Learning the ropes

Main-mast, Joseph Conrad, Mystic Seaport

Mystic Seaport Village is a living museum on the Mystic River in eastern Connecticut.  The museum memorializes our rich New England maritime history and several restored wooden sailing vessels show us how fishing and whaling and trade were accomplished in the age of sail. The town, famous for Mystic Pizza and its eponymous movie, is situated several miles north of Fisher’s Island Sound and is reached from the sea by navigating a circuitous channel and negotiating several ponderous bridges.

The first, a swing bridge, carries Amtrak trains across the river.  After contacting the bridge operator by radio, the bridge swings open when train schedules allow.  After waiting for one northbound and one southbound high speed Acela to pass, the bridge slowly swings open and we slip though. The next bridge carries busy US Route 1 through the middle of Mystic.  It opens at 40 minutes past each hour – if you arrive late, you must wait.

After negotiating both of the bridges and carefully staying within marked channels (the mud flats are treacherously shallow), we arrive at the Seaport.

The museum features a number of large sailing ships, notably the Charles W. Morgan (a whaling ship built in 1841 in New Bedford, MA), the L.A. Dunton (a fishing smack built in Essex, MA), and the Joseph Conrad (a 111 foot, square rigged training ship). All of these ships share the use of wind power, intricate sails strung from masts and yardarms, hoisted and canted by multitudinous lines.  Knowledgeable docents vividly describe life at sea, the jobs that the crew performed, and how they climbed through the ranks.

On a large capital ship of the late 18^th century, twenty or more sails hung on three masts provided power to the ship. Well over 300 lines were used to control and support the sails, and an able seaman must know all of their names and their functions. These were a combination of halyards (to haul the yards, i.e., raise the sail), sheets (to control sail angle and shape), and stays (to steady the masts). More, there were cunninghams, and vangs, and topping lifts, all used to control and refine sail shape, and hence deliver power to the ship.

In days of sail, the able seamen who mastered the complexity of their ships were the highly skilled workers of their time. They were the equivalent of today’s firemen and engineers who tend the engines of huge container ships and oil tankers.

Rising though the ranks, the sailing ship officers were educated and skilled in the arcane science of navigation.  Charts and sextants and trigonometry were used to ascertain the ship’s position and plot a course to the desired destination. Those mastering these skills were the technology wizards of their time, and handsomely paid.

After several days spent pleasantly reliving our maritime heritage, we fondly bid the Seaport adieu and head down the river.  Early, sun just risen, mist hangs on the water but begins to dissolve as we negotiate the two bridges. But upon reaching the base of the Mystic and entering Fisher’s Island Sound, we encounter a heavy fog, barely able to see the bow from the stern. Time to deploy our modern miracle, an iPhone with a marine GPS navigation app. We creep through the treacherous shoals and reefs, watching the navigational buoys loom from the fog, each on time and in position as predicted by the app. After some time, we emerge into the expanse of Block Island Sound, and the fog eases.

It becomes clear that what was of value then, and now, is knowledge. The able seamen and navigators of the sailing ships were the diesel engineers and Apple programmers of their day. Knowledge and skill must be learned, and earned, and applied to our common good. Anything we can do, collectively or individually, to motivate our children to learn, to enable their academic journey, is the highest good. We, and they, will benefit mightily.

Economics and the minimum wage

Most people think that economics is a highly mathematical science, abounding with spreadsheets and eyeshades and complex computer models.  That it is, but only because it tries to understand human behavior, a nearly unfathomable task. 

Economics is the study of how we humans decide to spend or save our hard earned money. It deals with demand and supply, and how business owners choose what to produce, and how much, depending on signals that they divine from consumers. It tries to understand what incentivizes job producers to hire workers and how to encourage them to hire even more.  But it’s all about human behavior, human thought, human decisions.

Government often tries to influence economic behavior.  They seek to assist the downtrodden, to regulate business, and to pick winners in new, exciting technologies. But do not neglect to recognize that government is a collection of humans who are governing humans and regulating businesses made up of humans.  So it is a true wonder that government seems to neither understand human behavior nor economics.

Here’s an example.  There is an ongoing effort to increase the minimum wage (currently $8.00 in Massachusetts).  The reasoning is that $8.00 per hour, or $16,640 per year, is not a “living wage”.  You may agree, or you may disagree.  Perhaps we should increase the minimum wage, or perhaps we should not.  But in any case, before making the decision, let’s try to understand what it’s all about. 

First of all, lets recognize that the minimum wage is paid to workers that are completely interchangeable. That is, they have no significant skills. If you are a minimum wage worker, it means that absolutely anyone can replace you. Once you have gained some expertise, such as how to operate a CNC milling machine, it is clear that not “absolutely anyone” can replace you, and you will earn significantly more than the minimum wage.

Now, a thought experiment.  Let’s assume that increasing the minimum wage is a good thing.  Further, we decide that it should be a very livable wage, so we set the minimum wage at $40 per hour ($83,200 per year). Let’s explore the consequences of this decision.

•  Imagine that your morning cup of coffee at Dunkin Donuts will now cost $8. 
• The neighborhood grocery store will install more self-checkout lines, reducing staff, and increasing unemployment.
• Manufacturing concerns will find that roboticized assembly lines are much more economically feasible, allowing them to shed workers.
• Service providers and call centers will determine that outsourcing of jobs overseas is increasingly prudent. Domestic employees can be dispensed with. 
• Overseas wages will be become drastically cheaper in comparison. Imports will increase, exports will decrease, and joblessness will inexorably creep up.
•  Students will determine that dropping out to earn this new, high minimum wage makes more sense than laboriously studying to learn new skills.

That’s pretty crazy, increasing the minimum wage to the point that it spawns inflation, demotivation, and increased unemployment.  Nothing good here.  But this is just a thought experiment.  What if we were to only increase the minimum wage to $10? The truth is, all of the above ills would still occur, but to a lesser, proportional, degree. 

Another way to attack the social issue of the minimum wage is from the other side.  Instead of artificially increasing the wages for unskilled labor, let’s increase the ranks of skilled laborers. By training and tutoring those at the bottom of the labor pool, we empower them to participate in our increasingly technical 21^st century economy. As a side benefit, this approach would result in workers with much higher, and well deserved, self-esteem and satisfaction. 

And by decreasing the supply of unskilled workers, we would, oddly enough, cause them to be in more demand with attendant higher wages.

That can’t be a bad thing. 

Socialization and social comity

President William Howard Taft

The CDC has spoken and we are fat. The worst state, Mississippi, has an obesity rate of 35%. Massachusetts, the third best, has nothing to brag about with nearly one out of four citizens tipping the scales at “unhealthy.” This 2011 study was based on self-reporting and people tend to gild the lily. Another more rigorous report which involved weighing participants estimates that 36% of all Americans are overweight.  We are in the midst of a true epidemic.

Obesity is serious because it increases the incidence of diabetes, heart disease, cancer, and stroke among other ailments. Quality of life is worsened and mortality rate increased. Obesity results in significantly elevated health care costs.  And while it is easy to make rationalizations, obesity is a choice. What and how much we put in our mouths, whether and how frequently we exercise; these are personal choices.

We hear the term “socialization” tossed about frequently. By this, we don’t mean the process of making your puppy play well with others, but rather, the spreading of risks and costs across a large group of people.

It is a familiar concept.  One common example of socializing risk is automobile insurance.  Every driver (at least in Massachusetts) is required to carry automobile insurance.  In a given period, not everyone will have an accident, but everyone pays premiums.  The unlucky few who actually suffer a loss are compensated from the pool.

But this is not, in itself, socialization of risk.  If a 19-year-old from Roxbury paid a premium based on his actual risk of loss, it might be $10,000 per year.  Meanwhile, a 50-year-old woman in rural western Massachusetts might pay only $400.  But that’s not how we do it.  The state, in its wisdom, has deemed that we should all pay more so that the young scofflaw in Roxbury pays less.  This is true socialization of risk, the salient point being that it is actuarially unfair. (Unfair in that the woman from western Mass, along with most of us, pay more than we should while the young man pays far less than he should). This leveling of risk premium removes from the young man in Roxbury the incentive to drive exceedingly carefully.

In other words, socialization of risk distorts our decision making process and leads to more risky behavior (because risk, and hence cost to the individual, is subsidized).  It is always true that to get less of something, tax it; to get more, subsidize it. Subsidizing risky behavior is a sure fire way to get more.

Any form of national health care is another variety of risk socialization. Our increasingly socialized health care system does not charge premiums based on risk factors.  For instance, an inveterate rock climber does not pay higher health insurance premiums than you do, but she takes much greater risks.  Likewise, a motorcycle racer, skier, pilot, scuba diver, or lumberjack do not pay higher premiums than you do.  Health risks are subsidized.

It was different in an earlier era.

William Howard Taft, our 27th president, served from 1909-1913.  He was morbidly obese, suffered from high blood pressure, severe sleep apnea, and died of a heart attack. But at that time, each was responsible for his own behaviors and the resultant consequences. Taft ate richly and drank to excess, did not exercise, packed on the pounds, and suffered poor health as a result. But no one had to pay Taft’s physician except Taft.

In this day of increasingly socialized medicine, where poor personal choices engender no individual costs but burden the public fisc, it is difficult to observe such profligacy without comment, or at least smoldering resentment.  Socialization is making us downright rude.

But government, which is adept in creating such a mess, can further intervene. A recent article in The Telegraph (London) offered such a solution:

“Ridiculing someone as 'fat' or 'obese' could become a hate crime under an idea being floated by a group of MPs and a leading charity.”

This is a solution of sorts.

Is tolerance banned in Boston?

Argonne Cross, Arlington National Cemetery

Mayor Thomas Menino of Boston made headlines recently by vowing to withhold permits from an organization wishing to locate in the city. “Catholic Charities does not belong in Boston,” Menino proclaimed, disagreeing vehemently with their values. “I urge you to back out of your plans to locate in Boston.” Catholic Charities opposes abortion on religious grounds, a viewpoint that the liberal Menino abhors.

Well, almost. As Dan Rather would say, this story is fake but accurate. Actually, Menino promised to block Chick-fil-A, a fast food operation, from the city because he disagrees with founder Dan Cathy’s religiously-based views on same-sex marriage. The story and the reality both hinge on religious beliefs that conflict with the Mayor’s views. But that is precisely the domain of the First Amendment, whose text is brief and unambiguous.

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

It is very clear that Menino, as a public official, cannot impose his viewpoint on another. However, as a private citizen, he is free to boycott Chick-fil-A and encourage others to do so as well. As are we all.

Does this mean that government is powerless in the face of bigotry? Indeed not. We have laws prohibiting discrimination in employment and accommodation of customers. These laws can and must be vigorously enforced.

On another religious freedom front, there is a group called “Freedom from Religion Foundation” who, with their willing ally the ACLU, remove prayers from school walls, crosses from war memorials, and crèches from public squares. This organization of atheists militantly imposes their views, often to the distress of  citizens of such disparate places as Cranston and Woonsocket RI, and Steubenville OH. The FFRF interprets the First Amendment as strictly banning religious practices and artifacts from the public space. This is a tortured interpretation.

One must step back and ask, what is a religion? Christianity, Islam, Buddhism, and Judaism all provide a model for how to live, how to behave well in a moral fashion, and require that adherents accept certain tenets of faith. In other words, part of the belief system must be accepted without proof because it is unprovable.

Atheists, likewise, believe in the goodness or badness of certain behaviors. Else, why would they intercede to prevent certain acts which they consider bad? And they share a belief that God does not exist. But that is an unprovable tenet of their belief system and must be accepted on faith. 

It appears clear that an alien visiting from the Cygnus constellation would be confused. Are not the atheists practicing their own religion? Are their attempts to impose their religious beliefs on the public space not, therefore, unconstitutional?

Perhaps the answer is to interpret the First Amendment in its simplest terms. The government shall not impose a religion, such as the historic Church of England. The government shall not prohibit the practice of religion, such as the Nazis did to the Jews, or the Taliban to Christians. Perhaps the answer is to be inclusive rather than exclusive. If you object to a cross on a war memorial, then add symbols of other religions, do not ban them all.

Tolerance, it seems, is a kinder and more peaceable approach than Menino and FFRF's belligerent intolerance.

Economic principles are older than history

Economics is incredibly complicated, we are told.  Economists would have us believe so because, otherwise, why would we need them?  Politicians likewise prefer befuddled voters as they are easy to manipulate.  Our economic system is indeed complex because of its enormous scale.  But it is based on some very simple principles, and we can use them to understand fundamental relationships.
 

In case you hadn’t noticed, the global economy is in a funk.  Investors aren’t investing, bankers aren’t lending, consumers aren’t consuming, manufacturers aren’t hiring... what to do?

There is a debate raging on the choice between growth or austerity (reducing debt) to improve things.  By “growth”, its proponents mean public sector spending (hiring more cops, clerks, and teachers), funded by higher taxes or increased borrowing. Those on the other side say that austerity works just fine, thank you very much, it just takes a little longer.  And further, they argue, “growth” could and should be nurtured in the private sector – it need not be a codeword for public spending.

Public sector, private sector, spending, growth, debt, taxes… it’s enough to make your head spin.  What should we do?  How do we decide?

Let’s take a look at how economics began. Imagine a prehistoric tribe made up of ten individuals.  We will focus on the adults and ignore the children for now.  The adults  are divvied up as follows:

• 3 hunters
• 4 gatherers
• 1 shaman (active)
• 1 shaman (retired)
• 1 hunter (disabled)

The three hunters, as you might guess, track, pursue, and take game animals, large and small.  The four gatherers cultivate simple grains and vegetables and collect wild fruits and berries. The hunters and gatherers make up the private sector, as they produce the means to keep the tribe alive.  Their output feeds the entire tribe.

The shaman uses magic to forecast the future, cast spells on the tribe’s enemies, and teaches basic skills to the tribe’s children.  He makes up the public sector.

The disabled hunter, unfortunately, is no longer able to contribute because of a badly wrenched back from trying to haul a large elk.  The retired shaman, too old to prognosticate, and the disabled hunter are social beneficiaries.    

All of the grains, berries, rabbits and venison produced by the hunters and gatherers must be shared with the public sector (current shaman) and the social beneficiaries (retired shaman and disabled hunter).  Every rabbit, sheave of grain, and basket of berries must be shared ten ways, even though only seven are responsible for production. For every 10 rabbits a hunter snares, he must give up 3 to support the public and social beneficiary sectors. This is a tax.

Imagine that a prolonged drought results in poor yields for both hunters and gatherers… the economy is a mess.  People are hungry, starving, and something must be done.  So what is the logical conclusion… shall we hire another shaman from the tribe in the next valley?

That’s what some argue… that by expanding our public sector, economic output will be increased.  But we still have only 3 hunters and 4 gatherers, who must now share their output 11 ways instead of 10.  They are rightfully baffled by this decision, because there are now more mouths to feed but no increase in production to do so.

Does this mean that the public sector is bad and that we shouldn’t support those in need?  Absolutely not!  In our real economy, public servants are crucial to our society’s functioning, keeping us safe from crime, putting out fires, and teaching the next generation of productive citizens.  And it is only decent to sustain those who are truly in need.  But remember that we can only do what we can afford to do.  That is the mistake made by the Greeks – chronic overpromising, living beyond their means.

When the government expands the public sector or expands social benefits, these costs must be paid.  There are only two choices… by raising taxes now or raising taxes later.  In the latter case, we can borrow a surplus from the tribe in the next valley, but it must eventually be repaid (plus interest), which requires a future tax.

This is not meant to convince you to think in any given way, only to think.  When presented with economic alternatives, think.  Then choose.  But do so based on an informed consideration.

Our wonderful gift of liberty

Statue of Liberty, 1901, Library of Congress

Two hundred and thirty six years ago, a new nation appeared on the face of the Earth, unlike any other. At its heart, with this core tenet, the Declaration of Independence was radical:

We hold these truths to be self evident, that all men are created equal…

Equality was extremely rare on the planet.  The English had their Kings, the Catholics, their popes, the Egyptians, their Pharaohs.  But here was a new country dedicated to the principle that we are all created equal.  The individual freedom flowing from that simple principle has made us the greatest nation in the world.

All men are created equal – no one can tell you what religion to practice, or not practice, or which words you may utter, or print, or with whom you may associate.

All men are created equal – your property is yours, no one may confiscate or use it without your permission or fair compensation.

All men are created equal – the government has no divine right and serves only with the consent of the governed, the people, who have the right “to alter or abolish it.”

It is important to note that we imperfect humans have not perfectly implemented this equality, but have striven to achieve it, driven by bedrock principle, over many years.  Witness the Civil War, the 13^th amendment (slavery abolished), the 19^th amendment (women’s right to vote), the Civil Rights Act, Title IX… the list goes on as we continue to perfect this belief in equality. But to be clear, the individual liberty recognized by our social covenant does not guarantee equal outcomes, rather it affords equal opportunity. 

The results have been very encouraging.  President Barack Obama, billionaire businesswoman Oprah Winfrey, former Senator and Secretary of State Hillary Clinton, and Supreme Court justice Thurgood Marshall (died 1993) are just the tip of the iceberg.  How about Meg Whitman, CEO of Hewlett Packard, or Stanley O’Neal, former CEO and chairman of Merrill Lynch. The incidence of successful, powerful, minorities and women continues to escalate, all to our mutual benefit as their ingenuity and drive contributes mightily to our collective success and well being.

Our founding fathers have given us a wonderful gift and our military has sacrificed mightily to help us keep it.  But whether we keep or squander it is up to us.  We can easily vote it away while chasing a mirage of equal outcomes.  Because with individual liberty comes choice and responsibility - the freedom to make choices and then being responsible for the outcome.  If you want equality of outcomes, then we must, perforce, yield up our liberty, forgo our choices.

Here is a better way.  Studies of census data have correlated individual behaviors to poverty over the past 60 years, and some simple relationships have emerged.  Ron Haskins of the Center on Children and Families at the Brookings Institute, recently testifying before Congress, made the following observation:

“… young people can virtually assure that they and their families will avoid poverty if they follow three elementary rules for success – complete at least a high school education, work full time, and wait until age 21 and get married before having a baby.”

Haskins went on to say that young people following those rules would almost certainly join the middle class and those who did not, would not.

Three simple rules.  Individual responsibility.  The outcome is your own doing, for better or for worse.  This is the cost, and the opportunity, of freedom.

Remembering Okinawa

Marines from the 1st Marine Regiment on Wana Ridge, Okinawa.

Each year in June, we remember the brave troops who first directly challenged the Nazi juggernaut on continental Europe. Operation Overlord, the assault on Nazi-occupied western Europe, began with the D-Day landings in Normandy on June 6, 1944.  The veterans of that action, if still alive, are 86 years or older.  This action, which over 60 days claimed the lives of over 20,000 American troops (and an additional 16,000 allied troops) has been memorialized by no less than John Wayne in “The Longest Day”, 1962, and Tom Hanks in “Saving Private Ryan”, 1998.  The enormous courage of these brave men broke the back of the Nazi war machine and directly led to victory in Europe in May of 1945.

While we should not, we must not, fail to recognize this enormous sacrifice, the month of June is somewhat unjustly overshadowed by D-Day.  Not as well known, one year later, on June 21, 1945, the Battle of Okinawa ended.

The war in the Pacific was viewed at the time as secondary to the war in Europe.  But the Japanese were fierce adversaries and had proven their battle mettle at Pearl Harbor, the Philippines, Singapore, Thailand, Malaysia, and China.  The threat of Japanese hegemony in the Pacific basin was very real. They were aggressively securing oil and mineral resources to fuel their formidable war machine. Not wishing to cede California, Oregon, Washington, Alaska (and Canada, Australia, and New Zealand) to Emperor Hirohito, we fought back. Hard.

There followed a series of swirling naval battles, such as the Battle of the Coral Sea and the Battle of Midway, intermixed with grueling island campaigns like the battles for Guadalcanal and Iwo Jima.  The Marine Corps, in particular, was the sharp end of the spear and suffered grievous losses.  But slowly the inexorable march to the Japanese homeland continued.

In April of 1945, Operation Iceberg was mounted. Okinawa, 340 miles from mainland Japan, was considered home Japanese territory.  This was the first Allied assault directly on Japanese native soil.  It was fiercely resisted.

Over 1,300 Navy ships and 183,000 troops (five Army and three Marine Corps divisions) were committed to Okinawa. Unlike the beaches of Normandy, the supply lines to Okinawa stretched across the Pacific, delivering over 750,000 tons of materiel.  The casualties were enormous: 72,000 Americans wounded, 12,500 dead, and 107,000 Japanese troops and over 100,000 civilians killed, more than the bombings of Hiroshima and Nagasaki combined (estimated at over 150,000 killed).

As horrible as the atomic toll was, it paled in comparison to the projected loss of life if Operation Downfall, the invasion of mainland Japan, were undertaken.  Various estimates centered around a half million Americans killed and perhaps several million Japanese military and civilians. These estimates were largely based on the desperate battle for Okinawa, and informed President Harry Truman’s decision to use atomic weapons in a bid to cut short the war.

In the end, terrible as was the carnage at Hiroshima and Nagasaki, it is clear that many Japanese and American lives were saved by avoiding the ultimate land battle for Japan.  Okinawa, a key factor in this calculus, deserves to be remembered. The ghosts of our troops, our fathers and grandfathers’ brothers, demand it.