Companies have always tried to corral their customers into behaving in ways that maximize the companies’ profits, even if that’s not best for the customers: forcing you to use “official” printer ink, to buy your printers and terminals from the same company that sold you your mainframe, to get your apps from the company that sold you your phone.
One especially effective profit-maximization strategy is controlling repairs. If a company can force you to use its official repair services, they can set prices for parts and service, and force you to use original manufacturer’s parts, rather than third-party parts or refurbished parts. And, of course, they can refuse to repair a product after a certain number of years: in the absence of a third-party repair option, this means that you have to throw away your product and buy another one from the company.
Though the urge to control customers to maximize profits is as old as business, the digital era has seen an important shift in the tactics used to make business models mandatory. The abuse of laws like Section 1201 of the DMCA (which bans breaking DRM), the Computer Fraud and Abuse Act (which lets companies treat their “license agreements” as though they had the force of law), as well as trade secrecy and monopolistic supply-chain control has literally criminalized many forms of independent repair, and it’s getting worse.
Last year, 18 state level Right to Repair bills were crushed by a big business coalition led by the tech industry. These bills would end companies’ war on independent service by forcing them to supply parts, manuals, and diagnostic codes to independent technicians.
October 22, 2018
The right to repair
October 19, 2018
Ontario’s lack of retail cannabis stores – “What have they been smoking at Queen’s Park?”
In the Financial Post, William Watson points out the weirdness of Ontario’s decision to delay the opening of legal cannabis stores until next Spring:
For several years now, dozens of dispensaries have been operating quite openly. (They call themselves dispensaries to further the narrative that, like your grandmother’s rye, marijuana is for medicinal purposes.) Only now, with pot use becoming legal, are these dispensaries being shut down — although Toronto’s chief of police says not right away, as he doesn’t have [the] person power to do it all at once.
If they don’t shut down, they may forfeit their chance at a licence to sell pot legally once licensed retail operations do finally start in the province on (when else?) April 1st of next year — 166 days after legalization. Why would they not be granted a licence? Not because they trafficked in marijuana when its use was strictly illegal, if seldom prosecuted. But because they continued to traffic in marijuana after it became legal but before the government gave them a licence, an offence that will be prosecuted slowly, if at all.
Silly me. I thought marijuana legalization would simply say that after a certain date the police wouldn’t arrest you for having such-and-such an amount of marijuana in your possession. End of story.
[…]
Countrywide, as the Financial Post’s Vanmala Subramaniam recently reported, a big roadblock to timely legal supply has been the need to seal products with federal excise revenue stamps. But there’s only one supplier and the stamps come without adhesive. Stamps! In 2018!
In American movies of the 1930s and 1940s, moonshiners and bootleggers waged war against “revenuers,” federal agents charged with levying excise taxes on booze. It seems the revenuers have now taken charge of Canada’s marijuana industry. You might plausibly argue that the former illegal market operated in the interests of consumers. There seems little doubt the new legal market will operate in the interest of governments, their unions and their revenue departments.
When cops did enforce the country’s no-toking laws, they could plausibly tell themselves they were doing it to protect young people and other innocents. Now when they enforce the laws they’re doing it to protect legally privileged producers against producers who find themselves offside with often arbitrary licensing laws. Protecting kids was one thing. Protecting cartels is quite another.
October 16, 2018
Fast food outlets cluster in poorer areas – because they’re low-margin businesses
Tim Worstall debunks the “fast food restaurants are preying on the poor” myth:
Contrary to the musings of Rod Liddle in the Sunday Times there is a cause and effect going on over the placings of fast food restaurants or outlets in British towns. The provision of burnt chicken and maybemeatburgers to the hoi polloi is a hugely competitive business. This means that it is also low margin. So, where do you put the places that are in a low margin line of business?
[…] this is about clustering of those nosh joints. Why are they in the poor areas? Well, for the same reason the poor are in the poor areas. They’re cheap. This being rather the defining point about poor people, they look for cheap places to live. The two are therefore synonymous, poor and cheap. And what is it we’ve just said about nosh? That it’s a low margin business. Therefore purveyors of the deep fried and battered saveloy – that joy of the ages – are going to be clustered in the poor part of town where they can afford the rents.
And that’s our cause and effect. Some poor people are poor because they’re, or have been, ill. They’re in the cheap part of town because they’re poor. Fried gut shops are in poor areas because they don’t make much money therefore they’re in the poor part of town. Absolutely any analysis of the phenomenon which doesn’t account for this is wrong. And no analysis done by anyone does take account of it – therefore all current analyses of the point are indeed wrong.
There are also other factors to consider, including the fact that poor people are less likely to have the ability or facilities to prepare their own meals (or the habit of cooking for themselves), so the easy availability of high-calorie fast food or snacks is rather important to them. When you’re hungry and don’t have a fridge or freezer full of food at home, a burger or fried chicken has a much stronger appeal than it does to more wealthy folks with well-stocked pantries. If you’ve been raised on high-fat/high-salt foods, the “healthier” alternatives may not appeal, as they also are less flavourful than their fast food options.
October 13, 2018
On the cusp of legalization
Colby Cosh finally gets to take a victory lap:
On Thursday the marijuana company Sundial Growers held a ribbon-cutting for its new grow-op in the Alberta town of Olds. I am not sure whether “grow-op” is an acceptable word in the new setting of giant legal cannabis cultivation facilities, but let’s stick with it, if only to call attention to the extraordinariness of what we are witnessing this month in Canada. The launch was held in a small office, and Sundial only received its cultivation licence from Health Canada on Sept. 14, but the first fruits of its pot business are already budding in a room nearby.
The company intends to have a 500,000-square-foot growing facility built in 2019, but its press release points out that it can add more space quickly. I might have been stopped short by the spectacle of the mayor and the (United Conservative) MLA rejoicing as a CEO explained the details of his craft weed business and remarked on plans for a “Sweet Jesus” varietal. But what really struck me is something the mayor said: When the company is up and fully running, he observed, it is going to hire 500 people in Olds, becoming the town’s largest single employer. Olds is, of course, home to Olds College, a century-old agriculture and food research institute: this was a major reason for the new marijuana industry to locate there.
How long ago would this scene — being played, as it is, in a naturally conservative part of the Alberta hinterland — have seemed like science fiction or parody? The Sundial facility is dwarfed by the 800,000-square-foot Aurora Sky factory, strategically located near Edmonton’s awkwardly remote international airport in the suburb of Nisku. Everyone who has ever tried to flee Edmonton or come to it through that airport has complained about its preposterous distance from the capital’s downtown, but this turns out to have an unimagined advantage. You can build a spacious agri-pharmaceutical facility at low cost practically next to the runway, establish an ultra-secure, ultra-short supply chain, and presto hemp-o: overnight response to a worldwide medical market for cannabis products becomes a snap.
I am someone who is entitled to a victory lap for having insisted years ago that we were not, as a country, properly imagining the dimensions of a legally unleashed cannabis industry. We had no idea how much economic activity was being annihilated by a perverse, illogical feature of criminal law. Maybe it is time, as Finally Doing The Obvious Thing Day nears, for me to take that victory lap.
October 10, 2018
Riding the Rocky Mountaineer
Fred Frailey just got back from a trip on the Rocky Mountaineer and he’s enthusiastic about the train and the experiences it offers (for a price):
I’m just back from railing from Banff, Alta., to Vancouver, B.C., aboard the Rocky Mountaineer … my first such trip in 23 years. Then, it was eight or nine Silver Leaf coaches and a single Gold Leaf bilevel first-class car. This time, it was two coaches and five packed Gold Leaf cars. From the rail trip alone, I figure that Armstrong Group grossed a minimum of $600,000.
Usually (but not this time) there’s a section of roughly equal length out of Jasper, Alta., that joins the Banff train at Kamloops, B.C., so this train can easily be a $2 million-dollar baby when the passenger count tops 1,000 (we had 350). But my sense is that Armstrong Group brings in a at least a much money booking people on pre-train and post-train tours and luxury hotel stays.The Rocky Mountaineer in the Rockies.
Photo by The Land via Wikimedia Commons.I’ve always sensed a lot of railfan resentment of Peter Armstrong. The beef is that he “stole” from VIA Rail Canada the idea of an all-daylight trip along the Rocky and Selkirk mountains and the Thompson and Fraser rivers. For sure, the man plays for keeps; he is forever wishing to axe VIA’s Toronto-Vancouver Canadian as a government-funded competitor west of Jasper or to have the train sold to his company to redo in some Rocky Mountaineer manner.
But give the man his due. He created something lasting by becoming one of the few people to run passenger trains more than a few miles and make money at it. Who knows where the Canadian will be in a decade; it keeps losing fingers and hands as frequencies are trimmed and schedules lengthened. But the Rocky earns its way commercially, having proven its durability by weathering 2008-2009’s Great Recession.
In the latest issue of Trains, my colleague Bob Johnston writes an excellent capsule history of this service: “One factor driving the decision to move the Canadian over to [the Canadian National] route was lobbying by Vancouver entrepreneur Peter Armstrong to privatize VIA’s summer excursions to Banff, Alta., introduced in 1988. This came with the understanding that his fledging operation would get route exclusivity and some initial financial assistance from VIA to ensure the venture’s success. After a few shaky early years, Armstrong invested heavily in specialty dome cars to make Rocky Mountaineer a financial and creative success in a way the public funded operator never could.”
October 8, 2018
QotD: The closed-source software dystopia we barely avoided
Thought experiment: imagine a future in which everybody takes for granted that all software outside a few toy projects in academia will be closed source controlled by managerial elites, computers are unhackable sealed boxes, communications protocols are opaque and locked down, and any use of computer-assisted technology requires layers of permissions that (in effect) mean digital information flow is utterly controlled by those with political and legal master keys. What kind of society do you suppose eventually issues from that?
Remember Trusted Computing and Palladium and crypto-export restrictions? RMS and Linus Torvalds and John Gilmore and I and a few score other hackers aborted that future before it was born, by using our leverage as engineers and mentors of engineers to change the ground of debate. The entire hacker culture at the time was certainly less than 5% of the population, by orders of magnitude.
And we may have mainstreamed open source just in time. In an attempt to defend their failing business model, the MPAA/RIAA axis of evil spent years pushing for digital “rights” management so pervasively baked into personal-computer hardware by regulatory fiat that those would have become unhackable. Large closed-source software producers had no problem with this, as it would have scratched their backs too. In retrospect, I think it was only the creation of a pro-open-source constituency with lots of money and political clout that prevented this.
Did we bend the trajectory of society? Yes. Yes, I think we did. It wasn’t a given that we’d get a future in which any random person could have a website and a blog, you know. It wasn’t even given that we’d have an Internet that anyone could hook up to without permission. And I’m pretty sure that if the political class had understood the implications of what we were actually doing, they’d have insisted on more centralized control. ~For the public good and the children, don’t you know.~
So, yes, sometimes very tiny groups can change society in visibly large ways on a short timescale. I’ve been there when it was done; once or twice I’ve been the instrument of change myself.
Eric S. Raymond, “Engineering history”, Armed and Dangerous, 2010-09-12.
October 5, 2018
When the marketing department took over tool sales
Paul Sellers was standing in line at one of his local big box store (in my part of North America, it’d be a Home Depot or Lowes), and he happened to glance at some of the packaging for otherwise pretty ordinary tools:
I’m never sure when it started, a point where you could no longer determine what something is by its name. A form of sensationalism was somehow loosed and we lost sincerity to titles declaring ‘not ordinary’ that hid what was, when all said and done, intrinsically quite the ordinary. All the handsaw makers followed suit latterly with model names like piranha, sabretooth and barracuda. Then they backed up claims with reference terms such as, “Using a handsaw impacts on all the muscles and joints in your arm. The ERGO™ handle is designed with users, tasks and environments in mind to make the job…” blah, blah, blah! The truth is that saw makers of the 18th century put far more effort into the development of ergonomic design of saw handles than any modern maker and all modern makers either copied what existed or dumbed down the designs to come up with the most basic one-size fits all design.
Photo by Paul Sellers
In reality of course nothing’s really changed except that the handles are pre moulded plastic and the teeth cannot be sharpened any more. I was in my local builders merchants waiting to pay and stood staring at the signage of the two nearest products facing me. Whereas these stab saws and jab saws convey a sense of brutalising aggression, it’s the marketer that suggests that this is what the buyer needs. Aggressive marketers think that that is indeed what the user wants, a kind of macho-man aggression to his work. The packaging has changed to use brighter hi-viz lines, letters and numbers with rip tares and wild hogs with tusks as the marketers way of connecting the would-be user to a sale of his products. Imagine, even a common degreasing agent remains the same as it was ten years ago is packed and wrapped with a punchy headline header, “Cleans like crazy!”, too, but why the wild ‘Mad Hog’ title replete with tusks? Reminds me of the Arkansas Razorback football team. What they don’t probably realise is that they would have sold as well without it. I guess they thought that they had that insider knowledge of what the trades people needed, right?
My suspicion is that there are really two distinct markets for tools and tool-related products like these. The first, and more stable market is the trades, where the demand is probably pretty steady and unlikely to shift much no matter what the marketers put on the packages. Tradespeople generally like to use known brands that they can depend on for consistent value at a given price point. These folks aren’t the target for all the marketing flash and bumf — they’ll keep buying the “Old Reliable™” brand until/unless they sell the brand to a cheaper manufacturer and the quality of the end product starts to slip. The target instead is … you. You, the non-regular user of “jab saws” or “stab saws” or even degreasing agents. You probably don’t have much recent experience with any of the current brands of tools, so you’re significantly more likely to be swayed by how the tools and materials are marketed. You’re the sucker who (they hope) will fall for the bright colours, eye-catching packaging, and mucho-macho descriptions.
And they wouldn’t keep doing it if it didn’t work.
A quick way for Doug Ford to reduce Ontario’s electrical rates
Ross McKitrick, Elmira Aliakbari and Ashley Stedman outline one of the fastest ways for the Ontario government to get Ontario electricity rates back down toward the national average:
The Ford government seems to want to repair Ontario’s electricity market. It recently moved to scrap the Green Energy Act and reportedly plans to eliminate or alter the so-called Fair Hydro Plan.
While these moves will mitigate future price increases, they won’t reduce current electricity prices. In fact, according to a Fraser Institute study being released today, to lower existing prices the government must reduce what’s known as the “Global Adjustment” — an extra charge on electricity. It won’t be easy, but reducing the global adjustment could bring down electricity prices by about 24 per cent.
This would be welcome news for Ontarians, as electricity prices increased 71 per cent from 2008 to 2016, far outpacing electricity-price growth in other provinces.
[…]
Between 2008 and 2017, the GA grew from less than one cent per kilowatt-hour (a common billing unit for energy) to about 10 cents, accounting for the entire increase in Ontario electricity commodity costs over that time. Therefore, the key to lowering power prices in Ontario is to reduce the GA.
In our study, we use reports published by the Ontario Energy Board to breakdown the GA to better understand where the money goes and provide specific recommendations on how to lower electricity prices. We found that the largest component of the GA charge — nearly 40 per cent — funds subsidies paid to renewable energy sources (wind, solar, etc.) under feed-in-tariff contracts, yet these sources only provide seven per cent of Ontario’s power output.
And notably, the GA provides almost 90 per cent of revenue earned by renewable generators, with only 10 per cent coming from actual power sales. This overwhelming reliance on government subsidies (paid by ratepayers) rather than actual electricity sales reveals how distorted the pricing structure has become in Ontario.
October 3, 2018
USMCA (aka son-of-NAFTA) – what’s the damage after all?
The most common sentiment from Canadian comments appears to be “meh, it could have been much worse”. That doesn’t mean it’s particularly good, either:
All that cross-border yelling, a solid year of bluster and petulance, dire rhetoric about “stabs in the back” and “special places in hell,” fake deadlines and all-night negotiations, and we end up with pretty much the agreement we started with? All that was required to fix NAFTA, that destroyer of American jobs and pox on its prosperity, the deal Donald Trump memorably complained was “the worst agreement in history,” was to change its name — from North American Free Trade Agreement to US-Mexico-Canada Agreement? Seriously?
Not quite. The result is certainly a far heave from some of the more apocalyptic scenarios we had been entertaining ourselves with. But neither is it the largely unaltered “NAFTA 2.0” of much initial comment. There are substantive changes in there, most of them bad, and not all of them imposed by an overbearing U.S. on an unwilling Canada.
Still, it’s not quite the conflagration we’d been banking on, is it? Trump is the bully in middle school who threatens to take your lunch money, only to settle for a half a slice of your pizza. Or, in this case, 3.6 per cent of it.
That’s the share of the Canadian dairy market to which the U.S. will now have tariff-free access, a slight advance on the 3.25 per cent market share the U.S. had negotiated under the Trans Pacific Partnership — before Trump withdrew from it. (Oh, and “milk price classes 6 and 7” are eliminated, for fans of that dispute. It involves skim milk solids.) There are also some minor increases in tariff-free imports in the other supply-managed sectors: eggs, chicken, cheese and so on. Everything else will face the same triple-digit tariffs, as before.
That’s unfortunate. Supply management is a blight on the Canadian political and economic landscape we could well do without. The NAFTA re-negotiations were an ideal opportunity to bargain it away, as it should have been in the original NAFTA. That it remains more or less intact — even the dairy lobby could manage only a half-hearted jeremiad of imminent lacto-doom in response — is one of the chief disappointments in this agreement.
Still, what did you expect? There was never any chance of these negotiations resulting in a deepening and broadening of NAFTA — not with protectionists on both sides of the table. The only question was whether the status quo protectionists on this side — who wished to preserve all of NAFTA’s existing exemptions — could hold out against the expansionist protectionists on the other, who wished to cut NAFTA into little mercantilist pieces. As it turns out the answer is: surprisingly well.
A quick summary of the winners and losers in this agreement:
Is this a free trade agreement?
No. Unlike NAFTA, this latest agreement makes no pretense to be about free trade (or even freer trade). It’s a protectionist agreement imposed by the U.S. on the other two countries.
Who benefits from the agreement?
The primary beneficiaries of the agreement are labor unions, U.S. dairy farmers, U.S. drug manufacturers, and companies that provide automation for manufacturers (e.g., robot makers).
The agreement will require at least 30 percent of cars (rising to 40 percent by 2023) to be made by workers earning $16 an hour. This will force more cars to be produced in the U.S. and Canada since the typical manufacturing wage in Mexico is only about $5 per hour. The agreement also requires Mexico to make it easier for workers to form unions, which will make them less competitive against more productive unionized workers in the U.S. and Canada.
U.S. dairy farmers will also gain greater access to the Canadian market. Because of new restrictions on how much dairy Canada can export, there is the potential for U.S. dairy to gain a greater market share in foreign countries.
U.S. drug companies will also be able to sell pharmaceuticals in Canada for 10 years (rather than eight) before facing generic competition.
Because the agreement makes human labor in the three countries somewhat more costly, companies that create robots and other automation will likely be the long-term beneficiaries.
Who are the biggest losers in this agreement?
As with almost all protectionist trade agreements, consumers are the ones who will be hurt the most.
As the Washington Post notes, economists and auto experts think USMCA is going to cause car prices in the U.S. to “rise and the selection to go down, especially on small cars that used to be produced in Mexico but may not be able to be brought across the border duty-free anymore.”
Because the restrictions on Canadian steel and aluminum also remain in place, businesses that use those materials in manufacturing will pay inflated prices, and their products will be less competitive on the global market.
September 29, 2018
The Ontario government’s amazingly sensible approach to legal cannabis
Chris Selley expresses what a lot of surprised people must be feeling after Premier Doug Ford’s government introduced startlingly mature and sensible rules for the distribution and sale of cannabis products in the province after the federal government’s legalization is enacted:
The Ontario government tabled its cannabis retail framework in the legislature on Thursday, and it only further repudiates the Frightened Communist model envisioned by the Liberals. The government will sell pot online, as before, and will maintain a monopoly on wholesaling. But the rest will be up to the private sector, under the control of the Alcohol and Gaming Commission. As it stands, there won’t even be a cap on the number of licences; a government official said Thursday they expect 500 to 1,000 applications right off the bat.
In response, OPSEU president Smokey Thomas beamed out a furious press release on behalf of his spurned members — er, sorry, on behalf of Ontario’s “municipalities and communities.”
“Unlimited stores and unlimited places to smoke will cause unlimited problems,” Thomas averred. “It’s outrageous. We’re going to become the wild west of cannabis and Sheriff Doug Ford is going to skip town, leaving communities and municipalities holding the dime bag.”
Thomas predicted Premier Ford would hand out retail pot licences to “Conservative insiders” and “corporate donors.” (Corporate donations are illegal.) He accused Ford of funnelling what by rights should be public profits into “private pockets.”
“If Ontario’s finances are truly as bad as Ford wants us to believe, why is he giving away the millions, maybe even billions, in revenue we’d get if cannabis sales were public?” he asked.
Does the government make money on cigarettes? On alcohol sold in bars and restaurants, at privately run LCBO agency stores and, of late, in supermarkets? Of course it does. Scads of it.
So it’s all quite ridiculous, as OPSEU press releases tend to be. But Thomas is not wrong when he argues the new approach is remarkably permissive. Perhaps most notably, whereas the Liberals’ proposed rules banned using marijuana in public, the PCs’ would allow you to smoke or vape it anywhere you can tobacco (though not in cars or boats). But it’s far less permissive than one might expect in other ways as well.
September 28, 2018
Ontario government lays out the path to a fully legal cannabis market
There is going to be a gap between the federal legalization date next month and the beginning of legal sales from brick-and-mortar stores in Ontario in April:
With the legalization of recreational marijuana around the corner, the Ontario government has finally answered some of the most burning questions about where residents can officially buy and smoke pot.
A day before new pot legislation is set to be tabled, The PC government announced earlier today that starting Oct. 17, weed will be up for sale at private retail pot shops by April next year.
Doing away with the cap on the number of licensed cannabis stores in the province, the government is officially taking a free-market approach to what would previously have been an LCBO monopoly under the Liberal provincial government.
[…]
Until April, cannabis will be sold exclusively online, distributed through federal wholesalers and the government’s Ontario Cannabis Store.
The Alcohol and Gaming Commission of Ontario will be in charge of regulating the marketplace, including granting and revoking pot shop licenses.
Store owners will need to apply for a retail-operator license as well as a retail store authorization for every location they open, which will be limited to a set number, to prevent possible over-expansion, Walmart-style.
There will also be restrictions for federal cannabis growers, who will only be able to hold “a single retail license at a single production site located in Ontario,” said Ontario Attorney General Caroline Mulroney.
All currently existing pot stores who continuing to operate illegally after Oct. 17 will lose their right to ever apply for a license in the future, as will stores who have a history of dealing with organized crime and providing pot to minors.
Ontario’s new government agency, the Ontario Cannabis Retail Corp., will be in charge of handling online cannabis sales as well as wholesaling to private stores, who will potentially run the gamut from local pot shops to huge cannabis corporations.
There will be a minimum distance requirement between pot shops and schools set up in the future.
Any Ontario municipalities who don’t want pot shops on their turf — like Norfolk County in Southwestern Ontario, the first to vote no on cannabis storefronts — will have to opt out officially by Jan. 22, 2019, which they were previously barred from doing.
September 26, 2018
The New York Times on the minimum wage question
Jon Miltimore shares the key points of a New York Times editorial on the minimum wage:
The minimum wage is the Jason Vorhees of economics. It just won’t die.
No matter how many jobs the minimum wage destroys, no matter how many times you debunk it, it always comes back to wreak more havoc.
We’ve covered the issues at length at FEE, and quite effectively, if I do say so myself. But I have to admit that one of the greatest takedowns of the minimum wage you’ll ever find comes from an unlikely place: The New York Times.
There are many reasons people and politicians find the minimum wage attractive, of course. But the Times, in an editorial entitled “The Right Minimum Wage: 0.00,” skillfully rebuts each of these reasons in turn.
Noting that the federal minimum wage has been frozen for some six years, the Times admits that it’s no wonder that organized labor is pressuring politicians to increase the federal minimum wage to raise the standard of living for poorer working Americans.
“No wonder. But still a mistake,” the Times explains. “There’s a virtual consensus among economists that the minimum wage is an idea whose time has passed.”
But why has the idea “passed”? Why would raising the minimum wage not help the working poor?
“Raising the minimum wage by a substantial amount would price working poor people out of the job market,” the editors explain.
But wouldn’t the minimum wage increase the purchasing power of low-income Americans? Wouldn’t a meaningful increase allow a single breadwinner to support a family of three and actually be above the official U.S. poverty line?
Ideally, yes. But there are unseen problems, as the editors point out:
There are catches…[A higher minimum wage] would increase employers’ incentives to evade the law, expanding the underground economy. More important, it would increase unemployment: Raise the legal minimum price of labor above the productivity of the least skilled workers and fewer will be hired.
But if that’s true, why would progressives support such a law? What’s their rationale for supporting a minimum wage if it does more harm than good? Is it sheer political opportunism?
Not necessarily. The Times explains:
A higher minimum would undoubtedly raise the living standard of the majority of low-wage workers who could keep their jobs. That gain, it is argued, would justify the sacrifice of the minority who became unemployable.
There’s just one problem with this logic, the editors say:
The argument isn’t convincing. Those at greatest risk from a higher minimum would be young, poor workers, who already face formidable barriers to getting and keeping jobs. The idea of using a minimum wage to overcome poverty is old, honorable – and fundamentally flawed. It’s time to put this hoary debate behind us, and find a better way to improve the lives of people who work very hard for very little.
Reforming Union Pacific
Fred Frailey explains why the vast Union Pacific system is due for some serious economic streamlining:
Union Pacific locomotive 5587, a General Electric AC4400CW-CTE (AC44CWCTE)
Photo by Terry Cantrell via Wikimedia Commons.
Union Pacific is the ideal lab rat for Precision Scheduled Railroading, practiced by the late Hunter Harrison on four Class I railroads, with great rewards for shareholders and mixed results for customers. UP, which will begin recasting itself October 1, is ideal for the role because it has too many employees, too many unproductive route miles, and too many expensive toys. Plus, it is less interested in increasing market share than in maximizing freight rates, which makes right-sizing the railroad easier. Let’s start by running the numbers.
Employees. At the peak of the last railroad cycle in 2006, Union Pacific had already been lapped by its western competitor, BNSF Railway, in both cars originated and revenue ton miles. Since then, through 2017, UP’s originations and revenue ton miles both fell 17 percent, while BNSF RTMs actually set a record in 2017. Yet at 44,146 employees last year, UP’s employee count was still 7 percent higher than that of BNSF. To put this another way, for UP’s productivity per employee (revenue ton miles per worker) to equal its competitor’s, it would need to slice the headcount by 16,000. A place to start might be headquarters in Omaha. UP counted 3,678 executives, officials and staff assistants in 2017 versus BNSF’s 1,511.
Barren route miles. Salina, Kan., to Provo, Utah, is becoming a traffic wasteland. That didn’t stop UP from laying welded rail and concrete ties and from covering the almost 1,000 miles with centralized traffic control. Meanwhile, one train a day (plus Amtrak) operates In Missouri between St. Louis and Poplar Bluff, Ark. And the railroad has effectively ceased freight service between Watsonville Junction and San Luis Obispo, Calif., and is close to doing so over the rest of the Coast Line to Los Angeles. All of these routes and perhaps many others you can identify contribute little revenue but buckets of costs, inflating the operating ratio (which is the percentage of revenues eaten up by operating costs). They would constitute Hunter Harrison’s first target.
Map of the Union Pacific Railroad as of 2008, with trackage rights in purple (the special Chicago-Kansas City intermodal trackage rights are lighter).
Image via Wikimedia Commons.[…]
Moreover, there are aspects to PSR as practiced by Hunter Harrison that customers won’t like. At the core of Precision Scheduled Railroading is intense use of assets: Run as many trains every day one direction as you do the other, fill them to maximum designed length and operate them at similar speeds. This isn’t how the commercial world works, and the Hunter Harrison way to make customers ship seven days a week was to discount rates on slow days and slap on surcharges on busy days. This keeps your crews and equipment fleet in motion at all times, and those cars and locomotives not continually used can be retired. Goodbye to growth and increased market share, which is a messy process requiring you to accede to the needs of customers rather than the other way around. But it is efficient.
However, if Union Pacific is serious about serving its customers better and delivering individual cars rather than trains to their destinations on schedule, I have an idea that I guarantee will achieve that result: Base salaried bonuses and stock grants on UP’s success in getting cars to customers on the right day and time and on the right train. UP has scheduled individual cars for decades, but there have never been monetary consequences for achieving those plans. People do follow the money. And when Union Pacific does for customers what it says it will do, calling the process Precision Scheduled Railroading or whatever you wish, I will be leading the applause.
September 24, 2018
QotD: Entrepreneurs
We need entrepreneurs to decide what to do.The only alternative is governmental bureaucracy, which is good for national defense and a few other things, but very bad at most of what we do, from room rental to rock music. The entrepreneuseonly succeeds if people like what she does, and agree voluntarily to pay for it. A free society is one of choice. Entrepreneurs give choice, bureaucrats crush it.
Deirdre Nansen McCloskey, “Why We Need to Admire Entrepreneurs”, Peace Love Liberty, 2018-09.
September 23, 2018
How to use the stock market as a scorecard during a trade war
At the Continental Telegraph, Tim Worstall explains how even the financial journalists at Fortune are misunderstanding what the changes in stock market values mean during Trump’s ongoing trade disputes with China:
… how stock markets react is not a good guide to the positive effects of tariffs. Quite the opposite in fact. It’s a much better guide to how we’re all getting screwed by tariffs. That is, the better the US stock market does the more evidence we’ve got of the bad effects of tariffs and a trade war.
Think on it. Why is Trump imposing tariffs? To protect American business from competition by those dastardly foreigners. Who loses in the absence of competition from the Yellow Peril? Those American consumers who would have bought those better/cheaper Chinese goods if they were able to. Who gains from tariffs? American businesses who can now gouge the American consumer a little more in the absence of those items imported from East Asia.
So, a rise in the US stock market is a guide to how much more profit American business can screw out of the American public. It’s a measure, a reasonably good and precise one too, of how much we the people are losing from the trade war and tariffs. More exactly, it’s the capitalised value of the ongoing losses we’re suffering from this restriction of our choices, the competition those who supply us face.
That is, the better the stock market performance the higher those costs and the more we’re losing the trade war. That is, as long as you accept that it is consumers, not producers, that matter, but then that’s the standard economic assumption ever since Adam Smith even if it gets lost in Washington DC often enough.
The US stock market rising in response to US tariffs is evidence of the losses from tariffs, not the gains.
