Tag Archives: Economics

Sex Trade is Best Trade

A high-ranked post on Reddit by littlemew explains why it’s good to be a sex worker:

I’ve done many different kinds of sex work. I’ve been a cam girl, a porn performer, a professional sub, and a performer at a peep show (similar to a stripper). I’ve also been working in retail and food service simultaneously.

I get so frustrated at how I’m treated at work. It really gets to me. I find myself involuntarily crying once I get into my car to drive home. I hate how dehumanizing it is. People don’t acknowledge me as a person. They think I’m less than them because of my job. Maybe they don’t actively think that, but that’s how they treat me. Oh, by the way, I’m talking about the food service job.

When I’m doing sex work I can refuse a customer. I can be rude to them if they are being rude to me. I don’t have to apologize for their mistakes. I don’t have to be sweet when they are being inappropriate. I negotiate my limits, and I only do what I feel comfortable doing. They don’t get to order off the menu, I’m not going to bend over backwards for them.

I find it oppressive to work for minimum wage. I find it oppressive to act like the customer is always right. I find it dehumanizing to apologize for things that aren’t my fault, like how much something costs or if you order something wrong and you want it remade the correct way. I find it dehumanizing to say “Hi! How are you?” and in response get “Yeah I just need a blah blah blah” and then have a customer go back to their cell phone conversation. I hate being reduced to a cash register.

Essentially, almost all sex work has an aspect of entrepreneurism about it with a much lower barrier to entry than other self employment. The very nature of the work requires denying that the customer is always right. As Richard Florida has talked about in his follow-up to the Creative Class, we need to bring these values to retail work for the service economy to be sustainable.

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Raise Tuition

It’s very unpopular to say so, but I think in the middle of huge protests is as good a time as any: tuition subsidies disproportionately benefit the children of the rich and decrease intergenerational mobility. I know when you’re living in your parents’ basement after graduation, struggling to pay off your student loans you don’t feel rich, but compared to poor Canadians you are. Structural inequalities prevent the children of poor Canadians from even contemplating university. As much as your parents’ basement sucks, it’s still a safety net that allowed you to take a risk in pursing an education.

The progressive way to charge for school is to have very high tuition fees (at least what international students pay) and offset those on a needs basis with massive amounts of bursaries. The result should be that the children of poor parents pay nothing, even if they are only of average intelligence, the children of middle-class parents pay what they can, and the children of rich parents pay a lot.

But prospective students know that education is a good investment: tuition increases have shown a low elasticity of demand. Andrew Coyne correctly points out that the problem with student loans isn’t how big they are, it’s that graduates are expected to pay them off quickly and at an even rate. Better would be to amortize them 25 years like a mortgage and have a repayment plan based on the graduates’ income.

Effectively, the government should not give you a loan, they should buy a share of your future earnings – subsidizing tuition with income tax is a very crude way to do this. Even better, universities themselves should own the shares so they have incentive to maximize their graduates’ earning potential. And before you say that will lead to short-term credentialism, remember that universities have shown themselves to be far better at strategic financing with their endowments than any governments or corporations.

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The Problem with Productivity

In economics, productivity is how much output you get for how much effort you put in. An increase in productivity means that the amount of labour we need to do and natural resources we need to use for a given standard of living and pollution output goes down:

standard of living = (labour + resources + pollution) × productivity

Everybody likes increased productivity. Increasing it is one of the main goals of Finance Ministers and corporate executives. But Ministers can’t just tap their ruby slippers, increasing productivity has an opportunity cost. This is often made explicit in games like Civilization where research costs money or Power Grid where you have to buy more efficient power plants. Philosopher Joseph Heath has argued that the cost of increasing productivity is too high. For example, university funding is shifted from teaching and pure research to applied research in the hopes that it might increase productivity.

For salaried employees, productivity growth can be captured as fewer hours worked, more pay or higher share price. In 1950, the United States government decided to prevent a reduction in work hours (although the NY Times thinks that productivity causes unemployment). From 1950 to the mid-1970s, productivity growth has been channeled into buying more stuff – growth formed a vicious cycle with marketing to increase demand for stuff and help people decide what to do with their extra pay. From the mid-1970s till now, productivity growth has largely been captured by the 1% by owning the means of production.

Productivity of resource use and pollution has lagged productivity of labour, so environmental degradation has accelerated with economic growth. In theory, technology could allow us to use fewer resources and emit less pollution to produce the same standard of living. In practice, this has never been observed and UK’s Sustainable Development Commission has concluded that productivity cannot save us from climate change.

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The Gerontocracy Think it’s Future America’s Problem

Canadian essayist Stephen Marche makes a scathing argument in Esquire that the last 30 years have not so much been good for the rich and bad for the poor as good for the old and bad for the young. This is obvious when Reagan, Mulroney, Bush, Obama and Harper pump up the deficit, but it’s also a matter of which programs get cut, and how the education and job markets are structured. The Baby Boomers grew up in a period of unusual prosperity and when that boom ended they kept their boats afloat by transferring wealth from younger generations.

Although the article is written from a US perspective, he mentions that this phenomenon is widespread in Western Europe. It’s obviously happening in Canada too, where health care is our government’s biggest expenditure (how many days did you spend in the hospital this year compared to your grandparents?).

It’s particularly insidious that, while Baby Boomers have had to support their adult children with housing and small financial assistance, they’ve managed to avoid paying most of their tuition, meaning student loan debt is a cost that society will still be paying off after they’re dead.

Marche doesn’t discuss the cost of real estate: Baby Boomers bought houses and then voted for policies that would keep supply growing slower than demand to increase the value of their houses. He also doesn’t discuss the environmental externalities that were produced and the irreplaceable natural resources that were consumed in the unsustainable generation of Boomer wealth.

Marche implies that the Occupation Movement wasn’t embraced by many Baby Boomers was because, although their wealth has stagnated relative to the 1%, they’ve built a society that will do a reasonably good job of supporting them until they die. Dismantling that system is simply too risky at their age.

Throughout history large numbers of unemployed youth have been responsible for revolutions. The next stage of the Occupation may not bother trying to find common ground with the 25% of the population that hold 80% of the wealth.

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Cheap Debt is Better Than No Debt

I saw this in a comment on Reddit the other day and then lost it, so I want to paraphrase it before I forget it. It’s also a consequence of stuff I learned in public sector financial management.

If you can borrow money with x% interest and then invest that money with a return rate of (x + n)% (adjusted for inflation), then it is economically rational to borrow the money. The profit you make off the investment will let you pay off your loan in the future. However, to keep a good credit rating, all you need to do is keep paying the premium and have the ability to pay off the loan – you don’t ever actually need to pay it off. You are financially sustainable if your wealth grows faster than your debt.

This isn’t fool-proof for individuals, because they can’t borrow money at an interest rate lower than the rate of return for guaranteed investments. So they have to take a bet that their wealth will grow faster and sometimes they lose (like when there’s a real estate crash).

Governments have much better credit ratings, because their investment is their own economy and if their investment fails they can, in theory, raise taxes to cover their debts (riots are a side-effect). So if a government can borrow money at an interest rate lower than the expected growth of GDP (adjusted for inflation), it’s economically rational to do that rather than pay down debt. The economy grows fast enough that the debt eventually shrinks to an insignificant amount.

Of course figuring out the exact debt is non-trivial, but the basic idea stands: we should be looking at debt-to-GDP ratio rather than absolute debt. This shows why we should resist comparisons with household debt (bonds are not like credit cards) and resist the impulse of right-wing Albertans to pay off the debt. However, it also shows why degrowth is completely incompatible with contemporary economic management.

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A Modest Proposal: Defund Canada Post

I’ve written before about Canada Post. Well, silly me, I trusted them again.

I’ve been stymied on a video project for a while and one of my friends agreed to help me finish it. I needed to send him 100 gigs of footage, so I cleared off one of my terabyte drives and packed it up. My studio is equidistant from a UPS store and a Canada Post outlet. I picked the wrong one.

I paid for insurance. I paid for guaranteed delivery. I was promised it would arrive last Thursday — and I double-checked this because I’m under time pressure. Today, Tuesday, it arrived… AT MY HOUSE IN TORONTO. They gave themselves a five day extension and then did it wrong anyway: CLUSTERFAIL.

This is a truly monstrous waste of taxpayer dollars. I would probably be even more upset if I paid taxes.

Naomi Klein claimed, in The Shock Doctrine, that the Right’s modus operandi is to wait for disasters and then use them as causi belli (forgive my probably-wrong Latin pluralization) to execute their agenda. Well, here’s a freebie: our economy is SHRINKING — there aren’t enough resources to go around — let’s stop delivering post in, say, the GTA. Just for a week.

I predict that people won’t notice, let alone care. If they do, either, just restart it.

But imagine: a whole week of not killing trees for paper-based spam, not having our identities and belongings stolen, and having packages delivered TO THEIR RECIPIENTS (I can’t stress this point enough — it’s really the whole key to “delivery”, as a concept, and I’m willing to pay extra for it)… Oh, what a magical land of joy our fair city might become.

And once that experiment is successful we could roll it out to the whole nation:

Seriously, though: I would rather Harper just keep the entire postal budget for himself. The money would do me just as much good, but he’d retire from politics. Maybe he could split it with Ford.

[UPDATE: THEY BILLED US EXTRA TO TAKE DELIVERY AT THE WRONG LOCATION.]

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Save the Planet So You Can Rape It Later

I believe that carbon emissions should be reduced just enough to stop environmental disaster. Most people are not explicit about this, but I think it’s a view almost everyone shares if they think about it: the climate can absorb some carbon without disruption, so there’s no problem in that amount of emissions. Besides, eliminating all emissions would require the end of civilization if not the end of mammals.

I would go further and say that some climate change is probably acceptable. The problem right now is that since carbon emissions are an externality, there’s no decision process over how much is acceptable. If carbon were properly priced, the market could weigh the trade-off between carbon-emitting activities and climate change. Will economic growth now be enough to make up for environmental consequences later?

This long, self-reflective essay gives a good counter-argument:

[Sustainability] means sustaining human civilization at the comfort level that the world’s rich people—us—feel is their right, without destroying the “natural capital” or the “resource base” that is needed to do so…The success of environmentalism has been total—at the price of its soul…This is business-as-usual: the expansive, colonizing, progressive human narrative, shorn only of the carbon.

The environmental movement used to be about protecting the environment for the environment’s sake, but then it became co-opted by capitalism into this utilitarian economic thinking that I presented above: the environment is a big truck you can dump a certain amount of shit in before the tubes get clogged.

In Canada this is expressed by the tension between the Green Party, which sometimes acknowledges the trade-off between social justice and environmental justice (but mostly just promises all the justice!), and the NDP, which is a social justice party that added some sustainability policies. And the BC Liberals introduced a carbon tax because sustainability is just good business.

It doesn’t really matter because ecocentrism failed and now even sustainability is failing because the majority have decided (if subconsciously) that economic growth now is worth any amount of environmental pain later.

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The Rich Have No Right to their Wealth

I’m a bit confused by articles discussing whether high-income tax increases are “fair”, like this one Simon linked to. Many progressives (Elizabeth Warren most notably) argue that it is fair for the government to take some of that wealth because the wealth was earned by consuming social goods. But that’s still accepting the Randian world view that people have an inherent right to be compensated for their ingenuity, not merely their labour.

The Universal Declaration of Human Rights says that people have the right to compensation and property ownership sufficient to ensure their dignity, nothing more. Only the Queen (and the First Nations) has any inherent right to own anything. She allows other people to own things because it is in the best interest of her subjects to do so.

Given that rich people have no inherent right to their wealth, the question should not be how much taxation is fair, the question should be how high can taxes be before it screws up society. There’s a concept in economics called Kaldor-Hicks Efficiency (which is a generalization of Pareto Efficiency): any redistribution of resources is efficient as long as the total amount of resources in the economy does not decline. Taking money from Scrooge and giving it to Cratchit is Kaldor-Hicks efficient as long as Scrooge and Cratchit do not decrease their labour and productivity. (Although note that the Globe & Mail Economy Lab claims that the low capital gains tax is K-H efficient.)

Any Kaldor-Hicks inefficient redistribution will cause a drop in the GDP, which is the current performance measure of choice. But inefficient redistribution could still increase our social welfare function. The left should stop arguing about what exactly the tax rate should be and start arguing about how we measure if a tax system is good.

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