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(Don Boudreaux)

Joel Kotkin has alway been good.  But he is (in my opinion) getting even better.  His essay on the sorry state of California, in today’s Daily Beast, is a gem.  (HT Manny Klausner)  Below are several slices (but do read the whole thing):

California has met the future, and it really doesn’t work. As the mounting panic surrounding the drought suggests, the Golden State, once renowned for meeting human and geographic challenges, is losing its ability to cope with crises. As a result, the great American land of opportunity is devolving into something that resembles feudalism, a society dominated by rich and poor, with little opportunity for upward mobility for the state’s middle- and working classes.

….

But since the 1970s, California’s water system has become the prisoner of politics and posturing. The great aqueducts connecting the population centers with the great Sierra snowpack are all products of an earlier era—the Los Angeles aqueduct (1913), Hetch-Hetchy (1923), the Central Valley Project (1937), and the California Aqueduct (1974). The primary opposition to expansion has been the green left, which rejects water storage projects as irrelevant.

Yet at the same time greens and their allies in academia and the mainstream press are those most likely to see the current drought as part of a climate change-induced reduction in snowpack. That many scientists disagree with this assessment is almost beside the point. Whether climate change will make things better or worse is certainly an important concern, but California was going to have problems meeting its water needs under any circumstances.

….

And there needs to be, at least for the short term, an end to dumping water into San Francisco Bay for the purpose of restoring a long-gone salmon run, or to the Delta, in order to save a bait-fish, the Delta smelt, which may already be close to extinct. This dumping of water has continued even as the state has faced a potentially crippling water shortage; nothing is too good for our fish, or to salve the hyper-heated consciousness of the environmental illuminati.

….

But it’s not just water that exemplifies the current “era of limits” psychology. Energy development has always been in green crosshairs and their harassment has all but succeeded in helping drive much of the oil and gas industry, including corporate headquarters, out of the state. Not building roads—arguably to be replaced by trains—has not exactly reduced traffic but given California the honor of having eight of the top 20cities nationally with poor roads; the percentage of Los Angeles-area residents who take transit has, if anything, declined slightly since train-building began. All we are left with are impossible freeways, crumbling streets, and ever more difficulty doing anything that requires traveling.

These policies have had numerous impacts, like weakening California’s industrial sector, which cannot afford energy prices that can be twice as high as in competing states. Some of those who might have worked in the factories, warehouses, and farms of California now help swell the numbers of the welfare recipients, who remarkably make up one-third of the nation’s total. As recently as the 1970s and ’80s, the percentage of people living in poverty in California was below the national average; California today, based on cost of living, has the highest poverty rate in the country.

….

Ultimately this is a story of a state that has gotten tired, having lost its “animal spirits” for the policy equivalent of a vegan diet. Increasingly it’s all about how the elites in the state—who cluster along the expensive coastal areas—feel about themselves. Even Brown knows that his environmental agenda will do little, or nothing, to combat climate change, given the already minimal impact of the state on carbon emissions compared to escalating fossil fuel use in China, India and elsewhere. But the cosmopolitan former Jesuit gives more priority to his spiritual service to Gaia than the needs of his non-affluent constituents.

But progressive narcissism is, as some conservatives assert, not the main problem. California greens are, to be sure, active, articulate, well-organized, and well-financed. What they lack is an effective counterpoint from the business class, who would be expected to challenge some of their policies. But the business leadership often seems to be more concerned with how to adjust the status quo to serve privileged large businesses, including some in agriculture, than boosting the overall economy. The greens, and their public-sector allies, can dominate not because they are so effective as that their potential opposition is weak, intimidated, and self-obsessed.

What we are witnessing the breakdown of a once-expansive, open society into one dominated by a small group of plutocrats, largely in Silicon Valley, with an “amen” crew among the low-information donors of Hollywood, the public unions, the green lobby, and wealthy real estate developers favored by Brown’s pro-density policies. This coalition backs Brown and helps maintain the state’s essentially one-party system. No one is more adamant about reducing people’s carbon footprint than the jet set of Silicon Valley or the state’s planning elite, even if they choose not to live in a manner that they instruct all others.

A few days ago I posted a negative review of Applied Underwriters, and linked to this post on my blog for much more detail.  Yelp promptly pulled the review, saying I violated their terms of service by linking to a commercial web site.  I thought that bizarre, since my blog has absolutely nothing commercial about it.   But it made more sense when I received a letter from Applied Underwriters demanding that I take down my negative Yelp review or they would sue me for libel.  I don't know for sure what happened, but I suspect that Applied Underwriters sent Yelp a similar demand and they used the link in the review as an excuse to delete it and avoid legal entanglements.

So I posted an updated review with more detail and no link.  Now, Yelp is hiding the review, along with most of the other negative reviews, behind a nearly invisible link at the bottom that says "other reviews that are not currently recommended".  Scroll down to the bottom of this page and you may see it if you have a keen eye.  It is not even clear it is a link, but if you click on it, you get all the bad reviews Yelp is hiding.

Let's dismiss all the reasons why Yelp might say they do this.  One is clarity, to reduce clutter.  But go to your favorite restaurant Yelp page.  Likely you will not see this link / hidden review phenomenon.  You will see pages and pages of reviews, far more than they would have to show if they just displayed all the reviews for Applied Underwriters.

So there must be another reason.  They say in their note there is a quality algorithm.  Anyone who has read a lot of Yelp reviews will know that if this is so, their quality algorithm is not working very hard.   They have a number of reviews that they "recommend" that are nothing more than a rant like "I will never use these guys again" while my unrecommended review includes paragraphs of detail about the service.  They say it is based on your review volume as well, but I have more Yelp review volume than several of the others who seem to pass the screen.

All of which leads me to believe that this is Yelp's purgatory where they hide reviews based on corporate pressure.  They have gotten a lot of cr*p publicly about deleting bad reviews from sponsors and from corporations that pressure them to do so.   They have a zillion self-righteous FAQ's asserting that they don't delete anything.   So imagine Applied Underwriters sends Yelp loads of threats to take down each negative review that comes up.  What do they do?  They put them in the not-recommended purgatory.  They can claim that they haven't deleted anything, but absolutely no one will ever likely see the review.  And they don't count any longer to the company's review count, so for all intents and purposes they are gone.

All of this is a guess, because it is absolutely impossible to contact Yelp about these issues.  No phone numbers.  The ones in general directories for San Francisco don't work for them.  You can't email or chat or contact their customer support in any way.  For a company in the transparency business, they avoid it like the plague.

But do you want to know what makes me doubly sure of my analysis?  Because there is no way to up-rate any of the "not recommended" reviews.  I would have thought the whole up-rating system was how they sorted reviews to present the most relevent at the top, but you can't do that with the ones they have put in purgatory.  Why?  Because these reviews are being put in purgatory not for some customer benefit but to protect corporations able to put pressure on Yelp.  Yelp doesn't want them uprated.  They are supposed to disappear.    If I had time, I would compare the number of "not recommended" reviews for corporations with powerful legal staffs like Applied Underwriters to the number for Joe's local business  (AU has 17 recommended reviews but a 28 full reviews that have been "disappeared" as unrecommended).

(Don Boudreaux)

… is from page 255 of David Boaz’s excellent new (2015) book, The Libertarian Mind (original emphasis):

Government doesn’t have customers, who can use its products or try a competitor’s instead, so it’s difficult to decide when government is doing a good job.

People on the left fancy that they are devoted to science and reality-based thinking – or are at least that they are more devoted to science and reality-based thinking than are their political and ideological opponents.  While the right has no shortage of people who are irrational and hold positions unsupportable by science – likewise for the political middle, by the way – I have no interest in offering my own opinion on which group wins the rationality contest.  But I will point out that people on the left, by so often decrying market competition and seeking to displace it with one-size-fits-all diktats from government, decry and displace the only dispassionate and most objective test for how best to allocate scarce resources among their multitude of possible uses.  If science requires empirical tests – rather than reliance on dogma or the pronouncements of pooh-bahs – then those people who fail to appreciate the incredibly rigorous and objective tests that take place every moment in private-property markets are not as devoted to science as they think.

Over the last few months, I’ve featured more than a dozen Venn diagrams on CD, and thought it might be a good time to feature ten of those today in this post. Here are my top ten favorite CD Venn diagrams:

1. Venn Diagram I on price controls (below).

2. Venn Diagram II on price controls (below).

3. Venn Diagram III on price controls (below).

4. Venn Diagram IV on prices controls (below).

5. Venn Diagram on weed vs. vaping in California (below).

6. Venn Diagram I on gender activism (below).

7. Venn Diagram II on gender activism (below).

8. Venn Diagram on diversity on college campuses (below).

9. Venn Diagram on income and wealth diversity (below).

10. Venn diagram on the War on Beer vs. the War on Drugs.

 

The post Venn diagram Sunday appeared first on AEI.

Well, I have managed to get myself into a scam.  It is not your normal scam, like the ones that are run by some mafia boiler room with guys working under aliases.  This scam comes via a major insurance company called Applied Underwriters (working under the names California Insurance Company and Continental Indemnity Company) which is owned by Berkshire Hathaway and none other than Warren Buffett.  If you feel sorry for Warren Buffett and want to give him a large interest-free loan for an indeterminate number of years, this is your program.

First, I need to give a bit of background on how workers comp works.  When you are a new company, they assign you an experience rating -- that is a multiplier of your premium based on past loss experience.  There is some default starting number that if I remember right, in most states, is a bit over 1.0x.  Each year, the workers comp world looks back at your past history and computes a new loss rating -- higher if you have had more payouts, lower if not.  Generally it is based on three years experience not counting the last year (so 2-4 years in the past).  Your future premiums get multiplied by this loss rating.

Several years ago we had a couple bad injuries that drove our loss number into the 1.7-1.9x area.   Neither were really due to a bad safety issue, but both involved workers in their seventies where a minor initial injury led to all sorts of complications.  Anyway, my agent at the time calls me one day a couple of weeks before renewal and says that none of the major companies will renew me.  This seemed odd to me -- I understood that my recent claims history was not good, but isn't that what the premium multiplier was for?  In fact, if my loss history returned to normal, they would make a fortune as I paid high rates based on old losses but had fewer new ones.

Apparently, though, insurance companies have fixed rules that keep them from underwriting higher loss ratings.  Probably for the same reason Vegas won't take action on Ivy League football games any more -- just too much variability.  I found out later with my new broker we could probably have overcome this, but I learned that too late.

My broker at the time put me into a 3-year program from Applied Underwriters, in part because they were taking everybody.  This program was set up differently from most workers comp programs.  You had a basic policy, but there was a second (almost indecipherable to laymen) reinsurance agreement that adjusted the rates of the basic policy based on you actual claims.  In other words, based on your claims, they would figure up at the end how much you owed and what your premium multiplier would be.

I saw two red flags that I ignored in signing up.  1)  The reinsurance agreement was impossible to understand, violating one of my foundational rules that I shouldn't sign things I don't understand.  And 2) The rate structure was very suspicious.  They touted a rate structure that could go as low as, say, $100,000 a year and was capped around $400,000 a year.  But when you pulled out a calculator, the $100,000 was virtually unobtainable.  It would require about zero claims.  If there were any claims at all, even for a few bandaids, the price would march up to $400,000 really fast.  It was the equivalent of a credit card teaser rate, and it should have made me suspicious.

Anyway, I was desperate.  For a business like mine, being told I had no workers comp insurance just a few weeks before the old policy ran out was a death sentence.  No one would write me or even quote me a policy that fast.  So I took the Applied Underwriters offer.  Shame on me, I should have worked on this much harder.

I won't bore you further with my voyage of discovery in trying to figure out how this thing works.  I will just tell you the results that I have found.  There are apparently other companies with similar issues, one of which is documented here Applied Underwriter Suit (pdf)Newsletter publisher objected to scan of article, so I have taken it down at their request.

I spent hours and hours trying to figure out their statements.  There is a whole set of terminology to learn that is actually not used in most of the rest of the workers comp world.  The key page of the statement is page 7, which I will show below because it highlights several of the issues with Applied.  Page 7 is the page where the monthly premium is "calculated".  I have added the red numbers and arrows for the discussion below.

Here are some of the Applied Underwriter problems:

1. Large deposits that must be made each year and may never be returned.    You can see that I am making deposits over $40,000 a year.  And that is each year.  The first year deposit is not returned.  The second year and third year are just added to it.  And I have found out since I joined this scam that they are not contractually obligated to return them until they are totally sure that all the claims are paid.  Maybe some guy who was hurt in his thirties has a relapse and claims more money when he is 75.  Gotta keep your deposit just in case, don't we?
2. Premiums based on the worst of your experience and their estimate of your losses, and they keep the difference for years and years.   For those in the same trap as me, I will try to explain the numbers above.  The estimated loss pick containment at the top is basically their estimate of your losses.  Note that it drives every number on the page and is basically their arbitrary number -- they could have set it anywhere.  The loss pick containment to date is just pro rated for the amount of the year that has gone by.  The 65% is an arbitrary number.    The $25,278 is my actual losses to date.  You can see where I point with #2 above, though, that my losses are irrelevant to my premiums.  They take the higher of my losses and what is essentially their estimate of my losses and I pay based on that.   Note that their higher number is not based on the reserved amounts on actual claims -- the $25,278 includes their reserves.  It is just the number they established at the beginning of my policy they think my claims are going to be and gosh darnit they are going to stick to that (and my claims even in my worst year in history were never even half of their estimate).  Yes, at the end of the policy if my losses stay low, they owe me money back for all the premium they overcharged me based on their arbitrarily high estimates.  But see #1 above -- there is no time horizon under which they have to return the money.  They can keep it for years and years.
3. The final premium is, after all these calculations, entirely arbitrary.  So after this loss calculation (which essentially just defaults to their arbitrarily high estimate and not my actual loss history) they do some premium calculations.  These actually sort of make sense if you stare at the agreements for a really long time.  But then we get to the line I point to in red labelled 3.  It is the actual amount I owe.  But it does not foot to any other number on the page.  How do they come up with this?  They won't say.  To anyone.  It might as well be arbitrary.  I actually had some dead time and took all my reports and tried to regress to a formula they use for this, but I couldn't figure it out.   So all the calculation on this page is just a sham, it's the mechanical wizard in the Wizard of Oz.  It looks good, but does not actually directly lead to what you are billed.

So I thought I understood my problems.  I put in large deposits and overpaid premiums based on arbitrarily high loss estimates they make -- all of which will take me years and years of effort to maybe get back.  It turns out that I likely will have a third problem.  In the lawsuit linked above in the pdf, the plaintiff complains that when they left the program after three years, Applied arbitrarily wrote up all their estimated losses on open claims to stratospheric levels and then demanded a large final premium payment at the end.  Folks on Yelp complain of the same thing.  You should know how this works by now -- the plaintiff will theoretically get all this back someday, maybe, when the claims prove to be less costly, but in the mean time Warren Buffet gets to invest the money for years and years (cost of capital = 0) until it is returned.

This is why I think Applied Underwriters actually likes companies with high lost histories.  Rather than costs, losses for them are excuses to over-collect on deposits and premiums -- money that can then be invested and held for years free of charge.

As an aside, I want to thank my new agents at Interwest Insurance for helping decipher all of this.  They actually flew a guy in to help me understand this policy.  They didn't get me into it, but they are helping me pick up the pieces as best we can.

My absolute favorite example of corporations using social causes as cover for cost-cutting is in hotels.  You have probably seen it -- the little cards in the bathroom that say that you can help save the world by reusing your towels.  This is freaking brilliant marketing.  It looks all environmental and stuff, but in fact they are just asking your permission to save money by not doing laundry.

However, we may have a new contender for my favorite example of this.  Via Instapundit, Reddit CEO Ellen Pao is banning salary negotiations to help women, or something:

Men negotiate harder than women do and sometimes women get penalized when they do negotiate,’ she said. ‘So as part of our recruiting process we don’t negotiate with candidates. We come up with an offer that we think is fair. If you want more equity, we’ll let you swap a little bit of your cash salary for equity, but we aren’t going to reward people who are better negotiators with more compensation.’

Like the towels in hotels are not washed to save the world, this is marketed as fairness to women, but note in fact that women don't actually get anything.  What the company gets is an excuse to make their salaries take-it-or-leave-it offers and helps the company draw the line against expensive negotiation that might increase their payroll costs.

Postscript:  Yes, I understand the theory of negotiation and price discrimination, as used by auto dealers.  One can make an argument that setting prices high (or wages low) and then allowing negotiation by the most wage or price sensitive is the best way to optimize profits, and that Pao's plan in the long-term may actually raise their total compensation costs for the same quality people.  I don't think she is thinking that far ahead.

We already covered the fact that the DEA had a phone tracking program similar to the NSA's that we've been debating. As we noted in our post, that DEA phone tracking program was actually revealed years ago in a NY Times report, though it didn't get that much attention at the time. Yesterday, USA Today's Brad Heath did a much more detailed report on the details of the program -- including how massive it was, how little oversight there was (basically none) and how widely it was used (all the time). But there was one element that seemed important enough to call out separately: this program has been ended and it's entirely because of Ed Snowden. While there's still a fight going on over whether or not the NSA program will continue after June 1st (when Section 215 of the PATRIOT Act expires), Heath's reporting notes that the DOJ realized the DEA program could not continue -- once it realized how similar it was to the NSA program:

Holder pulled the plug on the phone data collection in September 2013.

That summer, Snowden leaked a remarkable series of classified documents detailing some of the government's most prized surveillance secrets, including the NSA's logging of domestic phone calls and Internet traffic. Reuters and The New York Times raised questions about the drug agency's own access to phone records.

Officials said the Justice Department told the DEA that it had determined it could not continue both surveillance programs, particularly because part of its justification for sweeping NSA surveillance was that it served national security interests, not ordinary policing. Eight months after USTO was halted, for example, department lawyers defended the spy agency's phone dragnet in court partly on the grounds that it "serves special governmental needs above and beyond normal law enforcement."

Three months after USTO was shut down, a review panel commissioned by President Obama urged Congress to bar the NSA from gathering telephone data on Americans in bulk. Not long after that, Obama instructed the NSA to get permission from the surveillance court before querying its phone data collection, a step the drug agency never was required to take.

The DEA stopped searching USTO in September 2013. Not long after that, it purged the database.

"It was made abundantly clear that they couldn't defend both programs," a former Justice Department official said. Others said Holder's message was more direct. "He said he didn't think we should have that information," a former DEA official said.

Think about this, though: the program lasted for more than two decades before anyone bothered to even consider this idea. And it was only once the other database (which actually had a lot more strict access controls) started getting negative press that Justice Department officials realized they had no real legal basis for the DEA program.

Who, again, is watching the watchers? While some have argued that Snowden's revelations have not (yet) resulted in the NSA's surveillance programs being stopped, it seems pretty clear that he was directly responsible for this DEA program being shut down completely and the data purged.

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(Don Boudreaux)

… is from page 256 of the original edition of Robert Higgs’s indispensable 1987 book, Crisis and Leviathan:

The mixed economy that has prevailed in the United States since World War II, a uniquely American form of participatory fascism, has lent itself to a substantial expansion of the scope of government authority over economic decision-making.  Given capitalist color by the form of private property rights, the system has denied the substance of any such rights whenever governmental authorities have found it expedient to do so.

Obama claims 'global warming' public health hazard...


(Third column, 10th story, link)

---

Related stories:

More scientists doubt salt as bad for you as govt says...

Nintendo's never-ending desire to control how YouTubers review its games or do "let's plays" has been laughable from the start. From the trust-destroying agreement YouTubers had to enter into in order to get access to visual content to the beauracratic nightmare individuals had to wade through just to get a video approved for monetization, the whole thing started off on messy footing. And the biggest issue in all of this: Nintendo still can't seem to grasp that these YouTubers are giving the company free advertising. Gamers love the kinds of videos these YouTubers produce. They use them to make purchasing decisions, to become interested in new games, and to fuel word-of-mouth advertising that no trumped up ad campaign could ever possibly hope to achieve. Why make any of that more complicated by creating an approval system for the videos? And, more importantly, why take away the incentive for fans to promote your games by demanding a share of their YouTube revenue?

Well, the program that's a mere few months old has already resulted in the first major YouTuber proclaiming that Nintendo games will no longer be covered. Angry Joe (Joe Vargas) has one hell of an online following in the gaming YouTuber community and, following a spat over his Mario Party 10 video, Nintendo is dead to him.

Joe “Angry Joe” Vargas, who commands nearly two million subscribers on YouTube, has decided to stop covering Nintendo games, following a dispute over a Mario Party 10 video. Angry Joe’s Mario Party 10 video was flagged by YouTube, and while it’s possible for him to keep the video online, he can’t make money off it. It’s easy to imagine why he’s upset.

He tweeted about the decision a few days ago:

I hope @NintendoAmerica enjoyed the free ad revenue & coverage I generated for em. It will be my last Nintendo video. pic.twitter.com/07797eA7W4 — Joe Vargas (@AngryJoeShow) April 4, 2015

That sort of says it all, doesn't it? Millions of gamers who went to Angry Joe for help in where to spend their gaming dollar will no longer be directed by Joe to Nintendo games via reviews and gameplay footage. For Angry Joe followers, Nintendo might as well not exist. What's particularly insane about this is that the YouTuber Nintendo affiliate program described above wouldn't even have applied to this particular video, since some Nintendo games, Mario Party 10 among them, don't even qualify for coverage under the program. Why Nintendo would seek to piss off a popular YouTuber over a video for a game that wouldn't have been granted the okay under the affiliate program is beyond me.

Here's a case where Nintendo has locked up 100% of the ad revenue on Angry Joe's video, despite the fact that it's not Nintendo's copyright-covered content viewers are coming to watch. That's not only unfair, it's biting the very hand feeding Nintendo's coffers and sending the company new customers. This is the first major YouTuber to jump off the Nintendo ship, but it almost certainly won't be the last.

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Top Spy: Hillary's Emails 'Likely' Hacked by China, Russia, Iran...


(Second column, 8th story, link)

---

I featured a series of posts about profits last week here and here, (the first post was mentioned and discussed at other blogs and websites here, here, here and here), and this is another post on profits.

According to this database at Yahoo!Finance for 212 US industries, the median profit margin (net income / sales) for American companies was 6.5% during the most recent quarter. Assuming that a company operates 365 days a year, here’s a question about profits: How many days of sales in a calendar year does it take to cover all of a company’s annual expenses (labor, rent, cost of goods, utilities, property taxes, income taxes, interest payments, advertising, etc.), and then how many days of sales would represent the company’s profits?

As the table above shows (click to enlarge), for the typical US company with a 6.5% profit margin, all of the company’s sales revenue from January 1 to December 7 would go to cover the firm’s expenses for the year, and its sales on roughly the last 24 days of December from December 8 to December 31 would represent its profits. For the other industries displayed in the table above that operate on thin profit margins of less than 4%, companies in those industries have to operate until the middle of December (airlines for example at December 18), or even until the last week (department stores), or in the case of grocery stores until the middle of the last week of December. Think about it — a grocery chain like Safeway or Kroger has to operate from January 1 to December 26 until it breaks even for the year, and only then will its sales revenue from the the last 4.4 days starting on December 27 represent the profits for the entire year! And that’s only if everything goes exactly right, and nothing goes wrong — like a sales slump from a recessionary slowdown or from increased competition from a new competitor like Walmart and Target (now in the grocery business); or like an unexpected increase in costs that can’t be passed along in the form of higher prices, etc.

Using a different data source for the restaurant industry, the average profit margin over the 7-year period from 2007 to 2013 was 2.1% according to this report from Sage Works, and was less than 2% in five of those years. That means a typical restaurant that is open seven days a week has to operate until December 23 to cover its costs and break even, and would only earn its profits from the sales revenue generated from the last 8 days of the year from December 24-31. And again, that’s only if everything goes perfectly and there are no unexpected increases in costs/expenses and if there are no unexpected decreases in sales revenue. Those are big ifs in the hyper-competitive restaurant business, as demonstrated by the fact that 25% of restaurants close or change ownership in the first year of business, and that percentage rises to 60% after three years. Those thin margins in the restaurant business also demonstrate how vulnerable those establishments are to the whimsical and fanciful actions from politicians who routinely pass legislation that artificially and significantly raises the labor costs of restaurants in the form of minimum wage laws government-mandated wage floors that guarantee some small businesses and restaurants will be forced to close down. 

Bottom Line: The analysis above of profit margins for firms based on the “first day of profit” in the calendar year is another way to help illustrate that most of the money a firm takes in from its sales goes to pay expenses and costs of operation, and only a very small fraction of those sales (6.7% for a typical firm and only 1-4% for many retail industries) turns into profits that allow the company to survive. It’s a lesson about profits that politicians and the general public should keep in mind when they support proposals like a $15 minimum/living wage that can often mean the difference between a small business’s survival on a razor-thin profit margin and bankruptcy.

Update: As Jon Murphy aptly points out in his comment below the post, “many of the industries (restaurants, grocery stores and discount retailers) with low profit margins are also major employers of minimum wage workers. The simple fact is they cannot absorb wage hikes, their razor-thin profit margins simply won’t allow it.”

BONUS: In the Prager University video below, Professor Walter E. Williams of George Mason University answers some basic questions about profits: Is profit a dirty word? Would the world be better off without profits? Or are profits progressive — the only thing that can move potatoes from Idaho to Manhattan and medicine from America to Africa?

The post The typical US firm doesn’t earn a profit until sometime in December, and often it’s the end of the month appeared first on AEI.

carry-on-my-otp:

If Stuntmen from the old movies don’t have your full respect then I just don’t know what to say to you

fencehopping: Giant balloon popping in slow motion.

In 2009, Canadian economist Ross McKitrick was asked by a journalist for his thoughts on the importance of the annual one-hour event in energy self-flagellation and green nitwitery known as Earth Hour, which takes place today, March 28, at 8:30 p.m. Here is his excellent response (my emphasis):

I abhor Earth Hour. Abundant, cheap electricity has been the greatest source of human liberation in the 20th century. Every material social advance in the 20th century depended on the proliferation of inexpensive and reliable electricity.

Giving women the freedom to work outside the home depended on the availability of electrical appliances that free up time from domestic chores. Getting children out of menial labour and into schools depended on the same thing, as well as the ability to provide safe indoor lighting for reading.

Development and provision of modern health care without electricity is absolutely impossible. The expansion of our food supply, and the promotion of hygiene and nutrition, depended on being able to irrigate fields, cook and refrigerate foods, and have a steady indoor supply of hot water.

Many of the world’s poor suffer brutal environmental conditions in their own homes because of the necessity of cooking over indoor fires that burn twigs and dung. This causes local deforestation and the proliferation of smoke- and parasite-related lung diseases. Anyone who wants to see local conditions improve in the third world should realize the importance of access to cheap electricity from fossil-fuel based power generating stations. After all, that’s how the west developed.

The whole mentality around Earth Hour demonizes electricity. I cannot do that, instead I celebrate it and all that it has provided for humanity. Earth Hour celebrates ignorance, poverty and backwardness. By repudiating the greatest engine of liberation it becomes an hour devoted to anti-humanism. It encourages the sanctimonious gesture of turning off trivial appliances for a trivial amount of time, in deference to some ill-defined abstraction called “the Earth,” all the while hypocritically retaining the real benefits of continuous, reliable electricity.

People who see virtue in doing without electricity should shut off their fridge, stove, microwave, computer, water heater, lights, TV and all other appliances for a month, not an hour. And pop down to the cardiac unit at the hospital and shut the power off there too.

I don’t want to go back to nature. Travel to a zone hit by earthquakes, floods and hurricanes to see what it’s like to go back to nature. For humans, living in “nature” meant a short life span marked by violence, disease and ignorance. People who work for the end of poverty and relief from disease are fighting against nature. I hope they leave their lights on.

Here in Ontario, through the use of pollution control technology and advanced engineering, our air quality has dramatically improved since the 1960s, despite the expansion of industry and the power supply.

If, after all this, we are going to take the view that the remaining air emissions outweigh all the benefits of electricity, and that we ought to be shamed into sitting in darkness for an hour, like naughty children who have been caught doing something bad, then we are setting up unspoiled nature as an absolute, transcendent ideal that obliterates all other ethical and humane obligations.

No thanks. I like visiting nature but I don’t want to live there, and I refuse to accept the idea that civilization with all its tradeoffs is something to be ashamed of.

MP: The winner for Earth Hour every year since 2003 has been North Korea (see photo below of the Korean peninsula at night). Odds favor them to be the winner again this year.

The post Earth Hour celebrates ignorance, poverty, and backwardness appeared first on AEI.

If your firewall is blocking the image, see it on Twitter here.

Humor Dimensions: Recognition, mean, clever, bizarre

Brevity: Good (could lose the word “have” in first panel)

Inappropriateness: High (bathroom humor)

Predicted Twitter Response: Expect lots of retweets despite bathroom humor because the message about nutrition is important to folks and the naughtiness is softened by the silliness of it.

[Update: Typo in last frame corrected]

Update 3/29/15: I predicted lots of retweets despite the naughtiness of this comic because I assumed folks would agree with the message about nutrition. No one is on the other side of that issue. As predicted, this was a strong performer. Only a few of my tweets have had this many retweets.

Key Learning: You can get away with naughtiness if you don’t use actual naughty words and the message is otherwise positive.

If your firewall is blocking the image, see it on Twitter here.

Scott

@ScottAdamsSays

Paul C. "Chip" Knappenberger

Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

—

On Sunday, in anticipation of Sen. Ted Cruz’s (R-TX) announcement that he intends to run for president, California governor Jerry Brown (D), declared to NBC’s Meet the Press Cruz was “absolutely unfit to be running for office.” Why? Because of Cruz’s stance on climate change—some of which Cruz laid out on late night TV last week.

But comparing Cruz’s comments on Late Night with Seth Meyers and Brown’s remarks on Meet the Press, it is pretty clear that it is Gov. Brown who needs to spend more time familiarizing himself with the scientific literature on climate change and especially its associations with extreme weather events.

Apparently Gov. Brown is convinced that climate change, or rather the apparently scarier-sounding “climate disruption” Brown prefers, is behind the ongoing drought in California, not to mention the East Coast’s cold and snowy winter.

Cruz, on the other hand, told a more restrained story—that data doesn’t support many alarmist claims and that satellites show no warming during the past 17 years while climate models expected warming—one which comports better with the science that he portrayed.

While there is certainly more to the story than Cruz went into in his brief appearance with Seth Meyers, he is right, that according to satellite observations of the earth’s lower atmosphere as compiled by researchers at Remote Sensing Systems, there has been no overall temperature increase during the past 17 years.

Gov. Brown, meanwhile, decided to elaborate on the climate change issue. Under general questioning from Meet the Press host Chuck Todd, Brown admitted that is was difficult to link specific events, like the California drought, to human-caused climate change. But then Todd played a snippet of Cruz’s Late Night interview where Cruz said:

And my view actually is simple. Debates on this should follow science and should follow data and many of the alarmists on global warming, they have a problem because the science doesn’t back them up.

Brown’s assertions then got much bolder:

What [Cruz] said is absolutely false. Over 90% of the scientists who deal with climate are absolutely convinced that the human activity, the industrial activity, the generation of CO2, methane, oxides of nitrogen and all the rest of those greenhouse gases are building up in the atmosphere, they are heat-trapping, and they are causing warming, not just drought in California, but severe storms and cold in the East Coast. So it’s climate disruption of many different kinds. And that man betokens such a level of ignorance and a direct falsification of existing scientific data. It is shocking, and I think that man has rendered himself absolutely unfit to be running for office.

Unfortunately for Brown, it is he that is speaking against “existing scientific data.”

Consider this new study by a team led by Geophysical Fluid Dynamic Laboratory’s (GFDL) Thomas Delworth that examined the association between the global warming hiatus and drought in western North America (including California). Turns out, according to these scientists, both stemmed from a similar cause—a change in the patterns of winds across the tropical Pacific Ocean. Further, they suggest this pattern was not overly consistent with expectations from human-caused climate change. Here is an excerpt from that paper:

The strong connection between the intensification of Pacific trades and the drying in western North America observed over the past decade suggests that this drying cannot be connected in a straightforward fashion to greenhouse gas increases. In most coupled [climate model] simulations anthropogenic forcing produces a long-term weakening of the Walker circulation and tropical Pacific trade winds, but with substantial intrinsically-generated variability on decadal scales (Vecchi et al. 2006). Therefore, unless it can be shown that the strengthened trade winds are a result of either natural or human-induced radiative forcing changes, the model results suggest that the observed drying over the western U.S. over the last decade may be primarily due to natural variability, and therefore not necessarily a harbinger of a secular drying trend (Hoerling et al. 2010; Seager and Naik 2012). These results highlight how vulnerable western North America is to severe decadal swings in hydroclimate arising from internal variations of the climate system.

Clearly, Gov. Brown is out of touch with these findings, just as he is with many findings on East Coast cold and snow (for example, here, here, and here). But this is typical of those who are intent on attacking those folks (politicians, scientists, writers, etc.) who take a dimmer view than themselves on the necessity for policy action aimed to combat climate change—policies which too often seek to limit energy choice.

If anyone is keeping score, this round of political squabbling over climate change should go to Sen. Cruz.

Reference:

Delworth, T.L., et al., 2015. A link between the hiatus in global warming and North American drought. Journal of Climate, doi:10.1175/JCLI-D-14-00616.1, in press.

Written by: Kevin Cann

Most people reading this have heard of the term insulin resistance. For those of you that are new to the paleo diet and the site, insulin resistance is when our muscle, liver, and fat cells become desensitized to the hormone insulin. This leads the pancreas to have to produce more insulin and shovel the majority of glucose into our fat cells for storage.

Type 2 diabetes is a result of prolonged insulin resistance. The pancreas becomes tired from being overworked trying to produce extra insulin and eventually we cannot manage our blood sugar levels. Type 2 diabetes is an epidemic that the world is currently facing. It is estimated by the Center for Disease Control (CDC) that nearly 30 million Americans suffer from diabetes.

What if I said that type 3 diabetes is likely to be the next major epidemic that we face? You might be thinking “Type 3 diabetes? Is that such a thing?” You may know type 3 diabetes by another name, Alzheimer’s disease (AD). Yes, AD is a form of diabetes.

I am not just making this up. Research published in the Journal of Diabetes Science and Technology concluded by stating:

“ We conclude that the term “type 3 diabetes” accurately reflects the fact that AD represents a form of diabetes that selectively involves the brain and has molecular and biochemical features that overlap with both type 1 diabetes mellitus and T2DM” (1). This same research also showed that AD was treatable with insulin sensitizing agents.

Instead of having insulin resistance in the muscle, liver, and fat cells, we can develop insulin resistance in the brain. This is not hard to see once we realize that the brain uses about 25% of the body’s glucose supply. Type 3 diabetes does differ from type 2 in one scary way. We do not have to have dysfunctional blood sugar to develop it.

Some fascinating research is being conducted out of the University of Penn. For the first time they were able to prove that insulin resistance actually occurs in the brain. They also showed that this change can occur in the brain in non-diabetics and without any presence of hyperglycemia (2). This makes sense as insulin plays a critical role to glucose uptake and the health of brain cells. If something in this system becomes dysfunctional, cognitive decline would be a logical outcome. Glucose oxidizes easily in the blood and that oxidation can lead to DNA damage in the cells. Also, if we have insulin resistance in the brain our cells cannot get the glucose that they need to function.

According to the researchers at the University of Penn, people with diabetes are 50% more likely to develop AD. With this type of increase seen in this population it makes sense that insulin resistance plays a role in the development of AD. The theory is that the insulin resistance in the brain causes the formation of plaques and tangles in the neurons associated with cognitive impairment.

Insulin resistance in the brain also alters dopamine function. Dopamine is our neurotransmitter responsible for memory, focus, and energy (3). Dysfunctional dopamine levels have been linked to depression, ADD, ADHD, gambling addiction, drug addiction, and schizophrenia. Ironically sugar addiction has been linked to low dopamine levels as well.

This insulin resistance link to dopamine may explain why ketogenic diets are a useful therapeutic tool when treating diseases of cognitive decline and schizophrenia (4,5). Theoretically speaking, maybe the ketogenic diet reverses insulin resistance in the brain and brings the system back to normal.

Now that we know what causes AD how do we avoid it? Do we need to run as far away from carbohydrates as possible? In my opinion, no. There are a number of things that may lead to one developing AD such as food, stress, environmental toxins, gut health, and genetics.

In order to decrease our risk of developing AD we need to maximize each of those specified areas. Eating a healthy diet rich in nutrient dense foods is a start. I would not get so hung up on carbohydrate quantity as much as I would on quality. Most people that develop insulin resistance develop it from overeating highly refined and processed carbohydrates. I think we can still minimize our risk of developing AD eating a high carbohydrate diet that consists of fruits and sweet potatoes. If it was just the high carbohydrate intake leading to insulin resistance we would see more type 2 diabetes and AD in groups such as the Kitavans that consume a diet consisting of roughly 70% carbohydrates.

We need to manage our stress. If you are not doing something to actively manage your stress, you need to. Try adding in some daily meditation to your routine. Exercise is important to preventing AD, but it is not a stress management activity. Exercise increases insulin sensitivity and helps us recover from the stress response, but is a stressor in and of itself. Lift some weights 2-4 days per week and remain physically active throughout the week by walking more and standing up at your desk.

Limit the amount of environmental toxins in your home. Use cleaning products that are made from natural sources. Filtering your tap water is also a way to limit environmental toxins in your life. Some of us cannot control our work environment and may be surrounded by toxins there. Do the best you can to limit exposure and make sure you’re eating a nutrient dense diet. In a lot of cases nutrients in our food help protect us from environmental toxins.

We need to attempt to maximize our gut health. Our gut bugs are the gatekeepers of our immune system. They keep all unwanted things out. If they get out of balance things begin to slip through the cracks leading to a chronic inflammatory response. When this happens inflammatory cytokines are released and these cytokines cause DNA damage and inhibit cellular DNA repair (6).

Genetics may be a piece that is out of our control. However, our genes are not just locked into place. They respond to internal and external stimuli and express themselves accordingly (epigenetics). If we take more of the steps listed above I truly believe we can alter our genome for a favorable outcome.

AD, or type 3 diabetes, does not need to be the world’s next epidemic. We can take a proactive stance and eat a healthier diet consisting of nutrient dense real foods, manage our stress, optimize gut health, and limit environmental toxin exposure. If we do this we can age gracefully and enjoy a full life

It appears that Amazon is very serious about walling off its garden. Late last year, it pushed out a firmware update for its Amazon Fire TV devices that not only made rooted devices unusable, but prevented Fire TV owners from rolling back firmware to previous, more root-friendly versions. Apparently, Kindle users were also included in this lockdown.

A recent post at Good Reader notes that the latest firmware for Kindles is pretty much identical to its Fire TV firmware, right down to the destruction of functionality.

The new firmware was pushed out to all modern Kindle devices in late November of last year. Anything after version 5.60 will not allow you to hack the firmware and do interesting things like change the screensaver system or install custom apps.

And, like its firmware for the Fire TV, rollback to less hack-resistant firmware is nearly impossible. You can force it back, provided you have a soldering iron (and the willingness to apply it to your device) or you can follow a few not-so-simple steps to take your root access back from Amazon. But once again, it's the company removing functionality for the sole purpose of making devices perform the way Amazon wants them to, rather than leaving these sorts of decisions to those who have purchased the devices.

And it's not as though Kindle owners are receiving any heads up from Amazon about the firmware's plans for their jailbroken devices. No mention of it is made in the firmware's specifications, which only tells you about the (supposedly) good things the update will bring: vague "bug fixes and improvements." Softpedia's hosting page for the latest version (5.6.1) goes into a little more detail, but it only contains a list of slightly-upgraded Amazon features, rather than the limitations the firmware will impose on paying customers.

If you like Amazon's walled garden, the company is more than happy to ensure you never find the gate. If you don't, Amazon is more than happy to step in and brick over any openings. The latter does a huge disservice to paying customers who are looking to get the most out of something they purchased and own, but seems to still somehow "belong" to Amazon.

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(Don Boudreaux)

Here’s a letter to the editor of Alternet:

In what is a prime candidate for the most economically mistaken essay ever penned, Robert Reich calls a future in which technology makes ever-more high-quality goods and services widely available at virtually zero cost “horrifying” (“In Our Horrifying Future, Very Few People Will Have Work or Make Money,” March 17).

Where to start?  Perhaps with the fact that the history of such Luddite fear-mongering is as long (at least 200 years) as its batting record is low (.000%).  Or maybe with the illogical worry about the unemployment created by an imaginary device that Dr. Reich uses to scare your readers - a device “capable of producing everything you could possibly desire, a modern day Aladdin’s lamp.”  In fact, in a future filled with such devices unemployment wouldn’t be a problem because no one would have to work in order to acquire the means to consume lavishly.  (Indeed, in such a future there would technically be no unemployment because no one would want to work.)

But Dr. Reich’s most wrongheaded claim is this one: “when more and more can be done by fewer and fewer people, the profits go to an ever-smaller circle of executives and owners-investors.”  This claim is exactly backwards.  By far the greatest part of the gains from entrepreneurial-driven advances in technology are, as they have always been, widely dispersed to the masses in the form of more and better consumption options available at lower and lower prices.  Examples include the factory production of textiles that clothed the masses, the mechanization of agriculture that saved the masses from famine, the assembly line that brought the likes of automobiles, kitchen appliances, telephony, and air travel to even the modern-world’s ‘poor,’ and the technology revolution that enables those yearning to read Dr. Reich’s economically uninformed commentary to satisfy their demands 24/7/365 by using their smartphones while sipping lattes and attending protests against the predations of the one percent.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

Reich himself, in listing some modern devices (that he uses as evidence of the coming calamity of abundance), unwittingly gives examples against his proposition that all of the gains of labor-saving technological advances are captured by ‘the few.’

Indeed, even if one focuses exclusively and literally on the profits from entrepreneur-driven technological advances (rather than, more broadly, on the gains from such advances), they, too, are not destined to go to fewer and fewer people.  Higher profits spark competition which, in turn, drives profits down to ‘normal’ rates.  It’s this very process of competition that causes the gains from technological advances to be shared with the masses: the entrepreneurs might all like to keep their profits without sharing them, but competition obliges them to share those profits with the public, in the form of lower prices and improved product quality.  And with technology advancing as fast as Reich fears (and I applaud), the ability of entrepreneurs to compete against each other will only intensify.  If technology makes the production of the likes of clothes and cups of coffee cheap, easy, and fast, so, too, does technology make the production of other machines for use in competing in the production and sale of consumer goods cheap, easy, and fast.

UPDATE: Regular Cafe patron W.E. Heasley sent the following note to me by e-mail:

Is it not poetic justice that Reich managed to post his argument on a platform that uses little manpower, plenty of technology, and is distributed on mass? Shouldn’t Robert have had his essay hand delivered to each and everyone interested?

Bubbles Under The Ice of Abraham Lake by Emmanuel Coupe.


Bubbles in The Ice of Abraham Lake by Phillips Chip.


Frozen Pond by Adam Rifkin.


Ice Rider in Siberia by Matthieu Paley.


Baikal Lake in Russia by Daniel Kordan.


Lake Druzhby in Antarctica by Stu Shaw.


Blue Pond in Japan by Kent Shiraishi.


Frost Flowers in the Arctic Ocean by Matthias Wietz.


Frost Flowers in the Arctic Ocean by Matthias Wietz.


Pond in Switzerland by Dartai.

jedavu:

Frozen Lakes Patterns

With the fall of temperatures, we have gathered for you the most beautiful photographs of frozen lakes and ponds from all around the world : Russia, Switzerland, Japan or also in Canada, their frozen surfaces are full of aesthetic and graphic patterns.

Adam Bates

Over at Forbes, the Institute for Justice’s Nick Sibilla details a new report from the Department of Justice concerning the Drug Enforcement Administration’s practice of cold-stopping travelers at airports, bus stations, and train stations and asking to search their property looking for forfeitable assets.

Federal drug agents may be racially profiling and unjustly seizing cash from travelers in the nation’s airports, bus stations and train stations. A new report released by the Office of the Inspector General for the U.S. Department of Justice examined the Drug Enforcement Administration (DEA)’s controversial use of “cold consent.

In a cold consent encounter, a person is stopped if an agent thinks that person’s behavior fits a drug courier profile. Or an agent can stop a person cold “based on no particular behavior,” according to the Inspector General report. The agent then asks the people they have stopped for consent to question them and sometimes to search their possessions as well. By gaining consent, law enforcement officers can bypass the need for a warrant.

While many people who believe they have nothing to hide may–inadvisably–consent to a police search, they may not be familiar with federal civil asset forfeiture laws, which give federal agents wide latitude to seize property, especially cash, without charging anyone with any crime. Sibilla notes that the DEA agents even go so far as to carry affidavits for search targets to sign disclaiming any rights to the property being seized. 

Disturbingly, the Inspector General found that DEA interdiction task force groups have been seizing cash from travelers and then urging them to sign forms disclaiming their own cash and “waiving their rights.” In one cold consent encounter, DEA agents stopped another African-American woman in part because she was “pacing nervously” before boarding her flight. After gaining her consent, the agents searched her luggage and found $8,000.

The extortive waiver maneuver is not an isolated practice in civil forfeiture jurisdictions. In exchange for signing away your money, the agents agree not to seize other property (for instance, your car or home) or arrest you on criminal charges. Many interstate travelers (the primary targets of drug interdiction forfeiture efforts) rationally decide it’s better to get on with their journey than fight the government for their property. It’s not hard to imagine the practical and financial vulnerability of people getting ready to step on an airplane being threatened with arrest if they refuse to hand over their cash. 

The Department of Justice report also raises troubling questions concerning the criteria used to make the stops. There is an obvious risk that allowing DEA agents to stop travelers cold and question them invites the possibility of racial profiling. This federal policy bears a striking resemblance to the NYPD’s controversial Stop-and-Frisk program, which received withering criticism for the constitutional and racial dynamics involved in allowing officers to stop people cold.

In short, this is another on a long list of areas where the pernicious incentives of the drug war and civil asset forfeiture combine to create an institution of abuse and disregard for individual liberty. 

At a time when predatory, revenue-centered law enforcement is being rightly condemned-–with the ostensible imprimatur of the federal government-– it would be nice for the federal government to set an example by ending its own abusive law enforcement practices.