Monthly Archives: September 2014

A Feel Good Story About a Big Time Professional Athlete: Thank You San Diego Padres’ Cameron Maybin

Cameron Maybin Jersey

Cameron Maybin Jersey

This is an absolutely true story about an unlikely encounter between a short (shrinking), sixty-ish, balding, white haired, semi retired economist;  and a tall, obviously very fit, wealthy, professional athlete, with lots of great hair and charisma. We need a few of these good stories right now.

The balding, white-haired economist (BWE) was doing some business last Monday at the Ameritrade Building in the Fashion Valley district in San Diego.  Although he had some professional business to handle, the BWE was dressed in jeans and a San Diego Padres jersey with the name “Cameron Maybin’ on the back.

Maybin is the starting center fielder for the Padres major league baseball team.   A speedy, gold glove caliber fielder,  Maybin is working to improve his hitting , after a breakout year in in 2011. Further progress was interrupted by injury due partly to Maybin sacrificing his body regularly in center field making highlight reel catches,

The gentleman is fast, graceful, and fearless in center field. Earlier in his career, he was touted as the next Ken Griffey Jr.  He’s still young enough to have more than a few great years.  Here are Cameron’s stats.

The BWE had bought the Padres shirt with Maybin’s name on it a few years ago.  He had heard of Maybin, but didn’t know much about him at the time, except that he had great potential and covered a lot of ground in the outfield.

So, why did the BWE buy Maybin gear, when he could have had a Gwynn, Hoffmann, or Adrian Gonzalez shirt?  And what was BWE thinking when, on Monday, September 22nd, he wore the Maybin jersey to a professional meeting, where everyone else was dressed in suits?  And since BWE owns about ten baseball jerseys, why did he choose that particular one, on that specific day?  Certainly not to impress the suits in the Ameritrade Building.   Keep all of these forks in the road in mind as you ponder the rest of the saga,

After the meeting with the suits ended around 2:00 pm, the BWE took the elevator from the 9th floor to the lobby.  As the BWE walked out the elevator, he heard a man with a loud voice, from a distance away, saying,  “hey man, you just made my day. Hey, hey, let me tell you, you made my day.”

Being certain the words were meant for someone else, the BWE proceeded briskly toward the exit, not even bothering to look back. Then, he heard it again. This time the voice was a lot closer. “Hey, my friend, I can’t tell you how much this means to me!”

Now, the BWE was curious and puzzled. The BWE turned and saw a tall, handsome, obviously fit, young man, in workout clothes, with a lot of great hair, charisma, and a big, warm smile, with intensity in his eyes, that might have been bordering on tears. He reached out to the BWE, and repeated, “I can’t tell you how much this means to me……you wearing my shirt.  I AM CAMERON MAYBIN,” he proclaimed.   It sure was Maybin.

It took the BWE a beat or two longer than it might have twenty years ago to figure out what was going on; but once he did, joy broke out all over. He couldn’t imagine an encounter quite this improbable, affirmative, bridging so many gaps, and coming at a time when so much of the news about rich professional athletes is depressing.

Almost makes you want to believe in angels. The BWE’s late wife, Cheryl, believed fervently in angels, and that there were no coincidences in life. The BWE was a severe skeptic.  But he’s now thinking it over.

The day of the encounter with Maybin was September 22nd , the BWE’s and Cheryl’s wedding anniversary.  And, it  turns out, Cameron’s agent is Brian Goldberg (BG), whom it appears is the same BG that was Ken Griffey Jr’s, agent.  And Maybin is friends with Junior. What’s the significance of that?  The BWE’s baseball hero was Griffey.  But an unfortunate encounter with the Mariner great some years ago tarnished the BWE’s passion for the game.

I am going to believe that an angel got Cameron and I together at the Ameritrade Building to celebrate my anniversary with Cheryl; and to mend things with Junior and baseball….and maybe also to do some good for Mr. Maybin, who, after, all, did say it made his day.

All the best to Cameron Maybin.  Hey, man, you sure made my day….big time.    The BWE

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Climate Change Activist Says: “The Right is Right,” Saving the Planet Means an End to Capitalism

Groping for Solutions to Global Warming

Groping for Solutions to Global Warming

In her new book, “This Changes Everything,” climate change activist and long time, passionate critic of capitalism, Naomi Klein, says the Right Wing in America has a better understanding than the Left of what the Liberal Agenda implies for capitalism.   Her first chapter is titled, “The Right is Right,” by which she means that, yes, dealing with climate change implies an end to capitalism as we know it, just like Fox News and the Right Wing think tanks have been saying all along.

Klein makes no bones about that!  Her book is already being touted as the climate companion to Thomas Picketty’s  “Capital In the 21st Century,” which deals with capitalism’s tendency to produce severe wealth inequalities, as he sees it. Klein’s related point is that capitalism tends to produce catastrophic global warming.  Just replace “severe and inevitable inequalities” in Picketty’s work with “severe and inevitable desecration of the planet,” and you pretty much have the gist of Klein’s book.  (Here is a left view and a right view of Klein’s work).

Klein was recently interviewed about her new book on MSNBC.   Chris Hayes offered this teaser to the MSNBC audience before breaking for a commercial:

HAYES:  “Now, in a very provocative and I might say excellent new book, one of the left`s most celebrated and influential authors across the world, Naomi Klein says, ‘Yes, that is right, conservative fears about what climate change means for the global economy are well founded’”

Some of Hayes’ few Right Wing viewers must have switched the channel at that point, having captured all the material they needed for the next blog. They took Hayes’ provocative, “boost the ratings and sell the book” intro, as admission that climate change is a hoax concocted by the Left to sink free markets and to take over what remains, after Obamacare is through exacting its pound of flesh from capitalism (as the Right sees it).

Of course, Klein didn’t mean it exactly this way. Hayes of course knew that. Here, in her words, is what she actually meant — and eventually said — in the MSNBC segment:

KLEIN: “Yes. I mean, it is not true that it is some sort of conspiracy designed to smuggle in, you know, socialism and just using, you know, climate change as a cover. The fact is if we are going to respond to this crisis, we need to break a whole bunch of the free market rules that these guys hold very dear. We need to regulate. We need to get in the way of the fossil fuel companies, who have made it clear that they are willing to dig up five times more carbon than our atmosphere can absorb and still stay below catastrophic warming. We need to invest heavily in the public sphere.  But, I can understand why from a hard core free market conservative perspective, if you live at the Cato Institute and the American Enterprise Institute, this would feel like the end of the world. It is not the end of the world. It is the end of their world.” Here is the full interview from the MSNBC program.

Another way to convey what Klein is saying is with a title I first considered, but soon abandoned, for this blog post:  “If the global warming crisis is a socialist conspiracy to sink capitalism, then so was World War II.”  (Blog titles are supposed to be attention grabbing). What could I have possibly meant by that?  World War II was not only the mother of all economic stimulus packages  (which is of course not to say it was fought for that reason), but it also regulated the heck out of capitalism (which was necessary to fight the war), and ushered in thirty more years of activist government on the domestic side.

What Klein is saying is that if you believe man made global warming is as big a threat as the Axis Powers in the 1930s, there is no choice but to mobilize, aggressively regulate, and spend heavily in the public sphere, as we had to in WW II;  i.e., wage war against climate change.  We also accumulated debt in that era which makes our current sovereign debt problem seem manageable.

Of course, the Right would think comparing global warming to Hitler and Hirohito is absurd. But Klein thinks the threat to civilization is about as great; and that even “Green Capitalists,” like Virgin Airlines’ Richard Branson and former New York mayor, Michael Bloomberg, are so blinded by the imperatives of growth and profit, that they miss the point.  She laments that it’s unrealistic to rely on business to find solutions to climate change.

One big point Klein misses is that developing industrial societies like China, though perhaps not worshiping profits, aren’t ready to compromise on Growth,  the other part of the capitalist imperative.    The Chinese government doesn’t seem ready to adopt Klein’s solutions to curbing carbon emissions.  They think (wish?) they can pollute their way to growth, but clean it up as they go along,  with Geo-engineering and fantastic weather changing technology.   Klein regards that thinking as subversive.

Cents and Non-Cents About the Minimum Wage

How Much More Will This Cost?

How Much More Will This Cost?

Where would the money have to come from to pay for a mid range increase in the minimum wage (MW) for fast food workers in an affluent city like San Diego?  Lets assume a raise from $9.00 to $11.50 per hour, which is what the city council there is proposing (for all workers). By my estimates,  the MW in the fast food sector could be financed in three ways: (1) if customers are willing to pay 50 cents more per meal (from today’s $6.00 to about $6.50);  (2) if business owners could reduce their costs by about $60,000 a year, from the $700,000 they presently receive in annual sales revenue; or (3) if the customers and owners share the cost, doing a little of each.

If your view on the MW is based on how realistic you think it is for customers and owners to get past these hurdles, you’d be on firmer ground than listening to the clatter from lobbyists, advocates, economic modelers, and media headlines.

There are some credible efforts to score the effects of MW, like this one from Motley Fool; but also a lot of nonsense from sources like the Heritage Foundation “study.”

Mercifully, the latter has been buried, though it’s invaded the talking points of a lot of opinion leaders. If you believe Heritage, the fast food industry would have been decimated twenty five times over since the first MW was passed in 1939.

I chose this particular MW scenario for scrutiny because it happens to be the proposal on the table here in San Diego, where I live, though in the SD case, it would apply to more than just fast food restaurants. The SD proposal is somewhere in the middle, nationally,  in how much and how quickly it would change the MW.

I chose to look at just one business sector, fast food restaurants (nationwide), because that’s where most of the attention is now focused, and where many MW earners work. Also, that’s the sector with the best data.  And I can mostly evade the messy “tipped worker”  wrinkle on the MW if I stick with fast food places.

I use a definition of fast food restaurants and accompanying data from Pew Research and the National Restaurant Association, both credible sources; and then I fact checked them as best I could. I had to do some arithmetic to derive some numbers from the base data.

There are about 160,000 fast food establishments in the country; with annual sales of about $110 billion; and 50 million customers per day; a lot of fat and carbs, with a few salads here and there. That translates to about 300 meals a day served by each fast food restaurant, and an average of about $6.00 per meal. Total annual sales/revenue is about $700,000 per establishment. Obviously, all these numbers are “averages” and don’t apply to all the eateries.

On average, each restaurant currently employs about 15 workers (certainly, not all working full time). They earn about $13,700 annually. I don’t know the hourly rate paid to all of them, but in my exercise, I assumed that a 28 percent raise (based on the San Diego example) would apply to all the workers, boosting their annual equivalent salaries to $17,400; and the cost of doing business by $3,700 per worker. Spread across 15 workers, and absorbed entirely by raising the price on meals, this translates into a price hike of 50 cents per meal, or an increase in $60,000 in the annual cost of doing business.

Of course, 50 cents more spent on a meal at Burger King, is 50 cents less spent elsewhere in the economy. But, if the MW workers get a raise and have more spending money, other businesses in the community will see sales rise a bit.  In this simple model, it’s basically a wash for the overall economy. It’s also a transfer of modest income from customers and owners, to MW workers.  Joe the Plummer won’t like it, but that’s the point of the MW proposals. And also the basis of the opposition to it: “the MW is ‘redistributing’ the wealth by government fiat.”

Let’s look at the hurdles faced by customers and owners.

Economists (or at least their models) are not convinced that customers will merrily pay the higher price. The models say that a 1% increase in prices at fast food restaurants results in a 1% decrease in sales. That’s called “the price elasticity of demand.” In our scenario, it means an almost 10 percent decrease in revenue to each business owner if prices went up by 50 cents per meal; which means a $60,000 annual revenue loss to the average fast food business. If consumers behave according to the economists’ demand “elasticiities,” the average owner has almost $700,000 in annual revenue to find $60,000 to cut.

An obvious option for the owner is reducing the number of employees from 15 to 12. That would make up for most of the lost revenue. That’s what critics who talk about “job killing minimum wage hikes” say will happen. That amount of reduction in jobs is possible without loss of sales, if the manager achieves productivity gains from the remaining 12 workers. They may get those buns in motion if they fear more pink slips.

On the other hand, if we “follow the money” the way economic models do, then the 12 remaining workers earning almost $4000 more a year, will spend most of their higher pay checks in the community; thus, some new jobs will be created for their three jobless comrades.

After you set aside labor costs and fixed, or sticky, costs (like rent, taxes, licenses, repairs, maintenance, utilities), the average owner has only $200,000 left to play with, to find $60,000 in savings. These remaining costs are mostly for the food bought wholesale to make the burgers, salads, and milkshakes. There are ways to save here; which could degrade quality or take most of the chicken out of chicken salads. Oh, wait, that’s happened already?

Critics of the MW hike say, rather than a source of cost cutting, the price of ingredients will rise if the MW hike also affects the suppliers. That’s not a bad argument. It depends on the scope of the new MW policy, the location of the suppliers, and how they handle their own wage pressures.  I do not assume wholesale price increases. But, recall, elsewhere in the exercise, I’m arguably over-estimating the cost of the MW hike by assuming it applies to all employees at a restaurant, including the manager and assistant manager.

For establishments not on the bubble, cutting profits to handle the MW increase is of course another way to avoid price hikes. I don’t know how many of the fast food establishments are a half a buck per meal away from bankruptcy, but it’s many fewer than what the Heritage Foundation says, which (they say) is practically all of them.

In my own case, on the consumer side of things, I don’t often eat at fast food places, but the 50 cent increase wouldn’t bother me. I do, however, notice when mediocre Merlot at a higher end restaurant jumps from $8.00 to $12.00 a glass; or worse yet, when the price stays the same, but a fabulous, new Columbia Crest “Red Blend” suddenly appears on the menu as the house wine.

Revision: Business Costs, the Economy, and Happiness – Part I

Competing  for the  brass ring

Competing for the Brass Ring

(An error in the legend and wording for the state rankings chart has been corrected)

Is there a close relationship between the cost of doing business in a state, and the state’s economy, as the “business climate” gurus and lobbyists, would have us believe?  And we do believe it,  as witnessed by the legions of cities and states with economic development policies that make lower business costs, lower taxes, and less regulation the focus of governance.

That’s certainly not all bad; and can work to lure a specific company to a particular place, at a given time; not to mentioned what it can do for politician’s career.  But viewed from 10,000 feet, and with a longer view – which no one seems to take any more – the results may be surprising.  (I’ve whined about the business climate gurus before,  here).

I’m also asking a second question, which neither the business climate crowd nor the politicians (since Plato’s time) hardly ask anymore: “Do lower business costs or a better economy make us any happier” or improve our “well being?”

Happiness as the ultimate goal for a society is not just some nutty, woo-woo, “touchy-feely” 1960s hippie concept, or a Green version of the Gross Domestic Product.  It was, as you know, consecrated by Thomas Jefferson in the declaration of independence, with the famous phrase about “Life, Liberty and the Pursuit of Happiness.”

Jefferson said he was an Epicurean. The Epicureans were once ridiculed as hedonists. But neither Jefferson nor the other founders were hedonists.  (Although some of the stories about Franklin in Paris may raise an eyebrow, as would Jefferson’s biography).  Epicureanism seriously amended hedonism.  It urges  “simplifying your life” and “limiting your worldly and material desires”  as a means toward well being.  As you might guess, both sides of today’s vast political divide have a hugely different interpretation of what Jefferson may have meant by happiness.  (Am sure Mr. Justice Scalia, for one, has given lots of thought to what Jefferson meant).

So, is there a close relationship between the cost of doing business in a state, and the state’s economy?  And does any of that have anything whatsoever to do with happiness or well being?

The short answer is:  Business costs and the strength of a state economy are inversely proportional (negatively correlated).  Prosperous states are associated with higher business costs; and poorer ones, with lower business costs. Huh?  That’s exactly the opposite of what the “business climate” gurus keep telling us. 

If you don’t believe me, compare state rankings by Forbes for the “cost of doing business” by state,  with the rankings of states by median household income from the U.S.Census Bureau.  These measures were taken in the 2012-2013 time frame.

And,  how do these business climate and economic ranks comport with state ranks on “well being” or “happiness” as measured by Gallup?   (also from the 2012-2013 period).  It turns out there is no discernible relationship between business costs and well being (positive or negative).  But there is a moderately positive one between a state’s household median income and the happiness of its residents . That’s consistent with the common belief that more money tends to make life better (or at least, reduce suffering), but that money can’t buy everything.  But the bridge, from business climate to well being, via a strong economy, is swaying in the wind.

correlation2Here is a little table that shows you the specific “correlations” (you may recall that from Stat 101) among the three “variables.”  If Stat 101 is a bit foggy,  the correlation coefficient is a numerical value indicating the degree and direction of relationship between two variables; the coefficients range in value from +1.00 (perfect positive relationship) to 0.00 (no relationship) to −1.00 (perfect negative or inverse relationship).  Yes, we get a minus 0.43 correlation between Business Costs (others call this or include it in Business Climate) and Median Household Income.

rankings2Here is a busier chart which show each state’s rank on all three dimensions. The Yellow Shaded states are the ones which have amongst the lowest business costs, but a population that told Gallup surveyors it was (relatively) unhappy (with a subdued level of well being).  That’s Column #1 compared with Column #3.

The Green Shaded states are the reverse –high business costs, but happy.   Part II (the next blog post) will look at some of the possible reasons for these relationships.

Am not sure why yet, but it’s easy to see that a lot of Border and Deep South states are shaded yellow; while Northeastern and New England states are over-represented in the Green.

California is also shaded Green. That gives some support to the observations of Lisa Halvestadt and her associates in the Voice of San Diego about trade-offs in California between high business costs, taxes, and stiff regulations, on the one hand, and “well being,”  on the other. (The alarmingly high poverty rate in California notwithstanding).

The value of looking at this from 10,000 feet and with simple measures, and at one point in time, is that all of these indicators – business costs, median income, and happiness in 2012-2013 — are the cumulative effects of decades of private and public decisions in those states. Not just a headline in a news paper about the taxes that need to be cut right away in LA to keep the film industry in tow.

The business climate gurus will surely dismiss  these correlations as simplistic.  That’s fine! If it moves them to make their own message less cartoonish, and more nuanced,  it will be an accomplishment.  We’ll talk a lot more about this in Part II.

Business Costs, the Economy, and Happiness – Part I

Competing  for the  brass ring

Competing for the Brass Ring

Is there a close relationship between the cost of doing business in a state, and the state’s economy, as the “business climate” gurus and lobbyists, would have us believe?  And we do believe it,  as witnessed by the legions of cities and states with economic development policies that make lower business costs, lower taxes, and less regulation the focus of governance.

That’s certainly not all bad; and can work to lure a specific company to a particular place, at a given time; not to mentioned what it can do for politician’s career.  But viewed from 10,000 feet, and with a longer view – which no one seems to take any more – the results may be surprising.  (I’ve whined about the business climate gurus before,  here).

I’m also asking a second question, which neither the business climate crowd nor the politicians (since Plato’s time) hardly ask anymore: “Do lower business costs or a better economy make us any happier” or improve our “well being?”

Happiness as the ultimate goal for a society is not just some nutty, woo-woo, “touchy-feely” 1960s hippie concept, or a Green version of the Gross Domestic Product.  It was, as you know, consecrated by Thomas Jefferson in the declaration of independence, with the famous phrase about “Life, Liberty and the Pursuit of Happiness.”

Jefferson said he was an Epicurean. The Epicureans were once ridiculed as hedonists. But neither Jefferson nor the other founders were hedonists.  (Although some of the stories about Franklin in Paris may raise an eyebrow, as would Jefferson’s biography).  Epicureanism seriously amended hedonism.  It urges  “simplifying your life” and “limiting your worldly and material desires”  as a means toward well being.  As you might guess, both sides of today’s vast political divide have a hugely different interpretation of what Jefferson may have meant by happiness.  (Am sure Mr. Justice Scalia, for one, has given lots of thought to what Jefferson meant).

So, is there a close relationship between the cost of doing business in a state, and the state’s economy?  And does any of that have anything whatsoever to do with happiness or well being?

The short answer is:  Business costs and the strength of a state economy are inversely proportional (negatively correlated).  Prosperous states are associated with higher business costs; and poorer ones, with lower business costs. Huh?  That’s exactly the opposite of what the “business climate” gurus keep telling us. 

If you don’t believe me, compare state rankings by Forbes for the “cost of doing business” by state,  with the rankings of states by median household income from the U.S.Census Bureau.  These measures were taken in the 2012-2013 time frame.

And,  how do these business climate and economic ranks comport with state ranks on “well being” or “happiness” as measured by Gallup?   (also from the 2012-2013 period).  It turns out there is no discernible relationship between business costs and well being (positive or negative).  But there is a moderately positive one between a state’s household median income and the happiness of its residents . That’s consistent with the common belief that more money tends to make life better (or at least, reduce suffering), but that money can’t buy everything.  But the bridge, from business climate to well being, via a strong economy, is swaying in the wind.

correlation2Here is a little table that shows you the specific “correlations” (you may recall that from Stat 101) among the three “variables.”  If Stat 101 is a bit foggy,  the correlation coefficient is a numerical value indicating the degree and direction of relationship between two variables; the coefficients range in value from +1.00 (perfect positive relationship) to 0.00 (no relationship) to −1.00 (perfect negative or inverse relationship).  Yes, we get a minus 0.43 correlation between Business Costs (others call this or include it in Business Climate) and Median Household Income.

rankings2Here is a busier chart which show each state’s rank on all three dimensions. The Yellow Shaded states are the ones which have amongst the lowest business costs, but a population that told Gallup surveyors it was (relatively) unhappy (with a subdued level of well being).  That’s Column #1 compared with Column #3.

The Green Shaded states are the reverse –high business costs, but happy.   Part II (the next blog post) will look at some of the possible reasons for these relationships.

Am not sure why yet, but it’s easy to see that a lot of Border and Deep South states are shaded yellow; while Northeastern and New England states are over-represented in the Green.

California is also shaded Green. That gives some support to the observations of Lisa Halvestadt and her associates in the Voice of San Diego about trade-offs in California between high business costs, taxes, and stiff regulations, on the one hand, and “well being,”  on the other. (The alarmingly high poverty rate in California notwithstanding).

The value of looking at this from 10,000 feet and with simple measures, and at one point in time, is that all of these indicators – business costs, median income, and happiness in 2012-2013 — are the cumulative effects of decades of private and public decisions in those states. Not just a headline in a news paper about the taxes that need to be cut right away in LA to keep the film industry in tow.

The business climate gurus will surely dismiss  these correlations as simplistic.  That’s fine! If it moves them to make their own message less cartoonish, and more nuanced,  it will be an accomplishment.  We’ll talk a lot more about this in Part II.