Coyote Blog

Business gets held liable for the unpaid wages of the previous tenant of the building they are using.

An employer that acquired the assets of a defunct bar and restaurant and continued to operate a restaurant on the same premises was liable for unpaid wages owed to the defunct restaurant’s former employees, the Oregon Supreme Court has ruled. Blachana LLC v. Bureau of Labor and Industries, No. S060789 (Ore. Jan. 16, 2014).

Reversing the Oregon Court of Appeals, the Court found that the Bureau of Labor and Industries (BOLI) did not err in deciding the employer was a successor for state wage liability purposes because it conducted “essentially the same business as conducted by the predecessor,” even though it did not employ any of the predecessor’s employees.

San Francisco has put deep restrictions employers' ability to check the criminal records of people they hire.  Yesterday the Senate blocked the nomination of Debo Adegbile to run the Civil Rights division of the Justice Department.  Senators were concerned about his actions as defense attorney for a man convicted of murdering a Philadelphia police officer.  Honestly, I have no problem with defense attorneys going to extremes to defend their clients.  I was more concerned with his historic support for ideas like this one in San Francisco:

Private sector employers in the City of San Francisco will have to comply with new “ban the box” legislation restricting questions about applicants’ criminal records on applications for employment and during job interviews.

The Fair Chance Ordinance, No. 17-14, prohibits employers with at least 20 employees from inquiring about a job applicant’s criminal history on an employment application, including “checking the box” to indicate criminal convictions or other criminal justice system involvement. It also prohibits covered employers from asking about criminal history during an initial interview. The law applies not only to regular employees, but also those performing contracted or contingent work, or working through a temporary agency. The Ordinance becomes operative on August 13, 2014.

After the initial interview, the Ordinance prohibits the employer from asking the applicant about the following:

• arrests that did not result in conviction, unless charges remain pending;
• completion of a diversion program;
• sealed or juvenile offenses;
• offense s that are more than seven years old from the date of sentencing; and
• offenses that are not misdemeanors or felonies, such as infractions.

The employer must provide the applicant with a written notice before making any inquiry into the applicant’s criminal history and display a poster in the workplace developed by the City’s Office of Labor Standards Enforcement (OLSE).

The Ordinance also restricts an employer’s ability to consider criminal history disclosed by an applicant. The information may be used in the selection process only if it has “a direct and specific negative bearing on that person’s ability to perform the duties or responsibilities necessarily related to the employment position.”

This is just stupid.  First, I cannot tell you how many government forms (e.g. corporate registrations) require me to report my criminal background -- this is outright hypocrisy, holding private employers to  a different standard than public agencies.  If they really are consistent, truly believing that criminal background checks are discriminatory because they have disparate impact, then they should be pushing to remove them for things like gun ownership.  Anyone really believe they will do this?

The bigger issue for businesses is that we don't make these checks because we are jerks, we make them for real financial reasons.  Specifically, we are worried about the health and safety of our employees and customers.  And for those that think that business owners are all evil and wouldn't care about such things, then we certainly care about getting sued for the actions of our employees.  As a business owner I have been made, particularly in California, responsible for any dumbass thing my employees do.  I will get sued if these employees do something wrong.  And worse, can you just see the trial -- plaintiff's attorney is going to be in front of the jury and say things like "this employee has a long criminal record and defendant did not even check, he did not even care about my client's safety."

The PJ O'Rourke / Cato Supreme Court amicus brief that is making the rounds is well worth your time.  A lot of it is funny, like this footnote:

While President Obama isn’t from Kenya, he is a Keynesian—so you can see where the confusion arises.

But my favorite is footnote 15 where they make fun of the Supreme Court

Driehaus voted for Obamacare, which the Susan B. Anthony List said was the equivalent of voting for taxpayer- funded abortion. Amici are unsure how true the allegation is given that the healthcare law seems to change daily, but it certainly isn’t as truthy as calling a mandate a tax.

This is an update of a post I wrote here.

One question that keeps coming up, both from libertarians as well as others, is why should government define marriage at all?  Can't anyone get married in any kind of private ceremony?

My response is that yes, in some sort of libertarian small-government world, the state would be irrelevant -- what I used to call separation of marriage and state.

But it turns out that the state is already deeply involved in marriage.  The explicit state licensing of marriage already exists, and our laws in Arizona for this licensing are unequal -- some couples get access to this state license, and some cannot.

What makes this important is that marriage is embedded in hundreds, even thousands, of laws.   I searched the Arizona Revised Statutes for mentions of the words "spouse" or "spouses".  These words are used 1133 times in 373 different statutes!  The Our America team told me they counted over a thousand references in Federal code.  In other words, our law codes give -- in thousands of instances -- specific rights, responsibilities, and privileges to married couples who have access to a state-granted marriage license.  Those left out of the current unequal definition of marriage face any number of challenges imposed on them by these specifics of spousal rights and privileges embedded in our law code.  I call this the non-marriage penalty.

There is no way to rip all these references to marriage out of the law and tax code.  Likewise, there is no way to create an equable marriage alternative such as a civil union -- to do so, we would have to go through and rewrite 373 statutes to incorporate this terminology.   The fairest solution -- the one that most respects individual freedoms -- is to accept that such government licensing of marriage exists and then make it as open and as equal and as fair and as accessible as we possibly can.

Despite the title, I should make it clear that I oppose the proposed legislation in Arizona to allow warrant-less searches of  abortion clinics.  The stated justification for the law is to ensure safety and healthy conditions at clinics, but the law is transparently about harassing a particular type of business.

However,  I must admit I get some schadenfreude from this.  Supporters of the bill say that they are only extending the current standards applied to many other businesses, such as restaurants and bars, to abortion clinics.

Regulators from OSHA to the health department have tremendous powers to barge into private businesses and conduct searches without a warrant, whatever the text of the Fourth Amendment might say.  They justify this with licensing regimes that require these businesses to have state licenses, and then require businesses accept these extra-Constitutional searches as a prerequisite for the license.

I have opposed these licensing regimes for years, in part because the consumer protection justification is often a sham -- what they really want is to be able to exercise control of private businesses.  In some cases, these laws are used to protect incumbents.  In some cases (e.g. here) they are used to try to shut down the entire (legal) industry.

Statists on the Left have generally poo-pooed these concerns.  Their typical response is that businesses are just whining, and that only those in violation of the law have something to fear.  Now, they suddenly are recognizing that an unannounced search per se is threatening.

Update:  I find abortion proponents on the Left to be among the worst examples of faux libertarians.  They claim their issue is about choice regarding one's body, but then tend to simultaneously support all kinds of government interventions in personal medical decision-making.  They are all for the sanctity of private property when there is an abortion clinic on the site;  not so much otherwise.

I am simply exhausted with Paul Krugman calling people anti-science neanderthals for staking out fairly mainstream economic positions that he himself has held in the past.  It would be one thing to say, "well, I used to believe the same thing but I changed my mind because x, y, z".  That would be a statement to respect.  Instead Krugman 1) pretends he never said any such thing and 2) acts like his opponent's position is so out of the mainstream that they are some sort of terrorist for even suggesting it.

I had an example just the other day.

Here is another, from Ben Domenech:

Yesterday, New York Times columnist and CUNY economics professor Paul Krugman had some very strong words about the position in Republican Congressman Paul Ryan’s new poverty report that American welfare programs discourage work and “actually reduce opportunity, creating a poverty trap.”  In fact, after contrasting the Ryan report’s view on poverty traps with some data on inequality and welfare states, Krugman resoundingly concluded that Ryan’s ideas were a total sham:

So the whole poverty trap line is a falsehood wrapped in a fallacy; the alleged facts about incentive effects are mostly wrong, and in any case the entire premise that work effort = social mobility is wrong.

Despite Krugman’s strong conclusions, however, Ryan’s views about US welfare policies and poverty traps are actually pretty mainstream – cited by people across the political spectrum as a big reason to reform state federal poverty programs.  In fact, a New York Times columnist and Princeton economics professor expressed these widely-held views on the Old Grey Lady’s pages a mere two months ago:

But our patchwork, uncoordinated system of antipoverty programs does have the effect of penalizing efforts by lower-income households to improve their position: the more they earn, the fewer benefits they can collect. In effect, these households face very high marginal tax rates. A large fraction, in some cases 80 cents or more, of each additional dollar they earn is clawed back by the government.”

Even more, the Ryan report’s “poverty trap” analysis is based on the work of the Urban Institute’s Gene Steuerle’s (see p. 7 of the Ryan report), on whom the very same Princeton professor once wrote:

[I]t’s actually a well-documented fact that effective marginal rates are highest, not on the superrich, but on workers toward the lower end of the scale. Why? Partly because of the payroll tax, but largely because of means-tested benefits that fade out as your income rises. Here’s a recent discussion by Eugene Steuerle…

That professor, if you haven’t already guessed, was none other than Paul Krugman. 

By the way, can I say how happy the first sentance of this quote makes me, to no longer see my alma mater mentioned in the same breath as Krguman at every turn?

Update:  If you want to understand how deep the fraud runs, make sure to watch the 60 second video below with the US environmentalists caught on tape plotting their fraud.

Via Bloomberg:

U.S. District Judge Lewis Kaplan in Manhattan said today that the second-largest U.S. oil company provided enough evidence that a 2011 judgment on behalf of rain forest dwellers in the country’s Lago Agrio area was secured by bribing a judge and ghostwriting court documents. Kaplan oversaw a seven-week nonjury trial over Chevron’s allegations.

“The decision in the Lago Agrio case was obtained by corrupt means,” Kaplan said in an opinion that gave Chevron a sweeping victory. “The defendants here may not be allowed to benefit from that in any way.”

Chevron, based in San Ramon, California, was ordered to pay $19 billion to a group of farmers and fishermen by the Ecuadorean court. The award was reduced to $9.5 billion on Nov. 12 by the Ecuadorean National Court of Justice, the nation’s highest tribunal. That's almost half of its 2013 profit.

The Ecuadorean villagers, and activists working on their behalf, argued the oil producer should be held financially responsible for pollution of the Amazon rainforest by Texaco Inc. from the 1960s through the early 1990s. Chevron, which bought Texaco in 2001, claims the company already paid $40 million to clean up its share of the drilling contamination....

In its racketeering case before Kaplan, Chevron alleged that a U.S. lawyer leading the Ecuadoreans, Steven Donziger, and members of his team engaged in “repeated acts of fraud, bribery, money laundering” and obstruction of justice in pursuit of a multibillion-dollar payout.

I don't think there is any doubt that Chevron owed the Ecuadorans some clean up, since even they have agreed to doing work there.  And it is not unreasonable to be skeptical that Chevron's actions were perhaps incomplete.  But the $19 billion judgement always has smelled, particularly when the judge in the Ecuadoran case publicly admitted he had been bribed.

There was deep corruption in this case from the start, corruption that never will be adequately covered in the media because it "was for a good cause."  Similar levels of corruption by Chevron would have led the front page of the New York Times for weeks.

As a reminder, let me quote from an earlier story.  Please watch the short video, it is amazing:

The clip below is an outtake from the environmentalist movie "Crude", which purported to document the environmentalist's case against Chevron in Ecuador.  Apparently, between takes of earnest and un-selfinterested environmentalists saving the world from greedy corporations, these self-same environmentalists discussed lying about the science and duping the courts in order to score a big payday for themselves.

The video is doubly interesting because, as Anthony Watts explains, the woman in the video taking money to make up untrue findings was recently confirmed to the NAS, where there is a good bet that we will see her as the source for "evidence" that fracking is contaminating groundwater.  These three folks are all the subject of a civil suit from Chevron but all three should be subject to criminal charges for fraud and conspiracy.

Several of the environmentalists involved, including Dr. Ann Maest, have since recanted their corruption, sort of.  They claim they were "misled" in this New York Times story, but the clip above certainly belies that.  Donziger did not mislead her, he is seen convincing her that in Ecuador they can get away with lying.  All for a good cause, of course.

Dispatches from the echo chamber:  Mother Jones was on this story full force for years.  Then suddenly stopped reporting at all when it became clear that allegations of fraud were credible.  Check out the articles.

Update:  More here

Former Arizona State Parks director Ken Travous takes to the editorial page of our local paper to criticize current park management and the Arizona legislature for not sending enough money to parks"

Things were looking pretty good, and I guess that’s the problem. In some odd kind of way, employing some type of sideways logic, the Legislature deemed that if State Parks is getting along well, it must be out of our control. So, after 15 years of parks acting like a business, the Legislature decided to act like a government and take their money. A little bit here and there in the beginning, to test the public reaction, and then in breathtaking swaths.

Heritage Fund ... gone. Enhancement fund ... swiped. General fund? No way. A $250,000 bequest? Oops, they caught us; better put it back.

State Parks now has a mountainous backlog of maintenance projects all because the Legislature would rather wholly own a failure than share a success. We need to put people in the halls that care about those things that we want our children to enjoy, and a governor who will stand in the breach when the next onslaught appears.

I agree with Travous that our parks could use some more funds.  But what Mr. Travous ignores is that the seeds of this problem were very much sown on his watch.

Travous points out that revenues in the parks expanded to nearly $10 million when he was in charge.  But left unsaid is that at the same time agency expenses on his watch ballooned to a preposterous $33 million a year**.  At every turn, Travous made decisions that increased the agency's costs.  For example, park rangers were all given law enforcement certifications, substantially increasing their pay and putting them all into the much more expensive law enforcement pension fund.  There is little evidence this was necessary -- Arizona parks generally are not hotbeds of crime -- but it did infuriate many customers as some rangers focused more on citation-writing than customer service.  There is a reason McDonald's doesn't write citations in their own parking lot.

What Mr. Travous fails to mention is that the parks were falling apart on his watch - even with these huge budgets - because he tended to spend money on just about anything other than maintaining current infrastructure.  Infrastructure maintenance is not sexy, and sexy projects like the Kartchner Caverns development (it is a gorgeous park) always seem to win out in government budgeting.  You can see why in this editorial -- Kartcher is his legacy, whereas bathroom maintenance is next to invisible.  I know deferred maintenance was accumulating during his tenure because Arizona State Parks itself used to say so.  Way back in 2009 I saw a book Arizona State Parks used with legislators.  It showed pictures of deteriorating parks, with notes that many of these locations had not been properly maintained for a decade.  The current management inherited this problem from previous leaders like Travous, it did not create it.

So where were those huge budgets going, if not to maintenance?  Well, for one, Travous oversaw a crazy expansion of the state parks headquarters staff.    When he left, there were about 150 people (possibly more, it is hard to count) on the parks headquarters staff.  This is almost the same number of full-time employees that were actually in the field maintaining parks.  As a comparison, our company runs public parks and campgrounds very similar to those in Arizona State Parks and we serve about the same number of visitors -- but we have only 1.5 people in headquarters, allowing us to put our resources on the ground in parks serving customers and performing maintenance.  None of the 100+ parks we operate have the same deferred maintenance problems that Arizona State Parks have, despite operating with less than a third of the budget that Travous had in his heyday.

I am not much of a political analyst, but my reading is that the legislature cut park funds because it lost confidence in the ability of Arizona State Parks to manage itself.   Did they really need to cut, say, $250,000 from parks to close a billion dollar budget hole?  Arizona State Parks had its budgets cut because the legislature did not think it was acting fiscally prudent, like cutting off a child's allowance after he has shown bad judgement.

I have met with current Director Bryan Martyn and much of the Arizona State Park staff.  Ken Travous is not telling them anything they do not know.  Of course they would like more funds to fix up their parks.  But they understand that before they can expect any such largess, they need to prove that Arizona State Parks will use its funds in a fiscally sensible manner.  And I get the impression that they are succeeding, that the legislature is gaining confidence in this agency.  The irony is that  Arizona State Parks will be able to grow and get more funds only when it has overcome the problems Travous left for them.

 ** Footnote:  Getting an actual budget number for ASP is an arduous task.  I once talked to a very smart local consultant named Grady Gammage who worked with parks and finally despaired of accurately laying out the budget and allocating it to tasks.  What this achieves is that it allows insiders to criticize anyone they want as being "misinformed" because almost any number one picks is wrong.   The $33 million figure comes from outside consulting reports.  The headcount numbers come from numbers the ASP information officer gave me several years ago.  Headcount numbers are different today but the ones above are relevant to the agency as it existed when Travous left.

The new Bank of America building near me has all kinds of plaques inside about how it is LEED certified.  How?  Well, I don't know the whole plan, but out front there are four reserved parking spaces for electric vehicles.  There are not any charging stations mind you -- those might cost money -- just parking spots for electric vehicles, right next to the handicapped spots.  LEED is a points based system and you can score a lot of points doing mindless, useless, zero-value stuff like this.

So I am not at all surprised to read this:

Washington, D.C. may have the highest number of certified green buildings in the country, but research by  Environmental Policy Alliance suggests it might not be doing much good.

The free-market group analyzed the first round of energy usage data released by city officials Friday and found that large, privately-owned buildings that received the green energy certification Leadership in Energy Design (LEED) actually use more energy than buildings that didn’t receive this green stamp of approval.

LEED is the brainchild of the U.S. Green Building Council (USGBC), a private environmental group.

Washington, D.C.’s Department of Environment made the capital the first city in the nation to mandate LEED certifications in the construction of public buildings. The standards are now being phased in.

The results are measured in EUI’s, a unit that relates a building’s energy consumption to its size; the higher the number, the more energy is expended by a smaller building.

Take the Green Building Council’s Washington headquarters. Replete with the group’s top green-energy accolade, the platinum LEED certification, the USGBC’s main base comes in at 236 EUI. The average EUI for uncertified buildings in the capital? Just 199.

Certified buildings’ average comes in at 205 EUI, still less efficient than that didn’t take home the ultimate green trophy.

“LEED certification is little more than a fancy plaque displayed by these ‘green’ buildings,” charged Anastasia Swearingen, LEED Exposed’s lead researcher on the project. “Previous analyses of energy use by LEED-certified buildings have consistently shown that LEED ratings have no bearing on actual energy efficiency.”

Hilariously, the problem cited with the certification program by government regulators is not that it is ineffective - after all, they can't admit that after requiring LEED certification in DC buildings.  Their only problem is that it is a private program outside of government control.  I am sure the folks who gave hundreds of millions to Solyndra would do much better managing the program.

The problem with LEED is the same problem that many ISO 9000 programs had -- it puts too much emphasis on process an inputs, and not enough on results.

Postscript:  One wonders why if there is a perfectly good "output" metric like EUI why people even bother with input-based systems like LEED.  If the government really wants to regulate here, the lightest touch would be to require architects and builders to estimate EUI of buildings for clients.  Then the owners themselves can decide if they are comfortable with their potential energy bills or want so more design work.

The US Justice Department is using decades-old anti-discrimination law to stop poor black families from escaping crappy schools via a school choice program.  The awesome Clint Bolick of Goldwater has the details:

Despite reports of compromise or capitulation, the U.S. Justice Department is continuing its legal assault on the Louisiana school-voucher program—wielding a 40-year-old court order against racial discrimination to stymie the aspirations of black parents to get their children the best education.

The Louisiana Scholarship Program began in 2012. It provides full-tuition scholarships to children from families with incomes below 250% of the poverty level, whose children were assigned to public schools rated C, D or F by the state, or who were enrolling in kindergarten. In the current year, 12,000 children applied for scholarships and nearly 5,000 are using them to attend private schools. Roughly 90% are used by black children.

Parental satisfaction is off the charts. A 2013 survey by the Louisiana chapter of the Black Alliance for Educational Options, a national school-choice organization, found that 93.6% of scholarship families are pleased with their children's academic progress and 99.3% believe the schools are safe—a far cry from the dismal public schools to which the children were previously consigned.

But last August, the Justice Department filed a motion to enjoin the program in dozens of school districts that still have desegregation orders from generations ago. It claimed that any change in racial composition would violate the orders. After a tremendous public backlash, Justice withdrew its motion for an injunction, insisting it did not intend to remove kids from the program....

In fact, the children are very much in danger of losing their opportunities. The Justice Department is demanding detailed annual information, including the racial composition of the public schools the voucher students are leaving and the private and parochial schools the students are selecting. If it objects to the award of individual vouchers based on those statistics, the department will challenge them.

If I had to make a list of the top 10 things we could do to actually help African-American families (as opposed to the garbage programs in place now to supposedly help them), #1 would be decriminalization of narcotics and in general stopping the incarceration of black youth for non-violent victim-less offenses.  But #2 would be school choice programs like the one in Louisiana.

PS- I am thinking about what the rest of the top 10 list would be.  #3 would likely be putting real teeth in police department accountability programs, as I think that police departments tend to be the last bastions of true institutionalized racial discrimination.  #4 might be some sort of starter wage program that gives a lower minimum wage for long-term unemployed.  If I weren't a pacifist and committed to free speech and association, I might say #5 was shutting down half the supposed advocacy groups that claim to be working for the benefit of African-Americans but instead merely lock them into dependency.

California is about to implement a new climate tax via a cap and trade system, where revenues from the tax are supposed to be dedicated to carbon reduction projects.  Forget for a moment all my concerns with climate dangers being overhyped, or the practical problems (read cronyism) inherent in a cap-and-trade system vs. a straight carbon tax.  There is one improvement California can and should make to this system.

Anyone who can remember the history of the tobacco settlement will know that the theory of that settlement was that the funds were needed to pay for additional medical expenses driven by smoking.  Well, about zero of these funds actually went to health care or even to smoking reduction programs  (smoking reduction programs turn out to be fiscally irresponsible for states, since they lead to reduced tax revenues from tobacco taxes).  These funds just became a general slush fund for legislators.   Some states (New York among them, if I remember correctly), spent the entire 20 year windfall in one year to close budget gaps.

If California is serious that these new taxes on energy should go to carbon reduction programs, then these programs need to be scored by a neutral body as to their cost per ton of CO2 reduction.  I may think the program misguided, but given that it exists, it might as well be run in a scientific manner, right?  I would really prefer that there be a legislated hurdle rate, e.g. all programs must have a cost per ton reduction of $45 of less -- or whatever.  But even publishing scores in a transparent way would help.

This would, for example, likely highlight what a terrible investment this would be in reducing CO2.

From an entirely unexpected quarter, comes a story of the shortcomings of computer modelling, in this case in the America's cup.  It is a great example of how models reflect the biases of their authors.  In this case, the author assumed that the fastest upwind path was the shortest path (ie with the shallowest possible tacks).  It turns out that with the changing technology of boats, particularly the hydrofoil, a longer but higher velocity path was more optimal, but the model refused to consider that solution because it was programmed not to.

Please check out my Forbes post today.  Here is how it begins:

Last night, the accumulated years of being called an evil-Koch-funded-anti-science-tobacco-lawyer-Holocaust-Denier finally caught up with me.  I wrote something like 3000 words of indignation about climate alarmists corrupting the very definition of science by declaring their work “settled”, answering difficult scientific questions with the equivalent of voting, and telling everyone the way to be pro-science is to listen to self-designated authorities and shut up.  I looked at the draft this morning and while I agreed with everything written, I decided not to publish a whiny ode of victimization.  There are plenty of those floating around already.

And then, out of the blue, I received an email from a stranger.  Last year I had helped to sponsor a proposal to legalize gay marriage in Arizona.  I was doing some outreach to folks in the libertarian community who had no problem with gay marriage (after all, they are libertarians) but were concerned that marriage licensing should not be a government activity at all and were therefore lukewarm about our proposition.  I suppose I could have called them bigots, or homophobic, or in the pay of Big Hetero — but instead I gathered and presented data on the number of different laws, such as inheritance, where rights and privileges were tied to marriage.  I argued that the government was already deeply involved with marriage, and fairness therefore demanded that more people have access to these rights and privileges.  Just yesterday I had a reader send me an email that said, simply, “you changed my mind on gay marriage.”  It made my day.  If only climate discussion could work this way.

So I decided the right way to drive change in the climate debate is not to rant about it but instead to continue to model what I consider good behavior — fact-based discussion and a recognition that reasonable people can disagree without that disagreement implying one or the other has evil intentions or is mean-spirited.

This analysis was originally published about 8 years ago, and there is no longer an online version.  So for fun, I thought I would reproduce my original thought experiment on climate models that led me to the climate dark side.

I have been flattered over time that folks like Matt Ridley have picked up on bits and pieces of this analysis.  See it all here.

Apparently it is some kind of amazing new insight or quasi-scandal that the Fed seems to care more about inflation than unemployment, at least as measured by the language of its meeting notes.

Call me crazy, but the Fed's job is to manage the currency and money supply, not to manage employment or the broader economy.  I have always assumed that it was understood by all that keeping the value of money stable (ie fighting inflation) was the Fed's priority ahead of other economic issues.  What am I missing here?

via Maggies Farm

In addition, some smart people are saying the WhatsApp acquisition for a bazillion dollars makes sense, but I can't help feeling like it is the late 90's all over again.

update:  Apparently unlike most all other major online advertisers, Facebook terms and conditions do not allow 3rd party click audits.

The only reason people like Michael Moore or Tom Harkin can get away with singing praises of Cuban socialism is because most Americans can't go visit and see for themselves.  By keeping Cuba off-limits, we are doing the communists' work for them by allowing them to provide cherry-picked videos and stories through useful idiots that have zero bearing on the true life of the average person in Cuba.

When I was in high school, there was a dating ritual in which the guy (ie me) went to pick up the girl at the girl's house.  The girl was never ready, so the guy was forced into an awkward (particularly on the first date) conversation with the girl's dad.

Apparently, this sort of dating ritual is gone, at least at our school and in my family.  As my daughter gets closer and closer to leaving high school, it finally struck me last night that I may never get to enjoy the payback of being the "dad" in this ritual.  And I was all ready, too.  I never use my shotgun any more but I keep it around solely in the hope of having it out on the table for cleaning when my daughter's date comes over.  Now I fear I will be denied this small joy.

(Of course, the fact that I have communicated my fantasy of cleaning my shotgun on my kitchen table when my daughter's dates come over may have something to do with my daughter structuring her social life such that boys never come over.  Corollary to Heisenberg:  You cannot discuss a fantasy without disturbing it).

We have never really been able to look at trees as the agricultural crop that they are.  I am reminded of this fact from this forest watch site at Google, which purports to track deforestation around the world.

I have no problem calling activity in the Amazon where old growth is logged out in a tragedy of the commons "deforestation".  But the map is odd to me in the Southeast US.  While there likely is some reduction in forested lands around urban areas, overall the US has actually been increasing its forest cover since the early 1900's.  But the Google map of the southeast shows lots of forest "loss".  It also shows about as much forest "gain". (red is loss, blue is gain, click to enlarge)

Why is that?

Of late, I have spent a lot of time in the southeast and what I have observed are a lot of private forest lands that are harvested for timber.  One plot is harvested one year, and fast growing trees are replanted.  Then the next year a neighboring plot is harvest, etc, until it all starts over with the first plot.  In a large sense this is no different than any other kind of farming, just with a 15 year growing season instead of a one-summer season.

Calling harvested lands in this area "forest loss" and new growth "forest gain" makes about as much sense as calling land held fallow for a season in Iowa as "corn loss" and newly planted land as "corn gain."  There is a difference  between farming trees and strip-mining them that gets lost in this data.

My new column is up at Forbes.com, and asks why we fetishize capital gains over regular income

Let's consider two investors.  Investor A buys a piece of land and builds a campground on it, intending to run the campground for decades.  Investor A gets her return on investment from the profits each year running the campground, profits that are taxed as regular income  (Full disclosure:  In my business life, I am essentially investor A).

On the other hand, Investor B buys the same piece of land and builds the same campground on it, but in about a year Investor B sells the newly developed facility, making a profit on the sale over his original investment.  Investor B likely will pay taxes on this gain at reduced capital gains tax rates.

But why?  When Investor B sold the property, the price he got was probably something like the present value of the expected cash flows from operating the campground.   Both Investor A and B created essentially the same value., but Investor B took the value as a single lump sum rather than as a stream of income over time.  Why is Investor B's approach preferred in the tax code?  Or, stated another way, why does the tax code favor asset flipping over long-term operations?

I guess I never really paid much attention to how the Obamacare "risk corridors" work.  These are the reinsurance program that were meant to equalize the risks of various insurers in the exchanges -- but as exchange customers prove to be less healthy than predicted, they are more likely to become a government subsidy program for insurers.

I never knew how they worked.  Check out the incentives here:

According to the text of Obamacare, the health law's risk corridors—the insurance industry backstop that’s been dubbed a bailout—are only supposed to last through 2016. For the first three years of the exchanges, insurers who spend 3 percent more on health costs than expected will be reimbursed by the federal government. It’s symmetrical, so insurers who spend less will pay in, but there’s no requirement that the program be revenue neutral

So what, exactly, are the incentives for cost control?  If you lose control of your costs, the government simply pays for the amount you overspent.  Combine this with the fact that Obamacare puts caps on insurer non-patient-cost overhead spending, and I don't think you are going to see a lot of passion for claims management and reduction.  Note after a point, excess claims do not hurt profits (via the risk corridor) but more money spent on claims reduction and management does reduce profits (due to the overhead caps).

Nice incentives.

Postscript:  There is one flaw with my analysis -- 3% is a LOT of money, at least historically, for health insurers.  Why?  Because their margins are so thin.  I know this will come as a surprise with all the Obama demonization of insurance profits, but health insurers make something like 3-5% of revenues as net income.  My Boston mother-in-law, who is a very reliable gauge of opinion on the Left, thinks I am lying to her when I say this, even when I show her the Google finance pages for insurers, so convinced is she by the NYT and PBS that health insurer profits consume a huge portion of health care spending.

All that being said, I am pretty sure if I were an insurer, I could raise prices slightly, cut back on claims overhead, and make a guaranteed profit all while the government absorbs larger and larger losses.

Looking at this map of state licensing regimes (darker is more onerous, with AZ being the worst), it is hard to correlate with states being Republican or Democrat.  That doesn't surprise me, because I have always thought the urge to restrict competition and protect incumbents has always been a bipartisan enterprise.

So I sat and thought for a minute about my home state of AZ.  Why is it the worst?  We have a pretty good libertarian history here, from Goldwater onwards.  We have at least one fairly libertarian Senator (Jeff Flake).  So what is the deal?

My hypothesis is that it is related to immigration.  The same majority Republican legislators who are generally open to free markets simultaneously have an incredible fear and loathing of immigration.  Perhaps our onerous business licensing regime is driven by nativists wanting to protect themselves from competition by new immigrants, immigrants who would struggle to compete onerous licensing requirements?

So what does this map look like vs. immigrant population density?  Via Wikipedia, here are the states on density of Hispanics

Hmm, we might be getting somewhere, but its not a perfect fit.  So instead, let's hypothesize that business licensing is aimed at non-white, non-hispanic groups in general (similar to early justifications for the minimum wage as a way to keep black workers migrating from the south out of traditionally "white" jobs).  I cannot get it by state, but the map below by county looks pretty dang similar to the licensing map.  Areas in blue have above average percent of non-whites, red is below average.

Not a perfect fit certainly (one would expect Texas to be more onerous), but perhaps close enough to treat the hypothesis seriously.  I had always thought that I would be the last one to play the race card in a policy analysis, but business licensing tends to have an inherently base motive (protect one group from competition from another group) that is pretty easy to square with racial and ethnic fear.

Here is the problem:  There exists a highly dynamic, multi- multi- variable system.  One input is changed.  How much, and in what ways, did that change affect the system?

Here are two examples:

• The government makes a trillion dollars in deficit spending to try to boost the economy.  Did it do so?  By how much? (This Reason article got me thinking about it)
• Man's actions increase the amount of CO2 in the atmosphere.  We are fairly confident that this has some warming effect, but how how much?  There are big policy differences between the response to a lot and a little.

The difficulty, of course, is that there is no way to do a controlled study, and while one's studied variable is changing, so are thousands, even millions of others.  These two examples have a number of things in common:

• We know feedbacks play a large role in the answer, but the system is so hard to pin down that we are not even sure of the sign, much less the magnitude, of the feedback.  Do positive feedbacks such as ice melting and cloud formation multiply CO2 warming many times, or is warming offset by negative feedback from things like cloud formation?  Similarly in the economy, does deficit spending get multiplied many times as the money gets respent over and over, or is it offset by declines in other categories of spending like business investment?
• In both examples, we have recent cases where the system has not behaved as expected (at least by some).  The economy remained at best flat after the recent stimulus.  We have not seen global temperatures increase for 15-20 years despite a lot of CO2 prodcution.  Are these evidence that the hypothesized relationship between cause and effect does not exist (or is small), or simply evidence that other effects independently drove the system in the opposite direction such that, for example, the economy would have been even worse without the stimulus or the world would have cooled without CO2 additions.
• In both examples, we use computer models not only to predict the future, but to explain the past.  When the government said that the stimulus had worked, they did so based on a computer model whose core assumptions were that stimulus works.  In both fields, we get this sort of circular proof, with the output of computer models that assume a causal relationship being used to prove the causal relationship

So, for those of you who may think that we are at the end of math (or science), here is a class of problem that is clearly, just from these two examples, enormously important.  And we cannot solve it -- we can't even come close, despite the hubris of Paul Krugman or Michael Mann who may argue differently.    We are explaining fire with Phlogiston.

I have no idea where the solution lies.  Perhaps all we can hope for is a Goedel to tell us the problem is impossible to solve so stop trying.  Perhaps the seeds of a solution exist but they are buried in another discipline (God knows the climate science field often lacks even the most basic connection to math and statistics knowledge).

Maybe I am missing something, but who is even working on this?  By "working on it" I do not mean trying to build incrementally "better" economics or climate models.  Plenty of folks doing that.  But who is working on new approaches to tease out relationships in complex multi-variable systems?

here.

It used to be that updates of software products were something to look forward to.  I used to be a bleeding edge guy who, like as not, was using beta versions of most software.  Now I avoid updates and upgrades like the plague, particularly since companies like Apple make it virtually impossible to roll back any software update.  The four products that have scared me off of upgrades altogether are:

• Windows 7 to Windows 8
• Old versions of Office to the new versions with the stupid toolbars rather than menus where I still can't find what I want all the time.  On a bunch of my computers I still use Office 2002 and 2003 and it works just fine.
• Most all itunes updates, particularly 10 to 11 which has done nothing but make critical options harder to find and make the platform, at least on Windows, less stable.  I am told people are having major difficulty with the 11.3 to 11.4 update
• iOS 6 to iOS 7, which decreased battery life without adding any real user features.  So glad I still have not upgraded, though I am sure I will have to soon.

And don't even get me started on software like windows 8 and most of the recent Adobe products that require some sort of user login to even use the product at all.