Monthly Archives: March 2014

And you get what you punish less!

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When I first saw Michael Moore’s film “Roger and Me”, my primary reaction was not what Mr. Moore intended.  “Roger and Me” was a documentary on how the closing of the GM plant in Flint, Michigan several years before devastated the city.  The running joke in the movie was Moore’s continuous failed attempts to talk to Roger Smith, the president of General Motors.   This was laced around various stories of local residents whose lives were turned upside down.  I am sure Moore meant to make people sympathize with the town residents and hate General Motors.  While I did sympathize somewhat with the residents, my main reaction was wondering why these people all stayed in Flint rather than move to someplace with better opportunities?

This question is relevant now as the president and congress debate over extending unemployment benefits yet one more time.  The president wants us to feel sympathy for the long-term unemployed and he wants to paint anybody who opposes the extension as being heartless and cruel.   Unemployment insurance was designed to be a short-term program, to help people get back on their feet after they lose their job.  The big question is does extending unemployment benefits indefinitely contribute to unemployment?

North Dakota has about a 2% unemployment rate.  Why do people stay where jobs are scarce instead of moving to North Dakota where jobs are plentiful?  There are many reasons.  People have friends and family where they are and they don’t want to move.  Their former job may have been specialized and not available in North Dakota.  North Dakota is not usually on anybody’s 10 most fun places to live list.  At some point though, when people get desperate enough, they might just move and follow the opportunity and move to North Dakota.  Maybe if the person gets desperate enough, he/she will stop waiting for the high paying job like he/she used to have and will take an assistant manager job at McDonalds.  Sometimes desperation is what makes people do what is necessary to move on in life, to make the difficult choices.  Extending unemployment insurance delays the need to make the difficult choices.

The most common argument against this is that people don’t choose to be unemployed.  Unemployment is not pleasant.  I am not claiming that is is pleasant.  I am claiming that by reducing the unpleasantness of long-term employment, we are making it less unpleasant than alternatives such as relocation or taking less desirable jobs.  In the short-term it makes sense to give people time to re-group and re-plan.  At some point though, it becomes obvious that what people are doing isn’t working.  By enabling it, we reinforce it.  We are rewarding people for making the bad choice of continuing down a failing path.

Is that compassion?  I don’t think so.

You Get What You Reward!

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You get what you reward!

That is the most fundamental truism, not not for mankind but for all of the animal kingdom.  If you reward a behavior, you get more of it.  If you punish a behavior, you get less of it.

For example, the Affordable Care Act specified that employers with 50 or greater employees must give full healthcare benefits to employees working 30 or more hours each week.  The Bureau of Labor Statistics reported that prior to 2013, six full-time jobs were created for each part-time job.  In 2013 (article from August 2013) only one new full-time job was being created for every four part-time jobs.  In a Chamber of Commerce poll 24% of small businesses will reduce hiring to stay under 50 employees. ( http://www.forbes.com/sites/gracemarieturner/2013/08/27/its-fact-not-anecdote-that-obamacare-is-turning-us-into-a-part-time-nation/)

Basically, the Affordable Care Act punishes hiring full-time workers at a time of high unemployment.

You get what you reward!

The Affordable Care Act also states that the most expensive plan can cost no more than three times the cost of the least expensive plan.  This effectively forces the rates to be much higher for young, healthy people.  It also requires these people to buy comprehensive policies when they might just wish to purchase a bare-bones policy at a lower cost.  At the same time, insurance companies are no longer allowed to deny coverage for pre-existing conditions.  People can wait till they get sick and then get insurance if they need it.  Young people have the choice of buying costly healthcare insurance or saving the money and buying it later if needed.  We are rewarding people for not buying health insurance.

Large financial companies can make highly risky trades and get the profit if they succeed and go to the taxpayers for a bail out if they fail.

You get what you reward!

Whenever a policy is proposed, the primary question is usually who does it help and who does it hurt.  That is the wrong question.  

The first question we should always ask is if the policy rewards good choices or bad choices.

The Success Equation

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If we wish to have success, I think it is helpful to define the components of success, what I call the success equation.  As far as I know, this specific equation is my concept, but the ideas behind it do not require any particular genius so I would not be surprised at all if it has been proposed many times before.

Success = Talent x Choices x Opportunities

Here I define talent as your inborn abilities.  Choices are the sum of all of your decision.  Opportunities are what is available to you in the outside world.

By definition, talent is maximized at birth and is generally a constant.  A disability may decrease it, such as an artist going blind.  Refining and improving talent is a choice one makes.  Also by definition, a person can not create his or her own opportunities.  He or she can only recognize opportunities and then make the choice to take or not take advantage of the opportunity.

Since talent is fixed, any political policies that increase success has to do one of two things:  increase the probability that people will make good choices or increase opportunities.  Conversely, any policy that decreases the probability of good choices or opportunities will be harmful.

To some extent, all three are essential.  For example, in a medieval feudal society a peasant was destined to be a peasant, regardless of his or her talent or choices.  At this point, I would like to postulate that 21st century America is not a medieval society.  There is a multitude of opportunities, even for people who live under the worst conditions.  If there were no opportunities, as the peasant faced in medieval Europe, then nobody would be successful. However, some people are successful, so ergo there are opportunities.  I would also postulate that for a child growing up in a middle class family with a supportive, stable two-parent family, the opportunities are much easier to find and the child is more likely to make good choices.  A child growing up in a slum in an unstable single-parent household will most likely find fewer opportunities, they will be farther from home, and the child will be less likely to make good choices to take advantage of them.

The inherent unfairness of life, however, does not change the equation.  Regardless of the background, increasing the opportunities and increasing the probability of good choices will lead to more success.

In Malcom Gladwell’s book “Outliers” Gladwell demonstrates fairly convincingly that the most successful people such as the Bill Gates’s and Steve Jobs’s of the world would not be successful if they did not have amazing opportunities.  If they were born a few years earlier or later or if they did not have computer access unavailable to most kids their age, they most likely would not have had the same level of achievement.  This premise is entirely consistent with the success equation.  To achieve maximum success, all three elements of the equation,  talent, choices, and opportunities, must all be at a maximal level.   For most of us, however, we do not need to achieve billionaire status to be successful.   We just need to use whatever talent we have with reasonable choices to take advantage of reasonable opportunities and we can achieve enough success to have a fulfilling middle class lifestyle.

So how can a third party, such as the government, increase people’s probability of success?   It can promote policies that provide opportunities and provide incentives for people to make good choices.   The best way to provide opportunities for the most people is to promote a healthy growing economy.   I will discuss this at a later time.  For now, I would like to propose the idea that promoting good choices is much more important.  Even when there are limited opportunities, if a person makes very good choices he or she will find and take advantage of these opportunities.  On the other hand, even if there are fantastic opportunities, a person who makes poor choices will never take advantage of them.  Therefore, the key to promoting success is by helping people make good choices.  How do we do that?  That will be the subject of my next blog.

The First Assumption: Success is Good.

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In my last post I talked about the importance of assumptions.  My first assumption is that success is good.  We want to be successful in our lives and we favor policies that promote success, for ourselves, for those we care most about, and for the population as a whole.  The term “success”, however is a very vague term.  Success can be valued in terms of money, fame, professional achievement, impact on the lives of others, personal happiness,  etc.  

Moreover, the perception of success is highly relative, depending on our own expectations and the expectations of others.  For example, most people would say that a baseball player who makes the major leagues and plays at that level for many years is highly successful.  However, if this player was touted as the next Willie Mays and he spends his career as a bench player batting .250, many would consider him a disappointment.

When I speak of success in these blogs in terms of political policies, I am primarily referring to economic success.  Political decisions in economics help determine the overall wealth of the nation and how this wealth is distributed.  Economic success in terms of income and/or net worth is the only practical way to measure the results of economic policies.  While some may say that even though a policy is making people poorer, it is also making them happier, I think most people would be happier with a bit more money.

When I speak of success in terms of personal life, I mostly think of self actualization.  Self actualization is best described by the marine corps slogan “Be all that you can be!”.  This is extremely subjective, but here we are talking about personal decisions.  When we talk about improving the lives of others, we need to be more objective so we can measure results.  When we talk about our own life, we can use our own definitions.

In my personal opinion, success derives from setting and achieving goals.  I will talk about this more next time.