Modern Inequality

Equality seems to be the buzzword of the realm, but are we really getting to the root of the issue with modern policy? Granted; inequality has shaped our world into what it is today through slavery, discrimination, religious persecution, and globalization. Apple makes iPhones with cheap labor in China, the pyramids were built by Jewish slaves, Catholicism dominated Europe through crusading, etc… We’ve come a long ways but the division of labor and the wealth distribution is exponentially higher than any other time in American history. The last time there was such a blatant division of wealth and labor was during the events leading up to the French Revolution; is history doomed to repeat itself?

Maybe discrimination is human nature and we will never be able to work it out of our DNA? Like most shallow emotions us humans experience, we tend to respond emotionally to hardships by blaming it on others or lashing out. I’m not saying inequality is a shallow emotion, simply that it is the byproduct of basic human-nature. Someone once told me that “people like people like themselves”, this is evident among all cultures and character traits. We are most comfortable with a family unit, our DNA reproduces itself and assures that our genetic material survives, so it’s human nature to protect traits that we personally possess. So on a human level, I can get my head around where inequality comes from.

So what do we do about it?  All around me I see incentive programs for minorities and people from less fortunate backgrounds; then I see policies in place such as Harvard’s admission standards making it more difficult for Asians to gain admission because they are disproportionally enrolling; and similarly in New York City where Mayor De Blasio is manipulating test results to make private inner-city schools more accessible to minorities. But Asians are a minority, forget that they are the most populous race on the planet, and they work very hard to be able to pass these tests and go to a good school. Should the fight against inequality include reverse discrimination? 

This is a clear barrier-of-entry issue and inequality in reverse. As one demographic improves and adapts more pressure is in place to bring them down. Asians have a culture of performance and honor in academia, this is why they’re succeeding, not some loop-hole in the test structure. Maybe this is none of my business as a straight, white, catholic, educated, man from a middle-class home in Upstate New York. The Irish and Polish were discriminated against too, but well before my lifetime. That’s not to say I haven’t witnessed and experienced discrimination myself in the days of affirmative action and ‘white privilege’; but is the current course of action the best course of action? Does discrimination in the past justify different forms of discrimination in the present? I see a model of fighting inequality as holding down the top instead of elevating the bottom, that is an injustice to the hard-working people who have made good choices and worked hard to get ahead in life. We’re sending a message that if you study and challenge yourself it no longer affects your opportunities, or that if you make good choices and become weathy we will take your money to pay for everyone else’s bad choices. Isn’t that the exact discrimination we’ve been fighting all along? 

This inequality battle will not be won until we drop the labels and start promoting people and incentivizing them not by the color of their skin but on the content of their character (Martin Luther King, Jr.). This is America, if you work hard and make good choices you should be rewarded, not doomed to pay progressive taxes into a system that still labels people by skin color. 

I will never introduce myself as “hello, my name is Mark and I’m a straight white man!” That sounds ridiculous, because nobody cares. If we keep assigning labels to people we are doomed to perpetuate this vicious cycle of relabeling inequality time and time again. It will take on new faces and new issues, but the fact remains that as long as we call ourselves something other than an individual we will never move on, resentment and myopia will forever govern policy. With freedom of information, global mobility, interracial marriages and Canadians running for American office… Is this really the best we can do as a society?

To loosely quote an hilarious fictional character “maybe we should all just procreate until we’re all one color” – Senator Jay Billington Bullworth



Creative Destruction

I’ve been reading Capitalism, Socialism and Democracy by Joseph Schumpeter and can’t help but vent about the idea of creative destruction. Also called Schumpeter’s Gale, it states that efficiency in markets will lead to the constant destruction of older, obsolete, markets until we reach the pivotal annihilation of wealth under capitalism through the accepted business cycle. This is done through technological advances and the use of automation. We have already seen a number of markets dissolve due to this very concept, ie: telephone switchboard operators, travel agents, reservationists, secretaries, etc… And more jobs will continue to meet their demise as technology continues to advance.

Now, Schumpeter is clearly a Marxist. The first quarter of his book is all about Carl Marx and his manifesto. In theory, creative destruction leads to a communist state: where the labor force is entirely equal and income is evenly distributed in a way that will lead to money itself being obsolete. I’m not saying this theory isn’t theoretically sound and doesn’t makes the tree-hugging liberal buried inside of me jump for joy, but is it realistic? Will technology take over to the point where the labor force dynamic changes so much that what it means to be a contributing member of society is redefined? It sounds good in theory, but just like the Classical Theory Of Economics it loses momentum and the holes are revealed once you incorporate human nature into the equation. 

We already see the socioeconomic consequences of automation. Jobs are becoming increasingly technical and education requirements have skyrocketed even since I was a kid. A more educated labor force is key to improving human capital, but what will happen to the next generation of humanity who may not have to worry about what they want to be when they grow up?

If this happens, full automation, then humans will need to find fulfillment and challenge in other avenues besides their careers. This includes the arts, family, philosophy, and inventing. Part of what makes us human is the struggle to survive; this makes us creative, innovative, resourceful, and helps us achieve our potentials. During times of hardship we take chances, “dig deep”, think outside the box, and create. During times of limited struggle we are bombarded with Kardashians and bad music. 

So often do philosophical economists omit the human element of markets. Adam Smith couldn’t have predicted how inflexible prices and wages would be, Keynes could never have seen the effect of inflation on markets, and President Reagan couldn’t have predicted how unwilling markets would be to work in concert with regressive taxation. Is struggle necessary or will humans contribute more to the arts? Will we reach a higher fulfillment of will we atrophy? I personally think the later, we already see it all around us. If full automation leads to a “communist state” or what Schumpeter calls “the annihilation of wealth under capitalism” or “creative destruction” then the very fabric of our society will need to be redefined and it compromises the very thing that makes us human. 

Thank you for your time 


Are automated cars the future?… Surrendering to Siri

Driving is a nightmare… There, I said it.

I cannot be alone when I say that driving my car (a 2011 Ford Fusion) is by far the most stressful and dangerous part of my day.  I live outside of Washington, DC and we have, arguably, the worst traffic in the country.  I can’t believe what I see people doing other than drive, while driving.  With the ubiquity of smartphones (see previous post) driver distraction and apathy behind the wheel is only getting worse.  The population of the United States, as well as the number of licensed drivers, number of cars, and miles driven per car have ski-rocketed in the country and are showing no signs of decrease. Quite the contrary, we live in an economy that is dependent on and encourages more and more vehicles rolling onto the public roads while motor vehicle accidents and fatalities are a huge problem.  Car manufacturers are experiencing a booming marketplace for the improving safety features in new vehicles like anti-lock brakes, automatic safety detection software, rear-view cameras, and Onstar support.  The Insurance Institute of Highway Safety (IIHS) reports quarterly that the rate of vehicle casualties have remained steady the past few years, even though the number of vehicles on the road are rising.  So the technology is keeping the problem at bay, maintaining the status quo, but this is by no means sustainable as the economy and vehicle usage begins to grow.

drivers and MV#

These graphs show the increasing numbers of drivers and vehicles in the United States over the past 50 years as well as the number of miles traveled. This shows an increase in vehicles on the road of 357% and an increase in miles driven of 428%.

.population growth

This graph (complements of the US Census Bureau) shows the estimated population growth over the next century.

The population, licensed driver, and numbers of cars are only going up.  The figures for motor vehicle accident deaths is alarming as well.  According to the Center for Disease Control, motor vehicle deaths are the 4th leading cause of death in the United States.  The Insurance Institute for Highway Safety states that 92 people a day die in motor vehicle crashes (approximately 30,800 deaths per year in 32,719 crashes) as well as it costing over $1 trillion is 2010 in healthcare costs, loss of life and of productivity.  Alcohol related deaths contribute to 33% of these deaths (5,096 with a known BAC of greater than .08%).  With the US population being estimated to be over 400 million by 2030, these numbers are only expected to rise if we maintain the status quo like we’ve been doing.

Are automated cars the answer?  Wired Magazine a few days ago featured a 2014 Audi SQ5 that has been fitted with automated driving technology through Delphi (inventors of the electric car starter and many mainstream safety features).  The car will be driving unassisted but with employee passengers from San Francisco to New York City, about 3,500 miles and will take 8 days, to collect terabytes of information for developing the technology.  This is revolutionary in the auto industry, the idea of a fully autonomous vehicle is not that far off, maybe 2 or 3 years until a car will drive without assistance.  But are we ready for this technological leap?

People clearly cannot be trusted behind the wheel.  The figures don’t lie and we see it everyday.  From the overly aggressive to the distracted and passive, humans are taking their lives into others’ hands when they get behind the wheel. Companies like Delphi have created a healthy market with safety features, an industry that has grown 35% annually since 1998 (Wired Article) but more needs to be done, maybe it’s a societal issue.

If people are incapable of responsibly operating a vehicle, maybe we should relinquish control to a machine… That, or ask people nicely to follow the rules. We have already appealed to drivers’ bottom-line; penalizing those who are irresponsible with fines, increased insurance rates, or even jail time.  This has done little to deter behaviors and the issue is only increasing.  But will people surrender their keys to a computer instead of having control over their fate? How will it be implemented?  Will some cars be manually driven and some be automated until the technology catches up? These are business cycle questions but also societal issues.

People take pride and enjoyment in driving and most people are responsible and safe.  Driving used to be fun, relaxing, and a way to get your mind off of things.  That is simply not the case anymore.  The world has changed exponentially since my teenage years of my friends piling into my 1991 Chevy Cavalier and cutting class.  But why should people have their right to control over their vehicle taken away because others cannot be adults and responsible behind the wheel?  Can we mandate automated cars as a punishment like they do currently with installed breathalyzers? As a free and democratic society, is this even constitutional?  Will technology and innovation replace the human experience for control and independence and if so, where do we draw the line when sacrificing our freedoms?  I’m sure the technology will go through growing pains and social resistance but the world we live in is crowded, fast, impatient, noisy, unaccountable, and incredibly dangerous.  Bad drivers do not take the dangers seriously and we clearly cannot appeal to their self-interest, this affects everyone around them. The world has proven that if people want to drink, be reckless, and miopic, that is exactly what will happen regardless of the consequences.  Maybe automation is telling drunk drivers that they win?  However it is interpreted, too many people are dying and something has to change.

Almost 3,400 people per year die in motor vehicle accidents and $1 trillion is loss in productivity; this could be avoided if people would swallow their pride, sit back, slow down, enjoy the drive, and move on with their lives.  Maybe one day drunk and defensive driving will be as obsolete as analog.

Thank you for your time.

SOURCES:  United States Census Bureau (

Population Graph

Insurance Institute for Highway Safety: Highway Loss Data Institute

Center for Disease Control

Alex Davies – Wired Magazine: 03/13/15

The smartphone kerfuffle

Last week’s “The Economist” was highly focused on the social and economic impact of the smartphone in global society. Saying that by 2020 80% of adults will have a supercomputer in their pocket.  This is not a point to be debated but merely reflected upon, the release of the first iPhone in 2007 opened the flood gates to innovation and instantaneous communication unprecedented in the world. 

 I recently returned to school after several years in the workforce and am floored by the access to information and how ubiquitous the smartphone has become in education.  I’m not the oldest student in my class but I remember the days when if I didn’t understand something I would walk to the library and use the dewey decimal system to find a book, when photocopying was a luxury and email was noisy.  I remember during my undergrad I had a Dell laptop computer that weighed as much as a house brick.  I would pack it up and drag it to the library or student union, which had just been wired with WiFi and it was a real luxury.  My cell phone at the time was voice only but I mainly used my land-line (think of it as a cell phone that stays charging and you can’t go anywhere with it… craziness, I know).  Now my phone vibrates with instantaneous updates for anything from social media to email from any one of my multiple accounts synced to my “app”. 

 Last week’s Economist showed us how the smartphone may be ubiquitous but it must be respected as a potential invasion of privacy.  It knows everything about you, even things you may not know about yourself, and the average person spends two hours a day scrolling through news feeds and YouTube videos without a true grasp of the personal behavioral information that is broadcasted to whomever is savvy enough to intercept it.  It’s easy to take advantage of the luxury of smartphones in a capitalist society that focuses on personal freedoms and standing up for our rights and privacy, but imagine what information a totalitarian society can use against you with a simple algorithm.  It reminds me of George Orwell’s 1984, the boxes on the wall where Big Brother could hear everything you say and use it against you, creating a society based on distrust and fear. This was allegorical and hyperbolic yet alarming in how close to home Mr Orwell seems to have gotten at a time when interfacing was only a theory among academics. 

The illusion of security and privacy is enough for some people to turn a blind eye for the sake of cat videos and being able to Google how to spell “usurpation” in an increasingly fast-paced world.

What will happen when everyone who remembers the days before WiFi and smartphones are dead and gone? My generation is the last generation to remember encyclopedias, hand-written assignments, face-to-face interaction, and bullying that was harmless and not ‘cyber’. We were forced to communicate with each other in a way that humans had done since we invented verbal language.  It could be said that smartphones represent a leap in the human experience, similar to the advent of the the printing press or the radio.  A step in the direction of synchronizing technology with the human mind and reaching a potential unfathomable to my grandmother’s generation. Her generation saw the mass production of the automobile, a world war, a great depression, a dust-bowl, a man on the moon, digital interfacing, and (God willing) a man on Mars. My generation has seen a fraction of that with no sign of slowing down.  What will the next generation witness?

The smartphone, and digital interfacing of any kind, has given individuals access to information and the ability to connect with each other in a way that has started the momentum to change the world completely.  We already see the sharing of ideas, streaming of videos, and blogging that has given way to changes (sometimes destructive) in society; especially our police force and judicial system, international affairs, education system, and security.  It is up to the consumer to demand security and privacy in regards to our mobile devices.  There are already measures being taken to screen what information can be used for specific purposes.  With all new technologies there will be growing pains, then innovation and efficiency will lead to new problems.  

These are man-made problems and it is up to man to ensure that our own innovation doesn’t lead to our demise. 

 Thank you for your time. 


The Economist – Smartphones: Planet of the Phones 

The Economist – Smartphone Security: The Spy in your Pocket

Corporate Inversion… an old debate

Corporate inversion was a debate that saw it’s peak in September of last year then fizzled in the same manner as ebola, mad-cow disease, and MH370. However the pressures of tax reform and corporate transparency are still hot topics on the political agenda.  Corporate inversion hasn’t gone away, even though it isn’t making headlines anymore; but what is the real issue with corporate inversion?

Across the board, economists and policy makers are steadfast on it being a matter of evading US taxes.  Saying that multinational corporations are leaving to avoid the 35% tax rate imposed by the outdated US tax code and that it is as simple as that; to lower their overall tax burden.  I can agree with that statement, but I don’t believe it’s that simple.  Shareholders are seeing lowered dividends and it effects the long-term risk and transparency associated with their stock.  Leaving the US tax system for more favorable taxes elsewhere also makes a company look like it is unstable and unable to compete without absconding (for lack of a better term) to Europe or elsewhere. Systematic risk cannot be avoided entirely but moving overseas adds a lot of unknowns to the diversified portfolios of these corporations.

Even with the published 35% tax bracket, many companies in the gambit of industries are receiving tax breaks that ultimately enable them to pay (reportedly) 17% of tax on their current domestic and international revenue streams.  The tax brackets for the incoming countries that they are emigrating to are either on par with the US or cannot beat the 17% tax bracket. In addition to shareholders losing confidence and losing face with international investors seeing them as unstable; why trade the devil you know for the devil you don’t know especially when the cost of doing business is fractions of percentages and the risk of investors losing faith?

Repatriation of revenues is also said to be a reason for inversions.  Many US based multinational corporations have revenue from foreign investments that are subject to US taxes, inversion creates a tax wall that enables them to not pay US taxes on those dividends.  It is in the United States best interest to get this money back into the economy for domestic investment instead of having the existing barrier where companies are unwilling to pay the 33% repatriation tax on foreign money. There was talk of a tax holiday, shown in the article below from the Economic Policy Institute, where companies could repatriate funds at a pittance or no taxes at all.  The goal would be to get this currency and investment back into the American economy.  This is, naturally, caught up in the political tug-of-war that most good ideas see once they get to capitol hill.  Why are companies voting with their feet and expatriating overseas? Why the inability to reach common ground to keep the money and corporations within the United States?

Maybe they’re unhappy with the current anti-business climate of the United States.  Maybe they find it is easier and healthier for their bottom-line to relocate elsewhere. Or maybe it’s something entirely different that economists aren’t seeing.  The idea that this phenomenon is occurring because companies simply do not want to pay taxes is a simple answer and would require a simple solution.  The fact that this has been a trend over the past few decades and there are several companies in talks to invert in the coming years shows that this is not going away and not as simple as avoid tax liabilities.

The US has offered more than generous tax breaks to certain industries, the lobbying industry is healthier than ever, and companies will historically listen to the demands of their shareholders; yet still companies are inverting.  This shows a social and political issue bigger than simply lowering tax liabilities.  I believe more research needs to be done in order to understand what is really going on. Maybe we aren’t asking the right questions…

Some helpful articles and sources:

Economic Policy Institute – Policy Responses to Corporate Inversion

Center for American Progress – Corporate Inversion

The call for tax reform: VAT?

Tax reform is a huge issue in today’s political discussion.  The current structure of progressive taxation (increasing the percentage paid in taxes as income increases) and safety-net programs are showing a tremendous strain to sustain entitlement programs such as Social Security and Medicare. It is actually said that current taxes must be doubled simply to keep up with the expected fiscal pressures Social Security and Medicare will experience in the coming years, this is simply unrealistic (Bruce Bartlet, The American Economy, 2009).  

With globalization, the doubling of the national deficit during the recession years due to expanding fiscal policy and corporate bailouts, as well as the current issue with wealth distribution, taxing incomes is becoming increasingly difficult and ends up with tax revenues much smaller (28%) than our economic counterparts who achieve upwards of 38% through consumption based taxation; consumption based taxation, or a Value Added Tax (VAT), is the focus of this blog entry.

The reason that the United States doesn’t have a VAT is because conservatives view it as a money machine and liberals see it as a tax on the poor.  We will have a VAT, when liberals figure out that it is a money machine and conservatives figure out that it is a tax on the poor (Larry Summer, 1988).

Value Added Tax is seen as political suicide; as shown in parts of Europe, Australia, and Canada. VATs have increased tax revenues while providing a flat-rate tax structure on a percentage of GDP and individuals spending.  Additionally, regressive taxation (where tax percentages go down as a person’s income increases) is equally seen as political suicide in the current pressures on redistribution of wealth.  America taxes certain items more than others like gasoline, cigarettes, and alcohol which can be argued as a form of VAT. So how does the United States keep up with funding entitlement programs as well as the increasing cost of healthcare?  Doubling taxes within the current tax structure is absurd and will ultimately lead to lower marginal tax revenues as well as less incentive on production, less discretionary income to fuel consumption a market failure in supply-side economics. No politician who values their office will pitch VAT or regressive taxation in today’s political environment…

Additionally, ‘starving-the-beast’ as its called when we decrease taxes in hopes that the government as a whole will decrease spending, is a complete failure.  

Numerous economists (Summers, Hayek, and the Romers) all agree that decreased taxation does not lead to decreased spending. This was made shockingly clear when Standard and Poor revoked America’s coveted AAA credit rating in 2012, which was the lesser of two evils considering that the United States had to decide on how to pay their debts without defaulting.  Granted, entitlement programs and safety nets, that were nonexistant in the 1920s, are seen as a contributing factor to why the United States economy didn’t plummet into another depression in 2008; but lightning doesn’t strike twice.

VAT has an excellent track record but is seen as political suicide.  America clearly needs reform in both their outdated tax codes and how they spend our tax dollars.  In a lame-duck congress and the loss of faith in supply-side economics, where do we go from here? Macroprudential approaches are becoming increasingly popular as well as the writings of Irving Fisher; economists are aware of the threat of asset-bubbles like the housing market and the dot-com implosions and are finally thinking outside the box.  The fact that we have seen gradual recovery after the recession is a sign that this growth is sustainable and investors are being careful shaping the new economy. 

 The balanced budget days of our forefathers gave way to Keynesian economics after WWII until stagflation of the 1970’s lead to supply-side economics.  Progressive taxes don’t raise enough tax revenue, consumption-based taxation and regressive tax brackets are political suicide, and there is a huge push for healthcare spending and the redistribution of wealth; to hit the tip of the iceberg.

Tax reform needs to happen; who will be the first mover?

Unemployment rate- The reality

I am enrolled in a Macroeconomics class and found a discussion about the reality of the unemployment rate very interesting. There are several categories individuals fall into within the labor force and all of them sound wordy and complicated, these are quantified by the Bureau of Labor Statistics and reported quarterly to the public in the form of 6 different reports (U1 – U6). The official unemployment rate, the one that everyone focuses on, is the U3 – which simply shows the amount of people working compared to the amount of people in the labor force.  As of January 2015 it showed 5.7%, which is a sexy number compared to the 7% a year earlier or the 10% that haunted the recession years.  So the economy must be improving??  Not necessarily.  I took the liberty of showing how the participation rate (people participating in the labor force) has dwindled since the recent economic downturn.  The chart is from the Federal Reserve Economic Data (FRED) out of St. Louis and the grey bars show economic downturns. As the chart shows, there are fewer and fewer people in the labor force, so naturally the U3 report will show the math attributed to the people leaving the labor force for whatever reason.


The way my Professor explained it is that if there are 100 people in the labor force and 10 are unemployed and looking for work, the unemployment rate (U3) is 10% (10/100). But if three people stop looking because they get discouraged; so there now 97 people in the labor force and 7 unemployed (7/97), the rate becomes 7.2%.  A better number to report, but by no means a healthier labor force.  This is what the current U3 reports.

By all accounts, according to the definition of the unemployment rate, this is an entirely accurate figure to report.  But in order to fully understand the overall health we need to look at the big picture.  Which, the closest thing we can get to the big picture, is the U6 report which includes U3 numbers as well as people who are marginally attached or employed part time for economic reasons, which is a meatier figure to go with.  This figure, as of January was 11.3% and showed a steady rate around that for the past year.

I’m not here to call anyone a liar or discredit these reports, they are the best and most accurate snapshots with the information we have available. Im simply saying that as citizens, consumers, employers, and news-watchers we need to look at the world and economy for what it is, not what they want us to see.

Fee-based associations in addition to medical insurance

I recently made a doctor’s appointment through United Healthcare and discovered an alarming road-block in today’s healthcare. In addition to mandated healthcare by all of America’s taxpayers, many physicians are now electing to be members of fee-based associations.  These associations require that not only do the patients have appropriate healthcare coverage but that they must pay an additional membership fee to be a member of the practice.

Doctor’s have the right to charge based on the market and deserve to be compensated for their education and liability associated with being a physician in the increasingly unforgiving world of medicine.  However, the economy hasn’t yet adjusted to the Affordable Care Act (ACA).  To charge additional fees, excluding otherwise eligible patients from a practice is a clear example of unforeseen consequences to the ACA and a market failure.  The ACA was created to give average American’s access to healthcare and so businesses would re-evaluate their business models for the sake of the welfare of the employee.  Creating exclusionary boundaries is something that needs to be addressed.

I understand private practices have the rights to run their business as they see fit, but when did you need an MBA to also be a Doctor?

Below is a link to an example of one such association as well as an interesting article from the Center for American Progress on the healthcare spending slow-down.

Association of American Physicians

The Great Cost Shift

The new economy has changed everything, one man's attempt to make sense of it all