Category: Public Policy

Blog author: jballor
posted by on Wednesday, February 13, 2013

Jerk StoreIn “The Moral Meanings of Markets,” in the latest issue of the Journal of Markets & Morality, Ryan Langrill and Virgil Henry Storr argue that markets ought to be understood and defended not simply as amoral, or merely moral, but as robustly moral spaces. In exploring the contention that markets reward virtues besides prudence, Langrill and Storr illustrate how market exchanges tend to promote civility and politeness. “It makes sense for profit-seeking businessmen to invest in goodwill and good customer service,” they write.

A recent piece in the Harvard Business Review, however, underscores the reverse phenomenon, the costs of rudeness. As Christine Porath and Christine Pearson write in “The Price of Incivility,” the virtues required for good business are not merely oriented towards customers. “Rudeness at work is rampant, and it’s on the rise,” they write: “Nearly everybody who experiences workplace incivility responds in a negative way, in some cases overtly retaliating. Employees are less creative when they feel disrespected, and many get fed up and leave. About half deliberately decrease their effort or lower the quality of their work.”

But Porath and Pearson also note that “incivility damages customer relationships. Our research shows that people are less likely to buy from a company with an employee they perceive as rude, whether the rudeness is directed at them or at other employees. Witnessing just a single unpleasant interaction leads customers to generalize about other employees, the organization, and even the brand.”

The costs of rudeness are illustrated even more clearly outside the context of “competitive market settings,” as Langrill and Storr relate. They note John Mueller’s observation that “since enterprises like these cannot ration by price, they are inclined to ration by rudeness.” And even outside the context of “non-price competition,” as we observe in our own experiences everyday, there are costs associated with rudeness. Customers can certainly use rudeness as a rationing mechanism.

How much would it be worth to you to be treated rudely the next time you stop in at a McDonald’s or buy something from the supermarket? How cheap would things have to be for you to shop at the jerk store? Just how good would the lobster bisque have to be for you to buy it from the Soup Nazi?

During the State of the Union address President Obama suggested that having a minium wage was a moral issue. In the speech he said:

not-hiring2Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong. That’s why, since the last time this Congress raised the minimum wage, nineteen states have chosen to bump theirs even higher.

The President believes that it is a moral wrong for any full-time worker, regardless of what the job is, how much the job is worth, etc., should be able establish a home for a family of four. To solve this problem the President announced:

Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. This single step would raise the incomes of millions of working families. . . . For businesses across the country, it would mean customers with more money in their pockets. In fact, working folks shouldn’t have to wait year after year for the minimum wage to go up while CEO pay has never been higher. So here’s an idea that Governor Romney and I actually agreed on last year: let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.

I probably sound like a broken record, beating the same drum, but if you were a minority or teenager raising the minimum wage to $9 per hour is not what you wanted to hear. Here’s why as I stated back in 2006:
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rheeMichelle Rhee isn’t afraid of controversy. In 2007 she took the job of chancellor of Washington, D.C. public schools, one of the worst districts in the country. Given a free hand by the city’s mayor, she instituted a number of reforms that, while modest and sensible (accountability, standardized testing), were considered “radical” by many residents of D.C.

Rhee even fired 266 teachers and defended her actions by saying, “I got rid of teachers who had hit children, who had had sex with children, who had missed 78 days of school. Why wouldn’t we take those things into consideration?”

Putting kids before the teachers unions is not always a path to popularity, and following the logic of such convictions can lead an educational reformer to accept some uncomfortable positions. For Rhee, that was accepting the legitimacy of school vouchers:

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After decades of bloody turmoil between Protestants and Catholics in Northern Ireland, on March 26, 2007, Ian Paisley and Gerry Adams, sitting side-by-side at Stormont confirmed that power-sharing will return to Northern Ireland on May 8th of that same year. It was supposed to be a “new era.” Unfortunately, in order for Ireland to recover from decades of a very complicated history it needs a growing economy. Northern Ireland’s economy is in steep decline because it remains such a high-taxed welfare state.

For example, jobless remains at extremely high levels. The BBC reports that between June and August of 2011 8.1% of the population were unemployed. In fact,

Over the year, the number of people claiming unemployment benefit has increased by 4.8%, to 63,400, while in the UK as a whole the figure has fallen by 1.4%. A large proportion of the unemployed are young people, with 21.1% of those between aged between 18 and 24 now unemployed, up 3.0% over the year.

Northern Ireland also has high minimum wage rates—about $7.87/hr for workers 18-20 years-old—and a ridiculous corporate tax rate of 24%. This “one-two punch” does nothing but discourage the starting of new businesses, foreign direct investment, and provide incentives for companies not to hire young people. The Central Bank of Ireland, in a moment of common sense, now believes that maybe, just maybe, high corporate taxes stifle job creation. According to the BBC,
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Blog author: dpahman
posted by on Thursday, February 7, 2013
No more credit card offers on Saturdays....

No more credit card offers on Saturdays….

Regarding the USPS decision Wednesday to stop Saturday mail delivery, Ron Nixon at the New York Times writes,

The post office said a five-day mail delivery schedule would begin in August and shave about $2 billion a year from its losses, which were $15.9 billion last year. The Postal Service would continue to deliver packages six days a week, and post offices would still be open on Saturdays. Reducing Saturday delivery is in line with mail services in several other industrialized countries like Australia, Canada and Sweden, which deliver five days a week.

This move has not come without opposition, however. Nixon continues,

Whether it will succeed is difficult to predict. Many lawmakers view the Postal Service as the quintessential government service that touches constituents almost every day, and rigidly oppose any changes. Also, postal worker unions hold sway over some lawmakers who are influential in writing legislation that governs the agency.

Again, he reports,

Most Americans support ending Saturday mail delivery. A New York Times/CBS News poll last year found that about 7 in 10 Americans said they would favor the change as a way to help the post office deal with billions of dollars in debt. The Obama administration also supports a five-day mail delivery schedule.

But three postal unions and some businesses on Wednesday called the move to five-day delivery misguided.

He goes on to note, “Many companies said ending Saturday delivery would have a devastating effect on their businesses.”

This sounds like a dire situation. Faced with “a requirement that it pay nearly $5.5 billion a year for health benefits to future retirees” and a 37% decline in first class mail since 2007, the postal service has ceased to be profitable as it stands, despite consistent yearly increases in the price of stamps. Small businesses may be threatened; Nixon reports that Ricardo Rolando, president of the National Association of Letter Carriers, has additionally claimed that stopping Saturday mail “would be be particularly harmful” to “rural communities, the elderly, the disabled and others”; shouldn’t something be done to fix this problem? (more…)

JMM_15.2_WebThe newest issue of the Journal of Markets & Morality has been published. The issue is available in digital format online and should be arriving in print in the next few weeks for subscribers. This issue continues to offer academic engagement with the morality of the marketplace and with faith and the free society, including articles on economic engagement with Pope Benedict XVI’s encyclical letter Caritas in Veritate, biblical teaching on wealth and poverty, schools as social enterprises, the Reformed philosopher Herman Dooyeweerd’s economic theory, and much more.

As we have done in the past, Jordan Ballor’s editorial is open access, even to non-subscribers. In “Between Greedy Individualism Editorial and Benevolent Collectivism” he examines the enduring impact of Michael Novak’s The Spirit of Democratic Capitalism, writing,

At the time of its publication, Novak’s work must have been like a window thrust wide open in a dank room, introducing a breath of fresh air and the sanitizing rays of sunlight. Against ideologies that posit state power as a neutral or even benevolent force arising of necessity against the rapaciousness of the market, Novak observed instead that it was democratic capitalism that arose first as a system designed to check the invasiveness of state tyranny. The “founders of democratic capitalism,” wrote Novak, “wished to build a center of power to rival the power of the state.” Indeed, “they did not fear unrestrained economic power as much as they feared political tyranny.” Still more would they fear the union of economic and political power that we find all too often today in corrupt and cronyist regimes.

You can read his full editorial here. (more…)

Working Class Bulwark by Jacob BurckAs I noted last week, my review of Nicholas Eberstadt’s Nation of Takers: America’s Entitlement Epidemic appears in the current issue of The City, a fine publication produced by Houston Baptist University.

Eberstadt provides an important service in bringing home the fiscal realities of the spending crisis facing the American government. But Yuval Levin’s brief reply was, for me, the high point of the book, as it emphasized the indispensability of the so-called “third sector” in social analysis. Eberstadt’s case is helpful for drawing sharp lines, but it’s also worth taking a step back to appreciate the real complexity of the situation.

This is in part why I find any dichotomous breakdown of the situation, whether it pits “makers” against “takers” or the proletariat against the bourgeosie, to be insufficient.

When you have a fuller picture of society than is provided through merely political lenses, it becomes far more difficult to determine who is really a maker and who is really a taker. Or as Joseph Sunde puts it in his review,

The moment we disregard the value in varying social and institutional relationships—beginning with a holistic disregard of the distinct responsibilities of the government vs. the business vs. the school vs. the church vs. the father vs. the daughter vs. the grandmother—is the moment we should expect to see “dependency” become warped toward a one-sided “entitlement archipelago” that serves the self, and little else.

As for the complexity of modern society, Herman Bavinck describes things this way, in a manner that helpfully complicates any simple oppositional narrative:

Current society displays in every respect the greatest inequality and the richest diversity, far greater inequality and diversity than its opponents usually imagine. For they divide society actually into only two classes: the filthy rich and the dirt poor, the superpowerful and the powerless, the abusers and the abused, tyrants and slaves. But the real society, the society that lives and breathes, does not look at all like that; the diversity is far greater, so great that no one can form a complete picture of it. The filthy rich constitute a very small minority, and of these people, membership along a continuum proceeds down to the bottom not by a big leap but rather in terms of a gradual slope in various degrees and in various stages.

For more on these matters, I highlight Bavinck’s insight and the phenomenon of natural diversity, particularly in economic terms, in a recent paper, “The Moral Challenges of Economic Equality and Diversity.”

Seize the DayIn Businessweek late last year, Jason Zinoman noted the Broadway revival of Glengarry Glen Ross with Al Pacino as Levine. The play, says Zinoman, “speaks as directly to the economic anxieties of today as when it opened on Broadway in 1984, at the end of Ronald Reagan’s first term. Then, the play was widely seen by critics as a left-wing attack on a free-market system run amok.”

But as he also notes,

Glengarry Glen Ross is often compared to Arthur Miller’s Death of a Salesman, but the fundamental difference is that Mamet shows us in concrete detail the value of work. He lets the audience see salesmen doing their job, and then distinguishes between those who do it well and those who don’t. In fact, as corrupt as the office may be, there is a meritocratic ethos at its core—the most impressive salesman, Roma, is also the most successful. Levene, by contrast, repeats himself, caves in negotiation, lies poorly. It’s easy to have sympathy for him, but hard to conclude that he doesn’t deserve to get paid less than Roma. Look closely enough at this play and you’ll find a belief in the market as well as a critique of it. Like most great dramas or novels, its ideas are far too complicated to fit into a slogan.

As another great work of fiction that likewise doesn’t fit neatly into a simple binary pattern, in between Death of a Salesman (1949) and Glengarry Glen Ross (1984), I’d like to also highlight a short novel I recently read, Saul Bellow’s Seize the Day (1956). Seize the Day follows the travails of hapless Tommy Wilhelm as he tries to scrape out a living in New York, or at least as he tries to appear to try to do so. There’s some serious engagement with the realities of internalized expectations, competition, envy, hucksterism, and the phenomena of commodity speculation.
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James Q. Wilson’s terrific book Bureaucracy has an interesting story about Donald Trump and New York mayor Ed Koch. The year was 1986. The city of New York had spent six years and $13 million failing to build an ice skating rink in Central Park. In early summer that year, Donald Trump proposed to Mayor Ed Koch that he take over the project for $3 million and promised to cover any excess amounts himself rather than go back to the city. By late October the project was finished and was three quarters of a million dollars under budget.

How do you explain this story? Why was the city of New York so inept that it could not do in six years and with five times the money what Donald Trump was able to achieve in a few months?

There are several reasons why the city failed so miserably, but ultimately, the answer is that when government tries to do something, everything is infected by politics. For example, when the city planned to build the rink, the type of fuel used for refrigeration was a political matter. When Trump built the rink, he only worried about getting a reliable refrigeration unit. The city also had to abide by standards for equitable bidding of the project. Trump only had to give the contract to someone he knew could get the job done. Most important, when the city had the project there wasn’t much incentive to contain cost. No member of the government would personally have to cover cost overruns. Trump, on the other hand, accepted responsibility for coming in at or under the budget as the only way he could come out ahead.

As we continue to expand our government, we need to be thinking about what we really want. Bureaucracy gives us all kinds of things that we emphasize in our politics such as politically correct energy, equity and diversity in bidding, protection of union members, and providing jobs for government workers. On the other hand, sometimes you just want your skating rink by December.

Imagine that you have a series of plumbing problems in your house—clogged sinks, backed up toilets—and decide to hire a plumber. Which of these two incentive structures would you choose?

(A) The plumber only gets paid when the problems are fixed.
(B) The plumber will continue to be paid indefinitely for working on the problem, and will continue to get paid as long as the problem persists

Most of us would choose option A since we are more interested in functional indoor plumbing than we are in providing a paycheck for plumbers. Hard-working plumbers should prefer option A too since it respects their dignity and skills. The vocation of the plumber is to solve plumbing problems, not to latch onto make-work projects.

So if most people would choose option A, why does the government almost always adopt an incentive structure that reflects option B?
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