More Hypocrisy from Advocates of Smaller Government

In the May 25, 2010 Florida Times-Union blog entry, "Small-government Rubio said it may be time for federal takeover of cleanup ops", David Hunt highlights the hypocrisy inherent in many advocates of free markets, smaller government and lower taxes. When insufficiently regulated markets create socially undesirable outcomes, such as the oil spill in the Gulf of Mexico, those harmed by the market failure scream that the government should do more. You cannot have it both ways. It is easy to support free markets and smaller government when one fails to consider the negative consequences. Rational economists argue those consequences always should be considered.

According to David Hunt's blog:

During a campaign stop in Jacksonville, former Florida House Speaker Marco Rubio said he's been disturbed by the lack of technology to harness the oil leak in the Gulf of Mexico.

Although Rubio presents himself as a small-government candidate for U.S. Senate, he said it may be time for a government takeover of operations.

Here's what he had to say:

There's an increasing loss of patience with British Petroleum and, quite frankly, with the federal government. I think one of the things we've learned, sadly, is that cleanup technologies have not advanced at all over the last 30 years. They're basically making it up as they go along. The fact that they were drilling at such a deep level, and there wasn't the technology to deal with a spill if it happened, is in and of itself frightening. Those questions have to be answered.

Priority number one has got to be focus on preventing this from getting worse. If that means the federal government has to step in and take over than that's what needs to happen.

The second thing, we need to figure out why this happened so that it never happens again. You know how when there's an airline accident, how the FAA treats that very seriously? They investigate it down to the thread as to what caused that accident so that airline travel in America is exceedingly safe. The same needs to happen here.

Court orders Microsoft to stop selling Word

In his December 22, 2009 blog article "Microsoft Word sale prohibited as of Jan. 11, fix promised," Christopher Null reports that a U.S. federal court has found Microsoft in violation of patent law. This is another example of how some corporations abuse their market power to the detriment of consumers. Most economists agree government regulation is necessary to achieve more desirable social outcomes when there are market failures, such as a lack of sufficient competition.

Office workers of America, enjoy your Christmas break. Because come the new year, things could get a little hairy around the office. Microsoft Word is now scheduled to be prohibited from sale beginning January 11, 2010. That's less than three weeks away. The good news: Microsoft has promised a fix, one which will be rolled out before the deadline arrives.

If you don't understand, you might have simply missed this story, or dismissed it as something that Microsoft would ultimately use its considerable clout to have pushed under a legal rug.

But it's no joke. In August of this year, a court sided with a small Canadian company called i4i that holds a 1998 patent on the way the XML language is implemented, finding that Microsoft was in violation of that patent. The result: Microsoft was told to license the code in question from i4i or reprogram it, or else Microsoft Word would have to be removed from sale in the market. The original ruling gave Microsoft until October to get its legal affairs in order, but appeals pushed that out a bit.

Now a federal court has upheld that original ruling -- plus a fat, $290 million judgment against the company -- imposing the new January 11 D-Day on the matter. Microsoft Word and Microsoft Office will both be barred from sale as of that date -- though naturally you'll still be able to use copies of Word and Office that you already own, and Microsoft will be allowed to keep supporting those copies.

Unless Microsoft ships the promised technical workaround very quickly, things are going to get extremely dicey in the computer world, and fast. Not only will retail outlets selling shrinkwrapped copies of the software be affected, computer manufacturers (who complained loudly about this injunction when it was announced) who bundle Word and Office on the computers they sell will also be seriously impacted by the ruling.

There's always a chance things will change again as the January 11 deadline approaches, but if your company requires Word or Office to keep operations running, it might not be a bad idea to stock up on a few extra copies now.

How workers get stiffed out of pay

In the September 3, 2009 U.S. News & World Report article
"How the Lowest-Paid Workers Get Ripped Off," Liz Wolgemuth reports that employers are cheating some workers out of wages they legally earned. Regulation is sometimes needed to improve market outcomes when the marketplace fails to provide socially desirable ones.

In large cities like Chicago, Los Angeles, and New York, there's a good chance that the employee mopping up drips at the car wash, the delivery driver at the nearby gourmet grocery store, and the temp worker hired to do janitorial work are not being paid much. It turns out, there's also a good chance they are not even being paid what they've earned.

According to a new study, the average low-wage urban worker earning $339 a week is cheated out of $51 of that amount by an employer committing one or more workplace violations--such as paying less than minimum wage, refusing overtime pay, requiring off-the-clock work, or preventing workers compensation claims. Whether damning proof of the government's inability to adequately enforce labor laws or evidence of a need for stronger standards, the report offers insight into the working lives of an often under-the-radar demographic.

The study, funded by the Joyce, Haynes, Ford, and Russell Sage foundations, is based on interviews with 4,387 low-income workers--39 percent unauthorized immigrants, 31 percent authorized immigrants, and 30 percent U.S.-born citizens--in the first half of 2008. The median hourly wage for workers surveyed was $8.02, and the workers were in a wide variety of industries, including manufacturing, construction, food service, and child care. Employing a method that uses social networks to recruit participants, the study focused on workers who tend to be the most difficult to survey. The questions asked were aimed at gaining accurate information about employer policies from workers who might not understand the law, and surveys were translated into languages that included Hindi, Urdu, Bengali, Polish, and Haitian Creole.

More than two thirds of the workers surveyed had experienced at least one pay-related violation within the previous workweek, according to the study. Nearly a quarter worked off the clock and were rarely paid for it. And 76 percent of workers who had worked overtime were not paid the overtime rate, as required by law. More than two thirds of workers entitled to lunch breaks had either not received them, had them shortened, had been interrupted, or continued to work through their break.

More violations were found in certain industries than in others. Minimum wage violations were most common in apparel and textile manufacturing, personal and repair services, and in private households. Violations were lower in residential construction, social assistance and education, and home healthcare. Employees of businesses with more than 100 employees experienced violations less often than those who worked at smaller businesses.

Study coauthor Ruth Milkman, a sociologist at University of California-Los Angeles, says the study results provide convincing evidence that the enforcement of labor laws has been very limited. "In that segment of the labor market, it also appears that employers have realized that enforcement is extremely unlikely and they can do this stuff without much fear of consequences," Milkman says.

It's not clear how violations affecting low-wage workers compare with those who are paid more. Milkman suspects that overtime violations extend to groups of higher-earning workers. The researchers found that women, immigrants, and people of color were disproportionately more likely to experience a violation. Three quarters of the workers surveyed had a high school degree or less. Foreign-born workers were nearly twice as likely to experience minimum wage violations, and foreign-born Latino workers had the highest minimum wage violation rates of any ethnic or racial groups.

The study's authors argue that "the best inoculation against workplace violations is ensuring that workers know their rights, have full status under the law to assert them, have access to sufficient legal resources, and do not fear retaliation." This is, they point out, a near impossibility for unauthorized immigrant workers. "Any policy initiative to reduce workplace violations must prioritize equal protection and equal status in national immigration reform, and ensure status-blind enforcement of employment and labor laws," they write.

In the existing labor market, employers who hire illegal immigrants benefit from an unnatural balance of power, since undocumented workers have little leverage with employers who violate the regulations of the formal labor market, says Will Wilkinson of the Cato Institute. He believes there needs to be much greater integration in the labor market in North America and policies that give undocumented immigrants the status to live and work here.

According to the New York Times, Labor Secretary Hilda Solis said her department was hiring 250 additional wage-and-hour inspectors. But greater enforcement of the existing workplace standards could complicate the route to employment for many illegal immigrants because they often rely on jobs that are below minimum wage as entry points in the U.S. job market and use those jobs to gain the skills to reach higher pay levels, Wilkinson says.

Milkman tells of interviewing a hotel worker whose supervisor would enter hotel rooms before her and take the tips that had been left for her. The worker also was required to work more hours than she was paid for. When she complained, she was essentially fired--told her services were no longer needed.

Markets are not Perfect!

As mentioned in an earlier post, markets are amazing. Yet, they are far from perfect. When markets are unregulated, they create many undesirable social outcomes, such as too much pollution, poverty, and market power, and too few public goods, such as national defense, police protection, education, and investment in technology. Evidence of this is the 1969 burning of the Cuyahoga River in Cleveland, Ohio, which prompted the adoption of significant pollution control laws in the United States, such as the Clean Air Act and Water Quality Improvement Act of 1970. Prior to this intervention in the marketplace, businesses dumped so much pollution into the environment that a river literally caught on fire. To highlight this event, the Great Lakes Brewing Company named a featured ale "Burning River."

Cuyahoga River fire of 1969

The infamous Cuyahoga River fire of 1969 inspired the adoption of significant pollution control laws in the United States, including the Clean Air Act and the Water Quality Improvement Act of 1970. It also inspired a song by Randy Newman:

"Burn On, Big River" (excerpt)
from the Sail Away album by Randy Newman:

...There's an oil barge winding
Down the Cuyahoga River
Rolling into Cleveland to the lake

Cleveland city of light city of magic
Cleveland city of light you're calling me
Cleveland, even now I can remember
'Cause the Cuyahoga River
Goes smokin' through my dreams

Burn on, big river, burn on
Burn on, big river, burn on
Now the Lord can make you tumble
And the Lord can make you turn
And the Lord can make you overflow
But the Lord can't make you burn

The Web Browser Competition Between Microsoft and Netscape is an Example of the Failure of Unregulated Markets to Provide Socially Desirable Outcomes

In the June 18, 1999 Salon article "Web wars
Did Bill Gates beat Netscape fair and square?," Andrew Leonard describes how Microsoft used its market power to unfairly defeat Netscape in the market for web browsers. This is an example of how unregulated markets lead to some undesirable outcomes. Market power may allow one company to dominate a market in a way that is adverse to the interests and benefits of consumers and the general public.