What we're reading on Dec. 12th, 2018

Just a quick round of stories for December 12th, 2018.

Bank Rate Monitor has the original story on missing wage growth

Pew Research has a story from August, 2018 pointing out that wages for the average american have not increased for 40 Years. The actual point is some where in 1979 but liberal economist famously use the inauguration of Ronald Reagan in 1981 as the point wages stop growing because it's easy to remember.

Pew Research on Stagnant Wages

A lot of people like(or don't like) the Atlanta Fed's Wage Growth Tracker.  It lets you slice and dice wage data. But it's still flat

Atlanta Federal Reserve Bank's Wage Growth Tracker



Peter Navarro, who is trade adviser to President Trump, has a editorial in Real Clear Politics called

"Why economic security is national security"

Very good discussion of Merit in the Harvard Affirmative Action case

As a Black professional, over the years, I have been called on to give an "opinion" on Affirmative Action.

I have heard comments like: "It just Black racism","Don't we want to hire the best?","They don't deserve to go to Harvard",  or "it only helps middle class Blacks"

So, I have developed two common arguments to support affirmative action.  You cannot really change anyone's minds, but you can ask them to understand someone else's position. That's the best you can hope for.

So I usually start with "I am not asking you to accept affirmative action, just understand why other people might support it."

The best counters against the idea of perfectly determined "merit" are two following arguments:

1. What sort of society do we want to live in?
2. What is "merit" and who gets to decide?

Appiah argues that you cannot value one persons life over another. Society should provide the opportunity to flourish and lead a happy life to everyone including those who are not as successful in the "merit" game. His main ideas are: We should respect each others life choices and we should be expanding the pie of opportunity, not fighting over scraps

Mystal argues our definition of merit is wrong and favors the existing, educated classes not the people who most need the opportunity.

Read further for a deeper discussion

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1. What sort of society do we want to live in?

Kwame Anthony Appiah in the Guardian believes our current definitions of merit are damaging society. Merit is creating classes and cementing inequality the same way money, education, networks and power did in the previous century.  Instead we want to create a society that values everyone including people who do not perform well on the merit "test".

He wants people to live their happiness lives, achieve their full potential and flourish. People should have the full opportunity to compete on merit and no stigma when they fail.

He also discusses how merit removes responsibility to help other and becomes self justifying.

Another great quote from the article: "Still, a significant portion of what we call the American white working class has been persuaded that, in some sense, they do not deserve the opportunities that have been denied to them."

"we also need to apply ourselves to something we do not yet quite know how to do: to eradicate contempt for those who are disfavoured by the ethic of effortful competition."

"We cannot fully control the distribution of economic, social and human capital, or eradicate the intricate patterns that emerge from these overlaid grids. But class identities do not have to internalise those injuries of class. It remains an urgent collective endeavour to revise the ways we think about human worth in the service of moral equality."


2. What is "merit"? Who decide what is meritorious, what is valuable and how is it calculated.

Elie Mystal writes a great discussion of defining "Merit" in the Above the Law website.  How do we define merit and who get's to define it.

Affirmative action law suites again Harvard in Above the Law.

Here are some great quotes from the article:

"For the Class of 2022, Harvard received 42,749 applications and admitted 1,962 people or 4.6%."

"No matter what those 4.6 percent, and their parents, want you to think, getting into Harvard or any other top university is not all about “merit” so closely and illogically defined. The 4.6 percent who get in are not objectively “smarter” than the other 40,787 applicants. A school with an overabundance of choice is going to look at any number of factors in order to come up with a first year class. "

"A totally non-comprehensive list of factors could include: quality of high school, improvement over time, leadership opportunities, engagement with your civic or religious community, teacher recommendations, athletic prowess, artistic prowess, personal essay, geographic diversity, international diversity, alumni connections, criminal records, likelihood of matriculation, likelihood of dropping out of Harvard to start your own multi-billion dollar company, and also probably whether your Instagram is covered with Confederate Flags. "

"Perfect test scores are nice… but they are “one factor among many.” One would hope that Harvard would turn down a Brett Kavanaugh type: a kid with sterling academic credentials and a propensity to go to gang rape parties, if they had credible information about the latter."

"No honest person can say that admissions to top universities is solely about academic merit, whether those universities consider an applicant’s race or not. And no decent person would want them to be. If you can not see the “merit” of an applicant with a middling GPA who happens to be a world-class pianist, or the “merit” of an applicant who performed merely decently on a standardized test she prepared for under the hallway light at the homeless shelter, then your definition of “merit” makes you unworthy of admission to the Harvard Extension School, much less the undergraduate college."

Rare find. Oren Cass: Conservative labor market economist

Listening to Oren Cass promote his new book on the Brian Lehrer show on WNYC. 

Here is the AUDIO of a Brian Lehrer interview on Public Radio station WNYC in New York

https://www.wnyc.org/story/conservative-argument-workers

Here is his webpage

https://www.manhattan-institute.org/expert/oren-cass

Summary

Started off strong, got the problem right, but then faded when asked for solutions. Put forth a proposal for a wage subsidy then got side tracked bashing environmental regulations. Kind of long winded even to someone who really into this topic.

Here are some highlights

The US model of capitalism could be defined as supporting growth at all costs with a safety net for those who are left behind. This has been the US model since FDR. Both left and right agree on the model.

The model has flaws. It is based on material needs and wants only, not overall happiness. We analyze economic activity through the lens of the consumer: how much stuff can you buy? How cheap is it? What is your material living standard?

Our goal as a society should be a labor market that can support families and communities that allow people to lie healthy lives and to flourish

However, if you look at what drives peoples life satisfaction, their health, and their families health; it’s not about how much we consume, it's about the health of the labor market.  Are people find satisfying jobs, are they good jobs.  Can I support a family? Can they save for the future?

All long-term employment trends are bad. And the trends get worse each business cycle. We have the largest number of prime-age men outside the labor force. Wage growth is low. Both are on a downward slope.

Happiness studies show people recover from almost every life event but unemployment which leads to a permanent decrease in happiness.

Then he pretty much dies on air….

He discusses happiness measures. Two important measures are the number of people who can make ends meet.  Savings rate.  I really like the savings rate one.

He proposes a wage subsidy.

Get trapped in discussing less environment regulation and then run out of time

Great Article on Merit by Kwame Anthony Appiah: Do we really want to run a society based only on merit?

Affirmative Action Again: Do we really want to run a society based only on merit?

Harvard University is back in the news.  They are asking to consider race as one of the factors used in determining admission.  An Asian-American group is asking Harvard to stopping using race in the admissions.  

Harvard philosopher and ethicist, Anthony Appiah, argues that,  we many want to give out society's rewards based on more than just merit.  

Appiah in the Guardian

So, I am not doing justice to this great article but I am going to try to summarize.

The article does not take the standard approach of questioning "What exactly is merit ?" instead it considers what society would look like if everything was based on merit.  Appiah is arguing that societies develop hierarchies to efficiently distribute resources.  During the 1500-1900, ruling hierarchies were based on family ties and connections. In the 1900, we switched to merit based approaches. Merit maybe be good for assigning people to specific occupations. However, it also decreases the overall happiness in society, because of the contempt of the "winners" have for the "losers".  No one can ever understand the true value of a individual. Instead we must make it possible for every individual to flourish.

Appiah proposes "an alternative vision, in which each of us takes our allotment of talents and pursues a distinctive set of achievements and the self-respect they bring."

An interesting aside, is that the "winners" (merit or otherwise) do everything in their power to assure their children are also winners including rigging the system or endowing their kids with money, education, and opportunity.

More from International Association of Chiefs of Police (IACP) Convention

If you want to see where Policing is going, check out the “International Association of Chiefs of Police” (IACP) convention in Orlando.  Besides golf and hospitality suites, the convention was packed with new technologies like body cameras, robots, flying drones and expensive data-driven, AI-enabled, integrated, autonomous decision support systems. And loads and loads of salesmen.

If there was one theme, it’s that body cameras are here to stay, so let’s figure out all the repercussions on policing: from evidence, to PR and personnel issues.

A search of the session topics at the convention included homelessness(6), hate-crimes(3), juvenile enforcement and custody(3),  harassment and Discrimination(11) and Public Trust(70). Community/Police relations had the highest number of sessions at 102. Post-Shooting Personnel Support had 16 sessions.

The good news is that not every session was a sales job.  There were serious topics covered by real researchers. Important sessions included “Improving Clearance Rates for Serious Crimes,” “Improve Employee Accountability by Building Employee Trust” and “Me Too, Now What: Shifting Social Norms in the Workplace and Leading the Way.”  Also see “History as a Foundation of Building Trust and Legitimacy: Civil Rights and Law Enforcement” and “Body Cameras: The Good, The Bad, and The Ugly.”

Body Cameras and the International Association of Chiefs of Police

Body Cameras for All Police Officers

Laquan MacDonald was killed by Chicago Police Officer Jason Van Dyke.  The key piece of evidence was a video showing MacDonald posed no threat to the officers and was walking away from the officer who killed Mr. MacDonald at the time of the shooting. 

Chicago Tribune has story of the conviction

CNN Story on other non convictions

After the verdict, we wondered why there was no universal call for all Police Departments to use cameras in their daily policing routines. What might stop the implementation.  It's certainly not the cost.

Axon Body 3

We looked closely at the Axon (Taser Int'l.) Body 3 camera which features high resolution, low-light camera with 4 microphones and a real-time data link.  They also have software, evidence.com, that records the videos and provides cataloging and redacting services. It is expect to list at $700 dollars.

International Association of Chiefs of Police (IACP)

We also wanted to look in on the convention.  The conference website is here.

If you want to talk about someone who has close to unlimited spending authority, its the chief of a police department.  The money is flowing in from all sources.  Grants, programs, local budgets and confiscation all support spending on the latest equipment by police departments. The vendors came from all different areas.

There would big vendors like Accenture, Harris Corp, Hitachi, IBM, Panasonic and Uber.  And small vendors like Gunbusters, a gun and evidence pulverizing company.

Lots of clothing and equipment vendors for bullet proof vests, rain and safety gear, shoes and accessories.  A niche where a Chief would have purchasing influence was represented.

There were a good number of training vendors focusing on implicit bias such as the Institute of HeartMath.  Police skills "degrade" over time so they purchase a lot of training.  But most of the training was for basic police skills.

Here are some interesting statistics about the number of vendors by category

Aircraft                                                               4 Vendors
Equipment                                                        84
Communication Equipment                             39
Education and Training                                    85
Investigation/Surveillance/Detection               77
Less-than Lethal Weapons                               17
Mobile Technology                                          89
Professional/Consulting Services                    49
Software                                                         112
Robots and Unmanned Vehicles                      12

It is nice to see a large number of education and training vendors.  Police departments have big budgets for training. However, only a few of the education vendors focus on better community relations.

Seventeen of the vendors offered less-than-lethal weapons.

We are a little scared by the number of software vendors and consultants at the show.

And finally there were a couple of Chinese equipment manufactures.

JIANGSU ANKEY ADVANCED MATERIAL TECHNOLOGY CO.,LTD
Wenzhou Hongda Police Equipment Co., Ltd. 
Shenzhen DCW Electronic Technology Co., Ltd.
Guangzhou Yakeda Outdoor travel products

What we are reading in late September and early October 2018

What we are reading in late September 2018

In case you missed it, Donald Trump, received a lot of help from his father in the form of tax-evading gifts. Donald and Fred Trumps Tax Schemes

Fred Trump used GRAT (Grantor Retained Annuity Trusts) and low balled real estate appraisals to avoid large amounts of inheritance taxes as he passed assets to his kids..  GRAT let you "freeze" the value of an asset and transfer the asset to your kids after take some annuity income from the assets. Any appreciation passed to your kids. 

Tech company founders typically put their company shares in a GRAT for their kids right before a company issues an IPO.

Did you know you know that in 2016 you had a 5.45 million lifetime exemption from estate and from gift taxes. The Trump's tax cuts and jobs act to $11.2 Million estate and $11.2 million for gift taxes per person.

Obama tried to change or close the GRATS loophole in 2011 and again 2015 as a way to raise revenue for the budget but was blocked by congress. Obama and GRATS.

Bloomberg reports a tiny chip implanted in SuperMicro motherboards gave Chinese spy's access to top US corporations. Here in Bloomberg BusinessWeek.

Finally, we, here at the Evil Black Economist, have long advocated a balanced immigration policy tied to the economic plight of poor people in the US (including existing immigrants).  Immigration drives down wages for poor people in the US.  And the US has no industrial policy to shift workers into new jobs.

A Business Week commentator has a similar idea. Here in Bloomberg BusinessWeek.

v2

Who is the richest Black person in the US: Robert F Smith !!! #226 on the Forbes list. Oprah's #264

Robert F Smith has an interview here. The interviewer is David Rubenstein. Rubinstein was a founder of the Carlyle Group, an asset management firm that specialized in private equity investments and leveraged buyouts. 

Robert F Smith interview.

Yes, he really did marry a playboy model. Here. His ex-wife settled the divorce in 2014 after a three year battle.

He jumped to #226 on the Forbes richest Americans list. The list is here.

Why trump won the election: Status threat, not economic hardship, explains the 2016 presidential vote

So the election of 2016 really was about "power." Just plain old, naked tribal power.  Not ideas or policy or morals, but power. Diana Mutz has researched the topic. She found that by eliminating (controlling for) each of the possible explainations only "status threat" remained.  The original Diana Mutz study is here. It was published in the Proceedings of the National Academy of Sciences. She compared voter data collected in 2012 to voter data in 2016. The data is called Panel data since it is collected for the same samples over time.  She looked at voters perceptions of two key issues: Trade and Immigration.

The best summary article is her interview on the show:  On The Media.

It is part of a larger program called Dog Whistle - The Trump voter re-explained.

Charles Blow also did a great job covering the issue in detail in the opinion section of the NYT.

The Washington Post actually had the story first.

41% of White millennial's voted for Trump

WAPO on racial resentment

Summary

The election of Donald Trump was based on racial resentment of White voters who fear the success of non-whites will limit their own prospects in the future. 

"The America they knew is no longer available to them.  The rise of a non-White America has created anxiety and threats.  Men feel discriminated against. Threats from China and Mexico have reduced the US superpower status.  America will not be the same for their children." 

Ms. Mutz, in her interview, discusses the classic threat response: When we feel threaten we get defensive and seek to assert social dominance. 

Trump was able to tap into this on several key issues: On trade, Trump positioned himself much closer to the average american, then the "elites." He attacked China on trade and Mexico on immigration as proxies for loss of status.

Before this round of research, the media narrative described Trumps victory as about individual economic issues not race. The "left behind" theory.

The study refutes that belief for this election. The vote was about the dominate social groups: Whites, Men, Christians losing their position. 

One interesting note is that: "People vote on how their collective group is doing much more than individual pocket book issues. The groups in the survey had high employment rates and had generally done well since the recession. The  average person views the economy as a local issue that they do not connect to the larger political policies.

She also found that education had little effect on voting patterns. 

Inc.'s story on consumer category killers. Who's the next Warby-Parker?

Here is a pretty interesting article about DTC - Direct to the Consumer Retailing in Inc. magazine. Everyone is trying to apply the direct to consumer model to every consumer category.

https://www.inc.com/magazine/201805/tom-foster/direct-consumer-brands-middleman-warby-parker.html

One of the businesses is Away.com which sells medium to expensive luggage. You may have heard of them.

Here are away's current openings. I find the best way to see inside a company is through their job listings. They have only three jobs that deal with the actual product. It's all outsourced.

https://boards.greenhouse.io/away#.WuNjwG4vzIV

https://boards.greenhouse.io/away#.WuNjwG4vzIV

Physical Product (yes, physical product is now a job category)

Senior Manager, Packaging 

New York

Planning, Supply Chain & Operations(category)

Inventory Planning Associate 

New York

Senior Manager, Planning and Allocation 

New York

Packaging Design

Monogramming Associate