Walking It Back

My last post was surprisingly popular—and not just among people who know me personally. I even managed to pick up a few new followers, whom I’m afraid will be put off a bit when they discover travel writing isn’t aligned the usual subjects of this blog (but hopefully not!).

Anyway, as you may or may not recall, the last post incorporated a graph of the distance I’d walked the days before, during, and after various legs of my trip through Italy:

miles walked

In the graph’s caption, I glibly blamed my apparent sedentarism on my office job and commute. I like to think of myself as a decently fit person, you see. Surely, I reasoned, my desk job must be impeding an otherwise active lifestyle. I mean, I have a standing desk—clearly I’m a man who values his physical fitness.

It occurred to my a few days later that my hypothesis was actually pretty testable: if work and commuting were really to blame, my weekends should be significantly more active (measured by distance walked/run) than average. Apple has, for some reason, elected to make exporting health data from iPhones an incredibly difficult process, so, with the zeal of an intern, I manually entered 242 days worth of mileage, attempting to evidence my claim.

Looking back, my naiveté was almost cute. In the era of “binge-watching,” I really believed myself exceptional.

The raw data is pretty depressing, I must say. The mean distance walked is 1.54 miles. But the data is right-skewed, meaning outliers on the upper end of the distribution are pulling the mean higher. (The median distance walked over this period is a shockingly low .985 miles.) It’s also telling that the distribution isn’t bimodal, which would indicate two distinct populations—in the case of my hypothesis, weekdays and weekends.

Miles Walked histboxmiles

I could have quit here, but I’ve touched on the importance of publishing negative results before and therefore had a cross to bear. To make the data set more normal, I removed outliers (in this case, all values greater than 3.73 miles) and used a square-root transformation:

Square Root Miles Walked, no outliers

The means of our new, outlier-free population and the “weekend” sample (n=61) are, respectively, 1.023² miles and 1.046² miles, and the population standard deviation is .377² miles. At the .95 confidence interval, the sample would have to have a mean of about 1.106² miles to be statistically higher than the average.

It is with great shame that I reject the alternate hypothesis. And I do hereby humbly apologize to office life for blaming it for what is clearly a personal shortcoming.

A few caveats, in case my health insurance provider is reading:

  • I do exercise most days before work. But mostly pull-ups, lunges, and other anaerobic stuff. I only run sporadically—and when I do, I don’t always bring my phone with me.
  • I can’t vouch for the accuracy of the iPhone’s pedometer. Anecdotally, I’ve heard it isn’t great, and light research confirms it has trouble measuring steps under some common conditions, like being held or kept in a backpack.
  • The combination of the above suggests iPhone health data offers a convenient but incomplete metric to assess one’s activity. For example, July 31, a day my phone credits me with walking 4.7 miles, also happens to be a day I went for a 30-mile bike ride, for example.
  • Including Fridays in the “weekend” sample raises the mean distance slightly, to 1.08 miles, but still not enough to achieve statistical significance.
  • Uhh, I will try to do better.
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Obamacare’s Complicated Relationship with the Opioid Crisis

The opioid epidemic, having evolved into one of the greatest public health crises of our time, is a contentious aspect of the ongoing debate surrounding the Republican healthcare proposal.

Voices on the left worry that the repeal of Obamacare’s Medicaid expansion and essential health benefits would worsen the crisis by cutting off access to treatment for addiction and substance abuse. Mother Jones and Vox have both covered the issue. Former President Obama’s June 22nd Facebook post stated his hope that Senators looking to replace the ACA would ask themselves, “What will happen to the Americans grappling with opioid addiction who suddenly lose their coverage?”

On the other side of things, there are theories that the Affordable Care Act actually helped finance–and perhaps exacerbated–the opioid epidemic. It goes something like this: Expanded insurance coverage was taken as a primary goal of the ACA. Two of its policies that supported that goal–allowing adults up to 26 years of age to remain on their parents’ insurance and expanding Medicaid to cover a greater percentage of the population–unintentionally connected at-risk cohorts (chronically unemployed prime-age men and young, previously uninsured whites with an appetite for drugs, to name two) with the means to obtain highly addictive and liberally-prescribed pain medications at a fraction of their street price. (Some knowledge about labor force and other social trends helps paint a clearer picture on this.) Once addicted, many moved on to cheaper and more dangerous alternatives, like heroin or synthetic opioids, thus driving the growth in overdose deaths.

This is a really interesting, if tragic, narrative, so I decided to take a look. I focused on state-level analysis by comparing CDC Wonder data on drug-induced deaths with Kaiser Family Foundation data on expansion status and growth in Medicaid enrollment. The graph below plots states based on their rates of growth in Medicaid rolls and overdose deaths from 2010 to 2015, and is color-coded for expansion status: blue for states that expanded coverage before or by 2015, yellow for states that expanded during 2015, and red for states that hadn’t expanded by the end of 2015. (A note: this isn’t an original idea; for a more in-depth analysis, check out this post.)

What’s interesting is the places where overdoses have increased the quickest. The fastest growing rates of overdose deaths were mostly in states that had expanded Medicaid by 2015; the only non-expansion state to grow by more than 50% since 2010 was Virginia, which in 2015 still had a relatively low rate of 12.7 fatal overdoses per 100,000 population. For some perspective on how bad things have gotten, that rate would have been the 19th highest among states in 2005; today Virginia ranks 42nd in terms of OD rate.

On the other hand, there isn’t a noticeable correlation between increases in Medicaid coverage and increases in the rate of fatal overdoses. Additionally, the rates of overdose deaths in expansion states were increasing before many of the Affordable Care Act’s key provisions went into effect. Starting around 2010, there was a dramatic divergence between would-be expansion states and the rest. It’s possible that states with accelerating rates were more likely to expand coverage in response to increased frequency of fatal overdoses.

So what’s the deal? Did the Affordable Care Act agitate the opioid epidemic? Obviously I don’t have the answer to that, but here’s my take:

I think it would be difficult to argue it hasn’t been a factor on some level, given the far-higher rates of prescription, death, and opioid use and among Medicaid patients than the general population, as well as the state-level trends in OD rates (with acknowledgement that state-level analysis is pretty clunky in this regard; for many reasons West Virginia’s population isn’t really comparable to California’s). I think the fact that state Medicaid programs are adjusting regulations for painkiller prescriptions is an acknowledgement of that.

But if the ACA had a negative effect, I’d think it must register as a drop in the bucket. There are so many pieces to this story: lax prescription practices and the rise of “pill mills,” declining labor force participation, sophisticated distribution networks of Mexican heroin, bogus research and marketing on pain management, stark disparities between expectations and reality. It’s nice to think there’s one thing we can change to solve everything, but I don’t think we’re going to be so lucky.

Here’s another twist: Even if the Affordable Care Act had some negative impact, it could very well be that ACA repeal could make things worse. Scrapping essential benefits coverage could lead to a loss or reduction of access to addiction treatment for millions of Americans. Moreover, gaining insurance has been shown to alleviate feelings of depression and anxiety. How then, might we guess 20 million Americans will feel after losing their insurance? Given the feedback loop between pain and depression, this question deserves a lot of deliberation.

No, the Interest on Your Student Loan Isn’t Too High. In fact…

It seems like more often than not I’m opening these blog posts with an apology for a multi-week hiatus. Since nobody’s emailed to check on my well-being, I can only infer my readership has gotten on fine without my wonk-Jr. takes on public policy and other matters of high import. Fair enough; but don’t think your demonstrated lack of interest will spare you from a quick update.

Actually, it’s all good news: I’ve been having fun learning R (a statistical language), looking for a new apartment, and testing the limits of a 27-year-old liver. I saw Chance the Rapper and a Pirates game in Pittsburgh, which was awesome. The last article I wrote had some real success and was republished in several places, even earning a shout-out from John Stossel:

The big update is that my stint as a (purely) freelance writer has mercifully drawn to a close; I now write for a non-partisan public policy group. In fact, this very blog was one of my strongest selling points, according to my manager. It just goes to show you, kids: if you toil in anonymity for two years, eventually something will go your way.

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Okay, enough about me. Let’s talk about a topic close to the heart of many millennials: student loans. More specifically, I want to talk about the interest rates charged on undergraduate student loans.

That interest rates are too high is, unsurprisingly, a common gripe among borrowers. If I had a nickle for every twenty-something I’ve overheard complain that the federal government shouldn’t profit off student loans…well, it still wouldn’t cover one month’s interest. However, this sentiment isn’t limited to overqualified baristas; popular politicians like Elizabeth Warren and Bernie Sanders–and even unpopular politicians–have publicly called for loans to be refinanced at lower rates and decried the “profiteering” of the federal government. From Bernie Sanders’ website:

Over the next decade, it has been estimated that the federal government will make a profit of over $110 billion on student loan programs. This is morally wrong and it is bad economics. Sen. Sanders will fight to prevent the federal government from profiteering on the backs of college students and use this money instead to significantly lower student loan interest rates.

Under the Sanders plan, the formula for setting student loan interest rates would go back to where it was in 2006. If this plan were in effect today, interest rates on undergraduate loans would drop from 4.29% to just 2.37%.

It makes no sense that you can get an auto loan today with an interest rate of 2.5%, but millions of college graduates are forced to pay interest rates of 5-7% or more for decades. Under the Sanders plan, Americans would be able to refinance their student loans at today’s low interest rates.

As one of those debt-saddled graduates, and one of the chumps who took loans at a higher rate of interest, I would obviously be amenable to handing over less of my hard-earned money to the federal government. But as a person concerned with the larger picture, I have to say this is a really bad idea. In fact, rates should be higher, not lower.

First of all, the progressive case for loan refinancing or forgiveness only holds up under the lowest level of scrutiny. Such a policy would overwhelmingly benefit borrowers from wealthy families, who hold the majority of student loan debt. Conversely, most defaulters hold relatively small amounts of debt. Fiddling with interest rates shouldn’t be confused with programs that target low-income students, like the Pell Grant, which are another matter entirely and not the subject of my criticism.

More to the point, the federal government probably isn’t making any money on student loans. Contrary to the claims of Senators Warren and Sanders, which rely on estimates from the Government Accountability Office (GAO) and put federal profit on student loans at $135 billion from 2015-2024, the Congressional Box Office (CBO), using fair-value estimation, shows student loans costing the federal government $88 billion over the same period.

The discrepancy between the CBO and GAO figures comes from the former’s inclusion of macroeconomic forecasts. Essentially, the CBO thinks the risk of default on student loans is higher than the GAO does, due to forces beyond individuals’ control.

Evidence suggests it’s unwise to underestimate the risk associated with student loans. According to a study by the liberal think tank Demos, nearly 40% of federal student loan borrowers are in default or more than 90 days delinquent. Add to that the fact that student loans are unsecured (not backed by collateral or repossessable assets, like a car or house), and they start to look like an incredibly risky venture for the federal government, and ultimately, taxpayers.

That conclusion is deeply unpleasant, but not really surprising if you think about it. Ever notice how the interest rates on private student loans–approximately 10% of the market–are much higher? That’s not because private lenders are greedy; it’s because they can’t lend at the rate of the federal government without losing money.

This is all important because the money that finances student loans has to come from somewhere. Be it infrastructure upgrades, federal support for primary education, or Shrimp Fight Club, the money spent on student loans isn’t available for competing priorities. This is even more important when you consider the loss the federal government is taking on these loans, the cost of which is passed onto future taxpayers in the form of higher taxes or lower spending. Since higher education is only one among infinite human desires, we need to decide how much of our finite resources to devote to it. Properly set interest rates are one way (probably the best way) to figure that out.

The irony, of course, is that doing so would require the government to act more like a private lender–the very thing it’s designed not to do! Our student loan system ensures virtually anyone who wants to study has the money to do so, regardless of the likelihood they’ll be able to repay. One of the nasty side effects of this indiscriminate lending is a large amount of distressed borrowers, who now find themselves in the uncomfortable position of digging out from under a mountain of debt they likely shouldn’t have been able to take on.

More so than other forms of government spending, student loans have specific, discernible beneficiaries: the students who get an expensive education financed by the taxpayer at below-market rates. Sure, you can argue there’s some spillover; society does benefit from having more highly-trained workers. But most of the time, highly skilled labor is rewarded with higher wages. That being the case, is it really too much to ask for borrowers to pay a level of interest that reflects the actual cost of issuing their loans?

Yes, this would be discouraging for some: particularly those who want to pursue non-remunerative fields of study. That’s not such a bad thing; higher interest rates would steer people away from obtaining degrees with low salary expectations, which would–by my reckoning–reduce rates of delinquency and default over the long term. They would also help mitigate some of the pain of defaults when they do happen.

But–you might protest–you can’t run the government like a business! And sure, a lot of the time, you’d be right. However, I really think this is one area where doing so is appropriate–even desirable. Hear me out.

When the government can fund itself through profitable investments rather than zero-sum transfers, it should. If we’re going to have a government of any size (and few suggest that we shouldn’t), then we need to pay for it. Which sounds like the preferable way for that to happen: voluntary, productive, and mutually beneficial investments in society; or the forceful appropriation of private resources? I’m not suggesting the former could entirely replace the latter, but when it can, I think it absolutely should.

Astute readers will realize if the government decides to lend profitably, it will have to compete with private lenders, which would cut into its margins and make its presence in the market redundant. So maybe it’s just a pipe dream. But if profitable lending isn’t possible, the federal government should at least try to minimize losses. One way or another, that means higher interest rates.

Henrietta Leavitt: The Woman Who Measured the Universe

In the wake of the Women’s March on Washington,  International Women’s Day seems to be enjoying a bit of a resurgence this year.

If you read my writing, you’ll know that I’m not a fan of gross statistics that describe large groups of people as if they were homogeneous. As such, you might imagine that I wouldn’t see much point in a holiday that purports to celebrate over half of humanity.

Typically, you’d be right. But a couple days ago, while reading on Fivethirtyeight, I learned about Henrietta Leavitt–an astronomer in all but title who, in 1912, discovered how to use variable stars to measure distances in space. Her story struck a chord with me, and I thought it might be cool to write a little bit about it.

Leavitt discovered that there was a relationship between the brightness of a variable star and its period of pulsation. The length of that period can be used to find the star’s intrinsic brightness, or how bright the star would be at a common distance. From there, she was able to compare the star’s intrinsic brightness to its measured brightness and calculate its distance.

Before her, scientists were able to measure about 100 light years out into space. Leavitt’s discovery helped pushed that boundary to 10 million light years.

Leavitt was, for a long time, largely uncredited for her contribution to our knowledge of the universe. Her boss, Edward Pickering, published her work under his own name–a pattern familiar to women of the era–and referred to her only as the person who “prepared” it. Leavitt has since been credited for her work and posthumously biographied multiple times.

Anyway, I thought she–and by extension, the too-often anonymous female contributors of the past–deserved a shout out. Part of the joy of meticulous work is getting to show off a finished product that makes people say, “You did what? Why?” It’s a shame Leavitt didn’t get to enjoy that in her lifetime. But better late than never, I suppose.

Happy International Women’s Day.

Testing My Demand for Alcohol

New Years has some well-defined connotations for most of us: new beginnings, reflections, a chance to better ourselves, and above all, a chance to welcome the new year in a drunken stupor. On that note, here is a slightly belated New Years gift for you all—a statistically insignificant study of the correlation between my savings and the amount I’m willing to spend on alcohol in a given day, based on a year of data from my bank account.

I’ve been told that good writers share themselves with their readership. If that’s the case, I should come out of this looking like Hemmingway. The real gift, of course, is the knowledge that my bank account hasn’t been over $4,000 once in the past year. Next time I get ahead of myself, here or in person, feel free to make me regret my policy of strict honesty.

Abstract

When I was young, my dad gave me my first lesson in economics—though neither of us saw it that way at the time. I was curious about his job as a wine distributor (to be honest, I still grapple with the finer details of his day-to-day) and he was valiantly trying to provide me with some clarity. After a crude explanation of Maslow’s hierarchy of needs, he settled on a key industry takeaway: “When times are good, people drink. When times are bad, people drink.”

Fast-forward two decades. I have come to appreciate the wisdom of my dad’s words. Indeed, I find that even in periods of unemployment or underemployment, one thing I’m always willing to spend money on is alcohol. Naturally, I thought it might be cool to test out exactly how much bearing my total savings had on my demand for social lubricant. In that case, the null hypothesis will be that my savings have no significant impact on my purchasing amounts. The alternate hypothesis is that my purchases are affected by the amount of money I have in my bank account.

Deficiencies

This little “study” is basically an exercise in deficiency. Most glaring is my pathetic sample size (one 25 year old guy). This leaves me open to all sorts of opportunities to draw misleading conclusions, so it’s important to remember that we’re not trying to prove anything about people in general here—this is all relative to me. Also, I could only obtain a year’s worth of data, so it’s only relevant to the last year of my life.

Second, I was only able to track purchases (55 in total) that were made on my debit card. None made in cash or by credit card were included, so there’s probably a significant amount of data missing. Additionally, no purchases by others that I repaid (via Venmo or in cash) were counted.

Third, I was living in Morocco for most of January 2015, which is significant because it’s a Muslim country so alcohol is in short supply (though, as most Moroccans I met were happy to point out, as Muslim countries go it’s “Islam lite”!).

Fourth, there was some lag time on purchase dates due to my bank being closed certain days or general transaction delays.

Last of all, it is possible that even if it turned out that there were an correlation between the dollar amount of alcohol I purchased and my savings, it would still be possible for my physical consumption levels to remain constant if I economized on quality instead of amount. As someone who spent at least four years drinking Keystone Light, there’s a distinct possibility of that being the case.

Without Further Ado: Methods and Findings

I started gathering data by downloading my debit card statements from the last year. I then waded through and pulled out any purchase at a liquor store, bar, or occasionally, gas station. Ironically, I was at times forced to rely on memory to discern which purchases were drinks and which were food or otherwise.

After I was satisfied that I had extracted the best data I could, I created a pivot table. I made x and y values for all days in which I had purchased alcohol by combining all purchases into one sum and taking the maximum value of my bank account during the same day. While I don’t keep explicit track of my balance, I do usually have a good ballpark figure in mind when I go out–a valuable lesson courtesy of a $33 chicken sandwich in 2010.

I then ran the numbers to find the mean of both variables. The mean amount spent on alcohol was $31.65/day and the mean maximum account balance was $2371/day. Respective standard deviations were $21.06 and $878.24. The next step was to plot a graph to get a visual sense of what my buying patterns looked like. The raw coordinates looked like this:

Purchase, Account

Since they were all positive values, it could give the initial impression that there might be some positive correlation at hand. To get a better picture, I subtracted the mean x and y from each data point in order to plot the data points relative to the mean. That graph is a bit more telling.

dev from mean

The origin would have been a day in which I had a maximum of $2371 in my account and spent $31.65 on drinks: the average day during which I purchased alcohol with a debit card. Quadrants I through IV respectively represent days when I had more money and spent more on drinks, had less money and spent more on drinks, had less money and spent less on drinks, and had more money but spent less on drinks.

If you’re questioning the choice to use an average to create a visual representation of this data, you’re in good company. There were a couple of outliers (such as the time I spent $63 out of $422, fully 15% of my account balance, on drinks—what a night!) that distorted the averages of this relatively small data set.

dev from med

Out of curiousity and a desire for a better visual, I took the median of both values of the data and ploted once again. The distribution looks a little nicer, but it doesn’t tell us much more.

The most important piece of information is the r-value, also known as the correlation coefficient. That is, how able are we to predict y based on the value of x? R-values are between -1 and 1; the closer to 0 they are, the less of a correlation exists between the two variables. A value of 1 means that there is a perfect positive correlation between x and y while a value of -1 indicates a perfect negative correlation.

The r-value between my account balance and purchasing values was .1166—a very very weak correlation. In other words, the amount of money in my account is not a reliable predictor of how much money I’d be likely to spend on drinks, at least not with my debit card in the past year.

Conclusion

Based on this admittedly incomplete study, it seems that my dad was correct about demand for alcohol—at least with regard to the amount of money in my checking account. There may be other factors that influence how much I am willing to spend on a night out—such as how many people I go out with, where I am, or what day of the week it is—but that remains to be tested.

As I said earlier, this “study” is too small and problematic to apply to any group without being anecdotal. Therefore, there are no large-scale implications that we can infer from the data of my raucous year.

Americans Miss the Big Picture on Shooting Deaths

On Wednesday December 2nd, two shooters carried out the deadliest mass shooting of 2015, killing 14 and injuring 22 others. In the wake of another mass shooting, reactions have been as one might have predicted: despair, incredulity, and political dissonance.

Mass shootings have become a fascination in America. They garner a huge amount of social and political attention and are often cited as evidence by gun-control advocates that we have reached a critical point at which it no longer makes sense to allow (certain) individuals to own (certain) guns; that we should join the rest of the civilized world, invoke stricter screening processes for purchasing firearms.

Americans’ reactions to mass shootings prove three things: terrorism is effective; not all deaths are equally important; and our country sucks at math. Anyone who bothers to briefly check national homicide data will be aware that mass shootings are less of a lynchpin and more of a red herring in a serious debate about reducing violence in America. Let’s consult some numbers.

The Washington Post quickly pointed out that there have been more mass shootings than days in 2015: to be sure, a dismal and jarring statistic. However these days there are about 12,000 homicides annually—a number that has plummeted in the last two decades. There were 11,961 counts of homicide in 2014, according to FBI homicide data, meaning that on average there were roughly 32 homicides per day that year.

While there is no hard definition, a generally accepted criterion for a mass shooting is an incident in which 4 or more people are shot. According to the New York Times, so far this year there have been 462 deaths (and 1,314 non-lethal injuries) in mass shooting incidents. That averages out to about 1.3 deaths per mass shooting this year, or, in terms of the 2014 homicide count, about 3.9% of the all victims. In terms of the total US population (318.9 million) that’s one mass shooting death per 690,259 Americans.

Though the loss of 462 innocent lives is horrifying, such a number pales in comparison to our normal homicide toll. So why do we care so much about mass shootings? Part of the reason seems to be the unpredictability of it all. One of the San Bernardino shooters, Syed Farook—self-described as “modern”, a lover of cars and books—appeared to be leading a perfectly normal life. The perpetrators aren’t predictable, and the corollary is that the victims are random as well.

By comparison, typical homicide victims tend to be much more homogenous. They are more likely to live in a poor urban area, be a young man, and/or be black (actually they are about as likely to be black as they are to be white, but given that blacks make up 12% of the population and 51% of homicide victims, they are clearly overrepresented). This probably doesn’t concern the average American in the same way that mass shootings do because we’ve all but written off inner-city crime as a fact of life. In other words, under normal conditions, it’s pretty easy to maintain a low risk of being shot—stay out of violent neighborhoods, don’t be a man between the ages of 20 and 35, and don’t be black.

Mass shootings change the victimology entirely. They happen in the suburbs; at schools; at work. Now that a crisis that should be politicized. I generally try not to cry racism, classism, etc. because I consider it to be low-hanging fruit in today’s argumentative style, but what else might we call this?

Yes, the idea of being shot at work while minding my own business scares me. That children (a target as innocent as it gets) have been killed in large numbers while in school is disgusting. But still, is there any (non-emotional) reason why 462 murders a year should garner more attention than the other 11,000? Not really. Not if you’re serious about cutting down on homicides. If you really want to reduce homicides, you wouldn’t focus your energy and debate on a minuscule amount of them. You would aim for the scenarios in which they are most prolific and deadly.

But that isn’t what this is about. This is about ideology and politics. Enter the push to ban “assault weapons”.

It’s commonplace to see a social media user or politician decrying private possession of what they consider to be assault weapons—usually some denomination of automatic weapon, machine gun, or rifle with a detachable clip. It’s tempting to assume causation between assault weapon proliferation and what we deem to be high gun-related homicide incidence, especially given the high-profile status of mass killings performed with assault rifles. However, the oft-repeated argument that “These guns are only used for one thing; they’re mass-killing machines and we need to get rid of them!” is provably weak. For all their ubiquity, they are barely used to commit murders. There is no reason to believe that reducing the count of these weapons will have any significant effect on our homicide numbers.

Over the past decade (2004-14), there have been an average of 13,652 homicides per year. An average of 9,235, or 68%, of that count have been shooting-related. Of those, an average of 6,678—fully 72%—were committed with handguns. Rifles, shotguns, and “other” firearms together comprised 875 of the remaining gun-related homicides—merely 9% of the total homicides by guns over the past decade (all rifles—the category into which many assault weapons would fall—composed only 3% (363) of those deaths).

I can’t think of a reason why a homicide carried out by a rifle is more egregious than 18 carried out by a handgun—or for that matter a knife, grenade, or automobile. Why then, do we waste time debating the legitimacy of citizens’ rights to assault weapons under the guise of public safety concern when these weapons are involved in relatively few murders?

The answer is probably some combination of opportunism and inherent aversion to heavy weaponry. Personally, I understand the latter; I’m not into big guns and I’ve never shot one. But that doesn’t mean I want to take them away from everyone else, especially if there’s not a shred of evidence suggesting that doing so will result in any significant benefit!

So to quickly recap, in our national struggle against gun violence, gun-control advocates have chosen to rely on a very infrequent form of murder and barely-used weapons to make their point. This is, to say the least, a puzzling strategy assuming that the end goal is to reduce homicides and violence. Presumably, our policy crafters and the average internet user have access to the same data I used to write this article.

Even though I am generally for the liberalization of firearms and the democratization of force, I’m not inherently opposed to arguments for gun regulation, especially if they’re carried out in an intelligent fashion with the desire to help people: not merely deprive others of contentious items. After all, if you’re asking people to give something up, it’s not unreasonable for them to expect that there will be some benefit that exceeds their loss.

What I do find offensive is popular and political discourse that is entirely uninformed and espoused by people with the loudest voices in the most condescending fashion. There is such a void of critical thought in this fight that one wonders if today’s opinions are formed purely by partisanship with no regard for evidence.

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Now that I’ve spent a sufficient time addressing some of the logical and practical deficiencies of today’s rhetoric, I’d like to take the opportunity to suggest a solution that might actually help sizably reduce homicides. From here on out, this is going to be a lot of speculation on my part–assumptions being that most murder is happening in the inner city and that it is largely motivated, not random.

To distill it to three words: drug policy reform. If you want to stop people from doing something, it’s probably best to address the root of the action. What’s special about the activity of gang members compared to any number of alternative professions? Why are gangs more likely to be involved in violence than, say, engineering firms? The answer (in my mind) is that they operate decidedly outside of the law, with a solid chunk of their revenue coming from drug sales: a product with a law-induced scarcity.

Demand for gasoline, alcohol, and, yes, drugs is pretty inelastic. We shouldn’t be surprised about the latter; many drugs are known to be physically addictive substances. By making them illegal, we ensure that only people willing to break the law can supply them. This in turn, makes them all the more precious of a commodity for users and dealers alike. What might we expect but violence when we force groups with blatant disregard for the law into an environment of intense competition?

Relaxing drug laws could do a lot to diminish the power of gangs. If done to any degree, I would expect to see a reduction in violent crime. To be extreme, you could fully legalize the sale of drugs and allow merchants to freely distribute them. Who would buy cocaine from a stranger in a dark alley when you could pop into 7/11 and buy some over the counter? More importantly, many fewer people would shoot someone over something you can that can be store-bought. Alternatively, we could simply reduce the sale of narcotics to a civil infraction, increasing dealer supply and drug use but lessening incentives to commit violent crimes. The social and economic costs associated with increased drug use would probably be exceeded by the benefits of reducing prison populations and violence.

At the very least, it seems prudent to adopt a policy that takes a more liberal stance on the consumption of drugs. Doing the opposite has created an environment where the deleterious effects of drug use are compounded by the heightened violence inspired by their ban. If ever there were a policy gone wrong, it is probably the war on drugs.

If we really want to take action to diminish homicide frequency, we shouldn’t focus on the types of weapons that are being used to commit murders. Nor should we focus our attention on weapons that are specifically not being used to kill. Instead, we have to understand what motivates people to resort to violence and examine those factors to see if we can do anything to reduce such behavior. My belief is that ending the criminal monopoly on the sale of illicit substances is one thing we could do to that end.

This Essay is Not FDA Approved

Last Thursday, Nicholas Kristof penned an article for the New York Times entitled “Drugs, Greed and a Dead Boy.” The piece provides a dismal account of an industry rife with predatory marketing schemes, ineffective treatments, and captained by covetous sociopaths who care more about making money than they do about public health and are prepared to circumvent FDA regulations in order to do so. Whatever your convictions, Kristof makes a compelling case for regulation based on historical evidence. It’s not until the last paragraph that he writes something that makes me pause:

So if you agree with today’s politicians thundering against regulation, or if you think that pharmaceutical companies should enjoy a free speech right to peddle drugs, then talk to a family fighting opiate addiction. Or a parent of a thalidomide child. Or consult the grieving family of Andrew Francesco.

I certainly have no problem admitting that the pharmaceutical industry, much like any industry, doesn’t always act in the best interest of the public. Nor do I have a problem accepting that parents are probably over-medicating their children (and likely themselves) in today’s hypersensitive world. What I take issue with is his thoughtless, implicit dismissal of regulation reform advocates who are seeking to improve a poorly designed system.

I make a point of not agreeing with any thundering politicians, however, as someone who finds fault with the regulatory structure of the FDA, I feel that the argument for reform warrants some defense. The following argument isn’t exactly original–I’ve heard it made by others before, probably better than I am going to make it now–but it is a concept worth defending.

The first thing to realize is that nobody is arguing against regulation (well, some might be, but I’m not) or a vetting process for new drugs. I would find it hard to believe that anyone seriously believes drugs should be less safe for consumers and would fight to craft policies that reflect such a notion. The real point of contention here is who should be doing the regulating, and how.

Kristof appears to be falling victim to a false syllogism: The FDA is a regulator; people want to get rid of the FDA; therefore, people want to get rid of regulation. Not so. What those who challenge the FDA process are protesting is a monopoly on regulation that invariably leads to an inefficient process by which drugs are taken to market, and thus eliminates less human suffering than would otherwise be possible.

To understand why this happens, you have to understand the unique predicament of an organization like the FDA and what kinds of incentives that predicament creates.

There are basically two ways in which the FDA can be said to be performing its function optimally (granted, this is probably an oversimplification). Scenario number one–it takes a good drug to market quickly and efficiently after ensuring that the product is safe for consumption. Scenario number two–it stops a bad drug from making it to market after determining that it is not fit for human consumption. When either of these scenarios are realized, that’s great, and we are all better off for it.

Similarly, there are two ways in which the FDA can be said to be underperforming. In the first, it takes a bad drug to market and risks the lives of consumers. In the second, it engages in an unduly lengthy regulatory process that delays the emergence of new drugs, also risking consumers’ lives. This is where things get tricky. While both outcomes result in human loss and are undesirable, one of these is far less appealing to the FDA.

Moving bad drugs to market is a sure way to shake faith in the regulatory body and create a panic. More importantly, the negative effects of such a screw-up are overt and blame is easily assigned to the organization responsible.

Delaying good drugs due to overly cautious behaviour, although potentially just as deadly, is not nearly as conspicuous. It’s much harder to measure the patients that hypothetically would not have died had the regulatory process been more efficient than the patients that did die due to bad drugs, but that doesn’t mean the effects are any less real. For example, if drug x saves 1,000 lives per year, and spends 4 years tied up in the regulatory process when it could have passed in 2, one could very easily make the argument that 2,000 lives were lost to this inefficiency.

Given the choice between the two, it’s not hard to understand why the FDA would opt to take the path that obfuscates the negative consequences of their decision making. At least in some cases, this must lead to an overly stringent approval process for good drugs. Because they have a monopoly on the regulatory process, there is no one to pressure the system to be more efficient.

A little competition might go a long way in solving these problems. Private regulatory companies might sound strange, but the idea is actually quite logical. This might work something like this:

  1. Drug companies develop drugs and submit them to a regulatory company for quality assurance: a service for which they pay.
  2. The regulatory company tests the drug to its standards by its processes. If it doesn’t pass, the story ends here.
  3. If it does pass, however, the regulatory company approves it and affixes their logo to the medication, much like the FDA does now.
  4. The drug goes to market where consumers use the logos as signals of quality. The more they trust the logo, the more they trust the drug. Logos gain trust by screening accurately and lose clout by rushing drugs to market with bad consequences.
  5. The most trusted logos are in higher demand by people making (and consuming) good drugs, because they want consumers to trust that they’re safe. This in turn re-enforces the incentive to provide strict testing.
  6. Furthermore, drug companies would be willing to pay a premium to have their testing done quickly as well as accurately. This remedies the inherent flaw in the FDA’s design: the zero-sum game between accuracy and timeliness. From the consumer side of things, that means more lives saved/improved.

This solution would do a lot to align incentives within the process of getting safe drugs on shelves, so to speak. If the point of the FDA is ultimately to save lives and improve the quality of medicine–and we should presume it to be such–then why not create a system which could save and improve more lives? If it can be done by private companies, so much the better. All this is not to say that the FDA should be dismantled, but if we are able to admit that allowing for a competitive space can improve services to consumers, then what might be the benefit of having the FDA remain in such a position?

Perhaps it could serve in some overseer capacity–ensuring that no fraud or collusion occurs. Again, the point is not to eliminate the FDA or regulation; the point is to improve the regulatory process and save lives.

There is a semantic problem with Kristof’s (and many others’) understanding of regulation in that he understands it to be inherently and exclusively a purview of the government. Evidently, he has never paused while using Yelp, Uber, or Rotten Tomatoes to consider that these too are forms of regulation that let us know when something is fit for consumption.

Kristof and other “pro-regulators” usually understand the negative impacts of monopolies–inefficiency, unresponsiveness to consumers–and call for regulations to break them up. Competition is the way things get better–no industry is immune to this reality. Ironically, people who want to reform drug regulation for the same reason are met with staunch criticism by regulatory enthusiasts.

Once again, semantics plays a part in obscuring the fact that having a singular body in an industry is a monopoly, even if that body is a government entity. Monopolies are for private corporations; regulations are for governments. Again, not so.

Anti-Gentrification and Anti-Immigration Movements: Two Sides of the Same Dull Coin

After consideration, I have decided to omit the name of a private figure on the basis that my aim is not to denounce individuals, but faulty logic. Links have still been provided which may reveal that identity.

 

Recently, I read about a woman from Jersey City who is attempting to subvert the city’s “Make it Yours” promotion, aimed at attracting residents from New York City. She is worried that this campaign is contributing to rising housing costs in the downtown area, presumably displacing previous residents who aren’t able to afford prime real estate anymore. Her campaign, dubbed “Take it Back”, involves the use of such charming slogans as, “Go Home Yuppie Scum” and “Go Eat Brunch Somewhere Else”. So far, it has only inspired minor vandalism and a slew of negative comments from Jersey City residents.

Aside from the strident attitude and emotional-over-logical response that typically accompany such arguments, there are some very familiar components to this argument.

It’s the same sort of protectionist nonsense that is spouted by anti-immigration movements, virtually a carbon copy, in fact. After reviewing some of the leader’s work online, I am sure that she would be very dismayed to be compared to some Trump-esque anti-immigration fanatic who might advocate the construction of a concrete wall along our southern border, yet there are numerous parallels between them.

Anti-gentrification and anti-immigration proponents are typically very different people, or to be more accurate, they would style themselves very different from each other. From opposite sides of the yawning chasm that divides American politics, they vent their frustrations and scapegoat relentlessly. They operate blissfully ignorant of reality, the striking commonalities between each other’s arguments, and certainly the absurd logical extension of those respective fallacies.

I confess that I do take a certain joy in pointing out hypocrisy, especially when it pertains to ideological talking points between the right and left.[1] With that in mind, let’s examine the commonalities between these two seemingly different calls for exclusion.

Appeals for Economic Protectionism

 

Both arguments attempt to address a similar set of wrongs, as they see them. Chief between both sides is an appeal for economic protectionism. On the side of anti-immigration, the purpose is to protect American laborers and incumbent employees by stemming an influx of cheap labor in the form of immigrants. By restraining the supply of available workers, they hope to keep the price of labor higher than what it might otherwise be.

The counterpart on the anti-gentrification side of affairs would undoubtedly be the manipulation of property values, and by extension, rental prices. In order to keep rental units at their current prices, they must suppress the excess demand for housing that wealthier transports represent, usually attempting to do so by creating an inhospitable environment for the newcomers. Keeping demand low will naturally depress the market price of available housing, thereby maintaining the status quo.

Such plans rely on a crude understanding of supply and demand. If the people making these arguments could be afforded the time to read a book on economics, they might be able to understand the negative impacts that such protectionist policies inspire beyond the vacuum of immediate, desirable consequences for select groups.

Both sides are looking too short-term. While a carpenter in Texas feels threatened by the prospect of cheap immigrant labor, he is neglecting that the lower price of a carpenter is a boon for, say, his neighbor, who is looking to build an addition on his house. He is also forgetting to think of himself as a purchaser of labor, which he is in all instances but those in which his labor is being purchased (any time he goes to a store, eats a piece of fruit, puts gas in his car, etc. he is consuming the labor of others who made such supplies available through their labor). Indeed, he has probably also forgotten that the new immigrants represent not only a source of additional labor, but demand as well.

All things being equal in terms of quality, the prices of immigrant labor will be pushed up when people realize that they are cheaper, due to excess demand. Simultaneously, the prices of American carpenters will fall when the same demand shift occurs. Eventually, they should even out somewhere in the middle. All in all, the added competition will be a win for consumers.

Additionally, with the price of building lowered, it may well be that people who before were not able to afford construction suddenly find it affordable and there is a corresponding increase in available work.

Conversely, in order to keep property values down, opponents of gentrification must deprive property owners of the additional income they might receive from the new wave of inhabitants, thereby lessening or removing the incentive to own and develop property within the city in question. This is bad news for a lot of reasons, most of which can be viewed in the consequences of rent-controlled properties and other such scenarios involving price ceilings.

To put it simply, when people no longer feel there is anything to gain by owning property, they stop doing it. They halt property upkeep as a means to squeeze some meager profit out of the endeavor. They abandon properties or leave them vacant, as is the case in San Francisco. Ironically, this leads to housing crises that can still render housing unaffordable and scarce.

Of course, the inhibition of housing and property development is only one of many examples of the consequences of anti-gentrification protectionism. A general lack of investment (at its core, an anti-gentrification movement is really a resistance to private investment-sometimes aggravatingly accompanied by demands for public investment) in a city will naturally limit job growth and opportunity. The result is a flight of human capital, as talented and driven people will choose to relocate to places where advancement is more likely.

Cultural Consistency

 

            Another commonality in both camps is a general resistance to cultural change. Both sides feel that there are intrinsic cultural values at stake when outsiders become too prevalent for their liking. Those opposed to immigration might cite American work ethic, preservation of the dominance of English, and a fear of crime or losing their lifestyle. Anti-gentrification advocates tend to want to preserve the racial makeup of a city, average income level, or other cultural condition they might find desirable.

The similarities here are so evident that the reader requires little explanation. Both arguments are steeped in xenophobia and bigotry.[2] An aversion to demographic change is evident in either argument, as is a sense of incumbent entitlement to a particular location.

The drawbacks of segregation are numerous and easily viewed in segregated areas of the country. On the other hand, the added value that immigrants and private developers bring to cities is huge. Our diversity is what allows us to specialize and become more productive as individuals and a society. If all people in a given city or nation were of the same ilk, they would often be wanting for a great many services and undoubtedly paying more for them.

Necessary Impediment to Freedom

Implicit in the (successful) social architect’s quest to maintain the status quo is the necessity to exclude and the means to do so. While such exclusion does come at a price to current residents, as I have worked to detail, it must also adversely affect those undesirables who are to be barred from entry. Perhaps it is inconsequential to or altogether unacknowledged by either group, but people that voluntarily relocate are doing so to make their lives better. Whether it’s moving across the Hudson River in hopes of escaping the high cost of living in New York City, moving to Oklahoma suburbs to be closer to family, or coming to a country where you will be safer, have a better education, or have a higher quality of life in general, improvement in quality of life (or some end deemed positive) is always the goal. I would like to know by what justification might someone standing in the way of such a goal claim any morality.

Those protectionists who would seek to prevent outsiders from entering make the mistake of believing that they know the correct form that the world should take. Whether they are trying to keep people out of or in a location, the assumption is the same: they know what people should do, and those people do not. Their plans will produce the most fair and desirable outcome. Allowing people the ability to relocate and do what they want with their housing will result in undesirable outcomes. Despite all evidence to the contrary, society can be planned effectively! At least, that’s the theory.

How, we might ask, could a single person or even a group of people, realistically think that they are better equipped to make decisions for others that are reliant on decentralized knowledge and based on fairly straightforward information? Those “yuppies” moving into Jersey City are in a better position to decide what is right for them than anyone else. People who want to immigrate to this country are clearly doing it because they think it is the best option for them. Similarly, the people that are displaced or have to find new vocations are doing what’s right for them. They have little and less to gain from remaining in an environment that is ill fit for them. Digging our heels in and trying to legislate back in time is probably going to hurt more than it helps.

It’s tough to accept, but sometimes things do change. The best way to handle that change is to rely on everyone’s ability to make decisions for themselves.

Logical Extensions

 

            Taken at face value, efforts to protect workers and renters might seem harmless, even understandable. It is when we consider the logical extensions of such shortsighted acts that we are fully able to comprehend the absurdities they must entail. For example, if a country were going to limit immigration in order to protect the competitiveness of domestic workers, they should logically be compelled to control the birth rate of the country, cap the number of workers per industry, prohibit the development of innovative technologies, outlaw imports, and use government funds to purchase unwanted inventory, so as to keep production levels constant.[3]

Additionally, if it were true that a city should protect existing rental prices above all else, they would be compelled to manage the population of the city, so as to limit competition for housing. This would either result in birth rate controls or forced eviction. More than likely, it would involve implementing rent controls. They would also naturally have a vested interest in ensuring that people lived at home for as long as possible and perhaps force people to cohabitate.

Of course, the forward thinker will recognize faulty economics at work and realize that each of these tactics will have precisely the opposite result of that which is intended. For one, a smaller population means not only a smaller workforce, but also a smaller market. Assuming that the distribution of certain types of workers remains constant, there will be no gain for workers. Secondly, any international acts of protectionism are likely to be reciprocated, leading to a drop in domestic demand from abroad. More generally, the specialization that we have grown accustomed to, which is made possible because of population competition, growth, and technological advance, will disappear as populations and incentives dwindle.

Conclusion

 

There isn’t enough time to spend discussing the adverse effects of actions that fall under the umbrella term of protectionism. It must suffice to state that the best long-term economic or social policies will be the most open; those that understand that progress is driven by voluntary exchange and freedom of commerce. These sorts of values are equally incompatible with anti-immigration or anti-gentrification sentiments. Such movements are characterized by a reluctance to change and stubborn attempts to preserve the status quo-even at cost to the protected party.

Remember, policies can’t be made for one type of person. Rather, they must serve to promote the best interest of everybody within the system in question. Anti-movement protectionists are guilty of missing the forest while scrutinizing a few trees-and likely too busy pruning the leaves to look around.

[1] Though it would be disingenuous to presume that the left is typically against one and the right the other. Recently, a New York Times article was published denouncing immigrant labor for displacing tech workers in Disney. Likewise, the residents of Staten Island (the only consistently right-leaning borough of NYC) frequently voice opposition to the increased population of the island, which they might attribute to gentrification.

[2] I don’t mean that in a pejorative sense, necessarily, although both words connote unpleasantness.

[3] Dan Boudreaux covers this in an essay on Café Hayek entitled “That’s Where the Logic Leads”

June 26th SCOTUS Ruling

Today, the Supreme Court of the United States ruled that same-sex marriage is legally protected in all 50 states. This is obviously a huge win for the LBGTQ rights movement, and more generally for fans of equality under the law. It is a moment to celebrate an often-preached, rarely practiced tenant of American society: That one private citizen should not be unwillingly subject to the will of another.

Likewise, the decision to adhere to the language of the first section of the 14th amendment is a huge victory for personal liberty. It is conversely a blow to the state-sponsored discrimination as well as those who would seek to use legislature to place limits on their fellow citizens. It is not, as some would and have argued, a blow to religious liberty, you are still free to practice any religion you want, you just can’t cite it as a rationale for denying people their rights. Nor is it a change that threatens to bring society to its knees. (Even if it were, forcing people to forgo their personal happiness and rights for the sake of society or a special interest is something that only a fanatic nationalist or fascist could possibly support.)

I would not be doing the ruling justice if I didn’t name it for what it is: An advancement in the larger cause of freedom and a stride forward for those who seek to live their lives as they see fit, with minimal or no interference from coercive powers.

Opposition to same-sex marriage represents the worst kind of social architecture-that which seeks to control private, peaceful interaction and serves the happiness of some through government while depriving others of the means to achieve happiness on their own. When the desire to control meets the power to do so, freedom suffers.

Though it may not be apparent to opponents of same-sex marriage, this victory represents a win for them too. Consider the adage: A government big enough to supply you with everything you want is big enough to take everything you have. Perhaps a more apt (and certainly more contemporary) metaphor is Jon Snow’s misgiving that magic is sword with no hilt-potentially as dangerous to the wielder as the target. Coercion only tastes sweet when you are on the side of those doing the compelling. While they may have enjoyed thwarting same-sex couples, they are ultimately freer in a society that does not use coercive legislation to limit its members’ (non-criminal) private actions.

Ideally, we would live in a world where the peaceful actions and commitments undertaken by consenting adults were free from regulation. Personally, I look forward to the day when marriage and the state are…well, divorced. I see no compelling reason why a consensual partnership entered into by private citizens need warrant the involvement of a governing body.

But hey, that’s for another time. For now, we should take satisfaction in knowing that we have taken another step forward in the ongoing human quest for freedom.

Exploring the Tie Between Productivity and Wage

Part 1 in a series on labor and wage

The following is the first of likely three essays concerning popular myths that pertain to wage and employment. Herein, I will attempt to address the common popular fallacy that wage should necessarily rise in reflection of productivity. My aim is not to prove that this is never true, but rather to demonstrate that citing productivity as a rational for a mandated wage hike is a weak and incomplete argument.

This is a fairly common misconception that has been elevated to an argument by some of either today’s best or most misguided politicians, depending on their unknowable motives. Most memorably, it has been employed by senators Elizabeth Warren and Bernie Sanders, respectively of Massachusetts and Vermont, along with 16 others on behalf of the Fight for $15 movement to urge President Obama to take executive action to move the minimum wage to $15/hour.
The logic goes that as the average worker is producing more value, they should be entitled to a proportionally equal share of that value, resulting in a raise. Proponents say that had minimum wage kept pace with worker productivity, the federal minimum hourly wage would currently be set at $18.42[1], though some sources set it at over $20.
In some cases, this could be a sound argument, however advocates are likely misattributing the source of the increased productivity to the workers themselves. A more likely explanation is that technical advances and capital investments are greatly responsible for the increase in productivity, the cost of which is borne by the owners of capital. A correlation hinting at this hypothesis is a recent stagnation in productivity accompanied by a historically low rate of investment as a percentage of national GDP in the latter half of the last decade.[2] [3]
While it is also true that investments in human capital by workers themselves-voluntary training, education, or experience-or by companies are also responsible for greater productivity, I don’t believe that there is a good case for an argument that suggests that human capital accumulation is more responsible for productivity increases in low-wage sectors than capital investment. This is especially true given the tendency towards mechanization in such fields.

Consider the following scenarios:
Tim is a lumberjack who has been working in such a capacity for the past 5 years. When he started, he could cut down 10 trees a day with an axe provided by the company’s owner. After 5 years of experience, Tim is now more productive and is capable of cutting down 20 trees with the same axe.
James, on the other hand, works for a different company in the same position for the same amount of time. When he started, he could also cut down 10 trees in a day with an axe owned by the company. In the third year of his employ, James’ boss invested in chainsaws for his staff. Using the chainsaw, he is now capable of cutting down 20 trees per day.
Both workers’ levels of productivity have increased by the same amount, yet it would be ridiculous to argue that they should be compensated equally for this difference. Tim is demonstrably twice as productive as when he began and at no cost to his employer. His increase in productivity is completely organic and is due entirely to what we might call his own investment in human capital. James’ productivity increase, however, is due to an investment by his employer in machinery. That investment includes initial cost as well as upkeep (repairs, fuel etc.). In addition, while there is an element of investment on James’ part in his own technical skill, it is probably offset by a widened pool of applicants that is now able to perform his task. Such an investment in reality makes James’ job far easier and thus accessible to those who would have previously been unable to handle the workload. In actuality, James’ employer’s investment likely means that competition for his job has increased, creating downward pressure on the real price of his labor.

The other side of this coin is that he is no longer working as hard for the same amount of money, barring a reduction in pay. If we had some unit by which to measure effort, and their pay levels were to remain equal, James would be expending fewer units of effort per dollar earned than Tim.

As business owners continue to move towards automation and mechanization, and greater levels of production are attainable through the labor of fewer and fewer workers we can reasonably expect a coinciding change in the labor market to occur. As with every period of technological advance, the nature of available jobs is changed, but as old jobs are eliminated, new ones are created. The level of skill to operate and maintain such machinery will require sufficient investment in human capital as to elevate the wages of some, while the implementation of such machines will surely diminish overall employment at the bottom end of the production chain once a capital investment becomes a more attractive option than an employee who is paid hourly-a desire that is only exacerbated by arbitrary wage hikes.

Arbitrary wage hikes present a situation of diminishing returns for employers and employees alike. There exist both a natural limit to how productive a low-wage employee can be in such a position (in terms of dollars) and a natural limit to the price of their labor that an employer is willing to pay. The latter is simply the former minus some quantity, as no employer wants to employ someone at a loss or even neutrality. As the price of labor is pushed up, it makes less and less sense to employ low-skilled humans, especially when automation presents an evermore-attractive option. There is no limit on the price of labor that can be mandated, but there is a limit on how much employers are willing to pay for labor, unless they can be coerced by some means to do so.
The relationship between wage and productivity is, thankfully for all of us, not an intimate one. If they were, by some ill-contrived legislature or regulation, to be forced to move in relation to each other, then companies would lose the incentive to improve the means of production and remain wasteful. The incentive to innovate and streamline comes from the desire to increase profits and cut costs to the consumer. If the savings of improved productivity were continuously absorbed by wage increases, the consumer would never experience those benefits. Because we are all consumers of labor on a much grander scale than we are laborers, this would not likely be advantageous to any individual.

Of course, that is not to say that increased productivity due to investments can’t result in raises for workers-if it is the employers prerogative and within his ability to pass some of the profits on to his employees, so much the better-nor that it shouldn’t in some cases. Most readily, those cases would include scenarios where the workers are paid by unit, are working harder due to meet demand spurred by new investments, or own the means of production themselves and have made corresponding investments yielding higher productivity. Ultimately, however, we may never forget that the final market price of goods must account for and exceed all the labor and materials used to create a product; therefore final price and demand must be considered in the discussion of the price of labor. The problem with clumsy mandates is that they don’t (and realistically can’t) take these nuances into account.

Implying that productivity and wage should correlate is, in most cases, a weak argument, as productivity increase occurs largely outside of workers’ efforts and already benefits them when they take the role of consumers. An individual instinctively wants the price of her labor high and the price of everyone else’s to be low. When policies are put into place that uniformly lift the price of labor, final prices are not immune. The result is that protesters fighting for higher wages today will be protesting rising costs tomorrow.

In conclusion, the tie between wages and productivity cannot be shown to be innate or even uniformly desirable.[4] Increased productivity due to capital investment should not be used as grounds for mandating higher wages across the board, as it will de-incentivize investment and ultimately slow economic growth, leading to the cannibalization of future employment opportunities. In the case of a workforce that is becoming more capable due to human capital acquisition, their wages will likely increase due to a restricted supply of such workers. This is a negotiation that should take place between the parties involved and need not concern the nation at large.

[1] EPI analysis of data from the U.S. Department of Labor’s Bureau of Labor Statistics and Labor Wage and Hour Division

[2] Duesterberg and Norman, “Why Is Capital Investment Consistently Weak in the 21st Century U.S. Economy

[3] Supporting data provided by the IMF

[4] It is worth noting that an artificially high minimum wage will curb the potential for future human capital acquisition for the least employable members of society. This is because the minimum cost at which their labor is available for purchase is too high to warrant hiring inexperienced or under-qualified individuals.