Coyote Blog

Under both state and federal law, it is illegal for me to hire anyone without documenting that they are in fact a legal US resident and have the right to work in the US.  Those of you who read this blog know that this irritates me, given my support for open immigration, but I do it.  It is also illegal for me not to make all the relevant state and federal social security and income tax withholdings for each employee, as well as pay premiums into state and federal unemployment funds, all of which require that I have an accurate social security number from each employee.  No valid social security number, no job.

All this mess is hard enough to comply with, and it takes a lot of my managers time, a full-time HR person, and thousands of dollars sent to ADP to stay legal.

And then I see this:

A Mississippi Democrat in line to become chairman of the House Homeland
Security Committee has warned the nation's largest uniform supplier it
faces criminal charges if it follows a White House proposal to recheck
workers with mismatched Social Security numbers and fire those who
cannot resolve the discrepancy in 60 days.

Rep. Bennie Thompson said in a letter to Cintas Corp. it could be
charged with "illegal activities in violation of state and federal law"
if any of its 32,000 employees are terminated because they gave
incorrect Social Security numbers to be hired.

Great.  Now I can go to jail both for employing folks without a valid social security number and for not employing folks without a valid social security number.

"These very simple guidelines,
You can rely upon:
You're gouging on your
prices if
You charge more than the rest.
But it's unfair competition if

You think you can charge less!
"A second point that we would make
To
help avoid confusion...
Don't try to charge the same amount,
That would
be Collusion!
You must compete. But not too much,
For if you do you see,

Then the market would be yours -
And that's Monopoly!

That is from the Incredible Bread Machine by R.W. Grant.  And it seems to sum up the position of gasoline retailers given this story from Denver, where a grocery store chain was successfully sued for $1.4 million because it provided gasoline discounts to customers who bought over $100 of groceries.

Gasoline retailers can't win. One day, they're
accused of "gouging" us at the pump with outrageously high prices; the
next, they're accused of "predatory pricing," which means giving us a
deal so good it's illegal....

The effect of the $1.4 million jury verdict against Dillon Co.
means that two of its grocery chains, King Soopers and City Market,
will no longer give customers gas discounts based on grocery purchases.

Safeway wasn't a defendant but it got the message and likewise
suspended its discount program at 43 of its fuel centers. Discounts
sponsored by other supermarket or big-box chains are also expected to
end.

The lawsuit was based on Colorado's 69-year-old "Unfair
Practices Act," which prohibits selling a product "below cost." The law
is supposed to be enforced by the attorney general's office, but the AG
hasn't brought an action for years because of the near impossibility of
proving that gas sales are below cost when so many grocery products are
also involved.

But the law also permits private civil suits in which winning
plaintiffs are entitled to treble damages. The plaintiffs here were a
couple of independent gasoline dealers in Montrose spurred on by a
trade group representing the state's independent petroleum marketers....

The theory behind predatory pricing laws is that a large
company will sell certain products below cost in order to drive out
competitors. Once the competitors are gone, goes the hypothesis, the
big company will jack up prices to a monopoly level.

The only problem is, this never happens. New competitors always
move fast into markets where prices are unjustifiably high.
Predatory-pricing suits are generally filed by existing companies
unable or unwilling to meet competition provided by more efficient
firms. Legal restrictions on cutting prices invariably work against the
consumer.

I pointed to a similar situation a while back in Maryland.  Thanks to Overlawyered for the pointer.

I thought this was amazing, from an article by John Fund on the activist group ACORN.  Most of the article is about allegations of election fraud, but this caught my eye:

Founded by union organizer Wade
Rathke in 1970, Acorn boasts an annual budget of some $40 million and
operates everything from "social justice" radio stations to an
affordable-housing arm. Still run after 36 years by Mr. Rathke as
"chief organizer," it is best known for its campaigns against Wal-Mart,
and for leading initiatives in six states to raise the minimum wage....

Acorn is vulnerable to charges
it doesn't practice what it preaches. Its manual for minimum-wage
campaigns says it intends "to push for as high a wage as possible." But
it doesn't pay those wages. In 2004 Acorn won a $9.50 an hour minimum
wage in Santa Fe, N.M., for example, but pays its organizers $25,000 a
year for a required 54-hour week--$8.90 an hour. This year Acorn had
workers in Missouri sign contracts saying they would be "working up to
80 hours over seven days of work." Mr. Rathke says "We pay as much as
we can. If people can get more elsewhere, we wish them well."

In 1995 Acorn unsuccessfully sued
California to be exempt from the minimum wage, claiming that "the more
that Acorn must pay each individual outreach worker . . . the fewer
outreach workers it will be able to hire." Mr. Rathke acknowledges
higher wages can cost some jobs but that the raises for other workers
are worth it.

I am not sure this hypocrisy even requires further comment.  It is particularly hilarious that he argues that economic arguments against the minimum wage (e.g. that they reduce jobs) apply to a non-profit but not to for-profit companies.

This is also hilarious, for a group that is at the forefront of trying to unionize Wal-Mart:

One of them, Sashanti Bryant of
Detroit, Mich., was a community organizer for Acorn....Ms. Barton
alleges that when she and her co-workers asked about forming a union
they were slapped down: "We were told if you get a union, you won't
have a job." There is some history here: In 2003, the National Labor
Relations Board ordered Acorn to rehire and pay restitution to three
employees it had illegally fired for trying to organize a union.

After years of getting grief, mostly from the left, for its eschewing of zoning and land-use ordinances that more "enlightened" places like San Francisco and Portland are so famous for, residents of Houston are reaping the benefits of their historical Laissez Faire approach:

Houston's gains are nothing like those seen in the past decade in
the Northeast and California, but that may be the secret to Houston's
success and the reason a bubble is unlikely to develop here. Land here
is abundant, and the city has some of the least-restrictive land-use
and construction rules in the nation. Those factors help supply to keep
pace with demand and keep prices within reach of a broad range of
potential buyers.

"We haven't had a bad year in the past decade," says Lorraine
Abercrombie, chairwoman of the local Realtors group and marketing
director for Greenwood King Properties.

Houston's model is in stark contrast to cities such as Boston and
San Francisco, which have strict zoning, exacting building codes and
laws governing historical preservation. Some economists, including
Edward Glaeser of Harvard University, say excessive regulation in such
cities has slowed construction to the point where demand has
outstripped supply, fueling a run-up in home prices.

In the once-sizzling markets where home prices are falling, housing
costs are double, triple or even quadruple those of Houston. The
danger, says Dr. Glaeser, is such places have priced out today's highly
skilled "knowledge workers," forcing them to live in a more affordable
locale where their contribution to the economy might not be as great.
"These are places where only the elite can live," Dr. Glaeser says.

This issue is one of those great examples of the statist game to enlarge government.  Step 1:  Progressives argue for having government restrict land use and implement tight zoning.  Step 2:  Housing prices skyrocket, enriching the elite and making it tough for ordinary workers to own housing.  Step 3:  Progressives decry that lack of affordable housing represents a 'market failure' that must be addressed with more regulation.  For example, builders in the SF Bay Area are required to sell X number of below market rate 'affordable' homes for every Y homes they sell at market rates.  Step 4:  Builders costs go up from the new regulations, further reducing supply and increasing prices.  And the cycle just repeats, as bad outcomes from government regulation are blamed on free markets, and used to justify more regulation.

Here is a trick to try -- every time you see the word "sprawl" in an article, replace it with "affordable housing."  It makes for interesting reading.

Hat tip to Tom Kirkendall, who runs a great blog in Houston.

Hit and Run pointed out this story about a left-wing French newspaper that is looking to the Rothschilds for financial help.  I thought this would be a more interesting story of hippie meets banker, but I did find this one bit fascinating (shown in bold):

Mr. Rothschild, a scion of the powerful banking family,
forced out the long-serving editor of the paper in the summer. Serge
July, the editor who had created Libération along with
philosopher-writer Jean-Paul Sartre, said he resigned in hopes that his
departure would help save the paper from more radical changes.

Mr. July's exit was covered in the French media as the end of an era, a French version of the Japanese
seppuku, or ritual suicide, by a man who represented a more uncorrupted, hopeful France.

Since Mr. July left, some of Libération's best-known
reporters have quit, including Florence Aubenas, who was held hostage
in Iraq for six months in 2005. They have invoked the "conscience
clause" in French law that requires media owners to continue paying the
salary of journalists whose honor is offended by the owners' policies
or politics.

How screwed up does a legislature have to be to pass something this ridiculous?

Yes, for those who are counting, this is something like post number 157 on the mismatch between anti-trust myth and reality.  The myth is that it is about protecting the consumer.  The reality is that anti-trust is an opportunity for companies to get the government to sit on their competitors:

In their new version of Windows dubbed "Vista," Microsoft has included a number of useful features that has several companies rattling the anti-trust sabers once again.

For instance, Adobe Inc., creators of the widely used PDF
document standard, object to Microsoft's built-in functionality that
gives users the ability to create PDF files without having to use
Adobe's own software.

Real Networks, per usual, is protesting that Microsoft is integrating media playback capabilities in the form of Windows Media Player 11, which competes directly with Real Player.

And now Symantec, developers of anti-virus software, is complaining that Microsoft will include their own firewall, which could lower sales of Symantec's own solutions.

And as mentioned above, all three of these firms are appealing to regulators to "solve" what they see as anti-competitive business practices to prevent their sales from eroding.

Surely then, it is only a matter of time before software firms that
make calculators or solitaire protest the inclusion of such services
into Windows. Is not the native support of the English language (and
dozens of others) a clear and present danger to third-parties eeking
out a living?

Soon thereafter, perhaps boutique's specializing in steering-wheels
and headlights may begin to sue automobile companies for integrating a
steering-wheel and headlights into cars. And no one should forget about
those built-in cassette and CD players.

It's hard to see how consumers are hurt by getting more free functionality in their operating system.  Of course, the companies above will work very hard to get the government to require that you pay extra for these components. 

Arizona has a ballot initiative here in November to raise the minimum wage to $6.75.  Perhaps more worrisome, the law has been structured to raise the rate every year based on some cost of living increase.  (As an aside - these cost of living escalators in government-mandated wage rates are insanely recursive.  The government raises wages, which increases prices, which leads to a further increase of the statutory rate).  An Arizona group opposed to the initiative has put out a nice Word document with the proposed laws language annotated with facts and refutations.

I will not be coy and pretend that I don't have an interest in this question.  The campgrounds we operate on public lands were run by volunteers in the past, until the courts decided that private companies were not legally allowed to use volunteers.  Most of our camp hosts, who tend to be in their 70's or older (we have many employees in their eighties and a few in their nineties!) get paid minimum wage plus a camp site in a nice park for the summer (the latter is what they really want).  Unlike private campgrounds that are built to be efficient to operate, the public campgrounds we operate tend to be small and labor-intensive.

We make about a 5% profit on sales in the camping business (yes, I know that is pathetically low).  Labor is 60-70% of our costs, if you include costs that are directly tied to wages like payroll taxes and workers comp. premiums.  This law would raise the minimum wage by 31%.  You do the math.  In a stroke, this ballot initiative would raise our costs by 20% (.31 x .65) in a business where costs are 95% of revenues.  Something has to give.  I am not going to work the hours I work and run the business for charity.  A 5% margin is almost there already.  We are therefore planning for two different contingencies.

1. Camping fees will have to rise by approximately 20%.  This means that a camping fee of $16 will go up by $3.  I will not make any more money, this will all be a pass-through to my employees, most of whom really wanted to volunteer in the first place.  One could rename this ballot initiative the "vote yourself a camping fee increase" initiative.  A few years ago, an attempt to raise lodging taxes on camping by a few percent met with howls of opposition.  But in effect this is ballot initiative in in effect adding a 20% tax to camping fees.
2. My labor model of hiring retired people may well have to change.  There is a real trade-off in hiring retired folks to maintain campgrounds.  On the plus side, we get a lot of honest and responsible people who have the time and the flexibility in their life to pick up stakes and go live in a campground all summer.  The down side, of course, someone who is 75, or 85, is not going to work as fast or as productively as younger folks.  My workers also tend to get injured more easily (my insurance company freaks every time it sees my employee list with dates of birth) which costs a lot in workes comp. premiums.

   When presented with the choice in the current market of hiring a retired person at $5.15 an hour or a younger, faster worker at $7.50 an hour, I have been happy to hire retired people.  This model has worked great for us.  Unfortunately, I must revisit this business model when my choice is between hiring a faster worker at $7.50 and a slower worker at $6.75 (and rising).  Already in high minimum wage states like CA, OR, and WA we have begun shifting away from hiring as many retired people.  I also hire a lot fewer people, having invested in automated fee collection in high labor cost areas.  (Think about this, at least for a few seconds, before all of you start sending me the inevitable emails I get for being a heartless brute for paying anyone minimum wage).

By the way, the federal government gets around this problem for the campgrounds it operates itself.   How?  Why, it exempts itself from these laws.  Most federal campgrounds employ retired persons as volunteers.  They don't pay campground workers minimum wage, they pay them ZERO.

I wrote a much longer post on minimum wage laws here.  Minimum wage laws are becoming hip in traditionally red-state border areas as a tool to keep immigrants from working.

Update:  I actually underestimated the amount of my costs directly tied to wages, and so I have updated some of the numbers to be more realistic.

I have defended Wal-Mart on a number of occasions given its new whipping-boy-of-the-left status.  However, if it wants to get my further support, it is going to have to take it's nose out of the public trough.

It's hard to find reliable numbers on the total value to Wal-Mart of such subsidies. The leading report is Shopping for Subsidies: How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth
by Philip Mattera and Anna Purinton was published by a left-leaning
advocacy group and funded in part by one of the very unions trying to
unionize Wal-Mart's work force, which will suggest to some a need for
caution. Yet, even if one applies a substantial discount to Mattera and
Purinton's results, Wal-Mart is still doing quite well at the public
trough:

• In a sample of subsidy deals for individual stores, they found
  subsidies ranging from "$1 million to about $12 million, with an
  average of about $2.8 million."
• In a survey of Wal-Mart regional distribution centers, they found
  that "84 of the 91 centers have received subsidies totaling at least
  $624 million. The deals, most of which involved a variety of subsidies,
  ranged as high as $48 million, with an average of about $7.4 million."

In a very real sense, Wal-Mart thus is in part a creature of big
government. From this perspective, Wal-Mart's recent hiring of
long-time Democratic operative Leslie Datch and significant increase in
contributions to Democratic politicians comes as no surprise. (Of
course, as Timothy Carney has argued,
it may also be that Wal-Mart is now using big government not just to
boost its own growth but as a tool to squash competition.)

Is Wal-Mart becoming the Archer-Daniels-Midland of retail?  In fact, the article does not even mention the egregious practice of getting local governments to use eminent domain to clear them a building location.  A while back I argued that Wal-Mart was using regulation as a club to pound on their competitors:

Apparently, though I can't dig up a link right this second, Wal-mart
is putting its support behind a higher minimum wage.  One way to look
at this is a fairly cynical ploy to get the left off its back.  After
all, if Wal-mart's starting salary is $6.50 an hour (for example) it
costs them nothing to ask for a minimum wage of $6.50.

A different, and perhaps more realistic way to look at this Wal-mart
initiative is as a bald move to get government to sit on their
competition.  After all, as its wage rates creep up, as is typical in
more established companies, they are vulnerable to competitors gaining
advantage over them by paying lower wages.  If Wal-mart gets the
government to set the minimum wage closer to the wage rates it pays, it
eliminates the possibility of this competitor strategy.  Besides, a
higher minimum wage would surely put more low-skilled people out of
work, increasing the pool of people Wal-mart can hire  (and please do
not bring up the NJ convenience store study that supposedly shows that
higher minimum wage increase employment - no one in their right mind
really believes that demand for labor goes up when the costs go up).  I
am not sure what the net effect on Wal-mart's customers would be --
some would have more money, from higher wage, and some would have less,
from fewer hours or due to being laid off.

I have defended Wal-mart in the past,
but I am going to stop if they become the new auto or steel industry
and use the government to protect their market position.  Already they
are losing my sympathy with their whoring for local relocation subsidies and eminent domain land grabs.

If Wal-Mart wants to seek public funding for its business and impose regulation on its competitors, and thereby make itself a semi-governmental entity, then I am no longer going to have any sympathy for them when governments want to single them out for special regulation, no matter how bone-headed the regulation may be.

If you are not familiar with the Institute for Justice, the IJ is like the ACLU but from an alternate universe where the ACLU was not founded by a Stalinist and actually believed in property rights.  The IJ represented Ms. Kelo in her fight against eminent domain to aid Pfizer in Connecticut, and often takes on stupid government licensing programs.  For example, the IJ is representing some folks in New Mexico who think that it will not materially harm public safety if they do interior design without a government license:

If you need a license to arrange flowers
in a vase, it stands to reason that you'd need a license to arrange
furniture in a house"”not to mention picking paint and window
treatments. Or so the state of New Mexico (along with four other
states) seems to think. To be fair, you can do interior design in New
Mexico without a license; you just can't call it interior design, or
call yourself an interior designer, which makes it hard for potential
customers to find you. Today two people who in most states would call
themselves interior designers filed a federal lawsuit objecting to the
state's protectionist censorship on First Amendment grounds.

In the past, the IJ has also fought for the right of hair braiders and casket salesmen to operate without a state license.

Eight days from now, all of our first amendment rights will be put away in a box for 60 days, hopefully to be retrieved after the election is over.  During those 60 days, and in an astronomical violation of the intent of our Constitution and Bill of Rights, none of us, unless we are operating under the banner of certain organizations like official political parties, will be able to pay to publicly criticize the *cough* fine *cough* men and women who serve as elected officials in this country.  Once the election is over and their jobs are safe and the criticism is moot, then you will get your speech back.

Thank you very much John McCain, Russ Feingold, all the Congressmen who voted for this, GWB who signed it, and the Supreme Court who astoundingly declared it constitutionally A-OK.

Update: Here is an example.  I use it because the people involved are try to fund ads to support a law I absolutely oppose (I have no desire to give the Feds more power over the free movement of US citizens across state lines).  But I totally support their right to advocate their position on TV.  In this case, their public speech is great even for folks like me who oppose what they support, because I didn't even know this proposed legislation existed until they started talking about.  Their ad informs me, even if it is sending me the message that I need to counter their message.  And that is what political dialog should be in a free society.

I am constantly irritated by efforts to ban a certain speaker from speaking or to drown out their message with taunts and chanting.  If you think someone is advocating something so terrible - let him talk.  If you are right in your judgment, their speech will likely rally people to your side in opposition.  As I like to tell students who want to ban speakers from campus -- Hitler told everyone exactly what he was going to do if people had bothered to pay attention.

From Kevin Drum, it's good when progressives make it clear to everyone what they want:  Control!

[emphasis added]  It's just that, left to their own devices, both humans and corporations
tend to act solely in their own self-interest. That's why we have laws
to control human behavior, and it's why we need laws and regulations to
control corporate behavior. I prefer a society in which people don't
gun each other down in the streets, and I also prefer a society in
which middle class workers prosper when the economy grows. I support
laws that encourage both.

Woah!  Can't let all those damn individuals do whatever they please of
their own voluntary self-interest.  Don't they know they are supposed
to do what we intellectuals think best for them?  I want to repeat
this line:

That's why we have laws
to control human behavior

Actually, in governments with a strong grounding in individual rights,
we have laws to prevent people from acting using force or fraud on
other individuals.  So yes, we do have laws to stop people from
shooting each other, but these laws are philosophically a long step away from
laws that tell people what wage they can and cannot legally accept.   Preventing someone from using force against another is waaaaaaay different than using government force to prevent one or more individuals from acting voluntarily in their own self-interest.  The whole point of government in a free society is to prevent people
from trying to control each other by force, not, as Drum wants, for the
government to be the very agent of this control and coersion. 

People who root for more government control need to learn their lesson.  Both parties tend to set up mechanisms of control as if their own guys are going to run this machinery forever, only to freak out when the opposition party takes over and uses this machinery of control for its own purposes.  Thus Democrats lament that the machinery they built to control the drug market gets taken over by Republicans to ban the morning after pill, and that the public education system Democrats so love is co-opted by ID curriculum.  As I wrote here:

Again we hear the lament that the game was great until these
conservative yahoos took over.  No, it wasn't.  It was unjust to scheme
to control other people's lives, and just plain stupid to expect that
the machinery of control you created would never fall into your
political enemy's hands.

Drum makes these statements in the context of arguing that moderate Democrats should be irate about Wal-Mart and should be seeking to have the government sit on Wal-Mart in some way:

And one of the things that's changed is that Wal-Mart has gotten a lot
bigger, unions have continued shrinking, working class wages have
stagnated, and corporate power has grown tremendously. It's perfectly
rational for even moderate, pro-business Dems to look at the record of
the past couple of decades and conclude that things have gotten pretty
far out of whack and that Wal-Mart is a good symbol of this imbalance

One problem with this meme beyond the others I have pointed out in the past is that Wal-Mart is generally not supplanting (with one exception) unionized retailers.  In fact, the implication that Wal-Mart is somehow setting back unionization is actually a complete reversal of how Wal-Mart used to be hammered by critics.  Traditionally, Wal-Mart has been blamed for replacing small stores and family businesses which certainly aren't unionized, usually don't have health plans, and often pay lower wage scales than Wal-Mart does.  Now they are trying to reverse history, and claim instead that Wal-Mart has somehow been supplanting high-paid union jobs.  The only place where this could be argued to occur is in the supermarket business, where strong unions have dominated.  But these old-line unionized supermarkets were falling to competition from other supermarkets even before Wal-Mart came along.  And as to all those Chinese imports, well, I would LOVE to see a liberal try to twist themselves into a pretzel to make a progressive argument for why an impoverished person in China counts for less than a middle class person in the US.

The only real change in employee's fortunes is that employees who work for Wal-Mart are now more visible than they were when they worked for thousands of tiny local retailers, but are they really worse off and more powerless, or just a better target for populist rhetoric?  In fact, even if pay and benefits are the same as in a small store (and I think Wal-marts are probably better), Wal-Mart also offers opportunities for advancement and training far, far beyond the ma and pa store.

By the way, you know its election time when you hear this:

The American economy has changed for the worse over the past couple of decades if you're part of the working or middle class

Ahh, it reminds me of those heady days when Clinton was able to portray a modestly growing economy under Bush 1 the "worst economy since the great Depression."   Election rule to remember:  Republicans try to get elected by running down the morality of Americans, Democrats do so by running down their economic success.

Postscript:  I will admit there is one group who sometimes must accept wages that are not the result of pure voluntary agreement with an employer: Illegal immigrants.  Those who read this blog a lot will know I am very pro-immigration, and would like to see full, open immigration and there be no such thing as an "illegal" immigrant, except in narrow cases of convicted criminals, etc.  Illegal immigrants in many ways have the same problem as prostitutes, in that they have only limited legal redress when they are victims of force or fraud in their work.  Making currently illegal immigrants legal would do more to help disenfranchised workers than any slate of goofy government legislation to try to reinvigorate unions.

Update:  My past response to charges of widening income distribution was:  So what?  Also alot more links here.

I guess Exxon must be happy that after a really long run, they may finally be handing off the title of the left's great Satan to Wal-Mart.  Ezra Klein thinks government intervention to change the practices of Wal-Mart's managers, consumers, and employees is one of "the two or three most important issues facing the country" (hat tip: Instapundit).

Eegad!  My response in his comments:  "My guess is what is really worrying to you is that there is a large
group of people voluntarily and by individual choice making decisions
you don't agree with (e.g. to shop at Wal-Mart or to work at Wal-Mart)
and you are frustrated that no one has yet allowed you to become
economic fuehrer so that you can override by government coersion the
actions of individuals so you can force them to make decisions the way
that you think they should."

I have pointed out the great irony before that those who call themselves "progressive" are actually inherently conservative, hating capitalism for its chaos and unpredictability.  They hate new business models and often make common cause with incumbent competitors to get the government to halt such new competition (e.g. protection of US auto and steel vs. imports).

Update:  Sabastion Mallaby has an editorial in the Washington Post criticizing moderate Democrats for jumping on the anti-Wal-mart bandwagon

Update#2:  I realized that I forgot my usual caveat in my defense of Wal-Mart:  That is, Wal-Mart totally pisses me off in their rent-seeking from local government, benefiting from tax breaks and even eminent domain actions their competitors do not get the benefit of.  Also, I think their stores are aesthetic hell-holes I enter only under duress.  Wal-Mart has problems, I just don't agree they are the ones their critics harp on.  Tim Worstall's article reminded me I forgot this part.

In this post I said:

I could spend all day discussing the follies of anti-trust law.  But
one of the memes that still seems to hang on is that anti-trust was
designed as a form of consumer protection, with the government
protecting consumers from the monopoly power of consolidated
enterprises.

I am not enough of a business historian to comment on whether
anti-trust has ever been used for consumer protection, but it is clear
that it is not any more.  That has been one very expensive lesson we
can all learn from the Microsoft anti-trust cases, both in the US and
Europe.

Here is further proof.  NicSand, who used to have 2/3 of the retail channel for sandpaper locked up with exclusive deals, is complaining that 3M has usurped them and has taken their market share.   NicSand enjoyed monopoly margins for years, finally faced long-overdue price competition from 3M, and lost a lot of the business.  So they sued for anti-trust.

Between 1997 and 2000, 3M entered into contracts to supply automotive sandpaper
to Advanced Auto, Autozone, CSK and KMart and did so at prices ranging from 10%
to 30% over NicSand's costs. But nothing about this sequence of events suggests
an antitrust violation. As to the market share that 3M garnered over these
years, "it takes one to know one" is hardly an accredited hallmark of antitrust
liability"”particularly when NicSand's apparent solution to this problem is not
to encourage the entry of other suppliers to this lopsided market but to
preserve its 67% market share. As to 3M's discounting, NicSand of course has no
right"”under the antitrust laws no less"”to preserve 40"“50% margins on a product
that (so far as the allegations are concerned) does not take any ingenuity to
make. One can fairly doubt the size of NicSand's and 3M's R&D departments
for automotive sandpaper.

Unable to argue that 3M's discounting amounted to anything but legitimate (and
apparently long-overdue) competition, NicSand focuses on the fact that 3M
entered into exclusive contracts with the four large retailers that switched
from NicSand to 3M. Yet according to NicSand's amended complaint, the retailers
made exclusivity one of the preconditions for doing business with a new
supplier. The complaint says that the large retailers (1) choose to carry just
one brand of automotive sandpaper for sale to consumers, (2) re-negotiate these
one-brand contracts just once a year, (3) require a new supplier to purchase the
retailer's existing supply of automotive sandpaper, (4) require a new supplier
to provide racks and other display equipment, (5) require a new supplier to
produce a full line of automotive sandpaper and (6) require a new supplier to
provide a discount on the retailer's first order. NicSand of course complied
with these requirements in obtaining the supply business it held in 1997, and 3M
complied with them in winning some of that business away. If retailers have made
supplier exclusivity a barrier to entry, one cannot bring an antitrust claim
against another supplier for complying with that precondition. Put another way,
NicSand did not sue 3M insisting that it had a right to share shelf space; it
sued 3M because it wanted that shelf space all to itself"”just as it had it in
1997. This is precisely the kind of all-for-one-and-all-for-one competitor claim
that the antitrust laws do not protect.

Anti-trust is not about the consumer.  It is about one company trying to use the government to sit on its competitors.

Update: Oh, and in case you thought liscencing of professionals was about consumers rather than protecting incumbent competitors, example number 439,126:

If you've spent as much time on farms as I have, you may imagine that
floating horse teeth has something to do with a backup of equine urine. It
actually refers to the time-honored practice of filing horses' teeth to prevent
them from getting uncomfortably long. At the behest of veterinarians (who
else?), the state of Minnesota is trying to limit
the service to veterinarians, and the Institute for Justice (who else?) is challenging
the protectionist regulations in state court.

Should you balk at going to veterinary school just so you can file horse
teeth for a living (a technique veterinary schools don't even teach), Minnesota
will give you a pass if you 1) have more than 10 years of experience or 2) pass
an exam given by the Dallas-based International Association of Equine Dentistry.
"To qualify to take the IAED's test," I.J. notes, "you must float the teeth of
250 horses under the supervision of an existing IAED member. Not only are there
no IAED members in Minnesota, it is illegal to float without a license. So, to
abide by the law in Minnesota, you must break it."

I have had several readers email me asking my opinion on net neutrality, at least as embodied in the regulations passing through Congress.  I really haven't gotten worked up about it one way or the other, but here is where I am on it:

1. It seems to be solving a "problem" that doesn't exist, but is mostly hypothetical.  So the current benefit of the law is zero.  Which makes the law at best currently useless, and at worst a negative given inevitable unintended consequences.  It seems crafted out of general distrust of phone and cable companies than for any other reason.  Couldn't we at least have waited not just until some company was giving preferential access to certain sites, but until there was some demonstrable harm from the practice?
2. I dislike the precedent of the government increasing its regulation of the Internet.  I know folks want to argue to me that this law is just to "keep the Internet like it has always been" but that is the justification of half the regulations on the books -- locking the the status quo against new business models, technologies, and competitors
3. I can imagine situations where net neutrality might be bad.  I think in particular with fledgling wireless networks, that might want to put certain limits on high-bandwidth sites to try to reduce the load on their key nodes.
4. I know it is not a direct analog, but net neutrality smacks a bit of the awful "must carry" rules applied to cable and satellite.  These must-carry rules were crafted to force people like cable to carry every local TV station, worthy or not, on their cable and to force satellite providers to only bring the network feed to a city via its city's local affiliate.  Another government incumbent protection act, it basically said that incumbent terrestrial broadcasters got first call on cable bandwidth ahead of new entrants.   The sattelite rule has always irritated me - it means that to provide NBC to 60 cities, DirecTV has to carry 60 nearly identical feeds in its limited satellite bandwidth instead of just one, all to protect technologically dated but politically influential local TV businesses. 
5. Ironically, the same "progressives" pushing net neutrality also pushed, just 6 months ago, legislation to require cable TV to provide content a la carte rather than just one price for everything bundled.  Aren't these two initiatives effectively opposite of one another?  And why is either the government's business?

Have you ever heard of government authorities making public statements around Valentine's Day to please conserve on roses since we are entering our peak demand season for them and rolling shortages could ensue?  No?  Never?  Well, the demand spike for roses on Valentines is much more dramatic than the demand spike for power on a hot summer day.  So why no urgent government messages for conservation of the former but constant ones for the latter?

Because the rose market is not heavily regulated.  Producers are free to manage their capacity without government interference, and, perhaps more importantly, producers are free to charge peak pricing in high demand periods.  In fact, prices for roses on Valentines go for a multiple of everyday pricing that a similar differential in a peak supply period at, say, a gas station would likely get the proprietor arrested for price gouging.  But we recognize that its tough to manage a business to supply all its capacity in one day of the year, and accept the higher pricing.  Why is it we can't accept the same facts of life in electrical generation, where capacity is orders of magnitude more expensive to manage than rose growing?

More from Llewellyn Rockwell at the Mises Blog and Lynn Kiesling at the Knowledge Problem

Many of you will know that a big impetus for the original minimum wage laws in this country were a racist effort by unions (almost exclusively made up of white workers at the time) to protect white jobs from competition by low-skilled blacks.  [note:  This is not the only impetus, however.  Many of the original minimum wage supporters were not racist at all.  However, a large number of the original supporters of the legislation liked it in part because it was seen as sheltering higher skilled white workers from black competition, particularly in northern states experiencing substantial migration of black workers from the deep south]

This week, in the New York Times of all places, Michael Dukakis and Daniel Mitchell return to these same racist roots to justify a substantial hike in the minimum wage.  Their logic is that it will protect white workers from competition from immigrant (read: Mexican) labor:

But if we want to reduce illegal immigration, it makes sense to reduce the
abundance of extremely low-paying jobs that fuels it. If we raise the minimum
wage, it's possible some low-end jobs may be lost; but more Americans would also
be willing to work in such jobs, thereby denying them to people who aren't
supposed to be here in the first place

By the way, note that we finally have prominent liberal voices who will acknowledge that raising the minimum wage reduces the number of jobs.  Also note that while the authors try to narrow their focus to illegal immigrants, no such narrowing of effect would occur in real life:  All low skilled people, legal or illegal in their immigration status, would lose jobs.  But for the authors this is OK as long as more brown people than white people lose their jobs.  I mean really, that's what they are saying:  We like this law because it will preferentially put low-skill people, particularly brown people, out of work.  If Rush Limbaugh had said the same thing, there would be a freaking firestorm, but there's the good old NYT lending their editorial page to this sick stuff.  Marginal Revolution has more comments along the same lines.

I am sick of the condescension and arrogance that comes with statements like theirs that Americans won't work for the minimum wage.  That's ridiculous, because many do, and have good reason to.

Take my company.  A number of my workers are paid minimum wage. Am I the great Satan? Why do my employees accept it?  Because 99% of my workers are over the age of 70 -- they work slower and are less productive, but I like them because they are reliable.  There's no way anyone is going to pay them $15 an hour to run a campground -- for that price, someone younger and faster will be hired, but at or near minimum wage they are great.  And they are generally happy to start at minimum wage (plus a place to park their RV for the summer).  In fact, I have more discussions with employees trying to get paid less (conflicts with social security and retirement benefits and disability payments) than I have people asking for more. 

Granted, my situation is fairly unique.  But Michael Dukakis in his infinite wisdom thinks no one under any circumstances should be allowed to accept less than $8 an hour for his labor.  What does he know about campgrounds or my employees?  Nothing, but he is going to try to override my and my employees' decision-making if he can.  Because he knows better. 

Maybe Mr. Dukakis can write a note to all my older, slower employees after the new minimum wage passes and explain to them why they should be happier without a job camp-hosting (which most of them love to do, probably more than you like your job) than having to accept a wage that Mr. Dukakis thinks to be too low. 

Continue reading ‘This is Sick - Dukakis Advocates Jobs Go To White People First’ »

Chicago has become the latest city to try to impose special wage requirements solely on one sector of one industry, ie on big-box retailers like Wal-mart.  One wonders how anyone can bend the notion of "equal protection" to support this kind of hash, but rather than again refuting this silliness for about the 89th time on this blog, I will leave it to Cafe Hayek and Russel Roberts.  I particularly liked the way he rewrote the story for the Chicago papers:

Imagine a different world. A world where the City Council was blamed for the
failure of Wal-Mart and Target to pay a decent wage. Here's how the story might
read:

After years of disastrous decisions in running the public
schools, it has become clear that Chicago's City Council has failed the children
of the Chicago area. After attending these mediocre schools, many children of
the city have inadequate skills to be successful in the labor
market.

"Something must be done," declared Ald. Johnson. "If we had
decent schools, we wouldn't have this problem and people could live on the money
they made."

Johnson has proposed a bill that would require all Chicago
City Council members and teachers and administrators in the Chicago school
system to pay a special tax. The proceeds of the tax would help provide workers
in the member's district with a living wage.

Frequent readers of this blog will know that this quote from Milton Friedman on licensing is one of my favorites:

The justification offered is always the same: to protect the consumer. However, the reason
is demonstrated by observing who lobbies at the state legislature for
the imposition or strengthening of licensure. The lobbyists are
invariably representatives of the occupation in question rather than of
the customers. True enough, plumbers presumably know better than anyone
else what their customers need to be protected against. However, it is
hard to regard altruistic concern for their customers as the primary
motive behind their determined efforts to get legal power to decide who
may be a plumber.

Ilya Somin at Volokh has an interesting post (though right this moment their site seems to be down) about the American Bar Associations (ABA) role in accrediting colleges.

To my mind, the problem goes beyond the shortcomings of specific ABA standards.
The real mistake is allowing an organization with a blatant conflict of interest
to take over the accreditation role in the first place. As an interest group
representing lawyers, the ABA has an obvious stake in limiting entry into the
profession so as to decrease the competition faced by its members. One way of
doing so is by restricting the number of accredited law schools, at least in the
vast majority of states that require all or most aspiring lawyers to attend an
ABA-accredited school in order to take the bar exam.  We would not allow an
organization run by Chrysler, GM, and Ford to set regulatory standards
determining who has the right to sell cars in the United States. Requiring ABA
accreditation for law schools is the exact equivalent in our industry....

To be completely clear, I am NOT arguing that the ABA should be prevented from
certifying schools as meeting what it considers to be appropriate standards. I
am merely suggesting that ABA accreditation should not be required by law as a
prerequisite for allowing a school's graduates to take the bar. If ABA
accreditation really is a sign of school quality, then applicants can take that
into account in making their decisions on what school to attend, just as they
currently consider US News rankings and other data. If some form of legally
mandated accreditation is needed (and I highly doubt that it is), the system
should be run by an independent agency insulated as much as possible from
control by the ABA and other interest groups representing practicing lawyers.
There should be similar insulation, by the way, from influence by established
law schools, since we too have an obvious self-interest in limiting competition
by preventing new entry into the legal education market.

I could spend all day discussing the follies of anti-trust law.  But one of the memes that still seems to hang on is that anti-trust was designed as a form of consumer protection, with the government protecting consumers from the monopoly power of consolidated enterprises.

I am not enough of a business historian to comment on whether anti-trust has ever been used for consumer protection, but it is clear that it is not any more.  That has been one very expensive lesson we can all learn from the Microsoft anti-trust cases, both in the US and Europe. 

If you remember the US cases, Sun, Netscape, Oracle and other Microsoft competitors, having failed to best Microsoft in the marketplace, went running to the FTC to get them to sit on Microsoft for them.  And they were successful, with a series of high-profile settlements.  Nowhere was there even a hint that these cases were about the consumer -- in fact, the settlement demanded was to remove functionality and free add-on components from the Windows OS, making it less attractive to consumers.

We can see this again in the recent decision by an EU court, which seems very happy to use anti-trust law to step on an American competitor in favor of local companies (my emphasis added).

Microsoft was fined $357 million, on top of the record $613 million
fine it paid in the original order. It also faces new penalties of
$3.82 million a day beginning July 31....

The commission has said that it is concerned about Vista's Internet
search capabilities and method of managing digital rights. Regulators
also are worried about the implications for competitors of a new
technology for saving documents that is similar to the Portable
Document Format developed by Adobe Systems Inc.

Microsoft's chief crime is not doing enough to help competitors compete against them:

The fines announced Wednesday come after the EU told Microsoft to
supply "complete and accurate technical specifications" to developers,
so they could make software for servers that help computers running
Windows, printers and other devices on a network talk to each other. It
accused Microsoft of using its monopoly position with Windows to elbow
into the server software market.

Kroes said Microsoft's earlier efforts had not come even close to a readable manual developers could use.

Again, settlements are taking the form of defeaturing the product consumers get:

Smith said Microsoft had suggested various ways it could offer Vista in
Europe, to address concerns about XPS. One option is to ship Vista
without it, while another is to include ways for PC makers or others to
either remove certain XPS utilities or make them invisible.

And, by the way, this certainly gives one a lot of confidence in the due process the courts in Europe are going to give you as an American:

"In some ways, these fines are only partially about complying with the
... prior case, and half about sending a message to Microsoft that the
European Commission is not going away,"

You get that?  It sounds like a mafioso beating someone up because they didn't show him enough respect.

By the way, I am frustrated with Microsoft and their pricing as well.  Rather than run to the government, though, I have employed this and this and this.

I write in this blog often on my frustrations with regulation, but last night I learned, if I did not know it already, that things could be much worse.  I had dinner with some friends in London who are in the middle of a home improvement and renovation project on their 1830's era townhouse.  Now, I just completed a renovation of my own (1980's era) home in Phoenix, and, while home improvement is always frustrating, I at least had few problems with the city.  Phoenix will let you do about anything you want to your home as long as you respect your setbacks and don't install a nuclear reactor.

My London friends were not so lucky.  Their home is rated a class 2 historic structure, which means it gets a bit less scrutiny than class 1 palaces and stuff, but it still comes in for a lot of regulation.  Their plans had to be approved in detail, and I mean in gory detail, with the local history Nazis.  And this is for a building that really has little historic or aesthetic value (the owners would be the first to admit this) in a neighborhood that was nearly blighted thirty years ago. 

My hosts pointed out the dining room lighting, which was really dim (you could not see your food very well) band told me that the authorities would not let them add lighting fixtures to the room.  No doorways, moldings, or walls could be changed.  The funniest example of this was a doorway cut in a wall 20 years ago.  The government inspector came through the house and said "well, that door is not historic but I like it so you can't change it."  They thought the inspector was joking, but, after a lot of effort to get approval to change the door, found out she was not kidding. 

The staircase to the top floor (originally the servant's quarters) was steep and unsafe for their children, but the inspector insisted it could not be changed because the "logic" of having the servant's quarters accessible by a difficult staircase needed to be maintained.  The homeowners rebuttal that they had no servants and were more concerned with safety than the history of class differences in Britain had no effect.  In several cases where the homeowners argued that the portions of their house they wanted to change was not original to the house (and therefore not covered by restrictions) it was made clear that the burden of proof was on them, the homeowners, and not on the government.

As one other funny sidebar, the basements and below grade areas of these homes apparently don't fall under this scrutiny or are exempted in some way.  As a result, everyone in his neighborhood seems to be tunneling out into their backyards to expand their house.  One homeowner bought three adjacent homes and tunneled out enough area for an indoor underground swimming pool.

Can you imagine if someday the US government decided that those 1970's homes were subject to such historic restrictions?  Suddenly, by government fiat, instead of being stuck forever with insufficient lighting and unsafe staircases, you might get stuck with orange shag carpet and gold-mirrored walls.  If you think this is ridiculous, read this.

Suffice it to say, I am tired of a relatively small group of people imposing their wishes on other people's property, a practice I call eminent domain without compensation.  If you want something specific done to a piece of property, then buy it and have at it.

I have written before about the silliness of the liquor licensing process.  A regulatory procedure perhaps necessary when the government was trying to drive organized crime out of liquor in the 1930's, its insanely useless today.

For example, last winter we replaced a store building at the same address with a brand new building.  It did not even occur to me that I might have to make any changes to my liquor license.  Surprise!  Here is the paperwork required to activate my existing, already paid-for license at the exact same address, only in a newer building:

Its hard to tell from the picture, but we are talking lots and lots of detail, much of it repeated several times through the application.  And most every page has to be notarized.  How much of this is new and not already on file with my current license?  Just one-half of one page, down in the lower right where I draw the floor plan of the new building.  Everything else is a total repeat of the information on file.

My favorite question I had to answer to move my liquor license to a new building?  They require I give them the date and location of my wedding.

Update: Oh, and it has to be approved by the County planning department, who for several days now have not returned my calls.  And it may have to go in front of the county commisioners.  And I am pretty sure it will have to be publicly posted on the new building for a 30-day comment period, and I will have to pay for an announcement for three weeks running in the local paper.  And then it will probably be approved, just about when it will be time to close for the season.  For those who have not been there, though, McArthur-Burney Falls State Park is gorgeous, and, if I can brag, I think our new building is a big improvement as well.

By now, most will have heard that the young star quarterback for the Pittsburgh Steelers, Ben Rothlesburger, crashed his motorcycle and sustained head injuries in part because he was not wearing a helmet.  You can bet that someone in the legislature will introduce a helmet law in the next week, since most nanny-state legislation of this type usually gets passed in reaction to one high-profile incident where some legislator can grab some press.

Here is what really upset me yesterday:  Listening to a sports-talk radio station yesterday talking about this accident, I heard a number of people call in and say the following:

"I don't blame Ben for riding without a helmet -- that's legal in Pennsylvania.  I blame the state for not having a helmet law"

Wow - you don't see the death of individual responsibility highlighted any more starkly than that.  Much more on the topic here.

By the way, helmet laws are a particularly interesting bit of nanny-statism, since motorcyclers are such a small percentage of the population.  In most states where this law gets passed, the votes of people who will never ride a motorcycle and for whom the law will always be irrelevant generally overwhelms the wishes of motorcyclers themselves.  I wonder how many women who piously preach that the government can't tell us what to do with our bodies typically vote for helmet laws that tell people, uh, what they can do with their bodies.

Increasingly, you hear people justify helmet laws by saying "well, taxpayers have to pay the medical bill if someone gets hurt riding without a helmet."  I addressed this argument that public health care justifies total control of our lives in this post on health care as a Trojan horse for fascism.  (and here)

Our brave city of Scottsdale has come up with this pioneering idea:

Scottsdale's Historic Preservation Commission wants city staff to look
into designating '50s-era garden apartments as an entire historic
district

For those who have not struggled with this, being named a historic building or site can be the kiss of death - basically it means that the government has restricted your ability to do anything with your property.  You certainly can't tear the sucker down and put something more modern on your own land and you have to go through mind-numbing approvals and use special super-high-cost contractors even to do the smallest amount of work on the structure.  In some of the public parks we run, I know of several historic buildings that are falling apart because they have been named historic buildings and the bureaucratic headaches to even stabilize the roof and stop leaks is insurmountable.  (A few years ago I nearly got arrested for putting some tar paper on the roof of a historic cabin to try to stop the rain from getting in and ruining the building.  I was told that they would rather the building crumble to dust than let any non-authentic work be done on it).

Can you imagine having your dated 50's-era ugly home or condo designated so that you can't tear it down?  Does this mean that you can't even update it, to get rid of the avocado appliances? Apparently so:

Valarie Hartzell of Park Paradise, 6936 E. Fourth St., said condo
owners there also are making improvements, but city-approved
contractors balk at installing authentic, and perhaps hard-to-get,
fixtures

The woman driving this effort reveals the thinking so typical of these efforts:

Preservation Commissioner Nancy Dallett said the rare configuration of
the apartments in a single neighborhood may qualify them for a
geographic designation.

"The strength of our district is in the clustering of the apartments,"
Dallett said at Thursday's commission meeting. "I wouldn't want to let
go of any of these within the boundaries."

Don't you love that last line?  Look Nancy, if you want something specific done with this property, buy it yourself.  But don't try to manage property you don't own at costs you don't bear for an outcome you desire.

In a nutshell, such efforts result in the effective taking of the private property to meet some public good, without any compensation.  This is eminent domain without any payment at all, thereby taking Kelo even one step further.

By the way, this means you have about 20 years before your 1970's style house is declared a landmark, and you will be stuck forever with the orange deep shag carpet and mirrored walls, so move quickly on that renovation.

States all require that you register your corporation to do business in that state.  Most all states require that you have a registered agent in that state.  Sometimes this can be an employee, but since we are a seasonal business we have no full-time employees in many states to nominate.  This means that we have to pay an outsider a fee every year just to be this named agent.

And in my experience this person does ... NOTHING.  Zero.  Nada.  Bupkis.  But it is worse than that.  In many states like Minnesota, the secretary of state (who generally manages corporate registrations) absolutely insists that they will send no mail to your corporate headquarters, they will only send mail to your in-state registered agent.  Its like they don't have mail service or phone service that goes out of state in Minnesota.  Unfortunately, many of my agents repeatedly fail to forward this mail to me.  I just paid a $300 fine to Minnesota because I did not respond to an annual renewal notice that was sent to my local agent and never forwarded.

I have asked this question of my readers before but never gotten an answer.  My question is simple:

In this day of modern communications, what is the justification for requiring a corporation to have a registered agent in that state?

Is there any justification?  Or is this just a holdover from some past era when communication was by horse and telegraph.

In many states like California, auto insurance rates have been subject to state price controls for years.  A recent debate over a bill called AB 2840 helps shed some light on the total idiocy of trying to have government set prices.

I have to give you a paragraph of background.  Warning -- the next paragraph is mind-numbingly dull.  Please don't give up.

Apparently, auto insurance rates are higher in California cities in part because claims rates (theft, accidents) are higher in the cities.  The cities, which have a lot of political power, argued that this was unfair that their rates were so much higher than rural folks paid.  State-approved insurance rates were discriminating against cities, they claimed.  I don't know if they made the argument, but they could also have argued that infrastructure costs (sales, claims service) was likely lower in cities per capita because of the concentrated customer base.  So the state insurance board proposed to raise rural rates and cut city rates to make prices to all Californians more even.  Rural folks then freaked, and their legislators have proposed AB 2840 to put things back the way they were before.

So who is right?  How the hell am I supposed to know?  How the hell is anyone supposed to know?  There is absolutely no objective way to settle this argument.  I read the attached article and my eyes just started to blur.  That is why in practice, for all the talk of studies and analysis, issues like this are settled in favor of whoever has more political clout or votes.  Price controls, besides wreaking havoc on supply and demand, always - yes always - result in a transfer of wealth from those without political power to groups that have the power.   That's why politicians love them -- its a great way to raise campaign donations, as groups bid to be on the receiving end of such largess rather than being the sacrificial lamb.  And it's why in a free and just society we use this thing called "markets" to determine prices in most other such complex situations.