Selling off Detroit’s art collection

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Today’s New York Times carries an argument by an economist that Detroit’s art collection should be sold. Is this evidence to support the old saying that “an economist is someone who knows the price of everything and the value of nothing”?

It is kind of shocking to see how the author, Robert H. Frank, a professor at Cornell, calculates that it costs $1200/hour to have people looking at a $200 million Bruegel. But he does this by positing a world in which “interest rates return to normal levels — say, 6 percent”. In other words, a world in which Detroit might not have become insolvent because its pension assets would have been earning a return sufficient to pay off all of the commitments that Detroit’s politicians have made. The economics professor posits that the museum is open 2000 hours per year and that 5 people per hour would view the painting. that’s 100,000 people. http://www.dia.org/about/facts.aspx says that the museum received 600,000 visitors in the 2013 fiscal year. So that’s 1/6th of the visitors viewing this particular highlight of the collection. If we were to posit 2 percent interest rate and that half of the visitors view the painting, the foregone interest would instead be $4 million and the cost per viewer $13 (less than a ticket to see the next Avengers movie).

The art in this museum was donated to the city. If it is liquidated to pay for pension and other commitments this will presumably discourage future donors of property, since every state and local government in the U.S. is at risk of insolvency (promising to pay out unknown and unknowable amounts of future cash but without having a printing press for dollars).

Would anything change for the city via a $200 million cash infusion? We could look at Detroit’s past performance. Was the government capable of squandering comparable amounts historically with no benefit to citizens? We could look at Mark Zuckerberg’s donation of $100 million to the Newark schools. Did that result in better-educated students? Politicians can always give out cash to people who help get them elected/reelected. But it is tough for a politician to justify giving a painting from the city’s art museum to a beloved crony.

What do readers think? Should Detroit sell off the next generation’s chance to look at these famous paintings so that $18 billion in liabilities is reduced to $17 billion? Certainly it would spice up the museum if they had to go out and buy contemporary art and exhibit the old masters only by special loan.

Obamacare in Massachusetts

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I had thought that Obamacare had left Massachusetts relatively untouched, due to the fact that we already had near-universal health insurance coverage. However, a self-employed friend told me that his old $21,600 per year policy was canceled and now he must pay $30,000 per year in after-tax dollars to insure himself, his wife, and two teenage children.

Related: another friend’s Massachusetts Obamacare experience.

Federal workers toiling underground; England as a tax haven

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A couple of funny newspaper articles have crossed my inbox this weekend.

The first, “Sinkhole of bureaucracy”, is from the Washington Post decrying the fact that federal employee pensions are processed by hands on paper in an underground facility, rather than being computerized. This is ironic because it comes from a newspaper that has recently covered the cost overruns and quality problems with Obamacare web sites such as healthcare.gov. The underground facility costs only $56 million per year to operate, an amount that could be squandered on healthcare.gov-style IT very quickly. (Related: this History Channel story on the Ayalon Institute, an underground bullet factory in Israel.)

The second is a New York Times story about how French entrepreneurs are emigrating to avoid taxes and regulations handed down from their central government. It is funny because one of the tax havens is England, traditionally an example of a sclerotic permanently stagnant economy (see Mancur Olson). It is ironic because the same newspaper has spent the past six years cheerleading for more taxes and regulations to be handed down from our own central government, arguing that these new taxes and regulations will have no effect on Americans’ behavior or interest in work.

How do people like Comcast Extreme 105?

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How do folks like Comcast Extreme 105 Internet service? I have to appeal to readers because interacting with Comcast yields conflicting information. My current Comcast connection is 25 down/4 up, which is annoyingly slow when I am trying to clutter youtube with unlisted 1080p videos of my kids. It also means that VoIP phone service suffers a bit when a heavy upload is proceeding.

It is hard to tell exactly what Comcast promises in terms of upload speed with “Extreme 105″ but it seems to be 20 Mbps, i.e., slower than the mid-tier Verizon FiOS connection (50/25). Comcast has a “usage cap” of 250 GB per month, which works out to 5 hours of usage at 105 Mbps. Comcast says that they have to send out an installer to “install” Extreme 105 even though I already have Comcast Internet and a Motorola cable modem that is supposedly fully capable of handling Extreme 105. The customer service representative said that this was so that Comcast could set up a fiber optic line into my cable modem (this would be an interesting achievement since the Motorola modem has only a coax connector).

I don’t hammer the connection that much day-to-day, but the standard Comcast service seems to be subject to annoying hiccups. Do folks who upgraded to Extreme 105 find that the service is more reliable? And what does the installer do when he/she comes out? Finally, what does Comcast do about this usage cap?

Why are there any long-term unemployed people? Or any unemployed people at all?

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Folks:

Today’s New York Times has an article about how long-term unemployed Americans may never work again. And they say that this may be due in part to employers discriminating against people whose resumes say “unemployed” or “big gap”. This raises the question of why there are any such resumes.

I know a lot of people who are not working productively. They call themselves “entrepreneurs” and say that they are pulling together a startup. For about $500 they can even create an LLC so that their resume says “2013-present Big New Idea LLC: Founder and CTO” or whatever. That after a year or two their startup has not succeeded will not be held against them by a potential employer. After all, most startups fail or fizzle.

A friend’s daughter was trying to get her first job. Employers didn’t want to hire her because she had no work experience or references. So I edited her resume to say “Jane Smith Landscaping” [not her real name!], hired her to do some yard work, and put my name and phone number down as a reference. Having planted some daffodil bulbs, she went to her next interview as a self-employed person looking for an indoor job for the winter. She was hired.

Given that almost anyone can find work doing landscaping and call themselves a landscaping contractor, taking care of children and call themselves the founder of a child care center, etc., why are there resumes that say “I am unemployed.” If it is known that employers don’t like to hire the unemployed, why is anyone wearing a label that is essentially self-applied?

Boston Lyric Opera: Rigoletto

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Four of us went to the Boston Lyric Opera’s Rigoletto. Run out and see it before March 23!

As with the Barber of Seville back in 2012, hearing the opera in a hall whose size the composer would have recognized is a much better experience than being in the cavernous Met.

All of the performers were great (including the orchestra) but we particularly enjoyed Nadine Sierra as Gilda. She was a wonderful actress as well as singer.

[If you haven't seen Rigoletto before and you are a parent, especially of a daughter, be warned that it is pretty upsetting. Pretty soon I will be limiting myself to G-rated entertainment!]

Why does GM make cars with physical ignition keys?

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One of our government-selected automobile manufacturers (General Motors) is in the news due to hundreds of GM owners and family members who are now dead due to a faulty ignition switch design (LA Times). The big question for me is why GM continued (and continues) to make cars with physical ignition keys. A long time ago they apparently figured out that they were not good at making reliable physical ignition key systems. Why didn’t they just make a corporate decision to switch to making only cars where this deficiency wouldn’t be an issue? If they’d done it as a company and made every car with keyless ignition it shouldn’t have cost that much extra. According to Wikipedia, GM has had the technology to do this since 1993 when they introduced a Corvette with such a system.

Why would the company try to fix the problem instead of just engineering the cars so that the problem could not recur?

Electrical Fire on Board Malaysia Airlines 370?

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My friends are emailing me with the latest theories about Malaysia Airlines 370. There are many articles and blog postings (example) that posit that an electrical fire on board the airplane caused the crew to try to divert to a nearby airport. The original posting from Chris Goodfellow suggests the following:

  • an electrical fire caused smoke in the cockpit
  • the pilots pulled lots of breakers
  • the breakers that they pulled disabled everything that sends signals out of the airplane, e.g., the transponders and the ACARS
  • the breakers that they pulled had no effect on the air data computers, attitude reference systems, or autopilots, thus enabling the plane to continue to fly on autopilot for 6 more hours
  • the pilots tried to divert to a nearby airport

This does not match up very well with another bit of information we have about Flight 370, i.e., that the airplane was diverted (via the FMS (like the GPS in your car)) to an IFR intersection, which is an arbitrary point defined by a five-character code. If the pilots wanted to go to an airport they would presumably have typed in the four-letter airport ID instead of a five-letter IFR intersection in the middle of nowhere. (e.g., one could go to BOSOX with an airplane GPS and land on top of an exurban dentist’s McMansion and SUV collection or one could go to KBOS and find an assortment of two-mile-long runways; which would you prefer?).

The other problem is that autopilots just love to disconnect (I wrote about this in my first conjecture on Air France 447). So if one were to pull breakers at random one would be much more likely to cause autopilot disconnection (and a crash much sooner than 6 hours later unless the plane was being hand-flown) than to cause transponder and ACARS disconnection.

Finally you have to remember that, unlike in a crummy four-seat plane, all of that fancy stuff in front of the pilots in an airliner is not the real stuff that runs the airplane. It is mostly switches, knobs, and displays that connect through wires to the actual stuff, which is typically in “electronics bays” underneath the passenger seats (photos; don’t spill your Diet Coke if you want to get to Denver!). So even if a fire burned up the cockpit the transponders would continue to operate because the thing on the dashboard that says “transponder” is in fact just a control panel for a transponder located elsewhere. (I answered the question of Why is it possible to turn off the transponder? in a comment on an earlier posting.)

So I’m still as confused as anyone about what happened to this beautiful B777 and the passengers but based on the other information that we’ve received (many hours of pings, turn to an IFR waypoint,  etc.) I am pretty sure that there was not an electrical fire on board that yet left the autopilot and associated systems untouched.

Why is there any income limit on overtime regulations?

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President Obama last week expanded federal rules requiring American employers to pay overtime. In the press release the President said “So we’re going to update those overtime rules to restore that basic principle that if you have to work more, you should be able to earn more.”

What this means is that businesses that could formerly pay fixed salaries to some managerial workers earning over $23,660 will now be forced to comply with federal overtime regulations on workers earning perhaps as much as $50,000 per year.

But if this is a “basic principle” shouldn’t it apply to everyone? Los Angeles pays firefighters overtime though the average total compensation is close to $250,000 per year (article; cash pay was $142,000/year but they also get benefits including a pension starting at age 50 of 90 percent of their previous income).

Let’s consider Cameron Kennedy, a working mom featured in this Washington Post story. McKinsey pays her $350,000 per year, presumably a fair wage for her skills. If they make her work more than 40 hours/week because they don’t want to hire another $350k/year worker, why shouldn’t McKinsey pay her overtime? Hasn’t she earned it as much as anyone else who has worked more than 40 hours?

If it makes sense to impose a “basic principle” from Washington, D.C., what is the rationale for an income cap?

[And separately, can companies evade these new regulations by limiting workers to 40 hours/week?  Suppose that Business A has someone working 60 hours/week and getting paid a straight $10/hour = $600. Meanwhile Business B has an identical employee. Under the new regulation Business A would have to pay 40*$10 = $400 plus 20*$15 = $300 or $700, right? But couldn't the companies agree that they will swap these workers for the last 20 hours/week? So now there is no worker who works more than 40 hours/week. People are probably at their most efficient for the first 30 hours per week on a job, so wouldn't we expect a reshuffling of the workforce so that no company employs a person for more than 30 hours per week? Then employers don't have to provide health insurance under the Obamacare laws and they also don't have to pay overtime under the new overtime regulations.]

New York Times: Malaysians are stupid because they ignored radar blips

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In “Series of Errors by Malaysia Mounts, Complicating the Task of Finding Flight 370,” the New York Times says the following:

The radar blip that was Malaysia Airlines Flight 370 did a wide U-turn over the Gulf of Thailand and then began moving inexorably past at least three military radar arrays as it traversed northern Malaysia, even flying high over one of the country’s biggest cities before heading out over the Strait of Malacca.

Yet inside a Malaysian Air Force control room on the country’s west coast, where American-made F-18s and F-5 fighters stood at a high level of readiness for emergencies exactly like the one unfolding in the early morning of March 8, a four-person air defense radar crew did nothing about the unauthorized flight. “The watch team never noticed the blip,” said a person with detailed knowledge of the investigation into Flight 370. “It was as though the airspace was his.”

It was not the first and certainly not the last in a long series of errors by the Malaysian government that has made the geographically vast and technologically complex task of finding the $50 million Malaysia Airlines jet far more difficult.

The implication seems to be that the Malaysians are stupid while we Americans, especially New York Times journalists and our military personnel, are smart. We would never have done anything like this. The article certainly does not link over to Wikipedia, which notes “As the first wave [of Japanese aircraft attacking Pearl Harbor] approached Oahu, it was detected by the U.S. Army SCR-270 radar at Opana Point near the island’s northern tip. This post had been in training mode for months, but was not yet operational. Although the operators, Privates George Elliot Jr. and Joseph Lockard, reported a target, a newly assigned officer at the thinly manned Intercept Center, Lieutenant Kermit A. Tyler, presumed it was the scheduled arrival of six B-17 bombers. The direction from which the aircraft were coming was close (only a few degrees separated the two inbound courses), while the operators had never seen a formation as large on radar; they neglected to tell Tyler of its size, while Tyler, for security reasons, could not tell them the B-17s were due (even though it was widely known).”

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