When Scott , Kale, and I started this blog site, our intention was to blog about things we were passionate about and do so in our own unique styles. Mine tends towards the pedantic, obsessive researcher style, with lots of supporting documents and pretentious quoting.
This post, however, is going to be 99% opinion. Maybe more. I have a lot of opinions. So hang onto your bustles, kiddies….
So, this post was supposed to be finished MONTHS AGO. Being a person of many moods, I let this drop off my radar. But here it is, finally – my rebuttal to Scott’s empty gas tank & infrastructure post:
For the sake of argument, lets say I did let the gas tank get low because I was hunting for cheap gas. I come from driving people, trooping people, people who take pride in how good they are at finding deals. Add that to my general desire to put off filling the oddly finicky gas tank on our shared vehicle and you get a wonderful excuse to not fill it. Despite this, I’m also pretty certain, though, that the gas gage works, and is accurate enough that someone sitting in the driver’s seat could, in fact, see at a glance that the gas tank was not as full as one might like, and thereby prompt that someone to get gas in a less inconvenient part of town.
Just sayin’.
But infrastructure, now, that’s an interesting topic. There are a lot of good reasons to worry about infrastructure these days. Scott’s post got me thinking about infrastructure and how to get people to get excited or invested in it.
For the deniers among the bytegeist, just suspend your disbelief for a bit and pretend that global climate change is really a thing. I’m not going to talk about whether or not humanity is responsible, or can do anything, or even if it’s just a cyclical process that the global climate just… DOES. Instead, let’s all just agree that it’s getting weird out there and talk about how that relates to infrastructure.
Open Letter to Skippy:
Having taken our shared vehicle out to work on a weekend, I happened to find myself in the not unusual enough, frustrating situation of being out of gas in an inconvenient neighborhood, and I find you responsible.
There is a habit that you have been partaking in recently, at least with regard to our daily commute, that would put more blame on your shoulders than a typical “tank low” situation.
The habit is hunting for the lowest price in fuel. As the tank gets low, and the demand for fuel becomes more urgent, you fill the tank in $10 chunks while waiting for the next convenient time you come up to a cheap price in gas. Now the tank has a higher propensity to be empty, so on the off chance I happen to need the car alone, noting that you end up being the driver more often than me, I find myself looking for a gas station with no opportunity to price hunt. Hence, I end up filling the tank with expensive gas in inconvenient parts of town.
In order to avoid the string of $10 fills waiting for a cheap gas price, I encourage you to just fill the tank when it needs it, and the frequency of fills means you’ll get as many opportunities of cheap gas as you would expensive gas. Hence, you wouldn’t save the optimum amount, but half optimum and I wouldn’t have to experience the excessive empty tank situations.
However, that situation got me thinking: How would I solve the crumbling infrastructure problem?
The problem seems to have more to do with accountability than with willingness to pay ones dues or a need for financial security. On a reasonable schedule, the government (either state or federal) should take bonds out that are equal to the cost of improving said infrastructure – for this example we’re going to say roads and bridges in particular, but other infrastructure items like sewage, water, etc. (http://www.infrastructurereportcard.org/) would benefit from similar programs.
These bonds would be paid for through gas and tire taxes – maybe a little through vehicle registration, but specifically gasoline-oriented vehicles, with some opportunities to charge electric vehicles through tires and registration. The bulk, though, should be gasoline vehicles. Let me explain. No, there is too much, let me sum up…
It’s important to distinguish that this tax will be on gasoline, not diesel, because an increase in the cost of shipping would have a multiplier effect, (http://www.economicsonline.co.uk/Managing_the_economy/The_multiplier_effect.html) through transportation of goods, which would hurt the economy. So diesel is out. Tire and vehicle registration would be just as an offset, in case a stronger than anticipated shift occurs in using non-gasoline vehicles for personal use.
This Gas Tax will not be a flat 5% or $0.10 per gallon, it will be a yearly adjusted amount that is predicted to equal the cost of the bond repayment. Meaning, the rise in gas tax will be enough to pay the bond over a 10-20 year period (pending the type of bond for the market). As sales amounts shift, the adjusted amount changes to reflect that shift, so the total amount of the bond payment is paid. Excess goes to repaying the bond faster, shortages are made up in the following year.
I know what you’re going to say, so I prepared ahead with some further explanation.
(Opposition) “But increasing the tax amount will decrease the amount sold, so any prediction you make on current sales would lead to a shortage, per supply and demand.” (https://courses.byui.edu/econ_150/econ_150_old_site/lesson_03.htm)
(Response) Oh, good point, therefore the tax amount should be set higher, so if you need 5%, you raise the tax to 10%, under the assumption that the 5% would miss its mark, therefore you overshoot – and perhaps pay the bond off early. The inelasticity of gasoline sales (http://economics.about.com/od/priceelasticityofdemand/a/gasoline_elast.htm) would mean that there would be a convergent point where the increased price would meet the bond payment.
(Opposition) “But that convergence point would never happen, because consumers would recognize the higher cost of gasoline and switch to more fuel efficient cars or alternatively fueled cars, like electric (http://time.com/money/3730389/electric-cars-sales-cheap-gas/), eventually driving your tax to 100% of fuel cost and making travel by gasoline car impractical.”
(Response) You mean to tell me that this would not only start us on the path of fixing the infrastructure, but also wean us from fossil fuel vehicles? Sign me up!
Firstly, the convergent point would happen eventually anyway, as the cost of finding substitute cars with different fuels would become more and more expensive, helping gasoline’s inelastic demand curve, unless the increase in demand made the economies of scale for alternative fuel more practical – which wouldn’t be a bad thing. A similar event happened to solar panels (http://thinkprogress.org/climate/2013/08/13/2455121/solar-getting-cheaper/, http://www.npr.org/2015/04/10/398704224/how-solar-power-has-gotten-so-cheap-so-fast).
Secondly, as happens many times over in economics, there appears to be a natural dampening effect to shocks, where the deficit in the market leaves room for human intuition to fill the gap with new technology and market structures.
Take the solar subsidies’ effect on panel installation (http://www.npr.org/sections/money/2015/04/10/398811199/episode-616-how-solar-got-cheap). The start of a U.S. subsidies on solar at a time when China decided to launch head first into solar panel production threatened to bankrupt many installers, and did bankrupt many. However, as the market expanded, some installers utilized their innovations and when the dust settled, panel installations came down, many customers came away with a steal, and fortunes were made.
Or how breweries survived during the prohibition era, converting their breweries into creameries (http://mentalfloss.com/article/55157/how-breweries-kept-busy-during-prohibition).
Thirdly, no market is set, and as long as there is demand, supply will find a way.
Lastly, and the major point, the cost of fixing the infrastructure is a long ignored bill related to the cost of doing business in this country (http://www.asce.org/uploadedFiles/Issues_and_Advocacy/Our_Initiatives/Infrastructure/Content_Pieces/failure-to-act-transportation-report.pdf). Having roads, bridges and highways that help us communicate better, get to work faster, and live in more convenient locations is a benefit that comes with an added cost. This cost is like a cable bill we’ve been casually ignoring, while the guy at Comcast keeps calling us on the phone, attaching late fees, and threatening to cut our service.
(Opposition) “You say that, but what about the poor old people on fixed incomes who live more than 7 miles from a store that sells eggs or cartons of milk? Are they just going to be forced out of their homes due to a rise in cost of living?”
(Response) Moving further and further away from cities has been a subsidized luxury that the country has just been taking without thinking of the repercussions of bad urban planning or suburban sprawl (http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=3450&context=wmlr). Living more secluded today is a luxury, and by not adequately funding our infrastructure, it becomes a subsidized luxury. That being said, holding the people who live in secluded areas accountable for this increased cost of living may be an unreasonable shock that we as a society can help absorb.
I do feel for those people, especially the fixed income sort, the ones whose mobility is hampered through age, or just accumulated assets from years of not anticipating the impact their lifestyle has had on our infrastructure.
Perhaps we could provide them a discount in their property taxes, or provide subsidized fuel. Residents would have to apply for these subsidies, proving their need and that the increased cost of living is an unreasonable hardship (this is already done for things like sewer upgrades and other utility maintenance). These discounts and subsidies could be covered by the increased gas tax, which would make it go up more… so use would need to be sparing.
(Opposition) “Look, even if that stuff was true, and even feasible to assist those effected by the increased gas price, we don’t even have enough engineers and construction workers to perform the scale of project that this would create.”
(Response) An added point that not funding our infrastructure properly has created is an undervaluing of fields related to maintaining it. As Barak Obama said in “Audacity of Hope,” “I wish the country had fewer lawyers and more engineers.” Right now the highest paying jobs are for doctors, of various fashions, and lawyers (http://www.bls.gov/oes/2014/may/high_low_paying.htm); maybe our country needs a values shift.
Perhaps the lack of investment has left us in a situation where this would need to be staged in, and over time the salaries of the people creating and repairing this infrastructure would increase, shrinking the inequality gap, as well as generally boosting the economy by improving productivity due to better infrastructure and the multiplier of the jobs created by taking on this endeavor (http://profoundlydisconnected.com).
(Closing argument) Ultimately, the lack of investment in our infrastructure is a bill we’ve been refusing to pay. Perhaps the bill is so large that we won’t be able to pay it in one chunk, but will need to stage it in slowly over time. The alternative, in the long run, is to just cut our services. That would leave us in a downward spiral into constant, slow, underdeveloped status (http://www.bna.com/time-invest-americas-n17179911498/).
So the solution I propose:
Let me know what you think in the comments section.
In a 2013 article, The Atlantic discussed a study that found that poverty had a negative impact on people’s ability to make decisions or plan for the future.[1] The assertion was that poverty had a similar effect to losing 13 IQ points. This study, “Poverty Impedes Cognitive Function,” combined a laboratory experiment with a field study and focused on the effects of poverty-related concerns on adult cognitive functions.[2] This gives us insight of a kind into what happens when adults are not paid what is commonly referred to as “a living wage.”[3] A living wage is defined as the minimum amount needed to pay for the basic costs of living in a given area without government or poverty assistance. This amount changes according to the location, as it is more expensive to live in New York City than it is in rural Kansas, so the living wage in each of those places is very different. Minimum wage, in most cases, is far below the local living wage, and this can, as the research shows, severely impede the ability of people to make decisions.[4]
According to Economicshelp.org, economic growth can reduce poverty, but only if the minimum wage is tied to average earnings.[5] As average earnings increase, so should the minimum wage, which would also decrease the gap between the poorest and the richest. Economists who follow the school of trickle-down economics often say that a rising tide will lift all boats, but the fact is that the bigger boats will always be lifted higher, and will swamp the smaller ones.[6] The idea is that the wealthiest quintiles will create stable jobs that pay more than a living wage, which will in turn lift the poorest quintiles out of poverty.
![Somebody's boat is rising... [7]](https://politicallyskewed.com/wp-content/uploads/2015/06/david-horsey-cartoon20100526.jpg)
Author Robert A. Heinlein’s character Lazarus Long said, “People who go broke in a big way never miss any meals. It is the poor jerk who is shy half a slug who must tighten his belt.” When the 1% “go broke,” they have ways of getting out. There are safety nets and schemes that allow them to recover. When the poor lose a job or have their wages or assistance lowered, they don’t have those things to help them. They go hungry. Sometimes that hunger isn’t physical, sometimes it is spiritual or psychological, where they feel defeated, depressed, as if they are less than human. When we discuss minimum wage and social assistance programs from our places of modest privilege, those of us who are above the poverty line absolutely must remember how close we are to crossing that line in the wrong direction. We must learn to empathize, not just sympathize, and to remember that a society where all members have full bellies and safe places to sleep is a society with less crime and more happiness. The pursuit of happiness shouldn’t be selfish one, it should be an inclusive one.
[1] Derek Thompson, “Your Brain on Poverty: Why Poor People Seem to Make Bad Decisions,” The Atlantic, November 22, 2013, http://www.theatlantic.com/business/archive/2013/11/your-brain-on-poverty-why-poor-people-seem-to-make-bad-decisions/281780/.
[2] Anandi Mani, Sendhil Mullainathan, Eldar Shafir, and Jiaying Zhao, “Poverty Impedes Cognitive Function,” Science, August 30, 2013, 341 [DOI:10.1126/science.1238041].
[3] “What’s a Living Wage?,” Living Wage Action Coalition, Accessed May 19, 2015, http://www.livingwageaction.org/resources_lw.htm.
[4] Anandi et al., Poverty…
[5] Pettinger, Tejvan R. “Poverty, Income Inequality and Economic Growth.” Economics Help. April 6, 2011. Accessed May 25, 2015. http://www.economicshelp.org/macroeconomics/inequality/poverty-inequality-economic-growth/.
[6] Haushofer, Johannes, and Ernst Fehr. “On the psychology of poverty.” Science 344, no. 6186 (May 23, 2014): 862-67.
[7] Horsey, David. “The Rising Economic Tide.” Seattle Post-Intelligencer, August 30, 2005. http://www.seattlepi.com/davidhorsey/slideshow/David-Horsey-cartoons-August-2005-14730/photo-978746.php.
[8] Plumer, Brad. “How the recession turned middle-class jobs into low-wage jobs.” The Washington Post, February 28, 2013.
[9] Folbre, Nancy. “When a Commodity Is Not Exactly a Commodity.” Science 319 (March 28, 2008): 1769-70.
People’s lives have costs; just living in the world has a cost associated with it.
The common assumption is that the particular floor, minimum wage, forces the price of labor higher than equilibrium. This theory is widely accepted with anecdotal evidence of mom and pop stores forced to close when municipal laws force the wage higher. If the anecdotal evidence was indicative of market forces as a response to the wage we’d see a general economic decline. On top of a rise in inflation, as more people are forced out of work with wagesforced higher, local economies would be plunged into a death spiral. This has a lot of big names in economics going ballistic: 
http://www.forbes.com/sites/jamesdorn/2013/05/07/the-minimum-wage-delusion-and-the-death-of-common-sense/, imagining a shark tank for jobs, and all the hipsters having to board up their coffee shops and burn their Kindles for warmth as everything collapses around them.
But this isn’t happening, as shown from San Francisco’s research into the effects of the minimum wage increase in 2003: http://sfcontroller.org/Modules/ShowDocument.aspx?documentid=5495. What is happening instead, illustrated by examples from Washington and California as they adopt higher minimum wages, is economies not only avoid going into decline, they actually start to thrive on a scale not seen by typical economic mandates. In short, raising the wage seems to have added jobs, not forced down the job market.
So what is happening? More people are being employed due to a rise in low labor wage? But weren’t stores supposed to close? The part on inflation is easy: When you consider the typical employer paying minimum wage, wages are only a small fraction of the cost to do business. Therefore the increase in fixed cost of doing business (wages for service jobs being a fixed cost – cost of keeping the door open, wages are only a marginal cost for manufacturing) is dwarfed if the local economy sees a sudden increase in consumer spending, and the consumers that spend the largest portion of their income are the ones at the lowest bracket of earnings – the minimum wage earners.
The other change is that the minimum wage market doesn’t function like the typical wage market. Minimum wage employment is a buyer’s market. The employer gets to decide who to hire, and who to let go. This means there is no negotiation in terms of wage. For skilled jobs that are significantly higher than minimum wage, there is a market force that leads to job wage equilibrium. Low wage jobs, the employer can be so discriminatory that they can participate in something called “price discrimination.” http://www.economicsonline.co.uk/Business_economics/Price_discrimination.html
Price discrimination is bad, long story short. Short story long: When prices are set to an equilibrium price, it means that there are people who value the “for sale” item highly, and some that value it lowly, and some in between, but there is ultimately one price. With this continuum, it means that all people who bought the item at a lower price than they actually valued it gain “utility” or got a super deal, which is good for the economy. With price discrimination, the seller can price the item more closely to what the buyer is willing to pay. Hence, all utility goes to the seller, not to the buyers. This forces a shift in wealth to the seller, which adds to income inequality, which breaks down the economy.
There is also a talk of Monopsony (like a Monopoly only for buyers), however, monopsony applies for sinlge buying situations, where the minimum wage market has many buyers, all at the same wage, making the arguement a weak one. http://www.economicthought.net/blog/2013/11/monopsony-and-minimum-wage-logic/ Monopsony would only occur if there was one buyer –minimum wage workers, however, are a large group going to many employers.
To better understand where price discrimination fits in, we have to imagine what happens when people are living below poverty, more specifically, what happens when people live below autonomous expenditure. People’s lives have costs; just living in the world has a cost associated with it. The bare minimum you have to pay out to survive is referred to as “autonomous expenditure,” the automatic payment that has to be doled out before you can consider buying goods or saving for a rainy day. The funny thing about autonomous expenditure is that this is stuff that is paid whether it is you footing the bill or not. http://en.wikipedia.org/wiki/Autonomous_consumption.
Autonomous expenditure is like the minimum cost of living. Except there is no law saying you have to make the minimum cost of living to live in a community. Instead, this is the toll an individual puts on their environment, if they are unable to make a living. Power bill may not get paid, but power is still delivered and served, and if enough payments are missed, the line must be additionally served to guarantee that individual is not free loading off other people’s power. Food needs to be eaten by that individual, but if they can’t afford it, are we so daft as to believe they’ll just sit in a corner thinking to themselves, “Shoot, I guess I do not get my bread this evening, maybe tomorrow. Instead, I will gaze at those enjoying the fruits of life.” Where people are living below poverty, delinquency, theft and scofflaw activities thrive. All of these drive down the GDP of the surrounding group, surprisingly equal to their autonomous expenditure.
Therefore, with poverty wages, employers can hire employees equal to their willingness to live below poverty, which in my view, is price discrimination. Employers get to set the price for those willing to live under their cost of living.
So why would economies boom with a rise in minimum wage? Well the cost of the labor has not changed. Willing to bet the $15 minimum wage will not meet those individuals minimum cost of living, especially if they have children. That being said, the bill for that cost is now coming from those paying the wages and not the surrounding communities. That mixed with a healthy dose of marginal propensity to consume (to be discussed later), giving the poor workers of America a decent wage ends up being cheaper than forcing them to steal it.
Politically Skewed 