Capital Commerce
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Younger Americans Less Likely To Start Businesses
Continue reading… 0 CommentsOver the weekend, Elliot Gerson of the Rhodes Trust wrote about the trend over the last two decades of more and more Rhodes scholars going into business over supposedly more noble pursuits such as medicine, law, science and public service (HT: David Boaz). Although he never explicitly says it, Gerson strongly implies that the financial crisis should make bright young people question the value of business as a career, and maybe even reverse this trend among Rhodes scholars (although he's not hopeful):
Many thought a silver lining of last year's financial crisis -- or from the populist rage that flared against Wall Street excess and to profits born not from creativity but from leverage -- would be that earnings differentials would return from obscene to merely enormous levels, if not to the very generous multiples that had long been adequate to fuel a vibrant economy. Well, the hyper-bonuses are back -- astonishingly having been made even easier to achieve with taxpayers socializing the downside risks. And the crisis? What crisis?
So how many more of America's young and brightest will ask themselves what kind of chumps they are to give up the chance to earn 100 or 500 times as much as their mentors, their doctors, their favorite professors, their idols and heroes?
But Gerson should be careful what he wishes for. It's probably true that the Great Recession has made business a less desirable career. But when business loses its luster among those entering the workforce, we don't just lose Ken Lays or subprime mortgage lenders--we also lose the entrepreneurs who will start the next great businesses.
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Should Consumers Vote With Their Dollars on Gay Rights Issues?
Continue reading… 2 CommentsRemember when progressives staged a boycott of Whole Foods after CEO John Mackey wrote an op-ed criticizing single-payer healthcare, and critics of Obamacare staged a "buycott" to promote the company? Of course, that won't be the last time activists use consumer power as ammunition in political battles.
What was strange about that episode is that Mackey has for a long time publicly declared himself as a libertarian, and made clear he supports economic policies many progressives find horrific. But what about companies where we don't know the ideologies of executives? Activists have an incentive to find out those secrets.
Enter the Corporate Equality Index from the Human Rights Campaign. It's an annual index that rates companies based on what HRC sees as adherence to LGBT rights. Large employers filled out surveys with questions regarding company policies toward LGBT people, such as harassment policies, or benefits for same-sex couples.
You might think that because it's a voluntary survey, only the most progressive companies would comply. BUt HRC says that the index reveals stark differences between some competing companies.
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Palin Fan Can't Believe Sarah Supported Bank Bailout
Continue reading… 4 CommentsSkip to about two minutes into this video, and enjoy the awkwardness.
She responds, "I don't think if you asked [Palin] today, she would support it."
Well, of course not. That's what you do when supporting small government suddenly becomes politically convenient—you switch positions.
Bruce Bartlett has a column today on a much bigger instance of Republican hypocrisy regarding small government. Most Republicans in Congress today argue that healthcare reform is unacceptable because it would cost $900 billion over 10 years. But six years ago, when President Bush proposed a prescription drug benefit that would cost $1 trillion over 10 years, many of those same Republicans were all for it.
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Ron Paul Fed Provision Passes House Financial Services Committee
Continue reading… 15 CommentsRon Paul has received the most attention he's got since his presidential campaign with his "audit the Fed" bill. Now, that legislation seems to have a shot at passing, as it has been attached to Barney Frank's financial regulation bill.
But the irony is that, for Paul and other Republicans, in order to limit what they see as overreaching federal government power in the form of the Federal Reserve, they would have to greatly expand federal government power in the form of other aspects of the Frank bill. Among other things, it would establish a Consumer Financial Protection Agency, an idea that has been maligned by free-market groups.
See my interview with Rep. Paul for more on his plan, which may become a reality.
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Interchange Fees: GAO Recommends Caution on Regulation
Continue reading… 1 CommentThe Government Accountability Office just issued a report on the issue of rising interchange fees for merchants who offer credit card services. As I wrote in a previous article, merchant groups have got the ears of certain members of Congress, and regulation is on the table that would theoretically lead to lower interchange fees for merchants and lower prices for consumers.
But, as I explained, the issue isn't that simple. There are several myths that both sides (merchants on one side, credit card issuers on the other) are bandying about to make their individual stance look like the unalloyed good.
The GAO report serves to show how complicated interchange regulation is. But it does provide some notes of caution that Congress should heed before it acts.
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Ground Beef Hysteria Is Overblown
Continue reading… 2 CommentsThe Senate is currently considering a bill to beef up (pun intended) food safety regulations. They've been prompted to act by the rash of food scare headlines that have cropped up in the news over the past year or so, with "killer spinach" and "killer peanut butter" each getting a turn in the spotlight.
Ground beef has been an object of fear for much longer, from notorious deaths from e. coli at Jack in the Box in the 90's to mad cow disease hysteria. Now, Atlantic food blogger Marion Nestle declares in a stark headline that "ground beef is dangerous" and this danger is another reason for Congress to regulate the food supply.
When people die from contaminated food, it is a tragedy, and any company that distributes contaminated food should be justly punished. But take the issue in proportion. Getting sick from eating ground beef is very low on the list of fears that the average American worries about, and it should be. That's not to say Congress should do nothing about the issue, but let's not jump into crisis mode without considering the facts.
Look behind the headlines, and at the actual statistics.
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Where The Stimulus Is Working
Continue reading… 1 CommentThe Obama administration has claimed that over 600,000 jobs have been created by the stimulus so far through direct grants, and many have argued this is a deceptive argument in light of the "disturbingly high unemployment rate," as Michael Boskin writes today.
The White House is at a bit of a disadvantage in this debate because the method of counting jobs through direct contracts misses out on perhaps the stimulus's greatest successes. The ripple effects created by stimulus spending have consequences that are hard to calculate in the short-term. Nevertheless, we can identify certain winners from these ripple effects.
Take the education industry, for example. Not the schools and the people they employ, but the range of businesses that provide services to educators. At a conference yesterday, I spoke to the CEO of one such business, Dennis Heneger of the Provenio Group based in Austin, Texas. His company sells a piece of software called LEAPS that helps teachers deal with behavioral problems in their classrooms. The software lets teachers evaluate their students' behavior, and then offers resources to fix the problems based on the evaluations. Heneger said he was growing his business throughout the decade, spreading the technology to more and more school districts, but that changed in 2008.
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The Big Global Warming Offenders
Continue reading… 5 CommentsHere's a pretty cool graphic of countries around the world and how much they increased or decreased their greenhouse gas emissions from 2006 to 2007. Predictably, there are way more increasers than decreasers. But the top three that increased their emissions the most might surprise you.
Venezeula - 14.2 percent
United Arab Emirates - 10 percent
Australia - 9.2 percent
So Australia pumped out more emissions at a rate almost nine times that of the United States.
Chile had the biggest decrease—even more so than Germany and France.
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Public Transportation and Fast Commutes: Harder to Find Than You Might Think
Continue reading… 0 CommentsMy story on cities with short commuting times and low auto dependence touched on an interesting debate. As clogged as our highways are, driving is generally a much faster method of commuting than public transportation. Nationwide, the average time for driving alone to work is 24 minutes, while for public transportation, it is 48.3 minutes. Now, this is a bit of an unfair comparison because "public transportation" includes commuter rail, and people riding the train to work often travel over much greater distances than people driving to work. But even if we limit ourselves to just subways and streetcars (which cover much shorter distances than commuter rail), the difference is still stark: 47 minutes is the average commuting time for those systems.
Population alone doesn't explain the difference, either—in Houston, the vast majority of commuters drive. The Washington, D.C. metro area is of comparable size to Houston in terms of population, but has a much greater use of public transportation. But D.C. has a longer average commuting time than Houston.
The political debate enters in because advocates of smart growth, urban living, and mass transit would probably argue that this difference stems from the relative lack of investment in public transportation compared to road and highway infrastructure.
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Snoop Dogg Gives Business Advice
Continue reading… 1 CommentOf course Obama called Kanye West a "jackass," but as the president meets with business leaders to discuss innovation, maybe one rapper he'll want to take seriously is West Coast hip-hop icon Snoop Dogg. Snoop has gone from the LBC to Wall Street, as yesterday he was a panelist at an event for Global Entrepreneurship Week. He has perhaps the most successful brand to emerge from the music world since Kiss, with his own dolls, youth football league, and even a car.
Check out the questions CNBC's Maria Bartiromo asked him in this video (Snoop appears about three-quarters of the way in).
Where did he learn his most valuable lessons to succeed in business? Surprisingly, Snoop says it was in school. "Sometimes a loss is the best thing that can happen. It teaches you what you should have done next time," says Snoop. He failed a lot in school, but his mom "wouldn't let me come home with no F." So he eventually worked hard enough to go from the basic math classes to calculus. "If you stop at general math, you're only going to make general math money," Snoop said to wild applause from the crowd.
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Small Businesses Face Health Insurance Rate Hikes in Massachusetts
Continue reading… 1 CommentSome commentators have called the Massachusetts health reform plan adopted a few years ago "Obama-like." But health reform in the Bay State has not meant the end of insurance premium woes for small employers. The Boston Globe reports that small business insurance rates are jumping by the double digits.
At a time when both the state and the nation are struggling to rein in health care costs, many small businesses in Massachusetts say they’re receiving the largest premium increases in years for their Jan. 1 renewals. Insurers in September said they expect to raise premiums an average of 10 percent next year, but some employers are facing increases that are double or triple that - or even higher.
While all of the state’s health insurers have been jacking up rates for small businesses, which lack the negotiating might of larger enterprises with hundreds or thousands of employees, some of the steepest increases have been coming from Blue Cross and Blue Shield of Massachusetts. The Boston insurer, the state’s largest, has in the recent past offered lower base rates than many of its rivals.
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The SuperFreakonomics of Prostitution: Levitt and Dubner in Trouble Again
Continue reading… 3 CommentsThe long-awaited sequel to the best-seller Freakonomics is out, and you've almost certainly read about the controversies surrounding the book's chapter on global warming. But, before the book was even released, authors Levitt and Dubner caught some flak for the very first chapter in the book, which dares to ask the question, "Why aren't more women prostitutes?"
Portions of this chapter have been critcized for romanticizing prostitution and portraying it as a valid career choice. Now that I've read the chapter in full, I can say I walked away with a much different impression. Levitt and Dubner have some economic insights that, if fully considered, explain how society could make prostitution a less common profession.
They begin the chapter with evidence that one hundred years ago, prostitution was a much more popular profession than it is today—and as a result, much more lucrative. In the 1910s, apparently 1 out of every 50 American women worked as a prostitute. The low end of pay for a prostitute was $25,000 a year in today's dollars, and women working at the most expensive brothel in Chicago made over $430,000 annually. How does that compare to today? Using data gathered from in-the-field research, Levitt and Dubner found that an average prostitute in Chicago has a wage premium that "pales in comparison to the one enjoyed by even the low-rent prostitutes from a hundred years ago."
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Memo to Michael Moore: Workplace Democracy and Capitalism Go Together
Continue reading… 8 CommentsI missed Michael Moore's Capitalism: A Love Story when it was in theatres (and I wasn't alone, apparently, as it did not do nearly as well at the box office as many of his previous films). But I was intrigued by the interviews Moore gave for the film, such as this one with Wolf Blitzer in which Moore declares that we should replace capitalism with "democracy." "You and I should have a say in how this economy is run," he told Blitzer.
Blitzer misses some golden opportunities to ask Moore what he really means by this proposal. How can voters run an economy? Will the ballot box determine what new goods should go on sale? Will there be a referendum whenever we need to figure out the price of a loaf of bread?
As it turns out, there is a way democracy can coherently make economic decisions. But it's not what Moore wants. Many firms—profit-seeking, capitalist ones—around the country and world are implementing "workplace democracy," in which workers are given voting power over certain aspects of how the business is run.
My friend Greg Ferenstein, a researcher on this subject at UC Irvine, recently had a great op-ed in the Christian Science Monitor that explains where Moore gets democracy wrong, and how workplace democracy can actually help capitalists make money.
One example of the change: Harvard Business Review contributor Ricardo Semler saved his manufacturing plant from bankruptcy by replacing middle management with autonomous, employee-run teams.
Teams at his plant, Semco, set their own salaries, schedule their own hours, and are offered finance classes so they can understand Semco's transparent record books. Mr. Semler found that devolving power to employees made them happier — and happier workers were more productive.
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Don't Fear Productivity Increases
Continue reading… 0 CommentsThe news that productivity was up 9.5 percent in the third quarter, while employment remains depressed, has made some people understandably worried. Yes, it's true: businesses have found ways to wring more output out of each worker, so they don't need to hire as much, at least for now. So productivity does partially explain why employment gains lag recovery. But some people are taking this point way too far. Example:
Having suppressed wages for decades, now employers are suppressing jobs. Workers are not only making do with less -- they're working harder than ever, and there are no new hires, because fewer people seem to get the job done just fine.
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The US economy has lost some 10 million jobs since the recession began. Do you really think those 10 million jobs are coming back? It seems to me, the war is far from over and the spoils are just beginning to mount.
I can say with pretty high confidence: Yes, those 10 million jobs are coming back. To believe otherwise is to believe that the U.S. economy is done with the whole "economic growth" thing. But it might take a long time for them to come back. Higher productivity, however, will be helping those jobs come back, not hurting.
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How to Create Jobs in The Face of Globalization
Continue reading… 1 CommentYesterday's Washington Post had a very one-sided article on how it has been difficult for one region of North Carolina to cope with global economic competition. The local residents quoted in the story—many of whom have lost their jobs as local manufacturers move to China and elsewhere—are quite skeptical of the claim that local economies can adapt in the face of globalization:
"The people in the think tanks keep saying we are going to become—what's the term?—an 'information and services' economy," said Allan Mackie, manager of the North Carolina Employment Security Commission office. "That doesn't seem to be working out too good."
I wish author Peter Whoriskey had spent time investigating the other side of the coin—the entrepreneurs who are trying to create those new information and services jobs. That's the harder side of the story to report because it is never obvious where the new drivers of job growth will be, and it can be a slow process to discover them.
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Are Social Conservatives Holding Back Economic Conservatives?
Continue reading… 6 CommentsThe national debate has been all about economics recently. While the conventional wisdom is that economic issues tend to favor the Democrats in the realm of public opinion, there is at least some evidence that complaints about the economy and Obama's plan to fix it helped fuel the GOP victories in Virginia and New Jersey last week. And as I blogged about last week, conservatives' shift to the right on economics has led to the decidedly-unconservative Ayn Rand being annointed as a GOP idol.
But maybe Republicans aren't getting as much mileage from their economic arguments as they could. A recent article in the Nation looks at how young conservatives are turned off by some of the extremes of the party.
While these young conservatives may not present silver-bullet solutions to the GOP's woes, they believe rebuilding the party shouldn't take a back seat to birthers, deathers and the rest of the far-right fringe. David Laska, the 22-year-old president of New York University College Republicans, says, "We need to start paying less attention to the Tom Tancredo wing of the Republican Party. I don't think that wing of the party is as big as some people make it out it be."
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Healthcare Reform: As Congress Debates, Small Business Hiring in Paralysis
Continue reading… 0 CommentsIrwin Stelzer asks how private-sector employers are responding to the healthcare debate in Washington:
Small-business men I met with this week tell me they are in a state of paralysis as they watch the debate over the health care "reform" bill wending its way through Congress. Lurking in its 1,502 pages (the Senate version) are provisions that will markedly raise their costs, and their personal taxes. So even as business gets better, they won't take on more staff because they can't figure out what it will cost them to do so.
What are these cost-raising provisions? In my analysis of the Baucus bill, I mentioned the tax penalties that would apply to businesses that do not provide healthcare for employees who would be subsidized under the plan. But those penalties only applied to firms with 50 or more employees—only 4 percent of all employer businesses. The bill Congress is currently debating, however, is more expansive.
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GOP Healthcare Plan Claims 'Universal Access'
Continue reading… 0 CommentsRhetoric is important in all political debates, but it seems to be especially dominant in healthcare. From "public option" to "death panel," it seems like the war of words has eclipsed the war of ideas.
With their one-page summary of their healthcare plan, the Republicans seem to be toting a new phrase meant to capture our hearts and minds: "Universal Access Program," described in the summary as programs that will "expand and reform high-risk pools and reinsurance programs to guarantee that all Americans, regardless of pre-existing conditions or past illnesses, have access to affordable care—while lowering costs for all Americans."
What does that mean? High-risk pools are offered by most states as separate subsidized insurance pools for people with pre-existing conditions. So the Republicans want to expand these pools in order to try to cover these people without mandatory health insurance.
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Cash for Clunkers Critics Get White House Response
Continue reading… 0 CommentsThe White House has responded to an analysis of the Cash for Clunkers program by Edmunds.com that claims the program created only a trivial amount of new car sales, and many of the cars purchased under the program would have been sold anyway. Here's a point by Macon Phillips, the White House director of new media:
This analysis ignores not only the price impacts that a program like Cash for Clunkers has on the rest of the vehicle market, but the reports from across the country that people were drawn into dealerships by the Cash for Clunkers program and ended up buying cars even though their old car was not eligible for the program.
[emphasis mine]
That point goes two ways though. If we include cars that weren't directly eligible for the Cash for Clunkers program in our analysis, that means we need to look at the used car market. Of course, as I've pointed out before, subsidizing new car purchases is a good way to push up prices in the used market. A whole class of consumer for which used vehicles is all they can afford were pretty much given an "anti-stimulus."
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Ayn Rand's Problem With the Right
Continue reading… 2 CommentsAyn Rand and especially her magnum opus Atlas Shrugged are more popular than ever, as I've blogged about before. This might largely be in part to conservative activists appropriating imagery and the message from the book in their criticism of the Obama administration's economic policies. Now the literary world is getting in on the action, with a number of high-profile Rand biographies being published. The New York Times reviewed one such biography yesterday, Ayn Rand and the World She Made by Anne Heller.
If the protestors at tea party rallies carrying signs like "John Galt was right" were to read biographies of Rand, would they still tout her ideas and characters?
Here's an example: Glenn Beck has approvingly covered Ayn Rand on his show, and has likely increased her popularity among tea party activists. He has also called marriage the "building block of the universe" and criticized attempts to expand the definition of marriage to include same-sex relationships.
