Income inequality and reduced carbon emissions on the high seas

In an earlier blog post I wrote about how income inequality is caused not by greed or injustice, but rather by the fact that knowledge workers are becoming more and more valuable based on their ability to create systems that eliminate the need for middle-class, typically union, jobs. In that post, I cited Fastrak as an example of such a system -- since it eliminated union tolltakers -- and predicted that union workers on BART will soon be replaced by automated trains.

Well, now, Bloomberg reports that the Rolls Royce company is developing unmanned container ships:

In an age of aerial drones and driver-less cars, Rolls-Royce Holdings Plc is designing unmanned cargo ships. Rolls-Royce’s Blue Ocean development team has set up a virtual-reality prototype at its office in Alesund, Norway, that simulates 360-degree views from a vessel’s bridge. Eventually, the London-based manufacturer of engines and turbines says, captains on dry land will use similar control centers to command hundreds of crewless ships. ... The company’s schematics show vessels loaded with containers from front to back, without the bridge structure where the crew lives. By replacing the bridge -- along with the other systems that support the crew, such as electricity, air conditioning, water and sewage -- with more cargo, ships can cut costs and boost revenue, Levander said. The ships would be 5 percent lighter before loading cargo and would burn 12 percent to 15 percent less fuel, he said.

The maritime unions, of course, are appalled:

The International Transport Workers’ Federation, the union representing about 600,000 of the world’s more than 1 million seafarers, is opposed. “It cannot and will never replace the eyes, ears and thought processes of professional seafarers,” Dave Heindel, chairman of the ITF’s seafarers’ section in London, said in an e-mailed statement. “The human element is one of the first lines of defense in the event of machinery failure and the kind of unexpected and sudden changes of conditions in which the world’s seas specialize. The dangers posed to the environment by unmanned vessels are too easily imagined.”

So, Google can develop driverless cars that navigate flawlessly through traffic, but we still need the "eyes, ears, and thought processes" of the maritime unions. Right!

The really interesting thing about unmanned ships is that they are being justified by the argument that they will result in less fuel consumption: "The ships would be 5 percent lighter before loading cargo and would burn 12 percent to 15 percent less fuel." In my earlier post on Fastrak, I pointed out that one of the major advantages of RFID technology is that it helps to reduce carbon emissions because drivers do not need to idle their cars through long lines waiting to hand over physical money to a tolltaker.

It will be interesting to hear what Progressives say when it becomes obvious that the development of new technology required to reduce carbon emissions (such as unmanned container ships or Fastrak) directly translates into an increase in income inequality as high-tech entrepreneurs -- members of the 1% -- develop more fuel-efficient systems that eliminate middle-class union jobs. This is the same problem Obama faces with the Keystone pipeline: delaying the pipeline pleases his Green supporters and allows them to continue to make millions through the development of alternative energy projects, but it also costs thousands of well-paying middle class jobs.

The Obama alliance between the unions and the Greens has fault lines built in and will not hold together.

Tom Perkins was right

Recently, Tom Perkins complained that attacks against the wealthy in Silicon Valley are similar to attacks by the Nazis against Jews in Germany during the 1930's.

Well, now, a local CBS affiliate in the Bay Area is reporting that vandals have spray painted Atherton homes with graffiti reading things like "Fuck the 1%" and "Kill People."

The US Holocaust Memorial Museum describes the boycotting of Jewish businesses under the Nazis as follows:

When the Nazis came to power, the lives of German Jews changed drastically. On April 1, 1933, the Nazis carried out the first nationwide, planned action against them: a boycott of Jewish businesses. ... On the day of the boycott, Storm Troopers stood menacingly in front of Jewish-owned shops. The six-pointed "Star of David " was painted in yellow and black across thousands of doors and windows. Signs were posted saying "Don't Buy from Jews" and "The Jews Are Our Misfortune." [emphasis added]

So, Tom Perkins was right. The parallels are clear. Just as right-wing Nazi thugs attacked the Jews in Germany and blamed them for the economic misfortunes of the time, now left-wing thugs in America, egged on by a President who denounces "income inequality," are attacking the Silicon Valley rich and blaming them for things like driving up rents in San Francisco.

The franchise should be contingent on paying taxes

I'm really starting to like Tom Perkins.

A while back he observed in a letter to the Wall Street Journal that the persecution of the rich is not unlike the persecution of the Jews by the Nazis:

I would call attention to the parallels of fascist Nazi Germany['s war] on its "one percent," namely its Jews, to the progressive war on the American one percent, namely the "rich."

Now Mr Perkins has proposed that having the ability to vote (the franchise) should be made contingent on paying taxes:

Interviewer Adam Lashinsky: What is your 60-second idea to change the world?
Perkins: I got it. And it's going to make you more angry than my letter to the Wall Street Journal.
Lashinsky: I highly doubt it, but let's hear it.
Perkins: You're not ready. Thomas Jefferson, at the beginning of this country, thought that to vote you had to be a landowner. Now that didn't last very long and the vote was given to everyone. But, the basic idea was you had to be a taxpayer, or a person of property, to vote. That went by the board. Margaret Thatcher tried to change that in England, in what came to be called a "poll tax." The idea was that every single citizen of the UK had to pay something in taxes, even if they got it back in subsidies elsewhere. And if you didn't pay something in taxes, you didn't vote. And she was thrown under the bus by her own party for trying to push that through. So, the Tom Perkins system is: you don't get to vote unless you pay a dollar of taxes. But, what I really think is: it should be like a corporation. You pay a million dollars in taxes, you get a million votes. How's that? [emphasis added]
Audience: ... laughter ...
Lashinsky: You're right that I don't agree with you. You're wrong that I'm angry. I would point out to you that the flaw in your argument is that since everybody pays sales tax and anyone who drives a car pays taxes for that, we're right back where we started ...
Perkins: But not income tax.
Lashinsky: Or property tax.

The audience greeted Mr Perkins' proposal with laughter, which is just another indication of how far gone the political discussion in the US is. The idea that there should be some kind of wealth qualification for the franchise has been so thoroughly slandered and vilified by Progressives that the proposal that we should return to what was perceived by statesmen to be the normal state of affairs at the Founding is thought to be preposterous, unthinkable, heresy.

The key part of Mr Perkins discussion is his comparison to how things work with the corporation. Obviously, Mr Perkins' observations stem from his experience as a venture capitalist. I have often made the same comparison myself. My way of thinking also stems from my experience with startups and as a member of a Limited Liability Company (an LLC, similar to a corporation) with several other individuals.

In an LLC, the various shareholders or members contribute assets to the company and usually receive in return voting rights proportional to the value of the assets they contribute. Their share in any profits or losses generated by the LLC is also usually proportional to the value of the assets they contribute. For example, an LLC might be set up as follows:

• you have 10 members
• 2 of those members contribute all the assets
• the 2 members who contributed all the assets get all the profits
• the 2 members who contributed all the assets get all the votes
• decisions, including those about the rules of the LLC, are decided by a majority vote

Now, imagine a different arrangement. Imagine if the voting rights were not proportional to the value of the contributions. For example, imagine if the LLC were set up with the following rules:

• you have 10 members
• 2 of those members contribute all the assets
• the 2 members who contributed all the assets get all the profits
• each member gets one vote
• decisions, including those about the rules of the LLC, are decided by a majority vote

Very rapidly the 8 members who received no profits would vote to change this arrangement to the following:

• you have 10 members
• 2 of those members contribute all the assets
• the 8 members who contributed no assets get all the profits
• each member gets one vote
• decisions, including those about the rules of the LLC, are decided by a majority vote

Intuition tells me that most people, when presented with such a scenario, would judge that the 8 members who had contributed no assets had treated the 2 members who had contributed all the assets unfairly. But, this scenario is a very good general description of how affairs have progressed in modern democracies over the last 200 years. In the beginning, the time of Thomas Jefferson, there was a property qualification on the franchise. When this was removed, the great unwashed hoards got the vote and quickly realized that they could use the vote to transfer the assets of the wealthy to themselves.

This is exactly the point I made in my Thesis 8:

We have reached the terminal stage of democracy. Modern democracy is nothing more than a form of legalized theft, a system whereby the unproductive many, who have fewer assets, use the mechanism of universal suffrage (instead of, say, arms) to redistribute the wealth of the productive few, who have greater assets, to themselves.

Anyone who has held stock options in Silicon Valley recognizes the basic fairness of Mr Perkins' proposal: What you get out of a startup and the amount of control you exercise over that startup should be proportional to the value you have invested in that startup. Engineers who hold stock options would scream bloody murder if the benefits of their stock options were suddenly transferred to someone else. But, they seem to have no problem with supporting the modern Progressive state in which those without assets are allowed to vote to transfer the assets of others to themselves.

Saint Francis was no "community organizer"

My son is an undergraduate at Pomona College. This weekend is Parents' Weekend at Pomona. Parents are invited to come to the college for several days, visit their child, and participate in various events sponsored by the college. One of these events was a lecture given by Professor Ken Wolf on Saint Francis of Assisi, which I attended.

Professor Wolf read and interpreted various passages from Thomas of Celano's Life of Saint Francis. From the passages discussed, I came away with the impression that Saint Francis was a kind of medieval Stoic. As a young man he had been the son of a rich merchant. But, over time, he came to be filled with a sense of surfeit and disgust at the excesses of his class, and felt himself called to turn away from all concerns of the flesh and to lead a life of utter poverty, to achieve a kind of Stoic ataraxia or apatheia (equanimity or unconcern) in the face of worldly desires and preoccupations. The nobility of his calling can be seen by his characterization of poverty as a kind of Lady, Lady Poverty, to be served by him with an almost chivalrous devotion (like Don Quixote serving Dulcinea). Thus, although he led a life of abject poverty, he served thereby a noble ideal with the kind of dedication normally reserved to one's lover.

Professor Wolf is the author of the book The Poverty of Riches: St. Francis of Assisi Reconsidered. I should acknowledge that my impression of Saint Francis as a genuine ascete devoted to achieving a higher plane of existence through the renunciation of worldly concerns seems to stand in stark contrast with Professor Wolf's view that Saint Francis, reconsidered, was to some extent a charlatan, a person whose apparent devotion to poverty was to some degree self-serving. I must grant that my assessment of Francis may be naive when he is viewed in the light of other medieval "ascetes," like Peter the Hermit.

One passage from Thomas' Life, however, stood out to me for other reasons:

When [Saint Francis] was once passing through Apulia with a companion he found in the way near Bari a large purse ... stuffed with coin. The Saint’s companion advised him and urgently pressed him to take up the purse, and give the money to the poor; extolling the virtue of pity towards the needy, and praising the mercy which would be shown by spending the money thus. The Saint absolutely refused to do it, declaring that it was a trick of the Devil. “My son,” said he, “it is not lawful to take away the property of others; and to give away what belongs to others involves punishment for sin, not honour for merit.” So they left the spot and hastened to finish their journey. However, that brother, deluded by a vain compassion, was not satisfied; and continued to suggest transgression. The Saint consented to return to the place ... [H]e bade the brother take up the purse (which, through his prayer, contained a snake instead of money). The brother ... took the purse in his hands; when lo! a large serpent leapt out of the purse and showed that brother how the Devil had deceived him. Then said the Saint to him: “To God’s servants, brother, money is nothing else but a devil and a venomous snake”. [emphasis added]

Brother Thomas of Celano (2013-10-10). The Lives of Saint Francis of Assisi (Kindle Locations 2431-2444). The Pergamum Collection. Kindle Edition.

In light of this passage we can reconsider the modern liberal state, which taxes the rich in order to give to the poor. The proponents of such a state celebrate its acts of redistribution as exemplary of the "virtue of pity towards the needy" and as "mercy shown by the spending of the money thus." Saint Francis, on the other hand, sees these acts for what they really are: a form of "vain compassion," "unlawful seizure of the property of others," behavior that should be "punished as sin," not "honored as meritorious."

Saint Francis sees the agents of redistribution with a clear eye. They haughtily presume to know best how the wealth of others should be spent. They are perfectly willing to seize that wealth, acting in a way that Francis views as unlawful. In so doing, they are really only seeking to aggrandize themselves. Their so-called compassion is mere vanity. Their corruption is a sin and merits punishment, not honor.

In sum, when given the opportunity, Saint Francis refused to assume the mantle of community organizer (like Barack Obama or Robert Reich) attempting to aid the downtrodden. He did not presume to take from some to give to others on some pretense that "we are all in this together" and that he was the best arbiter of how the resources of the rich should be directed to benefit the general welfare. Instead, he saw that engaging in this kind of activity was merely another species of corruption and vanity, another violent appropriation of power.

Saint Francis' companion is a wonderful example of my Thesis 7:

Increases to government spending or programs that benefit particular special interest groups are always justified by noble-sounding, plausible arguments about promoting the general welfare:
• when we increase teachers' pay, we are "helping the children;"
• when we increase the pay of policemen, firefighters, and prison guards, we are "improving public safety;"
• when we increase spending on defense contractors peddling the latest computer hardware and software, we are "keeping America safe from Muslim extremists;"
• when Fannie Mae purchases junk loans from banks, we are "expanding homeownership;"
• when we expand affirmative action programs for various minority groups, we are “combating racism;”
• when we funnel billions of dollars to venture capitalists, we are “promoting green technologies.”
In fact, the money spent does not go to promoting the general welfare, but primarily benefits only the narrow special interest groups.

To Saint Francis, the unlawful seizure and doling out of money is nothing more than an attempt to aggrandize oneself, to promote oneself into a position of power and control. And those who act in this way are merely serving the devil, even when they portray themselves as well-intentioned community organizers.

Obamacare and startups

You no longer need to work for an employer in order to have healthcare. So, you are free to leave that employer and work on that software project that you have always really wanted to work on. This is the new status quo.

No doubt this new status quo will encourage many software engineers to abandon the companies they are currently working for and to do the kind of software tinkering that will result in the founding of their own startup companies.

So, one major category of beneficiaries of Obamacare, it seems, will be well-educated, healthy, hard-working, young Silicon Valley engineers, who will be freed from worry about providing healthcare for themselves and their families and will be able to do the kind of experimentation that will result in the Facebooks of the future.

This all sounds pretty good. But, there is, of course, no free lunch. Entrepreneurial software engineers will not be the only immediate beneficiaries of Obamacare. There will undoubtedly be many citizens who will not leverage the Obamacare subsidies they will receive in order to work even harder than they were working before. Rather, there will be an enormous subclass of individuals who will simply use the Obamacare subsidies to work even less, to contribute even less to society.

More importantly, you can be sure that, once you have made your millions or even billions in a software startup, the Federal government, having kept track (through the IRS, no doubt) of the fact that you received subsidized healthcare, will return to you and insist that you repay the debt you incurred when you took Obamacare subsidies. You can be certain that you will hear a new chorus of “You didn’t build that. We all helped you build it by subsidizing your healthcare when you were starting out. And now we want our cut.” Thus, Obamacare subsidies will just end up being one more way for you to become beholden to the Federal government and to enable the Federal government to lay claim at some time in the future to the wealth you have created for society.

Venture capital firms have to be very cautious. They have to ask themselves: if we allow the employees of the software firms that we fund to receive subsidized healthcare, are we creating an implicit claim on the value of the company we are creating?

Subsidized healthcare is not "free"

Ross Douthat writes in the New York Times concerning the CBO's report that Obamacare will incentivize 2.5M workers to drop out of the workforce:

[L]iberals retorted ...: These would be working hours freely given up, not jobs lost in huge Obamacare-induced layoffs. [emphasis added]

I take issue with the word "freely." Yes, the workers will give up their hours voluntarily. But, the subsidized healthcare provided to them will not be "free." Someone else will have to pay the freight.

The cause of income inequality

I have added a new thesis to the others I have nailed to the door:

Income inequality does not result from greed or mean-spiritedness or a lack of fairness or any of the other canards proffered by the Left. Rather, it results from the fact that low-skill workers are becoming less and less valuable in society today and knowledge workers are becoming more and more valuable.

My favorite example is: tolltakers and RFID engineers. In the not too recent past, armies of low-skill tolltakers manned tollbooths on all our bridges. These jobs were government, union jobs, so the tolltakers made a decent living. Then, along came a bunch of engineers and invented RFID technology and Fastrak. No one can dispute that Fastrak is a better system than manual tolltakers. It is cheaper and it doesn't result in automobiles lining up for miles wasting enormous amounts of fossil fuels as their drivers idle along, waiting to hand over their tolls. So, the tolltakers are out of a job and the engineers who created FastTrak are millionaires. Voila: an increase in income inequality. This is not injustice, but rather progress.

(BTW, the next place this will happen is with BART workers. Google has already developed self-driving cars. Self-driving trains are not far behind. And when they take over, many of the BART drivers will lose their jobs.)

CBO report confirms that more and more we are a nation of takers

The New York Times editorializes:

The Congressional Budget Office estimated on Tuesday that the Affordable Care Act will reduce the number of full-time workers by 2.5 million over the next decade. That is mostly a good thing, a liberating result of the law. ... The report estimated that — thanks to an increase in insurance coverage under the act and the availability of subsidies to help pay the premiums — many workers who felt obliged to stay in a job that provided health benefits would now be able to leave those jobs or choose to work fewer hours than they otherwise would have. ... Some workers may have had a pre-existing condition and will now be able to leave work because insurers must accept all applicants without regard to health status and charge premiums unrelated to health status. Some may have felt they needed to keep working to pay for health insurance, but now new government subsidies will help pay premiums, making it more possible for them to leave their jobs. [emphasis added]

In other words, Obamacare has created an enormous incentive not to work and to free ride the system. And the New York Times thinks this is a good thing.

What the Times fails to ask, however, is: Who will pay for the healthcare benefits and subsidies of the 2.5 million workers who have dropped out of the workforce? After all, the healthcare provided to these people will not be without cost. Someone else is going to pay. Namely, healthy, hard-working, prosperous young people. So, we are going to tax the most prosperous, hard-working, successful members of society to pay for the healthcare of freeloaders. The calculation for a worker is easy: if I don't work, or work less, my salary will go down to the point where I will receive subsidies for healthcare; in effect, if I don't work, I will get health care for free; so why should I work?

Yes, this is certainly a "liberating result." People will be liberated of their duty to work hard to support themselves since this support will be provided by others.