Pro-slavery Progressives

I would like to think that our modern democracy has moved beyond the ignorant beliefs of bigoted, uneducated times of a bygone era. Instead, essays such as this one by Princeton economist Uwe Reinhardt confirm a sad fact that people forget first principles all too conveniently.

Reinhardt makes a carefully-reasoned argument that the voluntary nature of military service in the U.S. is dangerous and altogether bad because it (1) allows risk-avoiding, war-mongering elites to send the lower classes into combat, and (2) allows college students to cheer on war without having to face the consequences, and just for spite (3) attracts the dregs of society into uniform. That third point is bracing in its offensiveness, but Reinhardt can get away with it because his own son is a Marine, wounded after multiple combat tours. Well, I’m still offended, almost as much by Reinhardt’s bad economic logic as by his contempt for my service in uniform, my dad’s service, and the freedom all veterans have defended.

In his own words:

[W]ith a hypothetical supply-of-soldiers curve such as the solid, upward-sloping line in the chart below … under an all-voluntary armed force, only individuals on line segment AB would join the armed forces, sparing the individuals located on segment BC the duty to fight and sacrifice for their country.

… I know from personal experience that, before the invasion of Iraq and thereafter, this welfare-economic analysis of the military draft was music to the ears of the many undergraduates who enthusiastically cheered on that invasion and the subsequent dangerous occupation of Iraq, leaving the fighting, the bleeding and the dying to someone else, …

… Clearly this is a classic case of moral hazard. It raises the probability of a nation going to war, especially if huge profits can be made off a war by those bearing little personal risk in that war but with powerful sway over government. (emphasis added)

All of these claims are wrong.  His subsequent moralizing is just as bad.

First, the supply curve analysis Reinhardt attempts is too simple. He must know this, yet he keeps making this argument that people with higher opportunity costs (“individuals located on segment BC”) would never join the military. This is belied by his own son, Mark Reinhardt, Princeton class of 2001 and proud but lonely member of the ROTC unit there. If Uwe Reinhardt had any sincerity, he’d do some real research on the topic instead of make this stuff up. What he would find is that low-skill youth (the roughly bottom 20 percent of Americans who score in the lowest “Category 5″ group on aptitude tests), are not welcome in the military today. They cannot volunteer even if they want to. My own research into the demographics of modern military enlistment found that volunteers disproportionately come from higher-income neighborhoods. But don’t let facts ruin a good story, Uwe!

Second, the professor says that the freedom to enlist or not was “music to the ears” of his undergraduates, but only those who cheered on the war. What a rude assertion. His whole chickenhawk critique, thick with insinuations of class divisions, is silly. Any polling to back this up?  No, of course not.

Third, he claims the all-volunteer force creates a moral hazard that raises the probability (not possibility, mind you) of going to war. Really?  Here are the U.S. wars fought under conscription: Civil, WW1, WW2, Korea, Vietnam (to name a few) which were in the 1860s, 1910s, 1940s, 1950s, 1960-70s. You call that rare? Then conscription ended in 1973 (more on that later), and the number of wars dropped dramatically. Better logic reveals that wars fought with volunteers are less deadly. Seriously, do the math, and the empirics back this up big time. Volunteer troops are more valuable: there’s an economic principle for you. (Or see this BBC report “Wars less frequent, less deadly“).

I find it bemusing how modern progressives tend to have a self-image as protectors of the downtrodden. You often hear them mock conservatives as racists, fascists, or other reprehensible things. Oddly though, the modern political party that is more conservative, the Republican party, was born expressly to oppose slavery. Likewise, people forget that Nazi, the movement of uber-fascist Adolf Hitler, was a shorthand for the National Socialist party. The Nazis, like the modern Democratic Party, stood quite firmly for bigger government. And nothing is bigger in principle than a government that can enslave its own people.

So why is Uwe Reinhardt in favor of that?

Naturally, Reinhardt and others say that what they favor is being mis-characterized. What they favor is “national service” a euphemistic, poll-tested, re-branding of what real liberals opposed in the 1960s when it was known as conscription, a.k.a. the draft. Coercing young people to fight in the Army was the norm in the U.S. until (surprise) Richard Nixon campaigned against the draft in 1968 and (avert your self-image, modern progressives) actually ended it  in 1973, despite howls of protest from many in the Pentagon and many Senators as well (here’s to you, Ted Kennedy).

I truly wish Reinhardt would open his heart and realize that slavery is wrong in all of its forms, private and public. He can call it national service all he wants, but coercing work from others against their will is wrong. It’s counter to my value system as a veteran of our military, and it is counter to the values of almost every teenager I know. So why is the idea of conscripting young men so popular with older men? I suspect it wouldn’t be such a hot idea if pressing people into service was limited to Ivy League professors – no that just wouldn’t do. But who has more brainpower that could be harnessed for the public good? What harm could two or three years of involuntary service do to those tenured geniuses?

Here’s a counterpoint. If the voluntary nature of labor markets creates moral hazard, does that mean you are more likely to abuse maids and trash collectors? Are we more likely to overuse services which we don’t have to provide? Are we likely to be inconsiderate to people in those jobs? Reinhardt logic says yes. It also says that a job lottery to fill dangerous jobs would be a Pareto improvement over a free country. Want to take a low-paying job working in a park? Too bad, you’ve been tapped to fight crime with the Chicago police. Want to design new medicines to fight cancer? Too bad, go dig a tunnel (it’s a public good you know).

Again, if Uwe Reinhardt was serious in his critique of the moral hazard of a voluntary military, he would do some actual research on the matter. He might even ask the troops who volunteer. Do the men and women who enlist today prefer to serve with conscripted soldiers? I know the answer because I’ve asked these questions. It turns out that nearly 90 percent of the officers I surveyed oppose efforts to reintroduce the draft. In my book Bleeding Talent I show that what’s really wrong with the military is that it hasn’t gone far enough in stomping out the remnants of coercion in how soldiers are treated. What America needs is a Total Volunteer Force that will add flexibility to the ranks and improve the way service members are treated. The troops know this, but Reinhardt and modern progressive elites are lost.

Unemployment versus Labor Force

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Here’s an update from my last post, this time contrasting Labor Force Participation with Unemployment. Both have U.S. population as a denominator.  Make sure to check out National Journal’s Major Garrett on the topic:

But is this a harbinger of a new, gruesome economic normal of laid-off workers who can’t find work, young Americans clinging to college and post-graduate work—adrift in a jobless future, piling up debt? Or is it a statistic that looks alarming but is really benign—a statistical brew of trends in aging, schooling, retraining, and life choices that’s frothy and mysterious but no more distasteful than Guinness served too cold?

 

 

The U.S. Labor Market Is Abnormally Broken

As the U.S. economy completes another year of non-recovery, I have become increasingly convinced the policy environment is harmful to the labor market. Congress enacted a sharp increase in the minimum wage at the beginning of the recession (41%) and also made unprecedented increases in the duration of jobless benefits, essentially quadrupling them. These distortions to work incentives are just two easily identifiable changes. The myriad pressures from new laws and regulations, notably ACA, are also negative but will be difficult for economists to quantify.  The resulting distortions are easy to see, however.

First, recent movements in the unemployment rate are now well-known to be false signals of recovery.  The U-3 rate does not count discouraged workers and others who have dropped out of the labor force. In the charts below, I show a snapshot of the relationship between the U-3 unemployment rate and the demographically neutral Employment-population ratio. I’ll save further commentary until after the charts.  Notice that the relationship, shown in a 2-axis scatter, varies as demography shifts from the 1950s to the 1970s (first chart). However, in later decades, the relationship is remarkably stable, until the 2009 “recovery” shown in the final chart.

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The scatter points in the last chart do move along the traditional line that was steady for 25 years. And then in late 2009, the scatter points get stuck in a cluster for a year or more with unemployment at 9.5 to 10, alongside the E-pop ratio at 58.5. After mid-2010, the old normal melts down, as unemployment begins to decline while E-pop holds firm. I find it amazing.  And the meltdown is ongoing.

Every month in which the unemployment declines while the E-pop ratio stagnates indicates a further breakdown in normal work patterns. I have to wonder if what these pictures reveal is an erosion of culture, for lack of a better term.

Four things to read about Ryan-Murray

1. A simple summary. This is a good start before reading the opinion pieces.

2. Congressman Paul Ryan at National Review.

3. Megan McArdle says it is a better deal for Republicans than Democrats. I agree.

4. Kevin Hassett‘s 5 reasons a Republican would support this deal:

First, the deal is microscopic, so small as to amount to economic rounding error. Second, it reduces government pensions by changing an indexing formula, a method that might have a better chance of sticking than more straightforward reductions, making these future cuts more certain than most. And if the new indexing continues forever, then spending will drop in the long run by much more than it will increase over the next two years. Third, if House Republicans pass this, it will reduce uncertainty and help the economy. Fourth (though this weakens the previous point some), the deal appears not to lift the debt limit, so they can play that game again if they want to. Finally, assuming that the debt-limit increase is not going to lead to another showdown next year, this deal allows Republicans to talk about Obamacare all next year.

I have a longer piece with my thoughts on Ryan-Murray coming soon to National Review online, by my own political take (not from the NRO piece) is that getting the budget deal off the table will be helpful in 2014. The debt limit fight is still on for February, and getting the discretionary budget resolved now will make that a very clean debate about reforming entitlements. Second, Obamacare goes back to the front burner for the next 2 months, which is vital to making it right, let’s say.

The Moral Wage

There were two, maybe three, stories on National Public Radio this morning that relate directly to the minimum wage. One story covered the opening of new Wal-Mart stores in Washington, DC, which according to many liberal activists hurts poor workers in the area because Wal-Marts wages are too low. Yet most of the residents quoted on air were ecstatic about the new place. What gives?

It is tempting to say that critics are looking at the glass half empty — low wages — because the net benefit to society has to account for the local consumers who can suddenly shop locally, and get much lower prices on a vast array of goods than before Wal-Mart opened. Imagine if the debate wasn’t about worker pay but about consumer prices. Activists could protest high prices and agitate for price controls on things like milk, meat, bread, shoes, shirts, pens, and paper. Price controls for the poor! Except we all know that kind of thinking is a dead end. Experience over many centuries confirms that when government tries to control prices, the end result is some mixture of empty shelves, black markets, and corruption. (Remember this logic shortcut when you get into office, young public policy grad student: regulation => corruption.)

So why do activists protest the very store that offers lower prices “organically,” i.e., without regulatory intrusion? If I were an activist for the poor, and come to think of it, I am, then opening a big box store in the urban core is cause for celebration.

NPR separately did a great analysis of McDonald’s and the minimum wage. On this one, the liberal activists are agitating for a fifteen dollar national minim wage, and pressuring McDonald’s to make the change on its own. Really?  This is an idea that is so bad that I can’t take it seriously on its face. Indeed, many of my liberal-economists friends find it grating, too. As NPR noted, McDonald’s stores are quasi-independent franchises, so that each stores offers a wage unique to its situation. One employee at an airport-based McD’s made something like 15 or 16 dollars per hour. But guess how much the burgers cost there? Sometimes 2 dollars more.

On Wednesday, December 4, 2013, President Obama spoke about the economy and said, “I believe this is the defining challenge of our time:  Making sure our economy works for every working American.” Most heard his speech as a call to fight inequality, particularly when he called for a higher minimum wage. Egads, what a terrible idea. Even the Washington Post questioned the Presidents claims, awarding him 2 Pinocchios for pretending the economics is settled. Far from it.

I’d like to ask a simple question. Rather than coercing employers to pay a minimum wage, why not let them pay a moral wage?  I use that phrase to assert a simple point, one embodied by the NPR story about a new IKEA store opening in Spain. In that European nation, the youth unemployment rate tops 50 percent and labor regulations are some of the strictest in the word — take a stab at which is cause and effect. So IKEA opens and announces 500 or so job opportunities and gets something like 20,000 applications in the first 48 hours. Yet some complain the wages are too low.

Who complains?  Not the job applicants.

A moral wage is any wage that is not paid through coercion. If two consenting adults agree with full information beforehand to exchange one’s labor for another’s payment, it is a moral arrangement so long as both are fully aware of the scope of the labor. The employer who hides the fact that his operation involves toxic fumes is not engaging in full information.

What is immoral is for a third party to use the threat of violence to bar consenting adults from making such an exchange. That would be the government.

I don’t believe the economics of the minimum wage are as important as the moral aspect, but I think the economics are on the side of free exchange.  The shame of this undying debate is that the activists are winning, and their victory hurts the poor. Let’s remember that the last time the feds raised the minimum wage, in 2007, Democrats used their monopoly power to force a 40% hike on every employer in every small town in the U.S.

So much for diversity!

The one-size-fits all Pelosi wage was followed by the worst labor recession in nearly a century. The poor are suffering from it still, and the only reason the national unemployment rate is in single digits is because millions of poor Americans have given up trying to work. That’s the Obama recovery. Yet, no humility?  No sense of self-doubt or questioning of priors? Sadly, they are pushing for more of the same.

Digital Killed the Video Star

We’re all feeling very cute today, noting Blockbuster’s demise with the witty riffs off the 1978 song titled “Video Killed the Radio Star.” The song is fondly remembered by a certain generation of Americans because its music video was the very one first played on MTV. Time: 12:01 AM, August 1, 1981. The song has a nostalgic tone, lamenting the loss of radio while celebrating the brave new world of video. And now we know how briefly that lasted before the video store was displaced by Netflix, which itself is being displaced by digital distribution. It won’t be long before all content is free, pre-installed on your smart ear pods while you sleep.

We are living in an era when people are self-aware of the evolution of the technology on which are culture and society exist. That’s awesome but weird. Humans weren’t aware of progress for most of human history — 99% of the time, that was because there was no progress. The other 1% of the time, progress was too slow to be noticed. Now: human society is self-aware but not altogether self-confident.

But you have to wonder if the kids get it. My sense is that the young have an even better grip on the dynamism of the era than the rest of us. They understand the short life cycle of gaming platforms, even though they missed out on the whole communism thing. Strange.

The question I find myself asking is a revision of the Zen If a tree falls in a forest with no one around to hear it, does it make a sound?  My version is: If I remember something that no one else remembers, did it really happen? Well, I remember going to Blockbuster with my young daughter to pick out movies on Friday nights, but she doesn’t. We drove by the old corner store at the nearby strip mall ten days ago, where a bank now resides, and she had no idea that it used to be a Blockbuster. Our Blockbuster. We rented all of the Star Wars movies there, kiddo!

Maybe change is so cheap that we don’t have to pay attention.

Too Many Generals?

The New York Times hosted a provocative discussion today regarding the “bloated” officer corps, particularly the number of flag officers. I took the contrarian view, but one that I think resonates in light of a future that will be decided more by brains than brawn.  I don’t disagree with the other participants, but I do think they are asking the wrong question. My summary argument:

Nobody knows what the optimal ratio of generals will be in 2025, let alone 2040. If the Pentagon wants to plan for that future, the smart strategy is a flexible personnel structure that can accommodate more, or less, expertise as needed. Maybe the next war will be dominated by drones, maybe cyber, maybe the electro-magnetic spectrum, or maybe analytics. In any scenario, the Pentagon deserves flexibility to hire talent at all ranks.

Allowing combat veterans now at Google, G.E. and General Atomics to return to uniformed service after a decade or two away is the big change America needs to establish a flexible force. It’s called continuum of service, banned by central planners today. But it’s anything but a radical idea.

Guess who rejoined the U.S. Army after 17 years out of uniform? He retired in 1758 as a major, but was asked to return as commander of the Continental Army in 1775. His name was George Washington.