~ Archive for Uncategorized ~

Gosplan decides that there should be a new Jeep factory in Ohio

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After the federal government showered Chrysler with $7 billion in 2009, this foreign-owned crony capitalist enterprise needs a new factory. Thus it is now time for Ohio taxpayers to come up with $400 million (Wall Street Journal) for gas-guzzling 4WD Jeeps. One advantage of Gosplan was that they provided written five-year plans explaining the rationale for their allocation of society’s resources. Would it be asking too much to see the plan where wise officials decided that this was the best use of $400 million?

[I’m leaving out the $1.5 billion bailout during the Jimmy Carter years, which translates to about $5 billion in today’s mini-dollars. Note that the article covers a $750 million hand-out from New York taxpayers to SolarCity (perhaps the government-provided cash should be conditional on the company renaming itself “Solyndra“).]

Too bad that Gandhi isn’t around to answer the question “What do you think of American free-market capitalism?” with “I think it would be a good idea.”

New Yorker versus Rolling Stone

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Rolling Stone has been in the news a lot lately because, after hearing about criminal activity during a fraternity party, they ran a story about the guilt of the fraternity brothers without picking up the phone and calling to inquire “Were you guys having a party on this particular night?” (Wikipedia). The New York Times, hard on the heels of incorrectly predicting a victory for Ellen Pao in her sex discrimination lawsuit against Kleiner Perkins, ran a story about how the fraternity can’t expect to win a libel lawsuit. It seems that, even with unlimited domestic long distance calling, calling the fraternity was too much to expect from Rolling Stone.

What would actual journalism look like? Check “The Kings of the Desert” from this week’s New Yorker magazine. Most of the action happens in Bahrain, the events are much more complex than what some college students supposedly did during a party, and most of the people with relevant knowledge speak Arabic as a first language. Yet the writer, Nicholas Schmidle, manages to get and present most sides of the story (though the guy who apparently ended up with most of the cash declined to be interviewed).

Litigious Minds Think Alike: Divorce litigators react to the Ellen Pao v. Kleiner Perkins lawsuit

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As part of wrapping up our book on divorce, custody, and child support laws in the 51 jurisdictions nationwide we talk to a lot of divorce litigators. We’ve talked to nine litigators since the Ellen Pao v. Kleiner Perkins jury came back and asked all nine “What do you make of the Ellen Pao case that has been in the news?” One litigator had been busy handling a trial and hadn’t heard about the Pao case. Among those attorneys who were aware of the Pao lawsuit, the first reaction was the same for 6 out of 8: “If you want to get paid for having lady parts you go to Family Court, not Superior Court,” was how one of the 6 phrased the general idea. “If she wanted money, what was she doing with a junior partner?” was an alternative response along the same lines. “Pregnancy with the boss is a better financial strategy than having a fling with a co-worker,” said another lawyer.

[What did the divorce attorneys who did not immediately volunteer the child support profiteering alternative lead with? “When I stage a gender war my client is going to win; the only question is how much.” and “Law firms are always desperate to have more women partners and will give a qualified woman a lot more breaks and chances than they would give a man.”]

How do the numbers work out? Pao’s boss was Kleiner Partner John Doerr, listed by Forbes as having a fortune of $3.4 billion. Let’s assume that a California family court would have imputed 7 percent per year in income to those assets and/or that Doerr actually can earn 7 percent per year. That’s $238 million per year in income for calculating child support or roughly $20 million per month. The official California child support calculator shows that Ms. Pao would have collecting a tax-free $1.05 million per month in child support ($227 million over 18 years). If she had used her Harvard Law School education to study the the Uniform Interstate Family Support Act, in which a factor for obtaining jurisdiction over a nonresident such as Mr. Doerr is the nonresident engaged in sexual intercourse in the state and “the child may have been conceived by that act of intercourse,” she could have made a lot more money accompanying Mr. Doerr on business trips to states where children are more profitable. For example, if Pao could have persuaded Mr. Doerr to have sex with her in Wisconsin she would have been entitled to between 10 and 17 percent of Doerr’s income over an 18-year period. That would have been as much as $728 million. Sex in Massachusetts and New Hampshire would also have yielded a better return than sex in California.

By spending one night with Mr. Doerr, Pao would have been in a good position to profit from any future period of inflation. State child support formulae are not inflation-adjusted. Thus if inflation rose to 9 percent per year and Doerr’s return on assets correspondingly rose to 14 percent in nominal terms, Pao’s child support profits would double.

In her lawsuit against Kleiner Perkins Pao had the burden of proof. To get $238 million in child support under California’s formula, however, Pao would have had the presumption on her side. Doerr would have had the burden to prove that he should be ordered to pay a different amount.

A divorce litigator with a tax background pointed out that had Pao prevailed in her discrimination lawsuit she would have had to pay income tax on at least the $160 million in punitive damages; child support revenue, on the other hand, is tax-free. Had Pao prevailed in her discrimination lawsuit she would have had to share her profits with her attorneys; she could have gotten guideline child support from a Kleiner partner, on the other hand, using taxpayer-funded child support enforcement personnel.

“Pao was sitting on something a lot more valuable than her Ivy League degrees,” concluded an attorney from a state with uncapped child support. “I just want to be there to represent her when Buddy Fletcher decides to go back to being gay.”

Related:

Buy a laptop from Woot for Kids on Computers?

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Kids on Computers needs some more laptops for a lab. The machines are standardized with Linux and have a bunch of offline content from a local server so they don’t need to be high-spec (and if you live in a poor country you’ve already suffered enough and don’t need Windows 8). Avni Khatri found a $150 deal on Woot but it is 1 per customer (same price as one laptop per child but a full 14″ screen instead of 7.5″). Who else wants to buy one of these and give it to Avni? Only one hour left in the deal. Without your help, how will a child in an unnetworked region of Africa be able to use his Google Glass?

Click here to buy. (You can log in with your Amazon credentials, so it takes just a minute.)

[And, more importantly, can the machine be upgraded to 128 GB of RAM? (previous post 1; previous post 2)]

Walter Scott: at odds with the law prior to being murdered by the police

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Four children lost their father and a woman lost her companion when Walter Lamer Scott was shot on April 4. The Wikipedia article on Mr. Scott notes that he had been repeatedly arrested for failure to pay child support. News articles linked to by the Wikipedia posting indicate that Scott was running away from the police officer who murdered him due to fears about being incarcerated for being behind on child support.

How common is it for an American to be on the wrong side of the law due to our child support system and how realistic were Scott’s fears? The “Post-Divorce Litigation” chapter of our book cites some statistics indicating that roughly 1 in 7 men who are ordered to pay child support will eventually be imprisoned. As they are being imprisoned for contempt of court rather than a criminal offense they are not entitled to an attorney nor do they enjoy a presumption of innocence.

The media coverage of the event stresses the fact that Mr. Scott was in conflict with the police due to his skin color. Yet they could equally have stressed that he was in conflict with our justice system due to the fact that he had children and, for whatever reason, was not living with their custodial parent(s).

This was a sad event, obviously, but I am not sure that it must be interpreted as a black-white event.

[What if Mr. Scott had lived in Europe? In most countries, the financial consequences of losing a custody lawsuit would likely have been a small fraction of what he had been ordered to pay here. In most countries he would not have been subject to imprisonment for failure to pay. (section 3.3 of this EU Committee on Women’s Rights and Gender Equality report has a table of the coercive measures applied in different countries)]

New York-area police officer life in novels versus reality

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In honor of spending a few days in Florida I indulged in a mystery novel: The Whites (sample review). The plot centers on a group of NYPD detectives who are upset about people whom they believe to be guilty but who can’t be convicted and imprisoned under the prevailing rules. Life for these cops is dramatic and enervating. Somebody gets killed in a bloody manner nearly every night. Nobody is concerned about quietly working until pension age (typically about 41?) and joining the check-of-the-month club. Writing sample:

He hated the no smoking laws. They created nothing but problems—late-night noise for the neighbors, elbow room enough for the bar-cramped beefers to finally start swinging, and a plague of off-duty limos and radio cabs all tapping their horns to hustle fares.

Is it a good book? Sort of. Does it reflect real life? My last long conversation with a New York-area police officer was during an airport-to-Manhattan Uber ride. The driver was a a police officer in a New Jersey town just across the river. He’d been on the force for six years. Was he obsessed with a murderer who got away, like the cops in the book? Sort of. Except the murder victim was his pension plan and the murderer was Governor Chris Christie who has been refusing to raise taxes sufficiently to fully fund the commitments that the state and local governments are making to public employees. A New Jersey cop gets a raw retirement deal compared to a New York cop. The pension starts after 25 years, which means age 43. It is 65 percent of an officer’s base salary, not the total payments including overtime as it would be in New York City or with the Port Authority.

Was there a lot of drama in the life of a NJ cop? “We have two trailer parks in town,” he responded. “That’s a big source of business for the police.” If not in the trailer park, what was he typically doing? “Our most common complaint is domestic violence,” he said. “Though more than half the time you show up and there is no evidence of anything other than maybe the couple had an argument.” (A domestic violence police report can be useful for a New Jersey divorce/custody/child support plaintiff; see Heleniak.) Any other intersection between the world of custody and child support litigation and his work as an officer? “Many women get orders that their children will be exchanged with the father at police stations,” he replied. “If the father is one minute late they ask us to log that and then they have something that they can take to their next court hearing.”

When being a police officer is in fact safer than being a trash collector (Daily Beast) how is it that these dramatic novels continue to be described by reviewers as “realistic”?

Caveman Economics: Will the next rounds of higher minimum wages cause massive unemployment?

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Some of the academic discourse in The Redistribution Recession: How Labor Market Distortions Contracted the Economy concerns the minimum wage. The eggheads say that when minimum wage is higher businesses will use less labor:

Traditional labor and macroeconomic theory predicts that marginal labor income tax rates and binding minimum wages distort the labor market and thereby reduce aggregate labor usage, reduce aggregate consumer spending and investment, and, in the short term, increase wages, labor productivity, and the usage of factors that can take the place of labor hours. As a result of greater labor productivity, part of the population—those (if any) not subject to the marginal tax rates or minimum wages—actually works more, even while aggregate work hours are less.

To understand why labor demand might be wage-inelastic, notice that prices are one of the ways in which employers might signal to their customers that the labor market has changed employment costs, and thereby create an elastic labor demand curve. For example, an increase in the minimum wage rate makes labor more expensive, in response to which the employers of minimum wage labor might raise their prices. Customers react to a price increase by purchasing less and, with fewer customers to serve the employers can cut back on their labor. This “pass-through” process, as industrial organization economists call it, links the amount of labor hired to the wage rate through a wage elastic labor demand curve like the one used throughout this book.

The Federal Minimum Wage Hikes Likely Reduced National Employment by Hundreds of Thousands, Especially Among the Young and Unskilled

Using the estimates surveyed in Neumark and Wascher (2008) and information about the amount and character of the July 2009 federal minimum wage hike, Neumark (2009) estimated that the July 2009 hike would reduce national employment among teens and young adults by three hundred thousand. Given that about half of all persons earning at or below the minimum wage in 2008 were under twenty-five and the other half over that age (U.S. Bureau of Labor Statistics 2009a), Neumark’s teen and youth estimate suggests that the nationwide employment effect (all ages) of the July 2009 minimum wage hike might be a reduction of about six hundred thousand,

My 2011 paper (Mulligan 2011c) estimated a monthly time series model of national part-time and full-time employment per capita for each of twelve demographic groups distinguished according to race, gender, and age, relative to prime-aged white males, whose employment rates were assumed to be unaffected by the July 2009 minimum wage hike. I used the model to estimate the amount and composition of employment losses due to the hike for the average month between August 2009 and December 2010, and found that lower-skill groups had the greater employment losses. The net nationwide employment loss estimate was 829,000, which includes employment gains among more skilled people

Among persons aged sixteen and over who were neither elderly nor household head or spouse, employment per capita fell from 58.0 percnt in 2007 to 52.3 percent in 2009. If instead their employment rate had continued to be 58.0 percent, about three million more of them would have been working. Thus, the minimum wage hikes since July 2007 might explain about roughly one-third to one-half of the employment decline among persons aged sixteen and over who were neither elderly nor household head or spouse.

Mulligan was talking about the comparatively small rises in minimum wage that occurred between 2007 and 2012. Much larger ones are scheduled, depending on the state and, more recently, on public pressure on companies such as Walmart and McDonald’s. I’m wondering if we can apply our experience as consumers to predicting what will happen.

Costco is known for paying higher wages than Target and Walmart. However, even a casual visitor to the stores in question can notice that the work being done per employee per hour is not the same. The Costco workers know what they are doing, move quickly around the store, and help move an astonishing amount of merchandise per worker. Target and Walmart? Well, let’s just say that the speed at which workers move is highly variable. Could it be the case that with higher minimum wages every retail store will turn into a Costco with a handful of reasonably well paid highly energetic workers? If Target cashiers scanned goods at the same rate as Costco cashiers Target could get by with perhaps 2/3rds as many cashiers.

The McDonald’s that is on my way to Hanscom Field used to have two workers running the drive-thru. One would take the cash and one would hand out the food. Since the Massachusetts minimum wage was pushed to $9 per hour (beginning of 2015) they’ve cut back to just one worker handling both tasks. Presumably they could increase throughput if necessary with a touch-screen ordering system and self-service credit card reader at the order entry position (maybe even simpler with the phone-based payment systems that are catching on).

It seems as though there is general political agreement in the U.S. that the lowest quality workers should be winnowed out of the workforce and the labor force participation rate should be kept on the low side. Nobody wants to see someone get off the couch and go to work all day for less than maybe $12 per hour. A natural question is “What should investors do about this trend?” Building low-income housing where the rent will be mostly paid by the government is already highly profitable. Perhaps invest in the relative handful of companies that are sufficiently close to government officials to be approved for this activity? Invest in Obamaphone providers? (how many are publicly traded?) People have been predicting doom and gloom for the cable TV providers but if there are a few million more customers who have been winnowed out of the workforce, isn’t that a solid source of revenue for them? An American who doesn’t work gets a lot more value out of a cable TV subscription than someone who is at work all day. Go long Comcast?

We will also need a word to describe what happens when a business goes from a large group of low-paid workers to a small group of gung-ho moderately paid workers. My vote: “The business has been Costcoed”.

Apple’s most important employees are programmers at other companies (making phone calls with a Samsung Note)

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For about 1.5 years I have been thinking that Samsung couldn’t possibly leave the Phone/Contacts app on the Galaxy Note 3 unpatched, yet in fact they have done just that. If you search for a friend by name, even after telling the app note to show contacts without phone numbers, you get a huge list of “contacts,” many of whom do not have the name searched for and for almost none of whom the phone has any number. I made a video of the remarkable behavior of this software.

Another knock against the phone/Samsung software/Android is that we couldn’t get it to work with a rented Nissan last month, either for phone calls or to play an audiobook yet a friend’s iPhone worked immediately.

I am about ready to switch to the iPhone 6 Plus partly for compatibility with the rest of the world, e.g., that Nissan, partly because I know that it won’t consider someone to whose email I responded 8 years ago a “contact,” and partly because of the image-stabilized camera and Apple’s excellent camera software. At the same time I am considering switching from Verizon to T-Mobile because Verizon has almost no coverage in my suburban neighborhood while T-Mobile and AT&T have at least some. T-Mobile seems to be about 1/2 the price of Verizon if there is any international usage at all (where T-Mobile is 1/6th the price per minute for voice calls and infinitely cheaper for data and text ($0 extra)). The plan is to use WiFi when calling from home so the iPhone and T-Mobile would have to hand off the call from WiFi to a tower if I were to head out for a walk in the neighborhood with Mindy the Crippler.

What do readers who’ve switched from Verizon to T-Mobile have to say? Is there an obvious reason to pay 2X for Verizon if your house happens to be in a place with poor Verizon coverage? (VZ has worked well most other places, though I have been afraid to turn the device on in a foreign country.)

Finally, is it fair to say that, in terms of keeping Apple stock price high and Apple products popular, the most important contributors are programmers at Samsung, Microsoft, and other potential competitors?

When SD cards turn bad

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Here’s a conundrum… A Canon 5D Mark III says “card 2 cannot be read” regarding a Lexar Professional 128 GB 400x SD card. Yet I can put the card into an HP notebook computer and read it or format it (exFAT). I put it into a Sony A6000 and the camera was unhappy about it (“please reinsert card”). Can the card truly be bad if the Windows machine is able to read/format it? I haven’t had a bad SD card before.

Separately, if I do have to replace this card, what’s the best price/performance for a 128 GB SD card that is occasionally used for HD video capture?

Commercial birthday parties considered harmful to children?

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About half of the kid birthday parties to which we’ve been invited lately are what might be called “credit card parties” in which a parent gives a credit card to an indoor gym that provides an hour of bouncy fun followed by plain cheese pizza and a nut-free cake served by minimum-wage 19-year-olds.

One of my childhood memories was watching our parents go out at least once a week to a neighbor’s house for a dinner or cocktail party. Virtually every family in the neighborhood was capable of cleaning up the house, putting some frozen pigs-in-blankets into the oven, and pouring out some wine.  Today’s young adults don’t seem to be as capable as hosts as were the 30-somethings of the 1970s.  I’m wondering if the next generation of adults will be even worse because they never got the idea that it is okay to spend more than 60 seconds of effort to host a group of friends.

What do readers think? And what about those of you with kids? Are the kids more or less enthusiastic about going to one of these commercial events compared to going to an artisanally organized party at another child’s home?

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