Category Archives: Economic Colloquy

In the wake of the “Great Recession” we discuss America and world economic progress (or lack there of).

Why A One-Size-Fits-All Minimum Wage Doesn’t Work For America

It seems to me that federally enforced on-size-fits-all minimum wage legislation is an ineffective way for policy makers to improve the standard of living for this country’s people.

I completely agree that something needs to be done. There are a thousand different ways we could improve the standard of living for the entire country. Simple and effective ways we could close the income gap between the richest and the poorest among us, but $10.10 an hour isn’t one of them. Frankly, it’s lazy policy making.

$10.10 an hour means different things in different parts of the country:

I think it is difficult for people in different parts of the country to understand what $10.10 an hour means to one another. Someone in New York City probably thinks that $10.10 an hour is slave wages while someone in Jackson, Mississippi (capital of MS) probably considers $10.10 an hour a livable wage. That is because the average cost of living varies wildly from region to region in the United States.

Average Cost of Living

Housing Prices Vary Wildly Across Major Cities: 

We can quickly compare median sales prices for homes across the country (source):

City Median Sale Price
Manhattan, NY $1,175,000
Jackson, MS $184,502
Seattle, WA $435,000
Atlanta, GA $245,000
San Francisco, CA $945,000

Gas Prices Vary Wildly Across Major Cities: 

We can quickly compare gas prices across the country (source)

City Regular Mid Premium Diesel
Manhattan, NY $4.052 $4.216 $4.354 $4.479
Jackson, MS $3.440 $3.642 $3.812 $3.737
Seattle, WA $4.035 $4.152 $4.255 4.109
Atlanta, GA $3.692 $3.871 $4.045 $3.893
San Francisco, CA $4.225 $4.342 $4.440 $4.291

Note: There are similar variances for food and clothing costs.

It is important to realize that these major variances are across major cities. If you compare rural areas to cities the variance is even more dramatic. So why does anyone expect a one-sized-fits-all minimum wage to work across the country?

The Solution: A Livable Wage that Fits

If we want to increase the minimum wage it seems like we need to make an effort to understand what that wage is in each part of country. We should not pick a number that everyone is expected to implement across the board. The country is to diverse for that to be successful.

What may be a fit for Seattle, WA would probably be overly burdensome to businesses in Jackson, MS. What may work in Jackson, MS would probably be insufficient in Manhattan, NY. So why do we treat wages the same when costs across the country are provably and undeniably different? This makes no sense to me.

Instead, it seems like we should empower our communities and local policy makers to actin the best interest of their constituents by providing the people living there with critical data and information to make better decisions for themselves. And if we are going to implement something federally (which I don’t think we should) – shouldn’t we at least make an effort to make it work for everyone?

We are a great country because of our diversity. There is something, somewhere, for everyone. We have always embraced that mantra. I don’t think we should stop now.

The Economics of Compounded Growth

Our economy slowly grows at around 4% a year. This is a given. An expectation. Anything less is seen as a failure, anything more is an achievement.

I read an article today that did a good job of putting that kind of growth into perspective.

“Let us imagine that in 3030BC the total possessions of the people of Egypt filled one cubic metre. Let us propose that these possessions grew by 4.5% a year. How big would that stash have been by the Battle of Actium in 30BC? This is the calculation performed by the investment banker Jeremy Grantham(1).
The trajectory of compound growth shows that the scouring of the planet has only just begun. We simply can’t go on this way.

Go on, take a guess. Ten times the size of the pyramids? All the sand in the Sahara? The Atlantic ocean? The volume of the planet? A little more? It’s 2.5 billion billion solar systems(2).”

This idea makes me wonder: Where is our breaking point? Where is the point in which we can’t sustain growth any longer? And what is our contingency plan?

I don’t know. Maybe we are already there. Maybe technology will let us keep going further than any of us ever dreamed. I don’t claim to know, but it’s certainly something we should all consider.

Problems and Solutions to the Broken Healthcare System

My wife and I recently had a little girl. Until that moment I had never been exposed to the healthcare and insurance ecosystem. I have been fortunate. I’ve never had an extended stay at the hospital, I’ve never been on prescription medication, and as an adult, I have never been to the doctor outside a checkup. Now I realize that the system is completely convoluted and non-transparent.

From what I can tell there are four major problems with the healthcare and insurance mechanisms.

1. Prices for healthcare services are unavailable, non-existent, or not published.
2. There is no crowd-sourced ratings system for hospitals (think yelp for hospitals).
3. Since everyone is insured no one cares about cost. This has resulted in higher prices.
4. The people have no power to control the quality or cost of the healthcare services.

These four problems ultimately result in a system that is too expensive, low quality, and where the people have no power to do anything about it.

Here are my proposed solutions:

1. Pricing for healthcare services are unavailable, non-existent, or not published.

Require all hospitals post itemized prices for their goods and services. Every procedure should have an itemized “menu” outlining what the procedure may cost. Since any given procedure is highly variable the menu should include “average cost”, “best case”, “most likely”, and “worst case” scenarios.

The menu should also include things like bandages, medication, and anything else a hospital could use to inadvertently pad the bill.  Great hospitals should even consider hiring a “budget specialist” who discusses costs and options with each patient.

These menus should be posted online and available before he procedure. This will allow individuals and insurance companies to shop around for a facility that meets the individuals’ need. This will also drive prices down since hospitals will be forced to compete based on price (or provide superior service to justify higher prices).

I would not eat at a restaurant that didn’t post prices so I should not have to receive healthcare services without prices either.

2. There is no crowd-sourced ratings system for hospitals (think for hospitals).

There should be a crowd-sourced ratings system for hospitals. In my opinion this would have been a much better investment than When hospitals are forced to compete for business based on price and services the consumer benefits. Prices will ultimately fall and service will rise.

For example, in Atlanta there are several major hospitals in the metro area. For most procedures I have no idea what a service cost or who the best service provider may be. I usually just go to the closest major hospital. I imagine most people do the same thing.

A rating system would enable a consumer to quickly and easily search for a service provider based on thousands of consumer ratings. Ultimately a sick person cannot choose if they want to go to the hospital, but they can choose which hospital they visit. The power of consumer choice based on good information will ultimately force hospitals to compete.

3. Since everyone is insured no one cares about prices. This has resulted in higher prices.

The third major problem I see with the healthcare system are insurance companies.

Healthcare prices are so complex and expensive (for reason listed above) that no one can or wants to deal with it. We defer all responsibility to our insurers. Now, with the implementation of the Affordable Care Act (Obamacare) we have no choice anyways. Ultimately this leads to a system where no one cares about prices because they will be paying the same insurance premium regardless. But this is a false premise.

Because no one cares about prices and live under the illusion that their costs are the same there is no incentive to seek more cost effective solutions. People rarely look at their hospital bill and pay whatever the insurer requires. This ultimately leads to higher healthcare costs and higher healthcare insurance premiums.

Healthcare insurers should provide incentives (lower insurance premiums) to individuals who shop around for better prices and value. This would ultimately lower insurance prices and force hospitals to compete again.

4. The people have no power to control the quality or cost of the healthcare services they receive. 

The biggest problem with our healthcare system is that the people receiving the services have no power to control prices or the quality of service they receive. The appropriate infrastructure is not in place. All of the power resides with the insurance companies and healthcare providers.

Insurance companies operate as powerful unions who dictate what they will pay a hospital for a given good or service. Insurance companies have large staff who perform complex pricing studies so they understand what people are paying and how much a product SHOULD cost regardless what a hospital charges.

This results in hospitals charging several times market value for a given good or service because they fully expect the insurance company to pay only a small fraction of that amount. Meanwhile: the consumer is screwed, hospitals charge too much, and insurance companies reek most of the profits.


Obamacare has only served to strengthen this broken system by further empowering insurance companies and disenfranchising the individual. Since EVERYONE is now forced to have healthcare insurance this eliminates any opportunity for individuals to negotiate or bargain for themselves.

Ultimately, we live in a system where the insurance companies dictate how much they will pay hospitals and how much they will charge consumers. Meanwhile, there has been no progress toward a system that promotes competition, dives prices down, or leads to better services.

The military passes a financial audit for the first time

For the first time since 1990, when the Congress approved the Chief Financial Officers Act, which among other things, required all federal agencies and departments to produce what would be regarded as a clean financial statement on their budgets, a branch of the U.S. military passed a financial audit.

As reported by Jamie Dupree:

“It was the first time any branch of the military service had been given an “unqualified favorable audit” for being able to show where billions in funding had gone.

Let me repeat that – it was the first time that any part of the service had been able to fully account for where all of its money was spent.”

This begs the question: What are the consequences for committing fraud, failing audits, and abusing tax dollars? Apparently nothing. What is the point of an audit if there is no enforcement?

Morality: Questioning Land Ownership

I began to think about the concept of  land ownership after reading two separate books, whose authors probably would not agree on the subject. The first was the final  pamphlet  in a series of writings by Thomas Paine called “Agrarian Justice”. The second is from a book I read about a year ago by Ron Paul called “Liberty Defined“.

Both Ron Paul and Thomas Paine are known for their outspoken “pro-Liberty” stance so I was interested to see such a dynamic exist between their ideas about land ownership. It also caused me to examine my own thoughts on the subject.

1. Opposing Views: Thomas Paine and Ron Paul on Land Ownership

In context, it may be helpful to quickly describe the two men’s views on the morality and right of land ownership and then my own thoughts on the subject.

1a. Ron Paul on Land Ownership:

Ron Paul is a champion of the Austrian school of economic thought. He believes that private land ownership is a pivotal component to a successful economy, personal liberty, and natural rights.  Ron Paul is against public land ownership, especially ownership by the Federal Government, citing the misuse of public land in the abuses of eminent domain, lobbyist groups, and otherwise corrupt actions by Governments. On many of these points I agree.

“In a free society, the land is owned by the people, not the government…Total federal ownership is more than one third of the land mass of the fifty states. But that’s not the only problem…Taxation and regulations are so cumbersome that land owners are essentially renters with no right to the land…”

Ron Paul also hints and problems of facism and oligarchical control of land:

“Today’s corporations and private businesses ask local governments to condemn land in order to resell it to them. The promise is that the land value will go up, the business will pay more taxes, the municipality will benefit, and the new business will earn moremoney with its new, preferable location…This is a modern distortion and abuse of the principle of eminent domain.”

The part I do not believe Ron Paul addresses  is the potential for private land owners and corporations to own and hold giant portions of land into perpetuity. If it is every man’s natural right to own land how can we justify one man or single corporation to own it all – leaving nothing for some people. Isn’t then, the perpetual ownership of massive amounts of land inherently immoral and contrary to liberty?

Thomas Paine addresses some of these concerns.

1b. Thomas Paine on Land Ownership:

Thomas Paine believed that, in a civilized state, individuals are entitled to the fruits of their improvements to land. And since it is impossible to separate the improvements made to land and the land itself property ownership is a right. Paine did however draw a distinction between the land itself (which everyone is entitled to) and the cultivation and improvement of that land (which the laborer is entitled to):

“And as it is impossible to separate the improvement made by cultivation, from the earth itself, upon which that improvement is made, the idea of landed property arose from that inseparable connection; but it is nevertheless true, that it is the value of the improvement, only, and not the earth itself that is individual property. Every proprietor therefore of cultivated land owes the community a ground-rent for the land which he holds…

The additional value made by cultivation, after they system [of property ownership] was implemented, became the property of those who did it, or who inherited it from them, or who purchased it. It had originally no owner. Whilst, therefore, I advocate the right, and interest myself in the hard case of all those who have been thrown out of their natural inheritance by the introduction of the system of landed property, I equally defend the right of the possessor to the part which is his…”

Thomas Paine offers the following solution to bridge the gap between the rights of land owners (those who own land and cultivate it) and the rights of non-land owners (those who have a right to the ground itself, but cannot use it because it is occupied):

“To create a National Fund, out of which there shall be paid to every person, when arrived at the age of twenty-one years, the sum of Fifteen Pounds sterling, as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property. And also, The sum of Ten Pounds per annum, during life, to every person now living, of the age of fifty years, and to all others as they shall arrive at that age.”

Many people equate Thomas Paine’s solution with the modern day property tax and Social Security payments.

2. My Thoughts on the Morality of Land Ownership

The biggest problem I see with land ownership today is the perpetual ownership of mass amounts of land by the wealth elites, government, and corporations. This system usually means that large plots of valuable land and it’s resources are owned by the same family, company, or the Government for centuries.

I wonder: Is the process of perpetual and infinite land ownership acceptable in a free society or is it a modern form of royalty – where power and resources are passed down from generation to generation by a group of powerful elites?*

25 men control over 30 million acres of land (2%).
* The federal government owns more that 650 million acres of land (30%).

Is $15 a fair minimum wage?

This morning in Atlanta, GA fast food workers are going on strike in an effort to demand a higher minimum wage of $15 per hour. That is $31,500 a year for a full time fast food employee (not including benefits).

As matter of practice I believe it is good policy for any given employer to treat their employees with a certain amount of dignity and respect – including paying their employees a fair wage. I believe this not just on moral grounds, but also as a matter of doing good business and competing in the marketplace.

For example, companies like McDonalds and Wal-Mart are notorious for treating and paying their long-time employees poorly. In response this has directly affected the quality of their businesses (no one shops at Wal-Mart or McDonald’s for the ambiance) and, perhaps more importantly, degrades their reputation with the consumer. In the long run this is just bad business.

Bad business doesn’t mean that the Government should necessarily litigate their business practices though. Bad business decisions for one company presents a new opportunity for another company (thus opening up new opportunities for employees as well). For example, companies like Costco and Chick-fil-a have decided to pay employees better and implement a different sort of culture. Ultimately, this has lead to better quality services, higher profits, and happier employees – all without Government intervention.

Problems with an artificially high minimum wage:

While the idea of every worker, regardless of their job title, earning over $30,000 per year may sound like a good idea to some people – it is important to point out that there are many unforeseen consequences.

1. It disrupts small business’s ability to compete.

Mandating an artificially high minimum wage (especially one as high as $15/hr) makes it very difficult for businesses to compete in the market place.

For example, let’s say that a local retail boutique (The Little Apple Boutique) offer’s high wages in an effort to draw in the best employees. They need these employees because part of their business model is to offer superior customer service in exchange for moderately higher prices for their goods. Their profit margins are low because the cost of paying their employees and running the business is high, but this is the niche that they have carved out for their business and it’s working.

When an artificial minimum wage is introduced this destroys The Little Apple Boutique’s ability to execute their business plan. They can no longer attract the best employees because every other business in the area is offering the same wage. The Little Apple Boutique can’t afford to raise their wages any higher and stay in business.  Six months later customers begin to complain that The Little Apple Boutique’s customer service isn’t what is used to be. Twelve months later The Little Apple Boutique is out of business.

2. High minimum wage closes the gap between the poor and the middle class, but not between the 1% and 99%.

In general, people are very aware (and concerned) about wealth inequality in America. There is a constantly growing gap between the super-rich and everyone else. But rather than addressing that inequality gap an artificially high minimum wage could serve to expand it.

US Wealth Distribution

2a. High minimum wages hurt small businesses and but do not affect big corporations

Most of the poor and middle class people in America shop at the same places. (We all shop at places like Wal-Mart, Target, Publix, McDonald’s, etc.) The places that we can afford to shop, in general, employee a large number of employees at or slightly above the current minimum wage.

Higher minimum wage (especially $15/hr) will ultimately drive prices up at places where the poor and middle class shop. Overall this means that the middle class will be poorer (assuming they already made above minimum wage, but now have higher prices) and only serve the poor marginally (assuming the poor now make $15/hr, but now have to pay higher prices).

The one class that the higher minimum wage does not affect is the rich. Moderately higher prices do not affect their lifestyle and they probably don’t shop at McDonalds or Wal-Mart anyways.

2b. Higher minimum wages hurt middle class small businesses, not rich corporations, ultimately helping the rich corporations.

On the surface, this seems like a battle waged against big and evil corporations. The type of corporations that treat their employees like trash and serve us mediocre food. We see this as a battle for the poor and against companies like Wal-Mart and McDonald’s. This is not the truth.

Ultimately, this is a fight against the middle class and an apathetic super-rich. If the people successfully lobby the Government to pass an artificially high minimum wage (specifically one as high as $15/hr) it will hurt small, middle class business – not the evil corporations.

In the long run companies like McDonalds and Wal-Mart will survive the minimum wage hikes. They will pass the expense on to their customers, to their suppliers of beef and paper products (who are probably small/medium sized businesses) and keep the profits for themselves. In fact, the poor (who shop at Wal-Mart) will keep shopping there, but since they make more money they will spend more. Ultimately giving Wal-Mart even more profits. Ironic.

The companies that will ultimately go out of business are the ones that ultimately treat their employees with respect in the first place. Small businesses like The Little Apple Boutique, Local Farmers, and Diners will go out of business. And in the end we will all keep shopping at Wal-Mart, but this time paying higher prices for the same bad service we’ve always had.

3. Outsourcing and the Value of low skilled labor

In the labor market of individuals who are paid less than $15/hr there are basically two classes: 1. low-skilled manual labor (cashier, hamburger cook) and 2. skilled-labor that doesn’t demand much money (tech support). I want to discuss how a higher minimum wage will affect each of these two classes.

3a. Does the low-skill labor demand $15/hr?

When people think about those people who are unfairly treated by their employers (and who deserve a higher wage) they often imagine the poor mother with two kids who cannot make ends meet. She gives life everything she has, but can’t make it. It is unfair.

This is a action-provoking idea, but it does not reflect the situation of the majority of minimum wage workers. Rather it serves as an artificial “poster child” used by lobbying groups to evoke emotion from the masses.

The truth is that over half of minimum wage workers are young people (probably in school and still gaining skills) not bread-winners. A research by the Pew Research Center shows that 50.6% are ages 16 to 24; 24% are teenagers (ages 16 to 19).

This begs the question: Do 16 year old teenagers and college students really need (or do their skills demand) $15/hr? I don’t think so and I do not think an artificially high minimum wage is an appropriate way to address the rare case of a struggling mother. There are numerous, more efficient, way to manage such cases.

3b. Skill-Labor: Outsourced jobs that could be in America:

The problem with most skilled-labor jobs that pay less than $15/hr is that they are easily outsourced to countries that do not have minimum wage standards or the job is subject to being automated.

The average outsourced job in India pays $13.46/hr ($28,000/yr). That is over $1.50 less than the proposed minimum wage of $15/hr. This means that all jobs that can be outsourced will be outsourced (or automated). 

The other idea to consider is that companies are smart. We already see retail stores replacing cashiers with automated machines. Would it seem strange to think that our food may be cooked by robots in the near future? I don’t.

In the future a $15/hr job might mean no job at all for many Americans. Food for thought.

Borders: Humanity in Exile

Earlier this year Holden and I ventured across the U.S. and Mexico border from San Diego to Tijuana. We took a 45 minute trolley ride to the Mexican border and crossed on foot. The juxtaposing skylines served as a depressing metaphor for what humanity has become. The richest people to have ever existing segregating themselves from the third world by a concrete barrier. All to protect our jobs, our border, our country. Nationality over humanity.

Immediately crossing the border there is a bridge to Tijuana that hovers over a filthy canal. In the canal are dozens of dirt and shit covered Mexicans.  Men, women, and children dressed in rags, teeth rotten, begging those Americans brave enough to cross for change. Cultural degradation as result of poverty, corruption, greed, and mal-education.

A few military guys crossing the board at the same time as Holden and I crack jokes about how they are going to “fuck some hookers” as they spit over the bridge down to where those “crazy fucks” are in the canal.

Years of conditioning has trained us to dehumanize the “other”. They are not one of us. Not human beings. We spit on them. We fuck them for pennies and brag about how cheap it was later. We separate ourselves from them by a few feet of concrete and steel. Dissociation -and the whole world is doing it.

More Borders: More Human Division

Then today I read a first hand account about another border. The border of Isreal and Palestine.

“I went to Israel. Saw a city much like any city in Europe. Clean streets. Beautiful big store fronts. Sidewalks. Nice signs telling you where to go. Little stands and shops everywhere. Great food from around the world. Pastries, pizza. It was Europe, basically. I loved it. It was very clean! It was great…

…You exit and on the other side [of the border]is a tall wire fence covered with barbed wire. There is graffiti all over the wall. The buildings are crumbling. No nice food, streets made of dirt, everyone is poor…”

It all sounds so familiar. Those fortunate enough to be rich create barriers to separate ourselves from those who are poor. Sometime we even call those people enemy. Subhuman. Terrorist. Barbarians. Backward.

Then we wonder why the have-nots are willing to die, to kill, and to terrorize. We wonder why these same people can be converted to extremism. Meanwhile we maintain a foreign policy of separatism, elitism, and turning a blind eye to exploitation. How can you call yourself a Christian, a Jew, a man of integrity, and moral atheist, a human being – and be okay with any of this?