Labor vs. capital in the driver's seat

One of the keys to a successful middle class is finding a way to keep labor from becoming a simple commodity.  Technology can be a huge help in this regard, allowing an individual with a particular skill set to be far more productive than his neighbors in a particular field such that it makes more sense for them to pay him than do the job themselves.  It can also be highly disruptive, replacing human labor with physical capital and allowing a smaller number of people to sell the same services as a larger group.

For an example, consider two approaches to the problems of traffic safety:  The first, from the Wall Street Journal, touts technology, or "capital" in the classical economic sense.  London, on the other hand, incentivizes labour. 

As a professional roboticist, your pie maker understands the appeal of the capital-intensive self-driving car.  He also understands the tremendous costs and risks involved in bringing that technology to market.  If it goes well, then the potential payoff is huge, otherwise the effort and money invested has no value.  This is the central reason that US tax policy has big incentives for endeavors that can easily lose participants money, instead of wage-based contracts that are safer for the recipient. When the definition of "capital" stops involving machinery, this notion gets a little more complex, and Simon Johnson does a pretty good job of explaining how this system can go awry.

The alternative approach to congestion and safety is regulation, in this case explicit licensing of preferred drivers and penalties for the rest.  In a way, this approach threatens a society with the same problems that Gail the Actuary predicts will befall us due to rising oil prices: Steadily increasing cost of transportation results in a net decline in personal productivity.  Your pie maker can make more pies if he spends less time commuting, i.e. not waiting for a cab or stuck in traffic.  On the other hand, this kind of economic inefficiency results in greater employment at lower levels, curtailing roboticists (and their investors') earning potential in favor of higher velocity of money. 

One of the central questions before the body politic today is whether your pie maker's time is best spent effectively replacing cab drivers or working to make them incrementally safer and more efficient over time.  There are clearly arguments to be made on both sides, and it is not clear which is the truly "pro-pie" position.  The best your pie maker can say at this point is to examine your own interests, not begrudge others their own, and work to find acceptable compromise whenever possible.  Interests are much easier to discuss than "values."

Consider, for example, your pie maker's somewhat unique perspective.  He rides a bike to work and everywhere else he can, largely for health reasons that don't factor into the calculus above.  His commuting interests lean slightly towards the "labor" side as he relies heavily on some very good bike mechanics, and he would prefer there be many somewhat safer vehicles with steadily improving alert systems instead of a few self-driven cars.  His hope is that the desire to keep the marginal product of labor (i.e. per capita GDP) high as energy prices rise will drive enough public and private investment to keep him in biofuel.

Questions for your next Congressional debate

Much of the press concerning the pre-election end of the 112th Congress is focused, rightly, on the unfinished spending and farm bills.  As good citizens we ought to read through this and consider it in light of the upcoming election.  As an added bonus, more time spent reading about legislation means less time watching political ads.

However, here at Pie and Policy we try not to focus on the headlines, and instead step back and look at the larger narrative.  With that in mind, here are two fundamental questions about the next chapter in the United States' history that your pie maker would love to hear his candidates answer:

(1) What size recession are you willing to cause next year?

Consider this: 10% of the Gross Domestic Product (GDP) this past year consisted of the Federal government borrowing or printing money, i.e. borrowing money from the Federal Reserve.  While no one thinks this is sustainable, it means that roughly 10% of all of the mortgages in the US, 10% of the shopping and probably more than 10% of all jobs require the United States to carry a sizable current accounts deficit.  Fiscal responsibility is a good thing, but its meaning gets murky once you put on the green eye shade.  For an example of austerity gone wrong, buy a ticket to Athens, and the Parthenon while you're at it.

There are three fundamentally different answers to that question tossed around this year.  The first is "I don't want to cause a recession at all," which is being pushed by those demanding that there be "no cuts to Defence!" or tax hikes either "for anyone" or "for the middle class."  This approach is known as "kicking the can down the road", and a good follow up question is "how do we get to a sustainable deficit?"  Honestly, the election should hinge on who can provide the best answer to that question.

The second option is to fall off the Fiscal Cliff, which no one seems to want to do, but House Speaker John Boehner warns is very likely.  Odds are good that the current Congress will agree to put the actual decision in the hands of the next Congress, much like happened in 2010, and so this is an entirely valid question of both candidate and challenger.  Left to its own devices, this approach results in a sudden drop of roughly 5% of GDP, so a net loss of 4%.  For comparison, the drop was 2.8% between 2008 and 2009.

The third answer, for which you'll find few serious minded advocates outside of Gary Johnson, is to cause the full 10%, or nearly so, and balance the budget.  The ramifications of that are very interesting, as it would probably lead to a substantial "un-development" of the United States in favor of a Jeffersonian vision.  If someone advocates this and can't describe the consequences, probably best to not vote for them.

(2) When you say "more jobs", doing what and for whom?

Policy has a dramatic impact on which industries are able to get capital, regulatory approval, their goods to market and the cost of production.  If policy favors industries for which there is a ready labor supply and strong demand, then it can be said to be creating jobs.  The GOP's focus on rewarding capital gains over other earned income makes the actual employment of people much less attractive than use of machines for production and increasingly elaborate credit systems for payment, often to workers abroad. Democrats argue for increasing labor and production costs through tighter requirements on work conditions, health insurance coverage and pollution.

In some industries, such as financial services, there is enough demand that regulation such as Sarbanes-Oaxely is more of a public-works program for accountants than an actual hindrance to economic activity.  In others, such as manufacturing, aviation and medical devices, business either moves abroad or doesn't happen.  There are risks and externalities associated with any jobs, and it would be more productive as a polity to discuss those trade-offs than abstract questions about the "size and role of government." 

Justin Beiber and the TEA Party

Your pie maker recently asked an intern from the Institute for Women's Policy Research about how the male ideal changed from "tall, dark and handsome" to "small, pale and pretty."  He pointed out how he had once mistook a picture of the pop star for a five year old, and could not see how someone who might not need to shave yet could attract such attention.  This was intended to be rhetorical, almost an ironic lament, as a hearty diet in his youth and regular outdoor exercise put your pie maker closer to the first category. 

Her answer, however, was both immediate and insightful.  Women do not need the protection of a man anymore, at least women living in the parts of town with good police protection.  There is no need for women to put up with the risks associated with signs of high testosterone levels, as a man able physically defend her is equally able, and somewhat likely, to harm her.  Since laborers are no longer primary breadwinners, at least in families that can afford concert tickets, evidence of physical labor will be a sign of "otherness" at best, lower caste at worst.  Only very rarely would a man working with his hands be pointed out by their mothers or older sisters as objects of desire.  In other words, since women are in many ways better equipped to thrive in the modern economy, it's not surprising that the new heartthrobs are more effeminate.

Herein lies a fascinating view of the psychology of the generation gap that largely defines the TEA Party.  A man who reaches adulthood without the scars, sun-driven wrinkles and callouses that come from learning at the basics of maintaining his own land will rely on contracts with others to ensure the work gets done.  Those contracts require courts, police and a whole body of laws to ensure that they are enforced.  To keep inequities in contracts from turning into civil unrest or threats to public health, they must be monitored by regulators.  The wealth required to ensure that enough of those contracts get paid that an acceptable amount of work gets done requires a financial system that cannot lose money, and so must be carefully regulated and backed by public funds. A nation whose majority work in offices needs to import its goods, requiring globe-spanning security with the equipment and intelligence systems, foreign and domestic, to ensure that the empowering technologies that make life in the US comfortable do not get turned against us.  Someone has to pay for this, and aren't we Taxed Enough Already?


There's no doubt that the Baby Boomers who make up the majority of the TEA Party have benefited from this system, even helped build major parts of it.  But they have ushered in a world whose reward structure is very different from the one in which the Greatest Generation raised raised them.  "Self reliance" is hard, and much of what we used to call "progress" trades it for interdependence.  Successful politicians have managed to keep many of the mechanisms that provide this prosperity hidden via subsidies, tax incentives and mandates on employers and manufacturers, allowing them to run essentially as their own opposition.  When times are good, the costs for this can be easily absorbed in by steadily increasing tax revenues and corporate earnings.  Indeed, regulations create barriers to entry that heavily favor incumbents and enable genuine economic profits.

However, times are not good.  We need to choose whether government influence should become more visible, and our lack of independence made clear, or accept less comfortable lives with fewer services.  Classic notions of masculinity clearly argue for the latter, but it's clear those views are losing cachet.  There is a lot of unfocused anger in the national discussion today, and your pie maker thinks this trend is at the heart of it.  He's not entirely sure which side of it he falls upon, however.  Interconnectedness, another word for specialization, is the core of civilization, but too much leads to fragility, a system rife with single points of failure as each individual is needed to make vital services function.  There is no easy answer, but it helps to ask the right question.

A progressive case for Mitt

Author's note: This is part of a series of semi-satirical pieces your pie maker is writing as a means of studying the writing and argumentative styles of various groups. I'll start with this, now Overcome By Events (OBE), "progressive" case for Mitt Romney. I'm going to try and adopt the language, style and most of the assumptions made by Huffington Post and Slate's left-leaning columnists. Obviously, the argument itself contains flaws, but they should be similar to those common in the writings I'm attempting to imitate.  Comments are appreciated on the style, language and assumptions.  The opinions expressed are not necessarily those of your pie maker, the Pie Cabinet or anyone associated with the production or consumption of pies.

A Progressive Case for Mitt

Take away the wars, tax cuts and bellicose language of the 43rd President of the United States, and what you have is perhaps the most progressive legislative legacy in our history. Consider:

No Child Left Behind: The largest and most forceful effort to compel school districts to educate all of their children.
Medicare Part D: The largest expansion of government health care coverage since LBJ. 
Sarbanes-Oaxley: The most comprehensive and, this is key, quickly implemented overhaul of financial regulation since the Great Depression.
An energy plan with support for lower-carbon fuels: Despite incredibly cheap oil at the time, this laid the regulatory framework to allow domestic gas drilling to explode as well as support for renewable energy.
The largest expansion of Federal spending since Reagan: Under the guise of increasing "security", the Federal workforce expanded rapidly, providing good jobs, benefits and stability to many disadvantaged parts of the country.

There are two reasons for this.  Number one, at least since WWII Americans have expected their Presidents to play against type.  Eisenhower warned us of the Military-Industrial-Complex.  War-hero Kennedy founded the Peace Corps.  Johnson, the Old Southern Gentleman, pushed through the Civil Rights Act.  Nixon, for all his faults, opened relations with China and signed the National Environmental Protection Act.  Reagan raised taxes and Bill Clinton signed the repeal of the Glass-Steagall Act.

The second reason is that progress is inevitable because it is good for business.  The president of Ford has called for a public healthcare system.  Employees whose identities are affirmed, relationships are legal and do not fear discrimination are more productive.  When a society's reactionaries are placated by seeing someone who looks and sounds like them at the head of the state, they are less likely to stand in its way.

Mitt Romney knows better than to say any of this now, but his record in Massachusetts clearly shows his understanding of the importance of governing progressively, even if you have to run conservatively.  He's smart enough to know that it isn't smaller government, but less visible government that people want.  It is unfortunate that we have to choose between progressive government and progressives in government, but the lessons of history are clear.  It may be distasteful, but history suggests that a vote for Mitt is a vote for progress.