In the News: Minimum Wage

Ingrid Case at Employee Benefit News has a thorough writeup of my recent minimum wage paper.

The article is here. The paper is here.

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This Week in Ridiculous Regulations

The latest Mad Libs-style political feud involves the NBA, the television cartoon South Park, and the Chinese government. President Trump also issued a pair of executive orders intended to rein in regulatory dark matter, and the 2019 Federal Register topped 55,000 pages. Rulemaking agencies published new regulations ranging from modern swine slaughter to order forms for illegal drugs.

On to the data:

  • Last week, 68 new final regulations were published in the Federal Register, after 97 the previous week.
  • That’s the equivalent of a new regulation every two hours and 28 minutes.
  • Federal agencies have issued 2,360 final regulations in 2019. At that pace, there will be 2,980 new final regulations. Last year’s total was 3,367 regulations.
  • Last week, agencies published 507 notices, for a total of 17,206 in 2019. At that pace, there will be 21,725 new notices this year. Last year’s total was 21,656.
  • Last week, 1,712 new pages were added to the Federal Register, after 1,937 pages the previous week.
  • The 2019 Federal Register totals 55,015 pages. It is on pace for 69,464 pages. The 2018 total was 68,302 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Four such rules have been published this year. Five such rules were published in 2018.
  • The running cost tally for 2019’s economically significant regulations currently ranges from savings of $4.39 billion to $4.08 billion, mostly from estimated savings on federal spending. The 2018 total ranges from net costs of $220.1 million to $2.54 billion, depending on discount rates and other assumptions.
  • Agencies have published 57 final rules meeting the broader definition of “significant” so far this year. 2018’s total was 108 significant final rules.
  • So far in 2019, 397 new rules affect small businesses; 20 of them are classified as significant. 2018’s totals were 660 rules affecting small businesses, with 29 of them significant.

Highlights from last week’s new final regulations:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

Alan Greenspan and Adrian Wooldridge – Capitalism in America: A History

Alan Greenspan and Adrian Wooldridge – Capitalism in America: A History

Deirdre McCloskey’s review is here. An economic history of the U.S. that is optimistic without being to starry-eyed. Greenspan and Wooldridge say wise things about two of my main policy interests. Early on, they have an excellent 30,000-foot level discussion of regulation. They don’t directly cite my colleague Wayne Crews or his Ten Thousand Commandments, but some of his numbers and many of his arguments appear prominently.

Later in the book, they give a defense of modern prosperity, complementing thinkers such as Julian Simon, Matt Ridley, Hans Rosling, and Deirdre McCloskey. They also draw on Cox and Alm’s ever-useful measure of how many hours an average person must work in order to afford a loaf of bread, a tv, a car, and other things. For the better part of two centuries, Americans have been getting more and better goods in return for steadily decreasing amounts of effort.

In between these two highlights is a fairly comprehensive business history of America, from roughly the founding up until now. Their discussion of the rise of the Carnegie, Rockefellers Vanderbilts, and Morgans of the world would have improved from a deeper discussion of competition theory that includes the Brandeisian view, the Borkian view, as well as the public choice critique of both (see Wayne Crews’ and my recent paper for that). Given Greenspan’s name recognition and Woodridge’s skilled writing and distillations, this is a book that will likely sell far better than the average of its genre, and hopefully will be more read as well. Not perfect, but good—much like the economy it studies.

Nicholas R. Lardy – The State Strikes Back: The End of Economic Reform in China?

Nicholas R. Lardy – The State Strikes Back: The End of Economic Reform in China?

Lardy’s “core conclusion is that absent significant further economic reform returning China to a path of allowing market forces to allocate resources, China’s growth is likely to slow, casting a shadow over its future prospects.” In this case, Lardy largely echoes other recent works such as Elizabeth C. Economy’s The Third Revolution: Xi Jinping and the New Chinese State and Ronald Coase and Ning Wang’s How China Became Capitalist.

China has taken a decidedly dirigiste turn under Xi Jinping. If Xi continues down an increasingly statist path, China’s growth will slow. If market reforms continue, China will prosper. Given the outsize amount of power centralized in his person, this choice is up to him more than anyone else. This will remain the case regardless of whether the current U.S.-China trade war ends tomorrow or continues for years. U.S. presidents come and go, but Xi will likely be around for a long time. And if not him, then someone in his inner circle with similar policy views.

Lardy is an excellent economic analyst, parsing through China’s not-entirely-truthful official statistics as well as international data to give as accurate a picture of China’s trajectory as he can, given the sources. One of his major conclusions is that China’s state-run businesses are severely underperforming compared to the country’s private businesses. State-run enterprises consistently make more and larger losses, are more heavily in debt, and the ones that are profitable tend to be less profitable than their private counterparts. They are also concentrated in legacy industries; China’s growth is less in energy and manufacturing and more in services and technology—precisely where China’s private sector is strongest.

This sounds like good news, but the trouble is that under Xi, the poor-performing state-run share of the economy has been growing. Since government tends to make a hash of whatever it does, if Xi keeps this up, China’s growth will slow. This is an avoidable mistake, but it is an open question if Xi will be willing to admit it.

China has several massive white elephant projects that are wasting precious capital, such as its Belt and Road initiative. While this program and others like it scare China hawks in the U.S., they are weakening China. Government infrastructure projects worldwide are late, overpriced, and often of low quality. The Belt and Road initiative is no different, according to available evidence so far. Moreover, the billions of dollars Beijing is putting into it now cannot put into more productive ventures.

Lardy, like everyone else, is unable to guess which path China will take—state-run and poor, or free and prosperous. Unlike many analysts, Lardy is humble enough to admit that he cannot predict the future. He is hoping Xi will eventually decide to turn China’s policy momentum back towards liberalization. The Chinese people share this hope, and China observers of all stripes should hope the same, whether their politics are hawkish or dovish.

Herman Wouk – The Caine Mutiny

Herman Wouk – The Caine Mutiny

This Pulitzer-winning 1951 novel is starkly relevant today. When a commander is clearly unfit for the job, at what point is it ok to depose them, and on what grounds? John Locke wrestled with this question. So did the American revolutionaries he influenced—as did their opponents. This book, set in World War II, explores the same question onboard the Caine, a fictional World War II U.S. navy minesweeping ship. The main character, who is something of a privileged twit though with redeeming qualities, enlists in the Navy and finds himself aboard an old bucket of a ship near the end of its lifecycle. The Caine‘s captain is as mediocre as his ship, and is eventually transferred elsewhere.

His replacement, with the Melville-esque name Captain Queeg, quickly establishes his popularity with the crew with his attention to details the previous captain had neglected, and boosts morale. But after the initial wave of good feeling, the mood quickly shifts. He is indecisive and wavering during several critical points of action, and nearly loses the ship and its crew more than once. He isolates himself in his cabin, avoiding both crew and duty. When they enter his cabin to bring him news, he is nearly always asleep, undressed, or unshaven. Captain Queeg resorts to harsh, arbitrary discipline, such as cutting the crew off from all non-subsistence water rations for 48 hours while the non-air-conditioned ship is sailing near the equator. The crew had earlier exceeded their water usage quotas by ten percent. This and other nonsensical measures, along with another panic attack during action induce the grumbling, frightened crew to relieve him of command.

The book is interesting because the case is not so cut-and-dry. During the court-martial trial that follows the mutiny, Queeg never exceeded his bounds of authority under regulations, and gives decent justifications. Despite showing some signs of mental illness, doctors refuse to formally diagnose him with anything that would render him unfit for command. Queeg is also able to give plausible justifications for his command decisions. Meanwhile, the crew clearly had an animus against him. There is clear evidence they conspired against Queeg in a premeditated mutiny, which the crew members admit to. After the trial, both of the mutinying crew members find themselves captaining the Caine at various points before its decommissioning. They find their performance in that difficult job to be not much better than Queeg’s.

The Caine Mutiny presents more questions than answers, on purpose. That is what makes it both an excellent novel and a good lesson for today’s predicament with President Trump. There are clear signs that his temperament is not suitable for the presidency, yet it’s not so cut-and-dry in a legal case. He has little respect for the rule of law, has an arbitrary, uncertain approach to policy, is an alienating diplomatic presence, and deliberately polarizes the electorate. His age and mental state are also tempting to question. But at the same time, does he meet the threshold for 25th Amendment action, or for impeachment? It’s not black-and-white, and both sides have good arguments. Moreover, Trump’s potential replacements from either party don’t necessarily guarantee improvement.

The weighty matter of mutiny is both leavened and paralleled in the main character’s romantic subplot. He comes from an upper-middle class WASP-ish upbringing. In his first post-Princeton job, as a nightclub pianist, he meets a young singer of poorer Italian-Catholic background. They genuinely love each other, but the main character’s reticence to marry outside of his class and religion, along with some mommy issues, complicate things. They are a cute couple together and the reader naturally wants to root for them, but both external circumstances and mutual idiocy keep them apart—though far more his than hers. At the end of the book, as with the question of mutiny, their relationship is unresolved, but it seems hopeful that things will work out.

James Dickey – Deliverance

James Dickey – Deliverance

As a long term project, I am slowly winding my way through the Modern Library’s highly subjective list of the 100 best novels. This entry was on sale for five dollars on Audible, so I took the plunge. I had previously seen the movie, but didn’t much care for it. Many years ago I also once went rafting on the same river where the movie was filmed, and didn’t much care for that. Perhaps unsurprisingly, the book wasn’t really to my taste, either.

The reason is likely that Deliverance is essentially sturm und drang that doesn’t let up. Angst and guilt are constant presences, but there isn’t a reason given for why that should be. They’re simply background conditions woven into the fabric of the book’s world. A good story contains both tension and release; this story has too much of one and too little of the other. Whereas I tend to prefer literature, music, and art that contain both light and shade, Deliverance is essentially monochrome.

As for the story, a rafting trip in rural Georgia among four city-dwelling friends goes about as wrong as it possibly can. The characters variously endure being brutally raped by a hillbilly, a broken leg, an arrow wound, and a drowning. The protagonists also kill two people, perhaps justifiably and perhaps not–the ambiguity is easily the most interesting part of the book.

Afterwards the three survivors create a cover story, wrestle with guilt, and arouse some suspicion among wary locals, but aren’t caught. The river basin they went through is dammed and flooded as part of a federal infrastructure project, destroying any evidence, as well as their friend’s body. Back in Atlanta, they go on with their lives as best they can, but never quite return to normal. Two of them ending up buying rural cabins near the area where it all happened. This unsatisfying ending, with no release for the built-up tension, is in direct, and probably intentional, contradiction to Deliverance‘s title.

In the News: Minimum Wage Tradeoffs

Here is a writeup of my recent minimum wage paper being syndicated to local newspapers by the Center Square. The full paper is here.