After World War II, many left-wing European governments wanted to do something about unemployment. As I discuss extensively in my book, unemployment is about the worst thing that can happen to you in a modern democracy, short of death or dismemberment. So they passed laws making it very, very difficult to fire workers. In Italy, for example, a judge could reverse a layoff decision, not because you’d fired the worker unjustly, but because the judge didn’t think you needed to cut staff. Hurrah! Finally, workers were protected from the dark specter of unemployment!
Well, not quite. Workers were thrilled; employers were terrified. Now hiring a worker meant you were stuck with them unless they committed some absolutely flagrant offense — like, say, emptying the till and running out the door.
That’s a hell of a commitment to make to someone you barely know. So employers didn’t want to hire scary strangers; they wanted to hire close friends and family. Or, better yet, no one at all. Youth unemployment in many of these nations was staggering. The insiders had a great deal, but people without jobs found themselves consigned to a series of temporary, not-very-well-paid contracts. Or the dole.
The lesson is that when you make it harder to exit, you also make people reluctant to enter.
Megan McArdle, “Can Limiting Divorce Make Marriage Stronger?”, Bloomberg View, 2014-04-16
November 13, 2014
QotD: Unintended consequences
November 12, 2014
To make renewable energy seem cheap, exaggerate the subsidies that fossil fuels get
Tim Worstall isn’t impressed with a recent report that claims traditional energy companies (oil, gas, and coal) get government subsidies that amount to $88 billion per year, just from the G20 countries:
The report itself is here. Have a look at it yourselves, by all means, but here’s the three things they’ve added up to get to that $88 billion figure:
A fossil fuel subsidy is any government action that lowers the cost of production, lowers the cost of consumption, or raises the price received by producers of fossil fuels. Types of fossil fuel subsidies include financial contributions or other support from the government, such as grants and direct payments, tax concessions, non-market investments made as a result of government ownership of fossil fuel companies, in-kind support (including specific infrastructure), credit support (loans and loan guarantees), insurance and indemnification, market price support, procurement, and responsibility for decommissioning (Koplow and Charles, 2010; Steenblik, 2008). This report divides ‘exploration subsidies’ into three categories:
• ‘national subsidies’, such as tax breaks to companies and direct spending by government agencies
• ‘investment by SOEs and
• ‘public financing’ including support from domestic, bilateral and multilateral international (e.g. loans, equity, and guarantees)To take that second one first, SOEs are state owned enterprises. So when Rosneft spends money on drilling a new well, given that Rosneft is largely state owned (and most certainly closely state connected) then this is a government subsidy to fossil fuel exploration. No, this isn’t normally what we mean by a subsidy and shouldn’t be counted as one. Just that one classification error accounts for up to half of their $88 billion. Just to repeat the error: claiming that investment by a state owned company on purely commercial terms is a subsidy simply isn’t true. If Statoil drills a new well, upon which it makes the usual profits and finances it in the normal manner, this is not a state subsidy. Yet this report is trying to claim that it is.
The public financing part is a bit of a stretch to be honest. The claim is that if the World Bank lends money to open a coal mine in some poor country then that’s a subsidy from the rich countries (who subsidise the World Bank) to fossil fuels. You could, I suppose, make that case but it is very much a stretch. And if you were to make that case then the subsidy would be only the difference between commercial lending terms on that mine and the concessionary terms that the World Bank is offering. Which isn’t what they measure at all.
But the real problem is with their insistence that any tax break is a subsidy. In their estimates of tax breaks they include things that any normal company gets it’s just that given the differences in the extractive industries we tend to give them different names. Every company is, for example, able to write off the cost of R&D against future income. Drilling or surveying is a form of R&D but we just have a slightly different set of names for how fossil fuel companies can write off those costs. To include all of those “tax breaks” as subsidies when they’re on offer, in slightly different forms and slightly different names, to all producers of anything is not quite being accurate.
Update: In a post today, he revisits the subsidies argument.
Here’s one report on what the IEA is saying:
Fossil fuels are reaping $550 billion a year in subsidies and holding back investment in cleaner forms of energy, the International Energy Agency said.
Oil, coal and gas received more than four times the $120 billion paid out in incentives for renewables including wind, solar and biofuels, the Paris-based institution said today in its annual World Energy Outlook.
Yes, all of that is entirely true. And it’s also true, as the IEA has said in the past, that we really would like to stop those subsidies to fossil fuels. On three grounds, the first that they’re very inefficient, the second that they don’t actually reach the poor they’re aimed at and the third that removing them would take us a long way to meeting our climate change targets.
However, nothing is ever that simple: and the big point to note here is that it really isn’t us in the rich countries that are subsidising fossil fuels.
[…]
There’s our two numbers, the renewables subsidy and the fossil fuel one. And yes it’s entirely true that we’d like to reduce that second, the fossil fuel one. Either so we can increase the renewables one because we have more money or so we can decrease it as we now longer have two policies working in opposition to each other.
However, here’s the thing for public policy. It’s us in the rich countries, largely so at least, who are subsidising the renewables. Great, that’s under our control. But it’s almost entirely not us in the rich countries subsidising the fossil fuels. That means, absent the reintroduction of colonialism, that those subsidies are not something under our control.
We should also note that these are “real subsidies”. These aren’t games being played with statistics as yesterday’s attempt to persuade us that we do subsidise by $88 billion. We’re not including tax breaks, not totting up R&D allowances or anything. This really is $550 billion in cash being spent by governments to subsidise fossil fuels.
November 6, 2014
Apple is working really hard to keep their customers
… but not necessarily in a good way:
Here is what they never tell you — Apple has devised a very clever way to make leaving the iOS world really, really painful. Specifically, when you send a text message on an iPhone, unless you fiddled with the default settings, it gets sent through iMessage and the Apple servers. If it is going to another iPhone, it can actually bypass the carrier text messaging system altogether, a nice perk back when texts were not unlimited but useful today mainly for international travel.
But here is the rub — when you switch you phone line away from an iPhone to an Android device, the Apple servers refuse to recognize this. They will think you still have an iPhone and will still try to send you messages via the iMessage servers. What this means in practice is that you can send messages from the new phone to other iPhones, but their texts back to you will not reach you. They just sort of disappear into the ether, and will try forever to be delivered to your now non-existent iPhone.
November 4, 2014
The chilling future of TV ads
Think today’s ads on TV are irritating? You ain’t seen nothing yet:
I’ve discussed in the past how many people mistake privacy as some sort of absolute “thing” rather than a spectrum of trade-offs. Leaving your home to go to the store involves giving up a small amount of privacy, but it’s a trade-off most people feel is worth it (not so much for some uber-celebrities, and then they choose other options). Sharing information with a website is often seen as a reasonable trade-off for the services/information that website provides. The real problem is often just that the true trade-offs aren’t clear. What you’re giving up and what you’re getting back aren’t always done transparently, and that’s where people feel their privacy is being violated. When they make the decision consciously and the trade-off seems worth it, almost no one feels that their privacy is violated. Yet, when they don’t fully understand, or when the deal they made is unilaterally changed, that’s when the privacy is violated, because the deal someone thought they were striking is not what actually happened.
And, unfortunately, it often seems like people are increasingly being pressured into deals they don’t fully understand and don’t have full control over. Michael Price, over at the Brennan Center for Justice, took the time to actually read through the “privacy policy” on his new “smart” TV and it’s terrified him. Just the fact that a TV even has a privacy policy seems oddly terrifying, but it makes sense, given that at least some information goes outbound as part of the “smarts.” But how much? Potentially a lot more than people would expect:
The amount of data this thing collects is staggering. It logs where, when, how, and for how long you use the TV. It sets tracking cookies and beacons designed to detect “when you have viewed particular content or a particular email message.” It records “the apps you use, the websites you visit, and how you interact with content.” It ignores “do-not-track” requests as a considered matter of policy.
To some extent, that’s not really all that different than a regular computer. But, then it begins to get creepier:
It also has a built-in camera — with facial recognition. The purpose is to provide “gesture control” for the TV and enable you to log in to a personalized account using your face. On the upside, the images are saved on the TV instead of uploaded to a corporate server. On the downside, the Internet connection makes the whole TV vulnerable to hackers who have demonstrated the ability to take complete control of the machine.
More troubling is the microphone. The TV boasts a “voice recognition” feature that allows viewers to control the screen with voice commands. But the service comes with a rather ominous warning: “Please be aware that if your spoken words include personal or other sensitive information, that information will be among the data captured and transmitted to a third party.” Got that? Don’t say personal or sensitive stuff in front of the TV.
You may not be watching, but the telescreen is listening.
November 1, 2014
3D printing today is at the same stage as photography before Kodak
Virginia Postrel looks at the current state of adoption for 3D printing:
Contrary to what the names suggest, a desktop 3-D printer today isn’t analogous to a 2-D desktop printer in the 1980s. When computer printers spread, after all, they didn’t replace printing plants. They replaced typewriters. As costs dropped and graphics software became easy to use, people found all sorts of new uses for desktop printing. But the technology originally caught on by offering a better way to do something familiar.
Instead of thinking of 3-D printers as printers, it makes more sense to think of them as cameras: a way for non-artists to create images. Before it went digital, photography too required a whole ecosystem, with cameras, film, developing and so on. George Eastman created a vast amateur market by making the part of photography people cared about — capturing pictures — easy, while hiding the technically demanding steps. Kodak handled the film and development, proclaiming, “You Press the Button, We Do the Rest.”
The critical insight is that the image is what’s exciting, not the machine that generates it.
“What 3-D printers are really producing, is demand for design. These machines, this industry, signal a huge, growing appetite for access to 3-D design,” said Cosmo Wenman, who’s been creating 3-D scans of classical sculptures and releasing the files on sites like Makerbot’s Thingiverse. (Wenman, whose early efforts I wrote about here in 2011, has received backing from Autodesk.) Thanks to his scans, you can now make your own “Venus de Milo” or “Winged Victory.”
October 30, 2014
Copyright’s friends and enemies
Mike Masnick linked to an article in The New Yorker by Louis Menand which tries to explain the concept of copyrights, the problems of ever-extending copyright terms, and who stands on each side of the ongoing debate:
The point of Peter Baldwin’s fascinating and learned (and also repetitive and disorganized) The Copyright Wars (Princeton) is that the dispute between analog-era and digital-era notions of copyright is simply the latest installment of an argument that goes all the way back to the Statute of Anne. The argument is not really about technology, although major technological changes tend to bring it back to life. It’s about the reason for creating a right to make copies in the first place.
In the United States, the reason is stated in the Constitution. Article I gives Congress power “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” The Copyright Act of 1790 set the length of copyright at fourteen years, renewable for another fourteen, after which the work falls into the public domain.
A right is just the flip side of a prohibition. The thinking behind Article I is that prohibiting people from copying and selling someone else’s original work is a way of encouraging the writing of useful or entertaining books, just as awarding a patent is a way of encouraging the invention of useful or enjoyable things. The prohibition operates as an incentive for the protected party. For a limited period — fourteen or twenty-eight years — authors get to enjoy the profits from sales of their books, and this prospect of reward induces people to write.
But Article I makes it clear that the ultimate beneficiary of books and inventions is the public. Copyrights are granted and patents are issued in order “to promote the Progress of Science and useful Arts.” This is why the Constitution dictates a limit on the right to make copies. After the term of protection expires, a work cannot be copyrighted again. It becomes a public good. It is thrown into the open market, which allows it to be cheaply reproduced, and this speeds the distribution of knowledge. “Intellectual property is a frail gondola that ferries innovation from the private to the public sphere, from the genius to the commons,” as Paul K. Saint-Amour, one of the leading literary scholars of copyright, elegantly describes it.
October 28, 2014
Self-driving trucks may be more significant (in the short term) than self-driving cars
At Samizdata, Brian Micklethwait looks at the likely short-term impact of driverless vehicles:
Robot passenger cars will eventually bring huge benefits. They will be epoch making, when the robot car epoch does finally arrive. I truly believe this. But in the shorter run, the problems of robot cars strike me as bigger than all the car and hi-tech companies are implying, and the benefits less immediate. Robot cars will presumably be good at finding their own parking spaces, and at making themselves useful to others if you aren’t using yours. Robot cars will presumably be less prone to error than humans, except when that turns out not to be the case. But what of those potholes?
In the meantime, making lorry (as we Brits call “trucks”) transport only somewhat more efficient will yield huge, very quantifiable, and fairly immediate benefits. Even if all they do to start with is robotise lorries on motorways, that would surely make a huge difference.
The motorway is the natural habitat of the big lorry, and is a place of far greater predictability than roads in general and hence more congenial for robots, especially robots in their early stages. Motorways are already highly controlled places, and are surely the right part of the road system to start introducing robots, not country lanes or city streets filled with complicated and unpredictable hazards.
Human lorry-drivers get tired, but robots don’t. A robot lorry could cross a continent with all the dogged, error-free serenity of a jumbo jet on autopilot crossing the same continent in the air.
At first, humans would need to sit in the lorries to check on their progress all the time, but pretty soon the human could be taking a nap and it wouldn’t matter. Not long after that, once everything has been shown to work, humans would not be needed to sit in lorries on motorways at all. Soon, all that the humans would need to do is collect the lorries (perhaps just the load bit) from their local off-motorway lorry parks, to which the robot lorries had driven themselves. Upon that solid technological foundation, lorries further into the future could then start travelling much faster. (I seem to recall a plan to concrete over railways and turn them into roads. Maybe that notion will be revived.) They could also make their way into the road system generally. The economic impact will surely be colossal, and more immediate than is the case for robot cars.
Facebook‘s UK tax picture
Tim Worstall explains why it’s not a scandal that Facebook doesn’t pay more taxes in the UK:
In fact, it’s actually rather a good idea that Facebook isn’t paying UK corporation tax. For the standard economic finding (also known as optimal taxation theory) is that we shouldn’t be taxing corporations at all. Thus, as a matter of public policy we should be abolishing this tax: and also perhaps applauding those companies that take it upon themselves to do what the politicians seem not to have the courage to do, make sure that corporations aren’t paying tax.
That isn’t how most of the press sees it, of course
[…]
That’s an extremely bad piece of reporting actually, for of course Facebook UK did not have advertising revenue of £371 million last year: Facebook Ireland had advertising revenue of that amount from customers in the UK that year. And that’s something rather different: that revenue will be taxed under whatever system Ireland has in place to tax it. And this is the way that the European Union system of corporate taxation is supposed to work. Any company, based in any one of the 28 member countries, can sell entirely without hindrance into all other 27 countries. And the profits from their doing so will be taxed wherever the brass plate announcing the HQ of that company is within the EU. This really is how it was deliberately designed, how it was deliberately set up: it is public policy that it should be this way.
We could also note a few more things here. The UK company itself made a loss and that loss was because they made substantial grants of restricted stock units to the employees. And under the UK system those RSU grants are taxed as income, in full, at the moment of their being granted. Which will mean, given those average wages, at 45% or so. And we should all be able to realise that a 45% tax rate is rather higher than the 24% corporation tax rate. The total tax rate on the series of transactions is thus very much higher than if Facebook has kept its employees as paupers and just kept the profits for themselves. Further, those complaining about the tax bill tend to be those from the left side of the political aisle: which is also where we find those who insist that workers should be earning the full amount of their value to the company which is what seems to be happening here.
October 22, 2014
“Will the American fashion industry ever tolerate another de la Renta?”
I don’t follow fashion at all, so it hadn’t occurred to me that the recent death of Oscar de la Renta would be much more than a footnote, but Virginia Postrel would disagree:
When fashion designer Oscar de la Renta died Monday, he left neatly resolved two issues that might have otherwise marred his legacy.
The first was the question of who would succeed him. Many a fashion house has been thrown into chaos by the death of its founder. But last week, Oscar de la Renta LLC, the privately held company headed by de la Renta’s stepson-in-law Alex Bolen, said it was appointing Peter Copping, the former artistic director of Nina Ricci, as its creative director. There will be no messy crisis this time.
The second was a matter of state. De la Renta had dressed every first lady since Jacqueline Kennedy — except Michelle Obama. To have the stylish first lady shun the dean of American fashion was tantamount to a public feud. Two weeks ago, the conflict ended when Mrs. Obama wore an Oscar de la Renta dress to a White House cocktail party filled with fashion insiders. Her appearance in the crisply tailored black cocktail dress embellished with silver and blue flowers — a quintessential de la Renta balance of precise lines with ornamentation and color — preserved the designer’s White House legacy.
The clean resolution of these two issues shortly before de la Renta’s passing befits the grace of his life’s work.
But a cultural question remains: Will the American fashion industry ever tolerate another de la Renta? His brand will continue, but the classic elegance for which he was known is as old-fashioned as it is beloved. It defies the prestige accorded to innovators who “move fashion forward” rather than simply creating fresh collections. Michelle Obama wouldn’t have won all those plaudits as a fashion leader if she’d worn his dresses and followed his rules. She would have merely been another tastefully attired Hillary Clinton or Laura Bush.
October 19, 2014
Brace yourselves for Beer Store price hikes
In the Toronto Star, Rob Ferguson details the provincial government’s new-hatched plans to pry more money out of consumers (by way of the Beer Store monopoly):
Premier Kathleen Wynne says she won’t shrink from a battle with The Beer Store as her government thirsts for a bigger cut of sales despite brewers’ warnings it would mean higher prices for suds lovers.
The comments came Saturday as Wynne commented in detail for the first time on recommendations from a blue-ribbon panel on squeezing more money from publicly owned agencies and the distribution system for beer, wine and spirits.
“They’ve laid out some challenging ideas for us and I’m absolutely willing take those on,” Wynne said of the panel headed by TD Bank chair Ed Clark.
“Will it be easy, will it be a path that is without any challenges? No it won’t be but that’s not a problem from my perspective. That’s exactly why it needs to be taken on,” she added after a 22-minute speech to party members in this border city for a strategy session and victory party after winning a majority in the June 12 election.
Clark’s recommendations Friday were a timely distraction for Wynne with the legislature starting its fall session Monday and her Liberals under fire for a bailout of the mostly vacant MaRS office tower across from Queen’s Park, with taxpayers on the hook for hefty interest payments.
The government already taxes beer at 44%. I guess they think that’s too little.
October 15, 2014
The pay gap issue, again
There’s been a lot of moaning on about inequality recently — some are even predicting it will be the big issue in next year’s Canadian federal election — but the eye-popping figures being tossed around (CEOs being paid hundreds of times the average wage) are very much a case of statistical cherry-picking:
Before retiring to their districts for the fall, the House Democratic Caucus rallied behind the CEO/Employee Pay Fairness Act, which would prevent a public company from deducting executive compensation over $1 million unless it also gives rank-and-file employees raises that keep pace with the cost of living and labor productivity.
Meanwhile, the AFL-CIO and its aligned think tanks have made hay of the huge difference between the pay of CEOs and employees. One of the most widely cited measures of the “gap” comes from the AFL-CIO’s Executive Paywatch website.
- The nation’s largest federation of unions laments that “corporate CEOs have been taking a greater share of the economic pie” while wages have stagnated for the rest of us.
- As proof, it points to a 331-to-1 gap in compensation between America’s chief executives and the pay of the average worker.
That’s a sizable number. But don’t grab the pitchforks just yet, says Mark J. Perry, economic professor at the University of Michigan-Flint and resident scholar at the American Enterprise Institute, and Michael Saltsman, research director at the Employment Policies Institute.
The AFL-CIO calculated a pay gap based on a very small sample — 350 CEOs from the S&P 500. According to the Bureau of Labor Statistics, there were 248,760 chief executives in the U.S. in 2013.
- The BLS reports that the average annual salary for these chief executives is $178,400, which we can compare to the $35,239-per-year salary the AFL-CIO uses for the average American worker.
- That shrinks the executive pay gap from 331-to-1 down to a far less newsworthy number of roughly five-to-one.
October 11, 2014
QotD: The economies (and dis-economies) of scale
We are the heirs of the Industrial Revolution, and, of course, the Industrial Revolution was all about economies of scale. Its efficiencies and advances were made possible by banding people together in larger and larger amalgamations, and we invented all sorts of institutions — from corporations to municipal governments — to do just that.
This process continues to this day. In its heyday, General Motors employed about 500,000 people; Wal-Mart employs more than twice that now. We continue to urbanize, depopulating the Great Plains and repopulating downtowns. Our most successful industry — the technology company — is driven by unprecedented economies of scale that allow a handful of programmers to make squintillions selling some software applications to half the world’s population.
This has left us, I think, with a cultural tendency to assume that everything is subject to economies of scale. You find this as much on the left as the right, about everything from government programs to corporations. People just take it as naturally given that making a company or an institution or a program bigger will drive cost efficiencies that allow them to get bigger still.
Of course, this often is the case. Facebook is better off with 2 billion customers than 1 billion, and a program that provides health insurance to everyone over the age of 65 has lower per-user overhead than a program that provides health insurance to 200 homeless drug users in Atlanta. I’m not trying to suggest that economies of scale don’t exist, only that not every successful model enjoys them. In fact, many successful models enjoy diseconomies of scale: After a certain point, the bigger you get, the worse you do.
Megan McArdle, “In-N-Out Doesn’t Want to Be McDonald’s”, Bloomberg View, 2014-10-02.
October 10, 2014
Cory Doctorow – “Information doesn’t want to be free, people want to be free”
Cory Doctorow’s latest book, Information Doesn’t Want to Be Free, briefly reviewed by Ian Steadman in New Statesman:
“Information wants to be free” is a rallying cry for many of those who fight against legal restrictions on the internet. The phrase was coined by the tech writer Stewart Brand in 1984 and referred to the way the web reduces many of the costs of producing and disseminating data to near zero. “Free” in this phrase has also come to mean “freedom”, because the internet makes it easy to avoid censorship.
Doctorow is challenging both interpretations – not because he doesn’t agree with them but because he thinks a crucial premise has been lost. “Information doesn’t want to be free,” he writes, “people want to be free.”
The first two-thirds of the book discusses ways in which artists are penalised by the internet’s present regulatory system. He criticises digital rights management (DRM) technology, which limits the platforms digital files can play on; not only does it mean we don’t “own” the files we pay for, but when a company that supports a file goes bust, the culture locked up in their DRM can be lost for ever. Doctorow describes this as “a library burning in slow motion”.
Many companies such as Apple sell devices that block you from downloading non-approved apps. “That is sold to creators as an anti-piracy measure,” Doctorow tells me when we speak on the phone. “But the most practical application has been to allow Apple to exert market power that it would never have had in any other world.”
This links to the final third of the book, which explores how systems for protecting copyrighted material can also be used for censorship.
October 9, 2014
The lightbulb cartel of 1924 and the birth of “planned obsolescence”
Markus Krajewski writes about the formation of a multinational industrial cartel shortly after the First World War that helped create the very concept of “planned obsolescence” for (no) fun and (their) profit:
On 23 December 1924, a group of leading international businessmen gathered in Geneva for a meeting that would alter the world for decades to come. Present were top representatives from all the major lightbulb manufacturers, including Germany’s Osram, the Netherlands’ Philips, France’s Compagnie des Lampes, and the United States’ General Electric. As revelers hung Christmas lights elsewhere in the city, the group founded the Phoebus cartel, a supervisory body that would carve up the worldwide incandescent lightbulb market, with each national and regional zone assigned its own manufacturers and production quotas. It was the first cartel in history to enjoy a truly global reach.
The cartel’s grip on the lightbulb market lasted only into the 1930s. Its far more enduring legacy was to engineer a shorter life span for the incandescent lightbulb. By early 1925, this became codified at 1,000 hours for a pear-shaped household bulb, a marked reduction from the 1,500 to 2,000 hours that had previously been common. Cartel members rationalized this approach as a trade-off: Their lightbulbs were of a higher quality, more efficient, and brighter burning than other bulbs. They also cost a lot more. Indeed, all evidence points to the cartel’s being motivated by profits and increased sales, not by what was best for the consumer. In carefully crafting a lightbulb with a relatively short life span, the cartel thus hatched the industrial strategy now known as planned obsolescence.
[…]
How exactly did the cartel pull off this engineering feat? It wasn’t just a matter of making an inferior or sloppy product; anybody could have done that. But to create one that reliably failed after an agreed-upon 1,000 hours took some doing over a number of years. The household lightbulb in 1924 was already technologically sophisticated: The light yield was considerable; the burning time was easily 2,500 hours or more. By striving for something less, the cartel would systematically reverse decades of progress.
The details of this effort have been very slow to emerge. Some facts came to light in the 1940s, when the U.S. government investigated GE and a number of its business partners for anticompetitive practices. Others were uncovered more recently, when I and the German journalist Helmut Höge delved into the corporate archives of Osram in Berlin. Jointly founded in 1920 by three German companies, Osram remains one of the world’s leading makers of all kinds of lighting, including state-of-the-art LEDs. In the archives, we found meticulous correspondence between the cartel’s factories and laboratories, which were researching how to modify the filament and other measures to shorten the life span of their bulbs.
The cartel took its business of shortening the lifetime of bulbs every bit as seriously as earlier researchers had approached their job of lengthening it. Each factory bound by the cartel agreement—and there were hundreds, including GE’s numerous licensees throughout the world—had to regularly send samples of its bulbs to a central testing laboratory in Switzerland. There, the bulbs were thoroughly vetted against cartel standards. If any factory submitted bulbs lasting longer or shorter than the regulated life span for its type, the factory was obliged to pay a fine.
Companies were also fined for exceeding their sales quotas, which were constantly being adjusted. In 1927, for example, Tokyo Electric noted in a memo to the cartel that after shortening the lives of its vacuum and gas-filled lightbulbs, sales had jumped fivefold. “But if the increase in our business resulting from such endeavors directly mean[s] a heavy penalty, it must be a thing out of reason and shall quite discourage us,” the memo stated.
The great Adam Smith, of course, saw this coming in 1776: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Some things never change.
October 8, 2014
Megan McArdle – It’s time for that talk
I don’t know how I missed this when it was published last week…
All right, boys and girls, it’s time to have some real talk about efficiency wages.
I know, you’re older now. You’re starting to notice things that you never noticed before. Like the differences between Costco and Wal-Mart, differences that suddenly seem so … intriguing. Exciting. You suddenly want to explore those feelings, maybe post a few GIFs to Facebook. You hear other kids talking, and suddenly you wonder about this whole new world of labor relations that you never even knew existed.
I want you to know that what you’re feeling is completely normal. Efficiency wages — that’s the scientific term, and we’re going to use scientific terms, not that dirty talk about scabs and exploiters that you hear in the locker room — are very exciting. It’s only natural that you want to explore. Now, stop tittering. I said “explore,” not “exploit.”
But you need to explore safely. You can’t just plunge straight into advocating a $15-an-hour minimum wage; you need to know all the facts so you can make sound, educated decisions about your labor-policy activism. So let’s talk about efficiency wages and how they work.
When an employer loves his workers … OK, never mind. Straight to the real talk.
As they used to say, “read the whole thing“.
