Oceans Yet to Burn — @argumate @collapsedsquid The thing I like about...

@argumate @collapsedsquid

The thing I like about the idea of mandatory safety insurance is that it introduces a new actor with new incentives into the problem.

Let us return to aircraft.

The State has determined that every airline company must carry two million dollars in insurance per passenger per flight, to be paid out in the event that the plane is destroyed and they die. It has set certain rules, for instance that the insurance company must be sufficiently well-capitalized and it can’t just waive paying out because the company did something stupid.

Executive Todd has plans to reduce the maintenance on Tumblr Airlines aircraft. He will be at the company for five years. There is a 90% chance that if he does this, there will be no crash, and he gets a million dollar bonus and leaves. There is a 10% chance that a plane will crash before he leaves and he’ll only have a personal fortune of ten million dollars and a mansion on Hawaii left, which he can retire to.

So Todd orders that the maintenance should be cut.

However, Blue Hellsite Insurance, Inc., Tumblr Airlines’ insurance company, depends for its funding entirely on carefully calculating risk and then charging a bit more than that, on an ongoing basis. To do so, as part of their contract (and thanks to provisions passed in law by the State), they can set insurance agents out to inspect processes, planes, and so on.

BHI’s reaction to a plan that results in a 10% chance of a plane crash is “you WHAT?!” Whereas the risk isn’t necessarily quite so visible or quantified to all others in the organization, or else they may have motivations to ignore it for the same reason as Executive Todd.

So BHI come back and say that either Todd’s plan isn’t going to fly, or the insurance rates are going to go up.

So what was an invisible cost that could have gotten kicked down the road to a successor is transmuted into a stubborn operating cost right now.

Tumblr Airlines makes less profit (upsetting shareholders), raises ticket prices to compensate (thus pricing the risk into the market and making them less competitive), or else doesn’t go through with the plan.

The State could even require that the portion of the cost which is the risk premium is printed on the ticket, informing consumers of roughly how dangerous a given flight is. This is actually an enormous information gain by consumers, who as non-experts find it very difficult to not only judge airline safety, but obtain inside information about aircraft maintenance procedures.

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argumate

All the NTSB recommendations are technically trade offs that have costs; consider American Airlines Flight 191 which crashed on take off killing everyone on board and two people on the ground after an engine separated from the wing due to improper maintenance procedures had cracked the pylon.

While 273 people may have died, the improper shortcuts taken during engine maintenance saved 200 man hours per aircraft! Why, the meddling FAA banning this procedure may have done more harm than the original crash!

mitigatedchaos

Nah it’s alright fam,

If we assume that the GDP per capita is $55,000, and that the typical passenger has 35 working years remaining, we can just have the state bill the company and its shareholders $525,525,000 and put them into debt bondage and sell off their assets if they are unwilling or unable to pay.

Now you may object to the state rolling around and charging huge sums of money as payment for accidental deaths, but I have it on good authority that everyone signed over their trusteeship to the state rather than get kicked into the ocean, entirely of their own free will. Quite remarkable, really. So I assure that this plan is entirely Capitalist.

death shtpost the invisible fist the iron hand policy politics

Who captures a wage subsidy?

Basically every benefit we give to the working poor ends up being an indirect subsidy for business - see, for example, employers telling their employees how to obtain food stamps.

One of the complaints about a wage subsidy over a higher minimum wage is that it will just be captured by employers, who will pay their employees less by that amount. That’s also potentially true of a basic income, and with a minimum wage, employers may opt to gain non-monetary compensation (e.g. terrible hours).

Now, here’s where the limits of my economics education probably show a bit, in that I’m not familiar with the literature on how, empirically, this works out. (Maybe @xhxhxhx can chime in.)

I realized that this is actually related to the marginal productivity of labor - how much revenue (and thus, potentially, profit) does each additional employee bring in, across the whole economy? There are limits to this based on the amount of equipment/capital needed for a marginal employee or marginal hours, including facility size, as well as the potential customers it might bring in (e.g. why haven’t they hired additional labor already?).

The reason for this is that to determine the leverage of a low-wage employee under a wage subsidy system, we need to know how many potential jobs our wage subsidy can create, and at what quality. How easy is it for an employee to just walk right out of the store, walk right in to another store, and get a new job? Even if the pay is somewhat lower, this creates a much stronger incentive against bad hours, bad bosses, and unsafe practices, about which employees will then either demand higher pay, or just tell the employers to knock it off.

However, that increase in leverage only occurs if enough potential jobs emerge, and this is more or less an empirical question.

The greater the marginal increase in the number of jobs per marginal decrease in minimum wage prior to subsidy, the more of the subsidy that will be captured by the workers. However, if cutting the minimum wage creates no new jobs, then leverage doesn’t change much at all and employers capture the majority of the subsidy.

If the leverage is high enough, wages may even be driven higher than they were prior to the subsidy, depending on employer margins that they were exploiting leverage over against employees.

However, since employers capturing part of the subsidy is potentially true for all subsidies for the working poor, even rental vouchers or healthcare, it has to be compared with other alternatives (such as basic income).

(For my preferred implementation, the accompanying decrease in minimum wage should be lower than the wage subsidy, and the wage subsidy should be paid directly to the employee, thus at least not resulting in a decrease in effective income even if the entire subsidy is captured.)

the invisible fist the iron hand economics flagpost policy

One of the classic problems around requiring regulations is that people just don’t have, and cannot easily obtain, that much information about businesses sometimes, which is required for markets to actually work.

(Even when information is free or nearly-free, the Market pays people to sabotage it, just like it pays people to sabotage Market competition through buying politicians.)

This is part of my interest in substituting mandatory insurance schemes for explicit regulations, provided the insurance regulations are themselves well-designed. The customer may not know much about the safety of the business, but the insurance company, which has a long-standing relationship with the business, does.

And the less the insurance company knows about the business, the more money it charges for insurance, offsetting some of the risk of harm and potentially communicating risk information to customers.

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slartibartfastibast

Source: resistdrumpf the invisible fist the iron hand flagpost policy my politics national technocracy politics

Suppose we have hired a contractor to build a bridge. We issue partial payment for the project in the form of a financial instrument (presumably in a mutual fund or something else that bears interest) which only pays out in X years from now if the bridge does not collapse by then. We then monitor the price of this instrument, particularly the sales by those holding it, in order to obtain information about the quality of the bridge. This allows us to obtain this information without incentivizing anyone to deliberately sabotage the bridge project (assuming we prohibit short-selling).

Huh.

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ranma-official

theunitofcaring

The solution to this, of course, is to just give low-wage workers money instead of making laws that try to force their employers to do it. No one should have to live on the money they can bring home from $9/hour? Agreed! Give them money.

ranma-official

What will happen as a result is, of course, that companies will routinely underpay their employees, effectively outcompeting companies that pay fair wages purely on the taxpayer’s dime, which is by the way what already happens when people who work are paid low enough to be eligible for welfare.

This is a fact.

Factual solutions only. No pandering.

wirehead-wannabe

Do you actually disagree with any factual statement Kelsey is making here? All I see are value disagreements about “underpaying” and “fair wages.”

ranma-official

A factual statement is what I said.

When companies underpay the employees and you pay those employees instead, you reward companies for underpaying employees.

The correct course of action is to force companies to pay fair wages to employees. The incorrect course of action is to provide companies with more market incentives for not doing so.

That is a factual statement also.

A value judgement would be if you’d disagree with me that people like me are not literal subhumans (which is by the way the universal opinion of people who endorse underpaying as much as possible).

mitigatedchaos

It depends - do we have individuals paying the low wage workers and not a subsidy to all low wage workers by the State? Then the problems with the libertarian plan will ruin it, that’s how the economics works. Do we have state action instead? Then the leverage of all low wage workers will be increased by other economic effects.

Source: theunitofcaring the invisible fist the iron hand policy

theunitofcaring

The form of direct action against abusive employers that I personally find the most tempting (this doesn’t mean it’s a good idea or anything, just that I daydream about it):

Employees often don’t file legal complaints about wage fraud and illegal conditions because they can’t afford to lose the job because they’re living paycheck to paycheck. I expect that many people in this situation would quit their horrible job and file a legal complaint if they would be given like $1200 to tide them and their family over while they found a new job.

So here’s what I’d be tempted to do: ask people online to tell you about a business that’s engaging in wage and hours violations/otherwise really shitty but still its employees’ best option. Find one with like 10-15 employees. Fundraise money within your activist group and online to get enough money for every single employee to walk away.

Then the employees go to their boss and say ‘the next time you take half our tips even though you’re not legally allowed to take any/make us come in when we’re really sick/deduct damaged merchandise from our paychecks/etc, we all walk away. We have filed a wage claim in court. If you retaliate for that, we all walk away.’

And then, you know, next time the employer breaks the law, any employee who wants to follow through on the threat gets $1200 to support them once they’ve quit. And then you publicize the heck out of it, and scare other shitty employers, and hopefully the wage claim is successful and your employees get recompensed the money they were owed. And you open online applications for the next place.

You’d have to be very careful to go after places with real, documented, verified workplace conditions violations, because most of the benefit is in the publicity and the scaring other employers into shaping up. And you can’t scare people into shaping up if they don’t know exactly what they need to do (meet their legal obligations). You could only go after small places, because you need most of the employees on the same page and because fundraising larger sums of money would be harder.

But with the right fundraising and PR team, I bet you could create conditions under which employers are way more scared to cheat their employees.

mitigatedchaos

Because employees lack negotiating leverage, the government should have a network of secret labor law informants, such that no business can be entirely sure they won’t get smacked down hard for flagrant violations. Simultaneously, the labor laws could be simplified.

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collapsedsquid

the-grey-tribe

One of the weirdest policy proposals is where you put an expiration date on cash, to encourage spending.

argumate

ooh I’ve played with that one, it also fits well with some basic income proposals

obiternihili

inflation

collapsedsquid

All the kool kids nowadays are talking about negative interest rates.

mitigatedchaos

They’re not yet talking about forming quasi-autonomous state agencies that compete for assignment of implementing government programs, with contracts that can be renewed, but

Shhhh, they aren’t supposed to know about it yet. I only know because I’m from the future.

Source: the-grey-tribe shtpost the iron hand chronofelony policy politics the invisible hand augmented reality break