Environment

Death by HR: The Great Enrichment to the Great Slackening

We’re going to talk about the Great Slackening and Human Resources (HR’s) role in damaging team effectiveness, and thus hamstringing business productivity and growth. But first we need to see the even bigger picture: the Great Slackening comes after a long period of powerful growth and change which started in Europe but swept most of the world, transforming stagnant, poverty-and-disease-ridden societies into a thriving, world-spanning technical civilization — the Great Enrichment. We refer to the culture that laid the foundation for this miracle as Western Civilization — though it’s not especially Western now as many elements have been adopted in the East.

The Great Enrichment - from Economic Growth: Unleashing the Potential of Human Flourishing

As wealth has grown, those protected from life’s harsher lessons by being born to great wealth and privilege have turned to sabotaging the very freedom and free markets that created that wealth — but that is nothing new in the world, where it has long been folk wisdom (“clogs to clogs in three generations”[1]) that the first generation of family wealth is generated by driven and productive founders, the next by not-so-driven conventional maintainers, and by the third generation, wealth is dissipated and pampered decadents run the family business into the ground if they are still in charge. Something similar happens to entire cultures unless leadership transfers to newer and hungrier elements as older generations grow wealthy and forget hunger, and the Great Slackening can be viewed as the consequence of the clinging to power of a wealthy elite who unconsciously act to keep down threats to their status from the new fortunes that might arise if free enterprise is allowed to grow unchecked.

Human status is relative, and those unwilling to work hard to keep their already-high status tend to rely on keeping down threats from nouveau riche others, which requires nothing more than political contributions and unthinking support of the status quo administrative state, which will happily regulate away threats of competition. This is certainly bad for hard-working, newly-middle-class strivers, but it’s also bad for society as a whole, stifling those who might have created the new technologies and businesses of a brighter future.

Economist Deirdre McCloskey has written some great books summarizing the culture that produced the Great Enrichment. Her latest, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World,[2] recaps the cultural features that allowed billions of people to escape poverty in the last few centuries. Her paper “The Great Enrichment: A Humanistic and Social Scientific Account,” summarizes:[3]

From 1800 to the present the average person on the planet has been enriched in real terms by a factor of ten, or some 900 percent. In the ever-rising share of places from Belgium to Botswana, and now in China and India, that have agreed to the Bourgeois Deal — “Let me earn profits from creative destruction in the first act, and by the third act I will make all of you rich” — the factor is thirty in conventional terms and, if allowing for improved quality of goods and services, such as in improved glass and autos, or improved medicine and higher education, a factor of one hundred. That is, the reward from allowing ordinary people to have a go, the rise at first in northwestern Europe and then worldwide of economic liberty and social dignity, eroding ancient hierarchy and evading modern regulation, has been anything from 2,900 to 9,900 percent. Previous “efflorescences,” as the historical sociologist Jack Goldstone calls them, such as the glory of Greece or the boom of Song China, and indeed the Industrial Revolution of the eighteenth century in Britain, resulted perhaps in doublings of real income per person—100 percent, as against fully 2,900 percent since 1800.

What needs to be explained in a modern social science history, that is, is not the Industrial Revolution(s) but the Great Enrichment, one or two orders of magnitude larger than any previous change in human history. If we are going to be seriously quantitative and scientific and social we need to stop obsessing about, say, whether Europe experienced a doubling or a tripling of real income before 1800, or this or that expansion of trade in iron or coal, and take seriously the lesson of comparative history that Europe was not unique until 1700 or so. We need to explain the largest social and economic change since the invention of agriculture, which is not the Industrial Revolution, not to mention lesser efflorescences, but the Great Enrichment.

In explaining it, I have argued, it will not do to focus on capital accumulation or hierarchical exploitation, on trade expansion or class struggle. This is for two sorts of reasons, one historical and the other economic…. Historically speaking, neither accumulation nor exploitation nor trade or struggle is unique to the early modern world. Medieval peasants in Europe saved more, in view of their miserable yield-seed ratios, than did any eighteenth-century bourgeois. Slave societies such as those of the classical Mediterranean could in peaceful times see a doubling of real income per person, but no explosion of ingenuity such as overcame northwestern Europe after 1800. The largest trade until very late was across the Indian Ocean, not the Atlantic, with no signs of a Great Enrichment among its participants. Unionism and worker-friendly regulation came after the Great Enrichment, not before. Thus world history.

Economically speaking, capital accumulation runs out of steam (literally) in a few decades. As John Maynard Keynes wrote in 1936, the savings rate in the absence of innovation will deprive “capital of its scarcity-value within one or two generations.” Taking by exploitation from slaves or workers results merely in more such fruitless capital accumulation, if it does, and is anyway is unable to explain a great enrichment for even the exploited in the magnitude observed, absent an unexplained and massive innovation. The gains from trade are good to have, but Harberger triangles show that they are small when put on the scale of a 9,900 percent enrichment. Government regulation works by reducing the gains from trade-tested betterment, and unions work mainly by shifting income from one part of the working class to another, as from sick people and apartment renters to doctors and plumber. Thus modern economics.

What then? A novel liberty and dignity for ordinary people, among them the innovating bourgeoisie, gave masses of such people, such as the chandler’s apprentice Benjamin Franklin, or the boy telegrapher Thomas Edison, an opportunity to innovate. It was not capital or institutions, which were secondary and dependent. It was the idea of human equality. Egalitarian economic and social ideas, not in the first instance steam engines and universities, made the modern world. One history of Western politics,” writes the political philosopher Mika LaVaque-Manty, citing Charles Taylor and Peter Berger (he could have cited most European writers on the matter from Locke and Voltaire and Wollstonecraft through Tocqueville and Arendt and Rawls), “has it that under modernity, equal dignity has replaced positional honor as the ground on which individuals’ political status rests.”

Out of common-law Northern European traditions, then, came the rule of law and equal treatment of all, at first just landholding men, but then every citizen of all stations, sexes, and races. Hard-won freedoms and respect for the individual gave each person enough security in their person and property to motivate them to work harder, since they could retain the fruits of their labors and hope to advance themselves and their heirs with less fear of theft by the powerful. This is related to the decline of the “Culture of Honor” (which relied on aggression and violence to maintain individual property and status) and its replacement by the “Culture of Dignity,” which replaced violence and theft with the rule of law and property rights.[4] No longer could a higher-status warrior simply kill and confiscate the property of a lesser-status person who had blocked his path or insulted his status; disputes were resolved peacefully by compromise, or taken to court to be judged by law.

Now there have been many earlier civilizations which had the rule of law and at least some theoretical rights for citizens — those who weren’t slaves, at least. But until the 17th century, no Great Enrichment occurred because kings, nobles, clergy, or warriors could rewrite contracts and restrain trade as needed to keep others from rising to threaten their power. As McCloskey says:

Liberty and dignity for all commoners, to be sure, was a double-sided political and social ideal, and did not work without flaw. History has many cunning passages, contrived corridors. The liberty of the bourgeoisie to venture was matched by the liberty of the workers, when they got the vote, to adopt growth-killing regulations, with a socialist clerisy cheering them on. And the dignity of workers was overmatched by an arrogance among successful entrepreneurs and wealthy rentiers, with a fascist clerisy cheering them on. Such are the usual tensions of liberal democracy. And such are the often mischievous dogmas of the clerisy.

But for the first time, thank God—and thank the Levellers and then Locke in the seventeenth century, and Voltaire and Smith and Franklin and Paine and Wollstonecraft among other of the advanced thinkers in the eighteenth century—the ordinary people, the commoners, both workers and bosses, began to be released from the ancient notion of hierarchy, the naturalization of the noble gentleman’s rule over hoi polloi. Aristotle had said that most people were born to be slaves. “From the hour of their birth, some are marked out for subjection, others for rule.” Bishop (and Saint) Isidore of Seville said in the early seventh century that “to those unsuitable for liberty, [God] has mercifully accorded servitude.” So it had been from the first times of settled agriculture and the ownership of land. Inherited wealth was long thought blameless compared with earned wealth, about which suspicion hung. Consider South Asia with its ancient castes, the hardest workers at the bottom. And further east consider the Confucian tradition (if not in every detail the ideas of Kung the Teacher himself), which stressed the Five Relationships of ruler to subject, father to son, husband to wife, elder brother to younger, and—the only one of the five without hierarchy—friend to friend. The analogy of the king as father of the nation, and therefore “naturally” superior, ruled political thought in the West (and the East and North and South) right through Hobbes. King Charles I of England, of whom Hobbes approved, was articulating nothing but a universal and ancient notion when he declared in his speech from the scaffold in 1649 that “a King and a Subject are plain different things.”

The ability to freely question old ways, and to improve a trade or production process by innovation then drive out the old ways of doing things — and the old fortunes — by outcompeting them, trading the new products to distant lands, is what started the Great Enrichment off with the bang of the Industrial Revolution. Printing, steam power, mass production, standardized parts, and engineering science made it possible to innovate, spread the new ideas broadly and preserve them in libraries around the world, and invest the profits from innovation into even more innovation. The explosive growth of productivity allowed billions of people to escape hardscrabble rural subsistence farming for urban living and increased the number of people wealthy enough to think about science, art, and design instead of short-term survival.

Thomas Piketty’s Capital in the Twenty-First Century[5] (2013) was a best-seller promoting a fashionable theory that the rate of return on capital had been greater than economic growth in recent years, which automatically increased concentration of wealth and therefore inequality. Seized on by redistributionists to justify new taxes on wealth and new subsidies for the poor, it seemed to mechanistically explain increasing inequality as the result of automatic processes which could be counteracted by redistribution without harming the engine of growth.

Piketty’s explanations were disputed, and MIT economist Matthew Rognlie demonstrated that most of the excess capital accumulation — the enrichment of the wealthy — that Piketty had discussed came from outsized real estate price increases around the world, due primarily to elite control over land development that artificially increased the scarcity and price of prime real estate, notably housing.[6] A more recent paper from the IMF demolished Piketty’s claim that inequality increased in step with excess capital accumulation. Piketty’s theories were no longer as useful to promote larger government, since government control of real estate development and regulation of other economic sectors like energy and healthcare began to look like the sources of the increasing inequality. The heretical notion that it was control by the elites of the commanding heights of government that was actually raising prices and squeezing out the middle class began to spread….

Is the Great Enrichment over? Certainly it continues to expand into newly-opened territories like China and India, where the old Communist Party and Indian bureaucracies are giving ground to freer enterprise and mass movement of rural folk into the cities is transforming life. But in the developed countries which once led the world in innovation, countervailing forces of regulation and central planning are slowing and stopping growth.

This is now being called the Great Stagnation, or as I’m calling it in its corporate form, the Great Slackening. The rise of the administrative superstate in the US and the EU has given the already-powerful a tool to suppress threats from below, and under the guise of protecting the people, it’s making the people poorer and more dependent while limiting their freedoms.

—

[1] Clogs to Clogs in Three Generations https://en.wiktionary.org/wiki/clogs_to_clogs_in_three_generations
[2] Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, by Deirdre McCloskey, Univ. of Chicago Press, 2016.
[3] “The Great Enrichment: A Humanistic and Social Scientific Account,” by Deirdre Nansen McCloskey, 2016. http://deirdremccloskey.org/docs/pdf/McCloskey_ASSA2016.pdf
[4] See “Men of Honor vs Victim Culture,” by Jeb Kinnison. https://substratewars.com/2015/09/09/men-of-honor-vs-victim-culture/
[5] Capital in the Twenty-First Century by Thomas Piketty, 2013. See https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century
[6] “Deciphering the fall and rise in the net capital share,” by Matthew Rognlie. March 19, 2015 Brookings Papers on Economic Activities. https://www.brookings.edu/bpea-articles/deciphering-the-fall-and-rise-in-the-net-capital-share/

Death by HR: How Affirmative Action Cripples OrganizationsDeath by HR: How Affirmative Action Cripples Organizations

[From Death by HR: How Affirmative Action Cripples Organizations,  available now in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. Here’s the condensed version; view the entire review here.

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

 

More reading on other topics:

Death by HR: Good-Enough Cogs vs Best Employees
Death by HR: EEOC Incompetence and the Coming Idiocracy
Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
The Great Progressive Stagnation vs. Dynamism
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
Corrupt Feedback Loops: Public Employee Unions
Death by HR: History and Practice of Affirmative Action and the EEOC
Civil Service: Woodrow Wilson’s Progressive Dream
Bootleggers and Baptists
Corrupt Feedback Loops: Justice Dept. Extortion
Corrupt Feedback Loops, Goldman Sachs: More Justice Dept. Extortion
Death by HR: The Birth and Evolution of the HR Department
Death by HR: The Simple Model of Project Labor
Levellers and Redistributionists: The Feudal Underpinnings of Socialism
Sons of Liberty vs. National Front
Trump World: Looking Backward
Minimum Wage: The Parable of the Ladder
Selective Outrage
Culture Wars: Co-Existence Through Limited Government
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
The Morality of Glamour

On Affirmative Action and Social Policy:

Affirmative Action: Chinese, Indian-Origin Citizens in Malaysia Oppressed
Affirmative Action: Caste Reservation in India
Diversity Hires: Pressure on High Tech
Title IX Totalitarianism is Gender-Neutral
Public Schools in Poor Districts: For Control Not Education
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
The Social Decay of Black Neighborhoods (And Yours!)
Child Welfare Ideas: Every Child Gets a Government Guardian!
“Income Inequality” Propaganda is Just Disguised Materialism

The greatest hits from SubstrateWars.com (Science Fiction topics):

Fear is the Mindkiller
Mirror Neurons and Irene Gallo
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Selective Outrage
Sons of Liberty vs. National Front
“Tomorrowland”: Tragic Misfire
The Death of “Wired”: Hugo Awards Edition
Hugos, Sad Puppies 3, and Direct Knowledge
Selective Outrage and Angry Tribes
Men of Honor vs Victim Culture
SFF, Hugos, Curating the Best
“Why Aren’t There More Women Futurists?”
Science Fiction Fandom and SJW warfare

More reading on the military:

US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy

Update: California High-Speed Rail Nearly Dead

Virginia Postrel has a good article on Bloomberg discussing the latest snags in the HSR project, the boondoggle being kept on life-support to shield the careers of politicians who have kept it going long after the original promises to voters were broken. I ended the previous post on the project with this:

A high-speed rail line through dense urban areas and mountains was always going to be a difficult project. But pie-in-the-sky projects pay off when you can direct money to your political supporters preparing for it, get back some of that as campaign contributions, and retire from public life before the public realizes they got nothing for their tax dollars. As in all these Bootleggers and Baptists stories, the “bootleggers” — politicians, unions, and contractors — pushed the project through fully aware the proposal was a fantasy and sold the dream to idealistic voters. Having foolishly voted for the bonds, the voters will never be allowed another vote to stop the project.

I don’t remember my own vote on the bond initiative — I may well have said yes since like other voters, I believed the promises made in the initiative would be kept, or if not, that the funding would be blocked. But courts have allowed the project to proceed and bond money to be spent despite ample evidence that those promises have not and cannot be met.

When I mentioned this on Facebook, I got this response back from friend David Gerrold, who is a good representative of those dreamers (the Baptists) who want something good and ignore until the bitter end the evidence that it can’t happen. I sympathize with the idealism, but also see the damage done when fantasy is more politically important than reality. Here’s his reaction:

David Gerrold Comment

This is the dream we were sold. None of those promises can be kept, especially the climate change benefits — since the fate of the project is now certain, further expenditure of $billions will leave behind nothing but partly-constructed tracks for a route that won’t be used enough to save even the carbon emissions used in materials to build it, so it’s even going to be a big net loss on the global warming front.

Developments since my last post make this even clearer. The Obama administration gave the project a temporary exemption from the rule requiring the state put up its own matching funds before the Federal money would be released. This exemption is the only reason project work can continue, with the state essentially borrowing its own contribution from the Federal government until its own funds are available.

The funds the state expected to have from emissions control credit auctions have gone missing. The latest auction was a failure, providing only $2.5 million for the train project vs the $150 million expected. The original promise of private matching investment has not happened and no private company is interested. The emissions money amounts to a tax on California industry and citizens and is not structured to be a reliable stream of funding. The entire funding scheme teeters on the brink as legislators eye the lists of much more critical infrastructure projects that would have to be cut to fund the train. While Governor Jerry Brown continues to support it, others are edging toward the door, eying each other as the realization sinks in that the merde is about to hit the rotational airfoil. No one wants to be first on the governor’s team to declare the truth, and so the zombie project appears to live. Here’s the original proposed route:

California HSR Original Route - Wikipedia

California HSR Original Route – Wikipedia

The original promise of high-speed service from downtown SF to downtown LA (and San Diego) was scrapped years ago, with the current $65 billion project estimate for the originally-proposed first phase from SF to LA unfunded and likely to remain unfunded. The desperate goal of project proponents now is to build something to entrench the project. The LA Times story on the rationalizations for building the least-useful part first:

The shift to the Bay Area [building the segment from San Jose to Bakersfield first] will help the California High-Speed Rail Authority hold down costs and expedite construction of the system, which is already two years behind schedule, according to details of the new plan released Thursday.

The change would also avoid expensive tunneling and viaduct construction through the geologically complex Tehachapi and San Gabriel Mountains, where several potential routes have been proposed through the Angeles National Forest. Those options have generated political opposition in communities that border the forest.

The high-speed rail authority said shifting to the Bay Area will allow it to have the initial segment operating by 2025, earlier than planned, which will make the project attractive to private investors that would help fill holes in funding.

California HSR Downsized Route - LA Times photo

California HSR Downsized Route – LA Times photo

The HSR Authority has failed to get rights-of-way through the urban areas needed to reach the stations in SF and LA, and the state’s laws giving local NIMBYs power to stall or block any major project with lawsuits funded by wealthy residents of towns like Atherton along the way means those routes will never be available as initially envisioned. Having compromised away all the speed benefits, the high-speed rail project is now a medium-speed rail project, offering little time advantage as its trains will proceed slowly through urbanized areas and stop at every intermediate city. And the low density of California cities, especially LA, means it will be more practical for most people not living near downtown stations to drive directly to their diverse destinations — trips from one downtown to another downtown are only a small fraction of the total demand for instate travel. Improvements to bus services in all metropolitan areas, and smaller, cheaper projects serving the real needs of middle and lower-income workers and families, are being neglected so this shiny dream choo-choo can keep going.

It’s clear the original project proposal was designed to offer some service to most towns in California, whether that was feasible or not, and it was on that basis that it got enough support to get the bond issue through the legislature and the voters. Every single one of the promises — routing, trip times, costs, self-supporting operation, private investment matching — has been broken since, yet the inertia of the project keeps the consulting companies, lawyers, and union workers spending borrowed money to build the train to nowhere.

The Great Slackening is caused by the bureaucratization of everything and the lack of accountability for failure. California’s government is no longer capable of building major infrastructure projects in a timely or efficient manner, and the state will exhaust its funds trying before recognizing that the system must be reformed.

Death by HR: How Affirmative Action Cripples OrganizationsDeath by HR: How Affirmative Action Cripples Organizations

[From Death by HR: How Affirmative Action Cripples Organizations,  available now in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. Here’s the condensed version; view the entire review here.

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

 

More reading on other topics:

Regulation Strangling Innovation: Planes, Trains, and Hyperloop
Who Killed Prince? Restrictions on Buprenorphine
The Great Progressive Stagnation vs. Dynamism
Captain America and Progressive Infantilization
FDA Wants More Lung Cancer
Corrupt Feedback Loops: Public Employee Unions
Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
Death by HR: History and Practice of Affirmative Action and the EEOC
Civil Service: Woodrow Wilson’s Progressive Dream
Bootleggers and Baptists
Corrupt Feedback Loops: Justice Dept. Extortion
Corrupt Feedback Loops, Goldman Sachs: More Justice Dept. Extortion
Death by HR: The Birth and Evolution of the HR Department
Death by HR: The Simple Model of Project Labor
Levellers and Redistributionists: The Feudal Underpinnings of Socialism
Sons of Liberty vs. National Front
Trump World: Looking Backward
Minimum Wage: The Parable of the Ladder
Selective Outrage
Culture Wars: Co-Existence Through Limited Government
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
The Morality of Glamour

On Affirmative Action and Social Policy:

Affirmative Action: Chinese, Indian-Origin Citizens in Malaysia Oppressed
Affirmative Action: Caste Reservation in India
Diversity Hires: Pressure on High Tech<a
Title IX Totalitarianism is Gender-Neutral
Public Schools in Poor Districts: For Control Not Education
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
The Social Decay of Black Neighborhoods (And Yours!)
Child Welfare Ideas: Every Child Gets a Government Guardian!
“Income Inequality” Propaganda is Just Disguised Materialism

The greatest hits from SubstrateWars.com (Science Fiction topics):

Fear is the Mindkiller
Mirror Neurons and Irene Gallo
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Selective Outrage
Sons of Liberty vs. National Front
“Tomorrowland”: Tragic Misfire
The Death of “Wired”: Hugo Awards Edition
Hugos, Sad Puppies 3, and Direct Knowledge
Selective Outrage and Angry Tribes
Men of Honor vs Victim Culture
SFF, Hugos, Curating the Best
“Why Aren’t There More Women Futurists?”
Science Fiction Fandom and SJW warfare

More reading on the military:

US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy

Free Trade, Specialization, and Economic Dynamism
Futuristic City - Coruscant

Futuristic City – Coruscant

Why do large companies exist? Some industries like film production used to be vertically integrated — that is, most aspects of production were completed by direct employees of the studio, with even screenwriters and actors under long-term contract. This allowed the studio to put together productions rapidly and under direct control, shooting on their own lots and cranking out enough product to keep costs down and quality up. Vertical integration kept down the costs of negotiating with each supplier / worker and guaranteed availability of unique resources, like the services of major stars and expensive soundstages.

The Hollywood studio system has since been broken up, and many productions are completed by dozens of business entities handling separate parts of the project. Agents and producers package projects and a thriving ecosystem of specialized contractors do much of the work; at the end of every special-effects blockbuster film you’ll see dozens of firms credited.

Big companies stay vertically integrated when a new product or industry takes off and there is limited support from outside contractors, or when legal and regulatory burdens make it difficult to reliably contract out parts of the work. In countries where influence with the government is the only way to operate without harassment, large firms that have apparently unrelated businesses under one ownership — conglomerates — are the most successful form. In South Korea, these firms (called chaebol[2]) were seen as national champions and had the political pull necessary to survive in a corrupt, influence-peddling environment; improvements in transparency and the curbing of corrupt influence after the Asian debt crisis of 1997 resulted in reform of the chaebol system and broke up the ownership of large segments of the Korean economy, which has improved the country’s growth record and competitiveness.

Mature industries with highly-developed contract labor markets tend to outsource many more functions, which lowers the carrying costs for the industry as a whole — an in-house special effects division, for example, will either be over- or under-utilized much of the time, and it’s a natural evolution from seeking outside business for slack periods to being spun off as an independent concern when there are large numbers of independent special effects firms with different areas of expertise. As a contracting market develops, it then becomes practical for even a small team to start their own firm, further atomizing the market.

The classic pamphlet “I, Pencil”[3] explains the story of the simple graphite-leaded wood pencil’s production as a mute symphony of coordination and cooperation by suppliers and producers who have organized spontaneously under the free market system to produce a product not one of them fully understands. All of its component materials and the machines needed to manufacture the pencil come from different suppliers who have developed the constituents independently, specializing in, say, the paint for the exterior, or the rubber eraser. Time and many instances of contracts fulfilled lead to trust between suppliers, and competitive markets hone each supplier’s quality and price to hold down the cost of the completed product.

What happens when trade barriers go up? Say the best producer of rubber pencil erasers is in Malaysia, and a protectionist Congress slaps a high tariff on products from Malaysia….

The price landscape the US-based pencil manufacturer sees changes when Malaysian erasers leap in price because of the new tariffs, and a US-based supplier now appears to offer a better deal on erasers, so the manufacturer orders from them instead. Unfortunately the unfamiliar supplier has a lower quality product at a higher price, and the pencil manufacturer and the new eraser supplier spend days negotiating payments and terms. The resulting pencils have to be priced higher and consumers notice the erasers don’t work very well, and begin to consider other brands of pencil instead….

Relatively free trade allows multinational networks of the best and most-efficient suppliers to capture the benefits of specialization globally. The world’s auto industry, for example, benefitted greatly in the end by combining innovations from Japan, Germany, and the US, and modern autos manufactured anywhere today source parts from multiple countries — which becomes most noticeable when, for example, the dangerous failure of airbag components made in Mexico by major supplier Takata of Japan spreads to include recalls of upwards of fifty million cars from at least twelve different car companies[4]. Atypical disasters aside, the availability of low-cost and reliable components from overseas has brought US-manufactured cars up to increasingly-high global standards and allowed US final assembly plants to remain competitive despite their higher labor costs.

When trade barriers are lowered, there is often short-term pain for less-competitive, formerly-protected industries, as there was for the US auto giants in making the transition to a global market. But high trade barriers and closed markets mean higher prices and a lack of competition to keep the domestic industry honest — and if the protected products are a large component of national consumption and a capital good necessary for other industries as well, like autos and trucks, the entire economy of the protectionist country will grow more slowly and become less competitive in international trade. A return to high trade barriers for the US, like the Smoot-Hawley Tariff Act of 1930,[5] would lower the quality and raise the prices of many US-made goods, making them less competitive in global trade even if no other countries retaliated by raising their tariffs. Just because there are still countries with high tariff and other barriers doesn’t mean the US, as one of the greatest beneficiaries of the global free trade system, should also shoot itself in the foot. In the 1930s countries stumbled into a worsening Depression by such short-sighted actions which harmed everyone, and contributed to the strains resulting in WWII.

Similarly, it is damaging when any government acts to limit or over-regulate trade between its citizens and its companies. The US Constitution addressed the issue of trade barriers between the various States by giving the power to regulate “interstate commerce” to the Federal government, intending to prevent the kind of tariffs and barriers that Britain had used to benefit their own industries at Colonial expense from springing up between the States.

Today France is in the throes of strikes and disorder as its Socialist government tries to reform its labor regulations to allow for a freer market in labor.[6] Current regulations there make it so difficult to fire or lay off employees that companies do everything they can to avoid hiring regular full-time employees, and most young people are forced into the undermarket of contract and temporary labor to gain employment. Youth unemployment rates over 20% in many parts of Europe are crippling their career development, in large part due to overregulation. Entire economies grow more slowly when special-interest regulation favors the few insiders who already have secure positions over the young outsiders.

Trade liberalization and the global spread of freer markets produced the greatest improvement in global living standards the world has ever seen, the Great Enrichment, with higher living standards than ever dreamed of for middle classes in the developed world, and billions of people lifted out of poverty outside it.[7] The increasing prosperity and health of these populations defused the population bomb that was supposed to have produced famine and war by the late 1970s.[8] Technological innovation and capitalist investment fed more people and found more resources and energy at lower prices. Growing wealth created a demand for clean air and water, and a supply of new emissions and cleanup technologies that have improved the local environment of every country that has completed the transition to both democratic governance and capitalism. The countries that tried to maintain their centrally-planned economies were outcompeted, and every one has either given up central planning or collapsed into poverty.

But the temptation to control an organic free-market economy to benefit special interests is always waiting, and those special interests (whether private industries or public employee unions) are good at funding campaigns and lobbying legislators to have laws written in their favor. US courts have been all too willing — since the Supreme Court’s 1937 “Switch in time that saved nine,” which bowed to to FDR’s desires[9] — to allow Congress and state legislatures to regulate private contracts and trade by presuming that any regulation which had a ”rational basis” was constitutional. This great expansion of opportunities for graft resulted in the growth of an overbearing administrative state, a permanent shadow government of tenured bureaucrats and administrators who are so protected by Civil Service and public employee unions that there is no accountability and only limited desire to serve the public who pay all the bills. Meanwhile, the economy grows more and more slowly as some industries like banks are bailed out and protected while others are harassed by regulators. Small businesses and community banks are crippled by costly regulatory requirements and labor rules like the ACA, while costs rise in every sector heavily regulated by governments — those sectors (healthcare, education, banking…) lobby for special loans and subsidies. Young people are told they must go to college, taught that government and nonprofit services are the most moral career choices, then saddled with student loan debt and a slack labor market when they graduate — if they graduate.

Let’s imagine for a moment that a Freedom of Contract Amendment exists — a freedom implied by common law and precedent until 1937, but smothered by Progressives eager to mold the people toward a scientifically-managed, centrally-planned future — which as we have seen does not work. People would be free to sell their labor under any terms they wish. Other than Civil Rights Act protections against discrimination, employers would be free to seek out the best employees for their teams and organize them and pay them however they wish. The impossibly complex jumble of fringe benefits and 401Ks and stock plans and options created by complicated tax incentives goes away when the tax system is simplified. It’s a dream, right? Freedom to achieve without being “helped” by a politician with his or her hand out for a contribution, or sued by a lawyer wanting to retroactively apply antiquated 1930s labor regulations designed for factories to your white-collar employees…

The future doesn’t come with thousands of pages of laws and regulations dating back to the last century and designed to hold a tottering status quo in place. It comes out of individual striving and new technologies, and an American people free to mold themselves as they wish. The access to all of the world’s knowledge we now have via the internet means education can be flexible and nearly free for those who are motivated, and trapping our children in failed urban schools or mediocre and left-wing public universities wastes their time and our tax money.

[Note that the current mechanism for negotiating and implementing “free trade agreements” looks very much like the dysfunctional process now used to write new laws — opaque, lengthy, written by committees and tailored to special interests. That’s certainly not a good thing, and opens the process to corrupt bargaining. I’m defending the general principle of free trade here, and often these deals are mixed, a net positive for the US economy while containing many objectionable parts.]

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[1] https://en.wikipedia.org/wiki/Vertical_integration
[2] “The Changing Role of Chaebol,” Charlotte Marguerite Powers, Stanford Journal of East Asian Affairs, Summer 2010, https://web.stanford.edu/group/sjeaa/journal102/10-2_09%20Korea-Powers.pdf
[3] “I, Pencil: My Family Tree as Told to Leonard E. Reed,” courtesy of the Ralph Smeed Private Foundation, 1958. https://fee.org/media/14940/read-i-pencil.pdf
[4] “U.S. Department of Transportation expands and accelerates Takata air bag inflator recall to protect American drivers and passengers,” US NHTSA 13-16, May 4, 2016, http://www.nhtsa.gov/About+NHTSA/Press+Releases/nhtsa-expands-accelerates-takata-inflator-recall-05042016
[5] https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act
[6] “France labour dispute: Wave of strike action nationwide,” BBC, 26 May 2016 http://www.bbc.com/news/world-europe-36385778
[7] “How the West (and the Rest) Got Rich — The Great Enrichment of the past two centuries has one primary source: the liberation of ordinary people to pursue their dreams of economic betterment,” Deirdre N. McCloskey, Wall Street Journal, May 20, 2016, http://www.wsj.com/articles/why-the-west-and-the-rest-got-rich-1463754427
[8] “The Unrealized Horrors of Population Explosion,” Clyde Habermann, New York Times, May 31, 2015, http://www.nytimes.com/2015/06/01/us/the-unrealized-horrors-of-population-explosion.html
[9] “‘The switch in time that saved nine’ is the name given to what was perceived as the sudden jurisprudential shift by Associate Justice Owen Roberts of the U.S. Supreme Court in the 1937 case West Coast Hotel Co. v. Parrish. Conventional historical accounts portrayed the Court’s majority opinion as a strategic political move to protect the Court’s integrity and independence from President Franklin Roosevelt’s court-reform bill (also known as the “court-packing plan”), which would have expanded the size of the bench up to 15 justices, though it has been argued that these accounts have misconstrued the historical record.” https://en.wikipedia.org/wiki/The_switch_in_time_that_saved_nine

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Death by HR: How Affirmative Action Cripples OrganizationsDeath by HR: How Affirmative Action Cripples Organizations

[From Death by HR: How Affirmative Action Cripples Organizations,  available now in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. Here’s the condensed version; view the entire review here.

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

 

More reading on other topics:

Regulation Strangling Innovation: Planes, Trains, and Hyperloop
Captain America and Progressive Infantilization
FDA Wants More Lung Cancer
Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
The Great Progressive Stagnation vs. Dynamism
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
Corrupt Feedback Loops: Public Employee Unions
Death by HR: History and Practice of Affirmative Action and the EEOC
Civil Service: Woodrow Wilson’s Progressive Dream
Bootleggers and Baptists
Corrupt Feedback Loops: Justice Dept. Extortion
Corrupt Feedback Loops, Goldman Sachs: More Justice Dept. Extortion
Death by HR: The Birth and Evolution of the HR Department
Death by HR: The Simple Model of Project Labor
Levellers and Redistributionists: The Feudal Underpinnings of Socialism
Sons of Liberty vs. National Front
Trump World: Looking Backward
Minimum Wage: The Parable of the Ladder
Selective Outrage
Culture Wars: Co-Existence Through Limited Government
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
The Morality of Glamour

On Affirmative Action and Social Policy:

Affirmative Action: Chinese, Indian-Origin Citizens in Malaysia Oppressed
Affirmative Action: Caste Reservation in India
Diversity Hires: Pressure on High Tech<a
Title IX Totalitarianism is Gender-Neutral
Public Schools in Poor Districts: For Control Not Education
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
The Social Decay of Black Neighborhoods (And Yours!)
Child Welfare Ideas: Every Child Gets a Government Guardian!
“Income Inequality” Propaganda is Just Disguised Materialism

The greatest hits from SubstrateWars.com (Science Fiction topics):

Fear is the Mindkiller
Mirror Neurons and Irene Gallo
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Selective Outrage
Sons of Liberty vs. National Front
“Tomorrowland”: Tragic Misfire
The Death of “Wired”: Hugo Awards Edition
Hugos, Sad Puppies 3, and Direct Knowledge
Selective Outrage and Angry Tribes
Men of Honor vs Victim Culture
SFF, Hugos, Curating the Best
“Why Aren’t There More Women Futurists?”
Science Fiction Fandom and SJW warfare

More reading on the military:

US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy

Followup on Two-Stage Evaporative Cooling
Two-Stage Evaporative Cooler from OASys

Two-Stage Evaporative Cooler from OASys

[This follows up on the previous post, This is Not My Beautiful House. Taken from “The Globally Optimized House: AC,” written August 11, 2010.]

Most of my work (that paid) has been some form of global optimization, from optimizing parallel programs and schemes to automatically optimize parallel programs, to optimizing plan layouts in subdivision, to managing investments considering all tax and estate consequences and adverse events.

The new house in Palm Springs is no exception. Built in 2003, by the standards of the time it’s well-insulated and efficient. At that time, electricity cost about 12 cents per kWh; currently the highest tiered rate (which we will easily reach using AC) is above 30c/kWh. The pricing scheme is hugely complicated and unpredictably micromanaged by an incompetent state legislature and regulators, and discriminates against large families as well as wasteful users. It does, however, result in such high marginal costs for larger houses that solar power, as currently subsidized, is more than competitive for the highest-tier rates.

The former owners were doing what most people do, shutting off AC in most of the house and using it sparingly in the areas they actually live in; this kept their bills down to $400/month or so, averaged year-round. In our usage with less than half the house cooled to 79-84 F, the power bill for the month of July would have been about $600 if we had been there full-time.

Heating and cooling buildings is a complex global optimization problem. First note that what we want to optimize is not the temperature as shown by the thermostats (there are 6), but human comfort; if there is no one at home, there is no need to control anything (though furnishings can suffer from excess heat or extremely high or low humidity.) We want the house to know how many people are in what areas to determine how hard to work to condition the air. Also, comfort depends on many factors; temperature, humidity, moving air, radiation temperature (easily noticed in winter when it can feel cold at an apparently comfortable temperature because cold walls or windows soak up thermal radiation.) I am trying to give up hot coffee in the summer since a cup can make me uncomfortably warm for an hour when an iced coffee would not have.

The general problem of cooling can be approached using a variety of sources and sinks available in the environment. Groundwater, for example, is often at a reliable low temperature and can be used for cooling, either through a heat exchanger or indirectly by using it as a heat sink for a conventional AC compressor. In the desert, evaporating water is an energy-efficient cooling method. [BTW. don’t let anyone tell you that there’s a water shortage and that evaporative cooling will make it worse; fossil fuel power plants use more water to produce the additional power needed for conventional AC than evaporative cooling uses. One source comments that use of evaporative cooling for a typical house results in additional water usage of about a shower per day, implying it would strain water resources; but since Southwestern homes typically use many times that amount on landscaping irrigation, and generation of additional electricity for conventional AC would use as much, additional water use is not really an issue.]

In a climate with wide swings in outdoor temperatures, simple ventilation and storage can provide most of the heating and cooling in many seasons; a whole-house fan and the house’s heat storage capacity obviates the need for costly AC much of the time, but it requires constant monitoring of conditions and control of ventilation, and is most effective when outside conditions in the next 12-24 hours are known. A smart person can handle this, and until now, most whole-house fans have been controlled by a simple switch and the strategic opening and closing of windows.

There’s huge room for improvement in the technology of AC. Manufacturers have improved conventional compression-cycle refrigeration AC a great deal since energy prices started to climb; SEERs (Seasonal Energy Efficiency Ratios) have climbed from 10 to 14-16 in two decades, cutting power used by a third.

But the original form of cooling, used since ancient times in dry climates, passes hot, dry air over water to cool and humidify it; this is now called evaporative cooling. In its simplest form, a fan blows hot dry air over a medium soaked with water. Evaporating water cools the medium, which cools the air passing over it, which meanwhile picks up some moisture. In a desert climate, outside air at midday can be at 110 F and less than 10% humidity; the wet-bulb temperature (the temperature a thermometer registers when it is cooled by a soaked medium after air is blown over it) can be below 50 F. These simple evaporative coolers, known as “swamp coolers,” were widely used in the desert Southwest until cheap AC units and the bad reputation of swamp coolers for high maintenance and growth of microorganisms in the medium led to their replacement by conventional refrigerative AC. There are times of year, also, when the humidity levels rise enough to reduce a swamp cooler’s effectiveness, so that for some weeks of the year, the output air from a swamp cooler is uncomfortably warm and humid.

More recent development of two-stage evaporative coolers resolves most of those issues. By using outside air in a first stage to cool one side of the medium, but exhausting the now-moister air and then drawing in more outside air to pass over the already-cooled moist medium on the other side, the air can be cooled more with less addition of humidity. This is not as efficient as a one-stage swamp cooler under ideal conditions for their use (because it uses more fan power to move more air), but works in a much wider range of conditions, and can cool a space for about 1/3 the cost of conventional AC (SEERs of 40 vs AC’s 14). The fungus and microbial issues of old-style swamp coolers have been dealt with by a variety of automated purging and cleaning methods, though some disinfection and annual maintenance is still a good idea.

Many other factors influence comfort and can be tweaked to improve it; our house is not ideally oriented, with its long axis north-south and prime living areas facing west. The best designs for passive solar heating and cooling have the house laid out east-west, with a large southern overhang sized to allow in winter sun and keep out summer sun. We spend a lot of time opening and closing 15-20 shades on the east and west sides of the house as solar incidence changes. A set of automated shades with a smart controller which can respond to conditions would handle that for us…. [ultimately a window technology which can be controllably tuned to allow in or block light and heat will simplify this problem, but while this has been an area of research for some time, no cheap and practical windows of this type exist.]

[Updating with a bit from Green Building Advisor, “Saving Energy With an Evaporative Cooler:”]

Whatever happened to the OASys?

Many articles on evaporative coolers mention the OASys, an energy-efficient appliance that was developed by engineers at the Davis Energy Group in Davis, California. Unfortunately, the OASys is no longer available.

For a while, the OASys was being manufactured by Speakman. After a while the production of the unit was moved to a factory in India. Because of poor sales, however, manufacturing was discontinued. The remaining units were shipped to a warehouse in Nevada, where a warehouse fire destroyed the entire inventory.

The end of a historical era

A few years ago I had a conversation about evaporative coolers with John Proctor, the president of Proctor Engineering Group in San Rafael, California. Proctor, a nationally known air conditioning expert, told me that evaporative coolers deserve wider use. “The problems with direct evaporative coolers are overblown,” notes Proctor. “I lived in an evaporatively cooled home in Colorado for many years and was extremely happy with it. It worked well. I’m befuddled by the fact that more people don’t use evaporative coolers.”

Like most GBA readers, Proctor is a strong advocate for the use of energy-efficient HVAC equipment, so his love of evaporative coolers isn’t too surprising. Although energy-efficiency advocates have been singing the praises of evaporative coolers for years, the tide seems to have turned away from these devices. Evaporative coolers are fading away.

A reporter for The Arizona Republic, Ryan Randazzo, described the trend in a 2010 article titled “Once-Common Evaporative Coolers Are Disappearing from Phoenix-Area Homes.” Randazzo wrote, “Now the metal boxes atop homes are rare, done in by a combination of cheap and increasingly energy-efficient air-conditioning and the time and expense of maintaining the coolers. Arizonans steadily have moved away from using the sometimes noisy, always drippy evaporative coolers, even though they may reduce energy bills.”

According to Randazzo, almost every Phoenix home had an evaporative cooler in 1940. In 1984, nearly half of all Phoenix residents still had one. By 2010, however, less than 10% of Phoenix homeowners had an evaporative cooler. “Most residents who still use them are either extremely cost-conscious, handy at fixing the units, or both,” Randazzo reported.

Randazzo continued, “New housing developments are limiting coolers’ use on roofs. And people are just happy to use an air-conditioner that rarely needs repairs vs. a cooler that needs rooftop service at least twice annually.”

Randazzo interviewed Mike Donley, president of Donley Service Center. Donley explained that “most people just tired of climbing on the roof in the spring to clean and activate their cooler, and getting up there again in the fall to clean it and seal it off. … ‘Coolers are a do-it-yourself project,’ Donley said. … ‘I hate to say this, but if you are going to [pay to] have us service it twice a year, you are better off buying a high-efficiency AC system,’ Donley said.”

So unless a manufacturer steps forward with a two-stage cooler that doesn’t require maintenance at all (which is possible; an automated device could clean itself, as ours did in part), people will think of it as too much trouble and move to use less efficient, overly drying AC.