Monthly Archives: April 2016

Mixed Signals

Recycling as a concept is not a bad idea. It is in the execution where things go awry. A logical leap fallacy occurs when assuming that because the recycling of materials A-D makes sense it must mean also that the recycling of materials E-Z makes sense.

Generally speaking the recycling of metals and glass make economic sense because reuse involves less effort than production. Due to the chemical nature of plastics it is practically impossible to recycle them for their original application. And the whole notion of recycling paper to “save a tree” makes about as much sense as not eating tortillas in order to “save corn.” If paper weren’t being used, then tree farmers would not plant trees. Contrary to popular mythology paper does not come from old growth forests – it comes from tree farms. In fact an argument can be made that virgin paper is actually better for the environment than recycled paper. Trees remove carbon from the atmosphere. Recycling of paper just tosses that same carbon back and forth like pitcher to catcher; virgin paper use creates a steady withdrawal of carbon from the atmosphere.

How do we know when recycling is “good” vs just “feel good”? If money is offered or it’s something best not released into the environment are two key indicators. Sometimes those two things coincide as in the case of lead acid batteries. Recycling these batteries creates a “double-whammy” effect: you make money and protect the environment! Who could object to that? The EPA apparently. Read on.

Last year our company had to replace the lead-acid batteries in our corporate power back up system. We had to unload over a thousand pounds worth of them and I was not keen on just dumping them in the trash. Fortuitously enough I was able to locate a company not far from us in Watkinsville that would not only take them off our hands but also cut us a check for them. This provided an incentive for me to stockpile my own used lead-acid batteries at home. After about a year or so and a hundred pounds later I was ready to divest myself of these batteries. Unfortunately that local recycler was out of business. No problem I thought, there is a county recycling station not far on Highway 15. So I drove on over only to discover for some bizarre reason they are not open Tuesday or Thursday, and my luck being what it was, it was Thursday. Artificially constrained hours of operation accompanied by a gate for an open-air facility is truly puzzling. Are they afraid someone is going to steal the recyclables? Wouldn’t that be a good thing? Artificially constrained access encourages people to not even bother if they have to make a special trip vs simply taking care of it when most convenient.

However, it turns out the closure did not matter as they don’t accept lead-acid batteries. Ok, so does my curbside garbage service take them in their recycling? Nope. Ok, surely the county dump takes them! Everything ultimately ends up in the dump, right? It’s the trash bin of last resort. So I drove to the Oconee county dump only to be told, no, they can’t accept lead-acid batteries due to EPA restrictions. So, let me get this straight, the EPA, the organization charged with ensuring the environment is protected from harm has set up regulations that prohibit a DUMP from accepting a known environmentally harmful agent (lead) but then provides no alternative to the those trying to properly unburden themselves of this material? EPA “protection” creates a perverse incentive to improperly dispose of it in the general trash. The agent at the dump then suggested I try the local Autozone. Ultimately this is where I took them and they were all too happy to take them off my hands.

So in conclusion, a non-governmental entity, enticed by market forces, helped me do the right thing, whereas when I tried to do the right thing, government (local and federal) thwarted nearly every attempt to do so and actually incentivized me to do the wrong thing. The first rule of behavior modification is provide an easy, not obstructed, path toward the desired end.

False Equality

This year the so-called “Equal Pay Day” was April 12th. It’s “celebration” is a weak attempt at capitalizing on the notoriety of the entirely valid “Tax Freedom Day” (i.e. the day after which a country’s citizens get to keep all their income if they were theoretically taxed at 100% until their tax burden was satisfied). In 1900 in the United States Tax Freedom Day was January 22. Today it is April 24. We have lost a lot of freedom in the interim. Many real injuries to women’s right have been reversed in that same interim; however pay inequality has always been a phantom menace. Equal Pay Day is but a disingenuous mischaracterization of a statistical truth as proof of willful malfeasance.

Yes, if you lump all female workers together and all male workers together the females earn about 79% of what the men earn. But through willful blindness of the trees (different jobs) in observation of only the forest (aggregate salaries) this statistic fails to make the case that it is employer discrimination that robs women of their rightful earnings. To highlight this failing consider another similar statistics. Comparing workers below age 45 against those over age 45 we find a similar gap. Those 45 and under earn about 80% of those 45 and over.  Clearly there must be a bias toward paying older works more. Or consider not pay but rather work place fatalities. On average, for every female workplace fatality there are twelve men who perish.  Again, clearly this must be a sign of a negligent disregard for the safety of men in the workplace relative to women. Oh, what’s that you say? There are obvious reasons why an older worker would earn, on average, more than a younger worker? There are obvious reasons why more men would die in the workplace than women? True (to both), yet somehow the “obvious” reasons that would also contribute to a difference in aggregate pay between men and women are dismissed out of hand whenever issues of gender pay disparity are discussed. Why is that?

If one were to look at wages at a hypothetical hospital where all the men were doctors and all the women were nurses would it not be surprising that the women made less than the men in aggregate? In reality, when numbers are adjusted for age and education, women (pre-child birth) earn just as much if not more than men in several fields. The shift occurs as couples start to have children and women take on the traditional role of staying at home and raising children.  This means they leave the workforce (reducing earnings based experience) or take on lower paying, more time-flexible positions.

Now the strident feminists among us might actually agree and say it is this cultural “patriarchy” that must be changed – by force. I’m not sure what they would have us do though – have the government decide which parent must raise the children in order to keep the distribution of male/female stay-at-homers equal across society? Even though feminists may privately admit that culture is the real reason for this wage “gap”, publicly they persist in casting employers as the scapegoat. This stance though demonstrates a profound lack of understanding of basic economics. Unsurprisingly, the type of person who will loudly clamor for more government intervention in the workplace to ensure “fair” pay for women will also decry the “greed” of the employer in paying them less. The irony of that position is that if the wage gap were employer driven, their supposed vice (greed) would quickly neutralize it. A properly “greedy” employer would seek out every women they can find in order to achieve a 20% discount on their payroll. In turn the unemployment rate for women would be 0%. But of course it is not. This lack of 0% female (or any supposedly discriminated group for that matter) unemployment should put to rest the notion that discrimination is the proximate cause for such pseudo-pay disparities.

Honey I Shrunk the Seat!

Senator Chuck Schumer (D-NY) recently introduced an amendment to an FAA reauthorization bill that would have required the FAA to set minimum values for how narrow and close commercial airline seats may be. Fortunately, this amendment was rejected last week.  While those of us who have flown in recent years (and experienced firsthand the “Honey I Shrunk the Airplane Seat” phenomena) can all certainly sympathize with the goals of such legislation, it would nevertheless be a gross violation of the rights of the airlines to dictate how they may or may not utilize equipment THAT THEY OWN. Of course there already exists an ever-expanding regulatory framework that strangles other businesses similarly. So how is this any different? It’s not. And that’s what is so scary – it was rejected not on principal but rather because it was visible. Visible government intrusions send the wrong vibe to a supposedly freedom loving populace. But invisible intrusions go on every day and are of course perfectly fine. If the death penalty were required to take place in public it would be ended immediately; but when done behind closed doors the public in general couldn’t care less.

Such reflexive urges to regulate by those “in charge” of our lives are a predictable outcome of their glaring ignorance of basic economics. It is the usual story: government engages in Practice A which stealthily causes Harm B and so our great benefactors must now step in to save us from the very harm they caused in the first place. For example, the federal government, through its puppet the Federal Reserve, is constantly inflating the US dollar. This steadily erodes the value of said dollar until after many years the drips of annual inflation have carved a canyon of lost value. There are two ways to respond to this declining value: raise prices, or, maintain prices while reducing quantity/quality. For example, boxes of cereal now contain 15% less than they did only a few years ago but are marketed at the same price point. It is a surreptitious form of inflation that consumers don’t immediately recognize but is just as injurious to their buying power as is rising prices.

Competition has become so fierce that a game of chicken has ensued where no one wants to be the first to raise nominal prices. This has occurred with airlines as well. Although ticket prices may have risen or fluctuated with fuel prices, such prices are, all things equal, less than they otherwise would have been had seat sizes not shrunk. Getting 10-15% more seats on a plane means lower average cost for each flyer. It is simply a natural response to the incentives created by government interference in the economy (Fed money printing). Eventually seat sizes will decline to a level where ridership will drop off. At that point the industry will know they can go no lower. But that is how the market works; the feedback of profit and loss tells businesses if they are doing good or doing poorly. Top down regulations subvert that process and prevent the voice of the consumer from being heard.

Actually, progressives like Schumer should appreciate the spectrum of market prices engendered by this seating freedom. It incentivizes those who value comfort over money to pay ever-increasing prices for the larger seats. These higher prices can be used to subsidize other ticket classes thereby expanding fare access through lower prices or halting the size decline. By allowing consumers to vote with their dollars the market delivers what consumers, in aggregate, are willing to accept. While any single consumer may disagree with where that point is, it should no more be the right of a minority of consumers to dictate to all what they should be able to buy any more than a minority of busybody senators should be able to dictate to a nation how they may live their lives.

Policy by Prediction

Science is supposed to be the domain of testable (and thus falsifiable) claims the evidence for which is a body of empirical studies that have stood the scrutiny of reproducibility. With the advent of computers that method of science seems to be growing increasingly passé. Why, we don’t need to bother actually doing the grunt work of experimentation, we can just sit back, press a button and let a computer model tell us the results. Of course the fault lies not in our machines but in ourselves (with apologies to the Bard). Computers are but tools that make some of that grunt work easier. But computer models are not so infallible that their output should solely be relied upon. They are imperfect not due to some failing of the technology but rather because they can only do what we tell them, and we humans are far from perfect or omniscient.

The flaw in computer models is two-fold: assumptions and unknowns. Assumptions are made about the contributions of certain factors and those assumptions are often wrong or even if close to being right can still introduces tremendous variability in outcomes from small differences in input. Unknown unknowns are an even greater contributor to the phenomenon known as “garbage in – garbage out” of modeling. We can’t account for the contribution of something we don’t even know exists.

Models are supposed to be part of an iterative process where you do the actual experiment, compare the results to your model’s output and then modify your model. To test the model you then change some of the variables and see how well it holds up in comparison to “real world” results. But, as soon as a new variable is introduced or a new unknown comes into play, then the model’s usefulness must be called into question.

Now by this point you might think I’m going to delve into an indictment of the climate models poor record of prediction but actually I’d actually like to talk about nuts. Or rather how we should all expect the price of nuts along with a host of other crops (pistachios, almonds, soybeans, tobacco, peanuts, cotton, lettuce, alfalfa, tomatoes, watermelon and bell peppers) to increase in price in the coming years due to the EPA banning a pesticide known as flubendiamide.  EPA determined that flubendiamide could break down in the environment and potentially cause harm to a few aquatic species. Ok, sounds like some dangerous stuff, fair enough. But, it turns out this alleged harm is not based on empirical studies but is rather based on computer models that attempt to predict toxicology – “predictive toxicology” they call it. BayerCropScience, the manufacturer of flubendiamide, went on record stating that such models “exaggerate environmental risk.”  Well imagine that, a computer model overstates the likelihood of a deleterious outcome in order to justify governmental intrusion into the market. Although science cannot be manipulated to service political interests, models surely can – click, click, here comes the desired result.

This ultimately is the true danger of such models. It is one thing if scientists want to put all their faith in such models, the worst that can happen is that eventually someone is made to look the fool when actual empirical studies prove them wrong. However it is far more dangerous if the cart is pushing the public policy horse by having bureaucrats and our supposed intellectual superiors run our lives and then justify their actions by pointing at selectively funded model-based “research” that can be tweaked to magically provide an outcome that conforms with the policy prescriptions desired. All that is needed to shut down debate is to claim “it’s science” and that it is “settled.”