Before The Next Day's Light

They gather, two by two, some alone, others by the swarm.
The assembly is building as the parts come to form.
The plan was loose, but the purpose to them quite clear.
Celebration at completion cracking open cheap beer.
Insecurities and inhibitions drift away; the term has ended.
The planners and anxieties, the learning and stresses are suspended.
What could have been has passed; what should have been is done.
Just remains this time of indulgent fun.
Revelry is the order; the last doubts melt tonight.
Police be dammed; it's their time to cast happy light.
What is next, lonely tomorrows or summer adventures . . . Who is to say?
For this moment, one last together, they will through night play.

Perhaps this flowchart will help . . . of course it would but won’t because we don’t want the real solutions and cannot accept ugly truths.

Here it is in word form with relevant links:

Is it free-market priced?

1. If no, Is this because of a policy choice (government regulation) or market failure?

   1. If the former, Come back to me when you fix that problem.

   2. If the latter, Let’s work on the market failure cause rather than the resulting effect.

2. If yes, Is there a clear net-negative externality?

   1. If yes, Consider a Coasean bargain first (allowing for tolerance), a Pigouvian tax second (paying attention to inaccurate pricing risk), and a regulatory regime third (paying attention to capture risk).

   2. If no, This is an imagined problem.

Sure, there is a lot of work left to be done in either of the true market-failure boxes (1b and 2a). Still, the biggest debate will come in answering the question posed in box 2. Net-negative externalities are elusive for those who are unwilling to think critically or are simply innumerate. And 1a lands us back at the top of the flowchart until people are willing to make hard choices.

Sigh . . .

Substack referenced:

Of course, Fungi also can be deadly—some mushrooms will kill you dead and AI has analogous risks.

I.

You would be surprised to learn that almost 69% of the US mushroom production occurs in the borough of Kennett Square, Pennsylvania. It is a small town of about 6000 people, but mushroom-growing facilities around town produce almost 451 million pounds of mushrooms annually (2024). 451 million pounds of mushrooms would occupy about 45 American football fields or 35 soccer fields. The dollar value of mushroom production in the US is roughly $ 1 billion per year.

China is the undisputed leader in mushroom production. China accounts for 93% of the world’s global mushroom production.

That is from Software is Feeding the World’s post “The case of missing American mushrooms”. The missing-American-mushroom angle centers on how immigration restrictions are introducing major supply-side problems.

II.

Imagine I told you that AI was going to create a 40% unemployment rate. Sounds bad, right? Catastrophic even. Now imagine I told you that AI was going to create a 3-day working week. Sounds great, right? Wonderful even. Yet to a first approximation these are the same thing. 60% of people employed and 40% unemployed is the same number of working hours as 100% employed at 60% of the hours.

…

Nor is this argument purely theoretical. Between 1870 and today, hours of work in the United States fell by about 40% — from nearly 3,000 hours per year to about 1,800. Hours fells but unemployment did not increase. Moreover, not only did work hours fall, but childhood, retirement, and life expectancy all increased.

That is directly from Alex Tabarrok at MR. The implied lesson is that AI-caused job loss, while likely disruptive and painful in the short term, would be greatly beneficial in the long run (for everyone) if history is any guide.

Consider both stat links food for thought.

Substack mentioned:

We are not on the brink of apocalypse. The world has continued to warm, due to accumulating carbon dioxide emissions. Of course, catastrophists are still with us, and surely always will be, but research has not supported the claims that humanity faces an existential threat. Most significantly, the most extreme climate scenarios that have dominated climate science and policy are not plausible. As a consequence, estimates of 2100 warming under “current policies” have declined from ~4°C to ~2.5°C. No one need take that from me, take it from the IPCC and UN FCCC.

Most types of extreme weather have not become worse. Floods, drought (hydrological and meteorological), tropical cyclones, and tornadoes have not had detectible changes according to the IPCC’s Sixth Assessment Report. Some signals have emerged — heat waves have become more frequent and heavy precipitation has increased in some regions. However, the fire and brimstone of AIT remains far from reality.

Those are just two of several points Roger Pielke makes in examining how Al Gore’s thesis in An Inconvenient Truth and the famous speech (a.k.a. sermon) he gave at the American Association for the Advancement of Science’s annual meeting have not held up in the 20 years hence.

Pielke explains that he, Pielke, misunderstood the problem with what Al Gore was doing and how he was doing it. Having thought of it as a science-understanding problem, he missed that it was actually akin to a religious movement of a apocalypticism. Thus, the reason Pielke calls it a revival sermon.

Continuing with another from Pielke, he appeared on The Human Progress Podcast this past week. Here are a few of snippets from the transcript:

Marian Tupy: Very good. So in this podcast, I want to spend most of our time talking about climate change and global warming and where we are. But I think probably the best thing to do is to start with the two extremes in the climate change debate. I don’t like to use the word denialist, but let’s look at that side first. So people who are critical of the dominant view that climate change is a crisis or even a problem will say things like CO2 concentrations in the atmosphere are much lower than what they were in the distant past of the planet. CO2 is vital for life, it is plant food, and it has led to global greening, which is a good thing. So nothing to worry about. What is wrong with that point of view?

Roger Pielke Jr.: Yeah, I mean, there’s a lot of what you say the science supports global greening and the fact that CO2 levels were higher in the past but where that goes away from scientific understanding is the “nothing to worry about” part. Anyone who claims to have certainty about the future, either we’re headed for the apocalypse or “don’t worry, be happy,” that’s not consistent with understandings of how humans are affecting the climate system. It always was and always will be a risk management problem. The late Steve Schneider, who was a famous climate scientist and climate activist I have this in my book he said at one time, the fundamental challenge of climate change is that outcomes could be very benign or they could be very serious and consequential, and we won’t know the difference during the time that we need to prepare. So both sides, I think, on both extremes the apocalyptics and the “don’t worry, be happy” folks are guilty of selectively interpreting evidence in a way that they think is favorable to whatever cause they want to advance. And the reality is that they’re both in that spectrum of possibilities, but smart decision-making has to consider that entire spectrum, not just one tail of the distribution on either end.

And then later:

Marian Tupy: We’ll get to the other side very soon. But the trade-off would be something like this. By emitting more CO2 into the atmosphere, we are making the world much richer so that even if we do have more CO2 in the atmosphere and it leads to some climatic problems down the line, the society is going to be so technologically advanced and so rich that we’ll be able to take care of it. Is there any evidence for that or is it mostly wishful thinking?

Roger Pielke Jr.: So humans are a fantastically inventive species. A lot of your work and a lot of the stuff I read that you put out emphasizes the progress that’s been made in making our material environments that much better off. And it’s absolutely true that fossil fuels, which have the side effect of emitting carbon dioxide, have been central to all of that progress. One data point, a trend that I think many people aren’t aware of, is that the carbon dioxide intensity of economic activity so technically it’s carbon dioxide per unit of GDP that has been steadily going down for as long as we have records, 60, 70 years. So as we’ve become wealthier, we’ve also become much less carbon intensive. And there are good reasons for that, and we could go into that, but it turns out that as a species we really like getting more output for less input, and that includes fuels. And we like cleaner burning fuels in terms of particulates in the atmosphere and other metrics. And so if that trend were to continue, then at some point we do go over the hump of increasing carbon dioxide emissions and it starts going down.

Roger Pielke Jr.: In fact, right now over the last decade, emissions have plateaued in the sense that there are small increases, but they’re within the margin of error measurement. And if you look to 20, 25 years ago, emissions were really going up fast, particularly due to coal consumption in China. So there is a background force that has nothing to do with climate policy that our economies have been decarbonizing. And so for those people on that side of the debate who really love CO2, we would have to intentionally take action to pump CO2 into the atmosphere because the long-term economic trends are in the other direction. I know it’s not as fast as some would like and it could be faster, but the decarbonization of the economy is just a fundamental reality of life on planet Earth.

And then later still:

Marian Tupy: Extreme weather events, especially hurricanes, cyclones, wildfires, and droughts.

Roger Pielke Jr.: Yeah, so I always say we gotta take these one by one. I’ve studied tropical cyclones for 30 years, which includes hurricanes, and the IPCC gets this one right also. There is not any convincing evidence that there’s more hurricanes, more intense hurricanes over the period of record. The IPCC is clear on that. The National Oceanic and Atmospheric Administration in the US, very clear on that. Hurricanes have become kind of a poster child. They’re very photogenic. Al Gore had one coming out of a smokestack in his famous movie. And hurricanes are probably one of the worst places to look for any signals of climate change. Simply, the numbers are small. There’s only 60 to 80 hurricanes on planet Earth in any given year. That’s a small number of events when you compare it to the millions and millions of temperature measurements we have everywhere every year. And the more measurements you have, the easier it is to detect small signals. Flooding, as I said, no detection or attribution. Drought, for most metrics of drought, again, no detection or attribution. The one distinction that the IPCC makes is soil moisture deficits, so think of dry land, which is associated with warming more than it is with precipitation. Winter storms, again, no detection or attribution there. What other events…?

The entire interview is definitely worth a listen. It is filled with his insightful (certainly not inciteful) perspective that brings careful balance and thoroughness to what is so often the fraught climate discussion. The message I always get from Pielke is: The climate is warming (and changing), humans are partially the cause, the implications are complicated and often misunderstood—the devil is in the details.

Doer of Impossible Things 
[for Mother's Day]

Staring deeply at one's creation
The feeling is both awe and terror
So beautiful and yet so fragile
In need of tender care, then tough love
Guidance, maintenance, direction, aid
Once free, mostly staring back blankly
Without full appreciation 
Motherhood first demands constant
Need, then support, though rejected
Mere moments of adoration 
Never again a thought, an 
Action, without second guess
Carrying their burdens
Always the safe refuge
The source, the resource 
Tirelessly giving
Looked upon as perfect 
With expectation to match
Bearing guilt undeserved, borrowed
Fearing failure untrue
Taking pride in brief flashes
Worry in waves
Love beyond words

Populism is a virus. The infection point is our susceptibility to its siren call that validates our poorly-formed intuitions. Then with the help of confirmation bias, the contagion vector is exploited as we amplify our shared desire to rise to the top from our perceived lowly perch as a victim of former/current elite indifference.

Elites are vital to a well-functioning society. Scratch that: Good elites are vital to a well-functioning society. Elites in general are necessary for a functioning society but not sufficient for a good one.

“Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” - H.L. Mencken

Populism is the notion that the masses have the answers and don’t need the elites. The elites in this model of the world are simply like undeserving kings who stand athwart progress and societal happiness.

Ironically but inevitably populists will gravitate toward the elevation of an elite—just one of their choosing. They have to, again, because elites are vital for a society to function. This is also because the laws of physics and economics force specialization and outsourcing. Populists start with the idea they can figure it all out (or that they have already figured it all out), proceed to oust the current regime of elites, then finally succumb to the need for a new group of elites to take the helm.

I think there is a particular weak point that emerged from America’s embrace of freedom and a democratic republic. This is not in any way, shape, or form to imply the American form of government is anything but the best thing mankind has ever developed in regard to social governance. But it is not perfect. Part of that imperfection is an inherent risk that our freedom allows us to make bad choices.

“The State is the great fiction by which everyone endeavors to live at the expense of everyone else.” - Frédéric Bastiat

In a world of small, limited, constrained government this is not only a tolerable risk, it is itself somewhat a feature. If nothing else, it allows experimentation to help us progress. Since we do not know the best path forward (in anything much less the details of governance), we need a method to test, reject, and refine.

We do not live in that world. We live in a world where the natural tendency of man (good men indeed) is to see wrongs, to see errors, and wish to correct them. Government is easily seen as a tool, a tool which can cut through the perceived obstacles1 to solutions that seem obvious.2

Not all of this is wrong. It is just overapplied. And the biggest risk comes when the tool is so powerful that its potential for error begins to outweigh its potential for success. We are dangerously past this threshold. Which brings us to today’s politics.

“Say what you will of closed-off, smoke-filled rooms, at least they serve a desired purpose.” - me, just now.

I take comfort in our current political degeneracy that each “side” of the nearly closed horseshoe can at least see the problems of the other. It is obvious to those on the left that Republicans have lost the script with Trump, MAGA, and all the various (and worse) bad actors that surround it. At the same time it is obvious to those on the right that Democrats have yielded to their own circus of stupidity with a candidate like Biden having been the cleanest dirty shirt.

When important and generally still needed institutions like the New York Times elevates and takes seriously in a non-critical way the thoughts of Hasan Piker, et al., the Overton Window has slipped and slips further to a lower level of elite degeneracy.3 This is just the example du jour of the left embracing nonsense. The bigger example is how the left is wholly owned by the socialist crusade against free markets.

When formerly important institutions like the The Heritage Foundation or generally still needed institutions like Fox News champion and obediently follow the whims of the Dear Leader, again the Overton Window shows a dim future for elites (of the right in this case). The bigger example here is the rejection of good experts for sake of not wanting to accept what they had to say. And the left shares this own goal. So the joint failure is not just the destruction of good elites. It is also the knock-on effect of bad experts replacing good.

“A republic, if you can keep it.” - Benjamin Franklin

The political orphanage grows larger with every turn to . . . I don’t want to call it extremism, per se. It is more just degeneracy. An embrace of our primal, tribal urges and weakest notions. It is a desire for outcomes without any attempt at discerning how to obtain them or considering if those outcomes are in fact desirable. Before weighing the tradeoffs, a cost/benefit analysis itself that no one seems willing to undertake, we should first have guideposts and guardrails—both of which we have spent amble resources dismantling.

This dismantling of good elites has been unintentional but nonetheless effective. The right and the left wanted the old guard gone, but in throwing the bums out they have ushered in new, worse bums. It took a generation for this remake just as every evolution in American political thought moves over decades. Never was it perfect, but with all the good and bad trends that have transpired over the course of 250 years, the latest iteration seems asymmetrically negative.

It was a better world when political elites like Woodrow Wilson no longer could rise to the top. Sadly it took too long for bigots like him to become unacceptable. Today that bigotry seems to have new life, yet I hold out hope that is just visibility rather than electability.

It was a better world when political elites like Richard Nixon were ousted from power. Sadly we don’t seem to have the stomach for doing the right thing like this today. Some of that is because power is too desirable (a fault for the right in Trump’s case) and because there is more benefit with a weak opponent (a fault of the left in Trump’s case). Both of these sides of the same coin come from long-term, social gain traded away for short-term, selfish gain. The roles would flip but the result remain if we switch out the positions each hold. A less powerful government would not enable this principal-agent problem.

I think we’ve reached a new dilemma with which we must contend. In ways it is a tipping point, but not necessarily in the most dire of circumstances. We’ve been here before just in other ways. Fortunately we are wealthier, better enabled technologically, and past so many constraints that once distracted if not crippled us. Yet indeed all of these factors can push back against the cause. Being wealthier can mean more is at stake for rent seeking and the opposition is better funded. Greater technology amplifies both risks and benefits. And if nothing else, the memory of past hardships can itself constrain—fear is a powerful foe.

I believe we have meaningfully dismantled an elite structure within our politics that silently helped hold the center. It may take a long time to rebuild it. I strongly believe in American resiliency, and this gives me hope. Still, I think we have a long, rough road ahead.

Relevant Substacks:

Frictional Non-Fiction

It seemed real at first.
From the pain to the relief,
All reactions must have been from cause.
The sensations were genuine.
Even the parts in blur felt real,
Seem real in their memory.
None could have been fully imagined.
It's not real now, just a memory,
A story told, a creation.
Recollection is real but only the act of recall.
The rest is a new fiction.
You cannot revisit the past.
Rather you can only invent it from premises.
You build upon that which you believe you knew, 
Believe you can believe.
It was never like this, never quite this.
No matter, bygones are gone
Even if still held.
Regret is an unattainable quest
Quixotic at the core.
Moving on they say is healthy,
But forgetting is its own fiction
And its own unachievable quest.

When it comes to taxing them, the reason this shouldn’t be a question is simply because we should not tax corporations in general. As Megan McArdle recently said on her podcast Reasonably Optimistic, taxing corporations is a particularly bad tax policy. In the episode she pithily explains how it fails on anyone’s terms.

Perhaps a better way to understand the argument is to realize that corporations cannot be taxed. The idea that a corporation is paying a tax bill is a fundamental mistake in tax incidence confusing accounting entries with economic reality. Corporations are collections of people, and those people pay the tax. Before you say, “Exactly! And that’s what we want,” understand that those people are owners, customers, and employees. Owners, the presumable target of those wanting to tax corporations, have the most control to pass off the tax incidence. To the degree they do endure it, be careful what you ask for. The end result is that the tax is hurting capital, the lifeblood of the economy upon which customers and employees depend.

In reality it is employees and customers who bear the brunt of the economic tax incidence. Customers face higher prices and reduced quantities including less quality as a result of corporate taxation. Employees face less employment than they would otherwise enjoy because the business is smaller than it would otherwise be.

Still, we do attempt to tax corporations. The result, like with any tax, is we get less of the thing being taxed—less corporation output. So if we were to tax nonprofits, we would get less nonprofit output. Shortly we will explore the implications.

Before we do that, though, we need to recognize there are two taxation issues facing nonprofits that they currently enjoy protection from. The first of these is the tax benefit donor’s enjoy when they donate to a qualifying nonprofit. If you give to a nonprofit, you can either deduct that donation (e.g., money to a 501(c)3) or you can fully avoid those funds being subject to taxation (e.g., setting up a private foundation or making a qualified charitable donation (QCD) out of a 401(k)). [NB: my apologies for all the jargon.]

Effectively these are negative taxes (subsidies), and they have reciprocal effects economically—just like taxing something gets less of it, subsidizing something gets more of it. Therefore, nonprofits benefit by getting more funds than they would otherwise get in a world where this tax benefit did not exist—subject to the economic caveat ceteris paribus (all else held equal).1

The second benefit is the impact at the entity level itself—the fact that it isn’t taxed on its profit/income.

So we have two elements to consider:

1. Donor benefit

2. Entity benefit

Nonprofit is a misnomer. Nonprofits do have profits. At least they should if they are actually providing benefit to society and wish to not simply immediately pay out all revenues (donated funds gained). Retaining these as investments for future beneficiaries is where these profits generally accrue. That introduces income (that would be taxed as income if they were a for-profit entity) as well as capital gain and more income from the investments themselves (that would be taxed as such, again, if they were a for-profit entity).

Since a nonprofit doesn’t have owners, it has to do something with its profits. Presuming we want the nonprofit to exist now almost always means we want it to exist in the future. That implies not paying out every dollar that comes in immediately.

What if all or much of the excess is paid to employees? Well, many of them are already doing this. Tax policy cannot prevent it other than having the IRS act as steward to monitor egregious behavior (e.g., private inurement). The IRS is ill-suited for this role to say the least. Much like FDIC insurance and FDIC/Federal Reserve bank regulation, this shifts the duty to a government body that itself has bad incentives and raises moral hazard generally in the process.

Might I suggest that caveat donoris is a more appropriate guidepost? Having donors monitor and decide what are appropriate practices from employee pay to marketing budgets and so forth is a much more effective method of getting desired behavior from nonprofits. We already have robust cottage industries designed to make such evaluations. And the effective altruism movement holds this objective as a central tenet. The more donors know they are the first and last defense against inappropriate behavior would only strengthen it.

Still, I don’t think corporations should be taxed. So why might I suggest that nonprofits should be? The reason goes beyond the simple idea of fairness and uniformity; although, that is the start of the reasoning.2

In an imperfect world where we insist on taxing for-profit entities, the economic distortions increase by excluding non-profit entities from this burden. Many would retort, “But that’s okay. Let’s err on the side of helping nonprofits.” Not so fast, my friends.

We must be careful what we ask for. Sheltering nonprofits from the tax burden as is now the case tips the balance in their favor. And the lesson from the prior post is that many of them are not doing a great job. And even when they are well run, the tax benefit encourages them to amass capital (endowments, etc.) rather than use these resources today.

To be certain there is a balancing act that is filled with assumptions and priors in the debate between spending now and spending in the future. While it is true, as I said above, that we almost always want non-profits to exist in the future when we want them to exist in the present, the devil is in the details about how to strike this balance. And also to be certain, we have greatly (not necessarily gravely) erred on the side of the future rather than the present.

Investment people like me are often pushing back against spending today with an eye to growth, which has two components. For one, we want purchasing power (spending impact in the case of nonprofits) to be preserved knowing the future needs and inflation risks are unknown. For another, we tend to favor the idea that the magnitude of impact can be larger when funds are compounded through investment.

Here is the very important other side of that debate: we do know what the spending needs are today, we don’t know if they will be needed in the future (many problems will actually be materially smaller if not solved), and we do know that if the future is even a little like the past, society will be vastly wealthier in the future.

And here is another, perhaps uncomfortable, truth: Let the future take care of itself. Don’t err on the side of saving so strongly that you (a world with current needs that is relatively poor) sacrifice for a future someone (a world with unknown but likely lesser needs that is relatively rich) who not only doesn’t need the help but who might be harmed in getting it. The concept I’m getting at is analogous to a stereotypical trust-fund grandchild who becomes a spendthrift never made to take care of themselves—skin in the game is a powerful, beneficial motivator.

Uniformity in the tax treatment of all these entities would better align incentives and give us a clearer picture on how resources are being used.

In short: Don’t tax corporations, period. But if you insist on doing so, tax all of them—for-profit and nonprofit—alike.

Here are a few examples.

Occupational licensing is where we’ll begin. Ritz Penaranda writes,

Today, an estimated 25 percent to 30 percent of Americans require a license – permission from the government (typically the state, rather than federal) – to engage in their occupation. Examples range from the unobjectionable to the eyebrow-raising.

Her article, “Permission to Earn a Living: History, Economics, and the Ethics of Occupational Licensing,” is a succinct look at the history, current state, and political economy of occupational licensing including a balanced analysis of its costs and benefits—both pragmatic and philosophical.

On the pragmatic, I found this part noteworthy:

Indeed, the supply-side theory highlights serious flaws in the demand-side argument. First, occupational licensing drives up prices. It decreases competition. And it leads to market inefficiencies, such as forum-shopping (whereby states attract professionals through higher salaries or lower regulatory burdens) or decreased economic mobility (as professionals licensed in one state will face higher transaction costs, in the form of repeat licensing, if they wish to move to another state.) It’s hard to see how any of these outcomes benefit consumers.

Second, occupational licensing appears to function as a polite form of incumbent protection. A recent Cato Institute report finds that “data on state associations for nine major occupations reveal that the probability of an occupation becoming regulated increased by 20 percentage points within five years of… [the] founding in that state [of a trade association representing that occupation].” Further supporting the supply-side, or lobbying, thesis, the Institute for Justice finds that licensing burdens disproportionately affect low-income occupations.

Third, a study by the Center for Growth and Opportunity at Utah State University identifies three counter-arguments to the public interest (consumer protection) approach: 1) technological advances over the past 30 years have reduced information asymmetries, so, if the consumer [protection] theory is correct, we should see a decline — not a rise — in occupational licensing (see the discussion of alternatives below); 2) consumer protection cannot explain the wide variation in licensing across states; and 3) consumers do not lobby for occupational licensing, but professional associations do, lending credence to the theory that licensing is motivated more by incumbent protection than by consumer protection.

On the philosophical, I highlight this excerpt:

Twentieth-century champions of liberty such as F.A. Hayek, Milton Friedman, and James M. Buchanan – who were all deeply concerned with individual rights and the rule of law – called for public support (if not provision) of such things as primary education, mosquito control, the earned-income tax credit, or even a minimum basic income. Super-minimalists would, naturally, rely first on voluntary market and reputational mechanisms; second, on legal action by the state to prosecute contract violations and fraud; and only then, as a last resort, on positive state action to protect consumers in cases of information asymmetry. They are careful to avoid policies that encourage incumbent protection or rent-seeking. Their approach involves gradually intrusive levels of enforcement: mandatory bonding or insurance could be a first step, followed by mandatory registration or disclosure, and only in extreme cases would they propose occupational licensing — and only for the most critical occupations.

Turning next to unionization, Liya Palagashvilli writes [emphasis in the original],

In 2023, the contract between UPS and the International Brotherhood of Teamsters, one of the world’s largest private sector unions, was widely described as historic. The agreement delivered large pay increases, expanded benefits, and introduced new work rules governing how labor is scheduled, deployed, and compensated. It was heralded as a turning point for workers in the shipping and logistics sector. For many observers, it appeared to demonstrate that aggressive bargaining could reverse years of stagnant wages and restore labor’s leverage.

Two years later, UPS is in the midst of a sweeping restructuring.

Since that contract, the company has eliminated 48,000 operational jobs, announced plans to cut another 30,000 positions, and closed or consolidated more than 100 facilities. Executives describe the effort as a necessary “right-sizing” of the business, driven by lower package volumes, higher operating costs, and a strategic shift away from less profitable delivery segments.

…

It is true that the 2023 contract delivered meaningful gains. Many UPS workers now earn higher pay and enjoy improved benefits. But that is rarely the end of the story.

The question, then, is not whether the gains are real, but how the trade-offs unfold. Why do headline-grabbing contracts so often coincide with downsizing, automation, and job losses in sectors governed by exclusive, monopoly bargaining arrangements? When short-run wage gains are secured through monopoly bargaining power, where do the adjustments occur—and who ultimately bears the costs?

The evidence suggests that this pattern is not accidental, but a structural feature of monopoly bargaining. Our recent study (with Revana Sharfuddin), Do More Powerful Unions Generate Better Pro-Worker Outcomes?, helps explain why the sequence now unfolding at UPS is not an anomaly. Drawing on 147 studies, the paper shows how monopoly union power tends to shift costs into the future, where they often appear as reduced employment, lower investment, and faster automation—often to the detriment of workers over time. This suggests that improving long-run worker outcomes requires rethinking not worker voice itself, but the monopoly structure through which it is exercised.

She uses the UPS example to draw broader points made in the referenced paper. Continuing she adds,

Research on the decline of Rust Belt manufacturing from 1950 to 2000 finds that powerful unions and frequent labor conflict played a significant role in the region’s employment losses—more so than globalization in the early decades. Wage premiums persisted even as investment slowed and firms gradually shifted operations elsewhere. When labor costs significantly rise without corresponding productivity gains, firms adjust over time. The Rust Belt shows this dynamic unfolding over decades; UPS illustrates it in real time.

The ironic twist is that, as argued in the paper and this piece, it is union monopoly that is at the heart of the problem. Whereas unions theoretically fight a monopolistic power (known as monopsony in this case, a single demander), the union itself poses an anti-market power threat to well-functioning markets.

Lastly, let’s look at a knock-on effect from immigration restrictions. Obviously immigration is a key component of well-functioning labor markets—all the more important in an aging, high-skilled economy like the United States. Less obvious, though, is what the downstream effects are from tampering with immigration flows. David Bier writes,

From 1994 to 2023, immigrants generated roughly $100,000 more in taxes per capita than the average US-born person—about 17 percent more over the entire period. In 2023 alone, immigrants paid $1.3 trillion in taxes while receiving $761 billion in benefits—a net fiscal surplus of over half a trillion dollars in a single year.

Here in the 250th year of Adam Smith’s The Wealth of Nations we are still suffering the effects of people of the same trade conspiring against the public and the conceits of the man of system.2 Will we ever learn? . . .

Substack referenced above:

Richard Hanania writes,

I want people to stop giving younger generations names. Except in articles like this where you deconstruct the concept, there is rarely any reason to use terms like “Generation Z” or (God help us) “Generation Alpha.” For cohort analysis, you can just split people up by the decade they were born and get all of the same benefits without the drawbacks. The names of generations used to mean something, and were applied retroactively. Today, we simply assign young people to arbitrary letter cohorts. This is pathological, and likely has had harmful downstream effects.

A thousand times YES! I've always hated and resisted the stupidity that is labeling generations after an arbitrary and fluid defining of what constitutes them and then drawing (jumping to) conclusions. Generation analysis that depends on these labels is not science; it is hokum used by shallow minds parroting real social science.

That said, Boomers suck, Gen X rulz!!!

II.

Greg Lukianoff writes,

All of this is why I resist the very modern expectation that the best speech is somehow gentle, hygienic, and emotionally pre-approved. No. Free speech is valuable in part because it gives us a way to fight without using fists. Self-government is deadly serious business. Historically, disputes over power, humiliation, injustice, and corruption have often been settled with blood, prison, or both. Speech offers another route: jokes, chants, songs, satire, mockery, sermons, pamphlets, editorials, and sometimes gloriously juvenile acts of public ridicule. It is not always pretty or kind, and only a certain kind of Victorian mind would expect it to be.

The lesson he’s teaching is that being polite isn’t always best. This is important to take to heart especially as it pushes back against what is otherwise a good practice, manners. I preach and attempt to practice the mantra of pleasant honesty—disagreement done with grace.

I don’t think Lukianoff contradicts that mantra, but it does suggest that it can certainly be overdone. Not only is there a risk of communication failure by overly disguising one’s position. There is also the risk of insufficient protest. As Lukianoff makes clear: when voices of opposition are stifled, the oppressed are made to suffer. The upshot eventually is even more violence in rebellion.

To put an exclamation on Lukianoff’s topic, Afroman is everything good about America. And whether you like it or not is my point.

Substacks referenced above:

Conflicting Visions

What use your wondering mind?
Can you not focus?
Is there purpose in your life?
In your design?

    I beg not for your patience
    Nor your approval.
    Just accept me and move on.
    Drop obeisance.

My observation deserves consideration.

    Your judgement lacks for any substantiation.

You dismiss without care?

    You attack without spare.

It is from a place of mere love.
Why must you go to the extreme?

    It is delivered from above.
    Yet you are not in such esteem.

• Take more good risks; think about risk (short and long term). Risk aversion is a big issue for people today. This seems especially true of the young. We seem to be throwing the good risk taking baby out with the bad risk taking bath water. Good risks are good; bad risks are bad—know the difference.

  An analogy for this is the speed/time chart below. I’m not advocating illegal speeding. Rather I’m showing that the marginal gain in time decreases surprisingly as speed increases. Driving 10 miles, one would shave 6 minutes off the trip by increasing speed from 20 mph to 25 mph. To attain that same 4 minute advantage when the speed is 60 mph, one would have to increase their pace to 100 mph! That is NOT a good tradeoff. The first one can be.

• Say “yes” more now. Keeping in mind my first point above, try things, but be willing to quit or pivot. You’ll have plenty of time later in life to say “no”, and it is then when your time will be more valuable. You also don’t know now as well as you will know then what is and what is not an obvious yes or no.

• Read more, time is on your side. If you read 30 minutes per day more than your peers, at a normal reading speed after 10 years you’ll have read the equivalent of at least 300 books more than the competition.

• Become a master user of AI. The easiest way is to engage with it and ask AI how to better use AI.

• Learn how to look and be professional when you should—err on the side of professional when you aren’t sure.

• Invest NOW! The power of time (compound interest) is on your side. Plus, getting used to funds being set aside is a very good habit to build.

• Borrowing from an earlier post:

  • Take in lots of diverse information.

  • Be willing to change your mind.

  • Gracefully stand up for what you believe in.

Perhaps this is helpful.

Help Wanted

Patiently she listened, her turn coming.
He asked another standard query.
"What would you say
     is your greatest flaw?"

Her mind exploded with mischief.
That I cannot answer 
     stupid questions.
She suppressed the desire.

A gapping blind spot for 
     personal shortcomings.
She demurred from the denial.

My bench press; these breasts
     get in the way.
She refrained from the inappropriate.

Desperately she sought a sane response. 

It came: "Self sabotage."

She let it hang in the room.

His eyes narrowed.
"And what would you say is
     your strongest attribute?"
"The same," she confidently announced. 

"How so?" he puzzled.

"Somehow I know when things should end
     even if I don't want them to."

She got the job.

Similarly, I think there are two types of nonprofits in this world: those that help people (the good kind), and those that help themselves (the bad kind). Both suffer from the same poor incentive structure. As Arnold Kling likes to say (my paraphrasing), “Profit-seeking firms are directly responsive to customers and indirectly responsive to owners and employees. Nonprofit-seeking firms are directly responsive to donors and somewhat to employees and indirectly responsive to explicit beneficiaries (presumed customers in this case).”

In the case of profit-seeking firms, we can measure their value to society very clearly through the profit/loss statement. For nonprofits it is much murkier. However, not all nonprofits are created much less run equally. Like I said, there are good ones and bad ones. While this distinction can just be a relative measure, often it is pretty stark.

The good nonprofits are not just relatively less bad where bad means socially destructive. Often the good ones really are doing good in this world. Keep in mind that good and bad is in terms of how we would define it in economics. Before you dismiss this, realize it is or at least can be an all-encompassing measure.

To correctly assess the social value of a firm (profit-seeking or otherwise) we want to know if it is using resources properly. A for-profit firm that is incurring losses is destroying resources. This cannot go on indefinitely without turnaround—the market will correct it by putting it out of business (assuming government doesn’t bail it out). If one were to argue that a for-profit is actually destroying resources despite showing a profit because it isn’t fully paying for the resources it uses (e.g., carbon use that isn’t capturing the externalities), the solution is simple: Add that to the profit/loss equation (e.g., a carbon tax).1

Similarly, a nonprofit can be examined in this framework by adding to the cost-benefit analysis any non-financial aspects one deems important. For example, spiritual benefits can certainly be considered. If a church’s food pantry work is not just about feeding the hungry but also to connect parishioners with those suffering, add that as a benefit.

No, this isn’t a straightforward effort, and it leaves plenty of room for debate. But having that debate through attempting to quantify and capture costs and benefits is a very useful exercise. Waving ones hands at it claiming “you simply can’t evaluate it” is not.

In fact one should be suspicious the more protest a nonprofit supporter puts up against any attempt at a cost-benefit analysis. To me that is a signal they either cannot stand up to scrutiny. At the very least it shows an unwillingness to do what should be required. “Just trust us” is a very poor substantiation.

Yet “just trust us [and let us verify with platitudes and generalities]” is the currency of the realm. So it is left up to us to do the heavy lifting to separate good from bad. Fortunately, we can begin to see the difference looking at a number factors.

Good nonprofits generally have the following characteristics:

• They are close to the people they aim to help.

• They are well regarded by knowledgeable outsiders in terms of outcomes—making progress toward goals we want achieved.

• They don’t pivot to new needs much less propagate/invent new causes to preserve themselves.

• They don’t pay very well—their employees all the way up to the top aren’t getting rich.2 [pay attention to the footnote here]

• They are generally low prestige.

• They have clearly defined, limited goals.

• They exhibit frugality behind the scenes—their back offices, board meetings, and activities for staff are not lavish.

• They have fundraising needs driven by spending that is obvious and mission specific.

I have a lot of experience and engagement with nonprofits of all stripes. Beyond casual witness to those around me, I have experience with many as a volunteer, board member, and outside money manager. While I’ve never directly experienced anything that I would call fraud, I have often seen meaningful contradictions between intentions and results.

One group of nonprofits that deserve careful attention is the case of nonprofits that exist to fund other nonprofit entities rather than people or causes directly. Foundations often fall into this group, and they span both spheres of good and bad nonprofits.

Foundations are particularly susceptible to mission creep and manipulation—both by staff and benefiting entity(s). Both of these are principal-agent problems. The staff version is fairly obvious (e.g., the staff using funds for personal benefit). The benefiting entity version is hard to see, and the foundation can be an innocent party to it. Unfortunately, I find in many cases they are a party to the conspiracy keeping in mind they usually all believe they are doing the Lord’s work.3

Determining whether a nonprofit is good or bad is both art and science meaning reasonable minds have more room to disagree. In the case of for-profit firms only the economically innumerate don’t understand that the greater the profit the greater the social good—where reasonable minds can only debate the externalities (positive as well as negative. Bryan Caplan’s recent book Pro-Market and Pro-Business and his upcoming book Unbeatable: The Brutally Honest Case for Free Markets should help in this matter.

In the case of non-profit firms we have to make a lot more assumptions. This is where reasonable minds can widely differ. Perhaps my list of good characteristics is a helpful starting point here.

[Note: I have left alone a discussion of tax treatment here leaving that for a future post. That discussion is really more about our abysmal tax policy and not a central feature of non-profit analysis despite how central tax treatment is for nonprofits.]

Substacks referenced:

Here is how I believe I present myself when asked (or not, I’m not afraid to offer) my opinion on something for which I have very meaningful grounding.

I think this strongly; can’t easily conceive of being wrong, but might be wrong nonetheless—i.e., conviction with humility.

Sadly many perceive this as weakness, and they discount the message and messenger as a result. This has implications for belief. As Arnold Kling says, “We decide what to believe by deciding who to believe.”

What I say and how I say it has big implications for persuasion as well as credibility. This is all the more important when the opposition has no chance for rebuttal or comment.

When I have regrets about an exchange, it usually goes like this: When I am agreeing, I regret what I said (the content or context). When I am disagreeing, I regret how I said it (the style or delivery). There are several tensions at work here.

For one, I am a very open and direct person. Not only do I not shy away from debate or controversy, I embrace it. Often this is perceived as being aggressive, which is not my intention, but I cannot control how others perceive it. I can only hope to influence through style. Most people are not like me in this regard. This puts how much I soften my delivery and the content delivered into tension.

For another, my very willingness (audacity) to disagree or present what I know to be a generally unorthodox point of view puts into tension my desire for honesty and my desire to be seen as a constructive ally while creating its own tension in the moment.

Resolving these tensions is an ever-evolving art not a science.

I have come to believe that honest delivery demands caveat when lecturing and frankness when in debate. This is easier said than done, and it cuts against the grain for most people’s desired communication.

II. Why don’t you just say what you mean?

Straussian speaking is all about self preservation (I would link and describe, but that wouldn’t be Straussian!). It is sometimes necessary, but it is often weak sauce for those who cannot read between the (intentionally blurred) lines. This is why people dismiss presentations given with humility mistaking it for insincerity or unreliability. So too for the cousin techniques of “on-the-other-hand” or “it depends . . .” when answering a seemingly direct question.

Brian Albrecht has made this point in answering the question “Why do populists hate economists?”

As he says,

Populists want solutions. Economists offer trade-offs. I'm not the first to point this out but its a huge distinction.

. . .

As Sowell put it: "The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics."

I think, not surprising, the economists are right.

It's more than just two different approaches. Thinking in trade-offs forces you to trace each step: who actually bears the cost of a tariff, what happens to housing supply when you cap rents, how a carbon tax changes behavior at every margin.

You can't skip ahead to the answer. You have to follow the chain. This is why economists spend careers doing exactly this and still argue about the answers. That's what it looks like when you take the problems seriously.

The populist skips all of this based on some intuition pump. Think of the person on a group project who's so confident in the answer that they never bother learning the material. That's populist economic reasoning from inside the discipline. The confidence comes from not having looked at the trade-offs closely enough to see how hard they are.

In my work as a financial money manager who works with a very large variety of clients, often I have to balance what I think, which I assume with appropriate caution to be true, against what I expect my audience wants to hear. Sometimes this is relatively easy like when I’m in a meeting with a single client or just a husband and wife. This gets harder when I’m presenting to an investment committee.1

Harder still are the occasions when I am presenting to a large audience (~100 people at an event for colleagues, existing clients, prospects, and who knows who else including competitors). In these settings I really have to carefully dance.

Recently I had just such an experience where I was the first half of an hour-long presentation. My role was discussing macroeconomics and the current economic environment. As I talked, I looked out to the audience seeing specific people who I know hold very specific points of view regarding politics and Trump in particular. The range was across both sides of the proverbial people at the barricades—strong Trump supporters and strong Trump opponents—as well as many throughout the middle.

The balancing act is done by very careful wording and knowing (guessing) how far to go. Preservation of truth in presenting my professional opinions is non-negotiable—I am paid by clients and dutybound otherwise to be truthful including not to deceive. In a professional setting, if you ask me for my professional position (my firm’s or investment team’s view or even my personal view) on a topic germane to the job I’m doing, you will get an honest reply. I might couch it a bit but only in the interest of staying constructive. I will not necessarily tell you what you want to hear—only if it matches my (our) actual point of view.

Further still in a professional setting, if you ask me for my personal opinion on a contentious matter not directly related to the professional capacity in which I’m serving, you will likely get me to demur. If pressed, however, I will deliver despite how I might expect or even know it will conflict with your point of view. My hope is that choosing pleasant honesty over a pleasant lie or an ugly (as presented) truth will win the day. If it doesn’t, come what may. As Alan Charles Kors once told me, there is dignity in disagreement. False acquiescence is insulting and worse than the fact that my disagreement might make you uncomfortable.

So how did I draw the line(s) in that recent large presentation? By applying a rule that works like this: Truthfully say what needs to be said to convey the relevant information including my firm’s interpretation and implications for investors and leave it at that.

What didn’t and always doesn’t get said is what fails a simple test of being helpful. This has two prongs. The first is the realm of arguable opinion including professional, educated opinion that nevertheless doesn’t matter. In the given subject area or at this level of detail I might very well be right. In the recent presentation I likely was in the top percentile of expertise on the topic discussed. Still, at the extreme this could be an area where reasonable minds disagree. To delve into these waters going past what needs to be conveyed is not constructive. While it is not pure opinion, in this setting I consider it akin to me arguing in favor of my favorite football team. Who cares even if I’m right?

The second prong is in the realm of uncomfortable opinion. Again, this opinion might well be the correct one. At the extreme these would amount to me saying that your sister is ugly. She may be hideous on any objective measure, but even if true, this isn’t constructive.

So I avoided a sermon on, for example, the evils of current immigration policies, the economic and constitutional nonsense of current tariff/trade actions, and the destructive implications of wealth taxes being proposed. I didn’t avoid mentioning that these are headwinds for the economy and, hence, the investment market outlook. I just presented what needed to be said and moved on.

Was I too vague? Perhaps, but my job wasn’t to make anyone in the audience become an expert on the specifics much less a zealot in my crusades. My job was to present the current landscape and what it implies about how I am investing (their) money.

III. If you didn’t want the answer, why did you ask?

This example of a large lecture is where I strive for honest delivery with caveat knowing the more caveat I express risks diminishing the perception of my expertise. Yet, I think this is important erring on the side of more reservation because of the simple fact that they, the audience, doesn’t really get a chance to respond. I want them to have off ramps of disagreement without dismissing me out of hand. Plus, this is respectful.

In a conversation, even it if is largely me leading the discussion, there are more degrees of freedom since the audience can respond. In these circumstances I feel I have more room to choose openness and completeness knowing every additional point presented raises the risk of disagreement. The key, which I often fail at, is making sure the listener feels welcomed to offer that disagreement—either simply to express it or to challenge. Unfortunately, my the directness of my personality tends to shut many people down with them mistakenly assuming I will dismiss them.

Surprisingly to many, I am open to changing my mind or being wrong. Few believe this about me. Some of it is how I present and some is what others assume. Perhaps this says something about how willing they are to change their own minds or how little they value updating. All I can control is my style in delivery as well as the amount of my view I offer up. As with all of this, I’m still working on it.

Substacks referenced above:

Drag Greater Than Pull

Once you get going, it is easier.
The getting going the hard part.

It's not so much the distractions.
Though they matter, it's just brutal physics.

Even rolling along drag sets in.
You're not winded, but rather clouded.

Frustrating how asymmetric inertia is.
No matter momentum,

Drag eventually beats pull.
One moment rhythm, progress, then suddenly

Inexplicably, you're stopped.
Work, play, relationships, they all will succumb.

Fighting it tragically gives in as
The fight's itself distraction, drag.

Don't yield, don't despair. Drop regret and doubt.
Keep moving. Push, push! Push makes pull.

Scott Sumner writes:

Sophisticated skeptics often tell us that people exaggerated the risk that Trump would abolish democracy and become a dictator. That’s true, they did exaggerate the risk.

But these pundits miss the more important point. Trump failed to achieve his goal precisely because people overreacted. A “hysterical” reaction can be a good thing. It was the reaction of investors, politicians, allies and voters that stopped Trump from following through with his instincts.

Trump’s worst instincts are not “negotiating positions”. He really did endorse China’s policy of putting a million Uyghurs into concentration camps. He really did endorse Duterte’s policy of murdering drug suspects. He really does respect Putin more than Zelenskyy. He really did support using force to take Greenland from Denmark. When people panic, Trump is stopped. When there isn’t enough panic, Trump indulges in his worst instincts.

This could be a candidate for my annual New Year’s Resolution—changing my mind. I’ve always thought the right way to think about panicking is never. It is never the “right time to panic”—the nature of panic being irrational. Sumner shines a new light on the question for me. Panic has a place, can serve a purpose. Sad but true.

II.

Veronique de Rugy writes:

Some argue that the solution is the European model of value-added taxes and high payroll levies. Michel estimates this would increase the average American household’s tax bill by roughly $12,000 per year, a heavy burden for the lower and middle classes.

But there’s a deeper problem: Europe’s approach doesn’t work, either.

Look at France, which has everything the American left claims to want: a 20% VAT, top income tax rates exceeding 45%, a lingering remnant of its old wealth tax and a state that consumes roughly 57% of GDP with its spending, among the highest in the developed world.

But with public debt standing at approximately 116% of GDP, France didn’t tax its way to solvency.

Veronique is making the key point of her article on why solving the government’s deficit problem cannot be fixed through taxation. As the title says and article makes clear, “Gov’t Doesn’t Collect Too Little, It Spends Too Much”.

Here in the peak of tax season, this is quite apropos. Our collective appetites for government are too ambitious for our collective capabilities to fund them.

Jeremy Horpedahl writes:

It may be more useful to remove some spending from the equation. In particular, entitlement programs and interest spending are very large spending categories that aren’t subject to the annual budgeting process. Of course, any program is ultimately under the control of Congress, so it’s a little bit of a cheat to remove Social Security and Medicare, but those programs are on autopilot with respect to the annual federal budget process. They are worth talking about, but they are probably worth talking about separately (especially because they have their own funding mechanisms). And interest on the debt isn’t something a President can control directly: it can only be reduced in future years by closing the budget gap today.

Removing those programs — which constitute about $4.8 trillion of the $7.8 trillion in 2025 spending (so a lot!) — gives you this chart:

Federal spending by this measure was about $160 Billion lower in 2025 than the prior year, or about 5 percent. And that’s in nominal terms: it is an even bigger cut if we adjust for inflation.

Horpedahl is answering the question: “Did federal government spending shrinking in 2025?” This is a fair presentation, and one that counts as a win for Trump. Though as he notes in the post, the cuts, which total about $200 billion before accounting for some increases, are certainly one-time hits and low-hanging fruit. The next 5% will be that much harder to find—probably requiring the help of Congress (RIP). And to make even the first 5% last, Congress probably needs to enshrine those executive orders into law. Otherwise the next president can simply restore those categories Trump eliminated with the stroke of a pen.

Turning to the minus, Dan Greenberg writes:

Biden’s pardons eliminated roughly $680,000 in financial penalties (fines, restitution, and forfeitures) owed to victims or the government. In contrast, Liz Oyer, the former lead pardon attorney of the United States, has calculated that Trump’s second-term pardons have forgiven criminal debts of more than $1.5 billion. This staggering sum—composed of money owed to crime victims and to government treasuries—has been zeroed out by presidential edict.

Neither Greenberg nor I are so much worried about the monetary value, per se. It is simply a signal of how egregious and problematic Trump’s use of the pardon power has been. It has been a very useful tool enabling his scheme of corruption.

All presidents have abused it—read the article for more details. But Trump, true to his character, takes it to new heights. People must come up to him tears in their eyes saying they’ve never seen pardons like this. In the spirit of this post, that thought cuts both ways.

The examples in this brief post are a good microcosm for how I see the Trump administration especially in this second term—small gains at huge costs. To say the juice is not worth the squeeze is quite the understatement.

The Friend Who Breaks Glass

It's eleven in the Friday evening
and the calm whisper of a long week is
broken by his reality's sharp call.

Perhaps with some reluctance or perhaps
all too easily the glass is broken.

In the former case reaching sooner for 
that lifeline would have been better for all
--more convenient with better expected 
outcomes. Hopefully it is not too late.

In the latter case it is yet again 
this panicked alarm is being sounded. 

It makes no difference. The need's real
even if the timing isn't opportune
or the actual danger that acute.

He isn't the best option nor the only.
He cannot entirely fix the problem 
--just a means to hoped-for solutions.

Whether he supplies a bandage or yields
a true fix is not really the point.
His role in this act of a many-act play 
has been cast, and he's not just another 
available actor. He's THE performer.

For him there is nothing of this that is 
obligatory. This is not duty 
as much as it is simply who he is.

He won't even cuss you as he slowly
tamps out his cigar, throws out his whiskey's 
last swallow, grabs his coat, and starts his car.

On his way, and he'd have it no other.

Of Gods And Dogs

To never want for more than a nap
Tormented by squirrels and doorbells

Meals faithfully served - sometimes a little cheese on top
Never knowing nor ever controlling what comes next

Excitement seeing a revealed leash
Frustration from persistent restraint

Pride and praise plus a treat for a small trick performed well
Shame and pain for an accidental bodily fail

Constancy your realm day in, day out
Aging much faster than those you love

The thrill of a car ride
Agony at the vet

So many new favorite things
So little time in each and all