Nightcap

  1. How conservatives won the law Steven Teles (interview), Wall Street Journal
  2. Libertarians in the Age of Trump Ross Douthat, NY Times
  3. Political theory for an age of climate change Alyssa Battistoni, the Nation
  4. Nationalists versus empire: A brief history of the African university Mahmood Mamdani, London Review of Books

West Coast Hillbillies

A long time ago, after moving from San Francisco, I bought a beautiful Labrador puppy from a woman named Brigid Blodgett, in the hills above Santa Cruz California. (I think she won’t mind the free advertising in the unlikely case that she reads Notes On Liberty or my blog.) Her house was an older conventional California so-called “ranch house,” with low roofs and a sprawling house plan. The pup she had in mind for me was playing with his ten siblings in a concrete backyard when I arrived. There was one new litter, lying with Mom on some rags in the living room, and another in the kitchen, that I could see and smell. The lady, the breeder, told me there was yet another litter in the garage.

To get my new dog, I had not gone to just anybody since most dogs last longer than most cars. I had gathered recommendations in Santa Cruz (pop. 60,000) and its suburbs. Brigid Blodgett’s name kept coming up. Other things being more or less equal, (“et cetibus…” as they say in Latin) I believe in the predictive power of redundancy. I purchased the pup, “Max” (for the German sociologist Max Weber. My previous dog was “Lenin,” another story, obviously). He was a wonderful animal, big, sturdy, healthy, smart, and with a physique that turned heads. I never saw Ms Blodgett again. She asked me once by phone to enter Max in a show but I thought it would inflate his ego and I declined. Her name came up a couple of times when perfect strangers stopped me to ask if Max was one of “Brigid’s dogs.” Continue reading

Nightcap

  1. Science fiction from China is epic AF Nick Richardson, London Review of Books
  2. What is the proper role of galactic government? Michelangelo Landgrave, NOL
  3. Science fiction & alternate realities in the Arab World Perwana Nazif, the Quietus
  4. Algorithmic wilderness: can techno-ecology heal our world? Henry Mance, Aeon

Simple economics I wish more people understood

Economics comes from the Greek “οίκος,” meaning “household” and “νęμoμαι,” meaning “manage.” Therefore, in its more basic sense, economy means literally “rule of the house.” It applies to the way one manages the resources one has in their house.

Everyone has access to limited resources. It doesn’t matter if you are rich, poor, or middle class. Even the richest person on Earth has limited resources. Our day has only 24 hours. We only have one body. This body starts to decay very early in our lives. Even with modern medicine, we don’t get to live much more than 100 years.

The key of economics is how well we manage our limited resources. We need to make the best with the little we are given.

For most of human history, we were very poor. We had access to very limited resources, and we were not particularly good at managing them. We became much better in managing resources in the last few centuries. Today we can do much more with much less.

Value is a subjective thing. One thing has value when you think this thing has value. You may value something that I don’t.

We use money to exchange value. Money in and of itself can have no value at all. It doesn’t matter. The key of money is its ability to transmit information: I value this and I don’t value that.

Of course, many things can’t be valued in money. At least for most people. But it doesn’t change the fact that money is a very intelligent way to attribute value to things.

The economy cannot be managed centrally by a government agency. We have access to limited resources. Only we, individually, can judge which resources are more necessary for us in a given moment. Our needs can change suddenly, without notice. You can be saving money for years to buy a house, only to discover you will have to spend this money on a medical treatment. It’s sad. It’s even tragic. But it is true. If the economy is managed centrally, you have to transmit information to this central authority that your plans have changed. But if we have a great number of people changing plans every day, then this central authority will inevitably be loaded. The best judge of how to manage your resources is yourself.

We can become really rich as a society if we attribute responsibility for each person on how we manage our resources. If each one of us manages their resources to the best of their knowledge and abilities, we will have the best resource management possible. We will make the best of the limited resources we have.

Economics has a lot to do with ecology. They share the Greek “οίκος” which, again, means “household.” This planet is our house. The best way to take care of our house is to distribute individual responsibility over individual management of individual pieces of this Earth. No one can possess the whole Earth. But we can take care of tiny pieces we are given responsibility over.

Immigration and Jobs

A couple of thoughts about immigration. It seems that there is a widespread belief in the US that immigrants take jobs from Americans. It makes superficial sense if you also assume that the number of jobs to be filled is fixed and that just about anyone can do any kind of work.

Both assumptions are mostly false. Here is an example that illustrates why.

I keep hearing native-born Americans trained in various high-tech fields who claim that they are unemployed because of competition from low-cost H1B visa holders. H1B visas go to foreigners with skills deemed to be needed by the American economy. A large number of H1B visa holders are from India and many are from China; they also come from a wide variety of other countries, including Russia, France, Bulgaria, etc. The implicit affirmation is that were such visas stopped completely, those who complain would step right into the vacant jobs.

Two things. First the claim that foreign H1B visa holders work for less is largely unsubstantiated although it should be easy to investigate such abuse. Second, I think it’s illegal to pay H1B holders less than Americans. Why would many employers risk a distracting lawsuit? Of course, a few might because there are irrational people everywhere.

Next and last: Hundreds of thousands of high-tech jobs are going begging as I write. Are employers so vicious that they would rather have the work not done at all than to give it to a credentialed American? Or is it more likely that the unemployed native-born high-tech workers have skills that do not match demand? If the second supposition is correct, ending the H1B visa program would cause even more high-tech positions to remain empty. Of course, this would have a negative effect on everyone, on every American’s prosperity.

Missing from this narrative: the possibility that high power, accelerated re-training programs would bring unemployed Americans the skills the high-tech sector requires.

I have to begin a confession that’s going to make me even more unpopular locally than I already am. I mean unpopular among my conservative friends. I taught in an MBA program in the middle of Silicon Valley for 24 years, two quarters each year. It was an evening program squarely directed at the ambitious hard-working. During that span of time, I must have had 150 students from India. I remember only one who was a bad student. I was intrigued, so I made inquiries. Sure enough, he had an Indian first name and last name, and the corresponding appearance but he was born in the US.* I cannot report so glowingly about other, non-Indian students that sat in my classroom through the years.

This little narrative proves nothing, of course. Consider it food for thought. Do it especially if you voted for Pres. Trump – as I did.

Reminder: H1B visas are awarded to individuals with an occupational qualification deemed to be in short supply in the US. Right now, it’s likely that most of those who get an H1B are trained in some IT area but that’s not all. For a long time, farriers from everywhere could easily get one. (If you don’t know what a farrier is, shame on you and look it up.)

There are other – presumably non-specialized – categories of immigrants who are widely suspected of taking jobs from Americans. The truth is not always easy to discern, not even conceptually. Five or six miles from where I live in Santa Cruz, there are growers who are tearing off their hair. Their problem is that they can’t figure out who is going to pick the crops they are now putting into the ground. As I have said repeatedly, the Mexicans they counted on in years past have largely stopped coming.

A quarter of a mile from where I live, and in the same direction, there are dozens of perfectly healthy US-born Americans who are working as “sales associates.” The apparent conceptual issue is this: sales associates earn $10/hr while a moderately experienced crop picker earns $15. The question arises of why we don’t see a full exodus from the sales positions to jobs that pay 50% more?

I think it’s lazy to call the US-born sales associates “lazy.” The reality is that the Mexicans who came, and are still coming, to pick vegetables and fruits in California overwhelmingly came from a rural population. They were reared under conditions where almost everyone around them labored in the fields. When they arrive in the US – legally through family reunion – or illegally, they are ready to take picking jobs. They then just do here more or less the same work they would do at home but for five times the pay or more.

In American society that kind of population disappeared several generations ago through mechanization and, of course, through the importation of foreign labor, precisely. Native-born Americans won’t do the work because it’s alien to their background. I think US-born people of Mexican ascendancy whose parents labored in the field won’t do the work either. Their parents do what they can to make their own work experience alien to their children. I am not surprised, that’s another expression of the American dream. It’s  what many would do back in Mexico but then, why emigrate?

I am pretty sure that any immigration reform should include a temporary agricultural program, a sort of H1A ( “A” for “Agriculture”) visa. It would allow foreigners to come to the US legally, just to work in the fields and for a set period only. It would not lead to permanent residency, nor, of course, to citizenship. Such a program existed between the forties and the early sixties, if memory serves. It was called the “Bracero program.” I don’t know why it was terminated. (Perhaps a reader can tell us.)

Mexicans would be the first to take advantage of such a program. As Mexico’s economy develops, they may be replaced by Central Americans and, eventually, by Africans. Such a program would sidestep the kind of assimilation problem France, for example, is facing right now with its North African population.

PS Personally, I think Mexicans make good immigrants to the US. I would bet than in ten years we will be begging them to come.


* Disclosure: I am married to an Indian woman. She is not in high-tech unfortunately.

The California Solar Energy Property-Tax Exemption

California exempts solar energy equipment from its property tax. The exemption will last until 2025. The California Wind Energy Association has complained that this exemption puts solar energy at an artificial advantage relative to other renewables such as windmills. Biomass, the use of biological materials such as wood and leftover crops, is also at a relative disadvantage.

Rather than eliminate the solar tax exemption, the other energy industries should seek to eliminate the property tax on all energy capital goods. With this exemption, the government of California is recognizing that property taxes on capital goods – buildings, machines, equipment, inventory – impose costs that reduce production and innovation. Since this tax is toxic, the property tax should be removed from all improvements.

The best revenue neutral tax shift would be to increase the property-tax revenue from land value by the same amount as the reduction in the taxation of capital goods.

The other energy industry chiefs call the solar property-tax exemption a subsidy. We need to distinguish between absolute and relative subsidies. An absolute subsidy occurs when government provides grants to firms, or limits competition. A relative subsidy occurs when one firm or industry receives a greater subsidy than its competitors. All absolute subsidies are also relative subsidies, because they exist relative to the rest of the economy. But if the subsidy is not in funds or protection, but from lower rates on industry-destructive taxes, this is a relative but not an absolute subsidy.

Suppose that there are patients in a hospital suffering from continuous poisoning. The doctor stops poisoning one patient, and he recovers. But the other patients are still being poisoned. The other patients complain that it is not fair for one patient to be singled out for favored treatment. But the just remedy is not to resume poisoning the recovered patient, but to stop poisoning the others. The taxation of capital goods is economic poison, which the state recognizes would poison the solar energy industry they seek to promote. But why poison the other industries? The property tax should exempt all capital goods, all improvements.

A broader issue is the subsidies to energy. All forms of energy, except human muscles, are subsidized by the state and federal governments. Energy from oil and coal are implicitly subsidized by exempting them from the social costs of their environmental destruction. There is no economic need for any subsidies. But to obtain the true costs of energy, governments should also eliminate taxes not only on their capital goods but also on their incomes and sales. We cannot know whether renewable energy can stand on its own until we eliminate all the government interventions, including taxes, subsidies, and excessive regulations.

Since a radical restructuring of public finances is politically impossible today, a politically feasible reform would be to exempt all capital goods investments from the property tax. If this needs to be revenue-neutral, California could replace its cap-and-trade policy with levies on emissions. The relative subsidy to solar power is unfair to the other energy industries, but the real unfairness is the property tax on their investments.
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This article first appeared at http://www.progress.org/views/editorials/the-california-solar-energy-property-tax-exemption/