Flutterby™! : Economic musings 2007-07-05 23:02:59.318975+00

Economic musings

2007-07-05 23:02:59.318975+00 by Dan Lyke 7 comments

On my family visit to to my sister's place outside of Toledo, we stopped in at a house in downtown that my sister and her husband were selling. I think it was $48k or so, and the deal could be structured so that there was no down payment. Minimum wage in Ohio is $6.85, if money costs $700 per hundred k per month, then minimum wage is 20 milliHouses.

Out here in the Bay Area, effective minimum wage is roughly $12/hour, and we'll be optimistic and say that in a similarly rough neighborhood in Oakland or Richmond you could pick up the same sized house on the same sized lot for $350k. I think that's way low, but that means that minimum wage is 5 milliHouses.

On one of Eric's visits out here he quipped that "the currency looks the same, but I can't figure out the exchange rate". As I started to think income not in terms of dollars but in terms of what it'll actually buy, I think I'm starting to get a handle on the exchange rate.

Toledo's economy sucks, and it sucks partially because paying people 20 milliHouses for minimum wage jobs is more than most service jobs will bear. So what about manufacturing jobs, real productive labor? After all, Ohio's closer to, say, California than China is, right?

I'm guessing it isn't. I'm guessing it costs about the same to get a shipping container from Toledo to Oakland as it does to get one from China to Oakland.

I wonder what China's low-end labor costs in milliHouses. I don't know, but given that in my visit there I saw the laborers building a factory living in bamboo shanties, I'm guessing that not only is it less in U.S. dollars (partially because we have a "strong" economy with an overvalued dollar), but it was less in terms of goods.

This starts to tumble us into the whole discussion of service economies versus goods based economies, but since manufacturing is dead in this country, I wonder if there's a minimum wage number in milliHouses that it takes to have a working service economy?

toledoHouse is easily equatable to oaklandHouse but neither equate easily to chinaHouse. As you mentioned, bamboo shanties were "all the rage" among minimum wage workers in China. And that's likely a step up from the mud-house on the rice paddy those workers grew up in.

And you are dead-on about the shipping costs. It's amazingly cheap to throw a bunch of stuff into a container and deliver it from China to the San Fran - much cheaper than putting a similar container onto a train or semi in Ohio.

I read an article examining the environmental economics of "buying local". In sum, unless you are riding your bicycle to the farmer's market to buy your produce, getting your produce from Safeway that's been shipped from the other side of the planet actually creates a smaller carbon footprint. That's because Safeway already uses the most efficient way to move produce - and that's in even larger quantities regardless of the distance moved. The efficiencies break down when the quantities start getting smaller and smaller. Figure one person driving 10 miles to the Framer's market to buy from a farmer who moved only enough goods to feed 50 families using roughly 1/2 the fuel necessary for a semi to move enough goods for 500 families to a Safeway 2 miles from a concentration of homes... You start to see the picture.

The greatest efficiencies come from pockets of dense population with efficient transportation among them. The efficiencies related to population density outweigh any impact of distance. This is the key idea behind globalization (and why it's pretty much inevitable as the market eeks out efficiency).

The world's getting more crowded but it's also getting more efficient in the process!

Yeah, one of my big concerns was finding farmers market vendors who'd driven a small truck up from Sanger, as though that'd be any more efficient than bringing it in by rail car or semi trailer from the same place.

#Comment Re: made: 2007-07-06 11:06:24.555443+00 by: jeff [edit history]

If capitalism is ultimately guided by the metric of "growth for the sake of growth," then we all should be reminded that cancer operates on the same premise. This is one of the reasons why large corporations "turn a blind eye" to the cultural and economic illegal immigration issue.

It would be interesting to study how "capitalistic efficiency" compares and contrasts to "local entropy." In the best long-term interest of the planet, all currencies should be valued in "local entropy units," based on the closed Sun-Earth system.

At what arbitrary point on a normal distribution curve do we determine that housing is affordable? Overpriced? Underpriced? But also keep in mind that we're likely headed towards a bi-modal distribution of wealth in this country, however.

Corporations "turn a blind eye" to the legalities of immigration when economics justify it. Just as their is only one ecosystem on Earth, there is only really one economy.

I'll see if I can run the numbers later, but it's fairly easy to create a distribution of average household income and then plot the average house price against it (as a payment of no more than 40% of househild income on a 30-year, fixed int, mortgage).

#Comment Re: made: 2007-07-06 17:05:08.037854+00 by: jeff [edit history]

Thanks ... I'd be interested to see those numbers, Eric. There may be one macro world economy, but there are plenty of micro differentiators.

I just watched Terminator 3 ("Rise of the Machines") the other night, and the proposition that corporations "turn a blind eye" to the legalities of immigration when economics justify it, causes me to grin as I visualize the comparisons from that fictional movie to the realities of today. It would appear that we're having a "judgement day" of a different sort, where corporations are involved once again.

This begs many questions, but one that immediately comes to mind is whether our government answers to the majority of the people, or to the majority of Fortune 1000 board members. Separation of church and state? How about separation of the state and the boardroom.

By extension, "any <entity> can turn a blind eye to the legalities of <anything>, when economics justify it." We live in sad philsophical and ethical times, indeed.

Jeff, I think the right way to look at economics (and thus legality and morality) is that economics is the underlying justification for everything, people will always try to optimize their "returns" (although those returns aren't always cash), legality and morality are friction or attempts to offer returns that aren't immediately dollar quantifiable.

#Comment Re: made: 2007-07-06 17:47:20.778676+00 by: jeff [edit history]

With that type of analysis (as it relates to illegal immigration), it's all about maximizing monetary (or voting) inputs, isn't it?

Certain conservative politicians "want" illegal immigration so the companies which bankroll their campaigns can enjoy cheap labor. Many liberal politicians "want" illegal immigration so they can create anchor babies and corresponding family structures to add to their liberal support base. Those are their inputs.

The only problem is that this doesn't "represent" the input of the majority of American citizens; hence, the current disconnect we have in our supposed government based on "popular sovereignty and representative democracy," both of which continue to be diluted and "dumbed down" by the usual suspects.

I'm losing a lot of faith in what our federal government can do (or wants to do) with respect to this issue, and opinion polls speak the same in overwhelming numbers (and to the overall effectiveness of our federal government in general). That's why we're seeing individual states, counties, cities, and municipalities (and even private citizens) start to create their own laws or pursue independent actions to address the situation. We can expect to see more of this in the future. Get ready for higher produce prices. "Growth for the sake of growth" has its own physical limits.

And lest I forget, the ACLU will try to "maximize its own inputs" by bringing cash-reaping-sometimes-less-than-altruistic-litigation to bear against these entities. ;^)