Easy Go, Easy Come

My lovely forest is gone - trees slain in their prime! - to clear the way for a new home next to mine.

The house looks charming, and the gentleman who owns it even has his own windmill. I only hope he's not one of those types who hires a chamber orchestra to play all night!

Competition policy and income inequality

The op-ed piece in last Sunday's Washington Post ("How American became uncompetitive and unequal," by Lina Khan and Sandeep Vaheesan)  suggests that a main contributor to income inequality, depressed wages, and lack of job opportunities is increasing concentration in U.S. industry, fostered in part by competition policy that focuses on economic efficiency over "fairness." Unfortunately, the authors have only a fuzzy grasp of the facts.

As a starting point, it's hard to tell what the authors mean by economic inequality. The piece starts by referencing the 1980s, but the next paragraph cites Piketty's Capital in the Twenty-First Century which, I've read, argues that income inequality today has increased relative to the early 20th century. (Others have critiqued Piketty's book, in particular the very premise that income inequality has increased.) However, it's an inescapable fact that merger policy fundamentally changed in the 1980s - part of the "Reagan Revolution"  - by focusing more on the economic effects of mergers, placing greater weight than before on cost-reducing efficiencies of mergers, rethinking the relationship between price and market concentration, and, as a consequence, challenging fewer mergers than before. Even as political winds shifted toward the Democratic Party, with its greater tendency to view mergers suspiciously, the fundamental approach to analyzing mergers hasn't changed since the 1980s.

What this means is that many industries have become more concentrated. This doesn't necessarily imply that these industries have become less competitive for reasons that include:

* Greater competition from foreign companies, so that U.S. concentration is not necessarily the relevant measure of concentration;

* A growing economic literature that reduced the myth of a strong price-concentration relationship; instead, studies showed that markets remained reasonably competitive until the number of firms was relatively small - markets of one or two firms certainly performed worse than they would have performed with more competition, but three or four vigorous competitors was generally enough to keep one another honest;

* Recognition that mergers could lead to significant cost reductions, a portion of which would be passed on to consumers in the form of lower costs.

At the same time, firms were rethinking their businesses. Cheap computing power and, later, the ubiquity of the Internet allowed firms such as Wal-Mart to revolutionize bricks-and-mortar retailing and Amazon to do the same with on-line retailing. Manufacturing firms could use just-in-time inventory to reduce costs and cheaper transportation allowed firms to conduct business over longer distances. Instead of many small-scale retailers serving local markets, a small number of large retailers served markets across the country. Instead of the "big three" U.S. car companies dominating the domestic market, foreign competitors made substantial inroads, resulting in cheaper and more reliable models (and forcing the U.S. firms to step up their game).

Of course, this transformation of the economy had losers as well as winners. Greater overseas competition in manufacturing meant that labor unions were under pressure to agree to wage reductions, and (not coincidentally) higher U.S. manufacturing costs, including labor costs, have meant job losses to overseas competition. Wal-Mart's growth has meant a reduction in "mom and pop" retail operations; even if the net result in employment was about a wash, as some studies have shown, the average wage at Wal-Mart is lower than the jobs it replaced. Bear in mind, however, that a small number of workers have lower wages while a large number of consumers - mainly lower-income consumers - have access to goods at lower prices. 

Khan and Vaheesan have a number of examples of anticompetitive behavior in particular industries, some of which are better than others. They mention the tech industry agreements to not poach workers. It's hard to quantify how much this affected wages, but it's certainly an example of an anticompetitive agreement that harmed workers (and, arguably, consumers as well). On the other hand, they claim that consolidation in the health-care industry has led to huge markups in the price of services. While it's true that some hospital mergers have been found to have led to higher prices - indeed, the FTC has challenged a number of hospital mergers (back in the 1990s, the agency lost those cases routinely; now the agency has a good track record of winning such cases) - much of the wacky pricing of hospital services is the result of efforts to cross-subsidize various parts of the business. For example, the requirement that hospitals take all comers for emergency services means that the cost of indigent patients be borne by patients of means - and their insurers.

In cable markets, another area mentioned in the article, operators such as Comcast and Time Warner Cable have certainly made out well, largely because of lack of competition. However, this lack of competition has not arisen through mergers - most cable mergers involved non-overlapping service areas, and where there have been substantial "overbuilds" (areas served by two cable operators) the FTC has ordered divestitures of the overlap areas - but because historical franchise agreements with local governments and the natural monopoly nature of utilities (including cable) have limited competition. Some parts of the country are lucky to have Verizon's FIOS service, or Google fiber-optic service, to compete with the local cable monopoly, and DirecTV has been a somewhat more distant competitor for much of the country, but there's no denying that cable prices are out of control. (Consumers get more for their higher prices - remember the days of just a handful of cable channels and no DVRs? - but still, this is an area that begs for more competition.)

Corporations certainly have an incentive to reduce competition, and mergers are one potential way to do so, but big companies have a much easier way to limit competition: enlist the government. Large firms are often in favor of  costly regulations because such regulations impose disproportionately high costs on small firms. A firm with a national footprint can afford a big legal department, to hire people full-time to handle regulatory compliance issues. Smaller firms are at a disadvantage. Furthermore, firms that induce the government to impose barriers to entry (regulatory or otherwise - a patent system that awards patents willy-nilly serves as an effective entry deterrent) can enjoy higher returns.

The sad truth is that the golden years of the U.S. economy are behind us. There are a lot of reasons for this. Much of the post-World War II boom was driven by the unique confluence of pent-up consumer demand (because of wartime shortages) and a decades-long increase in women's labor force participation: people wanted stuff and more people became available to make and sell stuff. We value thing such as cleaner air, workplace safety, consumer product safety, and social safety net programs (including a minimum wage), all of which have value but come at the expense of productivity. Government has gotten big and highly regulatory. Whether the pendulum has swung too far in the direction of regulation is a topic for another time, perhaps, but it's clear that there is no going back to the competitive conditions of the 1950s - including the dominance of U.S. manufacturing.

I don't want to leave the impression that regulation is necessarily bad - indeed, cable providers and the like probably should be regulated more than they are - nor that competition policy is unimportant. We want to be on the lookout for mergers to monopoly or near-monopoly. We want to look for widespread non-poaching agreements such as the one the technology companies had in place, just as we want to maintain our lookout for price-fixing agreements. And I agree with Khan and Vaheesan that the competition agencies should block mergers rather than okay complex settlements to deals. For the most part, however, what government should do to foster a healthy business - and hence healthy jobs - climate is to create conditions for entrepreneurs to take advantage of profit opportunities (including government's crucial role in protecting property rights) and then, to the extent possible, get out of the way. 

Ants

Sometimes I think we're just living on top of a giant ant colony. One day the ants will run out of space, tunnel too much dirt, and everything - houses, roads , people - will fall in.



The little buggers are everywhere, especially at this time of year.

Some days are filled with nothing but rain. Occasionally that’s a metaphor, but sometimes it’s quite literal. For example, once again following Honour McMillan’s intrepid footsteps, I  visited H22O, a region with its own kind of beauty - and plenty of rain.

 Oh, sure, the arrival point isn’t wet, just overcast:



And it’s nice and dry inside the lighthouse:



 Outside, however, is a different matter. Water and rain, rain and water:



I’m reminded of the song:

Last night the dealer offered me a new hand
Laid out so simply, thought I'd understand
With a different name, different face, different town, different place
In the same little world. 

When there's nothing left to salvage
When losing it all doesn't mean a thing
I pray for the never ending rain
To wash it all away. 

I set out on foot straight down the grade
Laying crumbs and seeds to mark the paths I'd laid
I found the northern lights, western shore, eastern front, southern cross
And soon I was home. 

(chorus) 

Every day I read the paper and I pray for the flood
But the rain always stops at the first sign of mud
I want to feel it all, feel it burn, watch it twist and feel it turn
And leave nothing behind. 

(chorus) 

(Steve Wynn - "Never Ending Rain")

The statue below reminds me of one of Doctor Who’s Weeping Angels, about to claim another victim:

A Random Friday Evening

Friday evening. A long week of work.

A jigger of Bombay gin. A splash of vermouth. The two mix with ice, the liquids melding with the melting cubes, creating a reassuring clink against the metal of the shaker.

Two olives at the bottom of a crystal glass. Cold liquid poured into the glass. Condensation forms instantly, and beads of sweat trickle down the sides.

A sip - nectar! - and the work week is but a distant memory.

Timing is Everything: The Audio Guide to Babylon 5

In watching classic Doctor Who episodes for a second time, and mostly in order - I'm up to “Pyramids of Mars” - I was thrown off course by an episode of The Incomparable! podcast, discussing Babylon 5. I had never seen the show, not a single episode. I don't recall why - perhaps because I saw Babylon 5 as an inferior imitation of Star Trek: Deep Space 9, itself a show I rarely watched. How interesting could hanging around a space station be?

Very interesting indeed, according to the participants in the podcast: host Jason Snell, Erika Ensign (of the Verity! Doctor Who podcast), Chip Sudderth (of the Two-Minute Time Lord podcast), Andy Ihnatko, and Michael Gartenberg. Their love of the show convinced me to try it. Amazon had better prices on DVDs than I could get for iTunes downloads, so I bought Season 1 and was immediately hooked.

In a fortuitous coincidence, Erika Ensign and Chip and Shannon Sudderth have joined forces to start The Audio Guide to Babylon 5. They plan on discussing each episode of the series, in order, on a biweekly schedule. As I'm nearly done Seasons 1 and 2, I'm enough ahead of them that spoilers shouldn't be a problem, while I've watched those episodes recently enough that they're still reasonably fresh in memory.

And - spoiler alert! - the show is nothing like Deep Space 9. It's much better.

Mayfair Woods

My modest place in Caledon Mayfair - my little cottage is certainly no threat to the stature of my fellow residents - has seen a number of neighbors come and go, both businesses and residences. I don’t think my presence has been the kiss of death to these ephemeral folk, though one would be wise to consider all possibilities, especially before placing one’s hard-earned cash on a parcel.

As one can see from the picture below, however, trees have grown on the parcel. The owner, Mr. Steadman Kondor, has dubbed the place Maefayr Woods.



Alternative spelling or no, the woods should provide relief from the summer heat.

A Tale of Tail

I received a delightful note in the post the other day from David and Beth Cooper-Pentewyns, owners of the Plum Wine and Piffle Gallery, announcing a new exhibit, entitled “The Catgirls of Caledon,” by Miss Tasha Sandalwood. (And, believe me, Caledon has a great many Catgirls, for reasons that remain obscure to me.) The Cooper-Pentewyns went on to say: “The artist has been intrigued by our catgirls and her photos are lively and show an appreciation of the special qualities of the cat girl.



The exhibition is in the upper gallery.





Meanwhile, in the lower gallery, pictures by Mr. and Mrs. Cooper-Pentewyn are displayed.





The exhibit and the gallery are both charming and worth dropping in on.

SF Plots Editors Don't Want

Via Magda Kamenev, “10 Science Fiction and Fantasy Stories that Editors are Tired of Seeing” on io9.com.

Zombies, sure. Too many Walking Dead and World War Z wanna-bes out there. Parallel universes, fine. Also a lot of Fringe fans still writing fanfic. Time travel, ditto Doctor Who. Faux Steampunk, yeah, annoying. Fairytale retellings… I’ve read 'em, I wrote one, they’re fun, but I can see how they can tire an editor quickly. Mermaids, though? Tween fans of Ariel writing mermaid stories? But fine. Revenge stories, “edgy” stories, yeah, I’ve waded through too many for my taste. Pregnancy horror? Isn’t the alien baby bursting out of the belly a metaphor for the all-consuming nature of children and, if so, how can we have too many of those?

But what caught my attention was Number Ten on the list, “Pun/twist ending.” You see, as a youngster of around 15, eons ago, I was a subscriber to Asimov’s and, God help me, enjoyed the occasional story, often by Isaac Asimov himself, that was nothing more than a long setup to a groaner of an ending. Naturally, I wrote one and submitted it to the magazine. Equally naturally, the story was rejected. I rather expected that - I have a big ego, but not that big - and I was happy with a hand-written note by the editor, George Scithers, or at least one of his minions. However, I was mildly taken aback by the content of the note, which said the story was being rejected as it was “contrived.” Contrived? ConTRIVED? Come on, George, that’s the nature of the beast. They’re all contrived.

Victorian Fantasy: "The Water of the Wondrous Isles"

It seems as though it’s been quite a while since I’ve written one of these Journal entries… By gum, it has been a while - since about this time last month, in fact. While I’ve been idle, my alter ego has been busy, but with matters too trivial to write about.

But here we are again, another month and another meeting of the Victorian Fantasy discussion group. This month’s selection is the 1897 novel The Water of the Wondrous Isles, by William Morris, the noted artist. Having read the book several months back, for a meeting of the group that had to be cancelled, the story was not exactly fresh in my mind. I was hoping for a large turnout to conceal that fact but, alas, this was not to be.

The book describes the adventures of a young heroine named Birdalone. Kidnapped by a witch and raised in a forest, she encounters a magical godmother, makes her escape from the witch in a boat that magically travels the titular isles, and meets a variety of people including three women who have been taken from their loves. Eventually she meets the boyfriends, falls in love with one, gets one killed, takes leave of the kingdom, works in a trade, meets more men, people are partnered up, and all live… well, if not happily ever after, at least satisfactorily.



As one can see from the photograph above, the reading room had plenty of seating available. Nonetheless, we had an interesting discussion as always, remarking on Morris’ writing style (which had an almost fable-like cadence to it, hearkening back to medieval quest literature - and, of course, Birdalone’s journey is very much a quest), his intense and somewhat unseemly liking for his main character, and why the young lady spends the first part of the book unclothed.

I listen to the wisdom of others (no, seriously!)

Dame Kghia Gherardi

A clean-shaven Sir JJ Drinkwater and Miss Ellie Mink

Miss Lacey Brenner

Mr. OldeSoul Eldemar...

…and his wife, Mrs. (Cassie) Eldemar

Alas, next month is the final meeting for the group, a wrap-up session in which we discuss our favorite (and least favorite?) works, and perhaps even consider what might come next.