The Vice President today commended the new owners of Republic Windows and Doors, a Chicago window manufacturing plant that was shuttered late last year, resulting in the lay-off of its 250 union workers. Republic was purchased in bankruptcy court last week by Serious Materials, a California-based company that makes energy efficient windows. Serious Materials has announced plans to reopen the Republic factory and to eventually rehire all 250 of its laid-off workers at their former pay levels. Serious Materials said it purchased Republic because the Recovery Act will increase demand for its products.

That which is not seen: The jobs lost elsewhere in the economy because of: higher taxes, crowding out of private investment by government deficits, entrepreneurial paralysis in the midst of never-ending and always-changing regulation, rent-seeking, government waste, political corruption, and the perpetual font of self-congratulatory hubris from politicians, bureaucrats, their pundit apologists, and all the other central-planning fetishists.

Enjoy the windows…

Previously:
–Maybe We'll Be Really Fortunate and Mount St. Helens Will Erupt
–Obama's Broken Window Fallacy

GEORGE: When did you leave the message?

GEORGE: Will that be cash, or check?

–Seinfeld, "The Kiss Hello"

More absurd blather from one of my favorite recurring Kip's Law exemplars, New York Times' "Ethicist" Randy Cohen:

Q: A few hours before a dentist appointment, I had to cancel because my baby sitter was ill. The dentist charged me $25 for canceling within 24 hours. Days later, just two hours before my rescheduled appointment, the dentist’s office called: because of an emergency, my appointment had to be rescheduled. This is hypocrisy on their part, but should I accept that "policy is policy" or demand "an eye for an eye?"
…
A: For a precept to be fair, it must apply no matter who transgresses. Here this means that whether dentist or patient cancels at the last moment, the same penalty should apply.

This is, of course, utter nonsense.

Cohen's argument collapses after just three words. "Precept" is an insolent gobbledygook term that drops all context entirely — which Cohen must of course do in order for his strained conclusion to appear viable.

It is entirely correct (and entirely libertarian) to say that, "for a law to be fair, it must apply no matter who transgresses." But Cohen can't use the word "law," because no law is at issue. The scenario is simply a mundane contract — an entirely voluntary agreement between two competent consenting adults.

Cohen, realizing the inherent ludicrousness of his argument, decides to proceed anyway and embrace the absurdity:

That you could, of course, find a different dentist does not justify an asymmetrical, and hence unjust, rule.

But of course, the voluntary nature of the contract most definitely does justify the asymmetrical "rule" (another gobbledygook term meant to overstate the issue — contracts don't have "rules," they have terms). But Cohen's argument would lose its luster and drama if he tried to blast an "unjust term," which is of course an oxymoron in the context of a voluntary contract anyway.

One more time: Any voluntary contract among competent consenting adults is, by definition, "fair." This is true for the simple reason that the only legitimate context by which "fair" can be measured is the subjective evaluation of the parties to the contract.

Just as all tastes and preferences are subjective, so too are all standards of contractual fairness. The fact that a third party might consider the contract "unfair" is utterly irrelevant beyond the choice not to enter the contract herself.

That rule applies — or in a sane society ought to apply — not only to a single third party observer (such as you, me, or Randy Cohen), but also to any number of third parties, no matter how large, as well as to the legislators whom they elect.

Democracy should be more than two wolves and a sheep voting on whether a dentist is being "asymmetrically unjust."

Kip's Law: Every advocate of central planning always — always — envisions himself as the central planner.

—

As an aside, Cohen appends an economic efficiency argument to try to defend his preposterous assertion that all asymmetrical contracts are inherently "unjust" —

To cancel precipitously can harm, or at least inconvenience, another person. If you do it, the dentist might miss an opportunity to treat another patient. If the dentist does it, you can lose the baby sitter’s fee or the chance to make other plans. The $25 charge both compensates for and, even more, deters the unwanted conduct.

This is a common fallacy often invoked to rail against adhesion contracts. In fact, such contracts — asymmetrical or otherwise — are highly efficient and reduce transaction costs for all who enter into them.

How much more expensive would a cruise or airline flight be if the carrier had to draft separate contracts with each passenger? Would sophisticated software ever be developed if each EULA had to be individually negotiated? And would a trip to the dentist be more or less expensive if the dentist had to hire a full-time "contract drafter" to accommodate each patient's notions of "asymmetrical injustice"?

The single best way to achieve economic efficiency is simply to leave people alone to pursue it themselves.

Previously:
–We Killed Off Lochner for This?
–On Narcissistic Altruism

Landing at Kennedy Airport from Hong Kong was, as I've argued before, like going from the Jetsons to the Flintstones. The ugly, low-ceilinged arrival hall was cramped, and using a luggage cart cost $3. (Couldn't we at least supply foreign visitors with a free luggage cart, like other major airports in the world?) As I looked around at this dingy room, it reminded of somewhere I had been before. Then I remembered: It was the luggage hall in the old Hong Kong Kai Tak Airport. It closed in 1998.

The next day I went to Penn Station, where the escalators down to the tracks are so narrow that they seem to have been designed before suitcases were invented. The disgusting track-side platforms apparently have not been cleaned since World War II. I took the Acela, America's sorry excuse for a bullet train, from New York to Washington.

Remind me again who owns and operates JFK airport? Oh, right, the government.

Remind me again who owns and operates Penn Station? Oh right, the government.

Remind me again who owns and operates Amtrak? Oh right, the government.

But they'll make great cars. Don't you dare fret about that.

—

Actually, Friedman does the fretting for you:

For all these reasons, our present crisis is not just a financial meltdown crying out for a cash injection. We are in much deeper trouble. In fact, we as a country have become General Motors — as a result of our national drift. Look in the mirror: G.M. is us.

So it's okay for the brattish Friedman to whine that "G.M. is us" but not that "Amtrak is us?"

Consider: Has the role of government in the economy expanded or contracted over the period Friedman considers one of decline and neglect? Has there been ever more or ever less regulation over the past few decades (the ignorant screeches of the Moron Left about an imagined "laissez faire Wall Street" notwithstanding)?

As economic libertarianism continues to be disgracefully defamed by its opponents, the single best course of action to climb out of this muck — which would be best described as, "Don't just do something, stand there!" — is the one course of action that malcontents like Friedman will do everything in their power to block. Just watch.

I know the days are gone when attendants could be written up if we did not put the linen napkins with the T.W.A. logo embossed on them in the lower righthand corner of the first-class diners' trays. As are the days when there were three dinner options on flights from Boston to Los Angeles — in coach. When, once, stuck on a tarmac in Newark for four hours, a planeload of passengers got McDonald's hamburgers and fries courtesy of the airline.

I have experienced the decline of service along with the rest of the flying public. But I believe I have felt it more acutely because I remember the days when to fly was to soar. The airlines, and their employees, took pride in how their passengers were treated. A friend who flew for Pan Am and I have a friendly rivalry over which airline was better. Friendly, yes. But we each believe we worked for the best.

Of course, TWA and Pan Am are both long since bankrupt and liquidated. So that "friendly rivalry" over which was "better" (defined how, by whom and in what context?) is, quite frankly, absurdly oblivious.

And I suppose that retired flight attendants (who were, back then, selected solely on their physical appearance and automaton-style customer service abilities) ought be forgiven for their lack of understanding of the history of commercial air travel and the role of deregulation in it. But are they also necessarily entitled to proclaim their ignorance on the op-ed pages of the New York Times?

It's remarkable how quickly the term "jet set" entered into, and then vanished from, our cultural lexicon (cf., "space age"). Embroidered napkins and three options in coach came with a price — a price that made commercial air travel an unattainable fantasy for all but the wealthiest people. Flying at all in the 1950s and 1960s was almost the budgetary equivalent of flying by private jet today.

Recall also that the reason that airlines competed so fiercely about minutiae such as embroidered napkins was precisely because they couldn't compete on price — or, for that matter, on destination. Both fares and routes were completely controlled by the Civil Aeronautics Board. If two airlines are required, by law, to operate the same route at the same price, then how else can they compete except by trying to offer the fluffiest pillows and the friendliest (and sexiest) stewardesses?

Grumblings about checked bag fees and no meal offerings are, for the intellectually honest at least, strictly tongue-in-cheek. Most middle-class Americans are thrilled at the notion that they can fly across the country for a few hundred dollars and a bit of cattle-call manhandling. Beats spending a week on a train (and if it doesn't, then you can "soar" on Amtrak, thanks to neverending taxpayer subsidies to the train that no one rides).

Yes, the airlines should (and of course do) still compete on the customer service front. But fliers now can prioritize customer service as one of several variables (along with price, schedule, etc.) in deciding which airline is truly "better" (i.e., for them).

But let's keep a little historical, and economic, perspective. Pre-deregulated commercial air travel was not, as this retired flight attendant misremembers, "to soar." It was to watch others soar, while you most likely settled for other, more proletarian options. By government dictate.

Kip's Law: Every advocate of central planning always — always — envisions himself as the central planner.

Previously:
–On Airline "Competition" Real and Imagined
–The Politics of Pull Thrust
–Stitch in Haste Podcast #003

Mass layoffs produce big winners and losers. Most workers who remain are financially unscathed, even though their employer is struggling. Wages are actually expected to increase 3.5 percent in 2009. Those laid off are left with no salary and, because the job market is so brutal, risk losing their homes and being unable to put food on the table.
…
One way to reduce the need for layoffs would be to cut back on hours, spreading the available work among more employees. This was an idea that had considerable currency in the Great Depression. In 1933, the Senate passed a "30 Hour Bill" that would have barred from interstate commerce goods made by workers employed more than 30 hours a week. Its sponsor, Senator Hugo Black of Alabama, said the bill would create six million new jobs. It made no sense, he insisted, for some employees to work 70 hours a week "while others are driven into poverty and misery from unemployment."

This is, of course, utter nonsense.

Ignore the strictly consequentialist (and therefore totally irrelevant) observation that "spreading the misery" could actually be worse for the economy — if most people are, as we are relentlessly told, living paycheck-to-paycheck and suddenly find their paychecks cut severely, then wouldn't that lead to more delinquent mortgages, personal bankruptcies, etc., than mass layoffs would?

Focus instead on how Cohen falls into the trap of treating "employment" as a policy goal in and of itself. Cohen is forgetting that the purpose of "employment" is not simply to employ, but to produce goods and services that people are willing to purchase (or, in the case of government employment, to produce services that are legitimate functions of government in their own right).

Note also how Cohen abstracts away from what a job might or might not entail and treats "working" as a homogeneous, fungible good. Is "three employees working six hours each" always, or even often, the same as "two employees working nine hours each"? (And that's even before the idea of shutting entire facilities: Is "three plants running at two-thirds capacity" ever the same as "two plants running at full capacity"?)

The function of an employer — private or public — is not to employ people for the sake of employing people or to pay wages for the sake of paying wages. Neither is their function to "spread the work around" when circumstances change. The function of an employer is to satisfy needs and wants, preferably in the most efficient way possible (i.e., whichever way maximizes private profits or minimizes public tax burdens).

If the best way (i.e., for the employer and therefore the economy) to respond to changing circumstances is to reduce staffing, then so be it. Those who view at-will employment as an intolerable risk have other options.

Incidentally, is Cohen not aware of what happened to the last economy that embraced the notion of a "job for life"? Would the French model really be an improvement for us?

Speaking of jobs for life:

In the case of unionized workers, the unions would have to agree. But as we are seeing with the United Automobile Workers union — which is offering to accept concessions as part of the Big Three auto companies' plea for a federal bailout — many unions might prefer moderate pay cuts over job losses. For most nonunion workers, employers that want to avoid layoffs could act unilaterally to cut salaries.

Would this be the same UAW that created and defended to the end its so-called "jobs bank"? How did that idea work out, for Detroit and for the economy?

Kip's Law: Every advocate of central planning always — always — envisions himself as the central planner.

Through sheer coincidence, two entirely unrelated stories hit my aggregator on the same day, neither of which will be good news for fans of Nudge or of the notion of "libertarian paternalism."

ITEM: The flagship anecdote in Nudge is automatic enrollment of employees in an employer's 401(k) plan (i.e., requiring a reluctant employee to actively opt out of enrollment rather than requiring her to actively opt in). This proposal is of course not really "libertarian paternalism" in that it is not truly a "libertarian" issue one way or the other — an employer should be able to structure its compensation arrangements as it sees fit, and employees should be free to accept them or seek work elsewhere. Only government-imposed automatic enrollment would raise libertarian concerns, "paternalistic" or otherwise.

In any case, how's opt-in working out?

People who previously did not pay much attention to those automatic 401(k) investments may now take notice when they see the losses. … According to the Wall Street Journal, target funds for people expected to retire in 2010 varied from a loss of 32% to a loss of 14% through Oct. 30th.
…
Worse, people who did pay attention and made deliberate choices to tailor their 401(k) to their liking did not necessarily succeed in that goal. Employers can move all participants' savings into the default fund, on the ground that the investments were not appropriately diversified. Again, employees can opt out, but they don't always notice and take action.

The whole "libertarian paternalism" house of cards is built on the foundational premise that the paternalist actually knows what he's doing. How realistic is that premise turning out to be?

—

ITEM: Another key anecdote in Nudge is the concept of "presumed consent" in organ donation: the notion that most people are in fact perfectly willing to donate their organs, but for whatever reason don't bother to opt-in to such programs. So, libertarian paternalism apparently tells us, why not require people to opt out instead of opt in?

Maybe because people don't like the idea of their bodies being "presumed" to belong to the government?

Gordon Brown favours a change in the existing law which would see everyone in the UK considered a donor unless they ask to be removed from the donor register.

But the UK Organ Donation Taskforce, set up by the Government, opposes the move because it says there is no evidence the change would significantly increase the number of organs available.

Actually, the Taskforce says much more than that (PDF – 40 pages):

Running as a leitmotif throughout the Taskforce's discussions has been the issue of trust: in government, in the NHS and, to a lesser extent, in doctors and other clinical staff. The public have become less trusting and more questioning of authority over recent years. … Trust, however, is key to the success of the organ donation system in the UK. If public trust is shaken, organ donor numbers are likely to fall rapidly and could take many years to recover. The need to maintain the confidence of the public has been a key consideration in the Taskforce's deliberations.

Both these anecdotes reflect the same problem with "libertarian paternalism." Whatever flaws and foibles one ascribes to the public generally must also be applied to the paternalists: Are they really better at managing our retirement decisions or at ensuring that our wishes after death are actually respected? What does history tell us? (Previous post on the U.K. presumed consent proposal here.)

As a sidebar regarding organ donation: True libertarians (as opposed to "libertarian paternalists) recognize that the best way to eliminate organ shortages is to end the absurd, and lethal, proscription on open markets for organs. On that front, a major development has arisen, in the form of Singapore crafting a pilot program allowing for the payment of compensation (but apparently not profit) to donors of kidneys and eggs. This is huge and welcome news that will, hopefully, spread to other jurisdictions. Stay tuned. (Via Marginal Revolution.) One of several previous posts on organ markets here.

"There should be a moratorium on bonuses," Frank, a Massachusetts Democrat, told reporters yesterday in Washington. "They have a negative incentive effect because they are the ones that say if you take a risk and it pays off you get a big bonus," and if it causes losses "you don't lose anything."

Of course, that same "negative incentive effect" applies just as well — far better, in fact — to politicians. Play dice with the economy, with geopolitics, and of course with the Constitution. "And if it causes losses, you don't lose anything." Pot-kettle-black, anyone?

Incidentally:

The moratorium "ought to be for all firms" and not just for those eligible for the Treasury financial-rescue program, Frank said.

A gay man baselessly stereotyping and demonizing an entire group of people, while disregarding notions of "fair and equal treatment"? Behold the undisputed hero-in-chief of contemporary gay politics.

Just goes to show: Even gays can be corrupted by politics and end up as power-mad assholes. Megalomania knows no sexual orientation, and moral defective politicians — gay, straight or "undecided" — will use their power to (metaphorically) rape anyone, regardless of the politicians' or the victims' genders. People like Frank succumb to a different kind of degenerate lust: the lust to control other people's lives and livelihoods.

(Via Dealbreaker.)

Kip's Law: Every advocate of central planning always — always — envisions himself as the central planner.

Apparently I'm one of the lucky ones:

A third of U.S. flights travel through New York airspace, and flight cancellations and delays at area airports account for three-quarters of significant delays at airports across the country, according to the U.S. Transportation Department.

To manage the congestion, Bush administration officials have grudgingly maintained caps on the number of flights per hour at the three airports — Kennedy, La Guardia [sic] and Newark Liberty — and have even added new caps, though such measures run counter to the White House's pro-competition principles.

Capping the number, officials complain, hinders competition by preventing new, upstart airlines from entering the market, and existing airlines from expanding operations. To mitigate the impact of the caps, the administration is now proposing to auction off some takeoff and landing slots to the highest bidder.

So far, so good. Recall that the demand (i.e., by the airlines) for airport slots is what economists call "derived demand" — it is exclusively determined by the demand for something else: air travel by fliers.

A simple example: If more customers are willing to pay more money to fly from New York to Point A (e.g., Las Vegas) than from New York to Point B (e.g., Salt Lake City), then an airline will be more willing to pay more money to acquire slots to fly more planes between New York and Las Vegas than they would be willing to pay for slots to service Salt Lake City.

(Which, in turn, means more, bigger and fuller flights, which means lower average costs for the airlines, which can lead to lower ticket prices.)

By recognizing that slots are strictly a derived demand and allowing the airlines to competitively bid for them, the slots will be devoted to the most profitable routes — which is to say the most highly demanded routes. Which in turn is to say the routes that get the most people to the most places they most want to go.

Bottom line: Auctioning would result in the best possible allocation of routes, as determined by the people who are actually trying to fly.

What, do you suppose, are an activist legislator's and an airport bureaucrat's responses to this elementary economic reasoning?

"This is an ideological, untested experiment from those in an ivory tower," said [Senator Charles] Schumer, who has introduced a bill to block the auctions. "This misguided plan to sell slots to the highest bidder won't make anyone's plane take off faster. It will just cost consumers more to fly and throw La Guardia [sic], JFK and Newark into chaos."

Other critics say that only the largest airlines would have the funds to win the auctioned slots; that the costs would simply be passed on to consumers; and that the auctions would cause airlines to drop less-traveled routes.

"Airports have been viewed for years as an important public resource," said William DeCota, the director of aviation for the Port Authority. "Price is a very bad basis to allocate this scarce capacity."

You read that right: "Price is a very bad basis to allocate this scarce capacity." Because it would mean that airlines would — gasp! — "drop less-traveled routes."

Much better, of course, to leave the rationing to Senator Chuck E. Cheese and some unaccountable airport bureaucrat. Much better to let market-immune central planners decide that Salt Lake City "deserves" a certain number of slots, regardless of how many more customers would rather be flying to Las Vegas. Much better to pretend that airlines don't make money by satisfying customers but only by "exploiting" them. Much better to pretend that commercial air travel — commercial as in "commerce" — in which private parties pay private parties to provide private service — is somehow a "public resource."

Guess my next trip will have to be to Salt Lake City. After all, that's where the central planners think I should be going, regardless of what I might happen to think about the matter.

Kip's Law: Every advocate of central planning always — always — envisions himself as the central planner.

The privatization process also laid waste to jobs that, while low paid, provided good benefits, civil service protection, union representation, and self-respect. Those lost jobs represent costs, personal and public, tangible and intangible.

This gobbledygook mirrors the one I debunked in my government-financed (which is to say, politically controlled) scientific research post earlier today: It is simply not a legitimate function of government to provide jobs for the sake of jobs. Even if the Broken Window Fallacy somehow did not apply (i.e., how many jobs were destroyed by the unnecessarily high taxes that once funded these now-laid-waste jobs?), the purpose of government jobs ought to be to provide those services that are legitimate functions of government in their own right.

The purpose of a police force is not to employ auto mechanics, but to provide police protection. The purpose of a courtroom is not to employ janitors, but to provide justice. The purpose of a government job is not to foster "self-respect," but to perform a needed function for the taxpayers who fund that government job.

(Incidentally, how much "self-respect" actually comes from having a job that you know is only there to, um, give you a job?)

To summarize the thesis: The government should, in classic Broken Window Fallacy style, destroy private sector jobs in order to create ("low paid") bureaucracy positions that, while not necessarily legitimate functions of government — indeed, not necessarily "necessary" one way or the other — that might foster someone, somewhere, with some sense of (cognitively dissonant) "self-respect."

Splendid.

Kip's Law: Every advocate of central planning always — always — envisions himself as the central planner.

…and pizza?

"Pizzaioli" or pizza chefs in Naples, birthplace of the Margherita, handed out free pizzas on Wednesday in protest at high prices charged by rivals who, they say, use the spike in commodity prices to rip off consumers.
…
The group staged the protest in Piazza Dante to demand stricter price controls to defend the reputation of a traditional Neapolitan product which they said should be "the synthesis of quality and low cost."

Commodity prices, like fuel prices, have fallen back from record highs in the past month on worries about global consumer and business demand as the world economy heads into a slowdown. But retail prices have so far failed to reflect that trend.
…
Pizzaioli in Naples favor fixing the price of a slice at 3-3.50 euros ($4.40-$5.15) — when most pizza outlets charge a minimum of 4 euros and often nearly twice that much.

"In Naples and elsewhere in Italy that should be enough to cover costs and give a profit margin, without damaging quality," Sergio Miccu, president of the Association of Neapolitan Pizza Cooks, told Reuters.

Put aside the utterly bizarre nature of the pizzaioli's complaint: That their competitors are charging too much and should be forced to become more competitive. I think relevant facts about comparative quality are being omitted from the article.

In any event, these malcontent pizza peddlers are exhibiting a common, perhaps the most common, anti-capitalist fallacy: That the "correct" price of a good is merely the sum of its material inputs, perhaps enhanced by a "reasonable" profit. ("Reasonable" to be determined by politicians and bureaucrats, rather than by buyers and sellers.)

But in reality the only "correct" price for any good is whatever the customer is willing to pay and the producer is willing to offer. (That can of course be a range of prices rather than a single point, but that's a side issue.) So if Italians are willing to pay, say, four euros for a slice of pizza, and pizzeria owners are willing to sell pizza for four euros per slice, then four euros is by definition a "correct price." What other pizzeria owners, or Italian politicians, or you or I, happen to think about the matter is utterly irrelevant. We can express our indignation at the "excessive" price of Italian pizza by not buying any.

Entrepreneurship is a factor of production no less important (and arguably far more important) than land, labor or capital. "Profit" is a return to that factor of production no less legitimate than rent, wage or interest. Even in pizza, creativity, expertise, experimentation and risk taking are all ingredients no less real than dough, sauce and cheese. The capitalist earns his keep in no less valid a manner than his employees, landlord or suppliers.

The fact that the market does not do what you want it to do does not mean that there is a "market failure." And your dissatisfaction in no way gives you standing to demand that the market be "corrected."

Kip's Law: Every advocate of central planning always — always — envisions himself as the central planner.

Previously:
–The Cost of Nothing and the Value of…
–In Memoriam: Mr. Ramen Noodle
–"No Company is Above the Law…"
–Sunday CuteTuber™: "I Just Wanted Pizza…"