese to accept. In this case, the reluctance to make a deal will be on the Chinese side, and the structure and relative power of the various American interest groups are not essential to understanding the outcome.

The question, then, is whether the U.S. national security establishment, and in turn Congress (which has been heavily influenced on this question), will accept a compromise on Huawei. Maybe that means no Huawei communications technologies for the U.S. and its closest intelligence-sharing allies, but otherwise no war against the company. That is the first critical question to watch in the unfolding of this trade war. The answer is not yet known, though it seems Trump is willing to deal.

The second major question, equally important but less commented upon, is Taiwan. China has long professed a desire to reunite Taiwan with the mainland, using force if necessary. If you belong to the U.S. national security establishment, and you think a confrontation with China is necessary sooner or later, if only because of Taiwan, you would prefer sooner, before China gains in relative strength. And that militates in favor of the trade war continuing and possibly even escalating, as the U.S. continues to push against China and there is simply no bargain to be had.

It is far from clear what a U.S.-China deal over the status of Taiwan could look like. How much Americans actually care about Taiwan is debatable, but the U.S. is unlikely to abandon a commitment that would weaken its value as an ally around the world. And unlike with Huawei, it is difficult to see what a de-escalation of this issue might look like.

So: If the Huawei and Taiwan questions can be resolved, then the trade war should be eminently manageable. Now, does that make you optimistic or pessimistic?

There is much more at the link.

The health care public option in Washington state

This excellent Sarah Kliff NYT article is from a few weeks ago, but I missed it the first time around.  Here is the clincher:

“The whole debate was about the rate mechanism,” said Mr. Frockt, the state senator. “With the original bill, with Medicare rates [for the state’s public option], there was strong opposition from all quarters. The insurers, the hospitals, the doctors, everybody.”

Mr. Frockt and his colleagues ultimately raised the fees for the public option up to 160 percent of Medicare rates.

“I don’t think the bill would have passed at Medicare rates,” Mr. Frockt said. “I think having the Medicare-plus rates was crucial to getting the final few votes.”

Nonetheless the piece is interesting throughout, and illustrates some basic dilemmas with health care reform and public options in particular, especially when a sector is controlled by powerful lobbies.

William Darity Jr. and Darrick Hamilton advising the Democratic Party

Here is the opening of a Jacob M. Schlesinger Wall Street Journal piece:

For decades, William Darity Jr. and Darrick Hamilton toiled in obscurity. They criticized mainstream economists and politicians for failing to address racial inequality, and touted more radical remedies of their own.

Now, with the 2020 presidential campaign under way and liberal Democrats ascendant, the two economists are in the spotlight, thrust into the middle of an intraparty debate over how much to embrace big government and a race-oriented message.

Their signature ideas—guaranteed jobs for all adult Americans seeking them, government-backed trust funds for American babies and reparations for slave descendants—are being talked about on the campaign trail and, in the case of reparations, during a raucous congressional hearing in June.

The two African-American economists’ theories on “stratification economics,” which focuses on economic gaps between whites and blacks, have helped shape the rhetoric and platforms of several candidates.

At a conference earlier this year for liberal activists, New Jersey Sen. Cory Booker told Mr. Hamilton he had “laid the foundation for a lot of things that we’re doing,” including “baby bonds.” Former Texas Rep. Beto O’Rourke name-checks Mr. Hamilton in television interviews, calling him an “extraordinary economist” who “talks about a more conscious capitalism.”

Mr. Hamilton, an Ohio State University professor, has advised the campaigns of California Sen. Kamala Harris on middle-class tax cuts, Vermont Sen. Bernie Sanders on job guarantees and Massachusetts Sen. Elizabeth Warren on student-debt relief.

And this section:

They have teamed up to write more than 50 articles for academic and popular journals and books, and pioneered what they consider a new field of scholarship they branded stratification economics. They contend that mainstream economists tend to regard racial discrimination as a short-term market glitch that market forces will correct eventually. That logic, they say, leads to the conclusion that persistent African-American woes result mainly from their own failings, such as inadequate education or poor financial choices.

Policy makers, they contend, focus too much on employment, income and education and not enough on family wealth across generations. They say wealth is a better measure of household economic security—the ability to weather emergencies, pay for education, afford homes in good neighborhoods and take risks.

The racial wealth gap accumulated over years, they say, stoked not just by slavery but by 20th-century policies that helped whites and marginalized African-Americans.

I hope you subscribe or can get through the gate, as there are many meaty sections.  One interesting angle, of course, is whether their claims and theories are true.  But most of all this piece, and their role as advisers, marks the end of an era, namely that of mainstream consensus technocracy.  The range of ideas being considered in politics today is remarkably wider than just a few years ago, for better or worse.  And, whether we like to admit it or not, the academic world also will follow rather than just lead this process.  If a plausible candidate pops up and starts making claims, especially on the Democratic side, the academic research supporting those claims will rise in status.

Fasten your seatbelts.

Addendum: Here are links for Darity, here are links for Hamilton.

Han Kuo-yu has won the Kuomintang primary in Taiwan

So yes, Taiwan does have the weirdest politics in the world right now.  Here is a reprise from my Bloomberg column last week:

Another candidate vying for the KMT nomination is Han Kuo-yu, mayor of Kaohsiung and a blunt-speaking outsider populist. He has called for closer ties with China and is believed to be China’s favored candidate, calling China and Taiwan “two individuals madly in love.” It is believed that Chinese cyber-operatives have been working to promote his candidacy. He might be more interesting yet.

What if Han wins the general election and calls for “peaceful reunification” of the two Chinas, based on “one country, two systems”?  Solve for the equilibrium!  I see the following options:

1. They go ahead with the deal, and voila, one China!

2. The system as a whole knows in advance if this is going to happen, and if it will another candidate runs in the general election, splitting the KMT-friendly vote, and Han never wins.

2b. Han just doesn’t win anyway, even though his margin in the primary was considerable and larger than expected.

3. The current president Tsai Ing-wen learns from Taiwanese intelligence that there are Chinese agents in the KMT and she suspends the general election and calls a kind of lukewarm martial law.

4. Han calls for reunification and is deposed by his own military, or a civil war within the government ensues.

5. Han foresees 2-4 and never calls for reunification in the first place.

Well people, which of these would it be?  Here is general background (NYT) on the new primary results.

Does Taiwan have the weirdest politics in the world?

That is the topic of my Bloomberg column earlier in the week, here is one excerpt:

Chiang Kai-shek, the first leader of the island, was part of a generation of Asian visionary leaders which is perhaps without parallel. It includes Lee Kuan Yew of Singapore, Park Chung-Hee in South Korea, Mao Zedong and Deng Xiaoping in China, and Ho Chi Minh in Vietnam. Whether you admire these figures or not, theirs  was an unparalleled time for nation building and at a much swifter pace than in European history.

And there is no successful polity that has so many apparently insoluble problems:

Taiwan is also inextricably linked to the economy of the mainland. By one estimate, over 10% of the Taiwanese population lives or works in mainland China, including many of the most ambitious Taiwanese, and China is by far the number one counterparty for trade and investment. Taiwanese real wages stagnated from 2000-2016, in large part because it was more profitable for Taiwanese investors to send their capital to the mainland. The Taiwanese birth rate has plummeted to 1.2 per woman, possibly the lowest in the world.

The Chinese also wish to take them over, by the way.  Finally, I close with some remarks on the forthcoming election.

Should the citizenship question be put on the Census?

That is the topic of my latest Bloomberg column, and here is one excerpt:

Unlike many of those who push for the question, I would like to boost the flow of legal immigration by a factor or two or three. Nonetheless, are we supposed to let foreigners in (which I favor), and give them a rapid path to citizenship (which I also favor), but somehow we are not allowed to ask them if they are citizens? To me this boggles the mind.

The real point is that the Democratic Party has talked itself into an untenable and indeed politically losing rhetorical stance on immigration (did you watch the debates? decriminalize illegal migration? health care benefits for illegal immigrants?), and the Census battle is another example of that.  It is no surprise that Trump wishes to keep it alive as a political issue:

Do you really wish for your view to be so closely affiliated with the attitude that citizenship is a thing to hide? I would be embarrassed if my own political strategy implied that I take a firm view — backed by strong moralizing — that we not ask individuals about their citizenship on the Census form. I would think somehow I was, if only in the longer run, making a huge political blunder to so rest the fate of my party on insisting on not asking people about their citizenship.

Not asking about citizenship seems to signify an attitude toward immigrants something like this: Get them in and across the border, their status may be mixed and their existence may be furtive, and let’s not talk too openly about what is going on, and later we will try to get all of them citizenship. Given the current disagreement between the two parties on immigration questions, that may well be the only way of getting more immigrants into the U.S., which I hold to be a desirable goal. But that is a dangerous choice of political turf, and it may not help the pro-immigration cause in the longer run.

Finally:

Countries that do let in especially high percentages of legal immigrants, such as Canada and Australia, take pretty tough stances in controlling their borders. Both of those countries ask about citizenship on their censuses. When citizens feel in control of the process, they may be more generous in terms of opening the border.

If you can’t ask about citizenship on your census, as indeed Canada and Australia do, it is a sign that your broader approach to immigration is broken.  I know this is a hard one to back out of, but if your response is to attack the motives of the Republicans, or simply reiterate the technocratic value of a more accurate Census, it is a sign of not yet being “woke” on this issue.  America desperately needs more legal immigration.