Accidental Factors

Just listened to a very interesting EconTalk episode with Ed Dolan. He outlines a healthcare approach that seems, first blush, an interesting option for the US.

The rough idea is that the government subsidises or provides insurance with deductables based as a (highish) percentage of income. That prevents people from going bankrupt due to healthcare costs, and can be set to 0 for low income individuals.

Most people would have some significant deductable and so would largely be out of pocket for routine healthcare. If competition could be appropriately allowed (where in many cases it is not), you can envieage Jiffy lube style physical centers, or low cost treatment services that covered manageable but ongoing conditions like diabetes or thryhoid disorders.

This would help with portability, largely removing job lock, and probably improve the state of healthcare provision which is horribly opaque in both the systems I have used (UK and US).

There seems to be enough in there for both left and right leaning folks, and the chance to help a lot of people. Dolan has a FAQ on his site with a number of questions answered for those looking to read more.

Timothy Taylor has a post on the Beveridge Curve, which plots employment rate against number of job openings.

To put it another way, employers in the years after 2009 seemed more reluctant to fill their job openings, or as economists say, it appeared to be harder for employers to find a match when they listed a job among the workers who were applying for those jobs. The "matching efficiency" of the US labor market had declined.

According to the article he references, this generally seems to have worsened since the great recession. This fits with a few trends around concentration of work - that demand (and pay!) is present and growing, but only given people that have the right skills, and location. There is also a question about how many of these openings are for badly paid or otherwise not-very-good jobs: leading to the rise in "joblessness" in some sectors where possibly folks could work, but not conditions that are significantly better than their alternatives. It would be interesting to see the data around what rate of jobs are filled with changing from one employer to another versus those joining the workforce or returning from unemployment.

I have recently been reading Steven Hill's Raw Deal, a mix of useful policy recommendations and ranty polemic against the gig economy. During one section he mentions, in an aside, the situation a few folks have suggested, where a private firm cherry picks the best bus routes in a city, depriving transport authorities from much needed revenue and while exploiting the infrastructure maintained by the public. Hill points to San Francisco where this had already started happening.

One company that somewhat followed that playbook in San Francisco, though not the first, was Chariot, who this month announced they were shutting down. Interstingly, the spillover effect is that their drivers may be getting an offer to move en masse to Muni, the San Francisco transport authority.

This is a good outcome if it comes about for the drivers, and highlights a the challenges in reasoning about this stuff: I never saw taxi firms aggressively trying to recruit ride share drivers.

Both the leftist argument against capitalist exploitation and the libertarian entrepreneurial view were off on the bus question: they both made the mistake of assuming that the reason there wasn't a good commuter option for a specific route was because it hadnt been tried, basically. Offering a differentiated service wasn't enough though - commuter patterns are complex and just because some routes are underserved doesn't mean sufficient routes are to build a business around (though Chariot did sell to Ford, so there were some winners). Muni is an active player in this space, not passive background infrastructure.

Its tempting to compare something like Chariot to Uber and Lyft, but there is a significant difference between a vested interest group who offered a not-particularly-good service (which hadn't responded to changing demand), and an active public transport system doing their best to provide good, affordable service.

Astronomer Royal Martin Rees gave a Long Now SALT talk last night around the topics in his new book, On The Future, which covers long term threats and opportunities for humanity. One of the approaches I found particularly interesting was being explicit about the discount rates applied when considering different kinds of preventative measures.

Rees described an ecologist who used a 5% rate, which effectively ignored longer term (>50 year) impacts, but also how our approach for nuclear waste storage uses a very low rate, leading to very long time horizons.

Being explicit about the discount rates used when modelling out scenarios can be helpful for people interested not just in conclusions but the process to arrive at them. This applies as much to the long term of 10 years as to the long term of 10,000.

As the job market changes, one way people can maintain or grow their incomes is by pivoting to more in-demands fields. For all the automation and expansion, relatively few people are unemployed (joblessness is a somewhat different boat), and most industries are unable to hire all the people they would like due to lack of appropriate candidates.

This isn't just true of highly paid workers either - there are pressures across wage scales. Some of this is geographic: the right kind of people are available, but not where the company that would hire them is located. This can be made worse by housing policy - the San Francisco Bay Area is a great example of a place where there are needs for people, but while wages are increased they are not increased sufficiently to account for the high price of housing. Some flexibility is limited by industry-specific experience: hiring managers tend to look for people with specific experience in their industry, which will limit the pool even if otherwise credible candidates are available.

Much of the unfilled need is skill-specific though: the requirements are specified in capabilities, not specific industry knowledge. This is much more amenable to training. In some cases the market had come up with offerings - there is sufficient demand and compensation for software development that many for-profit bootcamps (short term training courses) and online courses have developed. They appear to be reasonable effective in both helping people get jobs in that field, and also succeeding in those jobs. This takes some time though - modern software development has been an in-demand career for about 20 years (even incorporating the .com recession) but the environment for these types of new training both required technical developments and attitudinal shifts that occurred as developers moved up to be hiring managers and executives.

As more people have shorter stints in given occupations, such retraining may become a more common event. The Aspen Institute (and others) propose Lifelong Learning Accounts, which would be paid in to by employers and cover retraining during unemployed phases. Along similar lines, the Obama administration pushed for a program that covered dislocated employees, when trade deals results in job loss. It would cover some retraining costs, as well as other social benefits.

I mildly dislike the term "lifelong learning", as it implies without a formal training or education people aren't learning. That is both strictly not true, but also negates a significant amount of firm-specific skill development, and to be honest the kind of industry knowledge that employers seem to value. A lot of this is practical, hard to communicate knowledge about how to get things done, what events within the industry look like and so on. Of course, its value is totally dependent on the continuation of conditions in that specific firm or industry.

In some ways, more traditional education (employer training, universities) give a better leg up in these ares: a good chunk of value of an MBA is the network of fellow students, which somewhat mimics the effect of working in a firm - you are exposed to varying ideas and approaches. Similarly, apprenticeships have a clear line to effectiveness, but by being so focused on a specific job as-it-exists they make new graduates just as vulnerable to dislocations due to trade or automation as long-time workers.

What I don't disagree with is that there will be an increase in the mix of both formal and informal education and training throughout the careers of most people. Examples like the Khan Academy are interesting for describing genuine new approaches - Khan Academy content effectively supplements, rather than replaces, traditional teenage education, and can be used in varying structures which rely more, or less, on the online content. Most of the other MooC providers hew too closely to recreating a university-like environment without moving beyond the lecture+exercise, and significant time investment, model. In part this is driven by the need for equivalent credentials, which is separate failure, and discussion (c.f. Brian Caplan).

Still, given the high volume of content available already, the problem of matching individuals and training together seems pretty significant. For university-level education most countries have developed fairly robust ways of matching people to institutions, and there is still a fair amount of reallocation after students have their first experiences. Adults have to make a similar analysis with much less support, many more choices, higher costs, and more decision factors. Its interesting to see emerging tools here - for example HN Academy collects and ranks computer science courses based on their popularity in the Hacker News community.

From a introduction to consumption:

The situation of rising consumption levels has been compared to one in which the front row of a crowd of spectators stands on tiptoe to see better. Everyone else has to stand on tiptoe also, just to see as well as before. All are more uncomfortable, but none except the front row are better off. There is probably no net gain.

Consumption behaviour is a significant element in considering what the future of work and of productivity might be - The future of work and the future of consumption are, largely, sides of the same coin. Assumptions based on the experience of the US and Western Europe over the last 100 years may not be accurate or helpful, as it is unclear whether trends can continue as they have or whether it is desirable that they do so.

Juliet Schor wrote a great paper in 1995 on the market failures around consumer behaviour, A New Analysis Basis For An Economic Critique of Consumer Society. The paper highlights several effects, a couple being:

The failure to meet conditions of worker, and hence consumer, sovereignty

The assumption of revealed preferences is that people will try and do what is right for them, so if you look at what they have done, you get a sense of what they want. The interesting point here is that most people don’t really have a lot of granularity in deciding how much work they do, or whether gains can be taken in terms of time rather than in terms of money. Very few employers give promotions where you get either a higher raise or a shorter working week.

This means you can’t really tell whether people are consuming optimally, because you can’t tell if they are working optimally. If people have something unpleasant to do that has a desirable outcome (like working an extra day) and you reduce the unpleasantness, more people will choose to do it: the cost, though non-monetary, has reduced. Consumption and work have an odd relationship - if you have a long work week but can now listen to music on your phone, that makes the work more pleasant but also costs money which has to be earned at work.

This critique also touches on why the idea of a government mandated shorter working week feels questionable to me - it doesn’t necessarily get to what peoples actual preferences are (though it may still be the best of a bad set of options). There is definitely something weird in the fact that the US has among the lowest average paid time off of the advanced economies, but also among the most vacation not-taken (amusing citation Project: Time Off by the US Travel Association).

Collective action failures around relative income

This failure models consumerism as an inadequate, but stable, equilibrium where people work harder to maintain their relative level of affluence compared to those around them - the situation described in the quote at the start. In particular, there is a pressure around the social status of different types of consumption - leisure (at least in some societies) has less of a status component than goods, even if leisure drives as much benefit (or more) than goods.

I believe this argument to be correct, but its also hard to get to a clear image of what the world looks like without this equilibria. As much as there is keeping up with the Jones, there is an element which is the existence proof that someone very similar to you can have X or Y pleasant thing. While advertising and general media undoubtedly creates empty, pointless consumption that doesn’t deliver utility, it also exposes people to a much wider range of possibilities than previous generations had access to. Even if there was a way to trigger coordination to a new, better, equilibria, it's unclear what that equilibria would look like, and it may not be net-lower consumption.

There is a difference between buying a new, fancy phone because it is visibly new and fancy and buying it because it has an amazing camera which allows you to capture images you never would have without it. It is possible for the second case to be a genuine new capability, but it still results in the same consumption.

From Lever of Riches, talking about the impact of the state and state structures on diffusion of innovations:

Monopolistic market structures among the innovating firms would thus be advantageous in this regard. The more monopolistic the industry, the larger will be the share of social benefits captured by producers at the expense of consumers, meaning that lobbying would more likely be met by successful counterlobbying. In a competitive industry, on the other hand, the gains from innovation are passed on to the consumers in the form of lower prices, and the benefits are thus diffuse.

Indirect on tech in 2018.

A great conversation over the new year got me thinking about the types of consumption that we have, as individuals. There is a kind of spending and investment of time that is really about improving our productivity and career outcomes: training, reading in certain areas, buying tools, and spending on enabling technologies like cars or personal task trackers.

Most products that boost productivity are sold to companies, not individuals, and the benefits primarily accrue to companies. It is possible to have a product which, at scale, provides benefits to the individual? Or: given a technology which increases productive output, how does that benefit get split between employers and employees?

There are two classes of technologies that seem to apply, one being tools that employees invest in and make direct use of, and one in skills that employees invest in to use tools that employers have purchased. In the construction world its the difference between a worker who brings a tool belt with their preferred hammer, and one who drives a large JCB.

My impression is that tools that succeed become a cost of doing business: chef’s are expected to bring their own knives, MBAs to subscribe to the Wall Street Journal, and practically everyone in the US to have a car.

Equally though, sufficiently motivated individuals can succeed without these things - someone with persistence and a bus pass can get the same job as someone with a car. Tools provide benefits to workers outside of direct, remunerated productivity. A better hammer doesn't help a construction worker work faster, but it may make it easier for them, leave them less tired or less injured over time. A subscription to The Economist doesn't make someone better informed than another person who is motivated and has an internet connection, but it might save them time. Individuals invest in things that help them professionally to get the same financial results with fewer or better side effects.

Skill investments that allow workers to operate tools do come with some financial returns though: the JCB driver is more valuable to a firm than their untrained friend, and Excel wizardry can help an accountant land a better job. They equally tie an employee to the the skills associated with the larger outlay by the employer - maintaining relevance as the world changes is hard for the same reasons avoiding disruption is hard for companies.

Making the cost-benefit analysis of whether to invest in training or a tool is tricky. The costs are generally concrete and immediate but the benefits are spread over time and uncertain, particularly when the benefit is not financial. As well as this, individuals generally have less of a tool kit for performing that analysis than companies (with a gradiation of capability as the company gets bigger). Interventions by companies and by government can nudge people in a direction of beneficial choices by reducing the cost or clarifying the benefits, but that suffers from it's own set of problems or mismatched incentives, which can be particularly bad in fields like healthcare.

I can’t really do any justice to Jenny Odell’s great piece in the New York Times about a bizarre network of ventures, so if you (like me) didn’t see it when it came out, please go read.

While most of it seems to be in the service of some fairly shady financial dealing, there a lot of ideas that have been espoused for new economy micro-entrepreneurs, played out by people with high motivation and a reasonable level of capital:

  1. Buy then build. Some of the deepest weirdness in the story are the physical bookstores that are also part of the online empire, but at one level this isn’t a whole lot different than Amazon’s purchase of Whole Foods, or that different from the advice to buy a stable small business and add some online juice to get better returns.

  2. Search cost arbitrage. Drop shipping and rebadging definitely range from the mildly shady to the fairly clearly valuable - certainly not everyone wants to be on AliExpress themselves.

  3. Ad-supported content. Part generated and scraped in this case, but even that has shades of acceptability with generated news on the rise nearly everywhere.

  4. Synergies, for lack of a better world. A lot of these businesses were complementary, and if run fairly and honestly could benefit each other.

It also seems clear that a relatively small number of people are behind this whole web of stores (and that’s excluding the whole Newsweek situation, and the university itself), which is in some way a quite strong vote for the power of this suite of technology. What I found even more fascinating was one of the comments, that alleges the entire thing was running someone else’s playbook. Whether or not you could actually have got good returns is anyone’s guess, but it does feel at least plausible that there is a light-side version of this kind of business.

Part of the larger social contract forged over the 20th century was a set of a benefits: unemployment insurance, healthcare, workers compensation, and paid time off for vacation or for illness.

Different countries implemented these in different ways - some had it provided by the government, and paid by employers for through payroll taxes, such as in the UK. Some provided benefits through unions, paid by companies through negotiated agreement, such as unemployment insurance in the Ghent system. Finally, there were group insurance plans organised by the employer directly, though under pressure from union groups and with governmental tax support, such as in the US for healthcare.

All of these were predicated on a style of employment common at that time, full time employment with relatively limited changing of jobs. 21st century work has different characteristics in many countries - a rise in alternative employment options with platform based work, and a reduction in long-term employment even among regular workers.

This leaves workers without access to benefits, or disincentivized from taking socially beneficial actions like changing jobs due to ties to benefits. The Aspen Institute have a great paper on the idea of portable benefits, which they define as having the following characteristics:

  1. Portable - benefits follow the worker

  2. Pro-rated - contributions are made proportionally to time worked

  3. Universal - available to all forms of workers

Aspen’s focus is very much on alternative employment options, gig economy workers and so on, but there is value to even traditional workers in having benefits which are tied to them rather than to their employer or their industry. Managing your healthcare is a significant activity for many in the US, for example, balancing between options provided by the ACA, employer plans, and so on. Changing jobs can often mean losing access to your preferred doctors or facilities.

There are some good examples of more flexible solutions out there already. The Aspen paper covers multi-employer plans in construction and acting which allow workers to stabilise lumpy work schedules and ensure benefits even when moving between jobs. It also talks about the Black Car fund in New York which takes a percentage on all taxi-like rides and provides workers comp to all drivers, and is expanding to more benefit options.

Along similar lines, Alia is a new initiative from the National Domestic Workers Alliance (and outside investors, including Google’s charitable arm) which aims to provide benefits to house cleaners. People that book a cleaning chip in a few dollars for each clean, and Alia provides paid time off and unemployment insurance.

It’s somewhat easy to look at portable benefits as a US solution for a US problem, but some variant of the same concerns exists almost everywhere. Even in a more socialised system benefits are generally paid for through payroll taxes, and as employment and contracting become more fluid concepts it gets harder to properly apportion those costs, or pushes a greater burden on to individuals. Methods for properly managing contributions based on time worked are beneficial nearly everywhere, even if individual access is already a smaller problem.