Detailed Abstractions

In yet another tax on the citizenry in the form of regulation, Washington DC has decided to sue AT&T (here):

NEW YORK (Reuters) – The attorney general for Washington D.C. has filed a lawsuit against an AT&T Inc (T.N) unit, seeking to recover consumers’ unused balances on prepaid calling cards….

Why?  Because, unused minutes on a prepaid calling card is identical in the plaintiffs’ eyes as if you were to own a house and die without relatives or a will:

…”AT&T’s prepaid calling cards must be treated as unclaimed property under district law,” the attorney general’s office said in a statement….

But not to worry – using official government logic, they reason since we’re already doing wrong in one place, why not here?

…States and municipalities have often similarly used unclaimed property laws, known as escheat laws, to claim ownership of unused retail gift card balances….

I’m sure the states did this out of the kindness of their hearts though – they weren’t looking for any additional revenue stream, only to make sure those with unused balances could rightfully claim them…  As if that were easy to do.  As most know, the original purchaser of the card is unlikely to be the end recipient.  As for me personally, I tend to get gift cards from various people and usually just pass them to my daughter – so at this point, the intended recipient wasn’t even the final recipient.

Not only that, but if you buy a gift $50 dollar gift card, leave $5 indefinitely and businesses are required to have a program to capture that, process it, file it, and eventually write the state a check with your name attached to it… well, all of that increases overhead and lowers profit, which raises prices and reduces new entries into the market.

Lastly, these laws don’t take into account the time value of money.  As we all know, inflation is constant even if stable and relatively slow.  Meaning, what I can buy for $10 today, I will likely not be able to purchase the same amount of stuff with $10 in a year.

Of course unused amounts on gift cards is a recent invention.  So let’s first look at this law historically.  Escheat laws were meant to cover real property (here):

…The term is often now applied to the transfer of the title to a person’s property to the state when the person dies intestate without any other person capable of taking the property as heir. For example, a common-law jurisdiction’s intestacy statute might provide that when someone dies without a will, and is not survived by a spouse, descendants, parents, grandparents, descendants of parents, children or grandchildren of grandparents, or great-grandchildren of grandparents, then the person’s estate will escheat to the state….

Which makes complete sense.  For example – If I bought a prime piece of real estate in Manhattan and died without will or heirs…. what should happen?  Any decent legal framework which includes property rights needs an answer as leaving property in such an unknown state isn’t a good idea.

Unlike real property however, unused minutes don’t really exist.   Even though recent TV commercials might have confused the DC attorney general, they aren’t little plastic orange discs logging actual time.

Additionally, the escheat law in this case isn’t needed as it’s being handled without issue in a private contract.  Sort of like a will is used when distributing someone’s estate.  Currently, the contract for AT&T prepaid cell phones, which each buyer assumes on purchase, expires unused minutes if not used within 90 days (IE – they revert back to the company).

Lastly, according to the attorney general, the industry knows unused minutes account for 5 to 20 percent of the minutes purchased.  Unlike unused gift cards, treating unsure minutes has an additional consequence.  Without fully knowing, but recognizing the very competitive market that is the cell phone industry – it is likely true that the average unused portion is factored in the current pricing structure.

Therefore changing that from 5 to 20 percent unused minutes to always zero and increasing overall administration costs, will only result in higher prices for the end consumers.

But they are going after an evil company, right?

As should’ve been expected and according to all recent news, having a Treasury Department position of paymaster isn’t working out so well for the free market.

Earlier this year, against all basic free market principles the Obama Administration through the Treasury Department started setting up compensation boards (CNN):

WASHINGTON (CNN) — An amendment in the $787 billion economic stimulus package passed by Congress Friday would severely restrict bonuses and other forms of compensation for top executives at companies receiving federal bailout money….

Due to all the negative publicity surrounding the government’s handing over billions of dollars in tax payer dollars to corporations which deserved to fell, Senator Dodd explains:

…”The decisions of certain Wall Street executives to enrich themselves at the expense of taxpayers have seriously undermined public confidence in efforts to stabilize the economy. American taxpayers deserve better,” Dodd said….

Now it might just be me, but I’m not sure Wall Street executives are allowed to vote on appropriations bills and then force the treasury to distribute the funds as they see fit.  It seems Mr. Dodd is blaming Wall Street for the government’s failure to handle the crisis correctly.

With all logic aside though, they went forward.  Not only did they seek to limit overall compensation of the highest paid, but asked for refunds from bonuses already given – one provision in the bill:

…The secretary of the Treasury must review past compensation paid to the top 25 employees of TARP recipients and seek reimbursements “if those payments were contrary to the public interest or inconsistent with the purposes of the [stimulus package] or the TARP,” according to Dodd’s statement….

& People everywhere rejoiced…. I mean complained.  In what was an obviously anti-capitalist move sure to do more damage than any political good it might bring about, people everywhere spoke up (examples here, here, & here), including NBER (abstract here – paper costs $5):

…Important facts about compensation are that: the compensation distribution is highly skewed; each year, a sizeable fraction of chief executives lose money; the use of equity grants has increased; the income accruing to CEOs from the sale of stock has increased; regardless of the measure we adopt, compensation responds strongly to innovations in shareholder wealth; measured as dollar changes in compensation, incentives have strengthened over time, measured as percentage changes in wealth, they have not changed in any appreciable way….

Even little ole me could see this as a negative and wrote about this here just a month or so ago (here):

…Even without bothering with the fact that the government is not in any position to understand what kind of compensation any single employee should have, this is still a radical and arbitrary move that if continued can work to destabilize the economy.

…this decision is an anathema to a free society breaking not only the contract rights of ordinary citizens, but also violating all individuals by pushing a blatant ex  post facto punishment….

& now we have exactly what was shown through economic analysis and basic logic to be true (@Bloomberg):

Nov. 23 (Bloomberg) — Bank of America Corp.’s board may extend its search for a permanent new chief executive officer into 2010 if directors can’t settle on a candidate in the next three days, according to people familiar with the matter….

…At least four external candidates, including Citigroup Inc. director Michael O’Neill, rebuffed approaches….

…That’s narrowing the field and giving the board “an incredibly tough job,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “For people who have choices, it’s hard to figure out why someone would take this job.”…

Is it now time to stop calling obvious results  (Un)?intended Consequences…

Anyone remember when Halloween was about running around the neighborhood, staying up late, and eating too much candy?  Remember when selling lemonade was easy?

Well, thanks to how enlightened we’ve become, things like that are no longer allowed… by law in some places.

In Bellvile, IL the law encompasses ages of those allowed to trick-or-treat, whether children over 12 should be allowed to wear masks at all, and of course the all important curfew.

I don’t know about you, but it’s odd to me that this many ordinances are required for a fake holiday.  Even the explanation shows how little the mayor grasps what a police state this is becoming (@Fox2News):

…Mayor Eckert said “We had listened for many years to our residents, particularly seniors and single moms who said it was kind of scary many times when high school aged kids, people who are as tall as you and me, 6-feet tall, coming to their door late at night.”

“We firmly believe that trick or treating is for children, and when they get to be an age, if their parents aren’t sensible enough to tell them they’re getting too old, you’re getting too big, then we feel that the ordinance is in tact for our police officers to not have to tap them on the shoulder telling them to knock it off,” explained Eckert….

With all due respect to the mayor, I don’t honestly care what you “firmly” believe about Halloween.

Honestly, I tend to agree that 16 year olds running around for candy is stupid.  But I’m not sure that if parents allow their kids to do things I “firmly believe” are stupid equates to a government attempt to micromanage behavior on Halloween.

It’s instructive that the mayor doesn’t even seem to grasp the long term consequences of these actions.  Maybe someone should ask, “What if you firmly believed Halloween was evil?  Would you ban it altogether?”

Of course since they’re all busy dealing with youth crime, maybe they don’t have the time to answer.

It’s not kids and Halloween messing things up, but kids & unlicensed businesses.  It’s so bad in some places, that neighbor’s are calling the cops  (whole thing here):

…Juveniles, seven of them, on a quiet residential street, selling an uncontrolled substance: lemonade. A neighbor had dimed them out, and a Haverford Township police officer responded in a hurry. When he arrived at the two-story brick house on Maryland Avenue, he dutifully informed Dana Kleinschmidt, mother of four of the reputed offenders, who included 5-year-old triplets, that they were violating the law. They were selling lemonade without a permit….

Which in and of itself is dumb enough, but wait… after scaring little kids, it turns out what they were doing actually wasn’t against the law at all.  Enter John Viola, Deputy Chief of Police, to explain things:

…The responding officer – who was unavailable, whom Viola would not identify, and whose name and badge number were blacked out of the police report – invoked a township ordinance against vending without a permit. What the officer didn’t realize, Viola said, is that the law doesn’t apply to anyone younger than 16…

So there you have it – the War on Kids just had an innocent casualty due to a simple misunderstanding.  It’s just another  training opportunity really.

Or at least that’s as it appears.  In a stunning admission by the Deputy, he explains how they will continue to harass anyone they want, even if it’s not really illegal.  Seriously – how are they supposed to know the law?

…“The police officer would have no way of knowing this on the street,” Viola said. “He acts on information he has available.”…

It seems obvious to me, that if cops aren’t required to know the laws they are enforcing, we might have a problem, but I admit I’m not a cop.  I do recall something from school about ignorance being no defense, but I guess that’s only if you are charged with a crime, not if you’re being harassed for breaking a non-law.

Welcome to (NEW) America:  Home of the criminal, land of the state.

What are the odds that a government agency tasked with identifying research priorities, research performance management, and reviewing the impact of completed research will come up with a solution that doesn’t involve the government?

Today & tomorrow the EPA are meeting for just this reason (@eScienceNews):

…The goal of the meeting is to develop a collaborative framework to ensure future research and development dollars are spent wisely and in a coordinated manner….

Of course it doesn’t really matter what the answer is, because “spent wisely in a coordinated manner” is almost mutually exclusive to good R&D.  As should be expected by now, the EPA is wasting money on answering a question for which recent literature already exists.

Back in 2001, a Jack Welch underling, W. James (Jim) McNerney, Jr was hired as 3M’s CEO.  In the fanfare associated with being a protege of Mr. Welch, when Mr. McNerney joined 3M, investors had high expectations of pushing some of the GE magic onto the 3M culture.

One of the first and most prominent of these culture changes Mr. Mcnerney instituted was a heavy does of SixSigma.  From the beginning, leading business thinkers were asking whether pushing a very creative culture into the narrow focus of SixSigma might not work.  Or at least, it should not include the whole company.  Sure, use SixSigma for accounting procedures, but leave out R&D.

Of course proponents of SixSigma disagreed.  If it can help manufacturing and then be translated to service related products, why not R&D?

Regardless of the writing public, 3M went forward with implementing a SixSigma policy that included training all workers to a Green-belt level and use SixSigma methodology for every department, including R&D.  How’d it fare?

As you’d expect, the results are mixed.  But asking former 3M scientists, engineers, and the like?  Overwhelmingly they tend to agree it wen too far (@DesignNews):

…While 3M emerged financially stronger from the McNerney era, many long-time 3M researchers, engineers and scientists chafed under the strictures of Six Sigma. Critics argue that excessive metrics, steps, measurements and Six Sigma’s intense focus on reducing variability water down the discovery process. Under Six Sigma, the free-wheeling nature of brainstorming and the serendipitous side of discovery is stifled. Proponents contend such methodologies’ rules keep researchers on track and accountable for producing. Striking the right balance between the application of Six Sigma and unencumbered research is often seen as key….

In fact, a then board member and the former 3M scientist who developed Post-It Notes stated that he believes that in the SixSigma environment, Post-It Notes would simply never have been developed.

History is also rife with examples.  In the book, Sex, Science and Profits: How People Evolved to Make Money,  written by Terence Kealey (review @ Reason.com):

…Kealey shows in nearly every case the crucial inventions of the past two and half centuries were called forth by markets, not invented by scientists working from ivory towers. These include the steam engine, cotton gin, textile mills, railroad engines, the revolver, the electric motor, telegraph, telephone, incandescent light bulb, radio, the airplane—the list is nearly endless…

In fact, a government-funded research paper showed public money can hurt innovation.  Mr Kealey writing about it(@AllBusiness.Com):

…n fact, the evidence shows otherwise. In 2003, the Organisation for Economic Co-operation and Development published The Sources of Economic Growth in OECD Countries, reporting on a comprehensive regression analysis of the factors that might explain the different growth rates of the world’s 21 leading economies between 1971 and 1998. This indicated that only privately funded R&D led to economic growth, and that publicly funded R&D did not. Worse, the public funding of R&D crowded out private funding, and thus slowed economic growth…

No worries though, I’m sure the government will tell you, that this time is different.   Just ask them.  They completely understand it’s failed many times before, but what you (read: citizens) are too ignorant to understand, is that those failures were under other people and not the worldly, brilliant, omniscient, and yes, even death-defying leaders of today.

& if that doesn’t work for you, remember that it’s “Green”, which we all know are now established unqualified goods.  As such, regardless of how much money taxpayers have to spend to subsidize “green” stuff, the end results are worth it.

Last, but certainly not least, if both of these arguments don’t work to mitigate your concerns, welcome to the club: Disgruntled Americans Against Government Stupidity (DAAG)