Monthly Archives: May 2019

Addressing the Gender Pay Gap: Culture, Not Legislation

A recent Washington Times article quotes me on Democratic presidential candidate Sen. Kamala Harris’s plan to address the gender pay gap. I could have given better quotes, frankly, but it’s difficult to treat a complicated issue with nuance in a couple of short sentences. Conservatives and progressives both make some good points, but ultimately fall short of addressing the issue constructively:

  1. Conservatives often downplay gender discrimination or deny that it is a problem. This is wrong.
  2. Progressives are right that discrimination is a problem, but with the pay gap, they are prioritizing the wrong facet of the problem.
  3. There is a culture gap, far more than a pay gap. Most politicians put the pay gap at 77 or 79 cents on the dollar. One ideologically motivated study puts it at 49 cents. These figures do not account for the fact that women are more likely than men to work part time or not at all for extended periods to provide child care or other family needs. Men who do the same thing are subject to a similar wage lag. In another comparison, Bureau of Labor Statistics data show a wage gap of six cents for women who have never married—which says more about cultural gender norms than about different pay for equal work. Men and women also often cluster in different occupations, which have different pay. Occupations such as kindergarten teachers and construction have heavy gender disparities, as well as different pay—often in men’s favor. Again, the causes for this are often cultural, not due to different pay for equal work. The pay gap is almost certainly not a myth, but it is almost certainly a smaller problem than many people believe.
  4. Focusing so intently on the pay gap has an opportunity cost: More important gender discrimination issues are being crowded out from popular attention. In the workplace, these issues are as serious as rape and sexual harassment. They also include cultural pressures against women making their own life choices. Different people have different preferences on working vs. staying home. Many people on both sides of the culture wars still don’t respect that. Gender discrimination also includes everyday rudeness, such as men being more likely to interrupt women in conversation, taking their ideas less seriously, or judging them on appearance and demeanor rather than merit. The list is long, and the combined effects are large.
  5. One reason for the undue attention to the pay gap is that wages are easy to measure, while “soft” discrimination is often difficult or impossible to measure. It’s an example of what economist Jerry Z. Muller calls The Tyranny of Metrics. People tend to focus on what they can measure, and ignore what they can’t.
  6. Not only is attention being focused on the wrong issue, but many progressives are only offering one tool, poorly chosen: legislation.
  7. Pay gap legislation is prone to unintended consequences, such as businesses hiring fewer women. This is not what anyone intends. But it would be the easiest way for a company to avoid compliance headaches, potential lawsuits, or as in Sen. Harris’s proposal, a tax increase. This easily predictable effect works against everyone’s shared goal.
  8. Addressing gender discrimination requires cultural change from the bottom up, not top-down legislation. Politicians’ limited vocabulary is hurting progress on a real problem.
  9. Convincing millions of  individuals over time to be more thoughtful to others is a slow, uneven process. It will also likely never end; civilization is not humankind’s natural state.
  10. The cultural change argument is aesthetically unsatisfying. It can’t be planned, controlled, or quantified, even when possible improvements are clear as day, as with gender discrimination. It is a long-term process, not a short-term result. Advocating for cultural progress just looks flat compared to more immediate offerings such as taxes, fines, or quotas.
  11. Emotionally, it is much more fulfilling to hear a fast, simple, and concrete solution at a candidate’s press conference. It gives people something tangible with a face and a name they can rally around. This is in tune with how the human brain works. It gives us an in-group to affirm and an out-group to vilify. A story with a hero and a villain makes for a more interesting story than personal reflection.
  12. In addition to the endorphin rush it provides, signaling support of a bill is far less work than a lifelong effort to treat people well.
  13. The measurement problem, the cultural change argument’s lack of charisma compared to magic bullet legislation, the abstract nature of culture, the difficulty for ongoing individual effort, our own brain chemistry, and the long-term nature of change all contribute to why people’s everyday cultural values aren’t discussed as much as they could be.
  14. Astute readers might notice that economic historian Deirdre McCloskey says similar things about cultural change and the origins of modern mass prosperity, which extends beyond one’s bank account to include the arts, life expectancy, political inclusion, technology, travel, family life, and more. Caring about gender discrimination and fighting against it is another important aspect of the larger classical liberal project.
  15. Gender discrimination is a complex problem with a complex solution. But then, Rome wasn’t built in a day.

Trump Threatens up to 25 Percent Tariff on Mexican Goods, Jeopardizes NAFTA/USMCA

Things have been moving quickly on President Trump’s top legislative priority, the NAFTA/USMCA trade agreement. The key was rescinding steel and aluminum tariffs against Canada and Mexico. On Wednesday, Canadian Prime Minister Justin Trudeau moved to introduce the agreement to Canada’s legislature for ratification, prompting a Thursday visit from Vice President Mike Pence. Also on Thursday, Mexican President Andres Manuel Lopez Obrador introduced NAFTA/USMCA in Mexico’s Senate. He is requesting that the body, on recess until September, hold a special session to ratify it.

Within hours of Lopez Obrador’s announcement, President Trump may have torpedoed his own agreement. Shortly after markets closed, he threatened, via Twitter, a new tariff against Mexico that would dwarf the steel and aluminum tariffs:

1/2: On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied,..

2/2:….at which time the Tariffs will be removed. Details from the White House to follow.

On July 1, the 5 percent tariff would rise to 10 percent. It would then rise by an additional 5 percent at the beginning of each month until reaching 25 percent on October 1. It would remain there until President Trump is satisfied with Mexico’s immigration policies. He did not set specific criteria for Mexico to meet. And as mentioned earlier, Mexico’s Senate is out of session until September. But the administration’s statement indicates that this threat isn’t entirely about immigration (capitalization of “tariff” and typewriter-era extra spacing between sentences in original):

If Mexico fails to act, Tariffs will remain at the high level, and companies located in Mexico may start moving back to the United States to make their products and goods.  Companies that relocate to the United States will not pay the Tariffs or be affected in any way.

By way of context, this tariff would be nearly twice as large as the recent 25 percent tariff on $200 billion of Chinese goods. Mexico annually exports roughly $346.5 billion of goods to the United States.

NAFTA and the NAFTA 2.0/USMCA both require near-zero tariffs among the three member countries. Trump has invoked the Jimmy Carter-era 1977 International Emergency Economic Powers Act as legal authority for the tariffs, claiming that that bill’s emergency powers supersede possible NAFTA violations.

As I’ve mentioned before, Trump has a habit of using dramatic last-minute threats as a negotiating tactic. Sometimes he follows through, as with the recent 25 percent tariff on $200 billion of Chinese goods. Sometimes he withdraws, as he did with a threat to close the entire U.S.-Mexican border, and an April threat of a 25 percent tariff on Mexican-assembled automobiles—which are often made largely of U.S.-made parts.

For obvious reasons, a new tariff against Mexico will not make its government more likely to ratify NAFTA/USMCA. Tariffs are usually met with retaliatory tariffs, not the policy action Trump wants. The U.S. economy is risking yet another instance of double damage from President Trump’s announcement—once from his tariffs, and again from retaliatory tariffs.

Further complicating matters, Mexican President Lopez Obrador largely shares Trump’s negative view of free trade. His support of NAFTA/USMCA is not deeply held. His going along with the agreement is largely a kindness to his predecessor, Enrique Peña-Nieto, who negotiated the agreement and signed it on his final day in office. Lopez Obrador’s NAFTA/USMCA support is easily lost, and this tariff gives him an easy out.

The tariff also complicates matters in America. Also on Thursday, President Trump issued a Statement of Administrative Action. This opens a 30-day waiting period, after which Trump can send NAFTA/USMCA to Congress at any time for a mandatory ratification vote within a set period (Politico has a handy timeline). Members from both parties opposed the steel and aluminum tariffs, and they will likely oppose the new tariff, which is potentially much larger. If Congress is required to vote, it may well vote no due to the new Mexico tariffs.

Democrats already hold the upper hand in negotiations due to the administration’s high prioritization of a low-stakes agreement; USMCA contains no major changes to trade policy. Even without Trump’s tariff threat, they could hold up the agreement to add trade-unrelated provisions to benefit favored labor and environmental constituencies. Or they could condition ratification on a more important matter, such as must-pass appropriations bills or other Democratic policy priorities such as health care or the minimum wage.

A new tariff is Trump giving Democrats free ammunition to hold up not just NAFTA/USMCA, but other administration priorities as well.

We’ll find out by June 10th if Trump walks back a major economic and political mistake, or goes through with it.

Ron Chernow – Titan: The Life of John D. Rockefeller, Sr.

Ron Chernow – Titan: The Life of John D. Rockefeller, Sr.

I read this as part of my recent research on antitrust regulation; Rockefeller’s Standard Oil remains a touchstone case in the field. Chernow does a good job of portraying Rockefeller as neither devil nor saint. Just as people today get hyper-emotional about billionaires such as Bill Gates or Jeff Bezos, Rockefeller was a hotly divisive figure in his day. His detractors bordered on the obsessive, especially Ida Tarbell, who comes across as apoplectic as Koch and Soros obsessives do today.

Rockefeller’s father was a quack doctor selling natural remedies who left his family for months at a time, and turned out to be a bigamist. Rockefeller was his father’s opposite in almost every way, except for their shared insistence on always paying their debts on time. He also had his credulous side, believing in homeopathy and other quack remedies. He retained a strict Baptist faith for his entire life, which left him with a rather narrow mind—though this didn’t stop him from having a case of wandering hands in his old age that was creepy even by the standards of the time.

On the other hand, Rockefeller always tithed, both before and after he made his fortune, and had great concern for charity and the poor. Despite his wealth, he does not come off as a greedy man. He didn’t seem to enjoy money so much as putting in the required work to make money, and succeeding at it. He also played a large role in the founding of the University of Chicago, whose famous economics department would likely have appalled Rockefeller, who was a trade protectionist and favored a managed cartel economic system that was in vogue during the Progressive Era.

Chernow’s focus is more on the man than the company, but Standard Oil is entwined enough with Rockefeller that the reader sees just how quickly the company grew, and how it became a popular lightning rod. The ongoing controversy over Standard Oil’s discounted rail shipping rates comes off as just plain dumb, just as the controversy over tying web browsers into operating systems was in the Microsoft antitrust case a century later. Chernow is no free-market ideologue, but the fact that Standard Oil continued to reduce prices and expand output reveal how tenuous its dominant market share—as is the fact that it nearly collapsed as electric lights displaced kerosene lamps. If the automobile hadn’t emerged around this time, and Standard hadn’t been clever enough to pivot to gasoline and lubricants and away from kerosene, the big 1911 antitrust suit would likely never have happened. Monopolies cannot last without government help—though Rockefeller is not entirely blameless on this front.

Rockefeller’s long life also allows Chernow to treat the Rockefeller children and grandchildren in some detail, and as with any family, they were a varied lot. Some shared his business acumen. Some tried but weren’t quite up to the task. Grandson Nelson became New York governor and Gerald Ford’s vice president. Daughter Edith took to a bohemian lifestyle, and even fell in the psychoanalyst Carl Jung’s circle, which ended up being quite expensive, and more than a little scandalous.

Juan Reinaldo Sanchez with Axel Gyldén – The Double Life of Fidel Castro: My 17 Years as Personal Bodyguard to El Lider Maximo

Juan Reinaldo Sanchez with Axel Gyldén – The Double Life of Fidel Castro: My 17 Years as Personal Bodyguard to El Lider Maximo

Sanchez was Castro’s bodyguard for 26 years, and is now living out his old age in Florida. He saw a lot of things. The book contains plenty of juicy gossip, though from a well-placed source. But Sanchez also makes serious points about how power corrupts people, and the effect the Cuban Revolution has had on Cuba’s fortunes. He also gives insights into how the Cuban government works, what life is like for the elites versus commoners, how dissidents are treated, how the military is trained, and more. That is his real contribution, and it is a valuable one.

Anton Chekhov – Complete Short Stories

Anton Chekhov – Complete Short Stories

Chekhov’s stories have a quiet domesticity that is both comforting and melancholy. His characters take delight in the littlest things, where something as little as a food’s smell can bring back associations and memories from happier times—or a relief that past unhappy times are gone. His characters also argue about trifles, sometimes aware of the low stakes, and sometimes not. The small scale of his plots lets the reader concentrate on how different personality types and people in different social situations react to different stimuli, as though Chekhov were conducting experiments in human nature. This makes some sense; Chekhov was a medical doctor in his non-literary life.

Frank Dikötter – The Cultural Revolution: A People’s History, 1962—1976

Frank Dikötter – The Cultural Revolution: A People’s History, 1962—1976

Part of Dikötter‘s trilogy on Maoist China, with the other volumes covering the Revolution and the Great Leap Forward. The Great Leap Forward (1958-1962) caused millions of deaths from starvation, and its attempt at industrialization failed. Rather than admit defeat, Mao decided to double down, and began the Cultural Revolution just four years after the Great Leap Forward ended. In some ways, Dikötter argues, the Cultural Revolution was a continuation rather than a distinct event.

It formally lasted for a decade until Mao’s 1976 death, though by then it had tapered off somewhat. This second push went only marginally better than the first. It also dismantled China’s higher education system, leaving an entire generation essentially with almost no college graduates—at least from domestic universities. China’s university system is still stunted, with professors afraid to do anything that might be considered politically our of line. This has had predictable effects on subsequent generations’ entrepreneurship, political diversity, and cultural output such as literature and film.

This Week in Ridiculous Regulations

The number of new final regulations this year topped 1,000 last Tuesday, and President Trump and Congress entered Memorial Day weekend at odds on issues ranging from infrastructure to the renegotiated NAFTA/USMCA trade agreement. Meanwhile, rulemaking agencies marked the unofficial start of summer with new regulations ranging from temporary safety zones to potato handling.

On to the data:

  • Last week, 77 new final regulations were published in the Federal Register, after 55 the previous week.
  • That’s the equivalent of a new regulation every two hours and 11 minutes.
  • Federal agencies have issued 1,057 final regulations in 2019. At that pace, there will be 2,616 new final regulations. Last year’s total was 3,367 regulations.
  • Last week, agencies published 503 notices, for a total of 8,615 in 2019. At that pace, there will be 21,325 new notices this year. Last year’s total was 22,205.
  • Last week, 1,668 new pages were added to the Federal Register, after 1,925 pages the previous week.
  • The 2019 Federal Register totals 24,362 pages. It is on pace for 60,302 pages. The 2018 total was 68,082 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. One such rule has been published this year. Six such rules were published in 2018.
  • The running compliance cost tally for 2019’s economically significant regulations currently ranges from $139.1 million to $175.8 million. The 2018 total ranges from $220.1 million to $2.54 billion, depending on discount rates and other assumptions.
  • Agencies have published 29 final rules meeting the broader definition of “significant” so far this year. 2018’s total was 108 significant final rules.
  • So far in 2019, 191 new rules affect small businesses; 11 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.

Tyler Cowen – Create Your Own Economy: The Path to Prosperity in a Disordered World

Tyler Cowen – Create Your Own Economy: The Path to Prosperity in a Disordered World

One of Cowen’s best books. It has some surprisingly personal takes on autism. Cowen applies that spectrum’s cognitive advantages and disadvantages to the new custom algorithm-driven economy, and makes an entire book out of it that is difficult to put down. This surprisingly human turn, combined with Cowen’s love of dynamism and customization, make for a needed calming influence on how to view a changing world.

David Friedman, Peter Leeson, and David Skarbek – Legal Systems Very Different from Ours

David Friedman, Peter Leeson, and David Skarbek – Legal Systems Very Different from Ours

Many years ago at a Mont Pelerin Society conference in Reykjavik, I saw Friedman give a talk on Icelandic law during the Free State period, when the island had no central government. This book greatly expands on his earlier work on governance without government. Friedman looks at legal systems in Iceland, Somalia, Gypsy/Roma society, ancient China, Medieval Ireland, the Amish, Comanche, and more. He finds endless ingenuity and creativity among people trying to solve social problems, sometimes in very harsh conditions. Many legal institutions evolve as ways to reduce transaction costs, to reinforce group identity, and to enhance respect for social customs, whatever they may be in a given society. Leeson, a former professor of mine, and David Skarbek contribute chapters on laws among pirates and prisoners, respectively.

Robert Conquest – The Great Terror: A Reassessment

Robert Conquest – The Great Terror: A Reassessment

This book did more than any other to publicize the extent of how murderous the Soviet government was. Stalin never had a saint’s reputation, and there were whispers about gulags, deliberate famines, and the price of dissent. Conquest put faces and numbers on it. His exhaustive account shocked the world. These days, the 1937-1938 Terror is common knowledge. In a way, the fact that such a revolutionary book can seem ordinary is proof of the impact Conquest had. What was shocking at the time is now common knowledge.

Even so, this old book still has the power to startle. This is due in large part to Conquest’s eye for detail. The most striking one is his description of a physical paper record of a political interrogation. It contains the usual euphemisms and coded language one would expect from such a document. Nothing special there. But this one had an old stain on it, which was forensically tested. It came back positive for blood.

Stalin’s surprising approval rating today in Russia, and socialism’s campus voguishness are frightening to people who know the history. We likely have little to fear from either case. Many Russian people have a strong sense of nostalgia and a yearning for stability, more than a literal return to Stalinism. Putin, though a dictator, and a murderous one at that, is almost certainly no Stalin. In richer countries, college dorm room bull sessions should be taken as seriously as they deserve. That said, some knowledge of Conquest, Solzhenitsyn, Sheila Fitzpatrick, Robert Service, Richard Pipes, Stephane Courtois, and other historians and writers would likely change the tenor of discussion.

A final thing to bear in mind–the vast terror in this book is only a small slice of what happened. The Great Terror lasted for roughly two years out of the USSR’s 70-plus years. It is separate from multi-million-death events such as the deliberate Ukraine famine, the continent- and generation-spanning gulag archipelago, and the horrors of World War II.