Mom Salary

It turns out that moms do about $118,000 worth of work per year, according to Salary.com.  In light of this fact and the suggestions of certain less than intellectual U.S. public officials, I would like to share my thoughts on this. 

First let's look at the math.  One of the worst financial decisions anyone could make for single moms is to offer them free child care so they can work jobs that pay less than $10 an hour.  At full time, a $10 an hour job pays $20,800 a year, which is less than 20% of the value of staying at home to raise children.  It would be better to give them the $20,800 a year, no strings attached, because at least that way, we don't loose $97,200 a year in value.

Note that this accounts only for the actual monetary value of the work, not the social value.  The social value cannot even be calculated.  Civilization itself largely depends on it.


Now, here is a list of my immediate thoughts on this:

When we suggest that a mother work outside the home, we should start by comparing the income she could earn with the value of the work she does at home.  If the income from working is not significantly higher (recall that the $118,000 a year does not include social value), we should shut up and mind our own business.

There are not many jobs worth over $100,000 at entry level.  Motherhood is the easiest to get into.

While it is a volunteer position, unless we can justify the loss of volunteer labor at that value, we should be doing everything we can to make sure mothers have the necessary resources to do their job well.  In other words, it is a better financial choice to give a single mother $100,000 a year in welfare than it is to pay for daycare while she works a $10 an hour job.  The fact, however, is that $35,000 a year would be sufficient.  Are we really so stingy that we are not willing to pay 1/3 of the going rate for an essential service?  Even non-profits can afford to pay their lawyers and accountants around $40,000 a year.

As far as the government and society are concerned, raising children is an investment.  The average child does more to help society in the long run than to help her parents.  The majority of the payoff from the investment goes to the employers of the child, the government, and society in general, so why does the mother have to foot the entire bill of $100,000 per year worth of work?  In fact, why do the parents have to foot the entire monetary cost of child rearing, when they are not even in the top three who benefit from the investment?  We should not just be giving tax write offs and paltry credits for children.  Parents with children should be getting significant stipends, and society should be grateful that they are not demanding even more!

What I just said above is even more applicable when a majority of the children are being raised by a minority of the people.  When pretty much everyone raises 2 or 3 children, the costs get spread out fairly well (excluding the part owed by the government and businesses).  When Mormons have a birth rate of 3.4 and everyone else is hovering around 1.9, everyone but Mormons are freeloaders who are not doing their share.  Without Mormons, Catholics, and Protestants, we would probably be almost as bad off as Japan or South Korea.  You are welcome, all of you Americans who are choosing to have one child or less.  It would be nice if you at least acknowledged the massive value of our public service!  And it would be even better if you would occasionally help us out (without any petty complaining) when we needed it ("need" in this case should include things like occasional vacations, because raising children does not come with paid or even unpaid vacation time; you have to actually buy vacation time when you have children).


Now, I should probably note that a working mom evidently still does about $70,000 worth of work at home, in addition to paid work.  For single moms working $10 an hour jobs, the total value still comes out at only just over $90,000 a year (assuming full-time), except, of course, that the social value is significantly lower, because the kids get significantly less time with mom.  Also, the statistics seem to indicate that working moms ultimately do more hours of work total per week, for that lower total value.  This does not change the fact that a majority of U.S. society is freeloading though.  Likewise, even a working mom is doing $70,000 more worth of work that is benefiting everyone else more than herself, and that does not magically reduce the monetary cost of having kids (in fact, daycare actually increases that cost).

Video Games Rant

Last week in church, our lesson was on prioritizing time.  Actually, the official subject was avoiding being worldly, without excluding yourself from the world.  The two subjects that got the most attention were money and time, and time got the most, because money is always discussed, so it is nothing new.  Anyhow, at one point the teacher proudly told how he had prioritized his time better, by playing less video games and doing more physical activities like running.  I kept my mouth shut, because the subject of the lesson was not whether video games or physical activity is more valuable, but now it is time for me to rant on this subject.

I regularly hear people say things that devalue video games and exalt physical activity.  The common "wisdom" of modern society tells us the video games are time wasters that have no value beyond entertainment.  Combined with this, the fact that the occasional person gets addicted to video games, common wisdom says that video games are entirely bad.  In addition, common wisdom tells us that violent video games make kids violent.  Given these things, it must be obvious that violent video games are especially bad.  There is one problem with the common wisdom though: So far, all scientific evidence contradicts these claims.  It actually turns out that some of the minor benefits of video games were fairly well know over 20 years ago.  In fact, in a public speech on Aug. 8, 1983, Ronald Regan said, "I recently learned something quite interesting about video games. Many young people have developed incredible hand, eye, and brain coordination in playing these games. The air force believes these kids will be our outstanding pilots should they fly our jets."  It turns out that the long mocked benefit of increased coordination from playing video games is actually a very valuable asset in the military, among other professions (for instance, surgeons also need very good coordination).  Now, I call this only a minor benefit, because real science has found a large number of other benefits that go far beyond the limited applications of highly developed coordination.

First, I recommend watching all of the TED videos by Jane McGonigal (here is one).  In one of her videos, she talks about a study where people in rest homes were asked about their regrets and what they wished they had done.  The first notable thing is that none of the regrets included playing games too much (video or otherwise).  The things they wished they had done included things like spending time with family, working less, and other activities that games can help facilitate.  Another one of her videos discusses how adding game-like elements to real life can help improve motivation and even health.  She strongly recommends playing games (video games or other games) cooperatively with other people at least 20 hours a week.  In the video linked to above, she says that typically 10,000 hours of doing some activity is considered sufficient to become an expert in that activity.  She then points out that there are millions of people in the U.S. that have spent enough time playing various video games to be experts.  She asks, what are they experts in?  The answer is critical thinking and problem solving.  McGonigal says that if we can harness the problem solving power of all of these experts, we might be able to fix most or all of the world's problems.

Second, brain scientist Daphne Bavelier discusses actual scientific research in this TED video.  Science manages to debunk a large number of myths about playing video games.  One notable one is that playing a lot of video games damages eyesight.  The research Bavelier is involved with has shown that action games actually improve eyesight, as well as perception.  Gamers are more likely to notice small details than others.  She also discusses the claim that playing games leads to ADD or ADHD.  Again, this is false.  Gamers tend to be better at fast decision making where high focus is required.  They also tend to be better at keeping track of many things at the same time.  These are both things that people with ADD or ADHD have difficulty with.  Quantitative measures from Bavelier's research actually show that gamers are about twice as good at focusing compared to other people.  She also discusses several other lab tests they did, all of which found that gamers have greater brain development than people who do not play games.  After playing the games for several hours or several days, the above mentioned benefits were seen even in people who do not normally play games (and lasted up to 5 months).

Third, many studies have found that violent video games do not make children violent.  In fact, some studies have found that violent video games can work as an outlet for aggression, making aggressive children less aggressive towards other people.  The only case where video games and violence had a positive link were in people already predisposed to violence.  Otherwise stated, people who might be affected by video games to become more violent are people who already have psychological problems tending towards violent behavior.  These cases can be diagnosed before playing violent video games, and there are almost always warning signs long before any disastrous behavior occurs.  In other words, violent video games do not make anyone violent.  There is a very small amount of evidence that they may trigger violent behavior in people with diagnosable mental problems, earlier than would otherwise occur, but they will not cause violent behavior that would not have eventually happened anyway without video games.

There is far more evidence than this that games are good and healthy, and the only evidence that exists that they are bad only shows that they are bad when played obsessively.  Real research shows that common wisdom claiming video games are bad is not just wrong, but it claims the opposite of the truth.  Video games are actually very healthy for the brain.

I am not done ranting yet.  There are some interesting implications of the above that I want to discuss.  The first thing about the Sunday discussion that bothered me was the assumption that physical activity is superior to playing video games.  Now, I am not saying that physical fitness is not important.  It certainly is, but if a person is already reasonably fit, and that person has to choose between games and exercise, which is the better choice?  The answer to this depends.  In a society where people have to do a lot of physical labor to survive, further increasing physical prowess is extremely valuable, and physical activity would be the clear winner.  We do not live in that society though.  We live in a society where physical labor is done primarily by the lower class and is compensated fairly poorly.  In our society, the high paying jobs are engineering jobs, which require highly developed problem solving skills.  The ability to perceive small details is a huge asset in higher paying jobs.  Even many higher business jobs require good problem solving skills.  Further, getting those physical labor jobs is pretty difficult when the economy has trouble, because almost anyone can learn to do that work.  During the recent recession, when construction jobs and nearly every other physical labor employment dropped considerably, jobs in problem solving (most especially engineering jobs including electrical engineering and computer science) were constantly available.  For these problem solving industries it was business as usual: There was high demand for employees with a low supply.  In short, so long as a person has enough physical activity to avoid health problems, the video games are more valuable in the long run.  Going to the gym or hiking with friends is great, but it seems like a poor decision to sacrifice good brain exercise for physical activity that is little more than entertainment.

So, would I be proud of myself for spending less time playing video games and spending more doing physical activity?  Certainly not.  I currently spend around an hour a day walking to and from classes, every weekday.  About 3 of those days, I run part of the way, to get my heart rate up and to maintain good lung function.  I consider this physical activity an important part of my routine, because it is necessary to maintain good health.  I am not an athlete, but this is sufficient exercise to maintain quite good health.  My weekly total of time spent playing video games is probably several more hours than my weekly total of real exercise.  As a Computer Science major, my problem solving skills are more important than physical activity, so long as I remain healthy.  Since my exercise routine is sufficient for health, it would be rather irresponsible of me to spend less time playing video games so that I can spend more on physical activity.  Spending less time on video games could easily result in a reduction of problem solving skills, which could make my work less valuable to an employer.  I have a responsibility to provide for my family, and an important part of that is maintaining a high value to my employer, so my employment will be continued.  The consequences of playing video games less, no matter how noble the alternative seems, could easily result in letting my family down.

I have said this before (somewhere; I forget exactly where): Playing video games is like working out for the brain.  In physical workout, great strength can be gained, but it has no value if it is never used.  Similarly, through video games, great mental strength can be gained, but likewise it has no value if it is never used.  From this we should get two things: First, sitting in a basement playing video games constantly is truly a waste of time if the benefits are not used.  Second, playing video games is like working out!  Yes, that is exactly what I said.  If you are a parent and you are worried about how much time your children spend playing video games, ask yourself how you would react if your children were spending that time working out at the gym instead.  If your reaction to the gym is less negative, something is wrong.  Are you hoping your child will become a garbage collector or a cheap construction worker (there are some highly skilled construction jobs that require less physical work and more mental work), or do you want your child to be well suited to be an engineer, a surgeon, or a lawyer (or a CEO or...)?  Similarly, if you have a spouse or boyfriend/girlfriend who plays a lot of video games, consider the gym thing again.  It is possible to spend too much time at the gym, and if someone in your life is spending that much time playing video games, then it is perfectly reasonable to be concerned.  Otherwise is it completely hypocritical.

Now I am sure someone out there is wondering, "If video games are so beneficial, how did ancient humans get by without them?"  That is not an entirely unreasonable question, and it conveniently has a very simple answer: They lived them!  Ok, so that sounds both melodramatic and slightly absurd, but it is also true.  The most beneficial video games are those that require remembering where things are (mapping), noticing small details (perception), and making important decisions very quickly (decision making and problem solving).  Before we had all of this technology and knowledge, people had to hunt for food, they had to avoid or fight neighboring tribes, and they had to avoid predators.  Getting lost (mapping) was very often deadly.  If a person did not notice the stalking predator or warrior from a nearby tribe (perception) it would also result in a quick death.  If a person reacted poorly to a situation with a scout from a nearby tribe (attacked a friendly or tried to talk to a hostile; this is decision making), it could result in quick death or unnecessary war.  All of these things were literally developed as a consequence of the difficult conditions of real life.  People that live in a society without these difficult conditions do not get these opportunities to develop problem solving skills that are far more important than we give credit for.  Really, the only other reasonable (and cheap) place to get this training is video games that simulate similar conditions to those that ancient humans lived their entire lives in.  Many modern video games manage this very effectively.  The benefit with video games is that they do not require the grueling physical exertion (which can lead to poor choices as the body uses resources needed by the brain) and do not have the constant threat of death.  In other words, in games we can make mistakes and learn from consequences, without having to experience them first hand.

The moral of this is that video games are good for us, if we take advantage of the benefits they give us.  Even those who are traditionally against entertainment and for "going back to the land" should see the value in video games, as they train the human brain for problem solving in the way it was designed to learn.  Video games are more or less the most natural form of learning, aside from living under the constant threat of death.  I suspect part of the reason so many people are drawn to video games is that they use the brain in the most effective way possible.  Learning to play a new video game is easy, but learning a new school subject of equal complexity is often quite hard.  Games provide constant motivation to play.  In school, the only real motivation is a light at the end of a very long tunnel.  Games reward us for learning as much as we can.  School rewards us for doing as little as possible that will get us through it.  We can see this clearly by the fact that "piston" sometimes returns a Minecraft reference as the first result in a Google search (most of the time it is second to Wikipedia).  Many other searches return World of Warcraft results before real world knowledge.  Well designed video games can take advantage of this to teach useful real world applications of knowledge, but even games designed purely for entertainment can teach problem solving skills that cannot effectively be learned anywhere else.

Like Jane McGonigal, I recommend playing 20 hours of games a week (see her videos for the exact context).  Further, I recommend that at least 5 hours of this be video games where keeping track of location, noticing small details, and making quick decisions are integral parts of the game play (these do not all have to come from the same game, but I think it would be more efficient use of time if they did).  The most obvious genre for this is first person shooters (FPS, which I do not happen to enjoy much), but most real-time strategy games (RTS), role-playing games (RPG), and many games from other genres can satisfy these requirements (even Tetris is good for decision making).  Currently I have been playing a lot of Minecraft, which has small amounts of quick decision making, a huge amount of mapping, some small details, and an extremely strong focus on general problem solving (and if you do not like killing the occasional zombie or spider, you can set it for "Peaceful" mode, at the expense of quick decision making).

It is not hard to see major benefits from playing video games, unless you think that somehow a few more hours of physical activity is more valuable than useful work skills that are essential to comfortable survival in the modern world.  If you really want something to be proud of, quit wasting so much time on physical activity and spend a few more hours a week playing video games (or better, turn of the TV and spend the extra free time on video games; they are at least as entertaining and far more beneficial).

Lord Rybec

Manufacturing vs. Service, Value vs. Competitive Advantage

I would like to assert that part of the cause for recent economic problems is related to the fact that most of our modern work creates no value.  These jobs include everything from cashier to manager to CEO.  Disagree if you want, but let me explain my reasoning.

First, most people will disagree with the assertion that most service jobs do not create value.  I would argue that rather than value they create competitive advantage.  Let me explain the difference.  When work creates value, the value created exists regardless of whether the work is eventually compensated.  When work creates competitive advantage, if that work does not immediately create value, then the work will never be compensated.  An example of the first is when someone builds a house.  The labor value (arguably, the purest measure of value) of the house persists whether someone buys it or uses it immediately or not.  Even if no one wants the house now, the value will still be there when the housing market improves.  The second example is a cashier.  The cashier is getting paid even when there are no customers to serve.  If the cashier spends an eight hour shift, with no customers, the value of the work done by that cashier will never be compensated.  That eight hour shift will not have any value the next day, when the store is very busy.  In other words, the wages paid to the cashier did not create any value.

Now, let's look at the idea of competitive advantage.  If work of the cashier does not actually generate value, why do we even have them?  The reason we have cashiers is that they create competitive advantage.  In theory, if everyone was honest, we could eliminate cashiers, and customers could ring themselves up and pay without any human intervention.  In fact, self checkouts are evidence of this, except that to make up for human error, most stores provide one cashier per four or six self checkouts, for oversight.  So why don't we replace all cashiers with self checkouts, with one overseer per four or six?  The reason is that many customers prefer dedicated cashiers.  Stores could eliminate cashiers, but they would loose customers.  Cashiers provide competitive advantage.  If you think that competitive advantage can be translated to value though, you are wrong.  No value is created by competitive advantage.  Competitive advantage affects how value is distributed.  This is a problem of looking at an open system as a closed system.  A single store might see that increased competitive advantage increases profits and conclude that competitive advantage generates value.  This is an invalid conclusion because the single store is not a closed system.  If a store has low competitive advantage, the lower profits do not mean that they are generating less value than the other guy.  The lower profits mean that the profits are being distributed in favor of the other guy.  In plain English, the money is being spent somewhere else.  Assuming that competitive advantage creates value is the same as assuming that lower competitive advantage reduces the amount spent everywhere.

So, here is how service jobs can create problems.  When a store has to pay cashiers, that is overhead that costs money, but that does not create value.  In other words, the money spent on cashiers (in the open system, not per store) generates negative profit.  In fact, evidence of this is that many stores keep track of the labor costs as a percentage of revenue.  They recognize that non-productive labor generates negative profits, and they spend effort to try to minimize those costs.  The problem here is that when a business spends extra money to increase their competitive advantage, they must also raise prices to counter the negative profit created.  What this does is, it increases the number of people employed without increasing average wages (typically it actually lowers them, because the number of lower paid service workers hired is disproportionately large compared to higher paid service workers), while also increasing prices.  In other words, it causes unbalanced inflation.

Now you are probably wondering what I mean by unbalanced inflation.  You might recall in a previous article that I mentioned that between 1960 and 2010 average inflation was 659%, while average wage increase was somewhere around 75%.  This is what I mean by unbalanced inflation.  The problem this causes is that price inflation outpaces wage inflation, which makes the average person have decreasing relative wages.  Otherwise stated, prices increase faster than wages, making workers more and more poor.  Adjusted for inflation, the average worker now makes around one quarter what the average worker in 1960 made (I think my math is right; I'll make a chart from this data at some point).  No wonder we are having a credit crisis, and no wonder people are spending less money.  Adjusted for inflation, people have less money to spend.

The point of all of this is that service jobs need to be considered carefully.  Part of the fault is the consumer, who is often too lazy to bring their cart back to the return, do their own research for their project before going to buy supplies, clean up their own messes, and do anything else that they can reasonably do on their own.  When an employee of a business has to spend thirty extra seconds to get your cart from the far end of the parking lot, that increases prices slightly.  When this happens for hundreds or thousands of customers each day, it can result in a significant price increase.  Similarly, when a service associate spends half an hour helping you plan a poorly thought out project, that increases prices.  And again, when this happens for hundreds of customers per day, it results in a significant price increase.  Research and development teams also cost money where no value is created (if you disagree, read on; I am getting to this).  With the widespread automation of manufacturing, most modern jobs are service jobs.  Since service jobs do not create value, no wonder we are having problems.

I am sure there are still objections to the idea that service jobs do not create value.  I would now like to discuss what is probably the biggest objection.  This relates to my comment on research and development.  R&D does not create value.  The reason is that the product of R&D has no value in itself.  While you can use a blue print to built a house, which has value, the blue print itself has no value.  In fact, information in general has no value (right, knowledge is power, but without action, it still has no value).  The value in information is its use.  A blueprint for a new kind of computer processor is of no value itself, but it can be used to help create a large number of computer processors, which do have value.  Don't mistake my claim as saying that service jobs are worthless.  Many certainly have worth, because they are one step that leads to the creation of value.  However, there are many service jobs that are worthless.

Businesses typically use R&D as a means to increase competitive advantage, but R&D can also fuel increased ability to create value.  Good R&D produced the designs and ideas used to create hybrid cars, which most people will agree have higher value than gas only cars.  While the motive may have been increased competitive advantage, the result is higher potential for generating value.  This is sometimes also true of service jobs like accounting.  Sometimes even CEOs can improve ability to generate value (keep in mind, however, that increasing competitive advantage by itself does not generate value; the CEO that improves profit margins with a slick new ad campaign is only redistributing value,  not generating value).  It might sound like I am trying to justify spending huge amounts of money on some service jobs, but not others.  This is not true.  Any company that spends huge amounts of money on R&D, while severely underpaying their employees, is acting unethically and is ultimately harming the economy.  When employees cannot afford to buy the things they need, because money that they deserve is being redirected to R&D or any other competitive advantage service jobs, the economy suffers.  This is even more true when the employees have to resort to government aid, because that increases taxes, which further raises prices.

Businesses need to carefully weight the need for service positions against the need to pay their employees fairly and charge fair prices.  Most businesses do not recognize that this is important, because they do not look beyond their profit margins.  This is why we are having economic problems.  We might be seeing improvement in things like unemployment right now, but it will not last unless we can reform how we think about value.  (Recent research on unemployment has shown that part of the current downward trend is the result of people giving up on finding employment, so decrease in unemployment does not necessarily mean people are getting jobs.)  It turns out that this may be less difficult than most businesses think.

There is some irony in the idea of increasing service to increase competitive advantage.  The first is that it is malignant.  When one business increases competitive advantage, others must follow or die.  So, when a business increases service, value distribution is transferred to that business.  Others typically respond by increasing service to maintain balance.  There are more ethical alternatives though.  People like better service, but people also like lower prices.  Employees like higher pay as well.  If a business increases wages, they have a bigger selection of potential employees and can choose higher quality workers, which increases profits.  Higher pay also results in better morale.  Many customers will respond to the better treatment, even if there are fewer service employees.  Lower prices are always a good competitive advantage.  Many customers, especially the large spenders, will not mind fewer service employees if it means that they can save 5% or 10%.  (This is evident in the success of WinCo, which even requires customers to bag their own merchandise, to keep prices low.)  Having a big R&D department to compete with the other guys might sound good, but again, if cutting the size of R&D can lower prices significantly, more customers will come (even if they might occasionally go to the competitor for a more advanced product).  Note that all of these will appeal more to higher spending customers.  Higher spending customers typically know what they are doing, so they need service less.  They will prefer the better treatment over the larger number of service employees.  They will certainly prefer the lower prices, because they are getting more significant savings.  These are the most valuable customers, so pleasing them should be a priority.

This is a complicated matter.  We are finding service to be a more and more prominent aspect of our lives.  Many people feel that time saving services are valuable, even though they have no intent to use the time saved for anything productive.  Leisure time is great, but we are getting to a point where we are paying through the nose for it.  Businesses may not respond to the ideas I have written about, but consumers can.  We can start by bringing our carts all the way back to the store, cleaning up our own messes, doing our research so we don't need to spend half an hour of a service employees time for every project, and doing anything else we can do reasonably, instead of expecting someone else to do it.  If we really want to send a message, we can keep track of prices and only buy the cheapest (we don't have to sacrifice quality though).  If everyone in a town only ever bought gas from the cheapest station, even if it took an extra minute or two to get there, gas prices would drop.  The other stations would have no other option.  If people kept track of food prices and did the same thing for food, stores would be forced to compete on prices.  Our laziness has told businesses that we care more about service, which does not generate value, than prices, which at least save value.  If we would get off of our lazy duffs and take the effort to be cheap, prices would drop.  (And, certain cable shows about couponing have shown that the monetary savings can be well worth the time spent for shopping around.)

While I blame businesses for their irresponsible management of value (659% inflation to 75% wage increase), everyone has a responsibility for regulating this.  We have the ability to control how businesses handle value, by choosing where we buy.  If we really do value service more than value, then we are on the right track.  If we value low prices more though, then our laziness is betraying us.  So many people in the U.S. complain about high prices, but then do nothing about it.  People who are too lazy to shop cheap have no business complaining about prices and frankly deserve what they get.

The smell of chicken, the sound of music?

I want to share a parable of sorts that I was told as a child:

Long ago, there was this poor man.  He had a wife and two children.  He worked in a quarry for one piece of silver a day.  This was just enough money to buy a loaf of bread and some milk each day to feed his family.  Each day, he would get up at sunrise, to work at the quarry.  After six hours of work, he would get an hour off for his lunch, then he would work another six hours, before going home.  During his hour of lunch time, we would take his lunch, a small chunk of bread, to the market, and he would sit near the stall of a fried chicken vendor and enjoy the aroma of the chicken, while eating his bread.  One day, the vendor approached the man.  He pointed out that he had seen this man eating his bread near the stall, every day, for a long time.  He asked why the man chose to walk to the market and eat there each day, instead of staying at the quarry (the rock dust on his clothing made the man's occupation obvious).  The quarry worker told the vendor that he enjoyed the smell of the fried chicken while he ate his lunch.  The vendor suddenly got hostile.  He told the quarry worker that he had worked hard to make that chicken.  He demanded that the quarry worker pay him a silver piece for smelling the chicken.  The quarry worker laughed at him.  Several days later, the quarry worker was summoned to court.  The fried chicken vendor was there.  The judge informed him that the chicken vendor had accused him of theft.  When the vendor was allowed to speak, he reasoned that the quarry worker had benefited from his labor by smelling the chicken and thus owed him something of value in return.  He argued that, since the quarry worker had been smelling his fried chicken for many years, it was not unreasonable to charge him one silver piece.  He demanded that the quarry worker pay him something of equal value to the benefits received.  When the vendor was done speaking, the quarry worker was dumbfounded.  Being uneducated, he could not think of any argument against the chicken vendor, even though he was certain the vendor's demands were unfair.  An old wise man who had been observing the proceedings then stood and asked the judge if he could present a fair resolution to the case.  The judge, also unsure of the situation, agreed.  The wise man approached the quarry worker and asked him for a silver piece.  The quarry worker handed him the only silver piece he had, the previous day's pay.  The wise man held it up and asked the chicken vendor if he could see the shadow the coin cast on the floor.  The vendor acknowledged that he could.  The wise man then said, "You may take it and leave."  The judge agreed that this was a fair resolution, the silver piece was returned to the quarry worker, and the vendor left with only the knowledge gained from seeing the shadow of the coin.

This story is interesting, because nearly everyone can see the justice in the outcome.  It is immediately clear that the demands of the vendor are unreasonable.  After all, who can own a smell?  We can see the absurdity of the demand, even though the vendor is clearly correct that the smell was produced as a result of his hard work.  We can also see that the quarry worker did indeed benefit from the smell produced by the work of the chicken vendor.  The argument of the vendor is almost flawless.  Why then do we consider it unfair that he demand compensation for his work?  It is just a smell.  It is not a physical object, and it does not improve the quarry worker in any way.  The only material value that the quarry worker can get out of it is that it might make his bread more palatable.  It is possible that it gives him temporary pleasure, but this is only of value while he is actually smelling the aroma.  Once he goes back to work, the benefits are gone.  The smell of the chicken does not give any lasting benefits.  Similarly, the vendor might enjoy looking at the shadow of the coin, because he obviously likes money.  Seeing the shadow might give him temporary pleasure, just like the smell of the chicken might give the quarry worker temporary pleasure.  Just like the smell though, the vendor cannot take the shadow of the coin with him.

The moral of this story is that immaterial things do not have material value.  Immaterial things only have value as they are being experienced.  They have no value before or after the experience, only during.  Some might argue that pleasurable experiences can increase happiness.  This is true.  I would like to see someone try to put a material value on this.  The first problem with this is that it is completely subjective.  The chicken vendor smells the chicken every day, all day long.  If the pleasure from the smell of the chicken does indeed result in lasting increases in happiness, then the vendor should be the happiest man alive.  As such, it seems to me that it could be argued that the vendor is already getting the full benefits of the smell and thus should not expect compensation from anyone else.  If, however, the vendor is so sick of the smell that it results in decreased happiness, how then can we decide on a fair price?  The guy in the next stall over might also be sick of the smell, or he maybe he likes fried chicken so much that the smell will never get old for him.

What it comes down to is that the smell is just information.  Furthermore, it is information that has no inherent value.  A person who has smelled the chicken cannot use the knowledge of what it smells like to gain any profit.  Since there is no way to predict the affect of the smell on people, we cannot even claim that the smell improves happiness, and even if we could, there is no way we can accurately rate the value of the happiness it might bring.  In the story, the outcome was completely fair, because the vendor was "paid" with equally valueless information: what the shadow of the coin looked like.

Is there a way that we could make the smell more material, so that it could be considered to have material value?  First, to do this we would have to make the smell difficult to obtain.  If we cannot do this, then there is no way to assign a value.  The guy in the stall next to the chicken vendor will never pay for the smell, in any form, because he can get it for free.  In light of modern patent and copyright law, this might seem unfair to the chicken vendor, but it is actually an integral part of a free market system.  It is both unreasonable and unfair to attempt to force people to pay for a resource that is freely available.  It would be like trying to charge people for the air they breathe.  Air is required for our survival, but it cannot be assigned a value, because the supply is saturated.  The vendor would have to stop making chicken in the market, and he would have to prevent anyone else from making chicken there.  Second, he would have to attach the smell to a physical object.  This is necessary because the smell must have some means of  being transported.  Again, no one is going to pay much for it if they cannot use it as they please.  He could enclose his stall, so that no smell escapes, then he could charge a fee for entry (or, an hourly fee for being in the stall).  He would get few or no customers though, because most people are not willing to pay for valueless information, if the information will then be denied because they are no longer willing to pay for it, or can no longer afford it.  The solution to this would be for the chicken vendor to prevent anyone else from producing the fried chicken smell, then make something like scratch and sniff stickers with the smell.  Even this solution has problems though.  It clearly interferes with the freedom of other fried chicken vendors.

Now let's discuss media.  Movie theaters use one of the potential techniques I suggested for the fried chicken vendor.  They enclose their "stall" to prevent the "smell" from escaping.  Movie theaters are not much more than glorified stalls designed to allow paying customers to experience something with some of their senses, while preventing those who have not paid from experiencing that thing.  As I mentioned above though, for this to work, they also have to prevent any other "stalls" from offering the experience for free.  This is done with copyrights, in the case of movies.  Funny that it seems fair to do this for movies, but not for the smell of fried chicken.  Would it be fair to do this for fried chicken if this vendor had invented the product?  Now we have a dilemma.  Fried chicken is trivial, so it seems wrong to allow the government to impose such absurd limitations.  Movies take a lot of work to produce, so it seems more reasonable to impose these restrictions.  In fact, this particular contradiction actually exists in U.S. law.  Even though these are ultimately exactly the same thing, U.S. law forbids copyrighting or patenting of food recipes, but allows copyrighting or patenting of movies, music, writings, and a great number of other things.

Now let's look at this with reference to music piracy.  Why is music piracy so rampant in the world?  I have heard it argued that it is because people do not want to pay for things and will take anything that is available for free if they want it.  I cannot entirely discount this theory.  It is true that some people will steal if there is very low risk of getting caught.  That said, I think that most people have better ethics than that.  Most people can clearly see that shoplifting is wrong and choose not to do it, even though it is very low risk and extremely easy (in fact, most retail stores will not detain or press charges if they do not have continuous observation of a suspected shoplifter, because the person may have put the item down when not observed).  I think that music piracy is so rampant due to a combination of factors.  One factor is the freeness, and another is the convenience (bit torrent is even easier than I-Tunes).  The reason that people do not treat it like shoplifting, though, is that they do not see media piracy as the same thing as stealing.  The above story illustrates why.  Music has no material value.  Listening to a song imbues the listener with the knowledge of what it sounds like, but this knowledge has no functional value.  Music has value as it is being listened to, but not before or after.  As with the smell of the chicken, pleasure obtained during listening to music is completely subjective.  Some people love country music, while some people hate it, and this applies equally to every genre of music.  Some people do not like any music at all.  The only difference between the music and the smell is which sense is used to detect them.

So, here is where the problem lies with music:  The music industry used the scratch and sniff sticker strategy to monetize music.  They used copyright law to prevent other vendors from making the "chicken smell."  They attached the music to physical objects (vinyl records, tapes, CDs).  Then they sold the objects.  Using this strategy allowed them to include the perceived value of the music in the price of the physical object.  The internet made the inherent flaw in this strategy evident.  This strategy is not a free market strategy.  It relies on government intervention to work.  The problem is that the government only has so much resources, and further, it is not the government's responsibility to identify those who violate copyright, only to judge those that are accused.  The internet has allowed a huge number of unregulatable "vendors" to distribute the "smell" at no cost and in an extremely convenient way.  Since the media has been disassociated from the physical object, it is nearly impossible to regulate effectively.  The media is now free (as in freedom) information.  It is not chained to physical objects.  This means that music has become like the smell of the chicken, except that now it has a much more effective mode of transportation.

Let's look at data as a recipe for something (since it is really nothing more).  A computer program is a list of instructions, just like a cooking recipe.  An mp3 file is a more abstract recipe for generating sound.  Note that it is not the sound itself, it is just digital information that can be translated into a list of instructions for generating sound.  Similarly, digital movies are nothing more than a list of instructions for generating sound and video.  The only difference between this and cooking is that cooking requires that physical ingredients be consumed.  (Do not, however, think that this is a justification for treating them differently.  A patent is not much more than a list of instructions for a process, or for building and using a device, and exactly like a recipe, when building a patented object physical ingredients are consumed.  Like recipes to copyright, patents have an exception: mathematical algorithms cannot be patented, even though it could be argued that any process described in a patent can be boiled down to a simple mathematical algorithm.)

Anyhow, what this comes down to is that media piracy is so rampant because most people recognize the hypocrisy in charging for a sound or an image that has no lasting value.  This provides an ethical conflict that allows the desire for free and convenience to have highest priority.


I also want to cover an argument against my assertion that people will not pay for valueless information unless they are free to use it as they please.  First, there are always exceptions.  Not everyone has good judgment (and, our culture encourages poor judgment in this area).  Second, the obvious argument that people pay for video games on a subscription model is not a valid argument to claim that people will pay for valueless information.  Video games have repeatedly been shown to have educational value.  As interactive products, games also tend to continuously provide information (unlike a movie or song, games typically provide much more information, and well made games often provide different information each time they are played).  In fact, the interactive nature of games often creates a feedback loop that improves skills at the same time as encouraging the user to continue playing the game.  This leads to the third part, this does not apply to addictive substances or media.  Plenty of people pay subscription fees for pornography, even though the information has no value (and often has long lasting negative value).  This is because it causes dopamine addiction.  People acting on addictions cannot be considered competent customers.  (In some cases, games can also fall into this category.)

Lord Rybec

xkcd Money Chart

http://xkcd.com/980

I am tempted to print this on my 2' wide printer and put it on the wall. This is the most comprehensive chart of where money in the US is/goes that I have ever seen, and I just finished extensive research on this subject for a paper. I wish this had been posted a week ago.

Ok, so there are people starving in the US, while our government is spending $11 billion on military aid, and another $11 billion on foreign humanitarian aid (not certain if that is yearly, or total, but yearly makes more sense). Total US population (in 2009 according to Google) is 307 million. That is equal to $71 per person. If you discount the 50% of the population that is totally above the poverty line, and does not need the money, that is $142 per person. Note that this is not money that we are paying for our own defense. Also note that in the past this money has been used explicitly against us (by Iran and Iraq, for instance).

Corporate tax deductions are at $125 billion, which is equal to $407 per person.

Cost of war in Afghanistan is $321 billion, at $1,045 per person.

Iraq war was $784 billion, at $2,553 per person.

Stimulus spending was $206 billion in 2008 and $748 billion in 2009, totaling at $954 billion and $3,107 per person.

Recent bailouts totaled around $393 billion, $1,280 per person.

US annual charitable giving: $295 billion, at $960 per person.

And a bunch of small stuff that probably totals at several more trillion (not willing to take the hours to count it all).

So, the totals of the stuff that I provided values for is $2,872 billion. That comes out to $9,355 per person. If that money was distributed only to those that actually need it (the lower 50%), it would be $18,710 per person. xkcd.com assumes around $22,000 as the poverty level (on a per household basis). In a household of 2 people, $18,710 per person is enough money to survive on for a year, without even working a job. Many of the above are yearly figures, meaning that the government could dramatically improve the standard of living of the bottom 50% by giving them money, instead of wasting it on useless projects (admittedly, some of the money is spent on useful stuff, for instance, stimulus includes some education grants).

Note that the lower 50% includes households that earn less than $55,000 a year. Those making more than $40,000 a year and only include 2 people could be excluded based on research showing that $20,000 a year per person is the optimum income for happiness. This would further increase the per person payout of the nearly $3 trillion counted above.

Also, a wage cap and a profit cap for businesses would extremely dramatically redistribute wealth. A $500 million profit cap (I support something even more aggressive) would save $15.5 billion from Walmart (I'll be rounding down to the nearest $.5 billion), $29.5 billion from ExxonMobil, $5.5 billion from PepsiCo, $11 billion from Coca-Cola, $2 billion from VISA, $1 billion from MasterCard, $11 billion from GE, $12 billion from Berkshire Hathaway, $5.5 billion from GM, $6 billion from Ford, $19 billion from AT&T, $1.5 billion from Bank of America, $16.5 billion from JP Morgan Chase, $2 billion from Verizon, $10 billion from Citigroup, $51.5 billion from HP, $13.5 billion from Apple, $18 billion from MS, and $8 billion from Google. That totals to $239 billion, which is another $1,557 per person, and this time entirely on a yearly basis (and automatically adjusted for inflation even). And, this only includes a very small number of businesses that make over $500 million a year. If this money was distributed among the lower 50%, it would be $3,114 per year per person, enough to pull quite a few people out of the poverty level.

I don't want to do the work for finding the benefits of the wage cap, but I am certain they are at least as dramatic as the profit cap.

In short, if our government would quit squandering money, and if it would enforce a wage and profit cap, everyone one in the entire US could be living above the poverty level. (Hmm, according to the dollar section of the xkcd.com chart, the average CEO in the US makes $5,420 per hour. I could work for a single day every year at those wages, and be just barely at the poverty level. I take this to mean that each day of work for a typical CEO is robbing one person of an entire year's salary. Of course, this is presuming an 8 hour work day.)

If, in addition to this, taxes for the top 10% of wage earners was increased by even a little bit (ie, a few percent), it would generate enough more money to put the entire US population in the middle class. Note that this does not include large businesses, which would generate far more than that with a similar tax increase.

Anyhow, I like this chart. It gives very complete information (and would have made a nice reference for my paper, if it had come a week earlier).

Lord Rybec

What's it Worth?

There are many different types of value. Humans perceive value based on usefulness, need, rarity, mental stimulation, work or resources that went into an object, age, and many other factors. Probably the biggest factor of real value is need. What value is a big screen TV when you are starving the death? Usefulness and cost of production are also very strong factors of real value. Humans have invented another factor of value though. The phrase, "It is only worth what people are willing to pay," has been misconstrued to mean that the value of a thing is the highest price people are willing to pay for it.

The phrase, "It is only worth what people are willing to pay," was originally intended to convey the fact that an object which is appraised at a high value is only really worth that if you can find someone willing to pay that price for it. It was not intended to mean that it is ethical to charge any amount of money for an object, if someone is willing to pay that much. In fact, the US has anti-extortion laws to prevent businesses from taking advantage of shortages of goods needed for survival by raising prices (laws which have not been enforced during the last few disasters of sorts that those laws were created to cover).

I find that the most ethical method of determining value of goods for sale is to base the price on the cost of production. If a device costs $50 in parts and labor to produce, then that device should not be priced at $1,000. If it is, then it is extortion and theft. Of course, if the production of that device requires expensive equipment, then the cost of the device should reflect that, but it is still not ethical to make the first 100 customers pay for the manufacturing equipment and then keep the excessive profits from future sales.

There are many industries that abuse capitalism in ways that rip off the customer. Companies that produce electronic media are a major contender for the least ethical business practices. Electronic media is especially easy to do this with, because it only has to be produced once and then unlimited numbers of copies can be made at almost no additional cost. A music artist may spend 320 hours (2 months at 40 hours a week) composing a new album. The artist might then spend 20 hours recording all the tracks. Several people (3 maybe) at the studio will also be working to record the album and they might then spend 20 hours editing the tracks and mastering the first copy of the album. The record label might spend 100 hours working on advertising and pay some radio stations or TV stations for advertising time. The label will then copy the master onto thousands or millions of CDs. After this, people or stores will order the CDs, but they will pay shipping and handling, so the label does not have to worry about that. If each person involved gets paid $50 an hour (which I doubt), then the total labor costs through creating the master comes out to $25,000. The cost of the actual CDs (let's say 500,000) probably comes out to less than $50,000 (10 cents a piece is probably a high estimate). If each CD sells for $15 and the record label gets $10 from each, that comes out to $5 million. Presuming $500,000 in advertising costs, the company spent $575,000 on the entire thing and just made nearly 10 times that back. That is 1,000% return. That is absurd, especially given that the stores only made a 50% profit. Worse though, if the CD sells well, then the record company can quickly make another 500,000 copies for less than $50,000 and make another $5 million, at a 10,000% rate of return. Right, some money goes to royalties, but the pathetic rate of royalties for nearly any form of media is negligible (ever wondered why many musical artists keep going on tour, even when they have repeatedly stated how much they hate it). Why do we let the companies keep charging us for a product when society has already paid back several times what it cost to produce? This is extortion. Continuing to charge for a product that has already been paid for is theft.

It is not just media companies that do this though. Whenever new technology comes out, prices start very high. They generally slowly drop over time, but not at the rate they should. I understand that the cost of research and development has to be paid. This does not bother me. Once it is paid off though, quit charging us for it. New computer technology can take years to perfect. A lot of money goes into research. When it is finally ready, the prices are necessarily high. Most technology research is paid off within the first year after release. Somehow, even though devices like laptops only cost $50 to $100 to manufacture, we are still being charged $1,000 or more five or ten years later. When I found out about the low cost of manufacturing laptop computers, the technology was 5 years old. Now, 3 or 4 years later, the prices are finally dropping to more reasonable rates (though, $200 from $50 is still 400% return). The funny thing though is that they are not even using the old, cheaper technology. The new laptops are using new technology, which leads me to believe that $50 a piece was a high estimate and that modern laptops cost more like $25 (or less) to make, which means the return on a $200 laptop is 800%, which is still extortion.

Most of the world may disagree with me, but I am here to say: Charging the highest prices people are willing to pay is not ethical. Cheating people because they don't know better or because they are desperate is wrong. The value of merchandise should be based on how much it cost to produce, not on some math that maximizes profits but puts it out of the budget of people who really need it. What happens to those people that need food, but the math excludes their budget? Ever wonder why so many people need welfare just so they can afford to eat? Charging more than the poor can afford for food just to get a few extra dollars is evil and wrong. People are going hungry in the US because businesses have convinced us that it is ethical to rip off anyone who can afford to pay. It is not ethical to base prices on what people can afford. This is what is destroying our economy.

Lord Rybec